Loehmann's returns to bankruptcy to wind down and liquidate stores

By Caroline Salls

Pittsburgh, Dec. 16 - Loehmann's Holdings Inc. filed Chapter 11 bankruptcy on Sunday in the U.S. Bankruptcy Court for the Southern District of New York to complete a wind-down and liquidation of its stores.

"Over the past several years, Loehmann's has implemented strategic and operational initiatives that had initially yielded positive results, including improving inventory turnover, reducing expenses and reactivating lapsed customers," chief operating officer William Thayer said in a statement filed with the court.

"Notwithstanding these initiatives, the decline in economic conditions in several markets in which Loehmann's stores are concentrated, mainly California, the New York Region, Midwest and Florida, has had an adverse effect on Loehmann's financial condition and results of operations."

Liquidation agreement

As a result, Thayer said the company plans to complete a wind-down and liquidation of its stores through an acquisition and agency agreement with a joint venture among SB Capital Group, LLC, Tiger Capital Group, LLC and A & G Realty Partners, LLC.

The joint venture has agreed to a purchase price of $19 million in cash, subject to adjustments, 25% of any net proceeds received or realized by the sale or other disposition of additional agent merchandise, 75% of the portion of proceeds of the sale of specified consignment goods, 25% of net proceeds received or realized for the disposition of intellectual property and real property leases and assumption of other liabilities.

If the joint venture is not the high bidder at auction, Loehmann's will pay it a $250,000 break-up fee and reimburse up to $200,000 of its expenses.

Competing bids are due by 4 p.m. ET on Dec. 27. If one or more qualified competing bids are received, an auction will be held on Dec. 30.

The sale hearing is scheduled for Jan. 2. A hearing on approval of the bid procedures will be held on Dec. 17.

As previously reported, Loehmann's emerged from an earlier bankruptcy case filed in November 2010 on March 1, 2011.

In connection with the bankruptcy filing, the company requested court approval to use the cash collateral of its pre-bankruptcy lenders to fund its operations while in bankruptcy.

Debt details

According to court documents, Loehmann's has $50 million to $100 million in assets and $100 million to $500 million in debt.

The company did not list any unsecured creditors with claims of $1 million or more.

Whippoorwill Associates, Inc. owns 68.49% of Loehmann's equity interests through various managed funds, and Designer Apparel Holding Co. owns 19.13%.

The company is represented by Stroock & Stroock & Lavan LLP.

Loehmann's, a Melville, N.Y.-based retailer of women's clothing. The Chapter 11 case number is 13-14050.

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