Tuesday Morning plan of reorganization effective as of Dec. 31

By Sarah Lizee

Olympia, Wash., Jan. 4 – Tuesday Morning Corp.’s Chapter 11 plan of reorganization went into effect on Thursday, according to a notice filed with the U.S. Bankruptcy Court for the Northern District of Texas.

The plan was confirmed on Dec. 23, as previously reported.

Sources of funding for the plan include cash on hand from operations, projected sale proceeds of roughly $60 million from the sale leaseback of the debtors’ owned real property, $25 million in proceeds from the debtors’ issuance of $40 million of 14% four-year payment-in-kind senior subordinated notes and projected proceeds of $40 million from fully backstopped rights offerings.

The company has entered into a commitment letter with Tensile Capital Partners Master Fund LP, which has agreed to purchase $25 million of the notes.

The backstop commitment parties will receive a fee equal to 5% of their respective commitments payable in shares of the company’s common stock and 10 million warrants to acquire additional shares of the company’s common stock at a price equal to 150% of the price in the rights offering.

Any holder of existing common stock as of the rights offering record date will be eligible to participate in the eligible rights offering of common stock for an aggregate purchase price of up to $24 million, with the remaining $16 million reserved for the backstop parties.

Upon emergence from bankruptcy, the reorganized debtors will have access to a $110 million senior secured new asset-based credit facility offered by the debtors’ debtor-in-possession revolving facility lenders. Borrowings initially will bear interest at Libor plus a spread of 275 basis points, or the CB rate plus a spread of 175 bps, according to an 8-K filing with the Securities and Exchange Commission. The facility will mature in three years.

The plan provides for payment in full of secured, administrative and priority claims.

All holders of general unsecured claims will receive payment in full plus interest in cash.

Interests in Tuesday Morning will be converted into new common stock, subject to dilution by the rights offerings and the management incentive plan.

Holders of existing first-lien credit facility claims will receive payment in full in cash plus any and all fees, interest (both pre- and post-petition date) and reimbursement of expenses, as well as any other amounts owed, in three equal installments to be paid 30, 60 and 90 days after the effective date. All liens and security interests will be retained until the payments have been made.

In the event that the existing first-lien agent is the agent for the new ABL credit facility, it will retain the liens and security interests securing the existing first-lien credit facility claims after the payments are made and have those liens and security interests secure the new ABL credit facility.

The estimated total amount of allowed existing first-lien credit facility claims is $100,000.

Intercompany claims will be reinstated or canceled and released without any distribution.

Intercompany interests will be reinstated for administrative purposes only, with no distribution.

Tuesday Morning is a discount off-price retailer based in Dallas. The company filed bankruptcy on May 27, 2020 under Chapter 11 case number 20-31476.

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