According to a recent MarketWatch report, restaurant companies could be in for a challenging period. The skinny? Consumers are offsetting higher nondiscretionary spending needs by taking advantage of falling grocery prices. At the same time, restaurants are grappling with higher operating costs and market saturation. Economics 101, my friends. Falling demand accompanied by rising production costs spells supersized trouble. And following a string of downbeat restaurant earnings from the sector, there could be more pain to come….
Charles Blake Stringer, d/b/a CBS Farms, has filed for protection under Chapter 11 of the Bankruptcy Code. The filing indicates that CBS Farms has between $10-50 million in assets and $10-50 million in liabilities. Its largest unsecured creditors include Hilltop Securities, PHI Financial, Wilbur Ellis Agribusiness Division, Selectplus Agline, and West Texas Gas. The case is pending in the U.S. Bankruptcy Court for the Northern District of Texas, Ft. Worth, Case #16-44871.
Mette H. Kurth
Essential Living Foods, Inc. is on the auction block a mere three weeks after seeking bankruptcy protection on December 1, 2016. Don’t blink, or you could miss it.
The Proposed Bid Procedures
Yesterday, Essential Living filed a motion asking the court to approve bidding procedures; the hearing is scheduled for December 27th.
- Terraholdings, LLC has made the initial “stalking horse” offer to purchase the company for $1.5 million, subject to overbidding with a proposed opening bid of $1.57 million.
- Essential Living has asked that the Court set a hearing to approve a sale to the successful bidder on or before a lender-imposed closing deadline of January 10, 2017.
- The sale process is being overseen by the financial advisory and investment banking firm Mirus Securities, Inc.
- The debtor has proposed that all bid documents must be received by the company and its bankruptcy counsel, Weintraub & Selth, no later than two business days before the sale hearing.
The Company’s Operations
According to its court filings, Essential Living, a subsidiary of Beon Holdings, Inc., was incorporated in 2004 as a benefit corporation that sells sustainably sourced organic superfoods sourced from small farms around the world in locations such as Ecuador, Peru, and Indonesia. Its primary products include gogi berries, golden berries, maca, raw cocoa, smoothie blends, trail mixes, supplements and other organic superfoods and snacks. (Yum!) Customers include Costco, Whole Foods Market, and health food stores and grocery stores across the country.
Essential Living has a co-manufacturing facility in Commerce, CA, a third-party logistics warehouse in Los Angeles, and several warehouses. It has eight full-time employees handing accounting and administration, sales, warehousing and logistics, and food safety. Substantially all of the company’s assets are to be sold, including product formulas and blends, contracts and significant purchase orders, know-how, trade names, trademarks, inventory, accounts receivable, and fixed assets. In its emergency motion seeking authority to use cash collateral, the debtor valued its primary assets at roughly $1.9 million (consisting of approximately $700,000 in accounts receivable, $1.2 million in inventory, and $50,000 in cash on hand). It has projected gross sales of $700,000 and collections of $500,000 for December 2016.
Additional information can be obtained from Mirus Securities, Weintraub & Selth, or the Bankruptcy Court. The case is pending in the U.S. Bankruptcy Court for the Central District of California, Los Angeles Division, under Case #2:16-bk-25844-RK.
Mette H. Kurth
The Federal Reserve slashed rates to zero in 2008 in the midst of the financial crisis. There it remained during the Great Recession and beyond. This may be great for the economy, but it’s very disheartening if you are a bankruptcy professional.
Many of you are familiar with our rain dance. “How is business these days,” someone at a conference asks? Slow. “But this low-interest rate environment can’t last forever,” we say. “And when interest rates increase, then bankruptcy business will boom again.” A small gaggle of lawyers and financial advisors gathers around, theories are exchanged, and someone concludes authoritatively that interest rates will increase in the next 12-18 months. By the time next year’s conference rolls around, everyone has forgotten who made the prediction. For 8 years, this dance has been repeating itself at TMA, ABI and AIRA conferences, in bankruptcy courts, and in trustee’s offices across the country.
But this holiday season, things are different! Today, the Federal Reserve increased its key interest rate by 0.25%. This is just the second time in a decade that the Federal Reserve has raised rates. The first was in December 2015.
The action signifies the Fed’s confidence in the improving U.S. economy following an increase in economic growth since the middle of this year.
What, exactly, it will mean for bankruptcy practitioners remains to be seen.
But it sure beats a lump of coal in your stocking….
Follow the Wall Street Journal’s live coverage here.
Mette H. Kurth
Here are a few highlights from last week’s retail news.
Store closings are beginning at 59 Golfsmith locations nationwide, according to a Hilco press release.
The Retail Dive reports that J.C. Penny hit a roadblock in its turnaround efforts, with total and same-store sales going negative.
Nasty Gal filed for Chapter 11 bankruptcy protection on November 9th. The pleadings can be downloaded here.
Mette H. Kurth