Bankruptcy News

J & M Sales – Files Backstop Agency Agreement with Hilco Merchant Resources, Seeks Court Orders to Provide Value-Maximizing Flexibility

September 20, 2018 – J & M Sales requested Court orders authorizing (i) a backstop agency agreement with Hilco Merchant Resources (the “Stalking Horse”) dated as of August 5, 2018 (the “Agency Agreement”), (ii) bidding protections for the Stalking Horse, (iii) bidding procedures and a related auction, (iv) a sale hearing and (v) a range of monetizing options including (a) a sale of assets or (b) store closing sales [Docket No. 467]. 

The backstop agency agreement notes, “In furtherance of the Debtors’ efforts to maximize the value of the Assets in a sales process and as a backstop to their efforts to sell their assets as a going concern and/or confirm a plan, the Debtors are also seeking authority, in part, to assume the Agency Agreement for a Store Closing Sales process that would serve as the stalking horse bid subject to higher and/or better bids. The Stalking Horse is also the agent conducting the GOB Sales of the Closing Stores described in the GOB Sales Motion. Specifically, the Stalking Horse has agreed to “backstop” the Debtors’ sales efforts by permitting the Debtors to pursue a going-concern sale of their Assets and/or confirmation of a plan.  The Stalking Horse will provide the Debtors with a guaranteed percentage of 75.0% (the ‘Guaranty Percentage’) of the aggregate Cost Value of the Merchandise, based upon the aggregate Cost Value of the Merchandise included in the Sale. The Guaranty Percentage to the Cost Value of the Merchandise is subject to adjustment depending on the cost value of the Merchandise. In the event that the cost value of the Merchandise is less than $119,000,000, each $400,000 (or pro rata thereof) increment decreases the Guaranty Percentage by 0.25%. Thus, the Agency Agreement provides the Debtors with flexibility to pursue whichever transaction will maximize their asset value and provide the greatest benefit for creditors. If the Debtors are unable to effectuate a restructuring or Going Concern Sale, the Agency Agreement and Approval Order would allow the Debtors to commence the Store Closing Sales no later than November 5, 2018. The Guaranty Percentage has been fixed based upon the aggregate Cost Value of the Merchandise included in the Sale being not less than $127,000,000 and not more than $135,000,000 (the ‘Merchandise Threshold’) as of the Sale Commencement Date….If the Debtors consummate a transaction with a party other than the Stalking Horse (the ‘Alternate Transaction’), then the Stalking Horse shall be entitled to a breakup fee in the amount of one million ($1,000,000) against which the $250,000 ‘Put Fee’ (the ‘Put Fee’) already paid by the Debtors to the Stalking Horse upon entry into the Agency Agreement shall be credited (the ‘Breakup Fee’)….The Secured Lenders have agreed to give the Debtors additional time to solicit bids and market their assets if the Debtors receive a total of $15,000,000 in conforming inventory on or prior to October 5, 2018 (the ‘Inventory Threshold’) pursuant to the terms of the final order granting Final Order Approving Postpetition Financing.” 

The following general timeline is also fixed: (i) an October 8, 2018 deadline for entry of order approving the motion (if the Inventory Threshold is achieved this is extended until October 26, 2018), (ii) an October 12, 2018 deadline for closing of sale(s) (if the Inventory threshold is achieved this is extended until October 31, 2018) and (iii) an October 10, 2018 deadline for entry of an approval order (if the Inventory Threshold is achieved, this is extended until October 29, 2018).

Weinstein Company Holdings – Files Objection to Harvey Weinstein Motion to Compel Discovery

September 20, 2018 – The Weinstein Company Holdings filed an objection to Harvey Weinstein's motion to compel discovery [Docket No. 1430]. The objection [Docket No. 1516] asserts, “The Motion should be denied because there is no good cause for the requested discovery. First, the requested discovery has nothing to do with Weinstein’s defense of the civil or criminal cases pending against him. All of the emails Weinstein has requested between himself and alleged victims have been produced, and are continuing to be produced, in accordance with the 2004 Order. Second, any discovery related to a proof of claim Weinstein may one day file should be denied as premature. A proof of claim is prima facie valid as a matter of law until an objection is filed. Accordingly, if and when Weinstein files a proof of claim, and that proof of claim is objected to—which may or may not happen—Weinstein can seek discovery as to those matters that are actually in dispute in connection with his claim. There is no basis for Weinstein to seek broad discovery pre-emptively, at the expense of all creditors, when a bar date has not yet been set, no proof of claim has been filed, and no objections have been lodged. Moreover, even if such discovery requests were not premature, other than generic statements that the documents he seeks are ‘essential to his ability to investigate and analyze’ his claims, Weinstein does not draw any actual connection between the discovery he seeks and any proof of claim he may one day file. Third, Weinstein does not need any discovery to ‘ensure that his property has not been improperly transferred to Lantern’. Weinstein’s film rights are specified in Schedule I to his employment agreement, which is attached to Weinstein’s motion. The film rights that were transferred in the sale to Lantern are set forth in the publicly-filed Asset Purchase Agreement between the Debtors and Lantern—and necessarily only consist of those assets that were owned by the Debtors, not assets owned by Weinstein personally or by other third parties—and Weinstein agreed not to press his objection to that sale....Finally, the discovery sought is of the Debtors’ records predating the sale to Lantern, and Weinstein has done nothing to establish that there is any connection between that discovery and the alleged transfer of his rights....Engaging in the broad discovery that Weinstein seeks will distract the Debtors from those critical tasks and impose substantial unnecessary costs on the Debtors’ estates. In contrast, no harm will come to Weinstein if the Motion is denied because, if and when he files a proof of claim on some day in the future and the Debtors or another party objects, Weinstein will be entitled to seek discovery that is properly tailored to resolve that objection. The Motion should be denied.”

J&M Sales – Court Authorizes Final DIP Financing of $100 million

September 20, 2018 – J&M Sales received final Court authority [Docket No. 467] for its $100 million postpetition Debtor-in-Possession (“DIP”) financing; $57 million of interim DIP financing having previously been authorized on August 8, 2018 [Docket No. 93]. As previously reported [Docket No. 17], “The DIP Lenders are Encina Business Credit SPV; Israel Discount Bank of New York; and Midcap Financial Trust. The DIP Agent is Encina Business Credit. The L/C Issuer is Israel Discount Bank of New York….The total commitment for the DIP Facility is $100,000,000….For each LIBOR Rate Loan made by DIP Agent it shall bear interest equal to 7.75% per annum (at least 0.25%) plus Applicable Margin (7.5%)). For each LIBOR Rate Loan made by Israel Discount Bank of New York it shall bear interest equal to 5% per annum (at least 0.25%) plus Applicable Margin (4.75%)). For each Base Rate Loan made by DIP Agent it shall bear interest equal to 7.5% per annum (at least 1%) plus Applicable Margin (6.5%)). For each Base Rate Loan made by Israel Discount Bank of New York it shall bear interest equal to 4.25% per annum (at least 1%) plus Applicable Margin (3.25%)).” 
 

Hooper Holmes – Court Approves Quest Diagnostics Incorporated as Stalking Horse Bidder

September 20, 2018 – The Court hearing the Hooper Holmes case issued an order [Docket No. 119] approving the Debtors' (a) bidding procedures, (b) a stalking horse asset purchase agreement and bid protections, (c) form and manner of notice of auction, sale transaction, and sale hearing, and (d) assumption and assignment procedures. The order states, “Summit Health, Inc. submitted a bid for the Transferred Assets as reflected in the Stalking Horse APA (the ‘Stalking Horse Bid’), which Stalking Horse Bid represents the highest and best offer the Debtors have received to date to purchase the Transferred Assets. Summit Health, Inc. shall act as the ‘Stalking Horse Bidder’ under the Stalking Horse APA, and be subject to higher or better offers in accordance with the Bidding Procedures….Each of: (i) SWK Funding LLC (‘SWK’) and (ii) CNH Finance Fund I, L.P. (‘CNH,’ and together with SWK, the ‘DIP Lenders,’ and each individually, a ‘DIP Lender’) shall be entitled to credit bid the secured amount of its claim, subject to Challenge or limitation for cause pursuant to section 363(k) of the Bankruptcy Code, and shall constitute a Qualified Bidder; provided, however, that to be determined a Qualified Bid, any credit bid submitted by a DIP Lender must satisfy the requirements applicable to a DIP Lender’s credit bid set forth in the Bidding Procedures, including, without limitation, the requirement of submitting a good-faith cash deposit in an amount equal to the Break-Up Fee and Expense Reimbursement, or $1,110,000.” The order proposes the following general timeline: (i) a bid deadline of October 5, 2018, (ii) an auction, if necessary, to be conducted on October 10, 2018 and (iii) a sale hearing to occur on October 12, 2018 ( an October 9, 2018 sale hearing to be held if no Auction is conducted).

J & M Sales – Court Authorizes Final DIP Financing of $100 million

September 20, 2018 – J & M Sales received final Court authority [Docket No. 467] for its $100 million postpetition Debtor-in-Possession (“DIP”) financing; $57 million of interim DIP financing having previously been authorized on August 8, 2018 [Docket No. 93]. As previously reported [Docket No. 17], “The DIP Lenders are Encina Business Credit SPV; Israel Discount Bank of New York; and Midcap Financial Trust. The DIP Agent is Encina Business Credit. The L/C Issuer is Israel Discount Bank of New York….The total commitment for the DIP Facility is $100,000,000….For each LIBOR Rate Loan made by DIP Agent it shall bear interest equal to 7.75% per annum (at least 0.25%) plus Applicable Margin (7.5%)). For each LIBOR Rate Loan made by Israel Discount Bank of New York it shall bear interest equal to 5% per annum (at least 0.25%) plus Applicable Margin (4.75%)). For each Base Rate Loan made by DIP Agent it shall bear interest equal to 7.5% per annum (at least 1%) plus Applicable Margin (6.5%)). For each Base Rate Loan made by Israel Discount Bank of New York it shall bear interest equal to 4.25% per annum (at least 1%) plus Applicable Margin (3.25%)).” 
 

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