Vestis Retail Group LLC expects to pay claims totaling $8 to $10 million for goods Sport Chalet, Eastern Mountain Sports (EMS) and Bob’s Stores received in the 20 days preceding its Chapter 11 bankruptcy under a revised order approved Wednesday by the judge overseeing the case.
To be paid, vendors must have filed a Code 503 (b) (9) claim with the bankruptcy court for goods Vestis received on or after March 29, which fell 20 days before it filed its Chapter 11 petition in U.S. Bankruptcy Court.
Vestis also anticipates paying other pre-petition claims from a pool of funds that includes $3 million in cash, 75 percent of net proceeds from its sales of leasehold interests and recoveries on commercial tort claims. The sum of those funds is not yet known and no determination had been made as of Thursday on how they will be distributed to the three retailers unsecured creditors.
The details were part of a revised agreement U.S. Bankruptcy Court Judge Laurie Silverstein approved Wednesday that clears the way for EMS and Bob’s Stores to emerge from bankruptcy court largely intact, under the same management and ownership group and ahead of the back-to-school season.
Silverstein authorized Vestis to move forward with a revised “Stalking Horse Asset Purchase Agreement” with BSI Funding II LLC, an affiliate of Vestis’ current parent company Versa Capital Management. In doing so, she cancelled an auction of Vestis’ assets that had been tentatively scheduled for later this month.
In her order, the judge wrote that the terms of the deal were “reasonable and appropriate” and would yield better results for the company and the creditors than selling Vestis’ assets at auction.
An attorney representing creditors estimated the value of BSI Funding’s bid at $96 million. The sum includes $35 million Vestis owed Versa prior to filing bankruptcy, any outstanding balance on the $125 million Wells Fargo loan Vestis arranged to finance its operations during bankruptcy, assumption of other liabilities and $1.5 million in cash.
Assuming creditors don’t raise any objections to the revised asset purchase agreement by a June 15 deadline, the judge could approve the sale at the June 20 hearing. That would put Vestis on track to exit bankruptcy in July after liquidating all 47 Sport Chalet stores, eight EMS stores and one Bob’s store.
When it filed its Chapter 11 petition on April 18, Vestis said it planned to emerge from bankruptcy with 34 Bob’s Stores and 61 EMS stores and annual sales of approximately $400 million.
Photo courtesy Sport Chalet