Claire’s Stores a jewelry chain found in malls has filed Chapter 11 bankruptcy protection as it hopes to escape large debts that are preventing it from being a bright spot in today’s dim retail environment.
Claire’s is one more victim amongst several involving buyouts by private equity firms that were made by outside investors that loaded up debt over a decade ago, that saddled retailers with payments that became burdensome.
Another on that same list included Toy R Us, which a week ago ended its fight of restructuring operations and decided it would liquidate all its stores in the U.S. barring an 11th hour chance to keep its best 200 locations open.
Problems in malls, online competition as well as other more nimble competitors have proven problematic as well.
Claire’s announced that it secured support for its across the board debt-cutting plan from the leading secured lenders it has including Monarch Alternative Capital and Elliott Management, two hedge funds.
The retailer, which is known for the appeal it has to teens and for reaching a piercing count of over 100 million ears across the globe said it was confident it would survive its bankruptcy.
The company announced that it would use this legal process to eliminate close to $1.9 billion of its debt and then reemerge as a company in much better health in September of 2018, where it would be poised for a successful holiday season.
There were no plans signaled by Claire’s to cut any of its 7,500 locations it has in 45 countries.
CEO of Claire’s Ron Marshall through a prepared statement said that the bankruptcy transaction would substantially reduce the company’s debt it has on the balance sheet and would help its efforts to provide our customers with the best possible experience.
The CEO added that when the process is completed, the company will be more profitable and healthier, which will position it to be a stronger partner with its suppliers, concessions partners as well as franchisees.
The company during 2017 was profitable, reported a net income of more than $29 million, but follows the trend of today’s retailers looking at bankruptcy as a way of restructuring its debt load prior to it becoming too late to do so.
Several retailers filed bankruptcy of late, while they were still in reality profitable companies.