Lady LUX

In the latest round of news about its bankruptcy, retailer Loehmann’s has received approval from courts for a reorganization plan, reported Just-Style. The company is still hoping to exit chapter 11 sometime next month, and with this plan, expects it will significantly reduce its debts.

Loehmann’s is now able to seek creditor votes on the plan. Voting will end Feb. 2, and the court hearing to approve the arrangement will follow on Feb. 7.

As reported in a previous LadyLUX posting, the basic agreement is Loehmann’s will collect $25 million through a rights offering after exiting from Chapter 11, whereas the unsecured creditors will gain a pro rata distribution of $2 million cash.

The arrangement, according to the company, “should pave the way for an expedited Chapter 11 process.”

The New York-based discount chain had filed a voluntary prepackaged Chapter 11 petition in New York bankruptcy court back in mid-November of last year. The company reached an accord with equity sponsor Istithmar and major note-holder Whippoorwill Associates Inc., designed to lessen the debt – an agreement that closely follows the plan offered at the time Loehmann’s filed suit for bankruptcy.

The company is able to continue operating through $33 million revolving credit from Crystal Financial LLC, earmarked for post-petition financing, and a further $7 million junior facility by Whippoorwill. The latter was made immediately accessible for the retailer, which decided to use the money for spring inventory purchases, to supply reserve inventory and products manufactured specifically for its chain.

“With these capital commitments, Loehmann’s will have sufficient liquidity and the financial flexibility to fund daily operations without interruption,” the company told WWD in December.

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