The losing bidders for Filene’s Basement aren’t going away quietly.
This story first appeared in the June 10, 2009 issue of WWD. Subscribe Today.
In an unusual turn of events, both Crown Acquisitions and Syms Corp. filed objections to the bankruptcy auction sale of Filene’s Basement in which an affiliate of The Men’s Wearhouse Inc. was deemed the winning bidder at $67 million.
Their grievances will be considered during a hearing on the sale set for today in a Delaware bankruptcy court.
In court papers filed with the court Tuesday, Crown called the auction a “travesty.” It had been expected to file an objection since the conclusion of the auction late Friday, claiming it refused to bid because the debtor wasn’t adhering to court-approved bid procedures.
Crown complained Men’s Wearhouse failed to submit an offer by the bid deadline, as required, because the retailer intended to buy the assets pursuant to a plan of reorganization.
Crown also claimed Syms doesn’t have the financial wherewithal to close on a deal for the bankrupt off-pricer, and that its partner in the bidding process, Vornado Realty Trust, is in “default for millions of dollars of obligations owed to the debtors.” Vornado is the landlord of the troubled Downtown Crossing development in downtown Boston, where Filene’s Basement planned to open a store. It’s been paying Filene’s $500,000 a month since January as compensation for not delivering the store on schedule.
The winning $67 million bid by Men’s Wearhouse affiliate K&G Acquisition Corp. includes about $5 million associated with potential litigation revolving around Filene’s lease at the currently inactive Downtown Crossing project. After bidding $22 million for Filene’s last month, Crown was designated the stalking horse for the off-pricer.
Syms said in its filing Tuesday that certain bid procedures, including the requirement of a commitment to close promptly after the date of the sale, were not followed. It pointed out the Men’s Wearhouse bid has a proposed effective date of Sept. 26. Syms said that at a certain point of the auction, its bid was deemed the highest and best bid, and that it continued bidding even though procedures were not adhered to because it “risked being illegally excluded by the [unsecured creditors’] committee and the debtors from the auction if it did not bid.”
In a court document, Marcy Syms, president and chief executive officer of the off-price retail group that bears her family name, said, “The cavalier attitude towards contractual obligations and the meaning of a court order taken by the estate professionals in this case is extremely disconcerting to an outsider participating in the bankruptcy system. The inability to rely on the rules established by this court will leave me, and I suspect others, less willing to invest the time, resources and money in a similar endeavor in the future.”
Bob Carbonell, executive vice president and chief credit officer at Bernard Sands Credit Consultants, said, “In my 40 years in credit, I have never seen such a vociferous objection to a Chapter 11 bid. It must have been a heck of [an auction and the hearing to approve the sale] should be worth selling tickets to.”