September 16, 2021 – Further to a September 15th auction, the Debtors have filed a notice (i) naming Saadia Group LLC ("Saadia") as the Successful Bidder for its "Aquatalia Assets" and (ii) adjourned the auction with respect to their "Other Assets" (notably the Debtors’ Ely & Walker and Sean John brands) from September 15th until September 23rd [Docket No. 200]. The Saadia Group asset purchase agreement has yet to be filed (and price details not yet available) although the Saadia APA is to be filed in advance of the scheduled September 21st sale hearing.
The Debtors do not name a back-up bidder. An affiliate of Tengram Capital Partners (“Tengram”) had served as stalking horse with a $17.3mn bid; with Tengram now presumably in line to walk away with its negotiated $700k break-up fee and $300k expense reimbursement
This is the third time over the last year that the acquisitive Saadia has sniped e-commerce/IP assets at a bankruptcy auction and, if earlier outcomes are replicated here, we are likely to see a considerable advancement on the ($17.3mn) stalking horse opener. It has been an unusual strategy, but one that has quickly left Saadia comfortable claiming (at the launch of the digital platform for their Lord & Taylor and Le Tote assets): "we are the leaders in multi-category product manufacturing, wholesaling and retailing…The future of retail is fast and agile, mirrored by our team — which has managed to put together a fantastic assortment of merchandise and a website — in record time of less than 120 days. We are deeply committed to continuing the rich legacy of the brand in a progressive way. Today's unveil is just the beginning."
On October 22, 2020, the Court hearing the Le Tote (including Lord & Taylor) cases issued an order approving the sale of substantially all the Debtors’ assets relating to the e-commerce platforms of Le Tote and Lord & Taylor to Saadia ($12.0mn cash purchase price) topping the $3.75mn cash bid of stalking horse ZG Apparel Group LLP which was entitled to a 3% break-up fee (plus expenses).
On September 5th, Saadia doubled a $20.0mn stalking horse bid (resulting in some "extremely pleased debtors) and purchased the assets of e-commerce retailer RTW Retailwinds whose brands include New York & Company and Fashion to Figure for $40.0mn in cash. In those Chapter 11 cases, the stalking horse was Sunrise Brands, LLC which also received a 3% break-up fee (plus expenses) for its efforts.
Questions as to how relatively unknown Saadia would finance the $40.0mn RTW Retailwinds acquisition were answered when Saadia and White Oak Global Advisors ("White Oak") announced that White Oak had provided Saadia with a $25.0mn ABL facility.
Background on GBG USA Asset Sale
On August 31st, the Court hearing the GBG USA cases issued an order [Docket No. 141] approving (i) proposed bidding procedures for the sale of substantially all of the Debtors' assets, (ii) bidder protections for stalking horse Tengram ($17.3mn bid in respect of the Debtors’ Aquatalia assets) and (iii) an auction/sale timetable culminating in an auction on September 15, 2021 and a sale hearing on September 21, 2021 [Docket No. 141]. The July 28th Tengram APA is attached to the Debtors' July 29th bidding procedures motion [Docket No. 15] at Exhibit B.
As at filing, the Debtors had already sold two of their brands/assets (Spyder and Frye for @$15.0mn); and in addition to its proposed sale of the Aquatalia assets will continue to market "Other Assets…that fall outside the Stalking Horse Bid, including Capezio, Ely & Walker and MagnaReady."
Although the Debtors' July 29th bidding procedures motion applies globally to both Aquatalia and "Other Assets," the motion is clearly Aquatalia-centric, with the Debtors required to make separate requests to the Court as to any further stalking horse arrangements in respect of Other Assets.
Tengram's other recent Chapter 11-related activity includes the $7.5mn acquisition of the Hair and Skin Care Segment of High Ridge Brands Co. in April 2020. Tengram also already knows something about the Debtors’ assets and its parent company, having purchased (as the then private equity sponsor of Differentiated Brands Group, renamed “Centrica”), the North American licensing business of Global Brands Group Holding Limited for $1.2bn in 2018. Centrica declared bankruptcy in May of 2020 and emerged from bankruptcy the following October privately held by a partnership led by Blackstone and including Ares Management Corporation and HPS Investment Partners.
Even more recently (August 31st) Tengram saw another investment (Sequential Brands) seek bankruptcy shelter. At filing, Sequential Brands noted Tengram's 11.5% equity holding.
The Debtors' bidding procedures motion provides: "With the aid of their advisors, the Debtors have been exploring and evaluating strategic business opportunities to enhance liquidity, including debt refinancing, cost savings initiatives, proceeds-generating transactions, M&A activities and other strategic opportunities. Given, among other things, their substantial leverage, near term liquidity crisis and the continuing pressure on the Debtors’ business and related impact on retention of key personnel, the Debtors, in consultation with their advisors, conducted a comprehensive liquidity analysis and considered several potential restructuring alternatives. The Debtors ultimately determined that a targeted sale process was the best option to maximize value for all stakeholders. To that end, in or around May 2021, Ducera commenced a targeted marketing process, focused on potential M&A partners and well-funded bidders for which the Debtors’ business represented a strategic opportunity and that possessed the capability of consummating a transaction on an accelerated timeline. Specifically, Ducera commenced an expansive marketing process, which included reaching out to over 45 potential parties in interest. Over 30 parties signed confidentiality agreements and were granted access to a data room for continued diligence.
During this timeframe, and as the Debtors’ liquidity situation became more dire, discussions began to focus on the need to implement a potential sale of the Debtors’ remaining assets through a chapter 11 bankruptcy proceeding. Following an extensive, months long multi track negotiation process, the Debtors’ efforts ultimately culminated with the execution of that certain Asset Purchase Agreement, attached hereto as Exhibit B (together with the schedules and related documents thereto, and as may be amended, supplemented or otherwise modified from time to time, the 'Stalking Horse APA'), dated as of July 28, 2021, by and among GBG USA Inc. and the other Debtor entities party thereto (collectively, the “Sellers”) and WH AQ Holdings LLC (as Purchaser) and Hilco Trading, LLC (as Guarantor) (the 'Stalking Horse Bidder' and its bid, the 'Stalking Horse Bid'). Pursuant to the Stalking Horse Purchase Agreement, the Stalking Horse Bidder has committed to a purchase price of $17.3 million for the Debtors’ Aquatalia brand and related working capital assets (the 'Aquatalia Assets'), subject to higher and better offers.
The Debtors have commenced these chapter 11 cases to implement the sale of the Aquatalia Assets to the Stalking Horse Bidder — subject to Court approval and higher or otherwise better offers in accordance with the Bid Procedures — as well as the Debtors’ other fashion brands and assets that fall outside the Stalking Horse Bid, including Capezio, Ely & Walker and MagnaReady. The Debtors will continue marketing their assets throughout the chapter 11 cases — starting on day 1. The Debtors believe that their proposed sale process, which started months ago, is appropriate to ensure that the Debtors’ assets are sold for the highest price to ensure the best possible outcome for the Debtors’ stakeholders.”
Key Terms of Tengram Stalking Horse APA:
- Purchaser: WH AQ Holdings LLC, a Delaware limited liability company and affiliate of Tengram Capital Partners
- Seller: GBG USA Inc
- Guarantor: Hilco Trading, LLC
- Purchase Price: The aggregate consideration (the “Purchase Price”) to be paid by Purchaser for the purchase of the Acquired Assets shall be: (i) the assumption of Assumed Liabilities and (ii) a cash payment in an amount equal to $17.3mn (the “Cash Payment”).
- Deposit: $2.0mn
- Use of Proceeds: The Debtors shall use a portion of the sale proceeds to repay the Debtors’ proposed limited recourse senior secured superpriority debtor-in-possession financing facility
- Bidder Protections: (i) Break-up fee of $700k (i.e., 4.0% of the cash portion of the purchase price) and (ii) an expense reimbursement of up to $300k
About the Debtors
GBG USA is a company incorporated under the laws of Delaware and is an indirect wholly owned subsidiary of the Company. GBG USA is primarily engaged in operating the wholesale and direct-to-consumer footwear and apparel business in North America.
Read more Bankruptcy News
The post GBG USA Inc. – Saadia Group Snipes Aquatalia Assets at September 15th Auction, Continues Recent Shopping Spree in Respect of E-Commerce/IP Retail Assets appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.