Chapter 11 Watch: Aéropostale’s Savior, PacSun’s Win And A Dour Holiday Shopping Season

Failing Retail Wheel And Deal
The latest in Chapter 11 filings.

It was a long, windy and oftentimes bumpy road of bankruptcy that beleaguered teen retailer Aéropostale had to trod.

After filing to reorganize in May, then seeing some potential life-saving deals fall through and with the threat of liquidation looming, Aéropostale’s future did not look all too bright.

But a consortium of retail property landlords, including Simon Property Group Inc., General Growth Properties Inc., liquidators Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC and licensing firm Authentic Brands Group, swooped in at the last minute to win ownership of the struggling retail chain in a bankruptcy auction with a joint offer of $243.3 million.

It now looks as though Aéropostale maybe has finally made it to the other side after Sycamore Partners, the retailer’s largest debt holder, pushed hard to liquidate the company.

A bankruptcy court still has to sign off on the agreement, which is scheduled for a hearing on Sept. 12.

But the new Aéropostale will be a significantly smaller retailer than the pre-bankruptcy version, keeping open a total of 229 of the retailer’s 700 or so remaining stores.

Simon Property Group Inc. and General Growth Properties Inc., two of the largest mall property owners in the U.S., already serve as landlords for many Aéropostale stores.

Still, industry experts believe that the revived Aéropostale could be a win-win for the retailer and its new owners, as the teen retailer gets to stay open (which means thousands of employees get to keep their jobs), while the new ownership group will continue to get rent for the remaining Aéropostale locations and reap the benefits of the company’s sales as well.

Another bankrupt teen retailer, PacSun, appears to have had a much easier time going through its bankruptcy proceedings.

Bloomberg reported this week that PacSun has emerged from bankruptcy under the ownership of private equity firm Golden Gate Capital, which plans to shrink the retailer’s current outstanding debt from $88 million to $30 million and invest another $20 million in the company.

PacSun was operating 590 retail locations when it filed for bankruptcy in April but only had to close about 20 of them as it reorganized in bankruptcy.

Golden Gate Capital said it believes PacSun has positioned itself for success in the future as the premier California lifestyle brand.

“PacSun has successfully transitioned beyond its historical base of action sports brands to what we believe is the most relevant and coveted mix of brands celebrating the California lifestyle,” Josh Olshansky, Golden Gate Capital’s managing director, said in a statement in April. “We believe in the future of the company, as reflected by our significant injection of new capital into the business.”

And retailers are still freaking out about the bankruptcy of the world’s seventh-largest shipping company and the impact it could have on the global shipping industry in advance of the holiday shopping season.

South Korea’s Hanjin Shipping filed for bankruptcy protection on Aug. 31, and it’s been a bumpy ride for a lot of goods that need to travel across seas ever since.

On Tuesday (Sept. 6), The Wall Street Journal reported that a U.S. bankruptcy court judge placed the company under the protection of U.S. bankruptcy laws, even though the company filed for bankruptcy in Seoul Central District Court. That protection will, at least temporarily, protect Hanjin from having any of its assets seized by creditors.

But there is still the matter of about 80 Hanjin ships loaded with some 500,000 containers carrying an estimated $14 billion in cargo still stranded at sea until the finer workings of the shipping giant’s international bankruptcy proceedings can be worked out — to say nothing of future shipments that retailers may have already ordered and were relying on receiving.

With the holiday shopping season right around the corner, many retailers are afraid they won’t receive all the goods they ordered or still planned to order in time this year.

Hanjin ships about 7.8 percent of the U.S.’s trans-Pacific trade cargo.

“Retailers’ main concern is that there is millions of dollars’ worth of merchandise that needs to be on store shelves that could be impacted by this,” Jonathan Gold, vice president of supply chain and customs policy for the National Retail Federation, said in a statement. “It is understandable that port terminal operators, railroads, trucking companies and others don’t want to do work for Hanjin if they are concerned they won’t get paid. However, we need all parties to work together to find solutions to move this cargo so it does not have a broader impact on the economy.”