Children's Place Subsidiary Files for Bankruptcy

Children's Place Subsidiary Files for Bankruptcy
March 28, 2008

Secaucus, N.J.-based The Children's Place Retail Stores Inc. plans to exit the Disney Store North America (DSNA) business in order to focus on its core namesake brand. The company conducts the DSNA business through its subsidiary Hoop Holdings LLC and its subsidiaries under a license agreement with The Walt Disney Co. The move to exit the DSNA business is part of the company's review of strategic alternatives. As part of the review, the current management team determined that the license agreement, originated in 2004, requires substantial investments that are not expected to deliver economic returns. The company also took into account the losses incurred by DSNA's operations, DSNA's current earnings prospects as a licensee, and the restrictions imposed by the license agreement on the sale of the business to a party other than The Walt Disney Co. The management team is also undertaking a number of initiatives to reduce expenses, streamline operations, and lower inventories and capital expenditures. The company and Hoop have been engaged in advanced negotiations concerning the transfer of a substantial portion of the DSNA business to The Walt Disney Co. In connection with these negotiations, Hoop's board of directors has determined that with limited strategic and financial options available under the license agreement, Hoop's only alternative was to file bankruptcy proceedings. Hoop has commenced a Chapter 11 case and intends to pursue the transfer of a substantial portion of the DSNA business to an affiliate of The Walt Disney Co. in order to maximize proceeds available to its stakeholders. The transaction under negotiation is subject to the satisfaction of certain conditions, including approval of the U.S. Bankruptcy Court and is targeted for completion by April 30, 2008.