Lowes Companies is expected to buy the majority of assets of Orchard Supply Hardware Stores Corp. for $205 million after the latter filed for Chapter 11 bankruptcy protection according to court documents. The company was part of Sears Holdings Corp. before the spun off. The company reported that it may not be able to make payments when its debt matures in the end of the year.
“The companys substantial debt due, in part, to significant recapitalization dividends paid to Sears, made it difficult, if not impossible for the company to right itself. The ever present prospect of violating the companys leverage ratio covenants hampered many of its operational strategies,” Orchard said in the court filing.
The company added that management and board of directors have taken this decision as a result of exploring many options and choosing the right one for its stakeholders. For the last year, Orchard Supply generated $657 million of revenue, $480.1 million liabilities and $441 million of total assets according to filing.
Lowes, the rival of Orchid Supply Hardware Stores would use that opportunity to buy their assets for the lowest price if there is no competing bids at the auction. Lowes also stated it will buy no less than 60 stores for that price, considering that company has to pay Orchids payments owed to suppliers.
“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 Lowes chairman, president and chief executive Robert Niblock cited by Reuters.
Lowes shares are up 0.10 for last day of trade which was Friday.
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