(Bloomberg) -- The Container Store won court approval to exit bankruptcy a little more than a month after filing Chapter 11 and to enact a lender-backed plan to cut its debt and provide the retailer with fresh capital to withstand the post-pandemic sales lull.
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Judge Alfredo Perez in Texas said Friday he’d confirm the retail chain’s restructuring plan, which would take the business private by exchanging lender debt for the company’s equity. The restructuring cuts about $88 million in long-term debt and provides Container Store with $40 million in fresh cash, according to court documents. The restructuring doesn’t impact vendors or other unsecured creditors but wipes-out existing shareholders, which is common in Chapter 11.
The total enterprise value of Container Store upon exiting bankruptcy is estimated to be between about $184 million and $216 million and will save approximately 3,800 jobs, the company said. Lenders supporting the restructuring include Golub Capital LLC, LCM Asset Management LLC and Glendon Capital Management LP, according to a December court filing.
The restructuring gives the Coppell, Texas-based seller of closet organizers and storage bins a fresh start after struggling with declining sales. Container Store Chief Restructuring Officer Chad Coben said when the company sought court protection that the business struggled with sales and debt following Covid-19 era lockdowns, fewer home sales and stiff competition from rival retailers.
Perez said he’d approve the transaction after overruling challenges from the US Justice Department and Securities and Exchange Commission over a legal mechanism that shields third parties from hypothetical legal liabilities. Known as third-party releases, regulators have been challenging the mechanisms following a June US Supreme Court ruling over whether they are consensual or not.
The releases in Container Store’s restructuring plan passes the Supreme Court’s test because it gave parties a fair option to opt-out of them, Perez said.
The case is The Container Store Group Inc., number 24-90627, in the US Bankruptcy Court for the Southern District of Texas.
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