In a statement, Linens Holding Co., the parent company, also said it was in discussions with an ad hoc committee of holders of the notes regarding a restructuring of its capital structure and said the lenders were "supportive." Two days later, it announced that it had retained the New York City-based investment banking firm of Financo Inc., adding it to Conway, Del Genio, Gries & Co., LLC, which had previously been retained as financial advisor.

"We are committed to exploring all reasonable avenues in our efforts to strengthen the company and to adopt a financial solution that recognizes the inherent value of the Linens 'n Things' business," says Robert J. DiNicola, chairman and CEO, in a statement. In a published financial update, DiNicola cited "the increasing deterioration of the credit markets and the residential real estate meltdown, both stemming from the turmoil in the subprime mortgage market, and the resulting downturn in consumer spending, especially in the home sector," which combined to create "acute financial challenges."

Beyond that, he also referred to "the rapidly increasing financial storm outside the company (that), together with our operating results, have accelerated credit and insurance problems for our vendors, causing them to recently begin imposing significantly more restrictive payment terms."