🥾New Chapter 15 Bankruptcy Filing & CCAA - The Aldo Group Inc.🥾

The Aldo Group Inc.

May 7, 2020

Retail pain doesn’t respect borders. Canada-based The Aldo Group Inc. and eight (8) affiliated companies (collectively, the “Debtors”) filed petitions in the United States Bankruptcy Court for the District of Delaware seeking relief under chapter 15 of the United States Bankruptcy Code in support of a CCAA filing in Canada.

Aldo is a shoe retailer with stores in more than 100 countries. The Group notes roughly 3,000 points of sale with 700 directly owned stores and the remainder as franchises. There are 289 stores in Canada and 429 in the US.

In terms of funded debt, the Aldo Canada has CDN$140mm outstanding. Of that amount, Aldo US is an obligor on a CDN$100mm piece. Both entities are also co-borrowers on a CDN$300mm unsecured syndicated loan. Both the Aldo Canada and Aldo US have significant outstanding amounts to trade creditors including landlords who haven’t been paid for April or May.

Operating performance has been dogsh*t long before COVID hit the scene. Per the debtors:

Over the past few years, the Aldo Corporate Group has declined in profitability and regularly reported losses. For instance, for the twelve month period ending February 1, 2020, Aldo Canada posted a net loss from operations of approximately CDN$74,800,000 and Aldo U.S. posted a net loss of approximately USD$52,800,000. Taking into consideration yearend write-offs of amounts due from subsidiaries and affiliated and write-offs of future tax benefits that were recorded as an asset, Aldo Canada posted a net loss of approximately CDN$170,300,000 and Aldo U.S. posted a net loss of approximately USD$97,300,000.

Pre-COVID, the debtors were attempting an operational restructuring designed to de-emphasize brick-and-mortar stores and prop up e-commerce, wholesale and franchise channels. You know, like, the old playbook. They were also seeking to refinance the credit facility with an ABL. The “transformation” was allegedly on track when the pandemic struck precipitating an immediate liquidity crunch. Hence, the filing.

The debtors will use the filing to evaluate its store profitability, shed leases and contracts and restructure the unsecured loans both in Canada and the US.

It seems pretty safe to say that a good number of those US stores will join the retail garbage bin much to the chagrin of landlords.

• Jurisdiction: D. of Delaware (Judge Owens)

• Capital Structure: see above.

• Professionals:

  • Legal: Hogan Lovells US LLP (Peter Ivanick, Lynn Holbert, Alex Sher, Baraka Nasari) & Morris Nichols Arsht & Tunnell LLP (Eric Schwartz, Matthew Harvey, Paige Topper)

  • Canadian Monitor: Ernst & Young Inc.

  • Investment Banker: Greenhill & Co. Canada Ltd.

  • Claims Agent: Epiq (*click on the link above for free docket access)

• Other Parties in Interest:

  • Largest Unsecured Creditor: Bank of Montreal

    • Legal: Chapman and Cutler LLP (Stephen Tetro, Aaron Krieger) & Womble Bond Dickinson US LLP (Matthew Ward, Morgan Patterson)

🚗New Chapter 11 Bankruptcy Filing - Pace Industries LLC🚗

Pace Industries LLC

April 12, 2020

Arkansas-based Pace Industries LLC and ten affiliates (the “debtors”) — fully-integrated suppliers and manufacturers of aluminum, zinc, and magnesium die cast and finished products in service of several industries (auto, powersports, lawn & garden, lighting & electric, appliances & industrial motors etc.) — filed fully-accepted prepackaged chapter 11 bankruptcy cases in the District of Delaware over the holiday weekend. The plan features one impaired class which voted 100% to equitize pre-petition debt.

A quick digression before we delve into what happened here. COVID-19 provides the ultimate cover for any and all businesses that file for chapter 11 over the next several months. You’re going to see all kinds of companies “clean out the junk” over earnings reports. It will be important, therefore, to parse through company messaging to determine whether they’re just massaging matters or whether, on the other hand, there were fundamental problems confronting the business prior to COVID-19 rearing its ugly head and shutting down the US economy. Where a company discloses that problems existed prior to March, there is absolutely no reason NOT to believe them. So it’s important that the collective we — newsletters writers, journalists, the twitterverse — get things right when talking about the carnage created by COVID-19.

And this case is only partially a COVID-19 story. Given the rush to sensationalize headlines and tweets, this is something we now feel compelled to note with each new bankruptcy filing. While the debtors, like everyone else, have been affected by the virus, it was not the catalyst to the debtors’ filing. The debtors have been seeking new capital sources since the summer of 2018; they initially sought an equity investment but when that couldn’t get done, the debtors shifted towards a sale and marketing process. Any and all initial interest in the debtors’ assets dissipated, however, when the debtors suffered from a poor Q4 ‘19. Interestingly, the disappointing performance was attributable to lower demand in the lighting, BBQ grill and appliance markets. To make matters worse, General Motors Inc’s ($GM) employees went on strike further compressing decreasing automobile production volumes. Moreover, the company self-inflicted some wounds: production inefficiencies relating to new products also hurt performance. Bankruptcy lawyers and advisors were hired in January — long before COVID stormed through and complicated matters further.

The debtors solicited their plan prior to their filing making this a true prepackaged plan. In other words, old school. None of this new solicitation technology; no straddle stuff. The only impaired class, the pre-petition noteholders, voted to accept the plan pursuant to which they would swap $232.1mm in notes for (i) equity in a reorganized LLC (subject to dilution from a management incentive plan AND warrants issued to the debtors’ post-petition DIP term loan lenders) and (ii) take-back term loan paper. This means the new owners will be TCW and Cerberus.

The cases feature a roll-up DIP ABL (which will ultimately be refi’d out through an exit facility) and a post-petition DIP term loan that will be refi’d out via a new term loan exit facility. The aforementioned warrants could amount to 51% of the new post-reorg equity.

This should be a quick case. The DIP terminates in 90 days from the petition date. Given that acceptance was 100% and that general unsecured creditors will be paid in full, this case should, absent other crazy externalities, be in and out of bankruptcy relatively quickly.

• Jurisdiction: D. of Delaware (Judge )

• Capital Structure: $92.1mm ABL, $232.1mm pre-petition notes

• Professionals:

  • Legal: Willkie Farr & Gallagher LLP (Matthew Feldman, Rachel Strickland, Debra Sinclair, Melany Cruz Burgos) & Young Conaway Stargatt & Taylor LLP (Robert Brady, Edmon Morton, Joseph Mulvihill)

  • Financial Advisor/CRO: FTI Consulting Inc. (Patrick Flynn, Johnathan Miller)

  • Claims Agent: KCC (*click on the link above for free docket access)

• Other Parties in Interest:

  • DIP Revolver Agent ($125mm): Bank of Montreal

    • Legal: McGuireWoods LLP (Wade Kennedy, Alexandra Shipley, Brian Swett) & Richards Layton & Finger PA (John Knight, Amanda Steele, David Queroli)

  • DIP Term Agent ($50mm): TCW Asset Management Company LLC

    • Legal: Schule Roth & Zabel LLP (Adam Harris, Kelly Knight) & Landis Rath & Cobb LLP (Adam Landis)

New Chapter 11 Bankruptcy - Rentech WP U.S. Inc.

Rentech WP U.S. Inc.

• 12/19/17 Recap: Publicly-traded ($RNTK) Colorado-based wood fibre processing company that services large pulp, paper and packaging manufacturers with three core businesses: (i) contract wood handling and chipping services; (ii) the manufacture and sale of wood pellets for the U.S. heating market; and (iii) the manufacture, aggregation, and sale of wood pellets for the utility and industrial power generation market, has filed for bankruptcy to effectuate a sale to FFI Acquisition Inc. as buyer (Scott Davis Chip Company Inc. is the affiliate guarantor of the buyer). The company's wood fibre is used in the manufacturing of boxboard, containerboard, paper, and medium density fiberboard for building products. The company blames a strategic pivot from the development and commercialization of certain alternative energy tech to the the wood fibre processing business for its ultimate downfall. The company incurred debt to complete various acquisitions and cost overruns in connection with the development of various facilities combined to limit the company's liquidity. Now, the company intends, under cover of the use of cash collateral, to use pursue a plan pursuant to a plan of reorganization. 
• Jurisdiction: D. of Delaware (Judge Sontchi)
• Capital Structure: $19.5mm Term Loan (GSO/Credit Suisse AG), $20mm L/C (Bank of Montreal)
• Company Professionals:
  • Legal: Latham & Watkins LLP (Peter Gilhuly, Kimberly Posin, Adam Malatesta) & (local) Young Conaway Stargatt & Taylor LLP (Michael Nestor, Matthew Lunn)
  • Financial Advisor: RPA Advisors LLC
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Prepetition Term Lenders (GSO Special Situations Master Fund LP, GSO Palmetto Opportunistic Investment Partners LP, GSO Credit-A Partners LP, Steamboat Credit Opportunities Master Fund LP, GSO Coastline Credit Partners LP, GSO Cactus Credit Opportunities Fund LP, and GSO Aiguille des Grands Montets Fund II LP)
    • Legal: Akin Gump Strauss Hauer & Feld LLP (Ira Dizengoff, Daniel Fisher, Kevin Eide) & (local) Richards Layton & Finger PA (Paul Heath, Joseph Barsalona)