David’s Bridal confirmed that it will file for Chapter 11 bankruptcy in the near future, marking the latest bankruptcy in a year that has seen Sears, Toys ‘R’ Us, Mattress Firm, Bon-Ton Stores and Claire’s either liquidate or restructure their businesses.
Scott Key, CEO of David’s Bridal, asserted in a video on the retailer’s site that the company’s restructuring “guarantees that customers won’t see any change in the service level they’ve come to expect.” The company’s 300 stores will continue to operate throughout the bankruptcy, and in-store and online orders and appointments will not be impacted. The retailer hasn’t been in liquidation discussions, according to the Wall Street Journal.
Key’s words of reassurance are important, since there is precedent in the wedding retail space for bankruptcy to crash customers’ expectations. In July 2017, bridal retailer Alfred Angelo closed up shop and filed for Chapter 7 bankruptcy, a move that left hundreds of brides without dresses even after paying for them. After closing unexpectedly, the store told its customers that if they hadn’t received their dress yet, they wouldn’t receive them. Shoppers could file a claim if they believed they were still owed money from a past purchase.
The bankruptcy is part of a deal the wedding gown retailer has reached with its lenders to reduce its debt by more than $400 million. The retailer initially had until Nov. 14 to make an interest payment that it had skipped last month after initial negotiations with three creditor groups stalled, highlighting the need to restructure the business. Current lenders are offering $40 million to help support the retailer’s operations throughout the bankruptcy process.
$760 Million Debt Load Led To Minimal Digital Investments
Private equity firm Clayton, Dubilier & Rice acquired David’s Bridal in 2012 for approximately $1.05 billion. Like many private equity-owned specialty retailers (most recently Toys ‘R’ Us, Claire’s and Neiman Marcus), David’s Bridal has struggled to keep up in a swiftly changing shopping landscape while trying to pay down its debt load, which is at approximately $760 million, according to Bloomberg.
It’s not as if the retailer didn’t try to bolster its digital side, acquiring online gift company Blueprint Registry in August 2018. But Moody’s pointed out in its 2018 Retail Outlook that due to high debt service demands, David’s Bridal is at a disadvantage when it comes to improving overall omnichannel and digital shopping experiences and building out shorter product development cycles.
Moody’s recently downgraded David’s Bridal from its “Caa3” classification — rated as poor quality and very high credit risk — to “Ca” — meaning the company is highly speculative and likely nearing or in default, but with some possibility of recovering principal and interest.