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Retailer reaches Chapter 11 deal on unsecured debt

In follow-up to a recent story regarding a specialty retail corporation, a milestone has been hit in its quest to restructure its debt. Brookstone Holdings Corp., which has filed for Chapter 11 bankruptcy, has come to an agreement with unsecured creditors. This cleared the way for a judge in U.S. Bankruptcy Court to approve a settlement that includes bankruptcy financing and debt reorganization.

The creditors had indicated they would oppose the plan to sell the holding company to another retail chain because they felt they were not getting a fair recovery for the approximately $11 million in outstanding debts owed to them. Under the agreement, $1.25 million will go toward unsecured debt up front and the creditors will have the opportunity to collect another $1.5 million if enough revenue comes in from an upcoming bankruptcy auction.

The Chapter 11 filing came as the retailer struggled with a debt load requiring $8 million in interest payments each year. Rotating leadership left the company limping as it looked for a buyer.

The holding corporation faced opposition from a group of its bondholders, who alleged they had not been given a fair chance to participate in the debt reorganization. The business bankruptcy financing includes a $30 million "roll-up" of prior debt into a Chapter 11 loan. This places the financing at the top of the list of debts to be honored in a Chapter 11 bankruptcy. Participation in the roll-up places a creditor in a favorable position for repayment.

The deals announced in bankruptcy court were the result of concerted negotiations by the corporation's legal representatives. With experienced counsel, filing Chapter 11 bankruptcy has the potential to lead to debt relief for New Hampshire business owners and individuals.

Source: The Wall Street Journal, "Brookstone in Deal with Vendors as Bondholders Clash," Peg Brickley, April 25, 2014

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