Mervyns files Chapter 11 bankruptcy, secures $465 million DIP facility

By Jennifer Lanning Drey

Portland, Ore., July 29 - Mervyns LLC, together with its parent Mervyns Holdings LLC and subsidiary Mervyns Brands, LLC, filed Chapter 11 bankruptcy Tuesday in the U.S. Bankruptcy Court for the District of Delaware in order to restructure its debt and realign its business operations, according to a company news release.

"Mervyns needs to reorganize its finances and operations due to the state of the economy and difficult operating environment for our industry," John Goodman, chief executive officer of Mervyns, said in the release.

"After careful consideration of available alternatives, the company's management board determined that a Chapter 11 filing was a necessary and prudent step that allows us to operate our business without interruption as we seek to restructure our debt and other obligations in a controlled, court-supervised environment.

"The decisive action we are taking provides the company with the most effective means to restructure our operations, strengthen our balance sheet and position Mervyns to compete more effectively," he said.

DIP commitment

In conjunction with the bankruptcy filing, Mervyns has received a commitment for a $465 million debtor-in-possession facility from a lender group led by Wachovia Capital Finance Corp. (Western) as agent.

The financing will be combined with operating cash flow to fund the company's ongoing operations.

According to a Tuesday court filing, the facility includes a revolving credit facility with a $125 million sublimit on letters of credit.

Interest on the revolving loans A is the adjusted Eurodollar rate plus 350 basis points or Prime rate plus 200 bps, at Mervyns' choice.

Interest on the revolving loan B is the adjusted Eurodollar rate plus 450 bps.

The revolving credit facility will mature on the earliest of Dec. 31, 2009, the effective date of a plan of reorganization or liquidation and the last termination date set in an interim order unless a final order is entered prior to that date.

Largest creditors

According to court documents, Mervyns' largest unsecured creditors include:

• Levi Strauss & Co., San Francisco, with a $12.76 million trade claim;

• Wicked Fashions, Fort Lee, N.J., with a $6.05 million trade claim;

• Nike USA Inc., Beaverton, Ore., with a $4.72 million trade claim;

• Vans Inc., Larkspur, Calif., with a $2.90 million trade claim;

• Fashion Resource (TCL), Los Angeles, with a $2.65 million trade claim;

• Hanes Brand-Hanes UW, Winston-Salem, N.C., with a $2.59 million trade claim;

• Lolly Togs, New York, with a $2.56 million trade claim;

• VF Jeanswear Inc., Greensboro, N.C., with a $2.00 million trade claim;

• Jansport Inc./VF Outdoor, San Leandro, Calif., with a $1.74 million trade claim; and

• Hanes Brand-Playtex, Rural Hall, N.C., with a $1.38 million trade claim.

Mervyns is a San Francisco-based department store. Its Chapter 11 case number is 08-11586.

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