🤖New Chapter 11 Bankruptcy Filing - BroadVision Inc. ($BVSN) 🤖

BroadVision Inc.

March 30, 2020

California-based BroadVision Inc. ($BVSN) and two affiliates (the “debtors”), developers of enterprise portal applications that (a) “enable companies to unify their e-business infrastructure” and (b) “conduct interactions and transactions with employees, partners, and customers through a personalized self-service model” filed a prepackaged chapter 11 bankruptcy in the District of Delaware over the weekend. Yeah, we have no idea what that means either. Given that the debtors reflect assets of $5.6mm, it seems we’re not alone. From what we can gather, these dudes sell some software that is one part internal business dashboard, one part CRM and B2B and B2C e-commerce, and one part publishing system.

The company has been a value destruction machine for years. In fact, the debtor has an accumulated deficit of approximately $1.3 billion since 2001 — mostly non-cash charges, but still.

The upshot here is that the company intends to effectuate a sale via a prepackaged plan of reorganization which would transfer the assets to a subsidiary (Aurea Software Inc.) of large equityholder ESW Capital LLC. ESW will fund the plan including payments to unsecured creditors, coming out with 100% of the equity interests in the reorganized company for its trouble. At the time of this writing, the more interesting thing is that the plan calls for a $4.375/share recovery for equity plus “their pro rata share of the Debtor’s cash on hand as of the effective date of the Plan (including proceeds from the sale of a block of IP addresse[s] owned by the Debtor).” Why is this interesting? Well, at the time of this writing, here is where the stock is trading:

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There are only 5.1mm shares outstanding but if you could get your hands on some of that float, you’re talking a near-instant 10% recovery.* This reminds us of when Perfumania Inc. filed for bankruptcy in the middle of the Texas hurricanes and the market had a delayed reaction to the fact that equity would get paid out at a premium (PETITION Note: this is not investment advice and, more likely than not, by the time you read this on Wednesday, the gap will have closed). But we digress.

The proposed effective date is May 29, 2020 so, again, assuming you could even get your hands on some of the float, you’d have a little bit of risk with a two-month process.


*There are some caveats. The company notes:

“…the Equity Interest Recovery may be less than $4.375 per share of Debtor Common Stock in the event that (A) the Debtor has more than 5,142,333 shares of Debtor Common Stock outstanding (including all Outstanding Shares, Restricted Stock Awards, Restricted Stock Units and Permitted Stock Options, whether or not vested) or (B) the Debtor lacks sufficient Cash (including Cash-on-Hand and proceeds from the liquidation of the IP Addresses after the Effective Date) to pay all Case-Related Claims and Expenses and repayment of amounts, if any, incurred by the Plan Sponsor in connection with funding such Case-Related Claims and Expenses….”

Two things. First, there’s a 10,000 share delta between the 5,142,333 and the actual number of shares that would be outstanding if the Permitted Stock Options are exercised at $4.70/share. It seems unlikely that these options would be exercised unless cash on hand surprises to the upside (i.e., the IP addresses fetch surprisingly high prices). Second, would you be willing to stake your bet on restructuring professionals keeping administrative expense claims down? If so, more power to you. You’ve got a 10% margin of error.


  • Jurisdiction: (Judge Sontchi)

  • Capital Structure: No funded debt.

  • Professionals:

    • Legal: DLA Piper LLP (R. Craig Martin, Joshua Morse)

    • Directors: James Dixon, Robert Lee, Francois Stieger

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

  • Other Parties in Interest:

    • Purchaser: ESW Capital LLC

      • Legal: Goulston & Storrs PC (Trevor Hoffman) & Morris Nichols Arsht & Tunnell LLP (Derek Abbott)

⚫️New Chapter 11 Bankruptcy Filing - Longview Power LLC⚫️

Longview Power LLC

April 14, 2020

First it was True Religion and now it’s West Virginia-based Longview Power LLC: looks like we’re back to Chapter 22-ville after a long time away. This prepackaged chapter 11 also brings us back to (“clean”) coal country.* #MAGA!! Longview is the owner and operator of coal-filed power generation facility in West Virginia that services the PJM region (P - Pennsylvania, J - Jersey, M - Maryland, among other states). The company generated $28.1mm of EBITDA in 2019 versus $355mm of funded debt. You can do the math on what that means in terms of leverage ratios. 😬

The company attributes the drag on EBITDA to a combination of “…the rapid expansion of natural gas production, the use of natural gas in electric power generation in recent years, and lower energy prices due to a series of unseasonably warm winters has decreased energy price.” Colder winters = higher demand. Damn global warming! The average price per megawatt for electricity sold in the region is less than that of 2018 ($17.65/mwh). Other factors hitting the demand side include proliferation of use of LED light bulbs and solar roofs. Disruption! Given these market challenges, the company turned its attention to its balance sheet with the hope of eliminating interest expense and freeing up liquidity.

Alas, this is a balance sheet restructuring. The capital structure — while arguably not de-levered meaningfully enough after the initial chapter 11 cut $675mm — is at least straight-forward and simple. Longview has a $25mm revolver, $286.5mm term loan B facility and $44.3mm in subordinated notes. The company’s lenders from the 2013 bankruptcy own the equity.

Well, it looks like this will be Groundhog Day for Longview. Certain of the pre-petition term lenders will backstop a $40mm exit term loan and will get 10% of the new common equity with warrants exercisable for 90% of the new common equity provided the lender participates in the exit facility. Another debt for equity swap. Second time’s the charm?

*The company has already built one clean coal facility with an eye towards a second facility. The company also has plans for natural-gas-fired combined cycle plants and solar panel complexes.

  • Jurisdiction: D. of Delaware (Judge Shannon)

  • Capital Structure: $25mm RCF, $286.5mm TL (Deutsche Bank Trust Company), $44.3mm subordinated notes

  • Professionals:

    • Legal: Kirkland & Ellis LLP (David Seligman, Joseph Graham, Laura Krucks, Brenton Rogers, Stephen Hackney) & Richards Layton & Finger PA (Daniel DeFranceschi, Zachary Shapiro)

    • Financial Advisor: 3Cubed Advisory Services LLC

    • Investment Banker: Houlihan Lokey Inc.

    • Claims Agent: Donlin Recano & Co. (*click on the link above for free docket access)

  • Other Parties in Interest:

    • Ad Hoc Group of Prepetition Term Lenders

      • Faegre Drinker Biddle & Reath LLP (Kaitlin MacKenzie, James Millar, Laura Appleby, Kyle Kistinger)

😷New Chapter 11 Bankruptcy Filing - Quorum Health Corporation😷

Quorum Health Corporation

April 7, 2020

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

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

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

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

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

  • Jurisdiction: D. of Delaware (Judge Owens)

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

  • Professionals:

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

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

    • Investment Banker: MTS Health Partners LP

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

  • Other Parties in Interest:

    • DIP Agent: GLAS USA LLC

    • Consenting First Lien Lenders

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

      • Financial Advisor: Houlihan Lokey

    • Consenting Noteholders

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

      • Financial Advisor: Jefferies LLC

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

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

VIP Cinema Holdings Inc.

February 18, 2020

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

Here are some of the problems this company confronted:

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

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

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

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

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

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

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

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

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

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

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


  • Jurisdiction: D. of Delaware (Judge Walrath)

  • Capital Structure: see above.

  • Professionals:

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

    • Independent Director: Michael Foreman

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

    • Investment Banker: UBS Securities LLC

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

  • Other Parties in Interest:

    • First Lien Agent: Wilmington Savings Fund Society FSB

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

    • Ad Hoc Group of First Lien Lenders

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

      • Financial Advisor: M-III Partners LP

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

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

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

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

New Chapter 11 Filing - Anna Holdings Inc. (a/k/a Acosta Inc.)

Anna Holdings Inc. (a/k/a Acosta Inc.)

DATE

Back in September 2018’s “Trickle-Down Disruption from Retail Malaise (Short Coupons),” we noted a troubled trio of “sales and marketing agencies.” We wrote:

With the “perfect storm” … of (i) food delivery, (ii) the rise of direct-to-consumer CPG brands, (iii) increased competition from private-brand focused German infiltrators Aldi and Lidl, and (iv) the increasingly app-powered WholeFoods, there are a breed of companies that are feeling the aftershocks. Known as “sales and marketing agencies” (“SMAs”), you’d generally have zero clue about them but for the fact that you probably know someone who is addicted to coupon clipping. Or you’re addicted to coupon clipping. No shame in that, broheim. Anyway, that’s what they’re known for: coupons (we’re over-simplifying: they each perform other marketing, retailing, and data-oriented services too). The only other way you’d be familiar is if you have a private equity buddy who is sweating buckets right now, having underwritten an investment in one of three companies that are currently in distress. Enter Crossmark Holdings Inc., Acosta Inc., and Catalina Marketing (a unit of Checkout Holding Corp.). All three are in trouble.

What’s happened since? Catalina Marketing filed for chapter 11 bankruptcy. Crossmark Holdings Inc. effectuated an out-of-court exchange transaction, narrowing averting a chapter 11 bankruptcy filing. And, as of last week, Acosta Inc. launched solicitation of a prepackaged chapter 11 bankruptcy filing. It will be in bankruptcy in the District of Delaware very very soon. We’ve basically got ourselves an SMA hat-trick.

Before we dive into what the bloody hell happened here — and it ain’t pretty — let’s first put some more meat on those SMA bones. In doing so, mea culpa: we WAY over-simplified what Acosta Inc. does in that prior piece. So, what do they do?

Acosta has two main business lines: “Sales Services” and “Marketing Services.” In the former, “Acosta assists CPG companies in selling new and existing products to retailers, providing business insights, securing optimal shelf placement, executing promotion programs, and managing back-office order-to-cash and claims deduction management solutions. Acosta also works with clients in negotiations with retailers and managing promotional events.” They also provide store-level merchandising services to make sure sh*t is properly placed on shelves, stocks are right, displays executed, etc. The is segment creates 80% of Acosta’s revenue.

The other 20% comes from the Marketing Services segment. In this segment, “Acosta provides four primary Marketing Services offerings: (i) experiential marketing; (ii) assisted selling and training; (iii) content marketing; and (iv) shopper marketing. Acosta offers clients event-based marketing services such as brand launch events, pop-up retail experiences, mobile tours, large events, and trial/demo campaigns. Acosta also provides Marketing Services such as assisted selling, staffing, associate training, in-store demonstrations, and more. Under its shopping marketing business, Acosta advises clients on consumer promotions, package designs, digital shopping, and other shopper marketing channels.

In the past, the company made money through commission-based contracts; they are now shifting “towards higher margin revenue generation models that allow the Company to focus on aligning cost-to-serve with revenue generation to better serve clients and maximize growth.” Whatever the f*ck that means.

We’re being flip because, well, let’s face it: this company hasn’t exactly gotten much right over the last four years so we ought to be forgiven for expressing a glint of skepticism that they’ve now suddenly got it all figured out. Indeed, The Carlyle Group LP acquired the company in 2014 for a staggering $4.75b — a transaction that “ranked … among the largest private-equity purchases of that year.Score for Thomas H. Lee Partners LP (which acquired the company in 2011 from AEA Investors LP for $2b)!! This was after the Washington DC-based private equity firm reportedly lost out on its bid to acquire Advantage Sales & Marketing, a competitor which just goes to show the fervor with which Carlyle pursued entry into this business. Now they must surely regret it. Likewise, the company: nearly all of the company’s $3b of debt stems from that transaction. The company’s bankruptcy papers make no reference to management fees paid or dividends extracted so it’s difficult to tell whether Carlyle got any bang whatsoever for their equity buck.*

Suffice it to say, this isn’t exactly a raging success story for private equity (calling Elizabeth Warren!). Indeed, since 2015 — almost immediately after the acquisition — the company lost $631mm of revenue and $193mm of EBITDA. It gets worse. Per the company:

“Revenue contributions from the top twenty-five clients in 2015 have declined at approximately 14.6 percent per year since fiscal year 2015. Furthermore, adjusted EBITDA margins have decreased year-over-year since fiscal year 2015 from over 19 percent to approximately 16 percent as of the end of fiscal year 2018.”

When you’re losing this money, it’s awfully hard to service $3b of debt. Not to state the obvious. But why did the company’s business deteriorate so quickly? Disruption, baby. Disruption. Per the company:

Acosta’s performance was disrupted by changes in consumer behavior and other macroeconomic trends in the retail and CPG industries that had a significant impact on the Company’s ability to generate revenue. Specifically, consumers have shifted away from traditional grocery retailers where Acosta has had a leadership position to discounters, convenience stores, online channels, and organic-focused grocers, where Acosta has not historically focused.

Just like we said a year ago. Let’s call this “The Aldi/Lidl/Amazon/Dollar Tree/Dollar Store Effect.” Other trends have also taken hold: (a) people are eating healthier, shying away from center-store (where all the Campbell’s, Kellogg’s, KraftHeinz and Nestle stuff is — by the way, those are, or in the case of KraftHeinz, were, all major clients!); and (b) the rise of private label.

Screen Shot 2019-11-18 at 1.08.25 PM.png

Moreover, according to Acosta, consumer purchasing has declined overall due to the increased cost of food (huh? uh, sure okay). The company adds:

These consumer trends have exposed CPG manufacturers to significant margin pressure, resulting in a reduction in outsourced sales and marketing spend. In the years and months leading to the Petition Date, several of Acosta’s major clients consolidated, downsized, or otherwise reduced their marketing budgets.

By way of example, here is Kraft Heinz’ marketing spend over the last several years:

Screen Shot 2019-11-18 at 1.12.46 PM.png

Compounding matters, competition in the space is apparently rather savage:

“Acosta also faced significant pressure as a result of the Company’s heavy debt load. Clients have sought to diversify their SMA providers to decrease perceived risk of Acosta vulnerability. In fact, certain of Acosta’s competitors have pointed to the Company’s significant indebtedness, contrasting their own de-levered balance sheets, to entice clients away from Acosta. Over time, these factors have tightened the Company’s liquidity position and constrained the Company from making necessary operational and capital expenditures, further impacting revenue.”

So, obviously, Acosta needed to do something about that mountain of debt. And do something it did: it’s piling it up like The Joker, pouring kerosene on it, and lighting that sh*t on fire. The company will wipe out the first lien credit facility AND the unsecured notes — nearly $2.8b of debt POOF! GONE! What an epic example of disruption and value destruction!

So now what? Well, the debtors clearly cannot reverse the trends confronting CPG companies and, by extension, their business. But they can sure as hell napalm their balance sheet! The plan would provide for the following:

  • Provide $150mm new money DIP provided by Elliott, DK, Oaktree and Nexus to satisfy the A/R facility, fund the cases, and presumably roll into an exit facility;

  • First lien lenders will get 85% of the new common stock (subject to dilution from employee incentive plan, the equity rights offering, the direct investment preferred equity raise, etc.) + first lien subscription rights OR cash subject to a cap.

  • Senior Notes will get 15% of new common stock + senior notes subscription rights OR cash subject to a cap.

  • They’ll be $325mm in new equity infusions.

So, in total, over $2b — TWO BILLION — of debt will be eliminated and swapped for equity in the reorganized company. The listed recoveries (which, we must point out, are based on projections of enterprise value) are 22-24% for the holders of first lien paper and 10-11% for the holders of senior notes.

We previously wrote about how direct lenders — FS KKR Capital Corp. ($FSK), for instance — are all up in Acosta’s loans. Here’s what KKR had to say about their piece of the first lien loan:

We placed Acosta on nonaccrual due to ongoing restructuring negotiations during the quarter and chose to exit this position after the quarter end at a gain to our third quarter mark.

HAHAHAHA. Now THAT is some top-notch spin! Small victories, we guess. 😬😜

*There have been two independent directors appointed to the board; they have their own counsel; and they’re performing an investigation into whether “any matter arising in or related to a restructuring transaction constituted a conflict matter.” There is no implication, however, that this investigation has anything to do with potential fraudulent conveyance claims. Not everything is Payless, people.

  • Jurisdiction: D. of Delaware (Judge )

  • Capital Structure:

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  • Professionals:

    • Legal: Kirkland & Ellis LLP (Edward Sassower, Joshua Sussberg, Christopher Greco, Spencer Winters, Derek Hunter, Ameneh Bordi, Annie Dreisbach, Josh Greenblatt, Yates French, Jeffrey Goldfine) & Klehr Harrison Harvey Branzburg LLP (Domenic Pacitti, Michael Yurkewicz, Sally Veghte)

    • Independent Directors: Gary Begeman, Marc Beilinson

      • Legal: Katten Muchin Rosenman LLP

    • Financial Advisor: Alvarez & Marsal LLC

    • Investment Banker: PJT Partners Inc. (Paul Sheaffer)

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

  • Other Parties in Interest:

    • A/R Facility Agent: Wells Fargo Bank NA

    • Admin Agent and Collateral Agent: Ankura Trust Company LLC

      • Legal: Shearman & Sterling LLP (Joel Moss, Sara Coelho) & Drinker Biddle & Reath LLP (Patrick Jackson)

    • First Lien Credit Agent: JPMorgan Chase Bank NA

      • Legal: Freshfields Bruckhaus Deringer US LLP (Scott Talmadge, Samantha Braunstein) & Richards Layton & Finger PA (Mark Collins, David Queroli)

    • First Lien Lender Group

      • Legal: Davis Polk & Wardwell LLP (Damian Schaible, Stephen Piraino, Jacob Weiner)

      • Financial Advisor: Centerview Partners

    • Minority First Lien Lenders

      • Legal: Arnold & Porter Kaye Scholer LLP (Michael Messersmith, Seith Kleinman, Sarah Gryll) & Pepper Hamilton LLP (David Stratton)

      • Financial Advisor: FTI Consulting Inc.

    • Indenture Trustee: Wilmington Trust NA

    • Backstop Parties: Elliott Management Corporation & Oaktree Capital Management LP

      • Legal: White & Case LLP (Thomas Lauria, Michael Shepherd, Joseph Pack, Jason Zakia, Kimberly Havlin) & Whiteford Taylor & Preston LLC (Marc Abrams, Richard Riley)

    • Backstop Parties: Davidson Kempner Capital Management LP & Nexus Capital Management LP

      • Legal: Sullivan & Cromwell LLP (Alison Ressler, Ari Blaut, James Bromley) & Potter Anderson & Corroon LLP (Christopher Samis, Aaron Stulman)

    • Sponsor: Carlyle Partners VI Holdings LP (78.47% equity)

      • Legal: Latham & Watkins LLP (George Davis, Andrew Parlen)

😷New Chapter 11 Filing - Joerns WoundCo Holdings Inc.😷

Joerns WoundCo Holdings Inc.

June 24, 2019

We scoured far and wide to see whether there might be some businesses that get harmed by the uptick in healthcare distress we’ve witnessed of late. In early June, we took a bit of a stab in the dark (Members’-only access):

There has been notable bankruptcy activity in the healthcare industry this year — from continuing care retirement communities to the acute care space. When end users capitulate and need to streamline operations and cut costs, who gets harmed farther down the chain? It’s a good question: after all, there’s always some trickle down effect.

Our internal search for answers to this question recently brought us to Charlotte-based Joerns Healthcare, a “premier supplier and service provider in post-acute care.” The company sells supportive care beds, transport systems, respiratory care solutions and more.

Among other things, we noted how the company’s term loan maturing in May 2020 “was among one of the worst performing loans in the month of May — quoted in the low 70s, down approximately 15% since April.” We insinuated that a bankruptcy filing may not be too far afield.

We didn’t expect it to be in six weeks later.

On Monday, June 24, 2019, Joerns WoundCo Holdings Inc. and 13 affiliated entities filed a prepackaged bankruptcy in the District of Delaware. Among other reasons provided to explain its capitulation into bankruptcy court is “post acute sector disruption.” Now that’s music to our ears. Per the company:

The Company has been adversely impacted by the challenges faced by the postacute sector, which is a key end market. Post-acute providers have experienced multi-year occupancy rate declines while simultaneously seeing increases in the costs of providing patient care and structural changes in reimbursement instituted by the Centers for Medicare and Medicaid Services not yet offset by countervailing demographic trends. These structural changes include, among other things, higher operational costs driven by increasing regulatory burdens, lower reimbursement rates instituted by Centers for Medicare and Medicaid Services for patients, and patient migration to home health care. The decline in occupancy rates has led to reduced demand for the Company’s products and services, particularly in the rental segment, which is a major component of the Company’s business.

Further, the general post-acute sector disruption has placed many of the Company’s Customers under significant financial pressure, resulting in several bankruptcy filings, increased mergers and acquisition activity to divest under-performing facilities, and proactive cost reduction efforts, as well as fewer equipment purchases. (emphasis added).

Trickle down indeed. The provision of healthcare has simply changed: the debtors served fewer patients not only because of the reduction in the number of facilities served but because patients don’t fill facility beds like they used to. And when they do, the duration is much shorter than years past. The demand side simply wasn’t there* and, yet, the costs associated with the supply side of the business persisted. The debtors were caught between a rock and a hard place. Compounding matters was the company’s balance sheet:

  • $272 first lien term loan (+ $3.2mm LOCs)(Ankura Trust Company)

  • $80 tranche A second lien notes (US Bank NA)

  • $45.5mm tranche B second lien notes

In early June, we noted that one problem with understanding the full extent of Joerns’ trouble was that the company was private. In fact, the debtors had been in default of their covenants under their first and second lien agreements since 2018 and have been operating under a perpetual state of waivers since. In the midst of this, the debtors plunged deeper into default when they breached a financial covenant in March 2019: the debtors’ EBITDA plunged below the $40mm and $36.4mm thresholds required by the first and second lien agreements, respectively. On May 31, 2019, the company skipped a $5.9mm interest payment which, five days later, constituted an event of default.

The debtors then dove headfirst into a proposed sale process. It didn’t work: while dozens of parties signed NDAs and took a peek at marketing materials, none of the parties that the debtors and their banker, Moelis & Co. LLC ($MO), spoke to expressed interest in bidding.

This is where value really comes in to play in a restructuring transaction. And the value calculus for the existing lenders is different than that of outside strategics or sponsors who, seeing a distressed company hobbling, have no incentive to make a generous offer — if they’re even interested in making an offer at all.

The lack of market interest and the declining performance made clear that the value of the company doesn’t clear the first lien debt — making that part of the capital structure the “fulcrum security.” Accordingly, the debtors entered into a restructuring support agreement for a prepackaged plan of reorganization that would confer 95% of the equity in the reorganized debtors to the first lien lenders and the remainder to the second lien lenders (both subject to dilution). Said differently, the debtors’ value dictated that the second lien lenders had limited leverage in negotiations: the best they could achieve was a limited recovery of their positions and play out the option that, on a de-levered basis, the company can optimize their businesses and wade through the storm currently pounding the healthcare space. To aid with that, the lenders all agreed to pay general unsecured claimants in full so as to eliminate any additional unnecessary risk to the business. The debtors private sponsors also support the plan — not surprising given that they will want full exculpation and release provisions. To effectuate the deal, the debtors seek approval of a $40mm new money DIP (in addition to a roll-up portion of certain pre-petition amounts).

In the end, the company will eliminate $320mm of funded debt and have a new exit facility to lean on for post-emergence liquidity. The debtors hope to be out of bankruptcy before the end of summer.

*Even when demand WAS there, the debtors’ customers had liquidity issues of their own, preventing the debtors from collecting accounts receivable and causing bad debt expenses in each of 2016, 2017, 2018 and the first half of 2019.

  • Jurisdiction: D. of Delaware (Judge Dorsey)

  • Capital Structure: $272 first lien term loan (+ $3.2mm LOCs)(Ankura Trust Company), $80 tranche A second lien notes, $45.5mm tranche B second lien notes (US Bank NA)

  • Professionals:

    • Legal: White & Case LLP (David Turetsky, Philip Abelson, Richard Graham, John Ramirez, Fan He, Elizabeth Feld) & (local) Fox Rothschild LLP (Jeffrey Schlerf, Courtney Emerson, Katelyn Crawford)

    • Board of Directors: Frank Winslow, Anthony Ignaczak, Terrence Daniels, John Mapes, Terry Sutter, Todd Dunn

    • Financial Advisor: Conway MacKenzie Inc.

    • Investment Banker: Moelis & Company

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

  • Other Parties in Interest:

    • Large Equityholders: Quad-C Partners VII LP, Aurora Equity Partners III LP

    • First Lien Agent: Ankura Trust Company

      • Legal: King & Spalding LLP

      • Financial Advisor: FTI Consulting Inc.

    • Second Lien Noteholders: PineBridge, Cetus Funds

New Chapter 11 Filing - Sungard Availability Services Capital Inc.

Sungard Availability Services Capital Inc.

May 1, 2019

Pennsylvania-based Sungard Availability Services Capital Inc., a provider of “critical production and recovery services to global enterprise companies,” with $977mm of net revenue and $203mm of EBITDA in fiscal 2018 filed a prepackaged chapter 11 plan in the Southern District of New York on Wednesday and, if you blinked, you may have missed its residency in bankruptcy. Indeed, some lost their minds because Kirkland & Ellis LLP was able to shepherd the case in and out of bankruptcy in less than 24 hours — breaking the previous record only recently set in FullBeauty. Yes, people care about these things.*

The upshot of this expeditious bankruptcy case is that (a) the company shed nearly $900mm of debt from its balance sheet (reducing debt down to approximately $400-450mm) and (b) transferred 89% ownership to a variety of debt-for-equity swapping funds such as GSO Capital Partners, Angelo Gordon & Co., and Carlyle Group (who will also receive $300mm in senior secured term loan paper). Major equity holders — Bain Capital Integral Investors LLC, Blackstone Capital Partners IV LP, Blackstone GT Communications Partners LP, KKR Millennium Fund LP, Providence Equity Partners V LP, Silver Lake Partners II LP, TPG Partners IV LP — had their equity wiped out. We had previously highlighted KKR’s investment here in “A Hot-Potato Plan of Reorganization. Short BDC Retail Exposure,” discussing the broader context of BDC lending. This is what the capital structure looks like and will look like:

Source: Disclosure Statement

Source: Disclosure Statement

That balance sheet is the driver behind the bankruptcy filing. Per the company:

This legacy capital structure was created based upon the Company’s historical operating model and performance and is unsustainable under current market conditions. When the capital structure was put in place, the Company benefited from a larger revenue base with substantially higher free cash flow. As business conditions evolved and the Company’s revenue declined, cash flow available to service debt and invest in products and services substantially declined. Consolidated net revenue declined by approximately 18% from approximately $1.2 billion in 2016 to approximately $977 million in 20188 while adjusted EBITDA margins remained within a range of approximately 20% to 22%. Negative net cash flow from 2016 to 2018 was approximately $80 million.

In other words, this is as clear-cut a balance sheet restructuring that you can get. Indeed, general unsecured claims are — as you might expect from a prepackaged plan of reorganization — riding through unimpaired. This consensual restructuring is clearly the right result. Getting it in and out of court so quickly is a bonus.

Yet, lest anyone get too high on their own supply, it’s important to note that, while this is a good result under the circumstances, there is a significant amount of value destruction illustrated by this filing. The term lenders are getting merely an estimated 50-73% recovery while the noteholders are getting 7-14%**. Now, it IS reasonable to expect that the “par guys” blew out of this situation long ago. And it is also reasonable to assume that the current holders of loans and notes got in at a significant discount so “value destruction” really is a matter of timing/pricing. For the avoidance of doubt, however, there’s no question that certain lenders experienced some pain on the path to this filing. Here is the chart representing the company’s notes:

Screen Shot 2019-05-03 at 11.12.24 AM.png

So, while some are surely celebrating, others are surely licking their wounds.

*We don’t really want to be too flip about this. As critics of the bankruptcy process, we’re all for seeing more efficient uses of the bankruptcy court — even if that does mean that fees were run up pre-petition without any oversight whatsoever.

**You always have to take these recovery amounts with a grain of salt. In case the rampant Chapter 22s haven’t already taught you that.

  • Jurisdiction: S.D. of New York (Judge Drain)

  • Capital Structure:

  • Professionals:

    • Legal: Kirkland & Ellis LLP (Jonathan Henes, Emily Geier, Ryan Blaine Bennett, Laura Krucks

    • Board of Directors: Darren Abrahamson, Patrick J. Bartels Jr., Randy Hendricks, John Park, David Treadwell

    • Financial Advisor/CRO: AlixPartners LLP (Eric Koza)

    • Investment Banker: Centerview Partners (Samuel Greene)

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

  • Other Parties in Interest:

    • DIP Agent: JPMorgan Chase Bank NA

    • Secured Lender Group

      • Jones Day (Scott Greenberg, Michael Cohen, Nicholas Morin)

      • Financial Advisor: Houlihan Lokey Capital Inc.

    • Crossover Group

      • Akin Gump Strauss Hauer & Feld LLP (Philip Dublin, Naomi Moss)

      • Financial Advisor: PJT Partners LP

    • Large Equityholders: Bain Capital Integral Investors LLC, Blackstone Capital Partners IV LP, Blackstone GT Communications Partners LP, KKR Millennium Fund LP, Providence Equity Partners V LP, Silver Lake Partners II LP, TPG Partners IV LP

      • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Brian Hermann, Jacob Adlerstein)

⛽️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:

Screen Shot 2019-04-05 at 2.29.01 PM.png

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.

Screen Shot 2019-04-05 at 2.56.24 PM.png

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

Source: Disclosure Statement

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 Filing - CTI Foods LLC

CTI Foods LLC

March 10, 2019

CTI Foods LLC, a large independent provider of “custom food solutions” to major hamburger, sandwich and Mexican restaurant chains…wait, stop. “Custom food solutions"? Seriously? Does everything need to be made to sound technological these days? Homies produce hamburgers, cooked sausage patties, grilled chicken, shredded beef and chicken, fajita meat, ham, Philly steak, dry sausage, beans, soups, macaroni & cheese, chili, sauces, and other sheet pan and retail meals through seven production facilities; they service QSRs and fast casual restaurants, including four of the top six hamburger restaurant chains, four of the top six sandwich chains, and “the top Mexican restaurant chain.” Queremos Taco Bell?!? Anyway, that’s basically it: let’s not over-complicate matters.

In any event, lenders must love custom food solutions because they’ve offered a solution of their own…to the company’s balance sheet. The company filed a prepackaged bankruptcy in the District of Delaware with substantial numbers of holders of first lien and second lien term loans hopping on board in support of the plan of reorganization (though not enough second lien term lenders to establish a fully consensual plan by bankruptcy thresholds). The filing is predicated upon accomplishing the results set forth in this handy-dandy chart:

Source: First Day Declaration

Source: First Day Declaration

Pursuant to the plan, the first lien term lenders will receive some take-back paper and equity in the reorganized company, the second lenders will either equitize or cancel all $140mm of second lien term loan claims and existing equity will get wiped out. Trade creditors will ride through unimpaired. The company has secured a $155mm DIP commitment, the proceeds of which will be used, in part, to take out the ABL, and provide liquidity to fund the cases. Remaining funds will roll into an exit facility for the company to use post-emergence from bankruptcy. Just one thing: the chart shows a $50mm exit ABL and yet the company’s papers note a new $110mm exit ABL. Insert confusion here. 🤔

Confusion aside, this is a real business: the debtors apparently generated $1.2b of revenue in 2018 (and $29mm of EBITDA). Unfortunately, the private equity bros realized that back in 2013 when Thomas H. Lee Partners and Goldman Sachs & Co. acquired it from Littlejohn & Co. LLC. Per the company, the “current capital structure is the result of organic growth coupled with…strategic acquisitions….” So, uh, the capital structure didn’t fund the sponsor-to-sponsor purchase? Or is that “organic growth?” We suspect the former because, well, private equity, right? Debt is their jam. Oh, and the intercreditor agreement dated June 28, 2013 — mere months after the transaction — reflects that the debt was in place then rather than subsequently added to finance “organic growth.”* This is why PE firms pay firms like Weil the big bucks: first-class subterfuge. But…busted!

A quick aside, buried in paragraph 55 of the First Day Declaration is a cursory statement about the Restructuring Committee’s investigation into the company PE overlords. The company states:

On November 20, 2018, the Restructuring Committee separately retained Katten Muchin Rosenman LLP (“Katten”) as independent counsel. Specifically, the Restructuring Committee, with the assistance of Katten, conducted a thorough investigation into whether any potentially material claims or causes of action existed against directors, officers, or existing equity holders of the Debtors, including Goldman Sachs and T.H. Lee. Katten made extensive diligence requests to the Debtors, reviewed materials provided in response, interviewed several potential witnesses, and prepared a report for the Restructuring Committee evaluating the strengths and weaknesses of any such potential claims or causes of action. Ultimately, based on that investigation and the report prepared in connection therewith, the Restructuring Committee determined it was unlikely that any such meritorious claims or causes of action exist that ought to be pursued.

It’s a good thing trade is riding through: there likely won’t be an official committee of unsecured creditors to test this conclusion.

So, aside from the company-crushing transaction-induced debt placed on the company by its private equity overlords, why is the company in bankruptcy? Here’s where you really need to read between the lines: above we noted that the company “service[s] QSRs and fast casual restaurants, including four of the top six hamburger restaurant chains, four of the top six sandwich chains, and ‘the top Mexican restaurant chain.’” “Service” is the key word. We don’t see the word “exclusively” preceding it. Here’s the company:

CTI’s recent profitability decline is attributable in part to an increase in the number of protein processors in competitive segments of the food manufacturing and foodservice industries, which led to losses in customer shares and a decrease in new business for the Company. Simultaneously … the Company’s costs have increased over time. The combination of increased competition and increased costs resulted in lower volumes and narrower profit margins. (emphasis added)

Costs increased for a number of reasons — integration of new facilities, etc. — but the most disturbing one is food quality control. Per the company:

The Company’s profitability also suffered from food quality incidents in 2017 and 2018. Although the Company quickly identified and remedied the issues, those occurrences led to a loss of customer sales and to the incurrence of significant costs in remedying the situation and ensuring the integrity of products manufactured on a go-forward basis. These costs, albeit temporary, have collectively had a material impact on the Company’s recent profitability levels.

Yikes. That’s no bueno.

Now, there is some good news here. First, the company appears to have improved EBITDA in Q4 ‘18. Second, this plan is mostly consensual. And, third, the prepackaged nature of this plan will help the company accomplish their restructuring in a speedy six weeks, as planned. Food safety depends on it.

*$25mm of the principal amount of first lien term loans outstanding is attributable to a 2016 acquisition. To be fair.

  • Jurisdiction: D. of Delaware (Judge Sontchi)

  • Capital Structure: see above.     

  • Company Professionals:

    • Legal: Weil Gotshal & Manges LLP (Matthew Barr, Ronit Berkovich, Lauren Tauro, Clifford Carlson, David Li, Michael Godbe) & (local) Young Conaway Stargatt & Taylor LLP (M. Blake Cleary, Jaime Luton Chapman, Shane Reil)

    • Legal to Restructuring Committee: Katten Muchin Rosenman LLP

    • Financial Advisor/CRO: AlixPartners LLP (Kent Percy)

    • Investment Banker: Centerview Partners LLC (Karn Chopra)

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

  • Other Parties in Interest:

    • Prepetition Credit Agreement Agent: Wells Fargo Bank NA

      • Legal: Otterbourg PC (Andrew Kramer) & (local) Richards Layton & Finger PA (Mark Collins, Jason Madron)

    • Ad Hoc Group of Term Lenders & DIP Term Agent ($155mm): Cortland Capital Market Services LLC

      • Legal: Davis Polk & Wardwell LLP (Damian Schaible, Michelle McGreal, Stephen Piraino) & (local) Morris Nichols Arsht & Tunnell LLP (Robert Dehney, Curtis Miller, Matthew Harvey)

    • ABL DIP & Exit Agent ($235mm): Barclays Bank PC

      • Legal: Sherman & Sterling LLP (Joel Moss, Jordan Wishnew) & (local) Richards Layton & Finger PA (Mark Collins, Jason Madron)

⛽️New Chapter 11 Bankruptcy Filing - Arsenal Energy Holdings LLC⛽️

Arsenal Energy Holdings LLC

February 4, 2019

This is the week of proposed super-short bankruptcy cases.

Pennsylvania-based natural-gas developer, Arsenal Energy Holdings LLC, filed a prepackaged bankruptcy case in the District of Delaware. Pursuant to its prepackaged plan of reorganization, the company will convert its subordinated notes to Class A equity. Holders of 95.93% of the notes approved of the plan. The one holdout — the other 4+% — precipitated the need for a chapter 11 filing. Restructuring democracy is a beautiful (and sometimes wasteful) thing.

100% of existing equity approved of the plan and will get Class B equity (with the exception of Arsenal Resource Holdings LLC and FR Mountaineer Keystone Holdings LLC, which will both get Class C equity).

The company, itself, is about as boring a bankruptcy filer as they come: it is just a holding company with no ops, no employees and, other than a single bank account and its direct and indirect equity interests in certain non-debtor subs, no assets. The equity is privately-held.

More of the action occurred out-of-court upon the recapitalization of the non-debtor operating company. Because of the holdout(s), the company, its noteholders, the opco lenders (Mercuria) and the consenting equityholders agreed to consummate a global transaction in steps: first, the out-of-court recap of the non-debtor opco and then the in-court restructuring of the holdco to squeeze the holdouts. For the uninitiated, a lower voting threshold passes muster in-court than it does out-of-court. Out-of-court, the debtor needed 100% consent. Not so much in BK.

Given the simplicity of this case, the company hopes to be in and out of bankruptcy in less than two weeks. Which, considering the effort in FULLBEAUTY, begs the question: why is it taking so long?

  • Jurisdiction: D. of Delaware

  • Capital Structure: $861mm subordinated notes, $116.7mm Seller Notes

  • Company Professionals:

    • Legal: Simpson Thacher & Bartlett LLP (Michael Torkin, Kathrine McLendon, Nicholas Baker) & (local) Young Conaway Stargatt & Taylor LLP (Pauline Morgan, Kara Coyle, Ashley Jacobs)

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

  • Other Parties in Interest:

    • Ad Hoc Group of Subordinated Noteholders

      • Legal: Cleary Gottlieb Steen & Hamilton LLP (Sean O’Neal, Humayan Khalid)

    • Mercuria Investments US, Inc.

      • Legal: Vinson & Elkins LLP (David Meyer, Garrick Smith)

New Chapter 11 Bankruptcy Filing - FULLBEAUTY Brands Holdings Corp.

FULLBEAUTY Brands Holdings Corp.

February 3, 2019

We’re going to regurgitate our report about FULLBEAUTY Brands Holdings Corp. from January 6th after the company publicly posted its proposed plan of reorganization and disclosure statement and issued a press release about its proposed restructuring. What follows is what we wrote then:


FULLBEAUTY Brands Inc., an Apax Partners’ disaster…uh, “investment”…will, despite earlier reports of an out-of-court resolution to the contrary, be filing for bankruptcy after all in what appears to be either a late January or an early February filing after the company completes its prepackaged solicitation of creditors. Back in May in “Plus-Size Beauty is a Plus-Size Sh*tfest (Short Apax Partners’ Fashion Sense),” we wrote:

Here’s some free advice to our friends at Apax Partners: hire some millennials. And some women. When you have 23 partners worldwide and only 1 of them is a woman (in Tel Aviv, of all places), it’s no wonder that certain women’s apparel investments are going sideways. Fresh off of the bankruptcies of Answers.com and rue21, another recent leveraged buyout by the private equity firm is looking a bit bloated: NY-based FullBeauty Brands, a plus-size direct-to-consumer e-commerce and catalogue play with a portfolio of six brands (Woman Within, Roamans, Jessica London, Brylane Home, BC Outlet, Swimsuits for All, and Eilos).

Wait. Hold up. Direct-to-consumer? Check. E-commerce? Check. Isn’t that, like, all the rage right now? Yes, unless you’re levered to the hilt and have a relatively scant social media presence. Check and check.

Per a press release on Thursday, the company has an agreement with nearly all of its first-lien-last out lenders, first lien lenders, second lien lenders and equity sponsors on a deleveraging transaction that will shed $900mm of debt from the company’s balance sheet. It also has a commitment for $30mm in new liquidity in the form of a new money term loan with existing lenders. Per Bloomberg:

About 87.5 percent of the common reorganized equity would go to first-lien lenders, 10 percent to second liens, and 2.5 percent to the sponsor, according to people with knowledge of the plan who weren’t authorized to speak publicly.

Which, in English, means that Oaktree Capital Group LLCGoldman Sachs Group Inc., and Voya Financial Inc. will end up owning this retailer. Your plus-sized clothing, powered by hedge funds. Apax and Charlesbank Capital, the other PE sponsor, stand to maintain 2.5% of the equity which, from our vantage point, appears rather generous (PETITION Note: there must be a decent amount of cross-holdings between the first lien and second lien debt for that to be the case). Here is the difference in capital structure:

Screen Shot 2019-02-04 at 7.06.26 PM.png

What’s the story here? Simply put, it’s just another retail with far too much leverage in this retail environment.

Screen Shot 2019-02-04 at 7.06.56 PM.png

Of course, there’s the obligatory product strategy, inventory control, and e-commerce excuses as well. Not to mention…wait for it…Amazon Inc ($AMZN)!

“In addition to these operational hurdles, FullBeauty has also faced competition from online retail giant Amazon, Inc. and retail chains, including Walmart Inc. and Kohl’s Corporation, that have recently entered the plus-size clothing space.”

Kirkland & Ellis LLPPJT Partners ($PJT) and AlixPartners represent the company.


We give bankruptcy professionals grief all of the time for what often appears to be fee extraction in various cases. In our view, there have been some pretty egregious examples of inefficiency in the system and, considering a number of our readers are management teams of distressed companies, we feel it’s imperative that we cure for a blatant information dislocation and help educate the masses. This, though, appears to be an extraordinary case. In the other direction.

The company’s professionals here propose to confirm the company’s plan of reorganization at the first day hearing of the case. As Bloomberg noted on Monday, this would “set a new record for emerging from court protection in under 24 hours.” Bloomberg reports:

The previous record for the fastest Chapter 11 process is held by Blue Bird Body Co., which exited bankruptcy in 2006 in less than two days. Fullbeauty and its advisers aim to beat that mark.

“We structured this deal as if bankruptcy never happened for our trade creditors, vendors and employees to avoid further disruption to the company,” attorney Jon Henes at Kirkland & Ellis, the company’s legal counsel, said in an interview. “In this situation, every day in court is another day of costs without any corresponding benefit.”

In fact, this case would be so quick that, as you read this (on Wednesday), Judge Drain may have already given the plan his blessing. This makes Roust Corporation Inc. (6 days) and Southcross Holdings (13 days) look like child’s play. For that reason — and that reason alone — we’ll forgive the company’s professionals for their blatant victory lap: it’s curious that Bloomberg had a completed interview ready to go at 9:26am on the morning of the company’s bankruptcy filing. Clearly Kirkland & Ellis LLP, PJT Partners LP ($PJT) and Houlihan Lokey Capital ($HL) want to milk this extraordinary result for all it’s worth. We can’t really blame them, truthfully. That is, unless and/or until the company violates the “Two Year Rule” a la Charlotte Russe.

Anyway, why so quick? Well, because they can: the entire capital structure is on board with the proposed plan and trade will ride through unimpaired and paid. All contracts will be assumed. There are no brick-and-mortar stores to deal with: this is a web and catalogue-based business. Like we said, this case is extraordinary. Per the Company:

It is in the best interest of the estates that the Debtors remain in bankruptcy for as short a time-period as possible. If FullBeauty is forced to remain in chapter 11 longer than necessary, it may be required to seek debtor in possession financing, which would cost the Debtors unnecessary bank fees and professional expenses. In addition, although January has been relatively smooth in terms of vendor outreach, FullBeauty expects that trade could contract very quickly if the company remains in chapter 11 longer than necessary—particularly because many vendors are in foreign jurisdictions and they do not understand the nuances of prepackaged cases versus longer prearranged or traditional chapter 11 cases. Every day that FullBeauty remains in chapter 11 results in cash spent that could go to developing the business.

Indeed, for once, it appears that the best interests of the debtor company were, indeed, heeded.*

*Which is not to say that we believe the out-of-court bills will be light.

  • Jurisdiction: S.D. of New York (Judge Drain)

  • Capital Structure: $mm debt     

  • Company Professionals:

    • Legal: Kirkland & Ellis LLP (Jonathan Henes, Emily Geier, George Klidonas, Rebecca Blake Chaikin, Nicole Greenblatt)

    • Independent Director: Mohsin Meghji

    • Financial Advisor: AlixPartners LLC

    • Investment Banker: PJT Partners LP (Jamie Baird)

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

  • Other Parties in Interest:

    • Financial Sponsor (69.6%): Apax Partners LLP

      • Legal: Simpson Thatcher & Bartlett LLP (Elisha Graff, Nicholas Baker)

    • Financial Sponsor (26.4%): Charlesbank Capital Partners LLC

      • Legal: Goodwin Proctor LLP (William Weintraub, Joseph Bernardi Jr.)

    • ABL Agent & FILO Agent: JPMorgan Chase Bank NA

      • Legal: Davis Polk & Wardwell LLP (Darren Klein, Aryeh Falk)

    • First Lien Agent & Second Lien Agent: Wilmington Trust NA

      • Legal: Shipman & Goodman LLP (Nathan Plotkin, Eric Goldstein, Marie Pollio)

    • Ad Hoc Group of First Lien Term Loan Lenders

      • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Gerard Uzzi, Nelly Almeida)

      • Financial Advisor: Ducera Partners

    • Ad Hoc Group of Second Lien Term Loan Lenders

      • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Paul Basta, Elizabeth McColm, Christopher Hopkins)

      • Financial Advisor: Houlihan Lokey Capital Inc. (Saul Burian)

Updated 2/4/19 at 7:03 CT

New Chapter 11 Bankruptcy Filing - Arpeni Pratama Ocean Line Investment B.V.

Arpeni Pratama Ocean Line Investment B.V.

February 1, 2019

Dutch-based non-operating single-purpose-entity, Arpeni Pratama Ocean Line Investment B.V., filed a prepackaged bankruptcy case in the Southern District of New York to effectuate a restructuring of its $141mm Floating Rate Guaranteed Secured Notes due 2021 (HSBC Bank USA NA, as agent), the issuance of which is the legal entity's sole reason to exist. The Debtor's plan sponsor, PT Arpeni Pratama Ocean Line Tbk, is the owner and operator of a fleet of Indonesian flagged dry bulk vessels and a guarantor of the debt. It operates 14 wholly-owned and 2 chartered vessles, the use of which is to provide coal transportation and jetty management services to one of Indonesia's largest power plants. 

Why is this company in bankruptcy? Per the Company:

"...the Debtor is a single purpose entity created for the purpose of issuing the Senior Secured Notes. Accordingly, the Debtor is wholly dependent on its parent company, the Plan Sponsor, to generate sufficient revenues so as to permit for the repayment of the Senior Secured Notes. The Plan Sponsor, who derives substantially all of its revenues its drybulk shipping operations, has operated in an increasingly challenging market since the financial crisis of 2008 where operational costs have continued to increase and revenues for drybulk shipping have remained at historic lows. These factors, coupled with increasing competition from smaller and less leveraged drybulk shippers, has made it more difficult for the Plan Sponsor to service its existing indebtedness, including the Senior Secured Notes."

Accordingly, the Debtor and the Plan Sponsor have agreed to equitize substantially all of the Debtor's and the Plan Sponsor's indebtedness "to permit the Plan Sponsor to position itself on a more level landscape to its competitors to better prepare itself to weather the continuing uncertainty in the shipping industry." Pursuant to the Plan, holders of the notes will receive common shares in the Plan Sponsor, warrants, and a small cash payment. 

  • Jurisdiction: S.D.N.Y. (Judge Bernstein)

  • Company Professionals:

    • Legal: Paul Hastings LLP (Pedro Jimenez)

    • Financial Advisor: Fulcrum Partners Asia

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

  • Other Parties in Interest:

New Chapter 11 Bankruptcy Filing - Catalina Marketing Corporation

Catalina Marketing Corporation

12/12/18

On September 16 in “🤖Tech Wants to Axe Lawyers🤖,” we wrote about Crossmark Holdings Inc.Acosta Inc., and Catalina Marketing (a unit of Checkout Holding Corp.) and noted that “[a]ll three are in trouble.” Catalina Marketing was the first domino to fall as it filed for bankruptcy in the District of Delaware.

In connection with our review of the three companies, we previously wrote:

Finally, Catalina Marketing finds itself paying restructuring fees these days too. The St. Petersburg Florida company is owned by Berkshire Partners and Hellman & FriedmanCrescent Capital is also a large equity holder. The company’s capital structure includes approximately:

$29mm April ‘19 L+3.5% Revolving Credit Facility

$1.05b April ‘21 L+3.5% Term Loan (~48.4 bid)

$460mm April ‘22 L+6.75% Second Lien Term Loan (~11.6 bid)

$230mm PIK Toggle unsecured notes

Carry the one, add the two, that’s over $5b of debt across all three companies. Gotta love private equity.

So, yes, yet another private equity-backed company is in bankruptcy court. Here, the company appears to have an agreement with 90% of its first lien lenders (Abry Advanced Securities Fund II and III, Alcentra Limited, Bain Capital Credit LP, Carlyle Investment Management LLC, Invesco Senior Secured Management Inc., and OppenheimerFunds Inc.), and 75% of its second lien lenders, the effect of which is purported to be a $1.6b — yes, $1.6 BILLION — debt reduction. An ad hoc group of first lien lenders has agreed to provide $275mm DIP credit facility (of which $125mm is new money) and committed to provide $40mm in exit financing.

  • Jurisdiction: D. of Delaware (Judge Gross)

  • Capital Structure: see above.

  • Company Professionals:

    • Legal: Weil Gotshal & Manges LLP (Gary Holtzer, Ronit Berkovich, Jessica Liou, Kevin Bostel, Alexander Condon, Elizabeth Carens, Michael Godbe, Lisa Lansio, Leonard Yoo, Patrick Steel, David Zubkis, Theodore Tsekerides, Peter Isakoff) & (local) Richards Layton & Finger PA (Mark Collins, Jason Madron)

    • Financial Advisor: FTI Consulting Inc. (Robert Del Genio, Thomas Ackerman)

    • Investment Banker: Centerview Partners

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

  • Other Parties in Interest:

    • DIP Lenders and the Ad Hoc First Lien Lenders

      • Legal: Jones Day (Scott Greenberg, Michael J. Cohen, David Torborg, Stacey Corr-Irvine, Jeremy Evans, C. Lee Wilson) and (local) Pachulski Stang Ziehl & Jones LLP represent the DIP Lenders and the Ad Hoc First Lien Lenders. 

    • Ad Hoc Group of Second Lien Lenders

      • Paul Weiss Rifkind Wharton & Harrison (Brian Hermann, Robert Britton, Daniel Youngblut, Miriam Levi) and (local) Young Conaway Stargatt & Taylor LLP (Pauline Morgan, Andrew Magaziner)

    • Admin Agent of the First Lien Credit Agrement

      • Legal: Davis Polk & Wardwell LLP (Brian Resnick, David Schiff) and Landis Rath & Cobb LLP (Adam Landis, Kerri Mumford)

    • Admin agent under the Second Lien Credit Agreement

      • Legal: Wilmer Cutler Pickering Hale and Dorr (Andrew Goldman, Benjamin Loveland)

    • Ad Hoc Group of the PIK Toggle notes

      • Legal: Debevoise & Plimpton LLP

New Chapter 11 Filing - EV Energy Partners L.P.

EV Energy Partners L.P.

4/2/18

Assuming this filing has adhered to its previously announced Restructuring Support Agreement, this is pretty boring and so we'll just let the company's March press release speak for itself:

"...the Plan, which is subject to confirmation by the Bankruptcy Court, contemplates the equitization of all of the Company’s Senior Notes and the entry into an amended reserve-based lending facility with the Company’s existing lenders. Additionally, the Plan contemplates that suppliers, customers and other holders of general unsecured claims will be paid in full in the ordinary course of business and otherwise be unimpaired. The Company does not plan to reject any of its existing contracts as part of the restructuring."

The noteholders are agreeing to equitize the senior notes in exchange for 95% of the equity in the reorganized company. The upshot of this is that the company will eliminate $343 million of debt and debt-related obligations. 

Because no contracts will be rejected under section 363 of the Bankruptcy Code, all suppliers, service providers, customers, employees, royalty and working interest obligation holders will be paid in full in the ordinary course. Due to the company's Master Limited Partnership structure, however, stock holders will get hit by some "CODI" or "Cancellation of Debt Income" which ought to make for an interest tax filing. To alleviate some of that chafe, the company is offering 5% of the reorganized equity and warrants to the stock holders. 

  • Jurisdiction: D. of Delaware 
  • Capital Structure: ~$297 million RBL (funded, JPMorgan Chase Bank NA), ~$356 million 8.0% '19 senior notes (Delaware Trust Company)   
  • Company Professionals:
    • Legal: Kirkland & Ellis LLP (James Sprayragen, Joshua Sussberg, Jeremy David Evans, Brad Weiland, Travis Bayer) & (local) Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones)
    • Financial Advisor: Perella Weinberg Partners LP 
    • Restructuring Advisor: Deloitte & Touche LLP
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Ad Hoc Group of Senior Noteholders
      • Legal: Akin Gump Strauss Hauer & Feld LLP
      • Financial Advisor: Intrepid Partners LLC 
    • RBL Lenders
      • Legal: Simpson Thacher & Bartlett LLP
      • Financial Advisor: RPA Advisors, LLC
    • Consenting Sponsor:
      • EnerVest, Ltd. and EnerVest Operating, L.L.C.

Will Update if Filing Differs from Advertised. 

New Chapter 11 Bankruptcy - Patriot National Inc.

Patriot National Inc.

  • 1/30/18 Recap: Once publicly-traded ($PN, delisted) Florida-based tech and outsourcing solutions services provider to the insurance services space (primarily in the workers' compensation sector) has finally filed the prearranged bankruptcy it announced back at the end of November. This company's downfall is a lesson in making sure that a company's customer base is well-diversified. Here, one insurer, Guarantee Insurance Company, accounted for 55% of the policies serviced by the debtors and a similar percentage of the debtors' gross revenues. In November 2017, the Florida Office of Insurance Regulation notified the Florida Department of Financial Services of its determination that GIC ought to be in receivership. Which is what then happened. Whoops. The loss emanating out of this occurrence "was particularly severe." The company was also in default under its Financing Agreement with Cerberus Business Finance LLC. This perfect storm led to a negotiation and restructuring support agreement with Cerberus and TCW Asset Management Company, which will convert a portion of their claims under the financing agreement into 100% of the company's equity. The lenders will provide a $15.5mm DIP credit facility.
  • Jurisdiction: D. of Delaware
  • Capital Structure: $223mm debt (Cerberus Business Finance LLC)    
  • Company Professionals:
    • Legal: Hughes Hubbard & Reed LLP (Kathryn Coleman, Christopher Gartman, Jacob Gartman) & (local) Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, James O'Neill, Peter Keane)
    • CRO/Financial Advisor: Duff & Phelps LLC (James Feltman)
    • Financial Advisor: Conway MacKenzie Management Services LLC
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest: 
    • DIP Lender: Cerberus Business Finance LLC
  • Official Committee of Unsecured Creditors
    • Legal: Kilpatrick Townsend & Stockton LLP (David Posner, Gianfranco Finizio, Kelly Moynihan) & (local) Morris James LLP (Carl Kunz III, Brenna Dolphin)
    • Financial Advisor: Province Inc. (Sanjuro Kietlinski)

Updated 4/2/18

New Chapter 11 Filing - Rand Logistics Inc.

Rand Logistics Inc.

  • 1/28/18 Recap: NJ-based publicly-traded ($RLOG) bulk freight Jones Act shipper filed for bankruptcy to effectuate a balance sheet restructuring and sale pursuant to a prepackaged plan of reorganization. Lightship Capital LLC has agreed to acquire the company by converting all of the company's second lien debt into 100% of the equity. The deal eliminates approximately $90mm of debt. The company blames currency volatility (US vs. Canadian dollar) and increased maintenance/certification costs as factors necessitating a review of the capital structure. 
  • Jurisdiction: D. of Delaware 
  • Capital Structure: $235.9mm total funded debt; $149mm first lien debt (Bank of America) & $86.9mm second lien debt (Guggenheim Corporate Funding LLC)    
  • Company Professionals:
    • Legal: Akin Gump Strauss Hauer & Feld LLP (Meredith Lahaie, Alexis Freeman, Kevin Zuzolo, Zach Lanier, Abid Qureshi) & (local) Pepper Hamilton LLP (David Stratton, David Fournier, Evelyn Fournier)
    • Financial Advisor: Conway MacKenzie Inc.
    • Investment Banker: Stifel Financial/Miller Buckfire & Co. LLC (Kevin Haggard)
    • Claims Agent: KCC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • First Lien Agent: Bank of America NA
      • Legal: Otterbourg P.C. (Daniel Fiorillo, Chad Simon) and (local) Womble Bond Dickinson (US) LLP (Matthew Ward, Nicholas Verna)
    • Second Lien Agent and Second Lien Lender: Lightship Capital LLC
      • Legal: White & Case LLP (Thomas Lauria, Andrew Zatz, Rashida Adams) & (local) Fox Rothschild LLP (Jeffrey Schlert, Carl Neff)
      • Financial Advisor: Houlihan Lokey Capital Inc.

New Chapter 11 Filing - Philadelphia Energy Solutions LLC

Philadelphia Energy Solutions LLC

  • 1/21/18 Recap: Operator of refining complex with combined distilling capacity of 335,000 barrels/day of crude oil - representing roughly 28% of the east coast's refining capacity - and located roughly 2.5 miles from downtown Philadelphia filed a prepackaged bankruptcy in Delaware for the purposes of effectuating a sale. The company blames (i) regulatory compliance costs that specifically penalize independent merchant refiners (related, specifically, to the Clean Air Act), (ii) adverse macroeconomic trends in energy, and (iii) adverse government policy decisions for its chapter 11 filing. The goal of the prepackaged filing is to allow for an infusion of $260mm in new capital, a $35mm reduction of interest expense, and to kick maturities out to 2022. We're a little late to the game here with our summary so we'll say something that we haven't seen anyone else say about this just yet: that is, that this never would be able to file in Delaware if Elizabeth Warren has her way and the new bankruptcy reform bill is passed. Just sayin. 
  • Jurisdiction: D. of Delaware 
  • Capital Structure: See chart below.
  • Company Professionals: 
    • Legal: Kirkland & Ellis LLP (Edward Sassower, Matthew Fagen, Patrick Venter, Allyson Smith, Michael Slade, Richard Howell, Ciara Foster, Whitney Becker, Steven Serajeddini) & (local ) Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, Timothy Cairns, Peter Keane)
    • Financial Advisor: Alvarez & Marsal LLC 
    • Investment Banker: PJT Partners LP
    • Claims Agent: Rust Consulting/Omni Bankruptcy (*click on company name above for free docket access)
  • Other Parties in Interest:
    • DIP Commitment Parties
      • Legal: Davis Polk & Wardwell LLP (Damian Schaible, Aryeh Ethan Falk, Jonah Peppiatt) & (local) Morris Nichols Arsht & Tunnell LLP (Robert Dehney, Andrew Remming)
    • PNC National Association
      • Legal: Cahill Gordon & Reindel LLP (Joel Levitin, Richard Stieglitz Jr.) & (local) Reed Smith LLP (Kurt Gwynne, Emily Devan)
    • Sponsors
      • Carlyle Group & Sunoco Inc. (a subsidiary of Energy Transfer Partners LP)
Screen Shot 2018-01-24 at 12.21.38 PM.png

New Chapter 11 Filing - Expro Holdings US Inc.

Expro Holdings US Inc.

  • 12/18/17 Recap: Servicer to offshore, deepwater and other "technically challenging environments" filed a prepackaged bankruptcy to eliminate its entire $1.4b of debt (and attendant interest expense) via equity conversion in a balance sheet deleveraging transaction. Why did it file for bankruptcy? Private equity, of course. In 2008, the company turned down an acquisition offer from Halliburton in favor of a competing bid from a private equity group for $3.2b in cash, the largest LBO in the UK in 2008. Ok, so we're only half serious. Naturally, the oil and gas downturn led to a marked decline in demand for Expro's services. Psst: the PE-infused debt. The senior lenders will get the equity in the reorganized company while mezz loan holders and equity holders will get warrants. The company has lined up a $145mm DIP credit facility.
  • Jurisdiction: S.D. of Texas
  • Capital Structure: $125mm RCF (HSBC Bank USA), $1.261b TL, $18mm Mezz Loan.      
  • Company Professionals:
    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Brian Hermann, Alice Eaton, Sarah Harnett, Alexander Woolverton) & Jackson Walker LLP (Patricia Tomasco, Matthew Cavenaugh, Jennifer Wertz)
    • Financial Advisor: Alvarez & Marsal LLC (Julie Hertzberg, Jay Herriman)
    • Investment Banker: Lazard Freres & Co. 
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Mezzanine Facility Agreement Agent: Bank of New York Mellon
    • Credit Agreement Admin Agent: HSBC Bank USA
    • RCF Lenders
      • Legal: Sullivan & Cromwell LLP
    • Ad Hoc Group of First Lien Lenders
      • Legal: Davis Polk & Wardwell LLP (Damian Schaible, James McClammy, Christopher Robertson) & (local) Haynes and Boone LLP (Charles Beckham Jr., Kelli Norfleet, Kelsey Zottnick)
      • Financial Advisor: Rothschild Inc.
    • Ad Hoc Group of Shareholders (Goldman Sachs, HPS Investment Partners LLC, KKR, Candover/Arle, Park Square)
      • Legal: Kirkland & Ellis LLP
      • Financial Advisor: Houlihan Lokey Inc.

New Chapter 11 Filing - Global A&T Electronics Ltd.

Global A&T Electronics Ltd. 

  • 12/17/17 Recap: Singapore-based provider of semiconductor assembly and test services for integrated circuits for use in analog, mixed-signal and logic, and memory products across the globe filed for prepackaged bankruptcy...finally. The company had skipped its $56mm interest payment and let its 30-day grace period expire; it has also been the subject of litigation after issuing new notes back in 2014 in exchange for junior debt. The company blames the litigation, an over-levered balance sheet, underspending on capex, and liquidity constraints for its need to reorganize. The company seeks to confirm the case in FOUR DAYS which may be a new record for a bankruptcy of this size. 
  • Jurisdiction: S.D. of New York (Judge Drain)
  • Capital Structure: $1.13b 10% '19 first lien notes ($625mm Initial Nots, $502mm Additional Notes)(Citicorp International Limited)
  • Company Professionals:
    • Legal: Kirkland & Ellis LLP (Marc Kieselstein, Patrick Nash, Gregory Pesce, Michael Slade)
    • Financial Advisor: Alvarez & Marsal LLC (Robert Caruso)
    • Investment Banker: Moelis & Company LLC
    • Disinterested Director: Eugene Davis
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Ad Hoc Group of Initial Senior Secured Noteholders (GSO Capital Partners LP, IP All Seasons Asian Credit Fund, Brigade Capital Management LP, Southpaw Credit Opportunity Master Fund LP)
      • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Abhilash Raval, Brian Kinney, Michael Price)
      • Financial Advisor: PJT Partners LP
    • Ad Hoc Committee of Additional Senior Secured Noteholders (Taconic Capital Advisors LP, Marble Ridge Master Fund LP, KLS Diversified Asset Management)
      • Legal: Dechert LLP (Michael Sage, Brian Greer, Janet Doherty)
    • Ad Hoc Committee of Additional Senior Secured Noteholders
      • Legal: Ropes & Gray LLP (Gregg Galardi, Stephen Moeller-Sally, Daniel Anderson)
    • TPG
      • Legal: Cleary Gottlieb Steen & Hamilton LLP (James Bromley, Benjamin Beller)

New Chapter 11 Bankruptcy - Orchard Acquisition Company LLC (The J.G. Wentworth Company)

The J.G. Wentworth Company

  • 12/12/17 Recap: What's the statute of limitations for getting tagged with the "Chapter 22" label? While this may be out of bounds thanks to the passage of time, this is not the company's first foray in bankruptcy court, having previously filed during the financial crisis in 2009. It subsequently emerged under new private equity ownership and then IPO'd in 2013. This time around, the specialty-finance company in the business of providing financing solutions ((e.g., mortgage lending (as an approved issuer with Ginnie Mae, Freddie Mac, and Fannie Mae), structured settlement, annuity and lottery payment purchasing, prepaid cards, and personal loans)) filed a prepackaged bankruptcy pursuant to which its lenders will be swapping debt for at least 95.5% of the new equity and some cash. Holders of partnership interests and tax-related claims will get the remaining equity (subject to dilution by the 8% of equity set aside for management allocations). The company will eliminate its $449.5mm of debt and have a $65-70mm revolving credit facility to utilize going forward. The company blames regulatory requirements and a highly competitive market that pressured rates, service levels, products, and fees for its downfall. 
  • Jurisdiction: D. of Delaware (Judge Gross)
  • Capital Structure: $449.5mm '19 first lien TL (Jefferies Finance LLC)     
  • Company Professionals:
    • Legal: Simpson Thatcher & Bartlett LLP (Elisha Graff, Kathrine McLendon, Edward Linden, Randi Lynn Veenstra, Haley Garrett, Nicholas Baker, Bryce Friedman) & (local) Young Conaway Stargatt & Taylor LLP (Edmon Morton, Sean Beach)
    • FInancial Advisor: Ankura Consulting
    • Investment Banker: Evercore 
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Jefferies Finance LLC
      • Legal: Davis Polk & Wardwell LLP (Damian Schaible, Natasha Tsiouris, Erik Jerrard) & (local) Potter Anderson & Corroon LLP (Jeremy Ryan, R. Stephen McNeill, D. Ryan Slaugh)
      • Financial Advisor: FTI Consulting Inc. (formerly CDG Group LLC)
    • New RCF Commitment Party (HPS Investment Partners LLC)
      • Legal: Weil Gotshal & Manges LLP (Matthew Barr, Kelly DiBlasi, Damian Ridealgh) & (local) Morris Nichols Arsht & Tunnell LLP (Curtis Miller, Matthew Talmo)

Updated 12/13/17