Wedding retailer flirts with bankruptcy

David’s Bridal fails to make debt payment

The nation’s leading wedding retailer is flirting with the possibility of bankruptcy protection, which often involves some store closures, after skipping a key debt payment. David’s Bridal, whose tight grip on the wedding business has loosened in recent years amid digital competition and declining marriage rates, failed to make a key loan payment Oct. 15. That move served as a warning to creditors that the company is barreling toward a restructuring effort of some kind. Failing to make a debt payment is often a precursor to filing for Chapter 11 bankruptcy protection. There’s a “very high likelihood” of bankruptcy or a consensual debt restructuring for David’s Bridal, said Mathew Christy, an S&P Global Ratings analyst who tracks the retailer. S&P Global Ratings on Tuesday lowered David’s Bridal’s credit rating from CCC-, which suggests the borrower is vulnerable to not paying back its debts on time, to SD, which indicates the company has selectively defaulted on a debt obligation but plans to continue making payments. David’s Bridal said it voluntarily skipped the payment as it continues to negotiate a potential restructuring deal with its creditors. That means it has the financial wherewithal to make the payment. The company has a 30-day grace period to pay up, though S&P said it’s “highly likely” that won’t happen. “Our financial outlook is strong and we have ample liquidity to meet our key business objectives today and in the future,” David’s Bridal said in a statement Thursday. The problem is that in the long run, the company’s debt compared with its revenue is “unsustainable,” Christy said. David’s Bridal still sells about 1 in 3 U.S. wedding dresses through its more than 300 stores and website, with estimated annual revenue of $791 million, market research firm IBISWorld said. The company is turning a profit before interest, taxes and debt payments, but it has too much debt stemming from its 2012 acquisition for more than $1 billion by private equity firm Clayton, Dubilier & Rice. While sales are likely strong enough to keep it in business, bankruptcy would raise the prospect that David’s Bridal could close some stores.