💊 New Chapter 11 Bankruptcy Filing - AAC Holdings Inc. ($AACH)💊

AAC Holdings Inc.

June 20, 2020

Tasteless joke alert: if there’s one thing that we would’ve thought would benefit from COVID it would be addiction. Our expenses are WAY DOWN across the board with one exception: alcohol.

We joke about it but the sad and honest truth is that there were a lot of people who likely needed help over the last several months that were unable to get it. Overdose deaths are spiking across the country. And so we hope that people are able to (safely) find answers/help now that things are finally opening back up across most of the country. Our tastelessness aside, it really isn’t a joking matter.

Unfortunately, American Addiction Centers ($AACH) has been kicking around the bankruptcy bin for a very long time now — long before COVID struck. Everyone knew a bankruptcy filing was coming. S&P Ratings has a “D” rating on this thing; Moody’s is rocking a Caa2. The first lien term loan due 2023 was, as of last week, just a hair over 41. Suffice it to say, all the signs were out there for the Tennessee-based inpatient and outpatient provider of substance abuse services.

And so AAC has finally met its fate. The company filed for chapter 11 in the District of Delaware in a rare Saturday night filing, listing $517.4mm of total debts against $449.4mm of total assets. That is textbook insolvency right there.

The company has a commitment of $62.5mm in DIP financing from its pre-petition lenders to fund the cases, operate in the ordinary course while in bankruptcy, and pursue a marketing process for the sale of its assets; it will use the bankruptcy process to de-lever its balance sheet; it notes that there’ll be no layoffs or facility closures as a result of the filing and that the company hopes to emerge from bankruptcy within 125 days. To this end, the company has an RSA with 89% of its first lien senior lenders and more than 50% of its junior lenders.

• Jurisdiction: D. of Delaware (Judge Dorsey)

• Capital Structure: $47mm senior lien facility, $316.6mm junior lien facility

• Professionals:

  • Legal: Greenberg Traurig LLP (David Kurzweil, Alison Elko Franklin, Dennis Meloro) & Chipman Brown Cicero & Cole LLP

  • Directors: Scott Vogel, Michael Logan

  • Financial Advisor: Carl Marks Advisors (Jette Campbell)

  • Investment Banker: Cantor Fitzgerald

  • Claims Agent: Donlin Recano & Co. Inc. (*click on the link above for free docket access)

• Other Parties in Interest:

  • DIP & Pre-Petition Agent: Ankura Trust Company LLC

💈New Chapter 11 Bankruptcy Filing - Rudy's Barbershop Holdings LLC💈

Rudy's Barbershop Holdings LLC

April 2, 2020

Just when the entire country is sheltering in place and can no longer go out to get haircuts (reviving videos of 80s fave, the Flowbee), Seattle Washington-based Rudy’s Barbershop Holdings LLC and five affiliates (the “debtors”) have filed for chapter 11 bankruptcy. The business has been hemorrhaging cash for a few years now — losing $2.275mm in ‘18 and $2.142mm in ‘19. COVID-19 was the nail in the coffin. The debtors were forced to close on March 16, eliminating the debtors’ main source of revenue. The majority of the debtors’ employees currently are furloughed, with a small subset who work at the debtors’ Microsoft Inc. ($MSFT) office campus paid through a reimbursement from Microsoft Inc.

Owned by Northwood Ventures LLC, a NY-based private equity and venture capital firm, the debtors are hoping to achieve a going concern sale in bankruptcy to Tacit Capital LLC on an expedited basis. The company has about $4.6mm of funded debt and Tacit has committed to DIP financing. For what it’s worth, we here at PETITION hope that the sale can get done with ease so that this business is saved. Things are rough out there.

• Jurisdiction: D. of Delaware (Judge Silverstein)

• Professionals:

  • Legal: Chipman Brown Cicero & Cole LLP (William Chipman Jr., Mark Desgrossiers, Mark Olivere)

  • Financial Advisor: GlassRatner Advisory & Capital Group LLC (Wayne Weitz, Robert Trenk)

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

• Other Parties in Interest:

  • Sponsors: Northwood Ventures LLC & PCG-Ares Sidecar Investment LP

    • Legal: Joshua T. Klein & Gellert Scali Busenkell & Brown LLC (Michael Busenkell)

📰New Chapter 11 Bankruptcy Filing - The News-Gazette Inc.📰

The News-Gazette Inc.

August 30, 2019

The New York Times recently declared:

The crisis in local journalism is catastrophic — and it will get worse. More than 1,300 communities across the United States are without local news coverage, and thousands more have inadequate journalism. At the next recession, the collapse will accelerate.

Studies have now validated what we all know intuitively: The disintegration of community journalism leads to greater polarization, lower voter turnout, more pollution, less government accountability and less trust.

Insert doomsday music here, folks.

Champaign Illinois-based The News-Gazette Inc. is the leading local news source in Champaign County, Illinois. It publishes a daily newspaper that reaches approximately 22k people Monday-Friday and 24.3k people on Sunday; it has five weekly newspapers, two advertising-oriented shopper products and two magazines; through a wholly owned debtor subsidiary, DWS Inc., it also operates three radio stations and several companion websites.

Now it is another example of a struggling local news provider. The company filed for bankruptcy in the District of Delaware over the holiday weekend.

In 2008, the company “took on substantial debt to complete the first phase of a new 48,865-square-foot printing and distribution facility” and completed said phase (the distribution part) just prior to the Great Recession. The rest of the project — including the acquisition of a new printing press geared towards driving a regional commercial printing business — never got done. The company notes:

The “great recession” of 2008, however, marked the beginning of an accelerated trend of advertising revenue declines for the newspaper business in general. As revenues fell and financial performance suffered, expansion plans had to be shelved because Debtors could neither access, nor afford, the capital necessary to complete the project.

Compounding matters:

Over the last decade, circulation trends have generally been better than industry averages owing in large part to a continued commitment to maintaining a very high-quality news product. During the last two years, however, the rate of decline in circulation has increased meaningfully.

“Better than industry averages” is, by definition, a relative measurement. Which ain’t saying much. On the other hand, the metrics are “saying much.” Revenue dropped from $17.1mm in 2017 to $13mm in 2018. EBITDA went from $70k in 2016 to -$4.83mm in 2018.

Consequently, the debtors have spent the last few years rejiggering their business. That, naturally, means that people lost jobs. The debtors outsourced their production operations and liquidated its production assets; they also reduced their expenses and eliminated the facility-related debt. Nevertheless, the debtors needed an escape hatch; in late 2018, they engaged a broker to solicit interest from a strategic buyer “with financial resources and media footprint to further economize operations” to operate the debtors as a going concern.

The goal of the chapter 11 bankruptcy filing is to effectuate a sale to Community Media Group LLC by early November. Community Media Group is a privately-held multimedia company which owns and operates roughly 40 newspapers in six states. Subject to standard sale adjustments, CMG will pay $4.5mm.

It appears that the future of local news is increasingly in their hands.

*****

What happens to the employees? Well, as noted above, a number have already lost their jobs and those that remain were the glorious recipients of WARN notices (though some may be rehired). The company’s CEO said:

“It is most certainly regrettable that some employees won’t be rehired during the transition. Our economic circumstances — which are not unique to this operation — require that we operate more efficiently. Absent this sale transaction, we would be making similar decisions.”

The buyer is also leaving behind any and all liabilities (including withdrawal liabilities) with respect to defined benefit plans, pensions or similar retirement plans. As luck would have it, those liabilities make up the debtors’ three largest creditors:

Source: Chapter11 Petition

With a purchase price of $4.5mm, well, you can get a sense of how creditors, including folks who depended upon those pensions, will fare here. Pension liabilities alone are nearly $9mm.

And so this is a bittersweet result. The paper will live on but those who helped build it will be undeniably affected.

• Jurisdiction: D. of Delaware (Judge Owens)

• Professionals:

  • Legal: Chipman Brown Cicero & Cole LLP (William Chipman Jr., Mark Olivere) & Neal Gerber & Eisenberg LLP (NIcholas Miller Jr., Thomas Wolford)

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

• Other Parties in Interest:

  • Stalking Horse Bidder: Community Media Group/Champaign Multimedia Group LLC

    • Legal: Leech Tishman Fuscaldo & Lampl LLC (John Steiner, Gregory Hauswirth)

New Chapter 22 Filing - SEGA Biofuels LLC

SEGA Biofuels LLC

3/11/18

SEGA Biofuels LLC, an industrial wood pellet manufacturer and distributor with a Georgia-based facility filed for bankruptcy to pursue a sale. This is the second bankruptcy in the last 5 years. In this instance, the debtor has been sitting on an idled plant since 2016, having marketed the asset on two separate occasions to no avail. In fact, the bankruptcies of other wood pellet manufacturers in Louisiana and Texas during the company's marketing process didn't help with the marketing. (Notably, Rentech Inc., another wood pellet manufacturer, filed for bankruptcy in December). 

Now, though, the company proposes to sell to Global Infrastructure Partners, an affiliate of the company's pre-petition secured lender and (now) DIP lender, GIP Genesis LLC, for the equivalent of a few dollars and some spitwads. Or, said another way, $4.2mm in the form of a combined credit bid + cash offer, cure amounts and some assumed liabilities. 

Really the only reason why we're even covering this filing is because it reflects the continued decimation of the wood pellet space. 

• Jurisdiction: S.D. of Georgia
• Capital Structure: $9.658 mm in 4 term loans (Heritage Bank), $26.6mm debt (GIP Genesis LLC)  
• Company Professionals:
  • Legal: Chipman Brown Cicero & Cole LLP (William Chipman Jr., Mark Olivere) & (local) Seyfarth Shaw LLP (John Mills III)
  • Financial Advisor/CRO: CRS Capstone Partners LLC (James Calandra)
  • Claims Agent: Garden City Group LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Buyer: Global Infrastructure Partners
      • Legal: Greenberg Traurig LLP (Matthew Hinker)

New Chapter 11 Filing - TerraVia Holdings Inc.

TerraVia Holdings Inc.

• 8/1/17 Recap: TerraVia, a publicly-traded (Nasdaq: $TVIA) "next-generation" algae-based food company based out of San Francisco filed for bankruptcy. The company has a stalking horse bidder lined up to buy it for $20mm plus certain assumed liabilities and seeks to jam this case through bankruptcy in about 6 weeks lest it run out liquidity in the process (even with a proposed $10mm DIP); it claims that more time is unnecessary given that it ran a robust marketing process pre-filing that included outreach to over 100 parties. We'll let the company economics do the rest of the talking (see below).
• Jurisdiction: (Judge Sontchi)
• Capital Structure: $144.2mm 5% '19 convertible senior subordinated notes (GLAS Trust Company LLC) & $33.475mm 6% '18 convertible senior subordinated notes (Wilmington Trust)   
• Company Professionals:
  • Legal: Davis Polk & Wardwell LLP (Damian Schaible, Steven Szanzer, Adam Shpeen, Benjamin Kaminetzky) & (local) Richards Layton & Finger P.A. (Mark Collins, Amanda Steele)
  • Financial Advisor: 
  • Investment Banker: Rothschild & Co. (Tero Janne)
  • Claims Agent: KCC (*click on company name above for free docket access)
• Other Parties in Interest:
  • DIP Agent: Wilmington Savings Fund Society FSB & Ad Hoc Consortium of Holders of Convertible Senior Subordinated Debt (Gilead Capital LP, Higher Ground SICAV PLC Core Wealth Fund, Lazard Asset Management LLC, Passport Capital LLC, Wolverine Asset Management LLC, Zazove Associates LLC)
    • Legal: Brown Rudnick LLP (Robert Stark, Steven Levine, Brian Rice, Kellie Fisher) & (local) Ashby & Geddes P.A. (William Bowden, Gregory Taylor, Katharina Earle)
    • Financial Advisor: GLC Advisors & Co. LLC
  • Passport Capital
    • Legal: Shearman & Sterling LLP (Joel Moss) & (local) Drinker Biddle & Reath LLP (Patrick Jackson)
  • 6% Notes Successor Trustee: Wilmington Trust NA
    • Legal: Katten Muchin Rosenman LLP (Craig Barbarosh, Karen Dine, Jerry Hall) & (local) Morris James LLP (Eric Monzo)
  • JV Partner: Bunge Global Innovation LLC
    • Legal: Jones Day (Joshua Morse)
  • Silicon Valley Bank
    • Legal: Troutman Sanders LLP (Harris Winsberg, Stephen Roach) & (local) Chipman Brown Cicero & Cole LLP (William Chipman Jr., Mark Olivere)
  • Corbion NV
    • Legal: Baker & McKenzie LLP (Debra Dandeneau, Frank Grese) & (local) Whiteford Taylor & Preston LLC (L. Katherine Good, Aaron Stulman)

Updated 8/26/17

First Day Declaration.

New Chapter 11 Filing - FirstRain Inc.

FirstRain, Inc.

• 6/5/17 Recap: California-based enterprise SaaS company that services Fortune 1000 companies with its software and analytics-driven apps to discover/read/discern/summarize useful insights about other companies/markets filed a prepackaged bankruptcy. The plan contemplates $7.5mm of total consideration including a $4mm DIP credit facility and the plan is to pay the DIP Lender in full, general unsecureds in full and provide the prepetition lender a partial recovery. ESW Capital LLC will own the company on the backend of the restructuring.
• Jurisdiction: D. of Delaware (Judge Silverstein)
• Capital Structure: $5.5mm secured debt (Pacific Western Bank as successor to Square 1 Bank)    
• Company Professionals:
  • Legal: The Rosner Law Group LLC (Frederick Rosner, Scott James Leonhardt)
  • Investment Banker: Atlas Technology Group LLC
  • Claims Agent: JND Legal Administration (*click on company name above for free docket access)
• Other Parties in Interest:
  • DIP Lender: ESW Capital LLC
    • Legal: Haynes and Boone LLP (Trevor Hoffman, Arsalan Muhammad) & (local) Morris Nichols Arsht & Tunnell LLP (Derek Abbott, Matthew Talmo)
  • Prepetition Lender: Pacific Western Bank
    • Legal: Levy Small & Lallas (Leo Plotkin) & (local) Chipman Brown Cicero & Cole LLP (William Chipman Jr.) 

Updated 7/18/17