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Law360 (July 10, 2020, 6:50 PM EDT ) Men's clothing retailer Brooks Brothers Group Inc. told a Delaware bankruptcy judge at the outset of its case Friday that it obtained a new Chapter 11 loan that provides $5 million more in financing than previously contemplated and does so on better credit terms.
During a first-day hearing, debtor attorney Garrett A. Fail of Weil Gotshal & Manges LLP said the company had postponed the initial case proceedings because it received a new offer for debtor-in-possession financing from affiliates of Authentic Brands Group on Thursday and needed time to review the proposal.
After a day of consideration and another round of loan proposals from original lender WHP Global and ABG, Fail said the final offer from the new lender contained materially better terms, including no interest, no closing fees and no administrative fees, while providing $80 million in funding.
"Ultimately, the debtors determined the proposal by ABG was the best available and may be record-breaking," Fail said.
In addition to reduced fees and interest and increased funding, the new DIP package includes an increased contemplated wind-down budget, an increased administrative claim carveout and an extended sale consummation deadline, Fail told the court.
The DIP loan will be used to repay $32 million in bridge financing borrowed in the weeks before the Chapter 11 filing and will also fund Brooks Brothers' operations while it navigates an asset sale process aimed at closing a transaction within 88 days, according to Fail.
The DIP proposal didn't draw any objections, and U.S. Bankruptcy Judge Christopher Sontchi approved it along with a handful of other typical first-day motions from Brooks Brothers.
The company filed its petition earlier this week after a 2019 sale process was scuttled by the COVID-19 pandemic and its resulting business restrictions. By February, Brooks Brothers said many of its suppliers in Europe and Asia had fallen victim to those restrictions and stalled its supply chain, and when the virus reached the U.S., the company was forced to shutter its hundreds of retail locations.
While relying on e-commerce sales during the shutdown, the company said it furloughed nearly half of its employees, permanently closed dozens of stores and shut down three U.S. manufacturing facilities, according to court filings.
Despite those challenges, Brooks Brothers said it is encouraged by the continued interest in its assets from potential buyers. Its pre-bankruptcy marketing efforts garnered interest from bidders, and discussions with those parties have continued this week, Fail told the court.
The debtor anticipates filing proposed bidding procedures soon and is planning on closing a sale transaction in less than three months.
Brooks Brothers came to court with secured debt consisting of an asset-based lending facility with $212 million outstanding, a $32.5 million term loan and $13.6 million under an uncommitted facility. Another $7.5 million in mortgage debt rounds out the secured obligations. There is $126.3 million in unsecured note debt along with significant trade debt.
Brooks Brothers is represented by Mark D. Collins and Zachary I. Shapiro of Richards Layton & Finger PA, and Garrett A. Fail and David J. Cohen of Weil Gotshal & Manges LLP.
The case is In re: Brooks Brothers Group Inc. et al., case number 20-11785, in the U.S. Bankruptcy Court for the District of Delaware.
--Editing by Adam LoBelia.
For a reprint of this article, please contact reprints@law360.com.
