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Linens ‘n Things Gains $123 Million in Store Auction

By Home Textiles Today Staff -- Gifts and Dec, 5/30/2008 2:42:00 PM

Wilmington, DE — Bankrupt retailer Linens ‘n Things will receive $122.8 million for the liquidated inventory from the approximately 120 stores it is closing. The auction, which took place last week, was won by a joint venture of SB Capital and Tiger Capital. U.S. Bankruptcy Court Judge Christopher Sontchi signed an order approving the liquidation agreement and sale on Friday morning, according to Home Textiles Today, sister publication to Gifts & Decorative Accessories.

Funds from the auction will be used to pay down debt or fund continued operations. The company will also split a portion of the proceeds with the liquidators after expenses, during the going out of business sales in the stores.

The bankruptcy court approved a bid of 95.96 percent — about $2.5 million more than the minimum stalking horse bid of 94 percent for the value of the inventory at cost —pegged at $128 million. That’s about a $270 million retail valuation, said liquidation advisor Paul Traub, a principal in Asset Disposition Advisors. “Such a good result may help it in its other refinancing efforts,” Traub said.

Linens ‘n Things is still evaluating its strategy for how it will deal with the leases of the closing stores, Traub indicated. “It will likely look to sell the leasehold interest or negotiate their termination,” he said, adding that might help obviate the claims for unpaid rents. Still to be decided, too, is LNT’s plan to emerge from bankruptcy, how it will settle with secured creditors, which interests will emerge with control of the retailer, and what, if anything, unsecured and trade creditors will recover.

Other bidders included Gordon Brothers and Hilco, both retail liquidators. Interest from another potential joint venture bidder — Great American and Hudson — never materialized, according to a court transcript.

The result of the auction seems to obviate at least some reclamation claims made by suppliers seeking the return of unpaid goods in the closing stores. Additionally, the court swept aside many landlords’ objections to the auction and going out of business sales.

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