Fast-fashion retailer Charlotte Russe Holdings Corp. has filed for Chapter 11 bankruptcy and plans to close about 20 percent of its stores but said it could liquidate the business entirely if it is unable to sell the business as a going concern.

The mall-based retailer, which operates the Charlotte Russe and Peek Kids chains, said its stores and websites will remain open but it will use the bankruptcy proceedings to immediately begin winding down 94 of its more than 500 locations.

A Charlotte Russe store at the Chapel Hills Mall in Colorado Springs is not among the locations to be closed, according to a list reported by online publication Business Insider. Stores in Pueblo and Grand Junction, however, are scheduled to shut their doors, the list shows.

Charlotte Russe’s advisers are proposing two paths in Chapter 11 as the future of the retailer hangs in the balance. The company is hoping a buyer will come forward to purchase at least a “material portion” of its business out of bankruptcy but could begin liquidating if it can’t come up with a deal in the next couple of weeks, according to court papers filed in the U.S. Bankruptcy Court in Wilmington, Del.

So far, 17 potential buyers have signed nondisclosure agreements and conducted due diligence. “Despite some interest, no party has yet submitted a final proposal for a sale transaction,” Brian M. Cashman, Charlotte Russe’s chief restructuring officer, said in a declaration filed in court.

Charlotte Russe retained investment banker Guggenheim Securities in December to explore a possible sale but was forced to file for bankruptcy because its financial condition continued to deteriorate, court papers say.

The San Diego-based retailer has asked a judge for permission to tap a $50 million bankruptcy loan that will be used to fund the business while it is in Chapter 11. The loan requires Charlotte Russe to obtain a “firm commitment” from a buyer by Feb. 17. If not, Charlotte Russe will move forward with a potential liquidation of its entire retail chain, court papers say.

A Charlotte Russe spokeswoman said Monday that a going-concern sale is the retailer’s preferred path in Chapter 11 and what the company’s advisers are working on.

Charlotte Russe said it has about $129 million in funded debt and owes its landlords, vendors and other unsecured creditors about $50 million, court papers say.

Along with the bankruptcy loan, Charlotte Russe has also requested court permission to pay employee wages, taxes and ordinary business expenses as is common at the outset of corporate bankruptcy cases.

Charlotte Russe joins the long list of retailers that have filed for bankruptcy in recent years. Children’s clothing retailer Gymboree Group Inc. last month filed for bankruptcy protection for the second time in less than two years with plans to shut all of its Gymboree and Crazy 8 stores.

Charlotte Russe’s performance plummeted in the third quarter of 2018, court papers say. Sales declined by more than $35 million and adjusted earnings before interest, taxes, depreciation and amortization fell by more than $8 million compared with the third quarter of 2017, Cashman said.

“The Debtors suffered from a dramatic decrease in sales and in-store traffic, and their merchandising and marketing strategies failed to connect with their core demographic and outpace the rapidly evolving fashion trends that are fundamental to their success,” Cashman said.

The chief executive of Simon Property Group Inc., the biggest mall operator in the U.S., last week warned that more retail bankruptcies were on the way.

“There are some retailers out there that we’re nervous about,” David Simon said during the company’s earnings conference call on Friday. “We’re concerned about a few (bankruptcies) that should shake out in the first quarter.”

Advent International Corp. initially took Charlotte Russe private back in 2009. However, the retailer’s lenders took a majority stake in the company as part of a debt restructuring back in 2018.

Founded in 1975 in San Diego, Charlotte Russe said it has about 8,744 employees 1,412 of whom work for the retailer full-time. The company is scheduled to make its initial appearance in bankruptcy court on Tuesday.

The Gazette’s Rich Laden contributed to this story.

Shopping-mall retailer Charlotte Russe filed for bankruptcy with plans to close 94 stores but could still face liquidation.

ZUMA PRESS