RTI Holding Company, LLC – Seeks Approval of Disclosure Statement, Proposes February 4th Confirmation Hearing

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November 25, 2020 – The Debtors filed a motion requesting Court approval of (i) their Disclosure Statement, (ii) proposed Plan solicitation and voting procedures and (iii) a proposed schedule culminating in a February 4th Plan confirmation hearing [Docket No. 612].

On November 6, 2020, the Debtors filed the a Chapter 11 Plan of Reorganization and a related Disclosure Statement which set out “a dual path whereby the Debtors will either reorganize via a consensual transaction that would provide for the Debtors to emerge from these chapter 11 proceedings under new ownership by the Prepetition Secured Creditors or sell their assets as a going concern” [Docket Nos. 353 and 354, respectively].

On November 20th, the Court hearing the RTI Holding Company cases concretized the possible sale path of the Debtors' "dual path" strategy by issuing 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 on January 19, 2021 and a sale hearing on February 4, 2021 [Docket No. 585].

Propsed Key Dates

  • Voting deadline: January 22, 2021
  • Confirmation Objection deadline: December 24, 2020
  • Confirmation hearing: February 4, 2021

Plan Overview

The Disclosure Statement [Docket No. 354] notes, “Prior to the Petition Date, the Debtors engaged in extensive, good-faith negotiations with their Prepetition Secured Creditors to develop a comprehensive financing, restructuring, and recapitalization plan to be implemented through these Chapter 11 Cases. That agreement was memorialized in the Restructuring Support Agreement, attached hereto as Exhibit B, executed by the Debtors and the Prepetition Secured Creditors. The Debtors and the Prepetition Secured Creditors determined that it was the best option for the Debtors to file for chapter 11 with an agreement on a Plan that provides the possibility of recoveries to all of the Debtors’ stakeholders and allows the Debtors to undertake the necessary financial and operational restructurings.

The Plan reflects the agreement reached among the Debtors and Prepetition Secured Creditors to follow a dual path whereby the Debtors will either reorganize via a consensual transaction that would provide for the Debtors to emerge from these chapter 11 proceedings under new ownership by the Prepetition Secured Creditors or sell their assets as a going concern. The Debtors and the Prepetition Secured Creditors believe that the financial restructuring, the operational restructuring (through, among other things, focused lease rejections) and the other transactions reflected in the Plan would position the Reorganized Debtors well to succeed post-emergence from bankruptcy. With a sustainable business plan and adequate operating liquidity, the Reorganized Debtors will be positioned to compete more effectively in the challenging casual dining industry. 

Pursuant to the Plan, the operations of the Debtors will be bifurcated. Specifically, all of RTI’s operating assets other than RT Lodge and interests in its subsidiaries shall be transferred to RT Asset Company, which shall be wholly-owned after the Effective Date by TCW, subject to dilution. Also, pursuant to the Plan, the Debtors will transfer to each Holder of an Allowed Subclass 3A Claim its Pro Rata share of one hundred percent (100%) of the Equity Interests in RT Lodge Company, which shall retain the RT Lodge.”

The following is a summary of classes, claims, voting rights and expected recoveries (defined terms are in the Plan and/or Disclosure Statement):

  • Class 1 (“Non-Tax Priority Claim”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated aggregate amount of claims is $0 – $770,331 and the estimated recovery is 100%.
  • Class 2 (“Miscellaneous Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated aggregate amount of claims is $0.50mn and the estimated recovery is 100%.
  • Class 3 (“Prepetition Secured Debt Claims”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $37.91mn and estimated recovery is [ ]. On the Effective Date, (1) unless the Holders of the DIP Facility Claims and Prepetition Secured Debt Claims (other than with respect to any such Claims that have been credit bid in connection with a Successful Bid) have been paid in full previously from Net Sale Proceeds, each Holder of an Allowed Subclass 3A Claim shall receive, in full satisfaction, settlement, discharge and release of, and in exchange for such claim, its Pro Rata share of (i) the GS Cash Payment, (ii) any GS Adjustment Equity, and (iii) one hundred percent (100%) of the equity in RT Lodge Company; and (2) unless it has been paid in full previously from Net Sale Proceeds, each Holder of an Allowed Subclass 3B Claim shall receive, in full satisfaction, settlement, discharge and release of, and in exchange for such claim, its Pro Rata share of (i) the TCW Cash Payment and (ii) one hundred percent (100%) of the equity in RT Asset Company less any GS Adjustment Equity, subject to dilution on account of the Warrants and MIP, with all such entities, distributions and transfers subject to ARTICLE V.P of the Plan and the definition of Restructuring in ARTICLE I.C of the Plan. If a Successful Bid is selected after the Auction, notwithstanding anything to the contrary herein. (including, but not limited to, the description of the DIP Facility as priming), the proceeds of all Asset Sales by the Debtors made prior to the Effective Date shall first be applied to the repayment of the Prepetition Secured Debt Claims (other than any such Claims that have been credit bid in connection with a Successful Bid) on the Effective Date, and following their repayment in full, repayment of the DIP Facility Claims (other than any such Claims that have been credit bid in connection with a Successful Bid) as set forth in ARTICLE II.C of the Plan on the Effective Date. For avoidance of doubt, Class 3 shall be a Vacant Class if the Prepetition Secured Debt Claims (other than any such Claims that have been credit bid in connection with a Successful Bid) have been paid in full from Net Sale Proceeds before the Effective Date, and the subsections of ARTICLE III.C.3 of the Plan (other than the immediately preceding sentence and this sentence) shall no longer be operative. If Class 3 shall be come a Vacant Class, then in addition all of the provisions of the Plan related to ARTICLE III.C.3.c of the Plan shall not be operative, including (without limitation) provisions that implement or reference exit financing or the assumption of executory contracts and unexpired leases of the Debtors, unless such contracts and/or leases are listed on a schedule to the Plan Supplement.
  • Class 4 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $112.1mn – $117.4mn and estimated recovery is [ ] . Each holder of an Allowed General Unsecured Claim shall receive its Pro Rata share of [___] (the “Class 4 Aggregate Cash Distribution”).
  • Class 5 (“Preserved Intercompany Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated aggregate amount of claims is N/A and the estimated recovery is N/A.
  • Class 6 (“Extinguished Intercompany Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated aggregate amount of claims is N/A and the estimated recovery is N/A. 
  • Class 7 (“Dissenters Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated aggregate amount of claims is N/A and the estimated recovery is N/A.
  • Class 8 (“Equity Interests in Holding”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated aggregate amount of claims is N/A and the estimated recovery is N/A.
  • Class 9 (“Intercompany Interests”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated aggregate amount of claims is N/A and the estimated recovery is 100%.

The Disclosure Statement [Docket No. 354] attached the following documents:

  • Exhibit A: Plan of Reorganization 
  • Exhibit B: Restructuring Support Agreement 
  • Exhibit C: Organizational Chart of the Debtors 
  • Exhibit D: Liquidation Analysis (to be filed)
  • Exhibit E: Financial Projections (to be filed)

Prepetition and Post-Emergence Capital Structure

 As of the Petition date, the Debtors had outstanding funded debt obligations in the aggregate principal amount of approximately $37.91 million, and related interest and accruals.  Additionally, as of the Petition Date, the Debtors had an estimated $18.8 million of outstanding accounts payable, on an unsecured basis, to vendors, customers, service providers, and landlords. The Debtors’ pro forma exit capital structure will consist of (a) the Exit L/C Facility (equal to up to $10,000,000 or such lesser amount agreed by the Reorganized Debtors), (b) the Exit Term Loan (equal to the lesser of (i) $30,000,000 less 90% of the Net Sale Proceeds, if any, in excess of $2,500,000 (excluding any proceeds from the sale of RT Lodge) and (ii) 1.2 times the agreed Broker’s Opinion of Value of the Debtors’ real property) and (c) New Common Shares in RT Asset Company: 

 

  • FN2 Dollar amounts are in millions and do not include accrued and unpaid interest, fees, expenses and other obligations.  
  • FN3 Amount consists of Existing Letters of Credit in the approximate amount of $9.55 million and prepetition revolving loan advance of $2 million.   

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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