Case 20-12816-JTD Doc 87 Filed 11/23/20 Page 1 of 12 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ) In re: ) Chapter 11 ) FURNITURE FACTORY ULTIMATE ) Case No. 20-12816 (JTD) HOLDING, L.P., et al.,1 ) ) (Jointly Administered) Debtors. ) ) APPLICATION OF DEBTORS FOR ENRY OF AN ORDER (I) AUTHORIZING THE EMPLOYMENT AND RETENTION OF B. RILEY REAL ESTATE, LLC AS REAL PROPERTY LEASE CONSULTANT, NUNC PRO TUNC TO THE PETITION DATE AND (II) GRANTING RELATED RELIEF Furniture Factory Ultimate Holding, L.P. and its debtor affiliates, as debtors and debtors- in-possession in the above-captioned chapter 11 cases (collectively, the “Debtors”) file this application (the “Application”) seeking entry of an order, substantially in the form attached hereto as Exhibit A, 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 Rules 2014-1 and 2016 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 employ and retain B. Riley Real Estate, LLC (“BRRE”) as their real property lease consultant, nunc pro tunc November 5, 2020 (the “Petition Date”), in accordance with the terms and conditions set forth in a certain letter agreement between BRRE and the Debtors, dated November 20, 2020 (the “Engagement Agreement”), a copy of 1 The Debtors in these chapter 11 cases, along with the last four digits of each of the Debtors’ respective federal tax identification numbers, are as follows: Furniture Factory Ultimate Holding, LP (4089); Furniture Factory Holding, LLC (5055); Furniture Factory Intermediate Holding, LLC (8060); Furniture Factory Outlet, LLC (3952); Furniture Factory Outlet Transportation, Inc. (7131); Bedding Holding, LLC (7744); Bedding Intermediate Holding, LLC (6384); and Bedding, LLC (4774). The Debtors’ headquarters and mailing address is: 6500 Jenny Lind Road, Space A, Fort Smith, AR 72908. PHIL1 9219613v.4 Case 20-12816-JTD Doc 87 Filed 11/23/20 Page 2 of 12 which is attached hereto as Exhibit C; and (ii) granting related relief. In support of this Application, the Debtors likewise submit the Declaration of James Terrell (the “Terrell Declaration”), attached hereto as Exhibit B. In further support of this Application, the Debtors respectfully state as follows: JURISDICTION 1. The United States Bankruptcy Court for the District of Delaware (the “Court”) has jurisdiction over this matter pursuant to 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. 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 sections 327(a) of the Bankruptcy Code, Bankruptcy Rules 2014(a) and 2016, and Local Rule 2014-1. BACKGROUND 4. On the Petition Date, each of the Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code (the “Chapter 11 Cases”). The Debtors operating their businesses and managing their properties as debtors-in-possession, pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 2 PHIL1 9219613v.4 Case 20-12816-JTD Doc 87 Filed 11/23/20 Page 3 of 12 5. On November 6, 2020, the Court entered an order [Docket No. 33] authorizing the joint administration and procedural consolidation of the Chapter 11 Cases pursuant to Bankruptcy Rule 1015(b). 6. On November 18, 2020, the Office of the United States Trustee appointed an official committee of unsecured creditors in (the “Committee”) in these consolidated Chapter 11 Cases. 7. Additional information regarding the Debtors’ businesses and the facts and circumstances leading to the commencement of the Chapter 11 Cases is set forth in greater detail in the Declaration of Donald Roach in Support of Debtors’ First Day Motions and Applications [Docket No. 13] (the “First Day Declaration”), filed on the Petition Date and incorporated herein by reference. RELIEF REQUESTED 8. By this Application, the Debtors seek to employ and retain BRRE as their real property lease consultant, effective nunc pro tunc to the Petition Date, pursuant to the terms and conditions of the Engagement Agreement, a copy of which is attached hereto as Exhibit C and is incorporated by reference herein. BASIS FOR RELIEF 9. Section 327(a) of the Bankruptcy Code provides that a debtor, subject to Court approval: [M]ay 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 carrying out the [debtor]’s duties under this title. 3 PHIL1 9219613v.4 Case 20-12816-JTD Doc 87 Filed 11/23/20 Page 4 of 12 11 U.S.C. § 327(a). Section 1107(b) of the Bankruptcy Code elaborates upon sections 101(14) and 327(a) of the Bankruptcy Code in cases under chapter 11 of the Bankruptcy Code and provides that “a person is not disqualified for employment under section 327 of [the Bankruptcy Code] by a debtor in possession solely because of such person’s employment by or representation of the debtor before the commencement of the case.” 11 U.S.C. § 1107(b). 10. In addition, the Debtors seek approval of the Engagement Agreement 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 a retainer, on an hourly basis, on a fixed or percentage fee basis, or on a contingent fee basis . .” 11 U.S.C. § 328(a). Section 328(a) of the Bankruptcy Code permits the compensation of professionals, including investment bankers, on more flexible terms that reflect the nature of their services and market conditions. Furthermore, Bankruptcy Rule 2014(a) requires that an application for retention include: [S]pecific facts showing the necessity for the employment, the name of the [firm] to be employed, the reasons for the selection, the professional services to be rendered, and proposed arrangement for compensation, and, to the best of the applicant’s knowledge, all of the [firm’s] connections with the debtor, creditors, any other party in interest, their respective attorneys and accountants, the U.S. Trustee, or any person employed in the office of the U.S. Trustee. Fed. R. Bankr. P. 2014. 11. In light of the size and complexity of these consolidated Chapter 11 Cases, the Debtors respectfully submit that employing and retaining BRRE as their real property lease consultant, effective nunc pro tunc to the Petition Date, pursuant to the fair and reasonable terms 4 PHIL1 9219613v.4 Case 20-12816-JTD Doc 87 Filed 11/23/20 Page 5 of 12 of the Engagement Agreement, is necessary and in the best interests of the Debtors’ estates and all parties in interest to these Chapter 11 Cases. THE LEASE PORTFOLIO 12. The Debtors are party to approximately 31 non-residential real property leases in five (5) states (collectively, the “Lease Portfolio”). As part of their ongoing restructuring efforts, the Debtors are engaging in comprehensive review and analysis of its Lease Portfolio. The Debtors have determined, in consultation with its advisors and in exercise of its sound business judgment, to retain BRRE to advise and assist the Debtors in connection with a variety of matters relating to the review, analysis, restructuring, and disposition of the Lease Portfolio. The Debtors believe that the services provided by BRRE will substantially enhance the Debtors’ efforts to maximize the value of the Lease Portfolio and is the best interest of the Debtors, the Debtors’ estates, and the Debtors’ creditors. The Debtors have determined that BRRE is well-qualified to provide these services in light of BRRE’s extensive experience in the field of real estate and its familiarity with the needs of distressed companies. BRRE’S QUALIFICATIONS 13. BRRE is a preeminent real estate consulting and advisory firm with its principal office located at 875 North Michigan Avenue, Suite 3900, Chicago, Illinois 60611. BRRE advises clients throughout the United States and Canada. BRRE’s four Principals have over 120 years of retail real estate expense in and outside of bankruptcy. BRRE has dedicated professionals who provide real property lease advisory services to its clients and who have extensive experience optimizing retail real estate portfolios, reducing occupancy costs, and assisting in lease 5 PHIL1 9219613v.4 Case 20-12816-JTD Doc 87 Filed 11/23/20 Page 6 of 12 restructurings, terminations, dispositions, and selection—services that are crucial to the Debtors’ success in these consolidated Chapter 11 Cases. 14. Furthermore, BRRE’s professionals are expert negotiators with close and extensive relationships with landlords. BRRE Principals have considerable experience providing real property lease consulting services to financially troubled companies and have been retained in numerous large and complex chapter 11 cases, including: J.C. Penny, Sears Holdings, Bon-Ton Department Stores, Aldo, BCBG, Golfsmith, Gordman’s, Sharper Image, Sports Authority, and WorldCom.