November 4, 2020 – The Debtors filed a First Amended Chapter 11 Plan and a related Disclosure Statement [Docket Nos. 1494 and 1495, respectively], and further filed a motion requesting Court approval of (i) the Disclosure Statement, (ii) proposed Plan solicitation and voting procedures and (iii) a proposed timetable culminating in a December 18th confirmation hearing [Docket No. 1497]. 

On May 27, 2020, "off-price retailer" Tuesday Morning Corporation and six affiliated Debtors (Nasdaq "TUES;" “TMC” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Northern District of Texas; noting estimated assets of $92.0mn and estimated liabilities of $88.35mn. At filing, TMC announced that “it will pursue financial and operational reorganization designed to allow the Company to reduce its outstanding liabilities and strengthen its overall financial position. These actions are in response to the immense strain the COVID-19 pandemic and related store closures have put on the business."

The press release added that the reorganization process would enable TMC "to realign its store footprint" and that it "expects to close approximately 230 of its 687 stores" over the course of the summer and to leave a go-forward footprint of approximately 450 stores. 

The Disclosure Statement adds as to the Debtors' store closing efforts: "On the Petition Date the Debtors operated 687 stores in 40 states and distribution centers in Phoenix and Dallas. The Debtors’ largest store concentrations are in Texas, Florida, California, Virginia, Georgia, and North Carolina. Since filing, the Debtors have commenced store closing sales at approximately 200 store locations and have closed their Phoenix distribution facility." 

Plan Overview

The Disclosure Statement [Docket No. 1495] notes, “The Plan provides for the resolution of Claims against and Interests in the Debtors and implements a distribution scheme pursuant to the Bankruptcy Code. Distributions under the Plan shall be made with: (1) Cash on hand, including Cash from operations; (2) the New ABL Credit Facility; (3) the New Real Estate Credit Facility; (4) the issuance of the General Unsecured Bonds; and (5) Reinstatement of the Tuesday Morning Corporation Interests, as applicable. Under the Plan, Claims and Interests are classified, and each class has its own treatment. The table below describes each class of Claims and Interests, which holders of Claims and Interests belong in each class, the treatment of each class of Claims or Interests, and the expected recovery of each holder of Claims or Interests in the respective class.”

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

• Class 1 (“Other Priority Unsecured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $0 and expected recovery is 100%. 
• Class 2 (“Other Secured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $200k and expected recovery is 100%. Each holder of an Allowed Other Secured Claim shall receive: (i) Payment in full in Cash of its Allowed Class 2 Claim; (ii) The collateral securing its Allowed Class 2 Claim; provided, however, any collateral remaining after satisfaction of such Allowed Class 2 Claim shall revest in the applicable Reorganized Debtor pursuant to the Plan; or (iii) Reinstatement of its Allowed Class 2 Claim.
• Class 3 (“Secured Tax Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $0 (Tax claims are generally being paid in the ordinary course of business) and expected recovery is 100%. Each holder shall receive: (i) Payment in full in Cash of its Allowed Class 3 Claim; (ii) the collateral securing its Allowed Class 3 Claim; provided, however, any collateral remaining after satisfaction of such Allowed Class 3 Claim shall revest in the applicable Reorganized Debtor pursuant to the Plan; or (iii) Such other treatment consistent with the requirements of Bankruptcy Code section 1129(a)(9).
• Class 4 (“Existing First Lien Credit Facility Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $100k and expected recovery is 100%. Each holder shall receive Payment in Full, in Cash, of its Allowed Class 4 Claim plus any and all fees, interest (both pre and post-Petition Date), and reimbursement of expenses, and any other amounts owed or arising under the Existing First Lien Credit Documents through the time of Payment in Full, in three equal instalments to be paid on the 30th, 60th, and 90th days after the Effective Date (each a “Payment Date”). If a Payment Date does not fall on a Business Day, such Payment Date shall be extended to the next Business Day. All liens and security interests granted to secure such Allowed Existing First Lien Credit Facility Claims shall be retained until such payments shall have been made. Further, in the event that the Existing First Lien Agent is the agent for the New ABL Credit Facility, it shall retain the lines and security interests securing the Existing First Lien Credit Facility Claims after such payments are made and have such liens and security interests secure the New ABL Credit Facility. The estimated total amount of Allowed Class 4 Claims is $100,000.
• Class 5 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $116.7mn and expected recovery is 100%. Each holder of an Allowed Class 5 Claim shall receive its Pro Rata share of (i) the General Unsecured Cash Fund and (ii) the General Unsecured Bonds. 
• Class 6 (“Convenience Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $8.3mn and expected recovery is 100%. Each holder of an Allowed Class 6 Claim shall receive the Convenience Claim Distribution.
• Class 7 (“Intercompany Claims”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan. On the Effective Date, Class 7 Claims shall be, at the option of the Debtors, either Reinstated or cancelled and released without any distribution.
• Class 8 (“Tuesday Morning Interests”) is impaired and entitled to vote on the Plan. On the Distribution Date, each Class 8 Interests shall be exchanged for (1) one share of the New Common Stock and (2) a Share Purchase Right entitling the holder to purchase a Pro Rata portion of the Eligible Holders Rights Offering Common Stock. On the Effective Date, Tuesday Morning Corporation Interests consisting of options, warrants, or other rights, contractual or otherwise, to acquire shares of the Existing Common Stock shall be Reinstated, subject to dilution as a result of the issuance of the Rights Offering Common Stock and the issuance of equity securities on and after the Effective Date pursuant to the Management Incentive Plan.
• Class 9 (“Intercompany Interests”) is unimpaired, deemed to accept and not entitled to vote on the Plan. 

The following documents were attached to the Disclosure Statement [Docket No. 1495]:

• Exhibit 1: Chapter 11 Plan (Filed separately at Docket No. 1494)
• Exhibit 2: Liquidation Analysis
• Exhibit 3: Financial Projections
• Exhibit 4: Terms of the New ABL Credit Facility
• Exhibit 5: Backstop Commitment Letter

Proposed Key Dates:

• Voting Deadline: December 15, 2020
• Objections Deadline: December 15, 2020
• Confirmation Hearing: December 18, 2020

Liquidation Analysis (See Exhibit 3 of Disclosure Statement for notes [Docket No. 1495]) 
About the Debtors

Tuesday Morning Corporation (NASDAQ: TUES) 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 at filing operated 687 stores in 39 states.

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