West Palm Beach (HedgeCo.Net) - Hedge fund Bay Harbour Management is poised to take over bankrupt clothing retailer Steve & Barry’s.

The company announced on Monday it has filed a "stalking horse" purchase agreement with the hedge fund in which Bay Harbour will acquire the bulk of the chain’s assets for the bargain price of $163 million. Bay Harbour is creating a subsidiary, BH S&B Holdings, which plans to continue to operate Steve & Barry’s stores with their current staff and key facilities.

Should the court approve the agreement, Bay Harbour will be able to perform due diligence to determine which stores it will take over. Hilco Merchant Resources will act as stalking horse bidder looking to conduct a final sale of anything that remains. The proposal will act as an opening bid during an auction of the company scheduled for August.

Bay Harbour could still be outbid if another investor comes up with a better offer. Steve & Barry’s had been foundering in the economic slowdown, however, and had to file for Chapter 11 bankruptcy last month.

Douglas Teitelbaum, managing partner of Bay Harbour, has often been labeled as a "bottom feeder" for his fund’s focus on distressed debt and companies sorely in trouble. The New York-based fund has more than a billion dollars in assets under management.

In a statement, Steve & Barry’s noted that Bay Harbour participated in "the rebranding and turnaround of the former Aladdin Casino, now operating on the Las Vegas strip as the Planet Hollywood Resort and Casino." Other past holdings of the fund include Barney’s New York and telecom company TelCove, now owned by Level 3 Communications.

New York-based Steve & Barry’s operates 276 clothing stores specializing in apparel lines created by such celebrities as Sarah Jessica Parker, Amanda Bynes and Venus Williams. The company got its start back in 1985.