Mervyns has filed suit against its former ownership group, alleging the private equity firms’ business dealings forced the department store chain into bankruptcy in July.
The suit filed in federal bankruptcy court in Wilmington, Del., on Sept. 2 charges that the ownership consortium, which included Sun Capital Partners Inc. and Cerberus Partners, stripped Mervyns of valuable real estate assets, such as owned stores and below-market leases, when it took over the company for about $1.2 billion in a leveraged buyout from Target Corp. in 2004.
The owners then leased the properties back to the retailer at substantially increased rates to service acquisition debt, according to the complaint. The retailer said the excess cash strain directly contributed to its need to file for Chapter 11 bankruptcy protection.
The suit alleges that “the 2004 transaction is a transaction that ultimately led Mervyns to bankruptcy and is a fraudulent transfer that cannot withstand scrutiny.” The company also named Target as a defendant, contending that the company agreed to the arrangements.
Mervyns filed as its window of opportunity to do so was closing, a fact it made clear Thursday.
“Mervyns brought legal action, in advance of the possible expiration of the statute of limitations, in order to preserve the value of the claims for the benefit of the company’s creditors and the estate,” the company said. “The creditors’ committee is aware of this action and shares the company’s concerns.”
A spokesman for Cerberus said the suit is without merit and that the private equity firm will vigorously defend itself. A spokesman for Sun Capital also said that the suit was without merit.
Target defended its actions. “Our 2004 sale of Mervyns was an arm’s-length transaction that was the result of a competitive bidding process,” said Hadley Barrows, a spokeswoman.
Mervyns is seeking an amount equal to the price paid for the chain by the consortium “or the proceeds of the loans made by the real estate secured lenders that were borrowed using Mervyns’ real estate assets as collateral” and other damages to be determined at trial.
A new Joan Rivers coffee table book, titled “Joan Rivers Confidential,” gives readers never-before-seen photos and letters of the late comedian throughout her life. “Because of her drive to always be fresh, she kept records of every appearance, every performance, all the jokes that were used on TV, all the clothes that were worn,” said Rivers’ daughter Melissa. Here, Rivers poses at the “Tonight Show” in Tracy Mills in 1985. Read more about the book and see more photos at WWD.com. #wwdeye
After a career at New York hot spots like Narcissa, Dovetail and Nix, @chefjfraser has expanded to the West Village with The Loyal, a modernized take on an American brasserie. “And as I’ve gone through my career I’ve felt some departure from that kind of simple, straightforward [cooking]. This is meant to take on the idea of ‘what if the American brasserie was invented today?’” #wwdeye (📷: @chinseephoto)
@bellahadid and @lilyaldridge at @bulgariofficial’s celebration on Friday night, toasting the brand's new Peter Marino-designed flagship on Fifth Avenue. The two-part event included a cocktail party at the store followed by a dinner at a mystery location — the Met Cloisters. #wwdeye
From overseeing America’s fastest-growing speciality retailers to codifying cool, WWD talked to the women who are leading the way for the future of beauty. Check out our Instagram Stories to see how these women built today and are creating tomorrow. (📸: @hannah_khymych) #wwdbeauty
For @laperlalingerie's spring 2018 show, the brand chose to host their event at @thevenetianmacao. With Chinese megastars @bingbing_fan and @hubing in attendance, La Perla debuted a rock ‘n’ roll-inspired collection. The show marked the start of Sands Macao Fashion Week, which runs from October 19 to 24 — the city’s first such event. Pictured here are models backstage with glimmering eyes. #wwdfashion (📷: Cheuk-Yin To)
Trending for spring 2018: top stitch design. Gone are the days of stitch just for seams — designers are using the once-minimal detail to create strong decorative elements. (📷: Paola Testa; Styled by @andrew_shang) #wwdfashion
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews