OSH 1 Liquidating Corp. Preferred Series A(fka OSHSQ)

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Good news about other Bidders....

UPDATE: Orchard Supply CFO Says Lenders Helped Boost Lowe's Bid


By Jacqueline Palank

A competing bid from Orchard Supply Hardware Corp.'s (OSHWQ) lenders helped push Lowe's Cos.' (LOW) offer for the hardware chain's assets to $205 million from $190 million, Orchard's chief financial officer testified in court Monday afternoon.

Orchard CFO Chris D. Newman said weeks before the company's Chapter 11 filing, it was in talks with three potential buyers: Lowe's, a lender group that's now led by Gleacher Products Corp. and an undisclosed "financial buyer."

Only Lowe's and the lenders submitted offers, Mr. Newman told the Wilmington, Del., bankruptcy court, but Lowe's dropped its offer after the lenders rejected it. According to Mr. Newman, that is because a consensual deal was "a prime consideration" for Lowe's.

"Lowe's was clear at every point in the process that they didn't want this to be a fight," he said. "They wanted it to be a solution and a process that the company's creditors and term lenders were supportive of."

While Mr. Newman said the lenders' offer to forgive debt in exchange for Orchard's assets "needed to be more fully fleshed out," he said it was clear that one flaw of the bid was that "there would have been some level of creditors left behind."

The lenders said they would throw their support to a Lowe's bid if the purchase price increased as well as if they could then provide Orchard with bankruptcy financing, Mr. Newman said. He said he and Orchard Chief Executive Mark Baker "got on a plane" to take those terms to Lowe's executives.

"At the meeting, Mark and I helped the Lowe's team understand why we thought it was the appropriate thing to do," Mr. Newman said. If the purchase price went up to $205 million, "there would not be issues from lenders."

After meeting for about an hour and a half, Mr. Newman, formerly the CFO of home-decor chain Restoration Hardware Inc., said the Lowe's executives left to discuss a deal with the company's board of directors. He said the board approved the new bid "later that afternoon."

Reached Monday afternoon, a Lowe's spokesman confirmed that it is "important to Lowe's that we have the support of Orchard management as well as lenders" for a sale.

Orchard sought Chapter 11 protection on June 17 with Lowe's $205 million offer in hand and support from its lenders for that offer. The home-improvement retailer's bid is subject to rival offers at an Aug. 14 auction.

As for that third potential buyer, attorneys said its name is subject to a confidentiality agreement and can't be disclosed. However, they did say the potential buyer is active in the distressed investing field.

Mr. Newman's testimony came in a battle over Orchard's $176.3 million bankruptcy-financing package, which he said helped Orchard gain the confidence of its vendors in the days after its bankruptcy filing but which unsecured creditors say is unnecessary and expensive.

The lenders who originally sought to purchase Orchard have pledged $12 million of the bankruptcy financing, while other lenders led by Wells Fargo would contribute the rest.

Founded in 1931 in San Jose, Calif., Orchard Supply completed its spinoff from Sears at the beginning of 2012. The company had 91 stores in California and Oregon at the time of its June 17 bankruptcy filing, but it has since received court approval to close eight underperforming stores in California.

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

Write to Jacqueline Palank at [e-mail].


http://online.wsj.com/article/BT-CO-20130715-709983.html?mod=googlenews_wsj