While more than a dozen retailers have gone bankrupt in 2017, True Religion and RadioShack are the latest retailers to swing themselves back in the right direction — at least for now.
True Religion officially emerged from Chapter 11 bankruptcy on Oct. 25, less than four months after filing in July. Under a reorganization plan, the company closed 27 stores, reduced its term loans from $471 million to $113.5 million and extended its debt maturities to 2022. Citizens Bank provided $60 million in debtor-in-possession (DIP) financing, and also is providing the exit loan of $60 million to help the retailer.
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RadioShack hasn’t hit this exit stage yet, but it just got a step closer when it received court approval for its Chapter 11 plan of reorganization. General Wireless Operations, the parent company of the RadioShack brand, is seeking to retain the company’s warehouse, e-Commerce site and dealer network operations, as well as 28 stores.
When RadioShack officially exits bankruptcy, the company’s debtors will own the company in its entirety. The retailer will hold $23 million in remaining debt upon exit.
True Religion leaves bankruptcy in a scenario similar to retailers such as Gymboree, Payless, BCBG Max Azria and Rue21, all of which have emerged from Chapter 11 with reduced debt and smaller store footprints. But RadioShack’s situation is more convoluted, stemming from a lawsuit the company has filed against Sprint.
With nearly all its stores out of business, RadioShack’s creditors sued Sprint in June 2017, alleging that the wireless carrier took advantage of the partnership by using confidential data to pinpoint the best locations for Sprint’s own retail stores. The complaint also alleged that the carrier failed to hold up its end of the bargain when it came to providing staffing and inventory. The creditors are seeking $500 million in damages.
While both companies accelerated their own demise by failing to adapt to evolving retail trends, the debt restructuring will give them the chance to free up money to invest in their remaining stores, e-Commerce and supply chain operations.
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