As discussed here, Pike Nursery Holding, LLC filed a Chapter 11 Bankruptcy petition in the Northern District of Georgia on November 14, 2007. I represent two creditors at this point, including one that serves on the unsecured creditors committee. As is the case in many Chapter 11 cases, a lot happens in the first couple of weeks. I will periodically update this post as necessary. Here are some of the events over the last few days.
- An unsecured creditors’ committee was appointed, and has retained counsel. Subject to application and court approval, Pachulski Stang Ziehl & Jones and Powell Goldstein will represent he committee.
- The Court approved Pike’s request to honor pre-petition gift cards returns and guarantees. These obligations exceed $800,000, according to the motion. Thus, over $800,000 of creditor value, or approximately 10% of the amount of post-petition financing, is at risk for pre-petition, unsecured obligations.
- The Court entered an interim order approving post-petition financing from PNC Bank, NA. A final hearing is scheduled for December 4, 2007.
- The Court entered an interim Order approving $2 million in post-petition financing from PDIP, LLC. According to the Debtor’s Motion, PDIP, LLC, which will receive a super-priority security interest in the Debtor’s proceeds, is an entity created by insiders of Roark Capital Group, which owns a majority interest in Pike. These insiders are Scott Aronson and Jeffrey Kenan. How the Debtor obtained much of the collateral for these post-petition loans is discussed below.
- Scott Schnell, CEO of Pike’s, filed an Affidavit in Support of the first-day Motions.
- Pike incurred $20,000 in legal fees prior to filing; thus, the filing was not prepared on an emergency basis.
- In the days and weeks prior to filing, Debtor ordered and took delivery of a significant amount of goods for the holiday season, requesting some deliveries earlier than the delivery date originally agreed upon. The extent of unsecured debt incurred by Pike just prior to, or in preparation for, its Chapter 11 filing, will likely be an issue, as will its effect on the Debtor’s solvency (or insolvency). The effect of these deliveries was to significantly increase the collateral for the post-petition lenders (including the insiders) and for the benefit of individuals holding gift cards, and at the exense of the sub-class of holiday vendors. This subject will likely be addressed later in the case.