Bankruptcy Case Summaries

On August 26, 2017, Model Reorg Acquisition, LLC, and eighteen of its subsidiaries and affiliates (collectively, “Model Reorg” or “Debtors”), filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (No. 17-11794).

The Debtors, which primarily operate under the brand “Perfumania”, comprise the largest national specialty retailer and distributor of fragrances and beauty products.  According to a press reslease issued by Perfumania Holdings, Inc., Model Reorg “has initiated a recapitalization to be facilitated through a pre-packaged Plan of Reorganization (“the Plan”) to reduce its retail store count to better align with current consumer shopping patterns, increase investments in its e-commerce business, and become a privately-held Company.”   A link to the press release can be found here.

The case has been assigned to the Honorable Christopher S. Sontchi.  The Debtors are represented by the law firm of Skadden Arps Slate Meagher & Flom LLP.  The First Day hearing is noticed to take place today, at 2:00 p.m.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

On June 13, 2017, The Original Soupman, Inc. and its affiliates (collectively “Debtors” or “Original Soupman”) commenced voluntary bankruptcy proceedings under Chapter 11 of the Bankruptcy Code.  According to its petition, Original Soupman estimates that its assets are between $1 million and $10 million, and its liabilities are between $10 million and $50 million.

Shortly after the commencement of the bankruptcy case, the Debtors filed a number of first-day motions, including a critical vendor motion, and a DIP financing motion.  The first-day hearing to consider the interim relief requested in the various first-day motions is scheduled for June 20th at 2:00 p.m.  The case has been assigned to the Honorable Laurie Selber Silverstein.  The law firm of Polsinelli PC represents the Debtors in these bankruptcy proceedings.

A recent press release issued by the Debtors advises that Original Soupman obtain $2 million debtor in possession financing, and that operations of the Debtors will resume during the course of the bankruptcy. Stay tuned for further developments in this case.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

On May 17, 2017, GulfMark Offshore, Inc. (“GulfMark” or “Debtor”) filed a voluntary petition for bankruptcy relief under chapter 11 of the Bankruptcy Code in the United States District Court for the District of Delaware.

According to the first day declaration of Brian J. Fox, the managing director of Alvarez & Marsal North America, LLC, the restructuring advisor to the Debtors, GulfMark will file a prepackaged plan of reorganization.  Through the plan, GulfMark will equitize $400 plus million of its unsecured bond obligations and bolster its liquidity through a rights offering in the amount of $125 million.

The declaration states that general unsecured creditors will not be impacted by the restructuring.  The Debtor’s Petition lists estimated assets of between $100 to $500 million, and its estimated liabilities of between $500 to $1,000 million.

The hearing to consider the Debtor’s proposed Disclosure Statement for the Debtor’s Plan of Reorganization has been scheduled for June 26th. The case has been assigned to the Honorable Kevin Gross.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

Serving as an illustration of the principal that a financial restructuring won’t save a business that has ceased to be frequented by customers, RadioShack has filed for bankruptcy for the second time in as many years.  The prior case was filed in the Bankruptcy Court for the District of Delaware as case no. 15-10197.  This case is also in the Bankruptcy Court for the District of Delaware, and is case no. 17-10506.  Prime Clerk is the noticing agent in both cases and maintains a copy of the Court’s docket on its website – http://www.primeclerk.com/case-archive/.

The first bankruptcy had three primary results: 1) RadioShack closed approximately 2,400 stores, 2) the remaining stores were sold as a going concern to General Wireless, Inc., and 3) an agreement was entered into with Sprint, providing for co-branded product, exclusive access for Sprint within the RadioShack stores, and the payment of a portion of RadioShack rents by Sprint.

At the time of this second bankruptcy filing, there were over 1,500 stores in operation.  According to the first day declaration of Dene Rogers (the “Rogers Declaration”) in support of this bankruptcy, RadioShack is again seeking to shed underperforming leases and pursue a sale or restructuring.  As part of this process, it has transferred 115 stores to Sprint in exchange for a $12 million payment and the termination of the Sprint agreement, with the possibility of receiving another $5 million following an investigation period.

RadioShack has sought authority to close and liquidate the inventory of “between 530 and substantially all of their stores.”  See Rogers Declaration at 22.  Accordingly, creditors will want to keep close tabs on this case to make sure that any debts owed or claims they may have are not eliminated.

John Bird is a bankruptcy attorney with the law firm of Fox Rothschild LLP.  John is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach John at (302) 622-4263 or at jbird@foxrothschild.com.

ATopTech, Inc. (“ATopTech” or “Debtor”), an electronic design automation software company manufacturing software solutions for engineers to assist them in the physical design of integrated circuits, filed a voluntary petition for chapter 11 bankruptcy relief on January 13, 2017 in the United States Bankruptcy Court for the District of Delaware.

In addition, ATopTech filed a motion to sell its businesses under section 363 of the Bankruptcy Code and has selected a stalking horse bidder. The Debtor expects that the sale will be completed by March 31, 2017.

The Debtor’s petition lists between $10 and $50 million in assets and liabilities.  The case has been assigned to the Honorable Mary F. Walrath, case number 17-10111.  The Debtor is being represented by the law firm of Dorsey & Whitney, LLP.

A first-day hearing has not yet been scheduled, although the Debtor has filed a notice of agenda, which can be accessed here.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

On December 21, 2016, Modular Space Corporation and its affiliated entities (“Modular Space” or the “Debtors”) filed for bankruptcy protection in the U.S. and Canada, to implement a plan to rework its $1 billion load of long-term debt.  Modular Space will continue its operations during what the restructuring. Modular Space makes, leases and sells office trailers, mobile offices, temporary classrooms, modular office complexes and portable storage units.

A restructuring that will swap out about $400 million worth of debt for equity was negotiated in advance of the bankruptcy filing in the U.S. and the initiation of Canadian restructuring proceedings in Toronto.

The slowdown in the oil-and-gas sector and mining hurt Modular Space’s sales, according to papers filed with the Delaware Bankruptcy Court. With nonresidential construction numbers falling sharply, Modular Space was up against lowered demand and pricing pressures that ate into its margins.

The Debtors are represented by Cleary Gottlieb Steen & Hamilton LLP, Lazard Frères & Co. LLC, and Young Conaway Stargatt & Taylor LLP.  The case is pending before the Honorable Kevin J. Carey.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

On December 2, 2016, Limitless Mobile, LLC (“Limitless” or the “Debtor”) filed a chapter 11 voluntary petition in the United States Bankruptcy Court for the District of Delaware.  The Debtor was formed in 2013 to provide broadband and wireless telecommunication services in certain rural counties in central Pennsylvania.  The Debtor is part of a worldwide corporate family referred to as the Limitless Group.  According to the First Day Declaration, Limitless intends to wind down its retail-side business and emerge from bankruptcy as a wholesale operator.

According to the Petition, the Debtor has an estimated $10 million to $50 million in assets, and $50 million to $100 million in liabilities.  The law firm of Dilworth Paxson LLP represent the Debtor in this chapter 11 case.  The Honorable Kevin J. Carey has been assigned to the case.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

Made-in-the-USA retailer American Apparel, LLC and its affiliated entities (“Debtors”) filed for Chapter 11 bankruptcy protection on Monday, Nov. 14th for the second time in just over a year, colloquially known as the “Chapter 22”.  The filing comes just about a year after the fashion retailer previously filed for bankruptcy, when the company exited court protection in early 2016 but quickly encountered trouble again.

Canadian clothing manufacturer Gildan Activewear has agreed to a $66 million deal to acquire intellectual property assets and inventory from American Apparel, including the chance to maintain some or all of the company’s Los Angeles production and distribution operations, according to a court filing.

According to chief restructuring officer Mark Weinstein, “[t]he company faced unfavorable market conditions that were more persistent and widespread than the debtors anticipated. These market conditions were particularly detrimental to retailers.”  According to Weinstein, American Apparel’s turnaround strategy “completely failed” as the company reported a 33% decline in year-over-year sales as of Sept. 30. Since its first bankruptcy, the company failed to optimize merchandising, bolster online sales, improve quality expeditiously and form a cohesive marketing plan, according to Weinsten.

With 110 stores in 28 states and the District of Columbia, American Apparel has dwindled from the time of its original bankruptcy filing, when it had about 8,500 employees at six factories and 230 stores worldwide.  The company listed about $215 million in debts. It had $497 million in net sales in 2015.

The First Day Hearing is today (11/15) at 9:00 a.m.  The bankruptcy proceeding has been assigned to the Honorable Brendan L. Shannon.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

In the decision of In re Metroplex on the Atlantic, LLC, 545 B.R. 786 (Bankr. E.D.N.Y. 2016), the United States Bankruptcy Court for the Eastern District of New York held that an easement is an in rem property interest, subject to sale free and clear under Bankruptcy Code section 363(f).

The debtor constructed a building on property facing the Far Rockaway ocean.  Almost 100 years earlier, an easement had been granted to owners of an adjacent property, giving them a right of way to the ocean. The debtor and its secured creditor proposed a plan that provided for the property to be sold free and clear of all claims and interests, including the easement.  The owner objected, arguing that the property could not be sold free and clear of the easement.

The bankruptcy court found that the easement was an in rem property interest:  “An easement is more than a personal privilege to use another’s land, it is an actual interest in that land.”  As such, the court held it was subject to sale free and clear under section 363(f), and concluded that the easement owner could be compelled to accept a monetary satisfaction for the easement under state law.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

On August 12, 2016, petitioning creditors Beal Bank USA and CLMG Corp. filed an involuntary chapter 11 bankruptcy petition against Bennu Titan LLC (f/k/a ATP Titan LLC).  The involuntary debtor is affiliated with Bennu Oil & Gas, a deep water oil exploration firm based in Harris County, Texas.

For a link to a brief post discussing involuntary bankruptcies in general, click here.  Under Section 303 of the Bankruptcy Code, a debtor can be “forced” into an involuntary bankruptcy.  11 U.S.C.§ 303(b)(1).  If a company has 12 or more creditors, an involuntary petition requires three or more creditors whose claims are not contingent as to liability or subject to a bona fide dispute as to either liability or amount to file the petition.

The involuntary bankruptcy petition was filed in the United States Bankruptcy Court for the District of Delaware, and has been assigned to Judge Laurie Selber Silverstein, Case No. 16-11870.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.