GS Goldman Sachs Group Inc

By Becky Yerak 

Children's clothing retailer Gymboree Group Inc. filed for bankruptcy protection for the second time in less than two years and plans to shut all Gymboree and Crazy 8 stores and start going-out-of-business sales as early as Friday.

The company has 380 Gymboree-branded stores and 154 outlets in North America. Crazy 8 operates 253 stores and 11 outlets, a court filing shows.

The San Francisco-based company said it also entered into an agreement with an existing lender, an affiliate of Goldman Sachs Group Inc. called Special Situations Investing Group Inc. Under the agreement, SSIG will serve as the lead bidder for Janie and Jack, the company's high-end brand, as well as the intellectual property and online platform for the Gymboree brand.

SSIG's $85 million offer is a so-called credit bid, representing the approximate amount of Gymboree's outstanding term loan, meaning the lender would forgive the debt in exchange for the assets.

Janie and Jack operates 102 stores and 45 outlets in North America.

Gymboree first filed for bankruptcy protection in June 2017, weighed down by more than $1 billion in debt stemming from a leveraged buyout by Bain Capital Private Equity LP in 2010. The company was able to slash $900 million in debt from its balance sheet and turned over control to its lenders, including Brigade Capital Management LP and Oppenheimer Funds Inc.

At the time of its earlier bankruptcy filing, Gymboree had more than 1,280 stores, of which it immediately closed 375.

Gymboree had thought its earlier bankruptcy would give it a fresh start, allowing it to service its debt and invest in its business.

But the decline of bricks-and-mortar retail as more people shop online, along with tough competition that led to deep discounts and thinner profit margins, has hampered Gymboree's ability to repay debt and invest in its operations, Stephen Coulombe, Gymboree chief restructuring officer, said in a court filing.

Gymboree is entering chapter 11 with more than $200 million in debt.

Aside from its filing in the U.S. Bankruptcy Court in Richmond Va., Gymboree plans to seek protection from creditors in Canada.

Gymboree said it has lined up bankruptcy financing that includes $30 million in new-money loans to be provided by the Goldman Sachs entities. The package also includes a "roll up" of Gymboree's obligations under the prebankruptcy term loan in an amount not less than $89 million, the retailer said.

A group of liquidators also plans to buy inventory, providing additional liquidity for Gymboree during its bankruptcy proceedings.

Gymboree said during a court hearing Thursday that it wanted to begin going-out-of-business sales immediately, in time for the three-day holiday weekend in the U.S.

The going-out-of-business sales are expected to yield about $155 million in net proceeds, Gymboree said.

The company said it is "saddened and highly disappointed that we must move ahead with a wind-down of the Gymboree and Crazy 8 businesses."

The company has about 10,100 employees in total.

"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," it said.

Earlier this week, The Wall Street Journal reported on Gymboree Group's plans to file again for chapter 11 protection.

On Wednesday, Gymboree said it sought authorization from the court to continue to honor customer gift cards for 30 days. The retailer said it has discontinued its GymBucks and Gymboree Rewards programs effective immediately.

Most of its biggest unsecured creditors are suppliers owed as much as $12.1 million. Businesses owed money, according to a court filing, include textile and clothing companies, as well as a Detroit-based woodworking company owed $1.7 million.

Gymboree is being represented in bankruptcy by law firms Milbank Tweed Hadley & McCloy LLP and Kutak Rock LLP. Stifel Nicolaus & Co. will be its investment banker, and Berkeley Research Group LLC its financial adviser. The cases of Gymboree and related entities have been consolidated into number 19-30258.

--Lillian Rizzo and Soma Biswas contributed to this article.

Write to Becky Yerak at becky.yerak@wsj.com

(END) Dow Jones Newswires

January 17, 2019 15:37 ET (20:37 GMT)

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