Shopko’s Chapter 11 plan effective almost three years post-confirmation

By Sarah Lizee

Olympia, Wash., March 18 – Shopko’s Chapter 11 plan of reorganization, which was confirmed on June 11, 2019, went into effect on March 4, according to a docket entry filed Friday with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, the order confirming the plan was appealed by McKesson Corp. Among the issues appealed by McKesson was the proposed less-than-full payment of its administrative claim, which McKesson said violated bankruptcy code. Because of the appeal, the plan had not gone into effect.

However, in December the parties resolved all disputes regarding the administrative claim, the appeal and McKesson’s objections to the plan.

Under a settlement, McKesson’s administrative claim was allowed in the amount of $1.2 million, and the debtors were required to pay the claim within five days of the effective date of the plan.

McKesson waved and was not entitled to any post-petition interest on account of its claim, and was deemed a releasing party under the plan.

In March 2019, Shopko announced that it was unable to find a buyer for its go-forward business as a going concern and that it would launch a winddown of its retail operations. In addition, Shopko said it was evaluating strategic options for its optical business.

The company said it would not move forward with a previously announced auction, and Gordon Brothers would oversee a liquidation process.

Treatment of creditors under the plan included a toggle feature under which Shopko would determine whether to complete an equitization restructuring or an asset sale restructuring.

New Shopko interests were to be issued under the plan, and existing interests were to be canceled.

The company’s pre-bankruptcy ABL obligations were rolled into debtor-in-possession financing obligations.

Lenders were expected to convert their claims into exit financing commitments, or Shopko was to enter into a new credit facility sufficient to pay lender claims in full and provide incremental liquidity.

General unsecured creditors were to receive either 100% of the new Shopko interests or a share of an equitization reserve.

Shopko was a Green Bay, Wis., operator of general merchandise stores throughout the Central, Western and Pacific Northwest regions of the United States. The company filed bankruptcy on Jan. 16, 2019 under Chapter 11 case number 19-80064.

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