New Chapter 11 Bankruptcy Filing - Neiman Marcus Group LTD LLC

Neiman Marcus Group LTD LLC

May 7, 2020

Dallas-based Neiman Marcus Group LTD LLC, Bergdorf Goodman Inc. and 22 other debtors filed for chapter 11 bankruptcy in the Southern District of Texas late this week. If anyone is seeking an explanation as to why that may be outside the obvious pandemic-related narrative, look no farther than this monstrosity:

A quick reality check: that $5b capital structure isn’t attached to an international enterprise with hundreds or thousands of stores. You know, like Forever21. Rather, that horror show backs a 68 store business (43 Neiman Marcus, 2 Bergdorf, 22 Last Call). Ah….gotta love the good ol’ $5b leveraged buyout.

This case is all about “BIG.”

Big capital structure stemming from a big LBO by two big PE funds, Ares Capital Management and CPP Investment Board USRE Inc.

Big brands with big price tags. PETITION Note: top unsecured creditors include Chanel Inc., Gucci America, Dolce and Gabbana USA Inc., Stuart Weitzman Inc., Theory LLC, Christian Louboutin, Yves Saint Laurent America Inc., Burberry USA, and more. There is also a big amount allocated towards critical vendors: $42.5mm. Nobody messes with Gucci, folks. Here’s a live shot of a representative walking out of court confident that they’ll get their money:

Big fees. More on this below.

Big, complicated — and controversial — multi-year re-designation and asset stripping transactions that were part of the debtors’ (and now non-debtors’) elaborate strategy to restructure out-of-court by kicking the can down the road. This is undoubtedly going to stir a big fight in the case. More on this below too.

Big value destruction.

Here is what will happen to the pre-petition capital structure under the proposed term sheet and restructuring support agreement filed along with the chapter 11 papers — a deal that has the support of 78% of the term lenders, 78% of the debentures, 99% of the second lien notes, 70% of the third lien notes, and 100% of the private equity sponsors:

The Asset-Based Revolving Credit Facility and FILO Facility will get out at par. There’ll be a $750mm exit facility. Beyond that? All that red constitutes heaps and heaps of value that’s now essentially an option. It’s a bet that there is a place in the future for brick-and-mortar luxury department stores. Pursuant to the deal, the “Extended Term Loans” will get the lion’s share of equity (87.5%, subject to dilution). The rest of the capital structure will get small slivers of reorganized equity. General unsecured creditors will get “their pro rata share of a cash pool.” The private equity sponsors will get wiped out but for their hoped-for liability releases.

Back to those big fees. The biggest issue for this week was the debtors’ proposed $675mm new money DIP credit facility (that comes in junior to the existing ABL in priority…in other words, no roll-up here). The DIP is essentially 13% paper chock full of fees (including a backstop fee payable in “NewCo equity” at 30% discount to plan value). One disgruntled party, Mudrick Capital Management, a holder of $144mm of the term loan, appears to have beef with Pimco and other DIP backstop parties — saying that the backstop agreement is inappropriate and the DIP fees are outrageous, likening the fee grab to a COVID hoarding mentality — and therefore felt compelled to cross-examine the debtors’ banker as to the reasonableness of it all. If you’ve ever imagined a kid suing other kids for not picking him for their dodgeball team, it would look something like this did.

And so Lazard’s testimony basically boiled down to this:

“Uh, yeah, dude, nobody knows when the economy will fully open up. The company only has $100mm of cash on the petition date. And IT’S NOT OPERATING. That money is enough for maybe 3 weeks of cash burn given that the debtors intend to continue paying rent (unlike most other retailers that have filed for bankruptcy lately). Damn pesky high-end landlords. Anyway, so we’ll burn approximately $300mm between now and when stores are projected to reopen in July/August. No operating cash flow + meaningful cash burn = risky AF lending environment. It’s unprecedented to lend into a situation with a cash burn that, while it pales in comparison to something like Uber, is pretty damn extreme. Look at the J.Crew DIP: it ain’t exactly cheap to lend in this market. There are no unencumbered assets; there certainly isn’t a way to get junior financing. And a priming fight makes no sense here given the impossibility of showing an equity cushion. So stop being an entitled little brat. There’s no obligation on anyone to cut you into the deal. And if you’re going to cry over spilled milk, take up your beef with Pimco and f*ck right off. Alternatively, you can subscribe to your pro rata portion of the DIP and enjoy all of the fees other than the backstop fee.”

The Judge was convinced that the above rationale constituted good business judgment and approved the DIP on an interim basis.

The hearing also foreshadowed another contentious issue in the case: the myTheresa situation. See, the Debtors’ position is the following: “The ‘17 MyTheresa designation as unrestricted subs + the ‘18 distribution of the myTheresa operating companies to non-debtor Neiman Marcus Group Inc. (a/k/a the “asset stripping” transaction) + a ‘19 wholesale amend-and-extend + cost-saving initiatives + comparable same store sales growth for 7 of 10 quarters + “significantly expanded margins” during the holiday period = rocket ship future growth but for the damn pandemic. On the flip side, Marble Ridge Capital LP takes the position that:

…the Debtors’ financial troubles were entirely foreseeable well before recent events. The Company has operated at leverage multiples more than twice its peers since at least 2018 (prior to the fraudulent transfers described herein). And last year’s debt restructuring increased the Company’s already unsustainable annual interest expense by more than $100 million while only reducing the Company’s debt load by $250 million leaving a fraction of adjusted EBITDA for any capital expenditures, principal repayment, taxes or one-time charges. Sadly, the Debtors’ financial distress will come as no surprise to anyone.

This ain’t gonna be pretty. Marble Ridge has already had one suit for fraudulent transfer dismissed with prejudice at the pleading stage. Now there are defamation and other claims AGAINST Marble Ridge outstanding. And subsequent suits in the NY Supreme Court. Have no fear, though, folks. There are independent managers in the mix now to perform an “independent” investigation into these transactions.

The debtors intend to have a plan on file by early June with confirmation in September. Until then, pop your popcorn folks. You can socially distance AND watch these fireworks.

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

• Capital Structure: See above.

• Professionals:

  • Legal: Kirkland & Ellis LLP (Anup Sathy, Chad Husnick, Matthew Fagen, Austin Klar, Gregory Hesse, Dan Latona, Gavin Campbell, Gary Kavarsky, Mark McKane, Jeffrey Goldfine, Josh Greenblatt, Maya Ben Meir) & Jackson Walker LLP (Matthew Cavenaugh, Jennifer Wertz, Kristhy Peguero, Veronica Polnick)

  • Independent Managers of NMG LTD LLC: Marc Beilinson, Scott Vogel

    • Legal: Willkie Farr & Gallagher LLP (Brian Lennon, Todd Cosenza, Jennifer Hardy, Joseph Davis, Alexander Cheney)

    • Financial Advisor: Alvarez & Marsal LLC (Dennis Stogsdill)

  • Independent Manager of Mariposa Intermediate Holdings LLC: Anthony Horton

    • Legal: Katten Muchin Rosenman LLP

  • Neiman Marcus Inc.

    • Legal: Latham & Watkins LLP (Jeffrey Bjork)

  • Financial Advisor/CRO: Berkeley Research Group LLC (Mark Weinstein, Kyle Richter, Marissa Light)

  • Investment Banker: Lazard Freres & Co. LLC (Tyler Cowan)

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

• Other Parties in Interest:

  • Pre-petition ABL Agent: Deutsche Bank AG New York Branch

    • Legal: White & Case LLP (Scott Greissman, Andrew Zatz, Rashida Adams) & Gray Reed & McGraw LLP (Jason Brookner, Paul Moak, Lydia Webb)

  • FILO Agent: TPG Specialty Lending Inc.

    • Schulte Roth & Zabel LLP (Adam Harris, Abbey Walsh, G. Scott Leonard) & Jones Walker LLP (Joseph Bain)

  • Pre-petition Term Loan Agent: Credit Suisse AG Cayman Islands Branch

    • Legal: Cravath Swaine & Moore LLP (Paul Zumbro, George Zobitz, Christopher Kelly) & Haynes and Boone LLP (Charles Beckham, Martha Wyrick)

  • Second Lien Note Agent: Ankura Trust Company LLC

  • Third Lien Note Agent: Wilmington Trust NA

  • Unsecured Notes Indenture Trustee: UMB Bank NA

    • Legal: Kramer Levin Naftalis & Frankel LLP (Douglas Mannal, Rachael Ringer)

  • 2028 Debentures Agent: Wilmington Savings Fund Society FSB

  • Ad Hoc Term Loan Lender Group (Davidson Kempner Capital Management LP, Pacific Investment Management Company LLC, Sixth Street Partners LLC)

    • Legal: Wachtell Lipton Rosen & Katz (Joshua Feltman, Emil Kleinhaus) & Vinson & Elkins LLP (Harry Perrin, Kiran Vakamudi, Paul Heath, Matthew Moran, Katherine Drell Grissel)

    • Financial Advisor: Ducera Partners LLC

  • Ad Hoc Secured Noteholder Committee

    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Andrew Rosenberg, Alice Belisle Eaton, Claudia Tobler, Diane Meyers, Neal Donnelly, Patricia Walsh, Jeffrey Recher) & Porter Hedges LLP (John Higgins, Eric English, M. Shane Johnson)

    • Financial Advisor: Houlihan Lokey Capital Inc.

  • Large Creditor: Chanel Inc.

    • Legal: Sheppard Mullin Richter & Hampton LLP (Justin Bernbrock, Michael Driscoll)

  • Large Creditor: Louis Vuitton USA Inc.

    • Legal: Barack Ferrazzano Kirschbaum & Nagelberg LLP (Nathan Rugg)

  • Large Creditor: Moncler USA Inc.

    • Legal: Morrison Cohen LLP (Joseph Moldovan, David Kozlowski)

  • Marble Ridge Capital LP & Marble Ridge Master Fund LP

    • Legal: Brown Rudnick LLP (Edward Weisfelner, Sigmund Wissner-Gross, Jessica Meyers, Uchechi Egeonuigwe)

  • Mudrick Capital Management LP

    • Legal: Gibson Dunn & Crutcher LLP (Michael Rosenthal, Mitchell Karlan, David Feldman, Keith Martorana, Jonathan Fortney)

  • Sponsor: CPP Investment Board USRE Inc.

    • Legal: Debevoise & Plimpton LLP (Jasmine Ball, Erica Weisgerber) & Pillsbury Winthrop Shaw Pittman LLP (Hugh Ray, William Hotze, Jason Sharp)

  • Sponsor: Ares Capital Management

    • Legal: Milbank LLP (Dennis Dunne, Thomas Kreller)

  • Official Committee of Unsecured Creditors

    • Legal: Pachulski Stang Ziehl & Jones LLP (Richard Pachulski) & Cole Schotz PC (Daniel Rosenberg)

    • Financial Advisor: M-III Advisory Partners LP (Mohsin Meghji)

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

⛽️New Chapter 11 Bankruptcy Filing - Diamond Offshore Drilling Inc. ($DO)⛽️

Diamond Offshore Drilling Inc.

April 26, 2020

Houston-based Diamond Offshore Drilling Inc. and 14 affiliates (the “debtors”), a contract drilling services provider to the oil and gas industry filed for bankruptcy in the Southern District of Texas. The company has 15 offshore drilling rigs: 11 semi-submersibles and four ultra-deepwater drillships deployed around the world (primarily in the Gulf of Mexico, Australia, Brazil and UK). Offshore drilling was already challenged due to excess supply of rigs — and has been since 2014. Recent events have made matters much much worse.

Thanks MBS. Thanks Putin. Thanks…uh…debilitating pandemic. The left-right combination of the Saudi/OPEC/Russia oil price war and COVID-19 has the entire oil and gas industry wobbling against the ropes. The pre-existing reality for offshore services companies “worsened precipitously” because of all of this. And so many companies will fall. The question is at what count and at what strength will they be able to get back on their feet. Given that this is a free-fall into bankruptcy with no pre-negotiated deal with lenders, it seems that nobody knows the answer. How could they? More on this below.

Unfortunately, the services segment the debtors play in is particularly at risk. “Almost all” of the debtors’ customers have requested some form of concessions on $1.4b of aggregate contract backlog. One customer, Beach Energy Ltd. ($BEPTF), “recently sought to formally terminate its agreement with the Company” (an action that is now the subject of an adversary proceeding filed in the bankruptcy cases). The debtors have been immersed in negotiations with their contract counter-parties to navigate these extraordinary times. It doesn’t help when business is so concentrated. Hess Corporation ($HES) is 30% of annual revenue; Occidental Petroleum Corporation ($OXY) is 21%; and Petrobras ($PBR) is 20%. BP PLC ($BP) and Royal Dutch Shell ($RDS.A) are other big customers.

With the writing on the wall, the debtors smartly drew down on their revolving credit facility — pulling $436mm out from under Wells Fargo Bank NA ($WFC). WFC must’ve loved that. Times like these really give phrases like “relationship banking” entirely new meaning. The debtors also elected to forgo a $14mm interest payment on its 2039 senior notes. Yep, you read that right: the company previously issued senior notes that weren’t set to mature until 2039. Not exactly Argentina but holy f*ck that expresses some real optimism (and froth) in the markets (and that issuance isn’t even the longest dated maturity but let’s not nitpick here)!

Yeah, so about that capital structure. In total, the debtors have $2.4b in funded debt. In addition to their $442mm of drawing under their revolving credit facility, the debtors have:

• $500mm of 5.7% ‘39 senior unsecured notes;

• $250mm of 3.45% ‘23 senior unsecured notes;

• $750mm of 4.875% ‘43 senior unsecured notes; and

• $500mm of 7.785% ‘25 senor unsecured notes.

As we’ve said time and time again: exploration and production is a wildly capital intensive business.

So now what? As we said above, there’s no deal here. The debtors note:

The Debtors determined to commence these Chapter 11 Cases to preserve their valuable contract backlog, and preserve their approximately $434.9 million in unrestricted cash on hand while avoiding annual interest expense of approximately $140.1 million under the Revolving Credit Facility and the Senior Notes, and to stabilize operations while proactively restructuring their balance sheet to successfully compete in the changing global energy markets. The Debtors and their Advisors believe cash on hand provides adequate funding at the outset of these cases. The Debtors are well-positioned to successfully emerge from bankruptcy with a highly marketable fleet, a solid backlog of activity, a strong balance sheet and liquidity position, and a differentiated approach and set of capabilities. Despite the volatile and current uncertain market conditions, the Debtors remain confident in the need for their industry, its importance around the world, and the critical services they provide.

We suspect the debtors will hang out in bankruptcy for a bit. After all, placing a value on how “critical” these services are in the current environment is going to be a challenge (though the relatively simple capital structure makes that calculation significantly easier…assuming the value extends beyond WFC). One thing seems certain: Loews Corporation ($L) is gonna have to write-down the entirety of its investment here.

*****

We’d be remiss if we didn’t highlight that, similar to Whiting Petroleum’s execs, the debtors’ executives here got paid nice bonuses just prior to the bankruptcy filing. PETITION Note: We don’t have data to back this up but there appeared to be a much bigger uproar in Whiting’s case about this than here. Which is not to say that people aren’t angry — totally factually incorrect — but angry:

Because equity-based comp doesn’t exactly serve as “incentive” when the equity is worth bupkis, the debtors paid $3.55mm to employees a week before the filing and intend to file a motion to seek bankruptcy court approval of their go-forward employee programs.

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

• Capital Structure: $442mm RCF (inclusive of LOC)(Wells Fargo Bank NA). See above.

• Professionals:

  • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Paul Basta, Robert Britton, Christopher Hopkins, Shamara James, Alice Nofzinger, Jacqueline Rubin, Andrew Gordon, Jorge Gonzalez-Corona) & Porter Hedges LLP (John Higgins, Eric English, M. Shane Johnson, Genevieve Graham)

  • Financial Advisor: Alvarez & Marsal LLC (Nicholas Grossi)

  • Investment Banker: Lazard Freres & Co. LLC

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

• Other Parties in Interest:

  • Prepetition RCF Agent: Wells Fargo Bank NA

    • Legal: Bracewell LLP

    • Financial Advisor: FTI Consulting

  • Indenture Trustee: The Bank of New York Mellon

  • Ad Hoc Group of Senior Noteholders

    • Legal: Milbank LLP

    • Financial Advisor: Evercore Group LLC

  • Major Equityholder: Loews Corporation

    • Legal: Sullivan & Cromwell LLP (James Bromley)

  • Official Committee of Unsecured Creditors: The Bank of New York Mellon Trust Company NA, National Oilwell Varco LP, Deep Sea Mooring, Crane Worldwide Logistics LLC, Kiswire Trading Inc., Parker Hannifin Corporation, SafeKick Americas LLC

    • Legal: Akin Gump Strauss Hauer & Feld LLP (Ira Dizengoff, Philip Dublin, Naomi Moss, Marty Brimmage, Kevin Eide, Patrick Chen, Matthew Breen)

    • Financial Advisor: Berkeley Research Group LLC (Christopher Kearns)

    • Investment Banker: Perella Weinberg Partners LP (Alexander Tracy)

⛽️New Chapter 11 Bankruptcy Filing - Whiting Petroleum Corporation ($WLL)⛽️

Whiting Petroleum Corporation

April 1, 2020

Denver-based Whiting Petroleum Corporation ($WLL) and four affiliates (the “debtors”), independent oil-focused upstream exploration and production companies focused primarily on the North Dakota and Rocky Mountain regions, filed for bankruptcy in the Southern District of Texas. This is a story that requires an understanding of the debtors’ impressively-levered capital structure to understand what’s going on:

• $1.072b ‘23 RBL Facility (JPMorgan Chase Bank NA)(springing maturity to 12/20 if the ‘21 notes below are not paid in full by 12/20)

• $189.1mm ‘20 1.25% convertible senior unsecured notes due 2020 (Bank of New York Mellon Trust Company, N.A.)

• $773.6mm ‘21 5.75% senior unsecured notes

• $408.3mm ‘23 6.25% senior unsecured notes

• $1b ‘26 6.625% senior unsecured notes

You’ve heard us talk about the capital intensive nature of E&P companies so … yeah … the above $3.443b of debt shouldn’t come as much of a surprise to you. The company is also publicly-traded. The stock performance over the years has been far from stellar:

What’s interesting here is that EVERYONE knows that oil and gas has been a value-destructive sh*t show for years. There’s absolutely ZERO need to belabor the point. Yet. That doesn’t stop the debtors’ CRO from doing precisely that. Here, embedded in the First Day Declaration, is a chart juxtaposing a $100 investment in WLL versus a $100 investment in an S&P 500 index and a Dow Jones U.S. E&P Index:

We should also add that the spike reflected in the above chart in the 2017 timeframe isn’t on account of some stellar improvement of operating performance; rather, it reflects a November 2017 1-to-4 reverse stock split which inflated the reflected price of the shares. Just to be clear.

Notwithstanding the hellacious performance since 2014, the debtors take pains to paint a positive picture that was thrown into disarray by “drastic and unprecedented global events, including a ‘price war’ between OPEC and Russia and the macroeconomic effects of the COVID-19 pandemic….” In fact, the debtors come in HOT in the introduction to the First Day Declaration:

The Debtors ended 2019 standing on solid ground. While the Debtors had more than $1 billion in unsecured bond debt set to mature prior to December 2020, the Debtors had significant financial flexibility to restructure their capital structure. Most importantly, the Debtors began 2020 with a committed revolving credit facility that provided them with committed financing of up to $1.75 billion—more than enough liquidity to service the Debtors’ 2020 maturities and fund anticipated capital expenditure needs throughout the year. For these reasons, the Debtors secured a “clean” audit report as recently as February 27, 2020.

And to be fair, the debt was doing just fine until the middle of February. Indeed, the unsecured notes didn’t hit distressed levels until right after Valentine’s Day. Check out this freefall:

Who needs open amusement parks when you can just follow that price action?

Already focused on “liability management” (take a drink!) given the looming ‘21 notes maturity and the corresponding RBL springing maturity, the debtors’ retained professionals shifted over to restructuring talks with an ad hoc committee of noteholders. The debtors also drew down $650mm on their revolver to ensure adequate go-forward liquidity (and, cough, avoid the need for a relatively more expensive DIP credit facility). After what sounds like serious deliberation (and opposition from the ad hoc committee), the debtors also opted to forgo the $190mm maturity payment on the convertible notes due April 1.

The debtors filed the case with the framework of a restructuring support agreement (aka a term sheet). That framework would equitize the converts and the unsecured notes, giving them 97% of the equity (for now … debt is also still under consideration). Unsecured claims will be paid in full. Existing equity would receive 3% of post-reorg equity and warrants. Post-reorg management will get 8% of the post-reorg equity. In total, this would amount to the evisceration of over $2b worth of debt. 😬

Speaking of management, a lot of people were up in arms over this bit in the debtors’ Form 8-K filed to announce the bankruptcy filing and term sheet:

That’s right. A nice immediately-payable bonus to management.

Remember that story of Lehman Brothers CEO Dick Fuld getting punched the day after Lehman’s bankruptcy on a treadmill in the corporate gym?

Fees like something like that may be coming soon to $WLL headquarters... 👀

— EnergyCynic (@EnergyCynic) April 1, 2020

We’d love to hear how this ISN’T a subversion of code provisions regarding KEIPS/KERPS. Seriously, write us: petition@petition11.com. Ensure stability huh? Tell us: WHERE THE F*CK ARE THESE GUYS GOING TO GO IN THIS ENVIRONMENT? But at least they’re passing up their (WILDLY WORTHLESS) equity awards and bonus payments. FFS.

Ok, fine. Maybe there were contractual provisions that needed to be taken into account. And maybe the alternative — sh*tcanning management and rejecting the employment contracts — doesn’t fit the construct of leaving an umimpaired class of unsecured creditors. Equity is wildly out-of-the-money and getting a tip here anyway. This, therefore, is just a transfer of value from the noteholders to the management. We have to assume that the noteholders, then, were aware of this before it happened. If not, they should be pissed. And the Directors — who make between $180,000 and $305,000 a year — ought to be questioned by said noteholders about potential breaches of duties.

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

• Capital Structure:

• Professionals:

  • Legal: Kirkland & Ellis LLP (Stephen Hessler, Brian Schartz, Gregory Pesce, Anna Rotman) & Jackson Walker LLP (Matthew Cavenaugh, Jennifer Wertz, Veronica Polnick)

  • CRO: Stein Advisors LLC (Jeffrey Stein)

  • Financial Advisor: Alvarez & Marsal LLC (Julie Hertzberg)

  • Investment Banker: Moelis & Company

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

• Other Parties in Interest:

  • RBL Agent: JPMorgan Chase Bank NA

  • Ad Hoc Committee of Noteholders

    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Andrew Rosenberg, Alice Beslisle Eaton, Michael Turkel, Omid Rahnama) & Porter Hedges LLP (John Higgins, Eric English, Genevieve Graham)

    • Financial Advisor: PJT Partners LP

  • Creditor: Caliber North Dakota LLC

    • Legal: Weil Gotshal & Manges LLP (Alfredo Perez, Brenda Funk)

⚓️New Chapter 11 Bankruptcy Filing - American Commercial Lines Inc.⚓️

American Commercial Lines Inc.

February 7, 2020

Indiana-based American Commercials Lines Inc. and ten affiliates (the “debtors”), large liquid and dry cargo shippers with an active fleet of approximately 3,500 barges, filed a prepackaged bankruptcy case in the Southern District of Texas to (i) effectuate a comprehensive restructuring of $1.48b of debt ($536mm RCF and $949mm term loan) and (ii) inject the debtors with much-needed new capital via a rights offering. Now, we know what you’re thinking: the debtors are just the latest victims of the oil and gas crash. While oil and gas do make up some small portion of the debtors’ revenues (10%), this is incorrect. Other factors complicated the debtors’ efforts to service their bulk of debt (see what we did there?). Hold on to your butts, people.

The company notes:

Beginning in early 2016, the inland barge industry entered a period of challenging conditions that have resulted in reduced earnings. These challenges were brought on by a variety of international trade, macroeconomic, industry capacity, and environmental factors. The industry has experienced a prolonged period of declining freight rates, grain volume volatility related to international competition and tariffs on U.S.-grown soybeans, and excessive operating costs incurred as a result of extreme flooding conditions. Freight rates during 2016 and 2017 were under continued downward pressure from reduced shipping demand for metals, grain, refined products, petrochemicals, chemicals and crude oil. These declines resulted in part from pressure on the U.S. steel industry linked to dumping of foreign steel into U.S. markets, increased international competition in grain exports, and the decline in North American crude oil production in response to an oversupply of global crude oil.

Wow. So much to unpack there. It’s as if the debtors’ diversified revenue streams all fell smack dab in the middle of each and every declining sector of the US economy. Reduced steel shipments due to Chinese dumping ✅. Distress in agriculture leading to less volume ✅. Oil and gas carnage ✅.

Compounding matters was increased barge supply (read: competition) due to an increase in coal shipments. That’s right, folks. We’re back to coal. Less coal production = redeployed ships looking for replacement cargo = more competition in the liquid and dry cargo space = decreased freight rates.

The debtors got a temporary reprieve in late 2017 when the Trump administration imposed steel tariffs. A short-lived recovery in steel prices combined with a temporary recovery in oil prices and, due to the above issues, a slowdown in barge construction, helped rates recover a tad.

It didn’t last. In mid-2018, China imposed tariffs on US-grown soybeans. Agricultural products constitute 36% of the debtors’ revenues. Combined with flooding that disrupted farming and navigable waterways, the debtors experienced approximately $86mm in increased operating costs. So, yeah, no bueno. As the debtors note with no intended irony, all of these factors amount to a “perfect storm” heightened mostly by an unsustainable and unserviceable debt load.

A few things to highlight here in terms of the process and trajectory of the cases:

• This serves as yet another example where the pre-petition lenders used the debtors’ need for additional time to fund a short-term bridge and, in exchange, lock down a full rollup of the pre-petition debt into a $640mm DIP credit facility. The term lenders will also provide a $50mm DIP to fund the administration of the cases.

• The term lenders are equitizing their $949mm term loan, getting 100% 7.5% “take back preferred equity” and “new common equity” in return. Their estimated recovery is 38%. Post-reorg, the major owners of the debtors, therefore, will be Contrarian Capital Management LLC, Finepoint Capital LP, and Invesco Ltd.

• The company will get a $150mm of new money via a backstopped rights offering supported by certain holders of term loan claims. This new money infusion (in exchange for 10% junior preferred equity to that noted above and provided subject to a 7% backstop premium) will presumably give the debtors some additional runway should the market forces noted above persist.

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

• Capital Structure: $536mm RCF and $949mm term loan

• Professionals:

  • Legal: Milbank LLP (Dennis Dunne, Samuel Khalil, Parker Milender) & Porter Hedges LLP (John Higgins, Eric English) & Seward & Kissel LLP

  • Post-Reorg Independent Director: Scott Vogel

  • 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 ABL & DIP ABL Agent: Wells Fargo Bank NA

    • Legal: K&L Gates LLP (David Weitman, Christopher Brown)

  • Preptition Term Loan Agent: Cortland Capital Market Services LLP

  • Ad Hoc Group of Term Lenders: Contrarian Capital Management LLC, Finepoint Capital LP, and Invesco Ltd.

    • Legal: Davis Polk & Wardwell LLP (Damian Schaible, Darren Klein, Erik Jerrard) & Rapp & Krock PC (Henry Flores, Kenneth Krock)

    • Financial Advisor: Evercore Group LLC

  • Large Equityholder: Platinum Equity
    

😷New Chapter 11 Bankruptcy Filing - Walker County Hospital Corporation (d/b/a Huntsville Memorial Hospital)😷

Walker County Hospital Corporation (d/b/a Huntsville Memorial Hospital)

November 11, 2019

Walker County Hospital Corporation (“WCHC,” d/b/a Huntsville Memorial Hospital) is the latest in a recent string of healthcare bankruptcies. Why?

Per the debtor:

“While the Hospital has outpaced market trends in the region for admissions and revenue, and has little outstanding long-term debt, as a standalone hospital operator, the Debtor faces significant challenges in acquiring competitive pricing for necessary goods and services and favorable managed care contracts as compared to multi-hospital systems.”

If you’re wondering about why private equity firms are rolling-up hospital systems, this ⬆️ ought to give you some perspective.

“As a result, the Hospital has significantly above average operating costs that exceed its revenue generation.”

That, ladies and gentlemen, is what you call a lack of economies of scale.

“In addition, the Debtor’s over-extension into rural healthcare clinics and a failed lab venture and ambulatory surgery center, among other issues, have resulted in an unsustainable balance sheet and liquidity.”

So, uh, that all sucks.

Interestingly, the State of Texas helped bury the debtor:

In 2018, the State of Texas shifted its health insurance coverage for state employees from United Healthcare to Blue Cross Blue Shield. This shift materially impacted the Debtor’s revenue, as the Debtor’s contract with Blue Cross Blue Shield has less favorable reimbursement rates and a large portion of the Hospital’s patient population is employed by the State. The Debtor has been in negotiations with Blue Cross Blue Shield since 2016, in an attempt to obtain a managed care contract with the insurer at a fair market rate, but efforts thus far have remained unsuccessful.

Because of this and other issues, the debtor’s revenue dipped and it tripped covenants in its pre-petition credit facility AND defaulted under its operating agreements with the Walker County Hospital District. The debtor has been operating under forbearance agreements with both for some time now while it sought to find a buyer. It failed. This bankruptcy is intended to provide one chance for such a sale: the debtor already has a sale process motion on the docket. It does not have a stalking horse purchaser, it does have some hope that the District will be a participant in an auction. To allow that process to play out, the debtor obtained a $5mm DIP credit facility commitment from its pre-petition (direct) lender, MidCap Financial Trust.

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

• Capital Structure: $2mm RCF (MidCap Financial Trust)

• Professionals:

  • Legal: Waller Lansden Dortch & Davis, LLP (Ryan Cochran, Blake Roth, Tyler Layne, Andrea Cunha, Evan Atkinson)

  • Financial Advisor: Healthcare Management Partners LLC (Steven Smith)

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

• Other Parties in Interest:

  • DIP Lender: MidCap Financial Trust

    • Legal: Vedder Price P.C. (Michael Eidelman, David Kane) & Porter Hodges LLP (John Higgins, Kiran Vakamudi)

⛽️New Chapter 11 Filing - Alta Mesa Resources Inc. ($AMR)⛽️

Alta Mesa Resources Inc.

September 11, 2019

Man. We nailed this one. Once Alta Mesa Holdings LP’s borrowing base got redetermined down, it was f*cked.*

As we’ve previously covered, Alta Mesa Resources Inc. is an independent oil and nat gas exploration and production company focused on the Sooner Trend Anadarko Basin Canadian and Kingfisher County (otherwise known as the “STACK”) in Oklahoma. It has an upstream business and, through a non-debtor entity it is now suing in an adversary proceeding (Kingfisher Midstream LLC), a midstream business.

The fact that another oil and gas company is now in bankruptcy** is, frankly, fairly uninteresting: the debtors blame the usual factors for their demise. Depressed oil prices ✅. Over-leverage (here, a $368mm RBL and $509mm in unsecured notes)✅. Liquidity constraints✅. We’ve now seen these story — and those factors — several dozen times this year alone. Like many of its oil and gas predecessors, these debtors, too, will explore a “value-maximizing sale of all or substantially all of the [d]ebtors’ assets” while also looking at a restructuring along with non-debtor affiliates. Par for the course.

What’s most interesting to us on this one — and relatively rare in bankruptcy — is the fact that the company emanated out of a “special purpose acquisition company or “SPAC” for short (these are also known as “blank check” companies). For the uninitiated, SPACs are generally shady-as-sh*t investment vehicles with pseudo-private-equity-like characteristics (including the enrichment of the sponsors) that are offered via IPO to idiot public equity investors who are enamored with putting money behind allegedly successful founders/investors. They have a long and sordid history but, as you might imagine in frothy AF markets like the one we’re currently experiencing, they tend to rise in popularity when people have lots of money to put to work and limited avenues for yield baby yield. According to this “SPAC 101” presentation by the law firm Winston & Strawn LLP, “[i]n 2017, there were 32 SPAC IPOs raising a total of $8.7 billion, the highest total since 2007.” That number rose above $10b in 2018. Some recent prominent examples of SPACs include: (a) the proposed-but-called-off combination of SPAC Leo Holdings Corp. ($LHC) with Chuck E. Cheese, (b) Chamath Palihapitiya’s investment in Richard Branson’s Virgin Galacticspace initiative via his $600mm spac, Social Capital Hedosophia Holdings Corp ($IPOA), and (c) something closer to home for distressed players, Mudrick Capital Acquisition Corporation ($MUDS.U), founded by Jason Mudrick. The latter, despite being 18 month post-close, has yet to deploy its capital (which is notable because, typically, SPACs have a two-year life span before capital must be returned to investors).

In late 2016, Riverstone Investment Group LLC formed its SPAC and commenced an IPO in Q1 ‘17. The IPO generated proceeds of over $1b. These proceeds were placed in a trust account — standard for SPACs — and ultimately used to partially fund the “business combination” that started the sh*tshow that we all now know as Alta Mesa. That transaction closed in February 2018. Public shareholders were now in the mix.

So, how did that work out for them? Well, here we are:

$AMR is no more.

May be the embodiment of peak shale era with insane deal underwriting/valuation, misaligned incentives (SPAC) and a complete failure in execution.

Everything went wrong here, in quick fashion. https://t.co/uQCbtbkW4s

— EnergyCynic (@EnergyCynic) September 12, 2019

In 577 days, Silver Run II (SPAC) went from acquiring Alta Mesa Holdings to filing for Chapter 11. Roughly ~2B in cash was lit on fire ($3.5mm a day). Interestingly, Kingfisher Midstream was not part of the filing $AMR

— WastedEnergy (@energy_wasted) September 12, 2019

So, yeah. Add this one to the list of failed SPACs. The lawyers sure have: AMR, certain of its current and former directors, Riverstone Investment Group LLC and Riverstone Holdings LLC were named defendants in securities class action lawsuits in both United States District Courts for the Southern District of New York and the Southern District of Texas that allege that the defendants “disseminated proxy materials containing materially false or misleading statements in connection with the Business Combination….” The debtors are obviously calling these claims “meritless.”

So, there you have it folks. An inauspicious start has brought us to a suspect penultimate chapter. There is no purchaser in tow, no clear direction for the bankruptcy proceeding, and an adversary proceeding that faces some recent unfavorable precedent (albeit in a different, less favorable, jurisdiction).

We can’t wait to see where this flaming hot mess goes from here.

---

*We wrote:

PETITION Note: Ruh roh. Just like that, the lenders have put the squeeze on AMH. AMH meet world of hurt. World of hurt, meet AMH.

“As provided under the Alta Mesa RBL, AMH will elect to repay the excess utilization in 5 equal monthly installments of $32.5 million, the first of which will be due in September 2019. As of July 31, 2019, AMH had cash on hand of approximately $79.7 million.”

PETITION Note: HAHAHAHAHA, yeah, sure it will. And we have a bridge to sell you.

Re-engage the bankruptcy countdown. Maybe…MAYBE…some crazy macroeconomic shock will occur and oil prices will shoot up to $1900/barrel. Like, maybe a meteor strikes Earth and annihilates Saudi Arabia, completely wiping it off the map. In that scenario, yeah, sure, AMH is copacetic. 

Interestingly, as we write this, Yemeni Houthi rebels are taking credit for a drone attack that has shut down half of Saudi Arabia’s oil output. Per the WSJ:

The production shutdown amounts to a loss of about five million barrels a day, the people said, roughly 5% of the world’s daily production of crude oil. The kingdom produces 9.8 million barrels a day.

Meteors. Drones. Let’s not split hairs.

**10% of the top 30 creditors features energy companies with prior BK experience including greatest hits like Chaparral Energy LLC, Weatherford US LP (another recent Latham client), and Basic Energy Services LP.

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

• Capital Structure: $368mm RBL (Wells Fargo Bank NA), $509mm 7.785% unsecured notes (US Bank NA)

• Professionals:

  • Legal: Latham & Watkins LLP (George Davis, Caroline Reckler, Annemarie Reilly, Brett Neve, Andrew Sorkin) & Porter Hedges LLP (John F. Higgins IV, Eric English, Aaron Power, M. Shane Johnson)

  • Board of Directors: James Hackett (Riverstone), Pierre Lapeyre Jr. (Riverstone), David Leuschen (Riverstone), Donald Dimitrievich (HPS), William McCullen, Sylvia Kerrigan, Donald Sinclair, Jeffrey Tepper, Diana Walters, Patrick Bartels, Marc Beilinson)

  • Financial Advisor/CRO: AlixPartners LLP (Robert Albergotti)

  • Investment Banker: Perella Weinberg Partners (Kevin Cofsky)

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

• Other Parties in Interest:

  • Ad Hoc Noteholder Group (Bain Capital Credit LP, Firefly Value Partners LP, Leroy DH LP, PGIM Inc., PPM America Inc.)

    • Legal: Davis Polk & Wardwell LLP (Damian Schaible, Angela Libby, Stephanie Massman & (local) Rapp & Krock PC (Henry Flores, Kenneth Krock)

  • Issuing Lender: Wells Fargo Bank NA

    • Legal: Bracewell LLP (William A. Wood III, Jason G. Cohen)

  • Unsecured Note Indenture Trustee: US Bank NA

    • Legal: Blank Rome LLP (Ira Herman, James Grogan)

  • Creditor: Kingfisher Midstream LLC

    • Legal: Quinn Emanuel Urquhart & Sullivan LLP (Susheel Kirpalani, Patrica Tomasco, Devin va der Hahn)

  • Equity Sponsors: Riverstone Investment Group LLC/HPS Investment Partners LLC

    • Legal: Vinson & Elkins LLP (David Meyer, Michael Garza, Harry Perrin)

  • Equity Sponsor: Bayou City Energy Management LLC

    • Legal: Kirkland & Ellis LLP (Joshua Sussberg, Gregory Pesce, Anna Rotman)

  • Equity Sponsors: Orbis Investment Management Limited, High Mesa Holdings LP,

⛽️New Chapter 11 Filing - EPIC Companies LLC⛽️

EPIC Companies LLC

August 26, 2019

Another day, another oil-related bankruptcy filing. Houston-based Epic Companies LLC and six affiliated companies filed for chapter 11 on August 26, 2019 in the Southern District of Texas (Judge Jones presiding) to effectuate a sale to its pre-petition and post-petition lender, White Oak Global Advisors LLC.* White Oak intends to credit bid $48.9mm and assume $40mm of the debtors’ debt. It then hopes to flip the assets — that’s right, flip the assets — to a secondary buyer, Alliance Energy Services LLC, for $40mm and the assumption of $35mm of debt. The debtors hope to consummate the transaction within 65 days. This is bankruptcy today folks: super speedy cases tied to aggressive DIP milestones. Why? In large part, because bankruptcy is too frikken inefficient and expensive to go about a sale transaction otherwise. This is why it’s imperative to have a robust pre-petition marketing process. Here, there’s the added element of the secondary sale.

Formed in Q1 2018, the debtors service the oil and gas industry through heavy lift, diving and marine, specialty cutting and well-plugging and abandonment services. Said another way, these guys work with oil and gas companies at the end of the well lifecycle.

Speaking of the end of lifecycles, the company has been in trouble from the get-go. After spending a year acquiring assets, the debtors already had to start divesting by April of 2019. White Oak foreclosed on equity interests in three entities in July 2019. The company still owns three heavy lift and diving vessels, other equipment, IP, and real property. They owe $106.9mm under a senior loan** and $124.8mm under a junior loan. Unsecured trade debt is $30mm. Other liabilities include litigations against the debtors’ vessels.

Why is this company in bankruptcy? They’re very to the point:

Like many in their industry, the downturn in oil and natural gas prices and other industry-related challenges negatively impacted the Debtors' liquidity position.

Consequently, White Oak called a default and has been driving the bus ever since: in July, White Oak informed management that it was done sinking money into this morass. Five days later, the debtors terminated 400 employees. 28 employees remain. Sadly, their future is decidedly more uncertain today than it was even two months ago.

*Prior to the voluntary filing, one of the debtors was involuntaried in Louisiana.

**Once White Oak exercised remedies, it then restated the debtors’ senior debt into three separate facilities. Acqua Liana, as junior lender, followed suit vis-a-vis the junior loan.

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

• Capital Structure: see above.

• Professionals:

  • Legal: Porter Hedges LLP (John Higgins, M. Shane Johnson, Genevieve Graham)

  • Financial Advisor/CRO: S3 Advisors LLC (“G2”) (Jeffrey Varsalone)

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

• Other Parties in Interest:

  • Prepetition Senior Loan Lender & Postpetition Lender & Stalking Horse Purchaser: White Oak Global Advisors LLC

  • Prepetition Junior Loan Lender: Acqua Liana Capital Partners LLC

⛽️New Chapter 11 Filing - Legacy Reserves Inc.⛽️

Legacy Reserves Inc.

June 18, 2019

CNBC: What is it you like about the Permian Basin?

Munger: It's got a lot of oil in it

— Tara Lachapelle (@taralach) May 6, 2019

Even at 95 years old, you can’t get one past Charlie Munger. #Legend.

The Permian Basin in West Texas is where it’s at in the world of oil and gas exploration and production. Per Wikipedia:

As of 2018, the Permian Basin has produced more than 33 billion barrels of oil, along with 118 trillion cubic feet of natural gas. This production accounts for 20% of US crude oil production and 7% of US dry natural gas production. While the production was thought to have peaked in the early 1970s, new technologies for oil extraction, such as hydraulic fracturing and horizontal drilling have increased production dramatically. Estimates from the Energy Information Administration have predicted that proven reserves in the Permian Basin still hold 5 billion barrels of oil and approximately 19 trillion cubic feet of natural gas.

And it may be even more prolific than originally thought. Norwegian research firm Rystad Energy recently issued a report indicating that Permian projected output was already above 4.5mm barrels a day in May with volumes exceeding 5mm barrels in June. This staggering level of production is pushing total U.S. oil production to approximately 12.5mm barrels per day in May. That means the Permian now accounts for 36% of US crude oil production — a significant increase over 2018. Normalized across 365 days, that would be a 1.64 billion barrel run rate. This is despite (a) rigs coming offline in the Permian and (b) natural gas flaring and venting reaching all-time highs in Q1 ‘19 due to a lack of pipelines. Come again? That’s right. The Permian is producing in quantities larger than pipelines can accommodate. Per Reuters:

Producers burned or vented 661 million cubic feet per day (mmcfd) in the Permian Basin of West Texas and eastern New Mexico, the field that has driven the U.S. to record oil production, according to a new report from Rystad Energy.

The Permian’s first-quarter flaring and venting level more than doubles the production of the U.S. Gulf of Mexico’s most productive gas facility, Royal Dutch Shell’s Mars-Ursa complex, which produces about 260 to 270 mmcfd of gas.

The Permian isn’t alone in this, however. The Bakken shale field in North Dakota is also flaring at a high level. More from Reuters:

Together, the two oil fields on a yearly basis are burning and venting more than the gas demand in countries that include Hungary, Israel, Azerbaijan, Colombia and Romania, according to the report.

Permian Slowdown Continues; U.S. Rig Count Declines by Six: Led once again by declines in the Permian Basin, the U.S. rig count declined by six units in the week ended June 14 to finish at 969, according to the latest data from Baker Hughes... https://t.co/huCTiSD0i2 #NatGas pic.twitter.com/RxHsCiCt5B

— Shale Daily (@shaledaily) June 14, 2019

All of which brings us to Legacy Reserves Inc. ($LGCY). Despite the midstream challenges, one could be forgiven for thinking that any operators engaged in E&P in the Permian might be insulated from commodity price declines and other macro headwinds. That position, however, would be wrong.

Legacy is a publicly-traded energy company engaged in the acquisition, development, production of oil and nat gas properties; its primary operations are in the Permian Basin (its largest operating region, historically), East Texas, and in the Rocky Mountain and Mid-Continent regions. While some of these basins may produce gobs of oil and gas, acquisition and production is nevertheless a HIGHLY capital intensive endeavor. And, here, like with many other E&P companies that have recently made their way into the bankruptcy bin, “significant capital” translates to “significant debt.”

Per the Company:

Like similar companies in this industry, the Company’s oil and natural gas operations, including their exploration, drilling, and production operations, are capital-intensive activities that require access to significant amounts of capital.  An oil price environment that has not recovered from the downturn seen in mid-2014 and the Company’s limited access to new capital have adversely affected the Company’s business. The Company further had liquidity constraints through borrowing base redeterminations under the Prepetition RBL Credit Agreement, as well as an inability to refinance or extend the maturity of the Prepetition RBL Credit Agreement beyond May 31, 2019.

This is the company’s capital structure:

The company made two acquisitions in mid-2015 costing over $540mm. These acquisitions proved to be ill-timed given the longer-than-expected downturn in oil and gas. Per the Company:

In hindsight, despite the GP Board’s and management’s favorable view of the potential future opportunities afforded by these acquisitions and the high-caliber employees hired by the Company in connection therewith, these two acquisitions consumed disproportionately large amounts of the Company’s liquidity during a difficult industry period.

WHOOPS. It’s a good thing there were no public investors in this thing who were in it for the high yield and favorable tax treatment.*

Yet, the company was able to avoid a prior bankruptcy when various other E&P companies were falling like flies. Why was that? Insert the “drillco” structure here: the company entered into a development agreement with private equity firm TPG Special Situations Partners to drill, baby, drill (as opposed to acquire). What’s a drillco structure? Quite simply, the PE firm provided capital in return for a wellbore interest in the wells that it capitalized. Once TPG clears a specified IRR in relation to any specific well, any remaining proceeds revert to the operator. This structure — along with efforts to delever through out of court exchanges of debt — provided the company with much-needed runway during a rough macro patch.

It didn’t last, however. Liquidity continued to be a pervasive problem and it became abundantly clear that the company required a holistic solution to its balance sheet. That’s what this filing will achieve: this chapter 11 case is a financial restructuring backed by a Restructuring Support Agreement agreed to by nearly the entirety of the capital structure — down through the unsecured notes. Per the Company:

The Global RSA contemplates $256.3 million in backstopped equity commitments, $500.0 million in committed exit financing from the existing RBL Lenders, the equitization of approximately $815.8 million of prepetition debt, and payment in full of the Debtors’ general unsecured creditors.

Said another way, the Permian holds far too much promise for parties in interest to walk away from it without maintaining optionality for the future.

*Investors got burned multiple times along the way here. How did management do? Here is one view (view thread: it’s precious):

Time for another round of:

"These incompetent fucks bankrupted an energy company...now how much will they pay themselves for it?"

This week's edition: Legacy Reserves $LGCY

Real ones will remember that $LGCY had a #4 seed in the Worst Midstream / MLP Management Team Bracket

— Mr. Skilling (Parody) (@mr_skilling) May 24, 2019

😬

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

• Capital Structure: See above.

• Professionals:

  • Legal: Sidley Austin LLP (Duston McFaul, Charles Persons, Michael Fishel, Maegan Quejada, James Conlan, Bojan Guzina, Andrew O’Neill, Allison Ross Stromberg)

  • Financial Advisor: Alvarez & Marsal LLC (Seth Bullock, Mark Rajcevich)

  • Investment Banker: Perella Weinberg Partners (Kevin Cofsky)

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

• Other Parties in Interest:

  • Official Committee of Unsecured Creditors (Wilmington Trust NA, Dalton Investments LLC, Paul Drueke, John Dinkel, Nicholas Mumford)

  • GSO Capital Partners LP

    • Legal: Latham & Watkins LLP (George Davis, Adam Goldberg, Christopher Harris, Zachary Proulx, Brett Neve, Julian Bulaon) & (local) Porter Hedges LLP (John Higgins, Eric English, M. Shane Johnson)

  • DIP Lender: Wells Fargo Bank NA

    • Legal: Orrick LLP (Raniero D’Aversa, Laura Metzger)

  • Prepetition Term Agent: Cortland Capital Market Services LLC

    • Legal: Arnold & Porter Kaye Scholer LLP (Gerardo Mijares-Shafai, Seth Kleinman)

  • Indenture Trustee: Wilmington Trust NA

    • Legal: Pryor Cashman (Seth Lieberman, Patrick Sibley, Andrew Richmond)

  • Ad Hoc Group of Senior Noteholders (Canyon Capital Advisors LLC, DoubleLine Income Solutions Fund, J.H. Lane Partners Master Fund LP, JCG 2016 Holdings LP, The John C. Goff 2010 Family Trust, John C. Goff SEP-IRA, Cuerno Largo Partners LP, MGA insurance Company Inc., Pingora Partners LLC)

    • Legal: Davis Polk & Wardwell LLP (Brian Resnick, Stephen Piraino, Michael Pera) & (local) Rapp & Krock PC (Henry Flores)

Updated 7/7/19 #188

⛽️New Chapter 11 Bankruptcy Filing - Jones Energy Inc.⛽️

Jones Energy Inc.

April 14, 2019

Austin-based independent oil and natural gas E&P company, Jones Energy Inc., filed a prepackaged chapter 11 bankruptcy to restructure its $1.009b of debt ($450mm senior secured first lien notes and $559mm unsecured notes across two tranches). In case you didn’t realize, oil and gas exploration and production is a capital intensive business.

The company operates primarily in the Anadarko Basin in Oklahoma and Texas. Its territory is the aggregation of acreage accumulated over the years, including the 2009 purchase of Crusader Energy Group Inc. out of bankruptcy for $240.5mm in cash.

We’re not going to belabor the point as to why this company is in bankruptcy: the narrative is no different than most other oil and gas companies that have found their way into bankruptcy court over the last several years. Indeed, this chart about sums things up nicely:

It’s really just a miracle that it didn’t file sooner. Why hadn’t it? Per the company:

…the Debtors consummated a series of liquidity enhancing transactions, including equity raises, debt repurchases, strategic acquisitions, non-core asset sales, and modifications of their operations to reduce their workforce and drilling activities. This included a Company-wide headcount reduction in 2016 resulting in the termination of approximately 30% of the Debtors’ total workforce, as well as halting drilling activity spanning several months during the worst of the historic commodity downturn.

But…well…the debt. As in, there’s too much of it.

And debt service costs were too damn high. In turn, the company’s securities traded too damn low:

Source: Disclosure Statement

What’s more interesting here is the process that unfolded. In February 2018, the company issued $450mm of 9.25% ‘23 senior secured first lien notes. The proceeds were used to repay the company’s senior secured reserve-based facility and eliminate the restrictive covenants contained therein. The company also hoped to use the proceeds to repurchase some of its senior unsecured notes at a meaningful discount to par. In a rare — yet increasingly common — show of unity, however, the company’s unsecured lenders thwarted these efforts by binding together pursuant to a “cooperation agreement” and telling the company to take its pathetic offer and pound sand. (PETITION Note: its amazing what lenders can achieve if they can solve for a collective action problem). This initiated a process that ultimately led to the transaction commemorated in the company’s announces restructuring support agreement.

So what now? The senior secured lenders will equitize their debt and come out with 96% of the common stock in the reorganized entity. Holders of unsecured debt will get 4% equity and warrants (exercisable for up to a 15% ownership stake in the reorganized company), both subject to dilution by equity issued to management under a “Management Incentive Plan.” The company has a commitment for $20mm of exit financing lined up (with the option for replacement financing of up to $150mm).

Hopefully the company will have better luck without the albatross of so much debt hanging over it.

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

• Capital Structure: $450mm 9.25% ‘23 senior secured first lien notes (UMB Bank NA), $559mm 6.75% ‘22 and 9.25% ‘23 unsecured notes (Wells Fargo Bank NA)

• Professionals:

  • Legal: Kirkland & Ellis LLP (James Sprayragen, Christopher Marcus, Brian Schartz, Anthony Grossi, Ana Rotman, Rebecca Blake Chaikin, Mark McKane, Brett Newman, Kevin Chang) & (local) Jackson Walker LLP (Matthew Cavenaugh, Jennifer Wertz)

  • Independent Directors: Tara Lewis, L. Spencer Wells

  • Financial Advisor: Alvarez & Marsal LLC (Ryan Omohundro)

  • Investment Banker: Evercore Group LLC (Daniel Aronson)

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

• Other Parties in Interest:

  • Ad Hoc Group of First Lien Noteholders

    • Legal: Milbank LLP (Dennis Dunne, Evan Fleck, Michael Price) & (local) Porter Hedges LLP (John Higgins, Eric English, Genevieve Graham)

    • Financial Advisor: Lazard Freres & Co. LLC

  • Ad Hoc Group of Crossover Holders

    • Legal: Davis Polk & Wardwell LLP (Brian Resnick, Benjamin Schak) & (local) Haynes and Boone LLP (Charlie Beckham, Kelli Norfleet)

    • Financial Advisor: Houlihan Lokey Capital Inc.

  • Metalmark Capital LLC

    • Legal: Vinson & Elkins LLP (Andrew Geppert, David Meyer, Jessica Peet, Michael Garza)

Updated 4/15/19 2:05 CT

New Chapter 11 Bankruptcy Filing - Petroquest Energy Inc.

Petroquest Energy Inc.

November 6, 2018

Petroquest Energy Inc. ($PQUE), an independent energy company engaged in the exploration, development, acquisition and production of oil and gas reserves in Texas and Louisiana, managed to stave off bankruptcy back during the oil and gas downturn. How? Well, this is how:

Source: First Day Declaration

Bankruptcy, however, caught up to it anyway.

The company filed for bankruptcy in the Southern District of Texas with a restructuring support agreement in tow. The terms of the RSA reflect that (i) the prepetition term lenders will be paid in full with an exit facility, (ii) the holders of second lien notes will have an option to participate in the exit facility (which will be fully backstopped by certain consenting creditors), and (iii) the prepetition second lien noteholders will receive 100% equity in the reorganized PetroQuest, a backstop fee in connection with provision of the exit facility, and $80mm of new second lien PIK notes. All of which is to say that the company will meaningfully de-lever its balance sheet. Meanwhile, general unsecured creditors will get $400k and all equityholders will, shockingly, get wiped.

More to come…

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

• Capital Structure: $50mm Term Loan, $9.4mm second lien debt, $275mm second lien PIK debt (Wilmington Trust NA)     

• Company Professionals:

  • Legal: Porter Hedges LLP (John Higgins, Joshua Wolfshohl, M. Shane Johnson)

  • Financial Advisor: FTI Consulting Inc.

  • Investment Banker: Seaport Global Securities

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

• Other Parties in Interest:

  • Second Lien Agent: Wilmington Trust NA

    • Legal: Reed Smith LLP (Kurt Gwynne)

New Chapter 11 Filing - Neighbors Legacy Holdings Inc.

Neighbors Legacy Holdings Inc.

7/12/18

Look! Some healthcare distress. 

Neighbors Legacy Holdings Inc., an operator of 22 freestanding emergency centers throughout the state of Texas filed for bankruptcy on July 12, 2018. The company blames its filing on "financial difficulties caused in large part by increased competition, less favorable insurance payor conditions, declining revenues, and disproportionate overhead costs as compared to their operational income." In other words, its owners did too much too fast, taking on too much debt to expand too rapidly in a space that requires significant upfront capital investment in exchange for a 12-18 month lag in cash flow generation. Initiate death spiral. 

The company's financial numbers look brutal. Per the First Day Declaration:

"...the Debtors’ consolidated EBITDA dropped from $49 million in 2015, to $45 million in 2016, to $10.3 million in 2017. This drop has been caused, in part, by the increased competition in the industry, which has led to lower patient volumes per Emergency Center. For the Emergency Centers opened prior to 2016, the average claims per day fell from approximately 13 in the first quarter of 2017 to approximately 10 currently. For Emergency Centers opened during 2016, there continues to be, on average, fewer than 10 claims per day. This marked reduction in patient volume led to a strain at previously profitable locations and underperformance at new locations."

The company, therefore, has been engaged in a game of whack-a-mole, trying to plug leakages in the enterprise in order to survive. The company had to close several unprofitable locations and abandon planned (but never opened) locations. It also took down SG&A, all the while alienating relationships with critical parties like landlords, vendors and doctors. You know, like, critical cogs in a medical service machine. 

On the bright side, the company does have a stalking horse bidder in tow. Altus Health Systems OPCO LLC and Altus Health System Realty LLC are the staking horse bidder for Houston assets. The company will utilize the "breathing spell" provided by the filing to conduct an auction and attempt to maximize the value of the assets in a competitive process. 

• Jurisdiction: S.D. of Texas (Judge Isgur)
• Capital Structure: $30mm RCF & $120mm term loan (KeyBank National Association)
• Company Professionals:
  • Legal: Porter Hedges LLP (John Higgins, Eric English, Genevieve Graham)
  • CRO/Financial Advisor: CohnReznick LLP (Chad Sandler)
  • Investment Banker: Houlihan Lokey Inc. 
  • Claims Agent: KCC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Prepetition Lender: KeyBank National Association
    • Legal: Reed Smith LLP (Lloyd Kim, Matthew Tashman)

New Chapter 22 Filing - Geokinetics Inc.

Geokinetics Inc.

6/25/18

Just when we thought companies had mysteriously figured out how to stay out of bankruptcy court, alas, a filing!

And just when we thought oil and gas-related distress had ridden off into the proverbial Texan sunset, in walks Houston-based geophysical services provider Geokinetics Inc. into the Southern District of Texas with a plan to sell substantially all of its assets to (one-time bankruptcy candidate) SAE Exploration Inc. for $20mm. Looks like the oil and gas downturn still has some appetite for prey. And it must be tasty prey: this is the second time in four years that this company is in bankruptcy. #Scarlet22. Indeed, this company is so good at bankruptcy that, the first time, it emerged from chapter 11 a full year before it even confirmed its plan!! From paragraph 24 of the First Day Declaration:

"On March 10, 2014, GOK and certain affiliated subsidiaries confirmed a prepackaged chapter 11 plan of reorganization in the District of Delaware. Pursuant to the Plan, GOK equitized over $300 million of debt and paid off its revolving credit facility. On May 10, 2013, GOK and certain affiliated subsidiaries emerged from chapter 11."

And we thought Westworld had mind-bending timelines. Whoops. 

The company blames the prolonged downturn and certain discreet "operational difficulties" that resulted in uncollectable receivables for its bankruptcy. Wanting to jump ship as the iceberg approached, Wells Fargo sought to minimize its exposure but the company and its bankers, Moelis, weren't able to find a suitable secured loan facility to refinance its revolving loan. So Moelis toggled to "strategic alternatives" mode which, seemingly, included dumping this turd on unsuspecting public equity investors as the company -- under the guidance of Fried Frank Harris Shriver & Jacobson -- filed a confidential S-1 under the JOBS Act. Sounds a lot like Domo Inc. Or Tintri Inc., for that matter. #HailMary

Obviously the company didn't IPO. Instead, it continued to bleed cash. Ascribe Capital replaced Wells Fargo and funded bridge loans for some time until they were no longer willing to perform triage. The company and its advisors stepped on the gas, lined up the stalking horse bidder, and secured interest in a $15mm DIP credit facility -- from Whitebox Advisors and Highbridge Capital, two funds that are stakeholders in the stalking horse bidder -- and filed for bankruptcy. The proceeds of the DIP will be used, in part, to pay off Ascribe's bridge loans. 

Meanwhile, remember that IPO? It seems the company thought that that was a gigantic waste of time: among the top creditors are Fried Frank Harris Shriver & Jacobson LLP and Moelis & Co. ($MO). Savage. 

• Jurisdiction: S.D of Texas (Judge Jones)
• Capital Structure: $15.6mm Term Loan A (Ascribe Capital, Wilmington Trust), $6.8mm RCF (Ascribe Capital, Wilmington Trust)
• Company Professionals:
  • Legal: Porter & Hedges LLP (John Higgins, Joshua Wolfshohl, Aaron Power)
  • Financial Advisor: FTI Consulting Inc. 
  • Investment Banker: Moelis & Co. 
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Ascribe Investments LLC
    • Legal: Simpson Thacher & Bartlett LLP (Michael Torkin, Bryce Friedman, Randi Lynn Veenstra, Megan Tweed, Sandeep Qusba, Yun Joo Lim) & (local) Haynes and Boone LLP (Charles Beckham Jr., Martha Wyrick)
  • SAExploration Inc.
    • Legal: Akin Gump Strauss Hauer & Feld LLP (Sarah Link Schultz, Eric Seitz)
  • DIP Lenders: Whitebox Advisors LLC, Highbridge Capital Management LLC
    • Legal: Brown Rudnick LLP (Andreas Andromalos, Steven Levine, Jeffrey Jonas, Robert Stark, Kimberly Cohen)

Updated 6/26 6:54 PT

New Chapter 11 Bankruptcy & CCAA - Toys "R" Us Inc.

Toys "R" Us Inc.

• 9/19/17 Recap: So. Much. To. Unpack. Here. We've previously discussed the run-up to this massive chapter 11 bankruptcy filing here and here. Still, suffice it to say that, unlike many of the other retailers that have predictably filed for bankruptcy thus far in 2017, this one was different. This one seemingly came out of nowhere - particularly given the proximity to the holiday shopping season. Before we note what this case is, lets briefly cover what it isn't and clear the noise that is pervasive on the likes of Twitter: this is NOT "RIP" Toys "R" Us. We don't get overly sentimental usually but the papers filed with the bankruptcy court were well-written and touching: this is a store, a brand, that means a lot to a lot of people. And it's not going anywhere (the company will have its challenges to assure people that this is the case). This is a financial restructuring not a liquidation: the company simply hasn't been able to evolve while paying $400mm in annual interest expense on over $5b of private equity infused debt. Plain and simple. Yes, there are other challenges (blah blah blah, Amazon), but with that debt overhang, it appears the company hasn't been able to confront them (PETITION side note: an ill-conceived deal with Amazon 18 years ago is mind-blowing when viewed from the perspective of Amazon's long game). With this filing, the company is signaling that the time for short term band-aids to address its capital structure is over. Now, "[t]he time for change, and reinvestment in operations, has come." Decisive. Management isn't messing around anymore. With a reduction in debt, the company will be unshackled and able to focus on "general upkeep and the condition of...stores, [its] inability to provide expedited shipping options, and [its] lack of a subscription-based delivery service." Indeed, the company intends to use a $3.1b debtor-in-possession credit facility to begin investing in modernization immediately.
• Interesting Facts:
  • Toy Manufacturers: Mattel ($MAT)(approx $136mm), Hasbro ($HAB) (approx $59mm) & Lego (approx $31.5mm) are among the top general unsecured creditors of the company. Mattel and Hasbro's stock traded down quite a bit yesterday on the rampant news of this filing. Query whether any of the $325mm of requested critical vendor money will apply to these companies.
  • The Power of the Media (read: NOT "fake news"): This CNBC piece helped push the company into bankruptcy. Bankruptcy professionals were retained in July (or earlier in the case of Lazard) to pursue capital structure solutions. In August the company engaged with some of its lenders. But then "...a news story published on September 6, 2017, reporting that the Debtors were considering a chapter 11 filing, started a dangerous game of dominos: within a week of its publication, nearly 40 percent of the Company’s domestic and international product vendors refused to ship product without cash on delivery, cash in advance, or, in some cases, payment of all outstanding obligations. Further, many of the credit insurers and factoring parties that support critical Toys “R” Us vendors withdrew support. Given the Company’s historic average of 60-day trade terms, payment of cash on delivery would require the Debtors to immediately obtain a significant amount—over $1.0 billion—of new liquidity." 
  • Revenue. The company generates 40% of its annual revenue during the holiday season.
  • Footprint. The company has approximately 1,697 stores and 257 licensed stores in 38 countries, plus additional e-commerce sites in various countries. The company has been shedding burdensome above-market leases and combining its Babies and Toys shops under one roof; it intends to continue its review of its real estate portfolio. Read: there WILL be store closures.
  • Eff the Competition. Toys has some choice words for its competition embedded in its bankruptcy papers; it accuses Walmart ($WMT) and Target ($TGT)(the "big box retailers") of slashing prices on toys and using toys as a loss leader to get bodies in doors; it further notes that "retailers such as Amazon are not concerned with making a profit at this juncture, rendering their pricing model impossible to compete with..." ($AMZN). Yikes. 
  • Experiential Retail. The company intends to invest in the "shopping experience" which will include (i) interactive spaces with rooms to use for parties, (ii) live product demonstrations put on by trained employees, and (iii) the freedom for employees to remove product from boxes to let kids play with the latest toys. And...wait for it...AUGMENTED REALITY. Boom. Toysrus.ar and Toysrus.ai here we come. 
• Jurisdiction: E.D. of Virginia (Judge Phillips)
• Capital Structure: see below     
• Company Professionals:
  • Legal: Kirkland & Ellis LLP (Jamie Sprayragen, Anup Sathy, Edward Sassower, Chad Husnick, Joshua Sussberg, Robert Britton, Emily Geier) & (local) Kutak Rock LLP (Michael A. Condyles, 
    Peter J. Barrett, Jeremy S. Williams) & (Canadian counsel) Goodmans LLP
  • Legal to the Independent Board of Directors: Munger, Tolles & Olson LLP
  • Financial Advisor: Alvarez & Marsal North America LLC (Jeffrey Stegenga, Jonathan Goulding, Tom Behnke, Cari Turner, Jim Grover, Arjun Lal, Doug Lewandowski, Bobby Hoernschemeyer, Scott Safron, Kara Harmon, Nick Cherry, Adam Fialkowski)
  • Investment Banker: Lazard Freres & Co., LLC (David Kurtz)
  • Real Estate Consultant: A&G Realty Partners LLC (Andrew Graiser)
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Communications Consultant: Joele Frank Wilkinson Brimmer Katcher
• Other Parties in Interest:
• ABL/FILO DIP Admin Agent: JPMorgan Chase Bank NA
  • Legal: Davis Polk & Wardwell LLP (Marshall Heubner, Brian Resnick, Eli Vonnegut, Veerle Roovers) & (local) Hunton & Williams LLP (Tyler Brown, Henry (Toby) Long III, Justin Paget)
• DIP Admin Agent (Toys DE Inc). NexBank SSB & Ad Hoc Group of B-4 Lenders (Angelo Gordon & Co LP; Franklin Mutual Advisors LLC, HPS Investment Partners LLC, Marathon Asset Management LP, Redwood Capital Management LLC, Roystone Capital Management LP, and Solus Alternative Asset Management LP)
  • Legal: Wachtell Lipton Rosen & Katz (Joshua Feltman, Emil Kleinhaus, Neil Chatani) & (local) McGuireWoods LLP (Dion Hayes, Sarah Bohm, Douglas Foley)
• Ad Hoc Group of Taj Noteholders.
  • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Brian Hermann, Samuel Lovett, Kellie Cairns) & (local) Whiteford Taylor & Preston LLP (Christopher Jones, Jennifer Wuebker)
• Steering Committee of B-2 and B-3 Lenders (American Money Management, Columbia Threadneedle Investments, Ellington Management Group LLC, First Trust Advisors L.P., MJX Asset Management LLC, Pacific Coast Bankers Bank, Par-Four Investment Management LLC, Sound Point Capital Management, Taconic Capital Advisors LP).
  • Legal: Arnold & Porter Kaye Scholer LLP (Michael Messersmith, D. Tyler Nurnberg, Sarah Gryll, Rosa Evergreen)
• 12% ’21 Senior Secured Notes Indenture Trustee: Wilmington Trust, National Association.
  • Legal: Kilpatrick Townsend & Stockton LLP (Todd Meyers, David Posner, Gianfranco Finizio) & (local) ThompsonMcMullan PC (David Ruby, William Prince IV)
• Bank of America NA
  • • Legal: Skadden Arps Slate Meagher & Flom LLP (Paul Leake, Shana Elberg, George Howard) & (local) Troutman Sanders LLP (Jonathan Hauser)
  • Private Equity Sponsors: Bain Capital Private Equity LP, Kohlberg Kravis Roberts & Co. L.P. ($KKR), and Vornado Realty Trust ($VNO)
• Large Creditor: Mattel Inc.
  • Legal: Jones Day (Richard Wynne, Erin Brady, Aaron Gober-Sims) & (local) Michael Wilson PLC (Michael Wilson)
• Large Creditor: LEGO Systems Inc.
  • Legal: Weil Gotshal & Manges LLP (Matthew Barr, Kelly DiBlasi) & (local) Walcott Rivers Gates (Cullen Speckhart)
• Large Creditor: American Greetings Corporation.
  • Legal: Baker & Hosteler LLP (Benjamin Irwin, Eric Goodman)
• Creditor: River Birch Capital
  • Legal: Andrews Kurth & Kenyon LLP (Paul Silverstein)
• Creditor: Owl Creek Asset Management
  • Legal: Stroock Stroock & Lavan LLP (Samantha Martin)
• TRU Trust 2016-TOYS, Commercial Mortgage Pass-Through Certificates, Series 2016-TOYS acting through Wells Fargo Bank NA
  • Legal: Dechert LLP (Allan Brilliant, Brian Greer, Stephen Wolpert, Humzah Soofi) & (local) Troutman Sanders LLP (Jonathan Hauser)
• Trustee: Tru Taj DIP Notes (Wilmington Savings Fund Society FSB)
  • Legal: Porter Hedges LLP (Eric English) & (local) Spotts Fain PC (James Donaldson)
• Committee of Unsecured Creditors (Mattel Inc., Evenflo Company Inc., Simon Property Group, Euler Hermes North America Insurance Co., Veritiv Operating Company, Huffy Corporation, KIMCO Realty, The Bank of New York Mellon, LEGO Systems Inc.)

First Day Declaration

First Day Declaration

Updated 10/5/17 11:40 am

New Chapter 11 Filing - GenOn Energy Inc.

GenOn Energy, Inc.

• 6/14/17 Recap: NRG Energy Inc. ("$NRG") owned deregulated wholesale power generation corporation and operator of 32 power plants in 8 states (Mid-Atlantic & California) filed a bankruptcy case with a restructuring support agreement agreed to by NRG and holders of 90% of the funded debt. The plan for the restructuring is to delever the company by $1b with the holders of the unsecured senior notes obtaining equity in the reorganized entity from NRG (and the right to participation in rights offering for $900mm in exit financing). This is another in a line of recent power cases including Panda Temple Power, Homer City Generation LP, Illinois Power Generating Co., La Paloma Generating Company LLC. And it probably won't be the last. The company cited the following causes - in addition to its over-levered capital structure - for the bankruptcy filing: (i) flat demand for power over the past five years, (ii) excess capacity (in part due to insufficient power plant retirements), (iii) lower cost structure for competitors, and (iv) significantly depressed natural gas prices. "This combination has caused energy and capacity prices to fall. So has the Debtors' profitability as a result." In the mid-Atlantic, electricity cleared $100 per megawatt hour in early 2014 and now the price hovers around $30 per megawatt hour. And nat gas isn't predicted to recover to industry price highs at least until 2030. So, looks like the merger that created this combined mid-Atlantic/California entity and levered this sucker up to the sky was a bit ill-timed, hey? 
• Jurisdiction: S.D. of Texas (Judge Jones)
• Capital Structure: $ '18 RCF (NRG Energy Inc. & U.S. Bank NA), $691mm '17 7.875% Senior Notes & $649mm '18 9.50% Senior Notes & $490mm '20 9.875% Senior Notes (Wilmington Trust Company NA), $366mm '21 8.50% Senior Notes & $329mm '31 9.125% Senior Notes (Wilmington Savings Fund Socieity FSB)    
• Company Professionals:
  • Legal: Kirkland & Ellis LLP (James Sprayragen, David Seligman, Steven Serajeddini, W. Benjamin Winger, Christopher Hayes, AnnElyse Scarlett Gibbons) & (local) Zack A. Clement PLLC (Zach Clement)
  • Financial Advisor: McKinsey Recovery & Transformation Services U.S., LLC (Kevin Carmody, Tanner MacDiarmid, Sam Jacobs)
  • Investment Banker: Rothschild & Co. (Todd Snyder)
  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Ad Hoc Committee of GenOn Note and GAG Notes
    • Legal: Ropes & Gray LLP (Keith Woffard, Stephen Moeller-Sally, Marc Roitman, Meredith Parkinson) & (local) Porter Hedges LLP (John Higgins, Joshua Wolfshohl, Rachel Thompson)
  • Ad Hoc Steering Committee of GAG Notes
    • Legal: Quinn Emanuel Urquhart & Sullivan LLP (David Gerger, Emily Smith, Benjamin Firestone, Daniel Holzman)
  • NRG Energy Inc.
    • Legal: Baker Botts LLP (Emanuel Grillo, Ian Roberts, Christopher Newcomb)
  • Wilmington Trust Company
    • Legal: Covington & Burling LLP (Ronald Hewitt, Dianne Coffino)
  • Issuing Bank: Citibank NA
    • Legal: Latham & Watkins LLP (Richard Levy, David Hammerman)

Updated 7/11/17 6:47 pm CT

New Chapter 11 Filing - Ignite Restaurant Group

Ignite Restaurant Group

• 6/6/17 Recap: Publicly-traded ($IRG) Houston-based owner of 112 Joe's Crab Shack locations and 25 Brick House Tavern + Tap locations filed for bankruptcy because people can't tear their eyes off of whatever mobile device they're towing around long enough to sit at a casual dining spot. "The market for casual dining has been deteriorating for some time." No kidding, dudes. That said, someone clearly still believes in the space as the company has lined up a stalking horse bidder to purchase the company in bankruptcy for $50mm and some assumed liabilities (subject to deductions/increases). That "someone" is KRG Acquisitions Co LLC, an affiliate of Kelly Investment Group. Maybe it's the "'I'm relaxed' restaurant experience" that the buyer finds compelling...? (Serious question: is weed legal in Texas yet?). Anyway, good luck with that. 
• Jurisdiction: S.D. of Texas
• Capital Structure: $30mm RCF & $165mm TL (Credit Suisse AG)     
• Company Professionals:
  • Legal: King & Spalding LLP (Sarah Borders, Jeffrey Dutson, Edward Ripley, Elizabeth Dechant)
  • Financial Advisor: Alvarez & Marsal LLC (John Tibus)
  • Investment Banker: Piper Jaffray & Co. (Richard Shinder, Teri Stratton)
  • Real Estate Advisor: Hilco Real Estate LLC 
  • Claims Agent: Garden City Group LLC (*click on company name above for the free docket)
  • Other Parties in Interest:
    • Credit Suisse AG
      • Legal: Latham & Watkins LLP (Keith Simon, David Hammerman, Hugh Murtagh) & (local) Porter Hedges LLP (John Higgins)
    • KRG Acquisition Co LLC 
      • Legal: Goldberg Kohn Ltd. (Randall Klein, Prisca Kim) & (local) Okin Adams LLP (Matthew Okin, Ryan O'Connor)
    • Official Committee of Unsecured Creditors
      • Legal: Pachulski Stang Ziehl & Jones LLP (Jeffrey Pomerantz, Bradford Sandler) & (local) Cole Schotz PC (Michael Warner)
    • Potential Buyer: Landry's Inc.
      • Legal: Haynes and Boone LLP (Patrick Hughes, Arsalan Muhammad, Jonathan Pressment, Sarah Jacobson)

Updated 7/17/17 11:23 am CT

New Chapter 11 Filing - Adeptus Health Inc.

Adeptus Health Inc.

• 4/19/17 Recap: Publicly-traded ($ADPT) Texas-based for-profit hospital operator filed for bankruptcy to effectuate a sale of the business to Deerfield Management Company. The company blames significant working capital needs, challenges with revenue cycle management, and reduced utilization and patient volume for its filing. Deerfield is providing the company a $45mm DIP credit facility. 
• Jurisdiction: N.D. of Texas
• Capital Structure: $212.75mm total debt. $61.9mm RCF (Bank of America), $132mm TL (A-1 and A-2, latter with Goldman Sachs Lending Partners), $13.09mm LOC (Bank of America), $7.5mm bridge loan (Deerfield Management Company)    
• Company Professionals:
  • Legal: Norton Rose Fulbright LLP (Louis Strubeck Jr., Kristian Gluck, John Schwartz, Liz Boydston, Timothy Springer)
  • Financial Advisor/CRO: FTI Consulting (Andrew Hinkelman)
  • Investment Banker: Houlihan Lokey Capital Inc.
  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name for docket)
• Other Parties in Interest:
  • Deerfield Management Company LP
    • Legal: Katten Muchin Rosenman LLP (Peter Siddiqui, Paige Barr)
  • MatlinPatterson Global Opportunities Master Fund LP
    • Legal: Ropes & Gray LLP (Mark Somerstein, Keith Woffard) & (local) Porter Hedges LLP (John Higgins, Joshua Wolfshohl)
  • Wexford Spectrum Investors LLC and Debello Investors LLC
    • Legal: Winstead PC (Phillip Lamberson, Rakhee Patel, Annmarie Chiarello)
  • Healthcare Ombudsman: Daniel McMurray
    • Legal: Neubert, Pepe & Monteith PC (Mark Fishman) & (local) Quilling Selander Lownds Winslett & Moser PC (Joshua Shephard)
    • Medical Operations Advisor: Focus Management Group USA (Daniel McMurray, James Grobmyer, Angeline Bernard, Sandra Casper)
  • Official Committee of Unsecured Creditors
    • Legal: Akin Gump Strauss Hauer & Feld LLP (Sarah Link Schultz, Marty Brimmage, David Botter, Alexis Freeman)
    • Financial Advisor: CohnReznick LLP (Chad Shandler)
  • Official Committee of Equity Security Holders
    • Legal: Brown Rudnick LLP (Edward Weisfelner, Bennett Silverberg, Jeffrey Jonas) & Winstead PC (Rakhee Patel, Phil Lamberson)
    • Financial Advisor: Miller Buckfire & Co. LLC & Stifel Nicolaus & Co. (Richard Klein)

Updated 7/13/17

New Chapter 11 Filing - EMAS Chiyoda Subsea Limited

EMAS Chiyoda Subsea Limited

• 2/28/17 Recap: Some offshore blood here. The Houston-based deepwater subsea construction service company (which sounds pretty bada$$ btw) suffered from declining revenue and cash flow (read: declining demand), high costs and increasingly limited access to credit. Hence, bankruptcy. With the benefit of a $90mm dual-tranche DIP, the Company will sell its marine base in Texas and otherwise use bankruptcy to restructure the balance sheet.
• Jurisdiction: S.D. of Texas
• Capital Structure: $480mm secured debt & $175mm unsecured debt    
• Company Professionals:
  • Legal: Skadden Arps (George Panagakis, Justin Winerman, Robert Fitzgerald) & (local) Porter Hedges LLP (John Higgins, Joshua Wolfshohl, Eric English, Brandon Tittle)
  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name for docket)
• Other Parties in Interest:
  • Tranche A Lender (Subsea 7 Finance UK PLC)
    • Legal: Arnold & Porter Kaye Scholer (Mark Liscio) & (local) Freshfields Bruckhaus Deringer (Linda Martin)
  • Tranche B Lender (Chiyoda Corp.)
    • Legal: White & Case LLP (Roberto Kampfner) & (local) Haynes & Boone LLP (Charles Beckham Jr.)
  • DNB Bank ASA, Singapore Branch (agent and security trustee)
    • Legal: Milbank Tweed Hadley & McCloy (Dennis Dunne, Tyson Lomazow, Nelly Almeida) & (local) Haynes & Boone LLP (Bradley Foxman)

Updated 3/26/17

New Filing - Stone Energy Corporation

Stone Energy Corporation

• 12/14/16 Recap: Louisiana-based oil-and-gas producer files prepackaged chapter 11 case to sell its Appalachia assets to TH Exploration III LLC (an affiliate of Tug Hill Inc.), and shed approximately $850mm of debt and $46mm of annual interest expense. The company faces a potential equity committee appointment - all the rage these days.
• Jurisdiction: S.D. of Texas
• Capital Structure: $360mm RCF, $300mm '17 1.75% convertible unsecured notes, $775mm '22 7.5% unsecured notes     
• Company Professionals:
  • Legal: Latham & Watkins LLP (David Heller, Josef Athanas, Caroline Reckler, Matthew Warren, Matthew Dillard, Christopher Harris) & (local) Porter Hedges LLP (John Higgins, Joshua Wolfshohl, Aaron Power)
  • Financial Advisor: Alvarez & Marsal LLC (Dean Swick)
  • Investment Banker: Lazard (David Kurtz) & Tudor Pickering & Holt & Co. (Chad Michael)
  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name for docket)
• Other Parties in Interest:
  • Agent of RCF (BofA)
    • Legal: O'Melveny & Meyers LLP (George Davis, Suzzanne Uhland, Michael Lotito, Sean Davis)
    • Financial Advisor: RPA Advisors
  • Bank of New York Mellon Trust Company N.A.
    • Legal: Heller Draper Patrick Horn & Dabney LLC (William Patrick III, Tristan Manthey, Cherie Dessauer Nobles)
  • Ad Hoc Group of Unsecured Lenders
    • Legal: Akin Gump (Charles Gibbs, David Zensky, Kevin Zuzolo, Meredith Lahaie, Michael Stamer)
    • Investment Banker: Intrepid Partners
  • Buyer: TH Exploration III LLC
    • Legal:
  • Exxon Mobil Corporation
    • Legal: Haynes & Boone LLP (Charles Beckham)
  • Independent Directors of the Board of Directors
    • Legal: Andrews Kurth Kenyon LLP (Robin Russell, Timothy Davidson, Ashley Harper)
  • Ad Hoc Committee of Shareholders
    • Legal: Quinn Emanuel Urquhart & Sullivan LLP (K. John Shaffer, Benjamin Finestone, David Gerger, Emily Smith, Victor Noskov)

Updated 1/20/17.