Retail Carnage: True Religion Files For Bankruptcy

(RTTNews) - Jeans maker True Religion Apparel Inc. has filed for bankruptcy protection and also signed a restructuring agreement with a majority of its lenders.

The Los Angeles-based company joins several other retailers and apparel makers in filing for bankruptcy protection recently, as they grapple with declining mall traffic, switch in consumer tastes, dominance of online sales, and growing competition from fast fashion and off-price retailers.

True Religion said Wednesday that it filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court for the District of Delaware. The company expects it will take 90 to 120 days to obtain confirmation from the bankruptcy court for its pre-arranged plan.

True Religion said it signed a restructuring support agreement or RSA with the substantial majority of its term loan lenders and its private equity owner, TowerBrook Capital Partners.

The company noted that the restructuring agreement will reduce its debt by over 75 percent, or $350 million, and convert it into the substantial majority of the reorganized company's equity. The company will continue business operations as usual.

"After a careful review, we are taking an important step to reduce our debt, reinvigorate True Religion's iconic brand and position the company for future growth and success," John Ermatinger, president and CEO of True Religion said.

Ermatinger also said that the company's year-to-date adjusted EBITDA through May was $7.1 million, up 95 percent compared to last year.

True Religion has secured post-petition debtor-in-possession or DIP financing from Citizens Bank N.A. for up to $60 million.

True Religion said its restructuring plan provides for full payment of claims of its continuing trade creditors, including continuing vendors, suppliers and landlords.

In mid-June, struggling kids apparel retailer Gymboree filed for bankruptcy protection as it continued to struggle to return to profit and also failed to pay its interest payment due on debt notes.

Retailers Payless Shoesource, Bebe Stores and Rue21 filed for bankruptcy in April.