David's Bridal Avoids Devastating Bankruptcy Shutdown

When most retailers go bankrupt it's somewhere between frustrating and annoying for loyal customers. 

People who loved Bed Bath & Beyond, Tuesday Morning, and Christmas Tree Shops -- all of which have seen their retail businesses shut down in the past few weeks -- lament losing those stores, but they can simply shop elsewhere.

The loss of those big-name retailers is tragic for their employees and bad news for the shopping centers of which they were a part. It's bad news, a loss for the communities, and bankruptcies mean fewer choices for consumers. But a company going out of business rarely has major repercussions for its customers.

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That's not the case with one major kind of chain, where people place their orders well in advance and then pick them up close to a a major life event. 

When a bridal shop goes out of business, it can leave a customer without a dress for their wedding, a potentially traumatic experience. 

And it's why you likely heard a (metaphorical) loud sigh of relief when David's Bridal -- a national retailer from which "one in three brides in the U.S. purchases her dress," the chain's website says -- will continue in operation.

The loss of David's Bridal would have been catastrophic for countless weddings, and its rescue represents the rare good result when a company comes this close to going out of business.

What's the Future of David's Bridal?

David's Bridal filed for Chapter 11 bankruptcy protection in April and had planned to reorganize and keep open its nearly 200 stores. Like Bed Bath and Beyond, Christmas Tree Shops, and Tuesday Morning, the company ran into trouble when it came to securing the needed funding to keep operating.

At the time of the filing, the company said in a statement:

"David's Bridal stores remain open, and the company intends to continue operating in the ordinary course, including by fulfilling all customer orders without disruption or delay."

The company did make clear that it intended to sell its assets,

Prior to today's announcement, David's Bridal initiated an evaluation of a wide range of strategic alternatives to maximize value for all stakeholders, including a marketing and sale process for its assets. In light of its liquidity constraints, the Company was unable to finalize its marketing and sale process out of court and intends to continue exploring a sale of all or some of its assets pursuant to section 363 of the Bankruptcy Code. Alongside these efforts, the Company is also strategically managing inventory and evaluating its physical footprint to maximize value and the prospect of a successful going concern transaction.

Now, at the veritable last minute, David's Bridal has a buyer that will keep operating the brand.

David's Bridal Has a New Owner

U.S. Bankruptcy Judge Christine Gravelle on July 14 approved a no-cash sale of David's Bridal to the New York asset manager Cion Investment. That transaction will keep the retailer's 195 stores and its digital operations open. 

The judge decided that the "company's employees, landlords and creditors would be better off under new ownership than they would in a full liquidation," according to Reuters.

"It's essentially this or nothing," Gravelle said.

While 62 companies expressed interest in buying the retailer, the company received only three offers.

"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," the news outlet reported.

No other offer would have kept the company in business, which was a key goal of Chief Executive James Marcum.

"We are determined to stay focused on our future because we believe we have an important role in ensuring that every bride, no matter her budget, can have her perfect dress," he said at the time of the Chapter 11 filing.

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