UPDATE: January 22, 2021: Francesca’s won court approval of a deal to sell itself to TerraMar Capital and Tiger Capital following an auction for the retailer in Chapter 11, according to a securities filing.
TerraMar has committed to keeping at least 275 Francesca’s stores open, the fashion retailer said in a press release. The parties expect the transaction, which includes $18 million in cash for Francesca’s, to close by the end of January.
Francesca's will close another 97 stores, on top of the 140 it previously said would shutter, according to documents filed Friday at the U.S. Bankruptcy Court for the District of Delaware.
Unless another suitor outbids stalking horse TerraMar Capital, the retailer will be sold to the private equity firm for $23 million, including $17 million in cash (plus the assumption of gift card liabilities up to $3.1 million and previously deferred payroll taxes up to $3 million), according to other court documents.
The disclosures came a day after the retailer filed for protection under Chapter 11, and the same day that Nasdaq warned its stock would be delisted from the exchange on Dec. 15 — which Francesca's won't appeal, according to a document filed with the Securities and Exchange Commission.
In a press release last week announcing its bankruptcy filing, Francesca's noted that "558 boutiques remain open for business."
Its plans for a drastic reduction of that fleet come despite efforts by landlords and tenants alike to salvage leases at a time when traffic remains low and consumers do more shopping online. The pandemic-related store lockdowns that were mandated in the spring have been lifted in almost all areas of the U.S. Due to ongoing risk of infection, however, many consumers remain reluctant to shop indoors and many stores and malls continue to enforce occupancy limits.
In late November, A&G Real Estate Partners, whose retail clients include Francesca's, said the firm had successfully renegotiated 13,653 leases, securing lower rents on 9,550 of those and terminations on 950, according to an emailed press release.
"The pandemic tested both our core teams as well as our consultants," A&G co-President Andy Graiser said in a statement. "They have all worked seven days a week since the virus hit to catalyze real estate strategies for our clients, whether right-sizing their operations or reorganizing under Chapter 11. It's an ongoing task that has far exceeded anything we could have imagined."
Francesca's largely mall-based stores, which it calls "boutiques," are smaller than most. But the closure of so many specialty stores is more bad news for traditional shopping centers, where traffic was weakening even before the pandemic. Department stores, which enjoy pride of place as mall anchors, have increasingly left that role in favor of family-style strip centers or a smaller footprint.
That makes it easier for inline retailers to abandon their leases, thanks to clauses that allow alterations or nullification of a lease if a mall anchor, which is supposed to drive traffic, departs.