Betsey Johnson's fashions are known for being unconventional, so it's not surprising that the liquidation sales at the 63 stores owned by bankrupt Betsey Johnson LLC are, too.

The joint venture between Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC, which ultimately beat out two other bidders, guaranteed the New York-based debtor that it will recoup 102% of the cost value of the merchandise and paid Betsey Johnson a $5.24 million deposit for the merchandise the day after the sale was approved.

Liquidators rarely commit to such a high payout to debtors.

"In my experience, over 100¢ is high," said Betsey Johnson debtor counsel James F. Wallack of Goulston & Storrs PC. "We were very pleased that the number went over 100."

However, one source involved in the auction who asked not to be identified noted, "It's risky for a bid to be above 100¢."

Risky because these are slow times for auctioneers, the source added.

Recently, the only liquidator guarantee higher than Betsey Johnson's was the one a joint venture made involving bankrupt No Fear Retail Stores Inc. Before No Fear was sold out of bankruptcy on July 20, 2011, a Hilco Brands LLC-Gordon Brothers JV was the backup bidder for the retailer's retail assets with a proposed guaranteed payment to the debtor of 105% of the merchandise's value, according to The Deal Pipeline.

The Betsey Johnson liquidators are obviously keeping the prices in the stores high enough to get the 102% for the debtor while making a markup for themselves, given one comment overheard by this reporter at a store on Manhattan's Upper East Side recently. "What kind of closing sale is that?" quipped one patron leaving the store empty-handed.

When liquidators buy merchandise at a liquidation auction it means, for example, that if a Betsey Johnson dress has a retail value of $100, which would have been marked up from its original cost value, the liquidator would have paid $102 for the dress before the going-out-of business sales even began.

"[Liquidators] build a model for what [they] think [they] can sell [merchandise] to the public for," said the source involved in the auction. "To the consumer, it's seamless."

So the liquidator has to mark up the dress even more to get his cut, especially since Bet-

sey Johnson inventory is being sold at discounts of 20% to 50% off the sticker price.

"The liquidators felt that there was a sufficient margin in the goods and some room to make a profit," Wallack said.

He noted that two other parties competed at the May 8 auction -- Great American Group and a joint venture between Tiger Capital Group LLC and SB Capital Group LLC. Hilco was the stalking-horse bidder going into the auction, with a bid guaranteeing the debtor would recoup 92% of the cost value of the merchandise.

Wallack attributed the competitiveness of the auction -- the winning group topped the stalking horse's bid by 10 percentage points -- to the popularity of Betsey Johnson's brand, among other things.

"It's an iconic retailer with a lot of following in various groups," Wallack said.

The bigger issue, however, may be that the market for liquidation sales is particularly slow right now. The auction source noted that the senior management of each liquidation firm was present at the auction, which speaks to how slow it is.

Also, it's prom season, which would boost demand for Betsey Johnson fashions, Wallack pointed out.

Because of what Betsey Johnson will earn from the GOB sales, the company will be able to "enhance its return to the creditor constituencies, [such as] Steven Madden Ltd. and its unsecured creditors," Wallack added.

Judge James M. Peck of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan approved the going-out-of-business sales on May 10. The sales started the next day.

Wallack said the company can keep the stores operating through July 31, but many of the stores may close before then.

Betsey Johnson is owned by Boston private equity firm Castanea Partners, which purchased the company from Betsey Johnson and her co-designer, Chantal Bacon, on Aug. 20, 2007. Johnson and Bacon still held some of the equity after the acquisition, but Castanea owned the majority of voting shares.

Betsey Johnson filed for Chapter 11 on April 26 due to declining sales and profits, but the company had commenced an out-of-court restructuring on Oct. 5, 2010, under which it sold all of its intellectual property to Steven Madden in full satisfaction of a $50 million loan. Steven Madden and Castanea became the sole owners of the company, with 10% and 90% stakes, respectively. Castanea provided a $3 million equity infusion.

The brand was developed by Betsey Johnson, a 69-year-old grandmother and breast cancer survivor who found inspiration from dancing. She originally wanted to design costumes, but over the years, her talent and eccentricities led her through a string of projects that placed her at the forefront of fashion and in the Fashion Walk of Fame.

Along with Wallack, debtor counsel is Douglas B. Rosner, Gregory O. Kaden and Vanessa V. Peck of Goulston & Storrs and Frank A. Oswald of Togut, Segal & Segal LLP.

Richter Consulting Inc. is the debtor's financial adviser.

A representative from Hilco was unavailable for comment. Gordon Brothers declined comment.

Representatives from Betsey Johnson and Steven Madden did not respond to requests for comment.