L Brands has decided to spin off Victoria’s Secret rather than sell it, the New York Times reported. The company said last year that it was considering separating Victoria’s Secret from the rest of its business, to test private equity’s interest. Ultimately, sources say, L Brands has decided to split itself into two independent, publicly listed companies: Victoria’s Secret and Bath & Body Works. The deal is expected to close in August. Bids didn’t match what Victoria’s Secret expects to get in a spinoff. L Brands received several bids north of $3 billion, but it turned them down because it expects to be valued somewhere between $5 billion and $7 billion in a spinoff to L Brands shareholders. Analysts at Citi and JPMorgan recently valued Victoria’s Secret as a stand-alone company at $5 billion.
JCPenney landed in bankruptcy court after foundering during the pandemic, but the reorganized retailer now sports a relatively big liquidity cushion and its sales are growing, Bloomberg News reported. The company has more than $1.2 billion of cash and credit availability, interim Chief Executive Officer Stanley Shashoua said in an interview. And the 119-year-old company, whose financials are no longer public, has improved sales since it left bankruptcy in December. “We are very pleased to be running ahead of plan,” Shashoua said. “With improving sales and cash flow, and a strong liquidity position, we are turning our focus from stabilization to growth and we’re excited about JCPenney’s opportunities.” JCPenney, which entered chapter 11 last May as the pandemic collided with its struggling turnaround plan, was part of a wave of retail bankruptcies tied to the pandemic. More than three dozen clothing sellers have sought to reorganize in 2020 and 2021, including Ann Taylor parent Ascena Retail Group Inc., Francesca’s Holdings Corp. and Neiman Marcus Group Inc. Since then, retailers have enjoyed a sales boom as Covid restrictions ease and consumers spend cash from stimulus checks. Data last month showed retail sales hitting a record high in March. Yet they’ve also had to contend with sluggish supply chains and vendors reluctant to advance shipments after taking losses last year.
Authentic Brands Group LLC and the largest U.S. mall operator agreed to buy outdoor clothing and gear merchant Eddie Bauer, adding another well-known brand to a portfolio of retail names, Bloomberg News reported. Authentic and SPARC Group LLC are acquiring Eddie Bauer, including its 300 stores and e-commerce business, from a unit of Golden Gate Capital, according to a Friday statement. SPARC is a joint venture between Authentic and Simon Property Group. Terms weren’t disclosed. The purchase is the latest in a series of retail deals for Simon and Authentic, which once restricted itself to buying just brands rather than brick and mortar presence. They teamed up last year to purchase Brooks Brothers Group and Forever 21 out of bankruptcy and preserve store locations. Another partner in the Forever 21 acquisition, Brookfield Property Partners, converted its stake to equity in Authentic earlier this year. Private-equity firm Golden Gate bought Eddie Bauer out of bankruptcy in 2009, another period that saw a rash of retailers seeking court protection. Sales of outdoor gear thrived during the pandemic as Americans sought diversion from lockdowns and worries over the disease. The new owners plan to keep Eddie Bauer headquartered in the Seattle area and under the leadership of current President Damien Huang. The deal is expected to close by June 1.
The Crabcake Factory at 120th Street in Ocean City will head to auction this month after the business declared bankruptcy back in the fall, having owed thousands to various groups, the Salisbury (Md.) Daily Times reported. Bidders will have until May 19 to place bids on the restaurant's "furniture, fixtures, equipment, royalties and tangible and intangible assets," according to Alex Cooper Auctioneers, organizer of the auction. The opening bid for the restaurant is currently set at $325,000. Interested parties will be able to purchase tangible assets like Crabcake Factory's t-shirts, hats and memorabilia, as well as dining and kitchen equipment, according to the auction company. The restaurant is putting its royalties on the auction block as well, which were valued at about $62,769 in 2019 and $51,580 last year, according to the auction company. Crabcake Factory will also auction off its liquor license, business name, website domain and customer list.
Bankruptcy administrators for defunct retailer Toys “R” Us Inc. are trying to put its former top leaders on trial before a jury over the millions of dollars in bonuses they pocketed days before the company’s plunge into bankruptcy, the Wall Street Journal reported. The proposed jury trial concerns the practice of corporate executives collecting bonuses shortly before their businesses file for bankruptcy, leaving debts unpaid and employees at risk. While the Toys “R” Us bonus payments occurred in 2017, a range of businesses paid similar bonuses during the COVID-19 pandemic as they teetered on the brink of bankruptcy. Companies including rental-car giant Hertz Global Holdings Inc., department store chain J.C. Penney Co. and oil-and-gas driller Chesapeake Energy Corp. all dispensed bonuses shortly before they filed for bankruptcy last year as COVID-19 upended the U.S. economy. The stated rationale for the bonuses was retention — to persuade top executives to stick in their jobs despite their employers’ troubles. By paying bonuses before bankruptcy, the companies got around legal restrictions on such “stay pay,” which kick in once a business files for chapter 11. Creditors largely grumbled in private, but few took action in bankruptcy court to try to get the money back. Now, however, the practice is being hotly disputed in the aftermath of the 2017 bankruptcy of Toys “R” Us — one of the few times the legality of retention bonuses has been seriously tested in bankruptcy court. Although the company’s once-mighty fleet of toy stores is long gone, a bankruptcy trust set up to scrounge up money for unpaid suppliers is still around, as a vehicle for litigation.
As U.S. retailers celebrate a boom lifting one of the pandemic’s hardest-hit sectors, scars left by a year of bankruptcies and delayed vendor payments could threaten to undermine their recovery — just as the crucial back-to-school shopping season begins, Bloomberg News reported. After watching their receivables mount last year, vendors of apparel and other goods demanded change. In order to ship, many began requiring payment upon delivery of the goods or even in advance, according to people with knowledge of the demands, which were made of distressed and healthy clients alike. For merchants, that’s a big cash drain at a time of great uncertainty. The shift comes after retailers spent much of last year delaying payments to preserve cash. Such maneuvers have long been used by struggling chains, but amid the pandemic, even more stable merchants like Macy’s Inc. and Gap Inc. followed suit. An analysis of company financial data showed such buyers took at least two weeks longer to pay their suppliers than the same period the prior year. Vendors are “shell-shocked” after a string of Covid-era bankruptcies left them with large losses, and more concerned about guaranteeing they’ll be paid, said Perry Mandarino, head of restructuring and investment banking at B. Riley. “Late payments are not being tolerated,” Mandarino said.
Hertz Global Holdings Inc. determined a proposal from Knighthead Capital Management and Certares Management to buy the car renter was superior to an existing offer from a rival investor group, Bloomberg News reported. The decision further escalates the brawl to own the car renter out of bankruptcy as travel rebounds and means Hertz’s current reorganization sponsor, a group led by Centerbridge Partners, would need to counter with an updated plan of its own to stay in the running. If the company receives further proposals from either group that meet its qualifications, Hertz would hold an auction on May 10. The Knighthead bid assigned Hertz an enterprise value of $6.2 billion, paid debt holders in full and offered shareholders cash and a chance to purchase warrants that valued their holdings at around $2.25 a share, Bloomberg previously reported.
Krispy Kreme said yesterday that it had confidentially filed with U.S. regulators for an initial public offering, a move that would result in the doughnut chain’s return to the stock market five years after it was taken private, Reuters reported. The company first went public in 2000, but it had to file for chapter 11 protection following financial restatements, investigations into its accounting practices and a plunge in sales at some of its franchisees. It was bought by privately owned JAB Holding Co in a $1.35 billion deal in 2016 when the investment firm was ramping up its bets on coffee and restaurant businesses. The doughnut chain’s move would help it tap into a historic boom in U.S. capital markets, with companies raising $167 billion in 2020, according to Dealogic data, a record that investment bankers expect will be surpassed this year.
Restaurants, bars, caterers and other food businesses devastated by the pandemic began applying Monday for help from a new $28.6 billion federal aid program, but the money isn’t expected to last long, the New York Times reported. Despite a few glitches after thousands descended on the application website for the Restaurant Revitalization Fund when it went live at noon, the process was fairly straightforward, applicants said. That was a welcome change from the technical problems that have plagued other aid programs run by the Small Business Administration, which is managing the restaurant fund. “It was impressively smooth,” said Sarah Horak, who co-owns three bars and restaurants in Grand Forks, N.D. She was able to submit her first application just 10 minutes after she logged on to the website. Congress created the restaurant fund as part of the $1.9 trillion relief bill passed in March. For the first 21 days, the Small Business Administration will approve claims exclusively from businesses that are majority-owned by people who fall into one of the priority groups designated by legislators: women, veterans and individuals who qualify as both socially and economically disadvantaged. That latter group includes those who meet certain income and asset limits and are Black, Hispanic, Native American, Asian-Pacific American or South Asian American, the agency said. Applicants from those groups will be asked to certify their own eligibility for the exclusivity period. That three-week priority period alone is likely to exhaust the fund. The money allocated by Congress “is probably not going to be enough funds, in all likelihood, for the demand that’s out there,” Patrick Kelley, who runs the S.B.A.’s Capital Access office, acknowledged on a webinar last week. He said he hoped Congress would provide more money as needed. The fund offers grants of up to $10 million. The amount each business can receive equals the difference between its 2019 and 2020 gross receipts, minus certain other federal assistance such as loans from the Paycheck Protection Program.
Cosi Inc. is seeking to accelerate its bankruptcy case in order to have a shot at federal funds available to restaurants struggling during the pandemic, Bloomberg Law reported. The fast casual chain hopes to have a hearing on confirming its plan by June 30, according to court filings. Judge Brendan L. Shannon of the U.S. Bankruptcy Court for the District of Delaware already approved Cosi’s request for an expedited hearing on interim approval of its plan disclosures, setting the date for May 11. The Restaurant Revitalization Fund, part of the $1.9 trillion Covid relief package signed into law in March, provides restaurants and bars with up to $10 million from a $28.6 billion fund. The Small Business Administration, which administers the RRF, is now accepting applications for the program. The RRF is likely to be underfunded, meaning “applicants who do not submit their applications as soon as the window for applications opens will not be approved for the grant” because the money has dried up, Cosi said in an April 30 filing. The fast casual chain previously tried for a Paycheck Protection Program loan but was thwarted when the SBA blocked bankrupt borrowers from applying. The restaurant’s push to expedite its plan isn’t surprising, as a shift in SBA policy regarding PPP applications is expected to push small, bankrupt companies toward faster plan approvals. The agency recently said businesses with court-confirmed plans aren’t “presently involved” in bankruptcy and, thus, can apply for the loans. The SBA has taken a similar stance with respect to the RRF, according to agency guidance.
