Skip to main content

Orchard Supply files for bankruptcy; Lowe's buying assets


San Jose -- Orchard Supply Hardware Stores Corp. is filing for Chapter 11 bankruptcy. As part of the filing, Orchard Supply has reached an agreement for Lowe’s to purchase acquire the majority of its assets for $205 million in cash, plus the assumption of payables owed to nearly all of Orchard’s supplier partners. Under the terms of the agreement, Lowe’s, serving as “stalking horse bidder,” would acquire no less than 60 of Orchard’s stores, based on further due diligence on the store locations.

Orchard expects to operate its overall business and the majority of its stores as usual during its financial restructuring and has secured $177 million in debtor-in-possession financing from Wells Fargo Bank.

The retailer expects to pay suppliers in the normal course for all goods and services delivered on or after June 17, 2013, with payment for goods and services delivered prior to the filing addressed through the Chapter 11 process. Orchard Supply anticipates Lowe’s will assume responsibility for most of those payments.

Orchard says it will operate as a separate, standalone business at the completion of the sale process, retaining its brand, management team and associates. The chain was spun off a standalone business from Sears in 2011.

“The steps we are taking today allow us to definitively address our balance sheet issues in order to fully execute on our brand transformation and growth strategies,” said Mark Baker, Orchard president and CEO. “We believe that Lowe’s offer is a validation of Orchard’s unique market opportunity and of our strategy to capture it. We are confident the steps we are taking today will allow us to achieve our financial and operational goals.”

Robert A. Niblock, chairman, president and CEO of Lowe’s, said Orchard has a good business model but has been saddled with debt, and the retailer’s neighborhood stores complement Lowe’s big box stores and will also boost Lowe’s presence in California.

“Strategically, the acquisition will provide us with immediate access to Orchard’s high density, prime locations in attractive markets in California, where Lowe’s is currently underpenetrated, and will enable us to participate more fully in California’s economic recovery,” said Niblock.

The transaction is expected to be consummated through a court-supervised process under Section 363 of the U.S. Bankruptcy Code and is subject to an auction and bankruptcy court approval.

This ad will auto-close in 10 seconds