Christmas Tree Shops asks court to convert cases to Chapter 7

By Sarah Lizee

Olympia, Wash., Aug. 10 – Christmas Tree Shops, LLC asked the U.S. Bankruptcy Court for the District of Delaware to convert its Chapter 11 cases to Chapter 7, according to a motion filed Thursday.

The company said the debtors started their cases with the goal of restructuring their debt through a plan of reorganization, but later realized that path was not feasible.

After that, they pivoted to locating a going concern buyer.

In June, the debtors defaulted under the final debtor-in-possession financing order, which prompted a transition to an orderly liquidation via going-out-of-business sales at the debtors’ stores starting on July 6. The sales are expected to be completed by Saturday.

On Wednesday, the DIP agent delivered to the debtors a notice of event of default, DIP termination event and carveout trigger notice.

The debtors dispute that they are in default and are in discussions with the DIP lenders regarding the August default letter including whether the debtors are no longer permitted to access cash collateral to fund the continued administration of the cases.

“With no ongoing business operations as of Aug. 12 and with uncertainty regarding the debtors’ ability to use cash collateral to fund the continued administration of these cases, the debtors have no choice but to seek conversion of these cases,” the company said in its motion.

“While the debtors are disappointed in this outcome, they believe that there is no better alternative and that under these circumstances, conversion of these Chapter 11 cases to chapter 7 is in the best interests of their estates and creditors.”

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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