Rue21 files for bankruptcy protection under Chapter 11

In a turn worth of chronicle of a death foretold, teen apparel clothing company Rue21 filed for Chapter 11 bankruptcy protection Monday in a Pennsylvania court.

Explaining their decision in a statement, CEO Melanie Cox said that "These actions are being undertaken with the goal of strengthening the Company's balance sheet, achieving a more efficient cost structure, and concentrating resources on a tighter retail footprint in order to pave the best path forward for rue21."

Rue21 said Tuesday it has entered into agreements with some of its lenders to reduce its debt and to provide additional capital in support of its restructuring, according to a release, but the company expects to continue normal business operations throughout the process. Kirkland & Ellis will serve as Rue21's legal adviser. Rothschild will be its investment banker and financial adviser. Berkeley Research Group is Rue21's restructuring adviser during this process, the company said.

"The restructuring is an important step forward in rue21's ongoing business transformation into a more focused and highly performing retailer," added the company.

According to Monday’s filing, Rue21 has listed its assets and liabilities in the range of 1 billion dollars and 10 billion dollars.

Rue21 gets commitment from existing lenders for further financing

"Looking ahead, I am confident that the outcome of this process will be a stronger and more sustainable rue21 for our customers, vendors and business partners," CEO Cox remarked.

The retailer said it has reached agreements to obtain up to 125 million dollars in debtor-in-possession (DIP) financing from its existing lenders, and up to 50 million dollars in new money term loan DIP financing from a group of its existing term loan lenders.

The new financing will support day-to-day operations during the reorganisation, Rue21 explained, such as paying employee wages, fulfilling agreements with vendors and honouring existing customer programs like gift cards.

On a related note, Rue21 warned that it could evaluate additional store closures now, to add to the 400 closures that began in April.

Image:Rue21 Web