Contura Energy = Latest Post-Reorg Equity

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Contura Energy, f/k/a Alpha Natural Resources, filed its S-1 Registration Statement today looking to price an IPO of 6mm shares at somewhere between $23-27. We've noted the recent post-reorg equity bloodbath that has transpired in the energy space of late. Perhaps Contura can buck the trend. Unrelated, Peabody Energy ($BTU) traded up 2+% today. 

Coal Export Numbers are UP! But Still Ugly AF.

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Coal exports for Q1 '17 were 58% higher than Q1 '16. That's the good news. The bad news is that the base line was pretty damn low. Exports are running FAR below capacity. Total exports were 61 MMst vs. 257 MMst of capacity. Subtract the 1, subtract the 6, carry the one...WHOA, THAT'S FRIKKEN UGLY. 61 MMst is less than the Norfolk Virginia has capacity to export...on its own. #MAGA!

Fast Forward: Takata & Armstrong Energy

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Holy airbag Batman. It looks like Takata Corp. may finally be plunging into Chapter 11. For those who thought the coal-based bankruptcy wave was passed us, Armstrong Energy's recently filed 8-K is a reminder that maybe it isn't: the thermal coal producer (electricity production) skipped its interest payment and now negotiates within its 30-day grace period.

Interesting Restructuring News

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  • Busted Tech. Ok, not yet. But soon. Faraday Future has cancelled its plans to build a Vallejo California assembly factory - shortly after scaling back its original Nevada facility. This Techcrunch piece says that "it's unclear where the future will lead for Faraday." Seems pretty clear to us that it will lead to bankruptcy court. And, quietly, a number of (once) high-flying startups are laying people off including, notably, Postmates and Zozi ($60mm VC - Richard Branson and others). Finally, Munchery, often hailed as a top food-delivery startup, required a recap this week to survive.
  • Grocery & Sun Capital Partners. We SWEAR we are not picking on SCP here but c'mon already: now it looks like Marsh Supermarkets is in trouble as the company falls behind on rent and quietly - well, not so quietly anymore - shuts locations. So, let's recap: in the past 6 months, SCP has seen the following portfolio companies file for bankruptcy: Garden Fresh Restaurant Intermediate Holdings LLC, Limited Stores Company LLC, Gordman Stores Inc. Maybe this will be the next?
  • High Yield. Remember a few years ago when Chobani was distressed? Now you can get in on a new offering at a premium to par, it seems. Semi-related, the bidding to lend to Westinghouse in bankruptcy was reportedly pretty intense, with Apollo Investment Corporation duking it out with Goldman Sachs, Highbridge Capital, and Silver Point Finance for the privilege to finance the nuclear power company while it figures out how to restructure its business and address two incomplete installations in Georgia in South Carolina. Yield, baby, yield. 
  • Oil&Gas. That was fast. Like super fast. Seems the new owners of Samson Resources II, LLC don't share a very "long" view of the oil and gas space - despite "having discharged approximately $4 billion of debt and nearly $300 million of annual interest expense from Samson Resources Corporation," aka the previously bankrupt entity that filed in mid-2015. And distressed investors wonder where the term "vulture" comes from. PJT Partners LP was the previous banker for the company but with the Board being what it is, there's no surprise Houlihan Lokey has a piece of the action.
  • Retail. Finish Line added itself to the long line of retailers that reported dogsh*t numbers with earnings down, same store sales down, blah blah blah. Right, and approximately 40 store closures. Naturally. Also, David's Bridal was downgraded this week. The CD&R LLC owned retailer has a $520mm term loan due in 2019 and if millennials continue to flick off conventional marriage, there's no way they'll be able to sell enough gaudy wedding dresses to manage the interest expense. And, uh oh, now there appears to be a glaring hole in the "fast fashion" narrative as H&M missed expectations with declining net profit.
  • Rewind I: 3-D Printing. Not to be a broken record about this, but it is totally real. Last week we noted Adidas' plans for it and this week Under Armour followed suit. The implications for those in the supply chain can't be underestimated.
  • Rewind II: Glass Half Full. Looks like Gordmans Stores won't be a complete liquidation after all: Stage Stores stepped up and, as part of a joint venture with Tiger Capital Group and Great American Group, will acquire roughly 50 stores with an option for a handful of others. The remainder will be liquidated but this presumably means that, for now, a couple of dozen will continue to operate. At least until the inevitable Chapter 22 that occurs after next holiday season. Kidding! (Or are we?)
  • Chart of the Week: 

Interesting Restructuring News

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  • Grocery. Cerberus Capital Management-owned Albertsons is reportedly in talks regarding a possible take-private buyout of publicly-traded grocer Sprouts Farmers Market ($SFM). Given the tough grocery environment, this is an interesting development. And it may get EVEN MORE interesting given this.
  • Oil&Gas. Crude stockpiles hit a modern record this week as American producers basically flick off Saudi Arabia/OPEC and produce, baby, produce. Crude priced down to ~$48/barrel. This - and the embattled state of Seadrill Ltd. - isn't stopping John Fredriksen from looking at picking off offshore assets. Speaking of offshore assets, the oil players are going face-to-face with power suppliers - for wind. Meanwhile, a dissenting view relating to the effect of the rise of electric cars on oil demand (paywall). Elsewhere, in Canada...
  • Retail. Bebe Stores Inc. ($BEBE) is plans to shut down its brick-and-mortar locations and become an exclusively e-comm brand - a plan that depends on the sudden charity of landlords who have shown ZERO propensity for flexibility with retail tenants. Seriously, like, ZERO. See, e.g., THE TRAIL OF RETAIL CORPSES LINING THE 2017 BANKRUPTCY ROLLS. Meanwhile, Land's End ($LE) continued to suffer from its association with Sears while reporting a perfect storm of, wait for it...decreased net revenue, decreased catalogue and e-commerce revenue, decreased same-store sales, and worsening gross margin. J.Crew  reported sliding sales, revenue and same-store comps but nevertheless reported a (very) small profit - largely on the back of Madewell. And then there is Nike ($NKE) which, in its quarterly report, noted increased profit but modest sales growth in the face of online shipping headwinds.
  • Retail II. Uh oh. It appears that Walmart may be getting it's (e-commerce) sh*t together which doesn't bode well for brick-and-mortar already suffering from the Amazon onslaught. Speaking of which, peace out Payless Inc. Wethinks we'll soon be saying "peace out" to a bunch of Chinese shoe manufacturers on top of the thousands of American jobs that will be wiped out. But dividends for Golden Gate Capital and Blum Capital Partners!
  • Rewind I: We have taken a little bit of heat for two mentions of 3D-printing in this newsletter; we have been accused of over-hyping the technology and its near-term ramifications. Well, noting the Adidas announcement this week, have we?? 
  • Chart of the Week: 

News for the Week of 3/5/17

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  • Coal. Post-reorg players like Arch Coal are now trying to take advantage ofgovernment subsidy (which reeks of buyside "value-realization"): query what this means for alternative energy players who already receive such subsidies and are rumored to be under siege by the Trump administration...?
  • Environment. We wrote a few months ago about Oklahoma and the apparent correlation between wastewater disposal and an uptick in seismic activity. The seismic-hazard warning for Oklahoma in 2017 is "still significantly elevated."
  • Golf & Sexy Time. There's zero correlation: we just thought it was a funny combination. That said, tough times for TaylorMade (owned by Adidas and apparently being shopped by Guggenheim Securities). Meanwhile, Agent Provocateur sold while in UK "administration" to an affiliate of Sports Direct (which also recently surfaced as the stalking horse bidder in Eastern Outfitters). AlixPartners was the administrator.
  • Legal Profession. Short big firm junior lawyers.
  • Power. This is an odd report on Westinghouse. 
  • Retail. We're getting a little sick of sounding like a broken record but Best Buy and Target reported numbers this past week and then saw massive stock drops due to weak guidance. And Barnes & Noble got DECIMATED after reporting numbers. The good news is that the coloring fad appears to be over. Meanwhile, the tech barrage shows no signs of abating: GameStop came under pressure this week after Microsoft announced its subscription gaming service. Is GameStop an immediate near term restructuring candidate? No, but part of the value we provide is highlighting for you where future pain points are hiding and without sounding TOO dramatic, this could be the beginning of the end.
  • Retail II. We're nerds and so we found this analysis of when to close retail stores interesting. And we're curious to know if any of our advisory readers agree with this...LET US KNOW. Speaking of closing retail stores, Abercrombie will close 60 stores, Crocs will close 160 stores, and looming bankruptcy candidate hhgregg is closing 88 stores (which briefly sent Best Buy's stock north back up, despite earnings). Meanwhile, Neiman Marcus hired Lazard for balance sheet help and Radio Shack 2.0 (aka General Wireless Operations) is rumored to be Radio Shack chapter 22.0.  
  • Tech. Rough week for Uber. Choice quote: "Before too long, Uber's cash will run out. And if Uber hasn't built a viable self-driving car by then, the results won't be pretty."
  • Telecom. Wow, Intelsat, bailed out? 
  • Fast Forward: Seadrill Ltd. noted the possibility of a bankruptcy filing, sending the stock into a tizzy. Still, John Fredriksen quickly highlighted his history of no default. Related, Pacific Drilling also noted in its earnings call that Chapter 11 is possible. 
  • Rewind I: A lot of folks have been sleeping on tech bankruptcies, but NJOY was a hardware bankruptcy from last year that now has a resolution: Mudrick Capital seeks to turn the company around, operating it like a PE-owned company rather than a VC-funded company. Speaking of which, Cirque du Soleil got a workover by TPG Capital (and AlixPartners) and now there's this YouTube promotional video to show for it. Speaking of purchases out of bankruptcy, it seems a Canadian retail player made the first move on Wet Seal only to be outflanked by Gordon Brothers.
  • Rewind II: Soundcloud looks increasingly like it will be in the busted tech bankruptcy bucket. IP sale?
  • Chart of the Week: 
  • Tweet of the Week: This is great because it doubles as a second chart of the week: we're so creative. Anyway, we hate to say we told you so but, effectively,we told you so: we'd love to know why nearly 200 companies felt the need to reference AI in their earnings reports...

News for the Week of 2/19/17

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  • Capital Markets. The return of the Holdco PIK Toggle bond - a precursor to the inevitable market collapse. Or so they say.
  • Coal. Plants are closing. Looks like some votes from coal country were misplaced.
  • Dead Malls. Investing. See, e.g., this piece on Macerich. We don't typically cite to Seeking Alpha's collection of vagabonds and yahoos, but we found this particular analysis of A Malls interesting.
  • Exploration & Production. 17 months after filing its prepackaged bankruptcy case(s)...or was it prearranged?...sh*t, it's been so long that we can't even remember, Samson Resources Corporation finally has a confirmed plan of reorganization. We'd be curious to see what the professional fees are as a percentage of debt ($5.6b): perhaps this should be a new in-court ratio for courts to consider as part of 327(a) review. At least we got a new term of art out of it: "the Kirkland Prepack". So, there's that (2x if you consider EFH this week, too). 
  • Nuclear power. Toshiba took a beating on Westinghouse this week. And now there are whispers of bankruptcy.
  • Retail. We have a Billions-style therapist in-house who keeps using bad sex metaphors to inspire us to be more positive about retail. Ok, no we don't: last we checked none of you are paying for this newsletter and so how the hell would we afford THAT?! Still, there are some positive signs for retail: Barron's, for instance, thinks Macy's stock has fallen too far and has upside. Meanwhile, specialty women's retailer J.Jill has filed its S-1 under the JOBS Act for an IPO which either means there's one retailer bucking recent trends or - more likely - TowerBrook Capital Partners LP is looking to dump this thing before Amazon gobbles it up like it has everything else. Damn...that was cynical and negative wasn't it?  Well, we tried. 
  • Retail II. This week we learned that Warren Buffett dumped his entire position of Walmart stock ($900mm) which, as this piece notes, ain't exactly a vote of confidence in retail. Perhaps Buffett would have reconsidered had he known about "Moosejaw Madness." You read that right: this week Walmart spent $51mm to purchase Moosejaw, a Michigan-based online retailer (with about a dozen B-and-M locations). Interestingly, the business is similar to Gander Mountain which, as we covered last week, is staring down the barrel of a liquidation. Oh, and hhgregg isn't exactly instilling confidence either (yes, its publicly traded). But, in an ironic twist, Amazon is upping to 8 B-and-M book stores.
  • Retail III. This won't help mall foot traffic: frustrated by a lack of options, start-ups like Dia&Co. are looking to tackle the plus-size market (with wholly-unoriginal Birchbox-style monthly mailings). And a fresh round of funding from well-known VC Sequoia Capital will aid the effort. Speaking of Birchbox, note that the business - despite being copied by a slew of other start-ups - isn't exactly a shining tower of success; it recently took on venture debt (and rif'd staff) and now it's exploring pricier options to juice revenues.
  • Shipping. A bloodbath in China for the shipbuilders and Hanjin Shipping = toast.
  • Uber. With $500 million of delinquent taxi medallion loans, NY state regulators seized the Melrose Credit Union. #disruption 
  • Wind. No holding it back. 

News for the Week of 2/12/17

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  • Coal. Prices have risen and Trump is promising assistance. Is this enough to offset sagging demand? China's new measures aren't helping. But the capital markets are, as Peabody Energy, Arch Coal, and Contura Energy are all taking advantage of cheap financing/refinancing options. Peabody shopped an upsized term loan (by $450mm) with revised company-favorable pricing; it also issued new notes and bonds. Amazing how quickly things changed with coal.
  • Chicago. S&P is making threats. 
  • Electric Vehicles. Something tells us that oil and gas management teams and their wildly astute restructuring bankers and advisors neglected to bake this element into their business plans. 
  • European Debt. Increasing concerns about Italy and Greece. Meanwhile, in France, CVC Capital Partners' owned vehicle leasing firm Fraikin has hired Rothschild to restructure its 1.4 billion Euro debt. Lazard will represent the mezz debt.
  • Moelis & Co. & Aramco. "Ken of Arabia"? C'mon, that's just dumb.
  • Power. California has more power plants than it needs. After a slate of power-related bankruptcies, it looks like there is more hurt to come in this space. And big developments on the storage side probably won't help. And this new cooling tech won't help either - if it's legit.
  • Retail. And people wonder why private equity is vilified...case and point: Rackspace. Speaking of private equity, Canada Goose's proposed IPO reeks of a dump-and-run on greater fools. Millennials don't spend money, but Bain Capital will have us believe that $900 fur-lined jackets are the exception to the rule. Riiiight. 
  • Retail Part II. Organized Retail Crime = massive problem. 
  • Retail Part III. Gander Mountain = toast.
  • Retail Part IV. Amazon announced that the number of third-party sellers on its B2B site has reached 45k, up about 50% from the approx 30k sellers it had at the end of Q2...IN JUNE.
  • Return of the Maturity Wall. Nothing gets restructuring professionals' juices flowing like sexy maturity stats. So, here it is: $2 trillion of corporate debt comes due in five years. And this is, in part, because the capital markets are definitely wide open right now in the face of soon-to-be rising interest rates. Take THAT wall, President Trump! 
  • Sears. Everyone is looking at this oncoming trainwreck and wondering "when?", not "if." Nice recent CDS movements on it but then the company unearthed a remarkable $1b in cost savings. Like, out of nowhere. And, naturally, the stock soared 25+%.
  • Spotify. Typically there are tremors before the earthquake. Perhaps Filip Technologies, Violin Memory, and Nasty Gal are the tremors foreshadowing a venture debt-backed reckoning on the horizon. It's unclear. But, in Spotify's case, the interest ratchets attached to $1b of debt get more and more expensive with each consecutive quarter sans IPO. A big "unicorn" is going to fail and fail big. Spotify may not be the one, but it ain't looking great. But that one IS coming (Zenefits anyone?). Along these lines, how the eff is Theranos not bankrupt yet? 
  • Takata. Inching towards bankruptcy.
  • Fast Forward: Most retail-focused restructuring pros emphasize "omni-channel," the latest retail buzzword that, practically speaking, means basically nothing in today's climate. Case and point: Neiman Marcus, which was downgraded this week with projected 10x leverage on $4.77b of debt. Most of the cap stack traded at new lows this week. Omni-channel ain't a panacea, it appears.
  • Rewind I: This result for Relativity Media sure sounds positive.
  • Rewind II: The grocery space is getting hammered so badly that now even Whole Foods is retrenching, shutting more stores than it's opening go-forward.
  • Chart of the Week: 
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News for the Week of 01/08/17

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WHAT YOU NEED TO KNOW FROM THE PAST THREE WEEKS (PLAYING CATCH-UP EDITION)

  • Distressed Investing Hindsight. Avaya. Phone systems? Who would've guessed this could go wrong? Psssst: don't tell anyone but apparently Avaya and Goodman Networks are apparently in 30-day grace periods.
  • Fintech. Cracks in P2P lending by way of bankruptcy (Argon Credit).
  • Fraud. Theranos announced that it's letting go 41% of its work force - which we believe is a precursor to bankruptcy. Why file? To sell IP. If they actually even have any. And address litigation. Meanwhile, Snapchat, on the heals of a possible IPO, is being sued for misleading investors. Toss in ethical issues around Hampton Creek and others and we may start seeing some fraud-related bankruptcies a la 2001.
  • Grocery. Is Kroger's buyout announcement another leading indicator of future distress?
  • Media. Ev Williams, founder of Twitter and Medium, acknowledges that the ad-supported media model is broken while significantly cutting headcount. It seems that $150mm VC funding can't help produce a new business model. 
  • Retail. It looks like the Trump Job Preservation Tour forgot to schedule stops at KMart, Sears and Macy's (meanwhile Sears unloaded Craftsman and JC Penney shed its HQ). Next up: Kohl's? Ugly 20% drop after a nasty comp store sales drop and forecast cut. Apparently, omnichannel customers are the key to the riddle. Meanwhile, Amazon is sniffing around American Apparel (as is Forever 21, reportedly) and Boohoo is focused on Nasty Gal. Gap - mostly due to a 12% comp sales increase at Old Navy - showed positive signs while Neiman Marcus cancelled its IPO, a clear negative.
  • Taxi Companies. Uber is the death of traditional taxi companies and new tech companies that support the taxi companies (Karhoo). Which means those companies must really suck since Uber burned $3b in '16.
  • Wearables. Pebble. "Acquired." Vinaya. Bankrupt. Does someone want to raise us a Jawbone?
  • Fast Forward: With Amazon and Apple in the mix, music streaming services are struggling to make money and Soundcloud may be the closest victim. Restructuring professionals will remember that Rdio already went through bankruptcy and sold to Pandora.
  • Fast Forward II: Remember Exco?
  • Rewind I: Platinum Partners. It's amazing how funds get away with this nonsense: 17% returns for 13 years.
  • Rewind II: Athleisure. Financials-related Uh oh (Finish Line). And bankruptcy-related uh oh (Yogasmoga). But like most things, Amazon gives zero $&%s.
  • Rewind III: Coal. Maybe Trump will help the "clean coal" industry after all. And yet solar continues to progress, as does wind (in the UK and elsewhere). Ps, $361 billion is an awfully large number. And now things are progressing on the storage side thanks to Elon Musk.
  • Chart of the Week: 

News for the Week of 11/27/16

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  • Avaya. The long-rumored and awaited Chapter 11 filing may be imminent.
  • Buzzfeed. Buzzfeed acqui-hired Ben Kaufman, former high-flying CEO of the bankrupted Quirky to try and crack the elusive e-commerce nut. 
  • Dallas. Police and firefighter pensions threaten to push the growing city into municipal bankruptcy.
  • Payless Shoes. Australian operations may prove to be a leading indicator for what's to come in the U.S. Meanwhile, as retailers fall into bankruptcy left and right, once-bankrupt Circuit City is scratching and clawing to a (potential) re-emergence. While American Apparel got pantsed last week, it seems that Abercrombie is getting closer to losing its shirt (#dadjoke?).
  • Sun Capital. Fresh on the heals of the Garden Fresh bankruptcy, it looks like another portfolio company is on the verge of a restructuring as The Limited Stores - with a not-so-limited 243 locations - has hired Guggenheim Partners to explore strategic alternatives. Other accounts indicate that this may be an IP asset sale in the vein of American Apparel. 
  • Rewind: Coal. Last week we highlighted the contradiction between what is happening in the coal industry and what President-Elect Trump says will happen. In another blow to coal, generally, Canada announced this week that intends to fully phase out coal by 2030.
  • Chart of the Week: 

News for the Week of 11/20/16

  • Alberta, Canada. Steps needed to weather the oil downturn. In the US, some claim that oil-related job loss is bottoming.
  • Coal. Restructuring professionals have made millions in Arch Coal, Alpha Natural Resources, and Peabody Energy. But there's real pain out there in coal country - pain that Trump has promised to assuage by bringing back jobs. With that in mind, "Blood on the Mountain" looks like required viewing. This preview is compelling: we urge you to watch it. Even if others are more realistic about those job prospects.
  • Sears. The retailer's issues accelerate as suppliers get increasingly nervous and some predict this will be its last Christmas. Retail, generally, looks set to bludgeon private equity.
  • Fast Forward: Nuverra discloses restructuring talks, UCI International DS approved and marching towards confirmation, Stone Energy launches solicitation and filing in early December, JCrew hires Lazard, Homer City forbearance extended to 11/21, Paragon Offshore back to drawing board with cram-up attempt thwarted, Energy XXI announces PSA.  
  • Rewind I: An in-depth discussion of the Nasty Gal collapse.
  • Rewind II: Steinway Musical Instruments. Is apparently not a restructuring target yet. The company received an equity cure from Paulson & Co., pushing any potential restructuring activity deeper into 2017. 4th Quarter sales will be critical to avoid covenant pressure in '17.
  • Chart of the Week: