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Yet another company, Value City, enters Chapter 11, but Mrs. Fields and Goody's Family Clothing escape after short stays.
Stephen Taub, CFO.com | US
October 27, 2008
The economic downturn and global credit crunch have claimed another retail-industry victim. At the same time, however, a well-known retailer has emerged from bankruptcy, following another that did so last week.
Value City Department Stores filed for Chapter 11 bankruptcy, Reuters reported. The discounter, which plans to liquidate its remaining 66 stores, cited the economic downturn, higher gasoline prices, and increasing unemployment as reasons for its demise, according to the report.
The company also lamented that suppliers tightened credit terms, making it impossible to buy new merchandise, according to Reuters.
The retailer, which is now planning going-out-of-business sales, is seeking a $40 million debtor-in-possession credit agreement with National City Business Credit and Wells Fargo Retail Finance.
According to Reuters, shoe retailer DSW Inc. is Value City's largest unsecured creditor, with about $4.5 million in claims.
Other retailers that have filed for bankruptcy this year include Linens 'n Things, Sharper Image Corp., Lillian Vernon Corp., Steve & Barry's, Mervyn's, Goody's Family Clothing and Mrs. Fields' Original Cookies, Inc.
On Friday, Mrs. Fields announced that it had emerged from a brief sojourn in Chapter 11 with a prepackaged bankruptcy plan. The company asserted that it has an improved balance sheet and a good working capital position to go along with new ownership.
"Within 60 days of filing the Chapter 11 petition, we were able to significantly de-lever the company's balance sheet, establish a credit facility to support our working capital needs, and emerge from bankruptcy fully capable of meeting and exceeding customer expectations," said Michael Ward, interim co-CEO of Mrs. Fields.
Mrs. Fields' emergence came a week after Goody's Family Clothing exited Chapter 11. The company said it closed a $175 million revolving exit credit facility provided by GE Corporate Lending and Bank of America. In addition, Goody's secured $10 million and $35 million exit term loans from GB Merchant Partners and PGDYS Lending, respectively.
Goody's had filed for reorganization under Chapter 11 on June 9, 2008.
"I am particularly pleased that we were able to accomplish this restructuring in such an expeditious fashion," said Goody's CEO Paul White.
During its bankruptcy, Goody's took a number of steps to streamline and reorganize its operations, including the closure and liquidation of 69 underperforming retail locations in 18 states, the closing of a distribution center in Arkansas and a corporate office in New York. In addition, Goody's eliminated its e-commerce business, as well as an associated distribution center in Tennessee.