FREDERICK’S GETS NOD FOR $5 MILLION IN FINANCING
Byline: Kristin Young
LOS ANGELES — Frederick’s of Hollywood cleared the first of a series of hurdles in its reorganization plan late last week when the U.S. Bankruptcy Court for the Central District of California approved $5 million in interim financing.
As reported, the Hollywood, Calif.-based lingerie retailer filed for Chapter 11 earlier this month because of burdensome debt and shrinking market share. The company has requested an additional $7 million in financing from creditors. Another hearing is expected to be set for August to approve or deny the request.
Frederick’s said Monday it received the go-ahead from Judge Ernest Robles to enter into a debtor-in-possession financing agreement with Ableco Finance, a special situations lending company based in New York. Ableco is affiliated with Cerberus Capital Management and Gabriel Capital Group. Frederick’s was acquired for an undisclosed sum by Wilshire Partners, a private investment firm in Newport Beach, Calif., last month.
The company’s attorney, Michael Tuchin of the law firm Klee, Tuchin, Bogdinoff and Stern, said he was armed with letters from 25 vendors expressing support. “The vendors said they would immediately start shipping on terms, if approval by the court was given,” said Tuchin. Robles also determined Frederick’s could continue paying employee benefits and all customer programs, including returns, exchanges and gift certificates, he said.
“It means we’re back in business,” Linda LoRe, president and chief executive of Frederick’s, told WWD, noting the approval allows 1,600 employees to continue in their jobs as before. “We resumed normal shipping based on our agreements with vendor partners.”
LoRe said the company has already accessed the funding and has been receiving merchandise for its stores, catalog and the Internet businesses. Receipt of shipments had stopped for 45 days, she said.
According to court documents, the company owes $32 million in secured debt to creditors as well as $43 million in unsecured debt. Total company assets are listed as $66.3 million. The company expects to post $140 million in sales for fiscal 2000, which ends later this month.