Clothing retailer FULLBEAUTY Brands Inc. announced that it has entered into a comprehensive Restructuring Support Agreement with key stakeholders, including its equity sponsors, Apax Partners and Charlesbank Capital Partners, holders of 100% of its first-in, last-out term loan claims, holders of over 99% of its first lien term loan claims, and holders of over 95% of its second lien term loan claims. To implement the financial restructuring contemplated by the RSA, the Company expects to file voluntary petitions for reorganization pursuant to chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York, following expiration of the solicitation period on or about January 24, 2019.

The Company has negotiated agreements with certain of its existing lenders to provide FULLBEAUTY access to $30 million of additional liquidity from a new-money term loan. This incremental liquidity will ensure that suppliers, vendors and other business partners are paid in a timely manner for authorized goods and services provided during and after the chapter 11 process, in accordance with customary terms. 

According to sources cited by The Wall Street Journal, about 87.5 percent of the common reorganized equity would go to first-lien lenders, which includes Oaktree Capital Group LLC and Goldman Sachs Group, while 10 percent would go to second liens, and 2.5 percent to the sponsor.

The restructuring transaction contemplated by the RSA will reduce FULLBEAUTY's outstanding indebtedness by approximately $900 million, strengthening the Company's balance sheet and enhancing financial flexibility going forward. The transaction is expected to close in early 2019. The RSA represents the commitment of the RSA Parties to support a comprehensive restructuring of the Company's balance sheet. It comes as the Company continues to make significant progress in its turnaround, which started with the arrival of a new senior management team and continues with their ongoing efforts to improve merchandise assortment, expand distribution, bolster the customer experience, rationalize costs and transform FULLBEAUTY's culture.

Emilie Arel, Chief Executive Officer of the Company, said, "The agreement with our lenders and equity holders represents their support of FULLBEAUTY's future success. We are fortunate that FULLBEAUTY has highly relevant brands and a dedicated customer base and I am confident that the outcome of this process will be a more sustainable and stronger company for our customers, employees, vendors and business partners."

FULLBEAUTY will continue to operate in the normal course during the restructuring process. The Company continues to have adequate liquidity to meet its financial obligations to vendors, suppliers, and employees, and expects to continue making payments to these parties without interruption in the ordinary course of business. Its websites and social media pages remain open for business and the Company will continue to receive goods and ship customer orders as usual.

The RSA Parties include, among others:  (i) Apax Partners represented by Simpson Thacher & Bartlett LLP, (ii) Charlesbank Capital Partners represented by Goodwin Procter LLP, (iii) the FILO Lenders, (iv) an ad hoc group of First Lien Lenders represented by Ducera Partners LLC and Milbank, Tweed, Hadley, & McCloy LLP; and (v) an ad hoc group of Second Lien Lenders represented by Houlihan Lokey Capital Inc. and Paul, Weiss, Rifkind, Wharton & Garrison LLP. Kirkland & Ellis LLP, PJT Partners and AlixPartners are the advisors for the Company.