November 17, 2020 – The Debtor filed an Amended Plan of Reorganization and a related Disclosure Statement [Docket Nos. 217 and 218, respectively]; and separately filed a redline reflecting changes to the versions filed on October 15, 2020 [Docket No. 219]. Also filed separately were certain exhibits to the Disclosure Statement, namely (i) a liquidation analysis, (ii) financial projections and (iii) an "analysis of certain U.S. federal Income tax consequences [Docket No. 220]

Overview of the Plan

The Disclosure Statement details a Plan which will, absent the application of cramdown provisions which the Debtor has effectively waived, require the support of general unsecured creditors in Class 3. That class is to split a cash pool of $4.0mn which will deliver an estimated recovery of 50% – 66.67%. The Disclosure Statement provides : “The Plan contemplates a reorganization of the Debtor’s operations pursuant to which the Reorganized Debtor will operate a leaner and more profitable MUJI-branded store portfolio than prior to the bankruptcy Filing, all while continuing its growth of online sales. To that end, the Plan preserves the going-concern value of the Debtor’s business, maximizes recoveries to constituents, and protects jobs of the Debtor’s employees. More specifically, pursuant to the terms of the Plan:

1. All Allowed Administrative Claims (other than DIP Facility Claims) and Allowed Priority Tax Claims shall be paid in full in cash.
2. Allowed DIP Facility Claims shall receive a principal portion of the Exit Facility equal to the DIP Facility Claim Amount (less certain fees and expenses that will be paid to the DIP Lender on the Effective Date).
3. All Allowed Other Secured Claims and Allowed Other Priority Claims shall be paid in full in cash or receive such other treatment that renders such Claims Unimpaired.
4. Each Holder of Allowed Class 3 General Unsecured Claim shall receive its pro rata share (calculated based on the proportion that such Holder’s Allowed General Unsecured Claim bears to the aggregate amount of Allowed Class 3 General Unsecured Claims) of the $4 million GUC Cash Distribution Pool; provided, further, if Class 3 votes to accept the Plan, each Holder of an Allowed Class 3 Claim shall also receive a release from the Debtor and its Estate of any Avoidance Action against such Holder of the Allowed Class 3 Claim, which release shall be effective as of the Effective Date.
5. Ryohin Keikuku Co., Ltd. (‘RKJ’) will contribute its RKJ Unsecured Claims as capital in the Reorganized Debtor.
6. In consideration of, among other things, RKJ’s agreement to: (1) in its capacities as the DIP Lender and the Exit Facility Lender, roll the DIP Facility Claims into a portion of the Exit Facility, (2) forego distributions from the GUC Cash Distribution Pool on account of its RKJ Unsecured Claims, (3) fund the GUC Cash Distribution Pool (via proceeds from the Exit Facility) for the benefit of, and pro rata distribution to, Holders of Allowed Class 3 General Unsecured Claims, and (4) provide the Exit Facility to, among other things, fund distributions under the Plan and provide the Reorganized Debtor with additional liquidity that may be drawn on from time to time, as necessary, by the Reorganized Debtor to, among other things, fund business operations in the future and provide the Reorganized Debtor with a flexible and sustainable capital structure, on the Effective Date, RKJ will retain its Interest in the Reorganized Debtor

The Debtor is seeking to confirm the Plan pursuant to section 1129(a) of the Bankruptcy Code and will not be seek a 'cramdown' pursuant to section 1129(b) of the Bankruptcy Code. Accordingly, the Plan can be confirmed only if Class 3 votes to accept the Plan.”

The following is an amended summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement; Also see changes in bold, and Liquidation Analysis below):

• Class 1 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $0 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 $28,000 and expected recovery is 100%.
• Class 3 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $6.0mn – $8.0mn and expected recovery is 50%-66.67%. Each Holder of an Allowed Class 3 General Unsecured Claim shall receive its pro rata share (calculated based on the proportion that such Holder’s Allowed Class 3 General Unsecured Claim bears to the aggregate amount of Allowed Class 3 General Unsecured Claims) of the $4.0mn GUC Cash Distribution Pool; provided, further, if Class 3 votes to accept the Plan, each Holder of an Allowed Class 3 General Unsecured Claim shall also receive a release from the Debtor and its Estate of any Avoidance Actions against such Holder of the Allowed Class 3 Claim, which release shall be effective as of the Effective Date.
• Class 4 (“RKJ Unsecured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $63.4mn and on the Effective Date, the RKJ Unsecured Claims shall be deemed contributed as capital in the Reorganized Debtor. For the avoidance of doubt, the Holder of the RKJ Unsecured Claims shall be not receive any distribution on account of its RKJ Unsecured Claims from the GUC Cash Distribution Pool.
• Class 5 (“Interests in MUJI”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is N/A. The Plan leaves unaltered the legal, equitable and contractual rights to which such Holder is entitled on account of such interests.

Further Background

On July 10, 2020, MUJI U.S.A. Limited (“Muji” or the “Debtor”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 20-11805. At filing, the Debtor, a minimalist lifestyle brand/retailer owned by Japan's Ryohin Keikaku Co., Ltd. ("Ryohin") noted estimated assets between $50.0mn and $100.0mn; and estimated liabilities between $50.0mn and $100.0mn.

The Debtor operates 18 Muji stores in the United States (the majority in New York City and on the West Coast) as part of Ryohin's 1,000 (plus) global chain of Muji stores operating under the banner: "We spare no effort to serve the world as a sustainable entity."

Events Leading to the Chapter 11 Filing

The Disclosure Statement [Docket No. 217] notes, “…the Debtor opened the first of its stores in the United States in late 2007. The Debtor thereafter strategically expanded its footprint in the United States such that by December 31, 2019 the Debtor operated over twenty (20) stores in five states.

The Debtor experienced operating losses for each year since 2017, which losses were funded by an increase in the managed cash overdraft (discussed above) and issuance of common stock to RKJ. A large portion of these losses are directly attributable to the Debtor having expanded its footprint quickly and entered into expensive, above-market leases for numerous store locations.

The Debtor experienced continued operating losses in January and February 2020, and was struggling financially even prior to the outbreak of COVID-19. However, such issues were exacerbated by the COVID-19 pandemic as all of the Debtor’s stores were forced to close due to orders by various state and local authorities.

The Debtor ultimately determined that a proceeding under chapter 11 of the Bankruptcy Code was in the best interests of the Debtor and its stakeholders, with the intent of restructuring its operations and right-sizing its footprint, while also continuing to grow its online presence.

In preparation for a bankruptcy Filing, the Debtor negotiated with RKJ (in such capacity, the ‘DIP Lender’) to extend it debtor-in-possession financing consisting of up to $22.0 million in secured, delayed-draw term loans. The DIP Facility provided MUJI with timely access to liquidity while it restarted operations.”

The Amended Disclosure Statement [Docket No. 217] attached following documents:

• Exhibit A: Plan (separately filed at Docket No. 218)
• Exhibit B: Liquidation Analysis (separately filed at Docket No. 220)
• Exhibit C: Financial Projections (separately filed at Docket No. 220)
• Exhibit D: Tax Consequences (separately filed at Docket No. 220)

Liquidation Analysis (See Exhibit 1 at Docket No. 220 for notes)

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