🎢New Chapter 11 Bankruptcy Filing - TZEW Holdco LLC (a/k/a Apex Parks Group LLC)🎢

Apex Parks Group LLC

April 8, 2020

California-based TZEW Holdco LLC and six affiliates (including Apex Parks Group LLC, the “debtors”) filed for bankruptcy in the District of Delaware. The debtors are Carlyle-owned family entertainment centers located in California, Florida and New Jersey. Here’s what the debtors’ website says about their business prospects:

According to a 2011 International Association of Amusement Parks survey, 25% of Americans surveyed visited an amusement park within the last 12 months, with 43 percent of Americans indicating they plan to visit in the next 12 months. Consumers have a desire to get out of the house for fun, but want their entertainment dollars to represent a good value for the entire family. In America, people visit amusement parks nearly 300 million times each year and generate more than $12 billion in revenue.

Eesh. That’s a tough read these days. 😬😷

The purpose of the filing is to eliminate debt and sell the business to their pre-petition secured lenders. Troubles have been brewing here since 2019: indeed, the debtors have been “perpetually distressed.” Per the debtors:

The Company suffered from a number of challenges leading to these chapter 11 cases, including, among others, increased industry competition and consolidation, heavy operational expenditure requirements, the seasonal nature of the business, general litigation, and irregular management turnover. In the years and months leading up to the Petition Date, the Company initiated multiple go-forward operational initiatives to increase profitability, such as implementing strategic pricing and season pass sales, redesigning food and beverage offerings, optimizing operating calendars, and generally investing in the maintenance and improvement of its locations. Despite these efforts, the Company continued to experience negative cash flows and, ultimately, an unsustainable balance sheet. In the months leading up to the Petition Date, the Company faced rapidly dwindling liquidity and, in order to maintain day-to-day operations, needed to increasingly rely on discretionary disbursements under its prepetition financing agreement.

The Disney Effect!!

Indeed, the debtors blame Disney Inc. ($DIS) and Six Flags Entertainment Corporation ($SIX) for being bigger, better, and deep-pocketed. Well, and having much better IP. Anyone looking for a bullish reason to buy DIS stock — assuming COVID-19 is a short-term issue — can see here, in the words of a competitor, why DIS’ IP strategy over the years has been solid. Per the debtors:

For example, estimates suggest that Universal Studio Orlando's first Harry Potter attraction boosted attendance by 50% over the attraction's first three years. Similarly, Disney has recently constructed Star Wars themed attractions at Walt Disney World it Orlando, Florida and Disneyland in Anaheim, California, as part of a $2 billion investment Disney has made in its theme parks. This industry competition and consolidation by major corporations in recent years has been a key driver in a string of closures of small and middle market theme parks across the country.

The debtors were in the midst of parallel-tracking their marketing process while also talking to their lenders about additional sources of liquidity. COVID-19 didn’t help matters. The debtors shut down their parks and now that people are Amazon Priming their cotton candy, the revenue spigot is off.

As you well know, interest payments are, absent waivers/forbearance from lenders, still due. The debtors owe $79mm to lender, Cerberus Business Finance LLC. An affiliate thereof will serve as stalking horse purchaser of the debtors’ assets with an eye towards the EBITDA-rich June-September period — assuming people are allowed out and are willing to go to amusement parks by then. Cerberus is also providing the DIP. In other words, Cerberus is driving the bus here. The DIP commitment requires a sale hearing no later than May 11, 2020.

• Jurisdiction: D. of Delaware (Judge Sontchi)

• Capital Structure: $79mm (Cerberus Business Finance LLC)

• Professionals:

  • Legal: Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, David Bertenthal, Timothy Cairns)

  • Independent Directors: Michael Short, Jeffrey Dane

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

  • Investment Banker: Imperial Capital

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

• Other Parties in Interest:

  • Administrative Agent: Cerberus Business Finance LLC

    • Legal: KTBS Law LLP (Michael Tuchin, David Fidler, Jonathan Weiss, Sasha Gurvitz) & Young Conaway Stargatt & Taylor LLP (Michael Nestor, Robert Poppitti Jr.)

  • Stalking Horse Purchaser: APX Acquisition Company LLC

  • Largest Equityholders: Benefit Street Partners & Edgewater Growth Capital Partners

🍎New Chapter 11 Bankruptcy Filing - Earth Fare Inc.🍎

Earth Fare Inc.

February 4, 2020

North Carolina-based Earth Fare Inc. is the latest grocer to descend into the Delaware bankruptcy courts, closing a horrific stretch for the grocery space in which multiple chains — including Fairway Market and Lucky’s Market — capitulated into chapter 11. Signs were out there. On January 26th, we noted that the chain was quietly closing locations, a clear indication of trouble and precursor to bankruptcy. Subsequently, The Wall Street Journal reported that the grocer had begun closing approximately 50 stores. The thing is: it has about 50 stores (across 10 states) so that effectively signaled that the company was kaput. Twenty minutes later, the company confirmed as much, issuing a press release that it would liquidate inventory at all of its stores and pursue a sale of its assets. 3,270 people appear poised to lose their jobs. It’s brutal out there, folks.* But at least sumo mandarins are back, bringing all new meaning to “get them before they’re gone.”

Earth Fare is owned, as of 2012, by Oak Hill Capital Partners III LP (72.1%) and MCP Heirloom LLC (18.76%), an ironic name given that there isn’t expected to be much left of this sucker going forward. Which means that we all should suspect yet another onslaught of “Private Equity Kills X” pieces in the media. Because, like, those have been all the rage lately. See, e.g., The New York Times and Payless, and Slate and Fairway.

So what’s the story? Well, for starters, you know you’ve got a dumpster fire on your hands when the company’s first day declaration to be entered into evidence in support of the filing is a whopping 18 pages long. Clearly the expectations here aren’t particularly optimistic.

Similar to Lucky’s Market Parent Company LLC, it appears that the company took on too much debt and expanded too much, too soon. Ah, private equity. Consequently, it has approximately $76.8mm of funded debt including a revolving credit facility held by Fifth Third Bank and Wells Fargo Bank NA and a term loan with a mysterious “Prepetition Term Loan Lender” that the company was apparently fearful of identifying by name in its papers. Like, for some reason. Like, as if, uh, we won’t find out who that sucker is who dumped $14.8mm into this horror show a mere 6 months ago. In addition to the funded debt, the company owes $60mm in trade and other unsecured obligations.

The company blames its failure on a now-standard lineup of excuses that include (i) crazy amounts of competition,** (ii) significant capex, and (iii) too much debt.

Riiiiight. Back to that debt. The company has been in a perpetual state of amend-and-extend since 2017 when, in May of that year, it secured an amendment/extension of its revolving loan maturity to April 2019. Those private equity bros who are sure to get bashed put $10mm of equity capital into the company at that point. Then in August 2018, the company entered into another amendment pushing out its maturity. In connection therewith, those private equity bros who are sure to get bashed put another $9mm of equity capital into the company. Another extension followed in April 2019 in which those private equity bros who are sure to get bashed put another $5mm of equity capital into the company. They likely would have had more fun just putting all of that money on "black” at the roulette table.

Meanwhile, the company’s efforts to refinance its debt and/or sell stalled badly. It sold 5 underperforming stores but the rest of the company’s inventory will be the responsibility of Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC to sell; the sale of its locations the responsibility of A&G Realty Partners LLC; and the sale of the company’s IP, the responsibility of Hilco Streambank. This mandate is raining liquidators!! Toss in legal, a financial advisor and a strategic communications advisor and the question is: is there anyone left to hire to wind down this company?

*Interestingly, The Charlotte Observer reported that “[t]he number of grocery stores in the [Charlotte] metro area has grown by 38% in five years,” a real head-turner of a stat.

** GroceryDive reported:

“They made some strategic mistakes expanding too far into some non-continuous markets,” Burt Flickinger, managing director of Strategic Resources Group in New York, told Grocery Dive. He said Earth Fare’s key markets “were some of the most over-stored on the Eastern seaboard.”

They also note that the pain is pervasive:

Given their large size and market overlap with Earth Fare and Lucky’s, Sprouts and Whole Foods appear to be the main beneficiaries of this round of specialty store closures, sources said. But these chains certainly don’t have it easy. Whole Foods has not returned to profitable growth under Amazon, according to that company’s quarterly earnings reports, while Sprouts’ stock has dropped with the news from Lucky’s and Earth Fare.

“It’s an unforgiving market out there,” Flickinger said.

Indeed!

• Jurisdiction: D. of Delaware (Judge Owens)

• Capital Structure: $43.33mm RCF (Fifth Third Bank), $21.67mm RCF (Wells Fargo Bank NA), $14.8mm Term Loan

• Professionals:

  • Legal: Young Conaway Stargatt & Taylor, LLP (Pauline Morgan, M. Blake Cleary, Sean Greecher, Shane Reil)

  • Financial Advisor/CRO: FTI Consulting Inc. (Charles Goad)

  • Asset Disposition Advisor: Malfitano Advisors LLC

  • Liquidation Consultants: Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC

    • Legal: Pepper Hamilton LLP (Douglas Hermann, Marcy McLaughlin Smith)

  • Real Estate Consultant: A&G Realty Partners LLC

  • IP Consultant: Hilco Streambank

  • Strategic Communications Advisor: Paladin Management Group LLC (Jennifer Mercer)

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

• Other Parties in Interest:

New Chapter 11 Bankruptcy Filing - Republic Metals Refining Corporation

Republic Metals Refining Corporation

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)