Rent The Runway Offloads $240M Debt by Ceding Majority Ownership

Rent The Runway gets rid of debt. The U.S. company founded in 2009 has reached an agreement with its shareholders to reduce part of the liabilities that the company is carrying. Specifically, the exchange involves handing over the majority of the company’s capital in exchange for $240 million of its debt.

“This recapitalization is intended to improve the company’s balance sheet and financial flexibility through a significant reduction in debt and interest expense, while achieving a favorable extension of the maturity of the remaining debt,“ Rent The Runway explained in a statement.

The transaction has been structured in two different ways. On the one hand, the investment fund Aranda Principal Strategies will convert $100 million of its initial debt investment into an equity stake, which, based on the value of Rent The Runway’s shares, translates into $240 million.

Rent The Runway must repay before 2029 another $120 million of debt

In parallel, Aranda Principal Strategies, Nexus and Story3, also investment funds, will inject another $20 million in the company’s capital, in exchange for their participation. This also means the entry of both funds in the management committee of the U.S. company.

Once the deal closes, between the three funds they will control 86% of Rent The Runway, while the company’s liabilities will have been reduced to $120 million, with a new term extended to 2029. The company will, however, give existing shareholders the ability to purchase up to $12.5 million in shares.

For its last full fiscal year, ended Jan. 31, the company posted revenue of $264.9 million, down 1.5% from the previous fiscal year. Although Rent The Runway remained in the red, it also managed to reduce its loss by more than 18% to $113.2 million.

Rent the Runway has managed to greatly strengthen the business over the past eighteen months, defended Jennifer Hyman, the company’s co-founder and CEO. “We have brought the business close to cash flow breakeven in 2024, continued to transform the way we source to an agile model and have refocused on the customer, which is driving significant growth,“ she added.