BCBG Creditors’ Committee Organizational Meeting: March 9, 2017

Shortly before midnight on February 28, 2017, BCBG Max Azria Global Holdings, LLC and affiliates filed for Chapter 11 bankruptcy protection in the Southern District of New York. The United States Trustee has scheduled a meeting to form an unsecured creditors’ committee on March 9, 2017 in New York.

Store Closings and “Right Sizing”

The Bankruptcy Court has entered an interim order authorizing store closing sales at 120 BCBG locations, predominantly retail and factory stores. Each of the stores to be closed has historically operated at a loss. Collectively, the stores generated $10.3 million in losses in 2016, representing 63% of BCBG’s total losses from stores with a negative contribution margin. BCBG estimates the store closings will generate $20.1 million.  The liquidation sales commenced before the bankruptcy filing and are expected to continue through the end of April. It appears that, at least in the short term, about 50 of BCBG’s stores will remain open, together with a significant number of its partner shops located inside major department stores.

A Bankruptcy Sale…. Maybe?

BCBG has also filed a draft plan with a “toggle” feature, allowing for either (a) the sale of BCBG’s assets to a third party; or (b) a debt for equity conversion on terms to be negotiated.

BCBG says that it has begun marketing its assets, and it has filed a motion to approve bidding procedures. The motion includes a request to allow BCBG to provide a stalking horse bidder-if one is found-with break-up fees and expense reimbursements.  The proposed procedures, if approved, would require potential bidders to submit preliminary bid documents to BCBG and its investment banker, Jeffries, in order to receive due diligence information. They would also require interested bidders to provide non-binding indications of interest by March 30, 2017, with an auction tentatively to follow by May 22, 2017.  But the procedures proposed by BCBG and its lenders also grant them wide latitude to move forward, instead, with a debt for equity conversion… the terms of which have yet to be negotiated.

More Information

Additional information about the case, including a list of stores scheduled to be closed and the company’s proposed sale procedures and plan, can be found on the website maintained by BCBG’s claim agent, Donlin Recano.

 

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On the Auction Block: Essential Living Foods, Inc.

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.

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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

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