⛽️New Chapter 22 Bankruptcy Filing - PES Holdings LLC⛽️

PES Holdings LLC

July 21, 2019

Picture the private equity associate. He’s sitting at his desk, twiddling his thumbs, looking for something to do. All is good in the world: the portfolio is humming along, he hasn’t gotten roped into a lose/lose golf tournament with the senior partners in a while, and he just wants to lay low and ride out the summer if he can. Then, suddenly, on one fateful summer day in June, one of his portfolio companies just up -and-decides to randomly explode — or, as the company puts it, suffer a “historic, large-scale, catastrophic accident.” Suddenly he’s mopping the floor with his jaw.

This sudden turn of events is particularly stupefying when you consider that the portfolio company — PES Holdings LLC, aka Philadelphia Energy Solutions — happens to be a 150 year-old oil refining complex that also happens to be (i) the largest on the United States Eastern seaboard (representing approximately 28% of the crude oil refining capacity on the east coast), and (ii) an employer of 950 employees. What are the possible knee-jerk reactions here? Are they:

  1. “Oh sh*t, there goes our portfolio for the year!”

  2. “F******ck, did our investment literally just go up in smoke?”

  3. “Am I going to have a job tomorrow?”

Then there are likely the secondary considerations:

  1. “How will the Commonwealth of Pennsylvania and the City of Philadelphia fulfill their energy needs?”

  2. “Oh no! Did anyone die??!?”

That’s right: we’re cynical AF. After those two waves of initial thoughts and after a deep breath, we bet these were the next questions:

  1. “Do we have to file this thing for ANOTHER bankruptcy now?”

  2. “How robust is our insurance coverage? What are our insurance premiums and can we keep paying them to ensure coverage?”

  3. “Is this an opportunity? How do we transfer all of the risk and best position ourselves to drive equity value here?”

The latter two considerations — as heartless and lacking in empathy as they may be — are highly realistic. And highly relevant, considering the explosion and attendant fire on June 21 forced the company to shut down its plant. The timing couldn’t have been worse: the explosion took place mere days after the company finalized the implementation of a new intermediation facility. Now, though, all “momentum” is lost: the company is currently inoperable and will require an extensive rebuild: at limited capacity and with massive fixed operational costs, the company would have burned (pun most definitely intended) through $100mm in liquidity within a few weeks. Cue the chapter 22 bankruptcy filing.*

Of course, prior to the filing, the company engaged in dialogue with its insurers:

The Debtors also immediately began a process to engage with their insurers—as it relates to property and business interruption insurance claims for the losses caused by the Girard Point Incident—to advance a dialogue toward an immediate advance and a global resolution that will allow the Debtors to restore their operations. The Debtors have yet to obtain such an advance.

Show us an insurer who is ready and willing to fork over proceeds on a moments notice and we’ll show you a bridge we’re selling.

The Debtors’ goal in the near term remains continuing to preserve the safe operation of the Refining Complex while they seek to recover as quickly as possible on their property and business interruption insurance claims and pursue various transactions to preserve their operations and maximize value.

We’re not talking about peanuts here, folks:

The Debtors have $1.25 billion in property and business interruption insurance coverage to protect against these kinds of losses (in addition to other insurance policies that cover other aspects of the Girard Point Incident). The Debtors are working with the insurers under that program to make the Debtors whole for the physical loss of the refinery and the resulting interruption of the Debtors’ business. These insurance proceeds are the very heart of these chapter 11 cases: the sooner the Debtors can recover, the sooner the business can complete its recovery.

While the company waits for the insurers to cough up some cash, it, obviously, needs to focus on safety issues and fire-related cleanup. To that end, it secured a $100mm DIP commitment from certain of its term loan lenders and continues to engage in discussions with ICBC Standard Bank PLC about a dual-DIP structure that would avail the company of even more liquidity. Ultimately, the company hopes to reorganize as a going concern. The extent to which the insurers play ball will dictate whether that’s possible. Something tells us there are some risk analysts combing through those policies with a fine tooth looking for any and all exemptions that they can pull out of their a$$es.

*According to the company, the first chapter 11 filing: “(i) secured a capital infusion of approximately $260 million; (ii) extended the Debtors’ debt maturities through 2022; (iii) reduced the Debtors’ anticipated debt service obligations by approximately $35 million per year; (iv) provided the Debtors with access to a new intermediation facility; and (v) provided the Debtors with relief from certain regulatory obligations.

  • Jurisdiction: D. of Delaware (Judge Gross)

  • Capital Structure: see below

  • Professionals:

    • Legal: Kirkland & Ellis LLP (Edward Sassower, Steven Serajeddini, Matthew Fagen, Michael Slade, Allyson Smith Weinhouse, Patrick Venter, Nacif Taousse, Whitney Becker) & Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, James O’Neill, Peter Keane)

    • CRO: Stein Advisors LLC (Jeffrey Stein)

    • Financial Advisor: Alvarez & Marsal LLC

    • Investment Banker: PJT Partners LP

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

  • Other Parties in Interest:

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😷New Chapter 11 Filing - Center City Healthcare LLC (d/b/a Hahnemann University Hospital)😷

Center City Healthcare LLC

June 30, 2019

We take a break from our regularly scheduled oil and gas distress to bring you some regularly scheduled healthcare distress. That’s right: more healthcare distress. Here, Philadelphia Academic Health System LLC and 12 affiliated debtors — including two major hospitals in Philadelphia, St. Christopher’s Hospital for Children (“STC”) and Hahnemann University Hospital (“HUH”) and related physician practices — have filed for bankruptcy in Pennsyl…strike that…in the District of Delaware.* Gotta love venue!

This bankruptcy case likely marks the end of HUH, an academic medical center that (a) is the primary teaching hospital for Drexel University and (b) has been providing healthcare services since 1848.

According to the debtors, their troubles can be traced back to an August 2017 acquisition — consummated in January 2018 — of the assets (i.e., operating entities, non-debtor entities owning the real estate upon which the hospital operate, and certain receivables) from Tenet Business Services Corporation. The debtors’ primary source of funding for the acquisition was a pre-petition credit facility from Midcap Funding IV Trust.

Immediately after the sale, the debtors realized that they bought a lemon. Per the debtors:

Disputes arose between the Debtors and Tenet with regards to, among other things, the “Net Working Capital Adjustment” provided for under the parties’ Asset Sale Agreement, most notably, for overstated amounts of accounts receivable totaling approximately $21 million. The Debtors also learned that approximately $5 million of amounts received by Tenet at closing in order for it to pay certain accounts payable was never in fact paid. These issues resulted in a significant liquidity shortfall that adversely affected the Debtors’ operations almost immediately after closing of the Acquisition.

The parties are now in litigation with Tenet asserting counterclaims. Gotta hate when that happens. And that’s not the end of it:

Disputes also arose between the parties regarding the financial condition of the Debtors’ businesses, wherein the Debtors asserted that they were led to believe during due diligence process for the Acquisition that the business, as a whole, was essentially breaking even through November 2017 on an EBITDA basis. In fact, the business lost more than $6 million during its first full operational month in February 2018, and continues to experience substantial losses. The Debtors and their affiliates have asserted indemnity and fraud claims against Tenet on these grounds, which Tenet disputes.

Basically this is a hot mess. Coupled with (i) disputes with Drexel, (ii) delays in, and reduction of, payments of supplemental payments from the Commonwealth of Pennsylvania, (iii) decreased patient volumes in 2018, (iv) increased losses by certain of the physician groups, (v) material declines in outpatient procedures and surgeries; and (vi) reductions in average daily census, partly due to a reduction in average length of stay and reduced direct admissions, HUH encountered a maelstrom of negative operational issues to the tune of a pre-tax 2018 loss of approximately $69mm. STC is profitable; it, however, is dragged down by the rest of the enterprise. All in, the debtors pre-tax losses in 2018 exceeded $85mm and have not abated in 2019. Due to this piss poor financial performance, the debtors defaulted on their MidCap credit facility.

The debtors intend to use the chapter 11 process to pursue an orderly wind down of HUH while, contemporaneously, pursuing a sale of STC and the related physician practices. No stalking horse bidder is currently lined up. The debtors do, however, have a commitment from Midcap for $65mm of DIP financing, of which it appears less than $7mm will be new money.

Now is an occasion for Philly to, once again, show how tough it can be.

*SCH, HUH and their corporate parent, Philadelphia Academic Health System LLC, are all DE LLCs.

  • Jurisdiction: D. of Delaware (Judge Gross)

  • Capital Structure: $38.6mm RCF & $20mm TL (Midcap Funding IV Trust)

  • Professionals:

    • Legal: Saul Ewing Arnstein & Lehr LLP (Monique Bair DiSabatino, Mark Minuti, Jeffrey Hampton, Adam Isenberg, Aaron Applebaum, Jeremiah Vandermark) & Klehr Harrison Harvey Branzburg LLP

    • Financial Advisor/CRO: EisnerAmper LLP (Allen Wilen)

    • Investment Banker: SSG Advisors LLC

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

  • Other Parties in Interest:

    • Prepetition & DIP Lender ($65mm): MidCap Funding IV Trust

    • Tenet Business Services Corp.

      • Legal: Kirkland & Ellis LLP (Gregory Pesce) & (local) Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones)

New Chapter 11 Bankruptcy Filing - Kona Grill Inc. ($KONA)

Kona Grill Inc.

April 30, 2019

Let’s be honest: we’ve given this sh*t stain of a company far too much coverage given its size. Yet, it’s part of a broader casual dining narrative that is important to follow and, significantly, we took it upon ourselves to highlight how this thing was SO CLEARLY headed towards bankruptcy a year ago considering the company is (somewhat inexplicably) publicly-traded ($KONA). We first mentioned it in this Members’-only piece in April 2018. We dug deeper in this Members’-only briefing on August 2018. Additional mentions came here, here, here (“…there is no way this thing DOESN’T end up in bankruptcy court soon. It just blew out its board. It is on to its umpteenth CEO in a matter of years. Revenues fell 15.7% in the most recent reported quarter. Same-store sales fell 14.1%. 14.1%!!!! It’s just a matter of ‘when’ at this point.”), and, finally, as recently as April 28, 2019, here, wherein we wrote “[s]tick a fork in it.

Well, stick a fork in it, indeed. The company and several affiliated companies are now chapter 11 debtors in the District of Delaware.

To refresh your recollection, the company is a casual dining restaurant chain with 27 locations (down from 40+ locations when we first started discussing the company over a year ago). “The restaurants feature contemporary American favorites, award-winning sushi and an extensive selection of alcoholic beverages.” Award winning sushi, huh? We did some googling and were unable to ascertain which fine organization conferred upon Kona Grill Inc. an award for its fine sushi. But we digress.

As you might expect from such a long-time-coming sh*t show, the debtors’ first day filing papers are pure comedy chock full of hyperbolic bull sh*t. It’s amusing what the debtors say and it’s laughable what they don’t say. The first day declaration reads like marketing materials: it states that the company offers “an upscale contemporary ambience” with an “exceptional” dining experience and a “legendary” happy hour. The fact that this company is in bankruptcy belies the claim that the experience is exceptional. As for legend, Arya Stark is a legend; Tony Stark is a legend. Michael Jordan is a legend. Kona Grill has a bar that serves drinks. We can assure you with 100% certainty that there is absolutely nothing legendary about it. Indeed, revenues in fiscal ‘18 were $156.9mm, down 12.4% YOY, and, as of the petition date, the company had a meaningfully non-legendary $1.2mm of cash on hand. Legendary, our a$$es.

The company is party to a $33.2mm credit agreement split between a revolving loan and a term loan and has been in a state of perpetual amendment since Q1 2017. The company also owes unsecured trade creditors $8mm.

Why is the company in bankruptcy? Here’s where we get comedy by omission. Yes, sure, they acknowledge that they doubled their restaurants between ‘13 and ‘17, spent a ton on marketing to reverse negative same-store sale trends, and then engaged in an ill-advised stock repurchase program in 2016/2017, further draining much needed liquidity. Thereafter, the company was forced to deploy the standard playbook: cease opening new locations, shutter some underperforming stores (PETITION Note: the company filed a motion seeking to reject 18 leases already), fire people, cut back on training and staffing, etc. G-d help the people who actually ate there during this period: we can only imagine what happened to the food quality. What the company doesn’t say, though, is that there has been a revolving door of CEOs. We suppose the debtors ought to be commended for not completely throwing prior management teams under the bus. This may have something to do with active lawsuits between the company and a former CEO.

What’s crazy is that the company didn’t hire a banker until March 2019. This is a company that should have been marketed long ago. Notably, there’s no stalking horse buyer lined up. And while the company does have a commitment from KeyBank for $39.2mm of DIP financing (of which only $6mm is new money), the company also has a hard deadline of August 9, 2019 to avoid a default. Will it be able to find a buyer now?

We suppose we’ll find out how “legendary” things are after all.

  • Jurisdiction: D. of Delaware (Judge )

  • Capital Structure: $33.2mm

  • Professionals:

    • Legal: Pachulski Stang Ziehl & Jones LLP (James O’Neill, John Lucas, Jeremy Richards)

    • Financial Advisor/CRO: Alvarez & Marsal LLC (Christopher Wells, Jonathan Tibus)

    • Investment Banker: Piper Jaffrey

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

  • Other Parties in Interest:

    • DIP Agent: KeyBank National Association

      • Legal: Buchanan Ingersoll & Rooney PC (Mary Caloway)

🎥New Chapter 11 Bankruptcy Filing - Fuse LLC (a/k/a Fuse Media)🎥

Fuse LLC

April 22, 2019

California-based Fuse LLC, a multicultural media company composed principally of the cable networks Fuse and FM, filed a prepackaged chapter 11 along with 8 affiliated debtors in the District of Delaware to effectuate a swap of $242mm of outstanding secured debt for $45mm in term loans (accruing at a STRONG 12% interest and maturing in five years), new membership interests in the reorganized company and interests in a litigation trust. General unsecured creditors will recover nothing despite being owed approximately $10mm to $25mm.

The company is well known to millions of US homes: approximately 61mm homes get Fuse, an independent cable network that targets young multicultural Americans and Latinos. FM’s music-centric content reached approximately 40.5mm homes “at its peak.” The company has three principal revenue streams: (a) affiliate fees; (b) advertising; and (c) sponsored events; it generated $114.7mm in net revenue for the fiscal year ended 12/31/18 and “had projected affiliate fees of approximately $495 million through 2020.

Why is it in bankruptcy? In a word, disruption. Disruption of content suppliers (here, Fuse) and content distributors (the traditional pay-tv companies). Compounding the rapid changes in the media marketplace is the company’s over-levered balance sheet, an albatross that hindered the company’s ability to innovate in an age of “peak TV” characterized by endless original and innovative content.

The company illustrates all of this nicely:

“…the overall pay-TV industry is in a period of substantial transformation as the result of the introduction into the marketplace in recent years of high quality and relatively inexpensive and consumer friendly content alternatives (e.g., Netflix, Hulu and others). The ongoing marketplace changes have resulted in, and will continue to cause, a material decline in pay-tv subscribers and related affiliate fee revenue as a result of a declining number of new subscribers, "cord-cutting" (the cancellation of an existing pay-tv subscription), and "cord-shaving" (the downgrading of a pay-tv subscription from a higher priced package to a lower priced package). Each quarter the Company receives less revenue from its traditional pay-tv distribution partners as the result of the decline in subscribers receiving the Company's networks. And new sources of revenue for the Company, although developing and in progress, have not grown sufficiently to offset revenue declines in the legacy business. As a result of these trends, the refinancing of the Company's debt was not viable.”

Said another way, on a macro level, Netflix Inc. ($NFLX), Amazon Inc’s ($AMZN) Prime service, Hulu ($DIS) and various other OTT services have taken a huge chunk out of conventional bundlers and now victims are shaking from the tree. On a more micro level, the company is subject to distribution agreements with pay-TV operators. The majority of agreements were guaranteed through 2020, representing contracted revenue estimated at approximately $495mm through 2020. But the company’s debt, however, prevented it from investing in programming, marketing and original content at the same pace as its rivals. Consequently, Comcast and Verizon Fios ($VZ)— which represent significant percentages of the debtors’ subscriber base and, in turn, revenue — stopped distributing Fuse at the end of 2018. Compounding matters, DirecTV recently notified the company that it, too, intended to terminate its distribution agreement with the debtors — which is now subject to litigation in California. Talk about a hat trick!!

The company intends to use cash collateral to finance its cases. If successful, the company will emerge from bankruptcy with a substantially reduced balance sheet, having cut its debt by approximately 80%. After de-levering, the company believes it…

“… will be better able to effectively support its core linear networks business, as well as pursue growth areas, such as virtual multichannel video programming distribution (e.g., YouTube TV and Hulu Live), advertising supported distribution (AVOD), and complementary areas such as live events and music festivals. The Company also will be well-positioned post-emergence to explore strategic transactions that can accelerate greater growth in new areas for stakeholders.”

We suspect Fuse won’t be the last content supplier to shake out from this evolution in the media space.

  • Jurisdiction: D. of Delaware (Judge Gross)

  • Capital Structure: $242mm 10.375% Senior Secured Notes due 2019

  • Company Professionals:

    • Legal: Pachulski Stang Ziehl & Jones LLP (Richard Pachulski, Ira Kharasch, Maxim Litvak, James O’Neill)

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

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

  • Other Parties in Interest:

    • Supporting Noteholders

      • Legal: Fried Frank Harris Shriver & Jacobson LLP (Brad Scheler, Peter Siroka, Emil Buchman, Andrew Minear) & (local) Richards Layton & Finger PA (Michael Merchant)

🏠New Chapter 11 Bankruptcy Filing - Decor Holdings Inc.🏠

Decor Holdings Inc.

February 12, 2019

Source: https://www.robertallendesign.com

Source: https://www.robertallendesign.com

Privately-owned New York-based Decor Holdings Inc. (d/b/a The RAD Group and The Robert Allen Duralee Group) and certain affiliates companies filed for bankruptcy earlier this week in the Eastern District of New York. The debtors state that they are the second largest supplier of decorative fabrics and furniture to the design industry in the U.S., designing, manufacturing and selling decorative fabrics, wall coverings, trimmings, upholstered furniture, drapery hardware and accessories for both residential and commercial applications. All of which begs the question: do people still actually decorate with this stuff?!? In addition to private label product lines, the company represents six other furnishing companies, providing tens of thousands of sku options to design professionals and commercial customers. The company maintains a presence via showrooms in large metropolitan cities in the US and Canada as well as an agent showroom network in more than 30 countries around the world. In other words, for a company you’ve likely never heard of, they have quite the reach.

The debtors’ problems derive from a 2017 merger between the Duralee business and the Robert Allen business. Why? Well, frankly, it sounds like the merger between the two is akin to a troubled married couple that decides that having a kid will cure all of their ills. Ok, that’s a terrible analogy but in this case, both companies were already struggling when they decided that a merger between the two might be more sustainable. But, “[l]ike many industries, the textile industry has been hard hit by the significant decrease in consumer spending and was severely affected by the global economic downturn. As a result, the Debtors experienced declining sales and profitability over the last several years.” YOU MEAN THE PERCEIVED SYNERGIES AND COMBINED EFFICIENCIES DIDN’T COME TO FRUITION?!? Color us shocked.

Ok, we’re being a little harsh. The debtors were actually able to cut $10-12mm of annual costs out of the business. They could not, however, consolidate their separate redundant showroom spaces outside of bankruptcy (we count approximately 32 leases). Somewhat comically, the showroom spaces are actually located in the same buildings. Compounding matters was the fact that the debtors had to staff these redundant spaces and failed to integrate differing software and hardware systems. In an of themselves, these were challenging problems even without a macro overhang. But there was that too: “…due to a fundamental reduction of market size in the home furnishings market, sales plummeted industry wide and the Debtors were not spared.” Sales declined by 14% in each of the two years post-merger. (Petition Note: we can’t help but to think that this may be the quintessential case of big firm corporate partners failing to — out of concern that management might balk at the mere introduction of the dreaded word ‘bankruptcy’ and the alleged stigma attached thereto — introduce their bankruptcy brethren into the strategy meetings. It just seems, on the surface, at least, that the 2017 merger might have been better accomplished via a double-prepackaged merger of the two companies. If Mattress Firm could shed leases in its prepackaged bankruptcy, why couldn’t these guys? But what do we know?).

To stop the bleeding, the debtors have been performing triage since the end of 2018, shuttering redundant showrooms, stretching payables, and reducing headcount by RIF’ing 315 people. Ultimately, however, the debtors concluded that chapter 11 was necessary to take advantage of the breathing spell afforded by the “automatic stay” and pursue a going concern sale. To finance the cases, the debtors obtained a commitment from Wells Fargo Bank NA, its prepetition lender, for a $30mm DIP revolving credit facility of which approximately $6mm is new money and the remainder is a “roll-up” or prepetition debt (PETITION Note: remember when “roll-ups” were rare and frowned upon?). The use of proceeds will be to pay operating expenses and the costs and expenses of being in chapter 11: interestingly, the debtors noted that they’re administratively insolvent on their petition. 🤔

Here’s to hoping for all involved that a deep-pocked buyer emerges out of the shadows.

  • Jurisdiction: E.D. of New York (Judge Grossman)

  • Capital Structure: $23.7mm senior secured loan (Wells Fargo Bank NA), $5.7mm secured junior loan (Corber Corp.)

  • Professionals:

    • Legal: Hahn & Hesson LLP (Mark Power, Janine Figueiredo)

    • Conflicts Counsel: Halperin Battaglia Benzija LLP (Christopher Battaglia)

    • Financial Advisor: RAS Management Advisors LLC (Timothy Boates)

    • Investment Banker: SSG Capital Advisors LLC (J. Scott Victor)

    • Liquidator: Great American Group LLC

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

  • Other Professionals:

    • DIP Agent: Wells Fargo Bank NA

      • Legal: Otterbourg P.C. (Daniel Fiorillo, Jonathan Helfat)

    • Subordinated Noteholder: Corber Corp.

      • Legal: Pachulski Stang Ziehl & Jones LLP (John Morris, John Lucas)

New Chapter 11 Bankruptcy Filing - Things Remembered Inc.

Things Remembered Inc.

2/6/19

This has been a rough week for "out-of-court" restructurings in the retail space. On the heals of Charlotte Russe's collapse into bankruptcy after an attempted out-of-court solution, Things Remembered Inc. filed for bankruptcy in the District of Delaware on February 6, 2019. We recently wrote about Things Remembered here. Let's dig in a bit more. 

The 53-year old retailer filed with a stalking horse purchaser, Ensco Properties LLC, in line to purchase, subject to a tight 30-day timeframe, a subset of the company's store footprint and direct-sales business. The company writes in the most Trumpian-fashion imaginable:

"Although stores not acquired will need to close, the going-concern sale wills save hundreds of jobs and potentially many more and provide an improved, and significantly less risky, recovery to stakeholders." What does "potentially many more" mean? Don't they know how many people are employed at the locations being sold as well as corporate support? Seems like a Trumpian ad lib of corresponding inexactitude. But, whatever. 

What caused the need for bankruptcy?

"Like many other retailers, the Company has suffered from adverse macro-trends, as well as certain microeconomic operational challenges. Faced with these challenges, the Company initiated multiple go-forward operational initiatives to increase brick-and-mortar profitability, such as store modernization through elimination of paper forms and the addition of iPads to streamline the personalization and sale process, and by shuttering a number of underperforming locations. The Company also sought to bolster the Debtors’ online-direct sale business, including aggressive marketing to loyal customers to facilitate sales through online channels, attracting new customers via an expanded partnership with Amazon, and increasing service capabilities for the business-to-business customer segment."

Read that paragraph and then tell us that retail management teams (and their expensive advisors) have any real clue how to combat the ails confronting retail. Elimination of paper forms? Ipads? Seriously? Sure, the rest sounds sensible and comes right out of today's standard retail playbook, i.e., shutter stores, bolster online capabilities, leverage Amazon's distribution, tapping into "loyal customers," etc. We're surprised they didn't mention AR/VR, Blockchain, "experiential retail," pop-ups, advertising on scooters, loyalty programs, and all of the other trite retail-isms we've heard ad nauseum (despite no one actually proving whether any or all of those things actually drive revenue). 

The rest of the story is crazy familiar by this point. The "challenging operating environment" confronting brick-and-mortar and mall-based retail, specifically, led to missed sales targets and depressed profitability. Naturally there were operational issues that compounded matters and, attention Lenore Estrada (INSERT LINK), "…vendors have begun to place pressure on the supply chain cost structure by delaying or cancelling shipments until receiving payment." Insert cash on delivery terms here. Because that's what they should do when a customer is mid-flush. 

Anyway, shocker: negative cash flows persisted. Consequently, the company and its professionals commenced a marketing process that landed Enesco as stalking horse bidder. Enesco has committed to acquiring the direct-sales business (which constitutes 26% of all sales in 2018 and includes the e-commerce website, hq, fulfillment and distribution center in Ohio and related assets) and approximately 128 stores (subject to addition or subtraction, but a floor set at 50 store minimum). Store closings of approximately 220 stores and 30 kiosks commenced pre-petition. A joint venture between Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC is leading that effort (which again begs the question as to how Gymboree is the only recent retailer that required the services of four "liquidators"). The purchase price is $17.5mm (subject to post-closing adjustments). $17.5mm is hardly memorable. That said, the company did have negative $4mm EBITDA so, uh, yeeeeeaaaaah. 

$18.7mm '19 revolving credit facility (Cortland Capital Markets Services LLC); $124.9mm 12% '20 TL. 

The capital structure represents the result of an August 30, 2016 out-of-court exchange that, let's be honest here, didn't do much other than incrementally lessen the debt burden, kick the can down the road and get some professionals paid. If this sounds familiar, it's because it's not all that different than Charlotte Russe in those respects. 

  • Jurisdiction: D. of Delaware (Judge Gross)

  • Capital Structure: $mm debt     

  • Company Professionals:

    • Legal: Kirkland & Ellis LLP (Christopher Greco, Derek Hunger, Angela Snell, Spencer Winters, Catherine Jun, Scott Vail, Mark McKane) & (local) Landis Rath & Cobb LLP (Adam Landis, Matthew McGuire, Kimberly Brown, Matthew Pierce)

    • Legal (Canada): Davies Ward Phillips & Vineberg LLP

    • Financial Advisor/CRO: Berkeley Research Group LLC (Robert Duffy, Brett Witherell)

    • Investment Bank: Stifel Nicolaus & Co. Inc. and Miller Buckfire & Co. LLC (James Doak)

    • Liquidators: Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC

      • Legal: Pepper Hamilton LLP (Douglas Herman, Marcy McLaughlin)

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

  • Other Parties in Interest:

    • Stalking Horse Purchaser: Enesco Properties LLC  (Balmoral Funds LLC)

      • Legal: Pachulski Stang Ziehl & Jones LLP (Jeffrey Pomerantz, Maxim Litvak, Joseph Mulvihill)

    • Lender: Cortland Capital Market Services LLC

      • Legal: Weil Gotshal & Manges LLP (David Griffiths, Lisa Lansio) & (local) Richards Layton & Finger PA (Daniel DeFranceschi, Zachary Shapiro)

    • Sponsor: KKR & Co.

    • Official Committee of Unsecured Creditors (Jewelry Concepts Inc., Gravotech Inc., Chu Kwun Kee Metal Manufactory, Brookfield Property REIT, Inc., Simon Property Group LP)

      • Legal: Kelley Drye & Warren LLP (Eric Wilson, Jason Adams, Kristin Elliott, Lauren Schlussel) & (local) Connolly Gallagher (N. Christopher Griffiths, Shaun Michael Kelly)

      • Financial Advisor: Province Inc. (Carol Cabello, Sanjuro Kietlinski, Jorge Gonzalez, Michael Martini)

New Chapter 11 Bankruptcy Filing - Catalina Marketing Corporation

Catalina Marketing Corporation

12/12/18

On September 16 in “🤖Tech Wants to Axe Lawyers🤖,” we wrote about Crossmark Holdings Inc.Acosta Inc., and Catalina Marketing (a unit of Checkout Holding Corp.) and noted that “[a]ll three are in trouble.” Catalina Marketing was the first domino to fall as it filed for bankruptcy in the District of Delaware.

In connection with our review of the three companies, we previously wrote:

Finally, Catalina Marketing finds itself paying restructuring fees these days too. The St. Petersburg Florida company is owned by Berkshire Partners and Hellman & FriedmanCrescent Capital is also a large equity holder. The company’s capital structure includes approximately:

$29mm April ‘19 L+3.5% Revolving Credit Facility

$1.05b April ‘21 L+3.5% Term Loan (~48.4 bid)

$460mm April ‘22 L+6.75% Second Lien Term Loan (~11.6 bid)

$230mm PIK Toggle unsecured notes

Carry the one, add the two, that’s over $5b of debt across all three companies. Gotta love private equity.

So, yes, yet another private equity-backed company is in bankruptcy court. Here, the company appears to have an agreement with 90% of its first lien lenders (Abry Advanced Securities Fund II and III, Alcentra Limited, Bain Capital Credit LP, Carlyle Investment Management LLC, Invesco Senior Secured Management Inc., and OppenheimerFunds Inc.), and 75% of its second lien lenders, the effect of which is purported to be a $1.6b — yes, $1.6 BILLION — debt reduction. An ad hoc group of first lien lenders has agreed to provide $275mm DIP credit facility (of which $125mm is new money) and committed to provide $40mm in exit financing.

  • Jurisdiction: D. of Delaware (Judge Gross)

  • Capital Structure: see above.

  • Company Professionals:

    • Legal: Weil Gotshal & Manges LLP (Gary Holtzer, Ronit Berkovich, Jessica Liou, Kevin Bostel, Alexander Condon, Elizabeth Carens, Michael Godbe, Lisa Lansio, Leonard Yoo, Patrick Steel, David Zubkis, Theodore Tsekerides, Peter Isakoff) & (local) Richards Layton & Finger PA (Mark Collins, Jason Madron)

    • Financial Advisor: FTI Consulting Inc. (Robert Del Genio, Thomas Ackerman)

    • Investment Banker: Centerview Partners

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

  • Other Parties in Interest:

    • DIP Lenders and the Ad Hoc First Lien Lenders

      • Legal: Jones Day (Scott Greenberg, Michael J. Cohen, David Torborg, Stacey Corr-Irvine, Jeremy Evans, C. Lee Wilson) and (local) Pachulski Stang Ziehl & Jones LLP represent the DIP Lenders and the Ad Hoc First Lien Lenders. 

    • Ad Hoc Group of Second Lien Lenders

      • Paul Weiss Rifkind Wharton & Harrison (Brian Hermann, Robert Britton, Daniel Youngblut, Miriam Levi) and (local) Young Conaway Stargatt & Taylor LLP (Pauline Morgan, Andrew Magaziner)

    • Admin Agent of the First Lien Credit Agrement

      • Legal: Davis Polk & Wardwell LLP (Brian Resnick, David Schiff) and Landis Rath & Cobb LLP (Adam Landis, Kerri Mumford)

    • Admin agent under the Second Lien Credit Agreement

      • Legal: Wilmer Cutler Pickering Hale and Dorr (Andrew Goldman, Benjamin Loveland)

    • Ad Hoc Group of the PIK Toggle notes

      • Legal: Debevoise & Plimpton LLP

😷New Chapter 11 Bankruptcy Filing - Promise Healthcare Group LLC😷

Promise Healthcare Group LLC

November 5, 2018

Most professionals predicted at the start of 2018 that healthcare would be an active industry for restructuring activity. Instead, there’s only been a few cases here and there — nothing to really stand out from the crowd in terms of volume. And, so just when we’re on the verge of declaring that prediction utterly and emphatically wrong, here is Promise Healthcare Group LLC and its affiliated debtors — another short-term and long-term acute care and nursing facility operator in bankruptcy court (with DLA Piper and FTI Consulting in tow, a seemingly regular occurrence these days in sizable healthcare matters).

Why is another large acute care operator in bankruptcy? The debtors blame the usual deplorables, i.e., reimbursement rate declines, capital-intensive and ultimately-abandoned new business projects, underperforming facilities, and an “unsustainable balance sheet.” Consequently, it undertook performance improvement measures, including the closure of two facilities and the sh*tcanning of 147 full-time equivalent employees. This, collectively, freed up a total of $13.5mm but vendors had begun squeezing the company in such a way that this amount, alone, wasn’t enough to cash flow to sustain the debtors.

The debtors intend to (i) sell non-core assets and real estate to payoff certain secured creditors (including one in Silver Lake, Los Angeles, to the L.A. Downtown Medical Center for $84.15mm) and (ii) otherwise market and sell substantially all of the rest of their assets or, if an equity sponsor emerges, restructure. They intend to do this within six months (anyone want to take the under?). The company has a $85mm DIP commitment ($20mm new money) to fund the process.

  • Jurisdiction: D. of Delaware

  • Capital Structure: $61.6mm Revolver, $15mm TL debt, $200mm intercompany debt (two loans)

  • Company Professionals:

    • Legal: Waller Lansden Dortch & Davis LLP (John Tishler, Katie Stenberg, Blake Roth, Tyler Layne) & (local) DLA Piper LLP (Stuart Brown, Kaitlin MacKenzie Edelman, Erik Stier, Matthew Sarna)

    • CRO/Financial Advisor: FTI Consulting Inc. (Andrew Hinkelman, Jennifer Byrne, Chris Goff)

    • Investment Banker: Houlihan Lokey Capital Inc. (Andrew Turnbull, Matthew Ryan, Scott Kremeier, Moyo Mamora, Brian Marks, Marc Epstein, Conor Dorgan) and MTS Health Partners LP (Jay Shiland)

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

  • Other Parties in Interest:

    • Prepetition Administrative Agent: Wells Fargo Bank NA

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

    • Healthcare Services Group Inc.

      • Legal: Stevens & Lee P.C. (Joseph Huston Jr., Evan Coren, Robert Lapowsky)

    • Stalking Horse Purchaser: Select Medical Corporation

      • Legal: Dechert LLP (Brian Greer, Stephen Leitzell, Jonathan Stott) & (local) Young Conaway Stargatt & Taylor LLP (Robert Brady, Sean Greecher)

    • Official Committee of Unsecured Creditors (HEB Ababa, Ronaldoe Guiterrez and Yolanda Penney, Cardinal Health, Wound Care Management LLC d/b/a MEDCENTRIS, Freedom Medical Inc., Morrison Management Specialists Inc., Efficient Management Resources Systems Inc., Surgical Program Development)

      • Legal: Sills Cummis & Gross P.C. (Andrew Sherman, Boris Mankovetskiy, Rachel Brennan) & (local) Pachulski Stang Ziehl & Jones LLP (Jeffrey Pomerantz, Alan Kornfeld, Bradford Sandler, Maxim Litvak, Colin Robinson)

      • Financial Advisor: Province Inc. (Edward Kim, Paul Huygens, Carol Cabello, Jorge Gonzalez, Carlos Lovera, Paul Navid)

Updated 3/9/18

🚗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 - J&M Sales Inc./National Stores Inc.👗

Another day, another retailer in bankruptcy. Today, J&M Sales Inc., a “leading discount retailer” with $5-average-price goods in 344 stores in 22 states — operating under the names Fallas, Fallas Paredes, Fallas Discount Stores, Factory 2-U, Fallas and Anna’s Linen’s by Fallas — finds itself in bankruptcy court. The company offers value-priced merchandise, including apparel, bedding, household supplies, decor items and more; it generally supports underserved, low-income communities and can be found in power strip centers, specialty centers and downtown areas. All of its locations are leased.

The company blames (i) general retail pressures, (ii) bad weather (specifically hurricanes Harvey and Maria), (iii) a data breach (and a attendant $2mm reserve account set up by the credit card companies) and (iv) poor integration of growth acquisitions (e.g., Conway’s) for its chapter 11 filing. These company-specific factors may help explain why this company is apparently bucking the national trend of discount retail success (see, e.g., Dollar Tree).

The company intends to use the chapter 11 process to shop itself as a going concern and close at least 74 stores. The company makes no mention, however, of the extent of the sale process and there is no stalking horse bidder currently lined up. The company will seek approval of a (no new money?) $57mm DIP credit facility as well as credit support from certain “Critical Vendors” on a second and third lien basis.

  • Jurisdiction: D. of Delaware (Judge Silverstein)

  • Capital Structure: $57mm ABL (Encina Business Credit LLC/Israel Discount Bank of New York), $30mm term loan (Gordon Brothers Finance Company), $13.4mm Letters of Credit, $10mm Fallas Loan

  • Company Professionals:

    • Legal: Katten Muchin Roseman LLP (WIlliam Freeman, Karen Dine, Jerry Hall) & (local) Pachulski Stang Ziehl & Jones LLP (Richard Pachulski, Peter Keane)

    • Financial Advisor: SierraConstellation Partners LLC (Curt Kroll)

    • Investment Banker: Imperial Capital LLC

    • Real Estate Advisor: RCS Real Estate Advisors

    • Liquidation Agent: Hilco Merchant Resources LLC

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

  • Other Parties in Interest:

    • DIP Agents: Encina Business Credit LLC (Legal: Choate Hall & Stewart LLP, Kevin Simard) & Discount Bank of New York (Legal: Otterbourg PC, Daniel Fiorillo)

New Chapter 11 Filing - Tintri Inc.

Tintri Inc.

7/10/18

On June 23 in "#BustedTech (Short Busted IPOs…cough…DOMO), we wrote the following: 

Tintri Inc., a publicly-traded ($TNTR) Delaware-incorporated and Mountain View California based provider of enterprise cloud and all-flash and hybrid storage systems appears to be on the brink of bankruptcy. There's no way any strategic buyer agrees to buy this thing without a 363 comfort order. 
In an SEC filing filed on Friday, the company noted:

"The company is currently in breach of certain covenants under its credit facilities and likely does not have sufficient liquidity to continue its operations beyond June 30, 2018."

Furthermore, 

"Based on the company’s current cash projections, and regardless of whether its lenders were to choose to accelerate the repayment of the company’s indebtedness under its credit facilities, the company likely does not have sufficient liquidity to continue its operations beyond June 30, 2018. The company continues to evaluate its strategic options, including a sale of the company. Even if the company is able to secure a strategic transaction, there is a significant possibility that the company may file for bankruptcy protection, which could result in a complete loss of shareholders’ investment."

And yesterday the company's CEO resigned from the company. All of this an ignominious end for a company that IPO'd almost exactly a year ago. Check out this chart:
Source: Yahoo! Finance

Source: Yahoo! Finance

Nothing like a $7 launch, a slight post-IPO uptick, and then a crash and burn. This should be a warning sign for anyone taking a look at Domo — another company that looks like it is exploring an IPO for liquidity to stay afloat. But we digress. 
The company's capital structure consists of a $15.4mm '19 revolving credit facility with Silicon Valley Bank, a $50mm '19 facility with TriplePoint Capital LLC, and $25mm of 8% convertible notes. Revenues increased YOY from $86mm in fiscal 2016 to $125.1mm in fiscal 2017 to $125.9mm in fiscal 2018. The net loss, however, also moved up and right: from $101mm to $105.8mm to $157.7mm. The company clearly has a liquidity ("net cash") covenant issue (remember those?). Accordingly, the company fired 20% of its global workforce (~90 people) in March (a follow-on to a 10% reduction in Q3 '17). The venture capital firms that funded the company — Lightspeed Venture Partners among them — appear to be long gone. Silver Lake Group LLC and NEA Management Company LLC, unfortunately, are not; they still own a good amount of the company.
"Isn't cloud storage supposed to be all the rage," you ask? Yeah, sure, but these guys seem to generate product revenue largely from sales of all-flash and hybrid storage systems (and stand-alone software licenses). They're mainly in the "intensely competitive IT infrastructure market," sparring with the likes of Dell EMCIBM and VMware. So, yeah, good luck with that.
*****

Alas, the company has filed for bankruptcy. This bit about the company's financial position offers up an explanation why -- in turn serving as a cautionary tale for investors in IPOs of companies that have massive burn rates:

"The company's revenue increased from $86 million in fisca1 2016 to $125.1 million in fiscal 2017, and to $125.9 million in fiscal 2018, representing year-over-year growth of 45% and 1 %, respectively. The company's net loss was $101.0 million, $105.8 million, and $157.7 million in fiscal 2016, 2017, and 2018, respectively. Total assets decreased from $158.1 million as of the end of fiscal 2016 to $104.9 million as of the end of fiscal 2017, and to $76.2 million as of the end of fiscal 2018, representing year-over-year change of 34% and 27%, respectively. The company attributed flat revenue growth in fiscal 2018 in part due to delayed and reduced purchases of products as a result of customer concerns about Tintri's financial condition, as well as a shift in its product mix toward lower-priced products, offset somewhat by increased support and maintenance revenue from its growing installed customer base. Ultimately, the company's sales levels have not experienced a level of growth sufficient to address its cash burn rate and sustain its business."

With trends like those, it's no surprise that the IPO generated less capital than the company expected. More from the company:

"Tintri's orders for new products declined, it lost a few key customers and, consequently, its declining revenues led to the company's difficulties in meeting day-to-day expenses, as well as long-term debt obligations. A few months after its IPO, in December 2017, Tintri announced that it was in the process of considering strategic options and had retained investment bank advisors to assist it in this process."

As we previously noted, "[t]here's no way any strategic buyer agrees to buy this thing without a 363 comfort order." And that is precisely the path that the company seeks to take. In its filing, the company indicated that it plans to file a motion seeking approval of the sale of its assets and bid procedures shortly. The filing is meant to provide the company with a chance to continue its efforts to sell the company as a going concern. Alternatively, it will look to sell its IP and liquidate. Triplepoint has agreed to provide a $5.4mm DIP credit facility to fund the process.  Savage.  

Meanwhile, today's chart (at time of publication):

Source: Yahoo! Finance

 

  • Jurisdiction: D. of Delaware (Judge Carey)
  • Capital Structure: $4.7mm RCF (Silicon Valley Bank), $56mm term loan (TriplePoint Capital LLC), $25mm '19 convertible notes.     
  • Company Professionals:
    • Legal: Pachulski Stang Ziehl & Jones LLP (Henry Kevane, John Fiero, John Lucas, Colin Robinson)
    • Financial Advisor: Berkeley Research Group LLC (Robert Duffy)
    • Claims Agent: KCC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • First Lien Lender: Silicon Valley Bank
      • Legal: Riemer & Brownstein LLP (Donald Rothman, Paul Samson, Alexander Rheaume, Steven Fox) & (local) Ashby & Geddes PA (Gregory Taylor)
    • Second Lien Lender: TriplePoint Capital LLC
      • Legal: McDermott Will & Emery LLP (TImothy Walsh, Riley Orloff, Gary Rosenbaum) & (local) Polsinelli PC (Christopher Ward, Jeremy Johnson, Stephen Astringer)
    • Proposed Purchaser: DataDirect Networks Inc.
      • Legal: Manatt Phelps & Phillips LLP (Blase Dillingham, Alan Noskow) & (local) Richards Layton & Finger PA (John Knight)

Updated 7/12/18 at 2:09 CT

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 - EV Energy Partners L.P.

EV Energy Partners L.P.

4/2/18

Assuming this filing has adhered to its previously announced Restructuring Support Agreement, this is pretty boring and so we'll just let the company's March press release speak for itself:

"...the Plan, which is subject to confirmation by the Bankruptcy Court, contemplates the equitization of all of the Company’s Senior Notes and the entry into an amended reserve-based lending facility with the Company’s existing lenders. Additionally, the Plan contemplates that suppliers, customers and other holders of general unsecured claims will be paid in full in the ordinary course of business and otherwise be unimpaired. The Company does not plan to reject any of its existing contracts as part of the restructuring."

The noteholders are agreeing to equitize the senior notes in exchange for 95% of the equity in the reorganized company. The upshot of this is that the company will eliminate $343 million of debt and debt-related obligations. 

Because no contracts will be rejected under section 363 of the Bankruptcy Code, all suppliers, service providers, customers, employees, royalty and working interest obligation holders will be paid in full in the ordinary course. Due to the company's Master Limited Partnership structure, however, stock holders will get hit by some "CODI" or "Cancellation of Debt Income" which ought to make for an interest tax filing. To alleviate some of that chafe, the company is offering 5% of the reorganized equity and warrants to the stock holders. 

  • Jurisdiction: D. of Delaware 
  • Capital Structure: ~$297 million RBL (funded, JPMorgan Chase Bank NA), ~$356 million 8.0% '19 senior notes (Delaware Trust Company)   
  • Company Professionals:
    • Legal: Kirkland & Ellis LLP (James Sprayragen, Joshua Sussberg, Jeremy David Evans, Brad Weiland, Travis Bayer) & (local) Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones)
    • Financial Advisor: Perella Weinberg Partners LP 
    • Restructuring Advisor: Deloitte & Touche LLP
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Ad Hoc Group of Senior Noteholders
      • Legal: Akin Gump Strauss Hauer & Feld LLP
      • Financial Advisor: Intrepid Partners LLC 
    • RBL Lenders
      • Legal: Simpson Thacher & Bartlett LLP
      • Financial Advisor: RPA Advisors, LLC
    • Consenting Sponsor:
      • EnerVest, Ltd. and EnerVest Operating, L.L.C.

Will Update if Filing Differs from Advertised. 

New Chapter 11 - Remington Outdoor Company

Remington Outdoor Company

3/25/18

Remington Outdoor Company, a gun manufacturer, has finally filed for bankruptcy - a day after Americans took to the streets to #MarchforourLives. Ah, bankruptcy irony. The company's operations are truly national in scope; it has manufacturing facilities in New York and Alabama and a primary ammunition plant in Arkansas. Its "principal customers are various mass market retail chains (e.g., Wal-Mart and Dick's Sporting Goods) and specialty retail stores (e.g., Bass Pro Shops and Cabela's) and wholesale distributors (e.g., Sports South)." Guns! #MAGA!!

Why did the company have to file for bankruptcy? We refer you to our mock "First Day Declaration" from February here. Much of it continues to apply. Indeed, our mockery of the change in tone from President Obama to President Trump was spot on: post Trump's election, the company's inventory supply far exceeded demand. The (fictional) threat of the government going house-to-house to collect guns is a major stimulant to demand, apparently. Here is the change in financial performance,

"At the conclusion of 2017, the Debtors had realized approximately $603.4 million in sales and an adjusted EBITDA of $33.6 million. In comparison, in 2015 and 2016, the Debtors had achieved approximately $808.9 million and $865.1 million in sales and $64 million and $119.8 million in adjusted EBITDA, respectively."

Thanks Trump. 

We'd be remiss, however, if we didn't also note that NOWHERE in the company's bankruptcy filings does it mention the backlash against guns or the company's involvement in shootings...namely, the one that occurred in Las Vegas. 

The company, therefore, negotiated with its various lenders and arrived at a restructuring support agreement. The agreement provides for debtor-in-possession credit ($193mm asset-backed DIP + $100mm term loan DIP + $45mm DIP, the latter of which is a roll-up of a bridge loan provided by lenders prior to the filing). Upon the effective date of a plan of reorganization, the third lien lenders and term lenders will own the reorganized company. 

  • Jurisdiction: D. of Delaware 
  • Capital Structure: $225mm ABL (Bank of America, $114.5mm funded), $550.5mm term loan (Ankura Trust Company LLC), $226mm 7.875% Senior Secured Notes due 2020 (Wilmington Trust NA), $12.5mm secured Huntsville Note     
  • Company Professionals:
    • Legal: Milbank Tweed Hadley & McCloy LLP (Gregory Bray, Tyson Lomazow, Thomas Kreller, Haig Maghakian) & (local) Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, Timothy Cairns, Joseph Mulvihill)
    • Financial Advisor: Alvarez & Marsal LLC (Joseph Sciametta)
    • Investment Banker: Lazard (Ari Lefkovits)
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • DIP ABL Agent ($193mm): Bank of America NA (DIP ABL Lenders: Bank of America NA, Wells Fargo Bank NA, Regions Bank, Branch Banking and Trust Company, Synovus Bank, Fifth Third Bank, Deutsche Bank AG New York Branch)
      • Legal: Skadden Arps Slate Meagher & Flom LLP (Paul Leake, Shana Elberg, Jason Liberi, Cameron Fee)
    • Admin Agent to the DIP TL: Ankura Trust Company LLC
      • Legal: Davis Polk & Wardwell LLP (Damian Schaible, Darren Klein, Michele McGreal, Dylan Consla) & (local) Richards Layton & Finger LLP (Mark Collins, Michael Merchant, Joseph Barsalona)
    • Ad Hoc Group of TL Lenders 
      • Legal: O'Melveny & Myers LLP (John Rapisardi, Andrew Parlen, Joseph Zujkowski, Amalia Sax-Bolder) & (local) Richards Layton & Finger LLP (Mark Collins, Michael Merchant, Joseph Barsalona)
    • Third Lien Noteholders
      • Legal: Willkie Farr & Gallagher LLP (Rachel Strickland, Joseph Minias, Debra McElligott) & (local) Young Conaway Stargatt & Taylor LLP (Edmon Morton, Allison Mielke)
    • Wells Fargo Bank NA
      • Legal: Otterbourg PC (Andrew Kramer)
    • Cerberus Operations and Advisory Company, LLC
      • Legal: Schulte Roth & Zabel LLP (David Hillman)
    • Reorganized Board of Directors (Anthony Acitelli, Chris Brady, George W. Wurtz III, G.M. McCarroll, Gene Davis, Ron Coburn, Ken D'Arcy)
  • Official Committee of Unsecured Creditors
    • Legal: Fox Rothschild LLP (Michael Menkowitz, Paul Labov, Jason Manfrey, Jesse Harris, Seth Niederman)

Updated: 4/27/18

New Chapter 11 Filing - The Weinstein Company Holdings LLC

The Weinstein Company Holdings LLC

3/19/18

The good news is that the company believes that its total exposure to victims (and creditors) is limited to 999 people/entities and its liability exposure is capped at $1 billion - or at least that's what one could glean from the boxes that the company checked on its chapter 11 petition. 

TWC Chapter 11 Petition
TWC Chapter 11 Petition

TWC Chapter 11 Petition

Let's review what's "new" here without regurgitating everything the mainstream media has covered the last several months... 

The Weinstein Company's primary assets fall into three categories: (i) the film library, (ii) the television business, and (iii) the unreleased films portfolio. The library consists of 277 films and thanks to distribution rights sales internationally and to the likes of Netflix and broadcast/cable networks, generates ongoing cash flow. The television business includes the Project Runway franchise and other content like Peaky Blinders, Scream and Six. The latter unreleased portfolio includes five completed films (including Benedict Cumberbatch's "Current War") and other projects in various stages of development. 

The sale effort to a consortium of investors including Yucaipa, Lantern Asset Management and Maria Contreras-Sweet is well documented. As is the Attorney General of New York's complaint against the company. Neither are worth noting in detail here after months of incessant press coverage. Notably, however, Lantern Asset Management stuck with the process after its consortium partners dropped out, agreeing to become the stalking horse bidder for the assets pursuant to a proposed expedited sale process. Why expedited? In the company's words,

"It is an understatement to say that the last six months have been trying for the Company. Intense media scrutiny and various other factors have resulted in, among other things, the Company’s loss of goodwill with employees, contract counterparties, key talent and the entertainment industry at large. In order to preserve the going concern value of the Company’s Assets for the benefit of its stakeholders, the Debtors have determined that a sale of substantially all of their Assets is necessary. Further, the Debtors believe that time is of the essence and that effectuating any such sale as quickly as possible is necessary to maintain operations and preserve value for the benefit of the Debtors’ stakeholders."

Well, also, the company has no cash and the buyer is pushing for speed as a condition to its bid. Lantern has that luxury as the remaining bidder; it is offering $310 million and the assumption of certain project-level non-recourse indebtedness (read: the debt associated with individual projects). Moreover, the company has indicated that Lantern anticipates retaining "most of the Company's employees." That's good: something positive must come out of this for those who had nothing to do with Mr. Weinstein's behavior. Speed is needed, the company argues, to prevent more employees from leaving (25% have already left). 

Some other miscellaneous facts of note:

  1. Top Creditor. The number one creditor is a judgment creditor to the tune of $17.36 million.
  2. It's Hard Out There for a Pimp. Boies Schiller & Flexner LLC is listed twice in the top 25 creditors. Fresh on the heels of the Theranos fraud suit, this has not been a good week for David Boies and company. 
  3. Other Creditors. Other major creditors include Viacom International ($5.6 million), Sony Pictures Entertainment ($3.7 million), Creative Artist Agency ($1.49 million), and Disney ($1.13 million).
  4. It's Hard Out There for a Pimp Part II. Several law firms are listed in the top 25 creditors for accounts payable due and owing for professional services. Notably, O'Melveny & Myers LLP is listed at #10 and $3.1 million; it had long been rumored to be representing the company leading into the bankruptcy filing. This means, more likely than not, that Cravath was hired as an 11th hour replacement, leaving O'Melveny as a creditor. Also, Debevoise & Plimpton LLP has been left hanging after conducting the internal investigation of the charges against Mr. Weinstein. 
  5. The Cumberbatch. "Current War," the feature starring Benedict Cumberbatch is levered up by $7mm under a production-level loan agreement with East West Bank. Nothing unusual here: just a fun fact. We'll see if Cumberbatch's star power can raise this movie above the debt and the Weinstein taint. 
  6. Timing. To the extent any bidder wants to trump Lantern Asset Management, the deadline for bids is April 30 and an auction will occur on May 2 for court approval on May 4. 
  7. #FakeNews. The New York Times and the New Yorker both get credit for taking down Mr. Weinstein and for starting the #metoo movement and Time's Up campaign. 
  8. Ramifications. The company notes that the response to Mr. Weinstein's misconduct was fast and furious including (i) Apple ceasing plans for a 10-part Elvis biopic to be produced by TWC; (ii) Lin Manuel Miranda demanding that TWC release its rights to the movie adaptation of In the Heights, (iii) Amazon ditching TWC, cancelling plans for a David O'Russell series and dropped TWC as co-producer of a Matthew Weiner series; (iv) Channing Tatum halting development of a movie with the company, and (v) Quentin Tarantino seeking a different studio for his next and ninth film, the first time he would use a studio other than TWC. 
  9. Board of Directors. 5 members went running for the exits, including Paul Tudor Jones and Marc Lasry. 
  10. Lawsuits. TWC has been named in at least 9 civil actions by victims of Mr. Weinstein, including a broad federal class action, two civil actions by Mr. Weinstein himself, and 6 civil actions by contract counterparties. 

Lastly, it has been reported that any and all NDAs will be "lifted" and no longer apply. This means that those who aren't as financially able as, say, Uma Thurman and Saima Hayek, may now speak out with impunity. Hopefully this frees various women from the shackles of their memories. 

  • Jurisdiction: D. of Delaware (Judge Walrath)
  • Capital Structure: $156.4mm secured debt (ex-accrued and unpaid interest, MUFG Union Bank NA), $15.6mm junior secured debt (UnionBanCal Equities Inc.), $18.1mm secured term loan (Bank of America NA), $45.4mm secured industries debt (AI International Holdings BVI Ltd.), $42.5mm secured production facility (MUFG Union Bank NA), $57.2mm of production level debt (including Spy Kids and Current War), $8.3mm secured debt (Viacom Media Networks)

  • Company Professionals:
    • Legal: Cravath Swaine & Moore LLP (Paul Zumbro, George Zobitz, Karin DeMasi) & (local) Richards Layton & Finger PA (Mark Collins, Paul Heath, Zachary Shapiro, Brett Haywood, David Queroli)
    • Restructuring Advisor/CRO: FTI Consulting (Robert Del Genio, Luke Schaeffer, Michael Healy, Thomas Ackerman)
    • Investment Banker: Moelis & Company LLC
    • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Stalking Horse Bidder: Lantern Asset Management
      • Legal: Akin Gump Strauss Hauer & Feld LLP (Stephen Kuhn, Meredith Lahaie) & (local) Pepper Hamilton LLP (David Stratton, David Fournier) 
    • DIP Agent ($25mm): MUFG Union Bank NA (11% minimum)
      • Legal: Sidley Austin LLP (Jennifer Hagle) & (local) Young Conaway Stargatt & Taylor LLP (Robert Brady)
    • Official Committee of Unsecured Creditors
      • Legal: Pachulski Stang Ziehl & Jones LLP (James Stang, Debra Grassgreen, Robert Feinstein, Bradford Sandler)

Updated 3/30/18

New Chapter 11 Bankruptcy - The Walking Company Holdings Inc.

The Walking Company Holdings Inc.

3/8/18 Recap: Another retailer - this time a repeat offender - will be walking into bankruptcy court (see what we did there?). Here, the California-based once-publicly-traded ($WALK) manufacturer of footwear like Birkenstock and ASICS has filed for bankruptcy with a plan on file and an equity sponsor in tow to the tune of $10mm. 

This is a story of staggered disruption. In the first instance, the company expanded via acquisition and grew from 2005-2008 to over 200 stores. To fund the expansion, the company issued $18.5mm of convertible notes and transferred the proceeds of the liquidation of its Big Dog entity to The Walking Company, the use of proceeds including the buildout of omni-channel distribution and vertical integration. But,

As a result of many factors including- among them, challenging negotiations with landlords which did not provide the Debtors with the rent relief they believe they needed, and the state of the national economy, by late 2008 TWC found that nearly 100 of the newer stores it opened during this expansion period were not generating the sales and profits expected.

Moreover, 

...by 2008, Big Dogs' business had collapsed more rapidly than the Debtors had anticipated. Big Dogs was in the business of selling moderately priced, casual apparel through a chain of specialty retail stores (Big Dogs stores) located around the country. The rapid growth of big-box, mass-market retailers during this period put great pricing pressure on retailers of moderately priced, casual apparel, putting many of them out of business.

Walmart ($WMT). Target ($TGT). Just say it broheims. Never understand the reluctance in these filings. Anyway, the upshot of all of this? Once the Great Recession hit, mall traffic fell off a cliff, revenue declines accelerated, landlords proved obstinate, and the company filed for bankruptcy in December 2009. 

In bankruptcy, the company reached accommodations with certain landlords and received a $10mm capital infusion from Kayne Anderson Capital Advisors LP. 

Subsequent to the bankruptcy, the company apparently thrived from 2013 through 2017. It had a better rent structure, it ceased expansion, and it focused on successful brands (e.g., ABEO) and the wholesaling and international licensing thereof. But then the realities of e-commerce struck. Per the company,

During this period, however, the increasing power of Internet retailers made traditional business of retail stores selling products manufactured by others increasingly difficult, and it also had an increasingly negative impact on customer traffic in shopping malls. 

Indeed, Deckers Outdoor Corporation ($DECK)(the manufacturer of UGG footwear) terminated its relationship with the company. The company couldn't replace those lost sales fast enough - through third party or private label sales - and the dominos started to fall. The company sought rent concessions and landlords, for the most part, told it to pound sand. Holiday sales declined. Appraisers reduced the valuation of inventory and, in turn, the company had diminished access to its bank credit line. Cue the Scarlet 22.

The company intends to use the bankruptcy to obtain "substantial rent relief by conforming their lease portfolio to market rents." Notably, two of the initial 5 leases that the company seeks to reject in the first instance are Simon Property Group locations in Dallas and Oklahoma City and one Taubman location. Other creditors appear to be your standard retail slate: Chinese manufacturers, trade vendors (ECCO, Rockport) and other landlords (General Growth Properties is a prominent one with locations listed as 9 of the top 30 creditors). 

The company otherwise has agreement with its large shareholders (including another $10mm equity infusion) and Wells Fargo to provide DIP and exit credit. 

  • Jurisdiction: D. of Delaware 
  • Capital Structure: $40.3mm RCF & $7.25mm TL (Wells Fargo Bank NA), $11.74mm 8.375% '19 convertible notes    
  • Company Professionals:
    • Legal: Pachulski Stang Ziehl & Jones LLP (Jeffrey N Pomerantz, Jeffrey W Dulberg, Victoria A Newmark, James E ONeill) 
    • Financial Advisor: Consensus Advisors LLC
    • Claims Agent: KCC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • DIP Agent, DIP Term Agent, Prepetition Senior Agent: Wells Fargo Bank NA
      • Legal: Choate Hall & Stewart LLP (Kevin Simard) & (local) Womble Bond Dickinston (Matthew Ward)
    • Prepetition Subordinated Noteholders (Simon Property Group, Galleria Mall Investors LP)
      • Legal: Irell & Manella LLP (Jeffrey Reisner)

New Chapter 11 Filing - The Bon-Ton Stores Inc.

The Bon-Ton Stores Inc.

  • 2/4/18 Recap: See here
  • Jurisdiction: D. of Delaware (Judge Walrath)
    • Capital Structure: $339mm Tranche A RCF (Bank of America), $150 Tranche A-1 Term Loan, $350mm second lien notes (Wells Fargo Bank NA)     
  • Company Professionals:
    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Kelley Cornish, Elizabeth McColm, Claudia Tobler, Alexander Woolverton, Michael Colarossi, Diane Meyers, Moses Silverman) & Young Conaway Stargatt & Taylor LLP (Pauline Morgan, Sean Greecher, Andrew Magaziner, Elizabeth Justison)
    • Financial Advisor: AlixPartners LLC (Holly Etlin, Carrianne Basler, Jim Guglielmo, John Creighton, Ben Chesters, Jamie Strohl, Mitch Chubinsky, Thomas Cole, Daniel Law) 
    • Investment Banker: PJT Partners LP (Steven Zelin, James Baird, Jon Walter, Vinit Kothary, Sartag Aujla)
    • Real Estate Advisor: A&G Realty Partners LLC
    • Intellectual Property Disposition Consultant: Hilco IP Services (David Peress)
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Bank of America NA
      • Legal: Morgan Lewis & Bockius LLP (Julia Frost-Davies, Robert A.J. Barry, Amelia Joiner) & Richards Layton & Finger PA (Mark Collins, Joseph Barsalona)
    • Second Lien Noteholders: Alden Global, LLC; B. Riley FBR, Inc.; Bennett Management Corporation; Brigade Capital Management, LP; Riva Ridge Master Fund, Ltd.; Cetus Capital LLC; Contrarian Capital Management LLC; and Wolverine Asset Management, LLC
      • Legal: Jones Day (Bruce Bennett, Joshua Mester, Sidney Levinson, Genna Ghaul, Charles Whittman-Todd) & (local) Cole Schotz PC (Norman Pernick, J. Kate Stickles)
    • Official Committee of Unsecured Creditors
      • Legal: Pachulski Stang Ziehl & Jones LLP (Jeffrey Pomerantz, Robert Feinstein, Bradford Sandler)
      • Financial Advisor: Zolfo Cooper LLC (David MacGreevey)
    • Prospective Buyer: DW Partners LP
      • Legal: DLA Piper LLP (Stuart Brown, R. Craig Martin, Jason Angelo, Richard Chesley, John Lyons, Oksana Rosaluk)

Updated 4/10/18

New Chapter 11 Bankruptcy - Patriot National Inc.

Patriot National Inc.

  • 1/30/18 Recap: Once publicly-traded ($PN, delisted) Florida-based tech and outsourcing solutions services provider to the insurance services space (primarily in the workers' compensation sector) has finally filed the prearranged bankruptcy it announced back at the end of November. This company's downfall is a lesson in making sure that a company's customer base is well-diversified. Here, one insurer, Guarantee Insurance Company, accounted for 55% of the policies serviced by the debtors and a similar percentage of the debtors' gross revenues. In November 2017, the Florida Office of Insurance Regulation notified the Florida Department of Financial Services of its determination that GIC ought to be in receivership. Which is what then happened. Whoops. The loss emanating out of this occurrence "was particularly severe." The company was also in default under its Financing Agreement with Cerberus Business Finance LLC. This perfect storm led to a negotiation and restructuring support agreement with Cerberus and TCW Asset Management Company, which will convert a portion of their claims under the financing agreement into 100% of the company's equity. The lenders will provide a $15.5mm DIP credit facility.
  • Jurisdiction: D. of Delaware
  • Capital Structure: $223mm debt (Cerberus Business Finance LLC)    
  • Company Professionals:
    • Legal: Hughes Hubbard & Reed LLP (Kathryn Coleman, Christopher Gartman, Jacob Gartman) & (local) Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, James O'Neill, Peter Keane)
    • CRO/Financial Advisor: Duff & Phelps LLC (James Feltman)
    • Financial Advisor: Conway MacKenzie Management Services LLC
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest: 
    • DIP Lender: Cerberus Business Finance LLC
  • Official Committee of Unsecured Creditors
    • Legal: Kilpatrick Townsend & Stockton LLP (David Posner, Gianfranco Finizio, Kelly Moynihan) & (local) Morris James LLP (Carl Kunz III, Brenna Dolphin)
    • Financial Advisor: Province Inc. (Sanjuro Kietlinski)

Updated 4/2/18

New Chapter 11 Filing - Philadelphia Energy Solutions LLC

Philadelphia Energy Solutions LLC

  • 1/21/18 Recap: Operator of refining complex with combined distilling capacity of 335,000 barrels/day of crude oil - representing roughly 28% of the east coast's refining capacity - and located roughly 2.5 miles from downtown Philadelphia filed a prepackaged bankruptcy in Delaware for the purposes of effectuating a sale. The company blames (i) regulatory compliance costs that specifically penalize independent merchant refiners (related, specifically, to the Clean Air Act), (ii) adverse macroeconomic trends in energy, and (iii) adverse government policy decisions for its chapter 11 filing. The goal of the prepackaged filing is to allow for an infusion of $260mm in new capital, a $35mm reduction of interest expense, and to kick maturities out to 2022. We're a little late to the game here with our summary so we'll say something that we haven't seen anyone else say about this just yet: that is, that this never would be able to file in Delaware if Elizabeth Warren has her way and the new bankruptcy reform bill is passed. Just sayin. 
  • Jurisdiction: D. of Delaware 
  • Capital Structure: See chart below.
  • Company Professionals: 
    • Legal: Kirkland & Ellis LLP (Edward Sassower, Matthew Fagen, Patrick Venter, Allyson Smith, Michael Slade, Richard Howell, Ciara Foster, Whitney Becker, Steven Serajeddini) & (local ) Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, Timothy Cairns, Peter Keane)
    • Financial Advisor: Alvarez & Marsal LLC 
    • Investment Banker: PJT Partners LP
    • Claims Agent: Rust Consulting/Omni Bankruptcy (*click on company name above for free docket access)
  • Other Parties in Interest:
    • DIP Commitment Parties
      • Legal: Davis Polk & Wardwell LLP (Damian Schaible, Aryeh Ethan Falk, Jonah Peppiatt) & (local) Morris Nichols Arsht & Tunnell LLP (Robert Dehney, Andrew Remming)
    • PNC National Association
      • Legal: Cahill Gordon & Reindel LLP (Joel Levitin, Richard Stieglitz Jr.) & (local) Reed Smith LLP (Kurt Gwynne, Emily Devan)
    • Sponsors
      • Carlyle Group & Sunoco Inc. (a subsidiary of Energy Transfer Partners LP)
Screen Shot 2018-01-24 at 12.21.38 PM.png

New Chapter 11 Filing - M&G USA Corporation

M&G USA Corporation

  • 10/24/17 Recap: Disruption via cliche and foreign competition. Here, the plastics maker and indirect subsidiary of petrochemical giant Mossi Ghisolfi Group filed for bankruptcy. The company had begun construction on a vertically-integrated plant in Corpus Christi Texas back in 2013 but then they ran headfirst into the single-most common construction cliche out there: delays and cost overruns. And that was before Hurricane Harvey compounded matters. The plant remains incomplete and, consequently, the company has "severe liquidity constraints" that it intends to address in bankruptcy - specifically, through a significant deleveraging. The company highlighted several other causes for its state of affairs: (i) higher raw material costs due to supply shortages, (ii) a recent wave of competing low-priced imports that flooded the US market (note: the company has outstanding petitions with the US Department of Commerce and the US International Trade Commission alleging that imports of polyethylene terephthalate resin from Brazil, Indonesia, South Korea, Pakistan and Taiwan are being "dumped" in the US market), and (iii) price-compression due to a competitors GOB sale. The company seeks approval of a $100mm DIP credit facility to fund its cases. 
  • Jurisdiction: D. of Delaware (Judge Shannon)
  • Capital Structure: $1.7b outstanding principal amount of debt (see below)   
  • Company Professionals:
    • Legal: Jones Day (Scott Greenberg, Carl Black, Stacey Corr-Irvine, Michael Cohen, Nicholas Morin, Peter Saba, James Sottile IV, Daniel Merrett, Oliver Zeltner) & (local) Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, James O'Neill, Joseph Mulvihill)
    • Financial Advisor/CRO: Alvarez & Marsal North America LLC (Dennis Stogstill)
    • Investment Banker: Rothschild Inc. (Neil Augustine)
    • Board of Directors: Alan Carr, Frederick Brace
    • Claims Agent: Prime Clerk LLC (*click on link above for free docket access)
  • Other Parties in Interest:
    • DAK Americas LLC 
      • Legal: Weil Gotshal & Manges LLP (Alfredo Perez, Christopher Lopez) & (local) Morris Nichols Arsht & Tunnell LLP (Curtis Miller)
    • Equity Holders: Magnate S.a r.l.
      • Legal: Kirkland & Ellis LLP
    • DIP Lender: Banco Inbursa S.A., Institucion De Banca Multiple, Grupo Financiero Inbursa
      • Legal: Cleary Gottlieb Steen & Hamilton LLP
    • Large Unsecured Creditor: Indorama Ventures Montreal LP
      • Legal: Lowenstein Sandler LLP (Paul Kizel, Nicole Fulfree)
    • Official Committee of Unsecured Creditors:
      • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Abhilash Raval, Lauren Doyle) & (local) Cole Schotz P.C. (J. Kate Stickles, David Hurst)

Updated 11/19/17

Source: First Day Declaration

Source: First Day Declaration