Bon-Ton Stores Inc.’s creditors are trying to hold a bank accountable for a paperwork mistake that could cost bondholders millions of dollars, WSJ Pro Bankruptcy reported. In a lawsuit filed on Thursday, Bon-Ton’s unsecured creditors' committee sued Wells Fargo NA, the trustee for its second-lien bonds, for “defects in its liens securing” the bonds due to mishaps with filing paperwork at the right time. Bon-Ton issued $350 million in second lien bonds to investors in 2013. Wells Fargo, the original indenture trustee for the bonds, filed paperwork perfecting the bondholders’ liens on Bon-Ton’s assets and property. However, the trustee didn’t file the paperwork to continue the liens, the lawsuit claims, until earlier this year, just weeks before Bon-Ton’s bankruptcy filing. Since those filings fell within the 90-day preference period under bankruptcy law, the creditors say the bondholders’ claim should be disallowed. Wilmington Savings Fund Society succeeded Wells as the trustee and collateral agent and is also named as a defendant in the lawsuit. WSFS contends that its liens are valid and not avoidable, according to the lawsuit. Read more.
In related news, Bon-Ton Stores Inc. is in active discussions with a bidder to acquire the company, and had received approval from lenders to extend the deadline for submitting bids for the chain, it said on Friday. The company said that it had received approval to extend the deadline for submitting qualified bids by two days to April 4. Read more.
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