2011 in Review: Chapter 11 Filings Subside

Harry & David, Orchard Brands and Borders were among the big-name retailers that filed for Chapter 11 in 2011. But while the financial crisis of 2008 forced several merchants to file for bankruptcy – and even liquidate – in 2009 and 2010, Chapter 11 filings subsided in 2011.

Rumors that Harry & David Holdings was in trouble surfaced well before it brought turnaround specialist Kay Hong on as its CEO in February.

In January, Harry & David said in a statement to the Securities and Exchange Commission that it was unable to borrow under the $105 million revolving credit facility unless it was amended or the financial covenant noncompliance was waived. Harry & David also said it expected to report net sales of about $416 million for the 12-month period ending Christmas Day 2010, compared to $443 million the prior year.

Harry & David shuttered 52 retail locations after Christmas, and finally filed for Chapter 11 protection in March. The company emerged from Chapter 11 in September, and named former Musician’s Friend executive Craig Johnson its CEO in October.

Here’s a look at other Chapter 11 filings that happened in 2011:

  • Borders Group: In February, three years after Borders Group considered placing itself on the selling block, the books and music merchant filed for Chapter 11 bankruptcy. It closed several underperforming Borders locations, and will shut other Borders and Waldenbooks locations if leases cannot be renegotiated. Portfolio group Direct Brands announced on June 30 that it is the stalking horse bidder.
  • Orchard Brands: Filed for Chapter 11 in January, emerged in April, and got a new $90 million round of financing in June. Life can be good when you have a prepackaged Chapter 11 reorganization plan. The multititle mailer was able to shed about $420 million in debt and maintain its day-to-day operations.
  • Robb & Stuckey: The sluggish housing market hit the 96-year-old furniture seller – which added a direct channel in 2007 – very hard. Sales for the fiscal year ending June 30, 2010 were just under $140 million, which about half of what it did in its peak fiscal year 2006.
  • Signature Styles: Just two years after it was formed to acquire Spiegel Brands, the division of private equity firm Patriarch Partners filed Chapter 11 in June. The Spiegel, Newport News and Shape Fx apparel titles were included in the filing, along with affiliate Signature Styles Gift Cards. In September, a bankruptcy court judge approved the sale of Signature Style’s assets to Artemiss… a division of Patriarch Partners created to buy Signature Styles.
  • Wisconsin Cheeseman: Not a Chapter 11 filing, but a bankruptcy nonetheless via a Wisconsin Chapter 128 filing. Wisconsin Cheeseman was snapped up by Swiss Colony parent company Colony Brands in March.
  • Syms: Syms’ best customer may have been an educated customer, but today’s educated customer goes to Google. The upscale apparel seller filed for Chapter 11 in November, and its business winds down this week. The merchants had no online sales presence, and fell further into a hole after it acquired Filene’s Basement a few years back.

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