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December 23, 2020 – Further to its November 10th bidding procedures order [Docket No. 141] and the auction concluded on December 7th, the Court hearing the YogaWorks cases issued an order approving a $7.3mn sale of assets to The YW Company (“the Buyer”) [Docket No. 240]. The APA is attached to the order as Exhibit A.
On December 8, the Debtors designated MEP Capital Management, LLC and affiliates of GoDigital Media Group, Inc. (winning bid $9.6mn) as the Successful Bidder for their sale of Assets, with GuruNanda, LLC as the back-up bidder ($9.5mn). The Successful Bidder’s winning $9.6mn bid was comprised of $7.3mn in cash and an additional $2.3mn in non-cash consideration (the “Successful Bid”). GuruNanda’s back-up bid consisted of $7.25mn in cash and $2.25mn of non-cash considerations [Docket No. 200].
The auction had been paced by credit bidding stalking horse Serene Investment Management (“Serene,” $5.0mn opener) which has now finished out of the money and will be entitled to a $150k break-up fee.
It is not, however, that modest break-up fee that will likely leave Serene feeling none the worse for its efforts; Serene is also the Debtors’ prepetition and debtor-in-possession (“DIP”) lender, having purchased the Debtors’ $10.0mn of prepetition senior debt just prior to the Debtors’ Chapter 11 filings; with some of that debt now rolled into DIP financing. What Serene paid for the prepetition debt is unclear, but it had already changed hands once and it was undoubtedly at far below its face value.
Key Terms of APA:
- Seller: YogaWorks, Inc., a Delaware C-Corporation
- Buyer: YW Company LLC , a California limited liability company
- Purchase Price: The aggregate purchase price will be $7.3mn in cash (the “Cash Purchase Price”) plus (i) the gross revenue participation; (ii) the $75k Earnout obligation; and (iii) the assumptions of the Assumed liabilities, and the Cash Purchase Price shall be paid by buyer at closing.
On November 10th, the court issued an order approving (i) proposed bidding procedures in respect of the sale of substantially all of the Debtors’ assets and (ii) the Debtors’ stalking horse arrangement with YogaWorks Investment Fund LLC (“YWIF” or the “Stalking Horse,” an affiliate of Serene) further to which the Stalking Horse agreed to pace the sale process with an up to $5.0mn bid [Docket No. 141].
The Debtors’ motion [Docket No. 76] adds, “As noted and discussed in the First Day Declarations, the Debtors are experiencing a severe liquidity crisis. In light of their significant liquidity constraints, they have determined, in their business judgment, that a shorter marketing period offers the estates the best chance of preserving the Debtors’ value during the sale process, saving jobs and maximizing returns to creditors. It will allow the Debtors to devote the funds necessary to maintaining their businesses as a going concern through the marketing and auction period. Further, the proposed timeline will allow the Stalking Horse Bidder, or other Successful Bidder, to close the transaction and be up and running before the holidays and possibly before the start of the new year, which is, by far, the busiest time of the year in the Debtors’ industry.
As discussed in the First Day Declarations, the Debtors have been marketed extensively for months prior to the commencement of these Cases. Given this extensive pre-petition exposure, it is unlikely that extending the marketing period beyond that which is proposed in this Motion will garner any additional interest and will only serve to further heighten the Debtors’ severe liquidity constraints. The bidding process discussed herein has been carefully crafted to balance the needs of a meaningful sales process and the interests of the estates’ stakeholders with the economic realities facing these Debtors.”
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