Leslie’s Inc. (NASDAQ:LESL) shares are plunging Friday morning following reports that the swimming pool supplies retailer is preparing to file for Chapter 11 bankruptcy protection as soon as next week.
Here’s what investors need to know.
- Leslies stock is showing downward bias. What’s next for LESL stock?
Chapter 11 Preparations and Debt-for-Equity Swap
The aggressive sell-off follows a Wall Street Journal report published late Thursday indicating that Leslie’s is finalizing a restructuring agreement to hand over control of the business to its creditors.
Under the reported terms, a group of lenders will provide approximately $100 million in debtor-in-possession financing to fund ongoing operations through the court-supervised bankruptcy process.
In exchange, the company will surrender ownership to the lenders, extinguishing roughly $750 million in debt by converting it into equity.
Going Concern Warning and Post-Pandemic Contraction
The imminent bankruptcy filing comes after the company issued a “going concern” warning last month, acknowledging severe liquidity constraints as it grapples with a heavy debt load approaching 12.5x EBITDA. Leslie’s expanded aggressively during the pandemic-led home improvement boom, growing its retail footprint to more than 1,000 locations nationwide.
However, as discretionary consumer spending tightened and demand for non-essential pool products normalized, the company struggled to maintain its expanded operations.
Despite closing approximately 80 underperforming stores and one distribution center earlier this year in an attempt to stem its cash burn, persistent sales declines ultimately forced the specialty retailer to seek court-supervised debt relief.
LESL Shares Plunge Friday Morning
LESL Price Action: Leslies shares were trading 14.75% lower at 28 cents at the time of publication on Friday, according to Benzinga Pro data.
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