Claire’s Latest Retailer To File For Bankruptcy
Claire’s jewelry chain is looking for help in bankruptcy court. The company has filed for Chapter 11 bankruptcy protection in Wilmington, Delaware. Claire’s chief executive Ron Marshall said in a statement, “We will complete this process as a healthier, more profitable company, which will position us to be an even stronger business partner for our suppliers, concessions partners, and franchisees.”
Claire’s said the bankruptcy would not disrupt store operations and would not affect its international subsidiaries. The company’s bankruptcy also doesn’t include $245 million in funded debt at affiliates. It plans to emerge from bankruptcy in September, ahead of the crucial holiday season.
The company says the move would protect as many as 10,000 jobs, of which 6,400 are part-time. Worldwide, Claire’s has 17,000 workers. It has 7,500 locations in 45 countries. The chain also owns the Icing brand, a jewelry chain targeting older shoppers.
Claire’s, based in Hoffman Estates, Ill., began piercing ears in 1978 and has pierced more than 100 million ears worldwide. The company said it performed the service 3.5 million times in the United States last year. Claire’s operates in 99 percent of American malls.
Claire’s said that the bankruptcy filing is an attempt to restructure its balance sheet, as it is struggling with a heavy debt burden. Claire’s had $2.1 billion in long-term debt at the end of 2017. The debt is costing it $183 million a year alone in interest payments, according to Chief Financial Officer Scott Huckins. Last year, the company earned $29 million in profit and recorded $1.3 billion in revenue.
Through the bankruptcy, Claire’s is hoping to shed $1.9 billion in debt and close some underperforming stores. The company expects to reduce the number of its locations by 170 over the next few years and renegotiate the leases on some of its other stores. Claire’s said it was up-to-date with its vendor payments and had “ample liquidity.”
Claire’s said it secured $135 million in debtor-in-possession financing. According to court papers, the loan will include $75 million revolver and a $60 million term loan from a group led by Citibank N.A. The company said its reorganization is supported by holders of 72 percent of its first-lien debt. Claire’s also said holders of 8 percent of its second-lien notes and 83 percent of its unsecured notes support the restructuring.