Private equity firm Sycamore Partners may be looking to back out of its deal to buy a controlling stake in the Victoria's Secret lingerie brand, Reuters and other outlets report, and L Brands (NYSE:LB) stock is in free fall as a result. COVID-19 already hammered L Brands in March with retail store closures, sending its share value downward almost 50%. Now the current owner of Victoria's Secret has seen its stock collapse around 20% so far in today's trading.

Back in February, L Brands inked a deal with Sycamore that saw the latter agree to buy the troubled intimate apparel brand for $525 million. As part of the deal, founder and CEO Les Wexner would step down and move into an emeritus position, and Bath & Body Works CEO Andrew Meslow would take over as CEO of L Brands. The complex transaction would have ended with Victoria's Secret as a privately held subsidiary of Sycamore Partners.

A Victoria's Secret storefront.

Image source: L Brands.

Now, Sycamore Partners says L Brands' handling of Victoria's Secret following the deal violates its terms, and it no longer wants to go through with acquiring the half-billion dollar stake in the brand. Sycamore says that furloughing the majority of Victoria's Secret's workforce and shuttering most of its 1,600 outlets materially degrades the lingerie line's value.

In its court filing, the private equity firm argued that the coronavirus outbreak is no excuse, stating, "That these actions were taken as a result of or in response to the COVID-19 pandemic is no defense to L Brands' clear breaches of the transaction agreement." A 10% drop in L Brands' shares following the news triggered a temporary trading halt, but the downward slide resumed when trading started again.