(Bloomberg)—Fullbeauty Brands, the women’s plus-size clothing retailer owned by Apax Partners and Charlesbank Capital, has lined up support from creditors for a pre-arranged bankruptcy that would hand control to senior lenders.
The Chapter 11 bankruptcy would cut about $900 million of debt, Fullbeauty said in a statement Thursday. The filing allows the company to keep operating while it works out a plan to turn around the business and satisfy its debts. Fullbeauty expects to make the U.S. bankruptcy filing by about Jan. 24 in Manhattan, with completion of the process in early 2019.
About 87.5% of the common reorganized equity would go to first-lien lenders, 10% to second liens, and 2.5% to the sponsor, according to a person with knowledge of the plan, who wasn’t authorized to speak publicly.
Existing lenders will provide a new $30 million term loan, which will help ensure suppliers and vendors keep getting paid, Fullbeauty said. More than 99% of the first-lien lenders have agreed to support the restructuring plan, along with all of the first-in, last-out lenders and 95% of the second liens.
Company representatives didn’t elaborate beyond the statement.
Fullbeauty has faced increasing competition from Amazon.com Inc., No. 1 in the Internet Retailer 2018 Top 1000, and retailers including Kohl’s Corp. (No. 18) and Walmart Inc. (No. 3) that have entered the plus-size clothing market, which the chain defines as women’s sizes 12 to 44. Financial results were also hurt by low stocks of basics clothing, heavy discounting and inventory clearance, Bloomberg reported.
The New York-based retailer told investors in late October it wouldn’t make an interest payment on a $345 million second-lien term loan and invoked a five-day grace period, Bloomberg reported. A forbearance agreement with creditors followed in November, along with a tentative accord to rework the company’s debt and cut leverage.
Earlier this year, the company hired Kirkland & Ellis and PJT Partners Inc. to help it evaluate options for managing its $1.2 billion debt load, and added AlixPartners as its restructuring adviser.
Signers of the support agreement include Apax Partners, represented by Simpson Thacher & Bartlett, and Charlesbank, represented by Goodwin Procter, according to the statement. Also included were the FILO Lenders, a group of first lien lenders represented by Ducera Partners and Milbank, Tweed, Hadley, & McCloy as well as an ad hoc group of second-lien lenders represented by Houlihan Lokey Capital and Paul, Weiss, Rifkind, Wharton & Garrison.
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