YogaWorks, Inc. – Court Approves Bidding Procedures and Stalking Horse APA with Affiliate of Serene Management ($5mn Bid), Schedules December 9th Sale Hearing

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November 10, 2020 – The Court hearing the YogaWorks cases issued an order approving (i) proposed bidding procedures in respect of the sale of substantially all of the Debtors’ assets, (ii) the Debtors’ stalking horse arrangement with YogaWorks Investment Fund LLC (“YWIF” or the “Stalking Horse,” an affiliate of Serene Investment Management ("Serene") further to which the Stalking horse Bidder has agreed to pace the sale process with an up to $5.0mn bid and (iii) a proposed auction/sale timetable culminating in a December 7th auction and a December 9th sale hearing [Docket No. 141].

The Debtors want to move the sale process along quickly, aiming for 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.” The Debtors make clear the urgency of their situation in requesting Court authority for a truncated sale process, they have no money, the Stalking Horse is their only viable option and they need to be in position to attract new customers when those customers are acting on their new year's resolutions.

The Stalking Horse asset purchase agreement (the "APA") which memorializes Serene's current $5.0mn credit bid, and notes a $150k break-up fee, is filed with the order (see Exhibit 5 to the order).

Serene, also the Debtors' debtor-in-possession ("DIP") lender, is the present holder of $10.0mn of the Debtors' prepetition debt having purchased that debt just prior to the Debtors Chapter 11 filings. What Serene paid for that debt, which it can now credit bid at face value, is unknown; although we do know that it had already changed hands once when initial lender Avidbank assigned it to Great Hill Equity Partners V, LP (“GHP”).

Serene, which pitches itself as a "Lower Middle Markets Special Solutions" expert, has considerable recent experience buying assets out of bankruptcy, having recently acquired (or is in the process of acquiring) interests in Sugarfina, Warrior Custom Golf and FoodFirst Global Restaurants.

Background

The Debtors' motion [Docket No. 76] notes, “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.”

Key Terms of Stalking Horse Agreement

  • Seller: YogaWorks, Inc.
  • Buyer: YogaWorks Investment Fund LLC
  • Purchase Price: $5,000,000, which consists of (i) the credit bid consideration set forth in the Agreement. The Stalking Horse Bid also includes the assumption of liabilities.
  • Bid Protections: If the Agreement is terminated such that the Stalking Horse Bidder is entitled to the Break-up Fee as described in Section 7.4 of the Agreement (ie, kicks in with a winning bid of $13.5mn or more), the Debtors shall pay a break-up fee to the Stalking Horse Bidder in an amount equal to $150,000. The Initial Overbid Amount is $100,000. Bid increments thereafter shall be in the amount of $50,000.

Key Dates

  • Bid Deadline: December 4, 2020
  • Objection Deadline: December 2, 2020
  • Auction: December 7, 2020
  • Sale Hearing: December 9, 2020

About the Debtors

According to the Debtors: “YogaWorks is a leading provider of progressive and quality yoga that promotes total physical and emotional well-being. YogaWorks caters to students of all levels and ages with both traditional and innovative programming. It is also an international teaching school, cultivating the richest yoga talent from around the globe and setting the gold standard for teaching.”

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