In recent months, we’ve shared with you the bankruptcy saga of Sports Authority, a sporting goods chain that was deep in debt, filed for bankruptcy protection, and planned to re-emerge as a smaller and reorganized retailer, but couldn’t make it work, ultimately selling its remaining stores to liquidators. Teen clothing retailer Aeropostale seems to be headed down a similar path, with its biggest lender pressuring the chain to get ready to auction its stores instead of reorganizing.

You may remember Aeropostale’s battle against Sycamore Partners, a lender that happens to own one of the company’s biggest suppliers. The retailer says that Sycamore intentionally pushed it into bankruptcy by demanding up front payment for merchandise.

Aeropostale is preparing plans for liquidating the company, which would involve selling stores either to another company that would keep them alive, or (more likely) liquidators that would sell off inventory and fixtures, then close the chain. Aeropostale claims that its factory-store (outlet) sales are great and that reorganization is a realistic course.

This is all time-sensitive, since from lender Sycamore’s point of view, it would be best to either hand stores off to a new owner as the back-to-school season begins. From the point of view of Aeropostale’s leadership, it’s the other way around: back-to-school season will bring in piles of cash that the chain can use to reorganize.

The retailer and the lender will have a nice chat about this during a hearing over bankruptcy funding in court tomorrow. Aeropostale’s plans for reorganization and for liquidation are due in July.

Aéropostale Battles Sycamore for Shot at Turnaround [Wall Street Journal]

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