David’s Bridal Inc. filed for bankruptcy with a plan to cut debt by more than $400 million and a deal with lenders that will keep stores open during a reorganization.
The Chapter 11 filing in U.S. Bankruptcy Court in Delaware on Monday listed liabilities of more than $500 million and assets of more than $100 million, according to the filing. The court-supervised restructuring allows the business to keep operating, and thus avoid the calamitous and sometimes tearful impact on brides that often accompanies the collapse of wedding retailers.
David’s signed a restructuring support agreement with its main stakeholders before going to court that could speed the company through bankruptcy in a matter of weeks, and it doesn’t expect major store closures or liquidations. The company had more than 300 outlets in the U.S., Canada, U.K. and franchise locations in Mexico as of mid-year.
The restructuring agreement gives a majority of the reorganized equity to senior lenders, including Oaktree Capital Group LLC. The Conshohocken, Pennsylvania-based retailer asked for court protection after skipping an Oct. 15 interest payment on a loan.
David’s obtained commitments for $60 million in new debtor-in-possession financing from its current term loan lenders and a recommitment of its existing $125 million revolving credit facility to support the company through its restructuring, according to a news release. The retailer aims to emerge from bankruptcy by early January, and says vendors and manufacturing partners won’t be impaired.
Customer Deposits
As of Oct. 31, David’s was holding $32 million in deposits for 82,000 special orders and owed customers nearly $4 million in merchandise or cash through gift cards, an online cash-reward program and store credit, according to court records.
“There is a risk that they may seek to cancel their orders, seek a return of their purchase deposits or purchase merchandise and services from another bridal retailer,” if brides aren’t quickly reassured that deposits and other customer programs will be honored, the company said.
The 68-year-old retailer has a history of bouncing from one owner to the next, accumulating debt along the way. It began its life as a boutique salon in Fort Lauderdale, Florida. Then May Department Stores Co. bought the chain for more than $400 million in 2000 before merging with a rival, which sold it to private-equity firms Leonard Green Partners and TPG Capital for about $750 million in early 2007.
Five years later, its current owner Clayton, Dubilier & Rice took control in a $1.05 billion leveraged buyout that was the industry’s largest at the time, but sales and earnings weren’t enough to carry the debt load.
Marriage rates have fallen since the 1980s, and although the amount that Americans typically spend on weddings has risen, the industry has been thrown into chaos by intense competition, online options and shifting fashion tastes. In April, Gap Inc.’s Weddington Way bridal brand announced plans to close, which followed J. Crew Group Inc.’s decision in 2016 to shutter its wedding-dress business. David’s competitor Alfred Angelo closed its doors in 2017, leaving brides stranded as orders went unfulfilled.
David’s hired Debevoise & Plimpton LLP for legal counsel, Evercore Inc. as its financial adviser and AlixPartners LLP as its restructuring adviser.
