Dean & DeLuca New York, Inc., a New York-based multi-channel retailer of premium gourmet and delicatessen food and beverage products under the Dean & DeLuca brand name, filed for chapter 11 protection on Tuesday in the Bankruptcy Court for the Southern District of New York. The company ceased operations in mid-2019, with no retail outlets remaining (and all leases terminated) owing to a “liquidity crisis that impeded execution of its expansion strategy.” After the shutdown, the debtors worked with their two primary creditors and lenders - Pace Development Corporation (which acquired Dean & DeLuca in 2014 through its wholly owned subsidiary Pace Food Retail Co., Ltd.) and Siam Commercial Bank Public Company Limited - on an out of court reorganization that failed “due to the number and varying interests of the Debtors’ creditor body of approximately 1,300 individuals and entities.”
Shortly before the petition date, on March 27, the debtors, Pace and Siam Commercial Bank, or SCB, entered into a loan advance and security agreement, through which SCB committed to provide loans to fund the reorganization, with the first tranche of $750,000 used as retainers for the debtors’ bankruptcy advisors. Pace and the other debtors guaranteed Dean & DeLuca, Inc.’s obligations under the loan, and the debtors granted SCB a lien in all of their assets. The rest of the committed loans would be in the form of DIP financing, and the debtors say that they anticipate filing a separate request for approval of the DIP loan “as soon as possible.” The company has also had “fruitful” negotiations with certain stakeholders, including Pace and SCB, on the terms of a plan of reorganization, through which Pace would contribute new money for the debtors to re-launch retail operations.
The company filed chapter 11, according to the first day declaration of co-Chief Restructuring Officer Joseph Baum, to “to effectuate a restructuring transaction that would preserve the value of the Dean & DeLuca brand, position itself to re-open stores and rehire employees, and provide financial returns and new business opportunities to creditors.” The board resolutions attached to the petition indicate that “a principal goal of the Corporation is to effectuate a successful sale of all or a substantial part of its assets in the Chapter 11 Case or to undertake a substantial recapitalization or similar transaction.”
The first day hearing has yet to be scheduled.
The company attributes the bankruptcy filing to “significant operating losses” and a liquidity shortfall following Pace’s acquisition of Dean & DeLuca in 2014. As early as 2017, the debtors were actively engaged in efforts to right-size their expenses and reorganize their operations. “Despite best efforts, by mid-2019, Dean & DeLuca had run out of cash, and Pace was not able to offer sufficient additional loans to fund continuing losses,” the debtors say, noting that, at that time, the company shuttered all of its owned retail outlets and ceased direct retail operations.
The debtors are represented by Brown Rudnick as counsel. Lawton Bloom and Joseph Baum of Argus Management Corporation are co-Chief Restructuring Officers. The case has been assigned to Judge Michael E. Wiles (case number 20-10916).
Background
Until mid-2019, Dean & DeLuca operated as a multi-channel retailer of premium gourmet and delicatessen food and beverage products under the Dean & DeLuca brand name, which traces its roots to the opening of the first Dean & DeLuca store in New York’s Soho neighborhood by Joel Dean and Giorgio DeLuca in 1977. The company ceased operations in mid-2019 following a liquidity crisis that derailed its expansion plans. The debtors have one employee in New York.
Certain Dean & DeLuca branded retail outlets continue to operate under franchise agreements, some of which require franchisees to make regular license payments to the debtors, which totalled $1.5 million in 2019. The debtors note that it is “unclear whether the Debtors will continue to receive license payments in the near future due to the effect of the COVID-19 pandemic on the Debtors’ retail food and beverage franchises.”
Following its purchase of Dean & DeLuca in 2014, Pace Development Corporation lent to the debtors more than $200 million to support the opening of “dozens” of new stores and executing licensing agreements for the expansion, promotion and development of the brand. At its height, Dean & DeLuca operated or licensed retail outlets across much of the globe, as well as an e-commerce platform, “with plans to open hundreds of additional outlets.”
The debtors’ corporate organizational structure is below:
10 Largest Unsecured Creditors | |||
Creditor | Location | Claim Type | Claim Amount |
---|---|---|---|
33 Ninth Retail Owner LLC | New York | Lease | $ 21,465,605 |
Slg Graybar Mesne Lease LLC | New York | Lease | 9,160,566 |
Internal Revenue Service Center | Philadelphia | Tax | 2,151,220 |
Interserv | New York | General Contractor | 1,145,891 |
OS Development NY LLC | New York | Stage Services | 989,695 |
US Foods Inc. | Wilmington, Del. | Food | 869,323 |
Accenture LLP | New York | Professional Services | 783,470 |
Laura Lendrum | New York | Employee | 761,875 |
United Parcel Service | Atlanta | Logistics | 411,412 |
40 Wall Street LLC | New York | Lease | 400,000 |
Representatives | |||
Role | Name | Firm | Location |
---|---|---|---|
Debtors' Counsel | William R. Baldiga | Brown Rudnick | New York |
Bennett S. Silverberg | |||
Tristan G. Axelrod | |||
Debtors' Co-Chief Restructuring Officers | Lawton Bloom | Argus Management Corporation | New York |
Joseph Baum | |||
Debtors' Claims Agent | Sheryl Betance | Stretto | Irvine, Calif. |
First Day Motions