J. Crew Eyes Debt-Market Return After Upending Lending Years Ago

US retailer J. Crew is feeling out investor interest in refinancing a loan it used to exit bankruptcy four years ago, according to people with knowledge of the matter. 

Goldman Sachs is pre-marketing a term loan of about $400 million to refinance the debt, said the people, asking not to be named discussing private information. The deal could launch in September, the people added. 

The preppy clothing seller filed for Chapter 11 in May 2020, marking the first major retailer to fail during the Covid-19 pandemic. Creditors took the keys to the business in exchange for snuffing out $1.6 billion of secured debt. Anchorage Capital Group LLC became J. Crew’s biggest shareholder. 

J. Crew’s return to debt capital markets is sure to catch the eyes of lenders scarred by years of so-called creditor violence. Under different owners, the company dodged a default in 2017 by shuffling assets out of reach of creditors in a move that made the retailer synonymous with controversial debt deals.

Legal Loopholes

The transaction resulted in lawsuits and inspired other borrowers to use legal loopholes to pit creditors against each other in transactions that give shareholders more runway to stave off bankruptcy and keep control. It also branded a legal term in debt documents — the J. Crew blocker — aimed precisely at avoiding those type of moves. 

The bankruptcy exit facility that would be refinanced pays interest in-kind and isn’t due until 2027. Anchorage, GSO Capital Partners LP and Davidson Kempner Capital Management LP were among those who provided the debt.

Goldman Sachs and Anchorage declined to comment. J. Crew didn’t respond to a request for comment. 

Tailored Brands, another US clothing retailer that failed during the pandemic, privately placed a $550 million term loan in February at 6.5 percentage points over the Secured Overnight Financing Rate and at a 3-cent discount to par. The proceeds went toward a share buyback.

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