Milbank has successfully represented former children’s clothing retailer Gemstone Solutions Group Inc. (formerly known as Gymboree Group, Inc.) in its chapter 11 cases, obtaining confirmation of the company’s reorganization plan on May 27, 2020.
The company filed its chapter 11 cases on January 16, 2019 in the United States Bankruptcy Court of the Eastern District of Virginia. Milbank led the company’s efforts to secure court approval on the first day of the cases of an approximately $120 million debtor-in-possession (“DIP”) facility and an agreement with a third party consortium to monetize $135 million of inventory in Gymboree®, Crazy 8®, and Janie & Jack retail stores located across the United States and Canada.
After a live auction at Milbank’s New York offices on March 1, 2019, The Children’s Place emerged as the winning bidder and purchaser of the Gymboree® and Crazy 8® brands and related assets, and The Gap, Inc. as the winning bidder and purchaser of the Janie & Jack® brand and operations. The proceeds generated by the sales facilitated over $100 million in payments to creditors during the cases, including nearly $4 million in payments to former employees under a consensual settlement of WARN-related claims.
During the cases, Milbank also worked with the company to formulate and obtain Bankruptcy Court approval of a series of novel transactions designed to maximize value for the company’s creditors, including the monetization of ancillary estate assets that were not sold in the above-mentioned sales, entry into dozens of settlements providing for payment of potential administrative claimants at a discount and without the need to engage in substantial litigation, and a plan of reorganization premised on the DIP lender’s agreement to fund distributions to other creditors before being satisfied in full from proceeds of assets that would otherwise constitute DIP collateral.
The confirmed plan contemplates that on emergence, the company will be capitalized by a new $10 million exit revolving loan facility and will hold a controlling interest in Certified Art and Collectibles, a company that develops technology to electronically verify fine art, memorabilia, and other items. Gemstone will rebrand and market the technology with the name LuxVerity. The plan is anticipated to provide a substantial recovery for administrative and priority claims and will allow Gemstone to continue as a going concern, thereby preserving the jobs of remaining employees.
The Milbank team representing Gemstone is led by Financial Restructuring partners Dennis Dunne, Evan Fleck and Michael Price and includes partners Scott Golenbock (Corporate), Alex Lees and Aaron Renenger (Litigation), Russell Kestenbaum (Tax), and Manan Shah (Executive Compensation and Employee Benefits), as well as special counsel Brian Kinney (Financial Restructuring) and associates Evan Maass, Reuben Dizengoff (Financial Restructuring), and Dan Valenza (Corporate), among other Milbank attorneys.
