Bankrupt department store Boscov’s Inc. has asked a Delaware bankruptcy court to approve a sale to Versa Capital Management for $11 million plus the assumption of liabilities.
According to court papers filed Wednesday, Versa Capital would become the stalking horse bidder at an auction set for Oct. 13. The court procedure allows for stalking horse bids in hopes of garnering a higher bid at auction time for the benefit of creditors.
The privately held company had $538 million in assets and $479 million in liabilities as of May 3.
Versa Capital would receive a $4 million break-up fee if there is a better offer for the Reading, Pa.-based department store group.
Boscov’s, which generates $1 billion in sales annually, filed for bankruptcy on Aug. 4 because it was unable to raise additional capital to combat a credit squeeze brought on by its own soft sales and the economic downturn. In May, prior to its Chapter 11 filing, the retailer hired Lehman Brothers as financial adviser. It was later determined the retailer would be unable to enter into any transaction for the sale of the chain outside of a Chapter 11.
Lehman Brothers Holdings filed Chapter 11 on Monday as the credit crisis accelerated and took on more widespread international proportions.
Subsequent to its filing, Boscov’s on Aug. 15 received bankruptcy court approval to close 10 stores, seven of which were locations the company bought from Federated Department Stores Inc., now Macy’s Inc. Court papers filed on Wednesday said that despite the going-out-of-business sales at the shuttered stores, Boscov’s still “requires additional equity capital to achieve long-term viability.” The legal document also said prospective buyers contacted by Lehman “made it clear than any sale transaction must be closed prior to the onset of the holiday season.”
The bankruptcy court approved $250 million in debtor-in-possession financing the day after the bankruptcy filing.
Last month, the TJX Cos. Inc. sold its troubled Bob’s Stores unit to Versa and Crystal Capital for undisclosed terms. Versa said it seeks investments in companies with revenues between $50 million and $1 billion and assets or enterprise values of $25 million to $500 million.
Boscov’s operates 39 stores in six states. It serves smaller, middle-market communities. The Boscov and Lakin families, which own the company, had injected nearly $30 million to shore up the retailer in the month before the bankruptcy filing. The company currently has 9,500 employees and relationships with more than 3,000 vendors.