New Chapter 11 Bankruptcy Filing - PQ New York Inc. (a/k/a Le Pain Quotidien)

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PQ New York Inc.

May 27, 2020

New York-based and Belgium-company-owned PQ New York Inc., otherwise known to most as Le Pain Quotidien, filed for chapter 11 bankruptcy in the District of Delaware (along with 104 affiliates) to effectuate a sale of assets to LPQ USA LLC, an affiliate of Aurify Brands. Aurify Brands incubates in-house brands (e.g., Melt Shop) and harvests previously-created brands too (e.g., Five Guys Burgers and Fries). It intends to re-open no fewer than 35 of LPQ’s 98 restaurants (and, to this end, has already filed a lease rejection motion delineating which leases, subject to a negotiation between landlords and the proposed purchaser, are subject to rejection). LPQ USA LLC provided the debtors a $522k bridge loan pre-petition and roll that loan up into a $3mm post-petition DIP credit facility to fund working capital needs during the course of the cases.

This is not a pure COVID story. The debtors financial performance began to decline pre-pandemic as customer preferences shifted away from the casual dining concept towards other concepts like “grab n go.” This trend, combined with management turnover and lack of investment at the store level, led the debtors to begin exploring strategic alternatives for their European and US-based businesses in Q3 of 2019.

Let’s put some numbers around this. In 2018, the debtors had $175mm of sales and $4.4mm in EBITDA. In 2019, sales dropped to $153mm and EBITDA swung by over $20mm to -$16.8mm. Even worse? There was no hope on the horizon. With expensive leases and eroding same store sales, the debtors forecast negative EBITDA through 2023 absent a severe operational restructuring. Prior to COVID slamming the economy and shutting everything down, the debtors had already determined that a bankruptcy filing would be necessary to help negotiate lease terms with landlords, secure funding, and pursue a sale. The shutdown just postponed things for a while.

  • Jurisdiction: D. of Delaware (Judge Dorsey)

  • Capital Structure: $522k bridge loan

  • Professionals:

    • Legal: Richards Layton & Finger PA (Mark Collins, Michael Merchant, Jason Madron, Brendan Schlauch)

    • Financial Advisor/CRO: PwC (Steven Fleming)

    • Investment Banker: SSG Advisors LLC

    • Real Estate Advisor: RCS Real Estate Advisors

    • Claims Agent: Donlin Recano & Company Inc. (*click on the link above for free docket access)

  • Other Parties in Interest:

    • Stalking Horse Purchaser: LPQ USA LLC

      • Legal: Katten Muchin Rosenman LLP (Steven Reisman, Cindi Giglio) & Klehr Harrison Harvey Branzburg LLP (Domenic Pacitti, Morton Branzburg)

👗New Chapter 11 Filing - J&M Sales Inc./National Stores Inc.👗

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Another day, another retailer in bankruptcy. Today, J&M Sales Inc., a “leading discount retailer” with $5-average-price goods in 344 stores in 22 states — operating under the names Fallas, Fallas Paredes, Fallas Discount Stores, Factory 2-U, Fallas and Anna’s Linen’s by Fallas — finds itself in bankruptcy court. The company offers value-priced merchandise, including apparel, bedding, household supplies, decor items and more; it generally supports underserved, low-income communities and can be found in power strip centers, specialty centers and downtown areas. All of its locations are leased.

The company blames (i) general retail pressures, (ii) bad weather (specifically hurricanes Harvey and Maria), (iii) a data breach (and a attendant $2mm reserve account set up by the credit card companies) and (iv) poor integration of growth acquisitions (e.g., Conway’s) for its chapter 11 filing. These company-specific factors may help explain why this company is apparently bucking the national trend of discount retail success (see, e.g., Dollar Tree).

The company intends to use the chapter 11 process to shop itself as a going concern and close at least 74 stores. The company makes no mention, however, of the extent of the sale process and there is no stalking horse bidder currently lined up. The company will seek approval of a (no new money?) $57mm DIP credit facility as well as credit support from certain “Critical Vendors” on a second and third lien basis.

  • Jurisdiction: D. of Delaware (Judge Silverstein)

  • Capital Structure: $57mm ABL (Encina Business Credit LLC/Israel Discount Bank of New York), $30mm term loan (Gordon Brothers Finance Company), $13.4mm Letters of Credit, $10mm Fallas Loan

  • Company Professionals:

    • Legal: Katten Muchin Roseman LLP (WIlliam Freeman, Karen Dine, Jerry Hall) & (local) Pachulski Stang Ziehl & Jones LLP (Richard Pachulski, Peter Keane)

    • Financial Advisor: SierraConstellation Partners LLC (Curt Kroll)

    • Investment Banker: Imperial Capital LLC

    • Real Estate Advisor: RCS Real Estate Advisors

    • Liquidation Agent: Hilco Merchant Resources LLC

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

  • Other Parties in Interest:

    • DIP Agents: Encina Business Credit LLC (Legal: Choate Hall & Stewart LLP, Kevin Simard) & Discount Bank of New York (Legal: Otterbourg PC, Daniel Fiorillo)

New Chapter 11 & CCAA Filing - Payless Shoesource Inc.

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Payless Shoesource Inc.

  • 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.)    
  • Company Professionals:
    • Legal: Kirkland & Ellis LLP (James Sprayragen, Nicole Greenblatt, William Guerrieri, Christine Pirro, Jessica Kuppersmith) & (local) Armstrong Teasdale LLP (Steven Cousins, Erin Edelman) & (Canadian counsel) Osler Hoskin & Harcourt LLP 
    • Legal to Independent Director: Munger Tolles & Olson LLP (Thomas Walper, Seth Goldman, Kevin Allred)
    • Financial Advisor: Alvarez & Marsal North America LLC (Robert Campagna)
    • Investment Banker: Guggenheim Securities LLC (Morgan Suckow)
    • 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)
      • Financial Advisor: Province Inc.

Updated 4/18/17