US discount store owned by Dubai's Istithmar will present the plan two months after filing for bankruptcy
US discount retailer Loehmann’s, which is owned by debt-stricken Dubai World, is to send its reorganisation plan to creditors for a vote, less than two months after it filed for Chapter 11 bankruptcy protection.
US Bankruptcy Judge Robert Gerber said at a hearing in Manhattan on Thursday that he will approve the company’s disclosure statement, which describes the reorganisation, after Loehmann’s agreed to some changes. Gerber set February 7 for a hearing on confirmation of the plan.
“With the modifications that have been agreed to, the disclosure statement will be approved,” Gerber said. That approval means the company can have creditors vote on the plan.
Loehmann’s, which is owned by Dubai World’s Istithmar, filed for bankruptcy court protection on November 15, saying the recession caused a significant decline in sales at stores in California and Florida, as well as in the US Northeast and Midwest. The Bronx, New York-based retailer filed a pre-negotiated plan with Istithmar Retail Investments, and a noteholder, Whippoorwill Associates Inc.
The reorganisation includes a $25m preferred-stock rights offering that will be backstopped by Istithmar and Whippoorwill, which means they will buy all rights that other investors don’t acquire. The plan will cut Loehmann’s outstanding debt by about $110m, the company has said.
Objections to the disclosure statement were filed by the official committee of creditors with unsecured claims and by the US Trustee, the Justice Department representative that monitors bankruptcies.
The committee said the statement didn’t include adequate protections for minority holders of the company’s new stock. Lawyers for the committee and Loehmann’s told the judge they had been meeting to resolve the matter.
“We’ve made quite a bit of progress,” Frank Oswald, a lawyer for Loehmann’s, said in court. “We weren’t done in time for the disclosure statement hearing.”
Mark Indelicato, the lawyer for the committee, asked the judge to authorise sending a letter to creditors “indicating the status of where we are today.”
“We’re still working with the backstop parties on the resolution of the issues,” he said. If the matters aren’t resolved, there might an objection filed before the confirmation hearing, he said.
“There could be multiple issues that may require an evidentiary hearing at confirmation,” Indelicato said. “We’re working very hard to get a consensual plan done.”
Brian Masumoto, a lawyer for the US Trustee, said modifications to the disclosure statement had resolved some concerns. A remaining question, on the granting of some releases from claims, could be raised at the confirmation hearing if not settled before then, Oswald said.