đź‘—New Chapter 11 Filing - J&M Sales Inc./National Stores Inc.đź‘—

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Another day, another retailer in bankruptcy. Today, J&M Sales Inc., a “leading discount retailer” with $5-average-price goods in 344 stores in 22 states — operating under the names Fallas, Fallas Paredes, Fallas Discount Stores, Factory 2-U, Fallas and Anna’s Linen’s by Fallas — finds itself in bankruptcy court. The company offers value-priced merchandise, including apparel, bedding, household supplies, decor items and more; it generally supports underserved, low-income communities and can be found in power strip centers, specialty centers and downtown areas. All of its locations are leased.

The company blames (i) general retail pressures, (ii) bad weather (specifically hurricanes Harvey and Maria), (iii) a data breach (and a attendant $2mm reserve account set up by the credit card companies) and (iv) poor integration of growth acquisitions (e.g., Conway’s) for its chapter 11 filing. These company-specific factors may help explain why this company is apparently bucking the national trend of discount retail success (see, e.g., Dollar Tree).

The company intends to use the chapter 11 process to shop itself as a going concern and close at least 74 stores. The company makes no mention, however, of the extent of the sale process and there is no stalking horse bidder currently lined up. The company will seek approval of a (no new money?) $57mm DIP credit facility as well as credit support from certain “Critical Vendors” on a second and third lien basis.

  • Jurisdiction: D. of Delaware (Judge Silverstein)

  • Capital Structure: $57mm ABL (Encina Business Credit LLC/Israel Discount Bank of New York), $30mm term loan (Gordon Brothers Finance Company), $13.4mm Letters of Credit, $10mm Fallas Loan

  • Company Professionals:

    • Legal: Katten Muchin Roseman LLP (WIlliam Freeman, Karen Dine, Jerry Hall) & (local) Pachulski Stang Ziehl & Jones LLP (Richard Pachulski, Peter Keane)

    • Financial Advisor: SierraConstellation Partners LLC (Curt Kroll)

    • Investment Banker: Imperial Capital LLC

    • Real Estate Advisor: RCS Real Estate Advisors

    • Liquidation Agent: Hilco Merchant Resources LLC

    • Claims Agent: Prime Clerk LLC (click on company name above for free docket access)

  • Other Parties in Interest:

    • DIP Agents: Encina Business Credit LLC (Legal: Choate Hall & Stewart LLP, Kevin Simard) & Discount Bank of New York (Legal: Otterbourg PC, Daniel Fiorillo)