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Judge's ruling in Bon-Ton bankruptcy case might deter bid to keep retailer in business

April 13,2018 09:21

A potential bid that could keep Bon-Ton Stores Inc. from going out of business suffered a setback Wednesday when a judge in the retailer's bankruptcy case wouldn't let Bon-Ton pay $500,000 to help cover the possible buyer's due diligence expenses ...and more »


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A potential bid that could keep Bon-Ton Stores Inc. from going out of business suffered a setback Wednesday when a judge in the retailer's bankruptcy case wouldn't let Bon-Ton pay $500,000 to help cover the possible buyer's due diligence expenses.
Judge Mary F. Walrath of U.S. Bankruptcy Court in Delaware turned down the "work fee" payment request, which an attorney for Bon-Ton said was "a requirement" for an investors group that includes two mall owners to move forward from its letter of intent and make an actual bid for the company.
Walrath said Bon-Ton was not paying any other bidder's fees, and that the potential joint bid by Namdar Realty Group of Great Neck, N.Y.; Washington Prime Group, of Columbus, Ohio; and New York hedge fund DW Partners was not as far along yet as those of other bidders.
Other bidders in the case, including a group of creditors, want to buy all or parts of Bon-Ton and liquidate it.
"We have a potential — not an actual — bidder who appears to be the preferred by the debtor," Walrath said of the investor group that includes the malls and hedge fund. 
She said it looked like Bon-Ton was willing to reimburse the investor group its fees "simply to get them to make a bid," according to a recording of Wednesday's court hearing.
Asked Wednesday afternoon whether the judge's action put the investor group bid in jeopardy, Bon-Ton issued this statement: "We remain in active discussions with DW Partners and other members of the investor group to complete an asset purchase agreement as we proceed toward the court-supervised auction scheduled to be held on April 16, 2018."
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Bon-Ton, the parent company of Boston Store, Younkers and other department stores, filed for Chapter 11 bankruptcy protection on Feb. 4. It already has postponed the auction. It originally was slated for last Monday.
In its letter of intent, the investor group said it would pay a minimum of $128 million, with an as-yet-undetermined amount added on top of that based on Bon-Ton's borrowing capacity at closing.
Fourteen of Bon-Ton's more than 200 stores are located in shopping centers owned by Washington Prime, and Bon-Ton stores also are tenants in some Namdar shopping centers.
A group of creditors who hold about $251 million in Bon-Ton notes strongly objected to Bon-Ton's request that it cover $500,000 in fees for the mall owner investor group. The lien holders, known as the Second Lien Holders, want the company to be liquidated and have submitted a bid with that intent.
In a court filing, attorneys for the Second Lien Noteholders said Bon-Ton's request to pay fees for the mall-owner group "makes clear that the debtors have no intention of running a fair bidding process, and are instead determined to select any potential 'going concern' buyer as the 'highest and best' bid."
The attorneys contended paying fees on behalf of a potential bidder amounted to "bid protections."
"In short, there is no basis, in law or in fact, for the debtors to request this court to approve payment of $500,000 in fees and expenses for the investor group to conduct belated due diligence starting one week after the bidding deadline," attorneys for the Second Lien Noteholders asserted.
In addition to Boston Store and Younkers, Bon-Ton operates department stores under the brand names Bergner's, Bon-Ton, Carson's, Elder-Beerman and Herberger's. It has dual headquarters in Milwaukee and York, Pa. It has more than 20,000 employees.
The shutdown of nine Boston Stores, three Younkers stores and the company's co-headquarters office in Wisconsin would eliminate 2,255 jobs in the state, according to a Bon-Ton notice sent to state officials. The co-headquarters office at 331 W. Wisconsin Ave. in Milwaukee has 717 employees.
 
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