Fashion accessory retailer Charming Charlie will close all its stores after going bankrupt for the second time in less than two years. More than 3,000 full- and part-time employees could lose their jobs.
Cash Needed
Charming Charlie loaded up on lower-quality inventory after its last bankruptcy in an attempt to boost liquidity—its credit line grows along with its inventory levels. But those goods sat unsold, resulting in markdowns and thinner margins, Bellon said. In addition, vendors took longer than expected to ease off on tough trade terms, such as requiring deposits or cash on delivery.
The company arranged for a $13 million loan from existing creditors including Second Avenue Capital LLC and White Oak Commercial Finance LLC to help finance its wind-down. Hilco Merchant Resources LLC and SB360 Capital Partners were hired to run liquidation sales, which are expected to raise $30 million. Hilco helped the company close outlets as part of its prior bankruptcy, court papers show. The retailer expects to vacate its stores by Aug. 31.
Charming Charlie in the past paid severance to certain terminated employees, but discontinued that program as of the bankruptcy filing, court papers show. The company is, however, seeking court permission to give bonuses to store-level employees for staying on through the liquidation.
The company has debt of about $82 million, comprised of an asset-based credit line, a term loan facility and vendor payment credit line, court papers show.
A representative for Charming Charlie didn’t immediately return a call seeking comment.
The case is Charming Charlie Holdings Inc., 19-11534, U.S. Bankruptcy Court for the District of Delaware.