(Just filed. Developing story.) March 10, 2023 – Loyalty Ventures Inc.* and three affiliated debtors (Nasdaq: LYLT; together “LVI” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of Texas, lead case No. 23-90111 (Judge TBA). The Debtors, an operator/provider of consumer loyalty programs. are represented by Matthew D. Cavenaugh of Jackson Walker LLP. Further Board authorized appointments include: (i) Akin Gump Strauss Hauer & Feld LLP as general bankruptcy counsel, (ii) Alvarez & Marsal North America, LLC as financial advisors, (iii) PJT Partners LP as investment bankers and (iv) Kroll as claims agent.
*Acording to the debtors: "Loyalty Ventures Inc. ('LVI') is a leading provider of tech-enabled, data-driven consumer loyalty solutions that help financial services providers, retailers and other consumer-facing businesses create and increase customer loyalty. LVI operates BrandLoyalty, a European-based business that provides loyalty campaigns to high-frequency retailers and grocers, and AIR MILES, Canada’s most recognized consumer loyalty program."
The Debtors’ lead petition notes over 100,000 creditors; estimated assets between $1.0mn and $10.0mn; and estimated liabilities between $500.0mn and $1.0bn (NB: On a consolidated basis, the Debtors reported $1.59bn of assets and $1.98bn of liabilities in their Q32 2022 10-Q). Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Bread Financial Holdings, Inc. ($undetermined/disputed/contingent trade claim), (ii) Eligible Brand Loyalty Omnibus Incentive Plan Employees ($827k "February 2023 Annual Vesting Amounts" claim) and (iii) PricewaterhouseCoopers LLP ($250k trade claim).
Affiliate LoyaltyOne, an unlimited liability company incorporated under the laws of Nova Scotia (“LoyaltyOne”) and an indirect subsidiary of the Company, intends to seek creditor protection in Canada.
Filing Date Highlights
- "Provider of Tech-Enabled, Data-Driven Consumer Loyalty Solutions" Files for Chapter 11 Protection, with Affiliate LoyaltyOne Filing for Bankruptcy in Canada
- LVI to Pursue Sale of LoyaltyOne's AIR MILES® Reward Program to Bank of Montreal ("BMO") and Request Canadian DIP Financing
- Chapter 11 Filers to Get $30.0mn Intercompany $30.0mn DIP Loan from LoyaltyOne
- Company Will Voluntarily Delist Common Stock from Nasdaq
In a press release announcing the filings, the Debtors provide: "In connection with the CCAA proceedings, LoyaltyOne filed motions seeking Canadian Court approval under the CCAA of a sale and investment solicitation process ('SISP'). Under the SISP, interested parties would be invited to participate in a sale process in accordance with the SISP procedures….Bank of Montreal (TSX: BMO) (NYSE: BMO), and its subsidiaries BMO Financial Corp. and BMO Harris Bank N.A (together, 'BMO'), announced BMO's entry into a purchase agreement with LoyaltyOne pursuant to which BMO will acquire LoyaltyOne's AIR MILES Reward Program (AIR MILES) business. The consummation of the sale transaction is conditioned upon LoyaltyOne not receiving a more favorable offer from another party in accordance with the SISP, and other customary closing conditions.
The Company believes that BMO's acquisition of AIR MILES would secure the program and better position AIR MILES to continue delivering its leading loyalty program to nearly 10 million Canadian collectors.
The Company also announced today its intention to voluntarily delist its common stock, par value $0.01 per share (the 'Common Stock') from the Nasdaq Global Select Market ('Nasdaq') and deregister the Common Stock from Section 12(b) of the Securities Exchange Act of 1934, as amended (the 'Exchange Act').
The Company's previously announced sale of its BrandLoyalty business to Opportunity Partners B.V. remains on track to close by the second quarter of 2023."
Transaction Support Agreement
Much of the TSA (defined below) relates to the Canadian affiliate LoyaltyOne, including an intended sale of the LoyaltyOne assets (notably an air miles program) to Bank of Montreal and a DIP facility for LoyaltyOne.
According to a March 10th 8-K, the Debtors have entered into a Transaction Support Agreement with certain key stakeholders* (the "TSA"), with the TSA providing as to terms:
"As set forth in the TSA, the parties to the TSA have, among other things, agreed to the principal terms of a proposed financial restructuring of the Company Parties (the "Transactions"), which will be implemented through, among other agreements, (i) the Stalking Horse Transaction Agreement (as defined below [NB this relates to the Canadian affiliate "LoyaltyOne") attached to the TSA as Exhibit A thereto, and such transactions contemplated thereby and approved in accordance with the SISP (as defined below); (ii) the term sheet for the CCAA DIP Facility (as defined below) attached to the TSA as Exhibit B thereto (including any exhibits, schedules, annexes and other attachments thereto, each as may be modified in accordance with the terms thereof and of the TSA, the 'CCAA DIP Term Sheet'); (iii) the BrandLoyalty Transaction Agreements (as defined in the TSA) attached to the TSA as Exhibit C thereto (and together with the Stalking Horse Transaction Agreement, the CCAA DIP Term Sheet, the Intercompany DIP Term Sheet (as defined below) and the Combined DS and Plan (as defined below), the 'Transaction Documents'); (iv) a term sheet for an intercompany DIP facility in an amount not to exceed $30,000,000 (including any exhibits, schedules, annexes and other attachments thereto, each as may be modified in accordance with the terms thereof and of the TSA, the 'Intercompany DIP Term Sheet'), which Intercompany DIP Term Sheet will be in form and substance acceptable to the Company Parties and Consenting Lenders holding at least a majority of the aggregate principal amount of Loans held by the Consenting Term A Loan Lenders, Consenting Term B Loan Lenders and Consenting Revolving Lenders (collectively, the “Required Consenting Lenders”); and (v) a Combined Disclosure Statement and Joint Chapter 11 Plan of Loyalty Ventures Inc. and its Debtor Affiliates Pursuant to Chapter 11 of the Bankruptcy Code (including any exhibits, schedules, annexes and other attachments thereto, each as may be modified in accordance with the terms thereof and of the TSA, the 'Combined DS and Plan') in conjunction with the Chapter 11 Cases, which Combined DS and Plan will be in form and substance acceptable to the Company Parties and to the Required Consenting Lenders.
*(i) certain lenders to the Debtors November 3, 2021 credit Agreement (the "Credit Agreement," with Bank of America, N.A. as "Administrative Agent") who have extended Term A Loans (the “Term A Loans”) to LVI, (ii) certain lenders party to the Credit Agreement who have extended Term B Loans (the “Term B Loans”) to LVI; (iii) certain lenders party to the Credit Agreement who have extended revolving loans (the “Revolving Loans”) to LVI and (iv) the Administrative Agent. The TSA will become effective and binding on the parties once executed signature pages thereto are delivered by (a) holders of 66 2/3% of the claims against the Debtors arising under the Term A Loans, Term B Loans and Revolving Loans under the Credit Agreement and (b) the Administrative Agent.
DIP Financing
The 8-K notes a "intercompany DIP facility in an amount not to exceed $30,000,000." That financing is apparently to come from Canadian affiliate LoyaltyOne (although whether it comes from LoyaltyOn'es proposed DIP financing from BDO is unclear. The press releas provides: "Subject to approval of the Canadian Court, LoyaltyOne, as borrower, will enter into a debtor-in-possession ('DIP') facility with an affiliate of BMO, as lender, pursuant to which the lender will make available to LoyaltyOne a non-revolving secured credit facility in the amount of $70 million. Subject to the approval of the Bankruptcy Court and the Canadian Court, the Company, as borrower, and LoyaltyOne, as lender, will enter into an intercompany DIP facility. The Company currently expects that the intercompany DIP facility will provide sufficient liquidity to meet its financial obligations during the duration of the chapter 11 cases."
Prepetition Shareholders
- Bread Financial Holdings, Inc.: 18.97%
- BlackRock, Inc.: 5.23%
About the Debtors
According to the Debtors: “Loyalty Ventures Inc., a Nasdaq Global Select Market company (Nasdaq: LYLT), is a leading provider of tech-enabled, data-driven consumer loyalty solutions. We help partners achieve their strategic and financial objectives including increased consumer basket size, shopper traffic, frequency, digital reach and enhanced program reporting and analytics.
We help financial services providers, retailers and other consumer-facing businesses create and increase customer loyalty across multiple touch points from traditional to digital to mobile and emerging technologies. We own and operate the AIR MILES® Reward Program, Canada’s most recognized loyalty program, and Netherlands-based BrandLoyalty, a global provider of purpose-driven, tailor-made, campaign-based loyalty solutions for grocers and other high-frequency retailers.
At our AIR MILES Reward Program, AIR MILES Collectors earn AIR MILES at more than 300 leading Canadian, global and online brands and at thousands of retail and service locations across the country. This activity powers an unmatched data asset which along with world-class analytics and marketing capabilities, enables clients to accelerate their marketing activities and ROI. AIR MILES provides Collectors the flexibility and choice to use AIR MILES on aspirational rewards such as merchandise, travel, events or attractions or, instantly, in-store or online, through AIR MILES Cash at participating Partner locations. For more information, visit: airmiles.ca. Having celebrated the issuance of its 100 Billionth Mile in 2021, AIR MILES invites Canadians to visit the Program on Facebook, Instagram and Twitter.
BrandLoyalty provides winning loyalty campaigns by connecting high-frequency retailers, brand partners, and shoppers. BrandLoyalty changes shoppers’ behavior in high-frequency retail worldwide – both on a transactional and emotional level. Find out more via brandloyalty.com or on LinkedIn and YouTube."
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