Alex and Ani files Chapter 11, inks restructuring support agreement

By Sarah Lizee

Olympia, Wash., June 10 – Alex and Ani, LLC filed Chapter 11 bankruptcy on Wednesday in the U.S. Bankruptcy Court for the District of Delaware, according to a press release.

The company said that in an effort to stabilize its business, it has entered into a restructuring support agreement with 100% of its first-, second- and third-lien lenders and 100% of its equity holders regarding a comprehensive financial and operational restructuring. Pre-petition lender Lion Capital (Americas), Inc. is the consenting sponsor, according to court documents.

Alex and Ani intends to continue operating its currently open stores and its website as usual during the court-supervised process.

Along with the Chapter 11 filing, the company started a marketing process, under which parties will have the opportunity to submit competing bids for the purchase of the company's assets.

At the same time, the company's lenders and equity sponsors have agreed to the terms of a comprehensive stand-alone restructuring that will serve to ensure go-forward operations remain intact.

In the case of a stand-alone restructuring, the reorganized company will issue a single class of common equity interests. Cash distributions would be made from cash on hand, including proceeds from any sale, and an exit facility.

“We have worked diligently to overcome challenges with our capital structure, and we are very pleased with our progress from an operational efficiency standpoint,” Alex and Ani's chief restructuring officer, Robert Trabucco, said in the release.

“In 2020, Covid-19 forced the company to pause its key strategic growth initiatives, temporarily close stores and scale back its operations in light of reduced in-store customer demand. During that time, Alex and Ani continued to invest in its ecommerce platform.”

Alex and Ani said it has taken steps toward financial health through realignment of sales channels, reducing retail footprint, and reductions in capital expenditures and working capital.

“After a thorough review of a number of available options, the board determined that a Chapter 11 filing is in the best interests of all parties, including our valued customers and employees,” Trabucco said.

Creditor treatment

According to the restructuring term sheet, holders of administrative claims, priority tax claims and other priority claims will be paid in full.

Holders of other secured claims will receive payment in full in cash, the collateral securing their claims, reinstatement of their claims, or other treatment that renders their claims unimpaired.

Holders of secured credit facility claims will receive the sale proceeds if a sale transaction is completed. If a stand-alone restructuring is completed, they will receive a percentage of the new common equity of the reorganized debtors, subject to dilution by the management incentive plan.

Treatment for go-forward vendor claims and general unsecured claims was not disclosed.

Intercompany claims and intercompany interests will be reinstated or canceled.

Existing equity interests will be canceled.

Bid procedures

The company filed a motion seeking court approval of the bid procedures for the sale of substantially all of its assets.

Under the proposed bid procedures, all initial bids must be received by noon ET on July 7, all binding bids must be received by noon ET on Aug. 8, an auction will be held on Aug. 15, and a sale hearing will be held on Aug. 26.

Alex and Ani is also seeking court approval to choose a stalking horse bidder. The stalking horse agreement would provide for an up to 3% breakup fee and an up to $250,000 expense reimbursement.

Bids at auction must be made in minimum increments of $500,000 of additional value, including after payment of the bid protections to any stalking horse bidder, if applicable.

Cash collateral motion

The company also filed several first-day motions, including one seeking access to the cash collateral of its pre-petition secured lenders.

Alex and Ani said the debtors require immediate access to liquidity to ensure that they are able to continue operating during the Chapter 11 cases, preserve the value of their estates and pursue the restructuring transactions.

Debt details

In its petition, the company listed $100 million to $500 million in both assets and liabilities.

The company currently has $127.4 million of credit facility debt outstanding, including $20.4 million under a first-lien facility, $25.2 million under a second-lien facility and $81.8 million under a third-lien facility, each due Jan. 31, 2022.

Its largest unsecured creditors are Chapel Associates II LLC, based in Johnston, R.I., with a $4.13 million rent claim, Simon Property Group, Inc., based in Indianapolis, with a $3.95 million rent claim, Brookfield Properties Retail Inc., based in Chicago, with a $3.31 million rent claim, Quality Spray Technologies Inc., based in Providence, R.I., with a $3.26 million trade payable claim, and Macerich Oaks LP, based in Santa Monica, Calif., with a $2.11 million rent claim.

Kirkland & Ellis LLP and Klehr Harrison Harvey Brazenburg LLP are serving as the company's legal co-counsel and Portage Point Partners, LLC is serving as its financial adviser.

Alex and Ani is a jewelry-making company based in East Greenwich, R.I. The Chapter 11 case number is 21-10918.

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