J. Crew Group has been in deep waters for some time now, grappling with a heavy debt of around US$ 1.7 billion.
The retailer is now looking for options to pull itself out of its strained finances by preparing for an initial public offering (IPO) of its Madewell apparel business.
It expects Madewell, known for its denim clothing, to be valued by the stock market at significantly more than the outstanding debt. J. Crew, however, will not sell down its entire holding in Madewell right away, according to one of the sources.
Hoping to resuscitate its fortunes, the New York-based company has enlisted the likes of Bank of America Corp., Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley as the lead underwriters for an IPO of Madewell, expected sometime after the US Labour Day holiday in September.
In April, J. Crew said it was exploring alternatives for reducing debt and restoring profitability, and named Operations Chief Michael J. Nicholson interim CEO, but the decision to go through with the move for Madewell has taken three months to come to fruition.
Previously, it had enlisted restructuring advisers at Weil, Gotshal & Manges LLP, the law firm that helped negotiate a debt workout for the company and steered department store operator Sears Holdings Corp. through bankruptcy.
Madewell has experienced rapid growth, and makes up about 20 per cent of the company’s overall revenue, according to regulatory filings.
A slew of US apparel retailers in recent months have carved out divisions to bring overall business back to life.
