J Crew is reportedly in talks to lower its $2 billion debt as sales at the brand decline.
According to an article on Reuters, J Crew is in talks with creditors to lower its approximately $2 billion debt as sales decline. The company is looking at new ways to take advantage of the low trading price of some of its debt.
J Crew is also planning to move the rights to its brand into a separate subsidiary as part of its preparation for negotiating with its creditors. Doing so would give the company various options to lower its debt. The company could raise new financing to buy back its loans and bonds at a discount. It could also offer creditors the chance to move into the new debt holdings.
Prices on J Crew’s loans declined from 64 cents per dollar to 50 cents per dollar after one of the company’s banks told loan holders about the brand’s plans. The company’s bonds were trading at 36 cents per dollar.
Rumors of J Crew possibly lowering its debt began circulating in October when the company began speaking to consultants at McKinsey & Co. about a strategy to increase sales and profits.
The brand’s sales have been declining as many customers do their shopping online instead of in stores. Customers have also been disappointed as the brand has been cutting back on the quality of its clothing.
What’s more, the brand discontinued its bridal line, which also disappointed a lot of its customers, and was late in releasing athleisure clothing.
In December, J Crew reported a decline in sales by 4% to $569.8 million for Q2. Net loss also decline to $8.6 million, compared to $13.6 million in the same quarter last year. Same store sale declined by 8%. The company had about $2 billion in debt and $49.2 million in cash as of July 30th.
J Crew declined to comment.
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