⛽️New Chapter 11 Bankruptcy Filing - Nine Point Energy Holdings Inc.⛽️

Nine Point Energy Holdings Inc.

Colorado-based Nine Point Energy Holdings Inc. (along with three affiliates, the “debtors”) is and independent oil and gas exploration and production company focused on the Williston Basin in North Dakota and Montana. It is the successor to Triangle USA Petroleum Corporation, which filed for chapter 11 bankruptcy in June 2016 and confirmed a plan in March 2017. Four years later, it’s back in bankruptcy court. 😬

Followers of E&P bankruptcies have become accustomed to disputes relating to E&P companies and their midstream gathering, transportation and processing providers. Here, Caliber Midstream Partners LP was the debtors’ largest midstream services provider — “was” being the operative word after the debtors terminated the long-term midstream services agreements on the eve of bankruptcy. The story, however, doesn’t end there.

The debtors are willing to enter into a new arrangement with Caliber going forward. It’s unclear how the new arrangement might differ from the existing arrangement because redaction, redaction, redaction. The economic terms of the contract have not been disclosed. 🤔

And so here we are with another potential “running with the land” scenario. If you’re unfamiliar with what this is, you clearly haven’t been paying attention to E&P bankruptcy cases. Just Google it and you’ll pull up probably 8928394829248929 law firm articles on the topic. As this will be a major driver in the case, it probably makes sense to refresh your recollection.

Why are the debtors in bankruptcy? All of the usual reasons, e.g., the big drop in oil prices thanks to COVID-19 and Russia/OPEC. Nothing really new there.

So what does this filing achieve? For starters, it will give the debtors an opportunity to address the Caliber contracts. Moreover, it will avail the debtors of a DIP facility from their pre-petition lenders in the amount of ~$72mm — $18mm in new money and $54mm on a rollup basis (exclusive of an additional $16.1mm roll-up to account for pre-petition secured swap obligations)(8% interest with 2% commitment fee). Finally, the pre-petition-cum-DIP-lenders have agreed to serve as the stalking horse purchaser of the debtors’ assets with a credit bid floor of $250mm.

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Date: March 15, 2021

Jurisdiction: D. of Delaware (Judge Walrath)

Capital Structure: $256.9mm credit facility, $16.1mm swap obligations

Company Professionals:

• Legal: Latham & Watkins LLP (Richard Levy, Caroline Reckler, Jonathan Gordon, George Davis, Nacif Taousse, Alistair Fatheazam, Jonathan Weichselbaum, Andrew Sorkin, Heather Waller, Amanda Rose Stanzione, Elizabeth Morris, Sohom Datta) & Young Conaway Stargatt & Taylor LLP (Michael Nestor, Kara Hammond Coyle, Ashley Jacobs, Jacob Morton)

• Board of Directors: Patrick Bartels Jr., Dominic Spencer, Frederic Brace, Gary Begeman, Alan Dawes

• Financial Advisor: AlixPartners LLP (John Castellano)

• Investment Banker: Perella Weinberg Partners LP (John Cesarz)

• Claims Agent: Stretto (Click here for free docket access)

Other Parties in Interest:

• Pre-petition & DIP Agent: AB Private Credit Investors LLC

  • Legal: Proskauer Rose LLP (Charles Dale, David Hillman, Michael Mervis, Megan Volin, Paul Possinger, Jordan Sazant) & Landis Rath & Cobb LLP (Adam Landis, Kerri Mumford, Matthew Pierce)

• Ad Hoc Group of Equityholders: Shenkman Capital Management, JP Morgan Securities LLC, Canyon Capital Advisors LLC, Chambers Energy Capital

  • Legal: Willkie Farr & Gallagher LLP (Jeffrey Pawlitz, Matthew Dunn, Mark Stancil) & Richards Layton & Finger PA (John Knight, Amanda Steele, David Queroli)

• Midstream Counterparty: Caliber Measurement Services LLC, Caliber Midstream Fresh Water Partners LLC, and Caliber North Dakota LLC

  • Legal: Weil Gotshal & Manges LLP (Alfredo Perez, Brenda Funk, Tristan Sierra, Edward Soto, Lauren Alexander) & Morris Nichols Arsht & Tunnell LLP (Curtis Miller, Taylor Haga, Nader Amer)

⛽️ New Chapter 11 Bankruptcy Filing - Permian Holdco 1 Inc.

Permian Holdco 1 Inc.

July 19, 2020

Permian Holdco 1 Inc. and three affiliates (the “debtors”) filed chapter 11 bankruptcy cases in the District of Delaware. We know. It’s shocking. How in hell could a manufacturer of above-ground wellsite fluid containment and processing systems for oil and gas E&P companies be in trouble?!? The debtors’ pre-pretition lender will serve as DIP lender ($5mm) and stalking horse purchaser, credit bidding the DIP and prepetition credit facility amount ($28.6mm) as appropriate/necessary. Riveting stuff.

• Jurisdiction: D. of DE (Judge Walrath)

• Capital Structure: $28.6mm RCF & TL (New Mountain), $19.435mm unsecured promissory notes

• Professionals:

  • Legal: Young Conaway Stargatt & Taylor LLP (M. Blake Cleary, Robert Poppiti Jr., Joseph Mulvihill, Jordan Sazant)

  • Financial Advisor/CRO: CM Advisory LLC (Chris Maier)

  • Investment Banker: Seaport Gordian Energy LLC

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

• Other Parties in Interest:

New Chapter 33 Bankruptcy Filing - NorthEast Gas Generation LLC

NorthEast Gas Generation LLC

June 18, 2020

Texas-based NorthEast Gas Generation LLC (along with three affiliates, the “debtors”), an indirect subsidiary of non-debtors Talen Energy Corporation and NorthEast Gas Generation Holdings LLC (f/k/a MACH Gen LLC), filed for bankruptcy in the District of Delaware. This is the third chapter 11 in six years. You could be excused for thinking that, after two prior rodeos, the balance sheet would be pretty light. Alas, that is not the case. The debtors have $585.2mm of funded indebtedness split between a $554.7mm first lien credit facility and a much smaller $30.5mm second lien credit facility (PETITION Note: there are also LOCs of $23.2mm). Behind all of that is approximately $10.5mm of trade debt.

Low natural gas prices have persisted, unfortunately, and that has placed downward pressure on electric energy prices. Moreover, supply continues to outpace demand thanks to energy saving tech, alternatives, and more. Apparently global warming ain’t helping either: a warmer-than-normal winter reduced home heating levels. All of these factors affected the debtors’ ability to generate revenue and service their debt. The bankruptcy filed was tripped by the urgent need for liquidity and the ability to enter into a DIP financing agreement. This critical funding will bridge the debtors to some sort of transaction that will “allow them to effectuate an orderly restructuring process in chapter 11, pursuant to which the Debtors anticipate consummating a transaction that will transfer, sell, or otherwise convey substantially all of the Debtors’ assets to the First Lien Secured Parties or their designee.”

• Jurisdiction: D. of Delaware (Judge Walrath)

• Capital Structure: $585.2mm

• Professionals:

  • Legal: Richards Layton & Finger PA (Mark Collins, Dan DeFranceschi, Jason Madron, Brendan Schlauch)

  • Financial Advisor: Alvarez & Marsal LLC

  • Investment Banker: Houlihan Lokey Capital Inc.

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

• Other Parties in Interest:

  • DIP Admin Agent & DIP Lenders: CLMG Corp. & Beal Bank USA & Beal Bank SSB

    • Legal: White & Case LLP (Scott Greissman, Philip Abelson, Elizabeth Feld, Rashida Adams) & Fox Rothschild LLP (Jeffrey Schlerf)

  • Talen Energy Supply LLC

    • Weil Gotshal & Manges LLP (Matt Barr, Bryan Podzius, Alexander Welch, Ronit Berkovich & Morris Nichols Arsht & Tunnell LLP (Robert Dehney, Taylor Haga)

🚘 Special Edition: The Hertz Corporation ($HTZ) 🚘

The Hertz Corporation

May 22, 2020

Go here for our free a$$-kicking write-up about the situation.

• Jurisdiction: D. of Delaware (Judge Walrath)

• Professionals:

  • Legal: White & Case LLP (Thomas Lauria, Matthew Brown, J. Christopher Shore, David Turetsky, Ronald Gorsich, Aaron Colodny, Doah Kim, Jason Zakia) & Richards Layton & Finger PA (Mark Collins, John Knight, Brett Haywood)

  • Canadian Legal: McCarthy Tetrault LLP (David Galainena)

  • Financial Advisor: FTI Consulting Inc. (Michael Buenzow)

  • Investment Banker: Moelis & Co.

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

• Other Parties in Interest:

  • Barclays Bank PLC

    • Legal: Latham & Watkins LLP (George Davis, Suzzanne Uhland, Christopher Harris, Adam Goldberg, Heather Waller, Adam Ravin, Andrew Sorkin) & Morris Nichols Arsht & Tunnell LLP (Derek Abbott, Andrew Remming)

  • Indenture Trustee: Wells Fargo Bank NA

    • Legal: Foley & Lardner LLP (Mark Hebbeln, Harold Kaplan) & Dorsey & Whitney LLP (Eric Lopez Schnabel, Alessandra Glorioso)

  • Ad Hoc Group of Litigation Creditors

    • Lega: Pachulski Stang Ziehl & Jones LLP (John Fiero, Colin Robinson)

  • Official Committee of Unsecured Creditors

    • Legal: Kramer Levin Naftalis & Frankel LLP (Thomas Moers Mayer, Amy Caton, Daniel Eggermann, Alice Byowitz) & Benesch Friedlander Coplan & Aronoff LLP (Jennifer Hoover, Kevin Capuzzi, John Gentile)

🍿New Chapter 11 Bankruptcy Filing - VIP Cinema Holdings Inc.🍿

VIP Cinema Holdings Inc.

February 18, 2020

VIP Cinema Holdings Inc. and four affiliates (the “debtors”) filed prepackaged chapter 11 bankruptcy cases in the District of Delaware; they are manufacturers of luxury seating products for movie theaters. Here’s the problem: end user customers stopped ordering their stuff. Yup, that’s right, there’s a finite market for luxury seating in movie theaters. Who knew?

Here are some of the problems this company confronted:

• They made chairs that were too good. That’s right. Too good. The chairs had a longer lifecycle than the company likely wanted. Either that or people are engaging in too much Netflixing and chilling and not enough movie-going.

• Movie theaters slowed down their renovation activities and construction of new locations. Perhaps people are engaging in too much Netflixing and chilling and not enough movie-going.

• Movie theaters reduced capital investment — mostly because they haven’t exactly performed very well themselves and have their own debt and equityholders to contend with. Also, people are engaging in too much Netflixing and chilling and not enough movie-going.

• They conquered the total addressable market, securing 70% market share with little to no room to grow thanks to all of the foregoing bulletpoints.

Are we being too flip about $NFLX? Well, don’t take our word for it. Here’s the company explaining one of the reasons why it’s in trouble:

“Continued proliferation of online streaming services and alternative viewing experiences, which has led to declining movie attendance, a poor outlook sentiment for the overall U.S. movie theatre industry and particularly put significant pressure on the stock price of AMC, a key customer for the Company.”

Because of all of the foregoing factors, the debtors triggered an event of default under their first lien credit agreement and have been in a state of forbearance with their lenders ever since — all with the hope of negotiating an out-of-court restructuring transaction.

That hope was extinguished when Odeon reduced seating orders, napalming everyone’s financial models upon which the proposed out-of-court transaction was premised. Now we’re in prepackaged bankruptcy territory with a restructuring support agreement that will shed $178mm of debt and infuses the company with a $33mm DIP credit facility — of which $13mm is new money and $20mm is a roll-up of prepetition debt. Here is the pre-petition capital structure:

The liquidity is highly necessary. The debtors are burning cash like Rick Dalton burns interlopers bursting into his Hollywood Hills mansion. The debtors filed for bankruptcy with just $1mm in liquidity remaining.

Speaking of burning cash, that’s pretty much what you can say about the $200-or-so-million that previously went into these debtors. The restructuring support agreement will (a) convert first lien loans to preferred and common equity, (b) donut the second lien claims, and (c) donut the general unsecured claimants (unless they opt-in to a release, in which case they’ll get $5k). Critical to everything is the fact that HIG Capital LLC, the existing shareholder in the company, will write a new-money check of $7mm and enter in a management services agreement with the reorganized newco. In exchange for this investment, HIG will get preferred equity and 51% of the common equity.* Everyone is going to be holding their breath for the next 6 weeks, hoping that no other large chains cancel or downsize orders. If that happens, this deal could blow up.

*Suffering PTSD from the last-minute collapse of the out-of-court deal, HIG also negotiated the ability to walk if the debtors have less than $1.5mm of available unrestricted cash on the “Exit Date.”

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• Jurisdiction: D. of Delaware (Judge Walrath)

• Capital Structure: see above.

• Professionals:

  • Legal: Ropes & Gray LLP (Gregg Galardi, Christine Pirro Schwarzman) & Bayard PA (Erin Fay, Daniel Brogan, Gregory Flasser)

  • Independent Director: Michael Foreman

  • Financial Advisor/CRO: AlixPartners LLP (Stephen Spitzer)

  • Investment Banker: UBS Securities LLC

  • Claims Agent: Omni Agent Solutions Inc. (*click on the link above for free docket access)

• Other Parties in Interest:

  • First Lien Agent: Wilmington Savings Fund Society FSB

    • Legal: Wilmer Cutler Pickering Hale and Dorr LLP (Andrew Goldman, Benjamin Loveland) & Morris Nichols Arsht & Tunnell LLP (Robert Dehney, Joseph Barsalona II, Tamara Mann, Andrew Workman)

  • Ad Hoc Group of First Lien Lenders

    • Legal: Davis Polk & Wardwell LLP (Damian Schaible, Adam Shpeen) & Morris Nichols Arsht & Tunnell LLP (Robert Dehney, Joseph Barsalona II, Tamara Mann, Andrew Workman)

    • Financial Advisor: M-III Partners LP

  • Second Lien Agent & Second Lien Lenders: Oaktree Fund Administration LLC

    • Legal: Stroock & Stroock & Lavan LLP (Jayme Goldstein, Daniel Ginsburg, Joanne Lau) and Young Conaway Stargatt & Taylor LLP (Matthew Lunn, Edmon Morton, Betsy Feldman)

  • Sponsor: HIG Capital LLC & HIG Middle Market LBO Fund II LP

    • Legal: McDermott Will & Emery LLP (Brooks Gruemmer, Jay Kapp)

🍸New Chapter 11 Bankruptcy Filing - BL Restaurants Holding LLC (Bar Louie)🍸

BL Restaurants Holding LLC

January 27, 2020

Another day, another Sun Capital Partners’ portfolio company* in bankruptcy. Texas-based BL Restaurants Holding LLC — known to most as Bar Louie — and 3 affiliated entities filed for bankruptcy in the District of Delaware. Bar Louie is a gastrobar concept that operates 110 owned locations plus 24 franchises across 26 states and the District of Columbia. In 2019, it did $252mm of sales, down 3.7% YOY.

We hate to feed into the private-equity-destroys-everything-it-touches-trope but, well, judge for yourself…

The company notes:

Over the past several years, the opening of new locations was the primary driver for sales and profit growth for the Company. This growth was partially funded through new debt, but also utilized cash flow from operations, which ultimately over time restricted liquidity otherwise needed for store refreshes and equipment maintenance and modernization, resulting in inconsistent delivery of the brand promise across the system. This inconsistent brand experience, coupled with increased competition and the general decline in customer traffic visiting traditional shopping locations and malls, resulted in less traffic at the Company’s locations proximate to shopping locations and malls and contributed to sales falling short of forecast. These customer declines were also driven by major changes in consumer behavior, including the general national trend away from casual dining. The combination of these factors had a particularly major impact on a significant segment of the Company’s footprint.

Indeed, all of that growth — coupled with disruptive trends confronting both malls and casual dining — took its toll. Indeed, 38 locations, in particular, really saddled the company. Apparently it’s a bad sign when a third of your footprint has negative same store sale comps of 10.9%. 😬 This brought down the rest of the enterprise (which “only experienced a 1.4% SSS decline.”). Only. The debtors closed the aforementioned 38 locations pre-filing.

What of the debt? The company has $87mm of funded debt, $8mm of trade debt and approximately $6mm of other unsecured debt excluding lease termination claims. Things aren’t looking so great for the trade. The pre-petition lenders have agreed to place a $22mm DIP.

So now the debtors will use that DIP to give themselves time to attempt a sale in bankruptcy. The debtors’ first lien secured lenders and the pre-petition first lien secured agent will serve as a stalking horse via a credit bid. They are owed approximately $56.4mm. Pursuant to the sale motion filed with the court, they seek a 3% breakup fee in connection with the agreement to be the stalking horse which, if you asked us, seems a bit ridiculous under the circumstances. Why do they need a breakup fee at all when they’re trying to shed this turd? Do they really want to own this business? A multi-month pre-petition marketing campaign would seem to indicate otherwise. This reeks of greed and ought to spark an objection from creditors who will be hoping there’s some buyer who comes out of the wood work and overbids for this thing.

We wouldn’t bet on it.

*The debtors’ first day declaration only refers to its private equity sponsors as “its current owners”. While it’s not entirely clear from the bankruptcy papers, it appears that Sun Capital may also be the second lien lender agent here (and lenders) — a presumption that is bolstered by the appearance of Morgan Lewis & Bockius LLP as counsel. Morgan Lewis has represented Sun Capital portfolio companies in a number of recent chapter 11 bankruptcy filings. Curious how, with one exception, there was virtually no mention of Sun Capital’s involvement in any of the papers.

• Jurisdiction: D. of Delaware (Judge Walrath)

• Capital Structure: $42mm Term Loan + $14.4mm RCF (Antares Capital LP), $23.6mm second lien debt (BL Restaurants Group Holding Corp.)

• Professionals:

  • Legal: Klehr Harrison Harvey Branzburg LLP (Domenic Pacitti, Michael Yurkewicz)

  • Financial Advisor/CRO: Carl Marks Advisory Group LLC (Howard Meitiner)

  • Investment Banker: Configure Partners LLC (Vin Batra)

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

• Other Parties in Interest:

  • Prepetition First Lien Secured Agent and DIP Agent: Antares Capital LP

    • Legal: Latham & Watkins LLP (James Ktsanes, Jeremy Webb) & Young Conaway Stargatt & Taylor LLP (Michael Nestor, Andrew Magaziner)

  • DIP Lenders: Midcap Funding XVI Trust, Midcap Funding XXX Trust, Midcap Financial Trust, Woodmont 2017-2 Trust, Woodmont 2017-3 LP, Woodmont 2018-4 Trust

  • Prepetition Second Lien Agent:

    • Legal: Morgan Lewis & Bockius LLP (Barbara Shander)

  • Purchaser: BLH Acquisition Co., LLC

New Chapter 11 Filing - NeuroproteXeon Inc.

NeuroproteXeon Inc.

December 16, 2019

Many restructuring professionals predicted that “healthcare” would be an active area for bankruptcy in 2019. We suppose painting with such a broad brush increases the likelihood of being correct but it seems that the majority of the activity has really been in specific subsets, e.g., community retirement centers, biopharmaceuticals, and biotech/med-devices. Add another notch to the latter category.

New York-based NeuroproteXeon Inc. and its three affiliated debtors is the latest player in the space; it is “generally engaged in the development, commercialization and marketing of pharmaceutical agents, medical devices and/or other life sciences technologies.” The debtors have been “developing, testing and obtaining worldwide regulatory approval of a product consisting of pharmaceutical grade xenon gas for inhalation, which has been trademarked under the name XENEX™, and a propriety device…which delivers a combination of XENEX™ and oxygen to the respiratory system of persons who experience Post-Cardiac Arrest Syndrome….” The debtors device entered Phase III testing in 2018. But then it got suspended.

Why? Simply, the debtors ran out of money. The bankruptcy provides the debtors with access to critical funding — $5mm from JMB Capital Partners Lending LLC — that will allow them to continue to pursue testing. Meanwhile, the debtors’ investment bankers will market and try to sell the debtors’ assets.

• Jurisdiction: D. of Delaware (Judge Walrath)

• Capital Structure: $250k (JMB)

• Professionals:

  • Legal: Ashby & Geddes PA (William Bowden, Gregory Taylor, Stacy Newman)

  • Financial Advisor: Emerald Capital Advisors Corp. (John Madden)

  • Investment Banker: Lincoln Partners Advisors LLC (Brent Williams)

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

• Other Parties in Interest:

  • DIP Lender: JMB Capital Partners Lending LLC

    • Legal: Arent Fox LLP (Robert Hirsh, Beth Brownstein) & The Rosner Law Group LLC (Frederick Rosner, Scott Leonhardt, Jason Gibson)

🐻New Chapter 11 Bankruptcy - Sugarfina Inc.🐻

Sugarfina Inc.

September 6, 2019

First it was Lolli & Pops and now its Sugarfina Inc. Damn people! Don’t you eat sugar anymore?? What is Sugarfina?

Sugarfina is an iconic candy and confectionary brand with a uniquely fresh, fashionable, and experiential approach to gourmet confections. With the creation of a “candy store for grown ups,” Sugarfina has gained a strong and loyal customer following, through constant creation and innovation focused on distinctive product presentation and invention of fresh new candy offerings that delight and surprise. (emphasis added)

There it is again. The words “iconic” and “loyal customer following” to describe a never-profitable now-bankrupt company that bled cash like a baaaaawse over seven years. Seriously, let’s cut that hyperbolic sh*t out already: Sugarfina raised $60mm from investors — including the likes of Howard Marks, Roger McNamee, David Solomon ($GS) & Bono ($U2) — but ran out of cash by the end of ‘18. That’s enough to give us vertigo.

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Those investors will never find what they were looking for: ROI.

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Clearly this investment was not the “one” (we can keep going folks).

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to address this cash need, the company sought interest in a new debt and/or equity transaction from third-parties. But NOBODY WAS INTERESTED IN THIS ICONIC BRAND WITH THE LOYAL FOLLOWING. NO. ONE. The company was forced to take on $22.4mm in secured debt to raise short-term liquidity. Initiate death spiral.*

The company then hired a banker to raise new liquidity:

The Company’s process was open-ended, expressing a willingness to consider any type of transaction, with any terms (including complete or partial acquisitions, equity investments, or long-term debt transactions).

IN OTHER WORDS, THIS ICONIC BRAND WITH THE LOYAL FOLLOWING WAS DESPERATE AF. Over SIX MONTHS they contacted 170 — ONE HUNDRED AND SEVENTY — potential counter-parties, signed 42 NDAs, and still NO ONE wanted to move forward with an out-of-court deal. Hence, the chapter 11 filing.

You know what DOESN’T scream “iconic”? A measly $13mm purchase price (on $47mm of net sales,** $23.6mm from B&M retail). That’s right $13mm for 44 “Candy Boutiques” (inclusive of 11 shop in shops at Nordstrom’s), a wholesale business ($11.9mm sales), e-commerce ($5.6mm), international franchise ($1.8mm) and a corporate/custom channel ($4.1mm). You know what else doesn’t scream “iconic”? This:

In 2016, the Company incurred EBITDA losses of $4,828,574, which increased to EBTIDA losses of $7,340,000 in 2017, and to EBITDA losses of $17,913,000 in 2018.

SO. EFFING. ICONIC. The retail and international channels proved to be the main drag. The company already seeks approval to reject six leases so the buyer’s plan will clearly be less reliant on a physical footprint (at least in existing locations).

The company has 18.5k and 225k TWTR and Insta followers, respectively. It also has 140 design patents and trademarks in 22 international jurisdictions. Despite these “assets,” the purchase price doesn’t clear the secured debt. And the company “owe[s] material amounts, on an unsecured basis, to vendors critical to their production process, including candy and packaging suppliers.” (See “critical vendor” piece below).

The company — currently helmed by (i) a CRO who was formerly the GC (and before that, the GC of American Apparel Inc.) and (ii) two independent directors including the former CEO of both American Apparel Inc. and True Religion, Chelsea Grayson (pictured above in full-fledged Director power pose) — does have a stalking horse purchaser lined up (Candy Cube a/k/a Terramar Capital — your late night luxury sugar cravings powered by private equity!).*** It also has a $4mm (8%) DIP commitment from Serene Capital (its first lien lender) and Candy Cube.

We suppose we’ll now see how much interest this ICONIC brand draws in auction.

*At the time of filing, the company had $24.5mm of secured debt split amongst a capital structure that would make an E&P company jealous. There’s a $5mm first lien (SFF Loan Advisors LLC d/b/a Serene Capital), $10mm second lien (Goldman Sachs Specialty Lending), $8mm third lien (founder Josh Resnick), and $2.15mm fourth lien. There’s also a $2.1mm unsecured convertible promissory note. What? No appetite for a fifth lien tranche?!

**Revenue doubled each year from ‘13 thru ‘16, and 1.25x from ‘13 thru ‘18 (read: growth, as you might expect when a company matures, slowed meaningfully in the later years). Notably, the purchase price also includes membership interests in the emerging company, Candy Cube, including senior preferred membership interests with a $2.0mm preference and 20% of the common membership interests.

***The buyer has agreed to pay retention bonuses to employees who stay through the sale.

• Jurisdiction: D. of Delaware (Judge Walrath)

• Professionals:

  • Legal: Shulman Hodges & Bastian LLP (Alan Friedman, Ryan O’Dea) & Morris James LLP (Brya Keilson, Eric Monzo)

  • Financial Advisor: Force Ten Partners LLC (Adam Meislik)

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

• Other Parties in Interest:

  • Stalking Horse Purchaser: Terramar Capital (a/k/a Candy Cube Holdings LLC)

    • Legal: McDonald Hopkins (Marc Carmel) & Young Conaway Stargatt & Taylor LLP (M. Blake Cleary, Andrew Magaziner)

  • First Lien Lender & DIP Lender: SFCC Loan Investors LLC

    • Legal: Loeb & Loeb LLP (Lance Jurich, Vadim Rubinstein, W. Peter Beardsley) & (local) Pachulski Stang Ziehl & Jones LLP (Jeffrey Pomerantz, James O’Neill)

  • Landlord Creditors: Federal Realty Investment Trust

    • Legal: Ballard Spahr LLP (Leslie Heilman)

  • Landlord Creditors: A/R Retail LLC, The Forbes Company LLC, The Macerich Company

    • Legal: Ballard Spahr LLP (Leslie Heilman, Brian Huben, Dustin Branch)

  • Landlord Creditor: Taubman Landlords

    • Legal: The Taubman Company (Andrew Conway) & Law Office of Susan Kaufman LLC (Susan Kaufman)

  • Landlord Creditor: Taubman Landlords: Simon Property Group

    • Legal: Simon Property Group (Ronald Tucker)

  • Landlord Creditor: Westfield LLC

    • Legal: Barclay Damon LLP (Niclas Ferland, Ilan Markus) & Law Office of Susan E. Kaufman (Susan Kaufman)

  • Landlord Creditor: Landmark Properties LLC

    • Legal: Greenberg Traurig: (Heath Kushnick, Dennis Meloro)

  • Landlord Creditor: Shopcore Properties LP and Turnberry Associates

    • Legal: Kelley Drye & Warren LLP (Robert LeHane, Jennifer Raviele, Michael Reining)

  • Landlord Creditor: CIBC Leaseco LLC

    • Legal: Mayer Brown LLP (Brian Trust, Joaquin M. C de Baca)

  • Goldman Speciality Lending Group

    • Legal: King & Spalding LLP (Austin Jowers, Michael Handler) & Chipman Brown Cicero & Cole LLP (William Chipman, Mark Olivere)

  • Official Committee of Unsecured Creditors

    • Legal: Bayard PA (Justin Alberto, Erin Fay, Daniel Brogan)

Updated 9/24/19 #130

⛽️New Chapter 11 Filing - HDR Holding Inc. (Schramm Inc.)⛽️

HDR Holding Inc. (Schramm Inc.)

June 24, 2019

It stands to reason that businesses centered upon servicing mining and oil and gas drilling rigs may be suffering a bit in the current — and by “current,” we mean the last five-or-so years — macroeconomic environment. HDR Holding Inc., a Pennsylvania-based company started in 1900(!), along with certain debtor affiliates, produces “a variety of mobile, top-head hydraulic rotary drilling rigs that are mounted on trucks, tracks and trailers.” The company makes money by (i) manufacturing and selling their various rig models to drillers, (ii) selling consumable drill parts that naturally deteriorate over time, and (iii) servicing their equipment. For reasons that are, by now, blatantly obvious to anyone following the distressed world, oil and gas drilling hasn’t exactly been an obscenely profitable endeavor these last few years (or, in the case of certain drilling regions, EVER, really).

And so demand for the debtors’ wares is down. Per the debtors:

Given its strong connections to the oil and gas industry, the Company has faced significant challenges pervasive in the industry over the past three to five years. Numerous oil and gas producers have significantly curtailed, if not entirely ceased, drilling new wells in response to declines in commodity prices that make such projects uneconomical. The result of this trend for the Company has been a reduced demand for both new rigs and for the related consumable drill parts as existing rig assemblies are idled, which has led to the Debtors failing to meet revenue projections and maintain compliance with the covenants under their prepetition credit facilities.

Ah, yes, the debt. The debtors have approximately $20mm in debt spread out across three different term loan facilities. In an attempt to better service this debt, the debtors have pivoted their sales efforts “to a steadier mining sector” (Bitcoin, maybe? We kid, we kid), now sell aftermarket equipment, and have “managed” their workforce and expenses to preserve cash with the hope that oil and gas might cover. Spoiler alert: it hasn’t. Nevertheless, the debtors purport to have increased performance over the last few years. Just not enough to service their capital structure.

Accordingly, over the last eight months, the debtors and their advisors have pursued a sale process with the hope of selling the business as a going concern. No third-party purchaser came forward pre-petition, unfortunately, and so the debtors seek to pursue a sale to their largest pre-petition equityholder…which also happens to be their largest pre-petition lender…AND which also happens to be their proposed DIP lender (GenNx360 Capital Parters LP). The committed DIP is $6mm at 12% and the proposed purchase price is $10.3mm plus a credit bid of the $6mm DIP amount. Pursuant to the terms of the DIP, the debtors seek to have a sale hearing on or about August 19 to have some cushion in advance of the August 28 sale order milestone under the proposed DIP.

We’ll, therefore, have at least one data point by the end of summer to show us how bullish folks are vis-a-vis a recovery in the oil and gas market.

• Jurisdiction: D. of Delaware (Judge Walrath)

• Capital Structure: $5.3mm Term Loan A (Hark Capital I LP), $6.5mm Term Loan B (GenNx360), $6mm Term Loan C (Citizens Bank NA)

• Professionals:

  • Legal: Young Conaway Stargatt & Taylor LLP (Sean Greecher, Pauline Morgan,

  • Investment Banker: FocalPoint Partners LLC (Michael Fixler)

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

• Other Parties in Interest:

  • Largest EquityHolder & Stalking Horse Purchaser: GenNx360 Capital Partners L.P.

  • DIP Lender ($6mm at 12%): Schramm II Inc. (an acquisition vehicle created by GenNx360)

    • Legal: Winston & Strawn LLP (Carey Schreiber) & (local) Robinson+Cole LLP (Jamie Edmonson)

  • Term Loan A Lender: Hark Capital I LP

    • Legal: Perkins Coie LLP (Jordan Kroop) & (local) The Rosner Law Group LLC (Frederick Rosner)

Updated 7/7 #65

🚽New Chapter 11 Bankruptcy Filing - Orchids Paper Products Company🚽

Orchids Paper Products Company

April 1, 2019

We first wrote about Orchids Paper Products Company ($TIS) back in November 2018 in “🚽More Trouble in Paper-Ville (Short A$$-Wipes)🚽.” It is a piece worth revisiting because it sums up the situation rather nicely. We wrote:

Orchids Paper Products Company ($TIS) is a Okahoma-based producer of bulk tissue paper which is later converted into finished products like paper towels, toilet paper and paper napkins; it sells its products for use in the “at home” market under private label to dollar stores, discount retailers and grocery stores. Its largest customers include the likes of Dollar General Corp. ($DG), Walmart Inc. ($WMT) and Family Dollar/Dollar Tree, which, combined, account for over 60% of the company’s sales. Given the rise of the dollar stores and discount retailers and the rise in private label generally, you’d think that this company would be killing it. Spoiler alert: it’s not. In fact, it is, by definition, insolvent.

And:

This company doesn’t produce enough toilet paper to wipe away this sh*tfest. See you in bankruptcy court.

And that’s precisely where they (and affiliates) are now — in the District of Delaware.

And the story hasn’t really changed: the debtors still struggle from operational issues related to their facilities, too much competition (causing margin compression and loss of pricing power), rising input costs, and customer defections. To make matters worse, given the debtors’ deteriorating financial position, raw materials suppliers reduced credit terms given the debtors’ public reporting of its troubles. Consequently, virtually all of the debtors’ financial metrics got smoked. Gross profit? Smoked. Cash flow? Smoked. Net income? Smoooooooked.

Speaking of “smooooooked,” the company twice notes its termination of their investment banker, Guggenheim Securities. Bankers get replaced all of the time: not entirely sure why they felt the need to make such an issue of it here. That said, Guggenheim apparently marketed the company for months without finding a prospective buyer that would clear the debt. The company, therefore, hired Houlihan Lokey ($HL) to market the company. The result? They couldn’t find a buyer that would clear the debt. Nothing like paying a new banker AND presumably paying some sort of tail to your old banker just to end up with your pre-petition secured lender as your stalking horse bidder (and DIP lender)! Sheesh.

As we said, “[t]his company doesn’t produce enough toilet paper to wipe away this sh*tfest.”

• Jurisdiction: (Judge Walrath)

• Capital Structure: $187.3mm RCF/TL (Ankura Trust Company, L.L.C.), $11.1mm New Market Tax Loan

• Professionals:

  • Legal: Polsinelli PC (Christopher Ward, Shanti Katona, Jerry Switzer Jr.)

  • Board of Directors: Steven Berlin, John Guttilla, Douglas Hailey, Elaine MacDonald, Mark Ravich, Jeffrey Schoen

  • Financial Advisor: Deloitte Transactions and Business Analytics LLP (Richard Infantino)

  • Investment Banker: Houlihan Lokey Capital Inc.

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

• Other Parties in Interest:

  • Large Equityholder: BML Investment Partners LP

  • Prepetition RCF Admin Agent: Ankura Trust Company

  • DIP Admin Agent: Black Diamond Commercial Finance LLC

  • DIP Lender: Orchids Investment LLC

    • Legal: Winston & Strawn LLP (Daniel McGuire) & (local) Fox Rothschild LLP (Seth Niederman)

  • Stalking Horse Bidder

    • Legal: Skadden Arps Slate Meagher & Flom LLP (Kimberly Debeers, Ron Meisler)

  • Official Committee of Unsecured Creditors

    • Legal: Lowenstein Sandler LLP (Mary Seymour) & CKR Law (David Banker)

Updated 5/18

⛽️New Chapter 11 Filing - Southcross Energy Partners LP⛽️

Southcross Energy Partners LP

April 1, 2019

We’ve been noting — in “⛽️Is Oil & Gas Distress Back?⛽️“ (March 6) and “Oil and Gas Continues to Crack (Long Houston-Based Hotels)“ (March 24) that oil and gas was about to rear its ugly head right back into bankruptcy court. Almost on cue, Vanguard Natural Resources Inc. filed for bankruptcy in Texas on the last day of Q1 and, here, Southcross Energy Partners LP kicked off Q2.

Dallas-based Southcross Energy Partners LP is a publicly-traded company ($SXEE) that provides midstream services to nat gas producers/customers, including nat gas gathering, processing, treatment and compression and access to natural gas liquid (“NGL”) fractionation and transportation services; it also purchases and sells nat gas and NGL; its primary assets and operations are located in the Eagle Ford shale region of South Texas, though it also operates in Mississippi (sourcing power plants via its pipelines) and Alabama. It and its debtor affiliates generated $154.8mm in revenues in the three months ended 09/30/18, an 11% YOY decrease.

Why are the debtors in bankruptcy? Because natural gas prices collapsed in 2015 and have yet to really meaningfully recover — though they are up from the $1.49 low of March 4, 2016. As we write this, nat gas prices at $2.70. These prices, combined with too much leverage (particularly in comparison to competitors that flushed their debt through bankruptcy) and facility shutdowns, created strong headwinds the company simply couldn’t surmount. It now seeks to use the bankruptcy process to gain access to much needed capital and sell to a buyer to maximize value. The company does not appear to have a stalking horse bidder lined up.

The debtors have a commitment for $137.5mm of new-money post-petition financing to fund its cases. Use of proceeds? With the agreement of its secured parties, the debtors seek to pay all trade creditors in the ordinary course of business. If approved by the court, this would mean that the debtors will likely avoid having to contend with an official committee of unsecured creditors and that only the secured creditors and holders of unsecured sponsor notes would have lingering pre-petition claims — a strong power move by the debtors.

• Jurisdiction: D. of Delaware (Judge Walrath)

• Capital Structure: $81.1mm funded ‘19 RCF (Wells Fargo Bank NA), $430.875mm ‘21 TL (Wilmington Trust NA), $17.4mm unsecured sponsor notes (Wells Fargo NA)

• Professionals:

  • Legal: Davis Polk & Wardwell LLP (Marshall Heubner, Darren Klein, Steven Szanzer, Benjamin Schak) & (local) Morris Nichols Arsht & Tunnell LLP (Robert Dehney, Andrew Remming, Joseph Barsalona II, Eric Moats)

  • Financial Advisor: Alvarez & Marsal LLC

  • Investment Banker: Evercore Group LLC

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

• Other Parties in Interest:

  • Prepetition RCF & Unsecured Agent: Wells Fargo Bank NA

    • Legal: Vinson & Elkins LLP (William Wallander, Brad Foxman, Matt Pyeatt) & (local) Womble Bond Dickinson US LLP (Ericka Johnson)

  • Prepetition TL & DIP Agent ($255mm): Wilmington Trust NA

    • Legal: Arnold & Porter Kaye Scholer LLP (Seth Kleinman, Alan Glantz)

  • Post-Petition Lenders and Ad Hoc Group

    • Legal: Willkie Farr & Gallagher LLP (Joseph Minias, Paul Shalhoub, Leonard Klingbaum, Debra McElligott) & (local) Young Conaway Stargatt & Taylor LLP (Edmon Morton, Matthew Lunn)

  • Southcross Holdings LP

    • Legal: Debevoise & Plimpton LLP (Natasha Labovitz)

  • Stalking Horse Bidder:
    

Updated 9:39 CT

New Chapter 11 Bankruptcy Filing - DIESEL USA, Inc.

DIESEL USA, Inc.

March 5, 2019

Three things immediately occurred to us when we saw the news that Diesel USA Inc. filed for bankruptcy in the District of Delaware:

1. That makes perfect sense — Jersey Shore went off the air a long time ago;

2. This is “The Mattress Firm Effect” in action — a retailer using a quick trip in bankruptcy to, on an expedited basis, flush out some burdensome leases and otherwise leave parties in interest unimpaired; and

3. More surprising than the company filing for bankruptcy is the law firm filing it for bankruptcy. Arent Fox LLP, while a fine firm for sure, isn’t exactly known for its debtor-side chops. Just saying.

The numbers around this one are…well…interesting. The company’s brick-and-mortar retail operations consist of 28 retail store locations in 11 states, comprised of 17 full-price retail stores and 11 factory outlet stores. Net sales were:

• In 2014: $83mm for full-price retail and $42mm for outlet (Total: $125mm); and

• In 2018: $38mm for full-price retail and $34.5mm for outlet (Total: $72.5mm).

In terms of percentages:

• In 2014: brick and mortar represented 64% of net sales; and

• In 2018: brick and mortar represented 70% of net sales.

We see a couple of significant problems here.

Despite the superlatives that the company’s CRO generously uses to describe the company, i.e., “cutting-edge,” and “cultural icon,” the numbers reflect a BRAND — let alone the business — in significant trouble. Sure, net sales are down generally, but the distribution has gotten wildly askew. The numbers reflect a bare reality: Diesel simply isn't a brand people will pay full price for anymore. This couldn’t be more stark. And that’s a big problem when the company is (or was) party to expensive height-of-the-real-estate-market leases in prime locations like Manhattan’s Fifth Avenue. Diesel, quite simply, isn’t “Fifth Avenue,” let alone “Madison Avenue.”* We’re not convinced the company is being realistic when it says that it has “retained a loyal customer base.” The numbers plainly say otherwise. Moreover, in an age where digital sales are increasingly more important, the business has become MORE dependent on brick-and-mortar as opposed to its wholesale and e-commerce channels.**

But don’t take our word for it. Here’s the company’s CRO:

…in 2015 prior management implemented a strategic initiative that was focused on repositioning Diesel stores and products in premium locations and with premium customers so as to place them side-by-side with other premium fashion brands across the retail, online, and wholesale platforms. Unfortunately, since its implementation, the Debtor’s net sales have significantly decreased while its losses have significantly increased.

The market has spoken: Diesel is, according to the market, simply not “premium.”

And by “market” we also mean wholesalers. The company opted to stop distributing its products to wholesale partners “that were deemed not to fit the premium image.” Now, we can only imagine that included discount retailers. Basically, SOME OF THE RETAILERS WHO HAVE PERFORMED THE BEST OVER THE LAST SEVERAL YEARS. But wait: it gets even worse: the wholesale customers the company DID retain pursued voluminous “chargebacks.” Per the company:

As is common in the retail industry, the Debtor provides certain customers with allowances for markdowns, returns, damages, discounts, and cooperative marketing programs (collectively, the “Chargebacks”). If the Debtor’s customers fail to sell the Debtor’s products, they generally have the right to return the goods at cost or issue Chargebacks, which are netted against the Debtor’s accounts receivable. Due to mounting Chargebacks from wholesale customers, the Debtor was forced to significantly reduce its wholesale activities in recent years.

Basically, nobody is buying this sh*t. Not in stores. Not in wholesale.

And, yet, the company holds premium leases:

The primary means of implementing the 2015 strategy was to reposition the Debtor’s full-price retail and outlet stores to “premium”, high-profile, and high-visibility locations, which was executed by opening certain new stores and relocating others to “premium” locations while closing others deemed not to fit the new strategic positioning model. The result was, despite the losses suffered in connection with the Fifth Avenue store, management’s negotiation and entry into several expensive, long-term leases for certain of the Debtor’s retail locations, such as the Debtor’s “Flagship” store on Madison Avenue, which do not expire by their terms until 2024-2026. Of course, it was then (and remains today) an inopportune time to make long-term commitments to costly retail leases and the significantly increased lease expenses have not been offset by increased sales, which, in fact, have dropped precipitously.

…numerous of the Debtor’s stores are producing heavy losses. The Debtor’s unprofitable stores combined to produce negative EBITDA of approximately $10.7 million in 2018, nearly all of which flowed from full-price retail stores. The Debtor’s profitable stores are not enough to off-set the losses, as the 17 fullprice stores combined to produce negative EBITDA of approximately $8.7 million in 2018.

Now, the company does indicate that certain (seemingly outlet) stores remain profitable, as do the wholesale and e-commerce operations.*** So, there’s that. New management is in place and their plan includes (a) using the BK to negotiate with landlords, shutter some locations, shutter and relocate others, opening new smaller stores and refit existing locations; (b) deploying influencer marketing generally and aiming more efforts towards females (and hoping and praying that athleisure — a term we didn’t see ONCE in the entire first day declaration — doesn’t continue to hold sway and steer people away from jeans, generally);**** (c) growing e-commerce; and (d) revitalizing the wholesale business with key selective wholesale partners. This plan is meant to take hold in the next three years and “will require significant capital investments.” (PETITION Note: cue the chapter 22 preparation). The company intends to effectuate its new business plan via a plan of reorganization pursuant to which it will reject certain executory contracts. All in, the company hopes to be confirmed in roughly 5 weeks. Aggressive! But, like Mattress Firm, trade creditors are “current” and there’s no debt otherwise, so the schedule isn’t entirely out of the realm of possibility.

But this is the part that REALLY gets us. If you’ve been reading PETITION long enough — particularly our “We Have a Feasibility Problem” series — you know by now that you ought to be AWFULLY SKEPTICAL of management team’s rosy projections. Per the company:

The Debtor’s projections indicate that the Reorganization Business Plan will return the Debtor to stand-alone profitability by 2021 assuming successful store closures through this Chapter 11 Case, thereby ensuring its ability to continue operating as a going-concern, saving over 300 jobs, and creating new ones through the new store openings.

Generally, we’ll take the under. Though, we have to say: at least they’re not audaciously projecting a miraculous profit in 2019.

How will they achieve all of these lofty goals? The company’s foreign parent will invest $36mm over the three-year period of the business plan because…well…why the hell not? Everyone loves a Hail Mary.

---

*The company suffered from an ill-advised and poorly-timed real estate spending spree. Between 2008 and 2015, right as brick-and-mortar really started to decline and e-commerce expand, the company expended $90mm on leases. As for Fifth Avenue, per the company, “the Debtor’s store on Fifth Avenue in Manhattan, which opened in 2008 and closed in 2014, by itself received approximately $18 million in capital expenditures during its tenure while generating substantial losses.”

**The company doesn’t appear to have put much into its e-commerce growth. While e-commerce now represents 12% of net sales, sales are only incrementally higher in absolute numbers (from $8mm in 2014 to $12mm in 2018). The wholesale channel, on the other hand, has gone in the opposite direction. Net sales went from $61mm (2014) to $19mm (2018) and now represent only 19% of net sales (down from 32%).

***It seems, though, that outlet stores, wholesale and e-commerce resulted in negative $2mm EBITDA if the math from the above quote is correct. Curious.

****Score for Facebook Inc. ($FB)!

---

• Jurisdiction: D. of Delaware (Judge Walrath)

• Professionals:

  • Legal: Arent Fox LLP (George Angelich, David Mayo, Phillip Khezri) & (local) Young Conaway Stargatt & Taylor LLP (Pauline Morgan, Kenneth Enos, Travis Buchanan)

  • Claims Agent: Bankruptcy Management Solutions d/b/a Stretto (*click on the link above for free docket access)

• Other Parties in Interest:

New Chapter 11 Filing - The NORDAM Group, Inc.

The NORDAM Group, Inc.

7/22/18

A promising contract can sometimes prove to be an albatross. Here, The Nordam Group Inc., an Oklahoma-based aircraft component manufacturing and repair company, has filed for bankruptcy after a long-term development and manufacturing agreement ("LTPA") with Pratt & Whitney Canada Corporation ("P&WC") to develop, manufacture, and support an FAA-approved nacelle system for the Gulfstream G500 aircraft proved overly burdensome. Per the company:

"The Debtors currently estimate that their expenses incurred under the LTPA exceed $200 million. These expenses have, in turn, challenged overall financial performance, with EBITDA declining from approximately $88 million in fiscal year 2008 to approximately $50 million in fiscal year 2017. These financial challenges have further impacted the Debtors’ balance sheet and available liquidity, including with respect to the Debtors’ revolving credit facility, which matured on June 18, 2018 with approximately $266.5 million outstanding."

Harsh. After failing to successfully negotiate a resolution to these issues with both its bank group and P&WC, the company has filed for bankruptcy to leverage the Bankruptcy Code's "breathing spell" and, presumably, contract rejection provisions under section 365. The company seeks access to a $45mm DIP credit facility to fund its cases. 

• Jurisdiction: D. of Delaware (Judge Walrath)
• Capital Structure: $266.5mm RCF (JPMorgan Chase Bank NA), $19.2mm unsecured promissory notes   
• Company Professionals:
  • Legal: Weil Gotshal & Manges LLP (Ray Schrock, Ryan Preston Dahl, Jill Frizzley) & (local) Richards Layton & Finger PA (Daniel DeFranceschi, Paul Heath, Brett Haywood, Megan Kenney)
  • Financial Advisor: Huron Consulting Group Inc. (John DiDonato, Matthew Fisher)
  • Investment Banker: Guggenheim Securities LLC (Ronen Bojmel)
  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
  • Independent Directors: David Eaton, Thomas Allison
• Other Parties in Interest:
  • Prepetition Agent & DIP Agent: JPMorgan Chase Bank NA
    • Legal: Simpson Thatcher & Bartlett LLP 
  • P&WC
    • Legal: Wachtell Lipton Rosen & Katz (Philip Mindlin, Douglas Mayer) & (local) Stevens & Lee PC (Joseph Huston Jr.)

Updated: 7/23 at 2:09 CT

New Chapter 11 Filing - The Weinstein Company Holdings LLC

The Weinstein Company Holdings LLC

3/19/18

The good news is that the company believes that its total exposure to victims (and creditors) is limited to 999 people/entities and its liability exposure is capped at $1 billion - or at least that's what one could glean from the boxes that the company checked on its chapter 11 petition. 

TWC Chapter 11 Petition

Let's review what's "new" here without regurgitating everything the mainstream media has covered the last several months... 

The Weinstein Company's primary assets fall into three categories: (i) the film library, (ii) the television business, and (iii) the unreleased films portfolio. The library consists of 277 films and thanks to distribution rights sales internationally and to the likes of Netflix and broadcast/cable networks, generates ongoing cash flow. The television business includes the Project Runway franchise and other content like Peaky Blinders, Scream and Six. The latter unreleased portfolio includes five completed films (including Benedict Cumberbatch's "Current War") and other projects in various stages of development. 

The sale effort to a consortium of investors including Yucaipa, Lantern Asset Management and Maria Contreras-Sweet is well documented. As is the Attorney General of New York's complaint against the company. Neither are worth noting in detail here after months of incessant press coverage. Notably, however, Lantern Asset Management stuck with the process after its consortium partners dropped out, agreeing to become the stalking horse bidder for the assets pursuant to a proposed expedited sale process. Why expedited? In the company's words,

"It is an understatement to say that the last six months have been trying for the Company. Intense media scrutiny and various other factors have resulted in, among other things, the Company’s loss of goodwill with employees, contract counterparties, key talent and the entertainment industry at large. In order to preserve the going concern value of the Company’s Assets for the benefit of its stakeholders, the Debtors have determined that a sale of substantially all of their Assets is necessary. Further, the Debtors believe that time is of the essence and that effectuating any such sale as quickly as possible is necessary to maintain operations and preserve value for the benefit of the Debtors’ stakeholders."

Well, also, the company has no cash and the buyer is pushing for speed as a condition to its bid. Lantern has that luxury as the remaining bidder; it is offering $310 million and the assumption of certain project-level non-recourse indebtedness (read: the debt associated with individual projects). Moreover, the company has indicated that Lantern anticipates retaining "most of the Company's employees." That's good: something positive must come out of this for those who had nothing to do with Mr. Weinstein's behavior. Speed is needed, the company argues, to prevent more employees from leaving (25% have already left). 

Some other miscellaneous facts of note:

1. Top Creditor. The number one creditor is a judgment creditor to the tune of $17.36 million.
2. It's Hard Out There for a Pimp. Boies Schiller & Flexner LLC is listed twice in the top 25 creditors. Fresh on the heels of the Theranos fraud suit, this has not been a good week for David Boies and company. 
3. Other Creditors. Other major creditors include Viacom International ($5.6 million), Sony Pictures Entertainment ($3.7 million), Creative Artist Agency ($1.49 million), and Disney ($1.13 million).
4. It's Hard Out There for a Pimp Part II. Several law firms are listed in the top 25 creditors for accounts payable due and owing for professional services. Notably, O'Melveny & Myers LLP is listed at #10 and $3.1 million; it had long been rumored to be representing the company leading into the bankruptcy filing. This means, more likely than not, that Cravath was hired as an 11th hour replacement, leaving O'Melveny as a creditor. Also, Debevoise & Plimpton LLP has been left hanging after conducting the internal investigation of the charges against Mr. Weinstein. 
5. The Cumberbatch. "Current War," the feature starring Benedict Cumberbatch is levered up by $7mm under a production-level loan agreement with East West Bank. Nothing unusual here: just a fun fact. We'll see if Cumberbatch's star power can raise this movie above the debt and the Weinstein taint. 
6. Timing. To the extent any bidder wants to trump Lantern Asset Management, the deadline for bids is April 30 and an auction will occur on May 2 for court approval on May 4. 
7. #FakeNews. The New York Times and the New Yorker both get credit for taking down Mr. Weinstein and for starting the #metoo movement and Time's Up campaign. 
8. Ramifications. The company notes that the response to Mr. Weinstein's misconduct was fast and furious including (i) Apple ceasing plans for a 10-part Elvis biopic to be produced by TWC; (ii) Lin Manuel Miranda demanding that TWC release its rights to the movie adaptation of In the Heights, (iii) Amazon ditching TWC, cancelling plans for a David O'Russell series and dropped TWC as co-producer of a Matthew Weiner series; (iv) Channing Tatum halting development of a movie with the company, and (v) Quentin Tarantino seeking a different studio for his next and ninth film, the first time he would use a studio other than TWC. 
9. Board of Directors. 5 members went running for the exits, including Paul Tudor Jones and Marc Lasry. 
10. Lawsuits. TWC has been named in at least 9 civil actions by victims of Mr. Weinstein, including a broad federal class action, two civil actions by Mr. Weinstein himself, and 6 civil actions by contract counterparties. 

Lastly, it has been reported that any and all NDAs will be "lifted" and no longer apply. This means that those who aren't as financially able as, say, Uma Thurman and Saima Hayek, may now speak out with impunity. Hopefully this frees various women from the shackles of their memories. 

• Jurisdiction: D. of Delaware (Judge Walrath)

• Capital Structure: $156.4mm secured debt (ex-accrued and unpaid interest, MUFG Union Bank NA), $15.6mm junior secured debt (UnionBanCal Equities Inc.), $18.1mm secured term loan (Bank of America NA), $45.4mm secured industries debt (AI International Holdings BVI Ltd.), $42.5mm secured production facility (MUFG Union Bank NA), $57.2mm of production level debt (including Spy Kids and Current War), $8.3mm secured debt (Viacom Media Networks)

• Company Professionals:
  • Legal: Cravath Swaine & Moore LLP (Paul Zumbro, George Zobitz, Karin DeMasi) & (local) Richards Layton & Finger PA (Mark Collins, Paul Heath, Zachary Shapiro, Brett Haywood, David Queroli)
  • Restructuring Advisor/CRO: FTI Consulting (Robert Del Genio, Luke Schaeffer, Michael Healy, Thomas Ackerman)
  • Investment Banker: Moelis & Company LLC
  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Stalking Horse Bidder: Lantern Asset Management
    • Legal: Akin Gump Strauss Hauer & Feld LLP (Stephen Kuhn, Meredith Lahaie) & (local) Pepper Hamilton LLP (David Stratton, David Fournier) 
  • DIP Agent ($25mm): MUFG Union Bank NA (11% minimum)
    • Legal: Sidley Austin LLP (Jennifer Hagle) & (local) Young Conaway Stargatt & Taylor LLP (Robert Brady)
  • Official Committee of Unsecured Creditors
    • Legal: Pachulski Stang Ziehl & Jones LLP (James Stang, Debra Grassgreen, Robert Feinstein, Bradford Sandler)

Updated 3/30/18

New Chapter 11 Filing - Fallbrook Technologies Inc.

Fallbrook Technologies Inc. 

2/26/18 Recap: Texas-based inventor of and patent-holder in the NuVinci Technology, a potential gear replacement technology, has filed for bankruptcy to implement a balance sheet restructuring. The company's "game changer" NuVinci Technology purportedly "changes the way mechanical power is transmitted to improve the performance and efficiency of transmission systems" and can be incorporated in bicycles, automotive accessory drives, electric vehicles, lawn care equipment and small wind turbines. 

In addition to commercializing its technology, the company deploys a licensing and royalties model. Unfortunately, however, the company's licensees aren't selling product with the NuVinci Technology thus far and, consequently, royalty revenue is non-existent. As such, "the Debtors’ revenue streams do not currently provide sufficient liquidity necessary to satisfy their debt and operating expense obligations." Not quite a game changer, yet, it seems. Due to this, the company fell short of financial covenants protecting its lenders. 

After an attempted but failed prepetition sale process, the company secured a DIP credit facility from Kayne Credit Opportunities Fund (QP) LLP in support of a prearranged bankruptcy agreed to with certain supporting noteholders for the purposes of deleveraging. 

• Jurisdiction: D. of Delaware (Judge Walrath)
• Capital Structure: $49.6mm 12% '19 senior secured notes (inclusive of fees and PIK interest), $8.8mm secured bridge notes, $15.3mm '19 senior subordinated convertible notes     
• Company Professionals:
  • Legal: Shearman & Sterling LLP (Ned Schodek, Jordan Wishnew) & (local) Young Conaway Stargatt & Taylor LLP (Pauline K. Morgan, Kenneth J. Enos, Jaime Luton Chapman, Betsy L. Feldman)
  • Financial Advisor/CRO: Ankura Consulting (Roy Messing)
  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • DIP Lender: Kayne Credit Opportunities Fund (QP) LLP
    • Legal: Willkie Farr & Gallagher LLP (Rachel Strickland, Paul Shalhoub, Richard Choi) & (local) Richards Layton & Finger PA (Mark Collins, Michael Merchant, Joseph Barsalona)
  • Licensee: Dana Holding Corporation
    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Alan Kornberg, Aaron David) & (local) Cozen O'Connor (Mark Felger)

New Chapter 11 Filing - The Bon-Ton Stores Inc.

The Bon-Ton Stores Inc.

• 2/4/18 Recap: See here. 
• Jurisdiction: D. of Delaware (Judge Walrath)
  • Capital Structure: $339mm Tranche A RCF (Bank of America), $150 Tranche A-1 Term Loan, $350mm second lien notes (Wells Fargo Bank NA)     
• Company Professionals:
  • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Kelley Cornish, Elizabeth McColm, Claudia Tobler, Alexander Woolverton, Michael Colarossi, Diane Meyers, Moses Silverman) & Young Conaway Stargatt & Taylor LLP (Pauline Morgan, Sean Greecher, Andrew Magaziner, Elizabeth Justison)
  • Financial Advisor: AlixPartners LLC (Holly Etlin, Carrianne Basler, Jim Guglielmo, John Creighton, Ben Chesters, Jamie Strohl, Mitch Chubinsky, Thomas Cole, Daniel Law) 
  • Investment Banker: PJT Partners LP (Steven Zelin, James Baird, Jon Walter, Vinit Kothary, Sartag Aujla)
  • Real Estate Advisor: A&G Realty Partners LLC
  • Intellectual Property Disposition Consultant: Hilco IP Services (David Peress)
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Bank of America NA
    • Legal: Morgan Lewis & Bockius LLP (Julia Frost-Davies, Robert A.J. Barry, Amelia Joiner) & Richards Layton & Finger PA (Mark Collins, Joseph Barsalona)
  • Second Lien Noteholders: Alden Global, LLC; B. Riley FBR, Inc.; Bennett Management Corporation; Brigade Capital Management, LP; Riva Ridge Master Fund, Ltd.; Cetus Capital LLC; Contrarian Capital Management LLC; and Wolverine Asset Management, LLC
    • Legal: Jones Day (Bruce Bennett, Joshua Mester, Sidney Levinson, Genna Ghaul, Charles Whittman-Todd) & (local) Cole Schotz PC (Norman Pernick, J. Kate Stickles)
  • Official Committee of Unsecured Creditors
    • Legal: Pachulski Stang Ziehl & Jones LLP (Jeffrey Pomerantz, Robert Feinstein, Bradford Sandler)
    • Financial Advisor: Zolfo Cooper LLC (David MacGreevey)
  • Prospective Buyer: DW Partners LP
    • Legal: DLA Piper LLP (Stuart Brown, R. Craig Martin, Jason Angelo, Richard Chesley, John Lyons, Oksana Rosaluk)

Updated 4/10/18

New Chapter 11 Filing - KIKO USA Inc.

KIKO USA Inc.

• 1/11/18 Recap: Cosmetics retailer files for bankruptcy and simultaneously busts the narrative that cosmetics are safe in the age of Amazon, Sephora and Ulta Beauty - not to mention a long list of direct-to-consumer e-commerce players. Or does it? Here, the cosmetics retailer with retail stores, an e-commerce channel, and an Amazon.com presence filed for bankruptcy because “its retail sales have not been sufficient to cover its costs, which consist primarily of rent and labor.” In other words, you might as well stop reading because you’ve read this story dozens of times in the last 12 months. Of 29 domestic locations (26 in malls), the company intends to close 24 stores in bankruptcy after failing to negotiate concessions from landlords prior to the filing. It doesn’t own any of its locations (a recurring problem). Remaining locations will be those in big cities: New York, Miami, Las Vegas, Sunrise Florida, and Los Angeles. Tiger Capital Group has been hired to dispose of assets. The go-forward plan is also, frankly, fairly unoriginal. It includes re-focusing on product assortment and targeted in-demand product, (ii) realigning distribution via a focus on the five remaining locations and, seemingly, kiosks (or the like) within third-party retailers, (iii) enhancing the customer experience with better staff/training, (iv) organizational changes, (v) targeting marketing (cha ching, Facebook!), and growing the commerce and Amazon Prime offering (cha ching Amazon). In summary, KIKO S.p.A., the corporate overlord loses its equity but for its DIP loan and Facebook and Amazon benefit. What else is new?
• Jurisdiction: D. of Delaware (Judge Walrath)    
• Company Professionals:
  • Legal: Perkins Coie LLP (John Kaplan, Jeffrey Vanacore, Deborah Kennedy) & (local) Saul Ewing Arnstein & Lehr (Mark Minuti, Monique Bair DiSabatino, Sharon Levine)
  • Financial Advisor: Getzler Henrich & Associates LLC (Mark Samson)
  • Claims Agent: BMC Group (*click on company name above for free docket access)
• Other Parties in Interest:
  • KIKO S.p.A.
    • Legal: White & Case LLP (John Cunningham, Fan He, Robbie Boone Jr.) & (local) Fox Rothschild LLP (Jeffrey Schlerf, Carl Neff)

New Chapter 11 Filing - MAC Acquisition LLC (aka Romano's Macaroni Grill)

MAC Acquisition LLC (aka Romano's Macaroni Grill)

• 10/18/17 Recap: Back in 2015, Ignite Restaurant Group offloaded Romano's Macaroni Grill to RedRock Partners LLC in an attempt to bolster its liquidity and avoid bankruptcy. It failed: the company filed for bankruptcy earlier this year (case summary here). Perhaps that had something to do with the fact that the sale was for a measly $8mm, "a price akin to dumping your unwanted junk on Craigslist." Now, Romano's Macaroni Grill has filed for bankruptcy to restructure its balance sheet and further an operational restructuring, including dealing with lessor damage claims arising out of terminated leases (the company closed 37 company-operated locations in 2017; it has 93 company-owned restaurants remaining exclusive of non-debtor franchises). The company blames its chapter 11 filing on (i) the inability to generate sufficient cashflow, sales and margin to cover operating expenses let alone service its debt (TTM EBITDA as of 8/17 was -$12mm), and (ii) increased costs for both commodities and labor. We note that this provision in the company's bankruptcy papers is indicative of a larger trend befalling the casual dining segment: "The Debtors’ operations and financial performance have been adversely affected by a number of economic factors, but perhaps most notably by an overall downturn for the casual dining industry. The preferences of such customers have shifted to cheaper, faster alternatives. On the other end of the spectrum, there is a trend among younger customers to spend their disposable income at non-chain “experience-driven” restaurants, even if slightly more expensive." In other words, this bankruptcy is partly Evan Spiegel (Snapchat, $SNAP) and Kevin Systrom's (Instagram, $FB) fault. The company has a restructuring support agreement with its major stakeholders to pursue a dual-track bankruptcy via a plan of reorganization and a potential sale upon the hiring of an investment banker (heads up: bankers!!). The company has secured a junior $5mm DIP credit facility from Raven Capital Management LLC. P.S. Nothing to see here for the REITS: Simon Property Group has made a notice of appearance in the matter. 
• Jurisdiction: D. of Delaware (Judge Walrath)
• Capital Structure: $12mm RCF (Bank of Colorado), $2.5mm TL (Bank of Colorado), $3.5mm LOC (Bank of Colorado), $5mm Funding Loan 
• Company Professionals:
  • Legal: Gibson Dunn & Crutcher LLP (Jeffrey Krause, Michael Neumeister, Emily Speak, Brittany Schmeltz) & (local) Young Conaway Stargatt & Taylor LLP (Michael Nestor, Edmon Morton, Ryan Bartley, Elizabeth Justison)
  • Financial Advisor/Chief Restructuring Officer: Mackinac Partners LLC (Nishant Machado, Pasquale Maturo)
  • Claims Agent: Donlin Recano & Company Inc. (*click on company name above for free docket access)
• Other Parties in Interest:
  • DIP Lender: Raven Capital Management LLC
    • Legal: Winston & Strawn LLP (Justin Rawlins, Carey Schreiber, Eric Sagerman) & (local) Ashby & Geddes PA (Gregory Taylor, Stacy Newman)
  • Bank of Colorado
    • Legal: Shaw Fishman Glantz & Towbin LLC (Thomas Horan, Johnna Darby, Brian Shaw) & (local) Markus Williams Young & Zimmermann LLC (James Markus)
  • Official Committee of Unsecured Creditors
    • Legal: Kelley Drye & Warren LLP (Eric Wilson, Jason Adams, Lauren Schlussel) & (local) Bayard PA (Justin Alberto, Gregory Flasser)

Updated 11/8/17