Mall owners bid for bankrupt retailer Bon-Ton Stores Inc., according to court filing

An investor group that includes two mall owners has submitted a letter of intent to buy Bon-Ton Stores Inc. and keep it in business, according to a court filing Monday.

A bid by Namdar Realty Group, of Great Neck, N.Y., Washington Prime Group, of Columbus, Ohio, and New York hedge fund DW Partners could prevent bankrupt Bon-Ton, which has not been profitable since 2010, from facing liquidation if the offer is approved in U.S. Bankruptcy Court in Delaware.

But it appears that a group of creditors that hold Bon-Ton debt and want to liquidate the department store retailer is gearing up for a fight.

Namdar, Washington Prime and DW Partners have signed a letter of intent to buy most of the assets of Bon-Ton for no less than $128 million in cash and a total amount based on Bon-Ton’s borrowing ability at closing, according to a court document.

Bon-Ton, which is the parent company of Boston Store, Younkers and other department stores, filed for Chapter 11 bankruptcy protection Feb. 4. Since then, company leaders have been seeking to find a buyer that will keep Bon-Ton in business.

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An auction of Bon-Ton slated for Monday was postponed — a move that prompted an immediate objection from the group of creditors.

The company said the auction scheduled for Monday now will take place April 16. Bon-Ton initially said it was going to delay the auction only until Tuesday but later extended the postponement period.

The debt holders, known as the Second Lien Noteholders, disclosed Monday that, last Wednesday, they made a joint bid with two liquidation companies to buy Bon-Ton.

In a court filing Monday, the debt holders group said it is concerned that Bon-Ton, with the support of a committee of unsecured creditors who prefer Bon-Ton keep operating, "will attempt to tilt the playing field in favor of other bidders."

"The various unexplained delays in the sale process have only heightened those concerns," the Second Lien Noteholders asserted.

The group noted that the initial deadline to submit bids was extended by two days last week.

The group said it questions the fairness of the bankruptcy auction process and expects Bon-Ton will choose any bid other than the joint bid that would lead to liquidation.

"Based on (Bon-Ton's) prior words and deeds, as well as various news reports, the Second Lien Noteholders believe that the debtors are awaiting a bid to purchase the assets as a 'going concern' before proceeding forward with any auction," attorneys for the Second Lien Noteholders said in Monday's filing.

The Second Lien Noteholders, who hold about $251 million in Bon-Ton notes, said the judge in the case may have to address the fairness of the bidding process, how the bids are evaluated by Bon-Ton and factors used to determine the "highest and best bid."

Bill Tracy, president and chief executive of Bon-Ton, said in a statement Monday night, “We are pleased to have received this signed letter of intent and are advancing our discussions with the investor group to complete an asset purchase agreement as we proceed toward the court-supervised auction.”

In a court filing Monday, Bon-Ton disclosed it received several bids for certain assets or groups of assets, along with four bids for substantially all of its assets. Except for the letter of intent by Namdar, Washington Prime and DW Partners to maintain the company as a "going concern," the other bids were for liquidation of Bon-Ton.

The shutdown of nine Boston Stores, three Younkers stores and the company's co-headquarters office in Wisconsin would eliminate 2,255 jobs in the state, according to a Bon-Ton notice sent to state officials. The co-headquarters office at 331 W. Wisconsin Ave. in Milwaukee has 717 employees.

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The Bon-Ton department store in Wisconsin with the most workers is the Boston Store at Brookfield Square, with 243 employees. The Shops of Grand Avenue Boston Store in downtown Milwaukee has the fewest, at 52.

In addition to Boston Store and Younkers, Bon-Ton operates department stores under the brand names Bergner's, Bon-Ton, Carson's, Elder-Beerman and Herberger's. Its other co-headquarters office is in York, Pa. It runs more than 200 stores in the U.S. and has more than 20,000 employees nationwide.

The Second Lien Noteholders group consists of Alden Global Capital LLC, B. Riley FBR Inc., Brigade Capital Management LP, Cetus Capital LLC, Contrarian Capital and Wolverine Asset Management. The group said it filed its joint bid for Bon-Ton with liquidators GA Retail Inc., which is an affiliate of Great American Group, and Tiger Capital Group.