New Chapter 11 Bankruptcy Filing - Jason Industries Inc. ($JASN)

Jason Industries Inc.

June 24, 2020

Wisconsin-based Jason Industries Inc. ($JASN) and seven affiliates (the “debtors”) filed a long-anticipated (prepackaged) chapter 11 bankruptcy case in the Southern District of New York on Wednesday — the latest in a line of manufacturers (e.g., Pyxus International Inc., Libbey Glass Inc., Exide Holdings Inc., Pace Industries LLC) to wind its way into bankruptcy court.

The company is an amalgam of decades of growth by acquisition: it launched its components and seating businesses with acquisitions in ‘93 and ‘95, respectively. Everything appeared to be hunky-dory heading into the Great Financial Crisis when things took a turn for the worse.

And so this isn’t the company’s first rodeo in distress. Back in ‘08-’09, the company engaged in a recapitalization transaction supported by Falcon Investment Advisors LLC and Hamilton Lane Advisors; it persevered through the downturn and ultimately sold to a special-purpose-acquisition-company (Quinpairo Acquisition Corp.) in 2014 for $538.6mm. The acquisition was financed through a combination of (i) the $172.5mm raised by the SPAC in its ‘13 IPO, (ii) rollover equity from the aforementioned sponsors (and management), and (iii) $420mm of first and second lien debt. Stick a pin in that last number: it comes back to haunt the debtors. 👻

In the years since, the company streamlined its operations — selling off assets (i.e., its fiber solutions business and a metal components business) and consolidating around two primary business segments. Through their industrial segment, the debtors manufacture a bunch of stuff used for industrial and infrastructure applications; and through their engineered components segment, the debtors manufacture (a) motorcycle seats, (b) operator seats for construction, agriculture, law and turf care and other industrial equipment markets, and (c) seating for the power sports market. Said another way, the company is heavily indexed to the automotive, heavy truck, steel and construction markets. Powered by approximately 700 employees in the US, the company did $338mm in net sales in 2019.

And that is part of the problem. $338mm in net sales represented an 8.2% ($30.1mm) dropoff from 2018. Adjusted EBITDA declined from $36.7mm in ‘18 to $24.8mm in ‘19. Both segments have been underperforming for years. The question is why?

The debtors cite a dramatic dropoff in demand in ‘19. They note:

This reduction was largely caused by reduced end market demand in key industries across the portfolio, specifically, weak economic conditions in Europe and Asia, lower industrial production in North America, and softening end market demand from OEM customers. For example, since as early as the first quarter of 2019, the Company has experienced reduced OEM build and channel inventory destocking. These problems were exacerbated by the operational disruption and demand reduction caused by the COVID-19 pandemic.

Consequently, the debtors busted out the standard playbook to try and manage liquidity (while parallel-tracking a fruitless pre-petition sale and marketing effort). They (a) intensified focus on growing market segments, (b) reduced capital investment in non-core businesses, (c) cut/furloughed labor and instituted pay reductions for execs and other employees (and eliminated a 401(k) match program), (d) closed plants and manufacturing facilities and deferred rent payments or negotiated reduced rent at leased properties, (e) accelerated the consolidation of plants acquired in a recent acquisition, and (f) invested in automation at their facilities to reduce future operating costs (read: replace expensive human beings) and expand margins. Still, the debtors struggled.

…the pandemic’s impact on orders and revenues, combined with preexisting fixed costs and debt service requirements, have constrained available working capital, reduced profitability and cash flow, and significantly impaired the Company’s ability to adequately finance operations.

Which gets us back to the capital structure:

Given where EBITDA numbers were coming in, this thing’s leverage ratio was through the roof. More to the point, the debtors deferred a March 31 second lien interest payment and had been operating under a series of forbearance agreements ever since. Luckily, the capital structure isn’t all-too-complicated and lends itself well to a prepackaged bankruptcy. And so here we are with a restructuring support agreement and proposed prepackaged plan which will effectively turn the company over to the first lien term lenders and, but for some warrants, wipe out the second lien term lenders. Here’s how the above capital structure breaks down:

Source: PETITION LLC

A couple of notable features here:

• Drop it Likes its Hot. There’s a “first lien put option” baked into the plan pursuant to which any first lien term lender who doesn’t want to own equity or the junior converts can “put” its pro rata share of that equity/converts to a first lien lender, Pelican Loan Advisors III LLC (or lenders as the case may be), which has agreed to backstop this baby. Pelican is managed by Monomoy Capital Partners.

• F*ck You Pay Me. Those first lien lenders who consented to forbearances all of those months are about to get paaaaaaayyyyyyyyydd. They’ll receive a pro rated share of and interest in $10mm worth of open market purchases by the debtors of first lien credit agreement claims held by consenting first lien lenders AND a forbearance fee equal to 4.00% of the principal amount of the first lien credit agreement loans held by the consenting lenders as of a date certain. The open market purchases were, presumably, accomplished prior to the filing with 2% of the fee already paid and the remaining 2% to be paid-in-kind on the earlier of the termination date of the RSA or the plan effective date.

• It’s a Trap! Warrants are technically going to be issued to the first lien term lenders and “gifted” to the second lien lenders. But only if they vote to accept the plan. Given the midpoint total enterprise value of $200mm and resultant deficiency claim, this is a nice absolute priority rule workaround. As reflected in the graphic above, the allowed deficiency claim of $64.9mm is obviously impaired and will get a big fat 🍩.

And so this is what the capital structure will look upon emergence:

The first lien lenders have consented to the use of their cash collateral to fund the cases.*

* ⚡️July 15, 2020 Update: The Second Lien Ad Hoc Committee, however, filed a limited objection to the cash collateral motion on the basis that a final order should (a) limit any credit bid to their collateral (noting that a material amount of assets — including 35% of the equity in foreign subs — are excluded from the first lien lenders’ collateral package, and (b) require a finding that there’s diminution of value of the first lien lenders’ collateral such that they, despite providing no new financing, ought to be granted a superpriority lien on previously unencumbered assets. The Committee also previewed objections it will have to the plan of reorganization. For a purportedly “prepackaged” chapter 11, this one looks like it could be more contentious than most. A final hearing on the cash collateral motion is set for July 22, 2020.⚡️

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

• Capital Structure: see above.

• Company Professionals:

  • Legal: Kirkland & Ellis LLP (Jonathan Henes, Emily Geier, Laura Krucks, Dan Latona, Jake Gordon, Yates French)

  • Financial Advisor: AlixPartners LLP (Rebecca Roof)

  • Investment Banker: Moelis & Company LLC (Zul Jamal)

  • Claims Agent: Epiq Bankruptcy Solutions LLC

• Other Parties in Interest:

  • Large equityholder: Wynnefield Capital Management LLC

  • Ad Hoc Group of First Lien Creditors (Credit Suisse Asset Management LLC, Voya CLO Ltd., American Money Management Corp., First Eagle Alternative Credit LLC, Angel Island Capital Services LLC, Monomoy Capital Partners LP, Z Capital Partners LLC)

    • Legal: Weil Gotshal & Manges LLP (Matthew Barr, Ryan Preston Dahl, Alexander Welch)

    • Financial Advisor: Houlihan Lokey Capital Inc.

  • First Lien Agent: The Bank of New York Mellon

  • Second Lien Agent: Wilmington Savings Fund Society FSB

    • Legal: Seward & Kissel LLP (John Ashmead, Gregg Bateman)

  • Ad Hoc Group of Second Lien Lenders: Corre Partners Management LLC, Newport Global Advisors

    • Legal: Brown Rudnick LLP (Steve Pohl, Shari Dwoskin, Kenneth Aulet)

    • Financial Advisor: DC Advisory LLC

Update July 17, 2020

📺 New Chapter 11 Bankruptcy Filing - Frontier Communications Inc. ($FTR) 📺

Frontier Communications Inc.

April 14, 2020

We often highlight how, particularly in the case of oil and gas companies, capital intensive companies end up with a lot of debt and a lot of debt often results in bankruptcy. In the upstream oil and gas space, exploration and production companies need a lot of upfront capital to, among other things, enter into royalty interest agreements with land owners, hire people to map wells, hire people to drill the earth, secure proper equipment, procure the relevant inputs and more. E&P companies literally have to shell out to pull out.

Similarly, telecommunications companies that want to cover a lot of ground require a lot of capital to do so. From 2010 through 2016, Connecticut-based Frontier Communications Inc. ($FTR) closed a series of transactions to expand from a provider of telephone and DSL internet services in mainly rural areas to a large telecommunications provider to both rural and urban markets across 29 states. It took billions of dollars in acquisitions to achieve this. Which, in turn, meant the company took on billions of dollars of debt to finance said acquisitions. $17.5b, to be exact. Due, in large part, to the weight of that heavy debt load, it, and its 28922932892 affiliates (collectively, the “debtors”), are now chapter 11 debtors in the Southern District of New York (White Plains).*

The debtors underwrote the transactions with the expectation that synergistic efficiencies would be borne out and flow to the bottom line. PETITION readers know how we feel about synergies: more often than not, they prove elusive. Well:

Serving the new territories proved more difficult and expensive than the Company anticipated, and integration issues made it more difficult to retain customers. Simultaneously, the Company faced industry headwinds stemming from fierce competition in the telecommunications sector, shifting consumer preferences, and accelerating bandwidth and performance demands, all redefining what infrastructure telecommunications companies need to compete in the industry. These conditions have contributed to the unsustainability of the Company’s outstanding funded debt obligations—which total approximately $17.5 billion as of the Petition Date.

Shocker. Transactions that were meant to be accretive to the overall enterprise ended up — in conjunction with disruptive trends and intense competition — resulting in an astronomical amount of value destruction.

As a result of these macro challenges and integration issues, Frontier has not been able to fully realize the economies of scale expected from the Growth Transactions, as evidenced by a loss of approximately 1.3 million customers, from a high of 5.4 million after the CTF Transaction closed in 2016 to approximately 4.1 million as of January 2020. Frontier’s share price has dropped … reflecting a $8.4 billion decrease in market capitalization.

😬😬😬😬😬😬😬😬😬😬😬😬😬😬😬😬😬😬😬😬😬😬😬😬😬😬😬😬😬😬

Consequently, the debtors have been in a state of liability management ever since the end of 2018. Subsequently, they (i) issued new secured notes to refinance a near(er)-term term loan maturity, (ii) amended and extended their revolving credit facility, and (iii) agreed to sell their northwest operations and related assets for $1.352b (the “Pacific Northwest Transaction”). The Pacific Northwest Transaction has since been hurdling through the regulatory approval process and seems poised to close on April 30, 2020.**

While all of these machinations were positive steps, there were still major issues to deal with. The capital structure remained robust. And “up-tier” exchanges of junior debt into more senior debt to push out near-term maturities were, post-Windstream***, deemed too complex, too short-term, and too likely to end up the subject of fierce (and costly) litigation**** As the debtors’ issued third quarter financials that were … well … not good, they announced a full drawn down of their revolver, instantly arming them with hundreds of millions of dollars of liquidity.

$FTR with the clean sweep - Revs, margins, ebitda, FCF, churn, subs, ARPC all worse sequentially. https://t.co/vn49m5PDPP

— JV (@AyyouEm) November 5, 2019

The company needed reconstructive surgery. Band-aids alone wouldn’t be enough to dam the tide. In many respects, the company ought to be commended for opting to address the problem in a wholesale way rather than piecemeal kick, kick, and kick the can down the road — achieving nothing but short-term fixes to the enrichment of really nobody other than its bankers (and Aurelius).

And so now the company is at the restructuring support agreement stage. Seventy-five percent of the holders of unsecured notes have agreed to an equitization transaction — constituting an impaired consenting class for a plan of reorganization to be put on file within 30 days. Said another way, the debtors are taking the position that the value breaks within the unsecured debt. That is, that the value is at least $6.6b making the $10.949b of senior unsecured notes the “fulcrum security.” Unsecured noteholders reportedly include Elliott Management Corp., Apollo Global Management LLC, Franklin Resources Inc., and Capital Group Cos. They would end up the owners of the reorganized company.

What else is the RSA about?

• Secured debt will be repaid in full on the effective date;

• A proposed DIP (more on this below) would roll into an exit facility;

• The unsecured noteholders would, in addition to receiving equity, get $750mm of seniority-TBD take-back paper and $150mm of cash (and board seats);

• General unsecured creditors would ride through and be paid in full; and

• Holders of secured and unsecured subsidiary debt will be reinstated or paid in full.

The debtors also obtained a fully-committed new money DIP of $460mm from Goldman Sachs Bank USA. This has proven controversial. Though the DIP motion was not up for hearing along with other first day relief late last week, the subject proved contentious. The Ad Hoc First Lien Committee objected to the DIP. Coming in hot, they wrote:

Beneath the thin veneer in which these so-called “pre-arranged” cases are packaged, lies multiple infirmities that, if not properly addressed by the Debtors, will ultimately result in the unraveling of these cases. While the Debtors seek to shroud themselves in a restructuring support agreement (the “RSA”) that enjoys broad unsecured creditor support, the truth is that underlying that support is a fragile house of cards that will not withstand scrutiny as these cases unfold. Turning the bankruptcy code on its head, the Debtors attempt through their RSA to pay unsecured bondholders cash as a proxy for their missed prepetition interest payment, postpetition interest to yet other unsecured creditors of various subsidiaries, and complete repayment to prepetition revolver lenders that are attempting, through the proposed debtor-inpossession financing (the “DIP Loan”), to effectively “roll-up” their prepetition exposure through the DIP Loan, all while the Debtors attempt to deprive their first lien secured creditors of contractual entitlements to default interest and pro rata payments they will otherwise be entitled to if their debt is to be unimpaired, as the RSA purports to require. While those are fights for another day, their significance in these cases must not be overlooked.

Whoa. That’s a lot. What does it boil down to? “F*ck you, pay me.” The first lien lenders are pissed that everyone under the sun is getting taken care of in the RSA except them.

• You want to deny us our default interest. F+ck you, pay me.

• You want a DIP despite having hundreds of millions of cash on hand and $1.3b of sale proceeds coming in? F+ck you, pay me.

• You want a 2-for-1 roll-up where, “as a condition to raising $460 million in debtor-in-possession financing, the Debtors must turn around and repay $850 million to their prepetition revolving lenders, thus decreasing the Debtors’ overall liquidity on a net basis”? F+ck you, pay me.

• You shirking our pro rata payments we’d otherwise be entitled to if our debt is to be unimpaired? F+ck you, pay me.

• You want to pay unsecured senior noteholders “incremental payments” of excess cash to compensate them for skipped interest payments without paying us default interest and pro rata payments? F+ck you, pay me.

• You want to use sale proceeds to pay down unsecureds when that’s ours under the first lien docs? F+ck you, pay me.

• You want to pay interest on the sub debt without giving us default interest? F+ck you, pay me.

• You want to do all of this without a proper adequate protection package for us? F+ck you, pay me.

The second lien debtholders chimed in, voicing similar concerns about the propriety of the adequate protection package. For the uninitiated, adequate protection often includes replacement liens on existing collateral, super-priority claims emanating out of those liens, payment of professional fees, and interest. In this case, both the first and second liens assert that default interest — typically several bps higher — ought to be included as adequate protection. The issue, however, was not up for hearing on the first day so all of this is a preview of potential fireworks to come if an agreement isn’t hashed out in coming weeks.

The debtors hope to have a confirmation order within four months with the effective date within twelve months (the delay attributable to certain regulatory approvals). We wish them luck.

______

*Commercial real estate is getting battered all over the place but not 50 Main Street, Suite 1000 in White Plains New York. Apparently Frontier Communications has an office there too. Who knew there was a speciality business in co-working for bankrupt companies? In one place, you’ve got FULLBEAUTY Brands Inc. and Internap Inc. AND Frontier Communications. We previously wrote about this convenient phenomenon here.

**The company seeks an expedited hearing in bankruptcy court seeking approval of it. It is scheduled for this week.

***Here is a Bloomberg video from June 2019 previously posted in PETITION wherein Jason Mudrick of Mudrick Capital Management discusses the effect Windstream had on Frontier and predicted Frontier would be in bankruptcy by the end of the year. He got that wrong. But did it matter to him? He also notes a CDS-based short-position that would pay out if Frontier filed for bankruptcy within 12 months. For CDS purposes, looks like he got that right. By the way, per Moody’s, here was the spread on the CDS around the time that Mudrick acknowledged his CDS position:

Here it was a few months later:

And, for the sake of comparison, here was the spread on the CDS just prior to the bankruptcy filing last week:

Clearly the market was keenly aware (who wasn’t given the missed interest payment?) that a bankruptcy filing was imminent: insurance on FTR got meaningfully more expensive. Other companies with really expensive CDS these days? Neiman Marcus Group (which, Reuters reports, may be filing as soon as this week), J.C. Penney Corporation Inc., and Chesapeake Energy Corporation.

****Notably, Aurelius Capital Management LP pushed for an exchange of its unsecured position into secured notes higher in the capital structure — a proposal that would achieve the triple-frontier-heist-like-whammy of better positioning their debt, protecting the CDS they sold by delaying bankruptcy, and screwing over junior debtholders like Elliott (PETITION Note: we really just wanted to squeeze in a reference to the abominably-bad NFLX movie starring Ben Affleck, an unfortunate shelter-in indulge). On the flip side, funds such as Discovery Capital Management LLC and GoldenTree Asset Management LP pushed the company to file for bankruptcy rather than engage in Aurelius’ proposed exchange.

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

• Capital Structure: $850mm RCF, $1.7b first lien TL (JP Morgan Chase Bank NA), $1.7b first lien notes (Wilmington Trust NA), $1.6b second lien notes (Wilmington Savings Fund Society FSB), $10.95mm unsecured senior notes (The Bank of New York Mellon), $100mm sub secured notes (BOKF NA), $750mm sub unsecured notes (U.S. Bank Trust National Association)

• Professionals:

  • Legal: Kirkland & Ellis LLP (Stephen Hessler, Chad Husnick, Benjamin Rhode, Mark McKane, Patrick Venter, Jacob Johnston)

  • Directors: Kevin Beebe, Paul Keglevic, Mohsin Meghji

  • Financial Advisor: FTI Consulting Inc. (Carlin Adrianopoli)

  • Investment Banker: Evercore Group LLC (Roopesh Shah)

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

• Other Parties in Interest:

  • Major equityholders: BlackRock Inc., Vanguard Group Inc., Charles Schwab Investment Management

  • Unsecured Notes Indenture Trustee: Bank of New York Mellon

    • Legal: Reed Smith LLP (Kurt Gwynne, Katelin Morales)

  • Indenture Trustee and Collateral Agent for the 8.500% ‘26 Second Lien Secured Notes

    • Legal: Riker Danzig Scherer Hyland & Perretti LLP (Joseph Schwartz, Curtis Plaza, Tara Schellhorn)

  • Credit Agreement Administrative Agent: JPMorgan Chase Bank NA

    • Legal: Simpson Thacher & Bartlett LLP (Sandeep Qusba, Nicholas Baker, Jamie Fell)

  • DIP Agent: Goldman Sachs Bank USA

    • Legal: Davis Polk & Wardwell LLP (Eli Vonnegut, Stephen Piraino, Samuel Wagreich)

  • Ad Hoc First Lien Committee

    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Brian Hermann, Gregory Laufer, Kyle Kimpler, Miriam Levi)

    • Financial Advisor: PJT Partners LP

  • Second lien Ad Hoc Group

    • Legal: Quinn Emanuel Urquhart & Sullivan LLP (Susheel Kirpalani, Benjamin Finestone, Deborah Newman, Daniel Holzman, Lindsay Weber)

  • Ad Hoc Senior Notes Group

    • Legal: Akin Gump Strauss Hauer & Feld LLP (Ira Dizengoff, Philip Dublin, Naomi Moss)

    • Financial Advisor: Ducera Partners LLC

  • Ad Hoc Committee of Frontier Noteholders

    • Legal: Milbank LLP (Dennis Dunne, Samuel Khalil, Michael Price)

    • Financial Advisor: Houlihan Lokey Inc.

  • Ad Hoc Group of Subsidiary Debtholders

    • Legal: Shearman & Sterling LLP (Joel Moss, Jordan Wishnew)

  • Official Committee of Unsecured Creditors

    • Legal: Kramer Levin Naftalis & Frankel LLP (Amy Caton, Douglas Mannal, Stephen Zide, Megan Wasson)

    • Financial Advisor: Alvarez & Marsal LLC (Richard Newman)

    • Investment Banker: UBS Securities LLC (Elizabeth LaPuma)

🔌New Chapter 11 Bankruptcy Filing - Agera Energy LLC🔌

Agera Energy LLC

October 4, 2019

Agera Energy LLC, a retail electricity and natural gas provider to commercial, industrial and residential customers filed for bankruptcy in the Southern District of New York. The company blames, among other things, mismanagement and poor strategy for the run-up to its financial problems: too many low margin fixed contracts in an environment that calls for variable contracts proved to be an albatross. Nevertheless, in September ‘18, sponsor Eli Global LLC agreed to pursue a turnaround plan including any and all capital infusions that might be necessary.

But then the hammer dropped. New management discovered “material balance sheet issues, which led to a restatement of the Debtors’ financials. Specifically, as of August 31, 2018, there was approximately $39 million of over stated receivables, of which $37 million related to unbilled receivables. As a result of the foregoing discovery, the Debtors suddenly found themselves in breach of the Senior Lien Supply Agreement’s $16 million Tangible Net Worth covenant.” WHOOPS.

Thereafter, the company and its lenders operated pursuant to a series of forbearance agreements while Eli Global LLC made millions of dollars of capital contributions. Until they didn’t. In May, Eli Global indicated that it was no longer in a position to inject capital into the business — and it still had $21mm in commitments from that point forward. Without the capital, the company was unable to satisfy, among other things, renewable portfolio standards it is subject to.* This dominoed into a separate liability for the company of approximately $72mm and a slate of enforcement actions from the Massachusetts Department of Energy Resources, the Rhode Island Public Utilities Commission and the New Hampshire Public Utilities Commission that threatened the debtors’ ability to sell electricity or natural gas in those states. Consequently, the debtors initiated a strategic alternatives review process which, naturally, included a marketing process for the sale of the debtors. The company now has Exelon Generation Company LLC lined up as a stalking horse purchaser (for the debtors’ contracts) for $24.75mm.

*RPS laws require a certain portion of a state’s electricity consumption to be generated from renewable sources, such as wind, solar, biomass, geothermal, or hydroelectric.

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

• Capital Structure: $161.6mm Senior Lien Supply Agreement and Senior Lien ISDA Master Agreement (BP Energy), $35mm Second lien Revolving Credit Facility (Colorado Bankers Life Insurance Company)

• Professionals:

  • Legal: McDermott Will & Emery (Timothy Walsh, Darren Azman, Ravi Vohra, Debra Harrison)

  • Independent Manager: Stephen Gray

  • Financial Advisor: GlassRatner Advisory & Capital Group LLC

  • Investment Banker: Miller Buckfire & Co. LLC & Stifel Nicolaus & Co. Inc.

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

• Other Parties in Interest:

  • DIP Lender: BP Energy Company

    • Legal: Haynes and Boone LLP (Charles Beckham Jr., Kelli Norfleet, Arsalan Muhammad, Kathryn Shurin)

  • Stalking Horse Bidder: Exelon Generation Company, LLC

    • Legal: McGuireWoods LLP (Cecil Martin III)

  • Platinum Partners

    • Legal: Otterbourg PC (Melanie Cyganowski, Eric Weinick)

10/7/19 #42

🎦New Chapter 11 Bankruptcy Filing - Deluxe Entertainment Services Group Inc.🎦

Deluxe Entertainment Services Group Inc.

October 3, 2019

Summary to come.

• Jurisdiction: (Judge Drain)

• Capital Structure: ⬇️

• Professionals:

  • Legal: Kirkland & Ellis LLP (Jonathan Henes, Jonathan Altman)

  • Board of Directors: Ronald Perelman, Matthew Cantor, Paul Savas

  • Financial Advisor: AlixPartners LLP

  • Investment Banker: PJT Partners Inc. (James Baird)

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

• Other Parties in Interest:

  • Existing ABL Agent, Senior Priming Term Loan Agent, Priming Term Loan Agent, and Existing Term Loan Agent: Credit Suisse AG

    • Legal: Cravath Swaine & Moore LLP (Paul Zumbro, George Zobitz, Sarah Rosen) & Norton Rose Fulbright

  • Ad Hoc Committee of the Senior Priming Term Loan,2 the Priming Term Loan, the Existing Term Loan and the DIP Term Facility (see below, as of 10/7/19)

    • Legal: Stroock & Stroock & Lavan LLP (Kristopher Hansen, Jonathan Canfield, Gabriel Sasson)

    • Financial Advisor: FTI Consulting Inc.

  • MAFCO

    • Legal: Skadden Arps Slate Meagher & Flom LLP (Shana Elberg, Mark McDermott)

🎓New Chapter 11 Bankruptcy Filing - The College of New Rochelle🎓

The College of New Rochelle

September 20, 2019

Non-profit The College of New Rochelle filed for bankruptcy, an unfortunate step for a school founded in 1898 and meant to serve underprivileged and first-generational college students. Sadly, the school’s problems stem from a rogue Controller who (i) failed to pay payroll taxes over a two year period, (ii) misappropriated government grant money, (iii) used endowment funds in an unauthorized manner, (iv) stiffed creditors with all kinds of schemes, and (v) concealed the true nature of the school’s financial condition by, among other things, misrepresenting financial health and issuing false financial statements. Ouch.

While Mr. Incompetent Controller pled guilty to fraud and failure to pay payroll taxes, that, unfortunately, does not cure the financial situation for the school, which finds itself “with over $31 million in previously undisclosed debts.” As for the Controller, he was sentenced to three years in federal prison, a $25k fine, and ordered to pay restitution of no less than $13.2mm — which there isn’t a chance in hell he’ll be able to do.

As if this isn’t horrible enough already, the school’s endowment is too small and the school’s enrollment revenue is too inadequate to address this massive liability. Consequently, the school is now forced to wind-down to pay off its debts. As a practical matter, what does this mean? Well, first, the school had to figure out a solution for its students. It did so via a “teach-out agreement” with a neighboring school, pursuant to which the students were able to continue their education and secure credit. Second, the school owns its real estate and has hired a real estate broker to pursue sales thereof. Those sales will go a long way towards paying the past due taxes owed and secured debt. The company has a commitment for a $4mm DIP credit facility to fund the cases.

What a sad social commentary: one dude’s malfeasance tore down 100+ years of history. Tragic.

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

• Capital Structure: $31.9mm secured loan (Citizens Bank/DASNY), $2mm secured loan (Carney Family Charitable Foundation), ~$2.4mm secured loan (Key Bank NA), ~$14mm bond debt (Industrial Bonds, UMB Bank NA, trustee)

• Professionals:

  • Legal: Cullen and Dykman LLP (Matthew Roseman, Bonnie Pollack, Elizabeth Aboulafia, Sophia Hepheastou)

  • Financial Advisor/CRO: Getzler Henrich & Associates LLC (Herbert Weil, Mark Podgainy)

  • Real Estate Broker: A&G Realty Partners LLC/B6

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

• Other Parties in Interest:

  • Key Bank NA

    • Legal: Nolan Heller Kauffman LLP (Francis Berman)

  • DIP Lender ($4mm): Summit Investment Management LLC

    • Legal: Kilpatrick Townsend & Stockton LLP (Todd Meyers, David Posner, Paul Rosenblatt)

💊New Chapter 11 Bankruptcy Filing - Purdue Pharma LP 💊

Purdue Pharma LP

September 15, 2019

See here for our writeup.

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

• Professionals:

  • Legal: Davis Polk & Wardwell (Marshall S. Huebner, Benjamin S. Kaminetzky,, Timothy Graulich, Eli J. Vonnegut)

  • Board of Directors: Robert Miller, Kenneth Buckfire, John Dubel, Michael Cola, Anthony Roncalli, Cecil Pickett, F. Peter Boer

  • Financial Advisor: AlixPartners LLP

  • Investment Banker: PJT Partners Inc.

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

• Other Parties in Interest:

  • Ad Hoc Committee of AGs in Support of Settlement

    • Legal: Kramer Levin Naftalis & Frankel LLP (Kenneth Eckstein, Rachael Ringer), Brown Rudnick LLP (David Molton, Steven Pohl), Gilbert LLP (Scott Gilbert, Craig Litherland, Kami Quinn), Otterbourg PC (Melanie Cyganowski, Jennifer Feeney)

  • AG of New York

    • Legal: Pillsbury Winthrop LLP (Andrew Troop)

  • Official Committee of Unsecured Creditors: West Boca Medical Center, CVS Caremark D Services LLC, LTS Lohmann Therapy Systems Corporation, Blue Cross and Blue Shield Association, Pension Benefit Guaranty Corporation and 4 individuals

    • Legal: Akin Gump Strauss Hauer & Feld LLP

9/28/19 #135

🇲🇽New Chapter 22 Bankruptcy Filing - Maxcom USA Telecom Inc.🇲🇽

Maxcom USA Telecom Inc.

August 19, 2019

We’re all for a reprieve from retail and energy distress but, sheesh, couldn’t have been more interesting than this?

Maxcom USA Telecom Inc. is a telecommunications provider deploying “smart-build” approaches to “last mile” connectivity (read: modems, handsets and set-up boxes) for enterprises, residential customers and governmental entities in Mexico — which is really just a fancy way of saying that it provides local and long-distance voice, data, high speed, dedicated internet access and VoIP tech, among other things, to customers.* It purports to be cutting edge and entrepreneurial, claiming “a history of being the first providers in Mexico to introduce new services,” including (a) the first broadband in 2005, (b) the first “triple-play” (cable, voice and broadband) in 2005, and (c) the first paid tv services over copper network using IP…in 2007. That’s where the “history” stops, however, which likely goes a long way — reminder, it’s currently the year 2019 — towards explaining why this f*cker couldn’t generate enough revenue to service its ~$103.4mm in debt.** Innovators!!

And speaking of that debt, it’s primarily the $103.4mm in “Old Notes” due in 2020 that precipitated this prepackaged bankruptcy filing (in the Southern District of New York).***

The Old Notes derive from a prior prepackaged bankruptcy — in 2013 (PETITION Note: not a “Two-Year Rule” violation) — and were exchanged for what were then outstanding 11% senior notes due in 2014. These Old Notes have a “step-up interest rate,” which means that, over time, the interest rate…uh…steps up…as in, increases upward/up-like. The rate currently stands at 8%. Unfortunately, the company doesn’t have revenue step-ups/upwardness/upseedayzee to offset the interest expense increase; rather, the company “…incurred losses of $4.9 million for the three months ended June 30, 2019, as compared to losses of $2.9 million for the three months ended June 30, 2018, and losses of $16 million for the year ended December 31, 2018, compared to losses of $.8 million for the year ended December 31, 2017….” Compounding matters are, among other things, the negative effects of decreased interest income and foreign currency exchange rates (the dollar is too damn strong!).**** The closure of the residential segment also, naturally, affected net revenue.

To make matters worse, the company’s debt actually has limitations (remember those?). Per the company:

In order to expand its network and strengthen its market share, the Debtors require additional capital. But, the Old Notes Indenture prohibits Maxcom Parent from incurring additional indebtedness (other than permitted indebtedness) unless certain leverage coverage ratios are satisfied, and the increased interest burden under the Old Notes seriously constrains the Debtors’ ability to take the actions required under its business plan to strengthen and expand their operations.

The purpose of this bankruptcy filing, therefore, is to effectuate a consent solicitation and exchange offer whereby the Old Notes will be swapped (and extinguished) for new “Senior Notes,” new “Junior PIK Notes” and cash consideration. The cash consideration will be covered by a new equity injection of $15mm. This transaction will bolster the company’s liquidity and shed approximately $36mm of debt from the balance sheet (PETITION Note: carry the one, add the two, that’s roughly $2.88mm in annual interest savings before taking into account the PIK notes, which won’t be cash-pay, obviously).

Prior to the bankruptcy filing, the company obtained the requisite amount of support to jam non-consenting creditors (PETITION Note: in bankruptcy, a debtor needs 2/3 in amount and half in number of a particular class of debt to bind a class. Here, the company nailed down acceptances of the plan from 84.75% of the holders of Old Notes holding 66.73% of principal amount in Old Notes). And there is one large group of non-consenting holders, apparently. Cicerone Advisors LLC, a financial advisor to three holders of the Old Notes, Moneda Asset Management, Megeve Investments and UBS Financial Services, Inc., attempted to engage the company on better terms than that offered under the plan. It did not, however, ultimately provide a proposal; instead, it demanded terms, including confidentiality and an agreement to pay fees and expenses of financial and legal advisors. Here’s the thing, though: they miscalculated their leverage: with only 30% of Old Notes represented, they don’t have a “blocking position” that could thwart the company’s proposal. Absent an additional 4%, these guys are dead in the water.

This should be…should be…a very quick trip through bankruptcy.*****

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*The company is shutting down its residential segment, which “involves the gradual closure of residential clusters and mass disconnection of residential customers.” Apparently, people don’t need the company’s services anymore. At least not when they’re carrying $1,000 telecommunications systems in their pants pockets? 🤔

The disruption is real. Indeed, the company’s residential segment operates through an outdated copper network that doesn’t comport with the latest in fiber network technology.

**U.S. Bank NA is the indenture trustee under the Old Notes.

***Oh man, the venue on this one is just quaint. There are two debtors, Maxcom Telecomunicaciones, S.A.B. DE C.V., a Mexican entity and Maxcom USA Telecom Inc., which is 100% owned by the former. What does the latter do? According to Exhibit A of the First Day Declaration it does “[Assorted services in the USA].” Hahaha. This sh*t is so suspect that nobody even bothered to remove the brackets. It might as well say, “[Kinda sorta maybe some random sh*t within US borders and down the street from the SDNY for purposes of ginning up venue”]. Is it a guarantor on the notes? “[Yes].” HAHAHA. Like, is it, or not?? The listed highlight? “Recently created.” Damn straight it was. This year. The service address? “c/o United Corporate Services, Inc., Ten Bank Street, Suite 560, White Plains, NY 10606.” Conveniently happens to fall right in Judge Drain’s lap.

We mean, seriously, folks? People AREN’T EVEN TRYING to be slick about manufacturing venue anymore.

Apropos to the point, Duane Morris LLP’s Frederick Hyman highlights the trend of foreign borrowers with little to no assets in the U.S. filing for chapter 11 to take advantage of the automatic stay here, describing the slippery-slope-creating case of TMT Shipping (which established venue by funding professional retainers in the US).

****Interestingly, people have been voicing concerns about the foreign exchange rates and US-dominated debt in emerging markets. It seems those concerns may be warranted:

…from 2013 to date, the value of the Mexican Peso, as compared to the U.S., has decreased by 53%. Because of such devaluation, Maxcom Parent’s repurchase of the $74.3 million in principal amount of the Old Notes did not decrease the amount that Maxcom Parent’s books and records reflect is owed to the holders of the Old Notes given that Maxcom Enterprise’s revenues are mostly in Mexican Pesos. In other words, while the amount that Maxcom Parent owes on account of the Old Notes has decreased in U.S. Dollars, because the majority of Maxcom Enterprise’s revenues are in Mexican Pesos and the Old Notes are denominated in U.S. Dollars, Maxcom Parent’s liability on account of the Old Notes remains roughly the same on its books and records.

Ruh roh. 🙈 We expect to see many more mentions of exchange-related issues going forward. Mark our words.💥

*****Small victories. The dissenting bondholders were able to successfully push the debtors’ timeline by a week or so at the first day hearing.

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

• Capital Structure: $103.4mm old notes

• Professionals:

  • Legal: Paul Hastings LLP (Pedro Jimenez, Irena Goldstein)

  • Financial Advisor: Alvarez & Marsal Mexico

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

• Other Parties in Interest:

  • Indenture Trustee: US Bank NA

    • Legal: Thompson Hine LLP (Jonathan Hawkins, Curtis Tuggle)
      

⚡️New Chapter 11 Bankruptcy Filing - Empire Generating Co LLC⚡️

Empire Generating Co LLC

May 19, 2019

We love when companies that have been circling around the bankruptcy bowl finally get flushed into bankruptcy court. Empire Generating Company is a name that has been kicking around distressed circles for some time now: The Wall Street Journal wrote about it a year ago, back in May 2018. Alas, it now sits within the Southern District of New York. It is the latest in a line of power producers to file for bankruptcy in recent years.

The company owns and operates a (now) dual-fuel power plant in Rensselaer New York; as a merchant power plant, it sells electricity in the wholesale market that ultimately helps power New York’s electrical grid. Very soon, it will likewise be able to generate revenue in New England. In fiscal year 2017, the company generated $91.8mm of revenue and $16.77 of EBITDA. EBITDA decreased to $11.05mm in 2018. The company also has a meaningful amount of debt. As of the petition date, its outstanding owed amounts under its credit facility total $353.4mm. Its $20mm revolver matured in March 2019.

The company cites some interesting causes for its filing. First, it gives an economics 101 lesson, saying that coal and nuclear facilities in New York haven’t been retired quickly enough to limit electricity supply and put upward pressure on prices. Second, it blames progressives (Cuomo!!): New York’s Clean Energy Standard requires that 50% of NY’s electricity come from renewables by 2030, creating yet another supply/demand imbalance that has placed “downward pressure on the price for energy generated by other sources.” Third, unlike retailers who blame bad weather for under performance all of the time, this company actually has a viable excuse: the abnormally cold winter of 2017/2018 increased natural gas prices, compressing the company’s margins. At the time, the company wasn’t yet “dual-fuel” and, therefore, relied exclusively on natural gas whereas competitors could toggle to more economical fuel oil instead. This confluence of factors ultimately led the company to default under its loan docs.

The company has since been in a state of perpetual forbearance with an ad hoc group of pre-petition lenders. It was on the verge of a prepackaged solution to its balance sheet but time ticked away and the company’s pesky lenders traded out of their respective positions. Per the company:

Once the debt trades settled, approximately 55% of the Credit Facility was held by the Consenting Lenders (Black Diamond and MJX), and approximately 34% of the Credit Facility was held by funds managed by Ares Capital (“Ares”).

For the uninitiated, debtors need 2/3 of the amount of a particular tranche of debt to approve a deal for a plan of reorganization to be confirmed by the bankruptcy court. As you can see from the percentages above, Ares Capital and the “Consenting Lenders” (Black Diamond Capital Management LLC & MJX Asset Management LLC) had “blocking positions,” eliminating the possibility of surpassing the required threshold. Months of negotiations ensued and, apparently, Ares and Black Diamond simply couldn’t get along. Uh, yeah, bros: Black Diamond is kinda known for not getting along. Just sayin.

In lieu of an agreement with those parties, the company has secured, pursuant to a restructuring support agreement, a commitment by Black Diamond Capital Management LLC & MJX Asset Management LLC to credit bid — subject to higher and better offers — their debt in exchange for a 100% interest in the reorganized company. The company has, in turn, rejected a proposal from Ares Capital that would confer $37.8mm in cash and 89.75% equity of an acquisition vehicle as consideration for the company’s assets (which it values at a total of $369mm). Why? It concluded that the offer was neither higher nor better than the credit bid; it also had concerns about valuation, approval and feasibility (feasibility!!!!!). Otherwise, the company be like, “PEACE, B*TCHES, WE DON’T WANT NO PART OF THIS INTERCREDITOR DISPUTE.”

And an intercreditor dispute there is! Ares objected right away to the company’s proposed cash collateral, among other things, saying that Black Diamond is steering the company like a meek little sheep. The objection is too lengthy to recant here but, suffice it to say, it looks like we can expect an old school private equity battle over the course of the case. Judge Drain more or less shot down Ares at the hearing, questioning, even, whether they had standing to object; he then went on to amend the proposed cash collateral order.

Absent a settlement between the funds, this will not be the last fight in the case. Pop the popcorn.

• Jurisdiction: (Judge Drain)

• Capital Structure: $20mm RCF, $430mm Term B loan, $30mm Term C loan

• Professionals:

  • Legal: Steinhilber Swanson LLP (Michael Richman) & Hunton Andrews Kurth LLP (Peter Partee Sr., Robert Rich, Michael Legge)

  • Financial Advisor: RPA Advisors (Chip Cummins)

  • Investment Banker:

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

• Other Parties in Interest:

  • Secured Lenders: Black Diamond Capital Management LLC & MJX Asset Management LLC

    • Legal: Skadden Arps Slate Meagher & Flom LLP (Christine Okike, Albert Hogan III, Carl Tullson)

  • Secured Lender: Ares Capital LP

    • Legal: Kirkland & Ellis LLP (James Sprayragen, Brian Schartz, Anup Sathy, Stephen Hackney, Alexandra Schwarzman)

  • Secured Lender: Starwood

    • Legal: Vinson & Elkins LLP (Steven Abramowitz)

  • Ad Hoc Group

    • Legal: Stroock & Stroock & Lavan LLP

  • Agent: Ankura Trust Company

    • Legal: Davis Polk & Wardwell LLP (Darren Klein)

New Chapter 11 Filing - Sungard Availability Services Capital Inc.

Sungard Availability Services Capital Inc.

May 1, 2019

Pennsylvania-based Sungard Availability Services Capital Inc., a provider of “critical production and recovery services to global enterprise companies,” with $977mm of net revenue and $203mm of EBITDA in fiscal 2018 filed a prepackaged chapter 11 plan in the Southern District of New York on Wednesday and, if you blinked, you may have missed its residency in bankruptcy. Indeed, some lost their minds because Kirkland & Ellis LLP was able to shepherd the case in and out of bankruptcy in less than 24 hours — breaking the previous record only recently set in FullBeauty. Yes, people care about these things.*

The upshot of this expeditious bankruptcy case is that (a) the company shed nearly $900mm of debt from its balance sheet (reducing debt down to approximately $400-450mm) and (b) transferred 89% ownership to a variety of debt-for-equity swapping funds such as GSO Capital Partners, Angelo Gordon & Co., and Carlyle Group (who will also receive $300mm in senior secured term loan paper). Major equity holders — Bain Capital Integral Investors LLC, Blackstone Capital Partners IV LP, Blackstone GT Communications Partners LP, KKR Millennium Fund LP, Providence Equity Partners V LP, Silver Lake Partners II LP, TPG Partners IV LP — had their equity wiped out. We had previously highlighted KKR’s investment here in “A Hot-Potato Plan of Reorganization. Short BDC Retail Exposure,” discussing the broader context of BDC lending. This is what the capital structure looks like and will look like:

Source: Disclosure Statement

That balance sheet is the driver behind the bankruptcy filing. Per the company:

This legacy capital structure was created based upon the Company’s historical operating model and performance and is unsustainable under current market conditions. When the capital structure was put in place, the Company benefited from a larger revenue base with substantially higher free cash flow. As business conditions evolved and the Company’s revenue declined, cash flow available to service debt and invest in products and services substantially declined. Consolidated net revenue declined by approximately 18% from approximately $1.2 billion in 2016 to approximately $977 million in 20188 while adjusted EBITDA margins remained within a range of approximately 20% to 22%. Negative net cash flow from 2016 to 2018 was approximately $80 million.

In other words, this is as clear-cut a balance sheet restructuring that you can get. Indeed, general unsecured claims are — as you might expect from a prepackaged plan of reorganization — riding through unimpaired. This consensual restructuring is clearly the right result. Getting it in and out of court so quickly is a bonus.

Yet, lest anyone get too high on their own supply, it’s important to note that, while this is a good result under the circumstances, there is a significant amount of value destruction illustrated by this filing. The term lenders are getting merely an estimated 50-73% recovery while the noteholders are getting 7-14%**. Now, it IS reasonable to expect that the “par guys” blew out of this situation long ago. And it is also reasonable to assume that the current holders of loans and notes got in at a significant discount so “value destruction” really is a matter of timing/pricing. For the avoidance of doubt, however, there’s no question that certain lenders experienced some pain on the path to this filing. Here is the chart representing the company’s notes:

So, while some are surely celebrating, others are surely licking their wounds.

*We don’t really want to be too flip about this. As critics of the bankruptcy process, we’re all for seeing more efficient uses of the bankruptcy court — even if that does mean that fees were run up pre-petition without any oversight whatsoever.

**You always have to take these recovery amounts with a grain of salt. In case the rampant Chapter 22s haven’t already taught you that.

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

• Capital Structure:

• Professionals:

  • Legal: Kirkland & Ellis LLP (Jonathan Henes, Emily Geier, Ryan Blaine Bennett, Laura Krucks

  • Board of Directors: Darren Abrahamson, Patrick J. Bartels Jr., Randy Hendricks, John Park, David Treadwell

  • Financial Advisor/CRO: AlixPartners LLP (Eric Koza)

  • Investment Banker: Centerview Partners (Samuel Greene)

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

• Other Parties in Interest:

  • DIP Agent: JPMorgan Chase Bank NA

  • Secured Lender Group

    • Jones Day (Scott Greenberg, Michael Cohen, Nicholas Morin)

    • Financial Advisor: Houlihan Lokey Capital Inc.

  • Crossover Group

    • Akin Gump Strauss Hauer & Feld LLP (Philip Dublin, Naomi Moss)

    • Financial Advisor: PJT Partners LP

  • Large Equityholders: Bain Capital Integral Investors LLC, Blackstone Capital Partners IV LP, Blackstone GT Communications Partners LP, KKR Millennium Fund LP, Providence Equity Partners V LP, Silver Lake Partners II LP, TPG Partners IV LP

    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Brian Hermann, Jacob Adlerstein)

💥New Chapter 11 Bankruptcy: Sears Holdings Corporation💥

Sears Holdings Corporation

October 15, 2018

Finally.

Early this morning, Illinois-based Sears Holdings Corporation ($SHLD) and approximately 49 affiliated entities (including KMart) finally filed for chapter 11 bankruptcy. The company lists a staggering $11.339 billion of total debts and $6.937 billion of assets.

The well-known company has 866 full-line and specialty stores as of August 4, 2018. In its chapter 11 petition, it boasts of its legacy as an “integrated retailer with significant physical and tangible assets, as well as virtual capabilities enabled through technology.” Yes, you read that correctly: they actually say “virtual capabilities enabled through technology.” That right there may help inform EVERYONE why this storied retailer has found its way into bankruptcy court. To the last, Sears stands out for its ability to appear out of touch.

The company appears to have a commitment for a $1.875 billion debtor-in-possession (“DIP”) asset-backed credit facility, including an increase of $300mm from its existing facility as well as an agreement over the use of the company’s lenders’ cash collateral. According to a company press release, the company is also negotiating an additional $300mm commitment from ESL Investments Inc. (“ESL”), the company’s largest shareholder and the investment vehicle of Eddie Lampert. The company intends to reorganize around a smaller store platform of “EBITDA-positive stores.” To this end, the company will close 142 stores near the end of the year adding to the previously announced 46 stores set to close in November 2018 — potentially further perpetuating the hurt put on U.S.-based malls over the last several years. Meanwhile, the company continues to negotiate an asset purchase agreement with ESL for “a large portion of the Company’s store base.” This would, obviously, keep the enterprise from liquidating and potentially help maintain thousands of jobs: Sears currently employs approximately 90k people.

While Eddie Lampert will remain Chairman of the Board, he has resigned as CEO of the company. Godspeed, Eddie.

The company’s top listed creditors at the time of filing include The Pension Benefit Guaranty Corporation and various trustees under five different tranches of unsecured notes totaling over $3 billion in principal amount (BNY Midwest Trust Company, Computershare Trust Company NA, The Chase Manhattan Bank NA). Trade creditors include Whirlpool Corporation ($23.4mm), Frigidaire Company ($18.6mm), and Winia Daewoo Electronics America ($15.2mm).

We will update this post on Wednesday in our next briefing; we are particularly excited to see how the company spins the “factors” that led to its appearance in bankruptcy court. Here’s one explanation:

And here’s another — seemingly more-on-point — one:

• Jurisdiction: S.D.N.Y. (Judge Drain)

• Capital Structure: $11.339b debt     

• Company Professionals:

  • Legal: Weil, Gotshal & Manges LLP (Ray Schrock, Garrett Fail, Jacqueline Marcus, Sunny Singh)

  • CRO/Financial Advisor: M-III Partners, LP (Mohsin Meghji, Colin Adams, Brian Griffith, Christopher Good, Mary Korycki, Kevin Tanaka, Enrique Acevedo, Wesley Sima, Noah Zatzkin, Joseph Frantz, Nicholas Weber, Ravi Ramnani )

  • Investment Banker: Lazard Freres & Company

  • Restructuring Committee’s Independent Directors: William Transier, Alan Carr, Paul DePodesta, Ann Reese

  • Restructuring Sub-Committee (RSC): Alan Carr and William Transier

  • Legal to RSC: Paul Weiss Rifkind Wharton & Garrison LLP (Paul Basta, Kelley Cornish, Lewis Clayton, Susanna Buergel, Robert Britton, Jonathan Hurwitz, Emma Carlson, Teresa Lii)

  • Financial Advisors to RSC: Alvarez & Marsal North America LLC (Dennis Stogsdill, Nick Grossi, Brian Corio, Jonah Galaz, Andrew Gasbarra, Jonathan Bain, Jordan Kravette)

  • Investment Banker to RSC: Evercore Group LLC (Daniel Aronson, Jeremy Matican, Guy McCumber, Siddhesh Patkar, Jonathan Kamel, Ajith Sukumar)

  • Conflicts Counsel: Young Conaway Stargatt & Taylor LLP (Pauline Morgan, Rolin Bissell, Ryan Bartley, Travis Buchanan)

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

• Other Parties in Interest:

  • Large Shareholders: ESL Investments. Legal: Cleary Gottlieb Steen & Hamilton LLP (James Bromley, Sean O’Neal, Andrew Weaver)

  • Prepetition RCF, Term Loans, FILO & DIP ABL Agent: Bank of America NA. Legal: Skadden Arps Slate Meagher & Flom LLP (Paul Leake, Shana Elberg, George Howard)

  • Citibank NA. Legal: Davis Polk & Wardwell LLP (Marshall Huebner, Eli Vonnegut)

  • Large Shareholder: Fairholme Capital Management LLC. Legal: Sullivan & Cromwell LLP (Andrew Dietderich, Brian Glueckstein, David Zylberberg)

  • PBGC. Legal: Locke Lord LLP (David Wirt)

  • Debtors’ IP/Ground Lease Term Loan Lender: SHLD Lendco LLC. Legal: Cahill Gordon & Reindel LLP (Joel Levitin, Richard Stieglitz Jr.)

  • Official Committee of Unsecured Creditors

    • Legal: Akin Gump Strauss Hauer & Feld LLP (Ira Dizengoff, Philip Dublin, Abid Quereshi, SARA Brauner)

    • Legal (Conflicts): Herrick Feinstein LLP (Sean O’Donnell, Stephen Selbst, Steven Smith)

    • Financial Advisor: FTI Consulting Inc. (Matt Diaz, Conor Tully, Michael Berkin, Marshal Eisler, Kenny O’Trakoun, Morgan McCaskey, Samuel Star)

    • Investment Banker: Houlihan Lokey (Saul Burian, Eric Siegert, Brad Geer, Surbhi Gupta, Greg Rinsky, Tom Hedus, Ross Rosenstein, Ryan Conroy, John Hartigan, Ahmed Mumtaz, Jack Foster, James Lai, Natalie Weelborg, Andrew Felman, Matthew Stadtmauer)

  • Cyrus Capital Partners LP

    • Legal: Milbank Tweed Hadley & McCloy LLP (Eric Reimer, Thomas Kreller, Craig Price)

  • Indenture Trustee to Medium Term Notes: The Bank of New York Mellon Trust Company, N.A.

    • Legal: Carter Ledyard & Milburn LLP (James Gadsden, Leonardo Trivigno)

Updated 11/30/18

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New Chapter 11 Filing - Hooper Holmes Inc. (d/b/a Provant Health)

Hooper Holmes Inc. (d/b/a Provant Health)

8/27/18

Kansas-based Hooper Holmes Inc. ($HPHW), a provider of comprehensive health and wellbeing programs, e.g., biometric screening services, flu shots, lab testing and more, filed for bankruptcy in the Southern District of New York. The company does business as Provant Health Solutions LLC ("PHS), an entity it merged with as recently as 2017. And that is part of the problem: the company incurred tens of millions in debt over the last few years in connection with the PHS merger and a prior acquisition of Accountable Health Solutions Inc., a provider of, among other things, telephonic health coaching and wellness portals. 

The company will use the bankruptcy process to effectuate a sale of substantially all of its assets to a stalking horse bidder, Summit Health Inc., for $27mm in cash and the assumption of certain liabilities. The company's prepetition secured lenders will finance the cases via a proposed $13.6mm DIP credit facility. 

• Jurisdiction: S.D. of New York (Judge Drain)
• Capital Structure: See below.   
• Company Professionals:
  • Legal: Foley & Lardner LLP (Richard Bernard, Timothy Mohan, Jill Nicholson, Geoff Goodman, Michael Riordan, John Melko) & Halperin Battaglia Benzija LLP (Christopher Battaglia)
  • Financial Advisor: Phoenix Management (James Fleet, Albert Mink)
  • Investment Banker: Raymond James & Associates Inc. (Geoffrey Richards)
  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Term Lender: SWK Funding LLC
    • Legal: Holland & Knight LLP (Arthur Rosenberg)
  • Stalking Horse Bidder: Summit Health Inc., a subsidiary of Quest Diagnostics Inc.
    • Legal: Bass Berry & Sims PLC (Paul Jennings) & Weil Gotshal & Manges LLP (Gary Holtzer, Jessica Liou, John Conte)

Source: First Day Declaration

New Chapter 11 Filing - Global A&T Electronics Ltd.

Global A&T Electronics Ltd. 

• 12/17/17 Recap: Singapore-based provider of semiconductor assembly and test services for integrated circuits for use in analog, mixed-signal and logic, and memory products across the globe filed for prepackaged bankruptcy...finally. The company had skipped its $56mm interest payment and let its 30-day grace period expire; it has also been the subject of litigation after issuing new notes back in 2014 in exchange for junior debt. The company blames the litigation, an over-levered balance sheet, underspending on capex, and liquidity constraints for its need to reorganize. The company seeks to confirm the case in FOUR DAYS which may be a new record for a bankruptcy of this size. 
• Jurisdiction: S.D. of New York (Judge Drain)
• Capital Structure: $1.13b 10% '19 first lien notes ($625mm Initial Nots, $502mm Additional Notes)(Citicorp International Limited)
• Company Professionals:
  • Legal: Kirkland & Ellis LLP (Marc Kieselstein, Patrick Nash, Gregory Pesce, Michael Slade)
  • Financial Advisor: Alvarez & Marsal LLC (Robert Caruso)
  • Investment Banker: Moelis & Company LLC
  • Disinterested Director: Eugene Davis
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Ad Hoc Group of Initial Senior Secured Noteholders (GSO Capital Partners LP, IP All Seasons Asian Credit Fund, Brigade Capital Management LP, Southpaw Credit Opportunity Master Fund LP)
    • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Abhilash Raval, Brian Kinney, Michael Price)
    • Financial Advisor: PJT Partners LP
  • Ad Hoc Committee of Additional Senior Secured Noteholders (Taconic Capital Advisors LP, Marble Ridge Master Fund LP, KLS Diversified Asset Management)
    • Legal: Dechert LLP (Michael Sage, Brian Greer, Janet Doherty)
  • Ad Hoc Committee of Additional Senior Secured Noteholders
    • Legal: Ropes & Gray LLP (Gregg Galardi, Stephen Moeller-Sally, Daniel Anderson)
  • TPG
    • Legal: Cleary Gottlieb Steen & Hamilton LLP (James Bromley, Benjamin Beller)