New Chapter 11 Bankruptcy Filing - Stein Mart Inc. ($SMRT)

Stein Mart Inc.

Man. This story sucks. Stein Mart Inc. ($SMRT), a publicly-traded specialty off-price retailer with 281 stores across the Southeast, Texas, Arizona and California is the latest retailer to file bankruptcy (along with two affiliates).

To set the stage, imagine Han and Lando taking a fun little ride on a desert skiff. Suddenly a riot breaks out and amidst the confusion Lando falls off the skiff. Luckily, Han is able to grab Lando’s hand so that Lando doesn’t plummet into the gnarley tentacles of some strange sand beast that randomly happens to be there. As Han pulls Lando up out of reach of the beast, all of the sudden some crazy space virus flows through the airspace and smacks Han straight in the lungs. As he clutches his throat struggling to breathe, he releases Lando who consequently hurls straight down towards the beast and suffers a horrific death.

Now replace (a) Han with Kingswood Capital Management LLC, (b) Lando with Stein Mart, and (c) the “crazy space virus” with COVID-19 and you’ve basically got the story of Stein Mart’s collapse into bankruptcy court. Like many other retailers in this macro climate, Stein Mart was teetering pre-COVID. Sales have been on the decline since 2016. But then in January, Kingswood — along with an entity managed by the Chairman of the company — offered a roughly 20% premium over SMRT’s then-stock price ($0.90/share) to take Stein Mart private. Stein Mart, which had been on distressed watch lists around that time, seemed to be on the receiving end of a much-needed and wildly opportune lifeline. Of course, COVID ended that. Take a look at this mind-boggling decline in YOY performance:

Ab. So. Lutely. Brutal. Just brutal.

Kingswood agreed. Per the company:

…on April 16, 2020, the Merger Agreement was terminated prior to closing because the COVID19 pandemic forced the Company to close all of its stores and the Company was unable to satisfy the minimum liquidity closing condition in the merger agreement.

Was that the definitive end of the deal? No! The parties continued to discuss new deal parameters but then we, as a country, couldn’t get our sh*t in order. With the country averaging 1000+ deaths a day and tens of thousands of new daily COVID infections, Kingswood got skittish:

The Company has subsequently engaged in discussions with Kingswood regarding sale of the Company as a going-concern in recent months pursuant to a bankruptcy sale; however, a transaction presently appears unlikely given the COVID-19 resurgence.

The resurgence is notable because the company has a significant number of stores in Florida, Texas and California. Consequently,…

The Company’s updated financial projections, following the July resurgence of COVID-19, indicated that the Company would not have sufficient liquidity to continue operating the business in the ordinary course consistent with past practice.

So now the company is liquidating. The company projects $250mm in gross recovery from the liquidation of inventory, equipment, fixtures, leases IP and other assets. As of the petition date, it owes its senior secured lender, Wells Fargo Bank NA ($WFC), $84mm; it also owed its term lender, Gordon Brothers Finance Company, $35mm. Tack on administrative expenses for the professionals administering the case and recoveries for those creditors owed a sum total of $770mm in total liabilities begins to look a bit bleak.

*****

A couple of additional notes:

First, this company appears to have been addicted to factoring. Among the companies top six general unsecured creditors are CIT Commercial Services, Wells Fargo Trade Capital Services, and White Oak Commercial Finance.

Second, you can add SMRT to the list of companies that tapped PPP funds yet couldn’t avoid a bankruptcy filing. It received $10mm from Harvest Small Business Finance LLC.

Third, we’re back to borderline collusion among the liquidation firms. The company’s financial advisor issued RFPs to five liquidation consultants. It received two bids back: one from SB360 Capital Partners LLC and one from a Hilco Merchant Resources-led joint venture that included three — that’s right, three — competitors. Per the company:

The Debtors are of the view that in the current environment, where numerous large retailers are being simultaneously liquidated, joint venture liquidation bids are common because a single liquidation firm may not have the resources to staff and manage the entire project. (emphasis added)

Said another way, the retail industry is such an utter dumpster fire right now that liquidators simply don’t have the bandwidth to manage mandates like these on their own (or so the story goes).

While liquidation sales launch, the company will also seek to sell its leases and IP. Except…

…substantial doubt exists as to whether any buyers will be found for leases given the current depressed condition of the retail real estate market.

And they…

…do not anticipate the sale of intellectual property will produce substantial value.

Right. In case you haven’t noticed, the rubber meets the road with these retailers with the IP. That’s why there was the law suit in the Neiman Marcus matter. That’s why there was the asset stripping transaction in the J.Crew matter. But Stein Mart? IP? Brand? Hahahahaha. The company’s bankers tried selling this turd for over 2.5 years. The only buyer was Kingswood, a small LA-based PE fund with a portfolio of four companies and, well, Stein himself. The IP only had value to him. Go figure. And this is after three — yes, three — separate sale and marketing processes.

Is there a chance a buyer emerges from the shadows? Sure. Miracles happen. If not, Wells and Gordon Brothers will be fine. The professionals will get paid. The unsecured creditors will get hosed. Equity will…well forget about it. At least the equity market is finally getting these right (though reasonable minds could certainly question why the stock is trading as high as it is):

The greater likelihood is that this sucker ends in structured dismissal or a conversion to chapter 7.

It’s crazy. Eight months ago the company was headed for a new chapter. Instead the book shut closed.

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August 12, 2020

Jurisdiction: M.D. of FL (Judge Funk)

Capital Structure: see above

Company Professionals:

• Legal: Foley & Lardner LLP (Gardner Davis, John Wolfel, Neda Sharifi, Richard Guyer, Mark Wolfson, Marcus Helt)

• Financial Advisor: Clear Thinking Group (Patrick Diercks)

• Liquidators: Hilco Merchant Resources LLC, Gordon Brothers Retail Partners LLC, Great American Group LLC, Tiger Capital Group LLC, SB360 Capital Partners LLC

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

Other Parties in Interest:

• RCF Lender: Wells Fargo Bank NA

  • Legal: Otterbourg PC (Daniel Fiorillo, Chad Simon) & Smith Hulsey & Busey (John Thomas, Stephen Busey)

🔋New Chapter 11 Bankruptcy Filing - Exide Holdings Inc.🔋

Exide Holdings Inc.

May 19, 2020

Georgia-based Exide Holdings Inc. and four affiliates (the “debtors”), among the world’s largest producers and recyclers of lead-acid batteries used in cars, boats, golf carts and more, filed for chapter 11 bankruptcy in the District of Delaware earlier this week. The filing sparked an entire industry to ask “is it a Chapter 22 or a Chapter 33?” The answer, depending upon your look-back period, is the latter. The fairer answer is probably the former and even that was 7 years ago with emergence 5 years ago (PETITION Note: the Exide Creditors’ Liquidating Trust had to make a notice of appearance in these new cases so, there’s that). Going back nearly two decades seems to be an impossible standard to hold any business to but 5-7 years seems much fairer.

Since we’re discussing labels, here’s another one: failure. Per the debtors:

Notwithstanding the Company’s efforts to implement its business plan following its emergence from the 2013 Chapter 11 Case and the support of its new owners and lenders, the Company continued to face liquidity, performance, and operational challenges that were more persistent and widespread than anticipated. Coupled with adverse industry and market factors as well as substantial environmental costs, these challenges have resulted in reduced liquidity.

Sooooo…that sucks. We admit it: we were hoping that this was a disruption story. That Elon Musk and the increasingly large cohort of lithium-ion battery using OEMs pushing out electric vehicles were putting the lead-acid battery manufacturers out to pasture. But that is not a state reason for this chapter 3…uh…chapter 2…uh, whatever the f*ck this is. Rather, the debtors state that their post-emergence liquidity issues stem from (a) mounting environmental remediation costs and litigation, (b) rising production costs (PETITION Note: because the debtors shut two recycling facilities, they are now subject to pricing pressures from outside manufacturers rather than just using their own recycled inputs), (c) operational inefficiencies caused by legacy mixed-use facilities, and (d), of course…wait for it…COVID-19. Duck for COVID-cover folks! The debtors say that the pandemic’s impact on demand for product is the cherry on top.

The debtors’ capital structure doesn’t help. Look at this beaut:

With that much funded debt, the debtors’ leverage ratio stands at 9.2x. Debt service averages approximately $26.8mm/year.

So, confronted with all of these factors, the debtors have been engaged in a marketing process since 2018. The continued deterioration of the business, however, ultimately led to a restructuring path and now the debtors intend to use the bankruptcy process to effectuate a sale of (i) the entire business or (ii) the Americas business and/or (iii) the sale of its Europe/Rest-of-World business or (iv) a liquidation (PETITION Note: the debtors fall into chapter 11 largely separated into four main business groups). The Ad Hoc Group has submitted a binding credit bid for the Europe/ROW business group which will serve as a stalking horse bid; they have also committed $15mm in DIP financing to service certain non-debtor affiliates in Europe with an additional $25mm DIP commitment for the administration of the cases coming from Blue Torch Capital LP. The debtors hope to go “effective” by the end of August: this means that everyone has a lot of work to do to try and and locate a buyer for the rest of the debtors’ businesses in the interim.

• Jurisdiction: D. of Delaware (Judge Sontchi)

• Capital Structure:

• Professionals:

  • Legal: Weil Gotshal & Manges LLP (Ray Schrock, Jacqueline Marcus, Sunny Singh, Samuel Mendez, Alyssa Kutner, Jason Hufendick) & Richards Layton & Finger PA (Daniel DeFranceschi, Zachary Shapiro, Brendan Schlauch)

  • Independent Directors: Alan Carr, William Transier, Harvey Tepner, Mark Barberio

  • Financial Advisor/CRO: Ankura Consulting (Roy Messing)

  • Investment Banker: Houlihan Lokey Capital Inc.

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

• Other Parties in Interest:

  • Prepetition ABL Agent: Bank of America NA

    • Legal: Otterbourg PC (Daniel Fiorillo, David Morse, Jonathan Helfat)

  • Indenture Trustee

    • Legal: Arent Fox LLP (Andrew Silfen, Jordana Renert)

  • DIP Agent ($40mm): Blue Torch Capital LP

    • Legal: Gibson Dunn & Crutcher LLP (Robert Klyman, Matthew Bouslog, Michael Farag) & Cole Schotz PC (Norman Pernick, Patrick Reilley)

  • Ad Hoc Group

    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Alice Belisle Eaton, Robert Britton, Eugene Park, Claudia Tobler, Jacqueline Rubin, Douglas Keeton, David Weiss, David Giller) & Young Conaway Stargatt & Taylor LLP (Pauline Morgan, Sean Greecher, Andrew Magaziner, Ian Bambrick)

  • Large equityholders: Mackay Shields LLC, AllianceBernstein LLP, D.E. Shaw Galvanic Portfolios LLC, Neuberger Berman Group LLC

  • Exide Creditors’ Liquidating Trust

    • Legal: Kelley Drye & Warren LLP (Dane Kane, Konstantinos Katsionis)

New Chapter 11 Bankruptcy Filing - J.C. Penney Company Inc. ($JCP)

J.C. Penney Company Inc.

May 15, 2020

Let’s be clear about something right off the bat. Encino Man, Captain America and Austin Powers could all suddenly surface from being entombed in ice for decades and even THEY wouldn’t be surprised that Texas-based J.C. Penney Company Inc. (and 17 affiliates, the “debtors”) filed for chapter 11 bankruptcy.

There are a couple of ways to look at this one.

First, there’s the debtors’ way. Not one to squander a solid opportunity, the debtors dive under “COVID Cover”:

“Before the pandemic, the Company had a substantial liquidity cushion, was improving its operations, and was proactively engaging with creditors to deleverage its capital structure and extend its debt maturities to build a healthier balance sheet. Unfortunately, that progress was wiped out with the onset of COVID-19. And now, the Company is unable to maintain its upward trajectory through its “Plan for Renewal.” Moreover, following the temporary shutdown of its 846 brick-and-mortar stores, the Company is unable to responsibly pay the upcoming debt service on its over-burdened capital structure.”

The debtors note that since Jill Soltau became CEO on October 2, 2018, the debtors have been off to the races with their “Plan for Renewal” strategy. This strategy was focused on getting back to JCP’s fundamentals. It emphasized (a) offering compelling merchandise, (b) delivering an engaging experience, (c) driving traffic online and to stores (including providing buy online, pickup in store or curbside pickup — the latest in retail technology that literally everyone is doing), (d) fueling growth, and (e) developing a results-minded culture. The debtors are quick to point out that all of this smoky verbiage is leading to “meaningful progress” — something they define as “…having just achieved comparable store sales improvement in six of eight merchandise divisions in the second half of 2019 over the first half, and successfully meeting or exceeding guidance on all key financial objectives for the 2019 fiscal year.” The debtors further highlight:

The five financial objectives were: (a) Comparable stores sales were expected to be down between 7-8% (stores sales were down 7.7%); (b) adjusted comparable store sales, which excludes the impact of the Company’s exit from major appliances and in-store furniture categories were expected to be down in a range of 5-6% (adjusted comparable store sales down 5.6%); (c) cost of goods sold, as a rate of net sales was expected to decrease 150-200 basis points (decreased approximately 210 basis points over prior year, which resulted in improved gross margin); (d) adjusted EBITDA was $583 million (a 2.6% improvement over prior year); and (e) free cash flow for fiscal year 2019 was $145 million, beating the target of positive.

Not exactly the highest bar in certain respects but, sure, progress nonetheless we suppose. The debtors point out, on multiple occasions, that prior to COVID-19, its “…projections showed sufficient liquidity to maintain operations without any restructuring transaction.” Maintain being the operative word. Everyone knows the company is in the midst of a slow death.

To prolong life, the focus has been on and remains on high-margin goods (which explains the company getting out of low-margin furniture and appliances and a renewed focus on private label), reducing inventory, and developing a new look for JCP’s stores which, interestingly, appears to focus on the “experiential” element that everyone has ballyhooed over the last several years which is now, in a COVID world, somewhat tenuous.

Which gets us to the way the market has looked at this. The numbers paint an ugly picture. Total revenues went from $12.87b in fiscal year ‘18 to $12b in ‘19. Gross margin also declined from 36% to 34%. In the LTM as of 2/1/20 (pre-COVID), revenue was looking like $11.1b. Curious. But, yeah, sure COGs decreased as has SG&A. People still aren’t walking through the doors and buying sh*t though. A fact reflected by the stock price which has done nothing aside from slowly slide downward since new management onboarded:

All of this performance has also obviously called into question the debtors’ ability to grow into its capital structure:

Here’s a more detailed look at the breakdown of unsecured funded debt:

And yet, prior to COVID, the debt stack has more or less held up. Here is the chart for JCP’s ‘23 5.875% $500mm senior secured first lien notes from the date of new management’s start to today:

Here is the chart for JCP’s ‘25 8.624% $400mm second lien notes from the date of new management’s start to today:

And here is our absolute favorite: JCP’s ‘97 7.625% $500mm senior unsecured notes:

The fact that these notes were in the 20s mere months ago is mind-boggling.

We talk a lot about how bankruptcy filings are a way to tell a story. And, here, the debtors, while not trying to hide their stretched balance sheet nor the pains of brick-and-mortar department stores with a 846-store footprint, are certainly trying to spin a positive story about management and the new strategic direction — all while highlighting that there are pockets of value here. For instance, of those 846 stores, 387 of them are owned, including 110 operating on ground leases. The private brand portfolio — acquired over decades — represents 46% of total merchandise sales. The debtors also own six of their 11 distribution centers and warehouses.

With that in mind, prior to COVID, management and their advisors were trying to be proactive about the balance sheet — primarily the term loans and first lien secured notes maturing in 2023. In Q3 ‘19, the debtors engaged with their first lien noteholders, term lenders and second lien noteholders on proposals that would, among other things, address those maturities, promote liquidity, and reduce interest expense. According to the debtors, they came close. A distressed investor was poised to purchase more than $750mm of the term loans and, in connection with a new $360mm FILO facility, launch the first step of a broader process that would have kicked maturities out a few years. In exchange, the debtors would lien up unencumbered collateral (real estate). Enter COVID. The deal went up in smoke.

There’s a new “deal” in its stead. A restructuring support agreement filed along with the bankruptcy papers contemplates a new post-reorg operating company (“New JCP”) and a new REIT which will issue new common stock and new interests, respectively. Beyond that, not much is clear from the filing: the term sheet has a ton of blanks in it:

There’s clearly a lot of work to do here. There’s also the “Market Test” element which entails, among other things, running new financing processes, pursuing potential sale/leaseback transactions, and pursuing a sale of the all or part of the debtors’ assets. If the debtors don’t have a business plan by July 14 and binding commitments for third-party financing by August 15, the debtors are required to immediately cease pursuing a plan and must instead pursue a 363 of all of their assets. Said another way, if the economy continues to decline, consumer spending doesn’t recover, and credit markets tighten up, there’s a very good chance that JCP could liquidate. Remember: retail sales sunk to a record low in April. Is that peak pain? Or will things get worse as the unemployment rate takes root? Will people shop at JC Penney if they even shop at all? There are numerous challenges here.

The debtors will use cash collateral for now and later seek approval of a $900mm DIP credit facility of which $450mm will be new money (L+11.75% continues the trend of expensive retail DIPs). It matures in 180 days, giving the debtors 6 months to get this all done.

*****

A few more notes as there are definitely clear winners and losers here.

Let’s start with the losers:

1. The Malls. It’s one thing when one department store files for bankruptcy and sheds stores. It’s an entirely different story when several of them go bankrupt at the same time and shed stores. This is going to be a bloodbath. Already, the debtors have a motion on file seeking to reject 20 leases.

2. Nike Inc. ($NKE) & Adidas ($ADDYY). Perhaps they’re covered by 503(b)(9) status or maybe they can slickster their way into critical vendor status (all for which the debtors seek $15.1mm on an interim basis and $49.6mm on a final basis). Regardless, showing up among the top creditors in both the Stage Stores Inc. bankruptcy and now the J.C. Penney bankruptcy makes for a horrible week.

3. The Geniuses Who Invested in JCP Debt that Matures in 2097. As CNBC’s Michael Santoli noted, “This JC Penney issue fell only 77 years short of maturing money-good.”

4. Bill Ackman & Ron Johnson. This.

And here are the winners:

1. The New York Times. Imperfect as it may be, their digitalization efforts allow us all to read and marvel about the life of James Cash Penney, a name that so befitting of a Quentin Tarantino movie that you can easily imagine JC chillin with Jack Dalton on some crazy Hollywood adventure. We read it with sadness as he boasts of the Golden Rule and profit-sharing. Profits alone would be nice, let alone sharing.

2. Kirkland & Ellis LLP. Seriously. These guys are smoking it and have just OWNED retail. In the past eight days alone the firm has filed Stage Stores Inc., Neiman Marcus Group LTD LLC and now JCP. It’s a department store hat trick. Zoom out from retail and add in Ultra Petroleum Corp. and Intelsat SA and these folks are lucky they’re working from home. They can’t afford to waste any billable minutes on a commute at this point.

3. Management. They’re getting what they paid for AND, consequently, they’re getting paid. No doubt Kirkland marched in there months ago and pitched/promised management that they’d secure lucrative pay packages for them if hired and … BOOM! $7.5mm to four members of management!

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

• Capital Structure: See above.

• Professionals:

  • Legal: Kirkland & Ellis LLP (Joshua Sussberg, Christopher Marcus, Aparna Yenamandra, Rebecca Blake Chaikin, Allyson Smith Weinhouse, Jake William Gordon) & Jackson Walker LLP (Matthew Cavenaugh, Jennifer Wertz, Kristhy Peguero, Veronica Polnick)

  • OpCo (JC Penney Corporation Inc.) Independent Directors: Alan Carr, Steven Panagos

    • Legal: Katten Muchin Rosenman LLP (Steven Reisman)

  • PropCo (JCP Real Estate Holdings LLC & JC Penney Properties LLC) Independent Directors: William Transier, Heather Summerfield

    • Legal: Quinn Emanuel Urquhart & Sullivan LLP

  • Financial Advisor: AlixPartners LLP (James Mesterharm, Deb Reiger-Paganis)

  • Investment Banker: Lazard Freres & Co. LLC (David Kurtz, Christian Tempke, Michael Weitz)

  • Store Closing Consultant: Gordon Brothers Retail Partners LLC

  • Real Estate Consultants: B. Riley Real Estate LLC & Cushman & Wakefield US Inc.

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

• Other Parties in Interest:

  • DIP Agent: GLAS USA LLC

    • Legal: Arnold & Porter Kaye Scholer

  • RCF Agent: Wells Fargo Bank NA

    • Legal: Otterbourg PC & Bracewell LLP (William Wood)

    • Financial Advisor: M-III Partners (Mo Meghli)

  • TL Agent: JPMorgan Chase Bank NA

  • Indenture Trustee: Wilmington Trust NA

  • Ad Hoc Group of Certain Term Loan Lenders & First Lien Noteholders & DIP Lenders (H/2 Capital Partners, Ares Capital Management, Silver Point Capital, KKR, Whitebox Advisors, Sculptor Capital Management, Brigade Capital Management, Apollo, Owl Creek Asset Management LP, Sixth Street Partners)

    • Legal: Milbank LLP (Dennis Dunne, Andrew Leblanc, Thomas Kreller, Brian Kinney) & Porter Hedges LLP

    • Financial Advisor: Houlihan Lokey (Saul Burian)

  • Second Lien Noteholders (GoldenTree Asset Management, Carlson, Contrarian Capital Management LLC, Littlejohn & Co.)

    • Legal: Stroock & Stroock & Lavan LLP (Kris Hansen) & Haynes and Boone LLP (Kelli Norfleet, Charles Beckham)

    • Financial Advisor: Evercore Group LLC (Roopesh Shah)

  • Large equityholder: BlackRock Inc. (13.85%)

⚾️New Chapter 11 Bankruptcy Filing - Modell's Sporting Goods Inc.

Modell's Sporting Goods Inc.

March 11, 2020

There’s nothing particularly new or interesting about another liquidating retailer — especially when it’s just another in a long line of companies in its business segment to file for chapter 11 bankruptcy. Sorry to be callous: we get that Modell’s Sporting Goods Inc. is a family-owned establishment with 134 stores and thousands of employees. We get that people aren’t shopping at brick-and-mortar locations, that Walmart Inc. ($WMT), Target Inc. ($TGT), Amazon Inc. ($AMZN), and, in this category, Dick’s Sporting Goods Inc. ($DKS) are crushing the competition, and that there’s a “decline in sports team participation among youth and teens.” Here’s the number of tackle football participants over the age of six years old in the United States:

This trend in football, however, is not pervasive. Participation in high school baseball, for instance, is on the rise. Most other major high school sports are pretty static, soccer being an exception as that, too, is increasing in popularity. So, sure, okay. We’ll just take the company’s word for it.

But the company doesn’t just blame the youths for its demise; it blames global warming (“warm winter weather in the Northeastern states, which negatively affected the sales of cold-weather goods and items and overall store traffic…”), the crappy-a$$ New York Knicks and disappointing Philadelphia Eagles (“lower than anticipated sales of licensed goods in the fourth quarter of 2019 based on local professional team performance”), and inventory disruption from creditors who’ve gotten sick and tired of getting regularly screwed over by administratively insolvent retailers.

It doesn’t really blame its model. For instance, it doesn’t have any private label apparel. Nor does it own any of its real estate. It is completely beholden to its vendors and foot traffic at strip malls and shopping malls. It leases everything. Apparel merchandise expenses were roughly $225mm/year and rental expenses totaled approximately $95mm/year, constituting approximately 46% and 19% of gross sales ($490mm), respectively. In addition, it has unionized employees. The company is on the hook (jointly with a non-debtor entity) for a pension plan underfunded by $25.8mm.

Of course the company also has debt. It has a unitranche revolving credit facility and term loan with JPMorgan Chase Bank NA and Wells Fargo Bank NA, respectively. As of the petition date, the company owes approximately $39mm under the facility. But as operating performance deteriorated, JPM and WFC became skittish and increased discretionary reserves by $18mm — the nail in the coffin as the company no longer had sufficient liquidity to continue to operate (PETITION Note: Wells Fargo has been particularly savage when it comes to aggressively increasing reserves on its retail clients. We’ve seen this movie before with Pier 1 Imports Inc. and Destination Maternity Inc.). This, despite the company started stretching its vendors and landlords. Rent for February and March went unpaid. The company projects $100mm in general unsecured claims, ex-lease breakage claims.

While the business suffered, multiple attempts to achieve an out-of-court restructuring and/or a sale to a strategic buyer failed. The company will now undertake a coordinated wind down to maximize recoveries for stakeholders. Absent some White Knight swooping in here at the 13th hour, pour one out for Modell’s Sporting Goods Inc.

• Jurisdiction: D. of New Jersey (Judge Papalia)

• Capital Structure: $29.5mm RCF (JPMorgan Chase Bank NA), $9.225mm Term Loan (Wells Fargo Bank NA)

• Professionals:

  • Legal: Cole Schotz PC (Michael Sirota, David Bass, Felice Yudkin)

  • Financial Advisor: Berkeley Research Group LLC (Robert Duffy)

  • Investment Banker: RBC Capital Markets

  • Real Estate Advisor: A&G Realty Partners LLC

  • Liquidation Consultant: Tiger Capital Group LLC

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

• Other Parties in Interest:

  • JPMorgan Chase Bank NA

    • Legal: Otterbourg PC (Daniel Fiorillo, Chad Simon) & Norris McLaughlin PA (Morris Bauer, Allison Arotsky)

  • Wells Fargo Bank NA

    • Legal: Riemer & Braunstein LLP (Steven Fox)

  • Local 1102 RWDSU UFCW, Local 1102 Retirement Trust, and Local 1102 Health and Benefit Fund

    • Legal: Rothman Rocco Laruffa LLP (Matt Rocco) & Lowenstein Sandler LLP (Kenneth Rosen)
      

🔌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 - 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 11 Bankruptcy Filing - Decor Holdings Inc.🏠

Decor Holdings Inc.

February 12, 2019

Source: https://www.robertallendesign.com

Privately-owned New York-based Decor Holdings Inc. (d/b/a The RAD Group and The Robert Allen Duralee Group) and certain affiliates companies filed for bankruptcy earlier this week in the Eastern District of New York. The debtors state that they are the second largest supplier of decorative fabrics and furniture to the design industry in the U.S., designing, manufacturing and selling decorative fabrics, wall coverings, trimmings, upholstered furniture, drapery hardware and accessories for both residential and commercial applications. All of which begs the question: do people still actually decorate with this stuff?!? In addition to private label product lines, the company represents six other furnishing companies, providing tens of thousands of sku options to design professionals and commercial customers. The company maintains a presence via showrooms in large metropolitan cities in the US and Canada as well as an agent showroom network in more than 30 countries around the world. In other words, for a company you’ve likely never heard of, they have quite the reach.

The debtors’ problems derive from a 2017 merger between the Duralee business and the Robert Allen business. Why? Well, frankly, it sounds like the merger between the two is akin to a troubled married couple that decides that having a kid will cure all of their ills. Ok, that’s a terrible analogy but in this case, both companies were already struggling when they decided that a merger between the two might be more sustainable. But, “[l]ike many industries, the textile industry has been hard hit by the significant decrease in consumer spending and was severely affected by the global economic downturn. As a result, the Debtors experienced declining sales and profitability over the last several years.” YOU MEAN THE PERCEIVED SYNERGIES AND COMBINED EFFICIENCIES DIDN’T COME TO FRUITION?!? Color us shocked.

Ok, we’re being a little harsh. The debtors were actually able to cut $10-12mm of annual costs out of the business. They could not, however, consolidate their separate redundant showroom spaces outside of bankruptcy (we count approximately 32 leases). Somewhat comically, the showroom spaces are actually located in the same buildings. Compounding matters was the fact that the debtors had to staff these redundant spaces and failed to integrate differing software and hardware systems. In an of themselves, these were challenging problems even without a macro overhang. But there was that too: “…due to a fundamental reduction of market size in the home furnishings market, sales plummeted industry wide and the Debtors were not spared.” Sales declined by 14% in each of the two years post-merger. (Petition Note: we can’t help but to think that this may be the quintessential case of big firm corporate partners failing to — out of concern that management might balk at the mere introduction of the dreaded word ‘bankruptcy’ and the alleged stigma attached thereto — introduce their bankruptcy brethren into the strategy meetings. It just seems, on the surface, at least, that the 2017 merger might have been better accomplished via a double-prepackaged merger of the two companies. If Mattress Firm could shed leases in its prepackaged bankruptcy, why couldn’t these guys? But what do we know?).

To stop the bleeding, the debtors have been performing triage since the end of 2018, shuttering redundant showrooms, stretching payables, and reducing headcount by RIF’ing 315 people. Ultimately, however, the debtors concluded that chapter 11 was necessary to take advantage of the breathing spell afforded by the “automatic stay” and pursue a going concern sale. To finance the cases, the debtors obtained a commitment from Wells Fargo Bank NA, its prepetition lender, for a $30mm DIP revolving credit facility of which approximately $6mm is new money and the remainder is a “roll-up” or prepetition debt (PETITION Note: remember when “roll-ups” were rare and frowned upon?). The use of proceeds will be to pay operating expenses and the costs and expenses of being in chapter 11: interestingly, the debtors noted that they’re administratively insolvent on their petition. 🤔

Here’s to hoping for all involved that a deep-pocked buyer emerges out of the shadows.

• Jurisdiction: E.D. of New York (Judge Grossman)

• Capital Structure: $23.7mm senior secured loan (Wells Fargo Bank NA), $5.7mm secured junior loan (Corber Corp.)

• Professionals:

  • Legal: Hahn & Hesson LLP (Mark Power, Janine Figueiredo)

  • Conflicts Counsel: Halperin Battaglia Benzija LLP (Christopher Battaglia)

  • Financial Advisor: RAS Management Advisors LLC (Timothy Boates)

  • Investment Banker: SSG Capital Advisors LLC (J. Scott Victor)

  • Liquidator: Great American Group LLC

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

• Other Professionals:

  • DIP Agent: Wells Fargo Bank NA

    • Legal: Otterbourg P.C. (Daniel Fiorillo, Jonathan Helfat)

  • Subordinated Noteholder: Corber Corp.

    • Legal: Pachulski Stang Ziehl & Jones LLP (John Morris, John Lucas)

New Chapter 11 Bankruptcy Filing - Specialty Retail Shops Holding Corp. (Shopko)

Specialty Retail Shops Holding Corp. (Shopko)

January 16, 2019

Sun Capital Partners’-owned, Wisconsin-based, Specialty Retail Shops Holding Corp. (“Shopko”) filed for bankruptcy on January 16, 2019 in the District of Nebraska. Yes, the District of Nebraska. Practitioners in Delaware must really be smarting over that one. That said, this is not the first retail chapter 11 bankruptcy case shepherded by Kirkland & Ellis LLP in Nebraska (see, Gordman’s Stores circa 2017). K&E must love the native Kool-Aid. Others, however, aren’t such big fans: the company’s largest unsecured creditor, McKesson Corporation ($MCK), for instance. McKesson is a supplier of the company’s pharmacies and is a large player in the healthcare business, damn it; they spit on Kool-Aid; and they have already filed a motion seeking a change of venue to the Eastern District of Wisconsin. They claim that venue is manufactured here on the basis of an absentee subsidiary. How dare they? Nobody EVER venue shops. EVER!

Anyway, we’ve gotten ahead of our skis here…

The company operates approximately 367 stores (125 bigbox, 235 hometown, and 10 express stores) in 25 states throughout the United States; it employs…

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• Jurisdiction: D. of Nebraska

• Capital Structure: see report.    

• Company Professionals:

  • Legal: Kirkland & Ellis LLP (James Sprayragen, Patrick Nash Jr., Jamie Netznik, Travis Bayer, Steven Serajeddini, Daniel Rudewicz) & (local) McGrath North Mullin & Kratz P.C. LLO (James Niemeier, Michael Eversden, Lauren Goodman)

  • Board of Directors: Russell Steinhorst (CEO), Casey Lanza, Donald Roach, Mohsin Meghji, Steve Winograd

  • Financial Advisor: Berkeley Research Group LLC

  • Investment Banker: Houlihan Lokey Capital Inc. (Stephen Spencer)

  • Liquidation Consultant: Gordon Brothers Retail Partners LLC

    • Legal: Riemer & Braunstein LLP (Steven Fox)

  • Real Estate Consultant: Hilco Real Estate LLC

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

• Special Committee of the Board of Directors

  • Legal: Willkie Farr & Gallagher LLP

  • Financial Advisor: Ducera Partners LLC

• Other Parties in Interest:

  • Wells Fargo Bank NA

    • Legal: Otterbourg PC (Chad Simon) & (local) Baird Holm LLP (Brandon Tomjack)

  • Official Committee of Unsecured Creditors (HanesBrands Inc., Readerlink Distribution Services LLC, Home Products International NA, McKesson Corp., Notations Inc., LCN SKO OMAHA (MULTI) LLC, Realty Income Corporation)

    • Legal: Pachulski Stang Ziehl & Jones LLP (Jeffrey Pomerantz, Bradford Sandler, Alan Kornfeld, Robert Feinstein) & (local) Goosmann Law Firm PLC (Joel Carney)

    • Financial Advisor: FTI Consulting Inc. (Conor Tully)

    • Expert Consultant: The Michel-Shaked Group (Israel Shaked)

Updated 3/9/19

New Chapter 11 Filing - VER Technologies Holdco LLC

VER Technologies Holdco LLC

4/4/18

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

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

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

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

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

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

Updated 5/19/18

New Chapter 11 - Remington Outdoor Company

Remington Outdoor Company

3/25/18

Remington Outdoor Company, a gun manufacturer, has finally filed for bankruptcy - a day after Americans took to the streets to #MarchforourLives. Ah, bankruptcy irony. The company's operations are truly national in scope; it has manufacturing facilities in New York and Alabama and a primary ammunition plant in Arkansas. Its "principal customers are various mass market retail chains (e.g., Wal-Mart and Dick's Sporting Goods) and specialty retail stores (e.g., Bass Pro Shops and Cabela's) and wholesale distributors (e.g., Sports South)." Guns! #MAGA!!

Why did the company have to file for bankruptcy? We refer you to our mock "First Day Declaration" from February here. Much of it continues to apply. Indeed, our mockery of the change in tone from President Obama to President Trump was spot on: post Trump's election, the company's inventory supply far exceeded demand. The (fictional) threat of the government going house-to-house to collect guns is a major stimulant to demand, apparently. Here is the change in financial performance,

"At the conclusion of 2017, the Debtors had realized approximately $603.4 million in sales and an adjusted EBITDA of $33.6 million. In comparison, in 2015 and 2016, the Debtors had achieved approximately $808.9 million and $865.1 million in sales and $64 million and $119.8 million in adjusted EBITDA, respectively."

Thanks Trump. 

We'd be remiss, however, if we didn't also note that NOWHERE in the company's bankruptcy filings does it mention the backlash against guns or the company's involvement in shootings...namely, the one that occurred in Las Vegas. 

The company, therefore, negotiated with its various lenders and arrived at a restructuring support agreement. The agreement provides for debtor-in-possession credit ($193mm asset-backed DIP + $100mm term loan DIP + $45mm DIP, the latter of which is a roll-up of a bridge loan provided by lenders prior to the filing). Upon the effective date of a plan of reorganization, the third lien lenders and term lenders will own the reorganized company. 

• Jurisdiction: D. of Delaware 
• Capital Structure: $225mm ABL (Bank of America, $114.5mm funded), $550.5mm term loan (Ankura Trust Company LLC), $226mm 7.875% Senior Secured Notes due 2020 (Wilmington Trust NA), $12.5mm secured Huntsville Note     
• Company Professionals:
  • Legal: Milbank Tweed Hadley & McCloy LLP (Gregory Bray, Tyson Lomazow, Thomas Kreller, Haig Maghakian) & (local) Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, Timothy Cairns, Joseph Mulvihill)
  • Financial Advisor: Alvarez & Marsal LLC (Joseph Sciametta)
  • Investment Banker: Lazard (Ari Lefkovits)
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • DIP ABL Agent ($193mm): Bank of America NA (DIP ABL Lenders: Bank of America NA, Wells Fargo Bank NA, Regions Bank, Branch Banking and Trust Company, Synovus Bank, Fifth Third Bank, Deutsche Bank AG New York Branch)
    • Legal: Skadden Arps Slate Meagher & Flom LLP (Paul Leake, Shana Elberg, Jason Liberi, Cameron Fee)
  • Admin Agent to the DIP TL: Ankura Trust Company LLC
    • Legal: Davis Polk & Wardwell LLP (Damian Schaible, Darren Klein, Michele McGreal, Dylan Consla) & (local) Richards Layton & Finger LLP (Mark Collins, Michael Merchant, Joseph Barsalona)
  • Ad Hoc Group of TL Lenders 
    • Legal: O'Melveny & Myers LLP (John Rapisardi, Andrew Parlen, Joseph Zujkowski, Amalia Sax-Bolder) & (local) Richards Layton & Finger LLP (Mark Collins, Michael Merchant, Joseph Barsalona)
  • Third Lien Noteholders
    • Legal: Willkie Farr & Gallagher LLP (Rachel Strickland, Joseph Minias, Debra McElligott) & (local) Young Conaway Stargatt & Taylor LLP (Edmon Morton, Allison Mielke)
  • Wells Fargo Bank NA
    • Legal: Otterbourg PC (Andrew Kramer)
  • Cerberus Operations and Advisory Company, LLC
    • Legal: Schulte Roth & Zabel LLP (David Hillman)
  • Reorganized Board of Directors (Anthony Acitelli, Chris Brady, George W. Wurtz III, G.M. McCarroll, Gene Davis, Ron Coburn, Ken D'Arcy)
• Official Committee of Unsecured Creditors
  • Legal: Fox Rothschild LLP (Michael Menkowitz, Paul Labov, Jason Manfrey, Jesse Harris, Seth Niederman)

Updated: 4/27/18

New Chapter 11 Filing - 4 West Holdings LLC

4 West Holdings LLC

3/6/18 

Texas-based licensed operator or manager of 42 skilled nursing facilities in 7 states has filed a prearranged bankruptcy. The company blames "the performance of the current group of operating Facilities has been negatively impacted by industry headwinds, regulatory actions at certain Facilities, and an inefficient geographic footprint in certain regions in the United States" for its filing.

Similar to HCR Manorcare which filed for bankruptcy earlier this week, 4 West and its affiliates emanate out of a sale leaseback transaction with a publicly-traded REIT counterparty, Omega Healthcare Investors, Inc. ($OHI). And, similarly, this business suffers from many of the same problems, 

Since 2015, the Debtors have faced significant liquidity constraints caused principally by: (a) unfavorable commercial agreements and certain liabilities assumed as part of Merger, including regulatory and personal liability claims; (b) historical losses at certain of the Debtors’ previously-operated facilities, (c) a decline in performance within the current portfolio for a variety of industry-wide developments; and (d) significant capital expenditure needs. Further, the Debtors also faced rent payment obligations to the Omega Parties under the Master Leases, which were significantly higher than their operating income could support.

Consequently, the debtor has entered into a restructuring support agreement with Omega that is predicated upon two parts: (i) a transaction whereby certain unprofitable facilities will transition to a designee of Omega and (ii) a transfer of the more successful facilities to the Plan Sponsor, SC-GA 2018 Partners LLC, which is injecting the company with $225mm of new liquidity by way of $195mm in cash and $30mm note. The Omega Parties will provide a $30mm DIP credit facility to fund the cases. 

• Jurisdiction: N.D. of Texas (Judge Hale)

• Capital Structure: $14.2mm funded RCF (Sterling National Bank), secured Master Leases (Omega), $15mm funded LOC (OHI Asset RO, LLC), $6.2mm secured note (New Ark Mezz Holdings, LLC), $1.1mm unsecured promissory note (SA Mezz Holdings, LLC)

• Company Professionals:

  • Legal: DLA Piper (US) LLP (Thomas Califano, Daniel Simon, Dienna Corrado, Andrew Zollinger, David Avraham)

  • Financial Advisor: Crowe Horwath LLP

  • Restructuring Advisor/CRO: Ankura Consulting (Louis Robichaux, Ben Jones, Chris Hebard)

  • Investment Banker: Houlihan Lokey Capital Inc. (Andrew Turnbull, Ryan Sandahl, Angus Schaller, Adam Montague)

  • Independent Director: Drivetrain Advisors LLC (John Brecker)

  • Healthcare Ombudsman: Melanie Cyganowski

    • Legal: Otterbourg P.C. (Keith Costa)

  • Claims Agent: Rust Consulting/Omni Bankruptcy (*click on company name above for free docket access)

• Other Parties in Interest:

  • DIP Lender: OHI Asset RO, LLC

    • Legal: Bryan Cave LLP (Keith M. Aurzada, Michael P. Cooley, Mark Duedall, Leah Fiorenza McNeill, David Unseth)

  • Plan Sponsor: SC-GA 2018 Partners, LLC

    • Legal: Nelligan LLP (Patrick Nelligan, James Muenker)

  • Sterling National Bank

    • Legal: King & Spalding LLP (Arthur Steinberg, Scott Davidson, Bradley Giordano, Edward Ripley)

  • Official Committee of Unsecured Creditors (Pharmerica Corporation, Healthcare Services Group, Medline Industries, Alana Healthcare, Ominicare Inc., Joerns Healthcare LLC, Regional Ambulance

    • Legal: Pepper Hamilton LLP (Francis Lawall, Donald Detweiler, Joanna Cline) & (local) Norton Rose Fulbright US LLP (Louis Strubeck Jr., Ryan Manns, Elizabeth Boydston)

    • Financial Advisor: CohnReznick LLP (Clifford Zucker)

Updated 5/18/18

New Chapter 11 Filing - Model Reorg Acquisition LLC (aka Perfumania Inc.)

Model Reorg Acquisition LLC (Perfumania Inc.)

• 8/26/17 Recap: New York-based vertically-integrated specialty retailer (226 retail locations, mostly mall-based) and wholesale distributor of perfumes and fragrances (to the likes of Sears, Target, Walmart and Walgreens) filed for bankruptcy pursuant to a prepackaged plan of reorganization. The company is seeking approval of a $83,750,000 Wells Fargo DIP facility ("DIP") which will roll into an exit facility. What caused the filing? The overall retail bloodbath, naturally. Since 2015, the company has lost tens of millions of dollars, closed 105 retail locations, decreased the pace of brick-and-mortar openings and focused efforts - like the rest of the retail world - on e-commerce expansion. This way you could buy your one gallon bottle of CK One online rather than in a crappy mall stall. Awesome. The structure of this case is as follows: the DIP requires a completed case within 90 days to ensure that the reorganized (and newly private) company can take advantage of Q4 seasonality. The prepackaged plan leaves general unsecured creditors unimpaired and reinstates the unsecured notes. It also provides a $2/share recovery for shareholders who opt-in to a release of principals (notably, the shares were trading at $1.33/share at Friday's market close). The stockholder consideration will be paid via a $14.26mm equity infusion, which also serves as consideration for 100% of the reorganized equity. The transaction also preserves approximately $40mm of net operating losses and other tax attributes that will inure to the benefit of the owners. 
• Jurisdiction: D. of Delaware (Judge Sontchi)
• Capital Structure: $175mm senior credit facility ($18.78mm funded)(Wells Fargo Bank), $125.4mm unsecured debt +$54.8mm accrued and unpaid interest (3 different notes). Public equity ($PERF).     
• Company Professionals:
  • Legal: Skadden Arps Slate Meagher & Flom LLP (J. Gregory Milmoe, Lisa Laukitis, Raquelle Kaye, Anthony Clark)
  • Financial Advisor: Ankura Consulting Group LLC (Stephen Marotta)
  • Investment Banker: Imperial Capital LLC (Robert Warshauer)
  • Real Estate Advisor: A&G Realty Partners LLC (Andrew Graiser)
  • Liquidators: Hilco Merchant Resources LLC & Gordon Brothers Retail Partners LLC
  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Agent to Senior Credit Facility: Wells Fargo Bank
    • Legal: Otterbourg P.C. (Daniel Fiorillo)
  • CIII Holdings LLC
    • Legal: Nastasi Partners PLLC (Ancela R. Nastasi, Marshall E. Tracht, Moshie Solomon, William S. Katchen, Andrew Gottesman) & (local) Morris Nichols Arsht & Tunnell LLP (Robert Dehney, Curtis Miller)

Updated 9/18/17

First Day Declaration filed 8/26/17

New Chapter 11 Filing - 21st Century Oncology Holdings Inc.

21st Century Oncology Holdings Inc.

• 5/21/17 Recap: People have been talking about an uptick in healthcare-related bankruptcies. Is this the start? Here, Florida-based cancer care provider founded in the early 80s with 179 locations (including some in South America and Latin America) finds itself in bankruptcy court after years of acquisitions (including once-bankrupt Oncure Holdings Inc.) and a perfect storm of causes - most notably, an over-levered balance sheet. Other contributing factors to the company's chapter 11 filing include (i) decreased reimbursements under current insurance programs, (ii) Medicare changes, (iii) a shift from higher revenue per treatment PPO insurance plans to HMO plans, and (iv) government regulations, penalties and settlements. Some government inquiries remain outstanding. The company has a restructuring support agreement in place, a proposed $75mm DIP credit facility, and the plan is to delever the balance sheet by up to $500mm.
• Jurisdiction: S.D. of New York
• Capital Structure: $599mm TL & $121mm RCF (Morgan Stanley Senior Funding), $35mm MDL Facility (Wilmington Savings Fund Society), $368mm 11% '23 senior unsecured notes (Wilmington Trust National Association), $19mm PIK notes    
• Company Professionals:
  • Legal: Kirkland & Ellis LLP (James Sprayragen, Christopher Marcus, William Guerrieri, John Weber, Alexandra Schwarzman, Mark McKane, Michael Esser)
  • Financial Advisor: Alvarez & Marsal LLC (Paul Rundell)
  • Investment Banker: Millco Advisors LP (Brendan Hayes)
  • Claims Agent: KCC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Prepetition MDL Agent: Wilmington Savings Fund Society FSB
    • Legal: Pryor Cashman LLP (Seth Lieberman, Patrick Sibley, Matthew Silverman)
  • First Lien Ad Hoc Committee and DIP Lenders (Apex Credit Partners LLC, Black Diamond Capital Management LLC, BlueMountain CLO Management LLC, Carlson Capital LP, Deutsche Bank AG New York Branch, GMO Credit Opportunities Fund LP, Goldman Sachs Asset Management LP, HPS Investment Partners LLC, IA Clarington Investments Inc., Intermarket Corporation, Key Bank National Association, MJX Asset Management LLC, Morgan Stanley Senior Funding Inc., Och-Ziff Capital Investments LLC, Q Investments LP, Silver Rock Financial LP, Wazee Street Capital Management LLC, Wells Fargo NA)
    • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Evan Fleck, Matthew Brod)
    • Financial Advisor: PJT Partners LP
  • Ad Hoc Group of Crossholder Lenders
    • Legal: Stroock Stroock & Lavan LLP  (Frank Merola, Jayme Goldstein, Matthew Schwartz, Samantha Martin)
    • Financial Advisor: Houlihan Lokey Capital Inc.
  • Major Equity Holders (Canada Pension Plan Investment Board, Vestar Capital Partners V LP)
    • Legal for CPPIB: Debevoise & Plimpton LLP (Mi Chi To)
  • DIP Administrative Agent: Morgan Stanley Senior Funding
    • Legal: Cahill Gordon & Reindel LLP (Joel Levitin, Richard Stieglitz Jr.)
  • Patient Care Ombudsman
    • Legal: Otterbourg PC (Melanie Cyganowski, Keith Costa, Jennifer Feeney)
  • Backstop Parties: Beach Point Capital Management LP, Governors Lane LP, JPMorgan Investment Management Inc., Oaktree Capital Management LP, Roystone Capital Management LP, HPS Investment Partners LLC
  • Official Committee of Unsecured Creditors
    • Legal: Morrison & Foerster LLP (Lorenzo Marinuzzi, Jonathan Levine, Daniel Harris, Benjamin Butterfield)

Updated 7/11/17

New Chapter 11 Filing - Marsh Supermarkets Holding LLC

Marsh Supermarkets Holding LLC

• 5/11/17 Recap: After weeks of rumors and run-up, another Sun Capital Partners portfolio company has filed for bankruptcy with the hope of selling its remaining 44 locations to a buyer. A buyer is not currently lined up. The company cited the usual reasons for the filing: (a) the increasingly competitive grocery space with mega-retailers and specialty chains crowding the market, and (b) falling produce and retail food prices. We're frankly surprised that they didn't bother to mention Amazon like everyone else. When it doubt, "Amazon Effect" it. But we digress. Anyway, it also noted that capital investment (particularly relating to technological advances) trailed big players like Kroger ($KR) and Meijer. While those players reaped the benefits of their heavy investments, Marsh could not keep up, foot traffic declined, revenue suffered, and liquidity constraints increased. This is pretty basic sh*t. 
• Jurisdiction: D. of Delaware
• Capital Structure: $60mm RCF debt ($5.2mm funded + $2.5mm LOC)(Wells Fargo Bank NA), $25.7mm June 2016 junior note, $6.3mm October 2016 junior note    
• Company Professionals:
  • Legal: Young Conaway Stargatt & Taylor LLP (Robert Brady, Michael Nestor, Robert Poppiti Jr., Ashley Jacobs, Shane Reil)
  • Financial Advisor/CRO: Clear Thinking Group LLC (Lee Diercks, Anthony Gehringer, A.R. Williams, Thomas Burke)
  • Investment Banker: Peter J. Soloman Company (Scott Moses, Derek Pitts, Greg Grambling, Brandon Yoshimura, Dan Stolar)
  • Liquidator: Hilco Merchant Resources
    • Legal: Pepper Hamilton LLP (Douglas Hermann, Michael Custer)
  • Real Estate Advisor: Hilco Real Estate LLC (Ryan Lawlor)
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Senior Lien Agent: Wells Fargo Bank NA
    • Legal: Otterbourg PC (Jonathan Helfat, Daniel Fiorillo)
  • Junior Noteholder: Marsh Group Finance LLC
    • Legal: Kirkland & Ellis LLP (James Stempel) & (local) Morris Nichols Arsht & Tunnell LLP (Curtis Miller)
  • Official Committee of Unsecured Creditors
    • Legal: Cooley LLP (Cathy Hershcopf, Seth Van Aalten, Robert Winning, Max Schlan, Sarah Carnes) & (local) Bayard PA (Justin Alberto, Erin Fay, Gregory Flasser)
    • Financial Advisor: FTI Consulting Inc. (Conor Tully)

Updated 7/12/17