Linens Holdings Co.

CDG Role: Crisis & Interim Management (Chief Restructuring Officer and Interim CEO)

Background

  • Linens’ N Things, Inc. (“LNT”) was the second largest specialty retailer of home textiles and housewares in North America.
  • LNT employed 17,500 people and operated 589 retail stores in the United States and Canada.
  • These operations were supplied by a vendor base of over 1,000 suppliers.
  • LNT was acquired by a private equity group in November 2005.  In early 2006, the Company instituted a turnaround plan. However, due to a variety of factors including an over-levered capital structure, a decline in the housing market, tightening in the credit markets and a decline in consumer discretionary spending, LNT was unable to execute its plan.
  • CDG was engaged by the Company in March of 2008, as it prepared for its Chapter 11 filing and subsequent 363 sale, to provide interim management as well as financial advisory services.]

Issues

  • The Company had a significant number of under-performing stores
  • Lack of financial metrics to properly account for and measure profitability metrics at the stores level
  • Lack of a head merchant to drive product selection and overall merchandising strategy
  • A significant number of above market leases
  • An uneconomical new store format
  • Lack of robust financial reporting with respect to its Canadian operation resulting in skewed financial reporting between the U.S. and Canadian operations
  • Significant monthly operating losses
  • A bloated advertising budget that could not be tied directly to incremental sales or increased margins

 

Value to Client

  • Quickly stabilized operations and secured $700 million in DIP financing despite a nearly non-existent credit market.
  • Assumed control and management of cash while directing operations.
  • Enhanced communications with stakeholders, providing weekly updates.
  • Worked closely with senior management at each division to develop a detailed business plan.
  • Successfully facilitated the orderly wind down of all operations in order to maximize recoveries for stakeholders.
  • 589 stores in the U.S. and Canada were successfully sold
  • Senior secured lenders received a 100% recovery