The private equity-backed US clothes retailer Steve & Barry’s has filed for Chapter 11 bankruptcy protection blaming the credit market dislocation and a “liquidity shortfall.”
Boston-based TA Associates acquired a minority stake in the discount clothes company in 2006 for an undisclosed sum. A report in the Wall Street Journal said the firm paid $320 million for roughly half the company, half of which went to the business and half to co-founders Barry Prevor and Steve Shore.
TA Associates declined to comment, however at the time, the firm said it saw a “significant opportunity for continued expansion.” TA Associates principal Jeffrey Barber was appointed to Steve & Barry’s board of directors.
In a statement announcing the bankruptcy proceedings, Prevor and Shore said the current credit markets had proved too challenging for the firm, despite total store sales increasing 70 percent in the period January to May this year compared to one year ago.
Prevor and Shore also blamed mall landlords for stopping “remitting contractually-owed payments for construction and store opening work” performed by Steve & Barry's. According to the report in the Wall Street Journal, mall owners often offer attractive financial inducements to anchor stores in a bid to generate traffic for the rest of the mall. “As a result of all of this, our loans have gone into default, and we have had no alternative but to file Chapter 11 to enable continued operations,” the co-founders said.
In 2006, when TA Associates acquired its stake, Steve & Barry’s had 180 stores in 33 states across the US. By the time the company filed for Chapter 11 protection last week, it had grown to 276 locations. Last year, Steve & Barry’s also signed up Sex and the City star Sarah Jessica Parker to produce an affordable clothing line, named Bitten.
The company has already cut 172 jobs as part of the Chapter 11 proceedings and said it was considering further staff reductions, as well as slashing the number of stores and selling itself. The co-founders added: “The management of Steve & Barry's is deeply sorry to all who have been affected. We are in discussions with potential strategic and financial partners and working on solutions for a stronger Steve & Barry's to emerge from this process.”
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