A proposed spinoff of Madewell could turn J. Crew Group Inc. into an example of what can go right for creditors of struggling retailers, instead of an epithet for everything that could go wrong, Bloomberg News reported. Lenders fought hard to retain their claim on fast-growing Madewell in 2017 when J. Crew, strapped for cash and trying to stay solvent, shuffled intellectual property beyond their reach. Now their resolve could pay off: J. Crew is mulling an initial public offering of Madewell, and it has to get permission first from those lenders. They could insist that proceeds be used to pay down their $1.4 billion term loan. “Most lenders assumed the company would do something with Madewell, which is exactly the reason why they negotiated to protect it,” Justin Smith of Xtract Research said in an interview. “The business represents a significant portion of value” and has grown with time, he said. The outcome might be good for J. Crew, too, cutting the retailer’s debt down to about $347 million of notes and making it easier to fund a turnaround.
