GVS Portfolio I B, LLC – Files Amended Chapter 11 Plan of Reorganization and Related Disclosure Statement; New Sale-Focused Plan Has All Creditor Classes Unimpaired (Assuming $400mn of Net Asset Sale Proceeds)

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November 19, 2021 – The Debtors filed an Amended Plan of Reorganization and a related Disclosure Statement [Docket Nos. 342 and 343, respectively], and separately filed redlines of each document showing changes to the versions filed on October 4, 2021 [Docket No. 348]. 

The Debtors' heavily revised Plan and Disclosure Statement reflect the abandonment of a dual path strategy that was the center of the Debtors' October 4th Plan and the decision to proceed with a single "sale" path. The Plan, perhaps optimistically, now also has all creditor classes unimpaired based on estimated net asset sale proceeds of $400.0mn. The Debtors point out, however, that: "Although every reasonable effort was made to be accurate, the projections of estimated recoveries are only an estimate and are dependent on the results of the Auction and the availability of Net Sales Proceeds. To the extent Net Sales Proceeds are less than $400 million, creditors could receive less than the entirety of their Claims in reverse order of seniority…"

The changed approach follows the resolution of governance issues that have plagued the Debtors' case and heated opposition to any go forward involvement of the Debtors' owner Natin Paul. A November 10th "Governance Order" places the the Debtors "under the direction" of Alix Partners' Robert D. Albergotti and sees Mr. Paul comprehensively removed from the Debtors' management structure and any direct input on the management of the Debtors' cases. Since the issuance of the Governance Order, the Debtors have signaled that their cases were finally poised to see some rapid movement and that they would soon file a revised Plan and Disclosure Statement reflecting the new world order and the jettisoning of the previously embraced "toggle" Plan with its clear bias for a stand-alone restructuring to be led by Mr. Paul in the event that he could source financing.

Plan Summary

The Disclosure Statement provides as to the vastly simplified Plan: "The key components of the Plan:

Plan Overview. To ensure the Plan transactions contemplated herein maximize value for all stakeholders, the Debtors have obtained approval of the Bid Procedures for the marketing and sale of their assets. The Bid Procedures were approved by Order of the Court dated November 10, 2021. The Bid Procedures are incorporated into the Plan and will be implemented to effectuate the Sale, with the Net Sale Proceeds used to satisfy Claims and Interests in accordance with the Distribution Waterfall. To the extent the Net Sale Proceeds are insufficient to satisfy all creditors, the Debtors will pursue Causes of Action and Avoidance Actions until all Allowed Claims of creditors are satisfied.

Sale. The Debtors’ Assets will be marketed pursuant to the Bid Procedures…..The Debtors may, subject to Court approval, elect to use a stalking horse bidder and will file a further amended Disclosure Statement as necessary. The Confirmation Order shall, and shall be deemed to, pursuant to sections 363 and 1123 of the Bankruptcy Code, authorize, among other things, all actions as may be necessary or appropriate to effect any transaction described in, contemplated by, or necessary to effectuate the Plan….Maximizing the value of the Debtors’ Estate for the benefit of all stakeholders depends, in large part, on the Debtors expeditiously proceeding through these Chapter 11 Cases and minimizing Cash burn. Accordingly, the Bid Procedures and Sale timeline contemplated therein are carefully designed to facilitate an yet efficient, yet comprehensive, Sale process that will maximize the value of the Debtors’ Estates for all constituents.

Claims Resolution Process. The Debtors will seek the approval of a Claims Resolution Process which determine the (i) the Allowed Amount of the Senior Lender, Senior Mezz Lender and Junior Mezz Lender claims; (ii) estimate Administrative and Priority Claims; and (iii) estimate the amount of General Unsecured Claims in connection with the Sale and Auction.”

The following is an updated summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement, see changes highlighted in bold):

  • Class 1 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is Undetermined and expected recovery is 100%.
  • Class 2 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is Undetermined and expected recovery is 100%.
  • Class 3 (“Senior Lender Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $127.0mn and expected recovery is 100%. 
  • Class 4 (“PropCo Debtor Administrative Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $[●] mn and expected recovery is 100%. 
  • Class 5 (“PropCo Debtor Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $[●] mn and expected recovery is 100%.
  • Class 6 (“PropCo Debtor General Unsecured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $3.2mn and expected recovery is 100%.
  • Class 7 (“Senior Mezz Lender Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $126.7mn and expected recovery is 100%.
  • Class 8 (“Senior Mezz Debtor Administrative Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $[●] and expected recovery is __.
  • Class 9 (“Senior Mezz Debtor Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $[●] and expected recovery is 100%.
  • Class 10 (“Senior Mezz Debtor General Unsecured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $[●] and expected recovery is 100%.
  • Class 11 (“Junior Mezz Lender Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $122.0mn and expected recovery is 100%.
  • Class 12 (“Junior Mezz Debtor General Unsecured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $100K and expected recovery is 100%.
  • Class 13 (“Junior Mezz Debtor Interests”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $[●] and expected recovery is 100%.

Background on Sale and Governance Order

On November 11th, further to a November 5th hearing, the Court hearing the GVS Portfolio I B cases issued an order approving (i) bidding procedures for the sale of substantially all of Debtors’ assets and (ii) an auction/sale timetable culminating in an auction on February 28th and a sale hearing n March 2022 (exact date TBD) [Docket No. 318].

On November 5th, the Debtors filed heavily revised bidding procedures [Docket No. 306] which substantially bring forward key dates in the auction/sale process. As originally filed, the Debtors' bidding procedures motion (and its proposed lengthy auction/sale timetable) reflected a process that appeared designed to favor efforts of the Debtors' parent (World Class Holding Company, LLC, or "World Class") to come up with an "Equity Infusion," ie financing that would allow the parent to maintain control of the Debtors and obviate the need for a sale process. 

The now truncated timetable in the revised bidding procedures order is, however, only part of changes to Chapter 11 cases which now appear to be rapidly slipping out of Mr. Paul's control. 

Also discussed at the November 5th hearing were governance proposals that are now memorialized in a November 10th "Governance Order" [Docket No. 319]. That order has Alix Partners' Robert D. Albergotti appointed as sole manager of the Debtors and Mr. Paul resign as officer and director and left with "no role whatsoever with respect to management or operation of the Debtors except a duty to cooperate with Albergotti in accordance herewith." 

At his discretion, Mr. Albergotti is charged (with consent of the Senior Lender) with choosing "a new replacement management company from the property manager list provided by Senior Lender." He will also effectively be charged with managing the auction/sale process. 

For the time being, the governance order will end calls (by the U.S. Trustee assigned to the Debtors cases and mezzanine lender RREF III Storage LLC (“RREF”)) for conversion of the Debtors' cases to cases under Chapter 7.

About the Debtors

According to the Debtors: “Great Value Storage offers secure storage units with 24-hour security systems, both climate controlled and non-climate controlled, RV, car and boat parking, moving and storage supplies and moving truck rental. It caters to personal and business storage needs. The GVS Portfolio consists of 64 facilities in Colorado, Illinois, Indiana, Mississippi, Missouri, Nevada, New York, Ohio, Tennessee and Texas. The GVS Portfolio, which includes more than just self-storage facilities, took ten years to amass at a cost of approximately $300 million."

The Debtor is an indirect subsidiary of World Class Holding Company, LLC ("World Class") and is the indirect owner of 64 self-storage facilities — branded as Great Value Storage, or GVS — located throughout the United States.

About World Class Holding Company, LLC 

World Class is based in Austin, Texas and describes itself as one of the largest private real estate owners in the United States. According to its website, World Class is in the business of acquiring undervalued businesses and assets located in 17 states for the purpose of owning, operating and developing properties. In addition to GVS, World Class purports to own (a) World Class Property Company, a real estate investment company that owns, operates and develops office, retail, multifamily, industrial, mixed-use, hospitality and self-storage assets; (b) NowSpace, a provider of co-working office space; (c) World Class Technologies, a software development company; (d) World Class Mortgage Capital, a private commercial real estate lender; and (e) Westlake Industries, a commercial construction, industrial and energy infrastructure and property services company.

Organizational Chart (See Exhibit B to Disclosure Statement)

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