In the United States Bankruptcy Court for the District of Delaware
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Case 20-10941-CSS Doc 217 Filed 05/11/20 Page 1 of 12 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE Chapter 11 In re: Case No. 20-10941 (CSS) TRUE RELIGION APPAREL, INC., et al., 1 (Jointly Administered) Debtors. Objection Deadline: May 27, 2020 at 4:00 p.m. Hearing Date: June 22, 2020 at 10:00 a.m. DEBTORS’ APPLICATION FOR ORDER AUTHORIZING THE RETENTION AND EMPLOYMENT OF RCS REAL ESTATE ADVISORS NUNC PRO TUNC TO THE PETITION DATE True Religion Apparel, Inc. and certain of its affiliates, the debtors and debtors in possession in the above-captioned cases (collectively, the “Debtors”), hereby apply (the “Application”) for entry of an order, substantially in the form attached hereto as Exhibit A (the “Proposed Order”), pursuant to section 327(a) and 328(a) of title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”), Rules 2014(a) and 2016 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), and Rule 2014-1(a) and 2016-2(h) of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the “Local Rules”), (i) authorizing the Debtors to retain and employ Retail Consulting Services, Inc., d/b/a RCS Real Estate Advisors (“RCS”) as real estate consultant, nunc pro tunc to the Petition Date (as defined below), in accordance with the terms and conditions set forth in the Agreement (as defined below), (ii) approving under sections 327 and 328(a) of the Bankruptcy Code the provisions of the Agreement, including, but not limited to, the 1 The Debtors and the last four digits of their respective taxpayer identification numbers are: TRLG Intermediate Holdings, LLC (3150); True Religion Apparel, Inc. (2633); Guru Denim LLC (1785); True Religion Sales, LLC (3441); and TRLGGC Services, LLC (8453). The Debtors’ headquarters is located at 1888 Rosecrans Avenue, Manhattan Beach, CA 90266. 40000/0598-20301992v3 Case 20-10941-CSS Doc 217 Filed 05/11/20 Page 2 of 12 proposed compensation arrangement and indemnification provision, (iii) waiving certain information requirements of Local Rule 2016-2(d), and (iv) granting related relief. In support of this Application, the Debtors rely upon and incorporate by reference the declaration of Ivan L. Friedman (the “Friedman Declaration”), a copy of which is attached hereto as Exhibit B. In further support of this Application, the Debtors respectfully represent as follows: JURISDICTION AND VENUE 1. This Court has jurisdiction to consider this Application under 28 U.S.C. §§ 157 and 1334 and the Amended Standing Order of Reference from the United States District Court for the District of Delaware dated February 29, 2012. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2). The Debtors confirm their consent, pursuant to Bankruptcy Rule 7008 and Local Rule 9013-1(f), to the entry of a final order by the Court in connection with this Application to the extent that it is later determined that the Court, absent consent of the parties, cannot enter final orders or judgments in connection herewith consistent with Article III of the United States Constitution. 2. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409. 3. The statutory predicates for the relief requested herein are section 327(a) and 328(a) of the Bankruptcy Code, Bankruptcy Rule 2014(a) and 2016, and Local Rules 2014-1 and 2016-2(h). BACKGROUND 4. On April 13, 2020 (the “Petition Date”), each Debtor commenced a case by filing a petition for relief under chapter 11 of the Bankruptcy Code (collectively, the “Chapter 11 Cases”). The Chapter 11 Cases are being jointly administered. The factual background regarding the Debtors, including their business operations, their capital and debt structure, and the events leading to the filing of the Chapter 11 Cases, is set forth in the Declaration of Richard 2 Case 20-10941-CSS Doc 217 Filed 05/11/20 Page 3 of 12 Lynch, Interim Chief Financial Officer in Support of Chapter 11 Petitions and First Day Papers [Docket No. 19] (the “First Day Declaration”) incorporated herein by reference. 5. The Debtors continue to manage and operate their businesses as debtors in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. 6. On April 23, 2020, the Acting United States Trustee for Region 3 (the “U.S. Trustee”) appointed an official committee of unsecured creditors (the “Creditors Committee”) in the Chapter 11 Cases [Docket No. 108]. No trustee or examiner has been appointed in the Chapter 11 Cases. THE LEASE PORTFOLIO 7. The Debtors are parties to approximately 83 non-residential real property leases in 27 states (collectively, the “Lease Portfolio”). As part of their ongoing restructuring efforts, the Debtors are engaging in a comprehensive review and analysis of their Lease Portfolio. The Debtors have determined, in consultation with their advisors and in an exercise of their sound business judgment, to retain RCS to advise and assist the Debtors in connection with a variety of matters relating to the review, analysis, restructuring and disposition of their Lease Portfolio. The Debtors believe that the services provided by RCS will substantially enhance the Debtors’ efforts to maximize the value of their Lease Portfolio and is in the best interests of the Debtors, their estates, and their creditors. 8. The Debtors have determined that RCS is well qualified to provide these services in light of RCS’s extensive experience in the field of real estate and its familiarity with the needs of distressed companies. 9. By this Application, the Debtors seek entry of an order (i) authorizing the retention and employment of RCS as real estate consultant, nunc pro tunc to the Petition Date, 3 Case 20-10941-CSS Doc 217 Filed 05/11/20 Page 4 of 12 on the terms and conditions set forth in the Agreement between RCS and the Debtor True Religion, Inc., dated March 28, 2020, a copy of which is attached hereto as Exhibit C, and incorporated herein by referenced (the “Agreement”),2 (ii) approving the provisions of the Agreement, including, but not limited to, the proposed compensation arrangement and indemnification provision, (iii) waiving certain information requirements of Local Rule 2016- 2(d), and (iv) granting related relief. BASIS FOR RELIEF 10. The Debtors seek approval of the retention and employment of RCS as real estate consultant to the Debtors pursuant to sections 327(a) and 328(a) of the Bankruptcy Code. Section 327(a) of the Bankruptcy Code provides that the debtor in possession “may employ one or more attorneys, accountants, appraisers, auctioneers, or other professional persons, that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist” the debtor in possession in carrying out its duties. 11 U.S.C. § 327(a). 11. The Debtors seek approval of the Agreement (including its compensation structure and the Indemnification Provision) pursuant to section 328(a) of the Bankruptcy Code, which provides, in relevant part, that the Debtors “with the court’s approval, may employ or authorize the employment of a professional person under section 327 . on any reasonable terms and conditions of employment, including on retainer, on an hourly basis, on a fixed or percentage fee basis, or on a contingent fee basis” subject to later re-evaluation by the Court. See 11 U.S.C. § 328(a). 12. As detailed below, the Debtors submit that the employment and retention of RCS, nunc pro tunc to the Petition Date and on the terms and conditions set forth herein and in the 2 Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Services Agreement or the Friedman Declaration, as applicable. 4 Case 20-10941-CSS Doc 217 Filed 05/11/20 Page 5 of 12 Agreement, is in the best interest of the Debtors, their estates, their creditors, their stakeholders, and other parties in interest, and therefore, should be approved. RCS’S QUALIFICATIONS 13. RCS is well-qualified to provide real estate consulting services to the Debtors. RCS was founded in 1981 and has extensive real estate experience in the retail industry. Many RCS professionals have direct experience in executive positions in the retail marketplace. Further, RCS professionals are expert negotiators with close and extensive relationships with landlords. RCS specializes in analyzing real estate portfolios and reducing occupancy costs by providing key transitional services, including portfolio assessments, renewals, and lease restructuring, terminations, dispositions, and selection. 14. In addition, in providing prepetition services to the Debtors, RCS’s professionals have developed relevant experience and expertise regarding the Lease Portfolio and the Debtors’ goals and objectives related thereto. After due consideration and as an exercise of their business judgment, the Debtors believe that RCS’s extensive experience makes the firm well-situated to provide services relating to the Lease Portfolio and to deal effectively and efficiently with the many issues that may arise in the Chapter 11 Cases in connection with the Lease Portfolio. SERVICES TO BE PROVIDED 15. Upon the Court’s authorization, RCS will perform the services set forth in the Agreement (the “Services”), including, but not limited to, the following:3 a) prepare a lease portfolio book showing (a) current lease terms, (b) sales, (c) profits, and (d) occupancy cost and asset contribution percentages relative to sales; 3 Any description of the terms of the Agreement contained in this Application