On February 17, 2020 (the “Petition Date“), Pier 1 Imports, Inc. (“Pier 1”, or the “Company”) and seven of its affiliates (collectively, the “Debtors”) each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Virginia.
The Debtors are represented by Kirkland & Ellis LLP as lead counsel and Kutak Rock LLP as local counsel. The case has been assigned to the Honorable Kevin R. Huennekens. A hearing on the Debtors’ first day motions was held on February 18, 2020. A meeting to form the unsecured creditor’s committee was held on February 27, 2020. A second-day hearing has been scheduled for March 13, 2020.
Headquartered in Fort Worth, Texas, the Debtors are a retailer of home décor, furniture, and accessories. Their approach has focused on providing customers with a curated mix of home goods from artisans around the world. Founded in 1962 as a single store in San Mateo, California, the Company expanded rapidly in the 1970s, through the 1990s, with its own credit card having generated over $100 million in sales by 1994. The Company continued to grow its footprint and increase its brand exposure throughout the 90s, expanding into Puerto Rico and developing partnerships for operations in the UK and Mexico. Since 2000, the Company has continued to evolve, developing an e-commerce platform, opening new stores, and modernizing its existing stores. The Debtors currently have 923 stores throughout the United States and Canada though, in connection with the filing of these cases, they have announced the closing of up to 450 of their stores and all Canadian operations.
The Debtors cite a confluence of operational and strategic factors as having contributed to its need to file these cases, the most significant of which was a misguided effort by prior management to adapt to the changing retail environment by seeking to compete with low-price, low curation retailers. The strategy failed to resonate with core customers, leading to a glut of inventory on shelves that the Company could not move, requiring significant discounting and loss of margin. Even after bringing in new management, the Company was left with a large quantity of low-price, low-quality inventory that it needed to sell before implementing a new strategy, thus causing continuing losses into the fiscal year 2020. In addition, the Company did not appropriately adjust its store footprint to account for the losses. A decline in traffic is also attributed to the heightened competition online, with the entrance of Amazon, Wayfair, and Overstock, and in-store, with the entrance of AtHome, HomeGoods, and Target, among others, as well as increased furniture offerings from big-box retailers.
The Company has hired new management with extensive retail experience and demonstrated the ability to quickly design and execute a turnaround plan. With these efforts and a renewed focus on its core customer, the Company has already improved its margins, sales, and customer engagement. In addition, the Company’s lenders have analyzed the plan and are working with them as part of the chapter 11 process to maximize the Company’s ability to implement a going-concern restructuring (See Robert J. Riesbeck Affidavit in Support).
As of the Petition Date, the Debtors have outstanding funded-debt obligations in the aggregate principal amount of approximately $400 million, consisting of $187,300,000 in facilities from
Bank of America, N.A., Pathlight Capital Fund, and certain affiliated lenders (of which approximately $90 million in borrowings and $47.3 million of letters of credit are outstanding) and $189 million in loans from Wilmington Savings Fund Society, FSB, and its affiliated lenders, including approximately $9.5 million outstanding under industrial revenue bonds and approximately $14.2 million in loans secured by Company-owned life insurance policies.
The Company has received a commitment of approximately $256 million in debtor-in-possession financing from Bank of America N.A., Wells Fargo National Association, and Pathlight Capital LP, to be used subject to a thirteen-week cash-flow budget of $53,367,000. If approved by the court, Pier 1 expects this financing, along with cash flows from operations, to provide the necessary liquidity to support ongoing operations and a sale process. Certain plan and sale milestones have been set: on or before February 24, 2020, the Debtors shall file a plan of reorganization and corresponding disclosure statement; on or before March 23, 2020, the Debtors shall submit qualified bids; on or before April 23, 2020, the Debtors shall have obtained an order from the court confirming an acceptable plan which may include approval of a sale transaction.
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| Approximately $400 million. | |||||||||||||||||||||||||||||||||||||
| Unspecified, but at least $29.7 million in trade debt. | |||||||||||||||||||||||||||||||||||||
| FIRST DAY RELIEF FOR AUTHORIZATION TO PAY AND PAYMENTS | |||||||||||||||||||||||||||||||||||||
| Interim Relief Approximately $115,000. | Final Relief Unspecified. | ||||||||||||||||||||||||||||||||||||
| Interim Relief Approximately $17 million. | Final Relief Unspecified. | ||||||||||||||||||||||||||||||||||||
| Interim Relief Up to $12 million. | Final Relief Up to $30 million. | ||||||||||||||||||||||||||||||||||||
| Interim Relief Total unspecified, but approximately $65 million is outstanding between the Rewards Certificates and Gift Cards and Merchandise Credit programs alone. Debtors seek authorization to maintain and administer customer-related programs. | Final Relief Unspecified. | ||||||||||||||||||||||||||||||||||||
| Employees: Approximately 17,700: 3,600 full-time/14,100 part-time | |||||||||||||||||||||||||||||||||||||
| Interim Relief Approximately $17,310,320.
No payment shall exceed the statutory cap of $13,650. | Final Relief Approximately $51,483,520.
No payment shall exceed the statutory cap of $13,650. | ||||||||||||||||||||||||||||||||||||