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Former Karmaloop requests increase of DIP loan, conversion of cases to Chapter 7
By Mark Reccek
Bethlehem, Pa., Aug. 26 – KL Wind-Down, Inc., formerly Karmaloop, Inc., requested an increase of its debtor-in-possession loan of $30.87 million, remittance of cash collateral to the DIP agent and the conversion of its Chapter 11 cases to Chapter 7, according to a motion filed Wednesday with the U.S. Bankruptcy Court for the District of Delaware.
As previously reported, Karmaloop’s pre-bankruptcy lenders are providing the financing and ComVest Capital II, LP is the agent.
The financing will be used to repay pre-bankruptcy loan obligations and to provide working capital to the company.
According to the motion, the company said while it believes the lenders will fund the remaining carveout distributions, the final DIP order and post-petition documents need to be amended to increase the DIP commitment under the loan agreement by an acceptable amount to permit the company to make the remaining distributions.
The motion also said the amendment order “will further the purposes of the sale order and APA by allowing the turnover of money that is the purchaser’s property and the execution of one or more instruments to facilitate the purchasers’ use of purchased intellectual property.”
The company is requesting a case conversion to Chapter 7 due to its inability to reach an agreement to wind down the cases through a Chapter 11 plan.
“The debtors’ nationwide retail operations spawned many proofs of claim asserting substantial priority tax claims, and significant administrative claims have also been filed,” the motion said. “Those claims, among other factors, created insurmountable hurdles to reaching agreement on funding for, and a means to confirm, a Chapter 11 plan.”
Karmaloop, a Boston-based cross-platform digital commerce and media property company specializing in the sale of global streetwear fashion and culture, filed for bankruptcy on March 24. The Chapter 11 case number is 15-10635.
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