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While the Winc, Inc., stalking horse has a leg up on buying the bankrupt company's assets, other entities interested in acquiring the company still have an small window in which to enter a competitive bidding process.
Those efforts, and its deadlines, are the culmination of an extensive sub rosa effort by Winc's investment banker -- Cannacord Genuity Group, Inc. -- that have also raised objections from the Unsecured Creditor's Committee.
According to a key bankruptcy court filing Project Crush Acquisition Corp LLC (Delaware), a newly created LLC corporation run by a Winc co-founder, created by Mark Lynn who is a Winc co-founder and currently the CEO of the Amass Group is the actual stalking horse.
According to the court bidding procedures document, December 30 is the deadline for submitting a Letter of Intent (LOI). Bidder requirements to qualify for an acceptable LOI are listed on pages 12-18 in that document.
Deadlines for the submission for bids from qualified LOI is Jan. 9, 2023 with a potential auction two days later, a sale hearing on Jan. 17, and a projected closing on Jan. 20.
Secret marketing efforts by Cannacord
Given the high profile of Winc's flawed sales efforts, the effort to find qualified buyers was conducted at a secrecy level that puts the CIA to shame.
According to pages 3-5 of the Bidding procedures document:
In March 2022, after considering the Debtors’ outstanding debt under, and the upcoming maturity of, the Prepetition Credit Facility and the ongoing operational and liquidity needs of the Company, the Company determined to explore strategic alternatives.
Also in March 2022, the Company engaged Canaccord Genuity Group, Inc. (“Canaccord”), as their investment banker to explore a potential sale of the Debtors’ assets. In November 2022 the Company engaged RPA Advisors, LLC as their financial and restructuring advisor.
As part of the consideration of potential strategic alternatives, Canaccord undertook a prepetition marketing effort, and began soliciting indications of interest (each, an “IOI”) for the sale of the Debtors’ assets, both on an integrated basis as well as on a piecemeal basis.
In particular, Canaccord crafted detailed marketing materials and assembled related diligence information for a confidential electronic data room (the “Data Room”) and a confidential information memorandum with the assistance of the Debtors and their other professional advisors. Canaccord developed an initial list of approximately forty-five (45) strategic and financial prospective purchasers. Canaccord circulated, via email, a detailed “teaser” and description of the opportunity to acquire the Debtors’ assets to all of the prospective purchasers.
Following the Petition Date, Canaccord contacted fifty (50) potentially interested parties (including certain parties that had been contacted prior to the Petition Date) regarding the Assets and a potential Sale in connection with the Chapter 11 Cases. Canaccord continues to market the Assets to ensure that the Debtors are able to obtain the highest and otherwise best value for the Assets.
Reason for the stalking horse
According to the Proposed Bidding Procedures Order, the Stalking Horse was, "reasonably tailored to encourage, rather then hamper, bidding for the assets by providing a baseline for value, increasing the likelihood of competitive bidding at the auction.and facilitating participation of other potential bidders...." More details in ECF47-2-Order-Winc-BiddingProcedures-120722.pdf
Winc Unsecured Creditor's Committee Objects To Bid Process & Deadlines
The Unsecured Creditor's Committee, on December 21, filed a number of objections to the bidding process, deadlines and the proposed manner in which funds and assets should be used and allocated.
The committee, composed of FedEx Corporate Services, Inc., Frederic Chaudiere Famille Chaudiere (SARL), and Ranch Canada de los Pinos expressed their concern that:
Among the unsecured debtor's committee (excerpts ):
"...the Committee has developed serious concerns about administrative solvency and speed of this case. This is highlighted by how the DIP [Debtor In Possession (Winc)] Budget, critical vendor payments and sale cadence have been designed to tilt the playing field in favor of the Stalking Horse at the expense of administrative solvency.
"Rather than tailoring a DIP Budget for the immediate needs of the estate, this DIP Budget is funding the Stalking Horse Bidder’s business plan while radically underfunding the estate’s cost of restructuring.
... "this DIP Budget is funding the Stalking Horse Bidder’s business plan while radically underfunding the estate’s cost of restructuring."
... "The Committee has other concerns with the DIP Financing Motion, including the loss of core estate protections, encumbrances on litigation recoveries (including those against board members who voted to absolve themselves and other insiders of $3.5 million in loan obligations), and a severely imbalanced professional fee budget that allots the Debtors’ professionals more than 12 times the resources of the Committee’s professionals...."
... "Coupled with the DIP, the Stalking Horse proposal and attenuated sale process is also very concerning. Debtors are a public company that recently reported assets in excess of $50 million, including finished and salable inventory in excess of $18 million. Nonetheless, the structure of the transaction practically ensures administrative insolvency by virtue of a rushed sale over the Christmas and New Year holidays to the Debtors’ founder"
... "Late yesterday afternoon, the Committee was informed that the Stalking Horse Bidder/DIP Lender had changed its Stalking Horse offer from a purchase of equity that is set forth in the Stalking Horse Purchase Agreement, to an asset purchase transaction. This change is fundamental, and it is hard to fathom how the Committee (let alone other interested parties) could digest and respond to this change to the Bidding Procedures or the Court could reasonably approve them with less than 48 hours’ worth of review."
New Deadlines Proposed By Unsecured Debtor's Committee
Many More Details In The Full Document Links For Premium Subscribers
- ECF47-Omnibus Proposal For Bidding Procedures & Deadlines
- ECF47-2-Order-Winc-Proposed Bidding Procedures-120722
- ECF47-3-Order-Stalking Horse Agreement-120722.pdf
- ECF47-4-Winc - Sale Notice-120722.pdf
- ECF47-Winc - Bidding Procedures-120722.pdf
- ECF75-Objection By OFFICIAL COMMITTEE OF UNSECURED CREDITORS-122122.pdf
- ECF75-2-Creditors Committee-ExhibitB.pdf
- Winc Bankruptcy - Creditormatrix.pdf
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