Aé ropostale Loses Bid to Rein in Sycamore
August 26 2016 - 5:20PM
Dow Jones News
A bankruptcy judge has dealt a big blow to Aé ropostale Inc.'s
bid to survive chapter 11, refusing to rein in the bidding rights
of Sycamore Partners, a former big backer and now major critic of
the retailer.
Judge Sean Lane, in a decision signed Thursday but not made
public until Friday afternoon, said Sycamore is entitled to wield
its $151 million loan as currency at the bankruptcy auction of the
retail chain, a so-called credit-bid that gives it an advantage in
the competition.
The ruling portends bad news for landlords and employees of the
teen fashion retailer, which has been at odds with Sycamore since
before it filed for bankruptcy protection in May. The
private-equity firm has said liquidation may be the best outcome
for Aé ropostale and its stores, and scoffed at the company's hope
of a job-saving turnaround.
The credit-bid means Sycamore can walk into the auction without
cash, and demand rival bidders pay off the $151 million loan from
Sycamore if they want to save, or liquidate, the company.
A spokeswoman and a lawyer for Aé ropostale couldn't immediately
be reached for comment. Sycamore, through a spokesman, declined to
comment.
During arguments, Aé ropostale warned that allowing Sycamore to
credit-bid makes it unlikely that anyone but liquidators will show
up at the auction.
Philadelphia's Versa Capital Management has said it would be
interested in operating about 500 Aé ropostale stores. Versa's
offer wasn't reduced to a signed deal as Aé ropostale and Sycamore
fought over the bidding rights.
"Roughly fifteen parties that stepped away from the sale process
indicated that Sycamore's 'participation in the process' was an
element of their decision," Judge Lane noted in the ruling filed
Friday in the U.S. Bankruptcy Court in New York.
"Yet, there remain interested parties at this time," the judge
added. Judge Lane said there was evidence Aé ropostale could raise
"between $200 million to $300 million in proceeds" of bankruptcy
sales.
Sycamore was at one time a big investor in Aé ropostale stock,
but sold its stake before the bankruptcy. The private-equity firm
owns a major supplier to Aé ropostale, as well as one of the
retailer's major lenders.
The retailer accused Sycamore of inequitable conduct in the form
of tightening up terms on the supply deal to trigger financial
troubles that would push Aé ropostale into bankruptcy. The judge
found Sycamore didn't engage in unfair tactics.
Write to Peg Brickley at peg.brickley@wsj.com
(END) Dow Jones Newswires
August 26, 2016 17:05 ET (21:05 GMT)
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