WILMINGTON, Del, March 12 (Reuters) - Bankrupt regional department store chain Bon-Ton Stores Inc, under pressure from a group of hedge funds to liquidate, began a race on Monday to find a buyer to keep open some of its stores.
U.S. Bankruptcy Judge Mary Walrath approved sale procedures on Monday and an April 2 deadline to accept bids for the chain, which operated 256 stores when it filed for Chapter 11 on Feb. 4.
Bon-Ton has not yet received any initial bids, also called stalking horse bids, which help stoke interest and attract potential buyers to an auction it intends to hold on April 9.
The company faces a possible liquidation just as Toys 'R' Us, the largest U.S. toy retailer, is preparing to go out of business if negotiations do not produce a viable turnaround strategy.
Sales at many U.S. retail chains have tumbled in recent years as more Americans shop online and as consumers increasingly cut spending on apparel in favor of eating out and other experiences.
Bon-Ton and its official committee of unsecured creditors have been trying to round up a going concern bid backed by vendors and landlords, two sources with knowledge of the talks told Reuters.
A similar approach was used to prevent a liquidation of Aeropostale Inc. The mall-based retailer was acquired by a consortium that included landlords Simon Property Group and General Growth Properties, whose properties contain a combined 200 Aeropostale stores and sought to retain a key tenant.
Bon-Ton, however, has lots of landlords and many that own a single location, Kathryn Bufano, the company's former chief executive officer, told Reuters. As a result, no single landlord is heavily dependent on Bon-Ton, diminishing the appeal of an Aeropostale-type bid.
"The vendor community and Bon-Ton's bankers are working to see if the company can be salvaged," she said.
Six hedge funds that hold Bon-Ton's second-lien notes told the company they want to team up with liquidator Great American Group and wind down the business, their attorney Sidney Levinson of Jones Day told the court on Monday.
Levinson argued that a liquidation was the best way to squeeze the most value out of the company, which also operates Bergner's, Boston Store, Carson's, Elder-Beerman, Herberger's and Younkers stores.
Walrath reminded Levinson's group, which includes affiliates of Brigade Capital Management and Contrarian Capital, that Bon-Ton may consider the impact on landlords and employees when valuing bids.
"No court has said 'highest and best' is solely dollars," she said. (Reporting by Tom Hals in Wilmington, Delaware; Additional reporting by Tracy Rucinski in Chicago; Editing by David Gregorio)