Filene’s Basement has announced that an affiliate of Men’s Wearhouse emerged as the winning bidder in a nine-hour bankruptcy auction for assets of the off-price chain that was held in Manhattan on Friday.
The affiliate, K&G Acquisition Corp., offered a total of $67.0 million that will cover the purchase of 17 to 20 of Filene’s store leases; inventory from all 25 existing locations; leases for the company’s headquarters in Burlington, Mass., and distribution center in Auburn, Mass.; as well as the Filene’s Basement trade name. Men’s Wearhouse’s bid–which is subject to a hearing in Federal Bankruptcy Court in Wilmington, Del. on June 10–includes approximately $5.0 million associated with potential litigation revolving around Filene’s lease at the currently inactive Downtown Crossing redevelopment project in Boston.
“We are extremely pleased with the outcome of the auction,” said Scott Rusczyk, President of FB Acquisition II, the Buxbaum Group affiliate that acquired Filene’s Basement from Retail Ventures on April 20 and then filed to reorganize under Chapter 11 of the Federal Bankruptcy Code on May 4. “If ratified by the court, the Men’s Wearhouse bid allows for the continuation of one of the industry’s most iconic off-price brands under the aegis of a preeminent specialty retailer. Equally important, the agreement is expected to preserve jobs for the vast majority of Filene’s 1,600-plus employees, while maintaining relationships with many of the vendors that historically sold to the chain and preventing vacancies in at least 17 of the retail properties where the chain was an anchor or sub-anchor tenant. Given the disappearance on many prominent retail brands during the past 18 months, this development speaks volumes about the special place the Filene’s Basement name and concept holds in the hearts of consumers.”
Men’s Wearhouse competed in the auction against an affiliate of New York-based developer Crown Acquisitions, as well as a group consisting of off-price retailer Syms and Vornado Realty Trust . Under a previously announced ‘stalking horse’ bid, Crown had agreed to purchase the trade name and leases for 17 stores, but not the inventories, for approximately $22.0 million.
“With the inventories ultimately expected to be added into the equation, we anticipated that the auction bids would be north of $40 million. Accordingly, the winning bid was a great result,” said Filene’s Chief Restructuring Officer Alan Cohen. “It was a very spirited auction.”
Stores that will not be acquired are expected to be closed by mid-June, with employees in those locations receiving all assistance outlined under their employment agreements with Filene’s. Because Men’s Wearhouse had agreed to acquire all inventories, no liquidation sales are planned.
Men’s Wearhouse is expected to retain most employees in the store and corporate facilities it is acquiring. The company is also expected to honor Filene’s Basement gift cards or merchandise credits.
Discussing the disposition of the Filene’s Basement bankruptcy case, Cohen said he anticipates that unsecured creditors will be asked to submit proofs of claim before Labor Day. That would set the stage for the company’s bankruptcy plan to be confirmed by September or October, with creditors paid the following month, allowing for the case to be concluded by the end of 2009.
In addition to Alan Cohen, advisors to Filene’s Basement include legal counsel Pachulski, Stang, Ziehl & Jones LLP.
About Men’s Wearhouse
Founded in 1973, Men’s Wearhouse is one of North America’s largest specialty retailers of men’s apparel with 1,284 stores. The Men’s Wearhouse, Moores and K&G stores carry a full selection of designer, brand name and private label suits, sport coats, furnishings and accessories and Men’s Wearhouse and Tux stores carry a limited selection. Tuxedo rentals are available in the Men’s Wearhouse, Moores and Men’s Wearhouse and Tux stores. The company is based in Houston, Texas.
About Buxbaum Group
Buxbaum Group, based in Agoura Hills, Calif., has built its reputation for over 30 years as one of the largest liquidators and appraisers of retail and wholesale inventories across North America. While continuing to operate in those areas, the company has shifted its primary focus in recent years to turnaround investing.
