US-based teen apparel retailer rue21 has filed for Chapter 11 protection in the Bankruptcy Court for the Western District of Pennsylvania.
rue21 has also signed agreements with some of its lenders in order to reduce its debt and secure additional capital as part of its restructuring strategy.
The filing comes after the company revealed its decision last month to close nearly 400 underperforming stores to streamline operations, align the size of its footprint with market realities and shift focus to its better performing locations.
rue21 CEO Melanie Cox said: "These actions are being undertaken with the goal of strengthening the company's balance sheet, achieving a more efficient cost structure, and concentrating resources on a tighter retail footprint in order to pave the best path forward for rue21.”
In conformity with the restructuring strategy, rue21 has entered into a restructuring support agreement (RSA) with certain stakeholders.
It has also reached agreements to obtain up to $125m in debtor-in-possession financing from its existing lenders and up to $50m in new money term loan debtor-in-possession financing from a group of its existing term loan lenders.
According to the retailer, the financing provides the liquidity needed to support its ongoing business operations during the financial restructuring process, which includes payment of employee wages, vendor payments, and honouring customer programmes such as gift cards.