August 24, 2018 – The Official Committee of Unsecured Creditors (the “Committee”) of Brookstone filed a redacted objection [Docket No. 231] to Debtors financing motion [Docket No. 19] citing liquidity and cash collateral concerns upon termination of the Debtors’ debtor-in-possession facility (“the DIP Facility”). The Committee asserts, “The DIP Facility, with a total cost of approximately [redacted]…provides the Debtors with only $1.5 million of additional liquidity and rolls up approximately $28.5 million of prepetition debt into postpetition debt. The $1.5 million of liquidity was needed to bridge a one week shortfall at the outset of these cases before the proceeds from store-closing sales were realized. In exchange for resolving this one-week funding gap (caused by their own reserves), the DIP Lenders seek to drive a process that monetizes their collateral quickly and without regard to junior creditors, and to obtain substantial fees and other benefits that far outweigh the utility of their nominal funding. Equally troubling is the DIP Lenders’ refusal to pay the reasonable and necessary costs of disposing of their collateral….Upon the closing of a sale, the DIP Facility will terminate. The Debtors will then be left with a host of unpaid administrative claims, no agreement on the use of cash collateral with other lenders, and, potentially, a path to chapter 7 conversion. The DIP Lenders should not be permitted to run these cases entirely for their benefit and on the backs of unpaid landlords and vendors. To be clear, while the DIP Lenders believe there may not be any distributable value beyond their claims, the Committee believes that there could and should be. The Debtors’ brand is held in worldwide esteem, and their IP, as well as other assets, could generate a meaningful return to general unsecured creditors if ultimately marketed on a level playing field under a fair timeline. But even if that cannot be achieved, these cases should not be doomed to administrative insolvency. Accordingly, and for the reasons set forth herein, the Committee objects to approval of the DIP Facility on a final basis.” The Committee also requested that portions of its motion be filed under seal [Docket no. 233]. The Committee argued, “The adjudication of the DIP Motion and the DIP Objection requires the discussion and review of certain confidential business and commercial terms, and confidential information the Committee received from the Debtors. Accordingly, the Committee submits that the confidential information constitutes ‘commercial information’ and should be subject to the protections of section 107(b) of the Bankruptcy Code.”
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