RMH Franchise – Seeks Authority for Stalking Horse APA with ACON Equity Partners, ACON to Open Bidding with $65 million Offer

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November 27, 2018 – RMH Franchise Holdings requested Court authority to (i) enter into a stalking horse asset purchase agreement (the “Stalking Horse APA”) with ACON Equity Partners III, LP (“ACON” or the “Stalking Horse Bidder”) in relation to the Debtors’ sale of its interests in approximately 135 Applebee’s restaurant locations (the “Purchased Assets”) for $65 million and (ii) establish bid and sale procedures in respect of the Purchased Assets [Docket No. 814]. The Debtors’ motion states, “When it became apparent that confirmation of the Plan was most likely not going to be achievable, the Debtors commenced good-faith, arm’s length negotiations with the Stalking Horse Bidder regarding an asset purchase agreement that would provide for the sale of the Purchased Assets. Ultimately, these negotiations resulted in the Debtors’ execution of the Stalking Horse APA, pursuant to which the Stalking Horse Bidder agreed to purchase the Purchased Assets and to assume certain liabilities and obligations (the ‘Assumed Liabilities’) for a cash bid of $65.0 Million as the Purchase Price, subject to the adjustments set forth in the Stalking Horse APA for (i) all Cure Costs, (ii) all other Assumed Liabilities required to be paid in cash on the Closing Date, (iii) the amount of the Applebee’s Letter of Credit, (iv) the amount of the Travelers Letter of Credit, (v) the Transaction Advisor Fees, and (vi) the Cash Adjustment. 
 
By this Motion, the Debtors request authority to provide the Stalking Horse Bidder with the Expense Reimbursement for actual, reasonable documented expenses for all reasonable and actual costs and out of pocket expenses incurred by the Stalking Horse Bidder in connection with these Chapter 11 Cases, the preparation, negotiation, execution and performance of Stalking Horse APA, the Sale, the Bid Procedures, the Bid Procedures Order, the Franchisor Settlement Agreement, the Franchisor Settlement Agreement Order, and the Sale Order, as more fully described in the Stalking Horse APA, in an amount equal not to exceed $2.5 million.” 
 
The Debtors’ motion states in respect of any further qualified bids and auction process, “The purchase price shall be paid in full in cash at the closing of the Sale for the Purchased Assets (the “Closing”). Further they provide a minimum cash purchase price for the Purchased Assets (the “Purchase Price”) of not less than $69.5 million which is the sum of (i) $65.0 million (i.e., the Stalking Horse Bidder purchase price), plus $2,500,000 (the Expense Reimbursement), plus an initial overbid in an amount of not less than $2,000,000…. At the commencement of the Auction, the Debtors will announce the significant terms of all Qualified Bids and the highest Qualified Bid it has received to serve as the opening bid at the Auction (the ‘Baseline Bid’)….Bidding shall commence at the Baseline Bid. The first overbid at the Auction shall be the amount of the Baseline Bid plus the Minimum Initial Overbid. Thereafter, a Qualified Bidder may increase its Qualified Bid in any amount as long as each subsequent exceeds the previous highest bid by at least $500,000 of additional cash consideration.”

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