As it awaits the insurance claim payout for millions of dollars in business losses caused by Hurricane Sandy, Totowa-based Big M Inc., which owns and operates the Mandee, Annie Sez and Afaze discount clothing store chains, has filed for bankruptcy to reorganize its 129 stores, company CEO Alan Mandelbaum said.
According to Big M Chief Restructuring Officer Glenn Langberg, the firm obtained a new revolving line of credit to pay back its nearly $15 million in debt before the end of 2012 after implementing a restructuring plan that cut down on overhead costs and closed underperforming stores.
Langberg said the company was poised for positive growth in 2013 until it assessed the damage caused by Sandy, initially totaling nearly $6 million in losses from destroyed inventory and weeks of closed operations at its distribution centers, headquarters and stores, which he said are covered under its business interruption insurance policy.
However, 10 weeks later, Big M has not received any payment from its claim, which Langberg said prompted the firm to turn to the courts for financial protection by filing for Chapter 11 on Jan. 4 in the New Jersey district of U.S. Bankruptcy Court.
Mandelbaum, whose family founded the firm in 1948, said the superstorm cost the company three stores and shut down distribution channels and 55 stores in New Jersey for a week, which he said "took the steam out of the Christmas season and our preparations for it."
But Mandelbaum said Big M "most likely would have been able to weather the storm's impact" if it had received a timely payout from its insurance provider, Swiss Re subsidiary Westport Insurance Corp.
A Westport spokesman said in an e-mail the company "has been in ongoing communication with Big M following Hurricane Sandy."
"We are committed to promptly and fairly resolving Sandy related claims," the spokesman said, though he noted "we treat all insurance contracts as confidential agreements between Westport and each of our clients. Accordingly, we can not disclose the contractual elements of this matter."
In a statement, Big M said the length of time it has taken to resolve the insurance claims has "forced one of the longest-standing retailers in the tri-state area to turn to the court for relief and time to reorganize."
"I think at the end of the day, it was Hurricane Sandy that led to where we are right now," Langberg said. "If the insurance company paid us in a timely fashion, we would have had the cash we wanted to have on hand going into Christmas."
Still, Langberg said the company looks forward to joining the list of retailers that have successfully emerged from bankruptcy in recent years.
"We have an excellent Chapter 11 team in place, dedicated staff and a proud history of 60-plus years as a family-owned and operated business to carry us through," the company said in a statement. "Big M plans to emerge a stronger and healthier company as a result of taking this step."
Langberg said Big M secured a $10 million credit line from Salus Capital Partners LLC last week, but still owes its creditors approximately $15 million.