J.Crew Group Inc., a specialty clothing company that includes the J.Crew and Madewell brands, on Monday filed for bankruptcy protection, making it the first major U.S. retailer to do so since the coronavirus reached the country.
J.Crew in a news release said that its parent company, Chinos Holding, filed voluntary petitions to begin Chapter 11 proceedings in federal bankruptcy court in the Eastern District of Virginia. J.Crew lenders will get control of the company and convert about $1.65 billion of its debt into equity, the company said.
Anchorage Capital Group LLC, GSO Capital Partners and Davidson Kempner Capital Management LP will provide $400 million in financing to support J.Crew operations during the financial restructuring.
The company also noted that its e-commerce operation would continue to operate as it undergoes bankruptcy proceedings. Madewell will remain a part of J.Crew Group Inc. as well.
“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,” J.Crew Group CEO Jan Singer said in a statement. “We will continue all day-to-day operations, albeit under these extraordinary COVID-19-related circumstances."
Singer added that "financial restructuring" was taking place with the goal of keeping the company in business for "years to come."
The coronavirus outbreak has led to a mass shuttering of nonessential businesses around the world, as leaders have implemented policies designed to reduce crowds.
The closures have been especially devastating for the retail industry. Sales of clothing and accessories dropped by more than half in March and were expected to be worse for April, according to The New York Times.
In total, retail sales fell by 9 percent in March, according to the Commerce Department, the largest drop on record.
TPG Capital and Leonard Green & Partners purchased J.Crew in a $3 billion deal in 2011. Since then, the company has accrued significant debt. It had long-term debt of $1.7 billion as of Feb. 1, before the pandemic led to the closing of its stores, according to reports.
The company reportedly had 14,500 employees on its payroll last year. It also operates roughly 500 stores, including J.Crew, Madewell and J.Crew factory stores.