🥐New Chapter 11 Bankruptcy Filing - Gold Standard Baking LLC🥐

Source: goldstandardbaking.com

First, let’s dispense with the obvious: if your corporate name is “Gold Standard” *anything* you really ought to avoid filing a chapter 11 bankruptcy case because, otherwise, the punchlines just hang way low.

But, well, these are strange times and so here we are: on June 22, 2022, Chicago-based Gold Standard Baking LLC and two related debtors, Gold Standard Holdings Inc. and Gold Standard Real Estate LLC (collectively, the “debtors”) filed chapter 11 bankruptcy cases in the District of Delaware (Judge Stickles). The debtors are one of the largest industrial bakers in the US, specializing in croissants and a variety of other laminated dough-based sweet goods. Lamination, for those who are curious, is the process of folding and rolling butter into dough over and over again to create super thin layers. If that sounds f*cking disgusting to you, well, 🤷‍♀️.

It gets worse.

The debtors “…produce over 1.7 million pounds of fully-baked goods per week on average, including approximately 100 varieties of fully-baked croissants, Danishes, and cinnamon rolls. These goods are delivered to approximately 100 retail and other foodservice customers per week through a network of distributors. The Debtors offer fully-finished “thaw and serve” foods designed for ease of use to customers across a wide range of industries, including partners in food service, retail, casual dining, health, education, and quick service restaurants.” Is this an appropriate time to note that Covid-19 ravaged this country so viciously because we’re a country of rancid fat f*cks? Too soon?

Anyway, why is this company in bankruptcy and what does it hope to achieve? Apparently it has been suffering from workforce issues for literally years. A “no match” letter from the IRS in 2017 severely impacted operations because it eliminated 230 highly skilled and experienced workers from the debtors’ workforce. This affected production capacity, increased waste, and led to an uptick in customer complaints. Customers churned.

From there the debtors engaged in an operational restructuring of sorts, instituting new management, rejiggering its employee hiring process, commencing price increases, and securing additional liquidity from their indirect sponsor, Parallel49 Equity (Fund V), Limited Partnership. But then the pandemic hit.

Covid-19 introduced additional challenges. The debtors experienced labor shortages and to retain employees, had to increase pay. Additional costs in the form of repair and maintenance of its factories compounded matters. Through it all, the debtors’ capital structure loomed large:

Source: First Day Pleadings, Declaration.

Anyway, let’s cut to the chase here because this is a POS case that is probably more interesting for the fact that it shows how — up until lately, anyway — there’ve been so few deals out there that Houlihan Lokey felt compelled to take this $140.5mm debt mandate.

So what is Houlihan doing here to justify its existence? Well, first, it already helped the debtors sell one of their factories pre-petition.

And, second, there’s a party here called 37 Baking Holdings LLC (37BH) which took out the first lien debt (the RCF and 1L TL) and is now providing a DIP ($1.5mm new money, $500k interim, 8%, no commitment or exit fee) and acting as stalking horse purchaser. 37BH — which, for the record, is backed by all kinds of company insiders and affiliates of Parallel49, necessitating the appointment of two independent directors and formation of a “special restructuring committee” — proposes to credit bid (only) $20mm and assume certain liabilities/contracts as part of its stalking horse bid. 37BH baked various aggressive milestones into the DIP including an auction by July 28, 2022, and consummation of a sale by August 15, 2022. It’s also apparently pushing a $250k break-up fee and a $350k expense reimbursement. According to the bid procedures motion already on file, there also has to be a $200k overbid. In other words, just to have the luxury of competing against 37BH’s ability to rachet up its credit bid,* a competing bidder needs to up-bid by $800k. Rich.

But, yeah, sure, Houlihan is supposed to find other bidders out there to compete.

Good luck with that.

The debtors are represented by Klehr Harrison Harvey Branzburg LLP (Domenic Pacitti, Michael Yurkewicz, Sally Veghte, Morton Branzburg) as counsel, Riveron Consulting LLC (John Young Jr.) as CRO and financial advisor, and Houlihan (Ryan Sandahl) as investment banker. 37BH is represented by Bernstein Shur Sawyer & Nelson P.A. (Robert Keach, Adam Prescott, Lindsay Zahradka Milne) and Cozen O’Conner LLP (Thomas Horan).

*”Purchaser reserves the right, in its sole discretion, to increase the Credit Bid up to the full amount of the First Priority Obligations and the DIP Facility Obligations.”

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Date: June 22, 2022

Jurisdiction: D. of Delaware (Judge Stickles)

Capital Structure:

Company Professionals:

• Legal: Klehr Harrison Harvey Branzburg LLP (Domenic Pacitti, Michael Yurkewicz, Sally Veghte, Morton Branzburg)

• Special Restructuring Committee: Lisa Gavales, Patrick Bartels

• Financial Advisor/CRO: Riveron Consulting LLC (John Young Jr.)

• Investment Banker: Houlihan Lokey Capital Inc. (Ryan Sandahl)

• Claims Agent: Omni Agent Solutions (Click here for free docket access)

Other Parties in Interest:

• Pre-petition Secured Lender, DIP Lender & Stalking Horse Purchaser: 37 Baking Holdings LLC

  • Legal: Bernstein Shur Sawyer & Nelson P.A. (Robert Keach, Adam Prescott, Lindsay Zahradka Milne) and Cozen O’Conner LLP (Thomas Horan)

• Second Lien Term Loan Agent & Sponsor: Parallel49 Equity (Fund V), Limited Partnership

• Official Committee of Unsecured Creditors: Archer Daniels Midland Co., Bunge North America Inc., Midland Packaging & Display, Batory Foods, Armstrong Transportation Group

  • Legal: Lowenstein Sandler LLP (Jeffrey Prol, Scott Cargill, Arielle Adler, Bruce Nathan) and Morris James LLP (Eric Monzo, Brya Keilson, Jason Levin)