The Container Store declares bankruptcy, but claims it’s here to stay

The Container Store has placed an order for Chapter 11 bankruptcy protection on Sunday in an attempt to save the business and ensure future profitability.

Wall Street analysts had expected the move as the retailer’s financial difficulties continued to increase. The Texas-based company with 103 stores in 34 states and the District of Columbia sells custom cabinetry and storage products.

The Container Store said this does not mark the end of the retailer. The company said it has filed for voluntary Chapter 11 protection in the Bankruptcy Court for the Southern District of Texas, where it plans to “implement a recapitalization transaction to strengthen its financial position, support growth initiatives, and enhance long-term profitability.”

At least 90% of the company’s lenders have agreed to support its bankruptcy plan, which will provide the company with $40 million in new financing, help it reduce its debt by at least $45 million and ease debt payments as well as extend the time it has to repay. Pay off remaining debts.

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The company said it will continue to operate its business as usual and provide home products and services to customers “without interruption.” In addition, its stores and website will continue to operate as usual. The company also said that all customer deposits and orders will be honored and delivered as usual.

However, a source close to the matter told FOX Business that the process “allows companies to renegotiate the terms of their leases to align their store footprint with market realities and business needs.” If the company fails to “achieve significant rent reductions, it may be forced to close a few select locations,” the source said.

“The container store is here to stay,” CEO Satish Malhotra said, adding that the bankruptcy process will help the company grow its business and enhance its capabilities.

“We are particularly excited about the future of our custom space offerings, which continue to show strength,” Malhotra said. “We intend to Keeping our workforce strong We remain committed to providing an exceptional experience for our customers as we undertake this recapitalization and for many years to come.”

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The retailer known for its organizational solutions has quickly gained notoriety through its success “The Arrangement” series on Netflix, Which premiered in 2019.

Today, it faces a weaker housing market and the increasing availability of cheaper alternatives. Earlier this month, The Container Store’s shares were delisted from the New York Stock Exchange Ready to write off shareswhich fell below the New York Stock Exchange’s continuous listing standard. This standard requires listed companies to maintain an average global market capitalization of at least $15 million over 30 consecutive trading days.

Housing market conditions and increased competition “made this brick-and-mortar firm … an unnecessary purchase,” Eric Snyder, a partner at New York City-based Wilk Auslander LLP, previously told FOX Business.

The company does not benefit from holiday sales because its products are not considered discretionary purchases, which exacerbates its problems, according to Snyder.

“For this reason, in addition to losing a $40 million lifeline from Beyond, bankruptcy and a quick sale is the only option,” Snyder said. Beyond Inc., which owns Bed Bath & Beyond and Overstock.com, backed out of a deal to invest $40 million in the Container Store Group as part of a new partnership.

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It was originally planned to invest in the company and leverage a section within the Container Store’s real estate sites to showcase a variety of kitchen, bath and bedroom items, which would be co-branded. But Beyond Inc Executive Chairman Marcus Lemonis said last month that the company had concerns that The Container Store may not be able to reach an agreement with its lenders on terms that meet… Financial needs of the deal.

Latham & Watkins LLP served as legal counsel to The Container Store. Investment bank Houlihan Lokey served as its financial advisor. FTI Consulting served as its financial and communications advisor, and A&G Realty served as its real estate advisor.