One of the perks of working in the restructuring space is the wealth of industry information and forecasting available from the many talented financial advisors who I work with. FTI Consulting’s Retail & Consumer Products Practice, for one, is heavily involved with the issues and challenges facing retailers today, and I look forward to receiving a copy of their retail report at the end of each year.
The mood this year? Guarded optimism. But equally significant, one of this year’s take aways, according to FTI’s 2017 retail forecast, is that now, more than ever, how specific large retailers fare during the holiday season may be mostly or entirely divorced from the broader performance of the season. You can download the full report here.
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.
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.
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 Business Insider and Retail Dive report that Sears suppliers are slowing shipments based on bankruptcy fears.
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
Golfsmith has asked the Delaware Bankruptcy Court to approve a $1 million retention program for some of its key employees. The retention program, it says, is needed to implement its recently approved bankruptcy sale and to complete the wind down of its remaining business. The plan, if approved, will provide retention bonuses so some 127 non-insider employees.
The motion [Docket #483] is available for download here.
Another retailer comes off the bankruptcy auction block….
Following a hotly contested sale process, yesterday the bankruptcy court entered its order approving The Picture People’s sale to its prepetition lender through a designee, TPP OPCO, Inc.
The sale did not generate cash for creditors but instead was completed through a $12 million credit bid. (English translation: The lender was allowed to bid for the company by crediting its outstanding debt against the purchase price.)
The company has indicated that the sale will enable it to continue as a going concern, preserving roughly 1,200 jobs for its employees.
The credit bid, meanwhile, remains subject to attack by the Creditors’ Committee on a post-sale basis through December 9, 2016.
The Order Authorizing the Sale of Assets is available for download here, and the entire docket is available on KCC’s website.