⛽️New Chapter 11 Bankruptcy Filing - Jones Energy Inc.⛽️

Jones Energy Inc.

April 14, 2019

Austin-based independent oil and natural gas E&P company, Jones Energy Inc., filed a prepackaged chapter 11 bankruptcy to restructure its $1.009b of debt ($450mm senior secured first lien notes and $559mm unsecured notes across two tranches). In case you didn’t realize, oil and gas exploration and production is a capital intensive business.

The company operates primarily in the Anadarko Basin in Oklahoma and Texas. Its territory is the aggregation of acreage accumulated over the years, including the 2009 purchase of Crusader Energy Group Inc. out of bankruptcy for $240.5mm in cash.

We’re not going to belabor the point as to why this company is in bankruptcy: the narrative is no different than most other oil and gas companies that have found their way into bankruptcy court over the last several years. Indeed, this chart about sums things up nicely:

Screen Shot 2019-04-05 at 2.29.01 PM.png

It’s really just a miracle that it didn’t file sooner. Why hadn’t it? Per the company:

…the Debtors consummated a series of liquidity enhancing transactions, including equity raises, debt repurchases, strategic acquisitions, non-core asset sales, and modifications of their operations to reduce their workforce and drilling activities. This included a Company-wide headcount reduction in 2016 resulting in the termination of approximately 30% of the Debtors’ total workforce, as well as halting drilling activity spanning several months during the worst of the historic commodity downturn.

But…well…the debt. As in, there’s too much of it.

Screen Shot 2019-04-05 at 2.56.24 PM.png

And debt service costs were too damn high. In turn, the company’s securities traded too damn low:

Source: Disclosure Statement

Source: Disclosure Statement

What’s more interesting here is the process that unfolded. In February 2018, the company issued $450mm of 9.25% ‘23 senior secured first lien notes. The proceeds were used to repay the company’s senior secured reserve-based facility and eliminate the restrictive covenants contained therein. The company also hoped to use the proceeds to repurchase some of its senior unsecured notes at a meaningful discount to par. In a rare — yet increasingly common — show of unity, however, the company’s unsecured lenders thwarted these efforts by binding together pursuant to a “cooperation agreement” and telling the company to take its pathetic offer and pound sand. (PETITION Note: its amazing what lenders can achieve if they can solve for a collective action problem). This initiated a process that ultimately led to the transaction commemorated in the company’s announces restructuring support agreement.

So what now? The senior secured lenders will equitize their debt and come out with 96% of the common stock in the reorganized entity. Holders of unsecured debt will get 4% equity and warrants (exercisable for up to a 15% ownership stake in the reorganized company), both subject to dilution by equity issued to management under a “Management Incentive Plan.” The company has a commitment for $20mm of exit financing lined up (with the option for replacement financing of up to $150mm).

Hopefully the company will have better luck without the albatross of so much debt hanging over it.

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

  • Capital Structure: $450mm 9.25% ‘23 senior secured first lien notes (UMB Bank NA), $559mm 6.75% ‘22 and 9.25% ‘23 unsecured notes (Wells Fargo Bank NA)

  • Professionals:

    • Legal: Kirkland & Ellis LLP (James Sprayragen, Christopher Marcus, Brian Schartz, Anthony Grossi, Ana Rotman, Rebecca Blake Chaikin, Mark McKane, Brett Newman, Kevin Chang) & (local) Jackson Walker LLP (Matthew Cavenaugh, Jennifer Wertz)

    • Independent Directors: Tara Lewis, L. Spencer Wells

    • Financial Advisor: Alvarez & Marsal LLC (Ryan Omohundro)

    • Investment Banker: Evercore Group LLC (Daniel Aronson)

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

  • Other Parties in Interest:

    • Ad Hoc Group of First Lien Noteholders

      • Legal: Milbank LLP (Dennis Dunne, Evan Fleck, Michael Price) & (local) Porter Hedges LLP (John Higgins, Eric English, Genevieve Graham)

      • Financial Advisor: Lazard Freres & Co. LLC

    • Ad Hoc Group of Crossover Holders

      • Legal: Davis Polk & Wardwell LLP (Brian Resnick, Benjamin Schak) & (local) Haynes and Boone LLP (Charlie Beckham, Kelli Norfleet)

      • Financial Advisor: Houlihan Lokey Capital Inc.

    • Metalmark Capital LLC

      • Legal: Vinson & Elkins LLP (Andrew Geppert, David Meyer, Jessica Peet, Michael Garza)

Updated 4/15/19 2:05 CT

New Chapter 11 Filing - Hexion Holdings LLC

Hexion Holdings LLC

April 1, 2019

What we appreciate that and, we hope thanks to PETITION, others will eventually come to appreciate, is that there is a lot to learn from the special corporate law, investment banking, advisory, and investing niche labeled “restructuring” and “distressed investing.” Here, Ohio-based Hexion Holdings LLC is a company that probably touches our lives in ways that most people have no knowledge of: it produces resins that “are key ingredients in a wide variety of industrial and consumer goods, where they are often employed as adhesives, as coatings and sealants, and as intermediates for other chemical applications.” These adhesives are used in wind turbines and particle board; their coatings prevent corrosion on bridges and buildings. You can imagine a scenario where, if Washington D.C. can ever get its act together and get an infrastructure bill done, Hexion will have a significant influx of revenue.

Not that revenue is an issue now. It generated $3.8b in 2018, churning out $440mm of EBITDA. And operational performance is on the upswing, having improved 21% YOY. So what’s the problem? In short, the balance sheet is a hot mess.* Per the company:

“…the Debtors face financial difficulties. Prior to the anticipated restructuring, the Debtors are over nine times levered relative to their 2018 adjusted EBITDA and face annual debt service in excess of $300 million. In addition, over $2 billion of the Debtors’ prepetition funded debt obligations mature in 2020. The resulting liquidity and refinancing pressures have created an unsustainable drag on the Debtors and, by extension, their Non-Debtor Affiliates, requiring a comprehensive solution.”

This is what that capital structure looks like:

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Screen Shot 2019-04-01 at 12.29.02 PM.png

(PETITION Note: if you’re wondering what the eff is a 1.5 lien note, well, welcome to the party pal. These notes are a construct of a frothy high-yield market and constructive readings of credit docs. They were issued in 2017 to discharge maturing notes. The holders thereof enjoy higher priority on collateral than the second lien notes and other junior creditors below, but slot in beneath the first lien notes).

Anyway, to remedy this issue, the company has entered into a support agreement “that enjoys the support of creditors holding a majority of the debt to be restructured, including majorities within every tier of the capital structure.” The agreement would reduce total funded debt by $2b by: (a) giving the first lien noteholders $1.45b in cash (less adequate protection payments reflecting interest on their loans), and 72.5% of new common stock and rights to participate in the rights offering at a significant discount to a total enterprise value of $3.1b; and (b) the 1.5 lien noteholders, the second lien noteholders and the unsecured noteholders 27.5% of the new common stock and rights to participate in the rights offering. The case will be funded by a $700mm DIP credit facility.

*Interestingly, Hexion is a derivative victim of the oil and gas downturn. In 2014, the company was selling resin coated sand to oil and gas businesses to the tune of 8% of sales and 28% of segment EBITDA. By 2016, segment EBITDA dropped by approximately $150mm, a sizable loss that couldn’t be offset by other business units.

  • Jurisdiction: D. of Delaware (Judge Gross)

  • Capital Structure: See above.

  • Professionals:

    • Legal: Latham & Watkins LLP (George Davis, Andrew Parlan, Hugh Murtagh, Caroline Reckler, Jason Gott, Lisa Lansio, Blake Denton, Andrew Sorkin, Christopher Harris) & (local) Richards Layton & Finger PA (Mark Collins, Michael Merchant, Amanda Steele, Brendan Schlauch)

    • Managers: Samuel Feinstein, William Joyce, Robert Kaslow-Ramos, George F. Knight III, Geoffrey Manna, Craig Rogerson, Marvin Schlanger, Lee Stewart

    • Financial Advisor: AlixPartners LLP

    • Investment Banker: Moelis & Company LLC

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

  • Other Parties in Interest:

    • Ad Hoc Group of First Lien Noteholders

      • Legal: Akin Gump Strauss Hauer & Feld LLP (Ira Dizengoff, Philip Dublin, Daniel Fisher, Naomi Moss)

      • Financial Advisor: Evercore Group LLC

    • Ad Hoc Group of Crossover Noteholdres

      • Legal: Milbank LLP (Samuel Khalil, Matthew Brod)

      • Financial Advisor: Houlihan Lokey Capital Inc.

    • Ad Hoc Group of 1.5 Lien Noteholders

      • Legal: Jones Day (Sidney Levinson, Jeremy Evans)

    • Pre-petition RCF Agent & Post-petition DIP Agent ($350mm): JPMorgan Chase Bank NA

      • Legal: Simpson Thacher & Bartlett LLP

    • Trustee under the First Lien Notes and the Second Lien Notes: Wilmington Trust NA

    • Trustee of 1.5 Lien Notes: Wilmington Savings Fund Society FSB

      • Legal: Arnold & Porter Kaye Scholer LLP

    • Trustee of Borden Indentures: The Bank of New York Mellon

    • Sponsor: Apollo

    • Official Committee of Unsecured Creditors

      • Legal: Kramer Levin Naftalis & Frankel LLP (Kenneth Eckstein, Douglas Mannal, Rachael Ringer) & (local) Bayard PA (Scott Cousins, Erin Fay, Gregory Flasser)

Updated:

🚁New Chapter 11 Bankruptcy Filing - PHI Inc.🚁

PHI Inc.

March 15, 2019

It’s pretty rare to see a company affected by macro factors in two industries. And, yet, Louisiana-based PHI Inc. ($PHI) and four affiliates filed for bankruptcy in the Northern District of Texas, marking the fourth bankruptcy fallout in the helicopter services space following Waypoint LeasingErickson Incorporated and CHC Group. The company is a leading provider of transportation services to both the oil and gas industry (including, for example, Shell Oil CompanyBP America Production CompanyExxonMobil Production Co.ConocoPhillips CompanyENI Petroleum and the recently-bankrupt Fieldwood Energyand the medical services industry. It operates 238 aircraft, 213 which are company-owned and 119 of which are dedicated to oil and gas operations and 111 of which are dedicated to medical services. The company generated $675mm in revenue in 2018 — with much of that revenue coming from fixed-term contracts.

The company strongly asserts that operational failures are not a cause of its bankruptcy — a clear cut message to the market which might otherwise be concerned about safety and reliability. The issue here, the company notes, is the balance sheet, especially a March 15 2019 maturity of the company’s $500mm in unsecured notes. Despite alleged efforts to address this maturity with the company’s (fresh out of the womb) secured term loan holder and an ad hoc group of unsecured noteholders, the company was unable to do so.

The broader issue, however, is that the industry may be ripe for consolidation. Back in 2017, the company acquired the offshore business of HNZ Group Inc. This transaction expanded the company’s capacity to more international geographies. But given the dearth of offshore oil and gas production activity of late and intense competition in the space, there might be a need for more industry-wide M&A. The company notes:

As a result of this prolonged cyclical downturn in the industry, oil and gas exploration projects have been reduced significantly by the Company’s customers. Indeed, many customers have significantly reduced the number of helicopters used for their operations and have utilized this time instead to drive major changes in their offshore businesses, which have in turn drastically reduced revenues to PHI’s O&G business segment in the Gulf of Mexico. And while the price of crude oil slowly began to recover in 2018, the volatility in the market continues to drive uncertainty and negatively impact the scope and volume of services requested from service providers such as PHI.

This is simple supply and demand:

The effect of the downturn in the oil and gas industry has been felt by nearly all companies in the helicopter service industry. The downturn created an oversaturation of helicopters in the market, significantly impacting service companies’ utilization and yields. Indeed, this domino effect on the industry has required helicopter operators, like their customers, to initiate their own cost-cutting measures, including reducing fleet size and requesting rental reductions on leased aircraft.

Had these issues been isolated to the oil and gas space, the company would not have been in as bad shape considering that 38% of its revenue is attributable to medical services. But that segment also experienced trouble on account of…:

…weather-related issues and delays, changes in labor costs, and an increase in patients covered by Medicare and Medicaid (as opposed to commercial insurers), which resulted in slower and reduced collections, given that reimbursement rates from public insurance are significantly lower than those from commercial insurers or self-pay.

Compounding matters are laws and regulations that prohibit the debtors from refusing service to patients who are unable to pay. This creates an inherently risky business model dynamic. And it hindered company efforts to sell the business line to pay down debt.

Taken together, these issues are challenging enough. Tack on $700mm of debt, the inability to refi out its maturity, AND the inability to corral lenders to agree on a consensual deleveraging (which included a failed tender offer) and you have yet another freefall helicopter bankruptcy. Now the company will leverage the bankruptcy “breathing spell” and lower voting thresholds provided by the Bankruptcy Code to come to an agreement with its lenders on a plan of reorganization.

*****

That is, if agreement can be had. Suffice it to say, things were far from consensual in the lead up to (and at) the first day hearing in the case. To point, the Delaware Trust Companyas trustee for the senior unsecured notes, filed an objection to the company’s CASH MANAGEMENT motion because…well…there is no DIP Motion to object to. “Why is that,” you ask? Good question…

The debtors levered up their balance sheet in the lead-up to PHI’s well-known maturity. The debtors replaced their ABL in September with the $130mm term loan provided by Al Gonsoulin, the company’s CEO, Board Chairman and controlling shareholder. Thereafter — and by “thereafter,” we mean TWO DAYS BEFORE THE BANKRUPTCY FILING — the company layered another $70mm of secured debt onto the company, encumbering previously unencumbered aircraft and granting Mr. Gonsoulin a second lien. This is some savage balance sheet wizardry that has the effect of (a) priming the unsecured creditors and likely meaningfully affecting their recoveries and (b) securing Mr. Gonsoulin’s future with the company (and economic upside). Making matters worse, the trustee argues that the company made no real effort to shop the financing nor actively engage with the ad hoc committee of noteholders on the terms of a financing or restructuring; it doesn’t dispute, however, that the company had $70mm of availability under its indenture.

So what happened next? Over the course of a two day hearing, witnesses offered testimony about the pre-petition negotiations and financing process (or lack thereof) — again, in the context of a cash management motion. We love when sh*t gets creative! The lawyers for the company and the trustee hurled accusations and threats, the CEO was called a “patriot” (how, even if true, that is applicable to this context is anyone’s guess), and, ultimately, the judge didn’t care one iota about any of the trustee’s witness testimony and blessed the debtors’ motion subject to the company providing the trustee with weekly financial reporting. In other words, while this routine first day hearing was anything but, the result was par for the course.

Expect more fireworks as the case proceeds. Prospective counsel to the eventual official committee of unsecured creditors is salivating as we speak.

  • Jurisdiction: N.D. of Texas (Judge Hale)

  • Capital Structure: $130mm ‘20 senior secured term loan (Thirty Two LLC), $70mm secured term loan (Blue Torch Capital LP), $500 million ‘19 unsecured 5.25% senior notes

  • Professionals:

    • Legal: DLA Piper US LLP (Daniel Prieto, Thomas Califano, Daniel Simon, David Avraham, Tara Nair)

    • Legal (corporate): Jones Walker LLP

    • Financial Advisor: FTI Consulting Inc. (Robert Del Genio, Michael Healy)

    • Investment Banker: Houlihan Lokey Capital Inc.

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

  • Other Parties in Interest:

    • Prepetition TL & DIP Lender: Blue Torch Capital LP

    • Ad Hoc Committee of unsecured noteholders & Delaware Trust Company as Trustee for Senior Notes

      • Legal: Milbank LLP (Andrew LeBlanc, Dennis Dunne, Samuel Khalil) & (local) Norton Rose Fulbright US LLP (Louis Strubeck Jr., Greg Wilkes)

      • Financial Advisor: PJT Partners LP (Michael Genereaux)

    • Indenture trustee under the 5.25% Senior Notes due 2019 (Delaware Trust Company)

    • Thirty Two LLC

    • Official Committee of Unsecured Creditors (Delaware Trust Company, Oaktree Capital Management LP, Q5-R5 Trading Ltd., Regions Equipment Finance Corp., Helicopter Support Inc.)

New Chapter 11 Bankruptcy Filing - Windstream Holdings Inc.

Windstream Holdings Inc.

February 25, 2019

See here for our write-up on Winstream Holdings Inc.

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

  • Capital Structure: see below.

  • Professionals:

    • Legal: Kirkland & Ellis LLP (James Sprayragen, Stephen Hessler, Ross Kwasteniet, Marc Kieselstein, Brad Weiland, Cristine Pirro Schwarzman, John Luze, Neda Davanipour)

    • Legal (Board of Directors): Norton Rose Fulbright US LLP (Louis Strubeck Jr., James Copeland, Kristian Gluck)

    • Financial Advisor: Alvarez & Marsal LLC

    • Investment Banker: PJT Partners LP

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

  • Other Parties in Interest:

    • DIP Lender ($500mm TL, $500mm RCF): Citigroup Global Markets Inc.

    • Prepetition 10.5% and 9% Notes Indenture Trustee: Wilmington Trust NA

      • Legal: Reed Smith LLP (Jason Angelo)

    • Prepetition TL and RCF Agent: JPMorgan Chase Bank NA

      • Legal: Simpson Thacher & Bartlett LLP (Sandeep Qusba, Nicholas Baker, Jamie Fell)

    • Ad Hoc Group of Second Lien Noteholders

      • Legal: Milbank LLP

      • Financial Advisor: Houlihan Lokey Capital

    • Ad Hoc Group of First Lien Term Lenders

      • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Brian Hermann, Andrew Rosenberg, Samuel Lovett, Michael Rudnick)

      • Financial Advisor: Evercore

    • Midwest Noteholders

      • Legal: Shearman & Sterling LLP

    • Uniti Group Inc.

      • Legal: Davis Polk & Wardwell LLP (Marshall Huebner, Eli Vonnegut, James Millerman)

      • Financial Advisor: Rothschild & Co.

    • Large Unsecured Creditor: AT&T Corp.

      • Legal: Arnold & Porter Kaye Scholer LLP (Brian Lohan, Ginger Clements, Peta Gordon) & AT&T (James Grudus)

    • Large Unsecured Creditor: Verizon Communications Inc.

      • Legal: Stinson Leonard Street LLP (Darrell Clark, Tracey Ohm)

    • Official Committee of Unsecured Creditors (AT&T Services Inc., Pension Benefit Guaranty Corporation, Communication Workers of America, AFL-CIO CLC, VeloCloud Networks Inc., Crown Castle Fiber, LEC Services Inc., UMB Bank)

      • Legal: Morrison & Foerster LLP (Lorenzo Marinuzzi, Brett Miller, Todd Goren, Jennifer Marines, Erica Richards)

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😷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 - FULLBEAUTY Brands Holdings Corp.

FULLBEAUTY Brands Holdings Corp.

February 3, 2019

We’re going to regurgitate our report about FULLBEAUTY Brands Holdings Corp. from January 6th after the company publicly posted its proposed plan of reorganization and disclosure statement and issued a press release about its proposed restructuring. What follows is what we wrote then:


FULLBEAUTY Brands Inc., an Apax Partners’ disaster…uh, “investment”…will, despite earlier reports of an out-of-court resolution to the contrary, be filing for bankruptcy after all in what appears to be either a late January or an early February filing after the company completes its prepackaged solicitation of creditors. Back in May in “Plus-Size Beauty is a Plus-Size Sh*tfest (Short Apax Partners’ Fashion Sense),” we wrote:

Here’s some free advice to our friends at Apax Partners: hire some millennials. And some women. When you have 23 partners worldwide and only 1 of them is a woman (in Tel Aviv, of all places), it’s no wonder that certain women’s apparel investments are going sideways. Fresh off of the bankruptcies of Answers.com and rue21, another recent leveraged buyout by the private equity firm is looking a bit bloated: NY-based FullBeauty Brands, a plus-size direct-to-consumer e-commerce and catalogue play with a portfolio of six brands (Woman Within, Roamans, Jessica London, Brylane Home, BC Outlet, Swimsuits for All, and Eilos).

Wait. Hold up. Direct-to-consumer? Check. E-commerce? Check. Isn’t that, like, all the rage right now? Yes, unless you’re levered to the hilt and have a relatively scant social media presence. Check and check.

Per a press release on Thursday, the company has an agreement with nearly all of its first-lien-last out lenders, first lien lenders, second lien lenders and equity sponsors on a deleveraging transaction that will shed $900mm of debt from the company’s balance sheet. It also has a commitment for $30mm in new liquidity in the form of a new money term loan with existing lenders. Per Bloomberg:

About 87.5 percent of the common reorganized equity would go to first-lien lenders, 10 percent to second liens, and 2.5 percent to the sponsor, according to people with knowledge of the plan who weren’t authorized to speak publicly.

Which, in English, means that Oaktree Capital Group LLCGoldman Sachs Group Inc., and Voya Financial Inc. will end up owning this retailer. Your plus-sized clothing, powered by hedge funds. Apax and Charlesbank Capital, the other PE sponsor, stand to maintain 2.5% of the equity which, from our vantage point, appears rather generous (PETITION Note: there must be a decent amount of cross-holdings between the first lien and second lien debt for that to be the case). Here is the difference in capital structure:

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What’s the story here? Simply put, it’s just another retail with far too much leverage in this retail environment.

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Of course, there’s the obligatory product strategy, inventory control, and e-commerce excuses as well. Not to mention…wait for it…Amazon Inc ($AMZN)!

“In addition to these operational hurdles, FullBeauty has also faced competition from online retail giant Amazon, Inc. and retail chains, including Walmart Inc. and Kohl’s Corporation, that have recently entered the plus-size clothing space.”

Kirkland & Ellis LLPPJT Partners ($PJT) and AlixPartners represent the company.


We give bankruptcy professionals grief all of the time for what often appears to be fee extraction in various cases. In our view, there have been some pretty egregious examples of inefficiency in the system and, considering a number of our readers are management teams of distressed companies, we feel it’s imperative that we cure for a blatant information dislocation and help educate the masses. This, though, appears to be an extraordinary case. In the other direction.

The company’s professionals here propose to confirm the company’s plan of reorganization at the first day hearing of the case. As Bloomberg noted on Monday, this would “set a new record for emerging from court protection in under 24 hours.” Bloomberg reports:

The previous record for the fastest Chapter 11 process is held by Blue Bird Body Co., which exited bankruptcy in 2006 in less than two days. Fullbeauty and its advisers aim to beat that mark.

“We structured this deal as if bankruptcy never happened for our trade creditors, vendors and employees to avoid further disruption to the company,” attorney Jon Henes at Kirkland & Ellis, the company’s legal counsel, said in an interview. “In this situation, every day in court is another day of costs without any corresponding benefit.”

In fact, this case would be so quick that, as you read this (on Wednesday), Judge Drain may have already given the plan his blessing. This makes Roust Corporation Inc. (6 days) and Southcross Holdings (13 days) look like child’s play. For that reason — and that reason alone — we’ll forgive the company’s professionals for their blatant victory lap: it’s curious that Bloomberg had a completed interview ready to go at 9:26am on the morning of the company’s bankruptcy filing. Clearly Kirkland & Ellis LLP, PJT Partners LP ($PJT) and Houlihan Lokey Capital ($HL) want to milk this extraordinary result for all it’s worth. We can’t really blame them, truthfully. That is, unless and/or until the company violates the “Two Year Rule” a la Charlotte Russe.

Anyway, why so quick? Well, because they can: the entire capital structure is on board with the proposed plan and trade will ride through unimpaired and paid. All contracts will be assumed. There are no brick-and-mortar stores to deal with: this is a web and catalogue-based business. Like we said, this case is extraordinary. Per the Company:

It is in the best interest of the estates that the Debtors remain in bankruptcy for as short a time-period as possible. If FullBeauty is forced to remain in chapter 11 longer than necessary, it may be required to seek debtor in possession financing, which would cost the Debtors unnecessary bank fees and professional expenses. In addition, although January has been relatively smooth in terms of vendor outreach, FullBeauty expects that trade could contract very quickly if the company remains in chapter 11 longer than necessary—particularly because many vendors are in foreign jurisdictions and they do not understand the nuances of prepackaged cases versus longer prearranged or traditional chapter 11 cases. Every day that FullBeauty remains in chapter 11 results in cash spent that could go to developing the business.

Indeed, for once, it appears that the best interests of the debtor company were, indeed, heeded.*

*Which is not to say that we believe the out-of-court bills will be light.

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

  • Capital Structure: $mm debt     

  • Company Professionals:

    • Legal: Kirkland & Ellis LLP (Jonathan Henes, Emily Geier, George Klidonas, Rebecca Blake Chaikin, Nicole Greenblatt)

    • Independent Director: Mohsin Meghji

    • Financial Advisor: AlixPartners LLC

    • Investment Banker: PJT Partners LP (Jamie Baird)

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

  • Other Parties in Interest:

    • Financial Sponsor (69.6%): Apax Partners LLP

      • Legal: Simpson Thatcher & Bartlett LLP (Elisha Graff, Nicholas Baker)

    • Financial Sponsor (26.4%): Charlesbank Capital Partners LLC

      • Legal: Goodwin Proctor LLP (William Weintraub, Joseph Bernardi Jr.)

    • ABL Agent & FILO Agent: JPMorgan Chase Bank NA

      • Legal: Davis Polk & Wardwell LLP (Darren Klein, Aryeh Falk)

    • First Lien Agent & Second Lien Agent: Wilmington Trust NA

      • Legal: Shipman & Goodman LLP (Nathan Plotkin, Eric Goldstein, Marie Pollio)

    • Ad Hoc Group of First Lien Term Loan Lenders

      • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Gerard Uzzi, Nelly Almeida)

      • Financial Advisor: Ducera Partners

    • Ad Hoc Group of Second Lien Term Loan Lenders

      • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Paul Basta, Elizabeth McColm, Christopher Hopkins)

      • Financial Advisor: Houlihan Lokey Capital Inc. (Saul Burian)

Updated 2/4/19 at 7:03 CT

New Chapter 11 Bankruptcy Filing - Specialty Retail Shops Holding Corp. (Shopko)

Specialty Retail Shops Holding Corp. (Shopko)

January 16, 2019

Sun Capital Partners’-owned, Wisconsin-based, Specialty Retail Shops Holding Corp. (“Shopko”) filed for bankruptcy on January 16, 2019 in the District of Nebraska. Yes, the District of Nebraska. Practitioners in Delaware must really be smarting over that one. That said, this is not the first retail chapter 11 bankruptcy case shepherded by Kirkland & Ellis LLP in Nebraska (see, Gordman’s Stores circa 2017). K&E must love the native Kool-Aid. Others, however, aren’t such big fans: the company’s largest unsecured creditor, McKesson Corporation ($MCK), for instance. McKesson is a supplier of the company’s pharmacies and is a large player in the healthcare business, damn it; they spit on Kool-Aid; and they have already filed a motion seeking a change of venue to the Eastern District of Wisconsin. They claim that venue is manufactured here on the basis of an absentee subsidiary. How dare they? Nobody EVER venue shops. EVER!

Anyway, we’ve gotten ahead of our skis here…

The company operates approximately 367 stores (125 bigbox, 235 hometown, and 10 express stores) in 25 states throughout the United States; it employs…

TO READ THE REST OF THIS REPORT, YOU MUST BE A MEMBER. BECOME ONE HERE.

  • Jurisdiction: D. of Nebraska

  • Capital Structure: see report.    

  • Company Professionals:

    • Legal: Kirkland & Ellis LLP (James Sprayragen, Patrick Nash Jr., Jamie Netznik, Travis Bayer, Steven Serajeddini, Daniel Rudewicz) & (local) McGrath North Mullin & Kratz P.C. LLO (James Niemeier, Michael Eversden, Lauren Goodman)

    • Board of Directors: Russell Steinhorst (CEO), Casey Lanza, Donald Roach, Mohsin Meghji, Steve Winograd

    • Financial Advisor: Berkeley Research Group LLC

    • Investment Banker: Houlihan Lokey Capital Inc. (Stephen Spencer)

    • Liquidation Consultant: Gordon Brothers Retail Partners LLC

      • Legal: Riemer & Braunstein LLP (Steven Fox)

    • Real Estate Consultant: Hilco Real Estate LLC

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

  • Special Committee of the Board of Directors

    • Legal: Willkie Farr & Gallagher LLP

    • Financial Advisor: Ducera Partners LLC

  • Other Parties in Interest:

    • Wells Fargo Bank NA

      • Legal: Otterbourg PC (Chad Simon) & (local) Baird Holm LLP (Brandon Tomjack)

    • Official Committee of Unsecured Creditors (HanesBrands Inc., Readerlink Distribution Services LLC, Home Products International NA, McKesson Corp., Notations Inc., LCN SKO OMAHA (MULTI) LLC, Realty Income Corporation)

      • Legal: Pachulski Stang Ziehl & Jones LLP (Jeffrey Pomerantz, Bradford Sandler, Alan Kornfeld, Robert Feinstein) & (local) Goosmann Law Firm PLC (Joel Carney)

      • Financial Advisor: FTI Consulting Inc. (Conor Tully)

      • Expert Consultant: The Michel-Shaked Group (Israel Shaked)

Updated 3/9/19

New Chapter 11 Bankruptcy Filing - Synergy Pharmaceuticals Inc.

December 12, 2018

On November 11 and then, in a more fulsome manner in November 18’s “😬Biopharma is in Pain😬,” we noted that Synergy Pharmaceuticals Inc. ($SGYP) “appears to be on the brink of bankruptcy.” Looks like we were right on. This morning (12/12/18) at 4:37am (PETITION Note: remember that if you think that being a biglaw attorney is glamorous), the company and an affiliate filed for bankruptcy in the Southern District of New York.

Synergy is a biopharmaceutical company that develops and commercializes gastrointestinal therapies; its primary speciality revolves around uroguanylin, “a naturally occurring and ednogenous human GI peptide, for the treatment of GI diseases and disorders” Geez…bankers and lawyers have nothing on scientists when it comes to the vernacular. The company has one commercial product (TRULANCE) and one product in development. The company owns 33 patents.

We previously noted:

The company has a $200mm 9.5% ‘25 secured term loan with CRG (~$100mm funded plus PIK interest) that has been amended a bazillion times to account for the fact that its revenues suck, its market cap sucks, and that its on the verge of tripping, or has tripped, numerous covenants including, a “minimum market capitalization” covenant and a “minimum revenue covenant.” In its most recent 10-Q, the company noted:

To date the Company has been unable to further amend the agreement with respect to the financial and revenue covenants. The Company is continuing discussions with CRG and has received a temporary waiver on the minimum market cap covenant through November 12, 2018. The Company is currently pursuing alternatives that better align with its business, but there is no assurance that Synergy can secure CRG’s consent or otherwise achieve a transaction to refinance or otherwise repay CRG on commercially reasonable terms, in which case we could default under the term loan agreement. If CRG does not grant a further waiver beyond November 12, 2018 the Company will likely be in default of the minimum market cap covenant.

In its bankruptcy filing, however, the company takes a decidedly less aggressive posture vis-a-vis CRG (which makes sense…CRG is, after all, its proposed DIP lender) when explaining the factors leading to the commencement of its chapter 11 cases. While the company does highlight lack of access to capital markets (which, at least as far as we read it, is an implicit jab at CRG), the company primarily blames TRULANCE’s slow sales growth, market access, competitive landscape and a smaller-than-anticipated total addressable market for its travails.

For its part, Centerview Partners has been engaged in a less than ideal sellside process here. According to the company’s papers, Centerview has been trying to sell the company since 2015. Now, unless there is some crazy element to this engagement, most bankers are compensated on the basis of success fees. They want to a large purchase price and a short marketing process to get the best of both worlds: a huge payday without huge utilization. That does not appear to be the case here. 3 years!

Still, they located a buyer. Bausch Health Companies (“BHC”) has agreed to be the stalking horse purchaser of the company’s assets. BHC would get substantially all of the company’s assets — including its IP, certain customer and vendor contracts, A/R, and goodwill. In exchange, they would pay approximately $185mm in cash (minus certain deductions and adjustments) and $15mm in severance obligations.

CRG is the company’s proposed DIP lender with a $155mm facility, of which $45mm represents new money.

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

  • Capital Structure: $110mm 9.5% ‘25 secured term loan, $19mm 7.5% ‘19 senior convertible notes (Wells Fargo NA)

  • Company Professionals:

    • Legal: Skadden Arps Slate Meagher & Flom LLP (Ron Meisler, Lisa Laukitis, Christopher Dressel, Jennifer Madden, Christine Okike) & (special counsel) Sheppard Mullin Richter & Hampton LLP

    • Legal Conflicts Counsel: Togut Segal & Segal LLP (Albert Togut, Neil Berger, Kyle Ortiz)

    • Board of Directors

      • Legal: Davis Polk & Wardwell LLP

    • Independent Director: Joseph Farnan

      • Legal: Kirkland & Ellis LLP

    • Financial Advisor: FTI Consulting Inc. (Michael Katzenstein, Sean Gumbs, Heath Gray, Om Dhavalikar, Tom Sledjeski, John Hayes, Andrew Kopfensteiner)

    • Investment Banker: Centerview Partners Holdings LP (Samuel Greene, Josh Thornton, Ercument Tokat)

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

  • Other Parties in Interest:

    • Prepetition Agent & DIP Lender: CRG Servicing LLC

      • Legal: Venable LLP (Jeffrey Sabin, Lawrence Cooke)

    • Stalking Horse Bidder: Bausch Health Companies Inc.

      • Legal: Wachtell Lipton Rosen & Katz (Richard Mason, Michael Benn)

    • Ad Hoc Committee of Equity Holders

      • Legal: Cole Schotz PC (Ryan Jareck, Irving Walker, Norman Pernick, Mark Tsukerman)

    • Official Committee of Equity Security Holders

      • Legal: Gibson Dunn & Crutcher LLP (David Feldman, Matthew Kelsey, Alan Moskowitz, J. Eric Wise)

      • Financial Advisor: Houlihan Lokey Capital, Inc. (Christopher Di Mauro, Geoffrey Coutts)

    • Official Committee of Unsecured Creditors (Highbridge Capital Management, 1992 MSF International Ltd., 1992 Tactical Credit Master Fund LP)

      • Legal: Latham & Watkins LLP (Richard Levy, Jeffrey Mispagel, Matthew Warren, Blake Denton, Christopher Harris)

      • Financial Advisor: Alvarez & Marsal LLP (Mark Greenberg, Richard Newman, Jason Ivy, Martin McGahan, Allison Hoeinghaus, Seth Waschitz, Sean Skinner, Michael Sullivan)

      • Investment Bank: Jefferies LLC (Leon Szlezinger, Jeffrey Finger)

New Chapter 11 Bankruptcy Filing - Parker Drilling Inc.

Parker Drilling Inc.

12/12/18

Back in October, in “Still Work to Do in Oil Country (Short Oil Field Services Companies),” we wrote the following:

Restructuring professionals attempting to extricate themselves from oil and gas work may have to wait a little bit longer. With companies like Houston-based Parker Drilling Corporation ($PKD) continuing to tread water, there may continue to be action in the space in the very near future. 

We added:

The signs of a near-term (read: Q4 ‘18) bankruptcy filing for Parker Drilling continue to shine through. Back in July, the company implemented a reserve stock split and adopted a short-term shareholder rights plan. While neither initiative, on its own, is dispositive of a chapter 11 filing, they are indicia. The former increases the market price per share of the common stock, ensuring compliance with NYSE listing requirements. Given a delisting notice received back in the spring, some level of stock split was basically a fait accompli. The latter is intended to “protect the best interests of the Company and its stakeholders”and is meant to preserve certain tax attributes that, if lost, would be tremendous value leakage to the estate…uh, company. The company noted:

“The Company believes these Tax Benefits are valuable assets that could offset potential future income taxes for federal income tax purposes. As of December 31, 2017, the Company had approximately $456 million of federal NOLs and $47 million of foreign tax credits.”

Of course, net operating losses only emanate out of a business that is (or was during a given fiscal year) unprofitable for tax purposes. So, there’s that. Which, putting the aforementioned shenanigans aside, is seemingly the bigger problem here.

For its second quarter ended June 30, 2018, PKD reported a net loss of $23.8mm on $118.6mm of revenue, a loss of $2.56/share. Adjusted EBITDA was $18.7mm. While those numbers aren’t so good, to say the least, they actually include a Q-over-Q increase of 8.1% in revenue (thanks to an increase in gross margin). Of course G&A expenses increased by $2.1mm because…wait for it…there were “professional fees fees related to ongoing capital structure analysis during the quarter.” You bet there were, homies.

We continued:

This capital structure isn’t complex and refinancing options, while theoretical, may be difficult given the company’s continued cash burn.

This is the company’s capital structure:

Screen Shot 2018-12-12 at 8.28.57 PM.png

And so we concluded:

The path forward here given the liquidity needed seems pretty obvious: we expect to see a restructuring support agreement on this bad boy sometime soon with an attempted quick trip through bankruptcy court that de-levers the balance sheet, eliminates interest expense, and positions the company to make the capex necessary to capture the growth projected in the business plan.

So, what’s the latest? Well, as predicted, Houston-backed Parker Drilling Company, an international provider of contract drilling and drilling-related services and rental tools, filed an earnest bankruptcy petition and accompanying papers in the Southern District of Texas. Earnest? Why “earnest”? The company stated:

Adverse macro trends, including and especially the sustained downturn in commodity prices, have reduced demand for oilfield services provided by the Debtors, resulting in idle rigs, and placing downward pressure on the prices the Debtors are able to charge. Moreover, the Debtors are facing near term 2020 maturities of their 2020 Notes and ABL (each as defined in the First Day Declaration), for which the borrowing base has been tightened and which may not be re-financeable in the current environment under the existing capital structure.

Rather than hold out hope for a market recovery, or execute an inferior transaction that would at best provide more onerous financing without addressing their capital structure in a comprehensive manner, the Debtors have negotiated a comprehensive balance sheet reorganization to both reduce leverage and increase liquidity.

Rather than hold out hope for a market recovery.” Those are poignant words that say a lot about the company’s outlook for oil in the near-term. It also says a lot about the company’s capital structure: clearly, there was no chance this company could grow into its balance sheet and/or refinance its upcoming debt. And, so, as we also predicted, the company’s bankruptcy filing is accompanied by a deal in hand with the major players in the company’s capital structure and equity profile: Brigade Capital Management, Highbridge Capital Management, Varde Partners, Whitebox Advisors. These four institutions collectively hold approximately 77% of the unsecured notes, approximately 62% of the outstanding preferred stock, and approximately 15% of the outstanding common stock. They’ve agreed to equitize the notes in exchange for equity in the reorganized company and to participate in a rights offering that will have the effect of capitalizing the reorganized entity with $95mm of new equity. The net effect of all of this will be a $375mm deleveraging of the company’s balance sheet.

The company has a commitment for a $50 DIP credit facility to fund the cases and a $50mm exit facility (with an upsize option up to $100mm) upon its emergence from chapter 11.

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

  • Capital Structure: $80mm ABL (unfunded - Bank of America NA), $225mm ‘20 notes (The Bank of New York Mellon Trust Company, N.A.), $360mm ‘22 notes (The Bank of New York Mellon Trust Company, N.A.)

  • Company Professionals:

    • Legal: Kirkland & Ellis LLP (James Sprayragen, Christopher Marcus, Brian Schartz, Anna Rotman, Matthew Fagen, Jamie Netznik) & (local) Jackson Walker LLP (Patricia Tomasco, Matthew Cavenaugh)

    • Financial Advisor: Alvarez & Marsal North America LLC (Lacie Melasi, John Walsh)

    • Investment Banker: Moelis & Co. (Bassam Latif)

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

  • Other Parties in Interest:

    • Consenting Noteholders: Brigade Capital Management, Highbridge Capital Management, Varde Partners, Whitebox Advisors

      • Legal: Akin Gump Strauss Hauer & Feld LLP

      • Financial Advisor: Houlihan Lokey Capital Inc.

Copy of New Chapter 11 Filing - Waypoint Leasing Holdings Ltd.

Waypoint Leasing Holdings Ltd.

November 25, 2018

“Get to the Choppa!” - Arnold Schwarzenegger

It has been a tough couple of years for companies in the helicopter business (see, e.g., Erickson Aircrane and CHG Group, not to mention PHI Inc. and Bristow Group, both of which restructuring professionals continue to watch and salivate over). So tough, in fact, that even Thanksgiving weekend wasn’t sacrosanct and even some big name sponsors couldn’t keep this thing out of court. Over the weekend, helicopter leasing company, Waypoint Leasing Holdings Ltd., “facing imminent liquidity constraints and potential defaults under their secured loan facilities,” filed for bankruptcy with a goal of…

…TO READ THE REST OF THIS SUMMARY — WHICH INCLUDES DISCUSSION OF THE COMPANY’S CAPITAL STRUCTURE AND A ROSTER OF THE PLAYERS AND PROFESSIONALS INVOLVED IN THE MATTER — YOU MUST BE A MEMBER. BECOME ONE HERE.

New Chapter 11 Bankruptcy Filing - All American Oil & Gas Inc.

All American Oil & Gas Inc.

November 12, 2018

San Antonio-based independent oil company All American Oil & Gas Inc. (“AAOG”) and its two affiliated companies, Western Power & Steam Inc. (“WPS”) and Kern River Holding Inc. (“KRH”) filed for bankruptcy earlier this week in the Western District of Texas. WPS is a power company that sells power to the likes of Pacific Gas & Electric — a company that, as we’ve previously noted, is having problems of its own (which only appear to be getting worse) — and provides electricity and steam to KRH to aid KRH’s efforts to extract oil.

The enterprise is reportedly cash flow positive, with approximately $25mm in EBITDA in 217 and higher EBITDA projected for 2018. So what gives?

The debtors accuse their successor lender, Kern Cal Oil 7 LLC (“KCO7”), which acquired the company’s secured debt from Alliance-Bernstein, of “not act[ing] as a typical lender,” instead “implement[ing] a predatory ‘loan to own’ strategy.” The debtors note:

Unlike many E&P cases, this bankruptcy filing is not the result of the Company’s poor operational performance, illiquidity, debt maturities or lack of underlying value. Rather, it was precipitated by KCO7’s efforts to exploit its rights under the Credit Agreements to obtain the Debtors’ assets ‘on the cheap,’ and thereby to destroy tens of millions in equity value.

In a dramatic twist, Kern Cal Oil 7 LLC is, according to the debtors, run by two former investment bankers “who were fired allegedly for cause from AAOG’s and KRH’s former investment banker and financial advisor Cappello Capital Corporation” and have an SEC claim filed against them for “breach of fiduciary duty, misappropriation of confidential information, and fraud, among other allegations.” Salacious.

In October, Kern Oil 7 LLC, under the auspices of attending a constructive meeting relating to potential M&A involving Kern Oil and the debtors, issued a notice of default on the basis of insufficient hedging, a move the debtors claim “was a transparent attempt to intimidate AAOG into handing over the Company to KCO7 for little or no value to its shareholders.” Suffice it to say that there is other dramatic stuff here including the debtors’ inability to put hedges in place, purportedly due to the notice of default, incomplete documentation relating to the change from Alliance-Bernstein to KCO7, and more. KCO7 notified the debtors that default interest now applied and on November 8, the debtors had a scheduled interest payment to make which, given these circumstances, the debtors opted not to make. In turn, the debtors filed for bankruptcy to “protect its going concern enterprise value and to restructure its secured debt.”

To fund their cases, the debtors seek authority to use their pre-petition lenders’ (read: KCO7) cash collateral. That ought to be a fun first day hearing.

  • Jurisdiction: W.D. of Texas (Judge King)

  • Capital Structure: $80.1mm ‘19 first lien debt (plus $789k in accrued/unpaid interest)(Kern Cal Oil 7 LLC), $50mm ‘20 second lien debt (plus $10.6mm PIK and $440k accrued/unpaid interest)(Kern Cal Oil 7 LLC)

  • Company Professionals:

    • Legal: Hogan Lovells US LLP (Richard Wynne, Bennett Spiegel, Erin Brady, Christopher Bryant, John Beck, Sean Feener) & (local) Dykema Gossett PLLC (Deborah Williamson, Patrick Huffstickler, Danielle Rushing)

    • Investment Banker: Houlihan Lokey

    • Claims Agent: BMC Group Inc. (*click on company name above for free docket access)

  • Other Parties in Interest:

    • Kern Oil 7 LLC

      • Legal: O’Melveny & Myers LLP (Stephen Warren)

New Chapter 11 Bankruptcy Filing - Taco Bueno Restaurants, Inc.

Taco Bueno Restaurants, Inc.

November 6, 2018

Damn you Chipotle Mexican Grill Inc. ($CMG).

It’s been a rough several months for Mexican restaurants. Over the summer, Tennenbaum Capital and Z Capital-owned RM Holdco LLC (Real Mex) filed for bankruptcy in the District of Delaware and pursued a sale of its business. Now, Texas-based, TPG-owned Taco Bueno Restaurants, Inc., a Tex-Mex quick service restaurant (“QSR”) with 140 owned and 29 franchised locations, has filed a prepackaged bankruptcy that will convey ownership to Taco Supremo LLC, an affiliate of Sun Holdings Inc., which bought-out the debtors’ initial lenders in October. Taco Supremo subsequently signed a restructuring support agreement memorializing its intent to effectuate a debt-for-equity swap and provide the debtors with a DIP credit facility.

So, why is all of this necessary? The company noted:

…while Taco Bueno possesses a traditional brand with a loyal customer base and the potential for future growth under the leadership of its new management team, Taco Bueno’s existing capital structure is unsustainable and its financial performance fell significantly due to, among other things, historical mismatches between price and product value, a lack of product innovation, and deferred maintenance capital investment. In addition, competition in the Mexican food industry – including the rise in popularity of tacos at both QSRs and other types of restaurants – increased substantially in recent years, causing certain Taco Bueno stores to experience stagnant or reduced customer traffic and sales. Moreover, while Taco Bueno recently launched a process to close underperforming stores to better focus on core markets and high-value stores, Taco Bueno continues to suffer from a number of underperforming restaurants. Accordingly, Taco Bueno needs to continue to restructure its lease footprint and renegotiate existing leases to optimize profitability.

Even the “Buenoheads” — yes, that’s actually a thing, apparently — couldn’t save this thing from bankruptcy. The debtors’ EBITDA fell to approximately $17.2 million in 2017 with a projected EBITDA of approximately $5.9 million for 2018, compared to approximately $33 million in 2016 EBITDA and approximately $31 million in 2015 EBITDA. Of course, the $130mm of debt doesn’t help either.

Consequently, to salvage liquidity and allow its bankers to conduct a process, the debtors closed 20 locations in the last year (and are in the midst of negotiations with Spirit Realty Capital Inc. ($SRC), U.S Realty Capital, and Kamin Realty Co., the landlords of over 50% of the debtors’ leases). The management team has turned over and the company attempted a prepetition sale process. That process culminated in the above-noted RSA-based transaction that will attempt to flush the company in and out of bankruptcy court by the middle of December.

  • Jurisdiction: N.D. of Texas

  • Capital Structure: $130.9mm debt     

  • Company Professionals:

    • Legal: Vinson & Elkins (David Meyer, Jessica Peet, Paul Heath, Garrick Smith, Matthew Pyeatt, Andrew Geppert)

    • CRO/Financial Advisor: Berkeley Research Group LLC (Haywood Miller)

    • Investment Banker: Houlihan Lokey Capital Inc. (Adam Dunayer)

    • Real Estate Advisor: Jones Lang LaSalle Americas Inc.

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

  • Other Parties in Interest:

    • Initial Lender: Bank of America NA

    • Sponsor: TPG Growth III Management LLC

New Chapter 11 Filing - Mission Coal Company LLC

Mission Coal Company LLC

October 14, 2018

For a recap, please see here.

  • Jurisdiction: N.D. of Alabama (Judge Mitchell)

  • Capital Structure: See below

  • Company Professionals:

    • Legal: Kirkland & Ellis LLP (Stephen Hessler, Brad Weiland, Melissa Koss, Travis Bayer, Anne Gilbert Wallace, Francis Petrie, Ciara Foster, Michael Esser) & (local) Christian & Small LLP (Daniel Sparks, Bill Bensinger)

    • CRO/Financial Advisor: Zolfo Cooper LLC (Kevin Nystrom)

    • Investment Banker: Jefferies LLC

    • Claims Agent: Omni Management Group (*click on company name above for free docket access)

  • Other Parties in Interest:

    • First Lien Lenders and DIP Lenders

      • Legal: Akin Gump Strauss Hauer & Feld LLP (Martin Brimmage, Lisa Beckerman, Lacy Lawrence, Allison Miller, Erik Preis, Jason Rubin) & (local) Burr & Forman LLP (Michael Leo Hall, D. Christopher Carson, Heather Jamison)

      • Financial Advisor: Houlihan Lokey Capital

    • United Mine Workers of America

      • Legal: Rumberger Kirk & Caldwell PC (R. Scott Williams, Frederick Darrell Clarke III, Robert Adams)

    • The United Mine Workers of America 1974 Pension Plan and the United Mine Workers of America 1993 Benefit Plan

      • Legal: Morgan Lewis & Bockius LLP (Rachel Mauceri, John Goodchild III) & (local) Quinn Connor Weaver Davies & Rouco LLP (Glen Connor, George Davies)

Source: First Day Declaration

Source: First Day Declaration

🚗New Chapter 11 Bankruptcy Filing - ATD Corporation🚗

ATD Corporation

10/4/18

Recap: Please see here.

  • Jurisdiction: D. of Delaware (Judge Carey)

  • Capital Structure: See below.

  • Company Professionals:

    • Legal: Kirkland & Ellis LLP (James Sprayragen, Anup Sathy, Chad Husnick, Spencer Winters, Joshua Greenblatt, Jacob Johnston, Mark McKane, Jaimie Fedell, Andre Guiulfo) & (local) Pachulski Stang Ziehl & Jones LLP (Laura Jones, Timothy Cairns, Joseph Mulvihill)

    • Financial Advisor: AlixPartners LLP (James Mesterharm)

    • Investment Banker: Moelis & Co. (Adam Keil)

    • Claims Agent: KCC (*click on company name above for free docket access)

  • Other Parties in Interest:

    • Term Lender Committee

      • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Brian Hermann, Aidan Synnott, Jacob Adlerstein, Michael Turkel, David Giller, Oksana Lashko, Eugene Park, Jacqueline Rubin) & (local) Young Conaway Stargatt & Taylor LLP (Pauline Morgan, Joel Waite, Andrew Magaziner)

      • Financial Advisor: Houlihan Lokey

    • DIP Agent and Pre-Petition ABL Agent (Bank of America)

      • Legal: Parker Hudson Rainer & Dobbs LLP (C. Edward Dobbs, Eric W. Anderson, James S. Rankin Jr., Jack C. Basham) & (local) Richards Layton & Finger PA (John Knight, Amanda Steele, Brendan Schlauch)

    • DIP FILO Lenders & Consenting Noteholders

      • Legal: Akin Gump Strauss Hauer & Feld LLP (Ira Dizengoff, Philip Dublin, Naomi Moss) & (local) Pepper Hamilton LLP (Evelyn Meltzer, Kenneth Listwak)

      • Financial Advisor: PJT Partners

    • Indenture Trustee: Ankura Trust Company LLC

      • Legal: King & Spalding LLP (Jeffrey Pawlitz, David Zubricki, Jared Zajec) & (local) Chipman Brown Cicero & Cole, LLP (William E. Chipman, Jr., Mark D. Olivere)

    • Michelin North America Inc.

      • Legal: Nelson Mullins Riley & Scarborough LLP (George B. Cauthen, Jody A. Bedenbaugh, Shane Ramsey) & (local) Bayard PA (Justin Alberto, Evan Miller)

    • Cooper Tire & Rubber Company

      • Legal: Jones Day (Timothy Hoffmann) & (local) Potter Anderson & Corroon LLP (Jeremy Ryan, D. Ryan Slaugh)

    • Sponsor: Ares Management

      • Legal: Milbank Tweed Hadley & McCloy LLP (Paul Aronzon, Thomas Kreller, Adam Moses)

    • Sponsor: TPG Capital

      • Legal: Weil Gotshal & Manges LLP (Ryan Dahl, Natasha Hwangpo)

Screen Shot 2018-10-05 at 5.21.43 PM.png

New Chapter 11 Filing - Neighbors Legacy Holdings Inc.

Neighbors Legacy Holdings Inc.

7/12/18

Look! Some healthcare distress. 

Neighbors Legacy Holdings Inc., an operator of 22 freestanding emergency centers throughout the state of Texas filed for bankruptcy on July 12, 2018. The company blames its filing on "financial difficulties caused in large part by increased competition, less favorable insurance payor conditions, declining revenues, and disproportionate overhead costs as compared to their operational income." In other words, its owners did too much too fast, taking on too much debt to expand too rapidly in a space that requires significant upfront capital investment in exchange for a 12-18 month lag in cash flow generation. Initiate death spiral. 

The company's financial numbers look brutal. Per the First Day Declaration:

"...the Debtors’ consolidated EBITDA dropped from $49 million in 2015, to $45 million in 2016, to $10.3 million in 2017. This drop has been caused, in part, by the increased competition in the industry, which has led to lower patient volumes per Emergency Center. For the Emergency Centers opened prior to 2016, the average claims per day fell from approximately 13 in the first quarter of 2017 to approximately 10 currently. For Emergency Centers opened during 2016, there continues to be, on average, fewer than 10 claims per day. This marked reduction in patient volume led to a strain at previously profitable locations and underperformance at new locations."

The company, therefore, has been engaged in a game of whack-a-mole, trying to plug leakages in the enterprise in order to survive. The company had to close several unprofitable locations and abandon planned (but never opened) locations. It also took down SG&A, all the while alienating relationships with critical parties like landlords, vendors and doctors. You know, like, critical cogs in a medical service machine. 

On the bright side, the company does have a stalking horse bidder in tow. Altus Health Systems OPCO LLC and Altus Health System Realty LLC are the staking horse bidder for Houston assets. The company will utilize the "breathing spell" provided by the filing to conduct an auction and attempt to maximize the value of the assets in a competitive process. 

  • Jurisdiction: S.D. of Texas (Judge Isgur)
  • Capital Structure: $30mm RCF & $120mm term loan (KeyBank National Association)
  • Company Professionals:
    • Legal: Porter Hedges LLP (John Higgins, Eric English, Genevieve Graham)
    • CRO/Financial Advisor: CohnReznick LLP (Chad Sandler)
    • Investment Banker: Houlihan Lokey Inc. 
    • Claims Agent: KCC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Prepetition Lender: KeyBank National Association
      • Legal: Reed Smith LLP (Lloyd Kim, Matthew Tashman)

New Chapter 11 Filing - EBH Topco LLC (a/k/a Element Behavioral Health Inc.)

EBH Topco LLC (a/k/a Element Behavioral Health Inc.)

5/23/18 

Behavioral health services and residential drug and alcohol addition treatment provider in 13 treatment centers across 8 states filed for bankruptcy. If that sounds boring: it's because it is. Which would explain why the Wall Street Journal felt compelled to drop in that its also the facility that treated Britney Spears and Lindsay Lohan. SEO just shot through the roof. Anyway, the company stated,

While the Company has had ongoing financial difficulties, the overall census of the facilities and revenue has declined since 2017. The decline in out-of-network admissions, lower reimbursement rates by insurance providers and the decline in the average length of stay were all contributing factors to the financial losses of the Company. While the Company attempted to increase census through ongoing marketing efforts of its in-house sales team and internet advertising, the increased cost of these efforts did not result in the increase in revenue to improve the financial results of the Company and offset the Company’s cash burn. Financial performance for the fiscal year 2017 was $103.7 million in revenue, $129.6 million in expenses, and EBITDA of $(25.9) million with a total net income/(loss) of $(51.2) million.

Given that the company started in 2008 and then pursued an acquisition-based growth strategy, it seems like they didn't underwrite to current conditions. Ouch. 

Just a few weeks ago, Project Build Behavioral Health, LLC purchased the first lien paper and after an initial buyer of the assets fell through, agreed to be the company' stalking horse bidder in bankruptcy subject to an expedited sale process (the sale hearing is slated for late June); it intends to credit bid its debt. The company has a proposed $14.2 million DIP credit facility lined up to fund the cases. 

  • Jurisdiction: D. of Delaware (Judge Shannon)
  • Capital Structure: $76mm '19 first lien term loan and revolver debt (Madison Capital Funding LLC), $29mm '20 second lien term loan (Cortland Capital Market Services LLC)
  • Company Professionals:
    • Legal: Polsinelli PC (Christopher Ward, Shani Katona, Stephen Astringer, Jeremy Johnson)
    • CRO/Financial Advisor: Alvarez & Marsal LLC (Martin McGahan)
    • Investment Banker: Houlihan Lokey Capital Inc.
    • Claims Agent: Donlin Recano & Company Inc. (*click on company name above for free docket access)
  • Other Parties in Interest:
    • DIP Lender/Stalking Horse Bidder: Project Build Behavioral Health, LLC
      • Legal: McDonald Hopkins LLC (David Agay, Scott Opincar, Michael Kaczka) & (local) Morris Nichols Arsht & Tunnell LLP (Derek Abbott)
    • Ad Hoc Group of Second Lien Lenders
      • Legal: Morrison & Foerster LLP (Jonathan Levine, Daniel Harris)
    • Equity sponsors: NEA, Frazier Healthcare Ventures, Formation Capital

New Chapter 11 Filing - The Rockport Company LLC

The Rockport Company LLC

5/14/18

The Rockport Company LLC, a Massachusetts-based designer, distributor and retailer of comfort footwear has filed for bankruptcy — the latest in a string of footwear retailers that has found its way into chapter 11. Payless Shoesource, Sheikh Shoes, and Nine West Holdings are other recent filings. The current owners of the business — its prepetition lenders — purchased the business from Berkshire Partners LLC and New Balance Holding Inc. in 2017. 

The company operates in what it dubs a “highly competitive” business where “[a]t various times of the year, department store chains, specialty shops, and online retailers offer brand-name merchandise at substantial markdowns which further intensifies the competitive nature of the industry.” The company has (i) a robust wholesale business (57% of all its global sales), (ii) a direct retail business (eight (8) full-price and nineteen (19) outlet stores in the United States and fourteen (14) full-price and nineteen (19) outlet stores in Canada), (iii) e-commerce, and (iv) an international distribution segment. 

This business has suffered from (a) operational challenges (a costly and time consuming separation from the Adidas Networks, with which the company's operations were deeply integrated until late 2017), (b) other negative externalities (i.e., the closure of three supply factories, contract disputes with warehousemen, and (c) the burdens of its brick-and-mortar footprint. The company notes, "[o]ver the last several years the Debtors have faced a highly promotional and competitive retail environment, underscored by a shift in customer preference for online shopping." And it notes further, "[t]he unfavorable performance of the Acquired Stores in the current retail environment has made it difficult for the Debtors to maintain sufficient liquidity and to operate their business outside of Chapter 11."

In light of this, armed with a $20 million new-money DIP credit facility (exclusive of rollup amounts) extended by its prepetition ABL lenders, the company has filed for bankruptcy to consummate a stalking horse-backed asset purchase agreement with CB Marathon Opco, LLC an affiliate of Charlesbank Equity Fund IX, Limited Partnership for the sale of the company's assets - OTHER THAN its North American assets — for, among other things, $150 million in cash. The buyer has a 25-day option to continue considering whether to purchase the North American assets but the company does "not expect there to be any significant interest in the North American Retail Assets." Read: the stores. The company, therefore, also filed a "store closing motion" so that it can expeditiously move to shutter its brick-and-mortar footprint at the expiration of the option. Ah, retail. 

  • Jurisdiction: D. of Delaware 
  • Capital Structure: $57mm prepetition ABL Facility (Citizens Business Capital), $188.3 million '22 prepetition senior secured notes, $11mm prepetition subordinated notes.  
  • Company Professionals:
    • Legal: Richards Layton & Finger PA (Mark Collins, Michael J. Merchant, Amanda R. Steele, Brendan J. Schlauch, Megan E. Kenney)
    • Financial Advisor: Alvarez & Marsal Private Equity Services Operations Group, LLC (Paul Kosturos)
    • Investment Banker: Houlihan Lokey Inc.
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Prepetition Noteholders and DIP Note Purchasers
      • Legal: Debevoise & Plimpton LLP (My Chi To, Daniel Stroik) & (local) Pachulski Stang Ziehl & Jones LLP (Bradford Sandler, James O'Neill)
    • Collateral Agent and DIP Note Agent
      • Legal: Holland & Knight LLP (Joshua Spencer) & (local) Pachulski Stang Ziehl & Jones LLP (Bradford Sandler, James O'Neill)
    • ABL Administrative Agent and ABL DIP Agent: Citizens Business Capital
      • Legal: Riemer Braunstein LLP (Donald Rothman, Lon Singer, Jaime Rachel Koff, Jeremy Levesque) & (local) Ashby & Geddes PA (Gregory Taylor)
    • Stalking Horse Bidder: CB Marathon Opco, LLC an affiliate of Charlesbank Equity Fund IX, Limited Partnership
      • Legal: Goodwin Proctor LLP (Jon Herzog, Joseph Bernardi Jr.) & (local) Pepper Hamilton LLP (David Fournier, Evelyn Meltzer)

Updated 5/14/18 at 10:14 am

New Chapter 11 Filing - Nine West Holdings Inc.

Nine West Holdings Inc.

April 6, 2018

Nine West Holdings Inc., the well-known footwear retailer, has finally filed for bankruptcy. The company will sell its Nine West and Bandolino brands to Authentic Brands Group and reorganize around its One Jeanswear Group, The Jewelry Group, the Kasper Group, and Anne Klein business segments. The company has a restructuring support agreement in hand to support this dual-process. 

More on the situation here

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

  • Capital Structure: See below.

Source: First Day Declaration

Source: First Day Declaration

  • Company Professionals:

    • Legal: Kirkland & Ellis LLP (James Sprayragen, James Stempel, Joseph Graham, Angela Snell, Anna Rotman, Jamie Aycock, Justin Alphonse Mercurio, Alyssa Russell)

    • Financial Advisor: Alvarez & Marsal North America LLC (Ralph Schipani III, Julie Hertzberg, Holden Bixler, Amy Lee, Richard Niemerg, Theodore Langer, Stuart Loop, Thomas Koch, Michael Dvorak)

      • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Andrew Leblanc, Alexander Lees)

    • Investment Banker: Lazard Freres & Co. LLC (David Kurtz, Ari Lefkovits, David Hales, Mike Weitz, Nikhil Angelo, Okan Kender, Abigail Gay, Drew Deaton) & Consensus Advisory Services LLC

    • Authorized Officers: Stefan Kaluzny, Peter Morrow, Harvey Tepner, Alan Miller

    • Legal to the Authorized Officers: Munger Tolles & Olson LLP (Seth Goldman, Kevin Allred, Thomas Walper)

    • Financial Advisor to the Authorized Officers: Berkeley Research Group LLC (Jay Borow)

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

  • Other Parties in Interest:

    • Stalking Horse Bidder/Buyer: Authentic Brands Group

      • Legal: DLA Piper LLP (Richard Chesley, Ann Lawrence, Rachel Ehrlich Albanese)

    • Prepetition ABL and FILO Agent: Wells Fargo NA

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

    • Administrative Agent for the prepetition secured and unsecured Term Loan Facilities: Morgan Stanley Senior Funding Inc.

    • Indenture Trustee for 3 series of Unsecured Notes: US Bank NA

      • Legal: White & Case LLP (J. Christopher Shore, Philip Abelson) & Seward & Kissel LLP (John Ashmead, Arlene Alves)

    • Ad Hoc Group of Secured Lenders (Farmstead Capital Management LLC, KKR Credit Advisors (US) LLC)

      • Legal: Davis Polk & Wardwell LLP (Marshall Huebner, Darren Klein, Adam Shpeen)

      • Financial Advisor: Ducera Partners LLC

    • Ad Hoc Group of Crossover Lenders (Alden Global Capital LLC, Carlson Capital LP, CVC Credit Partners LLC, Silvermine Capital Management LLC, Trimaran Advisors)

      • Legal: King & Spalding LLP (Michael Rupe, Jeffrey Pawlitz, Michael Handler, Bradley Giordano)

      • Financial Advisor: Guggenheim Securities LLC

    • Brigade Capital Management, LP

      • Legal: Kramer Levin Naftalis & Frankel LLP (Douglas Mannel, Rachael Ringer)

      • Financial Advisor: Moelis & Company

    • Ad Hoc Group of 2019 Unsecured Noteholders (Whitebox Advisors LLC, Scoggin Management LP, Old Bellows Partners LP, Wazee Street Opportunities Fund IV)

      • Legal: Willkie Farr & Gallagher LLP (Rachel Strickland)

    • Ad Hoc Group of 2034 Unsecured Noteholders

      • Legal: Jones Day

      • Financial Advisor: Houlihan Lokey

    • Administrative Agent for $247.5mm DIP ABL Facility

    • Administrative Agent for $50mm DIP TL Facility

    • Sponsor: Sycamore Partners LP

      • Legal: Proskauer Rose LLP (Mark Thomas, Peter Young, Michael Mervis, Jared Zajac, Chantel Febus, Alyse Stach)

    • KKR Asset Management

      • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Andrew Leblanc)

    • Morgan Stanley & Co. LLC and Morgan Stanley Senior Funding Inc.

      • Legal: Ropes & Gray LLP (Gregg Galardi, Gregg Weiner)

    • Official Committee of Unsecured Creditors (Aurelius Capital Master Ltd., GLAS Trust Company LLC, PBGC, Simon Property Group, Stella International Trading (Macao Commercial Offshore) Ltd., Surefield Limited, U.S. Bank NA)

      • Legal: Akin Gump Strauss Hauer & Feld LLP (Daniel Golden, David Zensky, Deborah Newman, Arik Preis, Jason Rubin, Anthony Loring, Michael Byun, Patrick Chen)

      • Legal Conflicts Counsel: Kasowitz Benson Torres LLP (David Rosner, Howard Schub)

      • Financial Advisor: Protiviti Inc. (Guy Davis, Suzanne Roski, Heather Williams, John Eldred, Justin Koehler, Brian Taylor, Russell Brooks, Matthew Smith, Blake Parker, Lee Slobodien, Omkar Vale, Lok Lam, Sean Sterling) & Province Inc. (Michael Atkinson, Jason Crockett, Eunice Min, Byron Groth)

      • Investment Banker: Houlihan Lokey Capital Inc. (Saul Burian, Surbhi Gupta, Chris Khoury, Tejas Kullarwar, Matt Ender, Brendan Wu)

Updated 11/3/18 at 6:42 am CT

New Chapter 11 Filing - 4 West Holdings LLC

4 West Holdings LLC

3/6/18 

Texas-based licensed operator or manager of 42 skilled nursing facilities in 7 states has filed a prearranged bankruptcy. The company blames "the performance of the current group of operating Facilities has been negatively impacted by industry headwinds, regulatory actions at certain Facilities, and an inefficient geographic footprint in certain regions in the United States" for its filing.

Similar to HCR Manorcare which filed for bankruptcy earlier this week, 4 West and its affiliates emanate out of a sale leaseback transaction with a publicly-traded REIT counterparty, Omega Healthcare Investors, Inc. ($OHI). And, similarly, this business suffers from many of the same problems, 

Since 2015, the Debtors have faced significant liquidity constraints caused principally by: (a) unfavorable commercial agreements and certain liabilities assumed as part of Merger, including regulatory and personal liability claims; (b) historical losses at certain of the Debtors’ previously-operated facilities, (c) a decline in performance within the current portfolio for a variety of industry-wide developments; and (d) significant capital expenditure needs. Further, the Debtors also faced rent payment obligations to the Omega Parties under the Master Leases, which were significantly higher than their operating income could support.

Consequently, the debtor has entered into a restructuring support agreement with Omega that is predicated upon two parts: (i) a transaction whereby certain unprofitable facilities will transition to a designee of Omega and (ii) a transfer of the more successful facilities to the Plan Sponsor, SC-GA 2018 Partners LLC, which is injecting the company with $225mm of new liquidity by way of $195mm in cash and $30mm note. The Omega Parties will provide a $30mm DIP credit facility to fund the cases. 

  • Jurisdiction: N.D. of Texas (Judge Hale)

  • Capital Structure: $14.2mm funded RCF (Sterling National Bank), secured Master Leases (Omega), $15mm funded LOC (OHI Asset RO, LLC), $6.2mm secured note (New Ark Mezz Holdings, LLC), $1.1mm unsecured promissory note (SA Mezz Holdings, LLC)

  • Company Professionals:

    • Legal: DLA Piper (US) LLP (Thomas Califano, Daniel Simon, Dienna Corrado, Andrew Zollinger, David Avraham)

    • Financial Advisor: Crowe Horwath LLP

    • Restructuring Advisor/CRO: Ankura Consulting (Louis Robichaux, Ben Jones, Chris Hebard)

    • Investment Banker: Houlihan Lokey Capital Inc. (Andrew Turnbull, Ryan Sandahl, Angus Schaller, Adam Montague)

    • Independent Director: Drivetrain Advisors LLC (John Brecker)

    • Healthcare Ombudsman: Melanie Cyganowski

      • Legal: Otterbourg P.C. (Keith Costa)

    • Claims Agent: Rust Consulting/Omni Bankruptcy (*click on company name above for free docket access)

  • Other Parties in Interest:

    • DIP Lender: OHI Asset RO, LLC

      • Legal: Bryan Cave LLP (Keith M. Aurzada, Michael P. Cooley, Mark Duedall, Leah Fiorenza McNeill, David Unseth)

    • Plan Sponsor: SC-GA 2018 Partners, LLC

      • Legal: Nelligan LLP (Patrick Nelligan, James Muenker)

    • Sterling National Bank

      • Legal: King & Spalding LLP (Arthur Steinberg, Scott Davidson, Bradley Giordano, Edward Ripley)

    • Official Committee of Unsecured Creditors (Pharmerica Corporation, Healthcare Services Group, Medline Industries, Alana Healthcare, Ominicare Inc., Joerns Healthcare LLC, Regional Ambulance

      • Legal: Pepper Hamilton LLP (Francis Lawall, Donald Detweiler, Joanna Cline) & (local) Norton Rose Fulbright US LLP (Louis Strubeck Jr., Ryan Manns, Elizabeth Boydston)

      • Financial Advisor: CohnReznick LLP (Clifford Zucker)

Updated 5/18/18

New Chapter 11 Filing - Rand Logistics Inc.

Rand Logistics Inc.

  • 1/28/18 Recap: NJ-based publicly-traded ($RLOG) bulk freight Jones Act shipper filed for bankruptcy to effectuate a balance sheet restructuring and sale pursuant to a prepackaged plan of reorganization. Lightship Capital LLC has agreed to acquire the company by converting all of the company's second lien debt into 100% of the equity. The deal eliminates approximately $90mm of debt. The company blames currency volatility (US vs. Canadian dollar) and increased maintenance/certification costs as factors necessitating a review of the capital structure. 
  • Jurisdiction: D. of Delaware 
  • Capital Structure: $235.9mm total funded debt; $149mm first lien debt (Bank of America) & $86.9mm second lien debt (Guggenheim Corporate Funding LLC)    
  • Company Professionals:
    • Legal: Akin Gump Strauss Hauer & Feld LLP (Meredith Lahaie, Alexis Freeman, Kevin Zuzolo, Zach Lanier, Abid Qureshi) & (local) Pepper Hamilton LLP (David Stratton, David Fournier, Evelyn Fournier)
    • Financial Advisor: Conway MacKenzie Inc.
    • Investment Banker: Stifel Financial/Miller Buckfire & Co. LLC (Kevin Haggard)
    • Claims Agent: KCC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • First Lien Agent: Bank of America NA
      • Legal: Otterbourg P.C. (Daniel Fiorillo, Chad Simon) and (local) Womble Bond Dickinson (US) LLP (Matthew Ward, Nicholas Verna)
    • Second Lien Agent and Second Lien Lender: Lightship Capital LLC
      • Legal: White & Case LLP (Thomas Lauria, Andrew Zatz, Rashida Adams) & (local) Fox Rothschild LLP (Jeffrey Schlert, Carl Neff)
      • Financial Advisor: Houlihan Lokey Capital Inc.