Mervyn's bankruptcy leaves fate of Yuma store uncertain

Mervyn's department store filed for Chapter 11 bankruptcy Tuesday in U.S. Bankruptcy Court in Wilmington, Del., according to a company official.

"There is no immediate plan to close stores or anticipated impact on customers or employees," Andrew Siegel, Mervyn's spokesman, said by telephone from New York. "As the company goes through bankruptcy, it will put together a plan of reorganization to put the company on solid footing."

It was business as usual at the Mervyn's in Yuma, 475 W. 32nd St.

Mervyn's total assets and liabilities are between $500 million and $1 billion, Siegel acknowledged. It received a commitment for $465 million in financing from a group of lenders led by Wachovia Capital Finance Corp. to fund operations while the company is in bankruptcy, and hopefully will be approved by the court today, he noted.

The bankruptcy was a voluntary filing in Delaware, where the company is incorporated. The reorganization plan aims to reduce debt in order to improve capital structure and realign business operations so it can compete successfully for years to come.

It is too soon after the filing to speculate exactly what the plan's details may be, Siegel said. "It's going to be business as usual. We will continue to offer the same great merchandise, service and values."

He emphasized that the filing is a financial and legal procedure that will have no effect on customers while stores continue operations.

A Chapter 11 bankruptcy is available to any corporation or sole proprietorship or individuals with unsecured debt of more than $337,000 or secured debt of more than $1 million.

Whereas a Chapter 7 filing is when a business ceases operations and a trustee sells all of its assets and distributes the proceeds to its creditors. Chapter 11 is an attempt to stay in business while a bankruptcy court supervises the reorganization of the company's debt obligations, according to U.S. bankruptcy code.

Sun Capital Partner Inc., a Florida-based investment firm, bought Mervyn's from Target for $1.65 billion in 2004.

Mervyn Morris opened the first Mervyn's store in 1949 in San Lorenzo, Calif., an Oakland suburb. The Hayward, Calif.-based retailer sells clothing and home furnishings at 177 locations in seven states.

Mervyn's largest creditors are Levi Strauss & Co., owed $12,8 million; Wicked Fashions, owed $6.1 million; and Nike USA, Inc., owed $4.7 million. The company had net sales of $2.5 billion and a net loss of $64 million for the fiscal year that ended in February, according to the Bloomberg.com Web page.

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William Roller can be reached at
wroller@yumasun.com or 539-6858.