J.Crew committee objects to disclosure statement, questions valuation

By Caroline Salls

Pittsburgh, June 19 – J.Crew Group, Inc.’s official committee of unsecured creditors objected to approval of the disclosure statement for the company’s proposed plan of reorganization, according to a Thursday filing with the U.S. Bankruptcy Court for the Eastern District of Virginia.

“The disclosure statement (i) fails to provide creditors and parties in interest with adequate information to evaluate the plan; and (ii) describes a plan that cannot be confirmed,” the objection said.

Although J.Crew has never sought court approval to assume or implement a pre-bankruptcy transaction support agreement reached with “consenting support parties” and its private equity owners, the committee said the company has proceeded in accordance with that agreement and filed a plan that calls for the conversion of $1.6 billion of secured debt held by the pre-bankruptcy secured parties into post-emergence equity.

However, the committee said the valuation the proposed equity split is based on “raises more questions than it answers.”

According to the objection, the committee is conducting its own investigation to determine whether the secured lenders are being overpaid “and that value is not being given away to them at the expense of unsecured creditors due to an artificially low plan valuation.”

Either way, the creditor group said the disclosure statement lacks key information on the valuation analysis and the discrete value of J.Crew’s intellectual property.

In addition, the committee said the plan improperly classifies term loan deficiency claims as other unsecured claims.

J.Crew is a New York-based retailer of women’s, men’s and children’s apparel, shoes and accessories. The company filed for Chapter 11 on May 4 under case number 20-32181.

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