'Everything Must Go' at LNT Store Closings
By Brent Felgner -- Home Textiles Today, 5/19/2008 12:00:00 AM
New York —
Linens 'n Things has scheduled a May 29 auction for the liquidation rights to the approximately 120 stores it will close in connection with its Chapter 11 bankruptcy, even as creditors line up to be heard over the auction procedures and agency agreement.
In the meantime, the troubled 589-unit retailer reports that a "significant number" of vendors have resumed shipping on terms, although the company has yet to identify which suppliers and under what terms. Those moves come as suppliers are still assessing LNT's debtor-in-possession credit facility and, in some cases, are seeking credit insurance or factoring for those shipments.
Speculation continues to fly concerning potential bidders for LNT's total business. Late last week an executive for GHCL, the Indian parent of Dan River — which is now in liquidation — flatly denied that that company was in talks to acquire Linens 'n Things. The same media reports from business outlets in India identified Welspun as another possible suitor.
"This is a rumor only," B.G.K. Nair, general manager of corporate sales and marketing, GHCL, said from the company's corporate headquarters in Noida, India. We are not [seeking to acquire] them."
It was GHCL chairman Sanjay Dalmia who broadly hinted two years ago that his firm might be interested in an American specialty textiles retailer with all the attributes of LNT. It is unknown if there were ever any serious discussions.
Welspun USA coo and evp Charles Gaenslen said, "We are not in the market to buy LNT or any other U.S. retailer."
Reports through the industry and financial circles suggested that LNT's controlling shareholder, Apollo Management, might be continuing to buy up the retailer's debt paper in a bid to improve its standing against other secured noteholders. Those reports could not be confirmed, although that is similar to the strategy used by financier Carl Icahn in his successful 2005 bid for WestPoint Stevens out of bankruptcy. (His victory, however, is still being challenged in court years later by other secured creditors.)
For the LNT store liquidations, more than a dozen limited objections involving more than 35 individual entities — mostly real estate interests — had been filed with the court in Wilmington, Del. by late last week. A hearing on those objections was put off until May 20. At least some of the objections, such as those from mall operator CBL Management, complain of the GOB sales' impact on other stores in its locations and seek to limit the time and manner that the sales are held, including the type of signage used.
LNT won quick approval for the store closing auction and sales and was seeking competing bids from liquidating agents to conduct the sales, court documents stated. A hearing to approve the results of the auction is scheduled for May 30 at the bankruptcy court.
Still to be decided is specifically where the proceeds of the auction will ultimately go. The agency agreement calls for, among other things, a 50/50 split of the proceeds after expenses and the cost of goods.
Meanwhile a number of LNT suppliers have filed reclamation motions with the court, seeking the return of unsold goods. Those will be heard in a separate hearing, set for May 27.
A recommendation of the store auction winner will be made and sent to the court jointly by LNT, its noteholders committee and indentured trustee and the unsecured creditors committee.
In the meantime, LNT has not yet explained why two of its largest unsecured creditors were left off the list of the top 30 filed with the court. Springs Global, which is reportedly owed around $10 million, and CIT Group, one its major factors, were not included in the filing.
We would love your feedback!