Orchard initiates voluntary Chapter 11 reorganization proceedings

20 Jan '11

4 min read

Appleseed's Intermediate Holdings LLC and each of its domestic subsidiaries, which do business in the United States as “Orchard Brands”, a leading, multi-channel marketer of apparel and home products focused on serving the needs of the rapidly growing market segment of women and men above the age of fifty-five, announced that it has reached agreement with over 80% of its first lien secured lenders and 100% of its second lien secured lenders on the terms of a reorganization that will eliminate approximately $420 million of indebtedness and improve the Company's operating flexibility.

To facilitate and implement its agreed upon restructuring, the Company and certain of its affiliates announced the filing of voluntary petitions for reorganization under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.

As part of its pre-negotiated restructuring, the Company filed a chapter 11 plan of reorganization and related disclosure statement, and entered into an agreement with over 80% of its first lien secured lenders and 100% of its second lien secured lenders to support the chapter 11 plan. Certain of the Company's secured lenders have also agreed to invest $40 million of new capital through the chapter 11 plan.

The Company intends to move forward with the restructuring on an expeditious basis and complete the restructuring process in approximately three to four months. The Company also announced that it has already secured a commitment from its current lenders to provide up to $120 million in exit financing to consummate its chapter 11 plan.

The Company will use chapter 11 to reorganize its debts, and ensure its long-term financial health, while continuing to operate in the normal course of business without interruption during the restructuring process. Under the proposed restructuring, the Company expects to reduce its current indebtedness obligations by more than $420 million (over 55%) to approximately $310 million.

In conjunction with its filing, the Company is seeking approval to enter into a $140 million debtor-in-possession (DIP) financing agreement with its current secured lenders. The DIP financing will be used to provide up to $40 million of incremental liquidity in the form of a new term loan, in addition to a $100 million revolving loan.

The DIP financing will be made available to refinance the Company's existing revolving credit facility and provide the Company with additional working capital, which, combined with the Company's cash flow from operations, will provide the Company with sufficient liquidity to meet its post-petition operating expenses. Importantly, the Company has also secured a commitment from its lenders for up to $120 million in exit financing which will help facilitate the consummation of the plan of reorganization.

Said Neale Attenborough, Orchard Brands' Chief Executive Officer: “We look forwardto emerging from this process as quickly as possible with a capital structure that will firmly position us for long-term success. We are a strong and profitable company with an unparalleled portfolio of brands. With over 40 million customers and as a leading direct marketer to the rapidly growing market segment of women and men above the age of fifty-five, I am excited for the future of the Company and its prospects.

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