JACKSON, Mich. - Specialty retailer Jacobson Stores Inc. on Tuesday announced it had filed for Chapter 11 bankruptcy protection and was closing five stores, including two in Ohio.
With the court's approval, the retailer planned to cut 520 jobs and close underperforming stores in Columbus and Toledo, Ohio, and Clearwater, Osprey and Tampa, Fla.
"This action will allow Jacobson's to maintain normal business operations in our 18 best performing stores while restructuring our finances," Jacobson's President and Chief Financial Officer Carol Williams said in a statement.
The 133-year-old upscale merchant, which specializes in apparel and home decor, operates 23 stores in Michigan, Ohio, Indiana, Kentucky, Kansas and Florida.
Jacobson's also announced an agreement with Boston-based Fleet Retail Finance, Inc. and Back Bay Capital Funding L.L.C., for $130 million in financing for the company's reorganization.
A December filing with the U.S. Securities and Exchange Commission indicated that Jacobson's would default on a $150 million line of credit unless it negotiated new deals with its lenders.
The company had failed to uphold several loan covenants and announced that it would not make interest and other payments due on some of its debts. Jacobson's had been out of compliance with agreements on its mortgage loans since Nov. 3.
In October, Jacobson's announced plans to eliminate 225 of its 4,100 positions in an attempt to return to profitability. Nearly half of the cuts were made at the company's Jackson headquarters.
David Littmann, chief economist for Comerica Inc., said that although the company has been experiencing financial troubles for some time, a weak U.S. economy and a competitive retail market also hurt Jacobson's.
"Necessity is the mother of invention," he said Tuesday. "This company has a reputation for quality merchandise, and it will go through a downsizing, but I don't think this is the final chapter for Jacobson's."