Dive Brief:

• FullBeauty Brands this week missed a payment on a $345 million loan, according to S&P analysts in a press release emailed to Retail Dive. The payment came with a five-day grace period that ended Wednesday.
• Following the decision not to pay, the plus-size brand company and e-tailer entered into a forbearance agreement with its lenders, according to S&P, which downgraded FullBeauty's debt rating to indicate a default.
• S&P analysts said that they expect FullBeauty would "engage in an out-of-court restructuring across the capital structure before the end of the year." FullBeauty did not immediately reply to Retail Dive's request for comment.

Dive Insight:

Burdened with debt levels Moody's has called "untenable," FullBeauty could face competitive threats as new and established players breathe life into the plus-size category.

Private equity firm Apax Partners acquired FullBeauty in 2015 in a leveraged buyout worth more than half a billion dollars. Apax took on the company after FullBeauty had mulled an IPO and been sold two years earlier to a different set of private equity companies that were said to have made their investment back three times over.

Today FullBeauty — which owns the brands Woman Within, Roaman's, Jessica London, Swimsuitsforall, King Size, ellos and Brylane Home — is saddled with debt from its buyout, with leverage levels sitting at nine times earnings, Moody's noted in March. Analysts with the ratings firm said at the time that FullBeauty made $914 million in revenue over the previous 12 months and, as a catalog and direct-to-consumer retailer, would require "relatively modest capital" in engineering a turnaround.

"Favorable demographic trends with respect to a broadly overweight population in the US, along with good breadth and mix of product offerings relative to many competitors and more traditional retailers, also represent mitigating considerations," analysts with Moody's, lead by Brian Silver, said. But they also pointed to cash problems stemming from its debt obligations.

A deal with creditors could help reduce those obligations and free up cash for investment. S&P analysts expect a deal to come that wouldn't require a Chapter 11 filing. That does, however, depend on a deal being successfully negotiated.

That's not always the case. Not quite a year ago, Bon-Ton, for example, missed a debt payment, sending the retailer into a grace period and then forbearance, during which it tried to negotiate a deal and find a buyer. Neither worked out, and it ended up in bankruptcy. (Which did not go well.)

FullBeauty may have more luck. But to survive in the long run, it likely would need to invest in its business, as other players try to reimagine the $21 billion (and growing) plus-size market themselves. For instance, Walmart recently bought direct-to-consumer plus-sized brand Eloquii. J. Crew partnered with Universal Standard to expand its sizing. Old Navy in August added plus sizes to its stores. And a little more than a year ago Nordstrom added extended sizes to some of its stores. 

And so a market that has long suffered an image problem has plenty of major players trying to enter and reinvigorate it. As the past two years have vividly shown, a competitive and rapidly shifting retail market is not a safe place for companies with massive debt obligations.