KB US Holdings, Inc. – Court Allows 90-Day Extension of Exclusive Plan Filing Period (until March 21, 2021) to Complete Store Sale Process

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December 11, 2020 – The Court hearing the KB US Holdings cases has extended the periods during which the Debtors have an exclusive right to file a Plan and solicit acceptances thereof, through and including March 21, 2021 and May 20, 2021, respectively [Docket No. 410]. Absent the relief, the Plan filing and solicitation periods were scheduled to expire on December 21, 2020 and February 19, 2021, respectively.

According to the extension motion [Docket No. 353], now that the Debtors have obtained Court approval of the sale of 27 of their 35 supermarkets to Acme Markets, Inc., they are working toward the closing of that sale, which they previously stated will be achieved in a "staggered" fashion, and they are continuing to market six of the remaining stores.

An amended Plan and Disclosure Statement were filed on October 30, 2020 (see more on the amended Plan and asset sale below). The Debtors said in the extension motion that they are now negotiating with stakeholders with the goal of moving forward with a fully consensual Plan.

The motion notes, “The Debtors commenced these chapter 11 cases with the goal of implementing a sale of substantially all of their assets. From the outset, the sale process has been the foundation of these chapter 11 cases and is essential to maximizing recoveries for all creditors and preserving as many jobs as possible. In less than three (3) months, the Debtors have made significant progress towards completing their sale strategy. On October 13, 2020, the Debtors held a competitive auction for the sale of substantially all of their assets, and at the conclusion of the auction the Debtors determined that the bid of Acme Markets, Inc. (‘Acme’) for twenty-seven (27) of their thirty-five (35) supermarkets, for consideration of approximately $96.4 million in cash plus the assumption of approximately $25 million in underfunded pension liabilities and certain additional liabilities, was the successful bid. On October 26, 2020, the Court entered an order approving the sale of the assets and businesses related to these twenty-seven (27) stores to Acme upon terms and conditions set forth in the asset purchase agreement between Acme and the Debtors, dated as of October 19, 2020 [Docket No. 307]. The Debtors are continuing to market six (6) of their remaining supermarkets with the goal of executing additional value-maximizing sale transactions.

…the Debtors are now focused on negotiating a fully consensual chapter 11 plan with all of their major stakeholders, as well as closing the sale to Acme and continuing their sale process with respect to the remaining six (6) stores. Subject to review and approval of the sale to Acme under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the Debtors currently anticipate confirmation of their chapter 11 plan could occur in January 2021. The requested extension of the Exclusivity Periods will allow the plan negotiation process to proceed, will afford the Debtors time to obtain confirmation of the plan, will not prejudice any parties in interest and will promote the Debtors’ goal of maximizing value for their stakeholders. In addition, the Committee and the Debtors’ prepetition lenders and DIP lenders all support the requested extension. Accordingly, the Debtors respectfully request that the Motion be granted.”

Amended Plan

On October 30, 2020, the Debtors filed an amended Plan and a related Disclosure Statement [Docket Nos. 331 and 332, respectively]. Changes to the Amended Plan and Disclosure Statement from the versions filed on September 22, 2020 largely reflect the approval of a sale of 30 of the Debtors' stores to Acme Markets, Inc. In accordance with the Sale Agreement, Holders of Prepetition Secured Loan Claims will receive ratable shares of the sale proceeds and excess cash (effectively whatever is left after funding wind-down costs, the payment of professional fees and the payment of administrative claims).

The Amended Disclosure Statement [Docket No. 332] provides: "the Debtors anticipate that, following Confirmation of the Plan, the Sale Transaction will close, the Acquired Assets will have be transferred to the Acme, and Acme will pay the Sale Proceeds to the Debtors in accordance with the Sale Transaction Documentation. The Plan proposes that on the Effective Date, the Debtors shall fund the Effective Date Cash Amount (i.e., the Wind-Down Amount, the Professional Fee Reserve, and the Administrative and Priority Claims Reserve) from the Debtors’ Cash on hand, the Sale Proceeds and any other liquid assets of the Debtors following the Sale Transaction (including any proceeds under the DIP Facility) (and, with respect to the Professional Fee Reserve, amounts in the Professional Fees Escrow Account pursuant to Article II.C.2 of the Plan). In the event that Excess Cash remains in the Administrative and Priority Claims Reserve, the Wind-Down Trust or the Professional Fee Reserve after payment of all Allowed Claims to be paid therefrom pursuant to the terms of the Plan, such Excess Cash shall be paid in Ratable Shares to the Holders of Allowed Class 3 Claims." 

Asset Sale

On October 26, 2020, the Court approved a Sale transaction [Docket No. 307] that provides for the sale of the Debtors’ stores for a purchase price of $96.4 million in cash, plus the assumption of approximately $25 million in underfunded pension liabilities and certain additional liabilities. The Sale Transaction Documentation provides for “staggered” closings, by which Acme will acquire the Acquired Assets in groups beginning no earlier than 60 days from the entry of the Sale Order. The Sale Transaction also requires approval of the Federal Trade Commission. The Debtors are continuing to market six of the eight stores that are not included in the Sale Transaction. The Debtors closed the remaining two stores in September 2020.

The asset purchase agreement (the “APA”) governing the terms of the sale is attached to the order as Exhibit 2.

On October 14th, the Debtors designated the Buyer as the successful bidder and stalking horse TLI Bedrock as the back-up bidder [Docket No. 266]. TLI Bedrock had paced bidding with a $75.0mn offer and is entitled to payment of a $2.63mn break-up fee and reimbursement expenses of up to $550k if the Debtors close on a sale to Acme or another party.

The motion [Docket No. 353] notes, “The Debtors commenced these chapter 11 cases with the goal of implementing a sale of substantially all of their assets. From the outset, the sale process has been the foundation of these chapter 11 cases and is essential to maximizing recoveries for all creditors and preserving as many jobs as possible. In less than three (3) months, the Debtors have made significant progress towards completing their sale strategy. On October 13, 2020, the Debtors held a competitive auction for the sale of substantially all of their assets, and at the conclusion of the auction the Debtors determined that the bid of Acme Markets, Inc. (‘Acme’) for twenty-seven (27) of their thirty-five (35) supermarkets, for consideration of approximately $96.4 million in cash plus the assumption of approximately $25 million in underfunded pension liabilities and certain additional liabilities, was the successful bid. On October 26, 2020, the Court entered an order approving the sale of the assets and businesses related to these twenty-seven (27) stores to Acme upon terms and conditions set forth in the asset purchase agreement between Acme and the Debtors, dated as of October 19, 2020 [Docket No. 307]. The Debtors are continuing to market six (6) of their remaining supermarkets with the goal of executing additional value-maximizing sale transactions.

…the Debtors are now focused on negotiating a fully consensual chapter 11 plan with all of their major stakeholders, as well as closing the sale to Acme and continuing their sale process with respect to the remaining six (6) stores. Subject to review and approval of the sale to Acme under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the Debtors currently anticipate confirmation of their chapter 11 plan could occur in January 2021. The requested extension of the Exclusivity Periods will allow the plan negotiation process to proceed, will afford the Debtors time to obtain confirmation of the plan, will not prejudice any parties in interest and will promote the Debtors’ goal of maximizing value for their stakeholders. In addition, the Committee and the Debtors’ prepetition lenders and DIP lenders all support the requested extension. Accordingly, the Debtors respectfully request that the Motion be granted.”

About the Debtors

KB US Holdings Inc. is the parent company of King Food Markets and Balducci’s Food Lover’s Market.  

Kings Food Markets: For more than eighty years Kings has been rated one of the finest food stores to serve New Jersey, Long Island and Connecticut. Long before the national trend led other grocers to “local” and “organic,” Kings understood that their clientele, located in many of the finest towns in America, cared about freshness, sustainability, quality and the provenance of their food. From the freshest produce and cheeses, to the finest meats, poultry and fish, the in-store experience is enhanced by Kings’ associates who pride themselves on customer service. Kings is based in Parsippany, N.J., with twenty-five stores serving the region.

Balducci’s Food Lover’s Market: What began in 1916 as a small vegetable pushcart in the heart of New York City, Balducci’s became, over its 104-year history, America’s leading gourmet specialty food shop. Offering the finest foods– cheeses and meats, fish, fresh produce and grocery items from the exotic to the most luxurious, Balducci’s prides itself on presenting not just the best brands from every corner of the globe, but a gold standard private label too. Balducci’s has an executive chef cooking in every market with catering available as well. Balducci’s markets are located in New York, Connecticut, Maryland and Virginia.

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