Gymboree to Close Up to 450 Stores in Bankruptcy Filing
The Gymboree Corporation signed a Restructuring Support Agreement (RSA) with a majority of its term loan lenders, securing critical stakeholder support for a comprehensive financial restructuring and recapitalization of the company that will reduce Gymboree's debt by more than $900 million, establish a sustainable capital structure and position the company for long-term success. The company plans to close as many as 450 stores.
"The steps we are taking today allow the company to definitively address its debt and enable the management team to turn its full focus toward executing our key strategies, including our product, brand and omnichannel initiatives," said Daniel Griesemer, president and CEO of Gymboree. "The support of our lenders and their new financing commitment underscores their confidence in the company. We have three great brands, strong operations and dedicated employees, and throughout this process, we will continue to deliver superior service to our customers and put them at the center of all we do. We expect to move through this process quickly and emerge as a stronger organization that is better positioned in today's evolving retail landscape, with the right size store footprint and greater financial flexibility to invest in Gymboree's long-term growth."
To facilitate the financial restructuring and recapitalization, Gymboree filed voluntary Chapter 11 petitions with the United States Bankruptcy Court for the Eastern District of Virginia.
Gymboree expects to operate its overall business and the majority of its stores as usual during its financial restructuring. To this end, the company has secured commitments for $35 million in new-money debtor-in-possession (DIP) financing from a majority of its existing term loan lenders and up to $273.5 million in additional DIP financing from the existing lenders under Gymboree's asset-backed loan credit facilities which, in addition to Gymboree's ongoing cash flow, will ensure the company is able to continue meeting its financial obligations throughout the Chapter 11 case.
Gymboree filed its RSA in Bankruptcy Court on June 11, along with a series of first-day motions seeking authority to pay employee wages and benefits, honor customer commitments and otherwise manage its day-to-day operations as usual.
Gymboree expects to pay vendors in the normal course for all goods and services delivered on or after June 11, 2017. Payment for goods and services delivered prior to the filing will be addressed through the Chapter 11 process. It is currently expected that trade vendors that are critical to the company's business will be paid in full for pre-petition claims under the terms of the Plan. The company has also asked for authority to honor the pre-petition claims of its critical foreign and other critical vendors and expects to receive court approval for these requests.
Additionally, Andrew North is stepping down as CFO for personal reasons. North will remain with the company for a period of time as a consultant. Liyuan Woo, director at AlixPartners, has been appointed as interim CFO while the company searches for a replacement for North. James A. Mesterharm, managing director and co-lead turnaround & restructuring services at AlixPartners, has been appointed as chief restructuring officer. "Liyuan and Jim bring significant financial and restructuring experience to Gymboree and we are pleased to have them join the team," said Griesemer. "On behalf of the board, I would like to thank Andy for his leadership, hard work and dedication to Gymboree."
Kirkland & Ellis LLP is serving as the company's legal counsel, AlixPartners LLP is serving as its financial advisor, and Lazard is serving as its investment bank.