Loyalty Ventures’ Chapter 11 plan effective as of June 2

By Sarah Lizee

Olympia, Wash., June 5 – Loyalty Ventures Inc.’s Chapter 11 plan went into effect on Friday, according to a notice filed with the U.S. Bankruptcy Court for the Southern District of Texas.

The plan was confirmed on April 27.

As a reminder, on March 10, Loyalty Ventures and some of its subsidiaries filed Chapter 11 petitions, and subsidiary LoyaltyOne, Co. sought protection under the Companies’ Creditors Arrangement Act in the Ontario Superior Court of Justice. As part of the CCAA proceedings, LoyaltyOne lined up a $70 million DIP secured credit facility with Bank of Montreal.

In 2021, Alliance Data Systems Corp., now Bread Financial Holdings, Inc., caused entities that operate the debtors’ BrandLoyalty business and the Air Miles reward program to spin off from Alliance and form a new corporate structure with Loyalty Ventures as the ultimate parent.

Alliance required Loyalty Ventures to take on debt in connection with the spinoff, including a $175 million term loan A, a $500 million term loan B and a $150 million revolver with Bank of America, NA as administrative and collateral agent.

Bank of Montreal agreed to acquire LoyaltyOne's Air Miles reward program business, with the deal subject to more favorable offers and other customary closing conditions.

Loyalty Ventures entered into a transaction support agreement with lenders holding over 72% of loan claims.

Under the agreement, the debtors sought to consummate a Chapter 11 plan that would address the debt under their credit agreement and facilitate the pursuit of claims against Bread for harm resulting from the spinoff.

The plan includes formation of a liquidating trust to hold, investigate and pursue claims and causes of action against the Bread parties.

The plan provides for payment of all convenience claims in full. These claims are unsecured, non-priority claims allowed in the amount of $1.5 million or less per claim. The total amount of these claims was not likely to exceed $5 million.

Only two classes were entitled to vote on the plan. The first is comprised of all claims asserted by the lenders, and the second is comprised of unsecured, non-priority claims allowed in an amount in excess of $1.5 million.

The plan contemplates that lenders will receive the cash proceeds of any collateral securing the loan claims on account of the portion of the loan claims that is determined to be secured. Lender claims that are otherwise determined to be deficiency claims, together with holders of allowed unsecured, non-priority claims in excess of $1.5 million, if any, will receive their ratable share of interests in the liquidating trust, provided that Bread will not be permitted to share in the proceeds of any recoveries obtained from it if it is otherwise determined to hold an allowed claim.

The liquidating trust interests will otherwise entitle holders of the interests to share in any proceeds recovered by the liquidating trust after all amounts incurred under the intercompany DIP credit facility have been repaid unless otherwise agreed to by the relevant parties.

Finally, the plan provides for the release of some of the consenting lenders in exchange for their consent to the sale process contemplated to take place in the proposed CCAA proceeding (under which the consenting lenders have agreed not to credit bid), the sale of the BrandLoyalty business and the release of liens and claims in connection with the sale, the priming of their prepetition liens and claims by both the $70 million CCAA DIP facility and the related intercompany DIP facility, and the distribution of contingent litigation interests in full and final satisfaction of their claims against the debtor entities.

Loyalty Ventures is a Dallas-based operator of consumer rewards programs. The company filed Chapter 11 bankruptcy on March 10 under case number 23-90111.

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