DEB Stores Holding LLC and certain of its affiliated companies (“DEB” or the “Debtors”) filed for bankruptcy under Chapter 11 of the Bankruptcy Code on December 4, 2014 in the United States District Court for the District of Delaware.
According to the Declaration of Dawn Robertson, Chief Executive Officer of the Debtors, in Support of the Debtors’ First Day Motions (the “Robertson Declaration”), DEB is a mall-based retailer operating 295 retail store locations. In 2011, the predecessor company to DEB, which operated the retail stores under the same name, filed a bankruptcy petition. In that prior bankruptcy, DEB’s current equity holders purchased substantially all the assets of the predecessor company with a credit bid in a 363 sale.
Events Leading to Bankruptcy
According to the Robertson declaration, DEB’s recent performance has suffered due to weakness in the Juniors space and unfavorable mall traffic trends. In October, 2013, DEB began working to reduce costs in an effort to return to profitability. In August and September, DEB attempted to obtain additional cash infusions from its equity holders, without avail. DEB also sought to locate a buyer of the company or its assets. With its continually shrinking liquidity, and unable to locate any entities interested in purchasing DEB as a going-concern, DEB has filed for bankruptcy protection.
Objectives in Bankruptcy
According to the Robertson Declaration, the goal of DEB’s bankruptcy is to liquidate the assets of the company. The company has engaged in discussions with a potential stalking horse bidder in an effort to maximize recoveries to creditors. The potential stalking horse bidder is a joint venture comprised of two retail liquidators. DEB intends to pursue an auction of its assets and to begin conducting store closings sales to liquidate their inventory through a liquidator.
As provided by the Robertson Declaration, DEB’s last audited financial statements, current as of December 31, 2013, reflected assets totaling approximately $90.5 million and liabilities of approximately $120.1 million. It’s revenues in 2013 were $296 million. DEB employs approximately 4,000 individuals and orders product from approximately 11,000 vendors. This large bankruptcy is another in a growing body of retail operators who have failed, in part, due to the reduction of traffic to traditional brick-and-mortar retailers – presumably due to the competition from internet retailers. I’m interested to see what other businesses go the way of the newspaper in the continually growing pressure created by internet competition.
DEB is represented by the law firm Pachulski, Stang, Ziehl & Jones LLP. DEB’s bankruptcy proceeding is before the Honorable Kevin Gross of the Delaware Bankruptcy Court, proceeding under case no. 14-12676. The next omnibus hearing is scheduled for December 17, 2014 at 2:30 p.m.