Retailer Gymboree Corporation, a portfolio company of Bain Capital, has filed for Chapter 11 bankruptcy in hopes of restructuring its debt, according to a filing with the United States Bankruptcy Court for the Eastern District of Virginia.
The company is hoping the restructuring and recapitalisation plan will help reduce its debt by more than $900 million. Under Bain's ownership, the company has amassed significant debt since the private equity firm acquired Gymboree in 2010, as Private Debt Investor's sister publication Private Equity International reported.
“High debt leverage combined with weak operating trends drove Gymboree's filing,” Fitch Ratings wrote in a report on Monday, adding that the filing lifts the US retail loan default rate to 2.7 percent.
“The company has operated with significant leverage since a 2010 buyout transaction. As of 14 March quarterly earnings, Gymboree was faced with looming debt maturities of $1 billion during the next 22 months release and had insufficient liquidity available to address them.”
Fitch also noted that unlike some of its competitors in children's apparel, Gymboree benefits from the continuing support of its sponsor, Bain, and a plan to restore and grow brand value. Bain wasn't available to comment.
Bain acquired Gymboree from its $10 billion Bain Capital Fund X, paying $1.8 billion, which represented a 57.4 percent premium over the company's share price on 30 September, 2010, Private Equity International reported at the time.
Bain's Fund X recognised a 7.69 percent net internal rate of return as of 30 September, according to data from the California State Teachers' Retirement System, which committed $400 million in 2008 to the fund. According to the document, CalSTRS has contributed $387.8 million as of 30 September and received $345.6 million in distributions from the fund.
Other limited partners that initially committed to the fund include University of California Regents, Maryland State Retirement and Pension System, Alaska Permanent Fund Corporation, Employees' Retirement System of Rhode Island and Pennsylvania State Employees' Retirement System.
Maryland, Alaska and Pennsylvania also committed to a Bain Capital Fund X Co-investment Fund, although it is unclear whether they are co-investors in Gymboree.