Aeropostale Accuses Lender Of Purposely Squeezing It Into Bankruptcy

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Soon after former mall staple Aeropostale filed for bankruptcy on Wednesday, it turned around and threw darts at one of its lenders, which it accused of working behind the scenes to force the company’s hand.

Aeropostale claims that its lender Sycamore Partners instructed a company it controls — MFG Sourcing, which makes clothing for Aeropostale and other retailers — to cut off the teen chain’s credit, reports The Wall Street Journal. According to Aeropostale, earlier this year MFG demanded it pay for goods up front instead of after delivery.

That demand pushed Aeropostale farther down the bankruptcy path, the company said in court papers, all because of Sycamore’s machinations.

To add insult to injury, the retailer said it believes Sycamore co-founder Stefan Kaluzny in January “reached out to” the chain’s other principal supplier, Li & Fung Ltd., to suggest it take similar actions.

“The ultimate purpose may have been to drive the debtors to file this case and force it to liquidate,” Aeropostale said in court papers.

Sycamore said through a spokesman that the firm denies “engaging in any such conduct, as it would be counterproductive” to its investment in the company.

Aeropostale wants a bankruptcy judge to compel Sycamore, its founder and others to testify or produce documents related to the allegations.

Why is Aeropostale doing this now? Lenders will usually seek to protect their rights when they deal with borrowers in financial trouble like Aeropostale. But because Sycamore is so involved with the retailer in so many ways, the legal fight now will be whether or not it used its position with the chain’s main supplier to put undue pressure on Aeropostale, or if it was overly aggressive in protecting its interests.

Aéropostale Lashes Out at Lender After Filing for Bankruptcy [The Wall Street Journal]

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