October 7, 2020
Ruby Tuesday announced today that it has filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code. Prior to its filing, the Company reached an understanding with its secured lenders to support its restructuring through financing and an agreement regarding the terms of a plan that will provide a sustainable path forward for the restaurant chain. The casual dining favorite plans to use this filing to strengthen its business by reducing liabilities and emerge a stronger organization built for the future. The Company intends to move through the bankruptcy process as quickly as possible. Its restaurants will continue to operate “business as usual” throughout the reorganization process. Click here to request case updates.
Dick’s Sporting Goods expects to open 11 new stores this month, including six namesake locations, two combination Dick’s and Golf Galaxy locations, and three Warehouse Sale clearance outlets. So far, one Dick’s Sporting Goods in Lynchburg, VA opened on October 3. At the end of October, the Company will have 732 Dick’s stores, 97 Golf Galaxy units, and 14 Warehouse Sales locations.
In addition, Dick’s will open a limited number of Soccer Shops starting later this month. The shops will be located inside select Dick’s locations and will feature in-store soccer experts. The first Soccer Shop will open on October 23 in Leawood, KS, with additional shops expected to open in November. Click here to request a list of future openings and closings.
In the Stein Mart bankruptcy case, the Debtors filed a motion to sell unexpired store leases on all of its 281 stores through an auction process. The deadline for qualified bids is October 9, with an auction on October 15, and a sale hearing on October 22. GOB sales will conclude on October 31. The date for a hearing on the motion has not been scheduled. Click here to request a list of store closures.
On October 1, Bed Bath & Beyond reported second quarter results. During 2Q, the Company was able to capitalize on consumers' demand for home furnishings and decor, with comparable store sales rising 5.5%, the first positive comp since 4Q16, though total sales fell 1.2% due to the closure of One King's Lane. Sales in 2Q were driven by over 80% growth in digital sales, with penetration growing to 32%, up from 18% last year. Sales were strong in higher-margin categories, such as bedding, bath, and kitchen food preparation, aided by 21% growth in back-to-college sales. While store closures negatively affected sales the first month of the quarter, by early July nearly all stores were open. Bed Bath & Beyond announced it will closed 200 stores over the next two years, 63 of which will close by the end of 2020. Click here to request a list of recent and future store closures.
In the J.C. Penney bankruptcy case, the Debtors provided the following summary of negotiations surrounding a potential Asset Purchase Agreement (APA), which appeared in a motion to reschedule certain key dates:
- “Significant issues, including a working capital adjustment at closing, continue to be the subject of intense negotiations. The Debtors, the First Lien Ad Hoc Group, and a minority group of first lien lenders continue to engage in discussions to resolve potential inter-creditor issues. The Debtors do not believe those issues will pose any impediment to moving these cases forward. The Debtors will file a motion seeking entry of an order approving the Stalking Horse APA no later than October 10, 2020.”
- “On September 10, 2020, Brookfield Property Group and Simon Property Group, the Debtors, and the Ad Hoc Group of First Lien Lenders executed a letter of intent which reflects the terms of sale of certain of the Debtors’ operating assets (Opco). Additionally, the Debtors and the First Lien Ad Hoc Group amended the Restructuring Support Agreement to include terms by which the parties will effectuate the sale of, and the distribution of equity in PropCo. The amendment includes terms of a proposed credit bid transaction whereby the First Lien Ad Hoc Group will purchase the equity of an entity holding approximately 160 of the Debtors’ real property assets, subject to additional (and ongoing) negotiations. Furthermore, the final remaining milestone that must be satisfied under the RSA is the Plan effective date, which must occur by November 15, 2020.”
The current milestone for the Plan effective date is November 5. The motion to schedule hearings on the restructuring transactions will be considered by the Court tomorrow.
Separately, the Court issued an order extending the time period within which the Debtors must assume or reject unexpired leases through and including: (a) the earlier of: (i) entry of an order confirming a Chapter 11 Plan, and (ii) December 11; and (b) such other date that is mutually agreed to between the Debtors and the counterparty to the unexpired lease. Click here to receive case updates.
Bashas’ has opened two stores over the last couple of years which represents a departure from activity over the last decade during which there were no openings and seven closures. We speculate that the recent changes are representative of management’s willingness to move forward with its now lower debt load. Like others in the grocery space, tailwinds associated with COVID-19 have materially improved the Company’s outlook, which limits near-term risks. That said, the medium term remains a concern, as its small scale and historical lack of store-level investment poorly positions Bashas’ to compete. Additionally, the Arizona market is about to get even more competitive, with ALDI expanding into the area.
Southeastern Grocers, Inc. (SEG) announced that it intends to issue $325.0 million of Senior Secured Notes due 2028. The Notes will be fully guaranteed by the subsidiaries of SEG that guarantee its existing asset-based revolving credit facility. The Company plans to use the net proceeds, together with cash on hand and drawings under its $600.0 million revolver, to repay in full the amounts outstanding under, and cancel, the Company’s existing Term Loan Facility. The exact terms of the Notes and timing for completion of the offering will depend upon market conditions and other factors.
In September, Southeastern Grocers confidentially filed a registration statement with the SEC related to a potential initial public offering of its common stock. The shares in the proposed offering are expected to be offered by existing stockholders, in which case, no proceeds would go to the Company. SEG said this process will help facilitate the decision to become publicly traded, subject to market and other conditions.
The Company is also in the process of divesting non-core stores, including its BI-LO banner; in September, the Company announced the sale of 23 BI-LO and Harvey’s stores to Alex Lee, Inc. and B&T Foods, which followed the August announced sale of 46 BI-LO and 16 Harvey’s stores to Ahold Delhaize. After the divestment of the remaining 40 BI-LO stores, SEG will operate approximately 425 stores, comprised of about 370 Winn-Dixie stores, 30 Harvey’s and 25 Fresco y Mas stores. Click here to request a list of future openings and closings.
CEO Anthony Hucker recently commented that the Company has had six consecutive quarters of positive comps, more than half of its stores have been remodeled or renewed since emerging from Chapter 11 in 2018, and by the end of this year, it expects to complete 33 renewals and open nine new stores. Earlier this year, the Company purchased eight stores from Lucky’s and Earth Fare, which will open in the 4Q20 and 1Q21 periods.
Last December, Ahold Delhaize announced that it would begin a three-year strategy to shift U.S. supply function at its legacy Ahold stores from C&S Wholesale Grocers to a fully integrated, self-distribution model; the legacy Delhaize business currently self-distributes. The Company expects to transition six facilities this year, including those in Assonet, MA (Freetown Fresh and Freetown Grocery); Jessup, MD; Carlisle, PA; Manchester, CT; and Mauldin, SC. The Mauldin distribution center is in the process of being acquired by Ahold Delhaize’s Food Lion chain as part of the purchase of 62 BI-LO and Harvey’s stores from Southeastern Grocers announced in June; the transaction is expected to be finalized in the first half of 2021. With the transition of the six facilities in 2021, about 65% of Ahold Delhaize USA brand center-store volume will be self-distributed. The remaining volume is slated to enter the self-managed network by the end of 2023. Click here to request a list of future openings and closings.
On October 1, Academy Sports + Outdoors launched its IPO, but the initial price of $13.00 per share was below the target range of $15.00 – $17.00 per share. Academy will receive net proceeds of $183.0 million, a portion of which will be used to repay debt. Terms of the transaction imply a valuation for the Company of approximately $1.10 billion. The Company currently has a $1.43 billion Term Loan, due in 2022, which is a vestige of its 2011 LBO, led by Kohlberg Kravis Roberts & Co. The ratio of debt/TTM EBITDA was 3.2x (moderate) as of August 1.
Amazon announced the launch of Amazon One, a contactless device that scans for payments, loyalty programs, and other things, which the Company will roll out at two Amazon Go stores in Seattle for customers to gain entry. Customers will first swipe their credit card, then wave their palm above the device to register their “palm signature.” Once enrolled, customers can enter Amazon Go stores by waving their hand. Amazon will roll out the device at more of its stores in the coming months. Click here to request a list of future openings.
Homeland has begun construction on a new 30,000 square-foot grocery store in northeast Oklahoma City, OK. The store is expected to open next summer. The Company plans to build a new 35,000 square-foot corporate headquarters next to the store site in early 2021.
In the Town Sports International bankruptcy case, the Court entered an interim order authorizing the Debtors to (i) access up to $15.0 million of a $32.0 million DIP Term Loan Facility, and (ii) use cash collateral. The DIP Facility is provided by Tacit Capital, LLC and an ad hoc group of lenders. The additional $17.0 million of the DIP Facility will become available upon approval of a final order, which has not been scheduled yet.
Separately, the Debtors filed a motion seeking authorization to enter into a stalking horse Asset Purchase Agreement (APA) for a going concern sale of its assets to Tacit Capital, the DIP lender. The stalking horse bid is a credit bid of the amounts outstanding under the prepetition facility, which the ad hoc lender group has agreed to cap at $80.0 million.
Additionally, the stalking horse bidder retains the right to credit bid amounts outstanding under the DIP Facility. The deadline for qualified bids is October 26, with an auction on October 28, and a sale hearing on November 2.
The Debtors also filed a motion to reject certain unexpired leases. A hearing on the motion is scheduled for October 14. Click here to request a list of future closures.
Smart & Final confirmed that the pandemic has had a positive impact on its sales, profits and cash flow. As a result, debt to EBITDA is currently around 2x, although management indicated the ratio may fluctuate due to uncertainty related to the pandemic. After a period of significant growth in 2016 and 2017, management has slowed new openings, while continuing to convert legacy stores to the larger Extra! format. In 2019, net store count fell by five, with the total current 256 locations following the opening of three new Extra! locations thus far in 2020. Click here to request a list of future openings.
Walmart announced it will update about 1,000 stores, initially to create a more seamless omnichannel experience. Stores will include self-checkout and other contactless payment systems with select locations having the Scan & Go option. It will be rolled out immediately to about 200 stores, with the goal of 1,000 by the end of the fiscal year. Click here to request a list of recent and future openings and closings.
In other news, the Issa brothers, founders of the global convenience and forecourts retailer, EG Group, and investment funds managed by private equity firm TDR Capital have together agreed to acquire Asda Group Limited, Walmart’s wholly owned U.K. supermarket business, for an enterprise value of £6.80 billion (US $8.79 billion) on a debt-free and cash-free basis. Walmart acquired Asda in 1999 for $10.80 billion. Under the new ownership structure, the Issa brothers and TDR Capital are acquiring a majority ownership stake in Asda. Walmart will retain an equity investment in the business, with an ongoing commercial relationship and a seat on the board. Asda will remain headquartered in Leeds, and the business will continue to be led by CEO Roger Burnley, who will form part of Asda’s board alongside representatives appointed by the Issa brothers, TDR Capital, and Walmart. The transaction is expected to be completed in the first half of 2021. Based on the current deal terms, Walmart expects to recognize a non-cash loss of approximately $2.50 billion, after tax, in fiscal 2021. The use of cash proceeds will be determined at a later date. Under the new ownership, the Asda business will invest more than £1.00 billion (US $1.29 billion) over the next three years to strengthen the business and its supply chain. This is not the first time Walmart has tried to divest Asda. In April 2018, Walmart and J Sainsbury plc (Sainsbury’s) proposed a merger between Asda and Sainsbury’s, but it was blocked by the U.K. Competition and Markets Authority (CMA) a year later.
On October 5, Cineworld Group announced that it is temporarily suspending operations at all 536 U.S. locations and 127 of its U.K. locations, effective on Thursday. The decision comes after the release of the anticipated James Bond film No Time to Die was postponed from November 2020 to April 2021. As major markets have remained closed, and with studios reluctant to release films into the current environment, the Company decided to temporarily close until further notice. The Company is working to reduce SG&A costs, including furloughing employees, and assessing several sources of additional liquidity.
Quality Restaurant Group LLC (QRG), a multi-concept franchise operator, has acquired 62 Sonic Drive-In restaurants in Florida and Alabama as part of an ongoing expansion.The newly acquired units will be operated by a new division of the group, Quality Drive-In. Over the past year, QRG has purchased around 150 restaurants and now owns and operates 67 Moe’s Southwest Grill restaurants, 200 Pizza Hut locations, and 27 units of Arby’s.
1069 Restaurant Group filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court for the Middle District of Florida. The proceedings have been designated as case number 20- 05582. The Company, which operates 33 units, is the largest operator of franchised Golden Corral buffet restaurants The Company operates Golden Corrals through several subsidiaries, most of which are based in Florida. As of the petition date, debt totaled $49.7 million, which the Company attributed to restaurant closures and depressed sales during the pandemic. All of the Company’s restaurants were closed in March, when most states banned self-service formats. Six units have since reopened with modified service models; plans have already begun to resume operations in 18 more units by the end of the year.
Casey’s General Stores debuted a new logo, featuring its iconic barn and its name in white. The updated look comes as the Company enhances its online ordering and delivery services, curbside pickup, and rewards and promotions. A new convenience store in Ankeny, IA (Casey’s hometown) will be the first in the Company’s 16-state footprint to feature the updated visual identity to match a more contemporary experience for customers inside. Casey’s will also begin rolling out new branding across its more than 2,200 convenience stores and its online channels. Click here to request a list of future openings.
In the RTW Retailwinds bankruptcy case, the Debtors filed a Disclosure Statement and Plan of Liquidation. The Plan provides for a liquidating trustee to wind down the Debtors’ affairs, pursue causes of action (including preference/avoidance actions), and pay allowed claims. A hearing to approve the Disclosure Statement is scheduled for October 28.
The Debtors also closed on the sale of IP assets to Saadia Group LLC, a real estate company, for $93.6 million, including $66.0 million in cash and the assumption of certain liabilities. Saadia acquired the Company’s e-commerce business and all related intellectual property, including the websites nyandcompany.com and fashiontofigure.com, plus associated rental subscription businesses. Saadia said it intends to keep operating the e-commerce business as a going concern. It did not assume any leases as part of the sale. The Debtors also stated that they have fully satisfied and repaid all of their secured debt. Click here to request a list of store closures.
Sally Beauty Holdings announced that it acquired La Maison Ami-Co Inc., a professional beauty products distributor in Canada. The Company did not disclose financial terms of this transaction, which included the acquisition of 10 La Maison Ami-Co stores, the addition of 17 direct sales consultants, and the exclusive distribution rights in Quebec for professional hair care and color brands, including Wella Professional. Click here to request a list of future store openings.
In the Tuesday Morning bankruptcy case, the Court issued an order approving bidding procedures in connection with a possible sale of the Company’s assets. The deadline for qualified bids is October 19, with an auction scheduled for October 21. A sale hearing is scheduled for October 29, unless the Debtors notify the Court by October 26 that they intend to pursue a Plan of Reorganization instead of a sale. The prepetition lenders are authorized to submit a credit bid for all or part of their outstanding claims.Click here to request a list of store closures.