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Denim Retailer True Religion Files Chapter 11, Enters Restructuring Agreement With Lenders

July 05, 2017, 08:07 AM
Filed Under: Bankruptcy

Ongoing distress in the retail sector claimed another casualty this week, with True Religion Brand Jeans filing for creditor protection under Chapter 11 in the U.S. bankruptcy court in the District of Delaware. In a court filingthe company stated liabilities in the range of $100 million to $500 million.

The company anounced ina statement that it has secured critical stakeholder support for a comprehensive financial recapitalization of the Company’s capital structure. In signing a Restructuring Support Agreement (RSA) with the substantial majority of its Term Loan Lenders and its Sponsor, TowerBrook Capital Partners, the Company will reduce its debt by over $350 million and convert it into the substantial majority of the reorganized Company’s equity. To implement the terms of the pre-arranged restructuring expeditiously, the company filed a voluntary Chapter 11 petition in the United States Bankruptcy Court for the District of Delaware, and expects it will take 90 to 120 days to obtain confirmation of its pre-arranged plan by the Bankruptcy Court. Throughout the implementation of this process, True Religion will continue to operate its business without interruption to customers, employees and business partners.

True Religion has secured post-petition debtor-in-possession (DIP) financing from Citizens Bank N.A. for up to $60 million. Once True Religion’s plan is confirmed and it achieves the desired deleveraging of its balance sheet under the Plan, True Religion will have sufficient “exit” funding, also provided by Citizens Bank N.A., in addition to its ongoing cash flow, to finance operations post confirmation.

The Plan provides for full payment of claims of True Religion’s continuing trade creditors, which includes continuing vendors, suppliers and landlords. True Religion has taken additional steps in order to ensure a smooth and orderly transition through the Chapter 11 filing. The Company has filed a motion to honor and pay prepetition purchase orders that were issued prior to the petition date, but which have not yet come due. True Religion has also filed a separate motion to pay certain vendor claims that arose prior to the Petition Date, as well as to pay for goods received within 20 days of the bankruptcy filing.

“After a careful review, we are taking an important step to reduce our debt, reinvigorate True Religion’s iconic brand and position the company for future growth and success,” said John Ermatinger, President and CEO of True Religion. “By dramatically improving our capital structure 24 months in advance of our term loan maturity, we will continue business operations as usual and provide our employees and business partners the long-term stability they need, while providing the necessary flexibility to invest in growing our digital footprint, building connections with customers, and improving organizational competencies. I want to recognize our lender community, our private equity owner, TowerBrook Capital Partners, and our financial and legal advisors for negotiating a constructive outcome for the company. Importantly, I want to thank our dedicated employees for remaining focused on the business, and our loyal customers and valued business partners for their support throughout this process.”

Ermatinger continued, “I am also proud to announce that year to date adjusted EBITDA through May at $7.1 million is up 95% versus last year. This improved performance will allow us to enter into the next phase of our recapitalization process with confidence as we continue to execute against our strategic plan and drive the business forward.”

The company’s legal advisors include Wachtell Lipton Rosen & Katz and Pachulski Stang Ziehl & Jones. The company’s financial advisor is MAEVA Group, LLC.

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