🌑New Chapter 11 Bankruptcy Filing - Foresight Energy Inc.🌑

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Foresight Energy Inc.

March 10, 2020

Are there any coal companies left out there that HAVEN’T filed for bankruptcy at this point?

As expected by everyone, thermal coal producer Foresight Energy LP and numerous affiliates (the “debtors”) filed a “prearranged” bankruptcy on Tuesday in the District of Missouri.

Observers have long recognized that this chapter 11 filing was a fait accompli. The debtors are inextricably linked to Murray Energy, which filed late last year. The difference here, though, is that Foresight’s capital structure is FAR less complex and, because of that among other reasons, the debtors had the luxury of a bit more time to sit back and wait and see how the Murray bankruptcy played out. The debtors also had the luxury of taking their time — which is not to say that things haven’t been a sprint over the last several months — to come to terms on a deal with their lenders to emerge from bankruptcy with a significantly de-levered balance sheet. Indeed, that is the literal plan here.

The debtors have entered into restructuring support agreements with significant and meaningful percentages of holders of first lien loans and second lien notes. Moreover, the debtors have agreements with several key contract counterparties. The end result? The debtors will eliminate over $1b of debt, shed some burdensome royalty and contractual obligations, and get a new money infusion so that it can — against the odds in this hyper-negative-to-coal environment — be better positioned to survive. The reorganized entity, assuming the deal holds, will have $225mm of senior secured debt on it (which will roll in the proposed $175mm DIP facility).*

*The proposed DIP facility includes a new money multi-draw term loan facility of $100mm and a $75mm roll-up of pre-petition first lien debt into a DIP term loan.

  • Jurisdiction: D. of MO (Judge Surratt-States)

  • Capital Structure: $157mm RCF, $743.3mm first lien term loan, $425mm 11.5% ‘23 second lien notes

  • Professionals:

    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Paul Basta, Alice Belisle Eaton, Alexander Woolverton) & Armstrong Teasdale LLP (Richard Engel Jr., John Willard, Kathryn Redmond)

    • Financial Advisor: FTI Consulting Inc. (Alan Boyko)

    • Investment Banker: Jefferies Group LLC

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

  • Other Parties in Interest:

    • Ad Hoc First Lien Group

      • Legal: Akin Gump Strauss Hauer & Feld LLP (Brad Kahn, Ira Dizengoff, Zachary Dain Lanier, James Savin) & Thompson Coburn LLP (Mark Bossi)

    • Second Lien Notes Trustee: Wilmington Trust NA

    • Davidson Kempner Capital Management LP

      • Legal: Milbank LLP (Dennis Dunne, Parker Milender)

    • DIP Agent ($175mm): Cortland Capital Market Services LLC

⛽️New Chapter 11 Bankruptcy Filing - Shale Support Global Holdings LLC⛽️

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Shale Support Global Holdings LLC

July 11, 2019

When privately-owned companies that most people have never heard of file for bankruptcy, it naturally raises the following logical question: with oil and gas once again imploding, how many off-the-run companies are going to wind their way into bankruptcy court? 🤔 We reckon quite a number.

Shale Support Global Holdings LLC, a private Louisiana-based proppant supplier to oilfield servicing companies that, in turn, service E&P companies, filed for bankruptcy in the Southern District of Texas. The company and 7 affiliated debtors (the “Debtors”) have little by way of assets ($3.15mm) and much more by way of debt ($127.8mm). MOR Bison LLC and BBC Holding LLC own 69.24% and 29.67% of the company, respectively.

The company started in 2014 to solve the problem of expensive logistics costs emanating out of the transport of sand to frac sites. The company sought to vertically integrate the ownership of sand mines with, among other things, a drying facility and a transload facility; its mines are in Mississippi. Given what has occurred in oil and gas country since 2014, it seems abundantly clear that the timing here was just a bit off. “How off,” you ask? Per the Debtors:

Demand for frac sand is significantly influenced by the level of well completions by E&P and OFS companies, which depends largely on the current and anticipated profitability of developing oil and natural gas reserves. As such, Shale Support’s business is highly correlated with well completions, which is, in-turn, is dependent on both commodity prices and producers’ ability to deliver oil to the market. Over the past five years, commodity prices have been highly volatile resulting in an unpredictable demand curve and a significant amount of OFS and E&P bankruptcies. Compounding these demand issues, Shale Support operates in a highly-competitive industry that has seen a dramatic increase in supply. This new supply has come from basin-specific regional producers (that have dramatically lower logistic costs) as well as larger, often better-capitalized, competitors. Regional suppliers and Shale Support’s larger competitors are both in a position to exert significant, downward pressure on pricing for proppants.

Said another way, as off as humanly possible. With a supply/demand imbalance in 2H ‘18, the company saw revenue fall over 40% in 2018. 😬 This was in large part due to the fact that, despite falling proppants prices, the Debtors are locked in to fixed cost contracts with railcar transport providers. With this mix plus over $127mm in outstanding debt obligations, liquidity became an issue.

For over a year now, the Debtors have been in a state of perpetual marketing. Piper Jaffrey & Co., the Debtors’ banker, could not, however, locate a buyer. In the midst of discussions with potential strategic and financial buyers, the price of frac sand continued to fall. Per the Debtors:

Unsurprisingly, no party submitted an indicative expression of interest, a non-binding offer or a valuation of Shale Support. The stated justification from these parties centered around market conditions, location of the reserves, quality of sand, availability of buyer cash, and consistent underperformance of business relative to forecasts.

Efforts to refinance the debt were equally unsuccessful given the declining asset value upon which a new loan would be based. Ultimately, the Debtors defaulted under their prepetition term loan agreement and, over the course of multiple months of waivers, negotiated with their lenders with the hope of “building consensus around a de-leveraging transaction.” Spoiler alert: there’s no prepackaged plan on file here nor is there a bid procedures motion accompanied by a stalking horse asset purchase agreement so suffice it to say that whatever consensus there might be is limited to the commitment of a $16.6mm DIP credit facility. And that forces the issue: under the DIP milestones, the Debtors must confirm a plan of reorganization within 98 days. Will the lenders equitize? Given the astounding job the first day papers do of making the assets seem attractive, is there a chance in hell a buyer emerges? Stay tuned.

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

  • Capital Structure: $116mm ‘21 10% cash/12% PIK Term Loan (including interest, etc.), $11.6mm ‘21 ABL (Siena)

  • Professionals:

    • Legal: Greenberg Traurig LLP (Shari Heyen, Karl Burrer, David Eastlake, Eric Howe)

    • Financial Advisor/CRO: Alvarez & Marsal LLC (Gary Barton)

    • Investment Banker: Piper Jaffray & Co. (Richard Shinder)

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

  • Other Parties in Interest:

    • Prepetition Term Loan & DIP Agent ($16.6mm): BSP Agency LLC (DIP Lenders: Providence Debt Fund III LP, Benefit Street Debt Fund IV LP, and Benefit Street Partners SMA LM LP).

      • Legal: Baker Botts LLP (Emanuel Grillo)

    • Prepetition Revolving Lender: Siena Lending Group LLC

      • Legal: Thompson Coburn LLP (David Warfield, Victor A. Des Laurier)

New Chapter 11 Filing - Central Grocers Inc.

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Central Grocers Inc.

  • 5/4/17 Recap: May the Fourth be with you. Illinois-based food coop - the 7th largest in the nation - founded in, gulp, 1917, filed for bankruptcy to pursue a sale of its Strack & Wan Til stores and its distribution center (after certain creditors tried to force a bankruptcy on it). The company was initially founded with 32 supermarket owners seeking increased purchasing power through strength in numbers. Today, the coop supplies over 400 stores in the Chicago area. The coop supports its own brand, Centrella, which, being frank here, is probably value detract because nothing says "quality" like shoddy label design. That "Beef Stew" and "Chunk Pineapple" (see below) looks tasty AF, doesn't it? This makes us want to blow chunks. Seriously, though, this is another story of disruption. Disruption caused by the commodities markets, in part, with beef, chicken, eggs and dairy generally being at relatively low prices. But also disruption caused by new entrants into the grocery segment, including Walmart, Target, Costco, and dollar stores. And, of course, Amazon, which is increasingly becoming Darth Vader, even though we're pretty certain nobody we know actually uses AmazonFresh for produce and the like. But, whatever, when in doubt, blame Amazon. That's a much better excuse than 1917-style design sensibility and a classic innovator's dilemma.
  • Jurisdiction: D. of Delaware (transferred to N.D. of Illinois)
  • Capital Structure: $225mm '18 RCF (PNC Bank NA), $22.5mm TL (Bank of the West)  
  • Company Professionals:
    • Legal: Weil (Ray Schrock, Stephen Karotkin, Sunny Singh, Daniel Gwen, Danielle Donovan) & (local) Richards Layton & Finger PA (Mark Collins, Paul Heath, Brett Haywood, David Queroli) & (local) McDonald Hopkins LLC (David Agay, Rion Vaughan)
    • Financial Advisor: Conway MacKenzie Inc. (Donald Harer, Alpesh Amin, Michael Musso, John Cannon, Matthew Sedigh, Daniel Johnson, Lauren Leach, Harry Bramson, Jennifer Chaing, Joseph Wirija, Michael Kulkarni, Michael Flynn)
    • Investment Banker: Peter J. Soloman Company (Derek Pitts)
    • Claims Agent: Prime Clerk LLC (*click on company name for docket)
  • Other Parties in Interest:
    • PNC Bank NA
      • Legal: Blank Rome LLP (Regina Stango Kelbon, Victoria Guilfoyle, Mark Rabinowitz, Gregory Vizza, Michael Schaedle)
    • Bank of the West
      • Legal: Thompson Coburn LLP (Mark Bossi, Victor Des Laurier, Diona Rogers)
    • Successful Bidder
      • Legal: Duane Morris LLP (Lawrence Kotler, Rosanne Ciambrone)
    • Official Committee of Unsecured Creditors
      • Legal: Kilpatrick Townsend & Stockton LLP (Todd Meyers, David Posner, Gianfranco Finizio) & (local) Saul Ewing LLP (Mark Minuti, Lucian Murley) & (local) Arnstein & Lehr LLP (Barry Chatz, Kevin Morse, William Williams)
      • Financial Advisor: FTI Consulting Inc. (Conor Tully)

Updated 7/13/17

http://www.central-grocers.com/

http://www.central-grocers.com/

New Chapter 11 & CCAA Filing - Payless Shoesource Inc.

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Payless Shoesource Inc.

  • 4/4/17 Recap: Private equity backed Kansas-based discount footwear retailer with over 4000 stores filed for bankruptcy because, well, right, it's a private equity backed retailer. Golden Gate Capital and Blum Capital Partners are the sponsors and we've previously covered their methods, uh, we mean "value-add" proposition. We probably won't even bother to read the filing documents because we're 98.9% confident they say the same sh*t every other retail case has said, e.g., poor e-commerce...blah blah...Amazon...blah blah...mall-based retail...blah blah...bad weather...blah blah...Showtime's Billions sucks...wait, what?...whatever, it does (who cares if that's relevant?)...millennial shopping habits...blah blah...bleeding top line and depressed comp store sales...blah blah...dividend recaps...blah blah blah. Apparently the retailer is going to close nearly 400 stores while it attempts to reorganize around what remains - all in accordance to a plan support agreement that the company has entered into with 2/3 of its term loan lenders and with the support of a $385mm DIP facility (of which $80mm is new money). Meanwhile, we'll see what kind of cascading effect this will have on (a) China's manufacturing sector which, apparently, has seen significant stretching of payables (up to 100 days) - a fact evidenced by the top 50 creditors list, and (b) our lovely "A" malls (notably, Simon Property Group made a notice of appearance before the first day pleadings were even completely filed). Finally, the CEO dropped the fact that the new business plan will focus on, among other things, "omnichannel expansion" and since that is the retail buzzword/phrase of the moment, we guess there's really nothing to see here: all will be fine. 
  • 4/6/17 Update: We read the documents and, generally speaking, everything we said above applies. Two other factors apparently worth mentioning as causes for the filing: inventory management issues (compounded by the West Coast port strikes) and foreign exchange issues.
  • Jurisdiction: E.D. of Missouri
  • Capital Structure: $300 ABL ($187mm out - Wells Fargo), $520mm '21 TL ($506mm out), $145mm '22 second lien TL (Morgan Stanley Senior Funding Inc.)    
  • Company Professionals:
    • Legal: Kirkland & Ellis LLP (James Sprayragen, Nicole Greenblatt, William Guerrieri, Christine Pirro, Jessica Kuppersmith) & (local) Armstrong Teasdale LLP (Steven Cousins, Erin Edelman) & (Canadian counsel) Osler Hoskin & Harcourt LLP 
    • Legal to Independent Director: Munger Tolles & Olson LLP (Thomas Walper, Seth Goldman, Kevin Allred)
    • Financial Advisor: Alvarez & Marsal North America LLC (Robert Campagna)
    • Investment Banker: Guggenheim Securities LLC (Morgan Suckow)
    • Real Estate: RCS Real Estate Advisors (Ivan Friedman)
    • Liquidators: Great American Group LLC & Tiger Capital Group LLC
    • Claims Agent: Prime Clerk LLC (*click on company name above for free court docket)
  • Other Parties in Interest:
    • Ad Hoc Committee of First Lien Term Lenders (Alden Global Opportunities Master Fund, Credit Suisse Asset Management, GSO Capital Partners, Hawkeye Capital Management, Invesco Senior Secured Management, Octagon Credit Investors LLC, AIC Finance, Axar Capital Management)
      • Legal: King & Spalding LLP (Michael Rupe, Christopher Boies, Jeffrey Pawlitz, Austin Jowers, Michael Handler)
      • Financial Advisor: Houlihan Lokey Capital Inc.
    • DIP ABL Agent: Wells Fargo Bank NA
      • Legal: Choate Hall & Stewart LLP (Kevin Simard, Douglas Gooding, Jonathan Marshall) & (local) Thompson Coburn LLP (Mark Bossi)
    • First Lien Agent & DIP TL Agent: Morgan Stanley Senior Funding Inc. & Cortland Products Corp.
      • Legal: Norton Rose Fulbright US LLP (Stephen Castro, David Rosenzweig, Danielle Ledford, Tim Walsh)
    • Official Committee of Unsecured Creditors
      • Legal: Pachulski Stang Ziehl & Jones LLP (Robert Feinstein, Jeffrey Pomerantz, Bradford Sandler) & (local) Polsinelli PC (Matthew Layfield, Christopher Ward, Shanti Katona)
      • Financial Advisor: Province Inc.

Updated 4/18/17