Introduction
On June 3, 2019 (the “Petition Date”), FTD Companies, Inc.; Bloom That, Inc.; Florists’ Transworld Delivery, Inc.; FlowerFarm, Inc.; FSC Denver LLC; FSC Phoenix LLC; FTD, Inc.; FTD.CA, Inc.; FTD.COM Inc.; FTD Group, Inc.; FTD Mobile, Inc.; Giftco, LLC; Provide Cards, Inc.; Provide Commerce LLC; and Provide Creations, Inc. (collectively, the “Debtors”) filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware to facilitate the completion of strategic initiatives resulting from the Company’s previously announced strategic review.
The Debtors are represented by Jones Day, as lead counsel, and Richards Layton & Finger, P.A. as Delaware counsel. The case has been assigned to the Honorable Brendan Linehan Shannon. A hearing on the Debtors’ first day motions was held on June 4, 2019. A meeting to form the unsecured creditor’s committee is scheduled for June 12, 2019, at 10:00 a.m.
The Company intends to use the court-supervised process to support and protect its ongoing business operations, including its relationships with member florists and business partners, to provide an efficient and binding mechanism for the potential sales of its businesses and to address outstanding debt.
The Company is operating in the ordinary course and remains focused on supporting its extensive network of member florists and business partners connected by our iconic FTD brand in North America and Latin America. The Company’s other businesses, including ProFlowers, Shari’s Berries and Personal Creations, are also continuing to provide floral, speciality foods, gifts and related products to consumers.
Background
Headquartered in Downers Grove, Illinois, the Debtors are a premier floral and gifting company with an international presence providing floral, speciality foods, gift, and related products and services to consumers, retail florists, and other retail locations and companies in need of floral and gifting solutions. The Debtors operate primarily in the United States and Canada, however, they have a worldwide presence as their iconic MercuryMan® logo is displayed in over 30,000 floral shops in more than 125 countries.
On December 31, 2014, FTD acquired debtor Provide Commerce LLC (the “Provide Acquisition”). Through the Provide Acquisition, FTD acquired ProFlowers, Gourmet Goods, and Personal Creations business units. Provide Acquisition was the largest acquisition in FTD’s history. FTD entered into the Provide Acquisition with the belief that it would further FTD’s vision by uniting complementary businesses and offer a greater variety of products and choices. FTD also anticipated the Provide Acquisition would diversify its revenue streams and broaden its consumer demographics. To finance the cash portion of the Provide Acquisition purchase price, FTD borrowed $120 million under the amended and restated credit agreement.
Certain shifts in the market, technological changes, and improvident strategic outcomes in connection with the implementation of the Provide Acquisition combined to frustrate expectations regarding the earnings of the combined entity and impair the Debtors’ ability to refinance near-term maturities, which has driven the Debtors’ need to commence these chapter 11 cases.
Financial Condition
The Debtors are parties to an amended and restated credit agreement, which is secured by a lien on substantially all of the assets of the Debtors. The amended and restated credit agreement initially provided for three facilities (collectively, the “Credit Facility”): (a) a $200 million term loan (the “Term Loan Facility”); (b) a revolving credit facility with initial availability of $250 million (the “Revolving A Facility”); and (c) a revolving credit facility with initial availability of $100 million (the “Revolving B Facility” and, together with the Revolving A Facility, the “Revolving Credit Facility”).
As of the Petition Date, the Debtors had approximately $149.4 million in secured indebtedness outstanding under the Credit Facility, consisting of $57.4 million under the Term Loan Facility, and $92 million under the Revolving Credit Facility. In addition, as of the Petition Date, the Debtors estimate that they owe approximately $72.4 million for unsecured obligations for goods and services.
Motion for DIP Financing and/or Cash Collateral Motion
The Debtors are seeking authority to obtain post-petition financing consisting of a senior secured superpriority revolving facility in the aggregate availability amount of up to $94,485,608.00 from lenders from time to time who are parties to the DIP credit agreement and Bank of America, N.A. In addition, the Debtors are seeking authorization to continue to use cash collateral and all other prepetition collateral. The DIP facility will enable the Debtors to, among other things, pursue an organized sale process.
Other Significant First Day Motions
Wages and Benefits Motion
The Debtors seek authority to pay certain prepetition compensation and reimbursable expenses, honour workforce obligations, and maintain and continue employee benefits programs. As of the Petition Date, the Debtors estimate that they owe an aggregate of approximately $3.5 million in prepetition compensation and $731,000 in prepetition employee deductions. In addition, the Debtors are seeking authorization to pay prepetition business expenses and amounts incurred under the Debtors’ corporate credit cards that were accrued and unpaid as of the Petition Date in an amount not to exceed $289,000. The Debtors are seeking authority to pay the unpaid prepetition compensation up to the statutory cap of $13,650. As of the Petition Date, the Debtors had 872 full and part-time hourly employees.
Customer Programs Motion
The Debtors are seeking authority to continue, maintain, and to pay prepetition obligations related to, their prepetition customer programs which include florist network member programs, FTD rewards, rebates, gift cards, retail customer programs, and strategic partner programs. The Debtors state that delays in honouring or paying their customer obligations threaten to severely damage the Debtors’ relationships with existing customers and impair their ability to generate new customers. The Debtors are seeking authorization to pay their customer obligations in an amount not to exceed $10 million.
Administrative Expense Priority Status Motion
The Debtors are seeking an order confirming the administrative expense priority status of the Debtors’ undisputed obligations for post-petition delivery of goods to the Debtors and provision of services to the Debtors and authorization to pay such expenses in the ordinary course of business. The Debtors believe that this relief is necessary to permit the Debtors to obtain timely and uninterrupted delivery of goods and provisions of services from their suppliers.
Essential Suppliers Motion
The Debtors are seeking authority to pay, in the ordinary course of business, certain prepetition claims of certain parties who supply goods or services essential to the continued operation of the Debtors’ business an aggregate amount not to exceed $11 million on an interim basis and $15 million on a final basis. The Debtors list essential suppliers as inventory suppliers, key marketing, technology and third-party fulfilment services, and third-party drop shipping services. As of the Petition Date, the Debtors estimate that the vendors have prepetition claims in excess of $50 million.
Prepetition Claims of Certain Lien Claimants Motion
The Debtors are seeking authority to pay, in the ordinary course of business, certain prepetition claims of certain parties holding a lien or potential lien on, security interest in, or other possessory rights to property of the Debtors’ estates on an interim basis in an aggregate amount not to exceed $2.5 million and on a final basis in an aggregate amount not to exceed $3.5 million. The Debtors define the lien claimants as commercial common carriers, warehousemen, customs brokers and expeditors, and certain other third-party vendors and service providers who ship, transport, store, move through customs and deliver products through established distribution networks.
PACA Claims Motion
The Debtors seek authorization, on an interim and final basis, to pay claims under the Perishable Agricultural Commodities Act of 1930 (“PACA”) in the ordinary course of the Debtors’ business as such claims become due. The Debtors state that payment of valid PACA claims will facilitate the continued supply of goods necessary to the Debtors’ businesses and avoid potential disruption to business operations. The Debtors are seeking authority to pay PACA claims in an aggregate amount not to exceed $400,000, on an interim basis and an aggregate amount not to exceed $1.2 million on a final basis.
Taxes and Fees Motion
The Debtors are seeking authority to pay certain prepetition taxes and fees that, in the ordinary course of business, accrued or arose before the Petition Date in an aggregate amount not to exceed $7,126,000 on an interim basis and $7,464,000 on a final basis.
Insurance Programs Motion
The Debtors seek authority to maintain existing insurance policies and continue their surety bond program and to renew, revise, extend, supplement, change, or enter into new insurance policies as needed. The Debtors pay approximately $2.79 million in aggregate annual insurance obligations, including taxes and fees. The Debtors are seeking authorization to pay and honour their prepetition insurance obligations and surety bond obligations in an aggregate amount not to exceed $55,000 on an interim basis, and $110,000 on a final basis.