Brookstone gets approval from US bankruptcy court for US$91.3M financing package to facilitate sale to Spencer Spirit Holdings; financing critical to company's restructuring plans because it locks in support of more than two-thirds of its noteholders
Cindy Allen
April 7, 2014
(Bloomberg LP)
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April 5 (Bloomberg) -- Brookstone Inc., the retailer of luxury gadgets including $4,600 massage chairs, won bankruptcy court approval of a financing package to help fund operations and pay off some debt as it pursues a sale.
Brookstone filed for bankruptcy April 3 with a deal to sell its assets to Spencer Spirit Holdings Inc. The chain has struggled to adapt to an evolving retail landscape where online competitors dominate and consumers are cutting back on non- essentials. U.S. Bankruptcy Judge Kevin J. Carey yesterday in Wilmington, Delaware, granted the company interim approval to borrow about $91.3 million of $96.3 million in financing being provided by some of its noteholders. The company will seek approval of the remaining $5 million at an April 25 hearing. Brookstone, based in Merrimack, New Hampshire, said the financing is crucial to its restructuring plans because it locks in the support of more than two-thirds of its noteholders for the proposed $146.3 million sale to Spencer. In addition to providing working capital, part of the financing would be used to pay off the senior secured credit facility and $30 million of a second segment would be used to replace noteholder debt giving them a higher priority of repayment. Brookstone started as a catalog business in 1965, offering “hard-to-find tools” before opening its first store in 1973 in Peterborough, New Hampshire, according to its website. The company went private nine years ago in a $422 million deal backed by Temasek Holdings Pte, Singapore’s state-owned investment company, along with OSIM International Ltd. and JW Childs Associates LP. Singapore-based OSIM, Asia’s biggest maker of massage chairs, sells its products through Brookstone stores. Spencer, a novelty retailer, would pay $120 million in cash and $7.5 million in new notes and assume about $18.5 million in liabilities. The deal will be tested at a court-supervised bankruptcy auction to see if there are any better offers. Brookstone said in a court filing that it plans to expand the number of its airport stores to 85 from 47 by the end of 2016. Airports accounted for almost half of the company’s profit last year, the chain said. Most of its 242 locations in the U.S. and Puerto Rico are in malls. The gadget retailer has seen sales decline as it struggles to compete with online retailers such as Amazon.com Inc., which have made its once hard-to-find products as easy as shopping from a recliner. Net sales fell 7.4 percent to $481.3 million in fiscal 2013 from the prior year, resulting in adjusted earnings before interest, taxes, depreciation and amortization that plummeted about 42 percent to $10.7 million from 2012, according to court papers. Spencer operates 644 stores in the U.S. and Canada, selling novelty and pop-culture gifts. It also runs more than 1,000 seasonal Halloween stores under the Spirit brand. Brookstone listed debt and assets of as much as $500 million each in Chapter 11 documents. The company owes about $51.1 million on its senior secured credit facility, according to court documents. It has $34.1 million outstanding on its revolving facility, $12.3 million on its term loan and $4.7 million in letters of credit. The retailer owes about $137.3 million on its 13 percent second-lien notes due Oct. 15. The case is in re Brookstone Holdings Corp., 14-bk-10752, U.S. Bankruptcy Court, District of Delaware (Wilmington). To contact the reporter on this story: Michael Bathon in Wilmington, Delaware, at mbathon@bloomberg.net To contact the editors responsible for this story: Andrew Dunn at adunn8@bloomberg.net Charles Carter
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