(Bloomberg)—David’s Bridal Inc., No. 407 in the Internet Retailer 2018 Top 1000, is closing in on an agreement with lenders to cut debt through a bankruptcy filing and keep its chain of wedding-gown stores in business, according to people with knowledge of the matter.
The talks involve a restructuring deal that would hand ownership in the reorganized company to senior lenders that include Oaktree Capital Group LLC, said the people, who asked not to be identified because the discussions are private. As part of the agreement, David’s is preparing to file for court protection from creditors as early as next week, they said.
David’s, which has been considering bankruptcy for weeks, doesn’t expect major store closures or liquidations. The Chapter 11 filing would allow the business to keep operating with funding from existing lenders, and thus avoid the calamitous and sometimes tearful impact on brides that often accompanies the collapse of wedding retailers.
Discussions between the company and its creditors are ongoing, with talks revolving around an agreement with first-lien loan holders to provide new money in the bankruptcy that would pay all David’s vendors in full. An out-of-court deal is no longer being considered, and the company would receive a second debtor-in-possession loan facility from its existing asset-based lenders, the people said.
Staying open
“Our financial outlook is strong and we have ample liquidity to meet our key business objectives today and in the future,” the company said in a statement emailed to Bloomberg. “We do not expect this process to materially impact our business or interfere with day-to-day operations or our relationships with customers and vendors. ”
David’s expects to seek a court order that allows it to stay open and fulfill all customer and vendor claims, the people said. The company plans to move quickly through Chapter 11 with the aim to finish before the its crucial selling season after the New Year’s holiday, the people said.
Today marks the end of a 30-day grace period David’s has been operating under after it skipped an Oct. 15 interest payment on its $270 million of 7.75% unsecured notes.
The in-court version being pursued envisions new debtor-in-possession financing from Oaktree and other existing first lien lenders of about $60 million, which is still being negotiated, the people said. Oaktree, based in Los Angeles, is one of the biggest investment firms specializing in troubled companies. Support would also come from cash on hand and financing from asset-based lenders who would roll over their commitments in the restructuring, the people said.
David’s, based in Conshohocken, Pennsylvania and owned by the Clayton Dubilier & Rice buyout firm, was founded in 1950 as a neighborhood bridal salon in Fort Lauderdale, Florida. It now operates more than 300 stores throughout the U.S., Canada, Mexico and the United Kingdom, according to the company’s website.
A representative for Clayton Dubilier & Rice declined to comment. Oaktree didn’t immediately return requests for comment.
Marriage rates have fallen since the 1980s, and though the amount that Americans typically spend on weddings has risen, the industry has been thrown into chaos by intense competition, online options and shifting fashion tastes. Unlike some competitors, however, David’s Bridal is planning to stay open.
In April, Gap Inc.’s (No. 20) Weddington Way bridal brand announced plans to close within the next few months, following J. Crew Group Inc.’s (No. 53) decision in 2016 to shutter its wedding-dress business. David’s competitor Alfred Angelo closed its doors in 2017, leaving brides stranded as orders went unfulfilled.
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