Nine West Deal With Sycamore Sets Up Creditor Court Battle
(Bloomberg) -- A deal to bring Nine West Holdings Inc. out of bankruptcy is likely to face opposition from unsecured creditors who are seeking to file a $1 billion lawsuit against Sycamore Partners LLC for its role in the retailer’s 2014 leveraged buyout, according to a person familiar with the matter.
Sycamore and KKR & Co. have proposed paying $105 million to those creditors to settle allegations the buyout left Nine West unable to pay its debt. The settlement is part of a Nine West reorganization plan the retailer filed Wednesday, one day after the official committee of unsecured creditors reiterated its intention to sue Sycamore.
The Nine West plan has the support of nearly all creditors who hold debt senior to the unsecured noteholders. Next month, U.S. Bankruptcy Judge Shelley C. Chapman is scheduled to decide whether the plan and settlement should be sent to creditors for a vote, which is the first step toward final court approval of Nine West’s reorganization.
The committee is planning to meet soon to review the offer, said the person familiar with the situation, who asked not to be identified because the discussions are private.
A fund run by Aurelius Capital Management holds about $164 million of Nine West’s unsecured notes, making it one of the biggest individual creditors in the case. Aurelius didn’t immediately respond to a request for comment.
In September, the committee and senior creditors struck a tentative deal that would have allowed lawsuits related to the LBO to go forward after Nine West was reorganized. After that deal fell apart, Nine West’s independent directors moved ahead with settlement talks with Sycamore, eventually striking the $105 million agreement.
The committee needs court permission to file a lawsuit against Sycamore and others involved in the 2014 buyout of Jones Group Inc., which a KKR unit helped finance. Sycamore issued debt through Nine West to raise money for the purchase. It then bought three of Jones Group subsidiaries for its own direct ownership, at what the committee claims was a below-market price. KKR also ended up with an equity stake.
Representatives of Nine West, Sycamore and KKR declined to comment.
The case is Nine West Holdings Inc., 18-10947, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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