First Day Weekly
Real Estate Filings Continue to Rise, Restaurants Still Grappling With Suppressed Hospitality Industry as Incendiary 2020 Comes to a Close
Thu 12/31/2020 13:44 PM
Last week’s filings of “eatertainment” restaurant chain Punch Bowl Social, home improvement financing company Renovate America and leisure and corporate travel services provider Spherature were followed by a quiet final week of 2020. Continue reading for our First Day team's analysis of the chapter 11 filings from the last week of 2020, including highlights on recent real estate and hospitality industry filings, and Request a Trial for access to the linked documents and analysis as well as our coverage of all U.S. chapter 11 cases filed since 2012 with over $10 million in liabilities.
Thirty-one percent of December’s chapter 11s came from the real estate sector, which had an increase in filing frequency every quarter this year and notched 78 cases in 2020, marking a year-over-year increase of 34% in real estate filings from 2019 to 2020. Nine of this year’s real estate filings reported over $100 million in liabilities, which is at least six cases above the count for any other year on First Day record.
Nearly half of 2020’s real estate chapter 11s reporting over $10 million in liabilities were filed in New York or California:
For chapter 11s across all sectors and First Day liability ranges, the 2020 chapter 11 count stands at 476, representing a 20% increase from 2019, which was formerly the First Day record holder for chapter 11s filed in a single year. Below is the chapter 11 count per month from January to December:
Punch Bowl Social, a Denver-based “eatertainment” venue chain, filed for chapter 11 last week reporting $10 million to $50 million in both assets and liabilities and closed all their remaining locations. To “effectively reorganize,” the company requests $6.5 million in DIP financing from PBS DIP Lender, an affiliate of prepetition lender PBS Lender. The financing consists of a tranche A $6.175 million senior secured facility and tranche B $350,000 junior secured facility.
GL Brands, a Fort-Worth based global developer and distributor of cannabis-derived wellness products with a focus on CBD and hemp filed for chapter 11 to reorganize through a debt-to-equity swap and de-leverage their balance sheet. The company seeks $750,000 of DIP financing from prepetition secured creditor Merida Capital Partners, which has invested more than $6 million in the debtors in the form of stock purchases and loans. With “little” fixed capital, the company says its value is in future profits and believes it “has a bright future if it can survive in the short run.”
Due to changes in California legislation in 2018 that added income verification requirements for PACE financing, as well as the economic fallout of the Covid-19 pandemic, San Diego-based Renovate America filed for chapter 11 to run a sale process for their remaining Benji business, which provides home improvement financing to contractors and homeowners. The company’s other business division, HERO, originated “property assessed clean energy” assessments for residential projects but stopped accepting homeowner’s applications in October of this year. Finance of America Mortgage has agreed to serve as stalking horse bidder for the Benji assets and provide $50 million in DIP financing. The company states the DIP financing is necessary because its ongoing liquidity is dependent on the debtors’ whole-loan buyer, Ameris Bank, continuing to purchase retail installment contracts and promissory notes.
Facing Covid-19’s effect on the “decimated” travel industry, along with troublesome sales rep practices and an ensuing regulatory investigations, Spherature Investments filed chapter 11 to pursue a sale of its assets and/or equity interests. After prepetition negotiations stalled with its lender and Seacret Direct, another travel sales business, regarding a potential merger of Spherature and Seacret, the debtors sent solicitation documents to “a pool of over two hundred potentially interested parties” and secured a two-week maturity date extension from its lender.
Below is a recap of the sale-related events for this period’s cases:
Case data, such as advisors and DIP financing terms, including for filings discussed above, can be found in the First Day Database, which includes all U.S. chapter 11 cases filed since 2012 with over $10 million in liabilities.
Thirty-one percent of December’s chapter 11s came from the real estate sector, which had an increase in filing frequency every quarter this year and notched 78 cases in 2020, marking a year-over-year increase of 34% in real estate filings from 2019 to 2020. Nine of this year’s real estate filings reported over $100 million in liabilities, which is at least six cases above the count for any other year on First Day record.
Nearly half of 2020’s real estate chapter 11s reporting over $10 million in liabilities were filed in New York or California:
For chapter 11s across all sectors and First Day liability ranges, the 2020 chapter 11 count stands at 476, representing a 20% increase from 2019, which was formerly the First Day record holder for chapter 11s filed in a single year. Below is the chapter 11 count per month from January to December:
Punch Bowl Social, a Denver-based “eatertainment” venue chain, filed for chapter 11 last week reporting $10 million to $50 million in both assets and liabilities and closed all their remaining locations. To “effectively reorganize,” the company requests $6.5 million in DIP financing from PBS DIP Lender, an affiliate of prepetition lender PBS Lender. The financing consists of a tranche A $6.175 million senior secured facility and tranche B $350,000 junior secured facility.
GL Brands, a Fort-Worth based global developer and distributor of cannabis-derived wellness products with a focus on CBD and hemp filed for chapter 11 to reorganize through a debt-to-equity swap and de-leverage their balance sheet. The company seeks $750,000 of DIP financing from prepetition secured creditor Merida Capital Partners, which has invested more than $6 million in the debtors in the form of stock purchases and loans. With “little” fixed capital, the company says its value is in future profits and believes it “has a bright future if it can survive in the short run.”
Due to changes in California legislation in 2018 that added income verification requirements for PACE financing, as well as the economic fallout of the Covid-19 pandemic, San Diego-based Renovate America filed for chapter 11 to run a sale process for their remaining Benji business, which provides home improvement financing to contractors and homeowners. The company’s other business division, HERO, originated “property assessed clean energy” assessments for residential projects but stopped accepting homeowner’s applications in October of this year. Finance of America Mortgage has agreed to serve as stalking horse bidder for the Benji assets and provide $50 million in DIP financing. The company states the DIP financing is necessary because its ongoing liquidity is dependent on the debtors’ whole-loan buyer, Ameris Bank, continuing to purchase retail installment contracts and promissory notes.
Facing Covid-19’s effect on the “decimated” travel industry, along with troublesome sales rep practices and an ensuing regulatory investigations, Spherature Investments filed chapter 11 to pursue a sale of its assets and/or equity interests. After prepetition negotiations stalled with its lender and Seacret Direct, another travel sales business, regarding a potential merger of Spherature and Seacret, the debtors sent solicitation documents to “a pool of over two hundred potentially interested parties” and secured a two-week maturity date extension from its lender.
Below is a recap of the sale-related events for this period’s cases:
| Sales | |
| Spherature Investments | |
|---|---|
| Spherature Investments operates a travel services and products business under the name WorldVentures. | |
| Seeks to sell assets and/or equity interests. | |
| Renovate America | |
| Renovate America is a home improvement financing company. | |
| Seeks to run sale process for remaining Benji business, which provides home improvement financing to contractors and homeowners. | |
| Stalking horse: | Finance of America Mortgage for “(i) Buyer’s assumption of the Assumed Liabilities, and (ii) $5,000,000.00 plus the Loan Purchase Price plus the Contract Prepayment Amount.” |
| Sale timeline: |
|
Below is a recap of filing alerts and case summaries from this review period, all of which can also be found on the First Day website:
Case data, such as advisors and DIP financing terms, including for filings discussed above, can be found in the First Day Database, which includes all U.S. chapter 11 cases filed since 2012 with over $10 million in liabilities.
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