Ascena Gets Bankruptcy Court Approval for Sycamore Deal

By Sindhu Sundar on December 8, 2020

The sale of Ascena units including Lane Bryant and Ann Taylor to private equity firm Sycamore is expected to close in the coming weeks.

The Ascena Retail Group Inc.’s $540 million deal with private equity firm Sycamore Partners to sell its Ann Taylor, Loft, Lane Bryant and other businesses got a bankruptcy court’s approval Tuesday.

The companies disclosed the deal last month, notching an agreement that would preserve some 900 stores and thousands of jobs, its advisers have said in court. The proceeds of the sale will go toward paying off the bankrupt retailer’s debtor-in-possession financing, as well as to make distributions to term loan lenders, Steven Serajeddini of Kirkland & Ellis, an attorney for Ascena, told the court at a hearing on Tuesday in Virginia Eastern District Bankruptcy court.

The company also plans to hold roughly $400 million in cash reserves as it works to address claims in the case as it heads toward its plan confirmation hearing

“The business will be owned by a sophisticated retail investor with a track record of maximizing value in a space where others have encountered challenges, so we’re very thrilled with the result,” Serajeddini told the court.

“The key will be to execute efficiently and just as importantly, quickly before the year end, to the extent possible, without in any way disrupting the business and our employees and our customers,” he said.

Judge Kevin Huennekens signed off on the sale Tuesday, repeating a refrain in retail bankruptcies this year — any outcome in bankruptcy court where retailers stay in business is worth celebrating.

“I think it’s wonderful for the employees of these stores, who are not here today,” Huennekens said.

“I think it’s wonderful for the customers who get to continue to shop there, my daughter being one of them, who had been very upset with me because I told her she can’t shop in the stores so long as this case is in front of me,” he added, alluding to a measure to eliminate potential conflicts of interests in his oversight of the case.

“I’m pleased for the landlords, who have the opportunity to have operating entities in their malls around the country,” he said. “There’s a lot of benefit that goes into this.”

A representative for Ascena declined to comment.

The sale is being conducted within the framework of its Chapter 11 plan and restructuring support agreement, Serajeddini said. And it wouldn’t follow the familiar pattern of a bankruptcy auction process, in which an approved bidder is selected as a stalking horse, whose bid would set the bar for any competitors to leap over. Here, the company is proceeding with Sycamore as the buyer for those units it works toward getting its Chapter 11 plan across the finish line.

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