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Law360 (August 3, 2020, 10:44 AM EDT) -- Historic retailer Lord & Taylor filed for Chapter 11 protection late Sunday in Virginia, already struggling from the consumer shift away from brick-and-mortar shopping with its woes hastened by the COVID-19 pandemic.
During a first-day hearing Monday afternoon, debtor attorney Steven N. Serajeddini of Kirkland & Ellis LLP said Lord & Taylor and its parent company, clothing rental service Le Tote Inc., retreated into insolvency court following Le Tote's November 2019 acquisition of the nearly 200-year-old retailer and the double whammy of general retail struggles and the coronavirus.
"The company immediately stepped into the pressure of the current retail environment," Serajeddini said of the combined enterprise. "At the same time, there was the tragic hammer of COVID-19, which immediately forced the company to close all 38 of its retail locations and lay off its employees."
Despite being able to reopen its stores recently, Lord & Taylor has suffered from decreases in customer foot traffic while Le Tote's subscription service has shed customers as waves of job losses have impacted the workforce that makes up its customer base.
Le Tote issued a $30 million secured note to Hudson's Bay Co. when it bought the Lord & Taylor assets from HBC in November. The obligations under the note as well as payments required under a transition support agreement strained the debtors' liquidity just as their revenue streams dried up in the wake of the outbreak, according to a declaration from Chief Restructuring Officer Ed Kremer.
The company came to court with $138 million in secured debt and a plan to market and sell its assets as a going concern, Kremer said. Deadlines imposed by Lord & Taylor's secured lenders call for a sale of Le Tote by Oct. 5 and a sale of Lord & Taylor by Oct. 20.
Serajeddini said Lord & Taylor has already commenced store closing sales at its 38 locations, but built a toggle option into its plans so that it can pivot to a going-concern sale if a buyer emerges during the marketing process. U.S. Bankruptcy Judge Keith L. Phillips approved entry into a store closing agreement with store liquidators.
The court also approved requests from the debtor to access the cash collateral of its lenders, continue its insurance policies and customer programs and pay the wages and benefits of its employees.
Le Tote filed a Chapter 11 plan alongside its petition and will seek confirmation of the plan by the end of October, according to the debtor.
The debtors are represented by Michael A. Condyles, Peter J. Barrett, Jeremy S. Williams and Brian H. Richardson of Kutak Rock LLP and Steven N. Serajeddini, David L. Eaton and Jaimie Fedell of Kirkland & Ellis LLP.
The lead case is In re: Le Tote Inc., case number 20-33332, in the U.S. Bankruptcy Court for the Eastern District of Virginia.
--Editing by Katherine Rautenberg.
Update: This story has been updated with more information.
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