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Chapter 11 Bankruptcy

Chapter 11 bankruptcy allows for reorganization of a company under U.S. bankruptcy law. Chapter 11 bankruptcy is available to every business, where it is a corporation, partnership, or sole proprietorship. It’s also available to consumers, but is less commonly used. 

Delia*s Bankruptcy

The company has hired advisers to help liquidate its total assets of $74 million. It listed its liabilities at $32.2 million in its filing with a U.S. bankruptcy court. Additionally, its Chief Operating Officer Brian Lex Austin-Gemas resigned on Friday, as well as its Chief Executive Tracy Gardner. Delia*s had warned on Friday that it was also liquidating assets and that it would be filing for Chapter 11 “in the very near term.”

Debtor in Possession Credit

Salus Capital Partners LLC will give the company a $20 million debtor-in-possession credit in order to continue its operations, conduct store closings, and closeout sales. Debtor in possession credit is provided to companies experiencing financial distress. This debt is considered senior to all other debt.

Teen Fashion Going Bankrupt?

Retailers, especially ones that cater to teens have been hit hard ever since the beginning of the recession. It seems they have lost market share in comparison to brands such as H&M, Forever 21, and Inditex’s Zara, due to the fact that these stores seem to be able to bring the latest runway styles to stores within weeks. Additionally, Delia*s and other similar stores, have lost their ability to compete with online retailers such as, who are able to offer deeper discounts than most.

Source: Reuters, UPDATE 1-Teen apparel retailer Delia*s files for bankruptcy, December 8, 2014

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