NEW YORK (CNNMoney.com) -- Loehmann's Inc. filed for bankruptcy Monday after the discount designer clothing retailer reached an agreement with creditors to restructure its debt.
The New York-based company, which has 45 stores in 12 U.S. states and Washington, D.C., expects to remain in business during the Chapter 11 process and plans to emerge from bankruptcy in the first quarter of next year.
Loehmann's said it made the decision to file after reaching an agreement with Whippoorwill Associates Inc., which owns 70% of its senior secured notes, and its current owner, Istithmar World.
The plan will "substantially reduce the company's debt and recapitalize its balance sheet," Loehmann's said in a statement.
Istithmar World, a private equity company owned by state-sponsored investment vehicle Dubai World, bought Loehmann's in 2006.
As part of the agreement, Istithmar and Whippoorwill Associates will invest $25 million into the company after restructuring.
Under the terms of the deal, Loehmann's bondholders will exchange their notes for 51% common equity in the company. Istithmar will own the remaining 49%.
Loehmann's existing credit facility lender, Crystal Financial, will provide $45 million in financing to support the company during restructuring.
In court documents filed Monday in New York, Loehmann's estimated that its assets and liabilities were both in the range of $500 million to $1 billion.
Among the largest creditors Loehmann's listed in its filing were well-known brand names including Urban Outfitters, Juicy Couture, Steve Madden and Calvin Klein. The company estimates that it owes money to between 1,000 and 5,000 creditors.
This marks the second trip to bankruptcy court for Loehmann's this decade. Loehmann's previously filed Chapter 11 in 1999 and emerged in 2000.
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