Texas-based retail jewelry store operator Samuels Jewelers has filed its fourth Chapter 11 bankruptcy case. This time, the beleaguered company is hoping for a going concern sale.
The First Three(!) Chapter 11 Cases
Samuels Jewlers traces its origins to a jewelry chain founded in 1891, Barry’s Jewelers, as a single store in Los Angeles. In the 1980s, Barry’s rapidly expanded into indoor shopping malls. At the time, it was one of the fastest-growing jewelry chains in the country. But Barry’s experienced small waves of unprofitability, filing Chapter 11 petitions in 1992 and 1997. Following the second bankruptcy, it changed its name to Samuels Jewelers, its most recognizable brand. The company filed its third bankruptcy in 2003, emerging with new owners. It later relocated to Texas.
Who Is Samuels Jewelers?
Gitanjali Gems, an Indian public company, acquired the company in 2006. Samuels Jewelers operates over 120 stores across 23 states. Its brand names include Roger Jewelers, Andrews Jewelers, Schubach Jewelers, and Samuels Diamonds. In addition to its retail stores, the company has an e-commerce operation.
Why Has It Filed Another Bankruptcy Case?
The company cites several operational problems leading to its bankruptcy filing:
- Increased industry competition from discount and e-commerce stores;
- Operational deficiencies;
- Climbing expenses;
- A failure to keep up with customer preferences and build up of stale inventory.
The company has also been hard-hit by negative publicity associated with an investigation by the Indian Central Bureau of Investigation (CBI) into Gitanjali – Samuel Jewelers’ sole equity holder and one of its suppliers and lenders. The CBI has alleged that Gitanjali and others defrauded multiple Indian banks. Samuels’ states that some of its former directors, board members, and executives have been implicated, including its former CFO and president. While Gitanjali is no longer operating, this has disrupted Samuels Jewelers’ product supply and funding sources. And the situation has caused the company to lose standing with vendors, resulting in terminated relationships and more supply chain disruption. Moreover, according to the company new details and allegations continue to surface.
Samuels is at least the second jewelry company to file a chapter 11 case this year in the aftermath of a CBI investigation. In February, Firestar Diamond filed for Chapter 11 bankruptcy protection following news reports in India that its majority shareholder and parent had colluded with Punjab National Bank to obtain over $1 billion in unauthorized loans.
The (Hail Mary) Sale Effort
Although Samuels Jewelers says it is seeking a sale, its filings indicate it has yet entered into a purchase agreement with anyone. In fact, it has not even hired an investment banker. That is “in process,” it says. But the company states optimistically that it has received “some indication of interest” and is “hopeful” that a sale will be possible.
Meanwhile, Samuels Jewelers plans to start selling excess inventory and run store closing sales. It has enlisted a joint venture of Gordon Brothers Retail Partners and Hilco Merchant Resources as an asset disposition consultant to help with that effort.
Because Samuels Jewelers is pursuing a potential going-concern sale, the consulting agreement includes a fiduciary out provision to allow the company to terminate the agreement and pursue a partial or full going-concern sale.
The Committee Formation Meeting
The committee formation meeting is set for Thursday, August 16, 2018, at 10:00 a.m. It will be held at The Du Pont Hotel in Wilmington, DE. While you’re there, you can check out the “classy nouveau Victorian-inspired” lobby makeover by acclaimed New York architect and interior designer Campion Platt. Or stay in touch with your office with their new, top of the line Wi-Fi. But definitely stay inside. The weather forecast? 83 degrees, a downright tropical 65% humidity, and scattered thunderstorms.
The case number is 18-11818, and it is pending in the Bankruptcy Court for the District of Delaware. The case has been assigned to Judge Kevin Carey. Prime Clerk is the claims and noticing agent. For more information, you can view the company’s “first-day” global declaration here.