Bankruptcy judge reopens bidding on Lenox asset sale

By Rebecca Melvin

New York, Feb. 25 - Bidding on the assets of Lenox Group Inc. was reopened following litigation by Lenox term-loan lenders, which didn't come up with a qualifying bid on the day of the auction earlier this month.

"But as circumstances have developed, we can reopen to allow a bid even if it's unquestionably late to enhance the value of the estate," judge Allan Gropper of the U.S. Bankruptcy Court for the Southern District of New York ruled Wednesday.

An auction was conducted immediately following the judge's decision, but results weren't known by press time.

Enhancing the value of the estate is more important than adhering to the letter of rules governing the bidding, Gropper said, especially in this case where an auction was never held, and the party desirous of having a qualifying bid has demonstrated that its motives are in the best interests of the company.

Lenox term-loan lenders locked horns with the company and its official creditors committee in court this week after the company decided Feb. 11 that an all-cash bid from KPS Capital Partners LP trumped the term-loan lenders' stalking horse bid, which didn't qualify as a bid on the day of auction.

Subsequently the term-loan lenders had a conforming bid that they claimed was more favorable than the KPS bid.

The lenders are committed to the transaction, the judge said, and are concerned about closing. Moreover their own financial interests, namely about $100 million in claims, favor closing, he said.

The term loan lenders previously said their bid was at least $15 million higher than the KPS deal.

But Lenox and its creditors committee told the court they believed KPS will provide more security for the company going forward as a going concern.

In hearings Monday, Lenox counsel Alfredo Perez of Weil Gotshal & Manges said that while the company had subsequently worked through several issues with the term-loan lenders to make an acceptable bid, there was still the issue of whether the term-loan lenders could guide the company forward and prevent it from falling into bankruptcy again.

"Liquidity is thin and it's a concern, but if they had brought this at the time of the auction, we would have qualified them as a bidder," Perez said.

"We ran a process and we are reporting where we think we are right now with KPS. And we are prepared to go forward with that, subject to the court's decisions," he told the court.

Eden Prairie, Minn.-based Lenox filed for bankruptcy on Nov. 23. Its Chapter 11 case number is 08-14679.

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