Fred Leighton Files for Chapter 11, as Owner Tries to Block Jewelry Auction

Fred Leighton Holding Inc. filed for Chapter 11 bankruptcy protection Wednesday afternoon. The petition, which includes seven affiliated companies, lists debts and liabilities of between $100 million and $500 million and was filed shortly after company owner Ralph Esmerian lost a court battle to prevent the sale of jewelry items in an auction.

The company, bought in 2006 by Esmerian, lists 49 creditors in its bankruptcy filling. Esmerian defaulted on a $178 million loan taken from to Merrill Lynch & Co. taken to purchase Fred Leighton for $100 million.

The move ends, at least for now, an attempt to auction of antique gems and jewelry worth an estimated $34 million. A New York court of appeals ruled Monday that Christie’s must cancel its “Rare Jewels and Gemstones: The Eye of the Connoisseur” auction, after Esmerian, who owns the items in the collection, filed an emergency motion to stop the sale.

Esmerian has argued that the collection would garner much higher prices if it were sold in private sales.

The auction was initiated by Merrill in its attempt to recover some of its money. On Wednesday, it won a ruling allowing the sale to proceed. Minutes later, Esmerian’s lawyers said they would file a bankruptcy petition.

Merrill intends to fight for the auction, and a hearing is scheduled for Thursday to ask a bankruptcy judge to permit the auction to proceed on Thursday night.