February 2, 2021 – The Court hearing the Christopher & Banks cases issued an order approving (i) bidding procedures in relation to the sale of substantially all of the Debtors’ assets (the “Sale”), including bidder protections for stalking horse ALCC, LLC (the "Stalking Horse," an affiliate of ReStore Capital, LLC, the Debtors' prepetition term lender), (ii) the selection of the Stalking Horse and (iii) a proposed auction/sale timetable culminating in a February 19, 2021 auction (if necessary) and a February 22nd sale hearing [Docket No. 146].
On January 22nd, the Debtors executed a letter of intent (the "LOI") further to which ALCC, LLC agreed to serve as stalking horse bidder with a bid valued at $24.6mn. The LOI called for ALCC to buy the Debtors' remaining assets in exchange for the assumption of liabilities (including prepetition debt of approximately $8.1m) and leaves assets with the Debtors' estates (ie "excluded assets") valued at $12.7mn.
Further to the Debtors' January 25th bidding procedures motion [Docket No. 111] and the LOI, on January 28, 2021, the Debtors and the Stalking Horse into an asset purchase agreement (the “Stalking Horse APA”) with the Stalking Horse [Docket No. 135, with Stalking Horse APA attached as Exhibit 1].
In addition to being an an affiliate of prepetition lender ReStore Capital, LLC, the Stalking Horse is an affiliate of Hilco Merchant Resources, LLC which has been selected by the Debtors to conduct their store-closing sales.
Key Dates:
- Bid Deadline: February 17, 2021
- Sale Objection Deadline: February 18, 2021
- Auction (if required): February 19, 2021
- Sale Hearing: February 23, 2021
Key Terms of the Stalking Horse Agreement:
- Purchase Price: As noted in the table below (provided to prospective bidders to help in their assessment of what would be considered a qualified bid) the Debtors assess a "Stalking Horse Bid Value" of $24,585,000 and a "Value to the Estate" of the Stalking Horse bid of $25,935,000 which includes (in place of a credit bid construct) $8.1mn of prepetition debt as part of assumed liabilities and excluded assets of approximately $12.7mn. The “Purchase Price” as defined in the Stalking Horse APA "shall be (i) Buyer’s assumption of the Assumed Liabilities, (ii) payment of the Cure Costs as set forth herein, and (iii) the Closing Cash Payment" where
- "Assumed Liabilities" means:
- all Cure Costs under the Assumed Leases or Transferred Contracts as agreed to by the Buyer and the Sellers, and all Liabilities under the Assumed Leases or Transferred Contracts solely to the extent such Liabilities arise from and after the Closing Date;
- all Liabilities arising solely out of the ownership or operation of any Acquired Asset after the Closing;
- The sum of the principal amount of the term loan payable to ALCC, LLC, amounts due by the Debtors on account of the vendor program and all interest, fees and other amounts due by the Debtors on account of the term loan and under the vendor program, which collectively, as of the closing will be approximately $8.1 million;
- the Debtors’ obligations for unused and accrued “paid time off” or “PTO” for those E-Commerce Business employees listed on a schedule to the Transaction Documents (approximately $73,000);
- the Debtors’ obligations for “IBNR” in an amount not to exceed $950,000; and
- C&B’s post-petition obligations to Radial as of the closing date, which are estimated to be approximately $2.4 million
- "Closing Cash Payment" means: "(i) $12,700,000 less the amount of any expenses to be paid under line 24, week no. 7 of the of the Amended Cash Collateral Budget annexed hereto as Exhibit E (collectively, the “Wind Down Expenses”) (which Wind Down Expenses shall exclude any Assumed Liabilities or Liabilities to be paid by the Buyer pursuant to the Transition Services Agreement or otherwise and any realized budgeted expense savings) that are paid by Sellers prior to the Closing Date, plus (ii) an amount equal to the aggregate amount of all uncashed checks of Seller on the Closing Date, and less (iii) the aggregate amount of Sellers’ actual cash on hand as of the Closing Date (exclusive of any payment in respect of the Term Loan Obligations, the ABL Loan Obligations and/or Vendor Program Obligations.
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- Bid Protections:
- Expense Reimbursement: Capped at $350,000;
- Initial Overbid Amount: $650,000;
- Continuing Minimum Overbid Amount: $250,000.
Pre-Petition Marketing and Sale Process
The Debtors' bidding procedures motion states, “[t]he Debtors filed these chapter 11 cases with the intent to conduct a sale process with respect to the Debtors’ e-Commerce business and to liquidate the inventory in their 449 retail stores. A simultaneous sale and wind-down of the Debtors’ business operations is necessary to conserve liquidity and maximize the value of the Debtors’ assets in response to the COVID-19 pandemic that forced the closure of the Debtors’ stores in March of 2020. Although most of the Debtors’ stores have since reopened, the COVID-19 pandemic has caused significant disruption to the Debtors’ business and has had a significant adverse impact on their financial condition, results of operations and cash flows, both for the periods of time when the stores were temporarily closed as well as continued suppressed traffic and customer spending at the Debtors’ stores. In light of these unanticipated and insurmountable obligations, the Debtors have decided that it is in the best interests of their estates, creditors and other parties in interest to pursue an orderly liquidation of their assets through the chapter 11 process.
To that end, as described in detail in the First Day Declaration and the Mandarino Declaration, on or about November 4, 2020, the Debtors engaged B. Riley Securities, Inc. (‘B. Riley’) to provide investment banking services with respect to the Debtors’ retail and e-Commerce business assets, including exploring all restructuring, financing and M&A alternatives with respect thereto. Upon its retention, B. Riley immediately began conducting due diligence on the E-Commerce business assets and the Debtors’ operations.
Immediately upon its engagement, B. Riley began working closely with the Debtors’ senior management, their board of directors, and the Debtors’ other advisors to evaluate potential strategic alternatives and financing options. After considering the reasonably available possible courses of action, the Debtors determined that a sale of all or substantially all of the Debtors’ assets was in the best interest of the Debtors, their creditors and all parties in interest (each a ‘Potential Transaction’).
Beginning in December 2020, B. Riley commenced an extensive process to market the Debtors’ assets for sale to numerous prospective purchasers…Since the beginning of the marketing process, B. Riley has contacted at least two hundred (200) potential purchasers (collectively, the ‘Interested Parties’), consisting of at least one hundred and twenty-four (124) potential financial purchasers and at least seventy-six (76) potential strategic purchasers. As a result of these efforts, forty-nine (49) parties executed nondisclosure agreements, indicating an interest to further explore a potential transaction with the Debtors. Although approximately one hundred and twenty-three (123) entities declined to further participate in the sale process, B. Riley received indications of interest from three (3) parties seeking to acquire the Debtors’ e-Commerce assets, including the one from the Stalking Horse Bidder.
On January 20, 2021, the Debtors’ board of directors authorized the Debtors to enter into a letter of intent with ALCC, LLC, on behalf of itself and/or its affiliates or assigns, as buyer (collectively, the ‘Stalking Horse Bidder’), and on January 22, 2021 the Debtors and the Stalking Horse Bidder entered into such a letter of intent (the ‘Stalking Horse LOI’), a copy of which is attached hereto as Exhibit 4. The Stalking Horse LOI outlines the terms on which the Stalking Horse Bidder will acquire substantially all of the Debtors’ remaining assets (the ‘Stalking Horse Bid’). The Stalking Horse LOI contemplates execution of an asset purchase agreement acceptable to the Debtors and the Stalking Horse Bidder (the ‘Stalking Horse Agreement’) on or before January 27, 2021 (unless such deadline is extended upon the mutual agreement of the parties), which would supersede the Stalking Horse LOI in all respects. Additionally, if executed, the Stalking Horse Agreement will provide the Stalking Horse Bidder with certain customary stalking horse bid protections, in the form of an Expense Reimbursement, if the Stalking Horse Bidder is ultimately not the successful purchaser of the Debtors’ assets.
As the Debtors move forward with implementing the procedures outlined in this Motion, the Debtors will continue to market and solicit offers for the Acquired Assets to a wide range of potential purchasers and will work diligently with all parties that have expressed an interest in the Debtors’ assets. In this way, the Debtors intend to maximize the number of participants in the sale process.”
About the Debtors
According to the Debtors: “Christopher & Banks Corporation is a Minneapolis-based company that specializes in women’s apparel and accessories. Founded in 1956 when Gil Braun opened his first Braun’s store in Minneapolis, Minnesota, Brauns Fashions became publicly traded in 1992 and rebranded to Christopher & Banks Corporation in 2000.
We are a value-priced retailer of women’s specialty apparel that caters to women of all sizes from petite to missy to women’s (plus). We offer modern and comfortable clothes from the basics to unique colors, details and prints, which are specially designed for our proprietary Christopher & Banks line. What makes us unique is the quality, fit and service we offer, particularly as it relates to designing outfits. Our motto is Effortless Style for Real Life.
Our nearly 450 stores are located throughout the country primarily in smaller markets with populations less than 75,000. Not only are our retail and outlet stores highly accessible to our core customers, but they are also bright and inviting and feature stylists who assist in making each customer’s shopping experience enjoyable through genuine and customized wardrobe outfitting. In addition, for our customer’s convenience, our growing e-commerce business offers an expanded assortment of sizes, lengths, and colors.”
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