Anchor Blue Retail Group, Inc. ( the “Company”), parent company of specialty retailer Anchor Blue (“Anchor Blue Division”) and outlet store retailer Levi’s® & Dockers® Outlet by MOST, today announced that the Company and its subsidiaries have filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) to enter a 363 sale process to facilitate a restructuring. The process will allow the Company to quickly restructure and emerge stronger and more competitive.
As part of the filing, Anchor Blue Retail Group reached a stalking horse agreement with Levi Strauss & Co. regarding the purchase of the Levi’s® & Dockers® Outlet by MOST stores. The Company said this will enable the ongoing operation of the business and provide the best possible outcome for employees and vendors. In addition, the Company negotiated a stalking horse agreement with nationally recognized financial institutions to purchase its Anchor Blue Division in collaboration with the current senior management team. Both transactions are subject to an auction process and to approval from the Bankruptcy Court.
In conjunction with its filing, Anchor Blue Retail Group has secured $20 million in debtor-in-possession (DIP) financing from its existing lender, Wachovia Capital Finance. The financing will provide the Company with adequate working capital to meet its ongoing obligations during the reorganization. Anchor Blue Retail Group’s filing was largely the result of the significant and sustained economic downturn that has severely impacted California — its key market — and eroded the Company’s profitability. The filing will allow Anchor Blue Retail Group to restructure its balance sheet, re-negotiate certain existing agreements, and re-position the Company for long-term success. The Company expects to continue paying employee salaries and benefits as well as honor gift cards and store credits as usual.
“We launched a series of initiatives over the past few years to enhance the Company’s operational performance and refine our merchandising and marketing strategy,” said Thomas Sands, CEO of Anchor Blue Retail Group. “These efforts showed good progress and initially led to considerable cost savings. However, the unprecedented sustained economic downturn and a related drop in consumer spending, especially in the teenage market, have had a severe impact on our financial performance. Our restructuring will allow us to proactively address our capital structure, find a great home for our Levi’s® & Dockers® Outlet by MOST division, and re-build the Anchor Blue business. We look forward to continuing to provide our customers with the quality clothing and value they expect from Anchor Blue.”
Anchor Blue retail stores are well-stocked and will continue to operate as usual, but a number of underperforming stores will be closed as part of the transition (see attached list).
“After completing a detailed analysis of all our operations and conducting negotiations with a number of our landlords, we made the difficult but necessary decision to close approximately 50 underperforming Anchor Blue stores,” added Mr. Sands. “This will help us realize additional cost savings and operational efficiencies and improve our financial base so that we can better serve all of our constituencies.”
About Anchor Blue Retail Group
Anchor Blue Retail Group is the holding company for two subsidiaries — Anchor Blue Division and Levi’s® & Dockers® Outlet by MOST Division. Anchor Blue is a specialty retailer of casual apparel and accessories for the teenage market. Founded in 1972, the Company has 177 stores in 12 states. Anchor Blue offers a great assortment of well-priced fashion basics with West Coast style in a fun environment. MOST is an outlet store retailer that holds the exclusive U.S. license for Levi’s® Outlet & Dockers® Outlet Stores. Known for its denim apparel and reasonable prices, MOST operates 74 stores across the U.S.