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Nine West Debt Restructure Plan Likely To Include Bankruptcy Filing

Nine West Holdings and its creditors are nearing a deal to restructure approximately $1.5 billion in debt, according to a report from Bloomberg. As part of the reorganization, Nine West would file for Chapter 11 bankruptcy and sell off divisions of its business. The goal is for Nine West to file for bankruptcy before a March 15 interest payment, the report said.

Nine West and its private equity owner Sycamore Partners have declined to comment on the report. The retailer doesn’t have any debt due until 2019, but by then it will have to refinance roughly $1 billion.

Pursuing a Chapter 11 filing would give Nine West more time to repay creditors — an obstacle many private equity-backed retailers, including Payless ShoeSource, Toys ‘R’ Us and Gymboree, have run into as debts mature.

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Nine West has been a prime candidate for bankruptcy for more than a year. The apparel retailer has been performing poorly in a market now dominated by fast fashion players. Both Fitch Ratings and Moody’s Investor Services listed Nine West as a retailer with a significant risk of defaulting in 2017. Some retailers named in both lists filed for bankruptcy in 2017, including GymboreeRue21True Religion Apparel and Charming Charlie.

Nine West has one of the highest leverage ratios — a metric used to assess a company’s ability to meet its financial obligations — in retail. The retailer’s debt load is 19X higher than its adjusted earnings, according to Moody’s. Nine West has been negotiating with its creditors since at least 2017, when lenders and bondholders organized with advisers. The company brought in financial advisory firm Lazard in May 2017 to evaluate a long-term capital structure solution.

If the deal is successful, Nine West’s first-lien (highest priority) lenders would likely be repaid in full, with second-lien lenders receiving equity in the reorganized company. The company’s bondholders would also receive another, smaller piece of equity.

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