In the United States Bankruptcy Court for the Southern District of New York
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12-11732-jmp Doc 183 Filed 06/11/12 Entered 06/11/12 18:21:18 Main Document Pg 1 of 95 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW YORK ---------------------------------------------------------------x : In re : Chapter 11 : BETSEY JOHNSON LLC, : Case No. 12-11732 (JMP) : Debtor.1 : : ---------------------------------------------------------------x GLOBAL NOTES AND STATEMENT OF LIMITATIONS, METHODOLOGY, AND DISCLAIMERS REGARDING THE DEBTOR’S SCHEDULES OF ASSETS AND LIABILITIES AND STATEMENTS OF FINANCIAL AFFAIRS Betsey Johnson LLC (“Betsey Johnson”), Debtor and Debtor in possession (the “Debtor”), with the assistance of its advisors, have filed its Schedules of Assets and Liabilities (the “Schedules”) and Statements of Financial Affairs (the “Statements”) with the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) pursuant to section 521 of title 11 of the United States Code, 11 U.S.C. §§ 101, et. seq. (the “Bankruptcy Code”) and Rule 1007 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”). Mr. Jonathan Friedman has signed each of the Schedules and Statements. Mr. Friedman is the Executive Vice President, Chief Operating & Financial Officer of the Debtor. In reviewing and signing the Schedules and Statements, Mr. Friedman has relied upon the efforts, statements and representations of various personnel employed by the Debtor. Mr. Friedman has not (and could not have) personally verified the accuracy of each statement and representation contained in the Schedules and Statements, including statements and representations concerning amounts owed to creditors. These Global Notes, Methodology and Specific Disclosures Regarding the Debtor’s Schedules of Assets and Liabilities and Statements of Financial Affairs (the “Global Notes”) pertain to, are incorporated by reference in and comprise an integral part of the all of the Debtor’s Schedules and Statements. These Global Notes are incorporated by reference in, and comprise an integral part of, the Schedules and Statements and should be referred to and considered in connection with any review of the Schedules and Statements. The Schedules and Statements do not purport to represent financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), nor are they intended to be fully reconciled to the financial statements of the Debtor. Additionally, the Schedules and Statements contain unaudited information that is subject to further review and potential adjustment, and reflect the Debtor’s reasonable best efforts to report the assets and liabilities of the Debtor. 1 The last four digits of the Debtor federal tax identification number is 8779. 12-11732-jmp Doc 183 Filed 06/11/12 Entered 06/11/12 18:21:18 Main Document Pg 2 of 95 In preparing the Schedules and Statements, the Debtor relied upon financial data derived from its books and records that was available at the time of preparation. Although the Debtor has made reasonable efforts to ensure the accuracy and completeness of such financial information, inadvertent errors or omissions, as well as the discovery of conflicting, revised or subsequent information, may cause a material change to the Schedules and Statements. Accordingly, the Debtor reserves all rights to amend, supplement or otherwise modify the Schedules and Statements as is necessary and appropriate. Notwithstanding the foregoing, the Debtor shall not be obliged to update the Schedules and Statements. The Debtor and its officers, employees, agents, attorneys, and financial advisors do not guarantee or warrant the accuracy or completeness of the data that is provided herein and shall not be liable for any loss or injury arising out of or caused, in whole or in part, by the acts, errors, or omissions, whether negligent or otherwise, in procuring, compiling, collecting, interpreting, reporting, communicating, or delivering the information contained herein. In no event shall the Debtor or its officers, employees, agents, attorneys, and financial advisors be liable to any third party for any direct, indirect, incidental, consequential, or special damages (including, but not limited to, damages arising from the disallowance of a potential claim against the Debtor or damages to business reputation, lost business, or lost profits), whether foreseeable or not and however caused. Reservation of Rights. Nothing contained in the Schedules and Statements or these Global Notes shall constitute a waiver of the Debtor’s rights, claims or defenses with respect to its chapter 11 case, including, without limitation, with respect to any rights, claims or defenses related to claims asserted against the Debtor and its estate, equitable subordination, and causes of action arising under the provisions of chapter 5 of the Bankruptcy Code and any other relevant non-bankruptcy laws. Description of the Debtor and Its Case. On April 26, 2012 (the “Petition Date”), the Debtor filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. The Debtor is operating its business and managing its properties as a debtor in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On May 3, 2012, the United States Trustee for the Southern District of New York appointed a statutory committee of unsecured creditors pursuant to section 1102(a)(1) of the Bankruptcy Code. As of the Petition Date, Betsey Johnson was the 100% shareholder of each of Betsey Johnson Canada Ltd. (“BJ Canada”) and Betsey Johnson UK Ltd. (“BJ UK”). BJ Canada operates 5 retail stores located in various provinces in Canada. BJ UK operates a single retail store located in London, England. On May 15, 2012, BJ Canada filed a Notice of Intention to Make a Proposal in the Quebec Superior Court, Commercial Division and has obtained approval of that court to liquidate the inventory and assets in all of its Canadian retail stores. BJ UK has not commenced any formal restructuring proceedings, but is also liquidating its inventory and assets. As of the Petition Date, the Debtor operated out of various leased facilities in New York and New Jersey as follows: a) 498 Seventh Avenue, New York, NY, consisting of a showroom, design and corporate offices, b) 700 Penhorn Avenue, Secaucus, NJ, consisting of administrative 12-11732-jmp Doc 183 Filed 06/11/12 Entered 06/11/12 18:21:18 Main Document Pg 3 of 95 offices and a warehouse. In addition, the Debtor operates 63 corporate retail stores and outlets in the United States, and also sells its products in department and specialty stores worldwide, including Macy’s and Lord & Taylor, and online at www.betseyjohnson.com. As of the date of these Global Notes, the Debtor has filed a motion to reject 10 leases located in the United States and Canada. Additional notices of rejection, pursuant to procedures established by this court’s order establishing lease rejection procedures [Docket No. 157] were served on June 1, 2012 to an additional 16 landlords. On May 10, 2012, the Bankruptcy Court authorized the Debtor, in partnership with a joint venture consisting of Hilco Merchant Resources, LLC and Gordon Brothers Retail Partners, LLC, to conduct store closing sales at all of the Debtor’s U.S. retail store locations (the “Store Closing Sales”). Store Closing Sales commenced on May 11, 2012 and may last, at certain of its stores, through July 2012. Upon the conclusion of the Store Closing Sales, the Debtor will cease its business operations and begin the orderly wind-down of its estate. Overview of Methodology and Reservations of Rights Reporting Date. The Debtor’s Schedules and Statements are prepared as of the Petition Date, unless otherwise stated. In some instances, the Debtor has used estimates or prorated amounts where actual data as of the Petition Date was not available. Net Book Value of Assets. It would be prohibitively expensive, unduly burdensome, and an inefficient use of estate assets for the Debtor to obtain current market valuations of all of its assets. Accordingly, unless otherwise indicated, the Debtor’s Schedules and Statements reflect the net book value as of the Petition Date, unless otherwise indicated. The Debtor does not reflect any intellectual property on its financial statements. Furthermore, assets that were expensed for accounting purposes do not appear in these Schedules and Statements as they have no net book value. Recharacterization. Notwithstanding the Debtor’s reasonable best efforts to correctly characterize, classify, categorize, or designate the claims, assets, executory contracts, unexpired leases, and other items reported in the Schedules and Statements, the Debtor may have nonetheless improperly characterized, classified, categorized, designated or omitted certain items. Accordingly, the Debtor reserves all of its rights to recharacterize, reclassify, recategorize, redesignate, add or delete items reported in the Schedules and Statements at a later time as is necessary and appropriate, as additional information becomes available. Liabilities. The Debtor allocated liabilities between the prepetition and postpetition periods based on the information and research conducted in connection with the preparation of the Schedules and Statements. As additional information becomes available and further research is conducted, the allocation of liabilities between the prepetition and postpetition periods may change. Accordingly, the Debtor reserves all of its rights to amend, supplement or otherwise modify the Schedules