Blue Star leverages new “small business” section of Chapter 11 protection to exit in less than 100 days
Portland, Ore. (December 7, 2020) – Blue Star Donuts, Portland has successfully emerged from bankruptcy protection with a recapitalized balance sheet and its business reorganized to take advantage of new wholesale and e-commerce business ventures in addition to its retail establishments in and around Portland. The company was able to consensually resolve creditor claims through a chapter 11 plan that was confirmed on November 24, 2020 under the new “small business” subchapter in chapter 11, referred to as “subchapter V,” and the company exited chapter 11 on December 4, 2020. The company has finalized its restructuring after filing for Chapter 11 Reorganization with Subchapter V treatment on August 26th in response to the devastating closures related to the COVID-19 Pandemic.
The company decided to file in August after it determined that it could not resolve litigation and other disputes with creditors consensually outside of chapter 11. The company’s bankruptcy lawyer, Mr. Oren Haker of Stoel Rives, says, “Blue Star’s bankruptcy filing included the use of a new subchapter of chapter 11 focused on small businesses which came into effect in February 2020. Though this was new ground, Blue Star was able to formulate a plan that not only had the backing of its sponsor, Sortis Holdings, but also attracted new capital from its existing owners. Critically, the company was able to confirm its chapter 11 plan in less than 90 days and at a reduced cost than regular Chapter 11 bankruptcy.”
A vital component to success was attracting a Chapter 11 Plan sponsor. Blue Star Co-founder and CEO Katie Poppe worked closely with Paul Brenneke, Executive Chairman of local investment group Sortis Holdings, Inc. to discover a solution that would not only attract the support of the company’s creditors and help fund new growth, but would also achieve some of her long-desired goals for the company. “Similar to the Sortis Rescue Fund’s past few investments, it’s great brands with a unique strategy like Blue Star that can thrive in a new era of retail post-pandemic,” says Mr. Brenneke. “We were especially intrigued by the potential for wholesale and e-Commerce channels, in addition to the opportunity to help preserve a beloved Portland business and the culture it represents.”
“I appreciate the trust and faith that Paul and Sortis have in me and my vision for Blue Star,” says Ms. Poppe. “They listened to what was important to me, and put their money where their mouth is, so to speak. Maintaining women-majority ownership and folding in some of our key staff stakeholders was essential to me, and I’m thrilled to finally be able to expand the ownership structure as we rebuild the company.”
Blue Star will now move forward with navigating the unending challenges facing the restaurant industry. The company plans to continue developing their newly-established pivot concepts, including wholesale partnerships with New Seasons, Market of Choice, Green Zebra Grocery, and Alpenrose Dairy, as well as expanding its budding shipping line. “We’re incredibly grateful to be able to maintain positions for our existing staff members, as well as to continue to support the local vendors and community partnerships we value so much.” Adds Poppe, “I also cannot thank our fans and customers enough – we read every comment, we cheered with every order. Please know that showing up for and supporting your local restaurants does make a difference! I’m looking forward to getting back to business and focusing on what we do best: making delicious moments.”
ABOUT SORTIS HOLDINGS, INC.
Sortis Holdings (OTC: SOHI) is a leader in diversified alternative investment strategies focused on real estate, lending, distress situations, and rescue opportunities. Top priorities include capital preservation and long-term economic growth primarily focused in the Western United States. Sortis Funds include the Sortis Rescue Fund, the Sortis Income Fund, the Sortis Opportunity Zone Fund, and the Sortis Growth Fund. Operating under the principles of client focus, integrity, hard work and creativity, Sortis Holdings provides its accredited investors with well-managed, diverse asset-based investment strategies.
ABOUT BLUE STAR DONUTS
Blue Star Donuts is a gourmet donut shop born in Portland, Oregon. After a much-anticipated opening in 2012, the Portland-grown bakers expanded to eight locations in the Portland area. Four Portland locations have since been permanently closed due to the COVID-19 Pandemic. The unique brioche-based donuts and signature cake donut recipes quickly became a foodie favorite, recognized as the best in Portland and the United States by C onde Nast, The Washington Post, and U SA Today. Their gourmet gems have gained international attention on the Food Network, and were also featured on the cover of Bon Appetit Magazine. Executive Pastry Chef and Partner Stephanie Thornton was recently featured as a contestant on Chopped, and Co-Founder and CEO Katie Poppe is a recipient of the Portland Business Journal’s “40 under 40” award and “Oregon’s Most Admired Companies”, and is also a PCNW regional finalist for Ernst & Young’s “Entrepreneur of the Year” award.