After much anticipation, Pier 1 Imports has filed for Chapter 11 bankruptcy, the company announced Monday.
But there appears to be no Texas connection in the company’s legal representation nor where the homegrown Texas retailer chose to voluntarily file for Chapter 11.
The filing landed in a venue far from the home goods and decor retailer’s Fort Worth hometown: Richmond, Virginia.
According to the documents, filed in the U.S. Bankruptcy Court for the Eastern District of Virginia, lawyers out of Kirkland & Ellis’ New York, Chicago and Washington offices are leading the bankruptcy for Pier 1. The company’s restructuring advisor is AlixPartners, and its investment banker is Guggenheim Securities.
“So just like Houston has become the preferred venue for oil and gas industry filings, the Richmond venue is becoming the preferred for retail cases — at least the ones that Kirkland files.” — Lou Strubeck
The lawyers from Kirkland include New York partners Joshua Sussberg and Emily Geier, Washington, D.C. partner AnnElyse Scarlett Gains, and Chicago associate Joshua Altman.
Last year Pier 1 announced that it was making dramatic changes in its operations; those changes were believed to include the possibility of bankruptcy, but weeks passed and nothing was filed.
The company has long struggled with navigating the waters of the modern, ever-changing world of retail as the market’s customer base increasingly buys products online. In a continued effort to cut costs, Pier 1 announced less than two months ago that it is closing up to 450 of its stores throughout the U.S. and Canada. Pier 1 stock temporarily halted trading in light of the news.
A few weeks after that announcement, Pier 1 faced another challenge when Robert Bostrom, the company’s general counsel, unexpectedly passed away.
In its filing, Pier 1 listed the estimated number of creditors to be between “50,001 and 100,000,” and projected its debts to be between $500 million and $1 billion. The company said its top 30 creditors are owed an estimated $19.35 million, 21 of whom are located throughout Asia.
Pier 1 said it has received a $256 million commitment of debtor-in-possession financing with Bank of America N.A., Wells Fargo National Association and Pathlight Capital LP. It also said that it had utilized the bankruptcy filing to pursue a sale. Pier 1 said it has already engaged in discussions with multiple potential buyers.
While no significant Pier 1 connection to Richmond is apparent, Kirkland has represented other retailers that handled their bankruptcies in Richmond, including Circuit City and Toys R Us.
The New York Times reported that the Eastern District of Virginia is a popular venue for bankruptcy lawyers because of its reputation for a rocket docket and tendency to allow billing rates that are 25% higher than other venues.
A Kirkland spokesperson declined to comment on why the firm chose Richmond, but bankruptcy expert Lou Strubeck said it could have involved an analysis of a number of factors, including the experiences of judges in the district, either in handling cases or within a particular industry; the likelihood of getting a desirable judge assigned to the case; the involvement of the U.S. Trustee in the district or division; or treatment of certain legal issues, such as third party releases.
“The bottom line is that the Kirkland restructuring group is extremely strategic and savvy in terms of selecting what, based on precedent, they believe is the best venue for a filing where there are multiple options,” said Strubeck, a partner at Norton Rose Fulbright.
“From the perspective of a debtor, the way the Toys R Us and Circuit City cases were handled in Richmond would suggest that would be a good prospective venue for another,” he said. “So just like Houston has become the preferred venue for oil and gas industry filings, the Richmond venue is becoming the preferred for retail cases — at least the ones that Kirkland files.”
Sussberg and Geier both worked on the Toys R Us bankruptcy and were the top earners, each billing over $3 million. Kirkland received $57 million in total legal fees.
Collectively, the two lawyers have worked on multiple restructurings for Texas-based companies, including Energy Future Holdings, Charming Charlie, Southcross Holdings, Midstates Petroleum Company and McDermott International.