Aeropostale up for grabs: Sycamore forces the retailer into an auction

Aeropostale Inc. opened a bankruptcy auction Monday with senior lender Sycamore Partners joining the bidding, barely a week after the teen apparel firm was forced to face liquidation after losing the battle to the private equity firm, its major creditor.

On August 26, U.S. Bankruptcy Judge Sean Lane rejected Aeropostale’s attempt to disqualify Sycamore from bidding with its debt instead of cash. The judge shot down the claim that Sycamore plotted in 2013 to push the retailer into bankruptcy and buy it “on the cheap,” calling such an allegation “not credible.”

The private-equity firm and its corporate affiliates told the New York bankruptcy court judge that the “still-deteriorating business” had “wasted millions of dollars” going through the Chapter 11 process and had yet to “yield a firm purchase offer of any kind.”

The court is “mindful of the high stakes in this case for Aeropostale

“The court is mindful of the high stakes in this case for Aeropostale,” Lane wrote, before saying he was “duty bound to apply the applicable law to the facts of the case.”

Facing the judge´s rule, the company filed for bankruptcy in Manhattan last week, claiming Sycamore was partly to blame for its downfall. It´s worth recalling that the fashion retailer borrowed about 150 million dollars from affiliates of Sycamore in 2014 as it tried to reorganise.

New York-based Aeropostale filed for bankruptcy in May, recalls Bloomberg, highlighting as well how in July, the company said it wouldn’t be able to reorganise and instead would sell itself at auction.

Sycamore Partners gave it another turn of the twist to the already complex situation on Monday as it confirmed it submitted a bid for Aeropostale Inc after a judge issued an opinion rejecting the teen-focused retailer's attempt to block an offer and blame its bankruptcy on the private equity firm.

“Sycamore looks forward to participating in a fair and robust auction that maximises the value of the Aeropostale’s assets for the benefit of all of its creditors,” the private equity firm said Monday through a spokesman.

Aeropostale owes 151 million dollars to two affiliates of Sycamore, Aero Investors LLC and MGF Sourcing Holdings Ltd, and had sought to preempt a credit bid by them.

Last month, the troubled retailer presented court papers last month arguing for a court order denying Aero, a lender, and MGF, a supplier, an opportunity to credit bid their claims. Reuters reports that Aeropostale charged the affiliates had caused liquidity and inventory troubles in an effort to strain the company's finances and drive it into bankruptcy.

Aeropostale filed for Chapter 11 bankruptcy in May.

Image:Aeropostale Official Web