Dive Brief:

• RTW Retailwinds and its lender, Wells Fargo, reached an agreement to give RTW forbearance on a loan until July 15 after the apparel retailer defaulted.
• As part of the agreement with Wells Fargo, RTW was required to make a $2.7 million payment on July 3 and has an $8 million payment due Tuesday. RTW must also pay the full outstanding amount on its revolving loan by Aug. 31. RTW did not immediately respond to Retail Dive's request for comment. 
• In June, RTW disclosed that it was "likely in default" on its loan agreement with Wells Fargo, but that it had not received notice at that point. In that same securities filing, RTW, which owns the New York & Co. banner, said a bankruptcy filing was "probable."

Dive Insight:

RTW is among a handful of apparel retailers whose already tenuous finances have come under severe stress amid the COVID-19 crisis. 

The company revealed in June that it was in default with landlords and vendors, in addition to Wells Fargo. RTW said then that it had no other credit lines to lean on, in a time of depressed sales because of the pandemic. "The Company believes without seeking protection under the bankruptcy laws it does not have ability to raise additional capital at this time," RTW said at the time.

Now Wells Fargo is asking for full payment on its revolving loan. RTW, in March, tapped its loan agreement with Wells Fargo for $40 million as the company, among scores of others in retail, scrambled to raise liquidity to survive temporary store closures. 

Retailers' efforts to raise liquidity by and large proved successful. As an industry, retailers drew hundreds of billions of dollars from their revolving credit lines. Those that could also raised yet more money in new bond issuances. That cash helped companies stay afloat with their stores shut and revenue plummeting.

But it also added leverage to many companies. Retailers' ability to pay back all that debt will in large part depend on what sales look like in the coming months and years — which remains uncertain with the pandemic still spreading through the U.S. and the economy in recession. 

The challenges could prove fatal to RTW's brick-and-mortar business. Nearly a month ago, Bloomberg reported that RTW was preparing to file for bankruptcy with a plan to close all of its stores, something the retailer earlier acknowledged was a possibility. Adding to the chaos within RTW, the retailer disclosed in April that its CEO-elect resigned unexpectedly along with four of its board directors. 

RTW is by no means alone in its struggles. Among apparel retailers — which are struggling with rent obligations and depressed discretionary spending, among other challenges — Tailored Brands has disclosed it may have to file for bankruptcy. Ascena is also reportedly considering a filing. And on single day last week, two apparel sellers, Lucky Brand and G-Force Raw, filed for bankruptcy.