Fortunoff Files for Chapter 11 Bankruptcy
NEW YORK, Feb 5 (Reuters) – U.S. regional retailer Fortunoff filed for Chapter 11 bankruptcy protection on Thursday and said it will try to sell the business, but if it cannot it will close its doors.
The company, which sells jewelry, dinnerware and furniture in New York, New Jersey, Pennsylvania and Connecticut, began suffering a "severe liquidity crisis" in January as it was trying to sell the company, according to court documents.
Dismal sales over the 2008 holiday season, weak consumer spending on high-end furniture and jewelry, the costs of expanding its jewelry line in Lord & Taylor stores and reduced borrowing capacity all hurt operations, it said.
The prolonged economic recession has taken a major toll on a broad range of U.S. retailers as consumers scale back spending.
"Most of us thought that we would see more retailers filing by now," said Jerry Mozian, national segment leader for restructuring at turnaround firm Tatum. "January is one of the typical months that retailers file and then you put on top of that the backdrop of a very terrible economy."
A possible buyer may be able to pick up Fortunoff at an attractive price, but that is unlikely because it is unclear how long the recession will last, Mozian said. "I would not be surprised if it just turns out to be a liquidation."
Fortunoff, which began as a neighborhood venture in Brooklyn in 1922, was bought out of bankruptcy by private equity firm NRDC Equity Partners for $110 million, including $30 million in debt. NRDC said at the time that the company was worth $439 million and that it planned to double its size over five years, in part through expansion in the Lord & Taylor stores the private equity firm also owns.
It began talking to possible buyers, investors and partners at the end of 2008, including private equity firms and companies called liquidators that manage the closing of operations, it said.
It also began talks with its lenders and financial adviser Zolfo Cooper on the details of an auction-type sale but then decided to file for Chapter 11 and continue that process through the court.
In the filing, the company listed both assets and liabilities within a range of $100 million to $500 million. Fortunoff said it has 20 stores open, four of which carry its full line of merchandise. It has closed its New York City jewelry store.
It said it had net operating losses of $42 million on revenue of $260 million during the nine months ending Nov. 30.
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