Vendors brace for LNT filing
April 11, 2008,
New York — As at least two retail liquidators conducted inventory valuations and store closing assessments in upward of 100 Linens ’n Things units that might be shuttered, an ad hoc group of unsecured creditors — including some major suppliers — is scheduled to meet with LNT executives Monday, April 14, according to several executives that supplied the chain.
Most expect LNT to file for bankruptcy protection by Tuesday, April 15, but some acknowledge it might come as early as today. The beleaguered retailer has apparently been preparing for that eventuality for at least two weeks, not long after its yearend conference call in which it reported a steep net loss of $242.1 million on sales of $2.8 billion. During that time, LNT merchants and others have been calling around to vendors gathering formal corporate information on them — including mailing addresses and names of senior executives — the kind commonly included in court filings listing unsecured creditors.
Executives at Linens ’n Things could not be reached for comment.
The liquidators, possibly including a unit of Gordon Bros., are evaluating the cash that might be realized from the closings, which could occur with or without a Chapter 11 filing. During the quarterly conference call last month ceo Robert Di Nicola said that LNT would close some stores in a gesture to cut expenses and shed underperforming assets, but he did not specify a number.
The restructuring firm of Conway Del Genio Gries & Co. declined comment on a report earlier today that it had been engaged to provide services, including a potential bankruptcy recommendation, to LNT. A filing seems imminent, if only to open the pipeline supplying the stores with post-petition cash.
"Our accounting department was told on Wednesday [April 9] by Linens 'n Things' accounts payable department that all payments [to vendors] have been put on hold for now,” said Bob Weiss, director of sales and marketing for Creative Bath. "Linens 'n Things is a multi-million dollar customer to us, so we're concerned."
If there is a bankruptcy filing, it would be hard to envision a scenario in which trade vendors would recover much, if anything, of their receivables from LNT. The company’s secured debt is so large and the valuations of the company have fallen so far, even secured creditors might not recover everything they’re owed.
In the meantime, vendors have complained of payment delays. Some told HTT they stopped shipping only recently, while others said they shut off the supply lines as long as four weeks ago.
Factor CIT Group, which briefly held up its underwriting of LNT last February, and Springs Global are believed to be LNT’s largest creditors, with Springs owed as much as $20 million, according to one source. A Springs senior executive declined comment citing the company’s longstanding policy to not discuss its customers.
Many suppliers also expressed concern about what has been appearing as something of a siege mentality at LNT as the retailer’s troubles have deepened. Executives at all levels of the chain have become unresponsive to their calls, with rare exception.
“We’re concerned about the lack of information coming out of the main office at Linens ’n Things,” said Loren Sweet, president and CEO of Brentwood Originals.
The situation at LNT’s stores seems inconsistent. At two stores in Miami, it appeared as business as usual, albeit with a much more promotional twist in which much of the merchandise appeared to be on sale. At one store, employees were changing out a towel wall in preparation for an inbound Welspun program. A stocker at one store said the unit is expecting two shipments next week, one containing 1,000 items.
Another store in Palm Beach also showed a few inventory holes, but not many. Instead, clearance items filled shelves and gondolas. Unpacked cartons of goods sat idly in aisles on handtrucks, most from LNT’s Greensboro DC, with such suppliers as Welspun, Loftex, Croscill, Brentwood Originals and Pacific Coast Feather. Several cartons had additional labels: “Rejected.”
At the front of the store, outbound cartons awaiting UPS pick-up had the addresses of other LNT stores where they were apparently being transshipped. One employee, apparently unaware of the company’s plight, said today was his first day on the job. A “Help Wanted” sign remained posted on the front door of the store.
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