United Retail creditors committee objects to Versa plan to buy assets

By Lisa Kerner

Charlotte, N.C., Feb. 17 - United Retail Group, Inc.'s official committee of unsecured creditors filed an objection to the debtors' motion for an order approving the proposed bid procedures and protections for the sale of substantially all of the debtor's assets, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

A hearing is set for Feb. 22.

As previously reported, United Retail entered into a stalking horse asset purchase agreement with an entity controlled by Versa Capital Management.

Versa has agreed to buy the company's assets through the bankruptcy process for cash and the assumption of specified liabilities.

Versa, according to a statement filed with the court, will pay up to $15 million of debtor-in-possession financing, up to $2 million of wind-down costs for Avenue's estates, $500,000 to holders of unsecured claims, up to $11.1 million for administrative and priority claims, up to $2.2 million of Redcats Asia Ltd. trade payables and up to $4.7 million of post-closing liabilities.

In addition, Versa will commit to capitalize the acquisition vehicle with $13 million at closing and will guarantee up to $35 million of payment obligations.

Also under the agreement, Redcats USA will pay Versa $20 million in cash, prorated in connection with the number of leases assumed at closing.

Versa agreed to operate United Retail's Avenue business as a going concern while keeping the majority of Avenue stores open, the release said.

Committee's objection

The committee said in its objection that the proposed bid procedures "are replete with provisions that unfairly benefit Versa to the direct detriment of other interested bidders, and are designed to chill the bidding and enable Versa - propped up by substantial support from Redcats - to obtain overwhelming leverage in this expedited sale process."

In addition, the committee said it believes the break-up fee, equal to 10% of the maximum net cash consideration, is "excessive under any standard" and should not be approved.

The committee is asking the court to reject the bid procedures or to modify them at the committee's request.

United Retail is a Rochelle Park, N.J., specialty retailer of large-size women's fashion apparel, footwear and accessories. Its Chapter 11 case number is 12-10405.

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