Dive Brief:

• Francesca's Holdings, which runs 558 stores it calls "boutiques," on Thursday filed under Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware, with plans to sell its store and digital operations and new brands. The company previously said it would close 140 stores and Thursday said it may close more depending on lease negotiations.

• The largely mall-based retailer has a commitment from existing lender Tiger Finance for a $25 million debtor-in-possession loan, which will enable it to continue to do business and meet its financial obligations, according to a company press release.

• Private equity firm TerraMar Capital has agreed to be a stalking horse bidder for a bankruptcy auction planned for no later than Jan. 15. Bids are due by Jan. 13, and the sale is intended to conclude by Jan. 20. Neither TerraMar nor Francesca's immediately replied to inquiries about how much the firm will bid. 

Dive Insight:

Francesca's, which has struggled for years amid declines in apparel demand and mall traffic, already has a potential new owner.

The retailer recently teased a new tween line, and on Thursday touted that it's offering extended sizing online (two efforts that presumably count as the brand launches noted in its press release the same day).

The chain is the latest of dozens to head to bankruptcy court in 2020. The year has been unprecedented for the industry, with the pandemic forcing nonessential retailers closed for months, wreaking havoc on their inventories and sending them into financial freefall. Francesca's is among those that were already in a precarious financial and competitive position before that, however. The retailer has floated the possibility of bankruptcy since June, having added a going concern warning to its filings before that. 

By July, having paid down some of its new debt and renegotiated some leases, CEO Andrew Clarke said the retailer could see itself on a path forward, though executives continued to expect widening losses. That path has now led to bankruptcy court, albeit with a bidder lined up and, as the company said in its release Thursday, an expectation for "a speedy and successful resolution."

The financing and plan for a quick process mean that vendors will likely get paid, but the retailers' landlords may not be so lucky, according to Pat Collins, a partner at Farrell Fritz with expertise in bankruptcy, restructuring and distressed retail. While outside of bankruptcy, landlords have several avenues to enforce the terms of their leases, once a tenant is under Chapter 11, their leverage diminishes. It's a situation that worsens the already precarious situation at many U.S. malls.

"The bankrupt company can say, 'Here, take the store back,'" Collins said by phone. "It just gets thrown into the pot of unsecured creditors. The retailer is in a position to say 'take it or leave it.'"