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

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

Kitten Heels are Dead. Long Live Kitten Heels.

The retailpocolypose is continuing at full speed, impacting retailers both here in the US and across the pond. Clothing retailer LK Bennett Ltd. is the latest High Street casualty, closing five stores and going into administration in the UK. It is joined by its New York-based subsidiary, L.K. Bennett U.S.A., which has filed for chapter 11 protection in the Delaware Bankruptcy Court.

Company Background

Opening in London in 1990 to bring “a bit of Bond Street luxury to High Street,” LK Bennett quickly established itself as an upmarket retailer. And its founder, Ms Bennett, just as quickly established herself as “the Queen of the Kitten Heel.” Bennett’s “smart” dayware is a favorite of Princess Kate Middleton and other celebrities. And even Prime Minister Theresa May has been knows to step out in LK Bennett kitten heels.

Faltering Steps

Corporate missteps and a challenging retail environment have led to declining sales and, ultimately, bankruptcy.  Many of the elements of the LK Bennett story are all too familiar.

  • The UK clothing and footwear sector are suffering from price deflation, leaving LK Bennett priced beyond the reach of most shoppers.
  • Today’s retail environment is all about authenticity and distinctiveness; LK Bennett has failed to embrace a sense of uniqueness and creativity that would set it apart from more competitively priced competitors in a saturated market.
  • An excessive number of stores at above-market rates – exacerbated by decreasing foot traffic and overdependence on sales at brick & mortar locations – has left the company struggling with excessive lease costs.
  • LK Bennett has also failed to connect with its young consumers via social media and has been overtaken by younger, more-affordable and digitally-savvier brands. (Sorry, Prime Minister.)
  • Ownership changes have left strategies in flux without time to take root and come to fruition.

And by the way…. is an “affordable luxury brand” even a thing?  Are consumers who are willing to invest in a luxury pair of shoes more likely to go all in and aim for a recognized high-fashion shoe brand, such as Jimmy Choo? 

What Comes Next for LK Bennett?

Interested buyers have been actively pursuing the company, at least in the UK. Similarly to (much, much) edgier UK lingerie brand and retailer Agent Provocateur, LK Bennet’s counterpart bankruptcy filing for its US subsidiary has likewise been teed up to pursue a sale.

Case Information

L.K. Bennett U.S.A. is represented by DLA Piper as counsel and Ernst & Young as restructuring advisor. The case number is 19-10760. The case has been assigned to Judge Kevin Gross.

Mette H. Kurth

Argos Therapeutics Files Bankruptcy to Pursue a Sale

 Argos Therapeutics filed for chapter 11 protection in Delaware on Nov. 30th with a proposed buyer in hand. The bankruptcy follows the termination of an unsuccessful phase 3 clinical trial of its most advanced cancer-treatment product. Now, Argos seeks to run a going-concern sale process with Cellscript, LLC as a “stalking horse” buyer.  Argos values Cellscript’s opening bid at $3.8 million.

Who Is Argos Therapeutics?

Argos is an immunotherapy company based in North Carolina. It is publicly traded, with shares trading on the NASDAQ until April 23. After its common stock was de-listed as of April 25, Argos transferred its common stock to the OTCQB Venture Market.

Argos focuses on developing individualized immunotherapies to treat cancer and infectious diseases. The company derives its primary revenue from third-party license agreements and government grants. But the company has been far from profitable, with a net loss of $40.6 million for 2017.

The company built its immunotherapies on its Arcelis® technology platform.

Arcelis is a precision immunotherapy technology that captures the spectrum of mutated and variant antigens that are specific to each patient’s individual disease . . . to overcome immunosuppression by enabling specifically targeted, durable memory T-cells without adjuvants that may be associated with toxicity.

Confused?  Here’s a helpful diagram.

Argos-Arcelis-Platform_AGS-003_Activate-Neo-Immunity.png

Ummm…. Still confused? If you have 15 minutes, Jeff Abbey provides a thorough explanation here.

Practically speaking, a buyer might use the Arcelis platform to treat a range of different cancers and infectious diseases. And according to Argos (notwithstanding its bankruptcy), the platform is valuable because it may circumvent manufacturing and commercialization challenges that have impeded other personalized immunotherapies.

The Proposed Sale to Cellscript

Argos has engaged in an extensive marketing effort to capitalize on its intellectual property, its manufacturing capabilities, and its position as a publicly traded entity.  Ultimately, Cellscript – one of Argos’ largest unsecured creditors – presented a purchase offer. The bid includes $1.675 million in cash, cure costs and assumed liabilities valued at no less than $1.4 million, and the “release” of Cellscript’s $2 million unsecured claim against Argus, valued at a minimum of $700,000.

Argos has proposed a $75,000 breakup fee and a $75,000 expense reimbursement. Initial overbids must total at least $4,095,330, with subsequent overbid increments of at least $100,000.  And it proposes the following sale timeline:

  • Bid deadline: Jan. 16, 2019
  • Auction: Jan. 22, 2019

The court has scheduled the bid procedures motion for hearing on Dec. 20, 2018.

Case Information

Argos is represented by Landis Rath & Cobb as bankruptcy counsel, Wilmer Cutler Pickering Hale and Dorr as special corporate counsel, and SSG Advisors as investment banker. Judge Kevin Carey is presiding over the case (#18-12714).

Mette K.

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.