💄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 - Keystone Tube Company LLC (A.M. Castle & Co.)

Keystone Tube Company LLC (A.M. Castle & Co.)

  • 6/18/17 Recap: Publicly-traded ($CASL) Illinois-based specialty metals distribution company with customers in some hard hit sectors of late, e.g., oil and gas, retail, mining, defense, filed a prepackaged bankruptcy case to de-lever its balance sheet. 
  • Jurisdiction: D. of Delaware 
  • Capital Structure: $112mm first lien debt (Cantor Fitzgerald Securities), $177mm
  • 18 12.75% second lien notes (US Bank NA), $22.3mm '19 5.25% convertible third lien notes (US Bank NA)     
  • Company Professionals:
    • Legal: Pachulski Stang Ziehl & Jones LLP (Richard Pachulski, Jeffrey Pomerantz, Maxim Litvak, John Lucas, Peter Keane)
    • Financial Advisor & Investment Banker: Imperial Capital LLC (Joseph Kazanovski)
    • Claims Agent: KCC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Ad Hoc Lender Committee (At Filing: Corre Partners Management LLC, Highbridge Capital Management LLC, SGF Inc., Pandora Select Partners LP, Whitebox Advisors LLC, Wolverine Asset Management Ltd.)
      • Legal (except SGF Inc.): Paul Weiss Rifkind Wharton & Garrison LLP (Andrew Rosenberg, Jacob Adlerstein, Michael Rudnick) & (local) Young Conaway Stargatt & Taylor LLP (Pauline Morgan, Joel Waite, Ian Bambrick)
      • Legal (SGF Inc): Goodwin Proctor LLP (Michael Goldstein, Gregory Fox) & (local) Pepper Hamilton LLP (David Fournier, John Schanne)
      • Financial Advisor: Ducera LLC
    • Prepetition First Lien Agent: Cantor Fitzgerald Securities
      • Legal: Shipman & Goodwin LLP
    • Prepetition Indenture Trustee: US Bank NA
      • Legal: Dorsey & Whitney LLP (Eric Lopez Schnabel, Robert Mallard, Alessandra Glorioso)
    • Administrative Agent: PNC Bank NA
      • Legal: Goldberg Kohn Ltd (Jacob Marshall, Danielle Juhle) & (local) Blank Rome LLP (Josef Mintz)
    • Bank of America NA
      • Legal: Morgan Lewis & Bockius LLP (Jody Barillare, Rachel Jaffe Mauceri)
    • Nantahala Capital Management
      • Legal: King & Spalding LLP (Arthur Steinberg) & (local) The Rosner Law Group LLC (Frederick Rosner)

Updated 7/11/17 6:22 pm

Source: First Day Declaration.

Source: First Day Declaration.

New Chapter 11 Filing - Central Grocers Inc.

Central Grocers Inc.

  • 5/4/17 Recap: May the Fourth be with you. Illinois-based food coop - the 7th largest in the nation - founded in, gulp, 1917, filed for bankruptcy to pursue a sale of its Strack & Wan Til stores and its distribution center (after certain creditors tried to force a bankruptcy on it). The company was initially founded with 32 supermarket owners seeking increased purchasing power through strength in numbers. Today, the coop supplies over 400 stores in the Chicago area. The coop supports its own brand, Centrella, which, being frank here, is probably value detract because nothing says "quality" like shoddy label design. That "Beef Stew" and "Chunk Pineapple" (see below) looks tasty AF, doesn't it? This makes us want to blow chunks. Seriously, though, this is another story of disruption. Disruption caused by the commodities markets, in part, with beef, chicken, eggs and dairy generally being at relatively low prices. But also disruption caused by new entrants into the grocery segment, including Walmart, TargetCostco, and dollar stores. And, of course, Amazon, which is increasingly becoming Darth Vader, even though we're pretty certain nobody we know actually uses AmazonFresh for produce and the like. But, whatever, when in doubt, blame Amazon. That's a much better excuse than 1917-style design sensibility and a classic innovator's dilemma.
  • Jurisdiction: D. of Delaware (transferred to N.D. of Illinois)
  • Capital Structure: $225mm '18 RCF (PNC Bank NA), $22.5mm TL (Bank of the West)  
  • Company Professionals:
    • Legal: Weil (Ray Schrock, Stephen Karotkin, Sunny Singh, Daniel Gwen, Danielle Donovan) & (local) Richards Layton & Finger PA (Mark Collins, Paul Heath, Brett Haywood, David Queroli) & (local) McDonald Hopkins LLC (David Agay, Rion Vaughan)
    • Financial Advisor: Conway MacKenzie Inc. (Donald Harer, Alpesh Amin, Michael Musso, John Cannon, Matthew Sedigh, Daniel Johnson, Lauren Leach, Harry Bramson, Jennifer Chaing, Joseph Wirija, Michael Kulkarni, Michael Flynn)
    • Investment Banker: Peter J. Soloman Company (Derek Pitts)
    • Claims Agent: Prime Clerk LLC (*click on company name for docket)
  • Other Parties in Interest:
    • PNC Bank NA
      • Legal: Blank Rome LLP (Regina Stango Kelbon, Victoria Guilfoyle, Mark Rabinowitz, Gregory Vizza, Michael Schaedle)
    • Bank of the West
      • Legal: Thompson Coburn LLP (Mark Bossi, Victor Des Laurier, Diona Rogers)
    • Successful Bidder
      • Legal: Duane Morris LLP (Lawrence Kotler, Rosanne Ciambrone)
    • Official Committee of Unsecured Creditors
      • Legal: Kilpatrick Townsend & Stockton LLP (Todd Meyers, David Posner, Gianfranco Finizio) & (local) Saul Ewing LLP (Mark Minuti, Lucian Murley) & (local) Arnstein & Lehr LLP (Barry Chatz, Kevin Morse, William Williams)
      • Financial Advisor: FTI Consulting Inc. (Conor Tully)

Updated 7/13/17

http://www.central-grocers.com/

http://www.central-grocers.com/

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