Ritz Camera Chief, Fellow Investors, May Keep Photo Chain Afloat
Wednesday, July 22, 2009
The chief executive of Ritz Camera stepped in Tuesday to rescue the financially troubled 91-year-old photo chain from going out of business, outbidding three liquidators who probably would have sold off the company's assets, an attorney for the creditors said.
David Ritz, son of the Beltsville-based company's founder, teamed up with a group of investors to prevail in a 23 1/2 -hour auction in New York with the top bid of $33.1 million, according to the lawyer. If the U.S. Bankruptcy Court in Wilmington, Del., approves the sale Thursday, Ritz will keep between 163 and 375 stores open and continue operating the nation's No. 1 photo retailer as a going concern, the lawyer said.
The auction went 43 rounds.
"I think given the way the bidding was going, the company would have been liquidated" had Ritz not won, said Jay Indyke, a partner in the law firm of Cooley Godward Kronish, which represented the creditors committee.
Under Ritz's plan, a new photo chain would emerge as a separate entity from the old debt-ridden one, much like the restructurings involving Chrysler and General Motors. The new company would be placed under a payment plan allowing it to take care of a portion of the remaining debt from the old company over time, Indyke said.
The creditors committee, Indyke said, approved Ritz's business plan for the new company. Indyke would not disclose details of the plan, deferring to Ritz. "I don't think the committee would have supported the deal [if members felt] the plan wasn't viable," he said.
Ritz attorney Gary H. Leibowitz and a spokesman declined to comment Tuesday.
Some lawyers specializing in bankruptcy described the deal as one way for a retailer to handle its debt obligations and remain in business.
"Ritz Camera is not buying itself out of bankruptcy," said Brian Shaw, a Chicago lawyer specializing in commercial bankruptcy cases who is not affiliated with Ritz. "There is a group that is buying Ritz's assets out of bankruptcy."
The company filed for Chapter 11 bankruptcy protection in February. At the time, it owed more than $54 million to a long list of creditors, including Canon USA, Fuji Photo Film and Wachovia Bank. As part of the proceedings, the company closed about 400 camera shops and shuttered all 130 of its Boater's World Marine Centers. Retail analysts attributed Ritz's problems to a decline in consumer spending for nonessential items such as cameras and boating gear, as well as the marketplace's switch to digital photography, which is making photo processing obsolete.
Ritz's team included representatives of the company's online business, Ritz Interactive, which was not in bankruptcy protection, Indyke said. The other companies seeking to purchase Ritz were Hilco Trading and Gordon Brothers Group, which bid as a team, and Great American Group -- all of which specialize in liquidating failed retailers, he said.
"Hilco was involved in a joint venture with Gordon Brothers for bids for Ritz Camera, and unfortunately we were not successful bidders," a spokesman for Hilco said.
Mark Millman, president of Millman Search Group, a Baltimore-based retail consulting and executive search firm who follows Ritz, said he thinks each of the 375 stores is worth several hundred thousand dollars.
"David Ritz and his partners absolutely got a buy of a lifetime, getting the stores and all the equipment for as little as $90,000 per store," he said.
To succeed, Millman said, Ritz officials "need additional marketing and advertising to bring customers back to the store. They need to renegotiate leases with all landlords . . . and bring in high-energy professionals to run the business."
Staff researcher Eddy Palanzo contributed to this report.