OVERLAND PARK, Kan. — National Dry Cleaners Inc., the largest group of affiliated drycleaners in the United States with 231 stores in nine states, has filed for Chapter 11 bankruptcy protection. Its assets will be liquidated.
As of June 30, National Dry Cleaners operated 231 drycleaning stores and six central drycleaning and laundry plants in nine states, including 164 drop stores. On average, National Dry Cleaners drycleans and launders approximately 300,000 articles of clothes each week. The enterprise, which employs more than 1,500 people, had net annual sales of $70.2 million at Dec. 28, 2007.
National Dry Cleaners listed debt of $10 million to $50 million and assets of less than $50,000 in documents filed July 7 in U.S. Bankruptcy Court in Wilmington, Del. In the filing, the company blamed its lack of liquidity on increased energy costs, environmental cleanup and litigation costs, a decline in discretionary spending by core customers, and a general economic downturn.
Those problems “significantly hampered” its ability to service its debt to The Prudential Co. of America, its biggest creditor and shareholder. Since defaulting last September on payments to Prudential under a recapitalization agreement, National Dry Cleaners now owes Prudential $34.6 million. Prudential holds 61.04% of National Dry Cleaners’ common stock and 100% of its nonvoting Class A preferred stock.
Hilco Corporate Finance and Hilco Real Estate will liquidate the company's operations and assets. “Our mandate from the bankruptcy court is to maximize value for all interested parties by obtaining the highest and best bids for the assets,” says Craig Morse, managing director of Hilco Corporate Finance. “We believe the most probable potential buyers will be regional drycleaning operators who are interested in expanding their market share through acquisition.”
The affiliates of National Dry Cleaners, who operate drycleaning operations in southern Florida; Kansas City, Mo.; Indianapolis; Oklahoma City; Savannah, Ga.; Las Vegas; and South Carolina, continue to operate their businesses as debtors-in-possession during the asset-sale process.
Indianapolis-based Tuchman Cleaners, oldest of the National Dry Cleaners operations, will likely be put up for sale as a group.
Documents filed with the bankruptcy petition indicate that National Dry Cleaners has already entered into an agreement to sell 24 of its Kansas City-area stores and one laundry plant for $3 million to USDC Kansas City Inc., which is believed to have been formed by U.S. Dry Cleaning Corp. of Palm Springs, Calif.