Text size:

  • Small
  • Normal
  • Large
Pedestrians walk past Loehmanns department store in the Chelsea neighborhood of New York.
Pedestrians walk past Loehmanns department store in the Chelsea neighborhood of New York.

Istithmar-owned Loehmann's files for bankruptcy

Discount retailer forced into second filing for Chapter 11 protection after business drops off.

Loehmann's, the US retailer owned by Istithmar World, filed for bankruptcy just weeks after executives from the Dubai World unit flew to New York on a rescue mission.

The New York discounted designer goods chain is among a long list of purchases made by Istithmar during the boom years, including the luxury US retailer Barneys New York and the Queen Elizabeth 2 cruise liner. Some of Istithmar's investments have soured during the global recession.

"There's a repricing of some of the assets in Istithmar's portfolio bought at the peak of the market as they have not performed as well as the company had hoped," said Rachel Ziemba, a senior analyst covering sovereign wealth at Roubini Global Economics.

"Chapter 11 will ensure restructuring happens in an orderly manner and should avoid a free-for-all among creditors."

Loehmann's Holdings restructuring is the latest development in a string of debt refinancings to affect some Dubai Government-related entities. Dubai World, a conglomerate with interests from ports to property, last month finalised a US$24.9 billion (Dh91.45bn) debt restructuring with its creditors.

Problems for Loehmann's started after demand for its goods waned as US consumers cut back on spending. It filed for its second bankruptcy in 11 years after failing to exchange $110 million of senior notes, according to a filing with the US bankruptcy court in Manhattan.

Under US law, companies unable to repay debts can apply for Chapter 11 protection, a form of bankruptcy that involves the reorganisation of a debtor's financial affairs and assets. The law is intended to offer the debtor a fresh start.

Loehmann's agreed to the bankruptcy filing with "key supporting secured noteholders" and Istithmar, according to court papers.

Istithmar, along with Whippoorwill Associates, an agent for the retailer's discretionary funds and accounts, has agreed to invest an aggregate amount of $25m in Loehmann's subject to certain conditions after its emergence from Chapter 11. The investment would be in the form of a convertible preferred equity stake, according to the retailer.

"We look forward to working constructively through this process and achieving a consensual restructuring," said Andy Watson, the acting chief executive of Istithmar World.

In 2006 Istithmar purchased an 88 per cent stake from Arcapita, a Bahraini investment company, for about $264m.

Founded as a one-store operation in 1921 by Frieda Loehmann, the retailer passed through numerous hands in the 1980s and 1990s before going bankrupt as the decade ended.

A team of advisers led by Dr Shuja Ali, Istithmar's head of portfolio management, visited New York this month to try to sign a deal with Loehmann's bondholders to delay repayment of debts that become due next year.

While it has sold many of its New York assets, Istithmar still owns a building at 450 Lexington Avenue, the Mandarin Oriental hotel at Columbus Circle and Barneys, among other investments.

Loehmann's previously filed for bankruptcy in May 1999 because of growing competition from discount chains. It emerged from bankruptcy the following year after cutting more than $140m in debt and closing 25 stores.



Back to the top

More articles

Editor's Picks

 The Greens, villas: Q1 no change. 3BR - Dh210-250,000. 4BR - Dh210-260,000. 5BR - Dh220-300,000. Q1 2013-Q1 2014 5% rise. Pawan Singh / The National

In pictures: Where Dubai rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Dubai have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 Above, the private pool of Ocean Heights' five-bedroom penthouse flat. Courtesy Christie’s International Real Estate

In pictures: Penthouse flat is height of Dubai luxury living

A five-bedroom penthouse in Ocean Heights in Dubai Marina is on sale for Dh25 million and comes with a private pool and an unparalleled view of Dubai.

 The cooling towers of the Temelin nuclear power plant near the Tyn nad Vltavou in Czech Republic. The country wants to continue expanding nuclear energy capacity despite cancelling a tender to build two new units. David W Cerny / Reuters

In pictures: Best business images for the week to April 17, 2014

Here are some of the best business images for the week to April 17, 2014.

 A sign points the way to an outdoor market popular with German visitors on the Polish side of the German-Polish border. Sean Gallup / Getty Images

In pictures: A decade since the European Union went east

May 1 will mark 10 years since the European Union expanded east, taking in countries like Poland, the Czech Republic and the Baltic states as new members. And though the border region between Germany and Poland is flourishing with trade and cultural exchange, the open border has also brought a sharp rise in crime.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.


To add your event to The National listings, click here

Get the most from The National