Steve & Barry's files Chapter 11 bankruptcy

By Caroline Salls

Pittsburgh, July 9 - Steve & Barry's LLC and 63 of its affiliates filed for Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the Southern District of New York to address the company's financial challenges, according to a company news release.

The company said the bankruptcy filing was based on a combination of factors, including a liquidity shortfall as a result of credit market volatility and general economic conditions, which, in turn, have impacted Steve & Barry's store opening plans and borrowing capacity.

Steve & Barry's said it has performed very well from a sales perspective, with total sales in the first five months of 2008 up 70%, average store sales up 25% and comparable-store sales up 15%.

"High costs of materials and fuel prices have increased our cost of goods and cost of operating," Steve & Barry's founders and co-chief executive officers Steve Shore and Barry Prevor said in the release.

"Our customers are feeling the pain of high food and gas prices and declining home values, and many of them are being forced to shop closer to their homes and cut back on discretionary purchases.

"The generally poor environment for apparel retailers has reduced funding to our suppliers, landlords, and to our company."

As part of the Chapter 11 process, the company said it will move forward with operational improvements and explore a potential sale to repay outstanding debt.

According to the release, the company's operational improvements include taking immediate steps to reduce expenses through staff reductions and office consolidations.

Steve & Barry's said it eliminated 172 corporate and field staff positions Wednesday as part of the cost-saving initiatives.

The company said it has obtained an agreement from its secured lenders to use cash collateral for its operating needs.

According to court documents, the company had $693.5 million in assets and $638 million in debt as of May 31.

Steve & Barry's largest unsecured creditors include:

• Zheng Yong, Kingdom of Swaziland, with a $3.92 million trade claim;

• Texport Syndicate, Mumbai, with a $3.26 million trade debt claim;

• Yixing City (J.J. Garments), Shanghai, China, with a $2.54 million trade debt claim;

• Gildan Active Wear Srl, Quebec, with a $2.49 million trade debt claim;

• Simon Property Group, Indianapolis, with a $2.15 million leases claim;

• Atraco Inds - Ashton, Dubai, UAE, with a $2.14 million trade debt claim;

• Agi Logistics, Buffalo, with a $2.09 million trade debt claim;

• B&B Contractors, Inc., Chino, Calif., with a $1.8 million trade debt claim;

• Alstyle Apparel, Anaheim, Calif., with a $1.72 million trade debt claim; and

• Destination Apparel, Kathmandu, with a $1.37 million trade debt claim.

Steve & Barry's is a Port Washington, N.Y.-based national apparel and accessories retailer. Its Chapter 11 case number is 08-12579.

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