Federal bankruptcy judge OKs Boscov's sale

WILMINGTON - A federal bankruptcy judge approved the sale of the Boscov's department store chain yesterday to Albert R. Boscov in a $305 million deal that is expected to result in the ouster of Boscov's nephew, Ken Lakin, as chief executive.

Lakin, 54, sat attentively in court - his uncle did not attend - as U.S. Bankruptcy Judge Kevin Gross cleared the way for the buyback to be finalized the day before Thanksgiving or Dec. 5 at the very latest.

Gross praised Boscov and his brother-in-law, Edwin Lakin, 84, for putting together the rescue deal in so harsh an economic climate.

It resolves unpaid debts to banks and vendors while preserving livelihoods across the region, the judge noted. The 39-store chain employs 8,000 people, 5,000 in Pennsylvania.

The two men now buying the company ran the 97-year-old Reading-based business before cashing out their ownership interests in 2006 and handing control to Edwin Lakin's son.

In somber remarks to reporters, Ken Lakin called it a "near miracle" that the deal garnered support from the company's lenders, given the global credit freeze that has made banks squeamish about outstanding loans being held by struggling businesses.

"Al Boscov is, I think, a miracle maker here," Lakin said of his 79-year-old uncle, who had run the business for years hand-in-glove with his father.

Today, those two family elders are among the broad group of friends and family investors who agreed to contribute a portion of $100 million in equity and junior loans that are part of the overall $305 purchase. The Commonwealth of Pennsylvania also provided $35 million in loan guarantees.

"We are delighted with this outcome and are gratified that we will be able to continue participating in an active way in all the communities we serve," Albert Boscov said in a prepared statement.

At a time when the retail sector is asphyxiating from the contraction of consumer spending, Gross praised the Boscov-Lakin family for its commitment to the communities where the stores are situated and its "faith in the future" during "dark economic times."

The buyback will allow the company to continue operating, rather than potentially shutting the doors of the nation's oldest family-owned department store chain.

Lakin seemed on the verge of tears as he began to speak to reporters after the judge's ruling. "You leave one dream behind. Now it's time to start a new dream," he said.

Lakin was referring to his ambitious move in 2006 to expand the chain by 10 stores, a bold move that nonetheless contributed to the company's undoing.

"We made a good run at the time," said Lakin, whose uncle had criticized the acquisitions a few days earlier during his own appearance at a related bankruptcy hearing. Lakin was by his side at the time but remained silent.

When the economy began to sour in late 2007, underperforming stores became a drag on the company. As Boscov's began to have trouble paying its bills, vendors halted merchandise shipments, provoking the company's filing for Chapter 11 bankruptcy protection on Aug. 4.

One of the company's first moves in bankruptcy was to break the leases on and liquidate its 10 most underperforming stores.

The family buyback sets aside $8 million for merchandise vendors and other unsecured creditors, who as a group were owed $90 million when Boscov's declared bankruptcy.

The Boscov-Lakin family agreed to pay the $8 million as part of a settlement with those creditors.

Lakin said there would be changes in the upper echelons of management in the months to come, but he would not comment when asked if he would stay on as CEO. It is widely believed that Lakin will remain with the company but in a different role.