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UPDATE 1-Owners battle over fate of 65 Steve & Barry's stores
(Updates with results of court hearing)
By Emily Chasan
NEW YORK Nov 21 (Reuters) - The current and former owners of Steve & Barry's are battling over the assets of the retailer, which filed for bankruptcy again on Wednesday.
The original company, which now goes by the name Stone Barn, filed court papers on Friday saying it still owns some of the assets the retailer's new owners have sought bankruptcy protection for this week.
After purchasing the apparel chain out of bankruptcy for $168 million in August, the new owners of Steve & Barry's -- investment firms Bay Harbour Management and York Capital Management -- filed for bankruptcy protection on Wednesday with a plan to liquidate the chain's remaining 173 stores by early 2009. According to its Chapter 11 petition, plans to operate the chain fell victim to slumping retail sales and difficulty in getting financing.
Stone Barn said it objected to that plan. In a court hearing on Friday it said it may still have claims to about 65 stores and other assets in the stores and that the new company could not liquidate those stores.
"Much of the current debtors' operations are in stores and involve inventory owned by the Stone Barn Debtor," Shai Waisman, a lawyer representing the earlier Steve & Barry's bankruptcy case, said in court documents on Friday.
"The Stone Barn Debtors and their estates and creditors should not be forced to fund (the new company's) Chapter 11 cases, and, consequently, their rights and assets must be protected," Waisman wrote.
The original Steve & Barry's filed for bankruptcy protection in July. Steve & Barry's closed stores before it sold off its assets to Bay Harbour, and has the funds from the Bay Harbour sale to distribute to creditors.
Attorneys for the second bankrupt company, which goes by the name BH S&B Holdings, said in court on Friday that the ownership of 108 stores is undisputed.
Stone Barn said in the court papers that the company's new owners have "continually breached" requirements under their asset purchase agreement.
U.S. Bankruptcy Judge Martin Glenn on Friday approved procedures to get the BH S&B Holdings through the weekend. He said the company could access $1.8 million from a lender to meet payroll with certain conditions. During the weekend, revenue from the store operations will be held in a bank account maintained by the lender.
Both bankrupt companies are scheduled to have a joint hearing before the two bankruptcy judges overseeing the cases in Manhattan on Monday. (Reporting by Emily Chasan, editing by Phil Berlowitz and John Wallace)
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