Destination Maternity Corp. won court approval to liquidate its remaining stores after a judge rejected claims by a federal bankruptcy watchdog that a sale process, which might have saved part of the chain was “tainted” by conflicts, Bloomberg News reported. Bankruptcy Judge Brendan Linehan Shannon acknowledged that the structure of the deal he approved was unusual, but said he disagreed that there was an actual conflict of interest. Two retail liquidation specialists worked for Destination Maternity before teaming up on the winning bid to conduct going-out-of business sales for the chain. One of the liquidators also has ties to a key Destination Maternity lender. “There is at least an optical concern about a party wearing a number of hats,” Judge Shannon said. “But I don’t believe there is a meaningful conflict.” Under the deal, licensing company Marquee Brands LLC will get Destination’s name, website and other operating assets for about $50 million, while Hilco Merchant Resources and Gordon Brothers Retail Partners will run store-closing sales at its remaining 235 locations, with thousands of jobs likely to disappear, court papers show. The structure made it difficult for a rival to make a competing offer to buy the entire company as a going concern or to outbid Marquee for the intellectual property without first getting permission from Hilco and Gordon Brothers, according to Destination’s main financial adviser, Neil A. Augustine, with Greenhill & Co. The U.S. Trustee argued that Hilco and Gordon Brothers had an advantage in bidding on the right to wind down the chain because they had more access to information about Destination Maternity than other potential bidders.
