Mervyn's might fold -- but its new owners still would profit

Updated: July 21, 2008 - 7:44 PM

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Remember Mervyn's? That's the midprice department store chain that Target Corp. struggled for years to revive before closing the Minnesota stores and selling off the rest in 2004 to two private equity firms.

The new owners aren't having any better luck. Mervyn's is facing a possible Chapter 11 bankruptcy filing and shutdown after some vendors halted shipments to the company and key lenders pulled financing, the Wall Street Journal reported Monday. The chain has been hobbled by the housing bust in California, where many of its stores are located.

If Mervyn's folds, it would leave thousands of workers without jobs and dozens of malls without anchor tenants. But don't cry for the chain's owners, private equity firms Cerberus Capital Management and Sun Capital Partners.

They acquired Mervyn's real estate holdings in a deal structured separately from the deal for the retailer. Even if Mervyn's goes under, the real estate has generated profits that will more than offset those losses.

STAFF AND WIRE REPORTS