Gymboree shops for Bankruptcy Financing as it prepares filing

Move would mark retailer’s second chapter 11 filing since 2017

By guest author Lillian Rizzo from Wall Street Journal

Children’s retailer Gymboree Group Inc. is shopping for a bankruptcy loan as it prepares for a second chapter 11 filing in less than two years, according to people familiar with the situation.

The bankruptcy filing, which could come as soon as early January, would allow the struggling children’s apparel retailer to close most of its stores, the people said.

However, the company is seeking a bankruptcy loan that would give it the opportunity to keep some of its stores open while it searches for a buyer, the people said. In chapter 11, Gymboree would likely close a majority of its 900 stores, the people said, but the retailer has earmarked more than 100 stores—namely its well-performing Janie & Jack outlets—to put up for sale.

The negotiations remain fluid and may not result in a bankruptcy filing, the people said.

Gymboree has hired Stifel Financial Corp.’s restructuring advisory arm, Miller Buckfire & Co., which is searching for a buyer for the subset of stores, the person said.

In recent years, dozens of retailers have sought bankruptcy protection and liquidated. However, some retailers have filed for bankruptcy protection with prepackaged plans that allowed the retailers to stay alive, including rue21 Inc. and Payless ShoeSource Inc.

Others that had hoped to use bankruptcy to restructure their businesses—including Toys “R” Us, RadioShack and Sports Authority—ultimately were forced to shut down as the industry grapples with the disruption caused by the decline of brick-and-mortar stores and changing consumer behavior.

Gymboree filed for bankruptcy in June 2017, weighed down by more than $1 billion in debt stemming from a leveraged buyout by Bain Capital Private Equity LP in 2010. Through the bankruptcy process, the company was able to slash most of its debt and turn over control to its lenders, including Carriage House Capital Advisors LLC, Brigade Capital Management and Oppenheimer Funds Inc.

But Gymboree wasn’t able to shed all of its problems in its first trip through bankruptcy. The retailer closed just 300 of its roughly 1,300 stores, and it continued to suffer from declines in mall traffic after emerging from court protection, the people said.

Earlier this month Gymboree said it began a strategic review of its Gymboree, Janie & Jack and Crazy 8 brands, which may include a sale or other transactions at the brand level. The Wall Street Journal earlier reported that Miller Buckfire was searching for a buyer for Janie & Jack, the boutique chain apart of Gymboree.

In addition, Gymboree had said it is evaluating the store footprints of Crazy 8 and Gymboree and intends to close Crazy 8 locations and significantly reduce the number of Gymboree stores in 2019.