Avenue Stores creditors committee eyes conversion of Chapter 11 case

By Caroline Salls

Pittsburgh, Nov. 19 – Avenue Stores, LLC’s official committee of unsecured creditors is asking the U.S. Bankruptcy Court for the District of Delaware to convert the company’s Chapter 11 case to Chapter 7, according to a motion filed Monday.

The committee said in the motion that the cases should be immediately converted “in order to avoid continuing losses to and diminution of estate assets, especially as there is no reasonable likelihood of rehabilitation of the debtors’ business, and because the debtors are unlikely to effectuate the confirmation of a Chapter 11 plan.”

In addition, the committee said conversion of the cases and appointment of a Chapter 7 trustee are urgent matters in light of the impending expiration of an initial challenge period and the impact the expiration will have on a Chapter 7 trustee’s ability to prosecute claims and causes of action against Versa Capital Management, LLC and several of its affiliates, as well as Avenue’s pre-bankruptcy subordinated lender.

The creditor group said the potential causes of action against the Versa parties include avoidance of actual and constructively fraudulent transfers, claims for avoidance of preferential transfers, breach of fiduciary duty, aiding and abetting, corporate waste, equitable subordination and recharacterization and other challenges to the extent and priority of the subordinated lender’s liens.

“Given that the sale of the debtors’ E-Commerce business assets is complete and the store closing sales have ceased, remaining in Chapter 11 is simply not in the best interests of the estates or their unsecured creditors,” the motion said.

Avenue is a Rochelle Park, N.J., specialty retailer of large-size women’s fashion apparel, footwear and accessories. The company filed bankruptcy on Aug. 16 under Chapter 11 case number 19-11842.

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