Mall retailer Claire’s files for bankruptcy to cut debt by $1.9B

Claire’s Stores, a mall retailer of jewelry and accessories for teens and a provider of ear piercing, said Monday that it had filed for Chapter 11 bankruptcy protection and would lower its debt by about $1.9 billion.

Creditors led by Elliott Management and Monarch Alternative Capital have agreed to provide the company with about $575 million of new capital. The company expects to complete the Chapter 11 process in September 2018 and emerge with more than $150 million of liquidity.

“This transaction substantially reduces the debt on our balance sheet and will enhance our efforts to provide the best possible experience for our customers,” Ron Marshall, Claire’s CEO, said in a news release.

The announcement comes days after Toys “R” Us said it plans to liquidate its U.S. operations and other businesses.

Claire’s went private in 2007 in a leveraged buyout for $3.1 billion led by private equity firm Apollo Global Management, as The Wall Street Journal reported.

In January, Claire’s said it had hired Lazard to review its financial position, The Journal reported. At the time, the company had about $2.2 billion in net debt that was going to start to mature in the next few years.

Claire’s said on Monday that it has obtained $135 million in debtor-in-possession financing commitments, including an asset-based lending facility and a term loan from Citigroup.

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The retailer said it expects to report adjusted earnings for fiscal 2017 of about $212 million, up nearly 13% from the prior year.

The company sells its products at more than 7,500 locations in 45 countries around the world. Its international subsidiaries are not part of the Chapter 11 filing.

Claire’s describes itself as the world’s leading ear piercer and pointed out in the news release that the service can’t be replicated online.