Well, the DIP doesn't guarantee a fruitful exit out of BK; it just means the Crystal Financiers are now first in line to collect, whether ARO restructures or liquidates. They are now the senior financier (moving Sycamore into second place).
The $150M Sycamore credit facility that ARO agreed to in 2014 contained a poison pill which essentially stated that if ARO's ever fell below $70M, that ARO would default on the facility providing Sycamore the opportunity to legally enforce their will upon the company.
Sycamore has a history of predatory acquisitions(see Hot Topic).
Here's what I suspect: Based on the last 2 years of filings and news clips it appears ARO underwent a deep restructuring that included the closure of over 300 unprofitable stores (to include those 100 some stores now closed via BK). This sort of restructuring takes time to execute. I speculate that Sycamore recognized that ARO wasn't going to default (go below $70M in liquidity) on their credit facility, so they resorted to the next best tactic which was calling in the loan (all at once). This is really what appears to have set the Chapter 11 in motion.
Crystal's come to the rescue and provided a $160M DIP for the interim. Part of this apparently was/will be used settle to in full with Sycamore and their financing subsidiary and moving forward, they will part ways once BK is resolved (one way or another).
Okay so now that ARO is in BK, has worked out further financing for the interim; the main question now is will ARO restructure Common. Crystal is first to collect now. Sycamore's been put into second place in line. I'm not aware of any other Common institutional holders of AROPQ at this time. Notably, I haven't seen any insider selling (other than the Sycamore BoD member who resigned) leading up to the BK. I'm also not aware of any other Preferred shares in existence (other than the 1000 owned by Sycamore), or outstanding warrants or bonds issued from the company.
So basically we have 1000 Preferred shares, and about 80M Common outstanding as the only equity instruments -fairly simple. As best I can tell, all of the remaining Hedge Funds have exited and I'm not aware of any other large institutional holders (I did read one article that hinted there was another party with a claim but currently cannot find the source).
Which makes this interesting. Normally there's a hierarchy of debtors but in ARO's case there really only appear to be 2 major players (Crystal and Sycamore) and a ragtag collection of minors.
Let's be clear, if it comes to liquidation Common will be wiped out; this is a sure thing. But if ARO restructures, they will attempt to reconcile their liabilities and Common may have a chance. Right now their debt-to-equity ratio is pretty severe. This means if they restructure, they'll have to wipe debt out by handing out new equity instruments as recompense. This could take the form of bonds or convertible warrants, or it could mean wiping common and reissuing new shares. What's currently working in our favor is that the current O/s is relatively healthy which makes part of a case for saving common. Right now we just need an active investor making the case to save it (which I'm not sure we have).
