Conshohocken, Pa. — Wedding dress retailer David’s Bridal has filed for Chapter 11 bankruptcy protection. The Conshohocken-based company says it plans to keep its more than 300 David’s Bridal stores and online platform open and operating without disruption.
According to Monday’s announcement, “orders will arrive on time and bridal appointments will not be impacted” as the company says it has sufficient liquidity to operate during the court-supervised restructuring process.
David’s Bridal announced on Nov. 15 its restructuring support agreement (RSA) with the vast majority of its term loan lenders, senior noteholders and equity holders. The filing of Chapter 11 is the next step in the RSA, which David’s Bridal says will reduce the company’s debt by more than $400 million.
“The plan will allow us to reduce our debt significantly while continuing to run our business as usual,” says Scott Key, CEO of David’s Bridal. “We will be able to move through the court process very quickly. And in the end, we will be able to allocate even more of our resources toward making strategic investments in digital technologies and talent that will drive long-term growth and operational excellence at David’s Bridal.”
Real Estate Implications
While David’s Bridal says it is committed to keeping its stores open during the restructuring, retail real estate experts are dubious on whether or not the company will eventually shutter its less successful stores.
“With any retail chain, there are always stores that underperform or are unprofitable. Why would they not consider closing those stores?” asks Jeff Green, partner at Hoffman Strategy Group, a retail and mixed-use real estate consulting company with offices in Arizona, Nebraska and California.
Green says that whether or not David’s Bridal will close underperforming stores, the company could save some money on the real estate side by being more diligent in its site selection process.
“[David’s Bridal] has taken some rather expensive real estate for a concept that is as destination-oriented as it is,” says Green. “It could have taken secondary retail locations at a cheaper rent and achieved a similar sales volume.”
Green also says that David’s Bridal could take a note from the playbooks of many other national retailers like Kohl’s and Best Buy and reduce its store size to a smaller, more efficient format.
“In my professional opinion, David’s Bridal stores are too large. It could operate in stores about half their current size,” says Green.
Prepackaged Bankruptcy
The company’s Chapter 11 plan is “prepackaged,” meaning that it was agreed upon by its creditors prior to filing. Prepackaged bankruptcy is a conventional way to shorten and simplify the bankruptcy process, ultimately saving the company and its stakeholders money in legal and accounting fees.
David’s Bridal expects to complete the bankruptcy process by early January 2019.
David’s Bridal has obtained commitments for $60 million in new debtor-in-possession financing from its current loan term lenders and a recommitment of its existing asset-based lending (ABL) revolving credit facility totaling $125 million.
Debevoise & Plimpton LLP is serving as David’s Bridal legal advisor, Evercore LLC is serving as its financial advisor and AlixPartners LLP is serving as its restructuring advisor.
— John Nelson