A Sycamore Partners affiliate sued L Brands, the parent company of Victoria’s Secret, on April 22, claiming that the sellers breached a $525 million go-private sale contract by shutting down all their stores worldwide in March, according to Law 360.
The suit claimed that L Brands Inc. agreed in February to sell 55% of its Victoria’s Secret and PINK businesses to the private equity buyer. Within a month, however, L Brands launched massive store closings, furloughs and other retrenchments based on pandemic concerns, prompting Sycamore to declare Wednesday that the seller triggered a deal termination by breaching multiple contract provisions.
According to Law 360, L Brands announced temporary closings on March 17 but several days later said the shutdowns and worker furloughs would be extended indefinitely, although online sales would continue.
At the time, L Brands said it was not able to predict when the stores would reopen, but was monitoring the situation.
The complaint said Sycamore’s counsel notified L Brands on April 2 that it had neither “consented to nor acquiesced” to the store closings and had concerns about satisfaction of conditions for closing the deal. L Brands replied the same day that it had not breached the agreement, Sycamore said.
According to the suit, L Brands faced a debt covenant default on May 2 and might have closed stores to stockpile cash in order to weather the COVID-19 crisis and avoid a default and debt acceleration.
L Brands allegedly declared that “has no obligation to renegotiate the purchase price or any other economic terms of the pending transaction.”
Sycamore also cited L Brands move to cancel new merchandise orders and its failure to sell existing stock left the retailer inventory that had greatly diminished in value.
