Teen jewelry retailer Claire’s is due to exit Chapter 11 in early October after a Delaware bankruptcy judge approved its reorganization plan on Sept. 21, it said in a statement.
The chain first filed for Chapter 11 on March 19.
Going through the bankruptcy process allowed Claire’s to erase approximately $1.9 billion of debt from its balance sheet and gain access to $575 million of new capital, the company said.
“The Plan of Reorganization approved by the court gives Claire’s the financial strength necessary to cement our position as one of the world’s leading specialty retailers of fashionable jewelry, accessories, and beauty products for young women, teens, tweens, and girls,” said company CEO Ron Marshall in a statement.
Claire’s is different than some other notable retailers that have recently filed for Chapter 11, in that its business is considered relatively healthy. For the second quarter of fiscal 2018 (ended Aug. 4), it posted a 0.1 percent comp increase. North American same-store sales rose 4.4 percent.
It currently consists of 2,471 stores, as well as 6,631 concession locations—which is actually more than the 7,500 points of sale it had when it entered Chapter 11, due to an increase in concessions at CVS drugstores.
The filing was originally conceived as a “prepackaged” bankruptcy that was negotiated with its lenders prior to the filing. The company originally hoped to leave Chapter 11 by September.
But it didn’t go as smoothly as planned. According to Retail Dive and other sources, second-lien lender Oaktree Capital Management tried to block the reorganization plan, complaining it let the first-lien lenders gain control of the company at a bargain price. At one point, Oaktree tried to make its own $1.5 billion bid for the retailer.
But eventually Oaktree struck a deal with the other creditors that increased its recovery rate from 18 percent to 25 percent, and now supports the amended bankruptcy plan.
The chain’s bankruptcy papers can be seen here.
(Image courtesy of Wikipedia)