Retailer Steve & Barry's, which recently filed for bankruptcy-court protection, has agreed to be acquired by turnaround specialist Bay Harbour Management for $163 million if a deal on renegotiated leases can be reached.

The offer is a so-called stalking horse bid, which sets a minimum price for a company to be auctioned off under bankruptcy-court supervision.

Staying in business would be a godsend to mall owners across the country, who ponied up hundreds of millions of dollars to attract Steve and Barry's into huge, empty spaces, often as large as 100,000 square feet.

The Bay Harbour affiliate intends to continue operating the 276-store chain. Spokeswoman Rachel Brenner said the retailer hasn't determined how many stores under the bid it would have to close.

The fast-growing retailer filed for Chapter 11 last month as the company blamed a liquidity squeeze for its failing fortunes.

At the time, founders and co-Chief Executives Steve Shore and Barry Prevor said despite the Long Island company's rapid growth during its 23-year history -- including same-store sales up 25% the first five months of this year -- "this has not been enough .. in the current credit and economic environment."

With fashionable clothes priced below $10, Steve & Barry's deep-discount model was built to thrive in a difficult economic environment. In a 2006 interview with The Wall Street Journal, Mr. Prevor said the U.S. market could support 5,000 stores.

But a souring economy has made this a brutal period for retailers, who are pinched by slackening consumer spending and higher transportation costs. For Steve & Barry's, which ran its operations on the thinnest of margins, these factors made it all the more difficult to survive.

Bay Harbour's holdings have included the Planet Hollywood Resort and Casino on the Las Vegas Strip, which the hedge fund helped fund after buying the Aladdin out of bankruptcy.