Decor Holdings – Court Approves Disclosure Statement for Second Amended Plan and Schedules May 2, 2019 Confirmation Hearing

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April 16, 2019 – Further to the Debtors’ March 15, 2019 motion [Docket No. 148], the Court hearing the Decor Holdings cases issued an order (ii) approving the adequacy of the Debtors’ Disclosure Statement, (ii) authorizing the Debtors’ proposed solicitation and Plan voting procedures and (iii) scheduling a May 2, 2019 confirmation hearing [Docket No. 238]. The Court order attached the Disclosure Statement which was also filed separately at Docket No. 241. The amended Disclosure Statement (originally filed on March 18, 2019 at Docket No. 151) principally updates creditors on the April 12, 2019 designation of RADH Holdings LLC ("RADH" or the "Stalking Horse Bidder") as the Debtor' stalking horse bidder in a planned section 363 auction and the impact of RADH's $19.0mn bid on projected creditor recoveries (see the recovery waterfall in the table below).

The Second Amended Disclosure Statement notes, “On April 12, 2019, the Debtors filed a Notice of Designation of RADG Holdings LLC as Stalking Horse Bidder together with such Stalking Horse Bidder’s applicable Asset Purchase Agreement (the ‘Stalking Horse APA’). Pursuant to the terms of the Stalking Horse APA, the Stalking Horse Bidder proposes to purchase substantially all of the Debtors’ business-related assets for an estimated purchase price of $19,000,000, subject to, among other things, a working capital adjustment if the level of inventory and receivables fall below a threshold, plus the assumption of certain liabilities specified therein. There are certain Excluded Assets including cash and Chapter 5 Claims. 

The Stalking Horse Bid is subject to the submission of higher and better bids at the Auction and the Stalking Horse Bidder is entitled to a breakup fee of $330,000, plus an expense reimbursement not to exceed $250,000, in the event the Stalking Horse is not the successful bidder at the Auction. The Stalking Horse Overbid is $19,700,000.”

Updated Projected Recoveries Needed From Auction Sale:

Class of Claims

Estimated Allowed Amount of Claim

Projected Net Proceeds From Stalking Horse Bid

Additional Net Proceeds Needed from the Auction Sale

Projected Percentage Recovery Range

Class 1 Senior Secured Loan Claims

$25,488,600

$19,000,000

$6,488,600

74.5%-100%

Class 2 Junior Secured Loan Claims

$5,747,623

$19,000,000

$12,236,223

0.0%-100%

Class 3 Other Secured Claims

$0-$500,000

$19,000,000

$12,736,223

0.0%-100%

Class 5 General Unsecured Claims

$33,000,000 (excluding any Classes 1, 2 or 3 deficiency claims)

$19,000,000

Every $1mn realized above $31.736mn, would result in an est. increase of ~3.0% on General Unsecured Claims

0.0% – 5.0% EST

The following is the updated summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Disclosure Statement):

  • Class 1 (“Senior Secured Loan Claims”) is impaired and entitled to vote on the Plan. Estimated recovery is 75% to 100%.
  • Class 2 (“Junior Secured Loan Claims”) is impaired and entitled to vote on the Plan. Estimated recovery is 0% to 100%.
  • Class 3 (“Other Secured Claims”) is impaired and entitled to vote on the Plan. Estimated recovery is 0% to 100%.
  • Class 4 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Expected recovery is %100.
  • Class 5 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. Estimated recovery is 0.0% to 5.0% (EST).
  • Class 6 (“Intercompany Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. Expected recovery is 0%
  • Class 7 (“Equity Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. Expected recovery is 0%.

The following documents were attached to the Disclosure Statement:

  • Exhibit A: Debtors’ Second Amended Chapter 11 Plan of Liquidation
  • Exhibit B: Liquidation Analysis

The following documents were attached to the Order Approving the Disclosure Statement:

  • Exhibit 1: Liquidation Analysis
  • Exhibit 2: Notice of Non-Voting Status –Unimpaired Class
  • Exhibit 3: Notice of Non-Voting Status –Impaired Class
  • Exhibit 4: Notice of Confirmation Hearing
  • Exhibit 5: Ballots

Proposed Key Dates:

  • Voting Deadline: April 26, 2019
  • Plan Objection Deadline: April 29, 2019
  • Confirmation Hearing: May 2, 2019

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