Bankruptcy News

Distressed Retailers Report Released: Retail Bankruptcies Increase Expected

According to BankruptcyData, Toys "R" Us ranks as the 3rd largest retail bankruptcy of all time - with nearly $7 billion in pre-petition assets. Kmart's 2002 and Federated Department Stores' 1990 Chapter 11 filings hold respective first and second place titles on that list. In light of the recent barrage of high-profile retail bankruptcies - including Toys "R" Us, rue21, Gymboree, Vitamin World and countless others. BankruptcyData has released a free e-report focused exclusively on analyzing the distressed retail industry. The Distressed Retailers Report notes, "Global market forces, rapidly evolving technologies, an ever-increasing proliferation of online retail purchase channels and widespread commoditization have combined to elevate the expectations of many consumers while putting tremendous pressure on retailers to find new ways to survive and grow. As the industry struggles, the number of retailers filing for bankruptcy keeps growing, and 2017 could end up with the highest percentage of retail bankruptcies ever." Download BankruptcyData's free Distressed Retailers Report directly to your browser in PDF format: http://www.bankruptcydata.com/public/assets/filemanager/userfiles/Distressed-Retailers_Sep-17.pdf

Toys "R" Us Chapter 11 Petition Filed

Toys "R" Us and 24 affiliated Debtors filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Eastern District of Virginia, lead case number 17-34665. The Company, which retails children's toys, games and apparel, is represented by Michael A. Condyles of Kutak Rock. Concurrent with the Chapter 11 filings, the Company also initiated Companies' Creditors Arrangement Act (CCAA) proceedings in the Ontario Superior Court of Justice. Toys "R" Us' operations outside of the United States and Canada, including its operations in Europe and Australia and its approximately 255 licensed stores and joint venture partnership in Asia, which are separate entities, are not part of the bankruptcy proceedings. The Company expects this process will enable it to restructure its outstanding debt, which will provide greater financial flexibility to invest in the continued growth of the Company and build on its current position. Toys "R" Us explains, " Although the Company has managed its complex, highly-leveraged capital structure by refinancing its debt obligations before they come due, the Company's cash debt service burden of approximately $400 million per year is unsustainable in the current competitive environment. As a result, the Company concluded that a comprehensive deleveraging would be required to allow the Company to right-size its balance sheet, make necessary investments, and maximize the long-term value of the business." Court-filed documents note, "The Company commenced these chapter 11 cases to address its near-term liquidity issues, longer-term capital needs, and accomplish a comprehensive reorganization that will enable Toys 'R' Us to turnaround and simply make better its business for the millions of Toys 'R' kids around the globe. This turnaround begins today." The Company has received a commitment for over $3.0 billion in debtor-in-possession financing from various lenders, including a JPMorgan-led bank syndicate and certain of existing lenders, which, subject to Court approval, is expected to immediately improve the Company's financial health and support its ongoing operations during the Court-supervised process.

21st Century Oncology Holdings Report Filed

21st Century Oncology Holdings' patient care ombudsman (PCO) filed with the U.S. Bankruptcy Court a second report. The report states, "I found no indication that the Debtors' bankruptcy filings have adversely impacted operations or the quality of treatment and care provided to the patients. In fact, after years of uncertainty, the bankruptcy appears to have provided greater stability and assurances to staff that there is a clear path forward. I saw no evidence that patient care has suffered....The motto at 21st Century Oncology (quoted to me many times) continues to be that it is in the business of treating the patient and not just the disease. Perhaps for this reason, it is no surprise that in my view (based primarily upon my observations and discussions with doctors and other medical staff at the facilities), the bankruptcy has not impacted patient care in any discernible respect. During my visits to corporate headquarters and several of the Florida offices, among other things, I observed (i) clean, professional, and welcoming environments at each of the offices that I visited; (ii) physicians (reflecting all years of experience) that are the cream of the crop in the industry and are dedicated to their work and their patients; (iii) staff that is friendly and knowledgeable, (iii) regional management who knew the history, equipment, and personnel at each of the offices under their supervision; and (iv) state of the art technology and multiple treatment offerings, which provide patients with the full array of options within each region. As a result, the Debtors have not seen (i) any decline in overall patient volume since the bankruptcy cases; (ii) any decline in referrals from other physicians and healthcare facilities; or (iii) any impact on employee retention. Based upon what I observed thus far concerning the facilities and level of patient care, I do not believe that the bankruptcy has negatively impacted operations at the patient level and, if asked, I would not hesitate to recommend 21st Century Oncology to any in need of the cancer care provided at their facilities."

SunEdison Bidding Procedures Approval Sought

SunEdison filed with the U.S. Bankruptcy Court a motion for an order approving bidding procedures related to the Debtors' sale of real property located in Sherman, TX (subject to higher or better offers and Court approval), the times, dates, places and forms of notice for an auction and a sale hearing, a break-up fee and expense reimbursement, an order approving the sale (free and clear of liens, claims, encumbrances and other interests) and authorizing the payment of broker commissions on an interim basis from sale proceeds. The motion explains, "Indeed, after a year plus process and consideration of numerous written offers to acquire the Texas Property, the Debtors accepted, subject to higher and better offers and Bankruptcy Court approval, the written offer from Corning Research & Development (the 'Stalking Horse Purchaser') as a 'stalking horse offer'. The Debtors and the Stalking Horse Purchaser have negotiated a purchase and sale agreement…providing for the sale of the Texas Property for a purchase price of $21,000,000 (the 'Purchase Price'), subject to higher or better offers and Bankruptcy Court approval….The Stalking Horse Purchaser provided the Debtors with a $500,000 initial deposit upon execution of the Purchase Agreement (the 'Deposit')….If the Purchase Agreement has not been previously terminated due to a default by the Stalking Horse Purchaser or a Remediation Termination Event and if the Court approves the Sale of the Texas Property to a Successful Purchaser that is not the Stalking Horse Purchaser or otherwise declines to approve the Sale to the Stalking Horse Purchaser, the Purchase Agreement provides that the Stalking Horse Purchaser will be entitled to (a) the return of the Deposit, (b) a break-up fee equal to three-percent (3%) of the approved Purchase Price, (the 'Break-Up Fee'), and (c) an expense reimbursement up to $150,000 (the 'Expense Reimbursement')." The motion continues, "A Qualified Bid for the Texas Property must be for a price that exceeds the Purchase Price set forth in the Purchase Agreement by at least $900,000 and under terms which the Debtors believe to be higher or better than the Stalking Horse Purchaser's bid in cash; The bid must be accompanied by a deposit in an amount equal to at least $500,000….At the Auction, the minimum initial overbid must be, in the aggregate, at least $900,000 greater than the Starting Auction Bid, and subsequent bids must be, in the aggregate, at least $100,000 greater than the prior bid."

Crossroads Systems DS Approved, Plan Confirmed

The U.S. Bankruptcy Court approved Crossroads Systems' Disclosure Statement and concurrently issued an order confirming its Plan of Reorganization, with technical modifications. According to documents filed with the Court, "The Prepackaged Plan effectuates the terms of an agreement with 210/CRDS Investment ('210'), that will (i) provide the Debtor with an equity investment of $4 million and additional financing of $10 million which will allow the Debtor to monetize its patents, make profitable acquisitions, run the Debtor's business and fund necessary capital expenditures all to maximize shareholder return; (ii) retire all issued and outstanding preferred stock; (iii) pay all Administrative, Secured, Priority, General Unsecured, and Subordinated Claims in full; and (iv) allow common shareholders to retain their Interests. Subject to the terms and conditions of the Plan and related restructuring support agreement with 210/CRDS Investment, 210/CRDS Investment will invest $4 million cash in Crossroads Systems in exchange for shares of the reorganized company's common stock representing approximately 49.49% of the common stock of the reorganized company. The Plan provides for the payment of all creditor claims in full, for holders of Preferred Shares to receive their pro rata share of $2,672,233.78 in cash plus 8% of the common stock of the reorganized company, and for holders of common stock to exchange their existing shares of common stock for an equivalent number of new shares of the common stock of the reorganized company, which shares would constitute approximately 42.51% of the outstanding share of the common stock of the reorganized company." The Debtors also filed a notice of amendments to the Plan Supplement filed on September 11, 2017. This intellectual property licensor filed for Chapter 11 protection on August 13, 2017, listing $5.6 million in pre-petition assets.

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