Shares of retail holding company L Brands (NYSE:LB) were on the rebound on Thursday, a day after a lawsuit threatened to block the company's deal to sell a majority stake in its troubled Victoria's Secret chain.
As of 3:30 p.m. EDT, L Brand's shares were up about 6% from Wednesday's closing price.
L Brands' stock closed down over 17% on Wednesday, after the private-equity firm that had agreed to buy 55% of Victoria's Secret filed suit in a Delaware court in an effort to get out of the deal.
Sycamore Partners' suit against L Brands alleges that L Brands breached covenants in the transaction agreement when it shut down Victoria's Secret's stores and moved to preserve its cash in mid-March, amid the COVID-19 outbreak.
L Brands said on Wednesday that it plans to fight the suit, and it may have grounds to do so. The problem: Even if it eventually wins, the suit will delay the deal's closing -- and leave L Brands on the hook for the lease payments for Victoria's Secret's stores while they remain closed.
Analysts had mixed reactions to the news on Thursday, with some saying that L Brands' solvency may soon be in question, and others arguing that the company's stock is a buy because of the relative health of its other retail chain, Bed Bath & Beyond.
What happens now? Retail investors will have to watch and wait.