March 22, 2023 – Further to a March 8th bidding procedures order [Docket No. 351] and an auction held on March 21st, the Debtors notified the Court that Winning Bidders had been designated in respect of a majority of their 90 restaurant locations (several did not have bids) and that the Debtors’ stalking horse 13th Floor Capital, LLC (the “Stalking Horse Bidder”) had been named as the backup bidder in respect of a majority of the locations [Docket No. 375, with list identifying Winning Bidders and Back-Up Bidder by store attached at Exhibit A and below].
As detailed on that list of sold (and unsold) stores, Karali, Burger King, and DC Burger were named as winners for multiple locations.
The Debtors "intend to file with the Court the asset purchase agreements for the Winning Bids and the Back-Up Bid and a proposed Sale Order(s) as soon as those documents are finalized with the parties," with those APAs to be considered at an April 4th sale hearing.
UPDATE: On March 31, 2023, the Debtors, Bank of America, N.A., as Administrative Agent, L/C Issuer and Lender, the Official Committee of Unsecured Creditors, BKC and 13th Floor entered into and filed that certain Consent Stipulation and Order (I) Establishing Break-Up Fee and Expense Reimbursement Payable to Stalking Horse Bidder; (II) Establishing Payment Schedule for Break-Up Fee and Expense Reimbursement; (III) Designating Burger King Company LLC as Back-Up Bidder and Granting Related Relief [Docket No. 392] (the “New Back-Up Bidder Stipulation”). The New Back-Up Bidder Stipulation, among other relief, substitutes BKC as the new back-up bidder pursuant to the terms of the back-up purchase agreement in place of 13th Floor.
On April 5, 2023, the Court issued an order approving the consent stipulation order modifying the Break-Up Fee in the amount of $775k and Expense Reimbursement up to $175k payable to 13th Floor Capital, LLC as the Stalking Horse Bidder [Docket No. 415].
On January 2, 2023, TOMS King (Ohio) LLC and six affiliated Debtors (“TOMS King” or the “Debtors”) filed for Chapter 11 protection noting estimated assets between $0 and $50k; and estimated liabilities between $10.0mn and $50.0mn. At filing, the Debtors, one of the largest franchisees (90 locations) of Burger King Restaurants, noted that as a result of the “COVID-19 pandemic, the Debtors, business suffered significantly from loss of foot traffic, resulting in declining revenue without proportionate decreases in rental obligations, debt service and other liabilities. Recent increases in costs of shipping and food, decreased availability of labor and inflation generally have exacerbated the Debtors, cash flow issues. As a result, although certain of the Restaurants have remained profitable, others have been operating at a loss, resulting in the Debtors, inability to meet their obligations and achieve the financial metrics required under their Prepetition Credit Agreement” [Docket No. 403].
The consent stipulation also seeks entry of an order (i) modifying the Break-Up Fee in the amount of $775k and Expense Reimbursement up to $175k payable to 13th Floor Capital, LLC as the Stalking Horse Bidder.
In early November 2022, the Debtors engaged ReInvest Capital to conduct marketing of the Debtors, assets and to run a competitive bidding process. As a result, the Debtors believe they “are now in a position to complete a sale or reorganization process in an expedited manner through these Chapter 11 Cases. ReInvest has contacted over 200 potential purchaser prospects and will continue such marketing efforts during the bidding process.”
On February 2, 2023, the Court issued an order approving bidding procedures in relation to the sale of the substantially all of the Debtors’ assets, authorizing the Debtor to enter into one or more stalking horse agreements, and offer bid protections to any selected stalking horse and adopting an auction/sale timetable culminating in an auction on March 21, 2023 and a sale hearing on April 4, 2023.
On March 8th, the Court hearing the TOMS King (Ohio) cases issued an order authorizing the Debtors to enter into proposed stalking horse arrangements with 13th Floor Capital, LLC* ($31.0mn cash bid), including bid protections comprised of a $775k break-up fee and a $250k expense reimbursement [Docket No. 351, which attaches a Modified Stalking Horse APA at Exhibit A].
*13th Floor Capital is an affiliate of 13th Floor Investments, operating as a hybrid family office and independent sponsor with a core focus on multi-unit retail investments. Its portfolio companies combine to form one of the largest Focus Brands® franchisees in North America with over 60 Cinnabon®, Jamba®, and Auntie Anne’s® locations. In addition to restaurants and food-service, the firm also seeks opportunities to acquire or take controlling interests in cash flow generative companies across a multitude of industry categories and geographic markets, with strategic or opportunistic investments at all levels of the capital stack. Recently, the firm made a strategic investment in 37th Street Bakery (formerly known as Gold Standard Baking), one of the largest laminated dough bakeries in North America.
Bidding Procedures Motion
The motion [Docket No. 140] states, “The Debtors seek to maximize the value of their estates for the benefit of their creditors by conducting an auction for the sale of substantially all of their assets. The Debtors are engaged in advanced negotiations with multiple parties, including with respect to potential stalking horse bids, and file this Motion to advance the bidding process and schedule an auction to secure the highest or best bid for the benefit of their estates.
In October 2022, the Debtors retained ReInvest Capital, LLC (ReInvest,) to market the Debtors, assets (the, Prepetition Marketing Process,). With the Prepetition Marketing Process in mind, and in an effort to maximize value for all stakeholders, the Debtors have developed postpetition marketing, bidding and auction procedures (the ‘Postpetition Sale Process’) for the orderly marketing and sale of the Debtors, business. The Bidding Procedures are designed to promote a competitive and robust bidding process and are intended to generate the greatest level of interest in the Debtors, businesses.
The Bidding Procedures provide the Debtors with flexibility to solicit proposals, negotiate transactions, select one or more stalking horse bidders, hold an auction and proceed to consummate a potential sale transaction whether through a Bankruptcy Code 363 sale or through a Plan (a ‘Transaction’), all while protecting the due process rights of all interested parties and ensuring that there is a full and fair opportunity to review and consider proposed transactions.”
The motion continues, “In consultation with ReInvest, the Debtors have developed a list of parties whom they believe may be interested in, and whom the Debtors reasonably believe would have the financial resources to consummate a purchase of substantially all of the Debtors, assets, either through a Plan or otherwise. The list of parties includes strategic investors and financial investors, including well-resourced parties that the Debtors had been in contact with as part of their prepetition marketing (collectively, the ‘Contact Parties’). In October 2022, ReInvest contacted over 100 Contact Parties and provided them with a generic teaser. Since that time, ReInvest has contacted approximately 300 additional Contact Parties, for a total of approximately 400 Contact Parties. The Contact Parties may include parties whom the Debtors or its advisors previously contacted regarding a transaction, regardless of whether such parties expressed any interest at such time in pursuing a transaction. The Debtors will continue to discuss and may supplement the list of Contact Parties throughout the marketing process, as appropriate.
With the assistance of Dan Dooley and the Debtors’ management team, ReInvest has established a data room for prospective purchasers. To date, ReInvest has obtained 55 non-disclosure agreements from potential transaction parties. ReInvest will continue to aggressively market the Debtors, assets during the Chapter 11 Cases.”
List of Winning and Back-Up Bidders (NB: only 13th Floor Capital is a back-up bidder)
About the Debtors
According to the Debtors: “The Debtors constitute one of the largest current franchisees of Burger King restaurants. The Debtors operate 90 Burger King restaurants (the Restaurants,). The Restaurants span four states: Illinois, Ohio, Pennsylvania and Virginia.”
Corporate Structure Chart
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The post TOMS King (Ohio) LLC – Files Results of 90-Store Auction; Karali, Burger King, and DC Burger Each Named as Winning Bidder in Respect of Multiple Locations; Order Approves 13th Floor Bid Protections Stipulation appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.