Claire’s Stores – Modified Third Amended Plan Confirmed, Access to $575 million in Additional Capital

September 21, 2018 – The Court hearing the Claire’s Store’s case issues an order confirming the Debtors’ Third Amended Joint Chapter 11 Plan of Reorganization [Docket No. 1040]. In a press release announcing the confirmation, the Company stated, “Under the terms of the Plan, which is supported by all of the Company’s major creditor groups and sponsored by an Ad Hoc Group of First Lien Creditors led by Elliott Management Corporation and Monarch Alternative Capital LP, the Company will eliminate approximately $1.9 billion of debt from its balance sheet and gain access to $575 million of additional capital.”

 

The Court order specifically references the settlement announced on September 17, 2018 pursuant to which junior bondholder Oaktree Capital Management LP (“Oaktree”) agreed to vote in favor of the Plan proposed by the Company and supported by Claire’s senior lenders, led by Elliott Capital Management (Elliott”) and Apollo Management Holdings LP (“Apollo”), Claire’s’ private equity sponsor. Apollo is the holder of almost 98% of Claire’s outstanding equity and $52.8 million of debt which ranks senior to the $159 million of Claire’s second lien debt currently held by Oaktree. The Court order states, “The compromises and settlements set forth in the Plan are approved, including with respect to the Global Plan Settlement, and will be effective immediately and binding on all parties in interest on the Effective Date. On the date hereof, the Debtors shall assume and be deemed to have assumed each of: (a) the Comfort Letters; (b) the New Money Backstop Commitment Agreement; (c) the Restructuring Support Agreement; and (d) that certain Plan Support Agreement dated as of August 31, 2018 [Docket No. 854] by and among the FFI Parties (as defined therein), the Debtors, and certain other parties thereto….The contingent value rights (“CVRs”) described in Exhibit B to the Plan, to the extent applicable, will be issued in reliance upon section 1145 of the Bankruptcy Code and, for all purposes, the statements made in Article VI Section F of the Plan shall be deemed to refer to, and apply to, CVRs as and to the same extent as such statements apply to Reorganized Claire’s Parent Interests….Based on its representations on the record, Oaktree shall be deemed to have accepted the Plan, and Oaktree shall be deemed to have changed any prior Ballots cast by Oaktree rejecting the Plan to Ballots accepting the Plan…Class 10 (Second Lien Notes Claims) shall be deemed to have accepted the Plan for each Debtor other than Claire’s Parent….On the Effective Date, the Motion of Oaktree Capital Management, L.P. for Entry of an Order Granting Derivative Standing and Authority to Prosecute and Settle Claims on Behalf of Certain of the Debtors [Docket No. 648] shall be deemed withdrawn with prejudice….On the Effective Date, that certain Adversary Complaint filed on August 21, 2018 under Adversary Proceeding No. 18-50709 by the 6.125% First Lien Notes Trustee, the 9.00% First Lien Notes Trustee and the Prepetition First Lien Term Loan Agent against Oaktree Capital Management, L.P., Oaktree Special Situation Fund, L.P., Oaktree Principal Fund V, L.P., and Oaktree Principal Fund V (Parallel), L.P. shall be deemed dismissed and withdrawn with prejudice….Upon the occurrence of the Effective Date, (1) the Intercreditor Complaint shall be deemed voluntarily dismissed with prejudice and notice of said dismissal shall be filed on the docket of the adversary proceeding related thereto; and (2) the Standing Motion shall be deemed withdrawn with prejudice.”