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Welcome to the Information Website of the Ombudsman for the Reorganized School Specialty Inc., et al.
On May 23, 2013, the Bankruptcy Court entered an Order confirming the Debtors' Amended Joint Plan of Reorganization (the "Plan"). Click here for link to the Plan. The Plan became effective on June 11, 2013 (the "Effective Date"). Pursuant to the Plan and the Fifth Amended Supplement to the Plan (the "Ombudsman Plan Supplement"), the Ombudsman was appointed as of the Effective Date.
The Ombudsman’s Role:
Generally, the Ombudsman’s role is that of an advocate for trade creditors with regard to the trade election process, and an advocate for creditors in Class 5 (General Unsecured Claims) and Class 6 (Trade Unsecured Claims) with regard to Plan distribution issues. The Ombudsman’s role is described in Article V.I.4 of the Plan and in more detail in the Ombudsman Plan Supplement, but has three primary components. The Ombudsman (who was selected by the Creditors Committee) is authorized to:
(i) Monitor Trade Elections and work to resolve any disputes about Customary Trade Terms between holders of Allowed Class 6 Claims who have made Trade Elections and the Reorganized Debtors;
(ii) Notify holders of Allowed Class 5 and Allowed Class 6 Claims of any event that would, per the Plan, alter the anticipated date for Distributions to holders of Allowed Class 5 and Allowed Class 6 Claims, upon being notified of such event by the Reorganized Debtors; and
(iii) Generally monitor the Reorganized Debtors’ compliance with the provisions of Article V.I of the Plan regarding treatment of holders of Allowed Class 5 and Allowed Class 6 Claims.
Ombudsman's Update (May 29, 2020)
To: Holders of Class 5 and Class 6 Claims
By letter dated May 18, 2020, School Specialty and its subsidiaries (“School Specialty” or the “Company”) have asked holders of Allowed Class 5 and Class 6 bankruptcy claims to consent to a payment equal to 10% of the amount of the creditor’s anticipated bankruptcy distribution in full satisfaction of School Specialty’s obligations to that creditor under the 2013 bankruptcy plan. The Company’s May 18th letter requests that creditors respond to the new proposal on or before June 5, 2020 at 5pm Eastern Time via email (email@example.com ).
Please be aware that the proposal is not for 10% of the amount of your original allowed bankruptcy claim, but for 10% of the amount that you are entitled to as a distribution on account of the original claim. The last page of the settlement agreement that was sent to you should state the amount that School Specialty believes is owed to you, and in the event that the out-of-court closing occurs, the settlement should result in a payment to you of 10% of that amount.
The form of letter, as well as the forms of settlement agreement which were sent out by the Company, are provided on this website. There are two versions of the settlement agreement, and which version you were sent will depend upon whether you previously consented to the extension of the Company’s deadline for making the bankruptcy distribution, from December 2019 to December 2020. If you consented to that extension, you should have received the “3L GUC Settlement Agreement”; if you did not consent to the extension, you should have received the “Non-3L GUC Settlement Agreement”. The abbreviation “3L” is a reference to the 3rd lien that was granted by School Specialty to secure the balance of the bankruptcy distributions due to the creditors that consented to the one year extension of the Company’s payment deadline. The percentage amount of the proposed distribution is the same under both forms of agreement.
The May 18th letter and the proposed settlement agreements indicate that the new 10% payment will be made upon the closing of a sale of the operating assets of School Specialty to a group of the Company’s secured lenders. The obligation to make that 10% payment will be assumed by the purchaser of the business. Please read the proposed settlement agreement carefully, as it includes provisions under which you will be releasing all claims against School Specialty and others upon the closing of the sale, excluding the obligations of the released parties under the settlement agreement.
Whether the sale transaction can occur without a second bankruptcy filing by the Company will depend on several factors, including whether School Specialty receives enough consents from Class 5 and Class 6 creditors.
We are advised by representatives of the Company that it is anticipated that if the out-of-court sale is able to close, the closing will occur by August 18, 2020, subject to extension by the purchaser, and the 10% distributions will be made three (3) business days after the sale closing. We note, however, that it is possible that the parties to the sale transaction will extend these deadlines. We will continue to monitor this matter, and will post an update on this website if we learn that (i) the sale will not be happening by August 18th (or subsequent agreed-upon date), or (ii) an out-of-court transaction will not be possible.
If for any reason the out-of-court sale cannot be effected, the Company expects to file bankruptcy for the second time. The Company and the lenders which are interested in buying the business will then try to effect the sale transaction under section 363 of the Bankruptcy Code. In the event of a consensual sale transaction under section 363 of the Bankruptcy Code in which certain conditions precedent are met, we are advised that the purchaser has indicated that it will assume the 10% payment to consenting Class 5 and Class 6 creditors as described above (i.e., creditors that agreed to the new settlement proposal), subject in all respects to the terms of the executed settlement agreements.
The outcome of any bankruptcy case is difficult to predict. We note, however, that School Specialty believes that if a new bankruptcy filing is necessary, and a consensual section 363 sale is not achieved, there will not be any money available for distribution to holders of Class 5 and Class 6 claims.
Please do not hesitate to contact me or my colleague Donna Lieberman, if you have questions. It is currently better to contact us via email (firstname.lastname@example.org or email@example.com) than by phone, as we are working remotely due to the coronavirus.
School Specialty filed a form 8-K with the SEC on March 27, 2020. That filing discusses the impact that the Covid-19 pandemic and the resulting school and business closings are having on the Company. Another 8-K filing was made by the Company on April 8, 2020, disclosing that on April 6th, the Company entered into agreements with its lenders to (i) extend certain restructuring-related deadlines from March 31st until April 30th and (ii) extend the date for a term loan installment payment and interest from March 31st until June 30th.
School Specialty’s filings do not provide details of what the potential restructuring will look like, but according to the Company’s forbearance agreement with its lenders, the restructuring support agreement “shall include, among other things, milestones in connection with a potential restructuring or sale transaction of the Company and an agreement among Agent, the Lenders and the Company regarding the terms, scope, and fees to be incurred in connection with the consummation of the transactions contemplated thereunder”.
Links to both of the recently filed 8-Ks are available on this website. We will update the website as we learn more.
We hope everyone is safe and well during these challenging times!
Company Proposal (November 2019)
The Ombudsman has been advised by counsel to the Company that these forms of documents have been sent to Class 5 and Class 6 Claimants:
Please click here to view the Ombudsman's Letter dated November 27, 2019 regarding the Company's proposal.
Update re the Company's Proposal (December 26, 2019)
We are advised by School Specialty that it received more than one transaction proposal, each of which is being evaluated by the company and its secured lenders. While deliberations are ongoing, the company is hopeful that the lenders will make a decision by 12/31, though that date may be extended. If one of the proposals is approved, we expect that the 10% distribution will be made shortly thereafter to creditors that entered into the extension agreement.
We will remain in contact with the company and provide you with additional information as it becomes available. Happy holidays, and best wishes for a happy new year.
Alan D. Halperin
Update re the Company's Proposal (January 7, 2020)
We are advised by School Specialty that it has received confirmation from its secured lenders that it has received an acceptable transaction proposal, and that the conditions to making initial payments to creditors who have entered into extension agreements have been satisfied. Further, a third party collateral agent now holds a third lien on certain of the company’s assets for the benefit of the creditors who have entered into the extension agreements. The company will be making initial payments to those creditors as soon as reasonably practicable in accordance with the terms of their respective extension agreements.
We will remain in contact with the company and provide you with additional information as it becomes available.
Alan D. Halperin
Update re the Company's Proposal (January 30, 2020)
School Specialty has recently filed a document with the SEC that indicates that the Company is continuing to negotiate the terms of a transaction with one or more parties. A link to the Company’s filing can be found in the Financial Documents section of this website.
We will update this website as we learn more.
Ombudsman's School Specialty Updates
Please click here to view the Ombudsman's School Specialty Update dated June 21, 2017.
Please click here to view the Ombudsman's School Specialty Update dated February 7, 2017.
Please click here to view the Ombudsman's School Specialty Update dated June 3, 2016.
Please click here to view the Ombudsman's School Specialty Update dated June 11, 2015.
As of July 15, 2015, the Ombudsman has confirmed with the Company that the claims objection process has been completed, and that the amounts of Allowed Claims are:
-Class 5 (General Unsecured Claims) entitled to 20% distribution: $8,987,173.28
-Class 6 (Trade Claims) entitled to 20% distribution (no trade election or no agreement re trade terms): $8,701,382.15
-Class 6 (Trade Claims) entitled to 45% distribution (trade election and agreement re trade terms): $25,792,079.74
The Company further advises the Ombudsman that there has been no Change of Control at the Company. The anticipated date of distributions to holders of Allowed Class 5 and Class 6 Claims is therefore unchanged, and remains mid-December of 2019.
KCC maintains this website at the direction of Alan Halperin, the Ombudsman appointed for the Reorganized Debtors. KCC maintains this website for the public's convenience and, while KCC and the Ombudsman make every attempt to ensure the accuracy of the information contained herein, this website is not the website of the United States Bankruptcy Court and does not contain the complete, official record of the Bankruptcy Court. All documents filed with the Court are available for inspection at the Clerk of the U.S. Bankruptcy Court for the District of Delaware.