FOR IMMEDIATE RELEASE

May 4, 2020

CONTACT:

Andrew Park, andrew@ourfinancialsecurity.org 

Private Equity Looting Drove J. Crew Bankruptcy

Statement of Andrew Park, Americans for Financial Reform Education Fund Senior Policy Analyst

J. Crew’s unsurprising bankruptcy announcement had its roots in the private equity-imposed debt loads and financial engineering that made it impossible for the preppy retailer to survive the economic troubles in the retail sector exacerbated by the coronavirus pandemic. J. Crew struggled under $1.65 billion in debt driven by the TPG Capital and Leonard Green Partners leveraged buyout and by debt-financed dividend payments to the private equity firms.

But TPG and Leonard Green also deployed more novel tactics to siphon assets away from J. Crew’s investors and creditors. TPG and Leonard Green moved J. Crew’s intellectual property (the trademarked family of brands) into an offshore subsidiary that shielded these assets from its creditors and then used the new subsidiary to borrow more and repay the private equity firms for their original equity stake in J. Crew. TPG and Leonard Green got their initial investments back, while other creditors took a significant write-down in a debt-for-equity swap in 2017. Today’s bankruptcy announcement forces creditors and other investors to take another loss, while TPG and Leonard Green largely walked away unscathed. Still unknown is whether J. Crew’s more than 14,000 workers will keep their jobs, and on what terms, in the latest private equity-driven retail disaster.

A fact sheet on the J. Crew bankruptcy can be found here.

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Cover photo: J. Crew logo