True Religion Receives Court Approval to Exit Bankruptcy, Shifting Ownership to Lenders True Religion is on the verge of emerging from bankruptcy after receiving court approval for its Chapter11 reorganization plan, a significant step for the retailer that has faced financial turmoil amid the COVID-19 pandemic. This week, a spokesperson for the law firm Cole Schotz, which is representing True Religion in its Chapter11 case, announced that the plan will enable the apparel seller to transfer most of its new equity to existing lenders as part of a $65.8 million settlement.Having originally filed for bankruptcy in April2020, True Religion’s troubles were exacerbated by the pandemic, which forced the company to temporarily close its stores. According to court documents, the retailer currently operates50 stores, a significant reduction from the87 locations it had at the time of filing.
True Religion was one of the initial retailers forced to seek bankruptcy protection as the COVID-19 crisis wreaked havoc on the retail landscape. During the pandemic, the company’s revenue plunged by approximately80%, which prompted its Chief Financial Officer (CFO) to highlight the dire circumstances at the time of filing. The retailer sought a break on rent payments, a request that echoed across the industry as many retailers attempted to navigate the financial fallout from widespread store closures.
Founded in2002 by Jeff Lubell, True Religion previously filed for Chapter11 in2017. This first bankruptcy allowed the company to reduce its debt, but it failed to resolve ongoing issues. Problems persisted, with profits and sales declining in2019 due to “product designs which were not attractive to True Religion’s traditional customer base,” as noted by the CFO. Furthermore, heavy discounting in e-commerce channels to clear slow-moving inventory contributed to the retailer’s financial struggles.
For the year ending February1—prior to the pandemic—True Religion reported a net loss of 50million∗∗againstrevenuesof∗∗50million∗∗againstrevenuesof∗∗259 million. In an effort to regain stability, the company undertook various measures, including management changes, cost-cutting initiatives, and attempts to renegotiate with lenders. However, these out-of-court negotiations did not yield the desired results.
