Off-price designer fashion and furnishings retailer Loehmann’s Capital Corp today (15 November) filed for Chapter 11 bankruptcy protection in a move that will allow it to reduce its debt and recapitalise its balance sheet.
Loehmann’s said it has agreed the plan with its owner Istithmar World, the Dubai-based private equity house, and Whippoorwill Associates Inc, the agent for its discretionary funds and accounts, which represents around 70% of its senior secured notes.
The voluntary ‘pre-negotiated’ proceedings have begun in the US Bankruptcy Court for the Southern District of New York. The retailer says it will emerge with have sufficient liquidity and the financial flexibility to fund daily operations without interruption, including payments to essential vendors, customers and employees.
Under the plans, Series A noteholders will receive 42.4% of the reorganised equity, Series B holders will receive 8.6%, and new investors will receive 49.1%, all on a fully converted basis.
Istithmar World and Whippoorwill have also agreed to invest $25m in the company when it emerges from Chapter 11.
Loehmann’s existing lender, Crystal Financial, has also committed to provide a $45m debtor-in-possession financing facility.
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The department store retailer, which has 45 stores, was bought by Istithmar for $300m in July 2006. It expects to emerge from Chapter 11 during the first quarter of 2011. It has blamed falling sales and high levels of debt for today’s action.