Deb Shops bid procedures, agency agreement for sales allowed by court

By Kali Hays

New York, Dec. 18 – Deb Shops parent company Deb Stores Holding, LLC received approval of bid procedures and an agency agreement related to its asset and going-out-of-business sales, according to a Dec. 18 order from the U.S. Bankruptcy Court for the District of Delaware.

Included in the sale is the company’s inventory, fixtures and equipment, intellectual property, accounts receivable, cash on hand, property leases and customer lists.

As previously reported, if the intellectual property assets are not sold at auction, Deb Stores will seek approval of a separate sale.

The stalking horse bidder for the assets is a joint venture between Hilco Merchant Resources, LLC and Gordon Brothers Retail Partners, LLC with an agency agreement to conduct the store closing sales.

The stalking horse agreement guarantees Deb Stores will receive 98.25% of the cost value of all merchandise included in the sales, with a current value estimated between $38 million and $42 million.

If the sale proceeds exceed the estimated value, all remaining proceeds will be shared equally among the parties.

All expenses related to the sale will be paid by the stalking horse, but all transfer and delivery fees related to the merchandise will be at the cost of Deb Stores, according to the agreement.

If the joint venture is not the prevailing bidder for the assets, it will be entitled to a breakup fee of $400,000 and expense reimbursement up to $200,000.

If Deb Stores receives one or more qualified bids for the assets by Dec. 31, an auction will be held on Jan. 6.

Bids at auction must be made in 25% increments over the highest bid.

Under the agency agreement, the fee paid to Hilco and Gordon Brothers for conducting the sales will be equal to 6˝% of the aggregate cost value of the merchandise.

The sales are scheduled to begin no later than Jan. 9 or immediately after an approval of the procedures is entered by the court and are expected to end by April 30.

Deb Stores said proceeds from the sales will used to pay the DIP facility and agents.

A hearing to approve the sale is set for Jan. 7.

Deb Shops is a Philadelphia-based retailer that specializes in junior and plus-sized merchandise for women aged 13 to 25 that filed for bankruptcy on Dec. 4. The Chapter 11 case number is 14-12676.

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