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End is Near for Aéropostale

Aéropostale is facing the music.

The teen clothing chain, which filed for Chapter 11 in May, said in court papers filed Friday that “reorganization on a standalone basis is not feasible.”

Despite insisting last month that its back-to-school collection could perform well enough to generate the cash required to repay its debts, Aéropostale will now focus on selling its assets to a “stalking horse bidder,” which it said will “maximize value for the benefit of all creditors.”

It would seem the retailer realized that the $160 million debtor-in-possession financing provided by Crystal Financial LLC combined with its operating cash flow won’t be enough to make ends meet.

An auction is scheduled for Aug. 22, in the event that multiple bids are received on or before Aug. 18.

In other news, Aéropostale said it is reviewing roughly 11,000 pages of documents produced by Aero Investors LLC, a Sycamore Partners-backed lender that had called the retailer’s reorganization plan “illusory.” The retailer had also accused MGF Sourcing, a Sycamore-backed supplier, of triggering the Chapter 11 filing when it breached its payment terms.

Aéropostale is currently in the process of winding down operations at 154 of its 800 stores, including all 41 of its Canadian locations. The retailer said last week that its net sales were down from $318.6 million to $298.6 million in the latest quarter.