Report: Claire's mall jewelry chain headed toward bankruptcy

Nathan Bomey | USA TODAY

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Mall jewelry chain Claire's Stores is reportedly tumbling toward bankruptcy protection, aiming to polish off its finances and reemerge with a brighter future.

Claire's, which also owns the Icing chain, has fallen victim to a heavy load of debt acquired when private equity firm Apollo Global Management LLC orchestrated a $3.1 billion buyout in 2007.

Struggling malls, online competition and nimbler physical competitors have also proven problematic.

The chain is expected to file for bankruptcy "in the coming weeks," Bloomberg reported, citing confidential sources. Claire's had 3,291 stores worldwide as of Oct. 28, including 653 franchised locations.

Representatives at Claire's and Apollo were not immediately available to comment Friday.

"Claire’s business has been improving and it’s generating more cash-flow, but its debt level needs to be reduced," said Philip Emma, analyst at restructuring industry information firm Debtwire, in an email.

The company has key interest payments due March 15, potentially triggering the bankruptcy filing. Algother, the company owes more than $2 billion.

Bloomberg said Apollo was negotiating a deal to relinquish control to lenders, including Elliott Capital Management and Monarch Capital.

It was well known that Claire's was teetering. The company announced in January that it had hired investment banker Lazard "to evaluate a capital structure solution."

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“The steps we are taking now with Lazard will help to ensure Claire’s long-term success for years to come," CEO Ron Marshall said at the time in a statement. "We believe this is the right time to undertake this initiative and we want to assure our vendors, employees and stakeholders that we believe we have ample liquidity to honor our commitments through the completion of this process.”

When excluding debt payments and other one-time factors, the company's financial performance has remained decent. Adjusted earnings before interest, taxes, depreciation and amortization rose 14.8% to $42.4 million for the period.

Sales at stores open at least a year in Claire's third quarter, the period most recently available, rose 1.1%.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.