Use Your Gift Certificates: Linens 'N Things Expected To File Bankruptcy Tuesday

Home goods retailer Linens ‘N Things is expected to file for Chapter 11 bankruptcy protection on Tuesday. The company has hired “well-known restructuring firm” Conway Del Genio Gries & Company, and all signs point to dark days ahead, says the NYT:

If, as the market price implies, Linens ‘n Things noteholders expect to recover just one-third of face value on their debt, woe to the equity holders, Apollo Management, National Realty & Development Corporation and Silver Point Capital. Their stock is almost sure to be wiped out.

Under the terms of its senior notes, Linens ‘n Things continues to make regulatory filings like a public company. So we can see exactly how much is at stake: The buyout group supplied $648 million of their own equity — or, more precisely, their funds’ equity — to take Linens ‘n Things private two years sago. That is about half of the deal’s overall price of $1.3 billion.

And unless we are missing something, it appears that they haven’t yet recouped any of that cash in the form of a special distribution or dividend (a favorite trick in the buyout world).

Holding a gift certificate makes you an unsecured creditor in the eyes of a bankruptcy court, and as such you’re pretty low on the pecking order when it comes to divvying up the money. Today might be a good day to do some shopping.

Linens ‘n Things: Don’t Expect a Soft Landing [NYT]