Fortunoff Wraps Up Bankruptcy for Lord & Taylor

The deal seems to represent an M&A twist on the notion of a pre-packaged bankruptcy.
Stephen TaubFebruary 4, 2008

Fortunoff, the jewelry-story chain, reported that it has filed for bankruptcy and will be acquired by NRDC Equity Partners, the owner of the Lord & Taylor.

The deal seems to represent a mergers-and-acquisitions twist on the notion of a pre-packaged bankruptcy. In such an arrangement, a company submits a reorganization plan that’s agreed to by creditors and shareholders before the company files for bankruptcy. In Fortunoff’s case, the once gilded retailer of fine jewelry and home furnishings has already lined up NRDC to invest $100 million in the business, with the sale of the company expected to close in early March.

In conjunction with the bankruptcy filing, Lord & Taylor has made available a $10 million letter of credit to enable Fortunoff—which is privately-held—to continue to buy inventory. Further, some of the company’s existing lenders have agreed to provide Fortunoff with debtor-in-possession financing. The financing will be used to run its business during the bankruptcy process pending the sale. The bankruptcy process will also permit other interested bidders to make competing offers.

Arnold Orlick, Fortunoff’s chief executive, also noting that a difficult retail environment and capital constraints have limited its expansion opportunities. This is the second change of control for Fortunoff’s in less than three years. In 2005, two investment firms—Trimaran Capital Partners and Kier Group—bought 75 percent of the company while the Fortunoff and Mayrock families retained a 25 percent stake.