NewAge’s Chapter 11 liquidation plan effective as of May 4

Chicago, May 5 – NewAge, Inc.’s third amended Chapter 11 plan of liquidation went into effect on Thursday, according to a notice filed with the U.S. Bankruptcy Court for the District of Delaware.

The company’s plan was confirmed in March.

As previously reported, the company had also received approval of a settlement with the lender of its $16 million debtor-in-possession facility.

The lender is DIP Financing, LLC, whose principal is John Wadsworth. Wadsworth has worked as an independent sales representative of the NewAge enterprise since 1998.

DIP Financing also served as stalking horse bidder for the company’s assets. The court approved the sale of the assets for a credit bid of $28 million, as well as the assumption of some liabilities and payment of all cure costs of assumed and assigned contracts and leases. The sale closed on Oct. 17.

As part of an agreement reached between the debtors and DIP Financing, part of the sale order requires DIP Financing to, if necessary, make a cash payment to the debtors for the sole purpose of funding a post-confirmation trust so that remaining property in the debtors’ estates, along with any necessary “true-up” payments, to be made by DIP Financing provide the liquidation trust a cash balance of at least $1.5 million for the benefit of general unsecured creditors after payment of allowed administrative expense and priority claims.

After the sale closed, a dispute arose between the debtors and DIP Financing regarding the ownership of cash held in certain accounts that were transferred to the DIP Financing parties in connection with the sale.

The debtors requested the return of that cash, and DIP Financing objected to the request, saying it had purchased the right to the cash under the asset purchase agreement.

The lender said it holds certain administrative expense claims arising from the sale against the debtors’ estates, and the cash should be used to satisfy those claims.

Following the dispute, DIP Financing filed about $8.23 million in three separate claims, which the debtors objected to.

However, the parties were able to reach a settlement that allows the claims on a consolidated basis as a single administrative claim held by EYWA LLC.

EYWA will be entitled to retain $1.3 million of the disputed cash currently in its possession, which will reduce the allowed claim on a dollar-for-dollar basis.

EYWA will return $4.48 million to the debtors’ estates, $1.5 million of which will be reserved by the debtors to fund the liquidation trust.

To the extent the estates have excess cash remaining after the payment of all allowed administrative expense claims, other than the $8.43 million allowed claim of EYWA, and the reserve of $1.5 million in liquidation trust funding, EYWA will receive the first $100,000 of the excess cash, which will reduce its allowed claim on a dollar-for-dollar basis. Anything left after that will be transferred to the liquidation trust.

The balance of the allowed claim will be paid only from the net proceeds of recoveries from litigation claims prosecuted by the liquidation trust after payment of litigation fees and costs under the following waterfall:

• EYWA and the liquidation trust will share equally in the first $4 million of net litigation proceeds;

• EYWA will get 100% of the next $2 million in net litigation proceeds;

• EYWA and the liquidation trust will share in the next $2 million of litigation proceeds; and

• The liquidation trust will get 100% of any net litigation proceeds in excess of $8 million.

According to the plan, the assets that will be used for distributions to creditors consist of the liquidation trust; causes of action against some of the debtors’ officers and directors in the Kwikclick lawsuit, which are being assigned to the liquidation trust, and of which there may or may not be up to $35 million of director & officer insurance coverage available; all other causes of action; and any remaining cash on hand.

Under the plan, other secured claims are unimpaired.

Holders of class 2 general unsecured claims (estimated at $279,142 against NewAge, $14,808,711 against Morinda and $942,263 against Ariix) will receive their pro rata share of an interest in the liquidation trust.

Holders of general unsecured claims can opt to reduce their claims to the convenience claim threshold in order to participate in class 3 below, but by doing so they will be barred and will have waived their right to receive a distribution for the waived amount.

Holders of class 3 general unsecured claims (the administrative convenience class with a $249,710 total of claims from the three cases) will receive a distribution equal to 50% of their allowed claims unless the amount deposited into the GUC administrative convenience account is not enough to allow for this percentage distribution, in which case holders will receive their pro rata share, which will be less than 50% of their claims.

Holders of subordinated claims will receive their pro rata share of an interest in the liquidation trust assets that is subordinated to the holders of class 2 and will only receive a distribution after class 2 is paid in full.

Intercompany claims and interests will be canceled.

Holders of equity interests will receive a pro rata share of an interest in the liquidation trust that is subordinated to class 2 and subordinated claims, and will only receive a distribution until those classes are paid in full.

The Midvale, Utah-based direct-to-consumer organic and healthy products company filed bankruptcy on Aug. 30, 2022 under Chapter 11 case number 22-10819.

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