🚜New Chapter 11 Bankruptcy Filing - Tea Olive I LLC (d/b/a Stock+Field)🚜

Tea Olive I LLC (d/b/a Stock+Field)

The #retailapocalypse is indiscriminate. Sometimes it likes to take down big prey like J.C. Penney or J. Crew but other times it just wants to snag some low hanging fruit via the path of least resistance. That means that a number of retailers those of us in our bubbles in major coastal cities have maybe never heard of will find their way into a bankruptcy court. And a bankruptcy court outside of Delaware or Texas no less.

Like Tea Olive I LLC (d/b/a Stock+Field) for instance. The Minnesota-based “farm, home and outdoor retailer” operates 25 stores across the mid-West. It only sells “a small amount of products…online.” While that’s obviously pretty lame, this place seems like a smorgasbord of fun: in one fell swoop you can go in and pick up, among other things, some dog food, a kayak, some beekeeping equipment, some lawn fertilizer, workwear and apparel, a grill, paint, a new HVAC unit, auto parts, food, toys and firearms! A Christmas bonanza, this place must be! Earl Jr. can get himself a little toy gun while Big Earl can get himself a grenade launcher and AR-15. Everybody wins!

Well, not everybody. Unfortunately, the place is liquidating, a sad post-holidays result for the 1,000 full and part-time employees that work there.

In 2018, the debtor did $176mm of revenue and adjusted EBITDA of $5.1mm. In 2019, to differentiate itself from other unrelated “Big R” entities in the US, the debtor changed its name from “Big R Stores” to “Stock+Field” expecting some short-term drops in performance but expecting those drops to be mere blips on the road to a stronger future. And, in fact, the company did suffer a small drop in performance: it did $173.9mm in revenue and $1.6mm in adjusted EBITDA. 2020 was supposed to be the year.

Spoiler alert: it wasn’t. Not for literally anybody on the planet (well, other than maybe Elon Musk, Joseph Biden, fans of Brexit…ah…you get the idea…there are exceptions to literally everything). Per the company:

In the beginning of 2020, the Debtor continued its rebranding efforts and expected the business to grow throughout the year. However, the Covid-19 pandemic unexpectedly upset all expectations for 2020. All of the Debtor’s 25 stores were open under strict capacity and operating hour restrictions due to the pandemic. Additionally, the pandemic itself has altered the shopping behaviors of the Debtor’s consumers, with some customers not feeling comfortable entering physical stores to shop. While the Debtor sells some products online, the majority of its products are sold solely in stores.

😬Apparently they didn’t get the omni-channel memo. For fiscal year 2020, therefore, the debtor estimates $141.5mm in revenue and -$2.2mm in adjusted EBITDA. Consequently, the company hired restructuring professionals to pursue a financing options and/or a sale. But had no luck. The company then hired Tiger Capital Group to pursue liquidation. Get ready for…

The debtor owes $29.7mm to its senior secured lender, CIT Northbridge Credit LLC pursuant to a credit agreement entered into in early March 2020. Query how seriously the various parties were taking COVID-19 given the timing. Still, the debtor estimates its inventory value to be $45.6mm and it also has $734k of A/R and prepaid assets against $26.5mm in trade debt (inclusive of approximately $1mm in 503(b)(9) claims).* The size of general unsecured creditor recoveries — certain to be less than 100% — will definitely depend on whether there are shoppers out there who are willing to risk contracting COVID-19 simply to hit the bid on that alleged $45.6mm in inventory value.

One question that also arises with retail cases is what happens with gift cards? It appears the debtor intends to honor outstanding gift cards until February 8, 2021. Hurry out, y’all, and get yourself some new toys and firearms just in time for the Civil War.

*For the uninitiated, the Bankruptcy Code provides that suppliers of goods delivered to a debtor in the ordinary course of business in the 20 days prior to a petition date be allowed as administrative expenses.

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Date: January 10, 2020

Jurisdiction: D. of Minnesota (Judge Fisher)

Capital Structure: $29.7mm funded secured debt (Second Avenue Capital Partners LLC)

Company Professionals:

• Legal: Fredrikson & Byron PA (Clinton Cutler, James Brand, Steven Kinsella, Samuel Andre)

• Restructuring Advisor: Clear Thinking Group (Michael Wesley)

• Liquidator: Tiger Capital Group LLC

• Investment Banker: Steeplechase Advisors LLC (James Cullen, Dan O’Rourke, David Burke, Nate Anderson, Eddie Doherty, Amy Rose)

• Claims Agent: Donlin Recano (Click here for free docket access)

Other Parties in Interest:

• Secured Loan Agent: Second Avenue Capital Partners LLC

• Secured Lender: CIT Northbridge Credit LLC

  • Legal: Riemer & Braunstein LLP (Steven Fox)

New Chapter 11 Bankruptcy Filing - Stein Mart Inc. ($SMRT)

Stein Mart Inc.

Man. This story sucks. Stein Mart Inc. ($SMRT), a publicly-traded specialty off-price retailer with 281 stores across the Southeast, Texas, Arizona and California is the latest retailer to file bankruptcy (along with two affiliates).

To set the stage, imagine Han and Lando taking a fun little ride on a desert skiff. Suddenly a riot breaks out and amidst the confusion Lando falls off the skiff. Luckily, Han is able to grab Lando’s hand so that Lando doesn’t plummet into the gnarley tentacles of some strange sand beast that randomly happens to be there. As Han pulls Lando up out of reach of the beast, all of the sudden some crazy space virus flows through the airspace and smacks Han straight in the lungs. As he clutches his throat struggling to breathe, he releases Lando who consequently hurls straight down towards the beast and suffers a horrific death.

Now replace (a) Han with Kingswood Capital Management LLC, (b) Lando with Stein Mart, and (c) the “crazy space virus” with COVID-19 and you’ve basically got the story of Stein Mart’s collapse into bankruptcy court. Like many other retailers in this macro climate, Stein Mart was teetering pre-COVID. Sales have been on the decline since 2016. But then in January, Kingswood — along with an entity managed by the Chairman of the company — offered a roughly 20% premium over SMRT’s then-stock price ($0.90/share) to take Stein Mart private. Stein Mart, which had been on distressed watch lists around that time, seemed to be on the receiving end of a much-needed and wildly opportune lifeline. Of course, COVID ended that. Take a look at this mind-boggling decline in YOY performance:

Ab. So. Lutely. Brutal. Just brutal.

Kingswood agreed. Per the company:

…on April 16, 2020, the Merger Agreement was terminated prior to closing because the COVID19 pandemic forced the Company to close all of its stores and the Company was unable to satisfy the minimum liquidity closing condition in the merger agreement.

Was that the definitive end of the deal? No! The parties continued to discuss new deal parameters but then we, as a country, couldn’t get our sh*t in order. With the country averaging 1000+ deaths a day and tens of thousands of new daily COVID infections, Kingswood got skittish:

The Company has subsequently engaged in discussions with Kingswood regarding sale of the Company as a going-concern in recent months pursuant to a bankruptcy sale; however, a transaction presently appears unlikely given the COVID-19 resurgence.

The resurgence is notable because the company has a significant number of stores in Florida, Texas and California. Consequently,…

The Company’s updated financial projections, following the July resurgence of COVID-19, indicated that the Company would not have sufficient liquidity to continue operating the business in the ordinary course consistent with past practice.

So now the company is liquidating. The company projects $250mm in gross recovery from the liquidation of inventory, equipment, fixtures, leases IP and other assets. As of the petition date, it owes its senior secured lender, Wells Fargo Bank NA ($WFC), $84mm; it also owed its term lender, Gordon Brothers Finance Company, $35mm. Tack on administrative expenses for the professionals administering the case and recoveries for those creditors owed a sum total of $770mm in total liabilities begins to look a bit bleak.

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A couple of additional notes:

First, this company appears to have been addicted to factoring. Among the companies top six general unsecured creditors are CIT Commercial Services, Wells Fargo Trade Capital Services, and White Oak Commercial Finance.

Second, you can add SMRT to the list of companies that tapped PPP funds yet couldn’t avoid a bankruptcy filing. It received $10mm from Harvest Small Business Finance LLC.

Third, we’re back to borderline collusion among the liquidation firms. The company’s financial advisor issued RFPs to five liquidation consultants. It received two bids back: one from SB360 Capital Partners LLC and one from a Hilco Merchant Resources-led joint venture that included three — that’s right, three — competitors. Per the company:

The Debtors are of the view that in the current environment, where numerous large retailers are being simultaneously liquidated, joint venture liquidation bids are common because a single liquidation firm may not have the resources to staff and manage the entire project. (emphasis added)

Said another way, the retail industry is such an utter dumpster fire right now that liquidators simply don’t have the bandwidth to manage mandates like these on their own (or so the story goes).

While liquidation sales launch, the company will also seek to sell its leases and IP. Except…

…substantial doubt exists as to whether any buyers will be found for leases given the current depressed condition of the retail real estate market.

And they…

…do not anticipate the sale of intellectual property will produce substantial value.

Right. In case you haven’t noticed, the rubber meets the road with these retailers with the IP. That’s why there was the law suit in the Neiman Marcus matter. That’s why there was the asset stripping transaction in the J.Crew matter. But Stein Mart? IP? Brand? Hahahahaha. The company’s bankers tried selling this turd for over 2.5 years. The only buyer was Kingswood, a small LA-based PE fund with a portfolio of four companies and, well, Stein himself. The IP only had value to him. Go figure. And this is after three — yes, three — separate sale and marketing processes.

Is there a chance a buyer emerges from the shadows? Sure. Miracles happen. If not, Wells and Gordon Brothers will be fine. The professionals will get paid. The unsecured creditors will get hosed. Equity will…well forget about it. At least the equity market is finally getting these right (though reasonable minds could certainly question why the stock is trading as high as it is):

The greater likelihood is that this sucker ends in structured dismissal or a conversion to chapter 7.

It’s crazy. Eight months ago the company was headed for a new chapter. Instead the book shut closed.

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August 12, 2020

Jurisdiction: M.D. of FL (Judge Funk)

Capital Structure: see above

Company Professionals:

• Legal: Foley & Lardner LLP (Gardner Davis, John Wolfel, Neda Sharifi, Richard Guyer, Mark Wolfson, Marcus Helt)

• Financial Advisor: Clear Thinking Group (Patrick Diercks)

• Liquidators: Hilco Merchant Resources LLC, Gordon Brothers Retail Partners LLC, Great American Group LLC, Tiger Capital Group LLC, SB360 Capital Partners LLC

• Claims Agent: Stretto (Click here for free docket access)

Other Parties in Interest:

• RCF Lender: Wells Fargo Bank NA

  • Legal: Otterbourg PC (Daniel Fiorillo, Chad Simon) & Smith Hulsey & Busey (John Thomas, Stephen Busey)

🏈New Chapter 11 Bankruptcy Filing - The Northwest Company LLC🏈

The Northwest Company LLC

April 19, 2020

It’s one thing to secure the account. It’s another thing to maintain it. If that account is Walmart Inc. ($WMT), you damn sure better make certain that the account is maintained. Enter The Northwest Company LLC. You may have purchased product from The Northwest Company LLC without ever knowing it: it is a manufacturer and seller of branded home textiles with a specialization in throws and blankets; it has multi-year license agreements with global entertainment and lifestyle brands and professionals sports leagues and sells its product through major national retailers (cough, Walmart) and online. If you’ve stopped at Walmart on the way to freezing your a$$ off while tailgating the Bears game, well, you may have picked up some Bears-branded Northwest-made blankets. Ah, sports. Remember those?

Unfortunately, The Northwest Company LLC and an affiliate are now chapter 11 debtors. They’ve been suffering from various issues dating back to 2017.

First, the debtors acquired the sports-branded inventory of Concept One, a leading manufacturer of licensed backpacks and accessories sold primarily through Walmart Inc. ($WMT). Well, someone effed up. The debtors quickly discovered quality control “[c]hallenges with the acquired inventory” shortly after the deal closed. Consequently, the debtors didn’t make as much money from the product as modeled. All the while, the debtors were still on the hook for license payments. Rut roh. Lower than expected inputs + static outputs means that someone’s model got blown to sh*t. To make matters worse, certain product was so shoddy that Walmart reduced and subsequently cancelled the debtors’ participation in its juvenile bedding modular program. The bankruptcy papers don’t say but we have to think, on a volume basis alone, losing the Walmart juvenile bedding account was a major blow.

Enter President Trump. The trade war led to a 25% tariff on bags and backpacks imported from China. “The tariff was in addition to the already high 17.6% duty imposed on that category of goods, and decreased both demand for the goods and the margins on their sale.” Yikes. We wonder who these folks are voting for come November.

The debtors also blame general retail sector woes — as one might expect. Finally, they acknowledge COVID-19, saying it “exacerbated” their financial condition, but note that was “not the reason for the … bankruptcy.” Honestly, that’s somewhat shocking given that the NBA suspended as the playoffs neared and the MLB season never even got off the ground. Most of the major sports leagues are top creditors. The debtors owe $57mm in trade debt.

To finance their cases and pursue a sale, the debtors seek to enter into a post-petition financing agreement with their pre-petition lender, CIT Group, which appears over-secured by 2x.

• Jurisdiction: S.D. of New York (Judge )

• Capital Structure: $19.1mm pre-petition factoring obligations (CIT Group/Commercial Services Inc.), $10mm promissory note (Ashford Textiles LLC)

• Professionals:

  • Legal: Sills Cummis & Gross P.C. (S. Jason Teele, Gregory Kopacz)

  • Financial Advisor: Clear Thinking Group LLC

  • Claims Agent: Omni Agent Solutions LLC (*click on the link above for free docket access)

• Other Parties in Interest:

  • CIT Group/Commercial Services Inc.

New Chapter 11 Bankruptcy Filing - Advanced Sports Enterprises Inc.

Advanced Sports Enterprises Inc.

November 16, 2018

Another day, another retailer in bankruptcy court.

Advanced Sports Enterprises Inc. and several affiliated companies filed for bankruptcy on Friday in the District of North Carolina. The debtors are designers, manufacturers and wholesale sellers of bicycles and related equipment. The debtors utilize both online (www.performancebike.com) and brick-and-mortar channels (104 retail stores across 20 states) to sell their bikes.

The debtors blame their capital structure and the seasonal nature of their business for their fall into bankruptcy. Due to lack of liquidity, it sounds as if the debtors engaged in an operational restructuring that included stretching payables to suppliers and creditors. As you might imagine, once payments are delayed, suppliers and creditors get kind of pissed off and start imposing more aggressive payment terms. In other words, they’re not too keen on being creditors. When that happens, a company pushing the envelope is caught in a vicious cycle. Indeed, here, the debtors say that they are on pace to run out of money in January 2019.

So, the debtors intend to market their business to an array of potential purchasers: private equity funds, family offices, strategic parties, and liquidators. While that process plays out, they will close 40 stores. They seek approval of a $45mm DIP credit facility from their prepetition senior secured lender, Wells Fargo Bank NA, to fund the cases.

• Jurisdiction: D. of North Carolina

• Capital Structure: $37.9mm first lien credit facility (Wells Fargo NA). $7.375mm term loan (Advanced Holdings Co., Ltd.). Otherwise, see below.

• Company Professionals:

  • Legal: Flaster/Greenberg P.C. (William Burnett, Richard Dressel, Harry Giacometti, Douglas Stanger, Damien Nicholas Tancredi) & (local) Northern Blue LLP (John Northen, Vicki Parrott, John Paul H. Cournoyer)

  • Financial Advisor: Clear Thinking Group LLC (Joseph Marchese)

  • Investment Banker: D.A. Davidson & Co. (Michael Smith)

  • Liquidator: Gordon Brothers Retail Partners LLC

  • Real Estate Consultant: A&G Realty Partners LLC

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

• Other Parties in Interest:

  • Senior Secured Lender: Wells Fargo Bank NA

    • Legal: Riemer & Braunstein LLP (Donald Rothman, Steven Fox) & (local) Williams Mullen (Holmes Harden)

  • Unsecured Creditors Committee: none appointed due to lack of creditors.

Source: First Day Declaration.

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