Item 1.01 Entry into a Material Definitive Agreement.
As previously disclosed, on July 23, 2020, Ascena Retail Group, Inc. (the
"Company") and certain of its subsidiaries (together with the Company, the
"Debtors") filed voluntary petitions (the "Chapter 11 Cases") under chapter 11
of title 11 of the United States Code (the "Bankruptcy Code") in the United
States Bankruptcy Court for the Eastern District of Virginia (the "Bankruptcy
Court"). The Chapter 11 Cases were filed by the Debtors to implement the terms
of a Restructuring Support Agreement, dated July 23, 2020 (together with all
exhibits and schedules thereto, the "RSA"), by and among the Company and certain
of its subsidiaries (each, a "Company Party" and collectively, the "Company
Parties") and members of an ad hoc group of lenders (the "Consenting
Stakeholders") under the Term Credit Agreement, dated as of August 21, 2015 (as
amended, restated, supplemented or otherwise modified from time to time, the
"Prepetition Term Credit Agreement"), among the Company, AnnTaylor Retail, Inc.,
the lenders party thereto (the "Prepetition Term Lenders") and Goldman Sachs
Bank USA, as administrative agent.
Asset Purchase Agreement
On November 26, 2020, the Company, together with certain of its subsidiaries
(collectively, the "Sellers"), entered into an asset purchase agreement (the
"Asset Purchase Agreement") with Premium Apparel LLC (the "Purchaser"), an
affiliate of Sycamore Partners Management, L.P. Pursuant to the Asset Purchase
Agreement, the Purchaser will acquire assets relating to the Sellers' Ann
Taylor, LOFT, Lane Bryant and Lou & Grey brands pursuant to Section 363 of the
Bankruptcy Code for approximately $540.0 million, subject to certain customary
purchase price adjustments as set forth in the Asset Purchase Agreement, as well
as assume certain related liabilities. Under the Asset Purchase Agreement, the
Purchaser has committed to offer to employ associates of the Sellers whose
duties are primarily related to the Ann Taylor, LOFT, Lane Bryant and Lou & Grey
brands or the corporate functions of the Sellers, in each case who meet certain
conditions set forth therein. The consummation of the transactions contemplated
by the Asset Purchase Agreement (the "363 Sale") is subject to specified closing
conditions, including approval of the Bankruptcy Court.
The Asset Purchase Agreement contains certain customary termination rights for
the Sellers and the Purchaser. In certain circumstances, including approval by
the Bankruptcy Court of an Alternative Transaction (as defined in the Asset
Purchase Agreement), upon termination, the Sellers will be obligated to pay the
Purchaser a termination fee of $16.2 million and reimburse the Purchaser for up
to $5.4 million of expenses incurred in connection with the Asset Purchase
Agreement. In addition, if the Asset Purchase Agreement is terminated by the
Company for certain Purchaser breaches, including because the Purchaser does not
complete the 363 Sale in breach of the Asset Purchase Agreement, the Company
will be entitled to receive a termination fee of $54.0 million, which the
Purchaser has deposited into escrow.
The foregoing description of the Asset Purchase Agreement is not complete and is
qualified in its entirety by reference to the Asset Purchase Agreement, a copy
of which is attached to this Current Report on Form 8-K as Exhibit 2.1 and is
hereby incorporated by reference in this Item 1.01.
Second Amended Restructuring Support Agreement
In connection with the Company's entry into the Asset Purchase Agreement, on
November 26, 2020, the Company Parties and the Consenting Stakeholders entered
into the Second Amended Restructuring Support Agreement (the "Amended RSA").
Capitalized terms used but not otherwise defined in this "Second Amended
Restructuring Support Agreement" section of this Current Report on Form 8-K have
the meanings given to them in the Amended RSA.
In addition to providing for the Consenting Stakeholders' support of the 363
Sale, the Amended RSA provides, among other things, that each Consenting
Stakeholder and Prepetition Term Lender will receive its pro rata share (based
on its term loan holdings under the Prepetition Term Credit Agreement) of cash
pursuant to distributions in accordance with the schedule set forth in Section
6.01(p) of the Amended RSA instead of equity in reorganized Ascena as previously
contemplated in the RSA. The Amended RSA does not contemplate material changes
to the treatment of any other stakeholders' claims, including holders of general
unsecured claims, and in particular, the Amended RSA continues to provide that
the existing common equity in the Company be cancelled.
Also pursuant to the Amended RSA, to allow for additional time for the Company
to complete the 363 Sale, (i) the date on which the Required Consenting
Stakeholders may terminate the Amended RSA if the Bankruptcy Court has not yet
entered the Confirmation Order has been extended from November 10, 2020 (which
is 110 days after the Chapter 11 Cases commenced) to February 25, 2021, (ii) the
date on which the Required Consenting Stakeholders may terminate the Amended RSA
if the Plan Effective Date has not yet occurred has been extended from November
30, 2020 (which is 130 days after the Chapter 11 Cases commenced) to March 11,
2021, and (iii) the date on which an individual Consenting Stakeholder may, as
to itself only, terminate the Amended RSA if the Plan Effective Date has not yet
occurred has been extended from January 23, 2021 (which is six months after the
Chapter 11 Cases commenced) to March 31, 2021. Also pursuant to the Amended RSA,
each Consenting Stakeholder who is also a lender under the DIP Term Facility
agreed, in its capacity as a lender under the DIP Term Facility, to
corresponding amendments to milestones regarding entry of the Confirmation Order
and the Plan Effective Date that are included in the DIP Term Loan Credit
Agreement.
Although the Company Parties intend to pursue the restructuring contemplated by
the Amended RSA, there can be no assurance that the Company Parties will be
successful in completing a restructuring or any other similar transaction on the
terms set forth in the Amended RSA or at all. In particular, the transactions
contemplated by the Amended RSA are subject to approval by the Bankruptcy Court,
among other conditions.
The foregoing description of the Amended RSA is not complete and is qualified in
its entirety by reference to the Amended RSA, a copy of which is attached to
this Current Report on Form 8-K as Exhibit 10.1 and is hereby incorporated by
reference in this Item 1.01.
Item 2.05 Costs Associated with Exit or Disposal Activities.
The Company is currently unable in good faith to make a determination of an
estimate or range of estimates required to be disclosed by paragraph (b), (c) or
(d) of Item 2.05 of Form 8-K with respect to the 363 Sale.
Item 7.01 Regulation FD Disclosure.
In connection with the Company's entry into the Asset Purchase Agreement, the
Company issued a press release on November 26, 2020, a copy of which is attached
to this Current Report on Form 8-K as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
Number Description
2.1* Asset Purchase Agreement.
10.1* Amended Restructuring Support Agreement.
99.1 Press Release issued November 26, 2020.
104 Cover Page Interactive Data File. The cover page XBRL tags are
embedded within the inline XBRL document (contained in Exhibit 101).
* Certain schedules and similar attachments have been omitted. The Company
agrees to furnish a supplemental copy of any omitted schedule or attachment to
the Securities and Exchange Commission upon request.
Forward-Looking Statements
Certain statements or information made within this Current Report on Form 8-K
may constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially. Forward-looking statements are statements related to future,
not past, events, and often contain words such as "expect," "anticipate,"
"intend," "plan," "believe," "seek," "see," "will," "would," "estimate,"
"forecast," "target," "preliminary" or "range," or similar words.
Forward-looking statements are based only on the Company's current assumptions
and views of future events and financial performance. They are subject to known
and unknown risks and uncertainties, many of which are outside of the Company's
control that may cause the Company's actual results to be materially different
from planned or expected results. Those risks and uncertainties include, but are
not limited to, risks attendant to the bankruptcy process, including the
Company's ability to obtain approval from the Bankruptcy Court with respect to
motions or other requests made to the Bankruptcy Court throughout the course of
the Chapter 11 Cases; the ability of the Company to negotiate, develop, confirm
and consummate a plan of reorganization; the effects of the Chapter 11 Cases,
including increased legal and other professional costs necessary to execute the
Company's reorganization, on the Company's liquidity (including the availability
of operating capital during the pendency of the Chapter 11 Cases), results of
operations or business prospects; the length of time that the Company will
operate under Chapter 11 protection; risks associated with third-party motions
in the Chapter 11 Cases; conditions to which debtor-in-possession financing is
subject and the risk that these conditions may not be satisfied for various
reasons, including for reasons outside the Company's control; more stringent or
costly payment terms and/or the decision by a significant number of vendors not
to sell the Company merchandise on a timely basis or at all; the Company's
ability to attract, motivate and retain key executives and other personnel;
risks associated with the novel coronavirus pandemic (including any resurgence)
and actions the Company has taken in response thereto; general economic
conditions that adversely impact consumer spending; disruptions at ports used to
import the Company's products; increases in the price of raw materials, labor or
energy and transportation costs; the Company's ability to anticipate and respond
to changing fashion trends and customer preferences in a timely manner; the
Company's ability to maintain its brand image; the impact of cost reduction
initiatives; the Company's ability to successfully achieve its business
strategies; and changes in U.S. trade policies and trade restrictions. Please
refer to the Company's Annual Report on Form 10-K for the fiscal year ended
August 3, 2019 and subsequent filings with the Securities and Exchange
Commission for a further discussion of risks and uncertainties. The Company does
not undertake to publicly update or review its forward-looking statements, even
if experience or future changes make it clear that the projected results
expressed or implied will not be achieved.
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