UPDATE: February 6, 2019: The apparel retailer has put a deadline of Feb. 17 for finding a buyer, according to court documents. After that point, if the apparel retailer does not have "a firm commitment" from a going concern stalking horse bidder, it will pursue a full chain liquidation.
Charlotte Russe Holdings (and its subsidiaries) on Monday said on Feb. 3 it filed for relief under Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware.
The company intends to shutter 94 of its stores and pursue a going-concern sale of the business and its assets, according to a company press release. Charlotte Russe also said it has received a commitment for debtor-in-possession financing in the maximum amount of $50 million, which awaits court approval.
Charlotte Russe and Peek stores and their online platforms are still open and serving customers, the company said. Customary motions are already on file seeking authorization to operate business in the ordinary course during the proceeding, including the authority to pay employees and vendors, pay taxes and "honor certain customer programs," the company also said.
This filing has been anticipated since the start of the year, although concerns arose well before.
The apparel retailer's "very weak" operating results through the third quarter last month led financial agency S&P Global to downgrade both its issuer credit rating and its issue-level rating on its term loan facility. The retailer has also maintained its spot on Fitch's "Top Loans of Concern" list, which indicates a significant risk of default. Fitch's list includes debt that has deeply speculative-grade ratings, and "adverse market information or events and insight from sector analysts are also factors," according to a note emailed to Retail Dive.
As a mall-based, teen apparel retailer owned by private equity, Charlotte Russe joins several other embattled retailers whose debt loads hamper a turnaround. In 2009, at the time of a $380 million take-private buyout by Advent International, Charlotte Russe operated more than 500 stores in the contiguous 48 states, Hawaii and Puerto Rico and its website (which is still operational). But at that point it was already facing stiff competition, particularly from fast-fashion retailers like Forever 21 and H&M. In 2016, the company acquired children's brand Peek Kids, its 10 stores and e-commerce site.
Charlotte Russe's struggles were also emerging then: Fitch in 2016 listed the company's debt on its "Bonds of Concern" list, and Retail Dive flagged it as a retailer that could go bankrupt in 2017.
What seemed inevitable has now finally befallen the retailer. For the Chapter 11 proceedings, Cooley LLP is serving as legal counsel, Berkeley Research Group is financial advisor and Guggenheim Securities, LLC is its investment banker, according to the release.