Collected Group makes pre-packaged Chapter 11 bankruptcy filing

By Sarah Lizee

Olympia, Wash., April 7 – Collected Group, LLC and its affiliates filed Chapter 11 bankruptcy on Monday in the U.S. Bankruptcy Court for the District of Delaware.

“The company’s business was significantly impaired by the effects of the Covid-19 pandemic, which, among other things, resulted in extended closures of all retail stores, further strained liquidity, and diminished access to new inventory from certain vendors.” chief restructuring officer Evan Hengel said in a declaration.

Hengel said retail revenues plummeted by over 85%, and wholesale revenues were reduced by almost 70% in 2020.

The debtors filed the cases to implement a joint pre-packaged Chapter 11 plan of reorganization.

The plan contemplates restructuring transactions that will deleverage the debtors’ balance sheet by about $150 million to $30 million, materially reduce the debtors’ annual interest expense, provide the debtors with up to $30 million of exit financing from pre-petition secured lenders to support their go-forward operations, and put the reorganized debtors in a position to succeed and capitalize on further growth opportunities, Hengel said.

The restructuring transactions are supported by all of the debtors’ pre-petition secured lenders, including funds advised by KKR Credit Advisors (US) LLC and some affiliates of Callodine Commercial Finance, and the company’s equity sponsors, which are certain affiliates of KKR. KKR is expected to retain its ownership of Collected Group following emergence.

DIP financing

The company is seeking court approval of a $9.2 million delayed-draw debtor-in-possession term loan facility with its pre-petition secured lenders and KKR as administrative agent, with interim access to $6 million of the facility.

The facility would mature on June 10 at the latest.

Interest will be 10%. The default rate is 12%.

The facility carries a 3% closing fee.

Plan terms

On the effective date, any outstanding DIP payments will be paid in full in cash and the remaining DIP facility claims will be converted into exit facility loans.

Holders of first-priority secured claims will receive their pro rata share of: $14.5 million of exit facility loans; 100% of new preferred equity; and 95% of new common equity, subject to dilution by the management incentive plan (MIP) equity.

Holders of second-priority secured claims will receive 5% of the new common equity, subject to dilution by the MIP equity.

Third priority secured claims, general unsecured claims and existing equity interests will be canceled, released and discharged, and holders will not be entitled to receive any distribution under the plan.

Intercompany claims and intercompany interests may be reinstated or canceled with no distribution.

Holders of administrative claims, priority tax claims, other secured claims, other priority claims and professional claims will be paid in full in cash, have their claims reinstated, or otherwise be left unimpaired.

The debtors solicited acceptance of the pre-packaged plan from holders in the two impaired classes entitled to vote on the pre-packaged plan, and holders of the first-priority secured claims and second-priority secured claims unanimously voted to accept the pre-packaged plan prior to the petition date.

Collected Group is seeking a May 20 confirmation hearing, and hopes to emerge within 60 days.

Debt details

The company listed $50 million to $100 million in assets and $100 million to $500 million in liabilities.

Its largest unsecured creditors are RXR SL Owner LLC, based in New York, with a $2.46 million lease obligations claim, Rockpoint Group, based in Boston, with a $2.05 million lease obligations claim, Century City Mall LLC, based in Los Angeles, with a $1.9 million lease obligations claim, Dayu Garments Co. Ltd., based in Hong Kong, with a $1.45 million trade claim and Jointex Garment Manufactory Ltd., based in Hong Kong, with a $1.34 million trade claim.

Collected Group is a Chino, Calif.-based clothing retailer owned by KKR. The Chapter 11 case number is 21-10663.

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