Bankruptcy judge approves S&K sale

S&K Famous Brands Inc. is close to ending its storied run after a bankruptcy judge approved its sale yesterday after testimony from a company executive that the retailer could be out of money by the middle of June.

The Henrico County-based menswear chain, which filed for bankruptcy in February, already has a deal with liquidation specialist Hilco Merchant Resources LLC that guarantees the company $7.9 million for selling off its assets, including the merchandise and fixtures at its remaining 105 stores.

Hilco is the stalking-horse bidder, meaning that anyone interested in buying the bankrupt company must pay more. Interested bidders have until Friday at 5 p.m. to submit offers. If a higher bid is made, there will be an auction next Tuesday.

The parties will come back to court next Wednesday for a sales hearing.

Northbrook, Ill.-based Hilco has a provision in the contract that gives them an option to continue operating any number of the stores as a going concern. Hilco is supposed to notify S&K by Friday if wants to exercise the option.

But prospects that the company will live on are dimming.

During yesterday's hour-long hearing in Richmond, Jonathan Tibus, S&K's chief restructuring officer, testified that efforts over the past several months to find a buyer, lender or investors that would keep the company afloat have been unfruitful.

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

Bankruptcy Judge Kevin R. Huennekens asked whether holding off the sale would give S&K a better chance to survive, either under new ownership or as a restructured company.

The company has less than $1 million on hand, and without some kind of monetary infusion "we'll run out of cash sometime next month," Tibus said.

Exacerbating S&K's cash position, and hurting its ability to make sales that would raise money, is the fact that inventory at its remaining stores is running thin.

Tibus said S&K has been unable to get enough inventory into its stores and is seeing holes in some of its product lines.

He said the company will continue to look for a going-concern buyer to bid on S&K.

Jeffrey N. Pomerantz, an attorney representing the court-designated committee of unsecured creditors, said by phone that sales have fallen even farther than had originally been expected.

Pomerantz said he and the creditors' committee supported the idea of finding a buyer who would continue to operate the company, but those prospects are slim. He said liquidation is the best option to maximize returns because the value of the inventory will begin to drop as summer approaches.

Liquidators have to "commence sales before Memorial Day to enhance recovery," Pomerantz said.

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