/raid1/www/Hosts/bankrupt/TCR_Public/210806.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, August 6, 2021, Vol. 25, No. 217
Headlines
ALLIE'S PARTY: Seeks to Employ Briggs Law as Special Counsel
ALPHA LATAM: Bondholders Withhold $45 Million Loan Until CRO Joins
ALPHATEC HOLDINGS: Incurs $38.2 Million Net Loss in 2nd Quarter
APOLLO ENDOSURGERY: Incurs $3 Million Net Loss in Second Quarter
ARCHES HOLDINGS: Moody's Assigns B2 CFR on Strong Market Position
ASAIG LLC: Unsecureds to be Paid Out of Liquidating Trust
ASAIG LLC: Wins Conditional OK on Disclosure Statement
ASHLAND LLC: Moody's Rates New $450MM Senior Unsecured Notes 'Ba1'
BGT INTERIOR: Wins Cash Collateral Access Thru Sept 1
BLUE CARGO: Involuntary Chapter 11 Case Summary
C & C ENTITY: Wins Cash Collateral Access Thru Sept 11
CALIFORNIA PIZZA: Files Virus Coverage Suit vs. Insurer
CARPENTER TECHNOLOGY: S&P Lowers ICR to 'BB+' on Elevated Leverage
CASTLEROCK DEVELOPMENT: Case Summary & 20 Top Unsecured Creditors
CCO HOLDINGS: Moody's Assigns B1 Rating to New Sr. Unsecured Notes
CENTURY COMMUNITIES: Moody's Ups CFR to Ba3, Outlook Stable
CLEANSPARK INC: Provides Bitcoin Mining Operations Updates
CRAVE BRANDS: Wins Cash Collateral Access Thru August 25
CYTOSORBENTS CORP: Posts $4.7 Million Net Loss in Second Quarter
DARREN MARTIN: Seeks Approval to Hire Jones & Walden as Counsel
DAWN ACQUISITIONS: Moody's Cuts CFR to Caa1, Alters Outlook to Neg
DOLE PLC: S&P Assigns 'BB' ICR on Completion of IPO, Outlook Stable
DURRIDGE COMPANY: Gets OK to Tap Christine E. Devine as Counsel
EAST WEST AVL: Wins Cash Collateral Access Thru Aug 20
FOUNDATIONAL EDUCATION: Moody's Assigns First Time B3 CFR
GAINCO INC: Wins Cash Collateral Access
GBG USA: Wins Cash Collateral Access Thru Nov 3
GFL ENVIRONMENTAL: Moody's Rates New $400MM Unsecured Notes 'B3'
GIA DEVELOPMENT: Involuntary Chapter 11 Case Summary
GONGCOOK LLC: Seeks to Tap Richard Feinsilver as Legal Counsel
GPS HOSPITALITY: Moody's Rates New $385MM Secured Notes 'Caa1'
GYPSUM RESOURCES: Taps Colliers Nevada as Real Estate Broker
HERSCHEND ENTERTAINMENT: Moody's Ups CFR to B2 & Rates New Loan B2
HESS MIDSTREAM: Fitch Affirms 'BB+' LT IDR, Outlook Stable
HH ACQUISITION: Seeks to Hire Hostmark Hospitality as Hotel Manager
HILMORE LLC: Unsecured Creditors to be Paid in Full in 1 Year
HORIZON GLOBAL: Posts $960K Net Income in Second Quarter
INFINERA CORP: Incurs $35.6 Million Net Loss in Second Quarter
INFINERA CORP: Registers 4.35M Common Shares Under Incentive Plan
JTF LLC: Case Summary & 9 Unsecured Creditors
KATERRA INC: $71 Mil. Ch. 11 Sale of Manufacturing Plants Okayed
KATERRA INC: Clark Hill Represents Capitol Indemnity, 2 Others
KATERRA INC: VBC Buys Tracy, California Facility
KING'S TOWING: Seeks to Hire Smith & Taylor Tax as Accountant
KITTY HAWK: Bid Deadline Set for August 21
LBD PLLC: Plan Denied Confirmation, Fails 'Good Faith Test'
LIBERTY POWER: Subsidiaries Tap Genovese Joblove as Legal Counsel
LRS HOLDINGS: Moody's Assigns First Time B3 Corp. Family Rating
MALLINCKRODT PLC: Unsecured Noteholder Blasts Payout Plan
MAVENIR SYSTEMS: S&P Rates New $635MM 1st-Lien Credit Facility B-
MDC HOLDINGS: Moody's Rates Proposed $300MM Notes Due 2061 'Ba1'
MGM GROWTH: S&P Places 'B+' ICR on CreditWatch Positive
MIDTOWN CAMPUS: Gets Cash Collateral Access Thru Sept. 15
MIGO IQ: Seeks Approval to Tap Lugo Mender Group as Legal Counsel
NEWELL BRANDS: S&P Alters Outlook to Pos., Affirms 'BB+' LT ICR
NORTHWEST BANCORPORATION: U.S. Trustee Appoints Creditors' Panel
OCEANVIEW MOTEL: Secured Creditor Says He Will Not Vote on the Plan
ONEMAIN HOLDINGS: Moody's Upgrades CFR to Ba2, Outlook Stable
OPTION CARE: Posts $31.8 Million Net Income in Second Quarter
PACIFIC ENVIRONMENTAL: Wins Cash Collateral Access Thru Sept 30
PETROLIA ENERGY: Incurs $1 Million Net Loss in Q1 2020
PILOCH DISTRIBUTION: Court Denies Approval of Disclosure Statement
POGO ENERGY: Taps Conway MacKenzie as Financial Advisor
PRO MACH: Moody's Rates New First Lien Credit Facilities 'B2'
PSALMS FUNERAL: Seeks to Tap Tran Singh as Bankruptcy Counsel
RENOVATE AMERICA: Files $750K Chapter 11 Deal With Ex-Officer
SAMARITAN MEDICAL CENTER: S&P Lowers Revenue Bonds Rating to 'BB'
SOLSTICE MARKETING: Exits Ch. 11 with $6.5M Financing Facility
SPEEDWAY MOTORSPORTS: S&P Alters Outlook to Pos., Affirms BB- ICR
STERLING MIDCO: Moody's Upgrades CFR to B2, Outlook Stable
STS OPERATING: Moody's Affirms B3 CFR & Alters Outlook to Stable
SUNNOVA ENERGY: S&P Assigns 'B-' Rating, Outlook Stable
SVXR INC: Case Summary & 30 Largest Unsecured Creditors
TCP INVESTMENT: Case Summary & 20 Largest Unsecured Creditors
THERMOSTAT PURCHASER: S&P Assigns 'B-' ICR, Outlook Stable
TRANSOCEAN LTD: Incurs $103 Million Net Loss in Second Quarter
U.S. TOBACCO COOPERATIVE: Seeks to Hire SSG as Investment Banker
U.S. TOBACCO: Bankruptcy Administrator Unable to Appoint Committee
UNIFIED WOMEN'S: WHUSA Transaction No Impact on Moody's B3 CFR
VAC FUND: Causes of Action to Fund Ch. 11 Plan
VESTAVIA HILLS: Wells Fargo Objects to Disclosure Statement
VICI PROPERTIES: S&P Places 'BB' ICR on CreditWatch Positive
VILLAGIO CARLSBAD: Plan to Pay Creditors One Time From Asset Sale
W.R. GRACE: S&P Assigns 'B' ICR on Standard Industries Deal
W133 OWNER: $22MM Sale to Harlem to Fund Payments in Trustee's Plan
WAYSTAR TECHNOLOGIES: Fitch Affirms 'B-' LT IDR, Outlook Stable
WAYSTAR TECHNOLOGIES: Patientco Deal No Impact on Moody's B3 CFR
WB SUPPLY: Seeks Cash Collateral Access
WHITE RIVER: Unsecureds to Share Pro Rata of Liquidation Fund
WING DINGERS: Case Summary & 3 Unsecured Creditors
WITCHEY ENTERPRISES: Granted Leave to Amend Disclosures by Aug. 30
YAMANA GOLD: S&P Rates New US$500MM Senior Unsecured Notes 'BB+'
[*] Commercial Chapter 11 Filings Declined by 43% Year-to-Date
[^] BOOK REVIEW: From Industry to Alchemy
*********
ALLIE'S PARTY: Seeks to Employ Briggs Law as Special Counsel
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Allie's Party Equipment Rental, Inc. seeks approval from the U.S.
Bankruptcy Court for the Southern District of California to hire
Briggs Law Corporation to serve as special counsel in connection
with its pending state court class action wage and hour litigation
captioned as Francisco Flores, et al. v. Allie's Party Equipment
Rental, Inc., et al.
The firm's hourly rates are as follows:
Cory Briggs, Esq. $550 per hour
Associates $225 - $275 per hour
Paralegals $150 per hour
Cory Briggs, Esq., the firm's attorney who will be providing the
services, disclosed in a court filing that he is a "disinterested
person" as the term is defined in Section 101(14) of the Bankruptcy
Code.
The firm can be reached at:
Cory Briggs, Esq.
Briggs Law Corporation
99 C St., Suite 111
Upland, CA 91786
Tel: 909-949-7115
Fax: 909-949-7121
About Allie's Party Equipment Rental
Allie's Party Equipment Rental, Inc., a San Marcos, Calif.-based
company that offers party equipment rental services, filed a
Chapter 11 petition (Bankr. S.D. Calif. Case No. 21-01804) on April
30, 2021. The petition, signed by Michael B. Nicholson, president,
disclosed $1,055,520 in total assets and $5,143,074 in total
liabilities. Judge Christopher B. Latham oversees the case.
Curry Advisors, A Professional Law Corporation, represents the
Debtor as bankruptcy counsel while Briggs Law Corporation serves as
the Debtor's special counsel.
Jean Goddard has been appointed as the Debtor's Subchapter V
trustee.
ALPHA LATAM: Bondholders Withhold $45 Million Loan Until CRO Joins
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Steven Church of Bloomberg News reports that bondholders are
refusing to fund the reorganization of Alpha Latam Management,
unless the related, Mexico-based arm of the online
payroll-deduction lender installs an independent chief
restructuring officer.
The noteholders won't go through with their pledge to loan Alpha
Latam $45 million to fund the company's operations during its
bankruptcy unless their demands are met, Alpha's bankruptcy
attorney John K. Cunningham told a U.S. bankruptcy judge on
Tuesday. The Colombia-based business and the noteholders halted a
virtual court hearing about the loan to attempt to resolve the
dispute.
About Alpha Latam Management
Alpha Latam Management LLC, et al., operate a specialty finance
business that offers consumer and small business lending services
to underserved communities in Mexico and Colombia.
Alpha Latam Management LLC and certain of its affiliates sought
Chapter 11 protection (Bankr. D. Del. Case No. 21-11109) on August
1, 2021. In the petition signed, Alpha Latam Management estimated
assets of between $100 million and $500 million and estimated
liabilities of between $500 million and $1 billion.
RICHARDS, LAYTON & FINGER, P.A., led by Mark D. Collins, is the
Debtors' counsel.
ROTHSCHILD & CO. is the investment banker and ALIXPARTNERS LLP is
the financial advisor. PRIME CLERK LLC is the claims agent.
ALPHATEC HOLDINGS: Incurs $38.2 Million Net Loss in 2nd Quarter
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Alphatec Holdings, Inc. filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing a net loss
of $38.21 million on $62.25 million of total revenue for the three
months ended June 30, 2021, compared to a net loss of $15.81
million on $29.63 million of total revenue for the three months
ended June 30, 2020.
For the six months ended June 30, 2021, the Company reported a net
loss of $61.11 million on $106.37 million of total revenue compared
to a net loss of $36.53 million on $59.74 million of total revenue
for the same period during the prior year.
As of June 30, 2021, the Company had $441.03 million in total
assets, $107.57 million in total current liabilities, $55.79
million in long-term debt, $25.41 million in operating lease
liability (less current portion), $15.14 million in other long-term
liabilities, $23.60 million in redeemable preferred stock, and
$213.51 million in total stockholders' equity.
Alphatec said, "Our principal sources of liquidity are our existing
cash and additional borrowings available under our Term Loan. Our
liquidity and capital structure are evaluated regularly within the
context of our annual operating and strategic planning process. We
consider the liquidity necessary to fund our operations, which
include working capital needs, investments in research and
development, investments in inventory and instrument sets to
support our customers, as well as other operating costs. Our
future capital requirements will depend on many factors including
our rate of revenue growth, the timing and extent of spending to
support development efforts, the expansion of sales, marketing and
administrative activities, and the timing of introductions of new
products and enhancements to existing products. As current
borrowing sources become due, we may be required to access the
capital markets for additional funding. If we are required to
access the debt market, we expect to be able to secure reasonable
borrowing rates."
Cash was $76.6 million and $107.8 million at June 30, 2021 and Dec.
31, 2020, respectively. The $31.2 million decrease in cash was
primarily due to the open market purchase of outstanding EOS Shares
and OCEANEs in connection with the Company's acquisition of EOS and
increased activity related to its inventory and instrument set
builds, partially offset by the closing of the private placement on
March 1, 2021, which generated proceeds of $131.8 million, net of
offering costs.
Available borrowings under the Company's Term Loan were $40.0
million at June 30, 2021 and Dec. 31, 2020. The Company believes
that its existing funds, cash generated from its operations and its
existing sources of and access to financing are adequate to satisfy
its needs for working capital, capital expenditure and debt service
requirements, and other business initiatives the Company plans to
strategically pursue.
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1350653/000156459021040299/atec-10q_20210630.htm
About Alphatec Holdings
Alphatec Holdings, Inc. (ATEC) (www.atecspine.com), through its
wholly-owned subsidiaries, Alphatec Spine, Inc. and SafeOp
Surgical, Inc., is a medical device company dedicated to
revolutionizing the approach to spine surgery through clinical
distinction. ATEC architects and commercializes approach-based
technology that integrates seamlessly with the SafeOp Neural
InformatiX System to provide real-time, objective nerve information
that can enhance the safety and reproducibility of spine surgery.
Alphatec Holdings reported a net loss of $78.99 million for the
year ended Dec. 31, 2020, compared to a net loss of $57 million for
the year ended Dec. 31, 2019. As of March 31, 2021, the Company
had $404.50 million in total assets, $70.15 million in total
current liabilities, $38.58 million in long-term debt, $20.75
million in operating lease liability (less current portion), $11.29
million in other long-term liabilities, $23.60 million in
redeemable preferred stock, $131.84 million in contingently
redeemable common stock, and $108.29 million in total stockholders'
equity.
APOLLO ENDOSURGERY: Incurs $3 Million Net Loss in Second Quarter
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Apollo Endosurgery, Inc. filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing a net loss
of $3.02 million on $16.61 million of revenues for the three months
ended June 30, 2021, compared to a net loss of $6.25 million on
$5.64 million of revenues for the three months ended June 30,
2020.
Revenue increased $11.0 million or 194% compared to $5.6 million in
revenue during the second quarter of 2020 which was impacted by the
onset of the COVID-19 pandemic.
For the six months ended June 30, 2021, the Company reported a net
loss of $7.62 million on $30.47 million of revenues compared to a
net loss of $16.51 million on $16.36 million of revenues for the
same period during the prior year.
As of June 30, 2021, the Company had $74.42 million in total
assets, $71.71 million in total liabilities, and $2.71 million in
total stockholders' equity.
Compared to the second quarter of 2020, total ESS product sales
increased $7.0 million or 196% and total IGB product sales
increased $4.0 million or 220% due to the improvement in demand for
the Company's products as the impact of the pandemic continued to
dissipate.
Gross margin increased to 55% for the second quarter of 2021 from
43% in the second quarter of 2020 due to higher sales, improved mix
of higher variable gross margin products including the new X-Tack
device, and unabsorbed overhead costs from reduced production
volumes in the prior year quarter as a result of the COVID-19
pandemic.
Total operating expenses increased $7.6 million compared to the
second quarter of 2020. The increase was due to the normalization
of temporary cost controls that we implemented in response to the
pandemic. It also was impacted by higher stock-based compensation
expense in the second quarter of 2021.
Cash, cash equivalents and restricted cash were $31.2 million as of
June 30, 2021, representing a decrease of $1.4 million in cash for
the quarter.
Liquidity and Capital Resources
The Company stated, "We have experienced operating losses since
inception and have an accumulated deficit of $280.4 million as of
June 30, 2021. To date, we have funded our operating losses and
acquisitions through equity offerings and the issuance of debt
instruments. We have occasionally been out of compliance with our
debt covenants which have resulted in amendments to the terms of
our debt instruments. Our ability to fund future operations and
meet debt covenant requirements will depend upon our level of
future revenue and operating cash flow and our ability to access
additional funding through either equity offerings, issuances of
debt instruments or both.
"Management believes its existing cash and cash equivalents,
product revenues, and available debt and equity financing
arrangements will be sufficient to meet covenant, liquidity and
capital requirements for at least the next twelve months.
Management periodically evaluates our liquidity requirements,
alternative uses of capital, capital needs and available resources.
As a result of this process, we have in the past, and may in the
future, explore alternatives to finance our business plan,
including, but not limited to, sales of common stock, preferred
stock, convertible securities or debt financings, reduction of
planned expenditures, or other sources, although there can be no
assurances that such additional funding could be obtained."
2021 Outlook
Based on results in the first half of 2021, the Company is
increasing its guidance for the full year 2021 and now expects
revenue between $61-$63 million, compared to its prior guidance of
$55-$57 million.
"In the second quarter, Apollo continued to build momentum by
delivering strong financial performance, including record revenue
and increased gross margin," said Chas McKhann, Apollo's chief
executive officer. "We also achieved a number of strategic
milestones, including sequential growth in our ESS and IGB business
lines, positive early indication on MERIT study outcomes and a
significant expansion of our X-Tack user base. We believe that
these accomplishments plus additions to our leadership team and
commercial organization position us well for the future."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1251769/000125176921000098/apen-20210630.htm
About Apollo Endosurgery
Apollo Endosurgery, Inc. -- http://www.apolloendo.com-- is a
medical technology company focused on less invasive therapies to
treat various gastrointestinal conditions, ranging from
gastrointestinal complications to the treatment of obesity.
Apollo's device-based therapies are an alternative to invasive
surgical procedures, thus lowering complication rates and reducing
total healthcare costs. Apollo's products are offered in over 75
countries and include the OverStitch Endoscopic Suturing System,
the OverStitch Sx Endoscopic Suturing System, and the ORBERA
Intragastric Balloon.
Apollo Endosurgery reported a net loss of $22.61 million for the
year ended Dec. 31, 2020, compared to a net loss of $27.43 million
for the year ended Dec. 31, 2019. As of March 31, 2021, the
Company had $73.98 million in total assets, $71.29 million in total
liabilities, and $2.69 million in total stockholders' equity.
ARCHES HOLDINGS: Moody's Assigns B2 CFR on Strong Market Position
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Moody's Investors Service affirmed Arches Buyer Inc.'s first lien
senior secured credit facility, including the revolver and upsized
term loan (including $350 million incremental) at B1, senior
secured notes at B1 and senior unsecured notes at Caa1 following
the announcement of the company's proposed dividend
recapitalization transaction. The outlook remains stable. At the
same time, Moody's assigned a B2 corporate family rating, a B2-PD
probability of default rating and stable outlook to Arches Holdings
Inc., parent company of Arches Buyer Inc. ("Ancestry"). Moody's
will withdraw the B2 CFR and B2-PD PDR assigned to Arches Buyer
Inc.
Ancestry plans to use net proceeds from the proposed incremental
$350 million senior secured term loan and approximately $150
million of cash to fund a distribution of approximately $500
million to its financial sponsors.
RATINGS RATIONALE
"The levering up of Ancestry's balance sheet to fund a large
distribution weakens the company's credit profile and limits
financial flexibility in the near term," said Oleg Markin, Moody's
Assistant Vice President. Markin continued: "We expect that the
company's governance risk will remain high and subsequent
shareholder friendly transactions are likely over the medium term,
following a period of deleveraging."
Pro forma for the dividend recapitalization, Ancestry's
debt-to-EBITDA (Moody's adjusted) will increase meaningfully to
6.8x from 6.0x as of June 30, 2021, which is high for the current
rating. However, the company's good growth prospects, a track
record of deleveraging its balance sheet through earnings growth
and expectation for strong free cash flow generation in excess of
10% of total debt (Moody's adjusted) over the next 12-18 months
provide rating support.
The B2 CFR reflects the company's strong market position within its
family history research niche, supported by a large customer base
of approximately 3.8 million subscribers (as of June 30, 2021) and
the largest DNA database in the industry consisting of 20 million
genomes. Ancestry's family history business, estimated to represent
approximately 75% of the company's consolidated revenue in fiscal
2021, is a steadily growing and highly profitable subscription
business with low capital investment requirements that supports
Moody's expectation for continued strong free cash flow generation
in excess of 10% of total debt (Moody's adjusted and pro forma for
the incremental debt). The company's revenue generated from the
sale of DNA kits does not generate meaningful profits and has been
declining over the last several years but is expected to
stabilize.
The rating also considers Ancestry's high governance risk
associated with private equity ownership, including tolerance for
high financial leverage and the potential for more debt funded
shareholder returns. The company's high closing debt-to-EBITDA
leverage (Moody's adjusted), pro forma for the dividend
recapitalization transaction, estimated at around 6.8x as of June
30, 2021 and its concentrated operations within the niche genealogy
industry with high subscriber churn further constrain the rating.
The company's growing base of subscribers that have been with the
company for more than 2 years provides stability despite the high
churn from new members, who often churn off when the benefits of
the promotional offer that they joined under expires. While the
transaction involves a significant increase in leverage, the
company has a proven track record of deleveraging through earnings
growth. Moody's expects the company to reduce its debt-to-EBITDA
(Moody's adjusted) to below 6.5x by the end of 2022, absent
subsequent dividend payments. Furthermore, the ongoing regulatory
scrutiny surrounding the Ancestry DNA business and dependence on
highly cyclical and discretionary consumer spending are also key
credit constraints.
Moody's expects Ancestry to maintain very good liquidity over the
next 12-15 months, supported by a pro forma cash balance of
approximately $50 million at closing and full availability under
its existing $250 million revolving credit facility due 2025.
Moody's projects Ancestry will generate annual free cash flow in
excess of $300 million (before $19.4 million annual term loan
amortization, paid quarterly) over the next 12-15 months. The
company's revolver is subject to a springing first lien net
leverage ratio when utilization exceeds 35%. Moody's does not
expect the covenant to spring over the next 12-15 months but
estimates that the company would maintain at least a 30% cushion
even if the covenant is triggered.
Moody's considers Ancestry's exposure to social risk as moderate.
Ancestry data includes very sensitive consumer information,
including their genetic code, while also handling payment data. The
company has built a robust security apparatus to protect such
sensitive data. Additionally, it is very focused on consumer
privacy and is taking strides to be very upfront with customers
about how they use and protect their data.
Ancestry's debt instrument ratings are determined using Moody's
Loss Given Default for Speculative-Grade Companies Methodology and
reflect an average family recovery rate assumption of 50%. The
company's first lien senior secured credit facility ($1.95 billion
term loan, $250 million revolver and $700 million secured notes)
are rated B1, benefiting from loss absorption provided by the
unsecured notes and other unsecured claims in a distress scenario.
The rating on the $500 million of senior unsecured notes is Caa1,
reflecting its junior position in the capital structure.
Arches Buyer Inc. is the obligor under the credit facility
(revolver and term loan), secured and unsecured notes. The
obligations under the credit facility is secured by a
first-priority security interest in substantially all of the
tangible and intangible assets of Ancestry's direct and indirect
domestic wholly owned subsidiaries and the direct parent. The term
loan is subject to a 50% excess cash flow sweep with step-downs to
25% (if the first lien net leverage is equal to or less than 4.75x
and 0% if the ratio is equal to or less than 4.25x).
The stable outlook reflects Moody's expectation that Ancestry will
generate revenue and earnings growth in the low-to-mid-single digit
range over the next 12-18 months, allowing the company to de-lever
to the low 6.0x range (Moody's adjusted) by the end of fiscal 2022.
The stable outlook also incorporates Moody's expectation that
Ancestry will maintain very good liquidity, including free cash
flow to total debt (Moody's adjusted) above 10%.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
While unlikely in the near term, Ancestry's ratings could be
upgraded if the ownership group commits to maintain conservative
financial policies. Quantitatively, the ratings could be upgraded
if Ancestry sustains mid-single digit percentage organic revenue
growth, achieves and maintains debt-to-EBITDA (Moody's adjusted)
below 4.5x, and free cash flow as a percentage of debt (Moody's
adjusted) in the high single digits.
The ratings could be downgraded if business fundamentals weaken as
evidenced by increasing subscriber churn, declining average revenue
per user (ARPU) or more intense competition leading to a weaker
than expected operating performance. A deterioration in liquidity
or lack of meaningful progress in deleveraging such that
debt-to-EBITDA is sustained above 6.5x (Moody's adjusted), or
internally generated cash flows soften such that FCF-to- debt is
sustained below 5%, could also negatively pressure the ratings.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
Assignments:
Issuer: Arches Holdings Inc.
Probability of Default Rating, Assigned B2-PD
Corporate Family Rating, Assigned B2
Affirmations:
Issuer: Arches Buyer Inc.
Senior Secured 1st Lien Bank Credit Facility, Affirmed B1 (LGD3)
Senior Secured 1st Lien Regular Bond/Debenture, Affirmed B1
(LGD3)
Senior Unsecured Regular Bond/Debenture, Affirmed Caa1 (LGD6)
Withdrawals:
Issuer: Arches Buyer Inc.
Probability of Default Rating, Withdrawn, previously rated B2-PD
Corporate Family Rating, Withdrawn, previously rated B2
Outlook Actions:
Issuer: Arches Buyer Inc.
Outlook, Remains Stable
Issuer: Arches Holdings Inc.
Outlook, Assigned Stable
Arches Holdings Inc. ("Ancestry"), holding company for
Ancestry.com, a provider of family history and consumer genomics
services. Ancestry generates its revenue primarily by providing
customers with subscriptions to its family history platform and
through the sale of its AncestryDNA service. Ancestry is majority
owned by Blackstone, with a minority ownership held by Singaporean
sovereign wealth fund GIC and Ancestry's management. Ancestry
generated approximately $1.3 billion in revenue for the latest
twelve months ended June 30, 2021.
ASAIG LLC: Unsecureds to be Paid Out of Liquidating Trust
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ASAIG, LLC and ASAIG SubCo, LLC f/k/a Aztec/Shaffer, LLC filed with
the U.S. Bankruptcy Court for the Southern District of Texas a
Joint Combined Chapter 11 Plan and Disclosure Statement dated July
30, 2021.
The Debtors began the process of marketing and selling
substantially all of their Assets during the Chapter 11 Cases
pursuant to Section 363 of the Bankruptcy Code. The Debtors have
engaged Livingstone Partners LLC to commence a marketing process.
On March 12, 2021, the Debtors, after consultation with the
Consultation Parties, selected BSE Aztec, LLC to act as the
Stalking Horse Purchaser for certain Purchased Assets pursuant to
an Aztec Only Bid for $4,800,000. The Debtors did not select a
Stalking Horse Purchaser for a Whole Company Bid or a Shaffer Only
Bid. In addition to the Stalking Horse Bid, the Debtors received
four other Qualifying Bids by the Bid Deadline (consisting of two
(2) Whole Company Bids and two (2) Aztec Only Bids). As a result,
the Debtors proceeded with the Auction.
On April 6, 2021, upon the conclusion of the Auction, the Debtors
selected AAS BidCo, LLC as the Successful Bidder for the Purchased
Assets. The Buyer is a special purpose joint venture entity
comprised of: (i) AES Arena Event Services Holdings Limited; (ii)
SBN VIII ASE LLC; and (iii) the AIG Lenders. The Successful Bid
for the Purchased Assets submitted by the Buyer was a Whole Company
Bid with consideration valued by the Debtors for $25,600,000 plus
the assumption of certain liabilities of the Debtors. Importantly,
the Successful Bid included a Credit of the Prepetition Secured
Loan Claims -- i.e., First Lien Debt and Second Lien Debt -- owed
to the AIG Lenders equal to $14,000,000. Further, the Successful
Bid provided an amount in Cash necessary to pay 100% of the
outstanding DIP Loan Claims owed to the DIP Lenders as of the
Closing Date.
After the Sale Hearing held on April 16, 2021, the Bankruptcy Court
entered its Sale Order approving the Sale of the Purchased Assets
to the Buyer. The Sale Order and APA provide that the balance of
the Prepetition Secured Loan Claims owed to the AIG Lenders which
were not included in the Credit Bid were retained by the AIG
Lenders as a Deficiency Claim (which shall be treated as a General
Unsecured Claim under the Plan); provided, however, that the AIG
Lenders agreed to waive and release their right to receive on
account of their Deficiency Claim, adequate protection Claims or
otherwise, any portion of the first $200,000 distributed to General
Unsecured Creditors. The Purchased Assets specifically include all
of the Purchased Actions as defined in the APA. The only Causes of
Action remaining as Assets of the Estates are those Excluded
Actions designated in the APA. The Sale of the Purchased Assets to
Buyer closed on April 23, 2021. Accordingly, the DIP Loan Claim(s)
owed to the DIP Lenders in these Chapter 11 Cases have been paid in
full.
The Debtors propose to distribute any remaining Cash from the Sale,
and the Tax Credits and Employee Retention Credits pursuant to a
waterfall consistent with the priorities established under the
Bankruptcy Code, the Settlement Term Sheet, and the Plan. The
Debtors estimate that recoveries from collection and liquidation of
Tax Credits and Employee Retention Credits (after payments made
pursuant to the Settlement Term Sheet) and prosecution of Retained
Causes of Action will be in the range of 1% to 3% of total General
Unsecured Claims against the Debtors' and their Estates.
The Liquidating Trust
The Plan proposes to establish a Liquidating Trust to liquidate
remaining Assets and distribute available Cash to pay
Administrative Expense Claims, Secured Claims (to the extent not
already paid), Priority Tax Claims, Priority Non-Tax Claims, and
finally, to make distributions to Holders of General Unsecured
Claims.
The Liquidating Trust Assets include (i) all Causes of Action
constituting Excluded Assets as defined in the APA, Retained Causes
of Action, Avoidance Actions, and the proceeds thereof; and (ii)
all other remaining Assets of the Debtors other than the Cash set
aside for payment to the IRS and Buyer pursuant to the Settlement
Term Sheet.
Corporate Existence Post-Effective Date
The Debtors shall continue to exist after the Effective Date as the
Liquidating Debtors. After the Effective Date, pursuant to the
Plan, the Liquidating Trustee shall have the sole authority to
manage the remaining
affairs of the Debtors. The Liquidating Debtors shall operate
solely to the extent required to: (i) liquidate the Debtors'
remaining Assets to the extent not included as Purchased Assets in
the Sale to Buyer; and (ii) pursue and collect any available Tax
Credits and Employee Retention Credits, as defined and provided in
the Settlement Term Sheet.
At such time as the Debtors' collection and distribution of all
available Tax Credits and Employee Retention Credits is completed
and satisfied in accordance with the Settlement Term Sheet, the
Debtors or Liquidating Debtors may be dissolved. The Liquidating
Trustee shall have all power to wind up the affairs of the Debtors
under applicable state laws in addition to the Plan, the
Liquidating Trust Agreement and may, but shall not, be required to
dissolve the Debtors under applicable state law.
Classes of Claims and Interests under the Plan
* Class 1 Allowed Priority Non-Tax
Each Holder of an Allowed Priority Non-Tax Claim shall be entitled
to receive, on or after the Effective Date, in full satisfaction of
each Priority Non-Tax Claim: (i) payment in full in Cash of its
Allowed Class 1 Claim; or (ii) such other treatment as is
consistent with the requirements of Bankruptcy Code section
1129(a)(9). Class 1 is Unimpaired under the Plan. Holders of
Allowed Claims in Class 1 are conclusively presumed to have
accepted the Plan.
* Class 2 Allowed Other Secured Claims
On the Effective Date, Holders of Allowed Class 2 Claims shall
receive payment in full in Cash in full satisfaction of each Class
2 Claim. Class 2 is Unimpaired under the Plan. Holders of Allowed
Claims in Class 2 are conclusively presumed to have accepted the
Plan.
* Class 3 Allowed General Unsecured Claims
Class 3 shall include Deficiency Claim retained by the AIG Lenders.
On the Effective Date, Holders of Allowed Class 3 Claims shall
receive, in full and final satisfaction of, and in exchange for
each Class 3 Claim, an interest in the Liquidating Trust to be paid
as set forth in the Plan. Class 3 is Impaired under the Plan and
is entitled to vote to accept or reject the Plan.
* Class 4 Allowed Subordinated Claims
On the Effective Date, Holders of Allowed Class 4 Claims shall
receive in full, in exchange for each Class 4 Claim, an interest in
the Liquidating Trust to be paid as set forth in the Plan. Class 4
is Impaired under the Plan and is entitled to vote to accept or
reject the Plan.
* Class 5 Allowed Equity Interests
Class 5 shall consist of the Equity Interests of the Debtors. Upon
the Effective Date, all Equity Interests in the Debtors shall be
cancelled. Holders of Equity Interests in the Debtors shall receive
an interest in the Liquidating Trust to be paid as set forth in the
Plan. The Debtors do not anticipate Holders of Allowed Equity
Interests will receive any Plan Distributions from the Liquidating
Trust.
A copy of the Combined Plan and Disclosure Statement is available
for free at https://bit.ly/3fuMiTs from Donlin Recano, claims and
noticing agent.
The Disclosure Statement included in the current Plan has been
conditionally approved by the Bankruptcy Court. The Court will
consider final approval of the Disclosure Statement at the
confirmation hearing on August 31, 2021 at 10:30 a.m. (prevailing
Central Time).
Attorneys for the Debtors:
Matthew S. Okin, Esq.
David L. Curry, Jr., Esq.
Ryan A. O'Connor, Esq.
Okin Adams LLP
1113 Vine St., Suite 240
Houston, TX 77002
Telephone: 713.228.4100
Facsimile: 888.865.2118
Email: mokin@okinadams.com
dcurry@okinadams.com
roconnor@okinadams.com
About ASAIG LLC
ASAIG, LLC filed its voluntary petition for relief under Chapter 11
of the Bankruptcy Code (Bankr. S.D. Texas Lead Case No. 20-5600) on
Nov. 17, 2020. The petition was signed by A. Kelly Williams,
manager. At the time of the filing, the Debtor had estimated
assets of between $1 million and $10 million and liabilities of
between $10 million and $50 million. Judge Marvin Isgur oversees
the case. Matthew Okin, Esq., at Okin Adams LLP, represents the
Debtor as counsel. Donlin, Recano & Company, Inc. is the Debtor's
claims and noticing agent.
ASAIG LLC: Wins Conditional OK on Disclosure Statement
------------------------------------------------------
Judge Marvin Isgur of the U.S. Bankruptcy Court for the Southern
District of Texas conditionally approved the Disclosure Statement
of ASAIG, LLC and ASAIG SubCo, LLC f/k/a Aztec/Shaffer, LLC.
Judge Isgur fixed August 27, 2021 at 12 p.m. (prevailing Central
Time) as the voting deadline by which acceptances or rejections of
the Plan must be actually received by the Debtors in order to be
counted.
August 27, 2021 at 12 p.m. (prevailing Central Time) has also been
fixed as the last day for filing written objections to the
Confirmation of the Debtors' Plan.
The hearing to consider final approval of the adequacy of the
Disclosure Statement and confirmation of the Plan will be held on
August 31, 2021 at 10:30 a.m. (prevailing Central Time).
A copy of the order is available for free at https://bit.ly/3AabG8Y
from Donlin Recano, claims and noticing agent.
About ASAIG LLC
ASAIG, LLC filed its voluntary petition for relief under Chapter 11
of the Bankruptcy Code (Bankr. S.D. Texas Lead Case No. 20-5600) on
Nov. 17, 2020. The petition was signed by A. Kelly Williams,
manager. At the time of the filing, the Debtor had estimated
assets of between $1 million and $10 million and liabilities of
between $10 million and $50 million. Judge Marvin Isgur oversees
the case. Matthew Okin, Esq., at Okin Adams LLP, represents the
Debtor as counsel. Donlin, Recano & Company, Inc. is the Debtor's
claims and noticing agent.
ASHLAND LLC: Moody's Rates New $450MM Senior Unsecured Notes 'Ba1'
------------------------------------------------------------------
Moody's Investors Service assigned Ba1 ratings to Ashland LLC's
proposed $450 million senior unsecured notes due 2031. Ashland LLC
will be the borrower of the new senior notes which will be
guaranteed by Ashland Global Holdings Inc. Proceeds from the notes
are expected to be used to repay the existing 4.75% senior notes
due 2022, redemption premiums and transaction fees. Total debt and
balance sheet leverage will virtually remain unchanged. The outlook
is stable.
"The transaction is positive to the credit profile in that it
reduces pre-tax debt service cost and the company's overall cost of
debt capital," according to Joseph Princiotta, Moody's SVP and lead
analyst for Ashland. "The transaction also improves the company's
debt maturity profile by reducing debt due within 3 years from $485
million to $74 million, Princiotta added.
Assignments:
Issuer: Ashland LLC
Gtd. Senior Unsecured Regular Bond/Debenture, Assigned Ba1 (LGD4)
RATINGS RATIONALE
Ashland LLC's credit profile benefits from a portfolio of specialty
additive businesses serving diverse end markets in the U.S. and
internationally, strong and stable margins, and strong market
shares in life sciences, personal care and household businesses.
Business divestitures, asset sales and separations over the years
leave Ashland a smaller company with reduced diversification and
scale. However, the remaining Ashland is a more focused specialty
additives and ingredients pure-play with better end market, product
category and innovation focus. Ashland recently announced a
strategic review of its performance adhesives business unit and
said it intends to evaluate all options with respect to this
business unit including a potential divestiture. In the event the
business unit is sold, Moody's expects the use of proceeds,
together with free cash flow, to be used towards its core additives
organic and inorganic growth and possibly shareholder
renumeration.
Ashland's credit profile benefits from strong and usually stable
gross and EBITDA margins. However, recent margins in the Industrial
Specialties segment, while still strong, have come under pressure
due to raw material availability and cost issues as well as
industry supply chain constraints, namely in shipping. Despite
these margin headwinds the company recently affirmed its EBITDA
guidance in the $570 million to $590 million range for FY 2021.
Moody's believes a large part of these headwinds are temporary and
expects margins to recover as raw material and shipping headwinds
subside, and as price increases are realized. Moody's also expects
ongoing restructuring efforts, cost reductions, and new products to
support margin strength and improvement.
The company is targeting gross balance sheet leverage at or below
2.5x (or about 3.0x on a Moody's-adjusted basis), notwithstanding
occasional deviation to support opportunistic M&A activity.
Including the Schulke & Mayr personal care acquisition that closed
in June, Moody's expects gross adjusted leverage in the low-3x
range at fiscal year end 2021.
The company's efforts through the pandemic to manage costs,
preserve liquidity, and forego share repurchases given pressures in
the economy and industrial markets evidence a conservative approach
to financial policies. However, the emphasis on expanding its
additives portfolio, building bio-tech capabilities and
accelerating growth in Asia could result in a quicker pace of M&A
activity, or possibly larger deal size.
In addition to the M&A risk to support inorganic growth, other
negative factors in the credit include the scale of the downsized
portfolio with modest revenues of roughly $2.4 billion, organic
growth challenges, and legacy contingent liabilities associated
with asbestos litigation, albeit asbestos risk was largely
contained with the 2015 settlement.
Ashland's SGL-2 Speculative Grade Liquidity rating reflects its
good liquidity position, which is supported by $262 million in cash
balances at June 30, 2021, availability of $581 million, net of
outstanding LCs, on the $600 million senior unsecured revolver, $60
million of availability on its two accounts receivable
securitization facilities and expectations for positive free cash
flow generation in the next 12 months.
The stable outlook assumes the company restores and improves EBITDA
margins and avoids large debt-funded M&A or share buybacks that
increase leverage. Occasional modest M&A activity that temporarily
and modestly spikes leverage would be consistent with the stable
outlook.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
To be considered for an upgrade, the company would need to commit
to policies that support an IG rating over time: sustaining gross
leverage in the mid-to-high 2x range (on a Moody's adjusted basis),
and Retained Cash Flow/Debt above 25%, while the portfolio realizes
healthy organic growth and the company pursues a growth plan that
does not include large debt-financed acquisitions.
The ratings could be downgraded if adjusted gross leverage were to
be sustained above 3.5x and retained cash flow to debt declines
below 15%, resulting from M&A activity, earnings pressure or
debt-funded share buybacks.
ESG Consideration
ESG considerations and risks are modest for Ashland, and even more
so than most in the specialty chemical space given its predominant
use of natural-based resources including cellulosic, plant-derived
and other natural raw materials. However, the asbestos liability
associated with legacy boiler and pipe materials from past acquired
companies stands out in the environmental and social profile,
despite its long tail and trust and insurance funded status.
Environmental liabilities reflect remediation efforts at several
locations, with reserves totaling $205 million as of June 30, 2021,
of which $155 million was classified as non-current liabilities.
Governance risks are currently modest, given the lack of
concentrated ownership and recent focus on responsible leverage
management. However, Ashland has been the target of activists in
recent years, which has had the effect of accelerating portfolio
changes, reducing the size of the company and more conservative
balance sheet targets. The transformation to a pure-play specialty
chemicals company is essentially complete, but the company is still
committed to growth and dividends with excess cash, and it's
possible that more frequent M&A or large deals occur in the
future.
Ashland LLC (Ashland), headquartered in Wilmington, Delaware, is
focused on growing its specialty additives businesses globally. The
divestiture of the Composites segment and the Marl BDO facility
leaves two core segments -- Consumer Specialties and Industrial
Specialties -- and one smaller I & S segment. To better align its
business models and allocate resources, during the second quarter
of fiscal 2020, the company changed its segment reporting to
Consumer Specialty businesses (includes Life Sciences and Personal
Care & Household), Industrial Specialty businesses (includes
Specialty Additives and Performance Adhesives) and Intermediates
and Solvents. Revenues are geographically diverse with roughly 40%
derived from North America, 32% from Europe, 19% from Asia and the
balance from South America and Other. Ashland's revenues are
roughly $2.4 billion.
The principal methodology used in this rating was Chemical Industry
published in March 2019.
BGT INTERIOR: Wins Cash Collateral Access Thru Sept 1
-----------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of Texas,
Houston Division, has authorized BGT Interior Solutions, Inc. to
use cash collateral through September 1, 2021, to pay the actual,
necessary and ordinary expenses of its business, pursuant to the
budget.
As adequate protection for the Debtor's use of cash collateral,
Veritex Community Bank is granted a continuing valid, binding,
enforceable, and automatically perfected postpetition security
interest in, and replacement liens on all assets of the Debtor and
its estate to the extent of the diminution in value of the Lender's
collateral.
The US Small Business Administration, as Prepetition Junior Secured
Lender, is granted a continuing valid, binding, enforceable, and
automatically perfected postpetition security interest in, and
replacement liens on all assets of the Debtor and its estate,
together with the proceeds thereof, to the extent of the diminution
in value of the SBA's collateral. The replacement liens shall be
junior to Veritex's replacement lien.
Any State Tax Liens of the Texas Comptroller of Public Accounts
will not be primed by nor made subordinate to any liens granted to
any party, to the extent such State Tax Liens are valid, senior,
perfected and unavoidable, and rights of any party in interest to
object to the priority, validity, amount and extent of the claims
and State Tax Liens are fully preserved.
All State Tax Lien(s) will continue, and the Comptroller will be
granted a replacement lien on all of Debtor's property to the
extent of the diminution in value of the Comptroller's collateral.
All replacement liens will attach in the same order of priority as
existed on the Petition Date; and
Any party in interest other than the Debtor, may commence, no later
than September 11, 2021, an adversary proceeding or other contested
matter objecting to, contesting, or challenging the amount,
validity, priority, or enforceability of the obligations or the
liens in favor of Veritex. If no such adversary proceeding or
contested matter is commenced within the Challenge Period, such
obligations will be deemed and adjudicated finally and indefeasibly
as valid and enforceable, and the liens in favor of Veritex
securing the obligations will be deemed and adjudicated finally and
indefeasibly as valid, enforceable and perfected liens in the
Collateral.
A final hearing on the matter is scheduled for on August 25 at 9
a.m.
About BGT Interior Solutions, Inc.
BGT Interior Solutions, Inc. owns and operates a business known as
BGT Interior Services, Inc., which provides multi-family luxury
interior finish packages to the construction industry in Texas and
nationwide. The company specializes in custom turn-key flooring and
countertop packages to fit a variety of multi-family, hospitality,
or commercial settings. The company offers custom design services
and interior finish packages, providing its customers a single
point of contact from fabrication to installation.
The Debtor sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. S.D. Tex. Case No. 21-32124) on June 23,
2021. In the petition signed by Robert Wagner, vice president and
director, the Debtor disclosed up to $50,000 in both assets and
liabilities.
Judge Eduardo V. Rodriguez oversees the case.
Kimberly A. Bartley, Esq. at Waldron & Schneider, L.L.P. is the
Debtor's counsel.
Veritex Community Bank, as creditor, is represented by Crady Jewett
McCulley & Houren LLP.
BLUE CARGO: Involuntary Chapter 11 Case Summary
-----------------------------------------------
Alleged Debtor: Blue Cargo Group, LLC
18627 Brookhurst Street, #516
Fountain Valley, CA 92708
Involuntary Chapter
11 Petition Date: August 5, 2021
Court: United States Bankruptcy Court
Central District of California
Case No.: 21-11917
Judge: Hon. Erithe A. Smith
Petitioners' Counsel: Brendan M. Loper, Esq.
THOMAS VOGELE & ASSOCIATES, APC
129 W. Wilson St., Suite 200
Costa Mesa, CA 92627
Tel: (714) 641-1232
Email: tvogele@tvalaw.com
A full-text copy of the Involuntary Petition is available for free
at PacerMonitor.com at:
https://www.pacermonitor.com/view/ODJDP4Y/Blue_Cargo_Group_LLC__cacbke-21-11917__0001.0.pdf?mcid=tGE4TAMA
Alleged creditors who signed the petition:
Petitioner Nature of Claim Claim Amount
---------- --------------- ------------
Blu Logistics (China) Co. Ltd. Services $540,943
Room 1301-1302, Bldg. 3 Rendered and
of Innovative Factory Unpaid
No. 695 Ling Shi Road
Shanghai, China 200072
Istmus Investments, LLC Unpaid Loan $2,040,798
3177 Lake Ridge Lane
Weston, FL 33332
Blue Cargo Hong Kong Limited Services Rendered $116,845
Office F, 23/F and Unpaid
TG Place, 10 Shing Yip Street
Kwun Tong, Kowloon, Hong Kong
C & C ENTITY: Wins Cash Collateral Access Thru Sept 11
------------------------------------------------------
The U.S. Bankruptcy Court for the Eastern District of Pennsylvania
has authorized C & C Entity, L.P. and affiliates to use cash
collateral on an interim basis through September 11, 2021, in
accordance with the budgets for both Cardile Mushrooms C & M, LLC
and Cardile Mushrooms, Inc. for the period from (i) July 10,2021
through August 7, 2021 and (ii) August 8, 2021 through September
11, 2021. The Budgets were provided to the prepetition secured
lenders, Community Federal Savings Bank and CFS-IV, LLC, for review
and approval.
As adequate protection for the Debtors' use of the Cash Collateral,
each of the Prepetition Secured Lenders is granted, pursuant to
sections 361 and 363(c)(2) of the Bankruptcy Code, as adequate
protection of its interests in the Prepetition Collateral an amount
equal to the aggregate diminution in the value of its interests in
the Prepetition Collateral, including, without limitation, any such
diminution resulting from the Debtors' use of the Cash Collateral,
the imposition of the automatic stay pursuant to section 362 of the
Bankruptcy Code or otherwise as set forth in the Interim Order.
Each Prepetition Secured Lender is grated a replacement and
rollover security interest in and valid, binding, enforceable and
perfected liens on all of the Debtors' Postpetition Collateral to
the same extent and in accordance the relative priority of their
respective prepetition liens.
To the extent that the Rollover Liens granted are inadequate, the
Prepetition Secured Lenders are entitled to administrative
priority.
The Debtors are also directed to maintain all insurance policies,
including property, casualty, and life insurance policies for the
guarantors, naming CFSB as loss payee by making all premium
payments when due and owing and not permitting any insurance
policies to lapse.
As additional adequate protection, the Debtor will make continued
monthly adequate protection payments to CFSB in the amount of
$5,000 on the first day of each and every month.
The Debtors will make continued monthly adequate protection
payments to CFS4 in the amount of $1,000 on the first day of each
and every month. Nothing in the Order be deemed to be an admission
by CFSB that CFS-4 is entitled to any adequate protection payment
or an adequate protection payment in this amount.
On or before August 11, 2021, the Debtors must have entered into an
Auction Contract with Schrader Real Estate and Auction Company,
Inc.
In the absence of a further Court order, the Prepetition Secured
Lenders will have the capacity, in their full discretion, to deem
the Debtors' authorization to use Cash Collateral as automatically
terminate on any of the following events of default:
a. The Debtors' material breach of any of the terms or
provisions of the Eighth Interim Order, including providing the
Adequate Protection payments, and the failure of the Debtors to
cure such breach within seven days of receiving notice of same;
e-mail notification sent to Debtors' counsel will be sufficient
notice of an event of default;
b. The Debtors' failure to achieve the milestones without
obtaining the prior written consent of CFSB to extend such
milestones; no cure period being permitted;
c. The Debtors making of a payment that was not approved by
CFSB through its approval of the Budget or, for a payment outside
of the Budget, not approves with CFSB's prior written consent to
such payment;
d. Any stay, reversal, vacatur or rescission of the terms of
this Eighth Interim Order;
e. The Debtors' actual cash disbursements vary from the
approved Budgets in excess of the Permitted Variance;
f. The Court entering an order granting relief from the
automatic stay with respect to any of the Debtors' assets of a
value greater than $50,000;
g. Entry of an order by the Court dismissing the Debtors'
chapter 11 cases or converting the Debtors' chapter 11 cases to
cases under chapter 7 of the Bankruptcy Code;
h. The appointment of a chapter 11 trustee or the appointment
of an examiner; or
i. The Court will not have entered a subsequent or final order
regarding the continued use of cash collateral by August 6, 2021.
A final hearing on the matter is scheduled for September 8 at 12:30
p.m.
A copy of the order and the Debtors' budget is available at
https://bit.ly/3lpvQrj from PacerMonitor.com.
Cardile Mushrooms project $928,000 in total revenues and $926,581
in total expenses from July 10 to August 7.
About C & C Entity L.P.
C & C Entity, L.P. filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code on Sept. 18, 2020. Affiliates,
Cardile Mushrooms Inc. and Cardile Mushrooms C&M, LLC also sought
Chapter 11 protection on the same date. Cardile Mushrooms C&M LLC
packs and distributes fresh mushrooms like Whites/Buttons,
Portabella, Criminis, Oysters and Shiitakes. The cases are jointly
administered under C&C Entity, L.P.'s case (Bankr. E.D. Pa. Case
No. 20-13775).
At the time of the filing, C & C Entity had estimated assets of
less than $50,000 and liabilities of less than $50,000. Cardile
Mushrooms, Inc. and Cardile Mushrooms C&M, LLC each disclosed
assets of up to $50,000 and liabilities between $1,000,000 and
$10,000,000. C & C President Charles Cardile, Jr. signed the
petitions.
Judge Ashely M. Chan oversees the case. The Debtor tapped Offit
Kurman, P.C. as its legal counsel and Umbreit Wileczek &
Associates, P.C. as its accountant.
CALIFORNIA PIZZA: Files Virus Coverage Suit vs. Insurer
-------------------------------------------------------
Law360 reports that California Pizza Kitchen filed a lawsuit
blaming the coronavirus pandemic, related closure orders affecting
its restaurants and then Affiliated FM Insurance Co.'s failure to
live up to its obligations under an all-risk policy for its forced
bankruptcy filing last 2020, which it later emerged from. The
pizza chain said the coronavirus caused "direct physical loss of or
damage" to its 180 restaurants covered by Affiliated FM, according
to a Rhode Island state suit filed July 27. 2021. The chain filed
for bankruptcy in July 2020, saying the shutdowns had made its
balance sheet and lease footprint unmanageable.
About California Pizza Kitchen
California Pizza Kitchen, Inc. -- http://www.cpk.com/-- is a
casual dining restaurant chain that specializes in California-style
pizza. Since opening its doors in Beverly Hills in 1985, CPK has
grown from a single location to more than 200 restaurants
worldwide. CPK's traditional dine-in locations are full-service
restaurants that serve pizza, salads, pastas and other
California-inspired fare, alongside a curated selection of wines
and a menu of handcrafted cocktails and craft beers. Though the
Company's dine-in restaurants are the primary way the Company
serves its customers, CPK also has a number of "off-premises"
services and licensing agreements that allow customers to get their
favorite CPK dishes on the go.
California Pizza Kitchen, Inc., filed a Chapter 11 petition (Bankr.
S.D. Tex. Case No. 20-33752) on July 29, 2020. The Hon. Marvin
Isgur oversees the case.
At the time of filing, the Debtors have $100 million to $500
million estimated assets and $500 million to $1 billion estimated
liabilities.
Kirkland & Ellis is serving as legal counsel to CPK, Guggenheim
Securities, LLC is serving as its financial advisor and investment
banker, and Alvarez & Marsal, Inc., as restructuring advisor.
Gibson, Dunn & Crutcher LLP is acting as legal counsel for the
group of first lien lenders and FTI Consulting, Inc. is acting as
its financial advisor. Prime Clerk is the claims agent.
* * *
California Pizza Kitchen in November 2020 emerged from Chapter 11
bankruptcy protection with $220 million less in debt and no lending
obligations coming due in the near term.
CARPENTER TECHNOLOGY: S&P Lowers ICR to 'BB+' on Elevated Leverage
------------------------------------------------------------------
S&P Global Ratings lowered its issuer credit rating on U.S.
specialty metal alloys producer Carpenter Technology Corp. to 'BB+'
from 'BBB-' because of its elevated earnings and leverage
volatility and, partly, its greater end-market concentration
relative to those of its peers.
S&P said, "At the same time, we lowered our issue-level rating on
the company's unsecured debt to 'BB+' from 'BBB-' and assigned our
'3' recovery rating. The '3' recovery rating indicates our
expectation for meaningful recovery (50%-70%; rounded estimate:
65%) in a default scenario.
"The stable outlook reflects our forecast that Carpenter will
reduce its high leverage over the next 12 months as its largest end
market (aerospace) begins to stabilize and the conditions in its
other large end markets (including industrial and consumer) remain
solid, which will support its maintenance of more-favorable credit
ratios."
Carpenter's recent profit volatility and heavy reliance on the
troubled aerospace end markets highlight its smaller size relative
to its peers with similar business risk profiles. The company (less
than $1.5 billion of revenue in fiscal year 2021 and averaging
about $2.1 billion per year for the five years before the pandemic)
is much smaller than its peers that S&P assesses as having
satisfactory business risk profiles, including Reliance Steel &
Aluminum Co. ($8.8 billion in fiscal year 2020), Howmet Aerospace
Inc. ($5.3 billion in fiscal year 2020), and Steel Dynamics Inc.
($9.6 billion in fiscal year 2020). Although its smaller scale is
not necessarily a risk, smaller companies often have less breadth
and economies of scale, which can contribute to a greater level of
volatility in their profitability. They also tend to be less
diversified than their larger peers. Carpenter is a relatively
small supplier of critical performance aerospace products with
stringent quality qualifications to a highly competitive industry
with a consolidated end-use customer base, which reduces its
pricing power and can lead its margins to be weaker than those of
some of its stronger peers in these market conditions.
Consequently, the company's return on capital has been generally
low (averaging about 7%) for most of the last 5-7 years. Carpenter
relied on aerospace and defense customers for nearly 60% of its
sales heading into fiscal year 2021 and its revenue from this
segment subsequently dropped by about 40%. The sharp reduction in
the company's aerospace sales triggered a significant decline in
its earnings in fiscal year 2021 due to the high fixed cost nature
of its operations. While Carpenter was able to generate cash by
liquidating its inventories while winding down its operations, its
high operational leverage was a major factor behind its losses in
fiscal year 2021 and its negative EBITDA margin.
Carpenter's credit metrics will likely be weak for the next 12-24
months as the global commercial aerospace market stabilizes and
begins to recover. S&P anticipates that the company's leverage will
remain about 7x in fiscal year 2022 (ending June 30, 2022) before
trending below 5x in fiscal year 2023. Although the demand for
jetliners remains weak, aircraft manufacturers have largely reached
their revised production rates and it views further cuts as
unlikely. The recovery in air travel will be very uneven around the
world and further COVID-19 outbreaks could stall any improvement,
particularly for international travel, which could potentially lead
to a renewed round of aircraft order cancellations or deferrals.
S&P said, "We anticipate that the worst of the downturn is now
behind Carpenter. We anticipate the company's EBITDA will likely
recover incrementally quarter over quarter through fiscal year 2022
and pick up pace in the second half. Management's cost-reduction
initiatives implemented during the pandemic, such as reduction in
certain salaried positions and closure of older underperforming
powder facilities and the sale of its Amega West business, which
previously served the volatile oil and gas market, will likely
support improving EBITDA and cash flow generation as its demand
returns. Prior to the pandemic, the aerospace components industry
faced a capacity shortage and Carpenter was ramping up its new
Athens, Ala. production facility to increase its capacity. However,
the demand picture is very different today and has led to low
utilization rates across the industry. As demand recovers over the
longer term, we anticipate this new capacity will enable Carpenter
to increase its production volumes and utilization rate, which will
likely support incremental EBITDA growth. Nonetheless, given
Carpenter's size relative to the other players in the aerospace
components industry and the declines in its EBITDA during the
pandemic, we see some risk for increased earnings volatility over
the coming 12-24 months, particularly in the case of an uneven
recovery.
"The stable outlook on Carpenter reflects our forecast that it will
reduce its high leverage over the next 12 months as its largest end
market (aerospace) begins to stabilize and the conditions in its
other large end markets (including industrial and consumer) remain
solid, which will support its maintenance of more-favorable credit
ratios.
"We could lower our rating on Carpenter if its debt to EBITDA does
not improve toward 4x by mid-2022 or over the following 12 months.
This would most likely occur because of a slower-than-expected
recovery in its end markets that leads to weaker-than-forecast
demand and sustained weak profitability.
"While unlikely over the next 12-24 months given our expectation
for a long and uneven recovery in the aerospace end market, we
could raise our rating on Carpenter over the longer term if we
believe its debt to EBITDA will improve below 2x, which is a level
that we anticipate will allow it to accommodate future EBITDA
volatility." This could occur if:
-- The company outperforms S&P's base-case scenario by generating
stronger EBITDA than it assumes on a faster improvement in its
profitability; and
-- Stronger-than-anticipated volume growth and market share
gains.
CASTLEROCK DEVELOPMENT: Case Summary & 20 Top Unsecured Creditors
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Debtor: Castlerock Development Services, LLC
2021 Dahlonega Hwy, Cumming
Cumming, GA 30040
Chapter 11 Petition Date: August 5, 2021
Court: United States Bankruptcy Court
Northern District of California
Case No.: 21-20848
Debtor's Counsel: William A. Rountree, Esq.
ROUNTREE, LEITMAN & KLEIN, LLC
Century Plaza I
2987 Clairmont Road, Ste 350
Atlanta, GA 30329
Tel: 404-584-1238
Fax: 404 704-0246
Email: swenger@rlklawfirm.com
Estimated Assets: $1 million to $10 million
Estimated Liabilities: $1 million to $10 million
The petition was signed by Jody Lewis as president/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/BZ24J2A/Castlerock_Development_Services__ganbke-21-20848__0001.0.pdf?mcid=tGE4TAMA
CCO HOLDINGS: Moody's Assigns B1 Rating to New Sr. Unsecured Notes
------------------------------------------------------------------
Moody's Investors Service assigned a B1 rating to new senior
unsecured notes (the Transaction) to be issued at CCO Holdings, LLC
and CCO Holdings Capital Corp, wholly owned entities of Charter
Communications Operating, LLC (Charter or the Company). Charter's
Ba2 Corporate Family Rating, Ba2-PD Probability of Default Rating,
and all instrument ratings including the Ba1 senior secured 1st
lien credit facilities and senior secured 1st lien notes at Charter
Communications Operating, LLC, Time Warner Cable LLC, and Time
Warner Cable Enterprises LLC are unaffected by the proposed
Transaction. The stable outlook and SGL-1 speculative grade
liquidity are unchanged.
Assignments:
Issuer: CCO Holdings, LLC
Senior Unsecured Notes, Assigned B1 (LGD5)
Moody's views the Transaction as credit neutral. Moody's expects
the terms and conditions of the newly issued obligations to be
materially the same as existing obligations of the same class.
Charter intends to use the net proceeds from the financing for
general corporate purposes, to repay certain indebtedness, share
repurchases, and to pay related fees and expenses. Moody's believe
any incremental leverage (net of repayment) will not materially
change the credit profile or the proportional mix of secured and
unsecured debt, or the resultant creditor claim priorities in the
capital structure.
RATINGS RATIONALE
Charter Communications, Inc.'s (Charter) credit profile is
supported by the Company's substantial scale and share of the US
pay-TV market which is protected by a superior, high-speed network
with limited competitive overlap. Charter is the second largest
cable company in the United States, serving approximately 31.4
million residential and commercial customers across 41 states,
generating approximately $48.9 billion in revenue (March 2021 LTM).
Strong and sustained broadband demand drives growth and
profitability, providing an operating hedge to the secular decline
in video and voice services. The business model is also highly
predictable, with a largely recurring revenue base. Liquidity is
also very good, including free cash flows of close to $6.9 billion
(Moody's adjusted, March 2021 LTM) which provides significant
financial flexibility.
The credit profile is constrained by governance risk, including a
financial policy that targets a net leverage ratio of 4.0-4.5x, but
has operated near or slightly above the top end of the range for a
sustained period on a Moody's-adjusted basis. High absolute debt
levels (over $86 billion, Moody's adjusted at Q1 2021 and excluding
completed and pending transactions subsequent) can also represent a
refinancing risk when maturities are larger than internal sources
of repayment, but maturities will be balanced and insignificant
relative to free cash flows through 2024. During this time, and
absent acquisitions, Moody's expects most free cash flow will be
used for share repurchases rather than debt repayment. Charter is
also exposed to secular pressure in its voice and video services
due to intense competition and changes in media consumption,
driving penetration rates lower, despite recent growth.
Additionally, Charter's growing mobile wireless services uses a
mobile virtual network operator (MVNO) model that Moody's expect
will have steady-state economics that are less favorable than its
existing cable model and is currently producing negative cash
flows. Regardless, Moody's expect scaling the business will drive
revenue growth and diversity in the business and allow Charter to
participate in growth of high-speed wireless broadband while
improving customer retention rates. Over the medium term, 5G
wireless services offered by competing carriers could be a threat
to compete with its wireline internet growth engine.
The SGL-1 liquidity rating reflects very good liquidity with
positive free cash flow, a fully undrawn $4.75 billion revolver
facility, and only incurrence-based financial covenants. However,
alternate liquidity is limited with a largely secured capital
structure.
Moody's rates the senior secured 1st lien credit facilities and
senior secured 1st lien notes at Charter Communications Operating,
LLC, Time Warner Cable LLC, and Time Warner Cable Enterprises LLC
Ba1 (LGD3), one notch above the Ba2 CFR. Secured lenders benefit
from junior capital provided by the senior unsecured bonds at CCO
Holdings, Inc. (which have no guarantees). The senior unsecured
notes at CCO Holdings, LLC are the most junior claims and are rated
B1 (LGD5), with contractual and structural subordination to all
other obligations. Instrument ratings reflect the Ba2-PD PDR with a
mix of secured and unsecured debt, which Moody's expect will result
in an average rate of recovery of approximately 50% in a distressed
scenario.
The stable outlook reflects Moody's expectation that debt,
revenues, and EBITDA will rise to near $90 billion, $52.5 billion,
and $20.5 billion, respectively by the end of 2022. Moody's project
EBITDA margins near 40%, producing free cash flows averaging 7
billion. Key assumptions include capex to revenue averaging
15%-16%, and average borrowing costs of approximately 5%. Moody's
expect video subscribers to fall by low to mid-single digit percent
on a long-term secular basis, and data subscribers to rise by
mid-single digit percent. Moody's expect leverage to remain near
the top end of Moody's leverage tolerance of 4.5x and free cash
flow to debt to be sustained in the high single digit percent
range. Moody's expect liquidity to remain very good.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's could consider an upgrade if:
Leverage (Moody's adjusted debt/EBITDA) is sustained below 4.25x,
and
Free cash flow-to-debt (Moody's adjusted) is sustained above 5%
An upgrade could also be conditional on maintaining very good
liquidity, a more conservative financial policy, and stable
operating performance.
Moody's could consider a downgrade if:
Leverage (Moody's adjusted debt/EBITDA) is sustained above 4.75x,
or
Free cash flow-to-debt (Moody's adjusted) is sustained below low
single digit percent
Moody's could also consider a negative rating action if liquidity
deteriorated, financial policy implied higher credit risk, scale or
diversity was lower, or there were unfavorable and sustained trends
in operating performance or the business model.
Charter Communications, Inc., headquartered in Stamford,
Connecticut, provides video, data, phone, and wireless services to
58.6 million primary service units (PSU's) including both
residential and commercial (and 2.7 million mobile lines). Across
its footprint, which spans 41 states, Charter serves 31.4 million
residential and commercial customers under the Spectrum brand,
making it the second largest U.S. cable operator. Revenue for the
last twelve months ended March 31, 2021 was approximately $48.9
billion.
The principal methodology used in these ratings was Pay-TV
published in December 2018.
CENTURY COMMUNITIES: Moody's Ups CFR to Ba3, Outlook Stable
-----------------------------------------------------------
Moody's Investors Service upgraded Century Communities, Inc.'s
Corporate Family Rating to Ba3 from B1, Probability of Default
Rating to Ba3-PD from B1-PD, and the ratings on the company's
senior unsecured notes to Ba3 from B1. Moody's also assigned a Ba3
rating to Century's proposed $400 million senior unsecured note
offering due 2029, the proceeds of which will be used to retire
existing unsecured notes due 2025. The outlook was changed to
stable from positive. The company's SGL-2 Speculative Grade
Liquidity rating was maintained.
The Corporate Family Rating upgrade reflects strengthening of
Century's credit metrics, which Moody's expects to be maintained
over the next 12 to 18 months. "Moody's expects the company to
operate conservatively, maintaining its debt leverage below 40% and
exercising prudent strategies with respect to shareholder returns
and acquisitions, and benefit from strong demand for first-time
homes" says Natalia Gluschuk, Moody's Vice President -- Senior
Analyst. The rating action also reflects the company's improvement
in scale, with revenue exceeding $3.7 billion and an increase in
its gross margin toward 21% in the LTM period ended June 30, 2021.
Pro forma for the refinancing transaction, the debt to
capitalization ratio is expected to remain unchanged at about 38%
with homebuilding interest coverage improving modestly above 8x.
The stable outlook reflects Moody's expectation that Century's
solid operating performance and strong credit metrics will continue
as the company benefits from favorable underlying fundamentals in
the homebuilding sector over the next 12 to 18 months.
The following rating actions were taken:
Upgrades:
Issuer: Century Communities, Inc.
Corporate Family Rating, Upgraded to Ba3 from B1
Probability of Default Rating, Upgraded to Ba3-PD from B1-PD
Senior Unsecured Regular Bond/Debenture, Upgraded to Ba3 (LGD4)
from B1 (LGD4)
Assignments:
Issuer: Century Communities, Inc.
Senior Unsecured Regular Bond/Debenture, Assigned Ba3 (LGD4)
Outlook Actions:
Issuer: Century Communities, Inc.
Outlook, Changed to Stable from Positive
RATINGS RATIONALE
Century's Ba3 Corporate Family Rating is supported by the
company's: 1) track record of solid growth organically and through
acquisitions, and meaningful revenue scale; 2) good market position
in the first-time and entry-level homebuyer segment, where
inventories of available homes remain low; 3) broad geographic
footprint across 28 major metropolitan markets in 17 states; 4)
governance considerations, including a track record of
deleveraging, willingness to issue equity and conservative
strategies with respect to shareholder returns; and 5) favorable
underlying fundamentals in the homebuilding sector.
At the same time, the company's credit profile reflects: 1) the
high level of speculative home construction (without a purchase
order) of about 80% to 85% of total, which entails a risk of
elevated unsold inventory during a market weakening; 2) the
potential for cash flow from operations to turn negative if
investment in growth is accelerated; 3) track record of
acquisitions, which can present integration challenges and raise
debt leverage; 4) the cyclicality of the homebuilding industry and
exposure to significant volatility in results.
The assignment of a Ba3 rating to the company's proposed notes, at
the same level with its Corporate Family Rating, reflects the
capital structure that is composed of one class of debt.
The SGL-2 Speculative Grade Liquidity rating reflects Moody's
expectation that Century will maintain good liquidity over the next
12 to 15 months. Liquidity is supported by a cash balance of $419
million at June 30, 2021, Moody's expectation of modest positive
cash flow from operations, ample availability under a $800 million
revolving credit facility expiring in 2026, and good room under
financial maintenance covenants.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if the company continues to expand
scale and improve product and geographic diversity; if total debt
to capitalization is sustained below 40%, interest coverage above
5.0x and gross margin exceeds 20%; if conservative financial
policies, including with respect to acquisitions and shareholder
friendly actions are maintained; and good liquidity, including
strong positive cash flow, is sustained.
The ratings could be downgraded if end market conditions
deteriorate significantly causing a decline in revenue and gross
margin and an increase in impairments such that homebuilding debt
to book capitalization approaches 50% and interest coverage
declines below 4.0x; if the company pursues aggressive shareholder
friendly activities or large scale debt funded acquisitions; or if
liquidity deteriorates.
The principal methodology used in these ratings was Homebuilding
And Property Development Industry published in January 2018.
Century Communities, Inc., founded in 2002 and headquartered in
Greenwood Village, Colorado, is a builder of single-family homes,
townhomes, and flats, focusing on the entry-level product segment
for about 80% of home closings. The company operates in 28 major
metropolitan markets in 17 states. In the LTM period ended June 30,
2021, Century generated approximately $3.7 billion in homebuilding
revenue and $361 million in consolidated net income.
CLEANSPARK INC: Provides Bitcoin Mining Operations Updates
----------------------------------------------------------
CleanSpark, Inc. announced updates to a number of strategic
initiatives related to its Bitcoin and Energy business units.
CleanBlok, the Company's Bitcoin mining division, now has over
7,500 of the latest generation mining units deployed with a
hashrate capacity of over 740 PH/s, currently producing
approximately 6 Bitcoin per day at today's difficulty rates.
Another 1,670 units, capable of producing approximately 148 PH/s or
approximately 1.4 Bitcoin per day, have just been received and are
expected to be installed this month. Additional units are
scheduled for delivery in late August. Upon deployment of these
units, the Company expects to exceed a hashrate capacity of 1.0
EH/s, which would produce approximately 9.3 Bitcoin per day
assuming current difficulty. With a Bitcoin price of $40,000 and
current difficulty rates, 1.0 EH/s would result in an annual run
rate of $136 million of revenue, in the mining segment alone.
CleanSpark expects to approach 2.0EH/s by the close of calendar
2021, and 3.2EH/s by the end of September 2022.
The Company produced 147.8 Bitcoins during the month of July.
Cumulatively, the company has mined more than 520 Bitcoins since
entering the mining sector last December. The significant increase
in production for the month of July was due to a substantial
increase in the number of miners deployed over the past 30 days.
In addition, the difficulty of mining has decreased sharply over
the past two months resulting in increased production.
CleanSpark's Chief Executive Officer Zach Bradford stated, "We have
experienced tremendous growth over a relatively short period of
time, and we are very enthusiastic about the results. In just the
month of July, we have already produced nearly 70% of the Bitcoins
that we mined over the entire prior quarter, and we expect to
continue to grow at a strong pace. We're on track to receive over
20,000 additional miners over the coming 12 months."
CleanSpark's Bitcoins are mined using approximately 95% carbon-free
energy. The Company has a goal to achieve 100% carbon-free mining
through the installation of an on-site microgrid featuring
efficient solar and energy storage at its Atlanta facility,
participation in renewable energy credit programs, and, as
previously announced, CleanSpark plans to deploy its energy
solutions at co-located facilities operated by Coinmint. Upon
deployment of its microgrid project in Atlanta, which is planned
for 2022, the Company intends to showcase the facility's overall
energy efficiency in a public-facing dashboard.
CleanSpark's energy and microgrid services business unit integrated
over 180 batteries on more than 50 California locations during the
month of July, a significant increase from the previous entire
quarter's total residential battery installations of just 52.
Unaudited revenues generated from residential energy solutions for
the month of July was equal to 80% of total energy revenue for the
entire quarter ended June 30, 2021.
CleanSpark's Chief Revenue Officer and Energy Division President,
Amer Tadayon, said, "Our strong balance sheet enabled us to resolve
supply chain constraints, resulting in the delivery of more than
1,100 batteries to our facilities. The majority of our new
integrations were for our neighbors in fire-prone communities
throughout California. Our team has been able to install a number
of residential systems providing critical energy resiliency for
families with medical needs that require consistent and reliable
power. We expect the momentum to continue through the current
quarter and through the end of the year, with our contracted energy
backlog now in excess of $20 million."
The Company previously discussed the rollout strategy for its
residential microgrid solution, mVoult. The user application is
now in late-stage testing for its inclusion to the Apple and Google
app stores. Advanced orders are now available in select markets.
Tadayon added, "Battery energy storage systems continue to be
delivered to our warehouse on time and as expected and are being
installed as rapidly as possible. Due to the growth of our
California operations, the company recently relocated to a larger
12,704 square foot facility in Carlsbad. The new facility includes
offices, warehouse and training facilities. We intend to install a
full, mPulse-controlled microgrid in the coming months. This
microgrid will allow us to demonstrate energy savings and
optimization in real time to our partners, potential customers, and
the general public."
The Company achieved its single largest revenue month in history in
July.
CEO Bradford said, "Our growth has not been without its challenges,
however. The Company successfully navigated the volatility of
Bitcoin, managed supply chain constraints, and resolved a legal
dispute. Additionally, we were able to aggressively expand our
sales and marketing efforts and increase our labor force for energy
products."
"Also, CleanSpark, like all companies holding large amounts of
digital currency, is required to measure impairment risks to the
value of Bitcoin and other intangible assets pursuant to US
accounting rules," Bradford said. "We are also required to value
certain investments at the end of each reporting period. As a
result of market volatility in both Bitcoin and other investments
last quarter, we anticipate reporting losses on the impairment of
Bitcoin and recognizing unrealized losses on certain investments.
We also incurred costs related to employee pay and stock-based
compensation that were largely onetime events. These activities
and other growth-based initiatives contributed to non-cash and
one-time cash expenses last quarter that will have a negative
impact on the reported results for the prior fiscal quarter."
"Despite the challenges of last quarter," Bradford added, "we
believe our efforts will translate to a strong future and increased
stockholder value. Our growing mining fleet, California's
Self-Generation Incentive Program supporting energy storage, and
our backlog of executed contracts of over $20 million should
contribute to record growth continuing throughout the balance of
2021. We are really thankful for the support of our stockholders,
suppliers and customers and look forward to a strong future."
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.
CRAVE BRANDS: Wins Cash Collateral Access Thru August 25
--------------------------------------------------------
The U.S. Bankruptcy Court for the Northern District of Illinois,
Eastern Division, has authorized Crave Brands LLC and Meathead
Restaurants LLC to use cash collateral in which LQD Financial Corp.
claims an interest on an interim basis through August 25, 2021.
The Debtors are permitted to use cash collateral to pay actual,
ordinary, and necessary expenses, in accordance with the budget,
with a 10% variance.
The Debtors have stipulated that (a) the indebtedness described in
the loan agreements executed by and between LQD and the Debtors
matured on March 31; and (b) as of the Petition Date, the balance
due to LQD is not less than $6,550,000 in principal plus accrued
interest at the rate of 17% per annum.
As adequate protection for the Debtor's use of cash collateral, LQD
is granted replacement liens and security interests on the Debtors'
property and assets, to the same extent, validity and priority as
LQD's pre-petition liens and security interests, if any, with any
such liens and security interests automatically perfected without
further action. The replacement liens will be in an amount equal to
the aggregate post-petition cash collateral used.
In addition to the replacement liens granted, LQD is granted a
super-priority administrative claim under Sections 503(b)(1),
507(a), and 507(b) of the Bankruptcy Code for the amount by which
the replacement lien proves to be inadequate and LQD will have all
the rights accorded to it pursuant to Section 507(b) of the Code.
The Debtors are also directed to maintain insurance of the kind of
covering their property.
A further hearing on the matter is scheduled for August 23 at 2
p.m.
A copy of the order and the Debtor's budget is available at
https://bit.ly/3jilw1H from PacerMonitor.com.
The Debtor projects $35,000 in total receipts and $48,387 in total
disbursements for August 5.
About Crave Brands
Crave Brands LLC, a company based in Chicago, Ill., sought
protection under Chapter 11 of the U.S. Bankruptcy Code (Bankr.
N.D. Ill. Case No. 21-04729) on April 9, 2021. In the petition
signed by Steve Karfaridis, manager, the Debtor disclosed total
assets of up to $50,000 and liabilities of up to $10 million.
Judge Timothy A. Barnes oversees the case. Matthew Brash is the
Subchapter V trustee appointed in the Debtor's bankruptcy case.
David A. Warfield, Esq., at Thompson Coburn LLP, represents the
Debtor as bankruptcy counsel.
LQD Financial Corp., a creditor, is represented by the Law Office
of William J. Factor, Ltd.
CYTOSORBENTS CORP: Posts $4.7 Million Net Loss in Second Quarter
----------------------------------------------------------------
Cytosorbents Corporation filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing a net loss
of $4.68 million on $12.02 million of total revenue for the three
months ended June 30, 2021, compared to a net loss of $2.87 million
on $9.79 million of total revenue for the three months ended June
30, 2020.
For the six months ended June 30, 2021, the Company reported a net
loss of $8.85 million on $22.62 million of total revenue compared
to a net loss of $6.32 million on $18.50 million of total revenue
for the same period during the prior year.
As of June 30, 2021, the Company had $98.19 million in total
assets, $23.81 million in total liabilities, and $74.38 million in
total stockholders' equity.
Since inception, the Company's operations have been primarily
financed through the issuance of debt and equity securities. At
June 30, 2021, the Company had current assets of approximately
$77,085,000 including cash on hand of approximately $65,609,000 and
current liabilities of approximately $10,796,000. During the
period from Jan. 1, 2020 through July 15, 2020, the Company raised
approximately $26,427,000 by utilizing its ATM facility with
co-agents Jefferies LLC and B. Riley FBR. In addition, the Company
received net proceeds of approximately $53,800,000 from its
underwritten public offering that closed on July 24, 2020. Also,
the Company received approximately $1,127,000 in cash from the
approved sale of its net operating losses and research and
development credits from the State of New Jersey during the three
months ended June 30, 2021.
The Company believes that it has sufficient cash to fund its
operations well into the future.
Management Commentary
Dr. Phillip Chan, chief executive officer of CytoSorbents stated,
"We continue to prioritize the U.S. STAR-T trial as we believe it
provides the lowest risk, fastest, and most likely path to U.S.
marketing approval. Following full FDA approval of our IDE
application in July, we are ramping activities to begin enrollment,
with the first patient enrollment expected this quarter and trial
completion targeted next year. We believe the STAR-T pivotal trial
is rigorously designed to generate the highest level of evidence
and capture the full clinical and economic benefits of
intraoperative ticagrelor removal with our DrugSorb-ATR system in
patients undergoing cardiothoracic surgery. If obtained, FDA
marketing approval of DrugSorb-ATR for this application would be
the first step in a planned multi-phase growth strategy in the
United States. We expect to leverage the STAR-T trial
infrastructure and trial design in future studies to secure other
antithrombotic drug removal indications during cardiothoracic
surgery. Eventually, we plan to pursue the expanded use of
DrugSorb-ATR as a pre-operative measure to reduce the risk of
bleeding in patients on antithrombotic drugs undergoing any type of
high-risk surgical procedure. Overall, we believe the results from
these randomized, controlled trials, combined with real-world
evidence from the STAR registry, will eventually support the use of
our technology as the new global standard of care for the acute
hospital management of patients on antithrombotic drugs."
Dr. Chan continued, "Turning to quarterly results, product sales in
the second quarter of 2021 grew 19% to $11.4 million compared to
the prior year, aided by 38% growth in core non-COVID-19 product
sales. These core sales reached a quarterly record of $9.7 million,
or 85% of total product sales. We estimate that COVID-19 related
sales in the second quarter of 2021 were approximately $1.7
million. We continue to see improved access of our direct sales
force, distributors and partners to physicians and hospitals,
though access is still significantly less than pre-pandemic levels.
With the increase in global vaccinations, offset by the rise of
new cases and hospitalizations driven by new COVID-19 variants,
including the more contagious Delta variant, we are unable to
predict what impact, if any, the COVID-19 pandemic may have on
sales for the remainder of the year. Overall, we expect second
half 2021 product sales to exceed first half 2021 product sales,
with limited contribution from COVID-19 related sales in the second
half of 2021."
"Our business remains healthy with strong sales growth and 82%
product gross margins achieved in the second quarter of 2021. We
have maintained a robust cash balance, with $65.6M at June 30,
2021, providing us a long runway to support investments in
operations and clinical studies worldwide to drive future growth.
We also continue to expand our clinical team and other key talent
to execute our strategy and believe we are well-positioned to grow
in both the short- and long-term."
Second Half and Full Year 2021 Product Revenue Guidance
The Company continues to see underlying strength in its core
markets and therefore continue to expect strong growth of at least
30% Y-Y in core, non-COVID-19 product sales for the remainder of
the year, as well as at least 30% Y-Y growth in full year 2021
core, non-COVID-19 product sales. Overall, the Company expects
second half 2021 product sales to exceed first half 2021 product
sales.
CytoSorbents said, "We believe the COVID-19 pandemic has increased
awareness and usage of CytoSorb as a treatment to reduce cytokine
storm in many countries worldwide. However, the COVID-19 pandemic
continues to add uncertainty to the sales outlook, especially since
we are unable to predict the course of the pandemic. Vaccinations
have increased globally, but new cases and hospitalizations are
being driven by additional COVID-19 variants and we are unable to
predict what impact, if any, the COVID-19 pandemic may have on
sales for the remainder of the year. Given this uncertainty, and
to be conservative, we expect product sales associated with
COVID-19 treatments to be less than $1 million in the second half
of 2021, compared to approximately $3.5 million in the first half
of 2021."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1175151/000110465921099452/ctso-20210630x10q.htm
About CytoSorbents
Based in Monmouth Junction, New Jersey, CytoSorbents Corporation is
engaged in critical care immunotherapy, specializing in blood
purification. Its flagship product, CytoSorb is approved in the
European Union with distribution in 67 countries around the world,
as an extracorporeal cytokine adsorber designed to reduce the
"cytokine storm" or "cytokine release syndrome" that could
otherwise cause massive inflammation, organ failure and death in
common critical illnesses. These are conditions where the risk of
death is extremely high, yet no effective treatments exist.
Cytosorbents reported a net loss of $7.84 million for the year
ended Dec. 31, 2020, compared to a net loss of $19.26 million for
the year ended Dec. 31, 2019. As of March 31, 2021, the Company
had $87.48 million in total assets, $10.22 million in total
liabilities, and $77.26 million in total stockholders' equity.
DARREN MARTIN: Seeks Approval to Hire Jones & Walden as Counsel
---------------------------------------------------------------
Darren Martin Inc. seeks approval from the U.S. Bankruptcy Court
for the Northern District of Georgia to employ Jones & Walden, LLC
to serve as legal counsel in its Chapter 11 case.
Jones & Walden will render these legal services:
(a) prepare pleadings and applications;
(b) conduct examination;
(c) advise the Debtor of its rights, duties and obligations;
(d) consult with and represent the Debtor with respect to a
Chapter 11 plan;
(e) perform legal services incidental and necessary to the
operations of the Debtor's business; and
(f) take any and all other 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 $100 - $125 per hour
In addition, the firm will seek reimbursement for expenses
incurred.
As of the petition date, Jones & Walden holds a retainer of
$24,700.
Leslie Pineyro, Esq., a partner at Jones & Walden, disclosed in a
court filing that the firm is a "disinterested person" as defined
in Section 101(14) of the Bankruptcy Code.
The firm can be reached through:
Leslie M. Pineyro, Esq.
Jones & Walden LLC
699 Piedmont Ave. NE
Atlanta, GA 30308
Telephone: (404) 564-9300
Email: lpineyro@joneswalden.com
About Darren Martin Inc.
Darren Martin Inc. filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code (Bankr. N.D. Ga. Case No.
21-55682) on July 30, 2021, listing between $500,000 and $1 million
in both assets and liabilities. Darren Martin, chief executive
officer, signed the petition. Jones & Walden, LLC serves as the
Debtor's legal counsel.
DAWN ACQUISITIONS: Moody's Cuts CFR to Caa1, Alters Outlook to Neg
------------------------------------------------------------------
Moody's Investors Service downgraded Dawn Acquisitions LLC's
corporate family rating to Caa1 from B3 and its probability of
default rating to Caa1-PD from B3-PD. Dawn's $600 million senior
secured 1st lien credit facility, which consists of a $550 million
7-year term loan due 2025 and a $50 million 5-year revolver due
2023, was downgraded to Caa1 from B3. Dawn is a 2018 carve-out of
the colocation business of AT&T Inc. (AT&T, Baa2 stable), which
consists of a portfolio of owned and leased data centers and
related critical infrastructure assets. The rating outlook was
changed to negative from stable.
The downgrades and change in outlook to negative are the result of
Moody's expectations for continued elevated leverage (Moody's
adjusted), due to the company's protracted efforts to execute a
strategic repositioning for sustained long term revenue and EBITDA
growth. Moody's expects Dawn's debt leverage (Moody's adjusted)
will remain elevated for several years and contribute to reduced
financial flexibility, until the company's strategic repositioning
can deliver both sustained revenue and EBITDA growth. While cash
deficits in 2022 and 2023, mainly tied to growth capital investing,
are anticipated to be funded with capital support from the
company's equity sponsor, Brookfield Infrastructure and its
institutional partners (Brookfield), such support is not certain.
Dawn will also likely face difficulties maintaining some of its
existing customers as it exits unprofitable leased data center
facilities by year-end 2021 or early 2022. The potential for a
continuation of sizable one-off churn events remains, including
uncertainty surrounding an upcoming contract renewal with a large
telecom customer and its potential negative impact on revenue.
Downgrades:
Issuer: Dawn Acquisitions LLC
Corporate Family Rating, Downgraded to Caa1 from B3
Probability of Default Rating, Downgraded to Caa1-PD from B3-PD
Gtd Senior Secured 1st Lien Bank Credit Facility, Downgraded to
Caa1 (LGD3) from B3 (LGD3)
Outlook Actions:
Issuer: Dawn Acquisitions LLC
Outlook, Changed To Negative From Stable
RATINGS RATIONALE
Dawn's Caa1 CFR reflects weak revenue and EBITDA growth associated
with the company's current focus on global facility rationalization
efforts and continuing business strategy evolution. Dawn is now
pursuing targeted hyperscale customer opportunities to better fill
its underutilized capacity. The company's July acquisition of a
small consulting business, Foghorn Consulting, Inc. (Foghorn), with
full equity underwriting by Brookfield, will differentiate the
company among retail colocation providers. The multi-generational
infrastructure consulting expertise and managed services provide
the means to potentially retain and upsell existing customers,
while solidifying an improved value proposition to drive new
customer bookings growth. Eliminating smaller, lower margin and
less strategic facilities over the next 12 months will lower
revenue in the interim but help bolster EBITDA over time. While
Dawn operated with near neutral cash deficits in the initial years
after its carveout from AT&T, Moody's expects increased capital
investing targeted at existing and potentially new Tier 1 growth
markets will likely constrain liquidity by mid-2022.
If the company's evolving and revamped strategy results in stronger
traction in bookings and installations, Dawn may benefit from
improved public capital market access or deeper and more certain
continued support from Brookfield. Moody's views Brookfield's full
equity underwriting of Foghorn as a positive indication of likely
-- but not certain -- continued future support. However, EBITDA
growth has not materialized at a level sufficient to reduce very
high debt leverage (Moody's adjusted), which was incompatible with
the previous rating and is expected to remain at elevated levels
over at least the next two years.
The rating also incorporates the company's stable base of
contracted recurring revenue, secular growth drivers for colocation
services and still modest but increasing capital intensity relative
to the industry due to still underutilized capacity. Absent recent
large single customer churn events, which Moody's currently views
as mainly one-off in nature, Dawn's customer churn profile is
expected to remain in line with broader industry trends given the
pervasive customer stickiness of enterprise customers. These
positive factors are offset by the company's small scale, elevated
leverage, growth strategy execution risks, intense industry
competition and the potential necessity for higher capital
intensity in the future.
Moody's debt leverage (Moody's adjusted) stood at 9.1x for the 12
months ended March 31, 2021. With lower margin, non-core data
center facility closures over the next 12 months, Moody's expects
Dawn's leverage (Moody's adjusted) to peak over the next 12 months
and fall materially to near or below 10x by year-end 2023 based on
improving bookings and installation trends from the company's
direct sales force and channel partners. A mid-single digit revenue
growth rate is currently assumed in 2023, a critical inflection
point that should help Dawn drive capacity utilization higher and
expand EBITDA margins. Moody's forecasts free cash flow to be
slightly negative in 2021, with expanding cash flow deficits tied
to largely success-based capital growth opportunities necessitating
additional capital raises throughout 2022 and 2023.
Moody's expects Dawn to have adequate liquidity over the next 12
months. As of March 31, 2021, Dawn had $23 million of cash on hand
and close to full availability under its $50 million revolving
credit facility. For 2021, Moody's forecasts Dawn to generate
slightly negative free cash flow of around $10 million after
accounting for capital spending. The revolver contains a springing
8x maximum first lien net leverage covenant to be tested when 35%
or more of the revolver is outstanding at the end of each quarter.
As of March 31, 2021, Dawn was in compliance with its first lien
net leverage covenant.
The instrument ratings reflect both the probability of default of
Dawn, as reflected in the Caa1-PD probability of default rating, an
average expected family recovery rate of 50% at default, and the
loss given default assessment of the debt instruments in the
capital structure based on a priority of claims. The senior secured
first lien credit facility is rated Caa1, in line with the Caa1 CFR
given the lack of junior securities to provide loss absorption in
the event of default. The senior secured first lien credit facility
is guaranteed on a senior secured basis by Dawn Acquisitions LLC
and all direct and indirect material domestic subsidiaries subject
to certain exceptions.
The negative outlook reflects Moody's view that Dawn's revenue and
EBITDA remain at risk for further contraction and that improving
growth trends over the next 12-18 months will be difficult without
stronger evidence of sales force productivity driving steady and
sustained progress in bookings, installations and churn trends. The
negative outlook further reflects expectations for continued
elevated debt leverage (Moody's adjusted) and very limited
financial flexibility without greater certainty of continued
support from the company's equity sponsor. The outlook could be
revised to stable if solid strategic execution contributes to debt
leverage (Moody's adjusted) falling both materially and steadily
and if bookings, installation and churn improvement trends are
sustained. Further, available liquidity would need to be sufficient
to fund at least two years of internal cash deficits.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
Moody's could lower Dawn's ratings further if the company's
operating performance does not improve, liquidity deteriorates,
distressed debt exchanges are pursued or if capital spending is
reduced below a level necessary to support revenue growth.
Moody's could upgrade Dawn's ratings if debt/EBITDA (Moody's
adjusted) approaches 6.0x and free cash flow/debt (Moody's
adjusted) was positive, both on a sustained basis.
The principal methodology used in these ratings was Communications
Infrastructure Industry published in September 2017.
Headquarters in Dallas, TX, Dawn Acquisitions LLC, doing business
as Evoque data center solutions, is a full service retail
colocation provider with a portfolio of 30 currently owned and
leased data center facilities of which 18 are located in North
America, six in Europe, five in Asia and one in Australia, serving
over 1,000-plus enterprise customers across diversified industries.
DOLE PLC: S&P Assigns 'BB' ICR on Completion of IPO, Outlook Stable
-------------------------------------------------------------------
S&P Global Ratings assigned its 'BB' issuer credit rating to Dole
Food Co. Inc. and its 'BB+' issue-level rating and '2' recovery
rating to the senior secured credit facilities. The '2' recovery
rating indicates its expectation for substantial (70%-90%; rounded
estimate: 70%) recovery in the event of a default.
S&P said, "The stable outlook reflects our expectation for limited
integration risk and that the company's operating performance will
remain steady due to its better product and geographic diversity.
We also expect Dole to maintain leverage of just below 3x while
steadily improving its free operating cash flow (FOCF) over the
next two years.
Total Produce plc (TP) and Dole have completed their merger under a
new name, Dole plc (Dole). Dole is the largest fresh produce
company with over $8.9 billion of pro forma 2021 sales (excluding
joint ventures).
S&P said, "Our rating reflects the company's scale and expanded
product offerings, global sourcing, and distribution footprint to
create the largest fresh produce company in the world. We expect
Dole plc to have pro forma 2021 adjusted revenue of over $8.9
billion. The company's product offerings will range from fresh
fruit (bananas make up about 27% of its sales while other fruit
account for 28%) to fresh vegetables (28% of sales), including
packaged salads." With the flagship Dole brand, the company will
hold the No. 1 position for banana sales in North America and the
No. 3 position in Europe. It will also have the No. 2 position for
fresh pineapple sales in North America and the No. 3 position in
Europe. The Dole brand is also a market leader in North America for
fresh packed vegetables, including a No. 2 position in value-added
salads.
Dole plc will operate TP's asset-light sourcing and
distribution-focused model and Dole Food's brand-focused operating
model, wherein its vertical integration is a competitive advantage.
The company will have an enhanced global sourcing network
(multi-continental sourcing utilizing its own production) that will
provide it with year-round product availability and shipping
capabilities that offer operating flexibility. North America will
account for about 49% of Dole plc's 2020 pro forma sales, followed
by Europe at about 45%, and the rest of the world (Latin America,
the Middle East, and Africa [primarily South Africa]) at about 6%.
We believe the newly combined company will continue to increase its
presence in underpenetrated international markets given its
expanded scale.
S&P said, "We forecast the company's leverage will be moderate and
expect it to maintain a prudent financial policy.We view the merger
of TP and Dole Food as transformative because it will create the
No. 1 player in the fresh produce market. The combination of equity
modestly lower-than-expected proceeds of $400 million and new
financing will lead to a modest increase in estimated leverage. We
estimate S&P Global Ratings-adjusted pro forma 2021 net leverage of
around 3x, which compares to our previous expectations of high-2x.
We believe Dole plc will continue to prioritize strategic
acquisitions to bolster its product offerings in high-growth and
value-added areas or consolidate fragmented markets containing
multiple small- to medium-size regional players. As a public
company with lower debt leverage, we believe Dole plc will have
more financial flexibility and additional sources of liquidity to
execute its growth strategy. We also expect its management team to
take a similar approach to mergers and acquisitions (M&A) through
joint ventures and investments.
"We expect an ongoing, but periodically volatile, rise in the
company's organic sales underpinned by the increased consumption of
fresh and healthy foods.We expect Dole plc to increase its top-line
by about 2.0%-2.5% over the next two years supported by its
presence in attractive growth categories, such as soft fruit and
avocados, and its diversified portfolio with strong leadership
positions in stable categories, such as bananas, pineapples, and
fresh vegetables. Still, it competes in the competitive,
commodity-oriented, seasonal, and volatile fresh produce industry
where its operating performance is subject to uncontrollable
factors, such as weather- and disease-related supply shocks,
political risks (including potential trade barriers), and currency
swings. This causes its margins to remain low and subjects it to
volatility in its earnings and cash flow. We expect the company to
continue to reduce the risk in its portfolio by moving away from
more volatile bulk commodity volumes and continuing to increase its
presence in organic produce to take advantage of the rising
consumer preference for healthy and organic foods.
"TP's historically lower EBITDA margins will gradually converge
with industry averages because of the realization of synergies from
the merger.However, we acknowledge that the transaction involved
some integration risk. Dole Food generated a stand-alone EBITDA
margin of over 6% because of its vertically integrated business
model, branded focus in higher-margin value-added vegetables, and
organic offerings. Historically, we estimate that TP's EBITDA
margins were closer to the 2.5%-3.0% range. Despite the integration
costs we forecast in 2021, we expect that Dole plc will have S&P
Global Ratings-adjusted pro forma EBITDA margins of 5% in 2021 and
2022. We expect the increase in the company's EBITDA in 2021-2022
will be underpinned by Dole Food's generally higher EBITDA margins
and higher utilization rates and the positive effects from its
realization of cost and logistics synergies starting in 2022. We
believe these synergies are largely achievable. Dole plc aims to
achieve about $30 million to $40 million of synergies over the
medium-term. We anticipate the company will realize cost synergies
in its logistics (transport full loads minimizing the cost per unit
through collaboration across inland freight and logistics in North
America) and sourcing (collaborative sourcing from key producing
regions in Chile and South Africa). Dole will primarily realize
revenue synergies in its high-growth product area, such as avocados
and berries, by promoting the Dole brand in underpenetrated
markets. The integration risks are partly mitigated by TP's
two-year history operating as a 45% owner of Dole. In addition, TP
has a longer than 10-year track record of successfully integrating
several bolt-on acquisitions. However, we cannot completely rule
out the execution risk inherent in the transaction given the larger
size of the Dole acquisition and the complexity of operating
different business models. The risks include possibly higher
integration costs than we initially planned and
lower-than-anticipated or delayed realization of revenue and
logistics synergies.
"We expect Dole's pro forma free operating cash flow (FOCF) to be
negative in 2021 as its capital expenditure (capex) remains
elevated due to its investments in its vessel fleet.Dole Food's
vertical integration and ownership of its shipping fleet are key
strengths and TP also views these investments as critical. We
expect capex of about $210 million in 2021 and about $170 million
in 2022, which includes discretionary expansion capex. The
company's working capital will also be a moderate outflow of about
$30 million to $40 million. This will cause it to generate negative
FOCF in 2021 before rebounding to over $85 million in 2022. We
expect this will enable Dole to maintain its publicly stated
dividend policy in line with TP's historical pay-out ratio.
"The stable outlook reflects our expectation that Dole's operating
performance will remain steady due to its favorable growth outlook
and fairly modest integration risk. We also expect the company to
maintain leverage of just below 3x while steadily improving its
FOCF as its one-time transaction costs and working capital outflows
do not repeat.
"We could lower our rating on Dole if it underperforms our base
case because its operating performance weakens, causing its S&P
Global Ratings-adjusted leverage to rise above 3.5x and its FOCF to
fall below $50 million on a sustained basis." S&P believes this
occur if the company:
-- Is unable to effectively integrate the entities, leading to
delays in achieving its expected synergies or the incurrence of
higher-than-anticipated integration costs;
-- Operating profits deteriorate due to increased competition that
weakens Dole plc's market position, excess supply leads to pricing
pressure, or it is forced to conduct product recalls in North
America; or
-- The company's financial policy became more aggressive than we
currently expect, including sizeable debt-funded M&A or shareholder
remuneration that lead it to sustain elevated leverage levels for a
prolonged period.
S&P could raise its rating on the newly merged company if it
sustains S&P Global Ratings-adjusted FOCF to debt of over 15% and
debt to EBITDA of less than 3x. This could occur if the company:
-- Successfully integrates both platforms, delivers on its planned
synergies, and increases its EBITDA and cash flows;
-- Sustains positive FOCF of well over $50 million; and
-- Maintains its prudent financial policy, including a modest
dividend payout and no large share repurchases.
DURRIDGE COMPANY: Gets OK to Tap Christine E. Devine as Counsel
---------------------------------------------------------------
Durridge Company Inc. received approval from the U.S. Bankruptcy
Court for the District of Massachusetts to employ the Law Office of
Christine E. Devine, LLC as co-counsel with Parker & Associates,
LLC.
The firm will render these legal services:
(a) advise the Debtor with respect to its rights, powers and
duties in the continued operation of its business and management of
its assets;
(b) advise the Debtor with respect to its Chapter 11 plan;
(c) represent the Debtor at hearings and matters pertaining to
its affairs;
(d) prepare legal papers;
(e) advise the Debtor with respect to and assist in the
negotiation and documentation of, financing agreements, debt and
cash collateral orders and related transactions;
(f) review and analyze the nature and validity of any liens
asserted against the Debtor's property and advise the Debtor
concerning the enforceability of such liens;
(g) advise the Debtor regarding its ability to initiate action
to collect and recover property for the benefit of the estate;
(h) advise and assist the Debtor regarding the potential
disposition of any property;
(i) advise the Debtor regarding executory contract and
unexpired lease assumption issues, lease assignments, rejections,
restructurings, and recharacterization of contracts and leases;
(j) review and analyze the claims of the Debtor's creditors,
treatment of such claims and the preparation, filing or prosecution
of any objections to claims;
(k) commence and conduct any and all litigation necessary or
appropriate to assert rights held by the Debtor, protect assets of
the Debtor's Chapter 11 estate or otherwise further the goal of
completing the Debtor's successful reorganization; and
(l) perform all other necessary legal services for the
Debtor.
Christine Devine, Esq., the primary attorney in this
representation, will be compensated at her hourly rate of $395.
Ms. Devine disclosed in a court filing that her firm is a
"disinterested person" as that term is defined in Section 101(14)
of the Bankruptcy Code.
The firm can be reached through:
Christine E. Devine, Esq.
Law Office of Christine E. Devine, LLC
P.O. Box 7
Medway, MA 02053
Telephone: (508) 533-7240
Email: Christine@CDevineLaw.com
About Durridge Company
Durridge Company Inc. is a Delaware corporation organized on April
11, 2016 under the name of Sensory Acquisition Company. The name
was changed on that date to Durridge Company Inc. and is registered
to do business in Massachusetts.
The company provides professional radon detection equipment and
services, including radon detection solutions for businesses,
universities, and governments worldwide. It also provides a wide
range of accessories for its proprietary technology known as RAD7,
as well as software for performing sophisticated radon data
analysis, and expert calibration and maintenance services.
Durridge sought protection under Chapter 11 of the U.S. Bankruptcy
Code (Bankr. D. Mass. Case No. 21-40187) on March 15, 2021. In the
petition signed by Wendell Clough, president, the Debtor disclosed
$354,112 in assets and $2,182,277 in liabilities.
The Honorable Christopher J. Panos is the case judge.
Parker & Associates, LLC and the Law Office of Christine E. Devine,
LLC represent the Debtor as legal counsel while Huron Consulting
Services, LLC serves as its valuation expert.
EAST WEST AVL: Wins Cash Collateral Access Thru Aug 20
------------------------------------------------------
The U.S. Bankruptcy Court for the Western District of North
Carolina, Asheville Division, has authorized East West AVL Dev, LLC
to use the cash collateral of Pantheon Capital Advisors, Inc. on an
interim basis through August 20, 2021.
The Debtor is permitted to use cash collateral in the ordinary
course of business for the expenses specified in the budget, with a
variance of 10%.
As adequate protection for Pantheon's interest in cash collateral,
to the extent the Debtor uses the cash collateral, Pantheon is
granted valid, attached, choate, enforceable, perfected and
continuing security interests in, and liens upon all post-petition
assets of the Debtor of the same character and type, to the same
extent and validity as the liens and encumbrances of the Lenders
attached to the Debtor's assets pre-petition. The Lenders' security
interests in, and liens upon, the Post-Petition Collateral will
have the same validity as existed between the Lenders, the Debtor,
and all other creditors or claimants against the Debtor's estate on
the Petition Date.
As further adequate protection, the Debtor will make $1,250 in
adequate protection payments to Pantheon to be applied to the debt
associated with Pantheon's secured claims.
The Debtor also was required to proof of adequate insurance to
Pantheon's attorney by August 2 and must escrow into its DIP
account or prepay funds for ad valorem taxes equal to 1/12 of the
yearly amount due on each property.
A final hearing on the use of cash collateral is scheduled for
August 18 at 9:30 a.m.
A copy of the order and the Debtor's budget is available at
https://bit.ly/3jkOlKM from PacerMonitor.com.
The Debtor projects $5,000 in total income and $3,670 in total
expenses for August 2021.
About East West AVL Dev
East West AVL Dev, LLC sought protection for relief under Chapter
11 of the Bankruptcy Code (Bankr. W.D.N.C. Case 21-10134) on July
6, 2021, listing $100,001 to $500,000 in both assets and
liabilities.
Judge George R. Hodges oversees the case.
Ivey, McClellan, Siegmund, Brumbaugh & Mcdonough, LLP, serves as
the Debtor's legal counsel.
FOUNDATIONAL EDUCATION: Moody's Assigns First Time B3 CFR
---------------------------------------------------------
Moody's Investors Service assigned first time ratings to
Foundational Education Group, Inc. ("Teaching Strategies")
including a B3 Corporate Family Rating, a B3-PD Probability of
Default Rating, B2 ratings for its first lien bank credit
facilities (revolver and term loan), and Caa2 rating for the second
lien term loan. The outlook is stable.
Proceeds from the new term loans along with a substantial amount of
common equity from private equity firm KKR will be used to finance
the acquisition of Teaching Strategies in a leveraged buyout (LBO)
transaction.
Moody's took the following rating actions:
Ratings Assigned:
Issuer: Foundational Education Group, Inc.
Corporate Family Rating, Assigned B3
Probability of Default Rating, Assigned B3-PD
Senior Secured First Lien Credit Facilities (revolver and term
loan), Assigned B2 (LGD3)
Senior Secured Second Lien Term Loan, Assigned Caa2 (LGD5)
Outlook Actions:
Issuer: Foundational Education Group, Inc.
Outlook, Assigned Stable
Ratings Rationale
Teaching Strategies' B3 CFR broadly reflects its very small scale
as measured by revenue and competition in the fragmented market it
serves. The rating also reflects Teaching Strategies' very high
leverage with Moody's adjusted debt-to-EBITDA of about 12.0x after
deducting software and product development cash outlays for the
trailing twelve months ended March 31, 2021 and pro forma for the
LBO. Barring additional borrowings, Moody's expects debt-to-EBITDA
leverage will decline to below 10.0x by end of FY22 with earnings
growth. The very high leverage and small scale weakly positions the
company within the B3 category. Additionally, the rating reflects
the company's private equity ownership and the expected aggressive
financial policy that will likely include debt funded acquisitions
given its growth strategy.
However, the rating is supported by Teaching Strategies'
established market position serving the early childhood education
(ECE) market in the US. The company's good content development
supports its more than 40 year history of providing tools for
teachers in the ECE market. Teaching Strategies launched in 2020 a
digital online platform to deliver the content and the transition
to digital delivery will contribute to revenue and earnings growth
due to the higher average annual cost of the digital products. The
rating also benefits from solid growth prospects driven by
favorable industry fundamentals and funding dynamics at both the
federal and state levels supporting the public ECE sector. Teaching
Strategies' favorable cash generating capability is due to its
strong margins, rising deferred revenue driven by the digital
transition and customer growth, and low capital expenditure
requirements. The rating also benefits from the company's good
liquidity, which provides flexibility to sustain the meaningful
investment necessary to maintain competitive servicing offerings
while funding debt service.
Moody's views Teaching Strategies' governance risk as high given
its private equity ownership by KKR. As such, Moody's expect
financial policy to be aggressive and favor the shareholders.
Moody's expects debt funded acquisitions in the future as the
company's growth strategy includes tuck-in acquisitions.
Additionally, as a private company, financial disclosure is more
limited than for public companies.
Moody's believes KKR is paying a high multiple for Teaching
Strategies and utilizing high leverage based on the company's
growth potential, which is in part dependent on social factors such
as continued expansion of government ECE funding. Such funding is
contingent on legislative and regulatory actions that are
influenced by political factors that are uncertain, subject to
volatility, and dependent on demographic and societal trends. There
is good political support for public funding of ECE among some
constituents. However, shortfalls in public funding relative to
expectations could result in leverage growing or sustained at a
high level, which in a competitive marketplace could weaken the
company's ability to meet debt service.
Moody's also regards the coronavirus outbreak as a social risk
under Moody's ESG framework, given the substantial implications for
public health and safety. 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. However, lock downs and social distancing
measures during the pandemic have accelerated the demand for
digital learning products, which has in turn benefited companies
such as Teaching Strategies.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The stable outlook reflects Moody's expectation that barring any
additional borrowings, the company will be able to de-lever to
below 10.0x debt-to-EBITDA by the end of FY22 with earnings growth.
However, given the company's private equity ownership, Moody's
expect re-leveraging transactions to keep leverage elevated over
the longer term. The stable outlook also reflects Moody's
expectation for good liquidity over the next year.
The ratings could be downgraded if shortfalls in operational
execution or public funding of ECE weaken the company's growth
prospects, operating performance, or market share,
EBITA-to-interest expense is less than 1.0x, free cash flow is weak
or negative, or liquidity otherwise deteriorates. The rating could
also come under pressure if credit metrics weaken materially due to
aggressive financial policy.
The ratings could be upgraded if the company delivers sustained
organic revenue and earnings growth, with Moody's adjusted
debt-to-EBITDA sustained below 6.5x and free cash flow as a
percentage of debt sustained above 5%.
As proposed, the new credit facilities are expected to provide
covenant flexibility that if utilized could negatively impact
creditors. Notable terms: 1) Incremental first lien debt capacity
in an aggregate amount up to the sum of the greater of $57 million
and 100% of trailing four quarters consolidated EBITDA, plus any
unused amounts under the general debt and lien baskets, plus
additional amounts subject to a 5.5x first lien net debt-to-EBITDA
leverage ratio. Amounts up to the greater of $57 million and 100%
of trailing four quarter EBITDA may be incurred with an earlier
maturity than the initial term loans. Incremental second lien
capacity subject to 7.5x senior secured net leverage ratio. 2) Only
wholly owned subsidiaries must provide guarantees; partial
dividends or transfers of ownership interest resulting in partial
ownership of subsidiary guarantors could jeopardize guarantees,
with no explicit protective provisions limiting such guarantee
releases. 3) There are no expressed "blocker" provisions which
prohibit the transfer of specified assets to unrestricted
subsidiaries; such transfers are permitted subject to covenant
carve-out capacity and other conditions. 4) There are no expressed
protective provisions prohibiting an up-tiering transaction.
The proposed terms and the final terms of the credit agreement can
be materially different.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
Headquartered in Bethesda, Maryland, Teaching Strategies is a
provider of curriculum, assessment and family engagement tools for
the early childhood education market (from birth to 3rd grade).
After the proposed LBO transaction, the company will be owned by
KKR. Teaching Strategies generated about $95 million in revenue for
the trailing twelve months ended March 31, 2021.
GAINCO INC: Wins Cash Collateral Access
---------------------------------------
The U.S. Bankruptcy Court for the Southern District of Texas Corpus
Christi has authorized Gainco, Inc., to use cash collateral on an
interim basis to avoid immediate and irreparable harm to the Debtor
and its estate pending a final hearing.
The Court directed the Debtor to expend the temporary cash
collateral only pursuant to the terms of the current order and the
interim budget. At the end of every week, commencing on Friday of
the first full calendar week following the Petition Date, the
Debtor will deliver to the Subchapter V Trustee and Traditions
Commercial Finance, LLC, variance reports showing actual cash
receipts and disbursements for the immediately preceding week,
noting therein all variances from amounts set forth for such
period(s) in the Interim Budget.
As an adequate protection payment, the Debtor will pay to
Traditions $15,000 in August 2021. The Debtor and Traditions each
reserve their rights with respect to how such adequate protection
payment will be allocated with regard to any claims asserted by
Traditions.
Pursuant to the setoff right of First Community Bank and also as an
adequate protection payment -- to be applied against FCB's allowed
claim -- the Debtor will pay to FCB $2,101.11 in August 2021.
The Debtor is authorized to make a $5,000 post-petition retainer
payment to the Law Offices of William B. Kingman, P.C. The Debtor
will deliver the payment to the firm's IOLTA account to be held
until fees are approved pursuant to a subsequent court order.
The Debtor is also authorized to make a $2,500 post-petition
retainer to Ruble, Leadbetter & Associates P.C. as proposed
accountants for the Debtor. The Debtor will deliver the payment to
Kingman's IOLTA account to be held until fees are approved pursuant
to the subsequent court order.
As additional adequate protection for alleged cash collateral used,
Traditions, Yellowstone Capital LLC, Payroll Funding Company LLC,
CHTD Company, FCB and Affiliated Funding Corporation -- alleged
secured creditors who asserted or assert a security interest in
cash collateral -- are granted a valid, perfected, and
non-avoidable replacement lien and security interest on all of the
Debtor's accounts, receivables and proceeds thereof to the extent
acquired after the Petition Date. The replacement liens will be in
the same priority as existed on the Petition Date. However,
notwithstanding any provisions of the Interim Order, the ad valorem
tax liens currently held by San Patricio County incident to any
real property or tangible personal property will neither be primed
by nor subordinated to any liens granted.
A continued hearing on the use of cash collateral is scheduled for
August 31 at 12 p.m.
A copy of the Order and the Debtor's August budget is available for
free at https://bit.ly/3ile1Ys from PacerMonitor.com.
The Debtor projects $188,250 in gross profit and $183,369 in total
operating expenses.
About Gainco, Inc.
Gainco, Inc. sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. S.D. Tex. Case No. 21-21122 on April 30,
2021. In the petition signed by Theresa Nix, president, the Debtor
disclosed up to $1 million in assets and up to $10 million in
liabilities.
Judge David R. Jones oversees the case.
The Law Offices of William B. Kingman, P.C. is the Debtor's
counsel.
GBG USA: Wins Cash Collateral Access Thru Nov 3
-----------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York has
authorized GBG USA Inc. and affiliates to use cash collateral on an
interim basis in accordance with the budget and provide adequate
protection through November 3, 2021.
The Debtors require the use of cash collateral for working capital
purposes, other general corporate purposes of the Debtors, and the
satisfaction of costs and expenses of administering these Chapter
11 cases.
As of Petition Date, the First Lien Secured Parties consisting of
HSBC Bank USA, National Association, in its capacity as
administrative agent, and the lenders party thereto have made loans
and other financial accommodations pursuant to the Amended and
Restated Credit Agreement, dated as of October 23, 2020. Pursuant
to the Amended and Restated First Lien Guaranty, dated as of May
29, 2020, the Debtors, Global Brands Group Holding Ltd. as Parent
Guarantor and the other First Lien Guarantors guaranteed the First
Lien Guaranteed Obligations.
As of Petition Date, the Debtors were indebted to the First Lien
Secured Parties, with HSBC Bank USA, National Association as
administrative agent, in the aggregate principal amount of not less
than $126,516,527 in respect of loans and other financial
accommodations made pursuant to, and in accordance with, the First
Lien Loan Documents, plus accrued and unpaid interest, fees, costs,
and out-of-pocket expenses.
As of Petition Date, the Debtors were also indebted and liable to
the Second Lien Secured Lenders, with HSBC Bank USA, National
Association as second lien collateral agent, in the aggregate
principal amount of not less than $107,937,549 in respect of loans
and other financial accommodations made pursuant to, and in
accordance with, the Second Lien Loan Documents, plus accrued and
unpaid interest. fees, costs, and out-of-pocket expenses.
As adequate protection for the Debtor's use of cash collateral, the
First Lien Collateral Agent, for the benefit of the First Lien
Secured Parties, is granted a valid, binding, continuing,
enforceable, fully-perfected, security interest in and lien on the
Prepetition Collateral and all other of the Debtors' now owned and
hereafter-acquired real and personal property, assets and rights.
The First Lien Adequate Protection Liens will be senior in priority
to any and all other security interests and liens, subject only to
(a) the Carve Out, (b) the liens on the Collateral securing the DIP
Facility, (c) valid, perfected and enforceable prepetition liens
and security interests (if any) which are senior in priority to the
First Lien Secured Parties' liens or security interests as of the
Petition Date, and (d) valid and unavoidable liens in existence
immediately prior to the Petition Date that are perfected
subsequent to the Petition Date as permitted by section 546(b) of
the Bankruptcy Code.
The First Lien Admin Agent, for the benefit of the First Lien
Secured Parties, are also granted an allowed superpriority
administrative expense claim against each of the Debtors on a joint
and several basis.
The Debtors are authorized and directed to pay to the applicable
First Lien Agent, for the ratable benefit of the First Lien Secured
Parties, an adequate protection payment in cash in the amount of
$1,000,000 upon the earlier of 14 calendar days after the closing
of the sale of the Aquatalia Business and October 8, 2021, and
adequate protection payments in cash on the last business day of
each calendar month after the entry of the Interim Order.
The Second Lien Collateral Agent, for the benefit of the Second
Lien Secured Parties, is granted security interests in and liens on
the Collateral of the Second Lien Collateral Agent and an allowed
superpriority administrative expense claim against each of the
Debtors.
The Adequate Protection Liens granted will constitute valid,
enforceable, and duly perfected security interests and liens, and
the Prepetition Secured Parties will not be required to file or
serve financing statements, notices of lien or similar instruments,
which otherwise may be required under federal or slate law in any
jurisdiction, or take any action.
The Debtors' use of the Cash Collateral is subject to these
milestones, which may be extended from time to time by written
agreement between the Debtors and the Required First Lien Lenders,
in the exercise of their respective sole discretion, without
further Court order:
a. On the Petition Date, the Debtors, in consultation with the
Required First Lien Lenders, will have selected a binding,
irrevocable and unconditional stalking horse bid for the sale of
the Aquatalia Business, subject to higher or better offers
submitted in accordance with the Bidding Procedures, and will have
executed a binding purchase agreement with such stalking horse
bidder;
b. No later than two days after the Petition Date, the Debtors
will file one or more motions seeking entry of an order, in form
and substance reasonably acceptable to the Required First Lien
Lenders, authorizing and approving bidding procedures for the sale
of the Aquatalia Business;
c. No later than 35 days after the Petition Date, the Court
will have entered an order, in form and substance reasonably
acceptable to the Required First Lien Lenders, approving the
Bidding Procedures Motion and establishing the Bidding Procedures
for the sale of the Aquatalia Business;
d. No later than 60 days after the Petition Date, the Debtors
will have received binding, irrevocable and unconditional bids that
satisfy the requirements set forth in the Bidding Procedures for
the sale of the Aquatalia Business, which Qualified Bid. in the
event no other Qualified Bids are submitted, may be the bid
submitted in connection with the Stalking Horse APA;
e. No later than 70 days after the Petition Date, the Debtors
will conduct an auction for the sale of the Aquatalia Business in
accordance with the Bidding Procedures and will select a Qualified
Bid, in consultation with the Required First Lien Lenders, that is
the highest or otherwise best Qualified Bid at the auction;
f. No later than 70 days after the Petition Date, a closing of
the sale of the Aquatalia Business to the Successful Bidder will
have occurred, and the net proceeds thereof will be used by the
Debtors to repay in full the DIP Loan. The liens securing
Prepetition First Lien Indebtedness will attach to any remaining
proceeds of the sale and otherwise will only be used in accordance
with the Approved Budget and the Interim Order; and
g. No later than 70 days after the Petition Date, a closing of
the sale of Ely & Walker, Sean Jean and any other licenses, brands
or other material assets of the Debtors will have occurred and the
liens securing the First Lien Prepetition Indebtedness will attach
to the net proceeds, which net proceeds will be used to repay the
outstanding First Lien Prepetition Indebtedness in accordance with
the Approved Budget and the Interim Order.
The final hearing on the matter is scheduled for August 31 at 2
p.m.
A copy of the order is available at https://bit.ly/3jfslB8 from
PacerMonitor.com.
About Global Brands Group Holding Limited
Global Brands Group Holding Limited (SEHK Stock Code: 787) is a
branded apparel and footwear company. The Group designs, develops,
markets and sells products under a diverse array of owned and
licensed brands.
The Group's Europe wholesale business operates under legal entities
entirely separate and independent from the wholesale business in
North America. It primarily supplies apparel, footwear and
accessories to retailers and consumers across Europe under licenses
separately entered into by the Europe entities of the Group. The
Group's global brand management business operates on a different
business model and is distinctly separate from the wholesale
businesses in North America and Europe.
GBG USA is a company incorporated under the laws of Delaware and is
an indirect wholly owned subsidiary of the Company. GBG USA is
primarily engaged in operating the wholesale and direct-to-consumer
footwear and apparel business in North America.
GBG USA and 10 affiliates sought Chapter 11 protection (Bankr.
S.D.N.Y. Lead Case No. 21-11369) on July 29, 2021. In the
petition signed, GBG estimated both assets and liabilities between
$1 billion and $10 billion.
The cases are handled by Honorable Judge Michael E Wiles.
Willkie Farr & Gallagher LLP is the Debtors' counsel. Ankura
Consulting Group, LLC, is the Debtors' restructuring advisor.
Ducera Partners LLC is the Debtors' financial advisor. Prime Clerk
LLC is the claims and noticing agent.
Counsel to the First Lien Admin Agent, First Lien Collateral Agent
and Second Lien Collateral Agent is Moses & Singer LLP. Counsel to
the First Lien Lenders is Linklaters LLP.
GFL ENVIRONMENTAL: Moody's Rates New $400MM Unsecured Notes 'B3'
----------------------------------------------------------------
Moody's Investors Service assigned a B3 rating to GFL Environmental
Inc.'s proposed new $400 million senior unsecured notes due in
2029. The B1 corporate family rating, B1-PD probability of default
rating, Ba3 ratings on GFL's existing term loan and senior secured
notes and B3 ratings on its existing senior unsecured notes remain
unchanged. The Speculative-Grade Liquidity Rating also remains
unchanged at SGL-2. The outlook remains stable.
The proceeds from the new senior unsecured notes will be used to
partially fund the acquisition of Terrapure Environmental Ltd.,
which GFL committed to acquire in March 2021. The acquisition is
expected to close in October and is valued at approximately C$900
million. GFL will fund the acquisitions with the net proceeds from
the new issuance, cash on hand (C$200 million) and amounts drawn on
its revolving credit facility. The transaction is expected to
increase GFL's pro forma leverage for FY2021E from 4.8x to 4.9x.
Assignments:
Issuer: GFL Environmental Inc.
Senior Unsecured Notes, Assigned B3 (LGD5)
RATINGS RATIONALE
GFL's B1 CFR is constrained by: 1) its history of aggressive
debt-financed acquisition growth strategy; 2) Moody's expectation
that leverage will remain above 4x in the next 12 to 18 months
(about 4.9x pro forma for new issuance and Terrapure acquisition);
3) the short time frame between acquisitions which increases the
potential for integration risks and creates opacity of organic
growth; and 4) GFL's majority ownership by private equity firms,
which may continue to hinder deleveraging. However, GFL benefits
from: 1) the company's diversified business model; 2) high
recurring revenue supported by long term contracts; 3) its good
market position in the stable Canadian and US non-hazardous waste
industry; 4) EBITDA margins that compare favorably with those of
its investment grade rated industry peers; and 5) good liquidity.
The stable outlook reflects Moody's view that GFL will sustain
leverage in the high 4x range and continue to maintain its stable
margins and good liquidity in the next 12 to 18 months.
GFL has good liquidity (SGL-2). Sources are approximately C$650
million compared to C$60 million ($46 million) of mandatory
payments payable under the amortizing notes of the tangible equity
units over the next 12 months. GFL will have limited cash after the
acquisition of Terrapure, approximately C$250 million of
availability under its C$628 million and $40 million revolving
credit facilities, and Moody's expected free cash flow of about
C$400 million over the next 12 months to June 2022. GFL's revolver
is subject to a net leverage covenant, which Moody's expects will
have at least a 40% cushion over the next four quarters. GFL has
limited flexibility to generate liquidity from asset sales as its
assets are encumbered.
Environmental risks considered material are the various regulations
and requirements that GFL is subjected to for the collection,
treatment and disposal of waste. GFL has a long track record of
adhering to the requirements for the proper handling of the waste
materials encountered.
The governance considerations Moody's make in GFL's credit profile
include the majority ownership by private equity firms as well as
its history of debt-financed acquisitions and aggressive financial
policies, which may be reversed after the completion of the IPO
earlier this year. Moody's also considered GFL's track record of
successfully integrating its acquisitions for the expansion of its
business as well as the management team's experience in the
amalgamation of the businesses.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if GFL demonstrates consistent and
visible organic revenue growth, maintains good liquidity and
sustains adjusted debt/EBITDA below 4.0x (4.9x pro forma 2022E pro
forma for refinancing and acquisition). The ratings could be
downgraded if liquidity weakens, possibly caused by negative free
cash flow, if there is a material and sustained decline in margins
due to challenges integrating acquisitions or if adjusted
Debt/EBITDA is sustained above 5.0x (4.9x pro forma 2022E).
The Ba3 ratings on the existing senior secured notes and term loan
are one notch above the CFR due to the senior debt's first priority
access to substantially all of the company's assets as well as loss
absorption cushion provided by the senior unsecured notes. The B3
ratings on the new and existing senior unsecured notes are two
notches below the CFR due to the senior unsecured notes' junior
position in the debt capital structure.
The principal methodology used in these ratings was Environmental
Services and Waste Management Companies published in April 2018.
GFL Environmental Inc., headquartered in Toronto, provides solid
waste and liquid waste collection, treatment and disposal solutions
and soil remediation services to municipal, industrial and
commercial customers in Canada and the US. Pro forma for
acquisitions, annual revenue is approximately C$5.5 billion. GFL is
publicly traded on the Toronto Stock Exchange and New York Stock
Exchange.
GIA DEVELOPMENT: Involuntary Chapter 11 Case Summary
----------------------------------------------------
Alleged Debtor: GIA Development, LLC
14602 Montevideo Drive
Whittier, CA 90605
Business Description: GIA Development is a Single Asset Real
Estate debtor (as defined in 11 U.S.C.
Section 101(51B)).
Involuntary Chapter
11 Petition Date: August 5, 2021
Court: United States Bankruptcy Court
Central District of California
Case No.: 21-16276
Petitioners' Counsel: William H. Brownstein, Esq.
WILLIAM H. BROWNSTEIN &
ASSOCIATES, P.C.
11740 Wilshire Boulevard, Suite A2301
Los Angeles, CA 90025
Tel: 310-458-0048
Email: Brownsteinlaw.bill@gmail.com
A full-text copy of the Involuntary Petition is available for free
at PacerMonitor.com at:
https://www.pacermonitor.com/view/M6W5NNY/GIA_Development_LLC__cacbke-21-16276__0001.0.pdf?mcid=tGE4TAMA
Alleged creditor that signed the petition:
Petitioner Nature of Claim Claim Amount
---------- --------------- ------------
AVfund Capital Group, Inc. Loans $88,000
2443 W. Beverly Blvd.
Montebello, CA 90640
GONGCOOK LLC: Seeks to Tap Richard Feinsilver as Legal Counsel
--------------------------------------------------------------
GongCook, LLC seeks approval from the U.S. Bankruptcy Court for the
Eastern District of New York to employ Richard Feinsilver, Esq., an
attorney practicing in Carle Place, N.Y., to handle its Chapter 11
case.
Mr. Feinsilver will render these legal services:
(a) prepare and file the Debtor's bankruptcy schedules and
statements of financial affairs;
(b) negotiate with creditors;
(c) attend meetings with creditors and the U.S. trustee;
(d) prepare the Chapter 11 plan and all amendments thereto;
(e) attend all hearings;
(f) review monthly financial statements; and
(g) attend post-confirmation conferences with the U.S. trustee
and creditors.
Mr. Feinsilver and his legal assistant will be billed at their
hourly rates of $350 and $60, respectively, and will be reimbursed
for work-related expenses incurred.
The attorney received a retainer of $25,000 from the Debtor, plus
the filing fee of $1,738.
Mr. Feinsilver 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.
Mr. Feinsilver can be reached at:
Richard S. Feinsilver, Esq.
One Old Country Road, Suite 125
Carle Place, NY 11514
Telephone: (516) 873-6330
Facsimile: (516) 873-6183
Email: feinlawny@yahoo.com
About GongCook LLC
Valley Stream, N.Y.-based GongCook, LLC filed a voluntary petition
for relief under Chapter 11 of the Bankruptcy Code (Bankr. E.D.N.Y.
Case No. 21-71260) on July 8, 2021. Chiu Ng, managing member,
signed the petition. At the time of the filing, the Debtor listed
as much as $10 million in assets and as much as $1 million in
liabilities. Judge Alan S. Trust oversees the case. Richard S.
Feinsilver, Esq., represents the Debtor as legal counsel.
GPS HOSPITALITY: Moody's Rates New $385MM Secured Notes 'Caa1'
--------------------------------------------------------------
Moody's Investors Service affirmed the Caa1 corporate family
rating, Caa1-PD probability of default rating and Caa1 senior
secured bank ratings of GPS Hospitality Holding Company LLC. In
addition, Moody's assigned a Caa1 to GPS's proposed $385 million
senior secured notes and changed the outlook for GPS to positive
from stable. The senior secured bank facility ratings will be
withdrawn upon the close of the proposed refinancing.
GPS is in the process of issuing $385 million of 7-year senior
secured notes with the net proceeds used to refinance the company's
senior secured term loan, repurchase approximately $105 million of
preferred equity as well as general corporate purposes. GPS will
also be entering into a new 5-year $50 million super-priority
revolving credit facility (not rated) that is expected to be
undrawn at close.
The affirmation reflects governance considerations particularly
GPS's aggressive financial strategy in its decision to increase
debt to support a material return to shareholders as a part of the
proposed transaction. Debt/EBITDA will increase from about 6.2
times to above 7.2 on a proforma basis for the LTM period ending
March 31, 2021. Nonetheless, the change in outlook to positive from
stable reflects Moody's view for a continued improvement in same
store sales which will help drive higher earnings and result in
lower leverage and improved coverage as consumer demand for food
away from home continues to increase. GPS' Burger King restaurants
have generated positive same store sales since 3Q20 following the
material decline in 1Q20 and 2Q20 as a result of the pandemic.
Assignments:
Issuer: GPS Hospitality Holding Company LLC
Senior Secured Regular Bond/Debenture, Assigned Caa1 (LGD4)
Affirmations:
Issuer: GPS Hospitality Holding Company LLC
Probability of Default Rating, Affirmed Caa1-PD
Corporate Family Rating, Affirmed Caa1
Senior Secured Bank Credit Facility, Affirmed Caa1 (LGD4)
Outlook Actions:
Issuer: GPS Hospitality Holding Company LLC
Outlook, Changed To Positive From Stable
RATINGS RATIONALE
GPS' Caa1 rating is constrained by its high leverage driven in part
by higher debt levels as well as modest interest coverage despite a
lower interest burden as a result of the proposed refinancing. The
rating also considers the company's relatively high level of capex
required for new unit growth and remodel initiatives which will
constrain free cash flow over time but also considers that
management intends to enter into sale lease back transactions to
boost cash flows. GPS' restaurants are also geographically
concentrated in Georgia, Louisiana and Michigan resulting in its
operating performance being driven in large part by the economic
environment of these three states. GPS does benefit from its top
three position as a franchisee in the Burger King system in terms
of units as well as its ownership of Popeyes and Pizza Hut
restaurants which have both performed well during the pandemic. The
company's well balanced day-part and adequate liquidity also
support the rating.
GPS' private ownership is also a rating factor given the potential
implications from both a capital structure and operating
perspective. Financial policies are always a key concern of
privately-owned companies with regards to the potential for higher
leverage, extractions of cash flow via dividends, or more
aggressive growth strategies.
Restaurants are deeply entwined with sustainability, social and
environmental concerns given their operating model with regards to
sourcing food and packaging, as well as having an extensive labor
force and constant consumer interaction. While these may not
directly impact the credit, these factors could impact brand image
and change consumer perception of the brand overall. The
coronavirus pandemic is a social risk given the substantial
implications for public health and safety.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Factors that could result in a higher rating include the sustained
improvement in operating performance, liquidity and credit
metrics,. Specifically, an upgrade would require at least adequate
liquidity and debt to EBITDA sustained below 6.5x and EBIT to
interest expense sustained around 1.0x.
Factors that could result in a downgrade include an inability to
strengthen credit metric from current levels or a sustained
deterioration in liquidity for any reason.
GPS Hospitality Holding Company LLC, headquartered in Atlanta,
Georgia, owns and operates around 394 Burger King restaurants, 19
Popeyes and 67 Pizza Hut locations across 11 states. GPS
Hospitality is privately held and is majority owned by Tom Garrett,
the company's founder and CEO. Annual revenues are over $600
million.
The principal methodology used in these ratings was Restaurant
Industry published in January 2018.
GYPSUM RESOURCES: Taps Colliers Nevada as Real Estate Broker
------------------------------------------------------------
Gypsum Resources Materials, LLC seeks approval from the U.S.
Bankruptcy Court for the District of Nevada to hire Colliers Nevada
as real estate broker.
The Debtor needs a real estate broker to list and sell 90.72 acres
of industrial land and 88.97 acres of residential land in Clark
County, Nevada.
The firm will be paid a 4 percent commission on the gross sales
price of the properties.
Daniel Doherty, the firm's real estate broker who will be providing
the services, disclosed in a court filing that he is a
"disinterested person" as the term is defined in Section 101(14) of
the Bankruptcy Code.
The firm can be reached at:
Daniel Doherty
Colliers Nevada dba Colliers International
8760-8870 South Maryland Parkway
Las Vegas, NV 89123
Tel.: +1 702 836 3707
Email: Dan.Doherty@colliers.com
About Gypsum Resources Materials
Based in Las Vegas, Gypsum Resources Materials, LLC, a privately
held company in the gypsum mining business, and its affiliate
Gypsum Resources, LLC filed voluntary petitions for relief under
Chapter 11 of the Bankruptcy Code (Bankr. D. Nev. Lead Case No.
19-14799) on July 26, 2019. The petitions were signed by James M.
Rhodes, president of Truckee Springs Holdings, LLC, manager of
Gypsum Resources, LLC.
At the time of the filing, Gypsum Resources Materials had between
$10 million and $50 million in both assets and liabilities.
Meanwhile, Gypsum Resources, LLC had between $50 million and $100
million in both assets and liabilities.
The Debtors tapped Fox Rothschild LLP as bankruptcy counsel, Hill
Farrer & Burrill LLP as special counsel, and Conway MacKenzie, Inc.
and Sonoran Capital Advisors, LLC as financial advisors.
The U.S. Trustee for Region 17 appointed an official committee of
unsecured creditors on Aug. 30, 2019. The committee is represented
by Goldstein & McClintoc, LLLP.
HERSCHEND ENTERTAINMENT: Moody's Ups CFR to B2 & Rates New Loan B2
------------------------------------------------------------------
Moody's Investors Service upgraded Herschend Entertainment Company,
LLC's corporate family rating to B2 from B3 and assigned a B2
rating to the proposed term loan B. The outlook is stable.
Net proceeds of the proposed $475 million term loan B and cash from
the balance sheet will be used to refinance the existing term loan.
The transaction is expected to reduce outstanding debt by
approximately $21 million, lower interest expense, and extend the
maturity of the term loan to 2028 from 2025. Pro forma cash on the
balance sheet will be about $163 million, but Herschend will not
have access to a revolving credit facility. The ratings on the
existing term loan will be withdrawn after repayment.
The debt will be issued by three different co-borrowers with
Herschend Entertainment Company, LLC as the lead borrower, in
conjunction with Herschend Adventure Holdings, LLC and Harlem
Globetrotters International, Inc. The parent company will not be a
guarantor to the credit agreement.
The upgrade of the CFR reflects Moody's expectation of substantial
improvement in operating performance over the remainder of 2021 as
Herschend's entertainment-based assets recover from the pandemic.
While results were severely impacted by the pandemic and led to
extremely high leverage (EBITDA was only modestly positive as of
LTM Q1 2021), leverage will decline significantly as trough
quarters from 2020 begin to roll off. In addition, Herschend will
maintain significant cash balances to provide adequate liquidity
going forward.
Upgrades:
Issuer: Herschend Entertainment Company, LLC
Probability of Default Rating, Upgraded to B2-PD from B3-PD
Corporate Family Rating, Upgraded to B2 from B3
Senior Secured Term Loan B, Upgraded to B2 (LGD3) from B3 (LGD3)
Assignments:
Issuer: Herschend Entertainment Company, LLC
Senior Secured Term Loan, Assigned B2 (LGD3)
Outlook Actions:
Issuer: Herschend Entertainment Company, LLC
Outlook, Remains Stable
The assigned rating is subject to review of final documentation and
no material change in the size, terms and conditions of the
transaction as advised to Moody's.
RATINGS RATIONALE
The B2 CFR reflects Moody's view that Herschend's revenue and
EBITDA will improve substantially over the remainder of 2021 as
health restrictions ease and allow for higher capacity at its parks
and other attractions, with performance expected to return close to
pre-pandemic levels in 2022. The company is recovering from the
severe impact of the pandemic on the company's portfolio of assets
including amusement and waterparks as well as other entertainment
offerings which substantially reduced EBITDA in 2020. Herschend has
concentrated exposure to Tennessee, Missouri, and Georgia, which
elevates risks to performance, although the Harlem Globetrotters,
Pink Jeep, and the aquarium businesses offer a degree of
diversification. Herschend competes for discretionary consumer
spending from an increasingly wide variety of other leisure and
entertainment activities as well as cyclical discretionary consumer
spending. The parks are seasonal and sensitive to weather
conditions, changes in fuel prices, terrorism, public health issues
(such as the coronavirus) as well as other disruptions outside of
the company's control.
Herschend benefits from its three amusement parks including
Dollywood, Silver Dollar City, and Wild Adventures, in addition to
water parks, aquariums, adventure tours, dinner shows, lodging, and
the Harlem Globetrotters. While all of Herschend's businesses were
significantly impacted by the pandemic, the different businesses
reduce risks relative to companies with less diversified
entertainment offerings. Herschend's attractions are also largely
located in warmer climates or indoors which slightly reduces
seasonality and offers a longer operating season. Prior
expenditures on park expansions will support a recovery in
performance and Moody's expects additional capital expenditures
going forward that will contribute to future growth. Herschend's
ownership of significant amounts of land provide the opportunity
for future expansion or are a potential source of liquidity if
needed.
Moody's analysis has considered the effect on the performance of
leisure and entertainment spending from the current weak US
economic activity and a gradual recovery for the coming months.
Although an economic recovery is underway, it is tenuous and its
continuation will be closely tied to containment of the virus. As a
result, the degree of uncertainty around Moody's forecasts is
unusually high. Moody's regards the coronavirus outbreak as a
social risk under its ESG framework, given the substantial
implications for public health and safety.
A governance impact that Moody's considers is the expectation of a
relatively moderate financial policy over time. Moody's expects
minimal distributions in the near term, but as performance
improves, there may be additional distributions to the parent
company to support modest amounts of family owned debt at the
parent company or to equity holders. Herschend is a private company
owned by members of the Herschend family.
The stable outlook reflects Moody's expectation that results will
improve significantly beginning in Q2 2021 as Herschend benefits
from reduced capacity and health restrictions as well as from pent
up consumer demand. Even with the projected recovery, a lingering
pandemic poses some uncertainty over the pace of recovery and
performance in 2021. Moody's projects free cash flow will be
modestly positive during the rest of 2021. While leverage levels
are extremely high due to modest EBITDA levels as of LTM Q1 2021,
leverage will decline substantially throughout the remainder of
2021. Moody's expects leverage to decrease below 5x by the end of
2021 and to the low 4x range by the end of 2022.
Moody's expects Herschend to maintain adequate liquidity in the
near term supported by approximately $163 million of pro forma
cash, but the company will not have access to a revolving credit
facility. Moody's projects free cash flow will be modestly positive
during the rest of 2021 after distributions to equity holders and
higher capital expenditures. The parks and other entertainment
assets are divisible and could be sold individually, but all of the
company's assets are pledged to the credit facility (except for
joint ventures such as Dollywood) and asset sales trigger 100%
mandatory repayment if proceeds are not reinvested within 12
months. Herschend will likely consider additional acquisitions
going forward. The term loan is expected to be covenant lite.
As proposed, the new credit facility is expected to provide
flexibility that if utilized could negatively impact creditors
including: (i) the proposed terms provide Herschend the ability to
issue incremental first lien debt equal to the greater of $150
million and 100% of Consolidated EBITDA (as defined by the credit
agreement), plus a $25 million Incremental Revolving Facility. The
credit agreement also allows an unlimited amount of additional
secured debt if the First Lien Net Leverage Ratio (including a $100
million cap on cash netting) would not exceed the level at the
closing date. 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 capacities, certain other conditions, and subject to
"blocker" provisions which provide that material intellectual
property shall not be transferred to an unrestricted subsidiary.
Non-wholly-owned subsidiaries are not required to provide
guarantees; dividends or transfers resulting in partial ownership
of subsidiary guarantors could jeopardize guarantees, subject to
explicit protective provisions limiting such guarantee releases.
The credit agreement provides some limitations on up-tiering
transactions, including a requirement that the consent of each
lender shall be required for any amendment permitting a transaction
providing for the subordination of any lender's right to payment or
to the liens securing the obligation.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
A ratings upgrade could occur if Herschend's parks were operated as
scheduled without an ongoing impact from the pandemic and Moody's
expected leverage to be sustained under 4x with positive revenue
and EBITDA growth. A good liquidity profile with free cash flow as
a percentage of debt in the high single percentages would also be
required as well as confidence that the financial policy would be
consistent with a higher rating.
The ratings could be downgraded due to leverage maintained above
6x, or sustained negative free cash flow. A weakened liquidity
position could also lead to a downgrade.
Herschend Entertainment Company, LLC (the lead borrower), and
co-borrowers Herschend Adventure Holdings, LLC, and Harlem
Globetrotters International, Inc. operate a portfolio of consumer
entertainment attraction including three amusement parks, three
waterparks, two aquariums, adventure tours (including Pink Jeep),
dinner shows, lodging, and the Harlem Globetrotters. Herschend is a
privately owned company by members of the Herschend family.
Herschend's revenue was over $250 million as of LTM Q1 2021.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
HESS MIDSTREAM: Fitch Affirms 'BB+' LT IDR, Outlook Stable
----------------------------------------------------------
Fitch Ratings has affirmed Hess Midstream Operations LP's (HESM
OpCo) Long-Term Issuer Default Rating (IDR) at 'BB+'. Fitch has
also affirmed the senior secured rating, which is one notch up
above the IDR at 'BBB-'/'RR1'. The rating for the senior unsecured
rating is affirmed at 'BB+'/'RR4.' The Rating Outlook is Stable.
Fitch has assigned a 'BB+'/ 'RR4' rating to the proposed issuance
of $750 million senior unsecured notes, which are being issued to
fund the $750 million repurchase of sponsor-held class B units. The
new notes are pari passu to the existing senior unsecured notes.
The ratings reflect the strength of the high-quality counterparty,
Hess Corp. (HES), which has a Long-Term IDR of 'BBB-' and a Stable
Rating Outlook. HES is HESM OpCo's primary customer. Other driving
factors of the rating include HESM OpCo's low leverage,
single-basin concentration and strong liquidity position. Despite
the debt-funded share buyback and 10% increase in the per share
distribution announced last week, Fitch expects leverage to hit
management's stated leverage target of 3.0x by YE21 and decline
further to below 3.0x by YE22.
KEY RATING DRIVERS
Contracts Provide Stability and Growth: Contractually, HES'
(BBB-/Stable) subsidiaries are the only direct recipients of all of
HESM OpCo's services. HES guarantees the obligations of these
subsidiaries. The HES-HESM OpCo contracts have fee mechanisms by
which HES protects HESM OpCo from volume downsides and other risks.
One type of protection, minimum volume commitments (MVCs), from
time to time have been triggered for some of HESM OpCo services.
HES has indicated plans to add a third rig in the Williston Basin
in September 2021, supporting opportunities for organic growth.
Several of the commercial agreements with HES have been renewed for
a second term beginning in 2024 and will continue through 2033. For
gathering and processing activities, the contract will convert to a
fixed fee contract with MVCs continuing for the full 10 years. The
transition to the fixed fee in the second term will be set as an
average of the rate during the last three years (2021-2023) and
increase applying a CPI escalator through 2033. MVCs will also be
set in advance on a three-year rolling basis. As a result, revenues
will continue to be 100% fee based with at least 80% MVC revenue
protection through 2033.
Leverage Within Stated Goals: Fitch calculates 2Q21 LTM leverage
(total debt with equity credit/operating EBITDA) proforma for the
transaction at 3.0x, which is higher compared to 2.6x at YE20. Even
with the 10% distribution per share increase and debt-funded
buyback of sponsor-held class B units, Fitch expects leverage to
remain close to 3.0x by YE21, in line with management's long-term
target. With 95% of HESM OpCo's revenues supported by MVCs and fee
mechanisms through 2022, Fitch expects leverage to continue to
decline below 3.0x by YE22. HESM OpCo's leverage profile is
conservative relative to its midstream peers and supportive of
future growth spending.
HESM Growth: Following completion of the Tioga gas plant expansion
and the turnaround near the end of the year, future capex will
focus on gathering well connects and additional gas compression
capacity driven by increased drilling from HES. HESM OpCo plans to
add 64 MMcf/d compression capacity by 2022, which is expandable to
approximately 130 MMcf/d. Expansions will support continued flaring
reductions and gas capture. HESM has previously stated that
additional growth may potentially come from the acquisition of HES'
infrastructure assets located in the Gulf of Mexico.
Contracts Provide Two-Fold Revenue Protection: HESM OpCo is a 100%
fee-based business. Its fixed-fees are subject to annual
recalculation based HESM OpCo maintaining its targeted return on
capital through YE23 and longer for the terminal and export
agreement as well as the water agreement. The calculation also
incorporates the production profile of HES. In addition to this
re-calculation structure, the suite of contracts provides that
near-term total revenues may be bolstered by MVCs.
In HESM's 2020 10K, it was disclosed that the 2020 minimum volume
shortfall fee payments were $18.7 million versus $8.3 million in
the prior year. The setting of MVCs is an annual exercise, and they
are established each year for the current year and the two
thereafter. Once the MVCs are set, they cannot be lowered. HES, as
HESM OpCo's counterparty, will bear high effective unit costs in a
downside volume scenario by operation of the two revenue protection
mechanisms.
DERIVATION SUMMARY
HESM OpCo is rated 'BB+', one notch above EQM Midstream Partners LP
(EQM; BB/Negative), which is also a midstream operator in a single
basin with customer concentration. Approximately 70% of EQM's
revenues are from EQT Corporation (EQT; BB/Positive) and its focus
is on natural gas in the Appalachian basin. HESM OpCo receives
revenues from a stronger counterparty, HES, which is rated
'BBB-'/Stable. HESM OpCo's primary assets are located in the Bakken
region.
In terms of size of EBITDA, EQM is much larger than HESM OpCo.
However, HESM OpCo is rated above EQM given its strong contract
structure from an investment-grade counterparty and low leverage.
Fitch forecasts leverage at EQM to be between 5.4x and 5.6x at
YE21. Leverage at HESM OpCo is expected to be approximately 3.0x by
YE21 and drop below 3.0x by YE22.
EnLink Midstream, LLC (ENLC; BB+/Stable) is a comparable in the
same rating category as HESM OpCo. Whereas ENLC is larger in terms
of size and scale with assets diversified in Oklahoma (STACK play),
the Permian and the Barnett, the company is more highly leveraged.
HESM OpCo also compares more favorably in terms of contract
structure as MVCs from ENLC's major counterparty Devon Energy (DVN;
BBB/Positive) have expired.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- Gas processing capacity reaches 500 mmcf/d in 2021;
-- EBITDA grows approximately 18% in 2021;
-- Growth capex in 2021 is approximately $160 million, increasing
incrementally in 2022;
-- Distributions grow 5% through 2023, following the 10% step-up
in 2021;
-- New $750 million senior unsecured notes issuance to fund the
$750 million unit repurchase.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Positive rating action at primary counterparty HES.
-- A significant acquisition that diversifies the company's
business risk, provided that leverage (defined as total debt
with equity credit to adjusted EBITDA) stays below 4.5x
(although this may vary, depending on the risk profile of the
acquisition).
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Negative rating action at primary counterparty HES.
-- Adverse changes in certain terms in the array of contracts
with Hess Corporation.
-- Leverage (defined as total debt with equity credit to adjusted
EBITDA) rising above 4.0x on a sustained basis in the context
of HESM OpCo maintaining its current size.
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: As of March 31, 2021, HESM had approximate
$827.5 million of liquidity. The company had $1.5 million of cash
on the balance sheet, and $174 million drawn and no letters of
credit outstanding on the $1 billion senior secured revolving
credit facility that matures in 2024. The next maturities are the
senior secured revolving credit facility and the senior secured
term loan due in 2024.
Financial covenants on the secured credit facilities permit a
maximum funded debt to EBITDA ratio of 5.0x (as defined in the
credit facilities), expanding temporarily to 5.5x in the event of
certain acquisitions. Pro forma the debt issuance, HESM was in
compliance with these financial covenants as of March 31, 2021, and
Fitch expects this compliance to continue over the intermediate
term.
ISSUER PROFILE
HESM is a fee-based gathering- and processing-focused midstream
company with assets concentrated in the Bakken shale region in
North Dakota. HES has dedicated nearly all its existing and future
owned or controlled production in the Bakken under long-term
fee-based agreements supported by MVCs. HESM offers natural gas
gathering and compression, oil gathering, and produced water
gathering and disposal. Processing facilities include the Tioga Gas
Plant and JV interest in LM4. Additionally HESM offers crude oil
and NGL terminaling and export facilities.
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch typically calculates midstream energy issuers' leverage by
using an EBITDA figure that excludes earnings from equity
investments and adding in distributions from equity investments.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
Ratings for HESM OpCo are influenced by the ratings of the primary
counterparty HES.
ESG CONSIDERATIONS
Hess Midstream Operations LP has an ESG Relevance Score of '4' for
Group Structure due to the somewhat complex group structure HESM
operates under with exposure to financial issues arising elsewhere
in the group, which has a negative impact on the credit profile,
and is relevant to the rating[s] 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.
HH ACQUISITION: Seeks to Hire Hostmark Hospitality as Hotel Manager
-------------------------------------------------------------------
HH Acquisition CS, LLC filed a motion seeking approval from the
U.S. Bankruptcy Court for the District of Arizona to hire Hostmark
Hospitality Group, LLC to manage the Hyatt House hotel in Colorado
Springs, Colo.
The move comes following the Debtor's decision to reject its
current agreement with Rockies Hotel Management, Inc. due to the
hotel management company's alleged breach of contract.
Hostmark will be paid a management fee of 3 percent of gross
revenue, an incentive fee of 1 percent, and a monthly accounting
fee of $2,000.
Jerry Cataldo, chief executive officer of Hostmark, disclosed in a
court filing that his firm is a "disinterested person" as the term
is defined in Section 101(14) of the Bankruptcy Code.
The firm can be reached at:
Jerry Cataldo
Hostmark Hospitality Group
1300 E. Woodfield Road, Suite 400
Schaumburg, IL 60173
Email: jcataldo@hostmark.com
About HH Acquisition CS
HH Acquisition CS, LLC, a company based in Colorado Springs, Colo.,
sought protection under Chapter 11 of the Bankruptcy Code (Bankr.
D. Ariz. Case No. 21-05211) on July 6, 2021. In the petition signed
by Ian Clifton, authorized representative, the Debtor disclosed $10
million to $50 million in both assets and liabilities.
The Debtor tapped Cross Law Firm, P.L.C. to handle its Chapter 11
case and Hostmark Hospitality Group, LLC to manage its Hyatt House
hotel in Colorado Springs, Colo.
HILMORE LLC: Unsecured Creditors to be Paid in Full in 1 Year
-------------------------------------------------------------
Hilmore, LLC filed with the U.S. Bankruptcy Court for the Central
District of California a Disclosure Statement describing Chapter 11
Plan of Reorganization dated August 3, 2021.
In 1996, the Javidzad Sons' father, Nasser Javidzad, purchased the
Hilgard Property. The Hilgard Property is encumbered by a first
deed of trust held by Bank of America, NA. On or around September
12, 2016, the property was auctioned and sold in a non judicial
foreclosure sale, and DLI Properties, LLC was designated as the
successful bidder with a purchase bid of $3.37 million. However, a
trustee's deed upon sale was not issued to DLI.
On March 12, 2021, Strategic Acquisitions, Inc., the assignee of
DLI, caused a Notice of Sale to be recorded, which scheduled an
auction of the Property for April 6, 2021. On April 1, 2021, Nasser
Javidzad's application for the second TRO was denied and the
foreclosure sale scheduled for April 6, 2021 was permitted to go
forward. As a result, on April 5, 2021, the Debtor filed the
instant bankruptcy case in order to stay the foreclosure sale and
protect the Hilgard Property for the benefit of all creditors and
interested parties.
The Debtor and Strategic have reached an agreement regarding the
treatment of Strategic's secured claim which will resolve all
disputes between the parties and avoid a drawn out, contested plan
confirmation process.
This is a reorganizing Plan, meaning the Debtor will restructure
its financial affairs and retain its Property following
confirmation, making payments to its creditors from new cash
contributed to the bankruptcy estate.
The following is a summary description of the fundamental terms of
the Plan. The Plan provides that allowed claims shall be paid as
follows:
* The secured claim of Los Angeles County Treasurer and Tax
Collector shall be paid monthly interest payments at the rate of
18% per annum and the balance of the secured claim will be paid in
full on the first day of the 24th month following the Effective
Date;
* The arrears of Bank of America, N.A. shall be paid in equal
monthly installments over 10 years with interest at the rate of 6%
interest per annum;
* The secured claim of Strategic shall be paid (i) $150,000.00
on the Effective Date which shall be applied to the secured claim;
(ii) $10,000.00 for Strategic's attorneys' fees; and (iii) monthly
interest-only payments in the amount of $4,184.43 commencing on the
first day of the first month following the Effective Date; and (iv)
the balance of the claim shall be all due and payable on the first
day of the 60th month following the Effective Date;
* General unsecured creditors who are not insiders shall be
paid in full in quarterly installments over a 1 year term following
Plan confirmation; and
* General unsecured creditors who are insiders shall be paid
an amount equal to 3% of their allowed claims in one payment paid
on the Effective Date.
Class 7 consists of Interest Holders Shahrokh Javidzad (50%)
Shahpour Javidzad (50%). The holders of the Class 7 interests shall
retain their interests and such interest are not affected by the
Plan. As such, the Class 7 Interests are not entitled to vote on
the Plan and are deemed to have accepted the Plan.
The Plan will be funded from the Debtor's cash on hand on the
Effective Date and ongoing capital contributions by the Debtor's
members, Steve and Shawn. The Debtor's principals' company,
Overseas Food Distribution Inc. ("OFD"), will resolve the estate's
claims against OFD by paying the Debtor the sum of $300,000.00 as
follows: (i) payment of $150,000.00 one month prior to the hearing
on confirmation of the Plan; and (ii) payment of $150,000.00 on the
Effective Date. The payment from OFD resolves the $300,000.00 in
Akhavi loan funds that were transferred by the Debtor to OFD and
any potential claims related to the transfer. The Debtor estimates
that the sum of approximately $253,152.31 will be necessary to fund
the Plan on the Effective Date.
A full-text copy of the Disclosure Statement dated August 3, 2021,
is available at https://bit.ly/3yurqDb from PacerMonitor.com at no
charge.
General Bankruptcy Counsel for the Debtor:
Daniel J. Weintraub, Esq.
James R. Selth, Esq.
Crystle J. Lindsey, Esq.
Weintraub & Selth APC
11766 Wilshire Boulevard, Suite 1170
Los Angeles, CA 90025
Tel: (310) 207-1494
Fax: (310) 442-0660
Email: dan@wsrlaw.net
About Hilmore LLC
Hilmore LLC, a single asset real estate debtor (as defined in 11
U.S.C. Section 101(51B)), filed its voluntary petition for relief
under Chapter 11 of the Bankruptcy Code (Bankr. C.D. Calif. Case
No. 21-12755) on April 5, 2021. Shahrokh Javidzad, manager, signed
the petition. At the time of the filing, the Debtor had between $1
million and $10 million in both assets and liabilities. Judge
Sheri Bluebond presides over the case. Weintraub & Selth APC
represents the Debtor as legal counsel.
HORIZON GLOBAL: Posts $960K Net Income in Second Quarter
--------------------------------------------------------
Horizon Global Corporation filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing net income
of $960,000 on $222.12 million of net sales for the three months
ended June 30, 2021, compared to a net loss of $16.72 million on
$120.49 million of net sales for the three months ended June 30,
2020.
For the six months ended June 30, 2021, the Company reported a net
loss of $14.19 million on $421.31 million of net sales compared to
a net loss of $33.75 million on $283.74 million of net sales for
the same period a year ago.
As of June 30, 2021, the Company had $479.39 million in total
assets, $501.88 million in total liabilities, and a total
shareholders' deficit of $22.49 million.
As of June 30, 2021 and Dec. 31, 2020, total cash and availability
was $62.0 million and $83.4 million, respectively. The Company
defines cash and availability as cash and cash equivalents and
amounts of cash accessible but undrawn from credit facilities.
"The positive momentum from the back half of 2020 and Q1 2021
continued into Q2 2021 as we once again realized significant
profitability improvement across the business," stated Terry Gohl,
Horizon Global's president and chief executive officer. "Given the
impact of the global pandemic in 2020, we are comparing our Q2 2021
results against both Q2 2020 and Q2 2019. The Company has come a
long way in two years, and we expect this positive momentum to
continue into future periods.
Gohl continued "Our strong financial results for Q2 2021 reflect
the solid foundation we have built since we launched our turnaround
plan in late 2019. We now have the talent, business processes and
manufacturing and distribution capabilities to support profitable
growth on an accelerated timetable. During the quarter, the team
demonstrated extraordinary resilience as we encountered major
macroeconomic headwinds relating to material costs, supply chain
and logistics. While we dealt with these headwinds on a daily or
even hourly basis, we did not lose focus of our strategic plan as
we continued to identify and execute business improvement
initiatives to improve our operational and financial performance."
Gohl commented, "I want to thank the team for its resiliency and
support as the business has transformed since late 2019. Of
course, the job is not done. We have the foundation in place to
accelerate our strategic plan and set our targets on double-digit
margins. We believe this is possible through continuous
operational improvement initiatives in the Americas, the
realization of significant improvement opportunities in
Europe-Africa and continuing to serve as the supplier of choice to
our customers in our core geographies. We believe our roadmap to
double-digit margins is achievable and will generate both near- and
long-term value for our employees, customers and shareholders."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1637655/000163765521000143/hzn-20210630.htm
About Horizon Global
Horizon Global -- http://www.horizonglobal.com-- is a designer,
manufacturer, and distributor of a wide variety of
custom-engineered towing, trailering, cargo management and other
related accessory products in North America, Australia and Europe.
The Company serves OEMs, retailers, dealer networks and the end
consumer.
Horizon Global reported a net loss attributable to the Company of
$36.56 million for the 12 months ended Dec. 31, 2020, compared to
net income attributable to the company of $80.75 million for the 12
months ended Dec. 31, 2019. As of March 31, 2021, the Company had
$468.15 million in total assets, $492.41 million in total
liabilities, and a total shareholders' deficit of $24.26 million.
INFINERA CORP: Incurs $35.6 Million Net Loss in Second Quarter
--------------------------------------------------------------
Infinera Corporation filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing a net loss
of $35.59 million on $338.23 million of total revenue for the three
months ended June 26, 2021, compared to a net loss of $61.64
million on $331.59 million of total revenue for the three months
ended June 27, 2020.
For the six months ended June 26, 2021, the Company reported a net
loss of $83.92 million on $669.13 million of total revenue compared
to a net loss of $160.90 million on $661.86 million of total
revenue for the six months ended June 27, 2020.
As of June 26, 2021, the Company had $1.56 billion in total assets,
$514.71 million in total current liabilities, $461.08 million in
long-term debt, $21.35 million in long-term accrued warranty,
$28.41 million in long-term deferred revenue, $3.24 million in
long-term deferred tax liability, $67.99 million in long-term
operating lease liabilities, $87.16 million in other long-term
liabilities, and $376.59 million in total stockholders' equity.
Infinera CEO David Heard said, "Q2 was another quarter of strong
demand, with double digit year-over-year growth in product
bookings, a book-to-bill ratio above one and record backlog at
quarter end. Revenue was within our outlook range, despite
significant industry-wide supply chain challenges, while gross
margin and operating margin exceeded the high end of our outlook
ranges. For the first half of FY'21, we delivered double digit
year-over-year bookings growth and expanded each of gross margin
and operating margin by over 600 basis points.
"Our innovative new products continued to gain momentum in Q2 with
additional customer wins and expanded network footprint. Backed by
a highly focused strategy to gain share and grow our business,
these results reinforce our confidence in and commitment to
achieving the target business model we outlined during our recent
Investor Day."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1138639/000113863921000149/infn-20210626.htm
About Infinera Corp.
Headquartered in Sunnyvale, Calif., Infinera Corp. --
www.infinera.com -- is a global supplier of innovative networking
solutions that enable carriers, cloud operators, governments, and
enterprises to scale network bandwidth, accelerate service
innovation, and automate network operations. The Infinera
end-to-end packet-optical portfolio delivers industry-leading
economics and performance in long-haul, submarine, data center
interconnect, and metro transport applications.
Infinera reported a net loss of $206.72 million for the year ended
Dec. 26, 2020, compared to a net loss of $386.62 million for the
year ended Dec. 28, 2019. As of March 27, 2021, the Company had
$1.57 billion in total assets, $505.93 million in total current
liabilities, $453.43 million in long-term debt, $1.96 million in
long-term financing obligations, $19.94 million in long-term
accrued warranty, $28.96 million in long-term deferred revenue,
$3.68 million in long-term deferred tax liability, $72.91 million
in long-term operating lease liabilities, $86.79 million in other
long-term liabilities, and $393.35 million in total stockholders'
equity.
INFINERA CORP: Registers 4.35M Common Shares Under Incentive Plan
-----------------------------------------------------------------
Infinera Corporation filed a Form S-8 registration statement with
the Securities and Exchange Commission to register 4,350,000 shares
of common stock reserved for issuance pursuant to the Infinera
Corporation Amended and Restated 2016 Equity Incentive Plan. A
full-text copy of the prospectus is available for free at:
https://www.sec.gov/Archives/edgar/data/1138639/000113863921000150/infnforms-82021for2016eipa.htm
About Infinera Corp.
Headquartered in Sunnyvale, Calif., Infinera Corp. --
www.infinera.com -- is a global supplier of innovative networking
solutions that enable carriers, cloud operators, governments, and
enterprises to scale network bandwidth, accelerate service
innovation, and automate network operations. The Infinera
end-to-end packet-optical portfolio delivers industry-leading
economics and performance in long-haul, submarine, data center
interconnect, and metro transport applications.
Infinera reported a net loss of $206.72 million for the year ended
Dec. 26, 2020, compared to a net loss of $386.62 million for the
year ended Dec. 28, 2019. As of June 30, 2021, the Company had
$1.56 billion in total assets, $514.71 million in total current
liabilities, $461.08 millio in long-term debt, $21.35 million in
long-term accrued warranty, $28.41 million in long-term deferred
revenue, $3.24 million in long-term deferred tax liability, $67.98
million in long-term operating lease liabilities, $87.16 million in
other long-term liabilities, and $376.59 million in total
stockholders' equity.
JTF LLC: Case Summary & 9 Unsecured Creditors
---------------------------------------------
Debtor: JTF, LLC
DBA Joppatowne Flea Market
DBA Joppa Market Place
DBA Joppatowne Flea & Farmers Market
1000 Joppa Farm Road
Joppa, MD 21085
Business Description: JTF, LLC is primarily engaged in renting and
leasing real estate properties.
Chapter 11 Petition Date: August 5, 2021
Court: United States Bankruptcy Court
District of Maryland
Case No.: 21-15103
Debtor's Counsel: Joseph M. Selba, Esq.
TYDINGS & ROSENBERG LLP
1 E. Pratt Street
Suite 901
Baltimore, MD 21202
Tel: 410-752-9700
Email: jselba@tydingslaw.com
Estimated Assets: $0 to $50,000
Estimated Liabilities: $1 million to $10 million
The petition was signed by Brian J. Miller as owner/member.
A full-text copy of the petition containing, among other items, a
list of the Debtor's nine unsecured creditors is available for free
at PacerMonitor.com at:
https://www.pacermonitor.com/view/22B6GTY/JTF_LLC__mdbke-21-15103__0001.0.pdf?mcid=tGE4TAMA
KATERRA INC: $71 Mil. Ch. 11 Sale of Manufacturing Plants Okayed
----------------------------------------------------------------
Law360 reports that a Texas bankruptcy judge granted construction
technology firm Katerra's request Tuesday to sell its two U.S.
manufacturing plants for more than $71 million after approving a
settlement with creditors to clear liens on one of the plants.
U.S. Bankruptcy Judge David Jones approved the more than $11
million settlement with a pair of investment firms before signing
off on the sale of Katerra's U.S. manufacturing assets, a
transaction company financial advisers said will be sufficient to
fund the rest of the company's restructuring efforts.
About Katerra Inc.
Based in Menlo Park, Calif., Katerra Inc. is a Japanese-funded,
American technology-driven offsite construction company. Katerra
was founded in 2015 by Michael Marks, former chief executive
officer of Flextronics and former Tesla interim CEO, along with
Fritz Wolff, the executive chairman of The Wolff Co. It offers
technology-driven design, manufacturing, and assembly solution for
bathroom pods, door and window, furniture, and modular utility
systems.
Katerra and its affiliates sought Chapter 11 protection (Bankr.
S.D. Texas Lead Case No. 21-31861) on June 6, 2021. In its
petition, Katerra disclosed assets of between $500 million and $1
billion and liabilities of between $1 billion and $10 billion.
Judge David R. Jones oversees the cases.
The Debtors tapped Kirkland & Ellis, LLP and Jackson Walker, LLP as
bankruptcy counsel; Houlihan Lokey Capital, Inc. as investment
banker; Alvarez & Marsal North America, LLC as financial and
restructuring advisor; and KPMG, LLP as tax consultant. Prime Clerk
LLC is the claims and noticing agent.
The U.S. Trustee for Region 7 appointed an official committee of
unsecured creditors in the Debtors' Chapter 11 cases on June 22,
2021. The Committee is represented by Fox Rothschild, LLP.
Weil, Gotshal & Manges LLP is counsel for SB Investment Advisers
(UK) Limited, DIP Lender.
KATERRA INC: Clark Hill Represents Capitol Indemnity, 2 Others
--------------------------------------------------------------
Pursuant to Rule 2019 of the Federal Rules of Bankruptcy Procedure,
the law firm of Clark Hill PLC submitted a verified statement to
disclose that it is representing Capitol Indemnity Corporation,
Waste Management and Tekline Electrical Services, LLC in the
Chapter 11 cases of Katerra, Inc., et al.
As of August 2, 2021, the parties listed and their disclosable
economic interests are:
Capitol Indemnity Corporation
1600 Aspen Commons, Suite 300
Middleton, WI 53562
* Nature of Claim: Surety Bonds
* Principal Amount of Claim: $2,827,918.00
Tekline Electrical Services, LLC
2115 N Nevada St. Suite A
Chandler, AZ 85225
* Nature of Claim: Subcontractor Agreement on One East Camelback
Rd. Project
* Principal Amount of Claim: $525,259.25 plus interest, fees and
costs on secured Mechanic's Lien
Claim and $286,632.50 on unsecured
Delay Claim
Waste Management
800 Capitol Ste. 3000
Houston, Texas 77002
* Nature of Claim: Utility Services
* Principal Amount of Claim: Unknown
Counsel for Capitol Indemnity Corporation, Waste Management and
Tekline Electrical Services, LLC can be reached at:
CLARK HILL PLC
Duane J. Brescia, Esq.
720 Brazos, Suite 700
Austin, TX 78701
Tel: 512.499.3647
Fax: 512.499.3660
E-mail: dbrescia@clarkhill.com
Andrew Edson, Esq.
Audrey Hornisher, Esq.
901 Main St., Suite 6000
Dallas, TX 75202
Tel: 214.651.4300
Fax: 214.651.4330
E-mail: aedson@clarkhill.com
ahornisher@clarkhill.com
Anne Marie Laney Hill
909 Fannin, Suite 2300
Houston, TX 77010
Tel: 713-750
Fax: 713-750
E-mail: alaneyhill@clarkhill.com
A copy of the Rule 2019 filing is available at
https://bit.ly/3lxlTbx at no extra charge.
About Katerra Inc.
Based in Menlo Park, Calif., Katerra Inc. is a Japanese-funded,
American technology-driven offsite construction company. Katerra
was founded in 2015 by Michael Marks, former chief executive
officer of Flextronics and former Tesla interim CEO, along with
Fritz Wolff, the executive chairman of The Wolff Co. It offers
technology-driven design, manufacturing, and assembly solution for
bathroom pods, door and window, furniture, and modular utility
systems.
Katerra and its affiliates sought Chapter 11 protection (Bankr.
S.D. Texas Lead Case No. 21-31861) on June 6, 2021. In its
petition, Katerra disclosed assets of between $500 million and $1
billion and liabilities of between $1 billion and $10 billion.
Judge David R. Jones oversees the cases.
The Debtors tapped Kirkland & Ellis, LLP and Jackson Walker, LLP as
bankruptcy counsel; Houlihan Lokey Capital, Inc. as investment
banker; Alvarez & Marsal North America, LLC as financial and
restructuring advisor; and KPMG, LLP as tax consultant. Prime Clerk
LLC is the claims and noticing agent.
The U.S. Trustee for Region 7 appointed an official committee of
unsecured creditors in the Debtors' Chapter 11 cases on June 22,
2021. The Committee tapped Fox Rothschild, LLP, as counsel, and
FTI Consulting, Inc. is financial advisor.
Weil, Gotshal & Manges LLP is counsel for SB Investment Advisers
(UK) Limited, DIP lender.
KATERRA INC: VBC Buys Tracy, California Facility
------------------------------------------------
Volumetric Building Companies (VBC), on Aug. 4 disclosed that the
company has received approval from the United States Bankruptcy
Court for the Southern District of Texas (Houston Division) to
purchase Katerra, Inc. assets, including the lease and tenant
improvement of their state-of-the-art manufacturing facility and
offices in Tracy, CA. Katerra filed for bankruptcy protection on
June 6, 2021 and the transaction is part of a court supervised sale
of its assets.
The 577,000 square foot Tracy, CA factory, which opened in 2019, is
a highly automated production facility designed for the
manufacturing of building components, including wall panels, floor
systems, roof trusses, windows, cabinets and countertops. The newly
built offices and showrooms include 50,000 square feet of custom
fit-out and furnishings, conference rooms, model display areas and
office suites.
"With the continued growth and success of VBC, we were exploring
options to expand our manufacturing footprint and industry
influence," said Vaughan Buckley, Chief Executive Officer of VBC.
"Katerra's Tracy location provides an exceptional opportunity to
bring our hands-on construction and manufacturing expertise to a
state-of-the-art facility and build our presence on the West Coast.
We look forward to moving quickly to allow displaced staff members
to return to work, restart production and support the needs of a
very robust construction environment."
VBC is encouraging former Katerra employees to apply to work at the
Tracy location as it reopens and begins production by visiting
https://www.vbc.co/tracy/. VBC is looking to begin manufacturing of
windows, cabinetry, countertops, trusses & panelized building
components in 60 – 90 days and has plans to produce modular
housing components in 2022.
"Katerra's bankruptcy and the shutdown of the Tracy location
significantly impacted its employees as well as a wide range of
customers," added Buckley. "We are hopeful that we can provide jobs
to many of those employees and help address the needs of those
customers. We well understand the current state of play in the
construction sector and our goal is to provide great products,
superior service and customized solutions for the vibrant
California and western U.S. markets."
About VBC
Volumetric Building Companies is a volumetric modular business
headquartered in Philadelphia, PA that is building the future of
housing by integrating technology, architecture, logistics,
manufacturing and construction into a single offering to produce
multifamily housing solutions in less time at a greater return.
About Katerra Inc.
Based in Menlo Park, Calif., Katerra Inc. is a Japanese-funded,
American technology-driven offsite construction company. Katerra
was founded in 2015 by Michael Marks, former chief executive
officer of Flextronics and former Tesla interim CEO, along with
Fritz Wolff, the executive chairman of The Wolff Co. It offers
technology-driven design, manufacturing, and assembly solution for
bathroom pods, door and window, furniture, and modular utility
systems.
Katerra and its affiliates sought Chapter 11 protection (Bankr.
S.D. Texas Lead Case No. 21-31861) on June 6, 2021. In its
petition, Katerra disclosed assets of between $500 million and $1
billion and liabilities of between $1 billion and $10 billion.
Judge David R. Jones oversees the cases.
The Debtors tapped Kirkland & Ellis, LLP and Jackson Walker, LLP as
bankruptcy counsel; Houlihan Lokey Capital, Inc. as investment
banker; Alvarez & Marsal North America, LLC as financial and
restructuring advisor; and KPMG, LLP as tax consultant. Prime Clerk
LLC is the claims and noticing agent.
The U.S. Trustee for Region 7 appointed an official committee of
unsecured creditors in the Debtors' Chapter 11 cases on June 22,
2021. The Committee is represented by Fox Rothschild, LLP. FTI
Consulting, Inc. as financial advisor.
Weil, Gotshal & Manges LLP is counsel for SB Investment Advisers
(UK) Limited, DIP lender.
KING'S TOWING: Seeks to Hire Smith & Taylor Tax as Accountant
-------------------------------------------------------------
King's Towing and Recovery, LLC seeks approval from the U.S.
Bankruptcy Court for the Western District of Arkansas to employ
Smith & Taylor Tax and Management LLC as its accountant.
Smith & Taylor will render these services:
(a) provide accounting services;
(b) prepare annual tax returns and periodic tax filings;
(c) prepare monthly operating reports; and
(d) serve as an expert witness at the plan confirmation
hearing if necessary.
Smith & Taylor will be billed $100 per hour for its services, plus
reimbursement of expenses incurred.
The Debtor paid the firm a retainer of $700.
As disclosed in court filings, Smith & Taylor has no conflict of
interest with the Debtor, any of the creditors or other
parties-in-interest in the Debtor's Chapter 11 proceeding.
The firm can be reached at:
Pat Taylor
Smith & Taylor Tax and Management LLC
9 W. Township St.
Fayetteville, AR 72703
Telephone: (479) 442-4224
Facsimile: (479) 442-5082
About King's Towing and Recovery
King's Towing and Recovery, LLC filed a voluntary petition for
relief under Chapter 11 of the Bankruptcy Code (Bankr. W.D. Ark.
Case No. 21-70549) on April 19, 2021, disclosing up to $1 million
in both assets and liabilities. Judge Bianca M. Rucker oversees the
case. The Debtor tapped Bond Law Office, led by Stanley V. Bond,
Esq., and Smith & Taylor Tax and Management LLC as its legal
counsel and accountant, respectively.
KITTY HAWK: Bid Deadline Set for August 21
------------------------------------------
William Kaye as receiver for Kitty Hawk, a dissolved Delaware
Corporation, seeks interested parties to submit proposed bids in
writing by electronic mail to billkaye@jllconsultants.com, on or
before Aug. 21, 2021, at 5:00 p.m. (Eastern Time), pursuant to an
order issued by the Court of Chancery of the State of Delaware on
July 26, 2021.
Mr. Kaye will conduct the bidding process and establish any bidding
procedures, if necessary, if more than one offer is received. In
the event more than one offer is received that is acceptable to the
Receivers, a telephonic auction will be conducted on a date and
time to be determined by the receiver with reasonable notice to the
proposed bidders.
LBD PLLC: Plan Denied Confirmation, Fails 'Good Faith Test'
-----------------------------------------------------------
Judge Brian F. Kenney of the U.S. Bankruptcy Court for the Eastern
District of Virginia denied confirmation of the Second Amended Plan
of LBD, PLLC. Judge Kenney found at the confirmation hearing that
the Plan met almost all of the requirements for confirmation under
Section 1129(a) of the Bankruptcy Code except on the issue of
whether the Plan met the good faith test.
LBD, PLLC is a law firm founded in 2010, and doing business under
the name DiPietro Law Group. The Debtor is 100% owned by Joseph
DiPietro, who is also the managing partner of the firm. Before the
bankruptcy case was filed, Mr. DiPietro formed a company by the
name of Seamless Management Group, LLC. Seamless Management was,
according to Mr. DiPietro's testimony, "an attempt to create a
profit center out of [LBD's] overhead." Mr. DiPietro is the 100%
owner of Seamless Management. LBD's non-attorney staff employees
are employed by, and paid through, Seamless Management. Mr.
DiPietro described this as a "pass-through" arrangement. Mr.
DiPietro has an annual salary of $100,000 from Seamless Management,
in addition to his salary of $250,000 with LBD.
Judge Kenney said that the Fourth Circuit, with respect to the good
faith test, has held that a comprehensive definition of good faith
is not practical. The basic inquiry should be whether or not under
the circumstances of the case there has been an abuse of the
provisions, purpose, or spirit of [the Chapter] in the proposal or
plan. Chapter 11 Debtors are authorized to conduct business
transactions in the ordinary course of business, but they must seek
Court approval of non-ordinary transactions.
The courts generally apply a two-part test to determine
ordinariness under Section 363(b) -- a "horizontal test," which
measures the transaction objectively against industry standards,
and a "vertical test," in which the courts analyze the challenged
transaction from a hypothetical creditor's point of view and ask
whether it subjects a creditor to economic risks of a nature
different from those he accepted when he decided to extend credit.
Judge Kenney found that the Seamless Management payments were not
made in the ordinary course, under the horizontal test. The Debtor
offered no evidence on what other law firms of its size do with
respect to the hiring of, and the compensation of, non-attorney
staff employees. He said that in the Court's experience, the
hiring and compensation of all of a law firm's non-attorney
employees through a third-party vendor as a "pass through" is
unusual. As the 100% owner of LBD, Mr. DiPietro was the only one
who stood to benefit from outsourcing the LBD employees with
Seamless Management. There was no testimony, for example, that Mr.
DiPietro ever shopped for other management companies that might
have supplied the support staff to LBD at a lesser cost. The Debtor
never sought approval of its arrangement with Seamless Management.
Accordingly, the Court found that the Debtor did not meet its
burden to demonstrate that the payments were made in the ordinary
course of business.
Judge Kenney opined that the arrangement constitutes bad faith on
the part of the Debtor because during the course of 16 months in
Chapter 11, Mr. DiPietro, LBD's and Seamless Management's 100%
owner, paid himself $57,000 in 2020 and $46,000 in 2021, for a
total of $103,000 -- in addition to his $250,000 salary at LBD,
plus the Owner Draws -- all without Court approval. In comparison,
unsecured creditors will receive under the Debtors' Second Amended
Plan a total of $70,000 over a period between 48 and 72 months, for
a distribution of approximately 10% on their claims, beginning 12
months after the Effective Date of the Plan. Mr. DiPietro
compensated himself in a way that lacked transparency, as though
the firm were not in Chapter 11 at all, the Court said.
A copy of the Memorandum Opinion and Order is available for free at
https://bit.ly/3jkRtXc from PacerMonitor.com.
The Debtor is granted leave to file a Third Amended Disclosure
Statement and Plan within 21 days of the entry of the current
order.
The Court will hold a status hearing on August 24, 2021, at 11 a.m.
to consider approval of a Third Amended Disclosure Statement, if
any, filed by the Debtor.
About LBD PLLC
LBD, PLLC -- https://www.dipietropllc.com/ -- is a law firm
specializing in divorce, family law, estate planning and business
law. The firm has offices throughout Northern Virginia, Maryland
and the Washington, D.C. Metro areas.
LBD filed a voluntary petition under Chapter 11 of the Bankruptcy
Code (Bankr. E.D. Va. Case No. 20-10414) on Feb. 9, 2020. In the
petition signed by Joseph J. DiPietro, member and manager, the
Debtor estimated $50,000 to $100,000 in assets and $1 million to
$10 million in liabilities. Jeffery T. Martin, Jr., Esq. at Henry
& O'Donnell, P.C., is the Debtor's legal counsel.
LIBERTY POWER: Subsidiaries Tap Genovese Joblove as Legal Counsel
-----------------------------------------------------------------
LPT, LLC and two other subsidiaries of Liberty Power Holdings, LLC
seek approval from the U.S. Bankruptcy Court for the Southern
District of Florida to hire the Law Firm of Genovese Joblove &
Battista, P.A. to serve as legal counsel in their Chapter 11
cases.
The firm's services include:
(a) advising the Debtors with respect to their powers and
duties in the continued management and operation of their business
and properties;
(b) attending meetings, negotiating with representatives of
creditors and other parties-in-interest, and advising the Debtors
on the conduct of the cases, including all of the legal and
administrative requirements of operating in Chapter 11;
(c) advising the Debtors in connection with any contemplated
sales of assets or business combinations, formulating and
implementing bidding procedures, evaluating competing offers,
drafting corporate documents with respect to the proposed sales,
and advising the Debtors in connection with the closing of such
sales;
(d) advising the Debtors in connection with post-petition
financing, cash collateral arrangements, pre-bankruptcy financing
arrangements, and emergence financing and capital structure;
(e) advising the Debtors on matters relating to the evaluation
of their unexpired leases and executory contracts;
(f) advising the Debtors with respect to legal issues arising
in or relating to the ordinary course of their business;
(g) taking all necessary actions to protect and preserve the
Debtors' estates, including the prosecution of actions on their
behalf, the defense of any actions commenced against the estates,
negotiations concerning all litigation in which the Debtors may be
involved and objections to claims filed against the estates;
(h) preparing legal papers;
(i) negotiating and preparing a plan of reorganization,
disclosure statement and all related documents, and taking any
necessary action to obtain confirmation of such plan;
(j) attending meetings with third parties and participating in
negotiations;
(k) appearing before the bankruptcy court, any appellate
courts and the U.S. trustee; and
(l) performing all other necessary legal services.
The firm's hourly rates are as follows:
Paul J. Battista, Esq. $745 per hour
Mariaelena Gayo-Guitian, Esq. $550 per hour
Heather Harmon, Esq. $525 per hour
Paul Battista, Esq., a shareholder of Genovese Joblove & Battista,
disclosed in a court filing that his firm is a "disinterested
person" as the term is defined in Section 101(14) of the Bankruptcy
Code.
The firm can be reached at:
Paul J. Battista, Esq.
The Law Firm of Genovese Joblove & Battista, P.A.
100 Southeast Second Street, 44th Floor
Miami, FL 33131
Tel: 305-349-2300
Email: pbattista@gjb-law.com
About Liberty Power
Established in 2001 and headquartered in Fort Lauderdale, Fla.,
Liberty Power Holdings, LLC is one of the largest and
longest-tenured owner-operated retail electricity provider in the
United Stats. It provides large and small businesses, government
agencies and residential customers with competitively-priced
electricity, sustainability solutions and exceptional customer
service.
Liberty Power filed a voluntary petition for Chapter 11
reorganization (Bankr. S.D. Fla. Case No. 21-13797) on April 20,
2021. On June 4, 2021, LPT, LLC, Liberty Power Maryland, LLC and
Liberty Power District of Columbia, LLC sought Chapter 11
protection. The cases are jointly administered under Case No.
21-13797 and have been assigned to Judge Scott M. Grossman.
At the time of the filing, Liberty Power disclosed total assets of
up to $100 million and total liabilities of up to $500 million.
The Debtors tapped Genovese Joblove & Battista, P.A. as legal
counsel and Berkeley Research Group, LLC as restructuring advisor.
Robert Butler, managing director at Berkeley, serves as the
Debtors' chief restructuring officer. Stretto is the claims and
noticing agent.
LRS HOLDINGS: Moody's Assigns First Time B3 Corp. Family Rating
---------------------------------------------------------------
Moody's Investors Service assigned first-time ratings to LRS
Holdings, LLC (aka Lakeshore Recycling Systems, "LRS"), including a
B3 corporate family rating, B3-PD probability of default rating and
a B3 rating on the company's proposed senior secured bank (first
lien) credit facility, consisting of revolving credit and term loan
facilities. The outlook is stable.
The net proceeds from the $300 million first lien term loan B,
along with new sponsor equity (Macquarie) as well as rollover
equity, will be used primarily to fund the buyout of LRS, including
the repayment of all of its existing debt and cover transaction
expenses. As part of the transaction, the company will also issue a
$23 million delayed draw term loan to support acquisitions and a
new $75 million 5-year revolving facility, which is not expected to
be drawn at transaction close.
Moody's took the following actions for LRS Holdings, LLC:
Assignments:
Issuer: LRS Holdings, LLC
Corporate Family Rating, Assigned B3
Probability of Default Rating, Assigned B3-PD
Senior Secured First Lien Term Loan,Assigned B3 (LGD4)
Senior Secured First Lien Delayed Draw Term Loan, Assigned B3
(LGD4)
Senior Secured First Lien Revolving Credit Facility, Assigned B3
(LGD4)
Outlook Actions:
Issuer: LRS Holdings, LLC
Outlook, Assigned Stable
RATINGS RATIONALE
The ratings reflect LRS' modest scale, with a primary regional
focus in the US Midwest (mainly the Chicago area), its aggressive
pace of acquisitive growth, which limits visibility into
sustainable run-rate earnings, and a lack of a track record of
positive earnings and free cash flow. The free cash flow profile is
constrained in part by growth capital expenditures. The company's
markets are fragmented and competitive, increasing the likelihood
of further acquisitions to accelerate growth. A sizeable portion
(43%) of waste collections are recycled/diverted primarily at cost
and expose LRS to some commodity price volatility at roughly 5% of
revenue. This poses the challenge of pricing waste
collections/contracts adequately and running cost efficient
operations amid inflationary pressures to achieve an adequate
return. While LRS has annual price escalators, this may not always
fully offset the rate of cost increases. The company will likely
face margin pressures from SG&A and labor cost inflation amid a
tight labor market, including driver capacity. Nevertheless, there
is positive momentum in the business, with good drivers for
improving profitability. Recent contract wins along with ongoing
efficiency initiatives and earnings realization from acquisitions
already undertaken should support higher EBITDA margins into 2022,
which could exceed 20% with good execution. Debt-to-EBITDA should
also fall towards a mid 4x range over the next year, from above 5x
in 2021 (all ratios including of Moody's standard adjustments).
The ratings also reflect LRS' strong market position in the Chicago
metro area and expanding presence in the US Midwest, and contracts
averaging 3-5 years that provide a base of recurring revenue.
Steady municipal solid waste volumes, underpinned by 5-year
contracts, help offset the exposure of the company's
commercial/construction and demolition business to the economic
cycle. Investments in key infrastructure assets, including
strategically-located facilities, transfer stations and a landfill
that has enabled vertical integration, provide barriers to entry.
These assets also make LRS well-positioned to meet demand in its
core markets longer term. Longstanding customer relationships
translate into a high renewal rate, although this is an industry
characteristic and does limit organic growth prospects. A focus on
improving efficiencies, including optimization of collection routes
and pricing collections above inflation, should support higher
returns over time.
Moody's expects LRS to have adequate liquidity, with nominal cash
levels balanced by expectations of ample availability under the new
$75 million revolver and free cash flow (cash flow from operations
less gross capital expenditures less dividends) turning modestly
positive over the next year on higher earnings. Capex is relatively
high and expected to rise through 2022, including for fleet
renewal. Approximately 20% of the truck fleet is over 16 years of
age. Scaling back growth capital spending closer to maintenance
levels would drive stronger free cash flow. The revolving credit
facility will likely be tapped periodically for working capital or
bolt-on acquisitions to build scale. The facility will be subject
to a springing first-lien net leverage covenant (maximum 6.2x
proposed), tested if borrowings exceed 35% of the revolver
commitment. The term loan B and delayed draw term loan are not
expected to have any financial maintenance covenants.
The stable outlook reflects Moody's expectation of improving waste
volumes, led by a pick-up in construction and demolition activity,
to support moderate organic top-line growth and margin expansion
through 2022. Moody's expects inbound waste collections to be
priced with sound economics for the company, which along with
recent contract wins and ongoing efficiency improvements should
drive margin enhancement. Moody's also expects LRS to maintain
adequate liquidity over the next 12 to 18 months.
Environmental factors are a key consideration, given LRS operates
in an essential services industry and the business model should
benefit from regulatory requirements as well as increased awareness
of environmental concerns driving demand for the company's waste
disposal and recycling services. The company's strong focus on
diverting waste from landfills and environmental sustainability has
provided benefits, including a recently awarded meaningful contract
for a city recycling program. These factors should support the
credit metrics longer term. Moody's believes LRS complies with
environmental laws and regulations and obtains the necessary
government permits to operate its landfill and collection/sorting
facilities, with no material issues disclosed to date.
Corporate governance risk is highlighted by the potential for
aggressive financial policies given the company's ownership by a
private infrastructure fund and its acquisitive nature, which
creates uncertainty and poses execution risks, and could drive
weaker metrics or liquidity.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be downgraded with a material decline in revenue
and/or no earnings growth or margin expansion, including from
deteriorating business conditions, the loss of a contract or
inability to manage costs efficiently. Debt-to-EBITDA expected to
remain above the 5.5x or EBIT-to-interest below 1x could also lead
to a downgrade. A weaker liquidity profile, including Moody's
expectation of sustained negative free cash flow, diminishing
revolver availability or increasing reliance on the revolver for
working capital needs could also lead to lower ratings.
Additionally, unsuccessful integration of acquisitions or
debt-funded transactions that weaken credit metrics or liquidity
would also drive downwards rating pressure.
The ratings could be upgraded with profitable expansion in scale
beyond the company's current footprint, including material
improvement in earnings with stronger margins, such that
debt-to-EBITDA is sustained below 4.5x and EBIT-to-interest remains
at or above 2x. The maintenance of good liquidity, including
consistent positive free cash flow with free cash flow to debt of
at least 5%, and EBIT margins sustained in the mid to high single
digit range would also be a prerequisite for an upgrade.
Following are some of the preliminary terms in the marketing term
sheet that are subject to change during syndication:
The senior credit facility is expected to contain flexible
covenants for transactions that, if undertaken, could adversely
affect creditors. This includes (but is not limited to) incremental
facility capacity up to the sum of: (a) the greater of $74.5
million and the EBITDA equivalent percentage (to be defined); (b)
amounts replacing any terminated commitments or repaid term loans
under the credit agreement; (c) amounts incurred to extend the
maturities of any credit facility; (d) amounts replacing reductions
in revolver commitments and any voluntary prepayments or permanent
commitment reductions on the initial or incremental term loans. An
unlimited additional amount is permitted so long as the First Lien
Net Leverage Ratio does not exceed the greater of (i) 4.0x and (ii)
in the case of permitted acquisitions or other investments, the
ratio immediately prior to incurring such indebtedness. For junior
incremental debt, the Secured Net Leverage Ratio does not exceed
the greater of (i) 5.0x and (ii) if incurred due to a permitted
acquisition or other investment, the ratio immediately prior to
incurring such indebtedness.
There are no express "blocker" provisions that prohibit the
transfer of specified assets to unrestricted subsidiaries. Only
wholly-owned subsidiaries are required to provide subsidiary
guarantees, posing risks of potential guarantee release if there
were a partial change in ownership. There is also no explicit
protective language limiting such releases.
LRS Holdings, LLC (aka Lakeshore Recycling Systems), headquartered
in Morton Grove, Illinois, provides waste collection, disposal and
recycling services for residential, commercial and roll-off
customers in Chicago, Wisconsin and surrounding regions in the US
Midwest. LRS also provides adjacent ancillary services of street
sweeping and renting portable restrooms for construction sites,
parks and outdoor events. Revenue approximated $224 million (on a
reported basis) for the latest twelve-month period ended March 31,
2021. LRS Holdings, LLC will become a portfolio company of a
private infrastructure fund affiliated with Macquarie following
completion of its acquisition of LRS.
The principal methodology used in these ratings was Environmental
Services and Waste Management Companies published in April 2018.
MALLINCKRODT PLC: Unsecured Noteholder Blasts Payout Plan
---------------------------------------------------------
Law360 reports that an unsecured noteholder in the Chapter 11 case
of opioid supplier Mallinckrodt PLC branded the company's proposed
restructuring plan unconfirmable, alleging improper pooling of
multiple creditor claims against multiple debtors.
Aurelius Capital Master Ltd., argued late Monday, August 2, 2021,
that Mallinckrodt had proposed a $100 million unsecured creditor
claim pool for $293 million in valid claims as well as $11.7
billion in "highly disputed and unliquidated" claims against
multiple bankrupt entities. If approved, the plan would mean that
Aurelius would receive a less than 1% recovery for its 4. 75%
interest notes, originally scheduled to mature in 2023.
About Mallinckrodt 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.
MAVENIR SYSTEMS: S&P Rates New $635MM 1st-Lien Credit Facility B-
-----------------------------------------------------------------
S&P Global Ratings assigned its 'B-' issue-level rating and '3'
recovery rating to Mavenir Systems Inc.'s proposed $560 million
first-lien term loan B due 2028 and $75 million revolving credit
facility due 2026. The '3' recovery rating indicates S&P's
expectation for meaningful (50%-70%; rounded estimate: 55%)
recovery in the event of a payment default. Parent company, network
infrastructure software provider, Mavenir Private Holdings II Ltd.
(Mavenir)--plans to use the proceeds to repay the remaining $552
million balance on its existing term loan due 2025 and add $7
million of cash to its balance sheet. The new revolving credit
facility will replace the company's existing revolver due 2023,
which was undrawn as of April 30, 2021.
S&P's 'B-' issuer credit rating on Mavenir is unaffected because
the transaction is leverage neutral.
The company has strongly increased its earnings due in part to good
industry tailwinds. In addition, we view the recent investment from
Koch Strategic Platforms favorably. Still, the company is
generating negative free operating cash flow and its S&P Global
Ratings-adjusted leverage remains elevated at about 10x as of April
30, 2021. Our adjusted leverage metrics expense external
capitalized software costs, which add about six turns to its
leverage.
ISSUE RATINGS--RECOVERY ANALYSIS
Key analytical factors
-- S&P's hypothetical default scenario contemplates a default
occurring in 2023, primarily due to the loss of a major customer
because of consolidation in the telecom industry and revenue
declines in the company's core business due to competitive
pressures from third-party applications or lower-than-expected
growth in its advanced services.
-- S&P has valued the company on a going-concern basis using a 6x
multiple of our projected EBITDA of about $62 million. This
multiple is in line with the multiples we use for similar-rated
small- to mid-size network software providers.
Simulated default assumptions
-- EBITDA at emergence: $62 million
-- EBITDA multiple: 6x
-- Gross recovery value: $373 million
Simplified waterfall
-- Net recovery value for waterfall after administrative expenses
(5%): $354 million
-- Estimated senior secured debt: $635 million
-- Value available for senior secured debt: $305 million
--Recovery expectations: 50%-70% (rounded estimate: 55%)
MDC HOLDINGS: Moody's Rates Proposed $300MM Notes Due 2061 'Ba1'
----------------------------------------------------------------
Moody's Investors Service assigned a Ba1 rating to M.D.C. Holdings,
Inc.'s proposed $300 million notes due 2061. M.D.C.'s other ratings
and stable outlook remain unchanged. The Speculative Grade
Liquidity rating also remains unchanged at SGL-2.
The proceeds of the new notes will be used for general corporate
purposes, which may include the repayment of indebtedness. Pro
forma adjusted homebuilding debt to capitalization will increase to
39% as of 6/30/21, which assumes repayment of indebtedness, from
38%.
"The increase in debt deviates from our initial expectation, with
leverage now expected to decline to 36% by year-end 2021 instead of
34%", says Griselda Bisono, Moody's Vice President-Senior Analyst.
"However, we expect strong demand fundamentals within the
homebuilding sector to continue to support M.D.C.'s growth
strategy", added Bisono. Record low interest rates and scarce
single-family home inventory, as well as M.D.C.'s significant
backlog of sold homes at the end of Q2 2021 of close to 7,700
units, provides strong evidence to support the company's annual
sales target of 10,000-11,000 units.
Assignments:
Issuer: M.D.C. Holdings, Inc.
Senior Unsecured Notes, Assigned Ba1 (LGD4)
RATINGS RATIONALE
The Ba1 Corporate Family Rating (CFR) reflects M.D.C.'s successful
build-to-order strategy and history of moderate land supply.
Further supporting the rating is the company's diverse geographic
footprint and growing presence in affordable product offerings, a
category experiencing stronger demand as affordability issues
persist. Demand for new single-family housing across all product
categories has increased over the past year with families seeking
to relocate to suburban areas with more personal space as they
spend more time at home. These factors are offset by rising land,
labor and materials costs that can place downward pressure on the
company's gross margin. In addition, the homebuilding industry is
highly cyclical and could lead to protracted revenue declines in a
downturn.
M.D.C.'s proposed and existing senior notes are unsecured and have
the same priority of claim as M.D.C.'s unsecured revolving credit
facility. The Ba1 ratings assigned to the senior unsecured notes,
at the same level with the CFR, reflects that this class of debt
represents the preponderance of debt in the capital structure.
Moody's expects M.D.C. to maintain good liquidity over the next 12
to 18 months. In addition to $727 million of unrestricted cash at
June 30, 2021, the company has almost full availability on its $1.2
billion senior unsecured revolver. Approximately $1.125 billion of
facility commitments expire in December 2025, with the remaining
commitment expiring in December 2023.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
The ratings could be upgraded if M.D.C. demonstrates maintenance of
strong credit metrics, including homebuilding debt to book
capitalization below 35% and EBIT interest coverage in the high
single digits on a sustained basis. An upgrade would also require
maintenance of very good liquidity, including strong free cash
flow. Finally, an upgrade would require a meaningful increase in
size and scale while maintaining a conservative financial policy
and demonstrating a commitment to attaining and maintaining an
investment grade rating, both to Moody's and to the debt capital
markets.
The ratings could be downgraded if M.D.C. shifts to a more
aggressive financial policy or if operating results decline such
that debt to book capitalization approaches 45%, EBIT interest
coverage declines below 5x or liquidity weakens.
The principal methodology used in this rating was Homebuilding and
Property Development Industry published in January 2018.
Founded in 1972 and headquartered in Denver, CO, M.D.C. Holdings,
Inc. is a mid-sized national homebuilder that builds and sells
primarily single family detached homes to first time and first time
move up buyers under the name "Richmond American Homes".
MGM GROWTH: S&P Places 'B+' ICR on CreditWatch Positive
-------------------------------------------------------
S&P Global Ratings placed all of its ratings on MGM Growth
Properties LLC (MGP), including its 'B+' issuer credit rating, on
CreditWatch with positive implications.
The CreditWatch listing reflects its view that the transaction will
enhance MGP's credit profile because it is being acquired by a
higher-rated entity.
S&P said, "We believe that MGP's acquisition by a higher-rated
entity will improve its credit profile. In our view, VICI's
acquisition of MGP improves its scale and diversity enough to
support more leverage at higher ratings. Additionally, we expect
VICI to refinance its secured debt and unencumber its asset base,
resulting in a capital structure that is more comparable with
higher-rated REITs. As a result, we placed our ratings on VICI,
including the 'BB' issuer credit rating, on CreditWatch with
positive implications. We expect MGP will benefit from VICI's
significant scale, reduced tenant concentration, capital markets
access, and greater financial flexibility." Additionally, MGP will
no longer be controlled by MGM Resorts International.
S&P said, "We plan to resolve the CreditWatch listing when VICI
closes its acquisition of MGP, which we believe will likely occur
in the first half of 2022. We will likely discontinue our ratings
on MGP at that time as VICI plans to assume or refinance MGP's
existing debt."
MIDTOWN CAMPUS: Gets Cash Collateral Access Thru Sept. 15
---------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of Florida,
Miami Division, has authorized Midtown Campus Properties, LLC to
use the rents and other revenue generated by the Student Housing
Project through September 15, 2021, to pay for operating expenses
associated with the operation, maintenance and repair of the
Project.
The Debtor is party to a prepetition Loan Agreement with Florida
Development Finance Corporation, pursuant to which Florida
Development Finance issued Student Housing Revenue Bonds for
$77,820,000 to finance and/or refinance the Debtor's student
housing project in Gainesville, Florida. The amounts due and owing
under the Loan Agreement are payable to U.S. Bank, as the indenture
trustee under the Trust Indenture dated January 31, 2019, between
U.S. Bank and Florida Development Finance.
BMI Financial Group, Inc., holds perfected and enforceable liens
and security interests comprised of (i) a superpriority claim; (ii)
perfected first-priority liens on all unencumbered property of the
Debtor as of the Petition Date; and (iii) perfected junior priority
liens on any property of the Debtor that was subject to any valid,
perfected and non-avoided lien as of the Petition Date.
The Court ruled that U.S. Bank, as Prepetition Lender, is entitled
to (i) Adequate Protection Liens, and (ii) an allowed superpriority
administrative expense claim in the Debtor's case, for any
diminution in value on account of Debtor's use of the Prepetition
Lender's Collateral.
BMI Financial Group is granted a valid, binding, enforceable, and
perfected replacement liens upon and security interests in the
Junior DIP Collateral to the same extent, priority, and nature as
the Junior DIP Liens in such Junior DIP Collateral, subject and
subordinate to (i) the Priming DIP Liens; (ii) the Prepetition
Liens and Prepetition Lender's Adequate Protection Liens; and (iii)
the Carve-Out, the Fee Reserve for Professional Expenses and the
Professional Expense Escrow. The Junior DIP Lender is also granted
an allowed superpriority administrative expense claim for any
Diminution in Value arising from the Debtor's use of the Junior DIP
Collateral.
The Prepetition Lender may also use the funds on deposit in the
Debt Service Reserve Fund to pay the reasonable fees and expenses
it incurred and those incurred by its professionals and advisors,
provided that a summary of the proposed expenditures are provided
to the Debtor, through counsel, at least 10 days prior to the
proposed payment thereof.
The Debtor's right to use the Cash Collateral pursuant to the Order
will terminate without further notice or hearing on the earliest to
occur of (i) September 15; (ii) the entry of an order of the Court
terminating the use of cash collateral; (iii) the conversion of the
bankruptcy case to a case under Chapter 7 of the Bankruptcy Code;
(iv) the appointment of a trustee or examiner or other
representative with expanded powers for the Debtor; (v) the
dismissal of the Bankruptcy Case; (vi) an Event of Default under
the Priming DIP Loan that is asserted, and not waived, by the
Senior DIP Lender; (vii) modification (without the express written
consent of the Senior DIP Lender or the Prepetition Lender, or
order of the Court), reversal or vacatur of the Order, or (viii)
the Debtor's failure to perform any of its obligations under the
Order or its failure to comply with any of the terms or conditions
of the Order.
A copy of the order is available for free at https://bit.ly/3luDUqU
from PacerMonitor.com.
About Midtown Campus Properties, LLC
Midtown Campus Properties, LLC, is a single asset real estate that
owns the Midtown Apartments. The Midtown Apartments is a 310-unit
student housing apartment complex currently under construction at
104 NW 17th St in Gainesville, Florida, just across from the
University of Florida. It consists of a six-story main building, a
parking garage for resident and public use, and commercial retail
space.
Each unit includes a full-size kitchen, carpet, tile, and hardwood
floors and be fully furnished. It is located near several Midtown
bars and restaurants frequented by students, and just a couple of
minutes' walk from Ben Hill Griffin Stadium.
Midtown Campus Properties sought Chapter 11 protection (Bankr. S.D.
Fla. Case No. 20-15173) on May 8, 2020. The Debtor was estimated to
have $50 million to $100 million in assets and liabilities as of
the bankruptcy filing.
The Honorable Robert A. Mark is the presiding judge.
The Debtor tapped Genovese Joblove & Battista, P.A., as bankruptcy
counsel; and The Bosch Group, Inc., as construction consultants.
No creditors' committee has been appointed in this case. In
addition, no trustee or examiner has been appointed.
MIGO IQ: Seeks Approval to Tap Lugo Mender Group as Legal Counsel
-----------------------------------------------------------------
Migo IQ, Inc. seeks approval from the U.S. Bankruptcy Court for the
District of Puerto Rico to employ Lugo Mender Group, LLC as its
legal counsel.
Lugo Mender Group will render these legal services:
(a) advise the Debtor regarding its duties, powers and
responsibilities in its Chapter 11 case;
(b) advise the Debtor in connection with its reorganization
endeavors;
(c) assist the Debtor in negotiations with creditors;
(d) prepare legal papers;
(e) appear before the bankruptcy court, or any other court in
which the Debtor asserts a claim or defense directly or indirectly
related to its bankruptcy case; and
(f) perform such other legal services for the Debtor.
The hourly rates of Lugo Mender Group's attorneys and staff are as
follows:
Wigberto Lugo Mender, Esq. $300 per hour
Associate Staff Attorney $200 per hour
Legal and Financial Assistants $125 per hour
In addition, the firm will seek reimbursement for expenses
incurred.
Prior to the petition date, the firm received a retainer of $20,000
from the Debtor's stockholder, Shirley Overly.
Alexis Betancourt Vincenty, Esq., an attorney at Lugo Mender Group,
disclosed in a court filing that the firm is a "disinterested
person" as defined in Section 101(14) of the Bankruptcy Code.
The firm can be reached through:
Alexis A. Betancourt Vincenty, Esq.
Lugo Mender Group, LLC
100 Carr. 165, Suite 501
Guaynabo, PR 00968-8052
Telephone: (787) 707-0404
Facsimile: (787) 707-0412
Email: a_betancourt@lugomender.com
About Migo IQ
Migo IQ Inc. -- https://migoiq.app -- is a recommendation engine
that brings the power of machine learning to physical products and
experiences.
Migo IQ filed a voluntary petition for relief under Chapter 11 of
the Bankruptcy Code (Bankr. D.P.R. Case No. 21-02246) on July 23,
2021. Jonathan Kotthoff, chief executive officer, signed the
petition. At the time of the filing, the Debtor disclosed as much
as $10 million in assets and as much as $50 million in liabilities.
Lugo Mender Group, LLC serves as the Debtor's legal counsel.
NEWELL BRANDS: S&P Alters Outlook to Pos., Affirms 'BB+' LT ICR
---------------------------------------------------------------
S&P Global Ratings revised its outlook on U.S.-based consumer goods
company Newell Brands Inc. to positive from stable and affirmed all
its ratings, including its 'BB+' long-term and 'B' short-term
ratings.
The positive outlook reflects S&P's expectation that it could raise
its ratings in the next 12 months if the company continues to
increase sales and profitability while sustaining leverage in the
mid-3x area.
The positive outlook reflects Newell's turnaround efforts and debt
repayment leading to improving credit metrics. Newell has sold
assets to reduce its debt burden, significantly reduced its
stock-keeping units (SKU) count, reduced manufacturing
complexities, and integrated the remaining businesses it acquired
from Jarden Corp. in 2016. Additionally, the anticipated return to
offices and schools has reversed negative trends in its largest and
most profitable writing segment, while other segments benefit from
sticky trends that emerged or were accelerated by the pandemic. S&P
said, "The outlook includes our expectation that Newell will reduce
leverage to mid-3x in 2021 and sustain it there given its publicly
stated financial policy targets. However, the macroeconomic
environment remains uncertain. The rising cost of staple products
combined with supply chain constraints and the ongoing risk of
COVID-19 variants could delay our leverage reduction
expectations."
S&P expects new management to remain committed to its leverage
target of 3x (mid-3x with S&P's our adjustments), which it believes
is achievable in 2021.
Leverage for the last 12 months ended June 30, 2021, is about 3.5x,
down from its peak of 5.6x in 2018. The company reduced its debt
burden to $5.6 billion as of June 2021 from $12 billion largely
through debt repayment from asset sales. However, in 2018 previous
management also used a portion of the asset sale proceeds to buy
back stock, which left leverage elevated above 4x and led us to
downgrade Newell to speculative grade in 2019. S&P said, "We
believe the company will continue to repay debt as it comes due and
strive toward its leverage target of 3x, in line with
investment-grade-rated peers. We expect Newell to allocate capital
prudently, continue to maintain its dividend, and buy back shares
when leverage is lower than its targets. We do not expect the
company to pursue large transformational, debt-funded acquisitions
given its difficulties integrating Jarden. We expect it to pursue
tuck-in mergers and acquisitions or asset sales that won't
significantly shift leverage from its targets."
S&P said, "Newell has $351.6 million of 3.75% euro notes maturing
in October 2021 and $250 million 4% notes due in June 2022 that we
expect to be repaid by the end of 2021. Its largest upcoming
maturity is the 3.85% $1 billon notes in April 2023 that we assume
will be redeemed with an equal new issuance. The company has about
$700 million cash on the balance sheet that we believe includes
some cushion due to the uncertain macro environment amid the
pandemic and persistent supply chain disruptions from inflation and
port congestion. We will continue to monitor its performance
against these trends (including an estimated $560 million of
inflation costs in 2021 and the dynamic buying behavior from
pandemic-driven social changes).
"We expect Newell to continue to raise revenues and profitability
after benefits from pandemic-related consumer buying patterns wear
off.
"Newell posted its fourth-consecutive quarter of core sales growth
since embarking on its 2018 turnaround plan following the
acquisition of Jarden that created an overly complex company with a
high debt burden. The 28% net sales growth in the second quarter of
2021 is unsustainable and driven by lapping the most severe
pandemic lockdowns and shifts in consumer buying behavior. But we
believe it has better positioned the product portfolio to expand.
The pandemic trends of eating more at home, outdoor activities,
wellness, and nesting purchases benefited Newell over the last
year, particularly in its home appliances and food storage
products. The company introduced product innovations last year that
demonstrated its ability to benefit from these trends such as an
iced coffee maker, a food saver that can do sous vide cooking (low
temperature for a long time), new skydome tents, and
easier-to-assemble outdoor sheds. We expect Newell's home fragrance
portfolio under Yankee Candle to benefit from consumers staying at
home more, wellness trends, and product lines with calming scents
as an example of innovation. Yankee Candle is also lapping retail
closures and supply constraints from last year. The home fragrance
segment nearly doubled its sales , which is unsustainable. We
believe these trends will continue post-pandemic but to a lesser
degree and that the Newell can increase revenues in the
low-single-digit percentages after 2021. The writing segment, its
largest and most profitable, declined in the double-digit
percentages during the pandemic and returned to growth in fiscal
2021 as economies resumed working in the office and school.
"We also believe the company's top customers are in better
financial positions as legacy customers such as Toys 'R' Us were
replaced with e-commerce and better performing big box retailers,
supporting our expectation for growth."
Newell's turnaround strategy and simplification efforts improved
its products and cost structure.
The company is on path to reduce its SKU count to 30,000 in 2022
from 102,000 in 2018 and focused on removing low-margin-velocity
SKUs. Newell can now focus on higher-velocity SKUs, leading to
higher revenue per SKU. The cleaner portfolio also makes it easier
for management to better plan for demand and manage inventory and
reduce excess and obsolete inventory. Newell also improved its
terms with its strategic suppliers. These initiatives led to our
forecast of $1 billion in operating cash flow for 2021, compared to
the $500 million area before the Jarden acquisition. In 2020,
Newell removed $160 million from its overhead costs as part of its
simplification efforts. To achieve this, the company optimized its
manufacturing network and footprint (13% reduction in office
locations) and introduced more automation to increase productivity.
Newell further reduced overhead costs by cutting its domestic
supplier base and completing eight enterprise resource planning
migrations, which put almost the entire business on two platforms.
The savings from these initiatives will be reinvested in the
business and can support product innovation and marketing and flow
through to the bottom line.
The outcome of the U.S. Securities and Exchange Commission
investigation is uncertain, but S&P expects the company can manage
any potential financial impact.
Newell is subject to a subpoena related to its sales practices and
accounting from January 2016. S&P assumes potential penalties will
be manageable.
The positive outlook reflects S&P's expectation that it could raise
the ratings on Newell in the next 12 months.
S&P could raise its ratings on Newell if it sustains leverage in
the mid-3x area. This could occur if Newell:
-- Repays debt as it becomes due, sustains lower debt balances,
and consistently demonstrates a financial policy with respect to
acquisitions and shareholder returns.
-- Successfully navigates the dynamic macro environment by
offsetting inflation through price increases, productivity savings,
and operating leverage.
-- Continues to strengthen profitability by increasing its sales
and margins benefit from further cost-saving initiatives and
management's business simplification efforts.
-- If S&P raises its long-term issuer credit rating to 'BBB-' from
'BB+', S&P would raise its short-term rating to 'A-3' from 'B'.
S&P could revise its outlook to stable if S&P no longer expects the
company to sustain leverage in the mid-3x area. This could occur if
Newell:
-- Faces top-line or margin challenges, potentially stemming from
higher-than-expected inflationary costs that it cannot offset with
price increases or productivity improvements, increased competition
in the industry, or prolonged economic weakness that reduces
consumer spending.
-- Prioritizes shareholder returns ahead of paying down debt,
leading to leverage sustained in the high 3x area.
NORTHWEST BANCORPORATION: U.S. Trustee Appoints Creditors' Panel
----------------------------------------------------------------
The U.S. Trustee for Region 11 on Aug. 4 appointed an official
committee to represent unsecured creditors in the Chapter 11 case
of Northwest Bancorporation of Illinois, Inc.
The committee members are:
1. OSP Value Fund, L.P.
3948 49½ Street
P.O. Box 24794
Edina, MN 55424
Representative: Colin Dougherty
2. HoldCo Opportunities Fund, L.P.
441 Lexington Avenue, 15th Floor
New York, NY 10017
Representative: James McKee
3. The Bank of New York Mellon Trust Company, N.A.
500 Ross Street, 12th Floor
Pittsburg, PA 15262
Representative: Jennifer Provenzano
Official creditors' committees serve as fiduciaries to the general
population of creditors they represent. They may investigate the
debtor's business and financial affairs. Committees have the right
to employ legal counsel, accountants and financial advisors at a
debtor's expense.
About Northwest Bancorporation of Illinois
Northwest Bancorporation of Illinois, Inc. filed its voluntary
petition for relief under Chapter 11 of the Bankruptcy Code (Bankr.
N.D. Ill. Case No. 21-08123) on July 2, 2021. James Kane, attorney
for Northwest Bancorporation, signed the petition. At the time of
the filing, the Debtor listed between $10 million and $50 million
in both assets and liabilities.
Judge Janet S. Baer presides over the case.
Michael P. O'Neil, Esq., at Taft Stettinius & Hollister, LLP,
represents the Debtor as legal counsel. Janney Montgomery Scott,
LLC serves as the Debtor's financial advisor and investment banker.
OCEANVIEW MOTEL: Secured Creditor Says He Will Not Vote on the Plan
-------------------------------------------------------------------
Secured creditor, Harry Falterbauer filed an objection to the
Disclosure Statement of Ocean View Motel, LLC.
Falterbauer said the Court should not approve the Disclosure
Statement because said Disclosure Statement is inadequate and
misleading. The Disclosure Statement reflects an understated
amount of his claim, Falterbauer said.
Falterbauer also complained about the mechanism proposed in the
Disclosure Statement that allows the Debtor a 60-day window
post-confirmation to contest and adjudicate the amounts the Debtor
owes the Internal Revenue Service, the State of New Jersey Division
of Revenue, State of New Jersey Department of Labor and
Falterbauer. Assuming the Debtor gets to contest claims
postpetition, no one knows what the future adjudications might be,
rendering the Disclosure Statement incomplete and misleading, he
contended.
Falterbauer further complained that the Disclosure Statement
provided incomplete and missing information. Falterbauer said the
Debtor's June 2021 Operating Report is missing, and that the Debtor
has not provided a supplement with respect to its revenue and
expenses for July 2021, which he believes, is a presumably
successful month. The Debtor also did not provide 2019 and 2020
cost or profit information to support its projections.
Falterbauer, the Debtor's lone secured creditor, asserts that the
Debtor owes him at least $1,685,938 as of July 31, 2021. He said
he does not plan on voting in favor of the Debtor's Reorganization
Plan.
A copy of the objection is available for free at
https://bit.ly/3fxgqNV from PacerMonitor.com.
The Court will consider the objection at a hearing on August 12,
2021 at 10 a.m.
Counsel for Harry Falterbauer:
Christopher J. Stanchina, Esq.
Christopher J. Stanchina, Esquire, LLC
222 New Road, Suite 206
Linwood, NJ 08221
Telephone: (609)927-0200
Facsimile: (609)927-0900
About Ocean View Motel
Ocean View Motel, LLC, filed a Chapter 11 bankruptcy petition
(Bankr. D.N.J. Case No. 20-21165) on Sept. 30, 2020, disclosing
under $1 million in both assets and liabilities. Judge Andrew B.
Altenburg Jr., is assigned to the case. The Debtor is represented
by McDowell Law, PC.
ONEMAIN HOLDINGS: Moody's Upgrades CFR to Ba2, Outlook Stable
-------------------------------------------------------------
Moody's Investors Service has upgraded OneMain Holdings, Inc.'s
long-term Corporate Family Rating to Ba2 from Ba3. At the same
time, Moody's has upgraded OneMain Finance Corporation's issuer and
senior unsecured ratings to Ba2 from Ba3. The outlook is now stable
reflecting Moody's view that OneMain will maintain its good
financial performance, existing risk and leverage appetite and
strong liquidity position over the next 12-18 months. This rating
action concludes the review for upgrade that Moody's announced on
May 3, 2021.
Rating actions:
Issuer: OneMain Holdings, Inc.
Corporate Family Rating, Upgraded to Ba2 from Ba3
Issuer: OneMain Finance Corporation
Issuer Rating, Upgraded to Ba2 from Ba3
Senior Unsecured Rating, Upgraded to Ba2 from Ba3
Backed Senior Unsecured Rating, Upgraded to Ba2 from Ba3
Senior Unsecured MTN Program Rating, Upgraded to (P)Ba2 from
(P)Ba3
Backed Senior Unsecured Shelf, Upgraded to (P)Ba2 from (P)Ba3
Issuer: AGFC Capital Trust I
Backed Preferred Stock, Upgraded to B1(hyb) from B2(hyb)
Outlook Actions:
Issuer: OneMain Holdings, Inc.
Outlook, Changed To Stable From Rating Under Review
Issuer: OneMain Finance Corporation
Outlook, Changed To Stable From Rating Under Review
Issuer: AGFC Capital Trust I
Outlook, Changed To Stable From Rating Under Review
RATINGS RATIONALE
Moody's said the one notch upgrade to OneMain's ratings reflects
the company's continued solid financial performance even during the
weakened operating environment amid high unemployment and low loan
demand. OneMain's profitability remained solid in 2020, with its
Moody's-calculated net income % average managed assets of 3.35%,
and its asset quality performance was strong with net charge-offs
of 5.45% of gross loans, as its customers benefited from strong
government stimulus and other consumer support measures. OneMain's
first half of 2021 earnings have been strong with a reported return
on average assets (ROA) of 6.8%, benefiting from the release of
loan loss reserves which contributed 24% of pre-provision, pre-tax
income.
Another key driver for the upgrade was the firm's demonstrated
strong liquidity management, which was displayed during the
coronavirus pandemic. OneMain's liquidity management reacted to
sudden changing market conditions at the onset of the coronavirus
pandemic in March 2020 by building its cash position in large part
by drawing down on its multiple bank conduit lines. In doing so,
OneMain confirmed its liquidity runway, which management estimates
to be in excess of 24 months, enabling it to ensure continued
operations despite market uncertainty. OneMain has access to 13
revolving conduit facilities with multi-year revolving periods,
provided by a multiplicity of lenders with a borrowing capacity of
$7.3 billion and no amounts drawn and $9.7 billion of unencumbered
assets as of June 30, 2021. OneMain's improved funding profile is
further evidenced by the firm's staggered maturity profile and
decreasing reliance on confidence-sensitive secured funding, with
secured debt accounting for 35% of gross tangible assets as of
March 31, 2021, improved from 50% at year-end 2016.
OneMain's ratings also considers the benefits to creditors from the
reduced ownership position by the Apollo-Varde Group following
recent stock sales, which requires Apollo-Varde Group to reduce the
number of board members it appoints. The ratings upgrade reflects
Moody's view that OneMain's future board structure will not result
in a material change to its risk and leverage appetite. The rating
action incorporates the benefits to creditors from its future board
structure resulting from this governance change under Moody's
environmental, social and governance (ESG) framework, given its
positive implications for OneMain's corporate governance.
The stable outlook reflects Moody's expectations that OneMain's
financial performance will continue to be solid as the benefit of
reserve release declines and operating conditions improve over the
next 12-18 months.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
OneMain's ratings could be upgraded if: 1) the firm continues to
increase its use of and access to unsecured funding sources; 2)
maintains good financial performance with an ROA above 3.5%,
adequate capitalization with tangible common equity and loan loss
reserves above 12% of total managed assets and an asset quality
performance with net charge-offs below 6.5%; and 3) successfully
executes on its strategic priorities, including the launch of its
credit card product, without increasing the risk appetite of the
firm.
OneMain's ratings could be downgraded if: 1) the firm's
profitability and/or asset quality metrics deteriorate evidenced by
ROA below 2% and/or net charge-offs persistently above 7.5%; 2)
Moody's observes an increase in the risk or leverage appetite of
the firm; or 3) Moody's believes OneMain will not maintain its
liquidity position.
The principal methodology used in these ratings was Finance
Companies Methodology published in November 2019.
OPTION CARE: Posts $31.8 Million Net Income in Second Quarter
-------------------------------------------------------------
Option Care Health, Inc. filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing net income
of $31.82 million on $860.27 million of net revenue for the three
months ended June 30, 2021, compared to a net loss of $7.67 million
on $740.85 million of net revenue for the three months ended June
30, 2020.
For the six months ended June 30, 2021, the Company reported net
income of $28.96 million on $1.62 billion of net revenue compared
to a net loss of $27.58 million on $1.45 billion of net revenue for
the same period during the prior year.
As of June 30, 2021, the Company had $2.72 billion in total assets,
$1.66 billion in total liabilities, and $1.06 billion in total
stockholders' equity.
The Company said its primary uses of cash include supporting its
ongoing business activities and investing in various acquisitions
and its infrastructure to support additional business volumes.
Ongoing operating cash outflows are primarily associated with
procuring and dispensing prescription drugs, personnel and other
costs associated with servicing patients, as well as paying cash
interest on the outstanding debt. Ongoing investing cash flows are
primarily associated with capital projects related to business
acquisitions, the improvement and maintenance of its pharmacy
facilities and investment in its information technology systems.
Ongoing financing cash flows are primarily associated with the
quarterly principal payments on the Company's outstanding debt.
John C. Rademacher, chief executive officer, commented, "The Option
Care Health team delivered a very strong second quarter while
continuing to invest for future growth. Most importantly, the team
focused on extraordinary patient care as we continue to navigate a
dynamic healthcare environment. Based on the momentum established
in the first half, the Company is positioned very well heading into
the second half of 2021."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1014739/000101473921000040/bios-20210630.htm
About Option Care Health
Option Care Health -- OptionCareHealth.com -- is an independent
provider of home and alternate site infusion services. With over
5,000 teammates, including approximately 2,900 clinicians, the
Comopany works to elevate standards of care for patients with acute
and chronic conditions in all 50 states.
Option Care reported a net loss of $8.07 million for the year ended
Dec. 31, 2020, compared to a net loss of $75.92 million for the
year ended Dec. 31, 2019. As of March 31, 2021, the Company had
$2.64 billion in total assets, $1.62 billion in total liabilities,
and $1.02 billion in total stockholders' equity.
PACIFIC ENVIRONMENTAL: Wins Cash Collateral Access Thru Sept 30
---------------------------------------------------------------
The U.S. Bankruptcy Court for the Central District of California,
Los Angeles Division, has authorized Pacific Environmental
Technologies, Inc. to use cash collateral on an interim basis
through September 30, 2021, on the condition that the Debtor
provides the U.S. Small Business Administration with a replacement
lien to the same extent, validity, and priority as SBA's
prepetition lien.
A final hearing on the use of cash collateral is scheduled for
September 20 at 11:30 a.m.
A copy of the order is available at https://bit.ly/3ikEVj7 from
PacerMonitor.com.
About Pacific Environmental Technologies, Inc.
Pacific Environmental Technologies, Inc. sought protection under
Chapter 11 of the U.S. Bankruptcy Code (Bankr. C.D. Cal. Case No.
2:21-bk-16058-DS) on July 28, 2021. In the petition signed by Jon
Wayne Gow, chief executive officer, the Debtor disclosed up to
$100,000 in assets and up to $10 million in liabilities.
Michael Jay Berger, Esq. at Law Offices of Michael Jay Berger is
the Debtor's counsel.
PETROLIA ENERGY: Incurs $1 Million Net Loss in Q1 2020
------------------------------------------------------
Petrolia Energy Corporation filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing a net loss
of $1.03 million on $481,121 of total revenue for the three months
ended March 31, 2020, compared to a net loss of $413,600 on
$819,340 of total revenue for the three months ended March 31,
2019.
As of March 31, 2020, the Company had $13.40 million in total
assets, $8.73 million in total liabilities, and $4.67 million in
total stockholders' equity.
The financial condition of the Company has not changed
significantly throughout the period from Dec. 31, 2019 to March 31,
2020.
As of March 31, 2020, the Company had total current assets of
$163,976 and total assets of $13,403,414. Its total current
liabilities as of March 31, 2020 were $4,161,741 and its total
liabilities as of March 31, 2020 were $8,731,568. The Company had
negative working capital of $3,997,766 as of March 31, 2020.
Net cash used in operating activities was $239,860 and $165,014 for
the three months ended March 31, 2020 and 2019, respectively. The
decrease was primarily due to the Company's net loss, as well as a
deposit made to fund a future acquisition, and the defaulted
previous sale of the NOACK property.
Net cash used by investing activities was $1,374,353 and $120,000
for the three months ended March 31, 2020 and 2019, respectively.
The decrease was primarily due to the funds used to acquire the
Canadian Properties with an offset due to the sale of the NOACK
properties.
Net cash provided by financing activities was $1,652,674 and
$67,188 for the three months ended March 31, 2020 and 2019,
respectively. The increase was primarily due to a new $1,000,000
and $487,000 from a number of new notes payable by two
third-parties.
During the quarter ended March 31, 2020, the Company operated at a
negative cash flow from operations of approximately $10,000 per
month and its auditors have raised a going concern in their audit
report as contained herein. Management is pursuing several
initiatives to secure funding to increase production at both the
SUDS and TLSAUs fields which together with anticipated increases in
the price of crude oil may reduce the Company's monthly cash
shortfall. The total amount required by the Company to accomplish
this objective is approximately $2,000,000. The Company has
resumed workover activities at SUDS and expects progress to
continue past the 1st Quarter of 2020, funding permitting.
Petrolia said, "The Company has suffered recurring losses from
operations. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. We plan to
generate profits by working over existing wells and drilling
productive oil or gas wells. However, we will need to raise
additional funds to workover or drill new wells through the sale of
our securities, through loans from third parties or from third
parties willing to pay our share of drilling and completing the
wells. We do not have any commitments or arrangements from any
person to provide us with any additional capital. If additional
financing is not available when needed, we may need to cease
operations. There can be no assurance that we will be successful
in raising the capital needed to drill oil or gas wells nor that
any such additional financing will be available to us on acceptable
terms or at all. Any wells which we may drill may not be
productive of oil or gas. Management believes that actions
presently being taken to obtain additional funding provide the
opportunity for the Company to continue as a going concern. The
accompanying financial statements have been prepared assuming the
Company will continue as a going concern; no adjustments to the
financial statements have been made to account for this
uncertainty."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/Archives/edgar/data/1368637/000149315221018373/form10-q.htm
About Petrolia
Since 2015, Petrolia Energy Corporation has established a strategy
to acquire, enhance and redevelop high-quality, resource in place
assets. As of 2018, the Company has been focusing on strategic
acquisitions in western Canada while actively pursuing the strategy
to execute low-cost operational solutions, and affordable
technology. The Company believe its conventional, low-risk
resource plays and the redevelopment of its late-stage plays is a
solid foundation for continued oil production growth and future
revenue growth.
Petrolia reported a net loss of $2.89 million for the year ended
Dec. 31, 2019, compared to a net loss of $38.03 million for the
year ended Dec. 31, 2018.
Houston, Texas-based M&K CPAS, PLLC, the Company's auditor since
2019, issued a "going concern" qualification in its report dated
May 26, 2021, citing that the Company suffered recurring net losses
from operations for the years ended Dec. 31, 2019 and 2018 and has
a working capital deficit as of Dec. 31, 2019, which raises
substantial doubt about its ability to continue as a going concern.
PILOCH DISTRIBUTION: Court Denies Approval of Disclosure Statement
------------------------------------------------------------------
Judge August B. Landis of the U.S. Bankruptcy Court for the
District of Nevada, sustaining the objection of the U.S. Trustee,
Tracy Hope Davis, denied approval of the Disclosure Statement
explaining the Plan of Reorganization of Piloch Distribution, Inc.
A copy of the order is available for free at https://bit.ly/3jkMQwc
from PacerMonitor.com.
About Piloch Distribution
Piloch Distribution, Inc. -- http://www.piloch.com/-- distributes
food and related products on a wholesale basis to retailers. Piloch
Distribution filed a Chapter 11 bankruptcy petition (Bankr. D. Nev.
Case No. 20-13047) on June 25, 2020. Piloch Distribution President
Miguel Salido signed the petition. At the time of the filing, the
Debtor disclosed total assets of $2,332,683 and total liabilities
of $2,345,430. Judge August B. Landis oversees the case. David J.
Winterton & Associates, Ltd., is the Debtor's legal counsel.
POGO ENERGY: Taps Conway MacKenzie as Financial Advisor
-------------------------------------------------------
Pogo Energy, LLC seeks approval from the U.S. Bankruptcy Court for
the Northern District of Texas to hire Conway MacKenzie, LLC as
financial advisor.
The firm's services include:
(a) evaluating the short-term cash flows and financing
requirements of the Debtor as it relates to the Debtor's Chapter 11
proceedings;
(b) assisting the Debtor in its Chapter 11 proceedings,
including the preparation of its financial statements and
bankruptcy schedules, monthly operating reports, first-day
pleadings, and other information required in the bankruptcy;
(c) assisting the Debtor in obtaining court approval for use
of cash collateral or other financing;
(d) assisting the Debtor with respect to its
bankruptcy-related claims management and reconciliation process;
(e) assisting the Debtor in the development of a plan of
reorganization;
(f) assisting the management in negotiating with other
constituents critical to the successful execution of the Debtor's
bankruptcy proceedings;
(g) assisting the Debtor and its investment banking
professionals in assessing offers made pursuant to bankruptcy
court-approved sale procedures;
(h) assisting the Debtor in communicating with key
constituents, including lenders, equity holders, customers and
other stakeholders;
(i) assisting the management in negotiating with stakeholders
critical to the successful execution of the Debtor's near-term
business plan; and
(j) providing other services as directed by the Debtor and as
agreed to by the firm.
The firm's hourly rates are as follows:
Senior Managing Director $900 - $1,350 per hour
Managing Director $800 - $950 per hour
Director $520 - $725 per hour
Senior Associate $480 - $525 per hour
Associate/Analyst $350 - $400 per hour
The Debtor paid $75,000 to the firm as a retainer fee.
Jamie Chronister, managing director at Conway MacKenzie, disclosed
in a court filing that his firm is a "disinterested person" as the
term is defined in Section 101(14) of the Bankruptcy Code.
The firm can be reached at:
Jamie Chronister
Conway MacKenzie, LLC
909 Fannin Street, Suite 4000
Houston, TX 77010
Tel. : 713.650.0500
Email: jamie.chronister@conwaymackenzie.com
About Pogo Energy
Pogo Energy, LLC -- https://pogoenergy.com -- is a green energy
provider that offers prepaid electricity with no deposit required
and same-day electricity service in Texas.
Pogo Energy sought Chapter 11 protection (Bankr. N.D. Texas Case
No. 21-31224) on July 1, 2021. In its petition, the Debtor listed
as much as $10 million in assets and as much as $50 million in
liabilities. Judge Michelle V. Larson oversees the case. Ferguson
Braswell Fraser Kubasta, PC and Conway MacKenzie, LLC serve as the
Debtor's legal counsel and financial advisor, respectively.
PRO MACH: Moody's Rates New First Lien Credit Facilities 'B2'
-------------------------------------------------------------
Moody's Investors Service assigned a B2 rating to Pro Mach Group,
Inc.'s new first lien credit facilities consisting of a $1.540
billion first lien term loan, a $200 million revolving credit
facility and a $250 million delayed draw term loan. Proceeds, along
with $154 million in cash, the new $360 million of second lien
notes (unrated) and $150 million of second lien delayed draw notes
(unrated), will be used to refinance the existing capital structure
and fund a $450 million shareholder dividend and future
acquisitions. There is no change to the company's B3 corporate
family rating and B3-PD probability of default rating. The ratings
outlook is stable.
"The significant shareholder dividend is credit negative and raises
debt/EBITDA to over 7.5x" says Shirley Singh, Moody's lead analyst
for the company. "However, the new capital structure will provide
additional flexibility for future growth". The increased revolver
size (to $200 million from the current $100 million), along with
availability under the delayed draw term loan and second lien notes
will fund future acquisitions. As such, Moody's expects leverage to
remain elevated. However, continued strength in market demand will
drive higher earnings, resulting in gradual improvement in credit
metrics.
The following ratings/assessments are affected by the action:
New Assignments:
Issuer: Pro Mach Group, Inc.
Senior Secured 1st Lien Revolving Credit Facility, Assigned B2
(LGD3)
Senior Secured 1st Lien Term Loan, Assigned B2 (LGD3)
Senior Secured 1st Lien Delayed Draw Term Loan, Assigned B2
(LGD3)
RATINGS RATIONALE
Pro Mach's B3 CFR broadly reflects the company's high leverage as
it undertakes an aggressive growth strategy in the fragmented
packaging equipment industry. Demand for Pro Mach's products
exhibit volatility and are cyclical in nature. The rating is also
constrained by Pro Mach's private equity ownership and ensuing
aggressive financial policy that exposes the company to future
leveraging events.
Nonetheless, the rating benefits from the company's diversified
product offerings and large installed base that supports a high
margin aftermarket business. The company's exposure to food &
beverage and pharmaceutical end-markets is credit positive as these
markets are generally stable and growing. Also, the low capital
requirements inherent in the company's assembly-based business
model provides ongoing support to cash flow.
The stable outlook reflects Moody's expectation of improving credit
metrics and good liquidity.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if the company's earnings growth
results in debt/EBITDA below 6.0x, EBITA-to-interest above 2.0
times and FCF-to-debt above 5%.
The ratings could be downgraded if the company's organic growth
stalls or EBITDA margins decline. A large debt funded acquisition
or shareholder dividend could also result in a downgrade.
Specifically, adjusted debt-to-EBITDA sustained above 7.5x,
EBITA-to-interest falling below 1.0x, or deterioration in liquidity
could result in a downgrade.
The principal methodology used in these ratings was Manufacturing
Methodology published in March 2020.
Headquartered in Covington, Kentucky, Pro Mach Group, Inc.
manufactures a broad range of packaging equipment and related
aftermarket parts and services for a number of industries including
the food, beverage, household goods and pharmaceutical industries.
Pro Mach is owned by Leonard Green & Partners. Pro Mach's revenue
for the twelve months ended March 2021 is estimated to have been
$1.2 billion.
PSALMS FUNERAL: Seeks to Tap Tran Singh as Bankruptcy Counsel
-------------------------------------------------------------
Psalms Funeral Home, LLC seeks approval from the U.S. Bankruptcy
Court for the Southern District of Texas to employ Tran Singh, LLP
as its bankruptcy counsel.
Tran Singh will render these legal services:
(a) analyze the financial situation and render advice to the
Debtor;
(b) advise the Debtor with respect to its rights, duties and
powers;
(c) represent the Debtor at hearings and other proceedings;
(d) prepare and file legal papers;
(e) represent the Debtor at any meeting of creditors;
(f) represent the Debtor in all proceedings before the court
and in any other judicial or administrative proceeding where the
rights of Debtor may be litigated or otherwise affected;
(g) prepare and file a Chapter 11 Subchapter V plan of
reorganization;
(h) analyze the claims of creditors and negotiate with them;
and
(i) assist the Debtor in any matters relating to or arising
out of its Chapter 11 case.
The hourly rates of the firm's attorneys who may work on the
Debtor's case are as follows:
Susan Tran Adams $425 per hour
Brendon Singh $450 per hour
Briana Head $250 per hour
In addition, the firm will seek reimbursement for out-of-pocket
expenses incurred.
The firm received a pre-bankruptcy retainer in the amount of
$10,685.50.
Brendon Singh, Esq., an attorney at Tran Singh, 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:
Susan Tran Adams, Esq.
Brendon Singh, Esq.
Tran Singh LLP
2502 La Branch Street
Houston, TX 77004
Telephone: (832) 975-7300
Facsimile: (832) 975-7301
Email: stran@ts-llp.com
bsingh@ts-llp.com
About Psalms Funeral Home
Psalms Funeral Home, LLC, owner of a full-service funeral home and
florist services in Navasota, Texas, filed a voluntary petition for
relief under Chapter 11 of the Bankruptcy Code (Bankr. S.D. Texas
Case No. 21-32310) on July 7, 2021. At the time of the filing, the
Debtor listed $100,001 to $500,000 in both assets and liabilities.
Judge Eduardo V. Rodriguez oversees the case. Tran Singh, LLP
serves as the Debtor's legal counsel.
RENOVATE AMERICA: Files $750K Chapter 11 Deal With Ex-Officer
-------------------------------------------------------------
Law360 reports that bankrupt home improvement project lender
Renovate America Inc. submitted a settlement Wednesday, August 4,
2021, to a federal Delaware court that would resolve a dispute with
a former executive over $763,000 in unpaid stock redemption
obligations he says he is owed.
In its filings, Renovate America said former officer Dean Hollander
agreed to accept $10,000 from an escrow account that holds $763,180
set aside to pay a stock redemption installment payment, with the
remaining funds reverting to the debtor's estate. In exchange,
Hollander will seek to dismiss a California state court action he
commenced over the redemption funds and will withdraw his proofs.
About Renovate America
Renovate America is one of the nation's preeminent providers of
home improvement financing through its industry-leading home
financing product, Benji. The Company offers a proprietary
technology platform that helps Americans improve their homes while
giving contractors the tools they need to grow their business. In
addition to offering intuitive financing options, Renovate America
offers industry-leading education, training and mentoring to
contractor teams in the field. On the Web:
http://www.renovateamerica.com/
Renovate America, Inc. and affiliate, Personal Energy Finance,
Inc., sought Chapter 11 protection (Bankr. D. Del. Lead Case No.
20-13173) on Dec. 21, 2020. Renovate America was estimated to have
$50 million to $100 million in assets and $100 million to $500
million in liabilities as of the bankruptcy filing. Judge Laurie
Selber Silverstein oversees the cases.
Bryan Cave Leighton Paisner LLP is acting as the Company's legal
counsel. Stretto is the claims agent. Culhane Meadows, PLLC, is the
bankruptcy co-counsel. Armanino LLP is the financial advisor.
GlassRatner Advisory & Capital Group, LLC, is the restructuring
advisor.
SAMARITAN MEDICAL CENTER: S&P Lowers Revenue Bonds Rating to 'BB'
-----------------------------------------------------------------
S&P Global Ratings lowered its rating to 'BB' from 'BBB-' on
Jefferson County Civic Facility Development Corp., N.Y.'s series
2017A and 2017B hospital revenue bonds issued for Samaritan Medical
Center (SMC or Samaritan). The outlook is stable.
"The downgrade reflects operating losses in recent years and
balance sheet degradation despite relief funding from federal
programs due to the onset of the pandemic in the prior year," said
S&P Global Ratings credit analyst Alexander Nolan. A delay in cash
collections due to a 2020 malware attack led to a further decline
in unrestricted reserves from prior years, and contributed to the
financial profile being no longer commensurate with an investment
grade rating level. While there may be some incremental growth in
unrestricted reserves through the remainder of the year as volumes
continue their gradual recovery, the organization has limited
financial flexibility to endure any additional business
interruption due to the pandemic, IT challenges, or other factors
in our opinion. Moreover, we note that unrestricted reserves have
held flat over the past year, while peers have typically seen
acceleration in balance sheet growth mainly due to a plethora of
relief funds provided to hospitals."
SOLSTICE MARKETING: Exits Ch. 11 with $6.5M Financing Facility
--------------------------------------------------------------
Solstice Sunglasses, the second-largest sunglass retailer in the
United States, on Aug. 5, 2021, disclosed that it has successfully
emerged from Chapter 11 with the support of a $6.5 million exit
financing facility provided by Second Avenue Capital Partners, LLC
("SACP") (www.secondavecp.com). Solstice filed for bankruptcy
relief in February giving them an opportunity to restructure the
business as the country tries to recover from the impact of
COVID-19 disruptions.
"We are a leaner, more efficient operation coming out of this
process," said KCP Advisory Group's Jacen Dinoff, Chief
Restructuring Officer of Solstice Sunglasses. "The restructuring
gave us the opportunity to evaluate and right-size our store
footprint. Simultaneously, we have rededicated ourselves to
refining our unique selection of offerings both online and in-store
while also capitalizing on our hard-earned reputation for excellent
customer service."
"We're pleased Second Avenue Capital Partners remained committed to
our efforts," said
Mikey Rosenberg, Chief Executive Officer. "Working with them on
first the DIP, and now this exit financing package, has given us
the continuity of support we needed to successfully emerge from
Chapter 11. Coming out of the COVID challenge and emerging from
this Chapter 11 restructuring has strengthened the Company for all
our stakeholders, employees and customers alike. We'll continue
along the path we've established and remain focused on providing
our customers with the most distinctive and unique collection of
sunglasses available anywhere in the marketplace."
Mr. Rosenberg continued, "We also owe our sincerest gratitude to
the many team members who remained with us through this process.
Without their ongoing support, none of this would have been
possible."
Solstice Sunglasses offers a unique retail experience for consumers
looking for luxury, designer, and sport sunglasses -- with the
service and style to match. The vast hand-selected assortment from
the top brands is specially curated for quality and style. From
timeless to trendsetting, posh to performance-ready, Solstice
Sunglasses has something to fit ever-changing lifestyles and
activities. The company strives to provide a uniquely positive
shopping experience across their retail locations and an e-commerce
site, solsticesunglasses.com.
"Solstice Sunglasses is one of the success stories coming out of
this very challenging time for retailers," said Chris O'Connor,
President of SACP. "They had a vision for stabilizing the business
and we knew it was a viable plan we could endorse. We have a
passion for helping companies overcome challenges and supporting
Solstice through their restructuring and successful emergence is an
example of SACP going beyond a mission statement. As a lender with
retail affiliations, it's important for SACP to support other
retailers and give them the flexibility they need to thrive and
preserve jobs."
The Company retained Morgan, Lewis & Bockius LLP as its legal
counsel, RCS Real Estate Advisors to advise on all store leases,
and KCP Advisory Group LLC's Jacen Dinoff as Chief Restructuring
Officer.
About KCP Advisory Group
KCP Advisory Group is headquartered outside of Boston. KCP is
considered a leading business advisory firm built on the success of
its professionals who specialize in providing creative solutions
and aiding clients in rehabilitating their businesses. KCP renders
services spanning a range of advisory roles from consulting to
interim leadership. By recognizing the uniqueness of each
engagement, KCP ensures the needs of the situation are met and
minimize the cost of valuable solutions by working in small,
specialized expert teams. This format provides the experience of a
wide range of businesses and industries, to assist a client whether
they are healthy, challenged, or distressed and whether the
challenges include performance improvement or financial advisory
services or turnaround and restructuring.
About Second Avenue Capital Partners
Second Avenue Capital Partners, LLC ("SACP") --
http://www.secondavecp.com/-- is a Schottenstein Affiliate
specializing in asset-based loans for the broader retail and
consumer products industry. Serving middle-market companies, SACP
leverages the experience of retail operators, product merchants,
and lenders to deliver an array of customized, capital solutions. A
unique merchant perspective gives SACP the ability to recognize and
unlock value in assets other capital providers often overlook or do
not understand. The firm's tailored financial solutions are a vital
resource for clients seeking capital to effectuate strategy and
achieve financial objectives. SACP is headquartered in Boston with
additional offices in New York, Columbus, and Los Angeles.
About Solstice Sunglasses
Solstice Sunglasses is a luxury sunglasses boutique carrying the
finest assortment of designer, contemporary and sport sunglasses
for women, men, and children. Solstice Sunglasses is committed to
quality, in both our service and selection offered. We hand select
our assortments to ensure a refined offering, which includes
Italian handmade luxury sunglasses from iconic brands including
Dior, Dior Homme, Fendi, Givenchy, Gucci, Jimmy Choo, and Tom Ford.
The contemporary collection boasts of Boss, Carrera, Kate Spade,
Marc Jacobs, and Ray-Ban, and for your performance needs Maui Jim,
Oakley, and Smith Optics. Shop Solstice Sunglasses from one of our
stores across the US, or from the convenience of your home at
solsticesunglasses.com. Solstice Sunglasses offers Free shipping on
all online purchases, a replacement guarantee, complimentary
repairs, fittings and cleanings, plus hassle-free returns all in an
elegant luxurious environment.
About Solstice Marketing Concepts
Solstice Marketing Concepts LLC -- http://solsticesunglasses.com/
-- is a brick and mortar and online sunglasses retailer.
Solstice Marketing Concepts sought Chapter 11 protection (Bankr.
S.D.N.Y. Case No. 21-10306) on Feb. 17, 2021. Jacen A. Dinoff,
chief restructuring officer, signed the petition. The Debtor was
estimated to have $1 million to $10 million in both assets and
liabilities at the time of the filing.
Judge Martin Glenn oversees the case.
The Debtor tapped Morgan, Lewis & Bockius LLP as bankruptcy
counsel, Retail Consulting Services Inc. as real estate consultant,
and KCP Advisory Group LLC as restructuring advisor.
SPEEDWAY MOTORSPORTS: S&P Alters Outlook to Pos., Affirms BB- ICR
-----------------------------------------------------------------
S&P Global Ratings affirmed all its ratings on Speedway Motorsports
LLC, including the 'BB-' issuer credit rating.
The positive outlook reflects S&P's expectation for a meaningful
improvement in live attendance, sponsorships, and
advertising-related revenue that should result in leverage in the
mid-3x area in 2021.
The outlook revision reflects a reduction in leverage in 2021 and
2022 that will be driven by a recovery in live attendance,
sponsorships, and advertising-related revenues. S&P's updated base
case assumes that event-related revenue in 2021 will recover to
60%-65% of 2019 levels. Event-related revenue are generated from
sponsorships, food and beverage sales, and radio and advertising
sales. These revenues were significantly hurt in 2020 but will
partially recover in 2021 based on increasing sponsorship demand.
Admissions revenues, which are tied to ticket sales, are currently
rebounding, and S&P expects they will recover substantially from
the very low levels in 2020. Speedway's tracks are expected to
resume full attendance capacity for the remainder of 2021,
resulting in full-year admissions revenue of about 50% of 2019
levels. While the uneven pace of the economic recovery and high
unemployment rates could eventually cause admissions recovery to
plateau, S&P believes that could be offset in the near term by
pent-up demand for leisure activities. Its base case for 2022
incorporates a lingering impact from social-distancing measures and
the economic downturn that results in 25%-30% lower admissions
revenue than 2019 levels.
S&P said, "We believe Speedway intends to operate with lower levels
of leverage over time. We believe Speedway plans to reduce leverage
and maintain it at a lower level over time. The controlling Smith
family had a financial policy of operating Speedway with low levels
of leverage before the take-private transaction in 2019. Our
measure of Speedway's adjusted net leverage prior to the
take-private transaction was in the 1x-2x range. While there could
be leveraging events from time to time--including potential cash
distributions to the Smith family-controlled parent, Sonic
Financial Corp.--we believe Speedway would be motivated to reduce
leverage subsequently. We also believe there are few large-scale
acquisition opportunities available that could significantly
increase leverage above 4x, the threshold for an upgrade to 'BB'
from 'BB-'.
"Speedway's broadcasting media rights fees help provide revenue
stability. We expect media rights revenue to contribute about
55%-65% of Speedway's total revenue over the next two years.
Through NASCAR, Speedway has a 10-year (through the 2024 season)
broadcast media rights agreement for three national touring series
with NBC Sports Group and Fox Sports Media Group. The agreement
provides Speedway high-margin contractual revenue with annual price
escalators. Broadcasting-related media rights revenue mitigated
declines from other revenue channels in 2020 and will continue to
be a source of revenue stability as long as Speedway and NASCAR
deliver full race schedules. It's our understanding that even if
there is some variability in the timing of races during the year,
broadcasting revenue is not affected as long as the full race
schedule is delivered. Even if new COVID-19 variants emerge and
hamper sports activity, we believe Speedway could deliver its
contracted races because motorsports tends to be more conducive to
social distancing than sports that require closer physical contact
among athletes. NASCAR was the first among major sports to resume
competitions in 2020 (it restarted in May), demonstrating its
ability to conduct races safely.
Sports programming remains the glue holding the linear TV bundle
together. Sports programming continues to be a key must-have genre
for television. Sports generates higher audience ratings and has
smaller declines than other genres like scripted drama and comedy.
Unlike sports, other genres also face growing competition from
similar content on streaming platforms. As a result, S&P believes
the broadcast networks will continue to pay premiums for live
sports. NASCAR in particular is well-positioned, as audience
ratings for its races were essentially flat in 2020 compared to
2019. S&P believes this dynamic could benefit Speedway through the
league's next round of negotiations with its broadcast partners.
Nonetheless, NASCAR's television ratings are down significantly
since it was last awarded its media rights contract in 2013. For
this reason, while it is almost certain Speedway will participate
in another long-term broadcasting deal, the dollar amounts and
terms of a future contract will depend on how the league is able to
manage interest in the sport to maintain viewership and how demand
for sports among media broadcasters changes as consumers continue
to move from linear television to streaming services. How the
league decides to allocate its digital rights will also likely be a
significant factor in its next contract negotiations with the
broadcast networks.
Speedway's event-driven business model is exposed to the popularity
cycle of star athletes, the susceptibility of admissions and events
revenue to the economic cycle, and competition from non-NASCAR
entertainment events. Speedway's core fan base struggled during the
economic recovery after the 2008 recession, probably because of its
income demographic. This contributed to lower event attendance, and
S&P believes Speedway's admissions revenue could be vulnerable over
the coming years to the economic inequality stemming from the
COVID-19 pandemic. In addition, racing events are subject to
weather risks. While these are risk factors across the motorsports
industry, Speedway compares unfavorably to its larger peer NASCAR,
which also owns and operates tracks and has greater track and event
diversity. Speedway's sponsorships are typically at the individual
track-level, and so they are less lucrative than NASCAR's national
sponsorships and licensing fees. Partially offsetting these risks
are Speedway's good market position in the motorsports industry and
the high barriers to entry stemming from significant capital costs
for new racetracks and a limited availability of high-margin NASCAR
racing dates.
Environmental, social, and governance (ESG) credit factors for this
credit rating change:
-- Health and safety
S&P said, "The positive outlook reflects our expectation for
meaningful improvements in live attendance, sponsorships, and
advertising-related revenue that should result in leverage in the
mid-3x area in 2021.
"While unlikely, we could lower the rating if leverage increases
above 5x on a sustained basis. Such a scenario would likely be the
result of an impairment in live attendance in 2021 and 2022, an
inability to conduct the NASCAR-sanctioned race schedule, continued
EBITDA margin pressure, or an unanticipated dividend or
acquisition.
"We could raise the rating if revenue and EBITDA continue to
recover as we assume, increasing our confidence that leverage will
decline and be sustained below 4x."
STERLING MIDCO: Moody's Upgrades CFR to B2, Outlook Stable
----------------------------------------------------------
Moody's Investors Service upgraded Sterling Midco Holdings, Inc.'s
corporate family rating to B2 from B3, probability of default
rating to B2-PD from B3-PD and its first lien senior secured credit
facility (revolver and term loan) rating to B2 from B3. The outlook
is stable.
Upgrades:
Issuer: Sterling Midco Holdings, Inc.
Probability of Default Rating, Upgraded to B2-PD from B3-PD
Corporate Family Rating, Upgraded to B2 from B3
Senior Secured 1st Lien Bank Credit Facility, Upgraded to B2(LGD3)
from B3(LGD3)
Outlook Actions:
Issuer: Sterling Midco Holdings, Inc.
Outlook, Remains Stable
RATINGS RATIONALE
The upgrade of the CFR to B2 from B3 reflects Sterling's strong
revenue and earnings recovery in the first half of 2021 on the
heels of weak 2020. Timely cost actions that have led to
significant improvement in credit metrics and liquidity. The
company's continued business turnaround and a robust US job market
drove a 20% increase in revenue and 33% increase in management's
adjusted EBITDA for the LTM period ended Q2 2021, compared to the
same period in 2020. Sterling's solid operating results, including
double-digit screening and verification volume growth with new and
existing customers coupled with lower attrition rates through June
2021 will lead to further strengthening of the credit metrics over
the next 12-18 months. Despite the pandemic, management has
executed well on its 2018 strategic initiatives and remains well
ahead of meeting its 5-year growth plan.
Moody's expects Sterling's debt-to-EBITDA (Moody's adjusted) of
around 5.7x as of June 2021, to decline toward 4.6x by the end of
2022. Moody's anticipates the company's liquidity to remain good
and projects annual free cash flow of around $80 million and full
availability under its revolving credit facility. The company's
existing revolver will expire in June 2022 and Moody's expects that
the company will proactively address the maturity by the end of
2021.
The B2 CFR reflects Sterling's strong global market position in the
employment verifications and screening services market, favorable
macro-economic indicators to drive continued earnings growth, good
management execution on the growth strategies and positive free
cash flow generation. These factors support Moody's view that the
company will be able to reduce its debt-to-EBITDA leverage (Moody's
adjusted and expensing all capitalized software development costs)
towards 4.5x over the next 12-18 months. The company's credit
profile benefits from a good end user industry diversification,
long-standing relationships with blue-chip customers, strong
retention rates of around 96.5% as of June 2021 and no significant
customer concentration. Sterling has high EBITDA margins and
capacity to manage its cost base in uncertain economic environments
which helps to preserve margins. The rating also incorporates
Moody's expectation that Sterling will maintain good liquidity over
the next 12-15 months, including free cash flow to debt (Moody's
adjusted) above 10%.
The company's rating is constrained by its high financial leverage,
modest scale, operations within the highly competitive and
fragmented pre- and postemployment verification services market,
moderate social and reputational risks, and the potential that the
company will undertake aggressive debt-funded growth or shareholder
return strategies under financial sponsor ownership.
Moody's expects Sterling to maintain good liquidity over the next
12-15 months. Sources of liquidity consist of approximately $94
million of balance sheet cash at June 30, 2021, projected free cash
flow in excess of $80 million and access to funds under the $85
million revolving credit facility (undrawn). The company's
revolving credit facility is current and will expire in June 2022.
Moody's believes that current cash sources provide good coverage of
approximately $6.1 million of mandatory annual debt amortization
under the proposed amended and extender term loan, paid quarterly.
There are no financial maintenance covenants under the term loan
but the revolving credit facility is subject to a springing maximum
first lien net leverage ratio if the amount drawn exceeds 35% of
the revolving credit facility. The company is not expected to
utilize the revolver during the next 12-15 months and will remain
well in compliance with the springing first lien net leverage
covenant, if tested.
The stable outlook reflects Moody's expectation of further
deleveraging, such that debt-to-EBITDA will trend towards 4.5x over
the next 12-18 months. The stable outlook also assumes the company
will maintain good liquidity, including free cash flow-to-debt in
excess of 10%, and address the expiration of its revolving credit
facility before the end of 2021.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade of the ratings would require Sterling to commit to a
more balanced financial policy while meaningfully increasing scale
and maintaining at least good liquidity. Quantitatively, the
ratings could be upgraded if debt reductions combined with
sustained earnings growth leads to a material improvement in credit
metrics such that debt-to-EBITDA (Moody's adjusted and expensing
all capitalized software costs) is sustained below 4.0x and free
cash flow-to-debt (Moody's adjusted) will remain above 10%.
Conversely, Moody's could downgrade Sterling's ratings if operating
performance deteriorates, leading to permanently high leverage or
low free cash flow expectations. A large debt-financed acquisition
or shareholder distribution could also pressure the ratings.
Quantitatively, the ratings could be pressured if debt-to-EBITDA
(Moody's adjusted and expensing all capitalized software costs) is
maintained above 6.0x or free cash flow to debt (Moody's adjusted)
is sustained below 5%.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
Sterling Midco Holdings, Inc., through its operating subsidiary
Sterling Infosystems, Inc., provides prescreen identity
verification, pre hire screening, onboarding, post hire monitoring
including criminal background checks, credential verification and
employee drug testing. Sterling is majority owned by affiliates of
private equity sponsor Broad Street Principal Investments (a
subsidiary of Goldman Sachs) since 2015. The company generated
revenue of approximately $545 million in the LTM period ended June
30, 2021.
STS OPERATING: Moody's Affirms B3 CFR & Alters Outlook to Stable
----------------------------------------------------------------
Moody's Investors Service affirmed the ratings of STS Operating,
Inc., including the B3 corporate family rating and the B3-PD
probability of default rating. Concurrently, Moody's affirmed the
B3 senior secured bank credit facilities rating and the Caa2 senior
secured second lien term loan rating. At the same time, Moody's
changed the outlook to stable from negative.
The ratings affirmation and change in outlook reflect Moody's
expectation for credit metrics to improve with a gradual recovery
of STS Operating's markets over the next year, building on the
revenue and earnings momentum from a rebound in both the consumer
and heavy mobile markets. STS Operating improved its operations in
2020 and implemented cost measures such that, even with revenue
pressures, financial leverage was lower than Moody's expected and
free cash flow improved over the year.
Moody's took the following actions on STS Operating, Inc.:
Outlook Actions:
Issuer: STS Operating, Inc.
Outlook, Changed To Stable From Negative
Affirmations:
Issuer: STS Operating, Inc.
Probability of Default Rating, Affirmed B3-PD
Corporate Family Rating, Affirmed B3
Senior Secured Backed First Lien Term Loan, Affirmed B3 (LGD3 from
LGD4)
Senior Secured Backed Term Loan B, Affirmed B3 (LGD3 from LGD4)
Senior Secured Backed Second Lien Term Loan, Affirmed Caa2 (LGD6)
RATINGS RATIONALE
The ratings, including the B3 CFR, anticipate STS Operating's high
financial leverage improving to 6.1x debt-to-EBITDA (including
Moody's standard adjustments) by the end of 2021, from 7.1x at
March 31, 2021. The stronger than expected recovery in demand and
the cost reductions helped sustain the company's operating
performance, despite weak ongoing demand in oil & gas markets that
represent about 17% of sales. Moody's expects the company will
continue to generate positive annual free cash flow into 2022,
benefiting from an uptick in business activity that should support
modest earnings improvement. Its value added engineering
capabilities do support margins that are moderately higher than for
traditional distributors. These factors, as well as the company's
end market diversity and sizeable portion of revenue (60%) derived
from aftermarket demand, mainly maintenance and repair operations,
support the ratings. Backlog is at a historic level and should
provide revenue visibility at least through to the end of 2021.
Lastly, the fragmented and competitive operating landscape exerts
margin pressures and makes it likely acquisitions will continue.
Moody's expects that acquisitions will remain funded primarily with
debt, which has slowed de-leveraging in the past.
Moody's views liquidity as good, supported by cash balances of
about $50 million as of July 31, 2021, a fully available ABL
revolver and expectations of positive free cash flow. Moody's
expects free cash flow to be about $85 million over the next
12-months. These sources should adequately cover cash needs into
2022. Moody's expects that cash likely will be consumed with a ramp
up in business activity, as well as for additional bolt-on
acquisitions. The covenant-lite capital structure only has a
springing fixed charge coverage covenant of 1.0x when specified
revolver availability is less than 10% of the lower of the facility
size and the borrowing base. Moody's expect STS Operating to
maintain good headroom under the covenant. The company has no term
loan financial maintenance covenants or near term debt maturities
over the next year.
From a corporate governance perspective, event risk is high with
private equity ownership. The leverage profile is partly the result
of aggressive financial policies, given an active pace of debt
funded acquisitions, which also present integration risks.
Additional acquisitions are likely and could weaken the metrics or
liquidity.
The stable outlook reflects Moody's expectations that credit
metrics will continue to strengthen, building on the revenue and
earnings momentum from a rebound in demand in 2021, aided by cost
and efficiency measures. The outlook also reflects Moody's
expectation that the company will maintain at least good
liquidity.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could also be downgraded with deteriorating liquidity,
including diminishing revolver availability or lower than expected
free cash flow, or if debt-to-EBITDA is expected to remain above
7x, EBITA/interest below 1.5x or free cash flow to debt below 2.5%.
Debt funded acquisitions or dividends that weaken credit metrics or
liquidity would also result in downward ratings pressure.
A ratings upgrade is unlikely until business conditions broadly
improve along with end market fundamentals. Over time, the ratings
could be upgraded with consistent revenue growth and meaningful
margin expansion such that Moody's expects debt-to-EBITDA to remain
below 5.5x, with financial policies that support this lower
leverage level. A stronger liquidity profile would also be expected
for higher ratings, including ample revolver availability and free
cash flow to debt at least in the mid to high single digits.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
STS Operating, Inc. ("SunSource"), based in Addison, Illinois, is a
leading independent distributor of fluid power, fluid conveyance,
fluid process and motion control products, and provider of related
solutions. The company has 2,200 employees across 163 facilities
located in the United States and Canada. Revenues approximated
$1.14 billion as of the last twelve months ended March 31, 2021.
The company is majority-owned by funds affiliated with Clayton
Dubilier & Rice, LLC, a private equity firm that acquired SunSource
in December 2017.
SUNNOVA ENERGY: S&P Assigns 'B-' Rating, Outlook Stable
-------------------------------------------------------
S&P Global Ratings assigned its 'B-' issuer credit rating to
Sunnova Energy International Inc. and its 'B-' issue-level rating
to Sunnova Energy Corp.'s proposed $350 million senior unsecured
notes due 2026. The recovery rating is '4', indicating its
expectation for average (30%-50%; rounded estimate: 35%) recovery
in the event of a payment default.
S&P said, "The stable outlook reflects our expectation that good
residential solar demand, financing conditions, and operating
performance will support Sunnova's customer acquisitions and
earnings growth over the next 12 months. We expect adjusted EBITDA
of more than $40 million in 2021 and $80 million in 2022, with a
sustained liquidity cushion of at least $250 million.
"Our rating on Sunnova reflects the significant risks the company
faces as a fast-growing, early-stage residential solar service and
storage provider." These risks include the company's:
-- Considerable cash flow deficits as it scales the business;
-- Dependence on the capital markets for low-cost financing and
government incentives for its cost competitiveness;
-- Exposure to many market forces outside its span of control,
such as net metering regulations, China-policy actions, and the
pace of improvement of solar-cost efficiency; and
-- Limited operating track record (e.g., reliance on data
extrapolation and assumptions to estimate the company's consumer
credit losses and residential solar system maintenance needs over
the next 15-25 years).
However, supporting Sunnova's credit quality are positive
environmental, social, and governance (ESG) investing and policy
trends as well as its large potential addressable market, ability
to curtail much of its customer-acquisition spending without
harming operations, and lengthening (five years so far) track
record of accessing the securitization market.
Residential solar installations have had high growth, but the
long-term sustainability of Sunnova's business is uncertain.
Sunnova operates one of the largest fleets of residential solar
energy systems in the U.S., comprising more than 940 megawatts of
generation capacity and serving more than 162,000 customers. Its
revenue grew by just over 22% in 2020 and 26% in 2019, and S&P
expects growth above 25% over the next two years. Nevertheless, the
U.S. residential solar energy market is at a relatively early stage
of development, and the company faces numerous adverse market
forces outside of its control. The company also faces stiff
competition from powerful electric utilities, retail electric
providers, independent power producers, and fast-growing renewable
energy companies attempting to either protect or disintermediate
the existing value chain. In S&P's opinion, Sunnova's continued
success beyond the next three years is not guaranteed.
Adverse shifts in government policies could reduce the
affordability of residential solar. State and federal policy and
tax incentives have been critical growth drivers for the
residential solar industry, and the loss of this support would hurt
growth. For example, the federal investment tax credit program has
provided significant support to the solar industry, but the federal
government is lowering the benefit to 22% of the cost of a
residential solar photovoltaic system in 2023 from 26% currently,
and the commercial tax credit will fall to 10% while the
residential credit ends completely in 2024. If the program isn't
renewed, S&P expects a sharp decline in new installations and a
spike in capital costs. State production credits also contribute to
the industry's profitability, but trading market-dependent credit
value and the risk of policy changes create uncertainty. For
example, in New Jersey--where Sunnova generated most of its $36
million in solar renewable energy certificate (SREC) revenue in
2020--the value of each megawatt-hour produced for systems
installed after 2018 dropped by half as the state moved to a
transition renewable energy certificate (TREC). New Jersey
legislators did include a grandfather clause for existing SREC
beneficiaries, but these programs will remain at risk from changing
political priorities.
Net metering typically allows solar customers to interconnect their
on-site solar energy systems to the utility grid and offset their
utility electricity purchases by receiving a bill credit for excess
energy generated by their solar energy system that is exported to
the grid. In certain jurisdictions, regulators or utilities have
reduced or eliminated the benefit available under net metering, or
have proposed to do so. For example, changes to net metering rates
are being debated in California, Sunnova's top market. In addition,
many utility commissions--including those of California, New
Jersey, and Puerto Rico--have received proposals to increase the
cost to customers that use solar energy systems.
Weak access to capital markets could limit Sunnova's profitability
and growth. Sunnova's growth and profitability depend on the
availability of cost-effective asset-backed securitizations (ABS)
and tax-equity financing. In addition, if access to the capital
markets is limited for an extended period--such as during the
2007-2009 financial crisis--we would expect a decline in new
customer acquisitions, and the firm's excess liquidity cushion
could narrow. However, under such a scenario, we expect a sharp
reduction in free operating cash flow (FOCF) deficits as the
company curtails customer-acquisition efforts.
The company operates on a small scale, and its geographic and
dealer concentrations pose risks. With less than $200 million of
annual sales--and with New Jersey, California, and Puerto Rico
accounting for about 53% of 2020 installations—S&P views
Sunnova's revenue scale as relatively small and its operations as
vulnerable to region-specific disruptions. Furthermore, two
dealers--Trinity Solar Inc. and Infinity Energy Inc.--accounted for
40% of net originations in 2020. While these dealers can work under
exclusivity arrangements, relationship termination or poor dealer
performance could have a meaningful impact on Sunnova's
performance.
Sunnova's flexible operating model provides advantages as it scales
and adapts to industry changes. Sunnova's operating efficiency is
supported by its local dealer model and the predictability of
revenue from its long-dated customer contracts. The independent
dealer model facilitates entry into new markets and the agility to
pivot quickly as market opportunities and risks evolve. Dealers
bear the cost to originate, design, and install solar energy and
storage systems while Sunnova manages quality control and sales,
financing, and servicing standardization. This limits risks
associated with construction, such as cost overruns, and leverages
the dealers' working capital, workmanship, and local market
relationships and knowledge. Sunnova generally enters into 10- to
25-year contracts with its customers, which provides long-term cash
flow predictability. Lease and power purchase agreements (PPAs)
contracts typically have annual price escalators, but loan and
lease contracts can have performance guarantees.
The company's balance sheet is encumbered, but it has good
capital-market access and adequate liquidity. Sunnova's
securitizations and warehouse credit facilities encumber the
majority of its customer receipts and assets. Unencumbered cash
flows are modest and generally consist of unpledged SRECs and
inventory or maintenance-agreement-only sales. Positively, its
securitization borrowing fully amortizes with a weighted average
life of about 7.2 years, generally has long-term maturities, and is
increasingly eliminating the junior tranches to support the
available free cash flow. The company is diversifying its financing
sources, issuing the $142.7 million net share issuance in December
2020, the $575 million of senior convertible notes in May 2021, and
the proposed $350 million of senior unsecured notes. S&P said, "We
also look favorably on the company's repeat transactions with
financing partners (e.g., tax equity investors, ABS lenders) and
track record of declining capital costs. We consider Sunnova's
liquidity to be adequate given our view that substantially all of
its capital expenditures are discretionary, because they're related
to new customer acquisitions. We expect that the company will
maintain a healthy liquidity cushion of unrestricted cash and
credit facility availability of at least $250 million."
S&P said, "We expect sound underwriting standards with minimal
credit losses. We consider Sunnova's underwriting standards
relatively conservative, as demonstrated by its track record of
minimal credit losses and below-industry-average delinquency rates
and a fleet average 740 FICO score as of Dec. 31, 2020." Cash
collections are supported by 91% of its customers having automatic
monthly payments. Performance guarantees provide some cash flow
uncertainty, but the company's cumulative energy production
compared with contract rates has remained above 100% since the
fourth quarter of 2018.
Solar installation costs are falling, but at a slower pace than a
few years ago, which could limit Sunnova's growth and geographic
expansion. Declining residential solar installation costs have
supported industry growth by helping Sunnova expand into new
markets and deploy systems in states subject to high average
electricity rates. However, the pace of the installation-cost
decline has slowed in recent years, limiting the company's
geographic expansion into states with lower electricity rates.
According to the Solar Energy Industries Association (SEIA),
residential solar hardware costs have remained flat since 2017, and
soft costs (such as labor, customer acquisition, and permitting
costs)--which typically account for 63% of the total installation
costs--have declined only 4.5%. Improved permitting is crucial to
reduce installation costs, which SEIA estimates at $1 per kilowatt
of installation cost (about 53% of total soft costs). In addition,
improved solar-cell efficiency could support reduced hardware
costs.
S&P also sees concentration risk in the company's supply chain,
making the company susceptible to quality issues, shortages, or
price increases. To illustrate: As of June 30, 2021, Hanwha Q-Cells
and Trina Solar supplied approximately 38% and 13%, respectively,
of Sunnova's installed solar photovoltaic panels; Enphase Energy,
Inc. and SolarEdge Technologies Inc. supplied approximately 47% and
45%, respectively, of inverters; and Tesla Inc. provided 96% of
energy storage systems. In addition, China is a significant
exporter of solar cells and other solar products. Accordingly, an
escalation of trade tensions, tariffs, or regional disruptions
could adversely affect costs. Currently, high demand for energy
storage and limited battery suppliers are challenging availability
and lead times.
Sunnova has a good market position in a growing sector. The company
enjoys a good market position given its established customer base,
financing expertise, and unique independent dealer operating model
that leverages the large and fragmented local contractor market.
S&P said, "We believe the company could nearly double its revenue
by 2023 as it continues to expand its dealer network, increase
storage attachment rates, and leverage the recent SunStreet merger
for low-cost customer acquisitions. The company also has room to
grow in ancillary products. However, we remain uncertain about the
company's longer-term prospects. As the market matures, we believe
that an improved user experience and affordability will drive
success. We also believe success will depend on continuous efforts
to reduce manufacturing, installation, and financing costs and on
broadening its services per customer, which have remained at
approximately 3.7." These could include grid services, energy
management and storage services, and electronic vehicle charging.
S&P said, "The stable outlook reflects our expectation that good
residential solar demand, financing conditions, and operating
performance will support Sunnova's customer acquisitions and
earnings growth over the next 12 months. We expect adjusted EBITDA
of more than $40 million in 2021 and $80 million in 2022, with a
sustained liquidity cushion of at least $250 million."
S&P could lower the ratings if:
-- S&P expected available liquidity (unrestricted cash plus credit
facility availability) to fall and remain below $250 million;
-- Operating conditions or performance deteriorated such that we
concluded the capital structure were unsustainable or we expected a
payment default over the next 12 months; or
-- Credit losses spiked or value per customer or underwriting
standards deteriorated.
In such a scenario, there could be a covenant breach, cash traps
within securitizations, and lower residual cash flow to the
company, or the company could struggle to curtail its capital
expenditures and cash flow deficits in the face of weakening
capital-markets conditions.
Although unlikely over the next 12 months given the company's
significant growth investments and expected cash flow deficits, S&P
could raise the ratings if:
-- The company established a track record of consistent cash flow
generation during its growth,
-- Adjusted EBITDA interest coverage were sustained above 2x, and
-- There were significant increases in its operational and
geographic diversity.
SVXR INC: Case Summary & 30 Largest Unsecured Creditors
-------------------------------------------------------
Debtor: SVXR, Inc.
90 Bonaventura Drive
San Jose, CA 95134
Business Description: SVXR, Inc. -- https://svxr.com -- offers
high speed inspection and metrology
technology to the semiconductor packaging
industry.
Chapter 11 Petition Date: August 4, 2021
Court: United States Bankruptcy Court
Northern District of California
Case No.: 21-51050
Debtor's Counsel: Todd M. Schwartz, Esq.
PAUL HASTINGS LLP
1117 S. California Avenue
Palo Alto, CA 94304
Tel: (650) 320-1883
Email: toddschwartz@paulhastings.com
Debtor's
Notice,
Claims Agent
and Administrative
Advisor: OMNI AGENT SOLUTIONS
Estimated Assets: $1 million to $10 million
Estimated Liabilities: $10 million to $50 million
The petition was signed by Daniel Trepanier, CEO & president.
A copy of the Debtor's list of 20 largest unsecured creditors is
available for free at PacerMonitor.com at:
A full-text copy of the petition containing, among other items, a
list of the Debtor's 30 largest unsecured creditors is available
for free at PacerMonitor.com at:
https://www.pacermonitor.com/view/Z7BHN2Y/SVXR_Inc__canbke-21-51050__0001.0.pdf?mcid=tGE4TAMA
TCP INVESTMENT: Case Summary & 20 Largest Unsecured Creditors
-------------------------------------------------------------
Debtor: TCP Investment Properties, LLC
593 Regency Circle
Richmond, KY 40475
Business Description: TCP Investment Properties, LLC owns real
properties in Richmond, KY having a current
value of $3.67 million.
Chapter 11 Petition Date: August 4, 2021
Court: United States Bankruptcy Court
Eastern District of Kentucky
Case No.: 21-50906
Debtor's Counsel: Dean A. Langdon, Esq.
DELCOTTO LAW GROUP PLLC
200 North Upper St.
Lexington, KY 40507
Tel: (859) 231-5800
Fax: (859) 281-1179
Total Assets: $3,667,501
Total Liabilities: $2,971,137
The petition was signed by Paul W. Baker as 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/BOS3PYY/TCP_Investment_Properties_LLC__kyebke-21-50906__0001.0.pdf?mcid=tGE4TAMA
THERMOSTAT PURCHASER: S&P Assigns 'B-' ICR, Outlook Stable
----------------------------------------------------------
S&P Global Ratings assigned its 'B-' issuer credit rating to
Thermostat Purchaser III Inc. (d/b/a Reedy Industries Inc.). At the
same time, S&P assigned its 'B-' issue-level rating and '3'
recovery rating to the company's proposed first-lien debt
facilities. The second-lien debt is not rated.
S&P said, "The stable outlook reflects our expectation that Reedy's
increased scale should enable it to sustain EBITDA margins around
12% and generate free operating cash flow (FOCF--operating cash
flow less capital spending) of about $30 million in the next 12-18
months. However, we also expect adjusted leverage to remain above
the 7x.
"The company's high starting leverage, financial sponsor ownership,
and our expectation for ongoing debt-funded acquisitions will
likely prevent significant leverage reduction within the next 12
months. We expect S&P Global Ratings-adjusted pro forma leverage to
remain in the low-8x area through 2021. While we are forecasting
that Reedy will generate positive free cash flow over the next 12
months, which provides some financial flexibility, we do not
anticipate material debt reduction and expect the company's credit
measures will remain relatively stable, including leverage above
7x. Our forecast incorporates to the use of the new $92 million
combined first- and second-lien DDTL to fund acquisitions, which
are an integral part of Reedy's growth strategy given their
relatively favorable return economics compared to greenfield
expansion. We expect the company's pro forma revenue in 2021 to be
more than quadruple its revenues in fiscal year ended December
2018, totaling more than $500 million. The increased scale was
largely through an aggressive acquisition strategy starting in 2019
with about 15 acquisitions within the past three years. We view
integration and execution risk as relatively high as the company
broadens its footprint and invests in its technological
infrastructure.
"The company's small scale, narrow focus in the fragmented and
highly competitive HVAC industry, and geographic concentration
constrain our assessment of Reedy's competitive position. Reedy's
operating scale remains small and more concentrated compared to
rated peers in the HVAC and installation industries. While the
company has solid market share in the Midwest where it is
headquartered, it has a presence in only 10 states compared to
Service Logic, which operates nationally, generating about three
times more in revenue, and CoolSys, with its presence in more than
44 states and generating about a third more in revenue.
Additionally, the commercial HVAC servicing industry is highly
fragmented because it comprises thousands of small regional
contractors and mom-and-pop shops, as well as large original
equipment manufacturers (OEMs) and building management companies
that choose to in-source their routine maintenance work, due to the
limited barriers to entry. Consequently, the level of competition
is high, and providers have limited pricing power given that they
typically compete on the strength of their relationships in the
local market and ability to deliver high-quality work on time.
Given its long history operating in the Midwest, Reedy is able to
leverage its longstanding relationships to command higher pricing.
However, as the company continues to expand its geographic
footprint further South and West, it will have to compete with
incumbents that are more knowledgeable about those local markets.
"Maintaining high labor quality is one of the key differentiation
factors contributing to Reedy's current margins. We believe the
company's dependence on its technician workforce supports its
margins, but also constrains further improvements in profitability.
Due to the complexity of commercial building HVAC equipment, these
technicians are skilled workers that demand high wages, thus the
bulk of the company's cost base is composed of direct costs (about
70%), which is largely labor, subcontractor, and union workforce
costs. Accordingly, we believe that margin expansion opportunities
are limited because these high labor expenses burden its cost
structure, though we note these challenges are felt among most
competitors within the HVAC and broader facilities services
industry, and are not unique to the company whose profit margins
are, in our view, above some of its rated peers. Altogether, given
the high debt servicing costs stemming from the proposed
transaction, Reedy will have limited operational flexibility to
withstand any unanticipated operating issues.
Reedy benefits from a high rate of re-occurring revenue (around
84%) and more than one-third of its revenue being contract-based,
which provides good revenue visibility. Although costs associated
with switching providers are low, building operators tend to rely
on technicians experienced with their building's complex equipment
for any incremental ad hoc work, including emergency repairs, break
fix, and replacement and retrofitting work, which is typically
completed on a 10-15 year cycle as needed. As such, the company
derives nearly 75% of its customer base from maintenance and
repair, which then helps win additional follow-on jobs in its
retrofit and replacement segment where more than 80% is coming from
service pull-through. In addition, the company's adjusted-EBITDA
margins are above its most closely rated peers in the HVAC
industry.
HVAC industry growth is supported by positive secular tailwinds.
The COVID-19 pandemic heightened awareness of indoor ventilation,
which is especially relevant for education buildings, health care,
office spaces, and government buildings--Reedy's main end markets.
Similarly, some state governments as well as the new federal
administration are pushing for climate reform and lowering energy
consumption, which translates into an upgrade of HVAC systems to be
more energy efficient. These factors combined, help drive the
movement toward newer or retrofitted models.
S&P said, "The stable outlook reflects our expectation that Reedy's
increased scale should enable it to sustain EBITDA margins around
12%, and generate FOCF of about $30 million within the next 12-18
months. However, we also expect adjusted leverage to remain above
the 7x.
"We could lower our rating on Reedy if operating performance
deteriorates, if the integration of its newly acquired companies is
not executed well or intense price-based competition results in
deterioration of EBITDA. We could also lower our rating if the
company pursues aggressive shareholder returns." Specifically, S&P
would consider a downgrade if:
-- Margins fell below 8%;
-- S&P expected sustained FOCF deficits contributing to a less
than adequate liquidity position; or
-- S&P considered the company's capital structure to be
unsustainable absent favorable business conditions.
Although unlikely over the next 12 months given the company's high
starting leverage, S&P could raise its rating Reedy's operating
performance significantly exceeds its expectation through a
sizeable increase in scale and a strong ability to cross-sell its
services. In this scenario, stronger EBITDA growth would translate
into gradual deleveraging. S&P's upside scenario assumes the
company would refrain from large debt-funded dividends or
shareholder returns along with:
-- Adjusted debt to EBITDA sustained below 6.5x with a commitment
to keep it around this level; and
-- FOCF to debt sustained in the mid- to high-single digit percent
area.
TRANSOCEAN LTD: Incurs $103 Million Net Loss in Second Quarter
--------------------------------------------------------------
Transocean Ltd. filed with the Securities and Exchange Commission
its Quarterly Report on Form 10-Q disclosing a net loss of $103
million on $656 million of contract drilling revenues for the three
months ended June 30, 2021, compared to a net loss of $497 million
on $930 million of contract drilling revenues for the three months
ended June 30, 2020.
For the six months ended June 30, 2021, the Company reported a net
loss of $201 million on $1.31 billion of contract drilling revenues
compred to a net loss of $888 million on $1.69 billion of contract
drilling revenues for the same period in 2020.
As of June 30, 2021, the Company had $21.20 billion in total
assets, $1.32 billion in total current liabilities, $8.57 billion
in total long-term liabilities, and $11.31 billion in total
equity.
Operating and maintenance expense was $434 million, compared with
$435 million in the prior quarter.
General and administrative expense was $39 million, in line with
the first quarter of 2021.
Interest expense, net of amounts capitalized, was $115 million, in
line with the first quarter of 2021. Interest income was $4
million, compared with $3 million in the previous quarter.
Cash flows provided by operating activities were $153 million,
compared to $96 million in the prior quarter. This was primarily
due to the timing of interest payments and reduced
personnel-related payments.
Second quarter 2021 capital expenditures of $41 million were
primarily related to its newbuild drillships under construction.
This compares with $59 million in the previous quarter.
"Operationally, we delivered another solid quarter, with an
Adjusted EBITDA Margin of 36% on Adjusted Revenue of $713 million,"
said President and Chief Executive Officer, Jeremy Thigpen. "These
better than anticipated results were driven largely by our
continued focus on operational excellence, as evidenced by our
strong uptime performance, which resulted in revenue efficiency of
98 percent."
"During the quarter, we took meaningful steps to improve our
liquidity by agreeing to delay delivery and payment of our two
newbuild drillships, the Deepwater Atlas and the Deepwater Titan,
ultimately deferring over $450 million of near-term capex.
Additionally, we further improved our liquidity through the
initiation of our ATM program that provides us with additional
optionality. We will remain pragmatic yet disciplined in using
this tool now and in the future."
Thigpen concluded: "As we enter the back half of this year, we
remain encouraged by the upcycle that is currently unfolding.
Assuming oil prices remain supportive, we see utilization and
dayrates for our ultra-deepwater assets materially improving as we
move into 2022."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1451505/000145150521000071/rig-20210630x10q.htm
About Transocean
Transocean Ltd. is an international provider of offshore contract
drilling services for oil and gas wells. The company specializes
in technically demanding sectors of the offshore drilling business
with a particular focus on ultra-deepwater and harsh environment
drilling services.
Transocean reported a net loss of $568 million for the year ended
Dec. 31, 2020, compared to a net loss of $1.25 billion for the year
ended Dec. 31, 2019. As of Dec. 31, 2020, the Company had $21.80
billion in total assets, $1.38 billion in total current
liabilities, $8.98 billion in total long-term liabilities, and
$11.43 billion in total equity.
* * *
As reported by the TCR on July 12, 2021, S&P Global Ratings raised
its issuer credit rating on Switzerland-based offshore drilling
company Transocean Ltd. to 'CCC' from 'CCC-'. S&P said, "Our 'CCC'
issuer credit rating reflects the potential that the company will
undertake additional distressed transactions over the next year.
Although Transocean has taken steps to improve its liquidity, it
still has significant debt maturities and high capital spending
requirements over the next two years."
U.S. TOBACCO COOPERATIVE: Seeks to Hire SSG as Investment Banker
----------------------------------------------------------------
U.S. Tobacco Cooperative Inc. and its affiliates seek approval from
the U.S. Bankruptcy Court for the Eastern District of North
Carolina to employ SSG Advisors, LLC as their investment banker.
SSG will render these services:
(a) prepare an information memorandum describing the Debtors,
their historical performance and prospects;
(b) assist the Debtors in compiling a data room of documents
related to financing;
(c) assist the Debtors in developing a list of suitable
potential lenders;
(d) coordinate the execution of confidentiality agreements for
potential lenders and investors wishing to review the information
memorandum;
(e) assist the Debtors in coordinating physical or virtual
site visits for interested lenders and work with the management
team to develop appropriate presentations for such visits;
(f) solicit competitive offers from potential lenders;
(g) advise and assist the Debtors in structuring the financing
and in negotiating the financing agreements;
(h) provide testimony in support of such financing; and
(i) assist the Debtors and their other professionals, as
necessary.
The Debtors have agreed to compensate SSG as follows:
(a) An initial fee equal to $40,000;
(b) A monthly fee of $40,000;
(c) A financing fee upon closure of a financing transaction;
and
(d) Reimbursement of out-of-pocket expenses.
J. Scott Victor, a managing director at SSG Advisors, 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. Scott Victor
SSG Advisors, LLC
300 Barr Harbor Drive, Suite 420
West Conshohocken, PA 19428
Telephone: (610) 940-1094
Facsimile: (610) 940-4719
Email: jsvictor@ssgca.com
About U.S. Tobacco Cooperative
U.S. Tobacco Cooperative produces U.S. flue-cured tobacco grown by
500+ member growers in Florida, Georgia, South Carolina, North
Carolina, and Virginia. Member-grown tobacco is processed and sold
as raw materials to cigarette manufacturers worldwide.
U.S. Tobacco Cooperative and affiliates sought Chapter 11
protection (Bankr. E.D. N.C. Lead Case No. 21-01511) on July 7,
2021. In the petition signed by Keith H. Merrick, chief financial
officer, U.S. Tobacco Cooperative estimated assets of between $100
million and $500 million and estimated liabilities of between $100
million and $500 million.
Judge Joseph N. Callaway oversees the cases.
The Debtors are represented by Hendren, Redwine & Malone, PLLC.
BDO Consulting Group, LLC and SSG Advisors, LLC serve as the
Debtors' financial advisor and investment banker, respectively.
U.S. TOBACCO: Bankruptcy Administrator Unable to Appoint Committee
------------------------------------------------------------------
The U.S. Bankruptcy Administrator for the Eastern District of North
Carolina on Aug. 4 disclosed in a filing that no official committee
of unsecured creditors has been appointed in the Chapter 11 cases
of U.S. Tobacco Cooperative Inc. and its affiliates.
About U.S. Tobacco Cooperative
U.S. Tobacco Cooperative produces U.S. flue-cured tobacco grown by
more than 500 member growers in Florida, Georgia, South Carolina,
North Carolina, and Virginia. Member-grown tobacco is processed
and sold as raw materials to cigarette manufacturers worldwide.
U.S. Tobacco Cooperative and affiliates sought Chapter 11
protection (Bankr. E.D. N.C. Lead Case No. 21-01511) on July 7,
2021. In the petition signed by Keith H. Merrick, chief financial
officer, U.S. Tobacco Cooperative estimated assets of between $100
million and $500 million and estimated liabilities of between $100
million and $500 million.
Judge Joseph N. Callaway oversees the cases.
Hendren, Redwine & Malone, PLLC and BDO Consulting Group, LLC serve
as the Debtors' legal counsel and financial advisor, respectively.
UNIFIED WOMEN'S: WHUSA Transaction 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 $130 million under its first lien term
loan due 2027 (bringing the total to $794 million) and $55 million
under its second lien term loan (unrated) due 2027 (bringing the
total to $320 million). Proceeds, together with about $255 million
of equity, will be used to fund the acquisition of practice
management provider Women's Health USA (WHUSA; unrated) in a
transaction totaling $425 million. The outlook is unchanged at
stable.
Pro-forma for the transaction as of Q1/21, Moody's adjusted debt to
EBITDA will peak at around 7.3x (from around 7x, pro-forma for the
previously announced CCRM acquisition) before declining toward 6.5x
over the next twelve months. As part of the transaction, Unified
will also upsize its revolving credit facility to $120 million from
around $80 million currently.
The acquisition will enhance the company's presence in the OB/GYN
market, providing increased scale and geographic diversification.
Execution risks are partially mitigated by the similar nature of
WHUSA's service offerings and Moody's expectation that existing
management and administrative functions will remain largely intact,
limiting challenges around integration.
Unified's pro-forma liquidity is good. Sources total close to $200
million, supported by a cash balance of about $65 million
(excluding $71 million in restricted cash on hand to fund deferred
purchase obligations associated with tuck-in acquisitions during
2021), full availability under the $120 million revolver due 2025
and Moody's forecast for positive free cash flow over the next
twelve months of about $15 million. Following the transaction,
annual mandatory debt repayments will total about $8 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
850 locations across 16 states and D.C. It provides non-clinical
administrative support services to medical practices. The company's
annual pro-forma revenue is approximately $390 million (in excess
of $1 billion if the company's affiliates revenue is included).
VAC FUND: Causes of Action to Fund Ch. 11 Plan
----------------------------------------------
VAC Fund Houston, LLC and the Official Committee of Unsecured
Creditors filed with the U.S. Bankruptcy Court for the District
Nevada a Sixth Amended Joint Chapter 11 Plan of Reorganization and
accompanying Disclosure Statement dated July 30, 2021. The Debtor
and the Committee are the proponents of the Joint Plan.
The Proponents have determined that the only source of recovery is
the cause of action against LendingHome and possible claims against
insiders and third-parties to be investigated by the management
board after confirmation. The Reorganized Debtor (which will be
managed by a three-member board known as the Management Board) will
prosecute and have the authority to settle the LendingHome Action.
The following prepetition transfers to persons who may be insiders
may be avoidable under Sections 544 through 550:
(1) $50,000 to T & GB Enterprises, Inc. (a company owned by an
individual named Troy Gartrell);
(2) $341,157 to RG Pass Through CS, LLC (a company controlled by
certain trusts affiliated with the Debtor's principal, Chris
Shelton);
(3) $147,500 to Creative Design 4U, LLC (not an insider); and
(4) $101,577 to JC Management Consulting, LLC (a company owned by
the Debtor's controller, Jon Jorgenson).
The Debtor believes that the possible causes of action against
these four entities have little to no value to the unsecured
creditors. Nevertheless, the Committee will investigate all of
these transfers and transactions and prosecute or, through the
Management Board, cause the Reorganized Debtor to prosecute any
claims for any causes of action it determines are appropriate, and
the probable benefits of pursuing these matters outweigh the
probable costs and risks to the Estate.
Upon the Effective Date, all personal property of the Estate will
be transferred to and will be owned by the Reorganized Debtor
including all leases, licenses and contracts, except for the
Properties previously transferred to Goldman Sachs Bank and
LendingHome. The property securing the debt owed to Goldman Sachs
is no longer property of the Estate, pursuant to an order on a
Stipulation by and between the Debtor, the Committee and Goldman
Sachs. All of the assets transferred to the Reorganized Debtor
will remain subject to the liens of LendingHome, as well as the
relevant taxing authorities which have liens on the Properties.
Classes of Claims under the Joint Plan
* Class 1 Secured Claim of LendingHome
This Class consists of the claim of LendingHome for $168,000, (LH
Loan 7) plus accrued interest at the contract rate, allegedly
secured by the house located at 2319 Encreek Road. The Debtor and
the Committee dispute that LendingHome holds a valid perfected lien
on this property. They believe that any lien held by Lending Home
is voidable, pursuant to Section 544 of the Bankruptcy Code. The
Committee and the Debtor have filed an avoidance action against
this creditor. The net proceeds received from any such action,
after paying any Allowed Administrative Expenses, will be placed
into the Unsecured Creditors' Pool.
If LendingHome prevails in that action, it shall retain its lien on
the house and shall be paid the full amount of its Allowed Secured
Claim, plus interest, from the proceeds ofthe sale of the property
in the ordinary course of business over a period up to 18 months
after the Effective Date.
The Debtor shall be paid the net sale proceeds after payment of the
LH Loan 7, any recorded tax liens, properly perfected mechanics
liens which are unaffected by the Joint Plan or the Confirmation
Order, closing costs and commissions. The Reorganized Debtor shall
use those proceeds to pay first, any Allowed Administrative Claims
and, second, any Allowed Priority Claims. It shall deposit any
remaining proceeds into the Unsecured Creditor Pool.
If the house has not been sold prior to the eighteen-month
anniversary of the Effective Date, it shall be transferred to
LendingHome on that date in full satisfaction of the remaining
amount of the loan, unless the house is in escrow on the 18-month
anniversary of the Effective Date, in which case the Debtor shall
be permitted to proceed with the sale. If the home thereafter falls
out of escrow and a sale cannot be completed, the home shall be
transferred to LendingHome on that date.
* Class 2 General Unsecured Claims
The Unsecured Claims against the estate total approximately $4
million, of which an estimated $3.5 million will be Allowed
Unsecured Claims. The Debtor and Committee do not admit that any
scheduled or filed Unsecured Claim is valid.
Each holder of an Allowed Claim in Class 2 shall receive a
beneficial interest equal to the amount of their Allowed Claim in
the Unsecured Creditors Pool in exchange for their Allowed Claim.
On a quarterly basis, the Reorganized Debtor shall make a
distribution to holders of beneficial interests in the Unsecured
Creditors Pool, and each holder shall receive their pro rata share
of the Unsecured Creditors Pool on each quarterly distribution
date.
The Reorganized Debtor will investigate claims against entities
controlled by the Debtor's principal, Chris Shelton and avoidance
actions against third parties. In the event that those causes of
action yield a greater return that the administrative claims of
Tiffany & Bosco, P.A. and Brinkman Law Group, PC, there may be a
small distribution that may be paid to creditors from the Unsecured
Creditors' Pool.
* Class 3 Holders of Equity Interests
This class shall consist of the interests of the holder of Equity
Interests in the Debtor. No holder of Equity Interests shall retain
any interests under the Joint Plan. Holders of Equity Interests
are deemed to reject the Plan.
All three classes of claims are impaired and are entitled to vote
on the Plan.
A copy of the Disclosure Statement is available for free at
https://bit.ly/3jdPfZq from PacerMonitor.com.
Counsel for the Debtor:
Christopher R. Kaup, Esq.
Ace Van Patten, Esq.
Tiffany & Bosco, P.A.
10100 West Charleston Boulevard
Las Vegas, NV 89135
Telephone: (702) 258-8200
Facsimile: (602) 258-8787
Email: crk@tblaw.com
avp@tblaw.com
Counsel for the Official Committee of Unsecured Creditors:
Daren R. Brinkman, Esq.
Brinkman Law Group, PC
543 Country Club Drive, Suite B
Wood Ranch, CA 93065
Telephone: (818) 597-2992
Facsimile: (818) 597-2998
Email: firm@brinkmanlaw.com
About VAC Fund Houston
VAC Fund Houston, LLC, a Nevada-based company engaged in activities
related to real estate, filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code (Bankr. D. Nev. Case No.
19-17670) on Dec. 2, 2019, disclosing $15,948,556 in assets and
$17,369,695 in liabilities. The petition was signed by Christopher
Shelton, trustee of VAC Fund Houston Trust, manager of Debtor.
Judge Mike K. Nakagawa oversees the case.
Christopher R. Kaup, Esq., at Tiffany & Bosco, P.A., is the
Debtor's legal counsel.
The U.S. Trustee for Region 17 appointed a committee of unsecured
creditors on Jan. 15, 2020. The committee is represented by
Brinkman Portillo Ronk, APC.
VESTAVIA HILLS: Wells Fargo Objects to Disclosure Statement
-----------------------------------------------------------
Wells Fargo Bank, N.A. filed with the U.S. Bankruptcy Court for the
Southern District of California an objection to the Proposed
Disclosure Statement to the Chapter 11 Plan of Reorganization dated
July 2, 2021 of Vestavia Hills, Ltd., d/b/a Mount Royal Towers.
J. Barrett Marum, Esq., at Sheppard, Mullin, Richter & Hampton LLP,
counsel for Wells Fargo noted that within the Plan, the Debtor
proposes to stretch the protections available to non-debtors under
the Bankruptcy Code well beyond their permissible limits, such that
Wells Fargo will be precluded from collecting against the
Guarantors for years after Mount Royal Towers is sold, so long as
the reorganized debtor makes certain specified post-confirmation
payments. Owing to this, the Plan is unconfirmable as a matter of
law. Ninth Circuit precedent precludes the issuance of the type of
injunction contemplated under the Plan, he said.
Mr. Marum added that the Disclosure Statement fails to provide
creditors with the information they need to make an informed
decision about the Plan. Most notably, the Disclosure Statement
fails to sufficiently describe how the Debtor is going to fund its
Plan obligations after its only meaningful asset, Mount Royal
Towers, is sold. Assuming the sale closes, the Debtor will be left
with significant liabilities but no income-producing assets. The
Debtor recognizes this, but simply states that its limited partners
-- including the Guarantors of the Wells Fargo debt -- will somehow
provide the Debtor with funds sufficient to pay all amounts owing
under the Plan, he said. Those sums include the anticipated
deficiency amount owed to Wells Fargo (a sum expected to exceed
$5,000,000) as well as other creditors' claims (which include
$1,436,134 of general unsecured claims and could increase
significantly. The Disclosure Statement is fatally vague on this
critical issue, he told the Court.
For these reasons, the Court should not approve the Disclosure
Statement, the counsel asserted.
A copy of the objection is available for free at
https://bit.ly/3fusUG6 from PacerMonitor.com.
A hearing on the matter is scheduled for 2 p.m. on August 26,
2021.
Counsel for Wells Fargo Bank, N.A.:
J. Barrett Marum, Esq.
Aaron J. Malo, Esq.
Sheppard, Mullin, Richter & Hampton LLP
501 West Broadway, 19th Floor
San Diego, CA 92101-3598
Telephone: 619.338.6500
Facsimile: 619.234.3815
Email: bmarum@sheppardmullin.com
amalo@sheppardmullin.com
- and -
W. Patton Hahn, Esq.
Matthew M. Cahill, Esq.
Baker, Donelson, Bearman,
Caldwell & Berkowitz, P.C.
420 20th Street North
Wells Fargo Tower, Suite 1400
Birmingham, AL 35203-5202
Telephone: 205.328.0480
Facsimile: 205.322.8007
Email: phahn@bakerdonelson.com
mcahill@bakerdonelson.com
About Vestavia Hills Ltd.
Vestavia Hills, Ltd., which conducts business under the name Mount
Royal Towers, operates a continuing care retirement community and
assisted living facility for the elderly in Vestavia Hills, Ala. It
offers individualized senior living options for a convenient
community lifestyle and provides personalized nursing care.
Vestavia Hills sought Chapter 11 protection (Bankr. S.D. Cal. Case
No. 20-00018-11) on Jan. 3, 2020. The Debtor disclosed $18,531,957
in assets and $29,742,790 in liabilities as of the bankruptcy
filing. Judge Louise Decarl Adler oversees the case. The Debtor
tapped Sullivan Hill Rez & Engel as its legal counsel and Harbuck
Keith & Holmes, LLC as its special Alabama licensing and regulatory
counsel.
VICI PROPERTIES: S&P Places 'BB' ICR on CreditWatch Positive
------------------------------------------------------------
S&P Global Ratings placed all of its ratings on gaming REIT VICI
Properties Inc., including its 'BB' issuer credit rating, on
CreditWatch with positive implications.
VICI's acquisition of MGP will strengthen its competitive position.
The transaction will enhance the company's scale and reduce its
tenant concentration. Specifically, the acquisition will add 15
high-quality assets to VICI's portfolio, including eight regional
gaming assets and seven Las Vegas properties. In addition, MGP's
regional gaming portfolio will expand its regional footprint into
three new gaming geographies, including Maryland, Massachusetts,
and New York. Furthermore, the acquisition will increase VICI's
cash rent revenue by over 70% (to about $2.6 billion) by adding $1
billion of cash rent. The company's revenue mix between regional
gaming (55%) and Las Vegas (45%) will remain relatively balanced.
VICI's acquisition of MGP will also materially reduce its
concentration with its largest tenant. Pro forma for the
acquisition, Caesars will account for 41% of VICI's rent revenue,
which compares with 68% pro forma for the company's previously
announced Venetian acquisition.
VICI's improved competitive position will likely enable it to
support a greater level of leverage at higher ratings. The company
will fund the $17.2 billion purchase price by issuing stock to
MGP's Class A shareholders, providing $4.4 billion in cash to MGM
Resorts (MGP's Class B shareholder), and assuming $5.7 billion of
MGP's debt. The purchase price represents a 17.5x pro rata EBITDA
multiple. S&P said, "We do not currently know how the transaction
will affect VICI's leverage because it has not disclosed its
planned financing for the cash component of the purchase price.
However, we believe it will likely fund the cash consideration with
a mix of debt and equity. Although we believe the company's
long-term financial policy is to maintain leverage in the 5.0x-5.5x
range, we also believe that it might allow its leverage to increase
above the high end of its policy range for a large transformational
acquisition like MGP. Based on our view that the acquisition will
strengthen VICI's competitive position, we expect to loosen our
leverage thresholds for the company at higher ratings. If the
company finances the acquisition with a mix of equity and debt that
leads to pro forma leverage of about 6x or below in roughly one
year following the close of the acquisition, we could raise our
rating to 'BBB-'. If VICI's leverage increases above 6.0x but
remains below 7.5x for the next several years, we could raise our
rating to 'BB+'."
VICI likely plans to eliminate its secured debt and establish an
unencumbered asset pool. The company's existing secured term loan
currently encumbers nearly all of its asset base, which causes its
capital structure to compare unfavorably with those of the
higher-rated gaming and traditional REITs it covers. As part of
this acquisition, S&P expects VICI will look to refinance its
secured debt and fully unencumber its wholly owned asset base,
which will improve its financial flexibility and enhance the
comparability of its capital structure with those of higher-rated
REITs.
S&P said, "In resolving the CreditWatch, we plan to assess the
effects that VICI's financing plans for the MGP acquisition will
have on its leverage and its ability to unencumber its wholly owned
asset base. We could raise our issuer credit rating on the company
by one or two notches depending on the mix of debt and equity it
raises to complete the acquisition. If VICI funds the MGP
acquisition with sufficient equity such that we expect its pro
forma leverage to be about 6x or below in roughly one year
following the close of the acquisition, we could raise our rating
two notches to 'BBB-'. If we believe the company's pro forma
leverage will be above 6.0x but below 7.5x for the next several
years, we could raise our rating one notch to 'BB+'."
VILLAGIO CARLSBAD: Plan to Pay Creditors One Time From Asset Sale
-----------------------------------------------------------------
Villagio Carlsbad Cottages LLC filed with the U.S. Bankruptcy Court
for the Southern District of California a First Amended Chapter 11
Small Business Plan and accompanying Disclosure Statement dated
July 30, 2021.
The Debtor operates a rental real estate property located at 3044
State Street, Carlsbad, California, which has a fair market value
of approximately $4 million. The Subject Property is encumbered by
a deed of trust held by Sunwest Bank amounting to approximately
$1,827,487. The Subject Property, therefore, holds significant
equity.
Classes of Claims and Equity Interests
* Class 1 Secured Claim
Class 1 consists of Sunwest Bank's claim for $1,827,487, secured by
the Subject Property. Class 1 is impaired. The holder of the
Class 1 claim shall be paid its Allowed Claim in full upon closing
of the sale of the Subject Property, or upon refinance of the
Subject Property, whichever occurs, and which shall occur no later
than September 20, 2021.
* Class 2 Priority Unsecured Claims
The Debtor has no Priority Unsecured Claims.
* Class 3 General Unsecured Claims
Class 3 includes only the general unsecured claim of the Internal
Revenue Service for $3,200. This class is impaired. The holder of
the Class 1 claim shall be paid its Allowed Claim in full upon
closing of the sale of the Subject Property, or upon refinance of
the Subject Property, whichever occurs, and which shall occur no
later than September 27, 2021.
* Class 4 Equity Interest Holders
Class 4 consists of the 100% interest of Russell Bennett.
The Debtor does not intend on making monthly or other installment
payments to the Secured Creditor. Instead, the Secured Creditor
will be paid in full upon closing of the sale of the Subject
Property, or in the alternative, obtaining financing to refinance
the Subject Property.
The Debtor was managed by Mr. Bennett prior to, and during the
bankruptcy case. Mr. Bennett will continue to manage the Debtor
after the effective date of the order confirming the Plan.
A copy of the First Amended Disclosure Statement is available for
free at https://bit.ly/3Ci0I2O from PacerMonitor.com.
The hearing to consider approval of the Disclosure Statement will
be on September 8, 2021 at 2 p.m. Objections must be filed by
August 27.
Counsel for the Debtor:
Vik Chaudhry, Esq.
VC Law Group, LLP
6540 Lusk Blvd., Ste. C219
San Diego, CA 92121
Telephone: (858)519-7333
E-mail: vik@thevclawgroup.com
About Villagio Carlsbad Cottages LLC
Villagio Carlsbad Cottages LLC sought Chapter 11 protection (Bankr.
S.D. Cal. Case No. 21-01116) on March 23, 2021. On the Petition
Date, the Debtor estimated up to $50,000 in both assets and
liabilities.
The Debtor's bankruptcy was filed in an effort to stall the
foreclosure of a mortgaged property. As the foreclosure sale was
approaching, the Debtor aggressively attempted, and received Court
approval, to obtain financing in order to resolve the secured
creditor's claim. The secured creditor, however, would not stall
the sale, resulting to the bankruptcy case being filed just before
the foreclosure. Russell Bennett, manager, signed the petition.
Judge Margaret M. Mann presides over the case.
VC Law Group, LLP is the Debtor's counsel.
W.R. GRACE: S&P Assigns 'B' ICR on Standard Industries Deal
-----------------------------------------------------------
S&P Global Ratings assigned its 'B' issuer credit rating to W.R.
Grace Holdings LLC, which will be the borrower on the company's
revolving credit facility, new term loan, and exchanged notes.
S&P said, "We assigned our 'B' issue-level ratings to the company's
$450 million revolving credit facility, new $1,450 million senior
secured term loan, and exchanged senior secured notes. Our recovery
rating of '3', indicates our expectation for meaningful (50-70%;
rounded estimate: 55%) recovery in the event of a payment default.
"The stable outlook reflects our expectation that debt leverage
will increase substantially following the transactions, with S&P
Global Ratings-adjusted debt to EBITDA above 8x in 2021. Beyond
2021, we expect marginal deleveraging from EBITDA expansion, as
higher refinery utilization and strong polyolefin demand support
catalyst volumes, and net debt declines due to free cash flow
generation.
On April 26, 2021, U.S.-based Standard Industries Holdings Inc.
(Standard) announced that it had reached a definitive agreement to
acquire publicly traded W.R. Grace & Co. for $70 per share, valuing
the company at approximately $7 billion. As part of the
transactions, W.R. Grace Holdings LLC will increase incremental
debt by about $1.15 billion, and will issue $2.5 billion in new
senior secured debt, a portion of which will be offered in exchange
for existing unsecured notes and used to refinance existing term
loan facilities.
S&P said, "Our ratings on W.R. Grace Holdings LLC, and our view of
the company's elevated financial risk, reflect the considerable
increase in debt incurred as part of these transactions. We expect
EBITDA growth and free cash flow generation will lead to modest
deleveraging over our forecast period; however, we believe these
transactions will lead to credit metrics that are materially weaker
than our previous expectations at the rating."
Funding for the acquisition will be provided by a $3 billion equity
contribution by Standard, $600 million of preferred stock which
will be held by Apollo, and about $3.5 billion of debt issued by
W.R. Grace Holdings LLC. Overall, the acquisition by Standard will
add about $1.15 billion of incremental debt to the company's
balance sheet. S&P said, "Additionally, we view Apollo's $600
million preferred stock investment as debt-like due to the
securities' concentrated single investor ownership and the presence
of a what we view as an effective maturity date. This follows the
debt-funded acquisition of Albemarle's Fine Chemistry Services
business in the first half of 2021, which was financed by a $300
million term loan and $270 million of preferred stock. The
preferred stock, which we also consider to be debt-like, will
remain outstanding following the transaction."
S&P said "Upon acquisition close, we now expect leverage metrics
will weaken to what we consider to be elevated levels, with
weighted average debt to EBITDA around 8x and funds from operations
(FFO) to debt in the high-single digits. With metrics in this
range, we consider Grace to have higher financial risk than
similarly rated peers, such as PQ Corp. (B+/Stable/--). However, we
view the company's history of cash flow generation and high
profitability, including our expectation of moderate free cash flow
in 2021 and EBITDA margins in the 27%-28% range, as partially
offsetting the risk from higher absolute debt levels, and key
factors in helping to delever the business. However, management's
tolerance for initial leverage at such elevated levels constrains
our view of potential future deleveraging.
"Our ratings reflect Grace's global market leadership in polyolefin
and refining catalysts, polypropylene process licensing, and
specialty silicas, and are supported by its above-average
profitability and geographic diversification. We believe Grace's
business strengths offset a portion of the financial risk
associated with its highly leveraged financial metrics, and we
continue to view the company's leading market positions, long-term
customer relationships, and growth prospects in its consumer and
pharmaceutical materials technology portfolio as credit positive.
The company holds the number one or number two market position for
most of its offerings and maintains strong long-term relationships
with a diverse group of top-tier customers, each of whom make up
only a small portion of the company's overall revenue.
Additionally, the company has solid geographic diversity, with
operations and sales in over 60 countries. Our rating is also
supported by the company's high margins, which we expect to be in
the high-20% area over our forecast period."
Key risks to the business include raw material cost fluctuations
that have the potential to erode margins during periods of raw
material price inflation, and the company's exposure to volatile
end-markets given a sizeable portion of its revenue is derived from
petroleum refiners and the polyolefin industry. However, the
company has taken action to increase diversification and exposure
to higher growth end markets. Most recently it acquired Albemarle's
Fine Chemistry Services (FCS) business. FCS brought complementary
offerings to Grace's legacy materials technology
consumer/pharmaceutical portfolio and exposure to higher-margin,
higher-growth pharma end markets. Pro forma for the acquisition
only about one-third of the company's revenue will come from
refining technologies, with one-third from specialty catalysts, and
the remaining third from materials technologies.
S&P said, "The stable outlook reflects our expectation of
substantial EBITDA growth in 2021 based on our GDP growth
assumptions across key geographies, higher refinery utilization,
strong polyolefin demand, and incremental EBITDA from the company's
FCS acquisition. However, this will be more than offset by the
substantial increase in absolute debt incurred during 2021. We
project moderate deleveraging over our forecast period from further
EBITDA growth and free cash flow generation; however, under our
base-case scenario we expect the company's weighted-average credit
ratios will be substantially weaker than our expectations prior to
these transactions, with debt to EBITDA around 8x and FFO to debt
in the high-single-digit percent range.
"We could lower the ratings over the next 12 months if the demand
recovery currently underway in the company's key end markets such
as refining, transportation, and petrochemicals, were to slow
significantly, or if we expected the company to engage in
debt-funded acquisitions or shareholder distributions. In such a
downside scenario, we would expect EBITDA margins to decline by
greater than 200 basis points below our base-case forecast along
with slightly lower than projected revenue growth. This would most
likely cause debt to EBITDA to approach 9x on a weighted average
basis, and lead to a negative rating action.
"Although unlikely at this time, we could raise the rating over the
next 12 months if the macroeconomic environment, and demand in key
end markets, recovered to a level well above our current
expectations. To consider an upgrade, we would also expect the
company to use free cash flow to repay debt on an ongoing basis and
refrain from debt-funded acquisitions and/or shareholder
distributions, leading to materially improved credit metrics. In
such a scenario, we would expect S&P Global Ratings-adjusted debt
to EBITDA below 6.5x on a weighted average basis."
W133 OWNER: $22MM Sale to Harlem to Fund Payments in Trustee's Plan
-------------------------------------------------------------------
Lori Lapin Jones, Esq. as Chapter 11 Trustee of debtor W133 Owner
LLC submitted a Disclosure Statement and Plan of Liquidation for
the debtor dated August 3, 2021.
The centerpiece of the Plan is the post-confirmation closing on the
363 Sale of the Debtor's real property and improvements located at
308-310 West 133rd Street, New York, New York 10030 ("Property").
The 363 Sale of the Property was conducted on July 15, 2021
pursuant to the Sale Stipulation approved by the Bankruptcy Court
and the Terms and Conditions of Sale approved by the Bankruptcy
Court.
Harlem 133 Lender, having credit bid the sum of $22,000,000 for the
Property, was the successful bidder at the 363 Sale. In accordance
with the stipulation between the Trustee and Harlem 133 Lender, LLC
that was previously approved by the Bankruptcy Court, Harlem 133
Lender shall pay an amount equal to the Carve-Out to fund the Plan.
The Plan shall also be funded from any and all recoveries made or
obtained by the Trustee and/or Plan Administrator from the
liquidation of all of the Debtor's other assets, including any
litigation or avoidance claims held by the Debtor or the Estate.
The Trustee and Harlem 133 Lender entered into a stipulation ("Sale
Stipulation") pursuant to which Harlem 133 Lender consented to the
Trustee's sale of the Property and agreed to fund a carve out from
the sale proceeds encumbered by the Mortgage to pay, inter alia,
real estate tax liens against the Property, the Allowed
administrative costs and expenses associated with the sale of the
Property and administration of the Debtor's case, and Distributions
to Holders of Allowed General Unsecured Claims. Pursuant to the
Sale Stipulation, Harlem 133 Lender has an Allowed secured claim
against the Debtor's estate in the amount of $33,395,682 as of the
Filing Date ("Allowed Secured Claim").
Class 1 shall consist of the Allowed Secured Real Estate Liens and
Water and Sewer Charges as of the Closing Date. Class 1 is
unimpaired. Consistent with the Sale Stipulation and applicable
law, the Allowed Secured Real Estate Liens and Water and Sewer
Charges as of the Closing Date will be paid by the Trustee in full
from the Carve-Out within 7 business days after the Effective Date.
Class 1 Claimants are deemed to have accepted the Plan.
Class 2 shall consist of the Allowed Secured Claim of Harlem 133
Lender. Class 2 is impaired. Consistent with the Sale Stipulation:
(a) Harlem 133 Lender, its designee or assigns shall, in exchange
for the delivery of a Trustee's Deed for the Property tender to the
Trustee sums sufficient to pay the Carve-Out; and (b) Harlem 133
Lender shall not share in the General Unsecured Claims Reserve. The
Class 2 Claimant is eligible to vote on the Plan.
Class 3 shall consist of the Allowed Other Secured Claims. Class 3
is impaired. The Other Secured Claims are junior in priority to the
lien securing the Allowed Harlem 133 Lender Secured Claim, which is
not being paid in full. The Trustee believes that the Other Secured
Claims have a value of $0.00 and that Holders of Other Secured
Claims only have Deficiency Claims. Allowed Other Secured Claims
may be paid their Pro Rata share of: (a) any recoveries from Causes
of Action; and/or (b) any other source of recovery as and when
additional Distributions are made pursuant to the Plan.
Class 4 shall consist of the Allowed Priority Claims. Class 4 is
unimpaired. Consistent with the Sale Stipulation, Allowed Priority
Claims will be paid by the Trustee in full from the Carve-Out
within 7 business days after the Effective Date. However, the
Trustee does not believe there are any Priority Claims. Class 4
Claimants are deemed to have accepted the Plan.
Class 5 shall consist of all Allowed Unsecured Claims, which
include any allowed Deficiency Claims. Class 5 is impaired.
Consistent with the Sale Stipulation, Allowed General Unsecured
Claims, which shall include all Allowed Deficiency Claims, except
any Deficiency Claim of Harlem 133 Lender, will be paid their Pro
Rata share of no less than the Allowed General Unsecured Claim
Reserve. In addition, Allowed General Unsecured Claims, including
Allowed Deficiency Claims, may be paid their Pro Rata share of any
additional proceeds up to the amounts of the Allowed General
Unsecured Claims from: (a) any recoveries from Causes of Action;
and/or (b) any other source of recovery.
Class 6 shall consist of all Allowed Equity Interests. Class 6 is
impaired. Allowed Equity Interests are not anticipated to receive
any Distribution from the Estate given that the Holders of Allowed
Class 2, 3 and 5 Claims will not be made whole. Holders of Class 6
Equity Interests are deemed to have rejected the Plan.
The Plan shall be funded with the Carve-Out pursuant to the Sale
Stipulation together with the proceeds, if any, from the
prosecution of Causes of Action and any other source of recovery.
All Distributions shall be made by the Trustee or the Plan
Administrator in accordance with Article IX of the Plan, except
that to the extent that a Claim is a Disputed Claim, within 14 days
after the order allowing such Claim becomes a Final Order.
The 363 Sale was conducted on July 15, 2021. Harlem 133 Lender,
having credit bid the sum of $22,000,000 for the Property, was the
highest and best bidder. By the Sale Confirmation Order, the
Bankruptcy Court confirmed the results of the 363 Sale. Pursuant to
the Terms and Conditions of Sale, Harlem 133 Lender must close
title to the Property on or before the later of 30 days from the
entry of the Confirmation Order or an order confirming the results
of the 363 Sale, TIME BEING OF THE ESSENCE as to Harlem 133 Lender,
although such date may be extended solely by the Trustee.
The Bankruptcy Court has scheduled September 20, 2021 at 11:00 a.m.
as the Combined Hearing on Final Disclosure Statement Approval and
Plan Confirmation.
All completed ballots must be received no later than 5:00 p.m. on
September 10, 2021 ("Voting Deadline").
A full-text copy of Trustee's Disclosure Statement dated August 3,
2021, is available at https://bit.ly/2VjxCzO from PacerMonitor.com
at no charge.
Counsel to Lori Lapin Jones, Esq.:
Holly R. Holecek, Esq.
LaMonica Herbst & Maniscalco, LLP
3305 Jerusalem Avenue
Wantagh, NY 11793
Telephone: (516) 826-6500
Email: hrh@lhmlawfirm.com
About W133 Owner
W133 Owner, LLC, a Brooklyn, N.Y.-based company engaged in renting
and leasing real estate properties, sought protection under Chapter
11 of the Bankruptcy Code (Bankr. E.D.N.Y. Case No. 20-42637) on
July 16, 2020. Levi Balkany, sole member, signed the petition. At
the time of the filing, the Debtor had estimated assets of less
than $50,000 and liabilities of between $10 million and $50
million.
Rosenberg Musso & Weiner, LLP is the Debtor's legal counsel.
On Sept. 14, 2020, the court approved the appointment of Lori Lapin
Jones, Esq., as the Debtor's Chapter 11 trustee. The trustee
tapped LaMonica Herbst & Maniscalco, LLP as bankruptcy counsel and
Joseph A. Broderick, P.C. as accountant. Wenig Saltiel LLP,
Jeffrey Golkin Partners and Nixon Peabody LLP serve as the
trustee's special counsel.
WAYSTAR TECHNOLOGIES: Fitch Affirms 'B-' LT IDR, Outlook Stable
---------------------------------------------------------------
Fitch Ratings has affirmed the Long-Term Issuer Default Rating
(IDR) of Waystar Technologies, Inc. (Waystar) at 'B-' with a Stable
Outlook. Fitch has also affirmed the senior secured first lien term
loan at 'B+'/'RR2'. Fitch's actions affect approximately $1.8
billion of debt.
Waystar has announced the acquisition of Patientco for total
consideration in excess of $450 million, to be funded in part
through the issuances of an incremental $247 million first lien
term loan and an incremental $80 million second lien term loan
under the existing credit agreements. Fitch believes the
acquisition bolsters the company's end-to-end revenue cycle
management (RCM) solutions, adds critical capabilities to address
growing needs for revenue maximization by health care providers,
facilitates access to the large hospital system client segment and
provides opportunities for cross selling across the combined client
base.
KEY RATING DRIVERS
Sound Transaction Rationale: The Patienco acquisition supports
Waystar's go-to-market strategy to develop end-to-end RCM
offerings, leading with a strong technology platform based on
intuitive, flexible cloud-based software. The acquisition brings
capabilities in pre-service patient engagement and payments,
providing transparency and flexibility to a patient's ultimate
financial responsibility post-care.
Fitch believes these services fulfill increasingly important client
needs in maximizing collections. Patient receivables typically
experience elevated write-offs, while patient burdens for total
cost of care continue to rise. The average deductible has more than
doubled over the last 10 years, according to the Kaiser Family
Foundation. The deal also facilitates Waystar's penetration into
the large hospital client segment and presents meaningful
opportunities for cross-selling into the respective client bases.
Strong Growth Opportunity: Fitch expects Waystar to experience
consistent high-single to low double-digit organic growth as a
result of strong secular trends in U.S. healthcare spending and
utilization. The Centers for Medicare and Medicaid Services (CMS)
forecasts national health expenditure growth of 5.4% annually
through 2028 due to long-standing trends including an aging
demographic, medical procedure/drug cost inflation and utilization
growth. In addition, increased regulatory burdens, claims
processing complexity and pressures on provider profitability serve
as strong tailwinds for continued software adoption by providers.
The company's growth prospects are further supported by strong
retention rates resulting from high switching costs that include
staff training, implementation costs, business interruption risks
and reduced productivity when swapping vendors. Fitch believes that
the secular tailwinds and high switching costs produce a dependable
growth trajectory that benefits Waystar's credit profile.
Low Cyclicality: Fitch expects Waystar, which has experienced
positive growth in every year since its inception, including during
the current pandemic-driven macro downturn, to continue exhibiting
low cyclicality for the foreseeable future. Fitch believes the
company will exhibit continued strong correlation to overall U.S.
healthcare spending and utilization, which is highly
non-discretionary and has experienced uninterrupted growth since at
least 2000 according to CMS. As a result, Fitch believes Waystar
will demonstrate a stable credit profile with little sensitivity to
macroeconomic cycles.
Strong Margin Profile: Fitch forecasts pro forma FY20 EBITDA
margins of 43%, excluding synergies, for the combined Waystar,
eSolutions and Patientco. The company's margins compare favorably
to the 20%-45% range for Fitch-rated HCIT peers. In addition,
management has identified $3.3 million of synergies in the
acquisition of Patientco, balanced across printing costs,
third-party spend, and general & administrative expenses,
achievable within 18-24 months. Fitch believes the strong margins
contribute to robust FCF potential and support the ability to
sustain elevated leverage.
High Leverage: Waystar has agreed to acquire Patientco in a deal
valued in excess of $450 million, financed in part with $337
million of new debt with the balance provided primarily by readily
available cash. Fitch expects the transaction to raise
Fitch-calculated pro forma leverage to 9.1x as a result of the
minimal initial EBITDA contribution from the target. Fitch
forecasts a decline in leverage to 7.3x over the ratings horizon,
given the company's demonstrated commitment to reducing leverage
post M&A. Fitch expects limited deleveraging thereafter as a result
of the sponsor's likely strategy to continue to pursue debt-funded
acquisitions.
In 2020 Waystar completed the acquisition of eSolutions, which
increased pro forma leverage to 9.1x, while strong EBITDA growth
thereafter resulted in a reduction to 7.7x by 2Q21. Leverage is
well above the 5.6x median for Fitch-rated Healthcare IT issuers in
the 'B' category but is supported by the company's dependable
growth prospects, strong margin profile, limited capital intensity,
and low cyclicality.
Strategy Risks: Waystar's sales strategy targets the broad
healthcare provider market by leading with a strong technology
offering, rather than focusing on a narrow niche in the healthcare
universe. This presents competitive risks given direct competition
with larger RCM providers that could quickly scale up investment in
their product offerings and go-to-market efforts. This risk is
somewhat mitigated by the 2020 acquisition of eSolutions' NSV
offerings that require direct contracts with CMS and, as a result,
experience limited competition.
Evolving Marketplace: Waystar faces risks from an evolving
healthcare marketplace where efforts to slow cost growth will
require all constituents to modify their strategies. The nascent
efforts to shift to value-based care, where reimbursements are
directed toward successful outcomes rather than volume of
procedures, will require Waystar to re-examine its go-to-market and
pricing strategies to align more closely with the emerging
incentives that are based on medical outcomes. While the transition
to value-based case is slow-moving, Fitch believes that the shift
introduces risk of disruption and rejection from the marketplace
that may result in decreased growth.
DERIVATION SUMMARY
Fitch is evaluating Waystar pending its transaction to acquire
billing and payments platform provider, Patientco. Fitch believes
the company benefits from a favorable growth opportunity as medical
claim processing volumes continue to expand due to long-standing
trends in the U.S. healthcare industry including, an aging
demographic, medical procedure/drug cost inflation and utilization
growth.
The company exhibits strong client growth prospects with a leading
technology platform that addresses the increased regulatory
burdens, claims processing complexity and profitability pressures
that serve to promote continued software adoption by providers.
Fitch believes growth is further ensured by strong client retention
rates, high switching costs, robust sales efforts, and a history of
share gains.
Similar to the company's continued positive organic growth during
the pandemic-led downturn, Fitch expects Waystar to demonstrate
minimal cyclicality and durable resistance to economic cycles due
to the non-discretionary nature of healthcare spending. However,
despite these advantageous characteristics, the deal-driven
increase in Fitch-calculated pro forma leverage from 7.7x at 2Q21
to 9.1x is materially higher than the 5.6x median for Fitch-rated
Healthcare IT issuers in the 'B' category, which Fitch views as the
primary determinant of the 'B-' rating. No country-ceiling,
parent/subsidiary or operating environment aspects had an impact on
the rating.
KEY RECOVERY RATING ASSUMPTIONS
-- The recovery analysis assumes that Waystar would be
reorganized as a going-concern in bankruptcy rather than
liquidated;
-- 10% administrative claim;
-- 2% concession payment to junior lenders.
Going-Concern (GC) Approach
-- Waystar's GC EBITDA assumption includes pro forma adjustments
for a full-year contribution from the acquisition of
eSolutions but does not incorporate any further synergy
realization.
-- The GC EBITDA estimate reflects Fitch's view of a sustainable,
post-reorganization EBITDA level upon which Fitch bases the
enterprise valuation (EV). Fitch contemplates a scenario in
which platform consolidation into a unified RCM offering leads
to increased client churn, slowing revenue growth, and
increases in sales and R&D expenses to address the challenges.
As a result, Fitch expects that Waystar would likely be
reorganized with a similar product strategy and higher than
planned levels of operating expenses as the company reinvests
to ensure customer retention and defend against competition.
-- Under this scenario, Fitch believes revenue growth would slow
significantly to low single digits per annum with EBITDA
margins declining such that the resulting going-concern EBITDA
is approximately 10% below Fitch forecasted pro forma 2021
EBITDA.
-- An EV multiple of 7x EBITDA is applied to the GC EBITDA to
calculate a post-reorganization enterprise value.
The choice of this EV multiple considered the following factors:
-- Comparable Reorganizations: In Fitch's 13th edition of its
"Bankruptcy Enterprise Values and Creditor Recoveries" case
study, the agency notes seven past reorganizations in the
technology sector, where the median recovery multiple was
4.9x. Of these companies, only two were in the software
subsector: Allen Systems Group, Inc. and Aspect Software
Parent, Inc., which received recovery multiples of 8.4x and
5.5x, respectively. Fitch believes the Allen Systems Group,
Inc. reorganization is highly supportive of the 7.0x multiple
assumed for Waystar given the mission critical nature of both
companies' offerings.
-- M&A Multiples: A study of M&A transactions in the healthcare
IT industry from 2015 to 2020, particularly those competing in
the RCM space, establishes a median EV/EBITDA transaction
multiple of 15x. The acquisition of eSolutions represented a
21.3x multiple, not including synergies, while the acquisition
of Patientco represents a 7.3x multiple of revenue.
The recovery model implies a 'B+' and 'RR2' Recovery Rating for the
company's first-lien senior secured facilities, reflecting Fitch's
belief that lenders should expect to recover 71%-90% in a
restructuring scenario.
KEY ASSUMPTIONS
-- Transaction: acquisition of Patientco completed for total
consideration in excess of $450 million, funded with the
issuances of an incremental $247 million first lien term loan
and an incremental $80 million second lien term loan under the
existing credit agreements, as well as a fully drawn $50
million accounts receivable securitization facility and a $5
million equity contribution from the sponsor;
-- Revenue: FY21 pro forma growth of 14% due to accelerated
growth in patient volumes as patients catch up on medical care
that was deferred during the pandemic; organic growth of 9% -
10% annually thereafter due to client growth, cross-selling
opportunities, price increases, and increasing medical
procedure volumes;
-- Margins: pro forma EBITDA margin of 43% in FY21 due to
acquisition of low-margin Patientco, partially offset by
synergies achieved from prior acquisitions; minimal margin
expansion thereafter due to faster growth of Patientco, offset
by targeted $3.3m synergies and operating leverage from
Patientco;
-- Capex: capital intensity of 3.9% in FY21 due to completion of
new data center, declining to 2.4% - 2.8% thereafter,
consistent with history and peers.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Total Debt With Equity Credit/Operating EBITDA sustained below
6.0x;
-- Revenue growth consistently in excess of Fitch's forecasts;
-- Strengthened competitive positioning and increased scale.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- (CFO-Capex)/Total Debt With Equity Credit sustained below
2.5%;
-- FFO interest coverage sustained below 1.5x.
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
Abundant Liquidity: Fitch expects Waystar to maintain strong
liquidity following the transaction given moderate operating
expense requirements that result in strong margins, a highly
variable cost structure, a short cash conversion cycle due to
monthly billing, and low capital intensity. Pro forma for the
transaction, liquidity is expected to total $205 million, comprised
of $5 million in cash and the undrawn $200 million revolving credit
facility (RCF). This constitutes a considerable RCF commitment in
relation to the company's revenue scale.
Liquidity is also supported by Fitch's forecast for over $200
million in aggregate FCF generation over 2022-2023. Fitch forecasts
steady growth in liquidity to nearly $450 million by 2023 due to
accumulation of FCF and the expectation for the RCF to remain
undrawn.
ISSUER PROFILE
Waystar is a provider of cloud-based revenue cycle management (RCM)
software that healthcare providers use to track patient care and
data from registration through appointment with a high degree of
accuracy in order to ensure final payment and avoid reimbursement
denials, allowing providers to lower processing costs and increase
collections.
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch made standard financial adjustments as described in the
applicable ratings criteria.
ESG CONSIDERATIONS
Waystar has an ESG Relevance Score of '4' for Governance Structure
due to its ownership by private equity sponsors EQT Fund and Canada
Pension Plan Investment Board, which Fitch assumes are heavily
biased in favor of shareholder returns. 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.
WAYSTAR TECHNOLOGIES: Patientco Deal No Impact on Moody's B3 CFR
----------------------------------------------------------------
Moody's Investors Service said that Waystar Technologies, Inc.'s
mostly debt-funded acquisition of Patientco is slightly leveraging,
but strategically sound. The acquisition financing has no impact on
Waystar's B3 corporate family rating, B3-PD probability of default
rating, B2 senior secured first-lien instrument ratings or the
stable outlook at this time.
Kentucky-based Waystar Technologies, Inc. (formerly known as
Navicure, Inc.) provides SaaS-based revenue cycle management
services, focusing on healthcare claims management and patient
payment solutions for healthcare providers. Moody's expects Waystar
to generate 2021 revenues of just over $600 million.
WB SUPPLY: Seeks Cash Collateral Access
---------------------------------------
WB Supply LLC asks the U.S. Bankruptcy Court for the District of
Delaware for authority to use cash collateral and provide adequate
protection to Basin Holdings LLC.
The Debtor requires the use of cash collateral for working capital,
general corporate purposes and the administration of the Chapter 11
Case in accordance with the approved budget.
Pursuant to the terms of the Prepetition Senior Loan Documents and
the Postpetition Loan Documents, the Debtor remains indebted to the
Prepetition Senior Agent and the Postpetition Agent with respect to
Bank Product Obligations, certain indemnification and other
protection, and other Senior Obligations arising under the Senior
Loan Documents in favor of the Senior Agents as set forth in the
respective Senior Loan Documents notwithstanding the payment in
full of any other Prepetition Senior Obligations or Postpetition
Obligations.
Any Continuing Senior Obligations are secured by the Prepetition
Senior Liens and the Postpetition Liens on the Prepetition Senior
Collateral and the Postpetition Collateral, as applicable. To the
extent any Senior Obligations remain, the Senior Liens and the
Adequate Protection Senior Liens under the Final DIP Order are
senior to (i) the liens and security interests securing the Second
Lien Obligations; and (ii) the Replacement Liens proposed to be
granted under the Interim Order and Final Order.
Before the Petition Date, the Debtor, as borrower, entered into a
Senior Secured Promissory Note (Second Lien), dated September 11,
2020 with Basin Holdings. As of the Petition Date, the Debtor was
indebted to the Secured Party pursuant to the Second Lien Note in
the aggregate principal amount of not less than $3,967,352 plus
accrued but unpaid interest.
Pursuant to the Second Lien Loan Documents, the Secured Party holds
a security interest in and lien on all of the Debtor's right,
title, and interest in, to and under all Collateral to secure the
Second Lien Obligations.
As adequate protection for the Debtor's use of Cash Collateral, the
Debtor will provide to the Secured Party as adequate protection for
the use of its Cash Collateral (a) valid, binding, enforceable, and
perfected Replacement Liens on all of the Debtor's presently owned
or hereafter acquired property and assets; (b) an allowed
superpriority administrative expense claim with priority over all
other administrative claims; and (c) payment of all present and
future reasonable and documented post-Petition Date costs, fees,
charges and expenses of the Secured Party related to the Second
Lien Obligations or the Chapter 11 Case, to the extent provided for
in the Budget, all subject to the Carve-Out, any Senior
Obligations, the Senior Liens, and the Adequate Protection Senior
Liens, as applicable. The Debtor believes that the adequate
protection provided is fair, reasonable and sufficient to protect
any diminution in the value of the Secured Party's interest in the
Collateral during the period their Collateral is used by the
Debtor.
A copy of the motion and the Debtor's budget for August 1 to
September 26, 2021 is available at https://bit.ly/2WIWEIF from
Stretto, claims agent.
The Debtor projects $4,816,884 in total disbursements for the
period.
About WB Supply
WB Supply LLC is a privately held pipe and supply company based in
Pampa, Texas. Founded in 1971, WB Supply has grown to more than a
dozen locations in multiple states, including Texas, Oklahoma and
New Mexico.
WB Supply sought protection under Chapter 11 of the Bankruptcy Code
(Bankr. D. Del. Case No. 21-10729) on April 20, 2021. At the time
of filing, the Debtor had between $10 million and $50 million in
both assets and liabilities.
Judge Brendan Linehan Shannon oversees the case.
The Debtor tapped Chipman Brown Cicero & Cole, LLP as its legal
counsel, Great American Global Partners, LLC as liquidation agent,
and EHI, LLC, a division of KBF CPAS LLP, as restructuring advisor.
EHI President Edward Hostmann serves as the Debtors chief
restructuring officer. Stretto is the claims and noticing agent
and administrative advisor.
The U.S. Trustee for Region 3 appointed an official committee of
unsecured creditors in the Debtors case on April 29, 2021. The
committee is represented by William A. Hazeltine, Esq.
WHITE RIVER: Unsecureds to Share Pro Rata of Liquidation Fund
-------------------------------------------------------------
White River Contracting LLC filed with the U.S. Bankruptcy Court
for the District of Montana an Amended Chapter 11 Plan of
Liquidation and accompanying Disclosure Statement dated July 30,
2021.
The Debtor's Plan is a Plan of Liquidation. The Plan proposes the
liquidation of the Debtor's assets and the winding down of its
affairs. The entry of the Confirmation Order shall constitute the
Bankruptcy Court's approval of the sale of the Debtor's assets free
and clear of liens, claims and other encumbrances. Rocky Mountain
Bank shall be secured by a first priority lien on the auction
proceeds as set forth in the Plan. The Debtor estimates the
Effective Date of the Plan will be in September of 2021, the first
full business day following Confirmation.
Within 60 days of the Confirmation Order the Debtor's assets will
be sold at public auction pursuant to the provisions of the Plan.
The Auction will divide the Debtor's assets into Parcel 1,
consisting of the Debtor's real property, along with any
improvements and fixtures, and Parcel 2, which consists of
equipment to be auctioned individually or in lots. The Debtor
intends to hire, as auctioneer, James G. Murphy Company.
The Plan sets forth a process by which a Liquidation Fund shall be
established from a Carve Out of the auction proceeds. The
Liquidation Funds will be used to help fund potential distributions
to priority claims and unsecured claims. Furthermore, the Plan
details Rocky Mountain Bank's right to credit bid (using its
secured claim in lieu of cash) towards the purchase of either
Parcel 1 or equipment contained in Parcel 2, and how that credit
bid may impact the Carve Out.
It is anticipated that all distributions from the Auction shall be
completed within 10 months of the Confirmation Order at which time
the Liquidating Debtor shall file a Chapter 11 Final Report and
Application for Final Decree with the Court, and then the
Liquidating Debtor shall cease to exist. The Debtor is not seeking
a discharge order under the Bankruptcy Code.
The primary asset of the Debtor is the real estate and facilities
located at 1883 Highway 93 South, Hamilton, Montana secured by a
deed of trust with Rocky Mountain Bank. Additionally, the Debtor
possesses inventory, accounts receivable, office equipment,
fixtures, and deposit accounts also secured by Rocky Mountain Bank.
The primary assets of the Debtor not secured by Rocky Mountain Bank
consists of limited equipment and vehicles secured by other
creditors through purchase and finance agreement.
Classes of Claims and Equity Interests under the Plan
* Class 1 Allowed Secured Claim of Rocky Mountain Bank
Class 1 is impaired and is entitled to vote on the Plan. The Plan
calls for the Claim to receive funds from the Auction Proceeds.
Rocky Mountain Bank shall be assigned all rights that the Debtor
has in relation to the claims listed in the Debtor's bankruptcy
petition regarding Mountain Village Development LLC and ETPC LLC.
Any unsatisfied portion of Rocky Mountain Bank's Secured Claim will
be treated under Class 3 of the Plan as an Allowed Unsecured Claim
.
* Class 2 Allowed Unsecured Priority Claims of the Taxing
Authorities
Class 2 consists of the Allowed Unsecured Priority Claims of the
Internal Revenue Service; Montana Department of Revenue; Montana
Department of Labor and Industry; and Utah State Tax Commission.
Class 2 claims shall be paid a pro-rata share of the Liquidation
Fund, after administrative fees, as set forth in the Plan. The
Debtor anticipates insufficient funds to pay Class 2 in full.
Class 2 is impaired and is entitled to vote on the Plan.
* Class 3 Allowed Unsecured Claims (including Claims of
governmental taxing authorities not related to actual pecuniary
loss)
Class 3 shall be paid on a pro-rata basis out of the proceeds from
the Liquidation Fund after payment of any claims of a higher
priority, including Chapter 11 administrative claims and the Class
2 Unsecured Priority Claim. The Debtor anticipates insufficient
funds to pay Class 3 claims a distribution. Final determination as
to whether Class 3 will receive a distribution will not be known
until the auction is completed and any recovered litigation
proceeds are finalized. Class 3 is impaired and is entitled to
vote on the Plan.
* Class 4 Late Filed Claims
Class 4 is disallowed under the Plan. Class 4 is presumed to reject
and is not entitled to vote.
* Class 5 Equity Interests
Class 5 claims will be cancelled and released without distribution
upon Confirmation of the Plan. Class 5 is presumed to reject and
is not entitled to vote.
A copy of the Disclosure Statement is available for free at
https://bit.ly/2TYnwUg from PacerMonitor.com.
Counsel for the Debtor:
Matt Shimanek, Esq.
Shimanek Law PLLC
317 East Spruce St.
Missoula, MT 59802
Telephone: (406) 544-8049
Email: matt@shimaneklaw.com
About White River Contracting
White River Contracting LLC is a privately held company in the
residential building construction industry that specializes in
custom-tailored homes.
White River Contracting, based in Hamilton, MT, filed a Chapter 11
petition (Bankr. D. Mont. Case No. 20-90251) on Nov. 3, 2020. In
the petition signed by Craig Rostad, managing member, the Debtor
was estimated to have $1 million to $10 million in assets and $10
million to $50 million in liabilities. The Hon. Benjamin P. Hursh
presides over the case. Shimanek Law PLLC serves as bankruptcy
counsel to the Debtor.
WING DINGERS: Case Summary & 3 Unsecured Creditors
--------------------------------------------------
Debtor: Wing Dingers Texas, LLC
700 NW Loop 564
Mineola, TX 75773
Chapter 11 Petition Date: August 5, 2021
Court: United States Bankruptcy Court
Eastern District of Texas
Case No.: 21-60327
Debtor's Counsel: Eric A. Liepins, Esq.
ERIC A. LIEPINS
12770 Coit Road
Suite 850
Dallas, TX 75251
Tel: 972-991-5591
Fax: 972-991-5788
E-mail: eric@ealpc.com
Estimated Assets: $0 to $50,000
Estimated Liabilities: $1 million to $10 million
The petition was signed by Christopher Fischer, sole member.
A full-text copy of the petition containing, among other items, a
list of the Debtor's three unsecured creditors is available for
free at PacerMonitor.com at:
https://www.pacermonitor.com/view/R35C6JY/Wing_Dingers_Texas_LLC__txebke-21-60327__0001.0.pdf?mcid=tGE4TAMA
WITCHEY ENTERPRISES: Granted Leave to Amend Disclosures by Aug. 30
------------------------------------------------------------------
Judge Patricia M. Mayer of the U.S. Bankruptcy Court for the Middle
District of Pennsylvania has sustained the objection of the U.S.
Trustee to the Disclosure Statement of Witchey Enterprises, Inc.
The Court granted the Debtor leave to file an amended Disclosure
Statement on or before August 30, 2021.
A copy of the order granting leave is available for free at
https://bit.ly/3rSA4ZD from PacerMonitor.com.
About Witchey Enterprises
Witchey Enterprises, Inc., a Wilkes-Barre, Pa.-based provider of
courier and express delivery services, filed a Chapter 11 petition
(Bankr. M.D. Pa. Case No. 19-00645) on Feb. 14, 2019. Louis
Witchey, president, signed the petition. At the time of filing,
the Debtor had between $1 million and $10 million in both assets
and liabilities. Judge Patricia M. Mayer oversees the case. The
Debtor tapped Andrew Joseph Katsock, III, Esq., as legal counsel
and David L. Haldeman as accountant.
YAMANA GOLD: S&P Rates New US$500MM Senior Unsecured Notes 'BB+'
----------------------------------------------------------------
S&P Global Ratings assigned its 'BB+' issue-level rating and '3'
recovery rating to Yamana Gold Inc.'s proposed US$500 million
senior unsecured notes issuance. The '3' recovery rating indicates
its expectation for meaningful (50%-70%, rounded estimate: 65%)
recovery in its simulated default analysis, with no notching from
the issuer credit rating (ICR).
The proposed notes are due in 2031 and will rank pari passu with
Yamana's existing senior unsecured notes. S&P expects proceeds from
the issuance, along with cash on hand, will be used to repay all of
the company's debt maturing through 2024, resulting in an
incremental gross debt reduction of more than US$200 million. On
completion of the transactions, Yamana's earliest debt maturity
will be 2027.
S&P said, "The outlook on Yamana is positive. We continue to expect
the company will generate credit measures that are strong for the
ICR, including adjusted debt to EBITDA below 1x in 2021 and 2022
and free operating cash flow to debt above 30%. Our estimates
assume a gold price assumption of US$1,800 per ounce (/oz) for the
rest of this year and US$1,600/oz in 2022, and cash costs in the
mid-to-high US$600/oz area through next year. The planned
incremental debt repayment should also reduce the future volatility
of Yamana's credit measures relative to our previous estimates.
"Our 'BB+' ICR on the company is unchanged. Yamana's forecast
credit measures are consistent with a stronger financial risk
assessment and our upside triggers. We also assume the company will
continue to generate positive discretionary cash flow after higher
prospective capital expenditures and dividends over the next few
years. However, Yamana's recent performance and our near-term
estimates incorporate the impact of gold prices close to peak
levels. In our view, the company has not yet established a track
record of sustainable free cash flow and favorable returns on
capital that we expect for investment-grade-rated issuers."
[*] Commercial Chapter 11 Filings Declined by 43% Year-to-Date
--------------------------------------------------------------
ABL Advisor reports that Epiq released its July 2021 bankruptcy
filing statistics from its AACER bankruptcy information services
business. Across all chapters, new filings in July were 32,375,
down 6 percent from 34,277 in June 2021. Commercial filings across
all chapters were down 15 percent over June 2021, with a total of
1,696 across all chapters. In fact, commercial Chapter 11 filings
are down 43 percent over the last seven months with only 2,411 new
filings, compared to the first seven months of 2020 that had 4,254
commercial Chapter 11 filings.
"New commercial filings continue to lag as the financial markets
continue to offer robust alternatives to restructuring under U.S.
bankruptcy code," said Brad Tuttle, General Manager of Epiq
Corporate Restructuring.
July 2021 Chapter 13 non-commercial filings were 9,080, up 4
percent over June that had 8,714. This is the third month in a row
with gains in the sector.
"With eviction moratoriums expiring nationwide, it is conceivable
that the expected bankruptcy backlog building over the last 15
months could be starting," said Chris Kruse, Senior Vice President
of Epiq Bankruptcy. "However, growing COVID-19 infection rates in
every U.S. state may spark additional government support, stalling
new filings."
In addition, Chapter 7 non-commercial filings were also down 8.4
percent, with 21,540 filings in July 2021, down from 23,524 in June
2021.
There were 249,314 total new bankruptcy filings across all chapters
for the first seven months of 2021, down 27 percent to 340,986 in
the same period in 2020.
[^] BOOK REVIEW: From Industry to Alchemy
-----------------------------------------
From Industry to Alchemy: Burgmaster, A Machine Tool Company
Author: Max Holland
Publisher: Beard Books
Softcover: 335 pages
List Price: $34.95
From Industry to Alchemy tells the story of people caught in the
middle of global competition, the institutional restraints within
which smaller companies had to operate after the Second World War,
the rise of Japanese industry, and the conglomeration frenzy of the
1980s. The author's goal in writing this book was to chronicle the
decline in American manufacturing through the story of that
company.
Burgmaster was the culmination of the dream of a Czechoslovakian
immigrant, Fred Burg, who described himself as a "born machinist."
After coming to America in 1911, he learned the tool-and- die
trade, becoming so adept that he "could not only drill the hole,
but also make the drill." A life-long inventor, he designed an
electric automatic transmission that was turned down by GM's
Charles Kettering; GM came out with a hydraulic version six years
later. Forced by finances to work in retailing, after World War II
he retired, moved to California and set up a machine-tool shop with
his son and son-in-law to manufacture the turret drill, his own
design. With the help of the Korean War, and a previous shortage
of machine tools, business took off. It was a hands-on operation
from the start and remained that way. Burg once fired an engineer
who didn't want to handle a machine part because his hands would
get dirty. Management spent time on the shop floor, listening to
employee ideas. Burg lived and breathed research and development,
constantly fiddling to devise new machines and make old ones
better. Between 1955 and 1962, sales grew 13-fold and employees
from 62 to 272. Burg Tool was featured on Richland Oil Company's
broadcast Success Stories.
By 1965, however, Fred Burg was getting old and the three partners
knew that Burgmaster needed to fund another expensive, risky
expansion to fill back orders or lose market share. Although
companies had made offers before, Houdaille, a company named for
the Frenchman who invented recoilless artillery during World War I,
seemed a good match. The two had similar origins, it seemed.
Houdaille had begun an ambitious acquisition program and saw
Burgmaster fitting into an unfilled niche. With a merger, new
capacity would be financed, and "Burgmaster would continue to
operate under present management, personnel and policies but as a
Houdaille division."
What comes next is management by numbers rather than hands-on
decision-making; alienation of skilled blue-collar workers; pushing
aside of management; squelching of innovation; foreign and domestic
competition; bitter trade disputes; leveraged buyouts; the politics
of U.S. trade policy; Japan-bashing; and the inevitable liquidation
of Burgmaster and loss of livelihood of more than 400 employees.
This book was originally titled When the Machine Stopped: A
Cautionary Tale from Industrial America, published in 1989. It was
named by Business Week as one of the ten best business books of
1989. The Chicago Tribune said that "anyone who wants to
understand American business must read When the Machine Stopped.
Holland has written the best business book in years."
The author explains trade regulations, the machine-tool industry,
and detailed corporate buyouts with equal clarity. This
down-to-earth book provides valuable insight into the changes
within an industry. It combines fascinating, creative characters;
number crunchers; growing corporate disdain for manufacturing; and
tangible consequences of Washington and Wall Street gone crazy.
Max Holland is an American journalist, author, and editor of
Washington Decoded, an online publication. He is also a
contributing editor to The Nation and The Wilson Quarterly, and
sits on the editorial advisory board of the International Journal
of Intelligence and CounterIntelligence.
Holland graduated from Antioch College in 1972. From 1998 to 2003
he was a research fellow at the University of Virginia’s Miller
Center of Public Affairs. In 2001, Holland won the J. Anthony
Lukas Work-in-Progress Award, bestowed jointly by Harvard
University's Nieman Foundation and the Columbia University School
of Journalism, for a forthcoming narrative history of the Warren
Commission, to be published by Alfred A. Knopf. That same year he
won a Studies in Intelligence Award from the Central Intelligence
Agency, the first writer working outside the US government to be so
recognized.
Holland was born in 1950 in Providence, Rhode Island. His father
worked for 29 years as a tool-and-die maker, union steward, and
machine shop foreman for Burgmaster.
*********
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.
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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
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the definitive compilation of stocks that are ideal to sell short.
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Chapter 11 cases involving less than $1,000,000 in assets and
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Each Friday's edition of the TCR includes a review about a book of
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Monthly Operating Reports are summarized in every Saturday edition
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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
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re-mailing and photocopying) is strictly prohibited without prior
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*** End of Transmission ***