Iconic Retailer Preserved Thousands of Jobs Through Last-Minute Transaction, Secures Overwhelming Creditor Support
Claire's Holdings LLC and its debtor affiliates have filed a comprehensive memorandum seeking final approval of their disclosure statement and confirmation of their First Amended Joint Chapter 11 Plan, capping a remarkable turnaround from what initially appeared to be a full-chain liquidation into a value-maximizing going-concern sale that preserved over 800 stores and thousands of jobs.
The 80-page filing, submitted to the United States Bankruptcy Court for the District of Delaware on October 21, 2025, demonstrates overwhelming creditor support for the proposed plan, with 100% approval from holders of Prepetition Priority Term Loan Claims and 96.97% in number (99.93% in amount) approval from holders of Prepetition Existing Term Loan Claims. Only one limited objection was filed, by Mad River Development, LLC, which the Debtors assert is now moot.
From Liquidation to Going-Concern Sale
Claire's Holdings and 12 affiliated entities filed for Chapter 11 bankruptcy on August 6, 2025, after months of unsuccessful prepetition marketing efforts failed to produce an actionable bid for a going-concern transaction. At the outset of the bankruptcy case, the Debtors obtained court approval to commence immediate store closings across their entire retail footprint.
The situation changed dramatically on August 18, 2025, when the Debtors executed an Asset Purchase Agreement with AWS Claire's, LLC, immediately ceasing the closure of over 800 stores. To bridge to the closing of the sale transaction, the Debtors secured a DIP facility providing $22.5 million of incremental liquidity to restart inventory shipments. The court entered the Sale Order on September 10, 2025, and the transaction closed on September 18, 2025.
"The Debtors obtained relief at the first day hearing to commence a full-chain liquidation of the Debtors’ business. In parallel, the Debtors continued to market a going-concern transaction.," the memorandum states. "As a result of these efforts, the Debtors and their advisors negotiated, executed, and consummated a going-concern sale with AWS Claire’s, LLC that preserves thousands of jobs, provides continued business to many of the Debtors’ vendors and landlords, and will allow Claire’s to continue as an iconic brand for years to come."
Comprehensive Stakeholder Settlement
The Plan incorporates what the Debtors describe as a "comprehensive, good-faith settlement" between major stakeholders, including Prepetition Priority Term Lenders, Prepetition Existing Term Lenders, and the official committee of unsecured creditors (the "Committee Settlement"). This settlement provides for the funding and maintenance of a Stub Rent Reserve and Section 503(b)(9) Claim Reserve, and establishes a Liquidating Trust.
Under the Committee Settlement, the Prepetition Priority Term Lenders and Prepetition Existing Term Lenders agreed to fund the Liquidating Trust with $1.0 million of proceeds from the Sale Transaction and contribute Retained Causes of Action to the Liquidating Trust for the benefit of general unsecured creditors. This arrangement provides general unsecured creditors with a recovery opportunity they would not have received in a chapter 7 liquidation.
Independent Investigation Supports Releases
Prior to the Petition Date, the board of managers of Claire's Holdings appointed two independent and disinterested managers—David Barse and William L. Transier—to form a Special Committee. The Special Committee engaged Katten Muchin Rosenman LLP to conduct an independent investigation into potential claims against current and former directors, officers, and other parties.
According to the filing, Katten reviewed over 1,000 documents and interviewed seven parties, including current and former directors, officers, and advisors. The investigation was extensive, and the Special Committee concluded "that the Debtors' estates do not have any viable and valuable claims or causes of action against the current officers and current and former directors of the Debtors that would warrant the time, expense, and uncertainty associated with the prosecution or maintenance of such claims or causes of action."
This conclusion supports the Plan's release provisions, which include both debtor releases and consensual third-party releases. Importantly, the third-party releases are purely voluntary—parties must affirmatively opt in by checking a box on their ballot or completing an opt-in form. As of the voting deadline, 43 parties had affirmatively opted into the third-party release.
Plan Structure and Treatment of Claims
The Plan establishes nine classes of claims and interests, with different treatment for each class based on priority and legal rights. Administrative claims, priority tax claims, and other priority claims will be paid in full. The Plan provides for distributions of remaining proceeds according to the Bankruptcy Code's priority waterfall through a Liquidating Trust structure.
Significantly, Classes 1 (Other Secured Claims) and Class 2 (Other Priority Claims) are unimpaired and conclusively presumed to accept the Plan. Only Classes 3 and 4 were entitled to vote, and both overwhelmingly accepted the Plan. Class 5 (General Unsecured Claims) was deemed to reject, as the Debtors waived their right to solicit votes from this class, though these creditors will benefit from the Trust GUC Assets and any distributions from the Liquidating Trust waterfall.
The Plan contemplates the implementation of Wind-Down Transactions and an orderly liquidation and monetization of Liquidating Trust Assets, with a Liquidating Trustee serving as the sole director and officer of the post-effective date Debtors. On the Effective Date, all current directors and officers will be deemed to have resigned from their positions.
Legal Arguments for Confirmation
The Debtors' memorandum methodically addresses each of the requirements for plan confirmation under Section 1129 of the Bankruptcy Code. The filing argues that:
- The Plan complies with applicable provisions of the Bankruptcy Code, including proper classification of claims under Section 1122 and mandatory plan requirements under Section 1123
- The Debtors complied with disclosure and solicitation requirements under Sections 1125 and 1126
- The Plan was proposed in good faith
- The Plan satisfies the "best interests" test, as creditors will receive at least as much as they would in a Chapter 7 liquidation
- The Plan is feasible, with sufficient funds to complete the wind-down and make all contemplated distributions
- The Plan satisfies the "cram down" requirements for non-accepting classes
Regarding the cram down provisions, the Debtors argue that even though Classes 5 (General Unsecured Claims), 8 (Equity Interests), and 9 (Section 510(b) Claims) are deemed to reject the Plan, confirmation is appropriate because the Plan does not "discriminate unfairly" and is "fair and equitable" with respect to these classes. The filing notes that any recovery by Class 5 from Trust GUC Assets results from a negotiated resolution with secured lenders, and if the class receives any distributable proceeds from the waterfall recovery, such recovery will only occur after all senior classes have been paid in full.
Release and Exculpation Provisions
The Plan includes debtor releases, consensual third-party releases, exculpation provisions, and injunction provisions—all of which are extensively analyzed in the memorandum. The Debtors argue these provisions are appropriate because they are the product of extensive good-faith, arm's-length negotiations and are supported by key creditor constituents.
The scope of the debtor release is tailored to exclude claims arising from actual fraud, gross negligence, or willful misconduct. The Debtors apply the five-factor test from In re Zenith Electronics Corp. to demonstrate the appropriateness of the releases, arguing that:
- Released parties made substantial contributions to the reorganization
- The releases are essential to the Plan's success
- A substantial majority of creditors support the Plan (as evidenced by voting results)
- An identity of interest exists between the Debtors and certain released parties
- The Plan maximizes value and provides meaningful recoveries
Notably, the memorandum addresses the Supreme Court's recent decision in Harrington v. Purdue Pharma L.P., emphasizing that the Court "made clear the narrow scope of the decision by pointing out that 'nothing in [this opinion] should be construed to call into question consensual third-party releases offered in connection with a bankruptcy reorganization plan.'" The Debtors stress that their third-party releases are wholly consensual, requiring affirmative opt-in.
Single Objection Deemed Moot
The only objection to plan confirmation came from Mad River Development, LLC. However, the Debtors argue this objection should be overruled as moot because "the Debtors have not sought, and will not seek, to assume this or any other lease of nonresidential real property pursuant to the Plan." According to the filing, any nonresidential real property leases to be assumed will be assumed and assigned pursuant to the Sale Order, not the Plan.
The memorandum notes that the Debtors have resolved various informal comments from parties including the U.S. Trustee, numerous landlords, the Debtors' sureties, and governmental authorities through agreed-upon revisions to the Plan and proposed Confirmation Order.
Next Steps and Timeline
The Combined Hearing to consider final approval of the Disclosure Statement and confirmation of the Plan is scheduled for October 29, 2025, at 2:00 p.m. (Eastern Time). The Debtors filed their initial Plan Supplement on October 7, 2025, which includes the Schedule of Assumed Executory Contracts and Unexpired Leases, Schedule of Retained Causes of Action, Wind-Down Transactions Memorandum, identity of the Liquidating Trustee, and the Liquidating Trust Agreement.
The Debtors request that the court waive the 14-day stay typically imposed on confirmation orders under Bankruptcy Rule 3020(e), arguing that immediate effectiveness is warranted because "for each day the Debtors remain in chapter 11, they incur administrative and professional costs, which will be reduced if the Debtors emerge expeditiously."
The filing represents a significant milestone in what has been a remarkably fast-moving and successful Chapter 11 case for Claire's Holdings. From filing to anticipated plan confirmation spans less than three months, during which time the Debtors pivoted from liquidation to a going-concern sale, secured overwhelming creditor support, and positioned themselves for an orderly wind-down that preserves value for all stakeholders while allowing the Claire's brand to continue operating under new ownership.
This article was prepared using Stretto Conductor, our new AI-powered assistant that's here to help. Stretto Conductor was able to create this summary of a 80 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Stretto Conductor may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.