Linens 'n Things defers interest payment, launches restructuring talks; lenders grant default forbearance

By Caroline Salls

Pittsburgh, April 15 - Linens Holding Co. and its wholly owned subsidiaries Linens 'n Things, Inc. and Linens 'n Things Center, Inc. have decided to defer the $16.1 million interest payment due April 15 on the subsidiaries' senior secured floating-rate notes due 2014, and the company has launched restructuring talks with an informal committee of noteholders, according to a news release.

According to an 8-K filed with the Securities and Exchange Commission, Linens 'n Things has 30 days from the payment due date to make the interest payment before non-payment triggers an event of default.

Linens 'n Things said its senior asset-based revolving credit facility lenders support the company's efforts toward a consensual restructuring of its capital structure.

Specifically, the company's senior lenders have agreed not to exercise their rights related to the deferred interest payment, including the right to stop making loans and other credit extensions, until the earliest of May 13, the occurrence of any other event of default under the credit agreement and the date on which excess availability is less than $50 million.

General Electric Capital Corp. is the U.S. administrative agent of the credit facility, and GE Canada Finance Holding Co. is the Canadian administrative agent.

"Despite the strides that LNT has made to improve the operational side of its business over the past two years, these measures have not produced acceptable financial results," chairman and chief executive officer Robert J. DiNicola said in the release.

"The increasing deterioration of the credit markets and the residential real estate meltdown, both stemming from the turmoil in the subprime mortgage market, and the resulting downturn in consumer spending, especially in the home sector, have combined to create additional and acute financial challenges for the company and the retail sector as a whole.

"The rapidly increasing financial storm outside the company, together with our operating results, have accelerated credit and insurance problems for our vendors, causing them to recently begin imposing significantly more restrictive payment terms on LNT.

"These factors have had a dramatic effect on our liquidity outlook for the remainder of the year. We have made the decision to postpone today's interest payment as we continue to work with our constituencies to explore a number of alternatives to strengthen our balance sheet and improve liquidity."

Linens 'n Things said it has retained Conway, Del Genio, Gries & Co., LLC as its financial adviser.

Linens 'n Things is a Clifton, N.J., home furnishings specialty retailer.

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