US fashion retailer J Crew is understood to be in discussions with its creditors to renegotiate around US$2bn of its debt as its struggles with falling sales.

The company is exploring ways to take advantage of the low trading price of some of its debt in a bid to turn the business around, sources told Reuters. This could involve placing its intellectual property assets in a separate entity. 

J Crew has been challenged by falling sales since it was acquired by private equity firms TPG Capital and Leonard Green & Partners for US$3bn in 2011. Indeed, its latest third-quarter results reflected "ongoing traffic challenges and a highly promotional retail environment." Net losses narrowed to $7.9m from $759.7m, but gross margin declined and group sales fell 7.4%.

CEO Millard Drexler said the company has "several key operational initiatives" underway to position it to regain momentum and deliver long term growth.

Last month, reports also surfaced that J Crew was considering separating its Madewell brand from the parent company in a move that could lead to a sale or spin-off.

J Crew to separate Madewell brand?