Lingerie seller left blushingly bankrupt by leveraged buyout

A peek into fiscal reality at Frederick's of Hollywood

Apparel

July 12, 2000|By BLOOMBERG NEWS

LOS ANGELES - Frederick's of Hollywood Inc., which sells racy lingerie in 200 U.S. stores and on the Internet, has filed for bankruptcy protection to ease a debt load from a 1997 leveraged buyout.

The private company, bought three years ago by Knightsbridge Capital Corp. of Chicago for about $67 million, was sold in June to Newport Beach, Calif., investors Wilshire Partners for an undisclosed price.

"We will continue to operate our stores, famous catalog [and] Internet businesses, selling the world's sexiest lingerie," said Linda LoRe, Frederick's president and chief executive.

Filing for bankruptcy permits companies to reorganize and continue operating by paying creditors a portion of what they are owed.

Frederick's filed its Chapter 11 petition Monday in U.S. Bankruptcy Court in Los Angeles, where it's based. The company listed about $66 million in assets and about $67 million in liabilities, much of that in bank debt, according to a Wall Street Journal report.

"The [Knightsbridge] acquisition brought in way too much debt," said Frederick's spokeswoman Jennifer Lowitz.

The company said it would deal with its debt by taking out a loan from Ableco Finance LLC, affiliated with Cerberus Partners LP and Gabriel Capital Group.

Noting that the company was founded 55 years ago by Frederick Mellinger, LoRe said, "We're not going to let it dwindle away."

Mellinger started Frederick's in New York in 1946, selling sexy black underwear and the like through the mail to Army buddies for their girlfriends, according to Hoover's Co. profiles. He pioneered the push-up bra and was the first to sell bikinis in the United States. Later, the company branched out into sexual aids.

Today, Frederick's still sells racy underwear, but advertises more conservative items such as waterbras, shoes and swimsuits.

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