✈️ New Chapter 11 Bankruptcy Filing - LATAM Airlines Group S.A. ($LTM) ✈️

LATAM Airlines Group S.A.

May 26, 2020

COVID-19 is starting to notch a long list of corporate victims. Chapter 11 bankruptcy filings have NOT been in short supply the last two months. Yet while many of the debtors may cite COVID-19 as a factor leading to the bankruptcy filings, in the super-majority of cases it was merely a contributing factor. The icing on the cake, if you will. From our vantage point, prior to the last week, there had only been (arguably) four pure-play COVID-19 chapter 11 bankruptcy filings:

• Ravn Air Group Inc. — COVID-19 effectively shut down Alaska and CARES Act funds were unavailable to stave off a filing.

• Alpha Entertainment LLC (XFL) — COVID-19 cold-stopped all sports mid-season.

• GGI Holdings LLC (Gold’s Gym) — COVID-19 shuts down gyms nationwide.

• Avianca Holdings SA — COVID-19 and mandated government shutdowns hindered all travel and flight bookings went negative.

Those were just the appetizer. This week things got VERY, VERY, REAL. The Hertz Corporation ($HTZ) became one of the largest chapter 11 bankruptcy filings EVER because COVID-19 put a stop to air travel — the thing that HTZ is most dependent upon in its business. This caused used-car values to fall through the floor and, in turn, effectively blow up the company’s securitization structure. And then LATAM Airlines Group S.A. ($LTM) became the second large latin american airline to file. This should not have been a surprise to anyone.

On May 13 in “✈️ Airlines, Airlines, Airlines ✈️ ,” we wrote about (i) the airline bailout debate engulfing folks in the US, (ii) the Avianca bankruptcy filing, (iii) Virgin Australia’s voluntary administration filing in Australia (after the Aussie government refused to partake in a bailout), (iv) Norway’s attempts to deal with Norwegian Air Shuttle SA’s ($NWARF) troubles, and (v) Boeing Corporation ($BA) CEO Dave Calhoun’s flippant remarks that “it’s probable that a major [US] carrier will go out of business” — yet another example of people confusing the concepts “filing for chapter 11 bankruptcy” with “going out of business and disappearing from the face of the earth.” For the avoidance of doubt, no, they are not necessarily the same thing (outside of retail anyway). In what was not exactly our boldest call, we noted that there would be more COVID-19-spawned action to come — particularly, in the near-term, in Latin America:

Which leaves Latin America’s other air carriers in a bad spot, including Latam Airlines Group SA (the finance unit of which has debt bid in the 30s and 40s), Gol Linhas Aereas Inteligentes SA ($GOL)(the finance unit of which has debt bid in the low 40s), and Aerovías de México SA de CV (Aeromexico)(which has debt bid in the 30s). Will one of these be one of the next airlines in bankruptcy court?

Early in the morning on May 26th, LATAM Airlines Group SA (“LATAM Parent, and with 28 direct or indirect subsidiary debtors, the “Debtors”) filed for bankruptcy in the Southern District of New York. It is the fourteenth-largest airline in the world (measured by passengers carried) and Latin America’s leading airline; it services 145 different destinations in 26 countries. Including 20 aircraft leased to non-debtor third-parties, the company has a total fleet of 340 aircraft.

Source: First Day Declaration. Docket #3.

On the strength of this fleet, in 2019, the company did $10.1b in revenue with over $1b of operating cash flow after investments (for the third straight year) and $195.6mm of net income. While the majority of said revenue comes from passenger services, the company also supplements revenues with cargo-related services to 151 destinations in 29 countries (11% of revenue but growing quickly). With four consecutive years of net profits, the company was, as far as airline companies go, doing very well — particularly in Brazil (38% revenue), Chile (16%) and the United States (10%).

Contributing to the positive performance trend is the fact that the company has apparently been executing its business plan quite well. It has rejiggered its cost structure; established new routes; reduced fleet commitments; and upgraded operational execution and customer experience (including the implementation of a frequent flyer program).* Improved operational performance gave the company flexibility in other parts of the business. Notably, the company decreased leverage by $2b — dropping its leverage ratio from 5.8x to 4x. It also reduced its capital fleet commitments by $6.3b from 2015 to 2019. Everything was going in the right direction.

But then COVID-19 caused a 95% reduction in LATAM’s passenger service. All of the business plan execution in the world couldn’t have prepared the Debtors for such a meaningful drop off. To state the obvious, this created an immediate liquidity strain on the business and instantly called the Debtors’ capital structure into question. To address the liquidity situation, the Debtors drew down the entirety of their secured revolving credit facility giving them $707mm total cash on hand (plus another $621 held by non-debtor affiliates). Here is the rest of the Debtors’ largely unsecured capital structure:

The rubber is going to meet the runway with a lot of the aircraft leases. The finance leases are all entered into by special purpose vehicles (“SPVs”) which then lease the planes to LATAM Parent which then subleases the aircraft to other opcos including certain of the Debtors. The SPVs finance the acquisition of aircrafts through various banks, pledging the owned aircraft as collateral. The principal amount outstanding under the various SPV financings is $3.3b.

Meanwhile, the operating leases are entered into with third-party lessors like AerCap Holdings N.V., Aircastle Holding Corporation Limited and Avolon Aerospace Leasing Ltd. The Debtors have negotiated rent deferrals with these parties but, generally, they pay $44mm/month in rent and, all in, have $2.9b in aircraft-related lease liabilities.

Similarly, certain aircraft purchase agreements are likely to be grounded. The company has agreements to purchase 44 aircraft from Airbus S.E. and 7 aircraft from Boeing.

The Debtors seem primed to leverage certain bankruptcy tools here. First and foremost is right-sizing the fleet, which means a lot of the aforementioned agreements will be (or are likely to be) on the chopping block. Indeed, the Debtors have already filed a motion seeking to reject around 19 of them.

Two significant shareholders have agreed to fund $900mm of super-priority DIP financing which will be part of a larger $2.15b DIP Facility (PETITION Note: reminder that Avianca has not sought approval of a DIP credit facility…yet). Given that many Latin American countries have suspended air travel for months (i.e., Argentina through September, Colombia through August) and the US recently announced it would deny entry to non-citizens from Brazil, the Debtors will need this financing to complement the cash already on hand to stay afloat.

Like Hertz and Avianca, it looks like this one will linger in bankruptcy court for awhile as all of the various parties in interest try to figure out what a business plan looks like in a post-COVID world.

*Notably, the company brags that it was able to “…increase available seat kilometers (or ASKs, used to measure an airline’s carrying capacity) by approximately 11%…” which, in turn, contributed to an increase in passengers carried from 68mm to 74mm per year and increased its operational margin from 5% to 7%. This is confirmation of what we already knew: to juice revenues airlines have been engaging in sardine-packing experiment, squeezing as many passengers into a flight as possible. And it worked! Query, however, what will happen to ASKs in a post-COVID-19 world. 🤔

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

• Capital Structure: see above

• Professionals:

  • Legal: Cleary Gottlieb Steen & Hamilton LLP (Richard Cooper, Lisa Schweitzer, Luke Barefoot, Thomas Kessler, David Schwartz) & Togut Segal & Segal LLP (Albert Togut, Kyle Ortiz)

  • Financial Advisor: FTI Consulting Inc.

  • Investment Banker: PJT Partners LP

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

• Other Parties in Interest:

  • Large equityholders: Cueto Group, Delta Air Lines Inc. ($DAL), Chilean Pension Funds,

  • Large Equityholder: Qatar Airways investments UK Ltd.

    • Legal: Alston & Bird LLP (Gerard Catalanello, James Vincequerra)

  • Official Committee of Unsecured Creditors

    • Legal: Dechert LLP (Benjamin Rose)

    • Conflicts Legal: Klestadt Winters Jureller Southard & Stevens LLP

🎭 New Chapter 11 Bankruptcy Filing - Rubie's Costume Company Inc. 🎭

Rubie’s Costume Company Inc.

April 30, 2020

Star Wars. Marvel’s Avengers. Stranger Things. You’d think any business associated with this hot IP would be killing it. And yet it seems that even the Black Panther is susceptible to poor business fundamentals in a disrupted retail environment.

New York-based Rubie’s Costume Company Inc. and five affiliates (the “debtors”) — designers, manufacturers and distributors of costumes and related accessories — filed for bankruptcy in the Eastern District of New York. The debtors have non-exclusive licenses with the likes of Disney Inc. ($DIS), Lucasfilm, Marvel and others as well as non-licensed costumes for all of your not-just-Halloween costume needs (nobody is judging, people). They sell via 4 costume stores in New York, online, and wholesale channels; they count Target Inc. ($TGT), Walmart Inc. ($WMT), Amazon Inc. ($AMZN) and Party City Holdco Inc. ($PRTY) as distribution channels (the latter, itself, in trouble).

The debtors note that operating performance has been on the decline for years, attributing this primarily to “[i]ndependent customers hav[ing] declined and the average order per existing customer also ha[ving] declined.” Disruption! The small mom and pop costume shops are getting smoked while the bigbox retailers who have more leverage over pricing take over. We’re willing to bet that even Party City will attribute its recent travails to the rise of the bigbox retailer coupled with “The Amazon Effect.” The debtors highlight:

For the fiscal year ending December 31, 2018 (“FY 2018”) net sales and Adjusted EBITDA were approximately $310 million and $2 million, respectively. As a result of the decline in independent customers, for fiscal year ending December 31, 2019 (“FY 2019”), the Company generated net sales and Adjusted EBITDA of approximately $268 million ($42 million decline) and $3 million ($5 million decline), respectively.

The debtors also have over $47mm of secured debt outstanding under its pre-petition credit agreement with lenders such as HSBC Bank USA NA, Bank of America NA, Wells Fargo Bank NA, JP Morgan Chase Bank NA, TD Bank NA, and Citibank NA (the “Bank Group”). Operating under a series of forbearance agreements, the debtors have been engaged in an operational cost-cutting process since 2019.

Forbearances (accompanied, of course, with enhanced collateral packages and fees) and cost-cutting can only get you so far, of course. With COVID-19 hitting, the debtors suffered from a liquidity crunch. After all, we’re not hearing much about Zoom-costume-parties. The Bank Group has apparently taken a look at the debtors’ business prospects and said, “no way, Jose.” Per the debtors:

…the COVID crisis has had an impact on the Debtors’ ability to obtain new financing from the Bank Group. The Bank Group has declined to provide continued financing and the Debtors’ efforts to obtain replacement financing on an asset based lending structure have been slowed by the crisis.

Indeed, Wells Fargo Bank NA pulled out of refi discussions — a move consistent with Wells’ recent savagely escapist approach with respect to retail.

It advised the Debtors that its decision was based on the conditions in the global lending market due to the COVID-19 crisis and internal restrictions on its current lending, and was not a reflection on the Debtors’ creditworthiness.

Yeah, maybe.

The Debtors demonstrated the viability of their business to the Banks in a number of ways including through the business plan implemented over the last year with the assistance of BDO, the continued value of their inventory which exceeds the debt owed to the Banks and even most recently the fact that major national account clients placed firm orders for the Halloween season.

While we don’t find this particularly convincing either, Wells didn’t really need a pretense to bail out of retail these days.

Anyway, here we are. Without the refinancing, the debtors are in bankruptcy court seeking the use of cash collateral while they use the bankruptcy process to find a new source of capital.

• Jurisdiction: E.D. of New York (Judge Trust)

• Capital Structure: $46.7mm RCF

• Professionals:

  • Legal: Togut Segal & Segal LLP (Frank Oswald, Brian Moore) & Meyer Suozzi English & Klein PC (Edward LoBello, Howard Kleinberg, Jordan Weiss)

  • Financial Advisor: BDO USA LLP

  • Investment Banker: SSG Capital Advisors LLC

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

• Other Parties in Interest:

  • Pre-petition Agent: HSBC

    • Legal: Phillips Lytle LLP (William Brown)

🚗New Chapter 11 Bankruptcy Filing - Total Finance Investment Inc.🚗

Total Finance Investment Inc.

February 13, 2019

We’ve been asking about distress in the automotive industry since our inception and most recently noted in “🚗The Auto Sector is Quietly Restructuring🚗 that activity is picking up in the space. Admittedly, this case isn’t exactly what we had in mind. Nevertheless, earlier this week, Total Finance Investment Inc. and Car Outlet Holding Inc. (and affiliated debtors) filed for bankruptcy in the Northern District of Illinois; the debtors are an integrated chain of buy-here pay-here used vehicle dealerships in Illinois and Wisconsin.

What does “buy-here pay-here” mean? The debtors sold used vehicles, provided financing, AND operated an insurance broker to assist customers with procurement of automobile insurance coverage from third-party insurance providers. They “specifically catered to the fast-growing and underserved population of “unbanked” and “underbanked” Hispanic consumers in Northern Illinois and Milwaukee, which historically made up approximately 70% of the Debtors’ customer base.” There’s just one problem with all of this? Competition is BRUTAL. Per the company:

In recent years, BHPH dealerships have been subject to increasing industry-wide pressures that have negatively impacted their operating results, driving a number of the Debtors’ BHPH competitors out of business. The used vehicle dealership market is highly fragmented and fiercely competitive—with approximately 1,800 used car dealerships in Illinois alone—and the Debtors historically competed with other large used car dealerships like CarMax and DriveTime, as well as other BHPH operations. The fragmented nature of the industry and relatively low barriers to entry have led to steep competition between dealerships, putting significant downward pressure on the margins BHPH dealerships earn on vehicle sales. Further, as a result of a protracted period of increased capital availability, indirect auto lenders such as banks, credit unions, and finance companies have in recent years moved to originate subprime auto loans and offer attractive financing terms to customers with lower than average credit scores, putting pressure on BHPH operators’ market share among their traditional customer base.

Because, like, why not? Nothing has ever gone wrong when there has been excessive competition fiercely pursuing the subprime market. 🙈Ironically, the day before this filing, The Washington Post reported that 7mm Americans have, to the surprise of economists, stopped paying their auto loans. Whooooops. Per the WP:

The data show that most of the borrowers whose auto loans have recently moved into delinquency are people younger than 30 years old and people with low credit scores. Eight percent of borrowers with credit scores below 620 — otherwise known as subprime — went from good standing to delinquent on their auto loans in the fourth quarter of 2018.

No. Bueno. Anyway, back to the debtors. Read this part and tell us you don’t suffer PTSD circa-2008:

…capital markets became increasingly accessible for indirect auto lenders, many of which began to originate subprime loans and offer attractive financing terms to borrowers that historically had been overwhelmingly BHPH customers. The Debtors’ prior management team responded to the change in market conditions by providing larger loans with longer terms, accepting smaller down payments, and accepting transactions with increasingly negative equity in order to increase sales volume. The shift to offering riskier loans to subprime customers ultimately led to the Debtors experiencing historically high delinquency rates and losses beginning in the second half of 2015.

But wait. There’s more:

In addition to increased competition in the auto lending industry, the Debtors have also incurred significant expenses to ensure compliance with new regulations enacted by the Consumer Financial Protection Bureau. Furthermore, the political climate following the 2016 presidential election has had a negative impact on the spending habits of the Debtors’ traditional customer base in a manner that negatively impacted the Debtors’ operating results.

The debtors, therefore, suffered a consolidated pre-tax loss of approximately $29.9mm. MAGA!!!

The company has been trying to improve cash flows and operating results for years. One major initiative included, as far back as 2016, tightening underwriting standards to reduce consumer finance portfolio losses. We sure hope that there are others who took similar steps given the Washington Post report. But we digress.

Back in 2017, the debtors also received an $84mm equity infusion from Marubeni Corporation. Nevertheless, the debtors continued to hemorrhage to the point of compromising compliance with certain financial covenants under their senior secured debt facility with BMO Harris Bank NA. Thereafter, the company entered into a series of forbearance agreements with BMO as it attempted to figure out either a refinancing or an asset sale. In the end, the debtors obtained a restructuring support agreement and filed for bankruptcy to liquidate the used auto business and transfer its auto loan servicing business to a third-party servicer (PETITION Note: earlier this week, The Wall Street Journal reported that the mortgage servicing business is en fuego — notwithstanding the Ditech Holding Corporation bankruptcy (see here). We wonder: what sort of demand is there for subprime auto loan servicing businesses?). BMO Harris will fund the estates with a $4mm DIP credit facility.

So we’re left with this question: is this chapter 11 filing the canary in the coal mine for subprime auto lenders?

• Jurisdiction: N.D. of Illinois (Judge Doyle)

• Capital Structure: see below.

• Professionals:

  • Legal: Sidley Austin LLP (Bojan Guzina, William Evanoff, Jackson Garvey)

  • Conflicts Legal: Togut Segal & Segal LLP

  • Financial Advisor: Portage Point Partners LLC

  • Interim Management: Development Specialists Inc.

  • Investment Banker: Keefe Bruyette & Woods and Miller Buckfire & Co. LLC

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

• Other Professionals:

  • Prepetition Lender: BMO Harris Bank NA

    • Legal: Chapman and Cutler LLP (David Audley, Mia D’Andrea)
      

Source: First Day Declaration

New Chapter 11 Bankruptcy Filing - Synergy Pharmaceuticals Inc.

December 12, 2018

On November 11 and then, in a more fulsome manner in November 18’s “😬Biopharma is in Pain😬,” we noted that Synergy Pharmaceuticals Inc. ($SGYP) “appears to be on the brink of bankruptcy.” Looks like we were right on. This morning (12/12/18) at 4:37am (PETITION Note: remember that if you think that being a biglaw attorney is glamorous), the company and an affiliate filed for bankruptcy in the Southern District of New York.

Synergy is a biopharmaceutical company that develops and commercializes gastrointestinal therapies; its primary speciality revolves around uroguanylin, “a naturally occurring and ednogenous human GI peptide, for the treatment of GI diseases and disorders” Geez…bankers and lawyers have nothing on scientists when it comes to the vernacular. The company has one commercial product (TRULANCE) and one product in development. The company owns 33 patents.

We previously noted:

The company has a $200mm 9.5% ‘25 secured term loan with CRG (~$100mm funded plus PIK interest) that has been amended a bazillion times to account for the fact that its revenues suck, its market cap sucks, and that its on the verge of tripping, or has tripped, numerous covenants including, a “minimum market capitalization” covenant and a “minimum revenue covenant.” In its most recent 10-Q, the company noted:

To date the Company has been unable to further amend the agreement with respect to the financial and revenue covenants. The Company is continuing discussions with CRG and has received a temporary waiver on the minimum market cap covenant through November 12, 2018. The Company is currently pursuing alternatives that better align with its business, but there is no assurance that Synergy can secure CRG’s consent or otherwise achieve a transaction to refinance or otherwise repay CRG on commercially reasonable terms, in which case we could default under the term loan agreement. If CRG does not grant a further waiver beyond November 12, 2018 the Company will likely be in default of the minimum market cap covenant.

In its bankruptcy filing, however, the company takes a decidedly less aggressive posture vis-a-vis CRG (which makes sense…CRG is, after all, its proposed DIP lender) when explaining the factors leading to the commencement of its chapter 11 cases. While the company does highlight lack of access to capital markets (which, at least as far as we read it, is an implicit jab at CRG), the company primarily blames TRULANCE’s slow sales growth, market access, competitive landscape and a smaller-than-anticipated total addressable market for its travails.

For its part, Centerview Partners has been engaged in a less than ideal sellside process here. According to the company’s papers, Centerview has been trying to sell the company since 2015. Now, unless there is some crazy element to this engagement, most bankers are compensated on the basis of success fees. They want to a large purchase price and a short marketing process to get the best of both worlds: a huge payday without huge utilization. That does not appear to be the case here. 3 years!

Still, they located a buyer. Bausch Health Companies (“BHC”) has agreed to be the stalking horse purchaser of the company’s assets. BHC would get substantially all of the company’s assets — including its IP, certain customer and vendor contracts, A/R, and goodwill. In exchange, they would pay approximately $185mm in cash (minus certain deductions and adjustments) and $15mm in severance obligations.

CRG is the company’s proposed DIP lender with a $155mm facility, of which $45mm represents new money.

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

• Capital Structure: $110mm 9.5% ‘25 secured term loan, $19mm 7.5% ‘19 senior convertible notes (Wells Fargo NA)

• Company Professionals:

  • Legal: Skadden Arps Slate Meagher & Flom LLP (Ron Meisler, Lisa Laukitis, Christopher Dressel, Jennifer Madden, Christine Okike) & (special counsel) Sheppard Mullin Richter & Hampton LLP

  • Legal Conflicts Counsel: Togut Segal & Segal LLP (Albert Togut, Neil Berger, Kyle Ortiz)

  • Board of Directors

    • Legal: Davis Polk & Wardwell LLP

  • Independent Director: Joseph Farnan

    • Legal: Kirkland & Ellis LLP

  • Financial Advisor: FTI Consulting Inc. (Michael Katzenstein, Sean Gumbs, Heath Gray, Om Dhavalikar, Tom Sledjeski, John Hayes, Andrew Kopfensteiner)

  • Investment Banker: Centerview Partners Holdings LP (Samuel Greene, Josh Thornton, Ercument Tokat)

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

• Other Parties in Interest:

  • Prepetition Agent & DIP Lender: CRG Servicing LLC

    • Legal: Venable LLP (Jeffrey Sabin, Lawrence Cooke)

  • Stalking Horse Bidder: Bausch Health Companies Inc.

    • Legal: Wachtell Lipton Rosen & Katz (Richard Mason, Michael Benn)

  • Ad Hoc Committee of Equity Holders

    • Legal: Cole Schotz PC (Ryan Jareck, Irving Walker, Norman Pernick, Mark Tsukerman)

  • Official Committee of Equity Security Holders

    • Legal: Gibson Dunn & Crutcher LLP (David Feldman, Matthew Kelsey, Alan Moskowitz, J. Eric Wise)

    • Financial Advisor: Houlihan Lokey Capital, Inc. (Christopher Di Mauro, Geoffrey Coutts)

  • Official Committee of Unsecured Creditors (Highbridge Capital Management, 1992 MSF International Ltd., 1992 Tactical Credit Master Fund LP)

    • Legal: Latham & Watkins LLP (Richard Levy, Jeffrey Mispagel, Matthew Warren, Blake Denton, Christopher Harris)

    • Financial Advisor: Alvarez & Marsal LLP (Mark Greenberg, Richard Newman, Jason Ivy, Martin McGahan, Allison Hoeinghaus, Seth Waschitz, Sean Skinner, Michael Sullivan)

    • Investment Bank: Jefferies LLC (Leon Szlezinger, Jeffrey Finger)

New Chapter 22 Filing - Relativity Fashion Inc.

Relativity Fashion Inc.

5/3/18

Relativity Media LLC and its affiliates are back in bankruptcy court with a proposed expedited 363 sale to UltraV Holdings LLC, an entity backed by Sound Point Capital Management and RMRM Holdings. Per Deadline Hollywood, RMRM is led by David Robbins, former chairman of Bally Technologies; Lex Miron, a veteran media industry advisor; and Larry Robbins, a seasoned media industry executive. 

More to come...

• Jurisdiction: S.D. of New York
• Capital Structure: $mm debt     
• Company Professionals:
  • Legal: Winston & Strawn LLP (Carey Schreiber)
  • CRO/Financial Advisor: M-III Partners (Colin Adams)
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access (once up))
• Other Parties in Interest:
  • Litigation Trust of Previous Chapter 11
    • Legal: Togut Segal & Segal LLP (Frank Oswald, Charles Persons)

New Chapter 11 Filing - Pacific Drilling S.A.

Pacific Drilling S.A.

• 11/12/17 Recap: Another offshore driller finds its way into bankruptcy and, boy!, does its filing attempt to paint one rosy optimistic picture of its particular "competitive strength[]" in the offshore drilling space. But, first, let's take a step back: here, Pacific Drilling ($PACDF), an offshore drilling company formed in 2011 under Luxembourg law, filed bankruptcy in the Southern District of New York after over a year - and we mean YEAR - of speculation that this would end up where it now is. After all, when oil prices are where they are and you provide global ultra-deepwater drilling and complex well construction services to the oil and natural gas industry with high-specification drillships generally stationed in the Gulf of Mexico, the Federal Republic of Nigeria and the Islamic Republic of Mauritania, well, we'd venture an educated guess that the math simply ain't gonna add up. Certainly not at "day rates" averaging an estimated $155k. And so the company has three drillships contracted currently: two on short term agreements and, luckily, one at a well-above market contractual dayrate through September 2019. The others sit "smart-stacked." Choice quote, "My view in light of over 20 years in the industry is that recovery in the market for drilling contracts is a question of “when” not “if”. Pacific Drilling continues to have advantages over competitors with older fleets, as high-specification drilling units are generally better suited to meet the requirements of customers for drilling in deepwater, complex geological formations with challenging well profiles or remote locations. Furthermore, the uniformity and mobility of the Company’s fleet allow a Smart Stacking strategy that will continue to yield cost savings and flexibility if the downturn is prolonged." Clearly those advantages weren't so clear as to form consensus around the negotiating table with the various parties in interest as there is no restructuring support agreement in place here. Nothing like a good old-fashioned free fall into bankruptcy court, an increasingly-rare occurrence these days. 
• Jurisdiction: S.D. of New York
• Capital Structure: $3.188b total debt. Ship Group A Debt: $475mm RCF (Citibank NA), $750mm '20 5.375% Notes (Deutsche Bank Trust Company Americas), $718mm Term Loan B Credit Facility (Citibank NA). Ship Group B Debt (SSCF): $492.5mm 3.75% commercial tranche and $492.5mm (Wilmington Trust NA), combined post-amort equaliing $661.5mm outstanding. Ship Group C Debt: $438.4mm '17 7.25% senior secured notes (Deutsche Bank Trust Company Americas)
• Company Professionals:
  • Legal: Sullivan & Cromwell LLP (Andrew Dietderich, Brian Glueckstein, John Hardiman, Noam Weiss) & Togut Segal & Segal LLP (Albert Togut, Frank Oswald, Scott Ratner)
  • Financial Advisor: Evercore Partners International LLP 
  • Investment Banker: AlixPartners LLP (James Mesterharm)
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • RCF Agent: Citibank NA
    • Legal: Shearman & Sterling LLP (Fredric Sosnick)
    • Financial Advisor: PJT Partners LP
  • Ad Hoc Group of RCF Lenders
    • Legal: White & Case LLP
  • SSCF Agent: Wilmington Trust NA
    • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Tyson Lomazow, Matthew Brod)
    • Financial Advisor: Moelis & Company LLC
  • Ad Hoc Group of Ship Group C Debt, 2020 Notes and Term Loan B
    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Andrew Rosenberg, Elizabeth McColm, Christopher Hopkins)
    • Financial Advisor: Houlihan Lokey
  • 2017 and 2020 Notes Indenture Trustee(s): Deutsche Bank Trust Company Americas
    • Legal: Moses & Singer LLP
  • Large Equityholder: Quantum Pacific (Gibraltar) Limited
    • egal: Skadden Arps Slate Meagher & Flom LLP (Jay Goffman, George Howard)

Updated 11/15/17 at 5:09 pm 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 - Westinghouse Electric Company LLC

Westinghouse Electric Company LLC

• 3/29/17 Recap: File this under the most heavily leaked/discussed bankruptcy filing of all time: the Japanese government seemed to make an announcement about the proposed filing every hour. So...Pennsylvania-based nuclear power company filed for bankruptcy (30 debtors in total) after its parent, Toshiba, took a uuuuuuuuuge $6b+ write-down due to delayed and above-budget construction of plants in Georgia and South Carolina. The company secured a $800mm commitment for a DIP facility to fund the cases after a competitive DIP process with powerhouses like Goldman Sachs, Highbridge and Silver Point duking it out with Apollo. We've already covered this company a lot in previous weeks so suffice it to say that the upshot of this filing is that it will lead many to question the viability of nuclear as an alternative power source.
• Jurisdiction: SD of New York 
• Company Professionals:
  • Primary Legal: Weil (Gary Holtzer, Garrett Fail, Robert Lemons, David Griffiths, Charles Persons, David Cohen)
  • Legal for Toshiba Nuclear Energy Holdings (UK) Limited: Togut Segal & Segal LLP (Albert Togut, Brian Moore, Kyle Ortiz)
  • Financial Advisor: AlixPartners LLC (Lisa Donahue)
  • Investment Banker: PJT Partners Inc. (Timothy Coleman, John Singh, Mark Buschmann, Harold Kim)
  • Claims Agent: KCC (*click on company name for docket)
• Other Parties in Interest:
  • Toshiba Corporation
    • Legal: Skadden Arps Slate Meagher & Flom LLP (Van Durrer, Paul Leake, Annie Li) 
  • Prepetition Agent:
    • Legal: Latham & Watkins LLP (Zulfiqar Bokhari) 
  • Proposed DIP Lenders: Apollo Investment Corporation, AP WEC Debt Holdings LLC, Midcap Financial Trust, Amundi Absolute Return Apollo Fund PLC, Ivy Apollo Strategic Income Fund, Ivy Apollo Multi Asset Income Fund
    • Legal: Paul Weiss Rifkand Wharton & Garrison LLP (Jeffrey Saferstein, Claudia Tobler, Kevin O'Neill) 
  • Proposed DIP Agent: Citibank NA
    • Legal: Shearman & Sterling LLP (Fredric Sosnick, Ned Schodek) 
  • Competing (but losing) DIP Providers: Goldman Sachs Bank USA, HPS Investment Partners LLC, Silver Point Finance LLC
  • Georgia Power Company, Oglethorpe Power Corporation, Municipal Electric Authority of Georgia and City of Dalton Georgia
    • Legal: Jones Day (Gregory Gordon, Dan Prieto, Amanda Rush, Anna Kordas, Jeffrey Ellman)
  • Municipal Electric Authority of Georgia
    • Legal: Alston & Bird LLP (Dennis Connolly)
  • South Carolina Electric & Gas Company and South Carolina Public Service Authority
    • Legal: Reed Smith LLP (Paul Singer, Derek Baker, Tarek Abdalla)
  • Oglethorpe Power Corporation (An Electric Membership Corporation)
    • Legal: Dechert LLP (Michael Sage, Stephen Wolpert) & Parker Hudson Rainer & Dobbs LLP (C. Edward Dobbs)
  • Exelon Generation Company LLC
    • Legal: Ballard Spahr LLP (Matthew Summers)
  • Official Committee of Unsecured Creditors
    • Legal: Proskauer Rose LLP (Martin Bienenstock, Timothy Karcher, Vincent Indelicato)
    • Financial Advisor: Alvarez & Marsal LLC

Updated 5/31/17

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