LNT Stalking Horses Hard to Find

Brent Felgner, August 11, 2008

Perhaps it's just another sign of tough economic times, but Linens 'n Things has put off a hearing to set bid protections for a stalking horse bidder on its second round of store closings — because there still was no stalking horse by late last week. At least, none that was acceptable to LNT.

The hearing, originally scheduled last Thursday, was put off until Monday, Aug. 11. Bid procedures were already approved. The protections would have set break-up fees and expense reimbursement for a stalking horse, intended to draw other bidders into a competitive auction to liquidate the stores.

In LNT's first auction — a 120-store going-out-of-business event — a joint venture of SB Capital and Tiger Capital formed the stalking horse, providing a guaranteed minimum bid with a revenue split with LNT over minimums. There were at least two other competitors to become the stalking horse in that instance.

An additional group of 57 stores is being closed in the second round of liquidations.

LNT was able to sell off just five of the initial 120 closed store leases during an auction in late July, according to court documents. It is unclear if that auction result influenced the company's decision to scale back the second round of closings from the original 87 that had been announced to 57. With the change, the total count of stores to be closed numbers 177.

In related news, the committee of unsecured creditors of Linens 'n Things is seeking 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. They want to research: historic financial data and solvency analysis for various points prior to the filing; analysis of business plans, cash flow projections, and restructuring programs prior to the filing; analysis of the financial ramifications of certain transactions involving LNT; and evaluation of potential fraudulent conveyances and preferences. Such investigations are not uncommon in bankruptcy cases.

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