By  on July 14, 2010

Trade Secret Inc. last week filed a voluntary petition for Chapter 11 bankruptcy court protection in Delaware, and plans to sell certain assets to former owner and creditor Regis Corp.

The plan is to sell Trade Secret to Regis as the so-called “stalking horse bidder” for $45 million, which includes the assumption of $13 million in liabilities, with Regis transferring the interest into a new entity associated with Brian Luborsky, chief executive officer, for the purpose of operating a scaled-down version of the firm.

According to bankruptcy court records, Trade Secret, based in Ontario, Canada, operates both beauty and hair care retail sites. Operations are primarily mall-based, although 20 percent of the sites are located in outdoor shopping centers. The businesses operate under four trade names: Trade Secret, Beauty Express, BeautyFirst and PureBeauty.

In an affidavit filed last Tuesday with the Delaware bankruptcy court, Luborsky noted that product revenues represented 87 percent of total revenues and that, for the year ended January 2010, revenues were $220 million. He also noted that the cutback on discretionary spending since 2008, coupled with the firm’s inability to negotiate the closure of unprofitable stores, hurt the businesses’ operations.

The proposed transaction requires bankruptcy court approval and is subject to higher offers in a court-approved auction.

Regis sold the money-losing operation to Premier Salons Beauty Inc. in February 2009 for $3, according to Luborsky’s affidavit. Regis, based in Minneapolis, operates salons and hair restoration centers.

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