Leslie’s Files Chapter 11, Lenders Set to Take Control in Major Restructuring

After months of mounting financial pressure and weeks of speculation over its future, Leslie’s Inc. has officially filed for Chapter 11 bankruptcy protection, beginning a court-supervised restructuring that is expected to eliminate approximately $685 million in debt and ultimately hand majority ownership of the company to its lenders.

The Phoenix-based pool and spa retailer filed voluntary Chapter 11 petitions Wednesday in the U.S. Bankruptcy Court for the Southern District of Texas. The filing was widely anticipated after Leslie’s disclosed substantial doubt about its ability to continue as a going concern in August and reports surfaced last week that the company was preparing for bankruptcy.

What happens from here, however, is important to understand.

Leslie’s is not shutting down.

This is a prearranged restructuring designed to dramatically reduce the company’s debt while allowing the underlying business to continue operating. More than 80% of Leslie’s existing lenders have already agreed to support the restructuring plan, giving the company a significant head start as it enters Chapter 11.

Under the Restructuring Support Agreement, Leslie’s expects to eliminate approximately $685 million — roughly 90% — of its outstanding funded debt. The company has also secured commitments for $90 million in new debtor-in-possession financing and another $60 million in equity financing. Leslie’s is separately seeking approval for a fully committed $225 million asset-based DIP facility from its existing ABL lenders.

In practical terms, Leslie’s is using Chapter 11 to perform a massive financial reset.

Leslie’s CEO: “Leslie’s Is Here to Stay”

Leslie’s CEO Jason McDonell characterized the restructuring as an opportunity to remove debt from the balance sheet and redirect resources back into the business.

“Today’s announcement marks an important milestone in our commitment to our customers and our business,” McDonell said. “With a stronger balance sheet and greater financial flexibility, Leslie’s can reinvest across the business to strengthen operating execution and deliver an even better experience for our customers, both in-store and online.”

McDonell added, “Leslie’s is here to stay, and I am deeply grateful to our employees, customers, and partners for their continued support as we work to position Leslie’s for a strong future.”

What Chapter 11 Means for Leslie’s

Chapter 11 is often interpreted by consumers as synonymous with a company going out of business. That is not what Leslie’s has announced. The company intends to continue operating throughout the bankruptcy process while restructuring its balance sheet, store footprint and ownership.

Most Leslie’s stores will remain open, its website will continue operating, employees are expected to continue receiving wages and benefits, and the company says gift cards and loyalty benefits will continue to be honored. Leslie’s has also asked the bankruptcy court for authority to continue honoring obligations to vendors in the ordinary course.

There will, however, be a smaller Leslie’s on the other side.

The company announced another 76 store closures as part of the restructuring and said it will continue evaluating its real estate portfolio during Chapter 11. Leslie’s currently operates more than 900 locations nationwide.

What Happens to Leslie’s Now?

The easiest way to understand the transaction is to separate Leslie’s operating business from the financial structure sitting above it.

The problem Leslie’s is attempting to solve through Chapter 11 is not simply whether people still need chlorine, pumps, filters, chemicals and other pool supplies. Millions of swimming pools still require those products every year.

The larger problem has been carrying an enormous debt burden while trying to navigate declining sales, changing consumer behavior and a difficult post-pandemic pool market.

In its fiscal third quarter, Leslie’s reported sales of $458.5 million, down 8.4% from the prior-year period, while comparable sales declined 6.2%. For the first nine months of fiscal 2026, sales declined 7.3% to $790.4 million. Adjusted EBITDA for the third quarter fell to $55.7 million from $81.6 million a year earlier.

Chapter 11 gives Leslie’s an opportunity to address that debt problem directly.

Rather than lenders potentially recovering only a portion of what they are owed through a liquidation or prolonged financial deterioration, the restructuring converts their position into ownership of a substantially less leveraged company.

Upon emergence from bankruptcy, Leslie’s expects a group of its existing lenders to become the company’s majority owners.

That means Leslie’s will essentially emerge with a new capital structure, new majority ownership and approximately $685 million less funded debt hanging over the business.

That is a very different company financially.

The lenders taking control are not simply buying hundreds of pool stores in the traditional sense. They are effectively exchanging a significant portion of the debt they already hold for ownership of the underlying business.

For Leslie’s, removing that debt potentially frees up capital that otherwise would have been consumed servicing it. That money can instead be directed toward inventory, pricing, technology, e-commerce, store improvements and other operational priorities.

It does not, however, solve every problem facing the company.

Leslie’s still has to convince consumers to shop there.

The company still has to compete with independent pool retailers, service professionals, mass merchants and online sellers. It still has to determine the right number of physical stores to operate. And it still has to demonstrate that the underlying business can produce sustainable results once the debt problem has been substantially removed.

Bankruptcy can fix a balance sheet. It cannot, by itself, fix customer traffic, pricing strategy or execution.

That is where the next chapter of this story will ultimately be decided.

What Happens to Existing Shareholders?

Existing Leslie’s shareholders are in a much different position than Leslie’s customers, employees or vendors.

The restructuring agreement calls for lenders to become majority owners of the reorganized company. Exactly what existing shareholders ultimately receive will be determined through the Chapter 11 process and confirmed restructuring plan, but equity sits behind secured and unsecured creditors in bankruptcy priority.

Leslie’s entered Chapter 11 reporting approximately $722.2 million in assets and $1.21 billion in liabilities, according to bankruptcy filings reported by The Wall Street Journal.

That disparity helps explain why the restructuring is centered around creditors rather than preserving the company’s existing ownership structure.

For anyone watching Leslie’s stock, that distinction is critical: keeping Leslie’s stores operating does not mean preserving the value of Leslie’s existing publicly traded shares.

The business can survive while the existing capital structure does not.

Why the Bankruptcy Is Happening in Houston

Although Leslie’s is headquartered in Phoenix, the company filed its Chapter 11 cases in the Southern District of Texas. The case has been assigned to U.S. Bankruptcy Judge Alfredo Perez under Case No. 26-90795.

Houston has become a major venue for large corporate restructurings, with a bankruptcy bench and professional infrastructure accustomed to handling complicated Chapter 11 cases.

Leslie’s has retained Simpson Thacher & Bartlett and Haynes and Boone as legal advisers, BRG as financial and restructuring adviser, and Centerview Partners as investment banker.

What Pool Professionals Should Watch Next

For the pool and spa industry, the most immediate concern will be how aggressively Leslie’s reshapes its retail footprint.

The 76 announced closures may not necessarily represent the final number. Leslie’s specifically said it will continue evaluating its real estate portfolio during Chapter 11, giving the company an opportunity to reject leases and exit locations that no longer make economic sense.

That could create opportunities for independent pool retailers and service companies in markets where Leslie’s reduces its presence.

Vendors will also be watching closely. Leslie’s says it intends to continue paying vendors and operating normally during the proceedings, subject to court approval of its first-day motions. Maintaining supplier confidence will be important for a retailer whose business depends heavily on keeping stores stocked during the pool season.

The company is targeting an emergence from Chapter 11 in early 2027.

If that timetable holds, the Leslie’s that emerges will look considerably different financially from the company entering bankruptcy today.

The familiar orange-and-blue stores are not disappearing. Leslie’s is not being liquidated, and the company is making it clear that it intends to remain one of the largest players in the pool and spa aftermarket.

What is disappearing is much of the debt structure that became increasingly difficult for the company to carry.

The bankruptcy process will now determine exactly how that restructuring is implemented, which stores survive the continuing portfolio review, how creditors are treated and what ultimately happens to existing shareholders.

For the pool industry, the more important question is no longer whether Leslie’s will file for bankruptcy.

It has.

The question now is what Leslie’s looks like when it comes out the other side.