Wed 08/31/2022 17:10 PM
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Relevant Documents:
Voluntary Petition
Press Release
First Day Declaration
DIP Financing Motion
Bid Procedures Motion
First Day Hearing Agenda


















Summary
NewAge develops, sells and distributes health and nutritional products through a sales network of brand partners
Debtors seek to run going-concern sale process for substantially all assets, with a long-standing independent sales representative of the company to serve as stalking horse and DIP lender through DIP Financing LLC, an entity in which he is a principal
Case to be funded by $16 million in DIP financing

 


NewAge Inc., a Midvale, Utah-based developer, seller and distributor of health and nutritional products sold mostly through a sales network of brand partners, filed for chapter 11 protection today in the Bankruptcy Court for the District of Delaware, setting up a going-concern sale process for substantially all of their assets. John Wadsworth, who has worked as an independent sales representative of the company since 1998, has agreed to serve as stalking horse and DIP lender through DIP Financing LLC, of which he is a principal. Wadsworth owns less than 0.4% of the outstanding shares of NA Inc. and has never been a director or officer of the debtors, according to the first day declaration. The DIP financing would be in the amount of $16 million, and the stalking horse has also agreed to purchase the debtors’ $12 million East West Bank, or EWB, credit facility, with the stalking horse bid designed as a credit bid of the full amount of the DIP and EWB facilities.

The first day hearing has been scheduled for tomorrow, Thursday, Sept. 1, at 3 p.m. ET.

The company reports $310.9 million in assets and $149.4 million in liabilities as of Dec. 31, 2021. The company’s prepetition capital structure includes:

  • Secured debt:

    • East West Bank revolving loan facility: $12 million.



  • Unsecured debt (broken down by debtor below):

    • NewAge Inc.: $1 million (notes payable, trade debt, lease liability).

    • Morinda Holdings Inc.: $18 million (intercompany debt, employee liabilities, taxes).

    • Morinda Inc., dba Noni by NewAge: $34 million (intercompany debt, accounts payable, commissions, employee liabilities).

    • Ariix LLC: $235 million (intercompany debt, accounts payable and notes payable).



  • Equity: NewAge is a public company that trades on the Nasdaq under the ticker symbol NBEV. Cooper Family Investments LP owns 7% of NA Inc., and no other parties own more than 5% of the stock.


The debtors are represented by Greenberg Traurig as counsel and SierraConstellation Partners as financial advisor. Lawrence Perkins of SierraConstellation Partners is the chief restructuring officer. The case has been assigned to Judge Laurie Selber Silverstein (case No. 22-10819).

Events Leading to the Bankruptcy Filing

The company attributes the bankruptcy filing to the Covid-19 pandemic, supply-chain issues, and problems integrating the company’s two primary lines of business, “Morinda” and “Ariix.” NewAge also points to a challenging regulatory environment in China, which accounts for about 20% of the company’s business.

After NewAge acquired Ariix in 2020, the debtors conducted an independent investigation of international business practices and identified potential violations of the Foreign Corrupt Practices Act, leading to a voluntary self-disclosure in August 2021 to the Department of Justice and Securities Exchange Commission. Though the debtors have yet to be subject to any penalties or fines, the investigation and cooperating with the government have led to “significant” expenses and management changes.

Background

The debtors, along with nondebtor affiliates, develop, sell and distribute health and nutritional products, through a direct sales distribution network across more than 50 countries, primarily in North America, Japan, China and Europe. The company uses more than 400,000 brand partners and sells by e-commerce and through stores. The company’s largest brand is Tahitian Noni, which makes products designed for the purpose of “reducing inflammation and strengthening the body’s protection against viruses, primarily through a consumable beverage derived from the Noni plant, an antioxidant-rich, natural resource found in French Polynesia.” The company’s brands include Lucim, TruAge, Slenderiiz, Nutrifii, and Zennoa.

The company’s corporate organizational structure is HERE.

​​​​​​The debtors’ largest unsecured creditors are listed below:


 










































































10 Largest Unsecured Creditors
Creditor Location Claim Type Amount
TCI Biotech LLC American Fork, Utah Trade $   2,503,155
Zennoa LLC Island Park, Idaho Trade 1,627,271
Miller & Chevalier
Chartered Inc.
Washington Professional
Services
1,429,838
Deloitte & Touche LLP Salt Lake City Professional
Services
1,317,128
Internal Revenue Service Philadelphia Tax 488,961
SelectHealth Murry, Utah Health Benefits 448,944
Ernst & Young U.S. LLP Chicago Professional
Services
283,957
Mavie Singapore Trade 270,623
Barnes & Thornburg LLP Salt Lake City Professional
Services
209,353
2420 17th St. LLC Newport Beach, Calif. Lease 247,589
(208,849
unsecured)

The case representatives are as follows:















































































Representatives
Role Name Firm Location
Debtors' Counsel Dennis A. Meloro Greenberg Traurig Wilmington, Del.
Anthony W. Clark
Annette Jarvis Salt Lake City
Michael F. Thomson
Carson Heninger
Peggy Hunt
Alison Elko Franklin Atlanta
Debtors' Financial
Advisor
Lawrence Perkins (CRO) SierraConstellation
Partners
Midvale, Utah
Carl Moore
Debtors' Investment
Banker
Jay Weinberger Houlihan Lokey New York
David Cumming
Joe Ebb
Counsel to the DIP
Lender
Steven M. Berman Shumaker, Loop
& Kendrick
Tampa, Fla.
Debtors' Claims
Agent
Sheryl Betance Stretto Irvine, Calif.
U.S. Trustee John Schanne Office of the
U.S. Trustee
Wilmington, Del.

DIP Financing Motion

The debtors request approval of $16 million in DIP financing ($9 million on an interim basis) in the form of a multidraw term loan from DIP Financing LLC, whose principal is Wadsworth. New Age is the DIP borrower, with the remaining debtors as guarantors. The debtors also request the use of cash collateral other than cash held in the debtors accounts with East West Bank (China) Ltd., to which the DIP lender has consented. The prepetition credit facility requires maintenance of the equivalent of at least $13.2 million.

The DIP financing bears interest at 11.5%, with 2% added for the default rate, and matures on the earliest of 90 days after the petition date, the effective date of a plan, closing of a sale, and other customary events.

According to the motion, the DIP lender will “in effect” be priming itself, as the only liens to be primed are those under the existing secured credit facility, which the DIP lender holds as assignee. The debtors propose a lien on avoidance action proceeds subject to the final order.

The facility includes a 2% funding fee.

In support of the proposed DIP financing, the debtors filed the declaration of Jay Weinberger of Houlihan Lokey, who states that the “current outcome (i.e., the Debtors’ engagement with the DIP Lender, as assignee of the Prepetition Credit Facility)” has the benefit of “allowing the Debtors to avoid a costly and distracting fight over potential priming and adequate protection.”

The company proposes as adequate protection to the preposition secured lender “an amount equal to the aggregate diminution in value of the Prepetition Lender’s interests in the Prepetition Collateral from and after the Petition Date.” On account of the adequate protection claims, the proposed order provides for the debtors to maintain their Chinese accounts, over which the prepetition lender holds dominion. The debtors would also make interest payments as set forth in the budget.

In addition, the debtors propose a waiver of the estates’ right to seek to surcharge its collateral pursuant to Bankruptcy Code section 506(c).

The carve-out for professional fees consists of budgeted and approved amounts.

The proposed budget for the use of the DIP facility is HERE.

The DIP financing is subject to the following milestones:

  • Petition date: Aug. 30;

  • Interim DIP order: Entered by Sept. 1;

  • Bid procedures hearing / entry of bid procedures order: Sept. 20;

  • Final DIP order: Entered by Sept. 29;

  • Bid deadline: Oct. 4 (14 days after entry of bid procedures order);

  • Auction: Oct. 5 (15 days after entry of bid procedures order);

  • Sale hearing: Entered by Oct. 7 (17 days after entry of bid procedures order);

  • Sale order: Entered by Oct. 10 (18 days after entry of bid procedures order); and

  • Sale consummation: Within three days after entry of sale order (the bid procedures require a sale closing by Oct. 11).


The UCC lien investigation budget is $200,000.

Bid Procedures Motion

The debtors request approval of bid procedures for the sale of substantially all of their assets with Wadsworth’s vehicle, DIP Financing LLC, as the stalking horse for a credit bid of the prepetition EWB debt and DIP financing, with a payment of cash at closing of $16 million less the amount outstanding under the DIP facility. The stalking horse bid also includes the assumption of certain liabilities and payment of all cure costs.

The debtors propose a breakup fee of 2.5% and expense reimbursement up to $375,000. Initial and subsequent overbids are $50,000.

The debtors propose the following sale timeline (which is consistent with the DIP milestones):



 
Other Motions

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