C&R; Chapter 11 Plan Approved
A federal court in Los Angeles has approved C&R; Clothier’s reorganization plan, paving the way for the apparel retailer’s emergence from Chapter 11 bankruptcy.
The Culver City-based chain of men’s apparel stores filed for Chapter 11 bankruptcy protection last April after it was unable to resolve a debt with Wells Fargo, its primary lender. The company is expected to emerge from bankruptcy later this month after attorneys complete legal formalities.
Under the plan approved Thursday in U.S Bankruptcy Court, C&R; will make an initial payment of $4.8 million on its $11.8-million debt to Wells Fargo. The balance of the debt will be paid over a period ending in 1998. In return, Wells Fargo agreed to provide C&R; with $3.8 million in new revolving credit.
The plan was approved by Wells Fargo and most of C&R;’s creditors. Under the arrangement, unsecured creditors--those who had no collateral guarantees--will receive at least 15 cents for each dollar they are owed. As a result, C&R;’s total debt--$25 million when the retailer filed for bankruptcy--will be reduced by about $8.5 million, said David Levene, senior partner with the Los Angeles-based law firm Levene & Eisenberg, which represents the chain.
Stock that existed before the bankruptcy filing will be wiped out under reorganization. Before the filing, about 20% of the stock was controlled by two shareholders--Jack Roth and Robert Recht--and C&R; Chief Executive Paul Reisbord controlled about 50%.
Under the reorganization plan, an investment group headed by Reisbord will receive about 95% of the stock in exchange for an investment of about $1.5 million. Other new investors will control the remaining 5% of the stock.
Reisbord, in an interview Friday, said C&R--known; as a discounter of mainstream men’s apparel--experienced financial trouble largely because it began to offer customers more expensive and more colorful cutting-edge fashion. He said the company has now returned to its “price-value strategy.” As a result, sales since Thanksgiving are up about 15% compared to the same period last year, Reisbord said.
During the bankruptcy process, C&R; closed 20 stores--most of them in Northern California--and now has 36 stores throughout Southern California and part of Nevada. The company also eliminated about 200 jobs and now employs about 600.
