Despite a late surge in holiday sales, companies like J. Crew Group Inc. and 99 Cents Only Stores are struggling under debt they took on in leveraged buyouts years ago. Their bond prices have plummeted -- in some cases to as little as 25 cents on the dollar -- as investors brace for possible defaults.
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This wave of distress is different from the tough times of the Great Recession, said Patrick Dalton, chief executive officer of Gordon Brothers Finance Co., an asset-based lender that works with retailers. Now, "it's an industry issue, not an economy issue," he said. Shoppers are seeking value and turning away from pricey logos, which is hurting the teen-clothing category in particular. "What looks the same but costs three times less is where everyone's going," Dalton said.
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