Hills Department Stores Inc., the nation's fifth-largest discount retailer, filed for protection from its creditors yesterday after failing to gain approval from banks and bondholders for a financing plan.
Hills, which is based in Canton, Mass., and some of its affiliates made the filing under the Chapter 11 provisions of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York.
Hills operates more than 200 stores in 14 states, mostly in the Midwest, selling apparel and household items.
It listed assets of about $1 billion and and liabilities of about $1 billion as of Dec. 31.
The company is profitable on an operating basis but has been struggling to meet debt and interest obligations.
Since 1989, it has undergone a $425 million refinancing, the signing of a $325 million working-capital agreement and the acquisition of 33 Gold Circle discount stores in Ohio and New York from Federated Department Stores Inc.
John C. Brouillard, Hills' president and chief operating officer, said yesterday that the company had been unable to reach agreement with its creditors on a refinancing plan.
"We put forth a number of proposals but they had to meet the requirements of various types of creditors, and that's where we got bogged down," he said.
Mr. Brouillard said the company was also hurt by the weakened economy, strong price competition in electronics and appliances and disappointing sales at the Gold Circle stores.
"Our sales in those stores were under our plan," he said. "They catered to different customers in different markets from us, and we had difficulty adapting to that."
Hills said yesterday that Chemical Bank had agreed to provide $250 million in "debtor in possession" financing. Under such financing, the lender becomes a creditor with high priority for repayment.
Mr. Brouillard said he thinks the loan will cover the company's operating cash needs and will take the focus off the financial restructuring.