🔥New Chapter 22 Bankruptcy Filing - Remington Outdoor Company Inc.🔥

Remington Outdoor Company

July 27, 2020

To read our summary of the case, please go here.

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Jurisdiction: N.D. of Alabama (Judge Jessup)

Company Professionals:

• Legal: O’Melveny & Myers LLP (Nancy Mitchell, Stephen Warren, Karen Rinehart, Diana Perez, Jennifer Taylor) & Burr & Forman LLP (Derek Meek, Hanna Lahr)

• Post-Reorg Board of Directors: Anthony Acitelli, Alex Zyngier, George Wurtz III, G.M. McCarroll, Ron Coburn, Ken D’Arcy, Gene Davis)

• Legal to Restructuring Committee: Akin Gump Strauss Hauer & Feld LLP (Sarah Schultz)

• Financial Advisor: M-III Advisory Partners LP (Colin Adams)

• Investment Banker: Ducera Partners LLC (Bradley Meyer)

• Claims Agent: Prime Clerk (*Click on case name above for free docket access)

Other Parties in Interest:

• Priority Term Loan Lender: Whitebox Advisors LLC

  • Legal: Brown Rudnick LLP (Andreas Andromalos) & Balch & Bingham LLP (Jeremy Retherford)

• Priority Term Loan Agent: Cantor Fitzgerald Securities

  • Christian & Small LLP (Daniel Sparks, Bill Bensinger)

• FILO Lender: Franklin Advisors Inc.

  • Legal: Pillsbury Winthrop Shaw Pittman LLP (Joshua Morse, Andrew Alfano) & Christian & Small LLP (Daniel Sparks, Bill Bensinger)

• FILO Term Loan Agent: Ankura Trust Company

  • Legal: Davis Polk & Wardwell LLP (Donald Bernstein, Joanna McDonald) & Hand Arendall Harrison Sale LLC (Benjamin Goldman)

• Largest Equityholders (in order): Cede & Co., Schultze Master Fund, Antora Peak Credit Opportunities, BMR Funding LLC, Whitebox Asymmetric Partners LP, Whitebox Multi Strategy Partners LP, JNL Series TR - JNL/PPM America, Rockwall CDO II Ltd., Greenbriar CLO Ltd., SG-Financial LLC, W.R. Stephens Jr. Trust A., Eastland CLO Ltd., JMP Credit Advisors CLO IV Ltd., Stratford CLO Ltd., Westchester CLO Ltd., JMP Credit Advisors CLO III(R) Ltd., Voya CLO 2015-1 Ltd., Voya CLO 2014-4 Ltd., Voya CLO 2014-2 Ltd., Voya CLO 2013-3 Ltd., Voya CLO 2013-1 Ltd., Eastspring Investments US Bank Loan, PPM Grayhawk CLO Ltd., Commonwealth Fixed Interest Fund 17, National Railroad Retirement, Cantor Fitzgerald & Co.

New Chapter 11 Bankruptcy Filing - Jason Industries Inc. ($JASN)

Jason Industries Inc.

June 24, 2020

Wisconsin-based Jason Industries Inc. ($JASN) and seven affiliates (the “debtors”) filed a long-anticipated (prepackaged) chapter 11 bankruptcy case in the Southern District of New York on Wednesday — the latest in a line of manufacturers (e.g., Pyxus International Inc., Libbey Glass Inc., Exide Holdings Inc., Pace Industries LLC) to wind its way into bankruptcy court.

The company is an amalgam of decades of growth by acquisition: it launched its components and seating businesses with acquisitions in ‘93 and ‘95, respectively. Everything appeared to be hunky-dory heading into the Great Financial Crisis when things took a turn for the worse.

And so this isn’t the company’s first rodeo in distress. Back in ‘08-’09, the company engaged in a recapitalization transaction supported by Falcon Investment Advisors LLC and Hamilton Lane Advisors; it persevered through the downturn and ultimately sold to a special-purpose-acquisition-company (Quinpairo Acquisition Corp.) in 2014 for $538.6mm. The acquisition was financed through a combination of (i) the $172.5mm raised by the SPAC in its ‘13 IPO, (ii) rollover equity from the aforementioned sponsors (and management), and (iii) $420mm of first and second lien debt. Stick a pin in that last number: it comes back to haunt the debtors. 👻

In the years since, the company streamlined its operations — selling off assets (i.e., its fiber solutions business and a metal components business) and consolidating around two primary business segments. Through their industrial segment, the debtors manufacture a bunch of stuff used for industrial and infrastructure applications; and through their engineered components segment, the debtors manufacture (a) motorcycle seats, (b) operator seats for construction, agriculture, law and turf care and other industrial equipment markets, and (c) seating for the power sports market. Said another way, the company is heavily indexed to the automotive, heavy truck, steel and construction markets. Powered by approximately 700 employees in the US, the company did $338mm in net sales in 2019.

And that is part of the problem. $338mm in net sales represented an 8.2% ($30.1mm) dropoff from 2018. Adjusted EBITDA declined from $36.7mm in ‘18 to $24.8mm in ‘19. Both segments have been underperforming for years. The question is why?

The debtors cite a dramatic dropoff in demand in ‘19. They note:

This reduction was largely caused by reduced end market demand in key industries across the portfolio, specifically, weak economic conditions in Europe and Asia, lower industrial production in North America, and softening end market demand from OEM customers. For example, since as early as the first quarter of 2019, the Company has experienced reduced OEM build and channel inventory destocking. These problems were exacerbated by the operational disruption and demand reduction caused by the COVID-19 pandemic.

Consequently, the debtors busted out the standard playbook to try and manage liquidity (while parallel-tracking a fruitless pre-petition sale and marketing effort). They (a) intensified focus on growing market segments, (b) reduced capital investment in non-core businesses, (c) cut/furloughed labor and instituted pay reductions for execs and other employees (and eliminated a 401(k) match program), (d) closed plants and manufacturing facilities and deferred rent payments or negotiated reduced rent at leased properties, (e) accelerated the consolidation of plants acquired in a recent acquisition, and (f) invested in automation at their facilities to reduce future operating costs (read: replace expensive human beings) and expand margins. Still, the debtors struggled.

…the pandemic’s impact on orders and revenues, combined with preexisting fixed costs and debt service requirements, have constrained available working capital, reduced profitability and cash flow, and significantly impaired the Company’s ability to adequately finance operations.

Which gets us back to the capital structure:

Given where EBITDA numbers were coming in, this thing’s leverage ratio was through the roof. More to the point, the debtors deferred a March 31 second lien interest payment and had been operating under a series of forbearance agreements ever since. Luckily, the capital structure isn’t all-too-complicated and lends itself well to a prepackaged bankruptcy. And so here we are with a restructuring support agreement and proposed prepackaged plan which will effectively turn the company over to the first lien term lenders and, but for some warrants, wipe out the second lien term lenders. Here’s how the above capital structure breaks down:

Source: PETITION LLC

A couple of notable features here:

• Drop it Likes its Hot. There’s a “first lien put option” baked into the plan pursuant to which any first lien term lender who doesn’t want to own equity or the junior converts can “put” its pro rata share of that equity/converts to a first lien lender, Pelican Loan Advisors III LLC (or lenders as the case may be), which has agreed to backstop this baby. Pelican is managed by Monomoy Capital Partners.

• F*ck You Pay Me. Those first lien lenders who consented to forbearances all of those months are about to get paaaaaaayyyyyyyyydd. They’ll receive a pro rated share of and interest in $10mm worth of open market purchases by the debtors of first lien credit agreement claims held by consenting first lien lenders AND a forbearance fee equal to 4.00% of the principal amount of the first lien credit agreement loans held by the consenting lenders as of a date certain. The open market purchases were, presumably, accomplished prior to the filing with 2% of the fee already paid and the remaining 2% to be paid-in-kind on the earlier of the termination date of the RSA or the plan effective date.

• It’s a Trap! Warrants are technically going to be issued to the first lien term lenders and “gifted” to the second lien lenders. But only if they vote to accept the plan. Given the midpoint total enterprise value of $200mm and resultant deficiency claim, this is a nice absolute priority rule workaround. As reflected in the graphic above, the allowed deficiency claim of $64.9mm is obviously impaired and will get a big fat 🍩.

And so this is what the capital structure will look upon emergence:

The first lien lenders have consented to the use of their cash collateral to fund the cases.*

* ⚡️July 15, 2020 Update: The Second Lien Ad Hoc Committee, however, filed a limited objection to the cash collateral motion on the basis that a final order should (a) limit any credit bid to their collateral (noting that a material amount of assets — including 35% of the equity in foreign subs — are excluded from the first lien lenders’ collateral package, and (b) require a finding that there’s diminution of value of the first lien lenders’ collateral such that they, despite providing no new financing, ought to be granted a superpriority lien on previously unencumbered assets. The Committee also previewed objections it will have to the plan of reorganization. For a purportedly “prepackaged” chapter 11, this one looks like it could be more contentious than most. A final hearing on the cash collateral motion is set for July 22, 2020.⚡️

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

• Capital Structure: see above.

• Company Professionals:

  • Legal: Kirkland & Ellis LLP (Jonathan Henes, Emily Geier, Laura Krucks, Dan Latona, Jake Gordon, Yates French)

  • Financial Advisor: AlixPartners LLP (Rebecca Roof)

  • Investment Banker: Moelis & Company LLC (Zul Jamal)

  • Claims Agent: Epiq Bankruptcy Solutions LLC

• Other Parties in Interest:

  • Large equityholder: Wynnefield Capital Management LLC

  • Ad Hoc Group of First Lien Creditors (Credit Suisse Asset Management LLC, Voya CLO Ltd., American Money Management Corp., First Eagle Alternative Credit LLC, Angel Island Capital Services LLC, Monomoy Capital Partners LP, Z Capital Partners LLC)

    • Legal: Weil Gotshal & Manges LLP (Matthew Barr, Ryan Preston Dahl, Alexander Welch)

    • Financial Advisor: Houlihan Lokey Capital Inc.

  • First Lien Agent: The Bank of New York Mellon

  • Second Lien Agent: Wilmington Savings Fund Society FSB

    • Legal: Seward & Kissel LLP (John Ashmead, Gregg Bateman)

  • Ad Hoc Group of Second Lien Lenders: Corre Partners Management LLC, Newport Global Advisors

    • Legal: Brown Rudnick LLP (Steve Pohl, Shari Dwoskin, Kenneth Aulet)

    • Financial Advisor: DC Advisory LLC

Update July 17, 2020

New Chapter 11 Bankruptcy Filing - Neiman Marcus Group LTD LLC

Neiman Marcus Group LTD LLC

May 7, 2020

Dallas-based Neiman Marcus Group LTD LLC, Bergdorf Goodman Inc. and 22 other debtors filed for chapter 11 bankruptcy in the Southern District of Texas late this week. If anyone is seeking an explanation as to why that may be outside the obvious pandemic-related narrative, look no farther than this monstrosity:

A quick reality check: that $5b capital structure isn’t attached to an international enterprise with hundreds or thousands of stores. You know, like Forever21. Rather, that horror show backs a 68 store business (43 Neiman Marcus, 2 Bergdorf, 22 Last Call). Ah….gotta love the good ol’ $5b leveraged buyout.

This case is all about “BIG.”

Big capital structure stemming from a big LBO by two big PE funds, Ares Capital Management and CPP Investment Board USRE Inc.

Big brands with big price tags. PETITION Note: top unsecured creditors include Chanel Inc., Gucci America, Dolce and Gabbana USA Inc., Stuart Weitzman Inc., Theory LLC, Christian Louboutin, Yves Saint Laurent America Inc., Burberry USA, and more. There is also a big amount allocated towards critical vendors: $42.5mm. Nobody messes with Gucci, folks. Here’s a live shot of a representative walking out of court confident that they’ll get their money:

Big fees. More on this below.

Big, complicated — and controversial — multi-year re-designation and asset stripping transactions that were part of the debtors’ (and now non-debtors’) elaborate strategy to restructure out-of-court by kicking the can down the road. This is undoubtedly going to stir a big fight in the case. More on this below too.

Big value destruction.

Here is what will happen to the pre-petition capital structure under the proposed term sheet and restructuring support agreement filed along with the chapter 11 papers — a deal that has the support of 78% of the term lenders, 78% of the debentures, 99% of the second lien notes, 70% of the third lien notes, and 100% of the private equity sponsors:

The Asset-Based Revolving Credit Facility and FILO Facility will get out at par. There’ll be a $750mm exit facility. Beyond that? All that red constitutes heaps and heaps of value that’s now essentially an option. It’s a bet that there is a place in the future for brick-and-mortar luxury department stores. Pursuant to the deal, the “Extended Term Loans” will get the lion’s share of equity (87.5%, subject to dilution). The rest of the capital structure will get small slivers of reorganized equity. General unsecured creditors will get “their pro rata share of a cash pool.” The private equity sponsors will get wiped out but for their hoped-for liability releases.

Back to those big fees. The biggest issue for this week was the debtors’ proposed $675mm new money DIP credit facility (that comes in junior to the existing ABL in priority…in other words, no roll-up here). The DIP is essentially 13% paper chock full of fees (including a backstop fee payable in “NewCo equity” at 30% discount to plan value). One disgruntled party, Mudrick Capital Management, a holder of $144mm of the term loan, appears to have beef with Pimco and other DIP backstop parties — saying that the backstop agreement is inappropriate and the DIP fees are outrageous, likening the fee grab to a COVID hoarding mentality — and therefore felt compelled to cross-examine the debtors’ banker as to the reasonableness of it all. If you’ve ever imagined a kid suing other kids for not picking him for their dodgeball team, it would look something like this did.

And so Lazard’s testimony basically boiled down to this:

“Uh, yeah, dude, nobody knows when the economy will fully open up. The company only has $100mm of cash on the petition date. And IT’S NOT OPERATING. That money is enough for maybe 3 weeks of cash burn given that the debtors intend to continue paying rent (unlike most other retailers that have filed for bankruptcy lately). Damn pesky high-end landlords. Anyway, so we’ll burn approximately $300mm between now and when stores are projected to reopen in July/August. No operating cash flow + meaningful cash burn = risky AF lending environment. It’s unprecedented to lend into a situation with a cash burn that, while it pales in comparison to something like Uber, is pretty damn extreme. Look at the J.Crew DIP: it ain’t exactly cheap to lend in this market. There are no unencumbered assets; there certainly isn’t a way to get junior financing. And a priming fight makes no sense here given the impossibility of showing an equity cushion. So stop being an entitled little brat. There’s no obligation on anyone to cut you into the deal. And if you’re going to cry over spilled milk, take up your beef with Pimco and f*ck right off. Alternatively, you can subscribe to your pro rata portion of the DIP and enjoy all of the fees other than the backstop fee.”

The Judge was convinced that the above rationale constituted good business judgment and approved the DIP on an interim basis.

The hearing also foreshadowed another contentious issue in the case: the myTheresa situation. See, the Debtors’ position is the following: “The ‘17 MyTheresa designation as unrestricted subs + the ‘18 distribution of the myTheresa operating companies to non-debtor Neiman Marcus Group Inc. (a/k/a the “asset stripping” transaction) + a ‘19 wholesale amend-and-extend + cost-saving initiatives + comparable same store sales growth for 7 of 10 quarters + “significantly expanded margins” during the holiday period = rocket ship future growth but for the damn pandemic. On the flip side, Marble Ridge Capital LP takes the position that:

…the Debtors’ financial troubles were entirely foreseeable well before recent events. The Company has operated at leverage multiples more than twice its peers since at least 2018 (prior to the fraudulent transfers described herein). And last year’s debt restructuring increased the Company’s already unsustainable annual interest expense by more than $100 million while only reducing the Company’s debt load by $250 million leaving a fraction of adjusted EBITDA for any capital expenditures, principal repayment, taxes or one-time charges. Sadly, the Debtors’ financial distress will come as no surprise to anyone.

This ain’t gonna be pretty. Marble Ridge has already had one suit for fraudulent transfer dismissed with prejudice at the pleading stage. Now there are defamation and other claims AGAINST Marble Ridge outstanding. And subsequent suits in the NY Supreme Court. Have no fear, though, folks. There are independent managers in the mix now to perform an “independent” investigation into these transactions.

The debtors intend to have a plan on file by early June with confirmation in September. Until then, pop your popcorn folks. You can socially distance AND watch these fireworks.

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

• Capital Structure: See above.

• Professionals:

  • Legal: Kirkland & Ellis LLP (Anup Sathy, Chad Husnick, Matthew Fagen, Austin Klar, Gregory Hesse, Dan Latona, Gavin Campbell, Gary Kavarsky, Mark McKane, Jeffrey Goldfine, Josh Greenblatt, Maya Ben Meir) & Jackson Walker LLP (Matthew Cavenaugh, Jennifer Wertz, Kristhy Peguero, Veronica Polnick)

  • Independent Managers of NMG LTD LLC: Marc Beilinson, Scott Vogel

    • Legal: Willkie Farr & Gallagher LLP (Brian Lennon, Todd Cosenza, Jennifer Hardy, Joseph Davis, Alexander Cheney)

    • Financial Advisor: Alvarez & Marsal LLC (Dennis Stogsdill)

  • Independent Manager of Mariposa Intermediate Holdings LLC: Anthony Horton

    • Legal: Katten Muchin Rosenman LLP

  • Neiman Marcus Inc.

    • Legal: Latham & Watkins LLP (Jeffrey Bjork)

  • Financial Advisor/CRO: Berkeley Research Group LLC (Mark Weinstein, Kyle Richter, Marissa Light)

  • Investment Banker: Lazard Freres & Co. LLC (Tyler Cowan)

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

• Other Parties in Interest:

  • Pre-petition ABL Agent: Deutsche Bank AG New York Branch

    • Legal: White & Case LLP (Scott Greissman, Andrew Zatz, Rashida Adams) & Gray Reed & McGraw LLP (Jason Brookner, Paul Moak, Lydia Webb)

  • FILO Agent: TPG Specialty Lending Inc.

    • Schulte Roth & Zabel LLP (Adam Harris, Abbey Walsh, G. Scott Leonard) & Jones Walker LLP (Joseph Bain)

  • Pre-petition Term Loan Agent: Credit Suisse AG Cayman Islands Branch

    • Legal: Cravath Swaine & Moore LLP (Paul Zumbro, George Zobitz, Christopher Kelly) & Haynes and Boone LLP (Charles Beckham, Martha Wyrick)

  • Second Lien Note Agent: Ankura Trust Company LLC

  • Third Lien Note Agent: Wilmington Trust NA

  • Unsecured Notes Indenture Trustee: UMB Bank NA

    • Legal: Kramer Levin Naftalis & Frankel LLP (Douglas Mannal, Rachael Ringer)

  • 2028 Debentures Agent: Wilmington Savings Fund Society FSB

  • Ad Hoc Term Loan Lender Group (Davidson Kempner Capital Management LP, Pacific Investment Management Company LLC, Sixth Street Partners LLC)

    • Legal: Wachtell Lipton Rosen & Katz (Joshua Feltman, Emil Kleinhaus) & Vinson & Elkins LLP (Harry Perrin, Kiran Vakamudi, Paul Heath, Matthew Moran, Katherine Drell Grissel)

    • Financial Advisor: Ducera Partners LLC

  • Ad Hoc Secured Noteholder Committee

    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Andrew Rosenberg, Alice Belisle Eaton, Claudia Tobler, Diane Meyers, Neal Donnelly, Patricia Walsh, Jeffrey Recher) & Porter Hedges LLP (John Higgins, Eric English, M. Shane Johnson)

    • Financial Advisor: Houlihan Lokey Capital Inc.

  • Large Creditor: Chanel Inc.

    • Legal: Sheppard Mullin Richter & Hampton LLP (Justin Bernbrock, Michael Driscoll)

  • Large Creditor: Louis Vuitton USA Inc.

    • Legal: Barack Ferrazzano Kirschbaum & Nagelberg LLP (Nathan Rugg)

  • Large Creditor: Moncler USA Inc.

    • Legal: Morrison Cohen LLP (Joseph Moldovan, David Kozlowski)

  • Marble Ridge Capital LP & Marble Ridge Master Fund LP

    • Legal: Brown Rudnick LLP (Edward Weisfelner, Sigmund Wissner-Gross, Jessica Meyers, Uchechi Egeonuigwe)

  • Mudrick Capital Management LP

    • Legal: Gibson Dunn & Crutcher LLP (Michael Rosenthal, Mitchell Karlan, David Feldman, Keith Martorana, Jonathan Fortney)

  • Sponsor: CPP Investment Board USRE Inc.

    • Legal: Debevoise & Plimpton LLP (Jasmine Ball, Erica Weisgerber) & Pillsbury Winthrop Shaw Pittman LLP (Hugh Ray, William Hotze, Jason Sharp)

  • Sponsor: Ares Capital Management

    • Legal: Milbank LLP (Dennis Dunne, Thomas Kreller)

  • Official Committee of Unsecured Creditors

    • Legal: Pachulski Stang Ziehl & Jones LLP (Richard Pachulski) & Cole Schotz PC (Daniel Rosenberg)

    • Financial Advisor: M-III Advisory Partners LP (Mohsin Meghji)

    • Valuation Expert: The Michel-Shaked Group (Israel Shaked)

🍣New Chapter 11 Bankruptcy Filing - Dean & Deluca New York Inc.🍣

Dean & Deluca New York Inc.

March 31, 2020

Dean & Deluca New York Inc. hasn’t been in business in New York for well over six months so when this sucker and six affiliates (finally) filed for bankruptcy, our first reaction was, collectively, “No sh*t.” It’s somewhat ironic that it’s making a re-appearance at a time when New Yorkers are (unfortunately) clamoring for food options. But we digress.

The company has no operating retail locations; it has one remaining employee.* This reality is what’s left of a post-acquisition expansion plan gone bad where over $200mm of cash was flushed down the toilet.

For the last several months, the company has apparently been working with its two primary creditors and lenders, Pace Development Corporation and Siam Commercial Bank Public Company Limited (“SCB”), to develop a reorganization plan. No out-of-court option emerged and so now the company is in bankruptcy “to effectuate a restructuring transaction that would preserve the value of the Dean & DeLuca brand, position itself to re-open stores and rehire employees, and provide financial returns and new business opportunities to creditors.” Ummmmmm, okay.

The company received a $750k secured loan from SCB on the eve of bankruptcy. Otherwise, it has no secured debt just $295mm in unsecured debt (but was it debt, really?) and $25mm in trade debt. On the asset side, the company claims its trademark is worth $50mm (hahahahahaha). It also lists “franchise agreements and customer relationships” with a book value of $5mm, $100mm in NOLs (now we’re talking), $700k in accounts receivable and $20mm in property and equipment.

Where’s this thing go from here? Looks like Pace intends to sink more money into this thing and give it another go. G-d bless persistence.

*It still has some branded international franchisees who paid the company $1.5mm in license fees in 2019. COVID may have something to say about that happening in 2020.

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

• Capital Structure: $750k secured debt, $295mm unsecured debt

• Professionals:

  • Legal: Brown Rudnick LLP (Willam Baldiga, Bennett Silverberg, Tristan Axelrod)

  • Financial Advisor: Argus Management Corporation (Joseph Baum, Lawton Bloom)

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

• Other Parties in Interest:

  • Secured Lender: Siam Commercial Bank Public Company Limited

New Chapter 11 Bankruptcy & CCAA Filing - Pier 1 Imports Inc. ($PIR)

Pier 1 Imports Inc.

February 17, 2020

Fort Worth, Texas-based Pier 1 Imports Inc. and seven affiliates (the “debtors”) have fulfilled their obvious destiny and finally fallen into bankruptcy court in the Eastern District of Virginia. Contemporaneously, the debtors filed a CCAA proceeding in Canada to effectuate the closure of all Canadian operations. Color us pessimistic but we’re not feeling so great about the debtors’ go-forward chances in the US either.

We’ve covered the debtors ad nauseum in previous editions of PETITION. Here — supported by an ode to “Anchorman” — we described the debtors’ recent HORRIFIC financial performance and noted how a bankruptcy would be sure to confuse a peanut gallery accustomed to spouting regular (and sometimes inaccurate) hot takes about how private equity is killing retail.* We wrote:

The reaction to this surely-imminent bankruptcy (and, if we had a casino near us, liquidation) is going to be interesting. It is sure to flummox the “Private Equity is Killing Retail” camp because, well, it’s not PE-backed. Similarly it’ll confuse the “You Shouldn’t Put So Much Debt on Retail” cohort because, well, there really isn’t that much debt on the company’s balance sheet. Chuckling in the corner will be “The US is Over-Stored” team … And “The Millennials Aren’t Buying Homes and Furnishing Them With Chinese-Made Tchotchkes” gang (thanks a ton, Marie Kondo) … And the “Management Has Blown Chunks, The Assortment Sucks” bunch … And, finally, “The Amazon Effect” squad….

Over the weekend, The New York Times ran a piece from Austan Goolsbee, an economics professor at the University of Chicago’s Booth School of Business, that — no disrespect to the professor — says many of the same things PETITION has been saying for a LONG LONG time. That is, “The Amazon Effect” is overstated. He argues that “three major economic forces have had an even bigger impact on brick-and-mortar retail than the internet has”: (1) big box stores, (2) income inequality, and (3) the preference shift away from goods towards services. It’s fair to say that these three forces affected the debtors in a big big way.**

Who’s actually surprised #Pier1 is closing when they charge like $100 for a decorative pillow? $60 for a vanilla candle that’s also at Walmart for $5? PASS. People still shopping at a Pier 1 clearly haven’t heard of Home Goods or TJ Maxx

— Nicole (@Choley2007) February 17, 2020

Surely, e-commerce has a lot to do with it too. As one PETITION advisor said about the debtors’ wares yesterday:

“You can just order that sh*t online. You don’t need to try it on.”

It’s a fair point.

Another fair point that Mr. Goolsbee omits from his analysis is the role of management. It’s safe to say that the US is suffering from an epidemic of retail ineptitude.

Also management sucks

— TheHappySoul Goddess (@Yahiness11) February 17, 2020

And like the coronavirus, it keeps spreading from one retailer to the next.***

This has to be one of the most under-covered aspects of the #retailapocalypse: just a revolving door of execs moving from one troubled retailer to the next and everyone hoping and praying that that person can suddenly conjure up an answer. $ASNA $FRANhttps://t.co/5lmoMJFEAE

— 💥PETITION💥 (@petition) February 14, 2020

But we digress.

The business has clearly suffered:

From fiscal years 2014 to 2018, the company’s net income dropped from $108 million to about $11.6 million and in fiscal year 2019 Pier 1 experienced a $198.8 million loss.

So, what’s the upshot here? The debtors announced a plan support agreement and intend to use the chapter 11 bankruptcy process to (a) continue to shutter the previously announced ~450 stores (read: get ready for a lot of lease rejections) and (b) pursue a sale pursuant to a chapter 11 plan of reorganization of what remains of the debtors’ business. Frankly, this was masterful messaging: the announcement relating to a plan support agreement and potential plan of…wait for it…”reorganization”(!) head-faked the entire market into thinking this thing might actually be salvageable. That’s where the fine print comes in.

The debtors have dubbed this an “all weather” chapter 11 plan because it provides for either a sale or the equitization of the term loan at the term lenders’ election. This begs the question: will Pathlight Capital LP want to own this thing?🤔 This bit was eye-catching:

“To be clear, the term loan lenders have made no decision at this point, but instead support the process as outlined in the plan support agreement.”

Yeah, we bet they do. Qualified bids will be due on or before March 23 and the lenders have until March 27 to make their election. Which way will the winds blow?

Note that “the process” isn’t currently supported by a stalking horse purchaser. 🤔

Note further that the debtors are required under the DIP to distribute informational packages and solicitations for sale of the debtors’ assets on a liquidation basis to liquidators by March 9.🤔 🤔

It seems reasonably clear from the Pier 1 bankruptcy papers that none of the Debtors, the professionals nor the lenders expect this turd to actually find a buyer outside of the liquidator type.

— 💥PETITION💥 (@petition) February 18, 2020

It looks like we’ll know the answer very soon.

To finance the cases, the debtors obtained a committed for a $256mm DIP credit facility. The facility includes a $200mm revolving loan commitment and a $15mm first in last out term loan, each provided 50/50 by Bank of America N.A. and Wells Fargo National Association, and a $41.2mm term loan from Pathlight. This was the pre-petition capital structure:

The DIP effectively just rolls up much of the pre-petition debt. There is no new money. The messaging here, then, is also critical: the DIP facility ought to provide customers, vendors and employees comfort that there is access to liquidity if needed. Cash collateral usage, however, is the main driver here: the debtors believe that operating cash flow will suffice to handle working capital needs and bankruptcy expenses.

To summarize, we have another distressed retailer that is scratching and clawing to live. They’ve taken all of the usual steps to extend runway: cost cuts, footprint minimalization, new management. Bankruptcy is a last-ditch effort to survive: the debtors take pains to try and convince some prospective buyer that there is life left in the debtors’ brick-and-mortar business:

The remaining go-forward stores achieved superior sales and customer metrics in the last twelve months compared to the closing stores, including approximately 15% greater sales per square foot on average.

And if that doesn’t do it, there’s the argument that there’s an e-commerce play here. The debtors similarly go to great lengths to state OVER AND OVER AGAIN that e-commerce represents 27% of total sales. They’re practically screaming, “Look at me, look at me! We can be interesting to you [Insert Authentic Brands Group here]!”

Pathlight is sure as hell hoping someone bites.

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*Kirkland & Ellis…uh…we mean, the “debtors” appear to agree, stating, in reference to private equity, that “[t]oo many pundits have sought to point in too many wrong directions,” citing pieces in RetailDive and The Wall Street Journal. THAT ladies and gentlemen, is client advocacy!

**It’s also fair to say that Professor Goolsbee does his readers a disservice by neglecting the overall picture which, no doubt, also includes over-expansion, too much retail per capita, private equity and over-levered balance sheets. These cowboys are closing 400+ stores for a reason.

Of course, long time PETITION readers know that we’ve been arguing for a LOOOOONG time that the “perfect storm” hitting retail is a confluence of factors that cannot just be lazily summarized as “private equity” or “The Amazon Effect.” It’s good to see that the folks at Kirkland & Ellis agree:

In the face of the longest bull run in U.S. history (close to 3,000 days and counting), a myriad of factors have collectively changed the ways in which consumers and retailers interact—creating for retailers what is tantamount to a perfect storm—and directly contributing to the struggles retailers face in a shifting marketplace.5

Then it’s as if they lifted this footnote straight out of previous PETITION briefings:

***Not to cast aspersions, but the resume of the current PIR CEO is…uh…interesting: prior experience includes FullBeauty Brands, HHGregg, and Marsh Supermarkets. Any of those names sound familiar to bankruptcy professionals?

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• Jurisdiction: E.D. of Virginia (Judge Huennekens)

• Capital Structure: $140mm RCF + $47.3mm LOC, $189mm Term Loan (Wilmington Savings Fund Society FSB), $9.9mm industrial revenue bonds

• Professionals:

  • Legal: Kirkland & Ellis LLP (Joshua Sussberg, Emily Geier, AnnElyse Scarlett Gains, Joshua Altman) & Kutak Rock LLP (Michael Condyles, Peter Barrett, Jeremy Williams, Brian Richardson)

  • Canadian Legal: Osler Hoskin & Harcourt LLP

  • Independent Directors: Steven Panagos & Pamela Corrie

  • Financial Advisor: AlixPartners LLP (Holly Etlin)

  • Investment Banker: Guggenheim Securities LLC (Durc Savini)

  • Real Estate Advisor: A&G Realty Partners LLC

  • Liquidation Consultant: Gordon Brothers Retail Partners LLC

    • Legal: Riemer & Braunstein LLP (Steven Fox, Anthony Stumbo)

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

• Other Parties in Interest:

  • DIP ABL Agent: Bank of America NA

    • Legal: Morgan, Lewis & Bockius LLP, Hunton Andrews Kurth LLP, and Norton Rose Fulbright Canada LLP

  • DIP ABL Term Agent: Pathlight Capital LP

    • Legal: Choate Hall & Stewart LLP (John Ventola, Jonathan Marshall) and Troutman Sanders LLP (Andrew Buxbaum)

  • Ad Hoc Term Lender Group: Eaton Vance Management, Insight North America LLC, Marathon Asset Management LP, MJX Asset Management LLC, Whitebox Advisors LLC, ZAIS Group LLP

    • Legal: Brown Rudnick LLP (Robert Startk, Uchechi Egeonuigwe, Steven Pohl, Sharon Dwoskin) & Whiteford Taylor & Preston LLP (Christopher Jones, Vernon Inge, Corey Booker)

    • Financial Advisor: FTI Consulting Inc.

  • Large Equityholders: Charles Schwab Investment Management, Dimensional Fund Advisors LLP

  • Official Committee of Unsecured Creditors: Bhati & Company, Synergy Home Furnishings LLC, United Parcel Services Inc., Brixmor Operating Partnership LP, Brookfield Property REIT Inc.

    • Legal: Foley & Lardner LLP (Erika Morabito, Brittany Nelson, Timothy Mohan) & Cole Schotz PC (Seth Van Aalten)

    • Financial Advisor: Province Inc. (Paul Huygens, Sanjuro Kietlinski, Walter Bowser, Paul Navid, Shane Payne, Courtney Clement)

🚀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 Bankruptcy Filing - Purdue Pharma LP 💊

Purdue Pharma LP

September 15, 2019

See here for our writeup.

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

• Professionals:

  • Legal: Davis Polk & Wardwell (Marshall S. Huebner, Benjamin S. Kaminetzky,, Timothy Graulich, Eli J. Vonnegut)

  • Board of Directors: Robert Miller, Kenneth Buckfire, John Dubel, Michael Cola, Anthony Roncalli, Cecil Pickett, F. Peter Boer

  • Financial Advisor: AlixPartners LLP

  • Investment Banker: PJT Partners Inc.

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

• Other Parties in Interest:

  • Ad Hoc Committee of AGs in Support of Settlement

    • Legal: Kramer Levin Naftalis & Frankel LLP (Kenneth Eckstein, Rachael Ringer), Brown Rudnick LLP (David Molton, Steven Pohl), Gilbert LLP (Scott Gilbert, Craig Litherland, Kami Quinn), Otterbourg PC (Melanie Cyganowski, Jennifer Feeney)

  • AG of New York

    • Legal: Pillsbury Winthrop LLP (Andrew Troop)

  • Official Committee of Unsecured Creditors: West Boca Medical Center, CVS Caremark D Services LLC, LTS Lohmann Therapy Systems Corporation, Blue Cross and Blue Shield Association, Pension Benefit Guaranty Corporation and 4 individuals

    • Legal: Akin Gump Strauss Hauer & Feld LLP

9/28/19 #135

🏥New Chapter 11 Bankruptcy Filing - Insys Therapeutics Inc.🏥

Insys Therapeutics Inc.

June 10, 2019

Within a week of a massive settlement entered into with the United States Department of Justice, Insys Therapeutics Inc. ($INSY) and six affiliates have filed for bankruptcy in the District of Delaware.* The company is a specialty pharmaceutical company that commercializes drugs and drug delivery systems for targeted therapies (read: it manufactures opioids); it has two marked products. These products, if prescribed and used in the right way, aren’t in and of themselves evil (though former management is another story). Subsys is used for cancer patients and is delivered in the (non-invasive) form of an under-the-tongue spray. Syndros is used to treat loss of appetite and anorexia associated with weight loss in people with AIDS as well as nausea and vomiting caused by anti-cancer medicine. Not one to miss out on all the latest fads, the company also apparently has cannabinoid-based formulations in its pipeline. Because, like, to the extent the company wants to pursue a sale, nothing will get investor juices flowing like cannabinoid! Will its marketing get done via Snapchat and its sales conducted via the blockchain? Maybe it ought to package its formulations with fake meat. Lit!!

All in, the company owns 94 worldwide patents and 62 patent applications with expiration dates ranging between 2022 and 2039. In other words, it does have some potentially valuable intellectual property.

The company’s synopsis of why it is now in bankruptcy court reflects the world of opioid producers today:

…the Debtors are facing extensive litigation relating to their SUBSYS® product (“Subsys”), which is a prescription opioid. As of the Petition Date, one or more of the Debtors have been named in approximately one thousand lawsuits, and the Debtors anticipate that additional lawsuits may be commenced in the future. Some of the litigation they are facing is common to all opioid manufacturers, while other claims are based on particular alleged activities of the Debtors’ former executives, many of whom either pleaded guilty to or were convicted after trial of federal criminal activity relating to such activities. The expenses and settlement costs resulting from such litigation have been substantial, consuming large portions of the Debtors’ revenue and liquidity.

At the same time, over the last few years, the Debtors’ revenues from Subsys have been declining rapidly as a result of the increased national scrutiny of prescription of opioids by healthcare professionals, the resulting high-profile political and legal actions taken against manufacturers and distributors of opioids, and the specific news relating to the former executives’ criminal activity. Moreover, although the Debtors have promising products in the pipeline, those products are not yet approved for production, require significant additional investment to bring to market, and are not expected to generate revenue in the near term. As a smaller company than some other opioid manufacturers, with over 90% of its current revenue coming from the sale of opioids, Insys could not withstand the concurrent negative impact of massive litigation costs and significant opioid revenue deterioration. These factors have caused a substantial cash drain on the company to the point where, despite the Debtors’ best efforts, they risk running out of cash in 2019. (emphasis added)

We quoted that bit at length because it captures the risk that all opioid manufacturers face today given what appears to be pervasive sales and prescription practices across the country, subsuming countless companies all seeking sales and profits often in the name of shareholder value. Which is not to say that all companies and company management teams are equal: while the jury is still out in a variety of cases, here, we know that former company management engaged in some shady-a$$ methods to enrich themselves. Per Bloomberg:

In May, Insys founder and former Chief Executive Officer John Kapoor, 75, and four former executives were convicted of engaging in a racketeering conspiracy to bribe doctors to boost off-label prescriptions of Subsys, a fentanyl spray originally intended to treat cancer pain. The executives baited doctors with sham speaker fees, lavish dinners and nightclub outings, and then duped insurers into covering the prescriptions, prosecutors said. Kapoor and the others each face a maximum of 20 years in prison and will be sentenced in September.

A pandemic of addiction in Wyoming, Oklahoma and elsewhere, powered by some corrupt-AF executives and their bottles-and-models loving doctor homies.

The debtors filed their bankruptcy cases to (i) trigger the automatic stay, a statutorily imposed injunction that will, for the time being, halt ongoing litigation, (ii) pursue a sale of substantially all of their assets, and (iii) implement procedures designed to estimate categories of claims and impose distribution procedures via a plan of reorganization. Moreover, the debtors hope that a court-supervised proceeding in chapter 11 will provide the structure required to enter into additional settlements with other large groups of claimants.

As for current claims, there are lot (including a variety of professional services claims on account of indemnities and otherwise — a lot of lawyers are likely to have write-offs here). But the company has no funded debt and so the proceeds of any sale will, after professionals are paid, go to general unsecured creditors. First and foremost, the DOJ — on account of its allowed general unsecured claim ($243mm, but capped at a $195mm recovery inclusive of a $5mm prepetition payment). The DOJ will have to contend with, on an equal basis, other federal actions/settlements, state actions, municipal actions, and insurance, personal injury, securities and indemnity claimants. It’s a liability lovefest!

To address these liabilities, the debtors need asset value. To that end, the debtors are looking to establish a global sale process for their IP; they’re also looking at clawing back certain indemnification amounts they’ve paid over the years on behalf of their seemingly corrupt-AF former management; finally, they may pursue claims against their insurers for wrongful denial of coverage. All in, the debtors are seeking to maximize their estates for the purposes of broadening the potential pool for distribution to claimants. We’re all for that objective provided it can be done in a cost effective way — a rare accomplishment, these days, in bankruptcy.

*The stock, which had been trading at $1.31/share at market close on Friday, plummeted 51.45% on Monday upon the news of the bankruptcy filing. This prompted The Wall Street Journal’s Charley Grant to quip, “So much for efficient markets.” He continued:

Why the news took anyone by surprise, however, is more of a mystery. After all, Insys had given investors fair warning, just days after a federal jury convicted five former employees of engaging in a racketeering conspiracy to boost opioid sales. The company said in a report filed with the Securities and Exchange Commission that “it may be necessary... to file a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in order to implement a restructuring.”

In case that hint was too subtle, investors got another one last week, when Insys agreed to settle criminal and civil claims with the Justice Department for $225 million.

He forgot to mention another sign. In March we wrote:

Opioids (Long Professional Retentions). Insys Therapeutics Inc. ($INSY) has JMP Securities pursuing a divestiture of its fentanyl sublinqual spray, Subsys. The company revealed this week that Lazard has now also been hired. Per Reuters, a company spokesperson stated:

“We engaged Lazard thereafter to advise us on our capital planning and strategic alternatives across the business. These are two independent efforts.”

What kind of independent effort? Color us suspicious.

“Color us suspicious” was not-so-subtle code for “this f*cker is going to file for bankruptcy, people.” So, to Mr. Grant’s point, it should have been abundantly clear what was going to happen to any market follower actually paying attention.

• Jurisdiction: D. of Delaware (Judge Gross)

• Capital Structure: No funded debt.

• Professionals:

  • Legal: Weil Gotshal & Manges LLP (Gary Holtzer, Ronit Berkovich, Candace Arthur, Olga Peshko, Brenda Funk, Ramsey Scofield, Peter Isakoff ) & (local) Richards Layton & Finger PA (John Knight, Paul Heath, Amanda Steele, Zachary Schapiro)

  • Board of Directors: John McKenna, Trudy Vanhove, Rohit Vishnoi, Vaseem Mahboob, Andrew Long, Elizabeth Bohlen

  • Financial Advisor: FTI Consulting Inc.

  • Investment Banker: Lazard Freres & Co. LLC (Andrew Yearley)

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

• Other Parties in Interest:

  • Official Committee of Unsecured Creditors (McKesson Corporation, Infirmary Health Hospitals Inc., Louisiana Health Service & Indemnity Co. d/b/a Blue Cross and Blue Shield of Louisiana, LifePoint Health Inc., Deborah Fuller, Julie Kay, James Starling Jr., Angela Mistrulli-Cantone, Lisa Mencucci)

    • Legal: Akin Gump Strauss Hauer & Feld LLP (Daniel Golden, Mitchell Hurley, Arik Preis) & (local) Bayard PA (Justin Alberto, Erin Fay, Daniel Brogan)

  • MDL Plaintiffs

    • Legal: Brown Rudnick LLP (David Molton, Gerard Cicero, Kenneth Aulet, Chelsea Mullarney, Steven Pohl) & Blank Rome LLP (Stanley Tarr, Victoria Guilfoyle) & Gilbert LLP (Scott Gilbert, Craig Litherland, Kami Quinn, Jenna Hudson)
      

Update 7/7/19 #244

New Chapter 22 Filing - Geokinetics Inc.

Geokinetics Inc.

6/25/18

Just when we thought companies had mysteriously figured out how to stay out of bankruptcy court, alas, a filing!

And just when we thought oil and gas-related distress had ridden off into the proverbial Texan sunset, in walks Houston-based geophysical services provider Geokinetics Inc. into the Southern District of Texas with a plan to sell substantially all of its assets to (one-time bankruptcy candidate) SAE Exploration Inc. for $20mm. Looks like the oil and gas downturn still has some appetite for prey. And it must be tasty prey: this is the second time in four years that this company is in bankruptcy. #Scarlet22. Indeed, this company is so good at bankruptcy that, the first time, it emerged from chapter 11 a full year before it even confirmed its plan!! From paragraph 24 of the First Day Declaration:

"On March 10, 2014, GOK and certain affiliated subsidiaries confirmed a prepackaged chapter 11 plan of reorganization in the District of Delaware. Pursuant to the Plan, GOK equitized over $300 million of debt and paid off its revolving credit facility. On May 10, 2013, GOK and certain affiliated subsidiaries emerged from chapter 11."

And we thought Westworld had mind-bending timelines. Whoops. 

The company blames the prolonged downturn and certain discreet "operational difficulties" that resulted in uncollectable receivables for its bankruptcy. Wanting to jump ship as the iceberg approached, Wells Fargo sought to minimize its exposure but the company and its bankers, Moelis, weren't able to find a suitable secured loan facility to refinance its revolving loan. So Moelis toggled to "strategic alternatives" mode which, seemingly, included dumping this turd on unsuspecting public equity investors as the company -- under the guidance of Fried Frank Harris Shriver & Jacobson -- filed a confidential S-1 under the JOBS Act. Sounds a lot like Domo Inc. Or Tintri Inc., for that matter. #HailMary

Obviously the company didn't IPO. Instead, it continued to bleed cash. Ascribe Capital replaced Wells Fargo and funded bridge loans for some time until they were no longer willing to perform triage. The company and its advisors stepped on the gas, lined up the stalking horse bidder, and secured interest in a $15mm DIP credit facility -- from Whitebox Advisors and Highbridge Capital, two funds that are stakeholders in the stalking horse bidder -- and filed for bankruptcy. The proceeds of the DIP will be used, in part, to pay off Ascribe's bridge loans. 

Meanwhile, remember that IPO? It seems the company thought that that was a gigantic waste of time: among the top creditors are Fried Frank Harris Shriver & Jacobson LLP and Moelis & Co. ($MO). Savage. 

• Jurisdiction: S.D of Texas (Judge Jones)
• Capital Structure: $15.6mm Term Loan A (Ascribe Capital, Wilmington Trust), $6.8mm RCF (Ascribe Capital, Wilmington Trust)
• Company Professionals:
  • Legal: Porter & Hedges LLP (John Higgins, Joshua Wolfshohl, Aaron Power)
  • Financial Advisor: FTI Consulting Inc. 
  • Investment Banker: Moelis & Co. 
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Ascribe Investments LLC
    • Legal: Simpson Thacher & Bartlett LLP (Michael Torkin, Bryce Friedman, Randi Lynn Veenstra, Megan Tweed, Sandeep Qusba, Yun Joo Lim) & (local) Haynes and Boone LLP (Charles Beckham Jr., Martha Wyrick)
  • SAExploration Inc.
    • Legal: Akin Gump Strauss Hauer & Feld LLP (Sarah Link Schultz, Eric Seitz)
  • DIP Lenders: Whitebox Advisors LLC, Highbridge Capital Management LLC
    • Legal: Brown Rudnick LLP (Andreas Andromalos, Steven Levine, Jeffrey Jonas, Robert Stark, Kimberly Cohen)

Updated 6/26 6:54 PT

New Chapter 11 Filing - Gibson Brands Inc.

Gibson Brands Inc.

5/1/18

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

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

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

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

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

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

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

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

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

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

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

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

⚡️Warning: Geeky stuff to follow ⚡️:

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

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

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

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

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

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

Updated 5/2 5:12 pm CT

New Chapter 11 Filing - Orexigen Therapeutics Inc.

Orexigen Therapeutics Inc. 

3/12/18

Orexigen Therapeutics is a publicly-traded ($OREX) biopharmaceutical company with one FDA-approved product - "Contrave" - an adjunct to a reduced-calorie diet and exercise for chronic weight management in certain eligible adults. (Before we continue, please take a minute to appreciate the exquisite creativity these folks deployed with the name, "Contrave." Control + crave = Contrave. We hope they didn't shell out too much cash money to the brand consultants for that one). 

Anyway, the drug could theoretically service the 36.5% of adults the Center for Disease Control & Prevention has identified as obese, a potential market of 91-93 million people in the United States alone. And that number is predicted to rise to 120 million people in the next several years. Yikes: that's 33% of the U.S. population. Apropos, the drug is the number one prescribed weight-loss brand in the US with over 1.8 million prescriptions written to date, subsuming 700,000 patients. The drug is also approved in Europe, South Korea, Canada, Lebanon, and the UAE. 

All of that surface-level success notwithstanding, the company has lost approximately $730 million since its inception. This is primarily because it has been spending the last 16 years burning cash on R&D, clinical studies for FDA approval, recruitment, manufacturing, marketing, etc., both in and outside the U.S. And people wonder why drugs are so expensive. The company believes it could be profitable by 2019 under its existing operating model and revenue forecasts; it enjoys a patent until 2030. 

Obviously the patent is critical because the company, through its banker, attempted a sale prior to the bankruptcy filing but proved unsuccessful. The goal of the bankruptcy filing, therefore, is to effectuate a sale with the benefit of "free and clear" status. While no stalking horse bidder is lined up, The Baupost Group LLC, is leading a group of secured noteholders (including Ecori Capital, Highbridge Capital and UBS O'Connor) to provide a $35 million DIP credit facility and buy the company some time. Will they end up owning it? 

• Jurisdiction: D. of Delaware 
• Capital Structure: $165mm 0% '20 convertible notes (The Baupost Group LLC), $115mm 2.75% '20 convertible notes ($25 million outstanding, Wilmington Trust NA), $49.6mm 2.75% '20 convertible exchange senior notes ($38.9 million outstanding, US Bank NA) 
• Company Professionals:
  • Legal: Hogan Lovells LLP (Christopher Donolo, Eric Einhorn, Christopher Bryant, Jon Beck, Sean Feener) & (local) Morris Nichols Arsht & Tunnell LLP (Robert Dehney, Andrew Remming, Jose Bibiloni)
  • Financial Advisor: E&Y
  • Investment Banker: Perella Weinberg Partners 
  • Claims Agent: KCC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Prepetition Collateral Agent & Prepetition Trustee: U.S. Bank NA
    • Legal: Kelley Drye & Warren LLP (James Carr, Benjamin Feder)
  • DIP Lenders
    • Legal: Quinn Emanuel Urquhart & Sullivan LLP (Eric Winston)
  • DIP Administrative Agent: Wilmington Trust Company
    • Legal: Arnold & Porter (Tyler Nurnberg)
  • DIP Lender: Highbridge Capital Management LLC
    • Legal: Brown Rudnick LLP (Robert Stark, Stephen Levine, Uchechi Egeonuigwe) & (local) Whiteford Taylor & Preston LLC (Christopher Samis, L. Katherine Good, Aaron Stulman)
  • Official Committee of Unsecured Creditors
    • Legal: Elliott Greenleaf PC (Rafael Zahralddin-Aravena, Eric Sutty) & (local) Irell & Manella LLP (Jeffrey Reisner, Michael Strub Jr., Kerri Lyman)

Updated March 30, 2018

New Chapter 11 Bankruptcy - EXCO Resources Inc.

EXCO Resources Inc.

• 1/15/18 Recap: Dallas-based oil and gas exploration and production company filed for bankruptcy with no plan, no buyer, and a $250mm DIP credit facility in hand from the likes of Fairfax Financial Holdings Limited, Bluescape Resources Company LLC, and JPMorgan Chase Bank, N.A. ($JPM). The company intends to use bankruptcy to try and find a strategic buyer. Shockingly, it doesn't have a stalking horse bidder, all-the-more-surprising because this bankruptcy filing has been anticipated for a year, if not more. W.L Ross & Co. LLC, the former firm of Commerce Secretary Wilbur Ross (#MAGA!!), and Oaktree Capital Management Funds ($OAK) are two large equityholders with holdings of 12.5% and 8.29%, respectively. Companies in EXCO's list of top unsecured creditors is a who's who lineup of once-stressed, distressed, or bankrupt companies, including Azure Midstream, Goodrich Petroleum ($GDP), Chesapeake Energy ($CHK), Stallion Oilfield Services, Nuverra Environmental Solutions, and Light Tower Rentals, among others. At the time of this writing, the company hasn't completed its first day filing but do we even need to read the papers to understand why this company with $1.3 billion of total debt is in bankruptcy court? RIght, probably not. 
• Jurisdiction: S.D. of Texas (Judge Isgur)
• Capital Structure: $1.35b of debt including $131.5mm 7.5% '18 Senior Notes (Wilmington Savings Fund Society), $70.1mm 8.5% '22 Senior Notes (Wilmington Savings Fund Society). 
• Company Professionals:
  • Legal: Kirkland & Ellis LLP (Patrick Nash, Christopher Greco, Alexandra Schwarzman, Stephen Hackney, Ryan Moorman) & (local) Gardere Wynne Sewell LLP (Marcus Helt)
  • Financial Advisor: Alvarez & Marsal LLC (John Stuart)
  • Investment Banker: PJT Partners (Steven Zelin, Michael O'Hara, Adam Schlesinger, Zachary Rigoni, Keith Lord, Jeremey Woodard, Scott Meyerson, Gregory Nelson, Emmanuel Recachinas, Aaron Brenner, Tony Yang, Jennifer Wang)
  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • DIP Lender: JPMorgan Chase Bank NA
    • Legal: Simpson Thatcher & Bartlett LLP (Nicholas Baker, Sandeep Qusba) & (local) Norton Rose Fulbright US LLP (Louis Strubeck, Kristian Gluck, Ryan Manns)
  • DIP Lender: Fairfax Financial Holdings Limited
    • Legal: Kasowitz Benson Torres LLP (Andrew Glenn, Eric Taube, Adam Shiff, Emily Kuznick, Shai Schmidt)
  • Indenture Trustee: Wilmington Savings Fund Society FSB
    • Legal: Seward & Kissel LLP (John Ashmead, Robert Gayda, Catherine LoTempio)
  • Cross Sound Management
    • Legal: Quinn Emanuel Urquhart & Sullivan LLP (Benjamin Finestone, K. John Shaffer) & (local) Jackson Walker LLP (Patricia Tomasco, Matthew Cavenaugh)
  • Gen IV Investment Opportunities LLC and VEGA Asset Partners LLC
    • Legal: White & Case LLP (Thomas Lauria, Michael Shepherd) & (local) Gray Reed & McGraw (Jason Brookner)
  • Bluescape Resources Company LLC
    • Legal: Bracewell LLP (Kurt Mayr, David Lawton, Jason Cohen)
  • Official Committee of Unsecured Creditors
    • Legal: Brown Rudnick LLP (Robert Stark, Kenneth Aulet, Sigmund Wissner-Gross, Gerard Cicero, Steven Levine) & (local) Jackson Walker LLP (Patricia Tomasco, Matthew Cavenaugh)
    • Financial Advisor: FTI Consulting Inc. (Andrew Scruton)
    • Investment Bank: Intrepid Partners LLC (Matthew Hart)

Updated 4/1/18 at 12:13 CT

New Chapter 11 Bankruptcy - Herald Media Holdings Inc.

Herald Media Holdings Inc.

• 12/8/17 Recap: Boston-based 170-year old legacy print news media company that owns and publishes (i) the Boston Herald and (ii) the bostonherald.com digital media site has filed for bankruptcy to effectuate an expedited 363 sale to Gatehouse Media Massachusetts I, Inc for "an all-in value of not less than $5,000,000." In a sign of the times known to literally everyone, the Company notes in its filing that "there has been an increase in news source and advertising alternatives that has continued to erode traditional print media sources of revenue. Incremental digital revenue has not been sufficient to offset the decline in print revenue." Interestingly - given that there is a lot of discussion today about the state of media and the push-pull of advertising dollars vs. subscription revenue - the company derives approximately 67% of its revenue from paid circulation (single copy sales and subscription sales) and approximately 33% from print and online advertising. Nevertheless, the company's projections reflect a nearly $3mm loss for fiscal year 2018. In an effort to combat declining revenues, the Company pursued cost-cutting initiatives (e.g., headcount reductions, outsourcing, etc.,) but no more levers remained available to pull. Indeed, "[g]iven the general economic climate for the newspaper industry and the company’s significant pension and retirement liabilities, no financing options are available for the company to continue with its current capital structure." Note that the company's top list of creditors reflects various unions under four different collective bargaining agreements (CBAs): those fixed costs aren't easy to shed outside of bankruptcy. Employee-related expenses including payroll, benefits and pension/retirement contributions account for 58% of operating expenses while production and distribution of the paper accounts for 23% of total operating expenses. Looking at those numbers, it becomes pretty obvious why this business became unsustainable. Notably, the propose sale is conditioned upon the Company rejecting all CBAs in bankruptcy so that the asset transfer is free and clear of those obligations. Gatehouse is offering a $500k DIP credit facility to fund the administration of the case.
• Jurisdiction: D. of Delaware (Judge Silverstein) 
• Company Professionals:
  • Legal: Brown Rudnick LLP (William Baldiga, Sunni Belville, Tristan Axelrod) & (local) Morris Nichols Arsht & Tunnell LLP (Curtis Miller, Tamara Minott, Jose Bibiloni)
  • Investment Banker: Dirks Van Essen & Murray
  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
• Other Parties in Interest:

Updated 12/9/17 10:20 am CT

New Chapter 11 Filing - TerraVia Holdings Inc.

TerraVia Holdings Inc.

• 8/1/17 Recap: TerraVia, a publicly-traded (Nasdaq: $TVIA) "next-generation" algae-based food company based out of San Francisco filed for bankruptcy. The company has a stalking horse bidder lined up to buy it for $20mm plus certain assumed liabilities and seeks to jam this case through bankruptcy in about 6 weeks lest it run out liquidity in the process (even with a proposed $10mm DIP); it claims that more time is unnecessary given that it ran a robust marketing process pre-filing that included outreach to over 100 parties. We'll let the company economics do the rest of the talking (see below).
• Jurisdiction: (Judge Sontchi)
• Capital Structure: $144.2mm 5% '19 convertible senior subordinated notes (GLAS Trust Company LLC) & $33.475mm 6% '18 convertible senior subordinated notes (Wilmington Trust)   
• Company Professionals:
  • Legal: Davis Polk & Wardwell LLP (Damian Schaible, Steven Szanzer, Adam Shpeen, Benjamin Kaminetzky) & (local) Richards Layton & Finger P.A. (Mark Collins, Amanda Steele)
  • Financial Advisor: 
  • Investment Banker: Rothschild & Co. (Tero Janne)
  • Claims Agent: KCC (*click on company name above for free docket access)
• Other Parties in Interest:
  • DIP Agent: Wilmington Savings Fund Society FSB & Ad Hoc Consortium of Holders of Convertible Senior Subordinated Debt (Gilead Capital LP, Higher Ground SICAV PLC Core Wealth Fund, Lazard Asset Management LLC, Passport Capital LLC, Wolverine Asset Management LLC, Zazove Associates LLC)
    • Legal: Brown Rudnick LLP (Robert Stark, Steven Levine, Brian Rice, Kellie Fisher) & (local) Ashby & Geddes P.A. (William Bowden, Gregory Taylor, Katharina Earle)
    • Financial Advisor: GLC Advisors & Co. LLC
  • Passport Capital
    • Legal: Shearman & Sterling LLP (Joel Moss) & (local) Drinker Biddle & Reath LLP (Patrick Jackson)
  • 6% Notes Successor Trustee: Wilmington Trust NA
    • Legal: Katten Muchin Rosenman LLP (Craig Barbarosh, Karen Dine, Jerry Hall) & (local) Morris James LLP (Eric Monzo)
  • JV Partner: Bunge Global Innovation LLC
    • Legal: Jones Day (Joshua Morse)
  • Silicon Valley Bank
    • Legal: Troutman Sanders LLP (Harris Winsberg, Stephen Roach) & (local) Chipman Brown Cicero & Cole LLP (William Chipman Jr., Mark Olivere)
  • Corbion NV
    • Legal: Baker & McKenzie LLP (Debra Dandeneau, Frank Grese) & (local) Whiteford Taylor & Preston LLC (L. Katherine Good, Aaron Stulman)

Updated 8/26/17

First Day Declaration.

New Chapter 11 Filing - Tidewater Inc.

Tidewater Inc.

• 5/17/17 Recap: First Gulfmark Offshore Inc., now Tidewater: the offshore shakeout is finally upon us. The New Orleans-based publicly-traded offshore operator filed for bankruptcy to effectuate an expedited 6-week prepackaged financial restructuring of the company. This story is so cliche at this point: leverage is high, oil prices are low, E&P activity is down, natural gas is up, liquidity is constrained. Cue Weil and a slew of other restructuring professionals. File bankruptcy. 
• Jurisdiction: D. of Delaware (Shannon)
• Capital Structure: $1.95b funded debt. $300mm TL (DNB Bank ASA) & $600mm RCF (BofA), $1.15b unsecured notes, tons of of guarantees and nonsense.    
• Company Professionals:
  • Legal: Weil (Ray Schrock, Jill Frizzley, Alfredo Perez, Christopher Lopez, Yvanna Custodio, Andriana Georgallas) & (local) Richards Layton & Finger PA (Daniel DeFranceschi, Zachary Shapiro, Christopher De Lillo)
  • Financial Advisor: AlixPartners LLC (David Johnston, Richard Robbins, Jim Trankina, Bruce Smathers)
  • Investment Banker: Lazard (Timothy Pohl)
  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name for free docket)
• Other Parties in Interest:
  • Independent Directors of the Board
    • Legal: Andrews Kurth Kenyon LLP (Robin Russell, Timothy Davidson)
  • Term Loan Agent: DNB Bank
    • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Tyson Lomazow) & (local) Klehr Harrison Harvey Branzburg LLP (Domenic Pacitti)
  • Credit Agreement Agent: Bank of America
    • Legal: Morgan Lewis & Bockius LLP (Amy Kyle, Edwin Smith, Joshua Dorchak, Matthew Ziegler) & (local) Morris Nichols Arsht & Tunnell LLP (Derek Abbott)
  • Unofficial Noteholder Committee
    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Alan Kornberg, Brian Hermann, Sean Mitchell, Kellie Cairns) & (local) Blank Rome LLP (Stanley Tarr, Rick Antonoff, Barry Seidel)
  • Official Committee of Unsecured Creditors
    • Legal: Whiteford Taylor & Preston LLC
    • Financial Advisor: Berkeley Research Group LLC (Christopher Kearns, Mark Shankweiler, Rick Wright, Jeffrey Dunn, Carolyn Passaro)
  • Official Committee of Equity Holders
    • Legal: Brown Rudnick LLP (Howard Steel, Brandon Burkart, Jeffrey Jonas, Steven Pohl) & (local) Saul Ewing LLP (Mark Minuti, Sharon Levine)
    • Financial Advisor: Miller Buckfire & Co. LLC (Matthew Rodrigue) & Stifel Nicolaus & Co. Inc.
  • Post Reorg Board of Directors (Dick Fagerstal, Steven Newman, Larry Rigdon, Randee Day, Alan Carr, Thomas Robert Bates Jr.)

Updated 7/12/17 9:07 am CT

New Chapter 11 Filing - Chellino Crane Inc.

Chellino Crane Inc.

• 5/5/17 Recap: Illinois-based heavy crane operating company that services refineries, power and chemical plants filed for bankruptcy under the weight of its outstanding debt on equipment and union obligations. The downturn in the oil and gas industry, unfortunately, led to projected revenue misses and a liquidity crisis. The filing is meant to address the capital structure and equipment footprint.
• Jurisdiction: N.D. of Illinois
• Capital Structure: $51.6mm secured debt (First Midwest)    
• Company Professionals:
  • Legal: Sugar Felsenthal Grals & Hammer LLP (Jonathan Friedland, Elizabeth Vandesteeg, Jack O'Connor, Nicole Stefanelli, Leland Chait)
  • Financial Advisor: Conway MacKenzie Inc. (Jeffrey Zappone, J. Kotas, J. Marek)
  • Investment Banker: FocalPoint Securities LLC (Michael Fixler, Bryant Yu, Clinton Miyazono, Patrick Shin)
  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Prepetition Lender & DIP Lender: First Midwest
    • Legal: Foley & Lardner LLP (Mark Prager)
  • Official Committee of Unsecured Creditors
    • Legal: Brown Rudnick LLP (Gerard Cicero, Bennett Silverberg) & (local) Freeborn & Peters LLP (Shelly DeRousse, Devon Eggert, Elizabeth Janczak)
    • Financial Advisor: Emerald Capital Advisors (John Madden, Christopher Saitta)

Updated 8/26/17

New Chapter 11 Filing - Sungevity Inc.

Sungevity Inc.

• 3/13/17 Recap: Oakland California-based designer of residential and commercial solar energy systems in the US, UK and Europe filed for bankruptcy after a failed merger and an inability to service its capital structure. Large equity holders include Apollo Investment Corporation and Lowe's Corporation. The company secured a $20mm DIP facility to pursue a sale to a stalking horse bidder. 
• 4/17/17 Update: The company received no competitive qualified bids and, therefore, sought approval of the sale to the stalking horse bidder.
• Jurisdiction: D. of Delaware
• Capital Structure: $145.6mm of funded debt (Hercules Capital Inc. - $55mm, MMA Energy Capital LLC - $10mm, MHA Trust LLC - $5mm, Wilmington Savings Fund Society - $9.5mm bridge loan, Atalaya Special Opportunities Fund VI LP - $32mm, $34.1mm convertible notes     
• Company Professionals:
  • Legal: Morrison & Foerster LLP (Jonathan Levine, Jennifer Marines, Melissa Hager, Erica Richards, Todd Goren, Rahman Connelly, Andrew Kissner, Stacy Molison) & (local) Young Conaway Stargatt & Taylor LLP (M. Blake Cleary, Jamie Lutonn Chapman, Kenneth Listak)
  • Financial Advisor: AlixPartners LLC (Randall Eisenberg, Stephen Spitzer, James Guglielmo, Raju Patel, Allen Wong)
  • Investment Banker: Ducera Securities LLC (Joshua Scherer) & Greentech Capital Advisors (Michael Horwitz)
  • Claims Agent: KCC (*click on company name for docket)
• Other Parties in Interest:
  • DIP Lender & Stalking Horse Bidder: LSHC Solar Holdings LLC (JV between Northern Pacific Group and Hercules Capital Inc.)
    • Legal: Kirkland & Ellis LLP (Brad Weiland, Christine Pirro) & (local) Klehr Harrison Harvey Branzburg LLP (Domenic Pacitti)
  • Hercules Capital Inc.
    • Legal: Cole Schotz P.C. (Stuart Komrower, Katharina Earle)
  • Second Lien Lender: MMA Energy Capital LLC
    • Legal: Baker & McKenzie LLP (Debra Dandeneau, Jacob Kaplan) & (local) Richards Layton & Finger PA (Paul Heath, Zachary Shapiro)
  • Lowe's Corporation
    • Legal: Hunton & Williams LLP (Gregory Hesse, Nicole Collins)
  • Verengo Inc. (also in Chapter 11)
    • Legal: Bayard PA (Scott Cousins, Evan Miller)
  • Eastern Sun Capital Partners LLC 
    • Legal: Goodwin Proctor LLP (Kizzy Jarashow, David Koch) & (local) Whiteford Taylor & Preston LLP (Christopher Samis, L. Katherine Good)
  • Official Committee of Unsecured Creditors
    • Legal: Brown Rudnick LLP (Steven Pohl, Sunni Beville, Christopher Floyd, Tristan Axelrod, Fouad Kurdi) & (local) Morris James LLP (Jeffrey Waxman, Eric Monzo)
    • Financial Advisor: Goldin Associates LLC (Gary Polkowitz)

Updated 5/31/17

New Chapter 11 Filing - Azure Midstream Partners LP

Azure Midstream Partners LP

• 1/30/17 Recap: Spurned on by the potential riches guaranteed by $105 crude oil and $3.68 natural gas, Azure Midstream Partners - a master limited partnership headquartered in Dallas - invested heavily in natural gas pipeline in 2015, incurring hundreds of millions of debt to fund the expansion. Shortly thereafter, oil sank to $26 and natural gas to $1.62. With the industry in turmoil, capex budgets contracted considerably and the company’s largest contract counterparties terminated or lapsed contracts (including Anadarko Petroleum Corporation), materially reducing EBITDA and triggering covenant defaults. Now, the company seeks to sell its assets in bankruptcy and liquidate the rest. Discussions with a stalking horse bidder hadn’t been finalized at the time of filing.
• Capital Structure: $175mm debt (Wells Fargo Bank NA)     
• Company Professionals:
  • Legal: Weil (Gary Holtzer, Robert Lemons, Charles Persons, Chris Lopez, Katherine Doorley, David Zubkis) & Vinson & Elkins LLP (Bradley Foxman)
  • Financial Advisor: Alvarez & Marsal LLC (Ed Mosley)
  • Investment Banker: Evercore Group LLC (Stephen Hannon)
  • Claims Agent: KCC (*click on company name for docket)
• Other Parties in Interest:
  • Wells Fargo Bank
    • Legal: Baker & McKenzie (James Donnell, Peter Goodman, Frank Grese)
    • Financial Advisor: RPA Advisors
  • M5 Midstream LLC
    • Locke Lorde LLP (Elizabeth Guffy)
  • Official Equity Committee (Wampanoag Capital LLC)
    • Legal: Brown Rudnick LLP (Howard Steel)

Updated 5/2/17

New Filing: Bonanza Creek Energy Inc.

Bonanza Creek Energy Inc.

• 1/4/17 Recap: The company filed a prepackaged bankruptcy to eliminate $850mm of debt from its balance sheet and infuse the company with $200mm of new equity.
• Jurisdiction: D. of Delaware
• Capital Structure: $475mm '17 1.5-2.5% RCF (Key Bank), $500mm '21 6.75% senior unsecured notes, $300mm '23 5.75% senior unsecured notes (Delaware Trust Company).      
• Company Professionals:
  • Legal: Davis Polk & Wardwell LLP (Marshall Huebner, Brian Resnick, Elliot Moskowitz, Adam Shpeen, Lara Samet Buchwald) & (local) Richards Layton & Finger PA (Mark Collins, Amanda Steele, Brendan Schlauch)
  • Financial Advisor: Alvarez & Marsal LLC (Seth Bullock)
  • Investment Banker: Perella Weinberg Partners (Kevin Cofsky, Jacob Czarnick)
  • Claims Agent: Prime Clerk LLC (*click name above for docket link)
• Other Parties in Interest:
  • RBL Agent: Key Bank
    • Legal: Bracewell LLP (Trey Wood, Jennifer Feldshur, Dewey Gonsoulin)
  • Ad Hoc Committee of Noteholders (Apollo Energy Opportunity Mgmt, Continental Casualty, Credit Suisse Asset Mgmt, DE Shaw Galvanic Portfolios, Gen IV Investment Opportunities LLC, Lord Abbett & Co., Luxor Capital Group LP, Mangrove Partners, Nomura Corporate Research & Asset Mgmt, Oaktree Capital Management LP, Paloma Partners Management Company, Par-Four Investment Management LLC, Perry Creek Capital Fund I, Socratic Fund Management LP, Whitebox Advisors). Added subsequent to the case filing (Aristeia Capital LLC, Barclays Bank PLC, Continental Casualty Company, Venor Capital Management LP, Wells Fargo Securities LLC); Subtracted subsequent to the case filing (Credit Suisse Asset Mgmt).
    • Legal: Kirkland & Ellis LLP (Edward Sassower, Steven Serajeddini, John Luze, Stephen Schwarzbach Jr.) & (local) Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, Peter Keane)
    • Investment Bank: Evercore
  • Ad Hoc Committee of Equity Security Holders (Fir Tree Inc., HHC Primary Fund, CVI Opportunities Fund I, Silver Point Capital, MatlinPatterson Global Opportunities Master Fund)
    • Legal: Brown Rudnick LLP (Edward Weisfelner, Bennett Silverberg, D. Cameron Moxley) & (local) Chipman Brown Cicero & Cole LLP (William Chipman Jr.)
    • Financial Advisor: Miller Buckfire & Co. (Richard Klein, Matthew Rodrigue)
  • Delaware Trust Company (as successor trustee to Wells Fargo)
    • Legal: Haynes and Boone LLP (Charles Beckham Jr., Keith Sambur) & (local) The Rosner Law Group LLC (Frederick Rosner, Scott Leonhardt)
  • Silo Energy LLC
    • Legal: Arent Fox LLP (George Angelich, Jackson Toof, Andrew Silfen) & (local) Polsinelli PC (Justin Edelson)
  • Senior Unsecured Noteholders: GMO Credit Opportunities Fund LP and Global Credit Advisors LLC
    • Legal: Ropes & Gray LLP (D. Ross Martin, Andrew Devore) & (local) Pepper Hamilton LLP (David Stratton)

Updated 4/2/17

New Filing - Violin Memory Inc.

Violin Memory Inc.

• 12/14/16 Recap: Marc Andreeson of A16Z once famously said that software would eat the world. Case and point: Violin Memory Inc. The publicly-traded Santa Clara California-based flash-drive hardware and (only recently) software services provider files for bankruptcy after software providers cannibalized its product, two failed attempts to sell the company, and a failed attempt to secure DIP financing. The objective of the filing is a "value-maximizing sale" of the assets: hey, its three strikes and you're out, not two. 
• Jurisdiction: D. of Delaware
• Capital Structure: $10mm '17 5% RCF (Silicon Valley Bank - terminated as of petition date), $120mm '19 4.25% convertible notes (Wilmington Trust)
• Company Professionals:
  • Legal: Pillsbury & Winthrop LLP (Deryck Palmer, David Forsh, Cecily Dumas) & (local) Bayard PA (Scott Cousins, Justin Alberto, Gregory Flasser)
  • Financial Advisor & Investment Banker: Houlihan Lokey [(Andrew Turnbull, Ryan Sandahl, Randall Tatman, Angus Schaller, Brendan Wolf, Derek Kuns)
  • Claims Agent: Prime Clerk LLC (*click on company name for docket)
• Other Parties in Interest:
  • Ad Hoc Group of Convertible Noteholders (Jefferies Group LLC, Nokota Management LP, Pine River Capital Management LP, Silverback Asset Management LLC, Soros Fund Management LLC)
    • Legal: Weil (Gary Holtzer, David Griffiths)
  • Wilmington Trust
    • Legal: Brown Rudnick LLP (Daniel Saval) & (local) Drinker Biddle & Reath LLP (Steven Kortanek)
  • Unsecured Creditors' Committee
    • Legal: Cooley LLP (Lauren Reichardt, Robert Winning, Jay Indyke, Eric Haber, Michael Klein) & (local) Elliott Greenleaf PC (Eric Sutty, Rafael Zahralddin-Aravena)
    • Financial Advisor: The DAK Group (Sheon Karol, Ari Fuchs, Claudia Levine)

Updated 3/21/17