Aéropostale Inc. and affiliates of Sycamore Partners are battling for control over the teen chain’s future.
A Sycamore affiliate is the top secured pre-petition lender to the bankrupt chain.
It’s a fight that’s been brewing since the teen specialty chain filed a voluntary petition for Chapter 11 bankruptcy court protection on May 4. At the time of the filing, Aéropostale closed some stores and said it intends to restructure operations and file a plan of reorganization. But how realistic that is has always been a question mark, given the macroeconomic backdrop in retail, particularly among those that cater to teens. The company is also pursuing a sale process to see which option creates the best return to creditors.
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First the two fought over the retailer’s ability to get fresh inventory for its back-to-school selling season. That battle involved another Sycamore affiliate, MGF Sourcing, a key supplier for the chain. The dispute was settled and now the company is fighting Sycamore for the chance to survive. It feels that upcoming back-to-school sales could help in its bid to either restructure operations or find a “going-concern” buyer. Sycamore is pushing Aéropostale to identify a stalking horse for a bankruptcy court auction sooner rather than later.
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Joseph J. Sciametta, a managing director with Alvarez & Marsal North America, in a court filing in which portions of his statement were redacted, said a “liquidation analysis shows optimal liquidation is in July 2016.” It wasn’t clear what the rationale was due to the redactions, except that two time periods were used for the analysis, coupled with projections connected to related bankruptcy costs, including wind-down costs.
A separate filing by Robert J. Duffy — managing director at Berkeley Research Group, but formerly with FTI, which was hired as the chain’s financial adviser — indicates that by FTI’s projections, “liquidity is projected to increase and will be greater at the end of September.” It also said that the forced liquidation path that the Sycamore affiliates are seeking would “destroy the value of the debtors’ crown jewel, the international licensing business, which is valued at approximately twice as much if it is sold with an operating U.S.-based retail brand.”
Aéropostale has the exclusive right to file a plan of reorganization by July 3. Duffy’s filing said Sycamore is pushing for the selection of a stalking horse on July 1, although a hearing on court approval for bidding procedures isn’t until July 18. Further, the Duffy statement said even if the company decides to liquidate by the July 18 hearing, it will still have time to take advantage of the back-to-school selling season — the difference between July 18 and July 1 is just 17 days, Duffy emphasized. The current schedule has Sept. 22 as the auction date for bidding on the retailer.
The parties are slated to be present at a court hearing Thursday over financing.