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ABG and Simon Could Prevail in Brooks Brothers Bid: The Week Ahead

Who will be the new owner of bankrupt Brooks Brothers?

The answer will be known before next Friday, when a Delaware bankruptcy court is scheduled to hold a hearing to approve a sale of the company after an auction is set for Monday at 10:00 a.m., where the owner’s identity could be revealed.

Brand management firm Authentic Brands Group joined with mall operator Simon Property Group, under the company name Sparc LLC, to submit a $305 million stalking-horse bid for the company. Other prospects had a Thursday deadline to submit offers, giving Brooks’ advisors ample time to greenlight qualified bids to the auction process.

While it wasn’t immediately clear if other bids were submitted, there’s a chance that ABG’s brand management competitor WHP Global is still keen on trying to acquire the bankrupt American apparel retailer. But not only did lose it the stalking-horse bid to ABG and now faces $10 million break-up fee if it can outbid Sparc, but it also failed (again, to Sparc) to provide debtor-in-possession financing for Brooks. WHP had an accepted $75 million DIP facility lined up, but Sparc came in with a better deal, an interest- and fee-free $80 million facility. That gives Sparc a leg up on any other bidder since it can use the $80 loan to credit bid, essentially using the loan to offset the purchase price.

And Milan-based Giglio Group SpA has been said to be forming an investor group to bid for the bankrupt company. Giglio’s core operation is in helping fashion businesses build their e-commerce websites.

Should there be no need for an auction, then Sparc becomes the official buyer, pending bankruptcy court approval at Friday’s sale hearing.

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Mall operator CBL

Mall operator CBL & Associates Properties Inc. and women’s apparel chain J.Jill Inc. could be among the sector’s next bankruptcy cases.

CBL finally made its $30.4 million in interest payments on Wednesday. The payments were due in June and CBL was seen as possibly the first mall operator to file a Chapter 11 petition, particularly as the nonpayments translated to a default under its bank credit facility and prompted the firm to secure a forbearance agreement with lenders. Now that CBL has settled that bill, it no longer needs the lender agreement.

But CBL is not exactly out of the woods yet. The company on Thursday reported second-quarter results for the period ended June 20, showing a wider loss that doubled to $69.8 million, or 36 cents a diluted share, from a net loss of $35.4 million, or 20 cents, a year ago. Total revenues fell 35.8 percent to $124.2 million from $193.4 million. Rental revenues fell a similar 352 percent to $120.2 million from $185.4 million.

CBL said talks with lenders are ongoing and that it “anticipates cooperating with foreclosure conveyance proceedings on four properties.” Discussions continue to modify or extend loans connected to three other properties. And the mall operator continues to press tenants for past-due rent payments.

Women’s specialty chain J.Jill

The specialty retailer on Thursday said it was able to obtain another extension, its third, on its two forbearance agreements with lenders until next Thursday.

One agreement is connected to its asset-based loan and the other for a term loan agreement. The women’s chain fell out of compliance with specific covenants tied to both loans. The retailer’s debt loan before the coronavirus pandemic has been a concern for credit analysts for some time now, even before the virus outbreak exacerbated longstanding financial difficulties.

Another extension could be in the works next week if talks with lenders continue to progress, or there may be some other resolution for its capital structure. The retailer on July 29 reported a first-quarter net loss of $70.3 million, against net income of $4.4 million a year ago, while sales for the period dropped 48.4 percent to $91.0 million from $176.5 million.

J.Jill said last month that it plans to close 11 stores in the second quarter of the retail calendar and end the year with 275 doors, but there’s speculation that it could very well end up needing to close more doors before the year is over.