July 31 (Bloomberg) -- Love Culture Inc., the bankrupt clothing chain, won court permission to hold expedited store-closing sales, over the objection of unsecured creditors who said the sales will only benefit the womenswear retailer’s secured lender.
A U.S. Bankruptcy judge in Newark, New Jersey, approved the sales today, according to a courtroom deputy. Love Culture sought the sales as part of an agreement with pre-bankruptcy secured lender Salus Capital Partners LLC, which is providing $12 million in bankruptcy financing on an interim basis.
Great American Group Inc. won an auction yesterday for the right to run the sales, beating out a joint venture of Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC.
The unsecured creditors’ committee, which includes mall owners General Growth Properties Inc. and Simon Property Group Inc., said Love Culture failed to show any benefit to the estate from selling inventory, “its primary and most valuable asset,” only two weeks after filing for bankruptcy.
Once the inventory is sold, there will be almost no assets remaining for other creditors, the committee said in a filing. The proceeds shouldn’t automatically go to Salus, the committee said. Rather, the company should use the money to pay the cost of administering the bankruptcy, it said.
General unsecured creditors “have no chance of recovery once the agency agreement is consummated” and the bankruptcy financing is approved, the committee said.
Love Culture was founded in 2007 by Jai Rhee and Bennett Koo, former executives at retailer Forever 21, to sell affordable clothes and accessories to young women, according to its website. In 2010, the company started an online store. Two years later, it started the upscale Boutique Culture line.
The company filed for Chapter 11 protection July 16 in Newark. The retailer owes General Growth, the second-biggest U.S. shopping-mall owner, $3.9 million on unsecured obligations for store leases. It also owes Simon Property Group about $2 million and a Taubman Centers Inc. affiliate about $1.2 million, court papers show.
The case is In re Love Culture Inc., 14-bk-24508, U.S. Bankruptcy Court, District of New Jersey (Newark).
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