Bakers Footwear Group (fka BKRSQ)

[TheProfit]

Bakers Footwear Seeks to Replace Chapter 11 Financing to Avoid Liquidation

Nov 14, 2012 12:20:59 (ET)


By Stephanie Gleason

Bakers Footwear Group Inc. (BKRSQ) is asking a bankruptcy court to allow the company, on an emergency basis, to replace its bankruptcy financing with a new $9.5 million loan that has a later maturity date as the repayment deadline on its original financing draws near.

The U.S. Bankruptcy Court in St. Louis approved access to $22 million in bankruptcy financing from Crystal Financial LLC on Nov. 5. That financing, which included a $17.8 million rollup of pre-petition debt, was to be paid back on Nov. 16, or Bakers would have to begin liquidating the entire chain, it said, per the financing agreement.

However, since negotiating the Crystal bankruptcy financing, Bakers decided that it would like to reorganize its chain around 63 retail stores and close 150 others rather than liquidate completely.

SB Capital Group LLC and Tiger Capital Group LLC won the right at auction to run the liquidation sales at the 150 stores that are closing. The company is aiming to complete the sales by the end of the year.

"The replacement financing provides the debtor with its only chance to complete a reorganization of its business operations. Absent an immediate refinancing of the existing DIP facility, the debtor will be forced to commence a liquidation of all of its assets," it said in court documents.

The new financing is being provided by Salus Capital Partners LLC and matures in 12 months or after Bakers sells the remaining 63 stores. It stipulates that Bakers must file a plan by Nov. 30, get approval of a disclosure statement by Jan. 7 and obtain plan confirmation by Feb. 15.

The motion says that Salus will essentially pay off the outstanding obligations owed to Crystal by Bakers and in exchange Crystal will assign the original bankruptcy loan to Salus.

In addition to the replacement bankruptcy financing, Bakers has lined up $8.5 million in bankruptcy exit financing from Salus, money that is going to be used to fund a Chapter 11 plan.

The court said Bakers can pay Salus a $150,000 commitment fee and cover the expenses it incurred in connection with negotiating the financing deal.

Bakers, founded in 1924, filed for Chapter 11 bankruptcy protection on Oct. 3. At the time, it had 215 stores in 34 states.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com.)

--Rachel Feintzeig in New York and Marie Beaudette in Washington contributed to this article.

Write to Stephanie Gleason at [e-mail]

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