Linens ‘n Things Files Chapter 11

May 4, 2008  by in UnCategorized   

By Home Furnishings Business in Accessories on May 2008 Linens ‘n Things filed for voluntary Chapter 11 bankruptcy and plans to shut 120 under-performing stores after failing to make a payment on a key loan last month as sales sagged due to the floundering housing market.

The Clifton, N.J., company, which operates 589 stores in North America, said it has secured $700 million in debtor-in-possession financing from GE Capital to continue to operate stores without interruption and said stores will remain well-stocked. The company’s 40 locations in Canada, which the company is reportedly trying to sell, are not affected by the filing in federal Bankruptcy Court in Delaware.

Linens ‘n Things had sales of $2.8 billion last year. The announcement said Chairman and CEO Robert DiNicola has taken on the title executive chairman, and financial restructuring expert Michael Gries has been appointed interim CEO and chief restructuring officer by the company’s board.

“The significant deterioration in the mortgage, housing and credit markets, and the resulting impact on the retail marketplace, particularly in the home sector, has overwhelmed the operating and merchandising improvements that we have made over the past two years,” DiNicola said. “We are making the strategic decision to use a Chapter 11 filing to proactively address our capital structure and ensure that our stores will remain well-stocked while we work through the steps to align the capital structure of the company with the realities of today’s business environment.”

He said closing nearly one quarter of the company’s stores will put Linens ‘n Things on a stronger financial footing.

News outlets and analysts had been predicting a Chapter 11 filing since Linens ‘n Things announced two weeks ago that it would “defer” making a $16.1 million quarterly interest payment and had entered talks with debt holders regarding the company’s capital structure. The retail chain has apparently struggled since it was taken private by Apollo Management in 2005 in a deal valued at $1.3 billion.