By Lillian Rizzo 

A bankruptcy judge approved a sale of retailer Aéropostale Inc. to a group of landlords, liquidators and licensing company Authentic Brands Group, a decision which could save 229 stores and more than 7,000 jobs.

Aéropostale attorney Ray Schrock said that the decision would preserve more than 7,000 of the retailer's 10,000 positions. However, talks are still under way with landlords, and could increase the number of jobs and stores preserved, Mr. Schrock said.

The purchase, by Authentic Brands, landlords Simon Property Group and General Growth Partners, and liquidators Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC, is worth $243.3 million. Liquidators are overseeing the closings of the remaining Aéropostale stores.

Days before the bidding deadline, Judge Sean Lane of the U.S. Bankruptcy Court in New York had ruled that private-equity firm Sycamore Partners, which controls the entity that provided Aéropostale with a $151 million prebankruptcy loan, could use its debt as a currency at the bankruptcy auction.

Lawyers had argued it would be hard to snag an all-cash bidder to go up against Sycamore's bid and that the firm would drive the company into a full-on liquidation.

Instead, "This is an extraordinary result in a challenging case, especially after where we found ourselves after the Aug. 29 ruling," creditors' committee attorney Brad Sandler said on Monday, referring to Judge Lane's ruling that allowed Sycamore to bid.

Mr. Sandler said that following this ruling, the committee's lawyers reached out to its individual members about placing a bid. Simon Properties and General Growth, two members of the unsecured creditors' committee, mobilized days before the deadline to craft what would become the winning offer.

"This could be a model going forward for mall-based retailers that are stressed or distressed," Mr. Sandler said, rather than the typical liquidation outcome.

The private-equity firm ultimately threw its hat in the ring with an offer that would have kept some stores open but was outbid.

"As it turned out, my client wasn't in this to kill the company and all of its jobs," said Sycamore attorney James Stempel during Monday's hearing. "I think the term loan lender proved at the auction that it saw value in keeping stores open."

The New York-based retailer and Sycamore had been at odds since before the bankruptcy filing. Aéropostale's lawyers had argued the private-equity firm put it under unfair pressure, while Sycamore has said no one was to blame for its financial woes but the retailer itself.

Aéropostale, which operated about 800 stores at the beginning of the bankruptcy, saw its profit eroded by changing customer tastes, new competition and declining mall traffic. The retailer filed for bankruptcy protection in early May.

The company will go before Judge Lane again on Sept. 22 seeking approval for changes on an order allowing it to tap its lenders' cash, which is a result of the auction outcome.

Peg Brickley contributed to this article.

Write to Lillian Rizzo at Lillian.Rizzo@wsj.com

(END) Dow Jones Newswires

September 13, 2016 02:48 ET (06:48 GMT)

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