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Hale and Hearty

Hale & Hearty
Hale & Hearty

Beloved for its soups, sandwiches and salad offerings, Hale & Hearty had achieved recognition in New York City and Boston as a nourishing fast casual lunchtime mainstay for the busy professional.  Following the COVID-19 pandemic, the increase in hybrid and remote workforces led to reduced demand for fast casual lunchtime eateries in cities.  Hale & Hearty suffered along with many others, and in 2022, creditors pushed the company into chapter 7 bankruptcy.  The chapter 7 trustee and his counsel turned to preserving the remaining assets.  They discovered that, shortly before the bankruptcy, a third party had allegedly entered into an oral agreement with the company.  Pursuant to the oral agreement, the third party purported to take assignment of rights under a commissary lease and purchase the personal property therein, as well as the company’s principal assets: its intellectual property including brand name and recipes.  The consideration was to be $50,000 cash plus an assumption of the commissary lease liabilities.  The commissary purchaser alleged that it rightfully owned the company’s intangible assets (and, in fact, it was utilizing the brand name), although there was no evidence that the cash portion of the consideration was ever paid, or that the agreement pertaining to the intangible assets had been reduced to writing.

The trustee determined that the Hale & Hearty brand continued to resonate with the consumer, and that a potential buyer had the opportunity to cultivate value by expanding into packaged foods, wholesale, catering, and additional categories.  Accordingly, preserving the brand – as well as the soup recipes – was required.  Of all the intangible assets, the brand was likely to generate the greatest value because most restaurants, first and foremost, rely on customer recognition of their brand name.  Typically, only secondarily do they rely on supporting assets such as their website and social media accounts.  The trustee hired Hilco Streambank to assist.

To unlock this value for the benefit of the estate, the trustee creatively argued that the commissary purchaser did not rightfully purchase the company’s intangible assets, and therefore use of such assets was a violation of the automatic stay. Contemporaneous with this, the trustee filed a motion to sell the intangible assets, as potential buyers continued to express interest notwithstanding the stay violation.  The filings brought the commissary purchaser to the table, allowing for a resolution which brought $50,000 into the estate in consideration of the lease assignment and equipment purchase, and paved the way for the trustee to continue the sale process for the intangible assets.

The trustee received interest from restaurant owners, packaged food companies, and supermarkets.  We negotiated the terms of a stalking horse agreement on behalf of the trustee.  Following a spirited auction at which the closing price more than doubled the opening bid, the trustee declared the commissary purchaser as the successful bidder for the intangible assets.  The trustee’s determination to preserve the value-driving asset – the brand – led to a creatively executed and streamlined legal strategy which steered a resolution that achieved meaningful value for the estate.  The sale closed in April 2023.

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