Alex and Ani file for bankruptcy, hoping for a sale

Dive brief:

  • After a tumultuous and debt-laden year, Alex and Ani filed for bankruptcy in Delaware on Wednesday and went on sale. The jewelry retailer signed a restructuring support agreement with its debt holders and capital sponsors for financial and operational restructuring, according to the statement and court documents.

  • The company said in a press release that it intends to operate “its currently open stores and website as usual during the court-supervised process.” According to court documents, Alex and Ani have around 74 store leases, of which around 25 are still closed due to the pandemic.

  • The retailer, known for its charm bracelets, intends to assess existing leases and reject those deemed “unprofitable,” according to court documents. In 2019, 43% of its revenue came from wholesale and 45% from e-commerce, mostly from its own site, the company told the court..

Dive overview:

The merchandising at Alex and Ani, founded in 2004, is pretty straightforward: The retailer mainly sells one-size-fits-all yarn charm bracelets. But its operations over the past decade have been anything but.

Jewelry became very popular around 2010 or so, fueling growth from 2010 to 2015, according to bankruptcy court documents. But things were also falling apart. Company highlights extreme level of executive turnover as of 2014, inventory management issues that meant “a large percentage of wholesale orders” were not fulfilled, and a significant drop in store footfall physical as the main reasons for its classification. . The retailer has also been involved in lawsuits brought by former employees, including one, by a former acting director of operations claiming over $ 1 million in damages, still in dispute, by filing.

Founder and ex-CEO Carolyn Rafaelian, who owned the company until 2012 when a stake was sold to private equity, agreed to a resolution of her legal claims against the company and co-owner Lion Capital pending bankruptcy court approval. . Under the deal, it would also sell its remaining 35% stake, according to the documents.

Large debt has also hampered the business, and Alex and Ani have already been to the restructuring negotiating table to avoid defaulting on their obligations and avoid filing for bankruptcy. A string of bad luck last year, starting with a ransomware virus and immediately followed by the coronavirus pandemic, halted those efforts, the company said in its court documents. Revenue fell 40% last year, the company also said.

His the current capital structure results from the 2019 extrajudicial restructuring, with approximately $ 127.4 million of funded debt obligations outstanding, including capitalized interest, of which approximately $ 20.4 million under a facility senior credit facility, $ 25.2 million under a second senior credit facility and $ 81.8 million under a third senior credit facility.

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