On January 19, 2011, Orchard Brands, also known as “Appleseed’s Intermediate Holdings,” filed petitions for bankruptcy in the United States Bankruptcy Court for the District Delaware. According to the Declaration of T. Neale Attenborough, Orchard Brands’ CEO, the company sells clothing and home goods under 17 different brands including Monterey Bay, Norm Thompson, Draper’s & Damon’s and Bedford Fair Lifestyles. See Attenborough Declaration (“Declaration”) at *5. Prior to filing for bankruptcy, Orchard Brands negotiated a “Support Agreement” with many of its secured lenders. Under the Support agreement, the company and its lenders agreed to undergo a restructuring or sale of all assets under the Bankruptcy Code. Declaration at *2-3. A copy of the Declaration is available here for review.
Orchard Brands’ Business
Located in Beverly, Massachusetts, Orchard Brands employs (at the time of bankruptcy) over 4,000 employees, most of which work on a full-time basis. Aside from Massachusetts, the company has brand headquarters in Arizona, Pennsylvania, California, New Jersey, Oregon and Wisconsin. Under its various labels, Orchard Brands’ offerings include clothing, footwear, and home and health products for men and women. Net sales in 2010 totaled $881 million, down from $954 million in 2010. Declaration at *4-5.
Events Leading to Bankruptcy
Orchard Brands filed for bankruptcy due to its inability to service is debt obligations and maintain its trade obligations with vendors. By December of last year, the company’s secured debt totaled $725.1 million. The level of secured debt required Orchard Brands to make annual interest payments of approximately $52 million. Declaration at *5. Orchard Brands tried to restructure its debt outside of bankruptcy. With these efforts unsuccessful, the company next began negotiations with its secured lenders for a restructuring under chapter 11 of the Bankruptcy Code. Declaration at *6.
First Steps in Bankruptcy
Going in to bankruptcy, Orchard Brands seeks court approval of $140 million in postpetition financing. As stated in its Declaration, Orchard Brands intends to use the DIP facility to cover critical expenses such as wages, critical vendor claims and customer programs. Declaration at *7. It is not exactly clear whether Orchard Brands will be able to secure the support necessary to confirm a “pre-negotiated” plan of reorganization. By that, the Support Agreement with the company’s lenders provides for a “dual track” whereby it can seek to confirm a plan of reorganization as well as a sale of assets if a 363 sale becomes necessary. Declaration at *22-23. Whether this bankruptcy shifts from a reorganization to a sale of all of the company’s assets, depends on whether Orchard Brands is able to satisfy certain “milestones” provided for in the Support Agreement.
This bankruptcy proceeding is before the Honorable Kevin Gross. Orchard Brands is represented by the law firm Kirkland and Ellis LLP. The lead case in these proceedings is case no. 11-10160(KG). A copy of Orchard Brands’ Petition for Bankruptcy is available here for review.