(Rewrites and adds details)
By Chelsea Emery
NEW YORK Nov 20 Three months after purchasing
apparel chain Steve & Barry's out of bankruptcy, the new owners
will liquidate the remaining 173 stores after plans to operate
the chain fell victim to slumping retail sales and difficulty
in getting financing.
Investment firms Bay Harbour Management and York Capital
Management, which had bought the company for $168 million in
August, plan to liquidate their holdings by early 2009,
according to the company's Chapter 11 bankruptcy filing on
Wednesday in Manhattan.
"This is the hardest environment in 30 years for
retailers," said Peter Schaeffer, a partner with corporate
restructuring and investment adviser Carl Marks. "Chances of
companies that have filed for bankruptcy coming out whole is
BH S&B Holdings, the affiliate of the two investment firms,
said in the bankruptcy filing the declining health of the U.S.
economy and the slump in the retail market had hurt company
Sales at all stores have been disappointing, said the
filing, citing "the general health of the American economy and
the state of the retail market in particular."
Steve & Barry's had violated covenants under their senior
secured credit facility and the owners have no prospects to
obtain financing to keep operating the stores, according to
The company had already begun liquidation sales at about 67
Steve & Barry's, which began in 1985 as a retailer of
university-branded clothing, became known for its branded
apparel lines from celebrities including actress Sarah Jessica
Parker, surfer Laird Hamilton and tennis star Venus Williams.
To differentiate itself, it sold almost everything in its
stores for less than $11. At the same time, the chain
aggressively negotiated with mall landlords for
lower-than-average lease rates and expanded rapidly.
But the economic slump undermined already razor-thin
margins, restructuring experts said.
"This business growth was obsessively focused on real
estate growth and using recognizable faces to drive brand
growth," said Matthew Katz, a managing director at
restructuring firm AlixPartners. "In go-go growth years, the
business was rewarded. However the underlining business
processes and controls were not put in place and as the markets
turned, this unraveled quickly."
The company has asked the court for permission to begin
store-closing sales immediately because Thanksgiving and the
crucial Christmas shopping season are rapidly approaching.
RAS Management Advisors LLC is serving as restructuring
adviser, and a joint venture of liquidation firms led by Great
American Group LLC and including SB Capital Group, Tiger
Capital Group and Hudson Capital Partners will assist in the
liquidation, the filing shows.
Separately, former employees of the chain on Nov. 18 sued
the owners of Steve & Barry's, saying they were laid off the
day before without 60 days advance written notice of their
termination, as required by the Worker Adjustment and
Retraining Notification Act.
An attorney for the company declined to comment.
The liquidation of Steve & Barry's is another blow for
malls that are already losing a slew of tenants to bankruptcy
liquidations, including home goods retailer Linens 'n Things
and department store Mervyn's.
"In 2009, landlords are going to have to get creative to
figure out what to do with the enormous amount of empty stores
in their inventory," Schaeffer said.
Some 148,000 retail stores are expected to be shuttered
this year, according to the International Council of Shopping
Centers. That's the largest number since 2001 and represents at
least 625,000 retail jobs.
(Additional reporting by Jonathan Stempel; Editing by Lisa Von
Ahn and Brian Moss)