New Chapter 11 Bankruptcy Filing - Golden Eagle Entertainment $ENT

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Golden Eagle Entertainment

July 22, 2020

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

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

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  • Jurisdiction: D. of Delaware (Judge Dorsey)

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

  • Professionals:

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

    • Financial Advisor: Alvarez & Marsal LLC

    • Investment Banker: Greenhill & Co. Inc.

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

  • Other Parties in Interest:

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

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

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

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

    • Second Lien Agent: Cortland Capital Market Services LLC

    • Second Lien Noteholders: Searchlight Capital Partners LP

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

    • Southwest Airlines Inc.

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

    • AT&T Corp.

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

    • Terry Steiner International

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

    • Telesat International Limited

      • Legal: Hodgson Russ LLP (Garry Graber)

    • Nantahala Capital Management LLC

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

😷New Chapter 11 Bankruptcy Filing - Quorum Health Corporation😷

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Quorum Health Corporation

April 7, 2020

Tennessee-based Quorum Health Corporation, an operator of general acute care hospitals and outpatient healthcare facilities, filed for bankruptcy in the District of Delaware (along with a long list of affiliates). COVID-19!! Not quite. This turd has been circling around the chapter 11 bankruptcy bin for years now. The fact that it is only now filing for bankruptcy under the cloud of COVID simply serves as cover for its fundamentally unsound capital structure, its lack of integration post-spinoff and the composition of its patient base (rural and dependent upon Medicare and Medicaid). Your Nana’s acute care powered by private equity/Wall Street!

About that capital structure…we’re talking: $99mm ABL + $47mm RCF + $785.3mm in first lien loans and $400mm of senior notes for a solid total of ~$1.285b in funded debt. All of this debt was placed in connection with the debtors’ origin story: a 2015 spinoff from Community Health Systems Inc. ($CYH). Troubles began from there. The company states:

The assets the Company received in the Spin-off were not initially set up as an integrated, stand-alone enterprise and presented certain day-one integration challenges, including addressing significant geographic dispersion that resulted in a lack of scale in key markets. In addition, certain of the hospitals that the Company received in the Spin-off were underperforming….

If you’re wondering whether this spin-off might lead to fraudulent conveyance claims well, to (mis)quote Elizabeth Warren, the company’s plan of reorganization has a Trust for that. That ought to be fun.

Otherwise, this is a deleveraging transaction. The ABL and holders of first lien claims will come out whole. Likewise, general unsecured claims will ride through. The holders of the senior notes will equitize their claims and come out, prior to dilution, with 100% of the post-reorg equity. Certain lenders will write a $200mm equity check. The case is on a quick one-month timeline through which it will be funded by a $100mm DIP; therefore, come May, this hospital system will, hopefully, be ready to confront a post-COVID-19 world.

  • Jurisdiction: D. of Delaware (Judge Owens)

  • Capital Structure: ABL (UBS AG), RCF and Term Loan (Credit Suisse AG), $421.8mm ‘23 11.625% Senior Notes (Wilmington Savings Funds Society)

  • Professionals:

    • Legal: McDermott Will & Emery LLP (Felicia Perlman, Bradley Giordano, David Hurst, Megan Preusker)

    • Financial Advisor/CRO: Alvarez & Marsal (Paul Rundell, Steve Kotarba, David Blanks, Douglas Stout

    • Investment Banker: MTS Health Partners LP

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

  • Other Parties in Interest:

    • DIP Agent: GLAS USA LLC

    • Consenting First Lien Lenders

      • Legal: Milbank LLP (Dennis Dunne, Tyson Lomazow)

      • Financial Advisor: Houlihan Lokey

    • Consenting Noteholders

      • Legal: Kirkland & Ellis LLP (Nicole Greenblatt, Steven Serajeddini)

      • Financial Advisor: Jefferies LLC

    • Major Shareholders: Mudrick Capital Management, LP, KKR & Co. Inc., York Capital Management Global Advisors LLC, Davidson Kempner Capital Management LP, and The Goldman Sachs Group Inc.