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HAYWARD, CA-Two days after filing for Chapter 11 protection, Mervyns’ first-day motions were approved by the US Bankruptcy court. The chain has received $465 million in debtor-in-possession financing to continue operations, including paying vendors, employee wages, benefits and other obligations. It also can continue to honor its merchandise returns, outstanding gift cards and loyalty programs without seeking further court approval.

“With the court’s prompt approval of our DIP financing and first day motions, we are moving forward with our reorganization under Chapter 11 while maintaining normal operations in our stores,” said John Goodman, CEO, in a statement. “We are pleased that we can continue to serve our customers, and purchase goods and services from our vendors as we seek to implement strategies to restructure our operations, strengthen our balance sheet and position Mervyns to compete more effectively.” After weeks of speculation, Mervyns, its parent company and a subsidiary filed for Chapter 11 protection, citing $500 million to $1 billion in assets and $500 million to $1 billion in liabilities.

Founded in 1949, the chain went public in 1971, and was acquired by Dayton Hudson Corp. (later Target Corp.) in 1978. By the late 1980s, however, the chain began to struggle as it faced increasing competition, even as it expanded to new regions including the Southeast and Pacific Northwest. By the late 1990s, the company had exited many of its newer markets to refocus on California.

In 2004, Cerberus Capital Management LP, Sun Capital Partners and three other partners including real estate investor Lubert-Adler Management, acquired the chain from Target. More recently, the Macerich Co. and a joint venture of Developers Diversified Realty and Macquairie Trust acquired nearly 80 open and operating Mervyns stores. The company currently operates 176 locations in seven states.

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