July 29 (Bloomberg) -- Mervyn's LLC, the 59-year-old department-store chain, joined more than a dozen U.S. retailers that have filed for bankruptcy this year as consumers cut spending in the face of the credit crunch and higher oil prices.

Mervyn's LLC, which operates the Mervyn's business, together with its parent Mervyn's Holdings LLC and its Mervyn's Brands unit sought bankruptcy protection. The retailer listed assets and debt of more than $500 million in Chapter 11 documents filed today in U.S. Bankruptcy Court in Wilmington, Delaware.

It's the sixth bankruptcy in the past 12 months by a company owned by Sun Capital Partners Inc., a Florida-based investment firm.

Mervyn's said it instituted a ``long-term turnaround plan'' earlier this year to improve store productivity and cash flow. ``However, rollout of the plan coincided with a variety of external economic factors which have led to a precipitous decline in the debtors' profitability and liquidity,'' Charles Kurth, Mervyn's chief financial officer, said in court papers.

Retailers that have sought court protection over the past year include Steve & Barry's LLC, Sharper Image Corp., Shoe Pavilion Inc., Levitz Furniture Inc. and Linens 'n Things Inc. Declining home values, tightening credit and rising energy costs have left U.S. consumers ``tapped out,'' said Martin Bienenstock, a bankruptcy lawyer with Dewey & LeBoeuf in New York.

`Sources of Demand'

``What we're seeing is an end to the sources of demand,'' Bienenstock said. ``When you have to pay $4 for gasoline, you're not going to pay that $4 to the retail store.''

Mervyn's said it received a commitment for $465 million in financing from a group of lenders led by Wachovia Capital Finance Corp. to fund operations while the company is in bankruptcy, subject to court approval. Mervyn's said it owes $329.4 million under a pre-bankruptcy loan.

Company founder Mervin Morris opened the first Mervyn's store in 1949 in San Lorenzo, California, south of Oakland. The Hayward, California-based retailer sells clothing, including the Nike, Disney and Levi's brands, and home decor at 177 locations in seven states. It has struggled to compete with larger discounters including Wal-Mart Stores Inc. and Target Corp., Bienenstock said.

The retailer said it has identified a limited number of ``underperforming'' stores that will be closed. It will be seeking court approval of auction procedures for the selection of a liquidation firm to assist with store-closing sales. Exact store locations weren't disclosed in court documents. Other stores will remain open. The company is seeking approval to honor gift cards and customer-loyalty programs.

`Old School'

``Mervyn's is the old school of chain store that tries to use good locations and good merchandise to produce profits,'' Bienenstock said. Wal-Mart and Target buy at lower cost from suppliers and ``get economies in transportation, marketing and insurance,'' he said. ``It's almost impossible to beat.''

Sun Capital was part of a private-equity group that bought Mervyn's from Minneapolis-based Target for $1.65 billion in 2004. The Sun Capital holdings that have sought bankruptcy protection are Lillian Vernon Corp., Powermate Corp., Crafts Retail Holding Corp., Wickes Furniture Co. and Jevic Transportation Inc.

The 30 largest consolidated creditors without collateral backing their claims are owed a total of $57.6 million, according to court papers. The company listed its largest unsecured creditors as Levis Strauss & Co., owed $12.8 million; Wicked Fashions, owed $6.1 million; and Nike USA Inc., owed $4.7 million.

The company reported net sales of $2.5 billion and a net loss of about $64 million for the fiscal year ended in February.

The case is In re Mervyn's Holdings LLC, 08-11586, U.S. Bankruptcy Court, District of Delaware (Wilmington).

To contact the reporter on this story: Dawn McCarty in Wilmington, Delaware, at dmccarty@bloomberg.net.

Last Updated: July 29, 2008 22:47 EDT