Drones and other remote controlled toys are displayed for sale in a Brookstone Inc. store. (Craig Warga/Getty)
Apparently the market for zero-gravity loungers, oversized cotton rope hammocks, outdoor wireless speakers and weather wrap furniture covers is not as robust as it once was.
Brookstone, the specialty gadget and home furnishings retailer founded by late entrepreneur Pierre de Beaumont and his wife in 1965, filed for Chapter 11 protection Thursday in Delaware as part of a plan to sell itself to Spencer Spirit Holdings.
At $146.3 million, the proposed sale price is a far cry from the $458 million that Singapore’s sovereign wealth fund Temasek Holdings, Asian massage chair maker OSIM International and Waltham, Mass.–based private equity firm J.W. Childs Associates paid for Brookstone in 2005.
Kaye Scholer advised the buyers on that deal, while Ropes & Gray represented a special committee of Brookstone’s board of directors. Longtime Ropes client Bain Capital had purchased Brookstone in 1991 while it was saddled with debt stemming from a management-led leveraged buyout. And while the retailer was seen as one of Bain cofounder W. Mitt Romney’s best buys—the private equity firm took the company public in 1993—it has struggled of late amid increased competition from online vendors and a reduction in consumer spending in the aftermath of the global economic downturn.
After Brookstone defaulted on a $125 million debt payment connected to the 2005 buyout, bondholders hired outside counsel and the debtor began preparing for a potential bankruptcy filing. According to the company’s Chapter 11 petition, Brookstone and the 10 affiliates that filed for bankruptcy Thursday have more than $500 million in debt.
Court records show that K&L Gates restructuring partner Charles “Chad” Dale III ($720 per hour) and corporate partner John Cushing ($680), both of whom are based in Boston, are leading a team from the firm advising Merrimack, N.H.–based Brookstone in the Chapter 11 case. In January, K&L Gates received a $250,000 retainer that has been replenished five times in varying amounts, according to a declaration filed by Dale, a retail bankruptcy veteran. All told, the firm has billed $1.51 million for its work on the case so far.
Delaware’s Landis Rath & Cobb, which is serving as local counsel to the debtors through name partner Adam Landis and partner Kerri Mumford, has received $175,000 in retainer payments since being retained in January. Court filings show that Landis Rath partners are billing between $515 and $730 per hour, while the firm’s associates are billing at hourly rates ranging from $315 to $475.
The debtors’ prepackaged bankruptcy plan calls for Egg Harbor Township, N.J.–based Spencer to pay $120 million in cash and $7.5 million in new notes while assuming $18.5 million in liabilities in exchange for taking control of Brookstone. Michael Sirota, cochair of the bankruptcy and corporate restructuring practice at Cole, Schotz, Meisel, Forman & Leonard, is advising Spencer on its bid to buy Brookstone, along with bankruptcy partner J. Kate Stickles and Ilana Volkov.
The sale, which has the support of bondholders being advised by Stroock & Stroock & Lavan financial restructuring chair Kristopher Hansen, bankruptcy partner Erez Gilad, finance partner Scott Welkis and Delaware’s Young Conaway Stargatt & Taylor, should allow Brookstone to keep most of its roughly 250 stores open. Spencer will receive a $3.7 million breakup fee if it fails to acquire Brookstone.
Spencer, owner of the Spencer’s and Spirit retail chains, does have some competition for the debtor. The Wall Street Journal reported last week that Blucora, owner of online electronics retailer Monoprice, was also mulling a bid for Brookstone. Former Perkins Coie partner Linda Schoemaker serves as Blucora’s general counsel. Brookstone’s in-house legal chief is former Nutter, McClennen & Fish partner Stephen Gould.
Wells Fargo, which is acting as administrative agent for Brookstone’s debt, is being advised by Greenberg Traurig corporate partner Jeffrey Wolf and Choate, Hall & Stewart finance and restructuring cochair Kevin Simard.