Children’s Clothing Retailer Gymboree Declares Bankruptcy For Second Time In Two Years
For the second time in two years, children’s clothing retailer Gymboree Group Inc. has filed for Chapter 11 bankruptcy protection, offering the latest sign of the looming bloodbath in the retail space following stagnant foot-traffic during the holiday sales season (which was dominated by e-commerce), and the strain from higher interest rates. Gymboree, which filed late Wednesday, wasn’t the only retailer to file within the last 24 hours: Department Store Shopko also filed on Wednesday.
As part of its restructuring plans, Gymboree will close 800 Gymboree- and Crazy 8-branded stores in the US and Canada. In its press release, the retailer said it’s planning to sell its high-end children’s fashion line Janie and Jack, its online platform and its intellectual property – though all of these will remain open for now as the restructuring continues. Gymboree Play & Music, which split from Gymboree in 2016, will not be impacted.
The filing comes after Gymboree said last month that it had begun to review “strategic options” including a “sale at the brand level”.
The company previously invoked Chapter 11 in the summer of 2017, leading to the closure of about 350 of its 1,281 locations. The company was founded in the 1970s as a company that offered classes for toddlers and parents in Northern California, before diversifying into making children’s clothing.
The filing notably followed by less than a day a deal struck by Eddie Lampert to save Sears from liquidation.
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SAN FRANCISCO, Jan. 16, 2019 /PRNewswire/ — Gymboree Group, Inc. (the “Company” or “Gymboree Group”), today announced that the Company and its U.S. subsidiaries have voluntarily filed for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Eastern District of Virginia.
In addition, the Company’s Canadian subsidiary, Gymboree, Inc., intends to seek protection in proceedings pursuant to the Bankruptcy and Insolvency Act of Canada(“BIA”) in the Ontario Superior Court of Justice (Commercial List). Gymboree Group intends to use these proceedings to facilitate an orderly wind-down of all of its Gymboree® and Crazy 8® store locations and operations, while continuing to pursue a going-concern sale of its Janie and Jack® business and a sale of the intellectual property and online platform for Gymboree®. The Company has entered into an asset purchase agreement with Special Situations Investing Group, Inc. (“SSIG”), an affiliate of Goldman Sachs & Co. LLC, pursuant to which SSIG will serve as the stalking-horse bidder in a court-supervised sale process for Janie and Jack®.
Gymboree Group expects to conduct an auction pursuant to Section 363 of the U.S. Bankruptcy Code no later than February 25, 2019, pursuant to bid procedures to be approved by the Court. Pursuant to the asset purchase agreement, SSIG has agreed to acquire the Janie and Jack® business and the intellectual property and online platform for Gymboree®. The asset purchase agreement sets the floor for the auction, which is designed to achieve the highest or otherwise best offer, subject to approval by the Bankruptcy Court. Shaz Kahng, appointed in November 2018 as Gymboree Group CEO, said, “The Company has worked diligently in recent months to explore options for Gymboree Group and its brands, and we are saddened and highly disappointed that we must move ahead with a wind-down of the Gymboree and Crazy 8 businesses.
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. As we move ahead, we are working to minimize the impact on our employees, customers, vendors and other stakeholders.”
Ms. Kahng continued, “We have tremendous appreciation for the hard work of our dedicated employees and their commitment to Gymboree Group and our customers. We are also incredibly grateful for the many years of support by our vendors. And, finally, we thank the customers of the Gymboree, Janie and Jack and Crazy 8 brands for their loyalty – our teams have been proud to serve you since Gymboree was first started as a provider of mom-and-baby classes in 1976.” Gymboree®, Janie and Jack® and Crazy 8® stores and online platforms are currently open and continuing to serve customers. The Company will provide an update on plans for its Janie and Jack® stores as the court-supervised sale process progresses.
Gymboree Group will provide more details about the plans for its Gymboree® and Crazy 8® going out of business sales in the near term. Gymboree Group has received a commitment for a debtor in possession financing, which consists of $30 million in new money loans to be provided by SSIG and Goldman Sachs Specialty Lending Holdings, Inc. and a “roll up” of all of Gymboree’s obligations under the prepetition Term Loan Credit Agreement in an amount not less than $89 million.
If approved by the court, the financing package is expected to support the Company’s operations during these proceedings. Gymboree Group has filed a number of customary motions with the U.S. Bankruptcy Court seeking authorization to support its operations during the process, including authority to continue payment of employee wages and maintain healthcare benefits and certain other relief customary in these circumstances. The Company has sought authorization from the Court to continue to honor customer gift cards for 30 days.
Gymboree Group has discontinued its GymBucks and Gymboree Rewards programs effective immediately. Additional information regarding Gymboree Group’s Chapter 11 filing is available at www.GymboreeGroupRestructuring.com. Court filings and information about the claims process are available at https://cases.primeclerk.com/gym or by calling the Company’s claims agent, Prime Clerk, at (929) 272-0801 (or toll-free at (844) 399-4163 for international calls), or by sending an email to firstname.lastname@example.org.
Additional information regarding the Canadian proceedings of Gymboree, Inc. under the BIA will be available on the website of KPMG Inc., as Proposal Trustee: home.kpmg/ca/gymboree, or by calling (416) 777-3520 or (833) 467-5379, or by sending an email to email@example.com Gymboree Play & Music®, a separate entity, is not included in the court proceedings.
Milbank, Tweed, Hadley & McCloy LLP is serving as the Company’s legal counsel, Berkeley Research Group is serving as its restructuring advisor, and Stifel, Nicolaus & Co., Inc. and Miller Buckfire & Co., LLC are serving as its financial advisor. Norton Rose Fulbright Canada LLP is counsel to Gymboree Canada. KPMG Inc. is acting as Proposal Trustee and is represented by Osler, Hoskin & Harcourt LLP.