Tuesday Morning Corp. filed SEC Form 8-K: Entry into a Material Definitive Agreement, Bankruptcy or Receivership, Creation of a Direct Financial Obligation, Regulation FD Disclosure, Financial Statements and Exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Securities registered pursuant to Section 12(b) of the Act:
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| The Capital Market* |
*On January 3, 2023, the Company filed a Form 25 with the Securities and Exchange Commission (the “SEC”) in order to delist the Company’s common stock from The Nasdaq Capital Market. On January 3, 2023, trading in the Company’s common stock on Nasdaq was suspended, and the common stock has been delisted. The deregistration of the common stock under Section 12(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) will be effective 90 days, or such shorter period as the SEC may determine, after filing of the Form 25. Upon deregistration of the common stock under Section 12(b) of the Exchange Act, the common stock will be registered under Section 12(g) of the Exchange Act.
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 1.01. | Entry into a Material Definitive Agreement. |
The information set forth below under Item 1.03 of this Current Report on Form 8-K regarding the DIP Term Loan Agreement (as defined below) is incorporated herein by reference.
| Item 1.03. | Bankruptcy or Receivership. |
As previously disclosed, on February 14, 2023, Tuesday Morning Corporation (the “Company”) and certain of its direct and indirect subsidiaries (collectively with the Company, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Northern District of Texas, Fort Worth Division (the “Bankruptcy Court”). The Chapter 11 Cases are being administered jointly under the caption “In re: Tuesday Morning Corporation, et. al., Case No. 23-90001”.
The Debtors will continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
Debtor-in-Possession Financing
On February 16, 2023, in accordance with the terms of an interim order issued by the Bankruptcy Court (the “Interim DIP Order”), the Debtors entered into a Senior Secured Super Priority Debtor-in-Possession Term Loan Agreement (the “DIP Term Loan Agreement”) among the Debtors, Cantor Fitzgerald Securities, as administrative agent, for itself and for and on behalf of the other lenders party thereto. Pursuant to the terms of the DIP Term Loan Agreement, the lenders are providing the Debtors with a term loan facility (the “DIP Facility”) composed of (1) $15 million in initial term loans, which became available immediately following the entry of the Interim DIP Order (the “Interim DIP Term Loans”), (2) $26.5 million in incremental term loans, which are subject to approval of a final order by the Bankruptcy Court, and (3) $10 million of delayed draw term loans, which are subject to approval of a final order by the Bankruptcy Court (collectively, the “DIP Term Loans”).
The DIP Term Loan Agreement also provides that, subject to approval of a final order by the Bankruptcy Court, (1) each lender under the Credit Agreement, dated December 31, 2020, and as previously amended (the “Pre-Petition Term Loan Credit Agreement”), among certain of the Debtors, the lenders party thereto (the “Pre-Petition Term Loan Lenders”), and Alter Domus (US), LLC, as administrative agent and collateral agent, and (2) the holder of the junior secured convertible note (the “FILO C Convertible Note”) issued by the Company (the “Pre-Petition FILO C Lender”), may elect to provide a pro rata portion of the DIP Facility. For each $1.61 million of commitments under the DIP Term Loan Agreement made by each Pre-Petition Term Loan Lender or Pre-Petition FILO C Lender, as the case may be, such lender would agree to forgive $1 million of loans under the Pre-Petition Term Loan Credit Agreement or Pre-Petition FILO C Convertible Note, as applicable, and would receive $1 million of roll-up loans (“Roll-Up Loans”) under the DIP Term Loan Agreement. The maximum amount of Roll-Up Loans would be approximately $24.47 million with respect to the Pre-Petition Term Loan Lenders and approximately $7.74 million with respect to the Pre-Petition FILO C Lender. The Roll-Up Loans are subject to approval of a final order by the Bankruptcy Court.
Under the terms of the Interim DIP Order, proceeds of the Interim DIP Term Loans may be used to fund the Chapter 11 Cases, make certain other payments as provided in the DIP Term Loan Agreement, and to fund working capital of the Company.
The DIP Term Loan Agreement includes conditions precedent, representations and warranties, affirmative and negative covenants, and events of default customary for financings of this type and size. The DIP Term Loan Agreement requires the Debtors to, among other things, comply with the terms of approved budgets and a maximum loan-to-value ratio, maintain certain minimum levels of eligible inventory, use commercially reasonable efforts to renegotiate the leases for the Company’s distribution centers, and receive approval of a plan of reorganization or sale of substantially all assets of the Debtors through the Chapter 11 process by agreed upon deadlines. The DIP Term Loan Agreement also requires weekly cash sweeps and mandatory prepayment requirements from net proceeds received from casualty events, equity issuances or indebtedness or other extraordinary proceeds.
New money DIP Term Loans under the DIP Term Loan Agreement will bear interest at a per annum rate of 12.75%. Following the occurrence of an event of default under the DIP Term Loan Agreement, the interest rate on outstanding borrowings would increase by 5.00%.
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The commitments of the lenders under the DIP Term Loan Agreement will terminate and outstanding borrowings under the DIP Term Loans will mature at the earliest of (i) August 15, 2023; (ii) the consummation of a sale of all or substantially all of the assets of the Debtors pursuant to Section 363 or Section 1129 of the Bankruptcy Code; (iii) the effective date of any plan of reorganization; or (iv) such other date on which the outstanding borrowings become due and payable, whether by acceleration or otherwise; or (v) the date on which the administrative agent delivers written notice to the Debtors of its election to accelerate the outstanding borrowings as a result of an event of default.
The foregoing summary of the DIP Term Loan Agreement is qualified in its entirety by reference to the full text of the DIP Term Loan Agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated by reference herein.
| Item 2.03. | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information set forth above under Item 1.03 of this Current Report on Form 8-K regarding the DIP Term Loan Agreement is incorporated herein by reference.
| Item 7.01. | Regulation FD Disclosure. |
Bankruptcy Court filings and other documents related to the Chapter 11 Cases are available at https://cases.stretto.com/TuesdayMorning or by calling the Company’s claims agent, Stretto, at (855) 202-8673 or by sending an email to [email protected].
The Company cautions that trading in the Company’s common stock and other securities during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks. Trading prices for the Company’s securities may bear little or no relationship to the actual recovery, if any, by holders of the Company’s securities in the Chapter 11 Cases. The Company expects that its existing common stock will be cancelled and that holders of the common stock will not receive any amounts through the Chapter 11 Cases.
The information furnished in this Item 7.01 of this Current Report on Form 8-K shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of such section, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
Cautionary Notice Regarding Forward-Looking Statements
This Form 8-K contains forward-looking statements within the meaning of the federal securities laws, which are based on management’s current expectations, estimates and projections. Forward looking statements also include statements regarding the Company’s plans with respect to the Chapter 11 proceedings, the Company’s plan to continue its operations while it works to complete its proposed reorganization, the Company’s proposed debtor-in-possession financing, the Company’s plans for store closures, and other statements regarding the Company’s proposed reorganization, strategy, future operations, performance and prospects. These forward-looking statements are subject to risks and uncertainties that could cause the Company’s actual results to differ materially from the expectations expressed in the Company’s forward-looking statements. These risks, uncertainties and events also include, but are not limited to, the following: the Company’s ability to obtain timely approval of the Bankruptcy Court with respect to motions filed in the Chapter 11 proceedings; objections to the DIP financing or other pleadings filed that could protract the Chapter 11 proceedings; the Bankruptcy Court’s rulings in the Chapter 11 proceedings, including the approvals of the terms and conditions of the DIP financing, and the outcome of the Chapter 11 proceedings generally; the Company’s ability to comply with the restrictions imposed by the proposed terms and conditions of the DIP financing, including the Company’s ability to obtain a timely sale of all of its assets or approval of a plan of reorganization; the length of time that the Company will operate under Chapter 11 protection and the continued availability of operating capital during the pendency of the Chapter 11 proceedings; the Company’s ability to continue to operate their business during the pendency of the Chapter 11 proceedings; employee attrition and the Company’s ability to retain senior management and other key personnel due to the distractions and uncertainties; the effectiveness of the overall restructuring activities pursuant to the Chapter 11 proceedings and any additional strategies the Company may employ to address its liquidity and capital resources; the actions and decisions of creditors and other third parties that have an interest in the Chapter 11 proceedings; risks associated with third parties seeking and obtaining authority to terminate or shorten the Company’s exclusivity period to propose and confirm one or more plans of reorganization, for the appointment of a Chapter 11 trustee or to convert the Chapter 11 proceeding to a Chapter 7 proceeding; increased legal and other professional costs necessary to execute the Company’s restructuring; the Company’s ability to maintain relationships with suppliers, customers, employees and other third parties and regulatory authorities as a result of the Chapter 11 proceedings; litigation and other risks inherent in a bankruptcy process; and the other factors listed in the Company’s filings with the Securities and Exchange Commission. Except as may be required by law, the Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements were made or to reflect the occurrence of unanticipated events.
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| Item 9.01 | Exhibits and Financial Statements. |
(d) Exhibits.
104 Cover Page Interactive Data File, formatted in Inline XBRL (embedded within the Inline XBRL document)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| TUESDAY MORNING CORPORATION | ||
| Date: February 17, 2023 | By: | /s/ Jennyfer R. Gray |
| Jennyfer R. Gray | ||
| Vice President, Interim General Counsel and Corporate Secretary | ||
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