| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
 Filene's Basement Inc. is likely to liquidate if it does file for Chapter 11, Bill Welnhofer, managing director and head of Robert W. Baird & Co.'s corporate restructuring group told Dealscape.If the 100-year-old off-price retailer that introduced Boston to the running of the brides does file for bankruptcy, it will follow the stampede of other clothing retailers that have filed over the last year, including Steve & Barry's LLC, Everything But Water LLC, Boscov's Inc., Mervyn's LLC and Goody's LLC. Along with the 62-year-old tradition of Filene's Basement's bridal event, the chain's liquidation could also become yet another corporate casualty for the city of Boston, which has lost Fleet Boston, Gillette Co. and John Hancock Financial Services all in the last decade. Filene's Basement is scrambling for cash to pay off more than 10 vendors, and it is in talks with creditors to negotiate restructuring debt, according to the New York Post. Retail Ventures Inc., the owner, coughed up an additional $7.5 million in cash collateral in February, saying that the stores would need additional funds to satisfy its obligations. Apparently, that wasn't enough so Filene's hired restructuring adviser Loughlin Meghji + Co., according to Women's Wear Daily. So far, the restructuring included closing 11 of its 36 stores after the chain failed to negotiate rent reductions with landlords, according to The Boston Globe. The logical step, Welnhofer explains, is to try to restructure the retailer's debt. "Who knows if they can reach a consensual agreement out of bankruptcy? It is difficult for retailers to restructure because many of them are stuck with stores that are not making money and leases that they would like to get out of, and it's very difficult to do that outside of bankruptcy," Welnhofer said. Like many predecessors, Filene's Basement is now considering a rushed sale to stay out of bankruptcy or at least a delay until it can come up with a prearranged bankruptcy plan. However, most experts agree that the discount retail chain is unlikely to attract much interest from distressed investors, according to The Deal's Demitri Diakantonis (see full story in Pipeline). Even Bob Carbonell of Bernard Sands Credit Consultants, a New Jersey-based company that represents many of Filene's Basement's unpaid vendors, told The Boston Globe that, "the retailer will have a difficult time attracting a buyer because it is too small and has been losing money for a long time. In the latest financial results available, Retail Ventures said Filene's Basement sales dropped more than 9 percent last year compared with 2007." If Filene's Basement does enter Chapter 11 bankruptcy, it may have to liquidate, especially without a 363 buyer. Welnhofer explains that it's virtually impossible to restructure in bankruptcy due to the 2005 Bankruptcy Act, which only leaves 210 days to work things out, and even harder to come up with a 363 buyer right now. "If Filene's Basement files Chapter 11, I probably would say yes it will have to liquidate, but that is because a company that size that does not have enough heft to make it through bankruptcy," Welnhofer said. "If its stores are performing okay then they might find a buyer. Bankruptcy is a very expensive process. In order maintain operations in bankruptcy you have a certain critical mass. There really isn't anyone to buy in retail. You have seen some of the larger ones, like Circuit City that haven't found people to step up to the plate and buy the stores so really the only alternative left is liquidation." Those retailers that will survive Chapter 11 will be the ones, "with a strong niche," Welnhofer said, predicting we will see many more familiar retailers disappear before the end of the year. At the moment, Filene's Basement is bargaining for time, and on a limited amount of inventory from vendors, who are antsy for payment. - Maria Woehr Also see: Distressed Investing 2009: Survival of the retailers
CategoriesComments
From: Ellen,
The chain of command is to blame. They did not know tneir customers and they were rude and nasty to some of their very best customers. Jim Rudd, the cfo was inept and Heywood Wilensky had a terrible track record having put the Bon Ton stores into bankruptcy before coming to Filenes Basement. Jay Scottenstein does not know how to run a company that had upscale merchandise at great prices. He only knew how to be a low end marketeer. Just look at the low end merchandise at dsw. Mostly made in china or Brasil and at least 5 yrs. old as well, Guess what Jim and Donald, no one wants to shop your stores.
Posted on:
April 9, 2009 9:00 PM
 Deal Video
    Community
 Elsewhere on The Deal.comDealwatchThe Deal MagazineCorporate Dealmaker
The Deal VideoCategories
Blog roll
Archives
| |||||||||||||||||||||||||
|
|
|
|
|
©Copyright 2009, The Deal, LLC. All rights reserved. Please send all technical questions, comments or concerns to the Webmaster.
for all of the bad comments about Filene's basement closing, I can only hope this doesn't happen to you or your family. The fact of the matter is, there will be once again jobs lost, families suffering and a increase in the unemployment rate. Show some simpathy, we need the support of our fellow Americans, and not the negative comments! Enough is Enough!