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Container Store for Chapter 11 bankruptcy protection on Sunday in an effort to save the business and ensure future profitability.
The move was anticipated by Wall Street analysts as the retailer's financial struggles continued to grow. The Texas-based company sells storage products and custom closets with 103 stores in 34 states and the District of Columbia.
The Container Store said this does not mark the end of the retailer's career. The company said it has filed for voluntary Chapter 11 protection in bankruptcy court for the Southern District of Texas as it plans to execute a capital raising transaction to strengthen its financial position, boost growth initiatives and increase long-term profitability.
At least 90 percent of the company's lenders have agreed to support its bankruptcy plan, which will give the company $40 million in new financing. to reduce its debt by at least $45 million and facilitate the payment of debt, as well as increase the time required for the company. Pay off outstanding debts
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The company said it will continue to operate as usual and provide customers with domestic products and services “without disruption”. Additionally, its stores and website will continue to operate as normal. The company has also announced that all customer deposits and orders will be honored and delivered as usual.
However, a source close to the matter told FOX Business that the process allows the companies to renegotiate the terms of their leases to align their store footprints with market realities and business needs. If the company can't “achieve meaningful rent reductions, it may be forced to close a few select locations,” the source said.
A container store on Santana Row in Silicon Valley, San Jose, California, January 3, 2020. (Smith Collection/Gado/Getty Images)
“The container store is here to stay,” said CEO Satish Malhotra.
“We are particularly excited about the future of our custom spaces, which continue to show strength,” said Malhotra. “We intend to Maintain our strong workforce And we remain committed to providing an exceptional experience for our customers as we execute this capital increase and for years to come.”
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The retailer, known for its organizational solutions, quickly rose to fame through success. The Netflix series “Order” which was shown in 2019.
Today, it struggles with a weaker housing market and the growing availability of cheaper alternatives. Earlier this month, shares of The Container Store were suspended on the New York Stock Exchange Ready to remove stocks from the listwhich was below the NYSE continuation listing standard. This standard requires listed companies to maintain an average global market capitalization of at least $15 million over 30 consecutive trading days.
Shopping carts at The Container Store in New York, on November 4, 2013. (Jane Lee/via Bloomberg/Getty Images)
Eric Snyder, a partner at New York-based Wilk Auslander LLP, previously told FOX Business that housing market conditions and increased competition “made this brick-and-mortar company an unnecessary acquisition.”
The company doesn't profit from holiday sales because their products aren't considered discretionary purchases, which exacerbates its problems, according to Snyder.
“Because of this, plus losing the $40 million bailout from Beyond, bankruptcy and a quick sale are the only options,” Snyder said. Beyond Inc. which owns Bed Bath & Beyond and Overstock.com, backed out of a deal to invest $40 million in The Container Store Group as part of a new partnership.
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Beyond was originally planned to invest in the company and use a portion of the Container Store's real estate locations to showcase a collection of kitchen, bathroom and bedroom items, which would be co-branded. But Marcus Lemonis, CEO of Beyond Inc. The company said last month that it was concerned that The Container Store would not be able to reach an agreement with its lenders on terms they would match. Financial needs of the transaction.
Latham & Watkins LLP served as legal counsel to The Container Store. Investment bank Houlihan Lokey served as its financial advisor. FTI Consulting served as financial and communications advisor and A&G Realty served as real estate advisor.