Another Retail Bankruptcy? Why New York & Company’s Parent Company Is Heading Towards Chapter 11

The parent company of New York & Company, RTW Retailwinds (RTW), could be the next retailer to file for bankruptcy protection.

The company said in Securities and Exchange Commission (SEC) filing on Wednesday that there is “substantial doubt” about its “ability to continue as a going concern and the possibility it may file for bankruptcy under Chapter 11 of the United States Bankruptcy Code.”

RTW cited the impact of the coronavirus, which forced the retailer to close all of its stores in March. The continued store closures led to the furlough of its store employees and the termination of certain corporate personnel, the SEC filing said.

RTW said in the government filing that it “cannot reasonably estimate the length or severity of COVID-19.” The company expects an adverse impact on its financial position during fiscal 2020. RTW said it has already experienced a loss in operations, which has caused a deficit of $164.6 million as of Feb. 1.

The company is looking into its financial options, which could include restructuring or bankruptcy protection. It said that bankruptcy protection is “probable.”

RTW said it missed rent payments for April and May and has not made any recent payments to its vendors. The company may be in default with all of its store leases at the time of the SEC filing but has not received default notices from all its landlords to date.

The retailer also drew down $40 million, and it is “likely in default” under the terms of the loan agreement with Wells Fargo, which it has not received notice from yet. RTW said it does not have any other credit facilities it can borrow under at this time.

RTW also claimed that its inventory assets have “little to no value” as they have become dated and would need to be sold at a discounted rate, which would be further hurt by reduced mall traffic and reduced consumer spending because of the coronavirus pandemic.

RTW expects to begin reopening its stores during the first week of June, using a staggered approach. All of its stores are anticipated to be reopened by the last week of June.

Beyond the store closures, RTW has reduced its corporate headcount by 50% and made additional cost-cutting measures that include reductions in capital spending and negotiations with landlords and vendors to defer payments until the company is able to reopen its locations.

Shares of RTW stock were down 39.2559% as of 2:32 p.m. EDT on Wednesday.