Creditors seek forensic investigator in LNT bankruptcy

By Staff -- Home Textiles Today, 8/6/2008 2:10:00 PM

Wilmington, Del. — The Linens ’n Things unsecured creditors committee is seeking federal bankruptcy court approval to hire a forensic financial advisor, Traxi, to assist in the investigation of LNT’s condition and transactions in the years leading to its Chapter 11 filing in May.

Among other recent cases in which Traxi was involved, the company listed the Enron case, where Traxi managing director Perry Mandarino served as an expert witness.

“Traxi will aid the committee in investigating, and if appropriate, prosecuting claims for the benefit of the estates by providing committee counsel with specialized financial forensic services directed toward recovering assets and value for the estates,” the motion to the court said.

Among the services the committee is seeking from Traxi are:

• Historic financial data and solvency analysis for various points prior to the filing.

• Analysis of business plans and cash flow projections, restructuring programs prior to the filing.

• “Analysis of the financial ramifications of certain transactions involving LNT.”

• And, “evaluation of potential fraudulent conveyances and preferences,” at least a partial reference to preferential payments, common in most bankruptcy cases.

The creditors committee in many bankruptcy cases will commonly review similar records of a company leading up its bankruptcy and occasionally hire a forensic accountant or investigator when warranted. There was no reference to any specific instances the committee wishes to investigate or how many years back it intends to review, although it did reference in passing the sale of the company to an investor group led by Apollo Capital Management. That transaction was overseen by former ceo Norman Axelrod, who then stepped aside.

Executives at Traxi were either unavailable or declined comment. 

Calls to members of the creditors committee and its attorneys were not immediately returned.

The application states that Traxi will assist the committee counsel in the probe and that it will not duplicate the services of Carl Marks Advisory Group, hired last month as financial advisors.