Leslie’s Files Plan in Line With RSA to Cut Funded Debt by 90%, Streamline Business

Relevant Documents:
Plan
Disclosure Statement
DS Approval Motion
Motion to Shorten Notice of DS

The Leslie’s debtors filed their plan of reorganization and disclosure statement yesterday, Oct. 20, consistent with their restructuring support agreement with lenders holding 81% of prepetition term loan claims. The plan would effectuate a stand-alone recapitalization for the direct-to-consumer pool and spa supplier, reducing funded debt by $685 million through the equitization of prepetition term loans and providing a $60 million equity investment backed by certain RSA parties.

The cases are funded with two DIP facilities: a $90 million in new-money DIP term loan financing from existing lenders and a $225 million asset-based financing facility that effects a creeping rollup of prepetition ABL claims.

The plan would address the DIP facilities by refinancing or repaying DIP ABL claims through a new ABL facility, while converting $75 million of DIP term loan claims dollar-for-dollar into new term loans. The remaining DIP term loan claims (including accrued or capitalized interest) would be equitized into 30% of the new common equity.

Under the plan, the prepetition term loan claims would be equitized for 10% of new common equity, subject to dilution by a management incentive plan, or MIP, GUCs would receive a $500,000 GUC cash pool, and 55.8% of the new common equity would be exchanged for $60 million in new equity financing to recapitalize the business. The plan also streamlines the debtors’ retail footprint through the rejection of under- and nonperforming unexpired store leases and executory contracts.

The debtors are seeking a DS approval hearing on shortened notice and have requested a Nov. 13 at 5 p.m. ET hearing with objections due Nov. 10 at 5 p.m. ET.

DS Approval Motion / Confirmation Timeline

The debtors’ disclosure statement approval motion proposes the following confirmation-related timeline:
 

• Nov. 10 at 5 p.m. ET: DS objection deadline;
• Nov. 13 at 5 p.m. ET: DS approval hearing;
• Dec. 9 at 5 p.m. ET: Initial plan supplement filing deadline;
• Dec. 16 at 5 p.m. ET: Plan voting and confirmation objection deadline; and
• Dec. 23: Confirmation hearing.

Plan / Disclosure Statement

The plan’s classes, along with their impairment status and voting rights, are shown in the chart below.
 

Treatment of Claims and Interests

The debtors’ plan sets forth the following classification of and proposed distributions to holders of allowed claims and interests:
 

• Unclassified DIP claims: The plan would refinance or repay DIP ABL claims through a new ABL facility, refinance $75 million of the DIP term loan claims through the new term loan facility, and equitize the remaining DIP term loan claims into 30% of the new common equity (including accrued or capitalized interest).
   
• Class 1 – Other secured claims: Holders would receive, at the option of the debtors with the consent of the required consenting term loan lenders, either (i) payment in full in cash in the ordinary course, (ii) collateral securing their claims, (iii) reinstatement, or (iv) other treatment rendering the claim unimpaired.
  • Projected claims: NA.
  • Projected recovery: 100%.
     
• Class 2 – Other priority claims: Holders would receive treatment consistent with Bankruptcy Code section 1129(a)(9).
  • Projected claims: NA.
  • Projected recovery: 100%.
     
• Class 3A – Prepetition ABL claims: To the extent not rolled up into the DIP ABL facility, prepetition ABL claims would be either (i) converted into obligations under the new ABL facility on a dollar-for-dollar basis with the consent of the prepetition ABL agent and the prepetition ABL lenders, or (ii) repaid in full in cash from the proceeds of the new ABL facility.
  • Projected claims: “$[●].”
  • Projected recovery: 100%.
     
• Class 3B – Prepetition term loan claims: Holders would receive pro-rata shares of 10% of the new common equity, subject to dilution on account of the MIP.
  • Projected claims: “$[●].”
  • Projected recovery: “[●]%.”
     
• Class 4 – General unsecured claims: Holders would receive pro-rata shares of the $500,000 GUC cash pool.
  • Projected claims: “$[●].”
  • Projected recovery: “[●]%.”
     
• Class 5 – Intercompany claims: Intercompany claims would be reinstated or canceled and released without any distribution as determined by the debtors or reorganized debtors with the consent of the required consenting term loan lenders.
  • Projected claims: NA.
  • Projected recovery: NA.
     
• Class 6 – Intercompany interests: Intercompany interests would be reinstated, set off, canceled, and released without any distribution or receive such other treatment as determined by the debtors with the consent of the required consenting term loan lenders.
  • Projected claims: NA.
  • Projected recovery: NA.
     
• Class 7 – Existing equity interests: Existing equity would be canceled, released and extinguished holders would not receive any distribution.
  • Projected claims: NA.
  • Projected recovery: NA.
     
• Class 8 – Section 510(b) claims: All section 510(b) claims would be discharged and released without any distribution.
  • Projected claims: NA.
  • Projected recovery: NA.

Plan Milestones

The confirmation-related milestones contemplated under the RSA are as follows:
 

• Oct. 27 at 10 a.m. ET: Hearing on shortening DS objection and notice periods;
• Nov. 13 at 5 p.m. ET: DS approval hearing;
• Nov. 24: Entry of order approving the disclosure statement;
• Dec. 16 at 5 p.m. ET: Deadline to vote on the plan;
• Dec. 23: Confirmation hearing;
• Jan. 8, 2027: Entry of confirmation order; and
• Jan. 18, 2027: Emergence from chapter 11.

Management Incentive Plan

The plan states that the new board would adopt a MIP that reserves 10% of new common equity.

Other Plan Provisions

The plan provides for releases of the debtors, reorganized debtors, consenting term loan lenders, all DIP lenders, prepetition ABL lenders, the prepetition and DIP agents. In addition, the plan includes an exculpation provision in favor of the debtors and the official committee of unsecured creditors and its members.

According to the plan, the officers and directors of the new board for reorganized Leslie’s will be identified in a plan supplement; the initial plan supplement is due by Dec. 9.

The financial projections, liquidation analysis and a valuation analysis of the reorganized entity have not been provided in the DS on file.