New Chapter 11 Filing - Tops Holding II Corporation

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Tops Holding II Corporation

  • 2/21/18 Recap: When a company's "Overview" in its First Day Declaration basically leads with union metrics (12,300 unionized employees of 14,000 total employees) and collective bargaining agreement numbers (12 of them), you know there's gonna be a war with employees. The fact that the footprint is 169 stores-wide in three states almost seems like a footnote. As does the fact that the business started in the 1920s and seemingly thrived through 2007 when, naturally, private equity got involved and went on a debt-ridden acquisition spree. But hang on: we're getting ahead of our skis here. So, what happened here? Well, clearly, the company has to negotiate with its unions; it also seeks to deleverage its ballooning balance sheet and take care of some leases and supply agreements. The company has secured $265mm in DIP financing to fund the cases; it says that it "intend[s] to remain in chapter 11 for approximately six (6) months." We'll believe it when we see it. Anyway, WHY does it need to take all of these steps? Well, as we stated before: private equity, of course. "Despite the significant headwinds facing the grocery industry, over the past five years, the Company has experienced solid financial performance and has sustained stable market share. The vast majority of the Company’s supermarkets generate positive EBITDA and the Company generates strong operating cash flows. Transactions undertaken by previous private equity ownership, however, saddled the Company with an unsustainable amount of debt on its balance sheet. Specifically, the Company currently has approximately $715 million of prepetition funded indebtedness...." Ah, private equity = a better villain than even Amazon (though Amazon gets saddled with blame here too, for the record). But wait: don't forget about the pensions! "[T]he Company has been embroiled in a protracted and costly arbitration with the Teamsters Pension Fund concerning a withdrawal liability of in excess of $180 million allegedly arising from the Company’s acquisition of Debtor Erie Logistics LLC" from its biggest food supplier, C&S Wholesale Grocers Inc., the 10th largest private company in the US. Moreover, the company has been making monthly pension payments; nevertheless, the pension is underfunded by approximately $393mm. The company continues, "Utilizing the tools available to it under the Bankruptcy Code, the Company will endeavor to resolve all issues relating to the Teamsters Arbitration and address its pension obligations, and the Company will take reasonable steps to do so on a consensual basis." Oy. What a hot mess. We can't even read that without ominous music seemingly popping up out of nowhere. More to come.

  • Jurisdiction: S.D. of New York

  • Capital Structure: $112mm RCF (inclusive of a $10mm FILO and $34mm LCs, Bank of America NA), $560mm 8% '22 senior secured notes, $67.5mm 9% '21 opco unsecured notes, $8.6mm 8.75%/9.5% '18 holdco unsecured notes

  • Company Professionals:

    • Legal: Weil Gotshal & Manges LLP (Ray Schrock, Stephen Karotkin, Sunny Singh)

    • Financial Advisor/CRO: FTI Consulting Inc. (Michael Buenzow, Armen Emrikian, Paul Griffith, Ronnie Bedway, Andy Kopfensteiner)

    • Investment Banker: Evercore (David Ying, Stephen Goldstein, Jeremy Matican, Elliot Ross, Jonathan Kartus, Andrew Kilbourne)

    • Real Estate Advisor: Hilco Real Estate LLC

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

  • Other Parties in Interest:

    • Prepetition ABL Agent & DIP ABL Agent: Bank of America NA

      • Legal Counsel: Morgan Lewis & Bockius LLP (Julia Frost-Davies, Amelia Joiner, Matthew Ziegler)

    • Indenture Trustee for Senior Notes due 2018, notes due 2021 and Senior Secured Notes: U.S. Bank NA

      • Legal: Thompson Hine LLP (Irving Apar, Elizabeth Frayer, Derek Wright)

    • Ad Hoc Noteholder Group & DIP TL Lenders (Column Park Asset Management LP, Fidelity Management & Research Company, HG Vora Capital Management LLC, Signature Global Asset Management, Silver Point Capital LP)

      • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Alan Kornberg, Diane Meyers, Lauren Shumejda)

      • Financial Advisor: Lazard Freres & Co. LLC

    • DIP TL Agent: Cortland Capital Markets Services LLC

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

    • Southpaw Asset Management LP

      • Legal: Cooley LLP (Jeffrey Cohen, Steven Siesser, Sheila Sadighi, Andrew Behlmann)

    • Official Committee of Unsecured Creditors (PepsiCo, Inc., Valassis Direct Mail, Inc., Osterweis Strategic Income Fund, U.S. Bank N.A., the UFCW Local One Pension Fund, the Teamsters Local 264, and Benderson Development Company, LLC)

      • Legal: Morrison & Foerster LLP (Brett Miller, Dennis Jenkins, Jonathan Levine, Erica Richards)

      • Financial Advisor: Zolfo Cooper LLC