💥Eyes on Earnings💥
Updates: Leslie's Inc. ($LESL) + Verra Mobility Corp. ($VRRM). Also: ASP Unifrax Holdings Inc. (Alkegen) Files a Prepack.
⚡️Update: Leslie’s Inc. ($LESL)⚡️
There’ve been a lot of problems lately at the pool.
Not that one.
We mean Leslie’s, Inc. ($LESL)(“Leslie’s” or the “company”), the AZ-based pool supplies retailer that has also been desperately attempting repairs and which we’ve covered quite extensively here, here, and, most recently, here.
The company was seemingly starting to turn things around; it hit its (revised) targets for FY25 (ended 10/4/25), halted margin erosion over the last four quarters, and even returned to growth on the top line in 2Q26 (more on that below). The stock recovered sufficiently for NASDAQ to declare the company was back in compliance with its listing requirements.
Then, on July 22, 2026, Bloomberg dropped this article:
This headline was a bit misleading. Dig into the actual article — something a lot of people don’t seem to do anymore — and you’d note that it reported how Leslie’s “…is considering a range of strategic options to address its debt load, including a potential Chapter 11 bankruptcy filing” and the “…company has been holding confidential discussions with creditors to extend its debt,” according to unidentified sources. It went on:
“While the company has weighed a Chapter 11 filing, discussions are ongoing and no final decision has been made, the people said. Given the firm is in the peak summer season, its recent performance will have some sway on its path forward, some of the people said.”
The company has not commented on the story, but it is not out of step with what CEO Jason McDonnell had to say on the 2Q26 earnings call back in May:
“We continue to evaluate capital structure opportunities and are actively working with our incumbent lenders as well as third party capital providers to finance a series of incremental initiatives that could further accelerate our growth and shorten the path to profitability.”
Aren’t we all, in some way, always considering a bankruptcy filing? Or is that just us?
Still, the article caused the stock, which had recovered so valiantly in the two months since the last earnings report, to take a … dive. It fell from over $10 a share back below $1, giving up all the gains it had made since the relatively positive 2Q earnings report. While it has recovered a little bit, this demonstrates the brutality 👇:
As we noted above, Leslie’s operating performance through the first half of FY26 (ended March) offered early signs that the turnaround was starting to take hold. Leslie’s turnaround strategy seemingly includes anything and everything they and their advisors could think of: adjusting pricing strategy, targeting lapsed customers, closing underperforming stores and consolidating its footprint, altering store compensation structures, and optimizing inventory spend.
In 2Q26 (ended March) revenue ⬆️ 4.3% despite significant store closures. Same store sales ⬆️ by 6.6%, making it the first quarter of meaningful same store sales growth since ’22. 2Q26 Adj. EBITDA was negative, as is typical for the company in the first half of the year leading up to “pool season,” but losses narrowed to ($27mm) vs. ($36mm) in the prior year. Lower occupancy, labor, and other store operating expenses, as well as improved operating leverage and more favorable product mix, all contributed to improve Adj. EBITDA margins.
As you can see in the quarterly numbers above, the company generates more than 70% of revenue and all its positive Adj. EBITDA in the second half of year, so the more critical earnings reports are yet to come. However, the company reaffirmed its full year guidance in conjunction with its 2Q26 earnings. On an LTM basis, it is tracking ahead of the midpoint for revenue and forecasting more margin recovery in the back half of the year.
Leslie’s ended 2Q26 with $17mm of cash and $97mm available under its $250mm ABL revolver. The company drew down $25mm on the ABL Revolver in 1Q26 and a further $74mm in 2Q26, bringing the total draw up to $99mm and total leverage north of 14x. These draws follow the company’s usual pattern of drawing down on its revolver during 1H to prepare for the peak season and then paying it off in full in the back half of its fiscal year.
The ABL revolver bears interest at S+125-175 and is due three months inside of the company’s term loan due March ’28. The senior secured term loan (S+250-275) due March ’28 has $757mm outstanding and is pricing deep in distressed territory (~38c as of August 3, 2026).
The company has not yet set a date for its 3Q26 earnings report, but last year released preliminary 3Q results on July 28, 2025 and full results on August 6, 2025. We look forward to skewering reviewing them.
⚡️Update: Verra Mobility Corp. ($VRRM)⚡️
Management over at Mesa, Arizona-based Verra Mobility Corp. ($VRRM)(“Verra” or the “company”) must’ve been like “holy hell, we made PETITION, we’d better get our sh*t together.”
And so a mere nine days after we wrote about the hot mess that transpired after Avis Budget Group ($CAR)(“Avis”) said …
… and terminated its commercial services contract with the company — decimating the company’s stock by 70%(!) — the company dropped this bit of news to calm markets:
And … like … it … kinda worked … ? Take a look 👇:
That’s what you call a healthy ~44.5% bump, y’all. But there’s still quite a long way to go to get back to where it was before the initial announcement.
The company’s Q2’26 earnings release will be later today, August 5, 2026 after market close.
Management will have a lot of ‘splainin to do.
💥New Chapter 11 Bankruptcy Filing - ASP Unifrax Holdings Inc. (Alkegen)💥
On July 26, 2026, Irving, TX-based, Clearlake Capital Group, L.P. (“Clearlake”)-owned ASP Unifrax Holdings Inc. and sixty-two affiliates (collectively, the “debtors” and together with their non-debtor subsidiaries, the “company”) filed previously-announced prepackaged chapter 11 bankruptcy cases in the Northern District of Texas (Judge Everett), which, if we can be honest here, look to be set up to be pretty damn 🍿-free. We are not complaining.
Anyway, the company manufactures thermal management, filtration, emissions control, and battery fire protection “solutions” — think blast furnaces, catalytic furnace linings, exhaust systems — and is the result of Clearlake’s ‘18 acquisition of Unifrax LLC, which in turn acquired Lydall, Inc. in September ‘21 and created the company as it exists today.
It’s a big operation: 3.9k employees, 23 countries, excluding the debtors’ stake in the non-debtor, China-based Luyang Energy-Savings Materials Co. Ltd. (”Luyang”).
The company has two primary divisions: (i) the industrial solutions group, which as the name suggests, is focused on industrial applications and accounted for $636mm, or 64%, of the company’s ‘25 revenue; and (ii) the mobility solutions group, which homes in on the automobile industry, came in at $267mm, or 27%, for the same period.*
Like basically every industrial debtor, the debtors blame the bankruptcy on “… macroeconomic crosscurrents and market-specific pricing pressures …” In other words, interest rates are ⬆️, supply overcapacity is ⬆️, and market share is therefore ⬇️.** In addition, growth initiatives were underwhelming — could there be a root cause lying in CEO and Alvarez & Marsal LLC’s Brian Whittman’s first day dec? Let’s see what he says:
“Alkegen’s highly leveraged capital structure at times led to a focus on higher impact activities with more difficult execution, while under-investing in the core business.”
LOL, holy hell, that’s one of the best commentaries on the virtues of liability management exercises Johnny has ever seen — which happened in ‘24 when the company stepped into this bloated a$$ debt stack:
Mr. Whittman, though, can thank that bloat for his gig. Bob Caruso, the company’s chief restructuring transformation officer, can too. In October ‘25, the company showed prior management the door and brought them on “… to support a comprehensive review of the business, develop a 2026 budget and long-range business plan, and identify and implement a series of performance improvement initiatives,” which, in 1Q26, roped in the next workstream. That is, formulating a deal with an ad hoc group of debt holders (the “ad hoc group”) repped by Davis Polk & Wardwell LLP (“DPW”) and PJT Partners LP (“PJT”). Naturally, a special committee also integrated itself into the mix. That’s composed of David Ford and Todd Arden.
In any event, after a few months of trading term sheets, a deal emerged among the company, the ad hoc group, and Clearlake, which is embodied in a July 19, 2026 restructuring support agreement (the “RSA”). The RSA, as well as the related chapter 11 plan and disclosure statement (the “DS”), is supported by holders of (i) ~99% of 1L claims, (ii) ~80% of 2L claims, (iii) ~95% of the company’s pref A stock, and (iv) ~99% of its senior common stock*** and provides:
📍DIP Facility. A $630mm DIP loan composed of (a) $315mm in new money term loans and notes ($265mm interim) and (b) a $315 million roll-up of the DIP lenders’ 1L term loans and notes (also $265mm interim), which will be used to refinance the prepetition revolver in full. The DIP bears interest at SOFR + 8.375%, with up to 50% PIK, and includes a 5% backstop fee payable in net (discount from the funded proceeds) or cash to the ad hoc group members backstopping the DIP, a 2.5% upfront fee payable by netting, and a 2.25% exit fee.
📍Equity Rights Offering. An up-to $335mm equity rights offering (the “ERO”), which will be offered to 1L holders, for 59% of the reorg equity, subject to dilution by any MIP, and which is also backstopped by members of the ad hoc group. For the backstopping, they will straight-up receive 3% of the reorg equity (the “ERO fee”) under the plan.
📍Treatment of Claims. The plan provides a comprehensive restructuring. 1Ls will receive that right immediately ☝️, as well as $85mm in exit term loans and 100% of the reorg equity prior to giving effect to the ERO, the MIP, the ERO fee, and the junior funded debt recovery … which provides that all other funded debt claims, including 1L deficiency claims, will receive (i) five-year warrants to purchase 5% of the reorg equity at a ~$2b strike price and (ii) 1% of the reorg equity, subject to dilution by the MIP and the new warrants, but not the ERO or the ERO fee. Finally, the big one: GUCs. Imagine our delight when we saw this prepack did the typical prepack thing — it passes GUCs through entirely unimpaired. If there’s an official committee of unsecured creditors in the cases, we can’t imagine them complaining. Clearlake, as equity sponsor, will also receive the customary treatment — cancellation in full of its equity interests.
📍Exit Term Loan. To get out of bankruptcy, there’s a pre-baked $400mm term loan that’ll be put to use by refinancing the DIP and giving the 1Ls’ their $85mm in take-back debt.
📍Timeline. It’s fast. Obviously.
Will anyone have any issues with the pace? GUCs aren’t hurt, and the deleveraging is massive …
… so we reckon ‘no’.
The court held the first day hearing on July 28, 2026. Unfortunately, the audio isn’t available, but we imagine there was a lot of hand-holding and back-patting. Regardless, the court granted all requested relief and scheduled (i) the second day hearing for August 25, 2026 at 9:30am CT and (ii) the combined hearing on confirmation of the plan and final approval of the DS for September 3, 2026 at 10:30am CT.
The debtors are represented by Kirkland & Ellis LLP (Anup Sathy, Steven Serajeddini, Nicholas Adzima, Margaret Reiney) and Gray Reed (Jason Brookner, Lydia Webb, Emily Shanks) as legal counsel, Alvarez & Marsal LLC (Brian Whittman, Bob Caruso, Doug Donoghue) as financial advisor, CEO, and CTO, Centerview Partners LLC (Robert Beasley) as investment banker, and C Street Advisory Group as strategic communications advisor. Todd Arden and David Ford are the debtors’ independent directors and compose its special committee, which is represented by Katten Muchin Rosenman LLP (Steven Reisman, Marc Roitman, Robert Smith, Michael Rosella, Michaela Croker) as legal counsel. The ad hoc group is represented by DPW (Damian Schaible, Angela Libby, Jarret Erickson, Jacob Goldberger) and Haynes and Boone, LLP (Ian Peck, Jordan Chavez, Kelli Norfleet, David Trausch) as legal counsel and PJT Partners LP as investment banker. Wilmington Savings Fund Society FSB, as DIP agent and 1L collateral agent, is represented by Seward & Kissel LLP (John Ashmead, Gregg Bateman, Catherine LoTempio) and Blank Rome LLP (Buffey Klein, Jordan Williams) as legal counsel. JPMorgan Chase Bank NA, as the 1L admin agent, is represented by Paul Hastings LLP (Matthew Warren, Charles Persons, William Reily) as legal counsel. Wilmington Trust NA, as the indenture trustee under the debtors’ senior unsecured notes, is represented by Kelley Drye & Warren LLP (James Carr, Kristin Elliott, Andrew Matott, Jennifer Provenzano) as legal counsel.
*The company’s industrial filtration group — felt-based filtration materials for industrial waste gases — rounded up the last 9% ($88mm in revenue). It also has a start-up business business in the lithium-ion battery-space, which hasn’t yet reached commercialization.
**For a point of reference, Luyang’s sales fell by $141 million in ‘25, leading to a decrease in adjusted EBITDA of 50%+.
***The “vast majority” of the company’s stock is held by Clearlake entities.
📚Resources📚
There’s a lot of jittery market activity out there so you’ll have to forgive us for having market dysfunction on our minds. As you know, we’ve had a long-standing list of a$$-kicking resources on the topics of restructuring, tech, finance, investing, and disruption which, in case you forgot,💥you can find here💥. We do occasionally update it and this week you’ll now find a number of titles we’ve been dabbling in related to financial bubbles/crises. Take a look and read until your heart’s discontent.
📤 Notice📤
Kristine Manoukian (Partner) joined DLA Piper LLP from McDermott Will & Schulte LLP.
Kyle Trevett (Associate) joined Debevoise & Plimpton LLP from Kirkland & Ellis LLP.
Nicholas Dunstone (Partner) joined Jones Day from Milbank LLP.
(Former Judge) Robert Drain (Senor Advisor & Head of Fiduciary Services) joined M3 Advisory Partners LP from Skadden.
🍾Congratulations to…🍾
Darryl Myers on his promotion to Managing Director at BDO USA.
Matt Rahmani on his promotion to Partner at Perella Weinberg Partners.
Willkie Farr & Gallagher LLP (James Burbage, Hon. Shelley Chapman (Ret.), Brett Miller, Jennifer Hardy) for securing the legal mandate on behalf of the official committee of unsecured creditors in the Camp Mystic LLC chapter 11 bankruptcy cases.
NOTE: do you have exciting news to share? Feel free to email us — especially if you’re a firm administrator — with any and all personnel news at petition@petition11.com.
💰New Opportunities💰
PETITION is looking for MBA and JD candidates to work with us as paid interns. This is primarily a research and writing position for up to 10-20 hours a week that will give awesome exposure to the worlds of distressed investing, bankruptcy and restructuring. Work is remote. If interested, email us your resume at petition@petition11.com with the subject line “Internship” and we’ll be happy to answer questions. Cheers.
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PETITION is also seeking a freelance social media manager to give life to PETITION’s accounts on Instagram and potentially other platforms. The ideal candidate has experience managing social for a media brand or creator, is fluent in Canva and/or Illustrator, can adapt newsletter content into sharp, on-brand social posts (feed, stories, reels), and understands and enjoys financial storytelling. If you’re interested or know someone who could be a great fit, please send your/their portfolio, relevant social handles, and a short note about your/their availability to petition@petition11.com.