Express Creditors Oppose Lead Bidder’s Fees for Bankruptcy Sale

Express Inc. creditors challenged a potential fee and other protections for the distressed retailer’s lead bidder, saying they could chill competing offers to buy the company out of bankruptcy.

ReStore Capital LLC, representing second lien lenders, said it supports Express’ efforts to turn its business around but isn’t on board with proposed payments the lead bidder—a consortium led by Express’ two largest landlords—is seeking as a condition of its offer, according to a Sunday filing in the US Bankruptcy Court for the District of Delaware.

The clothing retailer filed for bankruptcy in April with an offer from a group that includes WHP Global, which owns a 60% stake in the retailer, and landlords Simon Property Group LP LLC and Brookfield Properties, to take over the company. Express said last month that it may have to liquidate if a sale isn’t completed quickly.

Express filed a notice on May 24 saying it selected the group as its lead bidder ahead of a potential auction. The consortium, known as Phoenix, previously offered $10 million in cash and 100% of net orderly liquidation value of the company’s merchandise and tangible personal property, according to the second lien agent’s filing. But Phoenix didn’t provide a clear purchase price in a sale agreement filed with the May 24 notice.

The bidders proposed a breakup fee and expense reimbursement each worth 3% of the “acquired merchandise amount” if Express ultimately picks a different offer. The bid protections are subject to court approval.

“The combined break-up fee and expense reimbursement would give the insider stalking horse bid an unfair advantage in any auction,” ReStore said in Sunday’s filing.

Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC submitted a competing liquidation bid of about $261 million last week. Hilco and Gordon Brothers didn’t request a breakup fee or expense reimbursement, ReStore said.

The second lien agent asked the court to only grant the protections if the Phoenix bid is determined to be larger than the $261 million offered by the liquidation bidders.

The retailer arranged $35 million in new financing from existing lenders to fund operations during the bankruptcy.

A committee of unsecured creditors objected to Express’ financing last week, saying parties were “being forced to bless” a path forward for the bankruptcy without adequate information.

Kirkland & Ellis LLP and Klehr Harrison Harvey Branzburg LLP represent Express. Ropes & Gray LLP and Chipman Brown Cicero & Cole LLP represent ReStore. Saul Ewing LLP and Kramer Levin Naftalis & Frankel LLP represent the committee.

The case is In re: Express Inc., Bankr. D. Del., No. 24-bk-10831, limited objection 5/26/24.