On March 9, 2020 (the ” Petition Date “), Bluestem Brands, Inc. (“Bluestem”, or the “Company”) and seventeen of its affiliates (collectively, the “Debtors”) each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.
The Debtors are represented by Kirkland & Ellis LLP as lead counsel, and Young Conaway Stargatt & Taylor, LLP as Delaware counsel. The case has been assigned to the Honorable Mary F. Walrath. A hearing on the Debtors’ first day motions was held on March 10, 2020.
Headquartered in Eden Prairie, Minnesota, Bluestem is a direct-to-consumer retailer of fashion, home, and entertainment merchandise. The Company traces its origins to Fingerhut Companies, Inc. (“Fingerhut”), a direct-to-consumer general-merchandise retailer founded in 1948. Bluestem, then named Fingerhut Direct Marketing, Inc., was established in 2002 after certain assets of Fingerhut were acquired from FAC Acquisition LLC. In 2009, Fingerhut launched the Gettington brand, changing its name to Bluestem Brands in 2010 to reflect the broadening of its scope.
Bluestem cites adverse macro-trends and operational shortfalls as being their primary challenges, including increased competition from retailers like Walmart and Amazon, and weaker-than-expected sales during the 2019 holiday season. As a result, the Debtors have been unable to generate the liquidity necessary to service their outstanding debt obligations and operate their businesses. Bluestem commenced these cases to obtain the necessary liquidity to fund their businesses as well as the chapter 11 cases ( See Thomas L. Fairfield Affidavit in Support ).
As of the Petition Date, the Debtors’ have approximately $416.7 million in secured debt under a term loan from Cerberus Business Finance, LLC (“Cerberus”) and affiliated lenders, and approximately $43.9 million in secured asset-backed revolving credit, also from Cerberus and a group of affiliated lenders. The Debtors also have the equipment and capital leases in the aggregate amount of approximately $30,000 per month.
The Debtors have support from their prepetition secured lenders, including DIP financing and a stalking-horse purchase agreement, to implement a value-maximizing transaction that deleverages the company. The $125 million financing consists of aggregate revolving commitments of $100,000,000 and aggregate term loan commitments of $25,000,000. The Debtors believe this financing will provide timely access to the necessary liquidity to stabilize their businesses and send a strong message to customers, vendors, employees, and contractors, that operations are appropriately funded and will not be impacted by the filing. Sale milestones include a May 7, 2020 bid deadline; May 12, 2020 auction; May 19, 2020 objection deadline; May 22, 2020 sale hearing.
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| Approximately $460.6 million. | ||||||||||
| Unspecified, but at least $37 million in trade debt. | ||||||||||
| IRST DAY RELIEF FOR AUTHORIZATION TO PAY AND PAYMENTS | ||||||||||
| Interim Relief Total unspecified. As the Petition Date, approximately $2.6 million is outstanding under an insurance financing agreement, and almost $4 million is outstanding in surety bonds, five of which are secured by letters of credit. Debtors seek authority to continue, maintain and perform under their insurance programs. | Final Relief Total unspecified, but Debtors indicate $450,000 is due under their premium financing agreement, plus potentially another $450,000 in unidentified insurance obligations. See Insurance Policies Motion ¶ 8, 10, 11. | |||||||||
| Interim Relief Approximately $13.1 million is due as of the Petition Date. | Final Relief Approximately $8.6 million will be due within 21 days. | |||||||||
| Interim Relief Up to $13.4 million. | Final Relief Up to $17 million. | |||||||||
| Interim Relief Debtors estimate the following are outstanding as of the Petition Date:
Debtors seek authorization to maintain and administer the programs and to pay and honour any obligations related to the programs, in the ordinary course. | Final Relief Total unspecified; Debtors seek authorization to maintain and administer the programs and to pay and honour any obligations related to the programs in the ordinary course. | |||||||||
| Employees: Approximately 2,200. As of the Petition Date, the following amounts are outstanding and due within 21 days:
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