Gymboree seeks Chapter 11 in U.S., also plans to file in Canada

By Susanna Moon and Caroline Salls

Chicago, Jan. 17 – Gymboree Group, Inc. said it filed for relief Wednesday under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Eastern District of Virginia.

Meanwhile, the company's Canadian subsidiary, Gymboree, Inc., plans to seek protection in proceedings under the Bankruptcy and Insolvency Act of Canada in the Ontario Superior Court of Justice.

Gymboree Group plans “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,” according to a company press release.

DIP financing

The group has received a commitment for a debtor-in-possession financing, which consists of $30 million in new 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 for at least $89 million.

Interest on class A DIP loans will accrue at the adjusted base rate plus 725 basis points or Libor plus 825 bps, with a 2% Libor floor, and interest on class B new-money DIP loans will accrue at the adjusted base rate plus 1,025 bps or Libor plus 1,125 bps, with a 2% Libor floor.

The financing will mature on the earliest of 210 days after the bankruptcy filing date, 35 days after the filing date if a final order has not been entered, the acceleration of the DIP loans and the effective date of an acceptable plan.

Asset sale

Special Situations Investing Group, Inc., an affiliate of Goldman Sachs & Co. LLC, will be the stalking-horse bidder in a court-supervised sale process for Janie and Jack under an asset purchase agreement.

Gymboree Group expects to conduct an auction under the U.S. Bankruptcy Code by Feb. 25 under bid procedures to be approved by the court.

Special Situations 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.

The bid procedures motion said that if the stalking-horse bid is solely for the intellectual property and e-commerce platform, it will be a credit bid. If, however, the bid includes the other Janie and Jack assets, it will include a cash component.

Initial indications of interest from potential competing bidders are due by 5 p.m. ET on Jan. 25. Final bids are due by 5 p.m. ET on Feb. 11.

“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,” Shaz Kahng, appointed in November as Gymboree Group chief executive officer, said in the press release.

“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.”

Gymboree Play & Music, a separate entity, is not included in the court proceedings.

Debt details

According to court documents, Gymboree has $100 million to $500 million in assets and $212 million in total funded debt obligations.

The company’s largest unsecured creditors are Hansoll Textile Ltd. of Seoul, with a $12.09 million trade payable claim; Tip Top Fashions Ltd. of Bangladesh, with a $9.71 million trade payable claim; Pan Pacific Co., Ltd. of Seoul, with a $7.13 million trade payable claim; Mawna Fashions Ltd. of Bangladesh, with a $5.58 million trade payable claim; and Concept Knitting Ltd. of Bangladesh, with a $5.29 million trade payable claim.

The largest unsecured creditors also include Royal Classic Mills (P) Ltd. of India, with a $4.7 million trade payable claim; Shartex International Trading of Shanghai, with a $4.45 million trade payable claim; Lim Line Apparel Co. Ltd. of Bangkok, with a $4.2 million trade payable claim; Tonxiang Colax Industrial of Jiaxing City, China, with a $4.13 million trade payable claim; and Eastman Exports Global Clothing of India, with a $3.97 million trade payable claim.

As previously reported, this is Gymboree’s second Chapter 11 filing. The plan of reorganization filed in its previous case took effect on Sept. 29, 2017.

Milbank, Tweed, Hadley & McCloy LLP is the legal counsel; Berkeley Research Group is the restructuring adviser; and Stifel, Nicolaus & Co., Inc. and Miller Buckfire & Co., LLC are the financial advisers. Norton Rose Fulbright Canada LLP is counsel to Gymboree Canada. KPMG Inc. is the proposal trustee.

Gymboree is a children’s apparel specialty retailer based in San Francisco. The Chapter 11 case number is 19-30258.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.