While retail bankruptcies have been the talk of 2017, Gymboree is the latest retailer to exit from Chapter 11, completing its financial reorganization plan and falling under new ownership.
Only four months after filing for bankruptcy, which came in the wake of a missed $171 million interest payment, the children’s apparel retailer eliminated more than $900 million of debt from its balance sheet and is liquidating 330 underperforming stores.
To inject capital into the company, Gymboree secured an $85 million new term loan from Goldman Sachs and access to a $200 million credit facility from Bank of America Merrill Lynch.
As a result of the restructuring, Gymboree’s existing lenders Searchlight, Apollo Global Management, Oppenheimerfunds, Brigade Capital Management, Marblegate, Nomura Securities International and Tricadia Capital Management now take shared ownership of the retailer from former owner Bain Capital.
Gymboree has taken similar paths to specialty retailers Payless, BCBG Max Azria and Rue21, which emerged from bankruptcy within four months of filing, reduced massive debt loads and closed 700, 170 and 400 stores respectively. Typical of many specialty retailers in recent years, Gymboree noted in its bankruptcy filing that it had fallen victim to adverse macro-trends such as the growth of online sales and traffic declines at malls.
The retailer’s existing debt surely didn’t help matters as these trends picked up. Many privately-owned retailers such as Gymboree and Toys ‘R’ Us are struggling to dig out of massive financial holes as a result of private equity buyouts that saddled the companies with significant debt.