JOAN & DAVID ACQUIRES DIP FINANCING, HIRES ADVISORS
Byline: Vicki M. Young
NEW YORK — Bankrupt Joan & David has a new team and new financing to execute a recovery plan.
Last week, the shoe and ready-to-wear firm got Manhattan bankruptcy court approval for a $15 million financing package to keep it afloat. For months the company has been looking for a buyer. The financing provides more time to find one.
Shari Gregerman has been hired as the firm’s chief operating officer. Gregerman is a former executive vice president of stores for Barneys New York. The initial term of her employment agreement runs through June 30, 2000, with up to three automatic extensions, each two months in duration.
All employees and officers of Joan & David, except for members of the board, will report to Gregerman, according to court documents. For her efforts, Gregerman gets $45,000, but the firm is not obligated to provide the ceo with any employee benefits such as health and retirement benefits. She is also entitled to a potential performance bonus of up to $5,000 per month.
Joan & David also received court approval this month to hire executives at Classic 400 Consulting to fill senior posts at the distressed fashion firm. Mark Friend, president of Classic 400, is chief information officer, and will be assisted by two Classic 400 employees, Jeremy Ruppert and Stephen Kitchens. Services rendered by Friend under the consulting agreement will be at a rate of $85 per hour with a 45-hour-per-week cap, while Ruppert and Kitchens each get $75 per hour.
As reported, Newmark Retail Financial Advisors was retained to provide restructuring services. Former Barneys co-chairman Robert Pressman is chief executive officer and managing principal of Newmark Retail Financial Advisors. Newmark’s fees are capped at $65,000 per month, plus no more than $200,000 in performance-related contingent fees.
Also, Rubenstein Associates, Inc., has been retained to help Joan & David “maintain its highly regarded reputation and brand awareness,” according to court documents. Rubenstein’s monthly fee is $15,000.
The $15 million debtor-in-possession financing facility comes from Paragon Capital. Of the total, $6.5 million will be paid to Fleet Retail Finance, Inc., to satisfy a secured claim. Fleet was Joan & David’s asset-based lender, but told the company that it would not provide financing during the firm’s bankruptcy.
Of the balance of the finance package, $3 million is available for letters of credit, leaving the fashion firm with just $5.5 million. But the actual amount available to Joan & David, or its borrowing power, is based on a percentage of eligible inventory and accounts receivable.
As reported, after months of financial difficulties and searching for a buyer, Joan & David filed for Chapter 11 bankruptcy court protection in Manhattan on March 9. Difficulties are traced to an overexpansion in the Nineties and excessive inventories.
The retailer and wholesaler operates freestanding stores, in-store shops and outlets in the U.S. and overseas. Leased departments are at Bloomingdale’s, Dayton Hudson department stores, Macy’s, Tootsies and Toronto-based Holt Renfrew. There is also a Joan Helpern Signature in-store shop at Harvey Nichols and an outlet in Barcelona.
Liabilities as of Jan. 1 were $33.1 million, while assets were $34.8 million. Sales for the 11-month period ending Jan. 1 were $75.8 million.