Syms Shareholders May Get Bankruptcy Committee

11/10/11
Bloomberg

Federal bankruptcy monitors are scouting for shareholders willing to serve on an official committee representing equity stakeholders in the bankruptcy liquidation of cut-rate clothiers Filene’s Basement and Syms.

The deadline is noon Monday for applicants for seats on the panel, which will have lawyers and financial advisers paid for by Syms Corp., the company that has all but promised that shareholders, for once, won’t get the short end of the stick in bankruptcy.

Shareholders are counting on a payout from the bankruptcy of the beaten-down retailers, which have been fumbling through a bad marriage in the recession. Syms shares jumped to about $10 per share briefly after the bankruptcy filing and have settled down to about $9 per share—higher than they were at this time last year.

The apparent willingness of U.S. trustee Roberta A. DeAngelis to name a shareholder committee is unusual. Federal bankruptcy officials generally resist pleas for official committees representing equity stakeholders on the grounds the money is better spent elsewhere.

But then Syms is an unusual case, said David Pollack, a bankruptcy lawyer from Philadelphia who is a fixture in big Chapter 11 cases in which big commercial landlords have millions on the line.

Syms owns real estate that it says is sufficiently valuable to offer hope to shareholders. Filene’s Basement has a lot of leases on big stores with lots of life left, said Pollack, who’s with Ballard Spahr. That could mean big lease rejection damages for Filene’s Basement landlords once the holiday liquidation frenzy is over.

Landlords nailed down most of the seats on the official committee of unsecured creditors in the case.

Much will depend, however, on whether the landlords negotiated guarantees with Syms when lease deals were inked. Some did and some didn’t. Those that failed to get Syms to underwrite the Filene’s lease could find shareholders ahead of them in the line to be paid if the case proceeds as it started out, with Syms and the owned real estate in one basket and Filene’s Basement and the leases in another.

“I’m not surprised there could be an equity committee,” Pollack said Thursday, adding it’s too early to tell if the shareholders’ gamble on Syms will pay off.

A hint could come as early as next week, when liquidators are expected to cough up the first payment on the going-out-of-business sales. With only $31 million in secured debt to pay off, Syms will have a good idea of how much ready money it will have to stretch out over its bills once the first installment is in hand.


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