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The economy claimed another large retail victim Tuesday when the $2.5 billion Mervyns filed a voluntary Chapter 11 petition for bankruptcy court protection in Delaware.
Mervyns Files Ch. 11
The economy claimed another large retail victim Tuesday when the $2.5 billion Mervyns filed a voluntary Chapter 11 petition for bankruptcy court protection in Delaware.
The filing further dramatizes the treacherous nature of the current retail climate, and its close links to the health of the housing market and the price of gas. The 59-year-old Mervyns was once a star of the booming California market, and for years dominated the retail scene in many of the areas in which it operated. Mervyns currently has 177 stores in seven Southwestern states.
The California-based midtier department store chain said it will reorganize its business and continue to operate as the company moves through the restructuring process. Mervyns follows the likes of Steve & Barry's, Goody's Family Clothing Inc., Fortunoff, Linens-N-Things and Sharper Image into bankruptcy, although many industry executives predict there will be more retailers filing for Chapter 11 in the months ahead unless the economy makes an unexpected turnaround.
The Hayward, Calif.-based Mervyns said it has secured a $465 million debtor-in-possession financing facility from a lender group led by Wachovia Capital Finance Corp. The DIP ensures vendors that ship goods during the post-petition period will get paid. Those with outstanding balances with the retailer will have no such assurances.
"We have reached out to Mervyns' management in an attempt to restore communications," said Bob Carbonell, executive vice president and chief credit officer of Bernard Sands Credit Consultants, the credit-checking company. "When the court approves the DIP financing and we have adequate financial information, we will consider a change in our credit opinion."
John Goodman, chief executive officer of Mervyns, said, "Mervyns needs to reorganize its finances and operations due...