Hema UK I files Chapter 15 case, eyes recognition of scheme proceeding

By Caroline Salls

Pittsburgh, Aug. 20 – Hema BV subsidiary Hema UK I Ltd. made a Chapter 15 bankruptcy filing Wednesday in the U.S. Bankruptcy Court for the Southern District of New York.

Foreign representative Joost Johannes Hendrikus De Beijer said in a statement filed with the court that Hema has a scheme of arrangement proceeding pending in the High Court of Justice of England and Wales.

De Beijer said challenging market conditions that have persisted over the past few years, accompanied by the cash interest costs required to service the Hema group’s significant funded debt obligations, led the group to consider strategic options beginning in January 2020 with a view toward decreasing its leverage to a more sustainable level.

The onset of the Covid-19 pandemic put significant additional pressure on group’s financial state, De Beijer said, as conditions in the retail market have been exceptionally challenging since March.

The representative said the group’s need to deleverage was made more acute in the period leading up to the maturity of existing payment-in-kind notes on June 15, “given that the group had no indication whether the parent would redeem the existing PIK notes.”

The group announced on June 15 that Hema UK Ltd., existing obligors, all of the groups revolving credit facility lenders and hedging providers and holders of 62% of existing senior secured notes had reached an agreement on the high-level terms of the restructuring of the group’s financial arrangements and had executed a lock-up agreement.

De Beijer said the scheme, which relates to a series of senior secured notes in the face amount of €600 million, allows Hema UK to implement the proposed restructuring by authorizing it to act as an attorney to sign a restructuring implementation deed and any relevant restructuring documents on behalf of the ultimate beneficial owners of the existing notes.

The proposed restructuring involves a partial debt-for-equity swap under which the existing notes will be partially discharged and exchanged for new debt and equity instruments.

All of the creditors and stakeholders ranking below the existing senior secured noteholders, including holders of the group’s secured notes and PIK notes and current equity owners, will receive nothing.

The existing revolver will remain in place.

In addition, Hema launched a sales process on June 26.

Final binding bids are expected on Sept. 14. If significant interest is received, scheme creditors will have the opportunity to approve a possible sale of the group in their capacity as prospective holders of new holding company shares.

On Aug. 19, scheme creditors approved the scheme at a meeting scheduled by the U.K. court. That court will hold a scheme sanctioning hearing on Aug. 24.

De Beijer said Hema made the Chapter 15 filing to seek recognition of the English Proceeding as a foreign main proceeding.

Cravath, Swaine & Moore LLP is representing Hema UK in its Chapter 15 proceedings.

Hema is an Amsterdam-based retailer. The case number is 20-11936.

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