Orchard Supply Hardware Stores Corp filed for Chapter 11 bankruptcy protection early on Monday, court documents showed, and has reached a prospective agreement to sell the majority of its assets to retailer Lowe's Companies Inc for about $205 million in cash.
Orchard, which was spun off by Sears Holdings Corp in late-2011, said it was carrying a high debt load on its balance sheet and that it may not be in a position to make scheduled payments when the first tranche of its debt matures in December 2013.
Continue Reading Below
The company said that home improvement retailer Lowe's would act as a "stalking horse bidder" in an auction of Orchard's assets, serving as a minimum offer for the business which could still be topped by others.
Management and the board determined that a sale of Orchard through a Chapter 11 process was the best possible outcome for the company and its stakeholders after exploring a range of alternatives, the company said.
The company, which generated revenue of $657 million in the 2012 fiscal year, listed total liabilities of $480.1 million and total assets of $441 million, according to a court filing.
Orchard said it has secured commitments for $177 million in debtor-in-possession (DIP) financing, which will help it to continue meeting its financial obligations throughout the Chapter 11 case.
(Reporting by Sakthi Prasad in Bangalore; editing by Patrick Graham)