[Developing story] May 27, 2020 – Tuesday Morning Corporation and six affiliated Debtors (Nasdaq "TUES;" “TMC” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Northern District of Texas, lead case number 20-31476. The Debtors, "off-price retailers" operating 687 stores in 39 states, are represented by Ian T. Peck of Haynes & Boone LLP. Further board-authorized engagements include (i) AlixPartners LLP as financial advisors, (ii) Miller Buckfire as investment banker, (iii) A&G Realty Partners, LLC as real estate advisor, (iv) A&G Realty Partners, LLC as liquidation advisor and (v) Epiq Corporate Restructuring, LLC as claims agent.
The Debtors’ lead petition notes between 1,000 and 5,000 creditors, estimated assets of $92.0mn and estimated liabilities of $88.35mn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Revman International Inc ($1.4mn trade debt claim), (ii) Three Hands Corp ($890k trade debt claim) and (iii) American Crafts ($824k trade debt claim).
In a press release announcing the filing, the TMC advised that “it will pursue financial and operational reorganization designed to allow the Company to reduce its outstanding liabilities and strengthen its overall financial position. These actions are in response to the immense strain the COVID-19 pandemic and related store closures have put on the business."
Highlights
- COVID-19 store closures led to loan agreement defaults, dramatic cutback in borrowing headroom
- Prepetition lenders to extend $100.0mn of DIP financing if Debtors source $25.0mn of additional financing
- Debtors will begin closing 230 stores in "footprint realignment"
- Debtors will "attempt" to renegotiate leases
Realignment of Store & Distribution Footprint (aka Store Closings and Lease Renegotiations)
The press release adds that the reorganization process will enable TMC "to realign its store footprint" and that it "expects to close approximately 230 of its 687 stores" over the course of the summer and to leave a go-forward footprint of approximately 450 stores. The Debtors will seek Court authority to close "at least 132 locations in a first phase and, eventually, the Company’s distribution center in Phoenix that supports these stores."
The Debtors also plan "to attempt to renegotiate a significant number of leases during this process."
DIP Financing
The Debtors have obtained a commitment from its existing lender group to provide $100.0mn of debtor-in-possession ("DIP") financing. The agreement requires that the Debtors obtain a commitment for up to $25.0mn of additional financing, "which the Company is negotiating."
Forbearance Agreement
On May 14, 2020, the Debtors entered into a limited forbearance agreement (the “Forbearance Agreement”) in respect of their August 2015 credit agreement (the “Credit Agreement”). Further to the Forbearance Agreement, JPMorgan Chase Bank, N.A., in its capacity as administrative agent, issuing bank and as swingline lender (“JPMorgan”), and the other lenders party thereto (the “Lenders”) agreed not to exercise remedies available to them under Credit Agreement documentation through May 26, 2020. The Debtors' concede that an event of default under loan documentation exists as a result of "suspending the operation of its business in the ordinary course," which appears to relate to COVID-19 closures. In exchange, the Debtors agreed to (i) a permanent reduction of lender commitments from $180.0mn to $130.0mnn, (ii) the termination of a swingline loan facility, (iii) repay $10.0mn under the Credit Agreement over the next week, (iv) apply unrestricted and unencumbered cash balances in excess of $32.0mn to the repayment of outstanding borrowings under the Credit Agreement and (v) allow for daily cash sweeps.The Forbearance Agreement also requires the Debtors to retain a liquidation consultant and financial advisor.
About the Debtors
Tuesday Morning Corporation (NASDAQ: TUES) is one of the original off-price retailers specializing in name-brand, high-quality products for the home, including upscale home textiles, home furnishings, housewares, gourmet food, toys and seasonal décor, at prices generally below those found in boutique, specialty and department stores, catalogs and on-line retailers. Based in Dallas, Texas, the Company opened its first store in 1974 and currently operates 687 stores in 39 states.
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The post Tuesday Morning Corporation – Dallas-Based Off-Price Retailer (687 Stores in 39 States) Succumbs to COVID-19, Will Close 230 Stores, Seek to Renegotiate Leases in “Footprint Realignment” appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.