News

Bankruptcy court OKs sale of BonWorth

By Bill Moss, Published: November 29, 2019

A bankruptcy judge has approved the sale of Bon Worth Inc. to a major supplier in a move that the women’s clothing retailer says provides the best path to survival.

Bon Worth, a women's clothing chain with 49 stores, is solely owned by Kyong Kook Kim. The retailer filed for Chapter 11 bankruptcy protection on Aug. 16, listing assets of $1 million to $10 million and liabilities of up to $50 million.
In a motion filed in October seeking U.S. Bankruptcy Court approval of the sale, attorneys for Bon Worth said the current management team of Yisan So, the chief executive officer, and David A. Herman, chief operating officer, “has a great depth of experience in the retail industry” and that the management had entered into an agreement to sell to its largest remaining supplier, New York-based Merchant Coterie Inc., last March. Although the sale did not go through, Merchant Coterie “has agreed to purchase the assets,” including “inventory, fixtures, furniture, equipment, accounts receivable, and the going concern value of the business including intellectual property, customer relationships and business goodwill,” the attorneys said. The buyer is willing to pay up to $3.79 million for the clothing retailer, the motion said.

Bon Worth owes Merchant Coterie $2,869,728.70 in unsecured debt. The retailer's assets total $2,827,798.45, the attorneys said in the petition said. The court filing shows numerous other large unpaid bills, including rent payments to outlet malls and shopping centers where it operates stores.
Bon Worth “offers a variety of women’s clothing and accessories in its stores, as well as through its online portal,” the company’s attorneys said. The company “has been successful in creating a vibrant social media presence, and can provide customers with product offerings from both its physical store locations combined with its online services.”
Moreover, it can only get inventory from Merchant Coterie.
“Specifically, market standard terms require a percentage down payment at the time of an order and payment of the remaining amount due within a few days following delivery,” the Bon Worth motion said. “The debtor has not been able to find a supplier other than Merchant Coterie who will provide inventory to the Debtor on even these terms. Rather, the debtor has only been able to find alternates to the Merchant Coterie inventory from companies which would require full payment up front.” Merchant Coterie has agreed to the favorable terms in order to facilitate the proposed sale.
“Without the financing provided by both Merchant Coterie and Crossroads (Bon Worth’s biggest secured lender), the debtor would be unable to continue its operations as a going concern,” the Bon Worth lawyers said. The order granting the sale preserves Bon Worth employees’ rights to their Cigna health insurance claims.