Pacific Linen Files For Chapter 11

Pacific Linen Inc., a Bothell-based bed-and-bath supply store chain, has filed for Chapter 11 bankruptcy protection from creditors.

U.S. Bankruptcy Judge Samuel J. Steiner on Thursday allowed the company to honor its payroll, employee benefits, gift certificates and return of merchandise.

Pacific Linen said it had closed eight U.S. stores immediately before filing, leaving 24 U.S. stores in Washington, Oregon, Idaho, Colorado, Utah, Kansas, Alaska and Nevada. The company’s Canadian subsidiary, which has 20 stores, has not filed for insolvency protection.

In court papers, the company claims $30.5 million in assets and $28 million in liabilities. It owes $12 million to nearly 1,200 creditors.

The company’s president and chief executive officer, William E. Shepard, resigned earlier this week, although he agreed to remain available as a consultant.

Shepard said the Chapter 11 filing would help the retailer get out of a “horrific real estate portfolio.”

“It’s always disappointing to see a company’s name and Chapter 11 side-by-side, but it’s a good news story because it gives the company breathing space and a fresh start,” he said.