Loehmann’s Holdings Inc., the New York-based seller of discounted designer goods controlled by Whippoorwill Associates Inc., agreed to alter a proposed sale timetable after a bankruptcy judge criticized it.
U.S. Bankruptcy Judge Martin Glenn in Manhattan today ordered changes to the sale agreement, under which Loehmann’s proposed to auction its assets with an opening bid of $19 million from a group of liquidators: SB Capital Group LLC, Tiger Capital Group LLC and A&G Realty Partners LLC. The retailer was seeking permission to hold an auction Dec. 30 with final approval of a sale by Jan. 2.
Glenn called such a fast-track plan “completely unreasonable” and said it would put small creditors such as landlords at a disadvantage. He said the case was being run for the benefit of secured lenders including Wells Fargo & Co. (WFC) and challenged the company to be tougher on them.
“Back up the truck and tell lenders they can take collateral. Go ahead, Wells Fargo, you sell women’s dresses,” Glenn said.
After negotiating in the hallway outside the courtroom, lawyers for the company reached an agreement with lenders to a new timeline, with an auction on Jan. 3 and court approval of a sale on Jan. 7. Closing sales would start Jan. 13, said Kristopher Hansen, a lawyer for the retailer.
The company had said bids would probably decline if store-closing sales started later than Jan. 7. Loehmann’s, which carries brands such as Michael Kors and Calvin Klein, has 40 stores in 11 states that sell designer goods at discounts of 30 percent to 65 percent, according to its website.
“Every day that passes causes the stores to suffer dwindling inventory that the debtors cannot replenish,” according to court papers.
Hansen told Glenn that his client waited until this week to file for bankruptcy because it had been trying to sell the company, with as many as 39 parties taking a serious interest. Loehmann’s now faces pressure from liquidators who want a sale as soon as possible, Hansen said.
The judge also took issue with part of the sale agreement that would sell potential claims and legal actions to the liquidators. He approved routine motions such as requests to pay employees and honor gift cards. He said the company seemed unlikely to honor store credit.
“The headline should be: Anyone with a store credit better rush to the store before its sale motion is approved,” he said.
The parties will return to Glenn’s courtroom tomorrow to seek approval of the new sale agreement, which addresses the judge’s misgivings about the sale of claims.
To contact the reporter on this story: Tiffany Kary in New York at email@example.com