Bankruptcy Debrief Jan. 18

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PacerMonitor's look back on the week's most compelling filings.

 

Gymboree Tumbles into Bankruptcy…Again

Children’s clothing retailer Gymboree finds itself in bankruptcy court for the second time in just two years, with a dim outlook this time around. Upon the commencement of the case, the retailer said it intends to close all of its roughly 800-store Gymboree and Crazy 8 retail chains. The retailer’s upscale brand, Janie and Jack, is going up on the auction block next month with a stalking horse bid from the Special Situations Investment Group.

This second bankruptcy case came after a failed attempt to raise capital or sell some or all of the brands outside of court. Certain prepetition lenders have agreed to provide $30 million of debtor-in-possession financing to fund the debtor through the case.

The company aims to conduct the nationwide closing of Gymboree and Crazy 8 store through April 2019 and estimates it will bring in $155 million into the debtor’s estate.

At the time of the filing, the company had about $212 million of total funded debt, comprised of $79.1 million outstanding under the asset-based revolving credit facility, $44.5 million outstanding letters of credit under that facility and $89 million outstanding under a senior secured term loan.

Read Chief Restructuring Officer Stephen Coulombe’s declaration in support of the first-day motions.

View the chapter 11 petition.

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Shopko Closing Stores and Selling Pharmacies in Chapter 11

Retailer Shopko (Specialty Retail Shops) filed for chapter 11 with plans to close roughly 100 of its 367 stores during the case. The company is also targeting a quick sale of certain assets also with a timeline proposing a January 26 auction of pharmacy assets including certain locations and closing that sale by March. Shopko is aiming to emerge in three months to limit the costs of the case.

As with most retailers landing in bankruptcy, the company cites the high costs of its large footprint of stores and costs associated with staffing them. Shopko said those costs, mixed with the trend of going to online retailers, has greatly depressed the capital structure and available liquidity. Additionally, the company’s main pharmaceutical supplier, McKesson Corp. pushed to reduce payment terms from 45 days to 1 day, accelerating roughly $70 million of invoices. McKesson ultimately landed on 21-day terms, but that was still not enough for McKesson, who pursued legal action against Shopko for a temporary restraining order to effectuate their demands. The issues with McKesson put even more of financial strain on Shopko, greatly contributing to its decision to file for bankruptcy.

The case will be funded by an additional $50 million of liquidity as part of a larger $485 million facility led by prepetition lender Wells Fargo. As of the filing, the company had roughly $440 million of funded debt including $356 million of revolving loans and $83 million of term loans.

Read CEO Russell Stenhorst’s declaration in support of the first-day motions.

View the chapter 11 petition here.

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Another Mattress Retailer in Bankruptcy

Innovative Mattress Solutions, operating under Mattress Warehouse, Sleep Outfitters and Mattress King, has filed for chapter 11 just a few months after Mattress Firm filed in October 2018.

The company had been growing since its founding in 1983, with 2015 being its most profitable year. Around that time, the company decided to expand and selected Tempur Sealy as its only provider, but at the same time, competitor Mattress Firm rapidly expanded and used aggressive sales and marketing tactics, which caused a decline in sales for Innovative Mattress Solutions.

Lead creditor Tempur Sealy, which is owed roughly $21 million, has agreed to provide the company with up to $14 million of debtor-in-possession financing to fund the company during the bankruptcy case.

Read founder and CEO Kimberly Knopf’s declaration in support of the first-day motions.

View the chapter 11 petition.

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