r/BBBY - Lazard and Legalese: The ultimate bear trap? The most artistic use of the English language and tinfoil-level plausible deniability.
OK so let’s rewind to August 2022. This is when BBBY reaches out to Lazard and the relationship begins. In the same month that “RC Ventures exits” the company is pursuing a debt-to-equity conversion on their bonds. Specifically, Lazard developed the terms and offers to exchange bonds in a public bond exchange.
In November 2022, Lazard also negotiated a private debt-for-equity exchange.
Then on January 5, the company terminated the public exchange, but here’s what happened with the private one:
r/BBBY - Lazard and Legalese: The ultimate bear trap? The most artistic use of the English language and tinfoil-level plausible deniability.
Private offering #1, with one existing holder.
r/BBBY - Lazard and Legalese: The ultimate bear trap? The most artistic use of the English language and tinfoil-level plausible deniability.
Private offering #2, with several, institutional holders.
So on the public front things didn’t look good, but behind the scenes, one holder paid 3.5M$ to converted their debt and in offering two a few days later, several institutional holders also convert a bunch, including all of their 2024 bonds.
r/BBBY - Lazard and Legalese: The ultimate bear trap? The most artistic use of the English language and tinfoil-level plausible deniability.
Here Kurtz tells the court that as early as December 2022, the company was considering Chapter 11 and if they could execute a going-concern transaction specifically, and also, look for interest in investors to provide financing after bankruptcy. In December! Out of 20 parties, 9 of them signed NDA’s in the second week of January. Signing an NDA allows you access to the data room, see the entire balance sheet, etc. Also, January 2023 was a long, 5 week month so the second week of January was January 9 to January 13. Of the parties that signed NDA’s, they were financial sponsors (as in post-petition financing?) and strategic buyers (like…). Then the paragraph returns to the going concern transaction.
You will remember, on January 13, the Pitchbook service reported the company had undergone a leveraged buyout, was 100% acquired by private equity and potentially triggered a change of control, which was listed as a “event of default” in the credit agreement. (this will be its own post, I’m not leaving a cliffhanger).
r/BBBY - Lazard and Legalese: The ultimate bear trap? The most artistic use of the English language and tinfoil-level plausible deniability.
mid January, 2023.
You will notice that in point 9, Mr. Kurtz changes his wording from second week of January to mid January. Noting that January was a 5 week month, “mid” would represent January 16 to January 20. Sneaky!
Following the events of the second week, during the following one efforts intensify to find a Plan sponsor (yes, the Plan) to fund post-petition financing. Again, in mid-January, Lazard and the company are planning an exit strategy out of bankruptcy. At the same time, the pool of interested parties expanded. Importantly, Mr. Kurtz does not mention a going concern in the first few sentences of this page. Not until mid-way through, the context changes and even though there was interest in providing financing, a funding a Plan out of bankruptcy, it did not appear the company would survive in a going concern as there was no interest for that.
This point I believe is presented to justify entering bankruptcy, and uses confusing language to present a negative outlook. But if you analyze the language very acutely, point 9 is saying two different things. 1. There are a lot of parties, both financing and buyers, that want some of this company. 2. At the same time, it appears over the next two weeks (end of January) none of them are likely wanting the company as a going concern specifically.
By that time, as in the end of January, Lazard had reached out to 60 potential investors now. Wow, even though the prospects of a going concern are looking grim, the interest throughout January is increasing. That is something I did not interpret before. Of these 60 parties, potential Plan sponsors wanted some or all of the company’s assets and some wanted to provide financing after bankruptcy.
Which brings us to point 10. To substantiate my theory that internet throughout January is increasing, Lazard and the company have to amend their engagement letter. Why? Because Lazard discovered they solicited potential successful outcomes that they would not be paid for as it was not outlined in their preliminary contract.
Sale and restructuring. Hmm, maybe IP sales, and a new entity through restructuring? That’s what it says. Again, in January, the firm plan was how to emerge out of Chapter 11.
r/BBBY - Lazard and Legalese: The ultimate bear trap? The most artistic use of the English language and tinfoil-level plausible deniability.
The timeline moves to mid-April 2023. This one is really confusing, Lazard re-engages (I opine due to their efforts in January through March being blocked) to find a Plan sponsor or lender for after bankruptcy. There are 30 parties in mid-April, with no mention if they are the same as the ones in January, or if some, or all, or none, are new.
They talk about acquiring all or part of the company with the 30 parties or providing DIP financing, and no viable buyer was found. Remember this is before Chapter 11, it is mid-April and they entered Chapter 11 on the last day of the second-last week of April. This is a factual and confusing as fuck statement. We know after mid-April they do in fact get DIP financing.
Lazard summarizes December to mid-April in the last two sentences. Lazard is providing the basis to justify voluntarily entering Chapter 11.
r/BBBY - Lazard and Legalese: The ultimate bear trap? The most artistic use of the English language and tinfoil-level plausible deniability.
On to point 12 and again, very time-specific language. We needed to enter Chapter 11 because we had no actionable offers before April 23. The language now moves to “some or all” asset sales through bidding and if necessary, an auction. As in, only if necessary. (Why did the Baby auction get canceled? It was not necessary.)
Kurtz is careful to say even though we are in Chapter 11, we are still trying for a going-concern transaction. More ass covering for after this bankruptcy is all done.
He also states the bidding procedures are structured so that there are options other than a going concern, such as structuring any Sale Transaction and by using “Sale Transaction” with capitalized letters, he is referring to the corresponding terms of payment Lazard have with the contract terms explained in “Sale Transaction.” (will be in my next post!)
r/BBBY - Lazard and Legalese: The ultimate bear trap? The most artistic use of the English language and tinfoil-level plausible deniability.
Get my DIP!
And now confirming, that even though there was no DIP financing in mid-April, a week later, at the commencement of the bankruptcy there is. Legalese I tell ya.
r/BBBY - Lazard and Legalese: The ultimate bear trap? The most artistic use of the English language and tinfoil-level plausible deniability.
Mr. Kurtz again returns to the Bidding Procedures, and like the Sale Transaction he is referring to another area of Docket 29 where the Bidding Procedures are outlined. Though they did not get a going concern transaction, there are multiple avenues to bid for any transaction, and multiple ways to put assemble a transaction.
I’ll end it there I don’t want to post another novel today. My next post will tie a lot of events together that occurred at the beginning of the year and be a deep dive into the events beginning in November 2022 and culminating in January 2023.
r/BBBY - Lazard and Legalese: The ultimate bear trap? The most artistic use of the English language and tinfoil-level plausible deniability. OK so let’s rewind to August 2022. This is when BBBY reaches out to Lazard and the relationship begins. In the same month that “RC Ventures exits” the company is pursuing a debt-to-equity conversion on their bonds. Specifically, Lazard developed the terms and offers to exchange bonds in a public bond exchange.
In November 2022, Lazard also negotiated a private debt-for-equity exchange.
Then on January 5, the company terminated the public exchange, but here’s what happened with the private one:
r/BBBY - Lazard and Legalese: The ultimate bear trap? The most artistic use of the English language and tinfoil-level plausible deniability. Private offering #1, with one existing holder.
r/BBBY - Lazard and Legalese: The ultimate bear trap? The most artistic use of the English language and tinfoil-level plausible deniability. Private offering #2, with several, institutional holders.
So on the public front things didn’t look good, but behind the scenes, one holder paid 3.5M$ to converted their debt and in offering two a few days later, several institutional holders also convert a bunch, including all of their 2024 bonds.
r/BBBY - Lazard and Legalese: The ultimate bear trap? The most artistic use of the English language and tinfoil-level plausible deniability. Here Kurtz tells the court that as early as December 2022, the company was considering Chapter 11 and if they could execute a going-concern transaction specifically, and also, look for interest in investors to provide financing after bankruptcy. In December! Out of 20 parties, 9 of them signed NDA’s in the second week of January. Signing an NDA allows you access to the data room, see the entire balance sheet, etc. Also, January 2023 was a long, 5 week month so the second week of January was January 9 to January 13. Of the parties that signed NDA’s, they were financial sponsors (as in post-petition financing?) and strategic buyers (like…). Then the paragraph returns to the going concern transaction.
You will remember, on January 13, the Pitchbook service reported the company had undergone a leveraged buyout, was 100% acquired by private equity and potentially triggered a change of control, which was listed as a “event of default” in the credit agreement. (this will be its own post, I’m not leaving a cliffhanger).
r/BBBY - Lazard and Legalese: The ultimate bear trap? The most artistic use of the English language and tinfoil-level plausible deniability. mid January, 2023.
You will notice that in point 9, Mr. Kurtz changes his wording from second week of January to mid January. Noting that January was a 5 week month, “mid” would represent January 16 to January 20. Sneaky!
Following the events of the second week, during the following one efforts intensify to find a Plan sponsor (yes, the Plan) to fund post-petition financing. Again, in mid-January, Lazard and the company are planning an exit strategy out of bankruptcy. At the same time, the pool of interested parties expanded. Importantly, Mr. Kurtz does not mention a going concern in the first few sentences of this page. Not until mid-way through, the context changes and even though there was interest in providing financing, a funding a Plan out of bankruptcy, it did not appear the company would survive in a going concern as there was no interest for that.
This point I believe is presented to justify entering bankruptcy, and uses confusing language to present a negative outlook. But if you analyze the language very acutely, point 9 is saying two different things. 1. There are a lot of parties, both financing and buyers, that want some of this company. 2. At the same time, it appears over the next two weeks (end of January) none of them are likely wanting the company as a going concern specifically.
By that time, as in the end of January, Lazard had reached out to 60 potential investors now. Wow, even though the prospects of a going concern are looking grim, the interest throughout January is increasing. That is something I did not interpret before. Of these 60 parties, potential Plan sponsors wanted some or all of the company’s assets and some wanted to provide financing after bankruptcy.
Which brings us to point 10. To substantiate my theory that internet throughout January is increasing, Lazard and the company have to amend their engagement letter. Why? Because Lazard discovered they solicited potential successful outcomes that they would not be paid for as it was not outlined in their preliminary contract.
Sale and restructuring. Hmm, maybe IP sales, and a new entity through restructuring? That’s what it says. Again, in January, the firm plan was how to emerge out of Chapter 11.
r/BBBY - Lazard and Legalese: The ultimate bear trap? The most artistic use of the English language and tinfoil-level plausible deniability. The timeline moves to mid-April 2023. This one is really confusing, Lazard re-engages (I opine due to their efforts in January through March being blocked) to find a Plan sponsor or lender for after bankruptcy. There are 30 parties in mid-April, with no mention if they are the same as the ones in January, or if some, or all, or none, are new.
They talk about acquiring all or part of the company with the 30 parties or providing DIP financing, and no viable buyer was found. Remember this is before Chapter 11, it is mid-April and they entered Chapter 11 on the last day of the second-last week of April. This is a factual and confusing as fuck statement. We know after mid-April they do in fact get DIP financing.
Lazard summarizes December to mid-April in the last two sentences. Lazard is providing the basis to justify voluntarily entering Chapter 11.
r/BBBY - Lazard and Legalese: The ultimate bear trap? The most artistic use of the English language and tinfoil-level plausible deniability. On to point 12 and again, very time-specific language. We needed to enter Chapter 11 because we had no actionable offers before April 23. The language now moves to “some or all” asset sales through bidding and if necessary, an auction. As in, only if necessary. (Why did the Baby auction get canceled? It was not necessary.)
Kurtz is careful to say even though we are in Chapter 11, we are still trying for a going-concern transaction. More ass covering for after this bankruptcy is all done.
He also states the bidding procedures are structured so that there are options other than a going concern, such as structuring any Sale Transaction and by using “Sale Transaction” with capitalized letters, he is referring to the corresponding terms of payment Lazard have with the contract terms explained in “Sale Transaction.” (will be in my next post!)
r/BBBY - Lazard and Legalese: The ultimate bear trap? The most artistic use of the English language and tinfoil-level plausible deniability. Get my DIP!
And now confirming, that even though there was no DIP financing in mid-April, a week later, at the commencement of the bankruptcy there is. Legalese I tell ya.
r/BBBY - Lazard and Legalese: The ultimate bear trap? The most artistic use of the English language and tinfoil-level plausible deniability. Mr. Kurtz again returns to the Bidding Procedures, and like the Sale Transaction he is referring to another area of Docket 29 where the Bidding Procedures are outlined. Though they did not get a going concern transaction, there are multiple avenues to bid for any transaction, and multiple ways to put assemble a transaction.
I’ll end it there I don’t want to post another novel today. My next post will tie a lot of events together that occurred at the beginning of the year and be a deep dive into the events beginning in November 2022 and culminating in January 2023.
Thanks for reading.