John Varvatos

John Varvatos can move ahead with a planned sale to Lion/Hendrix Cayman Ltd., which had the winning bid at an auction Wednesday for the bankrupt men’s designer brand’s business. 

The Lion bid is in the $97 million range, according to estimates in sale documents filed in Delaware bankruptcy court, where the company filed for Chapter 11 in May. 

At a sale hearing on Friday morning, U.S. Bankruptcy Judge Mary Walrath approved the sale to the Lion entity, with the caveat that if the sale doesn’t close by the Aug. 14 trigger date that the parties had agreed to in the case, a back-up bid by WHP Global in the auction could proceed instead. 

“I find that the Lion Cayman Hendrix [sic] bid is the highest and best, and will be approved,” Walrath said at Friday’s hearing. “To the extent that the closing does not occur by the trigger date, I find that WHP will be approved as the back-up bidder, and that bid will be found to be the highest and best at that time.”  

The WHP bid includes $62.5 million in cash, among other terms, its attorney Matt Barr, co-chair of the business finance and restructuring department at Weil, Gotshal & Manges LLP, told the court Friday. At the hearing, Barr expressed hope that WHP’s offer might yet prevail if the Lion bid doesn’t close by the deadline.  

For John Varvatos, the path to Friday’s fairly smooth and uncontested sale hearing involved resolving a number of objections to its plan. The company’s attorney, Derek Abbott, partner at Morris Nichols Arsht & Tunnell LLP, told the court that it had resolved informal objections by the company’s founder John Varvatos relating to the company’s use of intellectual property. 

WWD has previously reported that if Lion/Hendrix Cayman Ltd.’s bid succeeds, Varvatos will leave the brand he founded, and the company’s U.S. operation will be shuttered.

The designer and the company had a dispute about whether he or the company owned the brand’s Instagram account, Abbott said in court on Friday, which he said is now resolved in the company’s favor. Varvatos himself will be able to temporarily use the Instagram account “within certain parameters for up to a year, and during that year’s time, he will transition his use to another account that will be named distinctly from that of the company,” Abbott told the court. 

Abbott said Varvatos and the company were also at odds about one trademark in particular, “John Varvatos Records,” with both parties contending it belonged to them. That dispute has also been resolved, granting the designer a 99-year exclusive worldwide license from the company to use the mark in the areas of “apparel, home and accessories,” in exchange for “a nominal royalty” to the company, according to Abbott. 

The sale deal with Lion includes a settlement with the unsecured creditors committee, which had previously objected to the deal. According to a global settlement term sheet filed this week, the Lion bid would provide a $2 million recovery amount for general unsecured claims. The Lion sale order includes a provision to purchase some $6 million in inventory from the debtors’ existing vendors. 

“While I do appreciate Mr. Barr’s statements and desire to see our bid fall away and his bid become the winning bid, we certainly are intent, your honor, to close promptly,” James Bromley, partner in Sullivan & Cromwell LLP’s finance and restructuring group, who represents Lion/Hendrix Cayman Ltd.

“We are very pleased we’ve been able to reach the settlement with creditors’ committee,” he added.