Ann Taylor Parent Company Looks To Secure Loan To Finance Possible Bankruptcy, Wipe Down Debt

After reports indicated that it would close up to 1,200 of its 3,000 stores, Ascena Retail Group (ASNA) is moving one step closer to filing for bankruptcy as it looks to secure a $150 million loan from its lenders to help fund the restructuring process, sources for Bloomberg said.

Through the loan, Ascena, which owns the Ann Taylor, Lane Bryant, Catherines, and Justice brands, is looking to secure debtor-in-possession (DIP) financing with a 2.5% interest loan backed by its lenders, which is subject to change, the sources said.

The DIP financing is also expected to reportedly include about $160 million in existing debt that will be turned into exit filing through the restructuring process.

Ascena, which has about $1.2 billion in loans, plans to wipe this down to $100 million in debt, which will either be paid down or exchanged for equity, the sources for the news outlet said.

The retailer is thought to be close to finalizing its restructuring plans, which will also include the appointment of new board members, including seats for its lenders, Monarch Alternative Capital and Bain Capital, the sources said.

Ascena, like may retailers, has seen its sales plummet as its stores were temporarily closed during the coronavirus pandemic. The company began reopening stores in May but has not seen its store traffic return to pre-pandemic levels.

“COVID-19 has significantly disrupted our business,” said Carrie Teffner, interim executive chair at Ascena, in the company’s COVID-19 business update.

“Despite aggressive actions to preserve liquidity, the pandemic has significantly reduced our earnings and cash flow, resulting in increased levels of debt and deferred liabilities.

“With retail stores making up the majority of our revenue and cash flow, the uncertainty created by COVID-19 requires us to evaluate all options available to protect the business and its stakeholders."

Ascena would join retailers JC Penney, Neiman Marcus, J. Crew, Brooks Brothers, and RTW Retailwinds, the parent of New York & Company, in filing for bankruptcy protection during the pandemic.

Shares of Ascena were trading at $0.81 as of 12:53 p.m. ET, down $0.03 or 3.55%.