Linens Pulls Sheet Off New Chap. 11 Plan

In emergence from three months of bankruptcy, retailer will pay senior lenders in full, giving control to noteholders.
Stephen TaubSeptember 2, 2008

Linens Holding Co., the bankrupt parent company of home furnishings retailer Linens ‘n Things, said it agreed with creditors on a reorganization plan that will pay senior lenders in full and will give conversion rights to the majority of their debt.

Linens, which had filed for bankruptcy in May, said the arrangement has the support of senior lenders and its official committee of unsecured creditors, along with an ad hoc committee of the senior noteholders. The company expects to emerge from bankruptcy in early 2009.

Under the plan, conversion by holders of the senior notes will give them substantially all of the ownership of the reorganized company, Linens said. Unsecured creditors will receive warrants to purchase common stock in the new company.

“The filing of our Plan of Reorganization is a major milestone in the restructuring of LNT,” said Michael Gries, chief restructuring officer and iInterim CEO, “and reflects the hard work of the entire LNT team and the creditors’ and noteholders’ committees.””

Linens also announced that Robert J. DiNicola resigned as executive chairman, adding that he hd stated in his resignation letter that the plan’s filing represents substantial progress toward the goals outlined in connection with the Chapter 11 filing. He agreed to remain a board member and to serve as its nonexecutive chairman.

Linens ‘n Things had 2007 sales of about $2.8 billion. As of year-end 2007, it operated 589 stores in 47 states and seven provinces across the United States and Canada. When it filed for bankruptcy, the company said it would close 120 underperforming stores.

“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,” DiNicola said at the time. The bankruptcy came two years after private-equity firm Apollo Management bought Linens ‘n Things.

Linens’s bankruptcy filing has been one of many by retailers in a wave of filings in recent months, mostly due to a consumer spending slump and the credit crunch.