Bankrupt Metropark USA’s 69 stores will be conducting going-out-of-business sales by the end of the week as it seeks a buyer to allow it to remain in business.
Once seemingly on its way to a public offering, the retail chain on Monday filed a voluntary bankruptcy petition for Chapter 11 in a federal court in White Plains, N.Y.
Cathy Hershcopf, an attorney at Cooley LLP, which is Metropark’s bankruptcy counsel, said the retailer has “one very interesting party with a proposal that is enticing” that is being considered. She said that offer would allow the company to continue as a going concern.
Under bankruptcy court rules, any deal signed would position the buyer as a so-called stalking horse, subject to better offers at a court-approved auction.
The company, started by Hot Topic founder Orv Madden, withdrew its plans for an IPO last June, the same month it brought in Cynthia Harriss as chief executive officer, after filing a shelf registration with the Securities and Exchange Commission in 2008. Harriss, associated with former Gap ceo Paul Pressler at The Walt Disney Co., joined him at Gap, heading the Gap North America and Gap outlet divisions.
The chain targets Generation Y men and women with fashion-forward apparel, including premium denim brands such as True Religion and Rock & Republic. According to court papers, True Religion is the largest unsecured creditor, holding a trade claim of $629,000.
Harriss said in a statement filed with the bankruptcy court that Metropark’s disappointing sales in December and January led to reductions in available lines of credit from Wells Fargo and CIT Group/Commercial Services. Moreover, inventory receipts have fallen 30 percent below planned amounts since the beginning of fiscal year 2011.
Meanwhile, 70-unit discount apparel chain Susie’s Deals filed for Chapter 11 last month in a U.S. bankruptcy court in Riverside, Calif. The petition was filed under Hyman Family LP.
According to a court statement by Stephen Hyman, the family apparel chain operates in California, Arizona, Utah and Nevada. Its targeted customer base are consumers in the lower- to middle-income brackets with stores at community shopping centers and strip malls. Merchandise generally sells for $5 or less, and profit margins have been hurt by escalating prices for health care, wages and general operational overhead.
Hyman said he raised the ceiling for its products to $5.99, but “continuing increases in costs further affected the debtor’s margins.”
He said Susie’s Deals “intends” to reorganize and emerge from bankruptcy.