New Chapter 11 Bankruptcy Filing - Charlotte Russe Holding Inc.

Charlotte Russe Holding Inc.

February 3, 2019

San Diego-based specialty women’s apparel fast-fashion retailer Charlotte Russe Holding Inc. is the latest retailer to file for bankruptcy. The company has 512 stores in 48 U.S. states. The company owns a number of different brands that it sells primarily via its brick-and-mortar channel; it has some brands, most notably “Peek,” which it sells online and wholesale to the likes of Nordstrom.

The company’s capital structure consists of:

• $22.8mm 6.75% ‘22 first lien revolving credit facility (ex-accrued and unpaid interest, expenses and fees)(Bank of America NA), and

• $150mm 8.5% ‘23 second lien term loan ($89.3mm funded, exclusive of unpaid interest, expenses and fees)(Jefferies Finance LLC). The term loan lenders have first lien security interests in the company’s intellectual property.

The company’s trajectory over the last decade is an interesting snapshot of the trouble confronting the brick-and-mortar retail space. The story begins with a leveraged buyout. In 2009, Advent International acquired the debtors through a $380mm tender offer, levering up the company with $175mm in 12% subordinated debentures in the process. At the time, the debtors also issued 85k shares of Series A Preferred Stock to Advent and others. Both the debentures and the Preferred Stock PIK’d interest (which, for the uninitiated, means that the principal or base amounts increased by the respective percentages rather than cash pay interest or dividends being paid over time). The debtors later converted the Preferred Stock to common stock.

Thereafter, the debtors made overtures towards an IPO. Indeed, business was booming. From 2011 through 2014, the debtors grew considerably with net sales increased from $776.8mm to $984mm. During this period, in May of 2013, the debtors entered into the pre-petition term loan, used the proceeds to repay a portion of the subordinated debentures and converted the remaining $121.1mm of subordinated debentures to 8% Preferred Stock (held by Advent, management and other investors). In March 2014, the debtors and its lenders increased the term loan by $80mm and used the proceeds to pay a one-time dividend. That’s right folks: a dividend recapitalization!! WE LOVE THOSE. Per the company:

In May 2014, the Debtors paid $40 million in dividends to holders of Common Stock, $9.8 million in dividends to holders of Series 1 Preferred Stock, which covered all dividends thus far accrued, and paid $65.7 million towards the Series 1 Preferred Stock principal. The Debtors’ intention was to use a portion of the net proceeds of the IPO to repay a substantial amount of the then approximately $230 million of principal due on the Prepetition Term Loan.

In other words, Advent received a significant percentage of its original equity check back by virtue of its Preferred Stock and Common Stock holdings.

Guess what happened next? Well, after all of that money was sucked out of the business, performance, CURIOUSLY, began to slip badly. Per the company:

Following fifteen (15) consecutive quarters of increased sales, however, the Debtors’ performance began to materially deteriorate and plans for the IPO were put on hold. Specifically, gross sales decreased from $984 million in fiscal year 2014 with approximately $93.8 million in adjusted EBITDA, to $928 million in fiscal year 2017 with approximately $41.2 million in adjusted EBITDA. More recently, the Debtors’ performance has materially deteriorated, as gross sales decreased from $928 million in fiscal year 2017 with approximately $41.2 million in adjusted EBITDA, to an estimated $795.5 million in fiscal year 2018 with approximately $10.3 million in adjusted EBITDA.

Consequently, the company engaged in a year-long process of trying to address its balance sheet and/or find a strategic or financial buyer. Ultimately, in February 2018, the debtors consummated an out-of-court restructuring that (i) wiped out equity (including Advent’s), (ii) converted 58% of the term loan into 100% of the equity, (iii) lowered the interest rate on the remaining term loan and (iv) extended the term loan maturity out to 2023. Advent earned itself, as consideration for the cancellation of its shares, “broad releases” under the restructuring support agreement. The company, as part of the broader restructuring, also secured substantial concessions from its landlords and vendors. At the time, this looked like a rare “success”: an out-of-court deal that resulted in both balance sheet relief and operational cost containment. It wasn’t enough.

Performance continued to decline. Year-over-year, Q3 ‘18 sales declined by $35mm and EBITDA by $8mm. Per the company:

The Debtors suffered from a dramatic decrease in sales and in-store traffic, and their merchandising and marketing strategies failed to connect with their core demographic and outpace the rapidly evolving fashion trends that are fundamental to their success. The Debtors shifted too far towards fashion basics, did not effectively reposition their e-commerce business and social media engagement strategy for success and growth, and failed to rationalize expenses related to store operations to better balance brick-and-mortar operations with necessary e-commerce investments.

In the end, bankruptcy proved unavoidable. So now what? The company has a commitment from its pre-petition lender, Bank of America NA, for $50mm in DIP financing (plus $15mm for LOCs) as well as the use of cash collateral. The DIP will roll-up the pre-petition first lien revolving facility. This DIP facility is meant to pay administrative expenses to allow for store closures (94, in the first instance) and a sale of the debtors’ assets. To date, however, despite 17 potential buyers executing NDAs, no stalking horse purchaser has emerged. They have until February 17th to find one; otherwise, they’re required to pursue a “full chain liquidation.” Notably, the debtors suggested in their bankruptcy petitions that the estate may be administratively insolvent. YIKES. So, who gets screwed if that is the case?

Top creditors include Fedex, Google, a number of Chinese manufacturers and other trade vendors. Landlords were not on the top 30 creditor list, though Taubman Company, Washington Prime Group Inc., Simon Property Group L.P., and Brookfield Property REIT Inc. were quick to make notices of appearance in the cases. In total, unsecured creditors are owed approximately $50mm. Why no landlords? Timing. Despite the company going down the sh*tter, it appears that the debtors are current with the landlords (and filing before the first business day of the new month helps too). Not to be cynical, but there’s no way that Cooley LLP — typically a creditors’ committee firm — was going to let the landlords be left on the hook here.

And, so, we’ll find out within the next two weeks whether the brand has any value and can fetch a buyer. In the meantime, Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC will commence liquidation sales at 90+ locations. We see that, mysteriously, they somehow were able to free up some bandwidth to take on an new assignment sans a joint venture with literally all of their primary competitors.

• Jurisdiction: D. of Delaware (Judge Silverstein)

• Capital Structure: $22.8mm 6.75% ‘22 first lien revolving asset-backed credit facility (ex-accrued and unpaid interest, expenses and fees)(Bank of America NA), $150mm 8.5% ‘23 second lien term loan ($89.3mm funded, exclusive of unpaid interest, expenses and fees)(Jefferies Finance LLC)

• Company Professionals:

  • Legal: Cooley LLP (Seth Van Aalten, Michael Klein, Summer McKee, Evan Lazerowitz, Joseph Brown) & (local) Bayard PA (Justin Alberto, Erin Fay)

  • Independent Director: David Mack

  • Financial Advisor/CRO: Berkeley Research Group LLC (Brian Cashman)

  • Investment Banker: Guggenheim Securities LLC (Stuart Erickson)

  • Lease Disposition Consultant & Business Broker: A&G Realty Partners LLC

  • Liquidating Agent: Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC

  • Liquidation Consultant: Malfitano Advisors LLC

  • Claims Agent: Donlin Recano & Company (*click on company name above for free docket access)

• Other Parties in Interest:

  • DIP Lender ($50mm): Bank of America NA

    • Legal: Morgan Lewis & Bockius LLP (Julia Frost-Davies, Christopher Carter) & (local) Richards Layton & Finger PA (Mark Collins)

  • Prepetition Term Agent: Jefferies Finance LLC

    • Legal: King & Spalding LLP (Michael Rupe, W. Austin Jowers, Michael Handler)

  • Official Committee of Unsecured Creditors (Valueline Group Co Ltd., Ven Bridge Ltd., Shantex Group LLC, Global Capital Fashion Inc., Jainson’s International Inc., Simon Property Group LP, Brookfield Property REIT Inc.)

    • Legal: Whiteford Taylor & Preston LLP (Christopher Samis, L. Katherine Good, Aaron Stulman, David Gaffey, Jennifer Wuebker)

    • Financial Advisor: Province Inc. (Edward Kim)

Updated 2/14/19 at 1:41 CT

💍New Chapter 11 Filing - Samuels Jewelers Inc.💍

Samuels Jewelers Inc.

8/7/18

Let’s start by all agreeing that the pictured $900 engagement rings are outright hideous. Nobody wants those. Literally. Nobody. And so…bankruptcy.

Ok, so we’re being a bit flip here (as always) but the truth is that in addition to people not going to malls anymore, people have become increasingly comfortable purchasing jewelry over the internet. Don’t believe us? The list of growing Instagram-dominant direct-to-consumer jewelry brands seems to be growing longer than the list of professional athletes President Trump has insulted. There’s Vrai & Oro, Aurate, and several others. When a company is facing this kind of onslaught, it simply cannot be distracted by other externalities like…say, fraud at the parent level. That’s right. Per Reuters back in May:

U.S. jewelry chain Samuels Jewelers has hired a turnaround adviser at the request of its creditors in a bid to avoid the fate of brick-and-mortar retailers that filed for bankruptcy amid intensifying competition, according to people familiar with the matter.

Samuel Jewelers’ action comes as its Indian parent company, Gitanjali Gems Ltd, finds itself in legal hot water. Gitanjali’s chairman, Mehul Choksi, was accused by state-run Punjab National Bank in India of defrauding it of nearly $2 billion.

Or, even more significant, burdensome leases on its 120 leased stores in 23 states. Per the company:

The Debtor's headquarters and retail stores are leased. The Debtor does not own any real property. The aggregate monthly rent due under the leases (collectively, the "Leases") is approximately $1.7 million. The Debtor's retail store Leases generally have initial terms of ten years with varying options to extend. As of the Petition Date, the remaining terms under the Debtor's existing store Leases were widely variant, but the majority of the Leases currently will expire in or before 2023. The remainder of the Leases currently will expire between 2024 and 2028. As of the Petition Date, the Debtor owes approximately $3.0 million in unpaid current lease obligations.

And so, against this backdrop, the “bid” clearly failed because, today, Texas-based Samuels Jewelers Inc. has, indeed, filed for bankruptcy. The filing essentially marks a fitting new chapter for an enterprise so accustomed to bankruptcy court that it probably ought to be paying annual dues. Predecessor entities filed for bankruptcy in 1992, 1997, and 2003. With that historical perspective, we suppose that Gitanjali ought to be commended for extending the company’s streak outside of bankruptcy court beyond five or six years to a…gulp…commendable fifteen.

Why bankruptcy? Why now? To elaborate on our preface, a few reasons. First,“increasing competition in the retail jewelry industry, including competition by discount and other retailers, including online retailers.” So, like we said. And, second, the aforementioned fraud allegations and related India National Company Law Tribunal injunctive order against Gitanjali and other former principals of the company had the affect of (a) cutting off a major source of product historically sourced from Gitanjali or other non-debtor affiliates, (b) eliminating an oft-tapped short-term funding source, and (c) spooking third-party vendors and suppliers. Given these issues, the company opted to seek chapter 11 protection with the hope that it could stabilize operations, enhance liquidity and preserve value. In that vein, the company — despite having neither an investment banker nor a stalking horse bidder at the time of filing — hopes to sell the business as a going concern. Contemporaneously, the company hopes to assume an agreement to retain Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC as consultants to dispose of excess inventory and conduct store closing sales. Accordingly, major creditors include, as you might expect, the usual array of landlords, General Growth Properties ($GGP), Simon Property Group Inc. ($SPG), and Macerich Co. ($MAC).

Finally, the company will also seek approval of a poorly-named $100mm DIP Working Capital Facility — the majority of which will be used not for working capital but to roll-up Wells Fargo and Gordon Brothers’ loans — to fund the case until a buyer is found or the company liquidates. Anyone want to place bets on which scenario plays out?

• Jurisdiction: D. of Delaware (Judge Carey)

• Capital Structure: $84mm revolving credit facility (Wells Fargo Bank NA), $10mm term loan (GB Credit Partners LLC)

• Company Professionals:

  • Legal: Jones Day (Greg Gordon, Amanda Rush, Jonathan Fisher, Paul Green) & (local) Richards Layton & Finger PA (Daniel DeFranceschi, Zachary Shapiro)

  • Financial Advisor: Berkeley Research Group (Robert Duffy)

  • Liquidators: Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC

  • Claims Agent: Prime Clerk LLC

• Other Parties in Interest:

  • Prepetition RCF Lender: Wells Fargo Bank NA (Legal: Morgan Lewis & Bockius LLP, Julia Frost-Davies, Christopher Carter, Sandra Vrejan & (local) Reed Smith LLP, Kurt Gwynne, Jason Angelo).

  • Prepetition Term Agent & DIP Term Agent: Gordon Brothers Finance Company (Choate Hall & Stewart LLP, John Ventola, Jonathan Marshall & (local) Womble Bond Dickinson US LLP, Matthew Ward, Morgan Patterson)

New Chapter 11 Filing - Brookstone Holdings Corp.

Wellness, Entertainment & Travel Retailer Now Bankrupt

Brookstone Holdings Corp.

8/2/16

Source: Brookstone.com

Almost exactly a month ago we asked “Is Brookstone Headed for Chapter 22?” and wrote the following:

Go to Brookstone’s website for “Gift Ideas” and “Cool Gadgets” and then tell us you have any doubt. We especially liked the pop-up asking us to sign up for promotional materials one second after landing; we didn’t even get a chance to see what the company sells before it was selling us on a flooded email inbox. Someone please hire them a designer.

On Friday, Reuters reported that the company has hired Gibson Dunn & Crutcher LLP(remember them?) to explore its restructuring options. What’s the issue? Well, retail. Need there be any further explanation?

The company has roughly 120 stores (20 are in airports), approximately $45mm of debt and a Chinese sponsor in Sanpower Group Co Ltd.

This is a big change from when it first filed for bankruptcy in April 2014. At the time of that filing, the company had 242 stores and approximately $240mm in debt. The company blamed its over-levered capital structure for its inability to address its post-recession challenges. It doesn’t appear to have the same excuse now.

Upon emergence, it reportedly still had 240 stores. Clearly the company ought to have used the initial bankruptcy for more of an operational fix in addition to its balance sheet restructuring. While this could be a costly mistake, the company’s sponsor is a bit of a wild card here: Chinese sponsors tend to be more disinclined to chapter 11 proceedings than American counterparts. Will they write an equity check then?

Well, we now have our definitive answers. Yes. The company filed for bankruptcy earlier today. And whether Sanpower was disinclined to file or not, well…it’s in bankruptcy. And, it will not, at least not as of now, be writing an equity check.

The New Hampshire-based company describes itself as “a product development company and multichannel retailer that offer a number of highly distinctive and uniquely designed products. The Brookstone brand is strongly associated with cutting-edge innovation, superior quality, and sleek and elegant design.” Which is precisely why we plastered a “videocassette” emoji in our title. Because that description comports 100% with the way we view the brand. But we digress.

The company has clearly engaged in some downsizing since emerging from bankruptcy a few years ago; it notes that it currently operates 137 retail stores across 40 states with 102 of those stores located in malls and 35 in airports; it also carries 700 SKUs, the majority of which fall in one of three product categories (wellness, entertainment and travel). It sells across four product channels: mall retail, airport retail, e-commerce (brookstone.com and Amazon.com), and wholesale (including TV shopping which, we believe, means home shopping network sort of stuff). For fiscal year 2017, the company had net sales of $264mm and negative EBITDA was $60mm. For the first half of 2018, net sales were $74mm and negative EBITDA was $29mm. Annualize that first number and you’re looking at a pretty precipitous drop in revenue!

The company highlights the juxtaposition between its mall and retail sales channels. Whereas the former generated ‘17 net sales of $137.9mm and negative EBITDA of $30mm, the latter generated net sales of $37.7mm and “adjusted” EBITDA of $1.4mm. We haven’t seen the numbers but we’re guessing the adjustment takes this statement into account:

Moreover, the net sales and adjusted EBITDA figures do not tell the whole story with respect to the productivity of the Airport retail outlets. As described further below, supply chain issues have limited the sales potential that would otherwise be captured with a healthy network of suppliers. The Debtors believe that through the bankruptcy they can correct the supply chain issues and allow the airport stores to greatly increase their profitability.

🤔🤔 Seeing a lot of adjustments on the basis of “belief” these days.

Likewise, the company claims that aberrational externalities affected its e-commerce operations as well. There, the company claims $55.2mm in net sales and negative adjusted EBITDA of $1mm. The company believes that the discontinuation of its catalog mailings had a detrimental impact on its e-commerce (and store retail) numbers. It notes:

As with the airport retail segment, the net sales and adjusted EBITDA associated with the Debtors’ ecommerce segment is not reflective of its true potential due to supply chain difficulties. In addition, and as described further below, technology issues and a turnover of senior level management at the e-commerce segment led to underperformance at a segment that should be performing at a significantly higher level. The Debtors believe that the bankruptcy filing will afford the Debtors the opportunity to right the operational defects that have artificially stymied the overall profitability that should be incumbent to the Debtors’ online presence.

Finally, the company claims its wholesale business has a lot of demand and has been under-utilized due to the same supply chain issues affecting its other channels.

In other words, when we said earlier that “[c]learly the company ought to have used the initial bankruptcy for more of an operational fix,” we hit the nail on the head. The company notes:

Following the 2014 Bankruptcy, sales continued to lag almost immediately. For the years ended 2014 and 2015, net sales were pegged at approximately $420 million and $389 million respectively, while adjusted EBITDA was booked at negative $38 million and negative $24 million respectively. While a number of factors contributed to the underperformance, sourcing of products and supply chain difficulties were the major drivers.

But of course there’s an overall macro overlay here too:

The drop in net sales in 2016 and 2017 was further exacerbated by the decline in the mall model as a means for consumers to buy products of the type sold by Brookstone. During this time, foot traffic at mall locations decreased drastically, as consumers continued to seek out products online as a replacement for traditional brick and mortar shopping.

The company’s e-commerce efforts could not pick up the slack. It blames leadership changes, a new platform (and a loss of data and indexing that resulted), and the discontinuation of the hard copy catalog for this. The company notes:

Because the catalogs were directly responsible for a significant portion of the web traffic on the Debtors’ e-commerce site, the negative impact on the Debtors’ online sales was dramatic.

Anyone who thinks that e-commerce can survive independent of paper mailings ought to re-read that sentence. It also explains the fifteen Bonobos catalogs we get every week and the 829-pound Restoration Hardware calalog we receive every quarter. Remember the buzzword of the year: “multi-channel.” Case and point.

To make this already (too) long story short, Sanpower kept sinking money into this sinking ship until it finally decided that it was just throwing good money after bad. Callback to July when we said they’re disinclined to chapter 11…well, lighting millions of dollars on fire will make you a little more inclined. 💥💥

Powered by a $30mm DIP credit facility (not all new money: some will be used to refi out the ABL) from its prepetition (read: pre-bankruptcy) lenders, the company intends to use the bankruptcy filing to execute an orderly store closing process and market and sell the business. This is clearly why it went to great lengths to pretty up its e-commerce, mall and wholesale businesses in its narrative. Still, the company has been marketing the business for a month and, thus far, there are no biters. Per the agreement with its DIP lenders, the company has until September 2018 to effectuate its sale process. You read that right: a company that bled out over a period of years has two months on life support.

Major creditors include Chinese manufacturers and, as you might expect, the usual array of landlords, General Growth Properties ($GGP), Simon Property Group Inc. ($SPG), and Macerich Co. ($MAC). Given the positioning of the respective businesses, we wouldn’t expect much of a mall business to survive here regardless of whether a buyer emerges.

• Jurisdiction: D. of Delaware (Judge Shannon)

• Capital Structure: $70mm ABL Revolver (Wells Fargo NA) & $15mm Term Loan (Gordon Brothers Finance Company), $10mm second lien notes (Wilmington Trust), $39.4mm Sanpower Secured Notes, $46.6mm Sanpower Unsecured Notes

• Company Professionals:

  • Legal: Gibson Dunn & Crutcher LLP (David Feldman, Matthew Kelsey, Matthew Williams, Keith Martorana, Jason Zachary Goldstein) & (local) Young Conaway Stargatt & Taylor LLP (Michael Nestor, Sean Beach, Andrew Magaziner)

  • Financial Advisor: Berkeley Research Group LLC

  • Investment Banker: GLC Advisors & Co. (Soren Reynertson)

  • Liquidator Consultants: Gordon Brothers Retail Partners LLC & Hilco Merchant Resources LLC

  • Claims Agent: Omni Management Group (*click on company name above for free docket access)

• Other Parties in Interest:

  • DIP Agent: Wells Fargo NA (Morgan Lewis & Bockius LLP, Glenn Siegel, Christopher Carter & Burr & Forman LLP, J. Cory Falgowski)

  • DIP Term Agent: Gordon Brothers Finance Company (Choate Hall & Stewart, Kevin Simard, Jonathan Marshall & Richards Layton & Finger PA, John Knight)

  • Indenture Trustee: Wilmington Trust NA

New Chapter 11 Filing - Nine West Holdings Inc.

Nine West Holdings Inc.

April 6, 2018

Nine West Holdings Inc., the well-known footwear retailer, has finally filed for bankruptcy. The company will sell its Nine West and Bandolino brands to Authentic Brands Group and reorganize around its One Jeanswear Group, The Jewelry Group, the Kasper Group, and Anne Klein business segments. The company has a restructuring support agreement in hand to support this dual-process. 

More on the situation here. 

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

• Capital Structure: See below.

Source: First Day Declaration

• Company Professionals:

  • Legal: Kirkland & Ellis LLP (James Sprayragen, James Stempel, Joseph Graham, Angela Snell, Anna Rotman, Jamie Aycock, Justin Alphonse Mercurio, Alyssa Russell)

  • Financial Advisor: Alvarez & Marsal North America LLC (Ralph Schipani III, Julie Hertzberg, Holden Bixler, Amy Lee, Richard Niemerg, Theodore Langer, Stuart Loop, Thomas Koch, Michael Dvorak)

    • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Andrew Leblanc, Alexander Lees)

  • Investment Banker: Lazard Freres & Co. LLC (David Kurtz, Ari Lefkovits, David Hales, Mike Weitz, Nikhil Angelo, Okan Kender, Abigail Gay, Drew Deaton) & Consensus Advisory Services LLC

  • Authorized Officers: Stefan Kaluzny, Peter Morrow, Harvey Tepner, Alan Miller

  • Legal to the Authorized Officers: Munger Tolles & Olson LLP (Seth Goldman, Kevin Allred, Thomas Walper)

  • Financial Advisor to the Authorized Officers: Berkeley Research Group LLC (Jay Borow)

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

• Other Parties in Interest:

  • Stalking Horse Bidder/Buyer: Authentic Brands Group

    • Legal: DLA Piper LLP (Richard Chesley, Ann Lawrence, Rachel Ehrlich Albanese)

  • Prepetition ABL and FILO Agent: Wells Fargo NA

    • Legal: Morgan Lewis & Bockius LLP (Matthew Ziegler, Julia Frost-Davies, Amelia Joiner)

  • Administrative Agent for the prepetition secured and unsecured Term Loan Facilities: Morgan Stanley Senior Funding Inc.

  • Indenture Trustee for 3 series of Unsecured Notes: US Bank NA

    • Legal: White & Case LLP (J. Christopher Shore, Philip Abelson) & Seward & Kissel LLP (John Ashmead, Arlene Alves)

  • Ad Hoc Group of Secured Lenders (Farmstead Capital Management LLC, KKR Credit Advisors (US) LLC)

    • Legal: Davis Polk & Wardwell LLP (Marshall Huebner, Darren Klein, Adam Shpeen)

    • Financial Advisor: Ducera Partners LLC

  • Ad Hoc Group of Crossover Lenders (Alden Global Capital LLC, Carlson Capital LP, CVC Credit Partners LLC, Silvermine Capital Management LLC, Trimaran Advisors)

    • Legal: King & Spalding LLP (Michael Rupe, Jeffrey Pawlitz, Michael Handler, Bradley Giordano)

    • Financial Advisor: Guggenheim Securities LLC

  • Brigade Capital Management, LP

    • Legal: Kramer Levin Naftalis & Frankel LLP (Douglas Mannel, Rachael Ringer)

    • Financial Advisor: Moelis & Company

  • Ad Hoc Group of 2019 Unsecured Noteholders (Whitebox Advisors LLC, Scoggin Management LP, Old Bellows Partners LP, Wazee Street Opportunities Fund IV)

    • Legal: Willkie Farr & Gallagher LLP (Rachel Strickland)

  • Ad Hoc Group of 2034 Unsecured Noteholders

    • Legal: Jones Day

    • Financial Advisor: Houlihan Lokey

  • Administrative Agent for $247.5mm DIP ABL Facility

  • Administrative Agent for $50mm DIP TL Facility

  • Sponsor: Sycamore Partners LP

    • Legal: Proskauer Rose LLP (Mark Thomas, Peter Young, Michael Mervis, Jared Zajac, Chantel Febus, Alyse Stach)

  • KKR Asset Management

    • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Andrew Leblanc)

  • Morgan Stanley & Co. LLC and Morgan Stanley Senior Funding Inc.

    • Legal: Ropes & Gray LLP (Gregg Galardi, Gregg Weiner)

  • Official Committee of Unsecured Creditors (Aurelius Capital Master Ltd., GLAS Trust Company LLC, PBGC, Simon Property Group, Stella International Trading (Macao Commercial Offshore) Ltd., Surefield Limited, U.S. Bank NA)

    • Legal: Akin Gump Strauss Hauer & Feld LLP (Daniel Golden, David Zensky, Deborah Newman, Arik Preis, Jason Rubin, Anthony Loring, Michael Byun, Patrick Chen)

    • Legal Conflicts Counsel: Kasowitz Benson Torres LLP (David Rosner, Howard Schub)

    • Financial Advisor: Protiviti Inc. (Guy Davis, Suzanne Roski, Heather Williams, John Eldred, Justin Koehler, Brian Taylor, Russell Brooks, Matthew Smith, Blake Parker, Lee Slobodien, Omkar Vale, Lok Lam, Sean Sterling) & Province Inc. (Michael Atkinson, Jason Crockett, Eunice Min, Byron Groth)

    • Investment Banker: Houlihan Lokey Capital Inc. (Saul Burian, Surbhi Gupta, Chris Khoury, Tejas Kullarwar, Matt Ender, Brendan Wu)

Updated 11/3/18 at 6:42 am CT

New Chapter 11 Bankruptcy - The Walking Company Holdings Inc.

The Walking Company Holdings Inc.

3/8/18 Recap: Another retailer - this time a repeat offender - will be walking into bankruptcy court (see what we did there?). Here, the California-based once-publicly-traded ($WALK) manufacturer of footwear like Birkenstock and ASICS has filed for bankruptcy with a plan on file and an equity sponsor in tow to the tune of $10mm. 

This is a story of staggered disruption. In the first instance, the company expanded via acquisition and grew from 2005-2008 to over 200 stores. To fund the expansion, the company issued $18.5mm of convertible notes and transferred the proceeds of the liquidation of its Big Dog entity to The Walking Company, the use of proceeds including the buildout of omni-channel distribution and vertical integration. But,

As a result of many factors including- among them, challenging negotiations with landlords which did not provide the Debtors with the rent relief they believe they needed, and the state of the national economy, by late 2008 TWC found that nearly 100 of the newer stores it opened during this expansion period were not generating the sales and profits expected.

Moreover, 

...by 2008, Big Dogs' business had collapsed more rapidly than the Debtors had anticipated. Big Dogs was in the business of selling moderately priced, casual apparel through a chain of specialty retail stores (Big Dogs stores) located around the country. The rapid growth of big-box, mass-market retailers during this period put great pricing pressure on retailers of moderately priced, casual apparel, putting many of them out of business.

Walmart ($WMT). Target ($TGT). Just say it broheims. Never understand the reluctance in these filings. Anyway, the upshot of all of this? Once the Great Recession hit, mall traffic fell off a cliff, revenue declines accelerated, landlords proved obstinate, and the company filed for bankruptcy in December 2009. 

In bankruptcy, the company reached accommodations with certain landlords and received a $10mm capital infusion from Kayne Anderson Capital Advisors LP. 

Subsequent to the bankruptcy, the company apparently thrived from 2013 through 2017. It had a better rent structure, it ceased expansion, and it focused on successful brands (e.g., ABEO) and the wholesaling and international licensing thereof. But then the realities of e-commerce struck. Per the company,

During this period, however, the increasing power of Internet retailers made traditional business of retail stores selling products manufactured by others increasingly difficult, and it also had an increasingly negative impact on customer traffic in shopping malls. 

Indeed, Deckers Outdoor Corporation ($DECK)(the manufacturer of UGG footwear) terminated its relationship with the company. The company couldn't replace those lost sales fast enough - through third party or private label sales - and the dominos started to fall. The company sought rent concessions and landlords, for the most part, told it to pound sand. Holiday sales declined. Appraisers reduced the valuation of inventory and, in turn, the company had diminished access to its bank credit line. Cue the Scarlet 22.

The company intends to use the bankruptcy to obtain "substantial rent relief by conforming their lease portfolio to market rents." Notably, two of the initial 5 leases that the company seeks to reject in the first instance are Simon Property Group locations in Dallas and Oklahoma City and one Taubman location. Other creditors appear to be your standard retail slate: Chinese manufacturers, trade vendors (ECCO, Rockport) and other landlords (General Growth Properties is a prominent one with locations listed as 9 of the top 30 creditors). 

The company otherwise has agreement with its large shareholders (including another $10mm equity infusion) and Wells Fargo to provide DIP and exit credit. 

• Jurisdiction: D. of Delaware 
• Capital Structure: $40.3mm RCF & $7.25mm TL (Wells Fargo Bank NA), $11.74mm 8.375% '19 convertible notes    
• Company Professionals:
  • Legal: Pachulski Stang Ziehl & Jones LLP (Jeffrey N Pomerantz, Jeffrey W Dulberg, Victoria A Newmark, James E ONeill) 
  • Financial Advisor: Consensus Advisors LLC
  • Claims Agent: KCC (*click on company name above for free docket access)
• Other Parties in Interest:
  • DIP Agent, DIP Term Agent, Prepetition Senior Agent: Wells Fargo Bank NA
    • Legal: Choate Hall & Stewart LLP (Kevin Simard) & (local) Womble Bond Dickinston (Matthew Ward)
  • Prepetition Subordinated Noteholders (Simon Property Group, Galleria Mall Investors LP)
    • Legal: Irell & Manella LLP (Jeffrey Reisner)

New Chapter 11 Bankruptcy - B. Lane Inc. (d/b/a Fashion to Figure)

Fashion to Figure (@FTFSnaps)

• 11/13/17 Recap: Another retailer finds its way to bankruptcy. Here, the New York-based plus-size women's specialty retailer with 26-mall-and-outlet-center-based locations has filed for bankruptcy in New Jersey. The company appears to be suffocating under the weight of its brick and mortar locations but purports to have successful e-commerce and wholesale channels. It intends to pursue a sale of all of its assets "to be consummated as soon as possible given the upcoming critical holiday shopping season commencing on 'Black Friday'...." Wait, huh? The company is filing NOW to get out AHEAD of Black Friday? No wonder this company is bankrupt. Of course, the company is also considering vacating locations and "expeditiously conducting going out of business" sales. To this end, the company has filed a bid procedures motion with a joint venture of liquidators, SB Capital Group LLC and 360 Merchant Solutions LLC, lined up as stalking horse bidder for the assets; it also intends to continue to pursue a sale to "one of the largest department store chains in the United States," which apparently expressed some interest pre-petition. Meanwhile, no background on a bankrupt retailer is complete without some private equity shop getting thrown under the bus. Here, the company states (without overtly identifying the PE fund for whatever reason), "In 2012, prompted by a [$15mm] private equity investment, the Company embarked on a rapid expansion of the business. The expansion, however, proved ill-fated and ill-timed, coming at a time when traditional brick and mortar retail was on the decline. Specifically, the Company over-expanded into the shopping mall retail space at a time when market trends were shifting away from traditional brick and mortar stores and towards online retail." Ah, private equity. Speaking of private equity, a fund affiliated with Perella Weinberg Partners is listed as the primary equityholder with a 20.5% position. Curious. Otherwise, it looks like a slate of "friends and family" type investors got burned here. Speaking of getting burned, the list of top creditors reflects a who's who of landlords that the distressed world has become accustomed to seeing at the top of the "Top 30 Creditors" list: Washington Prime Group Inc. ($WPG)(listed once), Westfield Corp. ($WFD)(twice), Simon Property Group Inc. ($SPG)(six times), and Macerich Co. ($MAC)(listed twice). Nothing to see here.
• Jurisdiction: D. of New Jersey (Judge Sherwood)
• Capital Structure: $1.0mm secured debt (ACM Capital Fund I LP), $250k (Cowen Overseas Investment LP)
• Company Professionals:
  • Legal: Lowenstein Sandler LLP (Kenneth Rosen, Bruce Buechler, Philip Gross, Keara Waldron, Michael Papandrea)
  • Prepetition Investment Banker: Cowen and Company LLC
  • Claims Agent: Prime Clerk LLC (*click on the company name above for free docket access)
  • Other Parties in Interest:
    • ACM Capital Partners LLC
      • Legal: Shraiberg Landua & Page (Bradley Shraiberg)
    • Official Committee of Unsecured Creditors
      • Legal: Hahn & Hessen LLP (Mark Powers, Alison Ladd) & (local) Fox Rothschild LLP (Richard Meth, Paul Labov)
      • Financial Advisor: EisnerAmpner LLP (Edward Phillips)

Updated 5/5/18

New Chapter 11 Bankruptcy - Styles for Less Inc.

Styles for Less Inc.

• 11/6/17 Recap: Another retailer finds its way in bankruptcy court. Here, the company has 93 retail women's clothing stores in California, Nevada, Texas, Arizona and Florida. The company claims, in its bankruptcy papers, to "offer the hottest trendy clothing, shoes, accessories and more at discounted prices...." Which, naturally, begs the question: well then why the hell did it file for bankruptcy? Well, naturally, the company answers this question in its bankruptcy papers and its the now-typical litany of retail excuses: (i) "increased industry discounting" (read: price and margin compression), (ii) "online penetration" (read: e-commerce), and (iii) "shifts in consumer spending away from 'fast fashion' and toward services and experiences (read: Snapchat...okay, maybe NOT Snapchat...but...millennials!) - all of which have contributed to cash flow pressures and liquidity problems. We make light but this story really is becoming pandemic. And the story includes the closure of 55 brick-and-mortar locations, 311 lost jobs, and decreased pay for those who kept their jobs. To stay alive, the company continues to negotiate with landlords and pursue operational expense reductions. The company will operate using Wells Fargo Bank's cash collateral while it tries to figure out a reorganization plan. Notably, the service list includes representatives of General Growth Properties Inc. ($GGP) and Simon Property Group ($SPG). Nothing to see here.
• Jurisdiction: C.D. of California (Judge Wallace)
• Capital Structure: $915k secured debt (Wells Fargo Bank NA)
• Company Professionals:
  • Legal: Winthrop Couchot Golubow Hollander LLP (Marc Winthrop, Garrick Hollander)

Updated 11/7/17

New Chapter 11 Filing - MAC Acquisition LLC (aka Romano's Macaroni Grill)

MAC Acquisition LLC (aka Romano's Macaroni Grill)

• 10/18/17 Recap: Back in 2015, Ignite Restaurant Group offloaded Romano's Macaroni Grill to RedRock Partners LLC in an attempt to bolster its liquidity and avoid bankruptcy. It failed: the company filed for bankruptcy earlier this year (case summary here). Perhaps that had something to do with the fact that the sale was for a measly $8mm, "a price akin to dumping your unwanted junk on Craigslist." Now, Romano's Macaroni Grill has filed for bankruptcy to restructure its balance sheet and further an operational restructuring, including dealing with lessor damage claims arising out of terminated leases (the company closed 37 company-operated locations in 2017; it has 93 company-owned restaurants remaining exclusive of non-debtor franchises). The company blames its chapter 11 filing on (i) the inability to generate sufficient cashflow, sales and margin to cover operating expenses let alone service its debt (TTM EBITDA as of 8/17 was -$12mm), and (ii) increased costs for both commodities and labor. We note that this provision in the company's bankruptcy papers is indicative of a larger trend befalling the casual dining segment: "The Debtors’ operations and financial performance have been adversely affected by a number of economic factors, but perhaps most notably by an overall downturn for the casual dining industry. The preferences of such customers have shifted to cheaper, faster alternatives. On the other end of the spectrum, there is a trend among younger customers to spend their disposable income at non-chain “experience-driven” restaurants, even if slightly more expensive." In other words, this bankruptcy is partly Evan Spiegel (Snapchat, $SNAP) and Kevin Systrom's (Instagram, $FB) fault. The company has a restructuring support agreement with its major stakeholders to pursue a dual-track bankruptcy via a plan of reorganization and a potential sale upon the hiring of an investment banker (heads up: bankers!!). The company has secured a junior $5mm DIP credit facility from Raven Capital Management LLC. P.S. Nothing to see here for the REITS: Simon Property Group has made a notice of appearance in the matter. 
• Jurisdiction: D. of Delaware (Judge Walrath)
• Capital Structure: $12mm RCF (Bank of Colorado), $2.5mm TL (Bank of Colorado), $3.5mm LOC (Bank of Colorado), $5mm Funding Loan 
• Company Professionals:
  • Legal: Gibson Dunn & Crutcher LLP (Jeffrey Krause, Michael Neumeister, Emily Speak, Brittany Schmeltz) & (local) Young Conaway Stargatt & Taylor LLP (Michael Nestor, Edmon Morton, Ryan Bartley, Elizabeth Justison)
  • Financial Advisor/Chief Restructuring Officer: Mackinac Partners LLC (Nishant Machado, Pasquale Maturo)
  • Claims Agent: Donlin Recano & Company Inc. (*click on company name above for free docket access)
• Other Parties in Interest:
  • DIP Lender: Raven Capital Management LLC
    • Legal: Winston & Strawn LLP (Justin Rawlins, Carey Schreiber, Eric Sagerman) & (local) Ashby & Geddes PA (Gregory Taylor, Stacy Newman)
  • Bank of Colorado
    • Legal: Shaw Fishman Glantz & Towbin LLC (Thomas Horan, Johnna Darby, Brian Shaw) & (local) Markus Williams Young & Zimmermann LLC (James Markus)
  • Official Committee of Unsecured Creditors
    • Legal: Kelley Drye & Warren LLP (Eric Wilson, Jason Adams, Lauren Schlussel) & (local) Bayard PA (Justin Alberto, Gregory Flasser)

Updated 11/8/17

New Chapter 11 Bankruptcy & CCAA - Toys "R" Us Inc.

Toys "R" Us Inc.

• 9/19/17 Recap: So. Much. To. Unpack. Here. We've previously discussed the run-up to this massive chapter 11 bankruptcy filing here and here. Still, suffice it to say that, unlike many of the other retailers that have predictably filed for bankruptcy thus far in 2017, this one was different. This one seemingly came out of nowhere - particularly given the proximity to the holiday shopping season. Before we note what this case is, lets briefly cover what it isn't and clear the noise that is pervasive on the likes of Twitter: this is NOT "RIP" Toys "R" Us. We don't get overly sentimental usually but the papers filed with the bankruptcy court were well-written and touching: this is a store, a brand, that means a lot to a lot of people. And it's not going anywhere (the company will have its challenges to assure people that this is the case). This is a financial restructuring not a liquidation: the company simply hasn't been able to evolve while paying $400mm in annual interest expense on over $5b of private equity infused debt. Plain and simple. Yes, there are other challenges (blah blah blah, Amazon), but with that debt overhang, it appears the company hasn't been able to confront them (PETITION side note: an ill-conceived deal with Amazon 18 years ago is mind-blowing when viewed from the perspective of Amazon's long game). With this filing, the company is signaling that the time for short term band-aids to address its capital structure is over. Now, "[t]he time for change, and reinvestment in operations, has come." Decisive. Management isn't messing around anymore. With a reduction in debt, the company will be unshackled and able to focus on "general upkeep and the condition of...stores, [its] inability to provide expedited shipping options, and [its] lack of a subscription-based delivery service." Indeed, the company intends to use a $3.1b debtor-in-possession credit facility to begin investing in modernization immediately.
• Interesting Facts:
  • Toy Manufacturers: Mattel ($MAT)(approx $136mm), Hasbro ($HAB) (approx $59mm) & Lego (approx $31.5mm) are among the top general unsecured creditors of the company. Mattel and Hasbro's stock traded down quite a bit yesterday on the rampant news of this filing. Query whether any of the $325mm of requested critical vendor money will apply to these companies.
  • The Power of the Media (read: NOT "fake news"): This CNBC piece helped push the company into bankruptcy. Bankruptcy professionals were retained in July (or earlier in the case of Lazard) to pursue capital structure solutions. In August the company engaged with some of its lenders. But then "...a news story published on September 6, 2017, reporting that the Debtors were considering a chapter 11 filing, started a dangerous game of dominos: within a week of its publication, nearly 40 percent of the Company’s domestic and international product vendors refused to ship product without cash on delivery, cash in advance, or, in some cases, payment of all outstanding obligations. Further, many of the credit insurers and factoring parties that support critical Toys “R” Us vendors withdrew support. Given the Company’s historic average of 60-day trade terms, payment of cash on delivery would require the Debtors to immediately obtain a significant amount—over $1.0 billion—of new liquidity." 
  • Revenue. The company generates 40% of its annual revenue during the holiday season.
  • Footprint. The company has approximately 1,697 stores and 257 licensed stores in 38 countries, plus additional e-commerce sites in various countries. The company has been shedding burdensome above-market leases and combining its Babies and Toys shops under one roof; it intends to continue its review of its real estate portfolio. Read: there WILL be store closures.
  • Eff the Competition. Toys has some choice words for its competition embedded in its bankruptcy papers; it accuses Walmart ($WMT) and Target ($TGT)(the "big box retailers") of slashing prices on toys and using toys as a loss leader to get bodies in doors; it further notes that "retailers such as Amazon are not concerned with making a profit at this juncture, rendering their pricing model impossible to compete with..." ($AMZN). Yikes. 
  • Experiential Retail. The company intends to invest in the "shopping experience" which will include (i) interactive spaces with rooms to use for parties, (ii) live product demonstrations put on by trained employees, and (iii) the freedom for employees to remove product from boxes to let kids play with the latest toys. And...wait for it...AUGMENTED REALITY. Boom. Toysrus.ar and Toysrus.ai here we come. 
• Jurisdiction: E.D. of Virginia (Judge Phillips)
• Capital Structure: see below     
• Company Professionals:
  • Legal: Kirkland & Ellis LLP (Jamie Sprayragen, Anup Sathy, Edward Sassower, Chad Husnick, Joshua Sussberg, Robert Britton, Emily Geier) & (local) Kutak Rock LLP (Michael A. Condyles, 
    Peter J. Barrett, Jeremy S. Williams) & (Canadian counsel) Goodmans LLP
  • Legal to the Independent Board of Directors: Munger, Tolles & Olson LLP
  • Financial Advisor: Alvarez & Marsal North America LLC (Jeffrey Stegenga, Jonathan Goulding, Tom Behnke, Cari Turner, Jim Grover, Arjun Lal, Doug Lewandowski, Bobby Hoernschemeyer, Scott Safron, Kara Harmon, Nick Cherry, Adam Fialkowski)
  • Investment Banker: Lazard Freres & Co., LLC (David Kurtz)
  • Real Estate Consultant: A&G Realty Partners LLC (Andrew Graiser)
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Communications Consultant: Joele Frank Wilkinson Brimmer Katcher
• Other Parties in Interest:
• ABL/FILO DIP Admin Agent: JPMorgan Chase Bank NA
  • Legal: Davis Polk & Wardwell LLP (Marshall Heubner, Brian Resnick, Eli Vonnegut, Veerle Roovers) & (local) Hunton & Williams LLP (Tyler Brown, Henry (Toby) Long III, Justin Paget)
• DIP Admin Agent (Toys DE Inc). NexBank SSB & Ad Hoc Group of B-4 Lenders (Angelo Gordon & Co LP; Franklin Mutual Advisors LLC, HPS Investment Partners LLC, Marathon Asset Management LP, Redwood Capital Management LLC, Roystone Capital Management LP, and Solus Alternative Asset Management LP)
  • Legal: Wachtell Lipton Rosen & Katz (Joshua Feltman, Emil Kleinhaus, Neil Chatani) & (local) McGuireWoods LLP (Dion Hayes, Sarah Bohm, Douglas Foley)
• Ad Hoc Group of Taj Noteholders.
  • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Brian Hermann, Samuel Lovett, Kellie Cairns) & (local) Whiteford Taylor & Preston LLP (Christopher Jones, Jennifer Wuebker)
• Steering Committee of B-2 and B-3 Lenders (American Money Management, Columbia Threadneedle Investments, Ellington Management Group LLC, First Trust Advisors L.P., MJX Asset Management LLC, Pacific Coast Bankers Bank, Par-Four Investment Management LLC, Sound Point Capital Management, Taconic Capital Advisors LP).
  • Legal: Arnold & Porter Kaye Scholer LLP (Michael Messersmith, D. Tyler Nurnberg, Sarah Gryll, Rosa Evergreen)
• 12% ’21 Senior Secured Notes Indenture Trustee: Wilmington Trust, National Association.
  • Legal: Kilpatrick Townsend & Stockton LLP (Todd Meyers, David Posner, Gianfranco Finizio) & (local) ThompsonMcMullan PC (David Ruby, William Prince IV)
• Bank of America NA
  • • Legal: Skadden Arps Slate Meagher & Flom LLP (Paul Leake, Shana Elberg, George Howard) & (local) Troutman Sanders LLP (Jonathan Hauser)
  • Private Equity Sponsors: Bain Capital Private Equity LP, Kohlberg Kravis Roberts & Co. L.P. ($KKR), and Vornado Realty Trust ($VNO)
• Large Creditor: Mattel Inc.
  • Legal: Jones Day (Richard Wynne, Erin Brady, Aaron Gober-Sims) & (local) Michael Wilson PLC (Michael Wilson)
• Large Creditor: LEGO Systems Inc.
  • Legal: Weil Gotshal & Manges LLP (Matthew Barr, Kelly DiBlasi) & (local) Walcott Rivers Gates (Cullen Speckhart)
• Large Creditor: American Greetings Corporation.
  • Legal: Baker & Hosteler LLP (Benjamin Irwin, Eric Goodman)
• Creditor: River Birch Capital
  • Legal: Andrews Kurth & Kenyon LLP (Paul Silverstein)
• Creditor: Owl Creek Asset Management
  • Legal: Stroock Stroock & Lavan LLP (Samantha Martin)
• TRU Trust 2016-TOYS, Commercial Mortgage Pass-Through Certificates, Series 2016-TOYS acting through Wells Fargo Bank NA
  • Legal: Dechert LLP (Allan Brilliant, Brian Greer, Stephen Wolpert, Humzah Soofi) & (local) Troutman Sanders LLP (Jonathan Hauser)
• Trustee: Tru Taj DIP Notes (Wilmington Savings Fund Society FSB)
  • Legal: Porter Hedges LLP (Eric English) & (local) Spotts Fain PC (James Donaldson)
• Committee of Unsecured Creditors (Mattel Inc., Evenflo Company Inc., Simon Property Group, Euler Hermes North America Insurance Co., Veritiv Operating Company, Huffy Corporation, KIMCO Realty, The Bank of New York Mellon, LEGO Systems Inc.)

First Day Declaration

First Day Declaration

Updated 10/5/17 11:40 am

Chapter 11 Bankruptcy Filing - Aerosoles International Inc.

Aerosoles International Inc.

• 9/15/17 Recap: Remember that once-popular trope that footwear was impervious to Amazon and e-commerce? People want to go to stores to try on shoes, we've been told. Lost in that, however, is that free returns make it THAT much easier to try/err with sizing via delivery. And, so, not-so-shockingly, another private equity (Palladin Partners LP) owned specialty retailer is in bankruptcy court. The New Jersey based company has "approximately 78 stores" (PETITION Note: how does it not know the exact number?) in the United States that cater towards providing women with "feel good" footwear. The stores are located in malls, lifestyle centers, street locations and outlet centers. This 78-count footprint is down dramatically: the company has already reduced its store count by over 30 stores in the last year or so. The company also generates revenue through its (i) direct e-commerce business (which, seemingly, is fairly well built out with 1.4mm visitors a month...note, pretty good sales right now!), (ii) wholesale business, (iii) "first cost business" (which sounds like a middleman situation where the company aids other companies in the design and production of their own separately branded footwear, and (iv) international licensing. The company blames a highly competitive women's footwear market, a large sourcing disruption (to the tune of $4mm of lost EBITDA), shifting trends from bricks to clicks and other operationally-specific reasons for the chapter 11 filing. Like what? Glad you asked. First, the company had a hard time servicing its debt while also making the significant cash outlays needed to inventory-up for the critical spring and fall seasons. Second, the company - in a showing of REALLY FRIKKEN HORRIBLE TIMING - expanded its retail store footprint considerably in 2012 and 2013, subjecting itself to onerous leases in the process. Third, the company lost its Asian sourcing agent in spring 2016 and has subsequently had difficulty restoring lost customer confidence and maintaining order load. MAGA! And so now what? Ready for this shocker? The company intends to refocus its efforts towards the non-brick-and-mortar aspects of its business. Remember those "approximately 78" stores we noted above? Well, the company is saying "PEACE" to 74 of them in bankruptcy. Finally, the company intends to use the bankruptcy process to find a buyer for the company (and its new business plan). 
• Jurisdiction: D. of Delaware 
• Capital Structure: $72.3mm of total debt. $22.9mm ABL (Wells Fargo Bank NA), $19.7mm TL (THL Corporate Finance Inc.), $19.1mm senior notes, $8.9mm sub notes, and $1.7mm sub loan. 
• Company Professionals:
  • Legal: Ropes & Gray LLP (Gregg Galardi, Mark Somerstein, William Alex McGee) & Bayard PA (Scott Cousins, Erin Fay, Gregory Flasser)
  • Financial Advisor: Berkeley Research Group LLC (Mark Weinsten)
  • Investment Banker: Piper Jaffray & Co.
  • Liquidation Agent: Hilco Merchant Resources LLC 
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • ABL Agent: Wells Fargo Bank NA
    • Legal: Choate Hall & Stewart LLP (Kevin Simard, Jonathan Marshall) & (local) Womble Carlyle Sandridge & Rice LLP (Mark Desgrosseilliers, Matthew Ward)
  • TL Agent: THL Corporate Finance Inc.
    • Legal: Paul Hastings LLP (Matthew Murphy) & Young Conaway Stargatt & Taylor LLP (M. Blake Cleary)
  • Prepetition Senior Noteholders & Subordinated Noteholders (ORIX Funds Corp., Palladin Partners LP)
    • Legal: Weil Gotshal & Manges LLP (Jacqueline Marcus) & (local) Richards Layton & Finger PA (Mark Collins, Paul Heath, Joseph Barsalona II)
  • Official Committee of Unsecured Creditors (ICB Asia Co. Ltd., Rival Shoe Design Ltd., Moveon Componentes E Calcado SA, Simon Property Group, GGP Limited Partnership)
    • Legal: Cooley LLP (Michael Klein, Sarah Carnes) & (local) Gellert Scali Busenkell & Brown LLC (Michael Busenkell, Ronald Gellert, Shannon Dougherty Humiston)

Updated 10/5/17 11:17 am CT 

New Chapter 11 Bankruptcy - Vitamin World Inc.

Vitamin World Inc.  

• 9/11/17 Recap: As previously foreshadowed, the Holbrook NY-based specialty retailer in the vitamins, minerals, herbs, and supplements market with 334 mall and outlet center retail locations filed for bankruptcy to disentangle itself from legacy operational ties to prior owner NBTY Inc. and terminate various leases (52 identified so far; 45 locations have already been shuttered). Some of the locations are within malls owned by REITS, Simon Property Group, General Growth Properties, and Vornado Realty Trust. The company blames the bankruptcy filing on liquidity constraints caused by supply chain and ingredient availability issues, the struggling retail market, above market rents, and underperforming retail stores. Prepetition lender, Wells Fargo Bank NA, is providing credit during the bankruptcy cases. 
• Jurisdiction: D. of Delaware 
• Capital Structure: $14.4mm debt (Wells Fargo Bank NA), $9.5mm "Seller Note" (RE Holdings)
• Company Professionals:
  • Legal: Katten Muchin Rosenman LLP (Paige Barr, Peter Siddiqui, Allison Thompson) & (local) Saul Ewing LLP (Monique DiSabatino, Mark Minuti)
  • Financial Advisor: RAS Management Advisors LLC
  • Real Estate Advisor: RCS Real Estate Advisors
  • Claims Agent: JND Corporate Restructuring (*click on company name above for free docket access)
• Other Parties in Interest:
• DIP Lender: Wells Fargo Bank NA
  • Legal: Riemer Braunstein LLP (Donald Rothman) & (local) Ashby & Geddes PA (Gregory Taylor) 
• Official Committee of Unsecured Creditors (incl. Simon Property Group, General Growth Properties):
  • Legal: Lowenstein Sandler LLP (Jeffrey Cohen, Bruce Buechler, Mary Seymour) & (local) Whiteford Taylor & Preston LLC (Christopher Samis, L. Katherine Good, Kevin Shaw)
  • Financial Advisor: Berkeley Research Group LLC

Updated 9/24/17

New Chapter 11 Filing - The Gymboree Corporation

The Gymboree Corporation

• 6/12/17 Recap: Yawn...another private equity owned retailer in bankruptcy. Why? Standard fare for everyone following the retail story at this point: a substantial brick-and-mortar presence (1300 stores) in need of rightsizing, higher expenses than web-based competitors, an underdeveloped wholesale operation, an underdeveloped web presence, insufficient "omnichannel" capabilities (the go-to buzzword for retailers these days), and more debt than competitors like Children's Place and the Gap. In other words, private equity, that's why (here, Bain Capital Private Equity LP). Notably, "[a]pproximately 35% of their domestic real estate space is concentrated with Simon Property Group, Inc. and GGP Inc. (previously General Growth Properties, Inc.)" ($SPG, $GGP) and, in the first instance, the company is seeking to close 450 stores. Hmmm. The Company will operate under a $105mm DIP term loan credit facility ($35mm new money) and a $273.5mm DIP revolving credit facility; it will also seek to avail itself of $80mm in new equity capital by way of a fully-backstopped rights offering. The upshot of all of this financial mumbo-jumbo is that the term lenders will own the majority of the company. 
• Jurisdiction: E.D. of Virginia
• Capital Structure: $81mm '17 ABL RCF (Bank of America NA), $47.5mm '17 ABL Term Loan (Pathlight Capital LLC), 788.8mm '18 TL (Credit Suisse), $171mm '18 unsecured notes (Deutsche Bank Trust Company Americas)    
• Company Professionals:
  • Legal: Kirkland & Ellis LLP (James Sprayragen, Anup Sathy, Joshua Sussberg, Steven Serajeddini, Matthew Fagen, Laura Elizabeth Krucks, Timothy Bow, Gabor Balassa, Ben Tyson) & (local) Kutak Rock LLP (Michael Condyles, Peter Barrett, Jeremy Williams)
  • Legal (Special Committee): Munger Tolles & Olson LLP (Thomas Wolper, Seth Goldman, Kevin Allred)
  • Financial Advisor: AlixPartners LLC (James Mesterharm, Liyan Woo)
  • Investment Banker: Lazard Freres & Co. LLC (David Kurtz, Christian Tempke)
  • Real Estate Consultant: A&G Realty Partners LLC (Andrew Graiser)
  • Liquidators: Tiger Capital Group LLC and Great American Group LLC
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Consenting Term Loan Lenders & DIP Term Loan Agent: Credit Suisse AG, Cayman Islands Branch
    • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Evan Fleck) & (local) McGuireWoods LLP (Dion Hayes, Sarah Boehm, K. Elizabteh Sieg)
    • Financial Advisor: Rothschild & Co.
  • DIP ABL Administrative Agent
    • Legal: Morgan Lewis & Bockius LLP (Julia Frost-Davies, Robert A.J. Barry, Amelia Clark Joiner) & (local) Hunton & Williams LLP (Tyler Brown, Justin Paget)
  • DIP ABL Term Agent
    • Legal: Choate Hall & Stewart LLP (Kevin Simard, Jennifer Fenn) & (local) Whiteford Taylor Preston LLP (Christopher Jones)
  • Sponsor: Bain Capital Private Equity LP 
    • Legal: Weil Gotshal & Manges LLP (Matthew Barr, Robert Lemons) & (local) Wolcott Rivers Gates (Cullen Speckhart)
  • Ad Hoc Group of Senior Unsecured Noteholders
    • Legal: Akin Gump Strauss Hauer & Feld LLP (Daniel Golden, Jason Rubin)
  • Pathlight Capital
    • Legal: Choate Hall & Stewart LLP (Kevin Simard, Jonathan Marshall) & (local) Whiteford Taylor & Preston LLP (Christopher Jones)
  • Indenture Trustee: Deutsche Bank Trust Company Americas
    • Legal: Moses & Singer LLP (Alan Gamza, Kent Kolbig, Jessica Boneque) & (local) Hirschler Fleischer PC (Robert Westermann, Rachel Greenleaf)
  • Official Committee of Unsecured Creditors
    • Legal: Hahn & Hessen LLP (Mark Power, Mark Indelicato, Janine Figueiredo, Alison Ladd) & (local) Tavenner & Beran PC (Lynn Tavenner, Paula Beran, David Tabakin)

Updated 7/11/17 at 7:25 pm CT

New Chapter 11 Filing - Vanity Shop of Grand Forks Inc.

Vanity Shop of Grand Forks Inc.

• 3/1/17 Recap: As malls empty out across the country, the dominoes are starting to fall. If there is nothing but vacancy and tumbleweed around you, foot traffic will stall. If foot traffic stalls, revenue stalls. If revenues stall, landlords can't get paid. And if landlords can't get paid, well, say hello to the Grim Reaper. Okay, that's a little dramatic, but, to be fair, this does generally describe mall-based retail these days. And the latest chapter in this sad story is the liquidation of Vanity Shop's 137 stores - the affect of which in smaller geographies like North Dakota can't be underestimated (not to mention any ripple effect: 60% of the company's inventory came from US suppliers). In addition to the (now) regular laundry list of prior companies who have had a similar fate in the retail space, e.g., The Limited Brands, THIS was probably the most interesting disclosure in the company's filing: "The Debtor initially contemplated soliciting a bid from Hilco Merchant Resources, LLC (who has routinely performed inventory appraisals and liquidation analyses of Debtor's assets every six months) but was advised that Hilco is currently unavailable to take on another liquidation project at this time." (emphasis added). Now THAT is telling.
• Jurisdiction: D. of North Dakota
• Capital Structure: $4.3mm debt (Wells Fargo), $5mm subordinated debt   
• Company Professionals:
  • Legal: Vogel Law (Jon Brakke, Caren Stanley)
  • Liquidator: Tiger Capital Group LLC
    • Legal: Cohen Tauber Spievack & Wagner PC (Robert Boghosian)
  • Claims Agent: KCC (*click on company name for docket)
• Other Parties in Interest:
  • Wells Fargo
    • Legal: Riemer Braunstein LLP (Donald Rothman, Alexander Rheaume)
  • Official Committee of Unsecured Creditors (Washington Prime Group Inc., GGP Limited Partnership, Simon Property Group Inc.)
    • Legal: Fox Rothschild LLP (Mette Kurth, Paul Labov, Ellie Barragry, L. John Bird)
    • Financial Advisor: BGA Management LLC (Michael Knight)

Updated 4/27/17

New Chapter 11 Filing - BCBG Max Azaria Global Holdings LLC

BCBG Max Azaria Global Holdings LLC

• 3/1/17 Recap: Fashion powerhouse founded in 1989 filed for bankruptcy yesterday with a plan to optimize optionality: within the next six months, the company will dual track a potential debt-for-equity transaction (its second in 2 years) and a sales process to allow the business to continue as a going concern. This process comes on the heels of an operational restructuring which dramatically decreased the company’s brick-and-mortar footprint, with ~120 of ~550 stores already closed and attendant headcount reductions initiated. This is another sad retail story: macro retail headwinds (read: Amazon and decreased brand loyalty), too much debt, poor wholesale and IP licensing strategies, and too much unjustifiable stateside and global growth. Make no mistake: Amazon is a big story in all of this recent retail bloodshed but these bankruptcies wouldn’t be happening if that story wasn’t compounded by tunnel vision and poor strategy - here, marked, notably, by no recognizable online presence. Now, the restructuring professionals are going to earn their keep, devising a fast-track multi-tier process to try and keep this thing out of the liquidation bin. On an aside, we'd like to point out that, again, Simon Property Group and GGP Limited Partnership have made notices of appearances in this case so anyone who says that the A Mall operators are unharmed by the recent bloodbath in retail is smoking crack. Footnote: neither Twitter nor Sears can catch a break; they are both owed hundreds of thousands of dollars.
• Jurisdiction: S.D. of New York
• Capital Structure: ~$460mm debt. $82mm ABL Facility (Bank of America), $35mm TL Tranche A, $4.2mm TL Tranche A-1, $48.5mm Term Loan Tranche A-2, $0 (undrawn) Term Loan Tranche A-3, $289.4mm Term Loan Tranche B (Guggenheim Corporate Funding LLC).     
• Company Professionals:
  • Legal: Kirkland & Ellis LLP (Jayme Sprayragen, Christopher Marcus, Joshua Sussberg, Benjamin Rhode, John Luze)
  • Financial Advisor: AlixPartners LLC (Holly Feder Etlin, Deborah Reiger-Paganis)
  • Investment Banker: Jefferies LLC (Jeffrey Finger)
  • Liquidators: Hilco Merchant Resources LLC & Gordon Brothers Retail Partners LLC
    • Legal: Malfitano Partners (Joseph Malfitano)
  • Claims Agent: Donlin Recano (*click on company name for docket)
• Other Parties in Interest:
  • Bank of America (as ABL DIP Agent and Prepetition ABL Agent)
    • Legal: Morgan Lewis & Bockius LLP (Julia Frost-Davies, Christopher Carter, Robert Barry, Matthew Ziegler)
  • Guggenheim Corporate Funding LLC (as TL DIP Agent and Prepetition Tranche B TL Lenders)
    • Legal: Weil (Matthew Barr)
  • Allerton Funding LLC
    • Legal: Winston & Strawn LLP (Daniel McGuire, Gregory Gartland)
  • Silvereed (Hong Kong) Limited
    • Legal: Kramer Levin Naftalis & Frankel LLP (Robert Schmidt, Jonathan Wagner)
  • Official Committee of Unsecured Creditors (GGP Inc. & Simon Property Group)
    • Legal: Pachulski Stang Ziehl & Jones LLP (Robert Feinstein, Bradford Sandler, Jeffrey Pomerantz, Maria Bove)
    • Financial Advisor: Zolfo Cooper LLC

Updated 3/28/17

New Chapter 11 Bankruptcy Filing - Limited Stores Company LLC

Limited Stores Company LLC

• 1/17/17 Recap: Sun Capital owned multi-channel retailer with 250 locations (down from a peak of 750) filed for bankruptcy to continue its Hilco-assisted liquidation and sell its IP and e-commerce channel for a proposed ~$25.5mm sum to Sycamore Partners. Looks like some "A Malls" owned by Simon Property Group and GGP Limited Partnership just got nicked.  
• Jurisdiction: D. of Delaware
• Capital Structure: $50mm RCF (unfunded, BofA), $13.4 TL (Cerberus Business Finance LLC)   
• Company Professionals:
  • Legal: Klehr Harrison Harvey Branzburg LLP (Domenic Pacitti, Michael Yurkewicz)
  • Financial Advisor: RAS Management Advisors LLC (Timothy Boates)
  • Investment Banker: Guggenheim Securities LLC (Durc Savini, Ryan Mash, Michael Gottlieb, Ben Loveland, Justin Kundrat, Grace Dai)
  • Sponsor: Sun Capital Partners Inc.
  • Claims Agent: Donlin Recano (*click on company name for docket)
• Other Parties in Interest:
  • Cerberus Business Finance LLC
    • Legal: Klee Tuchin Bogdanoff & Stern LLP (Michael Tuchin, David Fidler, Jonathan Weiss)
  • Sycamore Partners
    • Legal: Kirkland & Ellis LLP (James Stempel)
  • TradeGlobal LLC
    • Legal: Squire Patton Boggs (US) LLP (Elliot Smith) & (local) Polsinelli PC (Christopher Ward)
  • Official Committee of Unsecured Creditors
    • Legal: Kelley Drye & Warren LLP (Jason Adams, James Carr, James Shickich, Kristin Elliott) & Pachulski Stang Ziehl & Jones LLP (Bradford Sandler, James O'Neill)
    • Financial Advisor: CBIZ Accounting Tax and Advisory of New York (Esther DuVal)

Updated 3/30/17