Fashion firm J Crew has filed for bankruptcy protection, making it the first big US retailer to fall victim to the coronavirus pandemic.
Under the terms of the filing, its main creditors are set to take control of the group in exchange for cancelling debts of $1.65bn (£1.3bn).
They are also providing about $400m of fresh financing to keep J Crew’s operations afloat.
Its 500 stores have been closed by the pandemic and some will not reopen.
However, the firm has not yet disclosed how many outlets will disappear.
Control of the group will now pass into the hands of Anchorage Capital Group, GSO Capital Partners and Davidson Kempner Capital Management, which hold large amounts of its debt.
As well as J Crew, the group also owns denim clothing specialist Madewell, which it had planned to spin off as a separate entity before the outbreak of the virus.
J Crew chief executive Jan Singer described the move as a “comprehensive financial restructuring” aimed at allowing the business “to thrive for years to come”.
“Throughout this process, we will continue to provide our customers with the exceptional merchandise and service they expect from us, and we will continue all day-to-day operations, albeit under these extraordinary Covid-19-related circumstances,” she added.
Neil Saunders, managing director of GlobalData Retail, said J Crew was profitable at operating level, but its “crippling” long-term debt “sits on the company’s balance sheet like a millstone around its neck”.
He said that although the restructuring would give the firm breathing space, it had to address the perception of many shoppers that its clothes were “both boring and bad value for money”.
He added: “This process gives the company a chance to survive. However, that survival is not just dependent on reduced debt; it requires a reinvention of the J Crew brand.”
Even before the advent of coronavirus, big retailers were suffering in the US, with the rise of online shopping and the decline of shopping malls taking their toll.
Sears had 700 stores across the US when it filed for bankruptcy protection in 2018. Although it survived, it now has fewer than 200 outlets.
JC Penney has been ailing for some time. It used to have more than 1,000 locations, but now has about 850.