By Dietrich Knauth
NEW YORK (Reuters) - Bankrupt wedding gown retailer David's Bridal received court approval on Friday to sell its business to asset manager Cion Investment Corp in a no-cash transaction, reaching a deal to keep 195 stores open and avoid a total shutdown.
U.S. Bankruptcy Judge Christine Gravelle approved the sale at a court hearing in Trenton, New Jersey, saying that the company's employees, landlords and creditors would be better off under new ownership than they would in a full liquidation.
"It's essentially this or nothing," Gravelle said.
David's Bridal said that its primary goal in bankruptcy was to find a buyer that could preserve its business. The company signed non-disclosure agreements with 62 potential buyers but only received two offers besides the Cion bid, according to testimony from David's Bridal's financial adviser, Surbhi Gupta.
Cion, in addition to keeping stores open, agreed to pay certain of David's Bridal's debts, costs related to renewing or breaking leases at retail locations, and professional fees incurred during the company's bankruptcy, according to court documents.
The other bidders offered to buy David's Bridal's brand name and intellectual property without acquiring its stores or inventory, and neither offered more than $250,000 in cash, Gupta testified.
"Candidly, I don't know if there are other viable options," Gupta said in court. "I'm not even sure we have the funds to finance a liquidation of the business."
The Cion sale would allow David's Bridal to continue as a scaled-down business, preserving about two-third of the company's stores and allowing 7,000 of the company's 10,000 employees to keep their jobs, Gupta said. The bankruptcy sale also reduced the company's overall debt to about $50 million from its previous level of $256.9 million.
David's Bridal filed for bankruptcy in April, saying its business has suffered in recent years due to the COVID-19 pandemic, decreased demand for wedding dresses and high inflation. The company previously went bankrupt in 2018.
About 25% of brides in the U.S. wear David’s Bridal gowns at their weddings, and David's Bridal has dressed 70 million brides over its 70-year history, according to the company's court filings.