Tuesday Morning: $40M Rights Offering Delivers Full Unsecured Recovery

Tuesday Morning Corporation, the Dallas-based off-price home goods retailer, filed voluntary chapter 11 petitions on May 27, 2020 in the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division, under lead Case No. 20-31476 before Judge Harlin D. Hale. Seven affiliated debtors were jointly administered under the lead case. The filing came weeks after the company shuttered its entire store chain in response to the COVID-19 pandemic, and it was structured from the outset as a financial and operational reorganization rather than a liquidation.

The confirmed plan paid general unsecured claims in full and preserved value for existing equity, funded by a $40 million rights offering and a new asset-backed exit facility. Getting there required a contested fight over post-petition interest, led by the Invictus-backed trade claimants committee, that ended with the court sanctioning the committee for misleading solicitation. Tuesday Morning emerged from chapter 11 in January 2021 with a reduced footprint before refiling for bankruptcy a second time in early 2023.

Debtor	Tuesday Morning Corporation (7 jointly administered entities)
Court	U.S. Bankruptcy Court, Northern District of Texas (Dallas Division)
Case Number	20-31476
Petition Date	May 27, 2020
Judge	Hon. Harlin D. Hale
DIP Facility	$125 million ($100 million from the existing lender group plus a $25 million commitment from BRF Finance Co., an affiliate of B. Riley Financial)
Emergence Date	January 4, 2021

Pandemic Shutdown and the Path to chapter 11

Tuesday Morning's restructuring engagement began in March 2020, concurrent with the temporary, chain-wide closure of its stores as the pandemic spread across the United States. As an off-price retailer dependent almost entirely on in-store traffic, the company had limited e-commerce capacity to offset the loss of physical sales during the shutdown, and the closures eliminated the revenue it needed to service its obligations.

By the petition date the company operated close to 700 stores, and it entered chapter 11 citing the financial impact of the COVID-19 pandemic as the primary driver of the filing. Management framed the case as a reorganization intended to reduce outstanding liabilities and strengthen the company's financial position, targeting an emergence by early fall 2020. The company also said it had too many stores in underperforming or overlapping locations.

DIP Financing and the B. Riley Commitment

Tuesday Morning entered chapter 11 with a debtor-in-possession facility from its existing prepetition lender group, opening the case with $100 million in DIP financing to fund operations through the reorganization while stores reopened and the company worked through its lease portfolio. The financing supported the company's plan to reduce its store footprint as the case progressed.

On June 4, 2020, the company secured an additional $25 million bankruptcy loan from BRF Finance Co., an affiliate of B. Riley Financial. That tranche was required under the existing DIP agreement and brought total committed DIP financing to $125 million, subject to bankruptcy court approval. CEO Steve Becker described the B. Riley commitment as a milestone that provided liquidity to continue operations throughout the reorganization.

Advisors. Tuesday Morning retained Haynes and Boone, LLP as legal counsel, Miller Buckfire, a Stifel company, as financial advisor, and AlixPartners, LLP as restructuring advisor, with Epiq Corporate Restructuring as claims and noticing agent. The Haynes Boone team included partner Ian Peck, whose engagement dated to the March 2020 store shutdowns, and Deborah Perry as lead debtor's counsel. A&G Real Estate Partners advised on the lease and real estate portfolio.

Store Closures and the A&G Real Estate Process

Soon after filing, Tuesday Morning announced plans to close roughly 230 of its nearly 700 stores, targeting locations it considered underperforming or too close to other stores. The first wave covered about 130 locations, with Great American Group conducting the store-closing sales; the company said it intended to identify an additional 100 stores for closure and run going-out-of-business sales at those sites as well. The closures carried a store-closing employee severance program for affected employees, a program referenced throughout the proofs of claim filed against the estate.

The real estate rationalization extended beyond closures to the retained fleet and the company's distribution network. The restructuring paired the closures with store lease renegotiations and a sale-leaseback transaction that lowered occupancy costs across the surviving stores. In August 2020, A&G Real Estate Partners began accepting offers on the leasehold interest in Tuesday Morning's 593,600-square-foot Phoenix distribution center, a facility that had supported the retailer's store network. A&G's work on the lease portfolio and the distribution-center disposition was later recognized with multiple industry awards.

Reorganization Plan, Rights Offering, and Exit Financing

The plan of reorganization was built around a capital raise and new exit financing rather than a sale. Tuesday Morning crafted a plan that paid its vendor claims in full while protecting shareholders, and it attracted new institutional ownership while allowing existing shareholders to participate in an upcoming $40 million rights offering.

Exit liquidity came from a $110 million asset-backed lending facility provided by J.P. Morgan, Wells Fargo, and Bank of America. The company emerged with 490 of its best-performing stores across 40 states, a footprint it described as a streamlined operating model after the closures earlier in the case.

The reorganization provided a 100% recovery to all general unsecured claims and a recovery to equity interest holders, avoiding a forced sale of the company. The debtors had earlier considered both a reorganization and a sale of substantially all assets before proceeding with the plan. The Pachulski Stang Ziehl & Jones team — Brad Sandler, Rob Feinstein, Shirley Cho, Judith Elkin, Cia Mackle, and Steven Golden — was recognized with the 2021 TMA Large Company Turnaround/Transaction of the Year award for its work on the reorganization, and the case also won Corporate Turnaround of the Year at the 2021 Turnaround Atlas Awards.

Claims administration. Epiq Corporate Restructuring served as claims and noticing agent and maintained the official claims register for the case. On July 23, 2020, Judge Hale entered a bar date order that shortened the deadline for filing proofs of claim and set August 28, 2020 as the general bar date. Claims activity continued into 2021, consistent with administration extending through plan confirmation.

Trade Claimants Committee Objection and Post-Petition Interest

The plan's treatment of post-petition interest drew a sharp objection. On November 25, 2020, an Invictus-led trade claimants committee objected to the proposed reorganization plan, and on November 30 Invictus Global Management issued an open letter urging fellow Class 5 general unsecured creditors to reject the plan and opt out of the third-party releases. Invictus argued the plan offered roughly 0.16% of post-petition interest at the federal judgment rate, when creditors could be entitled to 5% to 18% under contract or state rates.

The dispute escalated into a solicitation fight. On December 9, 2020, Judge Hale granted the debtors' motion to compel the committee to comply with the disclosure statement order, finding that information the committee disseminated in a website and press release was false and misleading. Judge Hale granted sanctions corresponding to the attorneys' fees of the debtors, the official committee of unsecured creditors, and the official equity committee, with the amount to be set later, and reserved decision on further sanctions for harm to the estate. Edward Schnitzer of Montgomery McCracken, counsel to the unsecured creditors committee, told the court the committee's solicitation cited the wrong federal judgment rate and omitted required risk factors.

Emergence and the 2023 Refiling

Tuesday Morning announced on January 4, 2021 that it had completed its reorganization and emerged from chapter 11, supported by the $110 million asset-backed facility and the $40 million rights offering. The company carried 490 stores into its post-emergence operations.

The reorganized company sought additional capital over the following year. In September 2022, Tuesday Morning secured a $32 million convertible debt investment from Retail Ecommerce Ventures, the owner of the Pier 1 Imports brand, to fund an e-commerce expansion. By January 2023, the company announced plans to voluntarily delist its shares from Nasdaq. Tuesday Morning filed for chapter 11 a second time in February 2023 — a separate case from the 2020 reorganization — attributing the renewed liquidity crisis in part to lender actions, specifically a decision by Wells Fargo to increase reserve requirements that wiped out operating liquidity. The second case opened with a $51.5 million debtor-in-possession facility from Invictus Global Management — the same firm that had opposed the 2020 plan — and ended in a court-approved $32 million going-out-of-business sale to Hilco Merchant Resources that liquidated the roughly 200 remaining stores.

Key Timeline

Date	Event
March 2020	Tuesday Morning temporarily closes its store chain as the pandemic spreads; restructuring advisors engaged.
May 27, 2020	Seven jointly administered debtors file chapter 11 in the Northern District of Texas (Case No. 20-31476).
May–June 2020	Company announces plans to close roughly 230 stores; Great American Group runs store-closing sales.
June 4, 2020	BRF Finance Co. (B. Riley) commits an additional $25 million in DIP financing, bringing the total to $125 million.
July 23, 2020	Judge Hale enters a bar date order shortening the claims deadline; August 28, 2020 is set as the last day to file proofs of claim.
August 2020	A&G Real Estate Partners begins accepting offers on the 593,600-square-foot Phoenix distribution center.
November 25–30, 2020	Invictus-led trade claimants committee objects to the plan and urges creditors to reject it over post-petition interest.
December 9, 2020	Judge Hale compels the trade claimants committee to comply with the disclosure statement order and grants sanctions.
January 4, 2021	Tuesday Morning completes its reorganization and emerges with 490 stores and a $110 million exit facility.
February 2023	The reorganized company files a second chapter 11, which proceeds to liquidation.

Frequently Asked Questions

Who was the claims agent for Tuesday Morning's 2020 bankruptcy?

Epiq Corporate Restructuring served as the claims and noticing agent in the 2020 case. The firm maintained the official claims register and case docket for the chapter 11 proceeding.

Why did Tuesday Morning file for chapter 11 in 2020?

The company attributed the filing to the COVID-19 pandemic, which forced the temporary closure of its entire store chain and eliminated the in-store sales the off-price retailer depended on. It entered chapter 11 to reduce liabilities, close underperforming stores, and reorganize.

Did unsecured creditors recover in the 2020 case?

Yes. The confirmed plan provided a 100% recovery to general unsecured claims and a recovery to equity interest holders, funded by a $40 million rights offering and a $110 million asset-backed exit facility, avoiding a forced sale of the company.

Who advised Tuesday Morning in the 2020 reorganization?

Haynes and Boone served as legal counsel, Miller Buckfire (a Stifel company) as financial advisor, AlixPartners as restructuring advisor, and A&G Real Estate Partners as real estate advisor. Epiq was the claims and noticing agent.

For more bankruptcy case coverage, visit the ElevenFlo bankruptcy blog.