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TA Associates-backed retailer could be sold for $163m

The Boston-based private equity firm could lose almost half its investment in US discount clothing store Steve & Barry’s after hedge fund Bay Harbour submitted a stalking horse bid. The retailer filed for Chapter 11 protection last month, two years after TA Associates paid a reported $320m for roughly half the company.

TA Associates is set to lose a significant chunk of its investment in troubled US clothes retailer Steve & Barry’s after hedge fund Bay Harbour submitted a stalking horse bid for the company for just $163 million (€105 million).

The Boston-based private equity firm had acquired a minority stake in the discount clothing company for an estimated $320 million in 2006, for roughly half the company. According to a recent report in the Wall Street Journal, half of the investment went to the Steve & Barry’s business and half to co-founders Barry Prevor and Steve Shore.

However today a statement from Steve & Barry’s said Bay Harbour had offered $163 million for the retail chain and its licensing and brand rights. Steve & Barry’s, which filed for Chapter 11 bankruptcy protection last month, said the offer had been approved by the US Bankruptcy Court although a full action would be held later this month when “higher and better offers” could be made.

TA Associates declined to comment but the statement said the offer, if agreed to, would include certain store leases, the company’s New York headquarters and Ohio distribution center, merchandise and the right to Steve & Barry’s celebrity and brand licenses. The clothing company last year signed up Sex and the City star Sarah Jessica Parker to produce an affordable clothing line, named Bitten.

In 2006, when TA Associates acquired its stake, Steve & Barry’s had 180 stores in 33 states across the US. By the time the company filed for Chapter 11 protection last month, it had grown to 276 locations. More than 170 jobs have already been cut, with the company also expected to cut its store numbers.

Announcing the bankruptcy proceedings, Prevor and Shore said the current credit markets had proved too challenging for the firm, despite total store sales increasing 70 percent in the period January to May this year compared to one year ago. They also blamed mall landlords for stopping payments to the company “for construction and store opening work” as the anchor tenant. “As a result of all of this, our loans have gone into default, and we have had no alternative but to file Chapter 11 to enable continued operations,” the co-founders said at the time.