Nine West and its creditors are close to reaching a deal that would result in the struggling clothing store filing for bankruptcy and selling some of its assets.
Citing people with knowledge of the negotiations, Bloomberg reported news that the deal aims to restructure the company’s nearly $1.5 billion debt. Part of those negotiations would include Nine West selling off parts of the company. The plan is dependent on its asset sales, the proceeds of which will be used to pay off creditors. Nine West would file for Chapter 11 bankruptcy, armed with a restructuring plan that has the support of its creditors. The creditors and Nine West, which have been in negotiations since 2017, are aiming to file before the company’s March 15 interest payment due date.
Bloomberg noted that first-lien lenders will likely be the first to get paid in full. Second-lien lenders will likely get the majority of the equity in Nine West once it’s reorganized, with a small portion of the equity going to those that have Nine West bonds.
Nine West has one of highest leverage ratios among its peers in retail. Its debt is more than 19 times the company’s adjusted earnings, reported Bloomberg, citing Moody’s Investors Service. Bloomberg previously noted that creditors had splintered into three groups, bringing on their own advisers. One set had the help of KKR & Co. and Farmstead Capital Management, while another group decided to use Carlson Capital and CVC Credit Partners. Creditor Brigade Capital Management reportedly hired its own advisers.
If Nine West inks a deal with creditors and does file for bankruptcy, the company would be the latest in a growing list of retailers that have had to file for bankruptcy as they continue to lose business from the expansion of eCommerce. Two retailers who made news in 2017 by doing just that included Gymboree and Toys R Us. Bloomberg said Bon-Ton stores is gearing up for its own bankruptcy in 2018 as well.