Gymboree committee raises concerns about term loan deficiency claim

By Caroline Salls

Pittsburgh, Aug. 18 – The official committee of unsecured creditors for Gymboree Corp.’s Chapter 11 bankruptcy case filed an objection Friday to “any term loan deficiency claim in excess of $296 million” and asked the U.S. Bankruptcy Court for the Eastern District of Virginia to rule that the claim is no more than that amount based on a total enterprise value of $741 million.

The committee said Gymboree investment banker Lazard Freres & Co. LLC estimated that the potential range of reorganized Gymboree’s operations on a going-concern-basis is $400 million to $600 million.

“However, the committee submits that in developing the projections and estimating the enterprise value (and, in turn, the range of potential equity value of reorganized Gymboree as of the effective date), Lazard used unrealistic and overly conservative assumptions and multipliers which artificially depressed the enterprise value and consequential range of total equity value of reorganized Gymboree,” the filing said.

As a result, the committee said it believes that the collateral securing the term loan secured claim is significantly more valuable than stated by the company in its disclosure statement.

In addition, the creditor group said the corresponding term loan deficiency claim “is significantly lower than the term loan deficiency claim calculated using the Lazard projections.”

The committee said it believes that the appropriate enterprise value for reorganized Gymboree for purposes of confirmation of the plan is between $716 million and $765 million.

Gymboree, a children’s apparel specialty retailer based in San Francisco, filed for bankruptcy on June 11. The Chapter 11 case number is 17-32986.

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