Bankruptcy judge approves sales plan for Boscov's
WILMINGTON - A Delaware bankruptcy judge yesterday approved fast-tracked plans for an auction sale later this month of Pennsylvania-based department store chain Boscov's.
Judge Kevin Gross accepted Boscov's Department Store L.L.C.'s proposed bid deadline of Oct. 15, followed by an auction Oct. 20 and sale hearing the next day.
Boscov's attorney, David Heiman, told the court that investors interested in bidding for Boscov's wanted assurances that they would be able to take advantage of sales during the coming holiday shopping season.
While acknowledging that certain aspects of the proposed sale procedure were unusual, Gross said that Boscov's has "a sterling reputation" and that the company, along with its creditors, employees, customers and the communities in which it operates, warranted "some greater leeway from the court than what otherwise may be the case."
Versa Capital Management Inc., of Philadelphia, has emerged as the lead bidder for the Reading chain, which filed for Chapter 11 protection in August and announced that it would close 10 of its 49 stores. Versa has offered to pay $11 million in cash and to assume Boscov's debt in a deal valued at about $288 million.
Joseph McMahon Jr., a lawyer representing the U.S. trustee, raised objections about expense reimbursements of up to $1.75 million for Versa, as well as a proposed $4 million breakup fee payable to Versa if Boscov's accepts a higher bid.
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 amounted to only about 1.5 percent of the value of the transaction, or roughly half of the 3 percent fee common in such transactions.
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 did not pan out was an acceptable trade-off 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.
"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.