Daffy’s Inc. filed its Chapter 11 bankruptcy petition in a Manhattan federal court Wednesday night, stating that it expects to receive cash proceeds of at least $59 million from the sale of assets.
In a court document by Richard F. Kramer, Daffy’s vice president of finance and secretary, the cash proceeds will satisfy the $37 million in creditor claims. That means that secured and unsecured creditors will receive full payment on their claims, a rarity in bankruptcy cases when creditors typically get a return of just pennies on the dollar.
In the same document, Kramer said for the year ended Jan. 1, the retail chain posted a net operating loss of $11.4 million on net sales of $151.3 million.
Kramer attributed the decline in profitability to the “continued economic downturn and increased competition in the discount fashion market [that includes the rise of] online discount retailers.”
As part of the wind-down of operations, JEMB Realty has agreed to acquire Daffy’s leasehold interests, certain real estate fixtures and intellectual property. In addition, it is purchasing three real estate properties, although neither the dollar amount of the latter transaction nor its locations were disclosed. The proceeds from the two transactions will be used to satisfy creditor claims.
Among the unsecured trade creditors listed in the petition, Peerless Clothing International Inc. holds a claim for $267,753.55, while Timberland is owed $154,645.50. NY Accessory Group is owed $93,840.50, while The Echo Design Group holds a claim for $78,717.45.
The 51-year-old chain was founded by Irving J. Shulman in 1961 as Daffy Dan’s Bargaintown.
On its Chapter 11 filing date, the company had 19 stores in operation. Inventory will be liquidated via a joint venture between Gordon Brothers and Hilco Trading. That process is expected to be completed by the end of October.