Orchard Supply Hardware Stores Corporation and two subsidiaries filed for Chapter 11 protection on June 17 in the U.S. Bankruptcy Court for the District of Delaware (In re Orchard Supply Hardware Stores Corporation, Bankr. D. DEl., No. 13-11565, petition filed 6/17/13).
Orchard Supply Hardware was founded in 1931 in San Jose, Calif., according to court documents. The debtors operate a chain of hardware and garden stores, with 89 stores in California and two in Oregon.
Court documents indicate that, “a highly leveraged capital structure instituted in 2006, combined with increasingly competitive conditions and a perilous California economy led the [c]ompany to experience sales declines of 21% over the three-year period from 2007 through 2010. The [c]ompany's extensive debt, combined with increased costs as the [c]ompany transitioned to an independent public company in late 2011 following the [c]ompany's spin-off from Sears Holding Corporation” made it difficult for the debtors to comply with their loan agreements. “While the [c]ompany's new management stemmed the tide of declining sales through the strategic implementation of a number of key initiatives … due to the constraints present in the [c]ompany's debt structure, the [c]ompany was unable to dedicate the resources necessary to fully transform the Orchard brand in the manner necessary to support the debt structure.”
A June 17 press release states that in preparation for the businesses' reorganization, the debtors have “reached an agreement through which Lowe's Companies, Inc. … will acquire the majority of [their] assets for $205 million in cash, plus the assumption of payables owed to nearly all of Orchard's supplier partners. … Under the terms of the agreement, Lowe's would acquire no less than 60 of Orchard's stores, based on further due diligence on the store locations.” The debtors have also arranged for debtor-in-possession financing which, in addition to their ongoing cash flow, will make it possible to continue their operations and meet their financial obligations during the course of the restructuring.
About the reorganization, the debtors' president and chief executive officer Mark Baker said, “The steps we are taking today allow us to definitively address our balance sheet issues in order to fully execute on our brand transformation and growth strategies. … We are confident the steps we are taking today will allow us to achieve our financial and operational goals and are certain we are making the right decision both for our business and for the many individuals and families who depend on Orchard.”
According to court documents, the debtors had total assets of $441,028,000 and total liabilities of $480,144,000 as of May 4, 2013.
The creditors with the largest unsecured claims and the amounts of those claims follow: Kawahara Nursery Inc., $1,467,048; The Scotts Company Inc., $910,483; Milwaukee Electric Tool Co., $790,195; Richard W. Wilson (Colorama), $756,693; Hillman Group Inc., $745,773; Jordan Manufacturing, $679,091; Blue Rhino Corp., $637,256; Sears Brands Management Corp., $585,348; Jensen-Byrd Co. Inc., $571,930; General Electric Company, $546,467; L&L Nursery Supply Inc., $514,051; Big Time Products, $491,570; Hong Kong Sunrise Trading Co., $447,929; HD Hudson Manufacturing, $357,990; Corona Clipper Company Inc., $357,350; First Alert, $352,252; Commerce LLC, $326,935; NDS Inc., $324,907; Makita USA Inc., $323,491; and Libman Co., $315,588.
The debtors are represented by Stuart M. Brown, DLA Piper LLP, Wilmington, Del.
The Chapter 11 petition is available at: http://www2.bloomberglaw.com/public/desktop/document/Orchard_Supply_Hardware_Stores_Corporation_Docket_No_113bk11565_B
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