Reading about Linens 'n Things Inc.'s imminent bankruptcy filing has become more tedious than spending a Sunday afternoon shopping there. But beating the proverbial dead horse reached a new level Tuesday, when The Wall Street Journal reported that the Clifton, N.J., home furnishing retailer took the "unusual and costly move" of paying between 60 and 100 of its 1,000 vendors before they deliver merchandise. To be sure, this is a critical issue. Linens' ability to pay its vendors, and the vendors' confidence in the company, will ultimately decide whether Linens can sidestep a bankruptcy. (Eleven suppliers have already formed an ad hoc committee to prepare for a Chapter 11 filing, the Journal said.)
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But the story's interview with CEO Robert J. DiNicola (who, according to the New York Post, is obsessed with the movie "The Godfather" and models his management style after Vito Corleone) is less revealing than the Cosa Nostra. "We are trying to avoid bankruptcy," DiNicola tells us, and that "one of three things will occur." DiNicola says the company will receive a cash infusion -- but doesn't say from whom (could be private equity owner Apollo Management LP, could be a hedge fund, could be another PE firm) -- will file a prepackaged Chapter 11 or a bankruptcy of a "different variation" (read: a Chapter 11 that's not a prepack).
In a word, duh.
We're left wondering what DiNicola is telling us that we couldn't deduce ourselves, or haven't read ad nauseum in the past two weeks. Aside from an outright sale outside of bankruptcy, what other options are there for Linens?
Maybe DiNicola is purposely being vague and is borrowing a scene in "The Godfather II," when Corleone capo Frank Pentangeli is about to rat out the family before a congressional committee only to clam up when Michael Corleone shows up in the audience with Frankie's long-lost brother from Italy in tow.
Given the fact that Linens has to pay up-front for inventory and that 11 suppliers have already formed an ad hoc committee to prepare for a Chapter 11 filing, however, it doesn't look like DiNicola's vagueness is assuaging anyone's fears. It seems like it's only feeding them.
Indeed, Linens thus far is the most hyped nonbankruptcy in years, and maybe that's DiNicola's strategy -- keep the news stream going on as to make everyone indifferent to the company's Chapter 11 filing when it does happen. It just could be a bigger letdown than "Godfather III." - John Blakeley
