By Elise Hansen

Law360 (August 12, 2020, 11:21 AM EDT ) Discount retailer Stein Mart filed for Chapter 11 protection Wednesday in Florida bankruptcy court, saying the COVID-19 pandemic and a challenging retail industry could force it to close its brick-and-mortar stores or look to sell its e-commerce business.

Stein Mart Inc. and two affiliates filed their petitions in the Middle District of Florida on Wednesday. Stein Mart said that as of May 2, it had nearly $758 million in total assets and about $791 million in debt.

The company will likely close many of its physical retail locations and is considering the sale of its online retail business, according to an announcement Wednesday.

"[Stein Mart] expects to close a significant portion, if not all, of its brick-and-mortar stores and ... has launched a store closing and liquidation process," the announcement said. "The company is evaluating any and all strategic alternatives, including the potential sale of its e-commerce business and related intellectual property."

Stein Mart sells discounted designer and name-brand goods such as clothing, home decor, accessories and shoes. It operates 281 stores and an e-commerce site, with most of its physical retail locations in the Southeast U.S. and Texas, Arizona and California, according to court documents.

CEO Hunt Hawkins cited the COVID-19 pandemic and long-standing challenges in the retail industry as the driving forces behind the move.

"The combined effects of a challenging retail environment coupled with the impact of the coronavirus (COVID-19) pandemic have caused significant financial distress on our business," Hawkins said in a statement. The company has determined that the best strategy to maximize value will be a liquidation of its assets pursuant to an organized going out of business sale."

Stein Mart said it will continue ordinary business operations in the short term.

The company hasn't lined up prospective buyers yet, a company representative told Law360 on Wednesday. Stein Mart in January entered a merger agreement with an affiliate of private equity firm Kingswood Capital Management LP, but the deal was later terminated because of COVID-19 uncertainties, the representative said.   

Some of its largest unsecured claims are a $16.4 million debt to CIT Commercial Services for merchandise goods and a nearly $10.7 million claim by Rosenthal & Rosenthal Inc., also for merchandise goods, court filings show. Stein Mart also owes Harvest Small Business Finance LLC $10 million for a small business loan taken out under the Paycheck Protection Program, part of the federal Coronavirus Aid Relief and Economic Security Act.

Stein Mart said in its petition that it expects funds to be available for unsecured creditors.

The company is one of numerous retailers to hit Chapter 11 amid the pandemic, many of whom have seen the pandemic stifle already-diminishing foot traffic to physical locations. Among others, historic retailer Lord & Taylor filed for Chapter 11 protection in early August; the parent company of clothing chain Ann Taylor filed its petition in July with a $1 billion debt-swap plan; and specialty gift and stationery store The Paper Store entered bankruptcy court in mid-July.

Stein Mart is represented by Foley & Lardner LLP.

The case is In re: Stein Mart Inc., case number 20-02387, in the U.S. Bankruptcy Court for the Middle District of Florida.

--Additional reporting by Rick Archer, Bill Wichert and Vince Sullivan. Editing by Marygrace Murphy.

Update: This story has been updated with counsel for Stein Mart, comment from the company and additional information.

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