In a declaration in support of the Chapter 11 filing (the “Duffy Declaration”) [Docket No. 4], Robert J Duffy, the Company’s Chief Restructuring Officer, detailed the events leading to the Company’s selection of Enesco as a stalking horse bidder, “With downward spiraling liquidity and increasing financial challenges, the Debtors concluded, in consultation with their legal and financial advisors, that pursuing a going-concern sale of the Direct Business and the Acquired Stores, coupled with a wind-down of all stores not acquired under the Stalking Horse APA, was the best option to maximize value for the Debtors’ estates and creditors. Leading up to the Petition Date, Stifel/Miller Buckfire contacted 28 potentially interested strategic and financial parties, comprised of 12 financial parties and 16 strategic parties. Of these, approximately 13 parties entered into confidentiality agreements with the Debtors and received a copy of the Debtors’ investor presentation and thus began the diligence process. Six parties showed interest following receipt of the investor presentation and were granted dataroom access. Four parties conducted management meetings or calls and three parties toured the Debtors’ Fulfillment and Distribution Center.
Supply Chain and Vendor Challenges: As liquidity tightened, vendors began to place pressure on the supply chain cost structure by delaying or cancelling shipments until receiving payment. Beginning in August 2018, merchandise shipments and inventory receipts began to slow due to shrinking liquidity and a lack of vendor support. Prior to the Petition Date, substantial numbers of vendors refused to ship inventory unless the Debtors paid cash on delivery, resulting in shelf-ready merchandise being stranded. Specifically, a large volume of inventory that was critical for the winter holiday season lay dormant in distribution centers and ports and was inaccessible due to a lack of liquidity necessary to satisfy vendors, which hurt the Company’s performance during the all-important winter holiday season.
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