Orchard Brands on Wednesday said it reached an agreement with the majority of its lenders to restructure the firm in a move that also includes a voluntary Chapter 11 filing in Delaware.
The bankruptcy filing was under the name Appleseed’s Intermediate Holdings. The catalogue operator, which targets men and women in the 55-plus age demographic, is owned by private equity firm Golden Gate Capital.
Golden Gate in October hired Moelis & Co. to find a buyer for the business, which does an estimated annual volume of nearly $1 billion, according to financial sources. Market and financial sources in November said there were few takers, and by December there was speculation that a bankruptcy filing was on the horizon.
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According to the company, the new agreement with its lenders will eliminate $420 million of debt and provide $40 million in new investment into the business. It is seeking bankruptcy court approval of a $140 million debtor-in-possession financing facility.
Orchard Brands’ chief executive officer Neale Attenborough said in a court affidavit that the firm’s $725.1 million in secured and unsecured debt carries an annual interest expense of $52 million. In addition, the business hit a roadblock when sales volumes declined at its “value” brands that offer low-price merchandise, such as Blair, Haband and AMO. While sales increased at its higher-end brands, such as Appleseed’s, The Tog Shop, Monterey Bay, Sahalie, Draper’s & Damon and Norm Thompson, gains weren’t sufficient to offset the weakness in its value catalogue operation.
According to the bankruptcy petition, its largest unsecured creditor is American Capital Financial Services, Bethesda, Md., whose bank loan claim is $73.4 million.
The petition estimated between $1 million to $500 million in assets, and a range of $500 million to $1 billion in liabilities.
“This should finally put an end to the long, drawn-out vendor uncertainty. If everything goes as planned they should emerge a much stronger company,” said Bob Carbonell, executive vice president and chief credit officer for Bernard Sands.
Beverly, Mass.-based Orchard Brands’ umbrella includes 17 catalogue businesses, and employs 3,000 full-time and 1,260 part-time staffers .