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December 8, 2020 – Further to a November 10th bidding procedures order [Docket No. 141] and the conclusion of a December 7th auction [Docket No. 200], 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 consideration.
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.
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 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 motion (see Exhibit 5 to the proposed bidding procedures order attached to the motion at Exhibit A).
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”).
The Debtors' motion [Docket No. 76] notes, “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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