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Struggling Express awaits CARES Act receivable payments

A Express clothing storefront in a mall.

Photo: Joe Raedle/Getty Images

Express is waiting on $52 million in CARES Act payments to shore up short-term liquidity, says a source familiar with the situation.

Why it matters: Express needs cash quickly to stave off bankruptcy.

Driving the news: The Wall Street Journal reported on Monday that the company hired law firm Kirkland & Ellis and adviser M3 Partners to restructure $280 million in debt and prepare for a possible bankruptcy.

Catch up quick: During Express' Q3 earnings call in November, CFO Mark Stills said the company was pursuing a CARES Act receivable payment in two pieces, including an agreed-upon $43 million and a second amount of $9 million, which was under review.

  • He said he expected to receive the $43 million and another $5 million reduction in its 2022 income taxes.

What's happening: In a memo provided to Axios, CEO Stewart Glendinning told employees on Wednesday that Express is working to preserve its liquidity while it awaits the payments.

  • "We are actively engaged with the IRS to move our claim forward, and it is only a matter of time until we receive those funds," he said.
  • "In the meantime, we continue to implement a range of alternatives to create short-term liquidity for the business," the CEO said.
  • The company is also working with vendors and landlords to save cash.

Zoom in: A source close to Express' thinking tells Axios that it has been working with Kirkland & Ellis since the company went public in 2010.

  • It has also been working with M3 Partners since it took out a FILO loan in 2021, the source says.
  • The retailer has not had any discussions with its lenders on a potential debt restructuring, contrary to reports from Bloomberg and WSJ, the source says.

Reality check: Express is trying to calm vendors and landlords, whose potential panic could put the company in a difficult financial position — and accelerate a need to file for bankruptcy.

Flashback: In late 2022, Express inked a deal with brand marketing firm WHP to form an intellectual property joint venture, with WHP investing $25 million in Express in exchange for a 7.4% stake.

  • WHP would also pay another $235 million for a 60% stake in the JV.

Between the lines: Parting with the IP and adding the FILO loan, among other remedies, bought the retailer more time but didn't solve lingering issues, RapidRatings CEO James Gellert tells Axios.

  • They reduced the company's flexibility and made a restructuring more difficult, he says.

The bottom line: High leverage, inflation and labor costs, along with eroding vendor support and dwindling mall locations, created the perfect storm for Express, Gellert says.

Editor's note: This story has been corrected to note it was CFO Mark Still who spoke about Express pursuing a CARES Act payment on the company's Q3 call, not CEO Stewart Glendinning.

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