Draw Another Circle (the “Company”), the parent of Hastings, SPImages and MovieStop, today announced the Company is now initiating a detailed process to evaluate offers for the assets of Hastings and SPImages, in order to maximize stakeholder value. This follows the Company’s launch of a successful refresh program across 20 Hastings entertainment superstores and the implementation of a series of initiatives aimed at increasing operational efficiency and overall profitability. The Company believes that the Hastings assets will be most valuable to a buyer who wants to complete the refresh program across the store base and benefit from higher levels of sales and profitability at the revitalized locations.
“In the past six months, Hastings has made significant progress in transforming our stores into entertainment destinations with exciting new categories that appeal to every member of the family and also extend to our e-commerce business,” said Jim Litwak, President and Chief Operating Officer of Hastings. “We are hopeful that we are on the right path but need an additional cash infusion to complete our remerchandising strategy. An asset sale to a well-capitalized purchaser would give us this financial stability and allow the buyer to pick and choose the assets it wants to acquire, while also disassociating us from the unique challenges facing our sister companies and creating new opportunities to generate long-term value for our creditors, associates, customers, suppliers and ultimately the communities we serve.”
To facilitate an orderly sale process while also addressing other legacy liabilities, Draw Another Circle and its subsidiaries have filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code. SPImages will continue a parallel sale process through Chapter 11, while MovieStop will continue its inventory clearance sales, which are expected to be completed in July.
Hastings and SPImages will operate in the ordinary course while they evaluate potential offers. All three businesses expect to maintain associates’ existing wages and benefit programs. To this end, Bank of America has committed to providing $90 million in new debtor-in-possession (“DIP”) financing, which, combined with cash from ongoing operations, will ensure the businesses are able to meet their financial commitments throughout this process.
As part of the Chapter 11 process, all potential buyers will have the opportunity to submit offers for the Hastings and SPImages business assets, and if more than one offer is received, an auction process will be held to ensure the highest or otherwise best sale is achieved for each business. Hastings and SPImages hope to complete their respective sale processes within 30 days.
The Chapter 11 cases are being heard in the United States Bankruptcy Court for the District of Delaware. Draw Another Circle, Hastings, MovieStop and SPImages are advised by Cooley LLP, Whiteford, Taylor & Preston LLP, RCS Real Estate Advisors, and FTI Consulting.