Rubie’s Costume unsecured creditors committee objects to asset sale

By Sarah Lizee

Olympia, Wash., Sept. 22 – The official committee of unsecured creditors for Rubie’s Costume Co., Inc.’s Chapter 11 case objected to the debtors’ motion to sell substantially all of its assets, according to a Tuesday filing with the U.S. Bankruptcy Court for the Eastern District of New York.

The committee said the sale is “disconcertingly incongruous with the many unequivocally optimistic representations from the debtors regarding the value of their assets and their ability to achieve a transaction that would fully satisfy general unsecured claims.”

The debtors are seeking approval of an insider sale transaction, despite their receipt of a more valuable competing bid disqualified by the debtors, which will “leave behind disfavored class of unsecured claims that were not paid through the critical vendor program or picked up through the sale and who now face significant uncertainty they will receive any meaningful recovery at all, let alone payment in full as promised,” the committee said.

“In short, the debtors’ marketing process did not live up to their assurances and unsecured creditors are being asked to live with the result and bear the cost.”

As previously reported, the company said a joint venture comprised of a multi-billion-dollar investment fund and a strategic operator will serve as stalking horse bidder.

According to the motion, the stalking horse bidder agreed to provide funds sufficient to satisfy the outstanding amounts due under Rubie’s debtor-in-possession loan and the secured obligations to its bank group; to assume all post-bankruptcy, non-professional trade liabilities; to provide $25 million of equity financing and to pay $2 million in cash to allow the company to complete a plan of liquidation.

Rubie’s will also keep $7 million of cash on hand to allow it to complete the plan.

A $9 million pool of cash will be used to fund a liquidating plan and make distributions to creditors.

The new company formed by the joint venture will receive 70% of the newly issued shares in Rubie’s, and Rubie’s Beige shareholders will receive the other 30%.

If the stalking horse bidder is not ultimately the winning bidder, Rubie’s will pay it a 3% break-up fee and reimburse its sale-related expenses.

The deadline for competing bids and the auction date were not specified in the motion.

Melville, N.Y.-based Rubie’s designs, manufactures and distributes Halloween costumes and accessories. The company filed bankruptcy on April 30 under Chapter 11 case number 20-71970.

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