First Day Weekly
FIKA Coffee, Seasons Kosher Supermarket Chains File Chapter 11 To Sell Their Assets, Burdened by Expansions
Fri 09/21/2018 13:26 PM
Two chains filed for chapter 11 this week intending to sell their assets - Swedish-inspired coffee chain FIKA and kosher supermarket chain Seasons. Pachanga, the owner and operator of the FIKA chain, was derailed by a lack of funding during an aggressive expansion, and Blue Gold Equities, the owner of the Seasons chain, similarly was felled by, among other things, “complications and delays” with respect to the opening of new stores. Each of the companies has secured stalking horse bidders. FIKA says it plans to propose a 60-day sale process but has yet to file a bid procedures motion, while Seasons has submitted bid procedures without a specific sale timeline. Also filing this week were: higher education course materials company Ed Map, owner of the Cary, N.C.-based The Mayton Inn hotel, and Ben & Reef Gardens, whose address is for the greater Los Angeles area-based Gardens of Paradise event venue.
Year-to-date, the 2018 case count by sector is shown below:
Seasons filed for chapter 11 protection on Sunday in the midst of the Jewish high holiday season, seeking $5.7 million of DIP financing from prepetition secured lender SKNY in the amount of. The funds would allow Seasons to stock shelves in time for the Jewish holiday Sukkot. The DIP financing includes a full rollup of SKNY’s prepetition debt in the amount of $3 million. SKNY has also agreed to serve as stalking horse for a $12 million purchase price. The debtors say that they had discussions with potential purchasers prepetition, “including at least one who may present alternative bids at the Sale.”
The Seasons chapter 11 brings 2018-to-date total of consumer staples cases up to 24, representing a 71% increase over the year-to-date period last year. The case is the latest grocer to seek bankruptcy protection since Southeastern Grocers’ billion-dollar filing back in April. Southeastern filed a prepackaged plan in line with an RSA that would reduce the company’s funded debt by about $500 million and contemplates the closure of approximately 100 store locations, with approximately 600 remaining to continue operating. While Southeastern based its filing on “challenging market conditions” in the food retail industry in the southeastern U.S., along with “stiff competition” from the likes of Walmart and Amazon and the rise in demand for a ‘gourmet’ shopping experience, Seasons struggles are more company-specific. The Seasons’ filing follows the company’s 2010 acquisition of former “Supersol” kosher supermarkets, after which the debtors were burdened by consultant payments to the former principals of the acquired businesses.
Consumer staples cases for 2018-to-date and over the same period last year are shown below:
FIKA’s Friday filing follows the company’s rapid expansion of 12 new stores in 2014 and 2015, before the closing of “a number” of stores in 2016 and 2017 because of a lack of additional required funding. Though the company was contemplating a chapter 11 filing to effectuate a 363 sale, the filing was “hastened” by the the New York State Department of Taxation and Finance’s closure of retail stores. The company says that FIKA Acquisitions, the debtors’ prepetition secured creditor by assignment of more than $11 million in secured claims from Apfel Holdings, would act as stalking horse for a credit bid of its secured debt “as well as a cash component.”
Seasons and FIKA are two of a multitude of 2018 chapter 11 filers whose bankruptcies were, at least in part, attributed to troublesome expansion efforts, including the following:
Two hospitality companies also filed this week, each of which has yet to file its first day pleadings - event venue operator Ben & Reef Gardens and upscale boutique hotel operator Memento Mori. Ben & Reef operates the Gardens of Paradise, a private and corporate event venue serving greater Los Angeles. Memento owns and operates The Mayton Inn, a boutique hotel complete with a spa, restaurant and cocktail bar in the downtown area of Cary, N.C. The two hospitality companies, plus Ed Map and FIKA, round out the week’s consumer discretionary case total at four, with the sector representing two-thirds of the week’s total.
The breakdown of chapter 11 cases by sector as a share of total filings is shown below for 2018-to-date and the same period last year:
Sales - Below is a recap of the sale-related events for the week’s cases:
Pachanga, Inc. (FIKA):
Case data, such as representatives and DIP financing terms, including for this week’s filings, can be found in the Reorg First Day database, which includes all U.S. chapter 11 cases filed since 2012 with over $10 million in liabilities.
Year-to-date, the 2018 case count by sector is shown below:
Seasons filed for chapter 11 protection on Sunday in the midst of the Jewish high holiday season, seeking $5.7 million of DIP financing from prepetition secured lender SKNY in the amount of. The funds would allow Seasons to stock shelves in time for the Jewish holiday Sukkot. The DIP financing includes a full rollup of SKNY’s prepetition debt in the amount of $3 million. SKNY has also agreed to serve as stalking horse for a $12 million purchase price. The debtors say that they had discussions with potential purchasers prepetition, “including at least one who may present alternative bids at the Sale.”
The Seasons chapter 11 brings 2018-to-date total of consumer staples cases up to 24, representing a 71% increase over the year-to-date period last year. The case is the latest grocer to seek bankruptcy protection since Southeastern Grocers’ billion-dollar filing back in April. Southeastern filed a prepackaged plan in line with an RSA that would reduce the company’s funded debt by about $500 million and contemplates the closure of approximately 100 store locations, with approximately 600 remaining to continue operating. While Southeastern based its filing on “challenging market conditions” in the food retail industry in the southeastern U.S., along with “stiff competition” from the likes of Walmart and Amazon and the rise in demand for a ‘gourmet’ shopping experience, Seasons struggles are more company-specific. The Seasons’ filing follows the company’s 2010 acquisition of former “Supersol” kosher supermarkets, after which the debtors were burdened by consultant payments to the former principals of the acquired businesses.
Consumer staples cases for 2018-to-date and over the same period last year are shown below:
FIKA’s Friday filing follows the company’s rapid expansion of 12 new stores in 2014 and 2015, before the closing of “a number” of stores in 2016 and 2017 because of a lack of additional required funding. Though the company was contemplating a chapter 11 filing to effectuate a 363 sale, the filing was “hastened” by the the New York State Department of Taxation and Finance’s closure of retail stores. The company says that FIKA Acquisitions, the debtors’ prepetition secured creditor by assignment of more than $11 million in secured claims from Apfel Holdings, would act as stalking horse for a credit bid of its secured debt “as well as a cash component.”
Seasons and FIKA are two of a multitude of 2018 chapter 11 filers whose bankruptcies were, at least in part, attributed to troublesome expansion efforts, including the following:
Two hospitality companies also filed this week, each of which has yet to file its first day pleadings - event venue operator Ben & Reef Gardens and upscale boutique hotel operator Memento Mori. Ben & Reef operates the Gardens of Paradise, a private and corporate event venue serving greater Los Angeles. Memento owns and operates The Mayton Inn, a boutique hotel complete with a spa, restaurant and cocktail bar in the downtown area of Cary, N.C. The two hospitality companies, plus Ed Map and FIKA, round out the week’s consumer discretionary case total at four, with the sector representing two-thirds of the week’s total.
The breakdown of chapter 11 cases by sector as a share of total filings is shown below for 2018-to-date and the same period last year:
Sales - Below is a recap of the sale-related events for the week’s cases:
Pachanga, Inc. (FIKA):
- Owner and operator of specialty espresso bars, restaurants and a chocolate business under the FIKA brand name.
- Debtors have yet to file bid procedures motion.
- Stalking Horse: FIKA Acquisitions - credit bid of prepetition secured claims plus a “cash component.”
- Sale Timeline: 60-day process.
- Owners and operators of the Seasons chain of kosher supermarkets.
- Seeks $5.7 million in DIP financing from SKNY, which is also the stalking horse.
- Requests approval of sale process for substantially all of the company’s assets.
- Stalking Horse: SKNY, LLC (prepetition secured lender) - $12 million bid.
- Sale Timeline: None proposed.
- Ed Map distributes print and digital textbooks to for-profit colleges and provides content strategy and logistical services.
- Prepetition sale negotiations were unilaterally terminated on Sept. 17, debtor filed bankruptcy case to sell assets.
- Debtor has yet to file any sale papers.
| DEBTOR | FILING ALERT | CASE SUMMARY |
| Consumer Discretionary | ||
| Pachanga | 9/14 S.D.N.Y. | CASE SUMMARY: FIKA’s ‘Aggressive’ Growth Efforts Derailed by Lack of Funding During ‘Critical Juncture’ of Expansion |
| Ed Map | 9/18 - S.D. Ohio | CASE SUMMARY: Ed Map’s Prepetition Sale Negotiations Hampered by Distributor Cutting Off Supply of Electronic Textbooks |
| Ben & Reef Gardens | 9/18 - C.D. Calif. | |
| Memento Mori | 9/20 - E.D.N.C. | North Carolina Boutique Hotel Owner Seeks Use of Cash Collateral to Effectuate a Reorganization |
| Consumer Discretionary | ||
| Blue Gold Equities D/B/A Seasons | 9/17 - E.D.N.Y. | CASE SUMMARY: Seasons Kosher Supermarkets Owner Seeks to Run Sale Process with Prepetition Secured Lender SKNY as Stalking Horse |
| VeroBlue Farms USA | 9/21 - N.D. Iowa | |
| Financials | ||
| Regdalin Properties | 9/18 - C.D. Calif. | |
Case data, such as representatives and DIP financing terms, including for this week’s filings, can be found in the Reorg First Day database, which includes all U.S. chapter 11 cases filed since 2012 with over $10 million in liabilities.
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