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The notice states, “Pursuant to the Confidentiality Agreements, the Company was required to publicly disclose the Cleansing Material (as such term is defined in the Confidentiality Agreements) by midnight on September 7, 2018 (which was the Disclosure Date as such term is defined in the Confidentiality Agreements) consistent with the terms of the Confidentiality Agreements….The Company disclosed certain Cleansing Material on September 9, 2018, which Cleansing Material did not include certain portions of the additional Cleansing Material requested to be included by the Affected Parties. As a result, the Company has failed to comply with its disclosure obligations under the relevant provisions of the Confidentiality Agreements. On September 8, 2018, the Affected Parties provided written notice to the Company of the failure by the Company to disclose all Additional Cleansing Materials (as defined in the Confidentiality Agreements), as well as a copy of such proposed Additional Cleansing Materials to the Company within the time period required under the Confidentiality Agreements….These Additional Cleansing Materials included the Cleansing Materials that the Company had previously agreed to disclose as well as the additional Cleansing Materials that the Affected Parties had sought to be included in the Cleansing Materials disclosed by the Company but not so included by the Company. The Affected Parties continued to engage in good faith discussions with the Company and its advisors and considered the Company’s proposed modifications to the proposed Additional Cleansing Materials….In accordance with paragraph 19 of the Confidentiality Agreements, Exhibit A hereto contains the Additional Cleansing Materials, which are required to be disclosed publicly in order to permit purchasing or selling of any debt or securities of the Company by the Affected Parties without violating securities laws and/or regulations. Nothing in this disclosure or the Additional Cleansing Materials shall be construed as a determination that any of the Additional Cleansing Materials constitutes material, non-public information within the meaning of the securities laws.”
- Worthless Stock Deduction: In the week prior to the filing of the Chapter 11 Cases, Sycamore Partners, L.P. declared a worthless stock deduction in its 2017 U.S. Partnership Tax Return…disavowance of the worthless stock deduction could provide up to approximately $126 million in tax savings. Sycamore never provided advanced notice of their intent to declare such deduction. We are informed that, shortly after the filing of the Chapter 11 Cases, Sycamore offered to settle all potential estate claims and causes of action assertible against them through a cash payment of approximately $30 million…No such settlement was agreed to, and as of date of this disclosure, no such unwinding of the worthless stock deduction has occurred.
- Working Capital Adjustment: We understand that as a result of the three acquisition transactions which took place in 2014 among the Company, on the one hand, and Sycamore and KKR Holdings L.P….relating to the sale of Stuart Weitzman, Kurt Geiger and Jones Apparel, the Purchasers were obligated to perform a post-closing working capital true-up. We are further informed that post-closing, Sycamore determined not to engage in the post-closing working capital exercise, which, as we have been informed, could have resulted in as much as $70 million being paid by the Purchasers to the Company. The Company’s counsel has informed us that the Company disputes this amount.
- UTL Settlement Proposal: We are informed that on August 30, 2018, the Company transmitted a settlement proposal to the holders of the unsecured term loan (the “UTL”). We understand that the proposal contained the following terms: (a) an allowed claim in the amount of $305 million; (b) a cash payment on account of that allowed claim in the amount of $85 million; (c) equity in a reorganized Company of a value of $150 million based on the Company’s chapter 11 plan setup value of $650 million; and (d) consideration of the holders of the UTL’s request to share in certain estate causes of action litigation proceeds.
- Independent Director Settlement Offer: On or about August 28, 2018, the independent directors of the Company met with representatives of Sycamore and KKR to discuss the resolution of all estate causes of action assertible against both of these entities. We are informed that during that meeting, the independent directors offered to settle all such assertible causes of action for $470 million.
- Cash Proceeds of Exit Financing: With respect to the Company’s preliminary estimates regarding certain claims filed or scheduled in the Chapter 11 Cases, we were informed that $35 million of cash proceeds from the exit first lien term loan facility would be available to be distributed to lenders under the UTL.
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