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Law360 (June 3, 2020, 7:44 PM EDT) -- The owner of apparel retail chain New York & Co. on Wednesday told federal financial regulators that it is likely on the verge of a bankruptcy filing, saying the impact of COVID-19 has raised "substantial doubt" about its ability to continue as a going concern.
New York & Co. parent RTW Retailwinds Inc. told the U.S. Securities and Exchange Commission in an 8-K filing that even though it expects to begin reopening its stores this month as COVID-19 restrictions loosen, the financial damage of months of closures has already been done.
"The company believes that seeking protection under the bankruptcy laws is probable," it said.
New York City-based New York & Co. was founded in 1918 and currently sells women's apparel in 387 stores in 33 states.
In the SEC filing, the company said all its retail outlets have been closed since March 19 due to the pandemic. At the end of March it announced it had furloughed all its retail associates, and in the filing it said it has laid off more than 50% of its corporate headquarters staff.
The company said although it expects to have the majority of its stores reopened by the end of June, it had been already operating at a $164.6 million deficit as of Feb. 1 and "cannot reasonably estimate the length or severity of COVID-19" and its impact on retail sales.
The company said it drew down $40 million under its loan agreement with Wells Fargo Bank in March and is likely to default on that loan. The company said it has missed many recent vendor payments and has not made any rent payments for two months, possibly putting it in default on all its leases.
"As such, the company's revenues, results of operations and cash flows have been materially adversely impacted, which raises substantial doubt about the company's ability to continue as a going concern," it said.
A representative for RTW could not immediately be reached for comment Wednesday.
--Editing by Stephen Berg.
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