Orchard Supply Hardware Stores (OSH), a neighborhood hardware and garden store focused on paint, repair and the backyard, has inked a deal through which Lowe's Companies, Inc. (LOW) would acquire majority of its assets for $205 million cash, plus the assumption of payables owed to nearly all of Orchard's supplier partners. In order to help the sale and restructure its balance sheet, Orchard has filed voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the District of Delaware.
This agreement includes the initial stalking horse bid in the Court-supervised auction process under Section 363 of the Bankruptcy Code. Pursuant to this, Lowe's would buy no less than 60 of Orchard's stores, based on further due diligence on the store locations. The company may complete the process in around 90 days.
The company fully expects to operate its overall business and the vast majority of its stores as usual during its financial restructuring. To this end, the company has secured commitments for $177 million in debtor-in-possession financing from Wells Fargo Bank, the company's existing ABL lender, and its Term Loan Lenders which would ensure it is able to continue meeting its financial obligations throughout the Chapter 11 case.
Further, the Term Loan Lenders would support the acquisition agreement with Lowe's as the stalking horse. Also, Orchard has filed a series of first day motions seeking authority to pay employee wages and benefits, honor customer gift cards and Club Orchard incentives, and otherwise manage its day-to-day operations as usual. Orchard expects to pay suppliers in the normal course for all goods and services delivered on or after June 17, 2013.
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