US retailer Ascena files for bankruptcy

Highlights:

• Ascena has 2,800 stores across the US, Canada and Puerto Rico
• A court has granted Ascena approval to access and use its more than $430 million in cash collateral

Pushed to the brink during the Covid-19 pandemic, Ascena Retail Group has become the latest US retailer to file for bankruptcy protection.

The retail conglomerate plans to permanently close a "significant" number of Justice stores – along with certain Ann Taylor, Loft, Lane Bryant, and Lou & Grey stores – during its "restructuring." 

However, the retailer will continue to operate the brands through a reduced number of retail stores and online.

When asked, the Bangladesh Garment Manufacturers and Exporters Association officials said they were unaware of the bankruptcy of the clothing conglomerate.

However, The Business Standard learned that at least four large Bangladeshi apparel factories have business with the clothing company.

The retailer has cancelled orders worth $36,238 and $2,120,000 of Crown Wears (Pvt) Limited and Sparrow Apparels Limited, respectively, during the pandemic.

It has also been learned that the other two Bangladeshi suppliers of the company are Palmal Group and Hameem Group.

Ascena Retail said it received approvals from the United States Bankruptcy Court for the Eastern District of Virginia for its "First Day" motions related to the company's voluntary Chapter 11 petitions filed on July 23.

The Court granted Ascena approval to access and use its more than $430 million in cash collateral.

Also, it approved procedures for store-closing sales, including all Catherines stores, a significant number of Justice stores and a select number of: Ann Taylor, Loft, Lane Bryant, and Lou & Grey stores.

Plus, the Court authorised the company to meet necessary obligations and fulfil its duties during the restructuring process, including the authority to continue payment of employee wages and benefits, honour certain customer and vendor commitments, and otherwise manage its day-to-day operations, as usual, reads a statement.

"We are pleased to have received prompt approval of these First Day motions, which will enable us to continue providing our associates with wages and benefits, maintain our outstanding relationship with our vendor community and serve our customers across our brand portfolio with fashion, inspiration and meaningful experiences every day," said Gary Muto, Ascena Chief Executive Officer said.

As previously announced, Ascena entered into a restructuring support agreement (RSA) with over 68 percent of its secured term lenders. 

The RSA contemplates agreed-upon terms for a pre-arranged financial restructuring plan that is expected to significantly reduce Ascena's debt by approximately $1 billion. 

The company will seek authorisation at its second-day hearing to access the $150 million in a new money term loan from the company's existing lenders.

This financing – combined with cash on hand and cash flow generated by the company's ongoing operations – is expected to be sufficient to meet Ascena's operational and restructuring needs.

Ascena operates e-commerce websites and around 2,800 stores across the US, Canada, and Puerto Rico through its retail brands.