IT’SUGAR and its subsidiaries has filed voluntary petitions under Chapter 11 of Title 11 of the U.S. Code. Subject to Bankruptcy Court approval, a subsidiary of New BBX Capital will provide debtor-in-possession financing to IT’SUGAR under the protections of the bankruptcy code.
IT’SUGAR and its subsidiaries has filed voluntary petitions under Chapter 11 of Title 11 of the U.S. Code. The Chapter 11 filings were made in the U.S. Bankruptcy Court for the Southern District of Florida. IT’SUGAR intends to continue to operate its retail locations while the bankruptcy proceedings are ongoing.
IT’SUGAR 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 IT’SUGAR under the protections of the Bankruptcy Code.
The parent company and its other principal subsidiaries, including New BBX Capital and its subsidiaries other than IT’SUGAR, remain financially strong and continue to conduct normal business operations. New BBX Capital and its subsidiaries, including IT’SUGAR, will be spun-off to the shareholders of parent if parent’s previously announced spin-off of New BBX Capital is completed.
“Unfortunately, it has become necessary for IT’SUGAR 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 IT’SUGAR’s business, results of operations and financial condition. Sales related to travel and tourism historically represented approximately 60% of IT’SUGAR sales on an annualized basis. In the middle of March 2020, as a result of the COVID-19 pandemic, IT’SUGAR closed all of its approximately 100 store locations. While IT’SUGAR commenced a gradual reopening of its stores between early June and the middle of July, as we previously disclosed, IT’SUGAR’s 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 IT’SUGAR will be better positioned to successfully navigate the effects of the COVID-19 pandemic upon exiting from bankruptcy.” Jarett Levan, president of BBX Capital Corporation and BBX Capital Florida LLC, said.
For the three and six months ended June 30, 2020, IT’SUGAR 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, IT’SUGAR 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, IT’SUGAR ceased paying rent or has made only partial payments to the landlords. While IT’SUGAR 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 IT’SUGAR’s goodwill and long-lived assets during the six months ended June 30, 2020. As of June 30, 2020, the carrying amount of the IT’SUGAR reporting unit was $18.9 million, which included goodwill of $14.9
BBX Capital Corporation is a Florida-based diversified holding company.