Lugano Diamonds & Jewelry, a designer, manufacturer and retailer of high-end jewelry, together with certain of its affiliates, have voluntarily filed for Chapter 11 relief in the United States Bankruptcy Court for the District of Delaware to facilitate a value-maximizing sale transaction. Lugano continues to operate in the ordinary course of business at this time and remains focused on continuing to provide exceptional service to its clients and the communities in which it operates.
Lugano has filed a motion seeking court approval to commence a value-maximizing sale process for substantially all of its assets under Section 363 of the U.S. Bankruptcy Code. To support this process, the company has reached an agreement with Enhanced Retail Funding, an investment firm focused on acquiring assets with over a century of direct experience in the jewelry sector. Under the proposed terms, Enhanced Retail Funding will immediately begin working with the company to support the smooth continuation of retail sales and operations through the court-supervised sale process, as well as serve as the stalking horse bidder.
The proposed transaction remains subject to higher and better offers and other customary conditions, and the company is actively soliciting additional qualified bids. Should such bids be received during the court-supervised sale process, the company expects to conduct an auction, with the stalking horse bid establishing the baseline for competing offers.
“We are deeply grateful to our dedicated employees, clients, partners, and community for their ongoing support,” Josh Gaynor, interim CEO of Lugano, said. “As this process is underway and we approach the holiday season, we look forward to continuing to provide our valued clients with unique, timeless pieces for themselves and their loved ones.”
Lugano is seeking relief through a number of customary “first day” motions to ensure a seamless transition into the Chapter 11 process. Upon court approval, these motions will enable the company to, among other things, continue payment of employee wages and benefits, maintain customer programs and satisfy post-petition obligations to vendors and partners.
“Lugano has worked extensively to prepare the business for this process, and I look forward to helping guide the company through the steps ahead,” J. Michael Issa of GlassRatner, who is serving as chief restructuring officer of Lugano, said. “I am committed to working closely with the management team and company advisors during this period to assess the best path forward.”
To fund operations during the Chapter 11 cases, Lugano has filed a motion seeking approval of a $12 million debtor-in-possession (DIP) financing facility that could provide up to approximately $10 million of new liquidity to Lugano. Following court approval, the company expects to use the DIP financing, together with cash on hand and operating cash flows, to support its continued operation throughout this process.
Keller Benvenutti Kim and Young Conaway Stargatt & Taylor are serving as legal advisors, Armory Securities is serving as investment banker, GlassRatner’s J. Michael Issa is serving as chief restructuring officer, with the firm also providing related services, and C Street Advisory Group is serving as strategic communications advisor to the company. Barnes & Thornburg is serving as legal counsel to the special committee of the company’s board of directors.
