Teen Retailer Aeropostale Avoids Bankruptcy Liquidation -- Update
September 02 2016 - 12:38AM
Dow Jones News
By Peg Brickley
Landlords, liquidators and licensing firm Authentic Brands Group
have been declared the winners of a contest for distressed retailer
Aéropostale, with an offer of $243.3 million in a deal that
preserves part of the business, according to a person familiar with
the matter.
The results of a bankruptcy auction that closed late Thursday
mean Aéropostale will survive chapter 11 in a streamlined form,
with a chain that once numbered 800 stores cut back but still in
operation.
Aéropostale said in a statement that it would emerge from
bankruptcy "with new ownership as a financially stronger company
positioned to compete and succeed in an evolving retail landscape."
The company filed for bankruptcy protection in May, unable to keep
pace with newer rivals in the teen apparel market.
Major Aéropostale landlords Simon Property Group and General
Growth Properties are part of the joint venture that formed ranks
just this week, as the sprawling store chain seemed headed to
liquidation.
Also part of the Authentic Brands joint venture are liquidators
Gordon Brothers Retail Partners LLC and Hilco Merchant Resources
LLC. Terms of the joint venture deal call for at least 229 stores
to be kept in operation. The venture partners will be selling off
inventory in stores that are slated to be shut down.
The auction that took place in New York pitted the joint venture
against Sycamore Partners, a private-equity firm that went into the
bidding war with a key advantage.
Sycamore controls a major secured lender to Aéropostale and won
a court fight that entitled it to use debt owed it by the retailer,
$151 million, as currency at the auction. Rivals had to bid with
cash, a disadvantage that caused some buyers that were willing to
keep Aéropostale alive to walk away, the person said.
In a statement Thursday, Sycamore said it was pleased with the
auction result, which will repay its debt while preserving jobs and
more than 200 stores.
Sycamore stayed in the competition until Thursday night, with a
bid that, according to the source, would have mean a full-chain
liquidation for Aéropostale, with hundreds of stores going dark and
thousands of jobs lost. The private-equity firm, which has been
critical of Aéropostale's management and expressed doubt about the
chain's ability to survive, bid $1 million more than the price
offered by the joint venture.
If the joint venture bid fails to close, Sycamore will be
declared the winner.
Auction results will be put before a bankruptcy judge Sept. 12,
for a ruling on whether Aéropostale's choice of a winner meets the
test of being the highest and best for creditors of the troubled
company. The sale will close as part of the chapter 11 plan that
will carry Aéropostale out of bankruptcy, the company said.
Lillian Rizzo contributed to this article.
Write to Peg Brickley at peg.brickley@wsj.com
(END) Dow Jones Newswires
September 02, 2016 00:23 ET (04:23 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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