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December 24, 2020 – The Court hearing the PBS Brand cases issued an interim debtor-in-possession (“DIP”) financing order authorizing the Debtors to (i) access $2.5mn of new money DIP financing and (iii) use cash collateral [Docket No. 43].
It was all change as to DIP financing for the Debtors following the receipt of an objection from prepetition lender CrowdOut Capital LLC (“CrowdOut”) which argued that it was: "highly unusual, if not unthinkable…to file a chapter 11 case without having at least some dialogue with a senior secured lender. The Debtors’ failure to engage with CrowdOut in any manner regarding these chapter 11 cases is particularly glaring when, as here, the Debtors improperly seek approval of a non-consensual priming DIP loan" [Docket No. 25 filed on December 23rd].
CrowdOut did, however (in its own view), offer a carrot along with its objecting stick, noting that it "stands ready, willing, and able, to consummate DIP financing on terms that are markedly better and more favorable to the Debtors than the legally impermissible proposal presently before the Court."
The Debtors will have had a slightly different take on the clearly strained dialogue with Crowdout; CrowdOut having initiated a foreclosure action against the Debtors on December 10, 2020. It was this, awkward communication, announcing a "public sale to be held on December 28, 2020" which pushed the Debtors into their Chapter 11 filings.
On December 22nd, 2020, the Debtors requested Court authority to access $6.5mn of DIP financing (including up to $1.5mn on an interim basis) from PBS DIP Lender, LLC (an affiliate of Sortis Holdings, Inc. or “Sortis”), which had extended a $261.5k bridge loan to the Debtors on December 10th. Sortis, which had been contacted by the Debtors' investment banker in connection with a possible out-of-court sale transaction, had declined during that prepetition marketing process to pursue an acquisition in an out-of-court context.
Sortis recently formed "The Sortis Rescue Fund…to capitalize on the dislocation and market stress caused by the COVID-19 pandemic and subsequent economic fallout. The current recession is proving to be deep and intense enough to create situational distressed opportunities, particularly in hospitality, retail, office, and select operating businesses. The SRF does not make broad market acquisitions but rather rescues and acquires specifically targeted distressed assets in situations with strong value enhancement."
DIP Budget (See Exhibit B to Docket No. 43)
About the Debtors
According to the Debtors: "Punch Bowl Social is the first experiential food and beverage brand to bring a made-from-scratch menu and craft beverages together with social gaming in one design-forward environment. Punch Bowl Social was named as one of Fast Company’s 2019 Top 50 Most Innovative Companies in the World, a Nation’s Restaurant News Hot Concept in 2018, among more than a dozen other national and regional awards. Punch Bowl Social serves weekend brunch, lunch, dinner and late-night snacks alongside a variety of creative punches, local microbrews and craft non-alcoholic beverages."
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