Oaktree, Goldman Said to Gain Control in Fullbeauty Bankruptcy

(Bloomberg) -- Fullbeauty Brands, the women’s plus-size clothing retailer owned by Apax Partners and Charlesbank Capital, has lined up support from creditors for a pre-arranged bankruptcy that would hand control to senior lenders including Oaktree Capital Group LLC and Goldman Sachs Group Inc.

The Chapter 11 bankruptcy would cut about $900 million of debt, Fullbeauty said in a statement Thursday. The filing allows the company to keep operating while it works out a plan to turn around the business and satisfy its debts.

Fullbeauty expects to make the U.S. bankruptcy filing around Feb. 4 in Manhattan, according to a company representative, with the solicitation process expected to end around Jan. 24 and the completion of the process in early 2019.

About 87.5 percent of the common reorganized equity would go to first-lien lenders, 10 percent to second liens, and 2.5 percent to the sponsor, according to people with knowledge of the plan who weren’t authorized to speak publicly.

New Financing

Existing lenders will provide a new $30 million term loan, which will help ensure suppliers and vendors keep getting paid, Fullbeauty said. More than 99 percent of the first-lien lenders have agreed to support the restructuring plan, along with all of the first-in, last-out lenders and 95 percent of the second liens.

First-lien lenders including Oaktree, Goldman Sachs and Voya Financial Inc. were among firms in a group that held restricted talks with the company ahead of the release, the people said. Under the terms of the RSA, secured lenders will provide a portion of the new financing and receive the majority of the reorganized equity in exchange for their holdings, said the people.

Representatives from Oaktree, Goldman Sachs, and Voya declined to comment.

Fullbeauty has faced increasing competition from Amazon.com Inc. and retailers including Kohl’s Corp. and Walmart Inc. that have entered the plus-size clothing market, which the chain defines as women’s sizes 12 to 44. Financial results were also hurt by low stocks of basics clothing, heavy discounting and inventory clearance, Bloomberg reported.

The New York-based retailer told investors in late October it wouldn’t make an interest payment on a $345 million second-lien term loan and invoked a five-day grace period, Bloomberg reported. A forbearance agreement with creditors followed in November, along with a tentative accord to rework the company’s debt and cut leverage.

Restructuring Advisers

Earlier this year, the company hired Kirkland & Ellis and PJT Partners Inc. to help it evaluate options for managing its $1.2 billion debt load, and added AlixPartners as its restructuring adviser.

Signers of the support agreement include Apax Partners, represented by Simpson Thacher & Bartlett, and Charlesbank, represented by Goodwin Procter, according to the statement. Also included were the FILO Lenders, a group of first lien lenders represented by Ducera Partners and Milbank, Tweed, Hadley, & McCloy as well as an ad hoc group of second-lien lenders represented by Houlihan Lokey Capital and Paul, Weiss, Rifkind, Wharton & Garrison.

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