Steve & Barry's creditors claim bid procedures, cash collateral motions favor pre-bankruptcy lenders

By Jennifer Lanning Drey

Portland, Ore., July 29 - Steve & Barry's LLC's official committee of unsecured creditors objected to proposed bidding procedures related to the sale of substantially all of its assets, as well as to the company's motion for final approval to use cash collateral, in a Tuesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

In the filing, the creditors claimed the sale process is designed to exclusively benefit the company's pre-bankruptcy lenders and may produce administratively insolvent estates that are incapable of confirming a plan of liquidation.

The creditors further asserted that the provisions of the company's proposed cash collateral order are "overreaching, harmful to the debtors' estates and/or contrary to applicable law and public policy."

Specifically, the committee said it objected to provisions granting pre-bankruptcy lenders liens and super-priority claims on previously unencumbered assets, including the proceeds of leasehold interests and avoidance actions.

Additionally, the creditors said they objected to a provision requiring the company to pay its pre-bankruptcy revolver lenders interest under the pre-petition revolver agreement and weekly payments of all cash on hand in excess of $2.5 million without evidence that the lenders are oversecured.

"The pre-petition lenders are not providing the DIP financing. Rather, they are merely consenting to the use of cash collateral to allow the debtors to run an expensive sale process which is designed to liquidate the pre-petition lenders' collateral expeditiously, and which may not confer any benefit whatsoever upon any other class of creditors," the creditors said.

The committee said it objected to the sale process because Steve & Barry's has not provided any business justification for a Chapter 11 liquidation process in a case where administrative solvency has not been proven to the committee or the court.

A hearing on Steve & Barry's bid procedures and cash collateral motions is scheduled for July 31.

Steve & Barry's, a Port Washington, N.Y.-based national apparel and accessories retailer, filed for bankruptcy on July 9. Its Chapter 11 case number is 08-12579.

© 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.