Denim retailer True Faith information for chapter in try and slash its US$500 million debt

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By Subrat Patnaik and Jessica DiNapoli

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True Faith Attire Inc, whose closely adorned denim denims have fallen out of style, filed for chapter on Wednesday with a deal in hand to slash its debt of about US$500 million and emerge from court docket safety rapidly as a going concern.

The retailer joins American Attire LLC, Payless ShoeSource Inc and different chains in chapter as buyers more and more purchase on-line, turning away from brick-and-mortar specialty outlets and malls, the place True Faith makes the vast majority of its gross sales.

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In court docket papers, a True Faith government pinned the corporate’s monetary difficulties on the expansion of “athleisure,” a transfer away from denim to informal sportswear outdoors of the gymnasium. True Faith grew to become part of standard tradition a decade in the past as celebrities donned the denim and hip hop artists cited the model in songs.

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Underneath True Faith’s plan, its lenders will obtain a lot of the fairness within the reorganized firm, whose debt load will fall by US$350 million to US$140 million. The corporate goals to exit chapter in about 4 months, based on court docket papers.

True Faith’s proprietor, non-public fairness agency TowerBrook Capital Companions, has additionally accepted the corporate’s chapter plans.

“We’re taking an vital step to scale back our debt, reinvigorate True Faith’s iconic model and place the corporate for future progress and success,” True Faith Chief Govt John Ermatinger stated in a press release.

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The corporate’s restructuring plan gives for full fee of claims of its persevering with commerce collectors, which incorporates distributors, suppliers and landlords.

True Faith has 128 retail shops, whose gross sales make up virtually 75 per cent of its whole web gross sales for its most up-to-date fiscal 12 months. The corporate additionally sells its denim by means of malls together with Nordstrom, Bloomingdale’s and Sakes Fifth Avenue.

The Manhattan Seaside, California-based retailer secured a debtor-in-possession (DIP) mortgage from Residents Financial institution for as much as US$60 million.

The premium denim maker filed its Chapter 11 petition in U.S. chapter court docket in Wilmington, Delaware.

Reuters reported in October that the retailer had employed a authorized adviser to discover a number of debt restructuring choices.

© Thomson Reuters 2017