nc.’s chances of emerging from bankruptcy intact appear to be deteriorating.

With the possibility that a sale may be an "unworkable option," Jacobson’s is now pursuing a dual path in its bankruptcy proceedings that could lead to the specialty store’s liquidation.

Jacobson’s last week said it plans to file a motion "in the next several days" in Detroit bankruptcy court that would allow it to solicit bids to sell the company at the same time as it prepares to liquidate the operation.

The chain, based in Jackson, Mich., does not have a white knight coming to its rescue yet.

The retailer said that it has worked with its financial advisers for several months to identify and evaluate restructuring alternatives. Due to defaults under the $100 million debtor-in-financing facility administered by Boston-based Fleet Retail Finance Inc., the retailer and its lenders agreed to the dual procedure so Jacobson’s can raise money to repay its DIP obligations.Jacobson’s disclosed that the proceeds from any sale resulting from successful bids "will not be sufficient to repay unsecured creditors in full."

Outstanding common shares will be canceled, and those holders will not receive any distributions from the bankruptcy.

Carol Williams, Jacobson’s president and chief executive officer, said: "After extensive analysis, Jacobson’s has concluded that it is necessary to simultaneously pursue two paths. We of course would prefer to sell Jacobson’s to a buyer whose financial resources would enable our company to emerge from bankruptcy. If this alternative is not feasible, the company will be compelled to liquidate its assets. Our intent has been to find a way to move forward with the Jacobson’s identity intact. Given the current unsettled state of the specialty retail sector, however, that might prove to be an unworkable option."

The 134-year-old company said it will request the bankruptcy court to schedule a hearing to accept offers during the week of July 22. That time frame will give the retailer, its DIP lenders, the unsecured creditors’ committee and interested buyers four weeks to analyze any offers.

Jacobson’s, which filed its Chapter 11 on Jan. 15, operates 18 stores in Michigan, Indiana, Kentucky, Kansas and Florida.

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