Bankruptcy judge OKs sale of Brookstone
$65 million deal reached after largest creditor agrees to relinquish debt
The bankruptcy sale of specialty retailer Brookstone got the blessing of the judge on Thursday.
In fact, Judge Brendan L. Shannon praised the “unexpected and successful result” of the recent bankruptcy auction at the hearing, held in federal bankruptcy court in Delaware.
In the final agreement, expected to close in the next couple of weeks, Bluestar Alliance LLC, a brand marketing firm in New York, and Apex Digital Inc., a consumer electrics company in California, will purchase Brookstone assets for $65 million.
That’s down from the $72.7 million cash bid that won the auction, held Sept. 26-30, after Sanpower Group Co. Ltd., Brookstone’s owner and largest creditor, agreed to relinquish more than $126 million in debt, including $40 million owed to Sanpower’s Shenzhen’s subsidiary, SSG, Brookstone’s main supplier.
The details of the Sanpower deal are part of the purchase agreement to be filed under seal, Shannon ruled Thursday. But the agreement will release Sanpower from some liability and allow it to continue operating – under the Brookstone name – the 550 stores it still owns in China. The Brookstone that emerges from bankruptcy will continue to receive licensing fees from that arrangement. The Bluestar deal also keeps open 34 of the company’s 35 airport stores in the United States. (An airport store in Detroit is not part of the deal.)
With the cash infusion Brookstone bankrupt estate will be able to pay off all of its secured debtors and a “substantial” part of the debt of the unsecured creditors, according to lawyers of the official committee representing them. At the hearing, they said they supported the deal “wholeheartedly.”
“This is a tremendous result of the sales process,” said Shannon, who anticipating signing the order Friday. “It took a challenging situation – to put it mildly – into a very, very welcome result for everyone, especially the unsecured creditors.”
However, the news may not be that welcome to many of the 90 employees working at Brookstone’s Merrimack headquarters, which was sold separately to Brady Sullivan for $6.1 million and will be leased back to Brookstone during a 90-day transition. Eventually, Brookstone said it will find a smaller facility to house a greatly reduced workforce. Nor is it much comfort to those who worked in the company’s for 102 mall stores – including those in Nashua and Conway – that Brookstone abandoned last week.
How much unsecured creditors will be paid remains to be seen. Brookstone has yet to file a plan on how to distribute the proceeds. That takes time, and “time is money,” said Shannon. As if to underscore the point, on Thursday just three of the numerous professionals working on the case filed invoices for their first month’ work, totaling $634,000.
While the court set Oct. 11 to close the sale, Shannon assured everyone the date was not set in stone, and already Bluestar said it would not be able to meet that date.