(Bloomberg) — Warburg Pincus-backed Gabe’s is closing in on a debt deal that would hand over control of the discount retailer to some of its lenders, according to people familiar with the situation.
The cash-strapped chain and its creditors have been ironing out details of an out-of-court plan that would help shore up its cash reserves, said the people, who asked not to be identified discussing private negotiations. Gabe’s has also been looking to cut deals with various landlords and vendors to help bring down expenses, said other people familiar with the matter.
A critical element of the company’s plan calls for existing term loan lenders to swap their debt for equity into the business, according to some of the people.
As part of the deal, lenders would provide as much as $55 million in new money. They are planning to provide $15 million of rescue financing in the coming days, and already extended $15 million last month, said some of the people familiar. There could be another $25 million injection depending on how the concessions coming from landlords and suppliers pan out, they added.
Representatives with Warburg and Berkeley Research Group, which is advising the company, declined to comment, while messages left with Gabe’s were not returned.
The debt talks come as a number of retailers have struggled with liquidity in the wake of President Donald Trump’s tariff efforts. At Home Group Inc. filed for Chapter 11 on Monday, and partly blamed the decision on tariff policies.
Warburg Pincus acquired Gabe’s from Alvarez & Marsal Capital in 2016. Last year, Second Avenue Capital Partners and Ares Management Credit Funds provided Gabe’s with a $175 million credit line after the chain bought Old Time Pottery in 2023 in a bid to expand its operational footprint. The retailer operates more than 150 Gabe’s and Old Town Pottery locations across 20 states, according to its website.
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