UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 22, 2020
BBX CAPITAL FLORIDA LLC
(Exact name of registrant as specified in its charter)
Florida | 000-56177 | 82-4669146 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) | ||
401 East Las Olas Boulevard, Suite 800, Fort Lauderdale, Florida |
33301 | |||
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: 954-940-4900
Not applicable
(Former name or former address, if changed since last report.)
Securities registered pursuant to Section 12(b) of the Act: None
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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 1.03 | Bankruptcy or Receivership. |
On September 22, 2020, ItSugar LLC and its subsidiaries (ITSUGAR) filed voluntary petitions (the Chapter 11 Petitions, and the cases commenced thereby, the Chapter 11 Cases) under Chapter 11 of Title 11 of the U.S. Code (the Bankruptcy Code) in the U.S. Bankruptcy Court for the Southern District of Florida (the Bankruptcy Court). ItSugar LLC and its subsidiaries are subsidiaries of New BBX Capital Florida LLC (New BBX Capital).
As previously disclosed, the effects of the COVID-19 pandemic on demand, sales levels and consumer behavior, as well as the recessionary economic environment, have had a material adverse effect on ITSUGARs business, results of operations and financial condition, and ITSUGARs liquidity and its ability to sustain its operations were dependent on obtaining significant rent abatements or deferrals from its landlords, amended payment terms from its vendors, and improvement and stabilization of its sales volumes. This has not occurred and resulted in the decision by ITSUGAR to file the Chapter 11 Cases.
ITSUGAR will continue to operate its businesses as debtor in possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. ITSUGAR currently intends to continue to operate its business in the ordinary course during the pendency of the Chapter 11 Cases, subject to business restrictions and other applicable mandates and guidelines related to the COVID-19 pandemic.
On September 22, 2020, New BBX Capital and BBX Capital Corporation, the current parent company of New BBX Capital, issued a joint press release announcing ITSUGARs filing of the Chapter 11 Petitions. A copy of the press release is attached hereto as Exhibit 99.1.
Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits:
Exhibit No. | Description | |
99.1 | Press release dated September 22, 2020 |
1
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.
Date: September 24, 2020
BBX Capital Florida LLC | ||||||
By: |
/s/ Jarett S. Levan | |||||
Jarett S. Levan | ||||||
President |
2
Exhibit 99.1
ITSUGAR, a subsidiary of
BBX Capital Corporation and BBX Capital Florida LLC,
has Filed for Chapter 11 Bankruptcy Protection
FORT LAUDERDALE, FL September 22, 2020, BBX Capital Corporation (NYSE: BBX; OTCQX: BBXTB) (Parent) and its subsidiary, BBX Capital Florida LLC (New BBX Capital), announced today that their subsidiary, ITSUGAR LLC and its subsidiaries (ITSUGAR), has filed voluntary petitions under Chapter 11 of Title 11 of the U.S. Code (the Bankruptcy Code). The Chapter 11 filings were made in the U.S. Bankruptcy Court for the Southern District of Florida (the Bankruptcy Court). ITSUGAR intends to continue to operate its retail locations while the Bankruptcy proceedings are ongoing.
Parent and its other principal subsidiaries, including New BBX Capital and its subsidiaries other than ITSUGAR, remain financially strong and continue to conduct normal business operations. New BBX Capital and its subsidiaries, including ITSUGAR, will be spun-off to the shareholders of Parent if Parents previously announced spin-off of New BBX Capital is completed.
Jarett Levan, President of BBX Capital Corporation and BBX Capital Florida LLC commented, Unfortunately, it has become necessary for ITSUGAR to make this filing, as the effects of the COVID-19 pandemic on demand, sales levels, and consumer behavior, as well as the recessionary economic environment, have had a material adverse effect on ITSUGARs business, results of operations and financial condition. Sales related to travel and tourism historically represented approximately 60% of ITSUGAR sales on an annualized basis. In the middle of March 2020, as a result of the COVID-19 pandemic, ITSUGAR closed all of its approximately 100 store locations. While ITSUGAR commenced a gradual reopening of its stores between early June and the middle of July, as we previously disclosed, ITSUGARs liquidity and its ability to sustain its operations were dependent on obtaining significant rent abatements or deferrals from its landlords, amended payment terms from its vendors, and improvement and stabilization of its sales volumes. This has not occurred and resulted in the decision to file bankruptcy proceedings. We believe that ITSUGAR will be better positioned to successfully navigate the effects of the COVID-19 pandemic upon exiting from bankruptcy.
For the three and six months ended June 30, 2020, ITSUGAR had approximately $3.6 million and $19.6 million of sales, respectively, and losses before income taxes of approximately $8.4 million and $36.5 million, respectively. As of the time of the bankruptcy filing, ITSUGAR has approximately $0.5 million of cash, $6.2 million of secured debt, and $10.4 million of unsecured liabilities, including unpaid rent obligations.
As a result of the impact of the pandemic, ITSUGAR ceased paying rent or has made only partial payments to the landlords. While ITSUGAR has been engaged in negotiations with its landlords for rent abatements, deferrals and other modifications, it has received notices of default from the landlords of 49 of its retail locations. While no termination notices have been received, the cure periods of the defaults have generally expired.
Parent recognized $24.9 million of impairment losses related to ITSUGARs goodwill and long-lived assets during the six months ended June 30, 2020. As of June 30, 2020, the carrying amount of the ITSUGAR reporting unit was $18.9 million, which included goodwill of $14.9 million and was net of debt payable to a subsidiary of New BBX Capital.
ITSUGAR will need cash to continue to operate its business during the bankruptcy proceedings and to cover its legal and other professional advisor expenses. Subject to Bankruptcy Court approval, a subsidiary of New BBX Capital will provide debtor-in-possession (DIP) financing to ITSUGAR under the protections of the Bankruptcy Code.
Bankruptcy of ITSUGAR
ITSUGAR and its subsidiaries filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Florida (the cases commenced by such filings, the Bankruptcy Cases). Under Section 362 of the Bankruptcy Code, the filing of a bankruptcy petition automatically stays most actions against ITSUGAR, including most actions to collect pre-petition indebtedness or to exercise control of the property of ITSUGAR. Absent an order of the Bankruptcy Court, substantially all pre-petition liabilities will be subject to settlement under a plan of reorganization.
The Office of the United States Trustee, a division of the Department of Justice, may appoint an official committee of unsecured creditors (the Creditors Committee). The Creditors Committee and its legal representatives have a right to be heard on all matters that come before the Bankruptcy Court. If ITSUGAR files a plan of reorganization or liquidation, the rights and claims of various creditors and security holders will be determined by a plan of reorganization that is confirmed by the Bankruptcy Court. Under the priority rules established by the Bankruptcy Code, certain post-petition liabilities and pre-petition liabilities are given priority over pre-petition indebtedness and need to be satisfied before unsecured creditors or stockholders are entitled to any distribution.
Reorganization Plan. In order to successfully exit the Chapter 11 Bankruptcy Cases, ITSUGAR would need to propose, and obtain confirmation by the Bankruptcy Court of, a plan of reorganization or liquidation (the Reorganization Plan) that satisfies the requirements of the Bankruptcy Code. As provided by the Bankruptcy Code, ITSUGAR initially has the exclusive right to solicit a plan. At this time, it is not possible to predict the precise effect of the reorganization process on ITSUGARs business and creditors or when or if ITSUGAR may emerge from bankruptcy, nor is it possible to predict the effect of the Bankruptcy Cases and the reorganization process on ITSUGAR and its results of operations, cash flows or financial condition. A Reorganization Plan is expected to be filed shortly but has not yet been submitted to the Bankruptcy Court.
Chapter 7 or Dismissal of the Bankruptcy Cases. If ITSUGAR fails to file a Reorganization Plan or if the Bankruptcy Court does not confirm a Reorganization Plan filed by ITSUGAR, the Bankruptcy Cases could be converted to cases under Chapter 7 of the Bankruptcy Code. Under Chapter 7, a trustee is appointed to collect ITSUGARs assets, reduce them to cash and distribute the proceeds to ITSUGARs creditors in accordance with the statutory scheme of the Bankruptcy Code. Alternatively, in the event ITSUGARs Reorganization Plan is not confirmed by the Bankruptcy Court, in lieu of conversion to Chapter 7, the Bankruptcy Court could dismiss the Bankruptcy Cases.
It is likely that, in connection with a final Reorganization Plan, the liabilities of ITSUGAR will be found to exceed the fair value of their assets. This would result in claims being paid at less than 100% of their face value and the extinguishment of the equity interests of the pre-bankruptcy owners. At this time, it is not possible to predict the outcome of the bankruptcy proceedings.
Accounting Impact. Based on this filing and the uncertainties surrounding the nature, timing and specifics of the Bankruptcy proceedings, it is anticipated that Parent and, following the proposed spin-off, New BBX Capital will de-consolidate ITSUGAR as of September 22, 2020 and recognize a noncontrolling equity investment in ITSUGAR at its estimated fair value on such date and a gain or loss based on the difference between the carrying amount of ITSUGAR at the time it is de-consolidated and the estimated fair value of the noncontrolling equity investment. Parent and New BBX Capital are currently evaluating whether its noncontrolling equity investment in ITSUGAR will be prospectively accounted for under the cost or equity method of accounting. In addition, Parent and New BBX Capital will be required to assess the collectability of $6.2 million in debt payable by ITSUGAR to a subsidiary of New BBX Capital that will no longer be eliminated in consolidation in Parent and New BBX Capitals consolidated financial statements following the de-consolidation of ITSUGAR. It is not possible at this time to predict the outcome of the Bankruptcy proceedings or whether Parent or New BBX Capital will continue to have an equity interest in ITSUGAR upon the resolution of the Bankruptcy Cases.
About BBX Capital Corporation: BBX Capital Corporation (NYSE: BBX) (OTCQX: BBXTB) is a Florida-based diversified holding company. For additional information, please visit www.BBXCapital.com.
BBX Capital Corporation Contact Info:
Investor Relations:
Leo Hinkley, Managing Director, Investor Relations Officer
954-940-5300, Email: LHinkley@BBXCapital.com
Media Relations: Kip Hunter, Kip Hunter Marketing
954-303-5551, Email: kip@kiphuntermarketing.com
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Forward-Looking Statements:
This press release contains forward-looking statements. All opinions, forecasts, projections, future plans or other statements, other than statements of historical fact, are forward-looking statements. The forward-looking statements in this press release are also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on current expectations and involve risks, uncertainties and other factors, many of which are beyond Parents and New BBX Capitals control, that may cause actual results or performance to differ from those set forth or implied in the forward-looking statements. These risks and uncertainties include, without limitation, the risks and uncertainties inherent in bankruptcy proceedings and the inability to predict the effect of ITSUGARs reorganization and/or liquidation process on Parent, New BBX Capital, and their respective results of operation and financial condition, including the risk that additional impairment charges may be required in the future, ITSUGARs ability to develop, prosecute, confirm and consummate a plan of reorganization or liquidation, ITSUGARs ability, through the Chapter 11 process, to reach agreement with its landlords or other third parties, and the risk that creditors of ITSUGAR may assert claims against Parent, New BBX Capital or any of their respective subsidiaries (other than ITSUGAR) and that Parents, New BBX Capitals or any such subsidiarys assets may become subject to or included in ITSUGARs bankruptcy case; risks related to the business, financial condition and results of the other subsidiaries of Parent and New BBX Capital; risks related to Parents proposed spin-off of New BBX Capital, including that the spin-off may not be consummated on the contemplated terms, or at all, that Parent may, in the sole discretion of its Board of Directors, abandon the spin-off at any time prior to its consummation, uncertainties relating to the trading of New BBX Capitals Class A Common Stock and Class B Common Stock, that, if consummated, the spin-off may not result in the benefits anticipated, the impact of ITSUGARs bankruptcy proceedings and process on New BBX Capital, uncertainties related to the tax effects of the spin-off to Parents shareholders, and the other risks and uncertainties set forth in the proxy statement for the special meeting of Parents shareholders at which the spin-off will be considered for approval and in New BBX Capitals Registration on Form 10, as amended,, including the respective Risk Factors sections thereof. In addition, reference is also made to other risks and factors detailed in reports filed by Parent with the SEC, including Parents Annual Report on Form 10-K for the year ended December 31, 2019 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, which may be viewed on the SECs website at www.sec.gov or in the Investor Relations section of Parents website at www.BBXCapital.com. The foregoing factors are not exclusive. You should not place undue reliance on any forward-looking statement, which speaks only as of the date made. Neither Parent nor BBX Capital undertakes, and each of them specifically disclaims any obligation, to update or supplement any forward-looking statements, except as may be required by law.
Additional Information and Where to Find it
On August 27, 2020, Parent filed with the SEC and mailed to its shareholders a definitive proxy statement for a special meeting of its shareholders to vote on the proposed spin-off of New BBX Capital. Parent has also filed with the SEC certain other documents that are incorporated by reference into the proxy statement. SHAREHOLDERS ARE URGED TO READ THE PROXY STATEMENT AND THE INFORMATION INCORPORATED THEREIN BY REFERENCE CAREFULLY AND IN THEIR ENTIRETY BEFORE MAKING A VOTING DECISION BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED SPIN-OFF.
Copies of all documents filed by Parent with the SEC, including the proxy statement and information incorporated therein by reference, are available, free of charge, on the SECs website at www.sec.gov and in the Investor Relations section of Parents website at www.BBXCapital.com. In addition, Parents shareholders may obtain copies of the documents filed by Parent with the SEC at no charge by contacting Parents Investor Relations Department by mail at BBX Capital Corporation, 401 East Las Olas Boulevard, Suite 800, Fort Lauderdale, Florida 33301, or by phone at 954-940-5300. Shareholders may also contact Laurel Hill Advisory Group, LLC, Parents proxy solicitor, toll-free at (888) 742-1305 for copies of the proxy statement and information incorporated therein by reference.
Participant Information
Parent and its directors and executive officers may, under the rules of the SEC, be deemed to be participants in the solicitation of proxies from Parents shareholders in connection with the proposed spin-off. Information regarding Parents directors and executive officers, including their names and interests in Parent, is set forth in Amendment No. 1 to Parents Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on April 29, 2020. This document can be obtained free of charge from the sources indicated above. Additional information regarding Parents directors and executive officers and their interests in Parent and the proposed spin-off is contained in the proxy statement filed by Parent with the SEC and mailed to Parents shareholders.