As expected, U.S. children's apparel retailer Gymboree Group Inc. and its subsidiaries filed for bankruptcy protection in the U.S. and Canada, under which it plans to shut down all Gymboree and Crazy 8 stores and operations and sell its Janie and Jack business.
The retailer said Jan. 16 that it filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Eastern District of Virginia, and its Canadian unit, Gymboree Inc., plans to seek protection under the Bankruptcy and Insolvency Act of Canada in the Ontario Superior Court of Justice.
The company emerged from Chapter 11 in September 2017 after eliminating more than $900 million in debt after completing a financial restructuring, including closing 375 stores, but its struggles continued, and it has filed for bankruptcy protection again.
The company said it entered into an asset purchase agreement with Goldman Sachs & Co. LLC affiliate Special Situations Investing Group Inc., or SSIG, for its Janie and Jack business and intellectual property as well as Gymboree's online platform.
Under the agreement, SSIG will serve as the stalking-horse bidder in a court-supervised sale process for the assets, setting the lowest price for the auction.
The company has received a commitment for a debtor in possession financing, which consists of $30 million in new money loans to be provided by SSIG and Goldman Sachs Specialty Lending Holdings Inc. and a "roll up" of all of Gymboree's obligations under the prepetition term loan credit agreement for at least $89 million. If approved by the court, the financing package is expected to support the company's operations during these proceedings.
Gymboree Group intends to use proceeds from the bankruptcy protection to facilitate an orderly wind-down of all of its Gymboree and Crazy 8 stores and operations. Gymboree, Janie and Jack, and Crazy 8 stores and online platforms will remain open for now, but the company will provide updates as the bankruptcy process progresses, the company said.
"[W]e are saddened and highly disappointed that we must move ahead with a wind-down of the Gymboree and Crazy 8 businesses. At the same time, we are focused on using this process to preserve the Janie and Jack business — a strong brand that is poised to grow — by pursuing a sale of the business as a going concern," said Shaz Kahng, who was appointed Gymboree Group CEO in November 2018.
"As we move ahead, we are working to minimize the impact on our employees, customers, vendors and other stakeholders."
Under its Chapter 11 filing, Gymboree has sought the court's permission to continue to honor customer gift cards for 30 days. It has discontinued its GymBucks and Gymboree Rewards programs effective immediately.