💊 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 Filing - Comcar Industries Inc. 🚚

Comcar Industries Inc.

May 17, 2020

Florida-based Comcar Industries Inc. and 31 affiliates (the “debtors”) filed for chapter 11 bankruptcy in the District of Delaware — the latest trucking company to end up in bankruptcy court (Callback to “🚛 Dump Trucks 🚛 ,” a PETITION deep dive into the industry which included a review of Celadon Group Inc.’s chapter 11 bankruptcy filing). Comcar is a holding company with four stand-alone trucking business units ((as well as (a) logistics services, (b) supplies, parts and repairs, and (c) fleet maintenance services)). Through the bankruptcy filing, the debtors intend to effectuate a sale of all four units.

Each unit services a different part of the trucking market:

• CCC Transportation LLC (“CCC”) is a bulk bulk carrier that primarily handles construction materials;

• CT Transportation LLC (“CT”) is a flatbed carrier that specializes in construction materials;

• CTL Transportation LLC (“CTL”) is a liquid bulk chemical transporter; and

• MCT Transportation LLC (“MTL”) is a refrigerated and dry van commodities transporter.

Formed in the 1950s, the debtors grew over the years in order to provide all of these offerings. To do so, they, naturally, took on debt. Funded debt stands at $64.8mm including an ABL, a term loan, and various real estate-backed loans. Servicing the debt has been a challenge going as far back as 2014.

Trucking industry struggles have compounded matters. Per the debtors:

The trucking industry has experienced significant headwinds starting in 2019. During the first half of 2019, the $800 billion American trucking industry began to experience a recession and a reported 640 trucking companies went bankrupt. By mid-2019, the trucking freight market continued to soften. The combination of a decline in overall freight tonnage and excessive truck capacity in the market led to a significant decline in freight rates, and customers began to take bids at lower freight rates. Compared to the year immediately prior, 2019 showed a steady decline in freight rates, including spot freight rates and contractual rates.

Rates weren’t the only problem. Volumes also declined.

During 2019, truck volumes decreased for nine consecutive months and the trucking industry braced itself for a decrease in demand through the third quarter of 2020. As a result, spot and contract prices, which increased thirty percent (30%) in 2018, decreased twenty percent (20%) in 2019. The decrease in truckload linehaul rates was driven by (1) spot rates that were below contract rates by unsustainably larger margins than, (2) capacity additions and (3) stalled growth in the consumer and industrial economy.

All of this hit the the top and bottom lines. In 2019, the debtors suffered a 26% YOY revenue decrease across all units. CCC got hit the most, down 44.2%. CT got hit the least. Yet even that was down 19.7%. In total, the debtors lost $25mm in 2019 and $6mm through March 27, 2020.

Luckily, as with Celadon Group Inc. previously, there is a market for these trucks. The debtors have a buyer lined up for the CT and CTL businesses for $9mm and $8.6mm, respectively. Similarly, the debtors have a buyer for the MCT business. They would like to proceed with private sales of each of these businesses stating that “…the terms offered … are materially superior to the terms that the Debtors could hope to achieve at any auctions….” Pursuant to the proposed DIP, these sales need to be consummated by the end of July.

The debtors pre-petition ABL and Term Loan lenders (which includes an affiliate of PIMCO) have committed to funding a $15mm DIP — some of which will pay down pre-petition debt, some of which ($1.33mm) will roll-up pre-petition term loans, and the rest for liquidity to fund the cases.

---

• Jurisdiction: D. of Delaware (Judge Dorsey)

  1. Capital Structure: $14mm ABL (Sterling National Bank), $25.3mm Term Loan (B2 FIE VIII LLC as lender, US Bank NA as agent), $6.2mm secured real estate loan (CenterState Bank NA), $7mm CWI Real Estate Loan (Commercial Warehousing Inc.),

  2. Professionals:

     • Legal: DLA Piper US LLP (Stuart Brown, Jamila Justine Willis, Tara Nair)

     • Independent Manager: Tobias Keller

     • Financial Advisor/CRO: FTI Consulting Inc. (Andrew Hinkelman)

     • Investment Banker: Bluejay Advisors LLC

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

  3. Other Parties in Interest:

     • Prepetition ABL Agent: Sterling National Bank

       • Legal: Greenberg Traurig LLP

     • Prepetition Term Loan Agent and DIP Agent: US Bank NA

       • Legal: Seward & Kissel LLP

     • Prepetition Term Loan Lender & DIP Lender: B2 FIE VIII LLC (Pimco)

       • Legal: Latham & Watkins LLP (Jason Bosworth)

⛽️New Chapter 11 Bankruptcy Filing - Shale Support Global Holdings LLC⛽️

Shale Support Global Holdings LLC

July 11, 2019

When privately-owned companies that most people have never heard of file for bankruptcy, it naturally raises the following logical question: with oil and gas once again imploding, how many off-the-run companies are going to wind their way into bankruptcy court? 🤔 We reckon quite a number.

Shale Support Global Holdings LLC, a private Louisiana-based proppant supplier to oilfield servicing companies that, in turn, service E&P companies, filed for bankruptcy in the Southern District of Texas. The company and 7 affiliated debtors (the “Debtors”) have little by way of assets ($3.15mm) and much more by way of debt ($127.8mm). MOR Bison LLC and BBC Holding LLC own 69.24% and 29.67% of the company, respectively.

The company started in 2014 to solve the problem of expensive logistics costs emanating out of the transport of sand to frac sites. The company sought to vertically integrate the ownership of sand mines with, among other things, a drying facility and a transload facility; its mines are in Mississippi. Given what has occurred in oil and gas country since 2014, it seems abundantly clear that the timing here was just a bit off. “How off,” you ask? Per the Debtors:

Demand for frac sand is significantly influenced by the level of well completions by E&P and OFS companies, which depends largely on the current and anticipated profitability of developing oil and natural gas reserves. As such, Shale Support’s business is highly correlated with well completions, which is, in-turn, is dependent on both commodity prices and producers’ ability to deliver oil to the market. Over the past five years, commodity prices have been highly volatile resulting in an unpredictable demand curve and a significant amount of OFS and E&P bankruptcies. Compounding these demand issues, Shale Support operates in a highly-competitive industry that has seen a dramatic increase in supply. This new supply has come from basin-specific regional producers (that have dramatically lower logistic costs) as well as larger, often better-capitalized, competitors. Regional suppliers and Shale Support’s larger competitors are both in a position to exert significant, downward pressure on pricing for proppants.

Said another way, as off as humanly possible. With a supply/demand imbalance in 2H ‘18, the company saw revenue fall over 40% in 2018. 😬 This was in large part due to the fact that, despite falling proppants prices, the Debtors are locked in to fixed cost contracts with railcar transport providers. With this mix plus over $127mm in outstanding debt obligations, liquidity became an issue.

For over a year now, the Debtors have been in a state of perpetual marketing. Piper Jaffrey & Co., the Debtors’ banker, could not, however, locate a buyer. In the midst of discussions with potential strategic and financial buyers, the price of frac sand continued to fall. Per the Debtors:

Unsurprisingly, no party submitted an indicative expression of interest, a non-binding offer or a valuation of Shale Support. The stated justification from these parties centered around market conditions, location of the reserves, quality of sand, availability of buyer cash, and consistent underperformance of business relative to forecasts.

Efforts to refinance the debt were equally unsuccessful given the declining asset value upon which a new loan would be based. Ultimately, the Debtors defaulted under their prepetition term loan agreement and, over the course of multiple months of waivers, negotiated with their lenders with the hope of “building consensus around a de-leveraging transaction.” Spoiler alert: there’s no prepackaged plan on file here nor is there a bid procedures motion accompanied by a stalking horse asset purchase agreement so suffice it to say that whatever consensus there might be is limited to the commitment of a $16.6mm DIP credit facility. And that forces the issue: under the DIP milestones, the Debtors must confirm a plan of reorganization within 98 days. Will the lenders equitize? Given the astounding job the first day papers do of making the assets seem attractive, is there a chance in hell a buyer emerges? Stay tuned.

• Jurisdiction: S.D. of Texas (Judge Jones)

• Capital Structure: $116mm ‘21 10% cash/12% PIK Term Loan (including interest, etc.), $11.6mm ‘21 ABL (Siena)

• Professionals:

  • Legal: Greenberg Traurig LLP (Shari Heyen, Karl Burrer, David Eastlake, Eric Howe)

  • Financial Advisor/CRO: Alvarez & Marsal LLC (Gary Barton)

  • Investment Banker: Piper Jaffray & Co. (Richard Shinder)

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

• Other Parties in Interest:

  • Prepetition Term Loan & DIP Agent ($16.6mm): BSP Agency LLC (DIP Lenders: Providence Debt Fund III LP, Benefit Street Debt Fund IV LP, and Benefit Street Partners SMA LM LP).

    • Legal: Baker Botts LLP (Emanuel Grillo)

  • Prepetition Revolving Lender: Siena Lending Group LLC

    • Legal: Thompson Coburn LLP (David Warfield, Victor A. Des Laurier)

New Chapter 11 Bankruptcy Filing - Hospital Acquisition LLC

Hospital Acquisition LLC

May 6 & 7, 2019

Texas-based Hospital Acquisition LLC and dozens of other affiliated companies operating in the acute care hospital, behavioral health and out-patient would care space have filed for bankruptcy in the District of Delaware.* The debtors operate 17 facilities in 9 states for a total of 865 beds; their revenue “derives from the provision of patient services and is received through Medicare and Medicaid reimbursements and payments from private payors.”

Technically, this is a chapter 22. In 2012, the debtors’ predecessor reeled from the effects of Hurricane Katrina and reduced reimbursement rates and filed for bankruptcy. The case ended in a sale of substantially all assets to the debtors.

So, why is the company in bankruptcy again? Well, to begin with, re-read the final sentence of the first paragraph. That’s why. Per the company:

…internal and external factors have lead the Debtors to an unmanageable level of debt service obligations and an untenable liquidity position. In 2015, Medicare’s establishment of patient criteria to qualify as an LTAC-compliant patient facility led to significant reimbursement rate declines over the course of 2015 and 2016 as changes were implemented. Average reimbursement rates for site neutral patients, representing approximately 57% of 2016 cases, is estimated to drop from $23,000 to $9,000 across the portfolio. When rates declined sharply, the Debtors were unable to adjust. Further, the number of patients that now qualify by Medicare to have services provided in an LTAC setting has declined substantially, resulting in a significant oversupply of LTAC beds in the market.

To offset these uncontrollable trends, the company undertook efforts to convert a new business plan focused around, among other things, closing marginally performing hospitals and diversifying the business into post-acute care “to compete in the evolving value-based health care environment.” To help effectuate this plan, the debtors re-financed its then-existing revolver, entered into its $15mm “priming” term loan, and amended and extended its then-existing term loan facility. After this transaction, the company had total consolidated long-term debt obligations totaling approximately $185mm.

So, more debt + revised business plan + evolving macro healthcare environment = ?? A revenue shortfall, it turns out. Which put the debtors in a precarious position vis-a-vis the covenants baked into the debtors’ debt docs. Whoops. Gotta hate when that happens.

The debtors then engaged Houlihan Lokey to explore strategic alternatives and engaged their lenders. At the time of filing, however, the debtors do not have a stalking horse agreement in place; they do hope, however, to have one in place by mid-July.

*There are also certain non-debtor home health owners and operators in the corporate family that are not, at this time, chapter 11 debtors.

• Jurisdiction: D. of Delaware (Judge Shannon)

• Capital Structure: $23.9mm RCF, $9.4mm LOCs, $15mm “Priming Term Loan” ($7.7mm funded), $136.8mm TL

• Professionals:

  • Legal: Akin Gump Strauss Hauer & Feld LLP (Scott Alberino, Kevin Eide, Sarah Link Schultz) & (local) Young Conaway Stargatt & Taylor LLP (M. Blake Cleary, Jaime Luton Chapman, Joseph Mulvihill, Betsy Feldman)

  • Financial Advisor: Houlihan Lokey Inc. (Geoffrey Coutts)

  • Investment Banker: BRG Capital Advisors LLC

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

• Other Parties in Interest:

  • Equityholders: Monarch Master Funding Ltd., Twin Haven Special Opportunities Fund IV LP, Blue Mountain Credit Alternatives Master Fund LP, Merrill Lynch Pierce Fenner & Smith Inc., Oakstone Ventures Inc.

  • White Oak Healthcare Finance LLC

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

  • Marathon Asset Management

    • Legal: Ropes & Gray LLP (Matthew Roose)

  • Prepetition Term Loan Agents: Seaport Loan Products LLC & Wilmington Trust NA

    • Legal: Shearman & Sterling LLP (Ned Schodek, Jordan Wishnew) & (local) Potter Anderson & Corroon LLP (Jeremy Ryan, R. Stephen McNeill, D. Ryan Slaugh)

  • Official Committee of Unsecured Creditors

    • Legal: Greenberg Traurig LLP (David Cleary, Nancy Peterman, Dennis Meloro) & (local) Bayard PA (Justin Alberto, Erin Fay, Daniel Brogan)
      

Updated 5/18

New Chapter 11 Bankruptcy Filing - Avadel Specialty Pharmaceuticals LLC

Avadel Specialty Pharmaceuticals LLC

February 6, 2019

Geez. All the action these days is in busted retail and busted pharma. Here, Avadel Specialty Pharmaceuticals LLC ("ASP") is a MIssouri-based pharmaceutical company engaged in the business of the distribution, sale and marketing of pharmaceutical products focused on chronic urological disorders. It has one product, NOCTIVA. In other words, it is not a manufacturer; it has an exclusive license from Serenity Pharmaceuticals LLC to develop, market and sell NOCTIVA in the US and Canada. The company paid $70mm for the license and Serenity maintained some option value as well, including the right to receive potential milestone payments and royalties from product sales. 

Why bankruptcy? Per the company:

"ASP has experienced several market challenges in its efforts to commercialize and increase sales volume while the overall growth for its product has been slower than anticipated. As a result, ASP has experienced losses since its inception, and as of the Petition Date, has an accumulated deficit, due in part to costs relating to underachieving sales, unanticipated competition, and certain supply agreements. Making matters worse, sales projections based on the current growth trend illustrate a substantially longer period of operating losses than originally assumed."

Or said another way, among other issues, doctors seem unwilling to prescribe NOCTIVA to their worst enemies. Per the company, "health care professionals ahve been unwillint to try (or adop) NOCTIVA." Why not? Well, for starters, there are other agents that physicians use to target the conditions NOCTIVA is formulated to tackle. Moreover, there are "underlying concerns with regard to the potential risks of a serious side effect associated with the active ingredient in NOCTIVA™ (desmopressin acetate), based on prior experience with older formulations of the same active ingredient…." Uh, yeah, that sounds sketchy AF. 

And so this thing has been a money pit. The company's direct (non-debtor) parent has funded approximately $152mm since September 2017 to support the business including $80mm in additional investment that have yielded less than $3mm in net sales. How's that for ROI? As you can probably imagine, that ROI proposition was enough to finally compel ASP's direct parent to stop funding it. 

Consequently, the company sought to perform triage, first by trying (and failing) to locate a co-promoter and, second, by sublicensing its obligations. But, no dice. it filed for bankruptcy to sell its assets and wind down its operations. The bankruptcy constitutes just one part in the overall restructuring efforts of ASP's indirect parent, Avadel Pharmaceuticals plc. The case will be funded, if approved, by a $2.7mm DIP revolving credit facility and $2.7mm unsecured DIP, both provided by the company's non-debtor indirect parent. 

• Jurisdiction: D. of Delaware (Judge Sontchi) 

• Capital Structure: $mm debt     

• Company Professionals:

  • Legal: Greenberg Traurig LLP (Paul Keenan Jr., John Dodd, Reginald Sainvil, Dennis Meloro, Sara Hoffman)

  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)

• Other Parties in Interest:

  • Avadel US Holdings Inc.

    • Legal: Troutman Sanders LLP (Jonathan Forstot) & (local) Ashby & Geddes PA (Gregory Taylor)

New Chapter 11 Filing - Nighthawk Royalties LLC

Nighthawk Royalties LLC

4/30/18

Colorado-based hydrocarbon exploration and production company filed for bankruptcy after "macroeconomic and industry distress and a failed waterflooding project" led it to trigger defaults under its senior secured credit facility with the Commonwealth Bank of Australia. The company has a signed letter of intent to sell its assets to a prospective purchaser under section 363 of the bankruptcy code. The company is also leveraging the Bankruptcy Code's automatic stay provision to prevent Fastighets AB Korpralen, a Swedish company affiliated with a former director of the debtor, from commencing shareholder litigation against the company. 

• Jurisdiction: D. of Delaware (Judge Shannon)
• Capital Structure: $21.25mm debt (Commonwealth Bank of Australia)
• Company Professionals:
  • Legal: Greenberg Traurig LLP (Mark Bloom, Paul Keenan Jr., John Dodd, Ari Newman, Dennis Meloro)
  • Investment Banker: SSG Advisors LLC
  • Claims Agent: JND Corporate Restructuring (*click on company name above for free docket access)
• Other Parties in Interest:
  • Major Shareholder: Fastighets AB Korpralen
    • Legal: K&L Gates LLP (Steven Caponi)

New Chapter 11 Filing - VER Technologies Holdco LLC

VER Technologies Holdco LLC

4/4/18

VER Technologies, a Los Angeles-based provider of for-rent production equipment and engineering support for live and taped television, cinema, live events and broadcast media has filed for chapter 11 bankruptcy in the District of Delaware. We hadn't heard of these guys before and we're guessing that, unless you live in Los Feliz or Silverlake, you haven't either. Suffice it to say that they're they guys behind the guy, so to speak. Recent broadcast work included the 2018 Super Bowl broadcast (eat it Brady); they also serve over 350 live music customers per year including the Biebs and the band-formerly-known-as-Coldplay-now-called-the-Chainsmokers. 

In some respects, this is a story about attempted avoidance of disruption leading to disruption. The company initially specialized in rentals with no equipment customization but, with time, opted to expand its product and service offerings to include customization. This endeavor, however, proved capital intensive to the point where the company exceeded $270 million on its prepetition asset-backed lending facility. This triggered cash sweeps to the company's bank which proved to further constrain liquidity. This sparked a need for an operational and balance sheet restructuring to maximize cash and get the company to the point of a potential transaction.

In other respects, this is another leveraged buy-out that saddled the target company with a wee bit too much debt. Moreover, the company seems to have undertaken a number of ill-advised or ill-executed operational initiatives that, ultimately, undercut revenue. It happens. 

Now the company -- supported by a restructuring support agreement with its lenders (including funds managed by GSO Capital Partners) -- hopes to facilitate a pre-negotiated merger with an entity controlled by Production Resource Group LLCl ("PRG"). PRG is a Jordan Company-owned provider of entertainment and event technology solutions. Naturally, the term lenders will also own a portion of the reorganized company. Per the term sheet, PRG will get 72% preferred and 80% common; the term lenders will get the delta. The reorganized company will still have a meaningful amount of debt on its balance sheet with a proposed new (unquantified) first lien term loan and a $435 million new second lien term loan. 

The company has secured a proposed $364.7 million DIP credit facility ($300mm ABL, $64.7mm Term Loan, of which $50mm is new money) to support its time in bankruptcy. The company seeks to be in and out of bankruptcy court in approximately 115 days. 

• Jurisdiction: D. of Delaware (Judge Gross)
• Capital Structure: $296.3mm ABL Facility (Bank of America NA), $424.2mm term loan (GSO Capital Partners LP/Wilmington Trust NA), $14mm FILO loan, $18.75mm New FTF Inc. Note, $7.5mm Catterton Notes.  
• Company Professionals:
  • Legal: Kirkland & Ellis LLP (Joshua Sussberg, Ryan Blaine Bennett, Christine Pirro, Jamie Netznik) & (local) Klehr Harrison Harvey Branzburg LLP (Domenic Pacitti, Morton Branzburg)
  • Financial Advisor/CRO: AlixPartners LLC (Lawrence Young, Stephen Spitzer, Bradley Hunter, Christopher Blacker, James Guyton, Brad Hall)
  • Investment Banker: PJT Partners LP (Nick Leone)
  • Strategic Communications: Joele Frank
  • Independent Director: Eugene Davis
    • Legal: Kramer Levin Naftalis Frankel LLP (Philip Bentley)
  • Claims Agent: KCC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Prepetition ABL Agent and DIP ABL Agent:
    • Legal: Skadden Arps Slate Meagher & Flom LLP (Shana Elberg, Christopher Dressel, Anthony Clark, Robert Weber, Cameron Fee)
    • Financial Advisor: Perella Weinberg Partners
  • DIP Term Loan Agent: Wilmington Trust NA
    • Legal: Alston & Bird LLP (Jason Solomon)
  • Supporting Term Loan Lenders: GSO Capital Partners, ABR Reinsurance Ltd., Consumer Program Administrators Inc., Irving LLC
    • Legal: Morgan Lewis & Bockius LLP (Frederick Eisenbeigler, Andrew Gallo, Christopher Carter) & Richards Layton & Finger PA (Mark Collins, Amanda Steele, Joseph Barsalona)
  • 12% Subordinated Noteholder:
    • Legal: King & Spalding LLP (Jeffrey Pawlitz, Michael Handler)
  • Indenture Trustee FTF Note:
    • Legal: Robins Kaplan LLP (Howard Weg, Michael Delaney)
  • Production Resource Group LLC
    • Legal: Greenberg Traurig LLP (Todd Bowen) & Morrison Cohen LLP (Joseph Moldovan, Robert Dakis)
  • Wells Fargo NA
    • Legal: Otterbourg PC (Andrew Kramer)
  • Official Committee of Unsecured Creditors
    • Legal: SulmeyerKupetz PC (Alan Tippie, Mark Horoupian, Victor Sahn, David Kupetz) & (local) Whiteford Taylor & Preston LLC (Christopher Samis, L. Katherine Good, Aaron Stulman, Kevin Hroblak)
    • Financial Advisor: Province Inc. (Carol Cabello) 

Updated 5/19/18

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 Bankruptcy Filing - WYNIT Distribution LLC

WYNIT Distribution LLC

• 9/8/17 Recap: Minnesota-based technology wholesaler filed for bankruptcy to pursue a sale process. The company seeks approval of a $15mm DIP credit facility to finance the cases. Major customers include Best Buy, Amazon, Costco, Walmart and Target. Fitbit and Symantec are listed among the companies largest creditors. 
• Jurisdiction: D. of Minnesota
• Capital Structure: $76.7mm RCF (Wells Fargo)    
• Company Professionals:
  • Legal: Stinson Leonard Street LLP (Robert Kugler, Edwin Caldie, Phillip Ashfield, Andrew Glasnovich)
  • Financial Advisor: Conway MacKenzie Inc. (Peter A. Richichi)
  • Claims Agent: JND Corporate Restructuring (click on the case name above for free docket access)
• Other Parties in Interest:
  • Prepetition Lender/DIP Lender: Wells Fargo
    • Legal: Greenberg Traurig LLP (David Kurzweil, John Dyer, DeWitt Perkins) & (local) Lindquist & Vennum LLP (Charles Perkins)
  • Prepetition Creditor: Fitbit Inc.
    • Legal: Akin Gump Strauss Hauer & Feld LLP (Arik Preiss, Deborah Newman, Kevin Zuzolo) & (local) Maslon LLP (Clark Whitmore, Jason Reed)
  • Official Committee of Unsecured Creditors
    • Legal: Lowenstein Sandler LLP (Jeffrey Cohen) & (local) Barnes & Thornburg LLP (Connie Lahn)

Updated 9/21/17

New Chapter 11 Filing - Lombard Public Facilities Corporation

Lombard Public Facilities Corporation

• 7/28/17 Recap: Illinois-based not-for-profit corporation formed to finance the cost of acquiring, designing, constructing, and equipping a conference center, hotel (Westin), restaurant and related improvements in the Village of Lombard filed for bankruptcy with a prearranged deal with its creditors. The corporation was funded via revenue bonds (A through C, with the A-2 bonds wrapped by an ACA Financial Guaranty Corporation policy) on the basis of a 2005 market study. Much like we saw with the Chapter 9 filing of The Kennewick Public Hospital District back in June, the study proved to be off the mark and the project has underperformed from the get-go. Some of this was bad timing: the project came online in August 2007: we all know what came shortly thereafter. The convention business the Project depended upon never came, rendering revenues insufficient and debt service payments difficult. Reserves set aside for the bonds were quickly depleted and the Project defaulted on the bonds. The Project enters bankruptcy with the A bonds as the declared fulcrum and a consensual restructuring in hand with each of ACA, holders of a majority of the bonds (here, Nuveen Asset Management LLC and OppenheimerFunds Inc.), and the hotel and restaurant managers, respectively. Taking it as given that Lombard is an "affluent" suburb of Chicago, you have to wonder why people thought this financing was a good idea. Lombard sounds quaint and all - with its annual Lilac Festival and parade - but there's nothing there, far as we can tell, that screams "convention business." Query how many Mom and Pop municipal bond investors are getting burned by this (seemingly) ill-advised financing. 
• Jurisdiction: N.D. of Illinois (Judge Cox) 
• Capital Structure: $246.65mm principal and interest municipal debt (Amalgamated Bank of Chicago)   
• Company Professionals:
  • Legal: Adelman & Gettleman, Ltd. (Henry Merens, Brad Berish, Alexander Brougham)
  • Financial Advisor: EisnerAmper LLP (Thomas Buck, Deborah Friedland, Allen Wilen)
  • Claims Agent: Epiq Bankruptcy Solutions LLC (click on case name above for free docket)
• Other Parties in Interest:
  • ACA Financial Guaranty Corp.
    • Legal: Greenberg Traurig LLP (Nancy Peterman)
  • Lord, Abbett & Co. LLC
    • Legal: Shaw Fishman Glantz & Towbin LLC (Peter Roberts)
  • Indenture Trustee: Amalgamated Bank of Chicago
    • Financial Advisor: FTI Consulting Inc.

Updated 7/28/17

New Chapter 11 Filing - Mountain Creek Resort

Mountain Creek Resort

• 5/15/17 Recap: This gives whole new meaning to the term "ski bums." Owner and operator of four-season resort (including a water park and a ski resort) filed for bankruptcy after suffering through (i) seasons of warm winters, (ii) a downturn in the residential real estate market locally, and (iii) a poor litigation outcome that put the business on the hook for millions. The company has lined up $6mm in DIP financing to fund its case. Meanwhile, folks living in the Township of Vernon, New Jersey, can sh*t bricks (see comments within) and try and figure out what the hell happens now that the $27mm owed to the Sussex County Municipal Utilities Authority is in danger of not being paid. See, the prior owner of the resort entered into various agreements with the Township for the construction of sewer capacity to support the Resort. The Township issued bonds to finance the costs of construction and the resort is apparently contractually obligated to reimburse the Township for costs associated with the issuance (naturally, the geniuses in the government didn't bother with a security interest (other than a paltry/limited LOC) and, even if they did, they'd probably be SOL anyway given M&T Bank's senior status in the capital structure). 
• Jurisdiction: D. of New Jersey
• Capital Structure: $22.7mm senior debt (M&T Bank), $7mm junior debt (HSK-MC LLC) & various promissory notes    
• Company Professionals:
  • Legal: Lowenstein & Sandler LLP (Kenneth Rosen, Jeffrey Prol, Nicole Fulfree, Michael Papandrea)
  • Financial Advisor: Getzler Henrich & Associates LLC (Mark Samson)
  • Investment Banker: Houlihan Lokey Capital (Jeffrey Altman)
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • M&T Bank
    • Legal: Greenberg Traurig LLP (Diane Vuocolo, Kevin Ray)
  • Township of Vernon
    • Legal: McElroy Deutsch Mulvaney & Carpenter LLP (Eric Perkins, Louis Modugno)
  • Prepetition Lender & DIP Lender: HSK Adventures Inc.
    • Legal: Tarter Krinsky & Drogin LLP (Rocco Caveliere, Scott Markowitz, Alex Spizz, Arthur Goldstein)
  • Official Committee of Unsecured Creditors
    • Legal: Trenk DiPasquale Della Fera & Sodono PC (Joseph DiPasquale, Adam Wolper, Robert Roglieri)

Updated 7/12/17

New Chapter 11 Filing - Angelica Corporation

Angelica Corporation

• 4/3/17 Recap: Thanks Obama! Alpharetta Georgia based provider of linens to the healthcare industry filed for bankruptcy to effectuate a sale to KKR Credit Advisors (US) LLC for $125mm (including a $17.4mm credit bid) - exclusive of liabilities emanating out of certain collective bargaining agreements because, well, why should anyone care about low-earning laundry employees, right? Not when you've got slicked back hair and a sick new Hamptons house to party in this Summer, right, bro? The company pointedly cites ObamaCare as a major source of pricing pressure as healthcare providers "became ever more cost-conscious to mitigate lower expected reimbursements from insurance companies." Reacting to the legislation, private customers joined forces via Group Purchasing Organizations, using strength in numbers as leverage to drive discounts with companies like Angelica. This, coupled with hospital consolidation - also apparently resultant from ObamaCare - led the company to suffer from significant revenue declines. The company has secured a $65mm DIP from certain ABL lenders to fund the bankruptcy case.
• Jurisdiction: S.D. of New York
• Capital Structure: $50.5mm ABL (funded, Wells Fargo Capital Finance LLC) & $85mm TL debt (Cortland Capital Market Services LLC)    
• Company Professionals:
  • Legal: Weil (Matthew Barr, Jill Frizzley, Kevin Bostel, Joshua Apfel, Prashant Rai, Matthew Skrzynski)
  • Financial Advisor: Alvarez & Marsal LLC (John Makuch, Joel Rogers, Paul Kinealy, Bryan Fleming)
  • Investment Banker: Houlihan Lokey Capital Inc. (Bradley Jordan)
  • Claims Agent: Prime Clerk LLC (*click on company name for docket)
• Other Parties in Interest:
  • ABL Agent: Wells Fargo Capital Finance LLC
    • Legal: Greenberg Traurig LLP (David Kurzweil, Nathan Haynes, John Dyer, Michael Leveille)
  • TL Agent: Cortland Capital Market Services LLC
    • Legal: Holland & Knight LLP (Joshua Spencer, Renee Lewis, Barbra Parlin)
  • Stalking Horse Bidder: KKR Credit Advisors (US) LLC
    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Brian Hermann, Lauren Shumejda)
  • Largest Secured Creditors: KKR Asset Management LLC, Wells Fargo Capital Finance LLC, GACP Finance Co., LLC, Regions Bank
  • Official Committee of Unsecured Creditors
    • Legal: Cole Schotz PC (Michael Sirota, Daniel Geoghan, Ryan Jareck, Warren Usitine, Mark Tsukerman, Jacob Frumkin, Rebecca Hollander)
    • Financial Advisor: FTI Consulting Inc. (Conor Tully, Marshall Eisler, Sean Eimer, Harrison West, Marili Hellmund-Mora)

Updated 5/31/17

New Chapter 11 Filing - Aerospace Holdings Inc.

Aerospace Holdings Inc.

• 3/28/17 Recap: Designer and manufacturer of machined parts, fabricated components and tooling for commercial aerospace and defense markets filed for bankruptcy to effectuate a 363 sale to a strategic competitor, Harlow Aerostructures LLC, which, prepetition, purchased the distressed senior secured debt held by Comerica Bank and Fifth Third Bank. Harlow will provide DIP financing and serve as the stalking horse for the company's assets. This appears to be a story about poor strategic acquisitions, reliance on two big projects that were ultimately cancelled (Lockheed Martin F-22 fighter jet and the Airbus A380) and reductions in military spending (which may or may not be related to the cancellations).
• Jurisdiction: D. of Delaware 
• Capital Structure: $38.6mm funded senior secured debt (orig: Comerica Bank), $27.1mm subordinated debt (Brookside Mezzanine Partners), $21.6mm promissory notes    
• Company Professionals:
  • Legal: Greenberg Traurig LLP (Nancy Mitchell, Matthew Hinker, Sara Hoffman, Dennis Meloro)
  • Financial Advisor: Conway MacKenzie Inc. (Matthew Sedigh, Michael Flynn)
  • Investment Banker: G2 Capital Advisors LLC
  • Claims Agent: BMC Group (*click on company name for docket)
• Other Parties in Interest:
  • Primary debtholders: Corinthian Capital Group, Brookside Mezzanine Partners, Patriot Capital, Catalus Capital Management
  • Official Committee of Unsecured Creditors
    • Legal: Drinker Biddle & Reath LLC
    • Financial Advisor: Gavin/Solmonese LLC

New Chapter 11 Filing - Gordmans Stores Inc.

Gordmans Stores Inc.

• 3/13/17 Recap: Clearly Warren Buffett doesn't own this dog. The Omaha, NE-based publicly-traded (GMAN) specialty retailer (apparel and home fashions) with 72 stores in 16 states (according to PE sponsor Sun Capital Partners) or 106 stores in 22 states (according to the company) filed bankruptcy to continue the 5-month long evisceration of Sun Capital Partners' retail portfolio. Oh, and liquidate. Choice quote: "It is likely that other retailers may commence chapter 11 cases in the near term, as retail is set to replace the troubled oil and gas industry as the most distressed sector this year." Just in case anyone is scratching their heads as to how this liquidation could possibly be happening, note that e-commerce made up less than 1-percent of the Company's sales. This REALLY begs the question: what value was Sun Capital Partners bringing to the table? Do they not have operating partners? Sheesh.
• Jurisdiction: D. of Nebraska
• Capital Structure: $68.75mm RCF (Wells Fargo) + $31.25mm RCF (PNC Bank NA) of which $29mm in total outstanding, $30mm TL (Wells Fargo - $15mm, Pathlight - $7.5mm & Gordon Brothers Finance - $7.5mm)($27.9mm outstanding). 
• Company Professionals:
  • Legal: Kirkland & Ellis LLP (Jayme Sprayragen, Patrick Nash, Brad Weiland, Jamie Netznik, Alexandra Schwarzman) & Kutak Rock LLP (Lisa Peters, Jeffrey Wegner)
  • Financial Advisor: Clear Thinking Group LLC (Joseph Marchese)
  • Investment Banker: Duff & Phelps Securities LLC (Joshua Benn)
  • Proposed Stalking Horse Liquidators: Tiger Capital Group LLC & Great American Group LLC
  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name for docket)
• Other Parties in Interest:
  • Wells Fargo Bank, NA
    • Legal: Riemer & Braunstein LLP (Donald Rothman, Steven Fox) & Greenberg Traurig LLP (Jeff Wolf) & (local) Croker Huck Kasher DeWitt Anderson & Gonderinger LLP (Robert, Gonderinger, David Skalka)
  • Sponsor: Sun Capital Partners
    • Legal: Morgan Lewis & Bockius LLP (Neil Herman)
  • Potential Bidder: Hilco Merchant Resources LLC & Gordon Brothers Retail Partners LLC
    • Legal: Paul Hastings LLP (Chris Dickerson, Matthew Murphy, Marc Carmel) & (local) Telpner Peterson Law Firm LLP (Charles Smith, Nicole Hughes)
  • Official Committee of Unsecured Creditors
    • Legal: Frost Brown Todd LLC (Ronald Gold, Douglas Lutz, Adam J. (A.J.) Webb) & (local) Koley Jessen PC (Brian Koenig)
    • Financial Advisor: Province Inc. (Paul Huygens)

Updated 4/14/17

New Chapter 22 Filing - Eastern Outfitters LLC

Eastern Outfitters LLC

• 2/5/17 Recap: Seems like chapter 22 bankruptcies are the "it" thing now: everyone's doing it. Last year, Versa Capital Management bought the company in the Vestis Group bankruptcy and, now, Sports Direct looks to pick up the pieces in yet ANOTHER sale of the Bob's Stores and Eastern Mountain Sports retail properties. Top creditors include Under Armour and Google which says something about (a) why UA's growth numbers were considerably off last quarter and (b) the cost of Google SEO for companies in this internet age.
• Jurisdiction: D. of Delaware    
• Capital Structure: $41mm RCF (PNC Bank), $42mm TL (Sportsdirect) 
• Company Professionals:
  • Legal: Bracewell LLP (Robert Burns, Jennifer Feldshur, David Riley, Mark Dendinger) & (local) Cole Schotz (Norman Pernick, Marion Quirk, Katharina Earle)
  • Turnaround Advisor: AlixPartners LLC (Spencer Ware, Susan Brown, Afshin Azhari)
  • Replacement Turnaround Advisor: Meru LLC (Nicholas Campbell, Timothy Meighan)
  • Financial Advisor: Lincoln Partners Advisors LLC  (Alexander Stevenson)
  • Liquidators: Hilco Merchant Resources LLC & Gordon Brothers Retail Partners LLC
    • Legal: Curtis Mallet-Provost Colt & Mosle LLP (Steven Reisman) & (local) Womble Carlyle Sandridge & Rice LLP (Mark Desgrosseilliers)
  • Asset Disposition Advisor & Consultant: Malfitano Advisors LLC (Joseph Malfitano)
  • Claims Agent: KCC (*click on company name for docket)
• Other Parties in Interest:
  • Purchaser: SportsDirect.com Retail Ltd.
    • Legal: Greenberg Traurig LLP (Nancy Mitchell, Maria DiConza)
  • First Lien Lender: PNC Bank, NA
    • Legal: Blank Rome LLP  (Regina Kelbon, Gregory Vizza)
  • Official Committee of Unsecured Creditors
    • Legal: Cooley LLP (Jay Indyke, Cathy Hershcopf, Richelle Kalnit, Sarah Carnes) & (local) Drinker Biddle & Reath LLP (Steven Kortanek, Patrick Johnson, Robert Malone)
    • Financial Advisor: Province Inc. (Paul Huygens, Carol Cabello, Sanjuro Kietlinski, Jin Lai Dong)

Updated 5/31/17