Affidavit/Declaration in Support of First Day Motion Declaration of Steven P. Jackson, Jr. in Support of Chapter 11 Petitions and First Day Pleadings of Remington Outdoor Company, Inc. and Its Affiliated Debtors and Debtors in Possession Filed By Remington Outdoor Company, Inc. (Attachments: # 1 Exhibit A # 2 Exhibit B # 3 Exhibit C)(Jones, Laura Davis) (Entered: 03/25/2018)
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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
âââââââââââââââââââââââââââââââââââââââââââââââââââââââââââ ââ X
In re: : Chapter 11
REMINGTON OUTDOOR COMPANY, INC, et : Case No. 18â10684 (_)
al.,
Debtors. : (Joint Administration Requested)
___________________________________________________________ .â X
DECLARATION OF STEPHEN P. JACKSON, JR.
IN SUPPORT OF CHAPTER 11 PETITIONS AND FIRST DAY
PLEADINGS OF REMINGTON OUTDOOR COMPANY, INC.
AND ITS AFFILIATED DEBTORS AND DEBTORS IN POSSESSION
1, Stephen P. Jackson, Jr., hereby declare under penalty of perjury:
1. I am the Chief Financial Ofï¬cer of each of the above-captioned debtors and
debtors in possession (each, a âDebtorâ and, collectively, the ângtg§â). I have served as Chief
Financial Ofï¬cer of Remington Outdoor Company, Inc. since August 15, 2015.
2. I have over 12 years of experience in the ï¬rearms manufacturing industry. Before
joining the Debtors, from October 2013 to August 2015, I was the Chief Financial Ofï¬cer and
Executive Vice President at Driven Brands, Inc. From 2003 to 2013, I worked for Remington
Arms Company, serving various roles, including Chief Strategy and Accounting Ofï¬cer, Chief
Financial Ofï¬cer, Treasurer, Corporate Secretary, and Vice President of Finance. From 1990 to
2003, I worked for PricewaterhouseCoopers LLP, where I served in various positions, including
Partner in Middle Market Advisory Services, as well as Senior Manager, Manager, Senior
1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtorâs federal tax identiï¬cation
number, as applicable, are: Remington Outdoor Company, Inc. (4491); FGI Holding Company, LLC (9899);
FGI Operating Company, LLC (9774); Remington Arms Company, LLC (0935); Barnes Bullets, LLC (8510);
TMRI, Inc. (3522); RA Brands, LLC. (1477); FGI Finance, Inc. (0109); Remington Arms Distribution
Company, LLC (4655); Huntsville Holdings LLC (3525); 32E Productions, LLC (2381); Great Outdoors
Holdco, LLC (7744); and Outdoor Services, LLC (2405). The principal ofï¬ces of Debtor Remington Outdoor
Company Inc., the top-level holding company, are located at 870 Remington Drive, Madison, NC 27025.
DOCS_DE:218594.1
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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
----------
x
In re:
Chapter 11
REMINGTON OUTDOOR COMPANY,INC., et
al.,l
Case No. 18-10684(^)
Debtors.
-------------------------------------------------------------
(Joint Administration Requested)
x
DECLARATION OF STEPHEN P. JACKSON,JR.
IN SUPPORT OF CHAPTER 11 PETITIONS AND FIRST DAY
PLEADINGS OF REMINGTON OUTDOQR COMPANY,INC.
AND ITS AFFILIATED DEBTORS AND DEBTORS IN POSSESSION
I, Stephen P. Jackson, Jr., hereby declare under penalty of perjury:
1.
I am the Chief Financial Officer of each of the above-captioned debtors and
debtors in possession (each, a "Debtor" and, collectively, the "Debtors"). I have served as Chief
Financial Officer of Remington Outdoor Company,Inc. since August 15, 2015.
2.
I have over 12 years of experience in the firearms manufacturing industry. Before
joining the Debtors, from October 2013 to August 2Q15, I was the Chief Financial Officer and
Executive Vice President at Driven Brands, Inc. From 2003 to 2013, I worked for Remington
Arms Company, serving various roles, including Chief Strategy and Accounting Officer, Chief
Financial Officer, Treasurer, Corporate Secretary, and Vice President of Finance. From 1990 to
2003, I worked for PricewaterhouseCoopers LLP, where I served in various positions, including
Partner in Middle Market Advisory Services, as well as Senior Manager, Manager, Senior
The Debtors in these chapter 11 cases, along with the last four digits of each Debtor's federal tax identification
number, as applicable, are: Remington Outdoor Company, Inc. (4491); FGI Holding Company, LLC (9899);
FGI Operating Company, LLC (9774); Remington Arms Company, LLC (p935); Barnes Bullets, LLC (8510);
TMRI, Inc. (3522); RA Brands, L.L.C. (1477); FGI Finance, Inc. (0109); Remington Arms Distribution
Company, LLC (4655); Huntsville Holdings LLC (3525); 32E Productions, LLC (2381); Great Outdoors
Holdco, LLC (7744); and Qutdoor Services, LLC (2405). The principal offices of Debtor Remington Outdoor
Company-Inc., the top-level holding company, are located at 87Q Remington Drive, Madison, NC 27025.
DOCS DE218594.1
Associate and Associate in the Audit Practice. I hold a Bachelor of Science in Accounting from
Nichols College and am a Certiï¬ed Public Accountant in the State of North Carolina.
3. On March 25, 2018 (the âPetition Dateâ), each of the Debtors ï¬led in this Court a
voluntary petition for relief under chapter 11 of title 11 of the United States Code, ll U.S.C. §§
101â1532 (as amended, the âBankruptcy Codeâ). The Debtors commenced these cases in order
to implement a comprehensive balance sheet restructuring pursuant to the Debtorsâ joint
prepackaged plan of reorganization (the âPlanâ), which the Debtors are ï¬ling concurrently With
the chapter 11 petitions. As discussed in further detail below, the Plan contemplates that, except
for the Term Loan Claims (as deï¬ned in the Plan), the Third Lien Notes Claims (as deï¬ned in
the Plan), and certain settled intercompany claims, all claims against the Debtors, including all
general unsecured claims, will either be paid in full or otherwise rendered unimpaired.
4. The Debtors have requested certain relief in âï¬rst dayâ applications and motions
ï¬led with the Court (collectively, the â irst Day Pleadingsâ)2 in order to minimize certain of the
potential adverse effects of the commencement of these chapter 11 cases and to maximize the
value of their estates while they seek conï¬rmation of the Plan. I submit this declaration (the
âDeclarationâ) to assist the Court and other parties in interest in understanding the circumstances
that led to the commencement of these chapter 11 cases and in support of the Debtorsâ chapter 11
petitions for relief and the First Day Pleadings.
5. Except as otherwise indicated herein, all facts set forth in this Declaration are
based on my personal knowledge, my discussions with other members of the Debtorsâ senior
management and other personnel, my review of relevant documents, or my opinion based on my
experience, knowledge, and information concerning the Debtorsâ operations and ï¬nancial
2 Capitalized terms used but not deï¬ned herein have the meanings ascribed to them in the First Day Pleadings.
2
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Associate and Associate in the Audit Practice. I hold a Bachelor of Science in Accounting from
Nichols College and am a Certified Public Accountant in the State of North Carolina.
3.
On March 25, 2018 (the "Petition Date"), each of the Debtors filed in this Court a
voluntary petition for relief under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§
101-1532 (as amended, the "Bankruptcy Code"). The Debtors commenced these cases in order
to implement a comprehensive balance sheet restructuring pursuant to the Debtors' joint
prepackaged plan of reorganization (the "Plan"), which the Debtors are filing concurrently with
the chapter 11 petitions. As discussed in further detail below, the Plan contemplates that, except
for the Term Loan Claims (as defined in the Plan), the Third Lien Notes Claims (as defined in
the Plan), and certain settled intercompany claims, all claims against the Debtors, including all
general unsecured claims, will either be paid in full or otherwise rendered unimpaired.
4.
The Debtors have requested certain relief in "first day" applications and motions
filed with the Court (collectively, the "First Day Pleadings")Z in order to minimize certain of the
potential adverse effects of the commencement of these chapter 11 cases and to maximize the
value of their estates while they seek confirmation of the Plan. I submit this declaration (the
"Declaration"~ to assist the Court and other parties in interest in understanding the circumstances
that led to the commencement of these chapter 11 cases and in support ofthe Debtors' chapter 11
petitions for relief and the First Day Pleadings.
5.
Except as otherwise indicated herein, all facts set forth in this Declaration are
based on my personal knowledge, my discussions with other members of the Debtors' senior
management and other personnel, my review of relevant documents, or my opinion based on my
experience, knowledge, and information concerning the Debtors' operations and financial
2
Capitalized terms used but not defined herein have the meanings ascribed to them in the First Day Pleadings.
condition. If called upon to testify, I would testify competently to the facts set forth in this
Declaration. I am authorized to submit this Declaration on behalf of the Debtors.
6. I am familiar with the contents of each First Day Pleading (including the exhibits
to such motions) and believe the relief sought in each First Day Pleading will allow for an
orderly transition of the Debtors into these chapter 11 cases and is critical to maintaining
operational stability and preserving the value of the estates as the Debtors seek conï¬rmation of
their Plan. Further, it is my belief that the relief sought in the First Day Pleadings is in each case
narrowly tailored and necessary to achieve the goals identified above, and, accordingly, best
serves the interests of the Debtorsâ estates and their stakeholders.
7. Parts I and II of this Declaration provide an overview of the Debtorsâ businesses,
organizational structure, and capital structure. Part 111 provides an overview of the
circumstances leading to the commencement of these chapter 11 cases. Part IV discusses the
bases for relief sought in the First Day Pleadings.
1. Description of the Debtors
A. The Debtorsâ Businesses
8. Headquartered in Madison, North Carolina, the Debtors are one of Americaâs
oldest and largest manufacturers of ï¬rearms, ammunition and related products for commercial,
military, and law enforcement customers throughout the world. The Debtors hold a diverse
portfolio of categoryâdeï¬ning brands, including Remington, Marlin, Bushmaster, Barnes Bullets,
Advanced Armament Corp, and DPMS, among others.
9. Since 2008, the Debtors have held leading market positions in the United States in
a variety of ï¬rearms and ammunition categories, including certain sales to the military and law
enforcement agencies. The Debtors have several key strengths that provide them with a
significant competitive advantage in the ï¬rearm and ammunition markets, including, among
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condition. If called upon to testify, I would testify competently to the facts set forth in this
Declaration. I am authorized to submit this Declaration on behalf ofthe Debtors.
6.
I am familiar with the contents of each First Day Pleading (including the exhibits
to such motions) and believe the relief sought in each First Day Pleading will allow for an
orderly transition of the Debtors into these chapter 11 cases and is critical to maintaining
operational stability and preserving the value of the estates as the Debtors seek confirmation of
their Plan. Further, it is my belief that the relief sought in the First Day Pleadings is in each case
narrowly tailored and necessary to achieve the goals identified above, and, accordingly, best
serves the interests of the Debtors' estates and their stakeholders.
7.
Parts I and II of this Declaration provide an overview of the Debtors' businesses,
organizational structure, and capital structure.
Part III provides an overview of the
circumstances leading to the commencement of these chapter 11 cases. Part IV discusses the
bases for relief sought in the First Day Pleadings.
I.
Description of the Debtors
A.
The Debtors' Businesses
8.
Headquartered in Madison, North Carolina, the Debtors are one of America's
l,
oldest and largest manufacturers of firearms, ammunition and related products for commercia
military, and law enforcement customers throughout the world. The Debtors hold a diverse
portfolio of category-defining brands, including Remington, Marlin, Bushmaster, Barnes Bullets,
Advanced Armament Corp., and DPMS,among others.
9.
Since 2008, the Debtors have held leading market positions in the United States in
a variety of firearms and ammunition categories, including certain sales to the military and law
enforcement agencies.
The Debtors have several key strengths that provide them with a
significant competitive advantage in the firearm and ammunition markets, including, among
3
other things, (i) category deï¬ning brands, (ii) a broad product portfolio, (iii) multiple distribution
channels designed to reach diverse end markets, and (iv) a differentiated, customer-focused
management, sales, and marketing approach. In addition, the Debtors are one of only two major
US. companies that manufacture both ï¬rearms and ammunition, which provides them with a
unique servicing edge, supports their market leading positions, and adds a recurring revenue
component to sales.
10. The Debtors currently manufacture their products in seven different facilities
located across the âUnited States with an aggregate 2.5 million square feet of manufacturing
space, enabling them to deliver products throughout the United States and globally to
approximately 52 countries. The majority of the Debtorsâ revenue is derived from two key
ï¬rearms facilities in Ilion, New York and Huntsville, Alabama and a primary ammunition plant
in Lonoke, Arkansas. The Debtorsâ principal customers are various mass market retail chains
(e.g., WalâMart and Dickâs Sporting Goods) and specialty retail stores (e.g., Bass Pro Shops and
Cabelaâs) and wholesale distributors (e.g., Sports South). As of the Petition Date, the Debtors
employed approximately 2,700 full-time employees, with an additional work force of temporary
employees engaged during peak production schedules at certain of their manufacturing facilities.
B. Corporate History
ll. Formed in 2007, Debtor Remington Outdoor Company, Inc. (âRQQâ) is a holding
company that is currently majority owned by R2 Holdings, LLC (â_R_2_H_â). ROC was previously
known as Freedom Group, Inc. (â11gâ), which was formed principally for the purpose of
acquiring Remington Arms Company, LLC3 (âRACâ). On December 12, 2007, through a series
of transactions, Bushmaster Firearms International, LLC and RAC became wholly owned
subsidiaries of FGI.
3 Formerly known as Remington Arms Company, Inc.
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other things,(i) category defining brands,(ii) a broad product portfolio,(iii) multiple distribution
channels designed to reach diverse end markets, and (iv) a differentiated, customer-focused
management, sales, and marketing approach. In addition, the Debtors are one of only two major
U.S. companies that manufacture both firearms and ammunition, which provides them with a
unique servicing edge, supports their market leading positions, and adds a recurring revenue
component to sales.
10.
The Debtors currently manufacture their products in seven different facilities
located across the United States with an aggregate 2.5 million square feet of manufacturing
space, enabling them to deliver products throughout the United States and globally to
approximately 52 countries. The majority of the Debtors' revenue is derived from two key
firearms facilities in Ilion, New York and Huntsville, Alabama and a primary ammunition plant
in Lonoke, Arkansas. The Debtors' principal customers are various mass market retail chains
(e.g., Wal-Mart and Dick's Sporting Goods) and specialty retail stores (e.g., Bass Pro Shops and
Cabela's) and wholesale distributors (e.g., Sports South). As of the Petition Date, the Debtors
employed approximately 2,700 full-time employees, with an additional work force of temporary
employees engaged during peak production schedules at certain oftheir manufacturing facilities.
B.
Corporate History
11.
Formed in 2007, Debtor Remington Outdoor Company, Inc.("ROC")is a holding
company that is currently majority owned by R2 Holdings, LLC ("R2H"). ROC was previously
known as Freedom Group, Inc. ("FGI"), which was formed principally for the purpose of
acquiring Remington Arms Company, LLC3 ("RAC"). On December 12, 2007, through a series
of transactions, Bushmaster Firearms International, LLC and RAC became wholly owned
subsidiaries of FGI.
3
Formerly known as Remington Arms Company, Inc.
0
C. Organizational Structure
12. Debtors ROC, FGI Holding Company, LLC (âFGI Holdingâ), and FGI Operating
Company, LLC (âFGI Opcoâ) principally serve as holding companies. ROC owns 100% of the
equity interests in FGI Holding, which in turn owns 100% of the equity interests in FGI Opco.
13. FGI Opco owns 100% of the equity interests in Debtors RAC, Barnes Bullets,
LLC (âBangâ), RA Brands, L.L.C. (âRA Brandsâ), FGI Finance, Inc. (âFGI Financeâ), and
Outdoor Services, LLC. RAC, in turn, owns 100% of the equity interests in Debtors Remington
Arms Distribution Company, LLC (âR_A_D_â), TMRI, Inc. (âMâ), Huntsville Holdings LLC,
32E Productions, LLC and Great Outdoors Holdco, LLC. A chart showing the Debtorsâ
organizational structure as of the Petition Date is attached hereto as Exhibit A.
14. Debtors RAC, Barnes, TMRI, and RAD are the principal operating companies
within the Debtorsâ corporate enterprise and the owner of the Debtorsâ principal manufacturing
plants. Brief descriptions of certain of the operating entitiesâ functions are outlined below:
0 Remington Arms Company, LLC â manufacturer of firearms,
ammunition, and related products;
0 Barnes Bullets, LLC â manufacturer of ammunition and ammunition
components;
0 RA Brands, L.L.C. â owns the Debtorsâ core brand trademarks and
charges a royalty to other Debtors for use of those brands;
o TRMI, Inc. â manufacturer of barrel components with certain Debtors as
primary customers;
0 FGI Finance, Inc. â inactive entity that is the coâissuer of the Third Lien
Notes (described below) with FGI Operating Company, LLC;
0 Remington Arms Distribution Company, LLC â distributes Remington
products to retail chains/ dealers.
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C.
Organizational Structure
12.
Debtors ROC,FGI Holding Company, LLC ("FGI Holding"), and FGI Operating
Company, LLC ("FGI Opco") principally serve as holding companies. ROC owns 100% of the
equity interests in FGI Holding, which in turn owns 100% of the equity interests in FGI Opco.
13.
FGI Opco owns 100% of the equity interests in Debtors RAC, Barnes Bullets,
LLC ("Barnes"), RA Brands, L.L.C. ("RA Brands"), FGI Finance, Inc. ("FGI Finance"), and
Outdoor Services, LLC. RAC,in turn, owns 100% of the equity interests in Debtors Remington
Arms Distribution Company, LLC ("RAD"), TMRI, Inc. ("TMRI"), Huntsville Holdings LLC,
32E Productions, LLC and Great Outdoors Holdco, LLC.
A chart showing the Debtors'
organizational structure as of the Petition Date is attached hereto as Exhibit A.
14.
Debtors RAC, Barnes, TMRI, and RAD are the principal operating companies
within the Debtors' corporate enterprise and the owner of the Debtors' principal manufacturing
plants. Brief descriptions of certain of the operating entities' functions are outlined below:
â¢
Remington Arms Company, LLC âmanufacturer of firearms,
ammunition, and related products;
â¢
Barnes Bullets, LLC âmanufacturer of ammunition and ammunition
components;
â¢
RA Brands, L.L.C. âowns the Debtors' core brand trademarks and
charges a royalty to other Debtors for use of those brands;
â¢
TRMI,Inc. âmanufacturer of barrel components with certain Debtors as
primary customers;
â¢
FGI Finance, Inc. âinactive entity that is the co-issuer of the Third Lien
Notes (described below) with FGI Operating Company, LLC;
â¢
Remington Arms Distribution Company,LLC âdistributes Remington
products to retail chains/dealers.
15. Debtors Huntsville Holdings LLC, 32E Productions, LLC, Great Outdoors
Holdco, LLC and Outdoor Services, LLC are inactive shell entities that do not have any material
assets or liabilities.
16. The Debtorsâ principal ofï¬ces and main corporate headquarters are located at 870
Remington Drive, Madison, North Carolina 27025. In addition, certain corporate administrative
functions are handled in ofï¬ces adjacent to the Debtorsâ Huntsville, Alabama plant.
II. Prepetition Capital Structure4
17. The Debtors have incurred and/or issued debt through ï¬ve primary debt facilities,
consisting of (i) an asset-based lending (âAgâ) facility, (ii) a term loan facility, (iii) third lien
notes, (iv) an intercompany note purchase agreement, and (v) a secured promissory note.5 A
summary of these debt facilities is provided below.6
A. ABL Facility
18. Debtors FGI Opco, RAC, Barnes, and RAD7 are the borrowers under an asset-
based revolving credit facility (the âABL Facilityâ), in an original amount of $225 million,8
which is memorialized pursuant to that certain Loan and Security Agreement, dated as of April
19, 2012 (as amended, modiï¬ed, supplemented or restated from time to time, the âABL Facility
Loan Agreementâ), by and among FGI Holding, FGI Opco and certain of FGI Opcoâs
The following summary is qualiï¬ed in its entirety by reference to the operative documents, agreements,
schedules, and exhibits.
Prior to the Petition Date, ROC advanced funds to its subsidiaries pursuant to the ROC Financing (deï¬ned
below), which is described in greater detail in Part III of this Declaration.
A chart that further illustrates the outstanding amounts under the debt facilities and the applicable guarantors,
borrowers, and issuers under the debt facilities is attached as Exhibit C.
RAD was not a borrower on the closing date, but was added as a borrower by way of joinder subsequently.
Pursuant to certain amendments entered into prior to the Petition Date, the maximum availability under the
ABL Facility has ï¬uctuated from time to time. As of the Petition Date, the facility size is $193 million.
Case 18-10684-BLS
15.
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Debtors Huntsville Holdings LLC, 32E Productions, LLC, Great Outdoors
Holdco, LLC and Outdoor Services, LLC are inactive shell entities that do not have any material
assets or liabilities.
16.
The Debtors' principal offices and main corporate headquarters are located at 870
Remington Drive, Madison, North Carolina 27025. In addition, certain corporate administrative
functions are handled in offices adjacent to the Debtors' Huntsville, Alabama plant.
II.
Prepetition Capital Stiâ¢ucture4
17.
The Debtors have incurred and/or issued debt through five primary debt facilities,
consisting of (i) an asset-based lending ("ABL") facility, (ii) a term loan facility, (iii) third lien
notes, (iv) an intercompany note purchase agreement, and (v) a secured promissory notes A
summary of these debt facilities is provided below.6
A.
AI3L Facilit3~
18.
Debtors FGI Opco, RAC, Barnes, and RADA are the borrowers under an asset-
based revolving credit facility (the "ABL Facility"), in an original amount of $225 million,$
which is memorialized pursuant to that certain Loan and Security Agreement, dated as of April
19, 2012(as amended, modified, supplemented or restated from time to time, the "ABL Facility
Loan Agreement"), by and among FGI Holding, FGI Opco and certain of FGI Opco's
4
The following summary is qualified in its entirety by reference to the operative documents, agreements,
schedules, and exhibits.
5
Prior to the Petition Date, ROC advanced funds to its subsidiaries pursuant to the ROC Financing (defined
below), which is described in greater detail in Part III of this Declaration.
~
A chart that further illustrates the outstanding amounts under the debt facilities and the applicable guarantors,
borrowers, and issuers under the debt facilities is attached as Exhibit C.
~
RAD was not a borrower on the closing date, but was added as a borrower by way ofjoinder subsequently.
8
Pursuant to certain amendments entered into prior to the Petition Date, the maximum availability under the
ABL Facility has fluctuated from time to time. As of the Petition Date, the facility size is $193 million.
subsidiaries including Barnes and RAC, Bank of America, NA, as Administrative Agent (the
âABL Agentâ) and coâcollateral agent with Wells Fargo Bank, National Association (âWellsâ),
and the lenders from time to time party thereto (the âABL Facility Lendersâ). The maturity date
for the ABL Facility is June 27, 2019, provided that, if the Term Loan Facility (as deï¬ned
below) is not reï¬nanced by'January 18, 2019, the ABL Facility will mature on such date.
19. Debtors FGI Holding, RA Brands, TMRI9 and FGI Finance are guarantors of the
ABL Facility (together with Debtors FGI Opco, Barnes and RAC, the âABL Loan Partiesâ).
Debtor ROC is not a borrower under or guarantor of the ABL Facility. As is typical in a ABL
and term loan structure, the ABL Loan Partiesâ obligations under the ABL Facility are secured
by (i) first priority liens on certain of the ABL Loan Partiesâ collateral, including but not limited
to accounts receivable, intellectual property, inventory, and proceeds thereof and (ii) a second
priority lien on substantially all other assets of the ABL Loan Parties.
20. As of the Petition Date, the aggregate outstanding principal balance under the
ABL Facility was approximately $114,500,000, plus any accrued and unpaid fees, expenses, and
other amounts due and owing pursuant to the terms of the ABL Facility Loan Agreement and
related loan documents.
21. As discussed below, and as set forth in the commitment letter attached as Exhibit
1 to the Plan, the ABL Facility Lenders have agreed to provide the Debtors with postpetition
ï¬nancing during the chapter 11 cases in the form of a debtor-inâpossession superpriority senior
secured asset-based revolving credit facility of up to $193 million in the aggregate (including a
$15 million letter of credit subfacility and a $25 million swingline subfacility), which the
9 Debtor TMRI was not a guarantor on the closing date, but was added as a guarantor by way of joinder
subsequently.
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subsidiaries including Barnes and RAC, Bank of America, N.A., as Administrative Agent (the
"ABL Agent") and co-collateral agent with Wells Fargo Bank, National Association ("Wells"),
and the lenders from time to time party thereto (the "ABL Facility Lenders"). The maturity date
for the ABL Facility is June 27, 2019, provided that, if the Term Loan Facility (as defined
below) is not refinanced by January 18, 2019, the ABL Facility will mature on such date.
19.
Debtors FGI Holding, RA Brands, TMRI9 and FGI Finance are guarantors of the
ABL Facility (together with Debtors FGI Opco, Barnes and RAC, the "ABL Loan Parties").
Debtor ROC is not a borrower under or guarantor of the ABL Facility. As is typical in a ABL
and term loan structure, the ABL Loan Parties' obligations under the ABL Facility are secured
by (i) first priority liens on certain of the ABL Loan Parties' collateral, including but not limited
to accounts receivable, intellectual property, inventory, and proceeds thereof and (ii) a second
priority lien on substantially all other assets of the ABL Loan Parties.
20.
As of the Petition Date, the aggregate outstanding principal balance under the
ABL Facility was approximately $114,500,000, plus any accrued and unpaid fees, expenses, and
other amounts due and owing pursuant to the terms of the ABL Facility Loan Agreement and
related loan documents.
21.
As discussed below,.and as set forth in the commitment letter attached as Exhibit
1 to the Plan, the ABL Facility Lenders have agreed to provide the Debtors with postpetition
financing during the chapter 11 cases in the form of adebtor-in-possession superpriority senior
secured asset-based revolving credit facility of up to $193 million in the aggregate (including a
$15 million letter of credit subfacility and a $25 million swingline subfacility), which the
~
Debtor TMRI was not a guarantor on the closing date, but was added as a guarantor
subsequently.
7
by way ofjoinder
Debtors intend to use to fund their working capital needs and satisfy certain prepetition
obligations under the ABL Facility during the chapter 11 cases.
B. Term Loan Facility
22. Debtor FGI Opco is the borrower under that certain Term Loan Agreement, dated
as of April 19, 2012 (as amended, modiï¬ed, supplemented or restated from time to time, the
âTerm Loan Agreementâ)10 by and between Debtors FGI Holding, FGI Opco and certain of FGI
Opcoâs subsidiaries, Ankura Trust Company, LLC, as successor agent11 (the âTerm Loan
Agenjâ), and the lenders from time to time party thereto (the âTerm Loan Lendersâ).
23. Debtors FGI Holding, RAC, RA Brands, TMRI, RAD, Barnes, and FGI Finance
are guarantors under the Term Loan Facility (together with Debtor FGI Opco, the âTerm Loan
Partiesâ).12 Debtor ROC is not a guarantor under the Term Loan Facility. As is typical in a ABL
and term loan structure, the Term Loan Partiesâ obligations under the Term Loan Facility are
secured by (i) second priority liens, junior to the ABL Facility liens, on certain of the Term Loan
Partiesâ collateral, including but not limited to accounts payable, inventory, and proceeds thereof
and (ii) ï¬rst priority liens on substantially all of the Term Loan Partiesâ other assets. The
maturity date for the Term Loan Facility is April 19, 2019.
24. On February 12, 2018, Debtors ROC, FGI Holding, and FGI OpCo, the other
Term Loan Parties and the Term Loan Agent, entered into an incremental amendment to Term
Loan Agreement (the âTerm Loan Amendmentâ), pursuant to which Debtor ROC agreed to loan
1° The credit facility memorialized by the Term Loan Agreement and the various related agreements and
documents is referred to herein as the âTerm Loan Facility.â
1' Ankura Trust Company, LLC was not the administrative agent on the closing date, but succeeded Bank of
America as administrative agent subsequently.
â2 RAD and TMRI were not guarantors on the closing date, but were added as guarantors by way of joinder
subsequently.
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Debtors intend to use to fund their working capital needs and satisfy certain prepetition
obligations under the ABL Facility during the chapter 11 cases.
B.
Term Loan Facility
22.
Debtor FGI Opco is the borrower under that certain Term Loan Agreement, dated
as of April 19, 2012 (as amended, modified, supplemented or restated from time to time, the
"Term Loan Agreement")10 by and between Debtors FGI Holding, FGI Opco and certain of FGI
Opco's subsidiaries, Ankura Trust Company, LLC, as successor agentll (the "Term Loan
A e~nt"), and the lenders from time to time party thereto (the "Term Loan Lenders").
23.
Debtors FGI Holding, RAC, RA Brands, TMRI, RAD, Barnes, and FGI Finance
are guarantors under the Term Loan Facility (together with Debtor FGI Opco, the "Term Loan
Parties").12 Debtor ROC is not a guarantor under the Term Loan Facility. As is typical in a ABL
and term loan structure, the Term Loan Parties' obligations under the Term Loan Facility are
secured by (i) second priority liens,junior to the ABL Facility liens, on certain of the Term Loan
Parties' collateral, including but not limited to accounts payable, inventory, and proceeds thereof
and (ii) first priority liens on substantially all of the Term Loan Parties' other assets. The
maturity date for the Term Loan Facility is April 19, 2019.
24.
On February 12, 2018, Debtors ROC, FGI Holding, and FGI OpCo, the other
Term Loan Parties and the Term Loan Agent, entered into an incremental amendment to Term
Loan Agreement (the "Term Loan Amendment"), pursuant to which Debtor ROC agreed to loan
and
10
The credit facility memorialized by the Term Loan Agreement and the various related agreements
documents is referred to herein as the "Term Loan Facility."
~~
Bank of
Ankura Trust Company, LLC was not the administrative agent on the closing date, but succeeded
ly.
subsequent
agent
ive
America as administrat
~Z
RAD and TMRI were not guarantors on the closing date, but were added as guarantors by way
subsequently.
ofjoinder
an aggregate of up to $45 million to Debtor FGI OpCo for general corporate and working capital
purposes and to pay fees and expenses related to the foregoing.
25. As of the Petition Date, the aggregate outstanding principal balance under the
Term Loan Facility was approximately $550,475,000.
26. Debtor ROC and certain of the Debtorsâ lenders have agreed to provide the
Debtors with postpetition financing during the chapter 11 cases in the form of a superpriority
debtorâin-possession credit facility of up to $145 million in the aggregate, which the Debtors
intend to use to fund their costs during the chapter 11 cases and for working capital needs.
C. Senior Third Lien Notes
27. Debtors FGI Opco and FGI Finance are issuers of those certain 7.875% Senior
Secured Notes due 2020 (the âThird Lien Notesâ)13 pursuant to that certain Indenture, dated as of
April 19, 2012, by and among, Debtors FGI Opco and FGI Finance, and Wilmington Trust,
National Association, as indenture trustee. Debtors ROC, FGI Holding, RAC, Brands,
Barnes, TMRI, and RADl4 are guarantors of the Third Lien Notes. The Third Lien Notes are
secured by third priority liens and security interests (junior to the respective liens and security
interests of the ABL Agent and the Term Loan Agent) on substantially all of the assets of the
issuers and guarantors of Debtors RAC, RA Brands, Barnes, TMRI, and RAD.
28. In addition, in connection with the execution of the RSA (as deï¬ned below), on
February 12, 2018, Debtors ROC, FGI Holding, OpCo, FGI Finance, RAC, Barnes, RAD, RA
Brands and TMRI entered into a letter agreement (the âLetter Agreemen â) with a majority of the
Third Lien Noteholders (the âConsenting_Third Lien Noteholdersâ). Pursuant to the Letter
13 The holders of the Third Lien Notes are referred to herein as the âThird Lien Noteholdersâ.
â4 Debtors TMRI and RAD were not Guarantors on the closing date, but were added as Guarantors by way of
joinder subsequently.
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an aggregate of up to $45 million to Debtor FGI OpCo for general corporate and working capital
purposes and to pay fees and expenses related to the foregoing.
25.
As of the Petition Date, the aggregate outstanding principal balance under the
Term Loan Facility was approximately $550,475,000.
26.
Debtor ROC and certain of the Debtors' lenders have agreed to provide the
Debtors with postpetition financing during the chapter 11 cases in the form of a superpriority
debtor-in-possession credit facility of up to $145 million in the aggregate, which the Debtors
intend to use to fund their costs during the chapter 11 cases and for working capital needs.
C.
Senior Third Lien Notes
27.
Debtors FGI Opco and FGI Finance are issuers of those certain 7.875% Senior
Secured Notes due 2020 (the "Third Lien Notes")13 pursuant to that certain Indenture, dated as of
April 19, 2012, by and among, Debtors FGI Opco and FGI Finance, and Wilmington Trust,
National Association, as indenture trustee. Debtors ROC, FGI Holding, RAC, RA Brands,
Barnes, TMRI, and RAD14 are guarantors of the Third Lien Notes. The Third Lien Notes are
secured by third priority liens and security interests (junior to the respective liens and security
interests of the ABL Agent and the Term Loan Agent) on substantially all of the assets of the
issuers and guarantors of Debtors RAC,IZA Brands, Barnes, TMRI,and RAD.
28.
In addition, in connection with the execution of the RSA (as defined below), on
February 12, 2018, Debtors ROC, FGI Holding, OpCo, FGI Finance, RAC, Barnes, RAD, RA
Brands and TMRI entered into a letter agreement(the "Letter Agreement") with a majority of the
Third Lien Noteholders (the "Consenting Third Lien Noteholders"). Pursuant to the Letter
13
The holders of the Third Lien Notes are referred to herein as the"Third Lien Noteholders".
14
of
Debtors TMRI and RAD were not Guarantors on the closing date, but were added as Guarantors by way
joinder subsequently.
E
Agreement, the Consenting Third Lien Creditors consented to Debtors ROCâS, FGI OpCo, and
FGI Holding entering into the Term Loan Amendment and the consummation of the transactions I
contemplated thereby (including, but not limited to, the provision of the ROC Financing (as
deï¬ned below)). Additionally, pursuant to the Letter Agreement, Debtor ROC granted the Third
Lien Notes Indenture Trustee, for the beneï¬t of the Third Lien Noteholders, a security interest in
and lien on substantially all of ROCâs assets, including ROCâS bank accounts and cash. On
February 12, 2018, the Third Lien Notes Indenture Trustee ï¬led a UCC-l ï¬nancing statement
identifying all assets of ROC as collateral.
29. The Third Lien Notes mature on May 1, 2020. As of the Petition Date, the
aggregate outstanding principal amount of the Third Lien Notes was approximately
$226,012,000.15
30. Debtors FGI Holding, OpCo, RAC, RA Brands, Barnes, FGI Finance, TMRI, and
RAD, the ABL Agent, the Term Loan Agent, and the Third Lien Notes Indenture Trustee are
party to that certain Intercreditor Agreement dated as of April 19, 2012 that, among other thing,
sets forth the relationship in terms of claims, priority, rights and remedies between and among
the parties. As of the date of this Declaration, I am unaware of any equity holder of Debtor ROC
that holds any Third Lien Notes.
D. Intercompany Note Purchase Agreement / ROC Financing
31. On May 11, 2017, Debtors FGI Opco and ROC entered into that certain Note
Purchase Agreement (â ntercompany NPAâ). Pursuant to the lntercompany NPA, FGI Opco
agreed to issue, and ROC agreed to purchase, up to $100 million of senior unsecured notes to
ROC up to and through July 19, 2019 for the purposes of obtaining additional cash to fund FGI
15 In late 2017, the Debtor FGI Holding repurchased approximately $24 million of the thenâoutstanding Third Lien
Notes and, prior to the Petition Date, cancelled all of the repurchased Third Lien Notes.
10
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Agreement, the Consenting Third Lien Creditors consented to Debtors ROC's, FGI OpCo, and
FGI Holding entering into the Term Loan Amendment and the consummation of the transactions
contemplated thereby (including, but not limited to, the provision of the ROC Financing (as
defined below)). Additionally, pursuant to the Letter Agreement, Debtor ROC granted the Third
Lien Notes Indenture Trustee, for the benefit of the Third Lien Noteholders, a security interest in
and lien on substantially all of ROC's assets, including ROC's bank accounts and cash. On
February 12, 2018, the Third Lien Notes Indenture Trustee filed a UCC-1 financing statement
identifying all assets of ROC as collateral.
29.
The Third Lien Notes mature on May 1, 2020. As of the Petition Date, the
aggregate outstanding principal amount of the Third Lien Notes was approximately
$226,012,000.is
30.
Debtors FGI Holding, OpCo,RAC,RA Brands, Barnes, FGI Finance, TMRI, and
RAD, the ABL Agent, the Term Loan Agent, and the Third Lien Notes Indenture Trustee are
party to that certain Intercreditor Agreement dated as of April 19, 2012 that, among other thing,
sets forth the relationship in terms of claims, priority, rights and remedies between and among
the parties. As of the date of this Declaration, I am unaware of any equity holder of Debtor ROC
that holds any Third Lien Notes.
D.
Intercompany Note Purchase Agreement/ROC Fii~.ancing
31.
On May 11, 2017, Debtors FGI Opco and ROC entered into that certain Note
Purchase Agreement ("Intercompany NPA"). Pursuant to the Intercompany NPA, FGI Opco
to
agreed to issue, and ROC agreed to purchase, up to $100 million of senior unsecured notes
FGI
ROC up to and through July 19, 2019 for the purposes of obtaining additional cash to fund
15
nding Third Lien
In late 2017, the Debtor FGI Holding repurchased approximately $24 million ofthe then-outsta
Lien
Notes.
Third
repurchased
of
the
all
cancelled
Notes and, prior to the Petition Date,
10
Opcoâs and its various subsidiariesâ working capital needs. As of the Petition Date, $20 million
in notes are outstanding under Intercompany NPA.
32. Furthermore, pursuant to the Term Loan Amendment discussed above, in
connection with the Debtorsâ entry into the RSA, Debtor ROC made a series of advances totaling
approximately $45 million from its cash on hand to its subsidiary Debtor FGI Opco for the
purpose of funding the operating Debtorsâ working capital needs. Additional details regarding
this prepetition ï¬nancing are set forth in Section III.B below.
E. Huntsville Secured Note
33. In February 2014, Debtor RAC obtained a $12.5 million loan from the City of
Huntsville, Alabama (the âCity of Huntsvilleâ) in order to improve its manufacturing facility
there. The loan is evidenced by a promissory note executed by Debtor RAC in favor of the City
of Huntsville (the âHuntsville Noteâ) and secured by a ï¬rst priority mortgage on the Debtorsâ
ï¬rearm facilities in Huntsville. The Promissory Note has an elevenâyear term with annual
amortization payments due each year beginning on the second anniversary of the issuance equal
to 10% of the original principal balance, provided that if RAC meets certain employment goals
for the year preceding the principal and interest payment dates, the annual principal and related
interest for that payment period will be forgiven. As of the Petition Date, the aggregate
outstanding balance under the Huntsville Note was approximately $12.5 million; provided
however, that the Debtorsâ obligations payable in connection with the Huntsville Note may
increase to the extent Debtor RAC has not satisï¬ed the criteria for the year ended December 31,
2017 and has not received from the City of Huntsville a waiver or reduction of any such
additional obligations.
11
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Opco's and its various subsidiaries' working capital needs. As of the Petition Date, $20 million
in notes are outstanding under Intercompany NPA.
32.
Furthermore, pursuant to the Term Loan Amendment discussed above, in
connection with the Debtors' entry into the RSA,Debtor ROC made a series of advances totaling
approximately $45 million from its cash on hand to its subsidiary Debtor FGI Opco for the
purpose of funding the operating Debtors' working capital needs. Additional details regarding
this prepetition financing are set forth in Section III.B below.
E.
Huntsville Secured Note
33.
In February 2014, Debtor RAC obtained a $12.5 million loan from the City of
Huntsville, Alabama (the "Cites of Huntsville") in order to improve its manufacturing facility
there. The loan is evidenced by a promissory note executed by Debtor RAC in favor of the City
of Huntsville (the "Huntsville Note") and secured by a first priority mortgage on the Debtors'
annual
firearm facilities in Huntsville. The Promissory Note has an eleven-year term with
amortization payments due each year beginning on the second anniversary of the issuance equal
goals
to 10% of the original principal balance, provided that if RAC meets certain employment
for the year preceding the principal and interest payment dates, the annual principal and related
interest for that payment period will be forgiven.
As of the Petition Date, the aggregate
outstanding balance under the Huntsville Note was approximately $12.5 million; provided
however, that the Debtors' obligations payable in connection with the Huntsville Note may
increase to the extent Debtor RAC has not satisfied the criteria for the year ended December
31,
such
2017 and has not received from the City of Huntsville a waiver or reduction of any
additional obligations.
11
F. Other Liabilities
34. As of the Petition Date, the Debtors have approximately $55 million in
outstanding claims owed to its various vendors, suppliers, and service providers, including
claims reï¬ected in the Debtorsâ current accounts payable or otherwise accrued and/ or attributable
to the period prior to the Petition Date. Additionally, the Debtors are party to various litigation
matters, including products liability actions. The claims associated with such litigation matters
are disputed, contingent, and/ or unliquidated as of the Petition Date.
G. ROC Common Stock
35. Debtor ROC has approximately 351,000 shares of common stock (including
restricted stock units) issued and outstanding. As of December 31, 2017, approximately 93.5%
of ROCâs outstanding common stock is held by R2H. The balance of ROCâs common stock is
held primarily by certain past and present directors, ofï¬cers, and employees of the Debtors
acquired primarily pursuant to various prepetition stock-based incentive plans. In addition,
certain past and present directors, ofï¬cers and employees hold options to purchase, in the
aggregate, less than 10% of ROCâs common stock.
III. Commencement of the Chapter 11 Cases
A. Key Events Leading to Chapter 11
36. Despite the historical strength of the Debtorsâ various brands, the Debtors have
experienced a signiï¬cant decline in sales and revenues in the approximately one-year period.
preceding the Petition Date. As a result, the Debtors have faced increasing difï¬culty in meeting
certain benchmarks in order to maintain borrowing capacity under their ABL Facility. Although
the Debtors negotiated for minor relief with respect to the borrowing capacity, the overall
business and industry environments continue to cause signiï¬cant ï¬nancial hardship to the
Debtors.
12
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F.
Other Liabilities
34.
As of the Petition Date, the Debtors have approximately $55 million in
outstanding claims owed to its various vendors, suppliers, and service providers, including
claims reflected in the Debtors' current accounts payable or otherwise accrued and/or attributable
to the period prior to the Petition Date. Additionally, the Debtors are party to various litigation
matters, including products liability actions. The claims associated with such litigation matters
are disputed, contingent, and/or unliquidated as of the Petition Date.
G.
ROC Common Stock
35.
Debtor ROC has approximately 351,000 shares of common stock (including
restricted stock units) issued and outstanding. As of December 31, 2017, approximately 93.5%
stock is
of ROC's outstanding common stock is held by R2H. The balance of ROC's common
of the Debtors
held primarily by certain past and present directors, officers, and employees
addition,
acquired primarily pursuant to various prepetition stock-based incentive plans. In
, in the
certain past and present directors, officers and employees hold options to purchase
aggregate, less than 10% of ROC's common stock.
III.
Commencement of the Chapter⢠11 Cases
A.
Key Events Leading to Chapter 11
36.
Despite the historical strength of the Debtors' various brands, the Debtors have
one-year period
experienced a significant decline in sales and revenues in the approximately
in
preceding the Petition Date. As a result, the Debtors have faced increasing difficulty meeting
Although
certain benchmarks in order to maintain borrowing capacity under their ABL Facility.
the overall
the Debtors negotiated far minor relief with respect to the borrowing capacity,
hardship to the
business and industry environments continue to cause significant financial
Debtors.
12
37. More speciï¬cally, throughout 2016, the Debtors were increasing production rates
based on inputs from its key markets to meet expected demand for its products in 2017. Those
demands, however, ultimately did not materialize. Due to the resulting elevated level of their
inventory, the Debtors initiated certain production reductions, as well as various cost cutting
measures and liquidity management initiatives. At the same time, however, the ï¬rearms and
ammunition markets experienced signiï¬cant competitive market pricing pressures from the
higher inventory levels industry-wide and the accelerating reduction in demand. Based on the
foregoing, the Debtorsâ ï¬nancial performance began experiencing signiï¬cant year-over-year
deterioration since the beginning of 2017.
38. Furthermore, the Debtorsâ early 2017 plans and historical seasonality needs
required additional working capital, and thus the Debtor increased its borrowings under the ABL
Facility. At that time, the Debtors expected that the additional borrowings would be repaid from
the collection of receivables on sales of the Debtorsâinventory. ThOse expectations, however,
did not materialize, and the Debtors therefore were left with continued high inventory balances,
an increased debt load, and a continuing market environment experiencing signiï¬cant pressures
on pricing, in large part due to the Debtorsâ principal competitors engaging in unusually heavy
discounting and promotions to reduce their own excess inventory.
39. To address these issues, in late 2017, the Debtors embarked on a number of
different initiatives, both from an operational and ï¬nancial perspective to improve sales and
obtain relief and ï¬exibility under its various debt instruments. With respect to its operations, the
Debtors broadened and restructured their sales force and reorganized their marketing
organization, which in turn helped expand their customer base. The Debtors also reset their
pricing strategy in the hopes that it would avoid the need to engage in additional discounting. In
13
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More specifically, throughout 2016, the Debtors were increasing production rates
based on inputs from its key markets to meet expected demand for its products in 2017. Those
demands, however, ultimately did not materialize. Due to the resulting elevated level of their
inventory, the Debtors initiated certain production reductions, as well as various cost cutting
measures and liquidity management initiatives. At the same time, however, the firearms and
the
ammunition markets experienced significant competitive market pricing pressures from
on the
higher inventory levels industry-wide and the accelerating reduction in demand. Based
ar
foregoing, the Debtors' financial performance began experiencing significant year-over-ye
deterioration since the beginning of 2017.
38.
Furthermore, the Debtors' early 2017 plans and historical seasonality needs
required additional working capital, and thus the Debtor increased its borrowings
under the ABL
be repaid
racility. At that time, the Debtors expected that the additional borrowings would
from
ions, however,
the collection of receivables on sales of the Debtors' inventory. Those expectat
inventory balances,
did not materialize, and the Debtors therefore were left with continued high
nt pressures
an increased debt load, and a continuing market environment experiencing significa
unusually heavy
on pricing, in large part due to the Debtors' principal competitors engaging in
discounting and promotions to reduce their own excess inventory.
39.
To address these issues, in late 2017, the Debtors embarked on a number of
sales and
different initiatives, both from an operational and financial perspective to improve
its operations, the
obtain relief and flexibility under its various debt instruments. With respect to
their marketing
Debtors broadened and restructured their sales force and reorganized
also reset their
organization, which in turn helped expand their customer base. The Debtors
ing. In
pricing strategy in the hopes that it would avoid the need to engage in additional discount
13
addition, the Debtors entered into a number of amendments of the ABL Facility which were
principally designed to increase borrowing capacity under the ABL Facility to facilitate smoother
operational reductions in their production facilities.
40. Despite these efforts, the Debtorsâ ï¬nancial performance continued to deteriorate,
owing in large part to higher costs. At the conclusion of 2017, the Debtors had realized
approximately $603.4 million in sales and an adjusted EBITDA of $33.6 million. In comparison,
in 2015 and 2016, the Debtors had achieved approximately $808.9 million and $865.1 million in
sales and $64 million and $119.8 million in adjusted EBITDA, respectively.
B. Negotiation and Entry into RSA
41. Given the continued strain the decreasing revenues were placing on their liquidity, '
in early 2018, the Debtors, together with various holders of the Debtorsâ funded debt obligations,
began exploring even broader solutions to the Debtorsâ ï¬nancial problems. Among the options
discussed by the parties were (i) a recapitalization of the Debtors through a traditional chapter 11
plan of reorganization and (ii) a potential sale of the Debtorsâ assets pursuant to section 363 of
the Bankruptcy Code. At the same time, the Debtors considered various ï¬nancing alternatives to
address their immediate working capital needs, including obtaining additional access under their
ABL Facility, ï¬nancing from the Term Lenders and/or the Third Lien Noteholders, or advances
from Debtor ROC to its operating subsidiaries.
42. Based on extensive, good faith efforts of the Debtors'and Certain of the Term
Lenders and Third Lien Noteholders, the parties ultimately were able to negotiate a
comprehensive restructuring (the âRestructuringâ) that not only would address the Debtorsâ
overleveraged balance sheet and a global settlement of various intercompany claims, but also
leaves general unsecured claims unimpaired and provides a path to the short~term and long-term
14
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addition, the Debtors entered into a number of amendments of the ABL Facility which were
principally designed to increase borrowing capacity under the ABL Facility to facilitate smoother
operational reductions in their production facilities.
40.
Despite these efforts, the Debtors' financial performance continued to deteriorate,
owing in large part to higher costs. At the conclusion of 2017, the Debtors had realized
approximately $603.4 million in sales and an adjusted EBITDA of $33.6 million. In comparison,
in 2015 and 2016, the Debtors had achieved approximately $808.9 million and $865.1 million in
sales and $64 million and $119.8 million in adjusted EBITDA,respectively.
B.
Negotiation and Entry into RSA
41.
Given the continued strain the decreasing revenues were placing on their liquidity,
in early 2018, the Debtors, together with various holders of the Debtors' funded debt obligations,
began exploring even broader solutions to the Debtors' financial problems. Among the options
discussed by the parties were (i) a recapitalization of the Debtors through a traditional chapter 11
plan of reorganization and (ii) a potential sale of the Debtors' assets pursuant to section 363 of
the Bankruptcy Code. At the same time, the Debtors considered various financing alternatives to
address their immediate working capital needs, including obtaining additional access under their
ABL Facility, financing from the Term Lenders and/or the Third Lien Noteholders, or advances
from Debtor ROC to its operating subsidiaries.
42.
Based on extensive, good faith efforts of the Debtors and certain of the Term
Lenders and Third Lien Noteholders, the parties ultimately were able to negotiate a
comprehensive restructuring (the "Restructuring") that not only would address the Debtors'
overleveraged balance sheet and a global settlement of various intercompany claims, but also
leaves general unsecured claims unimpaired and provides a path to the short-term and long-term
14
ï¬nancing that will allow the Debtors to operate their businesses successfully. The terms and
conditions of the Restructuring were set forth in that certain Restructuring Support Agreement,
dated as of February 11, 2018 (as amended, modiï¬ed, supplemented or restated from time to
time in accordance with the terms thereof, the âRSAâ) executed by the Debtors party thereto and
a majority in principal amount of each of the Term Lenders and the Third Lien Noteholders.16 A
true and correct copy of the RSA (redacted for certain conï¬dential information) is attached
hereto as Exhibit B.
43.
Pursuant to the terms of the RSA, each creditor signing the RSA agreed, among
other things, to:
44.
Support and take all commercially reasonable actions necessary or reasonably
requested by Remington to facilitate entry of the DIP Orders, the Disclosure
Statement Order, and the Conï¬rmation Order (each as deï¬ned in the RSA);
Support the Restructuring and vote in favor of the Plan, provided that the
obligations of the applicable creditors have not been terminated in accordance
with the terms of the RSA, and not withdraw or revoke its vote with respect to the
Plan; and
Not take any action materially inconsistent with the transactions expressly
contemplated by the RSA, or that would materially delay or obstruct the
consummation of the Restructuring, including, without limitation, commencing,
or joining in commencing, any litigation or involuntary case for relief under the
Bankruptcy Code against the Debtors.
Pursuant to the terms of the RSA, and in consideration of the Term Lendersâ and
Third Lien Noteholdersâ obligations thereunder, the Debtors agreed, among other things, to:
Support and, subject to all necessary Court approvals, consummate the Restructuring
and all transactions contemplated under the RSA;
Negotiate in good faith all deï¬nitive documentation contemplated by the RSA and
use best efforts to obtain all necessary regulatory and/or thirdâparty approvals;
16 The following summary of the Restructuring is qualiï¬ed in its entirety by reference to the RSA and Plan. In the
event of any conflict between the RSA or Plan, on the one hand, and the following summary, on the other hand,
the terms of the RSA or Plan, as applicable, shall control.
15
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financing that will allow the Debtors to operate their businesses successfully. The terms and
conditions of the Restructuring were set forth in that certain Restructuring Support Agreement,
dated as of February 11, 2018 (as amended, modified, supplemented or restated from time to
time in accordance with the terms thereof, the "RSA")executed by the Debtors party thereto and
a majority in principal amount of each of the Term Lenders and the Third Lien Noteholders.16 A
true and correct copy of the RSA (redacted for certain confidential information) is attached
hereto as Exhibit B.
43.
Pursuant to the terms of the RSA, each creditor signing the RSA agreed, among
other things, to:
â¢
â¢
â¢
44.
Support and take all commercially reasonable actions necessary or reasonably
requested by Remington to facilitate entry of the DIP Orders, the Disclosure
Statement Order, and the Confirmation Order (each as defined in the RSA);
Support the Restructuring and vote in favor of the Plan, provided that the
obligations of the applicable creditors have not been terminated in accordance
with the terms of the RSA, and not withdraw or revoke its vote with respect to the
Plan; and
y
Not take any action materially inconsistent with the transactions expressl
the
contemplated by the RSA, or that would materially delay or obstruct
consummation of the Restructuring, including, without limitation, commencing,
or joining in commencing, any litigation or involuntary case for relief under the
Bankruptcy Code against the Debtors.
Pursuant to the terms ofthe RSA, and in consideration of the Term Lenders' and
Third Lien Noteholders' obligations thereunder, the Debtors agreed, among other things,
to:
uring
⢠Support and, subject to all necessary Court approvals, consummate the Restruct
and all transactions contemplated under the RSA;
and
⢠Negotiate in good faith all definitive documentation contemplated by the RSA
use best efforts to obtain all necessary regulatory and/or third-party approvals;
I~
.reference to the RSA and Plan. In the
The following summary of the Restructuring is qualified in its entirety by
summary, on the other hand,
following
event of any conflict between the RSA or Plan, on the one hand, and the
the terms of the RSA or Plan, as applicable, shall control.
15
o Operate in the ordinary course consistent with industry practice and the operations
contemplated pursuant to the Debtorsâ business plan; and
0 Complete the Restructuring and all transactions contemplated thereby in accordance
with certain milestones (discussed further below).
45. The RSA includes two principal components. First, it addressed the Debtorsâ.
immediate liquidity needs by allowing the operating subsidiaries to borrow up to $45 million
from Debtor ROC in order to satisfy the subsidiariesâ various obligations, including the claims of
other Debtorsâ various vendors and suppliers (the âROC Financingâ). Debtor ROC provided the
funds for the ROC Financing from its existing cash on hand;
46. The primary purpose of the ROC Financing was to provide a bridge that would
allow the Debtors to operate until the commencement of these chapter 11 cases, as well as
provide additional liquidity postpetition. As of the Petition Date, Debtor ROC had advanced the
full $45 million available under the ROC Financing, which amounts will be fully converted and
rolled up into a postpetition DIP facility (the âROC DIP Facilityâ).
47. The RSA also contemplates that, upon the commencement of these chapter 11
cases, a subset of the Term Lenders and the Third Lien Noteholders would provide up to an
additional $100 million in postpetition ï¬nancing to the Debtors in order to fund the
administration of these chapter 11 cases and other working capital needs (the âTerm DIP
Eightyâ). The Term DIP Facility is described in greater detail below. Collectively, the total
postpetition ï¬nancing will be $338 million consisting of a $193 million ABL DIP Facility
(deï¬ned and discussed below), the $100 million Term DIP Facility, and the $45 million ROC
DIP Facility (the Term DIP Facility and the ROC DIP Facility together, the âTerm/ROC DIP
Facilityâ and the Term/ROC DIP Facility together with the ABL DIP Facility, the âDIP
9
Facilitiesâ).
16
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⢠Operate in the ordinary course consistent with industry practice and the operations
contemplated pursuant to the Debtors' business plan; and
⢠Complete the Restructuring and all transactions contemplated thereby in accordance
with certain milestones (discussed further below).
45.
The RSA includes two principal components. First, it addressed the Debtors'
immediate liquidity needs by allowing the operating subsidiaries to borrow up to $45 million
from Debtor ROC in order to satisfy the subsidiaries' various obligations, including the claims
of
other Debtors' various vendors and suppliers (the "ROC Financing"). Debtor ROC provided the
funds for the ROC Financing from its existing cash on hand:
46.
The primary purpose of the ROC Financing was to provide a bridge that would
11 cases, as well as
allow the Debtors to operate until the commencement of these chapter
had advanced the
provide additional liquidity postpetition. As of the Petition Date, Debtor ROC
fully converted
full $45 million available under the ROC Financing, which amounts will be
and
rolled up into a postpetition DIP facility (the "ROC DIP Facility")
47.
11
The RSA also contemplates that, upon the commencement of these chapter
provide up to an
cases, a subset of the Term Lenders and the Third Lien Noteholders would
order to fund the
additional $100 million in postpetition financing to the Debtors in
(the "Term DIP
administration of these chapter 11 cases and other working capital needs
Collectively, the total
Facility"). The Term DIP Facility is described in greater detail below.
DIP Facility
postpetition financing will be $338 million consisting of a $193 million ABL
the $45 million ROC
(defined and discussed below), the $100 million Term DIP Facility, and
the "Term/ROC DIP
DIP Facility (the Term DIP Facility and the ROC DIP Facility together,
DIP Facility, the "DIP
Facilit ", and the Term/ROC DIP Facility together with the ABL
Facilities").
16
48. In addition to the ï¬nancing aspects, the RSA sets forth the terms and conditions
for the comprehensive Restructuring of the Debtorsâ balance sheet and the path to resolve certain
prepetition intercompany and third party claims, all of which would be implemented through the
Plan. The principal terms of the Restructuring, which are set forth in greater detail in the RSA
and the Plan, are summarized below:
0 On the effective date of the Plan (the»âEffective Dateâ), Debtor ROC will
receive and immediately distribute to the Third Lien Noteholders, in full
and ï¬nal satisfaction of the $45 million ROC DIP Facility and the
settlement of any intercompany claims of ROC against its subsidiaries,
17.5% of the new common units of the applicable reorganized parent
entity, plus cash in an amount equal to all accrued and unpaid postpetition
interest on the ROC DIP Facility (collectively, the âROC DIP
Distributionâ);
0 On the Effective Date, the $100 million Term DIP Facility claims will be
replaced with obligations under a new $100 million exit term loan facility
made available to the reorganized Debtors (the âNew Term Loan
Facilityâ);
0 On the Effective Date, the claims under the ABL DIP Facility and the
ABL Facility will be repaid in full in cash, unless each holder of such
claims agrees to an alternative treatment, which may include participation
in an exit asset-based lending facilityâ;
0 On the Effective Date, the Term Loan Lenders will receive: (i) 82.5% of
the applicable reorganized parent entity, (ii) subject to the terms of the
Plan, (a) certain interests in the Litigation Trust (as defined below), or (b)
any amounts allocated for distribution to the Term Loan Lenders under a
Litigation Settlement (as defined below), and (iii) to the extent not
previously paid to the Term Loan Lenders in accordance with the Interim
DIP Order, Cash in an amount equal to the approximately $2.67 million
interest payment that was due to the Term Loan Lenders on February 1,
201 8;
o On the Effective Date, the Third Lien Noteholders will receive: (i) the
ROC DIP Distribution; (ii) a cash distribution of $39.3 million from
Debtor ROC, provided that such cash distribution (a) will be reduced by
certain fees and expenses incurred by the ad hoc group of certain holders
of the Third Lien Notes and (b) will be increased by $5.0 million if the
17 As discussed below, the ABL Lenders have executed a commitment letter agreeing to the conversion of the
ABL DIP Facility into the ABL Exit Facility, subject to the terms and conditions of such commitment letter.
17
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In addition to the financing aspects, the RSA sets forth the terms and conditions
for the comprehensive Restructuring of the Debtors' balance sheet and the path to resolve certain
prepetition intercompany and third party claims, all of which would be implemented through the
Plan. The principal terms of the Restructuring, which are set forth in greater detail in the RSA
and the Plan, are summarized below:
On the effective date of the Plan (the "Effective Date"), Debtor ROC will
receive and immediately distribute to the Third Lien Noteholders, in full
and final satisfaction of the $45 million ROC DIP Facility and the
settlement of any intercompany claims of ROC against its subsidiaries,
17.5% of the new common units of the applicable reorganized parent
entity, plus cash in an amount equal to all accrued and unpaid postpetition
interest on the ROC DIP Facility (collectively, the "ROC DIP
Distribution");
On the effective Date, the $100 million Term DIP Facility claims will be
replaced with obligations under a new $100 million exit term loan facility
made available to the reorganized Debtors (the "New Term Loan
Facility");
On the Effective Date, the claims under the ABL DIP Facility and the
ABL Facility will be repaid in full in cash, unless each holder of such
claims agrees to an alternative treatment, which may include participation
in an exit asset-based lending facilityl~;
On the Effective Date, the Term Loan Lenders will receive: (i) 82.5% of
the applicable reorganized parent entity, (ii) subject to the terms of the
Plan,(a) certain interests in the Litigation Trust (as defined below), or (b)
any amounts allocated for distribution to the Term Loan Lenders under a
Litigation Settlement (as defined below), and (iii) to the extent not
previously paid to the Term Loan Lenders in accordance with the Interim
DIP Order, Cash in an amount equal to the approximately $2.67 million
interest payment that was due to the Term Loan Lenders on February 1,
2018;
On the Effective Date, the Third Lien. Noteholders will receive: (i) the
ROC DIP Distribution; (ii) a cash distribution of $39.3 million from
Debtor ROC, provided that such cash distribution (a) will be reduced by
certain fees and expenses incurred by the ad hoc group of certain holders
of the Third Lien Notes and (b) will be increased by $5.0 million if the
~~
ofthe
As discussed below, the ABL Lenders have executed a commitment letter agreeing to the conversion
letter.
t
commitmen
such
of
conditions
and
terms
the
to
ABL DIP Facility into the ABL Exit Facility, subject
17
Litigation Trust is not established (the âThird Lien Noteholder Cash
Distributionâ); (iii) new warrants to acquire the new common units of the
applicable reorganized parent entity; and (iv) subject to the terms of the
Plan (a) certain interests in the Litigation Trust (as deï¬ned below), or (b)
any amounts allocated for distribution to the Third Lien Noteholders under
a Litigation Settlement (as deï¬ned below);
- Certain intercompany claims among Debtors ROC, FGI Holding and FGI
Opco will be settled, released and waived subject to the terms and
conditions of the Plan;
0 All other claims against the Debtors, including all general unsecured
claims, will either be paid in full in cash in the ordinary course after the
Effective Date or otherwise be unimpaired; provided that any allowed
general unsecured claim against Debtor ROC shall be assumed by Debtor
FGI Opco in accordance with the Plan; and
0 Existing equity interests in Debtor ROC would be canceled on the
Effective Date.
In light of the foregoing, the Plan contemplates that only two impaired classes of claims would
be entitled to vote on the Plan: the Term Loan Claims and the Third Lien Notes Claims.
49. In addition to the ROC Financing, prior to the Petition Date, the Debtors and the
ABL Facility Lenders also entered into a number of amendments to the ABL Facility to support
the Debtorsâ ongoing business operations during the immediate prepetition period. Furthermore,
in connection with the commencement of the Chapter 11 Cases, the Debtors expect to
immediately enter into a replacement superpriority senior secured debtorâinâpossession assetâ
based revolving credit facility (the âABL DIP Facilityâ), the proceeds of which will be used to
pay in full all outstanding obligations under/the ABL Facility. In this regard, the ABL Facility
Lenders have each executed a commitment letter by which each ABL Facility Lender agrees to
participate in the ABL DIP Facility, as well as an exit assetâbased lending facility in the
aggregate principal amount of $193 million (the âABL Exit Facilityâ), upon and subject to the
terms and conditions set forth in the commitment letter and in the term sheet attached thereto.
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Litigation Trust is not established (the "Third Lien Noteholder Cash
Distribution"); (iii) new warrants to acquire the new common units of the
applicable reorganized parent entity; and (iv) subject to the terms of the
Plan (a) certain interests in the Litigation Trust (as defined below), or (b)
any amounts allocated for distribution to the Third Lien Noteholders under
a Litigation Settlement(as defined below);
â¢
Certain intercompany claims among Debtors ROC, FGI Holding and FGI
Opco will be settled, released and waived subject to the terms and
conditions of the Plan;
â¢
All other claims against the Debtors, including all general unsecured
claims, will either be paid in full in cash in the ordinary course after the
Effective Date or otherwise be unimpaired; pNovided that any allowed
general unsecured claim against Debtor ROC shall be assumed by Debtor
FGI Opco in accordance with the Plan; and
â¢
Existing equity interests in Debtor ROC would be canceled on the
Effective Date.
In light of the foregoing, the Plan contemplates that only two impaired classes of claims would
be entitled to vote on the Plan: the Term Loan Claims and the Third Lien Notes Claims.
49.
In addition to the ROC Financing, prior to the Petition Date, the Debtors and the
ABL Facility Lenders also entered into a number of amendments to the ABL Facility to support
the Debtors' ongoing business operations during the immediate prepetition period. Furthermore,
in connection with the commencement of the Chapter 11 Cases, the Debtors expect to
immediately enter into a replacement superpriority senior secured debtor-in-possession assetbased revolving credit facility (the "ABL DIP Facility"), the proceeds of which will be used to
pay in full all outstanding obligations under- the ABL Facility. In this regard, the ABL Tacility
Lenders have each executed a commitment letter by which each ABL Facility Lender agrees to
participate in the ABL DIP Facility, as well as an exit asset-based lending facility in the
aggregate principal amount of $193 million (the "ABL Exit Facility"), upon and subject to the
terms and conditions set forth in the commitment letter and in the term sheet attached thereto.
18
50. In addition, on the effective date of the Plan, in connection with the various
restructuring transactions, the Debtors will enter into a $55 million senior secured ï¬rst in, last
out asset based term loan facility to be provided by certain of the lenders under the Term DIP
Facility (the âNew FILO Term Loan Facilityâ). Together, the ABL Exit Facility, the New Term
Loan Facility, and the New FlLO Term Loan Facility will ï¬nance the Debtorsâ postâchapter 11
cash and operational needs and support the unimpairment of general unsecured creditors as set
forth in the Plan.
51. The RSA and Plan also provide that, on the Effective Date, a litigation trust (the
âLitigation Trustâ) will be established and will acquire any claims or causes of action held by the
Debtorsâ estates as of the Effective Date, as well as any claims held by any of the Term Lenders
and Third Lien Noteholders voting to accept the Plan. The Litigation Trust will be funded with
$5 .0 million in cash in order to investigate and, potentially, prosecute the claims and causes of
action.
52. As set more specifically in the Plan, the first $5.0 million of recoveries obtained
by the Litigation Trust will be paid to the Third Lien Noteholders. Any recoveries after the
initial $5.0 million will be distributed 50% to the Term Lenders and 50% to the Third Lien
Noteholders. Notwithstanding the foregoing, the holders of Third Lien Notes (on account of the
Litigation Trust interests they would receive under the Plan) shall receive all recovery amounts
from any claims transferred to the Litigation Trust that (i) are exclusively related to amounts
transferred within the applicable statute of limitations from Debtor ROC to any transferee, or (ii)
belong solely to Debtor ROC or any of its stakeholders, in each case subject to the terms,
conditions and limitations of the Plan.
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In addition, on the effective date of the Plan, in connection with the various
restructuring transactions, the Debtors will enter into a $55 million senior secured first in, last
out asset based term loan facility to be provided by certain of the lenders under the Term DIP
Facility (the "New FILO Term Loan Facility"). Together, the ABL Exit Facility, the New Term
Loan Facility, and the New FILO Term Loan Facility will finance the Debtors' post-chapter 11
cash and operational needs and support the unimpairment of general unsecured creditors as set
forth in the Plan.
51.
The RSA and Plan also provide that, on the Effective Date, a litigation trust (the
"Litigation Trust") will be established and will acquire any claims or causes of action held by the
Debtors' estates as of the Effective Date, as well as any claims held by any of the Term Lenders
and Third Lien Noteholders voting to accept the Plan. The Litigation Trust will be funded with
$5.0 million in cash in order to investigate and, potentially, prosecute the claims and causes of
action.
52.
As set more specifically in the Plan, the first $5.0 million of recoveries obtained
by the Litigation Trust will be paid to the Third Lien Noteholders. Any recoveries after the
initial $5.0 million will be distributed 50% to the Term Lenders and 50% to the Third Lien
Noteholders. Notwithstanding the foregoing, the holders of Third Lien Notes(on account of the
Litigation Trust interests they would receive under the Plan) shall receive all recovery amounts
from any claims transferred to the Litigation Trust that (i) are exclusively related to amounts
transferred within the applicable statute of limitations from Debtor ROC to any transferee, or (ii)
belong solely to Debtor. ROC or any of its stakeholders, in each case subject to the terms,
conditions and limitations of the Plan.
19
53. The RSA also provides certain milestones that the Debtors must satisfy in
connection with the Restructuring:
o Commence solicitation of the Plan by March 22, 2018;
o Commence the chapter 11 cases by March 25, 2018;
0 File the Plan, the Disclosure Statement (as deï¬ned below), and the motion
to approve the Disclosure Statement by March 26, 2018;
0 Entry of the interim DIP order within three (3) days of the Petition Date;
0 Entry of the ï¬nal DIP order within thirty-ï¬ve (35) days of the Petition
Date;
0 Entry of the Conï¬rmation Order within ï¬fty (50) days of the Petition
Date; and
o Occurrence of the Effective Date within (15) days after entry of the
Conï¬rmation Order.
54. The Debtors have satisï¬ed the ï¬rst three of the milestones. Prior to the Petition
Date, the Debtors commenced solicitation of the Plan to holders of Term Loan Claims and Third
Lien Notes Claims and have set a voting deadline of April'26, 2018. In addition, concurrently
with the ï¬ling of the chapter 11 petitions, the Debtors are ï¬ling the Plan, along with the
accompanying disclosure statement for the plan (the âDisclosure Statementâ). In keeping with
the milestones, the Debtors are also seeking interim approval of the DIP Financing (deï¬ned
below) and are ï¬ling a motion requesting that the Court schedule a combined hearing to consider
approval of the Disclosure Statement and conï¬rmation of Plan on or around May 3, 2018.
55. The Debtors believe that the Restructuring as set forth in the Plan represents the
best outcome for the Debtors, the estates and all of their stakeholders. The Plan limits the
impairment of third party claims only to the Term Loan and Third Lien Notes classes and certain
settled intercompany claims. lmportantly, the Plan provides that all general unsecured claims
against the Debtors will be paid in full in cash in the normal course or otherwise be rendered
20
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The RSA also provides certain milestones that the Debtors must satisfy in
connection with the Restructuring:
54.
â¢
Commence solicitation of the Plan by March 22, 2018;
â¢
Commence the chapter 11 cases by March 25, 2018;
â¢
File the Plan, the Disclosure Statement(as defined below), and the motion
to approve the Disclosure Statement by March 26, 2018;
â¢
Entry ofthe interim DIP order within three (3) days ofthe Petition Date;
â¢
Entry of the final DIP order within thirty-five (35) days of the Petition
Date;
â¢
Entry of the Confirmation Order within fifty (50) days of the Petition
Date; and
â¢
Occurrence of the Effective Date within (15) days after entry of the
Confirmation Order.
The Debtors have satisfied the first three of the milestones. Prior to the Petition
Date, the Debtors commenced solicitation of the Plan to holders of Term Loan Claims and Third
Lien Notes Claims and have set a voting deadline of April 26, 2018. In addition, concurrently
with the filing of the chapter 11 petitions, the Debtors are filing the Plan, along with the
accompanying disclosure statement for the plan (the "Disclosure Statement"). In keeping with
the milestones, the Debtors are also seeking interim approval of the DIP Financing (defined
below) and are filing a motion requesting that the Court schedule a combined hearing to consider
approval of the Disclosure Statement and confirmation of Plan on or around May 3, 2018.
55.
The Debtors believe that the Restructuring as set forth in the Plan represents the
best outcome for the Debtors, the estates and all of their stakeholders. The Plan limits the
impairment of third party claims only to the Term Loan and Third Lien Notes classes and certain
settled intercompany claims. Importantly, the Plan provides that all general unsecured claims
against the Debtors will be paid in full in cash in the normal course or otherwise be rendered
20
unimpaired. Thus, the Plan will have little to no impact on most creditors of the Debtors and in
fact will better position the Debtors to satisfy those creditorsâ claims as they come due.
IV.
First Day Pleadings
56. Concurrently with its chapter 11 petitions, the Debtors are ï¬ling the following
First Day Pleadings:
a.
Debtorsâ Motion for Entry of Order (I) Directing Joint Administration of
Related Chapter 11 Cases and (II) Granting Related Relief (âJoint
Administration Motionâ);
Debtorsâ Motion for Entry of Order Authorizing Debtors to File (I)
Consolidated List of Creditors and (II) Consolidated List of Top Thirty
Creditors (âCreditor Matrix Motionâ);
Debtorsâ Application for Appointment of Prime Clerk LLC as Claims and
Noticing Agent (â rime Clerk Applicationâ);
Debtorsâ Motion for Entry of Interim and Final Orders (1) Authorizing the
Debtors to (A) Continue Operating Cash Management System, (B) Honor
Certain Prepetition Obligations Related Thereto, (C) Continue Charge Card
Programs and Pay Obligations and Fees, (D) Maintain Existing Business
Forms, and (E) Continue Performing and Granting Administrative Priority for
Intercompany Transactions, (11) Granting the Debtors an Extension to Comply
With the Requirements of Section 345(b), and (III) Scheduling a Final
Hearing (âCash Management Motionâ);
Debtorsâ Motion for Entry of Interim and Final Orders (I) Authorizing
Debtors to (A) Pay Prepetition Wages, Salaries, and Other Compensation, and
Employee Beneï¬ts, and (B) Continue Existing Employee Beneï¬t Plans and
Programs, (II) Authorizing Banks and Financial Institutions to Pay All Checks
and Electronic Payment Requests Relating to the Foregoing, and
(III) Scheduling a Final Hearing (âEmployee Wages Motionâ);
Debtorsâ Motion for Entry of an Order (I) Authorizing Debtors to
(A) Continue Debtorsâ Insurance Programs, (B) Pay Certain Obligations in
Respect Thereof Postpetition, and (II) Authorizing Banks and Financial
Institutions to Pay All Checks and Electronic Payment Requests Relating to
the Foregoing (âInsurance Motionâ);
Debtorsâ Motion for Entry of Interim and Final Orders (1) Determining
Adequate Assurance of Payment for Future Utility Services, (II) Prohibiting
Utility Companies from Altering, Refusing, or Discontinuing Services,
21
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unimpaired. Thus, the Plan will have little to no impact on most creditors of the Debtors and in
fact will better position the Debtors to satisfy those creditors' claims as they come due.
IV.
First Day Pleadings
56.
Concurrently with its chapter 11 petitions, the Debtors are filing the following
First Day Pleadings:
a. Debtors' Motion for Entry of Order (I) Directing Joint Administration of
Related Chapter 11 Cases and (II) Granting Related Relief ("Joint
Administration Motion");
b. Debtors' Motion for Entry of Order Authorizing Debtors to File (I)
Consolidated List of Creditors and (II) Consolidated List of Top Thirty
Creditors ("Creditor Matrix Motion");
c. Debtors' Application for Appointment of Prime Clerk LLC as Claims and
Noticing Agent("Prime Clerk Application");
d. Debtors' Motion for Entry of Interim and Final Orders (I) Authorizing the
Debtors to (A)Continue Operating Cash Management System, (B)Honor
Certain Prepetition Obligations Related Thereto, (C) Continue Charge Card
Programs and Pay Obligations and Fees, (D)Maintain Existing Business
Forms, and (E)Continue Performing and Granting Administrative Priority for
Intercompany Transactions,(II) Granting the Debtors an Extension to Comply
With the Requirements of Section 345(b), and (III) Scheduling a Final
Hearing ("Cash Management Motion");
e. Debtors' Motion for Entry of Interim and Final Orders (I) Authorizing
Debtors to(A)Pay Prepetition Wages, Salaries, and Other Compensation, and
Employee Benefits, and (B)Continue Existing Employee Benefit Plans and
Programs,(II) Authorizing Banks and Financial Institutions to Pay All Checks
and Electronic Payment Requests Relating to the Foregoing, and
(III) Scheduling a Final Hearing ("Employee Wades Motion");
f. Debtors' Motion for Entry of an Order (I) Authorizing Debtors to
(A) Continue Debtors' Insurance Programs,(B)Pay Certain Obligations in
Respect Thereof Postpetition, and (II) Authorizing Banks and Financial
Institutions to Pay All Checks and Electronic Payment Requests Relating to
the Foregoing ("Insurance Motion");
g. Debtors' Motion for Entry of Interim and Final Orders (I) Determining
Adequate Assurance of Payment for Future Utility Services, (II) Prohibiting
Utility Companies from Altering, Refusing, or Discontinuing Services,
21
(III) Establishing Procedures for Determining Adequate Assurance of
Payment, and (IV) Scheduling a Final Hearing (âUtilities Motionâ);
. Debtorsâ Motion for Entry of Interim and Final Orders (1) Authorizing
Debtors to Remit and Pay Certain Prepetition Taxes, Governmental
Assessments, and Fees, (II) Authorizing Banks and Financial Institutions to
Pay All Checks and Electronic Payment Requests Relating to the Foregoing,
and (III) Scheduling a Final Hearing (âTaxes Motionâ);
Debtorsâ Motion for Entry of Order (I) Authorizing Debtors to (A) Maintain
Certain Customer and Consumer Programs and (B) Honor or Pay Certain
Prepetition Obligations Related Thereto, and (II) Authorizing Banks and
Financial Institutions to Pay All Checks and Electronic Payment Requests
Relating to the Foregoing (âCustomer and Consumer Programs Motionâ);
Debtorsâ Motion for Entry of Interim and Final Orders (I) Authorizing the
Debtors to Pay Certain Prepetition Claims in the Ordinary Course, (II)
Authorizing Banks to Honor and Process Checks and Electronic Transfer
Requests related thereto, (III) Requiring Creditors to Maintain Customary
Terms as a Condition to Payment, and (IV) Scheduling a Final Hearing
(âPa able Claims Motionâ); and
. Motion of Debtors for Entry of Interim and Final Orders (1) Authorizing
Debtors to Obtain Postpetition Secured Financing, (II) Authorizing
Postpetition Use of Cash Collateral, (III) Granting Adequate Protection to
Prepetition Secured Parties, (IV) Scheduling a Final Hearing, and
(VI) Granting Related Relief With Respect to ABL DIP and Exit Facilities
Commitment Letter (âDIP Motionâ); and
Debtorsâ Motion for Entry of (I) Order (A) Scheduling Combined Hearing on
Adequacy of Disclosure Statement and Conï¬rmation of Plan, (B) Approving
Form and Manner of Notice of Combined Hearing and Commencement of
Chapter 11 Cases, (C) Establishing Procedures for Objecting to Disclosure
Statement or Plan, and (D) Conditionally Waiving Requirement to File
Statements and Schedules and (II) Order (A) Approving Prepetition
Solicitation Procedures, (B) Approving Adequacy of Disclosure Statement
and (C) Conï¬rming Plan (the â cheduling Motionâ).
As noted above, the relief sought in the various First Day Pleadings would allow
the Debtors to, among other things, (i) obtain certain operational relief and establish various
administrative procedures to promote a seamless transition into bankruptcy and (ii) obtain
debtorâin-possession ï¬nancing and use cash collateral in order to fund the Debtorsâ business
operations and the administration of these chapter 11 cases.
22
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(III) establishing Procedures for Determining Adequate Assurance of
Payment, and (IV) Scheduling a Final Hearing ("Utilities Motion");
h. Debtors' Motion for Entry of Interim and Final Orders (I) Authorizing
Debtors to Remit and Pay Certain Prepetition Taxes, Governmental
Assessments, and Fees, (II) Authorizing Banks and Financial Institutions to
Pay All Checks and Electronic Payment Requests Relating to the Foregoing,
and (III) Scheduling a Final Hearing ("Taxes Motion");
i.
Debtors' Motion for Entry of Order (I) Authorizing Debtors to (A)Maintain
Certain Customer and Consumer Programs and (B)Honor or Pay Certain
Prepetition Obligations Related Thereto, and (II) Authorizing Banks and
Financial Institutions to Pay All Checks and Electronic Payment Requests
Relating to the Foregoing ("Customer and Consumer Programs Motion");
j. Debtors' Motion for Entry of Interim and Final Orders (I) Authorizing the
Debtors to Pay Certain Prepetition Claims in the Ordinary Course, (II)
Authorizing Banks to Honor and Process Checks and Electronic Transfer
Requests related thereto, (III) Requiring Creditors to Maintain Customary
Terms as a Condition to Payment, and (IV) Scheduling a Final Hearing
("Payable Claims Motion"); and
k. Motion of Debtors for Entry of Interim and Final Orders (I) Authorizing
Debtors to Obtain Postpetition Secured Financing, (II) Authorizing
Postpetition Use of Cash Collateral, (III) Granting Adequate Protection to
Prepetition Secured Parties, (IV) Scheduling a Final Hearing, and
(VI) Granting Related Relief With Respect to ABL DIP and Exit Facilities
Commitment Letter ("DIP Motion"); and
1. Debtors' Motion for Entry of(I) Order(A)Scheduling Combined Hearing on
Adequacy of Disclosure Statement and Confirmation of Plan,(B) Approving
Form and Manner of Notice of Combined Hearing and Commencement of
Chapter 11 Cases, (C) Establishing Procedures for Objecting to Disclosure
Statement or Plan, and (D) Conditionally Waiving Requirement to File
Statements and Schedules and (II) Order (A) Approving Prepetition
Solicitation Procedures, (B) Approving Adequacy of Disclosure Statement
and(C)Confirming Plan (the "Scheduling Motion").
57.
As noted above, the relief sought in the various First Day Pleadings would allow
the Debtors to, among other things, (i) obtain certain operational relief and establish various
administrative procedures to promote a seamless transition into bankruptcy and (ii) obtain
debtor-in-possession financing and use cash collateral in order to fund the Debtors' business
operations and the administration of these chapter 11 cases.
22
58. I have reviewed each of the First Day Pleadings or had their contents explained to
me, and I believe the Debtors would suffer immediate and irreparable harm absent the ability to
continue their business operations as sought in the First Day Pleadings. In my opinion, approval
of the relief sought in the First Day Pleadings will be critical to maintaining the stability of the
Debtors business operations, preserving value, and allowing the Debtors to focus their efforts on
the Plan conï¬rmation process.
59. Several of the First Day Pleadings request authority to pay certain prepetition
claims. I am told by the Debtorsâ advisors that rule 6003 of the Federal Rules of Bankruptcy
Procedure provides, in relevant part, that the Court shall not consider motions to pay prepetition
claims during the ï¬rst 21 days following the ï¬ling of a chapter 11 petition, âexcept to the extent
relief is necessary to avoid immediate and irreparable harm.â In light of this requirement, the
Debtors have limited their request for immediate authority to pay prepetition claims to those
circumstances where the failure to pay such claims would cause immediate and irreparable harm
to the Debtors and their estates.
60. Below is a brief discussion of the Debtorsâ operational First Day Pleadings and an
explanation of why, in my belief, such motions are critical to the successful prosecution of these
chapter 11 cases. More fulsome descriptions of the facts regarding the Debtorsâ operations, and
the bases for the relief requested in the operational motions, can be found in each relevant First
Day Pleading.
Cash Management Motion
61. In the ordinary course of business, the Debtors utilize an integrated and
centralized cash management system (the âCash Management Systemâ) to collect, manage, and
disburse funds used in their operations. The Cash Management System is essential to the
23
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I have reviewed each of the First Day Pleadings or had their contents explained to
me, and I believe the Debtors would suffer immediate and irreparable harm absent the ability to
continue their business operations as sought in the First Day Pleadings. In my opinion, approval
of the relief sought in the First Day Pleadings will be critical to maintaining the stability of the
Debtors business operations, preserving value, and allowing the Debtors to focus their efforts on
the Plan confirmation process.
59.
Several of the First Day Pleadings request authority to pay certain prepetition
claims. I am told by the Debtors' advisors that rule 6003 of the Federal Rules of Bankruptcy
Procedure provides, in relevant part, that the Court shall not consider motions to pay prepetition
claims during the first 21 days following the filing of a chapter 11 petition, "except to the extent
relief is necessary to avoid immediate and irreparable harm." In light of this requirement, the
Debtors have limited their request for immediate authority to pay prepetition claims to those
circumstances where the failure to pay such claims would cause immediate and irreparable harm
to the Debtors and their estates.
60.
Below is a brief discussion of the Debtors' operational First Day Pleadings and an
explanation of why, in my belief, such motions are critical to the successful prosecution of these
chapter 11 cases. More fulsome descriptions of the facts regarding the Debtors' operations, and
the bases for the relief requested in the operational motions, can be found in each relevant First
Day Pleading.
Cash Management Motion
61.
In the ordinary course of business, the Debtors utilize an integrated and
centralized cash management system (the "Cash Management Sstem") to collect, manage, and
disburse funds used in their operations. The Cash Management System is essential to the
23
efficient execution and achievement of the Debtorsâ business objectives, and to maximizing the
value of their estates. As of the Petition Date, the Debtors maintained 28 bank accounts
(collectively, the âBank Accountsâ) at several banks (each, a âBankâ and, collectively, the
âBanksâ) in the United States. The Debtors primarily operate their Cash Management System
through 14 active bank accounts maintained at Bank of America. Money is transferred between
the Bank Accounts, and payments to creditors are made from Bank Accounts, in a variety of
manners, including checks, drafts, wire transfers, and automated clearinghouse (â_A_C_Ijl_â)
transfers. Additional detail regarding the Cash Management System, including a detailed
diagram of the system, is provided in the Cash Management Motion.
62. Pursuant to the Cash Management Motion, the Debtors request authority to
continue operating their Cash Management System, to honOr and pay associated Bank Fees, to
continue and pay all obligations under the Debtorsâ purchase card system, maintain existing
business forms, and to continue performing Intercompany Transactions in the ordinary course of
business. The Debtors also request a 45âday extension to comply with the investment
requirements of section 345(b) of the Bankruptcy Code. I believe that the relief requested in the
Cash Management Motion is necessary and appropriate in order to avoid signiï¬cant interruptions
to the operation of the Debtorsâ businesses. I believe that authorizing the Debtors to, among
other things, continue operating their Cash Management System, maintain existing business
forms, honor and pay the Bank Fees, honor and pay obligations with respect to the Companyâs P-
cards, and continue Intercompany Transactions is essential to the Debtorsâ operational stability
and restructuring efforts. The Debtors maintain a relatively complex Cash Management System,
and some of the Debtorsâ most critical operations, including payroll, are funded via
Intercompany Transactions. In my opinion, continued use of the Cash Management System will
24
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efficient execution and achievement of the Debtors' business objectives, and to maximizing the
value of their estates. As of the Petition Date, the Debtors maintained 28 bank accounts
(collectively, the "Bank Accounts") at several banks (each, a "Bank" and, collectively, the
"Banks") in the United States. The Debtors primarily operate their Cash Management System
through 14 active bank accounts maintained at Bank of America. Money is transferred between
the Bank Accounts, and payments to creditors are made from Bank Accounts, in a variety of
manners, including checks, drafts, wire transfers, and automated clearinghouse ("ACH")
transfers.
Additional detail regarding the Cash Management System, including a detailed
diagram of the system, is provided in the Cash Management Motion.
62.
Pursuant to the Cash Management Motion, the Debtors request authority to
continue operating their Cash Management System, to honor and pay associated Bank Fees, to
continue and pay all obligations under the Debtors' purchase card system, maintain existing
business forms, and to continue performing Intercompany Transactions in the ordinary course of
business.
The Debtors also request a 45-day extension to comply with the investment
requirements of section 345(b) of the Bankruptcy Code. I believe that the relief requested in the
Cash Management Motion is necessary and appropriate in order to avoid significant interruptions
to the operation of the Debtors' businesses. I believe that authorizing the Debtors to, among
other things, continue operating their Cash Management System, maintain existing business
forms, honor and pay the Bank Fees, honor and pay obligations with respect to the Company's Pcards, and continue Intercompany Transactions is essential to the Debtors' operational stability
and restructuring efforts. The Debtors maintain a relatively complex Cash Management System,
and some of the Debtors' most critical operations, including payroll, are funded via
Intercompany Transactions. In my opinion, continued use of the Cash Management System will
24
facilitate the Debtorsâ chapter 11 cases by, among other things, avoiding administrative
inefï¬ciencies and expenses associated with disrupting this system and minimizing delays in the
payment of postpetition obligations. Moreover, I believe that allowing the Debtors to continue
Intercompany Transactions, as well as to continue performing certain other status quo cash
management operations, such as maintaining current business forms, will assure that the
Debtorsâ businesses will be uninterrupted by the commencement of this bankruptcy, thereby
ensuring the efï¬cient administration of these chapter 11 cases, and maximizing the value of the
Debtorsâ estates.
Employee Wages Motion
63. As of the Petition Date, the Debtors employ approximately 2,700 employees,
consisting of approximately 591 full-time salaried and 2,109. full-time hourly employees
(collectively, the âEmployeesâ). Of the 2,109 full-time hourly employees, 735 are union
Employees and 1,374 are non-union Employees. The Employees are spread across eight
locations, spanning from New York to Utah.
64. The Employees perform a Wide variety of functions critical to the administration
of these Chapter 11 Cases and the Debtorsâ operations generally. In many instances, the
Employees include personnel who are intimately familiar with the Debtorsâ businesses,
processes, and systems, or who have developed relationships with counterparties that are
essential to the Debtorsâ business. â To that end, and as discussed in greater detail in the
Employee Wages Motion, in the ordinary course of business, the Debtors pay and incur a
number of obligations related to the Employees, including, among other things, wages and
salaries and business expense reimbursements.
25
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facilitate the Debtors' chapter 11 cases by, among other things, avoiding administrative
inefficiencies and expenses associated with disrupting this system and minimizing delays in the
payment of postpetition obligations. Moreover, I believe that allowing the Debtors to continue
Intercompany Transactions, as well as to continue performing certain other status quo cash
management operations, such as maintaining current business forms, will assure that the
Debtors' businesses will be uninterrupted by the commencement of this bankruptcy, thereby
ensuring the efficient administration of these chapter 11 cases, and maximizing the value of the
Debtors' estates.
Employee Wages Motion
63.
As of the Petition Date, the Debtors employ approximately 2,700 employees,
consisting of approximately 591 full-time salaried and 2,109 full-time hourly employees
(collectively, the "Employees").
Of the 2,109 full-time hourly employees, 735 are union
Employees and 1,374 are non-union Employees.
The Employees are spread across eight
locations, spanning from New York to Utah.
64.
The Employees perform a wide variety of functions critical to the administration
of these Chapter 11 Cases and the Debtors' operations generally. In many instances, the
Employees include personnel who are intimately familiar with the Debtors' businesses,
processes, and systems, or who have developed relationships with counterparties that are
essential to the Debtors' business. To that end, and as discussed in greater detail in the
Employee Wages Motion, in the ordinary course of business, the Debtors pay and incur a
number of obligations related to the Employees, including, among other things, wages and
salaries and business expense reimbursements.
25
65. Pursuant to the Employee Wages Motion, the Debtors request authority to pay
prepetition Employee Obligations to their employees and to continue existing Employee Beneï¬t
Programs for their current Employees in the normal course. I believe the relief requested in the
Employee Wages Motion is necessary and appropriate in order to avoid any unnecessary
disruptions to the Debtorsâ operations and any resulting deterioration in the value of the Debtorsâ
estates. I believe paying prepetition employee wages, beneï¬ts, and certain other compensation,
as well as continuing existing employee beneï¬ts for the Debtorsâ staff, is necessary to ensure the
Debtorsâ seamless transition into bankruptcy and the operational stability needed as the Debtors
promptly seek conï¬rmation of the prepackage Plan. In the absence of paying prepetition wages
and beneï¬ts and continuing existing employee beneï¬ts, I believe the Debtors would face severe
threats to the successful operation of their businesses, including employee attrition and turnover,
â loss of goodwill, and loss of morale, thereby unnecessarily impairing the Debtorsâ ability to
continue operations and reducing the value of the Debtorsâ estates. Therefore, I believe that such
authorization is necessary to keep the Debtorsâ existing workforce intact in order to maximize
the value of the bankruptcy estates for the beneï¬t of all parties in interest in these chapter 11
cases.
Insurance Motion
66. In the ordinary course of business, the Debtors maintain 15 insurance programs,
with many of those programs encompassing multiple policies. These programs provide insurance
coverage for, among other things, the Debtorsâ property and machinery, general liability,
automobile, workerâs compensation, umbrella coverage, and directors and ofï¬cers (each, an
âInsurance Programâ and, collectively, the â nsurance Programsâ). In addition, in the ordinary
course of business, the Debtors ï¬nance, through premium ï¬nancing agreements (the âPFAsâ),
26
Case 18-10684-BLS
65.
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Pursuant to the Employee Wages Motion, the Debtors request authority to pay
prepetition Employee Obligations to their employees and to continue existing Employee Benefit
Programs for their current Employees in the normal course. I believe the relief requested in the
Employee Wages Motion is necessary and appropriate in order to avoid any unnecessary
disruptions to the Debtors' operations and any resulting deterioration in the value of the Debtors'
estates. I believe paying prepetition employee wages, benefits, and certain other compensation,
as well as continuing existing employee benefits for the Debtors' staff, is necessary to ensure the
Debtors' seamless transition into bankruptcy and the operational .stability needed as the Debtors
promptly seek confirmation of the prepackage Plan. In the absence of paying prepetition wages
and benefits and continuing existing employee benefits, I believe the Debtors would face severe
threats to the successful operation of their businesses, including employee attrition and turnover,
to
loss of goodwill, and loss of morale, thereby unnecessarily impairing the Debtors' ability
such
continue operations and reducing the value of the Debtors' estates. Therefore, I believe that
authorization is necessary to keep the Debtors' existing workforce intact in order to maximize
chapter 11
the value of the bankruptcy estates for the benefit of all parties in interest in these
cases.
Insurance Motion
66.
In the ordinary course of business, the Debtors maintain 15 insurance programs,
with many of those programs encompassing multiple policies. These programs provide insurance
coverage for, among other things, the Debtors' property and machinery, general liability,
an
automobile, worker's compensation, umbrella coverage, and directors and officers (each,
"Insurance Program" and, collectively, the "Insurance Programs"). In addition, in the ordinary
"PFAs"),
course of business, the Debtors finance, through premium financing agreements (the
26
the payment of their premiums on certain Insurance Programs. The Debtorsâ Insurance
Programs and PFAs, along with a description of the insurance brokersâ fees that the Debtors pay
in the normal course, are described in further detail in the Insurance Motion.
67. Pursuant to the Insurance Motion, the Debtors request authority to maintain and _
continue to honor certain Insurance Policies, and pay Insurance Obligations, whether such
obligations relate to the period prior to or after the commencement of these chapter 11 cases, in
the ordinary course of business. I believe that the relief requested in the Insurance Motion is
necessary and appropriate because continuation of the Debtorsâ Insurance Programs and payment
of the Debtorsâ Insurance Obligations are imperative to the Debtorsâ continued operation and
preserving the value of the Debtorsâ estates. It is essential for the Debtors to carry insurance in
their dayâto-day operations, or they run the risk of, among other harms, incurring ï¬nancial
responsibility and legal liability for potential occurrences not covered by insurance. Moreover,
in many cases, coverage provided by the Debtorsâ Insurance Policies is required by the
regulations, laws, and contracts that govern the Debtorsâ commercial activities. Accordingly,
maintaining the Debtorsâ Insurance Programs, and paying their Insurance Obligations, ensures
that the value of the Debtorsâ estate is maximized for the beneï¬t of all stakeholders.
Utilities Motion
68. In connection with the operation of their business, certain of the Debtors obtain
electricity, telephone, water, gas, internet, waste disposal, and other similar services
(collectively, the âUtility Servicesâ) from a number of utility companies (collectively, the
âUtility Companiesâ), as identiï¬ed in the Utilities Motion. I believe the continued and
uninterrupted provision of Utility Services during the postpetition period is necessary to allow a
27
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the payment of their premiums on certain Insurance Programs.
The Debtors' Insurance
Programs and PFAs, along with a description of the insurance brokers' fees that the Debtors pay
in the normal course, are described in further detail in the Insurance Motion.
67.
Pursuant to the Insurance Motion, the Debtors request authority to maintain and
continue to honor certain Insurance Policies, and pay Insurance Obligations, whether such
obligations relate to the period prior to or after the commencement of these chapter 11 cases, in
the ordinary course of business. I believe that the relief requested in the Insurance Motion is
necessary and appropriate because continuation of the Debtors' Insurance Programs and payment
of the Debtors' Insurance Obligations are imperative to the Debtors' continued operation and
preserving the value of the Debtors' estates. It is essential for the Debtors to carry insurance in
their day-to-day operations, or they run the risk of, among other harms, incurring financial
Moreover,
responsibility and legal liability for potential occurrences not covered by insurance.
by the
in many cases, coverage provided by the Debtors' Insurance Policies is required
regulations, laws, and contracts. that govern the Debtors' commercial activities. Accordingly,
maintaining the Debtors' Insurance Programs, and paying their Insurance Obligations, ensures
that the value of the Debtors' estate is maximized for the benefit of all stakeholders.
Utilities Motion
68.
In connection with the operation of their business, certain of the Debtors obtain
electricity, telephone, water, gas, Internet, waste disposal, and other similar services
the
(collectively, the "UtilitX Services") from a number of utility companies (collectively,
"Utility Companies"), as identified in the Utilities Motion.
I believe the continued and
y allow a
uninterrupted provision of Utility Services during the postpetition period is necessar to
27
smooth operation of the Debtorsâ business and ensure stability in the production of the Debtorsâ
various products.
69. Pursuant to the Utilities Motion, the Debtors request that the Court determine
adequate assurance of payment for future utility services, establish procedures for determining
adequate assurance of payment, and prohibit Utility Companies from altering, refusing, or
discontinuing utility services. I believe the relief requested in the Utilities Motion is necessary
and appropriate because it Will ensure that there is a process to address any utility provider that
may make a demand to the Debtors for adequate assurance or otherwise threaten to alter, refuse,
or discontinue utility service, thereby ensuring that any disruptions to the Debtorsâ business
operations are minimized. I am informed and believe that the proposed adequate assurance
procedures are consistent with procedures that are typically approved in chapter 11 cases in this
district.
Taxes Motion
70. In the ordinary course of business, the Debtors incur federal excise taxes, sales
and use taxes, real estate taxes, personal property taxes, and other taxes, fees, and charges, each
as more particularly described in the Taxes Motion (collectively, the âTaxes and Feesâ). The
Debtors remit the Taxes and Fees to various federal, state, and local governments and agencies,
including taxing and licensing authorities (collectively, the âGovernmental Authoritiesâ).
71. Pursuant to the Taxes Motion, the Debtors request authority to pay certain
prepetition taxes, governmental assessments, and fees as those obligations become due in the
normal course. I believe that the relief requested in the Taxes Motion is necessary and
appropriate because the Debtorsâ failure to pay prepetition Taxes and Fees could materially and
adversely impact their business operations and impair the value of the Debtorsâ estates.
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smooth operation of the Debtors' business and ensure stability in the production of the Debtors'
various products.
69.
Pursuant to the Utilities Motion, the Debtors request that the Court determine
adequate assurance of payment for future utility services, establish procedures for determining
adequate assurance of payment, and prohibit Utility Companies from altering, refusing, or
discontinuing utility services. I believe the relief requested in the Utilities Motion is necessary
and appropriate because it will ensure that there is a process to address any utility provider that
may make a demand to the Debtors for adequate assurance or otherwise threaten to alter, refuse,
or discontinue utility service, thereby ensuring that any disruptions to the Debtors' business
operations are minimized. I am informed and believe that the proposed adequate assurance
procedures are consistent with procedures that are typically approved in chapter 11 cases in this
district.
Taxes Motion
70.
In the ordinary course of business, the Debtors incur federal excise taxes, sales
and use taxes, real estate taxes, personal property taxes, and other taxes, fees, and charges,
each
The
as more particularly described in the Taxes Motion (collectively, the "Taxes and Fees").
agencies,
Debtors remit the Taxes and Fees to various federal, state, and local governments and
including taxing and licensing authorities (collectively, the "Governmental Authorities").
71.
Pursuant to the Taxes Motion, the Debtors request authority to pay certain
the
prepetition taxes, governmental assessments, and fees as those obligations become due in
normal course.
I believe that the relief requested in the Taxes Motion is necessary and
appropriate because the Debtors' failure to pay prepetition Taxes and Fees could materially and
adversely impact their business operations and impair the value of the Debtors' estates.
28
Speciï¬cally, if the Debtors were to delay paying prepetition Taxes and Fees, there is a risk that
Governmental Authorities would assess penalty fees on the past due amounts, thereby increasing
the size of the Debtorsâ ï¬nancial liability, or that Governmental Authorities would pursue claims
against the Debtorsâ ofï¬cers and directors, thereby distracting them from the operation of their
businesses, the administration of these chapter 11 cases, and the Debtorsâ pursuit of conï¬rmation
of the Plan. Therefore, I believe that the ability to pay prepetition Taxes and Fees will greatly
assist the Debtors in maximizing the value of their estates for the beneï¬t of all stakeholders.
Customer and Consumer Programs Motion
72. In order to develop and sustain positive reputations in the marketplace for their
products and maximize the loyalty of, and goodwill with, their customers, the Debtors
historically have engaged in certain practices and programs designed to provide certain
incentives and services to the Debtorsâ various customers as well as the consumer end users of
the Debtorsâ products (collectively, the âCustomer and Consumer Programsâ). The Customer
and Consumer Programs principally consist of four categories of programs or services: customer
rebates; show special promotions; and a consumer warranty program. The speciï¬c Customer
and Consumer Programs are described in greater detail in the Customer and Consumer Programs
Motion.
73. Pursuant to the Customer and Consumer Programs Motion, the Debtors request
authority to continue the Customer and Consumer Programs and to honor and pay certain
prepetition obligations related to the Customer and Consumer Programs. I believe that the relief
requested in the Customer and Consumer Programs Motion is necessary and appropriate to
preserve the value of the Debtorsâ estates. I believe the ability to continue the Customer and
Consumer Programs and honor and pay the related in the ordinary course is critical to ensuring
29
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Specifically, if the Debtors were to delay paying prepetition Taxes and Fees, there is a risk that
Governmental Authorities would assess penalty fees on the past due amounts, thereby increasing
the size of the Debtors' financial liability, or that Governmental Authorities would pursue claims
against the Debtors' officers and directors, thereby distracting them from the operation of their
businesses, the administration of these chapter 11 cases, and the Debtors' pursuit of confirmation
of the Plan. Therefore, I believe that the ability to pay prepetition Taxes and Fees will greatly
assist the Debtors in maximizing the value of their estates for the benefit of all stakeholders.
Customer and Consumer Programs Motion
72.
In order to develop and sustain positive reputations in the marketplace for their
products and maximize the loyalty of, and goodwill with, their customers, the Debtors
historically have engaged in certain practices and programs designed to provide certain
of
incentives and services to the Debtors' various customers as well as the consumer end users
the Debtors' products (collectively, the "Customer and Consumer Programs"). The Customer
and Consumer Programs principally consist of four categories of programs or services: customer
rebates; show special promotions; and a consumer warranty program. The specific Customer
and Consumer Programs are described in greater detail in the Customer and Consumer Programs
Motion
73.
Pursuant to the Customer and Consumer Programs Motion, the Debtors request
authority to continue the Customer and Consumer Programs and to honor and pay certain
prepetition obligations related to the Customer and Consumer Programs. I believe that the relief
te to
requested in the Customer and Consumer Programs Motion is necessary and appropria
preserve the value of the Debtors' estates. I believe the ability to continue the Customer and
Consumer Programs and honor and pay the related in the ordinary course is critical to ensuring
29
the continued operation of the Debtorsâ business. The Debtors operate in a highly competitive
sector and much of the success and viability of the Debtorsâ business is dependent upon the
loyalty and conï¬dence of their customers and the end users of the Debtorsâ products. Any
failure to maintain the Customer and Consumer Programs or pay the Customer and Consumer
Obligations could result in the Debtorsâ losing support from their loyal customers and consumers
and could tarnish the Debtorsâ reputation in the marketplace. I believe that if the Debtors failed
to honor the Customer and Consumer Programs or pay the related obligations in the ordinary
course and without interruption, they would almost certainly suffer an irreparable loss of
customer support and conï¬dence and sales would dwindle to the ultimate detriment of the
Debtorsâ estates and all stakeholders.
Payable Claims Motion
74. In the ordinary course of its business, the Debtors incur numerous obligations to
various creditors that provide the Debtors with a variety of resources and services that are
necessary for the continued operation of the Debtorsâ ï¬rearms and ammunition business. The
Debtors estimate that, as of the Petition Date, they owe a total of approximately $55 million on
account of liquidated, noncontingent, and undisputed prepetition claims (the âPayable Claimsâ)
of third-party creditors who will be treated as unimpaired for purposes of the Plan, including,
without limitation, trade vendors, suppliers, common carriers, and service providers (the
âPrepetition Creditorsâ).18 Of the $55 million of Payable Claims, the Debtors estimate that
approximately $48 million will come due within the ï¬rst 30 days of the chapter ll cases. The
goods provided by the Prepetition Creditors include raw materials and parts speciï¬c to the
Debtorsâ various products, such as brass, lead, propellant, steel, plastic, resin, wood, stocks, as
18 For the avoidance of doubt, the scope of this Motion and the relief requested herein does not apply to any
prepetition claim for which the Debtors seek authority to pay pursuant to a separate âï¬rst-dayâ motion ï¬led by
the Debtors; such claims shall not be considered âPayable Claimsâ for purposes of this Motion.
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the continued operation of the Debtors' business. The Debtors operate in a highly competitive
sector and much of the success and viability of the Debtors' business is dependent upon the
loyalty and confidence of their customers and the end users of the Debtors' products. Any
failure to maintain the Customer and Consumer Programs or pay the Customer and Consumer
Obligations could result in the Debtors' losing support from their loyal customers and consumers
and could tarnish the Debtors' reputation in the marketplace. I believe that if the Debtors failed
to honor the Customer and Consumer Programs or pay the related obligations in the ordinary
course and without interruption, they would almost certainly suffer an irreparable loss of
customer support and confidence and sales would dwindle to the ultimate detriment of the
Debtors' estates and all stakeholders.
Payable Claims Motion
74.
In the ordinary course of its business, the Debtors incur numerous obligations to
are
various creditors that provide the Debtors with a variety of resources and services that
The
necessary for the continued operation of the Debtors' firearms and ammunition business.
on
Debtors estimate that, as of the Petition Date, they owe a total of approximately $55 million
account of liquidated, noncontingent, and undisputed prepetition claims (the "Payable Claims")
including,
of third-party creditors who will be treated as unimpaired for purposes of the Plan,
without limitation, trade vendors, suppliers, common carriers, and service providers (the
"Pre~etition Creditors"),Ig Of the $55 million of Payable Claims, the Debtors estimate that
approximately $48 million will come due within the first 30 days of the chapter 11 cases. The
to the
goods provided by the Prepetition Creditors include raw materials and parts specific
Debtors' various products, such as brass, lead, propellant, steel, plastic, resin, wood, stocks, as
18
not apply to any
For the avoidance of doubt, the scope of this Motion and the relief requested herein does
motion filed by
"first-day"
separate
to
a
pursuant
pay
to
prepetition claim for which the Debtors seek authority
Motion.
of
this
purposes
for
Claims"
"Payable
the Debtors; such claims shall not be considered
30
well as other materials relating to components, stamping, injection molds, safety systems,
machining, projectiles, and packaging and ï¬nishing. The Prepetition Creditors also provide the
Debtors with a variety of services in the ordinary course of business including, but not limited to,
machining, shipping, warehousing, logistics, equipment maintenance and repairs, property
maintenance and repairs, and other basic necessities for the operation of the Debtorsâ business.
75. Pursuant to the Payable Claims Motion, the Debtors request authority, in their
sole discretion, to pay the Payable Claims in the ordinary course of the Debtorsâ business. I
believe the relief requested in the Payable Claims Motion is necessary in order to minimize
disruption to the Debtorsâ operations and to ensure uninterrupted operations and to allow for a
seamless transition through these chapter 11 cases, for the beneï¬t of all parties in interest.
Moreover, as described above, because of the broad consensus that was reached under the RSA
and the support for the Plan, I am optimistic that the Plan will be conï¬rmed within
approximately ï¬fty days of the Petition Date. Because the Payable Claims are unimpaired under
the Plan, the relief requested in the Payable Claims Motion would merely expedite the treatment
and distribution to the Prepetition Creditors that they would otherwise be entitled to receive upon
consummation of the Plan. Given the strong likelihood that holders of the Payable Claims will
be paid in full anyway, I believe the mere timing difference is warranted in order to avoid the
risk of deteriorating relationships with suppliers, vendors and others.
DIP Motion
76. In the DIP 'Motion, the Debtors seek entry of an interim order (the âInterim
Orderâ) and a ï¬nal order (the âFinal Order,â and together with the Interim Order, the âDE
Ordersâ) approving the Debtorsâ entry into the DIP Facilities. The combination of the
Term/ROC DIP Facility and the ABL DIP Facilityâdocumented in separate credit agreements
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well as other materials relating to components, stamping, injection molds, safety systems,
machining, projectiles, and packaging and finishing. The Prepetition Creditors also provide the
Debtors with a variety of services in the ordinary course of business including, but not limited to,
machining, shipping, warehousing, logistics, equipment maintenance and repairs, property
maintenance and repairs, and other basic necessities for the operation of the Debtors' business.
75.
Pursuant to the Payable Claims Motion, the Debtors request authority, in their
sole discretion, to pay the Payable Claims in the ordinary course of the Debtors' business. I
e
believe the relief requested in the Payable Claims Motion is necessary in order to minimiz
for a
disruption to the Debtors' operations and to ensure uninterrupted operations and to allow
in interest.
seamless transition through these chapter 11 cases, for the benefit of all parties
RSA
Moreover, as described above, because of the broad consensus that was reached under the
confirmed within
and the support for the Plan, I am optimistic that the Plan will be
red under
approximately fifty days of the Petition Date. Because the Payable Claims are unimpai
the treatment
the Plan, the relief requested in the Payable Claims Motion would merely expedite
and distribution to the Prepetition Creditors that they would otherwise be entitled
to receive upon
will
consummation of the Plan. Given the strong likelihood that holders of the Payable Claims
order to avoid the
be paid in full anyway, I believe the mere timing difference is warranted in
risk of deteriorating relationships with suppliers, vendors and others.
DIP Motion
76.
In the DIP Motion, the Debtors seek entry of an interim order (the "Interim
the "DIP
Order") and a final order (the "Final Order," and together with the Interim Order,
Orders") approving the Debtors' entry into the DIP Facilities.
The combination of the
agreements
Term/ROC DIP Facility and the ABL DIP Facilityâdocumented in separate credit
31
but approved in a single order and working in tandem~âwill effectively replicate the Debtorsâ
existing capital structure. The DIP Term Facility, provided by a combination of certain
prepetition Term Loan Lenders and holders of Third Lien Notes, will make an additional $100
million available (in addition to the $45 million already advanced by Debtor ROC under the
ROC Financing) to address, in accordance with the terms of an approved budget, the Debtorsâ
immediate cash needs. The ABL DIP Facility, in turn, will provide the Debtors with up to an
additional $193 in liquidity, to (i) support letters of credit necessary to facilitate the Debtorsâ
ongoing business operations, (ii) supplement the cash otherwise available to the Debtors by
allowing the Debtors to engage in periodic collection pay downs and re-borrowings of funds; and
(iii) in certain limited circumstances, permit the Debtors to obtain incremental advances secured
by the Debtorsâ accounts and inventory.
77. Furthermore, the ABL DIP Facility will roll into the ABL Exit Facility (on terms
more favorable to the Debtors than any other facility it has identiï¬ed to date) to ï¬nance the
Debtorsâ postâchapter 11 cash and operational needs. Together, the liquidity provided by the
ABL Exit Facility, along with the New Term Loan Facility and the New FILO Exit Facility, will
support the Debtorsâ ability to pay their trade creditors in the ordinary course during the
pendency of these Chapter 11 Cases as well as the unimpairment of general unsecured claims as
contemplated by the Plan. Accordingly, I believe that entry into the DIP Facilities is in the best
interests of the Debtorsâ estates and the various stakeholders.
Scheduling Motion
78. As discussed above, the Debtors intend to effectuate the Restructuring through the
prepackaged Plan. Furthermore, pursuant to the RSA, the Debtors are bound by certain
milestones, including but not limited to deadlines to commence solicitation of the Plan, obtain
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but approved in a single order and working in tandemâwill effectively replicate the Debtors'
existing capital structure.
The DIP Term Facility, provided by a combination of certain
prepetition Term Loan Lenders and holders of Third Lien Notes, will make an additional $100
million available (in addition to the $45 million already advanced by Debtor ROC under the
ROC Financing) to address, in accordance with the terms of an approved budget, the Debtors'
immediate cash needs. the ABL DIP Facility, in turn, will provide the Debtors with up to an
additional $193 in liquidity, to (i) support letters of credit necessary to facilitate the Debtors'
ongoing business operations, (ii) supplement the cash otherwise available to the Debtors by
allowing the Debtors to engage in periodic collection pay downs and re-borrowings of funds; and
(iii) in certain limited circumstances, permit the Debtors to obtain incremental advances secured
by the Debtors' accounts and inventory.
77.
Furthermore, the ABL DIP Facility will roll into the ABL Exit Facility (on terms
the
more favorable to the Debtors than any other facility it has identified to date) to finance
the
Debtors' post-chapter 11 cash and operational needs. Together, the liquidity provided by
ABL Exit Facility, along with the New Term Loan Facility and the New FILO Exit Facility,
will
the
support the Debtors' ability to pay their trade creditors in the ordinary course during
pendency of these Chapter 11 Cases as well as the unimpairment of general unsecured claims as
contemplated by the Plan. Accordingly, I believe that entry into the DIP Facilities is in the best
interests of the Debtors' estates and the various stakeholders.
Scheduling Motion
78.
As discussed above, the Debtors intend to effectuate the Restructuring through the
prepackaged Plan.
Furthermore, pursuant to the RSA, the Debtors are bound by certain
milestones, including but not limited to deadlines to commence solicitation of the Plan, obtain
32
entry of a conï¬rmation order and to consummate the Restructuring. In light of those milestones
and the prepackaged nature of these cases, pursuant to the Scheduling Motion, the Debtors are
seeking a combined hearing to consider approval of the Disclosure Statement and conï¬rmation
of the Plan (the âCombined Hearingâ). The Debtors Will also seek approval of the prepetition
and postpetition solicitation of the Plan at the Combined Hearing. The Debtors believe the relief
requested in the Scheduling Motion is appropriate in that itwill best position to satisfy the RSA
milestones, thereby maximizing the Debtors ability to consummate the Restructuring for the
beneï¬t of all stakeholders.
33
Case 18-10684-BLS
Doc 7
Filed 03/25/18
Page 33 of 34
entry of a confirmation order and to consummate the Restructuring. In light of those milestones
and the prepackaged nature of these cases, pursuant to the Scheduling Motion, the Debtors are
seeking a combined hearing to consider approval of the Disclosure Statement and confirmation
of the Plan (the "Combined Hearing"). The Debtors will also seek approval of the prepetition
and postpetition solicitation of the Plan at the Combined Hearing. The Debtors believe the relief
requested in the Scheduling Motion is appropriate in that it will best position to satisfy the RSA
milestones, thereby maximizing the Debtors ability to consummate the Restructuring for the
benefit of all stakeholders.
33
Pursuant to 28 U .S.C. § 1746â I declare under penalty ofpujury that the foregoing
is true and correct to the btst 01â my knowiedgc and belie-i",
Dated: March 25, 2018 , ..
"4} 0 WW m ~ /â MyMâJ
, m
Stephen P. Jacky):ng
ChiefâFinancial Of per
Remington Outdoor Cbmpzmy..hz c.
Case 18-10684-BLS
Doc 7
Filed 03/25/18
Page 34 of 34
under ~~c~~alty c~f~ Pci'l~~iâ¢~' ti7~it t[~e f~~reboii~
P~~rs~iai~t t~ 28 tI.S.C`. ~ 17~b,]decl<~rr;
-lecis~e E nd l~eliet~,
is true. aEld cUrrect to the best c~f~ my kno~~
2~l l8
L)ate~d: ivi~rcli 25,
____
5te}~hen P. lacksa~3~,~~ â¢.
Claiet Fina~~cial Of[~icer
~tcan t~~~tcloc~r ~C~r~i~f~ia.~~.,_I c.
Retnin;