October 20, 2020 – The Debtors have filed a supplemental motion to reflect a last-minute change in stalking horse, with Premier Brands Justice LLC, an acquisition entity created by Manhattan-based IHL Group, being swapped out for Justice Brand Holdings LLC, an entity formed by Bluestar Alliance LLC ("Bluestar") which manages a portfolio of brands including Brookstone (purchased out of Chapter 11 in 2018), Hurley, bebe, kensie, Tahari and nanette lepore and which claims "current retail sales exceeding $3.0 billion."
As a result of the change, the Debtors have delayed their Plan confirmation hearing from October 23rd until November 5th, the new date also being the date when an auction (if necessary) is to occur; the auction/sale timetable unchanged by the switch in stalking horses and summarized below. The Debtors, who herald the better terms of the Bluestar deal (APA attached to the motion as Exhibit A-2) are probably anticipating that an auction does not occur; the one more onerous term (discretely added to the bidding proceures), a minimum bid increment of $2.0mn (raised from $500k) designed to persuade further bidder activity.
As to the improved terms, the Bluestar offer raises the cash consideration by $9.0mn to $44.0mn, but also perhaps makes slightly too much of the reduction in bidder protections, which now exclude a break-up fee (was $1.05mn) and reduces the expense reimbursement from $450k to $200k. The elimination of the break-up fee (which provides no value to the Debtors' estates one way or another) more than offset as a bidder protection (ie a term entrenching the bid of the designated stalking horse) by the increased minimum bid increment. Perhaps more useful to the Debtors is "an elimination of any requirements for a transition services agreement following Closing of the Sale." So far, no objection from the former stalking horse pipped to the post, but it is undoubtedly rather unhappy to have its negotiated and announced deal hobbled in this manner. As the Debtors noted, Bluestar and the IHL Group had each been involved in negotiations for quite some time, Bluetar having signed its NDA in July.
Key Terms of the Supplemental APA:
- Sellers: Ascena Retail Group, Inc., Tween Brands, Inc., Tween Brands Investment, LLC, Tween Brands Service Co., Tween Brands Direct Services, Inc., Tween Brands Marketing, Inc., Tween Brands Agency, Inc.
- Purchaser: Justice Brand Holdings LLC an entity created by Bluestar Alliance LLC
- Purchase Price: (i) the assumption of Assumed Liabilities and (ii) the payment of an amount equal to the sum of $44.0mn (the “Cash Purchase Price”).
- Bidder Protections: No break-up fee, an expense reimbursement of $200k and a minimum bid increment of $2.0mn
Key Dates
- Bidding Deadline: November 2, 2020
- Auction (if required): November 5, 2020
- Plan Confirmation hearing: November 5, 2020
- Objection Deadline: November 9, 2020
- Sale Hearing: November 12, 2020
Further Background
In a declaration in support of the revised motion filed by the Debtors' investment banker, the change in stalking horse is summed up as follows: "the Debtors concluded that the stalking horse bid (the 'Justice Brand Stalking Horse Bid') proposed by Justice Brand Holdings LLC ('Justice Brand'), an entity formed by Bluestar, presented certain advantages over the Original Stalking Horse Bid, including, among other things: (i) a Cash Purchase Price for the intellectual property of $44 million (approximately $9 million more than the Original Stalking Horse Bid); and (ii) significantly reduced bid protections, which include no break-up fee and expense reimbursement in an amount up to $200,000…the Debtors have, thus, determined that the Justice Brand Stalking Horse Bid is higher and better than the Original Stalking Horse Bid."
The Debtors' revised motion adds: "On October 13, 2020, the Debtors filed the Debtors’ Motion for Entry of an Order (I) Establishing Bidding Procedures and Granting Related Relief, and (II) Approving the Sale of Justice Assets Free and Clear of Liens, Claims, Encumbrances, and Interests [Docket No. 901] (the ‘Initial Motion’), seeking the Court’s approval of: (a) the bidding procedures for the sale of the Justice Assets (as defined herein); (b) the proposed dates and deadlines in connection therewith (including a bid deadline, objection deadlines, the date of the auction, and the hearing dates); (c) procedures for the assumption or assumption and assignment of certain executory contracts and leases and the resolution of related cure amounts; (d) the form and manner of notice of each of the foregoing; and (e) certain stalking horse protections.
The Debtors have undertaken an extensive sale and marketing process of the Justice Assets that began shortly after the Petition Date. As part of that process, the Debtors, through their investment banker, engaged in frequent communications with potential purchasers, including Bluestar Alliance LLC ( ‘Bluestar ‘), a leading brand management company, Premier Brands Justice LLC ( ‘Premier Brands ‘), and certain other parties. The Debtors initially selected Premier Brands as its stalking horse bidder for the sale of the Justice Assets, and its bid as the initial stalking horse bid (the ‘Original Stalking Horse Bid ‘), and filed the Initial Motion to seek approval thereof. However, shortly thereafter, the Debtors received an alternative proposal for the Justice Assets from Bluestar, which was higher and better than the Original Stalking Horse Bid. As a result, the Debtors requested an adjournment of the hearing on the Initial Motion to finalize the Stalking Horse Purchase Agreement (as defined herein).
As set forth in greater detail below, Justice Brand Holdings LLC ( ‘Justice Brand ‘ or the ‘Stalking Horse Bidder ‘), an entity formed by Bluestar, has offered to purchase the Justice Assets (the ‘Stalking Horse Bid ‘) pursuant to the terms of the Stalking Horse Purchase Agreement. The Stalking Horse Bid and the Stalking Horse Purchase Agreement present significant advantages to the Debtors’ estates over the Original Stalking Horse Bid, including: (i) an increased Cash Purchase Price of $44 million (which is $9 million more than the Base Amount (as defined in the Original Stalking Horse Bid)) for the Justice Assets; (ii) significantly reduced bid protections from those under the Original Stalking Horse Bid as a result of the elimination of a $1,050,000 break-up fee and a lower expense reimbursement of up to $200,000 (a reduction from $450,000 under the Original Stalking Horse Bid) (the ‘Stalking Horse Protections ‘); (iii) an elimination of any requirements for a transition services agreement following Closing of the Sale; (iv) the assumption of liability under certain postpetition purchase orders for goods to be delivered during the period beginning on December 1, 2020 and ending on April 30, 2020, up to an aggregate cap of $20 million; and (v) terms that are, in the Debtors’ business judgment, better than the terms reflected in the Original Stalking Horse Bid. The Stalking Horse Bid also contemplates a significantly higher cash deposit of $10 million (which is a $6.5 million increase from the deposit amount under the Original Stalking Horse Bid).
About Bluestar
According to Bluestar: "Founded by Joseph Gabbay and Ralph Gindi in 2006, Bluestar owns, manages, and markets a portfolio of consumer brands that span across many tiers of distribution from luxury to mass market. This portfolio consists of major department store retail brands including Brookstone, Tahari, Bebe, Kensie, Catherine Malandrino, Nanette Lepore, Joan Vass, Michael Bastian, English Laundry and Limited Too.
Each brand is uniquely positioned maintaining the brand heritage and equity, considering new categories and current tiers of distribution. Bluestar’s current network of international and domestic partners offers the opportunity to take a niche brand to a visible worldwide lifestyle brand. Since its inception, Bluestar has acquired select brands with current retail sales exceeding $3.0 billion. The company manages a current portfolio of over 300 licensees and a growing branded retail platform of over 100 stores worldwide throughout North America, Europe, Australia, South America, Asia, United Arab Emirates, Middle East, India and Russia."
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The post Ascena Retail Group, Inc. – Announces Last-Minute Change of Stalking Horse, with Bluestar Alliance Replacing IHL Group After Topping Cash Element of Consideration by $9mn appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.