Judge approves plan for Boscov’s to emerge from bankruptcy

Bankruptcy judge confirms Boscov plan

WILMINGTON, Del. — Regional department store chain Boscov’s won court approval Thursday to bring its Chapter 11 bankruptcy case to a successful conclusion.

Judge Kevin Gross approved the Reading, Pa.-based company’s plan to resolve all outstanding claims from creditors. The plan allows the birth of a new Boscov’s by providing for the transfer of substantially all of the old company’s assets to a trust that will make distributions to claims holders.

The plan previously received overwhelming support from holders of both priority and unsecured claims.

Gross noted that Thursday’s hearing marked a rare feel-good conclusion to a retail company’s bankruptcy.

“It really is a remarkable case to have a retailer successfully confirm a plan,” said the judge, adding that it was a first for him during his time on the bench.

Boscov’s, with a strong customer following and stores in Pennsylvania, New Jersey, New York, Maryland and Delaware, filed for Chapter 11 protection in August 2008 and announced that it would close 10 of its 49 stores. The filing followed bankruptcy petitions from several other retailers hit hard by the recession, including California-based department store chain Mervyns LLC, discount fashion retailer Steve & Barry’s LLC, home furnishings chain Linen ‘n Things Inc., catalog retailer Lillian Vernon Corp. and specialty retailer Sharper Image Corp.

Last year, Gross approved the sale of Boscov’s to the families of Albert Boscov and Edwin Lakin, the son and the son-in-law of the privately held company’s founder. The deal, which saved the company from liquidation, was valued at between $275 million and $300 million. The company received about $200 million in bank financing, as well as personal equity contributions of more than $60 million by the Boscov family.

Albert Boscov, who retired more than three years ago, returned as chairman and CEO late last year to guide the company founded by his father in 1921 out of bankruptcy. Asked why he decided to attend what essentially was a procedural hearing Thursday, Boscov, who will celebrate his 80th birthday next week, didn’t hesitate to explain.

“Because we’re alive,” he said in a faltering voice as tears welled in his eyes.

Boscov said he never doubted a positive outcome, and that the company knew it would be in good shape once it shed the 10 troubled stores.

Richard Kanowitz, an attorney representing Boscov’s committee of unsecured creditors, said the case was a testament to what can be achieved when debtors and creditors work together.

The judge personally thanked Boscov, saying the company’s success in bankruptcy was attributable to “the integrity that you’ve brought to your work, the quality of your product, the way you treat your employees and your customers…”

The judge recalled the admonition he received from his wife when he told her he was handling Boscov’s case: “Don’t mess this up, because everybody loves Boscov’s.”

Boscov said sales were up last month and that morale among the 7,500 employees is good. The company, which recently hired former Bass Pro Shops Chief Financial Officer Toni Miller as its new CFO, is beating the expectations of its bankers, and the vast majority of its vendors are shipping on regular terms, Boscov added.

He attributed the success to loyalty of both customers and suppliers, and the restoration of a direct, customer-friendly approach to pricing.

“We’re trying to be honest in values, getting back to honesty in pricing,” Boscov said, decrying what he described as phony discounting gimmicks used by other retailers that don’t fool customers.

“People aren’t silly,” he said.