On Aug. 7, Samuels Jewelers filed for Chapter 11 in Delaware bankruptcy court, a fallout from the scandals surrounding owner Gitanjali Gems.

CEO Farhad Wadia says the 120-store chain, which has roots dating back to 1891, is now for sale and is talking to several interested parties.

“We hope to find the right partner and come out of this,” he says. “We have retained an investment bank and have many leads.”

Wadia says that most of its stores are profitable, and that they are all still operating and gearing up for the holiday.

Its bankruptcy petition lists more than $100 million in assets and liabilities. Liabilities include $84 million owed to Wells Fargo and other lenders, $10 million owed to GB Credit Partners, and $23 million in trade debt. The company hopes the filing will significantly reduce its debt, Wadia says.

While Samuels is pursuing a going concern sale, it has also enlisted Gordon Brothers and Hilco as consultants to help sell off excess inventory.

In a declaration in support of first-day pleadings, Berkeley Research Group’s Robert J. Duffy, who has served as cochief restructuring officer since June, said that Samuels has, like all retailers, had issues navigating an increasingly competitive retail landscape.

For its fiscal year ended March 31, 2018, Samuels generated $112 million in net sales, but suffered an operating loss of $14.9 million. The prior year, it generated $119.4 million in sales, yet posted a $3.1 million loss.

Earlier this year, its problems became more serious, when legal issues engulfed its owner, the Gitanjali Group. The publicly traded Indian company purchased Samuels in 2006 and Rogers Jewelers a year later.

On Feb. 15, India’s Central Bureau of Investigation (CBI) announced it had filed charges against Gitanjali Group and managing director Mehul Choksi, along with nephew Nirav Modi, for allegedly defrauding Punjab National Bank and other financial institutions of $2 billion. Also that month, both Gitanjali and Choksi were named in an order from India’s National Company Law Tribunal (NCLT).

Shortly after, Gitanjali went offline and seemingly ceased to exist. Choksi resigned from Samuels’ board and for a time vanished from view. Recent reports say he’s become a citizen of Antigua.

“Neither Samuels Jewelers nor any of its current officers or directors has been charged with a crime either domestically or in India, or to their knowledge, is subject to investigation by Indian or U.S. authorities,” Duffy said.

Regardless, problems at its parent hurt Samuels in three ways, according to Duffy: First, Samuels lost a major source of supply. Second, it had occasionally tapped Gitanjali for funding. And third, news reports about the investigation made vendors skittish, which in turn hurt its liquidity.

Earlier this year, the company tapped Berkeley to strengthen its balance sheet. It ultimately decided it had no choice but to pursue Chapter 11, Duffy wrote.

Based in Austin, Texas, Samuels Jewelers operates in 23 states under the names Samuels Diamonds, Samuels Jewelers, Schubach Jewelers, Rogers Jewelers, and Andrews Jewelers. Its workforce includes 690 full- and part-time employees.

This is Samuels’ fourth trip to bankruptcy court, though its first in the last 15 years. It last filed for Chapter 11 in 2003. Under its prior name, Barry’s Jewelers, it filed for Chapter 11 in 1992 and again in 1997.

Samuels’ bankruptcy papers can be seen here. The retailer answers questions from consumers about the filing here.

(Image courtesy of Samuels Jewelers)

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