Coldwater Creek Inc., a women's clothing and accessory retailer, filed for Chapter 11 bankruptcy protection in Delaware Friday with a plan to liquidate its inventory and close its stores after failing to attract a buyer.
The retailer said it had considered several strategic alternatives over the past six months, including a sale, although it couldn't find a buyer or raise enough capital to fund its business.
Coldwater, which operates a catalog business, retail and factory stores, as well as an e-commerce website, expects to start going-out-of-business sales to liquidate its inventory in early May.
Like much of the broader retail sector, Coldwater has faced declining sales and a heavy debt load for some time, as the industry at large struggles with a tepid economic recovery. The Wall Street Journal reported late last month that Coldwater Creek--which, at the time, carried about $353 million in total debt--was preparing to file for bankruptcy.
"While we are extremely disappointed with this outcome, the company's declining liquidity position and the challenging retail environment, together with the fact that we have exhausted all other possibilities, requires that we take this action," said Jill Dean, chief executive of Coldwater Creek, in a statement.
According to documents filed with the U.S. Bankruptcy Court in Wilmington, Del., liquidators Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC will manage the going-out-of-business sales, subject to higher bids at auction.
"Time is of the essence in these Chapter 11 cases in order to minimize administrative expenses and therefore, maximize value for all stakeholders," said James A. Bell, Coldwater's chief financial officer, in a court filing. "It is critical that the Debtors commence the liquidation of their inventory prior to what has traditionally been a peak holiday weekend--Mother's Day."
Together, the two liquidators have guaranteed a sale price of 97% of the value of the company's merchandise, which is estimated to be between $90 million and $100 million. If another company successfully challenges Hilco and Gordon Brothers' offer, the liquidators will receive an expense reimbursement of $800,000 plus 1.5% of the amount they guaranteed.
The retailer is seeking $75 million in bankruptcy financing from senior lenders led by Wells Fargo to allow it to continue operations through the liquidation process. That financing, which rolls up $40 million in prebankruptcy debt, requires court approval.
Coldwater Creek was founded in Sandpoint, Idaho, in 1984. The company employs about 6,000 people and operates 334 retail stores, 31 factory outlet stores and seven day-spa locations.
The company reached a peak revenue of $1.1 billion and operating margin of about 8% in 2006. Shares of the company, which closed Thursday at 19 cents, have been trading under $1 since October.
A hearing on Coldwater Creek's initial bankruptcy requests is slated for Monday before Judge Brendan L. Shannon.
Write to Tom Corrigan at [email protected]
(CORRECTION: Coldwater Creek carried about $353 million in total debt late last month. An earlier version of this article incorrectly said the company carried about $353 in total debt.)