J.Crew Secures Lender Approval of Debt Plan

The heavy debt load just got a little lighter for J.Crew Group Inc., and its long-term outlook a bit brighter.

The company said it has received consents to the term loan amendment announced on June 12 from a majority of the lenders, the requisite threshold for approval. The struggling retailer said it received consents from holders representing more than 80 percent of the term loan.

The exchange offer to bondholders and update to its term loan is aimed at ending its legal battle with lenders and pushing its next loan maturity by two years to 2021.

The term loan amendment was announced last week in connection with an offer to exchange any or all of the outstanding $566.5 million aggregate principal amount of senior notes due 2019. J.Crew is carrying $1.5 billion in long-term debt.

J.Crew is said to have placed its intellectual property in a new subsidiary that will issue $250 million in new debt, which will be used to buy back existing bonds.

As part of the new deal, lenders agree to immediately stay all litigation activities regarding the company’s intellectual property transactions that occurred in December, and withdraw and dismiss all pending litigation, including any claims that were or could have been asserted between the company and the term loan agent.

J.Crew said it views these transactions as strategically important to its overall effort in positioning the company for long-term success. Addressing the nearest-term maturity removes an overhang in a challenging market environment and provides the company a clear and more confident path to execute its business plan, the retailer added.

(Read more about how debt is dooming retail: How a Lack of Liquidity is Tanking Retail—And Who’s to Blame)

The financial maneuvering should stave off bankruptcy for the merchant and comes on the heels of longtime chief executive officer Mickey Drexler’s stepping down. Drexler is being succeeded by West Elm president Jim Brett.

J. Crew had a first-quarter loss of $123.3 million, compared with an $8 million deficit a year earlier. Adjusted earnings before interest, taxes, depreciation and amortization fell 41 percent to $26.6 million from $45.4 million in the period, as revenues dropped 6 percent to $532 million.

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