November 20, 2020 – The Court hearing the RTI Holding Company cases issued an order (i) approving proposed bidding procedures, including bidder protections for any selected stalking horse, and (ii) an auction/sale timetable culminating in an auction (if topping bid, defined below, received) on January 19, 2021 and a sale hearing on February 4, 2021 [Docket No. 585].

Background

The Debtors conducted a "robust" prepetition marketing process, the fruitless results of which played an important role in pushing the Debtors into bankruptcy. However, those efforts were in respect of an out-of-court sale and the Debtors do not provide guidance on whether an in-court, section 363 driven process might change the interest level of any of the 154 parties contacted in that prepetition effort. Should an interested third party appear, it will have to do so with a bid that "is sufficient to pay all DIP Facility claims and Pre-Petition Secured Debt Claims…in cash in full on the closing date (a 'Topping Bid')."

The Debtors' assets include, inter alia: (i) 236 (Petition date) leased restaurant locations, (ii) developed and undeveloped real estate in the states of Alabama, Connecticut, Florida, Indiana, Kentucky, Maryland, Michigan, Missouri, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, and Virginia, (iii) intellectual property and (iv) liquor licenses valued at approximately of $13.9mn.

The Debtors' (now approved) bidder protections include "a Breakup Fee of up to 3.0% of the cash consideration offered by and selected stalking horse purchaser and an expense reimbursement of up to $500,000."

The Debtors' motion states, “To expeditiously exit bankruptcy while maximizing the value of their estates, the Debtors are moving forward swiftly with a marketing process for the purpose of ascertaining the most favorable means to restructure their debts. The centerpiece of the Debtors’ proposed restructuring, which has the support of the Debtors’ senior secured lenders and post-petition lenders, Goldman Sachs Specialty Lending Group, L.P. (‘GS’ or the ‘Agent’), and TCW Direct Lending LLC, a Delaware limited liability company, TCW Skyline Lending, L.P., a Delaware limited partnership, and TCW Brazos Fund LLC (collectively, ‘TCW’, together with GS, the ‘Secured Creditors’), is a dual-track process that provides for either (a) the stand-alone reorganization of the Debtors business (the ‘Stand-Alone Reorganization’) pursuant to the terms of a Restructuring Support Agreement, dated October 8, 2020, entered into between the Debtors and the Secured Creditors (the ‘RSA’); or (b) the sale of substantially all of the Debtors’ assets (the ‘Sale Process’) and distributions to creditors of the net sales proceeds (the ‘Sale’) to the Secured Creditors upon their credit bid or to a third party if a bid (or bids) is submitted by one or more third parties other than the Secured Creditors that, inter alia, provides for cash consideration at closing that is sufficient to pay all DIP Facility claims and Pre-Petition Secured Debt Claims (as defined in the RSA) in cash in full on the closing date (a ‘Topping Bid’).

The Bid Procedures will provide the formal framework for the Sale Process, which has been designed to elicit value-maximizing bids for substantially all of the Debtors’ assets. Among other things, the Bid Procedures (a) set forth the timeline for the Sale Process that is reasonable and appropriate to elicit value-maximizing bids for the Debtors’ assets in accordance with the RSA, (b) set forth the basic rules for submitting bids for the Debtors’ assets and a potential Auction and (c) provide major creditor groups with consultation rights at various stages in the process. The proposed Bid Procedures comply with the requirements of the Bankruptcy Code, the Bankruptcy Rules and the Local Rules and, therefore, should be approved.

The Debtors will seek approval of the sale or sales of substantially all of their Assets only in the event that the Sale Process is successful in attracting a Topping Bid. The Bid Procedures set forth a formula, which will be used to determine the minimum amount that a bid or collection of bids must provide for the Debtors to proceed with the Sale. In summary, the Debtors will proceed with the Auction only if a bid (or bids) is received which benefits the estates, provides for cash deposits of no less than ten percent (10%) of the purchase price and for cash consideration that is sufficient to pay all DIP Facility claims and Pre-Petition Secured Debt Claims in full on the closing date.

Solely in the event that a Sale yields a recovery more favorable than that under the restructuring transactions contemplated by the Plan, the Debtors may choose to pursue the Sale, subject to the terms and conditions of the RSA. The parallel sale process will allow the Debtors to ensure that the disposition of their chapter 11 cases maximizes value, regardless of whether such cases culminate in a Sale or a restructuring contemplated by the Plan. While the Debtors reserve the right to make a determination at any time whether to proceed with the Sale to conclusion, the Debtors will make such evaluation after the January 7, 2021, bid deadline, at which time the Debtors will file a notice with the Court to inform parties in interest whether one or more bids constituting a Topping Bid have been received."

Prepetition Marketing Efforts

The Debtors' motion continues: "The Debtors’ Sale Process is being managed by their investment banker, FocalPoint Securities, LLC ('FocalPoint'). In the spring of 2020, the Debtors retained FocalPoint to assist in the exploration of a potential refinancing and/or restructuring transaction (the 'Out of Court Transaction') in order to refinance its existing senior debt and fund a turnaround plan, including through seeking continued rent abatements and/or concessions from their landlords to provide relief during these unprecedented times. Prior to the Petition Date, FocalPoint conducted a robust marketing process including outreach to a broad universe of 154 financial investors. As a result, 67 parties executed nondisclosure agreements and were provided with confidential evaluation materials and access to a virtual data room; 61 parties declined after initial review of the opportunity prior to executing a nondisclosure agreement; and 26 parties reviewed the nondisclosure agreement and preliminary transaction information without providing definitive indication either way. At the initial indication of interest (“IOI”) deadline of August 14, 2020, one party had submitted an IOI but ultimately withdrew the consideration after further review. Without any party interested in pursuing an Out of Court Transaction, the Debtors determined, among other reasons, that it was necessary to file these chapter 11 cases.”

Key Dates:

• Deadline for execution of Stalking Horse Agreement, if any: December 10, 2020.
• Service of Notice of Confirmation Hearing and filing of form of Asset Purchase Agreement: December 14, 2020.
• Qualified Bids Deadline: January 14, 2021.
• Auction (if Topping Bid received): January 19, 2021.
• Successful Bid approval hearing: January 22, 2021.
• Deadline to close Sale with Successful Bidder or Back-Up Bidder (if Topping Bid received): March 23, 2021.
• Sale and Confirmation Hearing: February 4, 2021.

About the Debtors

According to the Debtors: “Founded in 1972 in Knoxville, Tennessee, Ruby Tuesday, Inc., is dedicated to delighting guests with exceptional casual dining experiences that offer uncompromising quality paired with passionate service every time they visit. From signature handcrafted burgers to the farm-grown goodness of the Endless Garden Bar, Ruby Tuesday is proud of its long-standing history as an American classic and international favorite for nearly 50 years. The Company currently owns, operates and franchises casual dining restaurants in the United States, Guam, and five foreign countries under the Ruby Tuesday® brand. 

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