Deb Shops has filed a Chapter 11 petition for bankruptcy court protection in Delaware that could lead to an orderly liquidation of its stores.
Dawn Robertson, chief executive officer, said the company is in talks with liquidators for a “stalking-horse bidder.” The plan is for a court-approved auction to elicit better offers for the company, both for a liquidation bid as well as for opening the process to anyone who might want to acquire the company as a going concern. The company has been working with its financial adviser, Houlihan Lokey, since November to explore strategic options, including finding buyers for the company, she said.
Robertson also said the Chapter 11 filing was due, in part, to its term lenders — Cerberus Capital Management and Guggenheim Partners — not wanting to make any additional investment in the company.
The filing listed assets of $10 million to $50 million and liabilities of $100 million to $500 million. The filing was under the name Deb Shops SD Inc. and included affiliates filing separate petitions.
According to bankruptcy court documents, the retailer’s board approved the filing on Tuesday. The document also showed that the company’s board approved a “chainwide going-out-of-business sale and store-closure process, including the retention of a liquidator.”
The retailer, which operates 295 stores, could name its stalking-horse bidder as early as Friday, when the debtor is expected in court for first-day orders.
The top 30 creditor matrix list had New York-based Wells Fargo Trade Capital Services Inc. as the largest unsecured creditor, holding trade debt at $1.1 million.
Deb Shops’ predecessor, Deb Shops Inc., filed for Chapter 11 in June 2011. Back then, the 325-unit juniors chain was under the ownership of Lee Equity Partners, which acquired the chain in July 2007 for $395 million. Lee Equity still holds a small stake in the company.