231 stores + $70 million revenue = bankrupt
National Dry Cleaners Inc., which operates 231 stores in nine states and claims
to be the largest affiliated group of drycleaners in the United States, filed for bankruptcy last month.
While National Dry Cleaners may not be a familiar name to many in the industry,
the names of the companies that comprise it include some long-time industry
stalwarts: Tuchman Cleaners of Indiana; Al Phillips the Cleaner of Nevada;
Capitol Varsity of Ohio; and Pride Cleaners of Missouri. Also included are
Dryclean USA properties in South Carolina, Nevada, Tennessee, Ohio, Georgia and
Florida.
Of the 231 stores involved, 164 are drop stores and 67 are operating plants. On
average, they clean approximately 300,000 garments a week; annual net sales
last year were $70.2 million. More than 1,500 people are employed by the
operations.
The affiliates will maintain possession of their respective properties and
continue to operate their businesses as “debtors in possession” during the asset sale process, according to Hilco Corporate Finance LLC and
Hilco Real Estate LLC, which have been retained to market and sell the business
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,” said 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.”
National Dry Cleaners Inc. and the 11 affiliated entities filed simultaneous
petitions in the United States Bankruptcy Court for the District of Delaware on
July 7. In court documents, Kevin M. Lyng, National Dry Cleaners’ chief executive, cited “a variety of factors” that led to the liquidity crises and the Chapter 11 filing.
“The drycleaning industry is a highly competitive industry marked by over
capacity with numerous competitors operating in virtually the same geographic
location,” Lyng said.
He said NDCI companies suffered from increased energy costs, environmental remediation and litigation costs, a
decline in discretionary spending by customers and the general economic
downturn.
Some of the stores may close, Lyng said, but most will stay open through the
reorganization. Lyng, who was hired as chief executive in April 2007 after 17
years with Jiffy Lube, runs the company out of offices in Overland Park, KS.
National Dry Cleaning’s filing claimed assets of less than $50,000 and debts of $10 to $50 million.
The Prudential Co. of America is its biggest creditor and shareholder, holding
61.04 percent of National Dry Cleaners’ common stock and 100 percent of its nonvoting Class A preferred stock.
Last September, National Dry Cleaning defaulted on its payments to Prudential
under a recapitalization agreement and now owes the insurance giant $34.6
million.
Prudential had financed the sale in 1999 of National Dry Cleaners to its current
ownership group, which consists of several dozen shareholders as well as
Prudential. The insurance company recapitalized National Dry Cleaners in 2001.
The list of the 30 largest creditors holding unsecured claims includes several
industry suppliers. Among them are United Cleaners Supply of Henderson, NV,
$291,303; Dry Cleaning and Laundry Supplies of Lenexa, KS, $114,429; E.J.
Thomas Co., of Columbus, OH, $110,684; Industrial Equipment & Supply of Miami, FL, $60,645; N.S. Farrington & Co. of Winston-Salem, NC, $54,838; and Fabritec International of Cincinnati,
OH, $28,434.
More than half of the creditors on the “Top 30” list represent remediation costs of unknown amounts at locations in Indiana,
South Carolina, Ohio, Illinois, Oklahoma, California, Nevada, and Georgia.
Other debts include an $87,500 settlement with Region 8 of the U.S. EPA.
Tuchman Cleaners, oldest of the NDCI operations, is expected to be put up for
sale as a group. The company was founded in Indianapolis in 1946 and has 30
locations across central Indiana.
For Pride Cleaners of Kansas City, which was founded 25 years ago by Jim Barry,
court documents indicate that National Dry Cleaners has entered into an
agreement to sell 24 of its stores and one laundry plant for $3 million to a
company called USDC Kansas City Inc., which is believed to be U.S. Dry Cleaning
Corp., a Palm Springs, CA, company that has been buying drycleaning business
around the U.S. with the goal of becoming a national chain through acquisition
of existing operations.
Both Tuchman and Pride were among cleaners purchased by the Johnson Group of
England when it was expanding into the U.S. market in the 1980s and 1990s. The
Johnson Group acquisitions also included Capitol Varsity and Dryclean USA
properties.
The Johnson Group sold those stores and others it owned to Delia’s Cleaners of California and Arizona for $50 million in 1999. Delia’s subsequently changed its name to National Dry Cleaners. Barry left Pride after
the sale and formed GreenEarth Cleaning.
