SAN FRANCISCO-Mervyn’s LLC this week sued its former owners for more than $1 billion. The suit alleges that they structured a transaction that “stripped” the Hayward, CA-based department-store chain of owned properties and below-market leaseholds, then heavily leveraged the assets and jacked up Mervyn’s rent by $80 million annually to cover it, effectively forcing the western US retailer into bankruptcy.

Among others, the defendants include Target Corp., and Cerberus Capital Management and Sun Capital Partners, two of the private equity firms to which Target sold Mervyn’s four years ago.

The lawsuit was filed on Sept. 2 as part of its bankruptcy case, which was filed on July 29. The story begins four years earlier when a group including Cerberus and Sun Capital acquired Mervyn’s from Target for $1.26 billion in a deal that was structured as two separate transactions, one for the real estate and another for the company itself. The lawsuit claims the structure of the deal and the private equity firms’ subsequent actions unduly enriched them at the expense of Mervyn’s solvency.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2024 ALM Global, LLC. All Rights Reserved.