Popular retail chain files Chapter 11 bankruptcy after deal fails

The retail sector is winding down a year filled with financial distress marked by several establishments filing for Chapter 11 protection.

Party City revealed on Dec. 20 that it was closing all stores and going out of business, and then filed Chapter 11 bankruptcy on Dec. 21.

That retail collapse came a day after home goods retailer Big Lots, which already filed Chapter 11 bankruptcy on Sept. 9, revealed on Dec. 19 that it would begin going-out-of-business sales at all remaining store locations in the coming days after a proposed sale agreement with stalking-horse bidder Nexus Capital Management collapsed.

Discount retailer 99 Cents Only also collapsed months earlier as it filed for Chapter 11 bankruptcy on April 8, 2024, liquidated and closed down all 371 locations in Arizona, California, Nevada, and Texas.

The Container Store is another home goods retailer facing severe economic problems. The retailer faced a recent financial dilemma when potential investment partner Beyond revealed in a statement on Nov. 20 that it had concerns about a proposed $40 million investment in the retail chain after the home goods retailer had not been able to secure additional financing acceptable to Beyond.

Midvale, Utah-based Beyond, which owns online retailers Overstock, Bed Bath & Beyond, Baby & Beyond, and Zulily, on Oct. 15, 2024, reached a $40 million securities purchase agreement with The Container Store Group Inc. that required the home goods retailer to secure new financing on terms commercially acceptable to Beyond as a condition to closing.

Under the agreement, Beyond has the right to determine in its sole discretion the adequacy of The Container Store’s financing arrangements.

In the November statement, Beyond said “the proposed financing terms we have reviewed to date fall short of what we believe is necessary to complete the transaction. As careful stewards of our shareholders’ capital, we must remain steadfast in ensuring that the terms of any financing package work for both The Container Store and Beyond.”

Under the agreement, The Container Store needed to obtain acceptable financing by Jan. 31, 2025, or Beyond could cancel the deal.

NYSE delisted The Container Store

The situation worsened for The Container Store on Dec. 9 when the New York Stock Exchange delisted and immediately suspended the trading of the retailer’s common stock, according to an NYSE statement.

It seemed like that the Beyond deal was not going forward, and The Container Store needed proceed in a different direction.

The Container Store files for Chapter 11 bankruptcy

Struggling home goods retailer The Container Store Inc. and four affiliates filed for Chapter 11 bankruptcy on Sunday to restructure its debts with a prepackaged reorganization plan that will recapitalize the company and hand ownership of the company to its term loan lenders as a going concern.

The Coppell, Texas, debtor hopes to complete the reorganization and exit bankruptcy in 35 days.

Under the plan, the debtor’s lenders will provide the company with a $115 million debtor-in-possession financing and exit loan package, which includes $40 million in new money and a rollup of $75 million in prepetition debt in exchange to 100 percent new equity interest in the reorganized company, subject to dilution.

The debtor said that 90 percent of its term loan lenders supported the transaction support agreement. It said that trade vendors and all other general unsecured creditors would be paid or compensated in full in the reorganization plan.

The Container Store listed $969.2 million in assets and $836.3 million in debts in its petition filed on Dec. 22.

The debtor, which was founded in 1978 and operates 102 stores in 34 states, specializes in storage and organization supplies, including closet and shelving systems.

The debtor blamed its financial distress on reduced consumer spending on storage and organization products, fewer home sales, effects from inflation, the post-Covid-19 winddown and intense competition, according to a declaration filed by Chief Restructuring Officer Chad E. Coben.

The company reported a 10.5 percent decline in revenue, totaling $196.6 million, for the quarter ending Sept. 28, 2024.