Orchard Trustee Sues Golden Gate Over $310M Payout

Law360 (April 28, 2011, 2:09 PM EDT) -- Bankrupt Orchard Brands Corp. subsidiaries sued various Golden Gate Capital Corp. funds Wednesday in Delaware, seeking to claw back a $310 million special dividend that allegedly helped cast the retailer into insolvency.

The Golden Gate funds, which own a controlling stake in Orchard Brands, paid themselves and their investors the extravagant dividend after orchestrating the retailer's 2007 leveraged buyout of Blair Corp. that heaped $650 million in secured debt onto the company's balance sheet, according to a bankruptcy court adversary proceeding filed by the litigation trustee for the Orchard Brands units.

"They purported to justify this staggering new debt load with...

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