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Fairfax Financial Holdings Ltd., the investment firm run by billionaire Prem Watsa, signed an agreement to buy the Canadian unit of Toys “R” Us Inc. for about C$300 million ($237 million), Bloomberg News reported. The stalking horse bid allows other potential buyers to enter competing proposals by Monday. Fairfax would then have the option of either increasing its offer or walking away. Under the terms of the deal, Fairfax would receive a break fee of about 4 percent if another bidder is chosen. After the takeover, Fairfax would be able to continue operating Toys “R” Us stores in Canada under the existing name, the person said. The deal would follow a Fairfax-backed consortium’s purchase of athletic equipment maker Performance Sports Inc. last year, a process that was also overseen by a bankruptcy court.

Bon-Ton Stores Inc. won court approval yesterday for a bid to wind down its operations, clearing the way for one of the largest U.S. department store chains to begin selling everything from its store inventory to leases and fixtures, Reuters reported. With the disappearance of Bon-Ton, analysts said rivals such as Macy’s Inc., J.C. Penney Co. Inc. and Kohls Corp. will compete to keep longtime customers from turning to discounters like Walmart Inc. or online stalwart Amazon.com Inc. “Now Macy’s and J.C. Penney will be the primary beneficiaries of Bon-Ton’s bankruptcy, and Stein Mart Inc will be able to get great leases at rock bottom low prices,” said Burt Flickinger, managing director at retail consultancy Strategic Resource Group. “Ironically, Sears Holdings Corp., which to its credit has done a very good job in the last three to four quarters on soft lines and clothes and apparel, will benefit greatly, too.” Read more. 

A special episode of “Eye on Bankruptcy” focused on the next wave of retail cases will be taped before a live audience at the Annual Spring Meeting on Saturday! Watch a preview. Walk-up registration welcome!

A closely divided Supreme Court struggled on Tuesday to decide whether internet retailers should have to collect sales taxes in states where they have no physical presence, the New York Times reported. Brick-and-mortar businesses have long complained that they are disadvantaged by having to charge sales taxes while many of their online competitors do not. States have said that they are missing out on tens of billions of dollars in annual revenue under a 1992 Supreme Court ruling that helped spur the rise of internet shopping. By the end of arguments yesterday, it was not clear whether there were five votes to overrule the 1992 decision, Quill Corporation v. North Dakota, which said the Constitution bars states from collecting sales taxes from companies that do not have a substantial connection to the state. Several justices expressed concerns about imposing crushing burdens on small businesses that sell goods on the internet and about making them liable for back taxes. Justice Sonia Sotomayor said the case before the court, South Dakota v. Wayfair, No. 17-494, raised “a host of questions” and “a whole new set of difficulties.”

Bon-Ton Stores Inc., a bankrupt department store chain, will begin a going-out-of-business sale at its 200 U.S. locations in the coming days after two liquidators won an auction for the company, Reuters reported. Bon-Ton, which traces its roots to 1854, had hoped in recent days that a pair of landlords and a private equity firm would actively bid at the auction and try to save the business. However, sources told Reuters on Monday that the auction started without the landlord group. Great American Group and Tiger Capital Group, which specialize in winding down retail chains, won the auction with a bid estimated to be worth $775.5 million. The pair bid against other liquidators. A portion of the winning bid came in the form of a credit bid, or when a creditor uses some of what they are owed instead of cash, sources told Reuters. Bondholders’ credit bid contributed at least $100 million to the value of the winning bid.

Toys “R” Us Inc.’s lawyers and advisers have shot down an 11th-hour offer from a billionaire toy maker that would have kept some of its U.S. stores open, the WSJ Pro Bankruptcy reported. Isaac Larian, the founder of Bratz dolls maker MGA Entertainment Inc., came forward last week with a $675 million bid for the bankrupt retailer’s U.S. stores. The offer included an additional bid of $215 million for the retailer’s Canadian operations. Larian’s offer didn’t meet the qualified bid threshold under the court-approved auction procedures and the retailer has taken it off the table. Larian said yesterday that he hadn’t been informed yet that the bid wasn’t qualified. “If that’s the case, it’s really a shame that they’re going to let this company go into liquidation instead of at least responding and saying we need more or we need this,” he said. The company’s lawyers and advisers are still evaluating the other bids they received for the Canadian operations, and it’s unclear if any include keeping U.S. stores open. An auction is slated to take place on Wednesday, court papers show. Read more. 

A special episode of “Eye on Bankruptcy” focused on the next wave of retail cases will be taped before a live audience at the Annual Spring Meeting! Watch a preview. To register for the Annual Spring Meeting, please click here. 

Bertucci’s Inc., the chain of Italian eateries rooted in the Boston area, will be auctioned off after filing for bankruptcy protection amid intense competition for diners who have less time for sit-down dining, Bloomberg News reported. The closely held restaurant company, based in Northborough, Mass., may close about half its locations and plans to hold an auction where the opening bid will be worth about $19.7 million, Chief Financial Officer Brian Connell said in court papers filed Sunday. An affiliate of Right Lane Capital has agreed to buy the chain should no higher offers come in, Eric Mara with Right said yesterday. Bertucci’s owes about $110 million to lenders, and about $9 million to suppliers, landlords and other unsecured creditors, the company said in the court papers filed in Wilmington, Del. Units of CIT Group Inc. and Wells Fargo & Co. were listed as first lien lenders. The chain is owned by an affiliate of Levine Leichtman Capital Partners, court papers show.

A joint bid by two liquidation firms will be the starting point for bidding today in the bankruptcy auction of Bon-Ton Stores Inc., the Milwaukee Journal Sentinel reported. Bon-Ton, the parent company of Boston Store, Younkers and other department store brands, has designated an undisclosed bid by Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC as the baseline bid, according to a court filing on Friday. That means it is the top bid to date, and sets the floor for bidding in Monday’s auction of the company and its assets. Hilco and Gordon Brothers are part of a group that is running the going-out-of-business sales for Toys “R” Us and Babies “R” Us stores in the U.S. Asked on Friday whether any of the bids submitted for Bon-Ton were from firms that want to keep operating the company, Bon-Ton issued a statement: “We are making every effort to sustain Bon-Ton as a going concern. As noted in the court filing, the bid submitted by Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC is a baseline to evaluate other potential offers and maximize value for our stakeholders through the court-supervised auction. Our team remains in discussions with the investor group to reach an agreement for Bon-Ton to be acquired as a going concern.” Read more. 

Occupancy issues are at the heart of many significant retail cases, as detailed in the forthcoming ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available at the ABI Store. 

Billionaire Isaac Larian, the toy marketer whose lineup includes Little Tikes and Bratz dolls, offered to save part of Toys “R” Us from liquidation with an almost $900 million bid for stores in the U.S. and Canada, Bloomberg News reported. Larian would pay $675 million and $215 million for outlets in Canada, he said Friday in a statement. The funds will come from Larian himself and bank financing, including UBS Group AG and Bank of America Corp., Larian said. The would-be rescuer is the chief executive officer of MGA Entertainment Inc., which sells toys including L.O.L. Surprise! and Baby Born. Larian previously started a GoFundMe campaign to help keep Toys “R” Us open, with the page now showing pledges of $200 million from Larian and other investors, and an additional $58,998 from various public contributions. Read more.

A special episode of “Eye on Bankruptcy” focused on the next wave of retail cases will be taped before a live audience at the Annual Spring Meeting this week! Watch a preview. To register for the Annual Spring Meeting, please click here.