Orchard Supply Hardware Stores Corp (NASDAQ:OSH) warned shareholders they could suffer a complete loss of their investments due to its Chapter 11 bankruptcy proceedings.
The management of the company issued a caution after observing high trading volume of Class A Common Stock and Series A Preferred Stock of Orchard Supply Hardware Stores Corp (NASDAQ:OSH) after filing Chapter 11 with the U.S. Bankruptcy Court on June 17, 2013.
With the S&P 500 falling a double-digit percentage in the first half, most equity hedge fund managers struggled to keep their heads above water. The performance of the equity hedge fund sector stands in stark contrast to macro hedge funds, which are enjoying one of the best runs of good performance since the financial crisis. Read More
“Stockholders of a company in Chapter 11 generally receive value only if all claims of the company’s secured and unsecured creditors are fully satisfied. In this case, Orchard’s management strongly believes that it is highly unlikely all such claims will be fully satisfied. Accordingly, it is expected that the Company’s equity holders will experience a complete loss of their investment as a result of Orchard’s Chapter 11 bankruptcy proceedings…” according to a statement by Orchard Supply Hardware Stores Corp (NASDAQ:OSH).
Over the past two years, the specialty retailer posted $132.8 million in total losses. It was spun off from Eddie Lampert’s Sears Holdings Corp (NASDAQ:SHLD) in December 2011. As of May 13, RBS Partners LP, a hedge fund sponsor headed by Lampert is the largest shareholder with a 21 percent stake in Orchard Supply Hardware Stores Corp (NASDAQ:OS).
Lowe’s to Buy OSH for $205 Million
The company recently announced that a majority of its assets will be acquired by its competitor, Lowe’s Companies, Inc. (NYSE:LOW) for $205 million in cash, and agreed to assume its debt owed to almost all of its partner suppliers. Under the terms of the agreement, Lowe’s Companies, Inc. (NYSE:LOW) will acquire no less than 60 Orchard’s stores.
Orchard Supply Hardware Stores Corp (NASDAQ:OSH) said that Lowe’s Companies, Inc. (NYSE:LOW) will serve as a “stalking horse bidder” in the auction of its assets, which means Lowe’s bid will be the minimum offer and other parties could offer a higher price.
The company also said that its business operations will continue to operate as usual during its financial restructuring as the company secured $177 million in debtor-in-possession (DIP) financing from Wells Fargo & Co (NYSE:WFC).
OSH Employee and Customer Benefits Will be Honored
Orchard Supply Hardware Stores Corp (NASDAQ:OSH) made an assurance that it will continue to fulfill its financial obligations throughout the Chapter 11 bankruptcy proceedings. The company added that the term loan lenders supported its acquisition agreement with Lowe’s Companies, Inc. (NYSE:LOW) as the stalking horse.
Furthermore, Orchard Supply Hardware Stores Corp (NASDAQ:OSH) filed motions seeking authority to pay the benefits and wages of its employees, and to honor customer gift cards and Club Orchard incentives.