UPDATE 4-Bay Harbour, York buy Steve & Barry's for $168 mln
(Adds details on Sarah Jessica Parker apparel line)
NEW YORK, Aug 21 (Reuters) - Investment firms Bay Harbour Management and York Capital Management will buy apparel retailer Steve & Barry's LLC for $168 million, the bankrupt clothing chain said on Thursday.
The company, which sells celebrity-branded clothing for less than $11, had filed for bankruptcy protection in July citing tight credit markets and a pullback in customer spending.
BHY S&B Holdings LLC, a newly formed affiliate of the two investment firms, was the successful bidder at the auction that concluded early on Thursday, Steve & Barry's said in a statement. Co-founders of the company Steve Shore and Barry Prevor are among the investors in BHY S&B Holdings.
More than 100 of Steve & Barry's 276 stores, located in U.S. malls and shopping centers, will likely close as the company focuses on its most profitable locations, said Bay Harbour managing principal Douglas Teitelbaum in an interview.
"It's going to be a little more than half its former size," said Teitelbaum, adding that the final number will depend on whether the company can reach favorable terms with current landlords.
In addition, new Steve & Barry's stores are expected to open in locations, including the site of the former Tower Records store in Manhattan, he said.
BENEFITS
The sagging economy can actually benefit the stores, said Teitelbaum.
"Value is the name of the game today," he said. "U.S. consumers need to be offered something exceptional on the value front and Steve & Barry's offers something really unique in terms of quality, excitement and price."
Sales will also be driven by demand for the company's lines of clothing designed by celebrities including actress Sarah Jessica Parker, said Teitelbaum.
Parker's line will remain at Steve & Barry's, the company said in a statement.
Bay Harbour Management is known for purchasing distressed companies and overseeing their turnaround. It bought high-end apparel department store Barneys New York and then sold it to Jones Apparel Group (JNY.N) for a "fair multiple," said Teitelbaum, declining to provide further details.
He said Steve & Barry's operates "at a fair margin," also without going into detail.
Steve & Barry's filed for Chapter 11 bankruptcy protection on July 9, joining a growing list of retailers seeking protection from creditors in a slow economy.
The 23-year-old company cited tight credit markets, higher costs and a pullback in customer spending that left it unable to pay debts accrued during a rapid expansion.
It was not yet clear how much creditors will receive for already-shipped merchandise or other services, but the purchase of the struggling retailer helps assure that suppliers will have an outlet for future business.
"Anything that keeps a retailer open is a good thing for our clients," said Bob Carbonell, executive vice president of retail credit rating service Bernard Sands. "There are some U.S. suppliers who may not come away whole, but they'll be able to do business with the new entity."
BHY S&B Holdings will acquire all merchandise from stores, and all intellectual property rights, including celebrity and brand licenses. It will also acquire key facilities including the Port Washington, New York, headquarters. (Additional reporting by Saumyadeb Chakrabarty in Bangalore; Editing by Brian Moss and Lisa Von Ahn)
