HAYWARD, Calif.–Bankrupt Meryvns has filed a lawsuit against Target, its former parent company, alleging that the private-equity firms Target sold it to in 2004 stripped the retailer of its real estate assets, thereby contributing to its Chapter 11 filing this summer.
“The suit alleges that through complex and sophisticated real estate transactions, the investment consortium acquired control of the company’s considerable real estate holdings, then leased back properties to the company at substantially increased rates, which contributed to the need for Mervyns to file for protection under Chapter 11 of the U.S. Bankruptcy Code,” according to a statement from Mervyns.
“Hundreds of millions of dollars of loans were made against those real estate assets, with none of the proceeds going to Mervyns,” according to the complaint obtained by HFN. “The private-equity players made sure that any residual value or upside in the real estate assets were reserved for themselves and not for Mervyns.”