Avenue Clothing Chain Owner United Retail Files for Bankruptcy, Plans Sale
By Dawn McCarty and Sophia Pearson – Feb 1, 2012 10:00 AM ET
An affiliate of Versa Capital Management, a Philadelphia- based private-equity firm, agreed to serve as the lead, or stalking-horse, bidder in a court-supervised auction, United Retail said today in a statement.
“We are seeking relief from disproportionately high costs for many of our leases that were signed prior to the recession,” United Chief Executive Officer Dawn Robertson said in the statement. “Through Chapter 11 relief and a lease renegotiation process, the turnaround of Avenue can continue.”
The company, based in Rochelle Park, New Jersey, listed assets of $117.2 million and debt of $67.3 million in Chapter 11 documents filed in U.S. Bankruptcy Court in Manhattan. It will seek court approval to borrow as much as $40 million from Wells Fargo & Co. to carry it through the bankruptcy process, according to the statement.
Redcats USA, a division of French retailer PPR (PP) SA, bought United for $198.9 million in 2007. Redcats is a catalog and online marketer of clothing and home products. Its brands include Roaman’s, Jessica London, BrylaneHome, KingSize, the Sportsman’s Guide and OneStopPlus.com. PPR, based in Paris, is the owner of the Gucci luxury brand.
Closing Some Stores
United, which has 433 Avenue stores in the U.S., hired Alixpartners LLC to advise the company. Kirkland & Ellis LLP is its legal adviser. The company plans to close 14 stores in the next month, according to court papers.
Among the largest unsecured creditors listed in court documents were Valentine USA of New York, owed $1.95 million; LF Centennial Pte Ltd. of Singapore, owed $1.91 million; Porta Asiatica Enterprise of Shanghai, owed $1.24 million; and Vanity Fair Brands LP of Charlotte, North Carolina, owed $793,000.
Robertson said in court papers that Avenue, which sells women’s clothing in sizes 14 and up, generated about $300 million in sales last year, with a pretax loss of $28 million.
In addition to lease expenses, she blamed “adverse economic conditions,” marketing and pricing problems, and retail sales declines for the bankruptcy.
The case is In re United Retail Group Inc., 12-10405. U.S. Bankruptcy Court, Southern District of New York (Manhattan).