On Sunday, we broke the news that luxury baby stroller company Austlen Baby Co. had filed for Chapter 11 bankruptcy protection in Texas. Initial court filings provided a lot of interesting background information on the company, but not much detail about where the company was headed. Well, now we have some answers - at least in regards to where the company hopes to go from here.
Yesterday, the company filed a declaration from Leslie Stiba, Austlen's Director and the Chief Operating Officer (interestingly, the company's "Team" page on its website lists her as the CEO).
Additional Background Facts About the Company:
- "The product is manufactured in China, and the Debtor uses third-party logistics providers for transport by ocean, rail and truck. In addition, Austlen Baby uses a contracted centralized fulfillment center. Inventory is stored at locations in Pennsylvania and California."
- "The Debtor currently employs five full-time employees, two contracted QC positions in China and a restructuring consultant. The company is headquartered in Austin, most employees work remotely, and there is an engineering facility leased in Pennsylvania."
- "In August of 2017, a leading mass retailer expanded Austlen’s footprint to an additional ~36 stores, with other store locations coming onboard via special requests. The Entourage and accessories are currently in 55 stores, ~50 specialty retailers and amazon.com. The Debtor also sells directly through its website http://www.austlen.com. Net sales for the 12 months ending May 2018 were $1,051,284."
- "Austlen’s operations have been financed through secured, SBA backed debt issued by Amplify Federal Credit Union (“Amplify”) through two loan facilities. . . the current balance of Loan # is 1,383,947.90. The current balance of Loan # is 1,606,945.50. The Amplify Debt is secured by blanket liens on Austlen’s assets. The Amplify Debt is personally guaranteed by [the company's founders]."
- "In addition to financing, Austlen raised $1,536,328 through a June 24, 2016, issuance of Preferred Series A stock. Austlen also entered into a Convertible Note Purchase Agreement dated April 11, 2016, raising an additional $1,090,000.00. Austlen has approximately $245,000 in outstanding unsecured trade debt, some of which is disputed."
The Bankruptcy Filing & Goals:
- "In the spring of 2018, Austlen began facing critical cash flow issues. Austlen worked with Amplify in an effort to renegotiate debt repayment terms. Austlen also sought to obtain additional investment and unsecured borrowing. During this period, Austlen engaged Terry Chase as a consultant to explore restructuring scenarios."
- "After unsuccessfully attempting to locate unsecured financing or further
investment, Austlen negotiated a Debtor-in-Possession Credit Facility in the total aggregate amount of $400,000, including a $55,000 interim borrowing amount (the “DIP Facility” and the “DIP Advancing Commitment”). This amount is designed to allow the Debtor to operate within the Bankruptcy Case until a confirmation hearing on a plan of reorganization. The “DIP Lender” is a group comprised of [certain] Pre-Petition lenders and Preferred Series A stockholders . . . or an entity which may be formed by them prior or after entry of any order approving the DIP Facility."
- The proposed DIP Facility carries an interest rate of 7% and a default interest rate of 18%.
- The proposed DIP Facility has a termination date a maximum of 100 days from entry of a final order approving the borrowing, unless extended.
- The proposed DIP Facility requires Austlen to file a proposed plan and disclosure statement on or before July 20, 2018 and the court to enter an order confirming a plan on or before October 10, 2018.