Tue 01/03/2023 14:06 PM
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Relevant Documents:
Voluntary Petition
First Day Declaration
Cash Collateral Motion
First Day Hearing Agenda

















Summary
TOMS King is “one of the largest BK franchisees in North America,” with 90 restaurants in Illinois, Ohio, Pennsylvania and Virginia
Case to be funded with use of cash collateral with consent of first lien lender Bank of America
Seek to restructure or sell assets

Palatine, Ill.-based TOMS King LLC, “one of the largest” Burger King franchisees in North America, and certain affiliates, filed for chapter 11 protection on Monday, Jan. 2, in the Bankruptcy Court for the Northern District of Ohio. The debtors propose to fund the case with the use of cash collateral with the consent of their prepetition lenders as they pursue a restructuring or a sale. The use of cash collateral is subject to various sale milestones.

The company attributes the bankruptcy filing largely to the Covid-19 pandemic and the loss of foot traffic at its restaurants. TOMS also blames increases in shipping and food costs, less availability of labor and inflation, which have led to cash flow issues. Though some restaurants have remained profitable, the debtors say that others have been operating at a loss, leading to default under their prepetition first lien loan with Bank of America. The lender agreed to a forbearance prepetition, which afforded the debtors time to negotiate with the bank, Burger King Corp. and “other key constituents” on a chapter 11 process.

In July, the debtors retained M3 Partners, whose analysis led to the determination that a chapter 11 process would be the most beneficial path forward for the debtors. In early November, the debtors appointed RJ Dourney as independent manager and first day declarant Daniel Dooley of MorrisAnderson as chief restructuring officer. The company also hired ReInvest Capital to market the business, contacting more than 200 potential purchasers.

The first day hearing is scheduled for tomorrow, Wednesday, Jan. 4, at 2 p.m. ET.

The company reports $10 million to $50 million in assets and $50 million to $100 million in liabilities. The company’s prepetition capital structure includes:

  • Secured debt:

    • Bank of America (first lien): $35.5 million



  • Unsecured debt: $14 million (including franchise royalties, advertising contributions and amounts due to Burger King Corp., lease obligations and “more limited” amounts owed to vendors)



  • Equity: TOMS King LLC, TOM King (Ohio II) LLC and TOMS King III LLC are owned by TOMS King Holdings LLC (95%) and William Carpenter (5%). TOMS King LLC is the 100% owner of other debtor affiliates.


Bank of America issued to all debtors a term loan facility of $44 million, a revolving credit facility up to $2.5 million and a development loan facility “reestablished” in a principal amount of $5 million. The credit agreement, secured by a first lien in substantially all of the assets of the debtors (other than TOMS King (Ohio II) LLC and TOMS King III LLC, which are not party to the credit agreement) has an outside maturity date of Jan. 28, 2025. The debtors also have a purchasing card with Bank of America with a $200,000 purchasing limit as of the petition date, with a $57,692 balance.

Bank of America agreed to defer principal payments in March, which was ultimately extended through the maturity date, and the parties entered into a forbearance agreement in October.

The debtor is represented by Womble Bond Dickinson and Allen Stovall Neuman & Ashton in Columbus, Ohio as counsel. The case has been assigned to Judge Alan M. Koschik (case number 23-50002).

Background

Headquartered in Pallantine, Ill., the debtors operate 90 Burger King restaurants in Illinois, Ohio, Pennsylvania and Virginia, and claim to be one of Burger King’s largest current franchisees. Heading into the bankruptcy, the debtors amended their management services agreement with TOMS King Services LLC to “ease” their transition into chapter 11.

Each of the restaurants is subject to its own lease agreement, for which TOMS King provided guarantees of subsidiaries’ obligations under “certain, but not all” of the leases.

The company’s corporate organizational structure is as follows:

The debtors' largest unsecured creditors are listed below:










































































10 Largest Unsecured Creditors
Creditor Location Claim Type Amount
Burger King Corp. Miami Franchisor $   7,043,827
American Finance OPR Cincinatti Landlord 2,367,882
Holtzman Oil Corp. Mount Jackson, Va. Landlord 281,294
Service Properties Trust Chicago Landlord 194,428
King of Northern Virginia LP San Ramon, Calif. Landlord 169,016
Brinks Inc. Atlanta Contractual 160,817
Gridpoint Inc. Reston, Va. Energy Management 154,524
Venable LLP Baltimore, Md. Legal 135,988
Case Snow Management Inc. North Attleboro, Ma. Landscaping 100,000
Eagle Trading Int’l Corp. Niles, Ill. Contractual 81,098

The case representatives are as follows:































































































Representatives
Role Name Firm Location
Debtors'
Co-Counsel
Richard K.
Stovall
 Allen Stovall Neuman
& Ashton
Columbus
Thomas R.
Allen
James Allan Coutinho
Debtors'
Co-Counsel
Matthew P.
Ward
Womble Bond
Dickinson
Wilmington, Del.
William D.
Curtis
Morgan L.
Patterson
Ericka F.
Johnson
Debtors'
Restructuring
Advisor
Daniel
Dooley
(CRO)
MorrisAnderson Chicago
Co-Counsel to
Bank of America
Frank W.
DeBorde
Morris,
Manning &
Martin
Atlanta
Lisa
Wolgast
Co-Counsel to
Bank of America
Jordan S.
Blask
Frost Brown Todd Pittsburgh
Jillian Nolan
Snider
Co-Counsel to
TOMS King
Holdings LLC
(equityholder),
TOMS
King Services
LLC and other
affiliated
nondebtors
Christopher W.
Peer
Wickens Herzer
Panza
Avon, Ohio
Malorie A.
Alverson
Co-Counsel to
TOMS King
Holdings LLC
(equityholder),
TOMS
King Services
LLC
and other
affiliated nondebtors
Sean
Southard
Klestadt Winters
Jureller
Southard &
Stevens
New York
John E.
Jureller
Stephanie
R.
Sweeney
United States
Trustee
Maria D. Giannirakis Office of the
U.S. Trustee
Cleveland
Kate M.
Bradley

Cash Collateral Motion

The debtors request the consensual use of cash collateral on an interim basis through Feb. 1, proposing as adequate protection a replacement lien and payment of professional fees, access to collateral and financial reporting. To the extent that the adequate protection “is insufficient to protect the security interests of Agent and/or Pre-Petition Lender from the Debtors’ use of Cash Collateral or from a diminution in value of the Pre-Petition Collateral arising from and after the Petition Date,” the debtors propose granting a superpriority administrative expense claim upon entry of the final cash collateral order and subject to the carveout.

In addition, subject to entry of a final order, the debtors propose a waiver of the estates’ right to seek to surcharge its collateral pursuant to Bankruptcy Code section 506(c) and the “equities of the case” exception under section 552(b).

The carveout for professional fees of the debtors is $100,000 and is $50,000 for an official committee of unsecured creditors.

The proposed budget for the use of cash collateral is HERE.

The use of cash collateral is subject to the following milestones:

  • Bid procedures motion: Filed within 15 days after petition date;

  • Bid procedures order: Entered within 30 days of petition date;

  • Bid deadline: 45 days after entry of the bid procedures order;

  • Auction: Five days after the bid deadline;

  • Sale hearing: Five days after the auction; and

  • Sale closing: Five days after entry of the sale order.


The lien challenge deadline is 60 days from appointment for a UCC and 75 days from entry of the interim order for all other parties in interest. The UCC lien investigation budget is $25,000.

Other Motions

The debtors also filed various standard first day motions, including the following:

  • Motion for joint administration

    • The cases will be jointly administered under the TOMS King (Ohio) LLC case at case No. 22-50001.



  • Motion to pay critical vendors/PACA/PSA claims

    • The debtors request authority to pay claims of critical vendors and claims arising under the Perishable Agricultural Commodities Act of 1930, or PACA, and the Packers and Stockyards Act of 1921, or PASA, under which claims are generally entitled to prompt payment from PACA or PASA trust assets ahead of secured, priority and unsecured creditors of a debtor’s estate. The debtors seek to pay: (a) on an interim basis, critical vendor claims up to $630,000 and PACA/PASA claims up to $400,000 and (b) on a final basis, critical vendor claims up to $900,000 and PACA/PASA claims up to $600,000.



  • Motion to reject unexpired leases of nonresidential real property and executory contracts and approve related procedures

    • The debtors seek to reject leases (as listed HERE) and executory contracts (as listed HERE) that they say are “inconsistent with the Debtors’ go-forward business plan” based on underperformance.



  • Motion to pay employee wages and benefits

    • The debtors have 2,177 employees. The debtors seek to pay the following amounts on account of prepetition wages and benefits:





 
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