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U.S. teen retailer Aeropostale Inc. plans to challenge in court private equity firm Sycamore Partners' claims as a creditor in its bankruptcy, Reuters reported yesterday. The fight between Aeropostale and Sycamore stands out from other bankruptcy cases of U.S. teen retailers, because very few of them triggered litigation. It could also complicate any effort by Sycamore to take over the retailer. The lawsuit, expected to be filed today, would follow an investigation by Aeropostale over the past several weeks into whether Sycamore drove the company into bankruptcy, in part by making the terms of its debt investment in the company in 2014 deliberately onerous. Sycamore affiliates loaned Aeropostale $150 million in 2014, and, as part of the deal, required that the chain make merchandise purchases from one of Sycamore's companies, MGF Sourcing. Aeropostale has said that MGF imposed new, burdensome terms on the retailer that precipitated its bankruptcy.

Sports Authority is scrambling to close the doors on most or all of its stores by the end of the month, according to multiple store employees and managers, an abrupt move that comes amid a fight over cash between lenders and suppliers, the Wall Street Journal reported today. Managers have been instructed on procedures for wiping the computers, locking up and walking away, as the dying athletic gear seller prepares for the final stage of its bankruptcy. A lawyer and officials of the Englewood, Colo., company didn’t respond to requests to discuss the accelerated shutdown plan, including questions about whether any stores would survive into August. In a May 25 letter to customers, Chief Executive Michael Foss said that the stores would be closed by the end of August. The end could be nearer than that for most Sports Authority stores, said store managers who were summoned to a conference call last week. Sports Authority and the nearly 14,000 jobs it once supported is essentially done at the end of July, they were told.

Teen clothing chain Aeropostale Inc. is preparing to sell all its assets and may bring claims against the private equity firm that it said drove it into bankruptcy, Bloomberg News reported yesterday. The New York-based company said in court papers on July 15 that “reorganization on a standalone basis is not feasible.” Instead, it will look for a “stalking horse” to make the lead bid at an auction next month and will pass the proceeds of any sale to creditors. The retailer also said it’s still reviewing 11,000 pages of documents and depositions of key individuals that senior lender Sycamore Partners produced during a bankruptcy probe and is evaluating whether to pursue claims against the private equity firm and affiliates. Aeropostale entered bankruptcy in May, saying that Sycamore used a supplier it controlled to trigger the filing. The retailer also says that the private equity firm controls its biggest secured lender, Aero Investors LLC, an agent to a $150 million term loan. 

To keep its nationwide bankruptcy liquidation from crashing to a halt, Sports Authority Holdings Inc. has cut a deal with senior lenders that portends bad news ahead for landlords and suppliers to the failed sports retailer, the Wall Street Journal reported today. Going-out-of-business sales are still in full swing at many stores, as liquidators sell off the last bicycles, skateboards and rest of the gear and apparel still on the shelves. Sports Authority auctioned off its intellectual property, which is going to high-bidder Dick’s Sporting Goods, for $15 million, and some leases. But in a court filing on Tuesday, Sports Authority admitted what creditors’ lawyers predicted early in the case — banks are claiming all the money rung up in the company’s last days. Without a deal, lenders will be poised on Friday to shut off the funds to Sports Authority, forcing an abrupt shutdown, court papers say. “So as to prevent these chapter 11 cases from coming to a grinding halt,” Sports Authority agreed to compromise legal disputes with the lenders, a group that is led by Wilmington Savings Fund Society. In a separate motion, Sports Authority revealed lenders have agreed to fund up to $2.85 million in bonuses to senior executives of the dying company. Under the proposal, four top executives are in line for up to $1.5 million in bonuses. Sports Authority won’t identify those getting bonuses at the end of a bankruptcy that cost 14,000 people their jobs. By Friday, Sports Authority will have paid off its top layer of debt from liquidation proceeds. Lenders claim to be owed an additional $240 million, a figure that includes loss of value in their collateral during the bankruptcy.