Gymboree closing stores after 2nd bankruptcy

by Ike Obudulu Posted on January 18th, 2019

San Francisco, California: Children’s clothing retailer Gymboree Group, Inc. has again filed for Chapter 11 bankruptcy protection, the second time in nearly two years. The company will close more than 800 Gymboree and Crazy 8 stores in the U.S. and Canada.

The San Francisco-based retailer said that along with its U.S. subsidiaries, it has filed a petition in the U.S. Bankruptcy Court for the Eastern District of Virginia. Gymboree Play & Music, a separate entity, is not included in the court proceedings.

The company’s Canadian subsidiary, Gymboree, Inc., intends to seek bankruptcy protection in the Ontario Superior Court of Justice.

Gymboree plans to use these proceedings to wind-down of all of its Gymboree and Crazy 8 store locations and operations, while continuing to pursue a going-concern sale of its high-end Janie and Jack business as well as a sale of the intellectual property and online platform for Gymboree.

Gymboree had earlier filed for bankruptcy protection in June 2017. At that time, the company closed a portion of its stores and saw lenders take control of the business.

The company has entered into an asset purchase agreement with Special Situations Investing Group, Inc. or SSIG, an affiliate of Goldman Sachs & Co. LLC. SSIG will serve as the stalking-horse bidder in a court-supervised sale process for Janie and Jack.

Gymboree expects to conduct an auction by February 25, 2019, pursuant to bid procedures to be approved by the court.

Gymboree has received a commitment for $30 million debtor-in-possession financing from SSIG and Goldman Sachs Specialty Lending Holdings Inc, and a “roll up” of all of Gymboree’s obligations under the pre-petition Term Loan Credit Agreement for an amount not less than $89 million.

If approved by the court, the company expects the financing package to support its operations during these proceedings.

The company has sought authorization from the court to continue to honor customer gift cards for 30 days. It has discontinued its GymBucks and Gymboree Rewards programs with immediate effect.

Gymboree, which began offering classes for mothers and their children in 1976, runs 380 Gymboree stores in the U.S. and Canada. When it first sought Chapter 11 bankruptcy protection in June 2017, it ran 1,300 stores.

The company has suffered in the post-recession years like almost all mall-based retail stores. Steep declines in mall traffic and the shift online have devastated many traditional retailers. This week, 132-year-old department-store chain Sears averted liquidation when billionaire Eddie Lampert won tentative approval for a $5 billion plan to keep it in business.

The holidays, the most important time of the year in retail, was not nearly as robust as most had expected it to be. Macy’s suffered its worst-ever day of trading after putting up lacklustre holiday numbers, and Kohl’s reported a dramatic slowdown from a year ago. Macy’s is considered a barometer of spending in malls.

Before the opening bell Thursday, retailers were among the worst performers on the S&P 500.

Gymboree was bought by the private equity firm Bain Capital for $1.8 billion in 2010 and taken private.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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