Anchor Blue Retail Group Inc. on Wednesday inked a deal to sell the company’s 73 Levi’s & Dockers Outlet by Most stores to Levi Strauss & Co. as part of its bankruptcy restructuring plan. Ontario, Calif.-based Anchor filed for Chapter 11 bankruptcy court protection in Delaware on Wednesday.
Anchor Blue is the holding company for two subsidiaries, the Anchor Blue specialty store business and the Levi’s & Docker’s Outlet store operation. The asset purchase agreement with San Francisco-based Levi’s serves as the stalking horse bid and is subject to better offers in a required bankruptcy court auction.
Of the 177 Anchor Blue stores, 48 are being closed, including 18 in Florida and 15 in California. A 74th outlet, in Puerto Rico, is excluded from the agreement with Levi’s and will be closed.
“Levi Strauss & Co. has been an excellent partner and a critical reason for the success of our Levi’s & Dockers Outlet by Most stores and we believe is best positioned to take the operation forward and continue to provide customers with a superior Levi’s & Dockers shopping experience,” said Thomas Sands, president and chief executive officer of Anchor Blue Retail Group.
In the bankruptcy petition, the debtor has assets of between $100 million and $500 million, as well as liabilities of the same amounts. Levi’s is the top unsecured creditor at $2.6 million, followed by Phoenix Textile Inc. at $665,236, and The Millwork Trading Co. Ltd., a Li & Fung USA company, at $403,877. Anchor has a $20 million debtor-in-possession financing commitment from its existing lender, Wachovia Capital Finance.
Scott Rosner, senior vice president and chief financial officer, said in an affidavit filed with the bankruptcy court that the outlet business is projected to generate sales of $146.6 million for the year ending Jan. 31, 2010, while Anchor Blue sales for the year are projected at $192.7 million. Anchor Blue posted a $10.8 million loss on sales of $370.6 million last year.
Sands said that, despite some success in initiatives to cut costs and reinvigorate the stores, “the unprecedented economic downturn and a related drop in consumer spending, especially in the teenage market, have had a severe impact on our financial performance.”
Anchor Blue was acquired by Sun Capital Partners Inc. in 2003, and in March 2005 sold a minority equity stake to Ares Management through a recapitalization. Some of its outlet stores were previously owned by Casual Male Retail Group Inc.