PE Firms Ares and Crescent Are Poised to Take Over Savers Thrift Stores

(Bloomberg) -- Savers LLC, the biggest for-profit thrift-store chain in the U.S., is preparing to hand the keys to a new set of private equity owners, with Ares Management Corp. and Crescent Capital Group LP taking control from Leonard Green & Partners LP and TPG.

The restructuring agreement calls for Ares and KKR & Co. to back about $590 million of funded debt, including a $540 million first-lien loan, according to people with knowledge of the matter. Ares would back a $50 million second-lien loan as part of the refinancing, said the people, who asked not to be identified discussing a private matter. The plan also includes a new revolver, they said.

At the end of process, Ares and Crescent would collectively hold a controlling stake in the reorganized company, the people said. The two firms would inject $165 million in cash, according to the people. Crescent, which owns a majority of the unsecured notes, would swap those for a 7.5 percent stake, and existing first-lien lenders would have their loan paid off, they said.

Savers plans to complete the deal out of court within the next two weeks, but it’s prepared to file for bankruptcy protection with a creditor support agreement in place, the people said. That option would include a $40 million debtor-in-possession loan, they said. Details are still being negotiated and plans could change depending on the outcome of those talks.

Various Options

“We’re exploring various options to strengthen our balance sheet and accelerate our growth,” Bellevue, Washington-based Savers said in an emailed statement. “The resale industry is one of the top 12 fastest-growing industries in the country and Savers is well-positioned to continue as a leading thrift retailer.”

Representatives for KKR and TPG declined to comment. Leonard Green, Ares and Crescent didn’t immediately return messages seeking comment. Savers is working with restructuring law firm Latham & Watkins LLP and investment bank Moelis & Co., Bloomberg previously reported.

Savers runs more than 300 stores with 22,000 employees under banners such as Savers and Value Village in the U.S., Canada and Australia, according to its website. The business model involves purchasing and reselling “gently used merchandise in a department-store environment.”

TPG and Leonard Green acquired the retailer in a 2012 deal that included a partnership with Savers’ Chairman Thomas Ellison -- the son of the company’s founder -- and the management team. The two private equity firms split a 45.5 percent stake, with Ellison also getting 45.5 percent and 9 percent going to management and others, according to Moody’s Investors Service.

The ratings firm cast doubt in October 2017 on whether Savers could meet its 2019 debt maturities, citing weak liquidity and an untenable capital structure. On the bright side, Moody’s noted the recession-resistant nature of demand for Savers’ business and low risk tied to changing fashions, a factor that can sink conventional apparel retailers if they miss a trend.

©2019 Bloomberg L.P.

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