Oaktree Seeks $1.5 Billion in Cash to Top Bid for Claire's

(Bloomberg) -- Claire’s Stores Inc. debtholder Oaktree Capital Management is working to raise $1.5 billion for a bid due Aug. 31 for the bankrupt retailer, a lawyer for the distressed-debt investment firm told a judge Friday.

“We are under extreme pressure raising $1.5 billion in cash,” Tom Lauria, a lawyer at White & Case, said in U.S. Bankruptcy Court in Wilmington, Delaware.

The offer would compete with a debt-for-equity deal valued at $1.4 billion from Claire’s senior lenders, led by Elliott Capital Management and involving Claire’s private equity sponsor Apollo Global Management LLC. Since the tween jewelry retailer filed bankruptcy in March, Oaktree has complained that Claire’s is trying to give itself to Elliott, Apollo and the other lenders at a bargain price.

Claire’s has been trying to find a buyer willing to pay senior lenders the $1.75 billion in cash they may be owed, a company restructuring adviser said in June.

Senior lenders would give up their push to swap their debt for ownership of Claire’s if Oaktree can pay them everything they claim to be owed in cash, the group’s attorney, Matthew Feldman, told the judge.

Should Oaktree give up on its bid and support the Elliott-backed reorganization, the investment firm would recover about 3.5 percent on the $159 million in Claire’s second-lien debt it holds, according to court papers. Oaktree, led by Chief Executive Officer Jay Wintrob, is one of the largest distressed-debt investors in the world and has about a fifth of its assets committed to troubled issuers. The firm reported $20 billion of uncommitted funds or "dry powder” as of midyear.

Claire’s was in court seeking to extend its exclusive right to file and win support for its bankruptcy-exit plan, which is built on its deal with lenders. The judge approved the extension over Oaktree’s objection.

The case is Claire’s Stores Inc., 18-10584, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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