L Brands returned Sycamore's legal effort to get out of its agreement to buy Victoria's Secret with a lawsuit of its own on Thursday, saying that the private equity firm is inappropriately leveraging the COVID-19 epidemic to renege on their deal, or get a better one.

The companies agreed in February that Sycamore would get a 55% interest in Victoria's Secret for about $525 million and take the brand private, with the retailer keeping a 45% stake. But on Wednesday, Sycamore told L Brands the deal was off, and took to court to enforce that.

In its own complaint Thursday, L Brands called the firm's legal move an "apparent case of buyer's remorse" and "a pretext for its invalid and improper termination," according to court papers emailed to Retail Dive. Also in the complaint, the company rebuffed Sycamore's arguments with details about phone calls and other communications in recent weeks, in which, L Brands says, Sycamore reiterated its desire to buy the struggling lingerie brand but, on April 13, asked to lower the price.

The pandemic's interruption of business as usual, especially in retail, is out of the ordinary, so it's difficult to predict the outcome. The pandemic per se isn't reason enough to call off the deal because a standard clause prevents that, unless Victoria's Secret could be seen as suffering more than its peers. Plus, L Brands notes the disease was a known quantity at the time they inked their deal. Sycamore itself seemed to acknowledge that in its filing with the court, writing about L Brand's decisions to close stores and furlough staff, "That these actions were taken as a result of or in response to the COVID-19 pandemic is no defense to L Brands' clear breaches of the Transaction Agreement."

Instead, the firm finds a workaround by quoting from their original contract, which stipulates that a condition to Sycamore's obligation to follow through on the acquisition is that L Brands "shall have performed in all material respects" its own usual responsibilities in conducting Victoria's Secret's business until their closing date. Many of the actions that L Brands has taken in recent weeks "breached its covenants in the parties' Transaction Agreement," according to a copy of Sycamore's lawsuit, filed Wednesday in the Chancery Court of Delaware, and emailed to Retail Dive by a Sycamore spokesperson.

The actions at issue, according to Sycamore, include closing "nearly all of its approximately 1,600 Victoria's Secret and PINK brick and mortar locations globally, including all 1,091 of its Victoria's Secret and PINK stores in the United States and Canada;" failing to pay April rent; furloughing most Victoria's Secret employees; reducing employee compensation and deferring merit increases; and — in one of the lawsuit's most cutting accusations — "drastically [reducing] new merchandise receipts which, when coupled with L Brands' failure to dispose of existing out-of-season, obsolete and excess merchandise, has saddled the Victoria's Secret Business with a stock of merchandise of greatly diminished value."

Some analysts have downplayed Sycamore's attempt, noting that L Brand's actions were all in response to the COVID-19 outbreak — in some cases arguably prudent and in others (as with some store closures) mandated by state or local governments. But other experts, including Alon Kapen, a partner at law firm Farrell Fritz, saw potential in it, in part because, with an agreement between them and a transaction pending, L Brands may have needed to consult with Sycamore in making some of those decisions.

Kapen said to expect more buyers to try to get out of deals due to business disruptions caused by the outbreak. "This is a perfect example of that. Sellers are going to justify whatever action they took or did not take with respect to the conduct of their business," he said in an interview. "This has the additional twist, that the seller says the buyer consented to it. That's not always going to be the case."

Indeed, L Brands noted in its own complaint that Sycamore, as the owner of several retailers (including office supply store Staples and department store Belk) has itself taken "the same, or even more extensive, steps to protect other retail portfolio companies they own — just as virtually every other retailer in the country has done."

Furthermore, L Brands seems to say that Sycamore was indeed consulted on the actions. The retailer claims that Sycamore in recent weeks has reiterated its interest in their deal, but asked to lower the price. All the while, Sycamore acknowledged and agreed with L Brands' actions as "reasonable," and in the process "raised no objection."

"In reality, Sycamore's current position is pure gamesmanship," L Brands lawyers write.

Still, there are a couple of sticking points. Cowen & Co. analysts led by Oliver Chen in emailed comments point out, for example, that Victoria's Secret closed some of its stores voluntarily. And Wedbush analyst Jen Redding noted that on March 19 L Brands closed down Victoria's Secret's e-commerce site "to focus resources on Bath and Body Work's production and distribution of soaps and hand sanitizers amid the pandemic." (Those digital sales have since resumed.)

One path to resolution of this feud is to lower the price, as Sycamore apparently has requested. In any case, L Brands needs the cash. The retailer has the highest debt balance ($5.5 billion) and interest liability ($350 million), among retailers covered by Wedbush. "We believe the termination of the transaction could add liquidity and solvency risks to shares of L Brands, as the company potentially approaches a breach of the debt covenant," Wedbush analysts said.

Then again, BMO Capital Markets analysts say that the deal falling through could be an opportunity for L Brands to turn the brand around on its own. "Taking a [long-term] strategic view, a COVID-19 revenue decline may actually pose an opportunity for [management] to focus on operating a smaller and healthier [Victoria's Secret] business," BMO Managing Director Simeon Siegel wrote in emailed comments, adding that "the segment could greatly benefit from pulling back promos and shedding some over-extended, low-profit sales."