5/15/17 Recap: Pennsylvania-based specialty fashion retailer (owned by private equity shop Apax Partners LP) with 1184 brick-and-mortar locations (pre recent closing initiative) in various strip centers, regional malls and outlet centers filed for bankruptcy to (i) further revamp its e-commerce strategy, (ii) improve the in-store experience, (iii) right-size the store footprint and lease portfolio, (iv) de-lever its capital structure, and (v) effectuate a long-term business plan under its relatively new management. The numbers here are interesting: the company had a negative EBITDA swing of approximately $51mm from 2015 to 2016 - despite rising sales. The company's girls' division got decimated due to "an evolution of customer tastes." Wow! Who knew that teenage girls have fickle fashion tastes? These merchandising issues combined with (a) supply chain issues (heightened - in a self-fulfilling kind of way - by all of the rumors surrounding the company's bankruptcy), (b) "the shift away from brick-and-mortar retail sales to online channels," AND (c) a "not as robust" e-commerce presence relative to competitors, to put the company in a tough spot. A digression: we have previously noted David Simon's comments on the Simon Properties Group (SPG) earnings call from 4/27/17 that SPG is NOT experiencing a decline in traffic - though he offered absolutely ZERO data to back that up. According to SPG's own website, there are currently 90 rue21 locations in SPG properties (which translates to nearly 8%): we're curious to see whether any of these 90 locations will be featured in store closing motions coming soon to a bankruptcy court near you; indeed, in the first instance, it appears that some already are). The company is proposing a deal whereby the Term Lenders will effectively own the majority of the company post-bankruptcy after rolling-up a $100 DIP credit facility (applied in addition to $50mm of new money to be rolled into an exit facility). They've been so kind so as to give general unsecured creditors (read: the little guys) a 4% equity kiss - but only if they vote to accept the plan. Otherwise, the "death trap" door opens and general unsecured creditors end up with nada. We're sure a creditors' committee will have something to say about that.
Jurisdiction: W.D. of Pennsylvania
Capital Structure: $150mm RCF ($78mm funded)(Bank of America), $521mm '20 TLB (Wilmington Savings Fund Society as successor to JPMorgan Chase Bank NA), $239mm '21 9% unsecured bonds (Wells Fargo Bank NA).
Company Professionals:
Legal: Kirkland & Ellis LLP (Jonathan Henes, Nicole Greenblatt, Robert Britton, George Klidonas) & (local counsel) Reed Smith LLP (Eric Schaffer, Jared Roach)
Financial Advisor: Berkeley Research Group LLC (Stephen Coulombe, Kyle Richter, Patrick Farley)
Investment Banker: Rothschild Inc. (Neil Augustine, Jonathan Brownstein)
Real Estate Advisor: A&G Realty Partners LLC
Liquidator: Gordon Brothers Retail Partners LLC
Legal: Greenberg Traurig LLP (Nancy Peterman)
Claims Agent: KCC (*click on company name for access to the free docket)
Other Parties in Interest:
ABL Agent and DIP ABL Agent: Bank of America
Legal: Morgan Lewis & Bockius LLP (Matthew Furlong, Marc Ledue, Julia Frost-Davis) & (local) Buchanan Ingersoll & Rooney PC (James Newell, Timothy Palmer, Kelly Neal)
TL Agent and DIP TL Agent: Wilmington Savings Fund Society FSB and Term Lender Group (Bayside Capital LLC, Benefit Street Partners LLC, Bennett Management Corporation, Citadel Advisors LLC, Eaton Vance Management, JPMorgan Chase Bank NA, Octagon Credit Investors LLC, Southpaw Credit Opportunity Master Fund LP, Stonehill Capital Management LLC, Voya Investment Management)
Legal: Jones Day LLP (Scott Greenberg, Michael J. Cohen, Jeffrey Bresch, Genna Ghaul)
Financial Advisor: PJT Partners
Indenture Trustee: Wells Fargo Bank NA
Legal: Milbank Tweed Hadley & McCloy LLP (Gerard Uzzi, Robert Nussbaum, Eric Stodola)
Sponsor: Apax Partners LP
Legal: Simpson Thacher & Bartlett LLP (Elisha Graff, Nicholas Baker, Jonathan Endean) & Duane Morris LLP (Joel Walker, Kenneth Argentieri)
Official Committee of Unsecured Creditors
Legal: Cooley LLP (Jay Indyke, Cathy Hershcopf, Seth Van Aalten, Michael Klein, Lauren Reichardt) & Fox Rothschild LLP (John Gotaskie Jr.)
Financial Advisor: FTI Consulting Inc. (Samuel Star)
4/4/17 Recap: Private equity backed Kansas-based discount footwear retailer with over 4000 stores filed for bankruptcy because, well, right, it's a private equity backed retailer. Golden Gate Capital and Blum Capital Partners are the sponsors and we've previously covered their methods, uh, we mean "value-add" proposition. We probably won't even bother to read the filing documents because we're 98.9% confident they say the same sh*t every other retail case has said, e.g., poor e-commerce...blah blah...Amazon...blah blah...mall-based retail...blah blah...bad weather...blah blah...Showtime's Billions sucks...wait, what?...whatever, it does (who cares if that's relevant?)...millennial shopping habits...blah blah...bleeding top line and depressed comp store sales...blah blah...dividend recaps...blah blah blah. Apparently the retailer is going to close nearly 400 stores while it attempts to reorganize around what remains - all in accordance to a plan support agreement that the company has entered into with 2/3 of its term loan lenders and with the support of a $385mm DIP facility (of which $80mm is new money). Meanwhile, we'll see what kind of cascading effect this will have on (a) China's manufacturing sector which, apparently, has seen significant stretching of payables (up to 100 days) - a fact evidenced by the top 50 creditors list, and (b) our lovely "A" malls (notably, Simon Property Group made a notice of appearance before the first day pleadings were even completely filed). Finally, the CEO dropped the fact that the new business plan will focus on, among other things, "omnichannel expansion" and since that is the retail buzzword/phrase of the moment, we guess there's really nothing to see here: all will be fine.
4/6/17 Update: We read the documents and, generally speaking, everything we said above applies. Two other factors apparently worth mentioning as causes for the filing: inventory management issues (compounded by the West Coast port strikes) and foreign exchange issues.
Jurisdiction: E.D. of Missouri
Capital Structure: $300 ABL ($187mm out - Wells Fargo), $520mm '21 TL ($506mm out), $145mm '22 second lien TL (Morgan Stanley Senior Funding Inc.)
Real Estate: RCS Real Estate Advisors (Ivan Friedman)
Liquidators: Great American Group LLC & Tiger Capital Group LLC
Claims Agent: Prime Clerk LLC (*click on company name above for free court docket)
Other Parties in Interest:
Ad Hoc Committee of First Lien Term Lenders (Alden Global Opportunities Master Fund, Credit Suisse Asset Management, GSO Capital Partners, Hawkeye Capital Management, Invesco Senior Secured Management, Octagon Credit Investors LLC, AIC Finance, Axar Capital Management)
Legal: King & Spalding LLP (Michael Rupe, Christopher Boies, Jeffrey Pawlitz, Austin Jowers, Michael Handler)
Financial Advisor: Houlihan Lokey Capital Inc.
DIP ABL Agent: Wells Fargo Bank NA
Legal: Choate Hall& Stewart LLP (Kevin Simard, Douglas Gooding, Jonathan Marshall)& (local) Thompson Coburn LLP (Mark Bossi)
First Lien Agent & DIP TL Agent: Morgan Stanley Senior Funding Inc. &Cortland Products Corp.
Legal: Norton Rose Fulbright US LLP (Stephen Castro, David Rosenzweig, Danielle Ledford, Tim Walsh)
Official Committee of Unsecured Creditors
Legal: Pachulski Stang Ziehl & Jones LLP (Robert Feinstein, Jeffrey Pomerantz, Bradford Sandler) & (local) Polsinelli PC (Matthew Layfield, Christopher Ward, Shanti Katona)
11/20/16 Recap: Ohio-based global supplier of products related to transmissions and drivetrains files for Chapter 11 to effectuate a prepackaged case handing the company over to the first lien lenders. The cases will be funded by Silver Point Finance LLC as DIP lender ($55mm).
Jurisdiction: S.D. of New York
Capital Structure: $376.6mm first lien TL (RBC), $48mm RCF (RBC), $170mm second lien TL (Cortland Capital Markets)
Company Professionals:
Replacement Legal: Jones Day LLP (Scott Greenberg, Carl E. Black, Daniel Merrett, Stacey Corr-Irvine)
Original Legal: Willkie Farr (Rachel Strickland, Christopher Koenig, Jennifer Hardy, Debra McElligott)
Financial Advisor: FTI Consulting LLC (Daniel Hugo, Dewey Imhoff, Stuart Gleichenhaus, Joe Lu, Carl Jones, Scott Hoffman, Luke McCrory, Patrick Rauh)
