Walking Co. Holdings makes pre-packaged Chapter 11 bankruptcy filing

By Caroline Salls

Pittsburgh, March 6 – The Walking Co. Holdings, Inc. made a pre-packaged Chapter 11 bankruptcy filing Tuesday in the U.S. Bankruptcy Court for the District of Delaware.

Tuesday’s filing follows a previous 2009 reorganization.

President and chief executive officer Andrew D. Feshbach said in a statement filed with the court that the company’s Chapter 11 plan “has been substantially pre-negotiated, and the debtors are seeking to move quickly through the reorganization process, with it lasting no more than 90 days.”

Specifically, Feshbach said the Walking debtors have secured $70 million in equity commitments from their largest shareholders, as well as $50 million in financing to both support operations and provide exit financing that will allow Walking “to exit Chapter 11 as a substantially stronger company.”

Feshbach said the stakeholders’ support and commitments are contingent upon the company obtaining substantial rent relief by conforming their lease portfolio to market rents.

The CEO said Walking negotiated with landlords in February, seeking concessions that would rationalize the debtors’ lease portfolio so that it is more in line with current market rent.

As a result, Feshbach said the company is seeking court approval to reject leases at The Walking Co. and Big Dog store locations in Dallas, Oklahoma City, Madison, Wis., Chesterfield, Mo., and Syracuse, N.Y.

Rent reduction negotiations are ongoing with landlords at virtually all of the debtors’ remaining store locations, Feshbach said.

Plan terms

Under the pre-packaged plan, all of the outstanding equity interests in the parent company will be extinguished.

The plan sponsors will provide a $10 million consideration in cash on the effective date and will be issued all of the new common stock of the reorganized parent, subject to dilution resulting from new common stock that may be issued to applicable pre-bankruptcy subordinated noteholders upon their exercise of new warrants that may be exchanged for ½% of the new common stock.

Administrative claims, debtor-in-possession facility claims, priority tax claims, priority non-tax claims and pre-bankruptcy secured loan agreement claims will be paid in full or rendered unimpaired.

In addition to receipt of the warrants, pre-bankruptcy subordinated notes claims will be amended, with the maturity date extended three years until March 31, 2022 and with unpaid interest and fees due as of the effective date capitalized into the principal.

Holders of general unsecured claims will receive a share of a $2.2 million fund.

DIP financing

In conjunction with the bankruptcy filing, Walking is seeking court approval to obtain $57.25 million in debtor-in-possession financing from Wells Fargo Bank, NA, consisting of a $50 million revolving facility and a $7.25 million term loan.

The DIP facility will mature on the earliest of Oct. 2, 2018, April 10 if the final order is not entered by then, the effective date of a confirmed plan of reorganization and the closing of a sale of all or substantially all of the company’s working capital assets.

Interest on the term loan will accrue at a rate of Libor plus 1,050 basis points, and interest on the revolver will accrue at either Libor plus 450 bps or the Base rate plus 350 bps.

Debt details

According to court documents, Walking has $100 million to $500 million of assets and $50 million to $100 million of debt.

The company’s largest unsecured creditors are Li & Fung of Guangdong, China, with a $5.19 million trade claim; MDC Power Link International Corp. of Dongguan, China, with a $1.95 million trade claim; Dansko Inc. of West Grove, Pa., with a $1.52 million trade claim; and Hoan Cau Hoa Binh JSC of Hoa Binh, Vietnam, with a $1.22 million trade claim.

Pachulski Stang Ziehl & Jones LLP is representing Walking in the Chapter 11 proceedings.

Walking is a Santa Barbara, Calif.- based comfort footwear retailer. The Chapter 11 case number is 18-10474.

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