This spring Mervyn's lender CIT Group Inc. stopped providing financing to the chain, causing vendors such as Levi Strauss & Co., to withhold shipments. Other lenders such as GMAC and Milberg followed CIT's lead, according to the New York Post.
Hayward, Calif.-based Mervyn's operates 177 stores in seven states, mostly in California. It's backed by Cerberus Capital Management LP, Sun Capital Partners and three other partners, including real estate investor Lubert-Adler who acquired the chain from Target Corp. in 2004 for $1.2 billion.
Does this whole situation sound familiar? Well, that's because Sun Capital has seen a number of its retail investments fall into bankruptcy. In February, Sun Capital portfolio companies Wickes Furniture Co. filed for bankruptcy in Wilmington, Del., followed by high-end gadget retailer Sharper Image Corp. and gift shop chain Lillian Vernon Corp.
However, Sun Capital isn't the only private equity investor feeling the pain. Steve & Barry's LLC, a TA Associates portfolio company, went through a very similar situation to Mervyn's circumstances, and ultimately filed for bankruptcy on July 9. Earlier this year, Linens 'n Things Inc., an Apollo Management Inc. portfolio company, filed for Chapter 11 after going through a similar problem with vendors.
As The Deal's Matt Miller reported, regional department stores, jewelry chains and consumer electronic stores are getting hit hard with lenders and vendors pulling out, leaving Chapter 11 the only option for many retailers. - Maria Woehr
See TheDeal.com's The coming catastrophe
It looks like the next retailer filing for Chapter 11 could be Mervyn's LLC. The private equity-owned department store may file for bankruptcy in 30 days because some of its vendors have stopped shipments to the company and key lenders have pulled financing, according to a report from The Wall Street Journal. 
