Claire's Warns Elliott, Apollo They May Get Cash, Not Company

(Bloomberg) -- Claire’s Stores Inc. is warning senior creditors including Elliott Capital Management and its private equity sponsor Apollo Global Management that their hold on the company could be slipping.

The lenders may get a different form of payout than what they’re promised in the current restructuring plan if the company receives an alternative proposal, the retailer said in Delaware Bankruptcy Court filings on July 25. Junior creditor Oaktree has promised to submit a competing restructuring plan that would improve creditor recoveries over the current proposal.

Elliott and Apollo are set to take ownership of the company after it exits bankruptcy, but Oaktree lawyers said in a July 20 hearing that an alternative plan in the works would involve a cash bid instead. The bid terms could entail Apollo and Elliott getting cash payouts instead of equity stakes in Claire’s, while lower-ranked creditors take ownership of the company. Oaktree has until Aug. 31 to make the bid official.

Meanwhile, Claire’s will send its current proposal to a vote, it said. The company warned in the July 25 documents that confirmation of the current plan could allow the alternative proposal to slip through without a separate vote if its payout to creditors is equivalent, albeit in a different form.

Elliott and other first-lien lenders, who are owed about $1.1 billion, would recover 86.8 percent on the secured portion of their claims. Oaktree and the other second lien debtholders owed $288.3 million would recover 3.5 percent if they give up their alternative proposal and accept the current plan, the company said.

Claire’s will be back in court in September for confirmation hearing. The case is Claire’s Stores Inc., 18-10584, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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