Cupboard Is Bare at Linens ‘n Things

The company joins the list of retailers filing for bankruptcy as the economy roils.
Stephen TaubMay 2, 2008

The latest retailer to file for bankruptcy is Linens Holding Co., parent of Linens ‘n Things, which mentioned the current economic downturn in its Chapter 11 filing. The home-furnishings specialty retailer said it will close 120 underperforming stores but will otherwise remain open for business.

“The significant deterioration in the mortgage, housing and credit markets and the resulting impact on the retail marketplace, particularly the home sector, has overwhelmed the operating and merchandising improvements that we have made over the past two years,” said executive chairman Robert DiNicola.

Linens ‘n Things said it has secured $700 million in debtor-in-possession financing from General Electric Capital Corp., allowing it to continue to buy merchandise in preparation for the crucial back-to-school and holiday selling seasons.

The bankruptcy, which comes two years after private-equity firm Apollo Management bought Linens ‘n Things, underscores the risks buyout firms have been taking lately when buying cyclical companies. Historically, they have preferred to buy more plodding, cash-flow-rich, noncyclical companies, which can more comfortably and predictably handle the added debt load when they are bought and taken private.

Linens Holding has named Michael Gries, a financial-restructuring expert and co-founder of Conway Del Genio Gries & Co., as chief restructuring officer and interim CEO.

“As we move forward with LNT’s restructuring, the Board and I concluded that we needed to have additional restructuring expertise on our executive team,” said DiNicola. “Michael Gries is as good as it gets in this area, a nationally recognized leader with the deep experience in driving the financial initiatives necessary to position our company for the future.”

Other retailers that have filed for bankruptcy protection this year include Sharper Image Corp. and Lillian Vernon Corp., as more and more individuals feel the bite of the economic slowdown. The corporate bankruptcies reflect the trend in U.S. consumer-bankruptcy filings, which increased 47.7 percent nationwide in April from the same month a year ago, according to the American Bankruptcy Institute, citing data from the National Bankruptcy Research Center.

The overall April consumer filing total of 92,291 also represents a 7.1 percent increase from the 86,165 filings in March. Chapter 13 filings constituted 31.14 percent of all consumer cases in April, a slight decrease from March.