October 6, 2021 – The Debtors filed a bidding procedures motion [Docket No. 213] which requests Court approval of (i) proposed bidding procedures for a sale of substantially all of Debtors' assets and (ii) a proposed timetable culminating in an March 28th auction and a TBD sale hearing.
The proposed bidding procedures are part of a "toggle" Plan filed on October 4th which promised an "immediate" start to a marketing process while making it clear that the toggle to an asset sale-driven restructuring remained the Debtors' Plan B, ie subject to the ability of parent (World Class Holding Company, LLC, or "World Class") to come up with an "Equity Infusion." The Debtors and World Class are giving themselves plenty of additional time (as noted below, financial advisor Houlihan Lokey already on the hunt for capital since June) to find that financing, ie until March 18, 2022 (this "Trigger Date" being 10 days before any auction, which the Debtors are looking to schedule for March 28, 2022).
Houlihan Lokey will now also be tasked with running from scratch this "immediate" [but not unduly rushed] marketing process.
The bidding procedures motion provides: "This motion and the accompanying Bidding Procedures are submitted in connection with the Debtors’ Plan of Reorganization filed on October 4, 2021. The Plan contains a 'sale toggle' feature, i.e., the Debtors will market their equity and assets pursuant to the Bidding Procedures, however, if at any time prior to the date which is ten (10) days prior to the scheduled auction (the 'Sale Trigger Date'), the Debtors’ existing equity interests produces the financing necessary to confirm the Plan, the marketing process will be terminated. This toggle feature provides certainty that this case will be resolved while at the same time preserving equity’s option to retain control of the Debtors’ Assets."
Marketing Process
The bidding procedures motion adds: “Houlihan is actively engaged with the Debtors to assemble and finalize various marketing materials, including a teaser and confidential information memorandum, create an initial outreach plan, and put together a comprehensive data room that would streamline potential purchaser diligence requests (collectively, the ‘Marketing Process’). Houlihan contemplates the Marketing Process will commence following the filing of this Motion, with initial indications of interest due from potential investors by January 24, 2022. Qualified Bids (as such term is defined in the Bidding Procedures), along with the documents necessary for such transactions will be due by March 4, 2022, with an auction to occur on March 28, 2022 (the ‘Auction’).”
Proposed Key Dates
- Bid Deadline: March 4, 2022
- Sale Trigger Date: March 18
- Auction: March 28
- Sale objection deadline: (7 Days Prior to Sale Hearing)
- Sale Hearing: TBD
Background
On June 17, 2021, GVS Texas Holdings I, LLC and 13 affiliated Debtors (“GVS” or the “Debtors”) filed for Chapter 11 protection noting estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn (funded debt of $295.0mn). At filing, the Debtors noted (as discussed further below): "Given the Debtors’ capital structure: the cash trap at the senior level affecting the Junior Mezz Loan, the unresolvable issues with the Junior Mezz Lender and imminent foreclosure, and the inability to efficiently restructure out of court in light of the intercreditor and related approvals, the filing these Chapter 11 Cases was necessary to preserve…value and effectuate a holistic restructuring across the entire debt stack.”
Plan Overview
The Disclosure Statement [Docket No. 208] reads: “To ensure the restructuring transactions contemplated herein maximize value for all stakeholders, the Plan includes a ‘toggle’ feature whereby the Debtors’ Existing Equity shall have the opportunity to provide a binding Commitment to fund the Plan Funding Obligations (i.e., the Equity Infusion) while the Debtors and their advisors simultaneously market the assets to effectuate the Sale. Specifically, in parallel with their Disclosure Statement approval, the Debtors will seek approval of certain bid procedures (the ‘Bid Procedures’) that will set forth the process by which the Debtors and their advisors are authorized to conduct the Auction, if any, for the Sale of all or substantially all of the Assets. The Bid Procedures will facilitate an open and competitive Sale process that will maximize the value of the Debtors’ estates. To that end, the Debtors shall commence the marketing process (the ‘Marketing Process’) immediately upon the filing of the Plan and Disclosure Statement. Existing Equity shall continue to have the opportunity to raise the Equity Infusion until ten (10) days prior to the commencement of the Auction (the ‘Sale Trigger Date’). If Existing Equity produces a binding Commitment prior to the Sale Trigger Date and files with the Court a binding Commitment letter, the Sale process will be terminated and the Debtors will take all necessary steps to consummate the Equity Infusion and implement the Reorganization Transactions, including the reinstatement of debt in accordance with the Plan. Alternatively, if the binding Commitment is not produced prior to the Sale Trigger Date, the Debtors shall conduct the Auction, proceed to Close the Sale, and distribute Sale Proceeds in accordance with Plan, reserving the Default Interest and yield maintenance premium, as applicable, in escrow.
Plan Transactions :
- The Equity Infusion. At any point prior to the Sale Trigger Date, the Existing Equity Interests shall have the opportunity provide a binding Commitment to fund the Plan Funding Obligations. Specifically, the Equity Infusion shall be sufficient to pay in full in Cash on the Effective Date (i) pay all amounts to be paid on the Effective Date including but not limited to all Allowed Administrative, Priority, Class 1 and Class 6 Claims, (ii) fund an interest reserve equal to the interest shortfall, if any, to the Class 3, 4 and 5 Holders for the two (2) years after the Effective Date, and (iii) fund such other reserves as may be required (collectively, the “Plan Funding Obligations”). If sufficient capital is raised to fund the Plan Funding Obligations, Existing Equity shall file with the Court a binding Commitment letter, which shall terminate the Sale process and allow the Debtors to pursue the Plan transactions contemplated in furtherance of the Equity Infusion (the “Restructuring Transactions”). If the Equity Infusion is made and the Plan Funding Obligations funded, then Existing Equity shall retain its Interests.
- The Sale. The Debtors shall continue to market their Interests and Assets pursuant to the Bid Procedures to facilitate an open and comprehensive Sale process. In the event a binding Commitment for the Plan Funding Obligations is not filed with the Court by the Sale Trigger Date, the Debtors shall conduct the Auction and close the Sale. The Sale Proceeds shall be distributed in accordance with the Plan ”
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. The aggregate amount of claims is Undetermined and expected recovery is 100%.
- Class 2 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is Undetermined and expected recovery is 100%.
- Class 3 (“Senior Lender Claims”) is impaired and entitled to vote on the Plan. Estimated claims are $110.0mn and estimated recovery is 100%. Treatment: (I) If the Equity Infusion occurs, then on or as soon as reasonably practicable thereafter, the Mortgage Loan shall be reinstated on existing terms; provided that Allowed Default Interest, in an amount to be agreed or determined by Final Order, shall be capitalized into a two-year note, junior to the Mortgage Loan but senior to the Senior Mezz Loan and the Junior Mezz Loan, and paid out according to the terms and conditions set forth in the documents evidencing the Junior Mortgage Loan. All accrued but unpaid pre- and post-petition Non-Default Interest and all reasonable allowed but unpaid expenses of the Senior Lender (including expenses from retained Professionals) shall be paid in full in Cash on the Effective Date or as soon as reasonably practicable thereafter. (II) If the Sale occurs, then (i) the Mortgage Loan principal amount, along with all undisputed accrued but unpaid pre- and post-petition Non-Default Interest and all reasonable allowed but unpaid expenses of the Senior Lender, shall be paid according to the priority scheme set forth in the Bankruptcy Code; and (ii) all Default Interest and/or disputed accrued but unpaid expenses of Senior Lender, if applicable, shall be held in escrow until Allowed subject to the objections of any party in interest
- Class 4 (“Senior Mezz Claims”) is impaired and entitled to vote on the Plan. Estimated claims are $103.0mn and estimated recovery is 100%. Treatment: (I) If the Equity Infusion occurs, then on the Effective Date, or as soon as reasonably practicable thereafter, then (i) the Senior Mezz Loan shall be reinstated on existing terms; provided that all Allowed Default Interest shall be capitalized into a two-year note, junior to the Senior Mezz Loan but senior to the Junior Mezz Loan, and paid out according to the terms and conditions set out in the documents evidencing the loan. All accrued but unpaid pre- and postpetition Non-Default Interest and all reasonable allowed but unpaid expenses of the Senior Mezz Lender (including expenses from retained Professionals) shall be paid in full in Cash on the Effective Date or as soon as reasonably practicable thereafter. (II) If the Sale occurs, then (i) the Senior Mezz Loan principal amount, along with all undisputed accrued but unpaid pre- and post-petition Non-Default Interest and all reasonable allowed but unpaid expenses of the Senior Lender, shall be paid according to the priority scheme set forth in the Bankruptcy Code; and (ii) all Default Interest and/or disputed accrued but unpaid expenses of Senior Lender, including any yield maintenance premium, if applicable, shall be held in escrow until Allowed subject to all objections of any party in interest.
- Class 5 (“Junior Mezz Claims”) is impaired and entitled to vote on the Plan. Estimated claims are $82.0mn and estimated recovery is 100%. (I) If the Equity Infusion occurs, then on the Effective Date, or as soon as reasonably practicable thereafter, GVS Portfolio I B, LLC shall reinstate the Junior Mezz Loan on existing terms; provided that any accrued but unpaid pre- and post-petition Default Interest and Non-Default Interest and reasonable allowed but unpaid expenses of the Junior Mezz Lender (including expenses from retained Professionals), in an amount to be agreed upon or determined by Final Order, shall be added to the outstanding principal balance of the Junior Mezz Loan. (II) If the Sale occurs, then (i) the Junior Mezz Loan principal amount, along with all undisputed accrued but unpaid pre- and post-petition Non-Default Interest and all reasonable allowed but unpaid expenses of the Senior Lender, shall be paid according to the priority scheme set forth in the Bankruptcy Code; and (ii) all accrued but unpaid preand post-petition Default Interest and/or disputed accrued but unpaid expenses of Senior Lender, including any yield maintenance premium, if applicable, shall be held in escrow until Allowed subject to the objections of any party in interest..
- Class 6 (“General Unsecured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $[●] and expected recovery is 100%.
- Class 7 (“Intercompany Claims”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan. The aggregate amount of claims is N/A and expected recovery is N/A.
- Class 8 (“Interests”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $[●] and expected recovery is 100%.
Prepetition Capital Structure
The following is an approximate overview of the Debtors’ consolidated capital structure as of the Petition date:
FN5 The amounts set forth herein represent estimates of amounts claimed by the Lenders as of the Petition Date and are subject to the Debtors’ internal verification.
Events Leading to Chapter 11 Cases
The Disclosure Statement reads: “
The State Court Action
GVS Portfolio Holdings I B, LLC initiated an action against Teachers Insurance Annuity Association of America (‘TIAA’), as Junior Mezz Lender, in the New York State Supreme Court (the ‘NY Court’) on August 27, 2020, styled as GVS Portfolio I B, LLC v. Teachers Ins. Annuity Assoc. of Am., No. 654095/2020 (N.Y. Sup. Ct. Oct. 5, 2020 (the ‘State Court Action’). The State Court Action sought to enjoin TIAA from pursuing a UCC foreclosure sale. The NY Court initially granted the motion and enjoined TIAA from foreclosing, finding the sale to be commercially unreasonable. The NY Court ordered the parties to meet and confer as to the terms of the foreclosure auction, which resulted in the entry of a stipulation (the ‘Stipulation’) memorializing the terms of the sale.
Approximately two days prior to the rescheduled foreclosure auction, TIAA sold the Junior Mezz Loan to RREF without notice to the GVS I B. Subsequently thereafter, the Debtors obtained a temporary restraining order grounded on the argument that the sale to RREF violated the terms of the Stipulation and did not provide adequate notice as required under the Junior Mezz Loan documents. No further injunctions were obtained after sale after the expiration of the initial temporary restraining order.
The Delaware Bankruptcy
On April 12, 2021, GVS Portfolio Holdings I B, LLC filed for bankruptcy styled In re GVS Portfolio Holdings I B, LLC, Case No. 21-10690 (C. S.) (the ‘GVS Portfolio Case’) in the District of Delaware Bankruptcy Court (the ‘Delaware Court’). Shortly thereafter, RREF commenced an action in the NY Court against the Junior Mezz Loan guarantor, Natin Paul, seeking payment in full of the outstanding principal due under the Junior Mezz Loan. GVS Portfolio Holdings I B, LLC was the sole debtor in the GVS Portfolio Case, making RREF the only secured creditor because, at the time, the senior Lenders had not declared a default such that the affiliates were facing immediate foreclosure.
On April 26, 2021, RREF filed a motion seeking dismissal of the GVS Portfolio Case, arguing the GVS Portfolio Case was not filed in good faith as a two-party dispute, and the case was ultimately dismissed on June 4, 2021.
The Current Bankruptcy (Material Change In Circumstances Since the GVS Portfolio Case)
On or around May 6, 2021, the Mortgage Loan Lender issued a notice of default requesting confirmation of certain reporting and property repairs that were required under the Mortgage Loan. The Mortgage Borrowers promptly responded to the notice and initiated discussions with the Mortgage Loan Lender to remedy the issues. Despite these conversations, the Mortgage Loan Lender issued another letter on June 4, 2021 detailing certain liens and other property-level items that needed to be cleared. The Mortgage Loan Lender immediately withheld cash preventing payment to the Senior Mezz Lender, thereby triggering a default under the Senior Mezz Loan.
The Senior Mezz Lender issued a default notice for missing the monthly payment due to the Mortgage Loan Lender’s withholding, and the Mezz 1 Borrowers immediately began efforts to remedy the defaults. RREF noticed the UCC foreclosure sale for a second time. The foreclosure was scheduled for June 17th at 9:00 a.m. Central Time. At the same time, for the first time, and only days before the rescheduled foreclosure sale, RREF increased its payoff demand by approximately $14,150,303.86 claiming it must also be paid yield maintenance in full in order to be paid off. Facing the defaults at the senior level and senior mezzanine level, the Debtors were unable to meet RREF’s increased demand before the rescheduled foreclosure sale.
Given the Debtors’ capital structure: the cash trap at the senior level affecting the Junior Mezz Loan, the unresolvable issues with the Junior Mezz Lender and imminent foreclosure, and the inability to efficiently restructure out of court in light of the intercreditor and related approvals, the filing these Chapter 11 Cases was necessary to preserve its value and effectuate a holistic restructuring across the entire debt stack.”
About the Debtors
According to the Debtors: “Great Value Storage offers secure storage units with 24-hour security systems, both climate controlled and non-climate controlled, RV, car and boat parking, moving and storage supplies and moving truck rental. It caters to personal and business storage needs. The GVS Portfolio consists of 64 facilities in Colorado, Illinois, Indiana, Mississippi, Missouri, Nevada, New York, Ohio, Tennessee and Texas. The GVS Portfolio, which includes more than just self-storage facilities, took ten years to amass at a cost of approximately $300 million."
The Debtor is an indirect subsidiary of World Class Holding Company, LLC ("World Class") and is the indirect owner of 64 self-storage facilities — branded as Great Value Storage, or GVS — located throughout the United States.
About World Class Holding Company, LLC
World Class is based in Austin, Texas and describes itself as one of the largest private real estate owners in the United States. According to its website, World Class is in the business of acquiring undervalued businesses and assets located in 17 states for the purpose of owning, operating and developing properties. In addition to GVS, World Class purports to own (a) World Class Property Company, a real estate investment company that owns, operates and develops office, retail, multifamily, industrial, mixed-use, hospitality and self-storage assets; (b) NowSpace, a provider of co-working office space; (c) World Class Technologies, a software development company; (d) World Class Mortgage Capital, a private commercial real estate lender; and (e) Westlake Industries, a commercial construction, industrial and energy infrastructure and property services company.
Organizational Chart (See Exhibit B to Disclosure Statement)
Read more Bankruptcy News
The post GVS Texas Holdings I, LLC – As Promised in October 4th Disclosure Statement, Debtors File Bidding Procedures as Part of “Toggle Plan,” Parent World Class Holding Company, LLC Gest until March 2022 to Come Up with “Equity Infusion” appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.