A Sycamore affiliate is the top secured pre-petition lender to the bankrupt chain and the two have been fighting since before the chain filed its voluntary petition for Chapter 11 bankruptcy court protection on May 4. A separate affiliate of the private-equity firm had been a key supplier for the chain. That dispute also has been settled.
Since the filing, Aéropostale has been pursuing a dual track that includes a reorganization and a sale process to see which option creates the best return to creditors. Sycamore had been pushing the company to identify a stalking horse for a bankruptcy court auction of the firm’s assets. A court document from an expert working with the private-equity firm said an analysis indicated July as the optimal period for a liquidation. Aéropostale opposed the timing, and was concerned that a forced liquidation would destroy the value of its international licensing business. The chain considers that business its crown jewel, and noted in court papers that it is “valued at approximately twice as much if it is sold with an operating U.S.-based retail brand.”
A spokesman for Sycamore said, “Sycamore Partners is pleased with the settlement reached today with Aéropostale. As Sycamore had requested, the settlement requires Aéropostale to conclude a sale or reorganization of the company no later than Aug. 26, 2016, instead of by Sept. 26, 2016. Today’s settlement requires Aéropostale to pursue a value-maximizing strategy for the benefit of the creditors by concluding a reorganization or sale of the company’s assets during the company’s back-to-school sales season.”
The retailer is in the process of closing 113 U.S. locations and all 41 stores in Canada. Its bankruptcy petition was expected as the chain had been losing money for years, and earlier this year began cutting jobs as a cost-reduction move. The retailer then said a few weeks later that it was considering its options, including a sale of the company. Shortly before its filing, rumblings began surfacing over a possible Chapter 11 petition due to its dispute with a key supplier.
Separately, Aéropostale on Friday said it received bankruptcy court approval to access its $160 million of debtor-in-possession financing from Crystal Financial. The retailer said the financing would allow it to “focus on completing its restructuring process, confirming a plan of reorganization and emergence from Chapter 11 during the third quarter of 2016.”