Walmart Gives Retail a Brief Reprieve

A number of retailers have cited wage increases as one of the reasons for filing for bankruptcy. John Morberg, the CEO of Garden Fresh Restaurant Intermediate Holdingsmade sure to highlight this issue upon that company's bankruptcy filing. On the flip side, Toys R Us includes wage increases in its go-forward business plan. Target recently announced wage increases too. But Walmart, which had previously announced wage increases didn't match Target in its earnings announcement on Tuesday, providing relief to a lot of retailers already squeezed by various macro trends. Speaking of Target and Walmart, they are innovating to compete with Amazon for the "last mile." This could get ugly.

Bankrupt Companies Love Blaming #Obamacare

As it relates to corporate bankruptcies, we feel as if we've seen nothing but negative accounts about the ACA. In its chapter 11 filing, its almost as ifAngelica Corporation went out of its way to sh*t on the ACA and blame it for, among other things, its bankruptcy. Same for Garden Fresh Restaurant. But, it seems that the ACA helped cut personal bankruptcy filings by 50%. We also note that it apparently helped the Commonwealth of Puerto Rico: per the bankruptcy filing, the island stands to lose $850mm of ACA funding in 2018 which would further the islanders' collective plight

Bankrupt Companies Love Blaming Obamacare

As it relates to corporate bankruptcies, we feel as if we've seen nothing but negative accounts about the ACA. In its chapter 11 filing, its almost as if Angelica Corporation went out of its way to sh*t on the ACA and blame it for, among other things, its bankruptcy. Same for Garden Fresh Restaurant. But, it seems that the ACA helped cut personal bankruptcy filings by 50%. We also note that it apparently helped the Commonwealth of Puerto Rico: per the bankruptcy filing, the island stands to lose $850mm of ACA funding in 2018 which would further the islanders' collective plight

Interesting Restructuring News

  • 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

News for the Week of 01/15/17

  • Canada. Predicting lots of doom and gloom.
  • CovenantsSome developments in the capital markets thanks to recent activity with makewhole provisions - including "the end of covenants?". 
  • Fees. It was only a matter of time before there was a new chapter in the always inevitable vilification of restructuring professionals due to fees. Instead of a front page story about Lehman or TXU in the WSJ, here the Houston Chronicle highlights oil and gas cases.
  • Fund Performance. Bloomberg does IR work for Brigade Capital Management, highlighting the asset management company's purported big '16. And for Mudrick Capitalnoting the fund's turnaround after a period of high profile poor performance.
  • Let's Get Technical. For you geeks who love worrying about CDS, high yield bonds and liquidity, this report is for you.
  • Municipal Trouble: we've talked about Dallas in the past and now Providenceis in the crosshairs.
  • North Dakota: In a shocking development, the state's forecasts did not account for the upheaval in the energy space: just a mere billion short.
  • Radio. Pros focused on radio-based media situations ought to take note of what is happening in Norway, which is now the first country to completely switch off its FM radio network and convert entirely to digital. Meanwhile, in the streaming music space, Soundcloud bankruptcy rumors continue to increase (we called it).
  • Sears. We're tempted to run a pool to gauge when this sucker FINALLY files for bankruptcy but like the villain in Die Hard, Lampert will probably find a way to keep the thing coming back.
  • Rewind IGarden Fresh Restaurant has sold to Cerberus Capital Management in bankruptcy. Sun Capital's pain is Cerberus' gain. Speaking of Sun Capital, it seems they made out okay with their Limited investment thanks to distributions and dividends. To summarize, they made 1.8x their initial $50mm investment. And 4000 people are losing jobs.
  • Rewind IIGilden Activewear Inc. will acquire American Apparel for $88mm, a premium to the original stalking horse bid. Meanwhile, Nasty Gal received approval to sell its brand and customer information for $20mm. Wet Seal, meanwhile, looks headed towards a Chapter 22 at best and a liquidation at worst - not long after Versa Capital bought it out of bankruptcy for $7.5mm.
  • Rewind IIIJawbone continues to struggle as the wearables space continues to consolidate.
  • Chart of the Week
  • Tweet of the Week

News for the Week of 10/16/16

  • In Australia, alternative capital providers like Oaktree and Bain Capital Credit look to replace banks pulling back from risky lending amidst the increasingly distressed commodities bust.
  • Last week, we discussed Chicago's stress and efforts there to stem the tide. Here is a more technical look at Chicago's options and whether it can even go the Detroit route.
  • Here is an interesting list of the worst corporate M&A flops, some of which are familiar to restructuring professionals, e.g., KMart/Sears.  
  • Number of new pianos sold in the US is down nearly 1/3 since 2005, a fact that may force Paulson & Co. to navigate loan defaults for portfolio company, Steinway Musical Instruments.
  • As predicted last week, Relativity Media inches closer to a Chapter 7 liquidation mere months after emerging from Chapter 11. 
  • On the heels of Cosi and Garden Fresh both filing for chapter 11 recently and grocers like A&PHaggen, and Fresh&Easy having already filed, food is filling the docket more than our stomachs these days. Along these lines, the news that Amazon is now pursuing fresh groceries has raised eyebrows and called into question, generally, the "Amazon effect":