Clothing Retailer Rue21 Files For Bankruptcy, Many More On Deck

Tyler Durden's picture

This time Fitch was right. One month ago the rating agency listed 8 retail names that were most likely to file for bankruptcy next, just over a month later 1 out of the 8 was down, when teen clothing retailer Rue21 filed a prepackaged bankruptcy on Monday night in Pennsylvania bankruptcy court.

In its bankruptcy petition, the company which retained Kirkland & Ellis as legal advisor, Rothschild as financial advisor, and Berkeley Research as its restructuring advisor, listed both assets and liabilities in the range of $1 to $10 billion.

The restructuring process, during which the company will operate as normal, will lead to company's "transformation into a more focused and highly performing retailer" the company announced in a press release, and added that as part of its restructuring process, it had "entered into a Restructuring Support Agreement (RSA) with certain of its stakeholders that confirms the support of the Debtors' key constituents for the Debtors' restructuring process and contemplates, among other things, an emergence from chapter 11 proceedings in the fall of 2017 with a significantly deleveraged balance sheet.  In particular, lenders holding 96.8% of the Company's secured term loan, bondholders representing 60.2% of the Company's issued and outstanding unsecured notes, and the Company's majority shareholder each executed the Restructuring Support Agreement."

The Company has also reached agreements, subject to the approval of the Court, to obtain up to $125 million in ABL debtor-in-possession financing from its existing ABL lenders and up to $50 million in new money term loan debtor-in-possession financing from a subset of its existing term loan lenders.  This financing is intended to provide the Company with the liquidity necessary to support its ongoing business operations during the financial restructuring process

Melanie Cox, Chief Executive Officer of rue21, said "These actions are being undertaken with the goal of strengthening the Company's balance sheet, achieving a more efficient cost structure, and concentrating resources on a tighter retail footprint in order to pave the best path forward for rue21. Even in a challenging environment, we are fortunate that rue21 has highly relevant brands, an enthusiastic and loyal customer base, and hundreds of highly performing stores. The agreement with our lenders represents their confidence in rue21's future success even at a time of significant retail industry change. Looking ahead, I am confident that the outcome of this process will be a stronger and more sustainable rue21 for our customers, vendors and business partners."

The company also noted that last month it began the process of closing approximately 400 underperforming stores in its 1,179 store fleet in order to streamline operations, however it warned that it "may evaluate additional store closings as it continues to manage its real estate lease portfolio."

Rue21’s bankruptcy filing lifts Fitch’s U.S. retail trailing 12-month institutional leveraged loan default rate to 1.7% from 0.9%. An impending bankruptcy from Gymboree would further lift the retail TTM to 2.7%, Fitch said. The rating agency expects a flood of future defaults, and forecasts the retail loan default rate at 9% on roughly $6 billion of defaults, though it concedes that "the fate of Sears Holdings and the resolution of J. Crew Group’s bond exchange could materially alter the projection."

It also noted that the high yield retail default rate is also expected to finish 2017 at 9%, with more than $4 billion of likely defaults

Additional Fitch revised its retail concern list, which now lists eleven retailers on Fitch’s loans and/or bonds of concern lists, which compile issuers with a significant risk of default within the next 12 months, including:

  • Sears Holdings
  • Gymboree
  • Nine West Holdings
  • 99 Cents Only Stores
  • True Religion Apparel
  • Charlotte Russe
  • Charming Charlie
  • NYDJ Apparel
  • Vince.A
  • Claire’s Stores
  • Chinos Intermediate Holdings (J Crew Group)

Finally putting the 2017 announced store closings in context, here is a chart we showed one month ago. We expect many more names will soon be added to this running total.

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Squid Viscous's picture

i remember trying to short this POS years ago when asshats like Cramer were pimping it,

full circle, bitchez

Buck Johnson's picture

This fake economy is going down, all these stores going under is because no one is buying period.  And when Walmart is having trouble you know that things are bad.  But the hugs and kisses keep on going.

 

yogibear's picture

The more failures and bankruptcies the higher all the stock indexes go. More failures and troubles translates to central banks bidding stocks higher. They will not and cannot slow true price discovery. Shorting paper PMs. So many plates spinning. Infinite debt is the money changer's way.

Max out debt and buy PMs, then default!

Silver Savior's picture

Already did. Trying to get new credit lol.

Silver Savior's picture

It's ok. Consumerism can all go to hell. I want to get back to basics like the local town stores.

Give Me Some Truth's picture

Good luck with your wish. Retail has moved to bigger cities. The sidewalks are being rolled up in almost all smaller towns. Who is going to start a "local town store?" Good luck to them too.

Give Me Some Truth's picture

For another anecdote about the true state of the economy, check out store sales and store traffic at Wal-Mart on the days that the "food stamp" cards are replinished ... Then compare typical store sales and customer traffic in weeks after the "food stamp" funds have been spent.

peopledontwanttruth's picture

Bingo my wife and I didn't even go out on the 3rd-4th of the month

peopledontwanttruth's picture

Soon the only retailer to make it will be

"Burlap and Beyond"

Grab yourself some complimary Ashes and Dirt at the door.

ZeroLounger's picture

I dunno, from the looks of the LandWhales around here, Tent City must be doing a great business.

peopledontwanttruth's picture

Hilarious we've been fattened and ready for slaughter

ToSoft4Truth's picture

Asshats like Cramer made a bundle pumping.  Cramer's net worth is over $100,000,000 - a real asshat.

 

"He was born into a Jewish family in a suburb of Philadelphia. "

Squid Viscous's picture

he's still a fucking clown, so what's your point?

that he's a rich clown? alot of them to pass around,

sgt_doom's picture

 

 

Simple Arithmetic, Anyone?

There has been a retail meltdown happening for quite some time now --- stores closing across the nation --- bankruptcies declared --- too many negative performance quarters reported.

The glib pundits report the rise of Amazon as the answer --- the more learned observers, who can do the math, realize that this easy answer doesn't begin to fully explain the situation. Others have explained that too many retail store chains have been the target of private equity/leveraged buyouts, the capitalist jackals who do asset stripping of businesses like ravaging plagues of locusts across the land!

This too was a major factor, but again doesn't fully explain the reality. All those jobs created --- all this great new employment, yet why all the Main Street difficulties and problems?

Except --- a study from Rutgers from a few years back suggests that almost one-third of the new jobs supposedly created could not be verified as existing --- and if they don't exist, then those job creation numbers were just so many fairy tales!

A study from Alan Krueger and Lawrence Katz suggested that many, if not the large majority, of new jobs created were part-time jobs, temporary jobs, etc., insufficient to feed any real recovery!

Extrapolating from these studies one could easily predict the situation we now observe with the retail stores across the land; the constant bludgeoning of Main Street! Dramatically increasing inequality --- between 1979 to 2012, 84% of economic growth went to the top 1% --- means a shrinking number of well-to-do consumers being responsible for the majority of store purchases: one person might purchase fifty pairs of socks for the year, when once there were a thousand consumers purchasing ten pairs apiece per year --- a dramatic drop in store purchases!

Add to this the banking reality where the majority of major loans were to corporations for their stock buybacks --- an activity once outlawed as stock market manipulation --- and many small-to-medium sized businesses were squeezed out of the market!

Then factor in the so-called Dodd-Frank "financial reform" legislation, which acted to destroy almost two thousand small and local banks --- which routinely serviced small and local business activity --- while reinforcing the monopolies of the top five banks which control 90% or more of the credit derivatives (fantasy financed WMDs).

A sound recipe for economic disruption of the 90% and inflating the financial assets of the top .01%.

No rocket science involved, just simple arithmetic.

There is a wonderful passage in the recently published book by Brian Alexander, titled: Glass House.

(Glass House, p. 291, by Brian Alexander)

"Corporate elites said they needed free-trade agreements, so they got them. Manufacturers said they needed tax breaks and public money incentives in order to keep their plants operating in the USA, so they got them. Banks and financiers needed looser regulations, so they got them. Employers said they needed weaker unions - or no unions at all - so they got them. Private equity firms said they needed carried interest and secrecy, so they got them. What did Lancaster and a hundred other town like it get? Job losses, slashed wages, poor civic leadership, social dysfunction, drugs." 

 

 

Give Me Some Truth's picture

And you can't say that the press doesn't know about the "apocalypse" occuring in retail. The advertising sales managers at newspapers, magazines, radio stations, TV stations know exactly what is happening. Someone in the "newsroom" could just interview someone in "sales" to find out the true state of the retail economy.

peopledontwanttruth's picture

They think we're lost after 20 when we run out of fingers and toes

Handful of Dust's picture

 

"8 years of Obamanomics has consequences, Bitchez."

 

~ Soweeto bin Bama

Silver Savior's picture

It was not about Obama. The president does not have that kind of power. People spend based on their outlook. Like when Trump made it to office I knew we were doomed so I cut my spending way down to the bare minimum to hedge against his recklessness.I felt a lot safer and thought I had a future under Obama.

Sam Spayed's picture

It's the obama malaise fool. It's hard to turn around.

peopledontwanttruth's picture

Kinda reminds you of the kids who would take a dump in a paper bag, ring the doorbell and light it on fire for the homeowner to step on and put it out. While he was bad he only took the baton from the other clown

aliens is here's picture

Please let Macy's go bankrupt soon.

Silver Savior's picture

Yeah, the snooty people shop there. It's like they are well off but  not quite rich enough to go to Neiman Marcus. Macy's is like entry level. lol.

DrZipp's picture

I get 5-6 color adverts from Macy's every week.  Thick, seasonal catalogs every week, with perfume inserts.  It cost me 50 cents to send a letter and these fucks get to spam my mailbox for almost nothing every week of the year.

peopledontwanttruth's picture

Save them you'll be able to sale them later for toilet paper.
I'm not kidding either

peopledontwanttruth's picture

What you gunna call the parade?
The former company known as Macy's Day Parade.

Consuelo's picture

 

 

The article about the rise in 'local dining' (i.e., the burrito place that sells a log big enough to feed 3 people for $6), is harbinger for this shit.   

People are going to buy what they need and make do with what they have.    YUUGE change afoot in this arena of socioeconomics.

 

 

Give Me Some Truth's picture

Amazon influence, no doubt. But people are also running out of disposable income. I'd like to see a story counting the number of "Pay Day Loan" and "Title Loan" locations in different cities and in America as a whole. These are proliferating and have been for years. Wonder why if the economy is so robust?

skinwalker's picture

Who actually buys anything at these specialty retailers? Most likely 'beautiful' people with way more money than sense.

Silver Savior's picture

They are empty and think spending ungodly amount of money is going to make them feel special. It's a disease.

bloofer's picture

Rue 21 is/was actually a pretty inexpensive store--a place to buy the teenage daughters' wardrobe fairly painlessly.

If parents can't afford to buy their girls' clothes at Rue 21, it bodes very ill for the economy. The next step down from Rue 21 is Wal-Mart or the thrift store. The next step up is Target.

Give Me Some Truth's picture

And the retail locations that are surviving are located in regional hubs, bigger cities where people from smaller nearby towns come to shop. All that will soon be left in the hinterland small towns are maybe a Wal-Mart (if they are lucky) and a Dollar General or two. ... And a lot of "Pay Day loan" locations.

Gaius Frakkin' Baltar's picture

My teenage daughter will be sewing and knitting her own clothes.

peopledontwanttruth's picture

Out of Burlap maybe. We'll all look the same please don't take offense to it

peopledontwanttruth's picture

Ever wonder why the name of the clothes is called "Faded Glory", Do you think it is a subliminal message for Americans

peopledontwanttruth's picture

Many teenage girl retailers have gone belly up recently. Mommy and daddy had to tell princess we can't afford that $200 outfit we need food and shelter. 90210 is history except on the Left Coast in Hollyweird

gregga777's picture

Rue what?  Never heard of them.  Good riddance to bad trash.

 

 

Philo Beddoe's picture

Rue is how the French say bowel movement. At least that is what I remember from High School French. 

Bryan's picture

Good.  There's too much clothes in the world anyway.  We need more games stores and ice cream parlors in the malls anyway.

rockmanlinux's picture

Gander Mountain is close 170 stores. NOT 30

whatamaroon's picture

Fucking Gander Mountain won't put ammo on sale, I have a $50 gift cert. to use until the 18th.

skinwalker's picture

What? Those bastards! They always have the most expensive ammo as it is, and not nearly enough of it.

buzzsaw99's picture

The Company has also reached agreements, subject to the approval of the Court, to obtain up to $125 million in ABL debtor-in-possession financing from its existing ABL lenders and up to $50 million in new money term loan debtor-in-possession financing from a subset of its existing term loan lenders. This financing is intended to provide the Company with the liquidity necessary to support its ongoing business operations during the financial restructuring process...

AND PAY THOSE EXECUTIVE BONUSES BITCHEZ!!!

Genby's picture

It was a pretty shitty chain anyway.

Silver Savior's picture

Never heard of it. Looks expensive like a banana republic. Gotta love the $20-$50+ tee shirts. What a fucking clown joke! 

yogibear's picture

The banksters wear those $50 tee-shirts to go along with their Maseratis

bloofer's picture

We had one (before it closed) in my area when my daughters were teenagers. Their clothing was a line of fairly inexpensive, trendy stuff exclusively for the teenage-girl market. In the year or two prior to the store's closing, all their stuff looked increasingly garish and cheap. Claire's was the jewelry/accessories version of Rue 21: cheap, trendy costume jewelry that only a teenage girl could love. (And love it they did!) But Claire's closed even before Rue 21.

Give Me Some Truth's picture

I've been keeping a running total too. My list (taken from www.al.com stories) is longer than your list. Retailer and closings announced in last few months.

Men's Warehouse - 150

Chico's - 120

BCBG - 120

The Children's Place - 200

Finish Line - 79

Abercombie & Fitch - 60

Wet Seal - 171

Kenneth Cole - 63

bebe - 160

GameShop - 150

Gymboree - 350

Crocs - 160

HH Greg - 88

JC Penney - 138

Sears - 42

K-Mart - 108

Macy's - 100

Family Christian Stores - 240

The Limited - 250

Aeropastle - 600

Office Depot - 300

Radio Shack - 552

Payless Shoes - 1,000

American Apparell - 110

Fred's - 40

Gander Mountain - 32

Kay/Jared Jewelers - 170

 

Total: 27 retailers, 5,585 locations.

Note: This list isn't comprehensive and hasn't been updated in past few weeks. It also doesn't include restaurant chains.