Beruflich Dokumente
Kultur Dokumente
Creditor Recoveries
Fitch Case Studies — 10th Edition
September 2016
Leveraged Finance
Corporates / U.S.A.
Analysts
Sharon Bonelli
+1 212 908-0581
sharon.bonelli@fitchratings.com
David Silverman
+1 212 908-0840
david.silverman@fitchratings.com
Table of Contents
Drivers of Default ................................................................................................................ 3
Liquidation Outcomes More Prevalent in Retail .................................................................. 4
Going Concern Case Studies ............................................................................................. 6
Liquidation Case Studies .................................................................................................... 9
Retail Recovery Rates ...................................................................................................... 14
Retailers in Chapter 11 ..................................................................................................... 17
Retailers at Risk of Default ............................................................................................... 18
Sector Default Rate .......................................................................................................... 18
Appendix: Concession Payments (Settlement Distributions) ............................................ 19
Case Studies
ALCO Stores, Inc. ............................................................................................................. 21
American Apparel, Inc. ..................................................................................................... 24
BI-LO, LLC ....................................................................................................................... 27
The Bombay Company ..................................................................................................... 30
Borders Group Inc. ............................................................................................................ 33
Brookstone, Inc. ................................................................................................................ 36
BSCV, Inc. (formerly Boscov’s Inc.) .................................................................................. 39
Circuit City Stores, Inc. ..................................................................................................... 42
Coldwater Creek Inc. ........................................................................................................ 45
Eddie Bauer Holdings, Inc. ................................................................................................ 48
Fairway Group Holdings Corp. ......................................................................................... 51
Finlay Enterprises, Inc. ..................................................................................................... 54
Goody’s, LLC .................................................................................................................... 57
Gottschalks, Inc. ............................................................................................................... 60
The Great Atlantic and Pacific Tea Company, Inc. ........................................................... 63
Harry & David Holdings, Inc. ............................................................................................ 67
Hub Holdings Corp. (formerly Anchor Blue Retailing Group, Inc.) .................................... 70
Linens ‘n Things, Inc. ........................................................................................................ 73
Loehmann’s Holdings Inc. (2010) ..................................................................................... 76
Loehmann’s Holdings Inc. (2013) ..................................................................................... 79
Movie Gallery Inc. ............................................................................................................. 82
Orchard Supply Hardware Stores Corporation ................................................................. 85
Penn Traffic Company (2003) .......................................................................................... 88
Related Criteria Penn Traffic Company (2009) .......................................................................................... 91
Recovery Rating and Notching
Criteria for Non-Financial Corporate Quiksilver, Inc. .................................................................................................................. 94
Issuers (April 2016)
RadioShack Corporation .................................................................................................. 97
Syms Corp., Filene’s Basement, LLC ............................................................................. 100
Value City Holdings, Inc. ................................................................................................ 103
The Wet Seal, Inc. .......................................................................................................... 106
Winn-Dixie Stores, Inc. ................................................................................................... 109
Increased competition can cause declines in comps, which yield fixed-cost deleverage and
• Retailer bankruptcies end in
liquidation more often than EBITDA declines. Retailers often respond to declines by cutting back spending on in-store
other corporate cases. maintenance, labor and marketing. These actions can exacerbate market share erosion
through declines in the in-store experience. Severe or persistent market share contraction can
lead to weak or negative FCF, which limits the ability to improve competitive position, creating
a downward spiral of operations and results.
Ultimately, bankrupt retailers are liquidated if they cannot access new capital to reorganize as
going concerns. Investors may be reluctant to invest new capital due to the lack of proprietary
products. In other words, increased competition and changing consumer behavior have left
these retailers with little reason to exist in the marketplace. Investors may also perceive that a
fallen retail brand (often in mall-based specialty apparel) has little chance of regaining favor in
the customer’s eye, yielding poor risk/return characteristics in a potential investment.
Liquidations
Company Type
ALCO Stores, Inc. Broadline
Bombay Company (The) Home Furnishings
Borders Group Inc. Operator of Book, Movie and Music Stores
Circuit City Stores, Inc. Consumer Electronics
Coldwater Creek Inc. Women’s Apparel and Accessories
Finlay Enterprises, Inc. Jewelry
Goody’s, LLC Family Clothing
Gottschalks, Inc. Department Stores
Linens ‘n Things, Inc. Home Textiles
Loehmann’s Holdings Inc. (2013) Discount Apparel
Movie Gallery Inc. Video Rental And Sales
Penn Traffic Company (2009)a Supermarkets
RadioShack Corporation Electronics
Syms Corp., Filene’s Basement, LLCb Family Clothing
Value City Holdings, Inc. Department Stores
a
Penn Traffic (2009) sold all assets. The acquirer operated some markets. bSyms ceased to operate as a retailer, but
reorganized as an owner of real estate assets.
Source: Company disclosure statements, Fitch Ratings.
The shortening of lease assumption/rejection decision deadlines can be problematic for several
reasons. From a human resources perspective, a large chain with an extensive store network
could have hundreds of executory contracts to review. In addition, some retailers may want to
keep stores open through the next December/holiday selling season to assess performance,
and a shortened deadline may prevent this opportunity.
Prior to the reforms resulting from the Bankruptcy Abuse Prevention and Consumer Protection
Act of 2005, debtors had 60 days from filing for Chapter 11 to assume or reject a lease.
However, despite the 60-day official limit, in practice, bankruptcy courts would routinely grant
repeated extensions that provided the retailers two years or more to determine what to do with
a lease. This extended time enabled retailers to operate stores for at least one Christmas
season — and possibly two — during bankruptcy, as was the case with Federated Department
Stores in the early 1990s. This lengthy decision period was unpopular with property owners,
who successfully lobbied for shorter decision times that became effective with the 2005 reforms.
The 2005 reforms limited the debtor’s decision period to 210 days (with court consent) to
assume or reject a lease. However, in practice, the decision period is often even shorter
because of limits placed on the company by the DIP lender. The lenders want to ensure they
have adequate time to conduct a routine going-out-of-business (GOB) sale (rather than a fire
sale) if the reorganization does not pan out as planned. Lenders sometimes impose deadlines
of 150 days for completion of store lease decisions in the DIP agreement, which places even
more time pressure on the retailer.
The 2005 code revisions also included vendor-friendly changes to claims treatment for goods
received by the company within 20 days of bankruptcy. Dilution of unsecured creditor
recoveries result from certain vendor claims moving up in rank to administrative status, known
as a 503(b)(9) claim. A supplier can make such a claim for the value of goods received by the
debtor within 20 days of the bankruptcy filing date.
A supplier can also make a reclamation demand for delivered goods received by the bankrupt
company within 45 days of the bankruptcy filing, but in many instances the goods will already
have been sold.
Because Chapter 7 liquidations include trustee fees (usually 3% of liquidation proceeds), they
are rarely the option that maximizes creditor recoveries and infrequently used. Most often,
large U.S. companies reorganize in bankruptcy. When they do go out of business, liquidation
under Chapter 11 is more common than Chapter 7.
Valuation estimates in GOB sales were more challenging for Fitch than going concern cases,
where the third-party fundamental enterprise value estimate used in the plan of reorganization
was available as an exhibit in the disclosure statement. For the GOB liquidations, Fitch used a
rough estimate of the sum of creditor distributions or the sum of liquidation proceeds as a proxy
for the recovery values in the liquidations.
Despite the challenges facing supermarkets, bankrupt grocers often have strong, entrenched
real estate positions in local markets. New capital, finding these real estate assets to be a
competitive advantage, has been more willing to fund grocer post-emergence liquidity and
operating needs than in other retail subsectors.
Five of the six completed supermarket case studies reorganized as going concerns. The sixth
case study, Penn Traffic Company (2009), has been classified as a liquidation, although some
of firm’s stores were sold to Tops Markets for $85 million and continued to be operated as
grocers. The Great Atlantic and Pacific Tea Company (A&P) chain reorganized as a going
concern in 2010 but filed again in 2015 and is in a liquidation process. Final recoveries of A&P
creditors are not yet determined.
Company-Specific Drivers
The remaining going concern case studies were more driven by an individual company’s ability
to find new capital than a broader theme.
Quiksilver, Inc. and American Apparel, Inc. are two recent examples of retailers that were able
to source new-money investment while in Chapter 11 and therefore survive as independent
going concerns. Quiksilver filed and emerged in 2016 after getting a new-money equity
investment from Oaktree. Funding for the bankruptcy plan included proceeds from a
$127.5 million rights offering for the new equity. In American Apparel’s case, several creditors
agreed to provide new equity capital in an amount ranging from $10 million to $40 million and
also agreed to provide a new exit term loan.
Harry & David Holdings, Inc. and Loehmann’s Holdings Inc. (2010) are two more retailers in the
Fitch study that survived bankruptcy and emerged independently. Harry & David obtained new
equity investment from a subset of noteholders, and Loehmann’s obtained a $25 million new
equity investment from its prepetition equity owner in return for 49% of the new equity. The
balance of Loehmann’s new equity shares was distributed to prepetition creditors in a debt-to-
equity conversion. However, Loehmann’s filed again in 2013 and liquidated in that bankruptcy.
Other non-supermarket retail companies that continued as going concerns were sold to new
owners as operating chains. The Wet Seal, Inc., a fast fashion retail chain, filed in 2016 and
emerged as a smaller going concern entity. Just prior to filing, the chain shuttered 337 stores.
The remaining 173 stores were acquired in a credit bid by Mador Lending, LLC, an affiliate of
Verso Capital Management.
Earlier cases of going concern sales include Eddie Bauer Holdings, Inc., Hub Holdings Corp.,
Boscov’s Inc., Brookstone, Inc. and Orchard Supply Hardware Stores Corporation. Eddie
Bauer sold all assets to Golden Gate Capital in a bankruptcy court-supervised auction one
month after its June 2009 bankruptcy filing. Hub Holdings (formerly known as Anchor Blue
Retailing Group, Inc.) sold its Levi’s outlet division to an affiliate of Levi Strauss & Co. and
liquidated its Anchor Blue division.
Boscov’s was able to obtain new capital investment from the founding family. The family
repurchased the company in bankruptcy with a new investment and paid prepetition secured
creditors in full. Boscov’s shut 10 under-performing stores during the bankruptcy and emerged
with a smaller base of 39 department stores. Brookstone was sold to an affiliate of Spencer
Spirit Holdings (Spencer’s), while Orchard sold 70 of its approximately 90 stores to Lowe’s
Corporation.
• Median Retail Third-party valuation advisors that produce enterprise value estimates typically use several
Reorganization Enterprise valuation methodologies, including discounted cash flow, peer comparable analysis and
Valuation Multiple of 5.4x
EBITDA. precedent transaction analysis to estimate the going concern valuations used to inform
claimholders prior to voting to accept or reject the plan of reorganization.
Fitch calculated the ratios using the enterprise value estimates in the companies’ bankruptcy
plan disclosure statements that are used by claimholders as information used for voting on
reorganization plans. The ratios in the table above also used managements’ EBITDA forecasts
for the first full year following emergence.
Fitch’s typical recovery analysis assumption that 70% of merchandise book value is realizable
in liquidation sales is supported by the minimum payment guarantees included in liquidation
agency agreements for GOB liquidations.
Typically, liquidation agents agree to pay the company in bankruptcy a specified minimum
guaranteed percentage of the merchandise cost, with sharing mechanisms for proceeds above
certain thresholds. Merchandise includes store inventory and distribution center inventory. The
sharing thresholds are any proceeds in excess of the sum of the minimum guarantee
percentage of merchandise cost, plus the agent’s fees and the agent’s expenses. Payment of
all expenses associated with GOB sales is the responsibility of the agent and includes costs
such as employee payroll, insurance, transportation, utility, advertising, and all other regular
store operating costs. (See table above for a hypothetical numerical example of how a typical
agency agreement works in practice). The Liquidation Agency Agreements table below
summarizes guaranteed percentages of cost and other key payment terms in specific retailer
bankruptcy cases. Additional information on the individual agency agreements follows.
Fitch commonly assumes that retail liquidations of inventory result in proceeds equal to 70% of
inventory book value in its issuer-specific recovery analyses for issuers rated ‘B+’ and lower.
The minimum guaranteed proceeds in the small sample of actual liquidation agency
agreements support the reasonableness of Fitch’s 70% assumption. The actual recovery will
depend on a number of factors, including merchandise category, aging of inventory (for
example, in-season holiday merchandise in October or November will get higher recoveries
Next, there was an unsuccessful effort to sell the remaining stores as a going concern through
an auction process. The stalking horse bidder for the auction, Direct Brands, a portfolio
company of Najafi Companies, proposed to purchase the assets of the remaining stores for
$215 million cash plus the assumption of $220 million of liabilities and payment of $15 million of
expenses. There were no other going concern bids received. The stalking horse bidder decided
not to proceed.
Borders also secured a back-up bid from a JV of liquidation firms for full-chain liquidation. The
JV consisted of Hilco Merchant Resources, LLC, Gordon Brothers Retail Partners, LLC, SB
Capital Group, LLC, Tiger Capital Group, LLC and Great American Group, LLC
One week after the failed auction, Borders moved forward with the phase two liquidation sale.
The guaranteed minimum percentage to be paid by the JV was 72% of the cost value of the
merchandise (using an estimate of $350 million–$395 million subject to adjustments), plus a
50/50 sharing of proceeds above a threshold level consisting of the 72% minimum plus the
agent fee and costs of the sale. The JV was responsible for all costs of the sale and was also
entitled to a fee of 4% of the proceeds of certain merchandise sales.
On Jan. 15, 2009, the company entered an agency agreement with a JV that included Great
American Group WF, LLC, Hudson Capital Partners LLC, SB Capital Group, LLC and Tiger
Capital Group, LLC. The agreement to conduct the sale of all merchandise at 567 stores was
approved by the bankruptcy judge the following day.
The liquidation agent agreement guaranteed that the proceeds of the sale would equal 70.5%
of the aggregate cost value of the merchandise plus an amount sufficient to pay expenses.
There was a 70% Circuit City/30% agent sharing mechanism for proceeds above a sharing
threshold. The sharing threshold was sale proceeds in excess of the 70.5% minimum plus the
agent’s expenses plus a 1% agent’s fee.
The sales started on Jan. 17, 2009 and were completed on March 8, 2009.
Gordon Brothers guaranteed proceeds of 64.75% of the cost value of the merchandise with a
50/50 sharing of proceeds above a threshold. The guaranty percentage was based on the cost
value of merchandise in the 49 stores in the range of $120 million–$123 million. The sharing
threshold was based on the sum of the 64.75% minimum proceeds plus the agent’s fees and
expenses. Agent fees included a base fee of 4.25% of the cost value of the merchandise plus
2.125% of the cost of certain additional merchandise sold.
Goody’s, LLC
Goody’s LLC entered a liquidation agency agreement with a joint venture of Hilco Merchant
Resources LLC and Gordon Brothers Retail Partners LLC on Jan. 6, 2009. The liquidator
guaranteed to pay Goody’s an amount equal to 77.7% of the cost value of the merchandise
included in the sale, subject to certain adjustments. The guarantee percentage was fixed based
on the cost value of the merchandise not being less than $110 million or more than
$114 million. The liquidation sale was to start on Jan. 9, 2009 and be completed by
March 31, 2009 unless extended by mutual agreement.
Gottschalks, Inc.
Gottschalks’ liquidation agency agreement was approved on April 7, 2009, approximately three
months following the petition date. The liquidation agent selected to conduct the GOB sales for
59 stores was a JV comprising SB Capital Group, LLC, Tiger Capital Group, LLC, Great
American WF LLC and Hudson Capital Partners LLC.
The JV guaranteed proceeds of 98% of the cost value of the merchandise plus expenses to
Gottschalks. The agent received a fee of 4% of merchandise cost value, and there was a
sharing mechanism for proceeds above a certain threshold. The Finlay (jewelry) goods were
consignment goods and were excluded from the merchandise. Finlay was entitled to 100% of
the proceeds from liquidation of its goods, less a 5.2% sales proceeds fee retained by the
agent and agent expenses.
Movie Gallery retained Great American Group to act as agent for the GOB sales in April 2010
and the court approved the motion for the sale of all remaining assets on May 20, 2010. Great
American guaranteed that Movie Gallery would receive $74.2 million from the sale of remaining
assets with a sharing mechanism for proceeds above a threshold. The consideration was
based on inventory units as of the sale commencement date, but no minimum guaranteed
percentage proceeds of merchandise cost value were specified. The liquidator charged a fee
equal to 3% of proceeds. The liquidation sales were completed by July 31, 2010.
RadioShack Corporation
General Wireless, a subsidiary of Standard General, acquired 1,743 of the better-performing
RadioShack stores in April 2015 to form the go-forward smaller footprint of the chain.
Inventory in the remaining stores was liquidated. The court motion to assume a liquidation
consulting agreement that was signed prior to bankruptcy filing was filed on Feb. 4, 2015. The
liquidation consultant engaged to conduct the GOB store closing sales of all merchandise and
furniture, fixtures and equipment (FF&E) were a joint venture comprising Hilco Merchant
Resources, LLC, Gordon Brothers Retail Partners, LLC and Tiger Capital Group, LLC.
The consultants received a flat fee of $500 for each store closed plus a percentage fee of 1.5%
of the gross sales at each closing location. In addition, to the extent that the GOB sales were
completed at 90% of the stores in number by certain target dates (for three separate groups of
stores) the consultant was entitled to receive an additional 0.5% of gross sale proceeds. In
addition, the consultants were entitled to 17.5% of the gross proceeds from sales of FF&E.
The GOB sales were to be conducted in three stages. The first group was closed by
Feb. 17, 2015, the second group of closings was completed by Feb. 28, 2015 and a third
tranche closed by March 31, 2015. The agreement stipulated that the consultants would accept
gift cards issued prior to the start of the GOB sales through March 31, 2015 and accept returns
(but not returns made to repurchase the same goods at the GOB price).
By the date of filing, the fate of the retail operation was sealed and the store merchandise
liquidation process was initiated. The GOB sales started two weeks after the bankruptcy filing
date under the terms of a liquidation agency agreement that was signed on Nov. 2, 2011.
The liquidation agent for the remaining 39 Syms/Filene’s stores was a JV between Gordon
Brothers Group, LLC and Hilco Merchant Resources, LLC. The JV agreed to pay a minimum
guaranty percentage of 90% of the aggregate cost value of the merchandise, with sharing
mechanisms for proceeds above a threshold.
Following the petition date, Value City assumed the prepetition consulting agreement contract
with Tiger, which then assisted in the liquidation of remaining stores. Tiger’s duties included
assembling a management team for the GOB sales, managing merchandising and inventory,
preparing the stores for the sales, human resources and continuity plans.
Tiger received a base fee of $22,500 per store plus a success fee for exceeding certain gross
returns per store that was capped at $22,500. Payment of the success fee was to be made
only after all claims under the prepetition credit agreement were paid in full.
The average duration from petition date to plan confirmation date of the 30 retail cases was
11 months, with a range of one month to 26 months.
Most distributions in retail sector bankruptcies cases were paid in the form of cash. This
reflects the above-average liquidation outcome rate for which there is no new common stock or
debt issued. For retailers that continued to operate as going concerns, prepetition loans were
sometimes converted into DIPs (or paid in cash by a new DIP) or via reinstatement of a debt or
trade claim at emergence or through debt-to-equity conversions.
For example, in the Harry & David case, a subset of prepetition noteholders provided
$55 million of new equity capital, and the old noteholders also received a share of the new
equity in a debt-to-equity conversion.
Retailers in Chapter 11
Bankruptcy
Company Retail Type Filing Date Notes
A&P Grocery 7/19/15 A&P filed again just a few years after emerging from a prior
bankruptcy. The company has already sold most of its grocery
stores in a piecemeal liquidation and will not operate post-
bankruptcy. More than $900 million of liquidation proceeds had
been raised by July 1, 2016. The sales of 17 liquor stores have
not been completed, and most of the liquidation proceeds have
not yet been distributed to claimholders.
Aeropostale, Inc. Teen Apparel 5/4/16 The proposed plan of reorganization provides for a sale of
substantially all assets. The company had identified
approximately 400 stores for shut-down and on Sept. 16, 2016
closed the sale of its remaining 400 stores and other assets for
$273 million as a going concern to a consortium led by General
Growth Properties Inc. and Simon Property Group. On
Sept. 21, 2016, the new owners of the ailing teen retailer
announced that they will work on keeping up to 475 stores
open in the U.S. — an additional 75 stores — as more
landlords agree to reduce rents.
Pacific Sunwear of Sports and Fashion 4/7/16 Proposed plan of reorganization is based on a restructuring
California, Inc. Influenced by support agreement with the term loan lenders and would lead
California Lifestyle to the company’s emergence as an independent going
concern. The proposed plan would provide the term loan
holders with 100% of the new common equity and a new term
loan in exchange for a new money $20 million investment to
fund operations in the form of debt and/or equity. However,
there are some objections to the plan and the company asked
the bankruptcy court to extend the exclusive period during
which the company can file another plan to Nov. 3, 2016.
Sports Authority, Sporting Goods 3/2/16 A full-chain going-out-of-business (GOB) sale is underway. The
Inc. (The) and Apparel seller of branded sportswear’s product line lacked compelling
differentiation. In addition, conflicts between vendors that
supplied inventory on consignment and the company and its
lenders on who owned the inventory was one issue that arose
during the case and made it more difficult to pursue a
reorganization. The company originally envisioned closing
unprofitable locations and emerging as a smaller chain.
However, a substantial portion of total sales was based on
consignment sales, and this complicated issues relating to
GOB sale pricing.
Source: Company reports, Fitch Ratings.
Most of the retailers at high risk of default are challenged by declining mall traffic, competition
from online and other types of retailers, and/or a lack of a compelling product line. Highly
leveraged capital structures may become unsustainable in the face of these challenges.
6
5
4
3
2
1
0
2010 2011 2012 2013 2014 2015 TTM Aug. 2016
Bankruptcy Summary Enterprise Value (EV) Range (or Asset Value Range)
a
Did All Entities in the Group File? No Low 180
Plan Proposed by Debtor High 270
Court District Delaware Midpoint EV (Value) 225
Substantive Consolidation No Equity Value Range
Petition Date 10/5/15 Low 75
Confirmation or Conversion Date 1/27/16 High 165
Effective Date 2/5/16 Midpoint EV/Post-Emergence EBITDA Estimate 7.7
Duration (Months) 4
Filing — Type Chapter 11 (Prearranged/Negotiated)
Section 363 Asset Sale by Debtor No Petition Date Versus Emergence Date
Voluntary or Involuntary Filing Voluntary Petition Date Emergence Date
Postconfirmation Liquidating Total Debt 295 135
Trust Yes Consolidated Leverage (x) 7.7 4.6
Resolution Emerged/Reorganized (Private) Debt Shed in Bankruptcy — 160
Debt Shed in Bankruptcy (%) — 54
While not related to the recent bankruptcy plan, Fitch notes that the company reportedly engaged Houlihan Loukey to explore a sale of the business in August 2016.
BI-LO, LLC
($ Mil., Except Where Noted)
Brookstone, Inc.
($ Mil., Except Where Noted)
Additional Information
Cash on Filing Date $2.66 million as of March 31, 2014 per Exhibit B to disclosure statement.
Prepetition Bank Facility Commitments $110 million senior secured revolver credit facility and $12.3 million of remaining borrowings under a term loan
that was originally $20 million.
Prepetition Bank Facility Borrowings on Filing Date $34 million of borrowings and $4.7 million letters of credit under the $110 million revolver and $12.3 million
term loan.
Was the DIP a New Money Facility or Roll Up of a The $96.25 million DIP was used to roll up the first-lien facility borrowings as well as a portion of the
Prepetition Facility? prepetition notes (that were held by DIP lender) and also included a $6.25 million new money term loan.
Other Notable Issues None
Executory Contracts The plan sponsor (Spencer’s) had the right to reject up to 75 store leases under the stock purchase
agreement. The exact number of store leases rejected is not available; however the liquidation alternative
valuation shows 10 assumed store rejections under the Chapter 11 plan with $2 million of claims.
Deficiency Claims Yes. $70 million–$80 million of the general unsecured claims consist of deficiency claims relating to the
$137.3 million of second-lien notes outstanding.
Contingent Claims and/or Contingent Recoveries A reserve for disputed claims was established.
Intercompany Claims None noted.
Pension Claims/Motions The defined benefit pension plan was expected to be terminated, but the disclosure statement indicated that
the acquirer may choose to continue the plan. The PBGC was expected to file or had filed claims for the
unfunded benefit liabilities (the amount of the claim was not provided).
Postpetition Interest? Yes
If Yes, Recipient Class Secured
Concession Payments Yes
Recipient and Comments General unsecured.
DIP – Debtor in possession.
Source: Fitch Ratings, company disclosure statement dated May 16, 2014.
Claim
Seniority Claim Type Description
DIP $250 Million DIP Facility • DIP borrowings (balance undisclosed) were paid in full in cash with proceeds of the company sale. The DIP was
used to refinance the borrowings under the prepetition first-lien bank facility. The usage on the petition date of the
first-lien facility included principal of $122 million plus letters of credit of $35 million, which were rolled into the DIP as
rollovers became due.
Secured $370 Million First-Lien Bank • The first-lien facility debt was unimpaired. Petition date borrowings of $122 million under the first-lien bank facility
Facility were rolled into the DIP facility and paid in full in cash as borrowings became due with DIP loans.
Secured $60 Million Second-Lien Bank • The second-lien bank debt was unimpaired and paid in full in cash with proceeds from the sale of the company to
Facility BLF Acquisition, Inc. The petition date balance was $38 million.
Secured Tom’s River Mortgage Facility • The Tom’s River mortgage facility was assumed by BLF Acquisition on emergence.
Unsecured Trade Debt • As of the petition date, the debtors estimated they owed at least $100 million of trade debt. The estimated range of
claims as of the disclosure statement date was $110 million–$130 million. Holders of unsecured claims received
partial recovery in the form of cash distributions from the Distribution Trust.
Intercompany Intercompany Claims • No property was distributed to intercompany claims.
Equity Equity Claims • Each holder of an old common stock interest retained such interest. The company is a privately held company with
common stock held through trusts by the Boscov and Lakin families.
RR – Recovery Rating. DIP – Debtor in possession. N.A. – Not available.
Source, unless otherwise noted: Company disclosure statement dated June 15, 2009, second amended disclosure statement dated July 22, 2009.
Note: This is an update of a case study published April 16, 2013.
Notes
The $436 million value in the liquidation analysis exhibit to the disclosure statement was estimated on Aug. 24, 2009, by which date much of the liquidation was
completed. The liquidation estimate include estimated cash of $275 million, and low-end asset value estimates: account receivable of $59.7 million, income tax
receivable of $52.7 million, and investments in subsidiaries of $72.9 million. Wind-down expenses include 3% trustee fee ($14.7 million–$16.4 million), operating
expenses and professional fees. The plan provided for an orderly liquidation of the remaining assets of the debtor. It should be noted that the $898 million DIP
borrowings were repaid with proceeds of asset sales prior to the publication of liquidation analysis exhibit to the disclosure statement, dated Aug. 24, 2009. The total
value of the company includes the $898 million of asset sale proceeds received between the petition date and the Aug. 24, 2009, liquidation analysis and excludes
administrative costs paid from the petition date to the Aug. 24, 2009, liquidation analysis.
Circuit City tried to sell itself as a going concern in an auction but received no viable going-concern bids. The company and other parties then determined liquidation
would result in the best recoveries for creditors. There was no going-concern basis valuation in the disclosure statement.
a
Source is Circuit City 10-K dated April 28, 2008. bTotal estimated remaining value from sale of assets as of liquidation analysis date plus $898 million of prior debtor-in-
possession repayments with liquidation proceeds. DIP – Debtor in possession. N.A. – Not applicable.
Source, unless otherwise noted: Company disclosure statement dated Sept. 24, 2009.
Note: This is an update of a case study published April 16, 2013.
Additional Information
Cash on Filing Date Not available.
Prepetition Bank Facility Commitments $40 million revolving credit facility and $269.8 million remaining debt under a $275 million (original) term loan.
Prepetition Bank Facility Borrowings on Filing Date $9.2 million of borrowings and $30.6 million of letters of credit under the $40 million revolver, plus the
$269.8 million term loan debt.
Was the DIP a New Money Facility or Roll Up of a The DIP term loan tranche was new money, and the prepetition letter of credit facility was converted into a DIP
Prepetition Facility? letter of credit facility and then an exit letter of credit facility.
Other Notable Issues This was purely a balance sheet restructuring that impaired only the senior secured lenders. Stores remained
open.
Executory Contracts Store leases and employee agreements were assumed and unaltered. Collective bargaining agreements were
treated as executory contracts that were assumed under the plan.
Deficiency Claims No
Contingent Claims and/or Contingent Recoveries Disputed claims are contingent claims and were to be settled one by one via settlement, satisfaction, claim
objections, etc.
Intercompany Claims None
Pension Claims/Motions All employee benefit plans and collective bargaining agreements were continued and honored with no changes.
Postpetition Interest? No
If Yes, Recipient Class Not applicable.
Concession Payments Yes
Recipient and Comments All trade vendors, landlords, vendors and employees were paid in full in the ordinary course of business.
Goody’s, LLC
($ Mil., Except Where Noted)
Gottschalks, Inc.
($ Mil., Except Where Noted
a
Filing excluded foreign subsidiaries. bEBITDA excludes cash flow from planned initiatives. cEquity based on book value in management forecast.
DIP – Debtor in possession.
Source, unless otherwise noted: Revised disclosure statement dated Dec.19, 2011.
Note: This is an update of a case study published April 16, 2013. The Great Atlantic and Pacific Tea Co, filed a subsequent bankruptcy in 2015 and is currently
liquidating the full chain.
(% of Par)
100
80
Filing Date: 3/28/11
60
40
20
0
3/10 4/10 5/10 6/10 7/10 8/10 9/10 10/10 11/10 12/10 1/11 2/11 3/11
Source: Bloomberg.
Hub Holdings Corp. (formerly Anchor Blue Retailing Group, Inc.) (Continued)
Estimated Recoveries for Select Claims
($ Mil., Except Where Noted) Form of Distribution
Allowed Projected Equivalent Secured Unsecured Subordinated New Options/
Claim Seniority Claim Type Claims Recovery (%) RR Category Cash Notes Notes Notes Equity Warrants
Wachovia DIP Revolving
DIP or Other Facility (Converted from
Administrative Prepetition) 19 100.0 RR1 19 — — — — —
Secured Other Secured 0.2 100.0 RR1 0.2 — — — — —
Secured Ableco Finance LLC Loan 79 90.0 RR2 70.5 — — — — —
Unsecured General Unsecured 34.5 2.0–4.0 RR6 0.7 — — — — —
Intercompany Intercompany 0 0 RR6 — — — — — —
Equity Equity Interests 0 0 RR6 — — — — — —
Estimated Claims 132.7 — Recoveries 90.4 0 0 0 0 0
New Borrowings at Emergence 0 — — — — — — — —
Debt of Nonfiling Affiliates on
Emergence Date 0 — — — — — — — —
Hub Holdings Corp. (formerly Anchor Blue Retailing Group, Inc.) (Continued)
Additional Information
Cash on Filing Date Not available.
Prepetition Bank Facility Commitments $120 million prepetition secured facility consisting of a $85 million term loan and $35 million revolving credit
facility.
Prepetition Bank Facility Borrowings on Filing Date Approximately $91 million consisting of $76 million of remaining term loan borrowings and $14.5 million of
revolver borrowings.
Was the DIP a New Money Facility or Roll Up of a The DIP was a roll up of the prepetition revolver.
Prepetition Facility?
Executory Contracts All 255 stores were leased. The respective buyers of the two divisions assumed the leases for the stores that
were sold as going concerns. The leases on the 60 stores that were closed were rejected.
Deficiency Claims Yes. The unsecured portion of the term loan was treated as a general unsecured claim and received recoveries
in the 2%–4% range.
Contingent Claims Disputed claims.
Intercompany Claims No distributions were made to intercompany claims, which were canceled in the substantive consolidation.
Pension Claims/Motions Not disclosed.
Postpetition Interest? Yes
If Yes, Recipient Class Secured
Concession Payments Yes
Recipient General unsecured.
DIP – Debtor in possession.
Source: Fitch Ratings, company disclosure statement dated Jan. 6, 2011.
Note: This is an update of a case study published April 16, 2013.
The table to the right provides a summary of remaining asset value as of the plan Remaining Asset Value
of reorganization confirmation date based on the balance sheet published as part ($ Mil.) 1/31/09
of the monthly operating statement dated Jan. 31, 2009 (filed as an 8-K). Note
that from the petition date to Jan. 31, 2009, debtor-in-possession borrowings of Book Value of Remaining Assets 467
$393 million were paid in full and the amount of other debts, including the senior Less Intangible Assets and Goodwillb (377)
secured notes, were reduced during the bankruptcy period using liquidation Tangible Asset Book Value 90
proceeds received prior to Jan. 31, 2009. The sum of the paydowns are part of the
Less Liabilities Not Subject to Compromise Plus Priority 36
company’s total asset value and recovery values.
Claims
Remaining Liquidation Value for Claim Distributions 55
Allowed Claims for Remaining Senior Secured Notesc 525
a
All U.S. entities filed Chapter 11. The Canadian affiliates filed a separate bankruptcy petition in Canada. bAssumed to have $0 value following liquidation of goods and
store closures. c$525 million was balance disclosed on the Jan. 31, 2009, monthly operating report balance sheet. Note: The total liquidation value of $592 million was
estimated by Fitch as the sum of (asset sale proceeds of $537 million used to pay down debt prior to Jan. 31, 2009, which included $393 million of DIP loans,
$144 million of senior notes and the $55 million estimated remaining value for claim distributions as of Jan. 31, 2009. Source of $55 million estimated remaining asset
value is monthly operating statement dated Jan. 31, 2009.
Source, unless otherwise noted: Company disclosure statement dated Jan. 16, 2009.
Note: This is an update of a case study published April 16, 2013.
Source: Bloomberg.
Quiksilver, Inc.
($ Mil., Except Where Noted)
RadioShack Corporation
($ Mil., Except Where Noted)
(% of Par)
70
60 Filing Date: 02/15/15
50
40
30
Confirmation Date: 10/2/15
20
10
0
Syms Corp., Filene’s Basement, LLC, Syms Clothing, Inc., Syms Advertising Inc.
($ Mil., Except Where Noted)
Syms Corp., Filene’s Basement, LLC, Syms Clothing, Inc., Syms Advertising Inc. (Continued)
Estimated Recoveries for Select Claims
($ Mil., Except Where Noted) Form of Distribution
Allowed Projected Equivalent RR Secured Unsecured Subordinated New Options/
Claim Seniority Claim Type Claims Recovery (%) Category Cash Notes Notes Notes Equity Warrants
Secured $75 Million Senior Secured 0 100.0 RR1 — — — — — —
Revolving Credit Facility
DIP or Other Administrative, Superpriority 31 100.0 RR1 31 — — — — —
Administrative Intercompany Claims and
Priority Tax Claims
Unsecured Unsecured Claims Against 54 100.0 RR1 54 — — — — —
Syms
Unsecured Short-Term Unsecured Claims 9 100.0 RR1 9 — — — — —
Against Filene’s
Unsecured Long-Term Unsecured Claims 37 75.0 RR2 28 — — — — —
Against Filene’s
Unsecured Union Pension Plan Claims 6 100.0 RR1 6 — — — — —
Intercompany Intercompany Claims 0 0.0 RR6 0 — — — — —
Estimated Claims 137 — Recoveries 128 0 0 0 0 0
New Borrowings at Emergence 0 —— — — — — — —
Debt of Nonfiling Affiliates on
Emergence Date 0 —— — — — — — —
Syms Corp., Filene’s Basement, LLC, Syms Clothing, Inc., Syms Advertising Inc. (Continued)
Additional Information
Cash as of Nov. 26, 2011 $45 million.
Prepetition Bank Facility Commitments $75 senior secured revolving credit facility.
Prepetition Bank Facility Borrowings on Filing Date Approximately $31.3 million including borrowings and letters of credit. This was paid in full.
Was the DIP a New Money Facility or Roll Up of a Prepetition facility paid in full. No new debt borrowed postpetition.
Prepetition Facility?
Disclosure or Estimate of Total Administrative and Priority $33.4 million.
Claims for Entire Period of Bankruptcy Proceeding?
If Yes, Admin. + Priority as % of Enterprise Value? 19%
Executory Contracts Lease rejections claims totaled $4.6 million directly against Syms, and $14.6 million in claims against
Filene’s guaranteed by Syms. These claims were fully paid as unsecured claims against Syms. Lease
rejection claims against Filene’s totaled $36.8 million and were paid 75% according to the plan as long-term
unsecured claims against Filene’s.
Deficiency Claims None
Contingent Claims To be paid with proceeds of asset disposition to the extent allowed.
Intercompany Claims Intercompany claims were canceled.
Pension Claims/Motions Voluntarily terminated on the effective date. Withdrawal liability of $6.4 million to be paid in full over time.
Postpetition Interest? No
If Yes, Recipient Class Not applicable.
Concession Payments Yes
Recipient Short-term unsecured claims against Filene’s and Union pension plan claims.
DIP – Debtor in possession.
Source: Fitch Ratings, company disclosure statement dated July 13, 2012.
Note: This is an update of a case study published April 16, 2013.
Based on the reorganized equity value of $749 million, the issuance of approximately 50 million total shares to creditors, and claims information as of June 26, 2006, the
recoveries for unsecured creditors were in accordance with the substantive consolidation compromise to unsecured creditor constituencies as described in the table
Estimated Recoveries for Select Claims.
Liquidation Value Alternative
• The gross estimate of proceeds in a liquidation scenario was in the range of $930.4 million–$1,020.1 million and was based on discounts to the $1.539.8 billion book
value of assets as of June 30, 2006, plus $106.97 million–$121.4 million proceeds from lease liquidation and $30.4 million–$62.1 million from pharmacy liquidation.
• The asset book values and discounts applied included:
o Cash and equivalents of $253.79 million at 100% of book value (estimated as of Sept. 30, 2006 book value)
o Trade and vendor receivables of $164 million at 70%–80% of book value (after prepetition receivable set-offs of $59 million)
o Inventory of $497 million at 62% of cost
o Land and buildings of $112 million at 83%–91%
o Equipment and leasehold improvements of $393 million at 6%–13% of book value
o There were incremental administrative costs and store lease rejection claims in a going-out-of-business store liquidation, including $224 million additional claims for
store lease rejections plus liquidation claims associated with the headquarters and distribution centers.
• Unsecured recoveries in a Chapter 7 liquidation were estimated to have been in the range of 4%–13%.
a
W-D (Bahamas) and insurance subsidiary were not included in the filing. bOriginal filing in Southern District of New York, then transferred to Middle District of Florida.
c
There was a settlement with respect to substantive consolidation among various unsecured claimant classes that determined the number of new shares received per
$1,000 of claims. dPetition date debt excludes $162 million of letters of credit and lease debt equivalents and emergence debt excludes $239 million letters of credit.
Source, unless otherwise noted: Disclosure statement with respect to joint plan of reorganization dated Aug. 9, 2006.
Note: This is an update of a case study published April 16, 2013.
(% of Par)
100
Filing Date: 2/21/05 Confirmation Date: 11/9/06
85
70
55
40
2/04 4/04 6/04 8/04 10/04 12/04 2/05 4/05 6/05 8/05 10/05 12/05 2/06 4/06 6/06 8/06 10/06 12/06
Source: Bloomberg.
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