After nearly 50 years in business, The Container Store on Sunday filed under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of Texas and expects to confirm a reorganization plan within 35 days. The process doesn’t include its Swedish Elfa business, according to a company press release.
Just days ago, the New York Stock Exchange suspended trading of the company’s shares and initiated delisting proceedings. That move is now moot, as, once its plan is executed, The Container Store will be owned by its term loan lenders and operate as a private company. In the meantime, the retailer will continue to operate as usual, with its stores and website open for business, per the release. The plan is to pay vendors and other trade creditors in full, as outlined in a motion filed with the court.
Ahead of the filing, the vast majority of the retailer’s term loan lenders agreed to a restricting plan that will give the company $40 million in new financing, at least $45 million in deleveraging, “substantial debt service relief” and “material maturity runway.” The company has added $40 million to its asset-backed lending facility.
The Container Store in October had floated the possibility of bankruptcy in the event that a pending strategic partnership with Beyond fell through. Beyond, which owns Bed Bath & Beyond, Overstock and other brands, had planned to invest $40 million in the struggling home goods retailer, but, weeks later, said The Container Store’s inability to reach an agreement with its lenders was jeopardizing the deal.
In a statement Sunday, Container Store President and CEO Satish Malhotra said the new strategy is sound, and thanked the company’s employees, customers, vendors and partners, who he said “clearly see the strong potential in our business.”
“We believe the steps we are taking today will allow us to continue to advance our business, deepen customer relationships, expand our reach, and strengthen our capabilities,” he said. “We are particularly excited about the future of our custom space offerings, which continue to demonstrate strength.”
The Container Store has for months cited soft demand as it continued to report falling sales. In its most recent quarter, net sales in its retail segment fell 10.4% year over year to $186.8 million, as store comps plummeted 12.5% and online sales fell 13.7%. However, net loss narrowed to $16.1 million, from $23.7 million the previous year.
