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Rent the Runway has announced a growth recapitalization to reduce debt, lower interest expenses, and extend the maturity of its remaining debt. The company's balance sheet will be enhanced, and it will continue to operate as a public company. Rent the Runway plans to execute its multi-year transformation plan, focusing on growing its customer base, innovating on its platform, and improving customer retention. The company ended Q1 2025 with a record 147,000 active subscribers and its strongest quarterly retention in four years.

NEW YORK — Rent the Runway, Inc. (NASDAQ: RENT) has announced a growth recapitalization plan aimed at enhancing its balance sheet and supporting future business initiatives. According to InvestingPro data, the company has been operating with a significant debt burden of $386.6 million and a concerning Altman Z-Score of -5.89, indicating potential financial distress [1].

The transaction will convert a substantial portion of debt held by Aranda Principal Strategies (APS) into common equity. Based on an estimated closing date of December 31, 2025, approximately $243 million of debt would be converted at an effective price of $9.23 per share, representing an 80.9% premium to the recent 30-day volume weighted average price [1].

APS is partnering with STORY3 Capital Partners and Nexus Capital Management to inject $20 million of new capital into the business. Upon completion, Rent the Runway’s outstanding debt will be reduced to $120 million with maturity extended to 2029 [1].

The company will also initiate a rights offering allowing existing stockholders to purchase up to $12.5 million of shares at $4.08 per share, a 20% discount to the recent 30-day average price. The offering will be fully backstopped by the three investment partners [1].

"We brought the business to nearly free cash flow breakeven in 2024, continued to transform the way we acquire inventory with an asset-light model, and returned to a culture of customer obsession," said Jennifer Hyman, CEO and Co-founder of Rent the Runway. Despite challenging market conditions, the company maintains impressive gross profit margins of 72.54%, though it reported negative free cash flow of -$43.6 million in the last twelve months [1].

The fashion rental platform reported ending Q1 2025 with 147,000 active subscribers, described as a record high. The company also noted improved customer retention rates [1].

As part of the transaction, Peter Comisar of STORY3 and Damian Giangiacomo of Nexus will join Rent the Runway’s board of directors. The deal requires stockholder approval and is expected to close by December 31, 2025 [1].

Rent the Runway will continue operating as a public company trading under the RENT ticker on Nasdaq. The information in this article is based on a company press release.

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References:
[1] https://www.investing.com/news/company-news/rent-the-runway-announces-growth-recapitalization-plan-93CH-4204544