In a dramatic turn of events for the customer loyalty industry, Kognitiv US LLC filed for Chapter 11 bankruptcy in Delaware federal court on Wednesday, citing more than $10 million in liabilities. The filing is part of a broader strategy to sell its assets to another loyalty platform, as the company grapples with severe financial pressures.
Debt Burden and Asset Sale Agreement
Kognitiv Corp. CEO Tim Sullivan, in the bankruptcy petition, disclosed that the company holds between $10 million and $50 million in both assets and liabilities. To ensure continuity, Kognitiv has entered into an asset purchase agreement with Capillary Technologies LLC, a global loyalty platform, to sell all of its assets for approximately CA$17.28 million ($12.3 million).
“This transaction presents the best available option for the debtor under the circumstances,” Sullivan stated in his first-day declaration.
Financing the Bankruptcy Case
As part of the restructuring process, Kognitiv secured a debtor-in-possession (DIP) financing agreement with its prepetition lenders, Guines LLC and Aimia Inc., on April 1. The DIP loan provides $2 million in secured financing, comprising a $1.6 million roll-up of prepetition bridge financing and $400,000 in new funds.
