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At Home Prepares for Potential Chapter 11 Filing Amid Tariff Disruption, Demand Headwind

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At Home is preparing to file for a potential chapter 11 bankruptcy amid the ongoing U.S.-China trade war, which has added to the home decor retailer’s struggles with liquidity and profitability, according to sources.

The Hellman & Friedman-backed company is working with Kirkland & Ellis and AlixPartners, according to sources, in addition to PJT Partners, as Octus, formerly Reorg, reported previously. A group of bondholders and term lenders is working with Dechert as legal advisor and Evercore as financial advisor, the sources said.

Separately, Bank of America resigned as the administrative agent on the term loan, according to sources. Bank of America remains the agent on the ABL facility due July 2026, the sources said.

No decision about a bankruptcy filing has been made, as the situation is fluid, the sources cautioned. The company may start an in-court restructuring later this month or next month, they added.

Moody’s Ratings downgraded the credit rating to Ca from Caa3 and changed its probability of default rating to Ca-PD from Caa3-PD, citing “unsustainably high lease-adjusted leverage with debt/EBITDA of 12.8x for the LTM period ending October 26, 2024 and very weak interest coverage with EBITA/interest well below 1x.”

Moody’s further said the trade tariffs imposed by the US on Chinese goods will hurt the company, which sources most of its products from China. Most recently, the United States and China agreed on a detente. The United States will keep a 30% duty on Chinese goods, and China will maintain a 10% tariff on American imports.

An Octus analysis at the end of last year noted At Home’s challenged liquidity position amid cash burn, the maturity of its ABL and PIK-to-cash pay coupon which will increase the company’s interest expense.

Beset by freight costs and a slow housing market, At Home executed the first double-dip in the current liability management exercise era in May 2023, which gave the company about $200 million of new money along with some discount through a debt uptiering. At the time, the company forecast growing sales, gross margin and adjusted EBITDA.

An estimate of the company’s capital structure is shown below:
 

The company’s $600 million first lien term loan due 2028 was indicated today at 26.57/31, according to Solve. A list of CLO lenders is HERE.

At Home, Kirkland & Ellis, PJT Partners, Bank of America, Dechert and Evercore did not respond to requests for comment. Sponsor Hellman & Friedman and AlixPartners declined to comment.

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