Aéropostale Files for Bankruptcy

by San Antonio Attorney

Aéropostale Inc., an American teen clothing retailer, sought for bankruptcy protection with plans to shut down hundreds of stores in the United States after suffering from financial losses.

The company filed for bankruptcy on May 3, 2016 in the U.S. Bankruptcy Court for the Southern District of New York.  The filing follows the steps of major retailers such as Sports Authority, Quiksilver and American Apparel.

Retailers in the malls such as Aéropostale have had a tough time to keep up with competition from merchants in the Internet as well as the shifting preference of teens.  The specialty retailer of casual apparel and accessories has also had to compete with fast-fashion clothing companies, who adapt to trends more rapidly and put new designs on shelves quicker.

Within the past few years, 215 Aéropostale stores had been shut down.  In the U.S., there are about 700 remaining stores.

Aéropostale’s plan is to exit bankruptcy within 6 months as an independent enterprise with a minimum store base.  Also, the company intends to sell its assets, and expects to conclude any sale before it completes the bankruptcy process.

According to the company, it has obtained a $160 million financing that will be used to satisfy financial obligations.

Bankruptcy makes closing a business less difficult because there are rules that let companies end contracts, such as leases.  However, the U.S.  Bankruptcy Code also gives some protection to the landlords by allowing them to pressure a bankrupt retailer into liquidating or restructuring swiftly.

Aéropostale’s bankruptcy is a result of losses for the past 3 years and a disagreement with its primary lender, Sycamore Partners.

Aéropostale hired Stifel Financial Corp. to facilitate a possible restructuring or sale.  Moreover, the company tapped Weil Gotshal & Manges LLP and FTI Consulting Inc.  on the bankruptcy filing.

The company announced on recently that it will shut down 113 shops in the United States, and all its 41 shops in Canada.

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