By Jamie Santo
A Delaware bankruptcy judge gave final approval Tuesday to Ritz Camera & Image LLC's $20 million debtor-in-possession financing after the bankrupt retailer and its creditors amended the agreement to better preserve the administrative solvency of the estate while it seeks a buyer.
The official committee of unsecured creditors, formed after the package received interim approval at a first-day hearing June 25, had objected to the terms and even to the necessity of the $20 million DIP, which was supposedly designed to support the bankrupt camera chain in Chapter 11 until it could be sold as a going concern.
The modified DIP order alleviated the creditors' concerns and also gave the committee standing. U.S. Bankruptcy Judge Kevin Gross signed off on the amended DIP facility, which still provides the company with a revolving credit line of slightly more than $15 million and a term loan of nearly $5 million.
Brent Weisenberg of Cooley LLP told the court that his firm had represented the creditors committee during Ritz's previous trip through bankruptcy three years ago, one that ended very successfully by today's standards, with creditors receiving 12 to 14 cents on the dollar.
"Fast-forward three years, however, and this time the circumstances are much more dire," he said, with no projected return for creditors and the prospect of administrative insolvency.
The committee supports bridging the gap until a sale of the company can be effected, Weisenberg said, but wanted to ensure that the bridge was not being used by senior secured parties to dispose of collateral.
While the terms of the DIP agreement set out an aggressive schedule with specific milestones, Ritz attorney Irving E. Walker told the court at an earlier hearing that it provides an opportunity to streamline that will result in a Ritz that is "not just viable, but profitable."
Walker said Tuesday that the proposed final DIP order reflects not just the debtors' judgment, but that of Crystal Financial LLC — currently owed $16 million as a secured lender under a prepetition credit facility and serving as the DIP agent and lender — and the creditors committee, and gives parties who care about the case the best chance to preserve the business as a going concern.
The DIP package is geared toward a Sept. 6 auction. Ahead of that date, Ritz aims to move from 265 stores down to 137 "go-forward" stores, which the company believes presents an optimal sale size.
A hearing on bidding procedures and other matters is scheduled for July 30.
Founded in 1918, Ritz has 1,960 employees and boasted net sales of $254 million in the year ending April 30, according to court documents, while its Ritz Interactive subsidiary had net sales of $36 million in 2011.
Ritz Camera, a previous iteration of the company, had been a billion-dollar concern with more than 1,000 stores before two powerful forces — the conversion to digital cameras and the 2008 market crash — slammed into the company and forced it into bankruptcy, Walker said previously.
Ritz is represented by Patrick J. Reilly, Sanjay Bhatnagar, Irving E. Walker, Gary H. Leibowitz and G. David Dean of Cole Schotz Meisel Forman & Leonard PA.
The committee is represented by Jay R. Indyke, Cathy Hershcopf and Brent Weisenberg of Cooley LLP and Michael J. Merchant, Paul N. Heath and Christopher M. Samis of Richards Layton & Finger PA.
Crystal Financial is represented by Robert S. Brady, Edmon L. Morton and Morgan L. Seward of Young Conaway Stargatt & Taylor LLP and Robert A.J. Barry, Wendy S. Walker and Rachel J. Mauceri of Morgan Lewis & Bockius LLP.
The case is In re: Ritz Camera & Image LLC, case number 12-11868, in the U.S. Bankruptcy Court for the District of Delaware.
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