Tuesday Morning eyes $12.5 million DIP loan as Invictus deal fails

By Sarah Lizee

Olympia, Wash., March 2 – Tuesday Morning, Inc. is now seeking approval of a $12.5 million debtor-in-possession asset-based revolving credit facility via prepetition lender 1903P Loan Agent, LLC instead of a $51.5 million DIP facility with Invictus Global Management, LLC, according to an emergency motion filed Thursday with the U.S. Bankruptcy Court for the Northern District of Texas.

The company said that Invictus has failed to deliver a stalking horse bid that it had previously guaranteed.

Even though the company’s ABL lenders had offered interim, fee-free use of cash collateral at a lengthy hearing on interim DIP approval held Feb. 15, the company favored the Invictus DIP because of the proposed stalking horse bid.

At the hearing, Invictus said it would withdraw its interest in making a stalking horse bid if the debtors accepted the ABL lenders’ proposed use of cash collateral.

“After it failed to make a stalking horse offer, and in the face of settlement discussions with the ABL lenders on a consensual resolution, it insisted on pursuing a strategy that, through costly, cumbersome litigation, would paralyze and stagnate these cases and severely threaten the value of the estates and the debtors’ critical prospects to expeditiously emerge from bankruptcy,” Tuesday Morning said.

“Needless to say, discussions with Invictus have broken down beyond repair.”

Financing terms

Interest on the new DIP facility is SOFR plus 1,100 basis points, subject to a SOFR floor of 2%.

The Invictus DIP loan bears interest at 12.75% per annum. The facility would also include a rollup of prepetition term loans and convertible notes, bearing interest at 10% per annum.

Under the new DIP loan, there are no closing fees, monitoring fees, agency fees or prepayment fees. There is a $200,000 expense reimbursement.

The term sheet includes some case milestones, including designating a stalking horse, receiving court approval of bid procedures, and receiving final approval of the new DIP loan by March 21, receiving approval of a sale by April 19, and closing the sale by April 21.

The new DIP lender is an affiliate of Gordon Brothers Group, and is also the company’s first-in, last-out B documentation agent.

Tuesday Morning said the new DIP facility, combined with cash on hand, will allow the debtors to cash collateralize their prepetition letter-of-credit obligations, pay off all other amounts owed under the prepetition ABL credit agreement, and then continue operating their businesses and pursuing a sale and reorganization process.

The company is also seeking court approval to use the ABL lenders’ cash collateral.

Prior to filing bankruptcy, the company had received a proposal for DIP financing from prepetition lenders that included a superpriority revolver of up to $40 million, an initial available amount of $35 million, and a partial rollup of the prepetition secured debt.

A key, non-negotiable requirement was that the debtors had to file Chapter 11 and immediately start a 60-day company-wide liquidation, then convert to Chapter 7.

Tuesday Morning is a discount off-price retailer based in Dallas. The company began its second Chapter 11 bankruptcy case on Feb. 14 under case number 23-90001. The previous case started on May 27, 2020 under case number 20-31476. The company exited that round of bankruptcy on Dec. 31, 2020.

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