Credit crunch stymies sale of Linens 'n Things
NEW YORK - Linens 'n Things, victim of a widespread credit crunch, will begin liquidating its remaining stores as early as tomorrow, after the bankrupt home goods retailer failed to find a buyer that will keep the company in operation.
The Delaware bankruptcy court had planned to hold an auction of company assets yesterday, after a group of liquidators had made a preliminary $475 million offer. But no other qualified bids came in and the auction was canceled, according to court documents filed late Monday.
The court is expected to approve the group's offer and liquidation sales are expected to begin tomorrow, said James Schaye, president and chief executive of Hudson Capital Partners, which is a member of the liquidator group.
Linens 'n Things, which initially struggled amid a housing slowdown and a decline in consumer discretionary spending, was finally taken down by a credit crisis that stymied possible buyers from obtaining credit to fund a purchase.
"If capital markets weren't so tight, I think this chain might possibly have survived," said Schaye. "There's just no financing to do these deals at all."
The company had filed for bankruptcy protection in May and has closed more than 100 stores. It had been under pressure from its creditors to rush closing its remaining 371 stores, according to court documents.
As of Dec. 31, the company employed some 17,500 people and had a vendor base of about 1,000 suppliers, according to court documents. At that time, the company operated 589 stores in the United States and Canada.
But the sharp decline in the housing market and a slump in consumer discretionary spending undermined the company's ability to pay its suppliers.
And though some investors were interested in buying the company, they were hindered by the lack of ability to borrow money, said Schaye.
The group offered 95 cents on the dollar, for about $500 million in inventory, valuing the bid at about $475 million, said Schaye.
He said he expects consumers to turn out in droves since it will be a rare chance to buy useful household merchandise, such as cooking supplies and bedding, for drastically reduced prices.
The stores should be completely closed by Jan. 1, he said.
Wall Street analysts said competing retailer Bed Bath & Beyond Inc. could benefit. 