Loyalty Ventures files bankruptcy, plans to sell Air Miles program

By Sarah Lizee

Olympia, Wash., March 10 – Loyalty Ventures Inc. and some of its subsidiaries filed Chapter 11 bankruptcy on Friday in the U.S. Bankruptcy Court for the Southern District of Texas, according to a press release.

Subsidiary LoyaltyOne, Co. sought protection under the Companies' Creditors Arrangement Act in the Ontario Superior Court of Justice on Friday as well.

In 2021, Alliance Data Systems Corp., now Bread Financial Holdings, Inc., caused entities that operate the debtors’ BrandLoyalty business and the Air Miles reward program to spinoff from Alliance and form a new corporate structure with Loyalty Ventures as the ultimate parent.

Alliance required Loyalty Ventures to take on significant debt in connection with the spinoff, the company said in court documents. The debt includes a $175 million term loan A, a $500 million term loan B and a $150 million revolver. Bank of America, NA is the administrative and collateral agent.

Loyalty Ventures said it has faced several operational challenges since the spinoff, including the loss and renegotiation of some customer sponsor contracts, and the impact of supply chain issues coupled with the impact of the Russian invasion of Ukraine.

In connection with the CCAA proceedings, LoyaltyOne filed motions seeking Canadian Court approval under the CCAA of a sale and investment solicitation process (SISP).

Bank of Montreal announced its entry into a purchase agreement with LoyaltyOne under which BMO will acquire LoyaltyOne's Air Miles reward program business. Closing of the sale is conditioned on LoyaltyOne not receiving a more favorable offer from another party, and other customary closing conditions.

In connection with the Chapter 11 cases, Loyalty Ventures has filed customary motions authorizing it to proceed with its operations in the ordinary course.

Subject to approval of the Canadian Court, LoyaltyOne will enter into a debtor-in-possession facility with BMO as lender for a $70 million secured credit facility.

Subject to the approval of the U.S. and Canadian courts, Loyalty Ventures, as borrower, and LoyaltyOne, as lender, will enter into an intercompany DIP facility.

The company is also seeking court approval to cash collateral that its prepetition secured lenders have an interest in.

Loyalty Ventures also announced its intention to voluntarily delist its common stock, par value $0.01 per share, from the Nasdaq Global Select Market and deregister the common stock.

Loyalty Ventures’ previously announced sale of its BrandLoyalty business to Opportunity Partners BV remains on track to close by the second quarter of 2023.

In their Chapter 11 petition, the companies listed $1.59 billion in assets and $1.98 billion in debt.

Bread Financial, based in Columbus, Ohio, has the largest unsecured claim, though the amount is undetermined.

PJT Partners LP and Alvarez & Marsal Inc. are acting as investment banker and financial adviser, respectively, and Akin Gump Strauss Hauer & Feld LLP and Cassels Brock & Blackwell LLP are acting as legal advisers to the companies.

Loyalty Ventures is a Dallas-based operator of consumer rewards programs. The Chapter 11 case number is 23-90111.

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