Mervyn's committee balks at chosen liquidation path, asks court to convert Chapter 11 case

By Caroline Salls

Pittsburgh, Oct. 23 - Mervyn's Holdings LLC's official committee of unsecured creditors objected to the proposed bid protections for the company's store closing sale agent selection process and filed a cross-motion to convert the company's bankruptcy case to Chapter 7, according to a Wednesday filing with the U.S. Bankruptcy Court for the District of Delaware.

According to the objection, Mervyn's is looking to liquidate substantially all of its assets for the sole benefit of its senior lenders.

The committee said it does not object to the company's plans to liquidate its assets, but rather to its decision to follow a path that benefits only the senior lenders.

The creditors' committee said the sale motion does not guarantee that the company will be able to pay its employees, landlords, vendors and other creditors and professionals needed to complete the sale process and wind down Mervyn's estates.

As a result, the committee said the company has not demonstrated an ability to confirm a Chapter 11 plan of liquidation after its proposed store closing sale process is complete.

Mervyns, a San Francisco-based department store, filed for bankruptcy on July 29 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 08-11586.

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