MAGRAM TO RUN BROWNSTONE IN INTERIM BEFORE PURCHASE
Byline: Vicki M. Young
NEW YORK — An agreement under which Lew Magram Ltd. will manage Jean Grayson’s Brownstone Studio was approved in bankruptcy court.
The agreement is a prelude to the planned purchase of Brownstone by Magram expected next month. A hearing on the sale is set for Oct. 15.
Both are mail order firms. Brownstone has been in bankruptcy since Feb. 26.
Manhattan Bankruptcy Judge James L. Garrity Jr. approved the management agreement Friday, as well as a $2 million loan to Brownstone by Magram, conditioned on approval of the management agreement.
When Brownstone filed for Chapter 11, it listed total liabilities of $13.9 million and assets of $12.3 million.
Marc E. Richards of Reid & Priest, Brownstone’s attorney, told Judge Garrity that the management agreement and the loan were necessary because Brownstone’s financial condition was “acute.” He explained Brownstone needed the money to fund the mailing of its fall catalog, which is already three weeks behind schedule. Brownstone also needs money for inventory because suppliers are demanding cash.
According to court papers, if Brownstone couldn’t get funding from Magram, it might be forced to liquidate.
Court papers also stated that Brownstone’s summer catalog generated a demand of $8 million, but the firm was only able to fill 68 percent of the orders because of insufficient inventory. The firm also suffered losses from an affiliated supplier.
Richards told Judge Garrity that the supplier’s losses reflected poor pricing. “The prices charged had no relation to the actual manufacturing costs” and the items were significantly underpriced, Richards said.
Brownstone sells apparel and accessories for mature women.