Loehmann’s said it has agreed the plan with its owner Istithmar World, the Dubai-based private equity house, and Whippoorwill Associates Inc., the agent for its discretionary funds and accounts, which represents around 70% of its senior secured notes.
The voluntary “pre-negotiated” proceedings have begun in the U.S. Bankruptcy Court for the Southern District of New York. The retailer says it will emerge with have sufficient liquidity and the financial flexibility to fund daily operations without interruption, including payments to essential vendors, customers and employees.Under the plans, Series A noteholders will receive 42.4% of the reorganized equity, Series B holders will receive 8.6%, and new investors will receive 49.1%, all on a fully converted basis.
Istithmar World and Whippoorwill have also agreed to invest $25 million in the company when it emerges from Chapter 11. Loehmann’s existing lender, Crystal Financial, has also committed to provide a $45 million debtor-in-possession financing facility.
The off-price retailer, which has 45 stores, was bought by Istithmar for $300 million in July 2006. The company listed having between $100 million and $500 million in assets and debts in the same range in its bankruptcy petition. It expects to emerge from Chapter 11 during the first quarter of 2011 and blames falling sales and high levels of debt for today’s action.