Bankruptcy Debrief for the Week of August 6th


Brookstone Lands in Chapter 11 Again Amid Declining Mall Retail

Mall and online retailer Brookstone filed for chapter 11 a second time after declining sales leading to losses of almost $100 million in the last year and a half. Brookstone joins the ranks of retailers falling victim to the shift away from malls and toward online shopping.

Brookstone’s overall goal in the cases is to close a number of unprofitable stores and sell the more streamlined business at auction. As of the filing, Brookstone operated 137 stores in 40 states and Puerto Rico, 102 of which are in malls and 35 in airports.

At the time of the filing, Brookstone’s funded debt was roughly $130 million, breaking down into a $13.5 million revolving credit facility, $15 million term loan, $14.8 million second-lien notes, $39.5 million Sanpower secured notes and $46.6 million Sanpower unsecured notes. To continue operations during the case, funding will come in the form of a loan from Wells Fargo Bank and Gordon Brothers Finance, an affiliate of Gordon Brothers liquidation business.

Read VP and CFO Greg Tribou’s declaration in support of the first-day motions here.

View the chapter 11 petition here.


Samuels Jewelers’ Tarnished Chairman Helps Drive Fourth Visit to Bankruptcy

Samuels Jewelers, a Texas-based jewelry retailer operating 122 stores filed chapter 11 for the fourth time after previously filing in 1992, 1997 and 2003. After its third bankruptcy case in 2006 Samuels Jewelers was acquired by Indian-based Gitanjali Gems Ltd., which later acquired Rogers LTD and merged it with Samuels Jewelers.

As of the filing, Samuels Jewelers has about $94 million of funded debt outstanding as well as $28.5 million of trade debt.

The investigations into parent company’s chairman and managing director, Mehul Choksi, in January of this year has had a substantial negative impact on Samuels Jewelers. The investigation into Choksi by the Indian Central Bureau of Investigation was related to alleged defrauding numerous Indian banks, including Punjab National Bank. The Indian government issued an order in February that essentially shut down Gitanjali, which was a major supplier of products to Samuels Jewelers. Based upon the difficulties faced since the investigation, the company decided to file for chapter 11 to maximize value for all shareholders.

Samuels Jewelers will use the case to pursue a dual-track approach including a going-concern sale of the business and at the same time entering a consultant agreement with liquidators to quickly sell excess inventory.

The case will be funded by existing prepetition lenders Wells Fargo and Gordon Brothers Finance Company with a rolling up of prepetition debt into a post-petition loan.

Read Co-Chief Restructuring Officer Robert J. Duffy’s declaration in support of the first-day motions here.

View the chapter 11 petition here.


Aralez Pharmaceuticals Files Chapter 11 to Sell All Assets

Aralez Pharmaceuticals filed chapter 11 in the U.S. and concurrently under Companies’ Creditors Arrangement Act (CCAA) in Canada to allow a sale of its main operating businesses at auction as well as selling its other assets and winding down the business.

Aralez, which has a product line that includes Toprol-XL, Zontivity, Fibricor and Vimovo, hired Moelis & Co. to market its assets for sale and after engaging with hundreds of buyers. As a result, Aralaez entered chapter 11 with Nuvo Pharmaceuticals set to act as the stalking horse bidder for Aralez’s Vimovo royalties and Canadian operations with a bid valued at $110 million and Deerfield Management affiliates tabbed as stalking horse bidder for the Toprol-XL franchise in a transaction valued at $140 million.

At the time of the filing, the company had $203.1 million outstanding under its credit agreement with lender Deerfield Partners and roughly $75.5 million of convertible secured notes. Additionally, there is an estimated $17.6 million of trade debt.

Read CFO Michael Kaseta’s declaration in support of the first-day motions here.

View the chapter 11 petition here.


National Stores Seeking to Close Some Stores and Reorganize in Chapter 11

Family-owned discount retailer National Stores filed for chapter 11 with a plan to right-size its balance sheet and close 74 of its 344 stores. The company operates stores under the names Fallas, Fallas Paredes, Fallas Discount Stores, Factory 2-U, Fallas and Anna’s Linen’s by Fallas.

The company cites many reasons for the chapter 11 filing, including retail economic pressures, negative financial results of acquiring 78 East Coast Conway stores and a data breach of over 550,000 credit card numbers that cost the company over $4 million.

Throughout the case, the company is pursuing a going-concern sale of the business led by investment banker Imperial Capital and a streamlining of operations led by Sierra Partners that includes closing certain locations.

As of the filing, National Stores listed roughly $110 million in funded debt.

Read Chief Restructuring Officer Curt Kroll’s declaration in support of the first-day motions here.

View the chapter 11 petition here.


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