Loehmann's, the US discount department store owned by Dubai World, has emerged from bankruptcy proceedings.
Retailer Loehmann's making a fresh start
Loehmann's, the US department store chain owned by a division of Dubai World, has emerged from bankruptcy but is shopping for a new chief executive.
The discount retail chain, which is based in New York and has 40 stores across the US, has officially completed its restructuring under Chapter 11 of the US bankruptcy code.
The process eliminated US$110 million (Dh404m) of long-term bond debt and $14m of related annual interest, and yielded other cost reductions totalling $23m.
But Jerald Politzer, who as the chief executive guided Loehmann's through the bankruptcy process, has chosen to leave, the company announced. Joe Melvin, the retailer's chief operating officer and chief financial officer, has become interim chief executive.
"As was our goal, we have significantly reduced our debt through the Chapter 11 process and have emerged a stronger, more financially secure company, better positioned to address the opportunities and challenges of the marketplace," Mr Melvin said. "We look forward to re-dedicating ourselves to building Loehmann's into an even more exciting shopping destination."
Istithmar, a private equity division of Dubai World, bought Loehmann's in 2006 for $300m. Istithmar also owns the luxury retailer Barneys New York.
But amid declining sales and waning consumer appetite for designer goods, Loehmann's filed for Chapter 11 protection in November after it defaulted on $110m of debt. Chapter 11 is a provision of US bankruptcy law that allows companies to restructure themselves while being shielded from creditors.
In the early stages of the bankruptcy reorganisation, Istithmar and Whippoorwill Associates, a major creditor, jointly agreed to pump $25m of fresh funds into the company. They proposed to keep Loehmann's running during its reorganisation with about $40m of new financing.
The company closed several underperforming stores and pared down its workforce, according to court documents, but it continued to trade.
On February 8, the reorganisation plan was given the green light by a bankruptcy court in New York and it took effect on Tuesday.
The company has secured $45m of exit financing from Wells Fargo Bank and Whippoorwill.