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October 16, 2019 – Further to the Court's bidding procedure order of August 22, 2019 [Docket No. 156], the Debtors have notified the Court of the designation of ABG-Barneys, LLC ("ABG-Barneys") as a stalking horse in respect of a sale of substantially all of the Debtors' assets. ABG-Barneys, an acquisition vehicle created by Authentic Brands Group ("ABG," which also owns over 50 brands including Nine West, Nautica and Hickey Freeman) will set the pace for an expected auction next week (deadline October 24th) with a bid that the Debtors value at $271.4mn [Docket No. 317].
Media reports suggest that the Debtors may have chosen ABG-Barneys over at least one other potential stalking horse (including a a consortium of investors led by Sam Ben-Avraham, the co-founder of the streetwear brand Kith). The existence of at least one stalking horse was also noted in an October 10th filing, in which the Debtors accused their debtor-in-possession ("DIP") lenders of trying to destabilize the Debtors' cases just as the Debtors were completing their search for a stalking horse bidder; a process then "reaching its conclusion with multiple bidders." Although any further bidders will have a right to press ahead their efforts in an auction process, the choice of ABG-Barneys undoubtedly conveys the Debtors' own preferences as to the future of the Debtors' assets; an important consideration as the relative value of competing bids is presented by the Debtors to the Court for consideration (and as competing bids considers ABG-Barneys' apparent home court advantage). The accelerated auction and sale process (auction by October 24th and sale hearing by October 31st) suggest that the field of potential bidders is already well known to the Debtors who are under considerable pressure from their DIP lenders (to be rewarded with handsome fees) to get a sale done and have the DIP financing (plus) repaid. One of the Debtors' DIP lenders, B. Riley Financial, is party to the ABG-Barneys asset purchase agreement, and is to serve as agent/consultant in planned store closing and liquidation sales in respect of unwanted assets.
Key Terms of the ABG-Barneys Asset Purchase Agreement
- Purchaser: ABG-Barneys, LLC
- Acquired Assets: Substantially all of the Debtors’ assets, subject to certain exclusions set forth in the Stalking Horse Purchase Agreement.
- Purchase Price: Estimated to be approximately $271,400,000 in cash. Purchase price is equal to the sum of the DIP Obligations, the Wind Down Amount, the Prepaid Expenses Amount, the Seller Proration Amount, minus the Buyer Proration Amount, the Post-Closing Royalty Payment Amount, the Pre-Closing Royalty Payment Amount, and the Pre-Closing, Proceeds Credit.
- Wind Down Amount: $27,000,000, to be advanced by B. Riley from time to time pursuant to the Wind Down Budget.
- Bid Protections: A break-up fee of $8,142,000 (three percent of the Purchase Price) and an expense reimbursement fee of $1.5mn.
Proposed Key Dates
- Bid deadline: October 22, 2019
- Auction deadline: October 24, 2019
- Objection to sale: October 29, 2019
- Sale Hearing: October 31, 2019
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