Filene’s Basement Declares Bankruptcy, Will Close its Doors

Retailer Filene’s Basement and its parent company, Syms Corporation filed for Chapter 11 bankruptcy in November, with plans to close down its operations after over 100 years in business. Filene’s Basement was famous for offering designer apparel, shoes and accessories at bargain prices. It was perhaps best known for its annual “Running of the Brides” events, where brides to be would sprint into stores for the chance to purchase bargain priced wedding dresses.

Since it was purchased by Syms in 2009, Filene’s has struggled to regain its footing in the discount retail market. In explaining the company’s decision, Syms Chief Executive Marcy Syms explained that Filene’s faced increased competition from large department stores that offered the same brands similar discounts, an increase in private label discount chains, and a decline in buying opportunities as brand name labels reduced overruns. It reported $51.7 million in losses in 2010.

Through Chapter 11 bankruptcy, corporations and partnerships may reorganize their debts and create a reasonable repayment plan, so that the business may return to profitability. Chapter 11 is not limited to large corporate enterprises, as individuals may seek protection under this chapter as well. However, troubled businesses often resort to Chapter 11 because it allows for the restructuring of an unlimited amount of debt; unlike Chapter 13 bankruptcy, which has limits on the total debt threshhold.

Chapter 11 also allows businesses to remain in control of their assets as the bankruptcy proceeds. As “debtors in possession” they can continue their operations and maintain decision-making powers. Like other forms of bankruptcy, Chapter 11 allows debtors to get a financial fresh start.

The Wall Street Journal reports that Syms will ask the bankruptcy court to allow going-out-of-business sales to take advantage of the holiday sales season. This ostensibly will allow creditors to recover a greater share of outstanding debt as the company is liquidated.

In its filings, Syms and Filene’s reported having assets valued between $1 million and $10 million, and debts estimated between $50 million to $100 million. A majority of the unsecured debts consisted of outstanding property leases and payments owed to merchandisers.

While Chapter 11 bankruptcy usually offers a chance for businesses to resurrect themselves, Syms management determined that their business model was no longer viable. As such, the companies will close its 46 stores and lay off nearly 2500 employees after the bankruptcy is completed.

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