OSIM’s Brookstone, known for massage chairs and travel electronics, is contemplating a possible bankruptcy protection filing in the coming weeks.

Brookstone Is Considering Bankruptcy Filing Within Weeks

Specialty Retailer in Talks With Hilco, Tiger Capital

EMILY GLAZER

Updated Feb. 13, 2014 4:47 p.m. ET

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Brookstone, which operates more than 250 stores, is known for a lineup of various consumer gadgets that includes these massage chairsTampa Bay Times/Zuma Press

Brookstone Inc., known for its wide array of consumer gadgets such as massage chairs and travel electronics, is contemplating a possible bankruptcy-protection filing in the coming weeks as talks advance with potential buyers, people familiar with the matter said.

The specialty retailer, plagued by disappointing sales, weak liquidity and a hefty debt load, is in talks with firms including Hilco Global and Tiger Capital Group LLC on buying or investing in the company, these people said. A liquidation of the mall- and airport-based chain isn’t currently on the table, some of these people added, though a potential buyer would likely evaluate the company’s more than 250 stores.

“In order to ensure Brookstone’s successful future, the Company is evaluating its options with respect to refinancing and/or restructuring its bond and other debt, and improving its capital structure,” the company said in a written statement to The Wall Street Journal. “We are in active discussions with our senior lender and an ad hoc group of Brookstone bondholders in regard to our bonds due October 2014, with the goal of coming to an agreement that is amenable to all parties.”

The company, which is based in Merrimack, N.H., and has about $140 million in debt, stressed that it hasn’t yet reached a deal with a potential buyer or investor or decided whether or not it will file for bankruptcy protection.

Brookstone, which got its start as a catalog retailer in 1965 selling “hard-to-find tools,” was taken private in 2005 by investment firms J.W. Childs Associates LP, Osim International Ltd. O23.SG +0.85% and Temasek Holdings Pte. Ltd. The $440 million deal saddled the company with additional debt, and Brookstone failed to meet sales expectations amid a recession that cut into consumers’ disposable income, according to people familiar with the matter. Increased competition from Internet retailers also hurt the company’s sales.

By Sept. 28, 2013, Brookstone had just $1.1 million in cash, off from $31.6 million a year earlier, according to a regulatory filing.

The company missed an interest payment last month on about $125 million of debt, and the payment’s grace period expires Saturday, people familiar with the matter said. The company could avoid default and enter into an agreement for more time with enough creditor approval, these people said. Creditors include investment firms KKRKKR +0.96% & Co. and Canyon Partners LLC, some of these people said.

Brookstone’s struggles come as distress begins to seep into the broader specialty-retailer sector, which posted underwhelming holiday sales. Discount retailer Loehmann’s Holdings Inc. filed for Chapter 11 protection in December and is shutting down its stores. Women’s clothing retailer Dots LLC followed Loehmann’s into bankruptcy court the following month.

Brookstone’s chief rival for many years was Sharper Image, which filed for Chapter 11 protection in February 2008. Its brick-and-mortar stores were liquidated by a group of firms including Hilco, but its brand was revived on the Internet and is licensed to other gadget makers.

In its statement, Brookstone said it would “continue to operate as we always have.” It added that it has hired restructuring advisers at investment bank Jefferies LLC, law firm K&L Gates LLP and financial advisers Deloitte CRG. Some of its bondholders are working with advisers at Stroock & Stroock & Lavan LLP and turnaround firm Alvarez & Marsal, according to people familiar with the matter.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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