Gymboree said that the potential range of its reorganized enterprise value on a going concern basis would be $400–600 million, and that assuming net debt of $156 million, the range of the company’s reorganized equity value would be $244–444 million.
According to an amended disclosure statement filed by the company on June 29 with the bankruptcy court in Richmond, Va., based on that valuation term loan lenders are estimated to recover 31–57% of their secured claims (estimated at $164–364 million) under the company’s proposed reorganization plan.
According to the disclosure statement, the company had $788.8 million outstanding under its pre-petition credit agreement as of the petition date. After a $70 million DIP roll-up (see below), however, and the elimination of a $20 million claim owed to a particular lender that is excluded on account of the company’s assumption of a separate agreement with that lender, the remaining total outstanding claim under the credit agreement was $699 million, plus accrued and unpaid pre-petition interest. The non-secured portion would constitute an unsecured deficiency claim under the plan, for which the recovery is zero.
As noted, certain of the company’s pre-petition term lenders provided the company with a $105 million term DIP facility, comprised of a $70 million term loan roll-up facility and $35 million of new money. Under the proposed reorganization plan, the roll-up facility would be exchanged for 41% of the reorganized company’s equity, while the new money DIP would be replaced by the $35 million exit term facility.
Lenders are to receive subscription rights to a pair of backstopped rights offerings representing 46.9% of the reorganized company’s equity for $80 million, calculated at a purchase price carrying a 35% discount to a stipulated reorganized equity value of $262.5 million (based, in turn, on a total enterprise value of $430 million).
Lenders are also to share in the remaining equity reduced by the DIP repayment, the rights offering, and backstopped fees, and further diluted by a management incentive plan.
Thus, on a pro forma basis (before the MIP dilution) the contemplated transactions would result in equity ownership in the reorganized company as follows: term loan lenders that contribute their pro rata share of the $35 million new-money DIP and their pro rata share of the rights offering will obtain the benefit of the $70 million DIP term loan roll-up and ultimately share in 89.6% of the equity in the reorganized company, with an additional 2.4% of the equity distributed to those lenders backstopping the rights offering. Non-participating term lenders would receive the remaining 8% of reorganized equity.
According to the disclosure statement, holders of 99% of the term loan claims support the restructuring-support agreement on which the proposed reorganization plan is based.
Lastly, the disclosure statement notes that on June 22, the U.S. Trustee for the Richmond bankruptcy court named an unsecured creditors’ committee in the case, comprised of Hansoll Textile; GGP Limited Partnership; PREIT Services, LLC; Deutsche Bank Trust Company Americas; Simon Property Group, Inc.; Hutchin Hill Capital Primary Fund, Ltd.; and Li & Fung Centennial Pte Ltd. The committee has retained Hahn & Hessen LLP as its legal counsel and Protiviti as its financial advisor.
On June 28, the panel’s attorneys, who are admitted in New York, sought permission to appear in the Richmond bankruptcy court. Other than that, the panel does not appear to have taken any legal action in the case.
As reported, the company has paid its critical trade creditors, and under the plan remaining unsecured creditors, comprised of the company’s unsecured notes with $171 million in principal amount outstanding, the secured loan deficiency claim that ranges from $335–535 million, and other general unsecured claims of $35–48 million.
The bankruptcy court scheduled a hearing on the adequacy of the proposed disclosure statement for July 24. Under the proposed timetable laid out by the company, following disclosure statement approval the voting deadline would be Aug. 24, and a confirmation hearing would be held on Sept. 7.
The company initially filed its proposed plan and disclosure statement on June 16. As reported, the company filed for Chapter 11 on June 12 after reaching a restructuring-support agreement with two-thirds of its term lenders. — Alan Zimmerman
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