July 19, 2023
In the DAVID'S BRIDAL, DIP case, reports indicate the Court approved the going concern sale of the David's Bridal business to Cion Investment Corporation, avoiding a liquidation. This follows our initial reporting that Cion was selected as the successful winner at an auction on July 6. Cion will keep up to 195 stores open, or about 65% of the store base. The Company operated 294 stores on the petition date, including 278 in the U.S., 12 in Canada, and four in the U.K. Approximately 105 of the 197 existing stores are listed with designation rights, which means Cion has up to 90 days to assume or reject the leases.
COSTCO has proposed a 241,000 square-foot store in Fresno, CA which will be its largest store and will replace a store three miles away that is 134,000 square feet. The store will include 32 gas pumps, an automated car wash, storage/loading space, and a market delivery option. Reports say residents of Fresno are concerned about the level of traffic such a large store would create, and Costco has yet to receive approval to build.
CAMPING WORLD closed on the acquisition of All Seasons RV in Yuba City, CA, bringing its RV dealership count to 198. The Company operates 18 locations in California. This is the 13th acquisition the Company has announced this year, including another All Seasons RV located in Bend, OR announced in April.
In the CHRISTMAS TREE SHOPS, DIP case, the Creditors' Committee withdrew its motion to convert the Chapter 11 cases to Chapter 7. This followed the Debtors' submission of a new budget and the Court's approval of a supplemental order reinstating the Debtors' access to the DIP Facility. We previously reported that the Debtors defaulted under the DIP Facility, which led to a termination of their ability to access funds necessary for operations. The Debtors noted that the supplemental order and a revised budget "will minimize disruption of the Debtors' operations and permit the Debtors to continue to operate through the commencement and operation of the store closing sales."
WALGREENS will acquire BROOKSHIRE'S GROCERY 120 pharmacies in Texas, Louisiana, and Arkansas, including pharmacy customer prescription files and related pharmacy inventory; terms of the deal were not disclosed. The vast majority of these locations are being converted to Walgreens pharmacies that will operate inside Brookshire's stores. The pharmacies located inside Brookshire's Reasor's stores in Oklahoma were not included in the transaction.
In the BED BATH & BEYOND, DIP case, the Court authorized the sale of the buy buy Baby intellectual property assets to Dream on Me Industries, the successful bidder at the auction. Reports state that negotiations for a going concern sale of buy buy Baby to Go Go Global fell apart after the parties failed to agree on valuation. DIP lender Sixth Street Partners determined it could recover more of its losses by selling the intellectual property, auctioning off the leases, and liquidating the remaining assets.
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BARNES & NOBLE EDUCATION filed a Form NT-10K (Non-Timely 10K filing) which indicated that it is delaying the filing of its annual report since it is "engaged in discussions with third parties to evaluate a range of options to strengthen its liquidity and financial position" including, among other, the refinancing of its ABL credit agreement. If a refinancing or other transaction does not occur within the 15-day grace period, management would likely conclude that substantial doubt exists about its ability to continue as a going concern.
In the PARTY CITY, DIP case, the Debtors filed a motion seeking to extend the periods during which they have the exclusive right to file a Chapter 11 Plan and seek acceptances thereof, through and including September 14, 2023, and November 13, 2023, respectively. We note that the Debtors filed a Plan of Reorganization, and they scheduled a confirmation hearing for May 17, 2023, which was subsequently adjourned to the week of June 26, but it was never actually held. The Debtors explained the reason for requesting the extensions as follows: "Notwithstanding the Debtors' efforts and the material progress towards confirmation and consummation of the Plan, superseding events have delayed these cases. Following the Court's conditional approval of the Disclosure Statement, the Debtors identified a decline in performance through their ordinary course financial forecasting process and determined to update their financial projections and related valuation analysis prepared in connection with solicitation of the Plan. As a result of these updated financials, the Debtors, the Ad Hoc Noteholder Group and the potential ABL Exit Facility providers entered into negotiations on modifications to the proposed structure of the Plan to account for the Debtors' revised financial outlook. These negotiations are ongoing, and the Debtors expect to file an amended version of the Plan reflecting the agreed modifications, file documents in support of confirmation, and emerge from Chapter 11. The Debtors understand that the Ad Hoc Noteholder Group, JPM, and the Creditors' Committee support the requested extensions."
Earlier this year, SUBWAY retained advisers to explore a potential sale, valuing the Company at more than $10 billion. However, after failing to secure that price tag, the Company has extended the bidding deadline and is searching for new suitors, according to sources. Previous bidders were private equity firms that struggled with financing, leading to a weak sales process and valuations that did not meet Subway's expectations.
GENERAL INTEREST
The CPI Index for all urban consumers rose 0.2% in June on a seasonally adjusted basis, after increasing 0.1% in May; over the last 12 months, inflation was up 3%, the slowest YOY increase since March 2021. Shelter was the largest contributor to the monthly increase, accounting for over 70% of the increase; other indexes that increased included motor vehicle insurance, apparel, recreation, and personal care. Airline fares, communication, used cars and trucks, and household furnishings and operations decreased. Food prices increased 0.2%, with flat food at home prices and a 0.4% increase in food away from home prices. Energy prices increased 0.6%. All items less food and energy rose 0.2%, the smallest one-month increase since August 2021.
On an annual basis, food at home prices were up 4.7%, with cereals and bakery products up 8.8%, dairy and related products up 27%, fruits and vegetables up 3%, nonalcoholic beverages up 7.6%, and food away from home 7.7%. Meats, poultry, fish and eggs decreased 0.2%. Monthly prices fell in four of the six categories, with prices for fruits and vegetables and cereals and bakery products both inching up since May 2023.
Quarterly Earnings
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