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Judge approves liquidation sale for clothing store

A judge overseeing the bankruptcy process of discount clothing retailer Loehmann's has approved the sale of the company's inventory. Liquidators already bid on the inventory at an auction and the winner offered to pay 29.8 percent of the total value of the inventory, which is estimated to be worth about $51 million.

Liquidating inventory is a very common step in business bankruptcies, even if the company was not primarily in the businesses of selling some type of good. Companies that declare bankruptcy will typically sell office supplies, furniture, property, and other assets to pay of debtors to the extent that it is possible. This is often done through the proxy of a liquidating company, as in this case, which will buy the inventory and undertake the process of selling it, paying a percentage of the total value of the goods to the company.

In some cases a company will also sell their intellectual property if trademarks, copyrights, or patents have value on the market. In this case the intellectual property from the store, (likely the name Loehmann's) is being sold along as well, indicating that the buyer may want to resurrect the brand and use the store's well regarded reputation in the new venture.

The fate of the clothing store's real estate holdings is still uncertain, although a top bid for the real estate has been made by a holding company.

As this case illustrates, there are many complex assets to a business or commercial bankruptcy, all of which must be managed carefully in order to find the best balance between paying off debtors and either closing down operations or restructuring to start over.

Source: Bloomberg Businessweek, "Loehmann's Bankruptcy Judge Approves Sale of Inventory," Tiffany Kary, Jan. 8, 2014.  

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