Denim brand True Religion has emerged from Chapter 11 bankruptcy. As part of a court-approved plan, the company will undergo reorganization, which is expected to significantly reduce the company’s debt and gain more liquidity for executing its growth plans for the coming years.
The company’s reorganization plan is being supported by Simon Property Group, a landlord for a substantial number of True Religion store locations, as well as lender and equity holders Farmstead Capital Management and Crystal Financial.
“The reorganization has allowed the company to reduce its operating costs and lower its debt load, and emerge a profitable, lean operating company with a healthy balance sheet. The path is now clear for True Religion to continue its reinvigoration of its iconic American brand,” said True Religion’s CEO Michael Buckley, who rejoined the company in November of 2019 after previously serving as the CEO between 2006 and 2010.
True Religion agreed to a $65.8 million settlement with its lenders, which enabled the company to finalize the terms of its reorganization plan, according to law firm Cole Schotz, which is representing True Religion. The company will also turn most of its new equity to its existing lenders and will be able to keep 50 of its approximately 87 stores open.
True Religion was one of the first apparel brands to have filed for bankruptcy after suffering from the economic impact of the COVID-19 pandemic. According to the company’s CFO, the retailer saw its revenue fall by 80 percent as its stores remained shuttered.
Even before the pandemic began, True Religion was facing several financial challenges. The company saw a net loss of $50 million on $259 million of revenue over a one year period ending February 1, 2020. Furthermore, the company’s new product designs were not resonating with its core customer base, which impacted its sales.
The bankruptcy plan would, however, help the brand better manage its debt and will give it a fair shot at surviving the pandemic.