Caché Inc. hopes to find a strategic partner to enable it to exit Chapter 11 as a going concern.
The women’s specialty retailer on Wednesday filed a voluntary Chapter 11 petition for bankruptcy court protection. The filing, in a Delaware bankruptcy court, has been expected for weeks.
The retailer has a commitment from Salus Capital for up to $22 million in debtor-in-possession financing.
Jay Margolis, chairman and chief executive officer, said the company has upgraded some stores, closed others, launched an improved Web site and “saw same-store comp sales from our 2014 holiday season increase 9.5 percent.”
What the company doesn’t have is time and capital to “realize the benefits of all our hard work,” Margolis said. He said the company intends to further reduce its store count during the bankruptcy. The company operates 218 stores.
Caché last month said in a regulatory filing that it has received a notice of delisting of its shares from the Nasdaq Global Select Market. Also late last month, the company accepted the resignation of Michael F. Price, who runs hedge fund MFP Partners, from his position as a board member.
The petition listed between $10 million to $50 million in assets and between $50 million to $100 million in liabilities. Given the projected liabilities, the company doesn’t expect to have sufficient assets to satisfy the claims of all its creditors.
The two top creditors are landlords; Simon Property Group is owed $1.4 million in rent and General Growth Properties is owed $1.1 million, according to the Chapter 11 petition.
In a statement filed in the court proceeding by Anthony DiPippa, Caché’s executive vice president and chief financial officer, net retail sales last year through Oct. 10, were $140.7 million, while net online sales were $15.5 million. The forecasted net loss for fiscal year 2014 is $32.7 million.
The cfo said two initiatives led primarily to the bankruptcy: an increase in the store footprint to 306 stores from 169, and a reorientation of the chain’s product lines away from its core higher margin high-end dress business into lower margin casual sportswear offerings.
While special occasion dresses have always been Caché’s hallmark, it expanded into complementary sportswear and casual dress offerings. Dresses represent 56 percent of sales, sportswear, 38 percent, and accessories, 6 percent.
DiPippa said about 50 percent of its stores generate positive cash flow. It began seeing some liquidity constraints in June 2014 when the company lost more than $3 million in factoring support, which became exacerbated when some vendors placed cash-on-delivery terms on orders.
Caché is seeking bankruptcy court approval to enter into an agreement with asset disposition firms SB Capital Group and Tiger Capital Group as the stalking-horse bidder for the company’s assets. That agreement would set the base price for better offers and anyone choosing to buy the company as a going concern during a bankruptcy court auction.
Caché is the fifth women’s specialty chain to file for bankruptcy in the past three months. In December, Deb Shops Inc. and Delia’s Inc. both filed their voluntary petitions. Both are in the process of being liquidated. The Wet Seal Inc. filed last month and is hoping to exit bankruptcy as a much smaller chain, although that’s still subject to bankruptcy court approval.
Body Central Corp. shuttered its 265 doors earlier this month via a state process called ABC, instead of a typical filing in bankruptcy court.