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Sycamore Again Objects to Aéropostale Chapter 11 Plan

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Aeropostale

Sycamore Partners did not hold back in court Monday, filing an objection opposing Aéropostale’s second amended joint plan of reorganization.

The private-equity firm—which loaned the teen retailer $150 million—and its corporate affiliates told a New York bankruptcy court judge that the “still-deteriorating business” had “wasted millions of dollars” going through the Chapter 11 process and had yet to “yield a firm purchase offer of any kind.”

“It is time for the only recalcitrant party in these cases, the debtors, to act responsibly and salvage from the wreckage of their misguided bankruptcy strategy as much value as possible for the benefit of, and in consultation with, all of the creditors in these cases, for whom the debtors and their officers are meant to act as fiduciaries,” the filing stated.

The protest is the latest blow in a bubbling row between the two. When Aéropostale filed for Chapter 11 in May, the retailer said it was forced to do so after MGF Sourcing—a Sycamore-affiliated supplier it started working with as part of the conditions of its 2014 loan from a Sycamore-backed lender—breached their contract by demanding payment up front instead of in 60 days’ time.

The following month, Sycamore called Aéropostale’s reorganization plan “illusory,” with “no realistic chance of success.” Then, in late July, the retailer filed a lawsuit against Sycamore to prevent the private-equity firm and its affiliates from credit bidding and also asked the court to reduce how much it would be repaid on its loan.

Monday’s objection by Sycamore refuted that claim, calling itself and its affiliates “the highest, best and only meaningful source of cash recovery for creditors in these cases” and stressed that Aéropostale needs to work with the term loan lenders, not against them, to confirm a liquidating plan.

“The Sycamore Parties stand ready and willing to negotiate amendments to the plan that will allow them to recover what they are entitled to recover on their claims. They cannot, however, accept the plan in its current un-confirmable form,” the filing said.

A plan confirmation hearing is scheduled for Wednesday. Aéropostale has so far shuttered 113 of its 739 U.S. stores and all 41 of its locations in Canada.

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