Lord + Taylor, the oldest department store in the US founded in New York in 1826, filed for bankruptcy and will submit a reorganization plan with the court. The filings come weeks after two other iconic department store chains, Neiman Marcus and JCPenney, filed for bankruptcy protection.
Le Tote, the clothing rental start-up that bought Lord & Taylor last year from Hudson’s Bay, also filed for Chapter 11 bankruptcy on Sunday. Le Tote’s co-founder Brett Northart said at the time of the transaction that they hoped to open stores across the country, creating a national chain and infusing it with cutting-edge technology, allowing Le Tote customers to return their clothing rentals to Lord + Taylor locations. The coronavirus complicated those plans with the shuttering of brick-and-mortar retailers.
The Lord + Taylor deal closed last November. In the $100 million deal for Lord + Taylor, the San Francisco start-up Le Tote took control of 38 stores and the chain’s online operation. Toronto-based Hudson’s Bay continues to own Lord + Taylor’s real estate and cover Le Tote’s rent at those properties for three years at $58 million annually.
Le Tote officials were struggling with “carrying the increased expenses associated with the acquisition, as well as the brick-and-mortar assets which were unusable for a substantial period of time,” Ed Kremer, the company’s Chief Restructuring Officer, said Monday in court filings. “These unprecedented market developments, compounded by lower-than-expected financial results, adversely impacted liquidity” and left the retailer drowning in debt, he added.
Le Total officials cut a deal with lenders to allow them access to cash to fund an effort to sell the company and “maximize value for all stakeholders,” Kremer added.
DETAILS FROM THE FILING:
- The company is soliciting bids for a going-concern sale of both its Le Tote and Lord & Taylor businesses.
- Lord + Taylor has 38 stores nationwide, most of them in shopping malls.
- The company released plans to permanently close 19 locations, including six in New York State, three in Connecticut, two each in Maryland and Massachusetts, and one each in Florida, Illinois, Michigan, New Jersey, Pennsylvania, and Virginia.
- The company has 651 employees and arrived at bankruptcy court with funded debt obligations of about $137.9 million.
- The real estate arm of previous owner Hudson’s Bay Co. is its largest shareholder, with a 27.6% interest.
- The company listed $100 million to $500 million in both assets and debts.
- Its largest creditor is the Israel-based Liquidity Capital II LP, with an unsecured claim of $8.5 million. It also owes $4.7 million to G-III Leather Fashions Inc., $3.5 million to Polo Ralph Lauren Clothing, $2.1 million to Michael Kors LLC, and $1.2 million to L’Oréal Lancôme.
- Le Tote said in a court filing Sunday that its companies reported revenue of about $253.5 million in 2019.
- Le Tote said it will conduct liquidation sales at its Lord & Taylor stores as they reopen.
- To help fund and protect its operations during the Chapter 11 process, the company has obtained consent to use cash collateral from its pre-petition secured lenders.
- The company has also filed a number of customary motions seeking court authorization to support its operations during Chapter 11, including the continued payment of employee wages and benefits and the authority to conduct store closing sales led by a joint venture of Hilco Merchant Resources and Gordon Brothers.
- Kirkland & Ellis LLP is acting as legal advisor to the Company and Berkeley Research Group, LLC is acting as restructuring advisor. Nfluence Partners is acting as the company’s investment banker, and a joint venture of Hilco Merchant Resources and Gordon Brothers is managing the company’s store closing sales.