🍎New Chapter 11 Bankruptcy Filing - Lucky's Market Parent Company LLC🍎

Lucky's Market Parent Company LLC

January 27, 2020

In Sunday’s Members’-only a$$-kicking briefing entitled “🔥Like No Other Newsletter🔥,” we took a deeeeeeeeep dive into the Fairway Group Holdings Corp. chapter 11 bankruptcy filing. We relegated to a mere footnote, the following:

*Two more local grocers to watch out for: Lucky’s Market (not PE-backed) and Earthfare (PE-backed). The former announced, on the heals of losing its sponsorship from Kroger Inc., that it would close 32 of 39 stores. The latter is quietly shuttering stores (e.g., Gainesville and Indianapolis). This is telling:

“Stern said Lucky's could potentially be acquired, but he said logical choices like Sprouts Farmers Market and The Fresh Market are also retrenching and not in expansion mode right now.”

The pain in grocery is pervasive.

Lucky’s Market Parent Company LLC be like:

And so the Colorado-based company and 21 affiliated entities filed for chapter 11 bankruptcy in the District of Delaware. Because, like, f*ck it: the pain in grocery IS pervasive so it might as well become a chapter 11 debtor like everyone else.

This one swims upstream. The debtors focus on affordable organic and locally-grown produce, naturally raised meats and seafood, and fresh daily prepared foods. Which, we thought, was supposed to be all the rage. “Organic for the 99%” was their mission. They even have private label goods. AND they have a millennial-pleasing “giving” element to their business: 10% of profits from private label sales are reinvested into the local communities they service. They have no unions. And they’re not even private equity owned!! Kroger Inc. ($KR) is the debtors’ secured lender and largest equity holder and, while obviously not PE bros, it seems that maybe(?) Kroger pushed the Colorado-based founders to grow too fast too soon?? In the midst of a number of grocery bankruptcies. In April 2016, they had 17 stores. The Kroger transaction took place at that time and then — BOOM! — a private equity growth mentality appears to have mysteriously overtaken the debtors. By the end of that year, the debtors’ footprint was up to 20 stores; by the end of 2017, it was 26 stores; 33 stores by the end of 2018; and 39 stores by the end of 2019. Florida was a primary focus.

The timing was pretty bad. Per the debtors:

…the Company’s expansion in Florida coincided with, among other things, increased competition in the grocery industry, including expansions from competing chains such as Sprouts Farmers Market, Fresh Thyme Farmers Market and Earth Fare. As a result, notwithstanding the growth in sales, the portfolio of Company stores was unable to achieve sustainable four-wall profitability.

Note the mention of Earth Fare ⬆️. Get ready for Dirty Dancing 2: Havana Nights gifs, people.

There’s more:

Most recently, fiscal year-to-date through January 4, 2020, the Company had approximately $22 million of store operating losses and approximately $100 million net loss. Additionally, fiscal year-to-date through the week ended January 18, 2020, the Company had a 10.6% reduction in comparable store sales versus the prior year-to-date period.

Suffice it to say, that growth strategy diiiiiiiidn’t work out so well.

And so now it’s all being unwound. The debtors began winding down 32 of their 39 stores pre-petition and, obviously, terminated plans for 19 leased but unopened locations.

Absent closure, the debtors note, they’d be on the hook for $30mm in operating losses for fiscal year ‘20. Now they’re selling furniture, fixtures and equipment from, and transferring leases of, 26 stores to third-party purchasers. They have an asset purchase agreement with Aldi for six FL locations while they continue to operate 7 locations while the marketing process progresses.

The debtors will use Kroger’s cash collateral to fund these cases.

• Jurisdiction: (Judge Dorsey)

• Capital Structure: $301.1mm secured loan (Kroger Inc.), $5.9mm New Markets Tax Credit Loan (BBIF Subsidiary CDE 3 LLC, guaranteed by Kroger Inc.)

• Professionals:

  • Legal: Polsinelli PC (Christopher Ward, Liz Boydston, Caryn Wang)

  • Financial Advisor: Alvarez & Marsal LLC

  • Investment Banker: Peter J. Solomon

  • Liquidation Consultant: Great American Global Partners LLC

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

  • Independent Director: William Transier

• Other Parties in Interest:

  • Large Equityholder (55%): Kroger Inc.

    • Legal: Weil Gotshal & Manges LLP (Garrett Fail, Moshe Fink) and Richards Layton & Finger PA (Zachary Shapiro, Brett Haywood)

New Chapter 11 Bankruptcy Filing - American Blue Ribbon Holdings LLC

American Blue Ribbon Holdings LLC

January 27, 2020

Man. The restaurant space is active AF when it comes to BK filings these days. Sysco Corporation ($SYY) must be sweating bullets. On the same day that BL Restaurants Holding LLC (Bar Louie) filed for bankruptcy and a mere week after The Krystal Company filed and less than six months after industry segment brother Perkins and Marie Callender’s filed for bankruptcy, Tennessee-based American Blue Ribbon Holdings LLC and four affiliated entities — the operators of 75 Village Inn and 22 Bakers Square family dining restaurant brands — filed for bankruptcy in the District of Delaware — the 8th significant bankruptcy filing in Delaware in 2020 (far outpacing any other jurisdiction).

This filing may come as a surprise to some. Why? Well, this August 2019 article in the Nashville Post dripped with optimism about the company’s proposed turnaround — a turnaround which included 50 pre-petition store closures. Despite these efforts, the debtors revenues were only $318mm in ‘19, a decline of $36mm.

Unlike BL Restaurants Holding LLC (Bar Louie), the debtors aren’t drowning in funded debt. In fact, they don’t have any secured debt at all. Unsecured claims total only $14mm.

They are, however, drowning due to industry-wide issues. If the factors leading to this filing sound familiar, well…they are:

• Increased competition in the restaurant business. ✅

• Increased competition from grocery stores’ expanded prepared meai offerings which, by and large, represent a much better value proposition. ✅

• Rising labor costs ($2mm hit). ✅

• Above-market rent. ✅

• Declining foot traffic due to “an increase in convenience via takeout and delivery at the expense of dine-in customers at restaurants.” DISRUPTION!! ✅

• Over-expansion. ✅

For all of these reasons, the debtors have been bleeding cash. They lost $11mm in ‘18 and $7mm in ‘19. So, sure, the turnaround was taking hold, it seems, but the $4mm in savings weren’t enough. Indeed, the debtors’ filing was precipitated due to a lack of liquidity.

The debtors will use the “breathing spell” provided by the filing to access $20mm in emergency liquidity (from their indirect ultimate majority owner, Cannae Holdings Inc. ($CNNE)) and pursue strategic options (without a banker….uh…ok, sure).

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• Jurisdiction: D. of Delaware (Judge Silverstein)

• Capital Structure: N/A

• Professionals:

  • Legal: KTBS Law LLP (Michael Tuchin, David Fidler, Jonathan Weiss, Sasha Gurvitz) & Young Conaway Stargatt & Taylor LLP (Robert Poppiti Jr.)

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

• Other Parties in Interest:

🍸New Chapter 11 Bankruptcy Filing - BL Restaurants Holding LLC (Bar Louie)🍸

BL Restaurants Holding LLC

January 27, 2020

Another day, another Sun Capital Partners’ portfolio company* in bankruptcy. Texas-based BL Restaurants Holding LLC — known to most as Bar Louie — and 3 affiliated entities filed for bankruptcy in the District of Delaware. Bar Louie is a gastrobar concept that operates 110 owned locations plus 24 franchises across 26 states and the District of Columbia. In 2019, it did $252mm of sales, down 3.7% YOY.

We hate to feed into the private-equity-destroys-everything-it-touches-trope but, well, judge for yourself…

The company notes:

Over the past several years, the opening of new locations was the primary driver for sales and profit growth for the Company. This growth was partially funded through new debt, but also utilized cash flow from operations, which ultimately over time restricted liquidity otherwise needed for store refreshes and equipment maintenance and modernization, resulting in inconsistent delivery of the brand promise across the system. This inconsistent brand experience, coupled with increased competition and the general decline in customer traffic visiting traditional shopping locations and malls, resulted in less traffic at the Company’s locations proximate to shopping locations and malls and contributed to sales falling short of forecast. These customer declines were also driven by major changes in consumer behavior, including the general national trend away from casual dining. The combination of these factors had a particularly major impact on a significant segment of the Company’s footprint.

Indeed, all of that growth — coupled with disruptive trends confronting both malls and casual dining — took its toll. Indeed, 38 locations, in particular, really saddled the company. Apparently it’s a bad sign when a third of your footprint has negative same store sale comps of 10.9%. 😬 This brought down the rest of the enterprise (which “only experienced a 1.4% SSS decline.”). Only. The debtors closed the aforementioned 38 locations pre-filing.

What of the debt? The company has $87mm of funded debt, $8mm of trade debt and approximately $6mm of other unsecured debt excluding lease termination claims. Things aren’t looking so great for the trade. The pre-petition lenders have agreed to place a $22mm DIP.

So now the debtors will use that DIP to give themselves time to attempt a sale in bankruptcy. The debtors’ first lien secured lenders and the pre-petition first lien secured agent will serve as a stalking horse via a credit bid. They are owed approximately $56.4mm. Pursuant to the sale motion filed with the court, they seek a 3% breakup fee in connection with the agreement to be the stalking horse which, if you asked us, seems a bit ridiculous under the circumstances. Why do they need a breakup fee at all when they’re trying to shed this turd? Do they really want to own this business? A multi-month pre-petition marketing campaign would seem to indicate otherwise. This reeks of greed and ought to spark an objection from creditors who will be hoping there’s some buyer who comes out of the wood work and overbids for this thing.

We wouldn’t bet on it.

*The debtors’ first day declaration only refers to its private equity sponsors as “its current owners”. While it’s not entirely clear from the bankruptcy papers, it appears that Sun Capital may also be the second lien lender agent here (and lenders) — a presumption that is bolstered by the appearance of Morgan Lewis & Bockius LLP as counsel. Morgan Lewis has represented Sun Capital portfolio companies in a number of recent chapter 11 bankruptcy filings. Curious how, with one exception, there was virtually no mention of Sun Capital’s involvement in any of the papers.

• Jurisdiction: D. of Delaware (Judge Walrath)

• Capital Structure: $42mm Term Loan + $14.4mm RCF (Antares Capital LP), $23.6mm second lien debt (BL Restaurants Group Holding Corp.)

• Professionals:

  • Legal: Klehr Harrison Harvey Branzburg LLP (Domenic Pacitti, Michael Yurkewicz)

  • Financial Advisor/CRO: Carl Marks Advisory Group LLC (Howard Meitiner)

  • Investment Banker: Configure Partners LLC (Vin Batra)

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

• Other Parties in Interest:

  • Prepetition First Lien Secured Agent and DIP Agent: Antares Capital LP

    • Legal: Latham & Watkins LLP (James Ktsanes, Jeremy Webb) & Young Conaway Stargatt & Taylor LLP (Michael Nestor, Andrew Magaziner)

  • DIP Lenders: Midcap Funding XVI Trust, Midcap Funding XXX Trust, Midcap Financial Trust, Woodmont 2017-2 Trust, Woodmont 2017-3 LP, Woodmont 2018-4 Trust

  • Prepetition Second Lien Agent:

    • Legal: Morgan Lewis & Bockius LLP (Barbara Shander)

  • Purchaser: BLH Acquisition Co., LLC

📜New Chapter 11 Bankruptcy Filing - SFP Franchise Corp. (aka Papyrus)📜

SFP Franchise Corp.

January 23, 2010

Just last week someone from the PETITION team needed to get a card commemorating a family occasion and checked out the Papyrus store in Grand Central Station. It was jam-packed. She then went on to spent $7.99 on a frikken card — something that, it seems, was just $2.99 a few years ago. We suppose there’s a $4 premium for cards that look hand-created yet are mass-produced. Whatever. Anyway, inflation notwithstanding, Tennessee-based SFP Franchise Corp. and its affiliate Schurman Fine Papers filed for bankruptcy this week. Sure, sure, they sell $7.99 cards but at the time of filing, the debtors were down to their last $32k. 😬

This is NOT a story about disruption in the way some might expect. No, electronic cards that literally NOBODY ON THE PLANET OPENS did not destroy this business. At least significantly enough for the company to acknowledge it as a factor. People still dig physical acknowledgements. Instead, this is a story about over-expansion, poor timing, bad deals and over-reliance on one counterparty. In this case, American Greetings Corporation.

The debtors started in 1950 as a greeting card and stationary wholesaler. They expanded into franchise, retail and online over time and the expansion brought on some pain in 2008-2009 (shortly after the company re-purchased franchises). At that time, the debtors engaged with American Greetings as a strategic partner. The debtors sold American Greetings their wholesale business and brand and related trademarks. In turn, the debtors acquired the retail business previously operated by American Greetings — both in the US and Canada (PETITION Note: if you’re thinking, “I thought that brand and trademarks are really the only thing of value for retailers today, well, you’re not wrong.”). Score one for American Greetings here: it dumped its brick-and-mortar retail on the debtors right before the retail sh*tstorm hit. 👍

The deal is special in retrospect. American Greetings agreed to (i) supply the debtors product for an initial term of 7 years, and (ii) provide a royalty-free license of the trademarks for 10 years. In exchange, the debtors agreed to (i) provide fee-generating marketing services for 7 years and (ii) collect and provide point-of-sale data to American Greetings for an initial term of 7 years (for a fee). In essence, the debtors didn’t own or control the product and didn’t own or control the intellectual property. Said another way, this business was dead in 2009: the debtors just didn’t know it yet.

Well, it’s now 2020 and the debtors are, in fact, officially dead. American Greetings pulled the plug in December when it notified the debtors that it was terminating the agreements (citing default under the agreements). Instantaneously, the debtors lost access to product which, in turn, affected revenues.

All 254 stores in the US (178) and Canada (76) will close. 1,100 people are going to need to find new jobs. Trade creditors owed approximately $8mm are essentially screwed. And there will now be more empty boxes in malls. The ramifications of a liquidating retailer cannot be overstated.

The debtors will seek permission to use cash collateral to conduct, with the assistance of Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC, an orderly liquidation under chapter 11.

• Jurisdiction: D. of Delaware (Judge )

• Capital Structure: $6.675mm RCF (Wells Fargo Bank NA), $10mm LOC (PNC Bank NA), $38.7mm subordinated debt (AG, Carlton Cards Limited, Papyrus-Recycled Greetings Canada Ltd.)

• Professionals:

  • Legal: Landis Rath & Cobb LLP (Adam Landis, Matthew McGuire, Nicolas Jenner)

  • Financial Advisor/CRO: Mackinac Partners LLC (Craig Boucher)

  • Liquidation Consultant: Gordon Brothers Retail Partners LLC & Hilco Merchant Resources LLC

    • Legal: Greenberg Traurig LLP (Jeffrey Wolf, Dennis Meloro)

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

• Other Parties in Interest:

  • Prepetition Agent: Wells Fargo Bank NA

    • Legal: Riemer & Braunstein LLP (Donald Rothman, Steven Fox, Anthony Stumbo, Paul Bekker) & Womble Bond Dickinson US LLP (Matthew Ward, Morgan Patterson)

  • Subordinated Creditor: American Greetings Corporation

    • Legal: Baker & Hostetler LLP (Michael VanNiel, Adam Fletcher) & Saul Ewing Arnstein & Lehr LLP (John Demmy)

🌿New Chapter 11 Bankruptcy Filing - GenCanna Global USA Inc.🌿

GenCanna Global USA Inc.

January 24, 2020

Cannabis companies may not have access to federal bankruptcy courts but vertically-integrated agtech companies that develop federally-legal hemp-derived cannabinoid products like CBD sure do. 👍

Now, we know what you’re thinking: CBD is all the rage, everyone is talking about it, everyone — even Nana — is using it, and everyone is infusing it in their products, so how the hell could an “industry pioneer” in the space end up in bankruptcy court?!? Sh*t. We have a whole bin of it in the corner of our WeWork office, just under where the beer used to be. In fact, we collectively drank some and rubbed some all over our bodies in a team building exercise just prior to righting and editting this peace so that’s a very fair question.

The companies troubles include:

• An inability to find a strategic partner or find a banker — in the age of WeWork — that would carry the company through a capital-raising IPO.

• Consummate a transaction with a public-traded strategic with a hyper-inflated stock price of its own (callback to the epic rise of weed stock values) prior to reality set in.

• A fire at a production facility. How ironic.

• A contract dispute with a contractor working on a new hemp processing facility. How trite.

• An inability to find proper “financial leadership.” Apparently, the lenders were unimpressed with the company’s chosen CFO and then required the retention of Huron Consulting Group which then led to the sh*tcanning of the CFO which then led to that CFO claiming that there was fraud on the books which then led to an investigation which then concluded that it was all just “psyche, I’m just a sore loser” and….damn this CBD feels good. How could there be drama like this when everyone has this sh*t tingling all over their body?

• Fights with farmers who didn’t get their fixed payments after the company’s sales did not materialize as projected. Ah, projections.

• A price collapse. Per the company, “Beginning in the summer of 2019, pricing in the industry plummeted across all CBD product categories. By the end of the year and through today, bulk product prices in nearly all categories have dropped by as much as 80%. This dramatic plunge in pricing also correlated to the large drop in the public capital markets for cannabis companies in both the US and Canada.” Apparently the fact that this sh*t is easy to produce and popped everywhere in basically 1.2 seconds is not good for pricing. Who knew?

• A lack of regulatory clarity about the status of hemp-derived products has delayed investment and development of products. Or so they say. Seems like everyone under the sun has some CBD-infused product at this point, but whatever. We’ll take this at face value.

Of course, the biggest trouble was probably the involuntary chapter 11 petition filed against the company by three creditors. But, in the spirit of making lemonade, the company will take advantage of the opportunity to convert the company to a voluntary 11 and use the benefit of the automatic stay obtain some much-needed liquidity in the form of a $10mm DIP credit facility and figure out a path forward.

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• Jurisdiction: E.D. of Kentucky (Judge Schaaf)

• Capital Structure: $68.5mm Term Loans (MGG Investment Group LP)

• Professionals:

  • Legal: Benesch Friedlander Coplan & Aronoff LLP (Michael Barrie, Jennifer Hoover, Elliot Smith) & Dentons Bingham Greenebaum LLP (James Irving, April Wimberg, Christopher Madden)

  • Financial Advisor: Huron Consulting Group (James Alt, Marc Passalacqua, Benjamin Smith)

  • Investment Banker: Jefferies Group LLC

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

• Other Parties in Interest:

  • Prepetition Lender: MGG Investment Group LP

    • Legal: Schulte Roth & Zabel (Kristine Manoukian, Adam Harris) & Fowler Bell PLLC (Taft McKinstry, Christopher Colson)
      

New Chapter 11 Filing - DBMP LLC

DBMP LLC

January 23, 2020

Let’s just deem January 2020 “Asbestos Month.” The end.

• Jurisdiction: W.D. of North Carolina (Judge Whitley)

• Professionals:

  • Legal: Jones Day (Gregory Gordon, Amanda Rush, Jeffrey Ellman, Danielle Barav-Johnson) & Robinson Bradshaw & Hinson PA (Garland Cassada, David Schilli, Andrew Tarr)

  • CRO: Robert J. Panaro

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

🍔New Chapter 11 Bankruptcy Filing - The Krystal Company🍔

The Krystal Company

January 19, 2020

Georgia-based quick-service restaurant chain, The Krystal Company, which features cheap — some might say “iconic” (read: the company = “some”) — square burgers among other horrendous-for-your-health fare (eggnog shakes, anyone?), filed for bankruptcy in the Northern District of Georgia over the holiday weekend. We’re guessing that most of you snobby coastal elites have likely never heard of Krystal and, well, neither had we to be honest. To our surprise, Krystal is purportedly “the oldest quick-service restaurant chain in the South and the second oldest in the United States, the Krystal brand has a prominent place in the South’s cultural landscape.” You learn something new every day.

The chain operates 182 restaurant locations across nine states; it has approximately 4900 employees; it doesn’t own its real estate; it does have 116 franchisees. It also has over $65mm in debt.

Why the bankruptcy? PETITION readers are very familiar with the trends afflicting quick service restaurants. A number have stumbled into bankruptcy in recent years. To point, the company’s Chief Restructuring Officer also recently worked with Kona Grill and Ignite Restaurant Group. There are plenty of distressed restaurant chains to keep the fee meter running, it seems.

So, what are these trends?

• Shifting consumers tastes and preferences (PETITION Note: people are becoming more health-conscious and a slab of previously-frozen meat stacked between a gnarled bun, diced onions, a pickle and some stadium mustard don’t really pass muster anymore). ✅

• Fast casual and online delivery are crushing quick service chains (PETITION Note: we’re going to have to start referring to “The Chipotle Effect”). ✅

• It is increasingly hard to find and retain qualified employees in the current labor market, as turnover exceeds 200% (PETITION Note: #MAGA!!). ✅

• Commodity costs are rising (PETITION Note: but there’s virtually no inflation folks). ✅

• Unfavorable lease terms. ✅

Facing all of this, the company did what struggling companies tend to do: they hired an expensive consultant. Boston Consulting Group came in and to advise the company with respect to “competitive positioning” and this led to a capital intensive rebuilding project of nine of its locations. Yes, they completely demolished and rebuilt nine locations in ‘18 and ‘19. Ultimately, this led to increased sales at those locations but it clearly couldn’t course correct the entire enterprise.

Consequently, the company breached a financial covenant in Q4 ‘18. It obtained an equity infusion which stopped the bleeding…for like a hot second. The company then defaulted under its credit agreement because it couldn’t obtain a “going concern” qualification for the fiscal year ending December 31, 2018. It has been in forbearance since October. Meanwhile, it has been shedding costs: people have been fired and stores have been closed.

About those stores. The average occupancy cost of the company’s locations is $482k/month. Because of this, the company regularly reviews profitability and recently has turned several of its stores “dark” by ceasing all business there. On day one of its chapter 11 bankruptcy filing, the company filed a motion seeking to reject (i) these “dark” leases (38 of them) as well as (ii) several other locations that franchisees operate under subleases that are not profitable (40 total locations).

So, what now? The papers don’t really say much. Oddly enough, the first day declaration ends with some information about a payment processing data breach and says nothing about DIP financing (there isn’t any) or the direction of the case. In a press release, however, the company says that it intends to use the bankruptcy process to pursue “an orderly sale of its business and assets as a going concern.” Now, in the past, we’ve certainly made fun of debtors who have used their first day papers as de facto marketing materials. Not because it’s stupid: it’s rather smart. It was just also rather blatant and shamelessly spinful. Here, though, Krystal doesn’t even mention anything about a marketing process in its papers or, for that matter, a banker (which happens to be the newly merged Piper Sandler).

These guys are off to a rockin start.

*****

Wells Fargo Bank NA ($WFC), the agent under the company’s secured loan, agrees. It filed an objection to the company’s motion seeking authorization to use cash collateral. They wrote:

As the Debtors’ largest stakeholder, the Agent is extremely concerned with the manner in which the Debtors are positioning these cases. The Debtors have yet to file their budget for either the interim period until the second interim hearing or a longer-term budget, but based on the draft budgets that were provided to the Agent prior to filing, it appears that operating on cash collateral alone will not provide the Debtors with sufficient liquidity to make it through a sale process and affords almost no margin for error. The Bankruptcy Code does not permit the Debtors to avoid their obligation to provide adequate protection to the Prepetition Secured Parties on the basis that the Debtors elected a budget that will not permit it. Were the Debtors to run out of cash during the sale process, as they are likely to do, the attendant disruption could jeopardize the entire going concern value of the business and the sale process.

Nothing like a contested cash collateral hearing to get things off on the right foot.

• Jurisdiction: N.D. of Georgia (Judge Hagenau)

• Capital Structure: $10mm RCF, $54.1mm Term Loan (Wells Fargo Bank NA), $1.5mm promissory note (KRY LLC).

• Professionals:

  • Legal: King & Spalding LLP (Sarah Borders, Jeffrey Dutson, Leia Clement Shermohammed)

  • Financial Advisor/CRO: Alvarez & Marsal North America LLC (Jonathan Tibus)

  • Investment Banker: Piper Jaffray & Co. (aka Piper Sandler)

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

• Other Parties in Interest:

  • Wells Fargo Bank NA

    • Legal: Morgan Lewis & Bockius LLP (Jennifer Feldshur, Charlie Liu) & Parker Hudson Rainer & Dobbs LLP (C. Edward Dobbs, Rufus Dorsey, Michael Sullivan)
      

😷New Chapter 11 Bankruptcy Filing - REVA Medical Inc.😷

REVA Medical Inc.

January 14, 2020

Take cover folks: it’s raining med device bankruptcies these days.

San Diego-based REVA Medical Inc. develops bioresorbable polymer technologies for coronary artery disease, peripheral artery disease and embolization therapy. If that sounds technical, you’re right: just like every other med device company that finds its way into bankruptcy. The details of the products go right over our heads but, fortunately, the general themes are the same as far less technical debtors. In a nutshell: the company’s products are highly capital intensive and require access to equity and debt markets.

And, indeed, REVA has accessed those markets. It was publicly-traded on an Australian exchange; it also raised tens of millions ($56.8mm to be exact) by way of convertible notes; and, finally, it had access to a senior secured credit facility that looks like a whole lot like bridge financing to a bankruptcy. Indeed, on January 9, just four days prior to filing, the debtor’s gained access to an additional $4.4mm from Goldman Sachs Specialty Lending Group, L.P. which perfectly teed up a cash collateral motion (which was granted the next day). With all of that debt and “relatively minimal sales,” the debtor “has not yet generated revenue at a level sufficient to support its cost structure.” (PETITION Note: we really hope that forthcoming med device AND biopharma debtors borrow this language because it’s likely universally applicable…they can save themselves the cost of 0.2 billable hours). Compounding matters was the maturity of its first issuance of converts, putting the debtor on the hook for $25.5mm. Ruh roh.

The debtor ran into other issues. For one, the debtor’s distributor, Abbott Laboratories ($ABT), withdrew one of the debtor’s products from the market (“Absorb”) after adverse events and poor clinical trial results. Score one for ethics! Thereafter, the European Society of Cardiology published new guidelines that basically napalmed the debtor’s Absorb saying that it’s not useful/effective and might actually be harmful. Whoops!

But there’s some good news here. The debtor has a deal. The deal will erase $90mm of debt with the senior secured lenders and the holders of convertible notes receiving new equity in the reorganized (read: post-bankruptcy) company. This product will live to see another day with the hope of a major course correction.

• Jurisdiction: D. of Delaware (Judge Dorsey)

• Capital Structure: $9.7mm senior secured credit facility (Goldman Sachs International), $25mm '14 7.54% convertible notes (matured 11/14/19)(Goldman Sachs International, Senrigan Capital Group), $47.1mm ‘17 8% convertible notes (GSI, Senrigan, Medtronic, Inc., HEC Master Fund LP, J.P. Morgan Securities plc, TIGA Trading Pty Ltd, and Saints Capital Everest LP)

• Professionals:

  • Legal: DLA Piper LLP (Thomas Califano, Stuart Brown, Jamila Willis)

  • Financial Advisor: Ernst & Young LLP

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

• Other Parties in Interest:

  • 5%+ Equityholders: Senrigan Capital Group, Goldman Sachs International, Robert Stockman, Elliott Associates, L.P, Brookside/Bain, Capital Public Equity, Cerberus Capital Management, JP Morgan, Citicorp Nominees PTY Limited, JP Morgan Nominees Australia Pty Limited, HSBC Custody Nominees (Australia) Limited –GSCO, HSBC Custody Nominees (Australia) Limited

  • Senior Secured Agent: Goldman Sachs International

    • Legal: Weil Gotshal & Manges LLP (David Griffiths, Kevin Bostel) & Richards Layton & Finger PA (Paul Heath, Zachary Shapiro, Sarah Silveira)

  • Senior Secured Lenders: MS Pace LP, Senrigan Capital Group Limited

  • Elliott Management Corporation

    • Legal: Debevoise & Plimpton LLP (Jasmine Ball) & Ashby & Geddes PA (William Bowden)

🏥New Chapter 11 Bankruptcy Filing - Thomas Health System Inc.🏥1/10/20

Thomas Health System Inc.

January 10, 2020

Yeah, we poo poo’d the whole healthcare distress theme because, well, there was a lot of bluster and not many large restructurings. Which is not to say that there weren’t restructurings. There were. A ton in fact. And patients apparently got left in complete and utter disarray as a result.

Now there’s another one to watch.

Thomas Health System Inc., a West Virginia nonprofit public benefit corporation, filed for bankruptcy along with two debtor hospitals (Charleston Hospital Inc. d/b/a Saint Francis Hospital and Thomas Memorial) and another debtor ancillary services provider (THS Physicians Partners Inc.). It claims to be the 17th largest private employer in West Virginia. Collectively, the debtors form a 391-bed hospital system and employ approximately 1700 people. Meaningful.

Also meaningful is the debtors’ $137.9mm of secured bonds and $45mm of underfunded pension obligations. The debtors annual debt service in 2019 was ~$10.8mm; their revenues were ~$267mm; their operating expenses were ~$253.3mm; and their net loss was ~$6.6mm. Clearly the debt service is making a mark.

In addition to their debt, the debtors cite a laundry list of reasons that led to their bankruptcy. In a nutshell, they boil down to “Thanks Obama.” Kidding, kidding. Well, sort of. These are all of the issues the company listed:

• Implementation of the Affordable Care Act (thanks Obama);

• The decline of the coal industry (“the war on coal”) and the thousands of resultant job losses (thanks Obama, and thanks Hillary for good measure);

• Medicaid expansion (thanks Obama);

• Reduced reimbursement rates (thanks Obama); and

• Patient outmigration to competing health systems (ah, f*ck it, yeah thanks Obama).

On brand, we’re being a bit flip here but the numbers cited here are staggering:

Between fiscal year 2015 and FY 2018, the Hospitals have seen a decline of adjusted admissions, observations, and emergency room visits by approximately 12%, 26% and 45%, respectively. In addition, over the last five years, the commercial insurers’ share of payor mix has declined from approximately 28% to approximately 18%.

So, visits are ⬇️. And reimbursements are ⬇️. Compounding matters is the complexity of treatment needed:

…recent reports rated West Virginia’s overall health as a state at 46th out of the 50 states, based largely on the facts that West Virginia has the highest number of opioid-related overdose deaths in the United States in 2017 and has the highest obesity rate in the country, leading to an increasing rate of diabetes. All of these factors contribute to increased healthcare costs to be borne by the Debtors suffering from substantial reductions in Medicare reimbursement.

The debtors have been trying to pursue strategic alternatives since February 2019. To no avail. The bankruptcy, presumably, is meant to re-energize those efforts. They defaulted on their bonds and so the filing will also give the debtors a “breathing spell” to try and de-lever their balance sheet.

• Jurisdiction: S.D. of West Virginia (Judge )

• Capital Structure:

• Professionals:

  • Legal: Whiteford Taylor & Preston LLP (Brandy Rapp, Michael Roeschenthaler) & Frost Brown Todd LLC (Jared Tully, Ronald Gold, Douglas Lutz)

  • Financial Advisor: Force Ten Partners LLC

  • Investment Banker: SOLIC Capital Advisors LLC

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

• Other Parties in Interest:

  • Indenture Trustee: UMB Bank NA

    • Legal: Mintz Levin Cohn Ferris Glovsky & Popeo PC (Colleen Murphy, Ian Hammel, Timothy McKeon) & Dinsmore & Shohl LLP (Janet Smith Holbrook)

New Chapter 11 Filing - Paddock Enterprises LLC

Paddock Enterprises LLC

January 6, 2020

Ohio-based Paddock Enterprises LLC (aka Owens-Illinois Inc.) is the latest victim of asbestos-related liabilities to find itself in bankruptcy court. And by “latest” we mean the first in, like, a few days. Just last week, another Ohio-based manufacturer, ON Marine Services Company LLC, filed for bankruptcy after having had enough of dealing with decades-worth of claims within the tort system. ON filed for bankruptcy to address 6,000 claims emanating out of the 70s; Paddock filed for bankruptcy because its alternative to the tort system — “administrative claims agreements” — became increasingly untenable and it must still address 900 claims stemming from the 40s and 50s. That’s right, the 40s and 50s!! The purpose of filing for bankruptcy is to establish a 524(g) trust to deal with current and future asbestos claimants.

This case seems rather straight-forward and so we’ll spare you the long summary. In a nutshell, if a company at one time manufactured product with asbestos, it is generally f*cked. But there is an interesting commentary herein about these types of lawsuits and why bankruptcy is warranted. In the context of discussing its reserve coverage of asbestos-related tort expenditures ($722mm!), the company notes:

The Debtor believes that, although the established reserves are appropriate under ASC 450, its ultimate asbestos-related tort expenditures cannot be known with certainty because, among other reasons, the litigation environment in the tort system has deteriorated generally for mass tort defendants and Administrative Claims Agreements are becoming less reliable.

It gets better (PETITION Note: this is a long but worth-it passage):

What is certain is the incredible disparity between what the Debtor has historically paid, and is now being asked to pay, for Asbestos Claims, given the extent of its historical asbestosrelated operations. As of September 30, 2019, the Debtor had disposed of over 400,000 Asbestos Claims, and had incurred gross expense of approximately $5 billion for asbestos-related costs. In contrast, its total Kaylo sales for the 10-year period in which it sold the product were approximately $40 million. Asbestos-related cash payments for 2018, 2017, and 2016 alone were $105 million, $110 million, and $125 million, respectively. Although these cash payments show a modest decline, the overall volume and claimed value of Asbestos Claims asserted against the Debtor has not declined in proportion to the facts that (i) over 60 years have passed since the Debtor exited the Kaylo business, (ii) the average age of the vast majority of its claimants is now over 83 years old, (iii) these demographics produce increasingly limited opportunities to demonstrate legitimate occupational Kaylo exposures, and (iv) other recoveries are available from trusts established by other asbestos defendants. Rather, increasing settlement values have been demanded of the Debtor. And because the Debtor has settled or otherwise exhausted all insurance that might cover Asbestos Claims, it must satisfy all asbestos-related expenses out of Company cash flows.

Oh man. You’ve gotta love the plaintiff’s Bar. Those numbers are staggering. $40mm in 1940-1950 dollars would be equal to approximately $565mm in 2018 dollars. As compared to $5b in liability. And more to come. SHEEEESH. (PETITION Note: none of the foregoing is intended to disrespect any of the victims of the debtor’s product. Yes, we feel obligated to say that.)

There’s also a structural issue: the debtor entity subject to these extensive liabilities was incorporated in December 2019 as a direct wholly-owned subsidiary of O-I Glass Inc. ($OI), a $2b market cap glass container manufacturer. This is the classic “good company,” “bad company” structural separation. We suspect there’ll be at least some fireworks in bankruptcy court over this structure as creditors — almost exclusively the plaintiffs’ law firms — try to broaden the pool of potential proceeds from which they can recover monies for their clients.

• Jurisdiction: D. of Delaware (Judge Silverstein)

• Capital Structure:

• Professionals:

  • Legal: Latham & Watkins LLP (George Davis, Jeffrey Bjork, Christina Craige, Jeffrey Mispagel, Helena Tseregounis, Michael Faris, Lisa Lansio) & Richards Layton & Finger PA (John Knight, Michael Merchant)

  • Board of Directors: Kevin Collins, John Reynolds, Scott Gedris

  • Estimation Agent: Bates White LLC

  • Financial Advisor: Alvarez & Marsal LLC

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

• Other Parties in Interest:

  • O-I Glass Inc.

    • Legal: Morris Nichols Arsht & Tunnell LLP (Derek Abbott, Joseph Halsey)

  • Future Claims Representative: James Patton Jr.

    • Legal: Young Conaway Stargatt & Taylor LLP

    • Claims Analyst: Ankura Consulting Group LLC

🐄New Chapter 11 Bankruptcy Filing - Borden Dairy Company🐄

Borden Dairy Company

January 5, 2020

Dallas-based Borden Dairy Company and 17 affiliated companies joined fellow dairy manufacturer, Dean Foods Company (which we’ve written about here, here, here and, lastly, here upon its chapter 11 filing) in bankruptcy court this week. Why? “Like other milk producers and distributors, Borden is facing a multi-year trend of shrinking margins and increasing competition. These negative trends have been exacerbated by declining margin over milk at retail even as the price of raw Class 1 milk has been increasing.” Boo Moo.

What a storied history. Founded by Gail Borden in 1856 (PETITION Note: read the link if you want to feel awful about yourself and what you’ve accomplished in your life), the New York Condensed Milk Company started the first successful condensed milk processing plant in 1861. In the latter part of the 19th century, the company added processed and evaporated milk to its offerings and pioneered the use of glass milk bottles.

In 1919, the company changed its name to Borden Company in honor of Mr. Borden. This was a period of great uncertainty — one captured in Hemingway’s “The Sun Also Rises” — but that didn’t stop Mr. Borden’s descendants from expanding their dairy-fueled reign. They acquired two of the largest ice cream manufacturers in the US, while also adding cheese and acquiring a chemicals company. Over those years, Borden acquired over 200 companies. “Elsie the Cow” was born in 1936 and became a well known mascot.

By the 80s, Borden was the world’s largest dairy operator with sales exceeding $7.2b. Then gravity prevailed. By the early 90s, the company experienced financial distress borne out of two much expansion over the years and sold to KKR for $2b. KKR then dismantled Borden by selling off divisions and brands to various buyers.

The debtors underwent a comprehensive restructuring in 2017. At the time of the restructuring, the debtors took on a $275mm credit facility held, in tranches, by PNC Bank and KKR. The effective interest rate on the term loan facilities was 9.3% as of 12/31/19, which is on top of the 4.95% interest due under the revolving portion of the loan. So, yeah, debt and the debtors’ interest expense nut is a big part of this bankruptcy filing.

The company is no longer the behemoth it once was. Nevertheless, it employees over 3000 people and makes tens of thousands of service calls to its customers (e.g., Walmart Inc. & Sam’s Club ($WMT)), Kroger Inc. ($KR), 7-Eleven, CVS HealthCorp. ($CVS), Starbucks Inc. ($SBUX), etc.).

But its number suck. In 2018, the company had a total net income loss of $14.6mm on ~$1.2b of sales. In 2019, the loss widened to $42.4mm. Liquidity, therefore, is a big issue — and it’s compounded by (a) interest expense and amort payments on the term loan and (b) employee obligations under mandatory retirement plans and settlements related to pension funds. More on this below.

The macro reasons for the debtors’ problems sound like a Dean Foods’ encore:

• The milk industry is highly competitive ✅;

• Non-dairy products and beverages are stealing share (DISRUPTION!!) ✅;

• Discount grocers have “intensified competition and reduced the margin over milk at retail” ✅; and

• Walmart and other retailers who use milk as a loss leader are napalming margins ✅;

• Commodity and freight costs are up ✅.

The company doesn’t tip its hand as to what it hopes to achieve in bankruptcy other than a “breathing spell” to get its sh*t in order. The Wall Street Journal noted:

Borden Chief Executive Tony Sarsam told The Wall Street Journal that he believes Acon, which took a major stake in the company in 2017, will be the primary owner of the business after the bankruptcy. He declined to say how much debt Borden would erase as part of its bankruptcy restructuring.

Acon is currently one of the debtors’ majority owners.

*****

There’s one thing that the Wall Street Journal doesn’t pick up on though. The debtors’ pensioners are about to get the royal screw.

The debtors note that, pre-filing, they made periodic payments pursuant to two settlement agreements they entered into in connection with their withdrawal from its (a) Central States, Southeast and Southwest Areas Pension Fund terminated in ‘14 (“Central States”) and (b) Retail, Wholesale and Department Store International Union pension fund terminated in ‘16 (“RWDSU”). In connection with the ‘17 restructuring, the debtors established a special purpose account funded with $30mm to fund these settlement payments — $185,225/month to Central States and $6,000/month to RWDSU. The account now has $26.6mm in it.

The debtors are laying claim to this money; they note that it is unencumbered by their lenders nor the pensioners.

This hasn’t been a great time for pensioners. With coal bankruptcies galore, Jack Cooper, and now the dairy producers, anxiety levels must be through the roof.

• Jurisdiction: D. of Delaware (Judge Sontchi)

• Capital Structure: $275mm of funded debt (see above). $30mm Term Loan A (PNC), $175mm Term Loan B (KKR Credit Advisors US LLC), $70mm RCF (PNC)

• Professionals:

  • Legal: Arnold & Porter Kaye Scholer (D. Tyler Nurnberg, Seth Kleinman, Sarah Gryll, Jeffrey Fuisz) & Young Conaway Stargatt & Taylor LLP (M. Blake Cleary, Kenneth Enos, Elizabeth Justison, Betsy Feldman)

  • Independent Directors: Harold Strunk, Andrea Fischer Newman

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

• Other Parties in Interest:

  • ACON Dairy Investors LLC

  • New Laguna LLC

  • Agent, RCF Facility Lenders & Term Loan A Facility Lenders: PNC Bank NA

    • Legal: Blank Rome LLP (Regina Stango Kelbon, Josef Mintz, John Lucian, Gregory Vizza)

  • Term Loan B Facility Lenders: KKR Credit Advisors US LLC/Franklin Square Holdings LP

    • Legal: King & Spalding LLP (Roger Schwartz, Peter Montoni, Christopher Boies, Stephen Blank) & Morris Nichols Arsht & Tunnell LLP (Robert Dehney, Curtis Miller, Matthew Harvey, Matthew Talmo)

  • Official Committee of Unsecured Creditors

    • Legal: Sidley Austin LLP (Matthew Clemente, Genevieve Weiner, Michael Fishel, Michael Burke) & Morris James LLP (Carl Kunz III, Eric Monzo, Brya Keilson)

🏆New Chapter 11 Bankruptcy Filing - ON Marine Services Company LLC🏆

ON Marine Services Company LLC

January 2, 2020

Pittsburgh-based ON Marine Services Company LLC gets the prize: it marks the first sizable chapter 11 bankruptcy case of 2020. This probably wasn’t the “victory” that Pittsburgh residents wanted after the Steelers crapped out at the end of the regular NFL season. Its reward? A plan of liquidation.

Let’s be clear: by “sizable,” we are not referring to operations, employees, or some other definitive metric. Rather, we’re referring to approximately 6,000 asbestos-related personal injury claimants and, by extension, the massive continent liabilities that comes with them. 😬

The debtor dates back to 1929 and has a legacy in manufacturing and selling products used exclusively in steelmaking. The products — called insulated “hot tops” — were single-use products into which molten steel was poured. While that might seem fairly innocuous, “[b]y the mid-1940s, certain of the … “hot top” products contained asbestos as an intentionally included ingredient.” This ceased to be the case after 1978.

The company previously filed for bankruptcy in 2004 which, we guess(?), means this is a Chapter 22. Like, maybe? (We really need a set statute of limitations for using that term). For whatever reason, the company did not address its asbestos-related liabilities in the prior bankruptcy and has subsequently enjoyed a jolly good time of defending cases for the past 14 years. Over 182,000 claims have been asserted against the company: we suppose someone deserves some sort of endurance award because, as noted above, only 6,000 remain on the books. Clearly, though, folks have had enough of this sh*t.

Interestingly, there’s a commentary here about the US tort system. While the 182,000 claims tout horrific injuries, e.g., mesothelioma, lung cancer, esophageal or colon cancer, the debtor highlights that 95% of the claims asserted against it have been dismissed without payment. Nevertheless, a decade+ of defending claims has depleted the debtor of critical insurance/reserves to fund defense and indemnity costs. “[T]he Debtor has reached the point at which its traditional method of dealing with Asbestos Claims is no longer economically feasible.” Said another way, this zombie is finally being put out of its misery.

The debtor filed for bankruptcy with an insurance settlement in hand. The proceeds from that settlement with fund the bankruptcy case and feed a liquidating trust that will be available to claimants as cases proceed.

• Jurisdiction: W.D. of Pennsylvania (Judge Bohm)

• Professionals:

  • Legal: Reed Smith LLP (Paul Singer, Andrew Muha, Luke Sizemore)

  • Claims Agent: Epiq Corporate Restructuring LLC (*click on the link above for free docket access)

New Chapter 11 Bankruptcy Filing - High Ridge Brands Co.

High Ridge Brands Co.

December 18, 2019

Connecticut-based, private-equity-owned (Clayton Dubilier & Rice LLC) High Ridge Brands Co. (“HRB”) filed for bankruptcy in the District of Delaware. High Ridge what? Right, we wouldn’t expect you to know what HRB is but you may very well know several of the brands in its portfolio. Ever visit Nana’s house for the weekend, hop into the shower, and see a boatload of VO5 or White Rain shampoo on the shelf? Zest soap? Or have you ever seen some shadeball do this on the street?

Oh yeah. Nothing says class like Binaca! Anyway, all four of the aforementioned products are in HRB’s brand portfolio. That portfolio also includes the Coast, Firefly, LA Looks, Rave, Reach, Salon Grafix, SGX NYC, Thicker Fuller Hair, and the Zero Frizz brands; the most recent portfolio addition was, in late 2016, Dr. Fresh, which sounds like a Marvel superhero but is an oral-care brand focused on value toothbrushes and the like. This acquisition marked an expansion away from HRB’s historical focus on primarily skin cleaning and hair care products in the “value” segment. HRB describes their business model as follows:

“Given their focus on value price points, the goal of the Debtors’ early strategy was to minimize costs, which they did by concentrating supply and optimizing logistics to leverage unit volumes to create a low cost structure with fully outsourced manufacturing and logistics primarily in the United States. Said differently, the Debtors’ original business plan revolved around low-cost, low-margin, and high-volume product distribution.”

Interestingly, the gangbusters economy has not been so gangbusters for HRB and, by extension here, CD&R’s equity. HRB, therefore, has recently pivoted:

Given that the Company’s hair care and skin cleansing brand portfolio was concentrated in product segments (e.g., bar soap and hair spray) and price points (e.g., opening price points and value) that were shrinking due to shifting consumer preferences and a strong economy that led to a reduction in shelf space allotted to value priced products, the Debtors have focused recently on transformative innovation to drive topline growth in growing segments (e.g., natural products, texturizers, and body wash) at slightly higher price points. The company has also invested in capability and capacity across the organization to elevate the speed it can bring products to market, its customer service, and its performance management. These tactics, in conjunction with their recent acquisitions, have positioned the Debtors well for sustainable, profitable growth.

Now, if that last bit about razzle dazzle change and high prospects seems like a sales pitch to you, well, give yourself a pat on the back because that is precisely the point of this chapter 11 filing. And the first day filing papers reflect this: the First Day Declaration is replete with chest-pounding talk about how great HRB’s asset-light model is, how large the total addressable market is for their products, how diversified and recognizable their brands are, and how deep their customer relationships are. With respect to the latter, HRB touts its key customers: “Walmart, Dollar Tree, Dollar General, Walgreens, Kroger, Family Dollar, 99 Cents Only Stores, CVS, HEB, Wakefern and other blue chip retailers.” UM, WOULD THESE BE THE VERY SAME CUSTOMERS WHO ARE TAKING AWAY HRB’S SHELF SPACE? 🤔😜

Someone will have to buy into all of ⬆️ and disregard HRB’s actual recent performance — performance that has sucked sh*t to the tune of $301.1mm in net sales and a $62.5mm net loss (and $35.5mm of adjusted EBITDA…adjusted for what we wonder?). We would love to see the data room: given increased emphasis on higher quality product at affordable prices, among other factors, we bet the numbers are showing disturbing quarterly declines but that’s just a guess.

HRB highlights the following as events that led to its chapter cases:

• Increased competition in the personal care industry and a shift away from its value brands;

• An inability to account for increasing commodity costs when marketing to value customers;

• A late shift to higher-margin products;

• An education challenge in that HRB will now need to educate the consumer about its newer, higher-margin brands — something that has and will elevate marketing costs; and

• A soap supplier (a) jamming HRB with higher costs and HRB not having replacements at the ready and (b) failing to deliver the supply HRB needed.

Of course, there’s also the capital structure. HRB has over $500mm of debt split between a $50mm revolving credit facility, a $213.4mm term loan, and $261mm of '25 8.875% senior unsecured notes (as well as $28.7mm of trade debt).

Tellingly, HRB wasn’t able to get its lenders on board with a restructuring transaction. Per HRB:

…the Debtors explored (1) a consensual restructuring among the Debtors, the Prepetition First Lien Lenders, and the Noteholders; (2) a plan of reorganization sponsored by the Prepetition First Lien Lenders; (3) a toggle plan with a focus on a sale of the Debtors’ assets with a reorganization backstop; (4) a chapter 11 sale process with the Prepetition First Lien Lenders acting as a stalking horse bidder; and (5) a chapter 11 sale process funded by a debtor-in-possession facility provided by the Prepetition First Lien Lenders or some subset thereof.

The Debtors’ initial goal was to effectuate a consensual restructuring out of court, and the Debtors engaged with both the Prepetition First Lien Lenders and the Ad Hoc Group to explore this possibility prior to commencing the Sale Process … in September of this year. As part of this, the Debtors provided the Ad Hoc Group with a significant amount of due diligence and held a number of meetings with the Ad Hoc Group’s professionals. Although the initial discussions did result in the Ad Hoc Group providing the Debtors with an initial set of potential terms for a restructuring, negotiations ultimately dwindled such that the Debtors decided they needed to pivot to other restructuring alternatives.

Now, it’s hard to say, from the outside looking in, what this all means. Getting this kind of deal done out-of-court was — depending on how concentrated the debt holdings are — probably unrealistic. It sounds like the lenders lacked not only the numbers to get something done but the conviction. There’s no restructuring support agreement here. There’s not even a stalking horse bidder. So, none of that is great.

On the plus side … maybe?… an earlier DIP commitment for $70mm has been decreased to $40mm ($20mm of which is a roll-up of prepetition amounts). HRB claims that this a reflection of the “liquidity position and forecasted liquidity needs over the course of the…cases” which would suggest that liquidity has improved since first discussing DIP financing back in August. Alternatively, it could mean that the DIP lenders are skittish given what appears to be a significant gap in the perception of value. The DIP matures in four months — presumably enough time to allow a sale process to play out through the beginning of February. Now the pressure is on PJT Partners Inc. ($PJT) to deliver a potential buyer.

*****

One final thing to note here: the petition lists HRB’s top 50 creditors and, of that 50, only a handful are trade creditors. Typically you’d see the indenture trustee listed as the top creditor, subsuming the entirety of the outstanding debt issuance outstanding. Here, HRB individually listed each of the noteholders. This could mean that the company has, for the most part, kept its trade current, relegating a very small subset to unpaid status. Indeed, those few creditors listed are owed more than 50% of the outstanding trade debt.

Furthermore, the company filed a critical vendor motion seeking to pay $26.5mm in critical vendor, shipper, 503b9 and foreign vendor claims. That conveniently wouldn’t leave much of an unsecured creditor body outside of the notes.

• Jurisdiction: D. of Delaware (Judge Shannon)

• Capital Structure: $50mm RCF & $213.4mm TL (BMO Harris Bank NA), $261mm '25 8.875% senior unsecured notes (Wilmington Trust)

• Professionals:

  • Legal: Young Conaway Stargatt & Taylor LLP (Robert Brady, Edmon Morton, Ian Bambrick, Allison Mielke, Jared Kochenash) & Debevoise & Plimpton LLLP (M. Natasha Labovitz, Nick Kaluk III)

  • Financial Advisor/CRO: Ankura Consulting Group LLC (Benjamin Jones)

  • Investment Banker: PJT Partners LP (John Singh)

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

• Other Parties in Interest:

  • Equity Sponsor: Clayton Dubilier & Rice LLC

  • DIP Administrative Agent & Agent under the Prepetition First Lien Credit Agreement: BMO Harris Bank NA

    • Legal: Winston & Strawn LLP (Daniel McGuire, Gregory Gartland, Dov Goodman) & Womble Bond Dickinson US LLP (Matthew Ward, Morgan Patterson)

  • Indenture Trustee for the 8.875% ‘25 Senior Notes: Wilmington Trust NA

    • Legal: Kilpatrick Townsend & Stockton LLP (Todd Meyers, Gianfranco Finizio) & Morris James LLP (Eric Monzo, Brya Keilson)

  • Ad Hoc Group of 8.875% ‘25 Senior Noteholders

🚀New Chapter 11 Bankruptcy - Vector Launch Inc.🚀

Vector Launch Inc.

December 13, 2019

🚀Another Example of the Tech Hype Machine Getting a Fast and Furious Reality Check (Short “Founder Friendly?”; Long #BustedTech)🚀

We’ve been rather bored with energy and retail distress these days and so we looked on with great interest when Arizona-based Vector Launch Inc. and its subsidiary, Garvey Spacecraft Corporation, filed for bankruptcy in the District of Delaware. Sure, sure, it’s not a big name like McDermott International ($MDR) — the excitement there awaits us in ‘20 — but it’s meaningful nonetheless. Why? Because Sand Hill Road is known for its moonshots. And they often come crashing down to earth. Just not usually in bankruptcy court.

Yet this one did. Vector, a space technology company that was producing rockets and satellite computing technology, has an interesting history. Founded in 2016 by two of the original team members behind Elon Musk’s SpaceX, the company shared Mr. Musk’s vision and penchant for exaggeration. The company launched in 2016 and, in retrospect, the laudatory coverage of the ambition is laughable. Here’s Techcrunch:

With small rockets carrying single 20-40 kg payloads launching weekly or even every few days, the company can be flexible with both prices and timetables. Such small satellites are a growing business: 175 were launched in 2015 alone, and there’s plenty of room to grow. It’ll still be expensive, of course, and you won’t be able to just buy a Thursday afternoon express ticket to low earth orbit — yet.

Customers will, however, reap other benefits. There are less restrictions on space: no more having to package your satellite or craft into a launch container so it fits into a slot inside a crowded space bus. Less of a wait between build and launch means hardware can be finalized weeks, not years, in advance — and expensive satellites aren’t sitting in warehouses waiting for their turn to go live and get that sweet return on investment.

Sounds dope AF, we admit. Even more exciting, Techcrunch reported that Vector hoped to make its first real flights in 2017. At the time, it had raised government grant money (DOD and NASA) and a small amount of angel money. Straight out of the Musk playbook: fund your company and get rich off of the government teat. Brilliant.

But you don’t get government money without pedigreed founders and highfalutin promises to change the world (literally via rockets). Just imagine how that package looks to the outside investment community.

Investors are knocking down the front door looking to get in, he said, though he declined to name any. Perhaps they smell profitability: Vector’s business plan has it cash positive after just a few launches.

Oof. That bit looks REALLLLLLY REALLLLLY bad now, huh? It gets worse.

Here are some of the things that subsequently transpired:

• The company finalized an agreement to conduct 21 launches for Finland-based Iceye’s commercial Synthetic Aperture Radar satellite constellation. 👍

• Quartz published a flattering piece about the shift to smaller rockets, giving heavy prominence to Vector. 👍

• The company won $2.5mm worth of contracts from the Defense Advanced Research Projects Agency (DARPA) and NASA. 👍

• The company announced a Tucson headquarters and manufacturing plant, celebrating the potential creation of 200 jobs with the hope of reaching as many as 500; the “direct economic impact of the facility could be $290 million over five years” (citing $2.5mm in contracts and revenue in ‘16 and $160mm-worth of signed contracts for launches “once the plant starts producing rockets…”). 👍

• Vector announced “an agreement with York Space Systems, an aerospace company specializing in small and medium class spacecraft, to conduct six satellite launches from 2019 through 2022 with the option for 14 additional launches”; the contract was reportedly worth a staggering $60mm. 👍

These guys were rockin’ and rollin'.

But, wait, there’s more!

• After several more government grants and a number of angel infusions, the company finally raised a $21mm Series A round in June 2017 — which included money from vaunted Silicon Valley venture capital firm, Sequoia Capital (as well as Shasta Ventures and Lightspeed).

• By August of 2017, the hype machine was in full effect. Here is a CNBC piece championing the company’s first completed “mission.” Around the same time, Techcrunch, The Los Angeles Times and Ars Technica all wrote about the promise of small rockets. Size doesn’t matter, they said!!

• By October 2018, the company was back fundraising; it secured a $70mm Series B raise from Kodem Growth Partners, Morgan Stanley Alternative Investment Partners and participation from its existing trio of VC firms. Now nothing and nobody could get in these guys’ way!!!!!

Well, except Sequoia Capital.

Per the company’s CHAPTER 11 BANKRUPTCY PAPERS(!!!!):

“In early August 2019, a member of Vector’s board of directors…appointed by Sequoia…abruptly resigned and informed Vector that Sequoia had decided to no longer support Vector via funding for future operations. Almost immediately after the…resignation, the Debtors’ CEO resigned. The fallout from Sequoia’s decision and the CEO’s resignation spooked the investor community and doomed the Debtors’ efforts to raise additional capital.”

There’s more:

These events could not have been timed more poorly for the Debtors. In addition to preventing the Debtors from attracting new capital, they occurred when the debtors had almost expended all of the capital from their prior capital raises. Indeed, the Debtors’ cash balances barely exceeded their secured debt, which principal amount totaled $11.5 million.

HOLD ON. So, the company lit $70mm of new funding on fire in less than a year and didn’t have enough money to clear its secured debt. And SECURED DEBT? Where was the press release for that?!?!

After evaluating its options, the Board determined that if it did not immediately cease operations, the Debtors would be unable to pay their employees if their secured lenders declared a default and froze the Debtors’ cash (which is precisely what occurred). With no access to capital to fund ongoing business needs and to satisfy the Debtors’ outstanding secured debt, the Board voted to cease operations and to terminate most of the Debtors’ employees and pay all owed wages…

This ain’t exactly WeWork but still. Life comes at you fast: one moment you’re a media darling garnering all kinds of favorable coverage, raising millions upon million of dollars with investors “knocking down the door” and, the next, your pesky venture capitalists are pulling the plug and high-tailing for the exits!

Less than two weeks later, the Debtors’ secured lenders froze the approximately $12 million in cash deposited in the Debtors’ bank accounts as expected. The Debtors’ secured lenders subsequently swept the cash from Debtors’ bank accounts, leaving the Debtors with no cash, a single employee (the acting CEO), and, after assessing fees and other charges, approximately $500k in secured debt. The Debtors’ remaining assets essentially consisted of three leased facilities, transporter-erector launcher, launch vehicle parts (including rocket engines and ground support equipment), satellite computer technology, patents, and other intellectual property.

So much to unpack here.

First, what the hell is a “transporter-erector launcher” and where does Johnny get one?

Second, at what point did this thing sh*t the bed so badly that it needed to tap a credit facility? That it had to (maybe?) jettison its founder-CEO?? Tap bridge financing???

It turns out that TriplePoint Capital LLC committed to lend the company $15mm back in October 2018 alongside the company’s Series B raise (PETITION Note: this is not in and of itself crazy…many startups take on venture debt in conjunction with a fundraise generally as a safety net; usually they hope NOT to use it because they’ll just go on to their next equity raise). The loan was secured by basically all of the company’s collateral and was structured as two draws in equal $7.5mm installments. With the sweep, TriplePoint ensured that its claim would be minimized: at the time of filing, they are owed $500k.

To bridge to a filing, the company secured a $500k bridge loan from Lockheed Martin Corporation — now the proposed stalking horse purchaser. The company also issued $1.6mm in convertible notes in connection with what it thought would be a Series C raise prior to Sequoia backing out. Whoops.

The big question, then, is why did Sequoia so abruptly quit the board and split?* Why, then, did the CEO, James Cantrell, quit the next day? It sounds like there’s a lot more here to uncover:

Mr. Cantrell subsequently filed a lawsuit against Vector claiming that he was terminated. The Debtors dispute Mr. Cantrell’s claims regarding his departure. Moreover, the Debtors believe they hold claims against Mr. Cantrell that they intend to pursue for the benefit of the Debtors’ creditors.

Some shady-a$$ sh*t must’ve been discovered around August 5. Just as fervently as investors were, at one point, trying to invest in this company, parties in interest were now eager to save themselves. Silicon Valley Bank (over $4mm owed) and TriplePoint issued notices of default and swept the Debtors’ cash (PETITION Note: that’s why they say that possession is half the battle!).

Lockheed is the White Knight here salvaging what’s left of this hot mess. It provided the bridge loan; it will provide a $2.5mm DIP (yay bankruptcy pros getting paid!); and it will purchase the debtors’ GalacticSky assets for $4.25mm. The offer is cash and equity.

Interestingly, despite all of this, optimism abounds here. The debtors note that they hope to pursue the Lockheed sale followed by other sales of assets:

If consummated, the Debtors believe that the proceeds from Sales will provide for payment in full of the Debtors’ secured obligations, administrative expense claims, and priority claims. In addition, the debtors believe there will be sufficient funds for (i) a liquidation trust to pursue the Debtors’ claims against certain parties, including its former CEO and (ii) distributions to general unsecured creditors.

That claim against the former CEO ought to be interesting. Stay tuned.😬

*Axios’ Dan Primack wrote:

Per a source: Sequoia decided to stop investing due to a high burn rate and the company not meeting projections. That decision was followed by two lenders opting against giving Vector new debt lines — something Sequoia didn't instruct, but which Vector nonetheless blames on the VC firm.

Case Data:

• Jurisdiction: (Judge Dorsey)

• Capital Structure: $500k (TriplePoint Capital LLC), $500k (Lockheed Martin)

• Professionals:

  • Legal: Pillsbury Winthrop Shaw Pittman LLP (Hugh Ray III, Jason Sharp, William Hotze) & Sullivan Hazeltine Allinson LLC (Elihu Allinson Ill)

  • Financial Advisor: Winter Harbor LLC (Shaun Martin)

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

• Other Parties in Interest:

  • Prepetition Lender ($500k): TriplePoint Capital LLC

    • Legal: McDermott Will & Emery LLP (Darren Azman, Daniel Thomson) & Bayard PA (Justin Alberto)

  • Prepetition Lender ($500k) & Stalking Horse Purchaser ($2.5mm): Lockheed Martin Corporation

    • Legal: Hogan Lovells LLP (Christopher Donoho, John Beck, Jennifer Lee & Morris Nichols Arsht & Tunnell LLP (Robert Dehney, Andrew Remming, Paige Topper)

  • Large Equityholders: Kodem Growth Partners, Sequoia Capital, Shasta Ventures V LP, Lightspeed Venture Partners XI LP, DNX Ventures

  • Official Committee of Unsecured Creditors: Valcor Engineering Corporation; (ii) Rincon Etal Investments, Inc.; (iii) Expanding TFO I, LP; (iv) M4 Engineering Inc., and (v) Gas Innovations

    • Brown Rudnick LLP (Bennett Silverberg, Kenneth Aulet) & Potter Anderson & Corroon (Christopher Samis, L. Katherine Good, D. Ryan Slaugh)

    • Financial Advisor: Dundon Advisors LLC (Matthew Dundon, Philip Preis)

New Chapter 11 Filing - NeuroproteXeon Inc.

NeuroproteXeon Inc.

December 16, 2019

Many restructuring professionals predicted that “healthcare” would be an active area for bankruptcy in 2019. We suppose painting with such a broad brush increases the likelihood of being correct but it seems that the majority of the activity has really been in specific subsets, e.g., community retirement centers, biopharmaceuticals, and biotech/med-devices. Add another notch to the latter category.

New York-based NeuroproteXeon Inc. and its three affiliated debtors is the latest player in the space; it is “generally engaged in the development, commercialization and marketing of pharmaceutical agents, medical devices and/or other life sciences technologies.” The debtors have been “developing, testing and obtaining worldwide regulatory approval of a product consisting of pharmaceutical grade xenon gas for inhalation, which has been trademarked under the name XENEX™, and a propriety device…which delivers a combination of XENEX™ and oxygen to the respiratory system of persons who experience Post-Cardiac Arrest Syndrome….” The debtors device entered Phase III testing in 2018. But then it got suspended.

Why? Simply, the debtors ran out of money. The bankruptcy provides the debtors with access to critical funding — $5mm from JMB Capital Partners Lending LLC — that will allow them to continue to pursue testing. Meanwhile, the debtors’ investment bankers will market and try to sell the debtors’ assets.

• Jurisdiction: D. of Delaware (Judge Walrath)

• Capital Structure: $250k (JMB)

• Professionals:

  • Legal: Ashby & Geddes PA (William Bowden, Gregory Taylor, Stacy Newman)

  • Financial Advisor: Emerald Capital Advisors Corp. (John Madden)

  • Investment Banker: Lincoln Partners Advisors LLC (Brent Williams)

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

• Other Parties in Interest:

  • DIP Lender: JMB Capital Partners Lending LLC

    • Legal: Arent Fox LLP (Robert Hirsh, Beth Brownstein) & The Rosner Law Group LLC (Frederick Rosner, Scott Leonhardt, Jason Gibson)

😷New Chapter 15 Filing - China Hospitals Inc.😷

China Hospitals Inc.

November 24, 2019

So, this is, uh, ONE. HELL. OF. A. FACT. PATTERN.

Back in 2014, Classroom Investments Inc., a wholly-owned subsidiary of Ontario Teachers’ Pension Plan Board (!), entered into a share purchase and subscription agreement and shareholder’s agreement with Frank Hu, the founder, director and majority shareholder of an entity called China Hospitals. Pursuant to the agreement, Classroom Investments Inc. would acquire 20% of China Hospitals in exchange for $175mm.

We know what you must be thinking: what crazy earth-bending technology must China Hospitals have possessed such that Classroom Investments Inc. felt compelled to make such an investment — an investment imputing a valuation of ~$875mm on China Hospitals? Was the cure for cancer uncovered by China Hospitals?!? Did that solve male pattern baldness?!??

Spoiler alert: nope. Actually, the proceeds were supposed to be used to roll-up four hospitals — Puyang Oilfield General Hospital, Qingfeng People’s Hospital, Anqiu People’s Hospital and Shouguang People’s Hospital (in addition to general corporate purposes). Pursuant to the understanding, China Hospitals was to IPO within 30 months.

Of course, even that surprising goal wasn’t achieved. Why? Because Frank Hu apparently fat-fingered the funds to a different bank account under his control. Okay, okay…more like sticky-fingered. But that wasn’t all: Hu engaged in a string of shady transactions that “effectively stripped Classroom of its bargained-for economic interest in China Hospitals….” Said another way, Mr. Hu did basically none of what he was supposed to; he simply absconded with the money.

In 2015, Classroom took the matter to the Hong Kong International Arbitration Centre, and the arbitration tribunal issued a “final award” holding China Hospitals and Mr. Hu jointly and severally liable “in the amount of $231,805,125.09, comprising the sum of (a) Classroom’s original investment of $175,000,000, (b) interest accrued from January 29, 2014 to June 15, 2018 in the amount of $45,969,863.01 as well as post-award interest at a rate of 8% from June 15, 2018 until complete payment, and (c) costs in the amount of $10,835,262.08 (collectively, the “Arbitration Award”).” Any guesses as to whether Classroom got paid? Spoiler alert: of course not. This left Classroom apoplectic.

Classroom next petitioned the Grand Court of the Cayman Islands to prevent the dissipation of China Hospitals’ assets. The Grand Court appointed a liquidator and the liquidator has been winding down the business since. The liquidators, however, would like to get access to a Bank of America account that is believed to hold — or, at least, held as of March 30, 2016 — over $202mm in cash. Given all of the accusations of malfeasance here, Classroom is obviously of the view that the $202mm constitutes its money. To hinder anyone from doing anything with those proceeds — to the extent they exist (🤔) the liquidators filed a Chapter 15 in the Southern District of New York. Per The Wall Street Journal:

During a hastily scheduled hearing Monday, lawyers for the liquidators asked Judge Shelley Chapman to allow them to use the U.S. proceeding to seek more information about an American bank account potentially holding more than $200 million and to bar anyone from removing funds from the account.

The judge granted those requests and scheduled another hearing in the chapter 15 case for Dec. 16.

Who wants to bet that the money is still there? 😬

*****

The greatest question this ridiculousness leaves us with is this: what the bloody f*ck was the Ontario Teachers’ Pension Plan Board doing investing in this particular man for this particular purpose? The OTPP is an organization responsible for administering the defined-benefit pensions for school teachers in Ontario. School teachers, people. What kind of return were they expecting on a $175mm investment on a Chinese hospital roll-up that was supposed to, in short order, IPO? And why? Who got fired for this nonsense?

The investment is not, as it turns out, terribly out of form. The OTPP owns and manages a portfolio of Canadian and international assets including real estate, infrastructure (airports, railways), national lotteries (in the UK and Ireland), a Spanish funeral provider, and a minority interest in the New York Yankees’ regional sports network (YES). So, yeah, sure, in the ever-present need for large-yield-wielding assets, why not invest in a shady-a$$ Chinese hospital rollup?!? 👍

When a downturn eventually does occur, we’re likely to see a number of private equity deals by pension funds go sideways (callback to iPic Entertainment Inc., now owned by the Teachers’ Retirement System of Alabama and the Employees’ Retirement System of Alabama). It’s going to be fun to see, with the benefit of hindsight, the quality of due diligence!

Top of cycle due diligence

pic.twitter.com/qk2grCyrdv

— Brent Beshore (@BrentBeshore) November 26, 2019

Or lack thereof.

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

• Professionals:

  • Legal: Kirkland & Ellis LLP (Christopher Marcus, Lauren Friedman, W. Benjamin Winger)

  • Claims Agent: Omni Management

🐟New Chapter 11 Bankruptcy & CCAA Filing - Bumble Bee Parent Inc.🐟

Bumble Bee Parent Inc.

November 21, 2019

Tuna fish went from playing a role in the founding of one of the world’s largest private equity firms (Blackstone) to, in the case of Bumble Bee Parent Inc. and its affiliated debtors, another private-equity-backed (Lion Capital LLP) bankruptcy. Bumble Bee is the company behind “shelf-stable seafood” brands Bumble Bee, Brunswick, Sweet Sue, Snow’s Beach Cliff and Wild Selections (as well as a Canadian brand). It has been on a wild ride since 2017.

The bankruptcy narrative is that a plea agreement with the United States Department of Justice related to criminal charges of alleged price-fixing led to burdensome financial obligations by way of (a) a $25mm criminal fine) and (b) defense costs associated with an onslaught of subsequent civil lawsuits from direct and indirect purchasers of products claiming damages arising out of the alleged price-fixing. This overhang ultimately led to the debtors arriving at, but not quite tripping, an event of default with their term lenders in Q4 ‘18. The debtors have been operating under a series of short-term limited waivers ever since as they sought to explore strategic alternatives.

They have one. The debtors have a stalking horse purchase agreement with affiliates of FCF Co. Ltd. “for the sale of substantially all of the Company’s assets at a total implied enterprise value of up to $930.6 million, comprised of $275 million of cash, assumption of the remaining $17 million of the DOJ Fine, and the roll-over of up to $638.6 million in outstanding term loan indebtedness.” This sale will preserve the business as a going concern, preserve jobs, and provide an ongoing business partner to vendors and customers who consider the debtors to be partners.

Debtor first day bankruptcy papers are typically replete with spin and these papers are no different. In fact, necessarily so, they read like an offering memorandum. The papers discuss how the debtors provide “nutricious foods” that are “well-positioned to address a number of important consumer preferences and food trends, including shifts toward protein-rich, low-fat/low-calorie, and high Omega-3 fatty acid diets and trends towards eating multiple small or ‘snack-sized’ portions per day rather than the traditional three-square meals per day, and an overall increase in ‘snacking.’” They have the #1 or #2 market share in the shelf-stable seafood category and 41% of the US share of sales of canned albacore tuna. They also hold “approximately 13% of the U.S. share of sales of canned “light meat” tuna, approximately 12% of the share of sales in tuna pouches, approximately 71% of the U.S. share of sales in ready-to-eat tuna meals, approximately 40% of the U.S. share of sales in sardines, and approximately 16% of the U.S. share of sales in salmon.” It helps that they’re sold at virtually every major bigbox retailer, wholesale club, and grocery store. In 2018, the company had net sales of approximately $933m and adjusted EBITDA of $112.3m and the debtors’ U.S.-based operations contributed $722.2m of net sales and adjusted EBITDA of $86.3m. This is big business.

Putting aside its recent brush with the law, it also faces big market challenges. Questions persist about the safety and viability of shelf-stable seafood, particularly tuna. Indeed, there are headwinds. One sign of this may be that the Company’s overall Adjusted EBITDA has declined by approximately 20% from 2015 to 2018. We assume that, here, the EBITDA is adjusted to ex-out litigation costs.

And then there is this bonkers Wall Street Journal piece noting that consumption of canned tuna has fallen steadily compared with fresh and frozen fish. “Per capita consumption of canned tuna has dropped 42% in the three decades through 2016, according to the latest data available from the U.S. Department of Agriculture. And the downturn has continued, with sales of the fish slumping 4% by volume from 2013 to October 2018, data from market-research firm IRI show.”

This bit is off the charts: “In a country focused on convenience, canned tuna isn’t cutting it with consumers. Many can’t be bothered to open and drain the cans, or fetch utensils and dishes to eat the tuna. “A lot of millennials don’t even own can openers,” said Andy Mecs, vice president of marketing and innovation for Pittsburgh-based StarKist, a subsidiary of South Korea’s Dongwon Group.” To address this trend, the debtors have made forays into the fresh fish category. Otherwise, these challenges will play out another day. With a different owner.

A few more bankruptcy-specific points:

1. The debtors prevailed over a fee objection by the United States Trustee relating to interim access to $40mm of a proposed $80mm DIP term loan facility and immediate access to a $200mm DIP ABL. It seems that Weil Gotshal & Manges LLP, as counsel to DIP term lender Brookfield Principal Credit LLC had to give the UST a lesson in reverse-Seinfeld Logic. With lending, it is about “taking the reservation” rather than holding or using the reservation: once a debtor obtains a commitment to funds, those funds are committed and technically cannot be allocated elsewhere. The lenders argue, therefore, that fees are warranted upfront.

2. Critical vendor motions can sometimes be controversial because, naturally, everyone wants to jump the line with critical vendor designation. To get it, however, pursuant to standards set many many years ago, there’s a multi-prong test that must be satisfied. In a nutshell, the critical vendor payments are needed to prevent disruption of a debtors’ business, among other things. Here, the buyer, FCF Co Ltd., seeks critical vendor status to the tune of $51mm (out of a $77mm critical vendor ask). Some other creditors were like “Mmmmmm???” and insisted that the Judge postpone any interim payments until an official committee of unsecured creditors could be appointed. Despite protests from FCF’s counsel, Weil for the DIP lender, and the debtors, Judge Silverstein declined to rule on the motion at the hearing, highlighting the unusual nature of a prospective buyer seeking status. If they want the business, will they really walk away?

Despite these first day fireworks, this should be a relatively smooth one.

One last question it poses is this: will this be just the first of a clump of tuna-related bankruptcies? 🤔

• Jurisdiction: D. of Delaware (Judge Silverstein)

• Capital Structure: see below.

• Professionals:

  • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Alan Kornberg, Kelly Cornish, Claudia Tobler, Christopher Hopkins, Rich Ramirez, Aidan Synnot) & (local) Young Conaway Stargatt & Taylor LLP (Pauline Morgan, Ryan Bartley, Ashley Jacobs, Elizabeth Justison, Jared Kochenash)

  • Board of Directors: Scott Vogel, Steve Panagos

  • Financial Advisor: AlixPartners LLP

  • Investment Banker: Houlihan Lokey Inc.

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

• Other Parties in Interest:

  • ABL Agent & DIP Agent: Wells Fargo Capital Finance LLC

    • Legal: Paul Hastings LLP (Andrew Tenzer, Michael Comerford, Peter Burke) & Womble Bond Dickinson US LLP (Matthew Ward, Morgan Patterson)

  • Term Loan Agent & Term Loan DIP Agent: Brookfield Principal Credit LLC

    • Legal: Weil Gotshal & Manges LLP (Matthew Barr, David Griffiths, Debora Hoehne, Yehudah Buchweitz) & Richards Layton & Finger PA (Paul Heath, Zachary Shapiro, Brendan Schlauch)

New Chapter 11 Filing - Anna Holdings Inc. (a/k/a Acosta Inc.)

Anna Holdings Inc. (a/k/a Acosta Inc.)

DATE

Back in September 2018’s “Trickle-Down Disruption from Retail Malaise (Short Coupons),” we noted a troubled trio of “sales and marketing agencies.” We wrote:

With the “perfect storm” … of (i) food delivery, (ii) the rise of direct-to-consumer CPG brands, (iii) increased competition from private-brand focused German infiltrators Aldi and Lidl, and (iv) the increasingly app-powered WholeFoods, there are a breed of companies that are feeling the aftershocks. Known as “sales and marketing agencies” (“SMAs”), you’d generally have zero clue about them but for the fact that you probably know someone who is addicted to coupon clipping. Or you’re addicted to coupon clipping. No shame in that, broheim. Anyway, that’s what they’re known for: coupons (we’re over-simplifying: they each perform other marketing, retailing, and data-oriented services too). The only other way you’d be familiar is if you have a private equity buddy who is sweating buckets right now, having underwritten an investment in one of three companies that are currently in distress. Enter Crossmark Holdings Inc., Acosta Inc., and Catalina Marketing (a unit of Checkout Holding Corp.). All three are in trouble.

What’s happened since? Catalina Marketing filed for chapter 11 bankruptcy. Crossmark Holdings Inc. effectuated an out-of-court exchange transaction, narrowing averting a chapter 11 bankruptcy filing. And, as of last week, Acosta Inc. launched solicitation of a prepackaged chapter 11 bankruptcy filing. It will be in bankruptcy in the District of Delaware very very soon. We’ve basically got ourselves an SMA hat-trick.

Before we dive into what the bloody hell happened here — and it ain’t pretty — let’s first put some more meat on those SMA bones. In doing so, mea culpa: we WAY over-simplified what Acosta Inc. does in that prior piece. So, what do they do?

Acosta has two main business lines: “Sales Services” and “Marketing Services.” In the former, “Acosta assists CPG companies in selling new and existing products to retailers, providing business insights, securing optimal shelf placement, executing promotion programs, and managing back-office order-to-cash and claims deduction management solutions. Acosta also works with clients in negotiations with retailers and managing promotional events.” They also provide store-level merchandising services to make sure sh*t is properly placed on shelves, stocks are right, displays executed, etc. The is segment creates 80% of Acosta’s revenue.

The other 20% comes from the Marketing Services segment. In this segment, “Acosta provides four primary Marketing Services offerings: (i) experiential marketing; (ii) assisted selling and training; (iii) content marketing; and (iv) shopper marketing. Acosta offers clients event-based marketing services such as brand launch events, pop-up retail experiences, mobile tours, large events, and trial/demo campaigns. Acosta also provides Marketing Services such as assisted selling, staffing, associate training, in-store demonstrations, and more. Under its shopping marketing business, Acosta advises clients on consumer promotions, package designs, digital shopping, and other shopper marketing channels.”

In the past, the company made money through commission-based contracts; they are now shifting “towards higher margin revenue generation models that allow the Company to focus on aligning cost-to-serve with revenue generation to better serve clients and maximize growth.” Whatever the f*ck that means.

We’re being flip because, well, let’s face it: this company hasn’t exactly gotten much right over the last four years so we ought to be forgiven for expressing a glint of skepticism that they’ve now suddenly got it all figured out. Indeed, The Carlyle Group LP acquired the company in 2014 for a staggering $4.75b — a transaction that “ranked … among the largest private-equity purchases of that year.” Score for Thomas H. Lee Partners LP (which acquired the company in 2011 from AEA Investors LP for $2b)!! This was after the Washington DC-based private equity firm reportedly lost out on its bid to acquire Advantage Sales & Marketing, a competitor which just goes to show the fervor with which Carlyle pursued entry into this business. Now they must surely regret it. Likewise, the company: nearly all of the company’s $3b of debt stems from that transaction. The company’s bankruptcy papers make no reference to management fees paid or dividends extracted so it’s difficult to tell whether Carlyle got any bang whatsoever for their equity buck.*

Suffice it to say, this isn’t exactly a raging success story for private equity (calling Elizabeth Warren!). Indeed, since 2015 — almost immediately after the acquisition — the company lost $631mm of revenue and $193mm of EBITDA. It gets worse. Per the company:

“Revenue contributions from the top twenty-five clients in 2015 have declined at approximately 14.6 percent per year since fiscal year 2015. Furthermore, adjusted EBITDA margins have decreased year-over-year since fiscal year 2015 from over 19 percent to approximately 16 percent as of the end of fiscal year 2018.”

When you’re losing this money, it’s awfully hard to service $3b of debt. Not to state the obvious. But why did the company’s business deteriorate so quickly? Disruption, baby. Disruption. Per the company:

Acosta’s performance was disrupted by changes in consumer behavior and other macroeconomic trends in the retail and CPG industries that had a significant impact on the Company’s ability to generate revenue. Specifically, consumers have shifted away from traditional grocery retailers where Acosta has had a leadership position to discounters, convenience stores, online channels, and organic-focused grocers, where Acosta has not historically focused.

Just like we said a year ago. Let’s call this “The Aldi/Lidl/Amazon/Dollar Tree/Dollar Store Effect.” Other trends have also taken hold: (a) people are eating healthier, shying away from center-store (where all the Campbell’s, Kellogg’s, KraftHeinz and Nestle stuff is — by the way, those are, or in the case of KraftHeinz, were, all major clients!); and (b) the rise of private label.

Moreover, according to Acosta, consumer purchasing has declined overall due to the increased cost of food (huh? uh, sure okay). The company adds:

These consumer trends have exposed CPG manufacturers to significant margin pressure, resulting in a reduction in outsourced sales and marketing spend. In the years and months leading to the Petition Date, several of Acosta’s major clients consolidated, downsized, or otherwise reduced their marketing budgets.

By way of example, here is Kraft Heinz’ marketing spend over the last several years:

Compounding matters, competition in the space is apparently rather savage:

“Acosta also faced significant pressure as a result of the Company’s heavy debt load. Clients have sought to diversify their SMA providers to decrease perceived risk of Acosta vulnerability. In fact, certain of Acosta’s competitors have pointed to the Company’s significant indebtedness, contrasting their own de-levered balance sheets, to entice clients away from Acosta. Over time, these factors have tightened the Company’s liquidity position and constrained the Company from making necessary operational and capital expenditures, further impacting revenue.”

So, obviously, Acosta needed to do something about that mountain of debt. And do something it did: it’s piling it up like The Joker, pouring kerosene on it, and lighting that sh*t on fire. The company will wipe out the first lien credit facility AND the unsecured notes — nearly $2.8b of debt POOF! GONE! What an epic example of disruption and value destruction!

So now what? Well, the debtors clearly cannot reverse the trends confronting CPG companies and, by extension, their business. But they can sure as hell napalm their balance sheet! The plan would provide for the following:

• Provide $150mm new money DIP provided by Elliott, DK, Oaktree and Nexus to satisfy the A/R facility, fund the cases, and presumably roll into an exit facility;

• First lien lenders will get 85% of the new common stock (subject to dilution from employee incentive plan, the equity rights offering, the direct investment preferred equity raise, etc.) + first lien subscription rights OR cash subject to a cap.

• Senior Notes will get 15% of new common stock + senior notes subscription rights OR cash subject to a cap.

• They’ll be $325mm in new equity infusions.

So, in total, over $2b — TWO BILLION — of debt will be eliminated and swapped for equity in the reorganized company. The listed recoveries (which, we must point out, are based on projections of enterprise value) are 22-24% for the holders of first lien paper and 10-11% for the holders of senior notes.

We previously wrote about how direct lenders — FS KKR Capital Corp. ($FSK), for instance — are all up in Acosta’s loans. Here’s what KKR had to say about their piece of the first lien loan:

We placed Acosta on nonaccrual due to ongoing restructuring negotiations during the quarter and chose to exit this position after the quarter end at a gain to our third quarter mark.

HAHAHAHA. Now THAT is some top-notch spin! Small victories, we guess. 😬😜

*There have been two independent directors appointed to the board; they have their own counsel; and they’re performing an investigation into whether “any matter arising in or related to a restructuring transaction constituted a conflict matter.” There is no implication, however, that this investigation has anything to do with potential fraudulent conveyance claims. Not everything is Payless, people.

• Jurisdiction: D. of Delaware (Judge )

• Capital Structure:

• Professionals:

  • Legal: Kirkland & Ellis LLP (Edward Sassower, Joshua Sussberg, Christopher Greco, Spencer Winters, Derek Hunter, Ameneh Bordi, Annie Dreisbach, Josh Greenblatt, Yates French, Jeffrey Goldfine) & Klehr Harrison Harvey Branzburg LLP (Domenic Pacitti, Michael Yurkewicz, Sally Veghte)

  • Independent Directors: Gary Begeman, Marc Beilinson

    • Legal: Katten Muchin Rosenman LLP

  • Financial Advisor: Alvarez & Marsal LLC

  • Investment Banker: PJT Partners Inc. (Paul Sheaffer)

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

• Other Parties in Interest:

  • A/R Facility Agent: Wells Fargo Bank NA

  • Admin Agent and Collateral Agent: Ankura Trust Company LLC

    • Legal: Shearman & Sterling LLP (Joel Moss, Sara Coelho) & Drinker Biddle & Reath LLP (Patrick Jackson)

  • First Lien Credit Agent: JPMorgan Chase Bank NA

    • Legal: Freshfields Bruckhaus Deringer US LLP (Scott Talmadge, Samantha Braunstein) & Richards Layton & Finger PA (Mark Collins, David Queroli)

  • First Lien Lender Group

    • Legal: Davis Polk & Wardwell LLP (Damian Schaible, Stephen Piraino, Jacob Weiner)

    • Financial Advisor: Centerview Partners

  • Minority First Lien Lenders

    • Legal: Arnold & Porter Kaye Scholer LLP (Michael Messersmith, Seith Kleinman, Sarah Gryll) & Pepper Hamilton LLP (David Stratton)

    • Financial Advisor: FTI Consulting Inc.

  • Indenture Trustee: Wilmington Trust NA

  • Backstop Parties: Elliott Management Corporation & Oaktree Capital Management LP

    • Legal: White & Case LLP (Thomas Lauria, Michael Shepherd, Joseph Pack, Jason Zakia, Kimberly Havlin) & Whiteford Taylor & Preston LLC (Marc Abrams, Richard Riley)

  • Backstop Parties: Davidson Kempner Capital Management LP & Nexus Capital Management LP

    • Legal: Sullivan & Cromwell LLP (Alison Ressler, Ari Blaut, James Bromley) & Potter Anderson & Corroon LLP (Christopher Samis, Aaron Stulman)

  • Sponsor: Carlyle Partners VI Holdings LP (78.47% equity)

    • Legal: Latham & Watkins LLP (George Davis, Andrew Parlen)
      
      

😷New Chapter 11 Bankruptcy Filing - Walker County Hospital Corporation (d/b/a Huntsville Memorial Hospital)😷

Walker County Hospital Corporation (d/b/a Huntsville Memorial Hospital)

November 11, 2019

Walker County Hospital Corporation (“WCHC,” d/b/a Huntsville Memorial Hospital) is the latest in a recent string of healthcare bankruptcies. Why?

Per the debtor:

“While the Hospital has outpaced market trends in the region for admissions and revenue, and has little outstanding long-term debt, as a standalone hospital operator, the Debtor faces significant challenges in acquiring competitive pricing for necessary goods and services and favorable managed care contracts as compared to multi-hospital systems.”

If you’re wondering about why private equity firms are rolling-up hospital systems, this ⬆️ ought to give you some perspective.

“As a result, the Hospital has significantly above average operating costs that exceed its revenue generation.”

That, ladies and gentlemen, is what you call a lack of economies of scale.

“In addition, the Debtor’s over-extension into rural healthcare clinics and a failed lab venture and ambulatory surgery center, among other issues, have resulted in an unsustainable balance sheet and liquidity.”

So, uh, that all sucks.

Interestingly, the State of Texas helped bury the debtor:

In 2018, the State of Texas shifted its health insurance coverage for state employees from United Healthcare to Blue Cross Blue Shield. This shift materially impacted the Debtor’s revenue, as the Debtor’s contract with Blue Cross Blue Shield has less favorable reimbursement rates and a large portion of the Hospital’s patient population is employed by the State. The Debtor has been in negotiations with Blue Cross Blue Shield since 2016, in an attempt to obtain a managed care contract with the insurer at a fair market rate, but efforts thus far have remained unsuccessful.

Because of this and other issues, the debtor’s revenue dipped and it tripped covenants in its pre-petition credit facility AND defaulted under its operating agreements with the Walker County Hospital District. The debtor has been operating under forbearance agreements with both for some time now while it sought to find a buyer. It failed. This bankruptcy is intended to provide one chance for such a sale: the debtor already has a sale process motion on the docket. It does not have a stalking horse purchaser, it does have some hope that the District will be a participant in an auction. To allow that process to play out, the debtor obtained a $5mm DIP credit facility commitment from its pre-petition (direct) lender, MidCap Financial Trust.

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

• Capital Structure: $2mm RCF (MidCap Financial Trust)

• Professionals:

  • Legal: Waller Lansden Dortch & Davis, LLP (Ryan Cochran, Blake Roth, Tyler Layne, Andrea Cunha, Evan Atkinson)

  • Financial Advisor: Healthcare Management Partners LLC (Steven Smith)

  • Claims Agent: Epiq Corporate Restructuring LLC (*click on the link above for free docket access)

• Other Parties in Interest:

  • DIP Lender: MidCap Financial Trust

    • Legal: Vedder Price P.C. (Michael Eidelman, David Kane) & Porter Hodges LLP (John Higgins, Kiran Vakamudi)

🥛New Chapter 11 Filing - Southern Foods Group LLC (d/b/a Dean Foods Company)🥛

Southern Foods Group LLC (d/b/a Dean Foods Company)

November 12, 2019

In one corner: innovation. In the other corner: disruption. Dean Foods Co. $DF, the largest US supplier of milk, is struggling as a result. From back in March: https://t.co/Rk8xRVdW86 (paywall) https://t.co/TNpq1s4rzc

— 💥PETITION💥 (@petition) May 21, 2019

We’ve published these charts before here but they’re worth revisiting:

Since we’re all about the charts right now, here’s another one — perhaps the ugliest of them all:

Yup, Southern Foods Group LLC (d/b/a Dean Foods Company) has been a slow-moving train wreck for some time now. In fact, we wrote about the disruption it confronts back in March. It’s worth revisiting (we removed the paywall).

Alas, the company and a long list of subsidiaries finally filed for bankruptcy yesterday in the Texas (where things seem to be getting VERRRRRY VERRRRRY busy these days; see below ⬇️).

Once upon a time everyone had milk. Serena and Venus Williams. Dwight Howard. Mark McGuire. Tyra Banks. The Olsen twins. David Beckham. Giselle. The “Got Milk? campaign was pervasive, featuring A-listers encouraging folks to drink milk for strong bones. Things have certainly changed.

Dean Foods’ long history begins in 1925; it manufactures, markets and distributes branded and private label dairy products including milks, ice cream, creamers, etc. It distributes product to schools, QSRs like McDonald’s Inc. ($MCD), small format retailers (i.e., dollar stores and pharmacies), big box retailers like Walmart Inc. ($WMT)(which accounted for 15.3% of net sales in ‘18), and the government. Its products include, among many others, Friendly’s, Land O Lakes and Organic Valley. This company is a monster: it has 58 manufacturing facilities in 29 states, 5000 refrigerated trucks and 15,000 employees (40% of whom are covered by collective bargaining agreements). Milk, while on the decline, remains big business.

How big? Per the company:

In 2018, Dean Foods’ reported consolidated net sales of $7.755 billion, gross profit of $1.655 billion, and operating income of $(315.2) million. Through the first 6 months of 2019, Dean Foods’ reported consolidated net sales of $3.931 billion, gross profit of $753.2 million, and operating income of $(96.2) million.

Those are some serious sales. And losses. And the company also has a serious capital structure:

Milk production is a capital intensive business requiring a variety of inputs: raw milk, resin to make plastic bottles (which likely infuse all of us with dangerous chemicals, but whatevs), diesel fuel, and juice concentrates and sweeteners. Hence, high debt. So, to summarize: high costs, low(er) demand, lots of debt? No wonder this thing is in trouble.

What are the stated reasons for the company’s chapter 11 filing?

• Milk Consumption Declines. “For the past 10 years, demand has fallen approximately 2% year-over-year in North America.” This is consistent with the chart above.

• Loss of Pricing Power. Because volumes declined, economies of scale also decreased. “Delivered cost per gallon rose approximately 20.7% between 2018 and 2013 as a result of volume deleverage.” That’s vicious. Talk about a mean spiral: as volumes went down, the company couldn’t support the input volumes it had previously and therefore lost pricing power. “Dean Foods suffered a full year 2018 year-over-year decline in fluid milk volume of 5.8% following a 2017 year-over-year decline of 4.2%. Moreover, Dean Foods’ volume declines continue to outpace the overall category; while category volumes declined by approximately 4%8 year-over-year through the end of September, 2019, Dean Foods experience declines of over 11.4%.” Apparently, this impacted Dean Foods disproportionately. Any buyer looking at this has to wonder how these issues can be remedied.

• Market Share Disruption. New forms of “milk” have taken market share. “Sales of nut and plant beverages grew by 9% in 2018 and had sales of $1.6 billion, according to the Plant Based Foods Association.”

• Retail Consolidation. It doesn’t help when, say, Dollar General merges with Family Dollar. That gives the dollar stores increased leverage on price. And that’s just one example.

• “The BigBox Effect.” The biggest retailers have become increasingly private label focused and, in turn, vertically integrated. Take Walmart, for example. In 2018, the retailer opened its first U.S. food production facility in Indiana. Want to guess what kind of food? Why would we be mentioning it? This new facility amounted to a 100mm gallon loss of volume to Dean Foods.

• “The Loss Leader Effect.” We often talk about the venture-backed subsidization of commonplace lifestyle items, e.g., Uber Inc. ($UBER). Retailers have, in recent years, aggressively priced private label milk to drive foot traffic. “As retailers continue to invest in private-label milk to drive foot traffic, private label margin over milk contracted to a historic low of $1.26 in June, before falling even further to $1.24 in September.”

• Freight Costs. They’ve been up over the last few years. This is a different version of
  ”The Amazon Effect” ($AMZN).

All of these are secular issues that a balance sheet solution won’t remedy. Buyer beware. 😬🤔

So, what CAN the bankruptcy achieve? Yes, the obvious: the balance sheet. Also, there is a contingent liability of over $722.4mm that results from the company’s participation in an underfunded multi-employer pension plan. And liquidity: the bankruptcy will avail the company of a $850mm DIP credit facility. It may also allow the company to pursue a sale transaction to its long-time commercial partner and largest single raw milk vendor, Dairy Farmers of America (which is wed $172.9mm). Surely they must be aware of the secular trends and will price any offer accordingly, right? RIGHT? Either way, those ‘23 notes look like they might be about to take a bath.*

*Likewise certain trade creditors. The debtors state that that they have $555.7mm of total outstanding accounts payable and claim $257mm needs to go to critical vendors and another $189.2mm to 503(b)(9) admin claimants. That leaves a small subset of creditors due a bit more than $100mm holding the bag. This also explains the sizable DIP.

Meanwhile, one of the largest unsecured creditors is Acosta Inc., with a contingent, disputed and unliquidated claim arising out of litigation. Acosta is unlikely to recover much on this claim which is a bit ironic considering that an Acosta bankruptcy filing is imminent. Womp womp.

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

• Capital Structure: see above

• Professionals:

  • Legal: Davis Polk & Wardwell LLP (Brian Resnick, Steven Szanzer, Daniel Meyer, Nate Sokol, Alexander Bernstein, Charlotte Savino, Cameron Adamson) & Norton Rose Fulbright LLP (William Greendyke, Jason Boland, Bob Bruner, Julie Goodrich Harrison)

  • Financial Advisor: Alvarez & Marsal LLC (Jeffrey Stegenga, Brian Fox, Tom Behnke, Taylor Atwood)

  • Investment Banker: Evercore Group LLC (Bo Yi)

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

• Other Parties in Interest:

  • Receivables Securitization Agent, RCF Agent & DIP Agent: Rabobank USA

    • Legal: White & Case LLP (Scott Greissman, Philip Abelson, Elizabeth Fuld, Rashida Adams, Andrew Zatz) & Gray Reed & McGraw LLP (Jason Brookner, Lydia Webb, Amber Carson)

  • Unsecured Bond Indenture Trustee: Bank of New York Mellon NA

    • Legal: Emmett Marvin & Martin LLP (Thomas Pitta, Edward Zujkowski, Elizabeth Taraila)

  • Ad Hoc Group of 6.5% ‘23 Unsecured Noteholders: Ascribe III Investments LLC, Broadbill Investment Partners LLC, Ensign Peak Advisors Inc., Kingsferry Capital LLC, Knighthead Capital Management LLC, MILFAM Investments LLC

    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Andrew Rosenberg, Robert Britton, Douglas Keeton, Grace Hotz) & Pillsbury Winthrop LLP (Hugh Ray III, William Hotze, Jason Sharp)

  • Official Committee of Unsecured Creditors: Central States Southeast and Southwest Areas Pension Fund, The Bank of New York Mellon Trust Company NA, Pension Benefit Guaranty Corporation, Land O’ Lakes Inc., California Dairies Inc., Consolidated Container Company LP, Select Milk Producers Inc.

    • Legal: Akin Gump Strauss Hauer & Feld LLP (Ira Dizengoff, Philip Dublin, Meredith Lahaie, Martin Brimmage, Joanna Newdeck, Julie Thompson, Patrick Chen, Madison Gardiner)

    • Financial Advisor: Berkeley Research Group LLC (Christopher Kearns)

    • Investment Banker: Miller Buckfire & Co. LLC (Richard Klein)

Update 1/11/20