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David's Bridal continues sale process under bankruptcy protection

A David's Bridal store stands in Manhattan.

Photo: Spencer Platt/Getty Images

David's Bridal announced early Monday morning it filed for Chapter 11 protection in U.S. Bankruptcy Court in New Jersey, under which it will continue a sale process for the company.

Why it matters: Distressed situations and bankruptcies in the retail sector are increasing after a relatively quiet 2021 and 2022.

Details: David's Bridal will file a recognition proceeding in Canada, a notice that the retailer's operations there will undergo a restructuring tied to the U.S. bankruptcy filing.

  • It also expects its U.K. subsidiary to commence an administration proceeding, it said.

Context: The company said it considered a range of strategic alternatives to maximize value for its shareholders, including a sale process for its assets.

  • But liquidity constraints prevented the retailer from finalizing that process out of court, it said.
  • The retailer will manage inventory and evaluate its physical store footprint to get the most value and increase its chances to complete a going concern transaction.

Catch up fast: It's the second trip through bankruptcy court in less than five years for the Conshohocken, Pa.-based bridal company, colloquially known as a Chapter 22.

  • After the company revealed plans on Friday to lay off more than 9,000 employees in the coming months, Axios reported the company was preparing to file for bankruptcy.
  • The New York Times previously reported David's Bridal was weighing bankruptcy, advised by investment bank Houlihan Lokey, law firm Kirkland & Ellis and restructuring specialist Berkeley Research Group.

What they're saying: "Our business continues to be challenged by the post-Covid environment and uncertain economic conditions, leading us to take this step to identify a buyer who can continue to operate our business going forward," said CEO James Marcum in a statement.

The big picture: Retailers are getting hit from all sides in today's environment, particularly middle-market companies.

  • Costs across the board have increased, including materials, supply chain, labor, real estate, and most significantly, interest rates.
  • Middle-market firms are the most vulnerable because they depend more on short-term lending, which typically charges a floating interest rate.
  • Bankruptcies so far this year include Party City, Serta Simmons, Tuesday Morning, Shoe City and Forma Brands.

Flashback: CPPIB Credit Investments, a subsidiary of the Canada Pension Plan Investment Board, provided David's Bridal with a $70 million term loan to fund operations in 2021. That loan matures in 2024.

Of note: Private equity firm Oaktree Capital Management, which recently sold Boardriders to Authentic Brands Group, is a leading shareholder in David's Bridal.

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