⛽️New Chapter 11 Bankruptcy Filing - Hornbeck Offshore Services Inc. ($HOSS)⛽️

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Hornbeck Offshore Services Inc.

May 19, 2020

Hornbeck Offshore Services Inc. and 13 affiliates (the “debtors”), providers of marine transportation services to petroleum exploration and production, oilfield service, offshore construction and US military customers, filed prepackaged chapter 11 bankruptcies in the Southern District of Texas. Judge Isgur and Judge Jones must be thinking “Thank G-d”: for the judges, “prepackaged” is the operative word here and a quickie case amidst some of these melting ice cubes (e.g., J.C. Penney) must be a welcome breath of fresh air.

Hornbeck is one of those companies that people have been watching ever since 2015 — mostly on account of (i) the idea that offshore drilling had become prohibitively expensive in a falling commodity price environment and (ii) thanks to years of capital-intensive vessel construction programs and vessel acquisitions, an over-levered balance sheet. The good news is that, because of those programs/acquisitions, the company is relatively well-positioned with a nimble and younger fleet (76 vessels in total) — a fact that’s surely recognized by the company’s future equity holders. The bad news is that, with this much debt, even Hornbeck couldn’t postpone the inevitable bankruptcy ad infinitum when oil is where it is. Per the company:

Despite the Company’s relative strengths in its core markets, recent industry trends have had a materially adverse impact on the offshore energy industry and on the Company in particular. While the Company is accustomed to, and built for, the cyclical nature of the oilfield services industry, the recent downturn in the industry has lasted nearly six years, much longer than any previous cycles in the deepwater era, and has put pressure on the Company’s ability to repay or refinance its significant debt obligations.

This is what the funded debt looks like:

Despite that ghastly capital structure and the unfriendly market, Hornbeck, unlike other players in the space like Tidewater Inc. and GulfMark Offshore Inc., managed to stay out of bankruptcy. To do so, it pulled every lever in the book:

  • Stacking of vessels to right-size the size of the available fleet relative to demand? ✅

  • Defer drydocking costs? ✅

  • Onshore and offshore personnel pay cuts? ✅

  • Selectively taking on assignments, avoiding long-term Ks and insurance risk? ✅

This is all great but of course there’s still that monstrosity of a balance sheet. In tandem with the operational restructuring, the company has been pursuing strategic balance sheet transactions since 2017 — some more successful than others. The most recent attempt of out-of-court exchange offers and consent solicitations was in early February and though it got a super-majority of support from holders of the ‘20 and ‘21 notes, it failed to meet the required 99% threshold to consummate the deal. On March 23, the date of the bottom of the stock market (irrelevant…just a fun fact), the company terminated the offers. After a long road over many years, bankruptcy became more of a reality.

And so here we are. With the amount of support indicated on the offers, this thing set up nicely for a prepackaged plan. Regarding the plan, there’s a whole lot going on there because of the way the exit facilities are contemplated and the fact that there are Jones Act compliance issues but suffice it to say that the plan treats the first lien lenders as the fulcrum security. The second lien lenders will get a tip and the unsecured noteholders essentially walk away with a small equity kiss and warrants. The company will require liquidity on the back end of the chapter 11 and so the plan also contemplates a $100mm rights offering in exchange for 70% of the reorganized equity.

The debtors will fund the cases via a $75mm DIP credit facility which includes $56.25 million funded by certain secured lenders and $18.75 million funded by certain unsecured noteholders.

  • Jurisdiction: S.D. of Texas (Judge Jones)

  • Capital Structure: $50mm ABL (Wilmington Trust NA), $350mm first lien facility (Wilmington Trust NA), $121.2mm second lien facility (Wilmington Trust NA), $224.3mm ‘20 unsecured notes, $450mm ‘21 unsecured notes

  • Professionals:

    • Legal: Kirkland & Ellis LLP (Edward Sassower, Ryan Blaine Bennett, Ameneh Bordi, Debbie Farmer, Emily Flynn, Michael Lemm, Benjamin Rhode) & Jackson Walker LLP (Matthew Cavenaugh, Kristhy Peguero, Jennifer Wertz, Veronica Polnick)

    • Financial Advisor: Portage Point Partners LLC

    • Investment Banker: Guggenheim Securities LLC

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

  • Other Parties in Interest:

    • DIP Agent ($75mm): Wilmington Trust NA

    • Counsel to the Consenting Secured Lenders

      • Legal: Davis Polk & Wardwell LLP (Damian Schaible, Darren Klein, Stephanie Massman)

    • Counsel to Consenting Unsecured Notes

      • Legal: Milbank LLP (Gerard Uzzi, Brett Goldblatt, James Ball)

    • Large equityholders: Cyrus Capital Partners LP, Fine Capital Partners LP, William Hurt Hunt Trust Estate

🤓New Chapter 11 Bankruptcy Filing - Loot Crate Inc.🤓

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Loot Crate Inc.

August 11, 2019

We’re old enough to remember when subscription boxes were all the rage. The e-commerce trend became so explosive that the Washington Post estimated in 2014 that there were anywhere between 400 and 600 different subscription box services out there. We reckon that — given the the arguably-successful-because-it-got-to-an-IPO-but-then-atrocious-public-foray by Blue Apron Inc. ($APRN) — the number today is on the lower end of the range (if not even lower) as many businesses failed to prove out the business model and manage shipping expense.

And so it was only a matter of time before one of them declared bankruptcy.

Earlier this morning, Loot Crate Inc., a Los Angeles-based subscription service which provides monthly boxes of geek- and gaming-related merchandise (“Comic-con in a box,” including toys, clothing, books and comics tied to big pop culture and geek franchises) filed for bankruptcy in the District of Delaware.* According to a press release, the company intends to use the chapter 11 process to effectuate a 363 sale of substantially all of its assets to a newly-formed buyer, Loot Crate Acquisition LLC. The company secured a $10mm DIP credit facility to fund the cases from Money Chest LLC, an investor in the business. The company started in 2012.

Speaking of investors in the business, this one got a $18.5mm round of venture financing from the likes of Upfront Ventures, Sterling.VC (the venture arm of Sterling Equities, the owner of the New York Mets), and Downey Ventures, the venture arm of none other than Iron Man himself, Robert Downey Jr. At one point, this investment appeared to be a smashing success: the company reportedly had over 600k subscribers and more than $100mm in annualized revenue. It delivered to 35 countries. Inc Magazine ranked it #1 on its “Fastest Growing Private Companies” list. Deloitte had it listed first in its 2016 Technology Fast 500 Winners list. Loot Crate must have had one kicka$$ PR person!

But life comes at you fast.

By 2018, the wheels were already coming off. Mark Suster, a well-known and prolific VC from Upfront Ventures, stepped off the board along with two other directors. The company hired Dendera Advisory LLC, a boutique merchant bank, for a capital raise.** As we pointed out in early ‘18, apparently nobody was willing to put a new equity check into this thing, despite all of the accolades. Of course, allegations of sexual harassment don’t exactly help. Ultimately, the company had no choice but to go the debt route: in August 2018, it secured $23mm in new financing from Atalaya Capital Management LP. Per the company announcement:

This financing, led by Atalaya Capital Management LP ("Atalaya") and supported by several new investors (including longstanding commercial partners, NECA and Bioworld Merchandising), will enable Loot Crate to bolster its existing subscription lines and improve the overall customer experience, while also enabling new product launches, growth in new product lines and the establishment of new distribution channels.

Shortly thereafter, it began selling its boxes on Amazon Inc. ($AMZN). When a DTC e-commerce business suddenly starts relying on Amazon for distribution and relinquishes control of the customer relationship, one has to start to wonder. 🤔

And, so, now it is basically being sold for parts. Per the company announcement:

"During the sale process we will have the financial resources to purchase the goods and services necessary to fulfill our Looters' needs and continue the high-quality service and support they have come to expect from the Loot Crate team," Mr. Davis said.

That’s a pretty curious statement considering the Better Business Bureau opened an investigation into the company back in late 2018. Per the BBB website:

According to BBB files, consumers allege not receiving the purchases they paid for. Furthermore consumers allege not being able to get a response with the details of their orders or refunds. On September 4, 2018 the BBB contacted the company in regards to our concerns about the amount and pattern of complaints we have received. On October 30, 2018 the company responded stating "Loot Crate implemented a Shipping Status page to resolve any issues with delays here: http://loot.cr/shippingstatus[.]

In fact, go on Twitter and you’ll see a lot of recent complaints:

High quality service, huh? Riiiiiiight. These angry customers are likely to learn the definition of “unsecured creditor.”

Good luck getting those refunds, folks. The purchase price obviously won’t clear the $23mm in debt which means that general unsecured creditors (i.e., customers, among other groups) and equity investors will be wiped out.***

Sadly, this is another tale about a once-high-flying startup that apparently got too close to the sun. And, unfortunately, a number of people will lose their jobs as a result.

Market froth has helped a number of these companies survive. When things do eventually turn, we will, unfortunately, see a lot more companies that once featured prominently in rankings and magazine covers fall by the wayside.

*We previously wrote about Loot Crate here, back in February 2018.

**Dendera, while not a well-known firm in restructuring circles, has been making its presence known in recent chapter 11 filings; it apparently had a role in Eastern Mountain Sports and Energy XXI.

***The full details of the bankruptcy filing aren’t out yet but this seems like a pretty obvious result.

⚡️UPDATE: August 18, 2019⚡️

On August 12, we published — and you should revisit — 📦Nerds Lament: Subscription Box Company Goes BK📦, a report on the bankruptcy filing of a company called Loot Crate Inc., an e-commerce subscription service that ships all kinds of nerdy sh*t to dorks who like comics and stuff (PETITION Note: for the record, we’re not making fun of nerds…we’re nerds…we’re just not nerds who subscribe to nerdy e-commerce subscription boxes and collect nerdy lunch boxes, nerdy bobbleheads, nerdy trinkets and super-nerdy action figures…there are levels here, people). While this company is generally a pimple on the U.S. economy’s very large a$$, we think it’s important for our readers — bankruptcy pros, investors, operators, startup/tech enthusiasts — to understand some of the reasons behind its demise: the small to middle market, after all, tends to get short shrift in a sea of bankrupted retailers with a formidable brick-and-mortar footprint or bankrupted oil and gas companies that have shredded public equity and debt value to the chagrin of many an investor. And as if that isn’t justification enough, how can we NOTrevisit this company when there’s THIS summary in its bankruptcy papers:

In short, despite liquidity constraints unlike those I and the Debtors’ other professionals have ever seen, the Debtors have created a path to get through Chapter 11, albeit quickly, to maintain their going concern, reduce the backlog of shipments (and Vantiv’s potential exposure), allow for renewed dealings with valued vendors and licensors, and achieve a result that is the best we could foresee over the last few distressing weeks and months. (emphasis most definitely added).

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HAVE. EVER. SEEN. HAHAHAHAHA. Restructuring professionals see a LOT. This is really saying something.

Anyway, to set the mood, let’s start with this choice quote from the company’s filing:

This is a company that has succeeded from ground zero – it is not an “old economy” business, shrinking every year, trying to determine how to remain relevant. Instead, it is the view of the Debtors’ management that once better capitalized and freed from legacy liabilities through the proposed sale of assets in these cases, the Debtors will return to success.

Some might take exception to the use of the word “succeed” here given the company’s current predicament. Just saying. Some might also be forgiven for viewing the conclusions of “Debtors’ management” with a glint of skepticism. Why? Keep reading: we’re about to explain the myriad reasons why this company failed.

First, and this is something that PETITION has focused on considerably over the last several months as digital advertising supply reportedly decreases, prices increase, and more and more DTC brands are seeking targeted eyeballs to sell product. Choice bit here:

By late 2017, the Debtors were having financial issues. The subscription and entertainment market has a healthy and sometimes insatiable appetite for marketing dollars. While the Debtors were very popular with their fan base, the need to continue to spend on marketing was hampering the Debtors’ finances. (emphasis added).

We cannot over-emphasize how critical this is. As more and more B&M retailers underscore their need to leverage social media, influencers, etc., they’ll find it’s not so easy in today’s hyper-competitive DTC environment to generate revenue while avoiding astronomical customer acquisition costs. The upcoming presidential election, meanwhile, might put increased pressure on retailer budgets as Facebook Inc. ($FB), Google Inc. ($GOOGL), and others attempt to limit the number of ads in users’ feeds in the name of “user experience.” Meanwhile, we’ll continue to see both of these behemoths on lists of top 30 creditors: Facebook, for instance, is listed here. Google is one of Avenue Stores LLC’s largest creditors.

All of which is to say that it appears that Loot Crate’s CACs were through the effing roof.

Second, PROGRESSIVES!!! And MAGA!!! The company initially had a distribution system based out of California, “a very high wage stage.” Now the company fulfills “most of their shipments with a third party warehouse and shipper, operating out of Tijuana, Mexico.” We wonder if the facility is wired up with Maxcom tech!?!?

Third, the company blames the Supreme Court’s Wayfair decision (which, for the record, we had highlighted long before the mainstream media) for some of its liquidity problems; it alleges that the decision “require[d] them to accrue sales tax charges for goods sold in the past.” More on taxes below: as a preview, there was seemingly some shady-a$$ sh*t going on here.

Fourth, this company got to experience first hand the dangers of venture debt. Because of the issues noted above, the company ran afoul of its $15mm credit facility with Breakwater Credit Opportunities Fund, an LA-based private investment firm that specializes in direct debt and equity investments in lower middle market companies. The company defaulted on the loan in 2017. This, naturally, gave Breakwater leverage to extract economic concessions from the company and juice their governance rights.

Needing to refinance out Breakwater to avoid Breakwater taking over the board (and presumably tossing the founding management team out the window), the company refinanced the Breakwater loan with a $21mm term loan from Midtown Madison Management LLC, an affiliate of Atalaya Capital Management (MMM also received a now-worthless warrant for 17% of the company’s common stock). Breakwater got out whole, with accrued and unpaid interest, default interest, fees, and repayment of OID provided at the time of default. Savage play by Breakwater. As a condition to the refinancing, the company issued $4.4mm in convertible subordinated notes and warrants to a number of holders, including the proposed DIP lender, the founder’s daddy, and Dendera Advisory LLC (which took notes and warrants in lieu of payment for services rendered in connection with the refinancing). Apparently, only Money Chest LLC, the proposed DIP lender, perfected liens.

The refinancing, while beneficial to Breakwater, did not prove the salvation for the company that it had hoped for. Per the company:

While the August 2018 Financing provided the Debtors with a slight liquidity reprieve, the fees and expenses that had to be repaid to Breakwater made this amount far less than expected, resulting in continued difficulty with vendors after the transaction, resulting in turn in difficulty in filling crates due to missing custom items, causing subscriber chargebacks and cancellations, and then resulting in serious concerns by the Debtors’ credit card processor, and its withholding of funds from the Debtors. All of this caused greater liquidity issues with each passing week and month. In short, the cycle in this unfortunate paragraph never stopped, with each negative event causing other negative events, again and again, and liquidity problems continued into 2019 and until these filing of these Cases. (emphasis added).

Man, these guys give good Declaration. For any business, not just a startup, that paragraph is utterly painful to read.

Let’s break this down: management (1) took an unfavorable deal to refi-out their venture lender and protect their a$$es, (2) quickly realized that, after all was said and done, the company still had severely constrained liquidity, (3) stretched vendors, (4) irritated vendors, resulting in inventory issues, (5) couldn’t ship their product, (6) pissed off customers, (7) sparked credit card chargebacks presumably en masse, and (8) red-flagged their credit card processor to the point that it, too, wanted to run for the hills (more on this below).

Yeah, sure, these guys are totally dependable.

programming.jpeg

Fifth, the company is prisoner to two large creditors. One, Clear Finance Technology Corporation d/b/a Clearbanc, paid the company’s vendors for the company in exchange for a royalty on billings. Clearly this was meant to provide vendors with comfort given the company’s liquidity shortfall. There will be some litigation to determine whether this arrangement is a financing vs. an ownership agreement and, in turn, whether Clearbanc is, by virtue of Clearbanc’s alleged failure to file a UCC-1 perfecting its interest, an unsecured creditor. The other, Vantiv LLC, is the company’s credit card processor and the company’s patsy for why shipments haven’t timely shipped and customers are pissed off. Per the company:

Vantiv has a contingent claim to the extent the Debtors do not ship goods to their customers for which such customers have already paid via credit card. Such customers could then, depending on their credit card agreements and applicable law, reverse or dispute prior charges, which may then have to be returned to the customers’ credit card issuer (and in turn, the customer) by Vantiv. Due to serious liquidity issues over the past months – including Vantiv’s withholding substantial sums to protect itself against this risk – the Debtors’ have over $20 million in customer orders for which the Debtors have obtained payment, but for which the Debtors have not shipped goods….

Vantiv is holding approximately $1.7 million of collections it made for the Debtors and, as of the Petition Date, continues to reserve 100% of the Debtors’ customer billings thereby guaranteeing a continuation of the vicious cycle that has strangled liquidity.

Right. Credit card processors aren’t typically in the business of losing money and they, generally, understand risk. This is what happens when a business starts to spiral: counter-parties who are more than happy to service your account when you’re, say, a high-flying startup ranked at the top of growth lists and featured in Techcrunch, abandon you like you’ve just fallen into a putrid pile of horse manure. Indeed, Vantiv’s threats to terminate credit card processing precipitated the chapter 11 filing: the company simply couldn’t function as an online business without credit card payment processing.

Sixth, we may be reading into things too much but it sure seems like the company engaged in some accounting shenanigans to help with liquidity — switching revenue recognition methodologies while in the midst of its liquidity issues. It helped…maybe…until it didn’t and when it didn’t, the company got pounded in a big big way with a big big outstanding tax liability. In many respects, the bankruptcy filing saves the debtors in this regard: through a customary tax motion and with DIP proceeds, the debtors seek to pay the approximately $5.87mm in back taxes owed. Death and taxes, baby. Death and taxes. Or, more appropriate here, bankruptcy and taxes. But we digress.

Finally, this bit should be a cautionary tale for startups in the e-commerce subscription business:

Unfortunately, the complexity of the transaction, the uncertainty surrounding eCommerce subscription companies, the amount of the Debtors’ funded, trade, and tax debt, and the recent challenges of the Debtors’ operations due to liquidity shortfalls, made it difficult to entice investors. Breakwater was one of the parties interested, and it spent substantial time and incurred costs in mid-July 2019 doing diligence and working on preliminary deal documents. But its interest waned, and sale discussions ceased. (emphasis added)

Riiiiight. Why would that be? Because, like, nobody has figured out how to make these subscription businesses actually work?!? 🤔

It’s telling when the entity that knows you the best and has been through the ups and downs with you wants no part of you going forward. Godspeed, Loot Crate. May the loot be with you.

  • Jurisdiction: D. of Delaware (Judge Shannon)

  • Capital Structure: $15mm credit facility (Breakwater Credit Opportunities Fund LP)

  • Professionals:

    • Legal: Bryan Cave Leighton Paisner LLP (Brian Duedall, Leah Fiorenza McNeill, Andrew Schoulder, Khaled Tarazi) & Robinson & Cole LLP (Jamie Edmonson, Natalie Ramsey, Mark Fink)

    • Independent Directors: Alexandre Zyngier, Osman Khan

    • Financial Advisor/CRO: Portage Point Partners (Stuart Kaufman)

    • Investment Banker: FocalPoint Securities LLC

    • Chief Transformation Officer: Theseus Strategy Group (Mark Palmer)

    • Communications Consultant: Sitrick and Company

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

  • Other Parties in Interest:

    • Prepetition Convertible Noteholder & DIP Lender: Money Chest LLC

      • Legal: Bayard PA (Erin Fay)

🚗New Chapter 11 Bankruptcy Filing - Total Finance Investment Inc.🚗

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Total Finance Investment Inc.

February 13, 2019

We’ve been asking about distress in the automotive industry since our inception and most recently noted in “🚗The Auto Sector is Quietly Restructuring🚗 that activity is picking up in the space. Admittedly, this case isn’t exactly what we had in mind. Nevertheless, earlier this week, Total Finance Investment Inc. and Car Outlet Holding Inc. (and affiliated debtors) filed for bankruptcy in the Northern District of Illinois; the debtors are an integrated chain of buy-here pay-here used vehicle dealerships in Illinois and Wisconsin.

What does “buy-here pay-here” mean? The debtors sold used vehicles, provided financing, AND operated an insurance broker to assist customers with procurement of automobile insurance coverage from third-party insurance providers. They “specifically catered to the fast-growing and underserved population of “unbanked” and “underbanked” Hispanic consumers in Northern Illinois and Milwaukee, which historically made up approximately 70% of the Debtors’ customer base.” There’s just one problem with all of this? Competition is BRUTAL. Per the company:

In recent years, BHPH dealerships have been subject to increasing industry-wide pressures that have negatively impacted their operating results, driving a number of the Debtors’ BHPH competitors out of business. The used vehicle dealership market is highly fragmented and fiercely competitive—with approximately 1,800 used car dealerships in Illinois alone—and the Debtors historically competed with other large used car dealerships like CarMax and DriveTime, as well as other BHPH operations. The fragmented nature of the industry and relatively low barriers to entry have led to steep competition between dealerships, putting significant downward pressure on the margins BHPH dealerships earn on vehicle sales. Further, as a result of a protracted period of increased capital availability, indirect auto lenders such as banks, credit unions, and finance companies have in recent years moved to originate subprime auto loans and offer attractive financing terms to customers with lower than average credit scores, putting pressure on BHPH operators’ market share among their traditional customer base.

Because, like, why not? Nothing has ever gone wrong when there has been excessive competition fiercely pursuing the subprime market. 🙈Ironically, the day before this filing, The Washington Post reported that 7mm Americans have, to the surprise of economists, stopped paying their auto loans. Whooooops. Per the WP:

The data show that most of the borrowers whose auto loans have recently moved into delinquency are people younger than 30 years old and people with low credit scores. Eight percent of borrowers with credit scores below 620 — otherwise known as subprime — went from good standing to delinquent on their auto loans in the fourth quarter of 2018.

No. Bueno. Anyway, back to the debtors. Read this part and tell us you don’t suffer PTSD circa-2008:

…capital markets became increasingly accessible for indirect auto lenders, many of which began to originate subprime loans and offer attractive financing terms to borrowers that historically had been overwhelmingly BHPH customers. The Debtors’ prior management team responded to the change in market conditions by providing larger loans with longer terms, accepting smaller down payments, and accepting transactions with increasingly negative equity in order to increase sales volume. The shift to offering riskier loans to subprime customers ultimately led to the Debtors experiencing historically high delinquency rates and losses beginning in the second half of 2015.

But wait. There’s more:

In addition to increased competition in the auto lending industry, the Debtors have also incurred significant expenses to ensure compliance with new regulations enacted by the Consumer Financial Protection Bureau. Furthermore, the political climate following the 2016 presidential election has had a negative impact on the spending habits of the Debtors’ traditional customer base in a manner that negatively impacted the Debtors’ operating results.

The debtors, therefore, suffered a consolidated pre-tax loss of approximately $29.9mm. MAGA!!!

The company has been trying to improve cash flows and operating results for years. One major initiative included, as far back as 2016, tightening underwriting standards to reduce consumer finance portfolio losses. We sure hope that there are others who took similar steps given the Washington Post report. But we digress.

Back in 2017, the debtors also received an $84mm equity infusion from Marubeni Corporation. Nevertheless, the debtors continued to hemorrhage to the point of compromising compliance with certain financial covenants under their senior secured debt facility with BMO Harris Bank NA. Thereafter, the company entered into a series of forbearance agreements with BMO as it attempted to figure out either a refinancing or an asset sale. In the end, the debtors obtained a restructuring support agreement and filed for bankruptcy to liquidate the used auto business and transfer its auto loan servicing business to a third-party servicer (PETITION Note: earlier this week, The Wall Street Journal reported that the mortgage servicing business is en fuego — notwithstanding the Ditech Holding Corporation bankruptcy (see here). We wonder: what sort of demand is there for subprime auto loan servicing businesses?). BMO Harris will fund the estates with a $4mm DIP credit facility.

So we’re left with this question: is this chapter 11 filing the canary in the coal mine for subprime auto lenders?

  • Jurisdiction: N.D. of Illinois (Judge Doyle)

  • Capital Structure: see below.

  • Professionals:

    • Legal: Sidley Austin LLP (Bojan Guzina, William Evanoff, Jackson Garvey)

    • Conflicts Legal: Togut Segal & Segal LLP

    • Financial Advisor: Portage Point Partners LLC

    • Interim Management: Development Specialists Inc.

    • Investment Banker: Keefe Bruyette & Woods and Miller Buckfire & Co. LLC

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

  • Other Professionals:

    • Prepetition Lender: BMO Harris Bank NA

      • Legal: Chapman and Cutler LLP (David Audley, Mia D’Andrea)

Source: First Day Declaration

Source: First Day Declaration

New Chapter 11 Bankruptcy - Maurice Sporting Goods Inc.

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Maurice Sporting Goods Inc.

  • 11/20/17 Recap: Another retailer with a deep legacy in this country has filed for bankruptcy. The plan is to sell to Middleton Management Company LLC, which has entered into a letter of intent with the company. We bet its for a fire sale price. But, first, let's take a step back: here, an Illinois-based manufacturer and distributor of 60,000 SKUs of outdoor sporting goods (fishing products, terminal tackle products, shooting sports accessories, etc.) has filed for bankruptcy, potentially leaving its relationship with its single largest customer, Walmart ($WMT), in limbo. The company blamed its debt (some of which was taken on to fund an acquisition spree from 2004-2011), a cost-overrun investment in a new state-of-the-art combined distribution center, the general retail environment, and dominoes. Wait, what? Dominoes? From the First Day Declaration, "The Debtors have also faced losses as a result of the recent bankruptcies of several retailers, including The Sports Authority, MC Sports (also known as Michigan Sporting Goods Distributors), Gander Mountain and Sport Chalet, and a generally challenging retail environment." We'd start the funeral dirge for sporting goods, generally, but earlier this week Hibbett Sports Inc. ($HIBB) reported earnings and surprised to the upside. Today, alone, the stock was up 13.74%. And Dick's Sporting Goods Inc. ($DKS) was up 1%. So have no fear kids: there are still gonna be physical places where you can check out some tackle products and, gulp, maybe shooting sports accessories...??
  • Jurisdiction: D. of Delaware (Judge Sontchi)
  • Capital Structure: $45mm debt (BMO Harris)    
  • Company Professionals:
    • Legal: Young Conaway Stargatt & Taylor LLP (Robert Brady, Michael Nestor, Justin Rucki, Ashley Jacobs, Tara Pakrouh)
    • Financial Advisor: Portage Point Partners
    • Investment Banker: Livingstone Partners
    • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • BMO Harris
      • Legal: Vedder Price PC (Douglas Lipke) & (local) Pepper Hamilton LLP (David Stratton)

Updated 11/23/17