July 15, 2022 – The Debtor filed an Amended Disclosure Statement and a related redline showing changes to the version of the Disclosure Statement filed on May 31, 2022 [Docket Nos. 151 and 152, respectively]. The Amended Disclosure Statement, which now notes target dates of October 6th and October 20th for Plan confirmation and Plan effectiveness, respectively, includes revised language on releases and new disclosure relating to (i) an adversary proceeding begun by creditor Mr. Carl Weiss ("Weiss") on July 5th and (ii) a $37.0mn claim held by Taz Partners.
Weisss, who owns 50% of the William Vale Hotel (balance held by the Debtor's sole shareholder, Mr. Yoel Goldman), objects to the inclusion of that Brooklyn hotel in the Debtor's reorganization which currently envisages a $60.0mn purchase (to be adjusted depending on outcome of the Weiss adversary proceeding) of all of the reorganized Debtor's equity by Paragraph Partners LLC (the "Sponsor," formed by Graph Group and Cammerby's international and which is also an affiliate of Taz Partners).
The Debtor insists that the sale of the William Vale property to the Sponsor is "not [a condition] precedent to confirmation of the Plan or the occurrence of the Effective Date," and notes its belief "that the Sponsor does not have the right to terminate the Investment Agreement" if the property is not ultimately included with the rest of the Debtor's assets. It also notes, however, that "the Sponsor reserves all of its rights with respect to the foregoing."
As to the Taz Partners claim* (being purchased by the affiliated Sponsor purchases it), the Debtor now adds: "The allowance or disallowance of the Taz Claim, however, will not impact recoveries to any other creditors under the Plan. Following the Effective Date, any repayment on account of the Taz Claim will be subordinated and will not be paid until the New Notes are repaid in full and the Sponsor’s contribution under the Plan to the holders of Class 4 Remaining Unsecured Claims is satisfied in full."
* At filing, the Debtor stated as to the Taz Partners claim: "the Parent Debtor became aware of a $37 million judgment [in favor of Taz Partners] entered against it in New York State Supreme Court on December 9, 2021, resulting from outstanding confessions of judgment that the Sole Shareholder unilaterally entered into on behalf of the Parent Debtor without consultation of the Board" (see "Events Leading…" below)
The Amended Disclosure Statement [Docket No. 151, which attached Investment Agreement] states, “Following a robust sales and marketing effort, the Debtor entered into an Investment Agreement, dated March 11, 2022 (as amended on April 21, 2022 and May 27, 2022, and as may be further amended, modified, or supplemented from time to time, and together with all schedules and exhibits thereto, ‘Investment Agreement’), with Paragraph Partners LLC (the ‘Sponsor’), among others, to implement a comprehensive restructuring of the Debtor and present a path forward for the Debtor’s successful emergence from chapter 11. The Investment Agreement is the cornerstone of, and is to be implemented pursuant to, the Plan.
The Investment Agreement provides that, in exchange for one hundred percent of the equity of the reorganized Debtor (the ‘Reorganized Debtor’), the Sponsor will contribute $60,000,000 to the Debtor, which is comprised of (a) $40,000,000 in cash and (b) promissory notes in the aggregate amount of $20,000,000. As set forth in further detail in Article IV below, the amount of (i) the promissory notes will increase to $22,000,000 and (ii) the cash contribution may increase by an additional $200,000, if the Sponsor, or an affiliate of the Sponsor, consummates a transaction involving the William Vale hotel.
Importantly, as part of the Investment Agreement, the Sponsor has agreed to assume all unsecured claims against the Debtor other than the Claims of holders of the Debtor’s various series of notes (the ‘Notes’ and the holders thereof, ‘Noteholders’) and certain other discrete categories of Claims set forth therein and described below. The Notes Trustee is a party to certain provisions of the Investment Agreement and has preliminarily consented to the Debtor’s entry into the Investment Agreement.
…only holders of Class 4 Remaining Unsecured Claims are Impaired and entitled to vote on the Plan. Class 4 is comprised of the holders of any Noteholder Claims, Subsidiary Plan Administrator Claims, and Non-Securities Indemnity Claims. The Plan provides for material recoveries to the holders of Allowed Claims in Class 4 (Remaining Unsecured Claims) in the form of Cash, New Notes and any potential recoveries on account of certain Causes of Action that have been preserved for the benefit of holders of Allowed Class 4 Claims. The transactions contemplated under the Investment Agreement will maximize the value of the Debtor’s estate and provide the basis for the expeditious conclusion of the Chapter 11 Case.”
Continuing as to Plan mechanics:
"On the Effective Date, in accordance with the Plan and the Investment Agreement, subject to the satisfaction or waiver of all applicable conditions under the terms thereof, the Sponsor shall: (i) provide the Sponsor Contribution; and (ii) be the sole shareholder of the Reorganized Debtor, and on the Effective Date, shall hold 100% of the NewCo Shares free and clear of all Claims and Liens.
On the Effective Date, in accordance with the Plan and the Investment Agreement, subject to the satisfaction or waiver of all applicable conditions under the terms thereof, the Disbursing Agent (on behalf of the Debtor) shall distribute Pro Rata the Class 4 ED Distribution to (i) the holders of Remaining Unsecured Claims that are Allowed as of the Effective Date, and (ii) the Disbursing Agent, to be held in the Class 4 Disputed Claims Reserve, on behalf of holders of Disputed Remaining Unsecured Claims.
On the Effective Date, in accordance with the Plan and the Investment Agreement, subject to the satisfaction or waiver of all applicable conditions under the terms thereof, a single limited liability company unit representing a non-economic 100% ownership interest in Wind-Down Co shall be issued to the Plan Administrator. The Pro Rata Share of the Class 4 ED Distribution allocated to Disputed Remaining Unsecured Claims shall be held in one or more segregated accounts in the Class 4 Disputed Claims Reserve until such claims are Allowed or Disallowed, at which time the applicable portion of the Class 4 ED Distribution (including any earnings
thereon, net of any allocable costs and expenses of the Class 4 Disputed Claims Reserve) shall be distributed to such holders of newly Allowed Remaining Unsecured Claims or to the holders of Remaining Unsecured Claims that were previously Allowed, as the case may be.
Following the distribution of all amounts from the Class 4 Disputed Claims Reserve, the liquidation of the Excluded Assets (including the completion of the prosecution of any Avoidance Actions and other Causes of Action held by Wind-Down Co), and the distribution of the proceeds therefrom and any remaining Wind Down Cash Funding in accordance with the Plan (including the payment of all costs and expenses and other liabilities of Wind-Down Co), Wind-Down Co shall be dissolved and the single unit shall be deemed cancelled and of no further force and effect. The Plan Administrator shall have no right to any distribution of property or value."
The following is an updated summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement):
- Class 1 (“Priority Non-Tax Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
- Class 2 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
- Class 3 (“General Unsecured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
- Class 4 (“Remaining Unsecured Claims”) is impaired and entitled to vote on the Plan. The expected recovery is 11-17%. Each Holder will receive (i) on the Effective Date, from the Disbursing Agent (on behalf of the Debtor), its Pro Rata Share of the Class 4 ED Distribution, (ii) in the event the William Vale Purchase occurs subsequent to the Effective Date, from the Disbursing Agent (on behalf of the Debtor), its Pro Rata Share of any additional New Notes issued, and (iii) on such other date(s) as determined from time to time by the Plan Administrator, from Wind-Down Co, the amounts recovered, if any, from the Excluded Assets (including, but without limitation, from the prosecution of Avoidance Actions and other Causes of Action) and any remaining Wind Down Cash Funding. Notwithstanding anything to the contrary herein, the Non-Securities Indemnity Claims will be estimated at zero dollars ($0) for all purposes under the Plan including for purposes of distributions under the Plan. The Debtor will file a motion to estimate or objection to such Non-Securities Indemnity Claims on proper notice to applicable parties.
- Class 5 (“Subordinated Securities Claims”) is impaired, deemed to reject and not entitled to vote on the Plan.
- Class 6 (“Equity Interests”) is impaired, deemed to reject and not entitled to vote on the Plan.
The Disclosure Statement [Docket No. 151] attached the following exhibits:
- Exhibit A: Plan of Reorganization
- Exhibit B: Investment Agreement
- Exhibit C: Organizational Chart
- Exhibit D: Israeli Disclosure Tables
- Exhibit D-1: Prior Year Income Report
- Exhibit D-2: Prior Year Property Report
- Exhibit D-3: Five Year Operating Plan
- Exhibit E: Appraisal Reports
- Exhibit E-1: LV Appraisal Report
- Exhibit E-2: Additional Appraisal Reports
- Exhibit F: CVs for Directors of Reorganized Debtor
- Exhibit G: Financial Projections
- Exhibit H: Liquidation Analysis
Proposed Key Dates:
- Solicitation Commencement Date: August 18, 2022
- Plan Supplement Filing Deadline: September 12, 2022
- Plan Voting Deadline: September 19, 2022
- Plan Confirmation Objection Deadline: September 19, 2022
- Plan Confirmation Hearing: October 6, 2022
Petition Date Perspective
Events Leading to the Chapter 11 Filing
In a declaration in support of the Chapter 11 filing (the “Ravid Declaration”), Assaf Ravid, the Debtor's chief executive officer and chief restructuring officer, detailed the events leading to All Year’s Chapter 11 filing. The Ravid Declaration provides: “[T]he ongoing COVID-19 pandemic severely impacted the Parent Debtor because it derives its revenues primarily from residential rental income streams. As a result, the Parent Debtor began struggling to service its debt, which necessitated discussions with third parties regarding a path forward to prevent any additional leakage of value.
Following the Parent Debtor’s suspension of interest payments on the Series B and Series D Bonds, the Parent Debtor entered into an agreement with the Trustee, dated December 10, 2020, whereby the Parent Debtor, among other things, agreed to appoint Mr. Joel Biran as CEO and CRO and Mr. Ephraim Diamond as ARO. The Board approved these retentions on December 30, 2020. On February 19, 2021, Mr. Biran provided notice to the Parent Debtor that he would be resigning his positions as CEO and CRO, effective as of February 28, 2021. On March 4, 2021, I was appointed by the Board of Directors as the CEO and CRO of the Parent Debtor.
Upon the CRO and ARO appointments, the Parent Debtor, with the assistance of its advisors, quickly moved to engage with the Bondholders and other stakeholders in a cooperative process to explore potential restructuring alternatives for the Parent Debtor and its subsidiaries. This has included a robust and wide-ranging public process to solicit interest and offers from potential third-party investors to either recapitalize the Parent Debtor or undertake an outright purchase of the Parent Debtor. The Parent Debtor has garnered substantial interest from potential investors and, with the consent of the Bondholders, is advanced in selecting and finalizing an exit transaction for the purchase of the equity of the Parent Debtor.
Nevertheless, the Parent Debtor is faced with potential litigation in multiple jurisdictions in light of its insolvency and defaulted Bonds. The commencement of cross-border litigation subject to differing legal regimes would undermine the Parent Debtor’s ability to effectuate a holistic, value-maximizing restructuring transaction in an orderly manner. On December 13, 2021, the Parent Debtor became aware of a $37 million judgment entered against it in New York State Supreme Court on December 9, 2021, resulting from outstanding confessions of judgment that the Sole Shareholder unilaterally entered into on behalf of the Parent Debtor without consultation of the Board. The existence of this judgment poses a threat that the judgment creditor may attempt to attach a lien on the Company’s assets, including its cash, thereby divesting the Company of its ability to continue its ongoing operations and to support the operations of the PropCos.
In addition, following a prior attempt by the Sole Shareholder to take control of the Parent Debtor’s Board, the Parent Debtor issued a single Class A voting share (the 'Class A Share') to myself and the ARO entitling us to vote on the appointment or removal of the directors of the Parent Debtor, as the owner of each of its direct and indirect subsidiaries, but conferring no other voting rights. These voting rights are set to expire at 11:59 pm (British Virgin Islands Time) on January 4, 2022 unless the Sole Shareholder agrees to amend the organizational documents of the Parent Debtor to extend the voting rights associated with the Class A Share.
The expiration of these voting rights would deprive the Bondholders and other parties in interest of their ability to continue their discussions and finalize an exit transaction for the Parent Debtor. To preserve the integrity of its restructuring process, the Parent Debtor was forced to commence this Chapter 11 Case to safeguard its assets for the benefit of its creditors and other parties in interest.
In light of the above, the Parent Debtor is also considering filing an application with the Courts in the British Virgin Islands to assist in the implementation of a transaction through the Chapter 11 Case. In addition, as the deeds of trust and other documents governing the Parent Debtor’s relationship with its Bondholders are governed by Israeli law, it may also become necessary for the Parent Debtor to commence a recognition proceeding in Israel to assist in the implementation of the Parent Debtor’s overall restructuring.
As set forth above, the Parent Debtor is not seeking any first day relief. The Parent Debtor is focused on continuing its discussions with its Bondholders and promptly presenting to the Court a restructuring solution that maximizes value for its creditors and estate.”
As of the Petition Date, the Company has approximately $1.6 billion of outstanding funded debt obligations comprised of (i) approximately $800 million in bonds issued by the Parent Debtor and (ii) approximately $760 million in property-level mortgage debt.
- Yoel Goldman owns 100% of the Debtor's common equity.
- Assaf Ravid and Ephraim Diamond, Chief Restructuring Officer and Associate Restructuring Officer, own 100% of the Debtor's Class A equity.
About the Debtor
According to the Debtor: “All Year Holdings Limited primarily operates residential real estate properties in Brooklyn, New York. It is involved in the acquisition, construction, improvement, development, rental and management of residential apartments.
Corporate Structure Chart
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The post All Year Holdings Limited – Files Amended Disclosure Statement; Notes Decelopments re: Weiss Adversary Proceeding, Taz Partners Claim and Intention to Complete $60mn Sale to Paragraph Partners LLC by October 20th appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.