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Aeropostale to Seek Bankruptcy Rescue

Posted on in Corporate Bankruptcy

In an earlier post, we discussed fashion retailer Aeropostale's financial troubles, the changing factors in the fashion world behind them, and the company's bankruptcy plan. Now, there are new developments regarding Aeropostale's bankruptcy and potential financial recovery. It and Versa Capital Management hope to reach a purchase deal by the second week of August.

In early August, Aeropostale won court approval to pay expenses to Versa Capital Management to cover the costs of Versa's stalking horse bid. Versa hopes to make a binding offer on Aeropostale's assets at auction. The management group has experience working with bankrupt retailers. One of its previous success stories is its reorganization of Eastern Mountain Sports in 2015. If it does obtain Aeropostale's assets, the management group hopes to keep at least 500 Aeropostale stores open in the United States, keeping thousands of individuals in those stores employed. The case is currently pending in the United States Bankruptcy Court for the Southern District of New York in Manhattan. Reorganization of a bankrupt company can be complex and involve multiple disputes from the parties involved. If you are considering filing for bankruptcy as a business owner, be sure to arm yourself with the aid of an experienced bankruptcy lawyer before you begin the process.

What is a Stalking Horse Bid?

You might not be familiar with the term “stalking horse bid.” A stalking horse bid is an attempt by an indebted party to test the market for its assets before the assets go to auction. This is to give the indebted party a better understanding of the true value of its assets before the court auction so it can avoid low bids and gauge the realistic bids it receives.

Stalking horse bids are often part of Chapter 11 asset sales. A stalking horse bid has benefits for the bidding party as well as the debtor. With a stalking horse bid, the bidding party can establish the initial bid against which others will be compared, rather than simply trying to bid its way into a competitive bidding war. This gives the bidder a bit of control in the auction process. It also allows the bidder to determine which assets will be included in the sale and any applicable legal clauses to the sale or the later use of these assets. Sometimes, a stalking horse bid is used to discourage other parties from bidding on the bankrupt party's assets, essentially determining the winner of the auction before it is even held.

Work with a Vernon Hills Bankruptcy Lawyer

If you are considering filing for bankruptcy, whether you are filing for Chapter 11, Chapter 13, Chapter 7, or any other type of bankruptcy, be sure to educate yourself about the specifics of the type of bankruptcy you are planning to file by working with an experienced bankruptcy lawyer. Contact our team at Newland & Newland, LLP today to set up your initial consultation in our office. We serve clients in the North Chicago, Fox Lake, Zion, Winthrop Harbor, Waukegan areas from out our office located in the prestigious 180 North LaSalle street building in Chicago.

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