A bankruptcy judge has dealt a big blow to Aéropostale Inc.’s bid to survive chapter 11, refusing to rein in the bidding rights of Sycamore Partners, a former big backer and now major critic of the retailer, the Wall Street Journal reported on Saturday. Bankruptcy Judge Sean Lane, in a decision signed Thursday but not made public until Friday afternoon, said that Sycamore is entitled to wield its $151 million loan as currency at the bankruptcy auction of the retail chain, a credit-bid that gives it an advantage in the competition. The ruling portends bad news for landlords and employees of the teen fashion retailer, which has been at odds with Sycamore since before it filed for bankruptcy protection in May. The private-equity firm has said liquidation may be the best outcome for Aéropostale and its stores, and scoffed at the company’s hope of a job-saving turnaround. The credit-bid means Sycamore can walk into the auction without cash, and demand rival bidders pay off the $151 million loan from Sycamore if they want to save, or liquidate, the company. During arguments, Aéropostale warned that allowing Sycamore to credit-bid makes it unlikely that anyone but liquidators will show up at the auction. Read more. (Subscription required.)
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