AmeriMark Interactive, LLC – Multi-Channel, “Digital-First” E-Commerce Specialist Owned by Justin Yoshimura’s CSC Generation Holdings (Itself a Serial Acquiror of Distressed Retail Assets) Files for Bankruptcy with Over $100mn of Debt

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April 11, 2023 – Privately-held AmeriMark Interactive, LLC and six affiliated debtors (together “AmeriMark Interactive” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware lead case No. 23-10438 (Judge TBA). The Debtors, "proud to be one of the largest multi-channel retailers [albeit within a purely "digital first," e-commerce context] targeting the mature market*," are represented by Derek C. Abbott of Morris, Nichols, Arsht & Tunnell LLP. Further Board authorized appointments include: (i) McDonald Hopkins LLC as general bankruptcy counsel, (ii) Riveron Management Services to provide a CRO, (iii) Consenus Advisory Services and Consensus Securities LLC as financial advisor and investment banker and (iv) Stretto as claims agent.

* See "About the Debtors," below.

The Debtors’ lead petition notes between 1 and 50 creditors; estimated assets between $0.0 and $50.0k; and estimated liabilities between $100.0mn and $500.0mn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) AmeriMark Holdings, LLC ($22.6mn promissory note claim), (ii) LSC Communications, Inc. ($7.7mn trade debt claim) and (iii) Fedex ($5.8mn trade debt claim). Each of the Debtors' top 30 unsecured creditors (mostly trade creditors) is owed in excess of $350k).

In Board minutes filed with the Debtors' lead Petition, the Debtors flag their intention to pursue a sale process and indicate that they have lined up DIP financing, without for the moment providing further details.

The Debtors are 100% owned by CSC Generation Holdings, Inc ("CSC") of Merrillville, Indiana. CSC, which while placing the Debtors into Chapter 11 with no assets and an impressive collection of trade creditors, notes as to itself: "We are not just savvy investors….We acquire overlooked store and catalog-based retailers and transform them into high performance, “digital first” brands through our proven omni-channel technology platform, operating expertise and scale.” 

CSC Generation was founded as a joint venture between the famously reticent entrepreneur Justin Yoshimura (interesting background piece here) and Chinese private equity firm China Science & Merchants Investment Management Group in 2016.

Beginning in 2017, CSC has built up a portfolio of brands largely acquired in the bankruptcy context, including DirectBuy, Z Gallerie, One Kings Lane (from bed Bath & Beyond), Sur La Table and Home Consignment Center. In a slightly unusual "Investors" section on its website, CSC notes, inter alia, Khosla Ventures, Panasonic and Altos Ventures as investors and adds the smiling endorsements of “family office” investors including Niraj Shah of Wayfair; Christian Friedland of and Zappos's now deceased Tony Hsieh.

As the Noyes Declaration [Docket No. 19] suggests (but leaves unclear), significant issues have arisen recently amongst the Debtors and CSC; issues which have necessitated efforts to separate the entities in a corporate governance context. From Noyes: "AmeriMark Interactive is owned by CSC Generation Holdings, Inc. ('CSC'), which among other things owns other retail and consumer-facing companies. However, in October 2022, to promote independence, the AmeriMark Interactive Board of Directors formed an independent committee and named director Larry Gottlieb to that committee. In addition, since that time, all CSC non-independent directors have resigned, and John Kolleng and Bruce Crain were appointed to the Board. Messrs. Gottlieb, Kolleng, and Crain are all independent and are the only directors of AmeriMark Interactive. Messrs. Gottlieb and Kolleng also serve on the boards of all other Debtors, and Mr. Reese also serves on the boards of certain of the other Debtors." It is unlikely that we have heard the last of the Debtors' "independence" issues.

Events Leading to the Chapter 11 Filing 

In a declaration in support of first day filings (the “Noyes Declaration”), Stuart Noyes, the Debtors’ Chief Restructuring Officer, commented: “In October 2021, AmeriMark Interactive purchased the companies that now make up the Debtors for $322.5 million. The timing of the closing was planned so that AmeriMark Interactive could capture 2021 fourth quarter sales and earnings, as the fourth quarter is the most profitable for the Debtors’ business. One of the most critical components of the transaction was the ongoing relationship with a key vendor, LSC Communications US, LLC (‘LSC’), which printed catalogs for the Debtors’ businesses. It was only after the closing that AmeriMark Interactive learned that LSC had given the seller written notice of a ‘Force Majeure’ event that was expected to result in a material diminishment in LSC’s ability to print and mail catalogs for the Debtors in the fourth quarter of 2021. The seller and certain of its officers are alleged to have concealed this information from AmeriMark Interactive, causing damages estimated to be at least $60 million and perhaps permanently damaging the Debtors’ relationships with many customers who did not receive catalogs for that important season. AmeriMark Interactive has initiated litigation in Delaware Chancery Court regarding this matter.

The Debtors have also suffered from the COVID-19 pandemic and macroeconomic forces. The Debtors experienced a surge in orders in 2020 and 2021, in primary part due to COVID-19. The Debtors’ business is catalog and ecommerce driven, which was well-suited to withstand the pandemic, especially for a company with an older clientele that is more susceptible than average to serious illness from the virus. However, with COVID came serious supply chain issues that affected the Company, as happened to many businesses. To meet expected demand, and anticipating continued supply chain concerns, the Company purchased significant quantities of inventory in advance, which negatively impacted availability under its loan facility. When demand was not as high as expected, the Debtors’ liquidity concerns were exacerbated. Recently, inflation has also had an impact on the Debtors, who have a senior customer base, many of who are on a fixed income. Finally, rising interest rates have increased the Debtors’ debt service costs.”

Prepetition Indebtedness

Pre-Petition Credit Agreement 

As of the Petition date, the Debtors’ capital structure consists of prepetition and revolving term loans in the aggregate principal amount of $241.8mn owed under an October 2021 credit agreement (the “Pre-Petition Credit Agreement”) with PNC Bank, National Association, as Administrative Agent, Swing Line Lender, Arranger and Book Runner (“PNC” or the “Pre-Petition Agent”), and Crystal Financial LLC, d/b/a SLR Credit Solutions, as Term Agent (“SLR” or the “Pre-Petition Term Agent”). 

Pursuant to the Pre-Petition Credit Agreement, the Pre-Petition Secured Parties extended to the Debtors revolving debt, term debt, a swing line and letters of credit, collectively in the aggregate amount of $238.0mn under one credit facility (the “Pre-Petition Financing Documents”). The Pre-Petition Financing Documents are structured as a unitranche with separate waterfalls with respect to different types of categories of collateral. The Pre-Petition Credit Agreement  is comprised of:

  • Pre-Petition Revolving Credit Facility. Pursuant to the Pre-Petition Credit Agreement, certain of the Pre-Petition Secured Parties and PNC (together, the “Pre-Petition Revolving Credit Lenders”) provided the Debtors with revolving credit loans, letters of credit and swing line loans (collectively, the “Pre-Petition Revolving Credit Loans”) in the maximum aggregate amount of up to $70.0mn. As of the Petition date, the Debtors estimate that approximately $43.9mn is outstanding under the Pre-Petition Revolving Credit Loans, which matures on the earlier of (a) October 15, 2026, or (b) ninety (90) days prior to the maturity date of the Pre-Petition Subordinated Note Debt (the “Maturity Date”). 
  • Pre-Petition Term Loan Facility. Pursuant to the Pre-Petition Credit Agreement and composing the remaining balance of the Pre-Petition Financing Documents, certain of the Pre-Petition Secured Parties (the “Pre-Petition Term Lenders”) provided the Debtors with term loans in the aggregate amount of $168.0mn (the “Pre-Petition Term Loans”). As of the Petition date, the Debtors estimate that approximately $178.6mn is outstanding under the Pre-Petition Term Loan Facility, which matures on the earlier of (a) the Maturity Date, or (b) the date of the acceleration of the Pre-Petition Term Loans pursuant to the terms of the Pre-Petition Credit Agreement. 

ZG Lending Pre-Petition Subordinated Note 

The Debtors are party to an October 2021, the Debtors Subordinated Secured Promissory Note with ZG Lending SPV, LLC (“ZG Lending”). As of the Petition date, the Debtors estimate that $15.7mn in principal, plus accrued and unpaid interest in the amount of $3.6mn, is outstanding under the Pre-Petition Subordinated Note, which matures on April 14, 2027.

About the Debtors

According to the Debtors: “Amerimark Interactive is proud to be one of the largest multi-channel retailers targeting the mature market, and we are even prouder of our understanding of the needs of that consumer. Our company is passionate about giving our customers the shopping experience they deserve. Age is just a number…and everyone can do it gracefully. With that in mind, we strive to utilize all opportunities towards providing our customers with thoughtfully curated merchandise at the best values, beautifully presented with ease of accessibility and by the most pleasant customer solutions team.

Our fully integrated system offers a multi-channel experience in every visit to our websites, social media outlets, mobile connections, multimedia messaging and customer solutions communication. While we’ve advanced with the times and incorporated technology into our approach, we’ve listened to feedback and maintained production of our very popular print catalogs, making sure they are consistent with every other platform…and this is what sets us apart. Our internal shareholders are aligned in all that they do to give our external clients a seamless message, regardless of the channel they have used to approach us.“

The Debtors' brands include:

Corporate Structure 

1. Debtor AmeriMark Interactive, LLC is 100% owned by CSC Generation Holdings, Inc.
2. Debtor AmeriMark Intermediate Sub, Inc. is 100% owned by Debtor AmeriMark Interactive, LLC.
3. Debtor L.T.D. Commodities LLC is 100% owned by Debtor AmeriMark Interactive, LLC.
4. Debtor AMDRL Holdings is 100% owned by Debtor AmeriMark Intermediate Sub, Inc.
5. Debtor AmeriMark Intermediate Holdings, LLC is 100% owned by Debtor AMDRL Holdings, Inc.
6. Debtor AmeriMark Direct LLC is 100% owned by Debtor AmeriMark Intermediate Holdings, LLC.
7. Debtor Dr. Leonard’s Healthcare, LLC is 100% owned by Debtor AmeriMark Direct LLC.

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