🍣 New Chapter 11 Bankruptcy Filing - Sustainable Restaurant Holdings Inc. 🍣

Sustainable Restaurant Holdings Inc.

May 12, 2020

Portland-based Sustainable Restaurant Holdings Inc., the holding company behind ten environmentally-friendly restaurants under the Bamboo Sushi and Quickfish brands, filed for bankruptcy in the District of Delaware. The company is owned by Kristofor Lofgren (42.1%) and supported by the Bain Capital Double Impact Fund LP (35.4%).

The company suffered, predictably, once COVID-19 struck and changed the business dynamic for restaurants all over the country. An attempted shift to take-out delivery wasn’t enough to drive revenue and shore up liquidity. The company makes no mention of any attempt to secure PPP funds pursuant to the CARES Act but, presumably, it wouldn’t have been eligible due to its connection to Bain. Bain, however, is stepping up to fund a $375k DIP that will fund the chapter 11 bankruptcy cases and hopefully buy the debtors time to locate a potential buyer of their assets.

• Jurisdiction: D. of Delaware (Judge )

• Capital Structure: ~$1.5mm unsecured note

• Professionals:

  • Legal: Klehr Harrison Harvey Branzburg LLP (Domenic Pacitti)

  • Independent Director: Pamela Corrie

  • Financial Advisor: Getzler Henrich & Associates LLC (David Campbell)

  • Investment Banker: SSG Capital Advisors LLC

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

• Other Parties in Interest:

  • Major Equityholder & DIP Lender ($375k): Bain Capital Double Impact Fund LP

🎓New Chapter 11 Bankruptcy Filing - The College of New Rochelle🎓

The College of New Rochelle

September 20, 2019

Non-profit The College of New Rochelle filed for bankruptcy, an unfortunate step for a school founded in 1898 and meant to serve underprivileged and first-generational college students. Sadly, the school’s problems stem from a rogue Controller who (i) failed to pay payroll taxes over a two year period, (ii) misappropriated government grant money, (iii) used endowment funds in an unauthorized manner, (iv) stiffed creditors with all kinds of schemes, and (v) concealed the true nature of the school’s financial condition by, among other things, misrepresenting financial health and issuing false financial statements. Ouch.

While Mr. Incompetent Controller pled guilty to fraud and failure to pay payroll taxes, that, unfortunately, does not cure the financial situation for the school, which finds itself “with over $31 million in previously undisclosed debts.” As for the Controller, he was sentenced to three years in federal prison, a $25k fine, and ordered to pay restitution of no less than $13.2mm — which there isn’t a chance in hell he’ll be able to do.

As if this isn’t horrible enough already, the school’s endowment is too small and the school’s enrollment revenue is too inadequate to address this massive liability. Consequently, the school is now forced to wind-down to pay off its debts. As a practical matter, what does this mean? Well, first, the school had to figure out a solution for its students. It did so via a “teach-out agreement” with a neighboring school, pursuant to which the students were able to continue their education and secure credit. Second, the school owns its real estate and has hired a real estate broker to pursue sales thereof. Those sales will go a long way towards paying the past due taxes owed and secured debt. The company has a commitment for a $4mm DIP credit facility to fund the cases.

What a sad social commentary: one dude’s malfeasance tore down 100+ years of history. Tragic.

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

• Capital Structure: $31.9mm secured loan (Citizens Bank/DASNY), $2mm secured loan (Carney Family Charitable Foundation), ~$2.4mm secured loan (Key Bank NA), ~$14mm bond debt (Industrial Bonds, UMB Bank NA, trustee)

• Professionals:

  • Legal: Cullen and Dykman LLP (Matthew Roseman, Bonnie Pollack, Elizabeth Aboulafia, Sophia Hepheastou)

  • Financial Advisor/CRO: Getzler Henrich & Associates LLC (Herbert Weil, Mark Podgainy)

  • Real Estate Broker: A&G Realty Partners LLC/B6

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

• Other Parties in Interest:

  • Key Bank NA

    • Legal: Nolan Heller Kauffman LLP (Francis Berman)

  • DIP Lender ($4mm): Summit Investment Management LLC

    • Legal: Kilpatrick Townsend & Stockton LLP (Todd Meyers, David Posner, Paul Rosenblatt)

New Chapter 11 Filing - Duro Dyne National Corp.

Duro Dyne National Corp. 

9/7/18

Duro Dyne National Corp., a manufacturer of sheet metal accessories and equipment for the heating, ventilating and air conditioning industry has filed for bankruptcy in the District of New Jersey. It constitutes one of those rare instances where an otherwise healthy business requires bankruptcy protection to ward off potential liability. 

The company reported steadily increasing sales and profits as steel prices fell to historic lows and construction activity continued to rebound from the recession. In 2017, the company had $69mm in sales and $5.2mm in EBITDA. In 2018, steel prices have increased -- in part due to tariffs -- and so the Company also raised prices. It expects $73.6mm of sales and $5.2mm of EBITDA. So what's the issue here? 

Per the company:

Beginning in the mid to late 1980s, the Company was sued on account of Asbestos Personal Injury Claims in various jurisdictions alleging liability for bodily injury allegedly sustained as a result of exposure to products containing asbestos allegedly manufactured and/or distributed by the Company from the 1950s through the 1970s.

Consequently, due to the increasing costs of defending and resolving the asbestos personal injury claims and the decline of insurance proceeds covering them, the company filed for bankruptcy to establish a plan that institutes a "channeling" injunction that directs all present and future asbestos-related demands to a funded trust for handling and payment. 

• Jurisdiction: D. of New Jersey (Judge Kaplan)
• Capital Structure: $1.29mm funded secured debt     
• Company Professionals:
  • Legal: Lowenstein Sandler LLP (Kenneth Rosen, Jeffrey Prol)
  • Financial Advisor: Getzler Henrich & Associates LLC
  • Claims Agent: BMC Group Inc. (*click on company name above for free docket access)
• Other Parties in Interest:
  • Exit Lender: Bank of America NA
  • Ad Hoc Asbestos Claimants Committee
    • Legal: Caplin & Drysdale Chartered (James Wehner, Jeffrey Liesemer)
  • Prepetition Future Claimants Representative
    • Legal: Young Conaway Stargatt & Taylor LLP (Edwin Harron, Sara Beth Kohut)

New Chapter 11 Filing - Firestar Diamond Inc.

Firestar Diamond Inc.

2/26/18

Company of billionaire Nirav Modi has filed for bankruptcy in the United States. He is currently in the midst of India's biggest-ever bank scam. Indian state-run Punjab National Bank uncovered fraudulent transactions in one its branches and notes that the fraudulent transactions could be around $2 billion. 

• Jurisdiction: S.D. of New York
• Capital Structure: $mm debt     
• Company Professionals:
  • Legal: Klestadt Winters Jureller Southard LLP (Ian Winters, Sean Southard, Stephanie Sweeney)
  • Restructuring Advisor/CRO: Getzler Henrich & Associates LLC (Mark Samson)
  • Financial Advisor: Marks Paneth LLP (Howard Hoff) 
  • Claims Agent: Rust Consulting/Omni Bankruptcy (*click on company name above for free docket access)
• Other Parties in Interest:
  • Creditor: Israel Discount Bank of New York
    • Legal: Troutman Sanders LLP (Brett Goodman, Harris Winsberg, Matthew Brooks)
  • Creditor: Punjab National Bank
    • Legal: Cleary Gottlieb Steen & Hamilton LLP (Sean O'Neal, James Bromley)
  • Creditor: J.C. Penney Corporation
    • Legal: Polsinelli PC (Christopher Ward, Jeremy Johnson) 

New Chapter 11 Filing - KIKO USA Inc.

KIKO USA Inc.

• 1/11/18 Recap: Cosmetics retailer files for bankruptcy and simultaneously busts the narrative that cosmetics are safe in the age of Amazon, Sephora and Ulta Beauty - not to mention a long list of direct-to-consumer e-commerce players. Or does it? Here, the cosmetics retailer with retail stores, an e-commerce channel, and an Amazon.com presence filed for bankruptcy because “its retail sales have not been sufficient to cover its costs, which consist primarily of rent and labor.” In other words, you might as well stop reading because you’ve read this story dozens of times in the last 12 months. Of 29 domestic locations (26 in malls), the company intends to close 24 stores in bankruptcy after failing to negotiate concessions from landlords prior to the filing. It doesn’t own any of its locations (a recurring problem). Remaining locations will be those in big cities: New York, Miami, Las Vegas, Sunrise Florida, and Los Angeles. Tiger Capital Group has been hired to dispose of assets. The go-forward plan is also, frankly, fairly unoriginal. It includes re-focusing on product assortment and targeted in-demand product, (ii) realigning distribution via a focus on the five remaining locations and, seemingly, kiosks (or the like) within third-party retailers, (iii) enhancing the customer experience with better staff/training, (iv) organizational changes, (v) targeting marketing (cha ching, Facebook!), and growing the commerce and Amazon Prime offering (cha ching Amazon). In summary, KIKO S.p.A., the corporate overlord loses its equity but for its DIP loan and Facebook and Amazon benefit. What else is new?
• Jurisdiction: D. of Delaware (Judge Walrath)    
• Company Professionals:
  • Legal: Perkins Coie LLP (John Kaplan, Jeffrey Vanacore, Deborah Kennedy) & (local) Saul Ewing Arnstein & Lehr (Mark Minuti, Monique Bair DiSabatino, Sharon Levine)
  • Financial Advisor: Getzler Henrich & Associates LLC (Mark Samson)
  • Claims Agent: BMC Group (*click on company name above for free docket access)
• Other Parties in Interest:
  • KIKO S.p.A.
    • Legal: White & Case LLP (John Cunningham, Fan He, Robbie Boone Jr.) & (local) Fox Rothschild LLP (Jeffrey Schlerf, Carl Neff)

New Chapter 11 Filing - Wordsworth Academy

Wordsworth Academy

• 6/30/17 Recap: Loyal PETITION readers know that we love lending snarky editorial color to chapter 11 filings. But sometimes things go beyond the pale and just aren't funny. This is one of them. This entity is a Pennsylvania non-profit corporation that provides education, behavioral health and welfare services to nearly 5,000 children who have emotional, behavioral and academic challenges. Why did it file? The company claims it needs an operational restructuring but there is a critical overhang here: a resident of one of the facilities died while being restrained. On top of that, there were other "allegations of other serious problems" at the same facility where the death occurred. There is an ongoing wrongful death suit against the company. Litigation appears to have pushed this company into bankruptcy, plain and simple. Tragic, sad, and definitely not amusing.
• Jurisdiction: E.D. of Pennsylvania
• Capital Structure: $4.7mm debt (M&T Bank)    
• Company Professionals:
  • Legal: Dilworth Paxson LLP (Lawrence McMichael, Peter Hughes, Anne Aaronson)
  • Financial Advisor: Getzler Henrich & Associates LLC (William H. Henrich)
  • Claims Agent: Donlin Recano & Company Inc. (*click on company name above for free docket access)
• Other Parties in Interest:
  • Secured Lender: M&T Bank 
    • Legal: Reed Smith LLP (Peter Clark II, Jennifer Knox)

Updated 7/11/17

New Chapter 11 Filing - Mountain Creek Resort

Mountain Creek Resort

• 5/15/17 Recap: This gives whole new meaning to the term "ski bums." Owner and operator of four-season resort (including a water park and a ski resort) filed for bankruptcy after suffering through (i) seasons of warm winters, (ii) a downturn in the residential real estate market locally, and (iii) a poor litigation outcome that put the business on the hook for millions. The company has lined up $6mm in DIP financing to fund its case. Meanwhile, folks living in the Township of Vernon, New Jersey, can sh*t bricks (see comments within) and try and figure out what the hell happens now that the $27mm owed to the Sussex County Municipal Utilities Authority is in danger of not being paid. See, the prior owner of the resort entered into various agreements with the Township for the construction of sewer capacity to support the Resort. The Township issued bonds to finance the costs of construction and the resort is apparently contractually obligated to reimburse the Township for costs associated with the issuance (naturally, the geniuses in the government didn't bother with a security interest (other than a paltry/limited LOC) and, even if they did, they'd probably be SOL anyway given M&T Bank's senior status in the capital structure). 
• Jurisdiction: D. of New Jersey
• Capital Structure: $22.7mm senior debt (M&T Bank), $7mm junior debt (HSK-MC LLC) & various promissory notes    
• Company Professionals:
  • Legal: Lowenstein & Sandler LLP (Kenneth Rosen, Jeffrey Prol, Nicole Fulfree, Michael Papandrea)
  • Financial Advisor: Getzler Henrich & Associates LLC (Mark Samson)
  • Investment Banker: Houlihan Lokey Capital (Jeffrey Altman)
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • M&T Bank
    • Legal: Greenberg Traurig LLP (Diane Vuocolo, Kevin Ray)
  • Township of Vernon
    • Legal: McElroy Deutsch Mulvaney & Carpenter LLP (Eric Perkins, Louis Modugno)
  • Prepetition Lender & DIP Lender: HSK Adventures Inc.
    • Legal: Tarter Krinsky & Drogin LLP (Rocco Caveliere, Scott Markowitz, Alex Spizz, Arthur Goldstein)
  • Official Committee of Unsecured Creditors
    • Legal: Trenk DiPasquale Della Fera & Sodono PC (Joseph DiPasquale, Adam Wolper, Robert Roglieri)

Updated 7/12/17

New Chapter 11 Filing - United Road Towing Inc.

United Road Towing Inc.

• 2/6/17 Recap: These bada$$ strapping towing lads fought the law and the law won. Meaning: a $5mm judgment was rendered against the Illinois-based company for purportedly charging excessive fees and now the company has less money, mo' problems. The company filed chapter 11 to obtain cover under the automatic stay (and avoid enforcement of the judgment) and sell the company. No stalking horse bidder, however, is in tow (see what we did there?). First lien lender Wells Fargo is providing a $32.25mm DIP to fund the case.  
• Jurisdiction: D. of Delaware
• Capital Structure: $32.3mm first lien credit facility ($13.8mm out - Wells Fargo) & $17mm second lien credit facility ($19.4 claim - Medley Capital)    
• Company Professionals:
  • Legal: Winston & Strawn LLP (Daniel McGuire, Grace D'Arcy, Carrie Hardman) & (local) Young Conaway Stargatt & Taylor LLP (M. Blake Cleary, Ryan Bartley, Andrew Magaziner)
  • Financial Advisor: Getzler Henrich & Associates LLC
  • Investment Banker: SSG Advisors LLC
  • Claims Agent: Rust Consulting/Omni Bankruptcy LLC (*click on company name for docket)
• Other Parties in Interest:
  • ABL/DIP Agent: Wells Fargo NA
    • Legal: Riemer & Brownstein LLP (Steven Fox) & (local) Ashby & Geddes (Gregory Taylor)
  • Medley Capital Corporation
    • Legal: Greenberg Traurig LLP (Maria DiConza, Dennis Meloro)
  • Official Committee of Unsecured Creditors
    • Legal: Pachulski Stang Ziehl & Jones LLP
    • Financial Advisor: Gavin/Solmonese LLC

Updated 2/16/17