Delaware Chapter 11: In re: Diesel USA, Inc.

Published 14 March 2019 by Elliott Greenleaf

Introduction

On March 5, 2019, (the "Petition Date"), Diesel USA, Inc. (the "Debtor") filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.

The Debtor is represented by Arent Fox LLP as lead counsel and Young Conaway Stargatt & Taylor, LLP as Delaware counsel. The case has been assigned to the Honorable Judge Mary F. Walrath. A hearing on the Debtor's first day motions was held on March 6, 2019. A meeting to form the Official Committee of Unsecured Creditors has not yet been scheduled.

Background

Headquartered in New York, New York, the Debtor is an apparel brand founded in Molvena, Italy in 1978. The Debtor specializes in a variety of denim-wear but has expanded to include premium casual clothing and accessories for men, women, and children. The Debtor has operations located in eighty-five (85) countries. The Debtor employs approximately 380 employees as of the Petition Date.

Through various court filings, the Debtors indicate that they have encountered financial difficulty due to the general downturn in the brick-and-mortar retail industry resulting from the drastic shift to online shopping. In addition, the Debtor faced certain failed strategic decisions implemented by prior management in an attempt to affect a post-recession out-of-court turnaround of the business.

Specifically, prior to 2015, prior management began employing a real estate strategy that involved substantial investments in its retail stores, including nearly $90 million in capital expenditures across the business that was primarily allocated to brick-and-mortar stores. Given the recession and its impact on the retail industry, those investments were ill-timed, excessive, and unfruitful.

The Debtor commenced this chapter 11 case to obtain relief from certain unexpired leases and executory contracts. The Debtor is continuing to evaluate all of its executory contracts and unexpired leases and will determine which will be necessary to reject through a prepackaged plan (the "Plan").

Financial Condition

As of the Petition Date, the Debtor estimates that it owes approximately $7.4 million in unsecured trade obligations.

In addition, UniCredit S.p.A. is owed approximately $2.5 million under an undrawn irrevocable standby letter of credit dated July 2, 2018.

Prepackaged Plan

The Debtor filed a Plan and disclosure statement which will provide for rejection of unexpired leases and executory contracts and allow the reorganized Debtor to emerge from chapter 11 and continue operating in the ordinary course of business. The Plan will provide for payment in full of all claims, including general unsecured claims. The Plan will not impair any class of claims or interests and will provide for the assumption of all of the Debtor's executory contracts and unexpired leases other than those to be rejected through the Plan. Accordingly, all classes are deemed to accept the Plan.

The Debtor seeks approval of the following deadlines:

Event

Proposed Date/Deadline

Petition Date

March 5, 2019

Plan Supplement Filing Deadline

March 28, 2019

Plan/Disclosure Statement Objection Deadline

April 4, 2019, at 4:00 p.m. (ET)

Assumption or Rejection Objection Deadline

April 4, 2019, at 4:00 p.m. (ET)

Plan/Disclosure Statement Reply Deadline (including, to the extent applicable, replies to any Executory Contract Procedures objections)

April 9, 2019 at 4:00 p.m. (ET)

Deadline to file proposed confirmation order

April 9, 2019 at 4:00 p.m. (ET)

Deadline to file brief in support of confirmation

April 9, 2019 at 4:00 p.m. (ET)

Second Day Hearing and Combined Hearing

April 11, 2019