Appleseed’s Intermediate Holdings, Inc. a/k/a Orchard Brands and 27 affiliates (the “Debtors” or “Orchard Brands”) filed for relief under Chapter 11 of the Bankruptcy Code on January 19, 2011 (Bankruptcy Court for the District of Delaware, Case No.11-10160). The case has been assigned to the Honorable Kevin Gross. This note briefly looks at the Debors’ business, discusses the trade debt picture and provides the list of the Debtors’ 50 largest unsecured creditors.
The Debtors’ Business
In support of its first day motions, the Debtors’ have filed a declaration of T. Neale Attenborough, Chief Executive Officer of Appleseed’s Intermediate Holdings, Inc. (the “Neale Affidavit”). The Neale Affidavit summarizes the business of the Debtors as follows:
The Debtors are a leading, multi-channel marketer of apparel and home products focused on serving the needs of the growing market segment of women and men over the age of 55. Through a portfolio of 17 brands, the Debtors offer apparel, accessories and shoes, as well as home, garden and health products. The Debtors employ approximately 4,260 employees; approximately 3,000 are full-time and approximately 1,260 are part-time. The Debtors manage their businesses from headquarters located in Beverly, Massachusetts. In addition, the Debtors maintain seven brand headquarters located throughout the United States.
The Debtors’ collection of specialty clothing, footwear, household and health brands for women and men includes Bedford Fair Lifestyles™, Blair™, Draper’s & Damon’s™, Haband!™, Monterey Bay™ and Norm Thompson™… . The Debtors had approximately $881 million in net sales in 2010, and approximately $954 million in net sales in 2009.
The Trade Debt Picture
The stated reason for the filing of the bankruptcy was “Debtors’ inability to service their prepetition secured indebtedness and remain current with their trade obligations”. The debt load, both secured and unsecured, at the end of the Debtors’ last fiscal year had reached approximately $725 million. With respect to trade debt, as of the bankruptcy filing date, the Debtors’ had “approximately $115 million outstanding in open accounts payable to trade vendors and suppliers, approximately $60 million of which is past due based upon invoice terms.”
The size of the Debtors’ secured indebtedness and the burden of servicing that debt appears to have been the primary factor in the Debtors’ slide into bankruptcy. As is often the case, however, the strain of trying to service the secured debt had impacted the Debtors’ relationships with it suppliers. The Neale Affidavit explains:
The Debtors’ restricted access to liquidity during this period placed significant stress on business operations, including the Debtors’ relationships with specialized third-party vendors and suppliers that are crucial to the Debtors’ operations. Because of the demands inherent in the Debtors’ highly coordinated production, purchasing, advertising and sale process, the Debtors rely on suppliers and vendors uniquely situated to provide the Debtors with the goods necessary to meet customer demands. As a result of sharp declines in the Debtors’ performance over the course of the last year, however, trade vendors and suppliers have begun to impose tightened credit terms on the Debtors, thereby limiting the Debtors’ access to key goods and services.
From a bankruptcy preference defense perspective, this type of verbiage always causes concern and especially with regard to the viability of the ordinary course of business defense. Based on this and other early indications, mass bankruptcy preference actions are a real possibility.
The Debtors’ 50 Largest Unsecured Creditors
The Debtors’ have requested authority to file a consolidated list of the 50 largest unsecured creditors in lieu of a separate list for each of the Debtors. The consolidated list is set forth below. The Debtors’ list did not include a column to identify claims that were “Contingent, unliquidated, disputed, or subject to setoff.”
|Name of Creditor and Complete Mailing Address, Including Zip Code||Nature of Claim||Amount of Claim|
|American Capital Financial Services, Inc.||Bank Loan||$73,386,838.40|
|RR Donnelly / Wallace||Trade Payable||$11,447,397.00|
|Gould North America||Trade Payable||$7,188,449.00|
|Harbour Regal Ltd Shanghai||Trade Payable||$1,635,896.00|
|News America Marketing FSI||Trade Payable||$1,517,081.75|
|Wiseknit Factory Ltd.||Trade Payable||$1,500,913.07|
|Jack N. Bostwick||Employee Debt||$1,450,000.00|
|John S. Farmer||Employee Debt||$1,450,000.00|
|American Spirit LLC||Trade Payable||$1,174,854.35|
|Allstate Can Corp.||Trade Payable||$721,076.20|
|Mackay Mitchell Envelope Co.||Trade Payable||$644,669.66|
|CCT Marketing LLC||Trade Payable||$579,416.07|
|Hoisted Marketing||Trade Payable||$561,806.71|
|Google Inc.||Trade Payable||$554,077.15|
|Seasons Apparel Inc.||Trade Payable||$542,761.83|
|Nine West Footwear Corp,||Trade Payable||$537,611.75|
|Eastman Footwear Group Inc,||Trade Payable||$527,258.59|
|Propet USA Inc.||Trade Payable||$509,101.54|
|Merchandising Mfg Sourcing||Trade Payable||$472,798.40|
|Lea Apparel, Inc.||Trade Payable||$427,957.00|
|Style Asia Inc.||Trade Payable||$397,609.00|
|Vishal Enterprises Inc.||Trade Payable||$392,489.00|
|Tamex Harbour Regal Ltd.||Trade Payable||$369,891.00|
|Valassis Communications||Trade Payable||$354,560.40|
|Granada Sales Corporation||Trade Payable||$347,962.00|
|Colorado Trading Company||Trade Payable||$347,043.00|
|Howard Berger Co.||Trade Payable||$345,936.00|
|Z-Ply Corporation||Trade Payable||$344,669.57|
|Classic Shoes Inc.||Trade Payable||$333,034.40|
|Jobar International Inc.||Trade Payable||$320,066.47|
|Pac Worldwide Corp.||Trade Payable||$317,576.00|
|Fabri Tech Inc.||Trade Payable||$315,572.60|
|Knit Textiles||Trade Payable||$310,522.00|
|JoRo Fashions||Trade Payable||$301,057.00|
|Qwest Communications||Trade Payable||$297,051.00|
|Alfred Dunner Inc.||Trade Payable||$296,777.00|
|Buy Global Inc.||Trade Payable||$283,441.20|
|Tien Flu Knitting Co (US) Inc.||Trade Payable||$283,121.00|
|Experian Marketing Services||Trade Payable||$279,148.00|
|Valassis Inserts||Trade Payable||$277,912.40|
|Amerex Group Inc.||Trade Payable||$275,251.00|
|Easy Street Shoe Co.||Trade Payable||$268,941.00|
|Rees Associates Inc.||Trade Payable||$259,279.00|
|Auclair & Martineau Inc.||Trade Payable||$253,000.00|
The list does not include: (1) persons who come within the definition of “insider”); or (2) secured creditors, unless the value of the collateral is such that the unsecured deficiency places the creditor among the holders of the largest unsecured claims.
Bankruptcy Rule 1007(d) provides that a debtor shall file “a list containing the name, address and claim of the creditors that hold the 20 largest unsecured claims, excluding insiders.” Fed. R. Bankr. P. 1007(d). In the case of a multi-debtor filing, it is likely that many creditors are shared among certain of the debtors. This is especially the case where the debtors operate as a single business enterprise. Under these circumstances and provided that there is a request for joint administration, it is common for multiple, related debtors to request authority to file a single, consolidated list of their collective largest general unsecured creditors. These requests usually are granted by the bankruptcy court.
The Top Unsecured Creditor List is never to be considered a waiver of any defense to or “allowability” of a listed claim or an admission of the amount of any listed claim. It is common for the amount of the claims to shift and sometimes a claim that is initially is undisputed is later disputed. Creditors should always consult the official claims register.
[FN1] The 27 associated debtors in addition to the lead debtor, Appleseed’s Intermediate Holdings LLC, are:
Appleseed’s Acquisition, Inc. ; Appleseed’s Holdings, Inc. ; Arizona Mail Order Company, Inc. ; Bedford Fair Apparel, Inc. ; Blair Credit Services Corporation ; Blair Factoring Company ; Blair Holdings, Inc. ; Blair International Holdings, Inc. ; Blair LLC ; Blair Payroll, LLC ; Draper’s & Damon’s Acquisition LLC ; Draper’s & Damon’s LLC ; Fairview Advertising, LLC ; Gold Violin LLC ; Haband Acquisition LLC ; Haband Company LLC ; Haband Oaks, LP ; Haband Online, LLC ; Haband Operations, LLC ; Johnny Appleseed’s, Inc. ; Linen Source Acquisition LLC ; LM&B Catalog, Inc. ; Monterey Bay Clothing Company, Inc. ; Norm Thompson Outfitters, Inc. ; NTO Acquisition Corporation ; Orchard Brands Insurance Agency LLC ; and Wintersilks, LLC