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(AP) — A Delaware bankruptcy judge on Wednesday approved fast-tracked plans for an auction sale of Pennsylvania-based department store chain Boscov's later this month.
Judge Kevin Gross accepted Boscov's proposed bid deadline of Oct. 15, followed by an auction on Oct. 20 and sale hearing the next day.
Boscov's attorney David Heiman told the court that investors interested in bidding for Boscov's want assurances that they will be able to take advantage of sales during the upcoming holiday shopping season.
"The survival of Boscov's as a going concern is greatly at risk unless we are able to consummate a transaction prior to the Christmas season," Heiman said.
While acknowledging that certain aspects of the proposed sale procedure were unusual, Gross said Boscov's has "a sterling reputation," and that the company, along with its creditors, employees, customers and the communities in which it operates, warrants "some greater leeway from the court than what otherwise may be the case."
"The timing is appropriate," the judge said. "The court is fully aware that the Christmas season is critical to the sale process. … If we allow delay, then we're just going to be hurting the estate."
Philadelphia-based Versa Capital Management has emerged as the lead bidder for Reading-based Boscov's, which filed for Chapter 11 protection in August and announced that it would close 10 of its 49 stores.
The Boscov's store at Park City Center would not be included in the closings, according to an Internet list provided in August.
Versa has offered to pay $11 million in cash and assume Boscov's debt in a deal valued at about $288 million.Anup Sathy, an attorney representing Versa, said that if the investment group doesn't take control of Boscov's by Halloween, "it's a much different economic situation from our perspective."
"For this asset, we believe the holiday season has already started, because we believe there needs to be additional stocking (of goods) now," Sathy added.
But the proposed bidding process, particularly its tight timeline, led to objections from other interested parties.
Joseph McMahon Jr., an attorney representing the U.S. trustee, raised several objections to the proposed bidding procedures, arguing that Boscov's seems to be impermissibly favoring Versa over other bidders. McMahon noted that Versa was not required to post a good-faith deposit, and that it is getting information about competing bids while there is no provision for the other bidders to receive the same information.
McMahon also has raised questions about expense reimbursements of up to $1.75 million for Versa, as well as a proposed $4 million breakup fee, which would be payable to Versa if Boscov's accepts a higher bid, even if that bid doesn't result in a completed deal. He told Gross that the breakup fee should be conditioned on an alternative transaction actually closing.
Attorneys for Boscov's noted that Versa would be reimbursed for only half of its documented expenses, up to $1.75 million, and that the breakup fee amounts to only about 1.5 percent of the value of the transaction, or roughly half of the 3 percent fee common in such transactions. Heiman also noted that any competing bid would have to be at least $4.25 million higher than Versa's, in order to cover the breakup fee and the required $250,000 bid increment.
Gross concluded that both the expense reimbursements and breakup fees were reasonable, adding that Versa's entitlement to the breakup fee if a competing bid doesn't pan out is an acceptable tradeoff for the lower fee percentage.
Gross also declined to order Versa to submit a good-faith deposit, instead lowering the deposit required of competing bidders from $10 million to $7 million.
(138) (112) (61) (50) (2)"I hope it will at least encourage other parties to come forward and participate in the bidding process and show that they are serious," said the judge, who also approved expense reimbursements of up to $100,000 for other bidders.
"We're seeking a very robust auction," he said.
