Daily Archives: September 19, 2020

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Dave & Busters stock price has taken a rollercoaster ride in the last day or so, after media reports highlighted concerns in the eatertainment chains quarterly report that raised the threat of possible bankruptcy.

The chains shares plummeted more than 26% Thursday, on reports that it might need to declare bankruptcy if it could not strike deals with lenders and landlords. By mid-day Friday, its stock price was up about 13%.

Some analysts said reports of the food-and-game chains demise were exaggerated.

In our opinion, shares will appreciate as the company demonstrates it can achieve profitability at lower sales volumes, reopen all of its stores by the end of December, and successfully restructure or amend its credit facility without the need for additional equity, the brokerage firm Stifel said in its latest guidance.

Nevertheless, it remains a perilous time for Dave & Busters, which is slowly reopening units closed at the outset of the pandemic while also issuing layoff notices to hundreds of workers around the country.

The Dallas-based company said in its latest quarterly report that it must obtain waivers from its lenders or else it may result in filing a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code to implement a restructuring plan.

Food-and-games concepts, especially, are struggling amid the pandemic, as they look for ways to safely bring back consumers while also boosting food and drink sales as amusements remain trickier to regulate.

Dave & Busters closed all of its locations in mid-March and only reopened three units, in very limited capacities, in Q1.

The Company is unable to determine whether, when or the manner in which the conditions surrounding the COVID-19 pandemic will change, including when any restrictions or closure requirements will be lifted or potentially re-imposed in certain states or local jurisdictions, whether it will be able to successfully staff stores, and the degree to which it will be able to re-engage customers, the chain said in its quarterly report. These developments have caused a material adverse impact on the Companys revenues, results of operations and cash flows, including the Companys ability to meet its obligations when due. These conditions raise substantial doubt about the Companys ability to continue as a going concern for a period of one year from the date the financial statements are issued.

This week, Restaurant Business reported on Dave & Busters plans to lay off 1,369 previously furloughed workers in seven states. Since then, the chain has issued new Worker Adjustment and Retraining Notification (WARN) alerts to 373 workers at four locations in New York about layoffs coming in December.

As of earlier this month, Dave & Busters said it had reopened 89 of its 137 stores. It had previously said all locations would reopen this month, but is now saying it expects to be fully operational by the end of December, with its 11 units in New York and 16 California stores among the last to return.

It reported a same-store sales decline of 87% for the quarter ended Aug. 2, with revenue also falling 85% to $50.8 million. Net losses for the quarter came to $58.6 million.

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Dave & Busters watchers wonder if the chain will declare bankruptcy - Restaurant Business Online

A bankruptcy judge blasted Hertz Global Holdings Inc.'s plan to pay top managers up to $14.6 million in bonuses after they collected millions in additional bonuses days before the rental car company filed for bankruptcy.

"It seems offensive to give senior executives bonuses when they were paid" retention compensation immediately before the bankruptcy was filed, Judge Mary Walrath said Thursday in U.S. Bankruptcy Court in Wilmington, Del. The 14 most senior executives could receive as much as $5.4 million.

"The incentive plan has serious problems," she said, asking Hertz to revise it.

The judge also said the financial targets the Hertz executives need to hit to qualify for the bonuses need to be tougher, echoing objections by a federal bankruptcy watchdog

That proposed $14.6 million in potential incentive compensation was on top of the $16.2 million in retention bonuses Hertz, just days before its May bankruptcy filing, said it would pay to about 340 employees in recognition of the uncertainty faced as a result of the novel coronavirus pandemic's impact on travel.

The new incentive plan would pay 309 employees.

The judge's ruling is a victory for a group of retired Hertz executives who criticized the new bonus plan, saying the company's promises to provide them with a secure retirement are being cast aside.

U.S. Trustee Andrew Vara, the government's bankruptcy watchdog, also has criticized Hertz's bonus plan.

The trustee said the company's top executives were reneging on a deal they made to get their retention pay before bankruptcy. Those executives signed agreements waiving their rights to 2020 performance bonuses as a condition of collecting the retention bonuses, Mr. Vara said.

Now in bankruptcy, they were trying to revive the performance-bonus program, with targets set at much lower levels, he has said.

Some key Hertz creditors, however, had backed the company's bonus plan. Those creditors supporting the plan include a bankruptcy committee that includes the International Brotherhood of Teamsters.

A lawyer for Hertz said during the hearing that the incentive plan was developed by independent directors and advisers who had no direct financial stake in the bonuses.

Hertz representatives couldn't be reached for immediate comment after the hearing.

Peg Brickley and Alexander Gladstone contributed to this article

Write to Becky Yerak at becky.yerak@wsj.com

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Judge rejects Hertz's bankruptcy bonuses to execs - MarketWatch

Naples businessman David Hoffmann and the Hoffmann Family of Cos. has agreed to allow Hertz to store its idle rental cars on the arena grounds at no cost. Fort Myers News-Press

A U.S. bankruptcy judge has rejected Hertz's controversial employee incentive plans, calling them "offensive."

After hearing testimony from all sides and allowing for the cross-examination of a few witnesses in a Delaware courtroom Thursday afternoon,Judge MaryWalrath struck them down, going along withthe objectors.

Objectionscame from a group of former executives, who fear the big payouts will jeopardize their promised retirement income from the company, and the U.S. trustee overseeing Hertz'sChapter 11case, who questionedthe real intentions and purpose behind them.

While Walrath spurned the incentive plans, she left the door open for Hertz to come back with revised ones, moving to continue the hearing and her final decision to a later date.

Ex-CEO of Hertz agrees to pay back nearly $2 million in compensation after charges filed

Money issues: Hertz reports huge second-quarter losses amid coronavirus pandemic

As it fights to drive itself out of bankruptcy, Estero-based Hertz Global Holdings parent of The Hertz Corp. has argued suchincentives are critical for motivating and keeping the employees in its management ranks and necessary to compensate them for their extra hard work in challenging times.

As written, the plans could have resulted in payouts of more than $14.6 millionto hundreds of employees, including its top brass.

In her ruling after anhours-long hearing, Walrath said it seemed offensive to award senior executives bonuses as they're the very same ones who got hefty retention payments a few days before the company'sbankruptcy filing, even though they "weren't entitled to them under the debtors' ownpolicy."

Hertz doled out more than $16.2 million in "cash retention payments" to what it described as "a broad base of key employees at the director level and above," raising some eyebrows.

Under the incentive plan proposed for top executives, a little over a dozen of Hertz's highest-ranking employees could have earned more than $5.4 million in additional bonus pay if Hertz achievedits highest performance goals.

Barb and Pete Martinez of Estero chug past hundreds of rental cars now stored around the Hertz Arena off Ben Hill Griffin Parkway in Estero. Naples businessman David Hoffmann and the Hoffmann Family of Cos., whichbought the Everblades hockey team and the Hertz Arena in August, agreed to allow Hertz to store its idle rental cars on the arena grounds a few weeks ago. It's yet another sign of the devastating blow thetourism industry has taken from the pandemic locally, nationally and globally, due to travel bans and other restrictions designed to curb the spread of COVID-19.(Photo: Michael Braun/news-press.com)

More than 50 others who received retention pay would have been able to collect more money too under a second incentive plan.

Hertz filed for bankruptcy on May 22 after seeing its rental revenuevirtually vanish and the value of its rental fleet plummet with the spread of the coronavirus, leaving its U.S. operations in dire financial straits and unable to meet its heavy debt load.

While Hertz may have slipped into bankruptcy because of the outbreak of COVID-19 the incurable, sometimes fatal disease caused by the coronavirus and not due directly to any wrongdoing or mismanagement, Walrath said it shouldn't mean its leaders are entitled to bonuses because of the unforeseen disaster that's made their lives harder.

"There a lot of people who were affected by COVID," she said. "A lot of people have had their compensationcut as a result of COVID. Many people have been furloughed and lost their jobs completely."

In making her decision, Walrathquestioned the validity of the incentive plans, saying she had "serious problems" with them, including the three levels of metrics Hertz proposed to use as triggers for the payouts.

The judge arguedemployees should not be givenrewards for not allowing Hertz's situation to get any worse or for keeping conditions going in the direction they're already headed as proposed in the plans. Thepayouts, she said, should be based on meeting much harder goals or true "stretches," if they're really designed to be incentives.

"I am very concerned about the tying of these metrics to what the debtor is already doing," she said.

As a judge, she saidshe'd never seen a situation where a company paid out millions in bonuses days beforea bankruptcy filing, only to come back a few months later and ask for thesekinds of incentives post-bankruptcy.

"I think more has to be established on why the employees who got their retentionbonuses and agreed to stay with the company are not going todo their best to make sure this company survives and succeeds," Walrath said.

She questioned why the request for the incentiveshave come so soon, when the company has yet to file a reorganization plan.

Walrath suggested Hertz change its metrics or come up with better arguments for why it chose the ones it did to address a "gut feeling" that the incentives aren'tnecessary or may not be "appropriate at all."

Hertz rental car customers drop off vehicles at the Southwest Florida International Airport on Tuesday May 7, 2013.(Photo: Andrew West/news-press.com)

In his testimony, Hertz's attorney Jason Zakia defended the incentive plans, arguing they were crafted in everyone's best interest by consultants and outside directors who would not directly benefit from them.

As for the metrics, he said, none of them would allow the company to be "simply put on autopilot."

Zakia argued the metrics and goals can't be so difficult to meet that they're seen as unachievable or unattainable because they would then "serve no incentivizing purpose whatsoever."

"Indeed, they'd serve no purpose for anyone whatsoever," he said.

"You need to strike a balance between something that is achievable, possible, but something that's incentivizing and motivating, not automatic. That's exactly what happened here," Zakia said.

He emphasized that if the goals were achieved and all the bonuses paid out it would be "good news for everybody."

Even when counting the prior bonuses, Zakia said the compensation for plan participants in no case would have exceeded the median pay offered at industry comparable companies or for comparable jobs.

He described the incentives as a wise expense based on Hertz's business judgment.

Hertz's unsecured creditors' committee supported the plans, arguingthey'd result in a stronger company performance that could ultimately allow the car rental companyto pay back more of what it owes.

"They looked at this very carefully," Zakia said. "This committee is no rubber stamp and they weren't a rubber stamp here."

Thomas Mayer, an attorney representing the unsecured creditors' committee, agreed, saying the group had done a lot of research of its own on the plans and their metrics.

"I don't know how much, if any of these bonuses, will be paid. So we do not view these as layups. We do not view these aspayments for just showing up," he said.

There's a long road to recovery ahead and theplans, Mayer argued, could help the company get out of bankruptcy sooner.

"It is highly unlikely that this debtor is going to be able to exit bankruptcy bythe end of 2020," hesaid.

Starfish greet Hertz Gold Plus Rewards customers in the rental area at Southwest Florida International Airport.(Photo: Casey Logan/The News-Press)

Representatives with FTI Consulting, which recommended and helped create the incentive plans, defended themat the hearing too, answering tough questions asked by attorneys representing the other side, who drilled down into the nitty-gritty details of them.

LindaRichenderfer, counsel forU.S. TrusteeAndrew Vara, asked pointed questions about how the metrics were determined and where the company's current performancestood against those metrics.

"In some areas we are improving and are ahead of the metrics. Inothers, we still trail behind or have work to do," said Michael Buenzow, a bankruptcy consultant with FTI.

Based on the proposed metrics, he said, thecompany was pacingahead on the sale of its surplus rental cars, for example, but still hada long way to go to meet its goals for operating cash flow, which continues to be in the negative.

Richenderfer also picked apart the comparable analysis used to develop the plans, questioning the peer group the consultants considered in coming up with the scope and amounts for its requested incentives.

Attorney John Demmy, representing the retired executives group, questioned how the performance targets were determined for each of the metrics, suggesting that they seemed too low based on business improvements seen since the early onset of the pandemic.

He pointedly asked Buenzow if any of the proposed metrics could be achieved by management just showing up.

Buenzow answered with a firm "absolutely not."

"For each of themetrics, there is a significant amount of effort that needs to be undertaken by the employees," he said.

The judge and the objectors remained skeptical.

The executives Demmy representsagreed to defer part of their compensation in return for Hertz's promises to pay them back what they're owed in retirement benefits.

The group claims that a few days after Hertz's bankruptcy filing thecompany told them the lifetime benefits they had been receiving were "required to stop."

As a group, the executives estimate they're still owed more than $5.5 million in benefits based on "over 182 years of accumulated service" withHertz.

That's just a small fraction of what Hertz Global owes.

By the end of March, the companyhad racked up more than $24 billion in debt, according to its bankruptcy filing, with only $1 billion of available cash to operate and pay its bills.

The Hertz Corp. operates the Hertz, Dollar andThriftybrands, with thousands of corporate and franchise locations throughout the country.

Parent company Hertz Global also ownsDonlen,an American fleet leasing and management company based in Illinois, which is part of the bankruptcy filings.

The company completed its new multmillion-dollar global headquarters in Estero at the end of 2015. The companyreceived millions in state and local incentives to relocate from New Jersey to Southwest Florida.

Read or Share this story: https://www.news-press.com/story/news/2020/09/18/hertz-bankruptcy-executives-bonus/3486629001/

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'Offensive.' Bankruptcy judge rejects Hertz employee incentive plans, executives would get second bonuses - News-Press

Shareholders of Dallas-based Tuesday Morning Corp. may be in the rare situation of owning some of the retailer after its expected exit from bankruptcy this fall.

Tuesday Morning, a retailer of gifts and home closeouts founded in 1974, filed for bankruptcy May 27 after all of its 700 stores were closed by the pandemic and it had no e-commerce business to make up any of the lost revenue.

U.S. Bankruptcy Court Judge Harlin DeWayne Hale on Friday approved the creation of a committee of equity security holders after denying the request twice before.

The Dallas judge said in his order that he now has greater confidence that there is a substantial likelihood that equity will receive a meaningful distribution."

Tuesday Morning stores have performed well since reopening, along with other retailers that sell home furnishings as Americans reacted to the pandemic by sprucing up their homes. Plus, the retailer has attracted 40 prospective buyers who have signed nondisclosure agreements to access confidential information. Several parties have signed nonbinding letters of intent, according to the judges order.

The judge previously said he would reconsider forming an equity committee if events changed the analysis. Theres little precedent for shareholders of public companies to come out with anything from a Chapter 11 reorganization. Thats because theres a strict hierarchy for who gets paid from the assets. Government taxes, lenders and other creditors, including utilities and merchandise suppliers, bondholders and preferred shareholders, are all paid ahead of common stockholders.

Tuesday Mornings stock price stopped trading on the Nasdaq at 28 cents a share on June 5 and has since been trading on the over-the-counter market, often called the pink sheets. The stock closed Friday at 63 cents a share, up 18 cents, or 40%.

Tuesday Morning said it will file bid procedures by Wednesday and anticipates a final sale hearing at the end of October. Next week, it said, it will also file a plan and disclosure statement to serve as an alternative to the sale process.

Hale said given how quickly Tuesday Morning is moving on the sale process, he believed that it was necessary to appoint an equity committee at this time to ensure that equity holders are able to participate meaningfully in the sale and plan processes in a streamlined and efficient way.

Unlike many retailer companies that were forced into bankruptcy because of debt, Tuesday Morning didnt have a problematic balance sheet. It lacked cash flow with stores closed, and because of uncertainty related to the pandemic, the bank wouldnt extend credit to the company.

As part of its reorganization, Tuesday Morning closed 132 stores through the end of July and 65 additional stores that started closing in August. It also closed a new distribution center in Phoenix. It was already in the process of retrofitting its 1.2 million-square-foot Dallas distribution center.

Twitter: @MariaHalkias

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Shareholders of Dallas-based bankrupt retailer Tuesday Morning may be in the money - The Dallas Morning News

Knotel is now facing a new lawsuit in San Francisco over unpaid rent; the flexible workspace company has active legal battles with landlords in New York, Atlanta, and Los Angeles. Regus Adds 6 NYC Locations to Chapter 11 Filing

The Real Deal reported this week that Regus has put half a dozen of its New York City workcenters into bankruptcy as the company seeks Chapter 11 protection for upwards of 100 locations across the country. Over the past six weeks, the company has added around 90 locations to its Chapter 11 filing. In a recent interview, Mark Dixon, CEO of Regus parent company, IWG, said the firm will be accelerating its plan to trim 4 percent of its global portfolio in response to Covid-19.

Bizjournals reported this week that lawsuits are stacking up against Knotel. According to reports, landlord Hudson Pacific Properties sued the company Wednesday over unpaid rent at a South of Market office building where Knotel has leased space since 2018. Hudson Pacific is seeking damages in excess of $393,498. The lease for that building is set to expire in April of 2027, but just 2 years in the flexible workspace provider is having a hard time making rent. The new suit adds to Knotels already mounting legal battles with landlords in New York, Los Angeles, and Atlanta.

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Flexible workspace provider, The Executive Centre, reported this week that its revenue in south Asia had grown by 18% in the first half of 2020. According to reports, the company reported $21 million in revenue and occupancy of 89% throughout the region. Global revenue for the company was up 5% despite the COVID-19 pandemic, and the number of workstations occupied as of June, 2020 increased by 14% compared to 2019. The company reported seeing strong demand for flexible space from domestic companies, which has helped the company recover from the pandemics impact.

For more flexible workspace and future of work news, visit our Daily Digest section!

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In The Loop: Regus Bankruptcy, Knotel's Legal Woes Continue, And More Industry News - AllWork.Space