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True Religion survives! Reorganisation plan get court approval


Debt-ridden True Religion Apparel has survived. The jeans giant has won court approval to to exit Chapter 11 with a reorganisation plan which slashes more than 70% of its debt load.

Judge Christopher Sontchi of the US Bankruptcy Court in Wilmington, Delaware approved the plan.

Its private-equity backer, TowerBrook Capital Partners, struck a deal with lenders to swap their debt for equity, which will erase about $386m in debt that was on True Religion’s balance sheet.

That means True Religion will emerge from its three-month bankruptcy with total funded debt of $139.5m. Much of its debt stems from TowerBrook’s $835m leveraged buyout four years ago.

TowerBrook will hold on to a 4% equity stake in the reorganised retailer, court papers show.

“We have a situation that has becoming increasingly rare in the space over the last year – a retailer that is reorganising,” True Religion’s attorney Laura Davis Jones said in court.

On Thursday, True Religion attorney Robert Orgel said the reorganisation plan received overwhelming support from creditors and lenders, who had until late September to cast their ballots.

True Religion’s leading lenders will swap much of its debt for a roughly 90% equity stake in the reorganised company. Unsecured creditors will share in cash pools.

It becomes the latest in a line of retailers to escape the failure trap door, reversing a trend that had seen at least 19 brick & mortar businesses shutter the bulk of their operations since 2014.

US physical store retail jobs have fallen by more than 100,000 so far this year, as more than 6,000 stores have disappeared from the retail landscape.

Until this year, most bankrupt retailers, including American Apparel, Sports Authority and The Limited, were dismantled during their bankruptcy process. However, several creditors, landlords and vendors now see more value left in some retailers, and are seizing on an opportunity to minimise their own losses in the retail rout.

“We’re seeing a set of situations come together in which the constituencies have more interest in the retailer surviving than not,” Holly Etlin, a managing director at AlixPartners told Reuters.

True Religion joins Perfumania to emerge from bankruptcy with at least some of their stores in operation, alongside Payless ShoeSource, rue21, and Gymboree.

This new reality offers grounds for optimism for Toys R Us, which last month became the largest retail bankruptcy in 13 years. Toys R Us has also fought to keep suppliers onboard, accelerating its plan to file for bankruptcy to be able to pay them. It has been making progress in winning back vendors who curbed shipments over payment fears.


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