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Gymboree files for bankruptcy protection; to liquidate some 800 stores

Gymboree has filed for Chapter 11 bankruptcy protection for the second time in less than two years. But this time it has no plans to revamp its business.

The children’s apparel retailer, which operates more than 900 stores under three banners (380 Gymboree, Crazy 8 and Janie and Jack) will close all its Gymboree and Crazy 8 stores. It is pursuing a sale for its higher-end Janie and Jack brand, which has 139 stores, and also for Gymboree’s intellectual property and online platform. Gymboree Group listed assets in the range of $100 million to $500 million and liabilities of $50 million to $100 million, according to its court filing.

Gymboree Play & Music, which offers classes for toddlers and children up to five years of age and their parents, is not part of the bankruptcy filing. It has operated as a standalone, privately-held company owned by Gymbo Global Education Group, an international education company, since 2016.

“The company has worked diligently in recent months to explore options for Gymboree Group and its brands, and we are saddened and highly disappointed that we must move ahead with a wind-down of the Gymboree and Crazy 8 businesses,” stated Shaz Kahng, who was named CEO of Gymboree Group in November 2018. “At the same time, we are focused on using this process to preserve the Janie and Jack business – a strong brand that is poised to grow – by pursuing a sale of the business as a going concern. As we move ahead, we are working to minimize the impact on our employees, customers, vendors and other stakeholders.”

Gymboree, Janie and Jack and Crazy 8 stores and their online platforms are currently open for business, with plans for going-out-of-business sales to follow. The company said it has discontinued its GymBucks and Gymboree Rewards programs effective immediately.

The retailer filed for Chapter 11 bankruptcy protection in June 2017. It successfully emerged later that year, in September, with about 350 less stores and new owners. It also cut its debt by some $1 billion.

But the retailer found itself under increasingly heavy competition from Target and Walmart, both of whom have expanded their kids’ clothing offerings, and a reenergized The Children’s Place. In July, Gymboree announced it was rebooting its brand with new in-store and digital experiences. The re-boot also included a merchandise update.

In December 2018, the company announced a strategic review that include a sale or other transactions for its Gymboree, Janie and Jack and Crazy 8 brands. It also said it planned to close its value-oriented Crazy 8 stores and “significantly” reduce the number of Gymboree store locations in 2019.

“Gymboree may have been able to regain ground through investment in their fleet of stores and omni-channel capabilities, but they were saddled with mounting debt at exactly the wrong time," said Tiffany Hogan, senior analyst, Kantar Consulting. "Gymboree also suffered from market conditions outside of its control, including a retail landscape bloated with stores and a shift to ecommerce.”

With regards to the current filing, Gymboree Group said it has signed an asset purchase deal with Special Situations Investing Group (SSIG), an affiliate of Goldman Sachs, with SSIG serving as the so called "stalking-horse" bidder in the sale of Janie and Jack.

The retailer also has received a commitment for a debtor in possession financing, which consists of $30 million in new money loans to be provided by SSIG and Goldman Sachs Specialty Lending Holdings, and a “roll up” of all of Gymboree’s obligations under the prepetition Term Loan Credit Agreement in an amount not less than $89 million. If approved by the court, the financing package is expected to support the company’s operations during bankruptcy proceedings.
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