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February 14, 2023 – The Debtors filed a motion requesting Court authority to close 264 underperforming stores (the "Closing Stores") [Docket No. 15, with a list of the Closing Stores beginning on p.33, we also attach an Excel spreadsheet].
Somewhat unusually, the motion does not include a request to appoint a consultant in respect of a store liquidation process that the Debtors hope to complete in 8 weeks. The Debtors' motion notes that the Debtors are "capable of continuing and completing the Sales and Store Closings without the assistance, and without the significant expense, of a liquidation consultant." Gordon Brothers had been slated to fill that role, as required by proposed debtor-in-possession ("DIP") financing offered by prepetition lenders, but "since the Debtors found alternative, more favorable DIP financing, the Debtors have filed a motion seeking to reject such agreement as an exercise of their sound business judgment." That more favorable DIP financing comes from Invictus Global Management, LLC ("Invictus") which as of February 10th (the date of the Debtors' Chapter 11-authorizing board minutes) had not yet been selected as the preferred provider of the DIP financing.
A hearing to consider the motion is scheduled for February 15, 2023.
On February 14, 2023, Tuesday Morning Corporation and six affiliated Debtors (“Tuesday Morning” or the “Debtors”) filed for Chapter 11 protection noting estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn.
In a press release announcing the filing, Tuesday Morning notes that: "it is pursuing a financial and operational reorganization to enable the Company to reduce its outstanding liabilities, obtain significant and necessary capital, and ultimately transform into a nimbler retailer that serves heritage markets in a profitable manner….The Company has also obtained a commitment from Invictus to provide $51.5 million of debtor-in-possession ('DIP') financing to support ongoing operations during the proceedings. The DIP financing is subject to approval of the Bankruptcy Court.
During the restructuring process, Tuesday Morning plans to focus on optimizing its store footprint and focusing on its core and heritage markets. The Company intends to close stores in low-traffic regions while allocating the proper resources to remaining stores in high-traffic regions. The Company believes this targeted approach to winding down unprofitable and underperforming stores will position Tuesday Morning to emerge from bankruptcy with a profitable, cash-generating store fleet that serves its most engaged and loyal customers."
The Store Closing Motion
The motion [Docket No. 15] states, “The Debtors have faced unprecedented challenges, including underperforming sales at their 464 retail locations (the ‘Stores’). To address these challenges, the Debtors’ management team, in the exercise of their sound business judgment and in consultation with their advisors, ultimately determined that immediate liquidation of the Company’s inventory at its underperforming store locations (the ‘Closing Stores’) under the supervision of the Bankruptcy Court is the best strategy to maximize value for the benefit of creditors. As such, the Debtors have determined, in their business judgment, that it is in the best interests of their estates, creditors, and all parties-in-interests to seek authority to close and wind down or conduct similar themed sales (the ‘Sales’) to conduct store closing sales at the Closing Stores (the ‘Store Closings’).
In conjunction with their analysis of the Stores’ performance, the Debtors also conducted a review and analysis of their inventory levels at the Closing Stores. Such inventory (the ‘Merchandise’) will be included in and sold as part of the Sales. The Debtors expect that the bulk of the Sales and the shuttering of the Closing Stores will take approximately 8 weeks to complete. Once the Sales and closings are complete, the Debtors intend to prepare those Closing Stores for turnover to the applicable landlords.
The Debtors have determined, in an exercise of their business judgment, that the Sales are necessary to maximize the value of the assets being sold. At this time the Debtors are capable of continuing and completing the Sales and Store Closings without the assistance, and without the significant expense, of a liquidation consultantFN2.
FN2: The prepetition lenders that provided the ABL DIP Proposal (as defined in the DIP motion) required that the Debtors negotiate and enter into a consultant agreement with Gordon Brothers. Since the Debtors found alternative, more favorable DIP financing, the Debtors have filed a motion seeking to reject such agreement as an exercise of their sound business judgment."
About the Debtors
According to the Debtors: “Tuesday Morning Corporation is one of the original off-price retailers specializing in name-brand, high-quality products for the home, including upscale home textiles, home furnishings, housewares, gourmet food, toys and seasonal décor, at prices generally below those found in boutique, specialty and department stores, catalogs and on-line retailers. Based in Dallas, Texas, the Company opened its first store in 1974 and currently operates 487 stores in 40 states."
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