Christmas Tree Shops receives post-default supplemental DIP order

By Sarah Lizee

Olympia, Wash., June 30 – Christmas Tree Shops, LLC has received a supplemental order for its $45 million debtor-in-possession facility with Eclipse Business Capital SPV LLC and ReStore Capital LLC, according to an order filed Thursday with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, the company sought the supplemental order after defaulting on the facility.

The DIP facility requires the company to meet certain milestones, including filing a plan acceptable to the DIP lenders by June 7, receiving approval of the disclosure statement by July 7 and securing confirmation of a plan by Aug. 16.

The debtors filed a plan on June 7. The plan provides for the continuation of the debtors’ business as a going concern and a restructuring of its debt with funding from a plan sponsor to be identified.

In the last three weeks, investment banker SSG Capital Advisors, LLC has been conducting a marketing process for the business and has been in contact with several interested parties, the debtor said.

However, on June 21, the DIP agent delivered a notice of event of default, DIP termination event and carveout trigger notice to the debtors. Because of this, under the terms of the DIP, the lenders would be relieved of any obligation to provide financing to the debtors, and the debtors wouldn’t be able to access the DIP accounts if they couldn’t remedy the defaults.

The DIP lenders are willing to continue to provide limited financing under the DIP facility if the debtors enter into an asset purchase agreement for a going-concern sale with a purchase price sufficient to satisfy the debt under the DIP facility by July 5, the purchaser tenders a non-refundable $5 million deposit by July 6, the sale is approved by the court by July 23, and the sale closes by July 30.

In the event those conditions are not met, the lenders have demanded that the debtors immediately start closing sales at their retail locations.

SSG informed the debtors and lenders that, while there are multiple parties interested in a going-concern sale, none are at the point where they could enter into an agreement to purchase the assets on the terms required by the DIP lenders.

On June 24, the DIP lenders provided the debtors with a proposed form of order for the continued use of cash collateral and limited financing after June 28, in line with a budget to be agreed to by the DIP lenders and the debtors.

The proposed form of order includes several material modifications to the final DIP order.

“If the relief requested in the supplemental DIP motion is not entered promptly, the debtors will not be able to operate their stores or pay employees and these Chapter 11 cases will likely convert to a full-scale liquidation,” the company had said in court documents.

Middleborough, Mass.-based Christmas Tree Shops sells home goods with a specialty focus on seasonal products. The company filed bankruptcy on May 5 under Chapter 11 case number 23-10576.

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