By Tom Hals
WILMINGTON, Del., Dec 15 (Reuters) - Retailer Loehmann's [ARCABL.UL] said on Wednesday it reached an agreement with unsecured creditors that will allow the department store chain to exit bankruptcy by Feb. 18.
Loehmann Capital Corp's current owner, Istithmar, a unit of Dubai World [DBWLD.UL], and Whippoorwill Associates Inc will backstop a rights offering that will invest $25 million in the company when it exits Chapter 11.
The pair will likely end up owning 71 to 85 percent of the company when it exits Chapter 11, depending on the outcome of the rights offering.
Loehmann's, which opened in Brooklyn in 1921, sells designer brands at steep discounts through its stores. It has been unable to meet its debt load even as competitors such as TJX Cos Inc (TJX.N) and Ross Stores Inc (ROST.O) have reported robust sales.
Loehmann's began the year with around 60 stores, but has been closing its weaker locations and currently has about 46.
The company has been trying to restructure its debt for months, but failed to reach an agreement with enough bondholders to prevent a bankruptcy.
The unsecured creditors had opposed the company's original bankruptcy plan, which offered them a recovery of about 4.2 percent.
Under the revised deal reached on Tuesday, the unsecured creditors will get a recovery of about 7.6 percent.
The deal allows Loehmann's to restructure, rather than seek a quick sale, as happens with most bankrupt retailers. The operator Trade Secret beauty salon chain and Urban Brands Inc, which owns the Ashley Stewart clothing chain, both sought quick sales in bankruptcy in recent months.
The Loehmann's agreement is subject to court approval.
The company will also have a $33 million revolving credit facility with Crystal Financial LLC to fund its operations once it exits bankruptcy as well as a $7 million junior facility provided by Whippoorwill. (Reporting by Tom Hals; Editing by Richard Chang)UPDATE 2-Loehmann's strikes deal for quick bankruptcy exit | Reuters