Dive Brief:

• Ascena Retail Group is preparing to file for Chapter 11 bankruptcy as soon as this week, according to a Bloomberg report that cited anonymous sources. Ascena did not immediately reply to Retail Dive's request for comment.
• The apparel retailer plans to close at least 1,200 stores and shed some $700 million of debt in the bankruptcy process while handing ownership over to lenders, according to Bloomberg.
• Ascena, which owns among others the Ann Taylor and Lane Bryant banners, would hold on to some of its businesses through the bankruptcy process while selling or closing others. Catherines and Justice are among those Ascena may shutter or jettison, Bloomberg reported.

Dive Insight:

In mid-March, Ascena said it had "significant" liquidity and that "bankruptcy is not being considered." That was a reiteration of an October statement by the company's interim board chief that "of the options being considered, to be clear and for the avoidance of doubt, bankruptcy of Ascena is not one of the options being evaluated."

The March statement was in response to an S&P downgrade of Ascena after the company went to the markets and bought back its own debt on the cheap, when it was trading below its initial value (something ratings agencies view as a form of default). 

Much has happened since even March, with Ascena's store closures rolling on for months, rather than the 10 days the company initially planned for. Then there's the combination of revenue drop-offs, additional leverage, rent defaults and other financial travails that have become a feature of the COVID-19 era. Those struggles have sent retailers large and small into bankruptcy already, with J. Crew, Neiman Marcus, J.C. Penney and Stage Stores among those that have filed since the pandemic crisis began. 

Ascena has been sagging under a heavy debt load — which fueled a spree of mall-based apparel acquisitions in the years before mall retail went into an accelerated decline — and sales drop-offs for years now. Among other moves to stabilize Ascena, the company has liquidated the Dressbarn banner and sold a majority stake in Maurices.

But the combination of an ailing apparel market and the COVID-19 crisis may have proved too much to overcome outside of a court process. In June, Debtwire reported that Ascena had brought on new advisers, including law firm Kirkland & Ellis, a prolific retail bankruptcy specialist. Bloomberg followed with a report days later that the company, which had more than once announced bankruptcy was off the table, was discussing a Chapter 11 filing. 

Per Bloomberg's report, Ascena, with some 2,800 stores, now aims to get leaner in bankruptcy and find some much-needed debt relief. Both of those things were needed long before anyone at Ascena had heard of COVID-19. But, as with so many other features of retail right now, the pandemic has accelerated those imperatives.