Coldwater Creek gets OK to start liquidation
By Bloomberg News
on May 07, 2014 at 7:22 AM, updated May 07, 2014 at 7:43 AM
Coldwater Creek, the women's clothing retailer, won bankruptcy court approval of an agreement with liquidators Hilco Merchant Resources and Gordon Brothers Retail Partners to run going-out-of-business sales at its more than 370 stores starting May 8.
U.S. Bankruptcy Judge Brendan Linehan Shannon in Wilmington, Delaware, on Wednesday approved the store-closing deal after Hilco and Gordon won a 32-hour auction, pushed by another liquidator group to substantially improve the initial offer.
The auction "was a resounding success" resulting in a deal valued at $161 million and "exceeded the expectations of all parties," Jill Frizzley, a lawyer for the company, said at the hearing.
The company is the latest clothing retailer to fall victim to falling sales in the wake of the recession, with others including Loehmann's Holdings.
Hilco and Gordon guarantee a 128 percent return on costs of Coldwater's merchandise from the sales, based on a value of $90 million to $105 million, court papers show. The liquidators' original stalking-horse offer guaranteed a recovery of 97 percent.
Coldwater, founded 30 years ago as a catalog business, needed to begin the store closing sales before the May 11 Mother's Day holiday, a key selling period, to maximize recoveries.
The Sandpoint, Idaho-based company listed assets of $278.5 million and debt of $361.3 million in Chapter 11 papers filed April 11 when it sought bankruptcy protection with plans to liquidate the business.
Coldwater, which hasn't posted an annual profit since 2007, joined women's clothing chains Dots and Ashley Stewart Holdings and discount fashion retailer Loehmann's in bankruptcy after sales declined and losses mounted in the wake of the U.S. recession. Revenue peaked at $1.1 billion in 2006.
The retailer scrapped a plan to hold a separate auction for its intellectual property, including customer lists, deciding bids for virtually all the assets would produce the best deal.
Hilco and Gordon offered about $27 million for the IP and customer list and another $6 million in value, including $2 million for furniture, fixture and equipment
