Local bankruptcy attorneys got a gift Sunday evening all the way from the West Coast.
Gymboree, a San Francisco-based chain of children’s clothing stores, filed for Chapter 11 in Richmond federal court, bringing with it plenty of work for at least a handful of Richmond law firms.
The debt-ridden company is the latest example of large out-of-town corporations planting their bankruptcies in Richmond in recent years, using a court and judges here known to handle complicated bankruptcy cases in a way that’s viewed by many as favorable to debtors.
That bodes well for local attorneys that win work on such cases, which typically last months, if not years.
The lead local attorneys representing Gymboree is a group from the Richmond office of Kutak Rock, including attorneys Michael Condyles, Peter Barrett and Jeremy Williams, according to court records.
They’re working with Chicago-based Kirkland & Ellis, which has had attorneys in Richmond for other out-of-town companies’ filings, including Patriot Coal and energy company Penn-Virginia.
Other local attorneys representing creditors and interested parties include: Tyler Brown and Justin Paget of Hunton & Williams, Dion Hayes of McGuireWoods, and Cullen Drescher Speckhart of Wolcott Rivers Gates.
Despite being based in California, Gymboree controls an LLC that was incorporated in Virginia, which allows it to file in the commonwealth. It put eight of its affiliated corporations into Chapter 11 in Richmond on Sunday.
As for the reason behind the bankruptcy filing, the company has more than $1 billion in debt coming due and had missed a debt payment earlier this month, according to national reports. The reorganization plan, which could be filed by the end of the week and confirmed in about 90 days, could reduce its debts by $900 million.
The company cited in bankruptcy filings “a challenging commercial environment brought on by increased competition from traditional competitors, the entry of new competitors employing new methods to enhance the customer experience, and a shift in consumer preferences away from shopping at brick-and-mortar stores to online retail channels.”
Its initial filings list 1,000-5,000 creditors, $756 million in assets and $1.36 billion in debts.
Judge Keith Phillips is overseeing the case in Richmond. He approved several motions from Gymboree on Monday, including merging the eight companies’ Chapter 11 cases into one, a round of financing to keep Gymboree afloat and pay its 11,000 employees during the reorganization, and the appointment of consultants to help the company close and liquidate up to 450 of its 1,300 stores.
That closure list would include underperforming stores and the exact count will depend on the company’s ability to negotiate rent reductions and more favorable leases.
The chain has five stores in the Richmond market, according to its website – at Short Pump Town Center, Stony Point Fashion Park, Regency Square, Virginia Center Commons and Chesterfield Towne Center.