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Thu 4 Nov 2010 06:43 PM

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Dubai World-owned US retailer may file for bankruptcy

Loehmann's, the discount retailer owned by Istithmar - a Dubai World investment arm - may file for bankruptcy as soon as next week say sources

Dubai World-owned US retailer may file for bankruptcy
Loehmanns is owned by Dubai investment group Istithmar, a unit of Dubai World

US discount retailer Loehmann’s, which is owned by debt-stricken Dubai
World, may file for bankruptcy as soon as next week after failing to complete a
debt exchange, sources in the US close to the situation said.

Many suppliers have stopped shipping to the 60-store
chain, according to a credit analyst.

Loehmann's failed to complete a debt exchange last week
that would have given the company financial breathing room by swapping debt
maturing next year for securities maturing in 2014. The retailer missed a debt
payment on October 1.

Loehmann's "is in dialogue with its senior lender
and certain large noteholders," said one source.

The source said the
company could file for bankruptcy as soon as the end of next week, if it choose
to restructure in court.

A Loehmann's spokeswoman said that "discussions are
ongoing so the company is not prepared to comment further now."

The New York-based company is owned by Dubai investment
group Istithmar, a unit of Dubai World, which itself is in the process of
restructuring $25bn worth of debt.

One possibility is for Istithmar to make an equity
investment if Loehmann's decided to pursue a bankruptcy court filing, according
to one source.

Istithmar did not immediately respond to a request for a
comment.

Loehmann's, which opened in Brooklyn in 1921, has stores
in sixteen states. It sells designer brands such as Calvin Klein and Diane Von
Furstenberg at steep discounts. The company said earlier this month that it planned to
close up to fifteen stores and a bankruptcy filing would make it easier to break
leases.

The company has a revolving credit facility with Crystal
Finance that was recently increased to $45m.

If Loehmann's files for bankruptcy, Crystal would likely
be in a position to negotiate the company's debtor-in-possession or DIP loan
which is used to fund the company's stay in Chapter 11.

Crystal declined to comment.

The size of the loan is important. Suppliers will want to
know the company's DIP loan is large enough to pay off the revolving credit
facility and have money left over to pay for new stock.

Many wholesalers have stopped shipping to Loehmann's
since September, according a credit analyst.

"Virtually none of my clients are shipping anything
at this time," said Bob Carbonell, the chief credit officer at Bernard
Sands, which provides credit recommendations to manufacturers and wholesalers.

He said anyone shipping to Loehmann's at this time is
making a business decision, such as maintaining a relationship, not a decision
based on the company's ability to pay.

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Doobie 9 years ago

Another one bites the dust, the biggest are falling and the rest are not that far behind.