Filene’s Basement on Monday filed a voluntary petition for Chapter 11 bankruptcy court protection in Delaware and agreed to sell 17 of its 25 stores, including flagships in Boston and New York, for $22 million to an affiliate of Crown Acquisitions.
Crown, a real estate management firm in New York, said it intends to continue operating the stores under the Filene’s Basement nameplate. The acquisition is subject to bankruptcy court approval.
Sources said off-pricer Syms Corp. might contemplate a bid for Filene’s Basement in a court-sponsored auction. Executives at Syms declined comment.
Describing Filene’s Basement as “a great brand,” Crown founder Stanley Chera said he expects to succeed in his purchase even if other bidders emerge.
“It’s been available for a while and no one has come forward,” Chera said. “But the law is the law and if they come, we’ll see what happens. Do I have any bullets left? Yes, I have bullets.”
Chera said the primary catalyst for the acquisition was the distressed state of retailing: “I’ve watched my good tenants come and go, and a lot of the others have no credit.”
After visiting the company, Chera said he realized the off-pricer was not “run with tight control on expenses. We can help with operations and overhead.”
Filene’s Basement chairman and president Mark Shulman and his merchandising team will remain with the company.
Chera hopes to eventually reopen the company’s flagship in Boston and is eyeing other sites, including New York’s Upper East Side and the city’s boroughs, but he wants to spend the next year strengthening operations at the existing 17 sites.
Filene’s Basement, best known for its annual bridal gown sale, was acquired on April 20 by Buxbaum Group affiliate FB Acquisition II from Retail Ventures Inc. It closed 11 units this year.
In its Chapter 11 petition, the chain estimated liabilities of $100 million to $500 million, and assets between $50 million and $100 million.
CIT Group Commercial Services in Charlotte, N.C., is the largest unsecured creditor and is owed $4.4 million. Other unsecured trade creditors include: Phillips-Van Heusen, Pittsburgh, $761,157; Calvin Klein, Philadelphia, $641,093; Jones Apparel Group, Atlanta, $608,658; the Nautica division of Oxford Industries Inc., Chicago, $433,184; Maidenform Inc., Charlotte, N.C., $272,986, and Peerless Clothing International Inc., St. Albans, Vt., $239,597.
Shulman’s affidavit with the bankruptcy court said the chain posted operating losses before interest and taxes of $53.1 million and sales of $422.1 million for the year ended Jan. 31, 2009.
He said the off-pricer owes its former parent, Retail Ventures Inc., $52.6 million under two unsecured subordinated promissory notes.
Lawrence Gottlieb of Cooley Godward Kronish, attorney for the ad hoc Filene’s creditors committee, believes the nameplate still has meaning among consumers. The planned sale of the retailer would run contrary to the recent trend of retailers such as Mervyns, Gottschalks Inc. and Goody’s Family Clothing Inc. going bankrupt and then being liquidated.
Gottlieb said new amendments to the bankruptcy code provide time limitations on lease rejections. Bankrupt retailers usually are given two months to sell the company or liquidate.
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