Aéropostale today filed for Chapter 11 in bankruptcy court in Manhattan, the company announced.
The company said it intends to emerge from Chapter 11 within the next six months “as a standalone enterprise with a smaller store base, increased operating efficiencies and reduced SG&A expenses.”
The company announced an initial store closure list of 113 U.S. locations, as well as all of it 41 stores in Canada, with closings set to begin in the U.S. this weekend and in Canada next week.
The company further said it was continuing its previously announced sale process, adding that it expects that any potential sale would also be completed within the next six months.
According to Bloomberg, the company has more than 700 locations in the U.S. Over the past three years, it has closed more than 200 locations.
In addition to store closings, the company said it would use Chapter 11 to resolve its ongoing dispute with Sycamore Partners, the company’s largest secured lender and owner of its second largest supplier, that the company said has “put substantial strain on our liquidity while also preventing us from realizing the full benefits of our turnaround plans.”
Among other things, according to court papers, the supplier, MGF Sourcing, has demanded onerous payment terms from the company.
Among other first day motions, the company filed a motion asking the bankruptcy court to require MGF Sourcing, to perform its obligations under its agreements with the company.
Lastly, in connection with the Chapter 11 filing the company has a $160 million DIP facility commitment form Crystal Financial.
In court papers, the company said it received four DIP proposals from prospective lenders, which it narrowed down to two options, one from Crystal Financial and the other from Bank of America.
The facility is comprised of a $75 million term facility and an $85 million revolver, of which the company is seeking immediate access to $45 million and $55 million, respectively, on an interim basis.
Interest under the facility is at L+500. Among others, the facility carries a 5% underwriting fee.
As for milestones, the DIP requires the company to file a reorganization plan within 60 days (July 3), obtain disclosure statement approval within 95 days (Aug. 7), begin soliciting votes on the reorganization plan within 100 days (Aug. 12), begin a plan confirmation hearing within 130 days (Sept. 11), obtain plan confirmation within 140 days (Sept. 21), and emerge from bankruptcy within 145 days (Sept. 26).
In addition, the DIP requires the company to pursue a Section 363 sale process simultaneously with the plan confirmation process on the following timeline: file a motion with the bankruptcy court to approve bid procedures within 75 days (July 18), which shall include a form of a stalking horse purchase agreement; forward bid packages to potential bidders within 75 days (July 18); obtain approval of a stalking horse sale and bid packages within 105 days (Aug. 17); conduct an auction within 141 days (Sept. 22); obtain approval of a sale within 143 days (Sept. 24); and close on a sale within 145 days (Sept. 26).
The DIP provides that while the company may abandon the reorganization plan confirmation process at any time during the proceedings, it may not abandon the sale process without the lenders’ consents. — Alan Zimmerman
This story first appeared on www.lcdcomps.com, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.