The silence from Filene’s Basement Inc., the off-pricer known for its annual bridal gown sale, has been deafening.
This story first appeared in the March 25, 2009 issue of WWD. Subscribe Today.
Credit sources have said for the last few weeks that Filene’s could be at risk for an involuntary bankruptcy because it seems to be neither paying its vendors nor showing any interest in communicating with them.
Lawrence C. Gottlieb, chair of the bankruptcy and restructuring practice at Cooley Godward Kronish, said, “My understanding is that the company is not returning any phone calls to vendors.”
Bob Carbonell, executive vice president and chief credit officer at Bernard Sands Credit Consultants, said, “We have clients who have not been paid since January. Filene’s management is not returning their calls nor giving any answers via e-mails as to when they will be paid.”
Carbonell added that it is “well-known in the vendor-factor community that there is an ad hoc creditors committee in play.”
Bernard Sands stopped supporting Filene’s on Jan. 22, when the company said it was planning to shutter 11 stores, and before that, Bernard Sands was considering approvals on an order-to-order basis.
The ad hoc creditors committee could conceivably haul Filene’s into an involuntary bankruptcy. A legal source said the basic requirements for such a move are that the involuntary debtor has not been paying bills when due and that there are at least three creditors owed payments.
A spokeswoman for Filene’s said the firm “is continuing to aggressively pursue strategic alternatives for the benefit of the company and our valuable vendor partners. We have told our vendors this and we have told them that we will communicate with them as soon as we have developments to report.”
Filene’s Basement, which operates 25 locations, opened in 1909, and became part of Federated Department Stores Inc., now Macy’s Inc., in 1929. It was sold to May Department Stores Co. in 1988, and then acquired in 2000 by Value City Department Stores LLC.
After a reorganization at Value City, Filene’s Basement became part of Retail Ventures Inc., the holding company that operates Filene’s and discount footwear retailer DSW Inc.
Should an involuntary petition be filed by creditors against Filene’s Basement, neither DSW nor RVI would be parties to the bankruptcy, although RVI might have to make some appearances in the bankruptcy case. RVI is guarantor of certain obligations under a loan agreement between Filene’s and its bankers, according to a regulatory filing with the Securities and Exchange Commission last month. That filing also noted the liquidity concerns at Filene’s Basement.
Separately, Inlet Square Mall on March 19 filed for bankruptcy in South Carolina under the name of its operating company, Inlet Retail Associates. Meanwhile, all eyes in retail are keeping tabs on troubled real estate investment trust General Growth Properties.
In other bankruptcy news, the future remains unclear for Everything but Water, an Orlando, Fla.-based designer swimwear retailer. Founded in 1984 and operating 60 stores in 22 states, the company filed for Chapter 11 bankruptcy court protection on Feb. 25. The bankruptcy court has scheduled an auction of its assets for April 27.
Hendricks Jewelers, a 27-year-old superstore in its second tour of bankruptcy proceedings, expects to conclude a going-out-of-business sale over the course of the next 60 days with the help of Buxbaum Jewelry Advisors. The 12,000-square-foot Bonita Springs, Fla.-based showroom is liquidating its entire inventory, valued at $8 million at retail, at 40 to 80 percent off.
Also liquidating is Drug Fair, which began GOB sales on Saturday at the 23 Drug Fair and Cost Cutters nameplates. Hudson Capital Partners is handling the liquidation of $30 million in inventory. Founded in 1954, the Somerset, N.J.-based firm filed on March 18 in Delaware, with GOB sales starting three days later.
Sportsman’s Warehouse filed a Chapter 11 petition on Saturday in Delaware bankruptcy court. The retailer plans to continue operating its remaining 29 stores, and said the filing was to “address financial challenges and identify a strategic or financial investor.” The firm on March 10 said it was liquidating 23 stores to reduce bank debt and selling 15 stores to UFA Co-op.