Entertainment trustee eyes $11.33 million going-concern offer

By Jim Witters

Wilmington, Del., March 22 - The Chapter 7 trustee for Entertainment Publications, LLC is seeking immediate authority to operate the debtor in light of "an offer of over $11 million to purchase the debtor's business as a going concern," according to a March 22 filing with the U.S. Bankruptcy Court for the District of Delaware.

"Without such authority, the going-concern value of the debtor will significantly decrease, as the debtor's key sales people will go elsewhere for employment, and the debtor's customers will quickly look to the debtor's competitors to fulfill their needs," trustee Charles M. Forman said.

The trustee also is seeking use of the cash collateral of the company's secured lenders.

While three parties expressed an interest in the debtor as a result of marketing efforts that began in mid-2012, no offer was made other than an offer by HSP-EPI Acquisition, LLC, the proposed purchaser.

HSP-EPI Acquisition was formed by Lowell Potiker, the son of company founders Hughes and Sheila Potiker.

Based on the family's successful record of running the company prior to its sale in 1992, Lowell Potiker "believes that he can restore the company to profitability," according to Forman's filing.

Key employees have been out of work since the business closed March 12 and "are under financial pressure to accept new jobs."

At the same time, customers of the coupon-book fundraising company are planning their fall campaigns and "must know that the debtor is moving forward under sound and dedicated management, or the damage done by the filing will be irreversible," Forman said.

The HSP-EPI offer would allow the debtor to pay its allowed secured creditors in full, other than Fontella, LLC, which has agreed to accept less than the total amount owed.

"The proposed transaction will provide $800,000 in unencumbered proceeds to the debtor's estate, which may allow for distributions to unsecured creditors," the trustee said.

Sale terms

Under the proposed sale agreement, bid procedures must be approved by March 25, and a sale must close by April 2.

The purchase price consists of $6.332 million in cash and a promissory note issued by the purchaser to the trustee for $5.5 million. The note would then be assigned to Fontella. That price satisfies HSP-EPI's agreement to pay at least $11.332 million, subject to certain adjustments.

Fontella also would receive warrants to buy 10% of the capital stock of the purchaser upon a liquidation event.

If HSP-EPI does not emerge as the successful bidder, HSP-EPI would receive a $315,000 breakup fee.

Bid procedures

No bid deadline or auction date was proposed in the March 21 or March 22 filings.

If an auction is conducted, the initial overbid must be at least $765,000 over the stalking-horse bid.

Subsequent bids would be in $250,000 increments.

"The trustee submits that selling the debtor as a going concern, and thereby saving 400 jobs and preserving a company that helps out with so many charitable causes, is in the best interests of the public as well as the debtor's estate," Forman said.

Judge Christopher S. Sontchi approved a shortened notice period and scheduled a hearing on the trustee's motions for 2 p.m. ET on March 25.

Entertainment Publications, a Troy, Mich.-based coupon book publisher, filed for bankruptcy on March 12. Its Chapter 7 case number is 13-10496.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.