Bankrupt discount-clothing retailer Syms Corp. and its Filene’s Basement LLC unit won court approval to conduct going-out-of-business sales to liquidate their inventory.
U.S. Bankruptcy Judge Kevin Carey said at a hearing today in Wilmington, Delaware, that he will approve the company’s agreement with a joint venture of Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC to run the liquidation sales.
“The terms of the agency agreement have been improved” for the benefit of the estate, as a result of negotiations that took place following objections from creditors and shareholders to the agreement with liquidators, Mark S. Chehi, a lawyer for the retailers, told Carey.
The agreement guarantees a payment of 90 percent of the cost of inventory, according to court documents. The agreement assumed an inventory cost of $65 million.
Originally, the percentage of the guaranteed payment would have been reduced if the inventory value turned out to be less than $64 million. Under the modified agreement the reduction would now begin at $62 million, according to creditors’ attorney Mark T. Power.
Another provision that was changed would have eliminated the guaranteed amount, replacing it with a negotiated payment percentage if the inventory value fell below a certain level.
Expenses of the sales at Syms and Filene’s and the proceeds generated from them will be segregated from each other.
Syms sought bankruptcy protection this month, listing assets of $236 million, including $97.7 million in real estate inventories, and liabilities of $94 million, according to court papers.
The company said seeking court protection was the best way to maximize value for its stakeholders, saying shareholders should see a recovery after the business is liquidated and its valuable real estate is sold.
Sales at Syms and Filene’s have continued to fall due to the prolonged economic decline, which has diminished consumer confidence and discretionary spending, and competition from other discount retailers, according to court documents.
The company, based in Secaucus, New Jersey, bought Filene’s Basement in a bankruptcy auction for about $64.4 million in June 2009. The company has 25 Syms stores and 21 Filene’s Basement locations. Syms owns 15 of its store locations and plans a separate sale process for its real estate. Syms, founded by Sy Syms in 1958, has about 910 employees, according to court documents.
Syms rose 32 cents, or 4 percent, to $8.22 at the close in New York.
Filene’s was founded by Edward Filene in 1909, when he opened up his Boston basement to clear out merchandise from his family’s department store, eventually leading other retailers to bring their unsold goods to him, according to the store’s website.
The lead case is In re Filene’s Basement LLC, 11-13511, U.S Bankruptcy Court, District of Delaware (Wilmington).