Bankruptcy comes as owner Istithmar tries to fine-tune a huge portfolio of assets bought during a credit-fuelled expansion in the mid-2000s
Dubai-owned retailer Loehmann's closer to leaving Chapter 11
Loehmann's, the US discount department store owned by Dubai's Istithmar World, is moving closer to emerging from its second bankruptcy proceedings in a decade.
The retailer received approval from a US bankruptcy court judge on Wednesday to put its reorganisation plan to a creditor vote.
If creditors give their approval by a deadline of early next month and the court approves the deal at a hearing soon after, Loehmann's would reach its goal of exiting bankruptcy protection by next month.
"The court's approval allows the company to proceed with seeking creditor votes on the plan," Loehmann's said, adding the decision paved the way "for an expedited and successful Chapter 11 exit in February 2011".
Chapter 11 is the provision of US bankruptcy law under which Loehmann's sought protection from creditors in November while it reorganised its financial affairs.
It filed for bankruptcy after defaulting on US$110 million (Dh404m) of debt amid declining sales and a fall-off in consumer spending on designer clothes in the US, where the chain operates more than 40 outlets.
As it restructures its business and secures new financing, Loehmann's has closed several under-performing stores and pared down its workforce, court documents show.
Istithmar, a private equity division of the Government-owned Dubai World, bought Loehmann's in 2006 in a deal worth $300m.
In the early stages of the bankruptcy reorganisation in November, Istithmar and Whippoorwill Associates, a major creditor, jointly agreed to pump $25m in fresh funds into the company. They proposed to keep Loehmann's running during its reorganisation with about $40m in new financing.
Should creditors approve it, the bankruptcy will reduce the company's debt and transfer some of Istithmar's stake to Whippoorwill.
Unsecured creditors, who include suppliers and other companies with claims against Loehmann's, are to receive a total of $2m under the plan. Loehmann's said holders of more than two thirds of the company's secured debt were supporting the plan.
Loehmann's has continued to trade during the critical holiday season in the US. Its operations are currently funded through a $33m revolving credit facility with Crystal Financial and an additional $7m junior facility from Whippoorwill.
The Loehmann's bankruptcy comes as Istithmar tries to fine-tune a huge portfolio of assets bought during a credit-fuelled expansion in the mid-2000s.
Istithmar also owns Barneys New York, a luxury retailer, and numerous hotels and office buildings in New York, London and elsewhere. It also owns a 20 per cent stake in the Cirque du Soleil, the Canadian entertainment group.
Loehmann's, founded in New York City in the 1920s, last underwent bankruptcy proceedings in 2000.