|
|
Item 1.03.
|
Bankruptcy or Receivership.
|
As previously disclosed, on May 27, 2020
(the “Petition Date”), Tuesday Morning Corporation (the “Company”) and certain of its direct and indirect
subsidiaries (collectively with the Company, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”)
under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court
for the Northern District of Texas, Dallas Division (the “Bankruptcy Court”). The Chapter 11 Cases are being administered
jointly under the caption “In re: Tuesday Morning Corporation, et. al., Case No. 20-31476-HDH-11.” The Debtors
will continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court
and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
On June 3, 2020, the Debtors entered into
a term sheet (the “Term Sheet”) with BRF Finance Co., LLC (“BRF Finance”), pursuant to which, and subject
to the satisfaction of certain customary conditions, including the approval of the Bankruptcy Court, BRF Finance would agree to
provide a debtor-in-possession delayed draw term loan facility in an amount not to exceed $25 million (the “DIP Term Facility”)
secured by the owned real estate of the Debtors (the “Real Estate Assets”). Under the terms of the Term Sheet, the
closing and initial extension of credit under the DIP Term Facility (which initial extension of credit is not to exceed $10 million)
will be subject to satisfaction of certain conditions precedent, including execution and delivery of definitive loan documentation,
entry of an interim order of the Bankruptcy Court authorizing the DIP Term Facility, receipt by BRF Finance of certain financial
and tax information with respect to the Debtors, including a cash flow budget (the “Budget”), and receipt by BRF Finance
of certain real estate appraisals and title reports with respect to the Real Estate Assets. Thereafter and so long as a final order
of the Bankruptcy Court authorizing the DIP Term Facility has been entered and is in full force and effect, the Debtors would be
entitled to make additional borrowings under the DIP Term Facility in minimum increments of $2.5 million subject to the satisfaction
of certain additional conditions, including absence of defaults under the DIP Term Facility, delivery of notices of borrowing and
the accuracy of the representations and warranties of the Debtor, in the definitive loan documentation for the DIP Term Facility.
Pursuant to the Term Sheet, proceeds of
borrowings under the DIP Term Facility would be used by the Debtors to: (1) repay obligations of the Debtors under (a) the Senior
Secured Super Priority Debtor-in-Possession Credit Agreement (the “DIP ABL Credit Agreement”) among the Debtors, JPMorgan
Chase Bank, N.A., as administrative agent, for itself and the other lenders party thereto, and (b) the Credit Agreement, dated
August 18, 2015 and as previously amended, among the Debtors, JPMorgan Chase Bank, N.A., in its capacity as administrative agent,
swingline lender and issuing bank, and the lenders party thereto; (2) fund general working capital; and (3) fund operational expenses
and restructuring expenses of the Debtors, in each case, to the extent permitted by the applicable orders of the Bankruptcy Court,
the Budget and the definitive loan documents for the DIP Term Facility.
The DIP Term Facility is expected to include
conditions precedent, representations and warranties, affirmative and negative covenants, and events of default customary for financings
of this type and size, but in all events consistent with the terms of the DIP ABL Credit Agreement. The Debtors will be obligated
to prepay amounts outstanding under the DIP Term Facility upon certain asset sales and casualty or condemnation events with respect
to the Real Estate Assets.
Under the terms of the DIP ABL Credit Agreement
and the Term Sheet, the lenders under the DIP ABL Credit Agreement will have a lien on the Real Estate Assets ranking junior to
the rights of the lenders under the DIP Term Facility, with the lien priorities and enforcement rights with respect to the Real
Estate Assets and the application of proceeds thereof to be governed by the terms of an intercreditor agreement.
The proposed DIP Term Facility would mature
on the earliest of (1) the date that is 180 days after the Petition Date, (2) the date of consummation of a sale of all or substantially
all assets of the Debtors, (3) the effective date of a plan of reorganization, or (4) the date the obligations of the Debtors under
the DIP Term Facility are accelerated as a result of an event of default.
The foregoing summary of the proposed Real
Estate DIP Facility is qualified in its entirety by reference to the full text of the Real Estate DIP Term Sheet, a copy of which
is attached hereto as Exhibit 10.1 and incorporated by reference herein, and the terms of which are subject to Bankruptcy Court
approval.