When a retailer like Bed Bath & Beyond goes out of business, customers simply have to find a new place to buy bedding, towels, and the other merchandise the chain sold. A few people might lose out on an item they ordered that was out of stock or a special order, but not getting your bedspread or coffee maker does not make a major impact on your life.
That's true of other recent bankruptcies like Tuesday Morning or Christmas Tree Shoppes. Both chains had really dedicated fanbases who will be upset that the brands will be disappearing (at least for now) but none of those customers will see their lives impacted by the closure.
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In one recent Chapter 11 situation, however, a lot of customers got sick to their stomachs at the possibility of losing their orders. That's because, unlike most retailers where customer largely shop off their shelves, David's Bridal sells wedding dresses that brides pick out well in advance of their weddings.
When other, smaller bridal shops have closed, some of them have left customers in a lurch by not delivering their pre-ordered dresses before closing. That problem will be avoided as David's Bridal has found a buyer that will not only rescue the company from its Chapter 11 bankruptcy filing but also keep open 200 of its brick-and-mortar locations.
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David's Bridal Finds a Saviour
While David's Bridal only had about 300 locations at its peak, the chain has an outsized influence on the wedding market. Somewhere between 25% and one-third of all brides purchase a dress from the chain.
That meant that tens of thousands of couples ran the risk of not getting the dresses (and suits and tuxedos from grooms) pre-ordered before its April Chapter 11 filing. There was a real risk that a buyer would not emerge and the company would have to be liquidated.
“We believe this transaction to substantially reduce the company’s debt burden and store portfolio will enhance the company’s ability to benefit from the expected post-COVID rebound in wedding activity and position the company for future success,” said Gregg Bresner, CION’s president and chief investment officer.
Mark Gatto, CION’s co-chief executive officer added, “Our long experience with the operations and management of David’s Bridal and our position as a secured lender enabled us to facilitate a consensual bankruptcy exit transaction that we believe provides strong value to the company’s employees, vendors, landlords, business partners and customers as well as to our shareholders.”
Ultimately, that did not happen as Cion Investment Corp. stepped up at essentially the last minute to acquire the company. There were two other offers in bankruptcy court for the company's intellectual property, but Cion's was the only one that offered to keep most of the company's brick-and-mortar locations open.
That deal closed on July 24 and the new owner shared what's next in a press release.
"Through the Cion Transaction, David’s Bridal will continue operations at up to 195 stores, preserving 7,000 jobs across the US," the company offered. "Cion has invested $20 million into the new business to fund future growth and has assumed certain bankruptcy-related liabilities.
The new owner also has a $50 million revolving credit line and a $20 million term loan through Bank of America (BAC) -) to provide operating funds.
“We believe this transaction to substantially reduce the company’s debt burden and store portfolio will enhance the company’s ability to benefit from the expected post-covid rebound in wedding activity and position the company for future success,” said Cion President Gregg Bresner.
