David’s Bridal – Court Approves Disclosure Statement and Confirms Chapter 11 Plan, Divorcing Company from $450mn in Debt

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January 4, 2019 – The Court hearing the David’s Bridal case issued an order [Docket No. 279] approving the adequacy of the Debtors’ Disclosure Statement and confirming the Debtors’ Joint Prepackaged Chapter 11 Plan [Docket No. 248]. The Court also approved certain procedures and forms relating to the solicitation of creditors’ votes on the Plan.

In a press release announcing the Court’s confirmation, the Debtors stated, “David’s Bridal will reduce its debt by approximately $450 million and…marks the beginning of an exciting new chapter at David’s Bridal as a stronger company with significantly less debt.” 

The $450 million of debt reduction comes at the expense of two impaired classes that nonetheless voted overwhelmingly “I do” in support of the Plan. Particularly hard hit were the holders of the Debtors’ $270 million senior unsecured notes due October 2020; who will see all of that $270mn of debt exchanged for 8.75% of the emerged Debtors’ new common stock and warrants (the latter presumably suitable for confetti). According to the Debtors’ Disclosure Statement, that translates into a 4.4% recovery based on a $436mn valuation of the Debtors’ new equity. 
 
Holders of the Debtors’ senior bank debt ($481.2mn as at the petition date) are in line for a 70.8% recovery based on that same new equity valuation and their receipt of 76.25% of the new common stock. In addition to equity, holders of senior debt claims will take their pro rata share in the Debtors’ new $300mn senior facility; the net result for the Debtors is the extinguishment of $181.2mn of senior bank debt.
 
Voting results:
 
On December 28, 2019, the claims agent notified the Court of the results of Plan voting [Docket No. 247] which were as follows:
 
  • Class 4 (“Prepetition Term Loan Claims,” ie the Debtors senior lenders) – 117 claims holders, representing $463,416,557.61 in amount and 100% in number, accepted the Plan. 
  • Class 5 (“Unsecured Notes Claims,” ie the holders of the Debtors’ unsecured 2020 notes) – 59 claims holders, representing $236,343,000 (or 99.16% %) in amount and 96.72% in number, accepted the Plan. 2 claims holders, representing $2,000,000 (or 0.84%) in amount and 3.28% in number, rejected the Plan. 
Background

David’s Bridal, an international bridal retailer and the largest U.S. destination for bridal gowns, wedding-related apparel, social occasion apparel and related accessories and services, filed for bankruptcy on December , 2018 noting between 50,000 and 100,000 creditors; estimated assets between $100 million and $500 million; and estimated liabilities between $500 million and $1 billion. 

In a declaration in support of the Chapter 11 filing (the “Hilson Declaration”) [Docket No. 9], Joan Hilson, David Bridal’s Executive Vice President and Chief Financial and Operating Officer, outlined the events leading to the Company’s Chapter 11 filing. 

The Hilson Declaration noted, “Despite the significant headwinds facing the brick-and-mortar retail industry, over the past several years, the Debtors have experienced steady financial performance and only modest loss of market share. The vast majority of David’s Bridal stores generate positive EBITDA, and the Debtors have historically generated stable operating cash flows. The most significant factor leading to the commencement of these chapter 11 cases is the amount of debt on the Debtors’ balance sheet, most of which will mature with the next 12 months.” 

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