⛽️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 Filing - Sarar USA Inc.

Sarar USA Inc. 

7/20/18

Sarar USA Inc., a New Jersey-based brick-and-mortar retailer of high-end men's apparel (read: custom-tailored suits) filed for bankruptcy. The company's products are manufactured by Sarar Turkey, a Turkey-based textile company that purportedly produces clothing for the likes of Hugo Boss and Ermenegildo Zegna. Sarar USA currently operates twelve locations; it, until recently, operated eighteen locations but recently closed six locations, including a store on Madison Avenue in New York City. The stores are "primarily in 'Class A' malls (prime locations)." 

The company filed for bankruptcy because "its retail sales have not been sufficient to cover its costs, which consist primarily of rent, labor and costs of products." And why is that? Well,

While the Debtor has created a unique high-end customer experience that is valued by its customers, unpredictable industry-wide market challenges in brick-and-mortar retail locations (notably, declining traffic in traditional shopping malls and the inability/lack of willingness by landlords to adjust rents to these operating realities) have led to extremely high operating costs and depressed profits in recent years.

At least they didn't note "the Amazon Effect." Whew. 

The company's equityholders were, for some time, propping the company up with liquidity infusions but apparently concluded that they were just flushing money down the toilet. Attempts to negotiate rent concessions from landlords proved futile. The company, therefore, is in Chapter 11 to review its store footprint, close underperforming stores under cover of the Bankruptcy Code, and take a second bite of its landlords to see if they'll be able to squeeze any postpetition rent forgiveness. If the company truly is in Class A malls, well...color us skeptical. 

The company, however, seems optimistic. It boasts: 

The Debtor’s products are priced from $50-$1,500, with an average retail price (after applicable discounts) of $320. Since its founding, the Debtor has been on a purposeful mission to create high-end tailored suits for the American and Canadian market. The Debtor’s suits are known throughout the world as one of the finest brands available to discriminating consumers. The Debtor offers suits that are both in-style and customer-fitted. Store locations are stocked with an average of 4,500 unique products, across a range of colors to fit any body type. The Debtor has become a leading fashion brand in the United States.

Which would explain why none of us here at PETITION have never heard of it. We've guessing nobody in the restructuring community has either, quite frankly. At least judging by the suits we've seen y'all rocking in court, anyway. 

The company also has an e-commerce platform that "currently accounts for approximately 2% of the Debtor's revenues." Expanding that platform is just one part of many in a robust strategic plan the company hopes to initiate in bankruptcy to be viable go-forward. Godspeed. 

• Jurisdiction: D. of New Jersey (Judge Sherwood)
• Capital Structure: No secured debt.      
• Company Professionals:
  • Legal: Perkins Coie LLP (Schuyler Carroll, Jeffrey Vanacore)
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)

Updated 7/20/18, 6:44 pm CT

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 - Ciber Inc.

Ciber Inc.

• 4/10/17 Recap: Once publicly-traded Colorado-based IT staffing and consulting services company filed for bankruptcy to pursue a sale of its business to CapGemini S.A., as stalking horse bidder, for at least $50mm plus the assumption of certain liabilities. The sale is subject to a postpetition marketing process. Ciber lists Microsoft and Oracle as major corporate partners; it sells and supports both companies' product offerings. Ciber seems like the quintessential go-big-or-go-home kind of company. It fueled growth over the years with over 60 acquisitions at a cost of more than $1b, never fully integrating the new businesses. This failure to integrate led to some AWESOME results: like the time the company paid $14mm to European consultants for NEGATIVE PERFORMANCE. And we thought Wells Fargo had a monopoly on stupid bonus-based behavior. Speaking of Wells Fargo, it is the lender here and the straw that broke the camel's back was the company's inability to adhere to its Fixed Coverage Charge ratio, triggering a default under its asset-based loan. Now Wells Fargo is providing the DIP facility of $41mm to fund the cases which, by our simple mathematical calculations, amounts to $4.1mm per bankruptcy lawyer who has made a notice of appearance on behalf of the debtors already (see below).
• Jurisdiction: D. of Delaware
• Capital Structure: $60mm ABL (Wells Fargo Bank NA)     
• Company Professionals:
  • Legal: Morrison & Foerster LLP (Brett Miller, Dennis Jenkins, Daniel Harris, Benjamin Butterfield, Steve Rappoport, Todd Goren) & (local) Polsinelli PC (Christopher Ward, Justin Edelson, Jarrett Vine)
  • Financial Advisor/CRO: Alvarez & Marsal LLC (Jonathan Goulding, Matt Covington, Glenn Gilmour)
  • Investment Banker: Houlihan Lokey Capital Inc. (Adam Dunayer, Michael Boone)
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Prepetition & DIP Lender: Wells Fargo Bank NA
    • Legal: Goldberg Kohn Ltd. (Jeremy Downs, Jacob Marshall)
  • Stalking Horse Bidder: CapGemini SA
    • Legal: Skadden Arps Slate Meagher & Flom LLP (Paul Leake, Mark McDermott, Raquelle Kaye)
  • Actual Buyer: HTC Global Ventures LLC
    • Legal: Plunkett Cooney PC (Scott Lites, David Lerner)
  • Official Committee of Unsecured Creditors
    • Legal: Perkins Coie LLP (John Penn, Schuyler Carroll, Tina Moos) & (local) Shaw Fishman Glantz & Towbin LLC (Thomas Horan)
    • Financial Advisor: BDO Consulting (David Berliner)
  • Ad Hoc Group of Non-Insider Employees
    • Legal: Blank Rome LLP (Josef Mintz, John Lucian)

Updated 5/21/17