Bankruptcy filing edging closer for Filene's Basement

Retail Ventures Inc., an Ohio retailer that bought Filene's Basement out of bankruptcy nine years ago, also raised the possibility that the chain could seek bankruptcy protection in a filing yesterday with the Securities and Exchange Commission, but didn't provide any details.

The filing also said Retail Ventures paid a California liquidator, Buxbaum Holdings Inc., $1.3 million in fees and $375,000 for expenses to dispose of Filene's Basement. Retail Ventures, which transferred Filene's Basement to Buxbaum a week ago, previously said it wouldn't receive any proceeds from the transaction, but didn't mention that it paid Buxbaum to take the struggling chain off of its hands.

A bankruptcy filing could potentially allow Filene's Basement to shed its existing debts and modify its store leases and other contracts, giving the century-old retailer a clean slate to move forward. Some potential buyers have expressed interest in buying Filene's out of bankruptcy, according to the person with ties to the chain.

But once in bankruptcy, it's also possible Filene's Basement could be liquidated completely or sold off in pieces to help pay off creditors. Two major retailers, Circuit City and Linens 'n Things, both recently liquidated after bankruptcy filings.

Filene's Basement, known for its automatic price reductions and regular sales on bridal gowns, has been suffering for years, the victim of ambitious expansion plans, the struggling economy, and other problems. Its flagship store in Downtown Crossing, a longtime tourist attraction that accounted for one-fifth of sales, has been closed for two years because of a stalled construction project on its old building. Earlier this year, Filene's Basement closed 11 of its 36 stores, but continued to lose money.

The struggling chain reported $422 million in total sales for the fiscal year ended Feb. 2, down 9 pecent from the year before, according to Retail Ventures.

Retail Ventures, the parent of DSW Inc., a speciality footwear chain with 295 stores, finally gave up on the Burlington-based Filene's Basement chain, and turned it over to Buxbaum, a company that offers turnaround consulting and manages going-out-of-business sales. Last week, Buxbaum said it was reviewing "all available options" for the retailer.

Both Filene's Basement and Buxbaum declined to comment on a potential bankruptcy filing. Retail Ventures could not be reached for comment.

Steven Hoort, a bankruptcy attorney with the Boston law firm Ropes & Gray, said it is common for struggling retailers to file for Chapter 11 bankruptcy protection to erase their liabilities or close stores. In some cases, the businesses are sold piecemeal - with everything from leases to merchandise to brand names going to separate owners.

"There is a whole industry set up there for retail bankruptcies," said Hoort, who is not involved with the Filene's Basement case.

Todd Wallack can be reached at twallack@globe.com.