Boscov’s Files for Bankruptcy

Becoming the latest retailer to bow to the challenging economy, Boscov’s Inc. filed for protection under the Chapter 11 bankruptcy code and plans to close 10 of its 49 stores. The largest family-owned independent department store chain in the U.S., based in Reading, PA, said the economy had caused consumers to spend less on discretionary items and that credit market conditions had caused vendors to tighten up.

Market observers also said the regional chain has been hurt by fierce competition from national chains like J.C. Penney, Kohl’s and Macy’s.
Boscov’s plans to use the bankruptcy to reorganize its debts and improve its finances. But the company also said in court filings that it is exploring all options, including a possible sale of the chain. The company has stores in six states, mostly in Pennsylvania.

In its filing in bankruptcy court in Wilmington, Delaware, the 97-year-old, mid-tier department store chain listed $538 million in assets and $479 million in debts as of May 3. The three largest unsecured creditors are Jones Apparel Group, owed $3.1 million; Kellwood, owed $2.6 million; and VF Corp., owed $1.3 million.

After the filing, Boscov’s received interim court approval for $250 million in bankruptcy financing from lenders led by Bank of America. The company also gained court approval to conduct an auction on Aug. 12 to select a liquidation firm to run store-closing sales at 10 “underperforming” stores.

Boscov’s move to Chapter 11 follows the bankruptcy of Mervyn’s, Steve&Barry’s, Goody’s Family Clothing and Shoe Pavilion.

About The Author

Boscov’s Files for Bankruptcy

Boscov’s Inc., the department-store chain based in Reading, PA, filed for Chapter 11 bankruptcy protection in Wilmington, Delaware, citing decreased consumer spending. The privately-held company will immediately close 10 of its 49 stores. The company said it will borrow as much as $250 million from a group of lenders led by Bank of America Corp. to help it restructure.

The collapse of the housing market and increased food and energy costs have led to “a decline in the discretionary spending by consumers upon which the debtors business depends, Michael Hughes, Boscov’s executive vice president of capital development, said in court papers. The company has stores in six states, mostly in Pennsylvania.

Boscov’s listed $538 million in assets and $479 million in debts as of May 3 in the court filing.

The company filed for bankruptcy protection with seven affiliates after failing to refinance its debt, it said. Boscov’s said it had sales of $1.25 billion last year. Boscov’s $250 million loan will consist of a $225 million senior revolving credit facility to be funded with as much as a $25 million “last out revolver advance.

The 40 largest creditors without collateral backing their claims are owed a total of $32.6 million, court papers show. The three largest unsecured claimholders are Jones Apparel Group Inc., owed $3.1 million; Kellwood, owed $2.6 million; and VF1, owed $1.3 million.

Boscov’s is seeking court approval of auction procedures for the selection of a liquidation firm to assist with store-closing sales. It is requesting an Aug. 12 auction. The company said it will liquidate about $34 million in merchandise at the sales to be commenced by Aug. 15.

The retailer has an agency agreement with Gordon Brothers Retail Partners LLC for about $35 million and is seeking a $50,000 termination fee if Gordon Brothers isnt the winning bidder. Other bids must exceed Gordon’s bid by at least $75,000, according to court papers.

The case is In Re Boscov’s Inc., 08-11637, U.S. Bankruptcy Court, District of Delaware (Wilmington). tennis player Venus Williams.

About The Author

Thomas J. Ryan

Thomas J. Ryan Senior Business Editor | SGB Media | 917.375.4699



Pin It on Pinterest

Share This