David's Bridal Gets Court Approval to Operate During Bankruptcy

(Bloomberg) -- David’s Bridal Inc., after filing for bankruptcy protection to restructure its balance sheet, got court permission to obtain new financing and stay open for business.

With support from existing lenders, David’s will continue paying vendors and filling customer orders during the Chapter 11 process. The wedding-gown retailer got approval to pay pre-petition claims -- including taxes, wages and employee benefits -- at a hearing Tuesday in U.S. bankruptcy court in Delaware.

Bankruptcy Judge Laurie Selber Silverstein gave provisional approval for a new-money, $60 million debtor-in-possession loan backstopped by existing lenders. She also granted permission to roll over a $125 million asset-based loan the company had before it filed for bankruptcy and to use cash collateral to pay vendors in full.

Exit financing is a "moving target” and will range from $40 million to $60 million, depending on the retailer’s liquidity needs at the time, backstopped by term loan lenders who choose to participate, company lawyers said.

Prepackaged Plan

In court, David’s detailed its prepackaged reorganization plan, which is supported by the vast majority of creditors. Before the Chapter 11 filing, the retailer entered a restructuring support agreement with about 85 percent of term loan holders, 97 percent of unsecured noteholders and principal equity holders.

"The numbers speak for themselves," Scott Greenberg of Jones Day, counsel for a group of term loan holders, said in court. The group -- which will become the largest holders of the reorganized equity -- fully supports the plan and believes in the underlying business, he said. The 15 percent of lenders who have not signed on to the agreement weren’t willing to accept claims-trading restrictions earlier in the negotiation process, he said, and are expected to accept the plan.

“We should be able to get to as close to 100 percent as possible,” Greenberg said.

The debtors aim to emerge from bankruptcy by early January. Crossover term-loan and noteholder Oaktree Capital Group LLC is also party to the restructuring deal and backs the debtor’s effort to emerge “as quickly as possible,” said Alan Kornberg of Paul Weiss, counsel for Oaktree.

The retailer has no plan to close any of the around 300 stores it operates, the majority of which are leased.

‘Unique’ Business

“The bridal business is unique among retailers,” so this restructuring looks different from others, Natasha Labovitz of Debevoise & Plimpton, a lawyer for David’s told the judge. It’s critical to have a brick-and-mortar presence, Labovitz said. “These are not the kinds of things a lady wants to buy” from a website, she added.

Lawyers for David’s and its lenders reiterated the importance of timing.

Unlike other bankruptcy cases where lenders insist upon tight, “unachievable” milestones, Greenberg said, David’s milestones were put upon the lenders by the debtor. The parties are going to “cancel our holiday plans to make sure this gets done,” he added.

The peak bridal selling season begins at the start of the year, and David’s plans to launch a new retail line in early January, company lawyers told the court. People typically get engaged over the holiday season, and many weddings are planned for the summer and fall, Labovitz said. This was the last chance for the company to file for bankruptcy, as vendor orders are now being placed and are critical before the time brides start making purchases, she added.

The case is: David’s Bridal Inc., 18-12635, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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