June 28 (Bloomberg) -- Orchard Supply Hardware Stores Corp., the operator of 91 hardware stores with a $205 million offer from Lowe’s Cos. for at least 60 of them, won court approval to hold going-out-of-business sales at eight underperforming stores and potentially another 22.
U.S. Bankruptcy Judge Christopher Sontchi, at a hearing today in Wilmington, Delaware, approved the company’s agreement with liquidator Great American Group, which yesterday won an auction for the right to run the store closing sales.
A joint venture of liquidators Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC made an initial offer for a 74 percent recovery on assets to be sold, according to court papers.
Two other bidders made offers at the auction, and after 16 rounds of bidding Great American prevailed with an offer for an 82.5 percent recovery. The liquidator’s bid represents an increase of at least $1 million to the estate, Richard Chesley, a lawyer for Orchard Supply, told the judge.
The hardware retailer needed to choose a liquidator quickly to prepare the sales in advance of the U.S. Independence Day holiday on July 4, in order to maximize the value of the assets, Chesley said at a June 18 hearing. The holiday is an important sales weekend for the home improvement and gardening industries.
Orchard Supply will have the option, until July 31, to conduct going-out-of-business sales at another 22 stores, according to court documents.
Lowe’s, the second-largest U.S. home-improvement retailer, has offered $205 million for at least 60 Orchard Supply stores, the company said in a June 17 statement. Lowe’s will also take on amounts owed to almost all of Orchard’s suppliers.
Orchard Supply, based in San Jose, California, said it sought bankruptcy protection after sales declined as the economy of the state, where 89 of its stores are located, deteriorated and the U.S. slipped into the recession in late 2007. It was unable to weather the storm like its larger rivals Home Depot Inc. and Lowe’s, and sales dropped 21 percent from 2007 to 2010.
The case is In re Orchard Supply Hardware Stores Corp., 13-11565, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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