Lincoln Heights based Loot Crate, the worldwide leader in fan subscription boxes, announced yesterday that it has filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The filing was made in Wilmington, Delaware, the jurisdiction under which Loot Crate Acquisition LLC was created as a company. They’ll be selling off pretty much everything they have. The terms of the agreement will be formalized and submitted to the Court later this week.
In accordance with Section 363 of the U.S. Bankruptcy Code, bidding is open to other companies on Loot Crate’s assets. Loot Crate expects the sale to be completed within 45 days. They’re hoping that they’ll be able to sell the entire company in one piece to a new owner that can absorb the debt they’ve accrued and help turn the company’s fortunes around.
“We have worked diligently to overcome challenges with our capital structure, along with legacy issues the Company has been struggling with for the past 18 months. We are very pleased with our progress from an operational efficiency standpoint, however, the company still faces liquidity issues,” said Loot Crate’s Chief Executive Officer Chris Davis. “After careful review of a wide range of available options, management determined that a sale of the Company is in the best interests of all parties, including our valued Looters (customers) and employees.”
They have a committment for up to $10 million in new financing from Money Chest LLC, an investor in the company. Between that and the subscriptions, they expect to be able to maintain normal operations. However, they have also laid off a number of their workers, so their idea of “normal” might be a bit different than yours.
We think that’s going to be especially difficult, considering that they just laid off dozens of workers this month, to add to the 150 employees they dismissed in July. That closure doomed its entire distribution warehouse in Vernon, California, with distribution now to be handled by a third party fulfillment house.
We also note that it’s extremely rare for companies to come out the other side on a Chapter 11 bankruptcy and stay in business. The telltale here is that they have to sell off all their assets. If they do that, what do they have left to stay in business with? We know that seems like a simplistic view, but it’s very often how things work out.
“This transaction represents good news for our employees, our customers, and our other constituents. It will provide Loot Crate with greater access to the financial resources necessary to continue to prosper and grow. By utilizing the Chapter 11 process, we are able to ensure an expedited and orderly transition,” Mr. Davis concluded.
That statement is about the best we can hope for. What’s actually going to happen is anybody’s guess, including whether or not they will be successful in finding a buyer. If they’ve had to let at least 175 people go in the past two months, things can’t be going all that great.
About Loot Crate
Founded in 2012, Loot Crate™, Inc. is the worldwide leader in fan subscription boxes. Loot Crate partners with industry leaders in entertainment, gaming, sports, and pop culture to deliver monthly themed crates, produce interactive experiences and digital content, and films original video productions. They have been a fixture at major comic book conventions for years. Since 2012, Loot Crate has delivered more than 32 million crates to fans in 35 territories across the globe.
Loot Crate calls itself “Comic-Con in a box”. It has raised roughly $41.5 million in venture captial since launching in 2016.
The company filed plans for the closure and layoffs with the state Employment Development Department in May. The EDD office published the filing June 1.
Loot Crate now operates only one warehouse in the U.S., in Lock Haven, Pa. It would not disclose the name of the new third-party firm.