Rent the Runway Inc. will cede a controlling stake in the business as part of a recapitalisation plan aimed at reducing debt and stabilising growth after pandemic-related disruptions pushed the company close to bankruptcy.
The deal with lender Aranda Principal Strategies and partners will eliminate more than US $ 240 million in debt, while extending repayment terms on US $ 120 million in remaining borrowings, according to a company statement. Private equity firms Story3 Capital Partners and Nexus Capital Management, along with Aranda, will also invest US $ 20 million into the business.
As part of the agreement, the three investors will receive a majority stake of about 86%, before adjustments for a management incentive plan and a rights offering that will allow existing shareholders to purchase up to US $ 12 million in stock.
Chief Executive Officer Jennifer Hyman said the restructuring provides the company with a fresh start, describing it as “an IPO 2.0” for Rent the Runway. She added that the firm had considered bankruptcy among alternatives, but that its operational performance over the past 18 months gave lenders confidence to back the plan.
Hyman noted that financial metrics had improved despite the weight of debt, which had ballooned after the company opted to pay interest in kind during the pandemic.
Founded in 2009, Rent the Runway pioneered clothing rental for events before expanding into subscriptions. The company was valued at US $ 1 billion in 2019, but has since faced difficulties in sustaining subscriber growth. Management has shifted to an “asset-light” model where brands place inventory on the platform and share in revenue, a strategy Hyman said will be expanded further following the recapitalisation.
The company added 1,000 new styles recently and plans to accelerate the rollout of fresh merchandise to attract more subscribers.
