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Introduction
On January 30, 2017 (the "Petition Date"), Prestige Industries LLC (the "Debtor") filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.
The Debtors are represented by Dilworth Paxson LLP. The case has been assigned to Judge Kevin Gross. A hearing on the Debtors' first day motions is scheduled for February 1, 2017. A meeting to form the Official Committee of Unsecured Creditors has not yet been scheduled.
Background
Headquartered in Lyndhurst, New Jersey, the Debtor provides commercial laundry services to the hospitality industry in the greater New York City area. As of the Petition Date, the Debtor employed approximately 582 individuals.
Through various court filings, the Debtor indicates that it has encountered financial difficulty after the acquisition of its Paterson, NJ facility. Construction delays and other challenges encountered during the build-out of the Paterson facility resulted in higher than anticipated costs and a significant delay in completion. The plant, which was ultimately completed in 2013, is the largest hospitality services facility on the East Coast. Although the plant was operational, the Debtor's North Bergen, NJ facility was not generating enough incremental revenue to fully offset the added costs for the first two years following its completion.
The Debtor has also already vacated their Bay Shore, NY facility and removed all property from it. This location's lease was the subject of a motion to reject the lease that was filed concurrently with its first day motions.
In addition, staffing constraints and a lack of adequate operational management in the Paterson facility resulted in a high rate of employee turnover, excess temporary labor costs and delays in service turnaround time. These issues, coupled with the operational losses and challenges faced during construction of the North Bergen facility, negatively impacted the Debtor's liquidity.
Financial Condition
Wells Fargo Bank is owed approximately $2.78 million under a line of credit; approximately $481,216.35 under a term loan; and approximately $510,331.99 under a CapEx loan.
St. Cloud Capital Partners II, L.P. is owed $6.24 million under a 10% note 1 principal; approximately $3,507,606.33 under a 10% note 1 PIK interest; approximately $1.5 million under a 10% note 2 principal; and approximately $1,108,285.82 under a 10% note 2 PIK interest.
Medley Capital Corporation is owed approximately $5.76 million under a 10% note; and approximately $3,088,673.99 under a 3% PIK interest.
Motion for DIP Financing
The Debtor is seeking authority to enter into a Debtor-in-Possession facility with Wells Fargo Bank that will provide post-petition financing, in the amount of $725,000 on an interim basis and $5.2 million on a final basis. An interim order was entered on February 1, 2017. A final hearing on the motion is scheduled for February 17, 2017.
Other Significant First Day Motions
Wages and Benefits Motion
The Debtor is seeking authority to pay certain employee obligations and maintain and continue employee benefits programs and schedule a final hearing on the motion. As of the Petition Date, the Debtor employs approximately 582 individuals. The Debtor owes approximately $450,000 of unpaid accrued wages, salaries, gratuities, overtime pay and other compensation. An order approving the motion was entered on February 1, 2017.
Insurance Motion
The Debtors seek authority to maintain existing insurance policies and pay all obligations and to renew, revise, extend, supplement, change, or enter into new insurance policies as needed. The motion and order did not include specifics on the amount necessary to address the emergency relief requested.
The Debtors pay approximately: $10,800 for the annual premium for the D&O Insurance Program, $103,415 for the liability insurance program, $1,418,178 for the workers' compensation program, $80,996 for commercial property insurance, $82,225 for umbrella insurance, $277,647 for automobile liability insurance, $70,081.13 for automobile insurance, $10,613 for flood insurance and $4,949 for crime insurance.
Taxes Motion
The Debtors are seeking authority to pay certain prepetition taxes and fees that, in the ordinary course of business, accrued or arose before the Petition Date. The motion and order did not include specifics on the amount necessary to address the emergency relief requested. An interim order was entered on February 1, 2017. A final hearing on the motion is scheduled for February 17, 2017.
If we can be of service, please contact me.
Rafael X. Zahralddin-Aravena
Commercial Bankruptcy and Commercial Restructuring Chair
Elliott Greenleaf
The I.M. Pei Building
Wilmington, Delaware 19899
Direct: 302-384-9401
Cell: 302-545-2888
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