*Judge OKs Crabtree & Evelyn reorganization plan
*Company reduced stores to 91 from 126
*Parent KLK is providing exit financing
*Company expects bankruptcy exit later this month (Updates with details from company statement)
By Emily Chasan
NEW YORK, Jan 14 (Reuters) - A U.S. bankruptcy judge on Thursday approved a reorganization plan from U.S. retailer Crabtree & Evelyn Ltd, paving the way for the seller of soaps, fragrances and lotions to exit court protection later this month.
Judge Burton Lifland approved the company’s standalone reorganization plan at a hearing in U.S. Bankruptcy Court in Manhattan, saying it was rare to see a retailer reorganize on its own in the current economic climate.
The Woodstock, Connecticut-based company, which is owned by Kuala Lumpur Kepong Berhad (KLKK.KL) and is a unit of Britain’s Crabtree & Evelyn Holdings Ltd, had filed for bankruptcy protection in July as consumers cut back on spending during the economic downturn and its sales dropped.
The company said it expects to exit bankruptcy by the end of January.
During the bankruptcy the company cut its number of stores to 91, down from the 126 stores it had when it filed for bankruptcy. “It is almost unique since 2005 for a retailer to reorganize,” said Larry Gottlieb, a bankruptcy attorney at Cooley Godward Kronish LLP representing the company.
Most retailers that have filed for bankruptcy in the recent economic downturn like Linens ‘N Things, Eddie Bauer, or Circuit City have been forced to shut their doors, or sell their businesses, rather than reorganize on their own amid the U.S. recession. New bankruptcy laws enacted in 2005 regarding leases have also made it more difficult for retailers to reorganize on their own, turnaround experts have said.
Crabtree is “a retailer that is reorganized and resized,” Gottlieb said, noting the parent KLK has agreed to provide the company with “more than sufficient” exit financing, to help the company execute on its plan.
Crabtree said in a statement on Thursday it expects to close on a $26.3 million exit financing facility from KLK. KLK had also provided a $40 million debtor-in-possession financing facility to keep the company operating during bankruptcy.
Under the reorganization plan, the company’s creditors are receiving payment equal to 45 percent of their claims in cash.
Crabtree & Evelyn, which also launched a new e-commerce website during the bankruptcy, said that it plans to expand its wholesale business and enhance its product assortment going forward.
“This does not look like a case that is a likely candidate for Chapter 22,” Judge Lifland said at the end of the bankruptcy hearing, referring to some companies that have been forced to file for Chapter 11 bankruptcy protection repeatedly amid the U.S. economic downturn.
The case is In re: Crabtree & Evelyn Ltd, U.S. Bankruptcy Court, Southern District of New York, No. 09-14267
Reporting by Emily Chasan, editing by Dave Zimmerman