💥Notice of Appearance: Andrew Glenn💥
Andrew Glenn, Managing Partner at Glenn Agre Bergman & Fuentes LLP
This week we welcome an appearance by Andrew Glenn, Managing Partner at Glenn Agre Bergman & Fuentes. We’re happy to have Andrew here because he’s been a key player in some of the big name bankruptcies of the last several years. Let’s dive in.
PETITION: Let’s start with a big one — an oldie but goodie. You really caught a lot of people’s attention in the Hertz Global Holdings Inc. chapter 11 bankruptcy case when you pushed for a more robust sale process and your clients — along with Knighthead Capital Management and Certares Management LLC — ended up with the winning bid. The bid got shareholders a pretty remarkable recovery. Give us your version of events — the “untold story,” if you will. We’re nerds so we really like the nitty gritty details that may not have been covered before!
Andrew: It was a whirlwind. We started with a small group that had strong conviction that Hertz was undervalued based on the Debtors’ own projections in their disclosure statement, and that we should wage a valuation fight in court. The more we dug in, the more upside we saw. It was just a matter of getting the word out because this opportunity was overlooked in the market.
The key moment in the case – one part of the “untold story”– was when we got Steve Tesoriere, Sherman Lau and Andrew West at Oaktree involved. Once word got out that Oaktree had conviction and was ready to put significant money to work, our investment group expanded, and the case morphed into assembling a competing deal. Our ad hoc equity committee raised $1 billion in a matter of a few weeks (my friend Rebwar Berzinji of Seaport Global gets much of the credit for that). Everyone on the Debtors’ side has declared this case a magnificent success, but what they don’t say now is that they tried to block our deal at every opportunity, and that the lenders may have taken this upside away from us as a result. They blocked us from submitting a better deal that would have precluded the Debtors from giving our competitors a break-up fee and they blocked us from trying to get financing from parties that the Debtors had exclusivity. We had to fight them in court to get an auction, and they nearly prevailed.
Then the auction unfolded. We were locked in conference rooms for 40 hours straight during COVID. There was nearly a fistfight (I won’t say who was involved but it wasn’t me!), and many other antics that I will remember forever. The lion’s share of the credit should go to Tom Wagner of Knighthead Capital and his team for the winning bid. He had 50 financing parties, and he had to develop a bidding strategy that did not require approval for every bidding move he made. He had wiggle room to propose warrants (rather than straight equity or additional cash), and he proposed warrants of such a long tenor that they were very close to being equity. He put those on the table in the final hour when the Debtors called for last and best bids, and we prevailed.
I’m so proud of the outcome, and I think it’s a testament that Chapter 11 can maximize value when the process allows it. The outcome was far from certain, but these are the fights I relish. I have to credit Sina Toussi of Two Seas, Jeremy Carton of Alta Fundamental and Larry Robbins and Jon Ansel of Glenview for being the first-movers that got our group off the ground.
PETITION: Any thoughts on the Third Circuit decision revolving around the Hertz makewhole drama? Care to explain what happened for our audience?
Andrew: Everything changes in a solvent case where shareholders get a premium recovery. The question that arose is how to treat unsecured noteholders’ makewhole claim, which many courts have held constitutes “unmatured interest” that is normally disallowed under the Bankruptcy Code. The Third Circuit held that while the makewhole claim is indeed unmatured interest, the “solvent-debtor” applies and in order for the noteholders to be deemed “unimpaired,” the company must pay them their makewhole premiums. This decision was not surprising as the Third Circuit followed a number of other circuits that have reached the same conclusion.
PETITION: Let’s move to another big one. You had a role in the Purdue Pharma matter, having filed an amicus curiae brief in the Supreme Court on behalf of bankruptcy law professors Ralph Brubaker, Bruce A. Markell, and Jonathan M. Seymour. Y’all argued that the Supreme Court should put an end to “the unconstitutional practice of nonconsensual third-party releases.” Well, the Supreme Court ruled and we all know how that played out. What is your assessment of the ruling, what are you seeing in chapter 11 cases since, and where do you think we go from here?
Andrew: While in Purdue we made several arguments concerning the constitutionality of non-consensual third-party releases, it’s important to recognize that the Supreme Court’s decision focused on whether the Bankruptcy Code itself authorizes such releases as a matter of statutory interpretation. I wholeheartedly agree with the Court’s finding that it does not, even though the practice of granting these releases in various situations had been adopted by courts for expedient reasons.
With that said, there are some open questions following Purdue, and debtors often look for ways to provide releases without running afoul of that decision. For example, in the recent Rockville Centre case, certain insurers were able to obtain releases as part of an asset sale via the free-and-clear mechanism under Section 363(f) of the Bankruptcy Code. I have no doubt advisors will continue to come up with clever ways to try to accomplish the desired outcome for their clients.
PETITION: Since we’re on the topic of big name cases with big implications, what is your take on Judge Lopez’s ultimate position in the Robertshaw matter? More broadly, what effect do you anticipate the recent Serta ruling will have?
Andrew: I cannot opine on Judge Lopez’s ruling on the Robertshaw matter since we are currently appealing his ruling on behalf of Invesco. All I will say is that we respectfully disagree with the decision and its rationale.
The Serta ruling has significant implications, particularly for recent credit agreements of the 2021-2022 vintages, which often include the "open market purchase" language at issue in the Serta decision. It complicates LMEs for companies, though some are finding ways to bypass the ruling with alternative mechanisms to effectuate non-pro rata deals. In the evolution of credit agreements, we are also seeing parties clarifying that a privately negotiated deal is allowed under the credit agreement. Parties are now negotiating and actively contracting around the Serta decision.
We should also pay attention to the Mitel decision from the Appellate Division in New York, which came down the same day as Serta. The appellate court adopted a more formalistic interpretation of the credit agreement where if the parties stay within the four corners of the agreement, there is no violation of the sacred right even if the LME involves non pro rata treatment of the different lenders.
PETITION: More broadly, in the wake of the Serta ruling, what do you think happens in the next wave of LME deals? What were some of the more interesting and perhaps controversial aspects of some of the more recent LME deals where you represented minority lender groups (e.g., Allen Media, Better Health, Del Monte Foods, Ivanti, Magenta, and Newfold Digital).
Andrew: The recent wave of LMEs differs significantly from earlier deals like Serta, Boardriders and TriMark. In those cases, a majority group participated in the deal while minority lenders were entirely excluded. Now, companies are attempting to involve all lenders by structuring LMEs in phases: the initial transaction involves the majority group, while the minority group is later invited to participate—typically on less favorable terms.
This creates a challenging dynamic for minority lenders. They often have only a short window, sometimes just seven days, to decide whether to participate. Saying “yes” means accepting worse terms than the majority group. Saying “no,” in the example of a dropdown transaction, could leave them without collateral supporting their loan. It’s a very tough position, and the lack of time for meaningful decision-making exacerbates the issue.
To address this, we have been organizing minority lender groups early on, before the LME is announced, and getting our groups to sign cooperation agreements. This proactive approach allows us to engage with the company, improve the group’s position, and, in some cases, become part of the solution by negotiating a holistic deal with the company (even before the LME is announced).
PETITION: Staying … 🥱 … on the LME theme for one more beat, can you share your thoughts on the increasing use of cooperation agreements? Do you see any merit to the potential challenges market participants have paraded around with respect to them?
Andrew: Cooperation agreements are by and large a defensive mechanism that lender groups employ to protect their interests. I don't see anything wrong with that. In fact, in some of our minority groups, our clients have signed cooperation agreements to make sure that the group is cohesive and acts in unison as it engages with the company and other groups of lenders. I see it as a positive development in the market.
The problem with lender-on-lender violence is that lenders compete with each other, when cooperation will produce a better overall recovery; that’s why we push co-ops. I take no stock in the threats made by debtors against these co-ops. Debtors succeed with LMEs by preying on threats that lenders could be excluded and get a worse deal. Co-ops ensure that no one can be excluded. It’s a legitimate, and frankly, necessary defense mechanism.
PETITION: You seem to love underdog situations. You represented the equity committee in Garrett Motion’s bankruptcy and, more recently, Yellow Corporation’s filing. Talk to us about the approach you take as equity committee counsel. Feel free to differentiate between the different fact patterns.
Andrew: I do! I love the fight. Any lawyer or financial advisor can represent an oversecured senior creditor and get them paid in full. Great lawyers and financial advisers are those that can produce a premium recovery when their clients are at risk. I enjoy the challenge of proving valuation and litigation theories to produce premium recoveries. I love the drama and combat in the courtroom (I guess I watched too much LA Law growing up!). But ultimately, having my clients get their recovery is all that matters whether in court or in a settlement.
Garrett Motion was a turning point in my career. Working with Lorie Beers (now at Intrepid), we executed the same strategy that ultimately prevailed in Hertz. Our official equity committee formulated a competing bid, while litigating a series of issues involving the claim asserting by Honeywell, and we fought the Debtors and their advisors who really did not want us to submit a competing bid. Ultimately, we settled and got the shareholders $13+/per share when the case originally would have given them less than $2 per share. I would have loved to have prevailed, but my clients were thrilled that we leveraged the Chapter 11 process so successfully. I have so much respect for Judge Wiles (my former mentor) who really was instrumental in driving the consensual outcome.
NOTE: My involvement in Yellow was brief because the folks at Kirkland were doing a solid job of representing the equity.
PETITION: Speaking of equity committees, Sorrento Therapeutics, whoa boy. What the holy f*ck. That’s not a question, that’s a statement but please feel free to answer it like it’s a question.
Andrew: Sorry, too much trauma!
PETITION: LOL, ooooook. Turning to the next question, then, what should Mom and Pop investors be thinking when they see Glenn Agre saddle up on behalf of equity holders?
Andrew: I’m going to fight for them, just as I would institutional investors. I’m proud that we protected so many people’s investments in Hertz and Garrett Motion. I just wish we could have done the same in Sorrento, which has such a devoted and savvy community.
PETITION: Another more recent one, True Value. You were conflicts counsel in that one — a weird case if we do say so ourselves given the fact that the debtors didn’t own brick and mortar locations with which they could liquidate inventory to satisfy lenders. Tell us more about what made this case and, frankly, what almost broke it.
Andrew: What made this case was the Debtors’ and the Committee’s professionals. The team at Skadden (Ron Meisler, Fmr. Bankruptcy Judge Robert Drain, Evan Hill, Steve Daniels) and M3 (Kunal Kamlani and Nick Weber) worked tirelessly to save the True Value franchise by driving a going concern sale to Do-it-Best. Pachulski (Brad Sandler and Paul Labov) supported our efforts to get the sale done.
The central battle in this case was whether liquidation value outweighed going concern value. In my view, the lenders' insistence on forcing a wholesaler liquidation was totally irrational. It was an untested strategy compared to retailer liquidations, and nobody knew if it could even work. Why would retail outlets that True Value does not control have any incentive to sell our inventory when we were about to shut down? Everyone on our side agreed that liquidation was a recipe for disaster. But the lenders dug in, refusing to allow the use of cash collateral for a going concern sale and only consenting if we agreed to liquidate.
Through Skadden and M3’s efforts, the issue became moot when they convinced Do-it-Best to beat the liquidation value. But here’s the fascinating question: can a lender consent to the use of cash collateral and force a debtor to ignore fiduciary duties and sound business judgment to pursue what it believes is a value-maximizing going concern sale? The way I see it, the court is the one that should make that final determination after all bids of all types are in. But ultimately, the court didn’t have to weigh in on this one.
PETITION: Zooming out, what is the biggest restructuring theme to emerge out of 2024?
Andrew: The biggest restructuring theme of 2024 is the shift in LMEs from outright excluding minority lenders to structuring deals that encourage full participation. However, this doesn’t mean the new wave of LMEs is “kinder” or “gentler,” as some have suggested. Many remain highly coercive and non-pro-rata.
What’s changed is that companies have recognized the value in convincing—or coercing—all lenders to participate. This approach minimizes the litigation risk that typically follows an LME.
PETITION: What would be your selection for the most impactful restructuring matter of ‘24 and why (don't shamelessly list your own work)? Feel free to acknowledge a matter that filed for chapter 11 or one that restructured out-of-court.
Andrew: The Wesco matter stands out as the most significant restructuring of 2024, particularly in the context of LMEs. The bankruptcy court’s decision was impactful because it set aside the formalities of how the parties structured the LME and focused instead on the substance of the transaction. In my view, the court reached the correct conclusion: if a transaction isn’t permissible in one step, breaking it into multiple steps doesn’t shield it from judicial scrutiny.
PETITION: What would be your selection for the most clever restructuring matter of ‘24 and why (don't shamelessly list your own work)? Feel free to acknowledge a matter that filed for chapter 11 or one that restructured out-of-court.
Andrew: Wesco again. People have proposed or threatened plans that preserve litigation rights pending appeal, but the strategy has never worked. I was not part of the case, but I’m guessing that Judge Brendan Shannon did a phenomenal job as mediator to produce the outcome to preserve the business and financial restructuring while the financial creditors fight. I think that’s very clever, and I applaud all the parties for this.
PETITION: Put your prediction cap on: what do you think the biggest restructuring theme of ‘25 will be?
Andrew: In 2025, we’ll likely see companies and sponsors increasingly structuring LMEs to achieve full participation. This shift is driven, in part, by the litigation risks highlighted in the Serta decision. To mitigate these risks, companies will prioritize strategies that minimize the potential for post-transaction disputes.
But I think the LMEs are a cautionary tale for our profession. You have to ask yourself why people are doing these LMEs? The sponsors want runway and to capture discount. This can be accomplished in Chapter 11, but people are avoiding Chapter 11 because it costs too much relative to its benefits. Many LMEs fail because it’s another version of extend-and-pretend. When the Chapter 11 ultimately comes, it’s often an expedited 363 sale with no real restructuring involved. If we don’t improve the Chapter 11 process as a viable alternative to LMEs, there will be fewer Chapter 11s, which ultimately hurts all of us.
PETITION: In the US, the industry that sees the most amount of distress in ‘25 will be … which? … and why?
Andrew: All shades of real estate. I think we are in a very big bubble, and trouble is brewing. I hope I’m wrong!
PETITION: The biggest controversy in RX circles in ‘25 will be _________?
Andrew: Venue. I’ll leave it at that.
PETITION: Finally, what is one off-the-run issue that keeps popping up in your discussions with clients that not enough people are talking about?
Andrew: Where can I put money to work? People are looking at more-and-more exotic investments and litigation finance. The opportunity set looks very different and much smaller than a year ago.
PETITION: Thank you Andrew. Wishing you all the best for a successful year.
💥21st Annual Wharton Restructuring and Distressed Investing Conference💥
This year the 21st Annual Wharton Restructuring and Distressed Investing Conference (“WRDIC”) will be held on Friday, February 21, 2025, at the Plaza Hotel in New York. This year’s conference theme is “Beyond Bankruptcy: Innovative Approaches to Liability Management,” and the fine folks at Wharton are excited to welcome a distinguished gathering of keynote speakers and panelists to discuss the evolving landscape of liability management, creative solutions in restructuring, and forward-thinking strategies for distressed investing in today's dynamic economic environment. Here is the link to the WRDIC ‘25 website and here’s the link for tickets. Professionals who use the code PETITION10-2025 will get a 10% discount.
📚Resources📚
We have compiled a list of a$$-kicking resources on the topics of restructuring, tech, finance, investing, and disruption. 💥You can find it here💥.
📤 Notice📤
John Mairo (Partner & Chair of the Financial Restructuring & Creditor’s Rights Group) joined Gibbons PC from Porzio Bromberg & Newman.
🍾Congratulations to…🍾
Alan Dalsass on his promotion to Senior Managing Director at Ankura Consulting Group.
David Castleman on his promotion to Partner at Otterbourg.
Jon Henrich on his promotion to Senior Managing Director at Ankura Consulting Group.
Mark Smith on his promotion to Senior Managing Director at Ankura Consulting Group.
Michael Maizel on his promotion to Counsel at Otterbourg.
Michael Pantzer on his promotion to Counsel at Otterbourg.
Pauline McTernan on her promotion to Partner at Otterbourg.