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August 30, 2019 – The Debtors requested Court authority to (i) sell twenty-four of their restaurants to Kona Grill Acquisition, LLC (the “Purchaser”) for a cash purchase price of $25.0mn in a private sale and (ii) distribute proceeds of that sale to its debtor-in-possession ("DIP") lender Keybank National Association [Docket No. 372]. The asset purchase agreement (the “APA”), dated August 30, 2019, amongst the Debtors and the Purchaser is signed by the President and CEO of The One Group Hospitality, Inc. ("The One Group") as the Purchaser's manager.
Publicly traded, The One Group describes itself as a leader in "Vibe Dining" and "a global hospitality company that develops and operates upscale, high-energy restaurants and lounges and provides hospitality management services for hotels, casinos and other high-end venues both nationally and internationally."
This is the Debtors' second turn at the Section 363 altar, having been jilted by original stalking horse Williston Holding Company, Inc. (‘Williston’) which was unable to to close on its earlier approximately $25.4mn offer ($20.3mn in cash, plus the assumption of the assumed liabilities of $5.1mn).
The Debtors motion states, “The Debtors, with assistance of Piper Jaffray (‘Piper’), their investment banker, formally commenced the sale process in March of 2019. On May 29, 2019, the Bankruptcy Court entered its order [Docket No. 170] (the ‘Bid Procedures Order’), which, among other things, approved the Bid Procedures. The Bid Procedures Order authorized the Debtors entry into an asset purchase agreement (the ‘Original APA’) with Williston Holding Company, Inc. (‘Williston’), which served as a stalking horse bidder for the sale of the assets, subject to higher and better bids that may be submitted in accordance with these Bid Procedures….On July 29, 2019, Williston's counsel informed the Debtors that it will not be able to close by the outside date of July 31, 2019 per the terms of the Original APA. In response, on or about August 1, 2019, the Debtors terminated the Original APA,
Given the prepetition and postpetition marketing undertaken by Piper, the lack of responses the Debtors received by the bid deadline, and that Williston is no longer interested or able to resurrect the Original APA, the Debtors believe that entry into the Purchase Agreement with Purchaser is the best course of action because: (a) the Sale is for a greater amount of cash than the Original APA, (b) it will preserve hundreds of jobs of the Debtors' employees, (c) dozens of the Debtors' vendors and lease counterparties will continue to have a customer or tenant, and (d) it will enable the Debtors to consummate a sale and wind down the remainder of their assets and estates… the only liens on the Assets of which the Debtors is aware is the lien of KeyBank on all of the Debtors' assets and certain statutory liens of certain state taxing authorities. KeyBank and the applicable taxing authorities have consented to the Sale free and clear of its liens, with such liens attaching to the proceeds of the Sale, provided that the Debtors shall use such proceeds subject to and in accordance with any order for use of cash collateral and budget.”
Key Terms of the APA (defined terms as defined in the APA attached to the motion):
- Purchase Price: $25,000,000 in cash, plus the assumption of the Assumed Liabilities in the approximate aggregate amount of $10,800,000, which include: (a) cure claims of executory contracts and unexpired leases, (b) postpetition accounts payable, (c) unpaid payroll that comes due and payable after the closing (even if it rebates to the pre-closing period), (d) accrued but unused paid time off for restaurant employees, (e) certain accrued taxes, (~ customer program liabilities (i.e., gift cards and “Konavore” program), (g) real estate restructuring fees of Keene Summit Capital Partners, and (h) transfer taxes.
- Purchaser: Kona Grill Acquisition, LCC
- Purchased Assets: The Debtors' right, title and interest in substantially all of the assets heretofore used exclusively in connection with or arising out of the operation of the Debtors' business as further set forth in section 1.1 of the Purchase Agreement and schedules thereto, including certain personal property, intangible property, governmental permits and licenses to the extent transferrable, and inventory.
- Closing Deadline: Closing shall be held upon the third business day following satisfaction of the conditions set forth in section 3 of the Purchase Agreement, and in any event no later than October 11, 2019.
About The One Group
The ONE Group (NASDAQ: STKS) is a global hospitality company that develops and operates upscale, high-energy restaurants and lounges and provides hospitality management services for hotels, casinos and other high-end venues both nationally and internationally. The ONE Group’s focus is to be the global leader in Vibe Dining, and its primary restaurant brand is STK, a modern twist on the American steakhouse concept with locations in major metropolitan cities in the U.S., Europe and the Middle East. ONE Hospitality, The ONE Group’s food and beverage hospitality services business, develops, manages and operates premier restaurants and turn-key food and beverage services within high-end hotels and casinos. Additional information about The ONE Group can be found at www.togrp.com
Proposed Key Dates:
- Sale Objection Deadline: September 17, 2019
- Sale Hearing Date: September 24, 2019
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