David’s Bridal is preparing to file for chapter 11 bankruptcy protection as soon as next week in the United States Bankruptcy Court for the District of Delaware with an initial new money DIP financing commitment from first lien term loan lenders in the range of approximately $50 million to $75 million, to be increased if needed, according to sources; exact amounts are still being negotiated. In addition to the new money contribution, the company’s operations would be supported in a restructuring by its cash on hand and revolving commitments from ABL lenders, who are contemplated to roll their commitments over, sources add.
Under the restructuring deal currently being contemplated, first lien term lenders would take substantially all of the company’s reorganized equity, sources say.
The company is currently operating in a 30-day grace period after
skipping an Oct. 15 interest payment on $270 million in 7.75% unsecured bonds due 2020; the company is using the grace period to continue negotiations in the hope of reaching a consensual restructuring deal. David’s Bridal is
advised by Evercore and Debevoise & Plimpton.
An ad hoc group of term loan lenders (represented by Jones Day and Greenhill) and Oaktree (represented by Paul Weiss and Moelis) collectively own over two thirds of the company’s $481 million of term loan debt and would together provide the DIP financing, sources say. Oaktree also owns a majority of the company’s notes,
as reported previously. Minority noteholder Solace,
advised by Fried Frank, remains in discussions with the parties regarding what consideration the unsecured noteholder would need in exchange for consent to an RSA, sources add, which consideration could include an amount of equity or warrants.
In an e-mailed statement, David's Bridal said it is negotiating with creditors to reach a “mutually agreed-upon resolution designed to strengthen [the company's] balance sheet." The company said it has "ample liquidity" to meet its key business objectives today and in the future, adding that it "does not expect the process to materially impact business or interfere with day-to-day operations or [the company's] relationships with vendors and customers."
A now-abandoned
out-of-court deal contemplated by the company and its lenders included equitization of the company’s notes, an $80 million equity rights offering backed by existing noteholders, an $80 million second lien facility in the form of new money or the subordination of the existing term loan and a repayment of $80 million of the first lien term loan (which then would have been refinanced) using cash proceeds from the rights offering. Ultimately, the various creditor parties and the company were unable to agree on economic terms for the out-of-court structure, sources add.
As previously reported, in conjunction with negotiations during efforts to reach an out-of-court deal, the ad hoc lender group had requested the company draft an RSA contemplating certain milestones including key dates during any potential chapter 11 cases.
The company's private equity sponsor Clayton Dubilier & Rice did not respond to requests for comment by press time.
Editor’s Note: This story has been modified to include a company statement provided after initial publication.