David’s Bridal, LLC – Leading “Bridal Authority” Back at Chapter 11 Altar for Second Time in Four Years Citing Lingering Impact of COVID and “Uncertain Economic Conditions”; Will Continue Asset Sale Efforts In-Court and “Evaluate Physical Footprint”

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April 17, 2023 – David's Bridal, LLC and five affiliated debtors (“David's Bridal” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of New Jersey, lead case No. 23-13131 (Judge Christine M. Gravelle). The Debtors, "the nation's leading bridal and special occasion authority*," are represented by Michael D. Sirota of Cole Scwartz LLC. Further Board authorized appointments include: (i) Kirkland & Ellis LLP  as general bankruptcy counsel, (ii) Berkeley Research Group, LLC (“BRG”) as financial advisors, (iii) Houlihan Lokey Capital as investment bankers, (iv) Gordon Brothers to assist with inventory sales and (v) as Omni Agent Solutions as claims agent.

*As at filing, the Debtors and their nondebtor subsidiaries operate 294 stores across the United States, Canada, and United Kingdom and franchise 8 stores in Mexico. The Debtors are headquartered in Conshohocken, Pennsylvania and currently employ approximately 10,000 employees.

The Debtors’ lead petition notes between 25,000 and 50,000 creditors; estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn ($256.9mn of funded debt). Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) UPS – United Parcel Service ($1.3mn trade debt claim), (ii) RM Richards ($1.0mn trade debt claim) and (iii) Google Inc. ($923k trade debt claim).

Filing Date Highlights

  • Wedding Specialist Back in Chapter 11 for Second Time in Under Four Years with $259.9mn of Funded Debt
  • Cites "Casualization" of Wedding Events as Well as COVID and Liquidity-Driven Constraints on Management Initiatives as Forcing Chapter 22
  • Will Ostensibly Continue to Pursue Failed Out-of-Court Going Concern Sale Effort…In-Court, But Clearly Poised to Morph "Strategic Management of Inventory" Workstream into Full-Blown Liquidation Operation

In a press release announding the development, the Debtors provide: "Prior to today's announcement, David's Bridal initiated an evaluation of a wide range of strategic alternatives to maximize value for all stakeholders, including a marketing and sale process for its assets. In light of its liquidity constraints, the Company was unable to finalize its marketing and sale process out of court and intends to continue exploring a sale of all or some of its assets pursuant to section 363 of the Bankruptcy Code. Alongside these efforts, the Company is also strategically managing inventory and evaluating its physical footprint to maximize value and the prospect of a successful going concern transaction

The Company expects to file a recognition proceeding in Canada and a subsidiary of David's Bridal expects to commence an administration proceeding for its business in the United Kingdom."

James Marcum, the Debtors' Chief Executive Officer, commented: "…our business continues to be challenged by the post-COVID environment and uncertain economic conditions, leading us to take this step to identify a buyer who can continue to operate our business going forward."  

Previous Chapter 11

In January 2019, the Debtors emerged from an earlier whirlwind, prepackaged bankruptcy, which saw holders of $270.0mn of senior unsecured notes exchange those notes for 8.75% of the emerged Debtors’ new common stock and warrants (the latter presumably used for confetti) which translated into a 4.4% recovery based on a then $436.0mn mn valuation of the Debtors’ new equity. The need to seek bankruptcy shelter in that instance (Delaware, lead case number 18-12635) was attributed to the "headwinds facing the brick-and-mortar retail industry" and "the amount of debt on the Debtors’ balance sheet, most of which will mature with the next 12 months.”
Holders of the Debtors’ senior bank debt ($481.2mn as at filing in January 2019) got a 70.8% recovery based on that same new equity valuation and their receipt of 76.25% of the new common stock. In addition to equity, holders of senior bank debt took their pro rata share in the Debtors’ then new $300.0mnmn senior facility; the net result for the Debtors being the extinguishment of $181.2mn of senior bank debt…and the ability to claim an aggregate $450.0mn debt reduction. 
In a press release announcing the Court’s 2018 Plan confirmation, the Debtors then provided, “David's Bridal will reduce its debt by approximately $450 million and…marks the beginning of an exciting new chapter at David's Bridal as a stronger company with significantly less debt."
Goals of the (Current) Chapter 11 Filing
The Marcum Declaration (defined below) provides: "In connection with the Company’s consideration of strategic alternatives, the Company has identified various operational efficiency initiatives to support a new, scaled down enterprise, including a reduction in its store fleet, corporate and store workforce, and corporate expenses. The Debtors commenced these chapter 11 cases to, among other things, obtain the immediate access to liquidity necessary to implement these cost saving initiatives and continue the marketing process for a potential sale transaction."
On sale efforts and possible pivot to liquidation, Marcum continues: "While the Debtors will continue to conduct a sale process at the outset of these chapter 11 cases, if the Debtors are unable to implement a going-concern transaction, the Debtors will turn to an orderly liquidation of their remaining assets, including the sale of distinct assets separate from the Debtors’ operations….The Debtors and Gordon Brothers Retail Partners, LLC ('Gordon Brothers') have proposed procedures related to a potential wind-down of the Debtors’ business operations and liquidation of inventory in all retail stores that are substantially similar to procedures used by other retailers in similar circumstances. To the extent necessary, the Debtors believe that the proposed timeline and procedures would result in an expedited and efficient wind-down process. The Debtors will manage their inventory in the coming weeks to further the opportunity to secure a value-maximizing going-concern transaction and, to the extent one materializes, will quickly pivot to cease store closings at any stores needed to implement the transaction."
Events Leading to the Chapter 11 Filing

In a declaration in support of first day filings (the “Marcum Declaration), James Marcum, the Debtors’  CEO commented: “On…January 18, 2019, the Debtors successfully emerged from the Prior Chapter 11 Cases, deleveraging their balance sheet by approximately $434 million….Notwithstanding…the Company is suffering under severe liquidity constraints brought on by a confluence of adverse macroeconomic trends and industry specific headwinds, including the lasting impact of COVID-19 on the wedding industry….A confluence of factors contributed to the Debtors’ need to commence these chapter 11 cases. First, internal factors, including the liquidity needs of the Company to support its significant operating expenses, and disruptions to management initiatives, have impaired the Debtors’ liquidity. Second, the impact of the COVID-19 pandemic, as well as the significant shift in the competitive landscape due to the disruption in the retail industry, has led to a decrease in sales. Finally, shifts in consumer behaviors have contributed to the elongation of wedding planning cycles and an overall casualization in wedding events, thereby affecting the demand for more traditional wedding gowns and formal attire, all of which have further reduced the Debtors’ revenue.

Prepetition Indebtedness
The following table depicts the Debtors’ prepetition capital structure as of the Petition Date:
The below table depicts the respective lien priorities under each of the Debtors’ credit facilities:

FN3 “ABL Priority Collateral” includes, among other things, the Debtors’ accounts, payment intangibles, cash and equivalents, inventory, and proceeds of the foregoing.
FN4 “Term Loan Priority Collateral” includes, among other things, the Debtors’ equipment, fixtures, real property, intellectual property, all assets other than ABL Priority Collateral, and proceeds of the foregoing.

About the Debtors

According to the Debtors: “With 70 years of experience dressing customers for all of life's special occasions, David's Bridal is built on the idea everyone deserves to have the attire of their dreams regardless of style preference, shape, size, or budget. We believe in: CELEBRATING all life's magical moments, INNOVATING so we are always serving her, PERSONALIZING everything so it's all done her way, DESIGNING the most luxurious dresses, and finally, KINDNESS – so she doesn't have to worry about anything. It is our mission to help anyone, and everyone, find the look that will allow them to be the best, most genuine version of themselves on their wedding day or any special occasion."
The Marcum Deeclartion adds: "The Debtors sell a broad assortment of bridal gowns, bridesmaid dresses, special occasion dresses and accessories. As of the date hereof, the Debtors and their nondebtor subsidiaries operate 294 stores across the United States, Canada, and United Kingdom and franchise 8 stores in Mexico. The Debtors are headquartered in Conshohocken, Pennsylvania and currently employ approximately 10,000 employees."

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