Z Gallerie details winning bid for assets, plan support agreement

By Caroline Salls

Pittsburgh, May 29 – Z Gallerie, LLC has selected a joint bid submitted by DirectBuy Home Improvement, Inc. and KKR Credit Advisors (US) LLC, on behalf of funds and accounts constituting pre-bankruptcy term loan credit agreement lenders as the winning offer for its assets, according to a notice filed with the U.S. Bankruptcy Court for the District of Delaware.

The winning bidders have agreed to pay $20.3 million for the assets, comprised of $7.7 million in cash to be provided by DirectBuy and $12.6 million in second-lien debt to be provided by KKR and B. Riley.

Participation in the second-lien debt will be offered to minority term loan lenders in proportion to their holdings of pre-bankruptcy secured term loan claims.

In addition, Z Gallerie said it has entered into a Chapter 11 plan support agreement with KKR Credit Advisors, the company’s debtor-in-possession financing lender, the winning bidder and the official committee of unsecured creditors appointed in Z Gallerie’s bankruptcy case.

The company said it will file definitive documentation and modifications to the plan necessary to implement the proposed sale transaction.

Under the plan support agreement, KeyBank will receive pay down of $15.3 million in DIP financing claims, $10 million in new first-lien senior secured debt and $2.7 million in new third-lien debt in exchange for its DIP financing claims, in addition to any cash in excess of $250,000 from any source, with that cash to be applied to the reduce the new third-lien debt.

Holders of pre-bankruptcy term loan claims will roll over $5 million into a fourth-lien debt facility issued by the purchaser and receive a 15% equity interest in the purchaser on terms to be agreed.

The plan confirmation hearing is scheduled for June 11.

Z Gallerie is a Gardena, Calif.-based furniture retailer. It filed bankruptcy on March 11 under Chapter 11 case number 19-10488.

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