J.Crew Group Inc., the preppy retailer that recently fell on hard times, is preparing to file for bankruptcy protection, one of several high-profile U.S. chains that are on the verge of unraveling during the coronavirus pandemic.
J.Crew has been in talks with a group of lenders for several weeks since the company was forced to cancel plans to take its Madewell subsidiary public, people familiar with the matter said. The company had planned to use the proceeds of the Madewell IPO to pay down part of its $1.7 billion debt. But the IPO plans were scrapped in March.
A deal hasn’t been reached with lenders and the retailer’s board hasn’t signed off on any plan, one of the people said. A filing could come as soon as this weekend, some of the people said.
J.Crew, which was taken private in a leveraged buyout in 2010, has struggled in recent years with fashion missteps and its debt load as more people shifted to fast-fashion chains and online shopping. It narrowly avoided bankruptcy as part of a 2017 debt swap, and the company’s longtime leader Mickey Drexler stepped aside as CEO in that same year.
Like a number of U.S. retailers, J.Crew shut its stores in March as the fast-spreading coronavirus prompted government officials to mandate nonessential businesses close. With most of their sales gone, retailers that were struggling before the pandemic have laid off tens of thousands of workers, decided not to pay April rents and tapped credit lines.
Neiman Marcus Group Ltd. LLC is also in the process of finalizing talks with multiple groups of lenders ahead of a bankruptcy filing, according to a person familiar with the matter. J.C. Penney Co. has been in talks with lenders for bankruptcy financing that could total $1 billion, the Journal has reported.
J.Crew had counted on using the proceeds of the Madewell IPO filing to pay down some of its debt, but in early March it became clear as the stock market started to spiral down that no IPO was possible.
Instead, J.Crew started negotiating with a group of lenders with a loan maturity looming in less than a year after ditching the Madewell IPO plans, according to the people familiar with the matter. The company, which has been working with advisers from investment bank Lazard and law firm Weil Gotshal & Manges, has a $4 million payment due at the end of April.
The company restructured its debt outside of bankruptcy in 2017 in a controversial deal that swapped $500 million of bonds due in 2019 for new securities backed by the intellectual property behind the J.Crew brand. Its lenders include Anchorage Capital Group LLC and Blackstone Group Inc.’s GSO Capital Partners LP.
Anchorage is leading a group of lenders who are in talks to provide a loan to finance the company during a bankruptcy, according to people familiar with the matter.
Founded in 1983 as a catalog retailer, J.Crew popularized a brand of preppy chic that included items like the rollneck sweater, weathered chino, barn jacket and pocket T-shirt.
It eventually added stores and sold a majority stake to the Texas Pacific Group in 1997. Mr. Drexler joined in 2003, and the company went public in 2006. It was taken private again in a leveraged buyout in 2010 by Texas Pacific, which had changed its name to TPG, and Leonard Green & Partners.
The company hired former West Elm executive Jim Brett as CEO in 2017. Mr. Brett left after 16 months following clashes with Mr. Drexler and the board over his strategy and spending plans, according to people familiar with the situation. Mr. Brett had veered from the brand’s preppy image, signed a deal to sell some clothes on Amazon.com Inc. and added more lower priced items.
In January, J.Crew named former Victoria’s Secret executive Jan Singer as CEO.
J.Crew Group swung to a profit of $1.5 million for the fiscal year ended Feb. 1, compared with a $74.4 million loss a year earlier. Total revenues increased 2% to $2.54 billion, but those gains were driven by Madewell.
—Miriam Gottfried contributed to this article.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and Soma Biswas at soma.biswas@wsj.com