Nov 20, 2008
Steve & Barry's stores to be liquidated
Nov 20, 2008
NEW YORK, Nov 20 (Reuters) - Three months after purchasing apparel chain Steve & Barry's out of bankruptcy, the new owners will liquidate the remaining 173 stores after plans to operate the chain fell victim to slumping retail sales and difficulty in getting financing.
Investment firms Bay Harbour Management and York Capital Management, which had bought the company for $168 million in August, plan to liquidate their holdings by early 2009, according to the company's Chapter 11 bankruptcy filing on Wednesday in Manhattan.
"This is the hardest environment in 30 years for retailers," said Peter Schaeffer, a partner with corporate restructuring and investment adviser Carl Marks. "Chances of companies that have filed for bankruptcy coming out whole is difficult."
BH S&B Holdings, the affiliate of the two investment firms, said in the bankruptcy filing the declining health of the U.S. economy and the slump in the retail market had hurt company revenue.
Sales at all stores have been disappointing, said the filing, citing "the general health of the American economy and the state of the retail market in particular."
Steve & Barry's had violated covenants under their senior secured credit facility and the owners have no prospects to obtain financing to keep operating the stores, according to court documents.
The company had already begun liquidation sales at about 67 stores.
Steve & Barry's, which began in 1985 as a retailer of university-branded clothing, became known for its branded apparel lines from celebrities including actress Sarah Jessica Parker, surfer Laird Hamilton and tennis star Venus Williams.
To differentiate itself, it sold almost everything in its stores for less than $11. At the same time, the chain aggressively negotiated with mall landlords for lower-than-average lease rates and expanded rapidly.
But the economic slump undermined already razor-thin margins, restructuring experts said.
"This business growth was obsessively focused on real estate growth and using recognizable faces to drive brand growth," said Matthew Katz, a managing director at restructuring firm AlixPartners. "In go-go growth years, the business was rewarded. However the underlining business processes and controls were not put in place and as the markets turned, this unraveled quickly."
The company has asked the court for permission to begin store-closing sales immediately because Thanksgiving and the crucial Christmas shopping season are rapidly approaching.
RAS Management Advisors LLC is serving as restructuring adviser, and a joint venture of liquidation firms led by Great American Group LLC and including SB Capital Group, Tiger Capital Group and Hudson Capital Partners will assist in the liquidation, the filing shows.
Separately, former employees of the chain on Nov. 18 sued the owners of Steve & Barry's, saying they were laid off the day before without 60 days advance written notice of their termination, as required by the Worker Adjustment and Retraining Notification Act.
An attorney for the company declined to comment.
The liquidation of Steve & Barry's is another blow for malls that are already losing a slew of tenants to bankruptcy liquidations, including home goods retailer Linens 'n Things and department store Mervyn's.
"In 2009, landlords are going to have to get creative to figure out what to do with the enormous amount of empty stores in their inventory," Schaeffer said.
Some 148,000 retail stores are expected to be shuttered this year, according to the International Council of Shopping Centers. That's the largest number since 2001 and represents at least 625,000 retail jobs. (Additional reporting by Jonathan Stempel; Editing by Lisa Von Ahn and Brian Moss)
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