[NEW YORK] Teen clothing chain Aeropostale Inc overcame the first challenge to its bankruptcy reorganization plans, securing US$100 million in interim financing over the objection of its main lender.
US bankruptcy judge Sean Lane in Manhattan Wednesday approved the company's request to draw from a US$160 million debtor-in-possession financing package provided by Crystal Financial LLC.
Aeropostale's senior lender, a unit of Sycamore Partners, opposed the loan. It called the retailer's reorganization plans "illusory" and said liquidation would be the most realistic course unless a buyer emerges in two to four weeks.
"Broadly speaking, you satisfied your requirements for interim relief," Mr Lane said in court Wednesday, adding that he understood concerns about the arrangement and that those matters could be revisited at a final hearing on the full loan. Considering some of the financing will go to pay off other loans, the company is only getting US$20 million in new money, he said.
Sycamore controls Aeropostale's biggest secured lender and one of its largest suppliers, MGF Sourcing, and used that influence to force the retailer into bankruptcy, according to the chain. Sycamore denies the allegations. Aeropostale wants court permission to investigate.
The judge also gave Aeropostale interim approval to start going-out-of business sales at 154 stores, including all 41 locations in Canada. The company will return to court later for final approval.
Aeropostale listed US$390 million in debt and about US$354 million in assets in the Chapter 11 petition it filed May 4 in Manhattan.
The case is In re Aeropostale Inc, 16-11275, US Bankruptcy Court, Southern District of New York (Manhattan).