New Chapter 11 Filing - M&G USA Corporation

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M&G USA Corporation

  • 10/24/17 Recap: Disruption via cliche and foreign competition. Here, the plastics maker and indirect subsidiary of petrochemical giant Mossi Ghisolfi Group filed for bankruptcy. The company had begun construction on a vertically-integrated plant in Corpus Christi Texas back in 2013 but then they ran headfirst into the single-most common construction cliche out there: delays and cost overruns. And that was before Hurricane Harvey compounded matters. The plant remains incomplete and, consequently, the company has "severe liquidity constraints" that it intends to address in bankruptcy - specifically, through a significant deleveraging. The company highlighted several other causes for its state of affairs: (i) higher raw material costs due to supply shortages, (ii) a recent wave of competing low-priced imports that flooded the US market (note: the company has outstanding petitions with the US Department of Commerce and the US International Trade Commission alleging that imports of polyethylene terephthalate resin from Brazil, Indonesia, South Korea, Pakistan and Taiwan are being "dumped" in the US market), and (iii) price-compression due to a competitors GOB sale. The company seeks approval of a $100mm DIP credit facility to fund its cases. 
  • Jurisdiction: D. of Delaware (Judge Shannon)
  • Capital Structure: $1.7b outstanding principal amount of debt (see below)   
  • Company Professionals:
    • Legal: Jones Day (Scott Greenberg, Carl Black, Stacey Corr-Irvine, Michael Cohen, Nicholas Morin, Peter Saba, James Sottile IV, Daniel Merrett, Oliver Zeltner) & (local) Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, James O'Neill, Joseph Mulvihill)
    • Financial Advisor/CRO: Alvarez & Marsal North America LLC (Dennis Stogstill)
    • Investment Banker: Rothschild Inc. (Neil Augustine)
    • Board of Directors: Alan Carr, Frederick Brace
    • Claims Agent: Prime Clerk LLC (*click on link above for free docket access)
  • Other Parties in Interest:
    • DAK Americas LLC 
      • Legal: Weil Gotshal & Manges LLP (Alfredo Perez, Christopher Lopez) & (local) Morris Nichols Arsht & Tunnell LLP (Curtis Miller)
    • Equity Holders: Magnate S.a r.l.
      • Legal: Kirkland & Ellis LLP
    • DIP Lender: Banco Inbursa S.A., Institucion De Banca Multiple, Grupo Financiero Inbursa
      • Legal: Cleary Gottlieb Steen & Hamilton LLP
    • Large Unsecured Creditor: Indorama Ventures Montreal LP
      • Legal: Lowenstein Sandler LLP (Paul Kizel, Nicole Fulfree)
    • Official Committee of Unsecured Creditors:
      • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Abhilash Raval, Lauren Doyle) & (local) Cole Schotz P.C. (J. Kate Stickles, David Hurst)

Updated 11/19/17

Source: First Day Declaration

Source: First Day Declaration

New Chapter 11 Bankruptcy - Appvion Inc.

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Appvion Inc.

  • 10/2/17 Recap: The 100+-year old Appleton Wisconsin-based manufacturer of specialty coated paper has filed for bankruptcy. The company operates in two segments, the thermal paper segment and the carbonless paper segment. The thermal paper segment, on the surface, seems like it would be the most susceptible segment to technological disruption. It is used in four principal end markets: 1) point-of-sale for retail receipts and coupons (PETITION Note: you could understand why this would seemingly be in decline with Square and other P.O.S. stations now emailing receipts - not to mention more and more retail being done online); 2) label products for shipping, warehousing, medical and clean-room supplies (PETITION Query: perhaps the shipping labels offsets the paper receipts?); 3) tags and tickets for airline/baggage applications, events and transportation tickets, lottery and gaming applications (PETITION Note: one of us bought a baseball a scannable paperless ticket the other day from Stubhub...hmmm); and 4) printer, calculator and chart paper for engineering, industrial and medical diagnostic charts. The thermal paper segment is 60% of the company's net sales and has enjoyed annual average growth rates between 1-3%. Somewhat shockingly. PETITION Note: We would have liked to have seen those four sub-segments separated out. Meanwhile, the carbonless paper segment accounts for the other 40% of net sales; it produces coated paper products for design and print applications. The paper is used in a variety of end markets including government, retail, financial, insurance and manufacturing. This segment has been in structural decline since 1994, down approximately 7-11% annually due to the rise of new technologies in digital laser, inkjet and thermal printers. Oh, and electronic communications: the company just throws that in their bankruptcy papers like it's an afterthought. In other words, government and corporations are relying more on email than on the printed page which, duh, obviously impacts this segment. The company owns there manufacturing plants and leases three warehouses; it also has 915 union employees - owed $112.6mm in obligations - who probably ought to get ready to get bent (they are represented by the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (the “USW”). The company blames the chapter 11 filing on negative industry trends, an unsustainable degree of balance sheet leverage, inability to adequately address near-term maturities and rapidly deteriorating liquidity. Liquidity became even more of an issue after the company issued a "going concern" warning and received an S&P credit downgrade - two things that obviously made suppliers skittish and resulted in demands for disadvantageous trade terms. Recognizing decreased liquidity, the company appears to have taken as much cost out of the business as it can which, from the looks of the company's papers, may be artificially inflating the numbers on the thermal side in the face of technological innovation. PETITION Note: the assumptions the bankers concoct for this side of the business ought to be watched very carefully. Somewhat surprisingly, despite a full slate of advisors and months of lead-up to the filing, this is a classic free-fall into bankruptcy: there doesn't appear to be any restructuring support agreement with the lenders whatsoever. There is, however, a proposed $325.2mm DIP credit facility which would include $85mm of new money and a $240.2mm rollup of pre-petition money (in other words, the full amount of pre-petition TL & RCF monies outstanding, ex-interest). Nothing like being senior in the cap stack. Final PETITION Note: anyone think this will be the last paper-related bankruptcy in, say, the next 12 months? This is starting to look like 2007 all over again...
  • Jurisdiction: D. of Delaware
  • Capital Structure: $335mm first lien TL & $100 RCF ($240.8mm outstanding included accrued/unpaid interest), $250mm '20 9% second lien senior notes, $24mm A/R securitization, $6mm Industrial Development Bonds, $500k TL with the State of Ohio
  • Company Professionals:
    • Legal: DLA Piper (US) LLP (Richard Chesley, Stuart Brown, Jamila Willis, Kaitlin Edelman)
    • Financial Advisor/CRO: AlixPartners LLP (Alan Holtz, Pilar Tarry, Nathan Kramer)
    • Investment Banker: Guggenheim Securities LLC (Ronen Bojmel)
    • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
    • Strategic Communications Consultant: Finsbury LLC
  • Other Parties in Interest:
    • DIP Admin Agent: Wilmington Trust, NA
      • Legal: Covington & Burling LLP (Ronald Hewitt) & (local) Pepper Hamilton LLP (David Fournier)
    • DIP Lenders
      • Legal: O'Melveny & Myers LLP (George Davis, Daniel Shamah, Matthew Kremer, Jennifer Taylor) & (local) Richards Layton & Finger P.A. (Mark Collins, Michael Merchant, Brett Haywood)
    • Prepetition Credit Agreement Admin Agent: Jefferies Finance LLC
      • Legal: Jones Day (Scott Greenberg, Brad Erens) & (local) Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, Timothy Cairns)
    • Key Bank National Association
      • Legal: Reed Smith LLP (Peter Clark II, Jennifer Knox, Emily Devan)
    • Fifth Third Bank
      • Legal: Vedder Price PC (Michael Eidelman, Michael Edelman) & (local) Potter Anderson & Corroon LLP (Jeremy Ryan, R. Stephen McNeill, D. Ryan Slaugh)
    • Ad Hoc Committee of Holders of the 9% '20 Second Lien Senior Secured Notes (ADK Capital LLC, ALJ Capital Management LLC, Archer Capital Management LP, Armory Advisors LLC, Barings LLC, Mackenzie Investments, MAK Capital One LLC, Nomura Corporate Research and Assset Management, Riva Ridge Master Fund Ltd., Rotation Capital Management LP, Scott's Cove Management LLC)
      • Legal: Stroock Stroock & Lavan LLP (Jayme Goldstein, Samantha Martin) & (local) Young Conaway Stargatt & Taylor LLP (Edmon Morton, Matthew Lunn)
    • Second Lien Senior Secured Notes Indenture Trustee: US Bank NA
      • Legal: Foley & Lardner LLP (Richard Bernard, Derek Wright, Mark Prager)
    • Official Committee of Unsecured Creditors
      • Legal: Lowenstein Sandler LLP (Kenneth Rosen, Jeffrey Prol, Wojciech Jung) & (local) Klehr Harrison Harvey Branzburg LLP (Michael Yurkewicz, Morton Branzburg, Sally Veghte)

Updated 10/26/17