Z Gallerie secures bankruptcy court approval for reorganization plan

By Caroline Salls

Pittsburgh, June 20 – Z Gallerie, LLC’s plan of reorganization was confirmed Thursday by the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, the company 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.

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 Credit Advisors 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 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.

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 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 calls for administrative claims, debtor-in-possession financing claims, secured tax claims and other priority claims to be paid in full in cash.

Other secured claims will either be paid in full in cash or reinstated or holders will receive the collateral securing the claims.

Holders of critical trade claims will receive a share of a recovery pool.

Holders of general unsecured claims will receive a share of excess distributable cash.

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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