Mall operator Simon Property Group and its associated landlords have filed objections against Ascena Retail Group’s Chapter 11 plan of reorganization after Ascena’s purchaser, private equity Sycamore Partners, laid out its intentions to close more stores than originally agreed upon.
“The result will be a significantly less creditworthy lessee than the entity with which the Simon Landlords originally contracted,” court documents said. “The purchaser’s significantly reduced store footprint and mix of remaining stores not only will diminish the profitability of its brick-and-mortar business, but also will hurt its e-commerce business, as a strong physical presence drives e-commerce sales and profitability as well.”
The objection was filed in U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond division.
In court papers, Simon pointed out Sycamore’s plans for closing even profitable stores, “likely corresponding drop in e-commerce performance” along with reduced in-store sales.
Ascena announced plans to sell its Ann Taylor, LOFT, Lane Bryant and Lou & Grey brands to Sycamore for $540 million per an asset purchase agreement on Nov. 26. The retailer signed the APA with Sycamore affiliate Premium Apparel LLC for a cash-free and debt-free purchase, subject to certain adjustments and the assumption of certain liabilities.
Ascena, based in Mahwah, has largely been a mall retailer, a sector that’s struggled since March due to pandemic-related mall closures and a drop in customer attendance thereafter.
The original APA according to Simon included a plan to keep no less than 900 stores operating under Sycamore, along with a master lease Simon entered with Ascena amid those negotiations.
“The purchaser’s about-face from the master agreement in favor of a far different, and worse, store lease portfolio, places the business at far greater risk than anyone contemplated at the time of the sale,” Simon said.
Sycamore did not return a request for comment by press time.