On the Auction Block: iPic-Gold Class Entertainment, Inc.

iPic-Gold Class Entertainment, Inc. (IPIC) has filed a Chapter 11 case in Delaware to sell its business through a “363” bankruptcy auction.

iPic’s Rise… and Fall

IMG_7496.jpgiPic is a Florida-based, publicly traded movie theater and restaurant company with 16 locations in 9 states that provide a “luxurious movie-going experience at an affordable price.” iPic touts its high-quality, chef-driven culinary and mixology offerings in unique destinations that include premium movie theaters, restaurants and lounges. The debtors’ restaurant concepts include: (1) The Tuck Room, a “drinking and dining den” with locations in Florida, New York, and Texas; (2) The Tuck Room Tavern, which serves “Craveable American Cuisine” in Los Angeles; (3) Tanzy Restaurant, offering modern Italian dining in Florida and Arizona; and (4) City Perch Kitchen + Bar, with seasonal American dining in Maryland, New Jersey and New York.

After achieving double-digit growth supported by its unique offerings and market position, new market entrants and competitive pricing slowed iPic’s growth.  Although demand for shares following iPic’s 2018 IPO was “strong,” the situation was compounded when institutional investors could not fund their commitment to the offering, with the total capital raised of $17 million insufficient to fund continuing development. But the company believes that its underlying business model remains strong, “bolstered by positive guest experience and loyalty.”

A Fast, “Naked” Auction

iPic is going forward with a “naked” auction at this time, with no stalking-horse bidder in hand.  If a stalking-horse offer (e.g., opening bid) is presented before the auction, it appears that it may be possible to negotiate for typical stalking-horse protections such as expense reimbursements and break-up fees. iPic is seeking approval of a 90-day marketing process, with a proposed bid deadline of October 11, 2019 and a sale closing by the first week of November. No minimum bid has been established. The company reports store-level EBITDA of $15.06 million for the year ended December 31, 2018, and roughly $160 million in assets at book value.

The iPic Bankruptcy Docket

iPic’s claims agent is maintaining a public website with information about the case.

Additional Information

Fox Rothschild is monitoring the situation.  If you are interested in more information about the auction and the bid process, we are available to assist.

Mette H. Kurth

Lolli & Pops Parachutes Into Bankruptcy

tandem-skydivers-skydivers-teamwork-cooperation-39608After a costly expansion plan in the midst of a challenging retail environment, and hampered by significant distribution costs and inventory management issues, Mishti Holdings, owner and operator of roughly 70 Lolli & Pops upscale candy stores across the country, has entered bankruptcy in free fall.

 

Facing a liquidity crisis and unmanageable trade debt, Lolli & Pops unilaterally suspended rent payments beginning in May of 2019. Its landlords did not take kindly to that decision, and beginning in July 2019 they began declaring defaults and taking court action to evict their tenant from certain store locations. In early August landlords for seven Texas and one Idaho location locked the company out, demanding payment of back rent. And on August 11, 2019, the company permanently closed its 10 Candyopolis store locations.

 

The plan for the bankruptcy case…? At present,there does not appear to be a plan.

 

Mette K.

 

On the Auction Block: NovaSom, Inc.

NovaSom, Inc. has filed a Chapter 11 case in Delaware in order to sell its business through a “363” bankruptcy auction. NovaSom joins other recent healthcare industry filings by companies such as True Health, Avadel Pharma, Argos Therapeutics,

NovaSom’s Business

NovaSom is a Maryland-based home sleep testing company. In 2010-2012, it developed a device, AccuSom, that sends sleep data wirelessly rather than requiring patients to return a device to a lab to download data. It is the only in-home sleep test available in the marketplace that provides patient support and next-day test results. Additional information is available at: https://www.novasom.com/

bed-bedroom-cute-545016.jpgBetween 2013 and 2017, orders for AccuSom grew 500%. The average sales price, however, dropped by nearly 30% due to market conditions and the general availability of home sleep testing providers. The company’s filings indicate that the significant cost of growing sales has thus far prevented NovaSom from reaching profitability.

The Auction Process

At present, one entity, VirtuOx, has expressed interested in buying NovaSom’s assets for an estimated $5.3 million. The bid deadline for competing bidders is September 19, 2019 at 4:00 p.m.  (Certain qualifications must be met to qualify as a bidder).  If the company receives qualified, competing bids, the auction will be held on September 23, 2019 in Philadelphia, PA.  The sale hearing will be held two days later.

The NovaSom Bankruptcy Docket

NovaSom’s claims agent is maintaining a public website with information about the case.

Additional Information

Fox Rothschild is monitoring the situation.  If you are interested in more information about the auction and the bid process, we are available to assist.

Mette H. Kurth

On the Auction Block: True Health Group

THG Holdings, better known as True Health Group and True Health Diagnostics, a Texas-based laboratory management and diagnostics services provider for the healthcare industry, has filed for bankruptcy protection in Delaware.

Concerns, Investigations & a Liquidity Crisis

The filing follows a severe liquidity crisis triggered when the Centers for Medicare and Medicaid Services instituted a 100% hold on all Medicare payments. The suspensions came amid concerns raised by CMS and multiple investigations by the U.S. Department of Justice.  True Health says that this is all old news.

Between June 23, 2017 and the end of May 2019, the Debtors took substantial steps to address the claims asserted and the concerns raised by CMS and the United States Department of Justice. . . . . [They] negotiated a comprehensive settlement with DOJ, including a new corporate integrity agreement [that] was on the verge of being consummated when CMS and DOJ advised the Debtors of a second investigation and CMS imposed a second 100 percent hold on all Medicare payments to THD. The Debtors believe that this most recent suspension is based on the very same conduct that [was addressed in the settlement and corporate integrity agreement].

–Clifford A. Zucker, Chief Restructuring Officer

A Naked Bankruptcy Auction

In the aftermath of the suspension, True Health has engaged SSG Advisors to run a “naked” bankruptcy auction process with no buyer in hand and a proposed sale closing by the end of September. If you are interested in making an offer, that means that “stalking horse” protections (e.g., breakup fees and expense reimbursements) are still up for grabs. The proposed bid deadline is September 13th.

True Health’s Operations

Founded in 2014, True Health is one of the largest independent providers of lab management and diagnostic services in the US.  The company operates full-service clinical laboratories offering, among others, comprehensive testing for biomarkers that can indicate risk for cardiovascular disease, diabetes, autoimmune disorders, cancer and other diseases. In total, True Health offers more than 400 tests and has handled more than 1.5 million patient samples.

Currently, True Health runs about 1,370 samples per day through two facilities – a 109,000 square foot facility in Richmond, Va., and a 7,000 square foot facility in Frisco, Texas. The company serves 1,250 physician offices spanning 46 states and Washington, D.C. It claims its advanced testing provides a “far broader and deeper picture of patient health than traditional testing.” True Health also offers an online patient portal that provides interactive reports, live coaching help, patient engagement videos and lifestyle tracking tools.

Long-Term & Trade Debt

True Health entered bankruptcy with over $174 million of debt obligations, including long-term debt of $150 million and $14 million in trade debt.

Mette K.

Philadelphia Energy’s Bright Future Goes Up in a Massive Fireball as It Files for Bankruptcy. Again.

Philadelphia Energy Solutions has filed for bankruptcy protection a month after an explosion permanently shut down the East Coast’s oldest and largest refinery. The chaos began on June 21 at 4 a.m. when a butane tank exploded, destroying an alkylation unit using hydrofluoric acid to process refined petroleum. If you’re not sure exactly what that means… it’s bad. The explosion sent fireballs into the air that you could see miles away. And it took two days to completely extinguish the massive fire that resulted. 

The company shut down the refinery less than a week later and announced—by email, and with only 5 days notice—that it would lay off 1,000 employees. Refinery workers were not pleased, responding with a lawsuit arguing that Philadelphia Energy Solutions failed to comply with the WARN Act’s requirement that a company with 100 or more workers give 60 days’ notice when expecting massive job loss. (Fair enough. But the WARN has exceptions for layoffs due to “unforeseeable business circumstances.” Is anyone arguing that Philadelphia Energy Solutions planned the explosion in advance?)

PES Seeks to Reorganize and Rebuild with $100 Million in New Funding

Philadelphia Energy Solutions owns and operates the Point Breeze and Girard Point oil refineries located on an integrated, 1,300-acre refining complex in Philadelphia. The with a combined capacity of 335,000 barrels per day. The company is seeking $100 million in new funding to support existing operations, undertake the work necessary to ensure the refinery complex is safely positioned for rebuilding, and restart and complete its reorganization process.

We will continue our ongoing cooperation with the federal, state and city governmental agencies investigating the June 21 accident and thank them and our employees for their diligent efforts at this difficult time. The success of our plan is critical to energy supply and security for the region, the Commonwealth of Pennsylvania and the City of Philadelphia

Mark Smith, Chief Executive Officer

The 2018 Bankruptcy and Restructuring

Notably, this is the company’s second bankruptcy in under two years. It blamed that first filing largely on the costs of complying with the US Renewable Fuel Standard, which requires refiners to either blend biofuels like ethanol into fuel or purchase credits from competitors who do. Philadelphia Energy Solutions does not have blending capabilities, so it pays for credits. (The withdrawal of over $590 million in dividend-style payments from the company may not have done anything to help the situation.)

During the first bankruptcy case, the EPA waived half of PES’s $350 million in liabilities related to biofuels credits. Philadelphia Energy Solutions then restructured over $635 million of funded debt while securing access to $260 million in new financing and a new $900 million intermediation facility.

Today marks the successful completion of a process that preserves the jobs of 1,100 hard-working Pennsylvanians and ensures the critical flow of energy to the Northeast U.S. . . . . PES has a bright future ahead as the longest continuously operating refinery on the East Coast. We will invest in the refinery, building on the more than $900 million that has been invested in the complex since PES was formed in 2012 to implement world-class refining capabilities.

Greg Gatta, Chief Executive Officer

Lingering Financial Woes

However, Philadelphia Energy Solutions was reportedly facing another financial crisis just months after emerging from that earlier bankruptcy. In February of 2019, Reuters reported that after exiting from bankruptcy in August of 2018, the company saw its cash balance fall to $87.7 million at the end of 2018, down from $148 million three months earlier.

According to Reuters, the company’s weak cash position forced the refiner to significantly scale back a planned $90 million maintenance project planned for last January. Refiners, of course, perform maintenance to keep units operating reliably and safely.

The refinery explosion occurred less than 6 months later.

Mette K.