- Forth Worth, Texas-based home furnishings retailer Pier 1 Imports has filed for Chapter 11 bankruptcy.
- With its filing, Pier 1 noted that it is pursuing a sale.
- “Somebody believes in them, because they’ve convinced banks to give them nearly $260 million, which allows them to continue operating the business,” Texas bankruptcy attorney Sid Scheinberg told Business Insider.
- Visit Business Insider’s homepage for more stories.
Pier 1 Imports has filed for Chapter 11 bankruptcy, the home goods retailer announced in a press release on Monday.
Chapter 11 may sound like a dire prospect for any company, but Pier 1’s filing may reveal a ray of hope for the future of the business. When it voluntarily filed for bankruptcy in the eastern district of Virginia, Pier 1 noted that it is pursuing a sale as it goes about shutting down 450 stores around the country.
Pier 1 didn’t immediately respond to Business Insider’s request for further comment.
Attorney Sid Scheinberg, who serves as the chair of the bankruptcy and creditors’ rights section of Dallas law firm Godwin Bowman PC, said that it’s a good sign that the retailer has obtained a $256 million debtor-in-possession financing from Bank of America, Wells Fargo National Association, and Pathlight Capital.
“Somebody believes in them, because they’ve convinced banks to give them nearly $260 million, which allows them to continue operating the business,” Scheinberg said. “There’s something there that’s worthwhile to continue operating or get sold.”
In its release, the company announced its intent to keep its stores and website “open and operating” throughout the bankruptcy proceedings, as well as to continue to “honor customer commitments,” compensate employees, and pay vendors and suppliers.
The statement noted that Pier 1 “intends to conduct a court-supervised sale process and complete the sale through a Chapter 11 plan,” with the deadline for “qualified binding bids” to be set around March 23. While those banks are setting themselves up to become more high-priority debtors — and thus get first crack at being paid off — they are also taking on risk with such a move.
While a retailer may file for bankruptcy with a buyer in mind, a judge can always throw those plans into flux by ordering the business to be sold at auction. With that in mind, Scheinberg said that it’s interesting that the company has filed in Richmond, Virginia, rather than in its home state of Texas.
He added that a strategic filing can help clear the way for such a sale. He said that leases can often be the “worst debt” that a retailer accrues.
“I think the big reason they filed is they’ve got a lot more retail stores that they really need,” Scheinberg said. “They’re stuck with all these leases. Bankruptcy is probably the only tool that allows them to reject all these leases easily without having to make some sort of deal with every one of these landlords.”
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