The hype for retailer Steve & Barry's LLC neared a zenith last June. The "Today" show touted the discount department store as actress Sarah Jessica Parker appeared on the program, announcing her new exclusive fashion line at a Manhattan store.
The Rhode Island contractors who helped prepare the store for national TV were beaming with pride. Their mood soon changed. The $4,000 bill for that store, and many others, went unpaid amid unreturned phone calls and promises of payment.
"They've never paid on time and always had some excuse, so when they were on the 'Today' show we felt really proud, but at the same time, it felt like the emperor had no clothes," said Laura Johnson, who owns a small carpentry firm, Ottmans Services.
For those doing business with Steve & Barry's, it has become hard to reconcile the hype with reality. As the chain was inking high-profile licensing deals and attracting national media acclaim, small vendors across the country -- along with overseas apparel manufacturers -- say they were going unpaid, or enduring months of lag time between payments.
For instance, Steve & Barry's is no longer allowed to advertise in the University of Michigan student newspaper, The Michigan Daily. The company was the paper's largest advertiser for the 2006-07 school year.
Newspaper business manager and University of Michigan senior Elaina Bugli said the retailer fell months behind on $36,000 in bills and still owes $20,326 for ads bought more than a year ago.
"It's by far our largest unpaid debt. They owe us more than we set aside for all unpaid debts for the year," Ms. Bugli said. Meanwhile, Steve & Barry's is a prominent licensee of merchandise for the University of Michigan, which ranks fourth in collegiate apparel sales.
Steve & Barry's, with about 275 stores across the country and sales approaching $1 billion, has hired the same turnaround firm as Sharper Image and Linens 'n Things, both of which have since filed for bankruptcy. That restructuring firm, Conway, Del Genio, Gries & Co., and a spokesman for Steve & Barry's didn't return calls seeking comment.
The closely held retailer has also hired a bankruptcy lawyer, and if
Goldman Sachs Group Inc. is unable to line up at least $30 million in last-minute rescue financing, the company may have to file for bankruptcy as soon as next week, several people involved in the matter said.
Crystal Capital, a retail-focused private-equity fund specializing in rescue financing is among the firms to be contacted by the retailer.
With their deeply discounted prices and celebrity endorsers, childhood friends Steve Shore and Barry Prevor of Long Island, N.Y., became media darlings. The attraction came on several levels. Celebrities such as Ms. Parker, actress Amanda Bynes, tennis star Venus Williams and surfer Laird Hamilton cut exclusive licensing deals with the company. Meanwhile, Steve & Barry's grew and added stores while other retailers closed sites or even filed for bankruptcy. The company has opened eight stores in the last month with 12 more in the works.
Along with the attention came big investments. TA Associates Inc., an old-line Boston-based private-equity firm with $12 billion in assets, paid $320 million for roughly half of the company. About half of that went into the company, with the balance being paid to Messrs. Prevor and Shore.
Steve & Barry's main lender is the commercial-lending unit of
General Electric Co. It provided the company with a roughly $200 million credit facility in March, and the company is already in default on that loan, three people familiar with the matter said.
Among landlords, four publicly traded mall REITs have the most exposure to Steve & Barry's, according to a report from Merrill Lynch. They are
Westfield Group, CBL & Associates Properties Inc., Glimcher Realty Trust and Feldman Mall Properties Inc. Each has that retailer at roughly one quarter or more of their malls. The malls declined to discuss Steve & Barry's or couldn't be reached for comment.
Despite all the attention and money, the company appears to have been getting far behind on some bills, including with long-time vendors that had been used to open a slew of new stores. Much of the investment that came in was used to open new stores or fund operating losses on low-cost apparel, people familiar with the matter said. Earnings were about $20 million on sales of $1 billion, and the store often lost money on its key merchandise, these people said.
Eight-person firm Ottmans Services put in fixtures, shelves, dressing rooms and other work for about 40 Steve & Barry's stores across the country, including the Manhattan site that hosted the "Today" show. The company was getting so much business with Steve & Barry's that Ms. Johnson said she cut her hourly rates from $65 to $45 as new stores opened from California to Idaho to New York.
But now, owed about $23,000 for a job in December, her firm has ceased work. Two weeks ago she backed out of a job on a new store to open in Danvers, Mass., a Boston suburb. The final straw was when she said the company offered to pay off its debt with a corporate credit card, if she would do the next job.
"There was always some excuse, some new form you had to fill out or a new person who was taking calls," Ms. Johnson said.
http://online.wsj.com/public/article...2_1356_leftbox
Steve & Barry's Possibly Headed Towards Bankruptcy
~Valeen~
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