💊 New Chapter 11 Bankruptcy Filing - Proteus Digital Health Inc.💊

Proteus Digital Health Inc.

June 15, 2020

In a week chock full of chapter 11 bankruptcy filings, in our opinion, the filing of California-based medtech company Proteus Digital Health Inc. is the most interesting and unique. Sure Extraction Oil & Gas ($XOG) is a publicly-traded oil and gas exploration and production company but, aside from the fact that it operates primarily in Colorado rather than Texas or Oklahoma, there’s nothing particularly fresh or interesting about it. We get it already: oil and gas is f*cked.

In contrast (and with apologies for the long block quote), when’s the last time you read about a chapter 11 debtor that does this:

The Debtor is a pioneer and leader of the “Digital Medicines” industry. “Digital Medicines” are oral pharmaceuticals formulated with an ingestible sensor aimed at tracking a patient’s adherence to prescribed medication treatments. When patients use Digital Medicines, their mobile devices collect information about medication taken and safely transmit the data via the cloud to the healthcare provider. Care teams are able to see if their patients are properly taking their medication and observe and analyze real-time data regarding the patient’s overall health such as heart rate, activity and rest. Digital Medicines enable care teams to manage larger patient populations and make medical decisions without the need for a patient to physically travel to the doctor’s office. Digital Medicines can help accelerate the trend toward conducting medical consultations over the internet. This opportunity is especially pronounced in rural areas and developing economies both domestically and internationally, particularly in light of challenges posed by the COVID-19 pandemic and resulting social distancing measures.

That’s like some Minority Report sh*t right there. Founded in 2002, the debtor has spent the better part of two decades developing its tech, testing its tech, commencing clinical trials, obtaining FDA approval of its drug-device combination product, entering into a marketing and distribution relationship with Otsuka Pharmaceutical Co. Ltd. ($OTSKY)(which it later expanded the scope of), and agreeing to a multi-year outcomes-based initiative with the State of Tennessee’s Medicaid program with a focus on hepatitis C treatment of underserved populations. The company currently “…has a panel of more than 20 Digital Medicines that treat cardiovascular and metabolic diseases including hypertension and diabetes being prescribed to patients in the United States.” Its patent portfolio is 400 strong.

On the flip side, the company is currently “pre-revenue.” And as you can imagine, accomplishing all of the above required a significant amount of upfront capital. There’s a reason why this company raised venture capital all the way through a Series H round: $461.5mm, actually, according to Angelist, with the last round of $50mm taking place in April 2016. The company’s cap table includes, among many others, The Carlyle Group ($CG)(Series B & C rounds), Medtronic PLC ($MDT)(Series D round), Novartis Pharma AG ($NVS)(Series E & F rounds), and PepsiCo Inc. ($PEP)(Series G round). The company also has a $9.5mm pre-petition credit facility.

In late 2019, the company experienced a severe liquidity crisis due, in part, to complications arising out of the expanded collaboration agreement with Otsuka. The debtor nearly wiggled its way out of trouble; it negotiated a synchronized deal with Otsuka and its prepetition lender that would coordinate (a) payments in from Otsuka and (b) payments out to the lender and (c) let the company get back to business as usual and buy it some time to source additional financing. But then COVID-19 struck and the company again found itself in a position where it wouldn’t be possible to live up to its obligations — in this case, a $7.75mm repayment to its pre-petition lender on or before April 30. This thing is like whack-a-mole.

The company spent April and May trying to negotiate itself out of its quagmire and hired Raymond James & Associates Inc. ($RJF) as investment banker to pursue a marketing and sale process. The company entered into a series of agreements with Otsuka and its lender to stem the tide but, ultimately, the shot clock ran out:

In light of all of these circumstances, and after having explored multiple options and carefully considering the alternatives, the Board, in consultation with managements and the Debtor’s advisors, made the difficult decision to file for chapter 11 protection in order to preserve the Debtor’s assets and conduct a sale process or other transaction, all in an effort to maintain continuity of business operations (including the Debtor's TennCare initiative) and maximize going concern value for the benefit of the Debtor’s creditors and equity stakeholders. The Debtor anticipates that it will seek approval of appropriate bidding and sale procedures in the early weeks of the Chapter 11 Case.

The pre-petition lender has consented to the use of its cash collateral to fund the case. Now we’ll see if there are any buyers out there who are as impressed with the premise of Digital Medicines as we are.*

*Full disclosure, we’re going purely off of what the debtor describes and have no medical knowledge whatsoever to opine on the efficacy of such initiatives. Sure sounds cool AF though.

• Jurisdiction: D. of Delaware (Judge Shannon)

• Capital Structure: $9.5mm secured debt (OrbiMed Royalty Opportunities II LP)

• Professionals:

  • Legal: Goodwin Procter LL (Nathan Schultz, Barry Bazian, Aretm Skorostensky) & Potter Anderson & Corroon LLP (L. Katherine Good, Aaron Stulman)

  • Financial Advisor/CRO: SierraConstellation Partners LLC (Lawrence Perkins)

  • Board of Directors: Shumeet Banerji, Regina Benjamin, Robert Epstein, Frank Fischer, Alan Levy, Ryan Schwarz, Joseph Swedish, Jonathan Symonds, Immanuel Thangaraj, Andrew Thompson

  • Investment Banker: Raymond James & Associates

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

• Other Parties in Interest:

  • Prepetition Lender: OrbiMed Royalty Opportunities II LP

  • Large Series A Preferred Equityholder: Spring Ridge Ventures I LP

  • Large Series B Preferred Equityholders: Carlyle Venture Partners II LP, Adams Street V LP, BVCF IV LP

New Chapter 11 Bankruptcy Filing - FULLBEAUTY Brands Holdings Corp.

FULLBEAUTY Brands Holdings Corp.

February 3, 2019

We’re going to regurgitate our report about FULLBEAUTY Brands Holdings Corp. from January 6th after the company publicly posted its proposed plan of reorganization and disclosure statement and issued a press release about its proposed restructuring. What follows is what we wrote then:

---

FULLBEAUTY Brands Inc., an Apax Partners’ disaster…uh, “investment”…will, despite earlier reports of an out-of-court resolution to the contrary, be filing for bankruptcy after all in what appears to be either a late January or an early February filing after the company completes its prepackaged solicitation of creditors. Back in May in “Plus-Size Beauty is a Plus-Size Sh*tfest (Short Apax Partners’ Fashion Sense),” we wrote:

Here’s some free advice to our friends at Apax Partners: hire some millennials. And some women. When you have 23 partners worldwide and only 1 of them is a woman (in Tel Aviv, of all places), it’s no wonder that certain women’s apparel investments are going sideways. Fresh off of the bankruptcies of Answers.com and rue21, another recent leveraged buyout by the private equity firm is looking a bit bloated: NY-based FullBeauty Brands, a plus-size direct-to-consumer e-commerce and catalogue play with a portfolio of six brands (Woman Within, Roamans, Jessica London, Brylane Home, BC Outlet, Swimsuits for All, and Eilos).

Wait. Hold up. Direct-to-consumer? Check. E-commerce? Check. Isn’t that, like, all the rage right now? Yes, unless you’re levered to the hilt and have a relatively scant social media presence. Check and check.

Per a press release on Thursday, the company has an agreement with nearly all of its first-lien-last out lenders, first lien lenders, second lien lenders and equity sponsors on a deleveraging transaction that will shed $900mm of debt from the company’s balance sheet. It also has a commitment for $30mm in new liquidity in the form of a new money term loan with existing lenders. Per Bloomberg:

About 87.5 percent of the common reorganized equity would go to first-lien lenders, 10 percent to second liens, and 2.5 percent to the sponsor, according to people with knowledge of the plan who weren’t authorized to speak publicly.

Which, in English, means that Oaktree Capital Group LLC, Goldman Sachs Group Inc., and Voya Financial Inc. will end up owning this retailer. Your plus-sized clothing, powered by hedge funds. Apax and Charlesbank Capital, the other PE sponsor, stand to maintain 2.5% of the equity which, from our vantage point, appears rather generous (PETITION Note: there must be a decent amount of cross-holdings between the first lien and second lien debt for that to be the case). Here is the difference in capital structure:

What’s the story here? Simply put, it’s just another retail with far too much leverage in this retail environment.

Of course, there’s the obligatory product strategy, inventory control, and e-commerce excuses as well. Not to mention…wait for it…Amazon Inc ($AMZN)!

“In addition to these operational hurdles, FullBeauty has also faced competition from online retail giant Amazon, Inc. and retail chains, including Walmart Inc. and Kohl’s Corporation, that have recently entered the plus-size clothing space.”

Kirkland & Ellis LLP, PJT Partners ($PJT) and AlixPartners represent the company.

---

We give bankruptcy professionals grief all of the time for what often appears to be fee extraction in various cases. In our view, there have been some pretty egregious examples of inefficiency in the system and, considering a number of our readers are management teams of distressed companies, we feel it’s imperative that we cure for a blatant information dislocation and help educate the masses. This, though, appears to be an extraordinary case. In the other direction.

The company’s professionals here propose to confirm the company’s plan of reorganization at the first day hearing of the case. As Bloomberg noted on Monday, this would “set a new record for emerging from court protection in under 24 hours.” Bloomberg reports:

The previous record for the fastest Chapter 11 process is held by Blue Bird Body Co., which exited bankruptcy in 2006 in less than two days. Fullbeauty and its advisers aim to beat that mark.

“We structured this deal as if bankruptcy never happened for our trade creditors, vendors and employees to avoid further disruption to the company,” attorney Jon Henes at Kirkland & Ellis, the company’s legal counsel, said in an interview. “In this situation, every day in court is another day of costs without any corresponding benefit.”

In fact, this case would be so quick that, as you read this (on Wednesday), Judge Drain may have already given the plan his blessing. This makes Roust Corporation Inc. (6 days) and Southcross Holdings (13 days) look like child’s play. For that reason — and that reason alone — we’ll forgive the company’s professionals for their blatant victory lap: it’s curious that Bloomberg had a completed interview ready to go at 9:26am on the morning of the company’s bankruptcy filing. Clearly Kirkland & Ellis LLP, PJT Partners LP ($PJT) and Houlihan Lokey Capital ($HL) want to milk this extraordinary result for all it’s worth. We can’t really blame them, truthfully. That is, unless and/or until the company violates the “Two Year Rule” a la Charlotte Russe.

Anyway, why so quick? Well, because they can: the entire capital structure is on board with the proposed plan and trade will ride through unimpaired and paid. All contracts will be assumed. There are no brick-and-mortar stores to deal with: this is a web and catalogue-based business. Like we said, this case is extraordinary. Per the Company:

It is in the best interest of the estates that the Debtors remain in bankruptcy for as short a time-period as possible. If FullBeauty is forced to remain in chapter 11 longer than necessary, it may be required to seek debtor in possession financing, which would cost the Debtors unnecessary bank fees and professional expenses. In addition, although January has been relatively smooth in terms of vendor outreach, FullBeauty expects that trade could contract very quickly if the company remains in chapter 11 longer than necessary—particularly because many vendors are in foreign jurisdictions and they do not understand the nuances of prepackaged cases versus longer prearranged or traditional chapter 11 cases. Every day that FullBeauty remains in chapter 11 results in cash spent that could go to developing the business.

Indeed, for once, it appears that the best interests of the debtor company were, indeed, heeded.*

*Which is not to say that we believe the out-of-court bills will be light.

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

• Capital Structure: $mm debt     

• Company Professionals:

  • Legal: Kirkland & Ellis LLP (Jonathan Henes, Emily Geier, George Klidonas, Rebecca Blake Chaikin, Nicole Greenblatt)

  • Independent Director: Mohsin Meghji

  • Financial Advisor: AlixPartners LLC

  • Investment Banker: PJT Partners LP (Jamie Baird)

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

• Other Parties in Interest:

  • Financial Sponsor (69.6%): Apax Partners LLP

    • Legal: Simpson Thatcher & Bartlett LLP (Elisha Graff, Nicholas Baker)

  • Financial Sponsor (26.4%): Charlesbank Capital Partners LLC

    • Legal: Goodwin Proctor LLP (William Weintraub, Joseph Bernardi Jr.)

  • ABL Agent & FILO Agent: JPMorgan Chase Bank NA

    • Legal: Davis Polk & Wardwell LLP (Darren Klein, Aryeh Falk)

  • First Lien Agent & Second Lien Agent: Wilmington Trust NA

    • Legal: Shipman & Goodman LLP (Nathan Plotkin, Eric Goldstein, Marie Pollio)

  • Ad Hoc Group of First Lien Term Loan Lenders

    • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Gerard Uzzi, Nelly Almeida)

    • Financial Advisor: Ducera Partners

  • Ad Hoc Group of Second Lien Term Loan Lenders

    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Paul Basta, Elizabeth McColm, Christopher Hopkins)

    • Financial Advisor: Houlihan Lokey Capital Inc. (Saul Burian)

Updated 2/4/19 at 7:03 CT

New Chapter 11 Filing - The Rockport Company LLC

The Rockport Company LLC

5/14/18

The Rockport Company LLC, a Massachusetts-based designer, distributor and retailer of comfort footwear has filed for bankruptcy — the latest in a string of footwear retailers that has found its way into chapter 11. Payless Shoesource, Sheikh Shoes, and Nine West Holdings are other recent filings. The current owners of the business — its prepetition lenders — purchased the business from Berkshire Partners LLC and New Balance Holding Inc. in 2017. 

The company operates in what it dubs a “highly competitive” business where “[a]t various times of the year, department store chains, specialty shops, and online retailers offer brand-name merchandise at substantial markdowns which further intensifies the competitive nature of the industry.” The company has (i) a robust wholesale business (57% of all its global sales), (ii) a direct retail business (eight (8) full-price and nineteen (19) outlet stores in the United States and fourteen (14) full-price and nineteen (19) outlet stores in Canada), (iii) e-commerce, and (iv) an international distribution segment. 

This business has suffered from (a) operational challenges (a costly and time consuming separation from the Adidas Networks, with which the company's operations were deeply integrated until late 2017), (b) other negative externalities (i.e., the closure of three supply factories, contract disputes with warehousemen, and (c) the burdens of its brick-and-mortar footprint. The company notes, "[o]ver the last several years the Debtors have faced a highly promotional and competitive retail environment, underscored by a shift in customer preference for online shopping." And it notes further, "[t]he unfavorable performance of the Acquired Stores in the current retail environment has made it difficult for the Debtors to maintain sufficient liquidity and to operate their business outside of Chapter 11."

In light of this, armed with a $20 million new-money DIP credit facility (exclusive of rollup amounts) extended by its prepetition ABL lenders, the company has filed for bankruptcy to consummate a stalking horse-backed asset purchase agreement with CB Marathon Opco, LLC an affiliate of Charlesbank Equity Fund IX, Limited Partnership for the sale of the company's assets - OTHER THAN its North American assets — for, among other things, $150 million in cash. The buyer has a 25-day option to continue considering whether to purchase the North American assets but the company does "not expect there to be any significant interest in the North American Retail Assets." Read: the stores. The company, therefore, also filed a "store closing motion" so that it can expeditiously move to shutter its brick-and-mortar footprint at the expiration of the option. Ah, retail. 

• Jurisdiction: D. of Delaware 
• Capital Structure: $57mm prepetition ABL Facility (Citizens Business Capital), $188.3 million '22 prepetition senior secured notes, $11mm prepetition subordinated notes.  
• Company Professionals:
  • Legal: Richards Layton & Finger PA (Mark Collins, Michael J. Merchant, Amanda R. Steele, Brendan J. Schlauch, Megan E. Kenney)
  • Financial Advisor: Alvarez & Marsal Private Equity Services Operations Group, LLC (Paul Kosturos)
  • Investment Banker: Houlihan Lokey Inc.
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Prepetition Noteholders and DIP Note Purchasers
    • Legal: Debevoise & Plimpton LLP (My Chi To, Daniel Stroik) & (local) Pachulski Stang Ziehl & Jones LLP (Bradford Sandler, James O'Neill)
  • Collateral Agent and DIP Note Agent
    • Legal: Holland & Knight LLP (Joshua Spencer) & (local) Pachulski Stang Ziehl & Jones LLP (Bradford Sandler, James O'Neill)
  • ABL Administrative Agent and ABL DIP Agent: Citizens Business Capital
    • Legal: Riemer Braunstein LLP (Donald Rothman, Lon Singer, Jaime Rachel Koff, Jeremy Levesque) & (local) Ashby & Geddes PA (Gregory Taylor)
  • Stalking Horse Bidder: CB Marathon Opco, LLC an affiliate of Charlesbank Equity Fund IX, Limited Partnership
    • Legal: Goodwin Proctor LLP (Jon Herzog, Joseph Bernardi Jr.) & (local) Pepper Hamilton LLP (David Fournier, Evelyn Meltzer)

Updated 5/14/18 at 10:14 am

New Chapter 11 Filing - Videology Inc.

Videology Inc. 

5/10/18

In what could amount to a solid case study in #BustedTech and the up/down nature of entrepreneurship, Videology Inc., a Baltimore based software ad-tech company that generated $143.2 million in revenue in fiscal 2017 has filed for bankruptcy.

The company has two principal business lines: (i) legacy media sales, a demand side (advertisers) platform that Videology would leverage to procure ad inventory to sell to advertising agencies (the supply side); and (ii) its long-tail "core use case," which included "long term planning, management, and execution of a company's entire portfolio of advertising campaigns or advertising inventory with complex, overlapping targets, objections...across multiple delivery channels." We're going to pretend we understand what that means; we think it has something to do with assisting ad agencies target ads effectively. What we do understand is that revenue generation for the more lucrative "core use case" segment involved a long sales pipeline that didn't support timely enough revenues to offset the liquidity draining legacy segment. Ruh roh.

But let's take a step back. This company was founded in February 2007. It raised its $15.1 million Series A round of funding in July 2008, securing Valhalla Partners II as a lead investor. It then secured its $16.4 million Series B round in Q4 2009. Comcast Ventures LP was the lead investor. Thereafter it nailed down its $30.4 million Series C round in May 2011 with New Enterprise Associates 12. Finally, in June of 2013, the company closed its $68.2 million Series D round with Catalyst Investors QP III as lead. Lots of funding. No down rounds. Everything seems to be on the right track.

Except it wasn't. The legacy segment was bleeding cash as early as 2012. The company had to tap the venture debt market in July 2017 to refi-out its bank line of credit. It obtained a $40-45 million 8.5% asset-backed credit facility (secured against virtually everything, including IP) with Fast Pay Partners LLC as agent and Tennenbaum Capital Partners LLC ("TCP"), as documentation agent and investment manager. It also obtained a second $20 million 10% asset-backed "UK" credit facility with FPP Sandbox LLC and TCP, which was secured by the same collateral. Both loans came with exit fees, charge 3% default interest and the larger facility has a 3% end-of-term premium attached to it.

At the same time the company took out the venture debt, it issued $17.1 million of convertible notes from board members and existing major investors (elevating them in the cap table) AND raised an additional $4.7 million in a subsequent rights offering to smaller legacy investors. What do you think will happen to that money? We'll come back to that.

In Q3 2017, the company also sought to find a strategic buyer. It didn't. It then started doing what every distressed company does: it stretched payables while it tried to formulate an out-of-court solution -- in the form of a restructuring or a refinancing. Certain vendors became skittish and withheld payments to the company. The resultant cash squeeze precipitated the prepetition lenders issuance of a notice of default. Thanks to a cash control agreement, they then seized control of the main operating accounts and paid down amounts owing with the company's cash and accounts receivable. And, yes, they applied the default interest rate. This is why they say what they say about possession. Savage. Consequently nothing is due under the larger facility; over $11.2 million remains due on the UK facility. 

The company now has a potential buyer, Amobee Inc., and has filed for bankruptcy to effectuate a sale. The company hasn't yet filed papers indicating the sale price but The Wall Street Journal reports that the purchase price may be $45 million -- or 1/3 of '17 revenues. The WSJ also reports that the company has nailed down a $25 million DIP credit facility which will be used to pay down the UK facility and fund the cases. Presumably the sale price will pay off the DIP and the $20 million that remains will be left for unsecured creditor recoveries. Back of the envelope, that will be about a 25% recovery. 

As for the equity holders? In the absence of bumping up by way of the convertible note, they'll be wiped out. That's venture capital for you. The venture debt providers, however, did well. 

• Jurisdiction: D. of Delaware (Judge Shannon)

• Capital Structure: $11.2mm UK Loan Facility (FPP Sandbox LLC and Tennenbaum Capital Partners LLC), $17.1 million convertible promissory note.

• Company Professionals:
  • Legal: Cole Schotz PC (Irving Walker, Patrick Reilley)
  • Financial Advisor: Berkeley Research Group LLC
  • Claims Agent: Omni Management Group (*click on company name above for free docket access)
• Other Parties in Interest:
  • Prospective Buyer: Amobee Inc.
    • Legal: Goodwin Proctor LLP (Gregory Fox, Alessandra Simons) & (local) Womble Bond Dickinson (US) LLP (Matthew Ward, Morgan Patterson)
  • Secured Lenders: FastPay Partners LLC & FPP Sandbox LLC
    • Legal: Buchalter (William Brody, Ariel Berrios) & (local) Richards Layton & Finger PA (John Knight, Christopher De Lillo)
  • DIP Lender: Draper Lending LLC
    • Legal: Arent Fox LLP (Robert Hirsh, Jordana Renert) & (local) Bayard PA (Justin Alberto, Daniel Brogan)

New Chapter 11 Filing - 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 - Keystone Tube Company LLC (A.M. Castle & Co.)

Keystone Tube Company LLC (A.M. Castle & Co.)

• 6/18/17 Recap: Publicly-traded ($CASL) Illinois-based specialty metals distribution company with customers in some hard hit sectors of late, e.g., oil and gas, retail, mining, defense, filed a prepackaged bankruptcy case to de-lever its balance sheet. 
• Jurisdiction: D. of Delaware 
• Capital Structure: $112mm first lien debt (Cantor Fitzgerald Securities), $177mm
• 18 12.75% second lien notes (US Bank NA), $22.3mm '19 5.25% convertible third lien notes (US Bank NA)     
• Company Professionals:
  • Legal: Pachulski Stang Ziehl & Jones LLP (Richard Pachulski, Jeffrey Pomerantz, Maxim Litvak, John Lucas, Peter Keane)
  • Financial Advisor & Investment Banker: Imperial Capital LLC (Joseph Kazanovski)
  • Claims Agent: KCC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Ad Hoc Lender Committee (At Filing: Corre Partners Management LLC, Highbridge Capital Management LLC, SGF Inc., Pandora Select Partners LP, Whitebox Advisors LLC, Wolverine Asset Management Ltd.)
    • Legal (except SGF Inc.): Paul Weiss Rifkind Wharton & Garrison LLP (Andrew Rosenberg, Jacob Adlerstein, Michael Rudnick) & (local) Young Conaway Stargatt & Taylor LLP (Pauline Morgan, Joel Waite, Ian Bambrick)
    • Legal (SGF Inc): Goodwin Proctor LLP (Michael Goldstein, Gregory Fox) & (local) Pepper Hamilton LLP (David Fournier, John Schanne)
    • Financial Advisor: Ducera LLC
  • Prepetition First Lien Agent: Cantor Fitzgerald Securities
    • Legal: Shipman & Goodwin LLP
  • Prepetition Indenture Trustee: US Bank NA
    • Legal: Dorsey & Whitney LLP (Eric Lopez Schnabel, Robert Mallard, Alessandra Glorioso)
  • Administrative Agent: PNC Bank NA
    • Legal: Goldberg Kohn Ltd (Jacob Marshall, Danielle Juhle) & (local) Blank Rome LLP (Josef Mintz)
  • Bank of America NA
    • Legal: Morgan Lewis & Bockius LLP (Jody Barillare, Rachel Jaffe Mauceri)
  • Nantahala Capital Management
    • Legal: King & Spalding LLP (Arthur Steinberg) & (local) The Rosner Law Group LLC (Frederick Rosner)

Updated 7/11/17 6:22 pm

Source: First Day Declaration.

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