Steve & Barry's is seeking financing of about $30 million to avoid filing for bankrptcy sometime in the next month, several creditors, bankruptcy lawyers and retail experts familiar with the matter told the Wall Street Journal. The closely-held retailer has also reportedly hired Goldman Sachs as a financial advisor and hired a bankruptcy lawyer to advise it on a restructuring.
A spokesman for Steve & Barry's declined to comment to the Wall Street Journal. Its attorney, New York-based retail-bankruptcy veteran Paul Traub, also declined to comment.
The company currently has 270 stores in 40 states and projected 2008 revenue approaching $1 billion, with earnings before interest, taxes, depreciation and amortization of roughly $20 million, said two people familiar with its finances.
The retailer, which sells most items below $10, has been rapidly expanding over the past several years. Since May 15, it has opened nine stores, from upstate New York to Kokomo, Ind., and San Jose. Besides a wide assortment of college-licensed apparel, the retailer has come out with lines endorsed by athletes Stephon Marbury, Venus Williams and Ben Wallace, as well as actresses, Sarah Jessica Parker and Amanda Bynes.
The article said the retailer has been particularly hurt by slower expansion stances by mall operators rather than significantly lower demand for its prdoucts. According to the Journal, much of the company's earnings came in the form of one-time, up-front payments from mall owners designed to lure the retailer to take over vacated sites, said several people familiar with the company. Without these payments, the stores are barely profitable, if at all.
The $30 million Steve & Barrys has been seeking over recent weeks would fund operations through 2008. Without additional capital, the company's fate will largely be determined by the commercial-lending unit of General Electric Co. It provided the company with a roughly $200 million credit facility in March, and the company is already in default on that loan, said three people familiar with the matter.
