Franchise Group, Inc. and its affiliated debtors filed their disclosure statement for their third amended joint Chapter 11 plan in Delaware bankruptcy court, outlining a comprehensive restructuring strategy that includes potential asset sales and debt conversion.
The disclosure statement, filed on February 5, 2025, in Case No. 24-12480 (LSS), details the company's plan to address approximately $1.985 billion in prepetition debt through a combination of debt-to-equity conversions and potential asset sales. The document was filed by Willkie Farr & Gallagher LLP and Young Conaway Stargatt & Taylor, LLP, serving as counsel to the debtors.
The company, which operates retail brands including The Vitamin Shoppe, Pet Supplies Plus, American Freight, and Buddy's Home Furnishings, filed for Chapter 11 protection on November 3, 2024. Prior to the bankruptcy filing, the company entered into a restructuring support agreement with holders of more than two-thirds of its first-lien debt.
Key elements of the plan include converting DIP claims into a mix of take-back debt and reorganized equity, equitizing first-lien loan claims into 100% of reorganized common equity (subject to dilution), and providing general unsecured creditors with litigation trust units. The plan also contemplates the possibility of partial or complete asset sales as an alternative to the equitization strategy.
The disclosure statement reveals that the company's financial challenges were exacerbated by macroeconomic headwinds in the retail industry, rising interest expenses, and material contingent obligations. The document also discusses the company's recent take-private transaction and the removal of former CEO Brian Kahn following investigations related to his alleged involvement with Prophecy Asset Management LP.
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Document length: 382 pages