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May 11, 2020 – The Debtors filed a motion requesting Court authority (i) to “close stores and begin wind-down operations” and (ii) to continue an existing relationship with Gordon Brothers Retail Partners, LLC ("Gordon Brothers" or "Consultant") further to which Gordon Brothers will manage the store closing process [Docket No. 27].
The Debtors are seeking Court authority to assume and perform under an existing May 2019 master consulting agreement (the “Master Consulting Agreement”) and a May 7, 2020 statement of work (the “SOW 4”) entered into with Gordon Brothers and further to which 600 of the Debtors’ stores have already been liquidated. Notwithstanding the Debtors’ insistence that there exists a “dual path” further to which going concern asset sales are still possible; this is an off-the-shelf store closing process that is intended to give the Debtors a running start when they begin reopening stores on May 15th.
There might be two paths, but the Debtors can only afford one to take one; and that one is a liquidation path. The motion also makes it clear that the Debtors’ want emphatic authority from the Court to force landlords to allow the store closing process to proceed unhindered; landlords having already threatened (and actioned) lock-outs and lease terminations.
The Debtors’ motion reads: “The Debtors have not made rent payments on many of their 734 leases since March, resulting in approximately $31 million in past due rent.
While the Debtors intend to pursue a marketing process to sell all or part of their assets, the Debtors do not have the capital to prolong the Wind-Down to run a full sale process. Accordingly, the Debtors will need to conduct an orderly wind-down of their retail operations. The Debtors believe that this dual-path process will best maximize value for all stakeholders.
The Debtors plan to conduct the Wind-Down in a manner that maximizes the value of their assets. The Debtors cannot initiate store-closing efforts until their stores reopen following the COVID-19 pandemic. And even after they can reopen, predicting consumer demand at that time is challenging. Accordingly, the purpose of this Motion is to put a process in place so that the Debtors can move to commence and conclude the Wind-Down as expeditiously as possible under the circumstances, but the Debtors cannot provide parties in interest certainty with respect to the ultimate sale end date. Nonetheless, the SOW 4 contemplates that the store closing sales will conclude 16 weeks after they commence. Because the Debtors currently plan to reopen 567 of their stores by May 15, 2020—and all of their stores during the interim period—interim relief related to this motion is necessary to maximize the value of the Debtors’ estate.
To implement the Wind-Down and store closing, the Debtors intend to capitalize on their long-standing relationship with Gordon Brothers Retail Partners, LLC (‘Gordon Brothers’ or ‘Consultant’). More specifically, Gordon Brothers has advised the Debtors on liquidating inventory at approximately 600 locations in the last 2 years. Accordingly, they have knowledge of the Debtors’ systems, protocols, and customers that other companies in the industry do not have. Additionally, Gordon Brothers is facilitating the store closings on a fee structure substantially similar to its ordinary course of dealing. Finally, the Debtors filed these chapter 11 cases on an emergency basis due to, among other things, the acceleration of landlord lock outs and purported lease terminations. All of these factors support the Debtors’ business judgment to retain Gordon Brothers for this store closing process.
The Debtors also request that no entity, including, without limitation, utilities, landlords, creditors, and all persons acting for or on their behalf shall be permitted to interfere with or otherwise impede the conduct of the Store Closings, or institute any action against the Debtors in any court (other than in this Court) or before any administrative body that in any way directly or indirectly interferes with, obstructs, or otherwise impedes the conduct of the Store Closings or the advertising and promotion (including through the posting of signs) of the Store Closings."
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