New Chapter 11 Bankruptcy Filing - Things Remembered Inc.

Things Remembered Inc.

2/6/19

This has been a rough week for "out-of-court" restructurings in the retail space. On the heals of Charlotte Russe's collapse into bankruptcy after an attempted out-of-court solution, Things Remembered Inc. filed for bankruptcy in the District of Delaware on February 6, 2019. We recently wrote about Things Remembered here. Let's dig in a bit more. 

The 53-year old retailer filed with a stalking horse purchaser, Ensco Properties LLC, in line to purchase, subject to a tight 30-day timeframe, a subset of the company's store footprint and direct-sales business. The company writes in the most Trumpian-fashion imaginable:

"Although stores not acquired will need to close, the going-concern sale wills save hundreds of jobs and potentially many more and provide an improved, and significantly less risky, recovery to stakeholders." What does "potentially many more" mean? Don't they know how many people are employed at the locations being sold as well as corporate support? Seems like a Trumpian ad lib of corresponding inexactitude. But, whatever. 

What caused the need for bankruptcy?

"Like many other retailers, the Company has suffered from adverse macro-trends, as well as certain microeconomic operational challenges. Faced with these challenges, the Company initiated multiple go-forward operational initiatives to increase brick-and-mortar profitability, such as store modernization through elimination of paper forms and the addition of iPads to streamline the personalization and sale process, and by shuttering a number of underperforming locations. The Company also sought to bolster the Debtors’ online-direct sale business, including aggressive marketing to loyal customers to facilitate sales through online channels, attracting new customers via an expanded partnership with Amazon, and increasing service capabilities for the business-to-business customer segment."

Read that paragraph and then tell us that retail management teams (and their expensive advisors) have any real clue how to combat the ails confronting retail. Elimination of paper forms? Ipads? Seriously? Sure, the rest sounds sensible and comes right out of today's standard retail playbook, i.e., shutter stores, bolster online capabilities, leverage Amazon's distribution, tapping into "loyal customers," etc. We're surprised they didn't mention AR/VR, Blockchain, "experiential retail," pop-ups, advertising on scooters, loyalty programs, and all of the other trite retail-isms we've heard ad nauseum (despite no one actually proving whether any or all of those things actually drive revenue). 

The rest of the story is crazy familiar by this point. The "challenging operating environment" confronting brick-and-mortar and mall-based retail, specifically, led to missed sales targets and depressed profitability. Naturally there were operational issues that compounded matters and, attention Lenore Estrada (INSERT LINK), "…vendors have begun to place pressure on the supply chain cost structure by delaying or cancelling shipments until receiving payment." Insert cash on delivery terms here. Because that's what they should do when a customer is mid-flush. 

Anyway, shocker: negative cash flows persisted. Consequently, the company and its professionals commenced a marketing process that landed Enesco as stalking horse bidder. Enesco has committed to acquiring the direct-sales business (which constitutes 26% of all sales in 2018 and includes the e-commerce website, hq, fulfillment and distribution center in Ohio and related assets) and approximately 128 stores (subject to addition or subtraction, but a floor set at 50 store minimum). Store closings of approximately 220 stores and 30 kiosks commenced pre-petition. A joint venture between Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC is leading that effort (which again begs the question as to how Gymboree is the only recent retailer that required the services of four "liquidators"). The purchase price is $17.5mm (subject to post-closing adjustments). $17.5mm is hardly memorable. That said, the company did have negative $4mm EBITDA so, uh, yeeeeeaaaaah. 

$18.7mm '19 revolving credit facility (Cortland Capital Markets Services LLC); $124.9mm 12% '20 TL. 

The capital structure represents the result of an August 30, 2016 out-of-court exchange that, let's be honest here, didn't do much other than incrementally lessen the debt burden, kick the can down the road and get some professionals paid. If this sounds familiar, it's because it's not all that different than Charlotte Russe in those respects. 

  • Jurisdiction: D. of Delaware (Judge Gross)

  • Capital Structure: $mm debt     

  • Company Professionals:

    • Legal: Kirkland & Ellis LLP (Christopher Greco, Derek Hunger, Angela Snell, Spencer Winters, Catherine Jun, Scott Vail, Mark McKane) & (local) Landis Rath & Cobb LLP (Adam Landis, Matthew McGuire, Kimberly Brown, Matthew Pierce)

    • Legal (Canada): Davies Ward Phillips & Vineberg LLP

    • Financial Advisor/CRO: Berkeley Research Group LLC (Robert Duffy, Brett Witherell)

    • Investment Bank: Stifel Nicolaus & Co. Inc. and Miller Buckfire & Co. LLC (James Doak)

    • Liquidators: Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC

      • Legal: Pepper Hamilton LLP (Douglas Herman, Marcy McLaughlin)

    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)

  • Other Parties in Interest:

    • Stalking Horse Purchaser: Enesco Properties LLC  (Balmoral Funds LLC)

      • Legal: Pachulski Stang Ziehl & Jones LLP (Jeffrey Pomerantz, Maxim Litvak, Joseph Mulvihill)

    • Lender: Cortland Capital Market Services LLC

      • Legal: Weil Gotshal & Manges LLP (David Griffiths, Lisa Lansio) & (local) Richards Layton & Finger PA (Daniel DeFranceschi, Zachary Shapiro)

    • Sponsor: KKR & Co.

    • Official Committee of Unsecured Creditors (Jewelry Concepts Inc., Gravotech Inc., Chu Kwun Kee Metal Manufactory, Brookfield Property REIT, Inc., Simon Property Group LP)

      • Legal: Kelley Drye & Warren LLP (Eric Wilson, Jason Adams, Kristin Elliott, Lauren Schlussel) & (local) Connolly Gallagher (N. Christopher Griffiths, Shaun Michael Kelly)

      • Financial Advisor: Province Inc. (Carol Cabello, Sanjuro Kietlinski, Jorge Gonzalez, Michael Martini)

New Chapter 11 Bankruptcy Filing - Charlotte Russe Holding Inc.

Charlotte Russe Holding Inc.

February 3, 2019

San Diego-based specialty women’s apparel fast-fashion retailer Charlotte Russe Holding Inc. is the latest retailer to file for bankruptcy. The company has 512 stores in 48 U.S. states. The company owns a number of different brands that it sells primarily via its brick-and-mortar channel; it has some brands, most notably “Peek,” which it sells online and wholesale to the likes of Nordstrom.

The company’s capital structure consists of:

  • $22.8mm 6.75% ‘22 first lien revolving credit facility (ex-accrued and unpaid interest, expenses and fees)(Bank of America NA), and

  • $150mm 8.5% ‘23 second lien term loan ($89.3mm funded, exclusive of unpaid interest, expenses and fees)(Jefferies Finance LLC). The term loan lenders have first lien security interests in the company’s intellectual property.

The company’s trajectory over the last decade is an interesting snapshot of the trouble confronting the brick-and-mortar retail space. The story begins with a leveraged buyout. In 2009, Advent International acquired the debtors through a $380mm tender offer, levering up the company with $175mm in 12% subordinated debentures in the process. At the time, the debtors also issued 85k shares of Series A Preferred Stock to Advent and others. Both the debentures and the Preferred Stock PIK’d interest (which, for the uninitiated, means that the principal or base amounts increased by the respective percentages rather than cash pay interest or dividends being paid over time). The debtors later converted the Preferred Stock to common stock.

Thereafter, the debtors made overtures towards an IPO. Indeed, business was booming. From 2011 through 2014, the debtors grew considerably with net sales increased from $776.8mm to $984mm. During this period, in May of 2013, the debtors entered into the pre-petition term loan, used the proceeds to repay a portion of the subordinated debentures and converted the remaining $121.1mm of subordinated debentures to 8% Preferred Stock (held by Advent, management and other investors). In March 2014, the debtors and its lenders increased the term loan by $80mm and used the proceeds to pay a one-time dividend. That’s right folks: a dividend recapitalization!! WE LOVE THOSE. Per the company:

In May 2014, the Debtors paid $40 million in dividends to holders of Common Stock, $9.8 million in dividends to holders of Series 1 Preferred Stock, which covered all dividends thus far accrued, and paid $65.7 million towards the Series 1 Preferred Stock principal. The Debtors’ intention was to use a portion of the net proceeds of the IPO to repay a substantial amount of the then approximately $230 million of principal due on the Prepetition Term Loan.

In other words, Advent received a significant percentage of its original equity check back by virtue of its Preferred Stock and Common Stock holdings.

Guess what happened next? Well, after all of that money was sucked out of the business, performance, CURIOUSLY, began to slip badly. Per the company:

Following fifteen (15) consecutive quarters of increased sales, however, the Debtors’ performance began to materially deteriorate and plans for the IPO were put on hold. Specifically, gross sales decreased from $984 million in fiscal year 2014 with approximately $93.8 million in adjusted EBITDA, to $928 million in fiscal year 2017 with approximately $41.2 million in adjusted EBITDA. More recently, the Debtors’ performance has materially deteriorated, as gross sales decreased from $928 million in fiscal year 2017 with approximately $41.2 million in adjusted EBITDA, to an estimated $795.5 million in fiscal year 2018 with approximately $10.3 million in adjusted EBITDA.

Consequently, the company engaged in a year-long process of trying to address its balance sheet and/or find a strategic or financial buyer. Ultimately, in February 2018, the debtors consummated an out-of-court restructuring that (i) wiped out equity (including Advent’s), (ii) converted 58% of the term loan into 100% of the equity, (iii) lowered the interest rate on the remaining term loan and (iv) extended the term loan maturity out to 2023. Advent earned itself, as consideration for the cancellation of its shares, “broad releases” under the restructuring support agreement. The company, as part of the broader restructuring, also secured substantial concessions from its landlords and vendors. At the time, this looked like a rare “success”: an out-of-court deal that resulted in both balance sheet relief and operational cost containment. It wasn’t enough.

Performance continued to decline. Year-over-year, Q3 ‘18 sales declined by $35mm and EBITDA by $8mm. Per the company:

The Debtors suffered from a dramatic decrease in sales and in-store traffic, and their merchandising and marketing strategies failed to connect with their core demographic and outpace the rapidly evolving fashion trends that are fundamental to their success. The Debtors shifted too far towards fashion basics, did not effectively reposition their e-commerce business and social media engagement strategy for success and growth, and failed to rationalize expenses related to store operations to better balance brick-and-mortar operations with necessary e-commerce investments.

In the end, bankruptcy proved unavoidable. So now what? The company has a commitment from its pre-petition lender, Bank of America NA, for $50mm in DIP financing (plus $15mm for LOCs) as well as the use of cash collateral. The DIP will roll-up the pre-petition first lien revolving facility. This DIP facility is meant to pay administrative expenses to allow for store closures (94, in the first instance) and a sale of the debtors’ assets. To date, however, despite 17 potential buyers executing NDAs, no stalking horse purchaser has emerged. They have until February 17th to find one; otherwise, they’re required to pursue a “full chain liquidation.” Notably, the debtors suggested in their bankruptcy petitions that the estate may be administratively insolvent. YIKES. So, who gets screwed if that is the case?

Top creditors include Fedex, Google, a number of Chinese manufacturers and other trade vendors. Landlords were not on the top 30 creditor list, though Taubman Company, Washington Prime Group Inc., Simon Property Group L.P., and Brookfield Property REIT Inc. were quick to make notices of appearance in the cases. In total, unsecured creditors are owed approximately $50mm. Why no landlords? Timing. Despite the company going down the sh*tter, it appears that the debtors are current with the landlords (and filing before the first business day of the new month helps too). Not to be cynical, but there’s no way that Cooley LLP — typically a creditors’ committee firm — was going to let the landlords be left on the hook here.

And, so, we’ll find out within the next two weeks whether the brand has any value and can fetch a buyer. In the meantime, Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC will commence liquidation sales at 90+ locations. We see that, mysteriously, they somehow were able to free up some bandwidth to take on an new assignment sans a joint venture with literally all of their primary competitors.

  • Jurisdiction: D. of Delaware (Judge Silverstein)

  • Capital Structure: $22.8mm 6.75% ‘22 first lien revolving asset-backed credit facility (ex-accrued and unpaid interest, expenses and fees)(Bank of America NA), $150mm 8.5% ‘23 second lien term loan ($89.3mm funded, exclusive of unpaid interest, expenses and fees)(Jefferies Finance LLC)

  • Company Professionals:

    • Legal: Cooley LLP (Seth Van Aalten, Michael Klein, Summer McKee, Evan Lazerowitz, Joseph Brown) & (local) Bayard PA (Justin Alberto, Erin Fay)

    • Independent Director: David Mack

    • Financial Advisor/CRO: Berkeley Research Group LLC (Brian Cashman)

    • Investment Banker: Guggenheim Securities LLC (Stuart Erickson)

    • Lease Disposition Consultant & Business Broker: A&G Realty Partners LLC

    • Liquidating Agent: Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC

    • Liquidation Consultant: Malfitano Advisors LLC

    • Claims Agent: Donlin Recano & Company (*click on company name above for free docket access)

  • Other Parties in Interest:

    • DIP Lender ($50mm): Bank of America NA

      • Legal: Morgan Lewis & Bockius LLP (Julia Frost-Davies, Christopher Carter) & (local) Richards Layton & Finger PA (Mark Collins)

    • Prepetition Term Agent: Jefferies Finance LLC

      • Legal: King & Spalding LLP (Michael Rupe, W. Austin Jowers, Michael Handler)

    • Official Committee of Unsecured Creditors (Valueline Group Co Ltd., Ven Bridge Ltd., Shantex Group LLC, Global Capital Fashion Inc., Jainson’s International Inc., Simon Property Group LP, Brookfield Property REIT Inc.)

      • Legal: Whiteford Taylor & Preston LLP (Christopher Samis, L. Katherine Good, Aaron Stulman, David Gaffey, Jennifer Wuebker)

      • Financial Advisor: Province Inc. (Edward Kim)

Updated 2/14/19 at 1:41 CT

💄New Chapter 11 Bankruptcy Filing - Beauty Brands LLC💄

Beauty Brands LLC

January 6, 2019

A second beauty bankruptcy in three weeks. We previously noted:

On December 19, 2018, a week after Glossier CEO Emily Weiss revealed that the direct-to-consumer beauty brand hit $100mm in sales, Glansaol, a platform company that acquires, integrates and cultivates a portfolio of prestige beauty brands — including a direct-to-consumer brand — filed for bankruptcy in the Southern District of New York.

Now, a Kansas City-based brick-and-mortar beauty retailer with 58 stores in 12 states, Beauty Brands LLC, filed for bankruptcy over the weekend in the District of Delaware. Though we’ve never heard of it, it is no small shop: the company generated $125mm of net sales for fiscal year ended February 3, 2018. 70% of its revenue came from retail products and 30% from salon and spa services. The company had an e-commerce platform that accounted for 6.2% of net sales. It does not own any real property, leasing each of its stores.

In December, the company’s lender, PNC Bank NA, declared a default on the company’s credit facility. Why? Per the Company:

Beauty Brands’ liquidity and financial position has been adversely affected by declining sales and rising costs associated with doing business as a predominantly “brick and mortar” retailer. These factors have adversely impacted the Debtors’ profitability and its liquidity, which in turn has made it increasingly difficult to source replenishment inventory, which in turn contributes to further declines in the Company’s sales.

Well, that certainly paints a nice picture of how trouble can spiral out of control. Compounding matters is the fact that the company decided to expand in the face of a changing brick-and-mortar retail environment…

From 2014 through 2016, Beauty Brands unsuccessfully attempted to reposition its brand identity and store model by opening 11 new format store locations, which required significant capital expenditures, deferral of other investment opportunities, and management’s focus on the new format stores to the detriment of its existing store locations. These new format store locations, which remain operational, have underperformed Beauty Brands’ expectations and contributed to operating losses incurred by the Debtors.

Despite pre-petition efforts to sell the company as a going concern, no buyers were forthcoming. Therefore, the company hired Hilco Merchant Resources LLC to commence a firm-wide liquidation. Nevertheless, the company holds out hope — given some 11th hour interest by two potential buyers — that it can auction approximately 33 of its stores (“Core Stores”). In the meantime, Hilco is pursuing “GOB” sales of the 23 remaining stores (“Closing Stores”)(PETITION Note: the company’s papers say there are 58 stores, and yet only 56 stores are accounted for in the company’s description of Core Stores and Closing Stores, though there is mention of one “Dark Store”). Hilco will also serve as the Stalking Horse Bidder for the Core Stores.

The company will pursue a short post-petition marketing and sale process with an aim towards an early February 2019 sale. The company will use a committed $9mm DIP from pre-petition agent, PNC Bank NA, to fund the process.

  • Jurisdiction: D. of Delaware (Judge Sontchi)

  • Capital Structure: $17.5mm ($6.9mm funded, including fees + interest)

  • Company Professionals:

    • Legal: Ashby & Geddes P.A. (Gregory Taylor, Stacy Newman, Katharina Earle, David Cook)

    • Financial Advisor/CRO: RAS Management Advisors LLC (Timothy Boates, Michael Rizzo)

    • Investment Banker: Lazard Middle Markets LLC (Dermott O’Flanagan)

    • Liquidator: Hilco Merchant Resources LLC

    • Claims Agent: Donlin Recano & Company Inc.

  • Other Parties in Interest:

    • DIP Agent: PNC Bank NA

      • Legal: Blank Rome LLP (Gregory Vizza, John Lucian)

    • Replacement Stalking Horse Bidder: Absolute Beauty LLC

      • Legal: Kirkland & Ellis LLP (Joshua Sussberg, Gene Goldmintz, Joshua Greenblatt) & (local) Klehr Harrison Harvey Branzburg LLP (Dominic Pacitti)

    • Official Committee of Unsecured Creditors (TIGI Linea Corp., Deva Concepts LLC, L’Oreal USA S/D Inc.)

      • Legal: Kelley Drye & Warren LLP (Eric Wilson, Jason Adams, Lauren Schlussel) & (local) Saul Ewing Arnstein & Lehr LLP

      • Financial Advisor: Province Inc. (Carol Cabello)

💍New Chapter 11 Filing - Samuels Jewelers Inc.💍

Screen Shot 2018-08-28 at 5.47.59 PM.png

Let’s start by all agreeing that the pictured $900 engagement rings are outright hideous. Nobody wants those. Literally. Nobody. And so…bankruptcy.

Ok, so we’re being a bit flip here (as always) but the truth is that in addition to people not going to malls anymore, people have become increasingly comfortable purchasing jewelry over the internet. Don’t believe us? The list of growing Instagram-dominant direct-to-consumer jewelry brands seems to be growing longer than the list of professional athletes President Trump has insulted. There’s Vrai & OroAurate, and several others. When a company is facing this kind of onslaught, it simply cannot be distracted by other externalities like…say, fraud at the parent level. That’s right. Per Reuters back in May:

U.S. jewelry chain Samuels Jewelers has hired a turnaround adviser at the request of its creditors in a bid to avoid the fate of brick-and-mortar retailers that filed for bankruptcy amid intensifying competition, according to people familiar with the matter.

Samuel Jewelers’ action comes as its Indian parent company, Gitanjali Gems Ltd, finds itself in legal hot water. Gitanjali’s chairman, Mehul Choksi, was accused by state-run Punjab National Bank in India of defrauding it of nearly $2 billion.

Or, even more significant, burdensome leases on its 120 leased stores in 23 states. Per the company:

The Debtor's headquarters and retail stores are leased. The Debtor does not own any real property. The aggregate monthly rent due under the leases (collectively, the "Leases") is approximately $1.7 million. The Debtor's retail store Leases generally have initial terms of ten years with varying options to extend. As of the Petition Date, the remaining terms under the Debtor's existing store Leases were widely variant, but the majority of the Leases currently will expire in or before 2023. The remainder of the Leases currently will expire between 2024 and 2028. As of the Petition Date, the Debtor owes approximately $3.0 million in unpaid current lease obligations.

And so, against this backdrop, the “bid” clearly failed because, today, Texas-based Samuels Jewelers Inc. has, indeed, filed for bankruptcy. The filing essentially marks a fitting new chapter for an enterprise so accustomed to bankruptcy court that it probably ought to be paying annual dues. Predecessor entities filed for bankruptcy in 1992, 1997, and 2003. With that historical perspective, we suppose that Gitanjali ought to be commended for extending the company’s streak outside of bankruptcy court beyond five or six years to a…gulp…commendable fifteen.

Why bankruptcy? Why now? To elaborate on our preface, a few reasons. First,“increasing competition in the retail jewelry industry, including competition by discount and other retailers, including online retailers.” So, like we said. And, second, the aforementioned fraud allegations and related India National Company Law Tribunal injunctive order against Gitanjali and other former principals of the company had the affect of (a) cutting off a major source of product historically sourced from Gitanjali or other non-debtor affiliates, (b) eliminating an oft-tapped short-term funding source, and (c) spooking third-party vendors and suppliers. Given these issues, the company opted to seek chapter 11 protection with the hope that it could stabilize operations, enhance liquidity and preserve value. In that vein, the company — despite having neither an investment banker nor a stalking horse bidder at the time of filing — hopes to sell the business as a going concern. Contemporaneously, the company hopes to assume an agreement to retain Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC as consultants to dispose of excess inventory and conduct store closing sales. Accordingly, major creditors include, as you might expect, the usual array of landlords, General Growth Properties ($GGP)Simon Property Group Inc. ($SPG), and Macerich Co. ($MAC).

Finally, the company will also seek approval of a poorly-named $100mm DIP Working Capital Facility — the majority of which will be used not for working capital but to roll-up Wells Fargo and Gordon Brothers’ loans — to fund the case until a buyer is found or the company liquidates. Anyone want to place bets on which scenario plays out?

  • Jurisdiction: D. of Delaware (Judge Carey)

  • Capital Structure: $84mm revolving credit facility (Wells Fargo Bank NA), $10mm term loan (GB Credit Partners LLC)

  • Company Professionals:

    • Legal: Jones Day (Greg Gordon, Amanda Rush, Jonathan Fisher, Paul Green) & (local) Richards Layton & Finger PA (Daniel DeFranceschi, Zachary Shapiro)

    • Financial Advisor: Berkeley Research Group (Robert Duffy)

    • Liquidators: Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC

    • Claims Agent: Prime Clerk LLC

  • Other Parties in Interest:

    • Prepetition RCF Lender: Wells Fargo Bank NA (Legal: Morgan Lewis & Bockius LLP, Julia Frost-Davies, Christopher Carter, Sandra Vrejan & (local) Reed Smith LLP, Kurt Gwynne, Jason Angelo).

    • Prepetition Term Agent & DIP Term Agent: Gordon Brothers Finance Company (Choate Hall & Stewart LLP, John Ventola, Jonathan Marshall & (local) Womble Bond Dickinson US LLP, Matthew Ward, Morgan Patterson)

👗New Chapter 11 Filing - J&M Sales Inc./National Stores Inc.👗

Another day, another retailer in bankruptcy. Today, J&M Sales Inc., a “leading discount retailer” with $5-average-price goods in 344 stores in 22 states — operating under the names Fallas, Fallas Paredes, Fallas Discount Stores, Factory 2-U, Fallas and Anna’s Linen’s by Fallas — finds itself in bankruptcy court. The company offers value-priced merchandise, including apparel, bedding, household supplies, decor items and more; it generally supports underserved, low-income communities and can be found in power strip centers, specialty centers and downtown areas. All of its locations are leased.

The company blames (i) general retail pressures, (ii) bad weather (specifically hurricanes Harvey and Maria), (iii) a data breach (and a attendant $2mm reserve account set up by the credit card companies) and (iv) poor integration of growth acquisitions (e.g., Conway’s) for its chapter 11 filing. These company-specific factors may help explain why this company is apparently bucking the national trend of discount retail success (see, e.g., Dollar Tree).

The company intends to use the chapter 11 process to shop itself as a going concern and close at least 74 stores. The company makes no mention, however, of the extent of the sale process and there is no stalking horse bidder currently lined up. The company will seek approval of a (no new money?) $57mm DIP credit facility as well as credit support from certain “Critical Vendors” on a second and third lien basis.

  • Jurisdiction: D. of Delaware (Judge Silverstein)

  • Capital Structure: $57mm ABL (Encina Business Credit LLC/Israel Discount Bank of New York), $30mm term loan (Gordon Brothers Finance Company), $13.4mm Letters of Credit, $10mm Fallas Loan

  • Company Professionals:

    • Legal: Katten Muchin Roseman LLP (WIlliam Freeman, Karen Dine, Jerry Hall) & (local) Pachulski Stang Ziehl & Jones LLP (Richard Pachulski, Peter Keane)

    • Financial Advisor: SierraConstellation Partners LLC (Curt Kroll)

    • Investment Banker: Imperial Capital LLC

    • Real Estate Advisor: RCS Real Estate Advisors

    • Liquidation Agent: Hilco Merchant Resources LLC

    • Claims Agent: Prime Clerk LLC (click on company name above for free docket access)

  • Other Parties in Interest:

    • DIP Agents: Encina Business Credit LLC (Legal: Choate Hall & Stewart LLP, Kevin Simard) & Discount Bank of New York (Legal: Otterbourg PC, Daniel Fiorillo)

New Chapter 11 Filing - Brookstone Holdings Corp.

Wellness, Entertainment & Travel Retailer Now Bankrupt

Brookstone Holdings Corp.

8/2/16

Source: Brookstone.com

Source: Brookstone.com

Almost exactly a month ago we asked “Is Brookstone Headed for Chapter 22? and wrote the following:

Go to Brookstone’s website for “Gift Ideas” and “Cool Gadgets” and then tell us you have any doubt. We especially liked the pop-up asking us to sign up for promotional materials one second after landing; we didn’t even get a chance to see what the company sells before it was selling us on a flooded email inbox. Someone please hire them a designer.

On Friday, Reuters reported that the company has hired Gibson Dunn & Crutcher LLP(remember them?) to explore its restructuring options. What’s the issue? Well, retail. Need there be any further explanation?

The company has roughly 120 stores (20 are in airports), approximately $45mm of debt and a Chinese sponsor in Sanpower Group Co Ltd.

This is a big change from when it first filed for bankruptcy in April 2014. At the time of that filing, the company had 242 stores and approximately $240mm in debt. The company blamed its over-levered capital structure for its inability to address its post-recession challenges. It doesn’t appear to have the same excuse now.

Upon emergence, it reportedly still had 240 stores. Clearly the company ought to have used the initial bankruptcy for more of an operational fix in addition to its balance sheet restructuring. While this could be a costly mistake, the company’s sponsor is a bit of a wild card here: Chinese sponsors tend to be more disinclined to chapter 11 proceedings than American counterparts. Will they write an equity check then?

Well, we now have our definitive answers. Yes. The company filed for bankruptcy earlier today. And whether Sanpower was disinclined to file or not, well…it’s in bankruptcy. And, it will not, at least not as of now, be writing an equity check.

The New Hampshire-based company describes itself as “a product development company and multichannel retailer that offer a number of highly distinctive and uniquely designed products. The Brookstone brand is strongly associated with cutting-edge innovation, superior quality, and sleek and elegant design.” Which is precisely why we plastered a “videocassette” emoji in our title. Because that description comports 100% with the way we view the brand. But we digress.

The company has clearly engaged in some downsizing since emerging from bankruptcy a few years ago; it notes that it currently operates 137 retail stores across 40 states with 102 of those stores located in malls and 35 in airports; it also carries 700 SKUs, the majority of which fall in one of three product categories (wellness, entertainment and travel). It sells across four product channels: mall retail, airport retail, e-commerce (brookstone.com and Amazon.com), and wholesale (including TV shopping which, we believe, means home shopping network sort of stuff). For fiscal year 2017, the company had net sales of $264mm and negative EBITDA was $60mm. For the first half of 2018, net sales were $74mm and negative EBITDA was $29mm. Annualize that first number and you’re looking at a pretty precipitous drop in revenue!

The company highlights the juxtaposition between its mall and retail sales channels. Whereas the former generated ‘17 net sales of $137.9mm and negative EBITDA of $30mm, the latter generated net sales of $37.7mm and “adjusted” EBITDA of $1.4mm. We haven’t seen the numbers but we’re guessing the adjustment takes this statement into account:

Moreover, the net sales and adjusted EBITDA figures do not tell the whole story with respect to the productivity of the Airport retail outlets. As described further below, supply chain issues have limited the sales potential that would otherwise be captured with a healthy network of suppliers. The Debtors believe that through the bankruptcy they can correct the supply chain issues and allow the airport stores to greatly increase their profitability.

🤔🤔 Seeing a lot of adjustments on the basis of “belief” these days.

Likewise, the company claims that aberrational externalities affected its e-commerce operations as well. There, the company claims $55.2mm in net sales and negative adjusted EBITDA of $1mm. The company believes that the discontinuation of its catalog mailings had a detrimental impact on its e-commerce (and store retail) numbers. It notes:

As with the airport retail segment, the net sales and adjusted EBITDA associated with the Debtors’ ecommerce segment is not reflective of its true potential due to supply chain difficulties. In addition, and as described further below, technology issues and a turnover of senior level management at the e-commerce segment led to underperformance at a segment that should be performing at a significantly higher level. The Debtors believe that the bankruptcy filing will afford the Debtors the opportunity to right the operational defects that have artificially stymied the overall profitability that should be incumbent to the Debtors’ online presence.

Finally, the company claims its wholesale business has a lot of demand and has been under-utilized due to the same supply chain issues affecting its other channels.

In other words, when we said earlier that “[c]learly the company ought to have used the initial bankruptcy for more of an operational fix,” we hit the nail on the head. The company notes:

Following the 2014 Bankruptcy, sales continued to lag almost immediately. For the years ended 2014 and 2015, net sales were pegged at approximately $420 million and $389 million respectively, while adjusted EBITDA was booked at negative $38 million and negative $24 million respectively. While a number of factors contributed to the underperformance, sourcing of products and supply chain difficulties were the major drivers.

But of course there’s an overall macro overlay here too:

The drop in net sales in 2016 and 2017 was further exacerbated by the decline in the mall model as a means for consumers to buy products of the type sold by Brookstone. During this time, foot traffic at mall locations decreased drastically, as consumers continued to seek out products online as a replacement for traditional brick and mortar shopping.

The company’s e-commerce efforts could not pick up the slack. It blames leadership changes, a new platform (and a loss of data and indexing that resulted), and the discontinuation of the hard copy catalog for this. The company notes:

Because the catalogs were directly responsible for a significant portion of the web traffic on the Debtors’ e-commerce site, the negative impact on the Debtors’ online sales was dramatic.

Anyone who thinks that e-commerce can survive independent of paper mailings ought to re-read that sentence. It also explains the fifteen Bonobos catalogs we get every week and the 829-pound Restoration Hardware calalog we receive every quarter. Remember the buzzword of the year: “multi-channel.” Case and point.

To make this already (too) long story short, Sanpower kept sinking money into this sinking ship until it finally decided that it was just throwing good money after bad. Callback to July when we said they’re disinclined to chapter 11…well, lighting millions of dollars on fire will make you a little more inclined. 💥💥

Powered by a $30mm DIP credit facility (not all new money: some will be used to refi out the ABL) from its prepetition (read: pre-bankruptcy) lenders, the company intends to use the bankruptcy filing to execute an orderly store closing process and market and sell the business. This is clearly why it went to great lengths to pretty up its e-commerce, mall and wholesale businesses in its narrative. Still, the company has been marketing the business for a month and, thus far, there are no biters. Per the agreement with its DIP lenders, the company has until September 2018 to effectuate its sale process. You read that right: a company that bled out over a period of years has two months on life support.

Major creditors include Chinese manufacturers and, as you might expect, the usual array of landlords, General Growth Properties ($GGP)Simon Property Group Inc. ($SPG), and Macerich Co. ($MAC). Given the positioning of the respective businesses, we wouldn’t expect much of a mall business to survive here regardless of whether a buyer emerges.

  • Jurisdiction: D. of Delaware (Judge Shannon)

  • Capital Structure: $70mm ABL Revolver (Wells Fargo NA) & $15mm Term Loan (Gordon Brothers Finance Company), $10mm second lien notes (Wilmington Trust), $39.4mm Sanpower Secured Notes, $46.6mm Sanpower Unsecured Notes

  • Company Professionals:

    • Legal: Gibson Dunn & Crutcher LLP (David Feldman, Matthew Kelsey, Matthew Williams, Keith Martorana, Jason Zachary Goldstein) & (local) Young Conaway Stargatt & Taylor LLP (Michael Nestor, Sean Beach, Andrew Magaziner)

    • Financial Advisor: Berkeley Research Group LLC

    • Investment Banker: GLC Advisors & Co. (Soren Reynertson)

    • Liquidator Consultants: Gordon Brothers Retail Partners LLC & Hilco Merchant Resources LLC

    • Claims Agent: Omni Management Group (*click on company name above for free docket access)

  • Other Parties in Interest:

    • DIP Agent: Wells Fargo NA (Morgan Lewis & Bockius LLP, Glenn Siegel, Christopher Carter & Burr & Forman LLP, J. Cory Falgowski)

    • DIP Term Agent: Gordon Brothers Finance Company (Choate Hall & Stewart, Kevin Simard, Jonathan Marshall & Richards Layton & Finger PA, John Knight)

    • Indenture Trustee: Wilmington Trust NA

New Chapter 11 Bankruptcy - Charming Charlie Holdings Inc.

Charming Charlie Holdings Inc.

  • 12/11/17 Recap: A mere two weeks before Christmas, another retailer falls into bankruptcy, capping a 2017 retail bloodbath. Here, the Houston-based specialty retailer focused on colorful fashion jewelry, handbags, apparel, gifts, and beauty products follows a long line of retailers into bankruptcy court. In doing so, it demonstrates that the "treasure hunt" experienced often touted as a plus for discount retailers like T.J. Maxx ($TJX), doesn't always hold; it also shows that the difficulties apparent in women's specialty retail are demography-agnostic (here, the core audience is women ages 35-55 - in contrast to, say, rue21). The company blames (i) "adverse macro-trends" and (ii) operational shortfalls, e.g., merchandising miscalculations, lack of inventory, an overly broad vendor base), for its underperformance and reduced sales. EBITDA declined 75% "in the last several fiscal years." 75-effing-percent! With a limited amount of money available under its revolving credit facility and even less cash on hand, "Charming Charlie is out of cash to responsibly operate its business." Ouch. Rough timing. Only subject to a restructuring would lenders support the company; accordingly, the company has entered into a restructuring support agreement with 80% of the term lenders which includes a $20mm new-money cash infusion via a DIP credit facility (the facility includes, in total, a $35mm ABL and a $60mm TL...so yes, a proposed roll-up of $75mm of prepetition debt into a DIP). The company has also commenced the closure of 100 of its 370 stores, a meaningful reduction in its brick-and-mortar footprint (PETITION NOTE: the usual array of landlords, i.e., General Growth Properties ($GGP), have made a notice of appearance). Note the carefully crafted language the company deploys in its initial filing, "The Debtors anticipate 276 go-forward locations following the first round of store closures." Key words, "FIRST ROUND." In other words, the ~100 stores the company notes that it is closing (and that it seeks to retain Hilco for) may just be the beginning. While the company leaves the door open for a sale, the current agreement contemplates the equitization of the term loan (with added equity weight to those providing DIP financing) and a post-emergence debt load of $85mm. 
  • Some other takeaways:
    • (1) the fashion industry has suffered a 15% downturn in fashion jewelry sales (and the company experienced a disproportionate 22% decline itself),
    • (2) vendors and factorers continue to be aggressive with constrictive trade terms and protect their turf (similar here to Toys R Us),
    • (3) Kirkland & Ellis LLP appears to effectively deploy its network to populate Boards of Directors (here, one of the independents appointed to the Board in July 2017 has ties to Gymboree and Toys R Us, two Kirkland clients),
    • (4) Guggenheim's efforts to sell this hot mess were unsuccessful pre-petition (query whether they'll have better luck post-petition...we doubt it),
    • (5) recall the words "first round" when you consider that even landlords for locations that remain open will be squeezed as the company seeks "to amend lease terms to reduce occupancy costs and obtain rent abatements for the first quarter of 2018," 
    • (6) this restructuring will lead to some supply chain pain as the company streamlines the vendor base down to 80 from 175, and
    • (7) its hard out there for a pimp (in this case: Charlie Chanaratsopon "vacated" his role as CEO and an interim CEO has taken the helm). 
  • Jurisdiction: D. of Delaware (Judge Sontchi)
  • Capital Structure: $22mm '20 ABL (Bank of America NA), $132mm '19 TL (Wilmington Savings Trust)  
  • Company Professionals:
    • Legal: Kirkland & Ellis LLP (James Sprayragen, Joshua Sussberg, Christopher Greco, Aparna Yemamandra, Rebecca Blake Chaikin, Michael Esser, Anna Rotman) & (local) Klehr Harrison Harvey Branzburg LLP (Dominic Pacitti, Michael Yurkewicz, Morton Branzburg)
    • Financial Advisor: AlixPartners LLC
    • Investment Banker: Guggenheim Securities LLC (Stuart Erickson)
    • Liquidation Agent: HIlco Merchant Resources LLC (Ian Fredericks)
    • Real Estate Advisor: A&G Realty Partners LLC
    • Claims Agent: Rust Consulting/Omni Bankruptcy (*click on company name above for free docket access)
  • Other Parties in Interest:
    • DIP ABL Agent/Prepetition ABL Agent: Bank of America NA
      • Legal: Morgan Lewis & Bockius LLP (Robert Barry, Julia Frost-Davies, Amelia Joiner) & (local) Richards Layton & Finger PC (Mark Collins, David Queroli)
    • Ad Hoc Group of Term Loan Lenders
      • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Jeffrey Saferstein, Adam Denhoff, Sharad Thaper) & (local) Young Conaway Stargatt & Taylor LLP (Pauline Morgan, M. Blake Cleary, Shane Reil)

12/13/17

Chapter 11 Bankruptcy Filing - Aerosoles International Inc.

Aerosoles International Inc.

  • 9/15/17 Recap: Remember that once-popular trope that footwear was impervious to Amazon and e-commerce? People want to go to stores to try on shoes, we've been told. Lost in that, however, is that free returns make it THAT much easier to try/err with sizing via delivery. And, so, not-so-shockingly, another private equity (Palladin Partners LP) owned specialty retailer is in bankruptcy court. The New Jersey based company has "approximately 78 stores" (PETITION Note: how does it not know the exact number?) in the United States that cater towards providing women with "feel good" footwear. The stores are located in malls, lifestyle centers, street locations and outlet centers. This 78-count footprint is down dramatically: the company has already reduced its store count by over 30 stores in the last year or so. The company also generates revenue through its (i) direct e-commerce business (which, seemingly, is fairly well built out with 1.4mm visitors a month...note, pretty good sales right now!), (ii) wholesale business, (iii) "first cost business" (which sounds like a middleman situation where the company aids other companies in the design and production of their own separately branded footwear, and (iv) international licensing. The company blames a highly competitive women's footwear market, a large sourcing disruption (to the tune of $4mm of lost EBITDA), shifting trends from bricks to clicks and other operationally-specific reasons for the chapter 11 filing. Like what? Glad you asked. First, the company had a hard time servicing its debt while also making the significant cash outlays needed to inventory-up for the critical spring and fall seasons. Second, the company - in a showing of REALLY FRIKKEN HORRIBLE TIMING - expanded its retail store footprint considerably in 2012 and 2013, subjecting itself to onerous leases in the process. Third, the company lost its Asian sourcing agent in spring 2016 and has subsequently had difficulty restoring lost customer confidence and maintaining order load. MAGA! And so now what? Ready for this shocker? The company intends to refocus its efforts towards the non-brick-and-mortar aspects of its business. Remember those "approximately 78" stores we noted above? Well, the company is saying "PEACE" to 74 of them in bankruptcy. Finally, the company intends to use the bankruptcy process to find a buyer for the company (and its new business plan). 
  • Jurisdiction: D. of Delaware 
  • Capital Structure: $72.3mm of total debt. $22.9mm ABL (Wells Fargo Bank NA), $19.7mm TL (THL Corporate Finance Inc.), $19.1mm senior notes, $8.9mm sub notes, and $1.7mm sub loan. 
  • Company Professionals:
    • Legal: Ropes & Gray LLP (Gregg Galardi, Mark Somerstein, William Alex McGee) & Bayard PA (Scott Cousins, Erin Fay, Gregory Flasser)
    • Financial Advisor: Berkeley Research Group LLC (Mark Weinsten)
    • Investment Banker: Piper Jaffray & Co.
    • Liquidation Agent: Hilco Merchant Resources LLC 
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • ABL Agent: Wells Fargo Bank NA
      • Legal: Choate Hall & Stewart LLP (Kevin Simard, Jonathan Marshall) & (local) Womble Carlyle Sandridge & Rice LLP (Mark Desgrosseilliers, Matthew Ward)
    • TL Agent: THL Corporate Finance Inc.
      • Legal: Paul Hastings LLP (Matthew Murphy) & Young Conaway Stargatt & Taylor LLP (M. Blake Cleary)
    • Prepetition Senior Noteholders & Subordinated Noteholders (ORIX Funds Corp., Palladin Partners LP)
      • Legal: Weil Gotshal & Manges LLP (Jacqueline Marcus) & (local) Richards Layton & Finger PA (Mark Collins, Paul Heath, Joseph Barsalona II)
    • Official Committee of Unsecured Creditors (ICB Asia Co. Ltd., Rival Shoe Design Ltd., Moveon Componentes E Calcado SA, Simon Property Group, GGP Limited Partnership)
      • Legal: Cooley LLP (Michael Klein, Sarah Carnes) & (local) Gellert Scali Busenkell & Brown LLC (Michael Busenkell, Ronald Gellert, Shannon Dougherty Humiston)

Updated 10/5/17 11:17 am CT 

New Chapter 11 Filing - Model Reorg Acquisition LLC (aka Perfumania Inc.)

Model Reorg Acquisition LLC (Perfumania Inc.)

  • 8/26/17 Recap: New York-based vertically-integrated specialty retailer (226 retail locations, mostly mall-based) and wholesale distributor of perfumes and fragrances (to the likes of Sears, Target, Walmart and Walgreens) filed for bankruptcy pursuant to a prepackaged plan of reorganization. The company is seeking approval of a $83,750,000 Wells Fargo DIP facility ("DIP") which will roll into an exit facility. What caused the filing? The overall retail bloodbath, naturally. Since 2015, the company has lost tens of millions of dollars, closed 105 retail locations, decreased the pace of brick-and-mortar openings and focused efforts - like the rest of the retail world - on e-commerce expansion. This way you could buy your one gallon bottle of CK One online rather than in a crappy mall stall. Awesome. The structure of this case is as follows: the DIP requires a completed case within 90 days to ensure that the reorganized (and newly private) company can take advantage of Q4 seasonality. The prepackaged plan leaves general unsecured creditors unimpaired and reinstates the unsecured notes. It also provides a $2/share recovery for shareholders who opt-in to a release of principals (notably, the shares were trading at $1.33/share at Friday's market close). The stockholder consideration will be paid via a $14.26mm equity infusion, which also serves as consideration for 100% of the reorganized equity. The transaction also preserves approximately $40mm of net operating losses and other tax attributes that will inure to the benefit of the owners. 
  • Jurisdiction: D. of Delaware (Judge Sontchi)
  • Capital Structure: $175mm senior credit facility ($18.78mm funded)(Wells Fargo Bank), $125.4mm unsecured debt +$54.8mm accrued and unpaid interest (3 different notes). Public equity ($PERF).     
  • Company Professionals:
    • Legal: Skadden Arps Slate Meagher & Flom LLP (J. Gregory Milmoe, Lisa Laukitis, Raquelle Kaye, Anthony Clark)
    • Financial Advisor: Ankura Consulting Group LLC (Stephen Marotta)
    • Investment Banker: Imperial Capital LLC (Robert Warshauer)
    • Real Estate Advisor: A&G Realty Partners LLC (Andrew Graiser)
    • Liquidators: Hilco Merchant Resources LLC & Gordon Brothers Retail Partners LLC
    • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Agent to Senior Credit Facility: Wells Fargo Bank
      • Legal: Otterbourg P.C. (Daniel Fiorillo)
    • CIII Holdings LLC
      • Legal: Nastasi Partners PLLC (Ancela R. Nastasi, Marshall E. Tracht, Moshie Solomon, William S. Katchen, Andrew Gottesman) & (local) Morris Nichols Arsht & Tunnell LLP (Robert Dehney, Curtis Miller)

Updated 9/18/17

First Day Declaration filed 8/26/17

First Day Declaration filed 8/26/17

New Chapter 11 Filing - Marsh Supermarkets Holding LLC

Marsh Supermarkets Holding LLC

  • 5/11/17 Recap: After weeks of rumors and run-up, another Sun Capital Partners portfolio company has filed for bankruptcy with the hope of selling its remaining 44 locations to a buyer. A buyer is not currently lined up. The company cited the usual reasons for the filing: (a) the increasingly competitive grocery space with mega-retailers and specialty chains crowding the market, and (b) falling produce and retail food prices. We're frankly surprised that they didn't bother to mention Amazon like everyone else. When it doubt, "Amazon Effect" it. But we digress. Anyway, it also noted that capital investment (particularly relating to technological advances) trailed big players like Kroger ($KR) and Meijer. While those players reaped the benefits of their heavy investments, Marsh could not keep up, foot traffic declined, revenue suffered, and liquidity constraints increased. This is pretty basic sh*t. 
  • Jurisdiction: D. of Delaware
  • Capital Structure: $60mm RCF debt ($5.2mm funded + $2.5mm LOC)(Wells Fargo Bank NA), $25.7mm June 2016 junior note, $6.3mm October 2016 junior note    
  • Company Professionals:
    • Legal: Young Conaway Stargatt & Taylor LLP (Robert Brady, Michael Nestor, Robert Poppiti Jr., Ashley Jacobs, Shane Reil)
    • Financial Advisor/CRO: Clear Thinking Group LLC (Lee Diercks, Anthony Gehringer, A.R. Williams, Thomas Burke)
    • Investment Banker: Peter J. Soloman Company (Scott Moses, Derek Pitts, Greg Grambling, Brandon Yoshimura, Dan Stolar)
    • Liquidator: Hilco Merchant Resources
      • Legal: Pepper Hamilton LLP (Douglas Hermann, Michael Custer)
    • Real Estate Advisor: Hilco Real Estate LLC (Ryan Lawlor)
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Senior Lien Agent: Wells Fargo Bank NA
      • Legal: Otterbourg PC (Jonathan Helfat, Daniel Fiorillo)
    • Junior Noteholder: Marsh Group Finance LLC
      • Legal: Kirkland & Ellis LLP (James Stempel) & (local) Morris Nichols Arsht & Tunnell LLP (Curtis Miller)
    • Official Committee of Unsecured Creditors
      • Legal: Cooley LLP (Cathy Hershcopf, Seth Van Aalten, Robert Winning, Max Schlan, Sarah Carnes) & (local) Bayard PA (Justin Alberto, Erin Fay, Gregory Flasser)
      • Financial Advisor: FTI Consulting Inc. (Conor Tully)

Updated 7/12/17

New Chapter 11 Filing - Gordmans Stores Inc.

Gordmans Stores Inc.

  • 3/13/17 Recap: Clearly Warren Buffett doesn't own this dog. The Omaha, NE-based publicly-traded (GMAN) specialty retailer (apparel and home fashions) with 72 stores in 16 states (according to PE sponsor Sun Capital Partners) or 106 stores in 22 states (according to the company) filed bankruptcy to continue the 5-month long evisceration of Sun Capital Partners' retail portfolio. Oh, and liquidate. Choice quote: "It is likely that other retailers may commence chapter 11 cases in the near term, as retail is set to replace the troubled oil and gas industry as the most distressed sector this year." Just in case anyone is scratching their heads as to how this liquidation could possibly be happening, note that e-commerce made up less than 1-percent of the Company's sales. This REALLY begs the question: what value was Sun Capital Partners bringing to the table? Do they not have operating partners? Sheesh.
  • Jurisdiction: D. of Nebraska
  • Capital Structure: $68.75mm RCF (Wells Fargo) + $31.25mm RCF (PNC Bank NA) of which $29mm in total outstanding, $30mm TL (Wells Fargo - $15mm, Pathlight - $7.5mm & Gordon Brothers Finance - $7.5mm)($27.9mm outstanding). 
  • Company Professionals:
    • Legal: Kirkland & Ellis LLP (Jayme Sprayragen, Patrick Nash, Brad Weiland, Jamie Netznik, Alexandra Schwarzman) & Kutak Rock LLP (Lisa Peters, Jeffrey Wegner)
    • Financial Advisor: Clear Thinking Group LLC (Joseph Marchese)
    • Investment Banker: Duff & Phelps Securities LLC (Joshua Benn)
    • Proposed Stalking Horse Liquidators: Tiger Capital Group LLC & Great American Group LLC
    • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name for docket)
  • Other Parties in Interest:
    • Wells Fargo Bank, NA
      • Legal: Riemer & Braunstein LLP (Donald Rothman, Steven Fox) & Greenberg Traurig LLP (Jeff Wolf) & (local) Croker Huck Kasher DeWitt Anderson & Gonderinger LLP (Robert, Gonderinger, David Skalka)
    • Sponsor: Sun Capital Partners
      • Legal: Morgan Lewis & Bockius LLP (Neil Herman)
    • Potential Bidder: Hilco Merchant Resources LLC & Gordon Brothers Retail Partners LLC
      • Legal: Paul Hastings LLP (Chris Dickerson, Matthew Murphy, Marc Carmel) & (local) Telpner Peterson Law Firm LLP (Charles Smith, Nicole Hughes)
    • Official Committee of Unsecured Creditors
      • Legal: Frost Brown Todd LLC (Ronald Gold, Douglas Lutz, Adam J. (A.J.) Webb) & (local) Koley Jessen PC (Brian Koenig)
      • Financial Advisor: Province Inc. (Paul Huygens)

Updated 4/14/17

 

 

 

New Chapter 11 Filing - Gander Mountain Company

Gander Mountain Company

  • 3/10/17 Recap: Preppers alert! The Minneapolis-based outdoor retailer that specializes in guns guns and more guns has run out of "dry powder" (score!) and finds itself in chapter 11. This comes around the same time that the Cabela's/Bass merger looks to be hanging by a thread. Tough time for outdoor retail. On the brightside, folks who are so scared by the recent election can now get a break on MREs and other survival gear as they go off-grid or to Canada. So, there's that.
  • 5/3/17 Update: The company has sold to Camping World Inc. and, attendant to the sale, entered into an agency agreement with a JV of liquidating firms noted below to handle the assets left out of the sale. 
  • Jurisdiction: D. of Minnesota
  • Capital Structure: $390mm ABL (Wells Fargo Bank NA) & $35mm TL (Pathlight Capital LLC) debt
  • Company Professionals: 
    • Legal: Fredrikson & Byron PA (Ryan Murphy, Clinton Cutler, Cynthia Moyer, James Brand, Sarah Olson, Steven Kinsella)
    • Financial Advisor: Lighthouse Management Group (Timothy Becker, James Bartholomew)
    • Investment Banker: Houlihan Lokey Capital Inc. (Stephen Spencer)
    • Real Estate Advisor: Hilco Real Estate LLC (Ryan Lawlor)
    • Liquidators: Tiger Capital Group LLC (Dan Kane, Michael McGrail), Great American Group LLC (Scott Carpenter, Alan Forman), Gordon Brothers Retail Partners LLC (Mackenzie Shea), Hilco Merchant Resources LLC (Ian Fredricks)
      • Legal for Liquidators: Wachtell Lipton Rosen & Katz (Scott Charles, Neil Snyder) & Riemer & Braunstein LLP (Steven Fox)
    • Claims Agent: Donlin Recano (*click on the company above for free docket)
  • Other Parties in Interest:
    • Prepetition ABL & DIP Lender: Wells Fargo Bank NA
      • Legal: Choate Hall & Stewart LLP (Sean Monahan, Kevin Simard)
    • Term Loan Agent: Pathlight Capital LLC
      • Legal: Morgan Lewis & Bockius LLP (Mark Silva, Julia Frost-Davis, Amelia Joiner)
    • Official Committee of Unsecured Creditors
      • Legal: Lowenstein Sandler LLP (Jeffrey Cohen, Keara Waldron, Barry Bazian) & (local) Barnes & Thornburg LLP (Connie Lahn, Peter Clark, Christopher Knapp, Roger Maldonado)
      • Financial Advisor: FTI Consulting LLC (Steven Simms, Dewey Imhoff, Matt Diaz, Timothy Gaines, Jessica Jedynak, Clement Chiun)
    • Buyer: Camping World Inc.
      • Legal: Latham & Watkins LLP (Zachary Judd, Caroline Reckler, Matthew Warren, Jason Gott)

Updated 5/3/17

New Chapter 11 Filing - hhgregg Inc.

hhgregg Inc.

  • 3/6/17 Recap: Indianapolis-based (and formerly publicly-traded - HGGG) brick-and-mortar retailer of appliances, consumer electronics, home products (read: all things that millennials don't buy) FINALLY filed for bankruptcy after an endless barrage of negative news stories, including reports of 88 store closures. The company's distress - brought on by trends afflicting the retail space generally and repeated to death in each and every retail bankruptcy filing, e.g., declining mall traffic, onerous leases, etc., - was exacerbated by its credit card program with Synchrony Bank and the need to post letters of credit to collateralize Synchrony's acquired receivables ($3mm paid, another $14mm owed). Note: there's a commentary here about consumer lending. The filing is intended to enable the company to continue with store closing sales and potentially find a buyer for its remaining locations.
  • Jurisdiction: S.D. of Indiana
  • Capital Structure: $300mm '21 credit facility ($56mm out)(Wells Fargo)     
  • Company Professionals:
    • Legal: Morgan Lewis & Bockius LLP (Neil Herman, Rachel Jaffe Mauceri, Benjamin Cordiano, Katherine Lindsay, Matthew Ziegler, Michaela Dragalin) & (local) Ice Miller LLP (Jeffrey Hokanson, Sarah Fowler)
    • Financial Advisor: Berkeley Research Group (Robert Duffy)
    • Investment Banker: Stifel & Miller Buckfire & Co. (James Doak)
    • Liquidators: Hilco Merchant Resources LLC (Ian Fredericks) and Gordon Brothers Retail Partners LLC (Michael Chartock) 
      • Legal: Kirkland & Ellis LLP (Patrick Nash, Bradley Weiland, Timothy Bow)
    • Real Estate Advisor: Hilco Real Estate LLC (Ryan Lawlor)
    • Asset Disposition Advisor: Malfitano Advisors LLC (Joseph Malfitano)
    • Claims Agent: Donlin Recano (*click on company name for free docket)
  • Other Parties in Interest:
    • Agent for Prepetition Secured Lender & DIP Lender: Wells Fargo
      • Legal: Choate Hall & Stewart LLP (John Ventola, Sean Monahan, Jonathan Marshall) & Faegre Baker Daniels LLP (Jay Jaffe, Terry Hall)
    • Official Committee of Unsecured Creditors
      • Legal: Cooley LLP (Cathy Hershcopf, Seth Van Aalten, Richelle Kalnit, Robert Winning, Melissa Boyd) & (local) Bingham Greenebaum Doll LLP (Whitney Mosby, Thomas Scherer, James Irving)
      • Financial Advisor: Province Inc. (Stilian Morrison)

Updated 4/3/17

New Chapter 11 Filing - BCBG Max Azaria Global Holdings LLC

BCBG Max Azaria Global Holdings LLC

  • 3/1/17 Recap: Fashion powerhouse founded in 1989 filed for bankruptcy yesterday with a plan to optimize optionality: within the next six months, the company will dual track a potential debt-for-equity transaction (its second in 2 years) and a sales process to allow the business to continue as a going concern. This process comes on the heels of an operational restructuring which dramatically decreased the company’s brick-and-mortar footprint, with ~120 of ~550 stores already closed and attendant headcount reductions initiated. This is another sad retail story: macro retail headwinds (read: Amazon and decreased brand loyalty), too much debt, poor wholesale and IP licensing strategies, and too much unjustifiable stateside and global growth. Make no mistake: Amazon is a big story in all of this recent retail bloodshed but these bankruptcies wouldn’t be happening if that story wasn’t compounded by tunnel vision and poor strategy - here, marked, notably, by no recognizable online presence. Now, the restructuring professionals are going to earn their keep, devising a fast-track multi-tier process to try and keep this thing out of the liquidation bin. On an aside, we'd like to point out that, again, Simon Property Group and GGP Limited Partnership have made notices of appearances in this case so anyone who says that the A Mall operators are unharmed by the recent bloodbath in retail is smoking crack. Footnote: neither Twitter nor Sears can catch a break; they are both owed hundreds of thousands of dollars.
  • Jurisdiction: S.D. of New York
  • Capital Structure: ~$460mm debt. $82mm ABL Facility (Bank of America), $35mm TL Tranche A, $4.2mm TL Tranche A-1, $48.5mm Term Loan Tranche A-2, $0 (undrawn) Term Loan Tranche A-3, $289.4mm Term Loan Tranche B (Guggenheim Corporate Funding LLC).     
  • Company Professionals:
    • Legal: Kirkland & Ellis LLP (Jayme Sprayragen, Christopher Marcus, Joshua Sussberg, Benjamin Rhode, John Luze)
    • Financial Advisor: AlixPartners LLC (Holly Feder Etlin, Deborah Reiger-Paganis)
    • Investment Banker: Jefferies LLC (Jeffrey Finger)
    • Liquidators: Hilco Merchant Resources LLC & Gordon Brothers Retail Partners LLC
      • Legal: Malfitano Partners (Joseph Malfitano)
    • Claims Agent: Donlin Recano (*click on company name for docket)
  • Other Parties in Interest:
    • Bank of America (as ABL DIP Agent and Prepetition ABL Agent)
      • Legal: Morgan Lewis & Bockius LLP (Julia Frost-Davies, Christopher Carter, Robert Barry, Matthew Ziegler)
    • Guggenheim Corporate Funding LLC (as TL DIP Agent and Prepetition Tranche B TL Lenders)
      • Legal: Weil (Matthew Barr)
    • Allerton Funding LLC
      • Legal: Winston & Strawn LLP (Daniel McGuire, Gregory Gartland)
    • Silvereed (Hong Kong) Limited
      • Legal: Kramer Levin Naftalis & Frankel LLP (Robert Schmidt, Jonathan Wagner)
    • Official Committee of Unsecured Creditors (GGP Inc. & Simon Property Group)
      • Legal: Pachulski Stang Ziehl & Jones LLP (Robert Feinstein, Bradford Sandler, Jeffrey Pomerantz, Maria Bove)
      • Financial Advisor: Zolfo Cooper LLC

Updated 3/28/17

New Chapter 22 Filing - Eastern Outfitters LLC

Eastern Outfitters LLC

  • 2/5/17 Recap: Seems like chapter 22 bankruptcies are the "it" thing now: everyone's doing it. Last year, Versa Capital Management bought the company in the Vestis Group bankruptcy and, now, Sports Direct looks to pick up the pieces in yet ANOTHER sale of the Bob's Stores and Eastern Mountain Sports retail properties. Top creditors include Under Armour and Google which says something about (a) why UA's growth numbers were considerably off last quarter and (b) the cost of Google SEO for companies in this internet age.
  • Jurisdiction: D. of Delaware    
  • Capital Structure: $41mm RCF (PNC Bank), $42mm TL (Sportsdirect) 
  • Company Professionals:
    • Legal: Bracewell LLP (Robert Burns, Jennifer Feldshur, David Riley, Mark Dendinger) & (local) Cole Schotz (Norman Pernick, Marion Quirk, Katharina Earle)
    • Turnaround Advisor: AlixPartners LLC (Spencer Ware, Susan Brown, Afshin Azhari)
    • Replacement Turnaround Advisor: Meru LLC (Nicholas Campbell, Timothy Meighan)
    • Financial Advisor: Lincoln Partners Advisors LLC  (Alexander Stevenson)
    • Liquidators: Hilco Merchant Resources LLC & Gordon Brothers Retail Partners LLC
      • Legal: Curtis Mallet-Provost Colt & Mosle LLP (Steven Reisman) & (local) Womble Carlyle Sandridge & Rice LLP (Mark Desgrosseilliers)
    • Asset Disposition Advisor & Consultant: Malfitano Advisors LLC (Joseph Malfitano)
    • Claims Agent: KCC (*click on company name for docket)
  • Other Parties in Interest:
    • Purchaser: SportsDirect.com Retail Ltd.
      • Legal: Greenberg Traurig LLP (Nancy Mitchell, Maria DiConza)
    • First Lien Lender: PNC Bank, NA
      • Legal: Blank Rome LLP  (Regina Kelbon, Gregory Vizza)
    • Official Committee of Unsecured Creditors
      • Legal: Cooley LLP (Jay Indyke, Cathy Hershcopf, Richelle Kalnit, Sarah Carnes) & (local) Drinker Biddle & Reath LLP (Steven Kortanek, Patrick Johnson, Robert Malone)
      • Financial Advisor: Province Inc. (Paul Huygens, Carol Cabello, Sanjuro Kietlinski, Jin Lai Dong)

Updated 5/31/17

New Chapter 22 Filing - Wet Seal LLC

 

Wet Seal LLC

  • 2/2/17 Recap: Chapter 22 of Versa Capital owned retailer filed to liquidate via joint venture with Hilco Merchant Services and Gordon Brothers. 
  • Jurisdiction: D. of Delaware
  • Capital Structure: $10-50mm debt 
  • Company Professionals:
  • Legal: Young Conaway (Robert Brady, Michael Nestor, Jaime Chapman, Andrew Magaziner) & (special counsel - avoidance actions) ASK LLP (Joseph Steinfeld)
  • Financial Advisor: Berkeley Research Group LLC (Stephen Coulombe)
  • Claims Agent: Donlin Recano (*click on company name for docket)
  • Liquidators: Hilco Merchant Resources (David Peress) and Gordon Brothers Retail Partners LLC
  • Intellectual Property Disposition Consultant: Hilco IP Services LLC
    • Legal: Riemer & Braunstein LLP (Steven Fox)
  • Other Parties in Interest:
    • Official Committee of Unsecured Creditors
      • Legal: Cooley LLP (Jay Indyke, Cathy Hershcopf, Seth Van Aalten, Max Schlan, Lauren Reichardt) & (local) Saul Ewing LLP (Mark Minuti)
      • Financial Advisor: Province Inc. (Stilian Morrison)

 Updated 4/14/17