LNT wins $123 mil. in store auction; more to come
May 30, 2008,
Wilmington, Del. — Bankrupt retailerLinens ‘n Things will receive $122.8 million for the liquidated inventory in the approximately 120 stores it is closing, following the auction last week to a joint venture of SB Capital and Tiger Capital. U.S. Bankruptcy Court
The bankruptcy court approved a bid of 95.96% — amounting to about $2.5 million more than the minimum stalking horse bid of 94% for the value of the inventory at cost—pegged at $128 million. That’s about a $270 million retail valuation, said liquidation advisor Paul Traub, a principal in Asset Disposition Advisors
“Such a good result may help it in its other refinancing efforts,” Traub said.
LNT is still evaluating its strategy for how it will deal with the leases of the closing stores, Traub indicated.
“It will likely look to sell the leasehold interest or negotiate their termination,” he said, adding that might help obviate the claims for unpaid rents.
Funds from the auction will be used to pay down debt or fund continued operations.
LNT said it was pleased with the results of the auction. The company will also split a portion of the proceeds with the liquidators after expenses, during the Going Out of Business sales in the stores.
SB Capital and Tiger Capital won the auction over Gordon Brothers and Hilco, both retail liquidators. Interest from another potential joint venture bidder — Great American and Hudson — never materialized, according to a court transcript.
The Gordon Bros. group initially proposed a 75% payment, and the Great American group proposed about 85% of the inventory at cost, according to Traub’s court testimony. The Tiger/SB group initially proposed about a 90% payment.
The Gordon bid was about $20 million less than the Tiger bid, and the Great American bid was about $7 million less, Traub told the court.
The result of the auction seems to obviate at least some reclamation claims made by suppliers seeking the return of unpaid goods in the closing stores. Additionally, the court swept aside many landlords’ objections to the auction and GOB sales.
The stores closing sales are just the first step in a long process. It remains to be seen if the closing of the 120 stores will adequately address LNT’s productivity and profitability concerns or whether additional stores will have to be shuttered.
Still to be decided, too, is LNT’s plan to emerge from bankruptcy, how it will settle with secured creditors, which interests will emerge with control of the retailer, and what, if anything, unsecured and trade creditors will recover.