(Reuters) – Philadelphia-based women’s clothing retailer Deb Shops Inc filed for bankruptcy protection in a Delaware court on Sunday as part of a financial restructuring that involves selling the company to a group of senior lenders. Abelco Finance provided a stalking horse bid; Lee Equity will also receive a stake in the company going forward.
The lenders, led by Ableco Finance LLC, have entered into a “stalking horse” agreement to acquire substantially all of the company’s assets.
They will pay $77 million in cash, take over Deb Shops’ $21.7 million debtor-in-possession loan and other liabilities, according to court papers.
A “stalking horse” sets a floor for the bidding at a court-supervised auction against which all other offers will need to match or exceed.
Lee Equity Partners LLC, the company’s current owner, will also receive a stake in Deb Shops following the sale on account of its interest in a senior credit facility, Deb Shops said in a statement.
The company will continue to be run by the existing management team, the statement said.
“This is strictly a financial restructuring of Deb Shops’ business and we foresee no impact on our operations as we proceed through this process,” Chief Executive Mark Hoffman said.
In court papers, the company said it had total assets of $124.4 million and total liabilities of $270.1 million as of April 30. The Chapter 11 petition listed 55 affiliates of the company.
Deb Shops currently operates 318 stores across the United States and employs about 3,400 people, according to court filings.
The case is In re: DSI Holdings Inc, U.S. Bankruptcy Court, District of Delaware (Delaware), No: 11-11941.
(Reporting by Santosh Nadgir; Editing by Vinu Pilakkott)