Hayward, Calif.-based department store Mervyn's LLC has
filed for Chapter 11 bankruptcy protection. Mervyn's stores are expected to remain open as the company moves through the bankruptcy
process. The company has received a
commitment for a $465 million debtor-in-possession financing from
a lender group led by Wachovia Capital Finance Corp.
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Hours before the filing, retail credit rating service Bernard Sands LLC had been telling its clients to not ship goods to the company because Mervyn's had stopped providing financial updates, according to a Reuters article.
"Their chief financial officer, their treasurer were always available and provided information like clockwork," Bob Carbonell, executive vice president and chief credit officer for Bernard Sands said. "But I haven't heard from them since July 7."
Last week, Dealscape reported that Mervyn's may be the next retailer to file for bankruptcy because some of its vendors had stopped shipments to the company and key lenders had pulled financing. 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.
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. Additionally, the Mervyn's filing marks the fourth for a Sun Capital-owned retailer this year.
Several other PE-owned retailers also have filed for bankruptcy this year including Steve & Barry's LLC and Linens 'n Things Inc. - Maria Woehr
See Mervyn's_bankruptcy filing (pdf)
Bankruptcy Watch: Is PE-backed Mervyn's the next to file Ch. 11?
See Dealscape: Mervyn's and the end of the regional retailer
See Dealscape: Sun Capital hits a bankruptcy trifecta
Dealwatch: Department Stores
