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Four years after emerging from Chapter 11 bankruptcy, apparel retailer J. Crew is looking to refinance its pricey exit financing debt with a new term loan led by Goldman Sachs.

The move would save the company some cash — at SOFR+625bps with a 98 OID, the $450m term loan B due 2031 is more than 350bps cheaper than the $400m TLB due 2027 issued in September 2020. J. Crew’s existing ABL will also be extended by five years alongside the loan refinancing. Commitments are due 17 September at 12pm ET.

Sources following the company said that it recorded $2.719bn of revenue and pro-forma adjusted EBITDA of $280m for the LTM Q2 2024 period. Net leverage for the transaction is 1.7x, based on the $280m of pro-forma adjusted EBITDA, sources said.

J. Crew’s proposed refinancing follows a massive turnaround pulled off by management in the four years since the company left bankruptcy. The company, which sells apparel under the J. Crew and Madewell brand names, had been struggling with changing consumer tastes and declining revenues prior to COVID. In May 2020, it became the first large retail victim of the pandemic to file for Chapter 11 bankruptcy and emerged several months later with Anchorage Capital as its majority owner.

We won’t go into the weeds on the changing tides of consumer fashion tastes; for more details, check out this in-depth interview the New York Times did with J. Crew CEO Libby Wadle on how the company recaptured full price-paying customers at its flagship brand and boosted its average order value.

Sources following the company also note that it has managed to successfully capture customers despite the general sentiment of tightening consumer spending this year.

In February and March 2022, S&P and Moody’s upgraded the company’s issuer ratings by one notch to B and B2 respectively, following significant deleveraging and earnings recovery on the back of strong consumer demand. On 6 September, S&P further revised its outlook on the credit to “stable” based on projections that revenue will grow more than 8% in 2024.

“Despite challenging macroeconomic conditions, the increase in sales largely reflected the repositioning of the company's main brands and a focus on value-oriented consumers,” wrote S&P analysts in the 6 September report. “We forecast revenue will grow more than 8% in 2024, further accelerating to 9% in 2025 as the company continues to invest in its business.”

But some sources have also raised concerns around the future of the company, especially given that J. Crew has attempted to spin off Madewell in the past. This would have helped to pay off a significant portion of the company’s pre-petition debt, but a few weeks after shelving the IPO plan, it pivoted towards the bankruptcy route.

“It’s not certain who’s going to own this business a year from now, and if Madewell is still going to be a part of it,” said a credit analyst who passed on the deal.

As it stands, J. Crew accounts for approximately 40% of total sales, with Madewell and J. Crew Factory comprising around 30% each, sources said.

Spokespeople for J. Crew and Anchorage Capital did not return a request for comment. Goldman Sachs declined to comment.

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J. Crew tries on new debt to take out exit loan

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