Christmas Tree Shops committee objects to DIP financing terms

By Sarah Lizee

Olympia, Wash., May 30 – Christmas Tree Shops, LLC’s proposed $45 million debtor-in-possession facility drew an objection from the official committee of unsecured creditors, according to documents filed Tuesday with the U.S. Bankruptcy Court for the District of Delaware.

“The committee supports the debtors' intentions to right-size their business and continue operating and is working to advance that goal,” the group said in its objection.

“The committee does not support the DIP lenders’ transformation of their asserted prepetition secured debts and covenants into post-petition super-priority debts and obligations, particularly where the DIP lenders, including one wearing multiple hats, provide nominal, if any, new money to the debtors, i.e., a net loan of just $150,000 over the 13-week budget.”

The committee said the DIP lenders, and particularly prepetition lender ReStore Capital, LLC and its affiliates, stand to benefit immensely from this Chapter 11 case.

The group noted that ReStore also consigns goods to the debtors via one affiliate and is the chosen going-out-of-business sale liquidator via another affiliate.

The committee said the sale liquidator affiliate stands to earn significant profits if the case is driven, by the DIP lender, into the liquidation route.

The DIP facility also calls for a series of quick milestones and provides the DIP lenders with the ability to call a default if any of the milestones are missed, which would trigger store closings and liquidations of inventory immediately delivers the profitable liquidation business to ReStore's family of companies, the committee said.

The DIP facility’s budget provides no net new money and does not budget for all administrative costs of the case, the committee said.

By contrast, it provides for nearly $6 million in DIP facility fees, interest and professional fees of the debtors and DIP lenders, while budgeting $456,000 for committee professionals.

“Taken together, the case looks like a pre-ordained liquidation, with the DIP constituting nothing more than a tool for Hilco, via Restore, to have its finger on the doomsday button,” the committee said.

Middleborough, Mass.-based Christmas Tree Shops sells home goods with a specialty focus on seasonal products. The company filed bankruptcy on May 5 under Chapter 11 case number 23-10576.

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