What exactly happened to J.Crew?
J.Crew might not be down for the count…
As someone who almost exclusively wears J.Crew, this really stung.
On May 6th, 2020, the J.Crew Group filed for Chapter 11 bankruptcy. Recent store closures due to coronavirus don’t help, but this bankruptcy was likely inevitable. It was forecasted by various experts that J.Crew would have likely had to file anyway. They were $1.6 billion dollars in debt and sales were steeply declining. In 2013, J.Crew was ranked the 29th most valuable brand — but that didn’t last long. Various fashion experts note that J.Crew missed out on some serious trends and continued to sell over-priced clothing — even when it didn’t work. It pushed them straight into the arms of Chapter 11. Well, what is Chapter 11 bankruptcy? I am glad you asked.
Chapter 11 bankruptcy is a chapter in the United State Bankruptcy Code that permits a business to reorganize under a particular set of laws.
This is a very unique form of bankruptcy because it doesn't actually shut the business down but instead allows for a reorganization of assets and debts. J.Crew was $1.6 billion dollars in debt, so this kind of reorganization was necessary. In a statement, J.Crew said that the company had secured $400 million of debtor-in-possession financing which allows them to keep stores open while they reorganize. Debtor-in-possession, or DIP, financing is only available to companies who have filed under Chapter 11. DIP allows various lenders to invest and hopefully turn the company around — it must be approved by a court. Anchorage Capital Group, Blackstone Group, and Davidson Kempner Capital Management will be the new owners of J.Crew moving forward. They will try to reorganize the debt and assets with the goal of restructuring in mind.
These new owners will have to work through a restructure to ensure that they will be able to get value out of the 181 J.Crew stores, 140 Madewell stores, and the 13,000 employees. “This agreement with our lenders represents a critical milestone in the ongoing process to transform our business with the goal of driving long-term, sustainable growth for J.Crew and further enhancing Madewell’s growth momentum,” said Jan Singer, the CEO of the J.Crew Group. Jan also said, “As we look to reopen our stores as quickly and safely as possible, this comprehensive financial restructuring should enable our business and brands to thrive for years to come.”
Things are looking up for J.Crew as they have the opportunity to clean house, reorganize, and get back out there once the world returns to normal.
