Linens 'N Things Interim Bankruptcy Protection Approved By U.S. Court

May 3, 2008 8:08 a.m. EST

Wilmington, DE (AHN) - A U.S. bankruptcy court has approved Linens 'n Things' temporary bankruptcy protection, which allowed the furniture and homeware retailer to borrow $700 million from General Electric Capital Corp., reports said Friday.

Judge Christopher Sontchi cleared the finance package but is subject to further challenge as the case progresses. The court's approval will make $40 million immediately available to the retailer, according to Dow Jones.

The retailer has incurred more than $1 billion in debt, including $650 million in bond debt and other debts from bank loans.

BBC said that Linens cited the housing market slump and credit squeeze in filing the bankruptcy. Consumers cutting on spending also hit demand in the home furnishings market.

Linens suffered a "precipitous decline" in profitability and liquidity, making it one of the largest retail bankruptcies in the country.

The firm, which owns 589 stores in the U.S. and Canada, plans to close 120 stores. Its Canadian stores, however, are performing well and are not part of the bankruptcy protection.

According to Dow Jones, banks led by GE Capital gave Linens until May 13 to pay bond debt or face an increase of two percent interest and the discontinuation cash infusion to the retailer.