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Francesca’s Clothing Chain Approved for Bankruptcy Sale

The buyers of Francesca’s remaining specialty retail business will keep at least 275 of its boutiques open, and retain the management team and nearly all other employees

Specialty retailer Francesca’s Holdings Corp. has won court approval to sell its remaining business out of bankruptcy to a group of buyers that plan to keep open about half of the chain’s roughly 550 stores.

Judge Brendan Shannon of the U.S. Bankruptcy Court in Wilmington, Del., said on Thursday he would approve the sale of substantially all of Francesca’s assets to an affiliate of investment firm TerraMar Capital LLC and appraisal and liquidation firm Tiger Capital Group LLC, one of Francesca’s lenders.

“This is a frankly very, very welcome result,” Judge Shannon said during a hearing Thursday held by video. “This is an extraordinarily challenging environment and to come up with competing, going concern sales and the opportunity for a robust auction, that would not have been anyone’s likely prediction at the outset of this process.”

Los Angeles-based TerraMar, which served as the lead bidder along with Tiger, agreed to a purchase price of $18 million in cash, subject to certain adjustments, plus a promissory note for $1.25 million and the assumption of about $7.74 million in liabilities.

The deal, which could close by next week, will preserve the business as a going concern with at least 275 Francesca’s boutiques. As of Tuesday, Francesca’s operated 551 locations, mostly in malls across the U.S. About 140 stores were shut before Francesca’s filed for chapter 11 bankruptcy in December.

As part of the asset purchase agreement, Tiger and liquidation firm SB360 Capital Partners LLC will hold the store-closing sales at locations that are rejected.

The venture between TerraMar and Tiger was declared the winner of an auction that began on Friday and continued until Sunday, with five rounds of competitive bidding. After that, Francesca’s requested that qualified bidders submit their final offers by Monday, court papers showed.

In selecting the successful bid, the Houston-based company evaluated a number of factors, including the purchase price, the assets purchased and liabilities assumed, whether the bid included sufficient cash to pay administrative bills and a commitment to keep as many stores open as possible and save the most jobs.

“It was a lengthy process as each bid required extensive analysis … based on a variety of factors, not just price,” Maria DiConza, a lawyer representing Francesca’s, said during the hearing. “And some of those factors were not readily susceptible to putting on a spreadsheet.”

The soon-to-be owners of Francesca’s said they would continue operating the retailer’s corporate offices, as well as employing its management team and nearly all employees. At the start of December, the boutique chain, which sells apparel, jewelry, accessories and gifts, had about 4,540 workers, including 223 corporate employees.

“This process evolved from a potential liquidation to a going concern transaction that provides for a minimum 275-store commitment, the preservation of thousands of jobs and vendor relationships, and the possibility for a meaningful return to unsecured creditors,” Sarah Carnes, representing the official committee of creditors. “That result really speaks for itself.”