PE Firms Crescent, Ares Take Over Savers Thrift Chain in Restructuring

(Bloomberg) -- Savers LLC, the biggest for-profit thrift-store chain in the U.S., reached a restructuring agreement that cuts its debt load by 40 percent and hands over the keys to Ares Management Corp. and Crescent Capital Group LP.

The company’s board of directors approved the out-of-court restructuring, which includes refinancing a $700 million first-lien loan and lowering the retailer’s interest costs, according to a statement seen by Bloomberg. The deal pays the retailer’s existing term loan holders in full, while holders of its senior notes swapped their debt for equity in the reorganized company, according to the statement.

Savers will get new loans under the deal and a $165 million capital infusion from Crescent and Ares, according to people with knowledge of the agreement. Crescent will take over as majority owner and Ares will hold a “significant” minority share of the company. Those firms replace previous private equity sponsors Leonard Green & Partners LP and TPG.

The retailer swapped $300 million of unsecured notes into a 7.5 percent equity stake that’s split between Crescent and other noteholders, said the people, who asked not to be identified discussing the private deal. Crescent and Ares get the remaining 92.5 percent of the reorganized entity, the people said.

Ares and KKR & Co. are backing $590 million of new debt structured as first- and second-lien loans, according to the people. Upon emergence, the company will also have a new $60 million revolving loan in place, they said.

Better Positioned

The lighter debt load and fresh financing will make Savers “well-positioned” to continue in the fast-growing resale industry, Duane Woods, chairman and chief executive officer of Savers said in the statement.

The company runs more than 300 stores with 22,000 employees under banners including its namesake chain and Value Village in the U.S., Canada and Australia, according to its website. The company buys and resells “gently used merchandise in a department-store environment.”

Crescent was among creditors that hammered out terms of the restructuring deal after months of negotiations with Savers, which faced looming debt maturities. The parties contemplated an in-court bankruptcy proceeding, which Savers chose not to pursue after it lined up the new money, the people said.

“Ares is excited to invest new capital to increase financial flexibility and help best position Savers for growth during this period of transformational change for the thrift retail industry,” Scott Graves, Ares’s co-head of North American private equity, said in the statement.

2012 Buyout

Former sponsors TPG and Leonard Green acquired the retailer in a 2012 deal that included a partnership with Savers’ then-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. Moody’s also noted the positive, recession-resistant nature of demand for Savers’ business, as well as the low risk tied to changing fashions, a factor that can sink conventional apparel retailers if they miss a trend.

Latham & Watkins LLP served as legal adviser, Alvarez & Marsal as restructuring adviser and Moelis & Co. as its investment banker for the restructuring.

To contact the reporter on this story: Katherine Doherty in New York at kdoherty23@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Shannon D. Harrington, Michael B. Marois

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