Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. AEROPOSTALE INC (1168213) 10-Q published on Oct 21, 2016 at 4:18 pm
Reporting Period: Jul 29, 2016
In connection with the closing of the Sale Transactions, the Company entered into a transition services agreement with OpCo LLC, pursuant to which OpCo LLC will provide the Company with certain services, at cost, in connection with the wind-down of the Company’s business operations. The Company also entered into a transferred employee agreement with OpCo LLC, pursuant to which the Company’s employees will be seconded to OpCo LLC for a period of time following the closing. No later than January 1, 2017 and subject to certain exceptions, any remaining store employees and any non-store employees who have been offered and accept employment with OpCo LLC will become employees of OpCo LLC.
As a result of the Chapter 11 Cases, we have adopted the provisions of reorganization accounting, which does not change the application of US GAAP with respect to the preparation of our financial statements. However, this guidance requires that financial statements, for periods including and subsequent to a Chapter 11 filing, distinguish between transactions and events that are directly associated with the reorganization proceedings and the ongoing operations of the business, and requires additional disclosures. Effective May 4, 2016, expenses, gains and losses directly associated with the reorganization proceedings are reported as reorganization items, net in the accompanying Consolidated Statements of Operations for the thirteen and twenty-six weeks ended July 30, 2016. In addition, liabilities subject to compromise in the Chapter 11 Cases are distinguished from fully secured liabilities not expected to be compromised and from liabilities in existence after the Petition Date ("post-petition liabilities") in the accompanying consolidated balance sheet as of July 30, 2016. Where there is uncertainty about whether a secured claim is undersecured or will be impaired under the Chapter 11 Plan, we have classified the entire amount of the claim as a Liability Subject to Compromise. Such liabilities are reported at amounts expected to be allowed, even if they settle for lesser amounts. These liabilities remain subject to future adjustments, which may result from: negotiations; actions of the Bankruptcy Court; disputed claims; rejection of executory contracts and unexpired leases; the determination as to the value of any collateral securing claims; proofs of claim; or other events.
On June 18, 2016 the Debtors filed statements and schedules (the “Statements and Schedules”) with the Bankruptcy Court setting forth the assets and liabilities of each of the Debtors as of the Petition Date. The statements and schedules are available at https://cases.primeclerk.com/aeropostale. On June 22, 2016, the Bankruptcy Court entered an order approving July 25, 2016 as the “Bar Date” in the Chapter 11 Cases for general creditor, non-governmental claims, which is the legal deadline by which any creditor must file a proof of claim in the Chapter 11 Cases. In accordance with that order, the Debtors have mailed proofs of claim forms to all known creditors, including, without limitation, their current and former employees, vendors and other parties with whom the Debtors have previously conducted business. Recipients disagreeing with the Debtors’ valuation of claims as set forth on the Statements and Schedules may have filed discrepancies with the Bankruptcy Court and differences between amounts recorded by the Debtors and claims filed by creditors will be evaluated and resolved as a part of the Chapter 11 Cases. However, the Bankruptcy Court will ultimately determine liability amounts, if any, that will be allowed for all claims.
On September 13, 2016, the Bankruptcy Court entered orders (“Orders”) approving (i) an Asset Purchase Agreement (the “Asset Purchase Agreement”), dated as of September 12, 2016, by and among the Company, the other direct and indirect subsidiaries of the Company signatory thereto (together with the Company, the “Sellers”), and Aero OpCo LLC (“OpCo LLC”). OpCo LLC, together with ABG-Aero IPCO, LLC (“IPCO”) were formed by a consortium comprised of Authentic Brands Group, Simon Property Group, General Growth Properties, Hilco Merchant Resources (“Hilco”) and Gordon Brothers Retail Partners (“Gordon Brothers”, and together with Hilco, the “Agent”), and (ii) an Agency Agreement (the “Agency Agreement”), dated as of September 12, 2016, by and among the Sellers, OpCo LLC, and the Agent (the transactions contemplated by the Asset Purchase Agreement and Agency Agreement, collectively, the “Sale Transactions”). Pursuant to the Sale Transactions, in consideration for a payment equal to $243.3 million (subject to certain post-closing adjustments, (a) the Agent entered into the Agency Agreement, pursuant to which it agreed to sell, in its capacity as agent, certain inventory located at the Debtors’ stores, certain inventory subject to open purchase orders, as well as certain furnishings and equipment located at the stores, (b) Aero Operations LLC (a wholly-owned subsidiary of OpCo LLC to which OpCo LLC assigned certain of its rights under the Asset Purchase Agreement) obtained the right to acquire leases for certain of the Sellers’ stores in connection with designation rights described below, (c) IPCO (to which OpCo LLC assigned certain of its rights under the Asset Purchase Agreement) acquired certain intellectual property of the Sellers, and (d) OpCo LLC acquired the balance of the assets to be acquired under the Asset Purchase Agreement, including the leases for those stores assigned and assumed at closing. The parties consummated the Sale Transactions on September 15, 2016. On September 15, 2016, the DIP Facility was repaid in full using the funds from the Sale Transactions.
Company signatory thereto (together with the Company, the “Sellers”), and Aero OpCo LLC (“OpCo LLC”). OpCo LLC, together with ABG-Aero IPCO, LLC (“IPCO”) were formed by a consortium comprised of Authentic Brands Group, Simon Property Group, General Growth Properties, Hilco Merchant Resources (“Hilco”) and Gordon Brothers Retail Partners (“Gordon Brothers”, and together with Hilco, the “Agent”), and (ii) an Agency Agreement (the “Agency Agreement”), dated as of September 12, 2016, by and among the Sellers, OpCo LLC, and the Agent (the transactions contemplated by the Asset Purchase Agreement and Agency Agreement, collectively, the “Sale Transactions”). The parties consummated the Transactions on September 15, 2016. On September 15, 2016, the DIP was repaid using the proceeds from the Sale Transactions (as described below).