Philadelphia-based Versa Capital Management has emerged as the lead bidder for Reading, Pa.-based Boscov's, which filed for Chapter 11 protection in August and announced that it would close 10 of its 49 stores.
Versa has offered to pay $11 million in cash and assume Boscov's debt, but the U.S. trustee has filed an objection, saying Boscov's seemed to be impermissibly favoring Versa over other bidders.
Among other things, the trustee noted that Versa has not been required to post a good-faith deposit, and that it is getting information about competing bids while there is no provision for the other bidders to receive the same information.
The trustee also has raised questions about a proposed $4 million breakup fee, saying conditions in the term sheet submitted by Versa make it difficult to determine when the breakup fee might be triggered.
"At bottom the debtors should not be paying a breakup fee to the buyer if the aforementioned conditions are not satisfied, as such payment would not be an actual, necessary cost of preserving the debtors' estates," wrote Joseph McMahon Jr., a trial attorney representing acting U.S. trustee Robert DeAngelis.
In addition to postponing a discussion of the bid procedures and a proposed October sale date, the court also heard arguments over a motion that was filed under seal by Boscov's last week. After meeting with attorneys behind closed doors, Gross approved a stipulation proposed by Boscov's and ordered that the initial motion remain under seal.