New Chapter 11 Bankruptcy Filing - Golden Eagle Entertainment $ENT

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Golden Eagle Entertainment

July 22, 2020

Suffice it to say, high correlation to the airline and cruiseline industries is a credit negative these days. A few months ago Speedcast — a provider of information technology services and (largely satellite-dependent) communications solutions (i.e., cybersecurity, content solutions, data and voice apps, IoT, network systems) to customers in the cruise, energy, government and commercial maritime businesses — discovered this the hard way and free fell into bankruptcy court. There’s still no resolution of that case. Similarly, Global Eagle Entertainment Inc. ($ENT), a business that generates revenue by (i) licensing and managing media and entertainment content and providing related services to customers in the airline, maritime and other “away-from-home” nontheatrical markets, and (ii) providing satellite-based Internet access and other connectivity solutions to airlines, cruise ships and other markets, couldn’t avoid trouble once COVID-19 shutdown its core end users. No monthly recurring revenue model can save a company when its clients are effectively closed for business AND there’s $855.6mm of funded debt to service. Not to state the obvious.

Things may get worse before they get better. The company’s largest customer is Southwest Airlines Co. ($LUV) (21% of overall revenue) and it has a pretty bearish take on …

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  • Jurisdiction: D. of Delaware (Judge Dorsey)

  • Capital Structure: $85mm RCF, $503.3mm TL, $188.7mm second lien notes, $82.5mm unsecured convertible notes.

  • Professionals:

    • Legal: Latham & Watkins LLP (George Davis, Madeleine Parish, Ted Dillman, Helena Tseregounis, Nicholas Messana, Eric Leon) & Young Conaway Stargatt & Taylor LLP (Michael Nestor, Kara Hammond, Betsy Feldman)

    • Financial Advisor: Alvarez & Marsal LLC

    • Investment Banker: Greenhill & Co. Inc.

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

  • Other Parties in Interest:

    • Prepetition First Lien Admin Agent & DIP Agent: Citibank NA

      • Legal: Weil Gotshal & Manges LLP (David Griffiths, Bryan Podzius)

    • Ad Hoc DIP & First Lien Lender Group: Apollo Global Management, L.P., Eaton Vance Management, Arbour Lane Capital Management, Sound Point Capital Management, Carlyle Investment Management LLC, Mudrick Capital Management, BlackRock Financial Management, Inc.

      • Legal: Gibson Dunn & Crutcher LLP (Scott Greenberg, Michael Cohen, Jason Goldstein) & Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, TImothy Cairns)

    • Second Lien Agent: Cortland Capital Market Services LLC

    • Second Lien Noteholders: Searchlight Capital Partners LP

      • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Alan Kornberg, Michael Turkel, Irene Blumberg, Elizabeth Sacksteder) & Richards Layton & Finger PA (Daniel DeFranceschi, Zachary Shapiro)

    • Southwest Airlines Inc.

      • Legal: Vinson & Elkins LLP (William Wallander, Paul Heath, Robert Kimball, Matthew Struble) & Saul Ewing Arnstein & Lehr LLP (Lucian Murley)

    • AT&T Corp.

      • Legal: Arnold & Porter Kaye Scholer LLP (Brian Lohan) & Morris Nichols Arsht & Tunnell LLP (Derek Abbott, Brett Turlington)

    • Terry Steiner International

      • Legal: Loeb & Loeb LLP (Daniel Besikof, Geneva Shi)

    • Telesat International Limited

      • Legal: Hodgson Russ LLP (Garry Graber)

    • Nantahala Capital Management LLC

      • Legal: King & Spalding LLP (Arthur Steinberg, Scott Davidson) & The Rosner Law Group LLC (Frederick Rosner, Jason Gibson)

New Chapter 11 Bankruptcy Filing - LSC Communications Inc.

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LSC Communications Inc.

April 13, 2020

Chicago-based LSC Communications Inc. ($LSC) and 21 affiliated debtors (the “debtors”), a provider of traditional and digital print products, print-related services and office products, filed for bankruptcy in the Southern District of New York. The company is the result of a 2016 spinoff from R.R. Donnelley & Sons and though it subsequently diversified its business into logistics, it still deals with old-school categories like print magazines, catalogs, books, directories, various other print-related services, and office products. In fact, it is one of the largest printers of books in the US. All of which is to say that the debtors were ripe for disruption.

Nothing about this ought to be surprising to people who have been paying attention to the retail and media landscape over the last decade. Nevertheless, it is painful to read:

Although the Company is a market leader in the printing and printing related services industries, the Company’s product and service offerings have been adversely impacted by a number of long-term economic trends. Digital migration has substantially impacted print production volume, in particular with respect to printed magazines as advertising spending continues to move away from print to electronic media. Catalogs have experienced volume reductions as retailers and direct marketers allocate more of their spending to online advertising and marketing campaigns and some traditional retailers and director marketers go out of business in the face of increased competition from online retailers. The Company saw an unprecedented drop in demand for magazines and catalogs in 2019, with the faster pace of decline in demand primarily due to the accelerating movement from printed platforms to digital platforms.

Thanks Facebook Inc. ($FB). Clearly all of the Restoration Hardware Inc. ($RH) catalogues in the world couldn’t offset the shift of advertising away from print media and soften this blow.

And then there’s this:

Demand for printed educational textbooks within the college market has been adversely impacted by electronic substitution and other trends such as textbook rental programs and free open source e-textbooks. The K-12 educational sector has seen an increased focus on e-textbooks and e-learning programs, but there has been inconsistent adoption of these new technologies across school systems. Consumer demand for e-books in trade and mass market has impacted overall print book volume, although e-book adoption rates have stabilized and industry-wide print book volume has been growing in recent years.

Apropos to the brief discussion above about Mary Meeker’s presentation, we’ve got news for these guys: these trends away from printed textbooks are going to gather steam post-COVID. And while we’re happy to see an uptick in physical book production, it’s unclear whether that is a short-term trend or a longer-term rebound. Someone is going to have to get comfortable betting on the latter. More on this in a moment.

As if the secular trends weren’t bad enough, the debtors’ attempt to consolidate with Quad/Graphics Inc. ($QUAD) (synergies!) in late 2018 met with resistance. The DOJ filed a civil antitrust lawsuit seeking to block the proposed merger and ultimately the parties agreed to terminate the merger. While LSC received a reverse termination fee that exceeded the amount of transaction costs, the proposed merger (i) hindered the debtors’ ability to make much-needed operational fixes (i.e., plant consolidation and footprint optimization), (ii) affected new business development efforts and strained existing customer relationships, and (iii) created uncertainty among the employee ranks that, in some respects, sparked attrition.

All of the above led to an internal restructuring. The debtors set their sights on nine plant closures and footprint reductions — primarily in magazines and catalog manufacturing; they also renegotiated a number of unprofitable customer contracts. Bear in mind: all of this was pre-COVID. Matters can only have gotten worse.

What does all of this look like from a financial perspective? The debtors filed their annual report in early March and the numbers don’t lie:

LSC Annual Report 3/2/20

LSC Annual Report 3/2/20

Net sales declined 13% and while there was a corresponding decline in the cost of sales, SG&A remained constant and restructuring costs ballooned.* The magazines/catalogues/logistics segment declined 7.3%. The book segment fell 3.6%. Office products were a rare bright spot up 8.1% (PETITION Note: this is a relatively small portion of the debtors’ business and we’ll see how that plays out going forward given that there may be a huge shift there).

Due to this piss poor operating performance, the debtors tripped their consolidated leverage ratio and minimum interest ratio covenants in their credit agreement. That’s right: you didn’t think this story would be complete without a significantly over-levered balance sheet, did you?

The company has $972mm of total funded indebtedness broken out among a revolver ($249mm + $50.8mm in outstanding letters of credit), a term loan ($221.9mm) and senior secured notes ($450mm at 8.75%). The term loan requires quarterly principal payments of $10.625mm. While the entire capital structure is secured by an “equal first-priority" ranking with respect to the collateral, the revolver has a “first-out” priority and is entitled first to any proceeds from the collateral while the term loan and the senior secured notes enjoy pari passu status. This is where the rubber meets the road: that’s a lot of parties to get to agree on a transaction.

Before it could agree to anything, however, the debtors needed time and therefore entered into a widely reported forbearance in early March. S&P Global Ratings promptly slapped a downgrade on the company saying that it believed a debt restructuring was likely within 90 days. What a genius call!! While all of this was happening, the debtors continued to deteriorate:

During its March discussions with creditors, the Debtors began to see a significant decrease in their available liquidity, driven in part by the long-term industry trends discussed above and made acute by the severe economic impact of the COVID-19 pandemic.

Which begs the question: what is the value of this business? Cleary nobody can agree on that: there is no restructuring support agreement here. Instead, there appears to be an arms-locked resignation that a parallel-path is needed to (i) nail down some DIP financing to shore up liquidity ($100mm at L+6.75%) and buy time, (ii) continue to discuss a balance sheet restructuring, AND (iii) simultaneously market test the business via a strategic marketing process. A lot of people will need to wait and see how this plays out, primarily pensioners owed over $50mm and various trade creditors including the bankruptcy-familiar RR Donnelley & Sons Co. ($RRD), Eastman Kodak Company ($KODK) and Verso Paper Holding LLC.

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

  • Capital Structure: $249mm funded RCF (plus $50.8mm LOCs), $221.9mm funded TL (Bank of America NA), $450mm ‘23 8.75% senior secured notes (Wells Fargo Bank NA)

  • Professionals:

    • Legal: Sullivan & Cromwell LLP (Andrew Dietderich, Brian Glueckstein, Alexa Kranzley, Christian Jensen) & Young Conaway Stargatt & Taylor LLP

    • Financial Advisor: AlixPartners LLP

    • Investment Banker: Evercore Group LLC

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

  • Other Parties in Interest:

    • DIP Agent ($100mm): Bank of America NA

      • Legal: Moore & Van Allen PLLC (David Eades, Charles R. Rayburn III, Zachary Smith)

    • Ad Hoc Group of Term Lenders: Bardin Hill Investment Partners LP, Eaton Vance Management, HG Vora Capital Management, LLC, Marathon Asset Management, Shenkman Capital Management, Sound Point Capital Management LP, and Summit Partners Credit Advisors, L.P.

      • Legal: Arnold & Porter Kaye Scholer LLP (Michael Messersmith, Sarah Gryll, Lucas Barrett)

    • Ad Hoc Group of Secured Noteholders: Capital Research and Management Company, Manulife Investment Management, Atlas FRM LLC, TD Asset Management Inc.

      • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Andrew Rosenberg, Alice Eaton, Claudia Tobler)

    • Official Committee of Unsecured Creditors

      • Legal: Stroock & Stroock & Lavan LLP (Frank Merola, Brett Lawrence, Erez Gilad, Harold Olsen, Gabriel Sasson)

New Chapter 11 Bankruptcy & CCAA Filing - Pier 1 Imports Inc. ($PIR)

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Pier 1 Imports Inc.

February 17, 2020

Fort Worth, Texas-based Pier 1 Imports Inc. and seven affiliates (the “debtors”) have fulfilled their obvious destiny and finally fallen into bankruptcy court in the Eastern District of Virginia. Contemporaneously, the debtors filed a CCAA proceeding in Canada to effectuate the closure of all Canadian operations. Color us pessimistic but we’re not feeling so great about the debtors’ go-forward chances in the US either.

We’ve covered the debtors ad nauseum in previous editions of PETITION. Here — supported by an ode to “Anchorman” — we described the debtors’ recent HORRIFIC financial performance and noted how a bankruptcy would be sure to confuse a peanut gallery accustomed to spouting regular (and sometimes inaccurate) hot takes about how private equity is killing retail.* We wrote:

The reaction to this surely-imminent bankruptcy (and, if we had a casino near us, liquidation) is going to be interesting. It is sure to flummox the “Private Equity is Killing Retail” camp because, well, it’s not PE-backed. Similarly it’ll confuse the “You Shouldn’t Put So Much Debt on Retail” cohort because, well, there really isn’t that much debt on the company’s balance sheet. Chuckling in the corner will be “The US is Over-Stored” team … And “The Millennials Aren’t Buying Homes and Furnishing Them With Chinese-Made Tchotchkes” gang (thanks a ton, Marie Kondo) … And the “Management Has Blown Chunks, The Assortment Sucks” bunch … And, finally, “The Amazon Effect” squad….

Over the weekend, The New York Times ran a piece from Austan Goolsbee, an economics professor at the University of Chicago’s Booth School of Business, that — no disrespect to the professor — says many of the same things PETITION has been saying for a LONG LONG time. That is, “The Amazon Effect” is overstated. He argues that “three major economic forces have had an even bigger impact on brick-and-mortar retail than the internet has”: (1) big box stores, (2) income inequality, and (3) the preference shift away from goods towards services. It’s fair to say that these three forces affected the debtors in a big big way.**

Surely, e-commerce has a lot to do with it too. As one PETITION advisor said about the debtors’ wares yesterday:

“You can just order that sh*t online. You don’t need to try it on.”

It’s a fair point.

Another fair point that Mr. Goolsbee omits from his analysis is the role of management. It’s safe to say that the US is suffering from an epidemic of retail ineptitude.

And like the coronavirus, it keeps spreading from one retailer to the next.***

But we digress.

The business has clearly suffered:

From fiscal years 2014 to 2018, the company’s net income dropped from $108 million to about $11.6 million and in fiscal year 2019 Pier 1 experienced a $198.8 million loss.

So, what’s the upshot here? The debtors announced a plan support agreement and intend to use the chapter 11 bankruptcy process to (a) continue to shutter the previously announced ~450 stores (read: get ready for a lot of lease rejections) and (b) pursue a sale pursuant to a chapter 11 plan of reorganization of what remains of the debtors’ business. Frankly, this was masterful messaging: the announcement relating to a plan support agreement and potential plan of…wait for it…”reorganization”(!) head-faked the entire market into thinking this thing might actually be salvageable. That’s where the fine print comes in.

The debtors have dubbed this an “all weather” chapter 11 plan because it provides for either a sale or the equitization of the term loan at the term lenders’ election. This begs the question: will Pathlight Capital LP want to own this thing?🤔 This bit was eye-catching:

“To be clear, the term loan lenders have made no decision at this point, but instead support the process as outlined in the plan support agreement.”

Yeah, we bet they do. Qualified bids will be due on or before March 23 and the lenders have until March 27 to make their election. Which way will the winds blow?

Note that “the process” isn’t currently supported by a stalking horse purchaser. 🤔

Note further that the debtors are required under the DIP to distribute informational packages and solicitations for sale of the debtors’ assets on a liquidation basis to liquidators by March 9.🤔 🤔

It looks like we’ll know the answer very soon.

To finance the cases, the debtors obtained a committed for a $256mm DIP credit facility. The facility includes a $200mm revolving loan commitment and a $15mm first in last out term loan, each provided 50/50 by Bank of America N.A. and Wells Fargo National Association, and a $41.2mm term loan from Pathlight. This was the pre-petition capital structure:

Screen Shot 2020-02-18 at 11.39.07 AM.png

The DIP effectively just rolls up much of the pre-petition debt. There is no new money. The messaging here, then, is also critical: the DIP facility ought to provide customers, vendors and employees comfort that there is access to liquidity if needed. Cash collateral usage, however, is the main driver here: the debtors believe that operating cash flow will suffice to handle working capital needs and bankruptcy expenses.

To summarize, we have another distressed retailer that is scratching and clawing to live. They’ve taken all of the usual steps to extend runway: cost cuts, footprint minimalization, new management. Bankruptcy is a last-ditch effort to survive: the debtors take pains to try and convince some prospective buyer that there is life left in the debtors’ brick-and-mortar business:

The remaining go-forward stores achieved superior sales and customer metrics in the last twelve months compared to the closing stores, including approximately 15% greater sales per square foot on average.

And if that doesn’t do it, there’s the argument that there’s an e-commerce play here. The debtors similarly go to great lengths to state OVER AND OVER AGAIN that e-commerce represents 27% of total sales. They’re practically screaming, “Look at me, look at me! We can be interesting to you [Insert Authentic Brands Group here]!”

Pathlight is sure as hell hoping someone bites.

*Kirkland & Ellis…uh…we mean, the “debtors” appear to agree, stating, in reference to private equity, that “[t]oo many pundits have sought to point in too many wrong directions,” citing pieces in RetailDive and The Wall Street Journal. THAT ladies and gentlemen, is client advocacy!

**It’s also fair to say that Professor Goolsbee does his readers a disservice by neglecting the overall picture which, no doubt, also includes over-expansion, too much retail per capita, private equity and over-levered balance sheets. These cowboys are closing 400+ stores for a reason.

Of course, long time PETITION readers know that we’ve been arguing for a LOOOOONG time that the “perfect storm” hitting retail is a confluence of factors that cannot just be lazily summarized as “private equity” or “The Amazon Effect.” It’s good to see that the folks at Kirkland & Ellis agree:

In the face of the longest bull run in U.S. history (close to 3,000 days and counting), a myriad of factors have collectively changed the ways in which consumers and retailers interact—creating for retailers what is tantamount to a perfect storm—and directly contributing to the struggles retailers face in a shifting marketplace.5

Then it’s as if they lifted this footnote straight out of previous PETITION briefings:

Screen Shot 2020-02-18 at 1.39.17 PM.png

***Not to cast aspersions, but the resume of the current PIR CEO is…uh…interesting: prior experience includes FullBeauty Brands, HHGregg, and Marsh Supermarkets. Any of those names sound familiar to bankruptcy professionals?

  • Jurisdiction: E.D. of Virginia (Judge Huennekens)

  • Capital Structure: $140mm RCF + $47.3mm LOC, $189mm Term Loan (Wilmington Savings Fund Society FSB), $9.9mm industrial revenue bonds

  • Professionals:

    • Legal: Kirkland & Ellis LLP (Joshua Sussberg, Emily Geier, AnnElyse Scarlett Gains, Joshua Altman) & Kutak Rock LLP (Michael Condyles, Peter Barrett, Jeremy Williams, Brian Richardson)

    • Canadian Legal: Osler Hoskin & Harcourt LLP

    • Independent Directors: Steven Panagos & Pamela Corrie

    • Financial Advisor: AlixPartners LLP (Holly Etlin)

    • Investment Banker: Guggenheim Securities LLC (Durc Savini)

    • Real Estate Advisor: A&G Realty Partners LLC

    • Liquidation Consultant: Gordon Brothers Retail Partners LLC

      • Legal: Riemer & Braunstein LLP (Steven Fox, Anthony Stumbo)

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

  • Other Parties in Interest:

    • DIP ABL Agent: Bank of America NA

      • Legal: Morgan, Lewis & Bockius LLP, Hunton Andrews Kurth LLP, and Norton Rose Fulbright Canada LLP

    • DIP ABL Term Agent: Pathlight Capital LP

      • Legal: Choate Hall & Stewart LLP (John Ventola, Jonathan Marshall) and Troutman Sanders LLP (Andrew Buxbaum)

    • Ad Hoc Term Lender Group: Eaton Vance Management, Insight North America LLC, Marathon Asset Management LP, MJX Asset Management LLC, Whitebox Advisors LLC, ZAIS Group LLP

      • Legal: Brown Rudnick LLP (Robert Startk, Uchechi Egeonuigwe, Steven Pohl, Sharon Dwoskin) & Whiteford Taylor & Preston LLP (Christopher Jones, Vernon Inge, Corey Booker)

      • Financial Advisor: FTI Consulting Inc.

    • Large Equityholders: Charles Schwab Investment Management, Dimensional Fund Advisors LLP

    • Official Committee of Unsecured Creditors: Bhati & Company, Synergy Home Furnishings LLC, United Parcel Services Inc., Brixmor Operating Partnership LP, Brookfield Property REIT Inc.

      • Legal: Foley & Lardner LLP (Erika Morabito, Brittany Nelson, Timothy Mohan) & Cole Schotz PC (Seth Van Aalten)

      • Financial Advisor: Province Inc. (Paul Huygens, Sanjuro Kietlinski, Walter Bowser, Paul Navid, Shane Payne, Courtney Clement)

New Chapter 11 Bankruptcy - Walter Investment Management Corp.

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Walter Investment Management Corp. 

  • 11/30/17 Recap: Mortgage banking firm focused primarily on the servicing and origination of loans, including forward and reverse loans, has filed a much-anticipated prepackaged bankruptcy with the intention of shedding nearly $800mm of debt from its balance sheet. The company originates "conventional conforming loans eligible for securitization by government-sponsored enterprises, such as Fannie Mae and Freddie Mac, or eligible for guarantees by government agencies, such as Ginnie Mae MBSs." If that was painful reading, imagine how the lawyers felt drafting that. Even more painful is understanding that this bankruptcy is directly attributable to decisions the company made in the aftermath of the financial crisis. From 2010 through 2015, the company went on a debt-ridden acquisition spree (including once bankrupt Residential Capital LLC) which just goes to show that, while one's crisis is another's opportunity, one's crisis could be one's crisis. With this deleveraging transaction, the company hopes to be more competitive in the market going forward.

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

  • Capital Structure: $100mm '18 RCF, $1.4b '20 TL (Credit Suisse AG), $540mm 7.875% '21 senior unsecured notes (Wilmington Savings Fund Society FSB), $242mm '19 senior subordinated convertible notes (Wells Fargo Bank NA)(public equity: $WAC)

  • Company Professionals:

    • Legal: Weil Gotshal & Manges LLP (Ray Schrock, Matthew Barr, Sunny Singh)

    • Financial Advisor: Alvarez & Marsal North America LLC (David Coles)

    • Investment Banker: Houlihan Lokey Capital Inc. (Reid Snellenbarger, Jeffrey Levine, Jeffrey Lewis, James Page, Daniel Martin, Derek Kuns)

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

  • Other Parties in Interest:

    • Administrative Agent: Credit Suisse AG

      • Legal: Davis Polk & Wardwell LLP (Brian Resnick, Michelle McGreal)

    • Consenting Term Lenders (Carlson Capital LP, TAO Fund LLC, Credit Suisse Asset Management LLC, Marathon Asset Management LP, Nuveen, Symphony Asset Management LLC, Eaton Vance Management)

      • Legal: Kirkland & Ellis LLP (Patrick Nash, Gregory Pesce)

      • Financial Advisor: FTI Consulting Inc.

    • Consenting Senior Noteholders (Canyon Capital Advisors LLC, CQS UK LLP, Deer Park Road Management Company LP, Lion Point Capital LP, Oaktree Capital Management LP, Omega Advisors Inc.)

      • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Gregory Bray, Haig Maghakian, Rachel Franzoia)

      • Financial Advisor: Moelis & Co.

    • Prepetition Indenture Trustee: Wilmington Savings Fund Society FSB

      • Legal: Pryor Cashman LLP (Patrick Sibley, Seth Lieverman, Matthew Silverman)

    • Prepetition Convertible Notes Indenture Trustee: Wells Fargo Bank NA

      • Legal: Thompson Hine LLP (Curtis Tuggle)

    • Administrative Agent for DIP Warehouse Facilities: Credit Suisse First Boston Mortgage Capital LLC

      • Legal: Alston & Bird LLP (Gerard Catalanello, Karen Gelernt, James Vincequerra)

    • Fannie Mae

      • Legal: O'Melveny & Myers LLP (Darren Patrick, Steve Warren, Jennifer Taylor)

    • Freddie Mac

      • Legal: McKool Smith (Paul Moak, Kyle Lonergan)

First Day Declaration

First Day Declaration

Updated 11/30/17 10:05 CT

New Chapter 11 Bankruptcy - Cumulus Media Inc.

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Cumulus Media Inc.

  • 11/29/17 Recap: It has become routine for a company to tout the synergistic benefits of an acquisition. But synergies only come from solid execution and integration of the new properties into the existing franchise. As we often see, that's a pipe dream that often fails to come to fruition. Take, Cumulus Media, for instance, which from 1998 through 2013, "completed approximately $5 billion worth of acquisitions to grow its network and station businesses," including two large recent acquisitions (Citadel Broadcasting in 2011 and Westwood One in 2013). Notably, "[t]he Company struggled to develop the management and technology infrastructure required to integrate the acquired assets and to support and manage its expanding portfolio. Additionally, certain of the acquisition projections proved erroneous and a number of subsequent management decisions failed to achieve their desired results. The Company was thus unable to achieve the cash flow projections it had made to support the prices paid for those acquisitions...." Projections didn't translate to reality? Color us shocked. Combine these operational challenges with "industry challenges" and you've got a recipe for decreased YOY trends in ratings, revenue and EBITDA. Since 2012. Yikes. But like most bankruptcies, this is a storm of multiple elements. Clearly, the above-noted transactions led to a tremendous amount of incurred debt, capex for integration, and interest expense on that debt. But, in addition, "advertiser and listener demand for radio overall has been negatively impacted by the availability of content and advertising opportunities in growing digital streaming and web-based digital formats, resulting in declines in radio industry revenue and listenership. As a result of these general industry pressures, high acquisition prices and subsequent poor performance, Cumulus Media found itself with an excessive level of debt relative to its earnings and rapidly approaching maturities on its funded debt." So, in other words, blame the debt, Facebook ($FB), Google ($GOOGL), Netflix ($NFLX), Amazon ($AMZN), podcasts, etc., for the decline in radio consumption. So, now the company is in bankruptcy with a restructuring support agreement in place to equitize the term loan. The term loan lenders will get take-back paper and 83.5% percent of the reorganized company. The noteholders will get 16.5% of the equity subject to management incentive plan. Shareholders will get bupkis. 
  • Jurisdiction: S.D. of New York (Judge Chapman)
  • Capital Structure: $1.73b TL (JP Morgan Chase Bank NA), $637mm 7.75% senior notes (U.S. Bank NA)   
  • Company Professionals:
    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Paul Basta, Lewis Clayton, Jacob Adlerstein, Claudia Tobler)
    • Financial Advisor: Alvarez & Marsal North America LLC (David Miller)
    • Investment Banker: PJT Partners LP
    • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
    • Board of Directors: Mary Berner, Jill Bright, Ralph Everett, Jeffrey Marcus, Ross Oliver, Jan Baker
  • Other Parties in Interest:
    • Ad Hoc Group of Term Loan Lenders (Eaton Vance Management and Boston Management & Research, Franklin Mutual Advisors, Highland Capital Management LP, JP Morgan Chase Bank NA, Silver Point Finance LLC, Symphony Asset Management LLC and Nuveen Fund Advisors, Voya Investment Management Co. LLC, Beach Point Capital Management LP)
      • Legal: Arnold & Porter Kaye Scholer LLP (Michael Messersmith, Michael Solow, Seth Kleinman)
      • Financial Advisor: FTI Consulting LLC
    • Ad Hoc Senior Noteholder Group (Angelo Gordon & Co. LLP, Brigade Capital Management, Capital Research and Management Co., Greywolf Capital Management LP, Waddell & Reed Investment Corporation)
      • Legal: Akin Gump Strauss Hauer & Feld LLP (Michael Stamer, Meredith Lahaie, Abid Qureshi, Kate Doorley)
    • Administrative Agent: JP Morgan Chase Bank NA
      • Legal: Simpson Thacher & Bartlett LLP (Elisha Graff, Nicholas Baker)

Updated 11/30/17

New Chapter 11 Filing - rue21 Inc.

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rue21 Inc.

  • 5/15/17 Recap: Pennsylvania-based specialty fashion retailer (owned by private equity shop Apax Partners LP) with 1184 brick-and-mortar locations (pre recent closing initiative) in various strip centers, regional malls and outlet centers filed for bankruptcy to (i) further revamp its e-commerce strategy, (ii) improve the in-store experience, (iii) right-size the store footprint and lease portfolio, (iv) de-lever its capital structure, and (v) effectuate a long-term business plan under its relatively new management. The numbers here are interesting: the company had a negative EBITDA swing of approximately $51mm from 2015 to 2016 - despite rising sales. The company's girls' division got decimated due to "an evolution of customer tastes." Wow! Who knew that teenage girls have fickle fashion tastes? These merchandising issues combined with (a) supply chain issues (heightened - in a self-fulfilling kind of way - by all of the rumors surrounding the company's bankruptcy), (b) "the shift away from brick-and-mortar retail sales to online channels," AND (c) a "not as robust" e-commerce presence relative to competitors, to put the company in a tough spot. A digression: we have previously noted David Simon's comments on the Simon Properties Group (SPG) earnings call from 4/27/17 that SPG is NOT experiencing a decline in traffic - though he offered absolutely ZERO data to back that up. According to SPG's own website, there are currently 90 rue21 locations in SPG properties (which translates to nearly 8%): we're curious to see whether any of these 90 locations will be featured in store closing motions coming soon to a bankruptcy court near you; indeed, in the first instance, it appears that some already are). The company is proposing a deal whereby the Term Lenders will effectively own the majority of the company post-bankruptcy after rolling-up a $100 DIP credit facility (applied in addition to $50mm of new money to be rolled into an exit facility). They've been so kind so as to give general unsecured creditors (read: the little guys) a 4% equity kiss - but only if they vote to accept the plan. Otherwise, the "death trap" door opens and general unsecured creditors end up with nada. We're sure a creditors' committee will have something to say about that. 
  • Jurisdiction: W.D. of Pennsylvania
  • Capital Structure: $150mm RCF ($78mm funded)(Bank of America), $521mm '20 TLB (Wilmington Savings Fund Society as successor to JPMorgan Chase Bank NA), $239mm '21 9% unsecured bonds (Wells Fargo Bank NA).    
  • Company Professionals:
    • Legal: Kirkland & Ellis LLP (Jonathan Henes, Nicole Greenblatt, Robert Britton, George Klidonas) & (local counsel) Reed Smith LLP (Eric Schaffer, Jared Roach)
    • Financial Advisor: Berkeley Research Group LLC (Stephen Coulombe, Kyle Richter, Patrick Farley)
    • Investment Banker: Rothschild Inc. (Neil Augustine, Jonathan Brownstein)
    • Real Estate Advisor: A&G Realty Partners LLC
    • Liquidator: Gordon Brothers Retail Partners LLC
      • Legal: Greenberg Traurig LLP (Nancy Peterman)
    • Claims Agent: KCC (*click on company name for access to the free docket)
  • Other Parties in Interest:
    • ABL Agent and DIP ABL Agent: Bank of America
      • Legal: Morgan Lewis & Bockius LLP (Matthew Furlong, Marc Ledue, Julia Frost-Davis) & (local) Buchanan Ingersoll & Rooney PC (James Newell, Timothy Palmer, Kelly Neal)
    • TL Agent and DIP TL Agent: Wilmington Savings Fund Society FSB and Term Lender Group (Bayside Capital LLC, Benefit Street Partners LLC, Bennett Management Corporation, Citadel Advisors LLC, Eaton Vance Management, JPMorgan Chase Bank NA, Octagon Credit Investors LLC, Southpaw Credit Opportunity Master Fund LP, Stonehill Capital Management LLC, Voya Investment Management)
      • Legal: Jones Day LLP (Scott Greenberg, Michael J. Cohen, Jeffrey Bresch, Genna Ghaul)
      • Financial Advisor: PJT Partners
    • Indenture Trustee: Wells Fargo Bank NA
      • Legal: Milbank Tweed Hadley & McCloy LLP (Gerard Uzzi, Robert Nussbaum, Eric Stodola)
    • Sponsor: Apax Partners LP
      • Legal: Simpson Thacher & Bartlett LLP (Elisha Graff, Nicholas Baker, Jonathan Endean) & Duane Morris LLP (Joel Walker, Kenneth Argentieri)
    • Official Committee of Unsecured Creditors
      • Legal: Cooley LLP (Jay Indyke, Cathy Hershcopf, Seth Van Aalten, Michael Klein, Lauren Reichardt) & Fox Rothschild LLP (John Gotaskie Jr.)
      • Financial Advisor: FTI Consulting Inc. (Samuel Star)

Updated 7/12/17

New Chapter 11 Filing - Ameriforge Group Inc.

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Ameriforge Group Inc. (d/b/a AFGlobal Corporation)

  • 5/1/17 Recap: Houston-based manufacturer of products for a variety of markets (oil and gas, power, aerospace and industrial) filed a prepackaged bankruptcy case to delever its balance sheet by approximately $680mm. The company's first lien lenders will get nearly all of the equity in the reorganized entity. Second lien lenders will get some option value in the form of an equity kiss and warrants/options. The company has secured $70mm in new money and seeks to be out of bankruptcy in roughly three weeks: some of these cases are getting VERY speedy.
  • Jurisdiction: S.D. of Texas
  • Capital Structure: $89.5mm '17 first lien funded RCF and $519mm '19 first lien senior secured TL-B (Deutsche Bank Trust Company Americas), $143.3mm '20 second lien secured TL (Delaware Trust Company).   
  • Company Professionals:
    • Legal: Kirkland & Ellis LLP (James Sprayragen, Edward Sassower, William Guerrieri, Christopher Hayes, Bradley Giordano, Chad Husnick) & (local) Jackson Walker LLP (Patricia Tomasco, Matthew Cavenaugh, Jennifer Wertz)
    • Financial Advisor: Alvarez & Marsal LLC (James Grady)
    • Investment Banker: Lazard Middle Markets LLC (Brandon Aebersold, Parry Sorenson)
    • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Ad Hoc Group of First Lien Lenders (Carlyle Strategic Partners, Deutsche Bank Trust Company Americas, Eaton Vance Management, Stellex Capital Management)
      • Legal: Jones Day LLP (Scott Greenberg, Michael Cohen, Bryan Kotliar, Paul Green)
      • Financial Advisor: Houlihan Lokey Capital Inc. (Adam Dunayer)
    • Ad Hoc Group of Second Lien Lenders
      • Legal: Akin Gump Strauss Hauer & Feld LLP (Ira Dizengoff, Philip Dublin, Jason Rubin, Charles Gibbs)
      • Financial Advisor: PJT Partners LP (Jon Walters, Paul Sheaffer)
    • Sponsor: First Reserve Heavy Metal LP
      • Legal: Simpson Thacher & Bartlett LLP (Sandy Qusba, Elisha Graff)
  • Prepetition 1L Agent & DIP Agent: Deutsche Bank Trust Company
    • Legal: White & Case LLP (Scott Greissman, Adam Zatz)
  • Prepetition 2L Agent: Delaware Trust Company
    • Legal: Bryan Cave LLP (Jeremy Finkelstein, Stephanie Wickouski, Keith Miles Aurzada)

Updated 7/13/17