True Religion Denim Jeans has filed for bankruptcy protection after securing “critical stakeholder support” for a recapitalisation rescue package.
The True Religion bankruptcy plan will allow its lenders along with TowerBrook Capital Partners to convert more than $350 million of debt into shares.
“Throughout the implementation of this process, True Religion will continue to operate its business without interruption to customers, employees and business partners,” the company said in a statement.
“After a careful review, we are taking an important step to reduce our debt, reinvigorate True Religion’s iconic brand and position the company for future growth and success,” said John Ermatinger, True Religion’s president and CEO.
The plan – to be considered by the bankruptcy court of Delaware – provides for full payment of True Religion’s continuing trade creditors, including continuing vendors, suppliers and landlords.
“By dramatically improving our capital structure 24 months in advance of our term loan maturity, we will continue business operations as usual and provide our employees and business partners the long-term stability they need, while providing the necessary flexibility to invest in growing our digital footprint, building connections with customers, and improving organisational competencies,” Ermatinger said.
Founded in 2002, True Religion is known for its unusual designs, individual styles and stitches and quality fits. The brand also presents vintage-inspired knits, graphic t-shirts and activewear.
Ermatinger says he is confident the company has a bright future, with adjusted EBITDA to May of $7.1 million up 95 per cent year-on-year.
“This improved performance will allow us to enter into the next phase of our recapitalisation process with confidence as we continue to execute against our strategic plan and drive the business forward.”
Online retail commentator Retail Dive blamed “fickle fashion tastes” for True Religion’s woes, including “the peculiar consumer attitudes of the moment, including a preference to save spending for smartphones and experiences”.
Many [apparel retailers] like True Religion are struggling, declaring bankruptcy and even folding — including once healthy companies like Sports Authority and The Limited,” the site said.
“Like many private equity-owned retailers, True Religion is hobbled by debt, leaving it less able to take on such challenges.”
