Law360 is providing free access to its coronavirus coverage to make sure all members of the legal community have accurate information in this time of uncertainty and change. Use the form below to sign up for any of our weekly newsletters. Signing up for any of our section newsletters will opt you in to the weekly Coronavirus briefing.
Sign up for our Bankruptcy newsletter
You must correct or enter the following before you can sign up:
Thank You!
Law360 (August 20, 2020, 11:33 AM EDT) -- Dutch retailer HEMA filed a Chapter 15 petition in New York as the business undertakes a restructuring and sale process in English court to ease a debt load made unsustainable by the COVID-19 pandemic and a long-term decline in retail sales.
HEMA UK I Ltd. filed its petition Wednesday in the Southern District of New York while the main proceedings take place in English court. HEMA UK was incorporated in England and Wales and is part of the HEMA group of businesses. The group's parent company is in the Netherlands.
HEMA bills itself as one of the Netherlands' largest and oldest retailers. Its first department store opened in Amsterdam in 1926, according to court filings. Today, HEMA says it has over 775 stores, including franchises, in 12 countries. HEMA sells apparel, household goods and food, among other consumer goods.
HEMA cited the long-term decline in foot traffic to physical retail stores as well as the impact of the COVID-19 pandemic. The company has garnered considerable support for a restructuring agreement and has launched a competitive sales process, according to court filings. Final bids are expected in mid-September.
Much of the company's existing debt stems from its acquisition by private equity firm Lion Capital in 2007, according to court filings. HEMA was later sold to Ramphastos Investments in 2018, but much of its debt load still remains, the filings said.
"Although at the time the debt was originally incurred, the group's financial performance had been sufficient to sustain this debt burden, in recent years the debt has become increasingly more difficult to carry," the company said in its declarations.
The restructuring deal will see the HEMA group's debt slashed from €830 million to about €427 million, the filings said. HEMA's cash interest payments would also decrease, and the company would receive additional liquidity by issuing new private placement notes, the filings said.
The restructuring deal has the support of all of HEMA's revolving credit facility providers and secured hedging providers and roughly 62% of its existing senior secured noteholders by value, according to court documents. More than 88% of its senior secured noteholders have agreed to a lock-up deal to temporarily waive a series of defaults that would have been triggered by some of HEMA's debt coming due, the filings said.
HEMA formally launched the sale process on June 26 and has since circulated letters to 15 potential buyers, the filings said.
The company is the latest of numerous retailers facing financial difficulties during the pandemic. Discount retailer Stein Mart filed for Chapter 11 protection in Florida earlier this month, as did historic retailer Lord & Taylor. The parent company of clothing chain Ann Taylor filed its petition in July with a $1 billion debt-swap plan. In mid-July, specialty gift and stationery store The Paper Store also entered bankruptcy court.
HEMA is represented by Paul H. Zumbro of Cravath Swaine & Moore LLP.
The case is In re: HEMA UK I Ltd., case number 20-11936 in the U.S. Bankruptcy Court for the Southern District of New York.
--Additional reporting by Vince Sullivan and Rick Archer. Editing by Rebecca Flanagan.
For a reprint of this article, please contact reprints@law360.com.
