Below is our initial take on recent bankruptcy-related developments:
The bankrupt company announced on Tuesday that a proposed $60 million debtor-in-possession loan—for which customer-owned shares would be used as collateral—had been cancelled.
S&K Take: We first discussed the Linqto case in the July 18 iteration of the blog, noting that this was not a traditional bankruptcy and that there would be a lot to unpack. That hyper-general prediction has been astoundingly accurate. First, the Court unsurprisingly denied a creditor’s motion to transfer venue to Delaware. Judge Perez ruled that an entity formed in Texas 91 days prior to the bankruptcy was a sufficient jurisdictional hook for Texas venue, and that there was no real convenience or interest of justice served by transferring the case. Next, on the more surprising side of the ledger, the Debtor relented and chose not to pursue its proposed DIP financing path, instead agreeing in principle with the unsecured creditors’ committee with respect to case strategy. Essentially, the UCC and the Debtors have a handshake agreement to formulate a plan that navigates “thorny” securities law issues and returns as many assets as possible to customers in kind, avoiding an FTX-like monetization of assets that customers assert were held in trust. This avoids the customer property litigation that has been a hallmark of many of the crypto cases, which all arrived at slightly different results. Devil is always in the details, so we will wait and see what structure the Debtors and the UCC come up with.
Two weeks after filing for Chapter 11 bankruptcy, the tween retailer announced Wednesday that it will be selling to private equity firm Ames Watson.
S&K Take: A white knight has arrived in the Claire’s bankruptcy cases, turning what looked like a liquidation into what looks like a going-concern sale. Welcome news after many a liquidation under similar circumstances. The Debtors are seeking approval of a sale to Ames Watson, which intends to maintain at least 795 out of 950 locations. Ames Watson put down a deposit of $22.5 million which is being utilized as a DIP Financing to fund the sale process. The “DIP” has already been approved, and the sale process is progressing. The sale hearing is set for Sept. 9 with a target close of September 26. Consideration is $104 million in cash and a $36 million seller note. The $104 million doesn’t do much for unsecured creditors (it is hopelessly short of satisfying $691 million in secured debt) but it does keep employees at work and gives vendors a counterparty with which to continue doing business. The secured lenders are on board, as is the Committee. Glad we could provide you with some sunshine and rainbows to end the week.
