Orchard Supply Hardware Files Chapter 11

Written by: Robert DeMarco
– Lowes to Buy Over 60 Store Locations
Orchard Supply Hardware Stores Corporation [“Orchard”], a neighborhood hardware and supply store with locations in California and Oregon, has filed for chapter 11 bankruptcy protection.  The San Jose based company said that Lowe’s Companies, Inc. [“Lowes”], will 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. The chapter 11 bankruptcy petition was filed in order to facilitate the sale and restructure its balance sheet.  Orchard filed the bankruptcy case in the United States Bankruptcy Court for the District of Delaware; Bankruptcy Case No. 13-11565-CSS.  During the fiscal period immediately preceding the commencement of the bankruptcy case, Orchard generated revenue of $657 million.
The asset purchase agreement [“Agreement”] between Orchard and Lowe’s constitutes the initial stalking horse bid under the terms of a proposed Section 363 sale.  Under the terms of the Agreement, Lowe’s will acquire at least 60 of Orchard’s 91 stores. Orchard expects the sale process to be concluded in approximately 90 days, pending receipt of the necessary approvals from regulators and the Bankruptcy Court.  Orchard plans on liquidating any stores not acquired by the successful bidder.
Orchard, under the terms of the Agreement, will operate as a separate, standalone business, retaining its brand, management team and associates.  Robert A. Niblock, Chairman, President and CEO of Lowe’s, said in a June 17, 2013, press release, “Orchard’s neighborhood stores are a natural complement to Lowe’s strengths in big-box retail, offering smaller-format hardware and garden stores catering to the needs of local customers. 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.
“Overall, Orchard’s business model offers great potential but it has been burdened with a high level of debt. With the debt addressed through the Chapter 11 process and appropriate support from Lowe’s, we believe that Orchard will be positioned for profitable growth as a standalone business within our portfolio,” added Mr. Niblock.
DATED:  June 21, 2013