US-based teen fashion retailer Rue21 Inc. faces an immense debt pile and declining foot traffic due to which it is preparing to file for bankruptcy as early as this month, as reported by people familiar with the matter.
The chain, which sells budget-priced clothing and accessories at about 1,100 stores in malls, strip centers and outlet centers across the US, is struggling to repay a debt load of nearly US $ 1 billion. Most of that debt stems from a US $ 1.1 billion leveraged buyout by a private equity firm Apax Partners LLP in 2013.
Company spokesperson Todd Fogarty, upon being asked to comment on its bankruptcy plans, reportedly said, “Rue21 has been working to improve its operations and enhance its liquidity position and has been actively engaged with its lenders and bondholders to explore the best path forward.”
Rue21 has been hit by competitors like Zara, Forever 21 and H&M which offer similarly priced apparels.
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Rue21 would be the latest to join a string of retailers seeking bankruptcy protection as shoppers shift their spending online.
Previously this week, Payless ShoeSource, a retailer of discount shoes, filed for bankruptcy with a plan to immediately close 400 of its 4,000 plus stores worldwide. Neiman Marcus Group LLC has also hired investment bank Lazard Ltd. to explore ways to slash its US $ 4.9 billion in debt, Reuters reported.
Like Rue21, Payless and Neiman Marcus have been hurt by debt loads created in private equity buyouts, preventing them from being nimble and adjusting to the changing retail environment.
