Bankruptcy judge approves ex-owner Ann Taylor’s revised Ch. 11 planes

An Ann Taylor ‘LOFT’ store in Encinitas, California is shown here May 20, 2008. REUTERS/Mike Blake

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(Reuters) – The former owner of Ann Taylor has won bankruptcy court approval for his revised reorganization plan after a judge rejected certain legal protections for people and entities connected to the business contained in a earlier version of the plan.

U.S. Bankruptcy Judge Frank Santoro of the Eastern District of Virginia approved Mahwah Bergen Retail Group Inc’s amended plan during a brief hearing on Thursday. Mahwah, formerly known as Ascena Retail Group, won approval for its previous plan last year but was forced to return to bankruptcy court in January after alleged releases of non-debtors from the plan that would have protected non-bankrupt individuals and entities from future litigation were overturned on appeal.

Ascena filed for Chapter 11 protection in July 2020 with more than $1 billion in debt, part of the wave of retail bankruptcies that occurred in the first few months after the COVID-19 pandemic hit. hit the United States. Ascena then sold its assets, including apparel retailers such as Ann Taylor, Lane Bryant and Loft, to private equity firm Sycamore Partners.

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In January, U.S. District Judge David Novak of the Eastern District of Virginia ruled that the nondebtor releases contained in the plan were null and void. Novak’s decision did not interfere with the sale of Sycamore, which had already been completed.

In his January ruling, Novak called press releases, which are a popular tool in corporate bankruptcies that have recently come under fire in high-profile cases like the Purdue Pharma bankruptcy, “shocking” and said the bankruptcy court that approved them had exceeded “constitutional limits.” limits of his authority.

As a result, Mahwah, who now only exists to reduce his estate, reworked the plan to provide that the releases “should be considered separate from the plan”, according to court documents.

Novak’s decision was a notable victory for the US Department of Justice’s bankruptcy watchdog, the US Trustee, which has long challenged such releases in corporate Chapter 11 cases.

The U.S. trustee and other critics of the statements, including U.S. Senator Elizabeth Warren, a Democrat from Massachusetts, say they wrongly offer valuable bankruptcy benefits — in particular, protection from future lawsuits — to people and companies that have not filed for bankruptcy themselves.

The US trustee did not object to approving the amended plan on Thursday.

Santoro, who approved the amended plan on Thursday, replaced the judge who previously approved the plan, U.S. Bankruptcy Judge Kevin Huennekens, after Novak ruled the case should be reassigned.

The case is Retail Group, Inc., US Bankruptcy Court, Eastern District of Virginia, No. 20-33113.

For Mahwah: George Hicks Jr., Andrew Lawrence, Edward Sassower, Steven Serajeddini and Jack Luze of Kirkland & Ellis and Cullen Speckhart and Olya Antle of Cooley

For the US Administrator: Ramona Elliott, P. Matthew Sutko and Sumi Sakata of the DOJ and John Fitzgerald III, Kathryn Montgomery and Hugh Bernstein of the Office of the US Administrator

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