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November 3, 2020 – The Debtors filed a motion requesting dismissal of their Chapter 11 cases, with certain of the dismissals to occur immediately and others upon reaching certain milestones [Docket No. 455].
On April 29, 2020, TooJay's Management LLC and 30 affiliated Debtors (“TooJay's” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of Florida, lead case number 20-114792. At filing, the COVID-stricken Debtors, owner operators of 28 deli-styled restaurants in Florida, noted estimated assets between $50.0mn and $100.0mn; and estimated liabilities between $10.0mn and $50.0mn.
The conversion motion states, “The Debtors commenced these Chapter 11 Cases to preserve the going concern value of their businesses. To efficiently implement a restructuring, the Debtors pursued a parallel path in these Chapter 11 Cases: (i) a restructuring which would require the Debtors to obtain incremental liquidity in order to finance their ongoing operations, and (ii) a sale of their businesses as a going concern. Regrettably, given the impact of the COVID-19 pandemic on the restaurant sector, and the global economy generally, the Debtors were unable to attract additional capital. Accordingly, following a robust marketing process and an auction, the Court entered its Order (I) Authorizing the Sale of Substantially All of the Debtors’ Assets Free and Clear of Liens, Encumbrances, and Other Interests; (II) Authorizing and Approving the Asset Purchase Agreement; (III) Approving Procedures and Rights Related to Assumption and Assignment of Certain Executory Contracts and Unexpired Leases; and (IV) Granting Related Relief [ECF No. 393] (the ‘Sale Order’) approving the Asset Purchase Agreement (‘APA’) between the Debtors and TJ Management Holdco LLC ( ‘Purchaser’), an affiliate of the Debtors’ senior secured lender.
The sale closed on September 9, 2020 (‘Closing’). While the sale did not generate sufficient proceeds to allow the Debtors to make a distribution to the holders of allowed general unsecured claims, the sale will permit the Debtors to pay all allowed administrative expense claims of the estates that were not assumed by the Purchaser. Equally important, the sale has preserved approximately 700 jobs and key trading relationships with the Debtors’ vendors, suppliers and landlords. Lastly, at Closing, the Debtors funded $3,034,474 into an Escrow maintained by Berger Singerman, LLP to pay, inter alia, allowed administrative expenses of the estates. As of the date hereof, Berger Singerman LLP continues to hold $1,396,754.87 in the Escrow.
In the Immediate Dismissal Cases, the Purchaser has either assumed the Retained Contracts, or the applicable Debtors have rejected their executory contracts and unexpired leases. There are no assets remaining to administer in those cases. Because the estates have been fully administered, and there are no funds available to distribute to the holders of allowed, general unsecured claims, there is no benefit to converting the Immediate Dismissal Cases to cases under Chapter 7. Accordingly, dismissal of the Immediate Dismissal Cases is in the best interest of the estates and their creditors.
The Debtors also request that the Court authorize the dismissal of the remaining Chapter 11 Cases: TooJay’s Altamonte, L.L.C.; TooJay’s Boynton Oakwood Square LLC; TooJay’s Palm Beach, L.L.C. and TooJay’s Management LLC (the ‘Applicable Debtors’) effective on the earlier of: (i) the date Purchaser files its notice electing to either assume or reject the respective lease(s) or (ii) December 31, 2020. As of that date, all of the Debtors’ cases will have been fully administered. Notwithstanding dismissal of the Applicable Debtors’ cases, the order shall expressly provide that the Court shall retain jurisdiction of purposes of adjudicating the Final Fee Applications and any disputes pertaining to the Escrow.”
Goals of the Chapter 11 Filing
The Piet Declaration (defined below) states: "The Debtors are filing this chapter 11 petition in order to preserve the going concern value of the Debtors’ assets and operations, restructure debt as necessary to the operations of the Debtor's business, and negotiate a plan of reorganization and to work with all of their existing landlords to address the impact of the temporary revenue reduction arising from state and city [COVID-19 related] regulations mandating the closure of the dining room at all restaurants."
Events Leading to the Chapter 11 Filing
In a declaration in support of the Chapter 11 filing (the “Piet Declaration”), Maxwell Piet, the Debtors' President and CEO, detailed the events leading to TooJay's' Chapter 11 filing.
The Piet Declaration states: "Prior to the COVID-19 pandemic and subsequent closures required by local governments, Debtors' businesses were operating profitably and there were plans to expand the chain into additional parts of Florida and the southeast region of the United States. Beginning in March 2020, the COVID-19 pandemic has caused the temporary or indefinite closure of the majority of Debtors’ restaurants and seriously affected the Debtors’ operations, revenues, and workforce. Although Debtors have taken proactive measures to reduce expenses wherever possible, including reducing the number of full-time employees and the fixed operating costs associated with Debtors' businesses making it challenging for Debtors to maintain profitability and other key financial health metrics that they are required to maintain by their lenders. As of March 29, 2020, Management was down to 290 full-time employees, compared to 1,114 at the end of February of 2020, and compared to 1,635 employees as of March of 2019. The reduction in sales has made it difficult for TooJay’s to maintain the level of profitability to which it has historically enjoyed and which it needs to continue operating its businesses.
In the interest of stabilizing their operations until closures related to COVID-19 are lifted, Debtors recently obtained an approximately $6,400,000 loan under the Paycheck Protection Program, which they plan to use on payroll and other expenses allowed under the program, including future rent."
About the Debtors
According to the Debtors: "TooJay’s began with a single location on the island of Palm Beach in 1981. The brand was born out of the passion for creating classic recipes and flavors of an authentic deli served with lots of love and amazing hospitality. Now, with locations across Florida, our focus is still the same – serving hearty portions of homemade comfort foods, handcrafted sandwiches and made-from-scratch soups, salads and baked goods. Our extensive menu provides options everyone loves from kids to the whole family."
The Piet Declaration adds: "Debtors are in the business of owning and operating twenty-eight (28) TooJay’s restaurants throughout the state of Florida, as well as a commissary and bakery. TooJay’s is a restaurant that focuses on providing the recipes and flavors of an authentic deli. Many TooJay’s restaurants are located at outlet malls or other large mixed-use retail properties. TooJay’s has an extensive menu and focuses on handcrafted sandwiches, made-from-scratch soups, salads and baked goods and is open for breakfast, lunch, and dinner. TooJay’s revenue streams come from its restaurants, take-out orders, delivery, and catering services."
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