Cases & Deals

rue21 term loan lender group receives 96 percent equity in reorganized company

Client(s) rue21 Term Loan Lender Group

Jones Day represented a group of term loan lenders of rue21, Inc., a specialty fashion retailer of girls' and guys' apparel and accessories with over 700 stores in 45 states, in connection with the retailer's chapter 11 cases in the U.S. Bankruptcy Court for the Western District of Pennsylvania.

The term loan lender group began the case by committing to fund a $150 million DIP term loan facility, which consisted of $50 million to provide new money loans and $100 million of term loans resulting from the "roll-up" of amounts outstanding under the prepetition term loan agreement, and agreed to "backstop" the company's exit financing facility by converting their DIP new money claims into an exit facility upon emergence from chapter 11. At the first day hearing, Jones Day successfully obtained the extraordinary relief of receiving court approval of the entire "roll up" portion of the DIP term loan facility upon entry of the interim DIP order.

Less than four months after the commencement of rue21's chapter 11 case, on September 8, 2017, the bankruptcy court confirmed the company's plan of reorganization after a contested confirmation hearing. The official committee of unsecured creditors' limited objection to certain plan releases was overruled by the bankruptcy court in a written decision. The Plan was overwhelmingly supported by both holders of term loan claims and general unsecured claims, and not a single rejecting vote was received by term loan lenders.

Pursuant to the Plan, the term loan lenders received 96 percent of the equity in reorganized rue21 in exchange for their approximately $421 million prepetition term loan claims and their $100 million DIP roll-up claims. General unsecured creditors received the remaining 4 percent of the equity in reorganized rue21. In addition, the DIP term loan facility was converted or "rolled" into an exit facility. The Plan went effective on September 22, 2017.