David’s Bridal is making preparations for a bankruptcy filing if the retailer can’t reach an out-of-court deal with its creditors, according to people with knowledge of the matter.
The goal is to ease the chain’s debt load of about $760 million with a prenegotiated restructuring plan either in or out of court, said the people, who asked not to be identified because the discussions are supposed to be private. Either way, David’s has no plans for major store closures or liquidations, and the business would keep operating regardless of a court filing, the people said.
The wedding gown merchant has until Nov. 14 to make an interest payment that it skipped last month after initial negotiations with three creditor groups stalled. Active discussions with debt holders are still underway and the situation remains fluid, the people said, with no guarantee that a filing will happen or end with a prepackaged plan in place.
Marriage rates have fallen since the 1980s, and though the amount Americans typically spend on weddings has risen, the wedding industry has been thrown into chaos by intense competition, online options and shifting fashion tastes. In April, Gap Inc.’s Weddington Way bridal brand announced plans to close within the next few months, following J. Crew Group Inc.’s decision in 2016 to shut its wedding dress business. David’s competitor Alfred Angelo abruptly closed its doors in 2017, leaving brides stranded as orders went unfulfilled.
David’s and three creditor groups have gone back and forth with out-of-court restructuring proposals for weeks. Early discussions contemplated a rights offering backed by existing noteholders, including Solace Capital Partners, and Oaktree Capital Group, a majority bond and loan holder, the people said. Those talks broke down after the financing from the funds did not materialize and creditors failed to agree on the pricing and terms of the proposed new debt structure, the people said.
“We are engaged in discussions with our lenders in order to reach a mutually agreed-upon resolution designed to strengthen our balance sheet so we can increase our financial flexibility and further invest in our business,” a representative for David’s said in an emailed statement. David’s said it doesn’t expect the process to materially affect its business or interfere with day-to-day operations or its relationships with vendors and customers.
David’s — based in Conshohocken, Pa., and owned by the Clayton Dubilier & Rice buyout firm — skipped an Oct. 15 interest payment on its $270 million of 7.75% unsecured notes due 2020 at the request of its creditors in order to allow more time to continue negotiations about reworking the company’s debt load. The talks involve the company and advisors for both loan and bondholders, the people said.
David’s is working with investment bank Evercore Inc. and legal counsel Debevoise & Plimpton LLP. Oaktree, which owns a majority of the company’s $491-million term loan and unsecured notes, enlisted the help of financial advisor Moelis & Co. and law firm Paul Weiss Rifkind Wharton & Garrison LLP.
Unsecured noteholder Solace is working with Fried Frank, while an ad hoc group of lenders is working with law firm Jones Day and investment bank Greenhill & Co.
Clayton Dubilier & Rice, Fried Frank, Greenhill, Jones Day and Paul Weiss didn’t immediately respond to requests for comment. Solace, Debevoise & Plimpton, Evercore, Moelis and Oaktree declined to comment.
One proposed out-of-court scenario would include a paydown of David’s existing bank debt using cash from the rights offering backed by existing noteholders, as well as an extension of the company’s bank debt, two people said. Existing bondholders would likely take equity as part of the paydown.
But an in-court restructuring may leave the bond owners getting little more than the currently depressed market value of their holdings, while a group of senior lenders could take equity in lieu of not having their holdings fully reinstated, one of the people with knowledge of the discussions said.
Doherty writes for Bloomberg.