Senior lenders at odds with J.Crew over debt restructuring

J.Crew is having a harder time than expected refashioning the company’s debt, The Post has learned.

The once hot but recently struggling New York retailer, now led by CEO Mickey Drexler, is running into stronger-than-expected resistance from senior lenders to its plan to create a subsidiary that would hold its intellectual property, sources said.

At the same time, J.Crew has been stymied by a Manhattan judge, who weeks ago refused to rule that the retailer had the right to form the subsidiary.

Instead of gaining a quick legal remedy to its financial problems as hoped, J. Crew is facing a drawn-out court battle and a possible 2018 trial.

By then, however, it may run out of cash — and other options, sources said.

The plan to create the subsidiary is aimed at giving the apparel chain added time to deal with its staggering pile of debt.

The news is much better for J.Crew when it comes to its more junior lenders.

J.Crew is close to a deal with junior lenders, who will exchange their loans coming due in May 2019 for a lesser amount of debt due much later, plus equity in the chain, a source close to the situation said.

It is much more dire with many of the senior lenders — who hold more than half the company’s $1.5 billion in notes.

A majority of the senior lenders need to approve the formation of a new subsidiary. The subsidiary would strip away collateral from the senior lenders’ notes.

The value of senior loans has fallen from 80 cents on the dollar to 69 cents since the news of the proposed debt swap came out — leaving most J.Crew senior lenders against the move.

“We don’t think they are near the 50 percent cap to amend the loan,” a senior lender told The Post.

J.Crew declined to comment.