Claire's Said to Plan Bankruptcy, With Creditors Taking Keys
Claire's Is Said to Plan Bankruptcy, With Creditors Taking Over
(Bloomberg) -- Claire’s Stores Inc., the fashion accessories chain where legions of preteens got their ears pierced, is preparing to file for bankruptcy in the coming weeks, according to people with knowledge of the plans.
The company is closing in on a deal in which control would pass from Apollo Global Management LLC to lenders including Elliott Capital Management and Monarch Alternative Capital, according to the people, who asked not to be identified because the matter isn’t public. Venor Capital Management and Diameter Capital Partners are also involved, the people said. The move should help ease the $2 billion debt load at Claire’s.
A spokesman for New York-based Apollo declined to comment. Representatives for Claire’s and the creditors declined to comment or didn’t respond to messages. New York-based Monarch specializes in distressed companies, while Elliott Capital is run by Paul Singer, the billionaire and activist investor.
The current debt load is more than 10 times a key measure of its annual earnings, the result of its 2007 leveraged buyout by Apollo. More than $1.4 billion of its debt matures next year, and more immediate pressure comes from a $60 million interest payment that’s due March 13. A Chapter 11 bankruptcy filing, which is typical for retailers, would allow the chain to continue operating and keep creditors at bay until a turnaround plan could be formalized.
New Outlets
Like other chains with a heavy mall presence, Claire’s has had to contend with declining customer traffic and online competition. It’s worked to find new sources of revenue, including agreements to sell in CVS pharmacies and Giant Eagle supermarkets.
Apollo paid $3.1 billion to acquire Claire’s from the family of founder Rowland Schaefer, and began expanding rapidly. It added about 350 stores between 2010 and 2013, with more than 2,700 globally by the time it filed plans that year to go public, according to a company document. But the chain struggled to remain profitable after the Apollo buyout, and Claire’s withdrew its initial public offering registration in early 2017.
Prices for some of Claire’s debt have been at deeply distressed levels, with quotes earlier this month for its 2019 issue hovering under 70 cents on the dollar.
--With assistance from Laura J. Keller
To contact the reporters on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net, Kiel Porter in New York at kporter17@bloomberg.net, Sridhar Natarajan in New York at snatarajan15@bloomberg.net, Eliza Ronalds-Hannon in New York at eronaldshann@bloomberg.net.
To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Nick Turner at nturner7@bloomberg.net, Nikolaj Gammeltoft at ngammeltoft@bloomberg.net.
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