Has retail patriarch and larger-than-life Reading philanthropist Albert R. Boscov pulled off the miracle that saves his father's legacy - and the nation's oldest family-owned department store chain?
The irrepressible Boscov, 79, has orchestrated a deal, announced today, that may rescue his family's company from the clutches of bankruptcy.
Boscov signed an agreement to buy back most of the assets of Boscov's Department Store L.L.C. despite the credit and consumer crises that have brought much deal-making to a standstill in the last two months.
The announcement today by the company followed months during which Boscov personally scrambled for investors and haggled with creditors, who were all the more skittish when economic turmoil erupted on Wall Street in mid-September.
If approved Nov. 13 by U.S. Bankruptcy Court Judge Kevin Gross, the asset-purchase agreement would restore family control to the company founded by Boscov's father 97 years ago, a chain whose 39 stores anchor many of the region's malls and which sponsors Philadelphia's annual Thanksgiving Day Parade.
The bid, which the company said had the support of its creditors, is backed by a team of private investors who include Boscov and his brother-in-law Edwin Lakin, 85. Both men watched the company fall on hard times after they retired from the helm in early 2006.
Terms were not disclosed. But a source familiar with the deal said the Boscov-Lakin offer included "substantially more equity" than the $11 million in cash offered by the Philadelphia private-equity firm Versa Capital Management Inc., whose own bid was valued at more than $225 million. Versa withdrew its bid.
The hefty cash component of the Boscov-Lakin offer was pivotal in persuading the major banks holding Boscov's multimillion-dollar loans and lines of credit to accept a plan that would keep the chain running rather than forcing a liquidation.
"I believe that this agreement maximizes the value of our business and the return to our creditors," Boscov's chairman and chief executive officer, Ken Lakin, said in a prepared statement. "It also provides certainty about the future direction of our company."
Lakin, who did not return calls for comment, said the buyout offer by his father and father-in-law would leave the chain well-capitalized so it could "build a stronger and more competitive business."
A formal financing agreement was not yet in place, but the company expressed confidence that it would be completed by the end of the month.
Boscov, who did not return calls for comment, touted in a prepared statement the company's "100-year tradition of providing quality, value and trusted brand names."
"We are pleased that we can save the jobs of many of our loyal employees and have a positive impact on the economic vitality of the communities in which we are located," Boscov said.
Given what one financing expert called the "extraordinarily challenging" credit and financing environment these days, news that Boscov had struck a deal was a sign that investors and lenders were confident in the Boscov family as business people, he said.
"Frankly, this is as difficult as it gets," said Jim Still, managing director and head of investment banking at Boenning & Scattergood Inc. "I think that with the family involvement - they're a very well-regarded family - there is certainly the opportunity for them to raise this level of capital."
Boscov's has been under Chapter 11 protection since filing in U.S. Bankruptcy Court in Delaware on Aug. 4, after the chain had fallen into arrears with creditors.
The retailer had embarked on an ambitious expansion several years earlier by purchasing a batch of department stores that earlier had been occupied by its competition. It also had taken out loans to help finance the retirement buyouts of Boscov and Edwin Lakin.
When the economy began to sour a year ago and sales dropped, the company was in distress. When it filed for bankruptcy, the chain of 49 stores employed 9,500 people and had $1.25 billion in annual sales.
But it also had $90 million in debts to vendors and other purveyors of goods and services, including Philadelphia Media Holdings L.L.C., which owns The Inquirer, and Jones Apparel Group Inc., a Bristol-based apparel retailer.
Boscov's also had $157 million in outstanding loans with Bank of America N.A., General Electric Co. and Wells Fargo & Co. It owed an additional $38 million to what was then Bear Stearns Corporate Lending Inc.
After declaring bankruptcy, the company shed 10 of its most unprofitable stores through going-out-of-business sales. The remaining 39 stores generate $1 billion in annual revenue.