Gymboree Files for Chapter 11 Bankruptcy Protection
Children's clothing chain Gymboree filed for Chapter 11 bankruptcy protection today after retaining a turnaround firm last month to assist with its operations. The children’s apparel retailer, which also announced the departure of Chief Financial Officer Andrew North, has been in discussions with lenders since the beginning of 2017 as it grapples with a heavy debt load, much of which stems from Bain Capital’s $1.8 billion leveraged buyout of the retailer in 2010. Public filings show Gymboree has $1.043 billion in outstanding debt, of which $872 million is due in less than a year. In conjunction with the filing, the company announced plans to close 375 to 450 of its 1,281 stores, and said it has secured commitments for $308.5 million in additional financing. Gymboree said it hopes to slash $1 billion of its $1.4 billion in debt and to win approval for its plan by Sept. 24.
Total Retail's Take: Gymboree's bankruptcy was widely expected. The company recently disclosed it had missed a June 1 payment to investors on senior notes due in 2018. Gymboree also was among 22 companies that a June 7 report by rating giant Moody's Investors Service characterized as distressed retailers. Gymboree had other shortcomings as well: it failed to innovate quickly, and buckled amid declining mall traffic, fixed rental costs and online competition. Online sales represent only 21 percent of Gymboree's revenue, and its web systems are "dated and unsupported," recently appointed Chief Restructuring Officer James Mesterharm said in a court filing.