Direct retailer School Specialty Inc. files for bankruptcy
January 31, 2013 04:02 PM
School Specialty Inc. has filed for bankruptcy protection and will sell its assets at auction, according to a Chapter 11 petition filed this week in U.S. Bankruptcy Court in the District of Delaware.
School Specialty is a direct marketer of educational materials for teachers and consumers, and the company’s e-commerce arm, School Specialty Online, is No. 135 in the Internet Retailer Top 500 Guide.
The court will oversee the sale of the company’s assets, which as of Dec. 6 totaled $494.5 million, according to the filing. School Specialty has $394.6 million in debt, including an outstanding claim for $516,426 with shipping provider UPS, and $380,382 with I.T. infrastructure firm Logicalis Inc.
Investment company Bayside Capital Inc. has placed a stalking horse bid of $50 million for the assets, but a higher bidder could still come forward. A stalking horse bid is an initial bid on a bankrupt company’s assets from an interested buyer chosen by the bankrupt company and sets the floor for minimum acceptable bids. Bayside is an affiliate of H.I.G. Capital, a private investment firm with $10 billion in equity under management.
School Specialty says the financing will allow the retailer to honor its obligations to customers, suppliers and employees through completion of the sale process, which is expected in 60 to 90 days. Also, as of Feb. 6, the merchant will be suspended from trading on the Nasdaq exchange.
Despite the restructuring, the merchant expects business operations to continue normally. “We are pleased to have reached these agreements with Bayside, and are confident School Specialty’s business has a bright future,” says president and CEO Michael Lavelle. “In School Specialty, we have a company with excellent potential but with a burdensome amount of debt on our balance sheet.”
In fiscal 2012, School Specialty reported $133.2 million in online sales, up 6.0% from $125.7 million in 2011. Total sales decreased 3.9% to about $732.0 million from $762.1 million.
For the second quarter of fiscal 2013 ended Oct. 27, School Specialty reported a 5.8% drop in total sales, to about $236.9 million from $251.4 million. The company did not break out online revenue.