David’s Bridal says creditors will keep stores open, dresses flowing, in bankruptcy

(Updated 11/23/2018, with analyst comments) A month after having stopped payment on its debt, David's Bridal, the Conshohocken-based bridal-stores chain, filed for Chapter 11 bankruptcy in Wilmington on  Monday morning.

The company said its more than 300 stores would  remain open and continue supplying wedding dresses and accessories while it works to persuade creditors to shave more than $400 million from its debt.

"David's Bridal has sufficient liquidity to meet its business obligations and will continue to operate its business as usual" while  under bankruptcy protection, the company said in a statement.

The company expects to complete its reorganization by January. During that period, at least, "customers can continue to shop across the more than 300 David's Bridal stores and online without disruption. Orders will arrive on time and bridal appointments will not be impacted."

A reorganization plan to reduce David's debt is already supported by "lenders, noteholders, and equity holders," said chief executive Scott Key in a statement. Key took the job last summer after Paul Pressler stepped down.

Bankrupt companies typically offer creditors partial ownership, or other assets, in exchange for debt forgiveness.

"David's Bridal debt will be reduced from $777 million to approximately $343 million. All trade vendors will be paid in full and there will be no store closures," under the bankruptcy plan, said Tim Hynes, head of North American research for Debtwire. "The company will have adequate liquidity to run its business on an ongoing basis through Chapter 11 and upon emergence from bankruptcy proceedings."

Will investors be convinced by owner Clayton, Dubilier & Ross's promise to modernize the company instead of stripping its cash? "Sounds like a typical pre-packed bankruptcy — though I badly want to see how investing in the latest in digital anything will help people purchase wedding dresses," said Ted Gavin managing director of Wilmington-based restructuring firm Gavin/Solmonese. "This is the most inexorably brick-and-mortar business around." (Added 11/23/2018)

David's, purchased in a deal valued at $1.05 billion by the buyout firm Clayton, Dubilier & Ross in 2012, said it has raised $60 million so far in debtor-in-possession financing from current lenders (at a minimum of 8.5 percent interest), and a renewal of its $125 million revolving credit facility for the next couple of months, adding that suppliers have agreed to keep doing business with David's "unimpaired."

According to its Chapter 11 petition, David's owes an additional $270 million to financial institutions represented by agent M&T Corp.'s Wilmington Trust Co. That bank represents David's unidentified creditors, but is not itself on the hook, said spokesman Kent Wissinger.

The company also owes  $6 million to smaller unsecured creditors, including the State of California, and bridal suppliers led by Ignite, Alex Apparel, and Jump Design Group, all of New York, and Swat Fame and Blossom Footwear, of California.

"Today's announcement is just the next step," said Key. He promised that the company would invest "in digital technologies and talent that will drive long-term growth and operational excellence" during "a long, successful future."

The company, like other bridal suppliers, has suffered from a decline in U.S. weddings and the rise of inexpensive Asian direct-to-bride online competition.

Lenders who have signed off on the reorganization include AlbaCore Capital LLP, London; Courage Capital Management, Westlake Village, Calif.; Eaton Vance Management, Boston; Deutsche Bank AG Cayman Islands Branch's Distressed Products Group; HG Vora Capital Management, New York; Rimrock Capital Management, Irvine, Calif.; Sound Point Capital Management, New York; Principal Funds LP, New York; and Whitebox Multi-Strategy Partners, Minneapolis.

More information on the bankruptcy is available  at  www.donlinrecano.com/davidsbridal, (877) 842-1616 or dbinfo@donlinrecano.com. The law firm Debevoise & Plimpton LLP is serving as the company's legal adviser, Evercore LLC is serving as its financial adviser, and AlixPartners LLP is serving as its restructuring adviser.