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Jacobson’s Files Chapter 11

<CS:BOLD>NEW YORK -- Attempting to stem the flow of red ink and focus on its 18 top performing stores, Jacobson Stores Inc. Tuesday filed for Chapter 11 bankruptcy court protection in Detroit and set the stage for its withdrawal from...

NEW YORK — Attempting to stem the flow of red ink and focus on its 18 top performing stores, Jacobson Stores Inc. Tuesday filed for Chapter 11 bankruptcy court protection in Detroit and set the stage for its withdrawal from Florida.

Once a high-end specialty fashion retailer offering everything from classic elegance to cutting-edge chic in apparel, the 23-unit chain has been struggling for months. In October, the Jackson, Mich.-based chain eliminated 225 jobs, but that wasn’t enough to stave off its bankruptcy petition.

Jacobson’s said Tuesday that it will close five underperforming stores and eliminate 520 positions. The five facilities are in Columbus and Toledo, Ohio, and Clearwater, Osprey and Tampa, Fla. Going-out-of-business sales at each of the locations are expected to start in a few weeks. After the closures, Jacobson’s would no longer operate in the Florida market, but will continue store operations in Michigan, Ohio, Indiana, Kentucky and Kansas.

Court documents were not immediately available. Credit analysts said Tuesday that they are waiting to see the Chapter 11 petition before deciding how to advise their clients, many of whom are apparel vendors.

Jacobson’s also announced that it has an agreement with Fleet Retail Finance Inc. and Back Bay Capital Funding, both in Boston, for a $130 million debtor-in-possession financing facility.

Carol Williams, Jacobson’s president and chief executive officer since June 2001, said in a statement, “Let me underscore that this was an exceptionally difficult decision for us to make. After exploring other alternatives, however, we concluded that a court-protected reorganization is the best option for the company to address its financial challenges.”

As recently as last month, Jacobson’s was adding new lines to its product mix. On Dec. 3, it announced an exclusive retail deal to offer Kiehl’s Since 1851 as part of its beauty collection in its Indianapolis store.

Top women’s apparel brands include Chanel, St. John, Celine, Badgley Mischka, Michael Kors, Anna Sui and Ellen Tracy.

Founded in 1868, the 134-year-old retailer last month posted a loss of $13.9 million, or $2.40 a share, for the third quarter ended Nov. 3, compared with a deficit of $2.4 million, or 42 cents, in the year-ago period. Sales were down 10.8 percent to $86.2 million from $96.6 million, while same-store sales declined 8.5 percent.

As of Nov. 3, the retail chain had failed to meet compliance requirements for financial covenants under some of its mortgage loans and was negotiating with lenders to amend the covenants or obtain waivers.

At the same time, Jacobson’s elected not to make sinking fund and interest payments that were due in December under its convertible subordinated debentures. In connection with that decision, the retailer reclassified $158.9 million of long-term indebtedness as a current liability.