Browse News by Topic

Data Products

Search Real Estate Records

To Do List

Printer Friendly Email This

SOILED LINENS

Troubled Chain Gets Financing

Retail chain receives bankruptcy nod, borrows $700 million to ‘normalize vendor relationships’ and meet obligations

By Howard French

Journal Inquirer

05/12/08

New Jersey-based Linens Holding Co. — which operates the Linens ’n Things retail chain — has received Bankruptcy Court approval to use its $700 million debtor-in-possession financing, “pending a hearing on final approval later this month,” according to a statement from Chief Restructuring Officer and Interim Chief Executive Officer Michael Gries.

As part of its restructuring effort, the company plans to close 120 of its 589 stores.

The chain will close two Connecticut stores — one each in Farmington and Lisbon — according to its Chapter 11 filing.

Linens ’n Things operates stores in Enfield and Manchester, which will remain open.

The financing will allow the company “to quickly normalize vendor relationships, providing a healthy merchandise flow as the company prepares for the back-to-school and holiday selling seasons, and meet its ongoing obligations through the restructuring process,” Gries said.

It will enable the company to continue to pay wages, healthcare benefits, workers’ compensation, 401k contributions, and other employee benefits, he said.

It also allows Linens ’n Things to continue to honor gift cards, rewards certificates, coupons, and merchant rebates, as well as its refund and exchange policies, according to Gries.

Relief From Creditors

“The court also granted certain relief for the payment of existing creditors, including utilities, taxing authorities, various logistics and transportation providers, as well as payments for goods shipped by vendors prior to the bankruptcy filing, but not received by Linens Holding Co. until after the filing,” he said.

Linens ‘n Things filed to reorganize under Chapter 11 on May 2 in the United States Bankruptcy Court for the District of Delaware.

Chapter 11 status permits a financially troubled company to continue its daily business while formulating a plan to regain profitability, or failing that, to liquidate.

The bankruptcy court filing comes just weeks after the company announced that it had hired a New York-based consultant specializing in mergers and acquisitions, divestitures, and restructuring.

Missed Payment

Three weeks ago, Chairman and Chief Executive Officer Robert J. DiNicola announced that his company had retained New York-based Financo Inc. “as a special advisor to assist the company in evaluating various strategies.”

On April 15, the company missed a roughly $16.1 million quarterly interest payment to the holders of its senior secured notes due 2014.

The company also disclosed on the same day that it was in discussions with “an ad hoc committee of holders of the notes regarding a restructuring of the company’s capital structure.”

Reorganization Underway

“The lenders under the company’s senior asset-backed revolving credit facility are supportive of efforts toward a consensual restructuring,” DiNicola said.

The company also retained Conway, Del Genio, Gries & Co., LLC as its financial advisor, he said.

In early April, published reports in the Wall Street Journal and in the New York Post claimed that Linens ’n Things could file for Chapter 11 status at any time.

The chain will continue to operate its stores “without interruption during the reorganization and the stores are open for business and expect to be well stocked with merchandise,” DiNicola said.