Le Tote committee seeks authority to prosecute claims against HBC

By Sarah Lizee

Olympia, Wash., Dec. 18 – Le Tote, Inc.’s official committee of unsecured creditors is seeking authority to prosecute claims, challenges and causes of action against the HBC secured parties, according to a Thursday filing with the U.S. Bankruptcy Court for the Eastern District of Virginia.

“The counts arise from the HBC parties’ decision to off-load their poorly performing Lord & Taylor business to the debtors through an unfair transaction whereby the debtors paid over $151 million to the HBC parties for the ‘privilege’ of operating Lord & Taylor at the end of its useful life,” the committee said.

“As a consequence, the HBC parties enriched themselves at expense of the debtors’ creditors, and drained all remaining value from a company that the HBC parties knew could never survive.”

The committee said HBC’s actions resulted in the extraction of hundreds of millions of dollars in value from the debtors.

“If the counts are successfully prosecuted, the HBC parties would not only lose their alleged secured and unsecured positions, but they would also be required to affirmatively pay significant monetary damages to the debtors’ estates,” the committee said.

“The counts would generate substantial value for the estates and form the basis for material recoveries to general unsecured creditors.”

The committee said the debtors have refused to bring the counts and have instead entered into an agreement with the HBC secured parties to settle those claims on terms that do not require the HBC parties to pay any consideration to the estates, allow the HBC parties to retain their secured position, and “place all of the risk of underperforming liquidation sales squarely on the shoulders of the very unsecured creditors who were harmed by the HBC parties’ conduct.”

The committee claims the settlement framework between the debtors and the HBC parties would all but ensure that general unsecured creditors will receive nothing more than nominal recoveries at best.

“That result would come nowhere close to exceeding the lowest range of reasonableness for settling these highly valuable and compelling claims against the HBC parties,” the committee said.

The committee said it was hopeful that it could make progress towards a consensual resolution with the HBC parties in advance of the Dec. 21 challenge deadline, but the HBC parties have refused to engage.

New York-based Lord & Taylor, a unit of Le Tote, operates fashion stores in the United States. The company filed bankruptcy on Aug. 2 under Chapter 11 case number 20-33332.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.