New Chapter 22 Filing - New MACH Gen LLC

June 11, 2018 by PETITION in Chapter11

New MACH Gen LLC

6/11/18

In ⓶⓶Is A Fresh Batch of Chapter 22s Coming?⓶⓶, we asked "Did Talen Energy's Acquisition of MACH Gen Miss the Mark? (Short Synergy)". Apparently the answer is yes to both questions: MACH Gen is now in bankruptcy court for the second time in four years.

New MACH Gen LLC and four affiliated debtors have filed a prepackaged chapter 11 bankruptcy that seeks to partially equitize its first lien debt, transfer interests in the Harquahala facility in Arizona to the First Lien Lenders, eliminate approximately $95 million of debt off of the company's balance sheet, shed approximately $20 million of annual interest expense, and reorganize around two of the debtor entities. If the plan is effectuated, the company will emerge from bankruptcy with a (slightly) trimmed down balance sheet including (i) $512 million of first lien debt split among a revolving credit facility and two term loans and provided by the prepetition First Lien Lenders and (ii) approximately $25 million in a new second lien term loan provided by Talen Energy Supply LLC. The First Lien Lenders have also agreed to provide a $20 million DIP credit facility. The proposed plan of reorganization appears to be fully consensual among the various debt and equity interest holders. Accordingly, the company hopes to confirm the plan within 45 days of filing and obtain regulatory approvals another within an additional 45 days.

The company is the owner and manager of a portfolio of three natural gas-fired electric generating facilities: (1) a 1,080 MW facility located in Athens, New York that achieved commercial operation on May 5, 2004 (the “Athens Facility”); (2) a 1,092 MW facility located in Maricopa County, Arizona, that achieved commercial operation on September 11, 2004 (the “Harquahala Facility”); and (3) a 360 MW facility, located in Charlton, Massachusetts, that achieved commercial operation on April 12, 2001 (the “Millennium Facility,” and collectively with the Athens Facility and the Harquahala Facility, the “Facilities”). The company generates revenue by selling energy, capacity and ancillary services from the Facilities into relevant power markets. In the last fiscal year, the company generated approximately $269 million of operating revenue at a net loss of approximately $10 million.

These numbers shouldn't really be surprising. In May we highlighted the following:

"Here is where natural gas prices were (i) in April 2014 around the time of the bankruptcy filing (5.97), (ii) in November 2015 (2.08) at the time of the Talen acquisition, (iii) in June 2016 (2.57) at the time of the announced Riverstone transaction, (iv) in December 2016 at the time the transaction closed (3.58) and (v) where they stand now (~2.69):"

Screen Shot 2018-06-11 at 9.41.11 AM.png

This change in the natural gas market (and regulatory hurdles) flipped "compelling future projections" to "a challenging operating environment" and, in 2016, the company "significantly underperformed" its way to a net loss of $589.8 million. Given the current environment for natural gas, we'll see whether this transaction does the trick. After all, as the company notes, "[a]though the Plan will result in the elimination of debt, Reorganized MACH Gen will continue to have a significant amount of indebtedness after the Effective Date." See you in four years?

Jurisdiction: D. of Delaware
Capital Structure: $132.9mm first lien RCF (CLMG Corp., Beal Bank SSB), $465.1mm first lien TL,
Company Professionals:
- Legal: Young Conaway Stargatt & Taylor LLP (Robert Brady, Edmon Morton, Kenneth Enos, Elizabeth Justison)
- Financial Advisor: Alvarez & Marsal LLC (Ryan Omohundro)
- Investment Banker: Evercore LLC (Bo Yi)
- Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
Other Parties in Interest:
First Lien & DIP Agent: CLMG Corp.
First Lien Lenders: Beal Bank USA/SSB
- Legal: White & Case LLP (Thomas Lauria, Scott Greissman, Elizabeth Feld)
Talen Energy Supply LLC
- Legal: Skadden Arps Slate Meagher & Flom LLP (Lisa Laukitis)

New Chapter 11 Filing - Color Spot Holdings Inc.

May 29, 2018 by PETITION in Chapter11

Color Spot Holdings Inc.

5/29/18

Sometimes distress comes from unexpected places. On Tuesday, Color Spot Holdings Inc., a "leading" grower and distributor of quality live plants in the western and southwestern United States filed for bankruptcy. The company's products include bedding plants, e.g., (i) annuals, perennials and poinsettas and other holiday plants (70% of revenue) and (ii) flowering and ornamental shrubs (30% of revenue).

In its First Day Declaration, the company noted:

"In 2016 and 2017, the Debtors had sales of about $268 million and $248 million, respectively. The Debtors’ industry is expanding due to, among other things, an ongoing focus by consumers on caring for their yards and outdoor spaces, favorable demographic shifts, and increasing housing stock. The Debtors are poised to capture upside from this industry growth."

Curiously that expansion and growth didn't point to expanded and grown sales. And that is despite having a heavyhitter client list, including The Home Depot ($HD), Lowe's Companies, Inc. ($LOW), Costco ($COST), Target ($T), and Walmart ($WMT). And this is despite the company's internal logistics infrastructure which includes 75% of product distribution handled by its internal fleet. This shields the company from rising trucking costs which, as PETITION has noted elsewhere, is more and more of an issue for a variety of businesses.

To fund its highly seasonal business, the company is a party to three different credit facilities, some components of which applied (cough, usurious) interest rates at 12+%. This is a big part of the problem. In addition, we like to joke a lot about how every business under the sun blames weather for its poor earnings reports. Here, though, it truly makes sense. Indeed, the company blames the long California draught and Texan storms in 2015 and 2017 for significant operational issues. Apparently, the company also experienced declining customer service as it grew. It's hard to get good help these days, it seems.

Consequently, the company has been in the midst of an operational restructuring; it has closed 33% of its nurseries and fixed its product mix. It has also been seeking a buyer. No stalking horse buyer is lined up, however, and the expressions of interest that the company has obtained don't appear likely to cover the Wells Fargo-funded debt. Consequently, the company intends to use bankruptcy to pursue an expedited sale process supported by the use of cash collateral with the hope of improving upon the prepetition interest and setting the business and its new owners up for success in the upcoming season. By late July, we'll know whether they were successful.

Jurisdiction: D. of Delaware (Judge Silverstein)
Capital Structure: $117.5mm debt
Company Professionals:
- Legal: Young Conaway Stargatt & Taylor LLP (M. Blake Cleary, Ryan Bartley, Sean Greecher, Jaime Luton Chapman, Betsy Feldman)
- Investment Banker: Raymond James & Associates Inc.
- Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
Other Parties in Interest:
- Prepetition Lender: Wells Fargo Bank NA
  - Legal: Pillsbury Winthrop Shaw & Pittman LLP (Matthew Walker, M. David Minnick) & (local) Richards Layton & Finger PA (John Knight, Brendan Schaluch)
- Capital Farm Credit, FLCA
- Black Diamond Commercial Finance, L.L.C.

New Chapter 11 Filing - EBH Topco LLC (a/k/a Element Behavioral Health Inc.)

May 28, 2018 by PETITION in Chapter11

EBH Topco LLC (a/k/a Element Behavioral Health Inc.)

5/23/18

Behavioral health services and residential drug and alcohol addition treatment provider in 13 treatment centers across 8 states filed for bankruptcy. If that sounds boring: it's because it is. Which would explain why the Wall Street Journal felt compelled to drop in that its also the facility that treated Britney Spears and Lindsay Lohan. SEO just shot through the roof. Anyway, the company stated,

While the Company has had ongoing financial difficulties, the overall census of the facilities and revenue has declined since 2017. The decline in out-of-network admissions, lower reimbursement rates by insurance providers and the decline in the average length of stay were all contributing factors to the financial losses of the Company. While the Company attempted to increase census through ongoing marketing efforts of its in-house sales team and internet advertising, the increased cost of these efforts did not result in the increase in revenue to improve the financial results of the Company and offset the Company’s cash burn. Financial performance for the fiscal year 2017 was $103.7 million in revenue, $129.6 million in expenses, and EBITDA of $(25.9) million with a total net income/(loss) of $(51.2) million.

Given that the company started in 2008 and then pursued an acquisition-based growth strategy, it seems like they didn't underwrite to current conditions. Ouch.

Just a few weeks ago, Project Build Behavioral Health, LLC purchased the first lien paper and after an initial buyer of the assets fell through, agreed to be the company' stalking horse bidder in bankruptcy subject to an expedited sale process (the sale hearing is slated for late June); it intends to credit bid its debt. The company has a proposed $14.2 million DIP credit facility lined up to fund the cases.

Jurisdiction: D. of Delaware (Judge Shannon)
Capital Structure: $76mm '19 first lien term loan and revolver debt (Madison Capital Funding LLC), $29mm '20 second lien term loan (Cortland Capital Market Services LLC)
Company Professionals:
- Legal: Polsinelli PC (Christopher Ward, Shani Katona, Stephen Astringer, Jeremy Johnson)
- CRO/Financial Advisor: Alvarez & Marsal LLC (Martin McGahan)
- Investment Banker: Houlihan Lokey Capital Inc.
- Claims Agent: Donlin Recano & Company Inc. (*click on company name above for free docket access)
Other Parties in Interest:
- DIP Lender/Stalking Horse Bidder: Project Build Behavioral Health, LLC
  - Legal: McDonald Hopkins LLC (David Agay, Scott Opincar, Michael Kaczka) & (local) Morris Nichols Arsht & Tunnell LLP (Derek Abbott)
- Ad Hoc Group of Second Lien Lenders
  - Legal: Morrison & Foerster LLP (Jonathan Levine, Daniel Harris)
- Equity sponsors: NEA, Frazier Healthcare Ventures, Formation Capital

New Chapter 11 Filing - R.E. Gas Development LLC (a/k/a Rex Energy)

May 19, 2018 by PETITION in Chapter11

R.E. Gas Development LLC

5/18/18

Pennsylvania-based R.E. Gas Development LLC and its affiliates are independent publicly-traded ($REXX) oil and gas companies operating in the Appalachian Basin with a focus on drilling and exploration activity in the Marcellus Shale, Utica Shale and Upper Devonian Shale, mostly throughout Western Pennsylvania. Like most other exploration and production companies that have found their way in bankruptcy court over the last several years, the sudden steep decline in crude oil and nat gas prices that began in 2014 significantly affected the company's liquidity and ability to manage its balance sheet. After all, this company isn't operating in the Permian. Revenues for 2017 were $205.3 million.

After months and months of foreplay, the company enters bankruptcy court with a restructuring support agreement ("RSA") in tow: it provides for a dual path pursuant to which the company will, in agreement with its secured lenders, pursue a sale of substantially all assets or, in the absence of qualified bids, pursue a plan process pursuant to which the first lien lenders (i.e., Angelo Gordon) will swap (DIP) debt for equity in the reorganized company. The RSA purportedly has the support of 100% of the first lien lenders and 71.8% of the outstanding second lien notes.

To fund the company throughout the dual process, the company seeks a $411 million DIP credit facility, the proceeds of which will be used to (i) roll up $261 million of prepetition loans and (ii) settle the "makewhole provision" under the first lien credit agreement to the tune of $50 million. The makewhole was put into place at the time of the issuance of the first lien loan just short of a year ago. For the uninitiated, the makewhole entitles the lender to certain economics in the event the lenders are "repaid in whole or in part prior to the maturity date or the outstanding indebtedness under the facility is accelerated for any reason." The economics are calculated "based on the sum of remaining interest payments and certain fees due on all loans for the remainder of the make whole period, which terminates on October 28, 2019." In other words, Angelo Gordon structured this to give themselves the utmost economics in the (highly likely) case of an event of default and eventual bankruptcy. Solid planning on their part -- assuming, in particular, that the assets fetch a purchase price that will clear the first lien debt and makewhole amount. Respect.

So, lo and behold, there was an event of default called in February for failure to deliver quarterly financial statements (which led to other defaults as well). In April, the lenders, after a short forbearance period, issued a notice of acceleration. Cha ching! Makewhole!!

The DIP credit agreement imposes fairly expedited -- but not wholly unreasonable (relative to other recent cases) -- timing on the company, including closing of any sale or confirmation of a plan 170 days after the filing date.

Jurisdiction: W.D. of Pennsylvania (Judge Deller)
Capital Structure: see below.
Company Professionals:
- Legal: Jones Day (Scott Greenberg, Tom Howley, Michael Cohen, Anna Kordas, Rachel Biblo Block) & (local) Buchanan Ingersoll and Rooney PC (James Newell, Timothy Palmer, Tyler Dischinger)
- Financial Advisor: FTI Consulting Inc. (Albert Conly)
- Investment Banker: Perella Weinberg Partners (Alexander Tracy)
- Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
Other Parties in Interest:
- Prepetition First Lien Admin Agent: Angelo Gordon Energy Servicer
  - Legal: Simpson Thacher & Bartlett LLP (Michael Torkin) & (local) Duane Morris LLP
  - Financial Advisor: PJT Partners
- Informal Group of 1%/8% Senior Secured Second Lien Notes due 2020 of Rex Energy Corporation
  - Legal: Akin Gump Strauss Hauer & Feld LLP (Michael Stamer, Meredith Lahaie, Stephen Kuhn, Kevin Zuzolo) and (local) Reed Smith LLP (Eric Schaffer, Maura McIntyre)
  - Financial Advisor: Stephens Inc.
- Wilmington Savings Fund Society FSB
  - Legal: Morrison & Foerster LLP (Jonathan Levine, Daniel Harris) & (local) Reed Smith LLP (Eric Schaffer, Maura McIntyre)
- BOKF, National Association
  - Legal: Arent Fox LLP (Andrew Silfen, George Angelich, Jordana Renert) & (local) Federic Dorwart, Lawyers PLLC (Samuel Ory)
- Official Committee of Unsecured Creditors
  - Legal: Brown Rudnick LLP (Robert Stark, Chelsea Mullarney, Sigmund Wissner-Gross, Brian Rice, Steven Pohl, Andrew Carty, Bennett Silverberg, Chelsea Mullarney, Emily Koruda, Justin Cunningham) & (local) Leech Tishman Fuscaldo & Lampl LLC (Patrick Carothers, David Lampl, John Steiner)
  - Financial Advisor: Conway MacKenzie Inc. (John Young Jr.)

New Chapter 11 Filing - Enduro Natural Resources LLC

May 16, 2018 by PETITION in Chapter11

Enduro Natural Resources LLC

5/15/18

Enduro Natural Resources LLC, an oil and natural gas producer with properties in North Dakota, Wyoming, Texas, Louisiana and New Mexico, has filed for bankruptcy to effectuate a three-package asset sale to three separate stalking horse bidders. The company notes in an endearingly self-aware way,

"Like many other upstream energy companies, the Debtors did not anticipate in the early part of this decade that they would eventually succumb to the demands of repaying the capital they borrowed to invest in their exploration and production activities. But the prices of crude oil and natural gas declined dramatically beginning mid-year 2014, as a result of robust nonOrganization of the Petroleum Exporting Countries' ("OPEC") supply growth led by unconventional production in the United States, weakening demand in emerging markets, and OPEC's decision to continue to produce at high levels."

While the company took a variety of measures to combat the effects of these externalities -- including operational fixes and a prior out-of-court restructuring transaction -- its leverage remained too high in relation to asset value. Indeed, in the aggregate, the combined offers for the three packages of assets equates to $77.5 million which doesn't even clear the first lien debt.

Finally, the beauty of a huge wave of same-industry chapter 11 filings is that you start seeing the same players over and over again. Among its top creditors are some other oil and gas companies with plenty of experience in bankruptcy court, i.e., Exco Operating Company and Basic Energy Services and, soon, Pioneer Natural Resources. The good times continue to roll in the upstream exploration and production space.

Jurisdiction: D. of Delaware
Capital Structure: $208.7mm first lien RCF (Bank of America NA), $141mm second lien debt (Wilmington Trust NA)
Company Professionals:
- Legal: Latham & Watkins LLP (George Davis, Caroline Reckler, Matthew Warren, Jason Gott, Lindsay Henrikson) & (local) Young Conaway Stargatt & Taylor LLP (Michael Nestor, Kara Hammond Coyle)
- Financial Advisor: Alvarez & Marsal North America LLC
- Investment Banker: Evercore LLC
- Claims Agent: KCC (*click on company name above for free docket access)
Other Parties in Interest:
- Sponsor & Major Second Lien Lender: Riverstone Holdings LLC
- First Lien Agent: Bank of American NA
  - Legal: Davis Polk & Wardwell LLP (Damian S. Schaible, Aryeh Ethan Falk) & (local) Morris, Nichols, Arsht, & Tunnell LLP
  - Financial Advisor: RPA Advisors

New Chapter 11 Filing - Arecont Vision Holdings LLC

May 14, 2018 by PETITION in Chapter11

Arecont Vision Holdings LLC

5/14/18

Arecont Vision Holdings LLC, a California-based manufacturer of high-performance IP cameras and video surveillance solutions, has filed for bankruptcy to effectuate a sale to an affiliate of Turnspire Capital Partners.

The company sells its products to a variety of industries including data centers, government, retail, financial, sports, and healthcare. End user customers include big names like Wells Fargo, Apple, Google, Facebook, Microsoft and others. In addition to holding several patents, the company counts a litigation claim against a once-secured-but-ultimately-failed-buyer, NetPosa, in the amount of $50 million among its assets. NetPosa signed a share purchase agreement in early 2017 for the purchase of Arecont for $170 million but the deal fell through while awaiting regulatory review. Apropos to the current international trade environment, NetPosa is a publicly-traded Chinese company.

Speaking of China, the company notes, "The Debtors' performance has been negatively impacted by increased competition from Chinese manufacturers who are able to produce and sell products at lower price points." This combined with other factors, stemmed the company's previously demonstrated compound double-digit growth from 2007 through 2016; it then experienced a dramatic EBITDA decline in 2017 from $72.7 million to $41.7 million.

To address this decline, the company engaged in a number of cost-reduction initiatives including shedding employees and outsourcing component and subassembly work to Asia from the US. Contemporaneously, Imperial Capital initiated a sale process. Enter Turnspire Capital.

Jurisdiction: D. of Delaware (Judge Sontchi)
Capital Structure: $73.2mm secured debt (AIG)
Company Professionals:
- Legal: Pachulski Stang Ziehl & Jones LLP (Ira Kharasch, Joshua Fried, Maxim Litvak, James O'Neill)
- CRO/Financial Advisor: Armory Group LLC (Scott Avila, Allen Soong)
- Investment Banker: Imperial Capital LLC
- Claims Agent: Omni Management LLC (*click on company name above for free docket access)
Other Parties in Interest:
- Stalking Horse Buyer: Turnspire Capiral LLC
- DIP Agent: Cortland Capital Market Services LLC
- ($4mm) DIP Lenders: American General Life Insurance Company, American Home Assurance Company, The United States Life Insurance Company in the City of New York, The Variable Annuity Life Insurance Company, American Home Assurance Company and United Guaranty Residential Insurance Company

New Chapter 11 Filing - The Rockport Company LLC

May 14, 2018 by PETITION in Chapter11

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.

May 11, 2018 by PETITION in Chapter11

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.

May 08, 2018 by PETITION in Chapter11

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.

May 04, 2018 by PETITION in Chapter11, Chapter22

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

May 01, 2018 by PETITION in Chapter11

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.

May 01, 2018 by PETITION in Chapter11

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:

Screen Shot 2018-05-01 at 9.44.56 AM.png

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

April 30, 2018 by PETITION in Chapter11

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.

April 16, 2018 by PETITION in Chapter11

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.

April 06, 2018 by PETITION in Chapter11

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.

New Chapter 11 Filing - VER Technologies Holdco LLC

April 05, 2018 by PETITION in Chapter11

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.

April 02, 2018 by PETITION in Chapter11

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.

April 01, 2018 by PETITION in Chapter11

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

March 27, 2018 by PETITION in Chapter11

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)

New Chapter 11 Filing - Wachusett Ventures LLC

March 26, 2018 by PETITION in Chapter11

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)