American Apparel Inc.’s board of directors rejected the latest takeover offer involving the company founder and fired Chief Executive Officer Dov Charney, Bloomberg News reported yesterday. The vote means an offer valued at $300 million from three investment funds who’ve aligned with Charney must be further sweetened to win over the company, or they must convince a judge next week to throw out a competing proposal backed by American Apparel’s lenders. The company is open to a revised offer from the funds. Hagan Capital Group and Silver Creek Capital Partners have offered to buy the company and bring back Charney, who was fired in 2014 when the board accused him of misusing corporate funds and violating the sexual-harassment policy. Time is almost up for the funds and Charney. On Jan. 20, the company will be in court seeking approval of its reorganization plan, which would cut about $200 million of debt. The company would be taken over by a group of senior lenders, including Monarch Alternative Capital LP.
Hancock Fabrics Inc., a retail chain that sells sewing supplies, is preparing for a second trip to bankruptcy court, Bloomberg News reported yesterday. The Baldwyn, Miss.-based company previously filed for bankruptcy in March 2007, soon after announcing it would close about 100 stores. The retailer re-emerged the following year. Hancock included a warning about its ability to continue as a going concern in its third-quarter filing late last year. The money-losing retailer had about $3 million in cash in the quarter ended Oct. 31. At the time, the company operated about 260 stores in 37 states, along with an e-commerce site.
Women's retailer Joyce Leslie Inc. has filed for bankruptcy with plans to liquidate if it can't find a buyer after grappling with declining sales in recent years, Dow Jones Daily Bankruptcy Review reported today. The New Jersey-based retailer, which filed for chapter 11 protection on Saturday in U.S. Bankruptcy Court in White Plains, N.Y., said that changing consumer spending patterns, in addition to its "inability to compete in today's technology-driven environment due to the lack of a sophisticated e-commerce platform" led to its downfall. Joyce Leslie hired SB Capital Group LLC, Tiger Capital Group LLC and 360 Merchant Solutions LLC to assist in liquidating its stores, with store-closing sales slated to begin in February if it can't find a buyer through a bankruptcy auction.
Lawmakers and industry groups who support online sales tax legislation are hopeful that they can get it passed despite a setback in Congress, The Hill reported today. Advocates for the sales tax measure had wanted to link it to a ban on taxing Internet access. But lawmakers did not take that step, instead crafting a conference report for a customs bill that would extend the ban on Internet access taxes indefinitely — but do nothing on the sales tax issue. Supporters of online sales tax legislation want the Senate to strip the access tax language from the conference report, but the effort appears to face an uphill climb. Conference reports generally cannot be changed on the floor.
American Apparel Inc., set to emerge from bankruptcy this month, has received a takeover bid of more than $200 million from an investor working with ousted Chief Executive Officer Dov Charney, Bloomberg News reported yesterday. Should the offer be accepted and a deal completed, the plan would be for Charney to return in some capacity to the company he founded in 1998. Charney was fired more than a year ago after allegations of misconduct, charges that his lawyer has denied. In his bid to return, Charney faces long odds because American Apparel’s bankruptcy case is reaching its final stages. Suffering declining sales and losses, the company sought protection from creditors in October with a prearranged plan that hands ownership of the company to bondholders, led by Monarch Alternative Capital, in exchange for a reduction in debt. The plan was supported by 95 percent of secured lenders, who will be fully repaid under the proposal.
Despite a late surge in holiday sales, companies like J. Crew Group Inc. and 99 Cents Only Stores are struggling under debt they took on in leveraged buyouts years ago, according to Bloomberg News yesterday. Eleven retailers defaulted last year through Dec. 14, the highest annual tally since 2009, according to Standard & Poor’s data. And the near future doesn’t look much brighter. “We expect more retail defaults in 2016 than 2015 and 2014,” said Robert Schulz, an S&P credit analyst. This wave of distress is different from the tough times of the Great Recession, said Patrick Dalton, chief executive officer of Gordon Brothers Finance Co., an asset-based lender that works with retailers. Now, “it’s an industry issue, not an economy issue,” he said.
Puerto Rico’s general-obligation bonds rallied, with some yields falling to the lowest since July, after officials said the commonwealth would pay all that it owed on the constitutionally protected debt while missing payments on other securities, Bloomberg News reported yesterday. The island’s benchmark general obligations issued in March 2014 with an 8 percent coupon traded yesterday at an average 73.6 cents on the dollar, to yield 11.4 percent. It’s the highest price since Dec. 11. The yield on securities due in July 2041, the second-most-traded Puerto Rico obligations of the day, touched 9.3 percent, the lowest since July. Puerto Rico Governor Alejandro Garcia Padilla said last week that the island would default on $37 million of the almost $1 billion in bond payments due Jan. 1 and divert revenue to make others. It will fail to pay on $35.9 million of non-commonwealth guaranteed Puerto Rico Infrastructure Financing Authority debt and $1.4 million of Public Finance Corp. bonds. By contrast, the commonwealth’s constitution guarantees payment on general obligations before anything else. Read more.
In related news, Puerto Rico’s government is struggling to pay its bills, but mall owners and retailers are betting that consumers on the island will keep on spending, the Wall Street Journal reported today. Fast-fashion retailer Hennes & Mauritz AB’s H&M plans to open its first store in the U.S. territory this year, at the 631,000-square-foot Mall of San Juan. Opened in March, it was the largest new mall on U.S. soil in 2015, according to real estate firm CoStar Group. Nordstrom Inc. and Hudson Bay Co.’s Saks Fifth Avenue made their island debuts at the Mall of San Juan last year, and other retailers are coming to the island or expanding operations. Retail landlords have invested tens of millions of dollars to upgrade their properties. Read more. (Subscription required.)
The December episode of "Eye on Bankruptcy" was devoted to Puerto Rico, featuring remarks by Rep. Pedro Pierluisi, Judge Steven Rhodes and an analysis of the coming Supreme Court argument on whether the Recovery Act was pre-empted by the Bankruptcy Code.
Join experts in San Juan to discuss Puerto Rico's economic distress and other important cross-border insolvency topics at ABI's Caribbean Insolvency Symposium, Feb. 4-6, 2016. Click here to register!
Centennial, Colo.-based convenience store and gas station chain Western Convenience Stores Inc. has filed for chapter 11 protection, the Denver Business Journal reported yesterday. The company operates 43 locations throughout Colorado and Nebraska, and its bankruptcy filing stems in part from a dispute between Western and Kansas City-based Suncor Energy Inc., according to attorney Lee Kutner, of Kutner Brinen Garber, who is representing Western in its bankruptcy proceedings. Western owes Suncor $7 million, according to the bankruptcy documents, making Suncor Western's largest creditor. Other creditors include Offen Petroleum, owed $2.3 million, and High Plains Bank, owed $1.6 million.
American Apparel Inc. is seeking to keep a tight grip on its bankruptcy case as its creditors cast their votes on the retailer's plan to exit bankruptcy protection, Dow Jones Daily Bankruptcy Review reported today. In a court filing on Monday, lawyers for American Apparel requested a 90-day extension of the company's exclusive right to file a reorganization plan. The company's request comes just a few weeks after ousted American Apparel founder Dov Charney hired Cardinal Advisors to help him line up investors that would keep him involved with the troubled retail chain. Charney has been garnering interest from new investors, and some bids could be completed in the upcoming weeks. The process has especially interested institutional investors. It is still unclear what role Charney would play at the company if he were to find an investor willing to buy it. A successful bid would most likely have to exceed $350 million to cover the money owed to bondholders in the bankruptcy process, as well as pay off the $90 million in postpetition financing and provide the $40 million of exit financing that is part of the chapter 11 plan.
Sports Authority has little to invest to turn its financials around as it faces a deadline to refinance almost half of its debt, and has hired restructuring advisers, Bloomberg News reported on Friday. To reassure suppliers the company would have enough money for the holiday season, lenders injected $95 million in recent weeks. Today Dick’s Sporting Goods Inc. is the largest sporting-goods chain, with $6.8 billion in sales last year and 645 stores. Nine years ago, the Sports Authority and Dick’s were neck and neck in revenue. An average Dick’s store has $10 million in annual sales, including those made online, compared with $5.75 million at Sports Authority, said Steven Ruggiero, a credit analyst at RW Pressprich & Co. Sports Authority’s operating income — profit after subtracting costs of goods sold and other expenses — hasn’t changed much in five years, inching up to $113.3 million in the year ended in February from $109.4 million in 2011, according to IBISWorld Inc. That figure in the same period for Dick’s climbed 79 percent, to $554.1 million.
