🙈New Chapter 11 Bankruptcy - Fred's Inc.🙈

Fred’s Inc.

September 9, 2019

Dallas-based Fred’s Inc. and seven affiliated debtors have filed a long-awaited bankruptcy in the District of Delaware with the intent to unwind the business. The debtors are — or, we should say, were — discount retailers with full service pharmacies, focusing on fixed income families in small and medium-sized towns.

The bankruptcy papers — from a law firm largely known for litigation (a curious fact here until you consider that Alden Global Capital LLC is a large shareholder) — are remarkably sparse. No lengthy back story about the company and how “iconic” it is. Just, “it was founded in 1947, sold a lot of sh*t to people who have no other alternative and now we’re kaput.” No discussion of the interim, say, 70+ years. Not a mention in the First Day Declaration of the failed Walgreens/Rite-Aid transaction that would have given Fred’s a larger pharmacy footprint. Nothing about Alden’s stewardship. Nada. Not a word, outside of the motion to assume the liquidation consultant agreement, about the state of retail (and in that motion, only: “The Debtors faced significant headwinds given the continued decline of the brick-and-mortar retail industry.”). Given the case trajectory — an orderly liquidation — we suppose there’s really no need to spruce things up. There’s nothing really left to sell here.* All in, it’s, dare we say, actually kind of refreshing: finally we have a debtor dispensing with the hyperbole.

The debtors started 2018 with 557 locations. After four rounds of robust closures — 263 between April and June and another 178 between July and August — the debtors have approximately 125 locations remaining. Considering that those stores are now closing too and given that the average square footage per store was 14,684, the end result will be ~8mm of square footage unleashed on the commercial real estate market. We suspect that these small and medium-sized towns will have some empty storefronts for quite some time.

The debtors have a commitment from their pre-petition lenders for a $35mm DIP credit facility (which includes a rollup of pre-petition debt).

*The Debtors previously sold 179 of their pharmacy stores to a Walgreens Boots Alliance Inc. ($WBA) subsidiary for $177 million in fiscal Q4 ‘18 and 38 more to a CVS Health Corp. ($CVS) subsidiary for ~$15 million in August.

  • Jurisdiction: D. of Delaware (Judge Sontchi)

  • Capital Structure: $15.1mm RCF (+ $8.8mm LOCs), $20.9mm (Cardinal Health Inc., secured by pharmacy assets), $1.4mm in other secured debt.

  • Professionals:

    • Legal: Kasowitz Benson Torres LLP (Adam Shiff, Robert Novick, Matthew Stein, Shai Schmidt) & Morris Nichols Arsht & Tunnell LLP (Derek Abbott, Andrew Remming, Matthew Harvey, Joseph Barsalona)

    • Board of Directors: Heath B. Freeman, Timothy A. Barton, Dana Goldsmith Needleman, Steven B. Rossi, and Thomas E. Zacharias

    • Special Legal: Akin Gump Strauss Hauer & Feld LLP

    • Financial Advisor: Berkeley Research Group LLC (Mark Renzi)

    • Investment Banker: PJ Solomon

    • Liquidator: SB360 Capital Partners LLC

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

  • Other Parties in Interest:

    • DIP Lender ($35mm): Regions Bank

      • Legal: Parker Hudson Rainer & Dobbs LLP (Eric Anderson, Bryan Bates) & Richards Layton & Finger PA (John Knight)

    • DIP Lender: Bank of America

      • Legal: Choate Hall & Stewart (John Ventola)

    • Large Shareholder: Alden Global Capital LLC

Update: 9/9/19 #19

⛽️New Chapter 11 Filing - EPIC Companies LLC⛽️

EPIC Companies LLC

August 26, 2019

Another day, another oil-related bankruptcy filing. Houston-based Epic Companies LLC and six affiliated companies filed for chapter 11 on August 26, 2019 in the Southern District of Texas (Judge Jones presiding) to effectuate a sale to its pre-petition and post-petition lender, White Oak Global Advisors LLC.* White Oak intends to credit bid $48.9mm and assume $40mm of the debtors’ debt. It then hopes to flip the assets — that’s right, flip the assets — to a secondary buyer, Alliance Energy Services LLC, for $40mm and the assumption of $35mm of debt. The debtors hope to consummate the transaction within 65 days. This is bankruptcy today folks: super speedy cases tied to aggressive DIP milestones. Why? In large part, because bankruptcy is too frikken inefficient and expensive to go about a sale transaction otherwise. This is why it’s imperative to have a robust pre-petition marketing process. Here, there’s the added element of the secondary sale.

Formed in Q1 2018, the debtors service the oil and gas industry through heavy lift, diving and marine, specialty cutting and well-plugging and abandonment services. Said another way, these guys work with oil and gas companies at the end of the well lifecycle.

Speaking of the end of lifecycles, the company has been in trouble from the get-go. After spending a year acquiring assets, the debtors already had to start divesting by April of 2019. White Oak foreclosed on equity interests in three entities in July 2019. The company still owns three heavy lift and diving vessels, other equipment, IP, and real property. They owe $106.9mm under a senior loan** and $124.8mm under a junior loan. Unsecured trade debt is $30mm. Other liabilities include litigations against the debtors’ vessels.

Why is this company in bankruptcy? They’re very to the point:

Like many in their industry, the downturn in oil and natural gas prices and other industry-related challenges negatively impacted the Debtors' liquidity position.

Consequently, White Oak called a default and has been driving the bus ever since: in July, White Oak informed management that it was done sinking money into this morass. Five days later, the debtors terminated 400 employees. 28 employees remain. Sadly, their future is decidedly more uncertain today than it was even two months ago.

*Prior to the voluntary filing, one of the debtors was involuntaried in Louisiana.

**Once White Oak exercised remedies, it then restated the debtors’ senior debt into three separate facilities. Acqua Liana, as junior lender, followed suit vis-a-vis the junior loan.

  • Jurisdiction: S.D. of Texas (Judge Jones)

  • Capital Structure: see above.

  • Professionals:

    • Legal: Porter Hedges LLP (John Higgins, M. Shane Johnson, Genevieve Graham)

    • Financial Advisor/CRO: S3 Advisors LLC (“G2”) (Jeffrey Varsalone)

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

  • Other Parties in Interest:

    • Prepetition Senior Loan Lender & Postpetition Lender & Stalking Horse Purchaser: White Oak Global Advisors LLC

    • Prepetition Junior Loan Lender: Acqua Liana Capital Partners LLC

🍤New Chapter 11 Bankruptcy Filing - RUI Holding Corp.🍤

RUI Holding Corp.

July 7, 2019

Back in October 2016, in the context of Sun Capital Partners’-owned Garden Fresh Restaurant Intermediate Holdings bankruptcy filing, we asked, “Are Progressives Bankrupting Restaurants?” We wrote:

Morberg's explanation for the bankruptcy went a step farther. He noted that cash flow pressures also came from increased workers' compensation costs, annual rent increases, minimum wage increases in the markets they serve, and higher health benefit costs -- a damning assessment of popular progressive initiatives making the rounds this campaign season. And certainly not a minor statement to make in a sworn declaration.  

It's unlikely that this is the last restaurant bankruptcy in the near term. Will the next one also delineate progressive policies as a root cause? It seems likely.

There have been a plethora of restaurant-related bankruptcy filings between then and now and many of them have raised rising costs as an issue. Perhaps none as blatantly, however, than Sun Capital Partners’ portfolio companies: enter RUI Holding Corp and its affiliated debtors, Restaurants Unlimited Inc. and Restaurants Unlimited Texas Inc. (the “Debtors”).

On July 7, 2019, the Sun Capital-owned Debtors filed for bankruptcy in the District of Delaware. The Debtors opened their first restaurant in 1969 and now own and operate 35 restaurants in 6 states under, among 14 others, the trade names “Clinkerdagger,” “Cutters Crabhouse,” “Maggie Bluffs,” and ”Horatio’s.” The Debtors note that each of their restaurants offer “fine dining” and “polished casual dining” “situated in iconic, scenic, high-traffic locations.” Who knew that if you want something to scream “iconic” you ought to name it Clinkerdagger?

As we’ve said time and time again, casual dining is a hot mess. Per the Debtors:

…the Company's revenue for the twelve months ended May 31, 2019, was $176 million, down 1% from the prior year. As of the Petition Date, the Company has approximately $150,000 of cash on hand and lacks access to needed liquidity other than cash flow from operations.

The Debtors have over $37.7mm of secured debt; they also owe trade $7.6mm. There are over 2000 employees, of which 168 are full-time and 50 are salaried at corporate HQ in Seattle Washington.

But enough about that stuff. Back to those damn progressives. Per the Debtors:

Over the past several years, certain changes to wage laws in the Debtors’ primary geographic locations coupled with two expansion decisions that utilized cash flow from operations resulted in increased use of cash flow from operations and borrowings and restricted liquidity. These challenges coupled with additional state-mandates that will result in an additional extraordinary wage hike in FYE 2020 in certain locations before all further wage increases are subject to increases in the CPI and the general national trend away from casual dining, led to the need to commence these chapter 11 cases.

They continue:

Over the past three years, the Company’s profitability has been significantly impacted by progressive wage laws along the Pacific coast that have increased the minimum wage as follows: Seattle $9.47 to $16.00 (69%), San Francisco $11.05 to $15.59 (41%), Portland $9.25 to $12.50 (35%). As a large employer in the Seattle metro market, for instance, the Company was one of the first in the market to be forced to institute wage hikes. Currently in Seattle, smaller employers enjoy a statutory advantage of a lesser minimum wage of $1 or more through 2021, which is not available to the Company. The result of these cumulative increases was to increase the Company’s annual wage expenses by an aggregate of $10.6 million through fiscal year end 2019.

For a second we had to do a double-take just to make sure Andy Puzder wasn’t the first day declarant!

Interestingly, despite these seemingly OBVIOUS wage headwinds and the EVEN-MORE-OBVIOUS-CASUAL-DINING-CHALLENGES, these genius operators nevertheless concluded that it was prudent to open two new restaurants in Washington state “in the second half of 2017” — at a cost of $10mm. Sadly, “[s]ince opening, the anticipated foot traffic and projected sales at these locations did not materialize….” Well, hot damn! Who could’ve seen that coming?? Coupled with the wage increases, this was the death knell. PETITION Note: this really sounds like two parents on the verge of divorce deciding a baby would make everything better. Sure, macro headwinds abound but let’s siphon off cash and open up two new restaurants!! GREAT IDEA HEFE!!

The Debtors have therefore been in a perpetual state of marketing since 2016. The Debtors’ investment banker contacted 170 parties but not one entity expressed interested past basic due diligence. Clearly, they didn’t quite like what they saw. PETITION Note: we wonder whether they saw that Sun Capital extracted millions of dollars by way of dividends, leaving a carcass behind?? There’s no mention of this in the bankruptcy papers but….well…inquiring minds want to know.

The purpose of the filing is to provide a breathing spell, gain the Debtors access to liquidity (by way of a $10mm new money DIP financing commitment from their prepetition lender), and pursue a sale of the business. To prevent additional unnecessary cash burn in the meantime, the Debtors closed six unprofitable restaurants: Palomino in Indianapolis, Indiana, and Bellevue, Washington; Prime Rib & Chocolate Cake in Portland, OR; Henry’s Tavern in Plano, Texas; Stanford’s in Walnut Creek, California; and Portland Seafood Co. in Tigard, Oregon. PETITION Note: curiously, only one of these closures was in an “iconic” location that also has the progressive rate increases the Debtors took pains to highlight.

It’s worth revisiting the press release at the time of the 2007 acquisition:

Steve Stoddard, President and CEO, Restaurants Unlimited, Inc., said, “This transaction represents an exciting partnership with a skilled and experienced restauranteur that has the requisite financial resources and deep operating experience to be instrumental in strengthening our brands and building out our footprint in suitable locations.”

Riiiiight. Stoddard’s tenure with Sun Capital lasted all of two years. His successor, Norman Abdallah, lasted a year before being replaced by Scott Smith. Smith lasted a year before being replaced by Chris Harter. Harter lasted four years and was replaced by now-CEO, Jim Eschweiler.

A growing track record of bankruptcy and a revolving door in the C-suite. One might think this may be a cautionary tale to those operators in the market for PE partners.*

*Speaking of geniuses, it’s almost as if Sun Capital Partners thinks that things disappear on the internets. Google “sun capital restaurant unlimited” and you’ll see this:

Source: Google

Source: Google

Click through the first link and this is what you get:

Source: Sun Capital Partners

Source: Sun Capital Partners

HAHAHAHAHA. WHOOPS INDEED!

THEY DELETED THAT SH*T FASTER THAN WE COULD SAY “DIVIDEND RECAP.”


  • Jurisdiction: D. of Delaware (Judge Silverstein)

  • Capital Structure: $37.7mm (plus $1.7mm of accrued and unpaid interest)(Fortress Credit Co LLC)

  • Professionals:

    • Legal: Klehr Harrison Harvey Branzburg LLP (Domenic Pacitti, Michael Yurkewicz, Sally Veghte)

    • Financial Advisor: Carl Marks Advisory Group LLC (David Bagley)

    • Investment Banker: Configure Partners LLC

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

    • Board of Directors: Stephen Cella, Jonathan Jackson, James Eschweiler

  • Other Parties in Interest:

    • PE Sponsor: Sun Capital Partners Inc.

    • Prepetition Agent & DIP Agent ($10mm): Fortress Credit Co LLC

      • Legal: Hunton Andrews Kurth LLP (Tyler Brown, Justin Paget) & Gellert Scali Busenkell & Brown (Michael Busenkell)

      • Financial Advisor: Grant Thornton LLP

    • DIP Lenders: Drawbridge Special Opportunities Fund LP, NXT Capital LLC

      • Legal: Goldberg Kohn Ltd. (Randall Klein, Prisca Kim)

Updated 7/7/19

⛽️New Chapter 11 Filing - HDR Holding Inc. (Schramm Inc.)⛽️

Jim Carrey Drill.gif

June 24, 2019

It stands to reason that businesses centered upon servicing mining and oil and gas drilling rigs may be suffering a bit in the current — and by “current,” we mean the last five-or-so years — macroeconomic environment. HDR Holding Inc., a Pennsylvania-based company started in 1900(!), along with certain debtor affiliates, produces “a variety of mobile, top-head hydraulic rotary drilling rigs that are mounted on trucks, tracks and trailers.” The company makes money by (i) manufacturing and selling their various rig models to drillers, (ii) selling consumable drill parts that naturally deteriorate over time, and (iii) servicing their equipment. For reasons that are, by now, blatantly obvious to anyone following the distressed world, oil and gas drilling hasn’t exactly been an obscenely profitable endeavor these last few years (or, in the case of certain drilling regions, EVER, really).

And so demand for the debtors’ wares is down. Per the debtors:

Given its strong connections to the oil and gas industry, the Company has faced significant challenges pervasive in the industry over the past three to five years. Numerous oil and gas producers have significantly curtailed, if not entirely ceased, drilling new wells in response to declines in commodity prices that make such projects uneconomical. The result of this trend for the Company has been a reduced demand for both new rigs and for the related consumable drill parts as existing rig assemblies are idled, which has led to the Debtors failing to meet revenue projections and maintain compliance with the covenants under their prepetition credit facilities.

Ah, yes, the debt. The debtors have approximately $20mm in debt spread out across three different term loan facilities. In an attempt to better service this debt, the debtors have pivoted their sales efforts “to a steadier mining sector” (Bitcoin, maybe? We kid, we kid), now sell aftermarket equipment, and have “managed” their workforce and expenses to preserve cash with the hope that oil and gas might cover. Spoiler alert: it hasn’t. Nevertheless, the debtors purport to have increased performance over the last few years. Just not enough to service their capital structure.

Accordingly, over the last eight months, the debtors and their advisors have pursued a sale process with the hope of selling the business as a going concern. No third-party purchaser came forward pre-petition, unfortunately, and so the debtors seek to pursue a sale to their largest pre-petition equityholder…which also happens to be their largest pre-petition lender…AND which also happens to be their proposed DIP lender (GenNx360 Capital Parters LP). The committed DIP is $6mm at 12% and the proposed purchase price is $10.3mm plus a credit bid of the $6mm DIP amount. Pursuant to the terms of the DIP, the debtors seek to have a sale hearing on or about August 19 to have some cushion in advance of the August 28 sale order milestone under the proposed DIP.

We’ll, therefore, have at least one data point by the end of summer to show us how bullish folks are vis-a-vis a recovery in the oil and gas market.

  • Jurisdiction: D. of Delaware (Judge Walrath)

  • Capital Structure: $5.3mm Term Loan A (Hark Capital I LP), $6.5mm Term Loan B (GenNx360), $6mm Term Loan C (Citizens Bank NA)

  • Professionals:

    • Legal: Young Conaway Stargatt & Taylor LLP (Sean Greecher, Pauline Morgan,

    • Investment Banker: FocalPoint Partners LLC (Michael Fixler)

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

  • Other Parties in Interest:

    • Largest EquityHolder & Stalking Horse Purchaser: GenNx360 Capital Partners L.P.

    • DIP Lender ($6mm at 12%): Schramm II Inc. (an acquisition vehicle created by GenNx360)

      • Legal: Winston & Strawn LLP (Carey Schreiber) & (local) Robinson+Cole LLP (Jamie Edmonson)

    • Term Loan A Lender: Hark Capital I LP

      • Legal: Perkins Coie LLP (Jordan Kroop) & (local) The Rosner Law Group LLC (Frederick Rosner)

Updated 7/7 #65

🌑New Chapter 11 Bankruptcy Filing - Cambrian Holding Company Inc.🌑

Cambrian Holding Company Inc.

June 16, 2019

Pour one out for the fine folks of eastern Kentucky and western Virginia. They can’t seem to catch a break.

Earlier this week, Cambrian Holding Company Inc. (and its affiliate debtors) joined a long line of coal producers/processors (e.g., Cloud Peak Energy, Westmoreland Coal, Mission Coal) who have recently filed for bankruptcy. The company employees approximately 660 people, none of whom are members of a labor union (in contrast to bigger, more controversial, coal filings, i.e., Westmoreland) and most of whom must be fretting over their futures. They must really be getting tired of all of the post-election “winning” that’s going on in coal country.

The company’s problems appear to start in 2015, at the time the company acquired TECO Coal LLC and assumed $40mm of workers’ compensation and black lung liabilities that TECO had previously self-insured. The company sought to leverage its broader scale to increase production but it failed to raise the working capital it needed to live up to its obligations and sustain production at levels necessary to service the company’s balance sheet. Post-acquisition, the company doubled revenues, but it couldn’t sustain that progress and nevertheless recorded net losses from 2015 through 2018. In turn, the company triggered financial covenant and other defaults under its ABL Revolver and Term Loan.

In other words, the company has been in a state of emergency ever since the acquisition. Almost immediately, the company “undertook various efforts to return to a positive cashflow,” which, as you might expect, meant idling or closing certain mining operations, stretching the usable life of equipment, and laying off employees.* Its efforts proved fruitless. Per the company:

Notwithstanding these efforts, the Debtors have been unable to overcome the pressures placed on their profit margins from steadily declining coal prices (along with burdensome regulations and the accompanying decline in demand for coal), all of which have contributed to the Debtors’ substantial negative cashflow and inability to consummate a value-enhancing transaction.

So, what now? The company, with assistance from Jefferies LLC, will attempt to find a buyer willing to catch a falling knife: the plan is to “commence an expeditious sale and marketing process” of the company’s assets (call us crazy, but shouldn’t it be the other way around?). To fund this process, the company has a DIP commitment from affiliates of pre-petition lenders for $15mm.**

*Interestingly, it was in March 2016 when Hilary Clinton infamously stated, “Because we're going to put a lot of coal miners and coal companies out of business.” At the time, Cambrian was already struggling, laying off people in an attempt to generate positive cashflow. That message really must’ve struck a chord down in coal country. WHOOPS.

**The Term Lenders swiftly objected to the terms of the DIP and the use of cash collateral.

  • Jurisdiction: D. of Kentucky (Judge Schaaf)

  • Capital Structure: $48mm ABL Revolver (Deutsche Bank AG New York Branch), $78mm Term Loan (Deutsche Bank Trust Company Americas)

  • Professionals:

    • Legal: Frost Brown Todd LLC (Ronald Gold, Douglas Lutz, Patrica Burgess)

    • Financial Advisor: FTI Consulting Inc. (Bertrand Troiano)

    • Investment Banker: Jefferies LLC (Leon Szlezinger)

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

  • Other Parties in Interest:

    • Term Lenders: Deutsche Bank AG, London Branch, Tennenbaum Opportunities Partners V, LP and Tennenbaum Opportunities Fund VI, LLC

      • Legal: Davis Polk & Wardwell LLP (Brian Resnick, Christopher Robertson, Elliot Moskowitz) & (local) Bingham Greenbaum Doll LLP (Christopher Madden)

    • DIP & Bridge Lender: Richmond Hill Capital Partners, LP

New Chapter 11 Bankruptcy Filing - F+W Media Inc.

F+W Media Inc.

March 10, 2019

WAAAAAAY back in September 2018, we highlighted in our Members’-only piece, “Online Education & ‘Community’ (Long Helen Mirren),” that esteemed author and professor Clayton Christensen was bullish about the growth of online education and bearish about colleges and universities in the US. We also wrote that Masterclass, a SF-based online education platform that gives students “access” to lessons from the likes of Helen Mirren(acting), Malcolm Gladwell (writing) and Ken Burns (documentary film making) had just raised $80mm in Series D financing, bringing its total fundraising to $160mm. Online education is growing, we noted, comporting nicely with Christensen’s thesis.

But we didn’t stop there. We counter-punched by noting the following:

Yet, not all online educational tools are killing it. Take F+W Media Inc., for instance. F+W is a New York-based private equity owned content and e-commerce company; it publishes magazines, books, digital products like e-books and e-magazines, produces online video, offers online education, and operates a variety of e-commerce channels that support the various subject matters it specializes in, e.g., arts & crafts, antiques & collectibles, and writing. Writer’s Digest is perhaps its best known product. Aspiring writers can go there for online and other resources to learn how to write.

For the last several years F+W has endeavored to shift from its legacy print business to a more digital operation; it is also beginning to show cracks. Back in January, the company’s CEO, COO and CTO left the company. A media and publishing team from FTI Consulting Inc. ($FTI) is (or at least was) embedded with new management. The company has been selling non-core assets (most recently World Tea Media). Its $125mm 6.5% first lien term loan due June 2019 was recently bid at 63 cents on the dollar (with a yield-to-worst of 74.8% — yields are inversely proportional to price), demonstrating, to put it simply, a market view that the company may not be able to pay the loan (or refinance the loan at or below the current economics) when it comes due.

Unlike MasterClass and Udacity and others, F+W didn’t start as an all-digital enterprise. The shift from a legacy print media business to a digital business is a time-consuming and costly one. Old management got that process started; new management will need to see it through, managing the company’s debt in the process. If the capital markets become less favorable and/or the business doesn’t show that the turnaround can result in meaningful revenue, the company could be F(+W)’d(emphasis added)

Nailed it.

On March 10, 2019, F+W Media Inc., a multi-media company owning and operating print and digital media platforms, filed for chapter 11 bankruptcy in the District of Delaware along with several affiliated entities. We previously highlighted Writer’s Digest, but the company’s most successful revenue streams are its “Crafts Community” ($32.5mm of revenue in 2018) and “Artist’s Network” ($.8.7mm of revenue in 2018); it also has a book publishing business that generated $22mm in 2018. In terms of “master classes,” the bankruptcy papers provide an intimate look into just how truly difficult it is to transform a legacy print business into a digital multi-media business.

The numbers are brutal. The company notes that:

“In the years since 2015 alone, the Company’s subscribers have decreased from approximately 33.4 million to 21.5 million and the Company’s advertising revenue has decreased from $20.7 million to $13.7 million.”

This, ladies and gentlemen, reflects in concrete numbers, what many in media these days have been highlighting about the ad-based media model. The company continues:

Over the past decade, the market for subscription print periodicals of all kinds, including those published by the Company, has been in decline as an increasing amount of content has become available electronically at little or no cost to readers. In an attempt to combat this decline, the Company began looking for new sources of revenue growth and market space for its enthusiast brands. On or around 2008, the Company decided to shift its focus to e-commerce upon the belief that its enthusiast customers would purchase items from the Company related to their passions besides periodicals, such as craft and writing supplies. With its large library of niche information for its hobbyist customers, the Company believed it was well-positioned to make this transition.

What’s interesting is that, rather than monetize their “Communities” directly, the company sought to pursue an expensive merchandising strategy that required a significant amount of upfront investment. The company writes:

In connection with this new approach, the Company took on various additional obligations across its distribution channel, including purchasing the merchandise it would sell online, storing merchandise in leased warehouses, marketing merchandise on websites, fulfilling orders, and responding to customer service inquiries. Unfortunately, these additional obligations came at a tremendous cost to the Company, both in terms of monetary loss and the deterioration of customer relationships.

In other words, rather than compete as a media company that would serve (and monetize) its various niche audiences, the company apparently sought to use its media as a marketing arm for physical products — in essence, competing with the likes of Amazon Inc. ($AMZN)Walmart Inc. ($WMT) and other specialty hobbyist retailers. As if that wasn’t challenging enough, the company’s execution apparently sucked sh*t:

As a consequence of this shift in strategic approach, the Company was required to enter into various technology contracts which increased capital expenditures by 385% in 2017 alone. And, because the Company had ventured into fields in which it lacked expertise, it soon realized that the technology used on the Company’s websites was unnecessary or flawed, resulting in customer service issues that significantly damaged the Company’s reputation and relationship with its customers. By example, in 2018 in the crafts business alone, the Company spent approximately $6 million on its efforts to sell craft ecommerce and generated only $3 million in revenue.

Last we checked, spending $2 to make $1 isn’t good business. Well, unless you’re Uber or Lyft, we suppose. But those are transformative visionary companies (or so the narrative goes). Here? We’re talking about arts and crafts. 🙈

As if that cash burn wasn’t bad enough, in 2013 the company entered into a $135mm secured credit facility ($125mm TL; $10mm RCF) to fund its operations. By 2017, the company owed $99mm in debt and was in default of certain covenants (remember those?) under the facility. Luckily, it had some forgiving lenders. And by “forgiving,” we mean lenders who were willing to equitize the loan, reduce the company’s indebtedness by $100mm and issue a new amended and restated credit facility of $35mm (as well as provide a new $15mm tranche) — all in exchange for a mere 97% of the company’s equity (and some nice fees, we imagine). Savage!

As if the spend $2 to make $1 thing wasn’t enough to exhibit that management wasn’t, uh, “managing” so well, there’s this:

The Company utilized its improved liquidity position as a result of the Restructuring to continue its efforts to evolve from a legacy print business to an e-commerce business. However, largely as a result of mismanagement, the Company exhausted the entire $15 million of the new funding it received in the six (6) months following the Restructuring. In those six (6) months, the Company’s management dramatically increased spending on technology contracts, merchandise to store in warehouses, and staffing while the Company was faltering and revenue was declining. The Company’s decision to focus on e-commerce and deemphasize print and digital publishing accelerated the decline of the Company’s publishing business, and the resources spent on technology hurt the Company’s viability because the technology was flawed and customers often had issues with the websites.

What happened next? Well, management paid themselves millions upon millions of dollars in bonuses! Ok, no, just kidding but ask yourself: would you have really been surprised if that were so?? Instead, apparently the board of directors awoke from a long slumber and decided to FINALLY sh*tcan the management team. The board brought in a new CEO and hired FTI Consulting Inc. ($FTI) to help right the ship. They quickly discovered that the e-commerce channel was sinking the business (PETITION Note: this is precisely why many small startup businesses build their e-commerce platforms on top of the likes of Shopify Inc. ($SHOP) — to avoid precisely the e-commerce startup costs and issues F+W experienced here.).

Here is where you insert the standard operational restructuring playbook. Someone built out a 13-week cash flow model and it showed that the company was bleeding cash. Therefore, people got fired and certain discreet assets got sold. The lenders, of course, took some of those sale proceeds to setoff some of their debt. The company then refreshed the 13-week cash flow model and…lo and behold…it was still effed! Why? It still carried product inventory and had to pay for storage, it was paying for more lease space than it needed, and its migration of e-commerce to partnerships with third party vendors, while profitable, didn’t have meaningful enough margin (particularly after factoring in marketing expenses). So:

Realizing that periodic asset sales are not a long-term operational solution, the Company’s board requested alternative strategies for 2019, ranging from a full liquidation to selling a significant portion of the Company’s assets to help stabilize operations. Ultimately, the Company determined that the only viable alternative, which would allow it to survive while providing relief from its obligations, was to pursue a sale transaction within the context of a chapter 11 filing.

Greenhill & Co. Inc. ($GHL) is advising the company with respect to a sale of the book publishing business. FTI is handling the sale of the company’s Communities business. The company hopes both processes are consummated by the end of May and middle of June, respectively. The company secured an $8mm DIP credit facility to fund the cases.

And that DIP ended up being the source of some controversy at the First Day hearing. Yesterday morning, Judge Gross reportedly rebuked the lenders for seeking a 20% closing fee on the $8mm DIP; he suggested 10%. Per The Wall Street Journal:

Judge Gross said he didn’t want to play “chicken” with the lenders, but that he didn’t believe they should use the bankruptcy financing to recoup what they were owed before the chapter 11 filing.

Wow. Finally some activist push-back on excessive bankruptcy fees! Better late than never.

  • Jurisdiction: D. of Delaware (Judge Gross)

  • Capital Structure:

  • Professionals:

    • Legal: Young Conaway Stargatt & Taylor LLP (Pauline Morgan, Kenneth Enos, Elizabeth Justison, Allison Mielke, Jared Kochenash)

    • Financial Advisor: FTI Consulting Inc. (Michael Healy)

    • Investment Banker: Greenhill & Co.

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

  • Other Parties in Interest:

    • Prepetition & Postpetition DIP Agent ($8mm): Fortress Credit Co. LLC)

      • Legal: Halperin Battaglia Benzija LLP (Alan Halperin, Walter Benzija, Julie Goldberg) & (local) Bielili & Klauder LLC (David Klauder)

    • DIP Lenders: Drawbridge Special Opportunities Fund LP, New F&W Media M Holdings Corp LLC, PBB Investments III LLC, CION Investment Corporation, Ellington Management Group, or affiliates thereof to be determined.

    • Official Committee of Unsecured Creditors (LSC Communications US, Inc. and Palm Coast Data LLC)

      • Legal: Arent Fox LLP (Robert Hirsh, Jordana Renert) & (local) Morris James LLP (Eric Monzo, Brya Keilson)

      • Financial Advisor: B. Riley FBR (Adam Rosen)

Updated 4/23

New Chapter 11 Bankruptcy Filing - Weatherly Oil & Gas LLC

Weatherly Oil & Gas LLC

February 28, 2019

Restructuring in the oil and gas space has been quiet of late but we here at PETITION suspect that may change very soon. While oil has been on the rise (in the mid-60s at the time of this writing) — and there are both potential political and supply-side roadblocks growing domestically that may help push prices upward — there nevertheless appear to be cracks forming. We’ve been noting that Jones Energy ($JONE), Sanchez Energy Corporation ($SN), Southcross Energy Partners LP ($SXEE), and Vanguard Natural Resources all look distressed and headed towards chapter 11 bankruptcy filings (or a chapter 22 filing, as the case may be with Vanguard). Recent price action for several other companies also reflects some doubt about the oil and gas space.

Take, for instance, Alta Mesa Holdings LP ($AMR). Per The Houston Chronicle:

Houston oil and gas company Alta Mesa Resources is struggling to stay afloat, laying off roughly one-fourth of its employees and writing down the value of its assets by $3.1 billion because of admitted failures in its financial reporting.

The company's three top executives, CEO Hal Chappelle, Chief Operating Officer Michael Ellis and Chief Financial Officer Michael McCabe, resigned abruptly a few weeks ago.

The company disclosed in an SEC filing that the write-down stems from “ineffective internal control over financial reporting due to an identified material weakness.” We’re conjecturing here, but that sure sounds like diplomatic Texan for “we effed up pretty badly…perhaps even fraudulently.” Consequently, the plaintiffs’ lawyers are circling this puppy like vultures and, well, this:

Indeed, the company’s $500mm 7.875% senior unsecured bonds due 2024 got UTTERLY HOUSED, dipping down over 40% in a week and approximately 50% versus a month ago. This chart is BRUTAL:

Source: TRACE

Source: TRACE

We’ll take a deeper dive into Alta Mesa soon for our Members: if you’re not a Member well, we hope you revel in ignorance.

The price action of once-bankrupt Chaparral Energy Inc. ($CHAP) is also notable: it saw its stock collapse over 20% and its $300mm 8.75% senior unsecured notes due 2023 fall nearly 17%. More debt BRUTALITY here:

Source: TRACE

Source: TRACE

Long trips to Texas.

Here, Weatherly Oil & Gas LLC is an oil and gas acquisition and exploration company focused on Arkansas, Louisiana and Texas; it operates over 800 well bores (over half shut-in or non-producing) on 200k net acres. The company blames continued low commodity prices and fundamentally changed lending practices for its bankruptcy. Specifically, the company notes:

Lending practices moved from a reserves-based approach to a cash-flow based approach, limiting access to capital growth and forcing the Debtor to utilize free cash flow to pay down senior debt instead of making other capital expenditures.

Without capital and with an expensive production focus, the company struggled in the face of a glut of competition.

The company has a transaction support agreement pursuant to which it intends to sell its assets to multiple purchasers and then pursue a plan of liquidation. Angelo Gordon Energy Servicer LLC, the company’s prepetition lender, will provide a $1mm DIP to fund the cases. Halliburton Energy Services is the company’s largest unsecured creditor with an approximate $2.9mm claim.

  • Jurisdiction: S.D. of Texas (Judge Isgur)

  • Capital Structure: $90.2mm term loan (Angelo Gordon Energy Servicer LLC)

  • Professionals:

    • Legal: Jackson Walker LLP (Matthew Cavenaugh, Kristhy Peguero, Vienna Anaya)

    • Financial Advisor/CRO: Ankura Consulting Group LLC (Scott Pinsonnault)

    • Marketing Agent: TenOaks Energy Partners LLC

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

  • Other Parties in Interest:

    • Prepetition Term Lender & DIP Lender ($1mm): Angelo Gordon Energy Servicer LLC

      • Legal: Vinson & Elkins LLP (Harry Perrin, David Meyer, Steven Zundell, Michael Garza)

    • Buyer: BRG Lone Star, Ltd.

    • Buyer: EnSight IV Energy Partners, LLC

    • Sponsor: Weatherly East Texas LLC

      • Legal: Kirkland & Ellis LLP (Gregory Pesce, Brett Newman)

😷New Chapter 11 Bankruptcy Filing - Trident Holding Company LLC😷

Trident Holding Company LLC

February 10, 2019

It looks like all of those 2018 predictions about healthcare-related distress were off by a year. We’re merely in mid-February and already there has been a full slate of healthcare bankruptcy filings. Here, Trident Holding Company LLC, a Maryland-based provider of bedside diagnostic and other services (i.e., x-ray, ultrasound, cardiac monitoring) filed for bankruptcy in the Southern District of New York. What’s interesting about the filing is that it is particularly light on detail: it includes the standard description of the capital structure and recent efforts to restructure, but there is a dearth of information about the history of the company and its financial performance. There is, however, a restructuring support agreement with the company’s priority first lien lenders.

Here’s a quick look at the company’s capital structure which is a large factor driving the company into bankruptcy:

Source: First Day Declaration

Source: First Day Declaration

As you can see, the company has a considerable amount of debt. The above-reflected “Priority First Lien Facility” is a fairly recent development, having been put in place as recently as April 2018. That facility, provided by Silver Point, includes a $27.1mm prepayment fee triggered upon the filing of the bankruptcy case. That’s certain to be a point of interest to an Official Committee of Unsecured Creditors. It also contributed to an onerous amount of debt service. Per the company:

In the midst of market and competitive challenges, Trident has significant debt service obligations. Over the course of 2018, Trident paid approximately $26,185,667.75 in cash interest on the Secured Credit Facilities. On January 31, 2019, the Company missed an interest payment of $9,187,477.07 on the Secured Credit Facilities, resulting in an Event of Default on February 8, 2019 after the cure period expired.

But, wait. There’s more. The recent uptick in distressed healthcare activity is beginning to aggregate and create a trickle-down bankruptcies-creating-bankruptcies effect:

Moreover, a number of recent customer bankruptcies – including those of Senior Care Centers, LLC, 4 West Holdings, Inc., and Promise Healthcare Group, LLC – have exacerbated the Company’s liquidity shortfall by limiting the collectability of amounts owed from these entities. A number of other customers who have not yet filed bankruptcy cases are generally not paying the Debtors within contractual terms due to their own liquidity problems. As a result of these collection difficulties and challenges with the new billing system in the Sparks Glencoe billing center, the Debtors recorded $27.8 million of extraordinary bad debt expense in 2018 and $12.7 million in 2017.

Ouch. Not to state the obvious, but if the start of 2019 is any indication, this is only going to get worse. The company estimates a net operating cash loss of $9.1mm in the first 30 days of the case.

Given the company’s struggles and burdensome capital structure, the company has been engaging its lenders for well over a year. In the end, however, it couldn’t work out an out-of-court resolution. Instead, the company filed its bankruptcy with a “restructuring support agreement” with Silver Point which, on account of its priority first lien holdings, is positioned well to drive this bus. And by “drive this bus,” we mean jam the junior creditors. Per the RSA, Silver Point will provide a $50mm DIP and drive the company hard towards a business plan and plan of reorganization. Indeed, the business plan is due within 36 days and a disclosure statement is due within a week thereafter. Meanwhile, the RSA as currently contemplated, gives Silver Point $105mm of take-back term loan paper and 100% of the equity of the company (subject to dilution). The first lien holders have a nice blank in the RSA next to their recovery amount and that recovery is predicated upon…wait for it…

…a “death trap.” That is, if they accept the plan they’ll currently get “ [●]%” but if they reject the plan they’ll get a big fat donut. Likewise, the second lien holders. General unsecured claimants would get a pro rata interest in a whopping $100k. Or the equivalent of what Skadden will bill in roughly, call it, 3 days of work??

The business plan, meanwhile, ought to be interesting. By all appearances, the company is in the midst of a massive strategic pivot. In addition to undertaking a barrage of operational fixes “…such as optimized pricing, measures to improve revenue cycle management by increasing collection rates, rationalizing certain services, reducing labor costs, better managing vendor spend, and reducing insurance costs,” the company intends to focus on its core business and exit unprofitable markets. While it retreats in certain respects, it also intends to expand in others: for instance, the company intends to “expand home health services to respond to the shifting of patients from [skilled nursing facilities] into home care.” Per the company:

Toward this end, Trident conducted successful home health care pilot programs in 2018 in two markets to optimize its Care at Home business model with radiology technicians dedicated to servicing home health patients. Trident hopes to expand this business model to an additional seven markets in 2019.

Like we said, a pivot. Which begs the question “why?” In addition to the debt, the company noted several other factors that drove it into bankruptcy. Chief among them? The rise of home health care. More from the company:

Trident has suffered ripple effects from the distress faced by skilled nursing facilities (“SNF”), which are its primary direct customers. SNF occupancy rates have declined to a multi-year low as a result of structural and reimbursement changes not yet offset by demographic trends. These structural changes include, among other things, patient migration to home health care. The decline in SNF occupancy rates has led to reduced demand for Trident’s services. At the same time, Trident has only had limited success reducing costs in response to lower volumes, as volume declines are driven by lower utilization per facility rather than a reduction in the number of facilities served.

This is a trend worth continued watching. Who else — like Trident — will be affected by this?

Large general unsecured creditors of the business include Grosvenor Capital Management, Jones Day (to the tune of $2.3mm…yikes), Konica Minolta Healthcare Americas Inc., McKesson ($MCK)(again!!…rough couple of weeks at McKesson), Quest Diagnostics Inc. ($DGX), Cardinal Health Inc. ($CAH) and others. They must be really jacked up about that pro rata $100k!!

  • Jurisdiction: S.D. of New York (Judge Lane)

  • Capital Structure: see above.

  • Professionals:

    • Legal: Skadden Arps Slate Meagher & Flom LLP (Paul Leake, Jason Kestecher, James Mazza Jr., Justin Winerman)

    • Independent Director: Alexander D. Greene

    • Financial Advisor: Ankura Consulting (Russell Perry, Ben Jones)

    • Investment Banker: PJT Partners LP (Mark Buschmann, Josh Abramson, Willie Evarts, Meera Satiani, Elsa Zhang)

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

  • Other Professionals:

    • Priority First Lien Admin Agent: SPCP Group LLC/Silver Point Finance LLC

      • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Alan Kornberg, Robert Britton, Lewis Clayton, Aidan Synnott, Christman Rice, Michael Turkel)

      • Financial Advisor: Houlihan Lokey LP

    • First Lien Agent: Cortland Capital Market Services LLC

      • Legal: White & Case LLP (Thomas Lauria, Erin Rosenberg, Jason Zakia, Harrison Denman, John Ramirez)

    • Ad Hoc Group of First Lien Lenders

      • Legal: Kirkland & Ellis LLP (Patrick Nash)

      • Financial Advisor: Greenhill & Co. Inc.

    • Second Lien Agent: Ares Capital Corporation

    • Ad Hoc Group of Second Lien Lenders

      • Legal: Latham & Watkins (Richard Levy, James Ktsanes)

    • Large Creditor: McKesson Medical-Surgical Inc.

      • Legal: Buchalter P.C. (Jeffrey Garfinkle)

    • Large Creditor: Quest Diagnostics

      • Legal: Morris James LLP (Brett Fallon)

    • Equity Sponsor: Revelstoke Capital Partners

      • Legal: Winston & Strawn LLP (Carey Schreiber, Carrie Hardman)

    • Equity Sponsor: Welltower Inc.

      • Legal: Sidley Austin LLP (Andrew Propps, Bojan Guzina)

    • Official Committee of Unsecured Creditors

      • Legal: Kilpatrick Townsend & Stockton LLP (David Posner, Gianfranco Finizio, Kelly Moynihan)

      • Financial Advisor: AlixPartners LLP (David MacGreevey)



😷New Chapter 11 Bankruptcy Filing - SQLC Senior Living Center at Corpus Christi Inc. (d/b/a Mirador)😷

SQLC Senior Living Center at Corpus Christi Inc. (d/b/a Mirador)

2/8/19

We started reading the papers for the bankruptcy filing of SQLC Senior Living Center at Corpus Christi Inc. (d/b/a Mirador) and started scratching our heads. “Have we read this before?” we wondered. The answer is, effectively, ‘yes.’ On January 30th, Mayflower Communities Inc. d/b/a The Barrington of Carmel filed for bankruptcy. As with Mirador, here, SQLC is the sole member of and administrator and operator of The Barrington of Carmel, too. And therein lies the familiarity: the first several pages of Mirador’s First Day Declaration filed in support of the bankruptcy have the exact same description of the continuing care retirement community business as that filed in The Barrington of Carmel case. Which makes sense: there’s the same CRO and financial advisor in both cases. And, so, we have to complement the efficiency: why reinvent the wheel?

Whereas Barrington was a 271-unit CCRC, Mirador — a Texas nonprofit — owns and operates a 228-unit CCRC, comprised of 125 independent living residences, 44 assisted living residences, 18 memory care residences, and 4 skilled nursing residences. Mirador makes all of its revenue from operation of the CCRC. Mirador is a smaller CCRC than Barrington and, similarly, its assets and liabilities are fewer. As of the petition date, the company reported approximately $53mm in assets and $118mm in liabilities, the bulk of which is comprised of $74.5mm of long-term municipal bond obligations (UMB Bank NA) and $13.9mm of subordinated notes.

So what factored into the company’s bankruptcy filing? It blames, among other things, (i) the inability to sustain pricing and the level of entrance fees needed to support its debt, (ii) the Great Recession’s effect on housing prices which had the trickle-down effect of impairing the ability of potential residents to sell their houses and pay the necessary entrance fee (which, in turn, led to below-model occupancy levels and depressed cash flow), and (iii) the competitive senior housing market in Corpus Christi.

To combat these trends, the company lowered its entrance fees to fill occupancy. While that worked, it “also produced the negative effect on the long-term financial ability of the Debtor to pay Resident Refunds as they became due.” See, this complicated things. Per the Debtors:

“The Debtor’s initial Life Care Residents often executed 90% refundable contracts, which resulted in higher Resident Refund obligation. In an effort to maintain occupancy levels, newer Life Care Residents often paid a lower cost Entrance Fee. Thus, as earlier Residents moved out of the Facility and became eligible for Resident Refunds, the Entrance Fees received from New Residents were not sufficient to cover the Debtor’s Resident Refund obligations. This pattern continued such that as of late 2017, the Debtor owed and was unable to pay Resident Refunds of approximately $2 million.”

This appears to be the nonprofit version of a Ponzi scheme, but we digress. In addition to the above, the company also stream-lined costs and curtailed company-wide expenses and administrative overhead. Ultimately, the company hired a slate of bankruptcy professionals and began a marketing process for the assets — a process that, in the end, culminated in the stalking horse offer by Aldergate Trust and Methodist Retirement Community for $20,350,000 in cash plus the assumption of certain liabilities. The agreement also includes the assumption of all Residence Agreements of former residents, preserving those residents’ rights to refunds. With this sale (and the proceeds therefrom) as its centerpiece, the company also filed a plan and disclosure statement on day one.

One last point here: considering that we now have two CCRC bankruptcies in the last two weeks and both are operated by SQLC, we’d be remiss if we didn’t highlight that SQLC also operates four other CCRCs: (a) Northwest Senior Housing Corporation d/b/a Edgemere; (b) Buckingham Senior Living Community, Inc. d/b/a The Buckingham; (c) Barton Creek Senior Living Center, Inc. d/b/a Querencia at Barton Creek; and (d) Tarrant County Senior Living Center, Inc. d/b/a The Stayton at Museum Way. With 33% of its CCRCs currently in BK, it seems that — for the restructuring professionals among you — these other SQLC facilities may be worth a quick look/inquiry.

  • Jurisdiction: S.D. of Texas

  • Capital Structure: see above.

  • Company Professionals:

    • Legal: Thompson & Knight LLP (Demetra Liggins, Cassandra Sepanik Shoemaker)

    • Financial Advisor: Larx Advisors (Keith Allen)

    • CRO: Ankura Consulting (Louis Robichaux IV)

    • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)

  • Other Parties in Interest:

    • Indenture Trustee: UMB Bank NA

      • Legal: McDermott Will & Emery (Nathan Coco)

    • Stalking Horse Purchaser: Aldergate Trust and Methodist Retirement Community

New Chapter 11 Bankruptcy Filing - Avadel Specialty Pharmaceuticals LLC

Avadel Specialty Pharmaceuticals LLC

February 6, 2019

Geez. All the action these days is in busted retail and busted pharma. Here, Avadel Specialty Pharmaceuticals LLC ("ASP") is a MIssouri-based pharmaceutical company engaged in the business of the distribution, sale and marketing of pharmaceutical products focused on chronic urological disorders. It has one product, NOCTIVA. In other words, it is not a manufacturer; it has an exclusive license from Serenity Pharmaceuticals LLC to develop, market and sell NOCTIVA in the US and Canada. The company paid $70mm for the license and Serenity maintained some option value as well, including the right to receive potential milestone payments and royalties from product sales. 

Why bankruptcy? Per the company:

"ASP has experienced several market challenges in its efforts to commercialize and increase sales volume while the overall growth for its product has been slower than anticipated. As a result, ASP has experienced losses since its inception, and as of the Petition Date, has an accumulated deficit, due in part to costs relating to underachieving sales, unanticipated competition, and certain supply agreements. Making matters worse, sales projections based on the current growth trend illustrate a substantially longer period of operating losses than originally assumed."

Or said another way, among other issues, doctors seem unwilling to prescribe NOCTIVA to their worst enemies. Per the company, "health care professionals ahve been unwillint to try (or adop) NOCTIVA." Why not? Well, for starters, there are other agents that physicians use to target the conditions NOCTIVA is formulated to tackle. Moreover, there are "underlying concerns with regard to the potential risks of a serious side effect associated with the active ingredient in NOCTIVA™ (desmopressin acetate), based on prior experience with older formulations of the same active ingredient…." Uh, yeah, that sounds sketchy AF. 

And so this thing has been a money pit. The company's direct (non-debtor) parent has funded approximately $152mm since September 2017 to support the business including $80mm in additional investment that have yielded less than $3mm in net sales. How's that for ROI? As you can probably imagine, that ROI proposition was enough to finally compel ASP's direct parent to stop funding it. 

Consequently, the company sought to perform triage, first by trying (and failing) to locate a co-promoter and, second, by sublicensing its obligations. But, no dice. it filed for bankruptcy to sell its assets and wind down its operations. The bankruptcy constitutes just one part in the overall restructuring efforts of ASP's indirect parent, Avadel Pharmaceuticals plc. The case will be funded, if approved, by a $2.7mm DIP revolving credit facility and $2.7mm unsecured DIP, both provided by the company's non-debtor indirect parent. 

  • Jurisdiction: D. of Delaware (Judge Sontchi) 

  • Capital Structure: $mm debt     

  • Company Professionals:

    • Legal: Greenberg Traurig LLP (Paul Keenan Jr., John Dodd, Reginald Sainvil, Dennis Meloro, Sara Hoffman)

    • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)

  • Other Parties in Interest:

    • Avadel US Holdings Inc.

      • Legal: Troutman Sanders LLP (Jonathan Forstot) & (local) Ashby & Geddes PA (Gregory Taylor)

New Chapter 11 Bankruptcy Filing - Petroquest Energy Inc.

Petroquest Energy Inc.

November 6, 2018

Petroquest Energy Inc. ($PQUE), an independent energy company engaged in the exploration, development, acquisition and production of oil and gas reserves in Texas and Louisiana, managed to stave off bankruptcy back during the oil and gas downturn. How? Well, this is how:

Source: First Day Declaration

Source: First Day Declaration

Bankruptcy, however, caught up to it anyway.

The company filed for bankruptcy in the Southern District of Texas with a restructuring support agreement in tow. The terms of the RSA reflect that (i) the prepetition term lenders will be paid in full with an exit facility, (ii) the holders of second lien notes will have an option to participate in the exit facility (which will be fully backstopped by certain consenting creditors), and (iii) the prepetition second lien noteholders will receive 100% equity in the reorganized PetroQuest, a backstop fee in connection with provision of the exit facility, and $80mm of new second lien PIK notes. All of which is to say that the company will meaningfully de-lever its balance sheet. Meanwhile, general unsecured creditors will get $400k and all equityholders will, shockingly, get wiped.

More to come…

  • Jurisdiction: S.D of Texas (Judge Isgur)

  • Capital Structure: $50mm Term Loan, $9.4mm second lien debt, $275mm second lien PIK debt (Wilmington Trust NA)     

  • Company Professionals:

    • Legal: Porter Hedges LLP (John Higgins, Joshua Wolfshohl, M. Shane Johnson)

    • Financial Advisor: FTI Consulting Inc.

    • Investment Banker: Seaport Global Securities

    • Claims Agent: Epiq Corporate Restructuring LLC (*click on company name above for free docket access)

  • Other Parties in Interest:

    • Second Lien Agent: Wilmington Trust NA

      • Legal: Reed Smith LLP (Kurt Gwynne)

New Chapter 11 Bankruptcy Filing - Aegean Marine Petroleum Network Inc.

Aegean Marine Petroleum Network Inc.

November 6, 2018

On Sunday, November 4, 2018, we wrote the following in our “Fast Forward” segment:

Aegean Marine Petroleum Network Inc. ($ANW) is now subject to a fraud probe by international auditors. This thing will be in a bankruptcy court near you before too long.

We didn’t expect that prediction to come to fruition so quickly!

Admittedly, Aegean, one of the world’s largest independent marine fuel logistics companies with 57 owned and chartered vessels, has been a slow moving train towards bankruptcy for some time. The recent revelation of fraud — yes, fraud — is just the cherry on top. (PETITION Note: in frothy times come desperate shenanigans. This won’t be the last bankruptcy filed in the near-term that, in part, will have an element of fraud in the story.) And, alas, earlier, Aegean Marine Petroleum Network Inc. and 74 affiliated debtors filed for bankruptcy in the Southern District of New York. The more immediate trigger? The maturity of its 4% convertible unsecured notes.

Aegean blames an over-saturated market, limitations imposed by its lenders under the credit facilities, and…wait for it…the fraud…as reasons for its bankruptcy filing. Wait. Why are we describing the debtors’ ails in words when they’ve provided us with some crafty graphics to illustrate, in part, the “perfect storm of circumstances” that have plagued them:

Source: First Day Declaration

Source: First Day Declaration

Aegean intends to use the bankruptcy process to address its capital structure (namely the maturity), stabilize operations and sell to Mercuria Energy Group Limited, a private company that, back in August, became the sole lender under both the debtors’ US and Global credit facilities. Mercuria also provided a DIP proposal that consists of a $160mm US credit facility, a $300mm global credit facility, and a $72mm term loan that the debtors deemed better than a proposed facility from an ad hoc group of unsecured convertible noteholders. The question will be to what degree a more robust and competitive sale process emerges now that this thing is finally in bankruptcy court.

  • Jurisdiction: S.D.N.Y. (Judge Wiles)

  • Capital Structure: $131.7mm US credit facility (ABN AMRO Bank NV), $249.6mm global credit facility (ABN AMRO Bank NV), $206.6mm aggregated across ten secured term loans, $172.5mm 4.25% convertible unsecured notes due 2021 (U.S. Bank NA), $94.55mm 4.00% convertible unsecured notes due 2018 (Deutsche Bank Trust Company Americas)  

  • Company Professionals:

    • Legal: Kirkland & Ellis LLP (James Sprayragen, Jonathan Henes, Marc Kieselstein, Ross Kwasteniet, Cristine Pirro Schwarzman, Adam Paul, Benjamin Winger, Christopher Hayes, Bryan Uelk)

    • Independent Directors: Donald Moore, Raymond Bartoszek, Tyler Baron)

    • Audit Committee of the Board of Directors

      • Legal: Arnold & Porter Kaye Scholer LLP (Tyler Nurnberg)

    • Financial Advisor: EY Turnaround Management Services LLC (Andrew Hede)

    • Investment Banker: Moelis & Company LLC (Zul Jamal)

    • Claims Agent: Epiq Corporate Restructuring LLC (*click on company name above for free docket access)

  • Other Parties in Interest:

    • Prepetition Agent: ABN AMRO Capital USA LLC

      • Legal: Willkie Farr & Gallagher LLP (Ana Alfonso)

    • Prepetition Agent: Aegean Baltic Bank SA

      • Legal: White & Case LLP (Scott Greissman, Elizabeth Feld, Mark Franke)

    • Indenture Trustee for the 4% ‘18 Convertible Senior Notes

      • Legal: Ropes & Gray LLP (Mark Somerstein, Patricia Chen)

    • Largest Equity Holder/Stalking Horse Buyer: Mercuria Energy Group Limited

      • Legal: Norton Rose Fulbright US LLP (Marc Ashley, Robert Kirby)

    • Official Committee of Unsecured Creditors (Deutsche Bank Trust Company Americas, U.S. Bank National Association, American Express Travel Related Services Company Inc.)

      • Legal: Akin Gump Strauss Hauer & Feld LLP (Ira Dizengoff, Philip Dublin, Kevin Zuzolo)

      • Financial Advisor: AlixPartners LLP

Source: First Day Declaration

Source: First Day Declaration

Updated 11/17/18

New Chapter 11 Bankruptcy Filing - PGHC Holdings Inc.

PGHC Holdings Inc.

November 5, 2018

On Sunday night, the New England Patriots took down the Green Bay Packers but the official pizza of the team took an “L.” Indeed, New England local news reported that dozens of area Papa Gino’s locations had abruptly shut down. Now we know why. And, it turns out, the dozens were really 95 stores all in. Which, we’d be remiss not to note, affects 1,100 employees who are now out of jobs.

On Monday morning, PGHC Holdings Inc., the parent company of 141 company-owned and 37 franchisee-and-licensee-owned New England restaurant chains Papa Gino’s Pizzeria and D’Angelo Grilled Sandwiches, filed for bankruptcy to effectuate a sale to WC Purchaser LLC, an affiliate of Wynnchurch Capital. Wynnchurch will provide a DIP credit facility to fund the case.

We, here, at PETITION have highlighted disruption in the casual dining space ad nauseum. The debtors, in their filings, confirmed a lot of what we’ve been saying. They noted:

Consumer preferences have shifted from in-restaurant dining to delivery and carryout ordering, which require fewer overall restaurants and smaller restaurant size to service the same geographic area. As a result of these shifting consumer preferences, the Debtors’ existing footprint is too large — in terms of both number and size of restaurants. In addition, minimum wage increases across many of the Debtors’ markets combined with higher employee benefit costs associated with health plans have also pressured the Debtors’ cash flows. The Debtors also have faced increased competition and associated price pressure from national chains that have increased their footprint in the Debtors’ core New England markets. In addition to these and other operational factors, the Debtors have a substantial debt load that, as noted above, they have been unable to service and are in default under.

Consequently, the debtors have let leases expire, engaged in (mostly unsuccessful) negotiations with landlords on lease forgiveness, changed internal IT systems, emphasized digital media marketing and formulated a smaller more efficient restaurant concept. Nevertheless, these efforts didn’t generate enough revenue and profitability to enable the debtors to handle their debt burden.

Wynnchurch will provide the company with a $13.8mm DIP facility, permit the use of cash collateral, and credit bid the debt it took over to the tune of $20mm. In other words, this is effectively a “loan-to-own” play. Bravo!

  • Jurisdiction: D. of Delaware

  • Capital Structure: $6.9mm Revolver A, $1.5mm Revolver B, $18.4mm Term Loan A (WC Financeco A LLC, as assignee), $34.2mm second lien debt (WC Financeco B LLC, as assignee), $27.9mm unsecured mezz debt (Hartford Life Insurance Company), $11.9mm unsecured mezz debt (Brookside Mezzanine Fund)

  • Company Professionals:

    • Legal: Morris Nichols Arsht & Tunnell LLP (Derek Abbott, Matthew Harvey, Eric Moats)

    • Financial Advisor: CR3 Partners LLC

    • Investment Banker: North Point Advisors LLC

    • Real Estate Advisor: Hilco Real Estate LLC

    • Claims Agent: Epiq Corporate Restructuring LLC (*click on company name above for free docket access)

  • Other Parties in Interest:

    • Mezz Debt Lenders

      • Legal: Choate Hall & Stewart LLP (Douglas Gooding)

New Chapter 11 Bankruptcy Filing - NRG REMA LLC

NRG REMA LLC

October 16, 2018

NRG REMA LLC, an indirect subsidiary of bankruptcy veteran GenOn Energy Inc., has filed for bankruptcy to effectuate a prepackaged plan of reorganization supported by “REMA, the independent directors of GenOn (who are advised by independent advisors), the independent directors of REMA (who are advised by independent advisors), more than 90% of holders of those certain Series C Pass-Through Trust Certificates due 2026, Public Service Enterprise Group and the steering committee of GenOn noteholders.”

We don’t really have much to add so we’ll leave it at that.

  • Jurisdiction: S.D. of Texas (Judge Jones)

  • Company Professionals:

    • Legal: Kirkland & Ellis LLP (James Sprayragen, David Seligman, Steven Serajeddini, W. Benjamin Winter, AnnElyse Scarlett Gibbons) & (local) Zack A Clement PLLC

    • Legal to Governance Committee of BOD: Akin Gump Strauss Hauer & Feld LLP

    • Financial Advisor: Alvarez & Marsal LLC

    • Investment Banker: Rothschild

    • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)

  • Other Parties in Interest:

    • Lease Indenture Trustees and Pass Through Trustee

      • Legal: Hogan Lovells US LLP (Robert Ripin, Alex Sher)

    • Consenting PTC Holders

      • Legal: Paul Weiss Rifkind Garrison & Wharton LLP (Andrew Rosenberg, Elizabeth McColm, Alexander Woolverton)

✈️New Chapter 11 Bankruptcy Filing - ONE Aviation Corporation✈️

ONE Aviation Corporation

10/9/18

ONE Aviation Corporation, a New Mexico-based OEM of twin-engine light jet aircraft (e.g., the Eclipse jet, a twin-turbofan very light jet or “VLJ”), filed a prepackaged bankruptcy case that will give 97-100% of the equity to its senior prepetition lender, Citiking International US LLC. Holders of senior secured notes will get 3% of the equity and warrants if they check the “yes” vote in the “death trap” plan of reorganization. General unsecured claimants will get a big fat zero and a bunch of court-mandated paper to throw into the recycling bin. Citiking is providing the company with a $17mm DIP credit facility that will roll into an exit facility upon emergence from chapter 11.

The company has $198.8mm of total funded debt, including approximately $53.2mm representing amounts owed to certain state and local governments in the form of development loans. Womp womp.

Why is there a bankruptcy here? The company pursued growth strategies that simply never came to fruition, including targeting the “air taxi” industry and development of new capital-intensive airplane models. The company notes:

That strategy ultimately proved unsuccessful in the near term because, in addition to the negative macro-factors, including the condition of the U.S. and global economies, ONE Aviation was unable to raise the capital needed to complete the new airplane programs. The VLJ market, a market dependent on luxury spending, simply had not recovered from its downturn in 2008.

Liquidity, therefore, became constrained as the company found itself caught between building for the future and sustaining today. After a considerable sales and marketing process conducted by multiple bankers (Guggenheim Securities, first, Duff & Phelps, second) both in the U.S. and internationally, the company had no luck finding strategic or financial buyers. Hence bankruptcy with a plan to convey the company over to the prepetition first lien lender.

  • Jurisdiction: D. of Delaware (Judge Sontchi)

  • Capital Structure: $58.6mm first lien RCF (Citiking), $43.3mm subordinated secured notes (Bank of New York Mellon Trust Company, N.A.), $20.5mm subordinated unsecured notes

  • Company Professionals:

    • Legal: Paul Hastings LLP (Chris Dickerson, Brendan Gage, Nathan Gimpel, Todd Schwartz, Stephen Bandrowsky) & (local) Young Conaway Stargatt & Taylor LLP (Robert Brady, M. Blake Cleary, Sean Beach, Jaime Lutan Chapman)

    • Financial Advisor: Ernst & Young LLP (Briana Richards, Brian Yano)

    • Investment Banker: Duff & Phelps Securities LLC (Vineet Batra)

    • Board of Directors: Michael Wyse, Jonathan Dwight, Alan Klapmeier, Kevin Gould, RJ Siegel

    • Claims Agent: Epiq Corporate Restructuring LLC (*click on company name above for free docket access)

  • Other Parties in Interest:

    • Administrative Agent & Collateral Agent: Cantor Fitzgerald Securities

      • Legal: Richards Kibbe & Orbe LLP (Gregory Plotko, Christopher Jarvinen) & (local) Ashby & Geddes PA (Gregory Taylor, Stacy Newman)

    • Senior Prepetition Lender: Citiking International US LLC

      • Legal: Emmet Marvin & Martin LLP (Thomas Pitta) & (local) Ashby & Geddes PA (Gregory Taylor, Stacy Newman)

    • Senior Subordinated Secured Noteholders

      • Legal: Manning Gross + Massenburg LLP (Marc Phillips)

Updated 10/9/18 at 5:12pm CT

🛌New Chapter 11 Bankruptcy Filing - Mattress Firm Inc.🛌

Mattress Firm Inc.

10/05/18

Recap: See our recap here.

  • Jurisdiction: D. of Delaware (Judge Sontchi)

  • Capital Structure: See below.

  • Company Professionals:

    • Legal: Sidley Austin LLP (Bojan Guzina, Michael Fishel, Gabriel MacConaill, Matthew Linder, Blair Warner) & (local) Young Conaway Stargatt & Taylor LLP (Edmon Morton)

    • Financial Advisor: AlixPartners LLP

    • Investment Banker: Guggenheim Securities LLC (Durc Savini)

    • Liquidator: Gordon Brothers Group LLC

      • Legal: Katten Muchin Rosenman LLP (Steven Reisman, Cindi Giglio) & (local) Saul Ewing Arnstein & Lehr LLP (Mark Minuti, Lucian Murley)

    • Real Estate Advisors: A&G Realty Partners

    • Claims Agent: Epiq Corporate Restructuring LLC (*click on company name above for free docket access)

  • Other Parties in Interest:

    • Barclays Bank PLC

      • Legal: Paul Hastings LLP (Andrew Tenzer, Michael Comerford) & (local) Richards Layton & Finger PA (Mark Collins, Jason Madron)

    • Citizens Bank NA

      • Legal: Morgan Lewis & Bockius LLP (Julia Frost-Davies, Marc Leduc, Laura McCarthy) & (local) Richards Layton & Finger PA (Mark Collins, Jason Madron)

    • Steinhoff International Holdings N.V

      • Legal: Linklaters LLP (Robert Trust, Christopher Hunker, Amy Edgy) & (local) Morris Nichols Arsht & Tunnell LLP (Derek Abbott, Andrew Remming, Joseph C. Barsalona II)

    • Exit term loan financing backstop group (the “Backstop Group”): Attestor Capital LLP, Baupost Group, Centerbridge Partners LP, DK Capital Management Partners, Farrallon Capital Management L.L.C., KKR & Co. Partners LLP, Monarch Alternative Capital LP, Och-Ziff Capital Management, Silverpoint Capital

      • Legal: Latham & Watkins LLP (Mitchell Seider, Adam Goldberg, Hugh Keenan Murtagh, Marc Zelina, Adam Kassner) & (local) Ashby & Geddes PA (William Bowden, Karen Skomorucha Owens, F. Troupe Mickler IV)

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New Chapter 11 Filing - Hooper Holmes Inc. (d/b/a Provant Health)

Hooper Holmes Inc. (d/b/a Provant Health)

8/27/18

Kansas-based Hooper Holmes Inc. ($HPHW), a provider of comprehensive health and wellbeing programs, e.g., biometric screening services, flu shots, lab testing and more, filed for bankruptcy in the Southern District of New York. The company does business as Provant Health Solutions LLC ("PHS), an entity it merged with as recently as 2017. And that is part of the problem: the company incurred tens of millions in debt over the last few years in connection with the PHS merger and a prior acquisition of Accountable Health Solutions Inc., a provider of, among other things, telephonic health coaching and wellness portals. 

The company will use the bankruptcy process to effectuate a sale of substantially all of its assets to a stalking horse bidder, Summit Health Inc., for $27mm in cash and the assumption of certain liabilities. The company's prepetition secured lenders will finance the cases via a proposed $13.6mm DIP credit facility. 

  • Jurisdiction: S.D. of New York (Judge Drain)
  • Capital Structure: See below.   
  • Company Professionals:
    • Legal: Foley & Lardner LLP (Richard Bernard, Timothy Mohan, Jill Nicholson, Geoff Goodman, Michael Riordan, John Melko) & Halperin Battaglia Benzija LLP (Christopher Battaglia)
    • Financial Advisor: Phoenix Management (James Fleet, Albert Mink)
    • Investment Banker: Raymond James & Associates Inc. (Geoffrey Richards)
    • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Term Lender: SWK Funding LLC
      • Legal: Holland & Knight LLP (Arthur Rosenberg)
    • Stalking Horse Bidder: Summit Health Inc., a subsidiary of Quest Diagnostics Inc.
      • Legal: Bass Berry & Sims PLC (Paul Jennings) & Weil Gotshal & Manges LLP (Gary Holtzer, Jessica Liou, John Conte)
Source: First Day Declaration

Source: First Day Declaration

New Chapter 11 Filing - Red Fork (USA) Investments Inc.

8/7/18

Red Fork (USA) Investments Inc., a Texas-headquartered oil and gas exploration and production company focused on five counties in Oklahoma, filed for bankruptcy after capitulating under the weight of its debt and inability to generate enough revenue to cover it. The company is also the subject of a number of legal actions asserting that the company owned and/or operated saltwater disposal wells that "caused or contributed" to certain earthquakes. Given the costs of the latter and the lack of revenue from E&P initiatives, the company commenced its chapter 11 cases. 

  • Jurisdiction: W.D. of Texas 
  • Capital Structure: $119.5mm debt (Guggenheim Corporate Funding LLC)    
  • Company Professionals:
    • Legal: Dykema Gossett PLLC (Deborah Williamson, Patrick Huffstickler, Jesse Moore)
    • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
    • Independent Board Director: Eugene Davis
  • Other Parties in Interest:
    • Prepetition Secured Lenders: Guggenheim Corporate Funding LLC
      • Legal: Haynes and Boone LLP (Charles Beckham Jr., Martha Wyrick, Matthew Ferris)

New Chapter 11 Filing - The NORDAM Group, Inc.

The NORDAM Group, Inc.

7/22/18

A promising contract can sometimes prove to be an albatross. Here, The Nordam Group Inc., an Oklahoma-based aircraft component manufacturing and repair company, has filed for bankruptcy after a long-term development and manufacturing agreement ("LTPA") with Pratt & Whitney Canada Corporation ("P&WC") to develop, manufacture, and support an FAA-approved nacelle system for the Gulfstream G500 aircraft proved overly burdensome. Per the company:

"The Debtors currently estimate that their expenses incurred under the LTPA exceed $200 million. These expenses have, in turn, challenged overall financial performance, with EBITDA declining from approximately $88 million in fiscal year 2008 to approximately $50 million in fiscal year 2017. These financial challenges have further impacted the Debtors’ balance sheet and available liquidity, including with respect to the Debtors’ revolving credit facility, which matured on June 18, 2018 with approximately $266.5 million outstanding."

Harsh. After failing to successfully negotiate a resolution to these issues with both its bank group and P&WC, the company has filed for bankruptcy to leverage the Bankruptcy Code's "breathing spell" and, presumably, contract rejection provisions under section 365. The company seeks access to a $45mm DIP credit facility to fund its cases. 

  • Jurisdiction: D. of Delaware (Judge Walrath)
  • Capital Structure: $266.5mm RCF (JPMorgan Chase Bank NA), $19.2mm unsecured promissory notes   
  • Company Professionals:
    • Legal: Weil Gotshal & Manges LLP (Ray Schrock, Ryan Preston Dahl, Jill Frizzley) & (local) Richards Layton & Finger PA (Daniel DeFranceschi, Paul Heath, Brett Haywood, Megan Kenney)
    • Financial Advisor: Huron Consulting Group Inc. (John DiDonato, Matthew Fisher)
    • Investment Banker: Guggenheim Securities LLC (Ronen Bojmel)
    • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
    • Independent Directors: David Eaton, Thomas Allison
  • Other Parties in Interest:
    • Prepetition Agent & DIP Agent: JPMorgan Chase Bank NA
      • Legal: Simpson Thatcher & Bartlett LLP 
    • P&WC
      • Legal: Wachtell Lipton Rosen & Katz (Philip Mindlin, Douglas Mayer) & (local) Stevens & Lee PC (Joseph Huston Jr.)

Updated: 7/23 at 2:09 CT

New Chapter 11 Filing - Color Spot Holdings Inc.

Color Spot Holdings Inc.

5/29/18

Sometimes distress comes from unexpected places. On Tuesday, Color Spot Holdings Inc., a "leading" grower and distributor of quality live plants in the western and southwestern United States filed for bankruptcy. The company's products include bedding plants, e.g., (i) annuals, perennials and poinsettas and other holiday plants (70% of revenue) and (ii) flowering and ornamental shrubs (30% of revenue).

In its First Day Declaration, the company noted:

"In 2016 and 2017, the Debtors had sales of about $268 million and $248 million, respectively. The Debtors’ industry is expanding due to, among other things, an ongoing focus by consumers on caring for their yards and outdoor spaces, favorable demographic shifts, and increasing housing stock. The Debtors are poised to capture upside from this industry growth." 

Curiously that expansion and growth didn't point to expanded and grown sales. And that is despite having a heavyhitter client list, including The Home Depot ($HD), Lowe's Companies, Inc. ($LOW), Costco ($COST), Target ($T), and Walmart ($WMT). And this is despite the company's internal logistics infrastructure which includes 75% of product distribution handled by its internal fleet. This shields the company from rising trucking costs which, as PETITION has noted elsewhere, is more and more of an issue for a variety of businesses. 

To fund its highly seasonal business, the company is a party to three different credit facilities, some components of which applied (cough, usurious) interest rates at 12+%. This is a big part of the problem. In addition, we like to joke a lot about how every business under the sun blames weather for its poor earnings reports. Here, though, it truly makes sense. Indeed, the company blames the long California draught and Texan storms in 2015 and 2017 for significant operational issues. Apparently, the company also experienced declining customer service as it grew. It's hard to get good help these days, it seems. 

Consequently, the company has been in the midst of an operational restructuring; it has closed 33% of its nurseries and fixed its product mix. It has also been seeking a buyer. No stalking horse buyer is lined up, however, and the expressions of interest that the company has obtained don't appear likely to cover the Wells Fargo-funded debt. Consequently, the company intends to use bankruptcy to pursue an expedited sale process supported by the use of cash collateral with the hope of improving upon the prepetition interest and setting the business and its new owners up for success in the upcoming season. By late July, we'll know whether they were successful. 

  • Jurisdiction: D. of Delaware (Judge Silverstein)
  • Capital Structure: $117.5mm debt     
  • Company Professionals:
    • Legal: Young Conaway Stargatt & Taylor LLP (M. Blake Cleary, Ryan Bartley, Sean Greecher, Jaime Luton Chapman, Betsy Feldman)
    • Investment Banker: Raymond James & Associates Inc.
    • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Prepetition Lender: Wells Fargo Bank NA
      • Legal: Pillsbury Winthrop Shaw & Pittman LLP (Matthew Walker, M. David Minnick) & (local) Richards Layton & Finger PA (John Knight, Brendan Schaluch)
    • Capital Farm Credit, FLCA
    • Black Diamond Commercial Finance, L.L.C.