February 9, 2021 – The Debtors filed a Chapter 11 Plan and a related Disclosure Statement [Docket No. 614 and 615, respectively]; and further filed a motion requesting Court approval for (i) the Disclosure Statement, (ii) proposed Plan solicitation and voting procedures and (iii) a proposed schedule culminating in an April 26th Plan confirmation hearing [Docket No. 616].
Plan Overview
The Debtors' Plan distributes assets received following the Debtors' sale of its intellectual property ($9.0mn) and insurance litigation assets ($59.0mn), together, the "Sale Transactions," each described below.
The Disclosure Statement provides: "The Plan contemplates a distribution of proceeds of the Sale Transactions and a Wind-Down of the Debtors’ remaining affairs, and this Disclosure Statement is being submitted to provide information about the Wind-Down and related information concerning the Debtors, all in accordance with the requirements of the Bankruptcy Code."
The Debtors' motion requesting approval of the Disclosure Statement provides: “The Debtors’ Plan contemplates, upon the Effective Date, (a) 100 percent (100%) recoveries for Holders of Administrative Claims, Priority Tax Claims, Other Secured Claims and Other Priority Claims, and meaningful recoveries for Holders of General Unsecured Claims and (b) the appointment of a Plan Administrator, (i) in which any Estate non-Cash assets are vested for the purpose of liquidating distributing them in accordance with the ‘waterfall’ set forth in the Plan and (ii) to wind down the Debtors’ affairs, prosecute, continue, or settle Causes of Action, reconcile Claims, and administer the Plan and Post Effective Date Reserve in an efficacious manner.
The Debtors believe that the proposed Plan will minimize the expenses of bankruptcy, maximize the value of their assets, and efficiently distribute value to their stakeholders and, therefore, intend to solicit acceptances of the Plan. By this motion, the Debtors are seeking the Court’s approval of the related Disclosure Statement.”
The following is a summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement):
- Class 1 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Expected recovery is 100%.
- Class 2 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Expected recovery is 100%.
- Class 3 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. Expected recovery is 30 to 40%. Each Holder shall receive: (i) a Pro Rata share of the General Unsecured Claims Recovery; and (ii) if such Holder votes to accept the Plan and does not owe a debt to the Debtors, such Holder shall be deemed a Released Party for all purposes hereunder. For the avoidance of doubt, even if the Holder of an Allowed General Unsecured Claim votes to reject the Plan, it shall still receive a Pro Rata share of the General Unsecured Claims Recovery.
- Class 4 (“Intercompany Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. Expected recovery is 0%.
- Class 5 (“Intercompany Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. Expected recovery is 0%.
- Class 6 (“Interests in C21 Holdings and L.I. 2000”) is impaired, deemed to reject and not entitled to vote on the Plan. Expected recovery is 0%.
A hearing to consider the Disclosure Statement is scheduled for March 16, 2021, with objections due by March 9, 2021.
Asset Sale
Further to an auction concluded on November 19th, on December 1, 2020 the Court hearing the Century 21 Department Stores cases issued an order approving a $9.0mn sale of the Debtors' intellectual property to Gindi C21 IP LLC ("Gindi C21" or “the Buyer”) [Docket No. 297]. The Gindi C21 APA is attached to the order as Exhibit 1.
The Buyer, named as successful bidder on November 20th [Docket No. 260], is an affiliate of ASG Equities ("ASG"), the real estate family office of the Gindi family which otherwise owns the Debtors. The back-up bidder at the auction was the active/acquisitive Saadia Group LLC which has recently completed (i) a $12.0mn purchase of bankrupt Lord & Taylor LLC and parent Le Tote Inc.'s e-commerce assets and (ii) a $40.0mn acquisition of the IP and e-commerce assets of RTW Retailwinds, Inc.
According to a press release announcing the Debtors' Chapter 11 filing, Raymond Gindi and IG Gindi are the co-CEOs of the "family business," Century 21, which was founded in 1961 by Al and Sonny Gindi.
Insurance Action
On December 28, 2020, the court issued an order [Docket No. 392] which approves (i) the sale of 100% of the the Debtors' insurance litigation interests to members of the Gindi family and (ii) a global settlement amongst the Debtors, their creditors' committee and the Gindi family, further to which the proceeds of the sale will be contributed to the Debtors' estates. Working in tandem, the two agreements will, subject to the outcome of the pending litigation, see $50.0mn and 10% of any amount recovered over $75.0mn go from the Gindi family to the Debtors' estates (the Disclosure Statement provides a $59.0mn, cash, figure). As part of the settlement, the creditors' committee will agree to settle "colorable claims for, inter alia, fraudulent conveyance, breach of fiduciary duty, corporate waste, alter ego, piercing the corporate veil, loan recharacterization and/ or equitable subordination against certain of the Gindi Parties."
In its filing date press release, Century 21 advised of its “plans to commence a wind down of its retail operations and going out of business sales at its 13 stores across New York, New Jersey, Pennsylvania, and Florida after serving customers for nearly 60 years.The decision follows nonpayment by the Company’s insurance providers of approximately $175 million due under policies put in place to protect against losses stemming from business interruption such as that experienced as a direct result of the COVID-19 pandemic.
…the Company is removing to the Bankruptcy Court a lawsuit pending in the Supreme Court of the State of New York against several of its insurance providers based on their failure to compensate the Company for its losses under the policies. The Company is requesting that the Bankruptcy Court expedite the adjudication of the suit for the benefit of its stakeholders."
Exhibits Attached to the Disclosure Statement [Docket No. 615]:
- Exhibit A: Debtors’ Joint Plan Pursuant to Chapter 11 of the Bankruptcy Code
- Exhibit B: Liquidation Analysis
Key Dates:
- Voting Deadline: April 15, 2021
- Plan Objection Deadline: April 15, 2021
- Confirmation Hearing: April 26, 2021
Liquidation Analysis (see Exhibit B of Disclosure Statement [Docket No. 615] for notes)
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