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Claire's Stores files for bankruptcy

RBR Staff Writer Published 21 March 2018

US discount jewelry chain Claire's Stores is the latest retailer to have applied for Chapter 11 Bankruptcy protection.

The company is implementing balance sheet restructuring supported by holders of substantial majority of its funded debt.

Claire's Stores expects to report adjusted EBITDA for 2017 (on a 52-week basis) of about $212m, up around 13% from 2016.

Net sales and net income for 2017 are estimated to be about $1.31bn and $29m, respectively.

The company said that it is growing and not shrinking it business. It aims to grow its concessions business by more than 4,000 stores this year.

It stated that it is applied for chapter 11 process to effectuate a balance sheet and not an operational restructuring.

Claire’s Stores started the restructuring process after a restructuring support agreement (RSA) with its Ad Hoc Group of First Lien Creditors led by Elliott Management Corporation and Monarch Alternative Capital. These two companies collectively hold about 72% of the company’s first lien debt, 8% of second lien notes and 83% of unsecured notes.

As per the agreement, the members of Ad Hoc Group of First Lien Creditors have agree to provide Claire’s Stores with about $575m in new capital, including financing commitments in $75m asset-based lending facility, a new $250m first lien term loan and a $250m as preferred equity investment.

With these commitments in place, Claire’s Stores expects that the Chapter 11 process will be completed by September this year and will emerge with more than $150m in liquidity and reduce its overall indebtedness by about $1.9bn.

Claire’s Stores CEO Ron Marshall said: "This transaction substantially reduces the debt on our balance sheet and will enhance our efforts to provide the best possible experience for our customers. 

"We will complete this process as a healthier, more profitable company, which will position us to be an even stronger business partner for our suppliers, concessions partners, and franchisees."

Image: Claire's store in New York. Photo: Courtesy of Jim henderson/Wikipedia.org.