Friday, April 11, 2008
Bankruptcy Starts NonFinancial setcotr - the first major shoe to drop in this retail sector
Linens 'n Things Inc., a home-furnishings retailer caught by an increasing debt load and shrinking housing market, is expected to file for Chapter 11 bankruptcy-court protection by Tuesday, several people familiar with the matter said. A Linens 'n Things filing would mark one of the first major retailers to seek bankruptcy protection in this economic downturn. The New Jersey retailer, which sells home products like towels, bath rugs and kitchen appliances, has about 590 stores in 46 states and employs 17,000 people. Linens would be one of the largest buyouts to go bust since the credit crisis took hold last summer. In February 2006, Apollo Management LP acquired Linens for $1.3 billion. The housing crisis made the home-furnishings space ultracompetitive, and the debt on the company's balance sheet gave it diminished flexibility to ride out the downturn. In a recent letter to investors, Apollo founder Leon Black acknowledged that the company was troubled, explaining that while it had made operational improvements, its financial results "remain challenged." Apollo filed to go public in a share offering this week.