Rent the Runway Says Recapitalization Plan Will Support Growth

Fashion rental company Rent the Runway has announced a recapitalization plan that will convert $243 million of its debt into common equity in the company, add $20 million to its balance sheet and extend the maturity of its outstanding debt balance of $120 million to 2029.

In this plan, Aranda Principal Strategies (APS) will convert a portion of its original debt investment into common equity ownership and APS, STORY3 and Nexus Capital Management will contribute new capital, the companies said in a Thursday (Aug. 21) press release.

The transaction is expected to close by Dec. 31, subject to customary closing conditions, according to the release.

“I’m proud that APS, STORY3 and Nexus see tremendous upside potential and are partnering with us to improve our balance sheet,” Rent the Runway CEO and Co-founder Jennifer Hyman said in the release. “Their partnership will allow us to grow in a more sustainable, healthy way and take advantage of the significant market for rental that continues to expand across the U.S.”

Hyman said the company has strengthened its business over the past 18 months, attained “nearly free cash flow breakeven” in 2024 and continued its shift to an asset-light model.

The company ended the first quarter with a record high number of active subscribers—147,000—and achieved a four-year high in customer retention, according to the release.

APS CEO Nicolas Debetencourt said in the release: “Jenn and her experienced management team have made great progress towards a differentiated strategy paired with financial discipline. By recapitalizing Rent the Runway’s balance sheet in partnership with STORY3 and Nexus—who each bring deep sector expertise—we believe the Company is well positioned to drive long-term value as the category-defining leader.”

Rent the Runway announced a restructuring plan in January 2024, a month after releasing earnings that showed its active subscribers down 2%. The plan included cutting 10% of the company’s corporate employees and Hyman taking over the duties of chief operating officer.

PYMNTS reported a month earlier, in December 2023, that ongoing inflationary challenges were leading clothing subscribers to reconsider their subscriptions.

In June, Rent the Runway said it planned to double its inventory this year to hold the interest of subscribers. To reduce the cost of growing its inventory, the company was forming agreements in which brands design apparel exclusively for Rent the Runway or provide apparel at no cost or lower cost in exchange for a share of the rental revenue.