Editor’s note: In court documents Aéropostale accuses private equity firm Sycamore Partners, its main lender, of forcing the chain to deteroriate via a supplier Sycamore controlled with the goal of gaining control of Aéropostale via the bankrutpcy process, according to Bloomberg.
Industry insiders may remember that Sycamore was the private equity firm that partnered with Paul Naude on a bid for Billabong several years ago.
Press Release:
Aéropostale, Inc. Takes Next Steps In Business Transformation
Commences Voluntary Chapter 11 Process with Commitment for $160 Million in DIP Financing
Expects to Emerge Within Six Months With a Right-Sized Store Footprint, Improved Operational Efficiencies and a Clear Resolution of Its Ongoing Disputes with Sycamore Partner
Near-Term Actions Include Store Closing Sales at 113 U.S. Stores and All 41 Stores in Canada.
NEW YORK, May 4, 2016 /PRNewswire/ — Aéropostale, Inc. (OTCQX: AROP) today took the next steps in its ongoing business transformation by filing voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. The Company expects to use the Chapter 11 process to optimize its store footprint, access additional tools to shed or renegotiate burdensome contracts, resolve its ongoing disputes with Sycamore Partners and achieve long-term financial stability.
The Company intends to emerge from the Chapter 11 process within the next six months as a standalone enterprise with a smaller store base, increased operating efficiencies and reduced SG&A expenses. The Company is also continuing its previously announced sale process to confirm that it is maximizing the value of its assets and achieving the best possible outcome for stakeholders. Any potential sale would be expected to be completed within the next six months.
As part of this effort to position the Company for long-term success, Aéropostale is reviewing its leases and other contracts to ensure they are competitive with current market dynamics. The Company today announced an initial store closure list of 113 U.S. locations, as well as all 41 stores in Canada. Store closing sales are scheduled to begin in the United States during the weekend of May 7-8, 2016, and in Canada during the week of May 9, 2016.
“While initiatives such as the implementation of our two-chain Factory and Mall strategy and our merchandise repositioning have started to gain traction, the ripple effects of an ongoing dispute with our second-largest supplier put substantial strain on our liquidity while also preventing us from realizing the full benefits of our turnaround plans. As a result, we have chosen to take more decisive and aggressive action to create a leaner, more efficient business that is well-positioned to compete and succeed in today’s retail environment,” said Julian Geiger, Chief Executive Officer. “We appreciate the loyalty and support of our customers, employees and business partners as we complete this process.”
In conjunction with the Chapter 11 filings, Aéropostale secured a commitment for $160 million in debtor-in-possession (“DIP”) financing provided by Crystal Financial LLC, which, combined with operating cash flow, will allow Aéropostale to meet its go-forward financial commitments.
The Company has also filed a series of motions that, pending Court approval, will allow it to pay employee wages and benefits without interruption, honor all gift cards in full, uphold the terms of its international licensing agreements, and pay suppliers in the normal course of business. These motions are typical in the Chapter 11 process and are generally heard in the first days of the case. The Company separately expects to use provisions in the Bankruptcy Code that require suppliers to meet the terms of their pre-existing contracts.
Additional information can be found at www.ARORestructuring.com. Suppliers and landlords may call our support center +1 (917) 877-5966 or toll-free at +1 (855) 360-2999. They also may email suppliers@aeropostale.com or landlords@aeropostale.com.
Aéropostale is advised in this transaction by Weil, Gotshal & Manges LLP, Stifel Financial Corp. and FTI Consulting.
About Aéropostale, Inc.
Aéropostale, Inc. is a specialty retailer of casual apparel and accessories, principally serving young women and men through its Aéropostale® and Aéropostale Factory™ stores and website and 4 to 12 year-olds through its P.S. from Aéropostale stores and website. The Company provides customers with a focused selection of high quality fashion and fashion basic merchandise at compelling values in an exciting and customer friendly store environment. Aéropostale maintains control over its proprietary brands by designing, sourcing, marketing and selling all of its own merchandise. As of May 1, 2016 the Company operated 739 Aéropostale® stores in 50 states and Puerto Rico, 41 Aéropostale stores in Canada and 25 P.S. from Aéropostale® stores in 12 states. In addition, pursuant to various licensing agreements, the Company’s licensees currently operate 322 Aéropostale® and P.S. from Aéropostale® locations in the Middle East, Asia, Europe, and Latin America. Since November 2012, Aéropostale, Inc. has operated GoJane.com, an online women’s fashion footwear and apparel retailer.
