September 10, 2020
Today, Century 21 Department Stores LLC, filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court for the Southern District of New York. The proceedings have been designated as case number 20-12097. In connection with the proceedings, the Company announced plans to commence a wind down of its retail operations and going out of business sales at its 13 stores across New York, New Jersey, Pennsylvania, and Florida. The decision follows nonpayment by the Company's insurance providers of approximately $175 million due under policies put in place to protect against losses stemming from business interruption, such as that experienced as a direct result of the COVID-19 pandemic.
Concurrently, the Company is removing to the Bankruptcy Court a lawsuit pending in the Supreme Court of the State of New York against several of its insurance providers based on their failure to compensate the Company for its losses under the policies. The Company is requesting that the Bankruptcy Court expedite the adjudication of the lawsuit for the benefit of its stakeholders.
Century 21 stores are currently open. The Company is commencing going out of business sales at all of its locations and at c21stores.com.
The Company said its lenders have consented to the use of cash collateral, which, subject to Bankruptcy Court approval, “will provide the liquidity necessary to support operations through the planned store closures.”
Co-CEO Raymond Gindi said, “While insurance money helped us to rebuild after suffering the devastating impact of 9/11, we now have no viable alternative but to begin the closure of our beloved family business because our insurers, to whom we have paid significant premiums every year for protection against unforeseen circumstances like we are experiencing today, have turned their backs on us at this most critical time. While retailers across the board have suffered greatly due to COVID-19, and Century 21 is no exception, we are confident that had we received any meaningful portion of the insurance proceeds, we would have been able to save thousands of jobs and weather the storm, in hopes of another incredible recovery."
According to reports, attorneys for J.C. Penney Company told the Court that a tentative agreement has been reached with Simon Property Group Inc., Brookfield Property Partners LP, and first lien lenders to purchase the Company’s assets. The agreement is incorporated in a non-binding letter of intent, which the Debtors will formalize into a stalking horse asset purchase agreement over approximately the next 10 days. The $1.75 billion transaction would include $300 million in equity from Brookfield and Simon, as well as $500 million of financing from the current DIP and first lien lenders. The transaction would include a $2.00 billion asset-based exit facility led by Wells Fargo. The Company plans to publicly file a letter of intent this week, and the transaction will be submitted for Court approval at a later date. There will be a division of the Company’s real estate assets (propco) and its operating unit (opco). The propco portion would include 160 of the Company’s owned properties that would be put into a public real estate investment trust, while its distribution centers would be put into separate REIT.
Separately, the Debtors filed a motion seeking to extend the time within which they may assume or reject unexpired leases, through the earlier of: (i) the date of entry of an order confirming a Plan of Reorganization, or (ii) December 11. The Debtors’ initial 120-day period to assume or reject unexpired leases will terminate on September 14. A hearing on the motion has not yet been scheduled.Click here to request a list of closings.
Yesterday, LVMH announced that it will not be able to complete the approximately $16.20 billion acquisition of Tiffany & Co., citing a letter from the French European and Foreign Affairs Minister which directed the Company to defer the acquisition until after January 6, 2021 due to the threat of taxes on French products by the U.S.
In response, Tiffany filed a lawsuit in the Court of Chancery of the State of Delaware against LVMH, seeking an order to require LVMH to abide by its contractual obligation under the merger agreement. Tiffany argues that LVMH did not provide any basis for its assertions and the Company is not excused from completing the merger merely because a government minister has requested that LVMH breach the agreement. Tiffany stated that given this supposed official French effort to retaliate against the U.S. for proposed new tariffs has never been announced or discussed publicly, it cannot possibly be an effort to pressure the U.S. into revoking the tariffs. Tiffany believes this latest development “represents nothing more than LVMH’s most recent effort to avoid its obligation to complete the transaction on the agreed terms, not dissimilar from LVMH’s baseless, opportunistic attempts to use the U.S. social justice protests and the COVID-19 pandemic to avoid paying the agreed price for Tiffany shares.” Tiffany also points out in the lawsuit that LVMH is in breach of its obligations relating to obtaining antitrust clearance. The merger agreement provided for an initial outside date of August 24; however, as of that date LVMH had not even filed for antitrust approval in three of the required jurisdictions; for this reason, Tiffany elected to extend the outside date to November 24. However, this extended outside date is now less than three months away, and LVMH still has not filed formal requests for antitrust approval in the European Union or Taiwan, and applications are still outstanding in Japan and Mexico. Tiffany believes this is due to LVMH’s concerted efforts to delay or avoid receipt of regulatory approvals in those jurisdictions, which is in breach of the agreement. Tiffany is seeking to expedite the Delaware proceedings to obtain a ruling prior to November 24, ordering LVMH to comply with its obligations and complete the transaction on the agreed terms.
Tiffany shares fell about 10% in premarket trading, while LVMH traded 1% lower in Paris.
Dollar Tree announced the opening of its 25th U.S. distribution center in Rosenberg, TX. The Company invested $130.0 million in the 1.2 million square-foot facility, which will initially service Dollar Tree stores across a three-state region. The Company also recently started shipping product from its 26th U.S. facility, in Ocala, FL. The first phase of the Company’s 1.2 million square-foot Ocala distribution center opened last month, with the second phase expected to be completed in 2022. Click here for a list of openings.
Driven by the boost it has gotten from the pandemic, BJ’s Wholesale Club is aiming to open two clubs in New York before the fiscal year is over, followed by six new units next year. CEO Lee Delaney commented, “Our hope is that next year we’ll be able to open significantly more than we have in the past. We are moving aggressively to make those numbers or even larger ones a reality. We expect this landscape will increase our relevance to members and prospective members alike. Almost regardless of the level of economic uncertainty, we should be well-positioned versus competitors. Click here to request a list of future openings.
Amazon has reportedly acquired a Boeing 767 cargo plane in a bid to strengthen its in-house shipping and logistics service to support its Prime-based delivery services. The plane will operate under direct registration to Amazon, unlike previously leased cargo planes. It will join a fleet of the Company’s more than 80 aircraft.
Amazon announced back in February that it was going on a hiring spree and adding 15,000 new jobs at its Bellevue, WA campus. Last week, Amazon said it will add an additional 10,000 positions. The Company has also reportedly secured two million more square feet of office space to accommodate the new hires.
In other news, Amazon announced two new fulfillment centers in Ontario, Canada, slated to open in 2021. The new fulfillment centers will be located in Hamilton and Ajax, and will stand at 855,000 square feet and one million square feet, respectively. Click here to request a list of future openings.
In other news, Amazon and Kohl’s are expanding on their relationship, with Kohl’s reportedly testing the right-sizing, side-by-side concept with an Amazon grocery store. So far, their efforts have been centered on Kohl’s accepting Amazon returns in its units. In La Verne, CA, Kohl’s owns an 88,000 square-foot property that it has reportedly proposed dividing so that Kohl’s would occupy about 50,900 square feet, and the grocery store would fill the remainder. The move is part of Kohl’s broader move to streamline its physical footprint while testing partnerships designed to generate traffic for its stores. It already has announced tests with ALDI and Planet Fitness.
The CMA (the U.K.’s competition regulator) has fined Amazon £55,000 over delayed responses to the information requested in connection with its purchase of a 16% stake in London-based food platform Deliveroo. Last month, the CMA cleared the purchase after more than a year of investigation. The news of Amazon leading a $575.0 million Series G investment in Deliveroo first emerged in May 2019.
In the Neiman Marcus Group bankruptcy case, the Court issued an order on September 4 confirming the Plan of Reorganization. The Company intends to emerge by September 30, once all conditions have been finalized. Management said, “Upon emergence, the Company is expecting to operate with a strengthened capital structure that will eliminate more than $4.00 billion of existing debt and more than $200.0 million of interest expense, with no near-term maturities. Certain institutional investors will fund a $750.0 million exit financing package that would fully refinance the DIP Facility and provide significant additional liquidity for the business. Such financing is strategically aligned with the Company’s new equity shareholders. The Exit Term Loan financing is in addition to the liquidity provided by a $900.0 million ABL Facility led by Bank of America and a consortium of commercial banks. With the exit financing and existing ABL Facility, the Company has the strategic capital available to support its business and transformation initiatives through emergence and beyond.”
The Company’s parent and its private equity sponsors will contribute 140 million shares of Mytheresa Series B Preferred Stock to the estate in full satisfaction of any potential claims the estate may have against them in connection with transactions related to Mytheresa (a website the Company conveyed in September 2018). Allowed administrative expense claims, including 503(b)(9) claims, will be paid in full. Holders of allowed general unsecured claims are projected to receive a recovery of between 1.7% and 34.4% (the low and high-end projections assume the Mytheresa Series B Preferred Stock is worth between $0 and $275.0 million, respectively). The reorganized Debtors will waive and release all avoidance/preference actions on the effective date. The Plan is supported by the ad hoc committee of holders of 2019 Term Loans, the holders of Second and Third Lien Notes Claims, the parent company’s private equity sponsors, and the Creditors’ Committee.
It was previously reported that Dan Kamensky, managing partner and principal of Marble Ridge Capital, was arrested and charged with securities fraud, wire fraud, extortion, and obstruction of justice in connection with his alleged attempt to manipulate bidding on Mytheresa. Until recently, Marble Ridge was one of the three co-chairs of the Creditors’ Committee. A lawsuit previously filed by the Debtors alleged that Mr. Kamensky and Marble Ridge’s actions cost the Company an opportunity to cash out its Mytheresa holdings, which would have provided unsecured creditors with between $42.0 million and $54.0 million in cash. Click here for a list of store closures.
Former shareholders of meal kit e-commerce business Plated sued Albertsons in Delaware’s Chancery Court on Tuesday, accusing Albertsons of failing to make good on post-deal support and earnings premium terms after it acquired the business in 2017 for $200.0 million. Synergies between the two companies failed to materialize, resulting in Plated’s executives departing, and in 2019 Albertsons temporarily pulled the meal kits from stores, laid off Plated’s staff, and canceled the online subscription segment of the service. The suit, filed by stockholder agent Shareholder Representative Services LLC, demanded release of a 2019 post-merger report on earnings performance as well as damages, accusing the buyer of breaches of contract, fraudulent inducement and breaches of good faith covenants. Details and amounts of the proposed earn-outs were not disclosed in the merger announcement or suit, although unconfirmed sources said the earn-out payment, which was dependent on hitting revenue targets over three years following the acquisition, could have been nine figures. When the deal was announced, Albertsons said Plated would operate as a wholly owned subsidiary under “a distinct consumer brand with its own leadership team.” Click here to request a list of future openings and closings.
Trader Joe’s plans to open its second store in Richmond, VA in October. The Company announced in April that it is leasing 12,995 square feet of a former 40,000 square-foot Martin’s Food Markets. Trader Joe’s currently has 14 stores in Virginia. Click here to request a list of future openings and closings.
Yesterday, Academy Sports and Outdoors, Inc. announced that it has publicly filed a registration statement on Form S-1 with the SEC, relating to a proposed initial public offering of its common stock. The number of shares of common stock to be offered and the price range for the proposed offering have not yet been determined. Academy has applied to list its common stock on the NASDAQ Global Select Market under the ticker symbol ASO.
The Company has not identified the amount of proceeds it expects to receive from the offering, but stated that the proceeds will be used “for general corporate purposes, which may include the repayment of certain indebtedness, as will be determined prior to this offering.” It is not clear how much of the proceeds may be payable to Kohlberg Kravis Roberts & Co. L.P. (KKR), the Company's private equity sponsor. As of August 1, 2020, the Company had approximately $1.43 billion in debt, the majority of which is a term loan, due in June 2022.
For the 12 months ended August 1, 2020, the Company reported $5.30 billion in sales, $204 million of net income, and $449 million in adjusted EBITDA. Comparable sales have been negative for the past three fiscal years, each of which ended on January 31, however the Company has reported four consecutive quarters of positive comparable sales as of 2Q2020. In addition, 2Q2020 reflected the fourth consecutive quarter of adjusted EBITDA growth and the fifth consecutive quarter of adjusted free cash flow growth.
Prior to the consummation of the offering, the Company intends to undertake a series of reorganization transactions that will result in New Academy Holding Company, LLC, (Holdco) the current holding company for the business being contributed to Academy Sports and Outdoors, Inc. (ASO) by its equity owners, and becoming a wholly owned subsidiary of ASO. Following the reorganization transactions, ASO will be the holding company of the business.
On August 28, 2020, Holdco paid a $257.0 million distribution to its equity owners of record as of August 25, 2020, of which the most significant elements are: $218.3 million paid to Allstar LLC, an entity owned by Kohlberg Kravis Roberts & Co. L.P. (KKR), and $24.9 million paid to the Gochman Investors. The distribution was funded through a combination of cash on hand and an offset of outstanding loans receivable from certain equity owners, as well as state income tax withholdings made on behalf of the Company’s equity owners.
As of August 1, 2020, management said it had 211 “mature stores,” which it said were all profitable on a four-wall basis for the twelve months ended August 1, 2020. The Company expects to open eight to 10 new stores per year starting in 2022, which is similar to the growth rate from 2018 to 2019.
Dunkin’ is gearing up to test an Amazon Go-style store in California in a currently undisclosed city. The checkout-free pilot program, which launches in October, allows customers to walk into a store to grab coffee and baked goods without interacting with anyone or scanning anything at a kiosk.
Amazon’s Whole Foods opened its first, permanent online-only location in Brooklyn, NY to fulfill orders for grocery delivery. These “dark stores” will not be open to the public and will serve customers only in the Brooklyn area. News of the new format comes after Whole Foods converted at least six stores earlier this year to help meet COVID-19 demand. Four of the six stores have since converted back.
Amazon’s Whole Foods also plans to offer grocery pickup at 480 stores by the end of September. The Company has tripled its pickup capabilities since March, in response to soaring e-commerce demand during the pandemic. Last December, the grocer only offered pickup at roughly 80 of its more than 500 stores. It also offers two-hour delivery in more than 2,000 cities and towns.Click here to request a list of future openings.
Walmart is rolling out Walmart+, a membership combining in-store and online benefits. Walmart+ members get unlimited free delivery from stores, fuel discounts, and access to time-saving shopping tools. Available to all customers on September 15, membership will cost $98 annually, or $12.95 per month.
Walmart also opened its fourth Georgia Walmart Health unit located in Newnan, next to its Supercenter. The new facility provides primary care, urgent care, labs, dental, hearing, counseling, x-ray and diagnostics services.
On September 9, documents in the CEC Entertainment, Inc.bankruptcy case stated that “cash on hand and operating cash flow, as currently projected, will not be sufficient to fund ongoing operations for the projected duration of the Chapter 11 cases.” In that regard, the Debtors filed a motion seeking authorization to enter into a $200.0 million DIP facility, based on a commitment from certain of their first lien lenders. A hearing on the motion is scheduled for September 29. Separately, the Debtors entered into a plan support agreement (PSA) with consenting creditors holding greater than 66.7% in principal amount of outstanding obligations under the prepetition first lien credit agreement. Click here to request a list of future closings.
After opening EatWell, A Natural Food Store by Schnucks in June, Schnuck Markets is planning to open a third store in Columbia, MO in spring 2021. The leased 48,000 square-foot store will include a heavy focus on fresh departments such as produce, meat, seafood and bakery.
Restaurant Brands International’s Burger King is unveiling new restaurant designs that include dedicated mobile order and curbside pick-up areas, drive-in and walk-up order areas, enhanced drive-thru experience, exterior dining spaces, and sustainable design elements. The first newly designed restaurants will be built in 2021 in Miami, Latin America, and the Caribbean.
In the GNC Holdings bankruptcy case, the Creditors’ Committee filed an objection to the Debtor’s motion for a going concern sale of the Company’s assets to Harbin Pharmaceutical Group Holding Co., the stalking horse bidder. The Committee objected on the following grounds:
- The Debtors failed to demonstrate that: (i) the proposed sale is for an adequate price, and (ii) negotiations were conducted in good faith, particularly when reviewed under the heightened level of scrutiny applicable to insider transactions. Harbin is considered to be an insider because it is a joint venture partner of the Debtors; and
- The sale would improperly permit the prepetition Term Loan lenders to receive the proceeds of various assets in which they may not have valid and perfected security interests. In this regard, the Committee proposes that the value of any of the Debtors’ unencumbered assets should be shared pro rata with unsecured creditors.
The Committee requested the Court to deny the Debtor’s motion unless the terms of the proposed asset sale are modified to appropriately address the issues raised. Click here to request a list of future closings.
A bankruptcy judge in the NPC International case (the largest franchisee of both Wendy’s and Pizza Hut) has approved an agreement between the Debtors and their franchisor, Pizza Hut LLC, which will allow NPC to close up to 300 unprofitable Pizza Hut locations. The Debtors previously stated the agreement will launch a sale process for their Pizza Hut restaurants. NPC’s portfolio includes 1,227 Pizza Hut locations, which represents 20% of the Pizza Hut system’s restaurant base in the U.S. NPC noted that no final determinations have been made regarding which restaurants will be closed nor the timing for any closures.
On September 4, Mom’s Organic Market opened its fourth store in the Philadelphia region in Abingdon, PA.
Fairway Group Holdings Corp. (Renamed: Old Market Group Holdings Corp.) filed a motion to extend the periods during which it has the exclusive right to file a Chapter 11 Plan and to solicit acceptances, through and including November 23, 2020 and January 22, 2021, respectively. A hearing on the motion is scheduled for September 17. The current exclusive period to file a Plan is set to expire on September 23. The Court entered an order authorizing the Debtors to change the corporate name to Old Market Group Holdings Corp., DIP.
On September 8, Luby’s said its board approved a plan of liquidation and dissolution that provides for the sale of the Company’s assets and distribution of the net proceeds to Luby’s stockholders. Following the sale process and distribution, Luby’s will be dissolved. The Company currently estimates that it could make aggregate liquidating distributions to stockholders of $92.0 million – $123.0 million, amounting to about $3 - $4 per share of common stock, respectively, based on nearly 30.8 million shares outstanding as of September 2. The plan of liquidation now awaits approval from Luby’s stockholders.
In the Sur La Table bankruptcy case, Second Avenue Capital Partners, LLC provided a $35.0 million secured credit facility to the joint venture of Marquee Brands (a brand owner) and CSC Generation (an e-commerce business). The financing is intended to support their acquisition of a substantial portion of the assets of Sur La Table, Inc., DIP (about 50 of its 121 stores) for $88.9 million, which the Court approved on August 17. The funding is being used to provide additional working capital and support growth.
Trans World Entertainment announced on September 3 that it changed its name to Kaspien Holdings Inc. On September 8, the Company’s ticker symbol on the NASDAQ Capital Market changed from “TWMC” to “KSPN.” The Company also took actions to set the size of the board at three directors, permit shareholders entitled to vote to take an action without a meeting by written consent rather than unanimous approval, and implement certain transfer restrictions intended to prevent an ownership change that could substantially reduce tax benefits associated with the Company’s net operating losses.