At the same time, the private equity industry was showing a hunger for investments in the retail space. During 2013 alone, investors closed deals to acquire Neiman Marcus and Juicy Couture, Allen Edmonds and Dakine, Hot Topic and Rue21. If you sold apparel at shopping malls, it seemed you were a potential buyout target.
So it was perhaps little surprise that six years ago today, on May 10, 2013, TowerBrook Capital Partners announced an agreement to purchase True Religion in a deal valued at $835 million, or $32 per share, a premium of more than 50% to True Religion's share price the day before it revealed it would explore a sale. For fashionistas, the TowerBrook name was likely familiar: Two years before, in 2011, the New York-based firm sold off a stake in luxury footwear brand Jimmy Choo it had acquired in 2007, reportedly netting £500 million (about $800 million at the time) in the process.
But TowerBrook's relationship with True Religion would not prove so profitable. One sign of potential unrest came two months before the deal was even done, when True Religion co-founder Jeff Lubell stepped down as CEO. Other issues began to mount. Chief among them was the internet's gradual transformation of the industry, making it more and more difficult for niche brick-and-mortar retailers to stay afloat—particularly those retailers that were weighed down by the sort of debt accompanying an LBO. By 2015, Moody's was calling True Religion's capital structure "unsustainable" and downgrading the company's ratings.
Before long, after previously being part of a wave of retail buyouts, True Religion and TowerBrook found themselves connected to a very different trend. One could date the onset of the so-called retail apocalypse to the final few months of 2015 and the beginning of 2016, a stretch that saw industry standard-bearers American Apparel, Quiksilver, PacSun and Aeropostale all file for bankruptcy. The spate of Chapter 11 filings gained further momentum by 2017: The Limited, Wet Seal, Payless ShoeSource and Rue21 all took the plunge between January and May.
That summer, it was True Religion's turn. The company filed for bankruptcy on July 5, at the time reportedly holding $534.7 million in liabilities compared to just $243.3 million in assets. But it did so with a strategy: As it entered Chapter 11 protection, True Religion said it already had a plan to slash hundreds of millions from its debt load and exit bankruptcy in four months.
It didn't even take that long. In October 2017, True Religion announced it had emerged from bankruptcy, having reduced its term loans from $471 million to $113.5 million and extending the maturities on its debt into 2022. The restructuring was aided by Citizens Bank, which offered up $60 million in debtor-in-possession financing and another $60 million in exit financing. It was also helped by TowerBrook, which reportedly struck a debt-for-equity deal with lenders that made the restructuring possible.
In the aftermath, TowerBrook retained a 4% equity stake in True Religion, according to reports from the time. And while any news connecting the firm and the company has been sparse in recent months, it would seem the relationship remains. True Religion is still listed as a TowerBrook portfolio company on the firm's website.
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