Aeropostale Said to Prepare Bankruptcy Filing

Apr 22, 2016

Aeropostale Inc., the teen-clothing chain that has suffered years of losses, is preparing to file for bankruptcy as soon as this month, according to people familiar with the matter.

The company is looking to reorganize under Chapter 11, said the people, who declined to be identified because the matter isn’t public. Aeropostale is trying to work out a loan to finance its operations during the bankruptcy process, according to the people. A deal to avert a filing or find a buyer also could still emerge, they said.

Aeropostale’s trip to bankruptcy court would follow three straight years of losses and a feud with its main lender, Sycamore Partners, which also owns a key clothing supplier. The New York-based retailer has struggled to hang on to teen consumers, who have shifted to online shopping or chains like H&M.

Representatives for Aeropostale and Sycamore declined to comment.

Aeropostale fell 28 percent to 15 cents after Bloomberg News reported on the bankruptcy plan. The stock had already lost 94 percent in the past 12 months, and the New York Stock Exchange previously threatened the company with delisting. Following Thursday’s decline, the exchange’s regulation staff moved ahead with removing the stock, which trades under the ticker ARO. Trading of the shares was suspended immediately.

Delayed Report
The company said last week that it would delay filing its annual report while it explores its options. Aeropostale announced plans in March to evaluate strategic alternatives, tapping Stifel Financial Corp. to help assess a possible sale or restructuring. The company also is working with law firm Weil Gotshal & Manges LLP and FTI Consulting Inc., people familiar with the matter said last week.

A filing would allow the company, which has more than 800 stores, to quickly close a large number of locations.

Aeropostale would join a spate of high-profile retail bankruptcies over the past year, including American Apparel Inc., Quiksilver Inc. and Sports Authority Inc. The industry is coping with a shift of money online, as well as slower foot traffic at many malls and retail centers. Teen chains also have had to contend with fast-fashion competitors, which react to trends more quickly and get merchandise into stores at a faster pace.

Source: Bloomberg