J. Crew Group comes out of bankruptcy

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J Crew has a chance to get his cool factor back.

Mother Society, J Crew Group, emerged from bankruptcy attorney, completing a four-month restructuring process involving significant debt reduction and the acquisition of new owners.

On Friday, the company said it was now “well positioned for long-term growth,” after converting $ 1.6 billion of its $ 1.7 billion debt into equity, making Anchorage Capital Group LLC its majority owner. Anchorage Capital Group is a new YorkRegistered investment advisor founded in 2003. The company manages private equity funds, with a focus on defaulted and leveraged issuers.

Anchorage, along with GSO Capital Partners LP and Davidson Kempner Capital Management LP, among others, provided J. Crew Group with a $ 400 million exit term loan maturing 2027 to support business operations. In addition, the company has access to a new $ 400 million ABL credit facility maturing in 2025, managed by Bank of America NA

As the new owner, Anchorage replaces TPG Capital, which owned 70% of J. Crew Group; Leonard Green & Partners, who held 20 percent, and Millard “Mickey” Drexler, who held a 10 percent stake.

Only a few years ago J. Crew had a special place in fashion – a niche between luxury and mainstream, a mix of whimsical, preppy, classic, colors, mixing patterns and prints, and never too trendy. In her heyday, then-first lady Michelle Obama appeared in public, wearing a J. Crew twinset or J. Crew coat.

The brand has won over different generations, captivating both designer customers and those who buy contemporary and cheaper brands. And the aura was amplified by a group of colorful creatives led for about a decade and a half by Millard “Mickey” Drexler, who catapulted Gap into a well-known brand and founded Madewell and Old Navy, as well as designers Jenna Lyons and Frank Muytjens. .

But they all left the company after a series of strategic and design missteps, quality issues, and a feeling that the branding was fading and customers were disheartened.

Although restructured and out of bankruptcy, the J. Crew brand still needs a turnaround, which has seen its turnover decline for many seasons, which represents a real challenge for its CEO, Jan Singer. The challenge for J. Crew is to find his own voice, and he could further reduce his store base of 170 J. Crew doors and 170 J. Crew Factory outlets, and try to stimulate activity through the J. Crew and the J. Crew Factory websites. She is backed by highly regarded CFO Mike Nicholson, who sources say has been instrumental in keeping the company going through its tough times.

Madewell is much more stable than its sister division. It has a different downtown appeal, a clear, fashionable voice, and a loyal following. It’s laid back, laid back, and rooted in denim. The brand has 142 stores and a website.

In his bankruptcy exit announcement Friday, Singer summarized the upcoming plan for the J. Crew brand. “For the future, our strategy focuses on three main pillars: offering a targeted selection of iconic and timeless products; elevate the brand experience to deepen our relationship with customers and prioritize frictionless shopping, ”she said. “As a reinvigorated company, we are committed to serving the changing lives and styles of today’s multi-faceted consumer and delivering long-term, sustainable results. ”

“We are energized by the upcoming opportunity for the Madewell brand and ready to build on our momentum as we enter a new phase of growth, said Libby wadle, CEO of Madewell. “We will remain focused on maintaining our leadership position in denim and on innovation to create a differentiated shopping experience. We also continue to expand our offering of everyday essentials and are well positioned to lead the casual trend by providing our customers with the clothes they want to wear now. ”

J. Crew Group’s $ 1.7 billion debt stems from a $ 3 billion debt buyout in 2011. Yet with the debt, the coronavirus, a failure to re-engage the client, and an aborted plan to get out of business. rid of Madewell in a separate state-owned company, the group went into bankruptcy last May. The IPO would have raised funds to repay debt, while highlighting the value of the growing Madewell label. It is possible that J. Crew Group will one day revisit an IPO of Madewell, although that is unlikely any time soon given the health crisis and economic climate. Additionally, last year, before the COVID-19 outbreak, Madewell’s impressive growth trajectory appeared to be slowing down.

J. Crew dates back to 1947, when Mitchell Cinader and Saul Charles founded his predecessor Popular Club Plan, which decades later was sold to Fingerhut.

In 1983, the J. Crew catalog was launched by Arthur Cinader, Mitchell’s son, and Arthur’s daughter, Emily Woods. It was Arthur’s gift to his daughter, the catalog muse. Often the models in the catalog looked like Emily. As the brand grew in popularity, attempts to give Emily more publicity never really took off. She had the look but didn’t quite take on the role.

In 1989, the first J. Crew store opened in the South Street Seaport in New York City.

In 1997 the company was purchased by TPG, and in 2003, after several years of average performance, Drexler joined as President and CEO of J. Crew, with an equity stake. Under his leadership, J. Crew also grew into a leading fashion brand with a designer cache but without designer prices.

The company went public in 2006 with a $ 376 million IPO – at the time, the most successful in retail history. That same year, Madewell, a spinoff brand of a former workwear factory in New England, was founded by Drexler, and Emily left the company, ending the family’s involvement.

“J. Crew and Madewell’s ability to combine timeless classics with modern, fresh designs will never go out of style, and we intend to continue the legacy of these two iconic American brands with deeply loyal customers and teams. strong and creative leadership, ”said Kevin Ulrich, CEO of Anchorage. “We see immense opportunity for growth and expansion for each brand and are confident that their strong direct-to-consumer and e-commerce platforms will enable the company to succeed in the evolving retail landscape of today. ”

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