🏠New Chapter 11 Bankruptcy Filing - Decor Holdings Inc.🏠

Decor Holdings Inc.

February 12, 2019

Source: https://www.robertallendesign.com

Source: https://www.robertallendesign.com

Privately-owned New York-based Decor Holdings Inc. (d/b/a The RAD Group and The Robert Allen Duralee Group) and certain affiliates companies filed for bankruptcy earlier this week in the Eastern District of New York. The debtors state that they are the second largest supplier of decorative fabrics and furniture to the design industry in the U.S., designing, manufacturing and selling decorative fabrics, wall coverings, trimmings, upholstered furniture, drapery hardware and accessories for both residential and commercial applications. All of which begs the question: do people still actually decorate with this stuff?!? In addition to private label product lines, the company represents six other furnishing companies, providing tens of thousands of sku options to design professionals and commercial customers. The company maintains a presence via showrooms in large metropolitan cities in the US and Canada as well as an agent showroom network in more than 30 countries around the world. In other words, for a company you’ve likely never heard of, they have quite the reach.

The debtors’ problems derive from a 2017 merger between the Duralee business and the Robert Allen business. Why? Well, frankly, it sounds like the merger between the two is akin to a troubled married couple that decides that having a kid will cure all of their ills. Ok, that’s a terrible analogy but in this case, both companies were already struggling when they decided that a merger between the two might be more sustainable. But, “[l]ike many industries, the textile industry has been hard hit by the significant decrease in consumer spending and was severely affected by the global economic downturn. As a result, the Debtors experienced declining sales and profitability over the last several years.” YOU MEAN THE PERCEIVED SYNERGIES AND COMBINED EFFICIENCIES DIDN’T COME TO FRUITION?!? Color us shocked.

Ok, we’re being a little harsh. The debtors were actually able to cut $10-12mm of annual costs out of the business. They could not, however, consolidate their separate redundant showroom spaces outside of bankruptcy (we count approximately 32 leases). Somewhat comically, the showroom spaces are actually located in the same buildings. Compounding matters was the fact that the debtors had to staff these redundant spaces and failed to integrate differing software and hardware systems. In an of themselves, these were challenging problems even without a macro overhang. But there was that too: “…due to a fundamental reduction of market size in the home furnishings market, sales plummeted industry wide and the Debtors were not spared.” Sales declined by 14% in each of the two years post-merger. (Petition Note: we can’t help but to think that this may be the quintessential case of big firm corporate partners failing to — out of concern that management might balk at the mere introduction of the dreaded word ‘bankruptcy’ and the alleged stigma attached thereto — introduce their bankruptcy brethren into the strategy meetings. It just seems, on the surface, at least, that the 2017 merger might have been better accomplished via a double-prepackaged merger of the two companies. If Mattress Firm could shed leases in its prepackaged bankruptcy, why couldn’t these guys? But what do we know?).

To stop the bleeding, the debtors have been performing triage since the end of 2018, shuttering redundant showrooms, stretching payables, and reducing headcount by RIF’ing 315 people. Ultimately, however, the debtors concluded that chapter 11 was necessary to take advantage of the breathing spell afforded by the “automatic stay” and pursue a going concern sale. To finance the cases, the debtors obtained a commitment from Wells Fargo Bank NA, its prepetition lender, for a $30mm DIP revolving credit facility of which approximately $6mm is new money and the remainder is a “roll-up” or prepetition debt (PETITION Note: remember when “roll-ups” were rare and frowned upon?). The use of proceeds will be to pay operating expenses and the costs and expenses of being in chapter 11: interestingly, the debtors noted that they’re administratively insolvent on their petition. 🤔

Here’s to hoping for all involved that a deep-pocked buyer emerges out of the shadows.

  • Jurisdiction: E.D. of New York (Judge Grossman)

  • Capital Structure: $23.7mm senior secured loan (Wells Fargo Bank NA), $5.7mm secured junior loan (Corber Corp.)

  • Professionals:

    • Legal: Hahn & Hesson LLP (Mark Power, Janine Figueiredo)

    • Conflicts Counsel: Halperin Battaglia Benzija LLP (Christopher Battaglia)

    • Financial Advisor: RAS Management Advisors LLC (Timothy Boates)

    • Investment Banker: SSG Capital Advisors LLC (J. Scott Victor)

    • Liquidator: Great American Group LLC

    • Claims Agent: Omni Management Group Inc. (*click on the link above for free docket access)

  • Other Professionals:

    • DIP Agent: Wells Fargo Bank NA

      • Legal: Otterbourg P.C. (Daniel Fiorillo, Jonathan Helfat)

    • Subordinated Noteholder: Corber Corp.

      • Legal: Pachulski Stang Ziehl & Jones LLP (John Morris, John Lucas)

New Chapter 11 Bankruptcy Filing - Republic Metals Refining Corporation

Source: Pexels.com

Source: Pexels.com

November 2, 2018

Republic Metals Refining Corporation (and affiliates), a Miami-based family-owned refiner of gold and silver, filed for bankruptcy to run an orderly sale process of their assets and operations. Last spring, the debtors discovered “a significant discrepancy” in their inventory accounting that, ultimately, led to summer-time default notices from their various senior lenders. The lenders, however, were mostly kept at bay until the filing because the debtors appeared, on multiple occasions, to be close to a going concern sale.

Close. But no cigar.

In the absence of a pre-petition buyer and/or stalking horse bidder, the debtors will now continue their potential sale process or, alternatively, engage in a process to liquidate. The debtors have an agreement with their senior lenders for the consensual use of cash collateral for a short period to attempt a sale, liquidate, and implement a plan for the wind down of the debtors’ estates.

  • Jurisdiction: S.D. of New York

  • Capital Structure: $177mm senior debt

  • Company Professionals:

    • Legal: Akerman LLP (Susan Balaschak, Andrea Hartley, Katherine Fackler, John Mitchell, Esther McKean)

    • Financial Advisor: Paladin Management Group LLC (Scott Avila)

    • Investment Banker: SSG Capital Advisors LLC

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

  • Other Parties in Interest:

    • Senior Lender: ICBC Standard Bank Plc

      • Legal: Haynes and Boone LLP (J. Frasher Murphy, Eli Columbus, Geoffrey Raicht)

    • Senior Lenders: Coöperatieve Rabobank U.A., New York Branch, Brown Brothers Harriman & Co., Bank Hapoalim B.M., Mitsubishi International Corporation, Techemet Metal Trading LLC, Woodforest National Bank, and Bank Leumi USA.

      • Legal: Luskin Stern & Eisler LLP (Richard Stern, Alex Talesnick)

New Chapter 11 Filing - ABT Molecular Imaging Inc.

ABT Molecular Imaging Inc. 

6/13/18

ABT is the designer, manufacturer and distributor of a Biomarker Generator. Our eyes glazed over just reading the filing papers on this one so we're going to outsource here, spare ourselves some time, and spare ourselves some serious boredom. 

The bottom line is that the company lost more money ($5.5mm) than it made in sales ($5.4mm). The company has $30mm of liabilities, all in, and assets with a net book value of merely $2.5mm. The disparity stems, in most respects, from the debt on the company's balance sheet. The purpose of the filing is to address the balance sheet and/or pursue a sale of the business. The company's secured lender, SWK Funding LLC, has agreed to fund a DIP credit facility over the course of the case and sponsor a sale through a chapter 11 plan if, during the bankruptcy process, the company is unable to find another suitable purchaser. 

  • Jurisdiction: D of Delaware (Judge Silverstein)
  • Capital Structure: $9.6mm first lien debt (SWK Funding LLC), $16.1 second lien debt (SWK Funding LLC)  
  • Company Professionals:
    • Legal: Bayard PA (Justin Alberto, Erin Fay, Daniel Brogan, Greg Flasser)
    • Investment Banker:: SSG Capital Advisors LLC (J. Scott Victor, Neil Gupta, Michael Gunderson)
    • Claims Agent: Garden City Group (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Secured Lender: SWK Funding LLC
      • Legal: Holland & Knight LLP (Brian Smith, Brent Mcilwain) & (local) Young Conaway Stargatt & Taylor LLP 

New Chapter 11 Filing - Unilife Corporation

Unilife Corporation

  • 4/12/17 Recap: Publicly-traded ($UNIS) manufacturer and B2B supplier of injectable drug delivery systems (including wearables) to pharmaceutical and biotechnology customers filed for bankruptcy to attempt a 363 sale of the business. This is kind of like a bad episode of Shark Tank. The Company appears to manufacture pretty innovative drug delivery systems - innovative in that the devices seem to be unobtrusive and, if we understand this correctly, help patients receive treatments without the need for multiple needles. But this is one of those episodes where the Sharks start asking about the numbers and they ain't pretty: the company is post-revenue and has some patents but it is pre-FDA approvals and pre-delivery (of medicine) to end users. Its limited revenue source is through negotiated supply agreements. It has a lot of debt (see below) and an expensive facility lease. It also had - in a very Kevin O'Leary-like fashion - a royalty agreement with its senior secured lender (ROS) which entitled ROS to a 4.52% royalty on the first $50mm of net sales (with ratchets for higher sales). So sharky. Of course, this isn't really that relevant when your incurred net losses are $100.8mm like they were in '16 (but we really enjoyed playing with the analogy). Now, ROS is providing a $7.5mm DIP credit facility to fund the cases for 90 days so that the company can attempt to find a buyer (note: there is no stalking horse bidder). Reminder: this was a PUBLICLY-TRADED company so, surely, there are some angry shareholders somewhere. 
  • Jurisdiction: D. of Delaware
  • Capital Structure: $70mm secured term loan (ROS Acquisition Offshore LP), $45.7mm senior secured convertible note (Amgen Inc.), $12.1mm mortgage (First National Bank), $1.9mm financing authority loan (Keystone Redevelopment Group LLC/Commonwealth of Pennsylvania Financing Authority)     
  • Company Professionals:
    • Legal: Cozen O'Connor (Mark Felger, Keith Kleinman, Eric Scherling, Frederick Schmidt) 
    • Financial Advisor: Protiviti Inc. (Guy Davis)
    • Investment Banker: SSG Capital Advisors LLC (J. Scott Victor)
    • Claims Agent: Rust Consulting/Omni Bankruptcy (*click on company name above for free docket access)
  • Other Parties in Interest:
    • DIP Lender: ROS Acquisition Offshore LP
      • Legal: Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, Jeffrey Davidson, Henry Kevane, Debra Grassgreen)
    • Senior Secured Convertible Noteholder: Amgen Inc.
      • Legal: Ropes & Gray LLP (James Wilton, Patricia Chen) & (local) Cole Schotz PC (Norman Pernick, Katharina Earle)
    • Large General Unsecured Creditor: Sanofi Winthrop Industrie
      • Legal: DLA Piper (US) LLP (Stuart Brown, Kaitlin Edelman)
    • Official Committee of Unsecured Creditors
      • Legal: Lowenstein Sandler LLP (Michael Etkin, David Banker, Barry Bazian, Gerald Bender) & (local) Schnader Harrison Segal & Lewis LLP (Richard Barkasy)

Updated 7/17/17