Claire's lender readies $1.5B bid for the bankrupt retailer

Dive Brief:

One of Claire's Stores' lenders, and its loudest opponent in the teen retailer's Chapter 11 case, is raising cash for a $1.5 billion bid to take over the business.
Thomas Lauria, a partner with White & Case representing hedge fund Oaktree Capital Management, said at a court hearing last week that Oaktree plans to file the bid for Claire's by a court deadline at the end of August, according to an audio recording of the hearing.
Oaktree had successfully extended a process to solicit and consider bids for Claire's after the retailer entered bankruptcy with a plan for reorganizing negotiated with some of its creditors. Ray Schrock, an attorney for Claire's, said the retailer is still soliciting bids.

Dive Insight:

Oaktree is putting its money where its mouth is by ponying up money for the retailer its has been fighting over in court.

The hedge fund from the beginning of the case opposed Claire's' originally proposed reorganization plan, which would turn over ownership of the retailer to a group of lenders led by Elliott Management Corporation and Monarch Alternative Capital and pay off some $1.9 billion in debt.

From the get-go Oaktree said the plan didn't value Claire's highly enough, leaving other creditors to get less than they otherwise might.

One of Oaktree's main contentions was that Claire's original efforts to market company, aside from not being long or strong enough, did not account for the more than 4,000 concession stands the retailer planned to open in CVS drug stores and with other third-party retailers.

The upshot of all this court fighting is that, despite the financial troubles that sent it into Chapter 11, Claire's is no retail dog. In the first quarter, the company made more than $20 million in operating income, but it was eaten up by the expenses of Chapter 11, among other costs.

The chain that claims to have pierced the ears of millions of teens has a future, at least in the eyes of some of its key lenders. And that matters. Both Bon-Ton and Toys R Us, among countless other retail names, went into liquidation because they could not muster stakeholder support during bankruptcy.