Edwin Watts Golf deal falls through; open auction planned; DIP OK'd

By Jim Witters

Wilmington, Del., Nov. 20 - Edwin Watts Golf Shops, LLC is pursuing an open auction and adhering to its tight timeline for a sale after proposed buyer GWNE, Inc. failed to meet a financing contingency in its asset purchase agreement, an attorney said during a Nov. 20 hearing in the U.S. Bankruptcy Court for the District of Delaware.

The company also obtained final approval of its $38 million debtor-in-possession financing facility, despite disclosing to the court that its current DIP budget fails to account for about $1.8 million of expenses that will accrue before the planned closing of the sale of the debtors' assets.

The DIP budget was closely tied to the GWNE asset purchase agreement, which was negotiated before the bankruptcy filing.

Deal collapse

GWNE, in a joint venture with Hilco Merchant Resources, LLC, had intended to guarantee the debtors at least $45 million in the transaction.

GWNE was to buy some of Edwin Watts Golf's stores and other assets. Hilco was to conduct going-out-of-business sales at the remaining sites.

However, GWNE failed to meet its Nov. 15 deadline to obtain a financing commitment, then missed an extended Nov. 18 deadline, debtors attorney Domenic E. Pacitti told the court.

GWNE forfeited a $500,000 deposit to the debtors' estates.

Revised sale plan

Pacitti said the debtors will move forward with its alternate sale process, which includes an open auction of substantially all of the company's assets.

Left open is the option of identifying and signing another stalking-horse bidder and offering stalking-horse protections that would be subject to court approval at the sale hearing.

Judge Mary F. Walrath, appearing via video conference from St. Thomas, U.S. Virgin Islands, approved the bidding procedures.

The bidding deadline is 4 p.m. ET on Dec. 2.

An auction is scheduled for Dec. 3.

The sale hearing is scheduled for 9:30 a.m. ET on Dec. 5.

Pacitti said the company hopes to close the transaction on Dec. 6, so the buyer can take advantage of the holiday shopping season and be prepared for the January introduction of new equipment models.

DIP terms

Judge Walrath also granted final approval to the DIP financing facility, subject to revisions in the DIP budget to cover the expenses for rent, payroll, payroll taxes and sales taxes that are accruing.

Pacitti said he planned to resume negotiations with lender agent PNC Bank, NA immediately after the Nov. 20 hearing.

Walrath said she wants to see a revised budget by Dec. 3.

Interest on the $38 million DIP will accrue at the alternate base rate plus 125 basis points.

The debtors also will pay a $200,000 commitment fee.

The DIP loan will mature on the earliest of Dec. 31, the effective date of a reorganization plan, the closing of the company's sale, conversion or dismissal of the bankruptcy case and Dec. 6 if the final order has not been entered.

The DIP agreement includes a "creeping rollup," with about $33 million of pre-petition secured debt being paid to PNC Bank.

Edwin Watts Golf, a Fort Walton Beach, Fla.-based specialty golf retailer, filed for bankruptcy on Nov. 4. The Chapter 11 case number is 13-12876.

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