Coldwater Creek Inc. (CWTR:US), a women’s clothing retailer that hasn’t posted an annual profit since 2007, filed for bankruptcy protection with a plan to start going-out-of-business sales in time for Mother’s Day.
Coldwater, founded as a catalog business 30 years ago, said it intends to start liquidating inventory just before the May 11 holiday, a peak sales period for the retailer. The company listed assets of $278.5 million and debt of $361.3 million in Chapter 11 papers filed today in U.S. Bankruptcy Court in Wilmington, Delaware.
The chain said revenue peaked at $1.1 billion in 2006. It expanded from 198 stores in 2005 to 336 locations in 2007 before the global economic downturn stunted its financial success and triggered a series of management changes, according to court filings. Sales at stores open at least a year plunged 17 percent in the quarter ended Nov. 2.
The company joins women’s clothing chains Dots LLC and Ashley Stewart Holdings Inc. in bankruptcy. Dots, with 400 stores, shut down after filing in January. Ashley Stewart, with 168 stores in 24 states, sought Chapter 11 protection on March 10. A drop in mall traffic also has helped to drive pizza seller Sbarro LLC, toasted-sandwich chain Quiznos and the owner of Hot Dog on a Stick to seek court protection since February.
Coldwater said last year that it was exploring strategic alternatives, including a sale. The retailer reached out to more than 75 parties as it sought refinancing or a buyer and “publicly invited strategic alternative proposals of any nature,” Chief Operating Officer James A. Bell said in a court filing.
The shares have declined (CWTR:US) 95 percent in 12 months, including a 17 percent drop yesterday. That valued the retailer at $5.8 million.
“The company’s declining liquidity position and the challenging retail environment, together with the fact that we have exhausted all other possibilities, requires that we take this action,” Jill Dean, chief executive officer of Sandpoint, Idaho-based Coldwater, said in a statement today.
Coldwater asked U.S. Bankruptcy Judge Brendan Linehan Shannon to schedule a sale-approval hearing for May 6 in the hope it can start the liquidation before Mother’s Day and maximize sales for creditors, according to the filing.
The retailer also asked the court to name a joint venture of Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC, which specializes in such cases, as a “stalking-horse,” or lead bidder.
Coldwater said it reached agreement with lenders on the liquidation plan and received a $75 million commitment in debtor-in-possession financing from Wells Fargo & Co., a current lender. Holders of common stock aren’t expected to recover any of their investment.
Dennis Pence, a former Sony Corp. executive, started Coldwater Creek as a catalog in 1984, selling women’s accessories and gifts, according to a 2005 Businessweek profile that highlighted the company’s rapid growth.
Coldwater began opening stores in the 1990s and had 379 locations as of Nov. 2, including 31 factory outlet stories and seven days spas. The company has 330 employees at its headquarters and more than 5,500 elsewhere, according to court filings.
Coldwater posted losses totaling $59.6 million in the first three quarters of the fiscal year ended Feb. 2, according to data compiled by Bloomberg. It had a loss of $81.8 million last year.
An affiliate of Golden Gate Capital Corp. in 2012 extended a $65 million senior secured term loan to Coldwater in return for preferred stock that’s convertible to as much as 6.1 million shares of common stock, according to company filings.
Comenity Bank and Groupon are the two biggest creditors without collateral backing their claims, according to court documents.
The case is In re Coldwater Creek Inc., 14-bk-10867, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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