UPDATE: December, 10, 2020: Over objections from the U.S. Trustee, a judge in the U.S. Bankruptcy Court for the Eastern District of Virginia in Richmond on Tuesday approved Ascena's sale of the Ann Taylor, Loft, Lane Bryant and Lou & Grey brands to Sycamore Partners for $540 million. 

Acting United States Trustee John Fitzgerald said in court documents filed Dec. 3 that while bankruptcy rules require "at least 21 days' notice," there was "a mere 12-day notice," and decried the fact that the transaction proceeded "without subjecting the sale to bidding procedures or an auction."

The trustee's office had also argued against what Fitzgerald called "excessive" buyer protections for Sycamore, saying they shouldn't apply because the private equity firm is also a DIP lender in the Ascena bankruptcy. " [T]he Debtors have failed to meet their burden that such fees are actual and necessary costs of preserving their estate. In the alternative, the Buyer Protections are excessive, the Termination Fee should not be entitled to super-priority treatment, and the Expense Reimbursement should be subject to further review," according to Fitzgerald's filing.

Dive Brief:

• In a culmination of the dismantling of its apparel portfolio under Chapter 11, Ascena Retail Group on Thursday said that it has agreed to sell its Ann Taylor, Loft, Lane Bryant and Lou & Grey brands to an affiliate of private equity firm Sycamore Partners for $540 million.

• Sycamore "has committed to retaining a substantial portion of the retail stores and associates affiliated with these brands," according to a company press release. The deal is expected to be completed by mid-December.

• Since filing for bankruptcy in July, Ascena has also sold off its Justice tween brand and Catherines plus brand; those deals are completed, the company said Thursday. Last year it sold its Maurices brand and wound down its Dressbarn stores, both apparel discounters.

Dive Insight:

Retailers have long dominated Sycamore's portfolio. The firm runs The Limited, department store Belk, Staples, Torrid, Talbots and Hot Topic, among others, and many of its acquisitions have been snapped up in bankruptcy.

Earlier this year the firm was set to take a majority stake in Victoria's Secret as well, although the deal fell apart as the pandemic drastically altered the retail landscape.

Ascena CEO Gary Muto in a statement Thursday called Sycamore "an experienced and trusted leader in the retail sector." 

Sycamore Managing Director Stefan Kaluzny said in a statement that the Ascena brands are "well-known" and "have significant potential." 

But all of the "premium" brands, including Ann Taylor and Loft, that Ascena has long touted as having the best potential for growth, are operating in a challenged apparel environment, mostly in malls. Demand for the workwear found at those banners, already weakening, has further eroded during the pandemic. Similarly, mall traffic that was already dwindling is down to a trickle in many areas as consumers avoid indoor shopping.

Moreover, the so-called premium brands haven't performed well for some time, and Ascena has faced shareholder gripes regarding the 2015 acquisition of Ann Taylor, including in court. That brand has also struggled with merchandising in addition to muted demand.

Rehabilitation of that brand and the others now falls to Sycamore. While the firm has committed to maintaining a robust brick-and-mortar presence, it has previously abandoned mall-based retail, as when it turned The Limited, once the crown jewel of L Brands' portfolio, into a private label sold through Southern department store Belk.

Sycamore will acquire all the brand assets "on a cash-free and debt-free basis, subject to certain adjustments, and the assumption of certain liabilities," Ascena said Thursday.