Dubai World-owned Loehmann’s Holdings, unable to complete an exchange offer in October, filed a Chapter 11 petition Monday in New York with agreement on a plan to swap $110 m in secured notes for the new equity.
The reorganisation will be financed in part with a new $25m investment from current owner Istithmar World, a unit of Dubai Holding, and Whippoorwill Associates, the owner of 70 percent of the notes.
Istithmar, which purchased the retailer in July 2006 in a $300m transaction, will provide 64 percent of the $25 million to purchase new convertible preferred stock.
Loehmann’s said the plan will be filed “shortly,” with an emergence from Chapter 11 to occur in the first quarter of 2011, the company said in a statement.
Loehmann’s has 48 stores in 13 states and the District of Columbia.
In addition to the notes, secured debt includes $30.5m outstanding on a $45m revolving credit with Crystal Financial. Crystal has agreed to provide a $45m revolving credit for the Chapter 11 case.
Loehmann’s blamed financial problems on “declining sales” and a “highly leveraged corporate structure,” court papers say.
Sales in 2009 were $422m. The operating loss for the quarter ended July 31 was $12m.
Assets were listed at $204.5m with liabilities totaling $232.7m. Trade suppliers are owed $15m, a court paper says.
Although Whippoorwill supported the failed exchange offer, another large noteholder, Plainfield Asset Management, didn’t go along. Whippoorwill, which initially had 33.9 percent of the notes, purchased Plainfield’s holding, raising its share to 70 percent.
Istithmar in turn agreed to purchase half of the notes previously owned by Plainfield.
The agreement between Whippoorwill and Istithmar to support the reorganization plan was dated yesterday. The plan will reduce debt by $115m.
The failed exchange offer would have swapped the existing notes for new notes with a different maturity. Although 92.4 percent of the notes were tendered, 97 percent were required for the restructuring to take place out of court.
The new restructuring agreement says that the treatment of unsecured creditors in Chapter 11 is still to be negotiated. Unsecured creditors are to receive cash or notes.
Loehmann’s said it closed seven stores in November and had been planning during the failed workout to close 15.
Loehmann’s emerged from a 14-month Chapter 11 reorganization with a confirmed plan in September 2000. At the time, it was operating 44 stores in 17 states.
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