Checkout Holding – Notifies Court of February 15, 2019 Effective Date for Joint Prepackaged Chapter 11 Plan, 1st and 2nd Lien Debt Holders Swap $1.55bn in Debt for Equity

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February 15, 2019 – The Debtors notified the Court hearing the Checkout Holding case that their Joint Prepackaged Chapter 11 Plan became effective as of February 15, 2019 [Docket No. 298]. The Court had previously confirmed the Plan on January 31, 2018 [Docket No. 266].

On December 12, 2018, Checkout Holding filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 18-12794. At filing, the Company, a market leader in shopper intelligence and personalized digital media that converts shoppers into buyers,  notes between 1,000 and 5,000 creditors; estimated assets between $1bn and $10bn; and estimated liabilities between $1bn and $10bn.

In a press release issued on January 31 following confirmation of the Plan, the Debtors stated, “The Court’s approval of our Plan will enable Catalina to move forward as a stronger company that is well positioned to succeed in a competitive marketplace….Through this process, which took less than 60 days, we have significantly reduced the debt on our balance sheet. With this solid financial foundation in place, we are accelerating critical investments in technology, advanced analytics and data science to transform the in-store experience for buyers and deliver innovative new solutions to solve our customers’ challenges.” 

Looking further ahead, the company said its successful financial restructuring is another step forward in what it calls its “omni transformation”, led by an experienced team of thought leaders and innovators, including Chief Data and Analytics Officer Dr. Wes Chaar. Dr. Chaar and his team will be focused on fortifying Catalina’s buyer intelligence data in a variety of ways to provide an increasingly dimensionalized view of buyers.

“We are leveraging machine learning and artificial intelligence to power new solutions around consumer preference modeling, measurement and ID mapping, providing buyer behavioral understanding,” Dr. Chaar said. “And, our growing team of data scientists is creating new algorithms to enhance personalization offerings to drive greater ROI.”
Plan Overview

The Disclosure Statement provided the following overview of the Debtors’ restructuring, “The Restructuring will leave the Debtors’ businesses intact and will substantially deleverage the Debtors’ capital structure. The Debtors’ balance sheet liabilities will be reduced from approximately $1.9 billion in secured and unsecured debt to approximately $281 million in secured debt, which represents a reduction of debt on the Effective Date of over 85% relative to the Petition Date. This deleveraging will enhance the Debtors’ long-term growth prospects and competitive position and allow the Debtors to emerge from the Chapter 11 Cases as a stronger company, better positioned to deliver value to its customers. The Plan contemplates the distribution of New Common Stock to the Debtors’ prepetition secured lenders (90% on account of Allowed First Lien Debt Claims and 10% on account of Allowed Second Lien Debt Claims, each subject to dilution by the Management Incentive Plan) and no impairment to the Debtors’ other creditors, except the NCS Rejection Claims and the General Unsecured PDM Claims. Further below is a short summary of the treatment of various creditor groups under the Plan.”

Voting Results

On January 29, 2019, The Debtors’ claims agent notified the Court of the results of Plan voting [Docket No. 255]. Two voting classes were entitled to vote on the Plan and each of them voted to accept. As noted in the summary below, each of the classes will receive their pro rata share of the emerged Company’s New Common Stock. Holders of first lien debt claims (holding approximately $1.075bn in debt) will receive 90% of that equity and an estimated recovery of 17.4%-43.6%. Holders of second lien debt claims ($472mn in debt) will receive 10% of that equity and an estimated 3.8%-9.5% recovery.
 

  • Class 3 (“First Lien Debt Claims”) – 203 claims holders, representing $871,017,758.76 (or 100%) in amount and 100% in number, accepted the Plan. 
  • Class 4 (“Second Lien Debt Claims”) – 55 claims holders, representing $371,452,493.87 (or 92.53%) in amount and 98.21% in number, accepted the Plan. 1 claim holder, representing $30,000,000.00 (or 7.47%) in amount and 1.79% in number, rejected the Plan.
Summary of Impaired Classes

  • Class 3 (“First Lien Debt Claims”) was impaired and entitled to vote on the Plan. The total of claims in this class is $1,075,545,556.48 (minus the aggregate amount of the DIP Facility Roll-Up Loans) and each holder shall be entitled to receive its pro rata share of 90% of the New Common Stock issued on the effective date (subject to dilution by the Management Incentive Plan). Estimated recovery is 17.4%-43.6%.
  • Class 4 (“Second Lien Debt Claims”) was impaired and entitled to vote on the Plan. Each holder shall be entitled to receive its pro rata share of 10% of the New Common Stock issued on the Effective Date (subject to dilution by the Management Incentive Plan). The total of claims in this class is $471,987,841.37 and estimated recovery is 3.8%-9.5%. 
The following is a full summary of classes, claims, voting rights and expected recoveries:
 
  • Class 1 (“Priority Non-Tax Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Estimated recovery is 100%.
  • Class 2 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Estimated recovery is 100%.
  • Class 3 (“First Lien Debt Claims”) is impaired and entitled to vote on the Plan. The total of claims in this class is $1,075,545,556.48 (minus the aggregate amount of the DIP Facility Roll-Up Loans) and each holder shall be entitled to receive its pro rata share of 90% of the New Common Stock issued on the effective date (subject to dilution by the Management Incentive Plan). Estimated recovery is 17.4%-43.6%.
  • Class 4 (“Second Lien Debt Claims”) is impaired and entitled to vote on the Plan. Each holder shall be entitled to receive its pro rata share of 10% of the New Common Stock issued on the Effective Date (subject to dilution by the Management Incentive Plan). The total of claims in this class is $471,987,841.37 and estimated recovery is 3.8%-9.5%. 
  • Class 5 (“General Unsecured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Each holder of a General Unsecured Claim shall be paid by the Debtors in the ordinary course of business as if the Chapter 11 Cases had never been commenced. Estimated recovery is 100%.
  • Class 6 (“NCS Rejection Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. The holders shall not receive or retain any property under the Plan. Estimated recovery is 0%.
  • Class 7 (“General Unsecured PDM Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. The holders shall not receive or retain any property under the Plan. Estimated recovery is 0%.
  • Class 8 (“Intercompany Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Estimated recovery is 100%.
  • Class 9 (“Subordinated Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. The holders shall not receive or retain any property under the Plan. Estimated recovery is 0%.
  • Class 10 (“(Existing Equity Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. The Existing Equity Interests shall be cancelled. Estimated recovery is 0%.
  • Class 11 (“Intercompany Interests”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Estimated recovery is 100%.
 

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