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Case 20-11768-CSS Doc 14 Filed 07/03/20 Page 1 of 185 Case 20-11768-CSS Doc 14 Filed 07/03/20 Page 1 of 185 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE -------------------------------------------------------- x : In re: : Chapter 11 : Lucky Brand Dungarees, LLC, et al.,1 : Case No. 20-11768 (_____) : Debtors. : (Joint Administration Requested) : -------------------------------------------------------- x MOTION OF DEBTORS FOR ENTRY OF INTERIM AND FINAL ORDERS (I) AUTHORIZING THE DEBTORS TO (A) OBTAIN POSTPETITION FINANCING, AND (B) USE CASH COLLATERAL, (II) GRANTING ADEQUATE PROTECTION TO THE PREPETITION LENDERS, (III) GRANTING LIENS AND SUPERPRIORITY CLAIMS, (IV) MODIFYING THE AUTOMATIC STAY, (V) SCHEDULING A FINAL HEARING, AND (VI) GRANTING RELATED RELIEF The above-captioned debtors and debtors in possession (collectively, the “Debtors”) respectfully represent as follows in support of this motion (this “Motion”):2 RELIEF REQUESTED By this Motion, the Debtors seek entry of an interim order, substantially in the form attached hereto as Exhibit A (the “Interim Order”), and a final order (the “Final Order” and, together with the Interim Order, the “DIP Orders”): (i) authorizing the Borrower (as defined below) to obtain secured postpetition financing (“DIP Financing”) on a superpriority basis consisting of a junior secured term loan credit facility in the aggregate principal amount of $15,600,000 (the “Junior DIP Facility”) which shall include a $4,100,000 sublimit for the issuance of letters of credit pursuant to that certain Superpriority Junior Debtor-in-Possession Secured Promissory Note, 1 The Debtors in these cases, along with the last four digits of each Debtor’s federal tax identification number, are: Lucky Brand Dungarees, LLC (3823), LBD Parent Holdings, LLC (4563), Lucky Brand Dungarees Stores, LLC (7295), Lucky PR, LLC (9578), and LBD Intermediate Holdings, LLC (7702). The Debtors’ address is 540 S Santa Fe Avenue, Los Angeles, California 90013. 2 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the DIP Facility Documents or the Interim Order (each as defined below), as applicable. 26731835.1 US-DOCS\115542578 Case 20-11768-CSS Doc 14 Filed 07/03/20 Page 2 of 185 substantially in the form attached to the Interim Order as Exhibit A (as may be amended, restated, supplemented, waived or otherwise modified from time to time, the “DIP Promissory Note” and collectively with any other related agreements, security agreements, or pledge agreements, including the DIP Orders, collectively, the “DIP Facility Documents”), by and among Debtor Lucky Brand Dungarees, LLC (the “Borrower”), as borrower, the guarantors party thereto, Lantern Capital Partners or its designee, “LCP”) in its capacity as administrative agent and collateral agent (in such capacity, the “DIP Lender Representative”), LCP, ReStore Capital, LLC or one of its affiliates (“ReStore”) and Clover Holdings II, LLC or one of its affiliates (“Clover Holdings” and, together with LCP and ReStore, the “DIP Lenders,” and, together with the DIP Lender Representative, the “DIP Secured Parties”); (ii) authorizing the Debtors to execute and deliver the DIP Facility Documents and to perform such other acts as may be necessary or desirable in connection with the DIP Facility Documents; (iii) authorizing the Debtors to grant, in each case subject to the Carve-Out (as defined in the Interim Order), to the DIP Secured Parties: 1. valid, enforceable, non-avoidable, automatically and fully perfected DIP Liens (as defined below) in all DIP Collateral (as defined below) to secure the DIP Obligations, which DIP Liens shall be (i) junior to the First Liens (as defined in the Interim Order) and any other valid, perfected, and non-avoidable liens in existence immediately prior to the Petition Date (other than liens on the Second Lien Collateral) and to any valid and non-avoidable liens in existence immediately prior to the Petition Date that are perfected subsequent to the Petition Date as permitted by section 546(b) of the Bankruptcy Code, in each case, that are senior to the First Liens; (ii) junior to the Prepetition Senior Adequate Protection Liens (as defined below); (iii) senior to the Second Liens (as defined below); and (iv) senior to the Prepetition Junior Adequate Protection Liens (as defined below); and 2. superpriority administrative expense claims that are junior to the superpriority administrative expense claims granted to the First Lien Secured Parties. (iv) authorizing the Debtors to pay the principal, interest, fees, expenses and other amounts payable under the DIP Facility Documents as such become earned, due and payable, including, commitment fees, exit premium, agent fees, audit fees, closing fees, service fees, facility fees, or other fees, costs, expenses, charges, and disbursements of the DIP Secured Parties (including 26731835.1 2 US-DOCS\115542578 Case 20-11768-CSS Doc 14 Filed 07/03/20 Page 3 of 185 the reasonable and documented fees and expenses of each of the DIP Secured Parties’ attorneys, advisors, accountants and other consultants), all to the extent provided in, and in accordance with, the DIP Facility Documents; (v) authorizing the Debtors to use Cash Collateral within the meaning of section 363(a) and 363(c) of the Bankruptcy Code; (vi) authorizing the Debtors to grant, in each case subject to the Carve-Out, adequate protection to the First Lien Secured Parties (as defined below) in the form of: (a) current cash payment of Unused Commitment Fees, Letter of Credit Fees (both as defined in the First Lien Credit Agreement) and interest on the obligations under the First Lien Facility at the default rate for Base Rate Loans (as defined in the First Lien Credit Agreement) provided thereunder; (b) replacement or, if applicable, new liens on and security interests in the DIP Collateral that are senior to the liens securing the DIP Junior Facility (such replacement or new liens, the “First Lien Adequate Protection Liens”); (c) superpriority claims as provided for in section 507(b) of the Bankruptcy Code that will have a priority in payment over any and all administrative expenses of the kinds specified or ordered pursuant to any provision of the Bankruptcy Code (the “First Lien Adequate Protection Claims”); and (d) the payment of all reasonable and documented out-of-pocket fees and expenses payable to the prepetition First Lien Agent under the prepetition First Lien Documents, whether incurred pre- or post- petition. (vii) authorizing the Debtors to grant, in each case subject to the Carve-Out, adequate protection to the Second Lien Secured Parties (as defined below and together with the First Lien Secured Parties, the “Prepetition Secured Parties”) in the form of: (a) current cash reimbursement of reasonable and documented fees and expenses and other disbursements under the Second Lien Term Loan A Credit Agreement or Second Lien Term Loan B Credit Agreement, as applicable, incurred in connection with the Debtors’ Chapter 11 Cases, whether incurred prior to, on, or after the Petition Date (subject to procedures for the payment of such amounts set forth in paragraph 5.15 of the Interim Order); 26731835.1 3 US-DOCS\115542578 Case 20-11768-CSS Doc 14 Filed 07/03/20 Page 4 of 185 (b) replacement or, if applicable, new liens on and security interests in the DIP Collateral that are junior to the liens securing the DIP Junior Facility and junior to the First Lien Adequate Protection Liens (such replacement or new liens, the “Second Lien Adequate Protection Liens”); and (c) superpriority claims as provided for in section 507(b) of the Bankruptcy Code that will have a priority in payment over any and all administrative expenses of the kinds specified or ordered pursuant to any provision of the Bankruptcy Code (the “Second Lien Adequate Protection Claims”) that are junior to the First Lien Adequate Protection Claim. (viii) vacating and modifying the automatic stay imposed by section 362 of the Bankruptcy Code to the extent necessary to implement and effectuate the terms and provisions of the DIP Facility Documents and the Interim Order; (ix) scheduling a final hearing (the “Final Hearing”) to consider the relief requested in this Motion; and (x) granting related relief. In support of the Motion, the Debtors submit the (i) Declaration of Eric Winthrop in Support of Motion of Debtors for Entry of Interim and Final Orders (I) Authorizing Debtors to (A) Obtain Postpetition Financing and (B) Use Cash Collateral, (II) Granting Adequate Protection to the Prepetition Lenders, (III) Granting Liens and Superpriority Claims, (IV) Modifying the Automatic Stay, (V) Scheduling a Final Hearing and (VI) Granting Related Relief, attached hereto as Exhibit B (the “DIP Declaration”) and (ii) the Declaration of Mark A. Renzi, Chief Restructuring Officer of the Debtors, in Support of Chapter 11 Petitions and First Day Relief (the “First Day Declaration”),3 filed contemporaneously herewith and incorporated herein by reference. The Debtors’ initial budget with respect to the Junior DIP Facility is attached to the Interim Order as Exhibit B. 3 The First Day Declaration and other relevant case information is available on the following website maintained by the Debtors’ proposed claims and noticing agent, Epiq Corporate Restructuring, LLC (“Epiq”), at https://dm.epiq11.com/LuckyBrand. 26731835.1 4 US-DOCS\115542578 Case 20-11768-CSS Doc 14 Filed 07/03/20 Page 5 of 185 JURISDICTION AND VENUE The Court has jurisdiction to consider this Motion pursuant to 28 U.S.C. §§
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