😷New Chapter 11 Bankruptcy Filing - Quorum Health Corporation😷

in

Quorum Health Corporation

April 7, 2020

Tennessee-based Quorum Health Corporation, an operator of general acute care hospitals and outpatient healthcare facilities, filed for bankruptcy in the District of Delaware (along with a long list of affiliates). COVID-19!! Not quite. This turd has been circling around the chapter 11 bankruptcy bin for years now. The fact that it is only now filing for bankruptcy under the cloud of COVID simply serves as cover for its fundamentally unsound capital structure, its lack of integration post-spinoff and the composition of its patient base (rural and dependent upon Medicare and Medicaid). Your Nana’s acute care powered by private equity/Wall Street!

About that capital structure…we’re talking: $99mm ABL + $47mm RCF + $785.3mm in first lien loans and $400mm of senior notes for a solid total of ~$1.285b in funded debt. All of this debt was placed in connection with the debtors’ origin story: a 2015 spinoff from Community Health Systems Inc. ($CYH). Troubles began from there. The company states:

The assets the Company received in the Spin-off were not initially set up as an integrated, stand-alone enterprise and presented certain day-one integration challenges, including addressing significant geographic dispersion that resulted in a lack of scale in key markets. In addition, certain of the hospitals that the Company received in the Spin-off were underperforming….

If you’re wondering whether this spin-off might lead to fraudulent conveyance claims well, to (mis)quote Elizabeth Warren, the company’s plan of reorganization has a Trust for that. That ought to be fun.

Otherwise, this is a deleveraging transaction. The ABL and holders of first lien claims will come out whole. Likewise, general unsecured claims will ride through. The holders of the senior notes will equitize their claims and come out, prior to dilution, with 100% of the post-reorg equity. Certain lenders will write a $200mm equity check. The case is on a quick one-month timeline through which it will be funded by a $100mm DIP; therefore, come May, this hospital system will, hopefully, be ready to confront a post-COVID-19 world.

  • Jurisdiction: D. of Delaware (Judge Owens)

  • Capital Structure: ABL (UBS AG), RCF and Term Loan (Credit Suisse AG), $421.8mm ‘23 11.625% Senior Notes (Wilmington Savings Funds Society)

  • Professionals:

    • Legal: McDermott Will & Emery LLP (Felicia Perlman, Bradley Giordano, David Hurst, Megan Preusker)

    • Financial Advisor/CRO: Alvarez & Marsal (Paul Rundell, Steve Kotarba, David Blanks, Douglas Stout

    • Investment Banker: MTS Health Partners LP

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

  • Other Parties in Interest:

    • DIP Agent: GLAS USA LLC

    • Consenting First Lien Lenders

      • Legal: Milbank LLP (Dennis Dunne, Tyson Lomazow)

      • Financial Advisor: Houlihan Lokey

    • Consenting Noteholders

      • Legal: Kirkland & Ellis LLP (Nicole Greenblatt, Steven Serajeddini)

      • Financial Advisor: Jefferies LLC

    • Major Shareholders: Mudrick Capital Management, LP, KKR & Co. Inc., York Capital Management Global Advisors LLC, Davidson Kempner Capital Management LP, and The Goldman Sachs Group Inc.

⛽️New Chapter 11 Bankruptcy Filing - Edgemarc Energy Holdings LLC⛽️

in

Edgemarc Energy Holdings LLC

May 15, 2019

Pennsylvania-based Edgemarc Energy Holdings LLC and its eight affiliated debtor affiliates are the latest in a string of oil and gas related bankruptcy filings. Don’t let $73/barrel brent crude and $63/barrel West Texas Intermediate prices full you: this is one of many oil and gas filings on the near term horizon.

Edgemarc is a natural gas E&P company focused on the Appalachian Basin in Ohio and Pennsylvania; it and its affiliates control approximately 45k net acres and have drilled and developed 60 producing wells. Now, everyone knows that, right now, the Permian Basin in West Texas is the shizz and, therefore, hearing about the Appalachian Basin may put some of you on edge. But, here, there was an extraordinary externality that really helped push the company into bankruptcy, other more macro factors notwithstanding.

In September 2018, a pipeline and gathering system under construction by a third-party (ETC Northeast Pipeline LLC) exploded. This pipeline was meant to be the gathering and processing avenue for the debtors’ natural gas. Imagine spending a ton of time milking a farm full of cows only to have the production facility designed for processing and transporting the milk explode right as you were about to bring your product to market. Kinda hard to make money in that scenario, right? The same applies to drilling for natural gas: its hard to generate revenue when you can’t process, transport and sell it. And, unfortunately, repair hasn’t been easy: what was supposed to be a “within weeks” project now looks poised to push well into 2020.

According to the debtors, a subsequent dispute with ETC prevented the debtors from flowing their gas through alternative pipelines. Consequently, the debtors “had no other means of selling gas from the affected wells” and opted to “shut in” their Pennsylvania wells and pause all remaining Pennsylvania operations — a hit to 33% of the company’s production activity. Compounding matters, the debtors and ETC are now embroiled in litigation. 😬

Suffice it to say that any company that suddenly loses the ability to sell 33% of its product will struggle. Per the company:

The Debtors’ inability to sell gas from their Pennsylvania properties had a substantial negative impact on their liquidity and ability to satisfy their funded debt, contractual and other payment obligations.

Ya think?!?!? The debtors have approximately $77mm of funded debt; they also has fixed transportation services agreements pursuant to which they agreed to fixed amounts of transportation capacity with various counterparties that exposes the debtors to financial liability regardless of whether they actually transport nat gas. This is so critical, in fact, that the debtors have already filed motions seeking to reject transportation services agreements with Rover Pipeline LLC, Rockies Express Pipeline LLC, and Texas Gas Transmission LLC. Combined, those three entities constitute 3 of the top 4 creditors of the estate, to the tune of over $6mm. These obligations — along with a downward redetermination of the borrowing base under the debtors’ revolving credit facility — severely constrained the debtors’ ability to operate. The debtors have, therefore, filed for chapter 11 with the hope of finding a buyer; they do not have a stalking horse purchaser lined up (though they do have a commitment for a $107.79mm DIP from their prepetition lenders, of which $30mm is new money). The company generated consolidated net revenue of $116.9mm in fiscal 2018.

Significantly, the company is seeking to reject a “marketing service agreement” and “operational agency agreement” with BP Energy Company ($BP), pursuant to which BP agreed to purchase and receive 100% of the debtors’ nat gas capacity. We gather (see what we did there?) that it’s hard to perform under those agreements when you can’t transport your product: accordingly, BP is listed as the debtors’ largest unsecured creditor at ~$41mm. BP’s rights to setoff and/or recoupment (PETITION Note: Weil Gotshal & Manges LLP just happened to write about these two remedies this week here) will be a major facet of this case: if BP is able to exercise remedies, the debtors ability to operate post-restructuring will be threatened. Per the company:

Docket #17, Rejection Motion.

Docket #17, Rejection Motion.

The privately-held company is owned primarily by affiliates of Goldman Sachs and the Ontario Teachers’ Pension. Absent “holdup value,” we can’t imagine they’ll get any return on their investment given the circumstances.

  • Jurisdiction: D. of Delaware (Judge Shannon)

  • Capital Structure:

  • Professionals:

    • Legal: Davis Polk & Wardwell LLP (Darren Klein, Lara Samet Buchwald, Aryeh Falk, Jonah Peppiatt) & (local) Landis Rath & Cobb (Adam Landis, Kerri Mumford, Kimberly Brown, Holly Smith)

    • Directors: Patrick J. Bartels Jr., Scott Lebovitz, Sebastien Gagnon, Baird Whitehead, Zvi Orvitz, Romeo Leemrijse, Verlyn Holt, Jack Golden, George Dotson, Callum Streeter, Alan Shepard

    • Financial Advisor: Opportune LLC and Dacarba LLC

    • Investment Banker: Evercore Partners

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

  • Other Parties in Interest:

    • Prepetition & DIP Agent: Keybank NA

      • Legal: Hunton Andrews Kurth LLP (Timothy Davidson, Joseph Rovira) & (local) Connolly Gallagher LLP (Jeffrey Wisler)

    • Equityholders: Goldman Sachs & Ontario Teachers’ Pension Plan Board

      • Legal: Wachtell Lipton Rosen & Katz (Richard Mason, Emil Kleinhaus, Michael Cassel) & (local) Drinker Biddle & Reath LLP (Steven Kortanek, Patrick Jackson, Joseph Argentina Jr.)

    • ETC

      • Legal: Akerman LLP (John MItchell, David Parham, Yelena Archiyan) & (local) Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, TImothy Cairns)

New Chapter 11 Filing - Expro Holdings US Inc.

in

Expro Holdings US Inc.

  • 12/18/17 Recap: Servicer to offshore, deepwater and other "technically challenging environments" filed a prepackaged bankruptcy to eliminate its entire $1.4b of debt (and attendant interest expense) via equity conversion in a balance sheet deleveraging transaction. Why did it file for bankruptcy? Private equity, of course. In 2008, the company turned down an acquisition offer from Halliburton in favor of a competing bid from a private equity group for $3.2b in cash, the largest LBO in the UK in 2008. Ok, so we're only half serious. Naturally, the oil and gas downturn led to a marked decline in demand for Expro's services. Psst: the PE-infused debt. The senior lenders will get the equity in the reorganized company while mezz loan holders and equity holders will get warrants. The company has lined up a $145mm DIP credit facility.
  • Jurisdiction: S.D. of Texas
  • Capital Structure: $125mm RCF (HSBC Bank USA), $1.261b TL, $18mm Mezz Loan.      
  • Company Professionals:
    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Brian Hermann, Alice Eaton, Sarah Harnett, Alexander Woolverton) & Jackson Walker LLP (Patricia Tomasco, Matthew Cavenaugh, Jennifer Wertz)
    • Financial Advisor: Alvarez & Marsal LLC (Julie Hertzberg, Jay Herriman)
    • Investment Banker: Lazard Freres & Co. 
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Mezzanine Facility Agreement Agent: Bank of New York Mellon
    • Credit Agreement Admin Agent: HSBC Bank USA
    • RCF Lenders
      • Legal: Sullivan & Cromwell LLP
    • Ad Hoc Group of First Lien Lenders
      • Legal: Davis Polk & Wardwell LLP (Damian Schaible, James McClammy, Christopher Robertson) & (local) Haynes and Boone LLP (Charles Beckham Jr., Kelli Norfleet, Kelsey Zottnick)
      • Financial Advisor: Rothschild Inc.
    • Ad Hoc Group of Shareholders (Goldman Sachs, HPS Investment Partners LLC, KKR, Candover/Arle, Park Square)
      • Legal: Kirkland & Ellis LLP
      • Financial Advisor: Houlihan Lokey Inc.

New Chapter 11 Filing - Westinghouse Electric Company LLC

in

Westinghouse Electric Company LLC

  • 3/29/17 Recap: File this under the most heavily leaked/discussed bankruptcy filing of all time: the Japanese government seemed to make an announcement about the proposed filing every hour. So...Pennsylvania-based nuclear power company filed for bankruptcy (30 debtors in total) after its parent, Toshiba, took a uuuuuuuuuge $6b+ write-down due to delayed and above-budget construction of plants in Georgia and South Carolina. The company secured a $800mm commitment for a DIP facility to fund the cases after a competitive DIP process with powerhouses like Goldman Sachs, Highbridge and Silver Point duking it out with Apollo. We've already covered this company a lot in previous weeks so suffice it to say that the upshot of this filing is that it will lead many to question the viability of nuclear as an alternative power source.
  • Jurisdiction: SD of New York 
  • Company Professionals:
    • Primary Legal: Weil (Gary Holtzer, Garrett Fail, Robert Lemons, David Griffiths, Charles Persons, David Cohen)
    • Legal for Toshiba Nuclear Energy Holdings (UK) Limited: Togut Segal & Segal LLP (Albert Togut, Brian Moore, Kyle Ortiz)
    • Financial Advisor: AlixPartners LLC (Lisa Donahue)
    • Investment Banker: PJT Partners Inc. (Timothy Coleman, John Singh, Mark Buschmann, Harold Kim)
    • Claims Agent: KCC (*click on company name for docket)
  • Other Parties in Interest:
    • Toshiba Corporation
      • Legal: Skadden Arps Slate Meagher & Flom LLP (Van Durrer, Paul Leake, Annie Li) 
    • Prepetition Agent:
      • Legal: Latham & Watkins LLP (Zulfiqar Bokhari) 
    • Proposed DIP Lenders: Apollo Investment Corporation, AP WEC Debt Holdings LLC, Midcap Financial Trust, Amundi Absolute Return Apollo Fund PLC, Ivy Apollo Strategic Income Fund, Ivy Apollo Multi Asset Income Fund
      • Legal: Paul Weiss Rifkand Wharton & Garrison LLP (Jeffrey Saferstein, Claudia Tobler, Kevin O'Neill) 
    • Proposed DIP Agent: Citibank NA
      • Legal: Shearman & Sterling LLP (Fredric Sosnick, Ned Schodek) 
    • Competing (but losing) DIP Providers: Goldman Sachs Bank USA, HPS Investment Partners LLC, Silver Point Finance LLC
    • Georgia Power Company, Oglethorpe Power Corporation, Municipal Electric Authority of Georgia and City of Dalton Georgia
      • Legal: Jones Day (Gregory Gordon, Dan Prieto, Amanda Rush, Anna Kordas, Jeffrey Ellman)
    • Municipal Electric Authority of Georgia
      • Legal: Alston & Bird LLP (Dennis Connolly)
    • South Carolina Electric & Gas Company and South Carolina Public Service Authority
      • Legal: Reed Smith LLP (Paul Singer, Derek Baker, Tarek Abdalla)
    • Oglethorpe Power Corporation (An Electric Membership Corporation)
      • Legal: Dechert LLP (Michael Sage, Stephen Wolpert) & Parker Hudson Rainer & Dobbs LLP (C. Edward Dobbs)
    • Exelon Generation Company LLC
      • Legal: Ballard Spahr LLP (Matthew Summers)
    • Official Committee of Unsecured Creditors
      • Legal: Proskauer Rose LLP (Martin Bienenstock, Timothy Karcher, Vincent Indelicato)
      • Financial Advisor: Alvarez & Marsal LLC

Updated 5/31/17

New (Chapter 22) Filing - American Apparel Inc.

in ,

American Apparel Inc.

  • 11/14/16 Recap: Large US-based apparel manufacturer and retailer with 193 total stores files for bankruptcy - months, uh, after emerging from bankruptcy. Company filed with a $30mm DIP proposal from Encina Business Credit LLC. Plan is to sell (for parts) expeditiously to Gilden Activewear SRL for $66mm (IP, remaining wholesale inventory and wholesale POs during restructuring).  
  • Jurisdiction: D. of Delaware
  • Capital Structure: $215mm of funded debt ($90mm DIP-rolled-into-TL-exit + $82mm of additional financing) & $15mm unsecured UK facility (Standard General)    
  • Company Professionals:
    • Legal: Jones Day LLP (Carl Black, Scott Greenberg, Michael J. Cohen, Erin Brady, Stacey Corr-Irvine, Genna Ghaul, Christpher Lovrien) & (local) Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, James O'Neill, Joseph Mulvihill)
    • Financial Advisor: Berkeley Research Group LLC (Mark Weinsten, Joseph D'Ascoli) & FTI Consulting (Andrew Hinkelman, Chuck Goad, Adam Saltzman, Frank Marshall, William Breashears, Zach Contreras)
    • Claims Consultants: Resources Global Professionals (Thora Thoroddsen, Evelyne Anglade, Scott Ashcraft, Luis Barreda, Sharon Dannewitz, Yolanda Hoelscher, Rodney Teruya)
    • Investment Banker: Houlihan Lokey (Saul Burian, Devin Shanahan, Sanaz Memarsadeghi, Ethan Kopp, Alexander Stolarz, Varun Desai)
    • Claims Agent: Prime Clerk (*click on company name for docket)
  • Other Parties in Interest:
    • DIP Lender: Encina Business Credit LLC
      • Legal: Riemer & Braunstein LLP (Steven Fox, Donald Rothman, Lon Singer, Alexander Rheaume) & (local) Ashby & Geddes PA (Gregory Taylor)
    • Agent to Prepetition Secured Lenders: Wilmington Trust
      • Legal: Covington & Burling LLP (R. Alexander Clark, Dianne Coffino) & Pepper Hamilton LLP (David Fournier)
    • Buyer: Gilden Activewear SRL
      • Legal: Sullivan & Cromwell LLP (Michael Torkin, Brian Hamilton, Miaoting Wu) & (local) Womble Carlyle (Matthew Ward)
    • Lead Lenders & Equityholders: Monarch Alternative Capital LP, Coliseum Capital Management LLC, Goldman Sachs Asset Management LP, Pentwater Capital Management LP, Standard General. 
      • Legal (except Standard General): Milbank Tweed (Gerard Uzzi, Eric Stodola) & (local) Fox Rothschild (Jeffrey Schlerf, L. John Bird)
      • Legal (Standard General): Debevoise & Plimpton LLP (Natasha Labovitz, Shannon Rose Selden, Craig Bruens, Erica Weisgerber) & (local) Young Conaway (Edmon Morton, Joseph Barry)
    • Largest Unsecured Creditors: Standard General, FTI Consulting, Moelis, Garden City Group
    • Unsecured Creditors' Committee:
      • Legal: Cooley LLP (Cathy Hershcopf, Seth Van Aalten, Robert Winning, Sarah Carnes, Michael Klein, Max Schlan) & (local) Bayard PA (Justin Alberto, Evan Miller, Gregory Flasser)
      • Financial Advisor: Emerald Capital Advisors (John Madden, Ryan O'Sullivan, Lawrence Jacobs, Christopher Moffatt, Jack Allen, Christopher Saitta, Daniel Pace, Ryan Feulner)

Updated 3/30/17

New Filing: Key Energy Services Inc.

in

Key Energy Services Inc.

  • 10/24/16 Recap: Oilfield services operator filed prepackaged plan to delever its balance sheet by 75% unsecured debt-for-equity swap subject to dilutive rights offering.
  • Jurisdiction: D. of Delaware
  • Capital Structure: $100mm '20 4.5% RCF (Wells Fargo), $315mm '20 9.25% TL (Cortland Capital Markets), $675mm '21 6.75% senior unsecured notes.     
  • Company Professionals:
    • Legal: Sidley Austin LLP (James Conlan, Larry Nyhan, Jeffrey Bjork, Andrew O'Neill, Christina Craige, John Hutchinson) & (local) Young Conaway (Robert Brady, Edwin Harron, Ryan Bartley)
    • Financial Advisor: Alvarez & Marsal LLC (Ed Mosley)
    • Investment Banker: PJT Partners (Mike Genereux)
    • Claims Agent: Epiq Bankruptcy Solutions LLC
  • Other Parties in Interest:
    • ABL Admin Agent (BofA):
      • Legal: Latham & Watkins (Richard Levy, James Ktsanes) & (local) Reed Smith (Kurt Gwynne, Emily Devan)
    • Term Lenders: (BlueMountain Capital Management LLC, TPG Specialty Lending Inc., Tennenbaum Capital Partners)
      • Legal: Davis Polk (Damian Schaible, Eli Vonnegut, Angela Libby) & (local) Richards Layton (Mark Collins, Andrew Dean)
      • Investment Banker: Evercore
    • Supporting Unsecured Noteholders:
      • Legal: Sullivan & Cromwell (Michael Torkin, David Jakus, Lee Parnes)
      • Investment Bank: Houlihan Lokey
    • Supporting Noteholders & Supporting Term Lenders
      • Legal: Cleary Gottlieb (Sean O'Neal, Humayan Khalid, Matthew Rappoport) & (local) Morris Nichols (Robert Dehney, Eric Schwartz, Andrew Remming, Andrew Roth-Moore)
    • Wells Fargo, as TL Agent
      • Legal: Greenberg Traurig
    • Unsecured Noteholders: Silver Point Capital LP, Contrarian Capital Management, Scoggin Capital Management, Platinum Equity Advisors, Quantum Partners, Goldman Sachs Global Special Situations Group

Updated 12/30/16