Aeropostale's bankruptcy causes issues with shareholder

Los Angeles - After prepping for a Chapter 11 bankruptcy, it seems that Aeropostale is only headed for more turmoil. The filing is potentially opening the teen retailer up to a conflict with one of its major shareholders: Sycamore Partners.

The reason that the court filing may cause problems for its shareholders is due to Sycamore Partners’ pre-petition policies. The private equity firm owns MGF Sourcing, which served as a large supplier for Aeropostale. Aeropostale’s chief financial officer, David J. Dick., said in the court filing that the firm demanded cash in advance terms, as reported by WWD. “It has become increasingly clear to me over the course of the last several weeks since Sycamore and MGF first demanded cash in advance terms...that Sycamore was using its leverage over MGF to precipitate the filing of these Chapter 11 cases,” Dick told WWD. The firm has denied any of these allegations currently.

Because Sycamore is one of Aeropostale’s biggest stockholders, the firm also has a lot to lose in the bankruptcy. This could also cause problems for both the retailer and the equity firm. Its stock already fell 28 percent to 15 cents, before it was removed from its previously traded under ticker ARO. Due to the filing, Aeropostale is set to close over 100 stores. This will also affect employees, as the company employs 21,000 workers as of January.