NEW YORK (Dow Jones) -- Fast-growing retailer Steve & Barry's LLC is expected to file for Chapter 11 bankruptcy protection as early as Wednesday, say people familiar with the matter, a collapse that stands to hurt everyone from Sarah Jessica Parker to the nation's struggling mall owners.
The Port Washington, N.Y., company hasn't been able to raise rescue financing in recent weeks, and is considering a plan that would sell off all of its assets. It also has been in last-minute discussions with Sears Holdings Corp., about a bailout or partial sale, say people familiar with the matter.
A filing would be painful to mall owners across the country, who ponied up hundreds of millions of dollars to attract Steve and Barry's into huge, empty spaces, often as large as 100,000 square feet. Many, and potentially all of those 275 stores could close, say people familiar with the matter. As of January, the company had between 16,000 and 17,000 employees; most of those jobs will be eliminated, people familiar with the matter say. Some vendors have already stopped shipping to the company in anticipation of a filing.
Steve & Barry's main lender is the commercial-lending unit of General Electric Co. It provided the company with a roughly $200 million credit facility in March. GE is expected to be made whole in any reorganization, though TA Associates, a private-equity firm that invested $320 million in 2006 faces far worse recovery prospects.
With fashionable clothes priced below $10, Steve & Barry's deep-discount model was built to thrive in a difficult economic environment. In a 2006 interview with The Wall Street Journal, co-founder Barry Prevor said the U.S. market could support 5,000 stores. Last year actress and fashion icon Ms. Parker made a splash launching her exclusive Steve & Barry's line Bitten with an appearance on the Oprah Winfrey Show.
But a souring economy has made this a brutal period for retailers, who are pinched by slackening consumer spending and higher transportation costs. For Steve & Barry's, which ran its operations on the thinnest of margins, these factors made it all the more difficult to survive.
People close to the company's finances say most of the retailer's earnings came in the form of one-time so-called tenant improvement payments from landlords of $2 million to $7 million per store. Mall owners likely won't recoup that money.
Founded by Barry Prevor and Steven Shore, childhood friends from Long Island, N.Y., the chain opened its first store in 1985 in Philadelphia, selling discount University of Pennsylvania apparel.