October 19, 2008 / 6:45 PM / in 9 years

Linens Canada files for bankruptcy protection

NEW YORK (Reuters) - The Canadian subsidiary of Linens ‘n Things has filed for bankruptcy protection in Canada, the retailer said in a statement on Sunday.

It said Linens ‘n Things Canada Corp (Linens Canada) expects to appear in court in Canada in the next week to seek approval under the Canadian Bankruptcy and Insolvency Act.

Canadian units were not part of the company’s voluntary filing for protection under Chapter 11 of the United States Bankruptcy Code on May 2.

Going-out-of business sales at Linens ‘n Things stores began on Friday in the United States after the bankrupt home goods retailer failed to find a buyer to keep the chain running.

A group of six of the U.S. largest liquidators who made a $475 million offer for the company, were the only buyers to emerge for the retailer’s assets in a bankruptcy auction.

In the liquidation, 371 stores throughout the United States will close.

Sunday’s statement said that if the Canadian court gives its approval, the agreement will also include all 40 Canadian locations. Store closing sales are expected following the court approval.

“Unfortunately, the worsening economic situation in the U.S., the deepening decline in the real estate market, the further downturn in consumer spending and the frozen credit markets combined to make this sale of assets the best vehicle to satisfy our creditors,” Michael Gries, chief restructuring officer and interim CEO, said in the statement.

“This is a difficult day, especially since our Canadian stores were among the best performing stores.”

The liquidators expect to sell more than $1 billion of inventory and store fixtures in the going-out-of business sales, they said.

When Clifton, New Jersey-based Linens filed for bankruptcy protection in May, it billed itself as the second largest specialty retailer of home textiles, housewares and home accessories in North America. At the time it was running 589 stores and it has already taken steps to close around 200 locations during the bankruptcy.

The joint venture of liquidators running the store closing sales includes Gordon Brothers Retail Partners, Hilco Merchant Resources, SB Capital Group, Tiger/Nassi Group, Hudson Capital Partners and Great American Group.

The stores are expected to be completely closed in less than 11 weeks, by January 1 at the latest.

Reporting by Grant McCool; Editing by Bernard Orr

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