Boutique women’s clothing chain Francesca’s — and the four subsidiaries that make up the business — filed for a voluntary petition for relief under Chapter 11 bankruptcy on December 3, 2020 with thousands of estimated creditors, including at least 15 contractors, property owners, or material suppliers.
Francesca’s, which is headquartered in Houston, is made up of four subsidiaries, including Francesca’s Holdings Corporation, Francesca’s LLC, Francesca’s Collections, Inc., and Francesca’s Services Corporation — all of which filed separately for Chapter 11 bankruptcy with the US Bankruptcy Court for the District of Delaware.
Companies such as Francesca’s create subsidiaries for a variety of reasons, possibly to insulate themselves from liability, establish an entity in a specific state for tax benefits, perform a specific financial function, and more.
At the time of their bankruptcy filing in December of 2020, Francesca’s and their four subsidiaries reported the following estimates:
Francesca’s Holdings Corporation
- $1,000,001 – $10 million in total estimated liabilities
- $0 – $50,000 in total estimated assets
- 1 – 49 estimated creditors
Francesca’s LLC
- $0 – $50,000 in total estimated liabilities
- $0 – $50,000 in total estimated assets
- 1 – 49 estimated creditors
Francesca’s Collections, Inc.
- $10,000,001 – $50 million in total estimated liabilities
- $10,000,001 – $50 million in total estimated assets
- 1,000 – 5,000 estimated creditors
Francesca’s Services Corporation
- $10,000,001 – $50 million in total estimated liabilities
- $50,000,001 – $100 million in total estimated assets
- 200 – 999 estimated creditors
What is Chapter 11 bankruptcy?
A bankruptcy case filed under Chapter 11 causes the debtor to “reorganize” their finances while also creating a debt repayment plan for their creditors.
If the debtor filing for Chapter 11 bankruptcy — which can be a business or individual — is unable to successfully reorganize their finances or create a debt repayment plan that’s approved by the creditors, this may result in the case being converted to Chapter 7, which could liquidate the debtor’s assets.
30 largest unsecured claims reported in Francesca’s Chapter 11 filing
Unsecured claims
At the time of their bankruptcy filing, all four Francesca’s subsidiaries reported a list of creditors with the 30 largest unsecured claims. Each subsidiary reported the same list with the same creditors and claim amounts.
In total, Francesca’s 30 largest unsecured claims total $9,328,655.
Of the 30 creditors, 15 are contractors, property owners, or material suppliers:
- Ana Accessories Corporation – $381,474
- Arc Textiles Inc – $492,694
- Asha Design LLC – $200,923
- Esung New York, LLC – $543,908
- Georgetown One, LLC – $211,395
- Jolie Clothing, Inc. – $437,969
- Kibo Software Inc. – $289,079
- National Project Management – $241,064
- Oz Jewelry Corp – $273,160
- Premium Outlet Partners, L.P. – $573,636
- Shantex Group LLC – $407,357
- Tanger Properties Limited Partnership – $535,829
- Trixxi Clothing Company – $409,568
- Valjean International, Inc. – $243,386
- 3B International LLC – $526,443
Secured claims
According to Francesca’s official bankruptcy filing, the retailer reports no secured claims.
Francesca’s involved in multiple recent construction disputes
Dating back to at least August of 2017, Francesca’s has been involved in several construction disputes.
Petition and request for disclosure
On August 23, 2017, contractor Retail Store Construction, Inc. filed a petition and request for disclosure against Francesca’s Collections, Inc. over a payment dispute following the construction of Francesca’s Houston, Texas headquarters.
According to the filing, Retail Store Construction claimed they were owed $20,394.80 in unpaid work. In August of 2018, the dispute was settled, according to the Harris County clerk’s office.
Previous mechanics lien claims
Several expired mechanics liens from 2018 were also filed against Francesca’s worth a combined $21,423.
The larger of the two unpaid work claims, worth $12,107, was filed on December 6, 2018 by subcontractor Valley Fire Protection Services following the construction of a Francesca’s in Aurora, Illinois.
On May 24, 2018, subcontractor Horizon Glass and Mirror Corp. filed a lien worth $9,316 against Francesca’s in Pembroke Pines, Florida.
Francesca’s announces 140 store closures by January 30, 2021
In a filing with the Securities and Exchange Commission from November 16, 2020, Francesca’s announced plans to close 140 of their locations by January 30, 2021.
CNBC also reported Francesca’s plans to shut down an additional 97 stores just days after filing for Chapter 11 bankruptcy.
According to a report from Retail Dive, the COVID-19 pandemic’s toll on the retailer has been in full-swing since the summer of 2020 — when Francesca’s first began flirting with a potential bankruptcy filing.
Bloomberg has also reported that Francesca’s announced plans to sell the business shortly after filing for Chapter 11 relief.
The report states that TerraMar Capital, LLC will become the “stalking-horse bidder in a court-supervised auction.”
Francesca’s current lender, Tiger Finance, LLC, has since agreed to submit a $25 million bankruptcy loan, according to Bloomberg.
Bloomberg also reported that Francesca’s suffered a 50% drop in first-quarter net sales in 2020, leading the retailer to temporarily shut down between March and April.