Byline: Rich Wilner

NEW YORK — The U.S. Trustee told a bankruptcy judge Thursday that Caldor and Bradlees should have separate legal counsel because of the “strong possibility” the two regional discounters would merge.
However, Michael Crames, counsel to Caldor, denied a merger was in the works and told Judge James Garrity, “There is much speculation being discussed. It shouldn’t be taken as fact.”
Merger speculation began after Bradlees and Caldor filed Chapter 11 this year. Both have been hurt by Wal-Mart’s growing presence in the Northeast. Combined, Bradlees and Caldor could be a more formidable force against Wal-Mart.
In fact, court papers reveal that the two companies had merger talks prior to and after their Chapter 11 petitions.
Bradlees filed for bankruptcy on June 23, and its choices of professionals have been approved by the court. Caldor filed on Sept. 18 and is seeking court approval to retain the same firms. The U.S. Trustee objected Thursday to the Caldor committee application because the chains are competitors. In discussing store closings, executive compensation and a merger situation, one law firm for both chains is bound to hurt one side or the other, said Brian Masumoto, an assistant U.S. Trustee.
Otterbourg, Steindler, Houston & Rosen is the proposed law firm and Ernst & Young is the proposed accounting firm and financial adviser.
Bradley I. Ruskin, of Proskauer, Rose, Goetz & Mendelsohn, counsel to E&Y, said nothing in the bankruptcy code prohibited the retention of the same accountants by committees in separate cases.
Kurt Wolff, of Otterbourg, Steindler, admitted under tough questioning from Judge Garrity that a potential problem could arise if just one attorney handled both committees but that his firm had erected barriers to prevent the comingling of proprietary information.
“I know what the statute says, but how could things that happen at Bradlees not spill over into this case and vice-versa; they’re competitors,” said Judge Garrity. He is not expected to rule before mid-January. — Fairchild News Service

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