New Chapter 11 Filing - The Rockport Company LLC

The Rockport Company LLC

5/14/18

The Rockport Company LLC, a Massachusetts-based designer, distributor and retailer of comfort footwear has filed for bankruptcy — the latest in a string of footwear retailers that has found its way into chapter 11. Payless Shoesource, Sheikh Shoes, and Nine West Holdings are other recent filings. The current owners of the business — its prepetition lenders — purchased the business from Berkshire Partners LLC and New Balance Holding Inc. in 2017. 

The company operates in what it dubs a “highly competitive” business where “[a]t various times of the year, department store chains, specialty shops, and online retailers offer brand-name merchandise at substantial markdowns which further intensifies the competitive nature of the industry.” The company has (i) a robust wholesale business (57% of all its global sales), (ii) a direct retail business (eight (8) full-price and nineteen (19) outlet stores in the United States and fourteen (14) full-price and nineteen (19) outlet stores in Canada), (iii) e-commerce, and (iv) an international distribution segment. 

This business has suffered from (a) operational challenges (a costly and time consuming separation from the Adidas Networks, with which the company's operations were deeply integrated until late 2017), (b) other negative externalities (i.e., the closure of three supply factories, contract disputes with warehousemen, and (c) the burdens of its brick-and-mortar footprint. The company notes, "[o]ver the last several years the Debtors have faced a highly promotional and competitive retail environment, underscored by a shift in customer preference for online shopping." And it notes further, "[t]he unfavorable performance of the Acquired Stores in the current retail environment has made it difficult for the Debtors to maintain sufficient liquidity and to operate their business outside of Chapter 11."

In light of this, armed with a $20 million new-money DIP credit facility (exclusive of rollup amounts) extended by its prepetition ABL lenders, the company has filed for bankruptcy to consummate a stalking horse-backed asset purchase agreement with CB Marathon Opco, LLC an affiliate of Charlesbank Equity Fund IX, Limited Partnership for the sale of the company's assets - OTHER THAN its North American assets — for, among other things, $150 million in cash. The buyer has a 25-day option to continue considering whether to purchase the North American assets but the company does "not expect there to be any significant interest in the North American Retail Assets." Read: the stores. The company, therefore, also filed a "store closing motion" so that it can expeditiously move to shutter its brick-and-mortar footprint at the expiration of the option. Ah, retail. 

• Jurisdiction: D. of Delaware 
• Capital Structure: $57mm prepetition ABL Facility (Citizens Business Capital), $188.3 million '22 prepetition senior secured notes, $11mm prepetition subordinated notes.  
• Company Professionals:
  • Legal: Richards Layton & Finger PA (Mark Collins, Michael J. Merchant, Amanda R. Steele, Brendan J. Schlauch, Megan E. Kenney)
  • Financial Advisor: Alvarez & Marsal Private Equity Services Operations Group, LLC (Paul Kosturos)
  • Investment Banker: Houlihan Lokey Inc.
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Prepetition Noteholders and DIP Note Purchasers
    • Legal: Debevoise & Plimpton LLP (My Chi To, Daniel Stroik) & (local) Pachulski Stang Ziehl & Jones LLP (Bradford Sandler, James O'Neill)
  • Collateral Agent and DIP Note Agent
    • Legal: Holland & Knight LLP (Joshua Spencer) & (local) Pachulski Stang Ziehl & Jones LLP (Bradford Sandler, James O'Neill)
  • ABL Administrative Agent and ABL DIP Agent: Citizens Business Capital
    • Legal: Riemer Braunstein LLP (Donald Rothman, Lon Singer, Jaime Rachel Koff, Jeremy Levesque) & (local) Ashby & Geddes PA (Gregory Taylor)
  • Stalking Horse Bidder: CB Marathon Opco, LLC an affiliate of Charlesbank Equity Fund IX, Limited Partnership
    • Legal: Goodwin Proctor LLP (Jon Herzog, Joseph Bernardi Jr.) & (local) Pepper Hamilton LLP (David Fournier, Evelyn Meltzer)

Updated 5/14/18 at 10:14 am

New Chapter 11 Filing - Videology Inc.

Videology Inc. 

5/10/18

In what could amount to a solid case study in #BustedTech and the up/down nature of entrepreneurship, Videology Inc., a Baltimore based software ad-tech company that generated $143.2 million in revenue in fiscal 2017 has filed for bankruptcy.

The company has two principal business lines: (i) legacy media sales, a demand side (advertisers) platform that Videology would leverage to procure ad inventory to sell to advertising agencies (the supply side); and (ii) its long-tail "core use case," which included "long term planning, management, and execution of a company's entire portfolio of advertising campaigns or advertising inventory with complex, overlapping targets, objections...across multiple delivery channels." We're going to pretend we understand what that means; we think it has something to do with assisting ad agencies target ads effectively. What we do understand is that revenue generation for the more lucrative "core use case" segment involved a long sales pipeline that didn't support timely enough revenues to offset the liquidity draining legacy segment. Ruh roh.

But let's take a step back. This company was founded in February 2007. It raised its $15.1 million Series A round of funding in July 2008, securing Valhalla Partners II as a lead investor. It then secured its $16.4 million Series B round in Q4 2009. Comcast Ventures LP was the lead investor. Thereafter it nailed down its $30.4 million Series C round in May 2011 with New Enterprise Associates 12. Finally, in June of 2013, the company closed its $68.2 million Series D round with Catalyst Investors QP III as lead. Lots of funding. No down rounds. Everything seems to be on the right track.

Except it wasn't. The legacy segment was bleeding cash as early as 2012. The company had to tap the venture debt market in July 2017 to refi-out its bank line of credit. It obtained a $40-45 million 8.5% asset-backed credit facility (secured against virtually everything, including IP) with Fast Pay Partners LLC as agent and Tennenbaum Capital Partners LLC ("TCP"), as documentation agent and investment manager. It also obtained a second $20 million 10% asset-backed "UK" credit facility with FPP Sandbox LLC and TCP, which was secured by the same collateral. Both loans came with exit fees, charge 3% default interest and the larger facility has a 3% end-of-term premium attached to it.

At the same time the company took out the venture debt, it issued $17.1 million of convertible notes from board members and existing major investors (elevating them in the cap table) AND raised an additional $4.7 million in a subsequent rights offering to smaller legacy investors. What do you think will happen to that money? We'll come back to that.

In Q3 2017, the company also sought to find a strategic buyer. It didn't. It then started doing what every distressed company does: it stretched payables while it tried to formulate an out-of-court solution -- in the form of a restructuring or a refinancing. Certain vendors became skittish and withheld payments to the company. The resultant cash squeeze precipitated the prepetition lenders issuance of a notice of default. Thanks to a cash control agreement, they then seized control of the main operating accounts and paid down amounts owing with the company's cash and accounts receivable. And, yes, they applied the default interest rate. This is why they say what they say about possession. Savage. Consequently nothing is due under the larger facility; over $11.2 million remains due on the UK facility. 

The company now has a potential buyer, Amobee Inc., and has filed for bankruptcy to effectuate a sale. The company hasn't yet filed papers indicating the sale price but The Wall Street Journal reports that the purchase price may be $45 million -- or 1/3 of '17 revenues. The WSJ also reports that the company has nailed down a $25 million DIP credit facility which will be used to pay down the UK facility and fund the cases. Presumably the sale price will pay off the DIP and the $20 million that remains will be left for unsecured creditor recoveries. Back of the envelope, that will be about a 25% recovery. 

As for the equity holders? In the absence of bumping up by way of the convertible note, they'll be wiped out. That's venture capital for you. The venture debt providers, however, did well. 

• Jurisdiction: D. of Delaware (Judge Shannon)

• Capital Structure: $11.2mm UK Loan Facility (FPP Sandbox LLC and Tennenbaum Capital Partners LLC), $17.1 million convertible promissory note.

• Company Professionals:
  • Legal: Cole Schotz PC (Irving Walker, Patrick Reilley)
  • Financial Advisor: Berkeley Research Group LLC
  • Claims Agent: Omni Management Group (*click on company name above for free docket access)
• Other Parties in Interest:
  • Prospective Buyer: Amobee Inc.
    • Legal: Goodwin Proctor LLP (Gregory Fox, Alessandra Simons) & (local) Womble Bond Dickinson (US) LLP (Matthew Ward, Morgan Patterson)
  • Secured Lenders: FastPay Partners LLC & FPP Sandbox LLC
    • Legal: Buchalter (William Brody, Ariel Berrios) & (local) Richards Layton & Finger PA (John Knight, Christopher De Lillo)
  • DIP Lender: Draper Lending LLC
    • Legal: Arent Fox LLP (Robert Hirsh, Jordana Renert) & (local) Bayard PA (Justin Alberto, Daniel Brogan)

New Chapter 11 Filing - RMH Franchise Holdings, Inc.

RMH Franchise Holdings, Inc.

05/08/18

In 🍟Casual Dining is a Hot Mess🍟, we wrote:

…don’t let the lull in restaurant activity fool you. As we’ve stated before, this is a space worth watching given intense competition and the rise of food delivery and meal kit services - both direct-to-consumer and in-grocery.

Looks like we spoke to soon about a lull. Earlier this week RMH Franchise Holdings Inc. filed for bankruptcy in the District of Delaware. If you’ve never heard of RMH Franchise Holdings Inc., have no fear. You haven’t. Nor had we. But it is purportedly the second largest franchisee operator of Applebee’s Neighborhood Grill & Bar restaurants, operating 159 restaurants across 15 states. The company represents a bit less than 10% of all Applebee’s locations. RMH cobbled together this footprint after a string of acquisitions between 2012 and 2015, growing quickly and expanding its geographical scope.

Alas, Applebee’s is a casual dining establishment and, as previously covered, casual dining is struggling. The company notes,

…significant challenges encountered by the Applebee’s brand generally, and specific managerial decisions made on behalf of it by its franchisor, Applebee’s International, Inc. (the “Franchisor”), have negatively impacted the Debtors’ business operations and left them facing near-term liquidity issues.

These numbers paint a stark picture:

For the trailing twelve months ending March 31, 2018,4 the Debtors generated approximately $375.9 million in gross revenue, and $12.6 million of EBITDA, on a consolidated basis, a drop of roughly 60% in two years from the Debtors’ peak of $431.1 million and $31.4 million, respectively, in the twelve months ending March 31, 2016.

60%. Sixty…percent. Y.I.K.E.S. Much of this is attributable to a steep decline in same store sales over a period of years.

It is apparently also attributable to misguided directives from Applebee’s International Inc. (“AI”), the franchisor. Efforts to convert to wood-fired grill platforms and engage consumers with new ad campaigns flopped, despite the additional capital expenditures that those efforts required. In addition,

These difficulties were exacerbated by generally increased food costs, higher minimum wage rates and other labor costs, and increasing rents.

Consequently, the company spent the last year trying to improve operational efficiency and reduce operating expenses. It (and its agent Hilco Real Estate LLC) renegotiated leases with landlords, shed underperforming locations and negotiated with the corporate overlords to reduce corporate expenses. What it didn’t secure, however, was a long-term definitive agreement with Applebee’s International Inc. (“AI”). Instead, AI indicated that intends to issue a notice of termination of the company’s franchise rights in Arizona and Texas. That, friends, is what you call capitulation.

And the result, friends, is a crash landing into bankruptcy to trigger the automatic stay. Now the company will shed additional leases, negotiate with AI, and determine what options remain for a casual dining establishment that faces a headwinds coming multiple directions.

• Jurisdiction: D. of Delaware (Judge Shannon)
• Capital Structure: $68.4mm debt (Bank of America), $30mm (BMO Harris Bank NA)    
• Company Professionals:
  • Legal: Young Conaway Stargatt & Taylor LLP (M. Blake Cleary, Kenneth Enos, Robert F. Poppiti, Jr., Justin H. Rucki, Tara C. Pakrouh)
  • Financial Advisor: Mastodon Ventures Inc.
  • Real Estate Advisor: Hilco Real Estate LLC
  • Claims Agent: Prime Clerk LLC (*click on case name above for free docket access).
• Other Parties in Interest:

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 - AcuSport Corporation

AcuSport Corporation

5/1/18

AcuSport Corporation, an Ohio-based (i) distributor of outdoor and shooting sports products and (ii) consultant to independent retailers, has filed for bankruptcy. Why? #MAGA!! That's why. 

In the company's words,

At a time when the defense market experienced a downturn in demand, the civilian small arms and ammunition market of the firearms industry was doing well. Consumers were concerned about the possibility of stricter gun control laws, which led to increased sales. Many firearms manufacturers, retailers, and distributors, including AcuSport, understood that consumers anticipated Hillary Clinton would win the presidential election in 2016. The common belief shared by businesses in the firearms industry was that demand would increase if Clinton was elected as President because consumers expected the new administration to seek to implement gun-control legislation. As a result, AcuSport, along with other firearms businesses, prepared for a spike in demand by, among other things, purchasing substantial amounts of inventory.

This should sound familiar. Remington Outdoor Company had a similar narrative when it filed for bankruptcy. Hilary Clinton's election loss has apparently wreaked havoc on the gun industry. To put some numbers around this, AcuSport's revenue decreased 30% in fiscal 2017 YOY. And yet it apparently has substantial inventory -- a fact borne out by its who's who list of top creditors. Gun lovers will recognize some of the names: Sturm Ruger & Company Inc. ($RGR), Glock Inc., Sig Sauer Inc., and others. If you're not a gun lover and happen to be a bankruptcy professional, you should recognize two others: Remington Arms Co. and Colt's Manufacturing Co. The latter two know their way around a bankruptcy court.

This turn of events triggered a default under the company's Wells Fargo-provided credit facility. The company proposes to sell to Ellett Brothers LLC, which has executed a stalking horse asset purchase agreement for a purchase price of $7.75 million plus the value of AcuSport's inventory. Subject to AcuSport's option and an administrative fee, the purchaser will also collect any accounts receivable existing at the time of closing. 

All of the Trump/NRA lovefests in the world can't seem to prevent gun-related companies from going bankrupt. Ironic. #MAGA!!

• Jurisdiction: S.D. of Ohio (Judge Hoffman)
• Capital Structure: $17.5mm debt (Wells Fargo Bank NA)      
• Company Professionals:
  • Legal: Bryan Cave Leighton Paisner LLP (Jason Dejonker, Cullen Kuhn) & (local) Allen Kuehnle Stovall & Neuman LLP (Thomas Allen, Richard Stovall, Erin Gapinski)
  • Financial Advisor: Huron Consulting Services LLC (Daniel Wikel)
  • Investment Banker: Huron Transaction Advisory LLC (Geoffrey Frankel)
  • Claims Agent: Donlin Recano & Company Inc. (*click on company name above for free docket access)
• Other Parties in Interest:
  • DIP Lender: Wells Fargo Bank NA
    • Legal: Goldberg Kohn Ltd. (Jacob Marshall, Jeremy Downs, Michael Tucker) & (local) Ulmer & Berne LLP (Reuel Ash)
  • Prospective Buyer: Ellett Brothers LLC
    • Legal: McDermott Will & Emery LLP (Timothy Walsh, Megan Preusker) & (local) Hahn Loeser & Parks LLP (Lawrence Oscar, Daniel DeMarco)

Updated 5/4 at 7:05 CT

New Chapter 11 Filing - Gibson Brands Inc.

Gibson Brands Inc.

5/1/18

After months of speculation (which we have covered here and elsewhere), the famed Nashville-based guitar manufacturer has finally filed for Chapter 11. We're old enough to remember this:

Late Tuesday, GIbson Brands CEO Henry Juszkiewicz denied all of the reports and indicated via press release that a plan was underway to salvage the brand.

What Mr. Juszkiewicz didn't say was that "a plan" actually meant a "plan of reorganization." Which is okay: nobody believed him anyway. 

And here's why: in the company's First Day Declaration, the company proudly boasts,

The Debtors' strength, rooted in their iconic Gibson, Epiphone, KRK, and other brands that have shaped the music industry for over 100 years, have been the brands of choice for countless musicians and recording artists, including some of the most legendary guitarists in history such as Muddy Waters, BB King, Elvis Presley, Pete Townsend, Keith Richards, Duane Allman, Elvis Costello, Lenny Kravitz, Slash, Dave Grohl, Joe Bonamassa, and Brad Paisley, among others. 

Anyone else see an issue with this lineup? Legends, sure, but not exactly a group of artists you see listed on Coachella posters. Even in a publicly-available document, this company doesn't know how to market itself to the masses. Case and point, after Guitar Center got its out-of-court deal done last week, we wrote the following:

Gibson may want to embrace the present. But we digress. 

Unbeknownst to many, however, Gibson is more than just its legendary guitars. No doubt, guitars are a big part of its business. According to the company's First Day Declaration (which, for the record, is one of the more jumbled incoherent narratives we've seen in a First Day Declaration in some time), 

Gibson has the top market share in premium electric guitars, selling over 170,000 guitars annually in over eighty (80) countries worldwide and selling over 40% of all electric guitars priced above $2,000.

But the company also expanded to include a "Professional Audio" segment, its musical instrument and pro-audio segment ("MI," which is positive cash flow), and a "Gibson Innovations" business ("GI"), which stems from a 2014 leveraged transaction. The latter business has been a drag on the overall enterprise ever since the transaction eventually leading to breaches of certain financial covenants under the company's senior secured bank debt financing agreements. The company was forced to pay down the debt to the tune of $60 million since the Fall of 2017, a cash drain which severely accentuated liquidity issues within that business. It came to this brutal reality: 

...the GI Business became trapped in a vicious cycle in which it lacked the liquidity to buy inventory and drive sales while at the same time it lacked the liquidity to rationalize its workforce to match its diminished operations.

That's rough. Even rougher is that on April 30, 2018, the GI business initiated formal liquidation proceedings under the laws of at least 8 different countries. Looks like Mr. Juszkiewicz' previous expansion "plan" was an utter disaster. 

⚡️Warning: Geeky stuff to follow ⚡️:

Now, the company is left with restructuring around the EBITDA- positive MI business with the hope of maximizing recovery for stakeholders. The holders of 69% of the principal amount of notes (PETITION NOTE: for the uninitiated, this satisfies the 2/3 in amount requirement of the bankruptcy code; unknown whether they satisfy the second prong of 1/2 in number) have entered into a Restructuring Support Agreement which would effectively equitize the notes and transfer ownership of MI to the noteholders. The company has also entered into a $135 DIP credit facility backstopped by an ad hoc group of noteholders to finance the company's trip through bankruptcy (the mechanic of which effectively rolls up some of the prepetition debt into the postpetition facility, giving the noteholders higher distribution priority). 

The RSA envisions a transaction whereby the company will exit bankruptcy with an untapped asset-backed lending facility and enough exit financing to pay off the DIP facility. So, the noteholders will collect some nice fees for about 9 months. The lenders under the DIP facility will have the option to cover the DIP monies into equity in the reorganized company at a 20% discount to the plan's valuation. 

⚡️Geeky Stuff Over. Now Back to Regularly Scheduled Snark ⚡️:

Naturally, current management has somehow convinced the new owners, i.e., the funds converting their notes into equity, that they're so invaluable that they should receive millions in "transition"-based compensation and warrants for upside preservation. Makes total sense. David Berryman, who runs Epiphone, will get a one year employment agreement paying $3.35 million, 5 year-warrants, and health benefits; Mr. Juszciewicz will get a one year "consulting agreement" paying $2.1 million, 5 year-warrants and health benefits (plus other profit-sharing incentives). It sure pays to run a company into bankruptcy these days. Naturally, they'll also get releases from any liability. Because, you know, bankruptcy!!

One final note: Thomas Lauria and White & Case LLP are listed as the 22nd highest creditor. Popping popcorn. 

• Jurisdiction: D. of Delaware 
• Capital Structure: $17.5 million ABL (Bank of America NA)/ $77.4 million Term Loan (GSO Capital Solutions Fund II AIV-I LP), $375 million '18 8.875% senior secured notes (Wilmington Trust NA), $60 million ITLA loan (GI Business only)
• Company Professionals:
  • Legal: Goodwin Proctor LLP (Michael H. Goldstein, Gregory W. Fox, Barry Z. Bazian) & (local) Pepper Hamilton LLP (David Stratton, David Fournier, Michael Custer, Marcy McLaughlin)
  • Financial Advisor/CRO: Alvarez & Marsal North America LLC (Brian Fox) 
  • Investment Banker: Jefferies LLC (Jeffrey Finger)
  • Independent Directors: Alan Carr & Sol Picciotto
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • DIP Agent: Cortland Capital Market Services LLC
    • Legal: Arnold & Porter Kaye Scholer (D. Tyler Nurnberg, Steven Fruchter, Sarah Gryll) & (local) Young Conaway (same four names as below)
  • Prepetition ABL Agent: Bank of America NA
    • Legal: Winston & Strawn LLP (Jason Bennett, Christina Wheaton)
  • Indenture Trustee: Wilmington Trust NA
    • Legal: Shipman & Goodwin LLP (Marie Hofsdal, Patrick Sibley, Seth Lieberman, Eric Monzo)
  • Ad Hoc Group of Noteholders
    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Brian Hermann, Robert Britton, Adam Denhoff, Kellie Cairns) & (local) Young Conaway Stargatt & Taylor LLP (Pauline Morgan, Sean Greecher, Andrew Magaziner, Betsy Feldman)
  • Ad Hoc Minority Noteholders Committee (Lord Abbett & Co. LLC, Wilks Brothers LLC)
    • Legal: Brown Rudnick LLP (Robert Stark, Steven Levine, Brian Rice) & (local) Ashby & Geddes PA (William Bowden)
  • Equity Holder: GSO Capital Partners LP
    • Legal: White & Case LLP (J. Christopher Shore, Andrew Zatz, Richard Kebrdle) & (local) Fox Rothschild LLP (Jeffrey Schlerf, Carl Neff, Margaret Manning)

Updated 5/2 5:12 pm CT

New Chapter 11 Filing - Nighthawk Royalties LLC

Nighthawk Royalties LLC

4/30/18

Colorado-based hydrocarbon exploration and production company filed for bankruptcy after "macroeconomic and industry distress and a failed waterflooding project" led it to trigger defaults under its senior secured credit facility with the Commonwealth Bank of Australia. The company has a signed letter of intent to sell its assets to a prospective purchaser under section 363 of the bankruptcy code. The company is also leveraging the Bankruptcy Code's automatic stay provision to prevent Fastighets AB Korpralen, a Swedish company affiliated with a former director of the debtor, from commencing shareholder litigation against the company. 

• Jurisdiction: D. of Delaware (Judge Shannon)
• Capital Structure: $21.25mm debt (Commonwealth Bank of Australia)
• Company Professionals:
  • Legal: Greenberg Traurig LLP (Mark Bloom, Paul Keenan Jr., John Dodd, Ari Newman, Dennis Meloro)
  • Investment Banker: SSG Advisors LLC
  • Claims Agent: JND Corporate Restructuring (*click on company name above for free docket access)
• Other Parties in Interest:
  • Major Shareholder: Fastighets AB Korpralen
    • Legal: K&L Gates LLP (Steven Caponi)

New Chapter 11 Filing - Bertucci's Holdings, Inc.

Bertucci's Holdings, Inc.

4/16/18

Bertucci's, the well-known Massachusetts-based restaurant chain with 59 casual family dining restaurants has filed for bankruptcy in order to effectuate sale to Right Lane Dough Acquisition, LLC. The company is owned by an affiliate of Levine Leichtman Capital Partners. 

As we discussed in a recent Members'-only write-up, the casual dining space has been under siege for some time. The company notes,

"With the rise in popularity of quick-casual restaurants and oversaturation of the restaurant industry as a whole, Bertucci’s – and the casual family dining sector in general – has been affected by a prolonged negative operating trend in an ever increasing competitive price environment. Consumers have more options than ever for spending discretionary income, and their preferences continue to shift towards cheaper, faster alternatives. Since 2011, Bertucci’s has experienced a year-over-year decline in sales and revenue."

To combat these trends, the restaurant implemented what seemingly every company selling a product is trying today: experiential something-or-other. It brought back its original executive chef and deployed quarterly food and wine pairings, specialty menus, express lunches and wine specials to draw and cultivate customers. Taking a page out of Domino's book, it also invested in and launched a mobile app. These measures -- along with attempts to streamline operational costs and re-negotiate leases -- were meant to help stop the bleeding. While millions of dollars of costs were taken out and 29 unprofitable leases identified (all of which the company intends to reject immediately), revenue could not support the company's debt and working capital needs. The company defaulted on its credit facility late last year. 

The company has determined that a sale of the remaining business is the best option for maximizing value to its stakeholders. What's that value, you ask? $1.7 million in cash, a credit bid against the DIP credit facility of no less than $4 million (which is the full principal amount of the DIP), and $14 million in new second lien notes. 

• Jurisdiction: D. of Delaware 
• Capital Structure: $37.9mm secured 1st lien term loan (CIT Bank), $29.6mm secured 2nd lien term loan (DV, an affiliate of Levine Leichtman Capital Partners), $42.9mm secured holdco first lien term loan (DV)  
• Company Professionals:
  • Legal: Landis Rath & Cobb LLP (Adam Landis, Kerri Mumford, Kimberly Brown, Jennifer Cree) & (special counsel) Schulte Roth & Zabel LLP (Adam Harris) 
  • Investment Banker: Imperial Capital LLC
  • Real Estate Advisor: Hilco Real Estate LLC
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Stalking Horse Bidder: Right Lane Dough Acquisition, LLC
    • Legal: McDonald Hopkins LLC (David Agay)
  • 1st Lien Agent: CIT Bank
    • Legal: Holland & Knight LLP (Brent McIlwain) & (local) Young Conaway Stargatt & Taylor LLP (Robert Brady)

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 - VER Technologies Holdco LLC

VER Technologies Holdco LLC

4/4/18

VER Technologies, a Los Angeles-based provider of for-rent production equipment and engineering support for live and taped television, cinema, live events and broadcast media has filed for chapter 11 bankruptcy in the District of Delaware. We hadn't heard of these guys before and we're guessing that, unless you live in Los Feliz or Silverlake, you haven't either. Suffice it to say that they're they guys behind the guy, so to speak. Recent broadcast work included the 2018 Super Bowl broadcast (eat it Brady); they also serve over 350 live music customers per year including the Biebs and the band-formerly-known-as-Coldplay-now-called-the-Chainsmokers. 

In some respects, this is a story about attempted avoidance of disruption leading to disruption. The company initially specialized in rentals with no equipment customization but, with time, opted to expand its product and service offerings to include customization. This endeavor, however, proved capital intensive to the point where the company exceeded $270 million on its prepetition asset-backed lending facility. This triggered cash sweeps to the company's bank which proved to further constrain liquidity. This sparked a need for an operational and balance sheet restructuring to maximize cash and get the company to the point of a potential transaction.

In other respects, this is another leveraged buy-out that saddled the target company with a wee bit too much debt. Moreover, the company seems to have undertaken a number of ill-advised or ill-executed operational initiatives that, ultimately, undercut revenue. It happens. 

Now the company -- supported by a restructuring support agreement with its lenders (including funds managed by GSO Capital Partners) -- hopes to facilitate a pre-negotiated merger with an entity controlled by Production Resource Group LLCl ("PRG"). PRG is a Jordan Company-owned provider of entertainment and event technology solutions. Naturally, the term lenders will also own a portion of the reorganized company. Per the term sheet, PRG will get 72% preferred and 80% common; the term lenders will get the delta. The reorganized company will still have a meaningful amount of debt on its balance sheet with a proposed new (unquantified) first lien term loan and a $435 million new second lien term loan. 

The company has secured a proposed $364.7 million DIP credit facility ($300mm ABL, $64.7mm Term Loan, of which $50mm is new money) to support its time in bankruptcy. The company seeks to be in and out of bankruptcy court in approximately 115 days. 

• Jurisdiction: D. of Delaware (Judge Gross)
• Capital Structure: $296.3mm ABL Facility (Bank of America NA), $424.2mm term loan (GSO Capital Partners LP/Wilmington Trust NA), $14mm FILO loan, $18.75mm New FTF Inc. Note, $7.5mm Catterton Notes.  
• Company Professionals:
  • Legal: Kirkland & Ellis LLP (Joshua Sussberg, Ryan Blaine Bennett, Christine Pirro, Jamie Netznik) & (local) Klehr Harrison Harvey Branzburg LLP (Domenic Pacitti, Morton Branzburg)
  • Financial Advisor/CRO: AlixPartners LLC (Lawrence Young, Stephen Spitzer, Bradley Hunter, Christopher Blacker, James Guyton, Brad Hall)
  • Investment Banker: PJT Partners LP (Nick Leone)
  • Strategic Communications: Joele Frank
  • Independent Director: Eugene Davis
    • Legal: Kramer Levin Naftalis Frankel LLP (Philip Bentley)
  • Claims Agent: KCC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Prepetition ABL Agent and DIP ABL Agent:
    • Legal: Skadden Arps Slate Meagher & Flom LLP (Shana Elberg, Christopher Dressel, Anthony Clark, Robert Weber, Cameron Fee)
    • Financial Advisor: Perella Weinberg Partners
  • DIP Term Loan Agent: Wilmington Trust NA
    • Legal: Alston & Bird LLP (Jason Solomon)
  • Supporting Term Loan Lenders: GSO Capital Partners, ABR Reinsurance Ltd., Consumer Program Administrators Inc., Irving LLC
    • Legal: Morgan Lewis & Bockius LLP (Frederick Eisenbeigler, Andrew Gallo, Christopher Carter) & Richards Layton & Finger PA (Mark Collins, Amanda Steele, Joseph Barsalona)
  • 12% Subordinated Noteholder:
    • Legal: King & Spalding LLP (Jeffrey Pawlitz, Michael Handler)
  • Indenture Trustee FTF Note:
    • Legal: Robins Kaplan LLP (Howard Weg, Michael Delaney)
  • Production Resource Group LLC
    • Legal: Greenberg Traurig LLP (Todd Bowen) & Morrison Cohen LLP (Joseph Moldovan, Robert Dakis)
  • Wells Fargo NA
    • Legal: Otterbourg PC (Andrew Kramer)
  • Official Committee of Unsecured Creditors
    • Legal: SulmeyerKupetz PC (Alan Tippie, Mark Horoupian, Victor Sahn, David Kupetz) & (local) Whiteford Taylor & Preston LLC (Christopher Samis, L. Katherine Good, Aaron Stulman, Kevin Hroblak)
    • Financial Advisor: Province Inc. (Carol Cabello) 

Updated 5/19/18

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

EV Energy Partners L.P.

4/2/18

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

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

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

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

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

Will Update if Filing Differs from Advertised. 

New Chapter 11 Filing - FirstEnergy Solutions Corp.

FirstEnergy Solutions Corp. 

March 31, 2018

#MAGA!!

FirstEnergy Solutions Corp. ("FES"), the wholly-owned subsidiary of publicly-traded (non-debtor) FirstEnergy Corp. has filed a "freefall" bankruptcy in the Northern District of Ohio. FES is a provider of "unregulated"-yet-regulated energy-related products and services to retail and wholesale customers primarily in Illinois, Maryland, Michigan, New Jersey, Ohio and Pennsylvania. It owns and operates (a) fossil generating facilities (read: coal) in Ohio (three) and Philadelphia (one) through its FirstEnergy Generation subsidiary ("FG") and, (b) 3 nuclear generating facilities (two in Ohio and one in Philadelphia)through its FirstEnergy Nuclear Generation LLC ("NG") subsidiary. 

For those of you who aren't power geeks - and we confess that we are not - this filing gives a pretty solid primer on how United States' power production and distribution works. Or doesn't work - depending on your point of view, we suppose. We summarize some high points here but if you're especially nerdy and want to understand the power industry better, read docket number 55. You can find it via the case name link above. 

A big piece of this bankruptcy filing is the debtors' retail electricity business. Retail sellers of electricity are subject to state-applied "Renewable Portfolio Standards" ("RPS") that requires sellers to obtain a certain percentage or amount of its power supply from renewable energy sources. One way to comply is through the purchase of renewable energy credits ("RECs"). Historically, FES has obtained RECs to comply with the RPS via eight power purchase agreements entered into between 2003-2011 with various wind and solar power producers. But apparently things have changed considerably since then. And FES no longer wants the RECs. 

What's changed? Now FES's actual and projected sales are much lower. Per the company in more detail: 

"The main drivers to the collapse in prices include:

• Lower natural gas prices due to continued improvements in natural gas fracking;

• Excess generating capacity due in part to lower than expected load growth;

• Lower cost of construction for renewable technologies, and/or improved performance (e.g., higher capacity factors); and

• Surplus of RECs."

Also, future market prices and outlook for power and RECs are projected materially lower. RPS mandates are less demanding (#MAGA!!). And the supply of RECs is significantly greater. Said another way: energy disruption. From frackers pushing a rapid expansion in nat gas supplies which, in turn, caused plummeting electricity prices and reduced profits. From regulation and the rise of renewables. From energy efficient electronics. 

Per the company, "While the PPAs made sense to FES at the time they were entered into, a dramatic downturn in the energy market and prices of RECs now renders these contracts extremely burdensome and uneconomic to FES." They're also, according to the debtor, unnecessary: FES is phasing out its retail business and, today, expects to sell less than half of the amount of power this year that it sold in 2013. Consequently, FES seeks to reject those PPAs in bankruptcy.

Which is not the only PPA it seeks to reject. The debtor also seeks to shed its multi-party intercompany PPA pursuant to which it and several other power companies purchase power generated via fossil fuel from the Ohio Valley Electric Corporation ("OVEC"). The debtor alleges that this obligation is priced at above-market rates. And because FES sells very little wholesale power emanating out of the OVEC PPA, it stands to lose approximately $268 million from the deal. Yikes. 

The issue, though, is whether the rejection of the nine PPAs will cause disruption to the continued supply of wholesale electricity or impact the reliability of the transmission grid in the regional transmission organization that governs FES and FG. That generally means YOUR electricity - if you live in the Northeast. Naturally, the debtor argues it won't. The federal government may think otherwise. And this is precisely why the company filed an action seeking a declaratory judgment and injunction against the Federal Energy Regulatory Commission ("FERC") to prevent the feds from hindering -- on the basis of the Federal Power Act -- the company's attempts to reject the PPAs under the federal bankruptcy code. FERC regulates the wholesale power market. It is also why the company has filed a request for assistance from Rick Perry, President Trump's Energy Secretary. This is some real dramatic sh*t folks: a conflict between federal statutes with efforts for executive branch intervention. Someone dial up Daniel Day-Lewis and bring him out of retirement: this could be the next "Lincoln." 

So, in a nutshell: the company filed for bankruptcy because it needs to leverage the bankruptcy code's debtor-friendly provisions to shed some burdensome contracts - including the PPAs. It also needs to address its cost structure, its over-levered balance sheet (in terms of interest payments and near-term maturities), and lease payments under certain sale-leaseback arrangements related to one of its power facilities. Said another way, this is a full-stop restructuring: both operational and financial in nature. There is a "Process Support Agreement" with various parties in interest which reflects a good faith commitment to cooperate on first day motions, implementation of employee retention and severance programs, and establishing a protocol for the disposition of company assets. Sounds great but it doesn't really promise any certainty given the various claims and regulatory issues. Buckle your seat belts. 

Some additional things of note:

• "Just when I thought I was out, they pull me back in!" (Long Don Corleone). Ironically in the week that Westinghouse Electric Corp. emerged out of its own bankruptcy proceeding, it may now find itself back in bankruptcy court for purposes of adjudicating its $2.36 million trade claim.
• Coal (#MAGA!!). A first order of business is the debtor is seeking to reject its coal transportation agreements with BNSF Railway Company ((owned by Berkshire Hathaway ($BRK.A)) and Norfolk Southern Railway Company ($NSC). Why? It expects to order 200,000 tons of coal less than the 2.5 million tons of coal minimum requirement delineated in the contract. The debtor claims that rejection of the contract will save it $105.6 million over the next 12 months as it replaces rail with barge transportation. 
• Commodities. The company also seeks to reject certain uranium supply contracts because (i) it already has enough uranium inventory for the rest of 2018 and 2019, (ii) the spot price for uranium has dropped precipitously since entering into the agreements (from $36 and $48 per pound, respectively, to $22 per pound), and (iii) there is "ample supply of uranium available in the market." 
• Professional Retentions: Two law firms represent the Ad Hoc Group of Holders of the 6.85% Pass Through Certificates due 2034 because George Davis departed O'Melveny & Myers LLP for Latham & Watkins LLP. 

• Jurisdiction: N.D. of Ohio (Judge Koschik)
• Capital Structure: $3.8 billion funded debt     

  • FES

    • $700 million secured revolving credit facility, ~$332 million of '21 6.05% unsecured notes; (c) ~$363 million of '39 6.80% unsecured notes; and (d) $150 million revolving credit note with Allegheny Energy Supply Company, LLC under which $102 million is currently outstanding and is due on April 2, 2018. 

  • FG

    • ~$328 million of secured fixed-rate pollution control revenue notes ("PCNs"); ~$677 million of unsecured fixed-rate PCNs

  • NG

    • ~$285 million of secured PCNs; ~$842 million of unsecured PCNs

• Company Professionals:
  • Legal: Akin Gump Strauss Hauer & Feld LLP (Ira Dizengoff, Lisa Beckerman, Brad Kahn, Scott Alberino, Kate Doorley, David Applebaum, Todd Brecher, Sean O'Donnell, Rachel Presa, Brian Carney, Abid Qureshi, Joseph Sorkin, David Zensky) & (local) Brouse McDowell LPA (Marc Merklin, Kate Bradley, Bridget Franklin) & (conflicts) Willkie Farr & Gallagher LLP
  • Financial Advisor/CRO: Alvarez & Marsal North America LLC (Charles Moore)
  • Investment Banker: Lazard Ltd. 
  • Claims Agent: Prime Clerk LLC (*click on company name for docket)
  • Special Nuclear Regulatory Counsel: Hogan Lovells US LLP
  • Industry Consultants: ICF International Inc.
  • Special Litigation Counsel: Quinn Emanuel Urquhart & Sullivan LLP
  • Tax Consultant: KPMG US LLP
  • Communications Consultant: Sitrick and Company
• Other Parties in Interest:
  • Board of Directors of FirstEnergy Corp. 
    • Legal: Squire Patton Boggs (US) LLP (Stephen Lerner, Peter Morrison, Julia Furlong)
  • Wilmington Savings Fund Society FSB
    • Legal: KIlpatrick Townsend & Stockton LLP (Todd Meyers, Michael Langford) & (local) McDonald Hopkins LLC (Michael Kaczka, Scott Opincar, Maria Carr)
  • Indenture Trustee: Bank of New York Mellon Trust Company, N.A.
  • Indenture Trustee to PCNs: UMB Bank, National Association
  • Ad Hoc Group of Holders of the 6.85% Pass Through Certificates due 2034
    • Legal: O'Melveny & Myers LLP & Latham & Watkins LLP
    • Financial Advisor: Guggenheim Partners LLC
  • Ad Hoc Group of Holders of PCNs issued by FG and NG
    • Legal: Kramer Levin Naftalis & Frankel LLP 
    • Financial Advisor: GLC Advisors & Co.
  • Contract Counterparty: BNSF Railway Company
    • Legal: Whitmer & Eherman LLC (Mary Whitmer, James Ehrman, Robert Stefancin)
  • Non-debtor Parent: FirstEnergy Corp.
    • Legal: Jones Day (Heather Lennox, Thomas Wilson)

New Chapter 11 Filing - Southeastern Grocers LLC

Southeastern Grocers LLC

3/27/18

Southeastern Grocers LLC, the Jacksonville Florida-based parent company of grocery chains Bi-Lo, Winn-Dixie and others, has filed a prepackaged bankruptcy in the District of Delaware - mere weeks after Tops Holding II Corporation, another grocer, filed for bankruptcy in the Southern District of New York. The company notes that, as part of the chapter 11 filing, it intends to "close 94 underperforming stores," "emerge from this process likely within the next 90 days," and "continue to thrive with 582 successful stores in operation." Unlike Tops, it helps when you don't have any collective bargaining agreements.

More to come...

• Jurisdiction: D. of Delaware
• Capital Structure: $385mm ABL (Deutsche Bank AG New York Branch), $425mm 9.25% '19 secured notes (Wilmington Savings Fund Society, FSB), $522mm 8.625%/9.375% '18 Senior PIK Toggle Notes unsecured notes (Wells Fargo Bank, NA)     
• Company Professionals:
  • Legal: Weil Gotshal & Manges LLP (Ray Schrock, Matthew Barr, Sunny Singh) & (local) Richards Layton & Finger PA (Daniel J. DeFranceschi, Paul N. Heath, Amanda R. Steele) 
  • Financial Advisor: FTI Consulting Inc.
  • Investment Banker: Evercore Group LLC (Stephen Goldstein)
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
  • Independent Director: Neal Goldman
• Other Parties in Interest:
  • Ad Hoc Group of Unsecured Noteholders & 9.25% '19 Senior Secured Noteholders
    • Legal: Morrison & Foerster LLP (Dennis Jenkins, Brett Miller) & (local) Drinker Biddle & Reath LLP (Steven Kortanek)
    • Financial Advisor: Moelis & Company LLC
  • Private Equity Sponsor: Lone Star Funds
    • Legal: King & Spalding LLP (W. Austin Jowers, Paul Ferdinands)

Source: First Day Declaration

New Chapter 11 Filing - Wachusett Ventures LLC

Wachusett Ventures LLC

March 26, 2018

Skilled nursing operator in Massachusetts and Connecticut has filed for bankruptcy. The company blamed legacy expenses, management distress and macro issues for its filing. Per the filing, 

"...the Debtors have not been immune to the macroeconomic and industry-wide economic issues impacting the skilled nursing industry. Like others in the industry, the Debtors face declining reimbursement rates, pressure from declining occupancy rates across the country caused by the increased use of home care and other factors, and wage pressure." 

Y'all had better get used to this rationale. 

• Jurisdiction: D. of Massachusetts (Judge Bailey)
• Capital Structure: ~$7mm of funded debt     
• Company Professionals:
  • Legal: Nixon Peabody LLP (RIchard Pedone, Christopher Desiderio, Christopher Fong)
  • Claims Agent: Donlin Recano (*click on company name above for free docket access)

New Chapter 11 - Remington Outdoor Company

Remington Outdoor Company

3/25/18

Remington Outdoor Company, a gun manufacturer, has finally filed for bankruptcy - a day after Americans took to the streets to #MarchforourLives. Ah, bankruptcy irony. The company's operations are truly national in scope; it has manufacturing facilities in New York and Alabama and a primary ammunition plant in Arkansas. Its "principal customers are various mass market retail chains (e.g., Wal-Mart and Dick's Sporting Goods) and specialty retail stores (e.g., Bass Pro Shops and Cabela's) and wholesale distributors (e.g., Sports South)." Guns! #MAGA!!

Why did the company have to file for bankruptcy? We refer you to our mock "First Day Declaration" from February here. Much of it continues to apply. Indeed, our mockery of the change in tone from President Obama to President Trump was spot on: post Trump's election, the company's inventory supply far exceeded demand. The (fictional) threat of the government going house-to-house to collect guns is a major stimulant to demand, apparently. Here is the change in financial performance,

"At the conclusion of 2017, the Debtors had realized approximately $603.4 million in sales and an adjusted EBITDA of $33.6 million. In comparison, in 2015 and 2016, the Debtors had achieved approximately $808.9 million and $865.1 million in sales and $64 million and $119.8 million in adjusted EBITDA, respectively."

Thanks Trump. 

We'd be remiss, however, if we didn't also note that NOWHERE in the company's bankruptcy filings does it mention the backlash against guns or the company's involvement in shootings...namely, the one that occurred in Las Vegas. 

The company, therefore, negotiated with its various lenders and arrived at a restructuring support agreement. The agreement provides for debtor-in-possession credit ($193mm asset-backed DIP + $100mm term loan DIP + $45mm DIP, the latter of which is a roll-up of a bridge loan provided by lenders prior to the filing). Upon the effective date of a plan of reorganization, the third lien lenders and term lenders will own the reorganized company. 

• Jurisdiction: D. of Delaware 
• Capital Structure: $225mm ABL (Bank of America, $114.5mm funded), $550.5mm term loan (Ankura Trust Company LLC), $226mm 7.875% Senior Secured Notes due 2020 (Wilmington Trust NA), $12.5mm secured Huntsville Note     
• Company Professionals:
  • Legal: Milbank Tweed Hadley & McCloy LLP (Gregory Bray, Tyson Lomazow, Thomas Kreller, Haig Maghakian) & (local) Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, Timothy Cairns, Joseph Mulvihill)
  • Financial Advisor: Alvarez & Marsal LLC (Joseph Sciametta)
  • Investment Banker: Lazard (Ari Lefkovits)
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • DIP ABL Agent ($193mm): Bank of America NA (DIP ABL Lenders: Bank of America NA, Wells Fargo Bank NA, Regions Bank, Branch Banking and Trust Company, Synovus Bank, Fifth Third Bank, Deutsche Bank AG New York Branch)
    • Legal: Skadden Arps Slate Meagher & Flom LLP (Paul Leake, Shana Elberg, Jason Liberi, Cameron Fee)
  • Admin Agent to the DIP TL: Ankura Trust Company LLC
    • Legal: Davis Polk & Wardwell LLP (Damian Schaible, Darren Klein, Michele McGreal, Dylan Consla) & (local) Richards Layton & Finger LLP (Mark Collins, Michael Merchant, Joseph Barsalona)
  • Ad Hoc Group of TL Lenders 
    • Legal: O'Melveny & Myers LLP (John Rapisardi, Andrew Parlen, Joseph Zujkowski, Amalia Sax-Bolder) & (local) Richards Layton & Finger LLP (Mark Collins, Michael Merchant, Joseph Barsalona)
  • Third Lien Noteholders
    • Legal: Willkie Farr & Gallagher LLP (Rachel Strickland, Joseph Minias, Debra McElligott) & (local) Young Conaway Stargatt & Taylor LLP (Edmon Morton, Allison Mielke)
  • Wells Fargo Bank NA
    • Legal: Otterbourg PC (Andrew Kramer)
  • Cerberus Operations and Advisory Company, LLC
    • Legal: Schulte Roth & Zabel LLP (David Hillman)
  • Reorganized Board of Directors (Anthony Acitelli, Chris Brady, George W. Wurtz III, G.M. McCarroll, Gene Davis, Ron Coburn, Ken D'Arcy)
• Official Committee of Unsecured Creditors
  • Legal: Fox Rothschild LLP (Michael Menkowitz, Paul Labov, Jason Manfrey, Jesse Harris, Seth Niederman)

Updated: 4/27/18

New Chapter 11 Filing - The Weinstein Company Holdings LLC

The Weinstein Company Holdings LLC

3/19/18

The good news is that the company believes that its total exposure to victims (and creditors) is limited to 999 people/entities and its liability exposure is capped at $1 billion - or at least that's what one could glean from the boxes that the company checked on its chapter 11 petition. 

TWC Chapter 11 Petition

Let's review what's "new" here without regurgitating everything the mainstream media has covered the last several months... 

The Weinstein Company's primary assets fall into three categories: (i) the film library, (ii) the television business, and (iii) the unreleased films portfolio. The library consists of 277 films and thanks to distribution rights sales internationally and to the likes of Netflix and broadcast/cable networks, generates ongoing cash flow. The television business includes the Project Runway franchise and other content like Peaky Blinders, Scream and Six. The latter unreleased portfolio includes five completed films (including Benedict Cumberbatch's "Current War") and other projects in various stages of development. 

The sale effort to a consortium of investors including Yucaipa, Lantern Asset Management and Maria Contreras-Sweet is well documented. As is the Attorney General of New York's complaint against the company. Neither are worth noting in detail here after months of incessant press coverage. Notably, however, Lantern Asset Management stuck with the process after its consortium partners dropped out, agreeing to become the stalking horse bidder for the assets pursuant to a proposed expedited sale process. Why expedited? In the company's words,

"It is an understatement to say that the last six months have been trying for the Company. Intense media scrutiny and various other factors have resulted in, among other things, the Company’s loss of goodwill with employees, contract counterparties, key talent and the entertainment industry at large. In order to preserve the going concern value of the Company’s Assets for the benefit of its stakeholders, the Debtors have determined that a sale of substantially all of their Assets is necessary. Further, the Debtors believe that time is of the essence and that effectuating any such sale as quickly as possible is necessary to maintain operations and preserve value for the benefit of the Debtors’ stakeholders."

Well, also, the company has no cash and the buyer is pushing for speed as a condition to its bid. Lantern has that luxury as the remaining bidder; it is offering $310 million and the assumption of certain project-level non-recourse indebtedness (read: the debt associated with individual projects). Moreover, the company has indicated that Lantern anticipates retaining "most of the Company's employees." That's good: something positive must come out of this for those who had nothing to do with Mr. Weinstein's behavior. Speed is needed, the company argues, to prevent more employees from leaving (25% have already left). 

Some other miscellaneous facts of note:

1. Top Creditor. The number one creditor is a judgment creditor to the tune of $17.36 million.
2. It's Hard Out There for a Pimp. Boies Schiller & Flexner LLC is listed twice in the top 25 creditors. Fresh on the heels of the Theranos fraud suit, this has not been a good week for David Boies and company. 
3. Other Creditors. Other major creditors include Viacom International ($5.6 million), Sony Pictures Entertainment ($3.7 million), Creative Artist Agency ($1.49 million), and Disney ($1.13 million).
4. It's Hard Out There for a Pimp Part II. Several law firms are listed in the top 25 creditors for accounts payable due and owing for professional services. Notably, O'Melveny & Myers LLP is listed at #10 and $3.1 million; it had long been rumored to be representing the company leading into the bankruptcy filing. This means, more likely than not, that Cravath was hired as an 11th hour replacement, leaving O'Melveny as a creditor. Also, Debevoise & Plimpton LLP has been left hanging after conducting the internal investigation of the charges against Mr. Weinstein. 
5. The Cumberbatch. "Current War," the feature starring Benedict Cumberbatch is levered up by $7mm under a production-level loan agreement with East West Bank. Nothing unusual here: just a fun fact. We'll see if Cumberbatch's star power can raise this movie above the debt and the Weinstein taint. 
6. Timing. To the extent any bidder wants to trump Lantern Asset Management, the deadline for bids is April 30 and an auction will occur on May 2 for court approval on May 4. 
7. #FakeNews. The New York Times and the New Yorker both get credit for taking down Mr. Weinstein and for starting the #metoo movement and Time's Up campaign. 
8. Ramifications. The company notes that the response to Mr. Weinstein's misconduct was fast and furious including (i) Apple ceasing plans for a 10-part Elvis biopic to be produced by TWC; (ii) Lin Manuel Miranda demanding that TWC release its rights to the movie adaptation of In the Heights, (iii) Amazon ditching TWC, cancelling plans for a David O'Russell series and dropped TWC as co-producer of a Matthew Weiner series; (iv) Channing Tatum halting development of a movie with the company, and (v) Quentin Tarantino seeking a different studio for his next and ninth film, the first time he would use a studio other than TWC. 
9. Board of Directors. 5 members went running for the exits, including Paul Tudor Jones and Marc Lasry. 
10. Lawsuits. TWC has been named in at least 9 civil actions by victims of Mr. Weinstein, including a broad federal class action, two civil actions by Mr. Weinstein himself, and 6 civil actions by contract counterparties. 

Lastly, it has been reported that any and all NDAs will be "lifted" and no longer apply. This means that those who aren't as financially able as, say, Uma Thurman and Saima Hayek, may now speak out with impunity. Hopefully this frees various women from the shackles of their memories. 

• Jurisdiction: D. of Delaware (Judge Walrath)

• Capital Structure: $156.4mm secured debt (ex-accrued and unpaid interest, MUFG Union Bank NA), $15.6mm junior secured debt (UnionBanCal Equities Inc.), $18.1mm secured term loan (Bank of America NA), $45.4mm secured industries debt (AI International Holdings BVI Ltd.), $42.5mm secured production facility (MUFG Union Bank NA), $57.2mm of production level debt (including Spy Kids and Current War), $8.3mm secured debt (Viacom Media Networks)

• Company Professionals:
  • Legal: Cravath Swaine & Moore LLP (Paul Zumbro, George Zobitz, Karin DeMasi) & (local) Richards Layton & Finger PA (Mark Collins, Paul Heath, Zachary Shapiro, Brett Haywood, David Queroli)
  • Restructuring Advisor/CRO: FTI Consulting (Robert Del Genio, Luke Schaeffer, Michael Healy, Thomas Ackerman)
  • Investment Banker: Moelis & Company LLC
  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Stalking Horse Bidder: Lantern Asset Management
    • Legal: Akin Gump Strauss Hauer & Feld LLP (Stephen Kuhn, Meredith Lahaie) & (local) Pepper Hamilton LLP (David Stratton, David Fournier) 
  • DIP Agent ($25mm): MUFG Union Bank NA (11% minimum)
    • Legal: Sidley Austin LLP (Jennifer Hagle) & (local) Young Conaway Stargatt & Taylor LLP (Robert Brady)
  • Official Committee of Unsecured Creditors
    • Legal: Pachulski Stang Ziehl & Jones LLP (James Stang, Debra Grassgreen, Robert Feinstein, Bradford Sandler)

Updated 3/30/18

New Chapter 11 Filing - Claire's Stores Inc.

Claire's Stores Inc. 

3/19/18

Claire’s® Stores Inc. is the latest in a string of specialty "treasure hunt"-styled retailers to find its way into bankruptcy court. In this case, the debtors, together with their 33 non-debtor affiliates, sell jewelry, accessories, and beauty products to young women/teen/tweens/kids; it has a presence in 45 nations spread throughout 7,500 company-owned stores, concession stands, and franchises. The company proudly states that "[a] Claire's store is located in approximately 99% of major shopping malls through the United States." Moreover, "[e]ach of the Debtors' store locations are leased, and are typically located in traditional shopping malls with, on average, 1,000 square foot of selling space." PETITION NOTE: this explains a lot. Hashtag, retail apocalypse.

First Day Declarations are interesting in that they are the first opportunity for a debtor-company to tell its story to the public, to parties in interest, and, significantly, to the bankruptcy judge. And this declaration is particularly interesting because, unlike many of its bankrupt specialty retail predecessors, Claire’s® makes a concerted effort to delineate why its physical presence is so critical. So what is that critical piece? Apparently, it is ear piercing. Yup, you read that right. Ok, well that and the "treasure hunt" shopping atmosphere which "simply cannot be replicated online." The company boasts about solid operating margins. and notes that, at the time of filing, it only intends to shed 95 leases. 

The company notes that it has established trust with parents and the number of pierced ears is indicative of that; it estimates that it has pierced over 100 million ears worldwide (since 1978) and 3.5 million in fiscal year 2017. While that is gimmicky and cute, the company doesn't not note how much of the reported $212 million of EBITDA (on $1.3 billion of revenue) is related to this phenomenon. Moreover, all of the trust in the world cannot overcome a capital structure with $1.9 billion of funded debt (ex-$245 million more at the non-debtor affiliate level) and $162 million in cash interest expense (see chart below) - especially when $1.4 billion of that funded debt matures in Q1 '19. And particularly when fewer and fewer people tend to frequent the malls that Claire’s® dominate. Notably, the company says ONLY the following about e-commerce: "Finally, the Claire's Group operates a digital sales platform through which new and existing customers can purchase products directly through the Claire’s® and Icing® websites and mobile application." So, as the malls go, Claire’s® goes. Notably, the company makes a point that it "is growing, not shrinking, its business. The Company expects its concessions business to grow by more than 4,000 stores in 2018." Landlords take note: the company highlights its CONCESSIONS BUSINESS, which is essentially a "mini-footpring" utilizing the store-within-a-store model. In other words, this growth won't help the landlords much. 

In addition to its debt, the company notes - as a primary cause for its bankruptcy filing - that the "Debtors operate in a highly competitive market." PETITION NOTE: No effing sh*t. Mall traffic has declined 8% year-over-year and the debtors - ear-piercing demand notwithstanding - aren't impervious to this. Accordingly, revenue is down $200mm since 2014. 

To counteract these trends, the company engaged in exchange transactions back in 2016 that had the effect of stripping out intellectual property collateral, swapping out debt, and deleveraging the company by $400 million. Clearly that was a band-aid rather than a solution. 

Now the company purports to have a restructuring support agreement with the Ad Hoc First Lien Group which, in addition to 72% of the first lien debt, holds 8% of the second lien notes and 83% of the unsecured notes. The members of the Ad Hoc Group of First Lien Creditors have agreed to provide the Company with approximately $575 million of new capital, including financing commitments for a new $75 million asset-based lending facility, a new $250 million first lien term loan, and $250 million as a preferred equity investment. In addition, the company has lined up a Citibank-provided DIP credit facility of $75 million ABL (supported, seemingly, by the consenting ad hoc first lien group) and a $60 million "last out" term loan. Consequently, Claire's expects to complete the chapter 11 process in September 2018, emerge with over $150 million of liquidity, and reduce its overall indebtedness by approximately $1.9 billion. We'll believe it when we see it. 

• Jurisdiction: D. of Delaware (Judge Walrath)
• Capital Structure: see below. 
• Company Professionals:
  • Legal: Weil Gotshal & Manges LLP (Ray Schrock, Matthew Barr, Ryan Dahl) & (local) Richards Layton & Finger PA (Daniel DeFranceschi, Zachary Shapiro, Brendan Schlauch, Brett Haywood)
  • Financial Advisor: FTI Consulting Inc.
  • Investment Banker: Lazard Freres & Co. LLC 
  • Real Estate Advisor: Hilco Real Estate LLC 
  • Independent Director: Michael D'Appolonia 
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • PE Sponsor: Apollo Investment Fund VI, L.P. (owns 97.7% of Claire's Inc, the parent)
    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Jeffrey Saferstein)
  • DIP Agent: Citibank
    • Legal: Latham & Watkins LLP
  • Prepetition ABL Facility & Revolving Credit Facility Agent: Credit Suisse AG, Cayman Islands Branch
  • Ad Hoc First Lien Group (Initial Consenting Creditors: Diameter Capital Partners LP, Elliott Management Corporation, Monarch Alternative Capital LP, The Cincinnati High Yield Desk of J.P. Morgan Investment Management Inc., The Indianapolis High Yield Desk of J.P. Morgan Investment Management Inc., and Venor Capital Management LP.)
    • Legal: Willkie Farr & Gallagher LLP (Matthew Feldman, Brian Lennon, Daniel Forman) & (local) Morris Nichols Arsht & Tunnell LLP
    • Financial Advisor: Millstein & Co. 
  • First Lien Note Agent: The Bank of New York Mellon Trust Company N.A.
  • First Lien Term Loan Agent: Wilmington Trust NA
    • Legal: Pryor Cashman LLP (Seth Lieberman, Patrick Sibley, Matthew Silverman)
  • Second Lien Note Agent: Bank of New York 
  • Unsecured Note Indenture Trustee: Bank of New York 
  • Official Committee of Unsecured Creditors
    • Legal: Cooley LLP (Cathy Hershcopf, Seth Van Aalten, Summer McKee) & (local) Bayard PA (Justin Alberto, Erin Fay, Gregory Flasser)
    • Financial Advisor: Province Inc. 

Source: First Day Declaration

Updated 3/30/18

New Chapter 11 Filing - Orion Healthcare Corp.

Orion Healthcare Corp.

3/16/18

You don't see this as the preface to a bankruptcy filing every day:

"...the Debtors are the victims of a large, complex, and brazen fraud that was subject to a complex and deliberate concealment effort perpetrated by their former management that was years in the making. After acquiring several of their businesses, the Debtors’ former CEO, Parmjit “Paul” Parmar (“Parmar,” who previously owned the company) took Constellation Healthcare Technologies, Inc., the parent company of the Debtors (and itself a Debtor), public on the London AIM and then proceeded to raise additional equity for additional acquisitions, many of which are believed to be largely or entirely fictitious. The Debtors borrowed approximately $130 million in debt in connection with a go-private transaction, the majority of which is believed to have been paid to Parmar (as a shareholder, through entities under his control), which is a financial burden the Debtors simply cannot sustain. The Debtors borrowed such funds based upon financials recently discovered by the Debtors’ new management and their professionals to be largely fictitious and involving numerous sham companies and fabricated transactions, revenues, and customers. The Debtors have commenced these chapter 11 cases to (i) market and sell their assets, (ii) wind down certain of their businesses, and (iii) to enable them to ultimately pursue claims against the individuals that put the Debtors in this position for the benefit of all their creditors."

Salacious. 

Orion Healthcare Corp. is in the business of (a) outsourced revenue cycle management (“RCM”) for physician practices, (b) physician practice management, (c) group purchasing services for physician practices, and (d) an independent practice association services, which is organized and directed by physicians in private practice to negotiate contracts with insurance companies on their behalf while such physicians remain independent and which also provides other services to such physician practices. The various businesses were cobbled together after a series of acquisitions. 

Constellation Healthcare LLC, a non-debtor, is an investment vehicle owned by Parmar and set up for the purpose of acquiring Orion back in 2013. Thereafter, the assets were transferred to a vehicle set up to be the holding company of the enterprise and subsequently listed on the London Stock Exchange's Alternative Investments Market. After that, the company went on an acquisition spree, picking up five new businesses. The company also hit the secondary market twice to finance the transactions. As if that isn't enough tomfoolery, the company then engaged in a take private transaction pursuant to which the sponsor contributed $82.5 million of cash as equity and the company obtained $130 million in financing from lenders. The company also issued unsecured promissory notes to its shareholders to the tune of $39.6 million. 

Parmar resigned from the company in September 2017 and, subsequently, the company has been engaged in a large forensic investigation that purports to have uncovered multiple fraudulent transactions while the company was publicly listed, including fabricated customer lists and associated revenue (which, naturally, would have the effect of jacking up valuation and violating reps and warranties, presumably, to the lenders). Moreover, it is alleged that there were a variety of sham acquisitions that had the effect of unjustly enriching Parmar to the detriment of the now-over-levered company.

In light of all of this - as well as the unsustainable debt on the balance sheet and other issues such as the lack of integration between business lines and various litigation - the company filed for bankruptcy. The purpose of the filing is to market and sell some of the business, wind down certain of the businesses, and pursue claims against a coterie of allegedly fraudulent m*therf*ckers. 

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

• Capital Structure: $159.3mm senior term loan, revolving loan and bridge loan (Bank of America NA)

• Company Professionals:

  • Legal: DLA Piper (US) LLP (Richard Chesley, Thomas Califano, Rachel Nanes)

  • Legal (Conflicts Counsel): Hahn & Hessen LLP

  • Financial Advisor/CRO: FTI Consulting Inc. (Timothy Dragelin)

  • Investment Banker: Houlihan Lokey Capital Inc. (Bradley Jordan, Dave Salemi, Andrew Redmond, Ethan Kopp, Jack Foster)

  • Independent Director: Robert Rosenberg

  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)

• Other Parties in Interest:

  • Prepetition Agent & DIP Agent ($7.5mm): Bank of America NA

    • Legal: Moore & Van Allen PLLC (James Langdon, Zachary Smith, David Eades, Gabriel Mathless)

  • Parmjit Singh Parmar (and affiliated non-Debtor entities

    • Legal: Windels Marx Lane & Mittendorf LLP (Charles Simpson)

  • Official Committee of Unsecured Creditors (JQ 1 Associates LLC, Christine Cohen, Kolb Radiology P.C.)

    • Legal: Pachulski Stang Ziehl & Jones LLP (Ilan Scharf, Richard Mikels, Maxim Litvak)

    • Financial Advisor: CBIZ NY (Charles Berk, David Greenblatt, Sharmeen Khan, Patrick Donnelly, Michal Sudo)

Updated 11/28/18

New Chapter 11 Filing - Augustus Energy Resources LLC

Augustus Energy Resources LLC

3/16/18

Augustus Energy Resources is a privately-owned natural gas E&P company based in Billings, Montana; its primary assets are operating and non-operating working interests in approximately 1575 natural gas wells in eastern Colorado, the aggregation of which arises out of various acquisitions from Berry Petroleum Company and Rosetta Resources. 

The company filed for bankruptcy because the collapse in the market price of natural gas left it in a position where it couldn't (i) devote the capital necessary to maintain and grow its business, (ii) service its balance sheet and (iii) get access to credit. Indeed, the falling natural gas price led to multiple redeterminations of the borrowing base in the company's Wells Fargo-provided senior secured credit facility. Moreover, the company became the subject of a class action lawsuit accusing it of improperly charging royalty owners of certain post-production processing and transportation costs. This complicated an attempted out-of-court sale process of the company.

The company has filed for bankruptcy, therefore, to pursue a sale to a proposed stalking horse bidder, OWN Resources Inc. 

• Jurisdiction: D. of Delaware 
• Capital Structure: $14.4mm debt (Wells Fargo Bank NA)    
• Company Professionals:
  • Legal: Davis Graham & Stubbs LLP (Christopher Richardson, Thomas Bell, Kyler Burgi) & (local) Sullivan Hazeltine Allinson LLC (William Sullivan, William Hazeltine)
  • Investment Banker: TenOaks Energy Advisors LLC
  • Claims Agent: JND Corporate Restructuring (*click on company name above for free docket access)
• Other Parties in Interest:
  • Sponsor: Kayne Anderson Capital Advisors LP 
• Wells Fargo Bank NA
  • Legal: Vinson & Elkins LLP (William Wallander, Matthew Pyeatt) & (local) Womble Bond Dickinson (US) LLP (Ericka Johnson, Morgan Patterson)
• Stalking Horse Bidder: OWN Resources Inc.
  • Legal: Husch Blackwell LLP (Lynn Butler)

New Chapter 11 Filing - iHeartMedia Inc.

iHeartMedia Inc.

3/14/18

iHeartMedia Inc., a leading global media company specializing in radio, outdoor, mobile, social, live media, on-demand entertainment and more, has filed for bankruptcy -- finally succumbing to its $20 billion of debt ($16 billion funded) and $1.4 billion of cash interest in 2017. WOWSERS. The company purports to have "an agreement in principle with the majority of [its] creditors and [its] financial sponsors that reflects widespread support across the capital structure for a comprehensive plan to restructure...$10 billion..." of debt.

The company notes $3.6 billion of revenue and unparalleled monthly reach ((we'll have more to say about this in this Sunday's Members-only newsletter (3/18/18) - this claim deserves an asterisk)). 

Still, as it also notes, the company faces significant headwinds. It states in its First Day Declaration,

"Among other factors, the global economic downturn that began in 2008 resulted in a decline in advertising and marketing spending by the Debtors’ customers, which resulted in a corresponding decline in advertising revenues across the Debtors’ business. Then, as the economy recovered, the Debtors’ industry faced new and intense competition from the rapidly-growing internet and digital advertising industry and the entry of on-demand streaming services, both of which siphoned off the share of advertiser revenues allocated by agencies and brands to broadcast radio. The Debtors have taken various operational steps to stem the negative effect of these trends; among other initiatives, the Debtors have successfully developed emerging platforms including its industry-leading iHeartRadio digital platform and nationally-recognized iHeartRadio-branded live events that are audio and video streamed and televised nationwide."

The company ought to expect these trends to continue.

Large creditors include Cumulus Media Inc. (~$5.6 million...yikes) and Spotify (~$2 million).  

• Jurisdiction: S.D. of Texas
• Capital Structure:    

• Company Professionals:
  • Legal: Kirkland & Ellis LLP (James Sprayragen, Anup Sathy, Brian Wolfe, William Guerrieri, Christopher Marcus, Stephen Hackney, Richard U.S. Howell, Benjamin Rhode, AnnElyse Gibbons) & Jackson Walker LLP (Patricia Tomasco, Matthew Cavenaugh, Jennifer Wertz)
  • Financial Advisor to the Company: Moelis & Co. 
    • Legal: Latham & Watkins LLP (Caroline Reckler, Matthew Warren)
  • Restructuring Advisor to the Company: Alvarez & Marsal LLC
  • Legal for the Independent Directors: Munger Tolles & Olson LLP (Kevin Allred, Seth Goldman, Thomas Walper, John Spiegel)
  • Financial Advisor to the Independent Directors: Perella Weinberg Partners LP
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Large Equity Holders: Bain Capital & Thomas H. Lee Partners
    • Legal: Weil Gotshal & Manges LLP (Matthew Barr, Christopher Lopez, Gabriel Morgan)
  • Potential Buyer: Liberty Media Corporation & Sirius XM Holdings Inc.
    • Legal: Weil Gotshal & Manges LLP (Stephen Karotkin, Ray Schrock, Alfredo Perez)
  • Successor Trustee for the 6.875% '18 Senior Notes and 7.25% '27 Senior Notes: Wilmington Savings Fund Society, FSB
    • Legal: White & Case LLP (Thomas Lauria, Jason Zakia, Erin Rosenberg, J. Christopher Shore, Harrison Denman, Michele Meises, Mark Franke, Michael Garza) & Pryor Cashman LLP (Seth Lieberman, Patrick Sibley, Matthew Silverman) & (local) Andrews Kurth Kenyon LLP (Robin Russell, Timothy A. Davidson II, Ashley Harper)
  • Successor Trustee for the 11.25% '21 Priority Guaranty Notes
    • Legal: Kelley Drye & Warren LLP (Eric Wilson, Benjamin Feder, Kristin Elliott)
  • Successor Trustee for the 14.00% Senior Notes due 2021
    • Legal: Norton Rose Fulbright (US) LLP (Jason Boland, Christy Rivera, Marian Baldwin Fuerst)
  • Term Loan/PGN Group
    • Legal: Jones Day (Thomas Howley, Bruce Bennett, Joshua Mester)
  • Ad Hoc Group of Term Loan Lenders
    • Legal: Arnold & Porter Kaye Scholer LLP (Michael Messersmith, Tyler Nurnberg, Sarah Gryll, Christopher Odell, Hannah Sibiski) 
  • TPG Specialty Lending Inc.
    • Legal: Schulte Roth & Zabel LLP (Adam Harris, David Hillman, James Bentley) & (local) Jones Walker LLP (Joseph Bain, Laura Ashley) 
  • Special Committees of the Board of Clear Channel Outdoor Holdings Inc.
    • Legal: Willkie Farr & Gallagher LLP (Matthew Feldman, Paul Shalhoub, Christopher Koenig, Jennifer Jay Hardy)
  • Ad Hoc Committee of 14% Senior Noteholders of iHeart Communications
    • Legal: Gibson Dunn & Crutcher LLP (Robert Klyman, Matt Williams, Keith Martorana, Matthew Porcelli) & (local) Porter Hedges LLP (John Higgins, Aaron Power, Samuel Spiers)
  • 9.00% Priority Guarantee Notes due 2019 Trustee: Wilmington Trust NA
    • Legal: Stroock & Stroock & Lavan LLP (Jayme Goldstein, Daniel Fliman, Brian Wells) & (local) Haynes and Boone, LLP (Charles Beckham Jr., Martha Wyrick, Kelsey Zottnick)
  • Citibank N.A.
    • Legal: Cahill Gordon & Reindel LLP (Joel Levitin, Richard Stieglitz Jr.) & (local) Locke Lord LLP (Berry Spears)
  • Delaware Trust Company
    • Legal: Quinn Emanuel Urquhart & Sullivan LLP (Benjamin Finestone, K. John Shaffer, Monica Tarazi, Victor Noskov)
  • Official Committee of Unsecured Creditors
    • Legal: Akin Gump Strauss Hauer & Feld LLP (Ira Dizengoff, Philip Dublin, Naomi Moss, Charles Gibbs, Marty Brimmage)

Updated 3/30/18