/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/210618.mbx T R O U B L E D C O M P A N Y R E P O R T E R Friday, June 18, 2021, Vol. 25, No. 168 Headlines 1011778 BC: Moody's Rates New $800MM First Lien Notes 'Ba2' 1362 H ST. DEVELOPMENT: Taps Capital Justice Attorneys as Counsel 4-S RANCH: Seeks to Hire Christopher E. Seymour as Special Counsel 49 BLEECKER: Manhattan Lease Already Terminated, Court Says ACADEMIR CHARTER SCHOOLS: Moody's Rates 2021A Education Bonds 'Ba2' ADARA ENTERPRISES: Court Approves Disclosures and Confirms Plan AHERN ENERGY: Case Summary & 7 Largest Unsecured Creditors ALISAL WATER: Fitch Affirms 'BB-' LongTerm IDR, Outlook Stable AMERICAN AIRLINES: Fitch Alters Outlook on 'B-' LT IDR to Stable AMERICAN MOBILITY: Seeks to Tap J.M. Cook as Bankruptcy Counsel AMERICAN MOBILITY: Seeks to Use Cash Collateral AMSTERDAM HOUSE: Taps Kurtzman Carson Consultants as Claims Agent API GROUP: Moody's Hikes CFR to 'Ba2', Rates New $300MM Notes 'B1' APOLLO COMMERCIAL: Moody's Rates New $400MM Sr. Secured Notes 'Ba2' ARCHKEY HOLDINGS: Moody's Assigns B2 CFR, Outlook Stable ARCHKEY HOLDINGS: S&P Assigns 'B' ICR, Outlook Stable ATOKA COUNTY HEALTHCARE: Pandemic Defers Survey, PCO Says AVALIGN HOLDINGS: Moody's Affirms B3 CFR & Alters Outlook to Stable AVATAR HOLDCO: S&P Affirms 'B-' ICR on Strong Recent Performance B & S DEVELOPMENT: Taps Vanecia Belser Kimbrow as Legal Counsel BETTEROADS ASPHALT: Court Confirms Plan BOUTIQUE NEVADA: Seeks to Use Cash Collateral BOUTIQUE NV: Case Summary & 11 Unsecured Creditors BRICK HOUSE: Seeks to Use Cash Collateral Thru Aug. 31 CB REAL ESTATE: Case Summary & 3 Unsecured Creditors CENGAGE LEARNING: Moody's Gives B2 Rating on New $1.25BB Term Loan CERTA DOSE: Seeks to Hire Ortiz & Ortiz as Bankruptcy Counsel CERTA DOSE: Seeks to Use Cash Collateral CHINA FISHERY: Burlington/Monarch Say Peru Plan Achieves Consensus CHOCTAW GENERATION: Fitch Affirms CCC on $59MM Series 2 Notes CHRISTIAN TEACHING: Seeks to Hire Charles Tyler Sr. as Counsel CINEMA SQUARE: Seeks Cash Collateral Access CIVITAS HEALTH: Electronic Health Record System Complete, PCO Says CLEANSPARK INC: Amer Tadayon Appointed President of Energy Division CLEANSPARK INC: Settles Dispute With Investor COLGATE ENERGY: Moody's Rates New $400MM Sr. Unsecured Notes 'B3' COMFORT AUTO: Southwest Reinsure Wins Default Judgment COMSTOCK RESOURCES: Fitch Rates Proposed 8.5-Yr. Unsec. Notes 'B+' COMSTOCK RESOURCES: Moody's Rates New $500MM Unsecured Notes 'B3' COMSTOCK RESOURCES: S&P Rates New Senior Unsecured Notes 'B' CONNECTIONS COMMUNITY: Seeks Pause of Methadone Tracking Suit COOPER TIRE: S&P Withdraws 'BB-' Issuer Credit Rating CRC INVESTMENTS: Wins Cash Collateral Access Thru July 8 CRED INC: Robert Stark Obtains Leave for Discharge as Examiner CRIMSONBIKES LLC: Bid to Use Cash Collateral Denied CRIMSONBIKES LLC: Seeks to Tap McCafferty & Company as Accountant DAEC HOME: Seeks to Hire Javier Villafuerte as Real Estate Broker DOUGLAS DYNAMICS: Moody's Withdraws B1 CFR on Debt Repayment DRAGONFLY GRAPHICS: Seeks to Tap Lisa Cohen as Bankruptcy Counsel DUKAT LLC: Case Summary & 20 Largest Unsecured Creditors EAB GLOBAL: Moody's Rates New First Lien Credit Facility 'B2' EAGLE RANCH: Unsecureds to be Paid on Monthly Basis EHT US1: Fee Examiner Taps Bielli & Klauder as Legal Counsel EIF CHANNELVIEW: S&P Raises ICR to 'BB+' on Material Debt Paydown ELEMENT SOLUTIONS: $400MM Loan Add-on No Impact on Moody's Ba2 CFR ELI & ALI: Wins Cash Collateral Access Thru July 2 EVERGREEN DEVELOPMENT: Seeks Cash Collateral Access Thru Sept 15 FIVE STAR: Engages Deloitte & Touche as Auditor FORCEPOINT: Deep Secure Deal No Impact on Moody's 'B3' CFR FORD CITY: Seeks Approval to Tap Golden Law as Legal Counsel FOREVER 21: Plan Funds Not Sufficient for Admin, Priority Claims FRANKLIN STREET: Moody's Assigns Ba1 CFR & Alters Outlook to Stable FRONTIER COMMUNICATIONS: Tsuei Appeal on Trustee Bid Ruling Nixed GARDA WORLD: S&P Alters Outlook to Stable, Affirms 'B' ICR GARRETT MOTION: S&P Assigns 'B+' ICR, Outlook Stable GARTNER INC: Moody's Rates New $500MM Unsecured Notes 'Ba3' GARTNER INC: S&P Rates New $500MM Senior Unsecured Notes 'BB+' GATEWAY FOUR: Unsecureds After Subcontractors in Trustee Plan GIBSON BRANDS: Moody's Assigns 'B2' CFR & Rates New $250M Loan 'B2' GIBSON BRANDS: S&P Assigns 'B-' ICR, Outlook Stable GINSBERG HOLDCO: S&P Raises ICR to 'B' on Steady Deleveraging GLOBALTRANZ ENTERPRISES: Moody's Reviews Caa1 CFR for Upgrade GNIRBES INC: Court Approves Disclosure Statement GRACEWAY SOUTH: Deborah Fish Named Ombudsman GRANITE US: S&P Raises Issuer Credit Rating to 'B', Outlook Stable GREAT AMERICAN: July 27 Hearing on Disclosure Statement GROSVENOR CAPITAL: S&P Alters Outlook to Neg., Affirms 'BB+' ICR GXO LOGISTICS: Moody's Assigns First Time 'Ba1' Corp Family Rating HANNON ARMSTRONG: S&P Rates $750MM Senior Unsecured Notes 'BB+' HASTINGS ESTATE: U.S. Trustee Unable to Appoint Committee HEADLESS HORSEMAN: Unsecureds to be Paid in Full Under Plan HENRY ANESTHESIA: Trustee Seeks Comfort Order on Debtor's Counsel HERMAN MILLER: Moody's Assigns Ba1 CFR on Knoll Inc Acquisition HILTON GRAND: S&P Assigns 'B-' Rating on New $425MM Notes HMONG EDUCATION: S&P Affirms 'BB+' Lease Revenue Bond Rating HUSCH & HUSCH: To File Amended Plan by June 22, Court Says ILLUMINATE MERGER: Moody's Assigns B2 CFR, Outlook Stable INGLES MARKETS: Moody's Rates New Senior Unsecured Notes 'Ba2' INGLES MARKETS: S&P Alters Outlook to Positive, Affirms 'BB' ICR ITT HOLDINGS: Moody's Assigns First Time 'B1' Corp. Family Rating JFAL HOLDING: Gets OK to Hire Weycer as Legal Counsel JS KALAMA: Gets Approval to Hire PDG Services as Broker KEYSER AVENUE: Seeks Cash Collateral Access KNEL ACQUISITION: S&P Upgrades ICR to 'B', Outlook Stable KNOTEL INC: CSC Global Subsidiary Proposed as Liquidating Trustee LEWISBERRY PARTNERS: U.S. Bank Opposes Interest Rate Cut LGI HOMES: Moody's Hikes CFR to Ba2 & Rates New $300MM Notes Ba2 LOST CAJUN: Taps Peak Franchise Capital as Financial Advisor LUXURY OUTER: Unsecureds to be Paid in Full in Plan MAGPUL INDUSTRIES: Moody's Assigns First Time 'B1' CFR MALLINCKRODT PLC: Public School Districts Oppose Plan Disclosures MALLINCKRODT PLC: Unsecureds to Get 0.8% to 34.1% in Plan MALLINCKRODT: Court Rejects Multiple Challenge to Ch.11 Disclosures MARCO ENTERPRISES: Seeks Continued Cash Collateral Access MAYBELLE BEVERLY: Seeks to Tap Ricky Juban as Commercial Appraiser MAYBERRY'S LLC: Seeks Cash Collateral Access MILK SPECIALTIES: Moody's Rates First Lien Loan Due 2025 'B2' MISSOURI JACK: Seeks to Use Cash Collateral Until Aug. 31 MY FL MANAGEMENT: Seeks to Tap Salpeter Gitkin as Special Counsel NEP GROUP: Fitch Alters Outlook on 'B-' IDR to Positive NOVETTA SOLUTIONS: Moody's Puts B3 CFR Under Review for Upgrade OMERS RELIEF: Moody's Assigns First Time 'B3' Corp Family Rating ONE SKY FLIGHT: Fitch Raises IDR to 'B', Outlook Stable PADAGIS HOLDING: Fitch Gives FirstTime 'BB-' IDR, Outlook Stable PADAGIS LLC: Moody's Assigns First Time 'B1' Corp Family Rating PNTG LLC: Court Approves Disclosure Statement PREMISE HEALTH: Moody's Raises CFR to B2 on Solid Performance PROFESSIONAL DIVERISITY: All 4 Proposals Passed at Annual Meeting PROFESSIONAL FINANCIAL: Court Confirms Chapter 11 Plan PROJECT BOOST: Fitch Alters Outlook on 'B-' LT IDR to Stable PURE BIOSCIENCE: Incurs $811K Net Loss in Third Quarter QUANTUM HEALTH: Moody's Assigns B3 Rating to Amended Term Loan RADIO DESIGN: Court Confirms Plan, as Modified RAYNOR SHINE: Court Approves Disclosures and Confirms Plan RE/MAX LLC: Moody's Rates New First Lien Credit Facilities 'Ba3' REDWOOD EMPIRE: Case Summary & 20 Largest Unsecured Creditors RESEARCH NOW: Moody's Affirms B2 CFR on Incremental $75MM Term Loan REX INC: Court Sets July 15 Plan Confirmation Hearing RGN-GROUP HOLDINGS: Plan Contemplates Reorganization, Liquidation RICHARD W TRACHUK: Court Approves Disclosure Statement ROYAL CARIBBEAN: Moody's Rates New $650MM Sr. Unsecured Notes 'B2' SAN LUIS & RIO: Trustee Taps Fletcher & Sippel as Special Counsel SBL HOLDINGS: Fitch Assigns 'BB' Rating to Series B Preferred Stock SECURE ENERGY: Fitch Assigns FirstTime 'B+' LT IDR, Outlook Stable SKYLINE RIDGE: Cinco's Substantial Contribution Claim OK'd STAN JOSEPH CATERBONE: District Court Won't Revive Ch.11 Case SUN COMMUNITIES: Moody's Assigns (P)Ba1 Rating on Subordinated Debt SYNCSORT INC: Winshuttle Acquisition No Impact on Moody's B3 CFR SYRACUSE INDUSTRIAL: Fitch Cuts Rating on 2016A/B Bonds to 'CC' TALEN ENERGY: Moody's Affirms B2 CFR & Alters Outlook to Negative TARGA RESOURCES: Moody's Alters Outlook on 'Ba2' CFR to Positive THERMON HOLDING: Moody's Affirms B2 CFR, Outlook Remains Stable TOUR BUS: Seeks Approval to Hire Lefkovitz & Lefkovitz as Counsel TRILOGY INT'L: Moody's Rates New $357MM Sr. Secured Notes 'Caa2' TRINITY INDUSTRIES: Moody's Affirms Ba2 CFR, Outlook Stable TRUEMETRICS: Unsecureds to Recoup 10.69% of Allowed Claims in Plan TUPELO WOOD: Seeks to Tap Frith-Smith & Archibald as Accountant U-HAUL CO OF WEST VIRGINIA: Starts Financial Restructuring UGI ENERGY: Fitch Affirms 'BB' LongTerm IDR, Outlook Stable UNIFIED WOMEN'S: CCRM Acquisition No Impact on Moody's 'B3' CFR VCLC HOLDINGS: Gets OK to Hire Villa & White as Legal Counsel VISTA OUTDOOR: S&P Upgrades ICR to 'BB-', Outlook Stable VISTAGEN THERAPEUTICS: Set to Join Russell 2000 Index WASHINGTON PRIME: Fitch Lowers LongTerm IDR to 'D' WC 5TH: Seeks to Hire Columbia Consulting as Financial Advisor WC 6TH: Seeks to Tap Columbia Consulting as Financial Advisor WC CULEBRA: Seeks to Tap Columbia Consulting as Financial Advisor WILLCO X DEVELOPMENT: Has Deal on Cash Collateral Use Thru Aug 6 WILLIAM PAUL BURCH: 5th Cir. Tosses In Forma Pauperis Bid WOODLAWN COMMUNITY: Trustee Taps Duane Morris as Special Counsel YS HOMES: Seeks to Hire Vallit Advisors as Forensic Accountant Z EDGE: Aug. 19 Hearing on Disclosure Statement [*] AlixPartners Launches Turnaround & Transformation Survey [^] BOOK REVIEW: Transnational Mergers and Acquisitions ********* 1011778 BC: Moody's Rates New $800MM First Lien Notes 'Ba2' ----------------------------------------------------------- Moody's Investors Service assigned a Ba2 rating to 1011778 B.C. Unlimited Liability Co.'s proposed $800 million senior secured 1st lien note offering due 2028. All other ratings of 1011778 B.C. remain unchanged including the company's Ba3 corporate family rating, Ba3-PD probability of default rating, Ba2 senior secured first lien bank credit facility ratings, Ba2 senior secured first lien note ratings, and B2 senior secured second lien notes rating. 1011778 B.C.'s SGL-1 speculative grade liquidity rating and Tim Hortons Inc.'s (Tim's) B1 senior unsecured legacy notes rating also remain unchanged. The outlook is stable. Proceeds of the proposed $800 million notes will be used to refinance 1011778 B.C.'s $775 million of 1st lien senior secured notes due 2024. This transaction is credit positive because it will extend maturities and reduce its interest burden. Assignments: Issuer: 1011778 B.C. Unltd Liability Co. Senior Secured First Lien Regular Bond/Debenture, Assigned Ba2 (LGD3) RATINGS RATIONALE 1011778 B.C. benefits from its brand recognition and meaningful scale in terms of systemwide units of its three restaurant concepts, Burger King, Popeyes and Tim Hortons. The company's franchised focused business model provides more stability to earnings and cash flow. In addition, 1011778 B.C.'s diversified day part and food offerings and very good liquidity are also credit positives. 1011778 B.C. is constrained by its relatively high leverage and modest retained cash flow to debt, as well as the high level of promotional activities by competitors and a value focused consumer that will continue to pressure same store operating performance. The stable outlook reflects Moody's view that same store sales will continue to improve and help drive a steady increase in earnings, credit metrics and liquidity as government restrictions continue to lessen. The stable outlook also anticipates that the company follows a balanced financial policy towards dividends and share repurchases and maintains very good liquidity. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING Factors that could result in an upgrade include a sustained strengthening of debt protection metrics with debt to EBITDA of around 5.0 times and maintaining EBIT coverage of interest of around 3.0 times. A higher rating would also require the company's commitment to preserving credit metrics during periods of operating difficulties and to maintain very good liquidity. Factors that could result in a downgrade include a sustained deterioration in credit metrics despite a lifting of restrictions on restaurants and a subsequent recovery in earnings and liquidity with debt to EBITDA above 5.75 times or EBIT to interest under 2.5 times on a sustained basis. 1011778 B.C. Unlimited Liability Company, owns, operates and franchises about 18,691 Burger King hamburger quick service restaurants, 4,987 Tim Hortons restaurants and over 3,495 Popeyes restaurants. Annual revenues are around $5 billion (including advertising revenue), although systemwide sales are over $31 billion. 3G Restaurant Brands Holdings LP, owns approximately 31% of the combined voting power with respect to RBI and is affiliated with private investment firm 3G Capital Partners, Ltd. The principal methodology used in this rating was Restaurant Industry published in January 2018. 1362 H ST. DEVELOPMENT: Taps Capital Justice Attorneys as Counsel ----------------------------------------------------------------- 1362 H St. Development, LLC, received approval from the U.S. Bankruptcy Court for the District of Columbia to hire Capital Justice Attorneys, LLP to serve as legal counsel in its Chapter 11 case. The firm's services include legal advice concerning the administration of the Debtor's bankruptcy estate, settlement negotiations, and the preparation of a Chapter 11 plan. The firm's hourly rates are as follows: Partner $360 per hour Attorney Time $295 per hour Paralegal Time $75 per hour As disclosed in court filings, Capital Justice Attorneys is a "disinterested person" within the meaning of Section 101(14) of the Bankruptcy Code. Capital Justice Attorneys can be reached through: Anitra Ash-Shakoor, Esq. Capital Justice Attorneys, LLP 1325 G Street NW, Suite 500 Washington, DC 20005 Phone: (202) 465-0463/(202) 465-0888 Fax: (202) 827-0089 Email: a.ashshakoor@capitaljustice.com About 1362 H St. Development 1362 H St. Development, LLC is the owner of a restaurant located at 1362 H St. NE, Washington, DC, having a comparable sale value of $2 million. 1362 H St. Development sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D. D.C. Case No. 21-00138) on May 20, 2021. At the time of the filing, the Debtor had between $1 million and $10 million in both assets and liabilities. Judge Elizabeth L. Gunn oversees the case. Capital Justice Attorneys, LLP serves as the Debtor's legal counsel. 4-S RANCH: Seeks to Hire Christopher E. Seymour as Special Counsel ------------------------------------------------------------------ 4-S Ranch Partners, LLC seeks approval from the U.S. Bankruptcy Court for the Eastern District of California to employ Christopher Seymour, Esq., an attorney at Gilmore Magness Janisse, PC, as its special counsel. The Debtor needs the assistance of a special counsel to pursue its claims regarding the sale of the abandoned flood waters stored underground the real property located at the north and south sides of Green House Road in Merced County, Calif. The hourly rates of the firm's attorneys and staff are as follows: Attorneys $350 - $500 per hour Paralegals $50 - $150 per hour Mr. Seymour's hourly rate is $435. The firm received a retainer of $50,000 from Sloan Cattle Company, LLC, the Debtor's affiliate. Mr. Seymour disclosed in a court filing that his firm is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Christopher E. Seymour, Esq. Gilmore Magness Janisse, PC 7789 N. Ingram Ave., Ste. 105 Fresno, CA 93711 Telephone: (559) 448-9800 About 4-S Ranch Partners Los Banos, Calif.-based 4-S Ranch Partners, LLC is a single asset real estate debtor (as defined in 11 U.S.C. Section 101(51B)). 4-S Ranch Partners filed its voluntary petition under Chapter 11 of the Bankruptcy Code (Bankr. E.D. Cal. Case No. 20-10800) on March 2, 2020. Stephen W. Sloan, managing member, signed the petition. At the time of filing, the Debtor was estimated to have $500 million to $1 billion in assets and $50 million to $100 million in liabilities. Judge Rene Lastreto II oversees the case. The Debtor tapped MacDonald Fernandez LLP as bankruptcy counsel; Klein, DeNatale, Goldner, Cooper, Rosenlieb & Kimball, LLP and Gilmore Magness Janisse, PC as special counsel; and McGinley & Associates, Inc. as hydrogeological rebuttal expert witness and hydrogeological consultant. 49 BLEECKER: Manhattan Lease Already Terminated, Court Says ----------------------------------------------------------- Bankruptcy Judge Michael E. Wiles ruled that: -- a proper notice of early termination was sent to debtor 49 Bleecker Inc., and was received by the Debtor with respect to the lessee of the third floor of a building located at 49 Bleecker Street in Manhattan; -- the Debtor was in default for nonpayment of rent and was not entitled to a return of its security deposit; -- the Lease terminated as of December 31, 2018; -- Rogers Investments NY, LLC, the building's current owner, has standing to seek the removal of the Debtor from the premises; and -- the Debtor's other defenses are without merit. The Debtor is a holdover tenant with no rights to possession under the terminated Lease. The parties were slated to appear before the Court on June 17, 2021 to discuss any further proceedings or rulings that may be appropriate with regard to Rogers NY's request for relief from the automatic stay and with regard to the Debtor's motion for an extension of time to assume or reject the Lease. The Lease provides the Landlord with an option to declare an early termination. Rogers NY contends that the early termination option was properly exercised in 2017 by Rogers Investments NV LP, which owned the building at the time, and that the Lease terminated as of December 31, 2018. The Debtor denies that proper notices were sent in accordance with the requirements of the Lease, denies that the notices were received, and asserts a number of other defenses. Rogers NY filed an action in the Civil Court of the City of New York in 2019, seeking possession of the premises. The Civil Court issued a decision holding that it lacked jurisdiction. The parties disagree over the interpretation and the implications of the Civil Court's decision. Rogers NY then filed suit in the Supreme Court of the State of New York. At some point in early 2020 the state court decided that a hearing would be held to determine whether a proper notice of early termination had been sent in accordance with section 2.4 of the Lease. The parties have not provided the Court with a detailed history of the state court litigation but for one reason or another that hearing was never held. A November 2020 hearing date was postponed apparently because the Debtor wished to change counsel, and then a January 11 hearing date was postponed because the Debtor did not appear with counsel. The New York State Court scheduled a final hearing date of February 17, 2021, but the Debtor filed its bankruptcy petition on February 16, thereby invoking the automatic stay and preventing the state court hearing from going forward. Rogers NY promptly filed a motion seeking relief from the automatic stay. The Debtor argued that any issues over the purported Lease termination should be resolved by the Bankruptcy Court and not by the state court. A trial was held June 7, 2021, via Zoom. A copy of the Court's June 15, 2021 decision is available at: https://www.leagle.com/decision/inbco20210616538 About 49 Bleecker 49 Bleecker Inc. filed a Chapter 11 bankruptcy petition (Bankr. S.D.N.Y. Case No. 21-10312) on Feb. 18, 2021, disclosing total assets of up to $1 million and total liabilities of up to $500,000. Judge Michael E. Wiles oversees the case. Alter & Brescia, LLP and Farber Schneider Ferrari, LLP serve as the Debtor's bankruptcy counsel and special counsel, respectively. ACADEMIR CHARTER SCHOOLS: Moody's Rates 2021A Education Bonds 'Ba2' ------------------------------------------------------------------- Moody's Investors Service has assigned an initial Ba2 rating and stable outlook to the $6.9 million Capital Trust Agency (FL) Educational Facilities Revenue Bonds (AcadeMir Charter Schools, Inc. Project), Series 2021A and $515,000 Taxable Educational Facilities Revenue Bonds (AcadeMir Charter Schools, Inc. Project), Series 2021B as AcadeMir Charter School West (the "school"). The conduit issuer is Capital Trust Agency. Upon issuance of the series 2021A&B revenue bonds the school will have $7.5 million in debt outstanding. The outlook is stable. RATINGS RATIONALE The Ba2 rating for the school reflects the school's consistently strong academic performance and a good enrollment demand with a history of operating at or near capacity. The school's authorizer, the Miami-Dade County Public Schools District, identifies the school as a high performing charter. Favorably, the school's 15 year charter spans through 2029. The Ba2 rating also incorporates the school's adequate financial position and liquidity. Debt service coverage for 2022 is expected to be over 2x, and cash on hand over 120 days which is sufficient compared to similarly rated peers. Pro forma coverage and leverage are expected to remain stable in the near term. These credit strengths are offset by the school's material key-person risk, both at the management and board level, as well as significant future leverage expected as AcadeMir expands its elementary and middle school footprint and plans to open a high school in the near future. While the board benefits from active and engaged members, it is a modestly sized board of five members a majority of which have been with the school since its first charter and is highly dependent on Superior Schools for day-to-day management of all AcadeMir Charter Schools, Inc. family of schools. Additional key person risk exists with the school's management company, Superior Schools, Inc., which is owned and operated by the school founders. It is unclear how a significant disruption on the board or at the management company would impact school operations. These governance risks are key drivers of the Ba2 rating assignment. RATING OUTLOOK The stable outlook reflects Moody's expectation for coverage levels consistent with the current rating and the maintenance or strengthening of the school's liquidity, as well as continuation of full enrollment levels and strong academic performance. FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS Greater independence between the board and the management company Successful opening of new schools, manageable leverage, and improved operating metrics Continuation of limited borrowing between schools FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS Material decline in operating and liquidity metrics Inability to meet forecasted coverage and enrollment levels Weakened academic performance Significantly increased leverage LEGAL SECURITY The bonds of each series are secured by a gross revenue pledge of AcadeMir Charter School West and a first priority lien on its facilities. The bond covenants include standard debt service coverage requirement of 1.1x and a liquidity test of 60 days cash on hand to be measured starting June 30, 2022. If the coverage and liquidity covenants are not met the school is required to hire a management consultant to review and make recommendations as to the operation and administration of the school. The additional bond test requires the school to have historical coverage and projected coverage ratio of 1.2x. The debt service reserve is funded at the lesser of the standard three-pronged test: maximum annual debt service, or 125% of average annual debt service, or 10% of initial principle, which will be funded from bond proceeds. The additional bonds tests provide the opportunity for the school to issue debt in order to purchase facilities currently leased. This provision requires maximum annual debt service to not exceed post issuance maximum annual debt service plus lease payments for the facility. In addition, the provision requires the additional debt does not cause a downgrade of the rating and limits maturity to 40 years. USE OF PROCEEDS The current issuance will be used to acquire the school properties that are currently leased for the school's use by the Mir family. Bond proceeds will also fund a debt service reserve as described. The school will continue to lease its primary classroom facility on the schools campus from a non-related third party property owner. PROFILE AcadeMir Charter Schools, Inc. was incorporated in 2008. AcadeMir Charter Schools, Inc. currently operates five schools under the D/B/A nomenclature. This includes the school securing the bonds (AcadeMir Charter School West), AcadeMir Preparatory Academy, AcadeMir Charter School Middle, AcadeMir Charter School of Math and Science, and AcadeMir Charter SchoolPreparatory. Additionally, AcadeMir Charters Schools, Inc. expects to operate AcadeMir Charter School East opening in 2021, and a high school and AcadeMir Charter School Elementary(South) both with an estimated opening date in 2023 as well as an AcadeMir School charter authorization in the Osceola County School District. The school enrolled approximately 618 students in fall 2020. It has registered 769 students for fall 2021 as it converts the use of a pre-school to house 151 additional students. The campus will be at physical capacity following the fall 2021 enrollment. The school was granted its second charter in 2014, expiring in 2029 and benefits from its status as a high performing charter school, including its current authorization which allows the school to grow enrollment to 968 students adding grade 6 thru grade 8 in the future. METHODOLOGY The principal methodology used in these ratings was US Charter Schools published in September 2016. ADARA ENTERPRISES: Court Approves Disclosures and Confirms Plan --------------------------------------------------------------- Judge J. Kate Stickles has entered an order approving the Disclosure Statement and confirming the Plan of Adara Enterprises Corp. Any formal or informal objection to confirmation are overruled. All claims and equity interests shall be, and hereby are, classified and treated as set forth in the plan. The plan's classification scheme shall be and hereby is approved. The treatment of claims and equity interests as provided in the plan is approved. The Plan complies fully with the requirements of 11 U.S.C. Sec. 1123(a)(4). As reflected in the treatment set forth in Article V of the plan, the treatment of each of the claims and equity interests in each particular class is the same as the treatment of each of the other claims or equity interests in such class. Section 1129(a)(8) requires that for each class of claims or equity interests under the plan, such class has either accepted the plan or is not impaired under the plan. Unimpaired classes 2, 3 and 4 are conclusively presumed to have accepted the plan without the solicitation of acceptances or rejections pursuant to Section 1126(f). Impaired classes 1, 5, and 6 have voted to accept the plan. Since each class of claims or equity interests has accepted the plan or is not impaired under the plan, the requirements of Bankruptcy Code section 1129(a)(8) have been met. As set forth in the voting certification, the Plan has been accepted by impaired classes 1 and 5, determined without inclusion of any acceptance of the plan by any insider, thus satisfying the requirements of Section 1129(a)(10). Moreover, class 6, which entirely comprised of insiders, has also accepted the Plan. Prepackaged Plan Adara Enterprises Corp. submitted an Amended Prepackaged Chapter 11 Plan of Reorganization. The Plan provides for (1) the reorganization of the Debtor by retiring, cancelling, extinguishing, and/or discharging the Debtor's prepetition Other Equity Interests and issuing (i) 50% of the New Equity in the Reorganized Debtor to the Preferred Equity Interest Holder in exchange for the Preferred Equity Interests, (ii) issuing 50% of the New Equity to the Prepetition Secured Lender, in exchange for a portion of the Prepetition Secured Lender Claim; (2) the remittal of the Consideration to the Debtor on the Effective Date; and (3) the distribution of the Consideration to holders of Allowed Claims and Other Equity Interests in accordance with the priority scheme established by the Bankruptcy Code or as otherwise agreed. The Plan proposes to treat claims and interests as follows: * Class 1 - Prepetition Secured Lender Claim. The holder of the Allowed Prepetition Secured Lender Claim shall receive (i) 50% of the New Equity in the Reorganized Debtor in full and complete discharge of, and in exchange for $2,000,000 of the Prepetition Secured Lender Claim, and (ii) the remainder of the Prepetition Secured Lender Claim shall be treated as a continuing obligation of the Reorganized Debtor upon the terms set forth in the Plan Supplement, and shall not be deemed extinguished, discharged, cancelled, released or otherwise satisfied under the Plan. Class 1 is impaired. * Class 4 - General Unsecured Claims. Each holder of an Allowed General Unsecured Claim shall receive, on account of and in full and complete settlement, release and discharge of, and in exchange for its Allowed General Unsecured Claim, (i) payment in full in Cash, plus any interest necessary to cause such Allowed General Unsecured Claim to be unimpaired; or (ii) such other treatment to the holder of an Allowed General Unsecured Claim as to which the Debtor, the Plan Sponsor and the holder of such Allowed General Unsecured Claim shall have agreed upon in writing. Class 4 is unimpaired. * Class 5 - Preferred Equity Interests. The Preferred Equity Interest Holder, on an account of and in full and complete settlement, release and discharge of, and in exchange for, its Allowed Preferred Equity Interest shall receive 50% of the New Equity in the Reorganized Debtor. Class 5 is impaired. * Class 6 - Other Equity Interests. The holder of Allowed Other Equity Interests will receive on account of its Other Equity Interests (i) all Remaining Cash and (ii) the IP Grant. Class 6 is impaired. Counsel to the Debtor: Daniel Besikof, Esq. Bethany Simmons, Esq. LOEB & LOEB LLP 345 Park Avenue New York, NY 10154 Telephone: (212) 407-4000 Facsimile: (212) 407-4990 - and - Ronald S. Gellert (DE 4259) GELLERT SCALI BUSENKELL & BROWN, LLC 1201 N. Orange Street, Suite 300 Wilmington, DE 19801 Telephone: (302) 425-5806 Facsimile: (302) 425-5814 A copy of the Order is available at https://bit.ly/2RLKY60 from Donlin Recano, the claims agent. A copy of the Disclosure Statement is available at https://bit.ly/3gsXE9Z About Adara Enterprises Adara Enterprises Corp. operates as an asset management business. Currently, the Debtor's primary asset is quantitative trading software, which was originally developed at significant expense over the course of 10-15 years by Clinton Group, Inc., and has been used to assist in trades of more than $50 billion by Clinton and its former licensees. Adara Enterprises filed a Chapter 11 petition (Bankr. D. Del. Case No. 21-10736) on April 22, 2021. LOEB & LOEB LLP and GELLERT SCALI BUSENKELL & BROWN, LLC, serve as counsel to the Debtor. The Debtor tapped DONLIN RECANO & CO, Inc., as claims and noticing agent. AHERN ENERGY: Case Summary & 7 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: Ahern Energy LLC 9811 W Charleston Blvd Ste 2-687 Las Vegas, NV 89117 Business Description: Ahern Energy LLC owns 201.5 membership interests of Wyo Tech Investment Group, LLC (valued at $2.15 million), 814,400 corporate shares of Inductance Energy Corporation (valued at $2.03 million), and interest in Quantum Energy Inc. (valued at $2.08 million). Chapter 11 Petition Date: June 16, 2021 Court: United States Bankruptcy Court District of Nevada Case No.: 21-13053 Debtor's Counsel: Mark M. Weisenmiller, Esq. GARMAN TURNER GORDON LLP 7251 Amigo Street, Suite 210 Las Vegas, NV 89119 Tel: 725-777-3000 Total Assets: $6,270,396 Total Liabilities: $2,439,206 The petition was signed by Evan Ahern, manager and member. A full-text copy of the petition containing, among other items, a list of the Debtor's seven unsecured creditors is available for free at PacerMonitor.com at: https://www.pacermonitor.com/view/NL4PLCQ/Ahern_Energy_LLC__nvbke-21-13053__0001.0.pdf?mcid=tGE4TAMA ALISAL WATER: Fitch Affirms 'BB-' LongTerm IDR, Outlook Stable -------------------------------------------------------------- Fitch Ratings has affirmed Alisal Water Corporation's (Alco) Long-Term Issuer Default Rating (IDR) at 'BB-'. The Rating Outlook is Stable. Fitch has applied its updated Corporates Recovery Ratings and Instrument Ratings Criteria, and as a result, has upgraded Alco's senior secured rating to 'BBB-' from 'BB+'. The recovery rating on the senior secured instrument has been revised to 'RR2' from 'RR1'. The ratings have been removed from Under Criteria Observation (UCO), where they were placed following the publication of the updated criteria on April 9, 2021. The Long-Term IDR was unaffected by this criteria change. The 'RR2' rating for the senior secured bonds reflects Fitch's expectation of superior recovery for the debt security in the event of default. KEY RATING DRIVERS Recovery Ratings Criteria Update: Instrument rating and RRs for Alco's debt are based on Fitch's newly introduced notching grid for issuers with 'BB' category Long-Term IDRs. This grid reflects average recovery characteristics of similar-ranking instruments. Alco's senior secured debt is viewed as a category 2 first lien because Alco's projected enterprise value using the sector's median multiple is less than $250 million, mapping to an 'RR2' under the criteria grid. The instrument ratings receive a two-notch uplift from the 'BB-' Long-Term IDR before considering utility sector uplift. Application of the sector uplift results in widening to three-notch uplift from the IDR of 'BB-' and a 'BBB-'/'RR2' senior secured rating. 'RR2' denotes superior recovery (71%-90%) in the event of default. Rating Affected by Small Size/Scale: Fitch expects Alco's small asset base and operations to yield an Operating EBITDA of approximately $2 million, and average funds flow from operations of $1 million during the forecast period, making it the smallest stand-alone privately owned utility Fitch rates. The size of operations carries an outsized risk of adverse changes from variations in revenues and/or expenses, making Alco more susceptible to external shocks. This could lead to a material impact on financial metrics from relatively small changes in business conditions. However, such variations are relatively unexpected given the regulatory mechanisms at Alco's disposal, i.e. 50% fixed charge cost recovery as part of Alco's rates to customers and the power cost recovery mechanism, the Purchased Power Expense Offset (PPEO). The latter allows the company to pass through power cost increases to customers. Legal Structure: Alco is a privately owned C-corporation and is family owned, members of which include the president and CEO. Alco is the exclusive holder of water utility assets and issuer of debt outstanding. There are no material operating subsidiaries. The legal structure is unlike most Fitch-rated utility peers, as the company is not part of a larger utility family, and is not subject to private equity ownership. Rate Regulation: Alco is regulated by the California Public Utilities Commission (CPUC) and is currently allowed to earn an above average 10.7% ROE on a below average 30% equity thickness. The company has been unable to meet the annual revenue requirement set in its last General Rate Case (GRC), due to successful water conservation efforts placing downward pressure on annual volume of water sold. The 2011 GRC decision set a 50% fixed-charge cost recovery mechanism, and Alco's recent ability to recoup increasing power costs from customers in the form of surcharges relieves downward pressure on profitability from reduced volume of water sold. Fitch views the recently allowed power cost recovery mechanisms, such as the PPEO, positively and expects Alco's ability to recover dollars spent to improve through rates charged to customers. However, revenues are not fully decoupled, and as such, the company is exposed to varying customer usage patterns. The collection of Purchased Power Balancing Account (PPBA) surcharges for historically under-collected power expenses is expected to relieve pressure on credit metrics in the near to medium term. Expected Stability In Credit Metrics: Alco's leverage has weathered some volatility over the past few years. However, Fitch expects leverage fluctuations to stabilize and improve over the forecast period. The expected stability comes after slightly reduced pressure on further water conservation efforts and recently set power cost recovery mechanisms, leading to quicker recoupment of costs. Alco's projected leverage metrics are supportive of the ratings throughout the forecast period. Assuming normal usage patterns, Fitch expects Total Debt with Equity Credit/Operating EBITDA and FFO leverage to average to 3.2x and 3.4x, respectively, during the 2021-2023 forecast period, compared to 5.5x and 4.5x, respectively, at YE 2020. Water Conservation Efforts: The 2011 GRC set Alco's estimated annual volume of water sold to 1.9 million CCF. Due to increased water conservation efforts, among other factors, the volume of water sold has been well below this threshold; however, increasing slightly yoy in 2020 (1.8 million CCF sold) due to stay at home orders. Fitch expects water conservation efforts to place continued downward pressure on volumes, and does not expect an increase in water volumes unless Alco's service territory has significant growth. Within the GRC, a water conservation budget of $85,000 per year was set, which recovers the required amounts to fund conservation programs. Any authorized surcharge is added to the quantity rate rather than a flat surcharge on each bill. The collection for 2020 will be collected through a surcharge of $0.0439 per CCF in 2021. Positive Free Cash Flow: Alco is unique compared to the rest of Fitch's utilities coverage, given its ability to directly collect costs from developers, typically as contributions, for new projects prior to commencing development. Once infrastructure is built, the projects are considered additions to Alco's plants but do not earn a rate of return, nor are added to rate base. The depreciation applicable to these utility plants effectively amortizes the initial contributions received. Alco collects its costs to operate and maintain the new facilities. The capability of externally funded growth allows Alco an opportunity to be consistently free cash flow positive while still growing. Modest Coronavirus Concerns: Approximately 90% of Alco's customer base consists of single- and multi-family units. Stay at home orders and reduced activities due to the pandemic resulted in higher water usage in 2020 and a muted pandemic impact on sales. Alco reported a manageable increase in accumulated provision for uncollectible accounts, though the balance is significantly higher versus prior fiscal year. Fitch will continue to monitor customer non-payments given the relatively high unemployment rate in Alco's service territory, as well as concerns related to Alco's ability to recover such expenses in a timely manner. Alco recently filed its transition plan to end emergency customer protections mandated by the CPUC. These restrictions are set to expire on June 30, 2021; however, water utilities are also subject to an executive order imposing a moratorium on water service disconnections for non-payment issued by the Californian Governor. The executive order ends on Sept. 30, 2021. Following the coronavirus related state of emergency announcement in California (March 4, 2020), Alco began booking costs related to pandemic-response activities, as well as compliance with government mandates to its Catastrophic Event Memorandum Account (CEMA). Steps taken by Alco during the pandemic include delaying discontinuation of service to non-paying accounts throughout the length of the state of emergency, and making available disaster relief customer protections (i.e. payment plans). The total balance booked as of date to the CEMA account for pandemic-related costs is considered de minimis by Fitch. DERIVATION SUMMARY Alco's ratings primarily reflect the utility's small scale of operations. On the regulatory front, recent mechanisms have been put in place to mitigate a portion of the impact from rising power cost, as well as recover previous under-collected costs. Alco has a weaker business risk profile compared to peer Mountaineer Gas Company (MGC; BB+/Rating Watch Positive), largely due to its notably smaller size. Similarities include rate regulation that lacks full revenue decoupling and weather normalization features. Both companies have repair and replacement spending expectations over the forecast period that drives modest rate base growth. However, MGC serves approximately 220,000 natural gas customers in West Virginia compared to approximately 40,000 to 50,000 water customers at Alco. Additionally, operating EBITDA of roughly $30 million-$35 million at MGC is significantly larger than the $1.5million-$2.0 million at Alco. Alco has a weaker business risk profile than peers, The Berkshire Gas Company (BGC; A-/Stable) and The Southern Connecticut Gas Company (SCG; A-/Stable), largely due its small size of operations. BGC and SCG operate in more-balanced regulatory environments and benefit from full revenue decoupling. Alco's ratings have limited upside due to the utility's small size and scale and geographic concentration. Unlike Alco, which is a stand-alone utility, BGC and SCG benefit from being owned by AVANGRID, Inc. (BBB+/Stable), which is a large parent of eight regulated electric and natural gas distribution utilities. Alco's credit metrics are weaker than its peers BGC, SCG and MGC but are expected to improve over the forecast period as free cash flow generation allows for debt repayment. Assuming normal usage patterns, Fitch expects FFO leverage to average to 3.4x from 2021 to 2023, higher than peers BGC and SCG but lower than MGC. KEY ASSUMPTIONS Fitch's key assumptions within the rating case for the issuer include: -- Revenue remains relatively flat throughout forecast period due to water conservation efforts placing downward pressure on volume of water sold; -- EBITDA margins increase due to improved power cost recovery mechanisms. Specifically, increasing power costs are offset through the implementation of PPEO and PPBA surcharge helps stabilize net income throughout forecast periods; -- Capex of $2.1 million from 2021-2023 related to updating meters, main replacements and pumping equipment. Fitch notes that Alco receives a good portion of its growth spending from developers ahead of time (before the related infrastructure is built), reducing the need for the company to spend large dollar amounts; -- Operating lease expense forecasted to be $199,000 over the forecast period, consistent with recent years; -- Secured debt repayments according to the amortization schedule assumed over the forecast period. RATING SENSITIVITIES Factor that could, individually or collectively, lead to positive rating action/upgrade: -- A positive rating action is not likely due to Alco's small scale of operations; however, Fitch could upgrade the rating if operating EBITDA were to reach $10 million while FFO leverage is maintained below 5.0x. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- FFO leverage expected to exceed 6.0x, on a sustained basis; -- An adverse regulatory decision that meaningfully reduces the stability and predictability of earnings and cash flow; -- Deterioration in liquidity; -- Outsized and unexpected negative pandemic-related impacts. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Sufficient Liquidity: Alco ended 2020 with $789,000 in available cash. Alco does not have a revolving credit facility of any kind. The company is required to keep just over $700,000 in restricted cash to meet funding needs related to the senior secured bonds, however. Alco does not anticipate the need for additional debt over the forecast period. As a backstop, the CEO and his family (founders of the company in 1932) have been supportive of Alco in extreme circumstances. Debt amortization of approximately $1.8 million is expected over the forecast period. Alco's single long-term debt maturity consists of the senior secured All State bonds due in 2027. ESG CONSIDERATIONS: The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). ISSUER PROFILE Alisal Water Corporation (Alco) is a privately owned public utility that began serving water in 1932. The utility was incorporated in 1950, and in the 1960s the area served was annexed to the City of Salinas, California. The company currently serves 30%-40% of the city of Salinas in Monterey County through roughly 9,200 service connections (approximately 40K to 50K people). Alco obtains its entire supply via groundwater sources from the Salinas Valley Groundwater Basin (the basin). This has been the sole supply source since initial operations began. The basin currently is not adjudicated and is in overdraft. The California Department of Water Resources has determined that at the current rate of overdraft the aquifer has sufficient supplies for roughly another 75 years. AMERICAN AIRLINES: Fitch Alters Outlook on 'B-' LT IDR to Stable ---------------------------------------------------------------- Fitch Ratings has revised its Outlook for American Airlines (American) to Stable from Negative and affirmed its Long-Term Issuer Default Rating at 'B-'. The Outlook revision reflects the company's strong liquidity position along with rebounding passenger traffic in the U.S. which together decreases the likelihood of a downgrade into the 'CCC' category. Meanwhile, the rollout of multiple effective coronavirus vaccines has increased Fitch's confidence in a meaningful rebound in air travel in 2021, lowering the likelihood that American will continue to burn cash for a prolonged period. American's 'B-' rating reflects material risks that remain for the airline industry. Air traffic remains well below pre-pandemic levels and the pace of recovery continues to remain uncertain as international travel restrictions and limited business travel are expected to weigh on traffic and yields well into next year at least. Substantial debt burdens and rising fuel prices are also concerns. Separately, Fitch has assigned a rating of 'B/RR3' to American's proposed series of special facility revenue bonds. The bonds are secured by American's interest at JFK airport and guaranteed by American Airlines Group Inc. and American Airlines, Inc. KEY RATING DRIVERS Domestic Recovery Ahead of Expectations: The rollout of effective COVID vaccines and loosening pandemic-era restrictions across the U.S. is driving a robust rebound in domestic leisure travel. While business and international travel remain weak, we now expect the recovery in domestic and near-international travel to be sufficiently durable such that our prior downside scenarios are less likely. TSA data show that passenger counts are now only around 30% below 2019 levels on a seven-day rolling average basis, a 20+ percentage point improvement compared to when Fitch last reviewed American's ratings in early March. Rising Jet Fuel Costs May Dampen Recovery: Recent increases in crude oil prices may present a headwind to margins and cash flows even as traffic begins to recover. With total traffic not expected to remain below 2019 levels least through 2022, Fitch believes that the airlines' ability to pass higher fuel costs through to passengers may be limited. Higher costs may drive weaker margins and leverage metrics remaining elevated for longer than initially expected. This risk is partly offset by lower levels of expected capacity in the market, and by improved average fuel efficiency stemming from the retirement of many older aircraft during the pandemic. Should higher fuel prices, combined with other factors, materially limit American's ability to de-lever, and drain liquidity, the Outlook may be revised back to Negative. Debt Burden Is Substantial: American entered the crisis with a higher debt load than competitor airlines following multiple years of heavy capex and simultaneous share repurchases. The company ended 2020 with a total debt balance (including lease obligations) of $41 billion, which is likely to increase to $47 billion by YE 2021, up more than 40% from prior to the pandemic. Fitch expects American to utilize excess cash to de-lever its balance sheet over time. The company has publicly stated that it intends to reduce total debt by $8 billion-$10 billion over the next five years. However, the pace of deleveraging will depend on a sustained recovery in traffic and yields, and the absence of any further shocks to the industry. In any case, American's debt balance will drive sustained leverage at levels that constrain the rating to 'B-' at least through 2022. Debt maturities are manageable through 2024, but become substantial in 2025 when the company's $2.5 billion secured notes, 2013 term loan, $500 million unsecured notes, and $1 billion convertible issuance come due. Fitch expects that the industry will have fully recovered from the pandemic by 2025, allowing American to address maturities through a combination of FCF, cash on hand, and access to capital markets. Capital Spending and Cash Flow: Limited capex spending over the next few years will aid American's efforts to start paying down debt. American expects aircraft deliveries to result in a net cash inflow in 2021, due to a combination of attractive financing, returns of pre-delivery payments, and American's settlement with Boeing related to the grounding of the 737 MAX. American is scheduled to take delivery of 36 aircrafts in 2021. Aircraft deliveries are limited in 2022 and 2023, as American largely completed its fleet renewal program prior to the pandemic. Fitch expects FCF to remain negative this year before potentially turning positive in 2022 or 2023, largely depending on the pace of recovery. JFK Bonds: American plans to issue $150 million in revenue bonds to fund an upcoming $47.8 million maturity in August of this year, to defease a portion of a bond due in 2031, and to fund ongoing construction. American initially issued its JFK revenue bonds in 2016. The bonds have varying maturities between August of this year and 2031. The JFK bonds are secured by a mortgage on American's leasehold interest in Terminal 8 at New York's JFK Airport. The 'RR3' rating on the JFK bonds, in line with American's other secured debt, reflects the strategic importance of American's position at JFK. The airport acts as a key international gateway for American. JFK is a slot-constrained airport; slots, gates and terminal space are highly sought after by airlines looking to maintain a presence in the key New York market. As such, Fitch believes that American would have a material incentive to affirm its lease at JFK in the event that it was to enter bankruptcy as it did during its 2011 bankruptcy proceedings. Recovery Ratings: Fitch's recovery analysis assumes that American would be reorganized as a going concern (GC) in bankruptcy rather than liquidated. Fitch has assumed a 10% administrative claim. The GC EBITDA estimate reflects Fitch's view of a sustainable, post-reorganization EBITDA level which is the basis for the enterprise valuation calculation. Fitch uses a GC EBITDA estimate of $5.5 billion and a 5.0x multiple, generating an estimated GC enterprise value (EV) of $25 billion after an estimated 10% in administrative claims. Fitch views its GC EBITDA assumption as conservative as it remains below levels generated in 2014, the first year after American last exited bankruptcy, but it incorporates potential structural changes to the industry driven by the pandemic. These assumptions lead to an estimated recovery for senior secured positions in the 51%-70% (RR3) range and poor recovery prospects (RR6) for unsecured positions. DERIVATION SUMMARY American is rated lower than its major network competitors, Delta and United, primarily due to the company's more aggressive financial policies. American's debt balance has increased substantially since its exit from bankruptcy and merger with US Airways in 2013, as it has spent heavily on fleet renewal and share repurchases. As such, American's adjusted leverage metrics are at the high end of its peer group. KEY ASSUMPTIONS -- Airline traffic remaining substantially below historic levels through 2021 with global traffic recovering to 2019 levels by 2023 or 2024, and U.S. traffic potentially recovering sooner; -- Passenger yields remain below 2019 levels through 2024; -- Jet fuel prices averaging around $1.95/gallon this year rising to $2.05/gallon through the forecast. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Adjusted debt/EBITDAR below 5x; -- FFO fixed-charge coverage sustained around 2x; -- FCF generation above Fitch's base case expectations; -- A faster than expected recovery in air traffic. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Failure to contain cash burn in 2021 leading to increased pressure on liquidity; -- Total liquidity falling towards or below $8 billion absent a line of sight towards cash flow breakeven; -- Inability to raise new capital in the event that liquidity becomes strained; -- Lack of recovery in passenger demand in 2021 possibly due to outbreaks of new variants of the coronavirus or new or lingering travel restrictions. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Liquidity Position Better than Expected: Fitch's expectations for American's liquidity position have improved since its prior review. The company ended 1Q21 with total available liquidity of $17.3 billion. American's $10 billion loyalty program debt issuance, the renewal of the government's payroll support program, and decelerating cash burn have pushed Fitch's forecast for American's YE liquidity balance to $15 billion, up from around $12 billion as of our prior review. Fitch believes that American's cash balance is sufficient to navigate through even a fairly slow recovery scenario. Congressional extension of the payroll support program in December 2020 provided American with roughly $3.5 billion in cash through a combination of grants and loans. A third round of payroll support was included in the American Rescue Plan Act of 2021 and will provide American with another $3.3 billion. American also announced a $1.1 billion at-the-market equity issuance program in January, of which $316 million was issued in the first quarter. ISSUER PROFILE American Airlines is one of three major network airlines in the U.S. and one of the largest airlines in the world as measured by available seat miles. American generated roughly $45 billion in revenue in 2019 (prior to the coronavirus pandemic), and operates a fleet of more than 850 mainline aircraft and 540 regional jets. American's primary hubs include Dallas/Fort Worth, Charlotte, Chicago, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington D.C. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. AMERICAN MOBILITY: Seeks to Tap J.M. Cook as Bankruptcy Counsel --------------------------------------------------------------- American Mobility, Inc. seeks approval from the U.S. Bankruptcy Court for the Eastern District of North Carolina to employ J.M. Cook, PA to serve as legal counsel in its Chapter 11 case. The firm's services include: (a) preparing legal papers; (b) evaluating the legal basis and effect of various pleadings; (c) preparing monthly operating reports and evaluating and negotiating the Debtor's or any other party's plan of reorganization and disclosure statement; (d) commencing and prosecuting actions or proceedings on behalf of the Debtor; and (e) other legal services. The firm will be compensated at an hourly rate of $300 for attorneys and $75 for paralegal. It received a retainer of $5,000 from the Debtor. J.M. Cook, Esq., disclosed in a court filing that his firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: J.M. Cook, Esq. J.M. Cook, PA 5886 Faringdon Place, Suite 100 Raleigh, NC 27609 Telephone: (919) 675-2411 Facsimile: (919) 882-1719 Email: J.M.Cook@jmcookesq.com About American Mobility American Mobility, Inc. filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. E.D.N.C. Case No. 21-01352) on June 11, 2021. William Ryan, president, signed the petition. In its petition, the Debtor disclosed total assets of up to $500,000 and total liabilities of up to $10 million. J.M. Cook, Esq., at J.M. Cook, PA serves as the Debtor's legal counsel. AMERICAN MOBILITY: Seeks to Use Cash Collateral ----------------------------------------------- American Mobility, Inc. asks the U.S. Bankruptcy Court for the Eastern District of North Carolina, Raleigh Division, for authority to use cash collateral. The Debtor needs to use post-petition income for its continued operations. Without the use of this cash, the Debtor will suffer immediate irreparable harm and be unable to preserve the value of the estate for creditors. Under the Debtor's current business model, the Debtor creates accounts receivable but its accounts are in various forms and collections. For example, the Debtor may have an account that was produced by the vendor supplying the equipment under a leasing structure or is subject to consignment. Based on these arrangements, it is unclear the amount of the accounts receivable at the time of filing that would be subject to lender liens. However, the Debtor does submit that accounts receivable, subject to security agreements of its lenders, did exist at the time of filing. The Debtor has reviewed the UCC-1 filings and identified several lenders that hold blanket security interests as well as security interests with a lien on pre-petition accounts receivable and parts. The lender with a first position lien on cash collateral would be Gulf Coast Business Credit. The balance owing to Gulf Coast as of the bankruptcy filing was $958,280. American Mobility says due to the balance owing to Gulf Coast, its lien would be greater than the amount of total accounts receivable and/or post-petition receivables arising from sale of parts. Therefore, the Debtor submits that all other junior lien holders are unsecured as to cash collateral. To the extent the Court finds it necessary to provide adequate protection to the lender, the Debtor agrees to grant a replacement lien in post-petition collateral to the same extent as existed pre-petition, up to the value of the pre-petition collateral. While it believes this is unnecessary, the Debtor submits this would protect the lender from any diminution or loss in this matter. A copy of the motion is available at https://bit.ly/3vnH6WA from PacerMonitor.com. About American Mobility, Inc. American Mobility, Inc. operates a retail company selling and servicing mobility products directly to consumers in the Wake County area in North Carolina. The Debtor sought protection under Chapter 11 of the U.S. Bankruptcy Code (Bankr. E.D.N.C. Case No. 21-01352-5) on June 11, 2021. In the petition signed by William Ryan, president, the Debtor disclosed up to $500,000 in assets and up to $10 million in liabilities. J.M. Cook P.A. is the Debtor's counsel. AMSTERDAM HOUSE: Taps Kurtzman Carson Consultants as Claims Agent ----------------------------------------------------------------- Amsterdam House Continuing Care Retirement Community, Inc. received approval from the U.S. Bankruptcy Court for the Eastern District of New York to employ Kurtzman Carson Consultants, LLC as its claims and noticing agent. Kurtzman Carson Consultants will oversee the distribution of notices and will assist in the maintenance, processing and docketing of proofs of claim filed in this Chapter 11 case on behalf of the Debtor. Prior to the petition date, the Debtor provided the firm a retainer in the amount of $30,000. The firm will bill the Debtor monthly. The Debtor agree to pay out-of-pocket expenses incurred by the firm. Robert Jordan, senior managing director of Corporate Restructuring Services at Kurtzman Carson Consultants, disclosed in a court filing that the firm is a "disinterested person" as that term is defined in section 101(14) of the Bankruptcy Code. The firm can be reached through: Robert Jordan Kurtzman Carson Consultants LLC 222 N. Pacific Coast Highway, 3rd Floor El Segundo, CA 90245 Telephone: (310) 823-9000 Facsimile: (310) 823-9133 E-mail: rjordan@kccllc.com About Amsterdam House Continuing Care Amsterdam House Continuing Care Retirement Community, Inc. (doing business as The Amsterdam at Harborside) operates Nassau County's first and only continuing care retirement community licensed under Article 46 of the New York Public Health Law, which provides residents with independent living units, enriched housing and memory support services, comprehensive licensed skilled nursing care, and related health, social, and quality of life programs and services. Amsterdam House Continuing Care Retirement Community filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. E.D.N.Y. Case No. 21-71095) on June 14, 2021. James Davis, president and chief executive officer, signed the petition. At the time of the filing, the Debtor had between $100 million and $500 million in both assets and liabilities. Judge Louis A. Scarcella oversees the case. The Debtor tapped Sidley Austin LLP as legal counsel, RBC Capital Markets, LLC as investment banker, and Kurtzman Carson Consultants LLC as claims and noticing agent. API GROUP: Moody's Hikes CFR to 'Ba2', Rates New $300MM Notes 'B1' ------------------------------------------------------------------ Moody's Investors Service upgraded APi Group DE, Inc.'s Corporate Family Rating to Ba2 from Ba3, Probability of Default Rating to Ba2-PD from Ba3-PD and upgraded the rating on the company's senior secured credit facility to Ba1. Concurrently, Moody's assigned a B1 rating to APi's proposed $300 million senior unsecured notes maturing 2029. The outlook remains stable. Finally, Moody's upgraded the company's Speculative Grade Liquidity Rating to SGL-1 from SGL-2. The proceeds from the proposed $300 million senior unsecured notes offering will be used to redeem the company's $250 million senior secured term loan B due 2026 and repay a portion of its outstanding borrowings under the company's $1,200 million term loan facility maturing 2026, and for general corporate purposes as well as fees and expenses. The rating on the $250 million term loan B facility will be withdrawn at the close of the proposed transaction. The transaction will be leverage neutral and extend the company's debt maturity schedule. At year-end December 31, 2021, Moody's projects total debt-to-EBITDA will be 3.9x. The ratings upgrade reflects Moody's expectation for continued improvement in APi's credit metrics, higher predictability in free cash flow and ongoing solid execution. The Ba1 rating on the company's senior secured credit facility is one notch above APi's CFR, reflecting its priority position to the senior unsecured notes and the collateral securing the facility. The B1 rating assigned to APi's proposed $300 million senior unsecured notes maturing in 2029 is two notches below the CFR and results from the notes position as the most junior debt in APi's capital structure. "APi's management team has successfully integrated acquisitions, remained focused on execution, re-invested back into the business and limited dividend distributions to its shareholders; balancing the interests of the company's creditors with the interests of its shareholders," said Emile El Nems, a Moody's VP-Senior Analyst. "In addition, the management team remains committed to a maintaining a net leverage target ratio of 2.0x to 2.5x (excluding Moody's adjustments)." Upgrades: Issuer: APi Group DE, Inc. Corporate Family Rating, Upgraded to Ba2 from Ba3 Probability of Default Rating, Upgraded to Ba2-PD from Ba3-PD Speculative Grade Liquidity Rating, Upgraded to SGL-1 from SGL-2 Senior Secured Bank Credit Facility, Upgraded to Ba1 (LGD3) from Ba3 (LGD3) Assignments: Issuer: APi Group DE, Inc. Senior Unsecured Notes, Assigned B1 (LGD6) Outlook Actions: Issuer: APi Group DE, Inc. Outlook, Remains Stable RATINGS RATIONALE APi's Ba2 corporate family rating reflects the company's position as a market leading business service provider of safety, specialty and industrial services in over 200 locations across North America and Europe. In addition, APi's credit rating is supported by very good liquidity with no significant debt maturities until 2026, and a commitment to a disciplined approach to balance sheet management. At the same time, the rating takes into consideration the company's exposure to cyclical end markets and the competitive nature of the construction business. The stable outlook reflects Moody's expectations that APi will steadily grow revenues organically, improve profitability and generate significant free cash flow that can be used to reduce leverage. This is largely driven by Moody's views that the US economy will improve and US construction industry will remain stable. APi's SGL-1 Speculative-Grade Liquidity Rating reflects Moody's expectation of very good liquidity over the next 12-18 months. The company's very good liquidity is supported by (i) approximately $745 million in cash and (ii) $300 million first lien revolving credit facility expiring October 2024, of which about $230 million was available as of March 31, 2021. The company has no significant debt maturities due until October 2026 when its $1,200 million first lien senior secured term loan becomes due. This amount is exclusive of the proposed $250 million repayment of the incremental term loan B facility. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded if: - The company maintains strong free cash flow and very good liquidity - Adjusted debt-to-EBITDA is below 3.0x for a sustained period of time - Adjusted EBITA-to-interest expense is above 6.0x for a sustained period of time - Retained cash flow-to-net debt is above 25% The ratings could be downgraded if: - The company's liquidity deteriorates - Adjusted debt-to-EBITDA is above 4.0x for a sustained period of time - Adjusted EBITA-to-interest expense is below 4.5x for a sustained period of time - Retained cash flow-to-net debt is below 15% The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. Headquartered in in New Brighton, MN, APi Group Corporation is a publicly traded company on the NYSE with the ticker symbol [APG]. As measured by revenue, APi Group Corporation is the largest provider of commercial life safety solutions and a top five specialty contractor servicing the industrial and commercial end markets in the US with a broad customer base and a diversified revenue stream. The company operates in over 200 locations and generates approximately 90% of its revenue in the United States. APOLLO COMMERCIAL: Moody's Rates New $400MM Sr. Secured Notes 'Ba2' ------------------------------------------------------------------- Moody's Investors Service has assigned a Ba2 rating to Apollo Commercial Real Estate Finance, Inc.'s (ARI) proposed senior secured notes. ARI's Ba3 long-term corporate family rating, Ba2 senior secured Term Loan B rating and negative outlook were unaffected by the company's decision to issue $400 million of senior secured notes. Assignments: Issuer: Apollo Commercial Real Estate Finance, Inc. $400 Million Senior Secured Notes, Assigned Ba2 RATINGS RATIONALE The Ba2 rating assigned to ARI's senior secured notes reflects its senior secured position in the company's capital hierarchy, and is at the same level as ARI's existing Ba2-rated senior secured Term Loan B. Moody's considers ARI's unsecured notes, which are subordinated to its proposed senior secured notes and Term Loan B, as a significant buffer to senior secured creditors in the event of default. ARI intends to use the net proceeds from its proposed senior secured notes' issuance for general corporate purposes, including the temporary reduction of borrowings under the company's repurchase agreements. ARI's Ba3 long-term CFR reflects the company's strong profitability and capital adequacy and low leverage. Moody's also views ARI's affiliation with its external manager, Apollo Global Management, LLC (Apollo), as a credit strength because it supports the sourcing, evaluation and risk management of investments. The rating also considers ARI's concentration in commercial real estate (CRE) lending, its portfolio composition, which consists of a relatively high, though declining, percentage of subordinated loans and exposure to the volatile hotel and retail sectors, and its high reliance on confidence-sensitive secured funding that encumbers its earnings assets and limits its access to the unsecured debt markets. ARI's rating outlook is negative, reflecting the deterioration in the company's asset performance and profitability relating to the coronavirus pandemic. Moody's regards the coronavirus pandemic as a social risk under its environmental, social and governance (ESG) framework, given the substantial implications for public health and safety. Please see Moody's Environmental risks and Social risks heatmaps for further information. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING ARI's negative outlook indicates that a ratings upgrade is unlikely over the next 12-18 months. However, ARI's ratings could be upgraded if the company: 1) improves its funding profile by reducing its reliance on confidence-sensitive short-term funding while increasing creditor diversification; 2) reduces debt maturity concentrations; and 3) continues to execute its existing strategy with strong capital levels. ARI's ratings could be downgraded if the company: 1) experiences a material weakening in asset quality and profitability; 2) increases its leverage (debt/equity) ratio above 3.5x given the current portfolio mix; or 3) increases second lien exposure without mitigating protections. The principal methodology used in this rating was Finance Companies Methodology published in November 2019. ARCHKEY HOLDINGS: Moody's Assigns B2 CFR, Outlook Stable -------------------------------------------------------- Moody's Investors Service has assigned a B2 Corporate Financial Rating to ArchKey Holdings, Inc., a B2-PD Probability of Default Rating and B2 to the company's new $410 million senior secured first lien credit facilities (comprising $320 million term loan and $90 million revolving credit facility). The proceeds of the term loan will be used along with the sponsor equity and management investment to fund the acquisition of ArchKey by an affiliate of One Rock Capital Partners, LLC from Oaktree Capital Management. The assigned ratings are subject to final documentation. The outlook on the ratings is stable. Rating Assignments: Issuer: ArchKey Holdings, Inc. Corporate Family Rating, Assigned B2 Probability of Default Rating, Assigned B2-PD Senior secured first lien Term Loan, Assigned B2 (LGD4) Senior secured first lien Revolving Credit Facility, Assigned B2 (LGD4) Outlook, Assigned Stable RATINGS RATIONALE ArchKey's rating reflects its limited operating track record with a number of acquired companies in the last three years, its business concentration on electrical infrastructure services and competition against large contractors, potential volatility in earnings and cash flows due to its undertaking of large projects, as well as the potential acquisitions under its private equity ownership. ArchKey more than doubled its revenues base and beefed up its capability to undertake more complex electrical infrastructure projects nationwide, after the acquisition of several regional electrical service companies (including Parsons, Sprig and Mona) from 2018 to 2020. The company operates in the competitive electrical contracting business with larger players such as Quanta Services, Inc.(Baa3 stable), EMCOR and MYR. The competitive bidding of large fixed-price electrical infrastructure projects elevates the risk of cost overruns for smaller contractors such as ArchKey. Its undertaking of large projects could lead to large swings in working capital, making cash flow generation less predictable. Moody's expect the company will continue to take on large projects alongside recurring service business and augment its growth through acquisitions under the private equity ownership. ArchKey's rating is supported by the recurring demand from maintaining, repairing and upgrading existing electrical infrastructure, which together with small-ticket projects (defined as less than $5 million) make up about 60% of its gross profit. This portion of the business has shown steady growth over the past three years. The company also benefits from building new electrical infrastructure for data center, e-commerce warehouse, commercial and industrial projects, which help mitigate the decline in other commercial construction projects as a result of the pandemic. Its current order backlog supports sales visibility over the next one to two years. Reshoring of manufacturing facilities and vehicle electrification also brighten long-term growth prospects. ArchKey's debt leverage of just below 4.0x at the transaction closing looks moderate and will help buffer against earnings and cash flow volatility. Cost structure is highly variable with limited amount of fixed costs given the backlog driven nature of its business, which provides visibility into labor and materials needs. The company is able to generate ample free cash flows given its low capital expenditure and moderate debt burden, if it completes large projects on time and on budget. Performance bonding capacity of approximately $1 billion is sufficient to cover its project executions. Liquidity profile is adequate given the company's expected free cash flow and undrawn revolving credit facility. Its new $90 million revolving credit facility, which matures in five years, will cover working capital needs. The revolver has a maximum springing First Lien Net Leverage Ratio set at 6.0x, which will be tested only if the outstanding amount exceeds 35% of the revolver commitment. Moody's expect the company to remain in compliance with the financial covenant. The first lien credit facilities are rated at the same level as the CFR, reflecting their preponderance in the debt capital structure. The credit facilities are secured by a first priority interest in substantially all tangible and intangible assets of the borrowers and the guarantors. ArchKey's assets mainly comprise contract receivables from customers, trade names, customer relations and contractual backlogs with a very small amount of long-term tangible assets given the skill-based engineering, design, construction and maintenance nature of its electrical contracting business. The stable outlook reflects Moody's expectation that commercial construction will benefit from the economic recovery and ArchKey's large order backlog and recurring maintenance and upgrade projects will support its sales and earnings in the next 12-18 months. ESG CONSIDERATION ArchKey's rating has also incorporated environmental, social and governance consideration. The company has above-average governance risk due to its limited business track record and private equity ownership that could result in a more aggressive financial profile through business acquisitions and discretionary dividends. Financial disclosures are often not as timely or comprehensive for sponsor-owned firms versus publicly owned companies. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS ArchKey's upside ratings potential is limited by its moderate scale and limited diversity, but its ratings could be upgraded if it demonstrates a track record of solid earnings growth and strengthens its cash generating ability, as evidenced by FFO/debt sustained above 20%, while maintaining good margins and a leverage ratio (debt/EBITDA) below 4.0x. A downgrade could occur if deteriorating operating results, debt-financed acquisitions or shareholder distributions result in the company's leverage ratio being sustained above 5.5x, or FFO/debt sustained below 15%. A weakening of its liquidity profile could also result in downward pressure. ArchKey Holdings, Inc.,headquartered in St. Louis, MO, is an electrical services and technologies provider in the US. It has amalgamated several regional electrical service companies and technology providers since 2018. The company maintains long-standing relationships with general contractors and undertakes electrical services and installation projects for commercial & industrial, data centers, healthcare, education, logistics & distribution, and government customers. Its revenues amounted to about $1 billion in 2020. The companyannounced it had signed a definitive agreement to be acquired by an affiliate of One Rock Capital Partners, LLC from Oaktree Capital Management in May 2021. The principal methodology used in these ratings was Construction Industry published in March 2017. ARCHKEY HOLDINGS: S&P Assigns 'B' ICR, Outlook Stable ----------------------------------------------------- S&P Global Ratings assigned its 'B' issuer credit rating to ArchKey Holdings Inc. The outlook is stable. S&P said, "We also assigned our 'B' issue-level rating and '3' recovery rating to the company's proposed $90 million revolving credit facility and $320 million first-lien term loan, indicating our expectation for meaningful (50%-70%; rounded estimate: 55%) recovery in the event of a payment default. "The stable outlook reflects our view that the company will benefit from its backlog of work and our expectation that adjusted debt to EBITDA will be below 4x, with free operating cash flow (FOCF) to debt of more than 10%. "We assume ArchKey will continue to benefit from favorable end-market trends and project backlog.In our view, ArchKey should continue to benefit from its market position as a specialty service provider in the U.S., particularly in the electrical and technology end market. Almost all of the company's revenue comes from data centers, electrical construction, and technologies integration for commercial and industrial customers. Increasing demand for building or upgrading data centers and for facilities with more advanced technology capabilities provides the company with long-term growth opportunities, in our view. We believe the company's near-term growth will be supported by its backlog of work. As of March 2021, ArchKey had over $1.2 billion backlog, of which we expect a substantial portion will convert to revenues in 2021. ArchKey has long-term relationships with its customers and generates more than 90% of revenue from repeat clients. In our view, its customer base is somewhat concentrated, with two customers contributing more than 10% total revenues, and top 10 customers accounting for about 50% of the revenues. The company's profitability (S&P Global Ratings-adjusted EBITDA margin of about 8%) is in line with the industry averages. Our view of the company's business risk incorporates the company's modest scale and domestic footprint, relative to larger diversified players in the broader global engineering and construction (E&C) industry. Like its peers in the E&C industry, we believe ArchKey faces cyclicality, price competition, and operating risks. Revenue and earnings could be affected by the cadence of some larger projects and the timing of completion. "We assume ArchKey will maintain its operating performance this year, with adjusted debt to EBITDA below 4x pro forma for the transaction.In 2021, we anticipate ArchKey will have high-teen-digit topline growth and maintain relatively stable adjusted EBITDA margins in the high-single-digit percent area. We anticipate good FOCF generation over the next 12 months, aided by low capital expenditure requirements of less than 1% of revenue. In our base-case forecast, we do not incorporate acquisitions or any form of shareholder returns. Despite its lower debt leverage in relative to other highly leveraged E&C peers, our view on the company's financial risk reflects its financial sponsor ownership. Additionally, we anticipate ArchKey will likely continue its acquisition strategy going forward, in line with recent years. "The stable outlook reflects our view that the company will benefit from its strong backlog of work and our expectation that its adjusted debt-to-EBITDA metric will remain below 4x, with FOCF to debt above 10% over the next 12 months. "We could lower our rating on ArchKey during the next 12 months if the company experiences unexpected deterioration in its revenues and EBITDA, or has material debt financed transactions, causing its adjusted debt to EBITDA above 6.5x or its FOCF to debt to fall below 3% on a sustained basis. "Although unlikely over the next 12 months, we could raise the rating on ArchKey if we believe that the company demonstrates financial policies in line with a higher rating and the company's financial sponsor is committed to pursue disciplined merger and acquisition and shareholder return strategies, such that its adjusted debt to EBITDA remains below 4x and FOCF to debt of more than 10% on a sustained basis, and that the risk of increasing debt leverage above 5x is low." ATOKA COUNTY HEALTHCARE: Pandemic Defers Survey, PCO Says --------------------------------------------------------- Deborah Burian, the duly appointed Patient Care Ombudsman for Atoka County Healthcare Authority (Atoka County Medical Center), disclosed in a report for the period from November 7, 2020, through January 5, 2021, that: -- the hospital's certification survey in connection with the Conditions for Participation, as condition for participation in Medicare, was not completed due to the ongoing COVID-19 pandemic. The hospital, however, continues to receive reimbursements as scheduled. -- in the period since the most recent report, there has been no further need for Atoka to access its "surge" plan to deal with high COVID-19 admissions as the care need of the community continues to be met; -- the Debtor has continued to follow guidelines from the Center for Disease Control (CDC) for the management of the COVID-19 pandemic throughout the 60-day monitoring period; and -- there are no immediate concerns regarding provisions of dietary services during the site visit. The PCO said she received no concerns during the monitoring period. A copy of the Ombudsman Report is available for free at https://bit.ly/2UiSK8t from PacerMonitor.com. About Atoka Based in Atoka, Oklahoma, Atoka County Healthcare Authority provides health care services. The Healthcare Authority filed for Chapter 9 bankruptcy protection on Jan. 10, 2017 (Bankr. E.D. Okla. Case No. 17-80016). The Debtor was estimated to have assets of less than $50,000, and debt of between $10 million and $50 million. Jeffrey E. Tate, Esq., at Christensen Law Group PLLC, represents the Debtor. Deborah Burian is the Debtor's Patient Care Ombudsman. Judge Tom R. Cornish is assigned to the case. AVALIGN HOLDINGS: Moody's Affirms B3 CFR & Alters Outlook to Stable ------------------------------------------------------------------- Moody's Investors Service changed Avalign Holdings Inc.'s outlook to stable from negative. At the same time, Moody's affirmed the company's B3 Corporate Family Rating, B3-PD Probability of Default Rating and the B2 ratings of the senior secured first lien term loan and revolving credit facility. The change of outlook to stable reflects Moody's expectations of the recovery in demand for the company's products, after a small decline in 2020 due to the coronavirus pandemic, will be sustained over the near-to-intermediate term. The stabilization of the outlook further reflects the resilience of the company's profit margin even during the pandemic due to the management's cost control initiatives. The affirmation of the B3 rating reflects Moody's expectation that the company's revenues will recover to pre-pandemic levels in the next few quarters while maintaining an adequate liquidity profile. Ratings Affirmed: Issuer: Avalign Holdings Inc. Corporate Family Rating at B3 Probability of Default Rating at B3-PD $35 million Senior Secured 1st lien Revolving Credit Facility expiring 2023 at B2 (LGD3) $229 million Senior Secured 1st lien Term Loan due 2025 at B2 (LGD3) Outlook Actions: Issuer: Avalign Holdings Inc. Outlook changed to stable from negative RATINGS RATIONALE The B3 CFR reflects Avalign's high financial leverage, moderate scale and customer concentration. The company's debt/EBITDA, including pro forma adjustments, approximated 7.0 times at the end of March 2021. Moody's expects that the leverage will decline in 2021 toward the mid-to-high 6.0x range, which is comparable to pre-pandemic levels. Avalign's ratings benefit from high barriers to entry and switching costs in the medical products contract manufacturing industry. This is because of the significant amount of time and investment required for its customers to obtain product regulatory approvals, of which Avalign is an integrated part. For this reason, the company tends to have long-term relationships with its customers, lending stability to revenue and cash flow albeit at modest levels. Avalign's liquidity is adequate. Moody's estimates that Avalign will generate $0-$5 million in free cash flow over the next 12 months. At the end of March 2021, the company had approximately $6 million in cash and $24 million availability under its $35 million revolver. The company's mandatory debt amortization is approximately $2.3 million per year which can be covered with the available liquidity. Social and governance considerations are material to the rating. For Avalign, the social risks are primarily associated with responsible production including compliance with regulatory requirements for the safety of medical devices as well as adverse reputational risks arising from recalls associated with manufacturing defects. Avalign, is also vulnerable to governance risks under private equity ownership including integration challenges as the firm has been acquisitive in the last few years. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Ratings could be downgraded if the company's liquidity and/or operating performance deteriorates. The ratings could also be downgraded if the company pursues an aggressive debt-funded acquisition strategy or if free cash flow becomes negative on a sustained basis. Ratings could be upgraded if Avalign materially increases its size and scale, diversifies its product portfolio and demonstrates stable organic growth at the same time it effectively executes its expansion strategy. Adjusted debt/EBITDA will need to be sustained below 5.0 times to support an upgrade. The principal methodology used in these ratings was Medical Product and Device Industry published in June 2017. Headquartered in Rosemont, IL, Avalign is a developer, manufacturer and supplier of implants, cutting tools, specialty surgical instruments and metal thermoformed cases and trays for medical devices original equipment manufacturers. It is owned by the private equity firm Linden Capital Partners. The company's revenue for 2020 was approximately $201 million. AVATAR HOLDCO: S&P Affirms 'B-' ICR on Strong Recent Performance ---------------------------------------------------------------- S&P Global Ratings affirmed its 'B-' ratings on Avatar Holdco LLC (doing business as EAB) and assigned a 'B-' rating to its new revolving credit facility and first-lien term loan. S&P said, "The stable outlook reflects our expectation that operating performance will continue to improve and EAB will maintain revenue, EBITDA, and free cash flow growth over the next 12 months. "EAB's leverage will remain elevated over the next 12 months due to high debt, a deferred revenue model, and several one-time expenses that have yet to roll off, though we view the proposed capital structure as more sustainable. The proposed transaction modestly reduces outstanding debt. We believe the transaction will improve the company's leverage profile over time as it eliminates the high interest payment-in-kind (PIK) preferred equity, which we treat as debt. We expect leverage to decline to the low-11x area over the next 12 months, coinciding with the company's fiscal 2022 year-end in June and the roll-off of integration and restructuring charges incurred in fiscal 2021. We expect the company to maintain moderate level of free operating cash flow generation despite an increase in cash interest costs." EAB's ability to improve cash flows should increase as it achieves operational leverage over its mostly fixed-cost base and decreasing capital spending. Its unique software sales model results in large stand-up costs, which previously hampered free operating cash flow (FOCF) since the carve-out in 2017. S&P said, "Beginning in fiscal 2022, we believe FOCF to debt will increase to about 5%, driven by strong improvements in gross margins and fewer operating expenses related to the build-out of internal infrastructure, low capex requirements, and recent acquisitions. We expect FOCF growth to accelerate over the next two years as the business increases its operational leverage." As clients increase their spending with EAB, gross margins will incrementally increase, significantly improving cash flows. EAB continues to perform well with highly recurring and visible revenue characteristics, which limits the chance of a decline in credit metrics. The company has performed well with limited impact from the Covid-19 pandemic. In S&P's view, EAB's services have strong growth rates due to its market-leading ability to provide solutions and manage all parts of the enrollment process for primarily higher education institutions. EAB routinely generates renewal rates above 90% for substantially all its segments, resulting in about 99% of total revenue being classified as recurring. EAB has added to its offerings over time, supplementing capabilities with smaller tuck-in acquisitions and increasing the average life of each contract. S&P said, "We believe EAB has limited competition due to its niche end markets, strong brand, and good relationships with over 2,100 clients and higher education administrators. We believe company's enrollment success (data enabled services) segment which accounts for over 50% of revenues will continue to drive the company's growth prospects." This segment primarily supports undergraduate student enrollment by targeting qualified prospective students to build a robust pipeline for the application process, which drives operational efficiencies and return on investment for the universities by ensuring they have the right fit students and optimize financial aid resources. S&P said, "The stable outlook on EAB reflects our expectation that it will continue to increase revenue and EBITDA in the historical mid-single-digit percentages, with improving EBITDA margins as it scales. We expect EAB to maintain adequate liquidity and generate at least $35 million of FOCF over the next 12 months due to lower one-time costs and investment spending for new product development." S&P could lower the ratings on EAB if: -- Revenue growth contracts or slows meaningfully below the historical mid-single-digit percentages, potentially due to market share losses from increased competition that leads to negligible FOCF; -- It cannot maintain adequate liquidity; or -- EBITDA interest coverage is sustained below 1.5x. S&P could raise the ratings on EAB if: -- The company sustains at least $50 million FOCF while increasing revenue in the high-single-digit percent area over the next 12 months; and -- It improves adjusted EBITDA margins to the low-30% area; and -- S&P-adjusted leverage is sustained under 7x. B & S DEVELOPMENT: Taps Vanecia Belser Kimbrow as Legal Counsel --------------------------------------------------------------- B & S Development, Inc., received approval from the U.S. Bankruptcy Court for the Western District of Tennessee to hire the Law Office of Vanecia Belser Kimbrow to serve as legal counsel in its Chapter 11 case. The firm's services include: (a) Advising the Debtor relative to the administration of its bankruptcy proceeding; (b) Advising the Debtor with respect to its powers and duties in the continued management and operation of its business and property; (c) Representing the Debtor before the bankruptcy court; (d) Advising the Debtor regarding applications, orders and motions filed with the court by third parties; (e) Attending meetings conducted pursuant to Section 341(a) of the Bankruptcy Code and representing Debtor at all examinations; (f) Communicating with creditors and other parties in interest; (g) Preparing legal papers; (h) Conferring with other professionals retained by the Debtor and other parties in interest; (i) Negotiating and preparing the Debtor's Chapter 11 plan and related documents, and taking necessary actions to obtain confirmation of the plan; and (j) other necessary legal services. The firm's hourly rates are as follows: Vanecia Belser Kimbrow, Esq. $550 per hour Paralegal $250 per hour As disclosed in court filings, the Law Office of Vanecia Belser Kimbrow is a "disinterested person" within the meaning of Section 101(14) of the Bankruptcy Code. The firm can be reached through: Vanecia Belser Kimbrow, Esq. Law Office of Vanecia Belser Kimbrow 1011 W. Poplar, Suite 5 Collierville, TN Collierville, TN 38017 Phone: (901)8707965 Email: belserkimbrolaw@gmail.com About B & S Development B & S Development, Inc. filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. W.D. Tenn. Case No.21-20894) on March 18, 2021, listing $500,001 to $1 million in assets and $100,001 to $500,000 in liabilities. Judge M. Ruthie Hagan oversees the case. Vanecia Belser Kimbrow, Esq., at the Law Office of Vanecia Belser Kimbrow represents the Debtor as legal counsel. BETTEROADS ASPHALT: Court Confirms Plan --------------------------------------- Judge Enrique S. Lamoutte has entered an order that the Plan of Betteroads Asphalt, LLC, as supplemented, is approved in its entirety and confirmed under Section 1129 of the Bankruptcy Code. All objections and all reservations of rights pertaining to the confirmation of the plan that have not been withdrawn, waived or settled have been or are hereby overruled on the merits The plan satisfies the requirements of section 1123(a)(2) of the Bankruptcy Code. Article III of the plan specifies that classes 5.1 and class 5.2 are unimpaired. The plan satisfied the requirements of Section 1129(a)(8) of the Bankruptcy Code with all classes which are casting votes and are not insiders. Unimpaired classes 5.1 is conclusively presumed to have accepted the plan. Also, the holders of claims of classes 1, 2, 3, 4, 5.2 and 6 have accepted the plan in accordance to Section 1126(d) of the Bankruptcy Code. The Plan satisfied the requirements of Section 1129(b) regarding class 7 and class 8. The Plan does not unfairly discriminate. The Plan is fair and equitable regarding class 7 and 8 inasmuch as no claim nor interest junior to such classes will not receive interest in any property. About Betteroads Asphalt and Betterecycling Corp Betteroads Asphalt LLC produces warm mix asphalt, which is used in airports, highways, neighborhoods, and environmental projects. Betterecycling Corporation produces gasoline, kerosene, distillate fuel oils, residual fuel oils, and lubricants. Both companies are based in San Juan, P.R. On June 9, 2017, creditors commenced involuntary bankruptcy petitions under Chapter 11 of the Bankruptcy Code against Betteroads Asphalt LLC (Bankr. D.P.R. Case No. 17-04156) and Betterecycling Corporation (Bankr. D.P.R. Case No. 17-04157). On Oct. 11, 2019, the court entered the "order for relief" after finding that the involuntary petitions were not filed for an improper bankruptcy purpose or with bad faith. Judge Enrique S. Lamoutte oversees the cases. The Debtors are represented by Lugo Mender Group, LLC. BOUTIQUE NEVADA: Seeks to Use Cash Collateral --------------------------------------------- Boutique Nevada, LLC asks the U.S. Bankruptcy Court for the District of Nevada for authority to use cash collateral in accordance with the budget and provide related relief. The Debtor requests interim approval on an emergency basis for the use of cash collateral to allow for the continued operation, preservation and maintenance of its Hotel business property pending a final hearing. Additionally, the Debtor requests that the Court schedule a further hearing not sooner than 15 days after the commencement of the case for a final hearing on the Motion. The Debtor owns and operates The Retreat on Charleston Peak, which is a 62-room hotel located at 2755 Kyle Canyon Road, Las Vegas, Nevada 89124, APN 128-28-304-001. The Debtor is managed by the husband-and-wife team of Deanna and Colin Crossman, who are experienced hoteliers who previously owned various hotels in North Carolina, and who first acquired the Hotel in 2018. The Hotel experienced a sharp downturn in revenue given its inability to host events and large gatherings during the COVID-19 pandemic and state-mandated closures, and thus fell behind on its debt service leading to a noticed foreclosure sale for the property, and this bankruptcy was filed to stay that foreclosure and allow for a restructuring of its secured debt. In addition to the Crossmans, who own 55.25% of the membership interests in the Debtor, the Debtor also has seven other members who collectively hold the remaining 44.75% of its membership interests. On June 26, 2018, Mt Charleston Landlord, LLC, as predecessor to the Debtor, acquired the Hotel from its prior owner for a purchase price of $4,500,000, which purchase was financed, in part, by an entity called Mountain West Debt Fund, LP, as secured lender. The Secured Lender is an affiliate of Taylor Derrick Capital, a private equity group with offices in Henderson, Nevada and Salt Lake City, Utah. On June 26, 2018, the parties entered into a Term Loan Agreement in the original principal amount of $3,530,000, with the debt evidenced by a Secured Promissory Note, and secured by a Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing that was recorded against the Hotel in the Official Records of the County Recorder, Clark County, Nevada on June 27, 2018 as Inst# 20180617-0000162. On June 26, 2019, the parties entered into a Loan Modification Agreement, which increased the loan amount to $4,525,000, permitted the borrower to draw available loan proceeds o $300,000, and extended the maturity date for six months to December 26, 2019, for an extension fee of $101,812.50. The Debtor used these additional monies to fund certain limited improvements at the Hotel. The loan to the Secured Lender was not repaid when it was due in December 2019. Due to the COVID-19 pandemic and related state Governor-ordered closures as a result, the Hotel was required to completely ceased all operations for a period of more than two months from March 17, 2020 through May 25, 2020. Additionally, from May 25, 2020 through June 1, 2021, and thus more than a year thereafter, the Hotel was able to reopen, but only on a limited and "phased" basis, except for the spa, which has remained closed and will not reopen until August. The foregoing closure and limited operations severely impacted the Debtor's operations and its ability to service its debt to the Secured Lender and other obligations. On July 27, 2020, the Nevada Employment Security Division obtained a Judgment against the Debtor in the Eighth Judicial District Court, Clark County, Nevada, Case No. A-20-8169130C in the amount of $21,833.53 for unpaid contributions to the Nevada Unemployment Compensation Fund, which Judgment was recorded in the Official Records on July 29, 2020 as Inst# 20200729-0000994. During the COVID pandemic, the Hotel did what it could to survive, including obtaining two round of Paycheck Protection Program fundings, and a small grant, however, the Hotel still struggled significantly. The Hotel also attempted to work out some kind of arrangement with the Secured Lender to forbear or restructure the loan, however, the Secured Lender demanded a $1,000,000 paydown of its loan in order for that to happen, which the Hotel obviously could not afford given that it was still reeling from the pandemic. On February 4, 2021, and thus more than a year and a half after the original loan was made, the Secured Lender filed a UCC-1 Financing Statement with the Nevada Secretary of State, thereby purporting to perfect a security interest in "all assets of Debtor." The Secured Lender is claiming that the Loan has now ballooned to not less than $6.65 million as of the Petition Date, inclusive of default interest, late fees, and costs. The Debtor filed for bankruptcy the day prior to the Secured Lender's foreclosure sale in order to avoid the Hotel being lost, thus staying the sale by operation of the automatic stay in section 362 of the Bankruptcy Code. The Debtor is only seeking to use alleged cash collateral to preserve, maintain and operate its Hotel and related business in the ordinary course of the business. Each expense included in the Budget is a necessary and appropriate to the business, which is Debtor's sole means of generating revenue. Additionally, during what is anticipated to be the Debtor's very brief period while it is in bankruptcy, the Debtor proposes to make a monthly adequate protection payment to the Secured Lender in the amount of $25,000 on or before the 5th calendar day of each and every month during the pendency of the Chapter 11 Case. Additionally, the Debtor will be filing its proposed Plan of Reorganization within the first few weeks of the bankruptcy case, and thus with the aim of having a confirmation hearing scheduled within 10 weeks of the Petition Date, thus mitigating any imposition on the Secured Lender even further. A copy of the motion is available for free at https://bit.ly/35vKKmJ from PacerMonitor.com. About Boutique Nevada, LLC Boutique Nevada, LLC owns and operates The Retreat on Charleston Peak, which is a 62 room hotel located at 2755 Kyle Canyon Road, Las Vegas, Nevada 89124, APN 128-28-304-001. The Hotel is a rustic lodge elevated at 6,700 ft. above sea level in the Kyle Canyon area situated on 5.76 acres of land near Mount Charleston, and is 45 minutes away from the Las Vegas Strip. The Hotel also offers various amenities, including the Canyon Restaurant & Tavern Bar, a full-service restaurant and bar with restricted gaming, and a 5,100 square foot event space and outdoor deck for wedding or commitment ceremonies, conferences, and other events. The Hotel also has a spa, however, that has been closed during the COVID-19 pandemic, but which will be reopened in August. The Debtor sought protection under Chapter 11 of the U.S. Bankruptcy Code (Bankr. D. Nev. Case No. 21-13050) on June 16, 2021. In the petition signed by Deanna M. Crossman, manager, the Debtor disclosed up to $10 million in both assets and liabilities. Larson & Zirzow, LLC represents the Debtor as counsel. BOUTIQUE NV: Case Summary & 11 Unsecured Creditors -------------------------------------------------- Debtor: Boutique NV, LLC The Retreat on Charleston Peak FDBA Mt Charleston Landlord 2755 Kyle Canyon Road Las Vegas, NV 89124-9282 Business Description: Boutique NV, LLC operates in the traveler accommodation industry. Chapter 11 Petition Date: June 16, 2021 Court: United States Bankruptcy Court District of Nevada Case No.: 21-13050 Judge: Hon. Natalie M. Cox Debtor's Counsel: Matthew C. Zirzow, Esq. LARSON & ZIRZOW, LLC 850 E. Bonneville Ave. Las Vegas, NV 89101 Tel: 702-382-1170 Email: mzirzow@lzlawnv.com Estimated Assets: $1 million to $10 million Estimated Liabilities: $1 million to $10 million The petition was signed by Deanna M. Crossman, manager. A full-text copy of the petition containing, among other items, a list of the Debtor's 11 unsecured creditors is available for free at PacerMonitor.com at: https://www.pacermonitor.com/view/56SDCQQ/BOUTIQUE_NV_LLC__nvbke-21-13050__0001.0.pdf?mcid=tGE4TAMA BRICK HOUSE: Seeks to Use Cash Collateral Thru Aug. 31 ------------------------------------------------------ Brick House Properties, LLC asks the U.S. Bankruptcy Court for the District of Utah, Central Division, for authority to use cash collateral on a final basis through August 31, 2021, and provide adequate protection payments. The Debtor requires funds to continue operating its business as a going concern, and manage and preserve its property for the benefit of Zions Bank and other creditors. The Debtor owns land, comprised of two separate parcels, located at 1624 and 1646 West 13200 South, Riverton, Utah 84065. The Property is comprised of approximately three acres of land, and is used by the Debtor's tenants for a variety of purposes. The Debtor's business consists primarily of holding and managing the Property. In connection with the Property, the Debtor has obtained financing from Zions Bank and as a condition of that financing, has granted Zions Bank a first-priority trust deed which encumbers the Property. The Debtor has also granted Zions Bank an assignment of leases, rents and income generated from the Property which constitute Zions Bank's cash collateral. The Debtor submits Zions Bank is adequately protected by the Debtor's payment of agreed upon payments to Zions Bank in the regularly scheduled amount of principal and interest due. The Debtor is not requesting any extraordinary relief through the Motion within the meaning of Local Rule 4001-2. Zions Bank will be further adequately protected by its interest in the Property and the substantial "equity cushion" over the amounts of their claims. The Debtor, as of the Petition Date, was indebted to Zions Bank in the approximate amount of $781,210. Based on the Debtor's Statements and Schedules, the value of the Real Property, as of the Petition Date, is in excess of $1,234,000. A copy of the motion and the Debtor's budget from May to August 2021 is available at https://bit.ly/3xrnkea from PacerMonitor.com. The Debtor projects $8,450 in income from rents in June. About Brick House Properties, LLC Brick House Properties, LLC, filed a Chapter 11 bankruptcy petition (Bankr. D. Utah Case No. 20-26250) on Oct. 21, 2020, estimating under $1 million in both assets and liabilities. Brick House Properties owns two parcels of real property in Riverton, Utah. It leases portions of the property to four related persons and entities: (i) Our Journey School LLC (the "Pre-Elementary School"); (ii) Our Journey, Inc. (the "Elementary School"); (iii) Hidden Valais Ranch LLC (the "Farm"); and (iv) Emily and Josh Aune. Emily Aune is the sole member of the Debtor, and is also the sole member and owner of the Farm. She is a 90% owner in the Pre-Elementary School. The Elementary School is a 501(3)(c) non-profit and is managed by a board which Emily and Josh are members of. The Debtor is represented by Cohne Kinghorn, P.C. as counsel. CB REAL ESTATE: Case Summary & 3 Unsecured Creditors ---------------------------------------------------- Debtor: CB Real Estate, LLC 1015 RH Todd PDA 18 San Juan, PR 00908 Business Description: CB Real Estate, LLC is a fee simple owner of two commercial buildings located in Puerto Rico and a residential property in New York valued at $8.9 million in the aggregate. Chapter 11 Petition Date: June 16, 2021 Court: United States Bankruptcy Court District of Puerto Rico Case No.: 21-01849 Debtor's Counsel: Charles A. Cuprill Hernandez, Esq. CHARLES A. CUPRILL, PSC LAW OFFICES 356 Fortaleza Street Second Floor San Juan, PR 00901 Tel: 787-977-0515 Email: ccuprill@cuprill.com Debtor's Financial Consultant: LUIS R. CARRASQUILLO & CO., P.S.C Total Assets: $10,147,500 Total Liabilities: $3,407,130 The petition was signed by Horacio Campolieto Bielicki, president. A full-text copy of the petition is available for free at PacerMonitor.com at: https://www.pacermonitor.com/view/DHZARZQ/CB_REAL_ESTATE_LLC__prbke-21-01849__0001.0.pdf?mcid=tGE4TAMA List of Debtor's Three Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ 1. Lilly Del Caribe Inc. Legal Case $2,019,874 c/o McConnell Valdes LLC PO Box 364225 San Juan, PR 00936-4225 Tel: 787-250-5665 2. Planterra Landscape, Inc. Landscaping $1,003 360 Sabalo Street Services URB. Paseo Las Olas Dorado, PR 00646 Tel: 787-579-1141 3. Triple S Propiedad Insurance $4,995 PO Box 70313 Financing San Juan, PR 00936-0313 Tel: 787-749-4600 CENGAGE LEARNING: Moody's Gives B2 Rating on New $1.25BB Term Loan ------------------------------------------------------------------ Moody's Investors Service assigned a B2 rating to Cengage Learning, Inc.'s proposed $1.25 billion term loan. Cengage's existing ratings, including the B3 corporate family rating, and stable outlook are unchanged. The company plans to use the proceeds from the issuance along with other secured debt to repay its existing $1.71 billion term loan ($1.6 billion outstanding balance currently) and transaction fees. Moody's views the proposed transaction as credit positive because it will extend the company's largest debt maturity to 2026 from 2023 without an increase in leverage or interest burden. Moody's took the following actions: Issuer: Cengage Learning, Inc. Ratings Assigned: Senior Secured Term Loan due 2026 at B2 (LGD3) RATINGS RATIONALE Cengage's B3 CFR reflects continued secular challenges pressuring the higher education segment, including affordability-driven price compression, intensely competitive markets, rental and used textbooks and open educational resources. The rating also reflects the company's highly seasonal business with high leverage at 6.8x when calculated on a cash EBITDA basis (including the change in deferred revenue and with cash prepublication costs expensed) and with Moody's standard adjustments as of LTM 12/2020. Cengage's rating continues to be supported by its well established brand, good market position, long-standing relationships with education institutions, proprietary content developed through long-term exclusive relationships with leading authors and broad range of product offerings in higher education publishing. The company's Cengage Unlimited and Cengage Unlimited eTextbooks products position it favorably to expand its share in the higher education market, as on-line learning continues to expand. The rapid move to a virtual classroom during the coronavirus pandemic has accelerated advances in online courseware delivery that might have taken much longer before the pandemic. This transformation supports digital revenue growth for Cengage. The company reported over 73% of its FYE 3/2021 total net sales are now from digital, up from 66% and 62% in fiscal 2020 and 2019, respectively. The company's US Higher Education business generated 83% of segment net sales from digital. While the business model transformation poses execution risk, it lays a pathway for a more efficient cost structure in the longer term, with lower inventory levels and lower earnings volatility associated with estimation of future period print returns. Moody's projects that the company's cost reductions taken during the pandemic, a portion of which will become permanent, coupled with acceleration in digital product sales, will drive EBITDA and leverage improvements, with Debt/cash EBITDA declining to the 6.2x -- 6.5x (Moody's adjusted) range over the next 12 months. While an improvement, this leverage is still high for a highly seasonal business. The stable outlook reflects Moody's expectations for Debt/cash EBITDA in the 6.2x -- 6.5x range (Moody's adjusted), good liquidity, and creditor-friendly financial strategies emphasizing repayment of debt. ESG CONSIDERATIONS The key social risks in the education publishing sector lies in evolving demographic and societal trends and particularly in the way students choose to study and consume learning materials. As affordability of textbooks and learning materials are important to students and higher education institutions, less expensive alternatives to print textbooks emerged. This social trend resulted in a multi-year precipitous decline in average spend per student on learning materials. Education courseware providers, including Cengage, are responding by growing digital offerings that provide extra value to students. The coronavirus outbreak has accelerated the transformational social changes impacting courseware providers. The move toward online and hybrid education (a combination of online and on-campus) has accelerated with the pandemic forcing many previously reluctant universities and K-12 schools to launch or expand digital capabilities, driving up the demand for the courseware providers' digital solutions. LIQUIDITY & STRUCTURAL CONSIDERATIONS Cengage has good liquidity, supported by a sizable $458 million cash balance as of March 31, 2021, and fully available ABL revolver maturing in October 2023. Moody's projects that cash on hand and externally generated cash flow will be sufficient to fund the company's highly seasonal cash needs and annual term loan amortization over the next 12-18 months. Cash flow needs are highly seasonal with working capital swings of roughly $100-$150 million as the majority of sales occur in Q2 and Q4 driven by sales of digital product and courseware. The ABL revolver (with no outstanding balance and $82.3 million borrowing base as of December 31, 2020) provides adequate backup for seasonal cash needs. Of the total $225 million ABL commitments, $18.45 million matures in June 2021 and the remaining $206.55 million matures on October 29, 2023 (or 91 days prior to June 7, 2023, if any of the company's term loans due 2023 are then outstanding). Moody's does not expect availability on the revolver to fall below the lesser of $25 million or 10% of the borrowing base that would trigger the requirement to maintain a minimum 1.0x fixed charge coverage ratio. If the covenant ratio were to be tested over the next 12-18 months, Moody's expects that there will be an adequate headroom over the requirement. The proposed senior secured term loan is rated one notch above the CFR, reflecting the debt cushion from the $620 million Senior Unsecured Notes. The term loan is not expected to have any financial covenants. The $620 million Senior Unsecured Note is rated Caa2 due to its subordination to the company's $225 million asset backed lending facility (unrated) and the senior proposed secured term loan. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING Ratings could be upgraded if Cengage is able to consistently grow revenue and demonstrate earnings growth resulting in debt-to-cash EBITDA (Moody's adjusted) being sustained comfortably below 5x and is committed to operating at that leverage level. Good liquidity with cash balances being more than sufficient to cover outflows including seasonal working capital swings and with free-cash flow-to-debt being sustained in the mid- single-digit percentage range or better, would also be needed for an upgrade. Moody's defines cash EBITDA as EBITDA with cash prepublication costs expensed, adjusting for deferred revenue and including Moody's standard accounting adjustments. Cengage ratings could be downgraded if market conditions or competitive pressures lead to earnings decline, resulting in debt-to-cash EBITDA sustained above 6.5x or free cash flow turning negative. A weakening of liquidity including through such factors as significant revolver usage, diminishing cash balance or elevated refinancing risk, would also pressure the company's ratings. Aggressive financial policy, including debt-funded acquisitions or distributions to owners, could also lead to a downgrade. The principal methodology used in this rating was Media Industry published in June 2017. Headquartered in Boston, Cengage Learning, Inc. is a provider of learning solutions, software and educational services for the higher education, research, school, career, professional, and international markets. Large shareholders currently include Apax Partners, KKR and Searchlight Capital as well as other creditors who became shareholders upon exit from the Chapter 11 bankruptcy in 2014. Revenue for the last twelve months ended March 31, 2021 totaled $1.26 billion. CERTA DOSE: Seeks to Hire Ortiz & Ortiz as Bankruptcy Counsel ------------------------------------------------------------- Certa Dose Inc. seeks approval from the U.S. Bankruptcy Court for the Southern District of New York to employ Ortiz & Ortiz, LLP to serve as legal counsel in its Chapter 11 case. The firm's services include: (a) performing all necessary services related to the Debtor's reorganization and the bankruptcy estate; (b) protecting and preserving the estate assets during the pendency of the Chapter 11 case; (c) preparing all documents and pleadings necessary to ensure the proper administration of the case; and (d) all other bankruptcy-related necessary legal services. The hourly rates of the firm's attorneys and staff are as follows: Partners $475 per hour Of Counsel $375 per hour Paralegals $100 per hour In addition, the firm will seek reimbursement for expenses incurred. The firm received a retainer of $20,000 from the Debtor. Norma Ortiz, Esq., a partner at Ortiz & Ortiz, disclosed in a court filing that the firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Norma E. Ortiz, Esq. Ortiz & Ortiz, LLP 35-10 Broadway, Ste. 202 Astoria, NY 11106 Telephone: (718) 522-1117 Facsimile: (718) 596-1302 Email: email@ortizandortiz.com About Certa Dose Certa Dose Inc., a New York-based company that develops, sells and licenses pharmaceutical products and technology, filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. S.D.N.Y. Case No. 21-11045) on May 30, 2021. Caleb S. Hernandez, president, signed the petition. In the petition, the Debtor disclosed total assets of up to $50 million and total liabilities of up to $100 million. Judge Lisa G. Beckerman oversees the case. Ortiz & Ortiz, LLP serves as the Debtor's legal counsel. CERTA DOSE: Seeks to Use Cash Collateral ---------------------------------------- Certa Dose, Inc. asks the U.S. Bankruptcy Court for the Southern District of New York for authority to use cash collateral, schedule a final hearing, and provide related relief. The Debtor commenced the Chapter 11 proceeding to affect a balance sheet reorganization stemming from disputes and self-dealing in a contrived scheme orchestrated by its former Chief Operating Officer John Blood and two affiliated board members, Steven Rubin and Steven Hoffenberg, to over-leverage the company and cause its takeover led by insurance company and lender COPIC Insurance Company, which is controlled by one of the board members. The Debtor was founded by Dr. Caleb Hernandez in 2013. Dr. Hernandez has been the Debtor's majority shareholder since the company was formed. Dr. Hernandez was an emergency room physician when he prevented a nurse from inadvertently administering a fatal dose of medicine to a child. He learned that there is an alarming number of pediatric overdoses in this country that result from the improper dosing of medicine. Dr. Hernandez developed a proprietary and patented method of delivering medicine to children and others in a way that significantly reduces, and virtually eliminates, the risk of life-threatening medical overdoses. He has also patented and developed an alternative to the EpiPen that is a fraction of the cost of that product. EpiPen is the brand name of an auto-injectable device that delivers the drug epinephrine for anaphylaxis. Epinephrine has become essential to the country's effort to defeat COVID-19 because it must be on hand when COVID vaccines are administered: it is the drug used to counter any allergic reaction a patient may have to the vaccine. The Debtor's product is a modern solution to the administration of this drug and costs a tenth of the retail price of the EpiPen. The Debtor has sold and marketed this product to municipalities and anticipates a significant increase in the sales of this product. The Debtor has been saddled with litigation that has adversely impacted its business operations and it is in need of the court's protection so that it can reorganize its affairs, continue to grow its life-saving business, and satisfy the claims of its creditors. Beginning in 2014, COPIC and the COPIC Investors made investments in the Debtor pursuant to which those companies and other parties entered into a Series Seed Preferred Stock Purchase Agreement, an Investor Rights Agreement, a Co-Sale Agreement, and a Voting Agreement. COPIC purchased preferred stock (designated Series Seed Preferred Stock) in the Debtor in 2014, 2016, and 2017. The Debtor also raised funds, through convertible notes, from a group of family and friends that were wholly-unrelated to COPIC's president, Rubin, became a member of the Debtor's Board of Directors in 2018. Blood and COPIC-affiliated Directors on the Board suggested that Dr. Hernandez operate out of New York City and permit Blood to manage the operations in Colorado. Dr. Hernandez had established a strong relationship with Johnson & Johnson in New York and continued his efforts to grow the company from New York. However, over Dr. Hernandez's objections, Blood ran through millions of dollars of the Debtor's cash, at a rate of $400,000 to $600,000 a month, before sales of the Debtor's products could support this level of spending. After he spent most of the cash raised by the Debtor, Blood recommended that the Debtor engage in another round of fund raising. When Dr. Hernandez learned that COPIC intended to restrict access to this round of funding to the COPIC Investors and preclude any of the Good Faith Investors from participating, he questioned the reasoning behind Blood's and COPIC's actions, but they assured him of their good intentions. He also knew they were bound by their fiduciary duties to the shareholders. It later became apparent to Dr. Hernandez that COPIC intended to devalue the company and saddle it with debt so it could take over the Debtor. When Dr. Hernandez called for an investigation of the nature of the proposed Series A fund raising, and a turnover of the internal documents and communications related to the proposed funding, Hoffenberg and Rubin refused to cooperate. Hoffenberg resigned from the Board and Rubin was removed from the Board. When Dr. Hernandez took over management of the Debtor in 2019, the Debtor had lost millions of dollars and had less than $350,000 in its operating account. Dr. Hernandez was forced to take immediate corporate action to protect the Debtor and the Good Faith Investors. He learned that Blood and COPIC were looking to sell the Debtor's intellectual property, its most valuable asset, and were planning implement a Series A round of financing which would effectively result in a sale of the company for $1.5 million dollars. Dr. Hernandez also learned that COPIC was one of the buyers. COPIC knew that the Debtor had significant value since it had obtained an appraisal of the company that gave it a value of $77 million to $160 million. Because Cooley LLP refused to advise Dr. Hernandez on how to protect the Debtor -- citing a conflict of interest -- he hired corporate counsel to advise him on how to thwart the outrageous self-dealing proposed by COPIC and its affiliates. Dr. Hernandez took a series of corporate actions that included amending the Debtor's certificate of incorporation and amending the terms of the convertible notes to prevent any further malfeasance by COPIC and the COPIC Investors. As a result of these actions, the Debtor converted the notes to equity. Litigation ensued in state court in Colorado, Delaware, and New York among COPIC, COPIC's affiliates, the Debtor, and Dr. Hernandez. The Debtor sued COPIC, Blood, Cooley LLP, and the related parties in New York state court. The action was dismissed for lack of jurisdiction and the action was commenced and is pending in Colorado. On June 5, 2020, the Debtor obtained an Economic Injury Disaster Loan from the U.S. Small Business Administration in the amount of $150,000. It is a 30-year loan with a low interest rate. Monthly loan installment payments are not required to commence until June 2021. The Debtor was required to grant the SBA a lien on all of its assets as a condition to obtaining the Loan, including a lien on its deposit accounts. The Debtor believes the SBA holds a first lien on all of its assets. The Debtor's other secured creditor is Dr. Hernandez who holds as trustee, liens against the Debtor's valuable intellectual property for the benefit of the company's shareholders. The transfer of the IP Assets to the Debtor occurred over a period of time and was besieged by delays and misrepresentations by Blood and his collaborators culminating in a November 2020 settlement agreement which comprehensively resolved all claims amongst the Debtor and Dr. Hernandez which is secured by duly filed UCC-1 financing statements in New York, Delaware, Colorado and the United States Patent and Trademark Office. The Debtor says it was battered by Blood's and COPIC's malfeasance, the numerous lawsuits brought by the parties, and the business low down that resulted from COVID-19. However, the Debtor believes its assets and business are worth no less than $80 million and may be worth significantly more when licensing agreements that are pending result in additional product being brought to market in the near future. Moreover, the Debtor believes the sales of its epinephrine product will continue to grow exponentially. To ensure that the SBA's interest in the cash collateral is protected, the Debtor proposes that the SBA be provided a replacement lien for the use of the funds. The Order provides that, as adequate protection for the Debtor's use of the SBA's collateral, and to protect the SBA from a diminution in its collateral, the Debtor grants the SBA replacement liens in all of the Debtor's post-petition assets and proceeds, including the cash collateral and the proceeds of the foregoing, to the extent that the SBA had a valid security interest in the assets on the Petition Date. In addition, the proposed order also permits the Debtor to make adequate protection payments to the SBA pursuant to the terms of the Loan. Since the Loan calls for monthly payments of $731, the Debtor says the Court should find those payments constitute additional adequate protection of the SBA's interest in the cash collateral. The Debtor believes the SBA is over-secured. The Loan amount is relatively modest and the Debtor's primary assets consist of its patents and intellectual property, which greatly exceeds the value of the SBA's lien. As such, the proposed adequate protection payments, the proposed Replacement Liens, and the equity cushion in the property support granting the relief sought. A copy of the motion and the Debtor's 30-day budget is available for free at https://bit.ly/3xqa8Gp from PacerMonitor.com. The Debtor projects $80,000 in sales and $117,417 in total expenses. About Certa Dose, Inc. Certa Dose Inc. develops, sells and licenses pharmaceutical products and technology. Its principal business is developing, selling and licensing its pharmaceutical products and technology. The Company was designated as an innovation company by Johnson & Johnson and has received a grant and mentor ship from J & J. The Debtor sought protection under Chapter 11 of the U.S. Bankruptcy Code (Bankr. S.D. N.Y. Case No. 21-11045) on May 30, 2021. In the petition signed by Caleb S. Hernandez, president, the Debtor disclosed up to $50 million in assets and up to $100 million in liabilities. Norma Ortiz, Esq., at Ortis & Ortiz, LLP is the Debtor's counsel. CHINA FISHERY: Burlington/Monarch Say Peru Plan Achieves Consensus ------------------------------------------------------------------ Creditors Burlington Loan Management DAC and Monarch Alternative Capital LP filed a Chapter 11 Plan for CFG Peru Investments Pte. Ltd. (Singapore). After nearly five long years, the chapter 11 process has maximized value for CFG Peru and its creditors. The Creditor Plan Proponents are pleased to report that they have resolved all potential substantive objections to the Plan from the Chapter 11 Trustee, the Other Debtors, and the U.S. Trustee; the Creditor Plan Proponents have also resolved an array of informal comments from an array of other case constituents. Furthermore, the Creditor Plan Proponents, the Other Debtors, and certain affiliated parties have entered into the Global Settlement Agreement, pursuant to which those parties have agreed to exchange consensual releases, facilitate the transactions in multiple foreign jurisdictions necessary to implement the Plan, and take other steps necessary to consummate the Plan. The level of consensus marshaled by the Creditor Plan Proponents for the Plan is particularly impressive given the circumstances under which these cases were commenced almost five years ago and the array of challenges -- including inter-creditor and inter-stakeholder disputes -- that were resolved as part of the Creditor Plan Proponents' restructuring process. Furthermore, the Plan will provide significant benefits to CFG Peru and its Peruvian OpCo subsidiaries, including substantially deleveraging the Peruvian OpCos and reduce their funded indebtedness from approximately $1.15 billion to $450 million (comprised of $300 million of take-back debt and a fully committed $150 million exit facility). Accordingly, the Creditor Plan Proponents request that the Bankruptcy Court confirm the Plan and clear the way for the Creditor Plan Proponents and the Plan Administrator designated pursuant to the Plan to implement the Plan and the transactions contemplated thereby. The Plan proposes to treat claims and interests as follows: * Class 3 – Senior Notes Claims. Each Holder shall receive the distributions to such Holder pursuant to the UK Proceeding and/or Singapore Scheme. Class 3 is impaired. * Class 4 – General Unsecured Claims. Each such General Unsecured Claim shall be deemed canceled and released and there shall be no distribution to Holders of General Unsecured Claims on account of such Claims; provided, however, that, for the avoidance of any doubt, the treatment provided in the Plan for General Unsecured Claims shall not modify the obligations of CFG Peru under the Global Settlement Agreement. Class 4 is impaired. * Class 5 – BANA-CFG Peru Claim. Each Holder of the BANA-CFG Peru Claim shall receive its pro rata share of $30,998,083.56 in Cash, which Cash shall be remitted by NewCo or the Peruvian OpCos. Class 5 is impaired. * Class 7 – Section 510(b) Claims. Each Section 510(b) Claim shall be deemed canceled and released and there shall be no distribution to Holders of Section 510(b) Claims on account of such Claims. Class 7 is impaired. * Class 8 – Interests in CFG Peru. In full and final satisfaction, compromise, settlement, and release of and in exchange for each Interest in CFG Peru, Interests in CFG Peru shall be Reinstated as of the Effective Date or, at the Creditor Plan Proponents' option, shall be cancelled. No distribution shall be made on account of any Interests in CFG Peru. Class 8 is impaired. On and after the Effective Date, the Plan Administrator will be authorized, subject to the Wind-Down Budget, to implement the Plan and any applicable orders of the Bankruptcy Court, and the Plan Administrator shall have the power and authority to take any action necessary to wind down and dissolve CFG Peru's Estate, including the power and authority to take any action necessary, at his reasonable discretion, to wind down or dispose of, directly or indirectly, the assets of, and/or the equity in, Protein Trading Limited. Following the Confirmation Date, neither CFG Peru nor the Plan Administrator shall have any obligation to participate in, or otherwise defend against, any litigation commenced against Protein Trading Limited As Soon As Practicable After The Effective Date, The Plan Administrator Shall: (1) Cause CFG Peru to comply with, and abide by, the terms of the UK Proceeding, the terms of the Singapore Scheme, and any other documents contemplated thereby; (2) appoint a liquidator pursuant to Singaporean law, as necessary; (3) to the extent applicable, file a certificate of dissolution or equivalent document, together with all other necessary corporate and company documents, to effect the dissolution of CFG Peru under the applicable laws of the jurisdiction of incorporation or formation (as applicable); and (4) take such other actions as the Plan Administrator may determine to be necessary or desirable to carry out the purposes of the Plan. Any certificate of dissolution or equivalent document may be executed by the Plan Administrator without need for any action or approval by the shareholders or board of directors or managers of CFG Peru. From and after the Effective Date, CFG Peru (1) for all purposes shall be deemed to have withdrawn its business operations from any state in which CFG Peru were previously conducting, or are registered or licensed to conduct, its business operations, and shall not be required to file any document, pay any sum, or take any other action in order to effectuate such withdrawal, (2) shall be deemed to have canceled pursuant to the Plan all Interests, and (3) shall not be liable in any manner to any taxing authority for franchise, business, license, or similar taxes accruing on or after the Effective Date. For the avoidance of doubt, notwithstanding CFG Peru's dissolution, CFG Peru shall be deemed to remain intact solely with respect to the preparation, filing, review, and resolution of applications for Professional Fee Claims and the Chapter 11 Trustee Fee Claims and expense reimbursement. Co-Counsel to the Creditor Plan Proponents: Patrick J. Nash, Jr., P.C. Heidi M. Hockberger KIRKLAND & ELLIS LLP 300 North LaSalle Chicago, Illinois 60654 Telephone: (312) 862-2000 Facsimile: (312) 862-2200 - and - Gregory Pesce WHITE & CASE LLP 111 South Wacker Drive, Suite 5100 Chicago, Illinois 60606 Telephone: (312) 881-5360 Facsimile: (312) 881-5450 A copy of the Disclosure Statement is available at https://bit.ly/3g98QK5 from PacerMonitor.com. About CFG Peru China Fishery Group Limited (Cayman) and its affiliates, including CFG Peru Investments Pte. Limited (Singapore), sought protection under Chapter 11 of the Bankruptcy Code (Bankr. S.D.N.Y. Lead Case No. 16-11895) on June 30, 2016. The petition was signed by Ng Puay Yee, chief executive officer. The cases are assigned to Judge James L. Garrity Jr. At the time of the filing, China Fishery Group estimated its assets at $500 million to $1 billion and debts at $10 million to $50 million. Weil, Gotshal & Manges LLP has been tapped to serve as lead bankruptcy counsel for China Fishery and its affiliates other than CFG Peru Investments Pte. Limited (Singapore). Weil Gotshal replaced Meyer, Suozzi, English & Klein, P.C., the law firm initially hired by the Debtors. The Debtors have also tapped Klestadt Winters Jureller Southard & Stevens, LLP as conflict counsel; Goldin Associates, LLC, as financial advisor; and RSR Consulting LLC as restructuring consultant. On Nov. 10, 2016, William Brandt, Jr., was appointed as Chapter 11 trustee for CFG Peru Investments Pte. Limited (Singapore), one of the Debtors. Skadden, Arps, Slate, Meagher & Flom LLP serves as the trustee's bankruptcy counsel; Hogan Lovells US LLP serves as special counsel; and Quinn Emanuel Urquhart & Sullivan, LLP, serves as special litigation counsel; and Epiq Bankruptcy Solutions, LLC, as notice and claims agent. CHOCTAW GENERATION: Fitch Affirms CCC on $59MM Series 2 Notes ------------------------------------------------------------- Fitch Ratings has taking the following rating actions on Choctaw Generation Limited Partnership, LLLP's (CGLP) $289 million of outstanding pari passu lessor notes: -- $235 million ($185 million outstanding) Series 1 lessor notes due December 2031 affirmed at 'B-'; Outlook Stable; -- $59 million ($104 million outstanding) Series 2 lessor notes due December 2040 affirmed at 'CCC'. RATING RATIONALE The rating reflects debt service coverage ratios (DSCR) and financial performance persistently near breakeven and reliance on liquidity from subordinate accounts to support repayment. DSCRs near breakeven heightens repayment risk on the Series 1 notes due to a lack of a debt service reserve to support cash shortfalls. Fitch's forecasts show an operating profile that results in a weak financial profile with a limited margin of safety. Some flexibility exists to manage liquidity through delaying major maintenance, although this could lead to a weaker operational profile as the plant ages. Further deterioration of the project's operational or financial profile would erode the remaining limited margin of safety for repayment of the Series 1 notes. Default is a real possibility for the Series 2 notes as deferred payments extend repayment beyond the purchase power agreement (PPA) term and into the merchant period. KEY RATING DRIVERS Operations Stabilizing - Operation Risk: Weaker The owner-lessor, a subsidiary of Southern Company, funded substantial modifications to improve plant performance. The operator, also a Southern subsidiary, is considered strong but the facility has experienced some volatility in operations since completing the modifications. Lack of a dedicated O&M reserve additionally weakens the project's ability to withstand periods of underperformance, potentially eroding cash flow cushion available for repayment. Adequate Mine-mouth Coal Supply - Supply Risk: Weaker CGLP's mine-mouth location and reputable fuel supplier moderates some supply risk. However, early termination or expiration of the supply agreement in 2032 with potentially less favorable pricing could lead to inadequate fuel cost recovery. Revenue Contract with Strong Counterparty - Series 1 Revenue Risk: Midrange CGLP has a PPA with Tennessee Valley Authority (TVA; AA/Stable Outlook) for the project's full capacity and energy output through mid-2032. The Series 1 notes mature four months prior to PPA expiration. Cash flows are moderately sensitive to dispatch levels with some vulnerability to deterioration in the economic environment. Significant Merchant Exposure - Series 2 Revenue Risk: Weaker Under a variety of sensitivity scenarios, a significant portion of Series 2 debt would remain unpaid upon PPA expiration. There is a high level of uncertainty regarding CGLP's ability to operate economically in a fully merchant environment. Debt Structure Lacks Typical Support Features - Debt Structure: Weaker Both series lack a dedicated debt service reserve, relying instead on draws from other project accounts to fund Series 1 payment shortfalls. The ability to defer Series 2 target interest and principal payments introduces the risk of a high outstanding balance to be repaid after the PPA expires resulting in exposure to refinancing risk. Financial Summary Under Fitch's forecasts with revised operational assumptions, the Series 1 DSCR will be close to 1.0x for most years. In the absence of a debt service reserve, the project will need to access funds from subordinate accounts or require equity support to avoid payment default. This profile suggests that material default risk is present and repayment is highly sensitive to moderate underperformance. Additionally, historical operating costs have yet to stabilize to within original expectations, eroding the limited coverage cushion available. The structural subordination on Series 2 notes yields weaker credit metrics with higher repayment risk. Payment deferrals under Fitch forecasts cause the outstanding balance to balloon to $207 million in 2031. Beyond 2031, there is a high degree of uncertainty regarding project economics under fully merchant conditions and ability to fully repay the Series 2 debt by maturity. PEER GROUP CGLP's rating is comparable with other privately rated thermal projects in the 'B' category. Comparable projects typically demonstrate low coverages with limited cushion available to withstand moderate periods of underperformance and reliance on reserves or available liquidity to support debt repayment. These projects have a limited margin of safety available and are vulnerable to deterioration in operations and/or economic environment. Outside the U.S., a higher-rated coal project in Indonesia, Minejesa Capital BV (BBB-/Stable Outlook), maintains an investment grade rating supported by the absence of merchant exposure under the PPA, favorable pass-through of fuel costs, stable operating history, and a stronger average rating case coverage of 1.45x. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Operational and financial performance consistently exceeding Fitch projections; -- Improvement in the rating of the Series 2 notes is considered unlikely barring a material repayment of the deferred balances. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Coverages persistently below Fitch projections on the Series 1 notes; -- Sustained operating and/or financial performance below Fitch projections; -- Consistent draws that deplete liquidity for the Series 1 notes. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. TRANSACTION SUMMARY In December 2002, SE Choctaw purchased the 440MW lignite-fired Red Hills Generation Facility from CGLP. Immediately following the acquisition, the owner leased the facility back to CGLP under a 45-year lease, expiring Dec. 20, 2047. Lessor notes were issued in accordance with the lease, but steady declines in performance prompted a restructuring of the original lessor notes. The notes were restructured to reduce interest rates, extend the debt term, and introduce a payment-in- kind (PIK) feature to Series 2. As part of the lease restructuring, the owner-lessor agreed to make approximately $60 million in equity investments for needed repairs and maintenance and to implement various modifications to improve the performance of the facility. The restructuring also included a new operator and new refined coal-purchase agreement. Along with the lease restructuring, the ownership interest in lessee CGLP was sold to two indirect wholly owned subsidiaries of PurEnergy I, LLC. Subsequently, PurEnergy sold their interests to Orion Acquisitions, LLC in 2020. CREDIT UPDATE The project reported availability of 87% in 2020 compared to 92% in 2019 while the capacity factor remained flat at 60% in 2020 compared to 61% in 2019. Total revenues remained stable at $137 million in 2020 compared to $135 million in 2019 as overall performance through 2020 was comparable to 2019. Over the year, fuel costs increased to $68 million in 2020 from $66 million in 2019 which is in line with the dispatch of the plant. Non-feedstock expenses in 2020 increased to $43 million from $41 million in 2018, a 5% increase. There were no major issues to note during the maintenance outages or unplanned capital expenditures in 2020. The project continues to perform reliability improvement projects on an as-needed basis in order to optimize performance and preserve cash liquidity. These projects could be delayed in the event of financial underperformance as there is limited to no advance funding toward planned major maintenance needs. This could heighten the project's difficulty to maintain current levels of performance if critical maintenance needs are delayed as the plant ages. In the latter half of 2020, a lightning strike took boiler 2 offline in late September, coinciding with the boiler 1 planned outage. As a result, the project generated zero energy in October and November. The project took the opportunity to perform additional maintenance work during the outages. The lightning strike resulted in a $1 million insurance deductible and approximately $400 thousand insurance reimbursement to repair minor damage to a water pump and fan. No major issues were noted during the outage and from the lighting strike. The existing refined coal sales agreement will expire upon on December 20, 2021 of which the project earned approximately $2.8 million in annual fees. The purpose of the agreement was to provide the project with refined coal. This system was operated by a third party who installed equipment on the conveyor belt and used a chemical solution to refine the lignite coal in hopes of improved plant efficiencies and lower emissions. There is currently no replacement in place for this service. Fitch's financial analysis includes the loss of this revenue source in the Fitch forecasts. The project reported a 2020 DSCR of 1.01x DSCR compared to a 2019 DSCR of 0.99x on the Series 1 notes. Cash flow available for debt service increased by 5% in 2020 to $25 million, remaining comparable to previous years cash flow of approximately $24 million. No payments on the Series 2 notes were made in 2020 or are expected for 2021 due to the limited cash flow available. As of June 2020, the project has approximately $32 million in liquidity available in the subordinate accounts to support temporary shortfalls, but no dedicated DSRF or O&M reserve is available. Available liquidity has averaged around $20 million to $25 million over the last year. A material decline in liquidity below current levels would further heighten repayment risk and potentially result in negative rating actions. The project is conservatively forecasting a 2021 DSCR of 0.74x and estimated cash shortfall of approximately $5.5 million on the Series 1 notes based on a budgeted availability of 90% and capacity factor of 70%. Year to date performance as of April 2021 is trending above forecasts with an availability of 92% and capacity factor of 82%. Additional maintenance work is contributing to the lower project forecasts but there is some flexibility on those cost spends in the event there is a need to preserve cash balances. Moderate performance deviations from current levels for the remainder of the year could further result in reduced cash flow available for debt service. The persistent low gas price environment has pushed the project higher on the dispatch curve resulting in lower energy generation and lower energy margins than originally forecasted despite the improved availability. To mitigate, the project is continuing to work on realizing operating and maintenance cost savings to preserve cash flow. The low gas pricing environment is expected to persist and pressures the project's limited margin of safety if it is unsuccessful in realizing the cost savings from the lower dispatch or maintaining stable performance. FINANCIAL ANALYSIS Fitch utilizes the sponsor's assumptions with moderated operational stresses in creating a base case for expected performance. The base case projects availability of 90% and capacity factor of 70% which is more in line with the recent performance after completion of the plant modifications and the sponsor's updated forecasts. The base case for the Series 1 note results in DSCRs near breakeven through the remaining PPA term with reliance on available liquidity to offset potential cash shortfalls. DSCRs average 0.98x with a minimum of 0.90x in 2026, during a major maintenance year with an estimated cash shortfall of approximately $1.9 million. Under this scenario, the project maintains a limited margin of safety as repayment is highly sensitive to any underperformance. Some uncertainty remains if the project can maintain current performance without additional capital expenditures or equity support. Under a consolidated basis, the DSCR falls below breakeven through the PPA term with a Series 2 estimated balance of $207 million by 2031. During the merchant period, Fitch's base case layers on additional availability and heat rate stress of 1%, cost stress of 5%, and reduces the capacity factor to 45% reflecting the project's forecasted heat rate and market implied heat rate during the merchant period. It's assumed the project will only operate during peak hours. The project demonstrates high sensitivity during this period to any deterioration in operations or economic environment, suggesting the project is unlikely to remain economical in a merchant environment. SECURITY CGLP is structured as a leveraged lease transaction and the Series 1 and 2 notes are pass-through trust certificates secured by the project's rent payments. Although Series 2 is structurally subordinated in the payment waterfall, the two series of notes are pari passu. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. CHRISTIAN TEACHING: Seeks to Hire Charles Tyler Sr. as Counsel -------------------------------------------------------------- Christian Teaching Center Church of Akron, Ohio seeks approval from the U.S. Bankruptcy Court for the Northern District of Ohio to employ the Law Office of Charles Tyler Sr., LLC to serve as legal counsel in its Chapter 11 case. The firm's services include: (a) advising the Debtor regarding its powers and duties in the continued operation of its business and management of its property; (b) prosecuting any necessary litigation on behalf of the Debtor; (c) representing the Debtor in connection with all matters that may be filed in the bankruptcy court; (d) preparing legal papers; and (e) other necessary legal services. The firm received a retainer of $5,000 from the Debtor. The hourly rates of the firm's attorneys and staff are as follows: Charles Tyler, Sr., Esq. $250 per hour Paralegal $75 per hour Charles Tyler, Sr., Esq., disclosed in a court filing that his firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Charles Tyler, Sr., Esq. Law Office of Charles Tyler Sr., LLC 137 S. Main Street Suite 206 Akron, OH 44308 Telephone: (330) 665-0910 Facsimile: (330) 665-0718 Email: charles.tyler@tylerlawoffice.com About Christian Teaching Center Church Christian Teaching Center Church of Akron, Ohio filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. N.D. Ohio Case No. 21-50796) on May 19, 2021, listing under $1 million in both assets and liabilities. Judge Alan M. Koschik oversees the case. The Law Office of Charles Tyler Sr., LLC serves as the Debtor's legal counsel. CINEMA SQUARE: Seeks Cash Collateral Access ------------------------------------------- Cinema Square, LLC asks the U.S. Bankruptcy Court for the Central District of California, Northern Division, for authority to use cash collateral to pay certain expenses to maintain the operation, including utilities, maintenance, management fees to a non-insider property manager, and similar expenses. The Debtor says the expenses are customary and necessary to the continued operation of the business. The Debtor also notes there are the larger, but non-monthly expenses of taxes and insurance for its property. All was well with the Debtor until the COVID-19 pandemic struck in March 2020. With the shutdown of the economy, the Debtor's primary tenant, the Galaxy Theater closed as it was required to do under local and state health orders. With its income stream halted, it ceased paying rent. With rent not being paid, the Debtor was unable to meet its obligation to its secured creditor, its secured creditor commenced non-judicial foreclosure proceedings. The Debtor believes it has good prospects going forward. It has applied for a Shuttered Venue Operator Grant, and expects to heat favorable news regarding that in the very short term. With the just authorized full reopening of the economy on June 15, the theater should once again start to earn income and pay rent. The Galaxy lease has expired, as its option exercise period occurred during the pandemic but Galaxy executed a month-to-month agreement, and is negotiating a new lease with the Debtor. In addition, the City of Atascadero greatly values the Debtor's space and especially wants to see the theater remain open. To that end, it has proposed additional financing to try to close the gap and allow a cure of the delinquent payments on the secured loan. The secured creditor, however, would not wait for these events to allow a cure. It pushed on toward a sale date, forcing the Debtor to file the case to prevent foreclosure from occurring. Wilmington Trust, National Association, As Trustee, for the benefit of the Holders of COMM 2016-DC2 Mortgage Trust Commercial Mortgage Pass Through Certificates, Series 2016-DC2 holds a first Trust Deed encumbering the Property. The Deed of Trust was originally in favor of Jefferies Loancore, LLC. An assignment of the document from the original beneficiary to Wilmington Trust has been recorded. The Deed of Trust contains an assignment of rents clause, and the rents from the property are the cash collateral of Wilmington Trust. As adequate protection for use of the cash collateral of the secured claims, the Debtor proposes that the secured creditor receive a lien on post-petition rents generated through the Debtor's business operations with the same validity, extent and priority they hold in the pre-filling assets, notwithstanding the effect of 11 U.S-C 552. A copy of the motion and the Debtor's budget from June 15 to December 2021 is available for free at https://bit.ly/3wt9OXi from PacerMonitor.com. The Debtor projects $328,549.50 in total operating income and $32,127.10 in expenses. About Cinema Square, LLC Cinema Square, LLC is the owner of a small shopping center located at 6917 El Camino Real, Atascadero, CA 93422. There are several tenants, the primary tenant is a movie theater, the Galaxy Theater. The Debtor sought protection under Chapter 11 of the U.S. Bankruptcy Code (Bankr. C.D. Cal. Case No. 21-10634) on June 14, 2021. In the petition signed by Jeffrey C. Nelson, president, the Debtor disclosed up to $50 million in assets and up to $10 million in liabilities. Judge Deborah J. Saltzman oversees the case. William C. Beall, Esq. at Beall & Burkhardt, APC is the Debtor's counsel. CIVITAS HEALTH: Electronic Health Record System Complete, PCO Says ------------------------------------------------------------------ Arthur E. Peabody, Jr., Patient Care Ombudsman for Civitas Health Services, Inc. disclosed in a report to the Bankruptcy Court, dated June 11, 2021, that the Debtor's implementation of an electronic health record system for all clients is complete and is being used by all staff. The Debtor has developed a series of "aps" and other features to meet the documentation needs of its programs, he said. According to the PCO, the Debtor was serving 16 patients more in its various behavioral health programs since the last report. The Debtor has added four direct care staff and currently has 41 employees, of which 30 are therapists or otherwise provide direct care to patients. The PCO said that the recent accreditation of the Debtor by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) and the increased caseload are positive factors in ensuring the provision of adequate care to patients and the financial viability of the overall program. The PCO's report was based on an interview with the Debtor's CEO, LeMar Bowers, and from additional information submitted at the end of May 2021. A copy of the Ombudsman Report is available for free at https://bit.ly/3zzN0XX from PacerMonitor.com. About Civitas Health Services Civitas Health Services, Inc. --http://www.civitashealth.com/-- is a healthcare company in Henrico, Va., that specializes in providing mental health skill building services, therapeutic day treatment, intensive in-home services, outpatient therapy, ABA therapy, substance abuse services, and peer recovery services. Civitas Health Services filed a Chapter 11 petition (Bankr. E.D. Va. Case No. 19-34993) on Sept. 24, 2019 in Richmond, Va. In the petition signed by Lemar Allen Bowers, chief executive officer and president, the Debtor was estimated to have at least $50,000 in assets and between $1 million and $10 million in liabilities. Judge Kevin Huennekens oversees the case. The Debtor tapped The McCreedy Law Group, PLLC as its legal counsel. Arthur E. Peabody, Jr. was appointed as the Patient Care Ombudsman on January 28, 2020. CLEANSPARK INC: Amer Tadayon Appointed President of Energy Division ------------------------------------------------------------------- CleanSpark, Inc. and Amer Tadayon have entered into an amendment to Mr. Tadayon's Amended and Restated Employment Agreement, dated Oct. 26, 2020, pursuant to which (i) Mr. Tadayon was appointed as president of the Energy Division, in addition to his current role as chief revenue officer of the Company; (ii) Mr. Tadayon's base salary was increased by $100,000 per year; and (iii) the bonus percentage relevant to the calculation of Mr. Tadayon's annual cash bonus, if paid pursuant to the terms of his Employment Agreement, was increased from 30% to not less than 70% of his Base Salary. The amendment does not alter, amend or supersede any other terms of Mr. Tadayon's Employment Agreement, all of which shall continue in full force and effect. In connection with the foregoing, on June 10, 2021, the Company granted Mr. Tadayon stock options to purchase an aggregate of 100,000 shares of the Company's common stock at an exercise price of $18.88 per share, which options vest in equal monthly installments over 36 months from the grant date. About CleanSpark Headquartered in Bountiful, Utah, CleanSpark, Inc. -- www.cleanspark.com -- is in the business of providing advanced energy software and control technology that enables a plug-and-play enterprise solution to modern energy challenges. Its services consist of intelligent energy monitoring and controls, microgrid design and engineering and consulting services. Its software allows energy users to obtain resiliency and economic optimization. The Company's software is uniquely capable of enabling a microgrid to be scaled to the user's specific needs and can be widely implemented across commercial, industrial, military and municipal deployment. CleanSpark reported a net loss of $23.35 million for the year ended Sept. 30, 2020, a net loss of $26.12 million for the year ended Sept. 30, 2019, and a net loss of $47.01 million for the year ended Sept. 30, 2018. As of March 31, 2021, the Company had $292.6 million in total assets, $8.89 million in total liabilities, and $283.72 million in total stockholders' equity. CLEANSPARK INC: Settles Dispute With Investor --------------------------------------------- Cleanspark Inc. and an investor entered into a mutual settlement agreement, pursuant to which the parties agreed, among other things, (i) to settle and dismiss, with prejudice, all pending actions related to the parties' dispute; (ii) to mutually release all claims, whether known or unknown, that either party may have now or in the future related thereto; and (iii) to terminate all of the agreements previously entered into by and between the parties, including all rights and obligations set forth therein, provided, however, that (a) any and all warrants previously issued to Investor pursuant to the Securities Purchase Agreement dated Dec. 31, 2018 and the Purchase Agreement dated April 17, 2019 shall remain in force and effect, and (b) that within a commercially reasonable amount of time after execution of the Settlement Agreement, Investor shall irrevocably assign the Warrants to an otherwise unaffiliated third party. Each party agreed to bear its own fees and costs for the Actions. The Settlement Agreement contains no admission or concession of fault, or of the truth of or validity or sufficiency of any allegation, contention or claim of either the Company or the Investor. About CleanSpark Headquartered in Bountiful, Utah, CleanSpark, Inc. -- www.cleanspark.com -- is in the business of providing advanced energy software and control technology that enables a plug-and-play enterprise solution to modern energy challenges. Its services consist of intelligent energy monitoring and controls, microgrid design and engineering and consulting services. Its software allows energy users to obtain resiliency and economic optimization. The Company's software is uniquely capable of enabling a microgrid to be scaled to the user's specific needs and can be widely implemented across commercial, industrial, military and municipal deployment. CleanSpark reported a net loss of $23.35 million for the year ended Sept. 30, 2020, a net loss of $26.12 million for the year ended Sept. 30, 2019, and a net loss of $47.01 million for the year ended Sept. 30, 2018. As of March 31, 2021, the Company had $292.61 million in total assets, $8.89 million in total liabilities, and $283.72 million in total stockholders' equity. COLGATE ENERGY: Moody's Rates New $400MM Sr. Unsecured Notes 'B3' ----------------------------------------------------------------- Moody's Investors Service changed Colgate Energy Partners III, LLC's outlook to positive from stable. Moody's affirmed Colgate's Corporate Family Rating at B2, Probability of Default Rating at B2-PD and the B3 rating of its senior unsecured notes due 2026. Moody's assigned a B3 rating to Colgate's proposed $400 million senior unsecured notes due 2029. Proceeds from the proposed $400 million of notes will fund the majority of Colgate's roughly $500 million acquisition of assets in the Southern Delaware Basin. The company will fund the balance of the acquisition with non-core asset sales, cash on the balance sheet and revolver borrowings. The company expects the acquisition to close in the third quarter of 2021. "Colgate Energy's outlook change to positive reflects increasing scale and our expectation for improving credit metrics through 2022 as the company integrates newly acquired assets into its development program while maintaining low leverage and good liquidity," commented Jonathan Teitel, a Moody's analyst. Assignments: Issuer: Colgate Energy Partners III, LLC Senior Unsecured Notes, Assigned B3 (LGD5) Affirmations: Issuer: Colgate Energy Partners III, LLC Probability of Default Rating, Affirmed B2-PD Corporate Family Rating, Affirmed B2 Senior Unsecured Notes, Affirmed B3 (LGD5) Outlook Actions: Issuer: Colgate Energy Partners III, LLC Outlook, Changed To Positive From Stable RATINGS RATIONALE Colgate's positive outlook reflects increasing production and reserves scale and Moody's expectation for credit metrics to improve through 2022 as the company integrates assets from its two acquisitions and boosts production while keeping leverage low and maintaining good liquidity. Colgate's two acquisitions, which are complementary with acreage largely adjacent to its existing assets, meaningfully increase the company's size in the Delaware Basin and create economies of scale. Financing for the acquisitions include a mix of debt and equity. On June 1, Colgate acquired a majority of the assets owned by Luxe Energy LLC (Luxe, unrated) in an all-stock transaction thereby benefiting credit metrics. Luxe was owned primarily by one of Colgate's financial sponsors. Assets from Luxe include 23,000 acres and production of 17 Mboe/d. On June 10, Colgate entered into an agreement to purchase certain assets from Occidental Petroleum Corporation (Ba2 negative) for $508 million (subject to closing adjustments based on an effective transaction date of April 1). Assets from Occidental include 25,000 acres and production of 10 Mboe/d. This transaction will be largely debt funded and the company's financial leverage pro forma for both acquisitions is somewhat increased, but still remains low relative to similarly rated peers. Colgate's B2 CFR reflects low leverage, strong interest coverage and single basin concentration. Colgate continues to develop its track record but has a short operating and financial history at scale. Colgate grew production from 3 Mboe/d in January 2018 to 28 Mboe/d in the first quarter of 2021. Pro forma for the two acquisitions, Colgate will have 83,000 acres and production of 55 Mboe/d. Colgate expects its development program to boost production to 75 Mboe/d in 2022. Colgate plans to reinvest cash flow that drives growth while maintaining low leverage. Colgate's hedging program mitigates commodity price volatility. While geographically concentrated in the Delaware Basin, this is a top tier oil-producing region in the US. The company's proved undeveloped reserves, including a large quantity from the two acquisitions, provide the company with a large drilling inventory to grow production but require significant capital investment to develop. Moody's expects Colgate will maintain good liquidity through 2022. As of June 1, Colgate had $32 million of cash on the balance sheet and $25 million outstanding on its $440 million borrowing base revolver due 2025 (increased from $265 million and extended from 2023 in connection with the Luxe acquisition). In connection with the closing of the acquisition from Occidental, the company expects its borrowing base to increase to over $550 million and that it will elect commitments of $500 million. Revolver financial covenants are comprised of a maximum net leverage ratio and a minimum current ratio, which Moody's expects the company to remain well in compliance with well into 2022. Colgate's $300 million of senior unsecured notes due 2026 and proposed $400 million of senior unsecured notes due 2029 are rated B3, one notch below the CFR, reflecting effective subordination to the company's secured borrowing base revolver due 2025 (unrated). FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Factors that could lead to an upgrade include successful integration and development of the acquired assets with production rising towards 75 Mboe/d; consistent positive free cash flow generation and maintenance of low leverage; the growth is achieved at competitive returns on investment with a leveraged full cycle ratio (LFCR) maintained above 1.5x; and debt-to-proved developed (PD) reserves below $8 per boe. Factors that could lead to a downgrade include negative free cash flow that leads to higher debt; deterioration in liquidity; an LFCR below 1x; debt-to-PD reserves above $10 per boe; or retained cash flow (RCF) to debt below 30%. Colgate, headquartered in Midland, Texas, is a privately owned independent exploration and production company focused in the Delaware Basin. The company is owned by Pearl Energy Investments, NGP Energy Capital and company management. The principal methodology used in these ratings was Independent Exploration and Production Industry published in May 2017. COMFORT AUTO: Southwest Reinsure Wins Default Judgment ------------------------------------------------------ District Judge Ada Brown in Dallas granted Southwest Reinsure, Inc.'s Motion for Default Judgment in the case, Southwest Reinsure, Inc. Plaintiff, v. Comfort Auto Group USA, LLC, Heshy Gottdiener, and Tobe Gottdiener, Defendants, No. 3:20-cv-2315-E (N.D. Tex.). The lawsuit is a diversity action against defendants to enforce Southwest's rights under a promissory note and guaranty. On December 3, 2020, after numerous unsuccessful attempts to serve defendants with process, the Court granted Southwest's motion to serve defendants by publication. Southwest served defendants by publication in the Rockland County Times and Dallas Morning News. Accordingly, defendants were effectively served with process by publication on or before January 7, 2021, and the time for them to file an answer or otherwise appear in the action was January 28. To date, defendants have not filed an answer or otherwise appeared in this action. On February 19, Southwest filed a Request for Clerk's Entry of Default, and the District Clerk entered a default against defendants the following day. Southwest then moved the Court to enter a default judgment. Southwest's Second Amended Complaint sets forth these factual allegations, which are deemed admitted due to defendants' failure to answer: 1. On June 14, 2019, Comfort Auto as borrower executed and delivered a Promissory Note in the amount of $1,800,000 to Southwest; 2. On June 14, 2019, the Gottdieners executed and delivered to Southwest a Guaranty, wherein they guaranteed payment of all amounts required under the Note; 3. Borrower defaulted on the Note by failing to comply with repayment obligations; 4. On July 10, 2020, Southwest provided written notice of the default to Borrower and Guarantors and demanded payment; 5. Borrower and Guarantors did not make any payment after the notice of default; 6. Southwest has suffered damages of $1,761,817.23 as of July 10, 2020, exclusive of any interest, attorney's fees, costs or expenses; 7. All conditions precedent to Southwest's right to maintain suit have either been performed, satisfied, or waived; and 8. Southwest retained a law firm to protect and enforce its rights under the Note and Guaranty and agreed to pay the firm reasonable and necessary attorneys' fees, costs, and expenses. A copy of the Court's June 14, 2021 Memorandum Opinion and Order is available at: https://www.leagle.com/decision/infdco20210616945 About Comfort Auto Group Brooklyn, N.Y.-based Comfort Auto Group NY LLC, d/b/a Chrysler Dodge Jeep Ram Fiat of Bay Ridge, an automobile dealer, filed a Chapter 11 petition (Bankr. E.D.N.Y. Case No. 20-42730) on July 24, 2020, listing $10 million to $50 million in both assets and liabilities. The petition was signed by Tim Ziss, manager. Kevin J. Nash, Esq., at Goldberg Weprin Finkel Goldstein LLP, serves as the Debtor's bankruptcy counsel. COMSTOCK RESOURCES: Fitch Rates Proposed 8.5-Yr. Unsec. Notes 'B+' ------------------------------------------------------------------ Fitch Ratings has assigned a 'B+'/'RR3' rating to Comstock Resources, Inc.'s proposed 8.5-year senior unsecured notes. Proceeds are intended to redeem the company's 2026 senior unsecured notes. Comstock's Long-Term Issuer Default Rating is 'B'. The Rating Outlook is Positive. Comstock's rating reflects the company's position as the largest producer of natural gas in the Haynesville Shale Basin, its industry low operating and drilling cost structure, the company's ability to generate positive FCF under base and strip pricing assumptions, relatively low differentials due to its proximity to the Henry Hub and its deep drilling inventory. Comstock also materially enhanced its liquidity by reducing revolver borrowings and extending debt maturities. This is offset by the company's modestly higher leverage and less robust hedging program relative to its peers. The Positive Outlook reflects Fitch's expectation of positive FCF, which would be applied to reduce debt and lead to improved credit metrics over the next 12-18 months. KEY RATING DRIVERS Low-Cost Operator: Comstock has one of the lowest operating cost structures among its natural gas peers due to its low lease operating costs and gathering and transportation costs. Margins are similar to some of the best Permian oil-based operators, as Comstock's proximity to Henry Hub allows the company to achieve minimal differentials and premium pricing for its natural gas. Fitch expects Comstock to further reduce price differentials as new pipelines that provide direct access to the Gulf Coast come online through 2022. Drilling costs also declined over time as the company achieved scale through acquisitions. Fitch anticipates further drilling cost reductions in the current low commodity price environment. Improving Liquidity: Comstock has reduced borrowings under its $1.4 billion revolver to $550 million at 1Q21 from $1.25 billion as of 4Q20 through a senior unsecured note issuance. Further reductions are expected in 2021 through the application of FCF. The revolver is due in 2024 and the remaining balance should be serviced through FCF. The next material bond maturity is not until 2025. Although Comstock currently has access to debt capital markets, Fitch notes access for most 'B' energy issuers was limited during periods of low commodity prices. Largest Haynesville Producer: Following the acquisition of Covey Park Energy LLC in 2019, Comstock is now the largest producer in the Haynesville Shale Basin. The scale provides for significantly lower operating, gathering and transportation, and drilling costs. The Haynesville is located close to the Henry Hub and other major natural gas buyers, which provides for lower differentials and higher realized gas prices. Comstock has approximately 1,930 net drilling locations in the Haynesville, with 73% of the locations with laterals greater than 5,000 feet. Approximately 93% of the acreage is held by production, and the company operates 91% of its position. Despite the scale, Comstock is exposed to single-basin risk. FCF Despite Low Prices: Fitch believes Comstock can generate FCF in its base and strip case scenarios, which reflect historically low commodity prices, given its low operating and drilling cost structure. The company operates five rigs with expected capex in the $510 million-$550 million range, leading to low single-digit growth over the next several years. The certainty of FCF over the next two years is enhanced by the company's hedging program. Solid Hedging Program: Comstock aims to hedge approximately 50%-60% of its forward 12-month gas production. The company hedged approximately 69% of its 2021 expected production at an average price of $2.51. Preferred No Equity Credit: Fitch does not apply its "Corporate Hybrids Treatment and Notching Criteria," as the new preferred stock will be held by existing equity investors or affiliates. Fitch instead uses its "Corporate Rating Criteria" on applying equity credit for shareholder and affiliated loans. The Series B preferred stock contains a provision for a mandatory cash redemption upon a change of control. As a result, Fitch is not allowing equity credit for the preferred stock. DERIVATION SUMMARY Fitch estimates Comstock's debt/EBITDA at 3.7x as of March 31, 2021, declining to less than 3.0x by the end of 2021. This is at the high range of other 'B' and 'BB' natural gas producers over the same rating horizon, which should reach 2.0x-2.5x by the end of 2021. This is offset by solid liquidity, lack of near-term maturities and a low-cost structure relative to its peers. Comstock's 1Q21 production of 1,281 million cubic feet equivalent per day (mmcfed) is above Vine Energy, Inc. (B/Stable; 658mmcfed), but below Ascent Resources Utica Holdings, LLC (B/Stable; 1,792mmcfed) and CNX Resources Corporation (BB/Positive; 1,545mmcfed). The company's proved reserves of 5.6 trillion cubic feet equivalent (Tcfe) are also below the same peers. Comstock's 2020 Fitch-calculated unhedged netback of $0.77/thousand cubic feet equivalent (mcfe) was among the highest among its peers, including Ascent ($0.39/mcfe), CNX ($0.55/mcfe), Vine (0.63/mcfe), Southwestern Energy Company (BB/Stable; $0.30/mcfe) and EQT Corporation (BB+/Stable; $0.36/mcfe). Fitch expects further improvement to Comstock's netbacks to come from reduced interest costs as the company reduces debt and refinances high-cost notes. KEY ASSUMPTIONS Fitch's key assumptions within its rating case for the issuer include: -- Base case West Texas Intermediate oil prices of $55/barrel (bbl) in 2021 and a long-term price of $50/bbl; -- Base case Henry Hub natural gas price of $2.75/mcf in 2021 and long-term price of $2.45/mcf; -- Production growth of 9% in 2021 and low single-digit growth throughout the forecast period; -- Capex of $564 million in 2021, increasing to approximately $600 million for the remainder of the forecast period; -- No incremental acquisitions, divestitures or equity issuance. Any FCF is assumed to be used to reduce debt. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Executable plan to enhance liquidity greater than $500 million through application of FCF, asset sales or equity to reduce the revolver; -- Demonstrated execution of generating positive FCF; -- FFO increasing to over $850 million; -- Midcycle gross debt/EBITDA below 2.5x. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- A change in terms of financial policy that is debtholder unfriendly, including not applying a material portion of FCF to debt reduction; -- Inability to enhance liquidity over next 12-18 months; -- Midcycle gross debt/EBITDA greater than 3.5x; -- Material reduction in the borrowing base that further limits liquidity. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Improving Liquidity and Runway: Comstock had $77 million of cash on hand and availability under its $1.4 billion revolver of $850 million as of March 31, 2021. Fitch anticipates the company will generate positive FCF over the next several years, with proceeds used to further reduce the revolver. Comstock's next maturity is the revolver in 2024, followed by two senior note maturities in 2025 ($244 million) and 2026 ($873 million). The revolver has two financial covenants: a leverage ratio of less than 4.0:1.0 and a current ratio of at least 1.0:1.0. The company complied with both as of March 31, 2021. Although Comstock has been acquisitive, the financing structure of the acquisitions has been conservative, with strong equity components to lighten the debt load. Access to debt capital markets have greatly improved over the past 12 months. Fitch does not expect the company to require access absent any unexpected acquisition, except for voluntarily refinancing its 2025 (currently callable) and 2026 notes (callable August 2021). ISSUER PROFILE Comstock is an independent exploration and production company that operates in the Haynesville (95% of reserves as of Dec. 31, 2020), Bakken (2%) and Eagle Ford/other (3%). The company has proved reserves of 5.6Tcfe. Production for 1Q21 was 1,281mmcfed, 98% of which was gas and 2% was oil. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. COMSTOCK RESOURCES: Moody's Rates New $500MM Unsecured Notes 'B3' ----------------------------------------------------------------- Moody's Investors Service assigned a B3 rating to Comstock Resources, Inc.'s proposed $500 million of senior unsecured notes due 2030. Comstock's other ratings, including the B2 Corporate Family Rating and stable outlook, remain unchanged. Comstock will use the net proceeds from the new notes to fund a redemption of senior notes due 2026. "Comstock's refinancing pushes out debt maturities and lower rates would improve future cash flow partially offset by upfront premiums to redeem its notes due 2026 early," commented Jonathan Teitel, a Moody's analyst. Assignments: Issuer: Comstock Resources, Inc. Senior Unsecured Notes, Assigned B3(LGD4) RATINGS RATIONALE Comstock's senior unsecured notes are rated B3, one notch below the CFR, reflecting their effective subordination to the secured revolver due 2024 (unrated). Comstock's interest expense comprises a substantial portion of the company's overall cost structure so lower rates would improve future cash flow partially offset by upfront premiums to redeem the bonds early. The refinancing transaction extends Comstock's debt maturities, partially replacing senior notes due 2026 with new notes due 2030. Comstock's B2 CFR reflects high but improving financial leverage, geographic concentration in the Haynesville Shale and natural gas focus. Comstock is prioritizing free cash flow in 2021 over production growth and Moody's expects that the company will apply that free cash flow towards debt reduction. Comstock also benefits from good liquidity and a long-dated maturity profile. Comstock is supported by its substantial acreage position, low-cost production and very limited processing needs because of its dry natural gas production. Comstock does not have debt maturities until 2024 when its revolver matures. Comstock benefits from the support of its majority-owner, Jerry Jones, who has invested a significant amount of equity in the company. Comstock's hedges increase cash flow visibility and mitigate risks from natural gas price volatility. Comstock's production benefits from close proximity to Henry Hub which supports low basis differentials. The company also benefits from nearby natural gas demand in the Gulf Coast region. The Haynesville Shale has midstream infrastructure that supports low-cost takeaway. Comstock's high proportion of proved undeveloped reserves provides the company with a large drilling inventory but requires significant capital to develop. The company benefits from the decline in its drilling and completion costs per lateral foot over the past few years. The stable outlook reflects Moody's expectation that Comstock will generate positive free cash flow and reduce leverage over the next 12-18 months while maintaining good liquidity. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Factors that could lead to an upgrade include consistent positive free cash flow generation while growing both production and proved developed reserves; debt reduction, lower leverage and retained cash flow (RCF) to debt sustained above 35%; and a leveraged full cycle ratio maintained above 1.5x. Factors that could lead to a downgrade include production expected to decline; negative free cash flow that leads to higher debt; higher leverage or RCF/debt below 20%; aggressive shareholder distributions; or weakening liquidity. Comstock, headquartered in Frisco, Texas, is a publicly-traded independent exploration and production company with operations focused in the Haynesville Shale. Production in the first quarter of 2021 was 1,281 MMcfe/d (98% natural gas). The principal methodology used in these ratings was Independent Exploration and Production Industry published in May 2017. COMSTOCK RESOURCES: S&P Rates New Senior Unsecured Notes 'B' ------------------------------------------------------------ S&P Global Ratings assigned its 'B' issue-level rating and '4' recovery rating to U.S.-based natural gas producer Comstock Resources Inc.'s proposed senior unsecured notes due 2030. The '4' recovery rating indicates its expectation for average (30%-50%; rounded estimate: 45%) recovery in the event of a default. S&P said, "We expect the company to use the proceeds from this offering to partially redeem its $873 million 9.75% senior unsecured notes due 2026 and pay related expenses, although we believe management may seek to fully refinance the existing notes by upsizing the issuance. We do not expect the transaction to materially affect our forecast financial metrics for Comstock, thus our 'B' issuer credit rating and stable outlook are unchanged." CONNECTIONS COMMUNITY: Seeks Pause of Methadone Tracking Suit ------------------------------------------------------------- Alex Wolf of Bloomberg Law reports that Connections Community Support Programs Inc. sued the federal government to pause legal action over the bankrupt health-care provider's alleged failure to keep track of controlled substances used to treat patients. The Delaware-based drug treatment and mental health-care provider recently won bankruptcy court approval to sell its assets to Conexio Care Inc., an affiliate of nonprofit Inperium Inc., for $12.75 million. Connections said it needs time to close the sale, transition services to a new operator, and finish reorganizing. The company asked the U.S. Bankruptcy Court for the District of Delaware Tuesday, June 15, 2021, to block the federal government from pursuing its civil lawsuit. About Connections Community Support Programs Connections Community Support Programs Inc. is a multifaceted not-for-profit 501(c)(3) health and human services organization operating and founded in Delaware with over 100 locations throughout Delaware and more than 1,100 employees. Since its founding in 1985, CCSP has grown from providing assistance to older adults with lifelong histories of psychiatric hospitalization to one of Delaware's largest nonprofit organizations that touches the lives of approximately 10,000 of Delaware's most vulnerable citizens and their families, dealing with behavioral health and substance use disorders, housing challenges, and developmental and intellectual disabilities. The organization leases 408 properties (including 389 leased facilities associated with housing and veterans' services) and owns 48 properties. Connections Community Support Programs filed for Chapter 11 protection (Bankr. D. Del. Case No. 21-10723) on April 19, 2021. The Debtor had estimated assets and debt of $50 million to $100 million as of the bankruptcy filing. The Debtor tapped Chipman Brown Cicero & Cole, LLP, led by Mark L. Desgrosseilliers, Esq., as legal counsel and SSG Advisors, LLC as investment banker. Robert Katz, managing director at EisnerAmper LLP, serves as the Debtor's chief restructuring officer. Omni Agent Solutions is the claims and noticing agent and administrative agent. The U.S. Trustee for Region 3 appointed an official committee of unsecured creditors on May 3, 2021. The committee is represented by Polsinelli, PC. On April 26, 2021, the U.S. Trustee for Region 3 appointed Eric M. Huebscher as patient care ombudsman in this Chapter 11 case. The ombudsman tapped Huebscher & Company as his consultant and advisor. COOPER TIRE: S&P Withdraws 'BB-' Issuer Credit Rating ----------------------------------------------------- S&P Global Ratings withdrew its 'BB-' issuer credit rating on Cooper Tire & Rubber Co. following the completion of Goodyear Tire & Rubber Co.’s acquisition of the company on June 7, 2021. S&P's ratings on Cooper Tire's outstanding senior unsecured debt remain unchanged, though it will now rate this debt as being at a subsidiary of Goodyear. CRC INVESTMENTS: Wins Cash Collateral Access Thru July 8 -------------------------------------------------------- The U.S. Bankruptcy Court for the Middle District of North Carolina, Winston Salem Division, has authorized CRC Investments, LLC to use cash collateral on an interim basis in accordance with the budget through July 8, 2021, with a 10% variance. The Debtor needs access to Cash Collateral to pay on-going costs of operating the business and insuring, preserving, repairing and protecting all its tangible assets. Portfolio Holdings IV-NC, LLC, the Internal Revenue Service and the U.S. Small Business Administration each hold an interest in the cash collateral. Portfolio, through its acquisition of a Bank of America loan, holds a note and deed of trust against the Debtor's Real Property located at 85 Pine Crest Lane, Tryon, Polk County, North Carolina. The Debtor owes taxes, penalties, and interest to the IRS which is now a secured lien by the IRS. Under 26 U.S.C. section 6321, the IRS asserts an inchoate lien against all property of the Debtor which includes cash collateral. Further, in connection with its business operations, the Debtor obtained an Economic Injury Disaster Loan from SBA secured by certain property of the Debtor. As of the Petition Date, the IRS was owed $509,757; the SBA was owed $126,500, and Portfolio was owed $1,100,000. As adequate protection for the Secured Parties' interest in the Cash Collateral, the Secured Parties are granted a perfected replacement lien in all postpetition assets of the Debtor to the same extent and priority as existed prepetition to the extent of diminution in value of the Secured Parties' collateral occasioned by the Debtors' use of Cash Collateral. The Debtor is required to pay all applicable insurance premiums, taxes, and other governmental charges as they come due and make all tax deposits and file all applicable tax returns on a timely basis. A further hearing on the matter is scheduled for July 8 at 2 p.m. A copy of the order and the Debtor's budget is available for free at https://bit.ly/3vr2jyN from PacerMonitor.com. The Debtor projects total revenues of $29,025 and total expenses of $26,960 from June 10 to July 8. About CRC Investments CRC Investments, LLC, d/b/a 1906 Pine Crest Inn and Restaurant, filed a petition under Subchapter V of Chapter 11 (Bankr. M.D.N.C. Case No. 21-80172) on May 6, 2021, estimating between $1,000,000 and $10 million in assets and liabilities. The petition was signed by Carl Ray Caudie, Jr., general manager. Judge Lena Mansori James oversees the case. Joshua H. Bennett, Esq., at BENNETT GUTHRIE PLLC, represents the Debtor as counsel. CRED INC: Robert Stark Obtains Leave for Discharge as Examiner -------------------------------------------------------------- Judge John T. Dorsey granted the request of Robert J. Stark to be discharged as examiner for Cred Inc., pursuant to an order entered June 11, 2021. Judge Dorsey discharged Mr. Stark of his obligations under the Examination Order, the Initial Work Plan Order, and the Work Plan Amendment Order, thereby terminating Mr. Stark's appointment as Examiner for the Debtor. The Court also (i) increased the budget for the Investigation up to $1.76 million in the aggregate, inclusive of professional fees and expenses; and (ii) relieved the Examiner and his professionals from any duty to respond to, object to, or move for a protective order in response to any formal or informal discovery process; provided that the rights of the Cred Inc. Liquidation Trust to seek discovery from the Examiner and his professionals are fully reserved, and the rights of the Examiner and his professionals with respect to any discovery request propounded by the Trust are fully reserved. Nothing the order, however, relieves the Examiner of his duty to cooperate with federal and state law enforcement and regulatory authorities with regards to the Investigation. A copy of the order is available for free at https://bit.ly/2TGoLab from Donlin Recano, claims agent. Mr. Stark, on May 14, 2021, filed a motion seeking his discharge, for an increase in the final budget for investigation, and for relief from third-party discovery. About Cred Inc. Cred Inc. is a cryptocurrency platform that accepts loans of cryptocurrency from non-U.S. persons and pays interest on those loans. Cred -- https://mycred.io -- is a global financial services platform serving customers in over 100 countries. Cred is a licensed lender and allows some borrowers to earn a yield on cryptocurrency pledged as collateral. Cred Inc. and its affiliates sought Chapter 11 protection (Bankr. D. Del. Lead Case No. 20-12836) on November 7, 2020. Cred was estimated to have assets of $50 million to $100 million and liabilities of $100 million to $500 million as of the bankruptcy filing. Judge John T. Dorsey oversees the cases. The Debtors tapped Paul Hastings LLP as their bankruptcy counsel, Cousins Law LLC as local counsel, and MACCO Restructuring Group, LLC as financial advisor. Donlin, Recano & Company, Inc. is the claims agent. The U.S. Trustee for Region 3 appointed an official committee of unsecured creditors in the Debtors' Chapter 11 cases on Dec. 3, 2020. The committee tapped McDermott Will & Emery LLLP as counsel and Dundon Advisers LLC as financial advisor. Robert Stark was the examiner appointed in the Debtors' cases. Ashby & Geddes, P.A., and Ankura Consulting Group, LLC, serve as the examiner's legal counsel and financial advisor, respectively. The Examiner obtained leave to be discharged of his duties effective June 11, 2021. CRIMSONBIKES LLC: Bid to Use Cash Collateral Denied --------------------------------------------------- The U.S. Bankruptcy Court for the District of Massachusetts has issued an order denying CrimsonBikes, LLC's request for authority to use cash collateral. The Motion is denied to the extent the Debtor seeks further use of cash collateral beyond the initial two-week period previously approved. The order is without prejudice to the Debtor filing a new motion for further cash collateral access. A copy of the order is available for free at https://bit.ly/2U0TBu2 from PacerMonitor.com. About CrimsonBikes LLC CrimsonBikes, LLC owns and operates a bicycle store in the Greater Boston area in Massachusetts. An involuntary Chapter 7 bankruptcy petition was filed against CrimsonBikes, LLC (Bankr. D. Mass. Case No. 21-10278) on March 3, 2021. The petition was filed by creditors SmartEtailing, Inc.; CVI-TCB Commercial, LLC; and Michael Jaeger. The Hon. Janet E Bostwick presides over the case. Petitioning Creditors SmartEtailing and Michael Jaeger are represented by Lynne B. Xerras, Esq. at Holland & Knight LLP. Petitioning Creditor CVI-TCB Commercial, LLC is represented by Andrew E Goloboy, Esq. at Dunbar Goloboy PC as counsel. CRIMSONBIKES LLC: Seeks to Tap McCafferty & Company as Accountant ----------------------------------------------------------------- CrimsonBikes, LLC seeks approval from the U.S. Bankruptcy Court for the District of Massachusetts to employ McCafferty & Company, PC as its accountant. The Debtor needs the assistance of an accountant to represent the estate with respect to its tax matters; complete its corporate financial reports; assist in the initial financial analysis and budgets and the initial monthly operating reports; and assist in preparing and filing all outstanding tax returns. McCafferty will charge $285 to $300 per hour for its services. The firm will also bill $75 per hour for bookkeeping and data compilation work. In addition, McCafferty will seek reimbursement for expenses incurred. Edward McCafferty, a member of McCafferty & Company, disclosed in a court filing that his firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Edward McCafferty McCafferty & Company, PC 70 Wells Ave. Newton, MA 02459 Telephone: (617) 964-3232 Facsimile: (617) 275-0014 Email: cpa@mccaffertycpa.com About CrimsonBikes CrimsonBikes, LLC owns and operates a bicycle store in the Greater Boston area in Massachusetts. An involuntary Chapter 7 bankruptcy petition was filed against CrimsonBikes, LLC (Bankr. D. Mass. Case No. 21-10278) on March 3, 2021. The petition was filed by creditors SmartEtailing Inc., CVI-TCB Commercial LLC, and Michael Jaeger. The creditors are represented by Lynne B. Xerras, Esq., and Andrew E. Goloboy, Esq. On May 19, 2021, CrimsonBikes consented to the entry of an order for relief and moved the court to convert its case to one under Chapter 11 of the United States Bankruptcy Code. The court granted the motion to convert on May 21, 2021. Judge Janet E. Bostwick oversees the case. The Debtor tapped McAuliffe & Associates, PC as legal counsel and McCafferty & Company, PC as accountant. DAEC HOME: Seeks to Hire Javier Villafuerte as Real Estate Broker ----------------------------------------------------------------- DAEC Home Improvement, LLC seeks approval from the U.S. Bankruptcy Court for the District of Massachusetts to employ Javier Villafuerte, a real estate broker at Continental Real Estate, to sell its real property located at 54 Elm St., Units F and B, North Andover, Mass. The broker will be compensated at a commission rate of 4 percent of the property's sale price. Mr. Villafuerte disclosed in a court filing that he is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The broker can be reached at: Javier Villafuerte Continental Real Estate 12 Serale Road W. Roxbury, MA 02132 Telephone: (617) 290-0998 About DAEC Home Improvement DAEC Home Improvement, LLC sought protection for relief under Chapter 11 of the Bankruptcy Code (Bankr. D. Mass. Case No. 21-40160) on Mar. 3, 2021. At the time of the filing, the Debtor disclosed $500,000 to $1 million in both assets and liabilities. Judge Christopher J. Panos oversees the case. John F. Sommerstein, Esq., at The Law Offices of John F. Sommerstein, represents the Debtor as legal counsel. DOUGLAS DYNAMICS: Moody's Withdraws B1 CFR on Debt Repayment ------------------------------------------------------------ Moody's Investors Service has withdrawn all ratings of snowplow manufacturer Douglas Dynamics, L.L.C. including the B1 Corporate Family Rating, the B1-PD Probability of Default Rating, and the B2 senior secured rating. This rating action follows the repayment of all company's rated debt. RATINGS RATIONALE Following a refinance, all the company's rated debt, including a senior secured bank credit facility due 2026 has been repaid in full. Consequently, Moody's has withdrawn all ratings of Douglas Dynamics. Withdrawals: Issuer: Douglas Dynamics, L.L.C. Corporate Family Rating, Withdrawn, previously rated B1 Probability of Default Rating, Withdrawn, previously rated B1-PD Speculative Grade Liquidity Rating, Withdrawn, previously rated SGL-3 Senior Secured Bank Credit facility, Withdrawn, previously rated B2 (LGD4) Outlook Actions: Issuer: Douglas Dynamics, L.L.C. Outlook, Changed To Rating Withdrawn From Positive Douglas Dynamics is a manufacturer and up-fitter of commercial work truck attachments and equipment. The company's products include snowplows, sand and salt spreaders as well as attachments and storage solutions for commercial work vehicles. Headquartered in Milwaukee, Wisconsin, the company generated approximately $515 million of revenue for the twelve months ended March 31, 2021. DRAGONFLY GRAPHICS: Seeks to Tap Lisa Cohen as Bankruptcy Counsel ----------------------------------------------------------------- Dragonfly Graphics, Inc. seeks approval from the U.S. Bankruptcy Court for the Northern District of Florida to employ Lisa Cohen, Esq., an attorney at the law firm of Ruff & Cohen, PA, to handle its Chapter 11 case. The attorney will render these legal services: (a) advise the Debtor concerning the operation of its business; (b) prosecute and defend any causes of action on behalf of the Debtor; (c) prepare legal papers; (d) prepare a plan of reorganization and disclosure statement; (e) obtain confirmation of the plan; and (f) obtain a discharge and a final decree. The Debtor will pay Ms. Cohen at the rate of $325 per hour and her legal assistant at the rate of $75 per hour. Ruff & Cohen received a retainer of $4,979 and filing fee of $1,738. Ms. Cohen disclosed in a court filing that she is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The attorney can be reached at: Lisa C. Cohen, Esq. Ruff & Cohen, PA 4010 Newberry Road, Suite G Gainesville, FL 32607 Telephone: (352) 376-3601 Facsimile: (352) 378-1261 Email: lisacohen@bellsouth.net About Dragonfly Graphics Dragonfly Graphics, Inc. sought protection under Chapter 11 of the Bankruptcy Code (Bankr. N.D. Fla. Case No. 21-10110) on June 14, 2021, listing under $1 million in both assets and liabilities. Joy Revels, president, signed the petition. Lisa C. Cohen, Esq., at Ruff & Cohen, PA serves as the Debtor's legal counsel. DUKAT LLC: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------- Debtor: Dukat, LLC DBA BMK Online, LLC DBA Tech to Commerce c/o On Spec 95 Newfield Avenue Suite H Edison, NJ 08837 Business Description: Dukat, LLC operates in the electronic shopping industry. Chapter 11 Petition Date: June 16, 2021 Court: United States Bankruptcy Court District of New Jersey Case No.: 21-14934 Debtor's Counsel: David H. Stein, Esq. WILENTZ, GOLDMAN & SPITZER P.A. 90 Woodbridge Center Drive Suite 900, Box 10 Woodbridge, NJ 07095 Tel: 732-636-8000 Fax: 732-855-6117 E-mail: dstein@wilentz.com Total Assets: $100 Total Liabilities: $5,251,749 The petition was signed by Elliott Kattan, managing member. A full-text copy of the petition containing, among other items, a list of the Debtor's 20 largest unsecured creditors is available for free at PacerMonitor.com at: https://www.pacermonitor.com/view/NC2RRQQ/Dukat_LLC__njbke-21-14934__0001.0.pdf?mcid=tGE4TAMA EAB GLOBAL: Moody's Rates New First Lien Credit Facility 'B2' ------------------------------------------------------------- Moody's Investors Service assigned B2 ratings to the proposed senior secured first lien credit facility issued by EAB Global, Inc., consisting of a $745 million term loan and a $125 million revolver. As part of the rating action, Moody's also affirmed EAB's B3 corporate family rating and the B3-PD probability of default rating. The rating action follows the proposed refinancing of EAB's debt structure in conjunction with the sale of a partial equity stake in the company to BC Partners Advisors LP. Upon completion of this transaction, Moody's expects EAB's existing debt to be repaid and ratings on these instruments to be withdrawn. The outlook is stable. Affirmations: Issuer: EAB Global, Inc. Corporate Family Rating, Affirmed B3 Probability of Default Rating, Affirmed B3-PD Assignments: Issuer: EAB Global, Inc. Senior Secured First Lien Revolving Credit Facility, Assigned B2 (LGD3) Senior Secured First Lien Term Loan, Assigned B2 (LGD3) Outlook Actions: Issuer: EAB Global, Inc. Outlook, Remains Stable RATINGS RATIONALE EAB's B3 CFR is principally constrained by the company's elevated pro forma debt/LTM EBITDA (Moody's adjusted) of approximately 9x. Additionally, EAB's limited history as a standalone operating entity and relatively small, concentrated revenue base in the domestic higher education market which continues to face a degree of uncertainty relating to the coronavirus pandemic adds further risk to the company's credit quality. Moreover, EAB's private equity ownership by Vista Equity Partners ("Vista") and BC Partners presents corporate governance and financial strategy concerns, particularly with respect to dividend distributions and debt funded acquisitions that could constrain the company's deleveraging efforts. However, EAB's credit profile is supported by the company's strong market position as a provider of research, software, and technology-enabled services to a diversified customer base of universities and other educational institutions. The company's credit quality is also supported by EAB's solid long term growth prospects and relatively healthy business visibility provided by a subscription-based revenue model featuring multi-year client contracts with historically strong retention rates. The B2 ratings for EAB's proposed first lien bank debt reflect the borrower's B3-PD PDR and a loss given default ("LGD") assessment of LGD3. The first lien ratings are one notch higher than the CFR and take into account the bank debt's priority in the collateral and senior ranking in the capital structure relative to EAB's proposed second lien bank debt (unrated). EAB's adequate liquidity reflects a pro forma cash balance of $15 million following the completion of the debt refinancing transaction and Moody's expectation of approximately $60 million of free cash flow generation in FY22. The company's liquidity is also bolstered by a proposed $125 million revolving credit facility. While EAB 's proposed term loans will not be subject to financial covenants, the revolving credit facility has a springing covenant based on a maximum net first lien leverage ratio which the company should be in compliance with over the next 12-18 months. As proposed, the new first lien credit facility is expected to provide covenant flexibility that could adversely affect creditors, including (i) incremental debt capacity not to exceed the greater of $132.5 million and 100% of Consolidated EBITDA, plus unused capacity reallocated from the general debt basket, plus additional amounts such that the pro forma first lien net leverage ratio does not exceed 5.51x (if pari passu secured), (ii) incremental amounts up to $350 million along with any incremental facilities incurred in connection with a permitted acquisition or investment, may be incurred with an earlier maturity date than the initial term loans, (iii) collateral leakage permitted through the transfer of assets to unrestricted subsidiaries, subject to covenant and carve-out capacity; there are no additional express blocker protections (iv) dividends or transfers resulting in partial ownership of subsidiary guarantors could jeopardize guarantees, with no explicit protective provisions limiting such guarantee releases, and (v) there are no express protective provisions prohibiting an up-tiering transaction. The proposed terms and the final terms of the credit agreement may be materially different. The stable outlook reflects Moody's expectation that EAB will experience moderate organic year-over-year growth in its revenues and EBITDA in FY22 as the company benefits from improving spending trends within its core domestic higher education market. Based on these expectations, debt/LTM EBITDA (Moody's adjusted) is expected to approximate 8.5x by the end of FY22 with continued deleveraging over the intermediate term. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The rating could be upgraded if EAB sustains strong revenue growth while driving profitability gains through the realization of operational cost synergies that reduce adjusted debt/EBITDA to below 7x and sustain free cash flow/debt above 5% while adhering to a conservative financial policy. The rating could be downgraded if EAB experiences a weakening competitive position, revenue contracts, the company is unable to realize anticipated cost synergies and margin expansion, liquidity weakens, or the company adopts more aggressive financial policies resulting in debt/EBITDA sustained above 9x. The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. EAB, principally owned by Vista and BC Partners, is a leading provider of research, software, and technology-enabled services to a diversified customer base of universities and other educational institutions across the United States. Moody's expect the company to generate pro forma revenues of approximately $390 million in FY22 (ending June). EAGLE RANCH: Unsecureds to be Paid on Monthly Basis --------------------------------------------------- Eagle Ranch Resort, LLC, submitted a Second Amended Plan of Reorganization. The Plan places claims and equity interests in various classes and describes the treatment each class will receive. Payments and distributions under the Plan will be funded by the Debtor from its projected and allocated cash flow from Debtor's continued operation of its business. The Plan provides for payments to members of the class of secured claims on a monthly basis, payments to priority tax claims on a monthly basis, and payments to the class of unsecured claims on a monthly basis. The Debtor's primary assets consist of 750 acres of real estate with several buildings, a lake and ponds, on which Debtor's business is located and operates as a campground with trail riding and event competitions. On Jan. 31, 2017, the real estate and buildings were appraised by appraiser Jerry W. Glor, of Jerry Glor Appraisal Service, LLC. Mr. Glor appraised the real estate property and improvements at a going concern value of $1,305,000. The Plan proposes to treat claims and interests as follows: * Class 2A – Secured Claims of Community National Bank & Trust totaling $837,086. The Debtor shall pay Community National Bank and Trust a payment in the amount of $30,000, on or before 30 days after confirmation of the Plan herein, to be applied first to payment of accrued interest, and then to the reduction of the recapitalized principal amount. Debtor shall pay Community National Bank and Trust monthly payments in the amount of $5,000.00/per month, beginning on or before 60 days after confirmation of the Plan herein, and continuing monthly thereafter until the balance of the loan is paid in full by the sale of the all or a portion and/or refinance of the remaining balance of the loan, to be applied first to the payment of accrued interest, and then to the reduction of the recapitalized principal amount. Class 2A is impaired. * Class 3A – Unsecured Non-Priority Claim of Internal Revenue Service. The IRS filed a Proof of Claim No. 3, as amended, with amount claimed: $37,297; asserting a priority claim in the amount of $11,836.83. The remaining balance of $25,460 is nonpriority unsecured. Therefore, Debtor disputes this claim and shall timely file an objection. Should the claim or any part of the claim be allowed, the claim shall be paid in full, with accrual of interest at the rate provided by applicable non-bankruptcy law, with payments to be made in regular monthly installment payments over a period of five (5) years with monthly distributions to be paid on the 29th day of each month, with the first payment beginning upon confirmation of the Plan, and continuing on the 29th day of each month until all distributions are made. * Class 3B - Unsecured Claim of MBE Capital SBA PPP Loan. The MBE Capital total balance due is $1,156. The aggregate obligations are represented by the Loan Documents, subject to forgiveness provisions for which Debtor has submitted the required paperwork to MBE Capital seeking forgiveness of the loan per the Loan Documents. * Class 3C - Unsecured Claim of Spark Business Capital One Bank totaling $4,858. The Debtor accepts the Proof of Claim as allowed claim, subject to application of payments made by the Debtor. The Debtor will reaffirm the aggregate obligations represented by the CCA and has continued to make court approved monthly payments, postpetition in the amount of $350 per month. In the alternative, Debtor will pay Spark Card $2,000 from cash on hand in DIP account to render this debt paid in full. * Class 4 – Equity Interest Holders or Parties who Hold an Ownership Interest (i.e. Equity Interest) of the Debtor. Equity interest holders shall not receive any distribution or payment until after payment of all claims in Classes 1 – 3 at which time equity security holders may receive their pro rata share of any distribution arising as a result of their ownership interest in the Debtor's corporation. Attorney for the Debtor: TONY D. KRUKOW KRUKOW LAW OFFICES, LLC 1287 US Business 65 Hollister, MO 65672 Tel: (417) 336-3777 Fax: (417) 336-3773 E-mail: tonykrukow@aol.com A copy of the Disclosure Statement is available at https://bit.ly/3gcpKHO from PacerMonitor.com. About Eagle Ranch Eagle Ranch Resort, LLC, founded in 2010 and organized in the state of Missouri, operates a resort that targets patrons who enjoy outdoor activities, camping, hunting, trail riding for horses and all-terrain vehicles, other horseback riding events, and ministry events and retreats. The Debtor filed for Chapter 11 bankruptcy protection (Bankr. W.D. Mo. Case No. 20-42109) on Dec. 11, 2020. Jerry Hennings, a member, signed the petition. In the petition, the Debtor disclosed $1,637,309 in assets and $973,597 in liabilities. Judge Dennis R. Dow oversees the case. Krukow Law Offices, LLC serves as the Debtor's legal counsel. EHT US1: Fee Examiner Taps Bielli & Klauder as Legal Counsel ------------------------------------------------------------ David Klauder, the fee examiner appointed in the Chapter 11 cases of EHT US1, Inc. and its affiliates, received approval from the U.S. Bankruptcy Court for the District of Delaware to hire Bielli & Klauder, LLC as legal counsel. The fee examiner requires legal assistance to review and assess requests for allowance of fees and expenses by bankruptcy professionals, assist in the preparation of reports, and represent him at court hearings. The firm's hourly rates are as follows: Thomas D. Bielli (Member) $375 per hour Associates/Of Counsel $225 - $325 per hour Paralegals/Paraprofessionals/Law Clerks $100 - $200 per hour Thomas Bielli, Esq., at Bielli & Klauder, disclosed in a court filing that his firm is a "disinterested person" within the meaning of Section 101(14) of the Bankruptcy Code. The firm can be reached through: Thomas D. Bielli, Esq. Bielli & Klauder, LLC 1204 N. King Street Wilmington, DE 19801 Phone: (302) 803-4600 Fax: (302) 397-2557 Email: dklauder@bk-legal.com About Eagle Hospitality Group Eagle Hospitality Trust -- https://eagleht.com/ -- is a hospitality stapled group comprising Eagle Hospitality Real Estate Investment Trust and Eagle Hospitality Business Trust. Based in Singapore, Eagle H-REIT is established with the principal investment strategy of investing on a long-term basis in a diversified portfolio of income-producing real estate, which is used primarily for hospitality or hospitality-related purposes as well as real estate-related assets in connection with the foregoing, with an initial focus on the United States. EHT US1, Inc. and 26 affiliates, including 15 LLC entities that each owns hotels in the U.S., sought Chapter 11 protection (Bankr. D. Del. Lead Case No. 21-10036) on Jan. 18, 2021. EHT US1 estimated $500 million to $1 billion in assets and liabilities as of the bankruptcy filing. The Debtors tapped Paul Hastings LLP and Cole Schotz P.C. as their bankruptcy counsel, FTI Consulting Inc. as restructuring advisor, and Moelis & Company LLC as investment banker. Rajah & Tann Singapore LLP and Walkers serve as Singapore Law counsel and Cayman Law counsel, respectively. Donlin, Recano & Company, Inc. is the claims agent. The U.S. Trustee for Region 3 appointed an official committee of unsecured creditors on Feb. 4, 2021. The committee tapped Kramer Levin Naftalis & Frankel, LLP as bankruptcy counsel, Morris James LLP as Delaware counsel, and Province, LLC as financial advisor. David M. Klauder, Esq., is the fee examiner appointed in the Debtors' Chapter 11 cases. Thomas D. Bielli, Esq., at Bielli & Klauder, LLC, is the fee examiner's legal counsel. EIF CHANNELVIEW: S&P Raises ICR to 'BB+' on Material Debt Paydown ----------------------------------------------------------------- S&P Global Ratings raised its issue rating on EIF Channelview Cogeneration LLC's (EIF) term loan B and the revolving credit facility to 'BB+' from 'B+'. The '1' (95%) recovery rating is unchanged. EIF is an 856-megawatt (MW) combined-cycle gas-fired cogeneration power plant located adjacent to LyondellBasell Industries' Equistar Chemicals L.P. refinery east of Houston. Channelview sells steam and a portion of its electricity to Equistar. Channelview sells the remainder of its electrical output to third parties under short-term contracts and into the Electric Reliability Council of Texas (ERCOT) energy-only merchant power market. The project is owned by Ares EIF Management LLC, operated by Siemens A.G. (subcontracted to the Worley Group), and managed by Power Plant Management Services LLC. Very low leverage. The project paid approx. 50% of its TLB balance in the first quarter of 2021, which has significantly improved its financial risk. Agreements with Equistar partially mitigate its market exposure for the next several years. The project has contracted with Equistar to supply 233-MW capacity and 333-MW electricity under an Energy Supply Agreement (ESA), and up to 1.9 million pounds per hour steam under a Steam Supply Agreement (SSA). The ESA runs through 2029 and provides stable cash flows during this period, accounting for about one-third of gross margins in S&P's forecast. The SSA runs through 2025 (with the option to extend for four consecutive five-year periods) and constitutes a competitive advantage as it enables the plant to reduce its effective heat rate and operate at lower production costs. Channelview has some redundancy characteristics. Channelview has four similar combustion turbine units, which it can use in a variety of configurations, so long as permissible under the plant's permit. The steam contract relies on only two units. This gives the plant considerable flexibility and creates redundancies in meeting contractual obligations. While these factors somewhat offset the plant's single-asset risk, all units are in the same location and still bear the same geographic and weather-related risks. The project is subject to volatile power prices in the energy-only ERCOT market. The project sells a significant portion of its generation (up to approximately 60% of its capacity) in the merchant market, exposing its cash flows to changing power prices. S&P said, "This volatility can cause cash flows to fall sharply below our base-case projections if demand proves softer than we anticipate or if renewable generation production is higher than expected. Furthermore, ERCOT is an energy-only market where participants are only paid for selling energy and not for committing to make capacity available in the future. This is a relative disadvantage compared with plants operating in regions such as the PJM interconnection (PJM), which have a capacity market and are therefore not as dependent on spikes in power prices to be made whole. We note that the capacity prices can also be volatile, as seen in the latest PJM auction where capacity prices cleared at $50/MWh compared to $140/MWh in the last auction, but on a relative basis, generators in such regions typically have greater visibility because of the capacity price component of the cash flows." EIF generated exceptionally high revenues during winter storm Uri and used proceeds to pay down approximately 50% of its term loan B balance. In February 2021, wholesale power prices hit record highs during the winter storm and EIF's power generating units generated and sold electricity throughout the storm. The project generated an EBITDA of approximately $186 million in the first quarter of 2021 (first-quarter 2020 EBITDA was about $9 million) and paid down $105.9 million during the same period (reflecting a 75% mandatory cash flow sweep). The project expects to pay down an additional $26 million on the TLB in the second quarter. After these paydowns, S&P expects the balance will be approximately $80 million at year-end 2021 compared with $208 million at year-end 2020. S&P said, "The project's refinancing risk at maturity has improved materially because of these paydowns. In our base-case assumptions, we expect the project will be able to pay its entire term loan B balance by 2025. Our forecasts assume the project's $30 million revolving credit facility will be fully drawn at maturity and will need to be refinanced. "The projects' DSCR has risen significantly because of deleveraging. We expect the minimum DSCR to be 5.6x in 2029. As a result of this material deleverage, EIF's operations phase standalone credit profile (SACP) has improved to 'bbb-', compared with 'b+' in years prior. The 'bbb-' operations phase assessment is capped by our view of its operations counterparty's credit quality, LyondellBasell Equistar Chemicals L.P. (Equistar). We deem EIF's energy supply and steam agreements with Equistar to be irreplaceable as they provide stable cash flow and competitive advantage to the project, which otherwise is exposed to volatile power prices in the energy-only ERCOT market. "Additionally, our estimate of the credit worthiness of its financial counterparty, Invectec Bank PLC, which is guarantees the project's letter of credit, caps our final rating on the project. We consider this counterparty as irreplaceable because it does not meet our replaceability conditions. Absent this cap, the rating on EIF would have been investment grade. "We will monitor the project for any changes in the capital structure in the near term. "In our experience with other term loan B project deals with large debt paydowns, we typically see changes to capital structure, particularly additional leverage. The project's rating might change in the future, depending on the capital structure strategies adopted by the sponsor." Environmental, social, and governance (ESG) credit factors for this credit rating change: -- Natural conditions S&P said, "The stable outlook reflects our view that power prices in ERCOT's Houston hub will be in line with forward pricing over the next few years. Our base case includes average on peak forward price of $50/megawatt-hour (MWh)for the remainder of 2021 and $45/MWh in 2022, and average off-peak forward price of 30/MWh for the remainder of 2021 and $26/MWh for 2022. It also reflects our view of the credit quality of the project's financial counterparty, which caps the rating. We expect the minimum DSCR to be 5.6x in 2029. "The potential for downgrade is limited because the project has significantly reduced leverage, leading to improved DSCR. We could lower the rating if the minimum DSCR falls below 2.5x because of decline in power prices, weaker-than-expected growth in power demand, a greater-than-expected penetration of renewable assets, or if the project faces sustained operational issues. In addition, any changes to the existing capital structure that may increase leverage at the project could also lead to lower ratings. The estimated credit worthiness of Investec Bank PLC (Investec), which guarantees the project's letter of credit, caps our rating on the project. Any decline in the credit worthiness of Investec will lead to lower ratings. "We could raise the rating on the project if we upgrade our view on the credit worthiness of Investec, provided the fundamental credit quality of the project is unchanged." ELEMENT SOLUTIONS: $400MM Loan Add-on No Impact on Moody's Ba2 CFR ------------------------------------------------------------------ Moody's Investors Service said that Element Solutions Inc's Ba2 Corporate Family Rating, Ba2-PD Probability of Default Rating, Ba1 senior secured revolving credit facility, B1 senior unsecured notes and Speculative Grade Liquidity rating of SGL-1 are not affected by the proposed $400 million add-on to the company's senior secured first lien term loan, which is rated Ba1. The company plans to use the term loan proceeds in addition to $122 million cash on the balance sheet to fund the EUR420 million ($512 million) acquisition of Coventya and pay fees and expenses. The outlook is stable. "Leverage will be temporarily elevated following the acquisition, but we expect Element Solutions to continue benefitting from strong demand in key end markets, its ability to generate free cash flow and the strategic rationale for the transaction that will allow the company to deleverage," said Domenick R. Fumai, Moody's Vice President and lead analyst for Element Solutions Inc. While the acquisition of Coventya will result in a temporary increase in leverage, with pro forma Debt/EBITDA of approximately 4.0x, including standard adjustments, for the latest twelve months ending March 31, 2021, Moody's views the transaction as credit positive. Moody's expects Element Solutions to reduce leverage over the next 12-18 months towards low 3.0x given the robust outlook for many of the company's end markets and strong free cash flow generation. Management is also committed to attaining a net leverage ratio at or below 3.0x at year end 2021. The acquisition will add scale, offers synergy opportunities of at least EUR13 million within two years from the close of the transaction, and broadens Element Solutions' position in the global metal finishing and industrial surface treatments markets. The complementary nature of the business enhances Element Solutions' protective and functional coatings while also providing some additional geographic exposure to higher growth Asian markets. Coventya also adds light-metal anodizing capabilities, which is becoming increasing important in electric vehicle production. The Ba2 CFR rating considers Element Solution's strong liquidity, attractive margins, variable cost structure and asset-light business model that enables the company to consistently generate healthy free cash flow. Element Solutions also benefits from high barriers to entry given its technical expertise and extensive qualification testing required by customers. The credit profile further incorporates its solid, globally diversified business with leading positions in niche segments and exposure to favorable long-term trends in 5G technology, semiconductors, increased electronic content in automobiles, electric vehicles and the Internet of Things (IoT). The rating also considers expectations that cash balances will be continue to be prudently managed. The rating is constrained by Element Solutions' significant exposure to the cyclical automotive and electronics industries. The company has demonstrated sufficient progress in adhering to its financial policy following the sale of Arysta and subsequent recapitalization. However, the public commitment to maintain net leverage below 3.5x according to management's calculation, is tempered by expectations that future free cash flow generation will be used for share repurchases, dividends and bolt-on M&A, rather than additional debt reduction. Headquartered in Fort Lauderdale, FL, Element Solutions Inc produces a wide array of specialty chemicals and materials primarily sold into the automotive, electronics and industrial markets with leading positions in a number of niche markets. The company operates in two business segments: Electronics and Industrial & Specialty. Element Solutions had sales of approximately $1.95 billion for the last twelve months ended March 31, 2021. ELI & ALI: Wins Cash Collateral Access Thru July 2 -------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of New York has authorized Eli & Ali, LLC to, among other things, use the cash collateral of Capital One, National Association, on a consensual basis in accordance with the budget through July 2, 2021. The Prepetition Lender consents to the Debtor's continued use of Cash Collateral solely for payment of such items as expressly set forth in the Budget, with (i) allowance for (x) a 10% aggregate variance on a rolling weekly basis during the period covered by the Interim Orders with respect to each of the line items in the Budget and (y) a 10% aggregate variance on a rolling weekly basis during the period covered by the Interim Orders with respect to each of the "Revenue 4/7 - 7/2" line item entries in the Budget, and (ii) provided that the Debtor will not use or spend more than $525,693 in the aggregate during the period covered by the Interim Orders. As of the Petition Date, the Debtor and its affiliates were indebted to CONA in the approximate amount of (a) $561,223.95, plus (b) interest accrued and accruing at the applicable annual contract rate under the Prepetition Financing Documents, plus (c) costs, expenses, fees and other charges and other amounts that would constitute Indebtedness under the Prepetition Financing Documents, including, without limitation, on account of cash management, credit card, depository, investment, hedging and other banking or financial services secured by the Prepetition Financing Documents. The Debtor has acknowledged and stipulated that its cash on hand and cash equivalents -- excluding the proceeds of the Paycheck Protection Program loan funded by TD Bank on February 22, 2021, in a principal balance of $100,000 as of the Petition Date -- constitute proceeds, products and profits of the Prepetition Collateral, and is cash collateral of the Prepetition Lender within the meaning of section 363(a) of the Bankruptcy Code. As adequate protection for the Debtor's use of cash collateral, the Prepetition Lender is granted solely to the extent of any diminution in value of the Prepetition Collateral, valid, binding, continuing, enforceable, non-avoidable and fully-perfected, first-priority postpetition security interests in and liens on all of the Debtor's rights in tangible and intangible assets, including, without limitation, the Prepetition Collateral and all other prepetition and postpetition property of the Debtor's estate and all proceeds, rents, and profits thereof, whether existing on or as of the Petition Date or thereafter acquired, that is not subject to (A) valid, perfected, non-avoidable and enforceable liens in existence on or as of the Petition Date or (B) valid and unavoidable liens in existence immediately prior to the Petition Date that are perfected after the Petition Date as permitted by section 546(b) of the Bankruptcy Code. In consideration of the Debtor's continued use of Cash Collateral in accordance with the Budget and/or the Debtor's use, sale, depreciation, or disposition of the Prepetition Collateral, the Prepetition Lender is granted solely to the extent of any diminution in value of the Prepetition Collateral, valid, binding, continuing, enforceable, non-avoidable and fully-perfected, first-priority postpetition security interests in and liens on all of the Debtor's rights in tangible and intangible assets. The Prepetition Lender will also receive (i) a payment of $750 per month, with the first payment due on April 16, 2021, and commencing promptly after the entry of the First Interim Order such that each additional monthly payment will be made no later the seventh day of each of subsequent month, and (ii) all proceeds payable upon a sale or other disposition of Prepetition Collateral and/or Postpetition Collateral, net of funding required to make payments in accordance with the Budget and the payments will be applied by the Prepetition Lender as a permanent reduction of the Prepetition Debt in accordance with the Prepetition Financing Document. The Prepetition Liens and Adequate Protection Liens are all subordinate to a Carve-Out for: (a) any quarterly or other fees payable to the U.S. Trustee pursuant to, inter alia, 28 U.S.C. section 1930(a) or interest, if any, pursuant to 31 U.S.C. section 3717; (b) professional fees of, and costs and expenses incurred during the Budget period by, professionals or professional firms retained by the Debtor and allowed by the Court in an amount not to exceed the actual Allowed Professional Fees accrued and incurred by each such Case Professional through the date of the Termination Event, but in no event exceeding $50,000 in total for the Chapter 11 Case; and (c) any cost and fees of a chapter 7 trustee, should one be appointed if the Chapter 11 Cases are converted in an amount not to exceed the amount of $20,000. These events will constitute a "Termination Event": (a) Entry of an order by the Bankruptcy Court converting or dismissing the Chapter 11 Case; (b) Entry of an order by the Bankruptcy Court appointing a chapter 11 trustee in the Chapter 11 Case; (c) The failure of the Debtor to perform or comply in any material respect with any term or provision of the Interim Order, including without limitation the Budget; provided that any failure to perform or comply with obligations will be deemed material; (d) Entry of an order that stays, reverses, vacates, amends, or rescinds any of the terms of the Interim Order, or order approving the Interim Order, without the consent of the Prepetition Lender; (e) Financing on a pari passu basis with the liens or claims of the Prepetition Lender; (f) Subject to and effective only upon entry of a Final Order, the filing of a motion that seeks to obtain first priority financing that does not pay the Prepetition Lender in full on account of the Prepetition Debt and any postpetition indebtedness, unless the Prepetition Lender otherwise consents to the financing; (g) The Court enters an order authorizing the sale of all or substantially all assets of the Debtor that does not provide for the payment in full to the Prepetition Lender of their claims in cash upon the closing of the sale, unless otherwise agreed by the Prepetition Lender in its sole and absolute discretion; (h) The Court enters the Final Order without (i) providing for any of the specific waivers with respect to "marshaling," "equities of the case," and "surcharge" under section 506(c) of the Bankruptcy Code, or (ii) granting the Prepetition Lender's Adequate Protection Liens; (i) The Debtor ceases operations without the prior written consent of the Prepetition Lender, except to the extent contemplated by the Budget; (j) The entry of an order or judgment by the Court or any other court: (i) modifying, limiting, subordinating, or avoiding the priority of the obligations of the Debtor under this Interim Order, the obligations of the Debtor under the Prepetition Financing Documents, or the perfection, priority, validity or enforceability of the Prepetition Liens or the Adequate Protection Liens, (ii) imposing, surcharging, or assessing against the Prepetition Lender's claims, or the Prepetition Collateral, any costs or expenses, whether pursuant to section 506(c) of the Bankruptcy Code or otherwise, except as expressly contemplated under Paragraph 17 of the Interim Order, or (iii) impairing the Prepetition Lender's right to credit bid under Section 363(k) of the Bankruptcy Code; (k) The occurrence of a material adverse change, including without limitation any such occurrence resulting from the entry of any order of the Court, or otherwise in each case as determined by the Prepetition Lender in its sole and absolute discretion in: (1) the condition (financial or otherwise), operations, assets, business or business prospects of the Debtor; (2) the Debtor's ability to repay the Prepetition Lender; and/or (3) the value of the Collateral; and (l) Any material and/or intentional misrepresentation by the Debtor in the financial reporting or certifications to be provided by the Debtor to the Prepetition Lender under the Prepetition Financing Documents and/or the Interim Order. The Final Hearing on the matter is scheduled for June 30 at 11:30 a.m. Objections are due June 25. A copy of the Order is available for free at https://bit.ly/3vr3HBv from PacerMonitor.com. About Eli & Ali, LLC Eli & Ali, LLC is a merchant wholesaler of farm product raw materials. It sought protection under Chapter 11 of the U.S. Bankruptcy Code (Bankr. E.D.N.Y. Case No. 21-40920) on April 7, 2021. In the petition signed by Jeffrey Ornstein, managing member, the Debtor disclosed $270,150 in assets and $1,427,375 in liabilities. Judge Jil Mazer-Marino oversees the case. Heath S. Berger, Esq., at BERGER, FISCHOFF, SHUMER, WEXLER & GOODMAN, LLP is the Debtor's counsel. Capital One, National Association, as Prepetition Lender, is represented by: Louis A. Curcio, Esq. Brett D. Goodman, Esq. Troutman Pepper Hamilton Sanders LLP 875 Third Avenue New York, NY 10022 E-mail: louis.curcio@troutman.com E-mail: brett.goodman@troutman.com EVERGREEN DEVELOPMENT: Seeks Cash Collateral Access Thru Sept 15 ---------------------------------------------------------------- Evergreen Development Group asks the U.S. Bankruptcy Court for the District of Minnesota for authority to use cash collateral and provide adequate protection. The Debtor requires the use of cash collateral to preserve the value of its business enterprise pending the confirmation of a Plan of Reorganization or consummation of a sale of the Debtor's business operations. The Debtor has filed a Plan of Reorganization and Disclosure Statement and believes it can move forward with a confirmation hearing by September 15, 2021. The Debtor has a need to use cash collateral through September 15 to pay operating expenses in the amounts identified in the Budget. The Court will hold a hearing on the matter on June 29 at 2:15 p.m. before Judge Michael E. Ridgeway, Courtroom 2 at the U.S. Courthouse, 118 South Mill Street, Fergus Falls, Minnesota. Evergreen Development says its operations have suffered in recent years due to several factors the downturn in the real estate markets over the last year. However, over the last several months the business has operated on a positive cash flow basis. In response to the Debtor's financial difficulties, the Debtor's management spent a substantial period of time evaluating alternatives for maximizing value for all of the Debtor's constituencies. After careful consideration and the exercise of sound business judgment, the Debtor concluded that a Chapter 11 filing was the only viable option. Minnesota Bank and Trust holds a combination mortgage, security agreement and fixture financing statement executed by the Borrowers, in favor of the Lender, dated November 30, 2005, and recorded on January 13, 2006, as Document No. 1182373, in the Office of the County Recorder in and for Stearns County, Minnesota. The Lender filed a Proof of Claim for $3,978,482.88 as of the Petition Date. The Lender claims a secured first-priority lien in substantially all of the Debtor's assets, real property and rental proceeds of the Debtor's operations. Keith A. Franklin, d/b/a Franklin Outdoor Advertising Co., asserts an interest in the Property pursuant to a Franklin Outdoor Advertising Lease Agreement dated August 29, 2004, and recorded on April 24, 2007, as Document No. 1225358, in the Office of the County Recorder in and for Stearns County, Minnesota. The John Duke Trust has an interest in the Property pursuant to a Mortgage dated February 15, 2008, and recorded on March 4, 2008, as Document No. 1251927, in the Office of the County Recorder in and for Stearns County, Minnesota. Paul Williams and Vickie Williams have an interest in the Property pursuant to a Mortgage dated February 15, 2008, and recorded on March 4, 2008, as Document No. 1251928, in the Office of the County Recorder in and for Stearns County, Minnesota. Lisa J. Hadley has an interest in the Property pursuant to a Mortgage dated February 15, 2008, and recorded on March 4, 2008, as Document No. 1251929, in the Office of the County Recorder in and for Stearns County, Minnesota. Edward H. Fish claims an interest in the Property pursuant to a Mortgage dated February 28, 2008, and recorded on April 8, 2008, as Document No. 1254750, in the Office of the County Recorder in and for Stearns County, Minnesota. As adequate protection for the use of cash collateral, the Debtor proposes to grant Minnesota Bank and Trust replacement liens in any new post-petition assets generated by the Debtor having the same dignity, priority and extent as existed on the Petition Date. A copy of the motion and the Debtor's budget from March to August is available for free at https://bit.ly/3cGXta8 from PacerMonitor.com. The Debtor projects $263,966 94 in total income and $292,570.94 in total expenses. About Evergreen Development Group Evergreen Development Group is a single asset real estate company which owns and leases commercial real estate in Waite Park, Minnesota. Its principal place of business and corporate offices are located at 95 10th Ave. South, Waite Park, Minnesota, 56387. It merged with The Evergreens of Apple Valley, L.L.P. in 2015. Evergreen Development Group and The Evergreens of Apple Valley, L.L.P., sought protection under Chapter 11 of the U.S. Bankruptcy Court (Bankr. D. Minn. Case Nos. 21-60066 and 21-40334) on February 26, 2021. In the petition signed by Robert A. Hopman, general partner, Evergreen Development disclosed up to $10 million in assets and up to $50,000 in liabilities. Foley & Mansfield, P.L.L.P., represents the Debtors as counsel. FIVE STAR: Engages Deloitte & Touche as Auditor ----------------------------------------------- The Audit Committee Five Star Senior Living Inc.'s Board of Directors approved the engagement of Deloitte & Touche LLP as the Company's independent registered public accounting firm, effective immediately. During the years ended Dec. 31, 2019 and Dec. 31, 2020, and the subsequent interim period through June 14, 2021, the Company did not, nor did anyone on its behalf, consult with Deloitte with respect to (a) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's consolidated financial statements, and no written report or oral advice was provided to the Company that Deloitte concluded was an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issue or (b) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions), or a disagreement, or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K), or a reportable event. Contemporaneous with the Committee's determination to engage Deloitte, the Committee dismissed RSM US LLP, or RSM, as the Company's independent registered public accounting firm, effective immediately. The reports of RSM on the Company's financial statements for each of the two years ended Dec. 31, 2019, and Dec. 31, 2020, did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. In connection with the audits of the Company's financial statements for the years ended Dec. 31, 2019, and Dec. 31, 2020, and during the subsequent interim period through June 14, 2021, there were no disagreements between the Company and RSM on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures which, if not resolved to the satisfaction of RSM would have caused RSM to make reference to the subject matter of the disagreement in their report. During the years ended Dec. 31, 2019 and Dec. 31, 2020 and the subsequent interim period through June 14, 2021, there were no reportable events. About Five Star Senior Headquartered in Newton, Massachusetts, Five Star Senior Living Inc. -- http://www.fivestarseniorliving.com-- is a senior living and rehabilitation and wellness services company. As of March 31, 2021, FVE operated 252 senior living communities (29,265 living units) located in 31 states, including 228 communities (26,963 living units) that it managed and 24 communities (2,302 living units) that it owned or leased. FVE operates independent living, assisted living, and memory care communities, continuing care retirement communities and skilled nursing facilities. Additionally, FVE's rehabilitation and wellness services segment includes Ageility Physical Therapy SolutionsTM, or Ageility, a division of FVE, which provides rehabilitation and wellness services within FVE communities as well as to external customers. As of March 31, 2021, Ageility operated 215 outpatient rehabilitation clinics and 37 inpatient rehabilitation clinics in 28 states. FVE is headquartered in Newton, Massachusetts. Five Star reported net loss of $7.59 million for the year ended Dec. 31, 2020, compared to a net loss of $20 for the year ended Dec. 31, 2019. As of March 31, 2021, the Company had $471.13 million in total assets, $179.07 million in total current liabilities, $78.44 million in total long-term liabilities, and $213.63 million in total shareholders' equity. FORCEPOINT: Deep Secure Deal No Impact on Moody's 'B3' CFR ---------------------------------------------------------- Moody's Investors Service said Panther Guarantor II, L.P.'s ("Forcepoint") and its subsidiaries B3 CFR and B3 term loan ratings were not affected by the recently announced upsizing of its first lien secured term loan by an incremental $55 million to $630 million. The net proceeds of the upsizing will be used to acquire Deep Secure, a U.K.-based cyber security firm providing threat removal and cross domain security products Though modest in incremental revenue at close, Deep Secure expands Forcepoint's U.K. exposure, Government business, and adds new threat removal technology to Forcepoint's product portfolio. Although the Deep Secure acquisition is principally debt funded, Forcepoint continues to experience solid revenue growth and has made significant cost reductions since closing of the buyout by Francisco Partners in January 2021. Pro forma leverage at closing is over 13x excluding certain one-time costs (and far higher including those items). Moody's expects Forcepoint can reduce adjusted leverage to under 6x over the next two years if the company can maintain low single digit growth while executing a significant cost reduction strategy. However, additional debt-funded acquisitions may lengthen Forcepoint's deleveraging path, delaying improvements in the company's credit profile. Forcepoint is a security software company serving both enterprise and government customers, with approximately $700 million of revenue for the fiscal year ended December 31,20. The company is owned by private equity firm Francisco Partners. FORD CITY: Seeks Approval to Tap Golden Law as Legal Counsel ------------------------------------------------------------ Ford City Condominium Association seeks approval from the U.S. Bankruptcy Court for the Northern District of Illinois to employ Golden Law to serve as legal counsel in its Chapter 11 case. The firm's services include: (a) advising the Debtor regarding its powers and duties; (b) preparing legal papers; and (c) performing necessary legal work regarding approval of the Debtor's disclosure statement and Chapter 11 plan. The Debtor has agreed to pay Golden Law a security retainer of $5,000. Shanita Straw, Esq., the primary attorney in this representation, will be billed at her hourly rate of $270, while associates and paralegals will be paid at $190 per hour and $130 per hour, respectively. In addition, Golden Law will seek reimbursement for expenses incurred. Shanita Straw, Esq., a member of Golden Law, disclosed in a court filing that the firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Shanita Q. T. Straw, Esq. Daniel W. Diamond, Esq. Golden Law 6602 Roosevelt Road Oak Park, IL 60304 Telephone: (708) 613-4433 Email: sstraw@goldenlawpc.com ddiamond@goldenlawpc.com About Ford City Condominium Association Chicago-based Ford City Condominium Association sought protection under Chapter 11 of the Bankruptcy Code (Bankr. N.D. Ill. Case No. 21-05193) on April 20, 2021. Wendy Watson, president, signed the petition. In the petition, the Debtor disclosed total assets of $511,636 and total liabilities of $1,266,643. Judge Carol A. Doyle oversees the case. Golden Law serves as the Debtor's legal counsel. FOREVER 21: Plan Funds Not Sufficient for Admin, Priority Claims ---------------------------------------------------------------- Forever 21, Inc. and its debtor-affiliates filed a Third Amended Joint Chapter 11 Plan and the accompanying Disclosure Statement on June 11, 2021. On February 19, 2020, the Debtors closed the sale of substantially all of their assets to F21 OpCo, LLC. Since that time, the Debtors, along with their advisors, have been working diligently to identify and effectuate a value maximizing wind down of the Debtors' estates, to allow them to exit these Chapter 11 cases while maximizing value to Holders of Claims and Interests. A. Sources for Plan Distributions The Debtors shall fund distributions under the Plan with cash (a) received from the Tax Refunds of approximately $22,400,000 from the CARES Act; approximately $1,900,000 from income tax prepayments; and approximately $500,000 in additional state tax refunds which the Debtors anticipate to receive;(b) remaining from the $16,000,000 Warehouse Sale; (c) from the Korea Settlement Proceeds of approximately $205,000; (d) from certain commercial property insurance proceeds; (e) from certain interest payments on deposited funds; (f) from professional fee retainer refunds; (g) from Warehouse rent prior to the sale of the Warehouse; (h) from the Wind-Down Amount; and (i) balance of the Carve-Out Account after satisfaction of all Allowed Professional Fee Claims. The Debtors estimate that Cash available for distribution under the Plan could be equal to approximately $30,400,000 to $30,900,000. B. Treatment of Administrative Claims, Priority Tax Claims and Other Priority Claims under the Plan It is anticipated that there will not be enough Distributable Cash to satisfy all remaining Allowed General Administrative Claims and Other Priority Claims in full in Cash. Any outstanding Allowed unpaid General Administrative Claim and Other Priority Claims arising prior to March 5, 2020, at 11:59 p.m., prevailing Eastern Time, will receive the treatment set forth in the Plan. All known Holders of General Administrative Claims, other than Administrative Settlement Claimants, and Other Priority Claims have been sent an Administrative/Priority Claim Consent Form pursuant to which the Debtors are seeking the agreement of each such party to the treatment afforded to such Holder under the Plan, which is less than the full payment as set forth in Section 1129(a)(9) of the Bankruptcy Code. If Distributable Cash is approximately $30,900,000 and allowed General Administrative Claims and Other Priority Claims total $220,000,000, Holders of General Administrative Claims and Other Priority Claims will get a 14% recovery in Chapter 11. The quantum of the recovery available to Holders of Allowed General Administrative Claims and Other Priority Claims pursuant to the Administrative and Priority Claims Recovery is dependent on the number of variables and conditions, including (i) the receipt of approximately $500,000 in remaining state tax refunds, and (ii) the aggregate amount of Allowed General Administrative Claims and Other Priority Claims following reconciliation and objection. A Holder of a General Administrative Claim or and Other Priority Claims who does not return the Administrative/Priority Claim Consent Form or to object to Confirmation of the Plan by a Holder of a General Administrative Claim or and Other Priority Claims prior to August 30, 2021 at 4 p.m., prevailing Eastern Time shall be deemed to have agreed to receive treatment for such Claim under the Plan. C. Consent of Holders of Administrative/Priority Claims Crucial The Debtors may not be able to confirm the Plan if a Holder of a General Administrative Claim or Other Priority Claim returns the Administrative/Priority Claim Consent Form or objects to Confirmation of the Plan asserting that it is entitled to payment in full under section 1129(a)(9) of the Bankruptcy Code. If the Debtors are not able to confirm the Plan, the Debtors anticipate that Holders of General Administrative Claims and Other Priority Claims will receive a smaller distribution on account of their Allowed Claims under any alternative to the Plan. The Debtors urge all Holders of General Administrative Claims and Other Priority Claims to abstain from returning the Administrative/Priority Claim Consent Form or objecting to the Plan and encourage all Holders of Claims who are entitled to vote to accept the Plan by returning their Ballots so that Prime Clerk, the Debtors' solicitation agent actually receives such Ballots by the Voting Deadline. D. Class 3A Crossover Unsecured Claims and Class 3B Other Unsecured Claims Class 3A Crossover Unsecured Claims, aggregating $400 million and Class 3B Other Unsecured Claims, aggregating $500 million will receive Pro Rata share of the General Unsecured Claims Recovery on the Effective Date. However, since it is unlikely that all Allowed General Administrative Claims and Other Priority Claims will be paid in full in Cash, the Debtors believe that it is unlikely that Holders of Allowed Crossover Unsecured Claims or Allowed Other Unsecured Claims will receive a Cash recovery under the Plan on account of such Claims. Nevertheless, any Avoidance Actions held by the Debtors or the Wind-Down Debtors against Holders of Allowed Crossover Unsecured Claims or Allowed Other Unsecured Claims will be fully waived, released, and discharged on the Effective Date. E. Carve-out Reserves for Professional Claims The Plan provides that Allowed Professional Fee Claims will be paid in Cash from the Carve-Out Account in a manner consistent with and contemplated by the Sale Order. The Carve-Out Account was funded by the Carve-Out Reserves for that exact purpose and escrowed into that certain Carve-Out Account as authorized by the Final DIP Order and Sale Order. There is approximately $8.3 million in Carve-Out Reserves remaining in the Carve-Out Account as of the filing date of the Third Amended Joint Plan. When all such Allowed amounts owing to Retained Professionals have been paid in full, any remaining amount in the Carve-Out Account shall be deemed to constitute Distributable Cash without any further action or order of the Court. F. Substantive Consolidation The Plan contemplates that the Debtors may seek substantive consolidation of the Debtors' estates in connection with confirmation of the Plan. To the extent the Debtors seek such relief, and such relief is granted by the entry of the Confirmation Order shall, all assets and liabilities of the Debtors shall be treated as though they were merged into a single economic unit. G. Corporate structure be upon Emergence Each Debtor shall continue to exist as of the Effective Date as a separate corporate Entity, limited liability company, partnership, or other form. After the Effective Date, the Wind-Down Debtors shall be deemed to be dissolved without any further action by the Wind-Down Debtors, upon a certification to be filed with the Court by the Plan Administrator of all distributions having been made and completion of all its duties under the Plan and entry of a final decree closing the last of the Chapter 11 Cases. H. Voting Deadline, Disclosure Statement Hearing The Deadline to submit votes on the Plan is August 30, 2021 at 4:00 p.m. prevailing Eastern Time. The Court will consider approval of the Third Amended Disclosure Statement will be held on July 22, 2021 at 3 p.m., prevailing Eastern Time. The deadline for filing objections to the Disclosure Statement is 4 p.m., prevailing Eastern Time, on July 12. A copy of the Disclosure Statement is available for free at https://bit.ly/3iHBUdu from Prime Clerk, claims agent. About Forever 21 Founded in 1984 by South Korean husband and wife team Do Won Chang and Jin Sook Chang and headquartered in Los Angeles, Calif., Forever 21, Inc. -- http://www.forever21.com/-- is a fast-fashion retailer of women's, men's and kids' clothing and accessories and is known for offering the hottest, most current fashion trends at a great value to consumers. Forever 21 delivers a curated assortment of new merchandise brought in daily. Forever 21, Inc. and seven of its U.S. subsidiaries each filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (Bankr. D. Del. Lead Case No. 19-12122) on Sept. 29, 2019. According to the petition, Forever 21 has estimated liabilities on a consolidated basis of between $1 billion and $10 billion against assets of the same range. As of the bankruptcy filing, the Debtors operated 534 stores under the Forever 21 brand in the U.S. and 15 stores under beauty and wellness brand, Riley Rose. The Debtors tapped Kirkland & Ellis LLP as legal advisor; Alvarez & Marsal as restructuring advisor; and Lazard as investment banker; and Pachulski Stang Ziehl & Jones LLP as local bankruptcy counsel. Prime Clerk is the claims agent. Andrew Vara, acting U.S. trustee for Region 3, appointed a committee of unsecured creditors on Oct. 11, 2019. The committee is represented by Kramer Levin Naftalis & Frankel LLP and Saul Ewing Arnstein & Lehr LLP. Counsel to the administrative agent under the Debtors' prepetition revolving credit facility and the Debtors' DIP ABL financing facility are Morgan, Lewis & Bockius LLP and Richards, Layton & Finger, PA. Counsel to the administrative agent under the Debtors' DIP term loan facility is Schulte Roth & Zabel LLP. FRANKLIN STREET: Moody's Assigns Ba1 CFR & Alters Outlook to Stable ------------------------------------------------------------------- Moody's Investors Service has downgraded Franklin Street Properties Corp.'s ('Franklin Street Properties' or 'the REIT') senior unsecured debt rating to Ba1 from Baa3 based on Moody's expectation that the REIT's smaller scale and weak portfolio lease rate will continue pressure operating margins and net debt to EBITDA ratio. In the same rating action, a Ba1 corporate family rating was assigned and the Baa3 issuer rating was withdrawn. The revision of the outlook to stable from negative reflects the REIT's sound liquidity position and anticipated improvement in its fixed charge coverage ratio. Franklin Street Properties Corp. The following ratings were downgraded: Senior Unsecured Regular Bond/Debenture, Downgraded to Ba1 from Baa3 The following rating was assigned: Corporate Family Rating, Assigned Ba1 Speculative Grade Liquidity Rating, Assigned SGL-2 The following rating was withdrawn: Issuer Rating, Withdrawn , previously rated Baa3 Outlook Action Outlook, Changed To Stable From Negative RATINGS RATIONALE Franklin Street Properties' Ba1 corporate family rating reflects its prudent leverage strategy, sound liquidity position, modest scale relative to rated office landlords and elevated net debt to EBITDA. The REIT's strategy to paydown debt with proceeds from recent asset sales will strengthen its debt to gross assets ratio and have a favorable impact on the net debt to EBITDA ratio too, albeit to a modest degree. The operating challenges are likely to persist given that the assets sold/to be sold are well-leased properties that likely generated meaningful operating income too. Moody's expect that the REIT's portfolio lease rate will improve to the mid to high 80% range over the next few quarters, however its smaller scale and tenant concessions will keep operating margins, below 50%. Moody's forecast that its net debt to EBITDA metric will mostly remain above Moody's expectations of 7.0x through YE 2022. The fixed charge coverage will, however, recover to the mid 3x range over the next 4-6 quarters. Franklin Street Properties owns a modestly sized portfolio of office assets primarily in large Sunbelt and Midwest markets. Over the last few years, the REIT's portfolio has faced a few challenges including elevated lease expirations in 2018 and 2019, weak leasing dynamics in Houston- one of its main markets, and more recently the decline in office utilization and leasing during the pandemic. As of March 31, 2021, Franklin Street Properties' portfolio was 81% leased relative to 84.2% a year earlier and 85.3% at the end of Q1 2019. The REIT's SGL-2 rating reflects its well-maintained assets, manageable lease maturity schedule through YE 2022, 20.8% of rental revenue, and diverse tenant base that limit downside risk. A fully unencumbered asset base and over 95% availability on its $600 million revolving credit facility which matures in Jan 2022 but can be extended to Jan 2023 are key underpinnings of Franklin Street Properties' solid liquidity position. The REIT's next debt maturity, after the repayment of the term loans maturing in 2021 from asset sale proceeds, would be its credit facility, including a $400 million term loan, in January 2023. The stable rating outlook reflects Moody's expectation that income trends would improve modestly from current levels and fixed charge would be close to the 3.5x range by YE2022. Ample liquidity to invest in its assets, including leasing capex, is another important consideration. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS A ratings upgrade would require net debt to EBITDA below 7.0x on a sustained basis and fixed charge coverage close to 4.0x. Maintaining good liquidity and operating margins above 50% are some other considerations that could prompt a positive rating action. A rating downgrade would reflect meaningful deterioration in operating performance such that net debt to EBITDA is close to 8.5x on a sustained basis, fixed charge drops below 2.5x and liquidity pressures emerge. The principal methodology used in these ratings was REITs and Other Commercial Real Estate Firms published in September 2018. Franklin Street Properties, a REIT headquartered in Wakefield, MA, owns and operates 31 office assets with 8.5 million square feet of space after the sale of 3 of its Atlanta properties in May 2021. The REIT's five core markets are Atlanta, Dallas, Denver, Houston and Minneapolis. FRONTIER COMMUNICATIONS: Tsuei Appeal on Trustee Bid Ruling Nixed ----------------------------------------------------------------- District Judge Colleen McMahon tossed an appeal by Tsuei Yih Hwa (Tsuei), proceeding pro se, from an order of the United States Bankruptcy Court for the Southern District of New York in the Chapter 11 case of Frontier Communications Corporation. The bankruptcy court denied motions by Summer Ridge Group Ltd. to dismiss Frontier's Chapter 11 bankruptcy proceedings, and also denied Tsuei's motion for appointment of either a Chapter 11 trustee pursuant to 11 U.S.C. Sections 1104(a)(1) and (2), or an examiner pursuant to 11 U.S.C. Section 1104(c)(1). Because the effective date of the plan has passed and the plan of reorganization has been substantially consummated, the appeal is dismissed as equitably moot, Judge McMahon said. Summer Ridge Group, Ltd., a Taiwan-based corporation that held several unsecured Frontier corporate bonds through UBS AG Singapore, argued that Frontier's bankruptcy was fraudulent and it should be ineligible for Chapter 11 protection because (a) Frontier affected a goodwill impairment in 2019 to fraudulently undervalue its assets so that it could qualify for bankruptcy; and (b) Frontier selectively repaid debts it owed to certain unsecured creditors before others prior to filing for bankruptcy. Tsuei Yih Hwa, a Singaporean national, filed a pro se motion for appointment of a case trustee or examiner to investigate Frontier for possible accounting fraud and bankruptcy fraud. Tsuei claimed he was an "unsecured bondholder" and "also a shareholder" of Frontier but did not file any documents with the Bankruptcy Court evincing that claim. A copy of the Court's June 8, 2021 Decision and Order is available at: https://www.leagle.com/decision/infdco20210615699 About Frontier Communications Frontier Communications Corporation offers a variety of services to residential and business customers over its fiber-optic and copper networks in 25 states, including video, high-speed internet, advanced voice, and Frontier Secure(R) digital protection solutions. Frontier Business offers communications solutions to small, medium, and enterprise businesses. Frontier Communications Corporation and 103 related entities sought Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 20-22476) on April 14, 2020. As of February 29, 2020, Frontier listed $17,433,201,422 in total assets and $21,855,602,151 in total debts. Judge Robert D. Drain presided over the cases. The Debtors tapped Kirkland & Ellis LLP as legal counsel; Evercore as financial advisor; and FTI Consulting, Inc., as restructuring advisor. Prime Clerk served as claims agent. The U.S. Trustee for Region 2 appointed a committee to represent unsecured creditors in Debtors' Chapter 11 cases. The committee tapped Kramer Levin Naftalis & Frankel LLP as its counsel; Alvarez & Marsal North America, LLC, as financial advisor; and UBS Securities LLC as an investment banker. The Bankruptcy Court approved Frontier's plan of reorganization on August 27, 2020. The Effective Date of the plan was April 30, 2021. GARDA WORLD: S&P Alters Outlook to Stable, Affirms 'B' ICR ---------------------------------------------------------- S&P Global Ratings revised its outlook on Montreal-based security and cash services provider Garda World Security Corp. to stable from negative. At the same time, S&P Global Ratings affirmed its 'B' issuer credit rating on the company. S&P said, "We also affirmed our 'B' issue-level rating on Garda's secured debt and our 'CCC+' rating on the company's senior unsecured debt. The '3' and '6' recovery ratings on the secured and unsecured debt, respectively, are unchanged. "The stable outlook reflects our expectation that Garda will sustain its adjusted debt to EBITDA at about 8x, which includes our assumption for modest acquisitions, while maintaining adequate liquidity. "Garda's operating results and credit measures were modestly stronger than our expectations in fiscal 2021, with a muted effect from the pandemic. Garda's fiscal 2021 operating results exceeded our expectations, with organic growth in the protection services segment and revenues from business acquisitions that contributed to adjusted EBITDA modestly (about 5%) higher than our expectations. New sources of revenues, notably from COVID-19 pandemic response services provided to clients, helped the company offset declines in cash services, aviation, and special event revenue streams in North America. As a result, the company generated adjusted debt to EBITDA of 8x, which was stronger than our previous expectation in the mid-8x area. "We estimate Garda's earnings and cash flow generation will improve this year from positive organic revenue growth across most of the company's business segments and continuing contributions from recent and prospective acquisitions. The international protection services revenues (mainly new contracts), U.S. government contracts associated with the pandemic management, and acquisitions in the U.S. protection services segment drive the bulk of our growth estimates. We assume demand for cash, aviation, and special events services will gradually resume as the North American economy reopens following mass vaccination efforts. Based on this, we forecast Garda will sustain adjusted debt to EBITDA at about 8x in fiscal 2022. Our calculations include the impact of modestly higher debt following the recent US$500 million senior debt issuance, which we expect will facilitate future bolt-on acquisitions. We also estimate that funds from operations (FFO) cash interest coverage will improve to just above 2.0x (from 1.7x in fiscal 2021), primarily benefiting from lower-cost refinancing transactions completed over the past year. "We now believe the risk of business disruption associated with the pandemic has materially reduced, thereby reducing the downside risk to our cash flow and leverage estimates. However, Garda's credit measures will continue to have heightened sensitivity to relatively modest declines in earnings and cash flow because of the company's high debt levels. "Our rating on Garda largely reflects its high leverage and private equity ownership. Garda has consistently maintained high debt levels, with an adjusted debt-to-EBITDA ratio well above 5x, due in large part to its leverage-supported growth strategy. The company has completed a series of debt-financed acquisitions in the protection services area in recent years and we expect this to continue. In our view, future acquisitions pose execution and financial risks mainly related to integration and higher prospective debt, but the company has demonstrated a solid track record of integration that has contributed to meaningful growth in its revenue and earnings over the past several years. "Based on our estimated earnings, coupled with the modest capital intensity of the company's business, we estimate Garda will generate annual positive free cash flows in the low-C$100 million area over the next two years. We believe that Garda will use free cash flows to fund opportunistic acquisitions rather than materially reduce the company's high debt load. This primarily reflects the company's aggressive financial policies associated with its private equity ownership. However, we assume the company will remain prudent with future purchases to the extent that leverage does not materially exceed our expectations. "The company has limited scale compared with that of larger global peers but benefits from relatively stable profitability. We believe Garda is a relatively smaller and less geographically diversified player than its larger global peers such as Allied Universal Topco LLC, Securitas AG, and Prosegur Compañía de Seguridad S.A. Garda derives almost 80% of its revenues from North America and has less than 5% market share of the highly fragmented global security services industry. "However, in our opinion, the company benefits from high contract renewal rates (we estimate about 90%) that we believe will continue. Also, the relative stability of the company's core protective services business (which represents about three-quarters of its fiscal 2021 revenue with a leading market position in Canada) and variable cost structure support consistent margins. Given the highly fragmented nature of this industry, we believe further expansion from acquisitions (particularly in the U.S.) will continue and contribute to growth in cash flows. "Garda is among the top three cash services providers in North America, which includes a leading (about 50%) market share in Canada, and this segment accounted for about one-quarter of Garda's revenue in fiscal 2021. The company's profitability benefits from its high-margin cash services business, but we believe the EBITDA margins will gradually decline as the company focuses on acquisitions in protective services domain for incremental growth. We view the growth prospects of cash services business to be limited, and this mainly reflects the increasing use of electronic payment methods and e-commerce in its core markets. "The stable outlook reflects S&P Global Ratings' expectation that Garda's credit measures will remain relatively stable over the next two years, including adjusted debt to EBITDA of about 8x and adjusted FFO cash interest coverage of about 2x. We believe gradual growth in earnings and cash flow will facilitate free cash flow generation and mitigate the effect of moderately higher debt that we assume will be used toward future acquisitions. "We could lower our ratings on Garda within the next 12 months if adjusted debt to EBITDA increases well above 8.0x on a sustained basis or adjusted FFO cash interest coverage approaches 1.5x. This could occur from weaker-than-expected earnings and cash flow resulting from competitive pressures or operating inefficiencies. It could also occur if debt levels materially increase, most likely from higher-than-expected acquisitions. "We could upgrade Garda in the event the company demonstrates a commitment to sustaining an adjusted debt-to-EBITDA ratio close to 5x, which we believe is unlikely within the next 12 months. We believe debt-funded acquisitions will remain an important part of Garda's growth strategy and limit rating upside." GARRETT MOTION: S&P Assigns 'B+' ICR, Outlook Stable ---------------------------------------------------- S&P Global Ratings assigned a long-term 'B+' issuer credit rating to U.S.-incorporated auto supplier Garrett Motion Inc. (GMI) and a 'B+' issue rating to the seven-year $1.25 billion senior secured term loan B (TLB) and the five-year $300 million revolving credit facilities (RCFs). The recovery rating of '3' indicates meaningful recovery prospects (50%-70%; rounded estimate: 60%) at default. The stable outlook reflects S&P's view that GMI will report annual revenue growth of 10%-15% in 2021-2022, improve its EBITDA margins toward 14%-15%, and generate annual free operating cash flow (FOCF) of $250 million-$300 million on average, allowing for significant deleveraging. The Chapter 11 plan of Garrett Motion Inc. (GMI) and its affiliated debtors, sponsored by the new main shareholders Oaktree Capital Management L.P. (23.2% voting rights) and Centerbridge Partners L.P. (23% voting rights) was implemented with no major deviation. The final ratings are in line with the preliminary ratings. GMI emerged from bankruptcy at end-April 2021 with no deviation from the latest plan, sponsored by Oaktree and Centerbridge with the support of Honeywell International Inc. and the holders of a majority of GMI's common stock. GMI filed for Chapter 11 on Sept. 20, 2020. Under the plan, all creditors of the company (other than Honeywell) have been repaid in full in cash with the proceeds of debt--namely $1.25 billion-equivalent under a syndicated TLB and equity financing. The plan sponsors and other investors purchased approximately $1.3 billion of preference shares A. Oaktree and Centerbridge, together, own 46% of GMI's voting rights. S&P said, "In our base-case scenario, the preference shares A do not meet our criteria for equity credit recognition and are therefore considered as debt, although we acknowledge that they have certain equity characteristics. S&P Global Ratings-adjusted debt of $3.5 billion post emergence from bankruptcy includes the $1.25 billion-equivalent TLB, $1.3 billion of preference shares A, $834.8 million of preference shares B, as well as adjustments for pension obligations and outstanding factoring facilities ($31 million at year-end 2020). This equates to S&P Global Ratings-adjusted debt to EBITDA of about 7.2x-7.5x in 2021 and about 6.0x-6.2x in 2022 (about 4.5x-4.7x and 3.8x-4.0x, respectively, excluding the $1.3 billion preference shares A from our adjusted debt figure). The ratings are supported by GMI's solid FOCF prospects and consequently rapid deleveraging prospects." The settlement with Honeywell is credit positive overall, since it removes a long-term overhang for the capital structure, but material cash outflows remain until 2030. As part of the plan, Honeywell has agreed to remain in the company's capital structure post Chapter 11. At emergence, Honeywell received $375 million in cash. The reorganized GMI issued $834.8 million of preference shares B to Honeywell, which amortize through 2030, and which S&P views as a debt-like obligation. Under the preference shares B, Honeywell will receive annual amortization payments ($34.8 million in 2022 and $100 million per year from 2023 to 2030), which will be deferrable if consolidated annual adjusted EBITDA falls below $425 million. Furthermore, in the 18-month period following emergence, GMI may call a portion of the outstanding preference shares B for the present value discounted at a rate of 7.25%, provided the present value of any amortization remaining after GMI exercises this option is no less than $400 million. Reorganized GMI also may call the full amount of the same outstanding amortization at any time, utilizing the same discount rate. This agreement settles pending litigation between GMI and Honeywell and limits the financial exposure of the former on a shorter horizon, which we consider credit positive for GMI. S&P said, "We see a limited impact from the bankruptcy proceedings on GMI's performance. GMI demonstrated resilience in a challenging 2020 marked by the COVID-19 pandemic and its bankruptcy proceedings. Topline and profitability turned out better than we had expected in our July 2020 scenario, thanks to GMI's proven cost flexibility and capacity to take advantage of market recovery. On an adjusted basis, FOCF was only mildly negative, outperforming our previous expectations for 2020. We anticipate GMI will go back to positive adjusted FOCF in 2021 of $200 million-$250 million, taking advantage of the global recovery and, in particular, of what we believe will be a dynamic Chinese market. Overall, we believe that GMI's competitive position was not impaired by the bankruptcy proceedings. At the same time, GMI still relies on legacy products for the bulk of its earnings. A further acceleration of the transition toward electric vehicle (EV) adoption, compared with what we now expect, is a risk for GMI and for our business risk profile assessment. We currently assume that the penetration of new battery electric vehicles and plug in hybrids vehicles sales will reach 30% in Europe and 10% in the U.S. by 2025. In China, we align our assumption with the Chinese government's target of 20% of sales of new energy vehicles by 2025. We expect GMI will seek opportunities to broaden its portfolio of innovative products through both organic and external growth. Therefore, we include acquisitions of about $300 million in 2022 and 2023 in our base-case scenario." The overwhelming influence of private-equity firms at reorganized GMI affects financial policy. With six out of nine board members, private equity firms Oaktree and Centerbridge have a controlling influence over the reorganized group. S&P reflects some concerns about the financial policy related to control by private-equity firms in its financial risk profile assessment, which is now weaker than before the Chapter 11 filing. The stable outlook reflects S&P's view that GMI will report annual revenue growth of 10%-15% in 2021-2022, improve its EBITDA margins toward 14%-15%, and generate positive FOCF of $200 million-$300 million on average per year, allowing for meaningful deleveraging. Any upgrade is contingent on financial policy and its effect on leverage. S&P would consider an upgrade if there is a firm commitment to a higher rating, supported by a clear and sustainable deleveraging trend. S&P could downgrade GMI if does not reduce its leverage from current levels due to an overly aggressive investment or acquisition spree. Albeit not expected in the near term, weaker revenue growth prospects or higher competitive pressure on margins, combined with a weakening cash flow and liquidity profile, could weigh on the rating. GARTNER INC: Moody's Rates New $500MM Unsecured Notes 'Ba3' ----------------------------------------------------------- Moody's Investors Service affirmed Gartner, Inc.'s corporate family rating at Ba2, probability of default rating at Ba2-PD and senior unsecured rating at Ba3. Moody's assigned a Ba3 rating to Gartner's proposed $500 million senior unsecured notes due 2029. The speculative grade liquidity rating remains SGL-1. The outlook was revised to positive from stable. The net proceeds of the proposed notes due 2029 will be used to repay approximately $100 million of senior secured term loans and for general corporate purposes. RATINGS RATIONALE "Despite the announced increase in debt and Moody's expectation for large, opportunistic shareholder returns, Gartner's ratings could be upgraded if it can maintain revenue growth and free cash flow generation," said Edmond DeForest, Moody's Senior Vice President. DeForest continued: "The ongoing increase in the proportion of unsecured to total debt could also result in an upgrade to the unsecured rating to Ba2, the same as the CFR." The Ba2 CFR reflects moderately high debt to EBITDA of over 3.5 times as of March 31, 2021, pro forma for the announced note sale and Moody's anticipation of opportunistic financial strategies featuring high share repurchase activity. The credit profile is supported by Moody's anticipation for low double digit range growth in both total contract value and revenue over the next 12 to 18 months, high teens range EBITDA margins and about $1 billion of free cash flow in 2021. EBITDA margins of about 23% for the LTM period ended March 31, 2021 reflect both cost management initiatives implemented at the start of the coronavirus pandemic in early 2020 and the unanticipated and strong rebound in revenues in the later part of 2020 and early 2021. Profit margins are expected to fall back into a high teens range and free cash flow may fall below $1 billion in 2021 as the company increases investment to fuel revenue growth. Declining profit margins, uncertain revenue growth and opportunistic financial strategies drive Moody's concerns that debt to EBITDA may rise toward 4.0 times in 2022 if growth stalls or Gartner adds more debt. Other credit metrics are expected to remain solid in 2021 and 2022, including EBITA to interest expense over 4.0 times and free cash flow to debt over 20%. All financial metrics cited reflect Moody's standard adjustments. Gartner's over $4.0 billion revenue scale, global operating scope and wide span of influence make it difficult to displace. Moody's anticipates recurring, subscription-based research products and services will represent around 80% of 2021 revenues, with good customer-retention rates -- the combination of which produces favorable economics and high revenue visibility. Gartner's conferences business unit may not generate meaningful revenue from live events for the remainder of 2021. As a business services company, Gartner's environmental and social risks are considered low. Gartner has been an active acquirer of its own stock, with over $500 million purchased in the LTM period ended March 31, 2021. Moody's considers Gartner's financial strategies aggressive and opportunistic, but consistent and visible. The 2017 acquisition of Corporate Executive Board ("CEB") left the company highly leveraged, but the company repaid over $1.2 billion of debt in from 2018 through 2020 to reduce financial leverage. Moody's anticipates Gartner will remain acquisitive to complement its product portfolio and an active acquirer of its own shares. The company may continue to use its free cash flow and incremental debt proceeds to finance acquisitions and share repurchases. The Ba3 senior unsecured rating incorporates Gartner's overall probability of default, reflected in the Ba2-PD PDR, and a loss given default assessment of LGD5, reflecting their subordination to the senior secured obligations. The SGL-1 speculative-grade liquidity rating reflects Gartner's very good liquidity profile. Moody's expects free cash flow of over $1 billion in 2021. Pro forma for the proposed notes, there was over $800 million in cash at March 31, 2021. The $1.0 billion senior secured revolving credit facility (unrated), which expires in September 2025 is unused and fully available. Gartner's good free cash flow and large revolver availability should provide ample flexibility to fund required debt maturities consisting of approximately $20 million of annual amortization required under its $390 million senior secured term loan (unrated) due 2025. The company's secured debt is subject to financial maintenance and other covenants. Moody's anticipates Gartner will maintain an ample cushion below the maximum leverage ratio and above the minimum interest expense coverage ratio applicable to the secured debt. The positive ratings outlook reflects Moody's anticipation that if Gartner can maintain continued strong operating performance and balanced financial strategies, debt to EBITDA would remain below 3.5 times. The outlook could be revised to stable if Moody's anticipates Gartner will pursue more aggressive financial strategies that cause debt to EBITDA to remain around 4.0 times or higher. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS An upgrade may be warranted if Gartner sustains: 1) its strong market position; 2) profitable revenue growth; 3) high teens range EBITA margins; and debt to EBITDA below 3.75 times. Given the positive outlook, a downgrade is not considered likely in the near term. Over the longer term, the ratings could be downgraded if Moody's anticipates: 1) debt to EBITDA will remain above 4.5 times; 2) revenue growth remains in a low single digit range; 3) technology or competitive shifts weaken the company's market position; 4) a deterioration in liquidity; or 5) more aggressive financial policies featuring material debt-funded acquisitions or shareholder returns. The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. Issuer: Gartner, Inc. Corporate Family Rating, Affirmed Ba2 Probability of Default Rating, Affirmed Ba2-PD Senior Unsecured Regular Bond/Debenture, Affirmed Ba3 (LGD5) Senior Unsecured Regular Bond/Debenture due 2029, Assigned Ba3 (LGD5) Outlook, Changed To Positive From Stable Gartner is a global research and advisory company specializing in issues including IT, supply chain management, marketing, human resources and personnel retention, sales, finance, and legal. Moody's expects 2021 revenues of over $4.5 billion. GARTNER INC: S&P Rates New $500MM Senior Unsecured Notes 'BB+' -------------------------------------------------------------- S&P Global Ratings assigned its 'BB+' issue-level rating and '3' recovery rating to Gartner Inc.'s proposed $500 million senior unsecured notes due 2029. The '3' recovery rating indicates S&P's expectation for meaningful (50%-70%; rounded estimate: 60%) recovery of principal in the event of a default. The company plans to use the net proceeds from these notes to repay a portion of its secured term loan A and will apply the remaining proceeds toward general corporate purposes, including to fund share repurchases. S&P said, "Our 'BB+' issue-level rating and '3' recovery rating on Gartner's existing senior unsecured notes are unchanged. "The company's leverage was 2.4x as of the 12 months ended March 31, 2021. The stable outlook reflects our expectation that it will maintain S&P Global Ratings-adjusted leverage in the 2x-3x range supported by a strong performance in its research segment and continuing improvements in its conferences segment over the next 12 months. A downgrade is unlikely over the next 12 months. However, we could downgrade Gartner if it pursues a more aggressive financial policy or experiences an operating underperformance that causes its leverage to exceed 3x on a sustained basis." ISSUE RATINGS--RECOVERY ANALYSIS Key analytical factors -- S&P's simulated default scenario contemplates a default occurring in 2026 due to a combination of subscription losses stemming from a cyclical downturn, operational missteps, mistimed acquisitions, and cost overruns. -- S&P's recovery analysis contemplates that the company would be reorganized and valued on a going-concern basis in a default scenario. -- Gartner's U.S. subsidiaries guarantee its senior secured first-lien credit facility and its senior unsecured notes. -- The senior unsecured notes are effectively subordinated to the credit facility to the extent of the collateral securing the credit facility. The collateral comprises substantially all of the material assets of the guarantors and a 65% stock pledge of the company's first-tier foreign subsidiaries. -- S&P assumes that the company's maturing debt is refinanced at similar terms prior to default. Simulated default assumptions -- Simulated default year: 2026 -- EBITDA at emergence: $395 million -- EBITDA multiple: 6.5x -- The revolver is 85% drawn in our simulated year of default Simplified waterfall -- Net enterprise value (after 5% administrative costs): $2.44 billion -- Valuation split between guarantors/non-guarantor foreign subsidiaries with 65% stock pledge: 45%/55% -- Senior-secured first-lien claims: $1.13 billion -- Value available to senior unsecured claims: $1.31 billion -- Senior unsecured debt claims: $2.14 billion --Recovery expectations: 50%-70% (rounded estimate: 60%) GATEWAY FOUR: Unsecureds After Subcontractors in Trustee Plan ------------------------------------------------------------- The Chapter 11 Trustee, David K. Gottlieb, submitted a Plan of Reorganization for Gateway Four, LP, et al. The primary asset of the Gateway Four bankruptcy estate is certain real property and improvements located thereon in the City of El Monte, California comprising a partially constructed apartment building with retail space on the street level (the "Gateway Four Property"). The completed apartment building is expected to be comprised of 208 units, and the streel level retail space is expected to be comprised of approximately 27,000 square feet. The fundamental purpose of the Plan is for Romspen to provide the funding needed to complete the construction of the Gateway Four Property (the "Gateway Four Property Construction") so that the completed Gateway Four Property can ultimately be sold for the benefit of the creditors of the Gateway Four bankruptcy estate. The Plan proposes to treat claims and interests as follows: * Class 1 - The prepetition secured claim of lender Romspen Mortgage Limited Partnership totaling $60,369,072 and Class 2 - The secured claim of KPRS totaling $6,393,845. Classes 1 and 2 claims will be paid out of the Remaining Net Property Sale Proceeds in the manner consensually agreed to between Romspen and KPRS or in accordance with the amounts and lien priorities as determined by the State Court in the Pending State Court Litigation or the Bankruptcy Court. Classes 1 and 2 are impaired. * Class 3 to 28 -- secured claims of subcontractors. Classes 3 to 28 will be paid out of the Remaining Net Sale Proceeds in the manner consensually agreed to between the New LLC Owners and creditors or in accordance with the amount and lien priority as determined by the State Court in the Pending State Court Litigation or the Bankruptcy Court. Classes 3 to 28 are impaired. * Class 31 - All non-priority general unsecured claims that are not included in any of classes 1-30 totaling approximately $617,131.35 to $1,619,629. Each holder of a class 31 allowed claim will be paid by the New LLC Manager a pro rata distribution out of any Remaining Net Sale Proceeds that are remaining, if any, after the allowed claims of all creditors in classes 1-30 have been paid in full. Class 31 is impaired. * Class 32 - Consists of all equity interests in the Gateway Four Debtor. The class 32 interests will receive all of the Remaining Net Sale Proceeds, if any, that are remaining after all allowed claims of all creditors in classes 1-31 have been paid in full, which the Trustee does not believe is likely to occur. Class 32 is impaired. On the Effective Date, all right, title and interest of all property of the Gateway Four bankruptcy estate (except for that needed to fund the Initial Estate Funding), including the Gateway Four Property and any and all rights, permits, and licenses of the Gateway Four Debtor (collectively, the "Estate Property"), shall be irrevocably transferred, absolutely assigned, conveyed, set over and delivered to the New LLC for the benefit of the creditors (and equity holders to the extent applicable) of the Gateway Four estate, free and clear of any and all liens, claims, encumbrances and interests (legal, beneficial or otherwise), with the exception of those covenants contained in and subject to the provisions of that certain Declaration Of Restrictive Covenants For The Development Of Market Rate Housing, recorded on the Gateway Four Property on March 31, 2014. Attorneys for David K. Gottlieb in his capacity as Chapter 11 Trustee: RON BENDER KRIKOR J. MESHEFEJIAN LEVENE, NEALE, BENDER, YOO & BRILL L.L.P. 10250 Constellation Boulevard, Suite 1700 Los Angeles, California 90067 Telephone: (310) 229-1234 Facsimile: (310) 229-1244 E-mail: RB@LNBYB.COM KJM@LNBYB.COM A copy of the Disclosure Statement is available at https://bit.ly/3iENtSN from PacerMonitor.com. About Gateway Four LP Gateway Four LP and its affiliates Gateway Two LP and Gateway Five LLC sought protection under Chapter 11 of the Bankruptcy Code (Bankr. C.D. Cal. Lead Case No. 20-11581) on Aug. 31, 2020. In the petition signed by its president, James Acevedo, Gateway Four disclosed assets ranging between $50 million to $100 million and liabilities ranging between $10 million to $50 million. Judge Martin R. Barash oversees the case. Daniel M. Shapiro, Attorney at Law serves as the Debtors' counsel, and the Law Office of Sevan Gorginian as co-counsel. GIBSON BRANDS: Moody's Assigns 'B2' CFR & Rates New $250M Loan 'B2' ------------------------------------------------------------------- Moody's Investors Service assigned a B2 Corporate Family Rating and B2-PD Probability of Default Rating to Gibson Brands, Inc. (New). A B2 was assigned to the company's proposed $250 million senior secured term loan due 2028. The outlook is stable. Proceeds from the proposed term loan will be used to pay a $225 million dividend to the owners including privately equity firm KKR, which owns approximately 70% of the company. The remainder will pay for fees and add $16.4 million to the balance sheet. Pro forma for transaction, Gibson will have a $250 term loan due 2028, a $50 million asset-based loan facility due 2025 ("ABL"), and $64.8 million of cash on balance sheet. The ABL facility is not rated. Gibson designs, manufactures, and distributes musical instruments and professional audio products and related accessories. The company is best known for its legendary Les Paul style guitar. Gibson is a considerably smaller but more focused company than when it filed for bankruptcy in May 2018 having divested or closed the consumer electronics, piano, DJ equipment and juke box businesses as part of the reorganization plan. The company emerged from bankrtupcy emergence in November 2018 under KKR and other lender control and new management has improved operating performance. The B2 assigned to the term loan considers that it accounts for a significant majority of Gibson's pro forma capital structure. The term loan will have first priority lien on the non-ABL priority assets, and a second priority lien on the ABL-priority assets that include cash and cash equivalents, trade accounts receivable, inventories, intangible assets, and investments held by Gibson. The term loan will be guaranteed by each of the company's direct and indirect domestic subsidiaries, subject to customary exceptions. The following ratings/assessments are affected by the action: New Assignments: Issuer: Gibson Brands, Inc. (New) Corporate Family Rating, Assigned B2 Probability of Default Rating, Assigned B2-PD Senior Secured 1st Lien Term Loan, Assigned B2 (LGD4) Outlook Actions: Issuer: Gibson Brands, Inc. (New) Outlook, Assigned Stable RATINGS RATIONALE The B2 CFR considers good operating performance since KKR took control of the company upon emergence from bankruptcy in November 2018, a high level of geographic diversification with respect to sales, and strong brand awareness. Gibson has a strong and long-standing reputation built upon the quality of its guitars and product innovation. This provides strong brand name recognition and significant barriers to entry for guitars, its flagship product. Since KKR took control of Gibson through its restructuring, the company's EBITDA has grown at a 25% CAGR. Approximately 50% of Gibson's sales are outside of the U.S. Key credit risks include the nonessential, highly discretionary nature of consumer spending on musical instruments, Gibson's high leverage, relatively narrow product focus, small size in terms of revenue, and some customer concentration. In addition, the continued uncertainty caused by the coronavirus pandemic remains a risk even though demand has held up well thus far. Leverage is also high with debt/EBITDA for the latest 12-month period of 4.7x on a Moody's adjusted basis and pro forma for the transaction. The coronavirus outbreak and the government measures put in place to contain it continue to disrupt economies and credit markets across sectors and regions. Although an economic recovery is underway, it is tenuous and its continuation will be closely tied to containment of the virus. As a result, a degree of uncertainty around Moody's forecasts remains. Moody's regards the coronavirus outbreak as a social risk under Moody's ESG framework, given the substantial implications for public health and safety. The stable outlook considers Moody's expectation of good demand for guitars and related products into 2021 with more individuals pursuing leisure activities close to home, and that as a result, the company will continue to generate positive free cash flow and maintain good liquidity. Gibson's good liquidity is characterized by positive free cash flow -- slightly more than break even in FY2022 growing to about Moody's estimate of $15 million to $20 million in fiscal 2023 -- along with an ABL revolver that will be undrawn at closing and not expected to be drawn during the life of the loan. The stable rating outlook also considers the covenant-lite nature of the financing. There will be a considerable amount of flexibility regarding covenant compliance. There are no financial covenants in the term loan and the ABL facility will only contain a minimum fixed charge coverage ratio of no lower than 1.00x to 1.00x. The company will have equity cure rights. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS An upgrade would require a high degree of confidence on Moody's part that consumer demand for musical instrument products has returned to a period long-term stability, and for Gibson to build greater scale. Gibson would also need to demonstrate the ability and willingness to generate strong positive free cash flow, maintain good liquidity, and continue to operate with a debt/EBITDA level at below 4.0x on a Moody's adjusted basis. Ratings could be downgraded if Moody's anticipates earnings to decline or liquidity to deteriorate because of actions to contain the spread of the virus or reductions in discretionary consumer spending. Separate from general operating conditions, Gibson's ratings could be downgraded if debt-to-EBITDA on a Moody's adjusted basis is sustained above 6.0x or the company decides to pursue a more aggressive use of leverage for any reason. The proposed first lien term loan is not expected to contain financial maintenance covenants, while the ABL revolving credit facility contains a maintenance minimum fixed charges coverage ratio of 1x. As proposed, the new credit facility is expected to provide covenant flexibility that could adversely affect creditors. Notable terms include the following: Incremental debt capacity up to the sum of (i) the greater of $53.3 million and 100% of trailing four quarter Consolidated EBITDA, and (ii) available capacity reallocated from the general debt basket, plus unlimited amounts subject to a pro-forma maximum first lien leverage of 3.5x (if pari passu secured). Amounts up to $53.3 million and 100% of trailing four quarter Consolidated EBITDA, and any amounts incurred in connection with a permitted acquisition or investment may be incurred with an earlier maturity date than the initial term loans. There are no express "blocker" provisions which prohibit the transfer of specified assets to unrestricted subsidiaries; such transfers are permitted subject to carve-out capacity and other conditions. Dividends or transfers resulting in partial ownership of subsidiary guarantors could jeopardize guarantees, with no explicit protective provisions limiting such guarantee releases. There are no express protective provisions prohibiting an up-tiering transaction. The proposed terms and the final terms of the credit agreement can be materially different. Gibson designs, manufactures, and distributes musical instruments and professional audio products and related accessories. Manufacturing operations are located in North America and China. The company also operates distribution and sales facilities in North America, Europe, and Asia. Products are marketed worldwide under a variety of brands, including Gibson, Epiphone, Kramer, MESA/Boogie, Steinberger, Dobro Maestro, and KRK. Gibson is a private company based out of Nashville, TN. Gibson was taken under the control of KKR, a private equity firm, through a restructuring in 2018. For the FYE period ended Mar. 31, 2021, Gibson generated about $300 million of revenue. The principal methodology used in these ratings was Consumer Durables Industry published in April 2017. GIBSON BRANDS: S&P Assigns 'B-' ICR, Outlook Stable --------------------------------------------------- S&P Global Ratings assigned its 'B-' issuer credit rating to U.S.-based designer, manufacturer, and distributor of guitars and related music products Gibson Brands Inc. S&P also assigned its 'B-' issue-level and '3' recovery ratings to the proposed $250 million term loan. The '3' recovery rating indicates its expectation for meaningful (50%-70%; rounded recovery: 50%) recovery. The stable outlook reflects S&P's expectation that the company will continue improving profitability through higher sales and stronger operating efficiency, allowing it to continue to deleverage to the mid-4x area over the next 12 months. The 'B-' issuer credit rating on Gibson Brands reflects its small size in a niche and fragmented industry, moderate brand concentration, the discretionary high-ticket nature of its products, weak free operating cash flow (FOCF) generation in the near term, and lack of a track record of stable operating and financial performance since emerging from bankruptcy in 2018. Gibson also has higher leverage than other discretionary rated musical instruments peers. The industry is subject to volatility in economic downturns. These challenges are somewhat offset by good growth prospects stemming from the company's new go-to-market strategy, strong brand recognition, good geographic diversity, and well-diversified customer base. S&P said, "High leverage, financial sponsor ownership, and ambitious expansion plans will likely limit the extent of deleveraging. Following the planned debt issuance and dividend distribution, we estimate Gibson Brands' adjusted leverage will be near 5x at the end of fiscal 2022 (ending March 2022). We forecast the company will need to continuously invest internally generated cash flows, leaving little to no headroom for debt repayment. Moreover, we believe profitability and leverage could be volatile from year to year. Although we see large debt-financed acquisitions as unlikely, we believe financial sponsors tend to maintain high leverage at their portfolio companies, typically using leverage capacity to fund shareholder distributions or make acquisitions. Gibson has focused on building a well-rounded product portfolio by adding brands and manufacturing capabilities via bolt-on acquisitions close to its core, including guitar amplifiers, parts, and accessories. Most recently, it bought Mesa/Boogie, which manufactures amplifiers for guitars and basses in addition to cabinets, pedals, buffers, simulators, switches, and routers. Therefore, our rating on Gibson incorporates our expectation for leverage above 5x longer term, despite our assumption for relatively lower leverage the next few years." Despite moderate brand concentration, the company has good geographic diversity and a diversified customer base. Gibson's portfolio contains five brands: Gibson, Epiphone, KRK Systems, Kramer, and Mesa/Boogie. Its top two generate 85% of pro forma revenue. It derives roughly 55% of its revenue from its largest brand, Gibson. Notwithstanding this moderate brand concentration, the company has good geographic diversification with 45% of sales outside the Americas, including 28% from Europe, the Middle East, and Africa (EMEA) and 17% from Asia-Pacific. Its largest single customer accounts for about 11% of sales, but its customer base is otherwise well-diversified across electronic super stores, e-commerce retailers, and specialty distributors. Gibson Brands has relatively small scale and narrow focus at the premium end of a competitive and fragmented industry, which is susceptible to high profit volatility during economic downturns. Gibson has a highly regarded brand and defensible competitive position given its solid market shares and recognition as one of the world's leading manufacturers of high-quality electric guitars and amplifiers for many decades. The company's premium guitar manufacturing with high-quality craftsmanship and vast distribution network should allow it to maintain its strong brand equity and global leadership positions in those end markets. It is a niche player with relatively limited scale competing against larger peers such as com.spglobal.ratings.services.article.services.news.xsd.MarkedData@473c8a31 and niche players such as C.F. Martin & Co. and Taylor Guitars (both not rated). The company also has modest manufacturing concentration, with all of Gibson and Mesa/Boogie branded products manufactured in the U.S. and most Epiphone branded guitars manufactured in China. The company utilizes some manufacturers to fulfill 15% of its needs, all concentrated in Asia. Moreover, S&P's assessment of Gibson's business risk is heavily influenced by its concentration in musical instruments, which are discretionary and relatively premium priced. While the company sells at multiple prices, its sales tend to be cyclical and vulnerable to economic downturns as customers generally put off purchases or trade down to lower-priced offerings, resulting in negative product mix shifts during economic stress. Therefore, we believe relatively high profit volatility is possible in a recession. Still, the company's recent efforts to rationalize its brand and product portfolio, relaunch some key brands, and undertake significant manufacturing capacity expansion to address volume constraints should support higher sales growth and profitability margins over the next 12 months. S&P said, "Despite the new management's limited track record, we expect recent initiatives and resilient industry demand will support Gibson Brands' operating performance over the next 12 months. Given the recent surge in popularity of guitars, driven by a significant increase in hobbyist musicians and podcasters, we expect industry demand to remain strong in fiscal 2022. We also acknowledge the strong order book and visibility of revenues from the large wholesale channel over the next 12 months. Although the management team has a limited track record of successfully managing the company's operations and maintaining consistent profitability, Gibson has embarked on a significant reorganization initiative over the last few years. This follows limited investment into the business through bankruptcy and emergence. Gibson has focused its efforts and resources on significant capacity expansion, factory modernization, process automation across all production facilities, and building out the DTC e-commerce platform. It also opened a large-format retail store in Nashville, Tenn. We believe these positive industry trends and the boost from company-specific measures will support double-digit percentage revenue growth in fiscal 2022. But we forecast a pullback in spending on musical instruments as the economy reopens and consumers pursue out-of-home entertainment and resume spending on travel and experiences." This will moderate sales growth to the mid-single-digit percentage area next year. However, demand trends over the next few years could be volatile given the uncertainty about changes in consumer purchasing power and consumer preferences. Gibson Brands' ambition to expand its DTC channels and increase manufacturing capacity will depress FOCF generation. It plans to significantly expand further into the DTC channel, leveraging a shift in consumer engagement trends during the COVID-19 pandemic toward more online activity and a stronger interest in direct brand interaction. This includes targeted investments in DTC capabilities to support website commercialization, elevated direct brand experiences, and service prioritization. S&P believes management's actions to focus on expanding the digital platform and digital experiences through initiatives such as Gibson TV amid mandatory store closures offset in-store sales losses, increased revenues in fiscal 2021, and set the stage for near-term accelerated DTC growth. The company's DTC and online strategies require annual capital expenditure (capex) to strengthen its information technology infrastructure. In addition, the plan to almost double its manufacturing capacity will require capex and working capital to provide inventories. In addition, Gibson plans to increase its finished goods inventory to improve order fulfillment and provide optimum DTC inventory. S&P said, "We also estimate Gibson will require additional personnel dedicated to online sales, workers for its expanded manufacturing facilities, and spending in digital marketing, all of which will put pressure on EBITDA margin. Consequently, we forecast an FOCF deficit in fiscal 2022. Although we expect FOCF to turn positive in fiscal 2023, we believe it will remain below $10 million annually due to continued investments into the business to support technological and product innovation and DTC expansion." The stable outlook reflects S&P's expectation that Gibson will continue improving profitability through higher sales and stronger operating efficiency, allowing it to continue to deleverage to the mid-4x area over the next 12 months. S&P could consider raising its rating on Gibson if: -- The company improves scale, solidifies competitive positioning, stabilizes operations, and demonstrates a track record of consistent operating performance whereby S&P views the business more favorably. -- It generates better-than-expected revenue and EBITDA growth, resulting in FOCF generation of at least $15 million, and S&P expects the better performance to be sustainable. S&P's could lower the rating if: -- S&P determines the capital structure is unsustainable in the long term because weaker-than-expected operating performance results in sustained negative FOCF; -- EBITDA cash interest sustained below 1.5x; or -- Liquidity becomes constrained. S&P believes this could occur if macroeconomic conditions such as higher inflation causes a decline in consumer spending on discretionary items like guitars, recent investments do not yield their targeted returns, or the company loses key customers. GINSBERG HOLDCO: S&P Raises ICR to 'B' on Steady Deleveraging ------------------------------------------------------------- S&P Global Ratings raised the rating on U.S.-based provider of network visibility and traffic control solutions Ginsberg HoldCo Inc. (Gigamon) (the borrowing entity) to 'B' from 'B-', and the issue-level ratings on the company's first-lien credit facilities to 'B' from 'B-'. At the same time, S&P assigned an issuer credit rating of 'B' to Ginsberg HoldCo Inc., the parent entity under which it reports consolidated financial statements. S&P said, "The stable outlook reflects our expectation that a more stable macroeconomic environment and greater 5G core network investments should help drive demand in Gigamon's core end-markets, resulting in at least mid-single-digit revenue growth in 2021. While EBITDA margins could decline slightly from more normalized travel and other operating expenses, we expect leverage to remain below 6.5x and FOCF to debt above 5%. "We expect Gigamon will continue to maintain leverage below 6.5x after steadily deleveraging since it was taken private in 2017. Despite significant investments in sales and marketing in recent years, Gigamon has been able to improve its EBITDA margins to the 20% area while achieving a compound annual growth rate of about 6% from 2017 to 2020. This has resulted in leverage declining to a lower-than-expected 6.3x as of Dec. 31, 2020. Following a slight revenue decline in 2020 due to delays in spending across the company's core end markets, we expect a more stable operating environment and an onset of 5G core network spending to support at least mid-single-digit revenue growth. We expect this to exceed a potential modest decline in EBITDA margins from the return of discretionary and other expenses in 2021, keeping leverage lower than 6.5x. In addition to expectations that FOCF to debt will stay higher than 5%, we consider these metrics to be consistent with 'B'-rated peers. "We adjust revenues and EBITDA for the impact of purchase accounting on deferred revenues. Our adjusted debt, EBITDA, and operating cash flow figures also include the standard adjustments for operating leases and share-based compensation. We do not net any surplus cash from our debt figures since we believe the company will likely use it for purposes other than debt prepayment given its financial-sponsor ownership. "5G core network investments, cloud adoption, and a focus on cybersecurity could serve as market tailwinds over the next few years. We expect several market trends to support Gigamon's growth prospects in the coming years in a more normalized operating environment. We believe the U.S. major wireless carriers' planned capital expenditure increases in 2021 related to 5G infrastructure are a positive signal that Gigamon may soon start benefitting from the use of its solutions in core network buildouts. We also consider accelerated cloud adoption rates supporting hybrid working environments as a boost in the enterprise market for the company's software solutions which, together with subscription and support revenues, represent a growing share of total revenues providing better revenue visibility." A potential further boost could come from the U.S. federal government's greater focus on cybersecurity following a recent spate of critical cyber attacks. Driving these tailwinds is the increasing need for traffic intelligence and security amid a backdrop of growing network complexity and data volumes. Lower cash interest payments should support continued solid FOCF. S&P said, "In addition to EBITDA growth, we expect Gigamon to generate FOCF of $40 million-$50 million in 2021 with help from a repricing of its term loan in February that saves about $2.7 million in annual cash interest payments. Furthermore, the company fully repaid the $15 million outstanding balance on its revolving credit facility (RCF) in the first quarter of the year. In addition to modest capital expenditures (capex) of 2%-3% of revenues, we expect FOCF to debt will improve to the mid-to high-single-digit percent area in 2021, which is consistent with the 'B' rating." S&P said, "The stable outlook reflects our expectation that a more stable macroeconomic environment and greater 5G core network investments should help drive demand in Gigamon's core end-markets, resulting in at least mid-single-digit revenue growth in 2021. We believe EBITDA margins could decline modestly as travel and other operating expenses normalize, but we expect leverage will remain lower than 6.5x and FOCF to debt higher than 5%." S&P could lower its rating if: -- Delayed customer spending, competitive pressures, or heightened investments result in sustained EBITDA and FOCF declines; or -- A more aggressive financial policy including debt-funded acquisitions result in leverage increasing to and staying well above 6.5x and FOCF to debt below 5%. Although unlikely over the next 12 months, given Gigamon's financial sponsor ownership, S&P could raise its rating if: -- Gigamon maintains significant revenue growth and EBITDA margins well above 20% such that leverage decreases below 5x on a sustained basis; and -- Gigamon's financial policy leads S&P to believe the company is committed to maintaining leverage below 5x. GLOBALTRANZ ENTERPRISES: Moody's Reviews Caa1 CFR for Upgrade ------------------------------------------------------------- Moody's Investors Service placed the ratings of GlobalTranz Enterprises, LLC. on review for upgrade. This follows an announcement by GlobalTranz, that it will merger with SMB SHIPPING LOGISTICS, LLC ("SMB" B3 stable), which operates under the name WorldWide Express, LLC. The ratings being placed under review include the Caa1 corporate family rating, Caa1-PD probability of default rating and B3 rating on the senior secured bank credit facilities. The outlook was revised to ratings under review from negative. On June 11, 2021, GlobalTranz announced that it has entered into an agreement with SMB to combine both companies. During the review process, Moody's will evaluate the proposed new debt structure of the combined companies, potential synergistic savings and restructuring charges that maybe necessary when combining complementary sized entities. At close it is expected that all outstanding debt at GlobalTranz and Worldwide will be repaid and at that time all ratings will be withdrawn. The merger is expected to be completed in the 3Q of 2021. On Review for Upgrade: Issuer: GlobalTranz Enterprises, LLC. Corporate Family Rating, Placed on Review for Upgrade, currently Caa1 Probability of Default Rating, Placed on Review for Upgrade, currently Caa1-PD Senior Secured Bank Credit Facilities, Placed on Review for Upgrade, currently B3 (LGD3) Outlook Actions: Outlook, Changed To Rating Under Review From Negative RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS GlobalTranz Caa1 CFR reflects its modest scale in a competitive industry and is exposed to cyclical markets. In addition, the rating is impacted by the company's high leverage at about 8.0 times for the period ending March, 31 2021 and weak liquidity. The company benefits from an asset-light business model that limits capital expenditure requirements and provide some flexibly to adapt its cost structure during downturns. ESG considerations includes GlobalTranz's high leverage, which reflects in part its private equity ownership. The company has a history of aggressive financial policies, with acquisitive growth funded primarily with incremental debt that has slowed the de-leveraging prospects. The review for up reflects Moody's expectation that, should the merger with WorldWide close that GlobalTranz outstanding debt will be repaid. It also takes into account that GlobalTranz will become part of a larger company, benefitting from greater scale and diversity. The principal methodology used in these ratings was Surface Transportation and Logistics published in May 2019. GlobalTranz Enterprises, LLC based in Scottsdale, Arizona, is a non-asset based provider of third-party logistics services specializing in truckload (TL), less-than truck-load (LTL), supply chain logistics, and warehousing services. Revenues for the last twelve months ended March 31, 2021, were approximately $1.8 billion. GNIRBES INC: Court Approves Disclosure Statement ------------------------------------------------ Judge Mindy A. Mora, on June 11, 2021, approved the Disclosure Statement of Gnirbes Inc. Judge Mora fixed July 13 as the last day for filing objections to Plan confirmation. The confirmation hearing will be held on July 27, 2021 at 1:30 p.m. via Zoom video conference. A copy of the order is available for free at https://bit.ly/2U5COWW from PacerMonitor.com. About Gnirbes Inc. Gnirbes Inc. sought protection under Chapter 11 of the Bankruptcy Code (Bankr. S.D. Fla. Case No. 20-13992) on March 26, 2020. At the time of the filing, the Debtor was estimated to have assets of less than $50,000 and liabilities of between $100,001 and $500,000. Judge Mindy A. Mora oversees the Debtor's case. The Debtor is represented by Kelley, Fulton & Kaplan, P.L. GRACEWAY SOUTH: Deborah Fish Named Ombudsman -------------------------------------------- Andrew R. Vara, United States Trustee for Regions 3 and 9, appointed Deborah L. Fish, a shareholder at Allard & Fish, P.C., as Patient Care Ombudsman for Graceway South Haven LLC on June 10, 2021. Ms. Fish agreed to be compensated for her services at an hourly rate of $380 and at 50% of the hourly rate for travel. She will also seek reimbursement for expenses incurred in the normal course of the discharge of her duties. Ms. Fish declared that she does not have an interest materially adverse to the interest of the estate or of any class of creditors or equity holders of the Debtor, and for this reason, is a "disinterested person" according to Section 101(14) of the Bankruptcy Code. The proposed PCO's contact information: Deborah L. Fish Allard & Fish, P.C. 1001 Woodward Avenue, Suite 850 Detroit, MI 48226 Telephone: 313-309-3171 Email: dfish@allardfishpc.com A copy of the appointment is available for free at https://bit.ly/2S8onkg from PacerMonitor.com. About Graceway South Haven, LLC Graceway South Haven LLC owns a skilled nursing facility. It filed a Chapter 11 petition (Bankr. E.D. Mich. Case No. 21-44888) on June 7, 2021 in the United States Bankruptcy Court for the Eastern District of Michigan. In the petition signed by Anthony Fischer, Jr., chief executive officer, the Debtor estimated up to $50,000 in assets and between $1,000,000 and $10,000,000 in liabilities. Strobl Sharp PLLC represents the Debtor as counsel. GRANITE US: S&P Raises Issuer Credit Rating to 'B', Outlook Stable ------------------------------------------------------------------ S&P Global Ratings raised its issuer credit rating on Granite US Holdings Corp. (d/b/a Howden) to 'B' from 'B-'. The outlook is stable. At the same time, S&P raised the ratings on the company's senior secured credit facilities to 'B' from 'B-' and on its senior unsecured notes to 'CCC+' from 'CCC'. The '3' recovery rating on the senior secured facilities (50%-70%; rounded estimate: 60%) and '6' recovery rating on the unsecured notes (0%-10%; rounded estimate: 0%) are unchanged. The stable outlook reflects S&P's view that Howden's operating performance will continue to improve given favorable end market conditions, allowing the company to maintain an S&P Global Ratings-adjusted debt to EBITDA ratio in the 4x-5x area over the next 12 months. Howden's operating performance held steady in 2020 despite pandemic-related challenges and has continued to perform well in the first quarter of 2021. Revenue declined 3.9% to $1.4 billion in 2020, as early in the pandemic the company saw weakness in aftermarket orders in its North American power end markets, declines in new build orders within the oil and gas segment, and broad softness in short cycle industrials. However, aftermarket orders for North American power end markets recovered in the second half of 2020, and the company saw continued strength in the power aftermarket within the Asia-Pacific region, which contributed to top-line growth. In addition, new build orders improved sequentially in each segment as end markets stabilized. In the first quarter of 2021, Howden's top line increased 5.9% year-over-year driven primarily by aftermarket growth. The company's orders increased 10% year-over-year, excluding recent acquisitions, with strength in both aftermarket and new build (up 10% and 9%, respectively). The shorter-cycle industrial business performed well, and the company saw a strong recovery in its North American power segment. S&P anticipates a broad macroeconomic recovery, though potentially uneven, across Howden's end markets to support revenue growth over the next 12 months. We anticipate the company's general industrial, infrastructure, and mining end markets will perform well, partially offset by stagnant metal processing and downstream oil and gas performance. As a result, S&P anticipates Howden's order book will continue to strengthen and drive mid-single-digit organic revenue growth in 2021, which we believe will be further supplemented by acquisition growth. Improving margins should enable the company to continue to reduce leverage in 2021. Even with challenging market conditions, Howden maintained S&P Global Ratings-adjusted EBITDA margins of 14.9% in 2020 due to good progress on product line margin improvement initiatives. Through the second half of 2020 and the first quarter of 2021, Howden's operating performance improved sequentially, and we believe the company will maintain this momentum. S&P said, "That said, we believe the company's costs may increase (particularly related to steel and freight), which may challenge incremental margin growth in the short term. Nevertheless, we believe Howden will continue to focus on realizing cost savings from managing its discretionary spending, which will enable it to maintain or increase S&P Global Ratings-adjusted EBITDA margins in the mid- to high-teens percentage area in 2021. We anticipate that the increase in EBITDA will drive S&P Global Ratings-adjusted debt to EBITDA to the low-5x area in 2021." S&P said, "We believe Howden's ample liquidity and positive FOCF this year will allow for internal investment and acquisitions. We anticipate Howden will generate FOCF in the $130 million-$140 million range over the next 12 months, driven by the strong global recovery, increased demand for its products, and working capital improvements. Still, we anticipate Howden to use cash flow for investments and remain acquisitive. Howden has completed four acquisitions so far in 2021, and we believe the company will likely continue to pursue bolt-on acquisitions over our forecast period. "The stable outlook reflects our view that Howden will sustain good operating performance in 2021 as the economy and the company's end markets continue to recover, and for Howden to improve leverage to the 4x-5x area over the next 12 months." S&P could lower its rating if: -- Demand for the company's products and operating results weaken meaningfully, such that its debt leverage deteriorates to 6.5x or above and is sustained at that level; or -- The company generates significantly weaker or negative FOCF. S&P could raise its rating if: -- Operating performance remains robust and the company improves leverage comfortably below 5x, inclusive of potential shareholder rewards and leveraging acquisitions. Under this scenario, S&P would also expect Howden to maintain sufficient leverage cushion in order to withstand potential volatility in its end markets; and -- The company continues to generate meaningfully positive FOCF. GREAT AMERICAN: July 27 Hearing on Disclosure Statement ------------------------------------------------------- Judge Joshua P. Searcy has entered an order setting a hearing to consider approval of the Disclosure Statement of Great American Treating, Inc., via telephonic means, for Tuesday, July 27, 2021, at 2:30 p.m. Monday, July 19, 2021, is fixed as the last day for filing and serving written objections to the Disclosure Statement. About Great American Treating Great American Treating, Inc.. filed a Chapter 11 bankruptcy petition (Bankr. E.D. Tex. Case No. 21-60078) on March 4, 2021, disclosing under $1 million in both assets and liabilities. The Debtor is represented by Patrick Law Offices. GROSVENOR CAPITAL: S&P Alters Outlook to Neg., Affirms 'BB+' ICR ---------------------------------------------------------------- S&P Global Ratings revised its outlook on Grosvenor Capital Management Holdings LLLP to negative from stable. At the same time, S&P affirmed its 'BB+' ratings on Grosvenor and its first-lien debt. The recovery rating remains '3' (50%), indicating a meaningful recovery in the event of a default. Grosvenor is exercising its option to repurchase the rights to carried interest in some of its funds that it sold to a third-party investor in February 2020 (the Mosaic transaction). The transaction will be funded with an $85 million add-on to Grosvenor's first-lien term loan, $25 million draw on its revolver, and cash. S&P said, "While the repurchase of carried interest-eligible assets has the potential to boost earnings, we do not expect this to fully offset the increase in debt in our calculation of leverage. We haircut all forecasted net performance-related fees by 50% of the five-year historical average in our adjusted EBITDA calculation. We expect the company to operate with a lower cash balance than in 2020, 85% of which we net against debt in our leverage calculation. As a result, we expect adjusted debt to EBITDA to rise to near 3.0x over the next 12 months from approximately 2.4x as of year-end 2020. "The option to repurchase the Mosaic assets at any time was a feature of the sale transaction in February 2020. However, our prior assumptions did not incorporate a repurchase within 16 months of the sale. In our view, the quick pivot in strategy regarding this transaction, and the resulting incremental leverage, gives us less certainty about the company's financial policy. "The negative outlook reflects our expectation that Grosvenor will operate with adjusted debt to EBITDA near 3x over the next 12 months. We also expect its private strategies to exhibit good performance and fundraising, and for net flows in the absolute return segment to be neutral. "We could lower the rating if we think the company will operate with leverage above 3x on a sustained basis, if investment performance weakens, or if fundraising or net flows materially weaken. "We could revise the outlook to stable if Grosvenor lowers and maintains leverage comfortably below 3x while also sustaining good performance in its private strategies and neutral net flows in the absolute return segment." GXO LOGISTICS: Moody's Assigns First Time 'Ba1' Corp Family Rating ------------------------------------------------------------------ Moody's Investors Service assigned first-time ratings to GXO Logistics, Inc. including a Ba1 corporate family rating, a Ba1-PD probability of default and a Ba1 rating to the company's $800 million senior unsecured notes and an SGL-2 Speculative Grade Liquidity Assessment. The rating outlook is stable The ratings assignment takes into account expectations of relatively low financial leverage but also the comparatively low margin nature of the logistics business and the need for GXO to make considerable ongoing investment to participate in the high growth logistics business to enable the company to execute at high level of customer performance. XPO Logistics, Inc. ("XPO") (Ba2 -- stable) is spinning-off into a separate public company its logistics business into newly formed GXO Logistics. Proceeds from the debt offering will be used to pay a special dividend back to XPO. GXO is an asset-light business that facilities the management and distribution of goods, order fulfillment, reverse logistics, and other services. RATINGS RATIONALE The ratings reflect GXO's significant scale and strong competitive position in the US and many international markets for logistics services. The company further benefits from the secular growth of e-commerce and positive trends in logistics outsourcing that underpin expectations of organic revenue growth over the coming years. In addition, Moody's recognizes that GXO's contract logistics business is a leading worldwide provider of a range of services and among the largest in North America and Europe for e-fulfillment. While the contract logistics business is relatively stable, GXO also benefited in 2020 by the sharp global shift in purchasing habits to online with home delivery. Moody's does not foresee large acquisitions, but small to medium-size investments are likely as the company fills in certain product services and geographic coverage. Moody's notes that while business activity is improving in 2021 and supports the reduction in financial leverage, the coronavirus creates uncertainty around a full resumption of demand globally and the potential shift in spending away from capital goods growth and to services. In addition, GXO will need to make ongoing and meaningful investments in infrastructure and technology, to support its expectations of double-digit revenue growth over the next few years, in which margins are unlikely to exceed the mid-single digit percentage in Moody's view. Therefore, Moody's expects debt-to-EBITDA (including Moody's standard adjustments) to be about 2.5x ending 2021 and declining slightly to the low 2x range in 2022. In terms of corporate governance, environmental exposure is moderate at this time. GXO monitors fuel emissions from forklifts, with protocols in place to take action if needed. The workforce is comprised of 67,000 full-time and part-time workers and 36,000 temporary workers, with about 71% of employees in Europe represented by unions, while none of the employees in North America are covered by collective bargaining agreements. Acquisitions remain a risk, however the company will be publicly traded and is committed to maintaining leverage around 2.5x with (including Moody's adjustments) and a nominal annual dividend. The SGL-2 speculative grade liquidity rating denotes expectations of a good liquidity profile over the next twelve months. Cash balance at close is expected to be $100 million and Moody's anticipate Moody's adjusted free cash flow to be about $200 million over the next 18-months as the company has significant capital expenditure requirements. External liquidity is provided by an undrawn $800 million revolve credit facility that expires in 2026. The stable outlook reflects Moody's expectations of healthy top-line organic growth, EBITA margins of at least 4%, and free-cash-flow to debt in the low to mid-single-digit range. Assignment: Issuer: GXO Logistics, Inc. Corporate Family Rating, Assigned Ba1 Probability of Default Rating, Assigned Ba1-PD Senior Unsecured Notes, Assigned Ba1 (LGD4) Rating outlook, Assigned Stable FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded with the maintenance of strong operating margins expected to be above 5% that preserve financial flexibility to fund what may be large capital investment to prefund revenue expansion and strong liquidity to manage through the cyclical end-markets. Moody's would also expect the company to sustain debt-to-EBITDA around 2 times and FFO-to-debt maintained around 40%. The ratings could be downgraded if GXO debt-to-EBITDA is sustained above 3.5x, operating margins decline below 3%, or liquidity deteriorates. Additionally, if the company engages in substantial debt funded acquisitions and/or shareholder friendly transactions, or end markets weaken, the ratings could be downgraded. The principal methodology used in this rating was Surface Transportation and Logistics published in May 2019. GXO Logistics is an asset-light business that facilities the management and distribution of goods, order fulfillment, reverse logistics, and other services. The company has long-term contractual relationships with high renewal rates. Revenues for the fiscal year ended December 31, 2020, were $6.2 billion. HANNON ARMSTRONG: S&P Rates $750MM Senior Unsecured Notes 'BB+' --------------------------------------------------------------- S&P Global Ratings assigned its 'BB+' senior unsecured debt rating to $750 million notes due 2026 being offered by HAT Holdings I LLC and HAT Holdings II LLC as co-issuers. The notes will be fully and unconditionally guaranteed by Hannon Armstrong Sustainable Infrastructure Capital Inc. (HASI; BB+/Stable/--). HAT I and HAT II are HASI's taxable real estate investment trust subsidiaries. HASI intends to use the net proceeds of the offering to redeem its 5.25% senior notes due 2024, of which $500 million was outstanding as of March 31, 2021, and use the balance to acquire or refinance eligible green projects that are intended to reduce carbon emissions or provide other environmental benefits. Pro forma for this issuance, S&P expects debt to adjusted total equity (ATE) to increase to about 2.3x from about 2.0x as of March 31, 2021. S&P deducts nonservicing intangibles (including lease intangibles), net operating loss tax carryforwards, and the residual interest in off-balance-sheet securitizations from reported equity in its measure of ATE. S&P's ratings on HASI reflect its relatively low leverage, conservative underwriting standards, and experienced management team. The company typically operates with leverage below its target of up to 2.5x debt to equity and has had a strong underwriting track record on a diverse portfolio of infrastructure investments. Partially offsetting these strengths are the company's niche position relative to larger competitors, such as banks and insurers. Also, HASI has some large single investments, although they are typically multiple underlying projects. S&P said, "The stable outlook on our issuer credit rating on HASI indicates our expectation that over the next 12-18 months HASI will maintain its conservative underwriting standards, with minimal credit losses or impairments. We expect that HASI will operate with leverage of 2.0x–2.5x, as measured by debt to ATE." S&P could lower the ratings if: -- Debt to ATE rises above 2.75x; -- The investment portfolio quality deteriorates, as indicated by rising credit losses, impairments, or nonaccruals; or -- Access to funding or liquidity deteriorates. S&P said, "We could consider raising the ratings if HASI continues to build its business position and reduces large single investment portfolio concentrations relative to ATE. Although we don't expect this, we could also raise the ratings if HASI operates with debt to ATE below 1.5x on a sustained basis." HASTINGS ESTATE: U.S. Trustee Unable to Appoint Committee --------------------------------------------------------- The U.S. Trustee for Region 18 on June 16 disclosed in a court filing that no official committee of unsecured creditors has been appointed in the Chapter 11 case of Hastings Estate Company, Inc. About Hastings Estate Company Hastings Estate Company, Inc. sought protection under Chapter 11 of the Bankruptcy Code (Bankr. W.D. Wash. Case No. 21-10995) on May 20, 2021. At the time of the filing, the Debtor had between $1 million and $10 millionand in both assets and liabilities. Alan J. Wenokur, Esq., at Wenokur Riordan PLLC, is the Debtor's legal counsel. HEADLESS HORSEMAN: Unsecureds to be Paid in Full Under Plan ----------------------------------------------------------- Judge Robert D. Drain has entered an order approving the First Amended Disclosure Statement filed by Headless Horseman Entities, Inc. The last date by which the holders of claims and interests may accept or reject the Plan is Aug. 24, 2021, at 4:00 p.m., Eastern Time. The Balloting Agent shall file a voting tabulation report with the Court no later than 5:00 p.m., Eastern Time, on August 26, 2021. Aug. 24, 2021 at 4:00 p.m., Eastern Time, is fixed as the deadline for filing and serving any written objections to (a) confirmation of the Plan and/or (b) final applications for allowance of professional compensation and reimbursement of expenses. A hearing shall be held before the Honorable Robert D. Drain, United States Bankruptcy Judge, at the United States Bankruptcy Court, Southern District of New York, 300 Quarropas Street, Courtroom 118, White Plains, New York, 10601 on August 31, 2021 at 10:00 a.m., Eastern Time, or as soon thereafter as counsel may be heard, via telephonic conference. Sale Plan Headless Horseman Entities submitted a First Amended Disclosure Statement explaining its Chapter 11 Plan. The Debtor is a single asset real estate entity, formed in or about 1995 which owns and leases certain improved real estate located at 410 North Broadway, Sleepy Hollow, New York ("Property"). The Debtor acquired the Property in 1995. The Property currently consists of 1 improved and 9 unimproved tax lots. In the instant Chapter 11 Case, the Debtor finally rectified the title defects so that it may now obtain a refinance for funding the Plan and has worked with its professionals to determine and resolve the years and years of tax certiorari claims for refunds, setoffs and credits against the Town and the Village, respectively. Pursuant to the Settlement Agreement, the Debtor globally resolves all of its pending tax certiorari proceedings and related issues with the Town and Village without the need for litigation and/or determination by the Bankruptcy Court under Section 505 of the Bankruptcy Code. The Debtor believes that the settlement embodied in the Settlement Agreement is fair, reasonable and necessary in order for the Debtor to be able to confirm the Plan. The Plan proposes to treat claims and interests as follows: * CLASS 2 – Allowed Secured Claims of Town of Mt. Pleasant. The Town has agreed to accept, in full and final satisfaction of its Class 2 Claim, the sum of $395,000, payable in Cash on the Sale Closing Date. Class 2 Claims are impaired. * CLASS 3 – Allowed Secured Claims of the Village of Sleepy Hollow. The Village has agreed to accept, in full and final satisfaction of its Class 3 Claims, the sum of $105,000 payable in Cash on the Sale Closing Date. Class 3 Claims are impaired. * CLASS 4 – General Unsecured Claims totaling $10,000. Each holder of an Allowed Class 4 Unsecured Claim shall be paid the Allowed Amount of their Unsecured Claim in full, in Cash, with no post-Petition Date interest thereon, on or as soon as practicable after the Effective Date in full and final satisfaction of Class 4 Claims. Allowed Class 4 is impaired. * CLASS 5 – Equity Interests. Class 5 consists of the Interests of Wayne Jeffers, Sr., the holder of 100% of the equity Interests in the Debtor. The holder of the Class 5 Interests shall receive no distribution on account of his Interests, and therefore the Class 5 Interests are deemed to reject the Plan. Mr. Jeffers nevertheless supports confirmation of the Plan. The Plan shall be funded (a) with the Debtor's available cash on the Confirmation Date and (b) the proceeds from the Sale. Attorneys for the Debtor: Robert L. Rattet, Esq. Jonathan S. Pasternak, Esq. DAVIDOFF HUTCHER & CITRON LLP 120 Bloomingdale Road White Plains, New York 10605 Tel: (914) 381-7400 A copy of the Order is available at https://bit.ly/3zeHkCF from PacerMonitor.com. A copy of the Disclosure Statement is available at https://bit.ly/3gjyHOc from PacerMonitor.com. About Headless Horseman Headless Horseman Entities, Inc., is a single asset real estate entity, which owns and leases certain improved real estate located at 410 North Broadway, Sleepy Hollow, N.Y. The property consists of one improved and nine unimproved lots. Headless Horseman Entities sought Chapter 11 protection (Bankr. S.D.N.Y. Case No. 12-24137) on Dec. 21, 2012. At the time of the filing, the Debtor disclosed assets of between $500,001 and $1 million and liabilities of the same range. Judge Robert D. Drain oversees the case. HENRY ANESTHESIA: Trustee Seeks Comfort Order on Debtor's Counsel ----------------------------------------------------------------- Tamara Ogier, the Subchapter V trustee appointed in the Chapter 11 case of Henry Anesthesia Associates, LLC, seeks comfort order from the U.S. Bankruptcy Court for the Northern District of Georgia regarding the employment of Jones & Walden LLC as the Debtor's legal counsel. During the remaining pendency of the Chapter 11 case, the trustee may require these legal services from Jones & Walden: (a) prepare pleadings and applications; (b) perform legal services necessary to the functions of the trustee; and (c) take any necessary action to preserve and administer the Debtor's estate and business. The hourly rates of Jones & Walden's attorneys and staff are as follows: Attorneys $225 - $400 per hour Paralegals/Clerical Assistants $100 - $125 per hour The firm can be reached through: Leon S. Jones, Esq. Jones & Walden LLC 699 Piedmont Avenue, NE Atlanta, GA 30308 Telephone: (404) 564-9300 Email: ljones@joneswalden.com About Henry Anesthesia Associates Henry Anesthesia Associates LLC is a Stockbridge, Ga.-based for-profit limited liability company, which provides anesthesiology services. Henry Anesthesia Associates filed a Chapter 11 petition (Bankr. N.D. Ga. Case No. 20-68477) on July 28, 2020. It first sought bankruptcy protection (Bankr. N.D. Ga. Case No. 19-64159) on Sept. 6, 2019. In the petition signed by Kenneth Mims, M.D., manager, the Debtor was estimated to have $1 million to $10 million in both assets and liabilities. Judge Lisa Ritchey Craig presides over the case. The Debtor tapped Jones & Walden, LLC as its bankruptcy counsel and Moorman and Pieschel, LLC as its corporate counsel. Tamara Miles Ogier was appointed as Subchapter V trustee in the Debtor's Chapter 11 case. Ogier, Rothschild & Rosenfeld, PC and Stonebridge Accounting & Forensics, LLC serve as the trustee's legal counsel and accountant, respectively. HERMAN MILLER: Moody's Assigns Ba1 CFR on Knoll Inc Acquisition --------------------------------------------------------------- Moody's Investors Service assigned a Ba1 Corporate Family Rating and a Ba1-PD Probability of Default Rating to Herman Miller, Inc. Moody's also assigned Ba1 ratings to the company's proposed $1.75 billion first lien senior secured credit facilities and assigned a SGL-1 Speculative Grade Liquidity rating. The outlook is stable. Herman Miller plans to acquire Knoll, Inc. (Knoll) in a cash ($560 million) and stock (17.1 million shares) transaction valued at $1.8 billion. The cash portion of the transaction and repayment/refinance of all existing debt at Knoll and Herman Miller will be financed with a combination of cash on hand and new debt comprising of a $725 million 5-year senior secured revolving credit facility (of which $225 million will be funded at close), a $400 million 5-year senior secured term loan A, and a $625 million 7-year senior secured term loan B (collectively the senior secured credit facilities). The acquisition is expected to close by the end of July 2021 subject to shareholder approval and other closing conditions. Moody's expects that Herman Miller's operating performance, pro-forma for the Knoll acquisition, will improve over the next 12-18 months because of a recovery in office construction spending and reopening of offices with revenue growth of about 10% for fiscal year ending May 2022 (FY 2022) and 2%-3% growth in FY May 2023. EBIT margins will improve to 10% by FY 2023 as the company realizes about $75 million to $100 million of acquisition-related synergies over the next two years. The level of future investment by businesses amid a re-evaluation of office space needs in the aftermath of the pandemic and more hybrid work arrangements will vary and create permanent structural changes that could impact demand for the company's office furniture. However, there are several mitigants over the next few years. Moody's expects that offices will undergo changes to provide employees with more collaborative and flexible workspaces to support an increasing hybrid workforce and to reverse densification in a post-pandemic environment. This will create opportunities for Herman Miller's businesses as employers look to reconfigure their office space. Herman Miller is well positioned to benefit from these office trends given their product offerings that provide functional and versatile office furniture. Herman Miller's retail business is also well positioned to benefit from an expanding work-from-home employee base given its residential work-related furniture offerings, which will expand with the acquisition of Knoll. Moody's expects that debt-to-EBITDA will be moderate at about 3.25x at close of the acquisition and gradually decline to 2.5x by the end of FY May 2023. This assumes that excess cash is used towards the repayment of debt with no outsized shareholder-friendly activities or acquisitions. However, Moody's expects the company to remain acquisitive and there is some cushion within the credit metrics expected for the rating category to accommodate a moderate level of debt financed acquisitions. Moderate leverage and financial flexibility are needed because of the cyclical nature of Herman Miller's business and the potential investment needs necessary to adjust product offerings to meet changing needs given the long-term transformation of the office furniture market. Herman Miller's SGL-1 rating reflects its very good liquidity, which will consist of a new $725 million 5-year revolving credit facility of which $500 million will be available at close. Additionally, the company is expected to have approximately $120 million to $130 million of cash on hand at close of the transaction. The liquidity rating also reflects the company's strong free cash flow generation which Moody's estimates will range about $170 million to $190 million per year. Following the closing of the acquisition, there will be no material maturities until 2026 when the revolver and term loan A come due with cash sources providing very good coverage for annual required amortization of approximately $26.3 million per year in FY 2022 and FY 2023. The following ratings/assessments are affected by the action: New Assignments: Issuer: Herman Miller, Inc. Corporate Family Rating, Assigned Ba1 Probability of Default Rating, Assigned Ba1-PD Speculative Grade Liquidity Rating, Assigned SGL-1 Senior Secured 1st Lien Revolving Credit Facility, Assigned Ba1 (LGD3) Senior Secured 1st Lien Term Loan A, Assigned Ba1 (LGD3) Senior Secured 1st Lien Term Loan B, Assigned Ba1 (LGD3) Outlook Actions: Issuer: Herman Miller, Inc. Outlook, Assigned Stable RATINGS RATIONALE Herman Miller, Inc's Ba1 CFR takes into account the new capital structure following the acquisition of Knoll, Inc and reflects Herman Miller's position in what will become the largest office furniture designer and supplier in the US and a leading supplier globally. The company has strong brand name recognition of office furniture products synonymous with modern design and innovation. The company also has strong end market diversification and good geographic reach throughout the U.S., Europe, Latam, and Asia. The company's credit profile is weakened by changing trends from the growing acceptance of hybrid office policies including increased work from home brought on by the global pandemic. Moody's believes this diminishes long-term demand for office furniture. However, the company is well positioned to benefit from several mitigants over the next few years. Changing office needs in the US will lead to increasing office remodeling projects following the global pandemic, and the company's retail business will benefit from increased demand for home office furniture. Herman Miller operates in highly competitive end markets with design driven demand and reliance on independent contract channels that fosters higher competitive risks. Herman Miller's earnings and cash flow are susceptible to economic downturns. The rating further reflects Herman Miller's aggresive acquisition strategy, which brings integration and leveraging risk, and also raw material, distribution and labor cost headwinds expected over the next year particularly in commodities such as steel. The credit profile further reflects Herman Miller's somewhat aggressive financial strategy including the secured nature of its current capital structure providing the company with less financial flexibility as most all assets are encumbered. The coronavirus outbreak and the government measures put in place to contain it continue to disrupt economies and credit markets across sectors and regions. Although an economic recovery is underway, it is tenuous, and its continuation will be closely tied to containment of the virus. As a result, there is uncertainty around Moody's forecasts. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. The consumer durables industry is one of the sectors most meaningfully affected by the coronavirus because of exposure to discretionary spending. Moody's also views the shifting office market due to coronavirus as a social risk as more employees work from home during the pandemic and long-term office furniture demand is hurt by hybrid work arrangements. From a governance perspective, the company has a somewhat aggressive financial policy with use of leverage to fund acquisitions, a stable dividend, and share repurchases. Moody's nevertheless believes that Herman Miller will continue to pursue strategies that preserve value for the long run, including good reinvestment in product development and a cautious approach to leveraging transactions. Acquisitions will be more opportunistic and large debt-funded acquisitions could potentially detract from the company's ability to maintain its ratings. Moderate leverage and strong liquidity provide flexibility to manage through economic cycles. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The stable outlook reflects Moody's expectation that Herman Miller's operating performance will continue to improve over the next 12 to 18 months as construction spending picks up and office space is redesigned to accommodate employees in a post pandemic environment. The stable outlook also reflects Moody's view that the company will continue to focus on growth through internal investment in its brands and modestly sized acquisitions. The ratings could be upgraded if Herman Miller exhibits improvement in its operating performance and operating margins from accelerating demand trends while managing their costs as office space is transformed following the pandemic and in the face of rising input costs. For an upgrade to be considered, the company will also need to maintain a more conservative financial policy that emphasizes financial flexibility in its capital structure. The company should also maintain very good liquidity and debt-to-EBITDA maintained below 3.0x. The ratings could be downgraded if office furniture market fundamentals weaken leading to weaker operating profits and lower cash flow generation ability, or if an increase in operating costs reduces EBITDA. Additionally, a downgrade would also be likely if debt-to-EBITDA is sustained above 4.0x for a prolonged period of time or if liquidity materially weakens. As proposed, the new $400 million senior secured Term Loan A facility, $625 million senior secured Term Loan B facility and the $725 million senior secured Revolving Credit Facility are expected to provide covenant flexibility that if utilized could negatively impact creditors. Notable terms include the following: Incremental debt capacity up to the sum of the greater of a dollar amount corresponding to the last twelve months (LTM) adjusted consolidated EBITDA as of the closing date and 100% of trailing four quarter Adjusted Consolidated EBITDA, plus unlimited amounts subject to closing date first lien net leverage ratio not to exceed closing leverage. Term loan amounts up to the greater of 50% of pro forma LTM Adjusted Consolidated EBITDA and a Corresponding Dollar Amount may be incurred with an earlier maturity than the initial first lien term loans. The credit agreement permits the transfer of assets to unrestricted subsidiaries, up to the carve-out capacities, subject to "blocker" provisions which prohibit the transfer to unrestricted subsidiaries the ownership or exclusive license in any intellectual property (IP) that is material to the business or operations of the borrower and restricted subsidiaries taken as a whole and is in a transaction with the principal purpose to incur structurally senior debt secured by such IP. Non-wholly-owned subsidiaries are not required to provide guarantees; dividends or transfers resulting in partial ownership of subsidiary guarantors could jeopardize guarantees, with no explicit protective provisions limiting such guarantee releases. The credit agreement is expected to provide some limitations on up-tiering transactions, including the requirement for affected lender consent with respect to modification of the pro rata sharing or payment waterfall provisions, and subordination of the obligations or subordination of the liens securing the facilities (except as otherwise not prohibited). The above are proposed terms and the final terms of the credit agreement may be materially different. The principal methodology used in these ratings was Consumer Durables Industry published in April 2017. Headquartered in Zeeland, Michigan and founded in 1905, Herman Miller, Inc. (Nasdaq: MLHR) designs, manufactures and distributes interior furnishings for use in office, healthcare, educational and residential settings. Knoll, Inc, founded in 1938, manufactures commercial and residential furniture, accessories, lighting and coverings, including textiles, felt and leather. Following Herman Miller's acquisition of Knoll, the company will have $3.5 billion on annual sales, 19 brands, presence in over 100 countries, a global dealer network, 64 global showrooms and approximately 50 retail locations. HILTON GRAND: S&P Assigns 'B-' Rating on New $425MM Notes --------------------------------------------------------- S&P Global Ratings assigned its 'B-' issue-level rating (two notches below the expected 'B+' issuer credit rating) and '6' recovery rating to Hilton Grand Vacations Inc.'s (HGV's) proposed $425 million senior unsecured notes due 2031. The proposed notes are part of HGV's financing plan to acquire Diamond Resorts International Inc. The '6' recovery rating reflects negligible (0%-10%; rounded estimate: 0%) recovery for lenders in the event of a default. S&P expects the company to use the proceeds from this proposed issuance, in addition to proceeds from the $850 million senior unsecured notes issued in May 2021, to complete the acquisition. Hilton Grand Vacations Borrower Escrow LLC and Hilton Grand Vacations Borrower Escrow Inc. were created solely to issue the notes and for other financing transactions related to the acquisition, and upon the closing of HGV's proposed acquisition, they will merge with and into Hilton Grand Vacations Borrower LLC and Hilton Grand Vacations Borrower Inc. S&P said, "We expect the pro forma capital structure at acquisition closing to consist of about $348 million drawn under HGV's $800 million senior secured revolving credit facility, $1.3 billion term loan, $1.275 billion of senior unsecured notes ($850 million issued in May and the proposed $425 million notes), and other debt of $33 million. To the extent additional senior unsecured notes are raised under the proposed transaction, we assume HGV would use them to partially repay the revolver balance." Issue Ratings--Recovery Analysis Key analytical factors -- The issue-level rating on the company's proposed $1.3 billion senior secured term loan is 'BB'. The recovery rating is '1'. -- After the acquisition closes this summer, we plan to remove from CreditWatch and lower our issue-level rating on the $800 million revolving credit facility to 'BB', so that it aligns with our rating on the proposed term loan. -- The issue-level rating on the company's $850 million senior unsecured notes issued in May 2021 is 'B-'. The recovery rating is '6'. -- S&P assumes the pro forma capital structure at acquisition closing to consist of about $348 million drawn under HGV's $800 million senior secured revolving credit facility, $1.3 billion term loan, $1.275 billion of senior unsecured notes ($850 million issued in May and the proposed $425 million notes), and other debt of $33 million. S&P said, "Our simulated default scenario contemplates a default by 2025 due to a severe economic downturn and tighter consumer credit markets, as well as an overall decline in the popularity of timeshares as a vacation alternative, which substantially reduces the demand for HGV's products. A default could also occur if the company experiences challenges in integrating Diamond. We also assume a period of illiquidity in the financial markets for timeshare securitizations and conduit facilities." S&P assumes a reorganization following the default and used a 6x emergence EBITDA multiple to value the company. Simulated default assumptions -- Year of default: 2025 -- Emergence EBITDA: $322 million -- EBITDA multiple: 6x -- Revolving credit facility: 85% drawn Simplified waterfall -- Net recovery value for waterfall after 5% administrative expenses: $1.835 billion -- Obligor/nonobligor valuation split: 95%/5% -- Estimated senior secured debt claims: $1.97 billion -- Value available for senior secured debt claims (including 65% stock pledge from nonobligor group): $1.80 billion --Recovery expectations: 90%-100% (rounded estimate: 90%) -- Estimated unsecured debt and deficiency claims: $1.51 billion -- Value available for senior unsecured debt claims: $32 million --Recovery expectations: 0%-10% (rounded estimate: 0%) Note: All debt amounts include six months of prepetition interest. HMONG EDUCATION: S&P Affirms 'BB+' Lease Revenue Bond Rating ------------------------------------------------------------ S&P Global Ratings revised the outlook to negative from stable and affirmed its 'BB+' underlying rating on the St. Paul Housing and Redevelopment Authority, Minn.'s series 2020A, 2016A, and 2016B lease revenue bonds, issued for the Hmong Education Reform Co., on behalf of Hmong College Prep Academy. "The outlook revision reflects our opinion that there is at least a one-in-three chance that we could lower the rating if recent audit findings affect the school's charter standing or if the financial risk with a potential loss on investment materially affect the school's liquidity position," said S&P Global Ratings credit analyst David Holmes. S&P said, "These audit findings involved approximately $5 million in impermissible investments that violated state statue, although, per our discussions with the issuer and the authorizer, a third-party investor made the investments without the school's knowledge. We believe the school has taken a course of action to remedy the situation, including implementing updated investment policies and new internal controls; the authorizer has confirmed that the charter remains in place and does not intend to take any action. We understand the situation is ongoing; the Minnesota Department of Education is reviewing the situation and we will monitor for updates. "We view the school's governance risk as elevated given risk and financial management inconsistent with our view of internal controls related to violation of state statute regarding improper investment of public funds. We view the risks posed by COVID-19 to public health and safety as an elevated social risk for all charter schools under our environmental, social, and governance factors given the potential impact on state funding, on which charter schools depend to support operations. For Hmong College Prep Academy, despite the pandemic, per pupil funding and enrollment have been stable, which, in our view, mitigate some near-term risk, although we expect to monitor the impact on state budgets over the longer term. We view the environmental risks posed as in line with the sector." HUSCH & HUSCH: To File Amended Plan by June 22, Court Says ---------------------------------------------------------- The Bankruptcy Court has continued to June 24, 2021 at 10 a.m. the hearing to consider approval of the Disclosure Statement of Husch & Husch, Inc. The Court directed the Debtor's counsel to file an amended Plan and Disclosure Statement by the end of day on June 22. About Husch & Husch Inc. Husch & Husch, Inc. -- http://www.huschandhusch.com/-- is a family-owned and operated agricultural chemical and fertilizer company located in Harrah, Washington. It provides conventional and organic fertilizers, micronutrient technology, and chemicals to help make a lawn, garden, agronomic crops, and fruit trees grow to their full potential. Husch & Husch was founded in 1937 by Pete Husch. Husch & Husch filed a Chapter 11 petition (Bankr. E.D. Wash. Case No. 20-00465) on March 4, 2020. In the petition signed by CFO Allen Husch, the Debtor disclosed $12,284,732 in assets and $5,966,019 in liabilities. Dan O'Rourke, Esq., at Southwell & O'Rourke, P.S., is the Debtor's bankruptcy counsel. ILLUMINATE MERGER: Moody's Assigns B2 CFR, Outlook Stable --------------------------------------------------------- Moody's Investors Service assigned a B2 Corporate Family Rating and B2-PD Probability of Default Rating to Illuminate Merger Sub Corp. ("Visual Comfort & Co." or "VCC"). Moody's also assigned a B1 rating to the company's proposed $835 million first lien term loan due 2028 and a Caa1 rating to its proposed $335 million second lien term loan due 2029. The outlook is stable. Visual Comfort & Co. is being recapitalized with a strategic investment from Goldman Sachs Asset Management and Leonard Green & Partners, L.P., alongside their existing investment partner AEA Investors and management. The transaction is valued at $2.2 billion, and will be funded by the proceeds of new credit facilities and $1.0 billion of equity contribution. The assignment of the B2 Corporate Family Rating to VCC reflects Moody's expectation that the company will make significant progress in reducing leverage toward 6.0x over the next two years through earnings growth and debt repayment. Moody's also expects the company to maintain EBIT margin above 15% and generate positive free cash flow. The rating also reflects Moody's expectation that positive trends in residential end markets will drive demand for the company's products and contribute to revenue growth. Lack of consistent deleveraging from the very high pro forma debt to EBITDA would pressure the ratings. Further, Moody's believes that the high leverage reflects the initial aggressive financial policies of its sponsors. The B1 rating on first lien term loan, one notch above the Corporate Family Rating, reflects its first priority interest in fixed assets of the company. The Caa1 rating on the second lien term loan reflects its junior position in the capital structure and the second priority interest in fixed assets. At closing of the transaction Illuminate Merger Sub Corp. will merge into VC GB Holdings I Corp., which will assume all debt obligations and become the borrower. The following rating actions were taken: Assignments: Issuer: Illuminate Merger Sub Corp. Corporate Family Rating, Assigned B2 Probability of Default Rating, Assigned B2-PD Senior Secured 1st Lien Term Loan, Assigned B1 (LGD3) Senior Secured 2nd Lien Term Loan, Assigned Caa1 (LGD5) Outlook Actions: Issuer: Illuminate Merger Sub Corp. Outlook, Assigned Stable RATINGS RATIONALE VCC's B2 Corporate Family Rating reflects: 1) the company's very high debt leverage pro forma for the leveraged buyout; 2) the highly competitive nature of the lighting industry; 3) the cyclicality of the residential and commercial end markets and volatility in results inherent to various industry cycles; 4) exposure of the majority of the company's product portfolio to tariffs; and 5) the risk of shareholder friendly returns stemming from the private equity ownership of the company. At the same time, the credit profile is supported by: 1) the company's solid position in the niche and fragmented lighting market and growing scale; 2) the majority of revenue generated from the repair and remodeling residential market segment, which is more stable than new construction; 3) the diversity of the company's brands, price points and distribution channels; 4) a track record of debt repayment, which is expected to continue; and 5) solid operating margin and good liquidity. The stable outlook reflects Moody's expectation that over the next 12 to 18 months the company will benefit from strong conditions in residential repair and remodeling and new construction markets, and delever through earnings growth and debt repayment stemming from its free cash flow. Moody's expects VCC to maintain good liquidity over the next 12 to 15 months, supported by positive free cash flow, ample availability under a $125 million ABL credit facility expiring in 2026, and the flexibility under springing financial covenant in the ABL. The proposed credit facilities are expected to provide covenant flexibility that could adversely affect creditors, including an uncommitted incremental first lien term loan in an aggregate amount of 1) the greater of a) $171 million and 100% of consolidated LTM EBITDA, plus b) the general debt basket, and 2) an unlimited amount up to 5.0x first lien net leverage ratio for first lien debt (for pari passu secured debt) and either the interest coverage ratio is greater than 2.0x or up to 7.0x secured net leverage ratio for second lien debt. Either (i) amounts up to $171 million and 100% of consolidated LTM EBITDA; or (ii) aggregate amounts reallocated from the general debt basket, may be incurred with an earlier maturity date than the initial term loans. The credit agreement permits the transfer of assets to unrestricted subsidiaries, up to the carve-out capacities, subject to "blocker" provisions which prohibit the transfer of intellectual property that is material to the business and its restricted subsidiaries (taken as a whole). Non-wholly-owned subsidiaries are not required to provide guarantees; dividends or transfers resulting in partial ownership of subsidiary guarantors could jeopardize guarantees, with no explicit protective provisions limiting such guarantee releases. There are no express protective provisions prohibiting an up-tiering transaction. The proposed terms and the final terms of the credit agreement may be materially different. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded if the company expands its size and scale, reduces its leverage sustainably below 5.0x, increases EBIT to interest coverage above 2.5x, while maintaining solid operating margin, conservative financial policies and good liquidity, including positive free cash flow. The ratings could be downgraded if the company does not make consistent progress in deleveraging from the very high pro forma leverage toward 6.0x, if operating margin weakens, including due to softness in the end markets, or if EBIT to interest coverage declines below 1.5x. Aggressive financial policies in a form of shareholder returns or debt funded acquisitions, or a deterioration in liquidity, including weakening in free cash flow, could also lead to a downgrade. The principal methodology used in these ratings was Consumer Durables Industry published in April 2017. Visual Comfort & Co., headquartered in Houston, TX and Skokie, IL, is a collection of brands including Visual Comfort premium decorative lighting collections, Tech Lighting decorative and functional lighting, Generation Lighting lighting and Monte Carlo ceiling fans. Its customer base includes lighting showrooms, which serve primarily the home remodeling market, and electrical distributors, which sell to the homebuilding and commercial markets, as well as interior design firms and third party e-commerce partners. The company's sponsors are AEA Investors, Goldman Sachs Asset Management and Leonard Green & Partners. In the LTM period ended March 31, 2021, VCC generated approximately $712 million in revenue. INGLES MARKETS: Moody's Rates New Senior Unsecured Notes 'Ba2' -------------------------------------------------------------- Moody's Investors Service assigned a Ba2 rating to Ingles Markets, Incorporated's proposed senior unsecured notes. All other ratings including the company's Ba1 corporate family rating and SGL-1 speculative grade liquidity rating remain unchanged. The outlook remains stable. "Ingles continues to be a strong operator albeit in a regionally concentrated market with a number of much larger competitive players", Moody's Vice President Mickey Chadha stated. "We expect a pull back in the top line and profitability in 2021 after a record 2020 performance fueled by the pandemic induced demand but the company's credit metrics are expected to remain strong", Chadha further stated. Assignments: Issuer: Ingles Markets, Incorporated Senior Unsecured Regular Bond/Debenture, Assigned Ba2 (LGD5) RATINGS RATIONALE Ingles' Ba1 corporate family rating reflects its solid regional franchise, its base of owned real estate and very good liquidity. Ingles' financial leverage is modest with debt/EBITDA at about 1.5 times and interest coverage is strong with EBIT/interest at about 10.0 times at March 27, 2021. Moody's expects leverage to be about 2.0 times in the next 12-18 months as buying patterns normalize with coronavirus related pantry loading subsiding and the company is expected to maintain a lower debt burden. Like its peers, Ingles has benefited from pantry loading and panic buying by consumers in 2020 due to the coronavirus related disruptions. However, even prior to the coronavirus pandemic Ingles outperformed its peers in a challenging business environment. The company's large base of stores that are owned rather than leased represent a credit positive, as it reduces Ingles' fixed cost burden relative to companies with leased real estate, and provides a source of value to creditors. The company's credit profile is constrained by its small scale, increasing competitive encroachment and geographic concentration in just six southeastern states. The stable outlook incorporates Moody's expectation that the company's same store sales growth will continue to outperform its peers, financial policies will remain benign and credit metrics will not deteriorate meaningfully in the next 12 months. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING The increasing competitive encroachment and the company's regional concentration are constraints to an upgrade. An upgrade would require an articulated financial policy, capital structure, meaningfully enhanced competitive position and liquidity that supports an investment grade rating. Quantitatively ratings could be upgraded if same store sales growth is consistently positive, liquidity is very good, debt/EBITDA is sustained below 2.25 times, and EBIT/interest is sustained above 5.5 times. Ratings could be downgraded if the company's profitability or liquidity deteriorate or same store sales growth demonstrates a declining trend. Quantitatively ratings could be downgraded if debt to EBITDA is sustained above 3.0 times or EBIT to interest is sustained below 3.5 times. Ingles Markets, Incorporated is a supermarket chain with operations in six southeastern states. Headquartered in Asheville, North Carolina, the company operates 198 supermarkets. The company also owns and operates neighborhood shopping centers, most of which contain an Ingles supermarket. The company owns 162 of its supermarkets, either in free-standing stores or as the anchor tenant in an owned shopping center. The company also owns and operates a milk processing and packaging plant that supplies approximately 79% of the milk products sold by the company's supermarkets as well as a variety of organic milk, fruit juices and bottled water products. In addition, the milk processing and packaging plant sells approximately 73% of its products to other retailers. Revenues are approximately $4.7 billion. The principal methodology used in this rating was Retail Industry published in May 2018. INGLES MARKETS: S&P Alters Outlook to Positive, Affirms 'BB' ICR ---------------------------------------------------------------- S&P Global Ratings revised its outlook to positive from stable and affirmed its ratings, including the 'BB' issuer credit rating on U.S.-based regional grocer Ingles Markets Inc. At the same time, S&P assigned a 'BB' issue-level rating and '3' recovery rating to Ingles' proposed senior unsecured debt offering. The '3' recovery rating reflects its expectation for meaningful (50%-70%; rounded estimate: 65%) recovery in a payment default or bankruptcy. The positive rating outlook reflects the potential for an upgrade over the next 12 months if Ingles Markets demonstrates consistent performance along with adjusted leverage remaining below 2x. The outlook revision reflects, in part, improved operating performance expectations and better credit protection measures. Ingles has shown good performance trends in fiscal 2021. These include comparable-store sales growth approaching 7% and adjusted EBITDA margins in the high 8% area, both somewhat ahead of S&P's previous expectations. In addition, free operating cash flow generation of about $45 million in the first six months of the fiscal year is ahead of most historic periods, outside of the abnormal $119 million cash generation in the similar fiscal 2020 period. S&P said, "Looking ahead, we think company initiatives and strategies around omni-channel, loyalty, and in-store customer retention will help Ingles maintain somewhat better operating performance results compared with previous years. In our view, promotional activity will be more muted. For the next 12 months, we project flat to modest low-single-digit sales growth, along with adjusted EBITDA margins in the high-7% to low-8% range, compared with 6% in the year before the pandemic. Our projections assume normalized sales and EBITDA over the next 12 months compared with the extraordinary growth in 2020. We also acknowledge the performance uncertainty as the economy recovers and consumers become comfortable with returning to previous food-away-from-home routines." Ingles' proposed refinancing will extend the company's debt maturity profile. The company intends to refinance its existing $295 million in unsecured notes and borrowings under its revolver with a new $350 million unsecured note issuance. The proposed refinancing will extend the company's debt maturity schedule, with the new issuance maturing in 10 years compared with 2023 for the existing notes. In addition, the refinancing will include a $150 million unsecured revolver maturing in five years, replacing the current $175 million revolver due next year. S&P said, "We believe the refinancing will lessen the company's interest burden and help boost free operating cash flow generation. For example, we expect interest expense in the low $20 million area over the next few years. This compares with the nearly $41 million in interest expenses for the fiscal year ended September 2020. The lower interest expense is partially a result of a lower expected interest cost on the proposed unsecured notes. We also expect Ingles to maintain relatively lower balance sheet debt levels compared with historic periods. "For the next 12 months, we expect free operating cash flow of about $80 million and a meaningful increase in balance sheet cash. This compares with the company's long history of flat to modest free cash generation and minimal cash balances. We think greater future cash balances could indicate improved credit risk if supported by financial policy. That said, we think Ingles' financial policy could evolve over time to include an emphasis on shareholder activity given the greater the cash flow generation and lower debt obligations relative to historic performance. This opinion also considers the company's meaningful activist investor ownership." Still, rapidly changing competitive dynamics and consumer behavior create the potential for downside performance risks. S&P said, "We believe the grocery industry will become increasingly aggressive in merchandising over the next few years after the effects of the coronavirus pandemic wind down. We think large national grocers will progressively use scale to invest in price to maintain store traffic. In addition, we think nontraditional grocers (like deep discounters and omni-channel vendors) will increasingly compete for customers in areas such as convenience and enhanced product selection, further upsetting the competitive environment. We also believe the trend toward omni-channel grocery sales will likely accelerate compared with the pre-pandemic operating environment as shopping habits evolved over the past year." Ingles will remain geographically concentrated in a mature and increasingly competitive industry with threats from both traditional and nontraditional participants. S&P said, "The company's owned distribution center ultimately, in our opinion, limits expansion options to areas with the distribution footprint, with about 200 stores centered on its Asheville, N.C. headquarters. We believe Ingles will remain geographically constrained in its core southeast markets, a region that has become increasingly crowded, in our opinion." This includes encroachment from significantly larger competitors such as Kroger Co., Wegmans Food Markets Inc., and Walmart Inc., posing a risk to Ingles' competitive position over the long-term. S&P said, "In addition, other competitors such as off-price and discount grocers have also expanded into these markets, a trend we expect to continue. We also believe Ingles' store productivity trails larger competitors, partly due to lower population density in its core markets, and maintain our negative comparable ratings analysis modifier, relative to higher rated peers. We hold this view despite the company's meaningful real estate ownership and its non-union workforce. We also believe Ingles has a good relationship with its core customers and has historically performed well against traditional competitors." The positive rating outlook reflects the potential for an upgrade over the next 12 months if Ingles Markets demonstrates sustained consistent performance gains, resulting in our expectations for adjusted leverage remaining below 2x and sustained meaningful free operating cash flow generation. S&P could raise the rating on Ingles if: -- The company sustained good operating performance and profitability as operations return to normal over the next year; -- Under this scenario, S&P would expect Ingles to sustain adjusted leverage below 2x. -- S&P would also expect Ingles to sustain meaningful free operating cash flow and its regional competitive position. -- This scenario will also coincide with Ingles maintaining a conservative financial policy and not pursuing aggressive shareholder activity. S&P could revise the outlook back to stable if: -- The company meaningfully underperformed S&P's base case, potentially due to increased competition, cost and inflationary challenges, strategy execution issues, or a significant decline in performance as the economy returns to normal over the next 12 months. -- This scenario would likely correspond with an expectation that the company will generate free operating cash flow of $50 million or less; -- S&P Global Ratings-adjusted leverage were sustained at 2x or higher and S&P believed the company's financial policy would become less supportive. ITT HOLDINGS: Moody's Assigns First Time 'B1' Corp. Family Rating ----------------------------------------------------------------- Moody's Investors Service assigned first time ratings to ITT Holdings LLC (IMTT OpCo) including a B1 Corporate Family Rating and B1-PD Probability of Default Rating. Moody's also assigned a Ba2 rating to IMTT OpCo's senior secured credit facility (including its senior secured term loan and senior secured revolving credit facility) and a B2 rating to its senior unsecured notes. The rating outlook is stable. Upon the closing of the IMTT OpCo financing transaction and full repayment of IMTT HoldCo's senior secured term loan, Moody's will withdraw all ratings at RS Ivy HoldCo, Inc. (IMTT HoldCo) including its Ba3 CFR. "IMTT OpCo's ratings reflect its meaningfully increased debt burden through the refinancing transaction including a dividend distribution, its small scale by revenue as compared to its midstream peers and modest cyclicality in its utilization rate. The company benefits from its diversified terminals platform which is critical oil & gas and chemicals infrastructure, relatively stable and fee-based cash flow despite the absence of long-term contracts, and long-standing creditworthy customer base," commented Sreedhar Kona, Moody's senior analyst. "The company's expected rapid deleveraging through growth in earnings and the completion of several capital projects with longer term contracts contribute to the stable outlook on its ratings". IMTT OpCo is refinancing its current indebtedness through a $950 million senior secured credit facility (including a $300 million senior secured revolver and a $650 million senior secured term loan, both pari passu) and $1.22 billion senior unsecured notes. Through this transaction, IMTT OpCo will pay off its existing debt and also the outstanding term loan balance at IMTT HoldCo. The company will also make a significant distribution of cash to its sponsor Riverstone Holdings LLC (Riverstone). Pro forma for the transaction, IMTT OpCo's capital structure will be comprised of $950 million senior secured credit facility and $1.22 billion senior unsecured notes. Debt List: Assignments: Issuer: ITT Holdings LLC Probability of Default Rating, Assigned B1-PD Corporate Family Rating, Assigned B1 Senior Secured Revolving Credit Facility, Assigned Ba2 (LGD2) Senior Secured Term Loan, Assigned Ba2 (LGD2) Senior Unsecured Notes, Assigned B2 (LGD5) Outlook Actions: Issuer: ITT Holdings LLC Outlook, Assigned Stable RATINGS RATIONALE IMTT OpCo's B1 CFR reflects a significant increase in debt and leverage as a result of the dividend recapitalization transaction, its small scale as measured by revenue and compared to its midstream peers, as well as modest cyclicality in its utilization rate. The rating is supported by the expectation of a rapid deleveraging through 2021 and 2022 driven by additional earnings and cash flow from several capital projects, as well as by repayment of debt. The company benefits from the stable nature of its cash flow from its terminal assets which generate revenue through fixed-fee, take-or-pay contracts, and the geographically diverse footprint of its asset base and the diverse array of the bulk liquid products stored. The longer term contracts underpinning new capital projects will improve the average contract length for the company. Governance considerations that factor into IMTT OpCo's ratings include the company's debt funded dividend distribution through the refinancing transaction which substantially elevated the company's debt leverage. The transaction highlights the aggressive financial policies subscribed by the company's private equity sponsor. Companies owned by private equity sponsors typically have tolerance for higher debt leverage than comparable publicly traded peers or companies owned by strategic parents. The stable outlook reflects Moody's expectation that IMTT OpCo will generate steadily growing earnings and that the ongoing capital spending for growth projects will meaningfully improve the company's contract coverage, cash flow generation and contribute to significant debt and leverage reduction. IMTT OpCo will maintain adequate liquidity. Pro forma for the transaction, the company will have $22 million of cash and approximately $265 million of availability under its $300 million senior secured revolving credit facility due July 2026. IMTT OpCo will rely on its operating cash flow and modest revolver drawings to meet its cash needs including debt service and capital spending. IMTT OpCo's credit facility has two financial maintenance covenants including a maximum senior secured net leverage ratio of 5x (which will be tested only if revolver utilization is equal to or greater than 35%) and a minimum debt service coverage ratio of 1.1x. IMTT OpCo will remain in compliance with its covenants. IMTT OpCo's $300 million senior secured revolving credit facility due in July 2026 and the $650 million senior secured term loan due in July 2028, both of which are pari passu to each other are rated Ba2 two notches above the company's B1 CFR. The ratings on the revolver and the term loan reflect their structurally superior position within the capital structure and the senior secured priority claim to the company's assets. Moody's views this outcome as more appropriate given the high total debt leverage and small size of the company. The $1.22 billion senior unsecured notes due in July 2029 are rated B2 one notch below the CFR reflecting its structurally subordinated position to the company's senior secured credit facility. The recapitalization transaction substantially reduces the company's corporate and capital structure complexity. The term loan benefits from structural enhancements, including an excess cash flow sweep. As proposed, preliminary terms of the IMTT OpCo's revolver and term loan (and subject to change in the final documentation) are expected to provide covenant flexibility that if utilized could negatively affect the creditors. Notable terms include the following: There are provisions for incremental debt capacity (together with any increases in commitments under the revolving credit facility ) up to the greater of $300 million and 100% of Consolidated EBITDA, plus an additional uncapped amount provided the consolidated first lien net leverage ratio does not exceed 2.75x (if pari passu secured) and consolidated total net leverage ratio does not exceed 6.5x. The company may incur up to the greater of (i) $100 million or (ii) 33% of Consolidated EBITDA of incremental indebtedness with scheduled maturity earlier than the initial Term Loan. The credit agreement permits the transfer of assets to unrestricted subsidiaries, up to the carve-out capacities, subject to customary "J. Crew" provisions to be mutually agreed. Only wholly owned subsidiaries must provide guarantees, raising the risk of potential guarantee release; dividends of partial ownership interests could jeopardize guarantees. There are no express protective provisions prohibiting an up-tiering transaction. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings may be downgraded if the company's debt leverage is likely to remain above 6.5x by year-end 2022 or if the company's liquidity weakens. The ratings would be considered for an upgrade if the company grows its size to above $400 million of annual EBITDA and is able to sustain its consolidated debt leverage below 5x debt/EBITDA. The company must also maintain good liquidity. ITT Holdings LLC owns a portfolio of bulk liquid storage terminals across North America. It is wholly and indirectly owned by Matex Terminal Holdings LLC, which is owned by Riverstone Holdings, LLC The principal methodology used in these ratings was Midstream Energy published in December 2018. JFAL HOLDING: Gets OK to Hire Weycer as Legal Counsel ----------------------------------------------------- JFAL Holding Company, LLC, received approval from the U.S. Bankruptcy Court for the Western District of Texas to hire Weycer, Kaplan, Pulaski, & Zuber, P.C. to serve as legal counsel in its Chapter 11 case. The firm's services include: (a) advising the Debtor of its rights, powers, duties and obligations in its bankruptcy case; (b) taking all necessary actions to protect and preserve the estates of the Debtor, including the prosecution of actions on the Debtor's behalf, the defense of actions commenced against the Debtor, the negotiation of disputes in which the Debtor is involved, and the preparation of objections with respect to claims that are filed against the estate; (c) assisting in the investigation of the acts, conduct, assets and liabilities of the Debtor, and any other matters relevant to the case; (d) investigating and potentially prosecuting preference, fraudulent transfer, and other causes of action arising under the Debtor's avoidance powers or which are property of the estate; (e) preparing legal papers; (f) negotiating, drafting and presenting a plan for the reorganization of the Debtor's financial affairs; and (g) other necessary legal services. The firm's hourly rates are as follows: Jeff Carruth, Shareholder $485 Other Shareholders $485 or less Associates $300 or less Paralegals $150 The initial retainer fee required is $27,000. As disclosed in court filings, Weycer is a "disinterested person" within the meaning of Section 101(14) of the Bankruptcy Code. The firm can be reached through: Jeff Carruth, Esq. Weycer, Kaplan, Pulaski, & Zuber, P.C. 3030 Matlock Rd., Suite 201 Arlington, TX 76015 Phone: (713) 341-1158 Fax: (866) 666-5322 Email: jcarruth@wkpz.com About JFAL Holding Company JFAL Holding Company, LLC sought protection under Chapter 11 of the Bankruptcy Code (Bankr. W.D. Texas Case No. 21-30285) on April 8, 2021. At the time of the filing, the Debtor had between $1 million and $10 million in both assets and liabilities. Judge H. Christopher Mott oversees the case. Weycer Kaplan Pulaski & Zuber P.C. is the Debtor's legal counsel. JS KALAMA: Gets Approval to Hire PDG Services as Broker ------------------------------------------------------- JS Kalama, LLC received approval from the U.S. Bankruptcy Court for the Western District of Washington to hire PDG Services as broker. The Debtor requires the services of a broker to market for lease its real property located at 552 Hendrickson Drive, Kalama, Wash. PDG will be paid at the rate of $250 per hour to review current negotiations for the lease of the Kalama property and to develop a plan with the Debtor to market the vacant property for lease. Upon lease of the vacant space, the firm will get a commission of 8 percent of the value of the lease. PDG can be reached through: Harold L. Palmer, Jr. PDG Services 625 Hillcrest Drive Longview, WA 98632 Phone: 360-431-2733 Email: Hal@equitynw@gamail.com About JS Kalama JS Kalama, LLC, a Kalama, Wash.-based company engaged in renting and leasing real estate properties, sought protection under Chapter 11 of the Bankruptcy Code (Bankr. W.D. Wash. Case No. 20-41495) on June 11, 2020. At the time of the filing, the Debtor disclosed assets of between $1 million and $10 million and liabilities of the same range. Judge Brian D. Lynch oversees the case. The Debtor is represented by J.D. Nellor, Esq., at Nellor Law Office. KEYSER AVENUE: Seeks Cash Collateral Access ------------------------------------------- Keyser Avenue Medical Park, LLC and Natchitoches Medical Specialists, LLC ask the U.S. Bankruptcy Court for the Western District of Louisiana, Alexandria Division, to enter an order authorizing the transfer and use of rental proceeds which may be cash collateral as defined in 11 U.S.C. section 363 and Federal Rule of Bankruptcy Procedure 4001(b). NMS, as Subchapter V Debtor and affiliate of KAMP, seeks the Court's approval to transfer funds to facilitate the cash collateral usage. BOM Bank f/k/a Bank of Montgomery is the lender on a Multiple Obligations Mortgage made unto KAMP with a maximum amount of indebtedness of $10,000,000, secured by, among other things, a collateral assignment and pledge of rights by KAMP of "the right to receive proceeds attributable to the insured loss of the Property." The "Property" includes the building and improvements located at 1029 Keyser Avenue, Natchitoches, LA. The building located at 1029 Keyser Avenue is rented by NMS, and is used by NMS and its affiliated physicians as a medical clinic. KAMP also executed an "Assignment of Leases and Rents" which secures a maximum amount of $5,000,000, and which provides BOM all of KAMP's right, title and interest in current and future leases and rents, including receipts, income, royalties, profits, revenues, proceeds, and bonuses. KAMP did execute a UCC financing statement to perfect, protect and continue BOM's security interest in the mortgaged property and rights under the mortgage, which also qualifies as a security agreement under Louisiana's version of UCC-9. KAMP has received these checks: A. The May 2021 rent of affiliate NMS by check dated 4/26/21 in the amount of $21,785.36; and B. On behalf of Dr. Tummala (Willis-Knighton Health System): 1. April 2021 rent and related expense obligations by check dated 3/29/21 in the amount of $540; 2. May 2021 rent and related expense obligations by check dated 4/28/21 in the amount of $540; and 3. June 2021 rent and related expense obligations by check dated 5/27/21in the amount of $540. Though paid in the form of a combined rent and expense check to KAMP, the expense obligations of Dr. Tummala ($40/month) are actually owed to NMS for Dr. Tummala's phone services. KAMP seeks to deposit these funds totaling $23,405.36 into a debtor-in-possession account which KAMP will open with BOM Bank. KAMP then seeks to transfer to NMS the amount of $120, representing three months of Dr. Tummala's expenses. NMS received these checks on behalf of Clinical Pathology Laboratories, Inc.: 1. April 2021 rent and related expense obligations by check dated 3/25/21 in the amount of $1,086.22; 2. May 2021 rent and related expense obligations by check dated 4/16/21 in the amount of $1,086.22; and 3. June 2021 rent and related expense obligations by check dated 5/14/21 in the amount of $1,086.22. Though paid in the form of a combined rent and expense check to NMS, the rent obligation of CPL ($862.75/month) is actually owed to KAMP. NMS seeks to deposit these checks totaling $3,258.66 in the NMS debtor-in-possession account opened at BOM Bank, and transfer to KAMP the amount of $2,588.25, representing three months of CPL's rent. KAMP seeks authority to continue transferring the expense amounts paid by or on behalf of Dr. Tummala ($40/month) to NMS as those payments are received byKAMP. NMS seeks authority to continue transferring the rent amounts paid by or on behalf of CPL ($862.75/month) to KAMP as those payments are received by NMS. KAMP will need to use a portion of rental payments in the ordinary course of its business to pay for property insurance, building maintenance, ordinary repairs, and other expenses of operations incurred during the course of the Chapter 11 proceeding. KAMP requests to use up to $10,000 of rental income per quarter, with the first quarter spanning June, July, and August 2021, and with the understanding that any expenditure above this amount in a given quarter would be subject to approval of BOM. As adequate protection for the use of cash collateral, KAMP propose to provide BOM a post-petition lien on the post-petition properties of the kind and nature that it holds in pre-petition property, to the extent it does not already have the same, in the same priority as it held in pre-petition property. To the extent that adequate protection is deemed necessary following a final hearing on the matter, KAMP would propose to pay as adequate protection unto BOM an amount sufficient to cover the interest on its loan on a monthly basis, should funds be available for the payment of same. A copy of the motion is available for free at https://bit.ly/3iOSlof from PacerMonitor.com. About Keyser Avenue Medical Park, LLC Keyser Avenue Medical Park, LLC owns a land and building at 1029 Keyser Ave. valued at $2.4 million. It sought protection under Chapter 11 of the U.S. Bankruptcy Code (Bankr. W.D. La. Case No. 21-80221) on June 11, 2021. In the petition signed by James Knecht, MD, managing member, the Debtor disclosed $3,051,857 in assets and $3,931,792 in liabilities. Affiliate, Natchitoches Medical Specialists, LLC, filed for Chapter 11 protection (Bankr. W.D. La. Case No. 21-80137) on April 11, 2021. The two cases are jointly administered under Natchitoches' case. Judge Stephen D. Wheelis oversees the cases. Bradley L. Drell, Esq. at Gold, Weems, Bruser, Sues & Rundell is the Debtors' counsel. KNEL ACQUISITION: S&P Upgrades ICR to 'B', Outlook Stable --------------------------------------------------------- S&P Global Ratings raised its issuer credit rating on U.S.-based KNEL Acquisition LLC to 'B' from 'B-'. At the same time, S&P raised its rating on the senior secured first-lien credit facilities and senior secured second-lien term loan to 'B' and 'CCC+', respectively. The recovery ratings remain '3' and '6', respectively. The stable outlook reflects S&P's view that the company will maintain leverage below 6.5x over the next 12 months. S&P's ratings upgrade reflects deleveraging from profitability improvement due to cost savings and efficiency improvements. The company's actions to increase efficiency, reduce costs, and improve yields at its production facilities have significantly boosted profitability despite a revenue decline of about 10% in fiscal 2020 due to pandemic-related store closures and lower consumption of bars. In 2020, the company reduced material loss per product, increased throughputs on automated lines, and shortened changeover times. It also reduced operating lines and headcount to better match production volumes. As a result, first-quarter S&P adjusted EBITDA margin was about 10.5%, up from 4.9% in first-quarter 2020 and 4.3% in first-quarter 2019. The higher profitability has helped the company reduce last 12 months S&P Global Ratings adjusted debt leverage to about 6.4x at the end of the first quarter, significantly improved from the 7.5x at for fiscal 2020 and about 13x for fiscal 2019. S&P believes sustained demand for the company's products and stronger operating leverage will result in leverage improving to the 5.5x-6x area by the end of 2021. Favorable consumer demand trends, greater operating leverage, and cost management will drive further profitability improvement in fiscal 2021. KNEL is benefiting from a rapid recovery in the demand for nutritional powders. Its powder business grew about 25% in the fourth quarter of 2020 and about 36% in the first quarter of 2021, recovering from significant declines at the onset of the pandemic due to nationwide closures of gyms and nutrition stores and GNC's bankruptcy. Powder sales have grown because of higher e-commerce sales, the lifting of pandemic-related shutdowns, new major customer wins, and a continued focus by consumers on diet and exercise. Demand for nutritional bars was still down in the first quarter, but the decline in this segment for KNEL moderated significantly to about -3.5% for the quarter from about -13.5% in the fourth quarter of last year. S&P said, "However, now that vaccines are widely available in the U.S., we anticipate bar top line will gradually recover as on-the-go snacking and quick meals return with offices and schools continuing to reopen. Although we do expect increased commodity costs, the company has arrangements with its customers to quarterly reset pricing. Additionally, the company leverages its research and development team to reformulate products with their customers, to alleviate ingredient shortages while ensuring taste and nutrition profiles remain consistent. We expect this to also benefit operating leverage as bar volumes increase, further accelerating EBITDA growth in fiscal 2021, resulting in adjusted EBITDA margin expansion to 10%-11% from 8%-9% in fiscal 2020." S&P said, "We expect the company to maintain aggressive financial policies, resulting in adjusted leverage sustained above 5x. "We believe the company would prioritize reinvestment, acquisitions, or dividends over debt prepayment. The company has a demonstrated history of aggressive financial policies through making acquisitions while simultaneously reinvesting cash in capital-intensive projects, which can result in reduced cash flow flexibility to manage leverage. In December 2017, the company acquired Genysis Brand Solutions to bolster its powder manufacturing business while investing over $50 million in its Ontario manufacturing facility. When operational problems at Ontario occurred, expenses soared and leverage was sustained above 10x for two years. Leverage did not decline below 7x until the first quarter of fiscal 2021. While we have not modeled any material acquisitions in our forecast, we believe the company will manage leverage above 5x over our forecast horizon. Additionally, we expect the company's majority owner, Kohlberg & Co. to seek a return on its investment in the coming years, which could result in releveraging. "The stable outlook reflects our expectation that the company will maintain leverage below 6.5x over the next 12 months." S&P could lower the ratings if it believes the company will sustain leverage above 6.5x or generate less than $20 million of free cash flow, which could result from: -- A significant slowdown in the demand for bars and powders; or -- Higher-than-expected cost inflation resulting in margin deterioration; or -- More aggressive financial policies such as a debt-funded acquisition or dividend. While unlikely, S&P could raise the ratings if: -- There is a commitment and record from the sponsor to maintain leverage below 5x; and -- Revenue and profitability continue to grow in both the bar and powder segments supported by positive consumer demand, winning new customers, greater operating efficiency, and prudent cost management. KNOTEL INC: CSC Global Subsidiary Proposed as Liquidating Trustee ----------------------------------------------------------------- Knotel, Inc., together with its debtor-affiliates and the Official Committee of Unsecured Creditors, as Plan Proponents, filed with the Bankruptcy Court a Plan Supplement consisting of a Liquidation Analysis and a form of the Liquidating Trust Agreement with the proposed Liquidating Trustee, Entity Services (SPV), LLC, a subsidiary of CSC Global Financial Markets. A copy of the Plan Supplement is available for free at https://bit.ly/2S1hDEE from Omni Agent Solutions, claims agent. About Knotel Inc. Knotel -- http://www.Knotel.com/-- is a flexible workspace platform that matches, tailors, and manages space for customers. New York-based Knotel offers workspace properties such as desks, open, and private spaces on rent for companies in 20 global markets. In the U.S., Knotel primarily serves in the New York City and San Francisco areas. Knotel Inc., founded in 2015, raised hundreds of millions of dollars from investors. It expanded rapidly for years and was one of the more aggressive competitors in the co-working and flexible office space sector, becoming one of WeWork's fiercest rival. As the COVID-19 pandemic upended the co-working industry, Knotel, Inc., and its U.S. subsidiaries sought Chapter 11 protection (Bankr. D. Del. Case No. 21-10146) on Jan. 30, 2021, to pursue a sale of the assets to Newmark Group. Knotel estimated $1 billion to $10 billion in assets and liabilities as of the bankruptcy filing. Morris, Nichols, Arsht & Tunnell LLP is serving as the Company's counsel. Moelis & Company is the investment banker. Omni Agent Solutions is the claims agent. LEWISBERRY PARTNERS: U.S. Bank Opposes Interest Rate Cut -------------------------------------------------------- U.S. Bank, N.A., HOF Grantor Trust 1 and Fay Servicing, LLC, ("Creditors") object to Lewisberry Partners, LLC's Disclosure Statement. U.S. Bank, et al., say the Debtor's Disclosure Statement should not be approved by this court, partly because it does not comply with Section 1125 of the Bankruptcy Code and partly because it describes its extreme cramdown plan of reorganization is patently unconfirmable. The Plan provides that to the extent that lender holds a secured claim, payment on that claim shall be made on a 30-year amortization at 3% interest. No explanation or justification is given for the attempted reduction of the interest rate from 8% on a non-default basis or from 23% on a default basis down to 3% fixed interest. As to the nonexistent but frivolous threatened lawsuit against Fay Servicing, the objectors point out that: * The Disclosure Statement alleges that Fay put force-placed insurance on the properties came. However, the Debtor fails to disclose that (1) a January 19,2020 letter was sent to Mr. Puleo notifying hi of nonpayment of insurance, (2) after Mr. Puleo failed to respond to that letter, a second warning letter was sent to him on February 18, 2020, (3) after Mr. Puleo failed to respond to the second warning letter, he was notified of the force placed insurance in the amount of $7512.13 pursuant to a letter dated March 19, 2020, and (4) after Mr. Puleo finally provided evidence that the property was insured, Fay immediately refunded the $7512.13. In addition, at no point were tenants notified of insurance issues. * The Disclosure Statement alleges that "Fay has, at various points, prepaid taxes for some of the properties but did not inform the Debtor that is was doing so, what provision of the Bridge Loan permitted to do so when taxes were not yet due or communicate to the Debtor which taxes were actually paid. These statements are completely false in multiple respects. * Another problem with the lawsuit-dependent nature of the Plan is that the Debtor allows itself to retain the net proceeds of the sale of any of Lender's collateral in escrow "pending the outcome of the Suit." The loan documents require that the Lender must be paid at least the Release Price for any properties that are sold. It is therefore inappropriate and inequitable that the Debtor should be permitted to hold on to all net proceeds of sales pending the outcome of some lawsuit that hasn't even been filed. The Creditors point out that the proposed "New value contribution" is violative of the Puleo Mortgage and does not create any actual new value. Article VII, Section 6 of the Plan provides that, for a new contribution, the Puleo's intend to contribute all but five of the 20 properties subject to the Puleo Mortgage to the Debtor. The other five would apparently be sold pursuant to Article VII Section 1 of the Plan. For a number of reasons, this is neither allowable, nor does it represent any new value, and nor can the Debtor try to shoehorn these properties within the protection of the automatic stay via this clearly illegal maneuver. The Creditors further point out that the Disclosure Statement should not be approved because it does not contain adequate information: * The disclosure statement in present case contains no feasibility analysis or budget or pro forma objections showing projected future income and expenses. It merely states that the debtor " believes it will have enough cash on hand to pay claims owed on the effective date." * The Disclosure Statement contains no analysis to justify the de minimus proposed 3% interest rate. The plan and disclosure statement unilaterally declare that, even if the lender's claim is allowed in full - i.e threatened lawsuit against Fay is either never brought and/or is determined to be without merit -, then the interest rate payable on the note will unilaterally be reduced by more than 50%, namely down to 3%. Attorneys for HOF Grantor Trust 1, U.S. Bank Trust, N.A. and Fay Servicing, LLC: Peter E. Meltzer, Esquire WEBER GALLAGHER 2000 Market Street, 13th Floor Philadelphia, PA 19103 Tel: (267) 295-3363 About Lewisberry Partners Lewisberry Partners LLC, a Phoenixville, Pa.-based company engaged in renting and leasing real estate properties, sought protection under Chapter 11 of the Bankruptcy Code (Bankr. E.D. Pa. Case No. 21-10327) on Feb. 9, 2021. In the petition signed by Richard J. Puleo, managing member, the Debtor disclosed up to $10 million in both assets and liabilities. Judge Eric L. Frank oversees the case. Obermayer Rebmann Maxwell & Hippel, LLP and Christopher L. Zellman serve as the Debtor's legal counsel and accountant, respectively. LGI HOMES: Moody's Hikes CFR to Ba2 & Rates New $300MM Notes Ba2 ---------------------------------------------------------------- Moody's Investors Service upgraded LGI Homes, Inc.'s Corporate Family Rating to Ba2 from Ba3, Probability of Default Rating to Ba2-PD from Ba3-PD, and the rating on the company's senior unsecured notes to Ba2 from Ba3. Moody's also assigned a Ba2 rating to LGI's proposed $300 million senior unsecured note offering due 2029, the proceeds of which will be used to retire the existing senior notes. The outlook is stable. The company's SGL-2 Speculative Grade Liquidity rating is maintained. The rating upgrade to Ba2 reflects Moody's expectation that LGI will operate with conservative debt leverage in the range of 30% to 35%, maintain its strong gross margin around 25%, benefit from solid underlying conditions in the homebuilding market, including strong demand for more affordable entry-level homes which the company focuses on, and continue to expand its scale and market share as the 10th largest builder by homes sold in the country. The refinancing of LGI's senior unsecured notes is leverage neutral, but is expected to lower the company's interest expense and improve pro forma homebuilding interest coverage toward 15.0x. LGI's liquidity benefits from the extension of its debt maturities, including the recent extension and upsize of its revolving credit facility. The following rating actions were taken: Upgrades: Issuer: LGI Homes, Inc. Corporate Family Rating, Upgraded to Ba2 from Ba3 Probability of Default Rating, Upgraded to Ba2-PD from Ba3-PD Senior Unsecured Regular Bond/Debenture, Upgraded to Ba2 (LGD4) from Ba3 (LGD4) Assignments: Issuer: LGI Homes, Inc. Senior Unsecured Regular Bond/Debenture, Assigned Ba2 (LGD4) Outlook Actions: Issuer: LGI Homes, Inc. Outlook, Remains Stable RATINGS RATIONALE LGI's Ba2 Corporate Family Rating is supported by the company's: 1) track record of strong organic growth funded by a conservative mix of debt and equity and Moody's expectation of modest leverage; 2) increasing scale and geographic diversification, and market position as the 10th largest builder by homes sold; 3) gross margin that is expected to remain among the highest within the peer group, strong interest coverage metrics, and consistent profitability; 4) business model that focuses on standardized home construction and creates production efficiencies; and 5) focus on the entry-level home segment, which is supported by favorable demographic trends and demand of the millennial buyers, and a relatively low supply of available homes. However, the credit profile also reflects: 1) the company's all speculative construction strategy, which can lead to high unsold home inventory during a housing downturn; 2) the potential for cash flow from operations to turn negative if investment in growth is accelerated; 3) a total land position of nearly seven years of supply with about four years of owned land, which increases exposure to land impairments during a weak market; 4) risk of shareholder friendly actions such as share repurchases; and 5) the cyclicality of the homebuilding industry and the resulting volatility in operating results. The stable outlook reflects Moody's expectation of solid underlying fundamentals in the homebuilding sector driving good demand and contributing to LGI's top line growth and strong credit metric performance over the next 12 to 18 months. LGI's SGL-2 Speculative Grade Liquidity rating reflects Moody's expectation of good liquidity over the next 12 to 15 months. Liquidity is supported by positive cash flow from operations, ample availability under the company's $850 million revolver due 2025, about 50% of which is expected to remain available, significant financial covenant cushion, and alternate sources of liquidity stemming from LGI's land supply. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded if the company meaningfully increases its revenue size and scale and improves product and geographic diversity. Additionally, maintenance of a conservative financial policy with respect to shareholder returns and leverage, including sustained homebuilding debt to book capitalization below 35%, strong gross margins and homebuilding interest coverage metrics, along with very good liquidity and strong free cash flow would also be important upgrade considerations. The ratings could be downgraded if the company shifts to a more aggressive financial policy with respect to shareholder friendly activities, large scale acquisitions or if homebuilding debt to book capitalization increases toward 45%. Weakening in interest coverage below 5.0x, significant decline in gross margin, a weakening in liquidity profile or a deterioration in end market conditions that results in net losses and impairments could result in a ratings downgrade. The principal methodology used in these ratings was Homebuilding And Property Development Industry published in January 2018. LGI Homes, Inc., established in 2003 and headquartered in Houston, Texas, builds largely starter, single-family homes, and operated in 110 communities in 34 markets across 19 states (as of March 2021), including Texas, Arizona, Florida, Georgia, New Mexico, Colorado, North Carolina, South Carolina, Washington, Tennessee, Minnesota, Oklahoma, Alabama, California, Oregon, Nevada, West Virginia, Virginia, and Pennsylvania. The company sells entry-level and move-up homes under its LGI Homes brand, and luxury homes under its Terrata Homes brand. LGI also sells homes to real estate investors that subsequently utilize these assets as rentals, representing about 9.3% of total LTM closings as of Q1 2021. In the LTM period ended March 31, 2021, the company generated approximately $2.6 billion in revenue and $381 million in net income. LOST CAJUN: Taps Peak Franchise Capital as Financial Advisor ------------------------------------------------------------ The Lost Cajun Enterprises, LLC and The Lost Cajun Spice Company, LLC received approval from the U.S. Bankruptcy Court for the District of Colorado to hire Peak Franchise Capital as their financial advisor. The firm's services include: a. Preparing financial analysis of monthly cash flow to determine the available operating cash flow, which may be applied to outstanding liabilities; b. Collecting past financial history, conducting interviews and creating a confidential memorandum to present a complete financial picture of the current situation; c. Investigating and evaluating the root causes of distress and recommend action items to address problems; d. Assisting in negotiating short-term relief such as lines of credit, forbearance agreements and promissory notes; e. Preparing a go-forward financial model utilizing multiple scenario analysis; f. Assisting in the negotiation of short-term and long-term solutions returning the Debtors to positive cash flow and allowing creditors a reasonable and fair recovery; g. Assisting in selling the Debtors' assets or the business as part of a long-term solution, if necessary; h. Sourcing new capital (debt or equity) to support restructuring initiatives or refinancing of current creditors; i. Providing strategic consulting, monitoring and analysis during the Debtors' bankruptcy; and j. other financial advisory services. The firm's hourly rates are as follows: Managing Partner $375 per hour Senior Advisor $300 per hour Associate $225 per hour Senior Analyst $175 per hour Peak Franchise Capital received a retainer in the amount of $10,000. As disclosed in court filings, Peak Franchise Capital is a "disinterested person" within the meaning of Section 101(14) of the Bankruptcy Code. Peak Franchise Capital can be reached through: Michael M. Elliot Peak Franchise Capital 4100 Spring Valley Road, Suite 535 Dallas, TX 75244 Phone: (972) 523-8344 Email: Mike.Elliott@peakfranchisecapital.com About The Lost Cajun Enterprises Frisco, Colo.-based The Lost Cajun Enterprises, LLC and The Lost Cajun Spice Company, LLC filed Chapter 11 petitions (Bankr. D. Colo. Lead Case No. 21-12072) on April 21, 2021. Raymond A. Griffin, founder, signed the petitions. At the time of the filing, Lost Cajun Enterprises disclosed between $100,000 and $500,000 in assets and between $1 million and $10 million in liabilities. Lost Cajun Spice disclosed total assets of up to $50,000 and total liabilities of up to $1 million as of the petition date. Judge Joseph G. Rosania Jr. oversees the cases. Akerman LLP and Peak Franchise Capital serve as the Debtors' legal counsel and financial advisor, respectively. LUXURY OUTER: Unsecureds to be Paid in Full in Plan --------------------------------------------------- Luxury Outer Banks Homes, LLC, submitted a Plan of Reorganization. The Plan contemplates a reorganization and continuation of the Debtor's business. In accordance with the Plan, the Debtor intends to satisfy certain creditor claims from income earned through continued operations. The Debtor's Plan of Reorganization is based on the Debtor's belief that the interests of its creditors will be best served if it is allowed to reorganize its debts. The Debtor's liabilities will be paid according to the priorities of the Bankruptcy Code and the Orders of this Court. The specific amounts and terms of payment will be made according to the treatment of each respective creditor. The source of payment shall be contributions from the equity interest holder, Kimberly Lane, and the Net Rental Income from the Debtor's real estate. The Plan proposes to treat claims and interests as follows: * Class 4 – Mr. Cooper. The estimated current balance of Mr. Cooper Note is $344,237.97 as of June 8, 2021. Interest shall accrue at a rate of 3.10% per annum following the Effective Date. The Debtor shall make monthly payments by the 10th day of each calendar month beginning July 10, 2021, of interest only in the approximate amount of $ 889.28 per month to the holder of the Class 4 Claim through December 10, 2022. Beginning January 10, 2023, the Debtor will make monthly payments on the tenth day of each calendar month based on an amortization of the current unpaid principal balance, $344,237.97 amortized over a period of 30 years, with interest at 3.10% per annum until this obligation is satisfied in full or at its new maturity date of December 10, 2052, whichever occurs first. Class 4 is impaired. * Class 5 – JP Morgan Chase Bank. The Debtor estimates the current balance of the Class 5 Claim to be $1,834,755.40 as of March 1, 2021. Interest shall accrue at a rate of 3.1% per annum following the Effective Date. The Debtor shall make monthly payments by the 1st day of each calendar month beginning July 1, 2021, of interest only (which is estimated to be $4,739.78 per month) to the holder of the Class 5 Claim until December 1, 2022. Beginning January 1, 2023, the Debtor will make equal monthly payments on the first day of each calendar month based on an amortization of the then outstanding principal amortized over a period of 30 years, with interest at 3.1% per annum until this obligation is satisfied in full. Chase shall provide an updated payoff quote and monthly payment amount as of the Effective Date of the plan within 10 days of the hearing on Confirmation. Class 5 is impaired. * Class 6 – General Unsecured Claims. The Debtor estimates general unsecured claims to be in the amount of $9,600. To the extent there are holders of general unsecured claims not otherwise qualifying for treatment under this Plan, the Debtor proposes to pay allowed general unsecured claims in full, with monthly payments of $300.00 per month. with interest from the Effective Date at the rate set out in 28 U.S.C. 1961(a) (determined as of the Effective Date). Payments shall be due monthly commencing on the 1st day of the first calendar month after the Effective Date. Class 6 is impaired. * Class 7 – Equity Interests. Kimberly Lane shall retain the Class 7 Interests. Kimberly Lane shall make sufficient contributions to the Debtor to enable it to make timely payments of all payment due under the terms of this Plan, without acceleration, through December 2023. Class 7 is impaired. The Debtor proposes to make payments under the Plan from the income derived from the continued operation of its business. Attorney for the Debtor: James B. Angell HOWARD, STALLINGS, FROM, ATKINS, ANGELL & DAVIS, P.A. P.O. Box 12347 Raleigh, NC 27605 Telephone: (919) 821-7700 Facsimile: (919) 821-7703 A copy of the Disclosure Statement is available at https://bit.ly/3xbl6zq from PacerMonitor.com. About Luxury Outer Banks Homes Luxury Outer Banks Homes, LLC, owns a house and lot located at 1340 DuckRoad, Duck, N.C., valued at $4.85 million, and a house and lot located at 116 Duchess Court, Kill Devil Hills, N.C., valued at $489,700. Luxury Outer Banks Homes sought protection under Chapter 11 of the Bankruptcy Code (Bankr. E.D.N.C. Case No. 21-00508) on Mar. 5, 2021. Kimberly H. Lane, manager, signed the petition. At the time of the filing, the Debtor disclosed total assets of $5,352,747 and total liabilities of $2,192,061. Judge Joseph N. Callaway oversees the case. Howard, Stallings, From, Atkins, Angell & Davis, PA, led by James B. Angell, Esq., serves as the Debtor's counsel. MAGPUL INDUSTRIES: Moody's Assigns First Time 'B1' CFR ------------------------------------------------------ Moody's Investors Service assigned first-time new issuer ratings to Magpul Industries Corp., including a B1 Corporate Family Rating and a B1-PD Probability of Default Rating. Concurrently, Moody's assigned a B1 rating to the company's proposed $300 million senior secured second lien notes due 2028. The outlook is stable. Net proceeds from the proposed $300 million second lien notes, after paying fees and expenses, are expected to be used to refinance existing debt, and to fund a dividend distribution to shareholders including private equity sponsor Albion River. Concurrent with the transaction the company is expected to enter into a new $25 million senior secured first lien revolving credit facility due 2024 (unrated) which is expected to be undrawn at close. Moody's took the following rating actions: Assignments: Issuer: Magpul Industries Corp. Corporate Family Rating, Assigned B1 Probability of Default Rating, Assigned B1-PD Senior Secured Second Lien Regular Bond/Debenture, Assigned B1 (LGD4) Outlook Actions: Issuer: Magpul Industries Corp. Outlook, Assigned Stable RATINGS RATIONALE Magpul's B1 CFR broadly reflects its strong market position in the firearms accessories market, supported by its good brand recognition and product innovation. The company has a solid EBITDA margin and has good channel diversification including a sizable exposure to ecommerce. Demand for the company's products has been very high since 2020, driven by consumer views that federal government firearms policy could shift and tailwinds related to the coronavirus pandemic and social unrest in some US cities. Magpul has good credit metrics including low debt/EBITDA leverage of 1.8x as of the last twelve months ending March 31, 2021, and pro forma for the notes offering. Moody's expects demand will remain elevated over the next 12-18 months supported by continued positive demand trends for firearms and as new recent gun owners accessorize. The company's very good liquidity reflects its relatively good free cash flow generation supported by its high profit margin and low capital expenditures, and access to an undrawn $25 million revolver facility pro forma for the transaction. The rating also considers Magpul's exposure to social risks and the high volatility and the cyclical nature of the firearms industry in the US. Social considerations are mixed for Magpul as the company faces rising risks of restrictive firearms regulation and is exposed to negative consumer activism related to gun control. However, demand for firearms and related products typically benefits initially if consumers expectations for gun regulations increases. The company is relatively small, has a narrow product focus and some customer concentration. Governance factors primarily consider the inherent risks related to its ownership by a private equity firm, including debt-financed shareholder distributions. The B1 rating assigned to the company's proposed $300 million senior secured second lien notes, the same as the CFR, reflects that the second lien notes represent the preponderance of the company's capital structure. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The stable outlook reflects Moody's expectations of continued good consumer demand for the company's products, resulting in stable revenue and earnings, as well as strong positive free cash flow over the next 12-18 months. The ratings could be upgraded if the company increases its revenue scale while demonstrating consistent organic revenue and earnings growth, along with Moody's expectations for meaningfully less business volatility. A ratings upgrade would also require debt/EBITDA sustained below 2.0x after factoring in demand volatility, the maintenance of at least good liquidity including good free cash flow generation, and financial policies that support credit metrics at the above levels. The ratings could be downgraded if the company's operating performance deteriorates with consistent declines in revenue or profit margin deterioration, or if debt/EBITDA is sustained above 3.5x. Ratings could also be downgraded if adverse regulatory developments or consumer preference shifts weaken product demand, the company's liquidity deteriorates with modest or negative free cash flow, or if its financial policies become more aggressive. Founded in 1999 and Headquartered in Austin, Texas, Magpul Industries, Corp. (Magpul) is a designer and marketer of firearms and outdoor accessories and lifestyle products. Since May 2020, the company is owned by private equity sponsor Albion River. Revenue as of the last twelve months period ending March 31, 2021 is under $500 million. The principal methodology used in these ratings was Consumer Durables Industry published in April 2017. MALLINCKRODT PLC: Public School Districts Oppose Plan Disclosures ----------------------------------------------------------------- The Board of Education of Chicago Public Schools, District No. 299, and certain additional public school districts (Public School District Creditors) in their individual capacities and as representatives of the putative class of the School District Class Claimants that they propose to represent, objected to the motion of Mallinckrodt PLC to approve their Disclosure Statement. David w. Giattino, Esq., at Stevens & Lee, P.C., counsel for the Public School District Creditors, said that the Debtors' initial disclosure statement lacked so much critical information that it seemed a supplemental update must surely be forthcoming. Now that the Debtors have issued their new disclosure statement, fundamental gaps remain," the counsel said. Noting the inadequacy of the Disclosure Statement, Mr. Giattino pointed out that the procedure for allocating funds are not adequately disclosed. As an initial matter, the Disclosure Statement gives creditors with opioid-related claims no meaningful grounds for assessing what, if anything, they may stand to gain under the Plan, he said. According to the Disclosure Statement's Executive Summary, "all Opioid Claims" are to be channeled to "certain opioid trusts" in accordance with "applicable trust documents." This channeling mechanism is a central feature of the Plan, and yet not a single aspect of it is adequately explained. While various trust documents are named in the Disclosure Statement, their contents remain undisclosed and, according to the Disclosure Statement, may not be disclosed for weeks to come, Mr. Giattino complained. Similarly, the release provisions in the Disclosure Statement are inadequately disclosed so that the sections of the Disclosure Statement that address the non-debtor releases are confusing, at best, and misleading, at worst, Mr. Giattino continued. As a threshold matter, these sections make use of key terms that are not clearly defined in the Disclosure Statement, he said. According to the Public School District Creditors, the Plan is patently unconfirmable for similar reasons -- the distribution framework is inconsistent with the Bankruptcy Code and the non-consensual non-Debtor releases are legally impermissible. The term "Released Parties" includes a whole laundry list of ill-defined third parties -- many of whom appear not to be entitled to release. The Plan and the Disclosure Statement are manifestly and substantially incomplete. For these reasons, approval of the disclosure statement should be denied, Mr. Giattino told the Court. A copy of the objection is available for free at https://bit.ly/2TuBug3 from Prime Clerk, claims agent Counsel for the Public School District Creditors, in their Individual Capacities and as Representatives of the Putative Class of the School District Class Claimants that the Public School District Creditors propose to represent: Joseph H. Huston, Jr., Esq. David W. Giattino, Esq. Stevens & Lee, P.C. 919 North Market Street, Suite 1300 Wilmington, DE 19801 Telephone: (302) 425-3310 | (302) 425-2608 Facsimile: (610) 371-7972 | (610) 371-7988 Email: jhh@stevenslee.com dwg@stevenslee.com - and - Eric B. Fisher, Esq. Binder & Schwartz LLP 366 Madison Avenue, 6th Floor New York, NY 10017 Telephone: (212) 510-7008 Facsimile: (212) 510-7299 Email: efisher@binderschwartz.com - and - Matthew J. Piers, Esq. Charles D. Wysong, Esq. Emily R. Brown, Esq. Margaret Truesdale, Esq. Hughes Socol Piers Resnick & Dym, Ltd. 70 W. Madison Street, Suite 4000 Chicago, IL 60602 Telephone: (312) 580-0100 Facsimile: (312) 580-1994 Email: mpiers@hsplegal.com cwysong@hsplegal.com ebrown@hsplegal.com mtruesdale@hsplegal.com - and - Cyrus Mehri, Esq. Steve Skalet, Esq. Joshua Karsh, Esq. Aisha Rich, Esq. Mehri & Skalet, PLLC 1250 Connecticut Ave., NW, Suite 300 Washington, D.C. 20036 Telephone: (202) 822-5100 Facsimile: (202) 822-4997 Email: cmehri@findjustice.com sskalet@findjustice.com jkarsh@findjustice.com arich@findjustice.com - and - Wayne Hogan, Esq. Leslie Goller, Esq. Terrell Hogan Yegelwel, P.A. 233 E. Bay Street, 8th Floor Jacksonville, FL 32202 Telephone: (904) 722-2228 Email: hogan@terrellhogan.com lgoller@terrellhogan.com - and - Neil Henrichsen, Esq. Dawn Stewart, Esq. Henrichsen Law Group, PLLC 1440 G. Street, NW Washington, D.C. 20005 Telephone: (202) 423-3649 Facsimile: (202) 379-9792 Email: nhenrichsen@hslawyers.com dstewart@hslawyers.com About Mallinckdrodt PLC Mallinckrodt -- http://www.mallinckrodt.com/-- is a global business consisting of multiple wholly owned subsidiaries that develop, manufacture, market and distribute specialty pharmaceutical products and therapies. The company's Specialty Brands reportable segment's areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, nephrology, pulmonology and ophthalmology; immunotherapy and neonatal respiratory critical care therapies; analgesics and gastrointestinal products. Its Specialty Generics reportable segment includes specialty generic drugs and active pharmaceutical ingredients. As of March 27, 2020, the Company had $10.17 billion in total assets, $8.27 billion in total liabilities, and $1.89 billion in total shareholders' equity. On Oct. 12, 2020, Mallinckrodt plc and certain of its affiliates sought Chapter 11 protection in Delaware in the U.S. (Bankr. D. Del. Lead Case No. 20-12522) to seek approval of a restructuring that would reduce total debt by $1.3 billion and resolve opioid related claims against the Company. Mallinckrodt plc disclosed $9,584,626,122 in assets and $8,647,811,427 in liabilities as of Sept. 25, 2020. Latham & Watkins LLP, Ropes & Gray LLP and Wachtell, Lipton, Rosen & Katz are serving as counsel to the Company, Guggenheim Securities, LLC is serving as investment banker and AlixPartners LLP is serving as restructuring advisor to Mallinckrodt. Hogan Lovells is serving as counsel with respect to the Acthar Gel matter. Prime Clerk LLC is the claims agent. MALLINCKRODT PLC: Unsecureds to Get 0.8% to 34.1% in Plan --------------------------------------------------------- Mallinckrodt PLC, et al., submitted a First Amended Plan and a Disclosure Statement. The Plan contemplates that on the Effective Date or as soon as reasonably practicable thereafter, the Reorganized Debtors may, consistent with the terms of the Restructuring Support Agreement, take all actions as may be necessary to effectuate the Plan, including: * The execution and delivery of appropriate agreements or other documents of sale, merger, consolidation, or reorganization containing terms that are consistent with the terms of the Plan and that satisfy the requirements of applicable law; * The creation of a NewCo and/or any NewCo Subsidiaries (if any) that may, at the Debtors' or Reorganized Debtors' option in consultation with the Supporting Parties, acquire all or substantially all the assets of one or more of the Debtors; * The execution and delivery of an equity and asset transfer agreement (if applicable) and any other appropriate instruments of transfer, assignment, assumption, or delegation of any property, right, liability, duty, or obligation on terms consistent with the terms of the Plan; * The creation of certain opioid trusts where all Opioid Claims will be channeled to in accordance with the terms of the Plan and the applicable trust documents (to be filed with the Plan Supplement); * The filing of appropriate certificates of incorporation, merger, migration, consolidation, or other organizational documents with the appropriate governmental authorities pursuant to applicable law; and * All other actions that the Reorganized Debtors determine are necessary or appropriate. The Plan provides that holders of General Unsecured Claims are entitled to indicate their preference, via a duly-submitted Ballot, to receive New Mallinckrodt Ordinary Shares as a portion of their distribution under the Plan. The proportion of the distributions made to such Holders in the form of New Mallinckrodt Ordinary Shares will be equal to the proportion of the Ballots submitted by Holders of General Unsecured Claims indicating the requisite election, calculated using the amount of General Unsecured Claims attributed to each such Ballot for purposes of voting on the Plan under the Disclosure Statement Order. The Plan proposes to treat claims and interests as follows: * Class 5 - Guaranteed Unsecured Notes Claims. Each Holder of an Allowed Guaranteed Unsecured Notes Claim shall receive its Pro Rata Share of (i) the Takeback Second Lien Notes and (ii) 100% of New Mallinckrodt Ordinary Shares, subject to dilution on account of the New Opioid Warrants, the Management Incentive Plan, and any General Unsecured Claims Distribution in the form of New Mallinckrodt Ordinary Shares. Creditors will recover 57% to 86% of their claims. * Class 6(a) Acthar Claims totaling $2.8 billion. Each Holder of an Allowed Acthar Claim shall receive its General Unsecured Claims Distribution. Creditors will recover 0.0% to 0.8% of their claims. * Class 6(b) Generics Price Fixing Claims totaling $4.0 billion. Each Holder of an Allowed Generics Price Fixing Claim shall receive its General Unsecured Claims Distribution. Creditors will recover 0.0% to 0.8% of their claims. * Class 6(c) Asbestos Claims totaling $4.5 billion. Each Holder of an Allowed Asbestos Claim shall receive its General Unsecured Claims Distribution. Creditors will recover 0.8% to 34.1% of their claims. * Class 6(d) Legacy Unsecured Notes Claims totaling $152,098,338. Each Holder of an Allowed Legacy Unsecured Notes Claim shall receive its General Unsecured Claims Distribution. Creditors will recover 0.8% to 34.1% of their claims. * Class 6(e) Environmental Claims totaling $306,000,000. Each Holder of an Allowed Environmental Claim shall receive its General Unsecured Claims Distribution. Creditors will recover 0.8% to 34.1% of their claims. * Class 6(f) Other General Unsecured Claims totaling $238,000,000. Each Holder of an Allowed Other General Unsecured Claim shall receive its General Unsecured Claims Distribution. Creditors will recover 0.8% to 34.1% of their claims. * Class 7 Trade Claims totaling $78,000,000. Each Holder of an Allowed Trade Claim that votes to accept the Plan and agrees to maintain Favorable Trade Terms in accordance with the requirements set forth in the Disclosure Statement Order shall receive its Pro Rata Share of the Trade Claim Cash Pool up to the Allowed Amount of such Claim. Creditors will recover 64% to 92% of their claims. * Class 8(a) State Opioid Claims. As of the Effective Date, all State Opioid Claims shall automatically, and without further act, deed, or court order, be channeled exclusively to, and all of Mallinckrodt's liability for State Opioid Claims shall be assumed by, the NOAT II. Each State Opioid Claim shall be resolved solely in accordance with the terms, provisions, and procedures of the NOAT II Documents and shall receive a recovery, if any, from the State and Municipal Government Opioid Claims Share. * Class 8(b) Municipal Opioid Claims. As of the Effective Date, all Municipal Opioid Claims shall automatically, and without further act, deed, or court order, be channeled exclusively to, and all of Mallinckrodt's liability for Municipal Opioid Claims shall be assumed by, the NOAT II. Each Municipal Opioid Claim shall be resolved solely in accordance with the terms, provisions, and procedures of the NOAT II Documents and shall receive a recovery, if any, from the State and Municipal Government Opioid Claims Share. * Class 8(c) Tribe Opioid Claims. As of the Effective Date, all Tribe Opioid Claims shall automatically, and without further act, deed, or court order, be channeled exclusively to, and all of Mallinckrodt's liability for Tribe Opioid Claims shall be assumed by, the TAFT II; provided, however, for the avoidance of doubt, for all purposes of this Plan, all Tribe Opioid Claims shall be channeled only to the Tribe entity constituting a trust under State law (and not to any limited liability companies or other Person included within the definition of TAFT II). Each Tribe Opioid Claim shall be resolved solely in accordance with the terms, provisions, and procedures of the TAFT II Documents and shall receive a recovery, if any, from the Tribe Opioid Claims Share. * Class 8(d) U.S. Governmental Opioid Claims. As of the Effective Date, all U.S. Government Opioid Claims shall automatically, and without further act, deed, or court order, be channeled exclusively to, and all of Mallinckrodt's liability for U.S. Government Opioid Claims shall be assumed by, the Opioid MDT II. Each U.S. Government Opioid Claim shall be resolved solely in accordance with the terms, provisions, and procedures of the Opioid MDT II Documents and shall receive a recovery, if any, from the U.S. Government Opioid Claims Share. * Class 9(a) Third-Party Payor Opioid Claims. As of the Effective Date, all Third-Party Payor Opioid Claims shall automatically, and without further act, deed, or court order, be channeled exclusively to, and all of Mallinckrodt's liability for Third-Party Payor Opioid Claims shall be assumed by, the Third-Party Payor Trust. Each Third-Party Payor Opioid Claim shall be resolved solely in accordance with the terms, provisions, and procedures of the Third-Party Payor Trust Documents and shall receive a recovery, if any, from the Third-Party Payor Opioid Claims Share, from which shall be deducted any attorneys' fees paid in accordance with Article IV.X.7 of the Plan. * Class 9(b) PI Opioid Claims. As of the Effective Date, all PI Opioid Claims shall automatically, and without further act, deed, or court order, be channeled exclusively to, and all of Mallinckrodt's liability for PI Opioid Claims shall be assumed by, the PI Trust. Each PI Opioid Claim shall be resolved solely in accordance with the terms, provisions, and procedures of the PI Trust Documents and shall receive a recovery, if any, from the PI Opioid Claims Share, from which shall be deducted any attorneys' fees paid in accordance with Article IV.X.7 of the Plan. * Class 9(c) NAS PI Opioid Claims. As of the Effective Date, all NAS PI Opioid Claims shall automatically, and without further act, deed, or court order, be channeled exclusively to, and all of Mallinckrodt's liability for NAS PI Opioid Claims shall be assumed by, the NAS PI Trust. Each NAS PI Opioid Claim shall be resolved solely in accordance with the terms, provisions, and procedures of the NAS PI Trust Documents and shall receive a recovery, if any, from the NAS PI Opioid Claims Share, from which shall be deducted any attorneys' fees paid in accordance with Article IV.X.7 of the Plan. * Class 9(d) Hospital Opioid Claims. As of the Effective Date, all Hospital Opioid Claims shall automatically, and without further act, deed, or court order, be channeled exclusively to, and all of Mallinckrodt's liability for Hospital Opioid Claims shall be assumed by, the Hospital Trust. Each Hospital Opioid Claim shall be resolved solely in accordance with the terms, provisions, and procedures of the Hospital Trust Documents and shall receive a recovery, if any, from the Hospital Opioid Claims Share, from which shall be deducted any attorneys' fees paid in accordance with Article IV.X.7 of the Plan. * Class 9(e) Ratepayer Opioid Claims. As of the Effective Date, all Ratepayer Opioid Claims shall automatically, and without further act, deed, or court order, be channeled exclusively to, and all of Mallinckrodt's liability for Ratepayer Opioid Claims shall be assumed by, the Ratepayer Account. The Ratepayer Account will receive a distribution of $3 million in cash from the Opioid MDT II on the Opioid MDT II Initial Distribution Date, which amount shall be gross of applicable Private Opioid Creditor Trust Deductions and Holdbacks, and from which shall be deducted any attorneys' fees paid in accordance with Article IV.X.7 of the Plan. * Class 9(f) NAS Monitoring Opioid Claims. As of the Effective Date, all NAS Monitoring Opioid Claims shall automatically, and without further act, deed, or court order, be channeled exclusively to, and all of Mallinckrodt's liability for NAS Monitoring Opioid Claims shall be assumed by, the NAS Monitoring Trust. Each NAS Monitoring Opioid Claim shall be resolved solely in accordance with the terms, provisions, and procedures of the NAS Monitoring Trust Documents. The NAS Monitoring Trust will receive a distribution of $1.5 million in cash from the Opioid MDT II on the Opioid MDT II Initial Distribution Date, which amount shall be gross of applicable Private Opioid Creditor Trust Deductions and Holdbacks, and from which shall be deducted any attorneys' fees paid in accordance with Article IV.X.7 of the Plan. * Class 9(g) Emergency Room Physicians Opioid Claims. As of the Effective Date, all Emergency Room Physicians Opioid Claims shall automatically, and without further act, deed, or court order, be channeled exclusively to, and all of Mallinckrodt's liability for Emergency Room Physicians Opioid Claims shall be assumed by, the Emergency Room Physicians Trust. Each Emergency Room Physicians Opioid Claim shall be resolved solely in accordance with the terms, provisions, and procedures of the Emergency Room Physicians Trust Documents. The Emergency Room Physicians Trust will receive a distribution of $4.5 million in cash from the Opioid MDT II on the Opioid MDT II Initial Distribution Date, which amount shall be gross of applicable Private Opioid Creditor Trust Deductions and Holdbacks, and from which shall be deducted any attorneys' fees paid in accordance with Article IV.X.7 of the Plan. * Class 9(h) Other Opioid Claims. As of the Effective Date, all Other Opioid Claims shall automatically, and without further act, deed, or court order, be channeled exclusively to, and all of Mallinckrodt's liability for Other Opioid Claims shall be assumed by, the Opioid MDT II and satisfied solely from the Other Opioid Claims Reserve. Each Other Opioid Claim shall be resolved solely in accordance with the terms, provisions, and procedures of the Opioid MDT II Documents and shall receive its Pro Rata Share of the Other Opioid Claims Share up to [●]% of the Allowed Amount of such Claim. The Opioid MDT II and the Other Opioid Claims Reserve shall be funded in accordance with the provisions of this Plan. * Class 10 Settled Federal/State Acthar Claims totaling $650 million. Each Holder of an Allowed Settled Federal/State Acthar Claim shall be resolved in accordance with the terms, provisions, and procedures of the Federal/State Acthar Settlement Agreements. Creditors will recover 28.4% of their claims. * Class 11 Intercompany Claims. Each Intercompany Claim will either be Reinstated or canceled and released at the option of the Debtors in consultation with the Required Supporting Unsecured Noteholders, the Supporting Term Lenders, the Governmental Plaintiff Ad Hoc Committee, and the MSGE Group. * Class 12 Intercompany Interests. Each Intercompany Interest will either be Reinstated or canceled and released at the option of the Debtors in consultation with the Required Supporting Unsecured Noteholders, the Governmental Plaintiff Ad Hoc Committee, and the MSGE Group. * Class 13 Claim/Equity Interest Subordinated Claims. Each Holder of Subordinated Claims shall receive no recovery or distribution on account of such Subordinated Claims. * Class 14 Equity Interests. Holders of Equity Interests shall receive no distribution on account of their Equity Interests. On the Effective Date, all Equity Interests will be canceled and extinguished and will be of no further force or effect. The Debtors shall fund Cash distributions under the Plan with Cash on hand, including cash from operations. The voting deadline to accept or reject the Plan is 4:00 p.m. Eastern Time on [August 16], 2021, unless extended by the Debtors. The Plan confirmation hearing will take place on [August 27], 2021 at 10:00 a.m. (prevailing Eastern Time) before the Honorable John T. Dorsey, United States Bankruptcy Judge, in the United States Bankruptcy Court for the District of Delaware, located at 824 Market Street North, 3rd Floor, Wilmington, DE 19801, and such hearing shall be conducted either by teleconference or videoconference via Zoom. The Plan objection deadline is [August 16], 2021 at 4:00 p.m. (prevailing Eastern Time). Counsel to the Debtors: George A. Davis George Klidonas Andrew Sorkin Anupama Yerramalli LATHAM & WATKINS LLP 1271 Avenue of the Americas New York, New York 10020 Telephone: (212) 906-1200 Facsimile: (212) 751-4864 Email: george.davis@lw.com george.klidonas@lw.com andrew.sorkin@lw.com anu.yerramalli@lw.com - and - Jeffrey E. Bjork LATHAM & WATKINS LLP 355 South Grand Avenue, Suite 100 Los Angeles, California 90071 Telephone: (213) 485-1234 Facsimile: (213) 891-8763 Email: jeff.bjork@lw.com - and - Jason B. Gott LATHAM & WATKINS LLP 330 North Wabash Avenue, Suite 2800 Chicago, Illinois 60611 Telephone: (312) 876-7700 Facsimile: (312) 993-9767 Email: jason.gott@lw.com Michael J. Merchant Amanda R. Steele Brendan J. Schlauch RICHARDS, LAYTON & FINGER, P.A. One Rodney Square 920 N. King Street Wilmington, DE 19801 Telephone: (302) 651-7700 Facsimile: (302) 651-7701 Email: collins@rlf.com merchant@rlf.com steele@rlf.com schlauch@rlf.com A copy of the Disclosure Statement is available at https://bit.ly/3xdCeo7 from Primeclerk, the claims agent. About Mallinckdrodt PLC Mallinckrodt -- http://www.mallinckrodt.com/-- is a global business consisting of multiple wholly owned subsidiaries that develop, manufacture, market and distribute specialty pharmaceutical products and therapies. The company's Specialty Brands reportable segment's areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, nephrology, pulmonology and ophthalmology; immunotherapy and neonatal respiratory critical care therapies; analgesics and gastrointestinal products. Its Specialty Generics reportable segment includes specialty generic drugs and active pharmaceutical ingredients. As of March 27, 2020, the Company had $10.17 billion in total assets, $8.27 billion in total liabilities, and $1.89 billion in total shareholders' equity. On Oct. 12, 2020, Mallinckrodt plc and certain of its affiliates sought Chapter 11 protection in Delaware in the U.S. (Bankr. D. Del. Lead Case No. 20-12522) to seek approval of a restructuring that would reduce total debt by $1.3 billion and resolve opioid related claims against the Company. Mallinckrodt plc disclosed $9,584,626,122 in assets and $8,647,811,427 in liabilities as of Sept. 25, 2020. Latham & Watkins LLP, Ropes & Gray LLP and Wachtell, Lipton, Rosen & Katz are serving as counsel to the Company, Guggenheim Securities, LLC is serving as investment banker and AlixPartners LLP is serving as restructuring advisor to Mallinckrodt. Hogan Lovells is serving as counsel with respect to the Acthar Gel matter. Prime Clerk LLC is the claims agent. MALLINCKRODT: Court Rejects Multiple Challenge to Ch.11 Disclosures ------------------------------------------------------------------- Law360 reports that a Delaware bankruptcy judge Tuesday, June 15, 2021, heard and rejected multiple challenges to opioid maker Mallinckrodt PLC's proposed Chapter 11 disclosures, saying they contain sufficient information on topics ranging from payouts from states to disputed intercompany transfers. At what turned out to be the first day of a virtual hearing on Mallinckrodt's Disclosure Statement, U.S. Bankruptcy Judge John Dorsey overrode multiple objections from creditors arguing the drugmaker isn't providing them with enough information to make an informed vote on the Plan. About Mallinckdrodt PLC Mallinckrodt -- http://www.mallinckrodt.com/-- is a global business consisting of multiple wholly owned subsidiaries that develop, manufacture, market and distribute specialty pharmaceutical products and therapies. The company's Specialty Brands reportable segment's areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, nephrology, pulmonology and ophthalmology; immunotherapy and neonatal respiratory critical care therapies; analgesics and gastrointestinal products. Its Specialty Generics reportable segment includes specialty generic drugs and active pharmaceutical ingredients. As of March 27, 2020, the Company had $10.17 billion in total assets, $8.27 billion in total liabilities, and $1.89 billion in total shareholders' equity. On Oct. 12, 2020, Mallinckrodt plc and certain of its affiliates sought Chapter 11 protection in Delaware in the U.S. (Bankr. D. Del. Lead Case No. 20-12522) to seek approval of a restructuring that would reduce total debt by $1.3 billion and resolve opioid related claims against the Company. Mallinckrodt plc disclosed $9,584,626,122 in assets and $8,647,811,427 in liabilities as of Sept. 25, 2020. Latham & Watkins LLP, Ropes & Gray LLP and Wachtell, Lipton, Rosen & Katz are serving as counsel to the Company, Guggenheim Securities, LLC is serving as investment banker and AlixPartners LLP is serving as restructuring advisor to Mallinckrodt. Hogan Lovells is serving as counsel with respect to the Acthar Gel matter. Prime Clerk LLC is the claims agent. MARCO ENTERPRISES: Seeks Continued Cash Collateral Access --------------------------------------------------------- Marco Enterprises, LLC asks the U.S. Bankruptcy Court for the District of Minnesota for authority to use cash collateral for operational expenses incurred in the ordinary course of business until a plan of reorganization is confirmed or another court order is entered terminating such authorization. The court previously issued a final order authorizing the use of cash collateral, which expired on May 31, 2021. Based on an objection by Commercial Credit Group Inc. to the treatment of its claim, the court denied the Debtor's proposed plan of reorganization on May 25. Marco Enterprises explains it requires continued use of cash collateral while it resolves Commercial Credit's claim, so the Debtor can propose and obtain confirmation of a new plan. Pursuant to 11 U.S.C. section 363(c)(2)(A), cash collateral creditor Concept Financial Group, Inc. has consented to the Debtor's use of cash collateral during the pendency of the motion seeking extension of the terms of the court's final cash collateral order. The Debtor believes that, after resolving the Commercial Credit claim, it will be able to obtain a confirmed plan and reorganization, in accordance with existing rules and statutes, in a reasonable period of time. The Debtor and Commercial Credit are scheduling a mediation with Judge Fisher in late July. As of the petition date, the Debtor owed $12,836 to Concept Financial, secured by cash collateral. The Concept Financial secured debt is a factoring debt, which fluctuates daily based on freight bills and invoices, approved by the Court's order allowing Concept Financial's post-petition secured loan. All of the Debtor's other secured lenders have liens in only certain specified equipment and have no liens in cash collateral. As of the petition date, the Debtor had cash collateral assets with a value of approximately $10,000. The Debtor projects that the value of cash collateral as of the hearing will be approximately $134,000 and otherwise will, at all times, remain in excess of its value on the petition date. As and for adequate protection, the Debtor proposes continued use of cash collateral under the same terms provided in the Court's final order authorizing use of cash collateral, including: a) Maintenance of cash collateral and use in the ordinary course of business; b) Non-occurrence of any specified event of default; c) Replacement liens in post-petition assets of the same amount, type, and nature as subject to pre-petition liens and only to the extent of the diminution in value of such creditors’ interest in pre-petition assets; and d) Maintenance of insurance, payment of post-petition taxes, creditor access to collateral and books for inspection, and use of a debtor-in-possession account. A copy of the motion and the Debtor's budget is available for free at https://bit.ly/3vxb8ai from PacerMonitor.com. The Debtor projects $906,300 in total cash source and $738,520.66 in total use of cash from June to December 2021. About Marco Enterprises, LLC Marco Enterprises, LLC operates a family-owned trucking business that has been in operation for more than 30 years and provides over-the-road refrigerated trucking services. It sought protection under Chapter 11 of the U.S. Bankruptcy Code (Bankr. D. Minn. Case No. 20-32694) on November 25, 2020. In the petition signed by Linda Marotz, president, the Debtor disclosed up to $50,000 in assets and up to $500,000 in liabilities. Larkin, Hoffman, Daly & Lindgren, Ltd. represents the Debtor as counsel. MAYBELLE BEVERLY: Seeks to Tap Ricky Juban as Commercial Appraiser ------------------------------------------------------------------ Maybelle Beverly Family Trust seeks approval from the U.S. Bankruptcy Court for the Eastern District of Louisiana to employ Ricky Juban, a licensed commercial appraiser in Springfield, La. Mr. Juban will provide appraisal services for the Debtor's properties located at 40239 N. Thibodeaux Road, Ponchatoula, La. and 40130 Wendell Lane, Hammond, La. The Debtor has agreed to pay Mr. Juban a flat fee of $1,250 and $650 for restricted appraisal of the Ponchatoula and Hammond properties, respectively. Mr. Juban disclosed in a court filing that he is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Mr. Juban can be reached at: Ricky M. Juban Ricky Juban Appraisers & Consultants, Inc. 106 Business Park Avenue Denham Springs, LA 70726 About Maybelle Beverly Family Trust Maybelle Beverly Family Trust filed a Chapter 11 petition (Bankr. E.D. La. Case No. 21-10391) on March 23, 2021. At the time of the filing, the Debtor disclosed $500,001 to $1 million in assets and $50,001 to $100,000 in liabilities. Judge Meredith S. Grabill oversees the case. The De Leo Law Firm, LLC represents the Debtor as legal counsel. MAYBERRY'S LLC: Seeks Cash Collateral Access -------------------------------------------- Mayberry's LLC asks the U.S. Bankruptcy Court for the District of Nevada for authority to use cash collateral on an interim and continuing basis. The Debtor seeks to use the revenue generated by its business for the management, costs, and expenses to run the business. The balance of revenue collected will be segregated and not used for other purposes. The Debtor says it is not conceding that any creditor has claim to the cash collateral, but is filing the motion for the purpose of establishing that right to use the income generated by the business for business expenses, and to deal with the objections of creditors, if any. The Debtor asserts that its anticipated revenue over the next six months are expected to be more than sufficient to pay for necessary expenses. The Debtor's cash needs are immediate and, absent satisfying those needs, the Debtor will be forced to terminate operations of the business, minimizing the potential value of its estate for any creditor. The Debtor has demonstrated "immediate and irreparable" harm to the estate absent consideration of the relief requested in the Motion. If the Debtor is able to use Cash Collateral, the Debtor believes it will be able to continue to maintain the business and stay in operation through confirmation of a plan of reorganization or liquidation. A copy of the motion is available for free at https://bit.ly/35zjR1j from PacerMonitor.com. About Mayberry's LLC Mayberry's LLC is a small business which specialized in cleaning services such as carpel cleaning, tile and grout cleaning, general cleaning, air duel cleaning, disinfecting, and window cleaning. The Debtor sought protection under Chapter 11 of the U.S. Bankruptcy Code (Bankr. D. Nev. Case No. 21-12946) on June 9, 2021. In the petition signed by Gil Sirimarco, managing member, the Debtor disclosed up to $100,000 in assets and up o $500,000 in liabilities. Seth D. Ballstaedt, Esq., at Ballstaedt Law Firm dba Ball Bankruptcy, is the Debtor's counsel. MILK SPECIALTIES: Moody's Rates First Lien Loan Due 2025 'B2' ------------------------------------------------------------- Moody's Investors Service assigned a B2 rating to Milk Specialties Company's extended first lien term loan due 2025. Milk Specialties' B2 corporate family rating, its B2-PD probability of default rating, and the B2 rating on its revolving credit facility maturing in August 2023 remain unchanged. The outlook remains stable. As part of the financing transaction, Milk Specialties will upsize its existing first lien term loan from $439 million to $519 million and extend the maturity date from August 2023 to August 2025. Milk Specialties will also be issuing a $100 million second lien term loan (unrated). The proceeds from the new debt issuances, in conjunction with cash on hand, will be used to pay a one-time distribution to the shareholders of Milk Specialties and pay transaction fees. "Despite an increase in leverage through the issuance of additional debt to fund a distribution to the shareholders, Milk Specialties' B2 CFR remains unchanged as a result of the company's improved operating results and its strong market positions in the human and animal nutrition segments" said Louis Ko, VP-Senior Analyst with Moody's. Assignments: Issuer: Milk Specialties Company Senior Secured Bank Credit Facility, Assigned B2 (LGD3)LGD Adjustment: Issuer: Milk Specialties Company Senior Secured Bank Credit Facility LGD Adjusted to (LGD3) from (LGD4) RATINGS RATIONALE Milk Specialties' B2 CFR rating is constrained by (1) Moody's expectation that leverage (adjusted debt/EBITDA) will increase to approximately 5.2x through FY2022 (fiscal year end in June) as a result of the leveraging transaction (from 4.5x as at LTM Q3/FY2021); (2) exposure to volatility in commodity pricing of key inputs; (3) unpredictable market conditions as witnessed by the negative impact from the African Swine fever in 2019; (4) narrow focus within the human and animal nutrition segments; and (5) risk of aggressive financial strategies under private equity ownership. The company's rating benefits from (1) its solid market position as the leading independent processor of whey protein in the US; (2) high barriers to entry; (3) synergies realized between the company's human and animal nutrition segments; (4) good customer diversification; and (5) secure access to liquid whey and other raw materials via strategically located plants and contracts with milk processors. The stable outlook reflects Moody's expectation that Milk Specialties' leverage will be maintained below 5.5x over the next 12 to 18 months. This is supported by the successful completion of its capital projects which will allow the company to satisfy increased demand in its human nutrition segment. Milk Specialties has good liquidity. Sources are approximately $135 million compared to about $5 million of cash usage over the next 12 months. Sources consist of $16 million of cash upon the closing of the debt issuance transaction, full availability under its $50 million revolving credit facility due August 2023, and positive free cash flow of approximately $70 million over the next twelve months. Milk Specialties' cash usage includes approximately $5 million of mandatory term loan amortization. Milk Specialties' revolver is subject to a Net Leverage Ratio covenant of 7.8x if its revolver exceeds 30% utilization. Moody's do not expect this covenant to be applicable in the next four quarters, but there would be sufficient cushion for the covenant should it become applicable. Milk Specialties has limited flexibility to boost liquidity from asset sales. Social risk considerations for Milk Specialties include the responsible production and safety of their products. The company established programs and procedures to monitor the quality and safety of their products from raw material evaluation through to delivery. It has also instituted a comprehensive Quality Systems program and works closely with a leader in the audit of food safety systems. Governance considerations include risks associated with private equity ownership and aggressive financial policies that favor shareholders, including the maintenance of high leverage and potential for additional debt-funded dividend transactions in addition to the financing currently in the market. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded if there is an increase in scale and product diversity, if leverage is sustained below 4x (projected to be 5.2x for FY2022E with a year-end date of June 30) with the company maintaining at least good liquidity. The ratings could be downgraded if leverage is sustained above 5.5x (projected to be 5.2x for FY2022E), or if liquidity deteriorates significantly, possibly due to a prolonged period of negative free cash flow generation. Headquartered in Eden Prairie, Minnesota, Milk Specialties is a leading independent manufacturer of whey protein for human nutrition (sports nutrition, health and wellness, infant formula, food manufacturing) and animal nutrition end markets. Milk Specialties is privately-owned by American Securities. Revenues for the twelve months ended March 31, 2021 were approximately $750 million. The principal methodology used in these ratings was Protein and Agriculture published in May 2019. MISSOURI JACK: Seeks to Use Cash Collateral Until Aug. 31 --------------------------------------------------------- Missouri Jack, LLC and Illinois Jack, LLC ask the U.S. Bankruptcy Court for the Eastern District of Missouri, Eastern Division, for authorization to use cash collateral until August 31, 2021. The Debtors collectively own and operate 70 Jack in the Box restaurants throughout Missouri and Illinois pursuant to various franchise and related agreements with Jack in the Box Inc., a Delaware corporation, and its affiliated entities. The Debtors collectively employ 1,660 active full and part time employees, of which Missouri Jack employs 1,338 and Illinois Jack employs 332. Related Debtor Conquest Foods, LLC is a co-franchisee of the Franchise Restaurants under the Franchise Documents. Conquest is also a co-borrower under a loan from City National Bank, the Debtors' largest creditor apart from JIB, and a co-defendant in a lawsuit filed by CNB. Conquest Foods does not have operations or employees of its own, and its primary assets are its membership interests in Debtors and its rights under the Franchise Documents. The Debtors declare that Jack in the Box Inc., City National Bank, Meadowbrook Meat Company, Inc., a subsidiary of McLane Company, Inc., and Trinity & Bowman Holdings, LLC, a California limited liability company, have an interest in the cash collateral. The Debtors seek to use cash collateral -- including cash on hand as of the Petition Date and funds generated from the operation of the Franchise Restaurants -- to fund continued operations, which requires the payment of various ordinary and recurring expenses including, but not limited to, franchise fees, rent, payroll, taxes, and the purchase of food and other supplies. The Debtors seek authority to continue the provision in the Final Cash Collateral Order that provides that notwithstanding the 15% variance stated above, in the event the Debtors' receipts for any given month exceed the amounts set forth in the Final Budget for such month, the Debtors are authorized to pay any and all correlating expenses to JIB that are based upon a percentage of receipts. An increase in fast food competition contributed to the Debtors' financial issues. In 2018, aggressive competitive intrusion into the market not only reduced market share, but also impacted the ability to obtain qualified employees. Competition contributed to raising labor costs and a corresponding decrease in sales. The situation was exacerbated by the COVID-19 pandemic. As a result of economic stress, the Debtors fell behind in payments to CNB beginning in 2018. On March 2, 2020, CNB filed a Complaint for Breach of Contract and Claim and Delivery against the Debtors and Conquest, seeking over $15 million alleged to be due and owing under the terms of several loans made by CNB to the Debtors and Conquest. Specifically, the CNB Complaint seeks "the amount of at least $15,206,503.37 as of January 13, 2020, plus accrued and accruing interest and default rate interest from January 13, 2020 through the entry of judgment." Shortly after the CNB Complaint was filed, the pandemic reached a critical point in the U.S., resulting in "stay at home" recommendations and orders that citizens refrain from unnecessary activities outside their homes in an effort to curb transmission of the disease. These restrictions had a further impact on the Debtors' businesses at many locations. JIB, the Debtors and Conquest have been negotiating an out-of-court workout for nearly a year, and those negotiations have resulted in a proposal by JIB whereby, among other concessions, the Debtors will be able to close 7 or 8 unprofitable locations without defaulting under the Franchise Documents, and JIB will permit assumption of such agreements and allow the Debtors to proceed with reorganization. JIB has also agreed to additional modifications to the Franchise Documents that will enhance the Debtors' efforts to reorganize. Unfortunately, the Debtors have been unable to reach agreement with CNB despite diligent efforts to do so, although the parties have tentatively agreed to attend mediation after the filing of the Chapter 11 cases. The CNB Complaint alleges that the CNB Loan is secured by a blanket lien on all of the Debtors' assets, including the proceeds thereof. However, CNB's filed UCC-1 financing statements against the Debtors, which were filed between February 20, 2014 and March 4, 2014, lapsed in 2019 without CNB having filed UCC-3 continuation statements, and CNB has not filed any new financing statements against the Debtors in connection with the CNB Loan. The Debtors contend CNB is currently unperfected as to the Debtors, and the Debtors intend to file an adversary proceeding to avoid CNB's asserted liens for the benefit of their estates using their strong-arm powers under Section 544(a)(1) of the Bankruptcy Code. CNB, the Debtors and Conquest participated in mediation before retired Bankruptcy Judge Mitchel Goldberg on March 26 and April 8, which resulted in an agreement regarding the amount and treatment of such claim. The status is uncertain due to the June 1 notice provided by counsel for CNB. JIB asserts a blanket lien in all of the Debtors' assets used in connection with the Franchise Restaurants, including the proceeds of such assets, and the Debtors believe that it will consent to their proposed use of its cash collateral as set forth in the motion. McLane asserts a lien in all inventory of the Debtors purchased from McLane, together with any and all proceeds of such inventory. McLane's pre-petition claim has been satisfied in full, with the Court's authorization in connection with the critical vendor motion filed by the Debtors. Trinity asserts a blanket lien in all of their assets, including the proceeds thereof, and has consented to the Debtors' use of its cash collateral. The Debtors assert that the Secured Parties are adequately protected by the continued operations of the Franchise Restaurants in the ordinary course of business, which will generate new cash collateral on a daily basis and will thereby preserve and potentially increase its value as a going concern. Pursuant to Section 361(2) of the Bankruptcy Code, the Debtors propose to grant post-petition replacement liens in their cash collateral, solely to the extent that their use results in a decrease in the value of the Secured Parties' interest in such cash collateral, with such replacement liens being granted to the Secured Parties to the same extent and with the same validity and priority as the Secured Parties' pre-petition liens, subject to all rights, claims, and defenses of the Debtors and their estates, including, but not limited to, the right to contest and/or object to the validity, priority, amount, and extent of the liens and claims of the Secured Parties. A copy of the motion is available for free at https://bit.ly/2TIEjKd from PacerMonitor.com. About Missouri Jack Missouri Jack, LLC, and its affiliates Illinois Jack, LLC and Conquest Foods, LLC, collectively own and operate 70 Jack in the Box restaurants throughout Missouri and Illinois pursuant to various franchise related agreements with Jack in the Box Inc., a Delaware corporation, and its affiliated entities. The Debtors filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on February 16, 2021 (Bankr. E.D. Mo. Case No. 21-40540). The petition was signed by Navid Sharafatian, manager of TNH Partners, LLC, the sole manager of Missouri Jack and Illinois Jack, and the sole managing member of Conquest. Judge Barry S. Schermer oversees the cases. Missouri Jack disclosed $10 million to $50 million in estimated assets, and $1 million to $10 million in estimated liabilities. MY FL MANAGEMENT: Seeks to Tap Salpeter Gitkin as Special Counsel ----------------------------------------------------------------- My FL Management, LLC seeks approval from the U.S. Bankruptcy Court for the Southern District of Florida to employ Salpeter Gitkin, LLP as its special counsel. The firm's services include: (a) investigating and gathering data regarding wages, hours, and other conditions and practices of the Debtor's employment records; (b) reviewing and inspecting the Debtor's employment records to ensure compliance with all provisions of the Fair Labor Standards Act; and (c) representing the Debtor in the investigation initiated by the U.S. Department of Labor's Wage and Hour Division. The hourly rates of Salpeter Gitkin's attorneys and staff are as follows: Partner Level Attorneys $395 per hour Paralegals $185 per hour In addition, the firm will seek reimbursement for expenses incurred. The firm requires an initial retainer of $3,500. James Gitkin, Esq., a partner at Salpeter Gitkin, disclosed in a court filing that his firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: James P. Gitkin, Esq. Salpeter Gitkin, LLP 3864 Sheridan Street Hollywood, FL 33021 Telephone: (954) 467-8622 Facsimile: (954) 467-8623 Email: seth@thediamondlawgroup.com About My FL Management My FL Management LLC, owns Royal Beach Palace, a hotel located in the residential Lauderdale-by-the-Sea, about a 10-minute walk to the beach. Fort Lauderdale, Florida-based MY FL Management LLC sought Chapter 11 protection (Bankr. S.D. Fla. Case No. 21-11028) on Feb. 2, 2021. Yuri Gnesin, manager, signed the petition. The Debtor estimated assets and debt of $1 million to $10 million as of the bankruptcy filing. Judge Scott M. Grossman oversees the case. The Debtor tapped Edelboim Lieberman Revah Oshinsky, PLLC as legal counsel; Salpeter Gitkin, LLP as special counsel; and Karlinsky & Golub CPAs, PLLC as accountant. NEP GROUP: Fitch Alters Outlook on 'B-' IDR to Positive ------------------------------------------------------- Fitch Ratings has affirmed the Issuer Default Ratings (IDR) and Issue Level Ratings of NEP Group (NEP) and its related entities. Fitch has also revised the Rating Outlook from Negative to Positive. The Positive Outlook reflects Fitch's expectation for gross leverage to decline rapidly from pandemic highs, and approach 6.0x by the end of 2022, driven by EBITDA growth. The Positive Outlook also reflects Fitch's expectations for neutral to slightly positive free cash flow generation beginning in 2022, as expanding revenue and profitability result in sufficient cash flow to fund capex spend. KEY RATING DRIVERS Live Events Recovery: Fitch expects the recovery in NEP's Live Events segment to accelerate in the second half of 2021, as coronavirus-related restrictions are loosened in large urban cities. Fitch expects Live Events revenue in fiscal 2022 to exceed 2019, as live concerts, festivals, and corporate events volumes exceed pre-coronavirus levels due to pent up consumer demand for live entertainment, and artists' desire to regain tour-related earnings. Highly Levered Capital Structure: Fitch expects leverage metrics to remain meaningfully elevated through 2021, and until effects of the pandemic have largely passed. Fitch expects gross leverage to fall from ~13.0x at the end of 2020, to mid-7.0x by the end of 2021, and to near 6.0x by year end 2022. Management has guided to a medium-to-longer term gross leverage target of 5.0x, however prioritizes global expansion and growth through acquisitions. Fitch recognizes that any future acquisition activity may slow the company's deleveraging plan as debt repayment is a secondary goal. Historically, the company has a track record of successfully deleveraging post-acquisitions through EBITDA growth. Leading Market Position: Fitch's ratings incorporate NEP's position as the largest global outsourced provider of production solutions for broadcasts and live events. NEP provides the broadcast equipment, post production, video display and software-based creative technology to the largest live sports and entertainment events including the NFL, ESPN, Super Bowl, Wimbledon, The Grammys, and the Oscars. NEP's asset and global client base enables the company to sustain a competitive advantage. The company estimates their broadcast services segment to be 8.0x the size of the next largest competitor, however is of similar size to peers operating in the live events space. Aggressive Acquisition Strategy: NEP's growth is characterized by strategic acquisitions, an important component to its growth strategy. The company targets market leaders to penetrate a new market and expand its global footprint and uses bolt-ons to expand its suite of services in an established geography. In 2019, the company closed on four acquisitions with an aggregate purchase price of ~$125 million and incremental EBITDA of $21 million. Fitch expects NEP may be highly acquisitive once credit metrics have normalized, as NEP will likely be able to acquire weaker and worse capitalized competitors at favorable valuations. Since the onset of the pandemic, NEP has completed only one smaller acquisition of VISTA Worldlink. The VISTA acquisition adds centralized production capabilities in the U.S., which Fitch believes will bolsters NEP's service offerings and competitive position. Capital Intensive Nature: NEP has historically operated at a capital intensity level of ~15%-20%. Most of capex is associated with new contract wins, making it success-based and tied to revenue and cash flow growth. Upfront capex is required at contract signing and the company targets a payback period of two years for live events given their shorter-term nature and four years for broadcast services. While the company generally depreciates assets over a six- to seven-year period, it is able to repurpose equipment past its depreciable asset life for second and third-tier events. Strong Revenue and Cash Flow Visibility: A significant portion of NEP's revenues are derived from long-term contracts with clients and generally range from three to 10 years with ~3% price escalators built in and a "take or pay" arrangement. The contracts are all event-based and cover specific events that recur annually or throughout the year. The longer-term sports contracts tend to be co-terminous with a network's broadcast rights for that particular sport, while live events are shorter-term in nature. The contractual nature of revenues provides strong visibility and stability of future cash flows. NEP does not receive payment on its contracts until after its services have been provided. Large and Growing End Markets: NEP focuses on the sports and entertainment markets, both of which have demonstrated consistent growth for a number of years, excluding the exogenous shock of the coronavirus pandemic. Live sports programming remains one of the few opportunities for broadcast and cable networks to generate large viewing audiences in an increasingly fragmented media landscape. As a result, the values for sports rights has continued to increase, despite relatively weak TV ratings in recent periods. On the live events side, there has been a surge in number of tours as artists compensate for a loss in recorded music revenue. Additionally, unscripted programming has remained largely resilient to time-shifted and OTT viewing. DERIVATION SUMMARY NEP's 'B-' IDR is supported by the company's elevated leverage, significant scale, high proportion of contracted revenue, aggressive acquisition strategy, and limited free cash flow generation. NEP has no direct peers in Fitch's ratings universe. NEP is 8.0x the size of its next largest competitor on the broadcast solutions side and of comparable size to peers operating in the U.S. live events business. Fitch notes that the company has gained first-mover advantage in many of the markets abroad where only small local players are present, providing strong defensibility and high barriers to entry. Fitch expects NEP will emerge from the pandemic in a stronger competitive position. Fitch believes smaller, worse-capitalized, and predominantly live events focused peers will have a more difficult recovery from the pandemic. NEP's large scale and adequate liquidity position provides an opportunity to take additional market share in both Broadcast Solutions and Live Events in the U.S. and abroad. KEY ASSUMPTIONS Fitch's key assumptions within its rating case for the issuer include: -- Fitch expects strong revenue growth in FY21, as both Broadcast Solutions returns to a normal operating calendar, and Live Events recovers materially in the second half of 2021. Fitch expects the recovery in live events to continue to strengthen in 2022 due to pent up demand for live entertainment. Fitch expects consolidated single digit revenue growth thereafter, driven by contract price escalators, increasing value of sports broadcasting rights, and strong demand for live entertainment. Fitch also expects revenue growth fluctuations based on even-year special events such as the Summer and Winter Olympics. -- Fitch expects EBITDA margins in the low-to-mid 20% range. -- Fitch expects capex to be lower in 2021, as fewer new contract wins in 2020 result in lesser upfront capex requirements. Fitch expects mid-teens capital intensity thereafter, as recent NFL and NHL broadcasting rights deals drive new contract wins and significant capex spending. -- Fitch expects NEP to frequently borrow and repay borrowings on the revolver due to the timing of cash outflows and inflows inherent in the business model. Fitch expects outstanding revolver borrowings to be termed out at ahead of the revolver maturity in 2023, and expects NEP to amend the revolver to extend the maturity date. -- Fitch forecasts NEP to resume larger-scale debt-funded acquisition activity in 2024 once operations and credit metrics have generally normalized. Fitch assumes approximately $300 million of acquisitions over the forecast. Recovery Analysis Assumptions The recovery analysis assumes that NEP would be reorganized as a going-concern in bankruptcy rather than liquidated. We have assumed a 10% administrative claim. Going-Concern (GC) Approach The GC LTM EBITDA of $281 million contemplates insolvency resulting from inadequate liquidity amid recessionary stress. In this scenario, Fitch assumed that the company is unable to integrate the large number of acquisitions into the business. Additionally, the company is unable to renew its large contracts, ceding share to competitors in the space, leading to depressed EBITDA and an unsustainable capital structure. The GC EBITDA estimate reflects Fitch's view of a sustainable, post-reorganization EBITDA level upon which we base the enterprise valuation. An enterprise valuation multiple of 6.0x EBITDA is applied to the GC EBITDA to calculate a post-reorganization enterprise value. The company's platform acquisitions are transacted on average between 4.8x-6.0x, while its smaller bolt-on acquisitions close in the range of 3.5x-4.5x. Most recently, VISTA Worldlink was acquired at ~5.0x EV/EBITDA in March 2021, HDR Group was acquired by NEP at 5.8x EV/EBITDA in June 2019 and Aerial Video Systems at 4.4x in September 2019. While the above transaction multiples are lower than the 6.0x used for NEP, these targets operated on a smaller scale with a less-developed footprint than NEP. The recovery analysis assumes that the full $250 million is drawn on the first lien revolver. The recovery analysis implies a 'B'/'RR3' rating with 66% recovery on the senior first lien secured debt and a 'CCC'/'RR6' with no recovery on the senior second lien secured debt RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Total debt with equity credit/Operating EBITDA sustained below 6.5x; -- Sustained positive FCF generation; -- CFO-Capex/Total Debt sustained near 2.5%. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- FFO Interest coverage sustained below 1.0x; -- Increasingly negative free cash flow; -- Fitch's view of heightened refinancing risk. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Sufficient Liquidity: At March 31, 2021, NEP's liquidity was supported by $35.3 million in balance sheet cash and $151 million of availability on its $250 million revolver. The company had FCF deficits of $55 million for the LTM period reflective of the capital-intensive nature of the live event and broadcast services industries, as well as the impacts of cost reduction efforts amid wide spread event cancellations. As of March 31, 2021, NEP had ~$2.18 billion in debt outstanding with no material maturities until 2023, when the revolver is scheduled to mature. The majority of NEP's debt is due in 2025, when its first lien term loans mature. ISSUER PROFILE NEP is the largest global outsourced provider of customized broadcast solutions to the live sports, entertainment and corporate events markets. The company designs and offers live event solutions and works alongside clients during a broadcast or live event in order to ensure a seamlessly delivered production. NEP has expanded globally through acquisitions and has leading market positions in the U.S., U.K., Europe, Asia and Australia. ESG Considerations Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3' -- ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. NOVETTA SOLUTIONS: Moody's Puts B3 CFR Under Review for Upgrade --------------------------------------------------------------- Moody's Investors Service placed all of its ratings, including the B3 corporate family rating of Novetta Solutions, LLC on review for upgrade. The review for upgrade follows the announcement of the company's planned sale to a subsidiary of Aa3-rated Accenture plc. On Review for Upgrade: Issuer: Novetta Solutions, LLC Probability of Default Rating, Placed on Review for Upgrade, currently B3-PD Corporate Family Rating, Placed on Review for Upgrade, currently B3 Senior Secured Revolving Credit Facility, Placed on Review for Upgrade, currently B2 (LGD3) Senior Secured 1st Lien Term Loan, Placed on Review for Upgrade, currently B2 (LGD3) Senior Secured 2nd Lien Term Loan, Placed on Review for Upgrade, currently Caa2 (LGD5) Outlook Actions: Issuer: Novetta Solutions, LLC Outlook, Changed To Rating Under Review From Stable In its review, Moody's will confirm its expectations that Novetta's debt will be paid off upon the closing of its sale to Accenture. Change of control terms of Novetta's existing loan agreements indicate that the sale of the company will require the repayment of substantially all rated debt concurrent with the sale. RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The B3 corporate family rating (currently on review for upgrade) reflects that despite organic sales growth exceeding 15% in 2020, Novetta's revenue base remains modest within defense services. The company has high customer concentration and has generated modest cumulative free cash flow since the rating was assigned in 2015. Novetta also reports negative operating margins and net losses because of significant amortization of intangible assets, the add-back of which supports positive operating cash flow. Execution of projects from a strong backlog of about $900 million heading into 2021, up materially from prior years, will expand revenues and cash generation in 2021. Novetta's high degree of labor specialization within the data analytics services niche of the US intelligence community should also sustain EBITDA margin of 14% or higher, leading among rated peers. If Novetta's rated debts are repaid at or soon after the closing of the sale, Moody's will withdraw all of Novetta's ratings. If the debt unexpectedly remains outstanding, Moody's will consider the credit benefits of being part of Accenture. The principal methodology used in these ratings was Aerospace and Defense Methodology published in July 2020. Novetta Solutions, LLC, headquartered in McLean, Virginia, is an advanced analytics company that works on intelligence and cyber security projects for the government and commercial organizations. The company is majority-owned by affiliates of The Carlyle Group. Revenues in the last twelve months ended December 31, 2020, were slightly above $360 million. OMERS RELIEF: Moody's Assigns First Time 'B3' Corp Family Rating ---------------------------------------------------------------- Moody's Investors Service assigned ratings to OMERS Relief Acquisition, LLC ("Gastro Health"), including a B3 Corporate Family Rating and B3-PD Probability of Default Rating. The rating agency also assigned B2 ratings to the company's senior secured first lien credit facilities, including a $60 million revolver, $300 million term loan, and $100 million delayed draw term loan. Moody's assigned a Caa2 rating to the $90 million senior secured second lien term loan. The outlook is stable. This is the first time Moody's has rated Gastro Health. Proceeds from the new debt will be used, in conjunction with equity, to consummate the acquisition of Gastro Health by OMERS Private Equity Inc., the private equity arm of OMERS Administration Corporation, a Canadian pension fund. Ratings assigned: OMERS Relief Acquisition, LLC Corporate Family Rating at B3 Probability of Default Rating at B3-PD Gtd Senior secured first lien revolving credit facility expiring 2026 at B2 (LGD3) Gtd Senior secured first lien term loan due 2028 at B2 (LGD3) Gtd Senior secured first lien delayed draw term loan due 2028 at B2 (LGD3) Gtd Senior secured second lien term loan due 2029 at Caa2 (LGD6) The outlook is stable. RATINGS RATIONALE The B3 Corporate Family Rating reflects Gastro Health's high financial leverage and aggressive acquisition strategy. Pro forma adjusted debt to EBITDA was approximately 7.8 times as of March 31, 2021. Moody's expects Gastro Health's debt to EBITDA to decline towards the low 7-times range over the next 12 months. The rating agency expects the company to continue its pursuit of acquisitive growth. The company has completed 29 acquisitions since 2017 and has spent more than $100 million per annum on acquisitions over the past few years. The rating is also constrained by the company's high geographic concentration as nearly 80% of its revenue is derived from three states - Florida (49%), Virginia (15%), and Ohio (14%). The rating is supported by the company's good scale relative to other providers of gastroenterology procedures and services. It also benefits from the lower costs associated with patients having these procedures done in ASCs or clinics as opposed to hospital outpatient departments. Finally, the rating reflects Moody's expectation that Gastro Health will operate with very good liquidity over the next 12-18 months. The stable outlook reflects Moody's expectation that Gastro Health will aggressively pursue acquisitions to complement its organic growth strategy over the next 12-18 months and continue to operate with high financial leverage and modestly positive free cash flow. Moody's considers the coronavirus to be a social risk given the risk to human health and safety. That said, declining coronavirus cases and hospitalizations coupled with the uptake of vaccines in the US have lowered Gastro Health's social risk. Aside from coronavirus, Gastro Health faces other social risks such as rising concerns around the access and affordability of healthcare services. However, Moody's does not consider the company's ASCs and clinics to face the same level of social risk as hospitals given that they are viewed as an affordable alternative to hospitals for elective procedures. From a governance perspective, Moody's views Gastro Health's financial policies as aggressive given the company's aggressive debt funded acquisition strategy. This reflects the risks inherent in a rapid growth strategy, including the potential for operational disruptions. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be downgraded if liquidity deteriorates or if the company is unable to generate positive free cash flow. A downgrade could also transpire if the company experiences integration challenges with future acquisitions. Finally, the ratings could be downgraded if leverage increases from current levels. The ratings could be upgraded if the company is able to effectively manage its growth while achieving greater geographic diversification. An upgrade could also occur if debt to EBITDA is sustained below 6.0 times. As proposed, the new senior secured first lien credit facilities are expected to provide covenant flexibility that if utilized could negatively impact creditors. The facilities include incremental debt capacity up to the greater of $64 million and 100% of EBITDA, plus unused capacity reallocated from the general debt basket, plus unlimited amounts so long as net first lien leverage does not exceed 5.25 times (if pari passu secured). Amounts up to the greater of $64 million and 100% of EBITDA may be incurred with an earlier maturity date than the initial term loans. There are no express "blocker" provisions which prohibit the transfer of specified assets to unrestricted subsidiaries; such transfers are permitted subject to carve-out capacity and other conditions. Non-wholly-owned subsidiaries are not required to provide guarantees; dividends or transfers resulting in partial ownership of subsidiary guarantors could jeopardize guarantees, with no explicit protective provisions limiting such guarantee releases. There are no express protective provisions prohibiting an up-tiering transaction. The above are proposed terms and the final terms of the credit agreement may be materially different. Gastro Health is a leading clinical platform comprised of physicians and advanced practitioners specializing in the treatment of gastrointestinal disorders, nutrition, and digestive health. The company's platform spans 6 states and includes 268 physicians. LTM revenue as of March 31, 2021 was approximately $351 million. The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. ONE SKY FLIGHT: Fitch Raises IDR to 'B', Outlook Stable ------------------------------------------------------- Fitch Ratings has upgraded One Sky Flight, LLC's (One Sky) Issuer Default Rating (IDR) to 'B' from 'B-'. Fitch has also upgraded the company's senior secured term loan to 'BB-'/'RR2' from 'B'/'RR3'. The Rating Outlook is Stable. Fitch expects private aviation tailwinds to persist in the post-coronavirus pandemic environment and to drive top-line and margin outperformance relative to prior expectations. The upgrade is supported by higher liquidity. One Sky has increased its cash by nearly 500%, from $109 million in 2019 to $512 million at year-end 2020. The company's elevated margin profile is expected to remain in the low double digits as it continues to reduced fixed overhead, partially offset by increased sales costs to cater to the growing base of new customers. KEY RATING DRIVERS Coronavirus Tailwinds to Persist: Fitch expects the increased demand for One Sky's private aviation offerings to persist in a post-coronavirus environment. Private aviation as a whole has capitalized on the shift in consumer sentiment towards socially distance traveling alternatives. Additionally, in Q1 2021 the company saw a 35% increase in fractional hours sold from the year prior, further emphasizing the positive demand shift that had been realized within the Sentient hourly card business in the latter half of 2020. The company continues to expand its product offering to cater to its target market through the acquisition of Associated Aircraft Group, a vertical take-off helicopter operator. Leverage Declining: Fitch believes that the company's adjusted leverage will be strong for the 'B' rating, given the company's path towards deleveraging as operational leverage improves and amortization of the term loan continues. Despite the harsh initial shock driven by the pandemic, the company reduced Gross Adjusted Debt to EBITDAR to 5.5x, down from 6.2x at year end 2019. Fitch expects adjusted debt/EBITDAR to decline below 4x by YE 2023, which includes adjustments off balance sheet debt with regards to leases. The company's covenant calculation regarding Total Net Debt to EBITDA for 2020 was 1.8x. Fitch does not anticipate the company will voluntarily pay down debt in the near term, but its improving margin profile in combination with the amortization of the term loan will likely reduce leverage over the rating horizon. Improving Margin Profile: In 2020, the company drove approximately 260 bps in EBITDA margin expansion via strong cost management. Fitch believes the company will maintain margins in the low double digits throughout the rating horizon, as the company aims to reduce fixed overhead costs and utilization rates normalize. Fitch expects utilization rates will continue to improve from the current level of 92% to historical rates of 99% as pent up demand utilizes its core fleet offerings. Fitch believes these margin improvements will be partially offset by an increase in the company's sales workforce, which has been ramped up to take advantage of the growing appetite for private flying. Free Cash Flow: Fitch expects cash flow in 2021 to be lower in comparison to the company's free cash flow margin performance in 2020. Free cash flow in 2020 was driven by the strong growth in jet card sales and customer deposits contributing over $332 million for the year and as well as $80 million in additional support via the CARES grants. As customers who purchased jet cards in 2020 utilize their flight hour privileges, Fitch expects a marginal cash burn in the first half of 2021. Fitch expects the company will utilize a portion of liquidity and free cash flow to support growth initiatives in both the margins and top-line arenas. Recovery Analysis: Fitch's recovery analysis assumes that One Sky would be reorganized as a going-concern in bankruptcy. Fitch has assumed a 10% administrative claim. Fitch's GC EBITDA assumption of roughly $78 million reflects a secular decline in business aviation, causing a drop in demand for One Sky's fractional ownership programs and charter flying. One Sky has a solid base of owned assets that Fitch believes should sustain EBITDA margins in the low single digits after a reorganization and scaling back growth. An EV multiple of 5x EBITDA is applied to the GC EBITDA to calculate a post-reorganization enterprise value. The choice of this multiple considered historical bankruptcy case study exit multiples for commercial airlines, which have ranged from 4.7x to 6.8x, with an average of 5.9x. Asset Light Model Reduces Balance Sheet Risk: One Sky's balance sheet risk is limited with regards to its aircraft purchases. Under the fractional ownership model, the company is able to sell shares of an aircraft well in advance of that aircraft's delivery, allowing the company to collect cash up front and minimize its own capital outlay. Although One Sky will remain less asset intensive than competitors like Vistajet, the company is planning to grow its owned core fleet to support future growth. Cyclical/Fragmented Industry: The business jet industry is cyclical due to the luxury nature of the product offering and the availability of commercial flights as a substitute. These risks are partly offset for One Sky by the management fees that it charges its fractional owners which are fixed through the life of the contract and do not depend on the number of hours flown, providing a steady source of revenue. However, fractional sales of new aircraft, jet card purchases, and charter flying are all vulnerable to economic cycles. DERIVATION SUMMARY One Sky's closest comparable peer is NetJets, which Fitch does not currently rate. Vista Global (B/Stable) is One Sky's closest rated peer. One Sky assumes limited asset risk through its fractional model, while Vista faces steeper upfront capital costs by bringing its aircraft on balance sheet and carries more residual value risk. One Sky has more scale with a managed fleet of more than that materially exceeds Vista Global. One Sky also has a broader product offering both in terms of the types of aircraft available and ways to utilize them (fractional, jet card, on-demand), whereas Vista solely operate super-mid and larger aircraft and they primarily operate on take-or-pay contracts in which customers pay for a set amount of hours that will expire if unused. KEY ASSUMPTIONS -- Consolidated revenues increase by approximately 17% as flight utilization and fractional share sales rebound to pre coronavirus levels; -- Margins expand by 190bps in 2021 as the company executes on reducing leasing costs and leveraging its core fleet as customer utilization increases; -- Cash burn in the first half of 2021 due to prepaid card ours being utilized, however, reverses in late 2021 during the company's more prominent flying months; -- The company refinances existing debt mid-2021. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Continued topline growth evidencing the durability of private aviation in the post-coronavirus environment; -- Total adjusted debt/EBITDAR sustained below 5x; -- FFO fixed charge coverage sustained around 2x; -- EBITDA margins sustained in the high single digits or better. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Total adjusted debt/EBITDAR remaining above 6.5x; -- FFO fixed charge coverage sustained below 1.5x; -- EBITDA margins falling to the low single digits. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Robust Liquidity: Fitch estimates the company's liquidity as of March 31, 2021 to be approximately $469.5 million, including $34.2 million available on their $40 million ABL facility, which held a borrowing base of $36.2 million and reduced by $2.0 million in LOCs, and approximately $435.3 million of cash and cash equivalents. This metric is well above expectations from Fitch's prior review. Liquidity is robust for the company's current rating, with ample headroom to service fixed and variable costs throughout the rating forecast. Debt maturities consist solely of required amortization under the term loan for the next several years. Fitch views the amortization payments as manageable given the company's cash flow profile over the forecast period. ISSUER PROFILE One Sky is a portfolio of three private jet travel labels covering the fractional ownership, fractional lease, prepaid charter/jet card, and on-demand charter segments. Initially focused on the chartering segment, One Sky has grown its offering by purchasing SentientJet in 2012, and FlexJet from Bombardier in 2013. SUMMARY OF FINANCIAL ADJUSTMENTS Fitch has chosen to recognize costs associated with fractional aircraft in the beginning of the contract rather than to recognize revenue over the life of the contract for the following reasons: (i) The economic benefit to the company is seen on day one of the contract, and therefore Fitch views the asset sale as a one-time transaction. (ii) Recognition of amortized revenue leads to a material disconnect between the underlying cash flow of the company and the associated EBITDA, which Fitch views as a proxy for such. ESG CONSIDERATIONS OneSky has an ESG Relevance Score of '4' for Energy Management due to concerns around energy management that stem from the potential for public/customer perception around private aviation, which can drive down demand as climate awareness and activism becomes more pronounced. Unlike commercial aviation, which Fitch views as more of a public necessity, and which benefits from dense seating arrangements that reduce carbon emissions on a per seat basis, private aviation is viewed as a luxury item that could face backlash if the public were to focus on the issue. This has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. OneSky has an ESG Relevance Score of '4' for Governance Structure. The governance structure score reflects the 40% ownership by Directional Aviation, which is controlled by CEO Kenn Ricci and CFO Mike Rossi. There is also an element of key person risk as the CEO and CFO have worked closely together for more than 30 years, and their loss could have a material impact on the company's operations. This has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. PADAGIS HOLDING: Fitch Gives FirstTime 'BB-' IDR, Outlook Stable ---------------------------------------------------------------- Fitch Ratings has assigned first-time 'BB-' Issuer Default Ratings (IDRs) to Padagis Holding Company LLC (Padagis) and Padagis LLC. The Rating Outlook is Stable. Fitch has also assigned expected ratings of 'BB+(EXP)'/'RR1' to Padagis LLC's senior secured revolver and senior secured term loan. The rating actions reflects Padagis's strong position in the extended topicals generic prescription drug market and consistently strong FCF. The company has a narrow geographic focus with approximately 89% of total firm revenues generated in the U.S. The ratings contemplate capital deployment that will maintain leverage (total debt/EBITDA) around 4.0x. The ratings will apply to approximately $850 million dollars of debt. KEY RATING DRIVERS Continued Price Pressure: The company continues to experience pricing pressure, although it has moderated relative to 2018 - 2019. The key drivers behind the pricing reductions during that period were competitive regulatory approvals for products in its portfolio resulting in increased competition. We expect pricing erosion to continue to impact the segment at roughly 4% - 5% annually. Continued increases in manufacturing efficiencies and new product launches should help to mitigate this pressure. R&D/New Products: Fitch expects the company will focus on complex formulations, first-to-file opportunities, generic drugs that require clinical studies or have other active pharmaceutical ingredient and/or regulatory hurdles. In the continuum of generic prescription drugs, there are varying degrees of complexity and difficulties in manufacturing processes offer barriers to entry and competitive advantages. Coronavirus Impact: Starting in the second quarter of 2020, with a partial rebound in Q320, Padagis experienced a reduction in demand for certain of its existing base products due to lower prescription volumes driven by the COVID-19 pandemic's impact on doctor visits. Dermatological products were the most negatively affected as they are generally less critical than life extending therapeutics. Fitch expects the operating environment will continue to improve in 2H21 and thereafter as the vaccination rate increases and as new COVID-19 cases and hospitalizations decline. Debt Reduction and Growth: Fitch expects Padagis will consistently generate strong FCF and prioritize a significant portion for debt reduction during the next two years. In addition, the company will invest in organic growth opportunities through ongoing research and development efforts, investing in new manufacturing capabilities that complement its extended topical focus, and expanding into new geographies. Its Israel-based business and channel partners should help the company in geographic expansion. Capital expenditure requirements should remain manageable for the firm. Favorable Demographics: Fitch expects aging populations in developed markets and increasing access to healthcare in emerging markets will support volume growth for Padagis and its generic pharmaceutical peers. In addition, continued patent expiries on branded drugs will provide greenfield opportunities for the industry. However, price erosion is expected to meaningfully offset such growth over the near term. Albuterol Quality Issue: Padagis initiated a voluntary nationwide recall of its albuterol sulfate inhalation aerosol in September 2020. The recall was driven by complaints from patients that some units may not dispense due to clogging. As a result of the recall, the company recorded a net charge of $22.5 million in 3Q20. Supply Disruption: Fitch recognizes the potential supply disruption in 2Q21 of a generic prescription product by a third party. The disruption could adversely affect the company's ability to sell and ship the product to customers in a timely manner. While Padagis has identified one or more potential alternative suppliers of the product, delays in qualifying such alternative supplier may result in a supply disruption for the duration of 2021 and possibly during 2022. DERIVATION SUMMARY Padagis's (BB-/Stable) closest key peers are Teva (BB-/Negative) and Viatris (BBB/Stable) in terms of manufacturing generic prescription pharmaceuticals and similar U.S. customers. However, Teva and Viatris are significantly larger in scale, breadth and depth of products. Viatris and Teva are pursuing biosimilar drugs, and Padagis is not. Padagis primarily manufactures generic prescription drugs, while Viatris markets branded generic prescription drugs in emerging markets and Teva markets a few branded drugs that have market exclusivity. Both also have greater geographic reach, given than Padagis primarily generates approximately 89% of its revenue in the U.S. Padagis's contingent liability risk is more benign than Teva's and generally similar to Viatris'. Fitch expects Padagis to operate with leverage (total debt/EBITDA) around 4.0x. Teva is more highly leveraged than other 'BB' rated healthcare companies operating in different industry subsectors, which typically have leverage sensitivities in the 3.0x-4.0x range. Another peer that can be considered is Endo International. The company has both an innovative portfolio, as well as a sizable generic prescription drug portfolio. Endo is slightly more similar in scale to Padagis but has a much more onerous contingent liability risk profile. The company is still addressing its pelvic mesh litigation settlements and working to address opioid-related lawsuits. Padagis's expected leverage is also expected to be at or below 4.0x compared to Endo's, which is currently about 6.6x. KEY ASSUMPTIONS -- Low- to mid-single-digit organic revenue growth during the forecast period, driven primarily by new products, partly offset by low- to mid-single-digit price declines. -- Incremental margin improvement driven by a focus on costs and an improving sales mix. -- Manageable annual capital expenditures of $20 million - $30 million. -- Annual FCF (cash flow from operations minus capital expenditures minus dividends) greater than $100 million during 2021-2024. -- Significant portion of FCF prioritized for debt repayment. -- Targeted acquisitions of products within or adjacent to its core competencies. -- No cash dividends during the forecast period. -- Total Debt with Equity Credit / EBITDA generally at or below 4.0x during the forecast period. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Improving operations including new product development that support long-term positive revenue growth and stable operating margins; -- Continued progress on expanding its product portfolio and geographic reach; -- A commitment and ability to a cash deployment strategy that maintains total debt/EBITDA durably below 3.5x. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Material and lasting deterioration in operations and FCF, possibly driven by lack of new product launches and increased pricing pressure; -- Durably and significantly deteriorating FCF margins; -- Leveraging acquisitions without the prospect of timely debt/leverage reduction; -- Total debt/EBITDA persistently above 4.5x. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity/Manageable Maturities: Padagis has adequate liquidity, including full availability on a $100 million revolving credit facility that matures in 2026. Liquidity is bolstered by consistent cash generation. At Dec. 31, 2020, Padagis had $39.8 million in cash and cash equivalents. Fitch expects liquidity to remain strong throughout the ratings horizon. Debt maturities are manageable; the term loan in the amount of $850 million is expected to mature in 2028. The senior secured revolver and term loan are expected to have outstanding recoveries in line with an 'RR1' rating and as such are notched two levels above the IDR to 'BB+'. ISSUER PROFILE Padagis develops, manufactures, and markets a portfolio of generic prescription drugs primarily for sale in the U.S. and roughly 11% of its revenue is generated in Israel. Fitch expects the company to expand into new geographies. The company's product portfolio includes an array of dosage forms such as creams, ointments, lotions, gels, shampoos, foams, suppositories, sprays, liquids, suspensions, and solutions. The portfolio also includes select injectables, hormones, oral solid dosage forms, oral liquid formulations, and controlled substances. ESG CONSIDERATIONS Padagis has an ESG Relevance Score of '4' for Exposure to Social Impacts due to pressure to contain healthcare spending growth, a highly sensitive political environment, exposure to price-fixing and opioid litigation, and social pressure to contain costs or restrict pricing. This has a negative impact on the credit profile and is relevant to the rating in conjunction with other factors. Padagis has ESG Relevance Scores of '4' for Management Strategy and Governance Structure, given its private equity owner. This has a negative impact on the credit profile and is relevant to the rating in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. PADAGIS LLC: Moody's Assigns First Time 'B1' Corp Family Rating --------------------------------------------------------------- Moody's Investors Service assigned first-time ratings to Padagis LLC (The RX business of Perrigo, "Padagis"), specifically a B1 Corporate Family Rating, B1-PD Probability of Default Rating, and a B1 rating to the senior secured credit facilities. The outlook is stable. Proceeds from the $850 million senior secured term loan, together with sponsor equity, will be used by Altaris Capital, to finance the $1.55 billion acquisition of the generic pharmaceutical business of Perrigo Company plc ("Perrigo," Baa3 RUR-down). Perrigo expects the transaction to close by the end of the third quarter 2021, subject to regulatory approvals. The new company will be headquartered in the US. Ratings assigned: Issuer: Padagis LLC Corporate Family Rating, assigned B1 Probability of Default Rating, assigned B1-PD Senior secured first lien term loan, assigned B1 (LGD3) Senior secured first lien revolving credit facility, assigned B1 (LGD3) Outlook action: Assigned, stable outlook RATINGS RATIONALE Padagis' B1 Corporate Family Rating reflects its pure-play focus as a US generic pharmaceutical company with moderate size of around $900 million in revenue (excluding generic ProAir) compared to larger generic pharmaceutical peers. About 10%-15% of sales are generated in Israel. The US generic pharmaceutical market will continue to be highly competitive, with risk of high earnings volatility. These risks are partially reduced by Padagis' focus on smaller niche products in dosage forms that generally tend to have fewer competitors. Moody's believes Padagis' debt/EBITDA at close will be moderate at around 4x. Earnings growth and deleveraging will be highly dependent on commercial success from Padagis' pipeline. While leverage is moderate, Moody's believes that Padagis will be acquisitive, which may periodically require additional debt. Under parent Perrigo, earnings over the last few years declined as contributions from new products were not sufficient to offset high price erosion on its base of existing products. But with price erosion lower and more stable today, Moody's believes product launches will drive a return to earnings growth for Padagis in 2022. Specifically, Padagis has several near-term commercial opportunities that will contribute meaningfully in 2022. Moody's views the risks associated with being separated from Perrigo as moderate, given that intentions to separate Padagis have been underway for several years and the company is already largely operating separately. Moody's believes that risk remains for overruns to the future cost structure of Padagis as a standalone company, compared to when it was part of Perrigo. Supporting the ratings is Padagis' position as one of the largest US manufacturers of extended topicals, and track record of generating good free cash flow. Following the transaction, Padagis' liquidity profile will be good. Moody's expects a modest starting cash balance, growing over time with free cash flow. Liquidity will be supported by a new undrawn $100 million revolver that will expire in 2026. Mandatory term loan amortization is modest at 1% per year, or $8.5 million. There will be no financial covenants on the term loan. The revolver will be subject to a springing maximum total net leverage ratio that will come into effect if more than 35% of the facility is drawn. Moody's does not expect the revolver to be drawn and Padagis will have ample compliance cushion if it did. The first lien credit facility contains covenant flexibility that if utilized could negatively impact creditors. Notable terms include the following: incremental debt capacity up to the greater of $228.7 million and 100% of adjusted EBITDA, plus unlimited amounts subject to the closing date first lien net leverage ratio; no portion of the incremental may be incurred with an earlier maturity than the initial term loans. The credit agreement permits the transfer of assets to unrestricted subsidiaries, up to the carve-out capacity and other conditions, subject to "blocker" provisions which prohibit the transfer of IP that is material to the operation of the company and its restricted subsidiaries, taken as a whole. Non-wholly-owned subsidiaries are not required to provide guarantees; dividends or transfers resulting in partial ownership of subsidiary guarantors could jeopardize guarantees, with no explicit protective provisions limiting such guarantee releases. The credit agreement provides some limitations on up-tiering transactions, including the requirement that each lender consents to any amendment providing for the subordination of their right to payment or to the liens securing any obligations owed to any lender, and consent of each affected lender for changes to the pro rata sharing and "waterfall" provisions. ESG considerations are material to Padagis' ratings. Social risks include high manufacturing and compliance standards at its various manufacturing facilities. Governance considerations include its private equity ownership and the risks associated with being carved out of a larger company. Padagis' stable outlook reflects Moody's view that the business will be successfully carved out of Perrigo with minimal disruption and cost overrun, while maintaining good liquidity. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Factors that could lead to a downgrade include if debt/EBITDA increases to above 5.0x on a sustained basis. Pressure on profit margins or debt-funded acquisitions could also lead to a downgrade. Factors that could lead to an upgrade of Padagis' ratings include successfully standing up the independent company, debt/EBITDA sustained below 4x with a conservative financial policy. Demonstrated track record of consistently growing sales and earnings through new product launches would also be needed. Padagis LLC, the RX business of Perrigo, which will be headquartered in the US, is a manufacturer of generic prescription drugs, with operations primarily in the US and to a lesser extent, Israel. Reported revenue for the twelve months ended December 31, 2020 approximated $1 billion. The principal methodology used in these ratings was Pharmaceutical Industry published in June 2017. PNTG LLC: Court Approves Disclosure Statement --------------------------------------------- The Bankruptcy Court approved the Disclosure Statement of PNTG LLC on June 14, 2021. On June 11, 2021, the Debtor filed, as supplement to the Disclosure Statement, a declaration of the Debtor's manager, Matthew Bryant, made on April 30, 2021. Mr. Bryant declared that: * he is able and willing to make the monthly payment of $3,500, according to the projections; * taxes on the Property do not exceed $4,500 annually; * he agrees to pay the future property taxes on the Property on behalf of the Debtor; * the Debtor's property has been listed for sale on a commercial property listing site; and * several potential buyers have contacted the manager about the Property. The Debtor filed the Plan dated April 30, 2021, which is a plan of liquidation. The Plan proposed to pay all creditors in full on their allowed claims. Pursuant to the Plan, the Debtor shall continue its business after the Confirmation Date until it sells the Property. The Property, which consists of 3.3 acres of unimproved land located in the city of Pantego, Tarrant County, Texas, is valued at $1,000,000 as of the Petition Date. The Debtor will fund the Plan by listing and selling the Property within one year from the Plan Effective Date of the Plan. The Debtor has listed the Property for sale on the commercial property listing sites LoopNet.com and CoStar.com. The Debtor will make payments to Allowed Claimants in the interim period before the sale, through its manager, Chase Bryant, who will fund the payments in the interim until the Property is sold. If the Property is not sold within 12 months from the Effective Date, or all Allowed Claims have not been paid in full then the Allowed Secured Claimants may pursue their state court remedies against the Property. The Claims, aggregating $522,908 under the Plan, are: Administrative Expenses and UST Fees $10,000 Class 1 Secured Claims of Arlington ISD $2,232 Class 2 Secured Claims of Town of Pantego $676 Class 3 Secured Claims of B1 Bank $500,000 Class 4 Secured Claims of Resolution Finance $10,000 A copy of the Disclosure Statement is available for free at https://bit.ly/3zrUU5C from PacerMonitor.com. About PNTG LLC PNTG LLC is a single asset real estate as defined in Section 101(51B) of the Bankruptcy Code. The Debtor sought Chapter 11 protection on February 1, 2021 (Bankr. 21-30206) in the U.S. Bankruptcy Court for the Northern District of Texas. On the Petition Date, the Debtor estimated between $500,001 and $1,000,000 in both assets and liabilities. The petition was signed by Matthew Bryant, manager. Judge Harlin Dewayne Hale is assigned to the. Joyce W. Lindauer Attorney, PLLC is the Debtor's counsel. The firm may be reached through: Joyce W. Lindauer, Esq. Joyce W. Lindauer Attorney, PLLC 1412 Main Street, Suite 500 Dallas, TX 75202 Telephone: (972)503-4033 Email: joyce@joycelindauer.com PREMISE HEALTH: Moody's Raises CFR to B2 on Solid Performance ------------------------------------------------------------- Moody's Investors Service upgraded Premise Health Holding Corp's Corporate Family Rating to B2 from B3, Probability of Default Rating to B2-PD from B3-PD. At the same time, Moody's also upgraded the first lien senior secured credit facilities to B1 from B2. The outlook is stable. The upgrade reflects the solid performance on behalf of Premise as the company saw an increase in demand for its services relating to the coronavirus pandemic, including performing temperature checks, coronavirus testing and other health screenings as employees return to work. Premise's recent acquisitions of CareHere and Sonic Boom further expanded Premise's scale and added reporting and analytical capabilities that have been extended throughout the platform. Premise has good liquidity, generating solid free cash flow of around $41 million over the past twelve months ending March 31, 2021 (partially inflated due to the payroll tax deferral of approximately $12 million). Premise's solid performance has allowed it to de-leverage to approximately 5.5x LTM March 31, 2021. The stable outlook balances the good near-term growth outlook with some longer-term uncertainty around contract losses. Longer-term, Moody's believes that there is the risk that the pandemic results in a smaller physical footprint for many companies which could lead to contract losses or reductions in scope for Premise. For example, if companies choose to consolidate office space and close down office locations, this would eliminate the need for on-site physicians. The following ratings/assessments are affected by the action: Ratings Upgraded: Issuer: Premise Health Holding Corp Corporate Family Rating, Upgraded to B2 from B3 Probability of Default Rating, Upgraded to B2-PD from B3-PD GTD Senior Secured 1st Lien Term Loan, Upgraded to B1 (LGD3) from B2 (LGD3) GTD Senior Secured Delayed Draw Term Loan, Upgraded to B1 (LGD3) from B2 (LGD3) GTD Senior Secured 1st Lien Revolving Credit Facility, Upgraded to B1 (LGD3) from B2 (LGD3) Outlook Actions: Issuer: Premise Health Holding Corp Outlook, Remains Stable RATINGS RATIONALE Premise's B2 CFR is constrained by the company's risk of customer contract losses, either due to changing customer preferences, competition or a customer's own financial challenges. Over the next year, Moody's expect the coronavirus pandemic will result in an increase in demand for Premise's services, including performing temperature checks and coronavirus testing to enable employees to return to the workplace. Longer-term, however, there is the risk that the pandemic results in a smaller physical footprint for many companies which could lead to contract losses or reductions in scope for Premise. For example, if companies choose to consolidate office space and close down office locations, this would eliminate the need for on-site physicians. Debt/EBITDA will remain high but has shown improvement. Debt/EBITDA is approximately 5.5x (including $20 million outstanding on the revolver). This is down from over 7.0x at the time of the leveraged buyout in 2018. The rating is supported by the company's blue-chip customer base, good customer diversity and historically high retention rates. The company also has low capital expenditure requirements. As a result, Moody's expect the company to continue to generate positive free cash flow. Moody's expect that Premise will operate with good liquidity over the next 12 to 18 months. Free cash flow is expected to be around $12 million in 2021 as there is a negative working capital swing and Premise will repay a portion of the deferred payroll tax. Without the tax, free cash flow would be closer to $25 million in 2021. Scheduled annual amortization under the first lien term loan is modest at $3.2 million paid in equal quarterly installments. Premise has a $60 million revolving credit facility expiring in 2023 that has approximately $20 million drawn net of letters of credit. Moody's expect the revolver to be at least partially paid down over the next 12-18 months. The revolving facility contains a springing 7.5 times leverage covenant. This covenant springs into effect when revolver utilization exceeds 35% ($21 million) of aggregate commitments. There are no financial covenants under the term loans. Moody's expect the company to maintain ample cushion when tested. Premise faces social risks such as the rising concerns around the access and affordability of healthcare services. However, Moody's does not consider Premise to face the same level of social risk as many other healthcare providers because they rely less on government and commercial insurers. From a governance perspective, Moody's expects Premise's financial policies to remain aggressive due to its private equity ownership. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded if Premise maintains good liquidity, continued growth in earnings through expansion with existing customers and new customer wins, such that Moody's expects adjusted debt/EBITDA to be sustained below 4.5x. The ratings could be downgraded if, for any reason, operating performance or liquidity deteriorates. If free cash flow is not expected to be positive or if adjusted debt/EBITDA is sustained above 6.0x, the ratings could be downgraded. The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. Premise is one of the leading providers of employer-sponsored on-site health and wellness clinics and pharmacies in the US, operating over 600 clinics, 359 primary care health centers, and 46 pharmacies across 45 states. Premise's recent acquisition of CareHere further expanded coverage to serve over 2,200 clients, operating about 800 onsite clinics and near-site wellness centers in 300 markets across 45 states and Guam. The company generated $861 million of revenue LTM 3/30/2021, with the combined entity expected to generate almost $1 billion in pro forma revenue. The company is owned by OMERS Private Equity and therefore publicly available financial information is limited. PROFESSIONAL DIVERISITY: All 4 Proposals Passed at Annual Meeting ----------------------------------------------------------------- Professional Diversity Network, Inc. held its Annual Meeting of Stockholders on June 14, 2021, at which the stockholders: (1) elected Michael Belsky, Haibin Gong, Grace Reyes, Courtney Shea, and Hao (Howard) Zhang as directors to serve until the next annual meeting of stockholders of the Company and until their respective successors are duly elected and qualified; (2) ratified the appointment of Ciro E. Adams, CPA, LLC as the Company's independent registered public accounting firm for the fiscal year ending Dec. 31, 2021; (3) approved the compensation of the Company's named executive officers; and (4) approved the Amended and Restated Professional Diversity Network, Inc. 2013 Equity Compensation Plan. About Professional Diversity Headquartered in Chicago, Illinois, Professional Diversity Network, Inc. -- https://www.prodivnet.com -- is a global developer and operator of online and in-person networks that provides access to networking, training, educational and employment opportunities for diverse professionals. Through an online platform and its relationship recruitment affinity groups, the Company provides its employer clients a means to identify and acquire diverse talent and assist them with their efforts to recruit diverse employees. Its mission is to utilize the collective strength of its affiliate companies, members, partners and unique proprietary platform to be the standard in business diversity recruiting, networking and professional development for women, minorities, veterans, LGBT and disabled persons globally. Professional Diversity reported a net loss of $4.35 million for the year ended Dec. 31, 2020, compared to a net loss of $3.84 million for the year ended Dec. 31, 2019. As of March 31, 2021, the Company had $6.04 million in total assets, $5.07 million in total liabilities, and $964,228 in total stockholders' equity. Wilmington, DE-based Ciro E. Adams, CPA, LLC, the Company's auditor since 2018, issued a "going concern" qualification in its report dated April 9, 2021, citing that the Company has a significant working capital deficiency, has incurred significant losses, and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. PROFESSIONAL FINANCIAL: Court Confirms Chapter 11 Plan ------------------------------------------------------ Judge Hannah L. Blumenstiel has entered an order finally approving the Disclosure Statement and confirming the Plan filed by Professional Financial Investors, Inc., et al. The Plan and each of its provisions are approved and confirmed in all respects, as modified herein; provided, however, that if there is any direct conflict between the terms of the Plan and the terms of this Order, the terms of this Order shall control. The limited objection filed by Christina Ensign, Felix Arts and Carol Sue Sproule is rendered moot by the Plan. On the Effective Date, PFI, PISF, the LLC/LP Debtors, Professional Investors 28, LLC, and PFI Glenwood LLC (collectively, the "Consolidated Estates") shall be substantively consolidated pursuant to sections 105(a), 541, 1123, and 1129 of the Bankruptcy Code. As a result of such substantive consolidation, on the Effective Date, all property, rights and claims of the Consolidated Estates and all Claims against the Consolidated Estates shall be deemed to be pooled for purposes of distributions under the Plan and, in the PFI Trustee's discretion, other purposes. On the Effective Date, and subject to Section 2.2 of the Plan, the PFI Trust shall be automatically vested with all of the Debtors' and the Estates' respective rights, title, and/or interest in and to all PFI Trust Assets, and the OpCo shall be automatically vested with all of the Debtors' and the Estates' respective rights, title and/or interest in and to all OpCo Assets. The liens of the DOT Noteholders shall be expunged from the record of the Real Properties, or the sale proceeds thereof, in accordance with the provisions of the Plan. Any DOT Noteholder that wishes to challenge the expungement of its lien shall file an objection with this Court and serve its objection on the PFI Trustee and counsel for the Proponents and Ad Hoc Committees no later than twenty (20) days after entry of this Order A copy of the pLan https://bit.ly/2Ui7cxv Counsel to the Debtors: Ori Katz J.Barrett Marum Matt Klinger SHEPPARD, MULLIN, RICHTER &HAMPTON LLP Four Embarcadero Center, 17th Floor San Francisco, CA 94111-4019 Telephone: (415) 434-9100 Facsimile: (415) 434-3947 E-mail: okatz@sheppardmullin.com bmarum@sheppardmullin.com mklinger@sheppardmullin.com About Professional Financial Investors Professional Financial Investors, Inc. and Professional Investors Security Fund, Inc. are engaged in activities related to real estate. PFI directly owns 28 real property locations in fee simple and has an interest as a tenant in common at another real property location, primarily consisting of apartment buildings and office parks, located in Marin and Sonoma Counties, California, with an aggregate value of approximately $108 million, according to an early July 2020 valuation. On July 16, 2020, a group of creditors filed an involuntary Chapter 11 petition (Bankr. N.D. Cal. Case No. 20-30579) against Professional Investors Security Fund. On July 26, 2020, Professional Financial Investors sought Chapter 11 protection (Bankr. N.D. Cal. Case No. 20-30604). On Nov. 20, 2020, Professional Financial Investors filed involuntary Chapter 11 petitions against Professional Investors Security Fund I, A California Limited Partnership and 28 other affiliates. The cases are jointly administered under Case No. 20-30604. Between February 3-4, 2021, Professional Financial Investors filed involuntary Chapter 11 petitions against Professional Investors 31, LLC and nine other affiliates. The cases are jointly administered under Case No. 20-30579. At the time of the filing, Professional Financial Investors disclosed assets of between $100 million and $500 million and liabilities of the same range. Hannah L. Blumenstiel oversees the cases. The Debtors tapped Sheppard, Mullin, Richter & Hampton, LLP, as their legal counsel; Trodella & Lapping LLP as conflicts counsel; Ragghianti Freitas LLP, Weinstein & Numbers LLP, Wilson Elser Moskowitz Edelman & Dicker LLP, Nardell Chitsaz & Associates, and Kimball Tirey & St. John, LLP as special counsel; and Donlin, Recano & Company, Inc. as claims, noticing, and solicitation agent and administrative advisor. Michael Hogan of Armanino LLP was appointed as the Debtors' chief restructuring officer. FTI Consulting, Inc. is the financial advisor. On Aug. 19, 2020, the Office of the U.S. Trustee appointed a committee of unsecured creditors. The committee is represented by Pachulski Stang Ziehl & Jones. Professional Investors 31 and affiliates tapped Sheppard, Mullin, Richter & Hampton LLP as general bankruptcy counsel; Trodella & Lapping LLP as conflicts counsel; FTI Consulting, Inc. as financial advisor; and Armanino LLP as tax accountant. Donlin, Recano & Company, Inc. is the claims, noticing and solicitation agent. PROJECT BOOST: Fitch Alters Outlook on 'B-' LT IDR to Stable ------------------------------------------------------------ Fitch Ratings has affirmed the Long-Term Issuer Default Rating (IDR) of Project Boost Purchaser, LLC and its parent Boost Parent, LP (dba J.D. Power) at 'B-'. The Rating Outlook has been revised to Stable from Positive to reflect elevated leverage following its recently announced acquisition (target not yet disclosed). Fitch has also downgraded the company's first-lien senior secured revolver and term loan to 'B+'/'RR2' from 'BB-'/'RR1'. Fitch also assigned a rating of 'B+'/'RR2' to the planned incremental first-lien senior secured term loan borrowings. The auto end market the company serves has stabilized and improved since the trough of the coronavirus pandemic. Improved trends across its end markets should lead to better than projected fundamentals in the coming years. Financial leverage metrics will remain high post the acquisition. However, J.D. Power's business model displays stable and strong FCF dynamics that limit credit default risk compared with other issuers in Fitch's 'B-' to 'B' coverage universe. KEY RATING DRIVERS Coronavirus Impacts: Fitch believes J.D. Power could see improved trends in 2021/2022, as the global auto segment continues to recover from the pandemic. Revenue declined 15% during the trough in 2Q20 as auto sales slowed. Revenue improved in recent quarters and was flat yoy in 1Q21 as auto sales rebounded. Fitch's auto team forecasts the U.S. seasonally-adjusted annual rate (SAAR) could increase 8% or more in 2021, versus a decline of 15% in 2020. Cost-saving initiatives helped offset revenue pressures for the company, with reported EBITDA up 11% in 2020. High Leverage: High gross leverage is a limiting factor for the IDR. Pro forma (PF) for the pending acquisition, Fitch calculates gross leverage is near 8.0x (reported closer to 7.5x PF for cost savings from past M&A). Leverage could remain near 7.0x in the coming years, partially supported by a highly recurring business model with significant cash flow predictability. Fitch believes leverage will remain high due to additional M&A and/or cash distributions to shareholders. The credit agreement provides significant flexibility to increase leverage, with relatively lenient maintenance covenants. Focus on M&A: Fitch expects J.D. Power will continue to prioritize its cash for M&A in the future, with a focus on higher margin data and analytics capabilities. This is evident in the announced deal, as well as the December 2019 Trilogy Automotive and November 2020 ALG, Inc. acquisitions. The company has aggressively used its balance sheet to consolidate industry players since the 2019 merger of J.D. Power and Autodata Solutions Group, Inc. The rapid pace of acquisitions in recent years enabled the company to meaningfully increase its scale, but presents credit risk given the high leverage profile and potential for mis-execution. Liquidity, Maturity Risk Limited: Fitch views liquidity and maturity risk as limited in the medium term despite continued macro concerns. Even in a stressed scenario, Fitch believes J.D. Power could generate EBITDA near $200 million or higher per year. With cash interest expense, taxes and capex projected in the low- to mid-$100 million range and minimal working capital needs, this provides the company headroom to generate positive cash flow, even in a downside scenario. It also has a $80 million secured revolver that provides additional flexibility. Maturity risk is also limited given its current debt structure was put in place in 2019 with the merger, and its nearest maturity is 2024. Increased Scale: Fitch views increased scale and diversification into new data and analytics solutions as positive for the rating. The business could generate annual revenue of more than $600 million and EBITDA approaching $300 million or more in 2022, or more than 40% higher than 2018 on a PF combined basis, including all announced M&A. Fitch believes J.D. Power's increased scale could help strengthen its overall competitive position. However, customer concentration risk remains, as the largest customer is 10% of revenue and the top 10 compose nearly 42% of revenue. Critical, Industry Embedded Data Sets: Fitch believes J.D. Power's data sets are critical to its customers' workflows and are difficult to replicate. This is likely evidenced by more than 75% of its customers having tenure of 10 or more years and customer revenue retention near 110%. Its products are highly embedded in the decision-making processes, with multiple customer touch points across the value chain. J.D. Power's offerings outside of auto to industries such as financial services and utilities are less embedded in the industry but provide some diversification. Highly Recurring Business Model: Subscription-based revenue composes the majority of the mix (more than 75% of sales), which Fitch believes provides significant visibility and stability to FCF generation. A meaningful portion of customers operate under annual or multiyear contracts, and net revenue retention has been high historically and more than 100%. The company also has limited working capital and capex requirements, which translates to strong FCF conversion metrics that Fitch projects could be near 40% or more of EBITDA in the coming years. Concentrated Exposure to Cyclical Market: The business is heavily reliant on the auto industry, which comprises more than 80% of revenue including manufacturers (Ford Motor Company, General Motors Company, and others), dealers and suppliers. J.D. Power experienced a roughly 13% revenue decline during the 2008-2009 recession, and adjusted EBITDA margin contracted to 10% from 12% while legacy Autodata sales fell in the high single-digit percentage range. This was much better than the more than 50% U.S. SAAR decline from its 2005 peak to early 2009 trough. J.D. Power now has a greater mix of contractual revenues, which should mitigate some industry cyclicality, but Fitch believes the business would still be hurt in an economic slowdown. DERIVATION SUMMARY Fitch's IDR reflects J.D. Power's position as a market leader in data and analytics solutions for the automotive industry, with strong market share and high brand awareness among industry participants. The company has a growing top-line largely composed of recurring revenues, strong EBITDA margins in the mid-40% range and a solid FCF generation profile. Each of these attributes positions it well versus other data/analytics companies Fitch reviews. These factors are partially offset by lack of end-market diversification (a majority of its business is exposed to auto), cyclicality inherent in the auto industry, customer concentration (top 10 customers compose nearly 50%) and high financial leverage. Gross leverage near 8.0x, pro forma for the pending acquisition, is particularly high relative to other business services companies Fitch rates. High leverage and lack of diversification are key limiting factors that Fitch believes positions the IDR in the 'B-' rating category. KEY ASSUMPTIONS Fitch's key assumptions within its rating case for the issuer include: -- High single-digit revenue growth over the rating horizon driven by low- to midsingle-digit growth in the existing business, plus assumed contribution from announced M&A; -- EBITDA margins improve in 2021 as the auto recovery continues and cost-saving initiatives taken during the coronavirus pandemic flow through. Fitch assumes modest margin expansion beyond the current year; -- FCF remains relatively strong over the rating horizon; -- Fitch has not modeled additional M&A, but believes the company will allocate the majority of its excess cash flow to incremental acquisitions. Recovery Assumptions: For entities rated 'B+' and below, where default is closer and recovery prospects are more meaningful to investors, Fitch undertakes a tailored, or bespoke, analysis of recovery upon default for each issuance. The resulting debt instrument rating includes a Recovery Rating or published 'RR' (graded from 'RR1' to 'RR6') and is notched from the IDR accordingly. In this analysis, there are three steps: (i) estimating the distressed enterprise value (EV); (ii) estimating creditor claims; and (iii) distribution of value. Fitch assumes J.D. Power would emerge from a default scenario under the going concern approach versus liquidation. Key assumptions used in the recovery analysis are as follows: -- Fitch estimates going concern EBITDA near $195 million, or approximately 25% to 30% below pro forma EBITDA including projected cost savings and pending M&A. -- Fitch assumes an 8.0x multiple, which is in-line with Fitch's assessment of historical trading multiples in the data & analytics industry, sector M&A, and historic bankruptcy emergence multiples Fitch has observed in the technology, media and telecom (TMT) sectors. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Gross leverage, Fitch-defined as total debt with equity credit/operating EBITDA, expected to be sustained below 7.5x over a multiyear horizon; -- FFO interest coverage approaching 2.5x or higher; -- Greater visibility into the company's resilience to the coronavirus pandemic and related U.S. macro shock could also lead to an upgrade. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Fitch could downgrade the IDR if FFO interest coverage is expected to remain below 1.5x and/or gross leverage is sustained above 8.5x; -- FCF leverage, Fitch-defined as cash flow from operations less capex/total debt with equity credit, is negative for a sustained period; -- Adverse operating performance, material changes to industry dynamics and/or the loss of a key customer that meaningfully alters the overall operating profile. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Sufficient Liquidity: J.D. Power has sufficient liquidity to navigate its business through the remaining stages of the pandemic and to execute on its growth strategy. However, the pace of M&A will likely be a determining factor in the level of liquidity over time. Pro forma for the pending acquisition, Fitch believes the company will have more than $50 million of cash on its balance sheet. Liquidity is further supported by a first-lien, senior secured $80 million revolver projected to be undrawn at closing. The company also generates strong positive FCF that was $84 million in 2020 and Fitch estimates could range from $100 million to $150 million per year over the next few years. Debt Profile: Pro forma for the acquisition, the company's debt structure consists of a mix of first-lien secured term loans ($1.6 billion, or 78% of debt) and second-lien term loans ($455 million, or 22% of debt). It will finance the $459 million acquisition via $310 million of incremental first-lien term loans and $40 million of incremental second lien, with the balance being paid via cash and rollover equity. The company also has an $80 million first-lien secured revolver in place that is undrawn. All of its debt is floating rate and matures in 2024-2027. ISSUER PROFILE Boost Parent is the parent company and financial statement filer for J.D. Power, Autodata and other related automotive-centric data and analytics operations. Boost Parent's intermediate subsidiary, Project Boost Purchaser, is the borrower on outstanding debt and operated as the acquisition entity for acquisitions since 2019. J.D. Power is a market leader in data and analytics solutions for the automotive industry, with high market share and brand awareness among industry participants. Boost Parent was formed in 2019 for the purpose of M&A in the segment, while the core underlying brands, JD Power and Autodata, were founded in 1968 and 1992, respectively. The company is a private company owned by Thoma Bravo. PURE BIOSCIENCE: Incurs $811K Net Loss in Third Quarter ------------------------------------------------------- PURE Bioscience, Inc. filed with the Securities and Exchange Commission its Quarterly Report on Form 10-Q disclosing a net loss of $811,000 on $561,000 of total revenue for the three months ended April 30, 2021, compared to net income of $473,000 on $2.22 million of total revenue for the three months ended April 30, 2020. For the nine months ended April 30, 2021, the Company reported a net loss of $1.59 million on $3.07 million of total revenue compared to a net loss of $1.32 million on $2.97 million of total total revenue for the nine months ended April 30, 2020. Tom Y. Lee, chief executive officer, said that, "Comparing third quarter net sales from this year to last year reflects the initial impact of the COVID crisis as sales increased 612% during Q3 of fiscal 2020. During the early stages of the pandemic, many of our end-users and distributors over-purchased product due to global supply chain uncertainty, an experience affecting industry as a whole. Over the course of the last few months, we are seeing regular reorders from our customer base and are continuing to grow new and existing opportunities. In addition, with the restaurant business severely curtailed during the pandemic, both our protein and produce food processing customers experienced a corresponding reduction in their orders which resulted in reduced production of food processing. This was evident in both our large protein and produce segment customers in fiscal third quarter 2021. Coming out of the shutdown we are now working with all our produce customers to ensure the continued use of PURE Hard Surface and PURE Control as part of their food safety programs. We are also taking similar steps with our protein customers and are seeing an increased frequency in orders as the industry as a whole returns to pre-COVID output," concluded Lee. As of April 30, 2021, the Company had $4.85 million in total assets, $938,000 in total current liabilities, and $3.91 million in total stockholders' equity. The Company has a history of recurring losses, and as of April 30, 2021 the Company has incurred a cumulative net loss of $125,060,000. During the nine months ended April 30, 2021, the Company recorded a net loss of $1,586,000 on recorded net revenue of $3,068,000. In addition, the Company used $1,259,000 in operating and investing activities resulting in a cash balance of $2,819,000. Based on current projections, the Company believes its available cash on-hand, its current efforts to market and sell its products, and its ability to significantly reduce expenses, will provide sufficient cash resources to satisfy its operational needs, for at least one year from the date these financial statements are issued. "Our future capital requirements depend on numerous forward-looking factors. These factors may include, but are not limited to, the following: the acceptance of, and demand for, our products; our success and the success of our partners in selling our products; our success and the success of our partners in obtaining regulatory approvals to sell our products; the costs of further developing our existing products and technologies; the extent to which we invest in new product and technology development; and the costs associated with the continued operation, and any future growth, of our business. The outcome of these and other forward-looking factors will substantially affect our liquidity and capital resources. "Until we can continually generate positive cash flow from operations, we will need to continue to fund our operations with the proceeds of offerings of our equity and debt securities. However, we cannot ensure that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to us or to our stockholders. If we raise additional funds from the issuance of equity securities, substantial dilution to our existing stockholders would likely result. If we raise additional funds by incurring debt financing, the terms of the debt may involve significant cash payment obligations as well as covenants and specific financial ratios that may restrict our ability to operate our business." A full-text copy of the Form 10-Q is available for free at: https://www.sec.gov/Archives/edgar/data/1006028/000149315221014404/form10q.htm About PURE Bioscience, Inc. PURE Bioscience, Inc. -- www.purebio.com -- is focused on developing and commercializing its proprietary antimicrobial products primarily in the food safety arena. The Company provides solutions to combat the health and environmental challenges of pathogen and hygienic control. Its technology platform is based on patented, stabilized ionic silver, and its initial products contain silver dihydrogen citrate, better known as SDC. This is a broad-spectrum, non-toxic antimicrobial agent, which offers 24-hour residual bacterial protection and formulates well with other compounds. As a platform technology, SDC is distinguished from existing products in the marketplace because of its superior efficacy, reduced toxicity and mitigation of bacterial resistance. PURE is headquartered in Rancho Cucamonga, California (San Bernardino metropolitan area). QUANTUM HEALTH: Moody's Assigns B3 Rating to Amended Term Loan -------------------------------------------------------------- Moody's Investors Service assigned a B3 (LGD4) rating to the amended senior secured term loan of Quantum Health, Inc. There are no changes to Quantum's existing ratings including the B3 Corporate Family Rating, the B3-PD Probability of Default Rating and the B3 (LGD4) senior secured revolving credit facility. The outlook remains stable. The term loan amendment is leverage-neutral, but is credit positive based on lower interest cost. Ratings assigned: Issuer: Quantum Health, Inc.: Gtd Senior Secured Term Loan, assigned B3 (LGD4) RATINGS RATIONALE Quantum's B3 rating reflects its leading position in the healthcare benefits navigation industry, its track record of profitability and positive cash flow, and its strong growth outlook due to rising customer demand. Moody's anticipates that the company will continue to grow its client base of large employers, resulting in significant expansion in revenue and earnings. Quantum offers a compelling value proposition in helping employers reduce employee benefit costs and complexity while improving member satisfaction. These strengths are tempered by very high financial leverage. As measured by reported debt/EBITDA, Moody's anticipates that leverage will remain above 7x over the next 12 to 18 months, albeit declining as contracted customer wins take effect. Although customer diversity is strong, Quantum's business model diversity is low with a narrow service offering. In addition, the benefits navigation industry remains somewhat nascent, with overall low penetration among large employers and high market fragmentation. As such, Quantum's ability to competitively differentiate itself over the long-term is uncertain. Moody's anticipates that Quantum will maintain good liquidity over the next 12 to 18 months, reflecting cash on hand of over $10 million, positive operating cash flow, and full availability under the $60 million revolving credit facility. There are no financial maintenance covenants in the term loan, and the revolver has a springing net leverage covenant (under 9.5x) if 40% of the revolver is drawn. Term loan amortization is modest at $3 million per year. Moody's anticipates good cushion under the covenant, if tested. ESG considerations are material to the Quantum's credit profile. Social factors are significant for companies operating in the employee benefits and care coordination areas. Demographics and societal trends favor increasing demand for these services, given rising medical costs and employers' goals of providing attractive but efficient healthcare benefits. However, social risks stem from the handling of confidential patient information, exposure to security breaches, litigation risks, and various regulatory risks that could change the nature of employer-provided healthcare benefits. With respect to legal risks, Quantum may be exposed to claims arising from a determination that the company acts in the capacity of a healthcare provider, or exercise undue influence or control over a healthcare provider. Among governance considerations, Quantum's private equity ownership creates risk of aggressive financial policies and shareholder distributions. The stable outlook incorporates Moody's expectation that operating cash flow will remain positive and that new business wins will result in declining debt/EBITDA. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING Factors that could lead to an upgrade include a sustained track record of solid growth through new customer wins and high customer retention, and greater diversity in the company's business model and service offerings. Quantitatively, debt/EBITDA sustained below 5x would support an upgrade. Factors that could lead to a downgrade include significant client terminations, business disruptions or client servicing issues stemming from high growth. In addition, an erosion in the company's liquidity could cause a downgrade. Headquartered in Columbus, Ohio, Quantum Health, Inc. provides healthcare coordination and navigation services to large US employers offering health benefits to employees. Quantum is privately-owned by Great Hill Partners, Warburg Pincus LLC and company management. The principal methodology used in this rating was Business and Consumer Service Industry published in October 2016. RADIO DESIGN: Court Confirms Plan, as Modified ---------------------------------------------- Judge Thomas M. Renn has entered an order confirming the Plan filed by Radio Design Group, Inc as modified: a. The amount of JPMorgan Chase Bank, N.A.'s Class 1 Secured Claim as of June 1, 2021 shall be $1,876,614.43; and b. The amount of JPMorgan Chase Bank, N.A.'s Class 2 Secured Claim as of June 1, 2021 shall be $745,321.75. The Disclosure Statement is approved based on the DIP's satisfaction of the requirements of 11 U.S.C. § 1125. Radio Design Group, Inc. submitted a Second Amended Plan. This Plan proposes to pay creditors from cash flow from the Reorganized Debtor's operations. The Plan provides for eight classes of secured claims; one class of general unsecured claims; and one class of equity security holders. Secured Claims will be paid according to the terms of their respective contracts, as modified herein. The holder of each Allowed Unsecured Claim will be paid in full as set forth herein. The equity holder shall retain his ownership interest upon re-vesting of the assets in the Reorganized Debtor on confirmation of this Plan. This Plan also provides for the payment of administrative and priority claims. All Allowed Administrative Claims will be paid in full on the Effective Date or at such times and in such amounts as is agreed with the Reorganized Debtor. Priority Unsecured Tax and Wage Claims will be paid in full within 60 months of the Petition Date as set forth herein. Attorney for Debtor in Possession: Loren S. Scott, OSB #024502 THE SCOTT LAW GROUP Springfield, OR 97475 Telephone: 541-868-8005 Facsimile: 541-868-8004 lscott@scott-law-group.com A copy of the Order is available at https://bit.ly/3wfBPSd from PacerMonitor.com. About Radio Design Group Radio Design Group, Inc., is a design and engineering firm based in Grants Pass, Oregon. Since its incorporation in 1992, Radio Design has grown from a small RF consulting company specializing in small commercial markets to a vital contributor to unique and innovative products that have advanced the state of technology in both the commercial and defense-related markets. Radio Design previously sought bankruptcy protection on July 24, 2014 (Bankr. D. Ore. Case No. 14-62732). Radio Design again sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D. Ore. Case No. 19-63617) on Dec. 2, 2019. In the petition signed by James Hendershot, president, the Debtor was estimated to have $1 million to $10 million in assets and liabilities of the same range. Judge Thomas M. Renn is assigned to the case. The Debtor is represented by Loren S. Scott, Esq., at The Scott Law Group. RAYNOR SHINE: Court Approves Disclosures and Confirms Plan ---------------------------------------------------------- Judge Lori V. Vaughan has entered an order approving the Disclosure Statement and confirming the Plan of Raynor Shine Services, LLC. Debtors' Motion for Cramdown with regard to Class 10, Class 13, and Class 14, is granted. The Confirmation Objections are overruled to the extent any such objection was not withdrawn on the record at the Confirmation Hearing. Pursuant to the terms of the Plan and the consent of SummitBridge National Investments VII, LLC, as successor in interest of BB&T Equipment Finance Corp and Truist Bank, the Debtor is authorized to sell the equipment listed on Exhibit "B" free and clear of all liens and encumbrances and use the proceeds to fund the Plan, which shall include paying Summit's one-half share of Harley Riedel's mediation legal bill. The Debtor shall file all objections to claims within 30 days after the date of entry of this Confirmation Order; provided, however, the Debtor may seek any extension of the deadline if the need arises. A post-confirmation status conference will be heard June 29, 2021 at 10:30 a.m. in Courtroom 6C, 6th Floor, George C. Young Courthouse, 400 W. Washington Street, Orlando, FL 32801. About Raynor Shine Services Raynor Shine Services, LLC, is an environmental recycling company based in Apopka, Florida. It offers mulch installation, grapple truck services, recycle yard disposal, land clearing, grinding services, storm recovery services. Raynor Shine Services, LLC, and Raynor Apopka Land Management, LLC, sought protection under Chapter 11 of the Bankruptcy Code (Bankr. M.D. Fla. Lead Case No. 20-00577) on Jan. 30, 2020. The petitions were signed by Henry E. Moorhead, CRO. At the time of filing, Raynor Shine Services was estimated to have $10 million to $50 million in both assets and liabilities and Raynor Apopka Land Management was estimated to have $1 million to $10 million in both assets and liabilities. Frank M. Wolff, Esq., at Latham Luna Eden & Beaudine LLP, serves as the Debtors' counsel. Moss, Krusick & Associates, LLC, has been tapped as accountant. RE/MAX LLC: Moody's Rates New First Lien Credit Facilities 'Ba3' ---------------------------------------------------------------- Moody's Investors Service affirmed RE/MAX, LLC's Ba3 Corporate Family Rating and Ba3-PD Probability of Default rating. Concurrently, Moody's assigned a Ba3 rating to the proposed senior secured first lien credit facilities consisting of a $460 million term loan B due 2028 and a $50 million revolving credit facility expiring 2026. RE/MAX's Speculative Grade Liquidity rating remains SGL-1, reflecting very good liquidity. The rating outlook is stable. Proceeds from RE/MAX's proposed senior secured term loan and $7 million of balance sheet cash will be used to fund the $235 million acquisition of RE/MAX INTEGRA's North America regions (INTEGRA NA), refinance its existing term loan, and pay related fees and expenses. The new $50 million revolver is expected to remain undrawn at closing. The rating on the existing first lien credit facility that will be repaid as part of this refinancing will be withdrawn upon repayment. INTEGRA NA represents the largest collection of independent regions which include five Canadian provinces and nine U.S. states. The acquisition will bring nearly 19,000 agents and over 1,100 RE/MAX offices under the RE/MAX company-owned region umbrella and will sizably increase its annual revenue per agent from agents in the acquired regions. The transaction is expected to close in the third quarter of this year. Pro forma for the transaction, leverage is high at 4.7x as of LTM March 31, 2021. The rating affirmation and stable outlook reflect Moody's expectation for RE/MAX to continue its strong operating and financial performance buoyed by the rebound in the housing market and the resiliency of the company's fully franchise-based model. These factors along with the likelihood of a successful integration of INTEGRA NA support Moody's expectation that revenue and profitability growth will bring leverage back below 4x by FYE 2022. INTEGRA NA will be the company's 13th independent region acquisition since 2013. Given that the remaining independent regions are much smaller in scale compared to INTEGRA NA, Moody's expects any potential future independent region acquisitions in the near-to-mid term to be funded with cash on hand and cash flow from operations. Any additional debt-funded M&A or aggressive financial policies enacted prior to reducing levels below 4.0x would place negative pressure on RE/MAX's ratings and stable outlook. Affirmations: Issuer: RE/MAX, LLC Corporate Family Rating, Affirmed Ba3 Probability of Default Rating, Affirmed Ba3-PD Assignments: Issuer: RE/MAX, LLC Senior Secured 1st Lien Term Loan B, Assigned Ba3 (LGD4) Senior Secured 1st Lien Revolving Credit Facility, Assigned Ba3 (LGD4) Outlook Actions: Issuer: RE/MAX, LLC Outlook, Remains Stable The assigned ratings are subject to review of final documentation and no material change to the size, terms and conditions of the transaction as advised to Moody's. RATINGS RATIONALE RE/MAX's Ba3 CFR reflects moderately high financial leverage following the acquisition of INTEGRA NA, small revenue scale relative to a broader set of business service peers, and intense industry competition to attract and retain agents. Support is provided by the protections offered by its 100% franchised business model, its highly profitable business, and very good liquidity. The strong RE/MAX brand recognition and leading market position drive the company's fairly predictable revenues, strong margins and substantial cash generation. In addition to its well-recognized global real estate brokerage RE/MAX brand, the company's credit profile also benefits from its Motto Mortgage brand in the US. The company's Motto brand is still small relative to RE/MAX but is growing rapidly as evidenced by the number of franchises sold and will play a significant part of the company's future growth. All financial metrics cited reflect Moody's standard adjustments. The SGL-1 Speculative Grade Liquidity rating reflects the company's very good liquidity supported by predictable free cash flow generation, substantial cash on hand, and low capital investment needs. Moody's expects that RE/MAX will fund itself through internally generated cash flow and cash on hand over the next 12-18 months. The company's cash balance was about $99 million as of March 31, 2021. Moody's expect the company to generate free cash flows (after dividends) in the $25-$30 million range in 2021. In combination with cash on hand, internal cash flows are sufficient to meet basic cash needs this year, including $10-$15 million in annual capex, around $50 million in member distributions, and reflecting the new $460 million first lien term loan, $4.6 million in term loan amortization per year. The company's new $50 million undrawn revolver expires in 2026, upsized from the existing $10 million revolver due December 2021. Moody's expects that the revolver will remain undrawn over the next 12-18 months. The size of the current commitment covers the company's fixed charges for a year. The revolver is expected to be subject to a springing financial maintenance covenant which comes into effect only when the revolver is drawn. Moody's does not expect the covenant to spring, but should the covenant be tested, covenant cushion is expected to be at least 35%. The Ba3 rating on the senior secured first lien credit facility, consisting of a $460 million term loan due 2028 and a $50 million revolver expiring 2026, reflects a PDR of Ba3-PD and a loss given default of LGD4. The first lien debt represents the preponderance of the capital structure and is thus rated the same as the CFR. The facility is secured by a first lien pledge of substantially all tangible and intangible assets of the company's domestic subsidiaries and 65% of the capital stock of first-tier foreign subsidiaries. The stable outlook reflects Moody's expectations for RE/MAX to successfully integrate INTEGRA NA and for mid-single digit global agent count growth such that leverage returns below 4x by FYE2022. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS While unlikely in the near term given the company's high pro forma leverage, the ratings could be upgraded if RE/MAX commits to maintaining conservative financial policies such that leverage is maintained below 3x as it continues to expand the size and scope of revenues through product and regional expansion. An upgrade will also require that RE/MAX maintains very good liquidity. The ratings could be downgraded if the company's financial policies become more aggressive, leverage is sustained above 4x beyond FYE2022, free cash flow to debt is sustained below 8%, or liquidity weakens. RE/MAX, LLC (RE/MAX) operates as a franchiser of real estate services in the U.S., Canada, and internationally and mortgage brokerage services in the U.S. RE/MAX derives its revenues primarily from continuing franchise fees, annual dues, broker fees, new franchise sales and renewals, and other revenue. RE/MAX, LLC is a subsidiary of RE/MAX Holdings Inc. (NYSE: RMAX) and is headquartered in Denver, Colorado. RE/MAX generated $268 million revenue as of LTM March 31, 2021. The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. REDWOOD EMPIRE: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Redwood Empire Lodging, LP 208 N. Lake Powell Boulevard Page, AZ 86040 Chapter 11 Petition Date: June 16, 2021 Court: United States Bankruptcy Court District of Arizona Case No.: 21-04678 Debtor's Counsel: Isaac M. Gabriel, Esq. QUARLES & BRADY LLP Rennaissance One Two North Central Avenue Phoenix, AZ 85004-2391 Tel: 602-230-4622 Email: Isaac.Gabriel@quarles.com Estimated Assets: $10 million to $50 million Estimated Liabilities: $10 million to $50 million The petition was signed by Debra Heckert, member. A full-text copy of the petition is available for free at PacerMonitor.com at: https://www.pacermonitor.com/view/NDHBTMI/REDWOOD_EMPIRE_LODGING_LP__azbke-21-04678__0001.0.pdf?mcid=tGE4TAMA List of Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ 1. Sonoma County Tax Collector Rohnert Park, CA $257,995 585 Fiscal Drive Santa Rosa, CA 95403 2. Best Western International Fees-Pages, AZ $104,151 P.O. Box 842700 Los Angeles, CA 90084-2700 3. City of Rohnert Park Bed Tax- $62,277 130 Avram Avenue Rohnert Park, CA Rohnert Park, CA 94928 4. Best Western International Fees- $61,123 P.O. Box 842700 Rohnert Park, CA Los Angeles, CA 90084-2700 5. Coconino County Treasurer Page, AZ $34,813 110 E. Cherry Avenue Flagstaff, AZ 86001-4627 6. CSI Networks Page, AZ $11,497 P.O. Box 363 Provo, UT 84317 7. S&K Inns of America Rohnert Park, CA $8,437 1080 NE Laurel Street Newport, OR 97365 8. California Office of Tourism Rohnert Park, CA $5,436 555 Capitol Mall, Ste. 465 Sacramento, CA 95814 9. CIG-2637 Rohnert Park, CA $3,956 P.O. Box 2093 Monterey, CA 93942 10. Page Utility Enterprises Page, AZ $3,893 640 Haul Rd. Page, AZ 86040 11. WCF Mutual Insurance Page, AZ $3,044 P.O. Box 26488 Salt Lake City, UT 84126-0488 12. A1 American Group Rohnert Park, CA $2,581 12386 Osbourne Place Pacoima, CA 91331 13. Ukiah Valley Rohnert Park, CA $2,289 Sanitation District 151 Laws Avenue Ukiah, CA 95482 14. DirectTV Rohnert Park, CA $2,086 P.O. Box 105429 Atlanta, GA 30348-5063 15. US Foods Inc. Page, AZ $2,003 P.O. Box 52531 Phoenix, AZ 85072-2531 16. CIG - 9001 Rohnert Park, CA $1,008 P.O. Box 2093 Monterey, CA 93942 17. Redd's Ace Hardware Page, AZ $929 82 S. Main Street Blanding, UT 84511 18. Ecolab Food Safety Rohnert Park, CA $927 P.O. Box 10512 Pasadena, CA 91189 19. California Dept. of Tax Rohnert Park, CA $871 and Fee Administration P.O. Box 942879 Sacramento, CA 94279 20. HD Supply Rohnert Park, CA $557 P.O. Box 509058 San Diego, CA 92150-9058 RESEARCH NOW: Moody's Affirms B2 CFR on Incremental $75MM Term Loan ------------------------------------------------------------------- Moody's Investors Service affirmed Research Now Group, LLC's (dba "Dynata") B2 corporate family rating and B2-PD Probability of Default Rating. Moody's also affirmed Dynata's B1 senior secured first lien instrument rating and Caa1 senior secured second lien rating. The outlook remains stable. The affirmation follows the issuance of an incremental $75 million term loan to the existing $873 million first lien term loan due December 2024. The company also recently extended its revolver maturity from December 2022 to June 2024 for a portion of the revolver. Proceeds from the incremental term loan will be used to pay down the revolver outstandings and add cash to the balance sheet. Affirmations: Issuer: Research Now Group, LLC Corporate Family Rating, Affirmed B2 Probability of Default Rating, Affirmed B2-PD Gtd Senior Secured First Lien Bank Credit Facility, Affirmed B1 (LGD3) Gtd Senior Secured Second Lien Bank Credit Facility, Affirmed Caa1 (LGD6) from (LGD5) Assignments: Issuer: Research Now Group, LLC Gtd Senior Secured First Lien Revolving Credit Facility, Assigned B1 (LGD3) Outlook Actions: Issuer: Research Now Group, LLC Outlook, Remains Stable RATINGS RATIONALE Dynata's B2 CFR reflects the company's highly leveraged capital structure with debt/EBITDA of 6.9x (Moody's adjusted) as of March 31, 2020. Pro forma for the incremental term loan leverage would be 7.3x. Exposure to cyclicality, recent deterioration of credit metrics due to the coronavirus pandemic, low free cash flow to debt, expectation for aggressive financial policies that includes frequent M&A also weigh on the credit. The pandemic caused credit metrics to decline as revenue dropped by low single digits in FY 2020 on a year-over-year basis. As a result, financial leverage increased to 6.7x as of the end of 2020 from 5.7x as of the end of 2019. Free cash flow to debt has been low and below 3% on a historical basis. Due to the lack of travel and other leisure activities there was a decline in demand for panelists from customers in many of the sectors where Dynata provides intelligence analysis. Demand also declined as a result of the recession stemming from the pandemic. Dynata benefits from its strong competitive position in its narrow niche market providing first party data on consumers and businesses. Moody's believes that the company has a competitive advantage due to its' difficult to replicate, sizable pool of survey panelists (about 60 million). The company's value proposition is that it recruits, curates and matches individual panelists with specific demographic characteristics to provide targeted results for customers that then helps them understand and analyze their target markets. Moody's expects the demand for surveys and data on consumers to regain its growth momentum as the economy rebounds from the pandemic, and then remain stable as businesses use their marketing budgets to target specific customers and gain greater insights on consumer behavior. Moody's expects the company to continue to acquire panelists and increase the size and depth of its pool of data, which will help in delivering specific needs from customers and obtain a broader and higher quality data set overall. The stable outlook reflects the view that Dynata is one of the largest collectors of first party data with a customer base that includes some of the largest market research and consulting firms. The outlook also incorporates the view that the market research industry is a stable industry and companies will continue to rely on outsourced information sources for marketing purposes. Moody's expects first party data to be an important source of information on consumers since the information is fully permissioned. This is an advantage that companies such as Dynata have over second- or third-party data providers since privacy concerns are playing an important role in collection of data. As a result, the demand for information on customers could be increasingly reliable on first party data providers as compared to second or third party data. Recent financial results for Dynata have been positive with revenue for 1Q 2021 showing momentum. Moody's expects FY 2021 revenue to be up in the mid-single digit area over FY 2020 and debt/ EBITDA (Moody's adjusted) is expected to decline to 6.6x by the end of FY 2021. The outlook also incorporates the expectation that the company will be able to generate free cash flow over the next 12 months and credit metrics will remain stable at the current rating level. Dynata has good liquidity, supported by a $75 million cash balance as of March 2021, a $95 million revolving facility that will be undrawn subsequent to this transaction and expected FCF/debt in the 3.5% - 4.5% range. The revolver includes a 5.5x first-lien springing senior secured net leverage covenant when 35% or more of the revolver is drawn. The company is expected to remain in compliance with the covenant. The ratings for the individual debt instruments incorporate Dynata's overall probability of default, reflected in the B2-PD rating, and the loss given default assessments for the individual instruments. The first lien credit facilities, consisting of the $95 million revolver expiring in December 2022 / June 2024 and a $948 million term loan due December 2024 are rated B1, one notch above the B2 CFR, with a loss given default assessment of LGD3. The B1 first lien instrument rating reflects the relative size and senior position ahead of the second lien senior secured term loan. The $250 million second lien senior secured term loan due December 2025 is rated Caa1, two notches below the CFR, with a loss given default assessment of LGD6. The Caa1 second lien senior secured rating reflects its junior ranking as well as its relative size within the capital structure. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded if the company demonstrates a track record of consistent revenue and earnings growth that leads to greater scale and if it exercises financial policies that support achieving and sustaining debt/EBITDA below 4.5x and EBITA/interest above 2.25x. In addition, a strong liquidity profile will have to be sustained for an upgrade to be considered. The ratings could be downgraded if increased competition, lower demand for data products or other factors result in declining revenue and lower profitability. Aggressive financial policies that include debt financed returns to shareholders that result in debt/EBITDA sustained above 6.5x and EBITA/interest approaching 1.25x (all metrics Moody's adjusted) would also cause ratings to be downgraded. Eroding liquidity and lower than expected free cash flow to debt would also pressure the ratings. Headquartered in Plano, Texas, Dynata LLC is a global leader in data collection through online, mobile and offline surveys used by market research firms, consulting firms, and corporate customers. New Insight Holdings, Inc. is the holding company and the guarantor of the bank credit facilities. Revenue for the LTM March 31, 2021 period was $626 million. New Insight Holdings, Inc. is indirectly owned by Court Square (60%) and HGGC (40%). The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. REX INC: Court Sets July 15 Plan Confirmation Hearing ----------------------------------------------------- The Bankruptcy Court for the Southern District of West Virginia has set for July 15, 2021 at 11 a.m. by telephone, the hearing to consider confirmation of the Amended Plan of Reorganization under Subchapter V of Chapter 11 of R.E.X. Inc. Objections to Plan confirmation must be filed by July 7. R.E.X., Inc. filed an Amended Plan on May 25, 2021. The Plan proposes to pay creditors from the cash flow from operations and from future income, and provides full recovery to all creditors. Events Leading to Bankruptcy Aside from the shopping center located off U.S. Route 60 in Barboursville, West Virginia, the Debtor also owns a 30,000 square foot building, which houses Billy Bob's Entertainment. The Debtor did fail to pay trust fund taxes owed to both the Internal Revenue Service and the West Virginia State Tax Department. The Plan treats of these tax obligations, as well as the real taxes the Debtor owed to the Sheriff-Treasurer of Cabell County, West Virginia. The State Tax Department assessed "successor liability" against the Debtor for unpaid consumer sales taxes and certain withholding taxes owed by Hurricane Plaza, the entity that operated Bill Bob's Entertainment from 2014 to 2017. Hurricane Plaza is owned by the Debtor's principals Rex and Barbara Donahue. The Debtor had previously filed an adversary proceeding challenging the successor liability claim of the West Virginia State Tax Department. That adversary proceeding will be dismissed as a part of the reconciliation of the overall claim of the West Virginia State Tax Department and the treatment of that claim in the Plan. Pre-petition, the Debtor has suffered from inadequate accounting services so that penalties and interest have accrued resulting from failure to file or delay in filing tax returns. The West Virginia State Tax Department had issued levies upon the tenants in the strip center, which issuance interrupted the Debtor's cash flow and resulted in the Debtor being unable to make payments to Community Trust Bank, the Debtor's secured lender. Then, came the pandemic and several of the tenants unilaterally discontinued making rent payments. Prior to the bankruptcy filing, Community Trust Bank had initiated foreclosure proceedings on the different parcels. Treatment of Claims under the Plan A. Class P-1 Class P-1 is the priority claim of the Internal Revenue Service for $99,874. The Debtor will pay this claim over a period of 60 months, plus statutory interest with monthly payments in the sum of $1,666. B. Class P-2 Class P-2 arose out of the Proof of Claim filed by The West Virginia State Tax Department for $551,575. The Claim consists of a secured claim for $40,808.98; a priority claim for $415,710; and an unsecured non-priority claim for $95,056. This claim, however, does not include the amount owed for the unpaid corporate franchise tax for the periods 2017, 2018, 2019 and 2020. Those returns will be filed and the amounts owed added to the claim. Class P-2 will be treated as follows: * the secured component of the State Tax Department's claim will be treated as fully secured and be paid in monthly payments at $856 each with interest at 9.25% per annum. The secured component of the claim of the State Tax Department may in fact not be secured since the State Tax Department's lien is junior to that of the secured claim of Community Trust Bank; * the priority component of the claim of the West Virginia State Tax Department shall be paid at the rate of $6,921 pursuant to Section 1129(a)(9)(C) of the Bankruptcy Code; and * the unsecured non-priority claim of the West Virginia State Tax Department shall be paid at $1,584 monthly over a period of 60 months. The Plan provides for a separate default provision in the event the Debtor would become delinquent on the tax payments or other payments under the Plan. The Debtor has retained the services of Paul Khoury, CPA to prepare missing tax returns to be filed with the Internal Revenue Service and the West Virginia State Tax Department. An accurate calculation of the taxes is a prerequisite for approval of a Plan. C. Class P-3 Class P-3 consists of the priority claim of the Sheriff of Cabell County, West Virginia for $69,593. The Debtor will seek permission from Community Trust Bank, with approval by the U.S. Bankruptcy Court for the Southern District of West Virginia, to use $34,000 of the money in an escrow account to be earmarked for these taxes. The balance of the claim of the State Tax Department will be paid at the rate of $1,000 per month until paid in full. All post-petition real property taxes shall be paid in the ordinary course of business when due. D. Secured Claim of Community Trust Bank The Debtor has entered into an adequate protection provision with Community Trust Bank which provides for interest only for a period of three months and resumption of the funding of escrow accounts. The Plan provides for payment to the Bank at $34,000 monthly, $11,700 of which will come directly from Outback, a tenant at the strip center. Post-confirmation Management Post-confirmation, Mark Donahue, the Debtor's manager, will be responsible for the operation of Billy Bob's Entertainment Center and the Putt Putt Golf Course, a mini golf course located at the Debtor's property. He will continue to serve as the operator of the Strip Center and be responsible for leasing and rent collection. Mr. Donahue will report to the Trustee regarding the status of all rent payments from tenants, and to Mr. Paul Khoury regarding receipts and disbursements. A "cram down" discharge under Section 1192 shall occur after the Debtor has completed all Plan payments. A copy of the Amended Plan dated May 25, 2021 is available for free at https://bit.ly/35mNBOI from PacerMonitor.com. About R.E.X. Inc. R.E.X., Inc., which has been operating and owning real estate since 1977, owns certain real property in West Virginia, including a shopping center located off U.S. Route 60 in Barboursville, which consists of space leased to certain shops and businesses. The Debtor filed a Chapter 11 bankruptcy petition (Bankr. S.D. W.Va. Case No. 20-30290) on July 27, 2020. The petition was signed by Rex Donahue, the company's manager. At the time of the filing, Debtor had estimated assets of between $1,000,001 and $10 million and liabilities of the same range. The Debtor has tapped Caldwell & Riffee, PLLC, as its legal counsel. Paul Khoury, CPA is employed as the Debtor's accountant. Michelle Steele is the Debtor's Subchapter V Trustee. RGN-GROUP HOLDINGS: Plan Contemplates Reorganization, Liquidation ----------------------------------------------------------------- RGN-Group Holdings, LLC and its debtor-affiliates filed a Chapter 11 Joint Plan and a corresponding Disclosure Statement on June 11, 2021. The Plan includes (i) the Plan of Reorganization for the Reorganizing Debtors and (ii) the Plan of Liquidation for the Liquidating SPE Debtors, dividing Debtors into the Liquidating SPE Debtors, the Excluded SPE Debtors (if any), and the Reorganizing Debtors. The Debtors experienced significant challenges as a direct result of the COVID-19 pandemic. Specifically, the occupancy rate at the Debtors' properties dropped, and many existing customers were unable or unwilling to meet their obligations to the Debtors under their office licensing agreements. As a result, the Debtors defaulted under certain leases, which triggered certain cross-defaults across the Debtors' lease portfolio. The Debtors filed the Chapter 11 Cases to prevent widespread enforcement of remedies under those leases, which would be detrimental to the Debtors' businesses. To the extent the Landlord with respect to the Unexpired Lease of a Liquidating SPE Debtor objects to, or votes against, the Plan, then such Liquidating SPE Debtor shall be an Excluded SPE Debtor. Excluded SPE Debtors are not party to the Plan, and Claims or Interests against any such Excluded SPE Debtors will not receive any treatment under, nor be governed by, the Plan. The Debtors' principal assets consist of their furniture, fixtures and equipment, their rights under their respective Franchise Agreements, Equipment Lease Agreements, Management Agreements, Guaranty Fees, Leases, as well as their right to receive the net Occupancy Fees from the operation of their respective Centers. Liquidating SPE Debtors' Settlement The Debtors' business is principally organized around SPE entities formed for the specific purpose of entering into Leases. During these Chapter 11 Cases, the Debtors have determined in their reasonable business judgment to reject certain SPE Debtor Leases, which Lease rejections have been approved by the Bankruptcy Court. Contemporaneously with rejecting such Leases, the Debtors have closed the respective Centers and wound down operations. These SPE Debtors no longer seek to retain their sole material asset or conduct operations and, accordingly, seek to proceed to Confirmation pursuant to a Plan of Liquidation. Pursuant to the Liquidating SPE Debtors' Settlement, Regus Corporation will contribute the Liquidating SPE Debtors' Settlement Amount to the Liquidating SPE Debtors in exchange for the full and final satisfaction and release of any and all claims and/or Causes of Action held by the Liquidating SPE Debtors against Regus Corporation and certain of its Affiliates and Related Parties. As further consideration for such release, Regus Corporation, in its capacity as DIP Lender and Prepetition Lender, agrees to release and waive any DIP Claims and Prepetition Credit Agreement Claims, respectively, it holds against the Liquidating SPE Debtors, solely to the extent such Liquidating SPE Debtor is not an Excluded SPE Debtor. The Debtors are each single-member, member-managed Delaware limited liability companies that are indirect or direct, wholly-owned subsidiaries of non-Debtor Regus Corporation. Regus Corporation is a wholly-owned subsidiary of non-Debtor Regus Group Limited, a company organized under the laws of the United Kingdom, which in turn, is a wholly-owned subsidiary of non-Debtor IWG Group Holdings Sarl, a company organized under the laws of Luxembourg. Non-Debtor IWG Group Holdings Sarl is a wholly-owned subsidiary of non-Debtor IWG plc, the ultimate parent of the IWG corporate structure. The amount of claims asserted against the Debtors are: H Work, LLC $87,791,347 RGN-NBC, LLC $57,128,139 RGN-Group Holdings, LLC $530,675,501 Debtor SPEs $168,426,480 The Debtor entities that will be Liquidating SPE Debtors are (i) RGN-Los Angeles XXV, LLC; (ii) RGN-Atlanta XXXV, LLC; (iii) RGN-Columbus IV, LLC; (iv) RGN-Chicago XLIV,LLC; (v) RGN-Portland VII, LLC; (vi) RGN-San Jose IX, LLC; (vii) RGN-New York V, LLC; and (viii) RGN-Chicago XVI, LLC. Classes of Claims against Reorganizing Debtors Class 1 Other Secured Claims Class 2 Other Priority Claims Class 3 Prepetition Credit Agreement Claims Class 4A Contingent Guaranty Claims against Guarantor Debtors Class 4B Non-Contingent Guaranty Claims against Guarantor Debtors Class 5A General Unsecured Claims against Guarantor Debtors Class 5B General Unsecured Claims against Assuming SPE Debtors Class 5C General Unsecured Claims against Rejecting SPE Debtors Class 6A Intercompany Claims against Guarantor Debtors Class 6B Intercompany Claims against Assuming SPE Debtors Class 6C Intercompany Claims against Rejecting SPE Debtors Class 7A Existing Interests in Guarantor Debtors Class 7B Existing Interests in Assuming SPE Debtors Class 7C Existing Interests in Rejecting SPE Debtors Class 3 (Allowed Prepetition Credit Agreement Claim) and Class 4A (Allowed Contingent Guaranty Claims) shall receive reinstatement of their Allowed Claims to the extent that such holders do not agree to other treatments. Classes 1, 2, 4B, 5A, 5B, and 5C may receive payment in full, in cash, in full and final settlement of their Allowed Claims, which payment shall occur on the later of the Effective Date or in the ordinary course. Claims in Classes 6A, 6B, 6C, 7A, 7B and 7C shall be reinstated on the Effective Date. All of the Claims against the Reorganizing Debtors are unimpaired, are deemed to accept the Plan, and therefore are not entitled to vote on the Plan. Claims against Liquidating SPE Debtors * Class L1 Other Priority Claims against * Class L2 Prepetition Credit Agreement Claims * Class L3 General Unsecured Claims against Liquidating SPE Debtors * Class L4 Intercompany Claims against Liquidating SPE Debtors * Class L5 Existing Interests in Liquidating SPE Debtors Classes L3, L4 and L5 are Impaired under the Plan. Classes L4 and L5 are deemed to reject the Plan and therefore are not entitled to vote. Only Holders in Class L3 are entitled to vote on the Plan. Each holder of a Class L3 Allowed General Unsecured Claim against a Liquidating SPE Debtor shall receive its pro rata share of the applicable Liquidating SPE Debtor Distribution Pool in cash on the Effective Date. Releases under the Plan The Plan provides that all Holders of Claims or Interests who are entitled to vote on the Plan who vote to accept the Plan or are Unimpaired under the Plan will be granting a release of any claims or rights they have or may have as against many individuals and Entities. Proposed Plan Confirmation Timeline * July 21, 2021 at 4 p.m. ET is the Voting Deadline for Liquidating Debtors; * July 21, 2021 at 4 p.m. ET is Disclosure Statement, Plan Confirmation and Cure Objection Deadline; * July 26, 2021 at 12 p.m. ET is the Confirmation Brief and Reply Deadline; * July 28, 2021 at 10 a.m. ET is the Combined Disclosure Statement and Confirmation Hearing Date. A copy of the Disclosure Statement is available for free at https://bit.ly/3wp3kZu from Epiq Corporate Restructuring, claims agent. About RGN Group Holdings LLC RGN-Group Holdings, LLC and its affiliates are primarily engaged in renting and leasing real estate properties. On Aug. 17, 2020, RGN-Group Holdings and its affiliates sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D. Del. Lead Case No. 20-11961). At the time of the filing, RGN-Group Holdings disclosed total assets of $1,005,956,000 and total liabilities of $946,016,000. Judge Brendan Linehan Shannon oversees the cases. The Debtors have tapped Faegre Drinker Biddle & Reath LLP as their bankruptcy counsel, Alixpartners as financial advisor, Duff & Phelps LLC as restructuring advisor, and Epiq Corporate Restructuring LLC as claims and noticing agent. Natasha Songonuga is the Subchapter V trustee for the estates of RGN-Group Holdings, LLC and its affiliates. The trustee is represented by Gibbons P.C. The Official Committee of Unsecured Creditors has retained FTI Consulting, Inc. as financial advisor; and Cole Schotz P.C. and Frost Brown Todd LLC as Co-Counsel. RICHARD W TRACHUK: Court Approves Disclosure Statement ------------------------------------------------------ Judge Robert A. Mark has entered an order conditionally approving the Disclosure Statement explaining the Plan filed by Richard W. Trachuk, Inc. The hearing on final approval of the Disclosure Statement and to consider confirmation of the Plan will be on Aug. 5, 2021 at 1:30 p.m. in U.S. Bankruptcy Court, C. Clyde Atkins United States Courthouse 301 North Miami Ave. Courtroom #4 Miami, FL 33128. The deadline for objections to final approval of the disclosure statement and confirmation of the Plan will be on August 2, 2021. The deadline for filing ballots accepting or rejecting the Plan will be on July 29, 2021. The deadline for objections to claims will be on July 22, 2021. About Richard W. Trachuk Inc. Richard W. Trachuk, Inc. sought protection for relief under Chapter 11 of the Bankruptcy Code (Bankr. S.D. Fla. Case No. 20-24060) on Dec. 29, 2020. At the time of the filing, the Debtor had estimated assets of less than $50,000 and liabilities of between $50,001 and $100,000. Judge Robert A. Mark oversees the case. Van Horn Law Group, P.A., led by Chad Van Horn, Esq., serves as the Debtor's legal counsel. ROYAL CARIBBEAN: Moody's Rates New $650MM Sr. Unsecured Notes 'B2' ------------------------------------------------------------------ Moody's Investors Service assigned a B2 rating to Royal Caribbean Cruises Ltd.'s planned $650 million senior unsecured note issuance. The company's other ratings are unchanged including its B1 corporate family rating, B1-PD probability of default rating, Ba2 senior secured rating, existing B2 senior unsecured rating and speculative grade liquidity rating of SGL-2. The outlook remains negative. Proceeds of the planned $650 million issuance will be used to refinance the 7.25% senior secured 2025 notes issued by its subsidiary, Silversea Cruise Finance Ltd. This refinancing transaction will further improve Royal Caribbean's liquidity by extending its maturity profile and reducing its overall cost of debt. The ratings under Silversea Cruise Finance Ltd. will be withdrawn upon its repayment in full and the closing of this transaction. Assignments: Issuer: Royal Caribbean Cruises Ltd. Senior Unsecured Regular Bond/Debenture, Assigned B2 (LGD4) RATINGS RATIONALE Royal Caribbean's credit profile is supported by its good liquidity which will enable the company to survive this extended period of suspended operations in the US and modest ramp up when US operations begin this summer. The company also benefits from its solid market position as the second largest global ocean cruise operator based upon capacity and revenue which acknowledges the strength of its brands. Royal Caribbean is well diversified by geography, brand, and market segment. Moody's view is that over the long run, the value proposition of a cruise vacation as well as a group of loyal cruise customers supports a base level of demand once health safety concerns have been effectively addressed. In the short run, Royal Caribbean's credit profile will be dominated by the length of time that US cruise operations continue to be suspended, the path forward to resuming operations and the resulting impacts on the company's cash consumption and its liquidity profile. The normal ongoing credit risks include the company's current exceptionally high leverage, the highly seasonal and capital intensive nature of cruise companies and the cruise industry's exposure to economic and industry cycles, weather incidents and geopolitical events. The negative outlook reflects Royal Caribbean's weak credit metrics, the continued uncertainty around the resumption of US cruise operations and the pace and level of recovery in demand that will enable the company to reduce its leverage once US operations resume. Royal Caribbean's liquidity is good with total liquidity as of March 31, 2021 of $5.8 billion, consisting of cash and cash equivalents of $5.1 billion and a $0.7 billion 364-day term loan facility commitment available to draw through August 12, 2022. The company's total revolver commitments of $3.2 billion remain fully drawn at March 31, 2021. Revolver commitments include $3.0 billion that expires in 2024 and $0.2 billion that expires in October 2022. The company has entered into several amendments of its non-export credit facilities and certain of its credit card processing agreements to extend the waiver of the financial covenants through and including the third quarter of 2022. During the waiver period the company is subject to a monthly-tested minimum liquidity covenant of $350 million. The amendments also modified the manner in the covenants are calculated (temporarily in certain cases and permanently in others) as well as the levels at which the net debt to capitalization covenant will be tested during the period commencing immediately following the end of the waiver period and continuing through the end of 2023. The company's ability to access alternate forms of liquidity are deemed to be modest in the current operating environment. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING The outlook could be revised to stable if cruise operations resume in the US with occupancy levels, booking trends and pricing that would support positive free cash flow generation, the ability to repay debt and earnings growth trajectory that supports credit metrics returning to levels more in line with its current rating. Ratings could be upgraded if the company is able to maintain leverage below 4.5x with EBITA/interest expense of at least 3.0x. Ratings could be downgraded if the company's liquidity weakened in any way, including a monthly cash burn rate higher than currently expected without a corresponding increase in cash deposits received. The ratings could also be downgraded if any signs emerge that the ramp up in operations will not enable the company to generate EBITDA of at least 50% of 2019 levels in 2022 or if it appears that leverage will remain above 6.0x over the longer term. Royal Caribbean (operating under the name Royal Caribbean Group) is a global vacation company that operates three wholly-owned cruise brands, including Royal Caribbean International, Celebrity Cruises and Silversea. Net revenue for fiscal 2020 was $1.7 billion. The principal methodology used in this rating was Business and Consumer Service Industry published in October 2016. SAN LUIS & RIO: Trustee Taps Fletcher & Sippel as Special Counsel ----------------------------------------------------------------- William A. Brandt, Jr., the appointed trustee in the Chapter 11 case of San Luis & Rio Grande Railroad, Inc., seeks approval from the U.S. Bankruptcy Court for the District of Colorado to employ Fletcher & Sippel LLC as special counsel. The trustee needs a special counsel to provide legal assistance in connection with the Debtor's business operations, including but not limited to, contracts, employment matters, litigation management, risk management, insurance, compliance, asset sales and all railroad regulatory related issues. The hourly rates of the firm's attorneys and staff are as follows: Attorneys $180 - $300 per hour David Michaud $220 per hour Paralegals $90 per hour In addition, the firm will seek reimbursement for expenses incurred. Michael Barron, Esq., a member at Fletcher & Sippel, disclosed in a court filing that the firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Michael J. Barron, Esq. Fletcher & Sippel LLC 29 North Wacker Dr., Suite 800 Chicago, IL 60606-3208 Telephone: (312) 252-1500 Facsimile: (312) 252-2400 Email: mbarron@fletcher-sippel.com About San Luis & Rio Grande Railroad San Luis & Rio Grande Railroad, Inc., operates the San Luis & Rio Grande Railroad. On Oct. 16, 2019, an involuntary Chapter 11 petition was filed against San Luis & Rio Grande Railroad by creditors, Ralco LLC, South Middle Creek Road Association and The San Luis Central Railroad Co. (Bankr. D. Colo. Case No. 19-18905). The petitioning creditors are represented by Brownstein Hyatt Farber Schrec and Graves Dougherty Hearon & Moody. Judge Thomas B. McNamara oversees the case. Williams A. Brandt Jr. was appointed as Chapter 11 trustee for San Luis & Rio Grande Railroad. The trustee tapped Markus Williams Young & Hunsicker LLC as legal counsel, Fletcher & Sippel LLC as special counsel, and D'Almeida Consulting, LLC as financial consultant and expert. SBL HOLDINGS: Fitch Assigns 'BB' Rating to Series B Preferred Stock ------------------------------------------------------------------- Fitch Ratings has assigned a rating of 'BB' to SBL Holdings, Inc.'s (SBLH) (Issuer Default Rating [IDR] BBB) issuance of Series B non-cumulative perpetual preferred stock. Existing ratings assigned to SBLH and its affiliates, including its primary insurance operating subsidiary Security Benefit Life Insurance Company, are unaffected by today's rating action. KEY RATING DRIVERS The rating assigned to the Series B preferred stock reflects standard notching as per Fitch's insurance rating criteria and is rated two notches below SBLH's IDR based on 'Poor' recovery expectations, with one additional notch for 'minimal' non-performance risk. Fitch's approach for notching reflects the regulatory environment of the U.S., which is assessed as 'Effective' and classified as following a Ring Fencing approach. Based on Fitch's insurance rating criteria, the new non-cumulative perpetual preferred stock is expected to receive 100% equity credit in evaluating financial leverage. The Series B preferred stock has no maturity, dividends are noncumulative, and the company has the option to defer them at their discretion. The Series B securities rank equally with the company's series A preferred shares and are subordinated to the company's outstanding senior unsecured notes. Net proceeds from this new issue are expected to be used to make a capital contribution to Security Benefit Life Insurance Co. and/or for general corporate purposes. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- A material decline in Fitch's view of asset risk (including the decline in short-term loans as a percentage of invested assets) while maintaining PRISM score well into the "Strong" category; -- Financial leverage below 20%; -- GAAP interest coverage greater than 10x; -- GAAP ROE of 15% or greater. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Deterioration in the quality of the asset portfolio; -- Sustained deterioration in capital resulting in a Prism score below the 'Strong' category; -- Deterioration in SBL operating performance such that GAAP ROE falls below 10%; -- GAAP interest coverage of less than 7x; -- Financial leverage above 25%. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. SECURE ENERGY: Fitch Assigns FirstTime 'B+' LT IDR, Outlook Stable ------------------------------------------------------------------ Fitch Ratings has assigned a first-time Long-Term Issuer Default Rating (IDR) to Secure Energy Services Inc. (SES) of 'B+'. Additionally, Fitch has assigned a senior unsecured rating of 'B+'/'RR4' to SES's proposed issuance of senior unsecured notes. The Rating Outlook is Stable. Proceeds from the senior unsecured note offering will be held in escrow pending the closing of the announced SES-Tervita Corporation (TEV) merger and be returned to noteholders should the transaction not proceed. Upon merger close, the unsecured notes proceeds will be used to retire a portion of debt acquired as part of the merger. Fitch has reviewed the preliminary documentation for the proposed notes offering. The assigned ratings assume there will be no material variation from the draft previously provided. KEY RATING DRIVERS WCSB Activity Exposed: SES and TEV both provide cost-effective and essential services to E&P customers, among others, in Western Canada and North Dakota and, as such, Fitch would expect demand for those services to remain healthy so long as oil is produced in those regions. However, activity levels in Western Canada and North Dakota has driven and will continue to drive to the degree to which SES and TEV services are required, in Fitch's view. With the majority of combined EBITDA post-merger expected to come from fixed-fee contracts without minimum volume commitments and with terms of less than one year, the company will remain exposed to production levels as well as the pace of drilling and completion in the WCSB (and ND). Risks remain from a prolonged period of low commodity prices leading to reduced oil and gas activity. Contracts Provide Some Stability: The combined SES-TEV will have some long-term contract cover through its Kerrobert and East Kaybob crude pipeline systems (SES) as well as the Pipestone (SES) and Montney (TEV) water disposal facilities. These longer-term take-or-pay-type and area dedication contracts provide stability and visibility into future revenue and cash flow for the combined entity. Fitch would consider the further contracting of these assets and/or the addition of other long-term contracted assets as positive for credit quality. Combination Provides Size and Scale Benefits: SES' EBITDA is expected to more than double with the with the TEV merger transaction. With synergy realization, Fitch anticipates the combined entity could reach $400 million within 18 months of deal close. The increased size and scale should yield material operational efficiencies leading to a stronger cost structure and better customer offering. Additionally, Fitch sees an increased business robustness, better equipping the combined entity with tools to weather a future downturn in commodity prices/activity. Fitch would look to the delivery of targeted synergies as well as a continued expansion of EBITDA toward $500 million annually as an improvement in the combined credit profile. Strong Leverage for the Rating: The targeted post-merger capital structure for SES-TEV is expected to contain leverage that is strong for the rating category. By Fitch's estimation, 2021 leverage will be just over 5x, however on a pro forma basis, including a full year of EBITDA from TEV, 2021 leverage would be closer to 3.5x. Additionally, Fitch forecasts leverage to decline over the forecast period to below 2x as free cash flow generated is allocated towards debt reduction, consistent with current management guidance calling for leverage below 2.5x within two years of transaction close. A steady quarterly decrease in outstanding revolver balance, post-merger, supported by prudent capital spending and flat dividend payments leading to positive FCF (before debt repayment) would be tangible indicators of credit strength, in Fitch's view. Customer Can Become Competitor: For a portion of SES and TEV businesses, a large number of E&P companies handle the services SES and TEV provide in house. It is Fitch's view that the trend of producers outsourcing more non-E&P activities, to better focus on core strengths and achieve improved capital efficiencies, will continue. However, should the cost to provide service become too high or there is a larger industry shift toward doing more in-house, the combined SES-TEV businesses not operating under long-term contracts may see financial results deteriorate. Additionally, the recent trend of upstream consolidation has both positive and potential negative implications for the combined SES-TEV. Larger producers may be more willing to sign long-term contracts for service as their more businesses are more robust. Conversely, a larger producer may find it more economical to handle produced water, for example. It is Fitch's view that ultimately consolidation is positive for the industry as it typically leads to lower costs and consequently improves resiliency. DERIVATION SUMMARY SES is somewhat unique relative to Fitch's midstream coverage given its diversification along the midstream value chain, including the operation of Class I & II landfills in Western Canada, combined with its structure as a standalone corporate entity. From a business line perspective, SES operates crude oil gathering, processing and transportation systems, among others, concentrated in a single basin, effectively, similar to Oryx Midstream Holdings LLC (Oryx; B/Positive) and Medallion Midland Acquisition, LLC (MEDMID; B+/Stable). Similar to WaterBridge Midstream Operating LLC (WBR; B-/Negative), SES operates produced and waste water treatment and disposal assets. Lastly, while little direct business line overlap, Precision Drilling Corporation (PD; B+/Stable) is a peer insofar as it is exposed to Canadian oil & gas activity and features a standalone corporate structure. As a standalone corporate entity, SES is dissimilar to sponsor-owned Oryx, MEDMID and WBR. SES, similar to peers, has limited direct commodity price exposure. Roughly 95% of EBITDA is generated from fixed-fee contracts and/or (non-commodity) fee-based service agreements. However, most of the fixed-fee contracts and/or fee-based service agreements do not contain significant minimum volume commitments and as such SES, similar to peers, is exposed to producer volume changes. While SES provides services in multiple plays in the WCSB, Fitch views its exposure to specific basin economics as similar to a single-basin G&P issuer, given the overarching exposure to Canadian crude differentials. SES benefits from a mix of take-or-pay-type and area dedication contracts with durations of greater than one year remaining; however, these contracts make up a smaller relative proportion of overall EBITDA compared with Oryx, MEDMID and WBR. Outside of two crude systems and one water system, the majority of SES revenue comes from fixed-fee contracts and/or fee-based service agreements of 3 months or less. This results in a weaker credit profile for SES, compared to Oryx, MEDMID and WBR. The combined SES-TEV will have a broader relative customer base including customers outside of the oil & gas industry (specifically rail operators, metals & mining and large industrial companies). Additionally, approximately 75% of expected revenue from the pro forma top 10 customers will be from investment-grade counterparties; however, without a portfolio of long-term take-or-pay contracts, the relative importance of customer credit quality is reduced and is not at, this time, a differentiating credit factor. SES, post-TEV merger close, is expected to have annual run-rate EBITDA in excess of $300 million. This compares favorably with Oryx, MEDMID and WBR. Pre-2020, PD reported EBITDA well in excess of $300 million. Fitch views the financial robustness afforded to larger relative scale, as measured by an EBITDA run-rate of $300 million per annum or greater, supportive of higher credit quality. Leverage, post-TEV merger close, is expected to be around 3.5x, on a pro forma trailing-twelve-month basis. Fitch forecasts leverage to decrease to below 2.5x by the end of 2023. This compares favorably with year-end 2021 leverage of 5.6x-5.9x at Oryx, 5.3x at MEDMID, 9.5x-10.0x at WBR and 5.1x at PD. Fitch views SES's lower expected leverage as a differentiating credit factor. Outsized event risk is shared by each of SES, Oryx, MEDMID and WBR, given the single-basin exposure. However, the combinations of SES's larger relative size, as measure by EBITDA, and meaningfully lower expected leverage reflects a comparably stronger credit profile. Compared with MEDMID, SES's size and leverage advantage is offset by MEDMID's much larger portion of EBITDA from long-term contracts as well as stronger producer expectations supporting targeted deleveraging. Size/scale and leverage differences more than offset contract portfolio duration and cause a one-notch separation between the IDRs of Oryx and SES. Lastly, compared with WBR, the significant leverage divergence, as well as larger relative size and scale, lead to a two-notch separation from the SES IDR. KEY ASSUMPTIONS Fitch's key assumptions Within the rating case for the issuer include: -- Oil and gas production and development activity in Western Canada and North Dakota consistent with a Fitch base case West Texas Intermediate (WTI) assumption of $55/bbl in 2021 before moving to a $50/bbl long-term price assumption; -- The SES-TEV merger transaction closes by the end of 3Q21. A small number of assets are assumed to be divested/decommissioned as part of the merger process, leading to an immaterial reduction in expected combined EBITDA; -- SES attains a new $800 million first lien secured credit facility, which is used to repay existing SES first and second lien facilities and existing TEV first lien debt, upon merger close. Additionally, a new $30 million unsecured credit facility is attained from Export Development Canada, replacing SES's existing $75 million unsecure bilateral LC facility; -- Proceeds from the proposed issuance of senior unsecured notes at SES are used to retire a portion of the existing second lien secured notes currently held at TEV, post-merger close; -- Meaningful overhead and operating cost synergies are realized over the forecast period; -- Dividends remain at current level through 2023. FCF generated is used to reduce outstanding credit facility borrowings; -- CAD/USD rate of $1.25 over the forecast period; -- The recovery analysis assumes that Secure Energy Services Inc. would be considered a going-concern in bankruptcy. Fitch has assumed a 10% administrative claim (standard). The going concern EBITDA estimate of $255 million reflects Fitch's view of a sustainable, post-reorganization EBITDA level upon which Fitch bases the valuation of the company. As per criteria, the going concern EBITDA reflects some residual portion of the distress that caused the default; -- Fitch used a 6x EBITDA multiple to arrive at SES's going concern enterprise value. The multiple is in line with recent reorganization multiples in the energy sector. There have been a limited number of bankruptcies and reorganizations within the midstream space, but bankruptcies at Azure Midstream and Southcross Holdco had multiples between 5x and 7x by Fitch's best estimates. In Fitch's bankruptcy case study report "Energy, Power and Commodities Bankruptcies Enterprise Value and Creditor Recoveries," published in April 2019, the median enterprise valuation exit multiplies for 35 energy cases for which this was available was 6.1x, with a wide range of multiples observed. RATING SENSITIVITIES Factor that could, individually or collectively, lead to positive rating action/upgrade: -- A positive rating action is not anticipated in the near-term; however, Fitch may look to take positive rating action should minimum volume commitment contracts with a weighted average duration remaining of three years or greater were to make up 25% or more of total EBITDA and leverage, defined as total debt with equity credit to operating EBITDA, were expected to be below 4.0x on a sustained basis. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Leverage, defined previously, above 5.0x for a sustained period; -- A negative rating action may be considered if annual run rate EBITDA were expected to remain below $300 million for a sustained period of time; -- Impairments to liquidity including expectations for Adjusted EBITDA Interest coverage to be sustained below 3.0x; -- An inability to close the announced Tervita merger transaction, as expected. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Sufficient Liquidity: SES had cash on the balance sheet of $17 million and TEV had a cash balance of $21 million, as of March 31, 2021. The post-merger capital structure is expected to include a new $800 million first lien secured revolver, of which just under $500 million is expected to be drawn at transaction close. Additionally, the combined company is expected to have an unsecured bilateral LC credit facility in place for $30 million. Given the relatively low working capital and sustaining capital requirements of the business, the more than $300 million in available revolver capacity, in addition to cash on hand, is sufficient, in Fitch's view. The company's expected debt maturities include the first lien revolver maturing in 2024, the US400 million second lien secured notes due in 2025 and the proposed senior unsecured notes to mature in 2026. ISSUER PROFILE Secure Energy Services Inc. is a service provider to upstream oil and natural gas companies in Western Canada and the Northern U.S. SES owns and operates a network of midstream processing and storage facilities, crude oil and water pipelines, and crude by rail terminals. SES also provides environmental and fluid management services. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. SKYLINE RIDGE: Cinco's Substantial Contribution Claim OK'd ---------------------------------------------------------- Cinco Soldados LLC is entitled to an $89,462 administrative expense claim for its substantial contribution in the Chapter 11 case of Skyline Ridge, LLC, Chief Bankruptcy Judge Brenda Moody Whinery in Arizona ruled. The claim represents fees and costs incurred by Cinco's counsel. Skyline opposed, arguing that Cinco is not a creditor and has not met the heavy burden of proving that a substantial contribution award is justified. Skyline argues that rather than seek to benefit the estate, Cinco has worked against the estate by pursuing confirmation of a self-interested plan that has diminished the bankruptcy estate by millions of dollars. Skyline further argues that to the extent the Court finds a basis to allow Cinco an administrative expense claim, the requested fees are unreasonable in relation to the amount of work performed and actual benefit conferred upon the estate, and should be substantially reduced. On June 29, 2018, the Debtor filed the Debtor's Plan of Reorganization Dated June 29, 2018, which generally provided for payments to creditors over time to be funded in part through what appeared to be litigation proceeds, which were not adequately described, in a priority determined by the Initial Debtor Plan. The Initial Debtor Plan contained material deficiencies, was facially unconfirmable, and provided for protracted litigation with many of the non-insider general unsecured claimants. On July 10, 2018, the Debtor filed a 1st Amended Plan of Reorganization Dated July 10, 2018, and a disclosure statement. Like the Initial Debtor Plan, the Debtor's First Amended Plan generally provided for payments to creditors over time, and did not materially improve the Debtor's proposed treatment of the claims in this case or provide for a greater assured return to creditors. Like the Initial Debtor Plan, the Debtor's First Amended Plan presumed continued litigation of many of the disputed, contingent, and/or unliquidated claims in this case, and relied upon unspecified, speculative litigation proceeds. At Cinco's behest, the Court terminated the Debtor's exclusivity periods. Shortly thereafter, Cinco filed a competing Plan of Reorganization Dated September 18, 2018. The Initial Cinco Plan generally proposed to pay claims in full promptly after the effective date, on the date the claim became allowed, or as otherwise agreed by the parties, using funds generated from a settlement between Cinco and the Debtor. Pursuant to various stipulations, the Initial Cinco Plan provided for the resolution and payment of many of the disputed non-insider general unsecured claims. On September 27, 2018, the Debtor filed the 2nd Amended Plan of Reorganization Dated September 27, 2018. The Second Amended Plan proposed (1) payment of administrative expense claims pursuant to the Code; (2) payment of secured claims in full or in stipulated amounts within one year of the effective date of the plan; (3) payment of allowed non-insider general unsecured claims in 36 equal monthly installments, with interest at the federal statutory rate, with payments to commence upon the earlier of payment in full of all claims of higher priority or one year after the effective date; and (4) payment of allowed insider general unsecured claims in full with interest at the federal statutory rate upon the earlier of the time all claims of a higher priority had been paid in full, or five years after the effective date. The Second Amended Plan presumed continued litigation with some of the largest non-insider general unsecured claims in this case, with an unknown cost to the estate. After certain Court-ordered changes to the respective disclosure statements were made, the Court approved the parties' disclosure statements, and set the competing Initial Cinco Plan and Debtor's Second Amended Plan for contested confirmation hearings. The Debtor sold numerous parcels of real property and used a portion of the net sale proceeds to pay certain secured debts, including all of the debt owed to Northern Trust Company, the largest secured creditor in this case. During this period of time, certain other secured debts were paid from the sales of property owned by non-debtor parties. As a result of these property sales, certain of the Debtor's pre-petition secured debts totaling in excess of $1.5 million were satisfied in full. The Debtor also paid all of its pre- and post-petition real property tax debt, albeit without obtaining prior Court approval. The remaining secured classes and the insider general unsecured class voted to accept the Debtor's Second Amended Plan and to reject the Initial Cinco Plan. The non-insider general unsecured classes voted to accept the Initial Cinco Plan and to reject the Debtor's Second Amended Plan. The Court conducted an evidentiary hearing on the competing Debtor's Second Amended Plan and Initial Cinco Plan, which began in December 2019 and concluded in April 2020. On June 10, 2020, the Court issued its Ruling and Order Regarding Plan Confirmation, in which the Court denied confirmation of both the Initial Cinco Plan and Debtor's Second Amended Plan, but granted the parties leave to amend their respective plans to rectify the deficiencies set forth in the Ruling and Order. Thereafter, the Debtor filed a Third Amended Plan of Reorganization Dated July 10, 2020, and Cinco filed an Amended Plan. After further briefing, the Court issued its Memorandum Decision Regarding Confirmation of Amended Plans of Reorganization, in which the Court concluded that Cinco's Amended Plan was the only plan before the Court that satisfied the requirements for confirmation. On November 20, 2020, the Court entered the Confirmation Order denying confirmation of the Debtor's Third Amended Plan and confirming Cinco's Amended Plan. The effective date of Cinco's Amended Plan timely occurred on February 19, 2021, on which date, among other things, the settlement payment which provided funding for Cinco's Amended Plan was wired by Cinco to the plan disbursing agent to be distributed to creditors pursuant to the terms of the Amended Plan. Skyline has appealed the Confirmation Order. However, there is no stay pending appeal in effect. The Court has already determined that Cinco is a creditor in this case. Cinco filed a proof of claim in an unspecified amount for damages, and although the Debtor objected to Cinco's claim, the Debtor did not pursue its claim objection. Further, the claim objection was settled as part of Cinco's Amended Plan. According to Judge Whinery, Cinco's participation in this case resulted in the only confirmable plan proposed in this case. "That confirmed plan of reorganization provides for prompt, full payment to creditors, with interest, and leaves the Reorganized Debtor in a solvent position, with substantial unencumbered assets. Given that Cinco is only seeking fees and costs for a relatively limited period of time, additional estate assets are preserved for the benefit of creditors and Skyline's equity security holder," she held. There is no dispute that the estate is solvent and that there are sufficient funds to pay any administrative expense claim that may be allowed, Judge Whinery said. A copy of the Court's June 14, 2021 Ruling and Order is available at: https://www.leagle.com/decision/inbco20210616534 About Skyline Ridge Based in Tucson, Ariz., Skyline Ridge, LLC, is an Arizona limited liability company categorized under residential contractor. Skyline Ridge filed for Chapter 11 bankruptcy protection (Bankr. D. Ariz. Case No. 18-01908) on March 1, 2018. In the petition signed by Ahmad Zarifi, managing member and sole owner, the Debtor estimated assets at $1 million to $10 million and liabilities at the same range. Judge Brenda Moody Whinery oversees the case. The Debtor hired Michael Baldwin, PLC and Engelman Berger, P.C. as its legal counsel; and Keegan Linscott & Kenon, P.C. as its accountant. On November 20, 2020, the Court confirmed Cinco Soldados LLC's Amended Chapter 11 Plan and denied confirmation of the Debtor's Third Amended Plan. The effective date of Cinco's Amended Plan timely occurred on February 19, 2021. Christopher Linscott has been appointed as Disbursing Agent under Cinco's Amended Plan. Cinco is represented in the case by Lewis Roca Rothgerber Christie LLP. STAN JOSEPH CATERBONE: District Court Won't Revive Ch.11 Case ------------------------------------------------------------- District Judge Edward G. Smith of the U.S. District Court for the Eastern District of Pennsylvania tossed Stan Joseph Caterbone's appeal from the bankruptcy court's order dismissing his Chapter 11 bankruptcy petition for his failure to pay the required fee. The District Court said the pro se appellant failed to timely file his appeal and, as such, the court lacks jurisdiction to hear this appeal. A copy of the Court's June 14, 2021 Memorandum Opinion is available at: https://www.leagle.com/decision/infdco20210616897 Stan Joseph Caterbone filed a Chapter 11 petition (Bankr. E.D. Pa. Case No. 21-10265) on January 28, 2021. On February 3, 2021, the Honorable Patricia M. Mayer entered an order informing Caterbone that the bankruptcy court may dismiss the case if he did not file or submit various documents that he should have submitted with his bankruptcy petition pursuant to Rule 1007 of the Federal Rules of Bankruptcy Procedure. On February 4, 2021, Judge Mayer entered an order requiring Caterbone to show cause why the court should not dismiss his bankruptcy petition because he failed to pay the mandatory filing fee of $1,738 along with his petition. Judge Mayer also scheduled a telephonic hearing on the order to show cause for February 16 and admonished Caterbone that if he failed to appear for the hearing, the court could dismiss the case. On February 16, Judge Mayer held the show cause hearing and, after the conclusion of the hearing, entered an order dismissing the action because Caterbone failed to pay the filing fee. SUN COMMUNITIES: Moody's Assigns (P)Ba1 Rating on Subordinated Debt ------------------------------------------------------------------- Moody's Investors Service assigned a first-time Baa3 issuer rating to Sun Communities Operating Ltd. Partnership, the operating subsidiary of Sun Communities, Inc. (collectively " Sun Communities "). In the same rating action, Moody's also assigned shelf ratings of (P) Baa3 to Sun Communities' senior unsecured debt shelf and (P) Ba1 to its subordinated debt shelf. The rating outlook is stable. The stable rating outlook reflects Sun Communities' large scale and good operational performance. The outlook incorporates the expectation that the REIT will maintain its disciplined approach towards the balance sheet and continue to reduce its secured debt level. The following ratings were assigned: New Assignments: Issuer: Sun Communities Operating Ltd. Partnership Issuer Rating, Assigned Baa3 Subordinate Shelf, Assigned (P)Ba1 Senior Unsecured Shelf, Assigned (P)Baa3 Outlook Actions: Issuer: Sun Communities Operating Ltd. Partnership Stable Outlook RATINGS RATIONALE Moody's Baa3 issuer rating incorporates Sun Communities' dominant size and scale as the industry leading owner and operator of manufactured homes, RV resorts and marinas, supported by a low leveraged balance sheet with strong fixed charge coverage and ample funding sources to support growth. Sun Communities' portfolio has a solid occupancy rate, low operating expenses and capital expenditure requirements, and good embedded growth through rental increases. Manufactured homes represent a material share of the US housing market, and limited supply of land zoned for manufacturing housing limits the risk of overbuilding. Additionally, the business' operating performance has been very resilient during the COVID crisis, as well as in past real estate cycles. The rating also considers the REIT's experienced management team that maintains a prudent financial policy. These credit strengths are offset by Sun Communities' reliance on secured debt, its comparatively low unencumbered portfolio compared to same rated peers and geographic concentration with over 50% of the portfolio located in Florida and Michigan. The RV and marinas portfolios (46% of ABR) are more susceptible to economic cycles given their recreational nature. Furthermore, the marinas portfolio may not be as easily pledged for collateral in financings as manufactured homes. Its growing marinas portfolio represents approximately 18% of the total ABR, which are assets that may not be readily adaptable to other uses is also a credit negative. Nonetheless mitigating some of the concern is the fact that approximately 90% of the marinas portfolio's NOI comes from recurring sources such as wet slip and dry storage rental and services. On average, the REIT's members maintain leases in its marinas for approximately eight years. Moody's expects the REIT to operate with net debt plus preferred/EBITDA in the range of 5.0x to 5.5x long-term, which is meaningfully lower than its historical level driven by a prudent capital management policy. The REIT has issued approximately $6.5 billion of common equity since 2012, including the settlement of the forward equity offering in October 2020 to fund the cash acquisition of Safe Harbor. Its total debt plus preferred stock over gross assets was approximately 30% at the end of 2020 and Moody's expects it to operate between 30% to 35% long-term. With $3.4 billion of property-level mortgage loans, the REIT's secured debt levels are elevated at approximately 26% of gross assets at the end of 2020. Positively, secured debt levels are expected to gradually decline in the next three years to less than 20%, driven by the REIT's plan to increase the share of unsecured funding in its capital structure to reduce refinancing risk and to increase its unencumbered asset pool. The REIT's financial flexibility is supported by a very strong fixed charge coverage ratio at 4.5x and Moody's expects the REIT to operate in the range of 4.5x to 5.0x, providing ample cushion against unexpected cash flow declines or spikes in interest expense. Moody's considers Sun Communities to have adequate liquidity to meet its near-term obligations and to fund growth. The REIT's primary source of liquidity is its $2.0 billion senior unsecured revolver maturing in June 2025, which can be extended for two additional six-month periods. Sun Communities has $1.8 billion available on the revolver, while its debt maturities in the next three years are modest, consisting of $70 million, $158 million and $271 million of mortgage debt maturing in 2021, 2022, and 2023, respectively. The next meaningful debt maturity is in 2024 when its $500 million term loan is due. Moreover, Sun Communities has demonstrated willingness to match-fund growth initiatives with equity. In early March 2021, it executed a $1.1 billion equity raise to secure capital to fund its growing acquisition pipeline and other opportunities, including approximately half of the shares were sold on a forward basis, of which 2.5 million shares or approximately $335 million have not yet settled. The stable rating outlook reflects Sun Communities' large scale and good operational performance. The outlook incorporates the expectation that the REIT will maintain its disciplined approach towards the balance sheet and continue to reduce its secured debt level. It is also expected that management will continue to selectively grow the portfolio while maintaining the positive trends in its same-community NOI growth, rent growth and occupancy rate. The stable outlook also incorporates the expectation that Sun Communities will continue to prudently manage its liquidity while deepening its access to capital as it transitions to a more unsecured borrowing strategy. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Upward rating movement would be predicated upon the REIT achieving, on a sustained basis, unencumbered assets greater than 75% of gross assets, secured debt approaching 15% of gross assets, total debt to gross assets below 30% , net debt to EBITDA below 5.5x while demonstrating consistent access to the public capital markets. Ratings could be downgraded if total debt to gross assets approaches 40%, net debt to EBITDA is sustained above 6.5x or a reversal trend in the secured debt level such that secured debt to gross assets approaches 30%. An acquisition that would present integration challenge or increases the REIT's leverage profile, significant liquidity challenges or a meaningful decrease in the valuation of the unencumbered asset base would also place pressure on the ratings. Sun Communities, Inc. (NYSE: SUI) is a fully integrated real estate investment trust that was established in 1975. It owns, operates and develops manufactured housing ("MH") communities and recreational vehicle ("RV") resorts throughout the United States and Ontario, Canada. In October 2020, the REIT also acquired Safe Harbor and its portfolio of marinas throughout the United States for approximately $2.1 billion. Predominantly, all of the business is conducted through its consolidated operating subsidiary, Sun Communities Operating Ltd. Partnership. The company owned, operated, or had an interest in 562 developed MH, RV and marina properties comprising over 151,600 developed sites and nearly 38,800 wet slips and dry storage spaces in 39 states and Ontario, Canada. The principal methodology used in these ratings was REITs and Other Commercial Real Estate Firms published in September 2018. SYNCSORT INC: Winshuttle Acquisition No Impact on Moody's B3 CFR ---------------------------------------------------------------- Moody's Investors Service says that Syncsort Incorporated's (Clearlake) (dba "Precisely") plans to raise an incremental $330 million first lien term loan and an incremental $85 million second lien term loan to fund an acquisition of Winshuttle is credit negative due to the increase in debt balances and the reduced free cash flow generation as a result of higher integration and restructuring costs over the near term. Moody's revised its projections for the company's free cash flow to debt to around 2% from 4% in fiscal 2021. In addition, this is the second sizeable debt-funded acquisition for Precisely since its LBO by Clearlake in April 2021, a sign of a very aggressive financial policy. However, there is no change in ratings, including the B3 Corporate Family Rating, or the stable outlook, given that pro forma leverage will remain around 7.5x (including synergies and excluding integration expenses, without these adjustments leverage can be viewed as 9x). Precisely has also demonstrated a track record of executing large scale M&A and achieving expected synergies, as well as realizing the strategic merits of the acquisition. The proposed acquisition provides Precisely with additional capabilities that are complementary with its data integration and data quality solutions. Winshuttle provides no-code, low-code software that enables the automated data movement between ERP systems (primarily SAP) and other business applications, as well as master data management. Precisely's credit profile reflects the company's modest scale relative to its high debt levels, acquisitive growth strategy and aggressive financial policies which are likely to lead to sustained high leverage levels and limited free cash flow. Precisely benefits from its differentiated niche product portfolio with a track record of high retention rates and a growing share of recurring revenue. Headquartered in Burlington, MA, Precisely is a global software company specializing in Big Data, high-speed sorting products, data protection, data quality and integration software and services, for mainframe, power systems and open system environments to enterprise customers. The company is majority-owned by Clearlake and TA Associates, with remaining ownership stakes held by Centerbridge and management. Pro forma revenues total $745 million for the last twelve months ended March 31, 2021. SYRACUSE INDUSTRIAL: Fitch Cuts Rating on 2016A/B Bonds to 'CC' --------------------------------------------------------------- Fitch Ratings has downgraded the rating on the following Syracuse Industrial Development Agency, New York (SIDA) bonds to 'CC' from 'B': -- Approximately $198.8 million Payments in Lieu of Taxes (PILOT) revenue refunding bonds, series 2016A (Carousel Center Project); -- Approximately $10.6 million PILOT revenue refunding bonds, taxable series 2016B (Carousel Center Project); -- Approximately $76.4 million PILOT revenue bonds, taxable series 2007B (Carousel Center Project). Fitch has removed the Rating Watch Negative. SECURITY The bonds are secured by Payments in Lieu of Taxes (PILOTs) on the original or 'legacy' Carousel Center mall payable to SIDA by the Carousel Center Company LP (the Carousel Owner) pursuant to a PILOT agreement, and interest earnings on the debt service reserves. The debt service reserve funds total 125% of average annual debt service or about $31 million. ANALYTICAL CONCLUSION The 'CC' rating indicates Fitch's belief that default of some kind appears probable, as indicated by the borrower's engagement of counsel and a PILOT bond restructuring agent. Since the announcement in April of the borrower's actions by Trimont, the PILOT bondholder representative, neither the borrower, the bond trustee nor Trimont has responded to Fitch's request for an update. The removal of the Rating Watch Negative indicates the lack of clarity as to potential terms and timing of any proposed restructuring. Fitch previously cited indications that the borrower is unable or unwilling to continue making PILOT payments as a rating sensitivity. The revised 'CC' rating reflects both the hiring of a restructuring agent and risk that if sales volume and the appraised value do not increase significantly as the mall reopens to full capacity, the owner's incentive to make increasing annual PILOT payments will erode further. The reported appraised value of the Carousel Center as well as the expansion project, together known as Destiny USA, has decreased dramatically since the onset of the coronavirus pandemic. Destiny USA is the dominant shopping center in the Syracuse area. Mall revenues are supported by its dominant market position and the broad geographic area from which customers are derived. The role of the special servicer for the CMBS loans (Wells Fargo & Co; IDR of A+/Negative) in advancing the payments and the strong lien position of PILOT payments in the mall's debt structure remain important rating considerations. The special servicer has reportedly entered into a standstill agreement with the borrower that grants a moratorium on CMBS loan payments and extension of the loan through June 6, 2022. The loan was originally due June 2019. Fitch believes the servicer is incentivized to continue to advance PILOT payments for the SIDA revenue bonds as long as the loan is in place given their senior position. However, continued weak appraised value could diminish this incentive. KEY RATING DRIVERS LEVERAGE RATIO WEAKENING: The most recent appraised valuation (late 2020) indicates combined PILOT and CMBS debt is about 3.5x the revised value of Destiny USA (the Carousel Center plus the expansion project). The potential for recovery to the pre-pandemic valuation is not yet discernable. WEAKENED BORROWER POSITION: The CMBS loans were recently returned to the master servicer after being turned over to the special servicer in March 2019. Nevertheless, the owner has indicated an interest in negotiating a debt restructuring with PILOT bondholders. SERVICER PROVIDES LIQUIDITY: The mortgage servicer, required as part of the securitization of the underlying commercial loan on the Carousel Center, is responsible for providing needed liquidity to cover any shortfalls in PILOT payments until mall operations recover or the PILOT lien is foreclosed, regardless of the property's value. PILOT LIEN STATUS: PILOT payments are on parity with all governmental fees and charges, all of which are senior to other payment obligations. Repayment of the CMBS loans is subordinate to the PILOTs. SOLID PRIOR OPERATIONS AND MARKET POSITION: Destiny USA has limited competition in the Syracuse, New York region. Mall occupancy rates and sales had improved slightly prior to the pandemic-related closure and sales per square foot were strong compared with national norms. NO ISSUER DEFAULT RATING (IDR): SIDA has no material exposure to operating risk. As such, Fitch has not assigned an Issuer Default Rating and there is no related cap on the PILOT bond rating. RATING SENSITIVITIES Factor that could, individually or collectively, lead to positive rating action/upgrade: -- Solid evidence that the mall's value will improve to a level at least modestly above the amount of PILOT debt as the mall continues to reopen. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Indications that a restructuring offer has been presented to PILOT bondholders with terms that materially reduce the value of the instrument for bondholders (a distressed debt exchange); -- Mall valuation remaining below the amount of PILOT debt as the revised June 2022 loan maturity approaches; -- A loan refinancing without a servicer role similar to the current CMBS loan; -- Failure by the borrower to provide frequent updates on mall sales, occupancy and rent rollovers could result in withdrawal of the rating. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. CURRENT DEVELOPMENTS Destiny USA continues to progress toward reopening after being closed from March 19 until July 10 due to the outbreak of the coronavirus. It is currently operating with limited capacity at entertainment venues and reduced operating hours. Regular operating hours are scheduled to return on June 28. The Canadian border remains closed; typically about 20% of mall sales are from Canadian visitors. Nevertheless, the borrower reports that foot traffic at the mall is about 80% of pre-pandemic levels. As of March 2021, the Carousel Center was reported to be 60% occupied. The servicer for the CMBS loans for the mall reported that the value as of November 2020 of the Carousel Center was $118 million, about 41% of the outstanding par amount of the PILOT bonds and 20% of debt outstanding including the CMBS loan on the Carousel Center portion of the mall. This portion of the mall was valued at $500 million in 2016. The combined appraised value of Destiny USA was $203 million, or 28% of all PILOT bonds and CMBS loans outstanding. Fitch is in receipt of the borrower's 1Q21 operating statement and rent roll, which indicate positive net cash flow before debt service, in contrast to a small budgeted cash deficit. Unrestricted cash at the end of 2020 was $1 million or about 13% of opex. Rent abatements to tenants were $1.5 million in 2020 and $1.2 million in 1Q21, compared with $264,353 in 2019. DEDICATED TAX CREDIT PROFILE CHALLENGES EVIDENT PRIOR TO CLOSURE The $300 million mortgage loan on the legacy Carousel Center property along with a $130 million mortgage on the expansion project have been securitized as commercial mortgage pass-through certificates. Both loans are interest only and were originally due in June 2019. Rather than being refinanced as expected, the loans were transferred to a special servicer in March 2019 amid questions about Pyramid's ability to repay or refinance the loans. A loan modification was signed on May 31, 2019, providing a conditional three-year extension. The special servicer and the borrower subsequently entered into a standstill agreement, which provided coronavirus-related relief including an eight-month moratorium on monthly debt service payments and an extension of the loan until June 6, 2022. Fitch is not aware of any default by the borrower on the terms of the current agreement, and the loan has been returned to the master servicer. ADEQUATE LEGAL PROTECTIONS FOR BONDHOLDERS The obligation of the Carousel Owner (Pyramid Company of Onondaga) to pay the PILOTs is on par only with governmental charges and fees including property taxes, all of which are senior to any other payment obligations. The requirement of the Carousel Owner to make PILOTs is evidenced by a PILOT note, payable to SIDA. A non-impairment covenant by the city of Syracuse and New York State prohibits the city and state from altering the rights of the issuer to collect PILOTs. The bonds are further secured by PILOT mortgages granted by SIDA and the Carousel Owner, encumbering their interests in the Carousel Center to the PILOT trustee. The PILOT mortgages do not extend to the expansion property. They impose a lien analogous to liens imposed by taxing authorities, and provide for similar remedies including foreclosure of property. The senior obligation of the PILOTs ensures that support funding and any proceeds from foreclosure will be allocated first to the PILOTs before the excess is utilized for underlying mortgage claims. Mall tenants are contractually obligated to pay the Carousel Owner, as additional rent, their pro rata portions of PILOTs, and payment of the PILOTs by the Carousel Owner is absolute and unconditional, notwithstanding the inability of the Carousel Owner to recover this payment from its tenants. Tenant leases generally have five- to 10-year expirations. The bonds have a cash-funded debt service reserve fund (DSRF) for the benefit of bondholders equal to 125% of average annual debt service of the PILOT bonds or $31 million in aggregate. The DSRF cannot be used to cure a default by the borrower to make PILOT payments. The remedy for such a default is for the PILOT trustee to foreclose on the PILOT mortgage corresponding to the defaulted PILOT note. Fitch does not believe the DSRF provides significant default protection as it is uncertain whether the funds would be used for that purpose if the bonds were in distress. ASCENDING DEBT SERVICE Annual debt service on PILOT bonds is structured on an ascending basis, with $22.2 million (19% of the current Carousel Center valuation) due in calendar 2021, increasing 4% annually to maximum annual debt service (MADS) of $35.6 million in 2035 (30% of the current valuation). Final maturity of the bonds is in 2036. The annual escalation of PILOTs needed to service the debt heightens the pressure on improvements to the mall's operations and valuation. Parity debt can only be issued as refunding bonds. PRESENCE OF MORTGAGE SERVICER AS A SOURCE OF LIQUIDITY Fitch views the presence of a mortgage servicer pursuant to the securitization of the underlying mortgage loans on the mall project as a key credit factor. Under the pooling and servicing agreement, the mortgage servicer is required to advance funds when necessary to preserve the security of the mortgage loans. Given the subordinate nature of the underlying mortgage loan to the PILOT bonds, this includes funds to make PILOT payments. The obligation to advance applies as long as the servicer (or special servicer) is in place and determines that the advances will be repaid. Servicer advances provide temporary cash flow support should pledged funds prove insufficient to cover all PILOTS until such time that either mall performance recovers or the property is foreclosed and sold to another entity. CAROUSEL OWNER The Carousel owner is a wholly owned subsidiary of the Pyramid Company of Onondaga, which is part of the Pyramid Companies. Based in Syracuse, NY, Pyramid Companies was established in 1969 and has developed malls across the northeast portion of the U.S. CRITERIA VARIATION The analysis supporting the PILOT revenue bonds rating includes a variation from the U.S. Tax-Supported Rating Criteria. A variation was made to the dedicated tax bond analysis by incorporating an analysis of the transaction's overall leverage, or loan-to-value (LTV) cushion, calculated by dividing the total amount of debt by the value of the property. This evaluation is supported by Fitch's U.S. Tax-Supported Rating Criteria, which includes modifications to the analysis of the dedicated revenue stream coverage cushions to address factors specific to a transaction. The revenue volatility that would be produced through the FAST Econometric API - Fitch Analytical Stress Test Model (FAST) does not anticipate this dedicated revenue source, which is derived from the value of the property. TALEN ENERGY: Moody's Affirms B2 CFR & Alters Outlook to Negative ----------------------------------------------------------------- Moody's Investors Service has changed Talen Energy Supply, LLC's outlook to negative from stable and downgraded its speculative grade liquidity rating to SGL-3 from SGL-2. Moody's affirmed Talen's ratings including its corporate family rating at B2, its probability of default (PD) at B2-PD, its senior secured debt at Ba3 and its B3 senior unsecured guaranteed debt. RATINGS RATIONALE "The company's financial profile will remain pressured over the medium-term following the results of the May 2021 PJM capacity auction, which cleared at lower levels than expected," stated Edna Marinelarena, Moody's analyst. Talen's financial performance had already weakened in 2020 when it ended the year with a ratio of cash flow from operation excluding changes in working capital (CFO pre-WC) to debt at 2.2% compared to 6.1% in 2019. In the first quarter ending 31 March 2021, financial results were even worse due to the combined impact of low energy margins and costs associated with the Texas winter storm in February 2021. Talen's B2 CFR reflects the inherent volatility of the merchant power markets in which it operates and a highly leveraged capital structure. The B3 senior unsecured debt rating is driven by a sizeable amount of first priority debt in the capital structure in relation to the remaining unsecured guaranteed debt. The company's credit metrics could improve marginally to about 4% CFO pre-WC to debt in 2021 largely driven by higher capacity revenue for the 2021/2022 delivery year following an earlier PJM auction and ongoing cost controls. However, after the most recent auction results for the 2022/2023 period, Talen's capacity revenue will again decline, straining the company's revenue and cash flow given that capacity revenue represents about 30-40% of gross margin. The outcome of PJM's next auction in December 2021 will be a key credit driver for Talen longer term. The affirmation of Talen's current ratings considers operational improvements made since the company was taken private at the end of 2016, which has helped to contain operating costs during a period of low power prices, and the deleveraging that occurred following Talen's exit from the non-recourse Northeast Gas operations that was finalized in 2020. However, Talen continues to face relatively low wholesale power prices driven primarily by low gas prices, an increasing supply of renewable resources, and weak demand for electricity. Liquidity The downgrade of Talen's speculative grade liquidity rating to SGL-3 from SGL-2 reflects a still solid liquidity position but one that has been adversely affected by the February Texas weather event and low energy margins and capacity revenue given the recent PJM auction results. As a result, Moody's expect internal cash generation to be lower over the near term, which future cash flow highly dependent on upcoming PJM capacity auctions and overall power prices. The company's unrestricted cash balance of $686 million includes $370 million of cash that it obtained from the monetization of $405 million of capacity revenue for the 2021/2022 auction delivery year, which helped support liquidity during the Texas winter weather event. The company has access to a $690 million secured revolving credit facility and a total of $200 million under unsecured letter of credit facilities. Usage under the secured revolver consisted of $385 million of letters of credit, reducing total availability to $305 million. Talen's revolving credit facility includes one financial maintenance covenant, a maximum senior secured net leverage ratio of 4.25x. As of 31 March 2021, the company's senior secured leverage ratio was 3.0x. The revolver also includes a covenant prohibiting distributions to equity holders while the total leverage ratio (as defined) is at or above 4.5x. As of March 2021, Talen calculated its total leverage ratio at 6.6x. Draws under the credit facility require representations of no material adverse change, a credit negative. Outlook The negative outlook reflects Moody's view that Talen's financial profile could decline over the next 12 to 18 months driven by low energy margin, weaker than expected PJM auction results for the 2022/2023 period, and uncertainty over future auction results and capacity revenue. As a result, the company's CFO pre-WC to debt ratio could remain below 5% on a sustained basis absent material additional deleveraging or other operational enhancements. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Factors that Could Lead to an Upgrade Given the negative outlook, an upgrade of the CFR is unlikely over the near-term. Longer term, if there were to be additional operational improvements, a material reduction in leverage, or an improvement in market conditions causing the ratio of CFO pre-WC to debt to increase and be maintained above 10%, there could be upward pressure on the ratings. Factors the Could Lead to a Downgrade A rating downgrade could occur if the next PJM capacity auction does not result in substantially higher capacity prices, if leverage remains elevated, if there are operational challenges at any of its generating facilities, if commodity prices and energy margins continue to be low such that the CFO pre-WC to debt ratio remains below 5% or if the company were to be significantly free cash flow negative for a prolonged period. In addition, if there is additional refinancing that replaces unsecured guaranteed debt with secured debt, or there is other erosion of the unsecured liability base, there could be pressure on the ratings of the unsecured guaranteed notes. Talen Energy Supply, LLC is an independent power producer with about 13 GW of generating capacity. Talen Energy Corporation, headquartered in The Woodlands, TX, is a privately owned holding company held by an affiliate of Riverstone Holdings LLC (Riverstone) that owns 100% of Talen and conducts all of its business activities through Talen. About 84% of Talen's generation assets are located in the PJM Interconnection, L.L.C. (PJM, Aa2 stable) with the balance located in Texas, Montana, and New England. These assets are largely fossil fuel with nuclear at about 17% of total owned generation. Downgrades: Issuer: Talen Energy Supply, LLC Speculative Grade Liquidity Rating, Downgraded to SGL-3 from SGL-2 Affirmations: Issuer: Talen Energy Supply, LLC Probability of Default Rating, Affirmed B2-PD Corporate Family Rating, Affirmed B2 Senior Secured Bank Credit Facility, Affirmed Ba3 (LGD2) Senior Secured Regular Bond/Debenture, Affirmed Ba3 (LGD2) Senior Unsecured Regular Bond/Debenture, Affirmed B3 (LGD5) Issuer: Pennsylvania Economic Dev. Fin. Auth. Senior Unsecured Revenue Bonds, Affirmed B3 (LGD5) Outlook Actions: Issuer: Talen Energy Supply, LLC Outlook, Changed To Negative From Stable The principal methodology used in these ratings was Unregulated Utilities and Unregulated Power Companies published in May 2017. TARGA RESOURCES: Moody's Alters Outlook on 'Ba2' CFR to Positive ---------------------------------------------------------------- Moody's Investors Service affirmed Targa Resources Corp.'s Ba2 Corporate Family Rating, Ba2-PD Probability Default Rating, and B1 secured bank facility rating. The outlook was changed to positive from stable, and the Speculative Grade Liquidity (SGL) Rating was changed to SGL-2 from SGL-3. Concurrently, Moody's upgraded Targa Resources Partners LP's (TRP) senior unsecured notes rating to Ba2 from Ba3, and assigned a positive outlook to TRP. Targa wholly owns TRP. The change to a positive outlook reflects the company's expected strong earnings performance, meaningful free cash flow generation in 2021-22, and further reduction in leverage. The ratings affirmation reflects Moody's expectation that credit metrics will remain solid even in a scenario where the Permian production volumes affecting Targa's assets remain flat over the medium term. "Targa's strong execution has been augmented by the resurgence in NGL prices and the company's timely completion of its growth projects, which is allowing it to focus on strengthening its balance sheet," said Arvinder Saluja, Moody's Vice President. "With balanced financial policies and free cash flow generation, the company is well positioned to continue delevering further." Upgrades: Issuer: Targa Resources Corp. Speculative Grade Liquidity Rating, Upgraded to SGL-2 from SGL-3 Issuer: Targa Resources Partners LP Senior Unsecured Notes, Upgraded to Ba2 (LGD4) from Ba3 (LGD4) Affirmations: Issuer: Targa Resources Corp. Probability of Default Rating, Affirmed Ba2-PD Corporate Family Rating, Affirmed Ba2 Senior Secured Revolving Credit Facility, Affirmed B1 (LGD6) Outlook Actions: Issuer: Targa Resources Corp. Outlook, Changed To Positive From Stable Issuer: Targa Resources Partners LP Outlook, Changed To Positive From No Outlook RATINGS RATIONALE The upgrade of TRP's unsecured senior notes ratings reflects Moody's expectation of meaningfully reduced levels of revolver usage compared to higher usage in the past when Targa was completing its growth projects. TRP's senior notes are unsecured and the creditors have a subordinated claim to TRP's assets behind the senior secured revolving credit facility and the accounts receivable securitization facility. The obligations of the revolving credit facility and receivable securitization facility should not be material in size relative to the unsecured notes to warrant notching below the CFR, and therefore the senior unsecured notes are rated Ba2, in line with the CFR. Targa's senior secured credit facility is rated B1 as the debt at Targa is structurally subordinated to all the debts. Targa's credit facility is secured by substantially all of Targa's assets, which are essentially its equity ownership interests in TRP. Targa's Ba2 CFR is supported by its sole ownership of TRP, its scale and EBITDA generation which has remained sizeable despite the volatile and low commodity prices, its track record of strong execution of growth projects, and the meaningful and growing proportion of fee-based margin contribution. Targa has increased geographic diversification, along with a significant presence in the Permian Basin, and improved business diversification. Its dividend and capital spending reductions have increased free cash flow and will help reduce debt, which will improve its deleveraging efforts. These positive attributes are tempered by its material exposure to the gathering and processing business, volatility inherent in natural gas liquids (NGL) prices that makes earnings on its commodity sensitive contracts less predictable, and volume risk. Furthermore, Targa has a complex corporate structure with assets held in joint ventures, including those with Stonepeak Lonestar Holdings LLC (Lonestar, B1 stable). Moody's expect Targa will use free cash flow and revolver borrowings to exercise its call option to purchase Lonestar's JV interests for roughly $900 million in early 2022. Targa also has had historically aggressive distribution policies, but has dramatically reduced its dividends since March 2020. The SGL-2 rating reflects Moody's expectation of good liquidity through at least mid-2022. At March 31, 2021, Targa had $249 million of cash, as well as $595 million available ($75 million of borrowings outstanding) under its $670 million senior secured revolver due June 2023. TRP had $2.1 billion of availability under its revolver which is also due June 2023. Targa is solely reliant on distributable cash flow from TRP to fund its common and preferred unit distributions. Moody's expect Targa to continue to reduce debt balances in 2021-22 through the free cash flow generated from substantial cuts to Targa's capital spending and dividends. Both Targa and TRP were in compliance with the covenants governing their revolving credit facilities. The Targa revolver requires that consolidated debt/EBITDA be no greater than 4x. Covenant calculations exclude TRP debt, and Moody's expect Targa will maintain compliance. The TRP revolver requires maintenance of EBITDA to interest expense of at least 2.25x and debt to EBITDA no greater than 5.5x. TRP's leverage covenant calculations exclude the secured debt at Targa and borrowing under its accounts receivable securitization. Secondary liquidity is limited as the majority of the partnership's assets are pledged to the senior secured creditors. The positive outlook reflects Moody's expectation that Targa will continue to focus on capital discipline and meaningfully reduce debt over the near to medium term. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Targa's CFR could be upgraded to Ba1 if consolidated leverage is sustained comfortably below 4.5x, dividend coverage remains strong, and its business mix continues decreasing its exposure to commodity price risk. The ratings could be downgraded if consolidated leverage is over 5.5x or if the company's business profile or financial policy becomes more aggressive. Targa Resources Corp., through its wholly-owned subsidiary Targa Resources Partners LP, operates a portfolio of midstream energy assets that include, gathering pipelines, gas processing plants, NGL pipeline, NGL fractionation units, and a marine import/export facility on the Gulf Coast. The principal methodology used in these ratings was Midstream Energy published in December 2018. THERMON HOLDING: Moody's Affirms B2 CFR, Outlook Remains Stable --------------------------------------------------------------- Moody's Investors Service affirmed Thermon Holding Corp.'s Corporate Family Rating at B2, Probability of Default Rating at B2-PD and senior secured debt ratings at B2. The Speculative Grade Liquidity rating remains unchanged at SGL-1. The outlook remains stable. "The affirmation of Thermon's ratings and stable outlook reflect our expectation for Thermon to grow revenue while further diversifying across end markets and generating positive free cash flow that supports continued debt reduction," commented Jonathan Teitel, a Moody's analyst. Affirmations: Issuer: Thermon Holding Corp. Probability of Default Rating, Affirmed B2-PD Corporate Family Rating, Affirmed B2 Senior Secured Revolving Credit Facility, Affirmed B2 (LGD3) Senior Secured Term Loan, Affirmed B2 (LGD3) Outlook Actions: Issuer: Thermon Holding Corp. Outlook, Remains Stable RATINGS RATIONALE Thermon's B2 CFR is constrained by the company's small scale but benefits from an established market position for industrial process heating solutions. The company's credit profile benefits from a continued focus on debt reduction and very good liquidity. During the fiscal year ended March 31, 2021, revenue declined significantly primarily because of the economic impact of the pandemic. To contend with lower customer demand, Thermon reduced costs and capital spending. The company's backlog provides some revenue visibility and products for customer maintenance, repair and operations are a source of recurring revenue. Customer spending for new projects as well as upgrade and expansion work fluctuates more. Thermon is diversified across geographic regions and customers. The oil and gas industry accounts for a sizable portion of revenue but the company is diversifying further into other end markets to drive growth and to reduce exposure to volatile commodity prices. Moody's expects Thermon will continue to generate positive free cash flow that it applies toward debt reduction. Thermon's SGL-1 rating reflects Moody's expectation that the company will maintain very good liquidity. As of March 31, 2021, the company had $40 million of cash and an undrawn $60 million revolver that matures in October 2022 ($3 million in letters of credit were outstanding). Moody's expects that Thermon will renew the facility in advance of it becoming current. The term loan amortizes at 1% per year ($2.5 million). The revolver has a minimum fixed charge coverage ratio of 1.25x and a maximum leverage ratio of 3.75x. During the quarter ending June 30, 2020, the company amended the leverage ratio covenant so that debt can be netted against cash in excess of $20 million. The maximum leverage ratio stepped down from 4.5x on December 31, 2020 and this action provides cushion to the tighter covenant. Thermon's $60 million senior secured revolver due October 2022 and $149 million senior secured term loan due October 2024 (amount outstanding as of March 31, 2021) are rated B2, the same as the CFR, reflecting their composition as the sole debt in the capital structure. Thermon Holding Corp.'s term loan and revolver borrowings are guaranteed by the company's US subsidiaries. Revolver borrowings can also be made in Canada via Thermon Canada Inc. and such borrowings are also guaranteed by Canadian subsidiaries. Thermon Group Holdings, Inc. guarantees the debt. The stable outlook reflects Moody's expectation that Thermon will grow revenue and generate positive free cash flow over the next 12-18 months that supports further debt reduction while maintaining very good liquidity. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Factors that could lead to an upgrade include significantly increased scale including EBITDA over $100 million and debt/EBITDA below 3.5x. Factors that could lead to a downgrade include debt/EBITDA above 4.5x or deterioration of liquidity. Thermon Holding Corp., headquartered in Austin, Texas, is a subsidiary of Thermon Group Holdings, Inc., a publicly traded company that provides industrial process heating solutions to customers in end markets that include oil and gas, chemicals, and power generation. Revenue for the fiscal year ended March 31, 2021 was $276 million. The principal methodology used in these ratings was Global Oilfield Services Industry Rating Methodology published in May 2017. TOUR BUS: Seeks Approval to Hire Lefkovitz & Lefkovitz as Counsel ----------------------------------------------------------------- Tour Bus Leasing, LLC seeks approval from the U.S. Bankruptcy Court for the Middle District of Tennessee to employ Lefkovitz & Lefkovitz, PLLC to serve as legal counsel in its Chapter 11 case. The firm's services include: (a) advising the Debtor as to its rights, duties, and powers; (b) preparing and filing legal papers; (c) representing the Debtor at all hearings, meetings of creditors, conferences, trials, and any other proceedings in this Chapter 11 case; and (d) other necessary legal services. The hourly rates of the firm's attorneys and staff are as follows: Steven L. Lefkovitz $555 per hour Associate Attorneys $350 per hour Paralegals $125 per hour In addition, the firm will seek reimbursement for expenses incurred. The firm received an initial retainer of $10,000 from the Debtor. Steven Lefkovitz, Esq., a member of Lefkovitz & Lefkovitz, disclosed in a court filing that the firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Steven L. Lefkovitz, Esq. Lefkovitz & Lefkovitz, PLLC 618 Church Street, Suite 410 Nashville, TN 37219 Telephone: (615) 256-8300 Facsimile: (615) 255-4516 Email: slefkovitz@lefkovitz.com About Tour Bus Leasing Tour Bus Leasing, LLC filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code (Bankr. M.D. Tenn. Case No. 21-01822) on June 14, 2021, listing under $1 million in both assets and liabilities. Judge Marian F. Harrison oversees the case. Lefkovitz & Lefkovitz, PLLC serves as the Debtor's legal counsel. TRILOGY INT'L: Moody's Rates New $357MM Sr. Secured Notes 'Caa2' ---------------------------------------------------------------- Moody's Investors Service has assigned a Caa2 rating to Trilogy International Partners LLC's (Trilogy) $357 million of 8.875% senior secured notes due May 2023 (New Secured Notes) and affirmed the Caa1 corporate family rating. The New Secured Notes were issued by Trilogy's indirect subsidiaries, Trilogy International South Pacific LLC. (TISP) and TISP Finance, Inc. (TISP Finance), in exchange for all of Trilogy's outstanding $350 million of 8.875% senior notes due May 2022 (Existing Notes), including consent solicitations to amendments to the indenture governing the Existing Notes and related premiums. Moody's believes the exchange of the Existing Notes into the New Secured Notes provides the company additional time to reduce consolidated debt through the pursuit of liquidity enhancing monetization strategies involving its New Zealand and Bolivian business operations. The SGL-4 speculative grade liquidity rating has been maintained. Concurrent with today's actions, Moody's withdrew the ratings on Trilogy's $350 million of 8.875% senior notes due May 2022 due to their full repayment. The outlook for Trilogy remains negative. Assignments: Issuer: Trilogy International South Pacific LLC. Senior Secured Regular Bond/Debenture, Assigned Caa2 (LGD5) Affirmations: Issuer: Trilogy International Partners LLC Probability of Default Rating, Affirmed Caa1-PD Corporate Family Rating, Affirmed Caa1 Withdrawals: Issuer: Trilogy International Partners LLC Senior Secured Regular Bond/Debenture, previously rated Caa2 (LGD5) Outlook Actions: Issuer: Trilogy International Partners LLC Outlook, Remains Negative Issuer: Trilogy International South Pacific LLC. Outlook, Assigned Negative RATINGS RATIONALE Trilogy's Caa1 CFR reflects its continued elevated leverage (Moody's adjusted), a still difficult and uncertain monetization effort to achieving sustained liquidity improvement, and the risk, although lessened, of future distressed debt exchanges. Trilogy's October 2020 debt issuance and now completed debt exchange benefits the company's financial flexibility in the interim by extending debt maturities out to May 2023. With this lengthened maturity profile, Moody's expects Trilogy will aggressively seek to strengthen its balance sheet and notes the company's public disclosure that it is preparing to publicly list shares of its New Zealand subsidiary, Two Degrees Mobile Limited (2degrees), by year-end 2021. Moody's expects debt leverage (Moody's adjusted) to decline towards 5.5x by year-end 2021 based on expectations for continued service revenue improvement at 2degrees due to solid demand trends and ARPU increases, factors that will likely aid any public listing effort. Moody's expects Trilogy's free cash flow will remain negative in both 2021 and 2022 as a result of higher capital intensity associated with spectrum and 5G efforts. Although largely immaterial historically, the company's 2020 suspension of shareholder dividends highlighted a financial policy pivot towards reinvestment in its growing New Zealand market, as well as the necessity of prioritizing liquidity. Multi-year efforts to sell the company's Bolivian subsidiary, NuevaTel, S.A. (NuevaTel), have been unsuccessful to date as a result of a heightened competitive environment, political unrest and weak economic conditions. Down from higher levels as recently as 2019 and now contributing just a mid-teens portion of company-defined consolidated EBITDA (before corporate allocations), NuevaTel remains a distraction but is now far less of an offset to Trilogy's credit profile given mid to high-single digit service revenue growth at its New Zealand subsidiary, 2degrees. Trilogy's speculative grade liquidity rating is SGL-4, indicating weak liquidity, primarily supported by cash balances at Trilogy itself and at subsidiary levels and modest availability under a credit facility at 2degrees. No revolving bank facility is in place at Trilogy itself. Currency fluctuations also impact the cost of servicing US dollar denominated debt given that Trilogy generates most of its cash flow in local currencies, although the Bolivian currency is pegged to the US dollar. While Trilogy had a consolidated cash balance (including unrestricted and restricted cash and cash equivalents) of $93.3 million as of March 31, 2021, Moody's expects cash usage to increase and cash levels at Trilogy to decline through year-end 2021. The company's ability to meet its approximate $37 million of annual interest payments on secured debt at its indirectly held subsidiaries, TISP and TISP Finance, could be potentially impaired. Despite Trilogy's efforts to better optimize its capital spending, Moody's still expects consolidated negative free cash flow of greater than $50 million in 2021, with limited visibility into improvement in 2022. Through Trilogy's wholly-owned New Zealand subsidiary, Trilogy International South Pacific Holdings LLC (TISP Holdings), the company's indirect subsidiaries, TISP and TISP Finance, are the borrowers of $357 million of 8.875% senior secured notes due May 2023 (New Secured Notes) and $51 million of 10% senior secured notes due May 2023 (Existing TISP Notes, and together the TISP Notes). Moody's does not rate the Existing TISP Notes, which are equal in priority ranking to the New Secured Notes and which Moody's rates Caa2, one notch lower than the Caa1 CFR due to the liabilities ranked ahead of it in Moody's loss given default (LGD) analysis, including structurally senior secured loans in local currency at the company's Bolivian and New Zealand operating subsidiaries (that could be increased in size) and trade payables at all operating subsidiaries. In Moody's opinion, asset security for lenders of the Bolivian and New Zealand loans and structural seniority for trade creditors put these debtors in a better position than holders of the TISP Notes. Holders of the TISP Notes have security in domestic subsidiaries primarily consisting of guarantees and shares in the international operations of Bolivia and New Zealand, a significant weakness from a collateral standpoint. Also, the foreign jurisdiction of the operating assets could complicate access for TISP Notes holders in bankruptcy. The negative outlook reflects the risk that Trilogy may not be able to sustainably improve weak subscriber, revenue and EBITDA trends on a consolidated basis, reduce cash flow deficits or service intermediate holding company interest obligations with ample cash cushion. The ability to refinance 2023 debt maturities well in advance of maturity dates remains uncertain as well, which will be primarily driven by monetization events difficult to forecast. Trilogy's credit metrics will remain under pressure over the next 12-18 months given elevated debt leverage and constrained liquidity. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: A substantial improvement in operating performance, an asset sale, initial public offering of New Zealand operations, or a reduction in leverage that significantly lowers default risk could result in a positive rating action. The rating could be downgraded if the probability of default increases or expected recoveries in a default scenario decline due to further profitability or liquidity erosion. The principal methodology used in these ratings was Telecommunications Service Providers published in January 2017. Based in Bellevue, WA, Trilogy International Partners LLC provides mainly wireless communication services in Bolivia and New Zealand, as well as fixed broadband communications services in New Zealand. The company generated $627 million of revenue and had approximately 3.2 million total wireless subscribers as of the latest 12 months ending March 31, 2021. TRINITY INDUSTRIES: Moody's Affirms Ba2 CFR, Outlook Stable ----------------------------------------------------------- Moody's Investors Service affirmed the ratings of Trinity Industries, Inc., including the Ba2 corporate family rating, the Ba2-PD probability of default rating and the Ba2 senior unsecured rating. The speculative grade liquidity rating remains SGL-3. The rating outlook remains stable. The affirmation of the ratings considers the relative stability of Trinity's railcar leasing business, the high proportion of secured debt compared to total leasing assets as well as the exposure of the railcar manufacturing business to very cyclical demand for new railcars. RATINGS RATIONALE The Ba2 corporate family rating considers Trinity's position as one of the leading railcar lessors with a diversified railcar fleet and customer base, as well as its position as one of the leading manufacturers of new railcars. Contractual lease revenues with an average remaining lease term of 3.4 years and a record of very high fleet utilization rates underpin the relative stability of the railcar leasing and fleet management segment, along with a fairly high lease renewal rate that helps to mitigate residual value risk. However, Trinity is considerably reliant on secured debt, which reduces its financial flexibility. Moody's estimates that the proportion of secured debt to total assets exceeds 50%, following a gradual increase in the loan-to-value of the lease portfolio using securitized debt. The Ba2 corporate family rating also considers the very cyclical demand for new railcars that the manufacturing segment has to contend with. The risk stemming from demand fluctuations is mitigated, however, by a material reduction in the break-even level of railcar deliveries following Trinity's initiatives in the last two years to concentrate its manufacturing footprint, outsource lower-value operations and utilize more automated processes. Consequently, segment profit for the railcar manufacturing business is likely break-even in 2021, despite historically low railcar deliveries this year. Liquidity is adequate (SGL-3). Free cash flow is often negative, even after the proceeds from the sale of leased railcars, reflecting the capital intensity of the railcar leasing business. Combined with material amortizations of securitized debt, annual funding needs can be sizeable. Availability under the revolving credit facility and warehouse loan facility is approximately $360 million and $235 million, respectively, as of March 31, 2021. The amount of unencumbered railcar assets is about $1.1 billion, according to Trinity. The $400 million senior unsecured notes due 2024 are rated Ba2, the same level as the corporate family rating. Given the absence of secured debt in the waterfall of Moody's Loss Given Default analysis (non-recourse debt is excluded pursuant to Moody's methodology) the rating of the senior unsecured notes aligns with the corporate family rating. The stable outlook reflects Moody's expectation of lessening pressure on lease rates as demand for rail freight transportation strengthens along with an increase in industrial production and construction activities. In addition, the outlook anticipates a marked increase in deliveries of new railcars in the next 18 to 24 months. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded if Trinity Industries materially increases the size of its railcar leasing business relative to its manufacturing and other operations, while the funding of this expansion does not materially weaken the capital adequacy and liquidity of the leasing business. A lower proportion of secured debt to total leasing assets is also an important consideration. EBITA margins that are sustained comfortably above 15% and a cash balance of at least $200 million are also supportive of a ratings upgrade. The ratings could be downgraded if Moody's expects a weakening of the capital adequacy and liquidity of the leasing business, in particular if the proportion of secured debt to total leasing assets continues to increase. The ratings could also be downgraded if Moody's expects that EBITA margins will be sustained below 15% or if the railcar manufacturing segment fails to demonstrate break-even profit at current railcar deliveries. Diminishing prospects for an increase in demand for new railcars could also pressure the ratings. The following rating actions were taken: Affirmations: Issuer: Trinity Industries, Inc. Corporate Family Rating, Affirmed Ba2 Probability of Default Rating, Affirmed Ba2-PD Senior Unsecured Regular Bond/Debenture, Affirmed Ba2 (LGD4) Outlook Actions: Issuer: Trinity Industries, Inc. Outlook, Remains Stable The principal methodology used in these ratings was Manufacturing Methodology published in March 2020. Trinity Industries, Inc. manufactures freight and tank railcars and provides leasing, management and other railcar related services. In addition, the company manufactures products used on highways and in traffic control. Revenues for the last 12 months ended March 31, 2021 were $1.8 billion. TRUEMETRICS: Unsecureds to Recoup 10.69% of Allowed Claims in Plan ------------------------------------------------------------------ Truemetrics filed an Amended Plan and a corresponding Disclosure Statement dated June 11, 2021. Pursuant to the Plan: * Unclassified Claims, which will be paid in full under the Plan, consist of Sec. 507(a)(8) Claims for $2,453; professional fee payable to Debtor's attorney for $20,000; and professional fee to Debtor's accountant for $2,000. * Claims in Class 2 consist of secured claims for $27,203 (Chase) and $432,026 (First Home Bank), which will be paid in full, with interest, over an amortized period of 60 months, with a balloon payment of $230,000 towards the First Home Bank Claim at the end of the term. * Claims in Class 3 consist of general unsecured claims aggregating $363,288 which will recover 10.69% of the allowed amounts under the Plan. A copy of the summary of treatment of claims is available for free at https://bit.ly/2RXDgWm from PacerMonitor.com. The Debtor expects the Plan to become effective on September 1, 2021. The Plan will be funded with $50,000 of funds drawn from bank account; $5,000 retainer refund; and cash from the income of the Debtor's business. A copy of the cash flow projections is available for free at https://bit.ly/2RYBhBc from PacerMonitor.com The Court will consider confirmation of the Plan on August 3, 2021 at 1 p.m. before Judge Neil W. Bason at Courtroom 1545, 255 E Temple St., Los Angeles, California. A copy of the Disclosure Statement is available for free at https://bit.ly/3grS9bC from PacerMonitor.com. About Truemetrics Truemetrics, a provider of Internet marketing service in Alhambra, Calif., sought protection under Chapter 11 of the Bankruptcy Code (Bankr. C.D. Cal. Case No. 20-14672) on May 21, 2020. At the time of filing, the Debtor estimated assets of between $100,000 and $500,000 and liabilities of between $500,000 and $1 million. Jaurigue Law Group is the Debtor's legal counsel. TUPELO WOOD: Seeks to Tap Frith-Smith & Archibald as Accountant --------------------------------------------------------------- Tupelo Wood, LLC seeks approval from the U.S. Bankruptcy Court for the Central District of California to employ Frith-Smith & Archibald, LLP as its accountant. The firm will render these services: (a) review the Debtor's prior year's unfiled tax returns, bankruptcy petition schedules and documents; (b) review and perform tax analysis of transactions; (c) prepare federal and state income tax returns; (d) communicate with taxing authorities on behalf of the estate; (e) obtain any required tax clearance from the Internal Revenue Service for the estate's income tax returns; and (f) perform any other financial analysis, investigation, and general accounting services. The hourly rates of the firm's professionals are as follows: David Frith-Smith, Managing Partner $350 per hour Mary Archibald, Partner $350 per hour Fred Ashoori $175 per hour In addition, the firm will seek reimbursement for expenses incurred. Fred Ashoori, a member of Frith-Smith & Archibald, disclosed in a court filing that the firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Fred Ashoori David Frith-Smith Frith-Smith & Archibald, LLP 6345 Topanga Canyon Road, Suite 400 Woodland Hills, CA 91367 Telephone: (818) 774-1500 Facsimile: (818) 774-3780 Email: FredAP@f-sa.com DavidF@f-sa.com About Tupelo Wood Tupelo Wood, LLC sought protection under Chapter 11 of the Bankruptcy Code (Bankr. C.D. Cal. Case No. 21-10759) on Mar. 24, 2021, listing under $1 million in both assets and liabilities. Vassili Charalambous, managing member, signed the petition. Judge Scott C. Clarkson oversees the case. The Debtor tapped Neel Law Group, APC as counsel and Frith-Smith & Archibald, LLP as accountant. U-HAUL CO OF WEST VIRGINIA: Starts Financial Restructuring ---------------------------------------------------------- On June 16, 2021, U-Haul Co. of West Virginia announced it has filed for voluntary Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of West Virginia. The Company serves do-it-yourself moving and self-storage customers in West Virginia and small parts of Kentucky, Virginia and Ohio. The Company, which was incorporated in West Virginia in 1970 and has operated continuously in the state for the last 52 years, has faced numerous challenges in recent years including management turnover, a lack of sufficient self-storage locations, and burdensome litigation costs resulting in declining cash flow and liquidity. The Company plans to continue business without interruption, and U-Haul customers are not expected to be impacted by this action. The Company has filed motions with the Bankruptcy Court seeking to continue operations in the ordinary course, including meeting commitments to customers, paying Team Members and continuing existing employee benefit programs. Twelve Company-operated stores and 123 independent U-Haul dealers in West Virginia will continue to offer affordable and accessible mobility to U-Haul customers. The Chapter 11 filing and anticipated restructuring transaction are the final steps in the Company's internal restructuring that began in 2020 with a renewed commitment to expanding Company locations in West Virginia, and the appointment of Mark Arnold as president to lead the Company into the future. Earlier attempts to implement a business and financial reorganization were interrupted by the unprecedented COVID-19 global pandemic that hit early in 2020. "This is a sad day for a very proud company," Arnold stated. "This appears on balance to be the best way to continue to serve the needs of moving customers and to see that suppliers and Team Members get paid." The Company and U-Haul International, Inc. ("UHI") are negotiating the terms of a plan of reorganization that is expected to include a substantial "new value" capital infusion by UHI. It is hoped the Federal Bankruptcy Court can quickly hear and resolve this matter. About U-Haul Co. of West Virginia Since 1970, UHWV has been meeting the moving needs of DIY customers in the Mountain State. With its marketing company office based in Saint Albans, UHWV employs approximately 150 Team Members and maintains affiliations with more than 100 small businesses serving their West Virginia communities as U-Haul neighborhood dealers. UHWV operates at 12 Company-owned and -operated facilities across the state, 10 of which offer the public self-storage options. Saint Albans, West Virginia-based U-Haul Co. of West Virginia sought Chapter 11 protection (Bankr. S.D. W.Va. Case No. 21-20140) on June 16, 2021. Flaherty Sensabaugh Bonasso PLLC is the Debtor's counsel. UGI ENERGY: Fitch Affirms 'BB' LongTerm IDR, Outlook Stable ----------------------------------------------------------- Fitch Ratings affirmed UGI Energy Services, LLC's (ES) Long-Term Issuer Default Rating (IDR) at 'BB' with a Stable Rating Outlook. Fitch affirmed the senior secured notes at 'BB+.' The Recovery Rating has been revised to 'RR2' from 'RR1.' Fitch removed the entity from Under Criteria Observation (UCO). The revision of the recovery rating reflects Fitch's application of the agency's updated Corporates Recovery Ratings and Instrument Ratings Criteria. The ratings were placed on UCO following the publication of the updated criteria on April 9, 2021. The rating reflects the favorable long-term counterparty risk with affiliate, UGI Utilities, Inc. (UGIU; A-/Stable) under long-term take-or-pay contracts, low leverage and an integrated business model that uses the company's long-life assets to support an energy marketing business. Concerns include volume risk in the gathering and processing segment, small scale within a single basin, and assets that are exposed to market demand, including gas storage, electric power plants and contract rights on third-party pipelines. KEY RATING DRIVERS Business Segments Support Stable Leverage: As of March 31, 2021, Fitch calculated ES's LTM leverage to be 3.0x. During FY20 there were pockets of weakness for the midstream segment, driven by lower producer activities in the Marcellus and Utica. Other segments such as LNG, Power and commodity posted a solid performance led by strong demand of energy and LNG purchases. The outperformance in the other two segments more than offset the profit decline from the midstream segment. Fitch forecasts ES to maintain leverage of 3.0x-3.3x through FY22 and parent UGI Corp (Not Rated) will continue to maintain a supportive dividend policy. Lower Midstream Processing During Pandemic: Midstream processing volumes in 2020 were weaker than 2019 Fitch expectations due to lower producer activity driven by the demand reduction during the global pandemic. Fitch notes that ES received deficiency payments during FY20 and 1Q21 from oil and gas producers within the Marcellus and Utica basins in the Appalachia region. The counterparty credit risk includes a variety of Appalachia basin-focused producers and one electric power plant customer. Fitch expects volumes to grow modestly in the near term as producers ramp up activities under the current Fitch price deck and commodity price environment. During 2019, ES's acquisition of the CMG asset added scale, an important factor for credit quality. The addition of five gas gathering systems, a processing plant and a 47% interest in Pennant Midstream, LLC saw ES's margin increase by about 45%. The midstream segment now comprises about 60% of ES's margin, with LNG storage contributing 25% and commodity marketing and power generation making smaller contributions. The acquisition also moved the margin generated under fixed-fee, minimum volume commitment (MVCs) contracts closer to 65%, providing some cash flow stability, and added tangible fixed assets that are useful to the energy-marketing platform. Affiliate UGIU Provides Highly Assured Revenue: UGIU contributes a significant amount to ES's gross margin. Most of the services provided by ES to UGIU, which are subject to regulatory review and approval, have been provided for many years. Almost all the gross margin from UGIU is under take-or-pay contracts that expire at or after September 2023. Fitch expects these take-or-pay contracts to be renewed on expiry, though the price may change, given past renewals. The contracts are subject to a least cost procurement review by UGIU's regulator. Fitch believes the take-or-pay payments from UGIU create a strong cash flow for ES to, among other things, withstand sector pressure and pursue opportunities. Marketing Segment Has Higher Risk: Fitch believes the energy marketing platform has a strong foundation. However, a group of marketing businesses have occasionally caused severe shocks at other companies, demonstrating the higher business risk. The segment requires tight execution and risk monitoring. Should execution fall short of past standards, the businesses may be vulnerable to a loss of market confidence, resulting in a fall in customers and collateral calls. In the absence of such problems, the marketing segment is complementary and provides ES with a competitive advantage. ES retails natural gas and electricity to approximately 13,000 commercial and industrial customers at 40,000 locations. These customers have more predictable load profiles than retail customers, which is credit positive. ES procures two energy types for these customers and has contracts for delivery services. Energy purchases and sales are well-matched as to payment types -- variable or fixed price -- and contract duration. Delivery service contracts are often longer than the retail contracts that the delivery contracts partly serve. ES also wholesales a portion of the delivery service contracts and obtains a gross margin from ancillary services, including storage and field services. Sustained Capital Spending: Capital spending has been stable, even during the pandemic, driven by investments in the midstream sector. Fitch believes management will continue to look for small incremental investments, such as the Pine Run Gathering system in February 2021, to supplement organic growth. Future growth capex may be directed to support management's goal of 55% reduction in corporate wide Scope 1 greenhouse gas emissions by 2025. Spending may increase in 2022 as growth resumes in the midstream segment. However, leverage will remain within expectations for a 'BB' category midstream company. Parent Subsidiary Linkage: Fitch assesses UGI Corporation and ES to be in a 'Strong Parent/Weak Subsidiary' relationship under its Parent Subsidiary Rating Linkage methodology, but rates ES on a standalone basis due to the absence of strong linkages on the relevant criteria parameters. DERIVATION SUMMARY ES is comparable with NuStar Energy LP (BB-/Stable), as both companies have diverse business lines. NuStar is involved in the transportation, terminalling, storage, and marketing of petroleum products, and is geographically more diversified with operations throughout the U.S. In terms of size, NuStar is larger and consistently generates EBITDA of over $500 million, compared with ES's below $300 million. Fitch commonly uses EBITDA of $500 million as a boundary for IDRs of 'BBB-' for midstream producers. ES compares favorably in term of leverage and is the key driver to the difference in the ratings. For NuStar, Fitch expects leverage between 5.6x-6.1x at YE21 before improving to a range of 5.3x-5.6x in 2022, two full turns higher than ES. Blue Racer Midstream, LLC (B+/Stable) is comparable with ES on the basis of a similar geographical position in the Appalachia basin, as well as having gathering and processing assets. However, ES has greater business-line diversity due to its marketing, storage and power-generation assets. ES's leverage (total debt with equity credit/ operating EBITDA) is forecast between 3.0x-3.5x through fiscal year 2022, lower than that of Blue Racer which is expected to decline to less than 4.5x in 2021. The leverage accounts partially for Fitch's higher IDR for ES in comparison to Blue Racer. Blue Racer's weaker counterparty exposures further differentiates it and informs ES's stronger credit profile. KEY ASSUMPTIONS -- A Fitch price deck of Henry Hub natural gas prices of $2.75 per thousand cubic feet (mcf) in 2021, 2.45 in 2022 and through the long term and West Texas Intermediate (WTI) oil prices of $55 per barrel (bbl) in 2021, $50/bbl in 2022-2023; -- Contract counterparties with MVCs or take-or-pay commitments perform under their obligations; -- Modest growth in gross margin from the Midstream and UGI Appalachia segments; -- Capital spending in the range of $100 million-125 million, with an increase in 2022 for additional growth opportunities. No spending for the PennEast pipeline project; -- No growth in the dividend after 2022. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Annual EBITDA above $400 million and the sanctioning of growth plans that Fitch expects will lead to EBITDA exceeding $500 million a year; -- Diversification outside of the Marcellus/Utica basins. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- A decline in the credit quality of UGIU or sector-wide weakening in the credit quality for an array of non-affiliated shippers that provide long-term minimum volume commitments (or take-or-pay commitments); -- Total debt with equity credit to operating EBITDA above 4.5x for a sustained period; -- ES's energy marketing segment becoming unprofitable due to a failure to adhere to risk management policies; -- Higher business risk due to increased gathering and processing; for example, ES begins taking title to commodities (receives a percentage of proceeds from natural gas processing) or if there is a significant increase in contracts without revenue assurance features, such as contracts that lack acreage dedication or minimum volume commitments; -- A significant reduction in the demand for natural gas and its products driven by ESG concerns and policy. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity: ES had $53 million in cash and cash equivalents and no borrowings on its $260 million revolving credit facility (RCF) as of March 31, 2021. ES has the option to utilize an accordion feature to upsize the RCF up to $325 million, which may be used for acquisitions, investments and general corporate purposes. The facility matures in March 2025. ES utilizes its $75 million-$150 million (amount varies seasonally) accounts receivable securitization facility for working capital needs. There was $17 million in outstanding trade receivables at March 31, 2021. Maturities are manageable. Its senior secured term loan, with $688 million outstanding, matures in 2026. ISSUER PROFILE ES owns and operates midstream natural gas assets that supports its wholesale marketing and sales of natural gas, liquid fuels, and electricity across the Mid-Atlantic and Northeastern U.S. The midstream assets are located in the Marcellus and Utica Basins in Pennsylvania. The Fitch adjusted EBITDA was over $225 million in fiscal 2020. SUMMARY OF FINANCIAL ADJUSTMENTS Fitch typically adjusts midstream energy companies' EBITDA to exclude equity in earnings of unconsolidated affiliates and includes cash distributions from unconsolidated affiliates. Fitch removes distributions to non-controlling interests from ES's EBITDA. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. UNIFIED WOMEN'S: CCRM Acquisition No Impact on Moody's 'B3' CFR --------------------------------------------------------------- Moody's Investors Service said Unified Women's Healthcare, LP's B3 corporate family rating, B3-PD probability of default rating and B2 senior secured ratings remain unchanged following proposed incremental borrowings of $235 million under its first lien term loan due 2027 (bringing the total to about $650 million) and $120 million under its second lien term loan (unrated) due 2027 (bringing the total to $260 million). Proceeds, together with about $430 million of equity, will be used to fund the acquisition of fertility services provider CCRM Management Company Holdings, LLC ("CCRM", unrated), in a transaction totaling $775 million. The outlook is unchanged at stable. Pro-forma for the transaction as of Q1/21, Moody's adjusted debt/EBITDA will peak at around 6.9x (from 6.1x) before declining towards 6.5x over the next twelve months. The proposed acquisition introduces new risks given increased leverage and the discretionary, high-cost nature of fertility services with limited insurance coverage: a majority of procedures are out of pocket and channeled through patient financing provided by CCRM. However, Moody's believes Unified's expansion into fertility services aligns with its long-term strategy and will better position the company within the wider OB/GYN market, where other large-scale providers offer a similar range of services. Trends including later-in-life pregnancies and a gradual expansion of insurance coverage will also support growth alongside increasing cross-referrals over time. Execution and integration risks will be mitigated under Moody's expectation that CCRM will be managed independently from Unified as a standalone line of business. CCRM will represent about 25% of Moody's' adjusted pro-forma EBITDA after adjusting for operating leases. Unified's pro-forma liquidity is good. Sources total close to $200 million, supported by a cash balance of about $90 million (excluding $90 million in restricted cash on hand to fund deferred purchase obligations associated with tuck-in acquisitions during 2021), full availability under the $80 million revolver due 2025 and Moody's forecast for positive free cash flow over the next twelve months of about $30 million. Following the transaction, annual mandatory debt repayments will total about $7 million. Headquartered in Boca Raton, Florida, Unified Women's Healthcare, LP is a leading provider of practice management services to OB-GYN practices affiliated with approximately 1,300 physicians in over 700 locations across 13 states and D.C.. It provides non-clinical administrative support services to medical practices. The company's annual consolidated revenue is approximately $180 million (in excess of $1 billion if the company's affiliates revenue is included). VCLC HOLDINGS: Gets OK to Hire Villa & White as Legal Counsel ------------------------------------------------------------- VCLC Holdings LLC received approval from the U.S. Bankruptcy Court for the Western District of Texas to hire Villa & White, LLP to serve as legal counsel in its Chapter 11 case. The firm's services include: (a) Assisting and advising the Debtor relative to its operations and the overall administration of the case; (b) Representing the Debtor at court hearings and communicating with its creditors regarding the matters heard and the issues raised as well as court decisions and considerations; (c) Preparing, reviewing and analyzing operating reports, schedules, statements of affairs and legal documents; (d) Preparing legal documents in support of positions taken by the Debtor as well as preparing witnesses and reviewing documents relevant thereto; (e) Coordinating the receipt and dissemination of information prepared by and received from the Debtor and bankruptcy professionals retained in the Debtor's case; (f) Conferring with the professionals selected and employed by any official committee appointed in the case; (g) Assisting in negotiations with creditors, or court-appointed representatives or interested third parties concerning the terms, conditions, and import of a plan of reorganization and disclosure statement to be proposed and filed by the Debtor; (h) Providing services necessary to obtain confirmation of the Debtor's plan of reorganization; (i) Assisting the Debtor in its discussions and negotiations with others regarding the terms, conditions, and security for credit, if any, during its bankruptcy; (j) Conducting examination of witnesses; and (k) other necessary legal services. The services will be provided mainly by Morris White III, Esq., who will be paid at the rate of $375 per hour. As disclosed in court filings, Villa & White does not hold an interest adverse to Debtor's estate. Villa & White can be reached through: Morris E. White III, Esq. Villa & White, LLP 1100 NW Loop 410 #802 San Antonio, TX 78213 Phone: (210) 225-4500 Fax: (210) 212-4649 Email: treywhite@villawhite.com About VCLC Holdings VCLC Holdings, LLC is a single asset real estate debtor (as defined in 11 U.S.C. Section 101(51B)). It is the fee simple owner of a property located at 14 Rosemary Ave., Alamo Heights, Texas, having an appraised value of $1.10 million. VCLC Holdings sought protection under Chapter 11 of the Bankruptcy Code (Bankr. W.D. Texas Case No. 21-50391) on April 6, 2021. At the time of the filing, the Debtor disclosed $1.1 million in assets and $960,000 in liabilities. Judge Craig A. Gargotta oversees the case. Morris E. White III, Esq., at Villa & White, LLP is the Debtor's legal counsel. VISTA OUTDOOR: S&P Upgrades ICR to 'BB-', Outlook Stable -------------------------------------------------------- S&P Global Ratings raised its issuer credit rating on U.S.-based Vista Outdoor Inc. to 'BB-' from 'B+'. Concurrently, S&P raised its rating on the company's unsecured debt to 'BB-' from 'B+'. S&P revised its recovery rating to '3' from '4', reflecting its expectations for improved profitability at emergence, resulting in a higher valuation. The stable outlook reflects S&P's expectation that the company will maintain net leverage below 2.5x over the next 12 months. The ratings upgrade reflects Vista's improved business profile and lower debt leverage. The company continues to benefit from strong demand in both its shooting sports and outdoor products segments, growing sales by 28% and 25% in fiscal 2021, respectively, over fiscal 2020. Heightened consumer demand for ammunition for personal protection and hunting drove increased sales. S&P said, "During the pandemic, consumers turned to outdoor sports as a form of entertainment, and though we expect a slight decline in fiscal 2022 as consumers reallocate discretionary spending, we still expect the segment to be substantially larger than what it was pre-pandemic with retention of some new users." The company's adjusted EBITDA margin improved to 16.7% in fiscal 2021 versus 7.2% in fiscal 2020, resulting in gross leverage of 1.6x (1x on a net basis) for fiscal 2021 versus gross leverage of 5.1x in the year prior. S&P now expects total sales to grow to $2.4 billion in fiscal 2022, driven by continued growth in the shooting sports segment. Vista's increased production scale and capabilities along with a significant ammunition order backlog boosted its pricing ability and market share. Additionally, its e-commerce strategy will continue to build loyalty across its broad portfolio of brands and unlock cross-selling and subscription revenue opportunities. Profitability should improve with increasing demand for ammunition and greater operating leverage. U.S. commercial wholesale ammo sales have been increasing since the back half 2019. The company holds roughly 35% share in the domestic commercial ammunition segment. In the near term, S&P expects ammunition demand to continue trending positive given the company's growing order backlog, increased firearm adoption by first-time users, pickup in hunting licenses, and increased gun range participation. There were 8 million new firearm buyers in 2020 and the U.S. Fish and Wildlife Service reported hunting license sales increased by 8% in 2020 versus a decline of 3% in 2019. The company continues to win ammunition contracts with major police departments and the military, which provide greater demand stability. The increased demand for ammunition has driven stronger operating leverage as gross profit for the shooting sports segment grew to 28% in fiscal 2021 from 18% in fiscal 2020. The acquisition of Remington Arms Co. Inc.'s ammunition and accessories businesses in the third quarter of fiscal 2021 further bolstered the company's ammunition production capacity and accelerated sales growth. S&P said, "Although we expect the Remington acquisition to cause temporary margin disruption, the business ramp is happening faster than expected and we expect it will contribute in excess of $200 million of sales in fiscal 2022. We expect EBITDA margins to decline to 14.3% in fiscal 2022, driven by a combination of Remington inefficiencies and rising commodity, labor, and freight costs. However, we expect the company will have the ability to pass on most of the costs to consumers, particularly on the ammunition side, as demand continues to outweigh supply." Cyclicality in the ammunition industry is an inherent risk to the company's profitability, though its portfolio has become more robust to navigate a down cycle. Despite the rapid increase in ammunition demand, our visibility into end-user ammunition stockpiles is limited, and as such there is a risk of a substantial downturn if the market stockpiles grow too large. During the previous ammunition downturn in 2016-2019, consumers had stockpiled ammunition in the years prior, and as a result demand collapsed. The problem was further exacerbated by Remington and distributor bankruptcies that led to excess product and cheap inventory flooding the market, depressing pricing. S&P said, "We believe the company is better positioned as its ammunition is more robust with more exposure to comparatively less cyclical types of calibers. Additionally, the company's outdoor portfolio has also grown with a strong rebound in demand through the pandemic, and as such the outdoor segment's gross margins increased to 29% in fiscal 2021 versus 26% in fiscal 2020. Despite these moderating factors, we still believe a substantial decline in the ammunition market driven by stockpiling, coupled with increasing commodity, freight, and labor costs, could drive a material decline in EBITDA, since the majority of the company's profitability is in the shooting sports segment. Additionally, we believe there are political and social risk factors related to shooting sports that could hurt the company's portfolio. For instance, retailers could destock the company's products or retailers could choose to not stock the company's outdoor products because of negative press or social pressures. "We expect Vista to manage net leverage at 2.5x or below on an S&P Global Ratings' adjusted basis. Adjusted net leverage for fiscal 2021 was about 1x and we expect the company to manage net leverage below 2.5x. We expect the company to generate at least $200 million free cash flow in fiscal 2022 and 2023. We expect it will use proceeds for reinvestment in the business, tuck-in acquisitions, or share repurchases in the longer term, though in the shorter term some cash could remain on the balance sheet. The company recently announced a $100 million share repurchase program over the next two years and made a few tuck-in acquisitions. If the company does increase net leverage above 2.5x for an acquisition, we would expect it to quickly reduce debt over a 12-month period to below 2.5x. However, if the company is more aggressive with its financial policy, we believe it could leave little leverage headroom for the rating category if there is a substantial downturn in demand for the company's products, such as an ammunition downcycle." Environmental, social, and governance (ESG) credit factors for this credit rating change: -- Health and safety The stable outlook reflects S&P's expectation that the company will continue growing sales and earnings while maintaining net leverage below 2.5x over the next 12 months, despite its expectations for continued bolt-on acquisitions. S&P could lower the ratings if net leverage rises to and is sustained above 2.5x. S&P believes this could happen if: -- Demand for the company's products decline substantially such that operating leverage is greatly reduced, hurting profitability; -- The company is unable to manage cost inflation such that margins decline substantially; or -- The company demonstrates a more aggressive financial policy and raises debt to fund large acquisitions or shareholder returns. S&P could raise the ratings if: -- The company further rounds out its portfolio such that its profitability is not mostly dependent on the ammunition segment; -- Market conditions remain favorable and organic growth is sustained across the entire portfolio; and -- The company maintains adjusted EBITDA margins of at least mid-teens percent and generates strong free operating cash flow. VISTAGEN THERAPEUTICS: Set to Join Russell 2000 Index ----------------------------------------------------- VistaGen Therapeutics, Inc. will be added to the Russell 2000 Index at the conclusion of the 2021 Russell Indexes annual reconstitution, effective after the U.S. market opens on Monday, June 28, 2021, according to a preliminary list of additions posted on June 4, 2021. "Inclusion in the Russell 2000 Index, which is one of the most cited performance benchmarks for small-cap companies, is another important milestone for VistaGen and an achievement we expect will increase overall awareness and exposure of our company within the investment community," stated Shawn K. Singh, chief executive officer of VistaGen. "Our late-stage anxiety and depression programs have exciting potential to change lives. We look forward to introducing our company to a wider investor audience as we continue to execute on noteworthy milestones during the second half of the year and beyond." Russell U.S. Indexes are widely used by investment managers and institutional investors as the basis for index funds and as benchmarks for active investment strategies. Approximately $10.6 trillion in assets are benchmarked against Russell U.S. Indexes. Russell U.S. Indexes are part of FTSE Russell, a leading global index provider. The annual Russell reconstitution captures the 4,000 largest U.S. stocks as of May 7, 2021, ranking them by total market capitalization. Membership in the U.S. all-cap Russell 3000® Index, which remains in place for one year, means automatic inclusion in the large-cap Russell 1000 Index or small-cap Russell 2000 Index, as well as the appropriate growth- and value-style indexes. FTSE Russell determines membership for its Russell Indexes primarily by objective, market-capitalization rankings, and style attributes. About VistaGen Headquartered in San Francisco, California, VistaGen Therapeutics -- http://www.vistagen.com-- is a clinical-stage biopharmaceutical company developing new generation medicines for CNS diseases and disorders where current treatments are inadequate, resulting in high unmet need. VistaGen's pipeline is focused on clinical-stage CNS drug candidates with a differentiated mechanism of action, an exceptional safety profile in all clinical studies to date, and therapeutic potential in multiple large and growing CNS markets. VistaGen reported a net loss attributable to common stockholders of $22.04 million for the fiscal year ended March 31, 2020, compared to a net loss attributable to common stockholders of $25.73 million for the fiscal year ended March 31, 2019. As of Dec. 31, 2020, the Company had $109.27 million in total assets, $15.46 million in total liabilities, and $93.81 million in total stockholders' equity. OUM & CO. LLP, in San Francisco, California, the Company's auditor since 2006, issued a "going concern" qualification in its report dated June 29, 2020, citing that the Company has not yet generated sustainable revenues, has suffered recurring losses and negative cash flows from operations and has a stockholders' deficit, all of which raise substantial doubt about its ability to continue as a going concern. WASHINGTON PRIME: Fitch Lowers LongTerm IDR to 'D' -------------------------------------------------- Fitch Ratings has downgraded the Long-Term Issuer Default Ratings (IDRs) of Washington Prime Group, Inc. and Washington Prime Group, LP (collectively WPG) to 'D' from 'RD', due to the company's Chapter 11 filing. Fitch has upgraded WPG's senior unsecured notes to 'CC'/'RR3' from 'C'/'RR4'. The upgrade reflects a lower cap rate Fitch applied to the assets, due to incremental data from recent restructurings and moving closer towards current market values given that the restructuring is more imminent. On June 11, 2021, WPG entered into a restructuring support agreement (RSA) with certain creditors, representing 70% of secured and unsecured debt. On June 13, 2021, the company filed for Chapter 11 under the U.S. Bankruptcy Code. The RSA, which may be subject to change, provides for a deleveraging of the company's balance sheet by nearly $950 million through the equitization of unsecured notes and a $190 million paydown of the revolving credit and term loan facilities. Washington Prime has secured $100 million in debtor-in-possession (DIP) financing to support day-to-day operations during the Chapter 11 process. Fitch may withdraw the ratings within 30 days. KEY RATING DRIVERS Recovery Ratings: Fitch's recovery analysis assumes WPG would be considered a going concern in bankruptcy and the company would be reorganized rather than liquidated. Fitch determines a post-reorganization NOI produced by the following three segments of operating real estate to determine the recoverable value attributable to the associated debt obligations: NOI encumbered by 75% of credit facility and term loans; asset-level encumbered NOI (mortgage debt); remaining unencumbered NOI (25% of credit facility, unsecured bond and deficiency claims). Claims for the three categories would total $1.0 billion, $1.1 billion, and $1.4 billion, respectively. Stressed capitalization rates are individually applied to the post-reorganization NOI produced by each assets type (Tier I malls, Tier II/noncore malls, open air) to determine the estimated recoverable value of each segment of the operating real estate portfolio. Fitch assumes a post-reorganization, consolidated property-level NOI of $240 million, reflecting recent and potential further declines that are not assumed to be remedied via a restructuring. Fitch has assumed a blended 11% cap rate, versus 14% previously. Including construction-in-progress and equity investments in unconsolidated entities at 25% of book value ($115 million), results in an estimated gross recoverable value of $2.2 billion. From the gross value, Fitch deducts 10% for administrative costs, which would include the DIP financing. The distribution of value yields a recovery ranked in the 'RR2' category for the senior secured revolver and term loans based on Fitch's expectation of recovery for the obligations in the 71%-90% range, the 'RR3' category for the senior unsecured bonds based on recovery in the 51%-70% range, and the 'RR6' category for the preferred stock based on recovery in the 0%-10% range. Under Fitch's Recovery Criteria, these recoveries result in notching two levels above the IDR for the secured revolver and term loans to 'CCC-', and one notch above the IDR at 'CC' for the unsecured bonds, and no notching for preferred stock at 'C'. Challenged Cash Flows: Fitch expects WPG's operating performance to deteriorate further in the near term. Operating performance has been diminished by negative retailer trends, specifically department store anchor closures and bankruptcies within the company's mall portfolio that have induced incremental occupancy and rental income losses through co-tenancy clauses. Ending occupancy for the Tier 1 and open-air properties (roughly 90% of total NOI) decreased to 90.8% at March 31, 2021 from 93.3% a year earlier. Average base minimum rent per square foot for the core portfolio decreased 3.6% year-on-year for the quarter ended March 31, 2021. Comparable NOI for the Tier 1 and open-air properties decreased 17.4% in the first quarter of 2021 when compared to the first quarter of 2020, including comparable NOI declines of 20.1% for Tier 1 properties and 12.2% for open air properties. The declines were driven by pandemic related tenant weakness, higher bad debt reserves and rent abatements, as well as impact of 2020 bankruptcies and lost rent from lower occupancy when compared to the first quarter of 2020. Weak Relative Capital Access: WPG's access to capital has been limited to its revolving bank credit facility, which was effectively fully drawn during 1Q20. Fitch believed the company's open-air unencumbered pool had material value, but the pool remaining after the waiver is unlikely to garner significant interest from third-party capital. Fitch does not expect lenders to have a significant appetite for retail real estate that does not have a significant grocer component or other essential use. DERIVATION SUMMARY WPG's IDR of 'D' reflects the company's Chapter 11 bankruptcy filing. Fitch links and synchronizes the IDRs of the parent REIT and subsidiary operating partnership due to the subsidiary's stronger credit profile as direct owner of the real estate portfolio and strong legal and operational ties between the two entities. KEY ASSUMPTIONS Fitch's key assumptions within its rating case for the issuer include: -- Further occupancy loss through 2022 due to activation of co tenancy clauses and continued challenges in the retail sector, stabilizing in 2023-2024; -- Mortgage refinancing requires partial principal reduction or additional contingencies in many cases as lending continues to retreat from the mall property type. RATING SENSITIVITIES Rating sensitivities do not apply given the Chapter 11 filing under the U.S. Bankruptcy Code. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Washington Prime has secured $100 million in DIP financing to support day-to-day operations during the Chapter 11 process. ISSUER PROFILE Washington Prime Group is a retail real estate investment trust, REIT, that owns, develops, and manages enclosed retail properties and open-air centers. As of March 31, 2021, WPG's assets consisted of interests in 101 shopping centers in the U.S., approximately 52 million square feet of managed gross leasable area. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. WC 5TH: Seeks to Hire Columbia Consulting as Financial Advisor -------------------------------------------------------------- WC 5th and Waller, LLC seeks approval from the U.S. Bankruptcy Court for the Western District of Texas to employ Columbia Consulting Group, PLLC as its financial advisor. The firm will render these services: (a) prepare projections and assistance in structuring a plan of reorganization; (b) prepare schedules, if necessary; (c) provide expert testimony, if necessary; and (d) other financial and accounting consulting services. The hourly rates of the firm's professionals are as follows: Partners $250 - $300 Other Accounting Professionals $75 - $175 In addition, the firm will seek reimbursement for expenses incurred. The Debtor has agreed to pay a retainer of $10,000. Jeffrey Worley, chief financial officer at Columbia Consulting Group, disclosed in a court filing that the firm and its professionals are "disinterested persons" as that term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Jeffrey A. Worley Columbia Consulting Group, PLLC 6101 Long Prairie Road Suite 744, MB 17 Flower Mound, TX 75028 Telephone: (972) 809-6393 About WC 5th and Waller WC 5th and Waller LLC is a Single Asset Real Estate debtor (as defined in 11 U.S.C. Section 101(51B)). WC 5th and Waller LLC filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. W.D. Tex. Case No. 21-10358) on May 4, 2021. Natin Paul, authorized agent, signed the petition. At the time of the filing, the Debtor estimated up to $50 million in assets and $1 million to $10 million in liabilities. Judge Tony M. Davis oversees the case. The Debtor tapped Mark H. Ralston, Esq. at Fishman Jackson Ronquillo, PLLC as counsel and Columbia Consulting Group, PLLC as financial advisor. WC 6TH: Seeks to Tap Columbia Consulting as Financial Advisor ------------------------------------------------------------- WC 6th and Rio Grande, LP seeks approval from the U.S. Bankruptcy Court for the Western District of Texas to employ Columbia Consulting Group, PLLC as its financial advisor. The firm will render these services: (a) prepare projections and assistance in structuring a plan of reorganization; (b) prepare schedules, if necessary; (c) provide expert testimony, if necessary; and (d) other financial and accounting consulting services. The hourly rates of the firm's professionals are as follows: Partners $250 - $300 Other Accounting Professionals $75 - $175 In addition, the firm will seek reimbursement for expenses incurred. The Debtor has agreed to pay a retainer of $10,000. Jeffrey Worley, chief financial officer at Columbia Consulting Group, disclosed in a court filing that the firm and its professionals are "disinterested persons" as that term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Jeffrey A. Worley Columbia Consulting Group, PLLC 6101 Long Prairie Road Suite 744, MB 17 Flower Mound, TX 75028 Telephone: (972) 809-6393 About WC 6th and Rio Grande WC 6th and Rio Grande, LP filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. W.D. Tex. Case No. 21-10359) on May 4, 2021. At the time of the filing, the Debtor disclosed total assets of up to $50 million and total liabilities of up to $10 million. Judge Tony M. Davis oversees the case. The Debtor tapped Mark H. Ralston, Esq. at Fishman Jackson Ronquillo, PLLC as counsel and Columbia Consulting Group, PLLC as financial advisor. WC CULEBRA: Seeks to Tap Columbia Consulting as Financial Advisor ----------------------------------------------------------------- WC Culebra Crossing SA, LP seeks approval from the U.S. Bankruptcy Court for the Western District of Texas to employ Columbia Consulting Group, PLLC as its financial advisor. The firm will render these services: (a) prepare projections and assistance in structuring a plan of reorganization; (b) prepare schedules, if necessary; (c) provide expert testimony, if necessary; and (d) other financial and accounting consulting services. The hourly rates of the firm's professionals are as follows: Partners $250 - $300 Other Accounting Professionals $75 - $175 In addition, the firm will seek reimbursement for expenses incurred. The Debtor has agreed to pay a retainer of $10,000. Jeffrey Worley, chief financial officer at Columbia Consulting Group, disclosed in a court filing that the firm and its professionals are "disinterested persons" as that term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Jeffrey A. Worley Columbia Consulting Group, PLLC 6101 Long Prairie Road Suite 744, MB 17 Flower Mound, TX 75028 Telephone: (972) 809-6393 About WC Culebra Crossing SA WC Culebra Crossing SA, LP is a Single Asset Real Estate debtor (as defined in 11 U.S.C. Section 101(51B)). WC Culebra Crossing SA, LP filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. W.D. Tex. Case No. 21-10360) on May 4, 2021. At the time of filing, the Debtor estimated $10 million to $50 million in assets and $1 million to $10 million in liabilities. Judge Tony M. Davis oversees the case. The Debtor tapped Mark H. Ralston, Esq. at Fishman Jackson Ronquillo, PLLC as counsel and Columbia Consulting Group, PLLC as financial advisor. WILLCO X DEVELOPMENT: Has Deal on Cash Collateral Use Thru Aug 6 ---------------------------------------------------------------- Willco X Development LLP and Independent Bank advised the U.S. Bankruptcy Court for the District of Colorado they have reached an agreement regarding Willco's use of cash collateral and now desire to memorialize the terms of the agreement into an agreed order. On October 9, 2020, the Debtor filed its Motion to Approve Stipulated Interim Order for Use of Cash Collateral. There were no objections to the Motion and a Cash Collateral Order was entered on October 29. The Debtor and the Secured Lender have worked to insure that the terms of the original Cash Collateral Order are performed and complied with, and the parties agreed to extend the Cash Collateral Order without alteration to its terms to and including August 6, 2021, provided the parties remain in compliance with the Order. The Budget referenced in the Cash Collateral Order was modified to include and reference the updated Budget. A copy of the stipulation is available for free at https://bit.ly/3gznryB from PacerMonitor.com. About Willco X Development LLP Willco X Development, LLLP, operator of the Hilton Garden Inn of Thornton in Colo., filed a Chapter 11 petition (Bankr. D. Colo. Case No. 20-16438) on Sept. 29, 2020. The Debtor was estimated to have $10 million to $50 million in assets and liabilities as of the bankruptcy filing. Judge Thomas B. Mcnamara oversees the case. Weinman & Associates, P.C., led by Jeffrey A. Weinman, is the Debtor's legal counsel. Independent Bank, as lender, is represented by John F. Young, Esq., at Markus Williams Young & Hunsicker LLC. WILLIAM PAUL BURCH: 5th Cir. Tosses In Forma Pauperis Bid --------------------------------------------------------- The U.S. Court of Appeals for the Fifth Circuit tossed William Paul Burch's bid for leave to appeal in forma pauperis (IFP) from the district court's dismissal, under Federal Rule of Civil Procedure 12(b)(6), of his removed state court action against Freedom Mortgage Corporation. The lower court held that Burch's action based on an allegedly fraudulent lien under Texas Civil Practice and Remedies Code Section 12.003 was untimely under the four-year limitation period of Texas Civil Practice and Remedies Code Section 16.004(a) because Burch knew or believed that Freedom had breached a Chapter 11 bankruptcy plan when Freedom foreclosed on Burch's property in January 2011. The lower court accordingly denied Burch's contemporaneous motion for summary judgment. The Fifth Circuit held that the district court did not abuse its discretion by denying IFP status based on Burch and his wife having sufficient income to pay the filing fees. The Fifth Circuit also noted that Burch and his wife own at least one home, although Burch listed the value of his home and other real estate as zero on the affidavit accompanying his IFP application. Burch's appeal is dismissed as frivolous. The Fifth Circuit also warned Burch that additional frivolous or abusive filings in this court, the district court, or the bankruptcy court will result in the imposition of sanctions, including dismissal, monetary sanctions, and restrictions on his ability to file pleadings in this court and any court subject to this court's jurisdiction. The appellate case is, William Paul Burch, Plaintiff-Appellant, v. Freedom Mortgage Corporation, Defendant-Appellee, No. 19-11197 (5th Cir.). A copy of the Court's June 16, 2021 per curiam decision is available at: https://www.leagle.com/decision/infco20210616065 About William and Juanita Burch Spouses William and Juanita Burch filed a Chapter 11 bankruptcy petition (Bankr. N.D. Tex., Case No. 08-45761) on December 1, 2008. Judge Russell F. Nelms is the case judge. At the time of filing, the Debtors estimated $1 million to $10 million in both assets and debts. Eric A. Liepins, Esq., at Eric A. Liepins, P.C. serves as bankruptcy counsel. WOODLAWN COMMUNITY: Trustee Taps Duane Morris as Special Counsel ---------------------------------------------------------------- Gina B. Krol, the appointed trustee in the Chapter 11 case of Woodlawn Community Development Corp., seeks approval from the U.S. Bankruptcy Court for the Northern District of Illinois to employ Duane Morris LLP, led by Rosanne Ciambrone, Esq., as special counsel. The trustee needs a special counsel to pursue the sale of the Debtor's interest in Jackson Park Terrace Apartments and South Park Plaza Apartments. Duane Morris has agreed to provide the Debtor a 10 percent discount of its preferred billing rates. The discounted hourly rates of the firm's counsel are as follows: Rosanne Ciambrone $958.50 Daniel Kohn $697.50 Art Momjian $958.50 In addition, the firm will seek reimbursement for expenses incurred. Rosanne Ciambrone, Esq., a member of Duane Morris, disclosed in a court filing that the firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Rosanne Ciambrone, Esq. Duane Morris LLP 190 South LaSalle Street, Suite 3700 Chicago, IL 60603-3433 Telephone: (312) 499-0127 Facsimile: (312) 277-2342 Email: RCiambrone@duanemorris.com About Woodlawn Community Development Founded in 1972, Woodlawn Community Development Corp. manages and develops affordable housing for families in the Greater Metro Chicago area. Visit https://www.wcdcchicago.com for more information. Woodlawn Community Development filed a Chapter 11 petition (Bankr. N.D. Ill. Case No. 18-29862) on Oct. 24, 2018. In the petition signed by Leon Finney, Jr., president and chief executive officer, the Debtor was estimated to have $50 million to $100 million in both assets and liabilities. Judge Carol A. Doyle oversees the case. The Debtor has tapped Herzog & Schwartz, P.C. as its bankruptcy counsel. Gina B. Krol is the Debtor's Chapter 11 trustee. The trustee tapped Cohen & Krol as bankruptcy counsel, and Freeborn & Peters, LLP and Duane Morris, LLP as special counsel. YS HOMES: Seeks to Hire Vallit Advisors as Forensic Accountant -------------------------------------------------------------- YS Homes, LLC seeks approval from the U.S. Bankruptcy Court for the District of Maryland to employ Vallit Advisors, LLC as forensic accountant. Vallit Advisors will render these services: (a) provide forensic accounting and related investigations, asset tracing and consulting services; (b) analyze financial and accounting books, documents, or records; (c) prepare written report(s) concerning findings as requested; (d) assist the Debtor to review and conduct financial forensic investigations of both pre- and post-petition transactions; (e) assist the Debtor to identify, formulate, and pursue claims and potential causes of action; (f) provide litigation support and testimony as required; and (g) provide such additional services as the Debtor may reasonably request. The hourly rates of the firm's professionals are as follows: Charles W. Rains $450 Professional Staff/Managing Members $165 - $550 In addition, the firm will seek reimbursement for expenses incurred. Charles Rains, a member at Vallit Advisors, disclosed in a court filing that the firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Charles W. Rains Vallit Advisors, LLC 9515 Deereco Road, Suite 407 Timonium, MD 21093 Telephone: (443) 482-9500 Email: crains@vallitadvisors.com About YS Homes YS Homes, LLC filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. D. Md. Case No. 21-10874) on Feb. 11, 2021, listing under $1 million in both assets and liabilities. Judge Michelle M. Harner oversees the case. Richard M. Goldberg, Esq., at Shapiro Sher Guinot & Sandler serves as the Debtor's counsel. Z EDGE: Aug. 19 Hearing on Disclosure Statement ----------------------------------------------- Judge Brenda K. Martin has entered an order that the hearing on Disclosure Statement of Edge of All Trades, LLC will be on August 19, 2021, at 1:30 p.m. Any party desiring to object to the Court's approval of the Disclosure Statement must file a written objection with the Court via the Electronic Court Filing System. The objection must be filed by August 9, 2021. About Z Edge of All Trades Z Edge of All Trades, LLC, is in the business of renting out residential properties and doing contracting work. Z Edge of All Trades sought Chapter 11 protection (Bankr. D. Ariz. Case No. 20-09480) on Aug. 19, 2020. LAWRENCE B. SLATER, PLLC, is the Debtor's counsel. [*] AlixPartners Launches Turnaround & Transformation Survey ------------------------------------------------------------ Global consulting firm, AlixPartners, is launching its annual Turnaround & Transformation Survey, which reveals that more than half of restructuring experts from across the US and Europe (56%) said that their clients performed better during the pandemic than they did during the financial crisis. The majority (80%) nod to the fact that companies have had greater access to liquidity over the past year. More than two thirds of restructuring experts across Europe (71%) and almost half (47%) in the US also state that they expect interest rates to remain low over the coming months. Yet, in spite of the available liquidity and low interest rates, 96% of restructuring experts believe that the pandemic will cause their clients distress this year. Approximately one in three (29%) specifically anticipate that over half of their clients that secured financing in 2020 will find themselves in financial distress again later in 2021. These findings are based on a survey of more than 500 restructuring experts from financial advisory firms, banks and law firms and corporate professionals across a range of industries based in the US, UK, France, Germany, and Italy. Lisa Donahue, global joint head of AlixPartners' Turnaround & Restructuring Services practice, commented: "Many businesses have been able to weather the storm over the past year, thanks to the ample availability of liquidity and to public funding in certain markets. But with the pandemic continuing to cause significant strain and with inflation on the rise, many businesses have taken on unprecedented levels of debt, while operating within a bubble that risks bursting. Business leaders must ensure that the debt they carry is sustainable and that they have an operating model that is fit for purpose for the long term. Those that seek to refinance without keeping a close eye on their balance sheet risk encountering disasters down the line." Commenting on the findings of this year's research, Joff Mitchell, global joint head of the firm's Turnaround & Restructuring Services practice, stated: "One of the biggest threats facing companies at the moment is the inevitable increase of the cost of debt and the withdrawal of pandemic-related public funding. To avoid being caught out, business leaders need to take the necessary steps now to manage their debt and associated capital structure, and to return their business to leverage levels and investment grade ratings that reassert a competitive stance. The implications of inflation and interest rate rises must be planned for and combated, should they materialize." About the Survey The AlixPartners annual Turnaround & Transformation Survey was conducted in April 2021 and is comprised of responses from more than 500 corporate leaders, financial and legal experts. About AlixPartners AlixPartners -- http://www.alixpartners.com-- is a results-driven global consulting firm that specializes in helping businesses successfully address their most complex and critical challenges. Our clients include companies, corporate boards, law firms, investment banks, private equity firms, and others. Founded in 1981, AlixPartners is headquartered in New York, and has offices in more than 20 cities around the world. [^] BOOK REVIEW: Transnational Mergers and Acquisitions ------------------------------------------------------- Author: Sarkis J. Khoury Publisher: Beard Books Softcover: 292 pages List Price: $34.95 Order your personal copy today at http://is.gd/hl7cni Transnational Mergers and Acquisitions in the United States will appeal to a wide range of readers. Dr. Khoury's analysis is valuable for managers involved in transnational acquisitions, whether they are acquiring companies or being acquired themselves. At the same time, he provides a comprehensive and large-scale look at the industrial sector of the U.S. economy that proves very useful for policy makers even today. With its nearly 100 tables of data and numerous examples, Khoury provides a wealth of information for business historians and researchers as well. Until the late 1960s, we Americans were confident (some might say smug) in our belief that U.S. direct investment abroad would continue to grow as it had in the 1950s and 1960s, and that we would dominate the other large world economies in foreign investment for some time to come. And then came the 1970s, U.S. investment abroad stood at $78 billion, in contrast to only $13 billion in foreign investment in the U.S. In 1978, however, only eight years later, foreign investment in the U.S. had skyrocketed to nearly #41 billion, about half of it in acquisition of U.S. firms. Foreign acquisitions of U.S. companies grew from 20 in 1970 to 188 in 1978. The tables had turned an Americans were worried. Acquisitions in the banking and insurance sectors were increasing sharply, which in particular alarmed many analysts. Thus, when it was first published in 1980, this book met a growing need for analytical and empirical data on this rapidly increasing flow of foreign investment money into the U.S., much of it in acquisitions. Khoury answers many of the questions arising from the situation as it stood in 1980, many of which are applicable today: What are the motives for transnational acquisitions? How do foreign firms plans, evaluate, and negotiate mergers in the U.S.? What are the effects of these acquisitions on competition, money and capital markets; relative technological position; balance of payments and economic policy in the U.S.? To begin to answer these questions, Khoury researched foreign investment in the U.S. from 1790 to 1979. His historical review includes foreign firms' industry preferences, choice of location in the U.S., and methods for penetrating the U.S. market. He notes the importance of foreign investment to growth in the U.S., particularly until the early 20th century, and that prior to the 1970s, foreign investment had grown steadily throughout U.S. history, with lapses during and after the world wars. Khoury found that rates of return to foreign companies were not excessive. He determined that the effect on the U.S. economy was generally positive and concluded that restricting the inflow of direct and indirect foreign investment would hinder U.S. economic growth both in the short term and long term. Further, he found no compelling reason to restrict the activities of multinational corporations in the U.S. from a policy perspective. Khoury's research broke new ground and provided input for economic policy at just the right time. Sarkis J. Khoury holds a Ph.D. in International Finance from Wharton. He teaches finance and international finance at the University of California, Riverside, and serves as the Executive Director of International Programs at the Anderson Graduate School of Business. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. On Thursdays, the TCR delivers a list of recently filed Chapter 11 cases involving less than $1,000,000 in assets and liabilities delivered to nation's bankruptcy courts. The list includes links to freely downloadable images of these small-dollar petitions in Acrobat PDF format. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. The Sunday TCR delivers securitization rating news from the week then-ending. TCR subscribers have free access to our on-line news archive. Point your Web browser to http://TCRresources.bankrupt.com/and use the e-mail address to which your TCR is delivered to login. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine Tumanda, Valerie Udtuhan, Howard C. Tolentino, Carmel Paderog, Meriam Fernandez, Joel Anthony G. Lopez, Cecil R. Villacampa, Sheryl Joy P. Olano, Psyche A. Castillon, Ivy B. Magdadaro, Carlo Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2021. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $975 for 6 months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. *** End of Transmission ***