NEW YORK Bankrupt apparel retailer Steve & Barry's can begin going-out-of business sales immediately, after a U.S. bankruptcy judge approved the company's request in court on Monday.
Judge Martin Glenn, who is hearing the case in U.S. bankruptcy court in Manhattan, approved the motion from the retailer on Monday. It filed for bankruptcy last week.
Company lawyers said in court that it was imperative to begin the closings immediately to maximize value for the company's creditors.
The chain sells clothing lines designed by tennis star Venus Williams, surfer Laird Hamilton and actresses Sarah Jessica Parker and Amanda Bynes, among other celebrities.
It first filed for bankruptcy protection in July and was sold in August for $168 million to investment firms Bay Harbour Management and York Capital Management. Its new owners filed for bankruptcy protection on Wednesday with a plan to liquidate the chain's remaining 173 stores by early 2009.
In a bankruptcy court hearing where both Judge Glenn and U.S. Bankruptcy Judge Allan Gropper took the bench together, Steve & Barry's also said it had resolved some issues with its former owners.
The former owners had earlier objected to the stores closings, saying that they still owned the inventory and other assets in about 65 of the remaining shops and that Bay Harbour and York Capital had failed to fulfill some terms of the original asset purchase agreement.
The judges approved a stipulation between the new and former owners of the company, allowing the former owners access to about $7.4 million in cash and $11 million in various escrow accounts.
"We believe that the money being provided by the new estate is sufficient to cover all of their obligations under the asset purchase agreement, " Shai Waisman, a bankruptcy attorney representing the former owners told reporters after the hearing.
Judge Gropper has presided over the original Steve & Barry's case, which became known as Stone Barn when its core assets were sold.
Gropper said in court that the stipulation balanced the rights of both bankrupt entities in what he termed "a very unsatisfactory situation."
"I don't think anyone can blame themselves," Gropper said in delivering his decision on the stipulation. "It is a terrible economic situation that we all face."
Judge Glenn noted the rarity of approving a going-out-of business sale before the company's creditors had formed a committee, but agreed with the company's "business judgment" that store closings needed to begin by "Black Friday" to take full advantage of the holiday retail season.
Glenn approved a motion allowing the company to accept gift cards during the liquidation and an interim debtor-in-possession motion, which if later granted final approval, would allow the company access to about $65 million in funds to operate during the stores closing process.
Liquidation companies Great American Group, SB Capital Group, Tiger Capital, and Hudson Capital Partners will assist the store closing sales. The former owners have already closed more than 100 Steve & Barry's stores in their case.
(Editing by Leslie Gevirtz)