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KB US HOLDINGS: TLI Buying Substantially All Assets for $75 Million

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KB US Holdings, Inc. and affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to authorize the bidding procedures in connection with the sale of substantially all assets to TLI Bedrock, LLC for approximately $75 million, subject to overbid.

In addition to maximizing the value of the Debtors’ estates for the benefit of their creditors and other stakeholders, the proposed Sale will preserve thousands of jobs and allow the Debtors to continue to provide essential goods to the communities they serve during the COVID-19 pandemic. Following an extensive prepetition marketing process and negotiations with numerous potential bidders, the Debtors entered into the Stalking Horse Purchase Agreement on July 13, 2020.

The Stalking Horse Purchase Agreement, dated July 13, 2020, provides for the sale of, among other things, 30 of the Debtors’ stores, for an aggregate purchase price of approximately $75 million. The Stalking Horse Purchase Agreement required the Stalking Horse Bidder to negotiate with the Unions prepetition, in consultation with the Debtors, to ask a consensual agreement on the terms of employment with affected unionized employees. The Stalking Horse Bid is subject to higher or otherwise better offers in accordance with the Bidding Procedures. The Debtors continue to engage with other interested parties as part of the sale process.

To facilitate the sale, as is set forth in the DIP Motion filed contemporaneously with the Motion, the Debtors have agreed to various case milestones that will allow for an efficient Sale process. Specifically, the milestones provide that (a) by Sept. 15, 2020, the Court enters the Bidding Procedures Order; (c) by Oct. 8, 2020, the Debtors conduct the Auction; and (d) by Oct. 22, 2020, the Court approves the Sale contemplated by the Motion. Given the extensive prepetition marketing process that the Debtors have already undertaken, the Debtors submit that the sale timeline is reasonable and appropriate.

To effectuate the Sale, the Debtors submit the Motion respectfully asking that the Court (a) authorizes them to enter into the Stalking Horse Purchase Agreement; (b) approves the Bidding Procedures for the sale of the Assets; (c) sets dates and deadlines in connection therewith; (d) approves the form and manner of notice of each of the foregoing; (e) approves procedures for the assumption and assignment of certain executory contracts and unexpired leases in connection with the Sale; and (f) grants the Debtors any related relief. In addition, they ask that the Court (x) authorizes the Sale of the Assets free and clear of all liens, claims, interests, and encumbrances; (y) approves the assumption and assignment of the Assigned Contracts in connection with the Sale; and (z) grants them any related relief.

The Debtors askauthority to provide the Stalking Horse Bidder with standard Stalking Horse Bid Protections. Specifically, the Stalking Horse Purchase Agreement provides for (i) the payment of a break-up fee of $2,625,000, (ii) the reimbursement of reasonable and documented expenses up to $550,000 in the event the Stalking Horse Bid is not selected as the winning bid. Furthermore, the Stalking Horse Purchase Agreement provides for the reimbursement of reasonable and documented expenses up to $750,000 if the Stalking Horse Purchase Agreement is terminated in the event the Sale Order does not include certain findings of fact and conclusions of law related to the Stalking Horse Bidder’s liability for union agreements and pension plans.

The Bidding Procedures also establish that if the Stalking Horse Bidder bids at the Auction, it will be entitled to a credit in the amount of the Termination Fee and Expense Reimbursement against the increased purchase price for the Assets. In the event it is not the winning bidder at the Auction, the Stalking Horse Bidder has agreed to act as a “Back-up Bidder” and, as such, hold open its binding offer to purchase the Assets for 20 days after the entry of the Sale Order in case the winning bid is not consummated.

The Stalking Horse Purchase Agreement includes various customary representations, warranties, and covenants by the Debtors and the Stalking Horse Bidder, as well as certain conditions to closing the contemplated Sale and rights of termination. The transactions contemplated by the Stalking Horse Purchase Agreement are subject to approval by the Court and entry of the Bidding Procedures Order and the Sale Order.

The Bidding Procedures will provide potential bidders with sufficient notice and time to conduct due diligence to submit binding bids in advance of the Bid Deadline.

The salient terms of the Bidding Procedures are:

a. Bid Deadline: Oct. 2, 2020 at 4:00 p.m. (ET)

b. Auction: The Auction, if necessary, will be held on Oct. 8, 2020 at 10:00 a.m. (ET) at the offices of counsel to the Debtors, Proskauer Rose LLP, Eleven Times Square, New York, New York, 10036, or at such other venue (or by such other medium) as may be agreed to by the Debtors, the Consultation Parties, and the United States Trustee. If there is no Auction, the Sale Hearing to approve the Sale to the Stalking Horse Bidder will be held on Oct. 8, 2020 at 10:00 a.m. (ET).

c. Sale Hearing: Oct. 18, 2020 at 10:00 a.m. (ET)

d. Sale Objection Deadline: Oct. 2, 2020 at 4:00 p.m. (ET)

The Debtors will file with the Court and serve on the appropriate notice parties the Notice of Auction Results within two days of the conclusion of the Auction.

To facilitate the Sale, the Debtors are asking approval of the Assignment Procedures. The Assignment Procedures set forth in the Bidding Procedures Order contemplate that certain executory contracts may be assumed and assigned to the ultimate purchaser of the Assets, and that the Buyer will be responsible for all related cure costs. On Sept. 18, 2020, the Debtors will file with the Court the Cure Notice, and post it to the Case Website (https://cases.primeclerk.com/kb).

Other than payment of the Stalking Horse Bid Protections to the Stalking Horse Bidder from the proceeds of a sale to a competing bidder, the Bidding Procedures and Stalking Horse Purchase Agreement do not allocate the proceeds of the Sale.

The Debtors ask relief from the 14-day stay imposed by Bankruptcy Rules 6004(h) and 6006(d).

A copy of the Agreement and the Bidding Procedures is available at https://tinyurl.com/y46whoaj from PacerMonitor.com free of charge.

About KB US Holdings

KB US Holdings, Inc. is the parent company of King Food Markets and Balducci’s Food Lover’s Market.

Headquartered in Parsippany, N.J., Kings Food Markets has been a specialty and gourmet food market across the East Coast. In 2009, Kings Food Markets acquired specialty gourmet retail grocer, Balducci’s Food Lover’s Market. As of the petition date, the Debtors operate 35 supermarkets across New York, New Jersey, Connecticut, Virginia, and Maryland.

KB US Holdings and its affiliates sought protection under Chapter 11 of the Bankruptcy Code (Bankr. S.D. N.Y. Lead Case No. 20-22962) on Aug. 23, 2020. At the time of the filing, Debtors disclosed assets of between $100 million and $500 million and liabilities of the same range.

Judge Sean H. Lane oversees the cases.

The Debtors tapped Proskauer Rose LLP as their legal counsel, Peter J. Solomon as investment banker, Ankura Consulting Group LLC as financial advisor, and Prime Clerk LLC as claims, noticing and solicitation agent.