New Chapter 11 Bankruptcy Filing - Jason Industries Inc. ($JASN)

Jason Industries Inc.

June 24, 2020

Wisconsin-based Jason Industries Inc. ($JASN) and seven affiliates (the “debtors”) filed a long-anticipated (prepackaged) chapter 11 bankruptcy case in the Southern District of New York on Wednesday — the latest in a line of manufacturers (e.g., Pyxus International Inc., Libbey Glass Inc., Exide Holdings Inc., Pace Industries LLC) to wind its way into bankruptcy court.

The company is an amalgam of decades of growth by acquisition: it launched its components and seating businesses with acquisitions in ‘93 and ‘95, respectively. Everything appeared to be hunky-dory heading into the Great Financial Crisis when things took a turn for the worse.

And so this isn’t the company’s first rodeo in distress. Back in ‘08-’09, the company engaged in a recapitalization transaction supported by Falcon Investment Advisors LLC and Hamilton Lane Advisors; it persevered through the downturn and ultimately sold to a special-purpose-acquisition-company (Quinpairo Acquisition Corp.) in 2014 for $538.6mm. The acquisition was financed through a combination of (i) the $172.5mm raised by the SPAC in its ‘13 IPO, (ii) rollover equity from the aforementioned sponsors (and management), and (iii) $420mm of first and second lien debt. Stick a pin in that last number: it comes back to haunt the debtors. 👻

In the years since, the company streamlined its operations — selling off assets (i.e., its fiber solutions business and a metal components business) and consolidating around two primary business segments. Through their industrial segment, the debtors manufacture a bunch of stuff used for industrial and infrastructure applications; and through their engineered components segment, the debtors manufacture (a) motorcycle seats, (b) operator seats for construction, agriculture, law and turf care and other industrial equipment markets, and (c) seating for the power sports market. Said another way, the company is heavily indexed to the automotive, heavy truck, steel and construction markets. Powered by approximately 700 employees in the US, the company did $338mm in net sales in 2019.

And that is part of the problem. $338mm in net sales represented an 8.2% ($30.1mm) dropoff from 2018. Adjusted EBITDA declined from $36.7mm in ‘18 to $24.8mm in ‘19. Both segments have been underperforming for years. The question is why?

The debtors cite a dramatic dropoff in demand in ‘19. They note:

This reduction was largely caused by reduced end market demand in key industries across the portfolio, specifically, weak economic conditions in Europe and Asia, lower industrial production in North America, and softening end market demand from OEM customers. For example, since as early as the first quarter of 2019, the Company has experienced reduced OEM build and channel inventory destocking. These problems were exacerbated by the operational disruption and demand reduction caused by the COVID-19 pandemic.

Consequently, the debtors busted out the standard playbook to try and manage liquidity (while parallel-tracking a fruitless pre-petition sale and marketing effort). They (a) intensified focus on growing market segments, (b) reduced capital investment in non-core businesses, (c) cut/furloughed labor and instituted pay reductions for execs and other employees (and eliminated a 401(k) match program), (d) closed plants and manufacturing facilities and deferred rent payments or negotiated reduced rent at leased properties, (e) accelerated the consolidation of plants acquired in a recent acquisition, and (f) invested in automation at their facilities to reduce future operating costs (read: replace expensive human beings) and expand margins. Still, the debtors struggled.

…the pandemic’s impact on orders and revenues, combined with preexisting fixed costs and debt service requirements, have constrained available working capital, reduced profitability and cash flow, and significantly impaired the Company’s ability to adequately finance operations.

Which gets us back to the capital structure:

Given where EBITDA numbers were coming in, this thing’s leverage ratio was through the roof. More to the point, the debtors deferred a March 31 second lien interest payment and had been operating under a series of forbearance agreements ever since. Luckily, the capital structure isn’t all-too-complicated and lends itself well to a prepackaged bankruptcy. And so here we are with a restructuring support agreement and proposed prepackaged plan which will effectively turn the company over to the first lien term lenders and, but for some warrants, wipe out the second lien term lenders. Here’s how the above capital structure breaks down:

Source: PETITION LLC

A couple of notable features here:

• Drop it Likes its Hot. There’s a “first lien put option” baked into the plan pursuant to which any first lien term lender who doesn’t want to own equity or the junior converts can “put” its pro rata share of that equity/converts to a first lien lender, Pelican Loan Advisors III LLC (or lenders as the case may be), which has agreed to backstop this baby. Pelican is managed by Monomoy Capital Partners.

• F*ck You Pay Me. Those first lien lenders who consented to forbearances all of those months are about to get paaaaaaayyyyyyyyydd. They’ll receive a pro rated share of and interest in $10mm worth of open market purchases by the debtors of first lien credit agreement claims held by consenting first lien lenders AND a forbearance fee equal to 4.00% of the principal amount of the first lien credit agreement loans held by the consenting lenders as of a date certain. The open market purchases were, presumably, accomplished prior to the filing with 2% of the fee already paid and the remaining 2% to be paid-in-kind on the earlier of the termination date of the RSA or the plan effective date.

• It’s a Trap! Warrants are technically going to be issued to the first lien term lenders and “gifted” to the second lien lenders. But only if they vote to accept the plan. Given the midpoint total enterprise value of $200mm and resultant deficiency claim, this is a nice absolute priority rule workaround. As reflected in the graphic above, the allowed deficiency claim of $64.9mm is obviously impaired and will get a big fat 🍩.

And so this is what the capital structure will look upon emergence:

The first lien lenders have consented to the use of their cash collateral to fund the cases.*

* ⚡️July 15, 2020 Update: The Second Lien Ad Hoc Committee, however, filed a limited objection to the cash collateral motion on the basis that a final order should (a) limit any credit bid to their collateral (noting that a material amount of assets — including 35% of the equity in foreign subs — are excluded from the first lien lenders’ collateral package, and (b) require a finding that there’s diminution of value of the first lien lenders’ collateral such that they, despite providing no new financing, ought to be granted a superpriority lien on previously unencumbered assets. The Committee also previewed objections it will have to the plan of reorganization. For a purportedly “prepackaged” chapter 11, this one looks like it could be more contentious than most. A final hearing on the cash collateral motion is set for July 22, 2020.⚡️

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

• Capital Structure: see above.

• Company Professionals:

  • Legal: Kirkland & Ellis LLP (Jonathan Henes, Emily Geier, Laura Krucks, Dan Latona, Jake Gordon, Yates French)

  • Financial Advisor: AlixPartners LLP (Rebecca Roof)

  • Investment Banker: Moelis & Company LLC (Zul Jamal)

  • Claims Agent: Epiq Bankruptcy Solutions LLC

• Other Parties in Interest:

  • Large equityholder: Wynnefield Capital Management LLC

  • Ad Hoc Group of First Lien Creditors (Credit Suisse Asset Management LLC, Voya CLO Ltd., American Money Management Corp., First Eagle Alternative Credit LLC, Angel Island Capital Services LLC, Monomoy Capital Partners LP, Z Capital Partners LLC)

    • Legal: Weil Gotshal & Manges LLP (Matthew Barr, Ryan Preston Dahl, Alexander Welch)

    • Financial Advisor: Houlihan Lokey Capital Inc.

  • First Lien Agent: The Bank of New York Mellon

  • Second Lien Agent: Wilmington Savings Fund Society FSB

    • Legal: Seward & Kissel LLP (John Ashmead, Gregg Bateman)

  • Ad Hoc Group of Second Lien Lenders: Corre Partners Management LLC, Newport Global Advisors

    • Legal: Brown Rudnick LLP (Steve Pohl, Shari Dwoskin, Kenneth Aulet)

    • Financial Advisor: DC Advisory LLC

Update July 17, 2020

🚚 New Chapter 11 Filing - Comcar Industries Inc. 🚚

Comcar Industries Inc.

May 17, 2020

Florida-based Comcar Industries Inc. and 31 affiliates (the “debtors”) filed for chapter 11 bankruptcy in the District of Delaware — the latest trucking company to end up in bankruptcy court (Callback to “🚛 Dump Trucks 🚛 ,” a PETITION deep dive into the industry which included a review of Celadon Group Inc.’s chapter 11 bankruptcy filing). Comcar is a holding company with four stand-alone trucking business units ((as well as (a) logistics services, (b) supplies, parts and repairs, and (c) fleet maintenance services)). Through the bankruptcy filing, the debtors intend to effectuate a sale of all four units.

Each unit services a different part of the trucking market:

• CCC Transportation LLC (“CCC”) is a bulk bulk carrier that primarily handles construction materials;

• CT Transportation LLC (“CT”) is a flatbed carrier that specializes in construction materials;

• CTL Transportation LLC (“CTL”) is a liquid bulk chemical transporter; and

• MCT Transportation LLC (“MTL”) is a refrigerated and dry van commodities transporter.

Formed in the 1950s, the debtors grew over the years in order to provide all of these offerings. To do so, they, naturally, took on debt. Funded debt stands at $64.8mm including an ABL, a term loan, and various real estate-backed loans. Servicing the debt has been a challenge going as far back as 2014.

Trucking industry struggles have compounded matters. Per the debtors:

The trucking industry has experienced significant headwinds starting in 2019. During the first half of 2019, the $800 billion American trucking industry began to experience a recession and a reported 640 trucking companies went bankrupt. By mid-2019, the trucking freight market continued to soften. The combination of a decline in overall freight tonnage and excessive truck capacity in the market led to a significant decline in freight rates, and customers began to take bids at lower freight rates. Compared to the year immediately prior, 2019 showed a steady decline in freight rates, including spot freight rates and contractual rates.

Rates weren’t the only problem. Volumes also declined.

During 2019, truck volumes decreased for nine consecutive months and the trucking industry braced itself for a decrease in demand through the third quarter of 2020. As a result, spot and contract prices, which increased thirty percent (30%) in 2018, decreased twenty percent (20%) in 2019. The decrease in truckload linehaul rates was driven by (1) spot rates that were below contract rates by unsustainably larger margins than, (2) capacity additions and (3) stalled growth in the consumer and industrial economy.

All of this hit the the top and bottom lines. In 2019, the debtors suffered a 26% YOY revenue decrease across all units. CCC got hit the most, down 44.2%. CT got hit the least. Yet even that was down 19.7%. In total, the debtors lost $25mm in 2019 and $6mm through March 27, 2020.

Luckily, as with Celadon Group Inc. previously, there is a market for these trucks. The debtors have a buyer lined up for the CT and CTL businesses for $9mm and $8.6mm, respectively. Similarly, the debtors have a buyer for the MCT business. They would like to proceed with private sales of each of these businesses stating that “…the terms offered … are materially superior to the terms that the Debtors could hope to achieve at any auctions….” Pursuant to the proposed DIP, these sales need to be consummated by the end of July.

The debtors pre-petition ABL and Term Loan lenders (which includes an affiliate of PIMCO) have committed to funding a $15mm DIP — some of which will pay down pre-petition debt, some of which ($1.33mm) will roll-up pre-petition term loans, and the rest for liquidity to fund the cases.

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• Jurisdiction: D. of Delaware (Judge Dorsey)

  1. Capital Structure: $14mm ABL (Sterling National Bank), $25.3mm Term Loan (B2 FIE VIII LLC as lender, US Bank NA as agent), $6.2mm secured real estate loan (CenterState Bank NA), $7mm CWI Real Estate Loan (Commercial Warehousing Inc.),

  2. Professionals:

     • Legal: DLA Piper US LLP (Stuart Brown, Jamila Justine Willis, Tara Nair)

     • Independent Manager: Tobias Keller

     • Financial Advisor/CRO: FTI Consulting Inc. (Andrew Hinkelman)

     • Investment Banker: Bluejay Advisors LLC

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

  3. Other Parties in Interest:

     • Prepetition ABL Agent: Sterling National Bank

       • Legal: Greenberg Traurig LLP

     • Prepetition Term Loan Agent and DIP Agent: US Bank NA

       • Legal: Seward & Kissel LLP

     • Prepetition Term Loan Lender & DIP Lender: B2 FIE VIII LLC (Pimco)

       • Legal: Latham & Watkins LLP (Jason Bosworth)

👕 New Chapter 11 Bankruptcy Filing - Chinos Holdings Inc. (J.Crew) 👕

Chinos Holdings Inc. (J.Crew)

May 4, 2020

If you’re looking for a snapshot of the pre-trade war and pre-COVID US economy look no farther than J.Crew’s list of top 30 unsecured creditors attached to its chapter 11 bankruptcy petition. On the one hand there is the LONG list of sourcers, manufacturers and other middlemen who form the crux of J.Crew’s sh*tty product line: this includes, among others, 12 Hong Kong-based, three India-based, three South Korea-based, two Taiwan-based, and two Vietnam-based companies. In total, 87% of their product is sourced in Asia (45% from mainland China and 16% from Vietnam). On the other hand, there are the US-based companies. There’s Deloitte Consulting — owed a vicious $22.7mm — the poster child here for the services-dependent US economy. There’s the United Parcel Services Inc. ($UPS)…okay, whatever. You’ve gotta ship product. We get that. And then there’s Wilmington Savings Fund Society FSB, as the debtors’ pre-petition term loan agent, and Eaton Vance Management as a debtholder and litigant. Because nothing says the US-of-f*cking-A like debt and debtholder driven litigation. ‘Merica! F*ck Yeah!!

Chinos Holdings Inc. (aka J.Crew) and seventeen affiliated debtors (the “debtors”) filed for bankruptcy early Monday morning with a prearranged deal that is dramatically different from the deal the debtors (and especially the lenders) thought they had at the tail end of 2019. That’s right: while the debtors have obviously had fundamental issues for years, it was on the brink of a transaction that would have kept it out of court. Call it “The Petsmart Effect.” (PETITION Note: long story but after some savage asset-stripping the Chewy IPO basically dug out Petsmart from underneath its massive debt load; J.Crew’s ‘19 deal intended to do the same by separating out the various businesses from the Chino’s holding company and using Madewell IPO proceeds to fund payments to lenders).

Here is the debtors’ capital structure. It is key to understanding what (i) the 2019 deal was supposed to accomplish and (ii) the ownership of J.Crew will look like going forward:

Late last year, the debtors and their lenders entered into a Transaction Support Agreement (“TSA”) with certain pre-petition lenders and their equity sponsors, TPG Capital LP and Leonard Green & Partners LP, that would have (a) swapped the $1.33b of term loans for $420mm of new term loans + cash and (b) left general unsecured creditors unimpaired (100% recovery of amounts owed). As noted above, the cash needed to make (a) and (b) happen would have come from a much-ballyhooed IPO of Madewell Inc.

Then COVID-19 happened.

Suffice it to say, IPO’ing a brick-and-mortar based retailer — even if there were any kind of IPO window — is a tall order when there’s, like, a pandemic shutting down all brick-and-mortar business. Indeed, the debtors indicate that they expect a $900mm revenue decline due to COVID. That’s the equivalent of taking Madewell — which earned $602m of revenue in ‘19 after $614mm in ‘18 — and blowing it to smithereens. Only then to go back and blow up the remnants a second time for good measure.* Source of funds exit stage left!

Fun facts. In fiscal 2019, Chino's revenues were:

👕J.Crew - $1.7b (67.2%)
👖Madewell - $602m (23.7%)
🏷Wholesale - $230m (9.1%)

Remember: Madewell is the crown jewel here. According to its S-1, it had $614m of revenue in fiscal '18. Its growth was declining pre-COVID.😬 pic.twitter.com/5jpNnJ5zoR

— 💥PETITION💥 (@petition) May 4, 2020

The post-COVID deal is obviously much different. The term lenders aren’t getting a paydown from Madewell proceeds any longer; rather, they are effectively getting Madewell itself by converting their term loan claims and secured note claims into approximately 82% of the reorganized equity. Some other highlights:

• Those term loan holders who are members of the Ad Hoc Committee will backstop a $400mm DIP credit facility (50% minimum commitment) that will convert into $400mm of new term loans post-effective date. The entire plan is premised upon a $1.75b enterprise value which is…uh…interesting. Is it modest considering it represents a $1b haircut off the original take-private enterprise value nine years ago? Or is it ambitious considering the company’s obvious struggles, its limited brand equity, the recession, brick-and-mortar’s continued decline, Madewell’s deceleration, and so forth and so on? Time will tell.

• Syndication of the DIP will be available to holders of term loans and IPCo Notes (more on these below), provided, however, that they are accredited institutional investors.

• The extra juice for putting in for a DIP allocation is that, again, they convert to new term loans and, for their trouble, lenders of the new term loans will get 15% additional reorganized equity plus warrants. So an institution that’s in it to win it and has a full-on crush for Madewell (and the ghost of JCrew-past) will get a substantial chunk of the post-reorg equity (subject to dilution).

Query whether, if asked a mere six months ago, they were interested in owning this enterprise, the term lenders would’ve said ‘yes.’ Call us crazy but we suspect not. 😎

General unsecured creditors’ new deal ain’t so hot in comparison either. They went from being unimpaired to getting a $50mm pool with a 50% cap on claims. That is to say, maybe…maybe…they’ll get 50 cents on the dollar.

That is, unless they’re one of the debtors’ 140 landlords owed, in the aggregate, approximately $23mm in monthly lease obligations.** The debtors propose to treat them differently from other unsecured creditors and give them a “death trap” option: if they accept the TSA’s terms and get access to a $3mm pool or reject and get only $1mm with a 50% cap on claims. We can’t imagine this will sit well. We imagine that the debtors choice of venue selection has something to do with this proposed course of action. 🤔

We’re not going to get into the asset stripping transaction at the heart of the IPCo Note issuance. This has been widely-covered (and litigated) but we suspect it may get a new breath of life here (only to be squashed again, more likely than not). In anticipation thereof, the debtors have appointed special committees to investigate the validity of any claims related to the transaction. They may want to take up any dividends to their sponsors while they’re at it.

Both Neiman and J. Crew are PE-backed and who each tried cute maneuvers with creditor collateral in order to kick the can but were not able to forestall the inevitable ch 11s. https://t.co/9PV6KxgS4A

— Sujeet Indap (@sindap) May 4, 2020

Both might have succeeded with said maneuvers if it weren’t for the pandemic.

— Miriam Gottfried (@miriamgottfried) May 4, 2020

The debtors hope to have this deal wrapped up in a bow within 130 days. We cannot even imagine what the retail landscape will look like that far from now but, suffice it to say, the ratings agencies aren’t exactly painting a calming picture.

.@jcrew's bankruptcy filing lifts the retail loan default rate to 9%, from 7%. "@fitchratings forecasts the loan retail default rate to reach 19% by year end 2020, far exceeding the overall 5%-6% rate."

— Kelsey Butler (@itskelseybutler) May 4, 2020

Per Moody's, distressed retail and apparel names with a Caa1 rating or lower hit 23 as of 4/24, up from 17 in mid-March. "The number will only grow in coming months."

— 💥PETITION💥 (@petition) May 3, 2020

*****

*Curiously, there are some discrepancies here in the numbers. In the first day papers, the debtors indicate that 2018 revenue for Madewell was $529.2mm. With $602mm in ‘19 revenue, one certainly walks away with the picture that Madewell is a source of growth (13.8%) while the J.Crew side of the business continues to decline (-4%). This graph is included in the First Day Declaration:

Source: First Day Declaration

The Madewell S-1, however, indicates that 2018 revenue was $614mm.

With $268mm of the ‘18 revenue coming in the first half, this would imply that second half ‘18 revenue was $346mm. With ‘19 revenue coming in at $602mm and $333mm attributable to 1H, this would indicate that the business is declining rather than growing. In the second half, in particular, revenue for fiscal ‘19 was $269mm, a precipitous dropoff from $333mm in ‘18. Even if you take the full year fiscal year ‘18 numbers from the first day declaration (529.2 - 268) you get $261mm of second half growth in ‘18 compared to the $269mm in ‘19. While this would reflect some growth, it doesn’t exactly move the needle. This is cause for concern.

**To make matters worse for landlords, the debtors are also seeking authority to shirk post-petition rent obligations for 60 days while they evaluate whether to shed their leases. We get that the debtors were nearing a deal that COVID threw into flux, but this bit is puzzling: “Beginning in early April 2020, after several weeks of government mandated store closures and uncertainty as to the duration and resulting impact of the pandemic, the Debtors began to evaluate their lease portfolio to, among other things, quantify and realize the potential for lease savings.” Beginning in early April!?!?

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• Jurisdiction: E.D. of Virginia (Judge )

• Capital Structure: $311mm ABL (Bank of America NA), $1.34b ‘21 term loan (Wilmington Savings Fund Society FSB), $347.6 IPCo Notes (U.S. Bank NA)

• Professionals:

  • Legal: Weil Gotshal & Manges LLP (Ray Schrock, Ryan Preston Dahl, Candace Arthur, Daniel Gwen) & Hunton Andrews Kurth LLP (Tyler Brown, Henry P Long III, Nathan Kramer)

  • JCrew Opco Special Committee: D.J. (Jan) Baker, Chat Leat, Richard Feintuch, Seth Farbman

  • Financial Advisor: AlixPartners LLP

  • Investment Banker: Lazard Freres & Co.

  • Real Estate Advisor: Hilco Real Estate LLC

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

• Other Parties in Interest:

  • Pre-petition ABL Agent: Bank of America NA

    • Legal: Choate Hall & Stewart LLP (Kevin Simard, G. Mark Edgarton) & McGuireWoods LLP (Douglas Foley, Sarah Boehm)

  • Pre-petition Term Loan & DIP Agent ($400mm): Wilmington Savings Fund Society FSB

    • Legal: Seward & Kissel LLP

  • Ad Hoc Committee

    • Legal: Milbank LLP (Dennis Dunne, Samuel Khalil, Andrew LeBlanc, Matthew Brod) & Tavenner & Beran PLC (Lynn Tavenner, Paula Beran, David Tabakin)

    • Financial Advisor: PJT Partners Inc.

  • Large common and Series B preferred stock holders: TPG Capital LP (55% and 66.2%) & Leonard Green & Partners LP (20.7% and 24.8%)

    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Paul Basta, Jacob Adlerstein, Eugene Park, Irene Blumberg) & Whiteford Taylor & Preston LLP (Christopher Jones, Vernon Inge Jr., Corey Booker)

  • Large Series A preferred stock holders: Anchorage Capital Group LLC (25.6%), GSO Capital Partners LP (26.1%), Goldman Sachs & Co. LLC (15.5%)

⚓️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 Filing - Nine West Holdings Inc.

Nine West Holdings Inc.

April 6, 2018

Nine West Holdings Inc., the well-known footwear retailer, has finally filed for bankruptcy. The company will sell its Nine West and Bandolino brands to Authentic Brands Group and reorganize around its One Jeanswear Group, The Jewelry Group, the Kasper Group, and Anne Klein business segments. The company has a restructuring support agreement in hand to support this dual-process. 

More on the situation here. 

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

• Capital Structure: See below.

Source: First Day Declaration

• Company Professionals:

  • Legal: Kirkland & Ellis LLP (James Sprayragen, James Stempel, Joseph Graham, Angela Snell, Anna Rotman, Jamie Aycock, Justin Alphonse Mercurio, Alyssa Russell)

  • Financial Advisor: Alvarez & Marsal North America LLC (Ralph Schipani III, Julie Hertzberg, Holden Bixler, Amy Lee, Richard Niemerg, Theodore Langer, Stuart Loop, Thomas Koch, Michael Dvorak)

    • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Andrew Leblanc, Alexander Lees)

  • Investment Banker: Lazard Freres & Co. LLC (David Kurtz, Ari Lefkovits, David Hales, Mike Weitz, Nikhil Angelo, Okan Kender, Abigail Gay, Drew Deaton) & Consensus Advisory Services LLC

  • Authorized Officers: Stefan Kaluzny, Peter Morrow, Harvey Tepner, Alan Miller

  • Legal to the Authorized Officers: Munger Tolles & Olson LLP (Seth Goldman, Kevin Allred, Thomas Walper)

  • Financial Advisor to the Authorized Officers: Berkeley Research Group LLC (Jay Borow)

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

• Other Parties in Interest:

  • Stalking Horse Bidder/Buyer: Authentic Brands Group

    • Legal: DLA Piper LLP (Richard Chesley, Ann Lawrence, Rachel Ehrlich Albanese)

  • Prepetition ABL and FILO Agent: Wells Fargo NA

    • Legal: Morgan Lewis & Bockius LLP (Matthew Ziegler, Julia Frost-Davies, Amelia Joiner)

  • Administrative Agent for the prepetition secured and unsecured Term Loan Facilities: Morgan Stanley Senior Funding Inc.

  • Indenture Trustee for 3 series of Unsecured Notes: US Bank NA

    • Legal: White & Case LLP (J. Christopher Shore, Philip Abelson) & Seward & Kissel LLP (John Ashmead, Arlene Alves)

  • Ad Hoc Group of Secured Lenders (Farmstead Capital Management LLC, KKR Credit Advisors (US) LLC)

    • Legal: Davis Polk & Wardwell LLP (Marshall Huebner, Darren Klein, Adam Shpeen)

    • Financial Advisor: Ducera Partners LLC

  • Ad Hoc Group of Crossover Lenders (Alden Global Capital LLC, Carlson Capital LP, CVC Credit Partners LLC, Silvermine Capital Management LLC, Trimaran Advisors)

    • Legal: King & Spalding LLP (Michael Rupe, Jeffrey Pawlitz, Michael Handler, Bradley Giordano)

    • Financial Advisor: Guggenheim Securities LLC

  • Brigade Capital Management, LP

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

    • Financial Advisor: Moelis & Company

  • Ad Hoc Group of 2019 Unsecured Noteholders (Whitebox Advisors LLC, Scoggin Management LP, Old Bellows Partners LP, Wazee Street Opportunities Fund IV)

    • Legal: Willkie Farr & Gallagher LLP (Rachel Strickland)

  • Ad Hoc Group of 2034 Unsecured Noteholders

    • Legal: Jones Day

    • Financial Advisor: Houlihan Lokey

  • Administrative Agent for $247.5mm DIP ABL Facility

  • Administrative Agent for $50mm DIP TL Facility

  • Sponsor: Sycamore Partners LP

    • Legal: Proskauer Rose LLP (Mark Thomas, Peter Young, Michael Mervis, Jared Zajac, Chantel Febus, Alyse Stach)

  • KKR Asset Management

    • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Andrew Leblanc)

  • Morgan Stanley & Co. LLC and Morgan Stanley Senior Funding Inc.

    • Legal: Ropes & Gray LLP (Gregg Galardi, Gregg Weiner)

  • Official Committee of Unsecured Creditors (Aurelius Capital Master Ltd., GLAS Trust Company LLC, PBGC, Simon Property Group, Stella International Trading (Macao Commercial Offshore) Ltd., Surefield Limited, U.S. Bank NA)

    • Legal: Akin Gump Strauss Hauer & Feld LLP (Daniel Golden, David Zensky, Deborah Newman, Arik Preis, Jason Rubin, Anthony Loring, Michael Byun, Patrick Chen)

    • Legal Conflicts Counsel: Kasowitz Benson Torres LLP (David Rosner, Howard Schub)

    • Financial Advisor: Protiviti Inc. (Guy Davis, Suzanne Roski, Heather Williams, John Eldred, Justin Koehler, Brian Taylor, Russell Brooks, Matthew Smith, Blake Parker, Lee Slobodien, Omkar Vale, Lok Lam, Sean Sterling) & Province Inc. (Michael Atkinson, Jason Crockett, Eunice Min, Byron Groth)

    • Investment Banker: Houlihan Lokey Capital Inc. (Saul Burian, Surbhi Gupta, Chris Khoury, Tejas Kullarwar, Matt Ender, Brendan Wu)

Updated 11/3/18 at 6:42 am CT

New Chapter 11 Filing - Suniva Inc.

Suniva Inc.

• 4/17/17 Recap: Large US manufacturer of photovoltaic solar cells used in residential, commercial and government solar applications filed for bankruptcy because of (cue ominous music) CHINA. Shocker! China's well-documented cheap solar capacity and flooding of the US market has pressured the US market for years (and resulted in the imposition of 30% tariffs on the Chinese - tariffs that were easily circumvented through creative delivery through other parts of Asia). Luckily, management didn't get ahead of their skis and expand by (i) tripling the company's manufacturing capacity and (ii) spending nearly $100mm on larger facilities (while incurring new debt). Oh wait, strike that: that's precisely what management did. Oops. (More to come.)
• Jurisdiction: D. of Delaware 
• Capital Structure: $50.9mm (SQN Asset Servicing LLC), $15mm LOC (Wanxiang America Corporation - now first in priority as successor to Wells Fargo's rights)    
• Company Professionals:
  • Legal: Kilpatrick Townsend & Stockton LLP (Todd Meyers, Colin Bernardino, Gianfranco Finizio) & (local) Potter Anderson & Corroon LLP (Jeremy Ryan, R. Stephen McNeill, D. Ryan Slaugh)
  • Financial Advisor/CRO: Aurora Management Partners Inc. (David Baker, Steve Smerjac, Matt McEnerney)
  • Claims Agent: The Garden City Group Inc. (*click on the company name above for free docket)
• Other Parties in Interest:
  • SunEdison Products Singapore Pte. Ltd.
    • Legal: Togut Segal & Segal LLP (Frank Oswald, Brian Moore)
  • Wells Fargo NA
    • Legal: Morgan Lewis & Bockius LLP (Richard Esterkin, Kelly Costello)
  • Alternative DIP Lender: Lion Point Capital LP
    • Legal: Cleary Gottlieb Steen & Hamilton LLP (Sean O'Neal, Jane VanLare, Thomas Kessler) & Ashby & Geddes PA (Ricardo Palacio, Karen Skomorucha Owens)
  • Official Committee of Unsecured Creditors
    • Legal: Seward & Kissel LLP (John Ashmead, Robert Gayda, Catherine LoTempio) & (local) Morris Nichols Arsht & Tunnell LLP (Robert Dehney, Eric Schwartz, Tamara Minott)
    • Financial Advisor: Emerald Capital Advisors (John Madden, Jack Allen, Christopher Saitta, Daniel Pace, Ryan Feulner)

Updated 7/17/17 

New Chapter 11 Filing - Toisa Ltd.

Toisa Ltd.

• 1/30/31 Recap: Bermuda-based operator of 19 offshore vessels servicing the oil and gas industry filed for chapter 11 bankruptcy to restructure its balance sheet amidst acceleration and demand notices from lenders (and, in one case, a ship seizure). With utilization rates down from 85% in 2014 to a scary 50% today and continued pressure projected throughout 2017, the company hopes the breathing spell triggered by the filing will provide the time needed to formulate a plan of reorganization. 
• Jurisdiction: S.D. of New York
• Capital Structure: $123mm (Danish Ship Finance), $115mm (DNB), $115mm (ING)    
• Company Professionals:
  • Legal: Togut Segal & Segal (Al Togut, Frank Oswald, Kyle Ortiz, Brian Moore)
  • Financial Advisor: Scura Paley & Company (Paul Scura)
  • Investment Banker: PJT Partners LP (Steven Zelin)
  • Claims Agent: KCC (*click on link above for docket)
• Other Parties in Interest:
  • Credit Agricole Corporate and Investment Bank
    • Legal: Linklaters LLP (Margot Schonholtz, Robert Trust) 
  • Danish Ship Finance A/S
    • Legal: Seward & Kissel LLP (John Ashmead, Catherine LoTempio)
  • DVB Bank America N.V. 
    • Legal: Seward & Kissel LLP (Robert Gayda)
  • Informal Committee of Secured Lenders
    • Legal: Cadwalader Wickersham & Taft LLP (Gregory Petrick, Michele Maman, Andrew Greenberg)
  • Unofficial Committee of Unsecured Creditors
    • Legal: Sheppard Mullin Richter & Hampton LLP (Craig Wolfe, Jason Alderson)

Updated 5/21/17

New Filing - Gracious Home LLC

Gracious Home LLC

• 12/15/16 Recap: New York based consumer products retailer of home furnishings (i.e., china, glassware, metalware, and all kinds of other things that millennials scoff at buying) files for bankruptcy to salvage what's left of its liquidating business after failing to renegotiate with its lender and landlords. This is its second bankruptcy filing in 6 years.
• Jurisdiction: S.D. of New York 
• Debt: $6.5mm secured debt (Signature Bank)
• Company Professionals:
  • Legal: Trenk DiPasquale Della Fera Sodono (Joseph DiPasquale, Irena Goldstein)
  • Financial Advisor: B. Riley & Co. (Perry Mandarino, Adam Rosen, Daniel Golynskiy)
  • Claims Agent: Prime Clerk LLC (*click on company name for docket)
  • Other Parties in Interest:
    • Official Committee of Unsecured Creditors:
      • Legal: Seward & Kissel LLP (John Ashmead, Robert Gayda, Catherine LoTempio, Michael Tenenhaus) 
      • Financial Advisor: Wyse Advisors LLC (Michael Wyse)
    • Gracious Home Lending LLC
      • Legal: Arent Fox LLP (Robert Hirsh)

Updated 5/12/17