Bertucci’s: Filing Alert & Committee Formation Meeting Notice

Italian restaurant owner and operator Bertucci’s Corporation filed for Chapter 11 bankruptcy protection on April 15, 2018.  The case is pending in Delaware.

Company Overview

Bertucci Info.jpgBertucci’s  was formerly known as NE Restaurant Company, Inc.  It changed its name to Bertucci’s Corporation in August 2001. Founded in 1981, the company is based in Northborough, MA.  Today Bertucci’s owns and operates a chain of 59 casual dining Italian restaurants in the Northeast and Mid-Atlantic.

A Bankruptcy Sale

The filing sets up a process to sell the company to Right Lane Dough Acquisition, LLC (an affiliate of Right Lane Capital) or an overbidder.  The proposed purchase price is $1.7 million in cash and a “credit bid” of up to $4 million.  In addition, the buyer will provide the company with exit financing in the form of $14 million in new second lien notes.

A Struggling Restaurant Market

Like others before it, Bertucci blames its bankruptcy filing on a proliferation of fast-casual restaurants and market oversaturation.

Bertucci’s, and the casual family dining industry generally, have suffered “a prolonged negative operating trend in an ever increasing competitive price environment.”

Since 2011, the company has experienced year-over-year declines in sales and revenue.

In fact, Reorg. First Day states that Bertucci’s is the third Massachusetts-based restaurant chain it has covered in recent years.  The others were Boston-based fast casual restaurant Cosi and the Sagamore-based restaurant chain Bugaboo Creek Steakhouse.

The Committee Formation Meeting

The company states it owes roughly $9 million to vendors, landlords, and other unsecured creditors.  The U.S. Trustee has scheduled a meeting to form a committee of unsecured creditors in the case.  The meeting will take place at 10:00 a.m. on Friday, April 27, 2018.  It will be held at the Delaware State Bar Association on 405 King Street, 2nd floor, in Wilmington, Delaware.  If you would like a copy of the formation notice, it is available here.

Barn Clouds.jpegThe weather forecast?  A very civilized high of 66 degrees.  With mostly cloudy skies becoming partly cloudy later in the day.  Because it is always partly cloudy in Delaware.  Except when its raining.  Or snowing.

Mette K.

Filing Alert: Hobbico Files Chapter 11 to Complete a Sale Process

Illinois-based Hobbico, Inc. sought chapter 11 bankruptcy protection yesterday in Delaware. Its goal? To continue a sale process started late last year.

The Bankruptcy Sale

The company says it is “actively” discussing a sale with potential buyers. (Translation: It does not yet have a commitment from anyone.) Hobbico’s prepetition lenders are financing the sale effort. They are calling for the following sale schedule:

  • Sale procedures by March 9;
  • A bankruptcy auction by March 26; and
  • A sale closing by April 5.

Events Contributing to the Bankruptcy

The company blames its bankruptcy on various events, including:

  • High leverage due to various acquisitions;
  • Lagging product innovation;
  • An underdeveloped e-commerce platform;
  • An increasingly competitive drone market;
  • Vendor issues; and
  • Depressed sales.

These factors eventually triggered defaults with the company’s secured lenders. They also lead to a deadly spiral of constrained liquidity, inventory shortages, and falling sales.

Additional Information

JND Corporate Restructuring is the claims agent. The case is assigned to Judge Kevin Gross (case number 18-10055 (KG)). Information about the Committee formation meeting is available here.

Company Background

Hobbico designs, manufactures, and distributes drones, radio controlled vehicles, and other cool hobby products. I wanted to post pictures for you, but I can’t find any on their website. (Underscoring my earlier point about their underdeveloped internet presence.) But the website does identify many of their 250 brands. These include Axial, ARRMA, Revell, Estes, Great Planes Model Manufacturing, DuraTax, and Top Flite. Based in Illinois, the company has operations and facilities in California, Colorado, Illinois, and Nevada.axid9060

Tower Hobbies is the company’s retail arm. It is also their highest margin distribution channel. Revell, Estes-Cox, and United Model make up its mass market business. And Great Planes represents the company’s wholesale operations. Besides its own trademarks, the company licenses various trademarks.rise0207

Wait…!  Their drones and other toys are featured on the Tower Hobbies retail website. Too bad Christmas is over….

Mette K.

It’s Black Friday, and FTI’s 2017 U.S. Holiday Retail Forecast Is Here

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.

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.

 

Retail Roundup

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