Francesca’s Files for Bankruptcy, Pursues a Sale

December 04, 2020

Francesca’s, which has struggled for years amid declines in apparel demand and mall traffic, already has a potential new owner.

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By July, having paid down some of its new debt and renegotiated some leases, CEO Andrew Clarke said the retailer could see itself on a path forward, though executives continued to expect widening losses. That path has now led to bankruptcy court, albeit with a bidder lined up and, as the company said in its release Thursday, an expectation for “a speedy and successful resolution.”

The financing and plan for a quick process mean that vendors will likely get paid, but the retailers’ landlords may not be so lucky, according to Pat Collins, a partner at Farrell Fritz with expertise in bankruptcy, restructuring and distressed retail. While outside of bankruptcy, landlords have several avenues to enforce the terms of their leases, once a tenant is under Chapter 11, their leverage diminishes. It’s a situation that worsens the already precarious situation at many U.S. malls.

“The bankrupt company can say, ‘Here, take the store back,'” Collins said by phone. “It just gets thrown into the pot of unsecured creditors. The retailer is in a position to say ‘take it or leave it.'”

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