Without buyer, S&K may liquidate

S&K Famous Brands Inc. could be liquidated if a buyer to keep it operating is not found in the next six days.

The Henrico County-based menswear retailer filed a motion late Friday evening asking a bankruptcy judge for permission to sell itself to Hilco Merchant Resources Inc.

Hilco is known for running liquidations of retail chains. It has worked on the liquidations of Mervyns, The Bombay Co. and Sharper Image. According to court papers, Hilco guarantees S&K $7.9 million for the merchandise.

S&K, burdened with falling sales and a downturn in the economy, filed for Chapter 11 bankruptcy protection in February.

A year ago the chain operated 218 stores. When the company filed for bankruptcy, the store count was down to 135. In February, the court approved the closing of an additional 30 stores, which Hilco operates and is in the process of closing.

S&K is operating the remaining 105 stores.

The court filing states that Hilco would sell off all the merchandise at S&K's remaining stores by "means of a going out of business, store closing or similar themed sale."

Calls to S&K officials and its attorneys were not returned yesterday afternoon.

S&K was founded in 1967 by I.J. "Hip" Siegel and his brother-in-law, Abe M. Kaminsky.

If Hilco is the winning bidder, it's not a foregone conclusion that S&K will be liquidated.

In an e-mail, an S&K spokeswoman said the sale to Hilco did not mean that the Henrico County-based S&K was going to liquidate its assets.

"The motion contain[s] provisions that allow Hilco to own and operate as many stores as they see fit, and management is working with representatives from Hilco to craft a transaction that supports and funds a viable S&K," wrote MaryJo Steinmetz.

But the proposed sale agreement includes only one paragraph where Hilco retains the option to keep S&K running as a going concern. To do so, S&K must file a new sales agreement with the court by Friday.

The circumstances under which Hilco would decide to keep S&K going were unclear. Hilco's president, Michael Keefe, did not respond to e-mails or phone calls yesterday.

Carl Tobias, a professor of law at the University of Richmond, said the provision could be a way for Hilco to cover its bases if another suitor for S&K appeared.

"This [provision] could maximize their options," he said. "Isn't it possible that Hilco could find someone that would keep S&K running? This allows them to work both ways. If that doesn't work, or another bidder doesn't appear, they get to liquidate."

If S&K is liquidated, it will be the second major Henrico retailer to shut down this year. Circuit City announced it was shutting down in January.

Before S&K can be sold, though, the company will open the sale to bidders who could be interested in taking the company over and either liquidating it or keeping it running.

The company has asked for a hearing Tuesday before U.S. bankruptcy Judge Kevin R. Huennekens to set up bidding procedures. If approved, bids would be due by Friday at 5 p.m.-- the same day Hilco can change its bid.

If there are competing bids, S&K would hold an auction May 19.

The company would go back before Huennekens on May 20 at noon to ask the judge to approve the sale.

Contact Louis Llovio at (804) 649-6348 or .