/raid1/www/Hosts/bankrupt/TCR_Public/210809.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Monday, August 9, 2021, Vol. 25, No. 220
Headlines
340 BISCAYNE: Wins Cash Collateral Access Thru Aug 31
37 CALUMET: Wins Cash Collateral Access Thru Oct 19
ADVANZEON SOLUTIONS: Seeks Dec. 3 Plan Exclusivity Extension
AES CORP: Moody's Affirms Ba1 CFR & Alters Outlook to Positive
AFFORDABLE RECOVERY: Amended Reorganizing Plan Confirmed by Judge
ALLIED SYSTEMS: Affiliates Can't Pause Court $118 Million Judgment
AMERIGAS PARTNERS: Fitch Affirms 'BB' LT IDR, Outlook Stable
APPLIANCESMART INC: JanOne to Get $25K from Exit Facility
APTEAN INC: Moody's Affirms 'B3' CFR, Outlook Stable
AQUA ADVENTURE: Seeks to Hire Charles A. Cuprill P.S.C. as Counsel
AQUA ADVENTURE: Taps Luis R. Carrasquillo as Financial Consultant
ATLANTIC WORLDWIDE: Seeks Cash Collateral Access
AUTOMOTIVE PARTS: U.S. Trustee Appoints Creditors' Committee
BALLY'S CORP: Moody's Rates New Unsecured Notes Due 2029/2031 'B3'
BALROG ACQUISITION: Moody's Assigns First Time 'B3' CFR
BAUSCH HEALTH: Moody's Affirms B2 CFR Following IPO Announcement
BCP RAPTOR II: Fitch Raises LT IDR to 'B', Outlook Stable
BCP RAPTOR: Fitch Raises LT IDR to 'B' & Alters Outlook to Stable
BEACH RESORTS: Gets Interim OK to Hire Chung & Press as Counsel
BEACH RESORTS: Seeks to Hire Burger & Comer as Accountant
BOUCHARD TRANSPORTATION: Fleet Sale Delayed as Assets Talks Drag On
BRAZOS ELECTRIC: Heads Toward $1.9 Billion ERCOT Claim Trial
BUILDING 1600: September 23 Plan Confirmation Hearing Set
CAMBRIAN HOLDING: Walther Gay Represents Kentucky Coal, 7 Others
CARBONYX INC: Sunshine & Rango Resolve Disputes in Joint Plan
CARVANA CO: Posts $45 Million Net Income in Second Quarter
CCO HOLDINGS: Fitch Assigns BB+ Rating on Unsec. Notes Due 2034
CERTA DOSE: Wins Access to Cash Collateral Thru Aug 17
CHEMOURS COMPANY: Moody's Rates New $650MM Sr. Unsecured Note 'B1'
CITY WIDE COMMUNITY: Cash Collateral Access Extended
CLEAN HARBORS: Moody's Puts Ba2 CFR Under Review for Downgrade
COBRA INK: May Use FC Marketplace's Cash Collateral
COOKE OMEGA: Moody's Rates New $480MM Term Loan B 'Ba1'
CROCS INC: S&P Rates New $350MM Senior Unsecured Notes 'BB-'
CURARE LABORATORY: Hits Chapter 11 Bankruptcy Protection
DAYCO PRODUCTS: Moody's Hikes CFR to B3, Outlook Remains Positive
DIEBOLD NIXDORF: Moody's Hikes CFR to B2, Outlook Stable
DIRECTV HOLDINGS: Fitch Withdraws BB+ Issuer Default Rating
DOLE FOOD: S&P Withdraws 'B' ICR on Merger With Total Produce PLC
EISNER ADVISORY: Fitch Assigns FirstTime 'B' IDR, Outlook Stable
ENGINEERED MACHINERY: Moody's Rates New $1.13BB 1st Lien Loan 'B2'
EPR PROPERTIES: S&P Alters Outlook to Stable, Affirms 'BB+' ICR
FAIR FINANCIAL: Reportedly Mulling Bankruptcy Filing
GAIA INTERACTIVE: Cash Collateral Deal OK'd Thru Oct 25
GPS HOSPITALITY: Fitch Assigns FirstTime 'B-(EXP)' LT IDR
GREEN VALLEY: Deal Allowing Cash Collateral Use Thru Sept 30 OK'd
GREENSILL CAPITAL: Headed to Sale of Finacity Despite Term Changes
HESS MIDSTREAM: Moody's Rates New Senior Unsecured Notes 'Ba3'
HIGHLAND CAPITAL: Court Fines Ex-CEO Dondero for Suing Present CEO
INSIGHTRA MEDICAL: Loses Bankruptcy Financing
INSYS THERAPEUTICS: Trust Sues Ex-Manager to Recover $750K Fees
JEFFERIES FINANCE: Fitch Hikes LongTerm IDR to BB+, Outlook Stable
KATERRA INC: Court Approves $71 Mil. Sales of Factories
KATERRA INC: SMTD Law Represents International Fidelity, 3 Others
KUMTOR GOLD: Sovereign Immunity Nulls Ch.11 Ruling, Says Kyrgyzstan
LKQ CORP: S&P Alters Outlook to Positive, Affirms 'BB+' ICR
LONG ISLAND DEVELOPERS: Seeks Cash Collateral Access
MAIN STREET INVESTMENTS II: Updates Secured Claim Pay Details
MAVENIR SYSTEMS: Moody's Affirms B2 CFR Amid $635MM Refinancing
MAVERICK GAMING: Moody's Gives B3 CFR & Rates $300MM Term Loan B3
MAVERICK GAMING: S&P Assigns 'B-' ICR, Outlook Stable
MGM GROWTH: Fitch Puts 'BB+' IDR on Watch Positive
MOUTHPEACE DENTAL: Wins Cash Collateral Access
MR. COOPER GROUP: S&P Ups ICR to B+ on Stable Financial Performance
NATIONAL FINANCIAL: Seeks Chapter 11 Bankruptcy Protection
NEW HAPPY FOOD: Gets Cash Collateral Access Thru Aug 26
OROVILLE HOSPITAL: S&P Lowers ICR to 'B+', Outlook Negative
POGO ENERGY: Seeks to Hire Ferguson Braswell as Legal Counsel
PPLUS TRUST LTD-1: S&P Raises Class A/B Certs Ratings to 'B+'
REALPAGE INC: Fitch Affirms 'B' LongTerm IDR, Outlook Stable
RKJ HOTEL: Unsecured Creditors' Recovery Hiked to 100% in Plan
RUBY TUESDAY: Equity Holders Lost $18 Million Claim in Chapter 11
SEVERIN ACQUISITION: Moody's Hikes CFR to B2 Amid Recent IPO
SIRIUS XM: Moody's Gives Ba3 Rating on New $2BB Unsecured Notes
SQUARE INC: Fitch Affirms 'BB' LT IDR & Alters Outlook to Pos.
SUNNOVA ENERGY: Moody's Assigns First Time B3 Corp. Family Rating
SUNOCO LP: Acquisition of Terminals No Impact on Moody's Ba3 CFR
SVXR INC: Finestone Hayes Represents Noteholders Group
THEOS FEDRO: Trustee Taps Bachecki Crom & Co. as Accountant
THEOS FEDRO: Trustee Taps Rincon Law as Legal Counsel
THERMOSTAT PURCHASER III: Moody's Rates First Lien Loans 'B2'
TIGER OAK: Deal on Cash Collateral Access OK'd
TK SKOKIE: Unsecured Creditors to be Paid in Full with Interest
TOWN & COUNTRY: Carlson Dash Represents Jordan, Workinger
VALUE VILLAGE: Case Summary & 13 Unsecured Creditors
VICI PROPERTIES: Fitch Puts 'BB' IDR on Watch Positive
VICI PROPERTIES: Moody's Puts Ba3 CFR Under Review for Upgrade
VIEQUES FO & G: Seeks to Hire Godreau & Gonzalez as Legal Counsel
VINE ENERGY: S&P Rates $150MM Second-Lien Term Loan 'B+'
VISTAGE INT'L: $90MM Incremental Loan No Impact on Moody's B2 CFR
WASHINGTON PRIME: Two More Creditors Appointed to Committee
WEINSTEIN CO: Spyglass' Plan to Cut Profits of 'Scream' Is Hearsay
WMG ACQUISITION: S&P Rates New EUR445MM Senior Secured Notes 'BB+'
WR GRACE: Fitch Assigns 'BB+' LongTerm IDR, Outlook Stable
WR GRACE: Moody's Assigns B2 CFR & Rates New Sr. Secured Loans B1
WYNDHAM HOTELS: S&P Upgrades ICR to 'BB+', Outlook Stable
[^] BOND PRICING: For the Week from August 2 to 6, 2021
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340 BISCAYNE: Wins Cash Collateral Access Thru Aug 31
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The U.S. Bankruptcy Court for the Southern District of Florida has
authorized 340 Biscayne Owner LLC to use cash collateral on an
interim basis in accordance with the budget and provide adequate
protection through August 31, 2021, or until otherwise ordered by
the Court.
The Debtor requires the use of cash collateral to acquire goods and
services necessary for its day-to-day operations or generally
maintain and preserve the going concern, enterprise value of the
business.
The Debtor is permitted to use cash collateral to pay
post-petition, current and necessary expenses as set forth in the
budget plus an amount not to exceed 10% for each line item as well
as payments to the US Trustee for quarterly fees and additional
amounts as may be expressly approved in writing by 340 Biscayne
Lendco, LLC.
The Court says in the event the Debtor's actual monthly Total
Operating Revenue exceeds the amount set forth in the budget by
more than 10%, the Debtor will be authorized to exceed the
following month's budget for the Franchise Fees line item and pay
the Franchise Fees to Holiday Hospitality Franchising, LLC that
will be due and owing pursuant to that Holiday Inn Hotel Change of
Ownership License Agreement dated May 31, 2016 between HHF, as
licensor, and the Debtor, as licensee, in full in the ordinary
course.
As adequate protection and to the extent of any diminution in value
of Lender's interest in Pre-Petition Collateral, the Lender is
granted a valid and perfected first-priority lien on and security
interest in all property acquired by the Debtor after the Petition
Date that is of the same or similar nature, kind or character as
Lender's Pre-Petition Collateral and the proceeds thereof. The
Replacement Liens are in addition to continuing post-petition liens
that the Lender has pursuant to Section 552(b)(2), and nothing in
the Order limits or diminishes in any way such post-petition lien
rights of the Lender.
The Debtor is directed to maintain insurance coverage for its
property in accordance with the obligations under the loan and
security documents with the Lender and submit to the lender a
report of the collections and disbursements at the Hotel on the
15th day of each month for the prior month.
A further interim hearing on the matter is scheduled for August 31
at 9:30 a.m.
A copy of the order is available at https://bit.ly/3ytdJEr from
PacerMonitor.com.
About 340 Biscayne Owner LLC
340 Biscayne Owner LLC is part of the hotels & motels industry. The
Debtor sought protection under Chapter 11 of the U.S. Bankruptcy
Code (Bankr. S.D. Fla. Case No. 21-17203) on July 26, 2021. In the
petition signed by Cristiane Bomeny, manager, the Debtor disclosed
up to $500 million in assets and up to $50 million in liabilities.
Judge Laurel M. Isicoff oversees the case.
Linda Jackson, Esq. at Pardo Jackson Gainsburg, PL is the Debtor's
counsel.
37 CALUMET: Wins Cash Collateral Access Thru Oct 19
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The U.S. Bankruptcy Court for the Eastern District of Massachusetts
has authorized 37 Calumet Street, LLC to use cash collateral, in
which Bridge Loan Venture V QV Trust 2019-2 asserts an interest, on
an interim basis on through October 19, 2021, on the same terms and
conditions as previously allowed.
On or before the 15th day of each month, the Debtor is directed to
submit to the Office of the United States Trustee and file with the
Court a cash flow report showing a comparison for the prior
calendar month of actual results of all items contained in the
Budget to the amounts originally contained in the Budget.
The Debtor will pay $1,000 to the Lender on August 15 and then
$5,000 on September 15. The payments will be held in suspense by
the Lender pending further and and final Court order.
The Lender is granted a replacement lien on all rental income of
the Debtor from and after August 1.
A telephonic hearing on the matter is scheduled for October 19 at
4:30 p.m.
A copy of the order and the Debtor's budget is available at
https://bit.ly/3yqpKdP from PacerMonitor.com.
The Debtor projects $1,980 in rental and $1,933 in total expenses
for August.
About 37 Calumet Street, LLC
37 Calumet Street LLC filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code (Bankr. D. Mass. Case No.
20-12253) on Nov. 19, 2020. The petition was signed by Patricia
Hounsell, its manager. At the time of filing, the Debtor disclosed
$1 million to $10 million in both assets and liabilities.
Judge Frank J. Bailey oversees the case.
Gary W. Cruickshank, Esq., serves as the Debtor's counsel.
ADVANZEON SOLUTIONS: Seeks Dec. 3 Plan Exclusivity Extension
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Debtor Advanzeon Solutions, Inc. requests the U.S. Bankruptcy Court
for the Middle District of Florida, Tampa Division to extend the
exclusive periods during which the Debtor may file a plan and
disclosure statement, through and including December 3, 2021, and
solicit acceptances through and including February 3, 2022.
The Debtor says cause exists to extend the exclusivity periods:
The Debtor's reorganization will center on Pharmacy Value
Management Solutions ("PVMS"), which is the Debtor's primary
operating asset. PVMS and its operations have been and continue to
be affected in significant ways by the COVD-19 pandemic, including
the closure or reduced operations of clinics from whom PVMS derives
a majority of its revenues, the suspension by the Department of
Transportation of requirements for medical examinations, and other
actions impacting various clients and current and potential
customers of PVMS.
The PVMS worked diligently to operate continuously despite many
delays and issues. The PVMS's main strategic partner and supplier
of CPAP machines issued a recall notice for some of its equipment,
which has required that PVMS transition its equipment supplier and
impacted business and sales operations, delaying the rollout of the
consumer mass-market business. PVMS expects the issue to be
remedied in the next few months.
The Debtor continues to work towards an exit plan for this case.
The Debtor is in negotiations with investment groups that are
intending to make a proposal that could form the basis for a plan,
but the Debtor needs additional time for those negotiations to
mature.
The Debtor is not using the delays, caused by COVID-19 and its
continuing effects on PVMS's operations, for purposes of pressuring
creditors to accept the Debtor's reorganization strategy. Also, the
Debtor is not aware of any other party in interest desiring to file
a competing plan.
Because of the continued effect of the moratoria on testing
impacting the Debtor's subsidiary's operations and other effects of
the pandemic, the Debtor needs more time to operate in a more
normalized environment before it can propose a plan.
A copy of the Debtor's Motion to extend is available at
https://bit.ly/3ChgiMg from PacerMonitor.com.
About Advanzeon Solutions, Inc.
Based in Tampa, Fla., -- advanzeonshareholders.com.—Advanzeon
Solutions, Inc. provides behavioral health, substance abuse, and
pharmacy management services, as well as sleep apnea programs, for
employers, Taft-Hartley health and welfare Funds, and managed care
companies throughout the United States. Additional information is
contained in the Debtor's public filings, available at sec.gov.
Advanzeon Solutions sought protection under Chapter 11 of the
Bankruptcy Code (Bankr. M.D. Fla. Case No. 20-06764) on September
7, 2020.
At the time of the filing, the Debtor had estimated assets of
between $500,000 and $1 million and liabilities of between $1
million and $10 million. The petition was signed by Clark A.
Marcus, chief executive officer.
Judge Michael G. Williamson oversees the case.
The Debtor tapped Stichter, Riedel, Blain & Postler, P.A. its legal
counsel; O'Connor, Pagano & Associates, LLC as its certified public
accountant; and Marcus & Marcus as its accountant.
AES CORP: Moody's Affirms Ba1 CFR & Alters Outlook to Positive
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Moody's Investors Service changed the outlook for The AES
Corporation to positive from stable. At the same time, Moody's
affirmed AES' Ba1 corporate family rating, Ba1 senior unsecured
rating and Ba1-PD Probability of Default Rating. AES' speculative
grade liquidity is unchanged at SGL-2.
RATINGS RATIONALE
"The positive outlook on AES reflects the company's de-risking
strategy and our expectation that incremental cash flow and capital
expenditure funding plans will allow it to generate a ratio of cash
flow to debt above 14%" said Natividad Martel, Vice President --
Senior Analyst.
The positive outlook also incorporates AES' progress in the
implementation of its decarbonization strategy through a
combination of retirements and disposals of its interests in
coal-fired facilities to be executed by 2025, along with its
growing backlog of contracted renewables, a key item in the
company's de-risking strategy. This decarbonization strategy is a
key ESG risk consideration and an important driver of the
organization's improving credit quality.
The rating action also considers the recent stabilization of the
outlooks of DPL Inc. (Ba1) and Dayton Power & Light Company (Baa2)
and affirmation of their ratings, after the outlooks had been
negative for some time. It also factors in the growing importance
of the US operations of AES due to a combination of planned
investments to grow its regulated utility rate base along with
material capital expenditures in renewables and battery storage.
The latter includes the investments of the sPower development
platform that AES started to consolidate through AES Clean Energy
in February 2021. Moody's estimate that, if the investment program
is implemented as planned, the US Strategic Business Units (SBU)
could represent around 40% of AES' consolidated operating income by
year-end 2023 compared to around 30% during the 2018-2020 period.
This changing business mix composition will also reduce AES'
emerging market risk exposure. However, the group's credit quality
will still benefit from the geographic diversity provided by its
other three non-US SBUs.
AES' Ba1 CFR and positive outlook also consider management's
commitment to improve the group's consolidated credit quality and
the resilience shown by its contracted power generation operations
in the face of the economic disruptions caused by the coronavirus
pandemic in 2020. It also reflects the group's ability to record a
ratio of cash flow from operations pre-working capital (CFO
pre-W/C) to net debt of nearly 14% at year-end 2020 and for the
last twelve month period (LTM) ended March 2021.
These ratios are calculated excluding the non-recurring impact of a
termination payment collected by Empresa Electrica Angamos SpA
(Baa3 stable), a subsidiary of AES Gener S.A. (Gener; Baa3 stable).
In 2020 and 1QLTM2021, AES' credit metrics were aided by a
reduction in the group's total outstanding net debt to around $18.3
billion, due to the combination of subsidiary debt reduction (net)
and a higher balance of cash and cash equivalents This debt
reductions included the repayment of nearly $445 million of project
debt outstanding at Angamos funded with the termination payment. In
addition, at year-end 2020, AES started to report around $1 billion
of debt outstanding at Mong Duong 2 under assets held for sale. As
a point of reference, this asset accounted for around 4% of the
subsidiaries' total funds from operations but approximately 6% of
the subsidiaries' outstanding debt at year-end 2019.
Moody's note that there is some execution risk that could affect
AES' ability to achieve and sustain its targeted ratio of CFO
pre-W/C to debt of between 14% and 15%. The improved metrics will
depend on several factors including the successful completion of
its material investment program. AES does not plan to issue common
equity other than the $1 billion of convertible preferred stock
issued in March 2021, while a historical reliance on project
finance transactions at the non-utility subsidiaries contributes to
the group's elevated debt. However, Moody's also acknowledge the
amortizing nature of this project finance debt that allows for some
deleveraging. This could help to offset the negative impact of the
incremental debt at the assets on credit metrics. Moody's expect
that AES' reliance on holding company debt issuances to meet its
capital requirements will remain limited. Moody's calculate that
the ratio of holding company debt to consolidated debt will remain
below 20%, despite AES' planned issuance of $1 billion of holding
company debt during the 2021-2025 period.
Affirmations:
Issuer: AES Corporation, (The)
Probability of Default Rating, Affirmed Ba1-PD
Corporate Family Rating, Affirmed Ba1
Pref. Stock Preferred Stock, Affirmed Ba3
Senior Unsecured Regular Bond/Debenture, Affirmed Ba1 (LGD4)
Outlook Actions:
Issuer: AES Corporation, (The)
Outlook, Changed To Positive From Stable
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Factors that Could Lead to an Upgrade
AES' ratings could be upgraded if (i) pending regulatory outcomes
are supportive of the utility subsidiaries' credit quality,
particularly if DP&L's pending distribution rate case; (ii) there
is no material deterioration in any of the key non-utility
subsidiaries' credit quality as Moody's gain more clarity regarding
the funding of their investments; (iii) pending decarbonization
legislation in Chile has no unexpected negative credit implications
on AES Gener and (iv) if AES is able to record a ratio of
consolidated CFO pre-W/C to consolidated net debt that exceeds 14%,
on a sustained basis, including 50% of AES' $1 billion preferred
stock issued in March 2021.
As per Moody's Hybrid Equity Credit methodology, an upgrade of AES
to investment grade would result in the application of 50% equity
treatment to AES' $1 billion preferred stock for the purpose of
calculating financial ratios, compared to the current 100% equity
treatment applied as long as AES remains non-investment grade.
Factors that Could Lead to a Downgrade
A stabilization of the outlook or a downgrade could occur if AES
diverges from its de-risking business strategy or there are credit
negative outcomes of any pending regulatory decisions. The
implementation of more aggressive financial policies than currently
anticipated that adversely affects any of the key subsidiaries'
credit quality or a failure of AES to report a consolidated ratio
of CFO pre-W/C to net debt of at least 14%, on a sustained basis,
is also likely to cause a stabilization of the outlook. A downgrade
of AES is likely if the consolidated ratio of CFO pre-W/C to
consolidated net debt falls below 11%, for a sustained period of
time.
Liquidity Analysis
The Speculative Grade Liquidity Rating (SGL) of SGL-2 reflects good
liquidity from both strong internal cash flow generation and
external cash sources, including' high availability under its $1
billion unsecured bank credit facility of $853 million at year-end
2020. The amounts available excluded $77 million in letters of
credit at year-end 2020. Borrowings under the facility, scheduled
to expire in December 2024, are subject to conditionality including
a material adverse change clause representation, a credit negative.
The facility has two financial covenants including a minimum cash
flow coverage ratio of 2.5x and a maximum recourse debt to cash
flow ratio of not more than 5.75x (both metrics calculated on a
parent only basis). Moody's anticipate that AES will remain in
compliance with substantial headroom.
The SGL-2 also factors in management's expectation that the
company's free cash flow will range between $775 million and $825
million in 2021. AES also expects to receive net proceeds from the
sale of assets of around $100 million this year.
AES has disclosed that during the 2021-2025 period, it expects to
have access to around $7.3 billion of discretionary cash that
includes nearly $4.8 billion of parent free cash flow (that is,
dividends received minus parent company costs such as interest
payments) and total net proceeds from asset sales of $500 million
(including the aforementioned $100 million). AES plans to issue up
to $1 billion in holding company debt over the next four years
following the $1 billion preferred stock issued in March 2021.
AES has also disclosed that it plans to use these funds to make
equity contributions to its subsidiaries of $4.8 billion and to
distribute around $2.5 billion.
The principal methodology used in these ratings was Unregulated
Utilities and Unregulated Power Companies published in May 2017.
AES is a globally diversified power holding company that holds
interests in a large portfolio of subsidiaries that operate in
twelve countries. These subsidiaries consist of (i) regulated
utility subsidiaries (three) and (ii) power generation projects and
independent power producers (IPPs). Their total generation capacity
exceeds 30,000 MW. AES organizes these subsidiaries under four
Strategic Business Units (SBU), largely based on the subsidiaries'
geographic operations: (i) US and utilities, (ii) South America,
(iii) Mexico, Central America and the Caribbean (MCAC) and (iv)
Eurasia. From a strategic perspective, the "other not consolidated"
segment (not included in any of the aforementioned SBUs), includes
Fluence Energy, LLC, a global energy storage technology and
services joint venture.
AFFORDABLE RECOVERY: Amended Reorganizing Plan Confirmed by Judge
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Judge Donald R. Cassling has entered an order approving the first
amended disclosure statement and confirming the first amended plan
of reorganization of Affordable Recovery Housing.
The Plan has been proposed in good faith and not by any means
forbidden by law. The Plan does not discriminate unfairly and is
fair and equitable with respect to each Class of claims that is
impaired under, and has not accepted, the Plan.
The late-filed ballot accepting the Plan by Mantellate Sisters
Servants of Mary is allowed as a timely filed ballot. At the
combined hearing on the adequacy of the Disclosure Statement and
confirmation of the Plan, the Debtor orally requested that the
late-filed ballot accepting the Plan by Mantellate Sisters Servants
of Mary be allowed and, further, that the Plan be amended to
reflect that any net sales proceeds paid to the Debtor from the
sale of the real property commonly known as 13542 South Western
Avenue, Blue Island, IL 60406, will be distributed, pro rata, to
all allowed claims in Classes 2-4.
The Plan is amended to reflect that any net sales proceeds paid to
the Debtor from the sale of the real property commonly known as
13542 South Western Avenue, Blue Island, IL 60406, will be
distributed, pro rata, to all allowed claims in Classes 2-4.
A copy of the Plan Confirmation Order dated August 3, 2021, is
available at https://bit.ly/3xsClMq from PacerMonitor.com at no
charge.
Attorney for the Debtor:
Joel A. Schechter
LAW OFFICES OF JOEL A. SCHECHTER
53 West Jackson Blvd., Suite 1522
Chicago, IL 60604
Tel: (312) 332-0267
E-mail: joel@jasbklaw.com
About Affordable Recovery Housing
Affordable Recovery Housing, an addiction treatment center in Blue
Island, Ill., filed its voluntary petition for relief pursuant to
Chapter 11 of the Bankruptcy Code (Bankr. N.D. Ill. Case No.
20-01973) on Jan. 23, 2020. The petition was signed by CEO John M.
Dunleavy. At the time of filing, the Debtor estimated $50,000 in
assets and $1 million to $10 million in liabilities. The Law
Offices of Joel A. Schechter and The Norman Law Firm serve as the
Debtor's bankruptcy counsel and special counsel, respectively.
ALLIED SYSTEMS: Affiliates Can't Pause Court $118 Million Judgment
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Law360 reports that a Delaware district court judge has declined to
stay enforcement of a $118 million bankruptcy court judgment
against affiliates of a private equity firm, saying he has seen
nothing to show they will suffer irreparable harm.
In an opinion issued Monday, August 2, 2021, U.S. District Court
Judge Colm Connolly said while the Yucaipa Co. affiliates claim
they will be "dismembered" if the Chapter 11 litigation trustee for
Allied Systems Holdings is allowed to enforce the June judgment
they allege no facts to back this claim up.
About Allied Systems Holdings
BDCM Opportunity Fund II, LP, Spectrum Investment Partners LP, and
Black Diamond CLO 2005-1 Adviser L.L.C., filed involuntary
petitions for Allied Systems Holdings Inc. and Allied Systems Ltd.
(Bankr. D. Del. Case Nos. 12-11564 and 12-11565) on May 17, 2012.
The signatories of the involuntary petitions assert claims of at
least $52.8 million for loan defaults by the two companies.
Allied Systems, through its subsidiaries, provides logistics,
distribution, and transportation services for the automotive
industry in North America.
Allied Holdings Inc. first filed for chapter 11 protection (Bankr.
N.D. Ga. Case Nos. 05-12515 through 05-12537) on July 31, 2005.
Jeffrey W. Kelley, Esq., at Troutman Sanders, LLP, represented the
Debtors in the 2005 case. Allied won confirmation of a
reorganization plan and emerged from bankruptcy in May 2007 with
$265 million in first-lien debt and $50 million in second-lien
debt.
The petitioning creditors said Allied defaulted on payments of
$57.4 million on the first lien debt and $9.6 million on the
second. They hold $47.9 million, or about 20% of the first-lien
debt, and about $5 million, or 17%, of the second-lien obligation.
They are represented by Adam G. Landis, Esq., and Kerri K. Mumford,
Esq., at Landis Rath & Cobb LLP; and Adam C. Harris, Esq.,and
Robert J. Ward, Esq., at Schulte Roth & Zabel LLP.
Allied Systems Holdings Inc. formally put itself and 18
subsidiaries into bankruptcy reorganization June 10, 2012,
following the filing of the involuntary Chapter 11 petition.
The Company is being advised by Mark D. Collins, Esq., at Richards,
Layton & Finger, P.A., and Jeffrey W. Kelley, Esq., at Troutman
Sanders, Gowling Lafleur Henderson.
The bankruptcy court process does not include captive insurance
company Haul Insurance Limited or any of the Company's Mexican or
Bermudan subsidiaries. The Company also announced that it intends
to seek foreign recognition of its Chapter 11 cases in Canada.
An official committee of unsecured creditors has been appointed in
the case. The Committee consists of Pension Benefit Guaranty
Corporation, Central States Pension Fund, Teamsters National
Automobile Transporters Industry Negotiating Committee, and General
Motors LLC. The Committee is represented by Sidley Austin LLP.
In January 2014, the U.S. Trustee for Region 3 appointed a
three-member Official Committee of Retirees.
Yucaipa Cos. has 55% of the senior debt and took the position it
had the right to control actions the indenture trustee would take
on behalf of debt holders. The state court ruled in March 2013 that
the loan documents didn't allow Yucaipa to vote.
In March 2013, the bankruptcy court gave the official creditors'
committee authority to sue Yucaipa. The suit includes claims that
the debt held by Yucaipa should be treated as equity or
subordinated so everyone else is paid before the Los Angeles-based
owner. The judge allowed Black Diamond to participate in the
lawsuit against Yucaipa and Allied directors.
Yucaipa American Alliance Fund I, L.P., Yucaipa American Alliance
(Parallel) Fund I, L.P., Yucaipa American Alliance Fund II, L.P.,
Yucaipa American Alliance (Parallel) Fund II, L.P., represented by
Michael R. Nestor, Esq., and Edmund L. Morton, Esq., at Young
Conaway Stargatt & Taylor, LLP; and Robert A. Klyman, Esq., at
Gibson, Dunn & Crutcher LLP.
First Lien Agent, Black Diamond Commercial Finance, L.L.C.,
represented by Adam G. Landis, Esq., and Kerri K. Mumford, Esq., at
Landis Rath & Cobb LLP; and Adam C. Harris, Esq., Robert J.
Ward, Esq., and David M. Hillman, Esq., at Schulte Roth & Zabel
LLP.
Allied Systems Holdings, Inc., has changed its name to ASHINC
Corporation.
* * *
ASHINC Corporation, f/k/a Allied Systems Holdings, Inc., and its
debtor affiliates filed with the U.S. Bankruptcy Court for the
District of Delaware a joint Chapter 11 plan of reorganization,
co-proposed by the Committee and the first lien agents.
The Plan provides that certain of the Debtors' assets, the
Litigation Trust Assets, will vest in the Allied Litigation Trust,
and the remainder of the Debtors' assets, including the proceeds
from the sale of substantially all of the Debtors' assets, will
either revest in the Reorganized Debtors or be distributed to the
Debtors' creditors.
AMERIGAS PARTNERS: Fitch Affirms 'BB' LT IDR, Outlook Stable
------------------------------------------------------------
Fitch Ratings has affirmed AmeriGas Partners, L.P. and its fully
guaranteed financing co-borrower AmeriGas Finance Corp.'s Long-Term
Issuer Default Ratings (IDR) at 'BB'. In addition, Fitch has
applied its updated "Corporates Recovery Ratings and Instrument
Ratings Criteria," affirmed the unsecured senior note rating of
'BB' and revised the Recovery Rating (RR) to 'RR4' from 'RR3.' The
ratings have been removed from Under Criteria Observation (UCO),
where they were placed following the publication of the updated
recovery rating criteria on April 9, 2021.
The Rating Outlook is Stable.
The rating reflects the strength of AmeriGas' retail propane
distribution network, broad geographic reach across the U.S.,
adequate credit metrics and ability to manage unit margins under
various operating conditions. Concerns include the financial
volatility from the sensitivity to weather conditions, secular
decline in usage and price-induced customer conservation.
KEY RATING DRIVERS
Recovery Ratings Criteria Update: Instrument ratings and RRs for
AmeriGas' debt instruments are based on Fitch's newly introduced
notching grid for issuers with 'BB' category Long-Term IDRs. This
grid reflects average recovery characteristics of similar-ranking
instruments. The senior unsecured debt is capped at 'RR4'. The
'RR4' denotes average recovery (31%-50%) in the event of default.
Coronavirus Pressures 2020-2021 Sales: Propane consumption began to
increase in the quarter ended March 31, 2021 following a decline in
2020. Drops in commercial and motor fuel volumes reduced EBITDA by
$18 million in fiscal 2020 (year ended September). Commercial and
industrial sales were 41% of 2020 sales and motor fuels were 18%.
Fitch's rating case forecasts AmeriGas' volumes to remain flat in
2021 with a gradual recovery in 2022-2023. Through 1H21, retail
volumes were down and propane price was up (Mont Belvieu propane
pricing is up 83% yoy), while the adjusted operating margin was
down due to lower volumes and margins.
The volume decline was only partially offset by an increased demand
for residential heating and a retail cylinder exchange program.
Management's Business Transformation Program, which restructured
operations and improved distribution channels, mobile systems and
customer service, is also offsetting the volume decline. Fitch
understands that the total cost of the business transformation
initiatives, including approximately $100 million of related
capital expenditures, to be approximately $200 million. Such
initiatives are expected to be carried out through fiscal 2022, and
to provide AmeriGas with more than $140 million of annual savings,
some of which will be reinvested in customer retention efforts.
Customer Conservation and Attrition: Fitch's primary concern
regarding the retail propane industry continues to be customer
conservation and attrition, driving sustained long-term declining
retail volumes. Recent propane prices increases, up over 40% for
winter 2021 compared with 2020, may power conservation efforts and
hinder management's ability to pass on rising commodity prices to
customers. Electricity remains the largest competing heat source to
propane. Customer migration to natural gas is a longer term
competitive factor as natural gas utilities build out systems to
serve areas previously only served by propane and electricity
providers.
Scale of Business: AmeriGas is the largest retail propane
distributor in the country, benefiting from significant customer
and geographic diversity. This broad scale and diversity helps
dampen the weather-related volatility of cash flows. AmeriGas
serves approximately 1.5 million customers and has approximately
1,800 locations in all 50 states. Retail gallon sales are fairly
evenly distributed geographically.
High Degree of Seasonality: Sales are highly seasonal and driven by
the winter heating season. Approximately 80%-85% of EBITDA is
derived in the first two quarters of each fiscal year ended
September. Results from the fiscal 2021 heating season were
affected by the pandemic, which reduced volume sales and EBITDA.
Retail gallon sales were 2% lower for the first six months of
fiscal 2021. The weather was 3.3% warmer than normal, continuing a
trend of warmer than expected winters in the prior year. AmeriGas '
cylinder-exchange business provides some seasonal diversity, and
national accounts are steady year round. The seasonal factors are
embedded in Fitch's analysis.
Deleveraging Back On Track: As a wholly owned subsidiary, AmeriGas
has financial flexibility to invest in structural cost reductions
and operating efficiencies, dividend reduction and capital
reinvestment. AmeriGas has proven adept at managing its operating
costs and distributions. Fiscal 2020 leverage (total debt with
equity credit to operating EBITDA) rose to 5.1x at fiscal YE 2020,
slightly above Fitch's negative sensitivity of 5.0x but well below
Fitch's forecast.
Fitch forecasts leverage will drop to a range of 4.4x-4.6x through
2024 as volume sales increase slightly in 2022 and margins
stabilize at pre-coronavirus levels. Capex spending will remain
flat with opportunistic acquisitions focused on renewable gas to
support the company's emission-reduction goals. Fitch's calculation
of leverage includes several nonrecurring costs for the
transformation project, and was 5.3x for the TTM ended March 31,
2021, which is above Management's leverage target of 4.00x-4.25x.
Parent Subsidiary Linkage: The rating reflects AmeriGas '
standalone credit profile and does not have any uplift in its
Long-Term IDR from its parent, UGI Corporation (not rated). Fitch
assumes UGI has a stronger credit profile than AmeriGas given the
diversity of cash flow from UGI's various subsidiaries and low
levels of parent-only debt ($831 million or 13% of consolidated
debt). The subsidiaries include a highly rated, regulated natural
gas local distribution utility, UGI Utilities, Inc. (A-/Stable).
Fitch assesses the strategic and legal ties as moderate. AmeriGas'
$2.6 billion senior notes are nonrecourse to the parent, and there
are no guarantees or cross-defaults. Operational ties are also
considered weak as AmeriGas has its own management team and
decentralized financial operations.
DERIVATION SUMMARY
AmeriGas ' focus in retail propane distribution is unique relative
to Fitch's other midstream energy coverage. Retail propane
distribution is a highly fragmented market with a significant
amount of seasonal sales variations driven by weather. AmeriGas '
size and scale is consistent with other 'BB' rated master limited
partnerships, which tend to have EBITDA of roughly $500 million per
year with concentrated business lines, like AmeriGas' focus on
retail propane distribution.
Fitch expects AmeriGas' leverage will decline and remain at
4.4x-4.6x as economies reopen and demand returns. AmeriGas '
leverage is slightly higher than wholesale fuel distributor Sunoco
LP (BB/Positive). Both have seasonal or cyclically exposed cash
flow, although retail propane demand tends to be more seasonally
and weather affected than motor fuel demand.
Fitch rates AmeriGas ' international propane retail affiliate UGI
International, LLC (UGII) 'BB+'/Stable. Although UGII is a large
propane retailer, it operates in less fragmented European markets
with lower leverage. AmeriGas has higher Fitch-estimated leverage
than UGII, with UGII's FFO-adjusted leverage averaging 3.0x through
2024. However, AmeriGas has stronger EBITDA margin of more than 20%
for the same period.
AmeriGas' margin benefits from its ability to roll up small retail
propane distributors in the U.S. and use its size and scale to
lower or eliminate overhead costs while maintaining sales. AmeriGas
has also become very adept at managing EBITDA margins and gross
margins, even in a contracting sales and volatile propane price
environment.
Rockpoint Gas Storage Partners, L.P. (ROCGAS; B-/Stable), a natural
gas storage provider, is similar to AmeriGas, with a strong
seasonal component and is heavily influenced by the weather during
the peak season. AmeriGas operates on the retail level while ROCGAS
sells at the wholesale level. AmeriGas is much bigger than ROCGAS
and has stronger geographic diversity compared with ROCGAS's
geographical concentration in Alberta.
ROCGAS's leverage, which is strong for the rating category, offsets
its geographic concentration. Fitch expects fiscal 2021 total debt
with equity credit to operating EBITDA to be 5.3x for ROCGAS, with
leverage moving below 5.0x over the forecast period, slightly
higher than Fitch's expectations for AmeriGas.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- Retail and wholesale sales flat in 2021, recovering to just
over 1% growth after 2022;
-- Dividend remains less than $200 million in 2021 and averages
$300 million annually from 2022 to 2024;
-- Operating margins consistent with four-year average;
-- Retail and wholesale pricing consistent with current pricing;
-- Total capital spending of between $100 million and $130
million annually, with small tuck-in acquisition in 2023-2024.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Increased scale of business without impairing profitability;
-- Total debt with equity credit to operating EBITDA below 4.0x
on a sustained basis.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Accelerating deterioration in customer, margin and/or volumes;
-- Acquisition that would materially affect leverage;
-- Total debt with equity credit to operating EBITDA above 5.0x
on a sustained basis.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Liquidity Adequate: AmeriGas had roughly $419 million of available
liquidity from cash balances and credit facility capacity as of
March 31, 2021. Approximately $410 million of borrowing capacity
was available on the $600 million revolving credit facility that
matures in December 2022, which is primarily used for seasonal
working capital needs. The available capacity on the credit
facility was reduced by $130 million of outstanding borrowings and
$60 million outstanding LOC.
Maturities are manageable, with no note maturities until May 2024.
Fitch expects AmeriGas to be in compliance with the leverage
covenants in the credit agreement. Fitch's leverage includes
several nonrecurring costs for the transformation project, which
differs from the leverage calculation used for covenant compliance
purposes.
ISSUER PROFILE
AmeriGas is the largest retail propane distributor in the U.S.
based on the volume of propane gallons distributed annually, with
about 13%-15% market share. Over 90% of its propane sales are
retail and primarily to residential customers (33% of 2020 sales),
commercial and industrial (44%), motor fuel customers (18%) and
agricultural (4%). AmeriGas is a wholly owned subsidiary of UGI
Corporation.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
APPLIANCESMART INC: JanOne to Get $25K from Exit Facility
---------------------------------------------------------
ApplianceSmart, Inc. submitted a Third Amended Plan of
Reorganization and accompanying Disclosure Statement.
The Debtor shall obtain the money needed to make the payments
called for under the Plan from affiliate and senior secured
creditor Live Ventures, who shall fund the payments needed under
the Plan as an "Exit Facility." The Exit Facility shall be a
capital contribution from Live Ventures, which is also known as a
contribution of "new value." In return, Live Ventures (or its
designated affiliate) shall become the sole shareholder of the
Reorganized Debtor.
The Debtor anticipates that the only Administrative Claim shall be
the claim of the attorney for the Debtor, estimated to be
approximately $70,000. The attorney for the Debtor shall file his
Final Fee Application by the Effective Date of the Plan. The
Administrative Claim Bar Date shall apply to any claimant who seeks
to assert an Administrative Claim against the Debtor. The Debtor is
unaware of any such claimant other than the attorney for the
Debtor.
Class 2 of the Plan shall be the Junior Secured Claim of JanOne.
JanOne shall receive $25,000 on the Effective Date from the Exit
Facility in full satisfaction of its claim. JanOne shall release
its security interest in the Debtor and the Reorganized Debtor's
assets upon payment.
Class 3 of the Plan shall be the Claims of the General Unsecured
Creditors. In full satisfaction of all Allowed General Unsecured
Claims, including the Allowed Claim of Whirlpool, in the amount of
$3,152,970.52, the Debtor shall fund a General Unsecured Creditors
Fund of $50,000, and each holder of an Allowed General Unsecured
Claim will be paid a pro rata share of its Allowed General
Unsecured Claim. Debtor's estimate of anticipated pro rata
distributions based on its estimate of Allowed General Unsecured
Claims and the General Unsecured Creditors Fund. The Debtor
projects that Allowed General Unsecured Claims will be paid .54% of
their total Allowed Claims.
Class 4 of the Plan shall be the Current Shareholder,
ApplianceSmart Holdings, LLC. ApplianceSmart Holdings, LLC shall
receive nothing under the Plan. Its equity interest in the Debtor
shall be cancelled on the Effective Date. Class 4 is deemed to have
voted against the Plan pursuant to 11 U.S.C. § 1126(g) because it
will receive nothing under the Plan.
The Plan is premised on the Exit Facility for payment of amounts to
be paid to creditors. Live Ventures shall provide the Exit Facility
in an amount projected to be $446,272.73 through a contribution of
new value to the Reorganized Debtor. Live Ventures shall wire the
funds to an escrow account maintained by a third party prior to the
Confirmation Hearing.
The Debtor shall hold sufficient amounts of the Exit Facility in
reserve to the extent a creditor is awaiting an Order from the
Court that would allow payment of the claim in accordance with the
Plan upon issuance of an Order Allowing the claim by the Court. To
the extent the amount of the Exit Facility must be increased based
on the final allowed Administrative Claim of the attorney for the
Debtor, Live Ventures shall deliver all amounts necessary to make
full payment of the final Allowed Administrative Claim within seven
days following entry of the Order Allowing such Claim, including
after the Effective Date if such date of Allowance occurs after the
Effective Date.
A full-text copy of the Disclosure Statement dated August 3, 2021,
is available at https://bit.ly/3yrSfrC from PacerMonitor.com at no
charge.
Counsel for the Debtor:
Kenneth A. Reynolds
The Law Offices of Kenneth A. Reynolds, Esq., P.C.
105 Maxess Road, Suite 124
Melville, New York 11747
Tel: (631) 994-2220
About ApplianceSmart Inc.
ApplianceSmart, Inc. -- https://appliancesmart.com/ -- is a
retailer of household appliances. ApplianceSmart offers
white-glove delivery within each store's service area for those
customers that prefer to have appliances delivered directly.
ApplianceSmart filed its voluntary petition under Chapter 11 of the
Bankruptcy Code (Bankr. S.D.N.Y. Case No. 19-13887) on Dec. 9,
2019. The petition was signed by Virland Johnson, chief financial
officer. At the time of the filing, the Debtor estimated $1 million
to $10 million in both assets and liabilities. Kenneth A.
Reynolds, Esq., at The Law Offices of Kenneth A. Reynolds, Esq.,
P.C. is the Debtor's legal counsel.
APTEAN INC: Moody's Affirms 'B3' CFR, Outlook Stable
----------------------------------------------------
Moody's Investors Service affirmed Aptean, Inc.'s B3 Corporate
Family Rating, B3-PD Probability of Default Rating and B2 rating on
its senior secured first lien credit facilities, including the new
$125 million incremental and fully fungible term loan. The outlook
is stable.
Net proceeds from the $125 million incremental term loan and the
new $50 million PIK preferred equity will be used to fund several
tuck-in acquisitions of small enterprise resource planning (ERP)
software providers servicing European and the United States
markets. In addition, proceeds will add cash to the balance sheet.
Outlook Actions:
Issuer: Aptean, Inc.
Outlook, Remains Stable
Affirmations:
Issuer: Aptean, Inc.
Probability of Default Rating, Affirmed B3-PD
Corporate Family Rating, Affirmed B3
Backed Senior Secured 1st Lien Term Loan, Affirmed B2 (LGD3)
Backed Senior Secured Delayed Draw Term Loan, Affirmed B2 (LGD3)
Backed Senior Secured Revolving Credit Facility, Affirmed B2
(LGD3)
RATINGS RATIONALE
The B3 CFR reflects Aptean's small scale, extremely high leverage
and negative free cash flow in the LTM ended March 31, 2021 as a
result of high restructuring and business optimization expenses.
Leverage is approximately 9.1x pro forma for the planned
acquisitions and excluding transaction fees (Moody's adjusted,
including expensing of capitalized software), albeit around 7.6x
excluding restructuring charges and giving full credit for planned
synergies. The use of new equity and EBITDA contribution from the
planned acquisitions results in half a turn leverage reduction from
the pre-acquisition level (around 9.6x as of March 31, 2021).
Nevertheless, the planned acquisitions will result in additional
integration expenses and costs to achieve synergies that will
continue to pressure Aptean's free cash flow generation in 2021,
positioning the company weakly in the B3 rating category.
Governance considerations include Aptean's aggressive strategy of
debt-funded acquisitions and the limited track record of
deleveraging since the LBO, which highlights the company's very
aggressive financial policies under private equity ownership, and
the likelihood that leverage will remain high.
Aptean's credit profile is supported by the company's solid niche
positioning as a provider of vertically focused ERP software to
small and mid-size enterprise (SME) customers. The critical nature
of the company's products, solid proportion of recurring revenues,
and good retention rates of over 90% provide for a stable base of
free cash flow if the company decided to pause its M&A activity.
Moody's expects total revenue to grow organically in the low single
digit range in the next 12 to 18 months, supported by strong
subscription bookings growth that will more than offset a decline
of license bookings. Additionally, Aptean benefits from its track
record of integrating acquired businesses and realizing cost
synergies.
The stable outlook reflects Moody's expectation for more moderate
use of leverage for acquisitions that will allow the company to
reduce its Moody's adjusted leverage to below 8.5x in the next 12
to 18 months.
The B2 rating on the first lien debt reflects its senior most
position in the capital structure. The first lien debt is rated one
notch above the B3 CFR.
Moody's expects Aptean's liquidity to remain adequate over the next
12 to 18 months. Pro forma for the proposed transaction, the
company will have a cash balance of approximately $49 million.
Moody's projects the company to generate positive free cash flow,
but it will likely remain suppressed by acquisition and
restructuring expenses. Aptean's liquidity is also supplemented by
an undrawn $50 million revolving credit facility, albeit small
relative to its annual cash interest expense of over $60 million
(pro forma for the debt financing), $16 million in additional
purchase price consideration, $10 million in debt amortization, $3
million in capital expenditures as well as significant
restructuring expenses required to integrate the acquisitions. The
revolving facility contains a springing maximum first lien net
leverage ratio leverage covenant of 8.1x (tested only when 35%
drawn). Moody's expects the company to maintain a sufficient
cushion over the next 12-18 months.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Aptean's ratings could be downgraded if integration challenges
arise, leverage is not on track to decline below 8.5x, reported
free cash flow does not turn positive, or liquidity weakens. The
ratings could also be downgraded if the company pursues large debt
financed acquisitions without material equity contributions.
The ratings could be upgraded if Aptean demonstrates a commitment
to more conservative financial policies, while maintaining its
debt/EBITDA below 6.5x and free cash flow to debt above 5% with
good liquidity.
The principal methodology used in these ratings was Software
Industry published in August 2018.
Aptean is a provider of vertical-focused ERP systems and related
products primarily to SME customers. For the last twelve months
ended March 31, 2021, pro forma revenue was $443 million. Aptean is
owned by private equity firms TA, Charlesbank and Vista.
AQUA ADVENTURE: Seeks to Hire Charles A. Cuprill P.S.C. as Counsel
------------------------------------------------------------------
Aqua Adventure, Inc. seeks approval from the U.S. Bankruptcy Court
for the District of Puerto Rico to hire Charles A. Cuprill P.S.C.
Law Offices to serve as legal counsel in its Chapter 11 case.
The firm's services include the preparation of the Debtor's plan of
reorganization, representation of the Debtor in adversary
proceedings and other legal services in connection with the case.
The firm will charge $350 per hour for work performed by Charles
Cuprill-Hernandez, Esq., $250 per hour for associates and $85 for
paralegals. It will also seek reimbursement for work-related
expenses incurred.
Charles A. Cuprill P.S.C. Law Offices received a retainer in the
amount of $15,000.
Mr. Hernandez, a principal at the firm, disclosed in court filings
that his firm is disinterested as defined in Section 101(14) of the
Bankruptcy Code.
The firm can be reached through:
Charles A. Cuprill Hernandez, Esq.
Charles A. Cuprill P.S.C. Law Offices
356 Calle Fortaleza, Second Floor
San Juan, PR 00901
Tel: 787 977-0515
Email: ccuprill@cuprill.com
About Aqua Adventure Inc.
San Juan, P.R.-based Aqua Adventure, Inc. filed its voluntary
petition for relief under Chapter 11 of the Bankruptcy Code (Bankr.
D.P.R. Case No. 21-02244) on July 23, 2021. Aqua Adventure
President Jose L. Morera Perez signed the petition. At the time of
the filing, the Debtor disclosed $1,679,795 in assets and
$1,915,985 in liabilities. Charles A. Cuprill P.S.C. Law Offices
and Luis R. Carrasquillo & Co., P.S.C. serve as the Debtor's legal
counsel and financial consultant, respectively.
AQUA ADVENTURE: Taps Luis R. Carrasquillo as Financial Consultant
-----------------------------------------------------------------
Aqua Adventure, Inc. seeks approval from the U.S. Bankruptcy Court
for the District of Puerto Rico to hire Luis R. Carrasquillo & Co.,
P.S.C. as its financial consultant.
The Debtor needs a financial consultant to assist in the financial
restructuring of its affairs, advise on strategic planning, assist
in the preparation of a plan for reorganization, and participate in
the negotiation with creditors.
The firm's hourly rates are as follows:
Luis R. Carrasquillo, Partner $175 per hour
Marcelo Gutierrez, Senior CPA $125 per hour
Arnaldo Morales Rivera, Sr. Accountant $95 per hour
Carmen Callejas Echevarria, Sr. Accountant $90 per hour
Zoraida Delgado Diaz, Sr. Accountant $75 per hour
Enid O. Olmeda, Jr. Accountant $45 per hour
Victoria Medina Rivera, Jr. Accountant $35 per hour
Rosalie Hernandez Burgos, Support $35 per hour
Kelsie Lopez, Esq., Legal Support $45 per hour
The Debtor paid $10,000 to the firm as a retainer fee.
Luis Carrasquillo Ruiz, a principal at the firm, 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:
Luis R. Carrasquillo Ruiz, CPA
Luis R. Carrasquillo & Co., P.S.C.
28th St., Turabo Gardens Ave.
Caguas, PR 00725
Tel: 787-746-4555
Fax: 787-746-4564
Email: luis@cpacarrasquillo.com
About Aqua Adventure Inc.
San Juan, P.R.-based Aqua Adventure, Inc. filed its voluntary
petition for relief under Chapter 11 of the Bankruptcy Code (Bankr.
D.P.R. Case No. 21-02244) on July 23, 2021. Aqua Adventure
President Jose L. Morera Perez signed the petition. At the time of
the filing, the Debtor disclosed $1,679,795 in assets and
$1,915,985 in liabilities. Charles A. Cuprill P.S.C. Law Offices
and Luis R. Carrasquillo & Co., P.S.C. serve as the Debtor's legal
counsel and financial consultant, respectively.
ATLANTIC WORLDWIDE: Seeks Cash Collateral Access
------------------------------------------------
Atlantic Worldwide Shipping, LLC asks the U.S. Bankruptcy Court for
the Southern District of Texas, Houston Division, for authority to
use cash collateral to pay for expenses set forth in the budget and
any other unforeseeable expenses that may arise and pose a threat
to the Debtor's continued operations.
The Debtor says it depends on the use of cash collateral for
payroll and general operating expenses. The Debtor generates
revenue through the Debtor's shipping and freight services. It is
critical to the operation of the Debtor's business and its
reorganization efforts that it be permitted to pay its drivers and
other shipping expenses using cash collateral.
According to the Debtor, there are two financing statements filed
by unknown creditors. CT Corporation System filed two financing
statements, one designated by filing number 20-0055193611 and the
second filing number 21-0011993076, as a representative for two
unknown creditors. Counsel for the Debtor contacted CT and was
unable to obtain the name of the creditors. As of the petition
date, the Debtor nor its counsel know which creditors filed the UCC
financing statements.
A search in the Texas Secretary of State shows that allegedly
secured positions are held by Triumph Business Capital, U.S. Small
Business Administration, Reserve Funding Group, and Tiger Capital,
among others.
As adequate protection for the use of Cash Collateral, the Debtor
proposes to grant Triumph Business Capital, SBA, Merchant Capital
Funding, Reserve Funding Group, Tiger Capital and Novus Capital
Funding replacement liens on all post-petition cash collateral and
post-petition acquired property to the same extent and priority
they possessed a valid, perfected and enforceable security interest
as of the Petition Date.
A copy of the motion is available at https://bit.ly/2VuioYg from
PacerMonitor.com.
About Advantage Worldwide Shipping, LLC
Advantage Worldwide Shipping, LLC is a freight management and
logistics company. The Debtor sought protection under Chapter 11 of
the U.S. Bankruptcy Code (Bankr. S.D. Tex. Case No. 21-32642) on
August 3, 2021. In the petition signed by Madhavadas Nair, general
manager, the Debtor had $252,080 in assets and up to $4,701,322 in
liabilities.
Judge Eduardo V. Rodriguez oversees the case.
Robert Chamless Lane, Esq. at The Lane Law Firm, is the Debtor's
counsel.
AUTOMOTIVE PARTS: U.S. Trustee Appoints Creditors' Committee
------------------------------------------------------------
The U.S. Trustee for Region 6 appointed an official committee to
represent unsecured creditors in the Chapter 11 case of Automotive
Parts Distribution International, LLC.
The committee members are:
1. King Shing Industrial Co., Ltd.
c/o Shining Ho
No. 3, Gongye 1st Rd., Pingzhen Dist.
Taoyuan City 32461, Taiwan (ROC)
Phone: +886-3-4195988
Fax: +886-3-4195404
2. TechRad Zhejiang Automotive Thermal Systems Corp.
c/o Ashley Tittle Goldstein
724 Johnson Street
Louisville, CO 80027
Phone: 678-778-0188
E-mail: atittle@tnimco.com
3. U&C Parts Company Ltd.
c/o Lynn Jiang
5th Floor A9 Building 8 East Shengtai Road
Najing, 21100, China
Phone: 86-25-52129310
E-mail: blm@cabcollects.com
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 Automotive Parts
Automotive Parts Distribution International, LLC was established in
January 2008 as a distribution and marketing company to cover the
North American aftermarket. It offers radiators, condensers, fan
assemblies, heater cores, intercoolers, heavy duty radiators, and
fuel pump module assemblies.
Automotive Parts Distribution sought Chapter 11 protection (Bankr.
N.D. Texas Case No. 21-41655) on July 12, 2021. In its petition,
the Debtor listed $10 million to $50 million in both assets and
liabilities. Kevin O'Connor, chief executive officer, signed the
petition. Rakhee V. Patel, Esq., at Winstead PC, is the Debtors'
legal counsel.
BALLY'S CORP: Moody's Rates New Unsecured Notes Due 2029/2031 'B3'
------------------------------------------------------------------
Moody's Investors Service assigned a B3 rating to Bally's
Corporation's proposed approximately $1,000 million senior
unsecured notes due 2029 and approximately $1,000 million senior
unsecured notes due 2031.
Proceeds from the proposed senior unsecured notes along with the
recently rated credit facilities will be part of the total
financing used to support Bally's merger with Gamesys Group plc
("Gamesys") that was announced on April 18. The transaction is
valued at $3.16 billion, or about 11x Gamesys' Dec. 31, 2020 fiscal
year-end adjusted EBITDA of $286 million.
The B3 assigned to the proposed notes, two notches below Bally's B1
Corporate Family Rating, acknowledges the considerable amount of
secured debt that is effectively senior to the notes.
This rating action follows Moody's July 27, 2021 upgrade of Bally's
Corporate Family Rating to B1 from B2 and Probability of Default
Rating to B1-PD from B2-PD. At that time, Moody's assigned Ba2
ratings to the company's amended and extended up to $750 million
1st lien senior secured revolver expiring 2026 and new $1.445
billion 1st lien senior secured term loan B due 2028. Bally's
Speculative Grade Liquidity rating was also raised to SGL-1 from
SGL-2 and a stable rating outlook was assigned.
The following ratings/assessments are affected by the action:
New assignments:
Issuer: Bally's Corporation
Senior Unsecured Global Notes, Assigned B3 (LGD5)
RATINGS RATIONALE
Bally's B1 Corporate Family Rating is supported by the company's
positive free cash flow during periods of normal operation, and
improved level of geographic diversification resulting from
acquisitions during the past two years. Also supporting the rating
is the company's significant cash balance, lack of meaningful
maturities until 2024, and good cost management that is
contributing to higher margins following facility re-openings. The
ratings also consider the benefits of the company's pending merger
with Gamesys that will provide Bally's with an increasingly
diversified product offering and improved free cash flow profile.
Key credit concerns include the highly competitive nature of the
online gaming industry, integration risk, and the inherent
regulatory uncertainty related to the evolving online gaming
business.
The SGL-1 Speculative Grade Liquidity rating considers that Bally's
will generate cash flow after all debt service, rent payments, and
capital expenditures in a range of $200 million to $300 million in
each of the next two years. Also considered is that the pro forma
unrestricted cash balance will be over $100 million, and the
company will have full availability under the new revolver.
Additionally, there will be no financial maintenance covenants with
the exception of springing leverage ratio that will only be
triggered if the revolver is drawn at a certain level.
The coronavirus outbreak and the government measures put in place
to contain it continue to disrupt economies and credit markets
across sectors and regions. Although an economic recovery is
underway, the recovery is tenuous, and continuation will be closely
tied to containment of the virus. As a result, a degree of
uncertainty around Moody's forecasts remains. Moody's regards the
coronavirus outbreak as a social risk under Moody's ESG framework,
given the substantial implications for public health and safety.
The gaming sector has been one of the sectors most significantly
affected by the shock given its sensitivity to consumer demand and
sentiment. More specifically, Bally's remains vulnerable to a
renewed spread of the outbreak. Bally's also remains exposed to
discretionary consumer spending that leave it vulnerable to shifts
in market sentiment in these unprecedented operating conditions.
Moody's expects the company to maintain somewhat balance financial
policies. Leverage is initially very high in part because of
earnings weakness related to the coronavirus, but the company is
targeting debt-to-EBITDA of 4.0-4.5x (company calculation). This is
down from the company's estimate of 5.3x at closing. The company
favorably does not pay a dividend and Moody's expects the company
will refrain from share repurchases until reaching its target
leverage ratio.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The stable rating outlook is based on Moody's expectation that
there will be a gradual easing of social distancing requirements
that will result in increased visitation relative to the past year,
and in turn, a continued improvement in revenue, EBITDA and
operating margins of Bally's regional casinos and meaningful
leverage reduction over the next 18 months. The stable outlook also
considers that Bally's very good liquidity will enable the company
to manage in the uncertain operating environment that is likely to
persist over the next year.
An upgrade requires a high degree of confidence that the gaming
sector has returned to a period of long-term stability, the
continuation of a positive free cash flow profile, maintenance of
good liquidity, and debt/EBITDA achieved and sustained below 5.5x.
Ratings could be downgraded if it appears Bally's is not able to
achieve and sustain Moody's adjusted leverage below 6.5x for any
reason such as operating weakness, acquisitions or shareholder
distributions. A deterioration in liquidity could also lead to a
downgrade.
The principal methodology used in these ratings was Gaming
published in June 2021.
Bally's Corporation (NYSE: BALY) owns and operates casinos in the
US. The company currently owns and manages 12 casinos across 8
states, a horse racetrack and 13 off track betting licenses in
Colorado. Following the completion of pending acquisitions, as well
as the construction of a land-based casino in Centre County, PA,
Bally's will own 15 casinos across 11 US states. Revenue and EBITDA
for the latest 12-months ended March 31, 2021 was US$456 million
and $US101 million, respectively.
Gamesys is the parent company of an online gaming group that
provides entertainment to a global consumer base and is listed on
the London Stock Exchange under the ticker symbol "GYS." Gamesys
holds gambling licenses in the UK, Spain, Malta, Gibraltar and
Sweden. Revenue and EBITDA for the latest 12-months ended Dec. 31,
2020 was GBP728 million and GBP206 million, respectively.
BALROG ACQUISITION: Moody's Assigns First Time 'B3' CFR
-------------------------------------------------------
Moody's Investors Service assigned a first time B3 Corporate Family
Rating to Balrog Acquisition, Inc, (Balrog a.k.a. BakeMark), a
Probability of Default Rating of B3-PD; a B3 to its proposed first
lien term loan and Caa2 to the proposed second lien term loan. The
rating outlook is stable. The debt issuance is in connection with
the acquisition of Balrog (BakeMark) by private equity firm
Clearlake for an undisclosed purchase price to be funded about half
with common and preferred equity and the rest with debt. The
ratings assume that audited financial statements will be provided
in the future by the borrower or a guarantor parent.
The following ratings were assigned:
Assignments:
Issuer: Balrog Acquisition, Inc.
Probability of Default Rating, Assigned B3-PD
Corporate Family Rating, Assigned B3
Senior Secured 1st Lien Term Loan, Assigned B3 (LGD3)
Senior Secured 2nd Lien Term Loan, Assigned Caa2 (LGD5)
Outlook Actions:
Issuer: Balrog Acquisition, Inc.
Outlook, Assigned Stable
RATINGS RATIONALE
Bakemark's B3 CFR and stable outlook reflect a relatively
aggressive financial policy as evidenced by high starting debt to
EBITDA leverage (including Moody's adjustments) in the 7x to 8x
range and modest EBITDA margins, though healthy relative to those
typical of a distribution business. At the same time, it reflects
Bakemark's position as a leading distributor and manufacturer of
bakery ingredients across North America and in some added markets,
with a diverse customer base, longstanding relationships, limited
exposure to commodity inflation due to cost pass through
arrangements and a captive truck fleet. The business is relatively
non-cyclical and BakeMark is uniquely positioned because of its
ability to offer value added manufacturing and well recognized
baking brands. Moody's expects deleveraging given the company's
good cash conversion due to its relatively low maintenance Capex
requirements, but the pace will depend on the rate of top line and
profit growth, and could also be slowed by additional acquisitions.
Further, the establishment of high coupon PIK preferred stock
creates an accreting obligation over time.
Following its 2017 carve out from CSM Bakeries the company saw a
step up in new business as it was able to approach and add customer
categories formerly served by CSM. However, the events of 2020
slowed its progress due the closure of some of its customers during
the pandemic, particularly smaller accounts. Moody's expects
recovery in 2021, and sustained growth into 2022 as smaller
accounts reopen, as a significantly expanded sales force comes on
line and as certain new national business that has already been
signed begins to be added during 2021 that will carry into next
year. Still, uncertainties remain around possible setbacks in the
business environment as further surges in the virus continue, and
around the onboarding of new sales representatives if the labor
market remains tight.
BakeMark has good liquidity reflecting Moody's expectation for
positive free cash flow of about $30 million over the next 12-18
months. The company will also have full access to a $100 million
ABL which will be undrawn at the close of the transaction. The ABL
is governed by a springing fixed charge coverage covenant of 1.0x
which is tested if availability falls below the greater of $7.5
million or 10% of the line cap. Moody's do not expect the covenant
to be triggered, however if it is tested, BakeMark would have
significant cushion. The first debt maturity is when the ABL
matures in 2026.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The stable outlook reflects Moody's expectation that the company
will sustain strong growth rates, positive free cash flow that will
be used to lower leverage and will refrain from any distributions
or redemption of equity until leverage is significantly improved.
An upgrade would be considered if the company demonstrates a solid
profit track record under new ownership including improving scale
and margins, solid free cash flow and if it sustains leverage below
6.0x.
A downgrade would be considered in the event of unexpected
operational difficulties, if leverage is sustained above 8.0x, if
cash flow were expected to be negative or in the event of debt
financed acquisitions or shareholder distributions.
ENVIRONMENTAL SOCIAL AND GOVERNANCE CONSIDERATIONS
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to
disrupt economies and credit markets across sectors and regions.
Moody's analysis has considered its effect on the performance of
BakeMark and the expectation of a gradual recovery for the coming
year. 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 Moody's ESG framework, given the substantial
implications for public health and safety. Volatility can be
expected in 2021 due to uncertain demand characteristics, channel
disruptions, and supply chain disruptions.
In terms of Societal factors, BakeMark faces the risk of shifts in
consumer behavior as well as health and wellness considerations,
which can influence the consumption of its products.
Moody's views BakeMark's environmental risk as low. The company is
exposed to energy availability to run its fleets and water and
waste considerations at its manufacturing facilities.
In terms of corporate governance, private equity ownership of the
company has led to comfort with high closing leverage and increases
the risk of aggressive shareholder returns.
Structural considerations:
The second lien is rated two notches lower than the CFR and first
lien given its loss absorbing position in the capital structure.
The first lien is rated at the same level as the CFR because it is
behind the ABL (unrated) in priority but benefits from the cushion
provided by the second lien.
As proposed, the new 1st and 2nd lien credit facilities are
expected to provide covenant flexibility that if utilized could
negatively impact creditors. Notable terms include the following:
Incremental debt capacity up to the greater of a specified fixed
amount and 100% of consolidated EBITDA; plus unused capacity
reallocated from the general debt basket, plus unlimited amounts
subject to a first lien net leverage test equal to or less than
5.25 to 1.00 (if pari passu with the first lien) and total net
leverage of 7.5 to 1.00 (if pari passu with the second lien).
Amounts up to the greater of a specified fixed amount and 100% of
TTM EBITDA may be incurred with an earlier maturity date than the
initial term loans. There are no express "blocker" provisions which
prohibit the transfer of specified assets to unrestricted
subsidiaries; such transfers are permitted subject to carve-out
capacity and other conditions. Non-wholly-owned subsidiaries are
not required to provide guarantees; dividends or transfers
resulting in partial ownership of subsidiary guarantors could
jeopardize guarantees, with no explicit protective provisions
limiting such guarantee releases. There are no express protective
provisions prohibiting an up-tiering transaction. The repricing
premium is not triggered by a refinancing in connection with a
dividend recapitalization.
The proposed terms and the final terms of the credit agreement may
be materially different.
The principal methodology used in these ratings was Distribution &
Supply Chain Services Industry published in June 2018.
Based in Pico Rivera, CA, BakeMark is a market leader in the baking
industry, as a manufacturer and distributor of bakery ingredients,
products, and supplies. BakeMark serves customers in North America
and in some international markets across industry channels with a
product portfolio which includes bakery mixes, fillings, icings,
glazes, commodities, frozen products, and bakery supplies. BakeMark
is the exclusive distributor of some of the industry's top brands,
including Westco, BakeSense, Best Brands, Multifoods, BakeQwik,
Trigal Dorado, C'est Vivant, and Sprinkelina, operating through
five manufacturing plants and 29 distribution centers located
across North America. 2020 reported net sales per the audited
financials were $863 million.
BAUSCH HEALTH: Moody's Affirms B2 CFR Following IPO Announcement
----------------------------------------------------------------
Moody's Investors Service affirmed the ratings of Bausch Health
Companies Inc. including the B2 Corporate Family Rating, the B2-PD
Probability of Default rating, the Ba2 senior secured rating and
the B3 senior unsecured rating. The Speculative Grade Liquidity
Rating remains unchanged at SGL-1. The outlook remains stable.
The rating affirmation follows the announcement that Bausch Health
will pursue an initial public offering (IPO) of its Solta Medical
business, anticipated in late 2021 or the first half of 2022. The
affirmation also considers the anticipated spinoff of the global
Bausch + Lomb business, with management targeting net debt/EBITDA
of 6.5x to 6.7x for the remaining Bausch Pharma business at the
time of spinoff. Moody's anticipates that following a spinoff,
Bausch Pharma will remain acutely focused on deleveraging -- a
positive governance consideration. Further, Moody's assumes that
Bausch Pharma's capital structure will not include a substantially
higher portion of secured debt compared to Bausch Health's existing
capital structure that would otherwise result in wider notching of
the ratings. However, many details of the pending spinoff
transaction remain unknown, and Moody's will continue to assess the
impact on the credit profile as details become available including
the company's deleveraging commitment.
Affirmations:
Issuer: Bausch Health Americas, Inc.
Senior Unsecured Notes, Affirmed B3 (LGD5)
Issuer: Bausch Health Companies Inc.
Probability of Default Rating, Affirmed B2-PD
Corporate Family Rating, Affirmed B2
Senior Secured Revolving Credit Facility, Affirmed Ba2 (LGD2)
Senior Secured Term Loan, Affirmed Ba2 (LGD2)
Senior Secured Notes, Affirmed Ba2 (LGD2)
Senior Unsecured Notes, Affirmed B3 (LGD5)
Issuer: VRX Escrow Corp.
Senior Unsecured Notes, Affirmed B3 (LGD5)
Outlook Actions:
Issuer: Bausch Health Americas, Inc.
Outlook, Remains Stable
Issuer: Bausch Health Companies Inc.
Outlook, Remains Stable
RATINGS RATIONALE
Bausch Health's B2 Corporate Family Rating reflects its high
financial leverage with gross debt/EBITDA of approximately 7x as of
June 30, 2021 including recent debt reduction. The credit profile
is also constrained by the pending spinoff of the company's global
eyecare business. This transaction will increase business risks of
the remaining company, known as Bausch Pharma, due to reduced scale
and diversity and high leverage initially, with targeted net
debt/EBITDA of 6.5x to 6.7x. The company faces various outstanding
legal investigations and an unresolved patent challenge on Xifaxan
-- its largest product.
These risks are tempered by good progress in an ongoing turnaround
prior to the coronavirus pandemic, and a consistent focus on
deleveraging, which Moody's expects will continue after the
spinoff. The credit profile is supported by good free cash flow,
owing to high margins, modest capital expenditures and an efficient
tax structure. Moody's will continue to gauge the impact on the
credit profile as more details around the eyecare spinoff are
disclosed, and based on the latest operating performance, risk
factors and financial policies.
ESG considerations are material to Bausch Health's credit profile.
Bausch Health's key social risks include a variety of unresolved
legal issues, notwithstanding significant progress to date at
resolving such matters. Other social risks include exposure to
regulatory and legislative efforts aimed at reducing drug pricing.
However, Bausch Health's product and geographic diversification
help mitigate some of that exposure, as well as business lines
outside of branded pharmaceuticals. Among governance
considerations, management has had a consistent debt reduction
strategy, which Moody's envisions continuing following the eyecare
spinoff. In addition, the company has built a steady track record
of generating positive organic growth in recent years.
The outlook is stable, reflecting Moody's anticipation of
deleveraging following the pending eyecare spinoff, and a solid
growth outlook for the remaining Bausch Pharma business.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Consistent earnings growth, successful pipeline execution of new
rifaximin formulations, and significant resolution of outstanding
legal matters including Xifaxan patent challenge. On a total
company basis, debt/EBITDA sustained below 6.0x could support an
upgrade. After the pending eyecare spinoff, debt/EBITDA sustained
below 4.0 times could support an upgrade.
Factors that could lead to a downgrade include an adverse outcome
in the unresolved Xifaxan patent challenge, significant reductions
in pricing or utilization trends of key products, or large
litigation-related cash outflows. On a total company basis,
debt/EBITDA sustained above 7.0x could lead to a downgrade. After
the pending eyecare spinoff, debt/EBITDA sustained above 5.5 times
could lead to a downgrade.
Bausch Health Companies Inc. is a global company that develops,
manufactures and markets a range of pharmaceutical, medical device
and over-the-counter products. These are primarily in the
therapeutic areas of eye health, gastroenterology and dermatology.
Revenues for the 12 months ended June 30, 2021 totaled
approximately $8.5 billion.
The principal methodology used in these ratings was Pharmaceutical
Industry published in June 2017.
BCP RAPTOR II: Fitch Raises LT IDR to 'B', Outlook Stable
---------------------------------------------------------
Fitch Ratings has upgraded BCP Raptor II, LLC's (CAPMID) Long-Term
Issuer Default Rating (IDR) to 'B' from 'B-'. Additionally, Fitch
has upgraded CAPMID's senior secured term loan B to 'B+'/'RR3' from
'B'/'RR3'. The Rating Outlook has been revised to Stable from
Positive.
The upgrade is due to a fall in leverage. CAPMID was revised to
Positive Outlook on March 25, 2021 on a view that 2021 leverage
would fall below a positive sensitivity. That view was based on
strong plant and network operations in a February 2021 cold snap,
as well as high hydrocarbon prices in 1Q21. Recent volumes have
been stronger than Fitch expected, and price realizations on an
array of commodity-linked contracts indicate 2Q21 will be a
financially strong quarter. The IDR upgrade is driven by a revised
Fitch 2021 forecast of total debt to adjusted EBITDA of
approximately 5.5x, down from Fitch's previous forecast of 6.5x.
The secured term loan B is upgraded one notch driven by the upgrade
to the IDR.
KEY RATING DRIVERS
Sizeable Deleveraging: Fitch forecasts a large deleveraging in
2021. Over its first two full years of operation as a sister
company to BCP Raptor, LLC (BCPRAP; B/Stable) in 2019-2020,
CAPMID's leverage exceeded 8.0x. Fitch now expects 2021 leverage to
be approximately 5.5x. Fitch previously expected leverage of 6.5x
in 2021. This forecast includes both EBITDA rising and debt falling
significantly from fiscal YE Dec. 31, 2020.
Commodity Prices and Low Capex Drive Debt Repayment: Fitch expects
2021 leverage to be low partly based on favorable commodity prices
YTD, and full-year budgeted low capex relative to historical capex.
CAPMID, like BCPRAP, has some of its contracts, which do not
include keep-whole contracts, provide risk and reward on several
hydrocarbon prices. CAPMID benefited from relatively high commodity
prices in the last few quarters, particularly the completion of new
natural gas pipelines that are helping CAPMID's price
realizations.
When Permian production was surging and new pipelines were still in
construction in 2019, Fitch's natural gas price deck for Henry Hub
translated into low forecast price realizations in West Texas for
CAPMID. The current slightly rising natural gas production (and
about level for oil) in West Texas gives Fitch the assurance that
hydrocarbon price realizations will stay at their current high
level.
Concentration Risk: Cimarex Energy Co (BBB-/Rating Watch Positive)
is CAPMID's largest customer. Large and highly creditworthy
customers like Cimarex can help a generic gathering and processing
company during price troughs. As such, exploration and production
companies potentially have the capability to fully fund and thereby
persevere with their drilling plans. Companies with extensive
property have an ability to dynamically swing efforts around to
their most promising locations. The Cimarex concentration risk is
not a payment risk, but a volumetric forecasting risk. Fitch has
elected to use recent volumes as the main forecasting foundation
for CAPMID future volumes.
ESG Relevance Score of '4' for Complexity: The governance part of
the ESG relevance score has garnered an outcome of '4' for Group
Structure and Financial Transparency, as private-equity backed
midstream entities typically have less structural and financial
disclosure transparency compared with publicly traded issuers. This
topic has a negative impact on the credit profile, and is relevant
to the rating in conjunction with other factors. Additionally,
group structure considerations have elevated scope in the presence
of related party transactions (albeit small and arms-length)
between affiliated rated entities.
DERIVATION SUMMARY
CAPMID's comparable is Navitas Midstream Midland Basin, LLC
(Navitas; B/Stable). CAPMID operates in the Delaware sub-basin, and
Navitas operates in the Midland sub-basin. Prior to 2021, the
generic Midland gatherers had better volume performance than the
generic Delaware gatherers.
A portion of both companies' business is paid in hydrocarbons.
However, Navitas' main contract type is a price floor-protected
contract, while BCPRAP has more diversity in contract types,
although keep-whole type contracts are not among them. Based on the
2022 and out portion of Fitch's price deck, including the price
deck's implication for the natural gas liquids (NGL) gallon, Fitch
believes Navitas will receive a unit gross margin (in
dollars/thousand cubic feet [mcf]) at or near its blended contracts
fee floor, even in scenarios materially higher or lower than the
Fitch price deck, which is not the case for CAPMID. Accordingly,
Fitch views CAPMID as having more commodity price risk in 2022 and
out.
CAPMID's customer mix shows slightly less diversity than Navitas',
yet CAPMID's customer mix is, on average, of stronger credit
quality. Fitch expects Navitas' leverage to be significantly under
6.0x at YE 2021, compared with a current expectation for CAPMID of
approximately 5.5x in 2021. The IDRs of the two companies are set
at the same level, with CAPMID forecast to have slightly lower
leverage offset by slightly more commodity price risk.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- For 2022 and out, Fitch Price Deck of $52/barrel West Texas
Intermediate and $2.45/mcf Henry Hub;
-- Small volume growth from the acceptable 2Q21 levels;
-- Capex mainly for maintenance purposes at this new system;
-- No dividends in 2021 and 2022;
-- LIBOR assumed to be 25bps;
-- A 6.0x recovery analysis multiple, which reflects the energy
sector average;
-- The going-concern EBITDA of $90 million is higher than the $80
million cited in the March 2021 Rating Action Commentary. The
increase in EBITDA reflects a transition from a past period of
some cases of fast/slow/fast customer development on CAPMID
acreage, as well as CAPMID having had to bear adversely high
locational basis differentials related to commodity price
realization. Development is now judged as steady, and the
macro circumstance in West Texas is favorable for
realizations.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Given CAPMID's relatively small historical EBITDA, a positive
rating action is unlikely. However, in the event of Fitch
making a forecast leverage (total debt with equity credit to
adjusted EBITDA) below 5.0x with a foundation of solid
volumes, an upgrade could result.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Fitch's forecast leverage ratio is above 6.5x;
-- Fitch's forecast FFO fixed-charge coverage ratio is below
2.0x;
-- A material increase in business risk of any kind;
-- A negative rating action at BCPRAP in the context of the two
sister companies both having unused capacity and operating
their networks and plants in an integrated fashion.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Sufficient Liquidity: Raptor 2 had approximately $51 million of
available liquidity as of March 31, 2021, composed of over $6
million in cash and $45 million of available capacity on the $60
million senior secured revolving credit facility. CAPMID's maturity
profile is manageable. The revolver matures in November 2023 and
the term loan matures in November 2025. CAPMID was in compliance
with all its covenants as of March 31, 2021. Fitch expects CAPMID
will remain in compliance with its covenants over the forecast
period.
The two sponsors have, on their own credit or the credit of
affiliates who are not CAPMID, caused banks to issue LOC in favor
of the senior secured debt's collateral agent for an amount of
approximately six months of expected interest and scheduled
principal repayment.
ESG CONSIDERATIONS
The governance part of the ESG relevance score has garnered an
outcome of '4' for Group Structure and Financial Transparency, as
private-equity backed midstream entities typically have less
structural and financial disclosure transparency compared with
publicly traded issuers. This topic has a negative impact on the
credit profile, and is relevant to the rating in conjunction with
other factors. Additionally, group structure considerations have
elevated scope in the presence of related party transactions
(albeit small and arms-length) between affiliated rated entities.
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.
ISSUER PROFILE
CAPMID gathers and processes natural gas, gathers crude oil, and
gathers and disposes of water in West Texas.
BCP RAPTOR: Fitch Raises LT IDR to 'B' & Alters Outlook to Stable
-----------------------------------------------------------------
Fitch Ratings has upgraded BCP Raptor, LLC's (BCPRAP) Long-Term
Issuer Default Rating (IDR) to 'B' from 'B-'. Additionally, Fitch
has upgraded BCPRAP's senior secured term loan B to 'B'/'RR4' from
'B-'/'RR4'. The Rating Outlook has been revised to Stable from
Positive.
The upgrade is due to a drop in leverage. BCPRAP was revised to
Positive Outlook on March 25, 2021 based on an improving multi-year
leverage trend that would, if trends continued, cause leverage to
fall below a level that merited an upgrade. Today's IDR upgrade
reflects a 2Q21 per-day gas gathered volume figure that exceeds
Fitch's 2Q21 estimate and its full-year 2021 estimate by 11% and
9%. Fitch now expects Total Debt to Adjusted EBITDA in 2021 to be
approximately 6.3x, below the sensitivity level of 6.5x. The
Secured Term Loan B has been upgraded to 'B'/'RR4' from 'B-'/'RR4',
driven by the IDR upgrade.
KEY RATING DRIVERS
Improved Leverage: With a strong 1Q21 financial performance and
good 2Q21 volumes, the trend of falling leverage is accelerating.
For 2019, leverage was over 9.5x, and for 2020, given pandemic
challenges, leverage was approximately 8.5x. For 2021, Fitch
forecasts leverage will fall to approximately 6.3x. For 2021, the
total debt quantum is assisting in leverage reduction, and open
market loan repurchases have supplemented scheduled loan
repurchases.
Volumes Forecast Strong Well Into 2022: Based on customer
completion schedules and contract wins, Fitch expects 2H21 and 2022
gas gathering and gas processing volumes will both show growth over
2Q21 figures, which were strong. Reeves county in West Texas, where
BCPRAP mainly operates, has been one of the strongest oil producing
counties in the U.S. since the onset of the pandemic.
Fitch tracks all-county production and the combined BCPRAP/CAPMID
production (CAPMID is the abbreviation for sister company BCP
Raptor II, LLC; B/Stable). BCPRAP/CAPMID has performed materially
in line with the county over a series of comparisons. This relative
performance serves as a foundation for Fitch's favorable long-term
expectations for BCPRAP/CAPMID.
Diverse Customer Base: E&P customers with contracts with BCPRAP
constitute a strong and diverse core customer base. Centennial
Development Corporation (NR) is the largest E&P customer by natural
gas volumes delivered to BCPRAP's gathering system, and
Centennial's level of volumes provides only about a one-fifth share
of BCPRAP volumes. This E&P company runs two rigs corporate-wide
currently, and one or both have been working periodically on
acreage the company dedicates to BCPRAP. For context, 10 rigs are
currently drilling on BCPRAP acreage. After Centennial, the next
largest customer for BCPRAP gathered volumes provides a much
smaller contribution than Centennial. Including Centennial, BCPRAP
has about 15 customers that produce a material amount of volumes
currently. A diverse customer base is a strength, given the
dynamism of the E&P industry.
ESG Considerations:
BCP Raptor, LLC has an ESG Relevance Score of '4' for Complexity.
In addition the company has an ESG relevance score of '4' for Group
Structure and Financial Transparency, as private-equity backed
midstream entities typically have less structural and financial
disclosure transparency compared to publicly traded issuers. This
topic has a negative impact on the credit profile, and is relevant
to the rating in conjunction with other factors. Additionally,
group structure considerations have elevated scope in the presence
of related party transactions (albeit small and arms-length)
between affiliated rated companies.
DERIVATION SUMMARY
BCPRAP's main comparable is Navitas Midstream Midland Basin, LLC
(Navitas; B/Stable). BCPRAP operates in the Delaware sub-basin, and
Navitas operates in the Midland sub-basin. Prior to 2021, the
generic Midland gatherers had better volume performance than the
generic ones in Delaware.
A minority portion of both companies' business is paid in
hydrocarbons. However, Navitas' main contract type is a price
floor-protected contract, while BCPRAP has more diversity in
contract types (although keep-whole type contracts are not among
them). In scenarios where actual commodity prices diverge up
slightly (reward) or down (risk) from the "2022 and out" portion of
Fitch's price deck (including the price deck's implication for the
natural gas liquids (NGL) gallon), Fitch forecasts that Navitas
will receive to receive a unit gross margin (in dollars per Mcf) at
or near its blended contracts fee floor. This is not the case for
BCPRAP.
Accordingly, Fitch believes BCPRAP has more commodity price risk in
"2022 and out." Both companies have similar customer-roster average
credit quality; however, BCPRAP's customer mix shows more diversity
than Navitas's.
Fitch expects Navitas's leverage to be significantly under 6.0x at
YE 2021, compared to a current expectation for BCPRAP of
approximately 6.3x in 2021. Both companies were Permian pioneers in
raising large syndicated loans, and therefore, at this stage, are
almost midway through their loan's seven-year life. Both companies
have about a remaining 10-year weighted average life on their
acreage-dedication-based contracts, which means contract-asset
coverage is good.
As the companies each continue to build out their systems, they
become almost invulnerable to competition, even after the
dedications expire. Going forward, Fitch will factor into the
rating each company's approaching maturities.
KEY ASSUMPTIONS
-- For 2022 and out, Fitch Price Deck, e.g., 2022 West Texas
Intermediate $52 per barrel and e.g., 2022 Henry Hub $2.45 per
thousand cubic feet;
-- In 2022, both gathering volumes and processing volumes
materially higher than 2Q21 levels due to contract wins and
2021-back-ended well completions;
-- Capex is mainly for maintenance in 2022 and 2023;
-- Libor assumed to be at or below the loan's LIBOR floor of
1.0%;
-- In the recovery analysis, the multiple used is a 6x multiple,
which reflects the energy sector average;
-- The going-concern EBITDA of $130 million is higher than the
$115 million cited in the March 2021 Rating Action Commentary.
The increase in EBITDA reflects a transition from a past
period of some cases of fast/slow/fast customer development on
BCPRAP acreage, and reflects past adversely high locational
basis differentials related to commodity price realization.
Development is now judged steady, and the macro circumstance
in West Texas is favorable for realizations.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Leverage (Total Debt with Equity Credit to Adjusted EBITDA)
forecasted to be below 5.5x with the foundation of material
volume growth.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Fitch's forecast for the ratio Total Debt with Equity Credit
to Adjusted EBITDA is above 6.5x;
-- Fitch's forecast of FFO fixed charge coverage ratio is below
2.0x;
-- A material increase in business risk of any kind;
-- Lack of pro-active effort to maintain adequate liquidity;
-- A negative rating action at CAPMID when or if the two sister
companies both have unused capacity and are operating their
networks and plants in an integrated fashion.
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
Acceptable Liquidity: As of March 31, 2021, BCPRAP's liquidity was
approximately $56.5 million, which includes $13.1 million in cash.
The senior secured revolving credit facility provided $43.4 million
of available liquidity, with $79.5 million drawn and $2.1 million
in letters of credit outstanding.
Maturities are manageable with the revolving credit facility
maturity extended to November 2023. The term loan maturity is in
June 2024. Covenants are manageable with a debt service coverage
ratio maintenance covenant of 1.1x (as defined), BCPRAP is
currently in compliance with this covenant and Fitch anticipates
BCPRAP will remain in compliance with this covenant over the
forecast period.
A letter of credit in favor of the collateral agent for the account
of an entity in the ownership chain for BCPRAP is sized to provide
approximately six months of expected interest payments and
scheduled principal repayments.
ESG CONSIDERATIONS
BCP Raptor, LLC has an ESG Relevance Score of '4' for Complexity.
In addition, the company has an ESG relevance score of '4' for
Group Structure and Financial Transparency, as private-equity
backed midstream entities typically have less structural and
financial disclosure transparency compared to publicly traded
issuers. This topic has a negative impact on the credit profile,
and is relevant to the rating in conjunction with other factors.
Additionally, group structure considerations have elevated scope in
the presence of related party transactions (albeit small and
arms-length) between affiliated rated companies.
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.
ISSUER PROFILE
BCPRAP primarily gathers and processes natural gas in West Texas.
BEACH RESORTS: Gets Interim OK to Hire Chung & Press as Counsel
---------------------------------------------------------------
Beach Resorts, LLC received interim approval from the U.S.
Bankruptcy Court for the District of Guam to hire Chung & Press,
P.C. to serve as legal counsel in its Chapter 11 case.
The firm's services include:
a) assisting and advising the Debtor relative to the
administration of its Chapter 11 proceeding;
b) representing the Debtor at the Section 341 meeting and
before the bankruptcy court, and advising the Debtor on all pending
litigations, hearings, motions, and of the decisions of the
bankruptcy court;
c) reviewing and analyzing all applications, orders and
motions filed with the bankruptcy court by third parties;
d) attending and representing the Debtor at all examinations;
e) communicating with creditors and all other parties in
interest;
f) assisting the Debtor in preparing legal papers and
witnesses;
g) conferring with all other professionals retained by the
Debtor and by any other party in interest;
h) assisting the Debtor in negotiations concerning the terms
of any proposed plan of reorganization;
i) preparing, drafting and prosecuting a plan of
reorganization; and
j) performing other necessary legal services.
Chung & Press will perform the services together with the Law
Offices of Mark E. Williams, P.C., the other firm tapped by the
Debtor to handle its bankruptcy case.
Daniel Press, Esq., a partner at Chung & Press, will be paid at the
rate of $495 per hour.
Mr. Press disclosed in court filings 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:
Daniel M. Press, Esq.
Chung & Press, P.C.
6718 Whittier Ave., Suite 200
McLean, VA 22101
Telephone: (703) 734-3800
Facsimile: (703) 734-0590
Email: dpress@chung-press.com
About Beach Resorts LLC
Beach Resorts, LLC, a Tamuning, Guam-based company that conducts
business under the name Hotel Santa Fe Guam, filed a petition under
Subchapter V of Chapter 11 of the Bankruptcy Code (Bankr. D. Guam
Case No. 21-00034) on July 27, 2021. Kathlyn Selleck has been
appointed as Subchapter V trustee in the Debtor's case.
In its petition, the Debtor disclosed up to $50 million in assets
and up to $10 million in liabilities. Bartley Jackson, authorized
representative, signed the petition.
Chung & Press, P.C. and the Law Offices of Mark Williams, P.C.
serve as the Debtor's legal counsel. Burger & Comer, P.C. is the
Debtor's accountant.
BEACH RESORTS: Seeks to Hire Burger & Comer as Accountant
---------------------------------------------------------
Beach Resorts, LLC seeks approval from the U.S. Bankruptcy Court
for the District of Guam to hire Burger & Comer P.C. as its
accountant.
The firm's services include:
a. coordinating the financial reporting for the Debtor's
business and assisting the Debtor's bookkeeper on an as-needed
basis to facilitate the timely completion of its work;
b. preparing, analyzing and reviewing the accounting schedules,
ledgers and financial statements and financial condition of the
Debtor;
c. reviewing the Debtor's historical and projected results of
operations and operating cash flows before and after expenses;
d. reviewing the terms and conditions of the Debtor's existing
receivables and indebtedness;
e. assisting the Debtor with its analysis and design of
restructuring plan;
f. assisting the Debtor in evaluating strategic alternatives,
including a potential sale of its property;
g. assisting the Debtor in negotiations with existing creditors
or their authorized representatives; and
h. providing other financial advisory services.
The firm's hourly rates are as follows:
CPA $120 per hour
Managers $80 per hour
Staff $40 per hour
Burger & Comer will also be reimbursed for out-of-pocket expenses
incurred.
David Burger, a member of Burger & Comer, 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.
Burger can be reached at:
David Burger
Burger & Comer P.C.
P.O. Box 504053
Saipan, MP 96950
Tel: (670) 235-8722
Fax: (670) 235-6905
About Beach Resorts LLC
Beach Resorts, LLC, a Tamuning, Guam-based company that conducts
business under the name Hotel Santa Fe Guam, filed a petition under
Subchapter V of Chapter 11 of the Bankruptcy Code (Bankr. D. Guam
Case No. 21-00034) on July 27, 2021. Kathlyn Selleck has been
appointed as Subchapter V trustee in the Debtor's case.
In its petition, the Debtor disclosed up to $50 million in assets
and up to $10 million in liabilities. Bartley Jackson, authorized
representative, signed the petition.
Chung & Press, P.C. and the Law Offices of Mark Williams, P.C.
serve as the Debtor's legal counsel. Burger & Comer, P.C. is the
Debtor's accountant.
BOUCHARD TRANSPORTATION: Fleet Sale Delayed as Assets Talks Drag On
-------------------------------------------------------------------
Jeremy Hill of Bloomberg News reports that the sale of Bouchard
Transportation Co.'s tug and barge fleet has been delayed while the
company's lawyers continue negotiations and weigh a competing
proposal for some assets. The $115.3 million sale of a group of
vessels to JMB Capital Partners Lending will go forward, Christine
Okike of Kirkland & Ellis said on behalf of Bouchard in a hearing
Tuesday, August 3, 2021. But the company is "still continuing to
negotiate" documents underpinning a proposed $130 million sale of
another group of boats to Rose Cay GP LLC, Okike said.
About Bouchard Transportation
Founded in 1918, Bouchard Transportation Co., Inc.'s first cargo
was a shipment of coal. By 1931, Bouchard acquired its first oil
barge. Over the past 100 years and five generations later, Bouchard
has expanded its fleet, which now consists of 25 barges and 26 tugs
of various sizes, capacities and capabilities, with services
operating in the United States, Canada and the Caribbean.
Bouchard and certain of its affiliates sought Chapter 11 protection
(Bankr. S.D. Tex. Lead Case No. 20-34682) on Sept. 28, 2020. At the
time of the filing, the Debtors estimated assets of between $500
million and $1 billion and liabilities of between $100 million and
$500 million.
Judge David R. Jones oversees the cases.
The Debtors tapped Kirkland & Ellis LLP, Kirkland & Ellis
International LLP and Jackson Walker LLP as their legal counsel;
Portage Point Partners, LLC as restructuring advisor; Jefferies LLC
as investment banker; Berkeley Research Group, LLC as financial
advisor; and Grant Thornton, LLP as tax consultant. Stretto is the
claims agent.
The U.S. Trustee for Region 7 appointed an official committee of
unsecured creditors in the Debtors' cases. The committee tapped
Ropes & Gray LLP as bankruptcy counsel, Clyde & Co US LLP as
maritime counsel, and Berkeley Research Group LLC as financial
advisor.
BRAZOS ELECTRIC: Heads Toward $1.9 Billion ERCOT Claim Trial
------------------------------------------------------------
Jeremy Hill of Bloomberg News reports that Brazos Electric Power
Cooperative has proposed holding a trial in bankruptcy court as
early as December 2020 over the amount it owes the Electric
Reliability Council of Texas, the state's grid operator, as a
result of Winter Storm Uri. Brazos needs a "speedy" trial so it
can "right-size" the $1.9 billion ERCOT claim, Lino Mendiola of
Eversheds Sutherland said on behalf of Brazos in a Wednesday,
August 4, 2021, bankruptcy hearing. The company needs a ruling on
how much is owed to ERCOT before it can pursue a securitization of
the sum, Mr. Mendiola said.
Brazos Electric Power Cooperative
Brazos Electric Power Cooperative Inc. is a 3,994-megawatt
transmission and generation cooperative which members' service
territory covers 68 counties from the Texas Panhandle to Houston.
It was organized in 1941 and the first cooperative formed in the
Lone Star state with the primary intent of generating and supplying
electrical power. At present, Brazos Electric is the largest
generation and transmission cooperative in the state and is the
wholesale power supplier for its 16 member-owner distribution
cooperatives and one municipal system.
Brazos Electric filed a voluntary petition for relief under Chapter
11 of the U.S. Bankruptcy Code (Bankr. S.D. Tex. Case No. 21-30725)
on March 1, 2021. At the time of the filing, the Debtor disclosed
assets of between $1 billion and $10 billion and liabilities of the
same range.
Judge David R. Jones oversees the case.
The Debtor tapped Norton Rose Fulbright US, LLP as bankruptcy
counsel, Foley & Lardner LLP and Eversheds Sutherland US LLP as
special counsel, Collet & Associates LLC as investment banker, and
Berkeley Research Group, LLC as financial advisor. Ted B. Lyon &
Associates, The Gallagher Law Firm, West & Associates LLP, Butch
Boyd Law Firm and Boyd Smith Law Firm, PLLC serve as special
litigation counsel. Stretto is the claims and noticing agent.
The U.S. Trustee for Region 7 appointed an official committee of
unsecured creditors in the Debtor's case on March 15, 2021. The
committee is represented by the law firms of Porter Hedges, LLP and
Kramer, Levin, Naftalis & Frankel, LLP. FTI Consulting, Inc. and
Lazard Freres & Co. LLC serve as the committee's financial advisor
and investment banker, respectively.
BUILDING 1600: September 23 Plan Confirmation Hearing Set
---------------------------------------------------------
On June 14, 2021, debtor Building 1600, L.L.C. filed with the U.S.
Bankruptcy Court for the Northern District of Georgia a Disclosure
Statement referring to a Plan of Liquidation.
On Aug. 3, 2021, Judge Jeffery W. Cavender ordered that:
* The Disclosure Statement is approved with the qualification
that Article III, subsection F appearing on page 9 of the
Disclosure Statement is amended to provide that all unexpired
tenant leases, regardless of whether they are oral or in writing,
will be deemed assumed upon the Effective Date of the Plan. Debtor
shall amend the Plan accordingly.
* Sept. 23, 2021, at 11:00 a.m. in Courtroom 1203, United
States Courthouse, 75 Ted Turner Dr, SW, Atlanta, Georgia is fixed
for the hearing on confirmation of the Plan.
* Sept. 16, 2021, is fixed as the last day for filing and
serving written objections to confirmation of the Plan.
A copy of the order dated August 3, 2021, is available at
https://bit.ly/3ytheuT from PacerMonitor.com at no charge.
Counsel for the Debtor:
Paul Reece Marr
PAUL REECE MARR, P.C.
Building 24, Suite 350
Marietta, GA 30067
770-984-2255
paul.marr@marrlegal.com
About Building 1600
Building 1600, L.L.C., owns and operates an office park condominium
having a local address of 2255 Cumberland Parkway SE, Building
1600, Atlanta, GA 30339. Phyllis Menser owns 50% of the membership
interests, and Charles D. Menser, III, owns 49%.
Building 1600, L.L.C., filed a Chapter 11 bankruptcy petition
(Bankr. N.D. Ga. Case No. 18-71813) on Dec. 31, 2018. In the
petition signed by Charles D. Menser Jr., manager, the Debtor
estimated less than $500,000 in assets and liabilities. Paul Reece
Marr, P.C. is the Debtor's counsel. No official committee of
unsecured creditors has been appointed.
CAMBRIAN HOLDING: Walther Gay Represents Kentucky Coal, 7 Others
----------------------------------------------------------------
In the Chapter 11 cases of Cambrian Holding Company, Inc., et al.,
the law firm of Walther, Gay & Mack, PLC provided notice under Rule
2019 of the Federal Rules of Bankruptcy Procedure, to disclose that
it is representing Kentucky Coal Employers' Self-Insurance Guaranty
Fund, Meritain Health, Inc., River Rose, LLC, SPK Enterprises,
Inc., Woodman Three Mine, Inc., Black Pearl Mining, Inc., Maggard
Sales & Service, Inc., and KP Trucking, LLC.
WGM, by and through Jonathan L. Gay, and Stephen Barnes, have been
engaged herein to represent Kentucky Coal Employers' Self-Insurance
Guaranty Fund, P.O. Box 910623, Lexington KY 40591. Kentucky Coal
has been advised of, and consented to, WGM's representation of
multiple entities in this Bankruptcy case. Kentucky Coal asserts
claims against the Debtors, which are filed of public record.
WGM, by and through Stephen Barnes, have been engaged to represent
Meritain Health, Inc., c/o Hon. Payam Khodadadi, McGuireWoods, LLP,
1800 Century Park East, 8th Floor, Los Angeles, California 90067.
Meritain has been advised of, and consented to, WGM's
representation of multiple entities in this Bankruptcy case.
Meritain is the target of a preferential transfer demand and
asserts claims against the Debtors, which are filed of public
record.
WGM, by and through Stephen Barnes, have been engaged to represent
River Rose, LLC, c/o William Griffith, 397 Little Card Road,
Mouthcard, Kentucky 41548. River Rose has been advised of, and
consented to, WGM's representation of multiple entities in this
Bankruptcy case. River Rose is the target of a preferential
transfer demand and may assert claims against the Debtors, which
are filed of public record to the extent such claims exist.
WGM, by and through Stephen Barnes, Esq., have been engaged to
represent SPK Enterprises, Inc., c/o Stanley Belcher, P.O. Box
4320, Pikeville, Kentucky 41502. SPK has been advised of, and
consented to, WGM's representation of multiple entities in this
Bankruptcy case. SPK is the target of a preferential transfer
demand and may assert claims against the Debtors, which are filed
of public record to the extent such claims exist.
WGM, by and through Stephen Barnes, Esq., have been engaged to
represent Woodman Three Mine, Inc., c/o John Freeman, 2412 Feds
Creek Road, Steele, Kentucky 41566. Woodman has been advised of,
and consented to, WGM's representation of multiple entities in this
Bankruptcy case. Woodman is the target of a preferential transfer
demand and may assert claims against the Debtors, which are filed
of public record to the extent such claims exist.
WGM, by and through Stephen Barnes, Esq., have been engaged to
represent Black Pearl Mining, Inc., c/o Ricky Lucas, 14551 Elkhorn
Gap Road, Shelby Gap, Kentucky 41563. Black Pearl has been advised
of, and consented to, WGM's representation of multiple entities in
this Bankruptcy case. Black Pearl is the target of a preferential
transfer demand and may assert claims against the Debtors, which
are filed of public record to the extent such claims exist.
WGM, by and through Stephen Barnes, Esq., have been engaged to
represent Maggard Sales & Service, Inc., c/o Archie K. Maggard,
7915 South Fork Road, Pound, Virginia 24279. Maggard has been
advised of, and consented to, WGM's representation of multiple
entities in this Bankruptcy case. Maggard is the target of a
preferential transfer demand and may assert claims against the
Debtors, which are filed of public record to the extent such claims
exist.
WGM, by and through Stephen Barnes, have been engaged to represent
KP Trucking, LLC, c/o Tina Prater, 337 Right Fork of Greasy Creek,
Shelbiana, Kentucky 41562. KP Trucking has been advised of, and
consented to, WGM's representation of multiple entities in this
Bankruptcy case. KP Trucking is the target of a preferential
transfer demand and may assert claims against the Debtors, which
are fi1ed of public record to the extent such claims exist.
Counsel for Kentucky Coal Employers' Self-Insurance Guaranty Fund,
et al. can be reached at:
Stephen Barnes, Esq.
Walther Gay & Mack PLC
163 East Main Street, Suite 200
Lexington KY 40507
Tel: (859) 225-4714
Fax: (859) 225-1493
E-mail: sbarnes@wumfirin.com
A copy of the Rule 2019 filing is available at
https://bit.ly/3fF7W7y at no extra charge.
About Cambrian Holding
Belcher, Kentucky-based Cambrian Holding Company, Inc., and its
subsidiaries produce and process metallurgical coal and thermal
coal for use by utility providers and industrial companies located
primarily in the eastern United States and Canada. The company
began operations in 1991 and, over time, acquired various mines and
mining-related assets from major coal corporations.
Cambrian Holding Company and 18 of its affiliates each filed a
petition seeking relief under Chapter 11 of the Bankruptcy Code
(Bankr. E.D. Ky. Lead Case No. 19-51200) on June 16, 2019. At the
time of the filing, Cambrian Holding Company had estimated assets
and liabilities of less than $50,000. Judge Gregory R. Schaaf
oversees the cases.
The Debtors tapped Frost Brown Todd, LLC as bankruptcy counsel;
Whiteford, Taylor & Preston, LLP as litigation counsel; Jefferies,
LLC as investment banker; and FTI Consulting, Inc., as financial
advisor. Epiq Corporate Restructuring, LLC, is the notice, claims
and solicitation agent.
The Office of the U.S. Trustee appointed an official committee of
unsecured creditors on June 26, 2019. The committee tapped Foley &
Lardner, LLP as legal counsel; Barber Law PLLC as local counsel;
and B. Riley FBR, Inc. as financial advisor.
CARBONYX INC: Sunshine & Rango Resolve Disputes in Joint Plan
-------------------------------------------------------------
Evan Shaw and Sunshine Recycling, Inc., ("Sunshine Proponents"),
and Frank Rango, Bhavna Patel, River Partners 2012-CBX LLC, C6
Ardmore Ventures, LLC, RCG LV Pearl LLC and Harmir Realty Co. LP,
(the "Rango Proponents") filed their Joint Modification to Chapter
11 Plans of Debtor Carbonyx, Inc. to settle the issues between the
Sunshine Proponents and the Rango Proponents.
The Joint Plan reflects a compromise and settlement between the
Rango Proponents, the Sunshine Proponents each having filed their
own separate plans in this case and having received approval of
their own Disclosure Statements. Further, it reflects a mutual
release agreement between the Rango Proponents and the former
Founders and Interim Management of the Debtor; although the
Founders and Interim Management are not co-proponents of this Plan,
they will not oppose confirmation of this Plan.
The Plan does not alter or impair the treatment of the Classes of
Creditors in either Plan but instead sets out terms for repayment
of creditors with Allowed Claims while resolving the disputes
between the Rango Proponents, the Sunshine Proponents as well as
the former Founders and Interim Management of the Debtor. This
Joint Plan supersedes the Plan of the Rango Proponents and the Plan
of the Sunshine Proponents.
The treatments of claims in both Plans is combined to make sure
that each creditor with an Allowed Claim receives the best of the
treatments being afforded such Claimants. The treatment of the
secured and non-insider unsecured creditors is the same as proposed
in the Sunshine Plan and Sunshine shall remain responsible for
paying such claims as proposed in the Sunshine Plan. Evan Shaw
voted in favor of the Sunshine Plan.
Class 1 consists of one Secured Claim of Wells Fargo Bank, N.A.
against the Debtor in the amount of $11,724.32. On or within 30
days after the Effective Date, Wells Fargo Bank, N.A. will receive
payment in full in Cash and payment of any interest from the
Sunshine Proponents; or delivery of the collateral securing the
Claim in full satisfaction of such debt. The value of the
collateral exceeds the amount of the debt to be paid under this
Plan. Class 1 is not impaired under the Plan.
Class 2 consists of the Claim of the Texas Comptroller of Public
Accounts against the Debtor. The Proponents estimate that the
aggregate amount of Allowed Other Priority Claims will not exceed
$6,211.92. On or within 30 days after the Effective Date, the Texas
Comptroller of Public Accounts shall receive, in full and final
satisfaction of such Allowed Other Priority Claim, an amount equal
to its Allowed Claim, in Cash, by the Sunshine Proponents. Class 2
is not impaired under the Plan.
Class 3 consists of Evan Shaw's Claims against the Debtor. The
Allowed Claim of Evan Shaw shall be satisfied by a pro-rata
Distribution of a payment of $5,000.00 per month for 60 months (for
a total of $300,000.00). Payments will commence on the first day of
the first month following the Effective Date and continue on the
first day of each month thereafter for 59 months. These payments
will be made by the Sunshine Proponents (not including Evan Shaw).
Class 3 is impaired under the Plan.
Class 4 consists of the Rango Proponents' Claims against the
Debtor. Each claim by any of the Rango Proponents other than Pearl,
can elect and shall receive, within 15 days of the Effective Date,
(i) a payment of its Pro Rata portion of the Creditor Cash
Redemption Amount, (ii) a Pro Rata Distribution in Preferred Shares
of the Preferred Share Amount (iii) a Pro Rata Distribution of 50%
of the Post Reorganization Equity or (iv) any Pro Rata combination
of (i), (ii) and (iii) thereof. To the extent that no election is
made by the holder of any given Class 4 Claim, that holder will
receive its Pro Rata Distribution of the Creditor Cash Redemption
Amount. Class 4 is impaired under the Plan.
Class 5 consists of the General Unsecured Claims against the
Debtor. Each of the Class 5 Claimants shall be paid pro-rata out of
$1,500.00 per month for a period of 60 months. Payments shall
commence on the first day of the first month following the
Effective Date and continue on the first of each month thereafter
for 60 months. These payments will be made by the Sunshine
Proponents (not including Evan Shaw). Class 5 is impaired under the
Plan.
Class 6 consists of all Equity Interests in the Debtor. Each
Existing Equity Interest shall be canceled, released, and expunged
and shall be of no further value, force and effect as of the
Effective Date. Holders of existing Equity Interests shall receive
no distribution. The Rango Proponents are acquiring 100% of the
Equity Interests in the Reorganized Debtor under this Plan.
This Plan contemplates that the Sunshine Proponents, but not
including Evan Shaw, shall pay the Allowed Claims other than the
Allowed Claims of the Rango Proponents. The Sunshine Proponents
propose payment in full in Cash to holders of Administrative
Expense Claims, Professional Fee Claims, Administrative Tax Claims,
Secured Claim, and Other Priority Claims.
The Rango Proponents plan to continue the specific licensing
business of the Debtor which will bring value to the Rango
Proponents who opt to receive and be issued the Post Reorganization
Equity.
This Joint Plan further contemplates the establishment of the Plan
Reserve, to be set up as an escrow account to be identified before
the Effective Date. The Plan Reserve shall contain funds sufficient
in amount to satisfy the Sunshine Payment, the Creditor Cash
Redemption Amount and shall also contain an additional $100,000.00
to continue the operations of the Reorganized Debtor as a going
concern.
The Plan Reserve will be funded by the issuance 20,000 voting
common shares of the Post Reorganization Voting Equity to Pearl or
an affiliated entity at the Issue Price for the Share Purchase
Consideration. Pearl or an affiliated entity will hold 50% of the
Post Reorganization Voting Equity as of the Effective Date.
A full-text copy of the Modified Chapter 11 Plan dated August 3,
2021, is available at https://bit.ly/3ipANhN from PacerMonitor.com
at no charge.
Attorneys for Evan L. Shaw and Sunshine Recycling, Inc:
Joyce W. Lindauer
Kerry S. Alleyne
Guy H. Holman
Joyce W. Lindauer Attorney, PLLC
1412 Main Street, Suite 500
Dallas, Texas 75202
Telephone:(972) 503-4033
Facsimile: (972) 503-4034
Attorneys for Rango Proponents:
Mark A. Platt
State Bar No. 00791453
Frost Brown Todd LLC
Rosewood Court
2101 Cedar Springs Road, Suite 900
Dallas, TX 75201
Telephone: (214) 545-3472
Facsimile: (214) 545-3473
About Carbonyx Inc.
Plano, Texas-based Carbonyx, Inc., filed a Chapter 11 petition
(Bankr. E.D. Tex. Case No. 20-40494) on Feb. 18, 2020. In the
petition signed by Hasmukh Patel, authorized agent, the Debtor was
estimated to have up to $50,000 in assets and $10 million to $50
million in liabilities. Judge Brenda T. Rhoades oversees the case.
Eric A. Liepins, P.C., serves as the Debtor's bankruptcy counsel.
On Nov. 10, 2020, Linda Payne was appointed as Chapter 11 trustee
in the Debtor's case. The Trustee is represented by the Law
Offices of Bill F. Payne, PC.
CARVANA CO: Posts $45 Million Net Income in Second Quarter
----------------------------------------------------------
Carvana Co. filed with the Securities and Exchange Commission its
Quarterly Report on Form 10-Q disclosing net income of $45 million
on $3.34 billion of net sales and operating revenues for the three
months ended June 30, 2021, compared to a net loss of $106 million
on $1.12 billion of net sales and operating revenues for the three
months ended June 30, 2020.
For the six months ended June 30, 2021, the Company reported a net
loss of $37 million on $5.58 billion of net sales and operating
revenues compared to a net loss of $290 million on $2.22 billion of
net sales and operating revenues for the same period during the
prior year.
As of June 30, 2021, the Company had $4.58 billion in total assets,
$3.81 billion in total liabilities, and $770 million in total
stockholders' equity.
Since inception, the Company has incurred losses, and expects to
incur additional losses in the future as it continues to build
inspection and reconditioning centers and vending machines, serve
more of the U.S. population, and enhance technology and software.
Since March 31, 2020, the Company has completed equity offerings of
approximately 18 million shares of Class A common stock for net
proceeds of approximately $1.1 billion and has issued a total of
$1.7 billion in senior unsecured notes due between 2025 and 2028,
from which approximately $627 million of the proceeds were used to
repay its senior unsecured notes due in 2023. As of June 2021, the
Company's forward flow partner has also committed to purchase a
total of $4.0 billion of the Company's finance receivables through
March 2022. In addition, the Company has a $1.75 billion floor
plan facility effective July 1, 2021, through March 31, 2023.
Management believes that current working capital, results of
operations, and existing financing arrangements are sufficient to
fund operations for at least one year from the financial statement
issuance date.
"This was a landmark quarter for Carvana. We delivered over
100,000 cars in the quarter growing 96% vs. a year ago and reported
our first positive net income quarter," said Ernie Garcia, founder
and CEO of Carvana. "This quarter we were also named to the
Fortune 500 list, becoming one of the four fastest companies to
ever make the list with organic growth. We are extremely proud of
this milestone and even prouder of the team that has made all of
this possible."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1690820/000169082021000242/cvna-20210630.htm
About Carvana
Founded in 2012 and based in Tempe, Arizona, Carvana Co. --
http://www.carvana.com-- is a holding company that was formed as a
Delaware corporation on Nov. 29, 2016. Carvana is an e-commerce
platform for buying and selling used cars. The Company owns and
operates Carvana.com, which enables consumers to quickly and easily
shop vehicles, finance, trade-in or sell the ir current vehicle to
Carvana, sign contracts, and schedule as-soon-as-next-day delivery
or pickup at one of Carvana's patented, automated Car Vending
Machines.
Carvana reported a net loss attributable to the Company of $171.14
million for the year ended Dec. 31, 2020, compared to a net loss
attributable to the Company of $114.66 million for the year ended
Dec. 31, 2019. As of March 31, 2021, the Company had $3.82 billion
in total assets, $3.10 billion in total liabilities, and $721
million in total stockholders' equity.
* * *
As reported by the TCR on May 24, 2021, S&P Global Ratings revised
its ratings outlook to positive from stable and affirmed its 'CCC+'
issuer credit rating on online used-car retailer Carvana Co. "The
positive outlook indicates that we could raise the ratings on
Carvana if the company continues to make progress in leveraging its
scale to improve margins such that it can achieve near breakeven
EBITDA while maintaining sufficient liquidity to pay for its cash
burn for at least 18 months," S&P said.
CCO HOLDINGS: Fitch Assigns BB+ Rating on Unsec. Notes Due 2034
---------------------------------------------------------------
Fitch Ratings has assigned 'BB+'/'RR4' ratings to CCO Holdings,
LLC's (CCOH) benchmark issuance of senior unsecured notes due 2034.
CCOH is an indirect, wholly owned subsidiary of Charter
Communications, Inc. (Charter). CCOH's Long-Term Issuer Default
Rating (IDR) is 'BB+'. The Rating Outlook is Stable.
The company is expected to use net proceeds from the offerings for
general corporate purposes, including potential buybacks of Class A
common stock of Charter or common units of Charter Communications
Holdings, LLC (CCH), a subsidiary of Charter, and/or the repayment
of indebtedness, and to pay related fees and expenses. As of June
30, 2021, Charter's stock buyback program had authority to purchase
an additional $1.7 billion of its Class A common stock and CCH
common units.
KEY RATING DRIVERS
Leading Market Position: Charter is the second largest U.S.
multichannel video programming distributor (MVPD) behind Comcast.
Charter's 31.8 million customer relationships at June 30, 2021
provide the company with significant scale benefits.
Credit Profile: LTM ended June 30, 2021 revenue and EBITDA totalled
$50.0 billion and $19.6 billion, respectively. As of June 30, 2021,
Charter had approximately $86.5 billion of debt outstanding,
including $62.6 billion of senior secured debt, pro forma for the
July 2021 redemption of $1 billion of Time Warner Cable, LLC's
(TWC) 4.0% senior secured notes due 2021. Fitch estimates total
Fitch-calculated pro forma gross leverage was 4.4x while secured
leverage was 3.2x for LTM June 30, 2021.
Positive Operating Momentum: Charter's operating strategies are
strengthening its competitive position and subscriber metrics while
growing revenue and margins. The company is focusing on a
market-share-driven strategy, leveraging its all-digital
infrastructure to enhance the overall competitiveness of its
service offerings. As a result, revenues increased to $50.0 billion
for the LTM ended June 30, 2021 from 2020 from $41.6 billion in
2017, a 5.4% 3.5-year CAGR. Over the same period, margins improved
by 240 bps to 39.2% as Charter's wireless business moved closer to
breakeven and the cable business continues its positive operating
momentum.
Fitch believes Charter's wireless service expansion offers further
operating leverage improvement through scaling benefits. In
November 2020, Charter extended and expanded the capabilities of
their mobile virtual network operator (MVNO) agreement with Verizon
Communications Inc. To further bolster network capabilities and
improve their cost structure, the company purchased 210 Citizen
Broadband Radio Service (CBRS) priority access licenses in 2020.
While the benefits of wireless should eventually offset related
infrastructure spending, systemwide rollout costs are expected to
continue to be a drag on near-term total margins.
Product Mix Shift: Internet services (broadband) revenues surpassed
video services revenues during fiscal 2020 and became the company's
largest product segment. Fitch believes broadband revenues will
grow in the high single digits in 2021 as consumers have become
increasingly reliant on broadband's capabilities, including
facilitating access to burgeoning video streaming services and
working from home. These capabilities powered the cable sector's
general outperformance relative to most other sectors. Fitch
believes broadband's growth will offset the expected continued
industrywide decline in basic video subscribers while also
benefiting margins and FCF given broadband's higher margins and
lower capital intensity.
Broadband Growth: Fitch expects broadband's growth will slow to
mid-single digits annually over the rating horizon as Charter
approaches penetration saturation in its existing footprint. Fitch
notes Charter plans to continue expanding its total footprint,
which it has grown to 53.9 million homes passed at June 30, 2021
from 50.3 million at Dec. 31, 2017. In addition, the company will
receive an aggregate $1.2 billion over 10 years from the Rural
Digital Opportunity Fund to build out broadband capabilities in
unserved areas. While these actions provide new growth potential,
Fitch is unsure penetration levels will replicate historical
levels, especially in currently unserved areas.
Potential 5G Disruption: 5G wireless technology deployment will
likely become a long-term disrupter, as wireline and wireless
connectivity convergence will threaten legacy competitive
positions, including Charter's broadband business. Fitch expects 5G
will bring new business models, new use cases and the potential for
fixed wireless to capture some broadband share over the medium
term. Fitch expects 5G to fully interoperate with 4G and become an
important enabler for Internet of Things applications.
Debt Capacity Growth: Charter maintains a target net leverage range
of 4.0x-4.5x and up to 3.5x senior secured leverage. Fitch expects
Charter to continue creating debt capacity and remain within its
target leverage, primarily through EBITDA growth. Proceeds from
prospective debt issuances under debt capacity created are expected
to be used for shareholder returns along with internal investment
and accretive acquisitions. As of June 30, 2021, Charter's stock
buyback program had authority to purchase an additional $1.7
billion of its Class A common stock and CCH common units.
Ratings are Linked: Fitch links the IDRs of CCO, CCOH, TWC and TWCE
in accordance with its criteria due to the presence of strong
legal, operational and strategic ties between the entities.
DERIVATION SUMMARY
Charter is well positioned in the MVPD space given its size and
geographic diversity. With 31.8 million customer relationships,
Charter is the third largest U.S. MVPD after Comcast Corporation
and DIRECTV, which is being spun off by AT&T Inc. (BBB+/Stable) and
will include AT&T's DIRECTV, U-verse, AT&T TV and legacy AT&T TV
Now and Watch TV assets.
Comcast (A-/Stable) is rated higher than Charter due primarily to
lower target and actual total leverage levels and significantly
greater revenue size, coverage area and segment diversification.
Although DIRECTV (BB+/Stable) lacks Charter's segment
diversification, scale, growth prospects and higher FCF, it will
have lower closing leverage and greater geographic diversification.
It also received a one-notch uplift from AT&T's 70% economic
ownership after the spin-off is completed.
Charter's ratings should be held in check as the company expects to
continue issuing debt under additional debt capacity created by
EBITDA growth while remaining within its target total net leverage
range of 4.0x-4.5x. Proceeds from prospective debt issuance under
this additional debt capacity are expected to be used for
shareholder returns along with internal investment and accretive
acquisitions. No country ceiling, or parent/subsidiary aspects
affect the rating.
KEY ASSUMPTIONS
-- Revenues: Total revenues increase low to mid-single digits
over the rating horizon. Internet growth is expected to slow
from high single digits to mid-single digits as Charter
approaches penetration saturation in its footprint. Video is
expected to decline 1% annually as price increases are unable
to fully offset annual mid-single-digit subscriber declines.
Mobile growth is expected to slow to 20% over the rating
horizon;
-- Adjusted EBITDA Margins: Total margins improve by 100 bps over
the rating horizon as cable margins settle in in the low 40%
and wireless margins become positive;
-- Charter's cash tax payments increase in 2022 as NOLs roll off;
-- Capital intensity begins to decline over time as primary
cable, which is now 100% digital using DOCSIS 3.1 to offer
1GHz of service, and wireless infrastructure upgrades have
been completed;
-- FCF grows to $8.1 billion by 2024;
-- Charter issues sufficient debt to fund maturities and for
shareholder returns using debt capacity created by EBITDA
growth;
-- Fitch expects Charter to remain at the high end of its target
net leverage of 4.0x to 4.5x;
-- Fitch excludes M&A activity given the lack of transformational
acquisitions opportunities.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Demonstrating continued progress in closing gaps relative to
industry peers in service penetration rates and strategic
bandwidth initiatives;
-- A strengthening operating profile as the company captures
sustainable revenue and cash flow growth, and the reduction
and maintenance of total leverage below 4.0x.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A leveraging transaction or adoption of a more aggressive
financial strategy that increases leverage over 5.0x in the
absence of a credible deleveraging plan;
-- Perceived weakening of its competitive position or failure of
the current operating strategy to produce sustainable revenue,
cash flow growth and strengthening operating margin.
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: Fitch regards Charter's liquidity position and
overall financial flexibility as satisfactory and will improve in
line with the continued growth in FCF generation. The company's
liquidity position as of June 30, 2021 comprised approximately $700
million of cash, pro forma for the July 2021 TWC notes redemption,
and was supported by $4.7 billion of availability under its $4.75
billion revolver, $249 million of which will mature in March 2023
and $4.5 billion in February 2025, as well as anticipated FCF
generation.
Charter's maturities through 2024 are manageable. Including
required term loan amortization, $139 million is due in 2021, $3.3
billion in 2022, $1.9 billion in 2023, and $2.3 billion in 2024.
Over the following 10 years, annual bond maturities range from $2.0
billion in 2035 to $5.8 billion in 2030. Required term loan
amortization totals $1.1 billion remaining through 2024, with $5.3
billion and $3.5 billion due at maturity in 2025 and 2027,
respectively.
Charter will need to dedicate a significant portion of potential
debt issuance during that period to service annual maturities,
which could reduce cash available for share repurchases, especially
in the event of market dislocation. Fitch expects Charter would be
able to access capital markets to meet its upcoming maturities, but
its liquidity profile could be weakened if a market dislocation is
severe enough to hinder the company's access.
CCO is the public issuer of Charter's senior secured debt, and CCOH
is the public issuer of Charter's senior unsecured debt. All of
CCO's existing and future secured debt is secured by a
first-priority interest in all of CCO's assets and is guaranteed by
all of CCO's subsidiaries, including those that hold the assets of
Charter, TWC, Bright House and CCOH. All of CCOH's existing and
future debt is structurally subordinated to CCO's senior secured
debt and is neither guaranteed by nor pari passu with any secured
debt.
Charter's Fitch-calculated secured leverage is expected to remain
below 4.0x over the rating horizon. Fitch does not view Charter's
secured leverage and strong underlying asset value as structural
subordination that could impair recovery prospects at the unsecured
level. Therefore, Charter's unsecured notes are not notched down
from its IDR.
ESG Considerations:
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
ISSUER PROFILE
Charter is the third largest MVPD in the US behind Comcast Corp.
and AT&T (through its DirecTV subsidiary), and the second largest
cable MVPD behind Comcast, with 31.8 million total customer
relationships as of June 30, 2021. Fitch rates Charter
Communications Operating, LLC (CCO), CCO Holdings, LLC, (CCOH), and
Time Warner Cable, Inc. and Time Warner Cable Enterprises, LLC
(collectively, TWC), all indirect wholly owned subsidiaries of
Charter.
CERTA DOSE: Wins Access to Cash Collateral Thru Aug 17
------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York has
authorized Certa Dose, Inc. to use cash collateral and all other
accounts of the Debtor for working capital and general operations
purposes, as well as for payment of costs and expenses related to
the Chapter 11 case, in accordance with the approved budget.
The U.S. Small Business Administration and Dr. Caleb Hernandez, an
inventor and the Company's president, are granted valid, binding,
enforceable and automatically perfected liens and/or security
interests upon all of the assets the Debtor, and the proceeds,
products, rents and profits of all of the assets and properties, to
the same validity, extent and priority as existed prepetition;
provided that the SBA's and the Inventor's Adequate Protection
Liens will only be granted to the extent that the SBA and Inventor
would have been entitled to a security interest in such Cash
Collateral up to the allowed amount of such lien calculated
pursuant to Section 506 of the Bankruptcy Code.
As further adequate protection for any diminution in value of SBA'
and the Inventor's interests, the SBA and Inventor are granted
super-priority administrative expense claims to the extent that the
Adequate Protections Liens prove inadequate.
In addition, the Debtor must make the monthly installment payments
of $731 to the SBA on the Economic Injury Disaster Loan, as they
come due and in accordance with the terms of the Loan.
The replacement liens, adequate protection liens, and
super-priority claims are subject to:
* all quarterly fees due to the Office of the U.S. Trustee and
interest due;
* any fees due to the Clerk of the Bankruptcy Court;
* the fees and expenses of a hypothetical Chapter 7 trustee up
to $10,000;
* the fees and expenses of proposed Debtor's counsel Ortiz &
Ortiz LLP, if approved by the Court, up to $20,000; and
* the recovery of funds or proceeds from the successful
prosecution of avoidance actions.
The Legal Fee Carve-Out may not diminish the SBA's right to a
super-priority claim in the event that there is a diminution of the
SBA's interest in the Debtor's Collateral.
The Adequate Protection Liens granted will not include any lien or
other interest in the Money Market Demand Account held at Pacific
Western Bank. The account and all funds therein are subject a
first priority security interest in favor of Pac West Bank,
pursuant to the Pledge and Security Agreement dated as of April 24,
2017 by and between the Debtor and Pac West Bank.
The provisions of the Third Interim Order and the Debtor's right to
use Cash Collateral will expire on August 17, unless extended by
further order of the Court or by written consent of the parties.
A copy of the order is available for free at https://bit.ly/3rVI5wT
from PacerMonitor.com.
About Certa Dose, Inc.
Certa Dose Inc. develops, sells and licenses pharmaceutical
products and technology. Its principal business is developing,
selling and licensing its pharmaceutical products and technology.
The Company was designated as an innovation company by Johnson &
Johnson and has received a grant and mentorship from J & J.
The Debtor sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. S.D. N.Y. Case No. 21-11045) on May 30,
2021. In the petition signed by Caleb S. Hernandez, president, the
Debtor disclosed up to $50 million in assets and up to $100 million
in liabilities.
Judge Lisa G. Beckerman presides over the case.
Norma Ortiz, Esq., at Ortis & Ortiz, LLP is the Debtor's counsel.
CHEMOURS COMPANY: Moody's Rates New $650MM Sr. Unsecured Note 'B1'
------------------------------------------------------------------
Moody's Investors Service assigned a B1 rating to $650 million in
new senior unsecured note due 2029 by The Chemours Company.
Proceeds of the issuance along with balance sheet cash are expected
to be used to refinance $750 million of Chemours' outstanding
7.000% senior notes due 2025. The outlook remains negative.
"Moody's views the transaction as credit favorable as it reduces
the company's cost of debt capital and extends the debt maturity
profile," according to Joseph Princiotta, SVP and lead analyst for
Chemours. "The transaction reduces debt maturing in 2025, the
company's nearest debt tower, to $1,255 million from roughly $2.0
billion," Princiotta added.
Assignments:
Issuer: Chemours Company, (The)
Senior Unsecured Regular Bond/Debenture, Assigned B1 (LGD5)
RATINGS RATIONALE
Chemours' credit profile reflects its position as a leading global
producer of TiO2 pigments where scale, technology and more
flexibility allow for industry-leading margins, currently and over
the cycle. Its profile also reflects leading market positions
across much of the fluoroproducts branded franchise, now operating
under two segments, Thermal & Specialized Solutions ("TSS") and
Advanced Performance Materials ("APM"). The franchise continues to
have a favorable secular growth outlook from Opteon,
notwithstanding the price pressure from black-market imports of
older refrigerants that contribute to global warming. Chemours is a
leader and one of only two major producers in the new HFO
generation of refrigerant products that do not deplete the ozone
layer and have a lower impact on global warming.
Moody's outlook for TiO2 markets remains favorable. Moody's expects
strong demand growth and modest global supply additions to keep the
market firm the next two years at least for TiO2 pigment. This
should allow for further price increases in all major consuming
regions. Moody's expects strong double-digit demand growth and
continued favorable pricing trends through the year. Margins should
also benefit from better overhead absorption in 2021, which was a
headwind last year because of weaker production volume.
In a rising TiO2 price environment Moody's expects Chemours' Ti
Pure Value Stabilization (TVS) program, which targets price
stability and volume assurance to customers, to allow market share
recapture through new AVA contracts with customers who want
guaranteed volumes but at a predictable price, while Chemours still
enjoys price upside through its Flex and distribution portals.
ESG factors are material in the credit profile and were a main
driver of the last downgrade rating action. The credit profile
reflects the substantial and growing litigation risk stemming from
the growing number of actions filed by states, environmental
regulators, water municipalities and private plaintiffs associated
with perfluorochemicals (or PFAS), a family of chemicals used for
decades to process a wide range fluoroproducts.
Other negative factors in the credit, aside from the litigation,
include the historical cyclical nature of the TiO2 industry, which
was recovering from an inventory cycle prior to the COVID-19 impact
on demand. The credit profile also reflects the balance sheet gross
adjusted leverage which was roughly 3.8x for the last twelve months
ended June, 30, 2021, down from 4.7x at year end December 31, 2020.
Net adjusted leverage is lower at around 2.8x due to large cash
balances. Gross adjusted leverage is expected to improve closer to
3.0x this year as the Tio2 and fluorochemical volumes recover on
the back of stronger coatings and plastics demand and from higher
auto unit production, respectively.
On January 22, 2021, Dupont (DuPont de Nemours, Inc.), Corteva
(E.I. du Pont de Nemours and Company) and Chemours entered into a
memorandum of understanding ("MOU") containing a cost sharing
arrangement to manage potential future legacy PFAS liabilities.
Moody's views the agreement as favorable to Chemours, particularly
in the earlier years of the agreement period, as it provides
greater certainty over cash outflows related to these liabilities
and shifts the legal responsibility for any PFAS liability,
including settlements, defense costs and remediation expenses, from
100% Chemours to 50% over the 20 year period or until $4.0 billion
is spent. The cost sharing arrangement reduces cash demands on
Chemours related to these liabilities in the near term, and could
also allow ample time for Chemours to strengthen its financial
profile in anticipation of possible worse case scenarios in PFAS
litigation where the $4.0 billion amount is exhausted in future
years.
Chemours' SGL-1 rating indicates excellent liquidity of roughly
$1.8 billion, consisting of $1.1 billion in balance sheet cash and
about $700 million in revolver availability (including $111 million
L/C use) at June 30, 2021.
The revolver has a maximum secured Net Debt/EBITDA ratio of 2.0x
and was in compliance with its debt covenants at June 30, 2021.
Moody's expect the company to be in compliance with covenants over
the next 12 months. The TLB does not have maintenance covenants. As
an additional source of liquidity, Chemours amended and restated
its accounts receivable securitization facility to $150 million in
March 2021. Working capital typically consumes cash in the first
half of the year but is a significant source of cash in the second
half.
Despite the benefits of the recent MOU, the outlook on Chemours'
ratings remains negative, reflecting Chemours' remaining $2.0
billion share of this $4.0 billion agreement and its potential
exposure to future amounts above this level, as well as the
continuing case load growth, the unknown ultimate scale of the PFAS
liability and the uncertain pace of incurring litigation costs.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
Moody's would consider stabilizing or upgrading Chemours ratings if
there's better clarity on the timing and scale of litigation
related costs, and if Chemours significantly improves its adjusted
gross debt/ EBITDA leverage. Moody's would consider stabilizing or
upgrading the ratings if gross adjusted Debt/EBITDA were sustained
below 3.5x and RCF/Debt remained above 20%, both on a sustained
basis.
Moody's would consider a downgrade if the pace of litigation
related costs indicates the $4.0 billion ceiling in the agreement
will be pierced, if NRD or other cases grow significantly, or it
appears Chemours will face liabilities related to the growing
firefighting foam cases. A downgrade would also be considered if
cash balances and liquidity were to deteriorate, if Debt/EBITDA
were to exceed the 4.5x range, or if RCF/Debt falls to single
digits, on a sustained basis.
ESG consideration
ESG factors are material in the credit profile and a main driver of
the last downgrade action. Despite the recent cost sharing
agreement among the three parties, the negative outlook reflects
the remaining $2.0 billion share of this $4.0 billion agreement and
its potential exposure to future amounts above this level, as well
as the continuing case load growth, the unknown ultimate scale of
the PFAS liability and the uncertain pace of incurring litigation
costs.
Environmental exposure and costs for commodity companies can be
meaningful, and even more so for TiO2 players, and can have credit
and ratings implications. Approximately all of Chemours' Tio2
production use the continuous chloride process, which has lower
energy requirements, produces less waste and is less
environmentally harmful than the sulfate-based production process
which is used by major competitors.
Other social risks are moderate but potentially increasing, as the
EU commission considers changing the classification of the Tio2 as
a Category 2 Carcinogen, which could come into enforcement this
year. The tightening regulation over chemical products, given
increased scientific findings and public awareness can increase
Chemours' Tio2 operating costs. As a public company, governance
issues are viewed as moderate and supported by good communication
of reasonable financial policies for the ratings category.
Chemours Company (The), headquartered in Wilmington, Delaware, is a
leading global provider of performance chemicals through four
reporting segments: Titanium Technologies, Thermal & Specialized
Solutions (formerly Fluorochemicals), Advanced Performance
Materials (formerly Fluoropolymers) and Chemical Solutions.
Revenues for the last twelve months ended June 30, 2021 were
roughly $5.7 Billion. On July 26, 2021, the company announced it
has entered into a definitive agreement with Draslovka Holding a.s.
to sell its Mining Solutions business for $520 million. The Mining
Solutions business is included in the Chemical Solutions segment
that produces sodium cyanide for the precious metals mining
industry.
The principal methodology used in this rating was Chemical Industry
published in March 2019.
CITY WIDE COMMUNITY: Cash Collateral Access Extended
----------------------------------------------------
The U.S. Bankruptcy Court for the Northern District of Texas,
Dallas Division, has authorized City Wide Community Development
Corp. and affiliates to continue using cash collateral on an
interim basis in accordance with the budget through September 8,
2021.
The Court says if the Debtors believe they will or need to exceed a
specific line item in the Budget, then the Debtors must obtain
approval from the U.S. Trustee, U.S. Small Business Administration,
Texas Mezzanine Fund, and the City of Dallas, for a variance in
excess of 10%, or an order from the Court before the Debtor can
make that expenditure.
As adequate protection for the use of Cash Collateral, the
separately identified secured creditors in the Motion and/or the
Order, including SBA, TMF, and COD are granted valid, perfected
liens and enforceable post-petition replacement security interests
in all property of the Debtors, whether acquired before or after
the Petition Date.
To the extent the replacement liens are insufficient to protect
SBA's, TMF's and COD's security interests in CWCDC's property, each
have an allowed claim against CWCDC.
Catalyst Urban Development, LLC and the Debtors stipulate, that
based on the Debtors' representations that CWCDC does not presently
hold (i) any intercompany accounts receivable from Commercial or
Residential, (ii) any cash, securities, dividends, increases,
distributions and profits received as a result of
reclassifications, readjustments, reorganizations, mergers,
consolidations, combinations or changes in the capital structure of
any of the Project Companies, Catalyst is not presently seeking
cash payments or replacement liens as adequate protection of its
secured claim that may be allowed in the case. As adequate
protection of Catalyst's secured Allowed Note Claim, and subject to
Court approval, the Debtors will provide Catalyst notice of any
Catalyst Collateral now or hereafter in the Debtors' possession,
custody, control, or ownership, and will not distribute any such
Catalyst Collateral absent an opportunity for Catalyst to request
adequate protection of its rights in such Catalyst Collateral, and
absent further order of the Court. Without limiting the generality
of the foregoing, Catalyst will have the right to request
additional adequate protection in connection with a proposed
substantive consolidation of these cases, a sale of any assets
including within the Catalyst Collateral, or a proposed
reorganization or recapitalization of the Debtors, whether through
a Chapter 11 plan or otherwise.
The Debtors and Texas Mezzanine Fund stipulate that prior to the
Petition Date, City Wide executed a Promissory Note dated April 29,
2019, in the original principal amount of $144,896 in favor of TMF,
providing for monthly principal and/or interest installments of
$874 to begin on June 1, 2019, with all unpaid principal and
interest due on March 1, 2020.
To secure City Wide's obligations under the TMF Note, City Wide and
TMF executed a Deed of Trust and Security Agreement dated April 29,
2019 covering the real and/or personal property, in favor of and
for the benefit of the TMF. pursuant to the Deed of Trust, City
Wide granted TMF a deed of trust lien upon certain real property
and all improvements thereon, including 3528 Pondrom Street,
Dallas, Texas and assigned to TMF all rents, and leases as provided
therein.
Prior to the Petition Date, City Wide defaulted under the terms of
the TMF Note.
As of the Petition Date, the outstanding unpaid principal, accrued,
unpaid interest and late/certain other fees due under the TMF Note
totaled no less than $130,994 plus attorney's fees, interest, as
well as other fees, charges, or costs recoverable under applicable
law.
The Debtors are authorized, subject to the protections and
consideration described in the Order, to use TMF Cash Collateral
through the earlier of a Termination Event or entry of a final
order authorizing the use of TMF Cash Collateral provided that: (1)
the Debtors remit to TMF on or before five days of entry of the
Order, the amount of $2350, (2) the Debtors pay to TMF $1000 per
month on or before the 1st business day of each month commencing
the later of August 1, 2021 or five days of entry of the Order, and
continuing on the 1st business day of each month through October,
2021.
The Debtors' authority to use TMF Cash Collateral, and any section
362 automatic stay provisions applicable to TMF, will not extend
under this or any subsequent order beyond October 30, 2021, and
neither the Debtors nor any affiliate entity or person can take any
action of any type in this or any forum to modify change, delay,
enjoin, restrict, or impede the rights of TMF under the Order at
any time.
The Debtor and City of Dallas stipulate that prior to the Petition
Date, City Wide executed numerous promissory notes with the City of
Dallas, Texas. Under the COD Notes, City Wide granted and executed
deeds of trust and security agreements covering the real and/or
personal property more particularly described therein, in favor of
and for the benefit of COD. The deeds of trust, in turn, were filed
of record in the Official Public Records of Dallas County, Texas.
Pursuant to the deeds of trust, City Wide granted COD deed of trust
liens upon certain real property described in each deed of trust
and all improvements thereon. These deeds of trust secured Cash
Collateral of revenues, income, rents, issues and profits of land
and improvements, contract rights, and reserve and operating
accounts.
These events constitute an "Event of Default:"
a. The Debtors' failure to timely and punctually perform any
of their obligations in accordance with the terms hereof or
otherwise defaults or breaches any provision of the Order;
b. Any other person or entity obtains an order permitting the
use of Cash Collateral without the written consent of TMF, SBA and
COD; as the case may be; or
c. The Replacement Liens granted to TMF, SBA, and/or COD cease
to convey, a valid and perfected first priority lien on and
security interest in the property of the Debtor.
d. The Debtors fail to timely file its monthly operating
reports beginning July 19.
A final hearing on the matter is scheduled for September 8 at 9:30
a.m.
A copy of the order is available at https://bit.ly/3fA5BKX from
PacerMonitor.com.
About City-Wide Community Development Corp.
City-Wide Community Development Corp. and its affiliates are
primarily engaged in renting and leasing real estate properties.
City-Wide Community Development Corp. and affiliates Lancaster
Urban Village Residential, LLC and Lancaster Urban Village
Commercial, LLC, sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. N.D. Tex. Lead Case No. 21-30847) on April
30, 2021. In the petitions signed by Sherman Roberts, president
and chief executive officer, the Debtors disclosed $12,026,657 in
assets and $10,332,946 in liabilities.
Judge Michelle V. Larson oversees the cases.
The Debtors tapped Wiley Law Group, PLLC, as legal counsel, Neal A.
Walker, CPA, P.C. as accountant, and Capstone Real Estate Services,
Inc. as property manager.
Texas Mezzanine Fund, Inc., as lender, is represented by:
Peter C. Lewis, Esq.
Scheef & Stone, LLP
500 N. Akard Street, Suite 2700
Dallas, TX 75201
Tel: (214) 706-4200
Fax: (214) 706-4242
Email: peter.lewis@solidcounsel.com
Catalyst Urban Lancaster Development, LLC, as lender, is
represented by:
Stephen J. Humeniuk, Esq.
Locke Lord LLP
600 Congress Ave., Ste. 2200
Austin, TX 78701
Tel: (512) 305-4700
Fax: (512) 305-4800
Email: Stephen.humeniuk@lockelord.com
CLEAN HARBORS: Moody's Puts Ba2 CFR Under Review for Downgrade
--------------------------------------------------------------
Moody's Investors Service placed the ratings of Clean Harbors, Inc.
("CLH") on review for downgrade, including the Ba2 corporate family
rating and Ba2-PD probability of default rating, as well as the Ba1
senior secured and Ba3 senior unsecured debt ratings. The SGL-2
speculative grade liquidity rating remains unchanged at this time.
The rating action follows CLH's announcement today that it reached
an agreement to acquire HydroChem PSC ("PSC", rated B3 as PSC
Industrial Holdings Corp.) for $1.25 billion. PSC is a provider of
industrial and specialty cleaning services to various end markets,
primarily the refining and petrochemical markets. The acquisition
price represents a robust valuation and - with the majority to be
debt-funded -will materially increase CLH's debt leverage. The
transaction is subject to regulatory and shareholder approvals, and
management expects the transaction to close by the fourth calendar
quarter of 2021. The ratings of PSC are unaffected at this time.
RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR
DOWNGRADE OF THE RATINGS
Moody's review will consider: (1) the planned capital structure and
financial leverage of CLH post-close; (2) the prospects for (and
pace of) de-leveraging based on Moody's expectations for cash flow
and profitability; (3) the integration risks, considering the
sizeable investment for CLH, including potential cash costs and/or
business disruptions; (4) the strategic and financial policy
changes for CLH implied by the acquisition; (5) CLH's financial
performance going forward, including the prospects for sustainable
organic growth for the combined operations and free cash flow; and
(6) the timing, scope and feasibility of realizing targeted merger
synergies.
From an ESG perspective, corporate governance considerations were a
key factor in Moody's rating action, reflecting primarily a more
aggressive financial policy. The acquisition is sizeable, with debt
expected to increase meaningfully (CLH has received a debt
commitment of $1 billion from its advisor), and poses integration
and execution risks. Moody's notes the transaction is also
occurring amid continued uncertainty around the ongoing global
economic impact of the coronavirus (with new variants emerging).
This has had a negative impact on the businesses of both CLH and
PSC over the past year and will likely drive a protracted economic
recovery. Nevertheless, CLH's management expects PSC to increase
the scale of its Industrial and Field Services segment, bringing
automation capabilities, deep customer relationships and
incremental waste volumes to CLH's incinerators and landfills.
Moody's took the following actions:
On Review for Downgrade:
Issuer: Clean Harbors, Inc.
Corporate Family Rating, Placed on Review for Downgrade, currently
Ba2
Probability of Default Rating, Placed on Review for Downgrade,
currently Ba2-PD
Senior Secured Bank Credit Facility, Placed on Review for
Downgrade, currently Ba1 (LGD2)
Senior Unsecured Regular Bond/Debenture, Placed on Review for
Downgrade, currently Ba3 (LGD5)
Outlook Actions:
Issuer: Clean Harbors, Inc.
Outlook, Changed To Rating Under Review From Stable
The principal methodology used in these ratings was Environmental
Services and Waste Management Companies published in April 2018.
Clean Harbors, Inc. provides environmental, energy and industrial
services throughout North America with services ranging from the
collection, packaging, transportation, recycling, treatment and
disposal of hazardous and non-hazardous waste; emergency spill
response; cleaning/remediation activities and oil re-refining. The
company reported revenues of approximately $3.26 billion for the
latest twelve months ended June 30, 2021.
COBRA INK: May Use FC Marketplace's Cash Collateral
---------------------------------------------------
Judge Randal S. Mashburn of the U.S. Bankruptcy Court for the
Middle District of Tennessee granted, on an interim basis, Cobra
Ink Systems, Inc.'s amended expedited motion to use cash collateral
of FC Marketplace, LLC.
A continued hearing on the matter has been rescheduled for
September 28, 2021, at 9:30 a.m. in Nashville.
Judge Mashburn previously denied, without prejudice, the Debtor's
request. And, by order dated July 23, the Court set an expedited
hearing for August 3 on a related issue involving a request for use
of cash collateral of two other creditors of the Debtor -- Alliance
Funding Group and Putnam 1st Mercantile Bank. In setting the
August 3 hearing, the Court pointed out that the Debtor had waited
two months after the bankruptcy was filed to make a request to use
cash collateral. The Court noted that the motion relating to
Alliance and Putnam included only conclusory statements and no
details about the cash collateral issues, about how the business
has been operating without use of cash collateral since the
bankruptcy filing on May 25, 2021.
Accordingly, the Court at that time, directed the Debtor to file a
supplemental motion providing additional information about the
Debtor's operations since the bankruptcy filing and the impact on
cash collateral during that time. Instead, the Debtor filed a new
motion seeking to use cash collateral related to FC Marketplace.
In so doing, the Debtor filed a motion virtually identical to the
one relating to Alliance and Putnam, the Court pointed out.
The Court at that time said it would not consider setting a new
expedited hearing on another cash collateral matter of the Debtor
until the Debtor makes a reasonable effort to provide the
information required by the prior order. The Court also directed
the Debtor to file any amended motion in compliance with LBR 9075-1
noting that the motion does not fully comply with the local rules.
On July 30, the Debtor filed an amended motion to use FC
Marketplace's cash collateral. The Debtor explained that it filed
for Chapter 11 under the belief that there were no secured
creditors, and the Debtor could use cash collateral in the ordinary
course of business. As a result, there was no motion filed to
utilize cash collateral. After learning of an asserted security
interest in cash collateral by Putnam 1st Mercantile, Alliance
Funding Group, and FC Marketplace, the Debtor said it has
communicated with the respective creditors, and is seeking the
appropriate permission to utilize cash collateral through the
Court. It appears that Putnam 1st Mercantile has a first lien
position, FC Marketplace, LLC has a second lien position, and
Alliance Funding Group has a third lien position.
The Debtor believes it currently has approximately $28,000
inventory. At the time of filing the Chapter 11, the Debtor had
approximately $26,000 worth of inventory.
The Debtor said its goal is "to be able to resolve all cash
collateral issues by consent with the respective secured creditors,
which will allow for replacement liens, permission to use cash
collateral in the ordinary course, and adequate protection payments
if necessary. Alternatively, if the Debtor could not use cash
collateral and thereby not be permitted to sell its inventory, then
it would force the Debtor to cease being able to provide the
necessary supplies to customers and would likely force the debtor
to liquidate."
Despite playing catch up in the case on the cash collateral issue,
according to the actual sales and expenses in the June budget, the
Debtor had $50,104 in sales, $46,585 in expenses, and is showing a
profit of approximately $3,519 in June 2021. Hence, the Debtor is
working towards a reorganization plan that based on the June net
profit, which granted is only one month of data, could potentially
pay over $200,000 to creditors over 5 years. If a liquidation were
to occur, the value of the assets at the time of filing the Chapter
11 were estimated at $54,019.94 according to the Debtor's Schedule
A/B.
About Cobra Ink Systems, Inc.
Cobra Ink Systems, Inc. sells ink for printers for businesses and
consumers that do high volume printing and needs better supplies as
a result. It filed a Chapter 11 petition (Bankr. M.D. Tenn. Case
No. 21-01651) on May 25, 2021. Emma R. McMaster, its president,
signed the petition.
On the Petition Date, the Debtor estimated $50,000 to $100,000 in
assets and $500,000 to $1,000,000 in liabilities.
Judge Randal S. Mashburn is assigned to the case. Lefkovitz &
Lefkovitz represents the Debtor as counsel.
Lender FC Marketplace, LLC is represented by:
Beckett & Lee, LLP
PO Box 3002
Malvern, PA 19355
COOKE OMEGA: Moody's Rates New $480MM Term Loan B 'Ba1'
-------------------------------------------------------
Moody's Investors Service assigned a Ba3 senior secured ratings to
Cooke Omega Investments Inc.'s ("Cooke Omega") proposed $480
million term loan B due 2028 and Caa1 senior unsecured ratings to
the company's proposed $580 million notes due 2029. These
instruments are issued by Cooke Omega, a wholly owned subsidiary of
Cooke Aquaculture Inc. ("CAI") and guaranteed by CAI. Moody's also
assigned a B2 corporate family rating and B2-PD probability of
default rating to CAI. The ratings outlook is stable. Concurrently,
Moody's has withdrawn Cooke Omega's B2 CFR and B2-PD PDR.
The proceeds of the proposed $1.38 billion debt offering will be
used to refinance Cooke Omega and CAI's existing debt (up to CAD1.6
billion), pay a dividend to holding company Cooke Inc., fund cash
to the balance sheet and pay related transaction costs. Cooke
Omega's existing senior secured ratings remain unchanged at B3 and
will be withdrawn when the existing debt is repaid with the
proceeds from this offering.
Assignments:
Issuer: Cooke Omega Investments Inc.
Gtd. Senior Secured Term Loan B, Assigned Ba3 (LGD2)
Gtd. Senior Unsecured Regular Bond/Debenture, Assigned Caa1
(LGD5)
Issuer: Cooke Aquaculture Inc.
Corporate Family Rating, Assigned B2
Probability of Default Rating, Assigned B2-PD
Outlook Actions:
Issuer: Cooke Aquaculture Inc.
Outlook, Stable
Issuer: Cooke Omega Investments Inc.
Outlook, Remains Stable
Withdrawals:
Issuer: Cooke Omega Investments Inc.
Corporate Family Rating, Withdrawn , previously rated B2
Probability of Default Rating, Withdrawn , previously rated B2-PD
RATINGS RATIONALE
CAI's B2 CFR benefits from 1) its strong market position as the
leading North American producer of farmed Atlantic Salmon, a market
with attractive long-term growth prospects; 2) geographically
diversified operations; 3) vertically integrated operations, which
provides operating flexibility and efficiency; and 4) a large
portfolio of aquaculture licenses, which creates a significant
barriers to entry. The company is constrained by 1) elevated
leverage, expected to be around 6.4x (pro forma for the announced
refinancing) LTM Q2 2021; 2) the sensitivity of operating and
financial results to the volatility in market prices; 3) exposure
to disease outbreaks and weather that could impact both the quality
and volumes of fish harvested; and 4) private ownership that could
potentially lead to shareholder friendly transactions.
The proposed Ba3 term loan B rating is two notches above CAI's B2
CFR, based on the application of Moody's Loss Given Default for
Speculative-Grade Companies methodology, and reflects its seniority
over the unsecured obligations which provide loss absorption. The
term loan B will be secured by a first lien priority on
substantially all assets of Cooke Omega, guaranteed by CAI and pari
passu with CAI's CAD500 million revolving credit facility (unrated)
and CAD400 million term loan A (unrated). Cooke Omega's proposed
senior unsecured notes are rated Caa1, two notches below the CFR,
to reflect its junior ranking behind the secured obligations.
CAI has good liquidity, with sources of around CAD600 million
compared to about CAD10 million of uses. Sources consist of CAD64
million of cash on the balance at close, a fully available CAD500
million of revolving credit facility due in 2026, and Moody's
expectation of positive free cash flow of about CAD40 million
(excluding the debt funded dividend) over the next 4 quarters. Uses
of liquidity consist of CAD10 million of mandatory debt repayment
in the form of term loan amortization. The revolver is subject to
financial covenants such as a net leverage ratio and interest
coverage, which Moody's expect the company to be compliant with
over the next 12 months. CAI will have limited flexibility to
generate liquidity from assets sales, as most of its assets are
encumbered.
As proposed, the new credit facilities are expected to provide
covenant flexibility that, if utilized, could negatively impact
creditors. Notable terms include the following: Incremental debt
capacity up to the greater of CAD350 million and 100% of Adjusted
Consolidated EBITDA, plus unlimited amounts subject to a first lien
net leverage ratio test equal to threshold at closing (3x) (if pari
passu secured). No portion of secured incremental debt may be
incurred with an earlier maturity than the initial term loans. The
credit agreement does not permit transfers of any material asset
from any Loan Party to a non-guarantor member of the Restricted
Group or from any Loan Party or other member of the Restricted
Group to any 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 protective provisions which only
permit guarantee releases if such transfer is for a bona fide
business purpose with a non-affiliate, subject to available
investment capacity. The credit agreement provides some limitations
on up-tiering transactions, including consent of all affected
lenders for modifications to subordinate the obligations or the
liens to any other indebtedness or liens, or to the waterfall
provisions. The above are proposed terms and the final terms of the
credit agreement may be materially different.
The stable outlook reflects Moody's expectation that the company's
leverage will improve below 5x in the next 12-18 months driven by
EBITDA expansion mainly from the recovery in foodservice demand and
better efficiencies due to improving farmgate costs (costs incurred
to grow and harvest the fish). The outlook also reflects Moody's
expectation that the company will remain positive free cash flow
generative and maintain good liquidity.
As a private company, CAI has less market transparency than
publicly traded peers. The company is also more likely to engage in
shareholder friendly activities, although Moody's note the
company's solid track record of conservative financial policies. In
addition, the company has pursued debt funded acquisitions in the
past as part of its growth strategy, such as the acquisition of
Omega Protein that was completed in 2017. Nonetheless, management
has demonstrated a good track record of deleveraging following
these acquisitions.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
A rating upgrade could be considered if the company is able to
generate consistent positive free cash flow, sustain leverage
(adjusted debt/EBITDA) below 4.5x (expected to be around 6.4x LTM
Q2 2021 pro forma) and EBITA/Interest above 2x (expected to be
around 1.2x LTM Q2 2021 pro forma). A rating downgrade could be
considered if the company's liquidity deteriorates, possibly from
sustained negative free cash flow, or if leverage (adjusted
debt/EBITDA) is sustained above 6.5x (expected to be around 6.4x
LTM Q2 2021 pro forma) or EBITA/Interest is sustained below 1x
(expected to be around 1.2x LTM Q2 2021 pro forma).
The principal methodology used in these ratings was Protein and
Agriculture published in May 2019.
Based in Blacks Harbor, New Brunswick, Canada Cooke Aquaculture
Inc. is a vertically integrated aquaculture company. CAI raises,
harvests, process and distributes Atlantic and Coho Salmon, Sea
Bass, Sea Bream and other specialty products. Through its wholly
owned subsidiary, Cooke Omega Investments Inc. the company
harvests, processes and distributes fish based animal and human
nutrition products. CAI reported revenues between CAD1 billion and
CAD2 billion for the financial year 2020.
CROCS INC: S&P Rates New $350MM Senior Unsecured Notes 'BB-'
------------------------------------------------------------
S&P Global Ratings assigned its 'BB-' issue-level rating to
U.S.-based footwear seller Crocs Inc.'s proposed $350 million
senior unsecured notes. The recovery rating is '4' (rounded
estimate: 30%). The company intends to use the net proceeds from
the issuance to fund share repurchases. At the same time, S&P
affirmed its 'BB-' issue-level rating on the company's existing
$350 million senior secured notes due in 2029. The recovery rating
is revised downward to '4' (rounded estimate: 30%) from '3'
(rounded estimate: 55%) because of lower recovery prospects from
the sizeable amount of debt added to the capital structure for this
transaction.
Pro forma for the proposed issuance, we estimate Croc's leverage to
increase to around 1.6x from 1x for the last 12-month period ended
June 30, 2021. This transaction will be the second $350 million
accelerated share repurchase for Crocs in 2021. S&P said, "We view
these debt-financed share repurchases as large, and they reflect a
modestly more aggressive financial policy than our prior
expectations. Still, the company's leverage remains fairly modest,
and we continue to expect the company to manage leverage in the
mid- to high-1x area, albeit now with less cushion to pursue
opportunistic acquisitions. We had expected the company would
prioritize debt for acquisitions to diversify its product and brand
portfolio over incremental shareholder returns." Following this
repurchase announcement, acquisitions could lead to a
higher-than-expected leverage profile. Moreover, the company will
have remaining availability under its existing share repurchase
authorization, which, if exercised, could further increase its debt
burden and pressure leverage, particularly if the company's recent
favorable operating trends reverse.
S&P said, "Our ratings incorporate Crocs' leading brand recognition
in the niche clogs footwear market, narrow product focus, and high
exposure to fashion trends. It has benefited from the COVID-induced
casualization trend of the consumer's wardrobe, and its brand has
resonated with younger consumers. We believe the company's revenue
growth will moderate as consumers return to more dressier
categories as social activities and working in the office
returns."
Issue Ratings - Recovery Analysis
Key analytical factors
Crocs is a leading casual footwear brand, combining comfort and
style with a value that consumers want; recognized globally for the
iconic clog silhouette. Our simulated default scenario assumes a
payment default in 2025 resulting from competitive pressures and
resulting significant loss in market share, a reputation-damaging
event, or a spike in input costs that cannot be passed along to
consumers. A combination of these factors could result in lower
revenue and cash flow. As a result, the company might find itself
having to fund cash flow shortfalls with available cash and
revolver borrowings.
S&P believes the company would be reorganized rather than
liquidated under a default scenario. As such, it has valued the
company based upon an enterprise value to gauge recovery using a
fixed-charge proxy approach.
The capital structure comprises:
-- $500 million secured cash revolver facility maturing in July
2024 (not rated);
-- $350 million senior unsecured notes due 2029; and
-- $350 million proposed senior unsecured notes due 2031.
Simulated default assumptions
-- Jurisdiction regime: U.S.
-- Year of default: 2025
-- Debt service assumption: $48 million (assumed default year
interest)
-- Minimum capex assumption: 4.5% of revenues ($62 million)
-- Cyclicality adjustment: 0
-- Operational adjustment: 15%
-- Emergence EBITDA: $127 million
-- Multiple: 5.5x
-- Gross enterprise value: $700 million
Simplified waterfall
-- Net enterprise value (after 5% administrative costs): $665
million
-- Obligor/nonobligor valuation split: 90%/10%
-- First-lien claims: $434 million
-- Collateral value available to first-lien claims: $642 million
-- Total unsecured claims: $727 million
-- Collateral value available to unsecured claims: $231 million
--Recovery expectations: '4' (30%-50%; rounded estimate: 30%)
CURARE LABORATORY: Hits Chapter 11 Bankruptcy Protection
--------------------------------------------------------
Haley Cawthon of Louisville Business First reports that Curare
Laboratory LLC, located at 4201 Springhurst Boulevard Suite 102,
recently filed a voluntary bankruptcy petition in the U.S.
Bankruptcy Court, Western District of Kentucky, Louisville
Division.
According to the bankruptcy filing, Curare Laboratory has five
creditors with unsecured claims totaling $400,000. The debtor has
less than $50,000 in assets.
One of the creditors is a custodian appointed in a lawsuit filed
against Curare Laboratory by Solar Holdings Group LLC, Bluewater
Toxicology LLC and Jennifer Bolus in Fayette Circuit Court. That
case has been ongoing for years, with the original complaint filed
in December 2017.
Solar Holdings Group claims Curare Laboratory defaulted on payment
under a $3.75 million promissory note, according to an amended
complaint filed March 2018. Curare has denied that claim, among
others, in the ongoing business dispute.
Curare Labortory is being represented by Louisville firm Kaplan
Johnson Abate & Bird LLP in the bankruptcy case. I have reached out
to the company's attorney for additional details, and this story
could be updated.
Curare Laboratory's principal address changed last July 2021 from
Lexington, Kentucky, to the aforementioned address in East
Louisville, according to documents filed with the Kentucky
Secretary of State's office.
Notably, the limited liability company was previously dissolved by
former Secretary of State Alison Lundergam Grimes in October 2019,
after not filing its annual report that year. Current Secretary of
State Michael G. Adams reinstated Curare Laboratory on July 14,
2021, noting that it had eliminated all grounds for dissolution.
About Curare Laboratory
Curare Laboratory LLC is a medical laboratory in Louisville.
Curare Laboratory LLC sought Chapter 11 protection (Bankr. W.D. Ky.
Case No. 21-31588) on July 29, 2021. In the petition signed,
Curare Laboratory estimated assets between $0 and $50,000 and
liabilities between $100,001 and $500,000. Kaplan Johnson Abate &
Bird LLP is the Debtor's counsel.
DAYCO PRODUCTS: Moody's Hikes CFR to B3, Outlook Remains Positive
-----------------------------------------------------------------
Moody's Investors Service upgraded Dayco Products, LLC's corporate
family rating to B3 from Caa1, its probability of default rating to
B3-PD from Caa1-PD and the senior secured term loan rating to B3
from Caa1. The outlook remains positive.
The upgrade reflects Dayco's strong performance thus far in 2021 as
operational efficiencies and higher volumes have contributed to
substantially improved earnings and margins. As a result, Dayco's
financial leverage has improved from above 7.5x debt/EBITDA over
the prior year to below 5.5x for the twelve months ending May 31,
2021. Moody's expects Dayco to maintain leverage in the mid-5x
debt/EBITDA range over the next twelve months as aftermarket demand
remains favorable and the company sustains an appropriate level of
operational efficiencies to offset cost inflations.
The positive outlook reflects the potential for Dayco to maintain
its EBITA margin near 10% and generate free cash flow of at least
5% of total debt over the next twelve months.
Upgrades:
Issuer: Dayco Products, LLC
Corporate Family Rating, Upgraded to B3 from Caa1
Probability of Default Rating, Upgraded to B3-PD from Caa1-PD
Senior Secured Bank Credit Facility, Upgraded to B3 (LGD3) from
Caa1 (LGD3)
Outlook Actions:
Issuer: Dayco Products, LLC
Outlook, Remains Positive
RATINGS RATIONALE
Dayco's ratings reflect the company's moderately elevated, yet
improving financial leverage, and modest scale relative to global
competitors in its end markets. Higher earnings from robust
aftermarket demand, recovering new vehicle production and cost
savings from consolidation in the company's manufacturing footprint
have supported expectations that Dayco will maintain debt/EBITDA in
the mid-5x range, which in Moody's view is a more tenable level as
the company faces 2023 debt maturities.
Dayco maintains a good market position with a suite of engine and
drivetrain products, including belts, tensioners and dampers, for
top automotive manufacturers and aftermarket retailers. The
company's aftermarket business, which historically represents about
40% of total revenue, provides a more stable demand base than new
vehicle production. New product development and a refocus of
customer relationships in the aftermarket segment have resulted
higher margins over the past twelve months, and Moody's expects
demand in this segment to remain strong while the recovery in new
vehicle production remains exposed to supply constraints at its
customers.
Moody's expects Dayco to maintain adequate liquidity. The company's
liquidity is primarily supported by its cash position, which
Moody's expects will remain in excess of $100 million over the next
twelve months. Dayco generated strong free cash flow during its
fiscal year ending February 2021 from meaningful working capital
and capex reductions. Moody's anticipates these trends to reverse
during Dayco's current fiscal year, but should remain modestly
positive.
As an automotive supplier for both new vehicle production and
aftermarket use, Dayco is exposed to material environmental risks
arising from increasing regulations on carbon emissions. Dayco's
products are heavily involved in the engines and drive systems of
vehicles with a focus on improving fuel efficiency for internal
combustion vehicles and providing quiet power transfer solutions
for hybrid electric vehicles. Dayco will need to continue to
develop products to meet the emission requirements for new
electrified vehicles with its customers while also maintaining its
existing product base for its sizable aftermarket exposure.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if Dayco maintains its EBITA margin
near 10% and demonstrates a financial policy of acquisitions and/or
distributions that is supportive of sustaining debt/EBITDA below
5.5x. Free cash flow generation of at least 5% of total debt could
also support an upgrade.
The ratings could be downgraded if Dayco demonstrates weaker
earnings from lower volumes or inability to maintain operational
efficiencies resulting in debt/EBITDA above 6.5x. A deterioration
in liquidity with materially lower cash balances or free cash flow
turning negative could result in a downgrade.
The principal methodology used in these ratings was Automotive
Suppliers published in May 2021.
Dayco Products, LLC, headquartered in Troy, MI, is a global
manufacturer of engine technology solutions targeted at primary and
accessory drive systems for the worldwide aftermarket, automotive
Original Equipment (OE), and industrial end markets. Revenues for
the last twelve month period ended May 31, 2021 were about $936
million. The company is owned primarily by a consortium of Oaktree
Capital, Anchorage Capital Group, L.L.C. and TPG Capital.
DIEBOLD NIXDORF: Moody's Hikes CFR to B2, Outlook Stable
--------------------------------------------------------
Moody's Investors Service upgraded Diebold Nixdorf, Inc's.
corporate family rating to B2 from B3, probability of default
rating to B2-PD from B3-PD, senior secured rating to B2 from B3,
and senior unsecured rating to Caa1 from Caa2. The rating outlook
remains stable.
"Strong order momentum across the business portfolio and completion
of restructuring spending drive improvement in Diebold's near-term
financial profile" said Peter Krukovsky, Moody's Senior Analyst.
"Management's objective of reducing net leverage to 3x by 2023 is
strongly credit positive, and the resulting financial flexibility
would enhance Diebold's strategic positioning in an evolving
industry."
The following rating actions were taken:
Upgrades:
Issuer: Diebold Nixdorf Dutch Holding B.V.
BACKED Senior Secured Regular Bond/Debenture, Upgraded to B2
(LGD4) from B3 (LGD4)
Issuer: Diebold Nixdorf, Inc.
LT Corporate Family Rating, Upgraded to B2 from B3
Probability of Default Rating, Upgraded to B2-PD from B3-PD
Speculative Grade Liquidity Rating, Upgraded to SGL-2 from SGL-3
Senior Secured Bank Credit Facility, Upgraded to B2 (LGD4) from B3
(LGD4)
Senior Secured Regular Bond/Debenture, Upgraded to B2 (LGD4) from
B3 (LGD4)
Senior Unsecured Regular Bond/Debenture, Upgraded to Caa1 (LGD6)
from Caa2 (LGD6)
Outlook Actions:
Issuer: Diebold Nixdorf Dutch Holding B.V.
Outlook, Remains Stable
Issuer: Diebold Nixdorf, Inc.
Outlook, Remains Stable
RATINGS RATIONALE
Diebold Nixdorf, Inc.'s (Diebold) operational performance has
stabilized following the transformational merger with Wincor
Nixdorf in 2016 which triggered a multi-year substantial
restructuring of operations. After spending about $350 million on
restructuring over the last three years, realization of $500
million in cost savings by 2021 has improved margins. With
restructuring spending declining to $50 million in 2021 and to zero
in 2022, Moody's project free cash flow to improve to $110 million
in 2021 and over $150 million in 2022. Moody's adjusted total
leverage stands at 5.4x as of June 2021, and Moody's projects a
decline to below 5.0x by the end of 2022.
Diebold's revenue and EBITDA trajectory over the coming years will
be supported by the cyclical rebound from the pandemic-induced
trough of 2020 and by the launch of compelling products in each key
business which are generating good new order momentum. However,
Diebold's long-term growth potential remains muted, as secular
trends of cash displacement and e-commerce growth reduce long-term
demand for its ATM and physical POS-related product categories. In
the near-term, trends will be supported by bank branch
rationalizations sustaining the importance of the ATM channel and
by penetration of self-checkout solutions among retail customers.
Moody's expects revenue growth in low single digits, with further
margin expansion constrained by recent logistics and input cost
inflation.
While leverage remains somewhat elevated, Diebold's management has
publicly communicated a capital structure objective of reducing net
leverage to 3.0x by the end of 2023. Moody's believes that this
objective may be achievable in this timeframe, but even if it takes
somewhat longer Moody's views the company's focus on deleveraging
and building financial flexibility as a strong credit positive.
Liquidity is good with cash balances of $232 million at the June
2021 seasonal low point.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The stable outlook reflects Moody's expectation of low-single digit
revenue growth over the next 12-18 months with stable profit margin
and improving cash flow, resulting in adjusted total leverage
gradually declining below 5.0x. The ratings could be upgraded if
Diebold demonstrates consistent revenue and EBITDA growth, and if
leverage is reduced below 4.5x. The ratings could be downgraded if
Diebold experiences a sustained revenue or EBITDA decline, or if
total leverage is sustained above 6x.
The principal methodology used in these ratings was Diversified
Technology published in August 2018.
With revenues of $4 billion for the last twelve months ended June
2021, Diebold is a leading global provider of ATM and POS
equipment, services and software to financial institutions and
enterprise retailers.
DIRECTV HOLDINGS: Fitch Withdraws BB+ Issuer Default Rating
-----------------------------------------------------------
Fitch Ratings has downgraded all of DIRECTV Holdings LLC's
(Holdings) issue ratings, including its Long-Term Issuer Default
Rating (IDR) to 'BB+'/Stable from 'BBB+'/Rating Watch Negative,
following the close of DIRECTV Entertainment Holding LLC's
(DIRECTV) spin-off transaction. Fitch has also withdrawn Holdings'
IDR and issue ratings, as these are no longer considered relevant
to the agency's coverage.
Holdings' BBB+ ratings were on Negative Watch pending the close of
DIRECTV's spin-off from AT&T Inc. The transaction was completed on
Aug 2, 2021. The Holdings' notes represent the legacy debt of
DIRECTV prior to the close of the transaction. Upon transaction
close, these notes transferred to DIRECTV. DIRECTV Financing LLC's
debt ratings are unaffected.
The ratings are withdrawn as these are no longer considered
relevant to the agency's coverage.
KEY RATING DRIVERS
Not Applicable.
RATING SENSITIVITIES
Not applicable as the ratings are withdrawn.
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.
DOLE FOOD: S&P Withdraws 'B' ICR on Merger With Total Produce PLC
-----------------------------------------------------------------
S&P Global Ratings withdrew all of its ratings on U.S.–based Dole
Food Co. Inc., including the 'B' issuer credit rating after Dole
Food Company merged with Total Produce plc, and its debt was
repaid.
EISNER ADVISORY: Fitch Assigns FirstTime 'B' IDR, Outlook Stable
----------------------------------------------------------------
Fitch Ratings has assigned a first-time Issuer Default Rating (IDR)
of 'B' to Eisner Advisory Group LLC. The Rating Outlook is Stable.
Eisner is a premier middle-market U.S. professional services firm
with a national platform and global presence. The company is
undergoing a transaction to be purchased by TowerBrook Capital
Partners L.P. (the Sponsor).
In connection with the transaction, the company is issuing a $40
million super priority revolver, a $400 million senior secure Term
loan, and a $40 million senior secured DDTL. Fitch has assigned a
rating of 'BB'/'RR1' to the super priority revolver and a rating of
'B+'/'RR3' to the senior secured term loan and DDTL.
KEY RATING DRIVERS
Middle Market Positioning: The market for accounting services at
the upper tier is largely an oligopoly market dominated by the big
four accounting firms. According to a June 2021 report by data
provider Audit analytics, the big four audited 66.7% of companies
with a market cap of above $75 million. This share falls
precipitously for companies with a market cap of below $75 million,
with the big four only auditing 10.9% of companies in that range.
EisnerAmper occupies a space among the fragmented mid-tier
accounting market, leveraging its brand name and focus on long-term
customer relationships to carve out a niche in this middle market
while avoiding competition from the big four.
Mid-Single Digit Leverage: Following the LBO by TowerBrook, Eisner
will be levered at 4.8x on a net basis using LTM April 2021 EBITDA.
Fitch believes this mid-single digit leverage limits the company to
the 'B' rating category. Fitch expects leverage to remain in the
mid-single digits over the rating horizon. Although the sponsor has
not indicated a clear financial policy over the rating horizon,
Fitch believes the presence of the $40 million DDTL in the
company's new credit agreement indicates that the company will
likely pursue acquisitions over the rating horizon.
Highly Recurring Revenue Model: Eisner's credit profile benefits
from recurring revenue streams driven by strong customer retention.
Client retention is aided by cross selling clients on multiple
business lines, leading to deeper customer relationships.
Diversified Business Lines and Client Base: EisnerAmper has
multiple business lines with across audit, tax and advisory
services, servicing customers globally. Clients are diverse
geographically, span several end-markets, and vary in size from
small private business to larger public companies. Fitch believes
this diversification limits Eisner's exposure to any single
end-market or region.
Inelastic Demand for Audit Services: Audits and tax services are
legally mandated and there are no alternatives that can legally
serve as substitutes. Material disruption resulting from
cyclicality is unlikely, given the critical role of audited
financials (capital market) and tax filing (IRS). Fitch believes
the demand for advisory services is more volatile than the demand
for the tax and audit services.
DERIVATION SUMMARY
Eisner is under plans to be purchased by a group of investors
formed by TowerBrook. In connection with the transaction, the firm
is seeking to raise $480 million in new debt to fund the purchase.
The current plans for the buyout financing package include a $40
million super priority revolver, a $400 million term loan B and a
$40 million DDTL along with equity committed by ToweBrook,
independent co-investors, and existing EisnerAmper partners
Pro forma for the transaction, the company will be levered at 4.8x
on a net basis using LTM April 2021 EBITDA. The new ownership
structure will change the way earnings are distributed to partners.
Previously, partners were paid out of profit at the end of the
year, below EBITDA. Under the new compensation model, partnership
distributions will be paid out of expenses before EBITDA. As a
result of the new compensation model, Fitch is projecting lower
EBITDA margins than historically over the rating horizon, but this
is reflective of a new compensation model rather than an impairment
to the earning ability of the company.
Fitch believes the mid-single digit leverage at the firm coupled
with middle market position limits the rating to the 'B' category.
These factors are partially offset by a high proportion of
recurring revenue and strong positioning in the middle market.
KEY ASSUMPTIONS
-- Revenue growth in the mid-single digits over rating horizon;
-- Full draw on DDTL in order to finance $40 million in
acquisitions;
-- No additional debt issuances over rating horizon;
-- No significant returns to shareholders over rating horizon.
KEY RECOVERY RATING ASSUMPTIONS
Fitch's recovery analysis assumes the company will be reorganized
as a going concern in the event of the bankruptcy rather than
liquidated. The going-concern analysis assumes a decline in EBITDA
to reflect the stress that provoked the bankruptcy as well as an
amount of corrective action taken before emergence from
bankruptcy.
The going-concern analysis contemplates a scenario in which a
concentrated push to enter the middle market by Big 4 competitors
drives business away from the company, resulting in substantial
declines to EBITDA. Fitch also assumes a full draw on the Company's
$40 million DDTL in order to finance $40 million in acquisitions at
an assumed 10x EBITDA multiple. The end result is $59 million in
going concern EBITDA.
The recovery multiple of 6.0 reflects several factors, including
the below:
Peer Multiple: According to the 2019 Fitch report, Telecom, Media
and Technology Bankruptcy Enterprise Values and Creditor
Recoveries, the average emergence multiple for companies in the TMT
space is 6.0x and the average multiple in the broadcasting and
media space (which includes business services companies in Fitch's
categorization) is 6.2x. The 6.0x multiple reflects the stable
recurring revenue nature of the accounting business as well as
EisnerAmper's favorable positioning in the fragmented market for
mid-tier accounting services while also recognizing the low growth
nature of the accounting industry.
The company's debt balance at the time of default is estimated to
be $460 million. Fitch assumes a full draw on the company's $40
million revolver to maintain liquidity heading into bankruptcy and
a full draw on the DDTL in order to finance several acquisitions.
Using a 6.0x emergence multiple and $59 million in going-concern
EBITDA, Fitch arrives at $318.6 million available for recovery.
Applying this amount to the super priority revolver leads to a
recovery of 'RR1'/100% with the remainder being applied to the $440
million in senior secured term loans for a recovery of 'RR3'/63%.
Applying standard notching criteria to the IDR of 'B' leads to
ratings of 'BB'/'RR1'/100% on the super priority revolver and
'B+'/'RR3'/63% on the company's senior secured term loans.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Fitch's expectation of leverage, as measured by gross total
debt with equity credit/operating EBITDA maintained below
5.0x;
-- Fitch's expectation of EBITDA margins maintained in the low
teens on a sustained basis.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Fitch's expectation of leverage, as measured by gross total
debt with equity credit/operating EBITDA maintained above
6.0x;
-- Fitch's expectation of EBITDA margins falling into the mid
single digits on a sustained basis;
-- Failure to deliver audited financials in a timely manner.
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
Moderate Debt Balance: In connection with the buyout by TowerBrook,
EisnerAmper will be issuing a $480 million credit facility
consisting of a $40 million super-priority revolver maturing in
2026, a $400 million Term loan B maturing in 2028, and a $40
million DDTL maturing in 2028.
Adequate Liquidity: Fitch is expecting the company to maintain
minimum balance sheet cash of $95 million over the rating horizon
along with full availability on the company's $40 million
revolver.
ISSUER PROFILE
Eisner Advisory Group LLC is a middle-market U.S. professional
services firm with a national platform and global presence. The
Company has a full suite of accounting, tax and advisory services
with over 12,700 clients across multiple industries.
ESG Considerations
Eisner Advisory Group LLC has an ESG Relevance Score of '4' for
Group Structure due to complexities in the post transaction group
structure of the firm, which 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 - 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.
ENGINEERED MACHINERY: Moody's Rates New $1.13BB 1st Lien Loan 'B2'
------------------------------------------------------------------
Moody's Investors Service assigned a B2 rating to Engineered
Machinery Holdings, Inc.'s (dba Duravant) proposed $1.135 billion
senior secured first lien term loan. As a part of the transaction,
the company is also increasing the size of its senior secured
second lien term loan to $550 million from $175 million. Proceeds,
along with $41 million of cash, will be used to refinance existing
facilities, fund a $275 million shareholder distribution and pay
associated fees and expenses. The company's corporate family rating
of B3, probability of default rating of B3-PD, EUR denominated
first lien term loan rating of B2 and Caa2 rating on the senior
secured second lien term loan remain unchanged. The ratings outlook
is stable.
"The significant shareholder dividend follows closely after the
company's recent acquisition of Foodmate, elevating financial and
execution risk", says Shirley Singh, Moody's lead analyst of the
company. "Leverage will increase above 7.0x on pro forma basis, but
our expectation of solid earnings growth, continued positive free
cash flow and good liquidity supports the ratings", added Singh.
LGD Adjustments:
Issuer: Engineered Machinery Holdings, Inc.
Senior Secured Bank Credit Facility LGD adjusted to (LGD5) from
(LGD6)
Assignments:
Issuer: Engineered Machinery Holdings, Inc.
Senior Secured 1st Lien Term Loan, Assigned B2 (LGD3)
RATINGS RATIONALE
Duravant's B3 CFR reflects the company's high leverage and the
inherent cyclicality of the business. The company's credit metrics
exhibit volatility due to its aggressive growth strategy with
periodic debt-financed acquisitions. Even so, Moody's notes the
company's ability to rapidly deleverage its balance sheet through a
combination of earnings growth and debt reduction.
The ratings are also supported by the company's strong
profitability with EBITDA margins in excess of 30% and low capital
needs that translates to strong cash flow generation. The company
benefits from its defendable niche position in the specialized
machinery market with long-established customer relationships. In
addition, the company's favorable exposure to food and beverage end
markets and the e-commerce sector, as well as growing presence in
the recurring aftermarket business, supports the ratings.
The stable outlook reflects Moody's expectation that the company
will be able to reduce leverage below 7.0x through solid earnings
growth as well as maintain good liquidity over the next 12-18
months.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Ratings could be upgraded should the operating performance and
financial policy support debt-to-EBITDA below 6.0x and
EBITA-to-interest expense above 2.0x on a sustained basis.
Ratings could be downgraded if there is a deterioration in
Duravant's earnings as a result business integration issues, weaker
operating environment or competitive pressures. A downgrade could
be prompted if adjusted debt-to-EBITDA is sustained above 7.5x,
EBITA-to-interest falls below 1.25x or liquidity weakens.
The principal methodology used in these ratings was Manufacturing
Methodology published in March 2020.
Engineered Machinery Holdings, Inc. is the indirect parent of
Duravant LLC. Headquartered in Downers Grove, Illinois, Duravant
designs and assembles packaging, material handling and food
processing equipment for a number of industries, including food and
beverage, consumer products, e-commerce and distribution, retail,
and agriculture and produce. Duravant is owned by affiliates of
Warburg Pincus, LLC. Sales for the last twelve months ended March
2021 were $855 million.
EPR PROPERTIES: S&P Alters Outlook to Stable, Affirms 'BB+' ICR
---------------------------------------------------------------
S&P Global Ratings affirmed its 'BB+' issuer credit rating on U.S.
net-lease REIT EPR Properties and its 'BB+' issue-level rating on
the company's senior unsecured notes with a '3' recovery rating.
S&P also affirmed its 'B+' issue-level rating on the company's
preferred stock.
S&P said, "The stable outlook reflects our expectation that tenant
distress from the COVID-19 pandemic should continue to subside over
the next two quarters, with rent collection trending toward 100% by
year-end 2021. As a result, we expect debt to EBITDA to decline
below 7.5x with fixed-charge coverage (FCC) improving to the low-
to mid-2x area over the next year.
"We expect continued improvement in EPR's operating performance,
with cash collections nearing historical levels by year-end.EPR's
cash collections are improving; the company collected 85% of
contractual revenue in the second quarter. In addition, EPR has
collected $48.9 million of deferred rent and interest from accrual
basis tenants through July 26, 2021. We expect continued
improvement over the next two quarters such that it reaches the
mid-90% area or better by year-end, supported by close to 100% of
tenants now open for business. This includes 99% of EPR's theaters,
which were one of the last entertainment categories to reopen
following the onset of the pandemic because of government
restrictions and changes in studio release schedules. Movie
attendance has slowly grown over the past few months from the
release of tentpole films, causing box office totals to steadily
increase, reaching over $575 million in July (though both
attendance and box office totals are still significantly lagging
historical levels).
"We expect continued improvement in theater attendance in the
second half of 2021, given the current movie slate, which includes
Suicide Squad, Ghostbusters, Top Gun, Spiderman, and Matrix 4,
among others. We expect this will lead to improving tenant-level
rent coverage levels. We believe this should enable EPR to collect
contractual rents from its operators, which includes some on cash
basis of accounting such as AMC and Regal. Moreover, exhibitor
health for tenants such as AMC has improved over the past year,
reducing concerns about EPR's ability to collect rents, provided
theaters can remain open. We believe improving vaccination rates
are important for theater attendance to remain on the path to
recovery and acknowledge that current and future variants could
cause some setbacks over the next year.
"The pandemic accelerated secular changes facing the theater
industry, but we expect EPR's properties to be resilient. Theaters
were closed for a significant period during the pandemic amid
restrictions and as studios delayed major films. This caused some
changes in theatrical releases, with some movies released directly
to streaming services or in tandem with theatrical releases. While
some of this is temporary, there could be more permanent changes,
such as the recent switch in theatrical release window to 45 days
from 90 days, which could cannibalize revenue. These changes in
distribution methods could pressure the film industry as it
recovers from the pandemic and aims to lure consumers back to
theaters amid lingering health and safety concerns. Moreover, they
could prevent box office revenue from recovering to pre-pandemic
levels.
"However, we expect EPR's theaters to perform better than those of
peers among these conditions. EPR's theaters are highly productive;
the company has 3% market share but generates 8% of the box office
revenue. Moreover, 96% of EPR's theaters are within the top 50% of
theaters in the U.S., with many offering enhanced amenities, such
as reclining seats, improved food and beverage selections
(including alcohol), and large format screens. We believe these
property characteristics bode well for EPR because any
rationalization among theaters/movie screens would likely start
with the lowest quality theaters in terms of
productivity/amenities. That said, we view EPR's exposure to
theaters as a key credit risk, given it comprises close to 50% of
its current contractual cash revenue, and its top tenant is AMC
(19% of second-quarter 2021 revenue).
"We expect improvement in EPR's credit protection measures as
EBITDA generation normalizes. Although EPR's adjusted debt to
EBITDA remains elevated at 9.7x for the 12 months ended June 30,
2021, revenue generation increased materially in the second quarter
as cash collections improved. We expect continued improvement over
the next several quarters, and we project debt to EBITDA will
decline below 7.5x. Moreover, we expect improvement in FCC, which
deteriorated over the past year, from EBITDA improvement coupled
with reductions in interest rates following the termination of the
covenant relief period. We expect EPR to focus on external growth
once EBITDA generation normalizes, which could offset some leverage
improvement. However, we expect EPR to fund any material investment
activities in a largely leverage-neutral manner, such that the
company remains committed to reaching and sustaining financial
metric targets.
"The stable outlook reflects our expectation that tenant distress
from the COVID-19 pandemic should continue to subside over the next
two quarters, with rent collection trending toward 100% by year-end
2021. This should result in material improvement in credit
protection measures such that debt to EBITDA trends below 7.5x and
FCC improves to the low- to mid-2x area over the next year, despite
some pressure on lagging 12-month metrics because of historical
quarters more affected by EBITDA dilution. It also reflects our
view for operating performance improvement, supported by limited
near-term lease expirations and our expectation for tenant rent
coverage levels to improve gradually over the next year as
entertainment properties continue to recover from the pandemic."
S&P could lower its rating if:
-- EBITDA generation fails to improve or EPR engages in aggressive
debt-funded acquisitions or development, such that debt to EBITDA
remains above 7.5x or FCC remains below 2.1x for a prolonged
period; or
-- Operating performance deteriorates, with cash rent collections
and/or occupancy declining along with tenant credit quality,
perhaps from a more severe coronavirus variant that causes the
closure of properties for a prolonged period.
While unlikely over the next 12 months, S&P could raise its rating
if:
-- Operating performance improves and compares favorably to those
of peers operating similar properties;
-- The tenant base becomes more diversified with tenant credit
quality improving; and
-- Credit-protection measures improve such that adjusted debt to
EBITDA is sustained below 6x, with FCC approaching the 3x area.
FAIR FINANCIAL: Reportedly Mulling Bankruptcy Filing
----------------------------------------------------
Sarah McBride of Bloomberg News reports that Fair Financial Corp.,
a startup car-leasing company backed by SoftBank Group Corp.'s
Vision Fund, is preparing a bankruptcy filing, potentially wiping
out equity investors, according to people familiar with the
matter.
In one scenario under consideration, SoftBank, which holds a third
of equity and serves as the senior secured lender of Fair's debt,
would retain control of the company through a restructuring. Fair,
which is based in Santa Monica, California, had raised about $450
million in equity and $500 million in debt, $315 million of which
is owed to SoftBank and is past due. Equity investors would lose
their stakes should courts approve a restructuring plan, said the
people, who requested anonymity to discuss a private matter.
About SoftBank Vision Fund
SoftBank Vision Fund -- https://visionfund.com/ -- is a venture
capital fund founded in 2017 that is part of the SoftBank Group.
About Fair Financial
Santa Monica, California-based Fair Financial runs Fair.com, a used
car leasing platform.
Formerly valued at $1.2 billion after raising more than $2 billion
in equity and debt financing from SoftBank, Fair laid off 40% of
its staff in October 2019.
Fair Financial bought Uber's XChange leasing program in early 2018.
The deal lets drivers lease an Uber-eligible car with
subscriptions to roadside assistance and maintenance for as low as
$130 per week with a $500 start fee.
GAIA INTERACTIVE: Cash Collateral Deal OK'd Thru Oct 25
-------------------------------------------------------
The U.S. Bankruptcy Court for the Northern District of California
has approved the stipulation Gaia Interactive, Inc. entered into
with its secured creditor, Cathay Bank, authorizing the Debtor to
use cash collateral through October 25, 2021.
The Debtor is authorized to use Cathay Bank's cash collateral
pursuant to the terms and conditions contained in the Stipulation
and the budget.
In exchange for cash collateral access, the Debtor will pay Cathay
Bank $3,750 every Monday, for the preceding week, by wire transfer
as adequate protection for its interest in the cash collateral.
Cathay Bank is also granted a post-petition lien on all of the
Debtor's assets, to the same extent of Cathay Bank's valid and
perfected security interest in its pre-petition collateral. Cathay
Bank will be allowed an administrative priority claim to the extent
the replacement lien is insufficient to cover Cathay's adequate
protection claims.
Cathay's Post-Petition Replacement Lien and administrative priority
claim will not extend to claims for relief arising under the
Bankruptcy Code (including claims arising under 11 U.S.C. section
506(c), 544, 545, 547, 548, and 549 thereof). The Post-Petition
Replacement Lien and administrative priority claim will be
subordinated only to:
-- the compensation and expense reimbursement of a
subsequently appointed chapter 7 trustee,
-- the compensation of the Subchapter V Trustee appointed in
the case, and
-- to the extent of the pre-petition retainer in the amount of
$183,163.09 paid to the Debtor's counsel, Binder & Malter LLP, and
the pre-petition retainer in the amount of $25,000 paid to BPM LLP,
and up to $5,600 for PAI Accountancy, LLP, the proposed tax
accountant of the Debtor (as a flat fee for the payment of the
Debtor's 2020 income tax returns).
Cathay will retain its rights as a creditor of Derek Liu regarding
any and all transfers of assets Mr. Liu has made; Mr. Liu will
retain all of his rights and defenses.
Cathay may apply for an order requesting relief from the automatic
stay upon 14 calendar days' written notice to the Debtor, its
counsel, a Trustee if any, the U.S. Trustee, the twenty largest
unsecured creditors and other persons or entities who have
requested notice in the bankruptcy case. Cathay may request that
the Court shorten such time for cause at Cathay's sole discretion.
A continued hearing on the matter is scheduled for October 19 at 2
p.m. in the event the Debtor and Cathay are not able to agree upon
terms for a further extension of the Budget for the time period
after October 25.
A copy of the order is available for free at https://bit.ly/3rTvSsP
from PacerMonitor.com.
About Gaia Interactive, Inc.
Gaia Interactive, Inc. -- doing business under several names such
as Gaia Online; Gaia Online, LLC; Ravel Labs LLC and Unrave -- owns
and operates online communities platform in Santa Clara,
California. The Debtor filed a Chapter 11 petition (Bankr. N.D.
Cal. Case No. 21-50660) on May 12, 2021, in the U.S. Bankruptcy
Court for the Northern District of California. The petition was
signed by James Cao, CEO.
As of the Petition Date, the Debtor has $567,616 in total assets
and $8,193,464 in total liabilities. Judge Stephen L. Johnson
oversees the case. Binder & Malter, LLP represents the Debtor as
counsel.
Monique D. Jewett-Brewster, Esq., at Hopkins & Carley, A Law
Corporation, represents Cathay Bank.
GPS HOSPITALITY: Fitch Assigns FirstTime 'B-(EXP)' LT IDR
---------------------------------------------------------
Fitch Ratings has assigned a first-time Long-Term Issuer Default
Rating (IDR) of 'B-(EXP)' to GPS Hospitality Holding Company LLC
(GPS). Fitch has also assigned a 'BB-(EXP)'/'RR1' rating to GPS's
proposed $50 million super-senior revolving credit facility and a
'B-(EXP)'/'RR4' rating to its proposed $385 million senior secured
notes which will be co-borrowed by GPS Finco Inc. The Rating
Outlook is Stable.
Fitch's rating assumes the company's proposed offering described
above to refinance its existing capital structure is executed
largely as planned. The rating considers the company's status as a
leading U.S. franchisee of Burger King, the second largest
quick-serve restaurant (QSR) burger company in the U.S. and the
world, as well as Fitch's expectation of high leverage with
adjusted debt/EBITDAR of around 7x following the proposed
refinancing, the company's small scale with EBITDA around $60
million and the risks inherent with the company's acquisition
strategy.
KEY RATING DRIVERS
Acquisitive Strategy Yields Moderate Diversity: GPS is a
multi-brand restaurant operator managing a modestly diversified
portfolio of 477 franchised restaurants under three leading brands:
Burger King (83% of units), Pizza Hut (13%) and Popeyes (4%)
yielding a relatively balanced mix by daypart with about a third of
sales coming from lunch, 21% each from dinner and snack, with the
remainder evenly split between breakfast and late night. Founded in
2012, GPS has grown its portfolio through strategic acquisitions of
around 470 units, supplemented with greenfield development and
offset by unit closures.
Since its inception in 2012, GPS has been highly acquisitive
completing 12 acquisitions expanding from its core Burger King
platform to include Popeyes starting in 2016 and, most recently
adding Pizza Hut in 2018. The company has expanded from its core
Georgia market where it maintains a sizable presence (28% of
current locations) into twelve additional states, primarily focused
in the south, mid-Atlantic, and Michigan. Given the company's
history, Fitch expects GPS to remain acquisitive going forward,
which heightens both operational and balance sheet risks.
Aggressive acquisitions that result in sustained Fitch-adjusted
leverage above 7.0x would be negative for the company's rating.
High Visibility Within Strong Franchisor System: Fitch views
greater scale within a franchisor system as positive, and with
nearly 400 Burger King locations, GPS is the third largest
franchisee of the brand in the U.S. Burger King is the second
largest hamburger chain both globally and domestically, with over
$20 billion in systemwide sales across nearly 19,000 restaurants.
GPS's scale and strong performance provide the company with direct
access to management not available to smaller franchisees,
including representation in various franchisee councils. Awards
received in 2018 for Global and North American Franchisee of the
Year further reflect the company's stature in the organization.
QSR Business Model Proves Resilient: The quick-serve restaurant
model has proven resilient through economic cycles as increased
spending power provides a tailwind during periods of strong
economic activity while a reputation for value and the trading down
by consumers from more expensive options limit downside during
economic slowdowns. While GPS was established after the Great
Recession, Fitch believes North American same-restaurant sales
(SRS) at the Burger King brand were largely flat during the 2008 to
2009 period while SRS for casual dining and fine dining competitors
quickly turned sharply negative and, in many cases, remained
negative through much of the period illustrating the brand's
resilience during economic downturns.
QSRs also meaningfully outperformed other restaurant formats during
the pandemic as mandated and proactive dining room closures
throughout the industry had less of an impact on quick-serve
restaurants given a primarily off-premise consumption model and
also due to a low-touch transaction environment facilitated by the
prevalence of drive-thru's and a well-developed digital
infrastructure. While industry data provided by the company
suggests that casual dining SRS declined nearly 40% in 2Q20 and
around 15% in the following two quarters, GPS's SRS declined less
than 7% in 2Q20 with SRS turning positive in the following two
quarters, further demonstrating the resilience of the company's
model.
Adequate Liquidity, High Leverage: Proforma for the proposed
refinancing, Fitch expects GPS to have adequate liquidity to fund
operations and tuck-in acquisitions with proforma cash expected
around $25 million and full access to an undrawn $50 million
revolver, net of an estimated $10 million in LOCs. Proforma
Fitch-adjusted leverage (capitalizing leases at 8x) is expected to
be elevated, in the 7x area. Fitch expects leverage to decline to
the mid-to-high 6x area by 2023 driven largely by growth in EBITDA
given limited expected debt paydown due to minimal FCF after growth
capex and acquisitions. Continued debt-funded shareholder returns
could also have negative implications for the company's rating.
DERIVATION SUMMARY
GPS's 'B-(EXP)' rating considers its small scale, with EBITDA
around $60 million, expected high leverage following the proposed
recapitalization and minimal expected FCF as well as its moderately
diversified restaurant portfolio across leading U.S. quick-serve
brands.
GPS's rating is in line with fellow QSR franchisee Sizzling
Platter, LLC's 'B-' rating given both companies' limited scale and
FCF generation, modest diversification and acquisitive growth
strategy. Leverage for both companies is expected to remain in the
6.5x to 7.0x area.
GPS's rating is higher than Wok Holdings, Inc. (PFC;
CCC+/Positive), operator of the P.F. Chang's chain of casual dining
restaurants. PFC's rating reflects the company's good niche
positioning and leading market position in the full-service Asian
category, as well as its high financial leverage, smaller scale
relative to other large casual chain dining concepts and secular
challenges within the casual dining segment that have been
exacerbated by the coronavirus pandemic. PFC has relatively good
system health supported by a better than average brand perception
with broad appeal across most consumer demographics, average unit
volumes that are at least on par with peers and same-store sales
(SSS) performance in-line with the casual dining segment but lower
Fitch-calculated EBITDA margins of 6.9% in 2020 versus some of its
peers that have margins in the mid-teens range.
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for the issuer
include:
-- Revenue grows around 2.5% to 3.0% organically from a base of
around $630 million in 2020 as SRS growth of around 2% is
supplemented by net restaurant growth of around 1% and
periodic tuck-in acquisitions;
-- EBITDA margins increase from 7.5% in 2020 to 9.0% in 2021
resulting in EBITDA approaching $60 million as the company
laps the pandemic-affected 1Q20 performance and as recently
acquired restaurants improve toward company margins. Fitch
assumes the company experiences modest leveraging of fixed
costs going forward on new unit growth with margins expanding
slightly over time;
-- FCF throughout the forecast remains essentially flat as cash
is absorbed by capex and acquisition spending;
-- Flat FCF and no prepayable debt result in steady debt levels
with modest EBITDA growth contributing to leverage declining
from around 7.0x to the mid 6x range over time.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Positive trends in same-store sales (SSS) and unit growth,
Fitch-calculated EBITDA sustained above $50 million, strong
FCF and total adjusted debt/EBITDAR sustained below 6.0x.
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- Adjusted debt/EBITDAR expected to sustain above 7.0x due to
operational concerns and/or debt financed acquisitions or
dividends, with persistently negative FCF leading to medium
term liquidity concerns and/or heightened refinancing risk.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Proforma for the proposed refinancing, Fitch
expects GPS to have adequate liquidity to fund operations and
tuck-in acquisitions with cash expected around $25 million and full
access to an undrawn five-year $50 million revolver, which is
expected to have around $10 million of LOCs outstanding. In
addition to the revolver, the company's debt structure is expected
to include seven-year $385 million senior secured notes. While the
revolver and the notes will include a first lien on substantially
all assets and equity interests of the company, the revolver will
benefit from super-senior status.
ISSUER PROFILE
GPS is a multi-brand restaurant operator managing a modestly
diversified portfolio of 477 franchised restaurants including
Burger King (83% of units), Pizza Hut (13%) and Popeyes (4%) across
the southern U.S., the mid-Atlantic region and Michigan.
SUMMARY OF FINANCIAL ADJUSTMENTS
Rent expense capitalized by 8.0x to calculate historical and
projected adjusted debt.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
GREEN VALLEY: Deal Allowing Cash Collateral Use Thru Sept 30 OK'd
-----------------------------------------------------------------
The U.S. Bankruptcy Court for the District of New Jersey approved a
stipulation providing for a third extension of the interim court
order allowing Green Valley at ML Country Club, LLC and ML County
Club, LLC to access cash collateral.
The Debtors entered into the Stipulation with Wilmington Savings
Fund Society, FSC, successor-by-merger to Beneficial Bank.
The Court says Section 6 of the Cash Collateral Stipulation is
modified to provide that Termination will occur on the earliest of
(i) September 30, 2021, or (ii) upon three business days' notice by
the Bank to the Debtors, the United States Trustee, and the
Committee (if any) of the occurrence of any Termination Event;
provided, however, that such termination will be automatic
immediately upon the Termination Event set forth in Section 7(f) of
the Cash Collateral Stipulation, without notice required to any
party.
The parties agree that the Debtors are liable to the Bank for
Pre-Petition Indebtedness in a principal amount of not less than
$1,990,830 (as to Debtor ML Country Club, with respect to the 2016
Loan), and $174,791.56 (as to both Debtors jointly and severally,
with respect to the 2017 Loan), as set forth in the Cash Collateral
Stipulation, together with any other obligations of the Debtors to
the Bank to the extent provided under the Pre-Petition Loan
Documents.
The Debtors are authorized to continue using the Bank's Cash
Collateral solely to pay their respective ordinary and necessary
business expenses and only as set forth in the Budget. Each Debtor
warrants and represents that the Budget (i) includes all
reasonable, necessary, and foreseeable expenses to be incurred in
connection with the Chapter 11 cases and the operation of the
Debtors' business for the period set forth in the Budget; (ii) will
be adequate to pay all administrative expenses due and payable
during the period set forth in the Budget, including statutory fees
pursuant to 28 U.S.C. Sec. 1930(a)(6); and (iii) does not provide
for any payment of pre-petition debt, liability or obligation of
any kind.
Each Debtor ratifies, confirms and reaffirms all of the terms,
covenants and conditions set forth in the Cash Collateral
Stipulation, except as expressly modified, and will continue to
comply with the same throughout the term of the Third Extension.
Each Debtor further represents and warrants that it has complied
with all terms and conditions of the Cash Collateral Stipulation
and the Budget, and that no Termination Event exists thereunder as
of the date of the Third Extension. The Debtors acknowledge and
agree that their use of Cash Collateral during the term of the
Third Extension remains subject to all terms and conditions of the
Cash Collateral Stipulation regarding adequate protection,
reporting, use of the DIP Accounts and compliance with the Budget.
The Automatic Stay is modified to permit the Bank and the Debtors
to carry out the terms and conditions of the Third Extension, and
the Debtors are authorized to execute any additional agreements as
may be deemed necessary to further effectuate and confirm the terms
and conditions of the Third Extension, and/or the Cash Collateral
Stipulation as modified and extended.
The hearing on the Cash Collateral Motion has been scheduled for
October 7 at 10 a.m.
A copy of the Order and the Debtors' budget for August and
September is available for free at https://bit.ly/3ynWzbf from
PacerMonitor.com.
The Debtors project $75,418.75 in gross profit and $74,163.59 in
total expenses.
About Green Valley at ML Country Club, LLC
Green Valley LLC at ML Country Club, LLC sought protection under
Chapter 11 of the U.S. Bankruptcy Code (Bankr. D.N.J. Case No.
21-11747) on March 3, 2021. In the petition signed by Louis Sacco,
managing member, the Debtor disclosed up to $50,000 in assets and
$1 million in liabilities.
Judge Jerrold N. Poslusny, Jr. oversees the case.
Robert N. Braverman, Esq. at McDowell Law P.C. is the Debtor's
counsel.
Wilmington Savings Fund Society, FSB, as Lender, is represented by
Ballard Sphar, LLP.
GREENSILL CAPITAL: Headed to Sale of Finacity Despite Term Changes
------------------------------------------------------------------
Law360 reports that a New York bankruptcy judge Wednesday set a
sale hearing for Greensill Capital affiliate Finacity Corp. in two
weeks despite a call by creditors for time to look at an amendment
to the purchase agreement indemnifying the buyer from future
compensation claims.
At a virtual hearing, U.S. Bankruptcy Judge Michael Wiles denied
the unsecured creditors committee's request for more time to look
at the recent change in the sale agreement with White Oak Global
Advisors and prepare for a potential contested sale hearing, noting
the conflict is over a relatively small amount of cash.
About Greensill Capital
Greensill is an independent financial services firm and principal
investor group based in the United Kingdom and Australia. It
offers structures trade finance, working capital optimization,
specialty financing and contract monetization. Greensill Capital
Pty is the parent company for the Greensill Group.
Greensill began to unravel in March 2021 when its main insurer
stopped providing credit insurance on US$4.1 billion of debt in
portfolios it had created for clients including Swiss bank Credit
Suisse.
Greensill Capital (UK) Limited and Greensill Capital Management
Company (UK) Limited filed for insolvency in Britain on March 8,
2021. Matthew James Byrnes, Philip Campbell-Wilson and Michael
McCann of Grant Thornton were appointed as administrators.
Greensill Capital Pty Ltd. filed insolvency proceedings in
Australia. Matt Byrnes, Phil Campbell-Wilson, and Michael McCann of
Grant Thornton Australia Ltd, were appointed as voluntary
administrators in Australia.
Greensill Capital Inc. filed for Chapter 11 bankruptcy (Bankr.
S.D.N.Y. Case No. 21-10561) on March 25, 2021. Jill M. Frizzley,
director, signed the petition. In the petition, the Debtor listed
assets of between $10 million and $50 million and liabilities of
between $50 million and $100 million. The case is handled by Judge
Michael E. Wiles.
The Debtor tapped Segal & Segal LLP as bankruptcy counsel, Mayer
Brown LLP as special counsel, and GLC Advisors & Co., LLC and GLCA
Securities, LLC as investment bankers and financial advisors.
Matthew Tocks is the chief restructuring officer.
The U.S. Trustee for Region 2 appointed an official committee of
unsecured creditors on April 7, 2021. The Committee is represented
by Arent Fox LLP.
HESS MIDSTREAM: Moody's Rates New Senior Unsecured Notes 'Ba3'
--------------------------------------------------------------
Moody's Investors Service assigned a Ba3 rating to Hess Midstream
Operations LP's (HESM Opco) proposed issuance of senior unsecured
notes. HESM Opco's existing ratings, including its Ba2 Corporate
Family Rating, and its stable outlook are not affected by this
action.
On July 27, 2021, Hess Midstream LP (HESM, unrated), the publicly
traded parent company of HESM Opco, agreed to repurchase $750
million of HESM Opco's Class B units from Hess Corporation (HES,
Ba1 stable) and Global Infrastructure Partners (GIP, unrated), who
control HESM through their joint ownership of HESM's general
partner. The proceeds of the new notes will be used to fund this
units repurchase.
"Hess Midstream's debt funded equity repurchase meaningfully
increases financial leverage and is therefore negative to its
credit profile," commented Pete Speer, Moody's Senior Vice
President. "However, the company's leverage had declined to low
levels relative to peers and remains well within the range
acceptable for its rating following this transaction."
Assignments:
Issuer: Hess Midstream Operations LP
Senior Unsecured Notes, Assigned Ba3 (LGD5)
RATINGS RATIONALE
HESM Opco's proposed new notes are rated Ba3, the same as its
existing senior unsecured notes and one notch below its Ba2 CFR in
consideration of the priority claim that its $1.0 billion revolving
credit facility and $400 million Term Loan A have relative to the
company's assets.
HESM Opco's Ba2 CFR is supported by its strong contractual
relationship with its primary counter party, HES, and its
strategically located and integrated asset base. Additionally, the
company's cash flow is underpinned by midstream services which are
fully contracted, 100% fee-based, and structured to minimize
commodity price and volume risk. HESM Opco is constrained by its
modest scale combined with its basin and customer concentration.
The use of the proceeds from the proposed issuance to fund the
share repurchase is credit negative, with pro forma LTM Debt/EBITDA
as of June 30, 2021 increasing by almost a full turn to around
3.2x. However, the company has publicly maintained its leverage
target of 3x and expects to be at that level by year end 2021 and
below that in 2022. Additionally, Moody's expects HESM to maintain
its distribution coverage ratio around 1.4x and EBITDA/Interest
above 8x, comfortably covering its obligations and supporting the
Ba2 CFR. Due to the nature of HESM's contracts and reduced capital
investment requirements, there is a clear line of sight towards
deleveraging primarily through EBITDA growth and some debt
reduction funded with free cash flow.
HESM Opco's outlook is stable, reflecting the stability of its cash
flow due to its contract structures which largely insulate the
company from commodity price and volume risk.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
HESM Opco could be upgraded to Ba1 should the company continue to
grow scale with leverage remaining below 3x, and presuming contract
structure continues to insulate EBITDA from commodity price and
volume risk.
HESM Opco could be downgraded should leverage exceed 4x, or should
contract structure erode resulting in increased leverage. Should
Hess to be downgraded below Ba2, HESM Opco would be similarly
downgraded given its customer concentration with Hess.
Hess Midstream LP is a publicly traded midstream energy company
that conducts all of its operations through its subsidiary Hess
Midstream Operations LP, which owns all the entity's operating
assets and issues all of its debt. The company provides natural gas
and crude oil gathering and pipelines, processing and storage,
terminals and rail connectivity, and water gathering and disposal
services to its primary customer, Hess Corporation, in its Bakken
Shale operations. Hess Corporation and Global Infrastructure
Partners each own 50% of HESM's non-economic general partner and
around 45% each the equity ownership in HESM, on a consolidated
basis, with about 10% owned by the public following the planned
equity repurchase.
The principal methodology used in these ratings was Midstream
Energy published in December 2018
HIGHLAND CAPITAL: Court Fines Ex-CEO Dondero for Suing Present CEO
------------------------------------------------------------------
Daniel Gill of Bloomberg Law reports that Highland Capital
Management LP's former chief executive received a $240,000 sanction
after a Texas bankruptcy judge found that he and two entities he
controls violated prior orders not to sue the company's current
CEO.
The contempt order against former Highland Capital CEO James
Dondero is the second that Judge Stacey G.C. Jernigan of the U.S.
Bankruptcy Court for the Northern District of Texas has imposed
during the investment firm's bankruptcy case.
The judge previously fined Dondero $450,000 for interfering with
Highland Capital's operations after he was ousted during the
investment firm's bankruptcy case. Dondero has appealed that
order.
About Highland Capital Management
Highland Capital Management, LP was founded by James Dondero and
Mark Okada in Dallas in 1993. Highland Capital was the world's
largest non-bank buyer of leveraged loans in 2007. It also managed
collateralized loan obligations. In March 2007, it raised $1
billion to buy distressed loans. Collateralized loan obligations
were created by bundling together loans and repackaging them into
new securities.
Highland Capital Management sought Chapter 11 protection (Bank. D.
Del. Case No. 19-12239) on Oct. 16, 2019. On Dec. 4, 2019, the
case was transferred to the U.S. Bankruptcy Court for the Northern
District of Texas and was assigned a new case number (Bank. N.D.
Texas Case No. 19-34054). Judge Stacey G. Jernigan is the case
judge.
At the time of the filing, Highland had between $100 million and
$500 million in both assets and liabilities.
The Debtor tapped Pachulski Stang Ziehl & Jones LLP as bankruptcy
counsel, Foley & Lardner LLP as special Texas counsel, and Teneo
Capital, LLC as litigation advisor. Kurtzman Carson Consultants,
LLC, is the claims and noticing agent.
The U.S. Trustee for Region 6 appointed a committee of unsecured
creditors on Oct. 29, 2019. The committee tapped Sidley Austin LLP
and Young Conaway Stargatt & Taylor LLP as bankruptcy counsel, and
FTI Consulting, Inc. as financial advisor.
INSIGHTRA MEDICAL: Loses Bankruptcy Financing
---------------------------------------------
Becky Yerak of The Wall Street Journal reports that Insightra
Medical Inc., a device maker which filed for bankruptcy after its
investment firm owner became the target of civil and criminal
complaints by the U.S. government, lost access to financing and is
teetering on the edge of liquidation.
Insightra lawyer Anthony Saccullo said at a court hearing Monday,
August 2, 2021, that its direct shareholder Odyssey Life Science
Holdings LLC was cutting off the financing, including $500,000 the
company needed in the short term.
About Insightra Medical
Insightra Medical is an innovative medical device company focused
on developing, manufacturing and selling value-add devices to
ambulatory surgery centers. Insightra Medical Inc. was founded in
March of 2001 and was originally located in Irvine, California.
Insightra Medical Inc. sought Chapter 11 protection (Bankr. D. Del.
Lead Case No. 21-11060) July 25, 2021. In the petition signed by
Craig Jalbert, president, Insightra Medical estimated assets
between $1 million and $10 million and estimated liabilities
between $1 million to $10 million. The cases are handled by
Honorable Judge Brendan Linehan Shannon. LAW OFFICE OF NATHAN A.
SCHULTZ, P.C., is the Debtor's counsel.
INSYS THERAPEUTICS: Trust Sues Ex-Manager to Recover $750K Fees
---------------------------------------------------------------
Daniel Gill of Bloomberg Law reports that Insys Therapeutics Inc.'s
liquidation trust is suing a former manager and a law firm to
recover $750,000 the bankrupt drug maker paid for the manager’s
criminal defense.
The payment to law firm Choate, Hall & Stewart LLP unlawfully
indemnified former manager Elizabeth Gurrieri in violation of
Delaware law, according to a complaint filed Tuesday in the U.S.
Bankruptcy Court for District of Delaware. Choate’s acceptance of
the lump sum payment wasn’t in good faith, the lawsuit alleged.
In May 2019, Insys founder and former CEO John Kapoor and other
executives were convicted in a racketeering conspiracy to bribe
doctors.
About Insys Therapeutics
Headquartered in Chandler, Ariz., Insys Therapeutics Inc. --
http://www.insysrx.com/-- is a specialty pharmaceutical company
that develops and commercializes innovative drugs and novel drug
delivery systems of therapeutic molecules that improve patients'
quality of life. Using proprietary spray technology and
capabilities to develop pharmaceutical cannabinoids, Insys is
developing a pipeline of products intended to address unmet medical
needs and the clinical shortcomings of existing commercial
products. Insys is committed to developing medications for
potentially treating anaphylaxis, epilepsy, Prader-Willi syndrome,
opioid addiction and overdose, and other disease areas with a
significant unmet need.
As of March 31, 2019, Insys had $172.6 million in total assets,
$336.3 million in total liabilities, and a total stockholders'
deficit of $163.7 million.
On June 10, 2019, Insys Therapeutics and six affiliated companies
filed petitions seeking relief under Chapter 11 of the Baintends to
conduct the asset sales in accordance with Section 363 of the
U.S.nkruptcy Code (D. Del. Lead Case No. 19-11292). Insys
Bankruptcy Code.
The Debtors' cases are assigned to Judge Kevin Gross.
The Debtors tapped Weil, Gotshal & Manges LLP and Richards, Layton
& Finger, P.A., as legal counsel; Lazard Freres & Co. LLC as
investment banker; FTI Consulting, Inc. as financial advisor; and
Epiq Corporate Restructuring, LLC as claims agent.
Andrew Vara, acting U.S. trustee for Region 3, on June 20, 2019,
appointed nine creditors to serve on an official committee of
unsecured creditors in the Chapter 11 cases. Akin Gump Strauss
Hauer & Feld LLP, and Bayard, P.A., serve as the Committee's
attorneys; and Province, Inc., is the financial advisor.
After selling substantially all of their assets, the Debtors filed
a Chapter 11 Plan and Disclosure Statement.
JEFFERIES FINANCE: Fitch Hikes LongTerm IDR to BB+, Outlook Stable
------------------------------------------------------------------
Fitch Ratings has upgraded the Long-Term Issuer Default Ratings
(IDR) of Jefferies Finance LLC (JFIN) and its debt co-issuing
subsidiary JFIN Co-Issuer Corporation (JFIN Co-Issuer) to 'BB+'
from 'BB'. The Rating Watch Positive has been removed and a Stable
Rating Outlook has been assigned. Concurrently, Fitch has assigned
a final rating of 'BBB-' to the $1.65 billion secured revolving
credit facility and a rating of 'BB+' to the $1 billion, 5%
unsecured notes maturing in August 2028, both of which are
co-issued by JFIN and JFIN Co-Issuer.
Jefferies Financial Group, Inc. (Jefferies, BBB/Stable), a 50%
owner of JFIN, recently announced a strategic alliance with
Sumitomo Mitsui Banking Corporation (SMBC) to collaborate on future
corporate and investment banking business opportunities. In
connection with the alliance, SMBC also agreed to provide financing
to JFIN in the form of a $1.65 billion secured revolving facility
and a $250 million subordinated loan, to support its lending
capabilities. Proceeds from this financing, together with the
unsecured notes and balance sheet cash, have been used to refinance
JFIN's $350 million superpriority revolver, $1.09 billion secured
term loan and $400 million secured notes.
Additionally, JFIN has transferred its ownership interests in its
CLOs to a newly created holding company, JFIN Parent LLC. The
transfer resulted in a $2.7 billion reduction in JFIN's balance
sheet assets and a $2.5 billion reduction in its balance sheet
liabilities.
The assignment of the final debt ratings follows the receipt of
documents conforming to information already received. The final
ratings are the same as the expected rating assigned to the secured
revolver and unsecured notes on July 26, 2021.
KEY RATING DRIVERS
IDRs and Senior Debt
The upgrade reflects the reduction in JFIN's corporate leverage
given the removal of the majority of CLO liabilities, the enhanced
funding flexibility given the introduction of a meaningful
unsecured funding component, and the stronger liquidity profile
given the upsize in the corporate revolver to $1.65 billion from
$350 million.
JFIN's ratings continue to reflect the benefits of the company's
relationship with Jefferies, which provides the firm with access to
underwriting deal flow and the resources of the broader platform;
JFIN's strong and experienced management team; and supportive
ownership from Jefferies and Massachusetts Mutual Life Insurance
Company (MassMutual; AA/Stable), both of which have provided the
firm with debt funding and incremental equity investments over time
to support business expansion. The ratings also reflect JFIN's
focus on senior lending relationships in the remaining funded
portfolio, low portfolio concentrations, solid asset quality
performance historically and sufficient liquidity.
Rating constraints include earnings sensitivity to market
conditions stemming from the reliance on deal flow and syndication
capabilities (particularly post asset transfer, as spread income
will decline), the potential liquidity and leverage impacts of
meaningful draws on revolver commitments, and expected fluctuations
in total leverage driven by draws on the corporate revolver and
other funding facilities used to front underwriting commitments.
The ratings also contemplate the aggressive underwriting conditions
in the broadly syndicated market in recent years, including higher
underlying leverage, meaningful EBITDA adjustments, and in many
cases, the absence of financial covenants. Fitch believes a
sustained slowdown in the economy would translate to asset quality
issues more quickly, given the limited embedded financial cushion
in most portfolio credits and weaker lender flexibility in credit
documentation.
The transfer of CLO equity to JFIN Parent LLC and the refinancing
of existing debt have reduced corporate leverage to 1.6x pro forma,
down from 3.2x at May 31, 2021. Fitch believes JFIN will manage its
corporate leverage within the 1.5x-2.0x range, excluding temporary
borrowings for fronting purposes. Fitch views the reduction in
corporate leverage favorably. However, borrowing capacity on the
new secured corporate revolver ($1.65 billion), the third-party
fronting facility ($1.1 billion) and the members fronting facility
($500 million) could have a meaningful impact on total leverage at
any point in time, up to a maximum of 4.5x as of May 31, 2021,
assuming maximum draws on all three facilities. While Fitch views
fronting facility draws as temporary in normal course, the
borrowings are considered in complementary leverage ratios, as JFIN
can get hung with an underwriting commitment during a market
dislocation if it is unable to syndicate the transaction, as was
witnessed during the coronavirus pandemic.
Fitch views the addition of an unsecured funding component via the
unsecured issuance and the subordinated debt favorably, as it will
enhance the firm's funding flexibility, particularly in times of
stress. Pro forma for the $1 billion of unsecured notes, unsecured
funding represented 73% of total debt as of May 31, 2021. This
unsecured funding mix is at the high end of Fitch's 'bb' category
benchmark range of 20%-75% for finance and leasing companies with
an operating environment score in the 'bbb' category. The unsecured
funding percentage could change materially if there are meaningful
draws on the secured revolver or fronting facilities.
Fitch believes the upsized revolver will enhance JFIN's liquidity,
market position and earnings potential, as it will be able to
participate in more underwriting transactions. The added liquidity
is particularly meaningful given the spike in JFIN's portfolio
company revolver draws at the onset of the pandemic, which peaked
at 63% of total committed exposure in April 2020, exceeding peak
levels experienced during the great financial crisis. Revolver
utilization has since returned to normalized levels. Fitch believes
JFIN will continue to access the revolver CLO market to fund a
portion of potential revolver draws and maintain adequate liquidity
reserves to account for potential revolver draws needed to be
funded from the balance sheet.
The secured debt rating is one notch above the IDR, reflecting
Fitch's expectation for good recovery prospects under a stress
scenario given available asset coverage and JFIN's funding mix.
The unsecured debt rating is equalized with the IDR, reflecting
average recovery prospects under a stress scenario given JFIN's pro
forma funding mix, which includes an increased proportion of
unsecured debt.
Subsidiaries and Affiliated Companies
The long-term IDR and debt ratings of JFIN Co-Issuer are equalized
with those of its parent JFIN. JFIN Co-Issuer is essentially a
shell finance subsidiary with no material operations, and is a
co-issuer on the secured corporate revolver and proposed unsecured
notes, in addition to the existing superpriority revolver, secured
term loan and secured notes.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Increased revenue diversity, as evidenced by growth in third
party assets under management, which generates more stable
management fees; enhanced consistency of operating results;
evidence of strong asset quality performance of the funded
loan portfolio; demonstrated management of leverage at 2.0x or
below; conservative management of fronting exposures, as
evidenced by portfolio diversity and strong syndication
performance through market cycles; and the maintenance of a
sound liquidity profile could all drive positive rating
momentum.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A sustained increase in total debt to tangible equity above
2.0x; a material weakening in liquidity; reduction in funding
flexibility, as evidenced by a material decline in unsecured
funding; meaningful deterioration in asset quality; an
extended inability to syndicate transactions that results in
material operating losses and/or weakens the firm's reputation
and market position; or a change in the firm's relationships
with Jefferies and/or MassMutual could lead to negative rating
momentum.
-- The secured debt and unsecured debt ratings are sensitive to
changes in JFIN's Long-Term IDR and to the relative recovery
prospects of the instruments. The debt ratings are expected to
move in tandem with JFIN's Long-Term IDR, although the
notching could change if there is a significant shift in the
funding mix.
Subsidiaries and Affiliated Companies
JFIN Co-Issuer's ratings are expected to move in tandem with JFIN's
ratings.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and
Covered Bond issuers have a best-case rating upgrade scenario
(defined as the 99th percentile of rating transitions, measured in
a positive direction) of three notches over a three-year rating
horizon; and a worst-case rating downgrade scenario (defined as the
99th percentile of rating transitions, measured in a negative
direction) of four notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
KATERRA INC: Court Approves $71 Mil. Sales of Factories
-------------------------------------------------------
Alex Wolf of Bloomberg Law reports that Katerra Inc. won court
approval to sell factories in Washington state and California for a
total of $71 million after the bankrupt construction materials
company reported uncontested initial offers for both facilities.
Blue Varsity LLC, a wholly owned subsidiary of Mercer International
Inc., is purchasing Katerra’s cross-laminated timber factory in
Spokane, Wash. The engineered wood product made there is primarily
used for commercial and residential building construction.
Volumetric Building Companies, a Philadelphia-based construction
company, agreed to buy Katerra’s two-year-old factory in Tracy,
Calif. That facility produces wood-framed walls, floor trusses,
roof trusses, cabinets, and other housing components.
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: SMTD Law Represents International Fidelity, 3 Others
-----------------------------------------------------------------
Pursuant to Rule 2019 of the Federal Rules of Bankruptcy Procedure,
the law firm of SMTD Law LLP submitted a verified statement to
disclose that it is representing International Fidelity Insurance
Company, Harco National Insurance Company, Five Ones on Prairie,
LLC, and Kruger Development Group, LLC in the Chapter 11 cases of
Katerra, Inc., et al.
As of Aug. 5, 2021, the creditors and their disclosable economic
interests are:
International Fidelity Insurance Company
One Newark Center
20th Floor
Newark, New Jersey 07102-5207
* Nature of Claim: Surety Bonds
* Principal Amount of Claim: $4,635,570
Harco National Insurance Company
One Newark Center, 20th floor
Newark, New Jersey 07102-5207
* Nature of Claim: Surety Bonds
* Principal Amount of Claim: $4,635,570
Five Ones on Prairie, LLC
485 S. Robertson Boulevard
Suite 4
Beverly Hills, CA 90211
* Nature of Claim: Design-Build Contract
Fraud
Conversion
Negligence
* Principal Amount of Claim: $8,900,319
Kruger Development Group, LLC
485 S. Robertson Boulevard
Suite 4
Beverly Hills, CA 90211
* Nature of Claim: Design-Build Contract
Fraud
Conversion
Negligence
* Principal Amount of Claim: $8,900,319
SMTD Law reserves the right to amend this Verified Statement as
necessary.
Counsel for Creditors, International Fidelity Insurance Company;
Harco National Insurance Company; Five Ones on Prairie, LLC; and
Kruger Development Group, LLC can be reached at:
SMTD LAW LLP
Robert J. Berens, Esq.
2001 E. Campbell Avenue, Suite 201
Phoenix, AZ 85016
Tel: (602) 258-6219
E-mail: rberens@smtdlaw.com
A copy of the Rule 2019 filing is available at
https://bit.ly/2X3cYnW 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. Tex. 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.
KUMTOR GOLD: Sovereign Immunity Nulls Ch.11 Ruling, Says Kyrgyzstan
-------------------------------------------------------------------
Law360 reports that Kyrgyzstan is asking a New York district judge
to hear its appeal of a bankruptcy court's finding that it violated
the stay in the Kumtor Gold Chapter 11 case, arguing the ruling
violated its sovereign immunity.
In a motion filed Tuesday, August 3, 2021, the Krygyrz Republic
argued the district court should immediately hear its appeal of a
ruling that an injunction granted by a Krygyrz court violated the
bankruptcy stay, saying whether the bankruptcy court can block
enforcement of Krygyrz law is one of the central issues of the
Chapter 11 case.
About Kumtor Gold Inc.
Centerra Gold Inc. is a Canadian mining company that owns and
operates the Kumtor Gold Mine in the Kyrgyz Republic.
Centerra placed subsidiaries, Kumtor Gold Co and Kumtor Operating
Co., into Chapter 11 bankruptcy in the U.S. following
nationalization of the miner's Kumtor gold mine by the Kyrgyz
Republic, a former Soviet republic.
Kumtor Gold Company CSJC and Kumtor Operating Company CSJC sought
Chapter 11 bankruptcy protection (Bankr. S.D.N.Y. Case Nos.
21-11051 to 21-11052) on May 31, 2021. Kumtor Gold was estimated to
have $1 billion to $10 billion in assets and $100 million to $500
million in liabilities as of the bankruptcy filing. The Hon. Lisa
G. Beckerman is the case judge. SULLIVAN & CROMWELL LLP, led by
James L. Bromley, is the Debtor's counsel. STIKEMAN ELLIOT LLP is
the co-counsel.
LKQ CORP: S&P Alters Outlook to Positive, Affirms 'BB+' ICR
-----------------------------------------------------------
S&P Global Ratings revised its outlook on LKQ Corp. to positive
from stable and affirmed its 'BB+' issuer credit rating.
S&P said, "At the same time, we raised our issue-level rating on
LKQ's cash flow revolver to 'BBB-' from 'BB+' and revised our
recovery rating to '2' from '3'. The '2' recovery rating indicates
our expectation for substantial (70%-90%; rounded estimate: 75%)
recovery in the event of a default.
"The positive outlook reflects the potential that we will raise our
rating over the next 12 months if the company maintains its
improved European margins and demonstrates its commitment to
sustain a reduced level of leverage. We expect LKQ to maintain
leverage of 2x-3x and free operating cash flow (FOCF) to debt of
well above 15%. We also anticipate the company's will maintain or
improve its market share in North America and demonstrate a
consistent and stable operating performance.
"The positive outlook reflects the company's improving margins,
rising market share, and strong free cash flow generation. LKQ's
margins continue to exceed our expectations despite the still
relatively weak collision environment and it has improved its
margins in both North America and Europe. While we don't expect the
company's current North American margin to be sustainable, given
our forecast that scrap and precious metal prices will moderate
over time, its results still show a clear improvement when
eliminating these temporary benefits. In North America, LKQ
improved its margin through disciplined pricing, cost cutting, and
the implementation of innovative approaches, such as using
artificial intelligence to bid on salvage cars at auction to
improve its part yield per vehicle. In Europe, the company
increased its margins by continuing to unify and streamline its
different geographies under its 1 LKQ Europe plan, specifically by
consolidating its procurement and logistics. Going forward, we will
closely monitor the LKQ's ability to maintain these stronger
European margins."
The company indicated that it has increased its market share in
many of its geographies due to its strong order fulfillment. In
North America, LKQ has indicated that its volumes were down only 9%
versus 15% for the overall collision industry. Nonetheless, S&P's
expect collision volumes will continue to improve as people return
to working outside their home and peak driving volumes increase.
Still, the improvement in collision volumes may experience
temporary setbacks depending on the spread of the delta coronavirus
variant.
S&P said, "We expect LKQ's leverage and FOCF to remain well below
3x and above 20%, respectively. The company has articulated a goal
of maintaining net leverage of about 2x (it was about 1.2x as of
June 30, 2021, per management's definition or roughly 1.5x-2.0x on
an S&P Global Ratings-adjusted basis). We anticipate LKQ's cash
flow generation will remain strong, though weaker than in 2020, as
it increases its inventories to more normalized levels and expands
its capital expenditure (capex) to support its future growth. Our
base-case scenario assumes the company focuses on smaller
acquisitions and uses more free cash flow for share repurchases. A
move away from the large debt-financed acquisitions of its recent
past is a key supporting factor for our outlook revision.
"The trend toward electrification remains a longer-term risk for
the company that we will continue to monitor. Announcements from
original equipment manufacturers (OEMs) and new legislation in
Europe indicate an acceleration in the likely penetration of
battery electric vehicles. While these vehicles will still require
parts and services, there are less parts to replace on a fully
electric vehicle than on a similar gas-powered model. However,
given the size of the North American and European car parcs and the
average age of their cars, we do not think this issue will affect
LKQ's performance for several years. Furthermore, it has been
strategically buying companies to gain exposure to battery
vehicles, such as through its recent acquisition of Green Bean
Battery, which is a hybrid battery re-conditioner and installer.
"The positive outlook on LKQ reflects the potential that we will
raise our rating over the next 12 months if it maintains its
improved European margins and demonstrates its commitment to
sustain a reduced level of leverage. We expect the company to
maintain leverage of 2x-3x and FOCF to debt of well above 15%. We
also anticipate it will maintain or improve its market share in
North America and demonstrate a consistent and stable operating
performance.
"We could upgrade LKQ in the next 12 months if it extends its track
record of strong operating performances and maintains leverage of
2x-3x and FOCF to debt of well above 15%. Moreover, we would need
to believe its strategic business, financial policies, governance,
and capital structure are consistent with a higher rating,
including a reduced focus on large debt-funded acquisitions
relative to its recent past.
"We could revise our outlook on LKQ to stable in the next 12 months
if its margins deteriorate and we expect its leverage to increase.
This could occur because of operating problems, a loss of business,
an inability to efficiently integrate acquired properties, or other
adverse market conditions such as an unfavorable change in how auto
insurers fulfill their collision claims."
LONG ISLAND DEVELOPERS: Seeks Cash Collateral Access
----------------------------------------------------
Long Island City Developers Group, LLC asks the U.S. Bankruptcy
Court for the Eastern District of New York for authority to, among
other things, use cash collateral in accordance with the proposed
budget and provide related relief.
The Debtor requires the use of cash collateral, in which Signature
Bank, has an interest to make adequate protection payments to the
Lender and to fund the operation of the Debtor's business in
accordance with the budget.
The bankruptcy filing was necessitated by the Debtor's financial
hardship caused by the COVID-19 outbreak in New York City, its
inability to meet its current debt obligations, and a pending
foreclosure proceeding by Cofane Associates, LLC, in the New York
State Supreme Court, County of Nassau, Index No. 601581/2021.
Through the bankruptcy, the Debtor intends to sell the real estate,
refinance, or reorganize and make a payment to creditors through a
plan of reorganization.
As of the petition date of the Bankruptcy, the Debtor was a party
to these loan documents:
a. Mortgage Note by the Debtor to the Lender, dated October 5,
2015, in the original principal amount of $2,000,000, and other
related loan documents;
b. Mortgage, Security Agreement, Assignment of Leases and
Rents and Fixtures, dated as of October 5, 2015 from the Debtor to
the Lender and other related loan documents;
c. Mortgage Note by the Debtor to the Lender, dated August 22,
2019, in the original principal amount of $300,000, and other
related loan documents; and
d. Mortgage, Security Agreement, Assignment of Leases and
Rents and Fixtures, dated as of August 22, 2019 from the Debtor to
the Lender and other related loan documents.
The Lender asserts that, as of the Petition Date the Debtor was in
arrears with payments due in the amount of:
-- $2,186,891.55 on the $2,000,000 Note; and
-- $325,553.03 on the $300,000 Note;
and that post-petition arrears are in the amount of:
-- $12,277.72 based on interest accruing at Prime Rate Plus
1%, currently 4.25%, with a per diem of $236.11 based on 52 days on
the $2,000,000 Note from May 11, 2021 through July 1, 2021; and
-- $1,408.16 based on interest accruing at Prime Rate,
currently 3.25%, with a per diem of $27.08 based on 52 days on the
$300,000 Note from May 11, 2021 through July 1, 2021.
As adequate protection for the Debtor's use of cash collateral, it
proposes to provide the Lender with valid, perfected and
enforceable security interests to the same extent that they existed
as of the Petition Date along with post-petition interest
payments.
The pre-petition liens and the Adequate Protection Liens will be
subject to (a) fees under 28 U.S.C. section 1930 and 31 U.S.C.
section 3717, (b) the sum of $50,000 for professional fees and
expenses incurred by the Debtor's counsel in excess of the
pre-petition retainer; and (c) the costs of administrative expenses
not to exceed $7,500 in the aggregate that are permitted to be
incurred by any Chapter 7 trustee in the event of a conversion of
the Debtor's Chapter 11 case pursuant to Bankruptcy Code section
1112.
These events constitute an "Event of Default:"
a. The failure by the Debtors to perform, in any respect, any
of the terms, provisions, conditions, covenants, or obligations
under the Interim Order;
b. The entry of any order by the Court granting relief from or
modifying the automatic stay of Bankruptcy Code section 362(a);
c. Dismissal of the chapter 11 case, conversion to chapter 7,
or the appointment of a Chapter 11 trustee, or examiner with
enlarged powers, or other responsible person;
d. A default by the Debtors in reporting financial or
operational information as and when required under the Interim
Order that is not cured within 15 business days after written
notice to the Debtors and their counsel.
A telephonic hearing on the matter is scheduled for August 18 at
10:30 a.m.
A copy of the motion is available at https://bit.ly/3yuUXNg from
PacerMonitor.com.
About Long Island City Developers Group
Long Island City Developers Group is a New York-based company
primarily engaged in renting and leasing real estate properties. It
owns a 10,000-square-foot commercial building located at 38-24 32nd
St., Long Island City, N.Y.
Long Island City Developers Group filed its voluntary petition for
relief under Chapter 11 of the Bankruptcy Code (Bankr. E.D.N.Y.
Case No. 21-4172) on May 10, 2021. Joseph Torres, 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 Hon. Jil Mazer-Marino oversees the case.
Morrison Tenenbaum, PLLC serves as the Debtor's legal counsel.
MAIN STREET INVESTMENTS II: Updates Secured Claim Pay Details
-------------------------------------------------------------
Main Street Investments II, LLC, submitted an Amended Disclosure
Statement for Plan of Reorganization dated August 3, 2021.
CCDFI through Assured Lender Services, Inc. had scheduled an
immediate foreclosure sale. The bankruptcy stayed the foreclosure
sale and allowed debtor to reorganized debt through Chapter 11.
Classes of Claims in the Plan
* Class 1 Unsecured Claims
Unsecured Claims will be addressed after dismissal of the
bankruptcy.
* Class 2A - 80 E. California Street, Las Vegas, NV 89104
Third party asset-based lender will provide financing to purchase
CCDFI's Notes for $2,000,000, which amount is close to the amount
agreed upon to be paid by the Debtor to CCDFI in previous
settlement discussions. Purchase of Notes will be effectuated
within 60 says of agreement by CCDFI with new entity.
CCDFI filed a secured proof of claim for $2,523,371 at a fixed
annual rate of 7%. The original promissory note was for
$2,570,405. CCDFI has Note/Deed of Trust against 1319 S. Main
Street, Las Vegas, NV 89104 for $892,343 (Main Street Investment
III, LLC). Purchase of Notes by new entity will cover the
outstanding secured notes on these two properties.
Debtor will seek dismissal of bankruptcy after Notes held by CCDFI
are purchased by new note holder. Unsecured creditors will be able
to assert/enforce claim upon dismissal of case.
Third party asset based on lender that will purchase CCDFI's Notes
for amount of $2 million dollars. Amount of purchase is close to
amount agreed upon to be paid by the debtor to CCDFI in settlement
discussions. Purchase of Notes will be effectuated in the next 60
days. CCDFI filed secured Proof of Claim (2-1) in the amount of
$2,523,370.73 at a fixed annual rate of 7.00%.
The original Promissory Note was in the amount of $2,570,405.00 but
these funds were not disbursed. CCDFI has Noted/Deed of Trust
against 1319 S. Main Street, Las Vegas, NV 89104 in the amount of
$892,342.99. Purchase of Notes by the new note holder will cover
outstanding Notes on these two properties.
Average income is approximately $4,894.85 from rental payments of
tenants at 80 E. California Street, Las Vegas, NV 89104. Basic
overhead – including utilities, insurance and property taxes have
been paid on the ongoing basis. Expenses average approximately
$1,477,75. Secured debt (CCDFI) will be paid in 60 days through
purchase of Note.
A full-text copy of the Amended Disclosure Statement dated August
3, 2021, is available at https://bit.ly/3yuBU5p from
PacerMonitor.com at no charge.
Counsel for the Debtor:
Corey B. Beck, Esq.
The Law Office of Corey B. Beck, P.C.
425 South Sixth Street
Las Vegas, NV 89101
Telephone: (702) 678-1999
Facsimile: (702) 678-6788
Email: Becksbk@yahoo.com
About Main Street Investments II
Main Street Investments II, LLC, filed its voluntary petition for
relief under Chapter 11 of the Bankruptcy Code (Bankr. D. Nev. Case
No. 21-10361) on Jan. 27, 2021. At the time of the filing, the
Debtor disclosed assets of between $1 million and $10 million and
liabilities of the same range. Judge Natalie M. Cox oversees the
case. The Law Office of Corey B. Beck, P.C. serves as the Debtor's
legal counsel.
MAVENIR SYSTEMS: Moody's Affirms B2 CFR Amid $635MM Refinancing
---------------------------------------------------------------
Moody's Investors Service affirmed Mavenir Systems, Inc.'s B2
Corporate Family Rating, as well as the B2-PD Probability of
Default Rating and existing B2 Senior Secured First Lien Bank
Credit Facility. Moody's assigned a B2 rating to a new, $635
million Senior Secured First Lien Bank Credit facility, consisting
of a new 5-year, $75 million revolving credit facility (due 2026)
and a 7-year, $560 million Term Loan B (due 2028). The proceeds
from the new facility will be used to fully repay the existing
facility. At close, Moody's expect to withdraw the B2 rating on the
existing facility. The outlook remains stable.
Issuer: Mavenir Systems, Inc.
Assignments:
Senior Secured 1st Lien Rev Credit Facility, Assigned B2 (LGD3)
Senior Secured 1st Lien Term Loan B , Assigned B2 (LGD3)
Affirmations:
Probability of Default Rating, Affirmed B2-PD
Corporate Family Rating, Affirmed B2
Senior Secured 1st Lien Bank Credit Facility, Affirmed B2 (LGD3)
Outlook Actions:
Outlook, remains Stable
Moody's views the refinancing as credit positive. The transaction
will be leverage neutral, is likely to be priced favorably relative
to the existing facility, will extend the maturities, and will
reset covenants.
RATINGS RATIONALE
Mavenir's credit profile is constrained by governance risk,
including private equity ownership that is pursuing an aggressive
growth strategy that requires substantial research and development
spending, producing low EBITDA margins, negative free cash flows
and high leverage (Moody's adjusted). The Company is also
relatively small in scale, with revenues below $600 million, has
high customer concentration, limited segmental diversity, and
competes against two very large companies, Nokia and Ericsson.
Good liquidity supports the credit profile, including high cash
balances and strong support from its financial sponsors that have
invested substantial cash equity in the business, and are committed
to fully funding R&D-driven free cash flow deficits.
Mavenir also has an established market niche in advanced network
virtualization software, within the wireless carrier end market,
supported by strong intellectual property assets with a large
portfolio of patents and engineering talent. Mavenir benefits from
long term customer relationships with a large number of telecom
carriers, including the top wireless carriers in the US and abroad
producing good geographic revenue diversity. High revenue growth is
also positive, driven by very strong demand drivers for 4G and 5G
advanced, mission critical, and innovative software and solutions
in wireless telecom network architectures.
Moody's expects Mavenir to have a good liquidity profile over the
next 12 months, reflected in high cash balances, an undrawn
revolver, and covenant-lite loans. Despite a fully secured capital
structure which generally limited alternate liquidity, Moody's
believe the financial sponsor will continue to contribute cash
equity as needed as long as revenue growth remains strong.
Moody's rate the Senior Secured Credit Facilities B2, in line with
the B2 CFR despite the all-bank facility structure. The instrument
ratings reflect a B2-PD Probability of Default Rating, and Moody's
expectation for an average recovery of approximately 50% in a
default scenario given the covenant-lite structure of the bank
credit facilities.
As proposed, the new credit facilities are expected to provide
covenant flexibility that if utilized could negatively impact
creditors. Notable terms include the following:
Incremental debt capacity up to the greater of (1) $156 million
and (2) 100% of consolidated adjusted EBITDA) plus an unlimited
amount, so long as pro forma first lien leverage, senior secured,
and total leverage (including unsecured debt) is equal to or less
than 3.6x, 4.1x, and 5.1x respectively, or does not increase in
connection with a permitted acquisition or investment and interest
coverage rate is not less than 1.75x on a senior secured and total
basis. The maturity date of incremental term loans shall be no
earlier than the latest maturity date of the existing Term Loan.
The credit agreement permits the designation of any existing or
subsequently acquired or organized subsidiary, as an unrestricted
subsidiary, and subsequently re-designate the subsidiary as
restricted. There are no express "blocker" provisions which
prohibit the transfer of specified assets to unrestricted
subsidiaries.
Non-wholly-owned subsidiaries are not required to provide
guarantees; dividends or transfers resulting in partial ownership
of subsidiary guarantors could jeopardize guarantees.
There are no express protective provisions prohibiting an
up-tiering transaction
The proposed terms and the final terms of the credit agreement may
be materially different.
The stable outlook reflects Moody's expectation for R&D spend to
remain high, and free cash flows to remain negative. Moody's expect
liquidity to be good, however, with cash and financial sponsor's
committed to fully fund cash flow deficits with equity
contributions when necessary. Moody's also expect strong revenue
growth, averaging near 20% or better over the next 12-18 months,
while maintaining steady EBITDA margins.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's could consider a positive rating action if Debt/EBITDA
(Moody's adjusted) is sustained below 4x, and free cash flow to
debt (Moody's adjusted) is sustained above 7.5%. Greater scale,
more revenue diversity, and or lower customer concentrations could
also create positive rating pressure.
Moody's could consider a downgrade if Debt/EBITDA (Moody's
adjusted) exceeds 5.5x on a sustained basis, or free cash flow
remains negative for a sustained period. Moody's could also
consider a negative rating action if operating performance
materially weakens.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
Mavenir sells core network infrastructure software solutions for
4G/5G, to mobile network operators. The Company is a combination of
the former mobile division of Mitel Networks Corporation and Xura
Inc., excluding Xura's enterprise messaging business. Mavenir is
majority owned and controlled by the private equity firm, Siris
Capital. Koch Strategic Platforms ("KSP"), a subsidiary of Koch
Investments Group, owns a minority interest. The Company generated
approximately $580 million in revenue during the last 12 months
ended April 30, 2021.
MAVERICK GAMING: Moody's Gives B3 CFR & Rates $300MM Term Loan B3
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Moody's Investors Service assigned a B3 Corporate Family Rating and
B3-PD Probability of Default Rating to Maverick Gaming LLC. A B3
rating was assigned to Maverick's proposed $300 million 7-year
senior secured term loan and a Ba3 rating was assigned to its
proposed $50 million 5-year super-priority first-out revolving
credit facility that will be undrawn at closing. The outlook is
stable.
Proceeds from the proposed term loan, along with $93 million of
proceeds from the sale and leaseback of 4 properties plus $7
million of cash on hand, will be used to refinance Maverick's $380
million of existing debt in full, as well as pay associated debt
breakage and related fees and expenses.
The following ratings/assessments are affected by the action:
New Assignments:
Issuer: Maverick Gaming LLC
Corporate Family Rating, Assigned B3
Probability of Default Rating, Assigned B3-PD
Super Priority Senior Secured Revolving Credit Facility, Assigned
Ba3 (LGD1)
Senior Secured Term Loan, Assigned B3 (LGD4)
Outlook Actions:
Issuer: Maverick Gaming LLC
Outlook, Assigned Stable
RATINGS RATIONALE
Maverick's B3 Corporate Family Rating is constrained by its high
leverage level, with the expectation for debt-to-EBITDA leverage to
come down from over 7x pro-forma for the close of the refinancing
transaction, to be in the mid to low 5x range over the next twelve
months. The company's growth strategy, including acquiring gaming
assets and improving operations, has been a key driver of the
company's increased debt levels and rapid growth, seen largely in
2019 through multiple acquisitions. Size, scale, and narrow product
focus represent key constraints, as Moody's expects the company to
generate less than $300 million in net revenue in 2021. Positive
credit consideration is given to the company's planned expansion of
four cardrooms in Washington State, where the company is the
largest operator of cardrooms and benefits from its locations being
concentrated in urban settings, such as the Seattle area. The 2020
legalization of retail and online sports betting and elimination of
the $100 maximum wager and legalization of additional table games
in Colorado will also benefit Maverick. Expense reduction and
margin improvement at the company's facilities, Maverick's
geographic diversification, with properties in Washington, Nevada,
and Colorado, and good liquidity further support the credit
profile.
The coronavirus outbreak and the government measures put in place
to contain it continue to disrupt economies and credit markets
across sectors and regions. Although an economic recovery is
underway, it is tenuous, and continuation will be closely tied to
containment of the virus. As a result, a degree of uncertainty
around Moody's forecasts remains. Moody's regards the coronavirus
outbreak as a social risk under Moody's ESG framework, given the
substantial implications for public health and safety. The gaming
sector has been one of the sectors most significantly affected by
the shock given its sensitivity to consumer demand and sentiment.
More specifically, Maverick remains exposed to travel disruptions
and discretionary consumer spending that leave it vulnerable to
shifts in market sentiment in these unprecedented operating
conditions and Maverick remains vulnerable to a renewed spread of
the outbreak.
Maverick is exposed to governance risk due to its private ownership
structure, high leverage, and expectation that some additional debt
will be used to support potential future acquisition activity, as
the company has a track record of growth via acquisition.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The stable rating outlook considers that despite its small size,
Maverick will generate positive free cash flow and maintain good
liquidity as the business continues to recover. The stable outlook
also incorporates Moody's expectation for the company to generate
positive free cash flow and for leverage to continue to come down
from current elevated levels as the business recovers and debt is
reduced.
Ratings could be upgraded if Maverick demonstrates the ability and
willingness to achieve and maintain debt-to-EBITDA leverage
comfortably below 5.0x while maintaining a positive free cash flow
profile and good liquidity.
Ratings could be downgraded if liquidity deteriorates or if Moody's
anticipates Maverick's earnings recovery will be more prolonged or
weaker than expected because of actions to contain the spread of
the virus or reductions in discretionary consumer spending at its
facilities. The ratings could be downgraded if debt-to-EBITA
leverage were maintained over 6.0x or free cash flow is positive.
As proposed, the new credit facilities are expected to provide
covenant flexibility that if utilized could negatively impact
creditors. Notable terms include the following: Incremental first
lien debt capacity up to the greater of $45 million and 100% of
trailing four-quarter pro forma consolidated EBITDA, plus unlimited
amounts subject to pro forma first lien net leverage ratio does not
exceed the first lien net leverage ratio as of the closing date. A
portion of the first lien incremental capacity may be used to
upsize the revolver on a super-priority basis up to the lesser of
$25 million and an amount such that total revolving commitments do
not exceed 1.0x consolidated EBITDA. No portion of the incremental
may be incurred with an earlier maturity than the initial term
loans. There are no express "blocker" provisions which prohibit the
transfer of specified assets to unrestricted subsidiaries; such
transfers are permitted subject to carve-out capacity and other
conditions. Non-wholly-owned subsidiaries are not required to
provide guarantees; dividends or transfers resulting in partial
ownership of subsidiary guarantors could jeopardize guarantees,
with no explicit protective provisions limiting such guarantee
releases. There are no express protective provisions prohibiting an
up-tiering transaction. The above are proposed terms and the final
terms of the credit agreement may be materially different.
The principal methodology used in these ratings was Gaming
published in June 2021.
Maverick Gaming LLC, headquartered in Kirkland, Washington, is a
regional casino and cardroom operator across Washington State,
Nevada, and Colorado. The company operates a portfolio of 27
casinos, hotels, and cardrooms, 2 gas stations, and a custom design
company. Maverick was founded in 2017 by Eric Persson and Justin
Beltram, who hold over 70% ownership in the company. Revenue for
the trailing 12-month period ended June 30, 2021 was $235 million.
MAVERICK GAMING: S&P Assigns 'B-' ICR, Outlook Stable
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S&P Global Ratings assigned its 'B-' issuer-credit rating to
regional casino and cardroom operator Maverick Gaming LLC.
S&P said, "We assigned our 'B-' issue-level and '3' recovery
ratings to Maverick's proposed first-lien term loan, which reflects
our expectation for meaningful (50%-70%; rounded estimate: 65%)
recovery in the event of a payment default. We also assigned our
'B+' issue-level and '1' recovery ratings to the company's proposed
super-priority revolving credit facility, reflecting our
expectation for very high recovery (90%-100%; rounded estimate:
95%) in the event of a payment default. The stable outlook reflects
our expectation that Maverick will maintain very high S&P Global
Ratings-adjusted leverage of above 7x in 2021 as its revenue and
EBITDA recover throughout the year. Adjusted leverage could improve
to about 6x in 2022 as a result of the company's planned cardroom
expansion and modest debt reduction.
"We expect Maverick to maintain S&P Global Ratings-adjusted
leverage of above 7x and generate negative FOCF in 2021. Our
forecast for adjusted leverage incorporates our expectation for
2021 revenue and EBITDA to recover to 2019 levels (pro forma as if
all 2019 acquisitions occurred Jan. 1, 2019). We expect revenue in
the company's Washington and Colorado segments to remain below 2019
levels, but we assume those declines will be offset by increased
contribution from the company's E-Gads segment and some modest
growth in Maverick's Colorado properties. We believe revenue
generation in 2021 will be supported by strong consumer spending
relative to 2020, the lifting of capacity restrictions, and
consumers feeling more comfortable, in general, being indoors, as
vaccine rates have increased. As of June 2021, all of Maverick's
properties were open, and we have assumed they remain open
throughout our forecast. Nevertheless, some regions could implement
varying degrees of social-distancing measures, capacity
restrictions, or mask mandates if COVID-19 case counts continue to
rise as we have seen in certain markets.
"Further, we expect 2021 EBITDA to benefit from the incremental
contribution from E-Gads and cost cuts made over the past year. We
expect Maverick to maintain many of the cost cuts it made over the
past year, particularly in areas of reduced advertising spend,
though the benefit of these cuts may be diluted somewhat by the
opening of lower-margin services (e.g., food and beverage) at the
company's hotels and casinos in Nevada and Colorado.
"Our measure of adjusted leverage includes operating leases and the
payment protection program (PPP) loan that Maverick received in
2020. Although the Small Business Administration (SBA) could fully
forgive the PPP loan if Maverick used the funds for qualifying
expenses, the loan remains outstanding. In our analysis, we have
conservatively assumed that the loan is held through its maturity
in 2022, and that Maverick retires it using cash on hand. Further,
we forecast Maverick will spend $20 million-$30 million in 2021 in
capital expenditure (capex) as it expands its existing cardroom
operations. We believe this level of investment will translate into
negative FOCF this year and some incremental EBITDA next year.
"Under these base-case assumptions, we expect S&P Global
Ratings-adjusted leverage to be elevated at about 7.5x and EBITDA
interest coverage of about 2x in fiscal 2021. If Maverick's PPP
loan is forgiven, we expect the company would end 2021 with
adjusted leverage of about 7x. Based on improved revenue and EBITDA
generation in 2022, driven by its cardroom expansion, and our
assumed debt reduction, we believe Maverick could improve adjusted
leverage to about 6x and EBITDA interest coverage to about 2.5x in
2022.
"We believe Maverick's expansion and rebranding of its Washington
cardrooms will strengthen its position in a key market, though the
company still faces competitive pressure from larger, more
diversified tribal casinos. As of June 2020, Maverick held just
under 50% of the Washington cardroom market, including four of the
top 10 producing assets by gross gaming revenue, which we believe
puts the company in a favorable position relative to direct peers.
Furthermore, Maverick intends to expand its cardroom operations and
consolidate some of its 19 cardrooms under three new brands. We
believe its plan to launch three new brands in the Seattle market
could strengthen its brand recognition over the long term and will
allow the company to more effectively market its cardrooms to
consumers looking for specific games because locations will be
dedicated to a single table game. If successful, we believe this
could increase margins over the long term. We expect the cardroom
expansion will generate $5 million-$10 million of adjusted EBITDA
annually, beginning in 2022.
"Nevertheless, most gambling in Washington takes place at tribal
casinos, which are located throughout the state, including just
outside of the Seattle-Tacoma area, Maverick's primary operating
market. Tribal casinos generate about 80% of the state's net gaming
receipts annually and offer a wider variety of game options and
slot machines. While we do not believe there is material overlap in
existing clientele, in our view, the Washington state legislature's
recent legalization of sports betting at tribal casinos could
increase competition for cardrooms. It is our understanding that
under the statute, mobile online sports betting will remain illegal
through 2023, which provides a competitive advantage to tribal
casinos because we believe they will be able to attract customers
with a higher affinity for sports betting." While proposed
legislation would legalize sports betting in cardrooms on similar
terms to that of tribal casinos, the timeline is uncertain and not
included in our forecast.
Maverick is vulnerable to operating volatility given its small
scale and minimal geographic diversity compared to larger peers.
This risk is partially offset by the company's leading market
position in its key markets. S&P's forecast Maverick to remain
highly exposed to the Washington cardroom market, which generates
more than 50% of the company's adjusted EBITDA. Given that the
company's operations are concentrated in Washington, Maverick lacks
material geographic diversity, which heightens its exposure to
adverse regional events, weather risk, regional economic weakness,
or changes in the competitive landscape that could result in
significant revenue and EBITDA volatility. For example, the state
of Washington prohibited cardrooms from operating indoors in
Seattle between August 2020 and January 2021. In response, Maverick
moved its operations outdoors, and because of inclement weather
over the winter months, its visitation, revenue, and EBITDA were
impaired more compared to casinos in its two other markets.
Furthermore, any proposed regulatory change in Washington to the
gaming tax rate or an expansion of commercial gaming licensees,
while not currently anticipated, could cause material
underperformance at Maverick's properties and impair credit
metrics.
Recent regulatory changes could provide substantial EBITDA
generation within the next few years. In November 2020, Colorado
expanded the number of table games allowed at casinos to include
baccarat, pai gow, and keno; eliminated maximum wager limits; and
legalized sports betting. S&P said, "As a result, we believe
Maverick will begin to offer a wider variety of games at its
locations in Central City and Black Hawk, including the launch of
its online sports betting operations in March 2021. We believe that
the pandemic could accelerate the adoption of online sports betting
as retail sportsbooks were temporarily shut down in 2020,
potentially driving a change in customer habits." Additionally, the
expansion of table games will likely increase the number of players
that Maverick can attract, which, combined with the removal of
maximum wager limits, could translate into higher EBITDA margins in
Colorado.
S&P said, "The stable outlook reflects our expectation that
Maverick will have adequate liquidity over the next 12 months and
maintain leverage of above 7x in 2021, declining to the low-6x area
in 2022, driven largely by its cardroom expansion and the lack of
capacity restrictions.
"We could revise our outlook to negative or lower the rating if
Maverick's liquidity deteriorates and we believe that its capital
structure is unsustainable over the long term. This would likely be
the result of a significant increase in COVID-19 case counts in one
or more of its markets that results in another round of property
closures.
"While an upgrade is unlikely over the next 12 months, we could
raise the rating if Maverick reduces leverage to below 6x and
sustains EBITDA interest coverage in excess of 2.5x, incorporating
our expectation for some leveraging acquisitions. An upgrade
scenario would also depend on the company generating positive FOCF
following heightened capital spending in 2021."
MGM GROWTH: Fitch Puts 'BB+' IDR on Watch Positive
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Fitch Ratings has placed the ratings of MGM Growth Properties LLC,
its subsidiary MGM Growth Properties Operating Partnership
(collectively, MGP), and their debt instruments on Rating Watch
Positive (RWP) following the announcement of the acquisition of MGP
by VICI Properties Inc. (VICI).
The pro forma company will have reduced tenant concentration,
improved asset quality following the addition of MGP's Las Vegas
Strip properties and market-leading regional casinos, progress
further toward a fully unencumbered asset pool, and a well
staggered maturity schedule. The combined company's strengthened
credit profile and '5.0x-5.5x' net leverage target will likely be
consistent with a low investment grade Issuer Default Rating (IDR)
over the long-term with the initial funding mix influencing the
timing of positive rating actions. MGP's RWP reflects the
likelihood that the surviving entity will have an IDR in-line with
or higher than MGP's current 'BB+' IDR.
VICI announced a $17.2 billion acquisition of MGP, including the
assumption of MGP's $5.7 billion in debt. The inclusion of MGM
Resorts' $860 million in pro forma annual rent reduces VICI's
tenant concentration away from Caesars Entertainment Inc. The
combined company will be among the largest triple net REITs with an
estimated EBITDA of $2.5 billion (excluding VICI's pro forma share
of the Mandalay Bay/MGM Grand JV).
Fitch expects to resolve the Rating Watch around the time of the
closing, which may take place more than six months in the future.
KEY RATING DRIVERS
Strategically Sound Merger: Fitch views the merger to be
strategically sound in that it alleviates some considerations that
were previously restraining the two companies' stand-alone credit
profiles such as tenant and asset diversification. The combination
should also improve pro forma the combined company's relative
access to the capital markets and has limited integration risk
given the triple-net leased nature of the portfolios.
Strong Cash Flow Stability: MGP generates 100% of its rental
revenue under a master lease with MGM (excluding the rent paid to a
JV 50.1% owned by MGP). The master lease has a long initial term
and is primarily fixed with 2% escalators, providing stability and
visibility to MGP's cash flows. Roughly half of the rent is
attributed to assets on the more cyclical Las Vegas Strip, but
MGP's regional assets are diversified and help insulate the company
from individual market-level underperformance.
MGM's pro forma coverage of its master lease using 2019 EBITDAR was
strong at 1.9x. Starting 2020, MGM no longer breaks out assets
specific EBITDAR making it more difficult to calculate master lease
level rent coverage. However, Fitch has sufficient information to
estimate coverage with decent precision. MGP's 50.1% owned JV's
rent coverage is about 1.8x using 2019 EBITDAR.
MGP's master lease assets account for roughly 60% of MGM's
wholly-owned EBITDAR and are critical to MGM operationally
comprising all of MGM's regional assets (including Springfield) and
all of MGM's mid-tier Las Vegas assets. MGP's master lease
structure should protect against adverse lease selection in a
bankruptcy scenario of MGM. Although not anticipated, Fitch views
rent concessions as a greater cash flow risk for triple-net lease
REITs with master leases, rather than tenant rejections in
bankruptcy.
Achievable Deleveraging Plan: Fitch expects the combined company's
leverage will return back to the acquirer's long-term financial
policy despite the likely increase in leverage at the onset of the
transaction. Deleveraging will result from a combination of annual
contractual increases in rental income (primarily fixed) and
whether retained cash flow post-merger is directed towards
acquisitions or debt repayment.
Improved Capital Markets Access: Fitch expects the combined company
will be one of the largest REITs in terms of enterprise value,
EBITDA generation, and unsecured debt outstanding which should
provide advantages that are a modest credit positive. These
advantages primarily relate to lower unsecured debt capital costs,
relatively stronger banking relationships and lower corporate
expenses relative to revenues or total assets.
Greater Financial Flexibility: Fitch expects the transaction will
advance the combined company's ambition to have a fully
unencumbered asset pool. Should this be achieved, it will have
significantly more financially flexibility given the sizeable pool
of unencumbered assets, which includes a number of assets in Las
Vegas (e.g. Mirage, Excalibur, Luxor).
Historically, gaming REIT's contingent liquidity in the form of
mortgage debt or asset sales is not as robust as more traditional
REIT asset classes. Gaming properties are a specialty property type
that appeals to a smaller universe of institutional real estate
investors and lenders than core commercial property sectors. Some
gaming companies have accessed debt secured by specific assets in a
time of stress.
There are also gaming assets in some CMBS transactions, but Fitch
views the through-the-cycle availability of capital from this
avenue as weaker than secured mortgages from balance sheet lenders,
including life insurance companies, and, to a lesser extent, banks.
Positively, non-traditional owners have increasingly been
purchasing Las Vegas real estate (e.g. private equity) which has
led to cap rate compression and is a longer-term positive as it
relates to attractiveness of Las Vegas gaming real estate.
Tenant Concentration to Improve from Merger: The combined company's
credit profile will benefit from more tenant diversification than
each stand-alone profile. MGM is MGP's sole tenant, but this tenant
concentration is partially offset by the diversification of assets
within the lease (roughly 50/50 Las Vegas/regional EBITDAR split),
the high-quality assets, the mission-critical nature of the master
lease to the tenant and the healthy rent coverage.
Conservative Financial Policy: Fitch expects the combined company's
long-term leverage will be consistent with MGP's net leverage
target of 5.0x-5.5x. MGP's stand-alone ratings have some tolerance
for net leverage to temporarily exceed 5.5x for larger
acquisitions. Fitch projects MGP's stand-alone net leverage to be
at 5.6x net at YE 2021 following its use of cash to fund the
recently completed MGM OP redemption and inclusive of the closing
of MGM Springfield. Net leverage will decline to 5.5x at YE 2022.
Dynamic Operating Environment: While Fitch has not assumed any
discontinuity to receipt of rental payments, the degree of positive
rating momentum will be governed in part by the fluid nature of the
pandemic and its influence on tenant cashflows, including whether
current or future variants are the catalyst for changes in consumer
behavior or guidance/requirements from elected officials and
regulators (i.e. property closures). Fitch's base case for regional
and Las Vegas casino operators does not include re-closures of
casinos but does include a degree of conservatism relative to
strong current operating trends to reflect the fluid
pandemic-related risks.
DERIVATION SUMMARY
MGP's main peers are gaming REITs including Gaming and Leisure
Properties Inc. (GLPI) and VICI. All three REITs have comparable
credit metrics and share a leverage target range of 5.0x-5.5x.
GLPI's higher IDR reflects its all unsecured capital structure and
more diversified tenant/asset base relative to MGP.
KEY ASSUMPTIONS
-- Annual master lease rent of $860 million following the
amendments as part of the VICI transaction.
-- VICI assumes MGP's existing debt.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Diversification of the tenant base;
-- An improvement in MGP's liquidity through moving towards a
more unsecured capital structure and greater staggering of the
maturity schedule;
-- A financial policy with a net leverage target of less than
5.0x may offset the lack of progress with respect to the above
sensitivities;
-- Any positive rating pressure would be weighed against the
considerations relating to MGM's credit profile and Fitch's
view on the linkage between MGM and MGP. Based on MGP's weak
to-moderate linkage to MGM, Fitch is unlikely to rate MGP more
than two notches above MGM's IDR.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Net leverage sustaining above 5.5x. Fitch has tolerance for
leverage to exceed 5.5x for larger acquisitions provided MGP
deleverages below 5.5x within 12-24 months;
-- A downgrade of MGM's IDR may have negative rating pressure on
MGP. Based on MGP's weak-to-moderate linkage to MGM, Fitch is
unlikely to rate MGP more than two notches above MGM's IDR.
Fitch will update the combine company's rating sensitivities upon
resolution of the RWP and there is greater clarity on the pro forma
capital structure.
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
MGP's stand-alone liquidity and liability management
characteristics relative to investment-grade U.S. equity REITs has
and is expected to improve further upon the combination. MGP repaid
its senior secured term loan in early 2020 and its wholly owned
recourse debt is mostly unsecured now except for a $1.35 billion
senior secured revolver.
MGP has been a regular equity issuer. MGP executed a number of
secondary equity offerings since its 2016 IPO with roughly $3.4
billion raised through Dec. 31, 2020. In April 2019, MGP entered
into an "at-the-market-offering" program. MGP upsized its revolver
to $1.35 billion from $600 million in 2018--sized appropriately
larger than any single unsecured maturity. MGP's maturity schedule
is also improved but remains somewhat high relative to REIT peers
with about 18% of its total wholly owned debt maturing in 2024
($1.05 billion unsecured notes).
ISSUER PROFILE
MGM Growth Properties is a gaming-oriented REIT with MGM Resorts
International as its sole tenant.
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch proportionally consolidates the BREIT JV's debt and equity
into MGP's leverage metrics.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
DEBT RATING RECOVERY PRIOR
---- ------ -------- -----
MGM Growth Properties LLC LT IDR BB+ Rating Watch On BB+
MGM Growth Properties LT IDR BB+ Rating Watch On BB+
Operating Partnership LP
senior unsecured LT BB+ Rating Watch On RR4 BB+
senior secured LT BBB- Rating Watch On RR1 BBB-
MOUTHPEACE DENTAL: Wins Cash Collateral Access
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The U.S. Bankruptcy Court for the Northern District of Georgia,
Atlanta Division, has authorized Mouthpeace Dental, LLC to use cash
collateral on a final basis in accordance with the budget, with a
15% variance.
The Debtor requires the use of cash collateral to fund critical
operations of its business.
The Debtor has made these stipulations with respect to Bank of
America, N.A.:
a) A Project Finance Term Loan Agreement dated June 14, 2013
from Syretta L. Wells, DDS, was assigned to the Bank in the
original principal amount of $450,000;
b) A Final Disbursement, Change and Repayment Schedule Loan
Documents dated March 30, 2015 between Guarantor and Mouthpeace
Dental, LLC, modifying the PFT Loan Agreement, inter alia, provided
for a loan in the original principal amount of $561,300;
c) A Forbearance Agreement dated December 17, 2018, was
entered into between the Bank and the Obligors; and
d) Loan Modification Agreement dated June 21, 2019, was
entered into between the Bank and the Obligors whereby, inter alia,
the maturity date of the loan was extended to June 1, 2020.
Pursuant to the Loan Documents, the Debtor stipulates that all
indebtedness owed by the Debtor to the Bank is secured by a blanket
lien on the collateral set forth in the Loan Documents.
The Debtor was in default under the Loan Documents because certain
Events of Default occurred under the Loan Documents.
As of December 3, 2020, the Bank is owed principal in the amount of
$540,754, plus accrued interest of $25,875, together with interest
accruing thereafter at the default rate of 11.6% per annum, fees in
the amount of $3,353 and other fees and charges as provided by the
Loan Documents.
The U.S. Small Business Administration has asserted that the Debtor
is a borrower on SBA Loan #9745347809 with a principal amount of
$93,000.
Unless an extension is otherwise agreed to in writing by the Debtor
and the Bank, the Debtor is permitted to use Cash Collateral during
the period beginning July 13 and ending on the earliest to occur
of (i) any order of the court modifying said authority, or (ii) the
confirmation of the Debtor's Plan of Reorganization, or (iii)
termination of the Debtor's use of Cash Collateral.
As adequate protection for the Debtor's use of cash collateral, the
Bank is granted, a replacement security interest in all assets
created or acquired by Debtor after the Petition Date of the same
nature in which the Bank held a pre-petition lien.
Commencing on August 11, the Debtor will make payments to the Bank
in the amount of $1,500 per week and continuing on Wednesday of
each week thereafter during the Cash Collateral Period. Beginning
with the payment due on November 3, the amount of the Adequate
Protection Payments will increase to $1,800 per week.
A copy of the order and the Debtor's budget is available at
https://bit.ly/3lv2CHH from PacerMonitor.com.
The Debtor projects total inflows of $422,800 and total outflows of
$431,670 from July to December.
About Mouthpeace Dental
Mouthpeace Dental, LLC filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code (Bankr. N.D. Ga. Case No.
20-72289) on Dec. 3, 2020. Syretta Wells, sole shareholder, signed
the petition. In the petition, the Debtor disclosed total assets
of up to $50,000 and total liabilities of up to $1 million.
Judge Barbara Ellis-Monro oversees the case.
Rountree Leitman & Klein, LLC and Carroll & Company, CPAs, P.C.
serve as the Debtor's legal counsel and accountant, respectively.
Bank of America, N.A., as lender, is represented by:
Beth E. Rogers, Esq.
Rogers Law Offices
100 Peachtree Street, Ste. 1950
Atlanta, GA 30303
Tel: 770-685-6320
Fax: 678-990-9959
Email: brogers@berlawoffice.com
MR. COOPER GROUP: S&P Ups ICR to B+ on Stable Financial Performance
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S&P Global Ratings raised its issuer credit and unsecured debt
ratings on Mr. Cooper Group Inc. (COOP) and subsidiaries to 'B+'
from 'B'. The outlook is stable. The recovery rating on the debt is
'4', reflecting its expectation of average recovery (30%-50%,
rounded estimate: 35%) in a simulated default scenario.
S&P said, "Our upgrade is driven by a continued decline in leverage
as measured by debt to equity, stronger-than-expected though
normalizing earnings from the originations segment, relatively
stable forbearance requests, adequate liquidity, and no senior note
maturities until 2027. We expect revenues from originations will
confront obstacles from decreasing volume and compressing gain on
sale margins in the second half of the year and particularly in
2022. During the second quarter, the company benefited from a gain
of $487 million on the sale of its title business. The company also
reached an agreement to sell its reverse mortgage business. We
believe this simplifies the business model while boosting
liquidity, which we expect the company will use to invest in
servicing and origination."
For the six months ended June 30, 2021, COOP reported earnings
before taxes from the origination segment of $569 million, compared
with $591 million in the same period last year. The first six
months of 2020 were uneven, as gain on sale margins increased from
2.34% in the first quarter to 4.62% in the second quarter because
of the pandemic, even though originations remained stable. Since
peaking in the second quarter of 2020, gain on sale margins
continued to compress, with a margin of 2.10% reported for the
second quarter of 2021. While this was expected, funded volume has
been stronger than forecasted so far in 2021. The company
originated $47 billion in funded volume through the first six
months of 2021, compared with $23 billion a year earlier.
As of the quarter ended June 30, 2021, COOP's average servicing
unpaid principal balance was $647 billion, of which forward
mortgage servicing rights (MSR) were $291 billion, and subservicing
was $356 billion. While amortization and mark-to-market adjustments
have largely driven generally accepted accounting principles (GAAP)
profitability in this segment, S&P excludes these from our measure
of EBITDA.
Operational revenue has been rising, driven by growth in unpaid
principal balance (UPB) and revenue earned as measured by basis
points. Since troughing at $571 billion in average forward UPB and
18.8 basis points in operational revenue in the third quarter of
2020, the company generated 27.4 basis points of operational
revenue on $647 billion of average UPB in the second quarter of
2021. S&P expects UPB growth to continue as the company targets $1
trillion in total servicing assets. The company has already
completed acquisitions of $24 billion in UPB of MSRs through the
first six months of 2021, compared with $1.5 billion in UPB of MSRs
for 2020.
S&P expects continued risk to MSR valuations from prepayments.
Prepayment rates for the first six months of 2021 were 28.4%, and
the company's average coupon is 3.8% for its agency servicing
portfolio, and 4.4% for its non-agency portfolio, compared with an
average 30-year fixed mortgage rate currently well below 3%. The
company has sufficient liquidity to continue making meaningful
purchases in the bulk market if opportunities warrant, which should
help support EBITDA if origination headwinds unfold, which we
expect.
This week, the company announced a repurchase of common and
preferred shares from KKR for total consideration of approximately
$396 million. After this transaction, KKR will no longer hold any
equity interests in the company. Pro forma for this transaction,
the company's debt to tangible equity is 0.9x.
As of July 18, 2021, approximately 3.6% of COOP's customers were on
a forbearance plan, down from a peak of 7.2%. COOP's total
committed advance and MSR financing capacity is $2.7 billion, of
which $1.9 billion was unused as of June 30, 2021.
The stable outlook over the next 12 months reflects S&P Global
Ratings' expectation that debt to tangible equity will remain below
1.0x, and the company will maintain adequate liquidity, despite
forbearance levels. Although debt to EBITDA is below S&P's expected
range, it expects continued normalization in origination revenues
will result in increasing leverage toward our 3.0x to 4.0x
longer-term expectation.
S&P said, "We could lower the ratings over the next 12 months if we
expect debt to tangible equity to rise well above 1.0x on a
sustained basis. We could also lower the ratings if debt to EBITDA
rises above 4.0x on a sustained basis. Although it is less likely,
we could also lower our ratings if the company discloses
significant regulatory or compliance failures that affect its
operating profitability or market position.
"We could raise the ratings over the next 12 months if we expect
debt to EBITDA to be sustainably below 3.0x and debt to tangible
equity below 1.0x on a sustained basis. An upgrade would also
depend on the company maintaining adequate liquidity and its
existing market position, as well as not disclosing any significant
regulatory or compliance failures."
NATIONAL FINANCIAL: Seeks Chapter 11 Bankruptcy Protection
----------------------------------------------------------
Ashley Portero of South Florida Business Journal reports that a
Palm Beach Gardens auto lending platform, National Financial
Holdings, backed by more than $150 million in venture capital, is
seeking bankruptcy protection.
National Financial Holdings, which does business as Finova
Financial, was among the region's top investment capital recipients
in 2017 after securing $102.5 million in a financing round led by
New York-based CoVenture Holdings Co.
It previously raised $52.5 million in a seed round supported by
Silicon Valley venture capital firms 500 Startups, MHS Capital and
Silicon Valley Bank. NerdWallet co-founder Jake Gibson, Funding
Circle co-founder Sam Hodges and Al Hamra Group, an investment firm
headquartered in the United Arab Emirates, also participated in the
technology's seed financing.
Finova Financial has debts owed to several unsecured creditors,
including a $10,857 claim from investor Silicon Valley Bank and a
$10,600 claim from Atlanta-based KyckGlobal, a cloud-based
integrated payments platform.
The fintech provides fast, online loans by allowing consumers to
use the equity in their vehicles as security. According to its
website, Finova Financial aims to serve underbanked markets that do
not have access to financial services from traditional banks.
The court filings did not detail the events that led to the Chapter
11 filing, which gives a business the ability to reorganize and pay
creditors over time. Dana Kaplan, an attorney at Kelley, Fulton &
Kaplan, the law firm representing Finova Financial in the case,
declined to comment.
About National Financial
Founded in 2015 as Finova Financial, National Financial Holdings,
Inc. operates a vehicle title loan financing company in Palm Beach
Gardens, Florida.
The company filed a Chapter 11 petition (Bankr. S.D. Fla. Case No.
21-16989) on July 17, 2021. On the Petition Date, the Debtor
estimated up to $50,000 in assets and $1,000,000 to $10,000,000 in
liabilities. Derek Acree, chief legal officer, signed the
petition.
Judge Erik P. Kimball was assigned to the case before Judge Mindy
A. Mora took over.
Kelley, Fulton & Kaplan, P.L. serves as the Debtor's counsel.
NEW HAPPY FOOD: Gets Cash Collateral Access Thru Aug 26
-------------------------------------------------------
The U.S. Bankruptcy Court for the Northern District of Georgia,
Atlanta Division, has authorized New Happy Food Company and
affiliates to use cash collateral on an interim basis through
August 26, 2021, the date of the final hearing.
The Debtors require the use of Cash Collateral to fund critical
operations of their businesses.
The Debtors are allegedly borrowers on certain loans with The
Avanza Group, LLC, Bridge Funding Cap, LLC, CFG Merchant Solutions,
LLC, EBF Holdings, LLC d/b/a Everest Business Funding, Fox Capital
Group, Inc., Highbridge Funding, LLC, Hunter Caroline Holdings,
LLC, IOU Central Inc., KYF Global Partners, Merchant Advance, LLC,
Metro City Bank, NewCo. Capital Group, Prosperum Capital Partners,
LLC, River Capital Partners, LLC, Toyota Industries
Commercial Finance, Inc., and the U.S. Small Business
Administration, which assert security interests in certain of the
Debtors' personal property. River Capital Partners, LLC asserts
that it is not a lender and that its transaction with the Debtors
was not a loan, but rather, a purchase and sale of a specified
percentage of gross receipts, the receipts purchased are not
property of the bankruptcy estate, and that the transaction was a
secured transaction subject to Article 9 of the Uniform Commercial
Code.
The Debtors assert that they did not authorize the vast majority of
the loans from the Lenders, many of which were obtained via forgery
without the Debtors' knowledge or authority, and the Debtors
dispute liability to many of the Lenders.
Prior to a Final Hearing or further order from the Court, the
Debtors are permitted to use Cash Collateral to pay the rent
payments only in an amount equal to the respective monthly mortgage
payments owed to Metro City Bank and provided for in the Budgets.
Ms. You Nay Khao, the Debtors' owner, will pay Metro City Bank, the
regular monthly payments under a U.S. Small Business Administration
promissory note dated November 7, 2016, in the original principal
amount of $320,000 executed by New Happy and Ms. Khao in favor of
Metro City Bank, which amount as of the entry of the Order is
$2,563, but is subject to adjustment per the terms of the note. The
first payment in the amount of $5,127 will be due within 2 business
days from the entry of the order and will be applied to the July
and August 2021 payments. All other payments will be made on the
first calendar day of the month commencing on September 1, 2021.
Nothing contained in the order will affect the obligations of NHC
and First Khao Enterprises LLC in connection with a U.S. Small
Business Administration promissory note dated May 15, 2015, in the
original principal amount of $815,000 executed by NHC and First
Khao Enterprises LLC in favor of Metro City Bank, which regular
monthly payment amount as of the entry of the Order is $4,752.87
but is subject to adjustment per the terms of the Note.
As adequate protection for the Debtors' use of cash collateral, the
Lenders and any other secured creditor, to the extent they hold
valid, properly-perfected liens, security interests, or rights of
setoff as of the Petition Date under applicable law, are granted
valid and properly-perfected liens on all property acquired by the
Debtors after the Petition Date that is the same or similar nature,
kind, or character as each party's respective pre-petition
collateral, to the extent of any diminution in the value of the
Cash Collateral, except that no such replacement liens will attach
to the proceeds of any avoidance actions under Chapter 5 of the
Bankruptcy Code. The Adequate Protection Liens will be deemed
automatically valid and perfected upon entry of the Order.
To the same extent of the validity and priority of the pre-petition
liens granted to Metro City Bank, the Debtors grant Metro City
Bank, a continuing, additional replacement lien and security
interests in and to all of the now existing or hereafter arising or
after-acquired assets of the respective Debtors relating to the
Cash Collateral and/or Metro City Bank collateral securing Note 1
and/or Note 2.
A copy of the order and the Debtors' budget is available at
https://bit.ly/3jpeUyw from PacerMonitor.com.
The Debtors project $1,716,160.40 in net receipts and
$1,624,532.96 in total expenses from July 19 to October 18.
About New Happy Food Company
New Happy Food Company operates a grocery store in Atlanta,
Georgia. Its affiliate, NHC Food Company Inc. operates a warehouse
business.
The Debtors sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. N.D. Ga. Case No. 21-54898) on June 29,
2021. In the petition signed by You Nay Khao, owner, the Debtors
disclosed $500,000 in assets and $10 million in liabilities.
William A. Rountree, Esq., at Rountree, Leitman & Klein, LLC is the
Debtors' counsel.
OROVILLE HOSPITAL: S&P Lowers ICR to 'B+', Outlook Negative
-----------------------------------------------------------
S&P Global Ratings lowered its long-term rating to 'B+' from 'BB'
on the City of Oroville, Calif.'s series 2019 revenue bonds, issued
for Oroville Hospital. The outlook is negative.
"The lower rating reflects significant deterioration in Oroville's
financial profile, particularly unrestricted reserves, through the
six-month interim ended May 31, 2021, coupled with an already
highly leveraged balance sheet," said S&P Global Ratings credit
analyst Blake Fundingsland.
Unrestricted reserves, excluding Medicare Advance Payment (MAP)
funds, have declined to 22 days' cash on hand and 8% reserves to
long-term debt as of May 31, 2021. While management expects
underlying reserves to improve by year-end, assuming cash flow
continues to improve, and does not expect any near-term covenant
violations as it relates to balance sheet metrics given access to
MAP funds and a $20 million line of credit, S&P expects reserves
will still be a limiting rating factor at around 2020 fiscal year
end levels. In addition, there are near term execution risks as
Oroville's new hospital opens next year that could make it
challenging for Oroville to attain its 60 days' cash on hand
covenant beyond 2021.
The 'B+' rating reflects a highly leveraged balance sheet and high
debt burden, tied to new tower construction that will open in Fall
2022, the weak reserves mentioned above, and a limited service
area. Factors supporting the credit include positive operations in
fiscal 2020, aided significantly by provider relief funds, and
improving quarter by quarter operating performance through interim
2021. "We view Oroville's business position as also good given its
healthy market share and with some diversity of revenues through a
larger lab business that services a larger area than the hospital
service area," Mr. Fundingsland added.
POGO ENERGY: Seeks to Hire Ferguson Braswell as Legal Counsel
-------------------------------------------------------------
Pogo Energy, LLC seeks approval from the U.S. Bankruptcy Court for
the Northern District of Texas to hire Ferguson Braswell Fraser
Kubasta P.C. to serve as legal counsel in its Chapter 11 case.
The firm's services include:
(a) advising the Debtor of its rights, powers, and duties
under the Bankruptcy Code;
(b) performing all legal services that may be necessary in the
administration of the bankruptcy case and the Debtor's business;
(c) advising the Debtor concerning, and assisting in, the
negotiation and documentation of financing agreements and debt
restructuring;
(d) reviewing the nature and validity of agreements relating
to the Debtor's interests in property and advising the Debtor of
its corresponding rights and obligations;
(e) advising the Debtor concerning preference, avoidance,
recovery, or other actions that it may take to collect and to
recover property for the benefit of the estate and its creditors
whether or not arising under Chapter 5 of the Bankruptcy Code;
(f) preparing legal documents and reviewing all financial
reports to be filed in the bankruptcy case;
(g) advising the Debtor concerning, and preparing responses
to, applications, motions, complaints, pleadings, notices and other
papers that may be filed and served in its bankruptcy case;
(h) counseling the Debtor in connection with the formulation,
negotiation and promulgation of a plan of reorganization and
related documents;
(i) working with and coordinating efforts among other
professionals to guide their efforts in the overall framework of
the Debtor's reorganization;
(j) working with professionals retained by other parties in
interest in the bankruptcy case to structure a consensual plan of
reorganization or other resolution for the Debtor; and
(k) performing other necessary legal services for the Debtor.
Rachael Smiley, Esq., and Alex Campbell, Esq., the primary
attorneys responsible for handling the case, will charge $500 per
hour and $425 per hour, respectively.
Ferguson received $100,000 as a retainer from the Debtor.
Ms. Smiley disclosed in a court filing that her firm is a
"disinterested person" as the term is defined in Section 101(14) of
the Bankruptcy Code.
The firm can be reached through:
Rachel L. Smiley, Esq.
Ferguson Braswell Fraser Kubasta P.C.
2500 Dallas Parkway, Suite 600
Plano, TX 75093
Tel: 972-378-9111
Email: rsmiley@fbfk.law
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.
PPLUS TRUST LTD-1: S&P Raises Class A/B Certs Ratings to 'B+'
-------------------------------------------------------------
S&P Global Ratings raised its ratings on the PPLUS Trust Series
LTD-1 $25 million class A and B certificates to 'B+' from 'B' and
removed them from CreditWatch with positive implications, where it
had placed them on July 15, 2021.
S&P said, "Our ratings on the certificates are dependent on our
rating on the underlying security, Bath & Body Works Inc's (BBWI's)
$350 million 6.95% debenture due March 1, 2033 ('B+'/NM).
"The rating actions reflects the Aug. 4, 2021, raising of our
rating on the underlying security and its subsequent removal from
CreditWatch with positive implications, where we had placed it on
July 15, 2021."
As noted in the BBWI analysis, the upgrade reflects BBWI's solid
performance, with consistent sales growth, high profitability, and
expanding digital presence. BBWI has established a consistent track
record of generating positive comparable store and digital growth
while maintaining strong profitability, reflecting solid execution
of its merchandising, marketing, and digital strategies. As a
result, revenue has grown about 80% and operating profit has more
than doubled since fiscal year 2015.
S&P may take subsequent rating actions on this transaction if its
rating on the underlying security changes.
Environmental, social, and governance (ESG) credit factors for this
credit rating change:
-- Health and safety.
REALPAGE INC: Fitch Affirms 'B' LongTerm IDR, Outlook Stable
------------------------------------------------------------
Fitch Ratings has affirmed RealPage, Inc. Long-Term Issuer Default
Rating (IDR) at 'B'. Fitch has also affirmed RealPage's 'B+'/'RR3'
first-lien secured term loan and revolver and applied the rating to
its add-on fungible first-lien term loan. Fitch has also affirmed
RealPage's 'CCC+'/'RR6' 2L term loan. The Rating Outlook is Stable.
The rating and Outlook reflect Fitch's continued appraisal of
RealPage's market position, growth profile and sizable margin
expansion potential balanced by very high financial leverage, which
is modestly higher with the addition of the proposed incremental
term loan financing to acquire G5 Search Marketing, Inc.,
subsequent to Fitch's initial rating in February.
KEY RATING DRIVERS
G5 Marketing Acquisition: G5 will provide enhanced marketing
technology, improved automation and entry to the storage market.
The bulk of anticipated cost synergies will be realized on the
RealPage side. RealPage has acquired over 50 businesses, honing a
track record for acquiring small franchises, integrating them with
the RealPage platform and growing them, providing approximately a
third of 20%+ revenue CAGR over a decade and a half. A modest
increase in leverage by Fitch's calculation will be offset through
adj. EBITDA growth afforded through synergy realization and
reasonable growth assumptions in line with the corporate average.
Defensible Market Position: RealPage customers managed 19.7 million
residential units as of Dec. 31, 2020, about 30% of the 65 million
units in the U.S. Publicly traded peer Appfolio Inc. (which
generally serves smaller clients) represented 5.4 million units
under management as of Dec. 31, 2020. RealPage acquired a leading
SMB property management software provider Buildium (for $580
million) used by 17k customers to manage approximately 2 million
units in 2019. As the system of record for property managers, akin
to an ERP, RealPage's solution is difficult (and often not
economically justified) to replace. Renewal rates are consistently
in the high 90s, 90% of revenue is subscription based, and
contracts are generally multi-year with mid-single digit price
escalators.
Significant Growth Opportunities: Total revenue has grown in excess
of 20% CAGR from 2007 reflecting organic unit growth of 3% to 5%
(1-3pts above market), contractual price increases, rent payment
inflation, and increased down market penetration which is growing
in the 20% to 30% range. Secular shifts towards increased
electronic payments and digital leasing and resident management
practices (which the overall sector has been slow to adopt but
accelerated in 2020 due to COVID-19) will likely drive RealPage's
growth profile going forward. Management believes it has only
penetrated 6% of the $19 billion TAM. Fitch conservatively assumes
RealPage's growth over the rating horizon will be high-single
digit.
Meaningful Margin Expansion: RealPage along with Thoma Bravo have
identified run-rate cost synergies of which Fitch assumes 100% of
headcount-related and 50% of non-headcount related are achievable,
plus those related to the G5 acquisition, resulting in a meaningful
lift to the company's pro forma 2021 adjusted EBITDA margin.
Through operating leverage, reduced product investment and M&A,
Fitch believes RealPage's adjusted EBITDA margin can expand another
6 points. For reference, RealPage has expanded its margin by about
21 points since 2007.
Aggressive Financial Structure: Pro forma gross leverage is
expected to be 8.6x at YE 2021, including Fitch's synergy
calculation and excluding ACV adjustment and contracted backlog,
both of which are meaningful. Including the adjustments yields a
starting leverage of 7.4x. Through growth and margin expansion,
Fitch anticipates leverage will decline to 5x to 6x over the rating
horizon, absent further leveraging transactions. While leverage
remains high for the 'B'-rating, RealPage's very strong recurring
revenue, vertical orientation and mission critical position and
strong cash flow generative power as a result (FCF margin of 20% to
30% pre-LBO financing) supports higher financial leverage.
DERIVATION SUMMARY
RealPage compares with vertical software and data analytics
providers. A direct competitor and rated peer is CoStar Group, Inc.
(BBB/Stable), which is approximately 40% larger in revenue for YE
2020 but has a similar growth and margin profile. CoStar's leverage
at Dec. 31, 2020 was expected to be 1.9x, which is significantly
lower than RealPage's pro forma leverage as a result of its
take-private transaction. Fitch expects RealPage's leverage to
decline to between 5.5x and 7x over the rating horizon. While not
direct peers, RealPage's financial and business profile is
comparable to vertical software providers that have been taken
private including Project Angel Holdings, LLC (d/b/a MeridianLink,
B/Stable), QBS Parent, Inc. (d/b/a Quorum Business Solutions,
B/Negative) and Ellie Mae, Inc. (WD, last rating B+/Negative).
RealPage competes directly with a host of software providers to the
real estate sector including property management software, cloud
services, and software-enabled value-added services (e.g. applicant
screening, CRM, marketing, Internet listing services and payment
processing). In addition to CoStar, direct competitors include
Yardi, Inc., Entrata, Inc. MRI Software LLC and AppFolio. RealPage
has the largest end-market coverage spanning single/multifamily,
affordable, senior, student, military, HOA and vacation. RealPage's
software comprises approximately 30% of nationwide units under
management.
RealPage's pro forma credit protection metrics compare similarly to
'B' rating category technology companies (many of which are
vertical and horizontal software providers and that have been taken
private). Gross leverage is expected to average approximately 7x
over the rating horizon which is 0.5x above the 'B' rating category
average and 0.9x above the median. RealPage's CFO-capex/total debt
with equity credit average over the forecast period is about 2 -3
percentage points above the software 'B' rating category average
and median values. Finally, RealPage's FFO/interest coverage metric
of 2.6x is in line with the 2.7x category average and 2.5x category
median. From a business profile perspective, RealPage's revenue
scale is about 6% higher than the 'B' rating category average (and
140% higher than the category median.) 'B-' rating category average
and median top line are 35% and 75% lower, respectively, reflecting
businesses that are typically much smaller in scale. Fitch expects
RealPage to grow about three percentage points faster than the 'B'
rating category average. Additionally, Fitch expects RealPage's
margin to operate well above the typical 'B' rating category
indirect peer.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- High single-digit 2021 revenue growth reflecting normalization
in property management and resident services contribution, a
rebound in leasing & marketing, and asset optimization revenue
in line to modestly higher than 2020. Fitch assumes the first
three On Demand sub-segments continue to grow robustly at
modestly lower levels (1-2 points) below 2021 levels while
asset optimization growth increases by about 1 point annually.
-- Realization of 100% of planned headcount-related synergies and
50% of non-headcount with 1-2 points of margin expansion
annually based upon operating leverage.
-- Capital expense plus capitalized software development costs
between 5.0% and 5.5% of revenue annually.
-- Fitch assumes FCF is used for tuck-in M&A, modest debt
reduction, or shareholder return; large-scale M&A would be
incremental to the rating case and considered in conjunction
with a planned de-leveraging path.
KEY RECOVERY RATING ASSUMPTIONS
The recovery analysis assumes RealPage would be reorganized as a
going-concern in bankruptcy rather than liquidated. Fitch has also
assumed a 10% administrative claim. RealPage's Fitch-calculated
going concern (GC) EBITDA is assumed to be $350 million,
approximately 10% above estimated LTM March 31, 2021 EBITDA of $302
million plus G5 and other acquired businesses and assets. The
company has been growing its revenue scale and benefiting from
operating leverage, as reflected in the recent expanding EBITDA
margins. Fitch believes the company can achieve GC EBITDA at least
same as LTM adjusted for planned cost actions associated with the
take-private transaction. An enterprise value (EV) multiple of 7.0x
EBITDA is applied to the GC EBITDA to calculate a
post-reorganization EV.
The choice of this multiple considered the following factors the
historical bankruptcy case study exit multiples for technology peer
companies which ranged from 2.6x to 10.8x. Of these companies, only
three were in the software sector: Allen Systems Group, Inc.;
Avaya, Inc.; and Aspect Software Parent, Inc., which received
recovery multiples of 8.4x, 8.1x and 5.5x, respectively. The highly
recurring nature of RealPage's revenue and mission-critical nature
of the product support the high end of the range.
We arrive at an EV of $2.5 billion. After applying the 10%
administrative claim, an adjusted EV of $2.2 billion is available
for claims by creditors. Fitch assumes a full draw on RealPage's
proposed $250 million revolver. The resulting recovery implies a
51% to 70% recovery on the 1L, with the incremental term loan,
consistent with a 'RR3' recovery rating and 0% recovery on the 2L,
consistent with a 'RR6' recovery rating. Fitch notches up the 1L to
'B+' and notches down the 2L to 'CCC+' as a result.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Total debt with equity credit to operating EBITDA expected to
be sustained below 5.5x;
-- CFO-capex/total debt with equity credit expected to be
sustained above 7%;
-- Expectation of sustained growth and/or margin outperformance
to Fitch's expectation.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Total debt with equity credit to operating EBITDA expected to
be sustained above 7x;
-- CFO-capex/total debt with equity credit expected to sustained
below 3%;
-- FFO interest coverage expected to be sustained below 2.5x;
-- Material decline in market share or emergence of significant
competitor or disruptor;
-- Failure to demonstrate timely progress towards expected margin
expansion.
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: RealPage had approximately $185 million in cash
at March 31, 2021 pro forma to the subsequent transactions. The
company also has access to an undrawn $250 million revolving credit
facility. Liquidity will be further supported by an additional $150
million to $275 million of annual FCF.
ISSUER PROFILE
RealPage, Inc., founded in 1998 and headquartered in Richardson,
TX, is a leading global provider of software and data analytics to
the real estate industry. Thoma Bravo acquired RealPage on April
22, 2021.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
RKJ HOTEL: Unsecured Creditors' Recovery Hiked to 100% in Plan
--------------------------------------------------------------
RKJ Hotel Management, LLC, a Nevada limited liability company,
submitted a Disclosure Statement to accompany Amended Plan of
Reorganization dated August 3, 2021.
The Plan provides for the continuation of the business of Debtor,
that being the ownership and operation of the Delta Marriott Hotel
at the Detroit Metropolitan Airport. To achieve this, the Plan
proposes to address defaults under the RSS Loan Documents through a
restructuring of the RSS Loan Documents, continue as a Marriott
franchisee, and pay over time the arrears to the Holders of its
Allowed Insider Unsecured Claims and Allowed General Unsecured
Claims more than they would receive in a liquidation under Chapter
7.
Class 4 is comprised of Priority Unsecured Claims. Each Allowed
Priority Unsecured Claim, if any, shall, in full and final
satisfaction of such Allowed Priority Unsecured Claim, be paid in
Cash payments 100% of the Allowed General Unsecured Claim with
interest at the Bank of America published prime rate plus 50 basis
points from the Effective Date in effect as of the Effective Date
as follows: (a) 10% on the Unsecured Creditor Initial Distribution
Date; and (b) the balance of 90% in 12 equal monthly installments
commencing on the first (1st) Business Day that is 30 days
following the Unsecured Creditor Initial Distribution Date.
Class 5 is comprised of all Insiders with General Unsecured Claims.
Except to the extent that a Holder of an Allowed Insider Unsecured
Claim agrees to less favorable treatment, each Holder or an Allowed
Insider Unsecured Claim, shall, in full and final satisfaction of
such Allowed Insider Unsecured Claim, be paid in Cash payments 100%
of the Allowed Insider Unsecured Claim in 48 monthly installments
commencing 30 Business Days following the last payment to Holders
of Allowed General Unsecured Claims.
Class 6 is comprised of General Unsecured Claims. Except to the
extent that a Holder of an Allowed General Unsecured Claim agrees
to less favorable treatment, each Holder of an Allowed General
Unsecured Claim, shall, in full and final satisfaction of such
Allowed General Unsecured Claim, be paid in Cash payments 100% of
the Allowed General Unsecured Claim with interest at the Federal
Judgment Interest Rate 0f 0.07% per annum from the Petition Date in
effect as of the Petition Date as follows: (a) 10% on the Unsecured
Creditor Initial Distribution Date; and (b) the balance of 90% in
24 equal monthly installments commencing on the first Business Day
that is 30 days following the Unsecured Creditor Initial
Distribution Date.
In any event, if a General Unsecured Claim is Allowed after the
Effective Date, such Allowed General Unsecured Claim shall be paid
in full by the latest of (a) 2 years following the Unsecured Claims
Initial Distribution Date, and (b) 14 Business Days following such
General Unsecured Claim being deemed an Allowed General Unsecured
Claim.
Class 7 is comprised of Equity Interests. On the Effective Date,
the Holders of Equity Interests of Debtor shall retain all their
legal interests.
A full-text copy of the Disclosure Statement dated August 3, 2021,
is available at https://bit.ly/3yw9Cre from PacerMonitor.com at no
charge.
Attorneys for Debtor:
Gerald M. Gordon, Esq.
Mark M. Weisenmiller, Esq.
Garman Turner Gordon LLP
7251 Amigo Street, Suite 210
Las Vegas, NV 89119
Tel: (725) 777-3000
Fax: (725) 777-3112
Email: ggordon@gtg.legal
mweisenmiller@gtg.legal
About RKJ Hotel Management
RKJ Hotel Management, LLC sought protection under Chapter 11 of the
Bankruptcy Code (Bankr. D. Nev. Case No. 21-10593) on Feb. 9, 2021.
Jeff Katofsky, member and authorized representative, signed the
petition. In the petition, the Debtor disclosed assets of between
$10 million and $50 million and liabilities of the same range.
Judge Natalie M. Cox oversees the case. The Debtor tapped Garman
Turner Gordon, LLP as its legal counsel.
RUBY TUESDAY: Equity Holders Lost $18 Million Claim in Chapter 11
-----------------------------------------------------------------
Law360 reports that a pair of equity holders that declined to
participate in Ruby Tuesday's 2017 take-private transaction lost
out on the chance to share in unsecured recoveries in the company's
Chapter 11 case, with a Delaware judge ruling Wednesday, August 4,
2021, their $18 million in stock appraisal claims are not entitled
to a recovery.
In a 10-page opinion, U.S. Bankruptcy Judge John T. Dorsey said
shareholders Powell Anderson Capital LP and Quadre Investments LP
only had claims in the bankruptcy case because of their status as
pre-bankruptcy shareholders of Ruby Tuesday Inc. , requiring them
to be subordinated behind other secured and unsecured claims.
About RTI Holding Company
RTI Holding Company, LLC and its affiliates develop, operate, and
franchise casual dining restaurants in the United States, Guam, and
five foreign countries under the Ruby Tuesday brand. The
company-owned and operated restaurants (i.e. non-franchise) are
concentrated primarily in the Southeast, Northeast, Mid-Atlantic
and Midwest regions of the United States.
On Oct. 7, 2020, RTI Holding Company and its affiliates sought
protection under Chapter 11 of the Bankruptcy Code (Bankr. D. Del.
Lead Case No. 20-12456). At the time of the filing, the Debtors
disclosed assets of between $100 million and $500 million and
liabilities of the same range.
Judge John T. Dorsey oversees the cases.
Pachulski Stang Ziehl & Jones LLP and CR3 Partners LLC serve as the
Debtors' legal counsel and financial advisor respectively. Epiq
Corporate Restructuring LLC is the claims, noticing and
solicitation agent and administrative advisor.
On Oct. 26, 2020, the U.S. Trustee for the District of Delaware
appointed an official committee of unsecured creditors in the
chapter 11 cases. The committee tapped Kramer Levin Naftalis &
Frankel LLP and Cole Schotz P.C. as counsel and FTI Consulting,
Inc. as financial advisor.
SEVERIN ACQUISITION: Moody's Hikes CFR to B2 Amid Recent IPO
------------------------------------------------------------
Moody's Investors Service upgraded Severin Acquisition, LLC's (dba
"PowerSchool") corporate family rating to B2, from B3, and its
probability of default rating to B2-PD, from B3-PD. Moody's
confirmed the ratings on PowerSchool's senior secured first-lien
debt, which includes a roughly $825 million term loan due 2025 and
a $289 million revolving credit facility expiring in 2023, at B2.
Moody's also assigned a speculative grade liquidity rating of
SGL-2, reflecting Moody's assessment of the company's liquidity as
good. The outlook was revised to stable from ratings under review
for upgrade.
Proceeds from PowerSchool's July 28th IPO have been used to retire
all of its $365 million senior secured second-lien term loan.
Moody's has withdrawn the Caa2 ratings for that instrument.
Governance was a key driver of the rating since PowerSchool is now
a publicly traded company.
These rating actions conclude Moody's review of PowerSchool's
ratings that was initiated on April 26, 2021.
Issuer: Severin Acquisition, LLC
Corporate family rating, upgraded to B2, from B3, previously on
watch for upgrade
Probability of default rating, upgraded to B2-PD, from B3-PD,
previously on watch for upgrade
Senior Secured 1st Lien Bank Credit Facility, confirmed at B2
(LGD3), previously on watch for upgrade
Senior Secured 2nd Lien Bank Credit Facility, withdrawn, from Caa2
(LGD5), previously on watch for upgrade
Speculative grade liquidity rating, assigned SGL-2
Outlook, changed to stable, from rating under review
RATINGS RATIONALE
The upgrade of the CFR to B2 from B3 is driven by debt repayment
from the net proceeds of PowerSchool's IPO and Moody's expectation
for lower financial leverage now that PowerSchool is publicly
traded. Cash from the IPO is being used almost exclusively for debt
repayment, including the retirement of a $320 million, first-lien
bridge loan assumed for a late-March 2021 acquisition, all of a
$365 million second-lien term loan and, possibly, a small amount of
outstanding revolver loans. The resultant more than 40% decline in
funded debt leads to a Moody's-adjusted debt-to-EBITDA leverage of
about 7.2 times, pro-forma as of March 31, 2021, from more than
10.0 times pre-IPO. Moody's anticipates financial leverage will
improve to about 5.5 times by the end of this year, more in keeping
with the B2 CFR. Pressuring the ratings are the continued heavy
influence, after the IPO, from private equity sponsors Vista Equity
Partners ("Vista") and Onex Corporation ("Onex"), who retain an
evenly split 78% ownership in PowerSchool. The substantial
reduction in debt from IPO proceeds and the somewhat more modest,
transparent financial policy expected going forward, are offset by
the continued large majority PE ownership. Moody's therefore views
governance considerations as a key driver of this ratings action,
contributing both positive and negative influences.
Through multiple acquisitions executed since affiliates of Vista
acquired PowerSchool's core student information systems business
from Pearson Plc in mid-2015, PowerSchool continues to execute on
its plan of building an end-to-end offering of educational
enterprise resource planning ("ERP"), student information systems
("SIS"), and learning management systems ("LMS") software
applications for the K through 12 market. Moody's believes the
company's outsized revolver points to the likelihood of a continued
active acquisition program. PowerSchool has performed well through
the COVID-19 pandemic, as customers have sought its help setting up
distance learning capabilities. Diminished future acquisition
activity would lessen integration expenditures and improve earnings
quality as the company translates a large amount of EBITDA
adjustments into sustainable increases in earnings and
profitability. Risks posed by scale and financial leverage are
offset by a highly recurring, subscription-based revenue model, and
Moody's view that PowerSchool's SIS and ERP platforms have become
increasingly necessary for schools' administrative and educational
functionality.
Moody's expects PowerSchool to show improved free cash flow and
higher cash balances through 2021, underscoring the assigned SGL-2
liquidity rating. Balance sheet cash has been modest, and the
company relies significantly on its (recently enlarged) $289
million revolver, but largely for satisfying the pronounced
seasonality of an academic year, since cash flow from operations
runs negative in the first half of a calendar year, and positive in
the second. The large revolver may point to the company's appetite
for acquisitions. Moody's expects free cash flow as a percentage of
debt to reach a high-single digits range over the next 12 to 18
months, which is good for the B2 CFR.
The confirmation of the B2 ratings assigned to the senior secured
first-lien term loan and revolver reflects PowerSchool's B2-PD PDR
and a loss given default assessment of LGD3. The B2 instrument
ratings are the same as the B2 CFR as the rated debt would
represent the preponderance of PowerSchool's debt claims at
default.
The stable outlook reflects Moody's expectation for healthy,
low-double-digit percentage revenue growth over the next 12 to 18
months. Growth plus successful acquisition integration should drive
debt-to-EBITDA to below 6.0 times quickly (barring additional
debt-financed acquisitions). Moody's also expects free cash flow to
improve to a high-single-digits range as a percentage of debt.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if Moody's expects PowerSchool's
debt-to-EBITDA leverage will be sustained below 5.0 times; if
acquisitions are integrated successfully (requiring lesser earnings
adjustments); if the size and scope of the business, as well as
profits, expand, and; if the company, as a public entity,
demonstrates balanced financial strategies.
The ratings could be downgraded if: leverage holds above 6.0 times
over the next 12 to 18 months; if liquidity deteriorates,
reflective, perhaps, of an unsuccessful acquisition strategy, or;
if planned synergy execution fails to translate into improved
EBITDA and positive free cash.
With Moody's-expected 2021 revenues of about $600 million,
pro-forma for the early 2021 acquisition of certain business lines
of Hobsons, PowerSchool provides SIS, ERP and LMS software that
facilitates the management, operations, communications, and
teaching functionality for kindergarten through twelfth-grade
educational institutions largely in North America. Vista Equity
Partners acquired PowerSchool's core SIS business from Pearson Plc
in 2015, and has executed many acquisitions since then. PowerSchool
Holding, Inc. (NYSE: PWSC) undertook an IPO in July 2021.
The principal methodology used in these ratings was Software
Industry published in August 2018.
SIRIUS XM: Moody's Gives Ba3 Rating on New $2BB Unsecured Notes
---------------------------------------------------------------
Moody's Investors Service assigned a Ba3 rating to Sirius XM Radio
Inc.'s proposed 5 and 10-year senior unsecured notes offering
totaling $2 billion. Sirius XM's Ba3 Corporate Family Rating,
Ba3-PD Probability of Default Rating, Ba3 senior notes rating and
stable outlook remain unchanged.
Net proceeds from the transaction and cash on the balance sheet
will be used to repay $1 billion of the 4.625% senior notes due
July 15, 2024 and the $1 billion outstanding of 5.375% senior notes
due July 15, 2026. The new senior notes will rank pari passu with
Sirius XM's existing senior notes and will be guaranteed on a
senior unsecured basis by the same operating subsidiaries that
guarantee the company's current senior notes.
Following is a summary of the rating action:
Assignment:
Issuer: Sirius XM Radio Inc.
$750 Million Senior Unsecured Notes due 2026, Assigned Ba3 (LGD4)
$1.25 Billion Senior Unsecured Notes due 2031, Assigned Ba3
(LGD4)
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
Moody's expects that the refinancing transaction will be leverage
neutral since Sirius XM's total debt quantum and financial leverage
will remain unchanged with pro forma total debt to EBITDA staying
at roughly 3.7x (as calculated by Moody's at June 30, 2021).
Moody's views the transaction favorably given the extension of the
2024 and 2026 debt maturities. Upon repayment of the senior notes,
Moody's will withdraw the ratings.
Sirius XM's Ba3 CFR is buttressed by moderate leverage for the
rating category, high EBITDA margins in the 30%-35% range (as
calculated by Moody's) and roughly 60% free cash flow conversion.
It also considers the company's sizable self-pay in-vehicle
satellite radio subscriber base, unique mix of content and curated
channels, Moody's forecast for a recovery in domestic new light
vehicle volume, and Sirius XM's increasing penetration in the used
car segment. Sirius XM derived revenue diversification and scale
benefits from the 2019 acquisition of Pandora, which helped extend
the company's presence to in-home and mobile entertainment markets
in North America, and enabled the creation of new curated content.
The acquisition of Stitcher in 2020 deepens Sirius XM's position in
the fast-growing podcasting space. With the combination of its
satellite radio service, music streaming platform and podcasting
assets, Sirius XM has the largest addressable audience across all
digital audio categories in North America giving it more ways to
monetize across listeners, advertisers, publishers and creators.
The rating is constrained by Sirius XM's historically aggressive
financial policy, which includes funding sizable share repurchases
with debt and most of its free cash flow generation. Moody's
expects that Sirius XM will continue to opportunistically use debt
and free cash flow to fund buybacks and/or engage in M&A activity.
Despite debt levels that have risen nearly each year, financial
leverage ratios along with other credit metrics have remained
well-positioned for the rating category. The company's majority
ownership by Liberty Media Corporation poses event risk given
Liberty's track record for M&A and shareholder-friendly
transactions. Other challenges include slowing subscriber and
revenue growth coupled with high monthly churn in Sirius XM's core
satellite radio business as a result of growing competition from
digital audio providers expanding into the vehicle market; and
declines in Pandora's monthly ad-supported listener hours at a time
when rising capex levels and dividends will increasingly consume
free cash flow generation.
Sirius XM's business model remained fairly resilient during the
COVID-19 pandemic given the company's satellite radio
subscription-based revenue model, which accounts for nearly 80% of
revenue.
The stable outlook reflects Moody's view that Sirius XM's business
model and operating profitability will continue to remain solid
during the gradual economic recovery following the recession and
generate robust free cash flow. Potentially higher leverage rising
modestly above the 4x area (Moody's adjusted) due to moderating
EBITDA and/or higher debt levels is also factored in the stable
outlook.
Moody's expects Sirius XM to maintain very good liquidity, even
during periods of economic weakness and increased satellite
construction spend. Liquidity is supported by access to a $1.75
billion unrated senior secured RCF maturing June 2023 and free cash
flow projected this year in the range of $1.4 billion to $1.6
billion aided by revenue visibility from its subscription-based
model. Cash balances pro forma for the transaction and the 3.875%
Notes Redemption are expected to be $18 million as of June 30,
2021.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade could occur if management demonstrates a commitment to
balance debt holder returns with those of its shareholders, which
would include sizing share repurchases within annual free cash flow
generation and limiting debt-funded buybacks. Moody's would also
need assurances that Sirius XM will operate in a financially
prudent manner consistent with a higher rating. Upward ratings
pressure could also transpire if the company stabilized key
operator performance metrics in its core satellite radio business
and Pandora subsidiary, and demonstrated a track record for
sustaining total debt to EBITDA below 3.5x (including Moody's
standard adjustments) and free cash flow to debt above 12% (Moody's
adjusted) even during periods of satellite construction.
The ratings could be downgraded if: (i) Moody's expects total debt
to EBITDA will be sustained above 4.5x (including Moody's standard
adjustments); (ii) free cash flow generation falls below targeted
levels as a result of subscriber losses due to the weak economy,
customer migration to competing media services or functional
problems with satellite operations; or (iii) Sirius XM experienced
weakened liquidity below expected levels as a result of increased
share repurchases, dividends, capital spending or acquisitions.
The principal methodology used in these ratings was Media published
in June 2021.
Headquartered in New York, NY, Sirius XM Radio Inc., is a
wholly-owned operating subsidiary of Sirius XM Holdings Inc., which
provides satellite radio services in the United States and Canada
through a fleet of six owned satellites. The company creates and
broadcasts commercial-free music; premier sports talk and live
events; comedy; news; exclusive talk and entertainment; and
comprehensive Latin music, sports and talk programming. Sirius XM
services are available in vehicles from every major car company in
the US, and programming is also available online as well as through
applications for smartphones and other internet connected devices.
Sirius XM is publicly traded and a controlled company of Liberty
Media Corporation, which owns roughly 77% of its outstanding common
shares. Revenue totaled approximately $8.4 billion for the twelve
months ended June 30, 2021.
SQUARE INC: Fitch Affirms 'BB' LT IDR & Alters Outlook to Pos.
--------------------------------------------------------------
Fitch Ratings has affirmed the Long-Term Issuer Default Rating
(IDR) of Square Inc. at 'BB'. The rating Outlook has been revised
to Positive from Stable.
The Positive Outlook largely reflects robust revenue and EBITDA
growth trends in the core business as well as consideration of a
modest incremental contribution from the pending, equity-financed
Afterpay Limited acquisition. Fitch views Afterpay as a strategic
fit and is encouraged by the all-equity financing component, though
acknowledges there are new risks related to the deal, including
risks related to integration, execution and consumer financing.
The ratings affect approximately $5.7 billion of debt outstanding
at June 2021, not including undrawn capacity on the company's
revolver and PPP facility.
KEY RATING DRIVERS
Afterpay Acquisition: Fitch views the pending $29 billion Afterpay
acquisition as credit neutral, as the all equity financing will not
change the leverage profile and should further accelerate growth,
but there is integration risk and incremental consumer financing
risk. Strategically, Fitch believes the deal fits within Square's
strategy and adds value to both its merchant and consumer
customers. Afterpay nearly doubled its revenue in each of the past
two fiscal years to $693 million as of June 2021. The deal will
further bolster Square's already strong revenue growth and could be
beneficial to EBITDA in the years ahead once the platform scales
further. The deal is scheduled to close in 1Q 2022.
High Growth Fintech Leader: Fitch believes Square is well
positioned to capitalize on secular growth areas in payments and
consumer financial services. It is among the market leaders in
small business point of sale (POS) hardware-software solutions and
has quickly become one of the U.S. leaders in peer-to-peer payments
and crypto trading. The company witnessed tremendous growth over
the past decade, with TTM gross profit as of June 2021 of $3.7
billion versus $65 million in 2012. Gross profit is a key metric to
focus on given the bitcoin trading business has grown significantly
since 2018 and has skewed reported revenue, as bitcoin transactions
are reported on a gross basis.
Beneficiary of Secular Payments Shift: Square operates at the
intersection of an industry shift away from cash to electronic
forms of payment, which Fitch believes will provide a continued
revenue tailwind in the coming years. According to Mastercard, card
usage is approximately 56% of global personal consumption
expenditures (PCE) and will continue to grow as a portion of
overall spending in the years ahead. Square serves the physical and
omni-channel retail POS market as well as digital app-based
payments that continue to benefit from a broader adoption of
digital and mobile-based payments. Increased reliance by consumers
on electronic payments will drive revenue growth in the coming
years.
Profitability Below Peers: Fitch views Square's profitability as a
limiting factor for the IDR, as the company continues to invest
heavily to grow its Seller and Cash App businesses. Fitch does not
believe Cash App is materially profitable at the EBITDA level but
will scale over time. Square publicly guided for material opex
growth in 2021. However, Fitch believes high incremental margins
typical for payments businesses could improve profit generation
materially over time. Fitch estimates Square could generate EBITDA
approaching $2 billion by 2024 (potentially sooner depending on
growth investments), or materially above near break-even levels in
2015-2016.
High, but Evolving Leverage: Gross leverage is high following
pandemic-driven EBITDA pressures and incremental debt taken on in
the past 12-18 months. Fitch expects leverage to improve materially
over the next few years and could trend toward 3x or below via a
combination of EBITDA growth and potentially lower debt with
convertible debt conversions. However, leverage could remain high
if there were a material share price pullback given a lower
likelihood of convertibles being converted. Importantly, Square
operates with net cash currently although M&A could change this
over time.
Significant Financial Flexibility: Fitch views Square as having
high financial flexibility given: (i) positive FCF generation since
2017 (average 78% annual EBITDA conversion), (ii) $6.5 billion of
cash and investments, (iii) a $500 million senior unsecured
revolver, and (iv) a market cap of more than $120 billion that
further affords it various avenues to external financing. The
company also has nearly $300 million of investments in bitcoin as
of June 2021. The pending Afterpay acquisition is expected to be
largely equity financed, although it may finance up to 1% of the
deal price (implies approximately $290 million) with cash.
Competitive, Fragmented End Markets: Fitch views Square's end
markets as huge and fragmented but also highly competitive. The
Seller payments business continues to evolve as more U.S.
merchants, particularly smaller ones that were Square's core
customers historically, adopt card and electronic forms of payment.
Square's Seller business faces competition not only from newer,
software-centric POS providers such as Toast, Clover and others,
but also from legacy merchant acquirers & hardware POS providers,
and e-commerce providers such as PayPal and Stripe. Its Cash App
segment is also very competitive, with Square vying for share from
banks, large tech providers, stock brokerage firms, among others.
Ownership Concentration: Fitch views founder and Chairman/CEO Jack
Dorsey's ownership and control position, with 51% of voting power,
as meaningful to the rating. The company has a very successful
track record, but the voting control is an important credit
consideration for investors. There is also key-person risk if Mr.
Dorsey were to leave or be removed from the company. The CEO is
also CEO of another public company he co-founded, Twitter, Inc.
Fitch views the ownership concentration as a factor in ESG
considerations, with a '4' rating that could negatively affect the
IDR over time.
DERIVATION SUMMARY
Square's ratings reflect its strong market position in each of its
segments, historic growth profile, positive FCF generation in
recent years, significant cash on the balance sheet (net cash) and
secular growth in each of its main businesses. Offsetting
attributes include a lower margin prole versus fintech industry
peers and gross leverage that is higher versus industry leaders.
The scale of Square's business (EBITDA) and more limited
diversification versus certain higher rated peers are also limited
factors to the rating.
PayPal Holdings, Inc. (A-/Stable) and Fidelity National Information
Services, Inc. (BBB/Positive) are among the leading U.S. and global
fintech issuers and each operates with lower leverage, materially
higher EBITDA and margins, and a track record of strong, growing
FCF. PayPal also has a stronger market position in its core
e-commerce payment solutions business. NCR Corporation (BB-/Stable)
has relatively similar revenue and FCF scale to Square and is
expected to operate at similar gross leverage levels in the coming
years, although Square has a materially stronger growth prole and
has net cash. Relative to these issuers and other fintech, payments
and software-oriented peers rated by Fitch, Fitch believes the IDR
is well positioned at the 'BB' category.
KEY ASSUMPTIONS
-- Revenue grows by high-30% CAGR through 2024, driven by
improved consumer spending patterns post pandemic, organic
growth in Cash App, and M&A contribution;
-- EBITDA margin expansion is limited due to significant
projected opex investments. Reported margins are also skewed
lower due to the material scale of bitcoin revenue, which is
reported on a gross transaction value basis;
-- Fitch assumes Square will build cash in the absence of
material acquisitions. Fitch forecasts modest M&A spend,
although the company has significantly more flexibility
currently to do deals;
-- Fitch assumes debt and leverage both decline through 2024 as
the company realizes significant EBITDA growth and gross debt
declines with the PPP facility rolling off and portions of the
in-the-money convertible notes outstanding are assumed to be
converted.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- EBITDA scales to $750 million or higher, while gross leverage
remains within Fitch's bands outlined below;
-- Gross leverage, Fitch-defined as total debt with equity
credit/operating EBITDA, sustained below 4.25x;
-- FCF margins expected to be sustained at 6.5% or above.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Gross leverage sustained above 5.25x;
-- FCF margins expected to be sustained near 3% or below;
-- Significant fundamental shifts in the business that negatively
affect revenue, EBITDA and/or FCF;
-- A significantly lower level of financial flexibility could
also lead Fitch to reassess the rating.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Robust Liquidity: Square has strong and stable access to liquidity
in various forms, particularly given its net cash position. Fitch
expects its liquidity will improve in the coming years as the
business further scales and margins and FCF improve over time. As
of June 2021, the company had the following key sources of
liquidity: (i) $6.5 billion of cash and investments; (ii) an
undrawn $500 million senior unsecured revolver facility; and (iii)
strong FCF generation that ranged from $230 million-$400 million
from 2018-2020 ($231 million in first-half 2021).
The company also has significant access to the capital markets,
given its high market cap and multiple convertible debt issuances
in recent years. It also has investments that could be monetized if
needed, but that Fitch has not included in readily available cash
nor net leverage calculations including: (i) approximately $281
million of bitcoin investments ($220 million cost basis) as of June
2021; and (ii) $87 million of equity ownership in non-public
companies.
Debt Structure: Since its IPO, Square relied upon the convertible
debt market for most of its external capital needs. The company had
$2.9 billion of convertible note issuances outstanding at June
2021, but approximately $1.9 billion of these notes are materially
"in-the-money" and Fitch projects could convert into equity in the
next few years. Fitch expects the conversion could be settled via
new Class A shares. The company also has an undrawn $500 million
senior unsecured revolver (May 2023 expiration) and $2 billion of
senior unsecured notes that mature in 2026 and 2031.
In addition to its revolver and convertibles notes, Square has $824
million outstanding on a facility related to the Paycheck
Protection Program (PPP) that Fitch considers as debt for leverage
calculations. Square Capital has acted as a facilitator of loans to
small businesses since April 2020, whereby it borrows from the
Federal Reserve via its PPP facility (capacity up to $1 billion)
and provides loans to merchants that meet certain requirements.
The PPP was created to provide funding for businesses affected by
the coronavirus pandemic. Merchant borrowers may qualify for debt
forgiveness in certain instances. Via the PPP facility, subsidiary
Square Capital provides two- or five-year loans at a 1% fixed
interest rate, while Square pays 0.35% on the facility. Since
inception, Square has retained some of these loans while selling
others to institutional third-party investors. These loans are
non-recourse to Square, secured by a pledge of PPP loans held by
Square Capital, and the Small Business Administration (SBA) has
guaranteed the loans. Square still bears some risk if it fails to
meet certain requirements.
ISSUER PROFILE
Square, Inc. was founded in 2009 and is one of the largest and
fastest growing U.S. fintech companies. The company historically
focused on hardware and software checkout solutions for merchants,
but has since evolved into being a provider of omni-channel
payments solutions and app-based personal financial services.
ESG Considerations
Square has an ESG Relevance Score of '4' for Governance Structure
due to its significant control and ownership by CEO and Chairman
Jack Dorsey. Mr. Dorsey has been a key force behind the company's
success historically and will likely remain so in the years ahead,
which presents both key-person risk as well as risks of misaligned
incentives between shareholder and debt holder interests. This
factor was a consideration, in conjunction with other factors, used
in Fitch's rating analysis that could have a negative impact over
time to the overall IDR.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. ESG issues are credit
neutral or have only a minimal credit impact on the entity, either
due to their nature or the way in which they are being managed by
the entity.
SUNNOVA ENERGY: Moody's Assigns First Time B3 Corp. Family Rating
-----------------------------------------------------------------
Moody's Investors Service assigned a first-time B3 corporate family
rating, B3-PD probability of default rating and SGL-3 Speculative
Grade Liquidity (SGL) rating to Sunnova Energy International Inc.
(Sunnova), a residential solar energy company. Concurrently,
Moody's also assigned a B1 senior unsecured rating to Sunnova
Energy Corporation's (an intermediate holding company) senior
unsecured notes maturing in 2026. The $350 million of unsecured
notes are guaranteed by the Sunnova Energy International Inc., the
parent company, and Sunnova Intermediate Holdings LLC, a wholly
owned subsidiary of Sunnova Energy Corporation. The outlook of both
entities is stable.
Assignments:
Issuer: Sunnova Energy Corporation
Gtd Senior Unsecured Regular Bond/Debenture, Assigned B1 (LGD2)
Issuer: Sunnova Energy International Inc.
Corporate Family Rating, Assigned B3
Probability of Default Rating, Assigned B3-PD
Speculative Grade Liquidity Rating, Assigned SGL-3
Outlook Actions:
Issuer: Sunnova Energy Corporation
Outlook, Assigned Stable
Issuer: Sunnova Energy International Inc.
Outlook, Assigned Stable
RATINGS RATIONALE
"Sunnova operates in the residential solar industry and is still a
young and evolving enterprise," said Toby Shea VP - Senior Credit
Officer. "We see Sunnova growing at a fast pace, with its B3
corporate family rating reflecting a high level of spending to
support this growth, weak cash flow coverage metrics and high debt
leverage," added Shea. Nevertheless, Sunnova has been one of the
more successful companies in the sector in recent years, with a
credit profile supported by a diverse, high credit quality
residential customer base under long-term contracts through either
lease, loan and purchased power arrangements.
Sunnova's rating reflects the emerging risks associated with a
residential solar company undergoing rapid growth in a relatively
new, evolving and competitive industry. The company has an
extensive network of local dealers and warehouse credit facilities
to facilitate solar project development, helping it to manage
demand on its working capital. To date, Sunnova has accumulated a
sizable portfolio of residential customers that provide a
company-estimated net gross contracted customer value of $3.5
billion. The stability and ultimate improvement in Sunnova's credit
profile is largely dependent on the continued execution of its thus
far successful business model.
The ratings also consider the company's high debt leverage, most of
which has been incurred since 2017 to support this growth. The B1
rating on the senior notes reflects the probability of default of
Sunnova, as reflected in the B3-PD probability of default rating
and the ranking of the notes in the capital structure ahead of $575
million of convertible notes (unrated) at the Sunnova parent
company. The organization has borrowed heavily against its
contracted cash flow through the issuance of $1.8 billion of
project debt. Its operating cash flow and free cash flow are both
strained by high spending related to marketing and sales, financial
transaction costs, and solar installation costs.
The residential rooftop solar industry has expanded dramatically
over the past ten years, and Sunnova is currently one of the
largest players. The dominant drivers of this growth are federal
tax credit incentives, state-level incentives, which are often
embedded in net energy metering regulation, the declining cost of
rooftop solar installations, and anxiety about power outages.
Even though federal tax credits for residential solar are currently
scheduled to be phased out by the end of 2023, they have been
extended three times in the past and Moody's credit analysis
incorporates a view that the tax credits will be extended again.
Although some states have reduced the incentives embedded in net
metering regulation, solar companies are responding by driving down
costs.
Moody's see customers increasingly buying batteries in combination
with their solar installations as a guard against grid outages,
particularly in Puerto Rico, Florida, Texas, and California.
Despite the substantial additional cost associated with battery
storage, 28% of Sunnova's solar systems were originated with
battery attachments in the second quarter of 2021.
In the dealer network model, Sunnova partners with local dealers
who originate, design, and install customers' solar energy systems
and energy storage systems on Sunnova's behalf. The dealers are
responsible for taking the project to completion and self-funding
the construction cost. Sunnova pays the dealer for the construction
cost upon certain construction milestones. Upon taking possession
of the system, Sunnova has three non-recourse warehouse facilities
with a total maximum borrowing capacity of up to $1.0 billion that
can be used to finance the dealer payments. There is some risk and
concentration in these dealer relationships, but Sunnova appears to
have maintained relationships with many dealers that have lasted
several years and Moody's incorporate a view that these
relationship will continue in a constructive and supportive
manner.
Sunnova further limits demand on its capital by periodically
securitizing portfolios of operating projects as they grow to
scale. Normally, the securitization structure includes a high-yield
tranche, and the company is able to borrow more from the
securitization vehicle than what it invests in the projects. Though
Sunnova does not plan to include a high-yield tranche in its future
securitization transactions, securitization proceeds will still
likely cover most if not all of its upcoming project investments.
Sunnova has so far securitized cash flows from ten portfolios of
operating projects. Even though these historic securitizations have
performed at or better than expectations, the residual cash flow
available for distribution to Sunnova has been relatively small
because all but two prior to July 2021 have included a high yield
tranche. Sunnova does, however, receive significant cash flow
outside of and not pledged to the securitization structures. These
unpledged cash flows are primarily comprised of uncontracted
revenues from state solar incentives and operating projects that
not yet been securitized as well as capacity fees, service-only
fees and other cash sources.
Because of the large growth-related expenditures and financial
transaction costs, Sunnova exhibits weak cash flow coverage metrics
with negative CFO pre-WC of $42 million and $66 million in 2019 and
2020, respectively, translating to a consolidated CFO pre-WC to
debt of negative 3% in each of the past two years.
However, with most of its debt at the projects, Sunnova's corporate
debt level has been relatively modest at $40 million at FYE 2019
and $60 million at FYE 2020. Moody's estimate that if
growth-related expenditures and financial transaction costs are
removed, CFO pre-WC would have been positive at around $54 million
in 2019 and $73 million in 2020, resulting in a CFO pre-WC to debt
of 4% for both years.
Going forward, Sunnova could produce positive consolidated CFO
pre-WC to debt, even with a sharp rise in holding company debt to
$925 million following two substantial debt issuances in 2021. The
$925 million parent holding company debt is comprised of $575
million of 0.25% Sunnova convertible notes issued in May 2021 to
pre-fund a large portion of its operating expenses through 2023 and
the current issue of $350 million of unsecured notes at
intermediate holding company Sunnova Energy Corporation, which are
being issued to alleviate the need for high-yield securitization
debt over the next three years. The $350 million of unsecured notes
at the intermediate holding company are structurally senior to the
convertible notes at the parent company.
Liquidity
Sunnova's Speculative Grade Liquidity rating of SGL-3 reflects
adequate liquidity with limited internal sources of cash flow and a
high reliance on revolving warehouse loan facilities to fund high
capital expenditures. Sunnova does not have a corporate revolving
credit facility.
Because of the high level of growth-related spending and financial
transaction costs, Sunnova exhibits an operating cash flow deficit.
However, it has funded most of its operating expenses for the next
two and half years with the above mentioned issuance of $575
million of convertible debt in May 2021 and $350 million of
unsecured debt in August 2021. The company also has access to $1.0
billion of revolving warehouse facilities to supports its capital
expenditures, which are expected to be about $1.9 billion in 2021.
Sunnova could trigger an amortization event under its warehouse
facilities if, among other things, the gross default rate exceeds
0.5% for its warehouse loan portfolios or 0.75% for its warehouse
PPA and lease portfolios. Moody's believe that the company will be
able to comply with the covenants required under its warehouse
facilities.
As of June 30, 2021, Sunnova had $294 million of available
borrowing capacity under its revolving warehouse facilities and an
unrestricted cash balance of $369 million. If necessary, Sunnova
can generate alternative liquidity sources by monetizing the
residual cash flows from the securitized assets, but it will not be
able to sell the underlying projects to raise liquidity without
first paying off the securitization debt.
In terms of major debt maturities, Sunnova only has the two new
non-amortizing corporate debt issuances that were issued in 2021 --
the $575 million of convertible notes at Sunnova and the current
$350 million unsecured notes being issued at Sunnova Energy
Corporation, both due in 2026.
Outlook
Sunnova's stable outlook reflects its ability to manage the demands
of its growing residential solar portfolio and continue to develop
projects that are accretive to its long-term value and cash flow
without adversely affecting its credit profile. It also considers
Moody's expectation that the company will not issue any additional
corporate debt over the next several years and will maintain its
competitive position without sacrificing margins or residential
customer credit quality.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Factors that could lead to an upgrade
Moody's could upgrade Sunnova's ratings if it continues to exhibit
a track record of successfully executing on its capital and growth
plan, gains greater scale and maintains its competitive position,
generates additional contracted cash flow over time, maintains
corporate level debt at current levels and produces a consolidated
CFO pre-WC to debt of ratio of at least 4% on a sustained basis.
Ratings could also be upgraded if there is a material reduction of
the level of convertible notes in the capital structure.
Factors that could lead to a downgrade
Moody's could downgrade Sunnova's ratings if its investments in
growth projects fail to produce adequate long-term returns, the
company's competitive position deteriorates, or the amount of
corporate debt increases. Moody's could also downgrade Sunnova
should its CFO pre-W/C to debt not improve and remains at 0% or
below.
Company Profile
Sunnova Energy International Inc. (Sunnova) is the parent company
of one of the leading US residential solar and storage service
providers headquartered in Houston, Texas. Sunnova Energy
Corporation is an intermediate holding company of Sunnova that
holds an interest in its operating subsidiaries. The company serves
more than 162,000 residential customers as of June 30, 2021, in
more than 25 states and US territories. Sunnova receives long-term
contractual revenues from customers through power purchase
agreements (PPAs), leases, and loans.
The principal methodology used in these ratings was Unregulated
Utilities and Unregulated Power Companies published in May 2017.
SUNOCO LP: Acquisition of Terminals No Impact on Moody's Ba3 CFR
----------------------------------------------------------------
Moody's Investors Service said that Sunoco LP's (SUN, Ba3 positive)
planned acquisition of eight refined products terminals from NuStar
Energy L.P. (NuStar, Ba3 stable) and one terminal from Cato,
Incorporated (Cato, unrated) for a combined price of $255.5 million
is credit positive. However, SUN's ratings, including its Ba3
Corporate Family Rating (and B1 senior unsecured notes rating, are
not affected at this time.
Sunoco LP, headquartered in Dallas, Texas, is a master limited
partnership (MLP) that distributes motor fuels on a wholesale basis
to convenience stores, independent dealers, commercial customers
and distributors situated in over 30 states. Its general partner is
controlled by Energy Transfer, L.P.
SVXR INC: Finestone Hayes Represents Noteholders Group
------------------------------------------------------
In the Chapter 11 cases of SVXR, Inc., the law firm of Finestone
Hayes LLP provided notice under Rule 2019 of the Federal Rules of
Bankruptcy Procedure, to disclose that it is representing the
Noteholders Group.
As of Aug. 5, 2021, members of the Noteholders Group and their
disclosable economic interests are:
Amount of Claim
---------------
Grand Process Technology Corporation $1,000,000
ASE Test Limited $954,000
David Adler $500,000
Michael Wu $270,000
Scott Jewler $250,000
The McWhirter Living Trust $200,000
The Franklin/Malnekoff Trust $300,000
Remon Kaldani $100,000
Sunil Kaul $100,000
Robert Maire $100,000
The address for each listed creditor is c/o Finestone Hayes LLP,
456 Montgomery St., 20th Floor, San Francisco, CA 94104.
Counsel for the Noteholders Group can be reached at:
FINESTONE HAYES LLP
Stephen D. Finestone, Esq.
Jennifer C. Hayes, Esq.
456 Montgomery Street, 20th Floor
San Francisco, CA 94104
Tel: (415) 421-2624
Fax: (415) 398-2820
E-mail: sfinestone@fhlawllp.com
A copy of the Rule 2019 filing, downloaded from PacerMonitor.com,
is available at https://bit.ly/37rbG8k
About SVXR Inc.
SVXR, Inc. -- https://svxr.com/ -- offers high-speed inspection and
metrology technology to the semiconductor packaging industry.
SVXR sought Chapter 11 protection (Bankr. N.D. Cal. Case No.
21-51050) on Aug. 4, 2021. In the petition signed by Daniel
Trepanier, CEO & president, the Debtor estimated assets of $1
million to $10 million and debt of $10 million to $50 million.
PAUL HASTINGS LLP, led by Todd M. Schwartz, is serving as the
Debtor's counsel. OMNI AGENT SOLUTIONS is the claims agent.
THEOS FEDRO: Trustee Taps Bachecki Crom & Co. as Accountant
-----------------------------------------------------------
Janina Hoskins, the trustee appointed in Theos Fedro Holdings,
LLC's Chapter 11 case, received approval from the U.S. Bankruptcy
Court for the Northern District of California to hire Bachecki Crom
& Co., LLP as her accountant.
The firm's services include:
a. preparing tax returns, tax projections and tax analysis;
b. investigating and evaluating tax claims filed in the
Debtor's Chapter 11 case;
c. analyzing the tax impact of potential transactions, if
necessary;
d. analyzing as to avoidance issues, if necessary;
e. testifying as to avoidance issues, if necessary;
f. preparing a solvency analysis, if necessary;
g. preparing wage claim withholding computations and payroll
tax returns, if necessary;
h. serving as the trustee's general accountant.
The firm's hourly rates are as follows:
Partners $425 - $545 per hour
Senior Accountant $240 - $410 per hour
Junior Accountant $150 - $250 per hour
Bachecki Crom & Co. will also be reimbursed for out-of-pocket
expenses incurred.
Jay Crom, a managing partner at Bachecki Crom & Co., disclosed in a
court filing that his firm is a disinterested person as defined by
Section 101(14) of the Bankruptcy Code.
The firm can be reached through:
Jay D. Crom, CPA
Bachecki, Crom & Co., LLP
400 Oyster Point Blvd., Suite 106
South San Francisco, CA 94080
Phone: (415)398-3534
Fax: (415)788-0855
Email: jcrom@bachcrom.com
About Theos Fedro Holdings
Theos Fedro Holdings, LLC, a San Francisco, Calif.-based company
that provides support services to the transportation industry,
filed a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code (Bankr. N.D. Calif. Case No. 21-30202) on March 16,
2021. Philip Achilles, managing member, signed the petition. In
its petition, the Debtor disclosed $1 million to $10 million in
both assets and liabilities. Judge Dennis Montali oversees the
case.
The Law Offices of Stuppi & Stuppi serves as the Debtor's legal
counsel.
Janina M. Hoskins is the Chapter 11 trustee appointed in the
Debtor's case. Rincon Law, LLP and Bachecki Crom & Co., LLP serve
as the trustee's legal counsel and accountant, respectively.
THEOS FEDRO: Trustee Taps Rincon Law as Legal Counsel
-----------------------------------------------------
Janina Hoskins, the trustee appointed in Theos Fedro Holdings,
LLC's Chapter 11 case, received approval from the U.S. Bankruptcy
Court for the Northern District of California to hire Rincon Law,
LLP, as her legal counsel.
The firm's services include:
(a) advising the trustee regarding her duties under Section
1106 of the Bankruptcy Code;
(b) advising the trustee regarding her report and
recommendation under Section 1106(a)(5) of the Bankruptcy Code and,
if advisable, assisting in the formulation and filing of a Chapter
11 plan;
(c) advising the trustee regarding cash collateral issues;
(d) assisting the trustee in the investigation, collection
and, if appropriate, liquidation of assets of the estate;
(e) advising the trustee regarding any transfers that may be
avoidable under the provisions of the Bankruptcy Code;
(f) representing the trustee in litigation she determines is
necessary;
(g) assisting the trustee in preparing objections to claims if
requested; and
(h) attending court hearings.
The firm's hourly rates are as follows:
Charles P. Maher $550 per hour
Gregg S. Kleiner $550 per hour
Jeffrey L. Fillerup $550 per hour
Michael A. Isaacs $550 per hour
Michael Isaacs, Esq., a partner at Rincon Law, 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 through:
Michael A. Isaacs, Esq.
Rincon Law, LLP
268 Bush Street, Suite 3335
San Francisco, CA 94104
Tel: 415-996-8280
Fax: 415-680-1712
Email: cmaher@rinconlawllp.com
About Theos Fedro Holdings
Theos Fedro Holdings, LLC, a San Francisco, Calif.-based company
that provides support services to the transportation industry,
filed a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code (Bankr. N.D. Calif. Case No. 21-30202) on March 16,
2021. Philip Achilles, managing member, signed the petition. In
its petition, the Debtor disclosed $1 million to $10 million in
both assets and liabilities. Judge Dennis Montali oversees the
case.
The Law Offices of Stuppi & Stuppi serves as the Debtor's legal
counsel.
Janina M. Hoskins is the Chapter 11 trustee appointed in the
Debtor's case. Rincon Law, LLP and Bachecki Crom & Co., LLP serve
as the trustee's legal counsel and accountant, respectively.
THERMOSTAT PURCHASER III: Moody's Rates First Lien Loans 'B2'
-------------------------------------------------------------
Moody's Investors Service assigned a B2 rating to the prospective
senior secured first lien credit facilities of Thermostat Purchaser
III, Inc. (aka "Reedy Industries" or "Reedy"), including a $325
million term loan, $76 million delayed draw term loan, and $65
million revolving credit facility. In addition, Moody's assigned a
B3 Corporate Family Rating and B3-PD Probability of Default Rating
to Reedy. The outlook is stable.
The proceeds from the $325 million first lien term loan will be
used in conjunction with a $94 million second lien term loan
(unrated), management and existing ownership rollover equity, and
new cash equity from new sponsors, Partners Group (unrated), to
acquire Reedy Industries. This is the first time Moody's has
assigned ratings to Reedy Industries.
Assignments:
Issuer: Thermostat Purchaser III, Inc.
Corporate Family Rating, Assigned B3
Probability of Default Rating, Assigned B3-PD
Senior Secured 1st Lien Term Loan, Assigned B2 (LGD3)
Senior Secured 1st Lien Delayed Draw Term Loan, Assigned B2
(LGD3)
Senior Secured 1st Lien Revolving Credit Facility, Assigned B2
(LGD3)
Outlook Actions:
Issuer: Thermostat Purchaser III, Inc.
Outlook, Assigned Stable
RATINGS RATIONALE
Reedy Industries' B3 CFR reflects the company's high debt leverage,
which will be 7.8x on a pro forma basis for the transaction as of
March 27, 2021 and Moody's expects leverage to decline to 6.7x by
the end of 2021 and then 6.1x by 2022. Moody's forecast
incorporates significant revenue and EBITDA growth, largely through
multiple recent acquisitions, that will more than double the size
of the company by the end of 2021. Furthermore, margin improvement
considers ongoing initiatives, including increasing route
optimization for technicians to enable servicing more customers in
less time as well as decreasing corporate overhead costs. Demand
for Reedy's services within the commercial HVAC sector is supported
by the need for regular preventative maintenance and the eventual
retrofit and replacement of that equipment. Furthermore, demand of
HVAC products and services is inelastic due to the high cost
associated with equipment failure. Moody's rating also considers
the company's historically high customer retention, diverse end
market exposure and broad customer base.
Reedy's liquidity is expected to be good over the next 12 to 18
months and considers the company's annual positive free cash flow
of around $25 million through 2023. Liquidity is supported by the
expectation of full availability under the new $65 million revolver
over Moody's forecast horizon. The revolver is subject to a
springing maximum first lien secured leverage ratio of 9.6x that is
tested when utilization rises above 35%, which Moody's does not
expect the company to trigger over the next 12 to 18 months.
Alternative liquidity sources are limited as the majority of the
company's assets are encumbered by secured debt.
Governance considerations include Moody's expectations that Reedy
Industries will maintain an aggressive financial policy that favors
shareholders over creditors. The company has historically grown
through debt funded acquisitions, and Moody's expects this strategy
to continue. Furthermore, given the private equity ownership,
Moody's expects the company to pay dividends, possibly with
additional debt, from time to time.
The B2 rating assigned to Reedy's first lien credit facilities
(term loans and revolver) is one notch higher than the B3 CFR,
which reflects their senior position in the capital structure
relative to the second lien debt and other junior claims including
trade payables and operating leases.
The stable outlook reflects Moody's expectations of continued
stable demand for the maintenance and repair of HVAC equipment as
well as maintenance of good liquidity.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade of the rating could result from the successful
generation of organic revenue growth while increasing EBITA margins
and maintaining strong free cash flow. In addition, Reedy
Industries would need to sustain debt to EBITDA below 6.0x and
maintain conservative financial policies along with a good
liquidity profile.
A downgrade would likely result should the company experience
revenue and EBITA margin declines, financial leverage sustained
above 7.0x, or if the company experiences a weakening in its
liquidity profile. Ratings could also be downgraded if the company
accelerates its debt funded acquisition activity or undertakes a
significant shareholder return.
As proposed, the first lien term loan and revolver are expected to
provide covenant flexibility that if utilized could negatively
impact creditors. Notable terms include the following:
Incremental Facilities
Incremental debt capacity up to the greater of 100% of Reedy's pro
forma consolidated adjusted EBITDA at closing, plus unused capacity
reallocated from the general debt basket, plus unlimited amounts
subject to the closing first lien net leverage ratio plus 0.25x (if
pari passu secured).
No portion of the incremental may be incurred with an earlier
maturity than the initial term loans.
Unrestricted Subsidiary Asset Transfers
There are no express "blocker" provisions that prohibit the
transfer of specified assets to unrestricted subsidiaries; such
transfers are permitted subject to carve-out capacity and other
conditions.
Guarantee Releases
Non-wholly-owned subsidiaries are not required to provide
guarantees; dividends or transfers resulting in partial ownership
of subsidiary guarantors could jeopardize guarantees, with no
explicit protective provisions limiting such guarantee releases.
Subordination/Anti-subordination
There are no express protective provisions prohibiting an
up-tiering transaction.
The proposed terms and the final terms of the credit agreement may
be materially different.
Reedy Industries, headquartered in Deerfield, IL, is a provider of
commercial HVAC, plumbing, and building controls and solutions
serving US municipal and commercial buildings such as universities,
hospitals, churches, banks and manufacturers. For the twelve month
period ended March 27, 2021, the company generated $240 million in
revenue. Following the transaction, the company will be owned by
Partners Group, a private equity group.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
TIGER OAK: Deal on Cash Collateral Access OK'd
----------------------------------------------
The U.S. Bankruptcy Court for the District of Minnesota entered an
order approving the Sixth Stipulation for Use of Cash Collateral
that Edwin H. Caldie, Chapter 11 Trustee for Tiger Oak Media,
Incorporated, has entered into, on behalf of the Debtor, with
Choice Financial Group and the Official Committee of Unsecured
Creditors with respect to the use of cash collateral pursuant to
the budget.
As previously reported by the Troubled Company Reporter, the
parties agreed that (i) during the term of the sixth stipulation,
the Trustee will not make payments to Choice and Choice will not
divert any funds from any accounts held by the Debtor without
further order of the Court; and (ii) the Challenge Period (only as
to the Trustee) and Guaranty Challenge Period (as to the Trustee
and the Committee) will be extended through September 30, 2021.
The Court says the Stipulation is approved in its entirety and the
Trustee is authorized to perform thereunder and use cash collateral
as provided in the Stipulation and 11 U.S.C. section 363(c)(2).
A copy of the order is available for free at https://bit.ly/3joOwVA
from PacerMonitor.com.
About Tiger Oak Media
Tiger Oak Media, Incorporated, is a regional and national publisher
of books, magazines, media and events that appeal to targeted
audiences.
Tiger Oak Media sought protection under Chapter 11 of the
Bankruptcy Code (Bankr. D. Minn. Case No. 19-43029) on Oct. 7,
2019. In the petition signed by its CEO Craig Bednar, the Debtor
was estimated to have assets of less than $50,000 and liabilities
of less than $10 million.
The Hon. Michael E. Ridgway is the case judge.
The Debtor tapped Steven Nosek, Esq. and Yvonne Doose, Esq., as
bankruptcy attorneys; Lurie, LLP as accountant; and Integrated
Consulting Services, LLC as financial consultant.
The U.S. Trustee for Region 12 appointed creditors to serve on the
official committee of unsecured creditors on Oct. 22, 2019. The
committee tapped Bassford Remele, P.A., as its legal counsel, and
Platinum Management, LLC as its financial advisor.
Choice Financial Group, as Lender, is represented by Manty &
Associates, PA.
TK SKOKIE: Unsecured Creditors to be Paid in Full with Interest
---------------------------------------------------------------
TK Skokie, LLC, submitted an Amended Disclosure Statement relating
to the Plan of Reorganization dated August 3, 2021.
The Reorganized Debtor will use the income generated from its
operations to fund its obligations under this Plan. It is intended
by this Plan that the Debtor's creditors will be paid in full on
all allowed claims. Once all claims have been paid in to the extent
provided, any of the Reorganized Debtor's remaining assets will be
retained by the Reorganized Debtor.
Class 2 consists of Priority Governmental Claims. The Debtor is
currently entitled to a $205,899.30 credit toward its IRS debt
which shall be applied as of the Effective Date of this Plan.
Commencing the month following the confirmation of this Plan the
Debtor shall deposit the sum of $100,000.00 into an account
designated for payments to be made to Class 2 Creditors. Commencing
the month following the confirmation of this Plan the Debtor shall
commence monthly payments of $7,224.16 into that same account for
payment to the Class 2 claim(s) which amount is sufficient to
ensure the payment of the balance of said claims in full, including
interest, penalties, and other charges imposed by law thereon,
within 5 years after the Petition Date.
Class 3 consists of Other Government Unit Claims. The Class 3
claims will be paid in full, with 2 % interest. Once the Class 2
Creditors have been paid, the Debtor shall continue making monthly
payments of $7,224.16 into its designated account for payment to
creditors. For the sake of economy, commencing the fourth month
following the date that Class 2 Claims have been satisfied the
Debtor will make quarterly payments to the Class 3 claimants, pro
rata, until all such claims are paid in full.
Class 4 consists of General Unsecured Claims. The Class 4 claims
will be paid in full, with 2% interest. Once the Class 2 Creditors
have been paid, the Debtor shall continue making monthly payments
of $7,224.16 into its designated account for payment to creditors.
For the sake of economy, commencing the fourth month following the
date that Class 2 Claims have been satisfied the Debtor will make
quarterly payments to the Class 4 claimants, pro rata, until all
such claims are paid in full.
Payments under the Plan will be funded from income the Debtor
generates in connection with its business operations. Once all
Claims have been paid to the extent provided herein, any and all of
the Reorganized Debtor's remaining assets will be retained by the
Reorganized Debtor.
A full-text copy of the Amended Disclosure Statement dated August
3, 2021, is available at https://bit.ly/3jlP0M8 from
PacerMonitor.com at no charge.
Attorney for the Debtor:
Timothy C. Culbertson
ARDC No. 6229083
P.O. Box 56020
Harwood Heights, Illinois 60656
Tel: (847) 913-5945
E-mail: tcculb@gmail.com
About TK Skokie
TK Skokie, LLC, owns and operates a restaurant and bar in Skokie,
Illinois. It sought Chapter 11 protection (Bankr. N.D. Ill. Case
No. 19-33898) on Nov. 29, 2019, listing assets and liabilities of
less than $1 million. Timothy C. Culbertson, Esq., at the LAW
OFFICES OF TIMOTHY C. CULBERTSON, is the Debtor's counsel.
TOWN & COUNTRY: Carlson Dash Represents Jordan, Workinger
---------------------------------------------------------
In the Chapter 11 cases of Town & Country Partners, LLC, the law
firm of Carson Dash, LLC submitted a verified statement under Rule
2019 of the Federal Rules of Bankruptcy Procedure, to disclose that
it is representing Jordan & Morgan Estates, LLC and Sage
Workinger.
Carlson Dash has been employed to represent the Creditors, whose
addresses are listed below, in the Chapter 11 case of Town &
Country Partners, LLC.
Jordan & Morgan Estates, LLC
826 Old Mountain Rd NW
Kennesaw, GA 30152
Sage Workinger
893 Vanderbilt Beach Road
Naples, FL 34108
Jordan & Morgan Estates, LLC and Sage Workinger both have claims
related to the Debtor's breach of a settlement agreement between
the parties. The settlement agreement arose out of a case pending
in Cook County brought by Jordan & Morgan Estates and Sage
Workinger against, among others, the Debtor based on the fraudulent
transfer of certain real estate.
The Creditors have been fully advised with respect to Carlson
Dash's concurrent representation as set forth herein and each such
Creditor has agreed to such concurrent representation.
Carlson Dash does not own, nor has it ever owned, any claim against
or interest in the Debtor.
The Firm can be reached at:
CARLSON DASH, LLC
Martin J. Wasserman, Esq.
216 S. Jefferson St., Suite 504
Chicago, IL 60661
Telephone: (312) 382-1600
E-mail: mwasserman@carlsondash.com
A copy of the Rule 2019 filing, downloaded from PacerMonitor.com,
is available at https://bit.ly/3lCX7qr
Town & Country Partners LLC sought Chapter 11 protection (Bankr.
N.D. Ill. Case No. 21-08430) on July 14, 2021. The Debtor
estimated assets of $10 million to $50 million and debt of $1
million to $10 million as of the bankruptcy filing. The Hon.
Jacqueline P. Cox is the case judge. BENJAMIN LEGAL SERVICES PLC,
led by Kevin Benjamin, is the Debtor's counsel.
VALUE VILLAGE: Case Summary & 13 Unsecured Creditors
----------------------------------------------------
Debtor: Value Village Thrift Stores, Inc.
d/b/a Value Village
6626 W. Camelback Road
Glendale, AZ 85301
Business Description: Value Village --
http://www.valuevillageaz.com-- offers
a complete line of men's, women's and
children's fashions, household and
miscellaneous items, TV's, computers,
furniture, jewelry, shoes, and more.
Chapter 11 Petition Date: August 6, 2021
Court: United States Bankruptcy Court
District of Arizona
Case No.: 21-06112
Judge: Hon. Paul Sala
Debtor's Counsel: Harold E. Campbell, Esq.
HAROLD CAMPBELL, PC
910 W. McDowell Road
Phoenix, AZ 85007
Tel: 480-839-4828
Fax: 480-897-1461
E-mail: heciii@haroldcampbell.com
Estimated Assets: $0 to $50,000
Estimated Liabilities: $1 million to $10 million
The petition was signed by Ross O. Kloeber, III as president.
A full-text copy of the petition containing, among other items, a
list of the Debtor's 13 unsecured creditors is available for free
at PacerMonitor.com at:
https://www.pacermonitor.com/view/QRBBDVA/VALUE_VILLAGE_THRIFT_STORES_INC__azbke-21-06112__0001.0.pdf?mcid=tGE4TAMA
VICI PROPERTIES: Fitch Puts 'BB' IDR on Watch Positive
------------------------------------------------------
Fitch Ratings has placed the ratings of VICI Properties Inc.,
subsidiaries VICI Properties L.P. and VICI Properties 1 LLC and
their debt on Rating Watch Positive (RWP) following the announced
acquisition of MGM Growth Properties (MGP).
The RWP reflects the combined company's improved credit profile
relative to standalone VICI's 'BB' Issuer Default Rating (IDR),
notwithstanding the likely temporary increase in net leverage above
VICI's 5.0x-5.5x target to fund the acquisition. Pro forma VICI
will have reduced tenant concentration, improved asset quality
following the addition of MGP's Las Vegas Strip properties and
market-leading regional casinos, further progress toward a fully
unencumbered asset pool and a well staggered maturity schedule. The
combined company's strengthened credit profile and 5.0x-5.5x net
leverage target will likely be consistent with a low
investment-grade IDR over the long term, with the initial funding
mix influencing the timing of positive rating actions.
Fitch expects to resolve the Rating Watch around the time of the
closing, which may take place more than six months in the future.
KEY RATING DRIVERS
Strategically Sound Merger: VICI announced a $17 billion
acquisition of MGP, including the assumption of MGP's $5.7 billion
in debt. The combined company will be among the largest triple-net
REITs with an estimated EBITDA of $2.5 billion. Fitch views the
merger to be strategically sound in that it alleviates some
considerations that previously restrained the two companies'
standalone credit profiles, such as tenant and asset
diversification. The combination should also improve pro forma
VICI's relative access to the capital markets and has limited
integration risk given the triple-net leased nature of the
portfolios.
Achievable Deleveraging Plan: Fitch expects VICI's leverage will
return back to its long-term financial policy despite the likely
increase in leverage at the onset of the transaction. Deleveraging
will result from a combination of annual contractual increases in
rental income (primarily fixed) and whether retained cash flow post
merger is directed toward acquisitions or debt repayment.
Improved Capital Markets Access: Fitch expects the combined company
will be one of the largest REITs in terms of enterprise value,
EBITDA generation and unsecured debt outstanding, which should
provide advantages that are a modest credit positive. These
advantages primarily relate to lower unsecured debt capital costs,
relatively stronger banking relationships, and lower corporate
expenses relative to revenues or total assets.
Greater Financial Flexibility: Fitch expects the transaction will
advance the combined company's ambition to have a fully
unencumbered asset pool. Should this be achieved, VICI will have
significantly more financial flexibility given the sizeable pool of
unencumbered assets, which includes a number of assets in Las Vegas
(e.g. Mirage, Excalibur, Luxor).
Historically, gaming REITs' contingent liquidity in the form of
mortgage debt or asset sales is not as robust as more traditional
REIT asset classes. Gaming properties are a specialty property type
that appeals to a smaller universe of institutional real estate
investors and lenders than core commercial property sectors. Some
gaming companies have accessed debt secured by specific assets in a
time of stress. There are also gaming assets in some CMBS
transactions, but Fitch views the through-the-cycle availability of
capital from this avenue as weaker than secured mortgages from
balance sheet lenders, including life insurance companies, and to a
lesser extent banks. Positively, nontraditional owners have
increasingly been purchasing Las Vegas real estate (e.g. private
equity), which led to cap rate compression and is a longer term
positive as it relates to attractiveness of Las Vegas gaming real
estate.
Adequacy and Visibility of Coverage Unchanged: Neither VICI
(landlord) or Caesars (legacy largest tenant) publicly disclose
asset-level rent coverage for the two Caesars master leases. This
limitation is unchanged by the merger, although the materiality is
lessened due to the improved tenant diversification. VICI was spun
out of Caesars Entertainment Operating Company (CEOC) in late 2017
with a Fitch-estimated rent coverage of 1.7x. Fitch estimates based
on available disclosure at the time of the spinoff the initial
asset level rent coverage of all leases at around 1.7x. This is
less than the initial rent coverage levels set by VICI's peers,
including MGM Growth Properties and Gaming and Leisure Properties,
Inc. (GLPI, BBB-/Stable), who set their initial rents for their
respective major master leases at around 1.8x.
Estimating more current asset-level rent coverage is difficult
because Caesars does not disclose property-level EBITDAR and there
are no rent escalator coverage tests. VICI's transactions with
Caesars in 2020, which increased rent on existing leased assets,
weakened the asset-level rent coverage of Caesars' leases.
Additionally, certain future potential acquisitions from Caesars by
VICI are contemplated with the initial incremental EBITDAR/rent
being below 1.7x. Merger synergies realized by Caesars have likely
improved coverage and Fitch forecasts Caesars corporate coverage of
its leases will exceed 2.0x by YE 2022.
Fitch believes lower asset-level rent coverage increases the
probability that a lease may be renegotiated in a downturn. In
VICI's case, the leases are guaranteed by the tenants' respective
parent entities. However, the tenants generally have weaker credit
profiles relative to VICI, with the exception of Seminole Hard Rock
International, LLC (BBB-/Stable). Therefore, Fitch puts more
emphasis on asset/lease level coverage.
While Fitch has not assumed any discontinuity to receipt of rental
payments, the degree of positive rating momentum will be governed
in part by the fluid nature of the pandemic and its influence on
tenant cash flows, including whether current or future variants are
the catalyst for changes in consumer behavior or
guidance/requirements from elected officials and regulators (i.e.
property closures). Fitch's base case for regional and Las Vegas
casino operators does not include re-closures of casinos, but
includes a degree of conservatism relative to strong current
operating trends to reflect the fluid pandemic-related risks.
DERIVATION SUMMARY
VICI's most direct peer is GLPI, another gaming REIT. Both
companies operate with a net leverage target of 5.0x-5.5x, although
GLPI's capital structure is already fully unencumbered. Following
the transaction closing, VICI will have better tenant
diversification than GLPI but with higher exposure to the more
cyclical Las Vegas Strip (GLPI is primarily regional gaming
focused). MGM and Caesars will constitute approximately 80% of
VICI's total rent, versus the high 70% range for Penn National as a
tenant to GLPI. VICI's more cyclical tenant mix is partially offset
by the fact that Las Vegas assets are starting to exhibit more
financeability vis-à-vis mortgage markets than regional casinos.
GLPI has greater clarity surrounding lease-level coverage and has
historically displayed more conservative lease underwriting.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- The Venetian acquisition closes in late 2021 and the MGP
merger closes at the beginning of 2022;
-- The VICI and MGP portfolios realize contractual rental
increases with no lease restructurings;
-- No material voluntary debt repayments;
-- VICI remains acquisitive, with $3 billion of assumed
acquisitions through 2024 at a 7% cap rate. This is funded
with a mix of equity, debt and retained cash flow;
-- Dividends grow at 5% per year, which allows some degree of
retained FCF to be allocated toward acquisitions;
-- Proportional consolidation of Blackstone Real Estate Income
Trust JV's EBITDA and debt into leverage metrics.
ESG CONSIDERATIONS
VICI has an ESG Relevance Score of '4' for Financial Transparency
due to lower transparency around rent coverage relative to industry
peers, which 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.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Track record of acquisitions with asset-level rent coverage
being closer to 2.0x;
-- Improvement in Caesars' credit profile and Fitch's estimate of
Caesars' lease coverage levels due to EBITDAR growth;
-- Greater disclosure on rent coverage at asset or master lease
level;
-- Further migration toward increasing the unsecured debt mix;
-- Diversification in tenant base;
-- Greater staggering of the maturity schedule;
-- Net debt/EBITDA remaining within the 5.0x-5.5x range, or
absent VICI making progress with respect to the above
sensitivities, net debt/EBITDA target being set at below 5.0x.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Net debt/EBITDA sustaining above 5.5x;
-- Significant deterioration in Caesars' (or surviving entity
following the Eldorado merger) credit quality;
-- Increased aggressiveness with respect to acquisition and lease
underwriting, especially relating to transactions with
Caesars.
Fitch will adjust VICI's rating sensitivities upon resolving the
RWP and greater clarity is known around the pro forma capital
structure.
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
Fitch assumes the combined company will have an appropriately sized
revolver compared with its standalone revolver capacity of $1.35
billion and $1 billion, respectively. The revolver, when combined
with Fitch's expectation of approximately $500 million per year of
retained cash flow, will be sufficiently sized to meet VICI's
liquidity needs for the foreseeable future given the lack of debt
maturities through 2023. Debt maturities are expected to be well
staggered with no year comprising more than 20% of total debt
maturing, thereby lessening refinancing risk.
ISSUER PROFILE
VICI is a gaming-focused REIT created in 2017 through an
OpCo/PropCo transaction during the Chapter 11 reorganization of
CEOC.
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch proportional consolidates the BREIT JV's EBITDA and debt into
leverage metrics.
DEBT RATING RECOVERY PRIOR
---- ------ -------- -----
VICI Properties L.P. LT IDR BB Rating Watch On BB
senior unsecured LT BB Rating Watch On RR4 BB
VICI Properties Inc. LT IDR BB Rating Watch On BB
VICI Properties 1 LLC LT IDR BB Rating Watch On BB
senior secured LT BBB- Rating Watch On RR1 BBB-
VICI PROPERTIES: Moody's Puts Ba3 CFR Under Review for Upgrade
--------------------------------------------------------------
Moody's Investors Service has placed on review for upgrade all the
ratings of VICI Properties L.P. and its subsidiary, VICI Properties
1 LLC (collectively "VICI") following the announcement of the
proposed merger with MGM Growth Properties Operating Partnership LP
("MGP") where VICI will be the surviving entity.
The review for upgrade reflects Moody's view that VICI's planned
acquisition of MGP will result in a combined entity with
significant size and scale. The acquisition will also improve the
portfolio's quality with reduced tenant concentration and a vastly
unencumbered portfolio of properties. The rating action also
considers VICI's good corporate governance including its bench
strength with the same management and board members who will lead
the combined company.
The review will focus on the REITs' ability to receive shareholder
and gaming regulators' approvals. The review will also focus on
their leverage positions, VICI's execution plans relating to the
potential elimination of its existing secured debt and the
permanent financing upon the closing of the merger.
On Review for Upgrade:
Issuer: VICI Properties, L.P.
LT Corporate Family Ratings, on Review for Upgrade, currently Ba3
Backed Senior Unsecured, on Review for Upgrade, currently Ba3
Issuer: VICI Properties 1 LLC
Senior Secured Bank Credit Facility, on Review for Upgrade,
currently Ba2
Issuer: MGM Growth Properties Operating Partnership LP
LT Corporate Family Ratings, on Review for Upgrade, currently Ba3
Senior Secured Bank Credit Facility, on Review for Upgrade,
currently Ba3
Senior Unsecured, on Review for Upgrade, currently B1
Backed Senior Unsecured, on Review for Upgrade, currently B1
Outlook Actions:
Issuer: VICI Properties, L.P.
Outlook changed to Rating Under Review from Negative
Issuer: VICI Properties 1 LLC
Outlook changed to Rating Under Review from Negative
Issuer: MGM Growth Properties Operating Partnership LP
Outlook changed to Rating Under Review from Negative
RATINGS RATIONALE
On August 4, 2021, VICI and MGM announced that they had entered
into a definitive merger agreement whereby VICI will acquire MGP
for a total consideration of $17.2 billion (inclusive of the
assumption of approximately $5.7 billion of debt) with an all-stock
consideration for the 58% of MGP owned by public shareholders and a
cash acquisition of the 41% of MGP owned by MGM Resorts
International for approximately $4.4 billion.
The acquisition of MGP will increase VICI's gross assets by 74% to
$36.9 billion from $21.2 billion (proforma for Venetian
acquisition), which is more than three times larger than its
distant number two gaming peer, GLP Capital L.P. with approximately
$10.6 billion of gross assets at Q1 2021. VICI will own 43 assets
with $2.6 billion annual cash rent in 15 states, including MGP's 15
marquee Las Vegas and market leading regional assets. The merger
improves the diversity of its tenant base while also reducing the
tenant concentration to Caesar Entertainment from 68% to 41% of
proforma annual rent. Relative to its rated gaming REIT peer, its
assets are leased to a more diversified tenant base that includes
eight gaming operators.
VICI's unencumbered assets will improve meaningfully from a modest
11% of gross assets to approximately 95% of gross assets as Moody's
expects that VICI could potentially eliminate all of its existing
secured debt and establish an unencumbered asset pool.
The SGL-2 for both VICI and MGP remain unchanged. Moody's expects
both REITs to maintain their respective prudent financial policies
with a well laddered debt maturity schedule. There are no debt
maturities until 2024 (except for MGP's $1.4 billion revolver which
will mature in 2023. The revolver was nearly fully available at
March 31, 2021). In addition, both have good access to capital.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The review could result in an up to two notch upgrade for VICI's
CFR and senior unsecured rating and up to one notch for its secured
bank credit facility upon the closing of the transaction. After the
acquisition is completed, MGP will be merged into VICI. As such,
Moody's expects to upgrade MGP's ratings to match those of VICI at
that time.
It is unlikely that the REITs' ratings will be downgraded given the
direction of the review. Moody's review is unlikely to conclude
until after the transaction has received approvals from
shareholders and gaming regulators.
The principal methodology used in these ratings was REITs and Other
Commercial Real Estate Firms published in July 2021.
VICI Properties Inc. [NYSE: VICI] owns a portfolio of 28 properties
in Las Vegas and elsewhere across the United States. As of March
31, 2021, VICI had gross assets totaling $17.1 billion.
MGM Growth Properties LLC [NYSE: MGP] owns a portfolio of
properties acquired from MGM Resorts, consisting of fifteen premier
destination resorts in Las Vegas and elsewhere across the United
States. As of March 31, 2021, MGP had gross assets totaling $14.2
billion.
VIEQUES FO & G: Seeks to Hire Godreau & Gonzalez as Legal Counsel
-----------------------------------------------------------------
Vieques FO & G, Inc. seeks approval from the U.S. Bankruptcy Code
for the District of Puerto Rico to employ Godreau & Gonzalez Law,
LLC to serve as legal counsel in its Chapter 11 case.
The firm's services include the preparation of the Debtor's plan of
reorganization, representation of the Debtor in adversary
proceedings and other legal services in connection with the case.
The firm will charge these fees:
Partners $150 per hour
Associates $125 per hour
Rafael Gonzalez Valiente, Esq., at Godreau & Gonzalez, disclosed in
court filings that he and other employees of his firm are
"disinterested" as defined in Section 101(14) of the Bankruptcy
Code.
Godreau & Gonzalez can be reached through:
Rafael Gonzalez Valiente, Esq.
Godreau & Gonzalez Law, LLC
P.O. Box 9024176
San Juan, PR 00902-4176
Tel: (787)726-0077
Email: rgv@g-glawpr.com
About Vieques FO & G, Inc.
Vieques FO & G, Inc. sought protection for relief under Chapter 11
of the Bankruptcy Code (Bankr. D.P.R. Case No. 21-01688) on May 28,
2021, listing $50,001 to $100,000 in assets and $100,001 to
$500,000 in liabilities. Judge Edward A. Godoy oversees the case.
Rafael A. Gonzalez Valiente, Esq., at Godreau & Gonzalez Law, LLC,
represents the Debtor as legal counsel.
VINE ENERGY: S&P Rates $150MM Second-Lien Term Loan 'B+'
--------------------------------------------------------
S&P Global Ratings assigned its 'B+' rating and '1' recovery rating
to U.S.-based natural gas exploration and production company Vine
Energy Holdings LLC's $150 million second-lien term loan due 2025.
The notes are secured on a junior-lien basis by all assets and
stock and the subsidiaries that secure the company's reserve-based
revolving credit facility. The '1' recovery rating indicates its
expectation for very high (90%-100%; rounded estimate: 95%)
recovery of principal to creditors in the event of a payment
default.
ISSUE RATINGS--RECOVERY ANALYSIS
Key analytical factors
-- S&P's simulated default scenario for Vine Energy Holdings
assumes a sustained period of low commodity prices, consistent with
the conditions of past defaults in the sector.
-- S&P bases its valuation for Vine's reserves on a
company-provided PV-10 as of Dec. 31, 2020.
-- S&P has capped the PV10 valuation such that proved undeveloped
reserves account for no more than 25% of the total value of
reserves.
-- S&P assumes borrowing base of up to $350 million is fully drawn
at default, pro forma for outstanding letters of credit.
-- S&P adjust its gross enterprise value to account for
restructuring and administrative costs (estimated at 5% of gross
value).
Simulated default assumptions
-- Simulated year of default: 2023
-- Jurisdiction (Rank A): The company is headquartered in the U.S.
and most of its assets are located domestically.
Simplified waterfall
-- Net enterprise value (after 5% in administrative costs): $858
million
-- First-lien secured claims: $337 million
--Recovery expectations: Not applicable
-- Remaining value available to second-lien claims: $521 million
-- Second-lien secured claims: $158 million
--Recovery expectations: 90%-100% (rounded estimate: 95%)
-- Remaining value available to unsecured claims: $363 million
-- Senior unsecured claims: $982 million
--Recovery expectations: 30%-50% (rounded estimate: 35%)
Note: All debt claims include six months of prepetition interest.
VISTAGE INT'L: $90MM Incremental Loan No Impact on Moody's B2 CFR
-----------------------------------------------------------------
Moody's Investors Service says Vistage International, Inc.'s
issuance of an incremental $90 million first lien term loan due
2025 to fund a dividend distribution is a negative credit
development because it results in increased financial leverage and
a weaker credit profile. Furthermore, this transaction is Vistage's
second dividend distribution within the last 12 months. However,
prior to the transaction, Vistage was strongly positioned at the B2
corporate family rating with debt to EBITDA (Moody's adjusted) of
4.6x as of LTM June 30, 2021. Pro forma for the proposed
transaction, Moody's estimates that pro forma financial leverage
will increase by about 1.1x to 5.7x as of LTM June 30, 2021,
slightly below Moody's potential downgrade threshold of 6.0x debt
leverage. Therefore, despite the credit negative impact of this
debt-financed dividend, Vistage's ratings, including its B2 CFR and
stable outlook, are unchanged at this time.
The proceeds from the incremental term loan and cash will be used
to fund an $88 million distribution to shareholders, repay the $7
million outstanding revolver balance and pay transaction fees and
expenses. Although the transaction can be accommodated within the
existing rating, any aggressive financial actions over the near
term, including debt-funded acquisitions or distributions, would
place negative pressure on the company's ratings and outlook.
Moody's expects leverage to remain in the high 5x range over the
next 12 to 18 months. However, Vistage can further reduce financial
leverage by using free cash flow to repay debt, which the company
has done on multiple occasions in the past.
While the potential for future debt-funded shareholder
distributions is a risk, the credit profile is supported by
Vistage's consistent free cash flow (before debt-funded dividends),
good revenue visibility supported by a subscription-based model
with a diverse customer base, solid profitability with at least 30%
EBITDA margins (Moody's adjusted) anticipated and a highly variable
cost structure. Moody's also expects the company will maintain good
liquidity over the next 12 months, supported by cash balances of
about $13 million as of June 30, 2021 (pro forma for the dividend
distribution), a fully available $40 million revolver, low capital
expenditure requirements and Moody's expectation for good free cash
flow generation of at least $25 million over the next 12 months.
Vistage, headquartered in San Diego, California, provides CEOs,
other senior executives and business owners with peer advisory
board membership and coaching services. The company is
majority-owned by affiliates of private equity sponsor Providence
Equity Partners.
WASHINGTON PRIME: Two More Creditors Appointed to Committee
-----------------------------------------------------------
The U.S. Trustee for Region 7 appointed Mountain Special Situations
Fund, LLC, and Clear Harbor Asset Management, LLC, as new members
of the official committee of unsecured creditors in the Chapter 11
cases of Washington Prime Group Inc. and its affiliates.
Meanwhile, Nationwide Janitorial Services resigned as committee
member.
As of Aug. 7, the members of the committee are:
1. Wilmington Savings Fund Society, FSB, as Trustee
500 Delaware Avenue
Wilmington, DE 19801
Attention: Patrick J. Healy
Phone: 302-888-7420
E-mail: phealy@wsfsbank.com
2. Mountain Special Situations Fund, LLC
300 South East 5th Avenue, Unit 5080
Boca Raton, Fl. 33432
Attention: Nader Tavakoli
Phone: 212-278-2141
E-mail: ntavakoli@eaglerockcapital.com
3. Clear Harbor Asset Management, LLC
5345 Towne Square Dr., Ste 140
Plano, TX 75024
Attention: Michael H. Scholten
Phone: 214-228-7196
E-mail: mscholten@clearharboram.com
About Washington Prime Group
Washington Prime Group Inc. (NYSE: WPG) --
http://www.washingtonprime.com/-- is a retail REIT and a
recognized leader in the ownership, management, acquisition and
development of retail properties. It combines a national real
estate portfolio with its expertise across the entire shopping
center sector to increase cash flow through rigorous management of
assets and provide new opportunities to retailers looking for
growth throughout the U.S.
Washington Prime Group and its affiliates sought Chapter 11
protection (Bankr. S.D. Texas Lead Case No. 21-31948) on June 13,
2021. At the time of the filing, Washington Prime Group's property
portfolio consists of material interests in 102 shopping centers in
the United States totaling approximately 52 million square feet of
gross leasable area. The company operates 97 of the 102
properties.
As of March 31, 2021, Washington Prime Group had total assets of
$4.029 billion against total liabilities of $3.471 billion.
The Debtors tapped Kirkland & Ellis, LLP and Kirkland & Ellis
International, LLP as lead bankruptcy counsel; Jackson Walker, LLP
as co-counsel; Alvarez & Marsal North America, LLC as restructuring
advisor; Guggenheim Securities, LLC as investment banker; Deloitte
Tax, LLP as tax services provider; and Ernst & Young, LLP as
auditor. Prime Clerk LLC is the claims agent, maintaining the page
http://cases.primeclerk.com/washingtonprime
SVPGlobal, the Debtors' lender, tapped Davis Polk & Wardwell, LLP
and Evercore Group, LLC as its legal counsel and investment banker,
respectively.
The U.S. Trustee for Region 6 appointed an official committee of
unsecured creditors in the Debtors' cases on June 25, 2021.
Greenberg Traurig, LLP serves as the creditors committee's legal
counsel.
On July 15, 2021, the U.S. Trustee appointed an official committee
of equity security holders. The equity committee is represented by
Porter Hedges, LLP and Brown Rudnick, LLP.
WEINSTEIN CO: Spyglass' Plan to Cut Profits of 'Scream' Is Hearsay
------------------------------------------------------------------
Law360 reports that Weinstein Co.'s former co-chair Robert
Weinstein on Wednesday, August 4, 2021, said Spyglass Entertainment
Co.'s attempts to shoot down his claim to a cut of proceeds from
the film "Scream 4" were hearsay, denying arguments that his rights
ended with the entertainment company's Delaware Chapter 11 sale.
Responding to Spyglass Media Group's assertions, Weinstein, brother
of jailed sex offender and former entertainment mogul Harvey
Weinstein, said that his rights to a percentage of the movie
proceeds survived U.S. Bankruptcy Judge Mary F. Walrath's approval
of the 2018 deal that handed Weinstein Co. assets to a business
that afterward became Spyglass.
About The Weinstein Company
The Weinstein Company (TWC) -- http://www.WeinsteinCo.com/-- is a
multimedia production and distribution company launched in 2005 in
New York by Bob and Harvey Weinstein, the brothers who founded
Miramax Films in 1979. TWC also encompasses Dimension Films, the
genre label founded in 1993 by Bob Weinstein. During Harvey and
Bob's tenure at Miramax and TWC, they have received 341 Oscar
nominations and won 81 Academy Awards.
TWC dismissed Harvey Weinstein in October 2017, after dozens of
women came forward to accuse him of sexual harassment, assault or
rape.
The Weinstein Company Holdings LLC and 54 affiliates sought Chapter
11 protection (Bankr. D. Del. Lead Case No. 18-10601) on March 19,
2018, after reaching a deal to sell all assets to Lantern Asset
Management for $310 million.
The Weinstein Company Holdings estimated $500 million to $1 billion
in assets and $500 million to $1 billion in liabilities.
The Hon. Mary F. Walrath is the case judge.
Cravath, Swaine & Moore LLP is the Debtors' bankruptcy counsel,
with the engagement led by Paul H. Zumbro, George E. Zobitz, and
Karin A. DeMasi, in New York.
Richards, Layton & Finger, P.A., is the local counsel, with the
engagement headed by Mark D. Collins, Paul N. Heath, Zachary I.
Shapiro, Brett M. Haywood, and David T. Queroli, in Wilmington,
Delaware.
The Debtors also tapped FTI Consulting, Inc., as restructuring
advisor; Moelis & Company LLC as investment banker; and Epiq
Bankruptcy Solutions, LLC as claims and noticing agent.
The official committee of unsecured creditors retained Pachulski
Stang Ziehl & Jones, LLP as its legal counsel, and Berkeley
Research Group, LLC, as its financial advisor.
WMG ACQUISITION: S&P Rates New EUR445MM Senior Secured Notes 'BB+'
------------------------------------------------------------------
S&P Global Ratings assigned its 'BB+' issue-level rating and '3'
recovery rating to WMG Acquisition Corp.'s proposed EUR445 million
senior secured notes due 2031. The '3' recovery rating indicates
S&P's expectation for meaningful (50%-70%; rounded estimate: 65%)
recovery of principal in the event of a payment default.
The company will use the net proceeds from these notes to refinance
its existing EUR445 million senior secured notes due 2026. We
expect the transaction to be roughly leverage and cash flow
neutral.
Ratings List
WARNER MUSIC GROUP CORP.
Issuer Credit Rating BB+/Stable/--
NEW RATING
WMG ACQUISITION CORP.
Senior Secured BB+
Recovery Rating 3(65%)
WR GRACE: Fitch Assigns 'BB+' LongTerm IDR, Outlook Stable
----------------------------------------------------------
Fitch Ratings has assigned a Long-Term Issuer Default Rating (IDR)
of 'B+' to W. R. Grace Holdings LLC and a 'BB+'/'RR1' to the
company's secured debt, including the company's announced $1.45
billion term loan due 2028 and the notes resulting from a bond
exchange that will replace $300 million in 2024 unsecured notes and
$750 million in 2027 unsecured notes with secured notes of the same
size and maturity. The Rating Outlook is Stable.
Proceeds from the transaction will be used to fund the company's
$7.0 billion acquisition by Standard Industries Holdings, with the
remainder of the consideration to be paid in equity contributions
and additional debt issuances. The 'B+' rating level captures the
company's strong FCF generation, specialized product portfolio and
modest cyclicality, offset by a sizable but falling debt burden.
Fitch's currently outstanding ratings on W. R. Grace & Co. and its
subsidiaries will be withdrawn when the full funding structure is
in place and its acquisition has closed. At that time, all material
debt will sit at W. R. Grace Holdings LLC.
KEY RATING DRIVERS
Standard Industries Acquisition: Grace announced on April 26, 2021
that it entered into a definitive agreement under which Standard
Industries will acquire Grace in an all-cash transaction valued at
approximately $7.0 billion, including Grace's pharma fine chemistry
acquisition. The move comes after a number of attempts made by 40
North Management LLC, Standard Industries' investment platform, to
acquire Grace. Fitch believes Grace's cash-generative catalyst
offerings coupled with the opportunity to invest in the Materials
Technologies business made it an attractive acquisition target.
Following the acquisition, Grace will operate as a standalone
company within the portfolio of Standard Industries Holdings.
Durable Increase in Leverage: Fitch has awarded 0% equity credit
awarded to the $270 million in preferred shares associated with the
Albemarle Corporation (BBB/Stable) transaction for which the
company also issued $300 million in new secured debt, and the
leveraging nature of the Standard Industries transaction means
Grace's capital structure will likely operate with higher leverage
in the long term than it has as a public company. Fitch anticipates
continued strong EBITDA generation as Refining Catalyst demand
returns to historical levels; strong, stable FCF generation; and
gross debt reduction, including the redemption of the preferred
shares and some term loan prepayment. However, the sizable amount
of debt assumed in 2021 makes the company unlikely to return to
pre-2021 levels throughout the rating horizon.
Specialized Chemical Portfolio: Grace's two business segments offer
highly specialized products with high margins and pricing power.
Grace has been able to pass through costs to customers, and the
Catalysts Technologies segment has consistently generated EBITDA
margins of around 35%, while the Materials Technologies business is
in the low 20% range. These margins are on the high end for
specialty chemical companies, and while somewhat volatile, are
partially insulated by way of solid pass-through rates. Fitch
believes the company will continue to deploy capital in the medium
term to build out the Materials Technologies segment.
Refinery Production Drives Growth: Growth in the Refining
Technologies subsegment, which accounts for roughly 41.5% of
Grace's revenue, is determined primarily by refinery production
utilization levels. Products in this subsegment have various uses,
including cracking hydrocarbon chains in distilled crude oil to
produce transportation fuels, maximizing propylene production and
converting methanol into petrochemical feeds. These are valuable
inputs to a refinery's operations that support the optimization of
crack spreads -- as such, Fitch expects volumes to track refinery
production utilization levels, with high pass-through rates keeping
gross margins relatively stable.
DERIVATION SUMMARY
Grace's EBITDA margins are consistently above 25%, placing the
company firmly within the specialty manufacturer group. The company
is smaller than direct competitor Albemarle, which also produces
lithium and bromine to complement its catalysts. Like NewMarket
Corporation (BBB/Stable), Grace is a leader in a highly specialized
industry, but has a greater appetite for debt funded M&A, and Fitch
expects the company under Standard will operate with a leverage
profile generally consistent with the 'B+' rating category,
generally at or above 5.0x. Aruba Investments, Inc. (B+/Negative)
possesses a comparable leverage profile with similarly resilient
cash flow streams.
Like many chemicals peers, Fitch anticipates Grace's growth to
roughly track economic activity. Fitch projects Grace to generate
consistent FCF margins in the mid-single digits over the forecast
period, given low maintenance capex requirements and relatively
stable earnings, which is consistent with Fitch's views on
Newmarket. Fitch projects Albemarle to generate neutral to negative
FCF throughout the forecast period, given committed large-scale
capital projects.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- Sharp near-term recovery in Catalysts Technologies, with a
more modest, longer-dated recovery in Materials Technologies.
-- EBITDA margins roughly flat throughout the forecast.
-- Standard transaction closes in 2021.
-- Limited to no upstream dividends to Standard.
-- Bolt-on M&A in Specialty Catalysts and Materials Technologies
prioritized, with the majority of excess cash going toward
debt repayment. Solidly positive FCF throughout the forecast
period.
-- Total debt with equity credit/operating EBITDA peaks in 2021,
falling sharply thereafter as the normalization of refinery
output and voluntary debt reduction drives deleveraging
efforts to around 5.0x.
The recovery analysis assumes Grace would be reorganized as a
going-concern in bankruptcy rather than liquidated. Fitch has
assumed a 10% administrative claim.
Grace's GC EBITDA assumption is based on forecast 2022 EBITDA. The
going-concern EBITDA estimate reflects Fitch's view of a
sustainable, post-reorganization EBITDA level upon which the
valuation of the company is based. The going-concern EBITDA depicts
a scenario in which severe headwinds in the company's more
commoditized Refining Technologies business, and weak growth in
other segments due to slower macroeconomic activity, leads to a
severe drop in both EBITDA and cash generation. The assumption also
reflects corrective measures taken in the reorganization to offset
the adverse conditions that triggered default, such as cost cutting
efforts and industry recovery.
An enterprise value (EV) multiple of 6.5x EBITDA is applied to the
GC EBITDA to calculate a post-reorganization EV. The multiple is
comparable to the range of historical bankruptcy case study exit
multiples for peer companies, which ranged from 5.0x to 8.0x.
Bankruptcies in this space related either to litigation or to deep
cyclical troughs. The revolving credit facility is assumed to be
drawn at 80%. Fitch's recovery assumptions result in a recovery
rating for the senior secured debt within the 'RR1' range and
results in a 'BB+' rating.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Demonstrated commitment to debt reduction coupled with
continued cash generation and earnings stability, leading to
total debt with equity credit/operating EBITDA durably below
4.5x and/or FFO-adjusted leverage durably below 5.0x;
-- Successful completion of Materials Technologies and Specialty
Catalysts buildout, resulting in a more conservative capital
deployment strategy.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- FFO fixed-charge coverage durably below 2.0x;
-- Loss of leading market positions -- particularly in the
Refining Technologies business -- leading to total debt with
equity credit/operating EBITDA durably above 5.5x and/or FFO
adjusted leverage durably above 6.0x;
-- Reduced ability to pass through costs to customers, leading to
less stable margins and heightened cash flow risk;
-- More aggressive than anticipated M&A activity, including
transformative, credit-unfriendly acquisitions, or dividend
policy otherwise incompatible with management's articulated
capital deployment.
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
Strong Liquidity: Following the June 2020 refinancing, the company
will face limited maturities throughout the rating horizon on a
standalone basis, with full availability on the company's new $450
million revolving credit facility. Additionally, Fitch anticipates
solid FCF generation through the medium term. Fitch acknowledges
there is incentive for the company to take out the outstanding
preferred shares when possible.
ISSUER PROFILE
W.R. Grace is a specialty chemicals company comprising two business
segments: Grace Catalysts Technologies and Grace Materials
Technologies.
The Grace Catalysts Technologies segment sells fluid catalytic
cracking catalysts used in refining crude oil to produce gasoline
and diesel fuels; hydroprocessing catalysts used in the process of
upgrading heavy oils into lighter more useful products; and
polyolefin catalysts, which are used for the production of
polypropylene and polyethylene thermoplastic resin to enhance the
performance of a wide range of industrial and consumer end-use
applications. Grace holds a leading position in over 80% of
catalyst technologies products.
The Grace Materials Technologies segment produces specialty
silica-based and silica-alumina-based materials used in coatings
and print media applications, as well as for consumer, industrial
and pharmaceutical applications. Grace is a worldwide leader in
specialty silica gel, and its material technologies segment also
supplies raw materials for its catalyst business providing
synergies between the two segments.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
WR GRACE: Moody's Assigns B2 CFR & Rates New Sr. Secured Loans B1
-----------------------------------------------------------------
Moody's Investors Service has assigned a B2 Corporate Family Rating
to W.R. Grace Holdings LLC, B2-PD Probability of Default Rating, B1
ratings to the proposed $1.45 billion first lien senior secured
term loan due 2028 and $450 million senior secured revolving credit
facility maturing 2026 and B3 ratings to the existing senior
unsecured notes due 2024 and 2027. Grace has commenced an offer to
exchange the existing senior unsecured notes for new secured notes
with the same coupon and maturity date. Moody's will review the
ratings on the unsecured notes once the results of the exchange
offer are disclosed. The outlook is stable.
Proceeds from the term loan, an equity contribution of
approximately $3.6 billion, $1.05 billion of existing senior
unsecured notes, $270 million preferred equity roll-over as well as
additional unsecured financing will be contributed to the $7.0
billion acquisition of W. R. Grace & Co. by Standard Industries
Holdings Inc.
The ratings on W.R. Grace & Co.-Conn., including the Ba3 CFR,
Ba3-PD and all associated instrument ratings will be withdrawn upon
closing of the transaction and repayment of the outstanding debt.
The acquisition involves only a change in ownership; however, W.R.
Grace & Co. (W.R. Grace) will continue to operate.
"The assigned ratings reflect the additional debt to finance the
acquisition by Standard Industries and more aggressive financial
policy under the new ownership," said Domenick R. Fumai, Moody's
Vice President and lead analyst for W.R. Grace Holdings LLC.
Assignments:
Issuer: W.R. Grace Holdings LLC
Corporate Family Rating, Assigned B2
Probability of Default Rating, Assigned B2-PD
Senior Secured First Lien Term Loan, Assigned B1 (LGD3)
Senior Secured First Lien Revolving Credit Facility, Assigned B1
(LGD3)
Senior Unsecured Regular Bond/Debenture, Assigned B3 (LGD4)
Outlook Actions:
Issuer: W.R. Grace Holdings LLC
Outlook, Assigned Stable
RATINGS RATIONALE
Following the announcement on April 27 that Grace entered into a
definitive agreement to be acquired by Standard Industries Holdings
Inc. (Standard Industries) for approximately $7.0 billion, the
company is pursuing a recapitalization. Upon completion of the
transaction, which is expected to occur in the fourth quarter,
Grace will be highly levered and credit metrics will be
commensurate with the B2 rating. As Grace transitions from a public
company to privately controlled, there will be an increase in
corporate governance risks. Grace will no longer be required to
file public documents including financial statements and the board
of directors will not be required to have a majority of independent
directors.
Moody's anticipates Grace's results will improve in FY 2021, and as
refinery utilization rates continue to recover, it has experienced
sequential improvement across all segments. The acquisition of
Albemarle's Fine Chemistry Services (FCS) business, which closed on
June 1, should provide further revenue and EBITDA growth in FY
2021. Nevertheless, credit metrics are expected to remain more
commensurate with the B2 rating category. Moody's projects pro
forma adjusted financial leverage (Debt/EBITDA) of 7.7x in FY 2021,
which includes a substantial underfunded/unfunded pension liability
and leases, as the transaction is expected to add an incremental
$1.2 billion of debt on the company's balance sheet. While Moody's
does expect further deleveraging over the next several years,
additional debt repayments beyond the amortization of the term loan
are not factored.
Grace's B2 rating is constrained by Moody's expectations that
although leverage will decline from current levels, it will remain
elevated. The rating further incorporates Moody's view that Grace
will maintain an aggressive financial policy under its new owners,
which includes a willingness to incur debt to fund strategic
acquisitions and prioritize shareholder-friendly activities. The
rating factors modest business diversity with a significant
emphasis on catalysts, though Moody's believes the recently
announced acquisition of Fine Chemistry Services and strategic
tuck-ins in Material Technologies will further reduce dependence on
catalysts.
The B2 rating is supported by strong market positions in several
key end markets, including the leader in the global refining
catalysts and polyolefin catalyst industries, specialty silica
gels, and independent polypropylene licensing technologies. Grace's
rating is further underpinned by significant R&D capabilities and
favorable industry prospects due to increased global environmental
regulations and policies, a focus on sustainability initiatives, as
well as positive demographic trends. Grace's business profile also
benefits from high barriers to entry, a good operating track record
with attractive EBITDA margins, and the ability to generate free
cash flow through economic cycles compared to a number of
comparably rated peers in the chemical industry. The rating also
considers the company's good liquidity position.
Grace has a good liquidity profile to support operations in the
near term, including approximately $312 million of balance sheet
cash and roughly $392 million of availability under its $400
million revolving credit facility as of June 30, 2021. Moody's does
expect Grace to maintain more moderate cash balances going forward,
though this is partially mitigated by expectations that the
proposed $450 million revolving credit facility will remain largely
undrawn.
Pro forma for the transaction, debt capital is comprised of $1.45
billion first lien term loan, $450 million first lien senior
secured revolving credit facility, $300 million 5.625% senior
unsecured notes due 2024 and $750 million 4.875% unsecured notes
due 2027. The B1 rating on the first lien term loan, one notch
above the B2 CFR, reflects a first lien position on substantially
all assets. The B3 rating on the unsecured notes, a notch below the
CFR, indicates their subordination as a result of the significant
amount of first lien debt in the capital structure.
The new credit facilities are expected to provide covenant
flexibility that if utilized, could negatively impact creditors,
including an incremental first lien facility up to the greater of
100% of closing date consolidated EBITDA and 100% of LTM
consolidated EBITDA, plus amounts subject to the closing date First
Lien Net Leverage Ratio. Amounts up to the greater of 50% of
consolidated EBITDA as of the closing date and 50% of consolidated
EBITDA may be incurred with an earlier maturity date than the
initial term loans. Only wholly-owned subsidiaries must provide
guarantees; dividends or transfers resulting in partial ownership
of subsidiary guarantors could jeopardize guarantees, with no
explicit protective provisions limiting such guarantee releases.
Collateral leakage is permitted through transfers of assets to
unrestricted subsidiaries up to carve-out capacity, subject to a
"blocker" provision restricting the transfer of material
intellectual property to unrestricted subsidiaries. The credit
agreement provides some limitations on up-tiering transactions,
including the requirement that each affected lender consents to any
amendment or waiver required to permit a transaction providing for
the subordination of any lender's right to payment or to the liens
securing any obligations. The above are proposed terms and the
final terms of the credit agreement may be materially different.
ESG CONSIDERATIONS
Moody's has factored environmental, social and governance risks in
Moody's assessment of W.R. Grace's credit profile. Similar to many
specialty chemical companies, Grace has high environmental risk.
Grace's estimated liability related to legacy environmental
response costs totaled approximately $109 million as of December
31, 2020. On the other hand, social risks are considered low to
average. Grace has made significant investments including research
and development of products such as catalysts that are beneficial
to reducing emissions. A growing percentage of the company's sales
are tied to sustainability objectives and are positive for both
environmental and social causes. Grace is also focusing on
incorporating sustainability into their own operations, with
strategic initiatives to lower greenhouse gas emissions by 22%,
reduce water consumption by 10% and waste by 5% from a 2019
baseline by 2030. Governance risks are above average as Grace will
become a private company with a lack of a majority of independent
board members, will not be required to file public financial
statements and will be controlled by new owners that have an
aggressive financial policy.
The stable outlook assumes that Grace will successfully de-lever
over the next 2-3 years as profitability recovers and the Fine
Chemistry Services acquisition is efficiently integrated
contributing to additional revenue and EBITDA. Moody's also expects
Grace to maintain a good liquidity position during the rating
horizon.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade is unlikely at this time, but Moody's could upgrade the
rating with expectations for adjusted financial leverage sustained
near 5.5x (Debt/EBITDA), retained cash flow-to-debt sustained above
15% (RCF/Debt) and more balanced financial policies that include
gross debt reduction and a commitment from its owners to a more
conservative financial policy. An upgrade would also assume a
reduction in event risk such that the size of future acquisitions
would not raise pro forma leverage meaningfully above 5.0x for a
sustained period.
Moody's could downgrade the rating with expectations for adjusted
financial leverage sustained above 6.5x, or retained cash
flow-to-debt sustained below 10%, a significant deterioration in
the company's liquidity position, or another large debt-financed
acquisition or dividend to shareholders.
The principal methodology used in these ratings was Chemical
Industry published in March 2019.
Headquartered in Columbia, MD, upon completion of the transaction,
W.R. Grace Holdings LLC will be the parent of W.R. Grace & Co., a
manufacturer of specialty chemicals and materials operating and/or
selling in over 60 countries. The company has two reporting
segments: Catalysts Technologies and Materials Technologies.
Catalysts Technologies is a globally diversified business that
includes refining, polyolefin and chemicals catalysts. Materials
Technologies includes specialty materials such as silica-based and
silica-alumina-based materials used in consumer/pharmaceutical,
chemical processes and coatings applications. On April 26, 2021
W.R. Grace agreed to be acquired by Standard Industries Holdings
Inc. for $7.0 billion. Grace generated approximately $1.73 billion
of sales for the year ended December 31, 2020.
Standard Industries Holdings Inc., is the parent of Standard
Industries Inc, a leading manufacturer and marketer of roofing
products and accessories with operations primarily in North America
and Europe. The company manufactures and sells residential and
commercial roofing and waterproofing products, insulation products,
aggregates, specialty construction and other products.
WYNDHAM HOTELS: S&P Upgrades ICR to 'BB+', Outlook Stable
---------------------------------------------------------
S&P Global Ratings raised its issuer credit rating on Wyndham
Hotels & Resorts Inc. to 'BB+' from 'BB'. S&P also raised the
issue-level rating on Wyndham's senior secured debt to 'BBB-' from
'BB+', and the rating on the unsecured debt to 'BB-' from 'B+'.
S&P removed all the ratings from credit watch with positive
implications.
The stable outlook reflects S&P's assumption for a continued
recovery in Wyndham's economy and midscale hotels, resulting in
lower leverage over the course of 2021 and 2022.
The upgrade reflects robust year-to-date recovery in the lodging
industry, particularly for economy and midscale hotels. S&P said,
"We believe this will result in adjusted net debt to EBITDA of
about 4x in 2021, with the possibility of additional improvement to
the 3.5x area in 2022 assuming no acquisitions or other leveraging
transactions. We assume the 2021 U.S. lodging industry RevPAR will
be 25%-35% below 2019 levels, and we believe Wyndham will
outperform the better end of this range in 2021 and possibly
achieve close to full RevPAR recovery in 2022 compared with 2019."
According to Wyndham's guidance, RevPAR is likely to rebound by 40%
in 2021, to a level that is approximately 85% of 2019 levels.
Leisure demand has been robust this summer and could extend into
2022 as restrictions on daily activities are lifted. Wyndham will
likely continue to benefit from robust leisure demand since it sold
almost 70% of its 2019 room nights to leisure travelers and this
percentage will probably be even higher this year and next.
COVID-19 variants may have a negative impact on consumer behavior
over the coming months. S&P said, "However, we currently assume
Wyndham will likely outperform the overall lodging industry because
of the company's exposure to economy and midscale price segments,
which account for more than 85% of the company's rooms base. We
assume these price segments will be more resilient because they
cater to logistics workers, construction crews, and small group
demand. Wyndham has low exposure to business transient and
large-group convention demand, which will enable the company to
lead the lodging recovery and restore credit metrics sooner
compared with most peers. Wyndham's franchisee base is likely
experiencing occupancy levels that are solidly profitable, partly
because Wyndham relaxed brand standards to support hotel owner
savings, and we believe the demand increasingly enables hotels to
utilize the brand's revenue management tools to price room nights
for even higher profitability." Furthermore, lodging companies that
generate a significant majority of EBITDA from franchised or
managed hotels typically generate high EBITDA margin and strong
cash flow conversion. Wyndham will likely generate a very high
EBITDA margin in 2021 and 2022 due to its fee-based revenue model
and partly du to cost cuts in 2020, a portion of which could remain
in place for years.
Debt-financed acquisitions and financial policy will become more
important risk factors as Wyndham realizes a clear path to EBITDA
recovery. In S&P's updated base-case forecast, Wyndham will build
some cushion against the 5x downgrade threshold by the end of 2021.
This cushion will provide flexibility to make acquisitions if
Wyndham decides to opportunistically access favorable credit
markets or use cash balances to complete acquisitions. A number of
issuers, including Wyndham, have publicly discussed growth
strategies involving acquisitions or organic investments, and, in
some cases, have stated a prioritization of growth before
shareholder capital returns. S&P's base case does not assume any
M&A activity, which if pursued, could slow the deleveraging path
and increase financial risk.
S&P said, "We believe Wyndham is well-positioned for acquisitions.
Wyndham's size and scale, large number of enrolled loyalty members,
and track record of integrating acquired brands put it in a
favorable position for acquisitions in the select service space.
The company's 2018 acquisition of La Quinta complemented the
Wyndham Rewards program, which currently has more than 86 million
members. We believe a strong loyalty program enhances the value of
a system's brands, and is important for attracting third-party
capital because it encourages customers to stay inside the network
and drives direct bookings, which have higher margins than bookings
through other channels such as online travel agencies (OTAs)."
Wyndham has a large portfolio of recognizable brands, many of which
are highly rated for guest satisfaction in their respective
segments. Because of Wyndham's scale, S&P believes the company can
leverage its distribution to benefit acquired brands, including
through marketing campaigns that share fixed advertising costs
among portfolio hotel owners. Wyndham can also extract synergies
from acquisitions by controlling corporate overhead costs. However,
acquisitions pose integration risks, including unforeseen
additional investments in infrastructure and the possibility that
an acquired brand does not adequately complement Wyndham's core
offerings in the midscale and economy segments.
Wyndham focuses on franchising and managing hotels, a business
model that mitigates cash flow volatility over the lodging cycles
compared with hotel ownership. Wyndham's comparably less severe
RevPAR and EBITDA declines in 2020 and the ongoing rebound in 2021
demonstrate this quality. Wyndham's high EBITDA margin and
relatively low anticipated EBITDA volatility over the cycle
reflects its position as a hotel franchiser and manager, its size
as one of the largest hotel companies in the world, good geographic
diversity, a strong loyalty program, and a large portfolio of
recognizable brands. S&P believes Wyndham's business compares
favorably to many other rated leisure companies. Because the
company is paid royalty fees by franchisees based on gross room
revenues and not on profits, Wyndham's franchising model is
typically less volatile because it is not responsible for the
operating costs of the hotels. Wyndham also has low capital
investment needs because hotel franchise agreements typically
stipulate that existing and prospective franchisees are responsible
for covering the operating costs of the hotels in its system.
S&P said, "The stable outlook reflects our assumption that recovery
in economy and midscale hotels will continue, allowing Wyndham to
reduce leverage over the course of 2021 and 2022.
"Although unlikely in the near term given our current base-case
forecast, we could consider lowering the rating if we believe the
company will sustain leverage higher than 5x or funds from
operations (FFO) to debt of less than 12%, likely the result of a
leveraging acquisition combined with underperforming RevPAR.
"We could consider raising the rating if Wyndham sustains adjusted
debt to EBITDA below 4x and FFO to debt above 20% over the volatile
lodging cycle, incorporating acquisitions and capital returns to
shareholders. This is unlikely over the intermediate term, given
our expectation for the company to periodically make acquisitions
that could increase leverage to more than 4x."
[^] BOND PRICING: For the Week from August 2 to 6, 2021
-------------------------------------------------------
Company Ticker Coupon Bid Price Maturity
------- ------ ------ --------- --------
BPZ Resources Inc BPZR 6.500 3.017 3/1/2049
Basic Energy Services Inc BASX 10.750 16.123 10/15/2023
Basic Energy Services Inc BASX 10.750 16.123 10/15/2023
Buffalo Thunder
Development Authority BUFLO 11.000 50.000 12/9/2022
EQT Corp EQT 8.990 98.136 9/1/2021
Energy Conversion Devices ENER 3.000 7.875 6/15/2013
Energy Future Competitive
Holdings Co LLC TXU 0.928 0.072 1/30/2037
Federal Farm Credit Banks
Funding Corp FFCB 2.450 99.602 5/10/2034
Federal Farm Credit Banks
Funding Corp FFCB 1.500 99.777 4/26/2028
Federal Farm Credit Banks
Funding Corp FFCB 0.750 99.836 3/17/2025
Federal Home Loan Banks FHLB 0.875 99.054 11/10/2025
Federal Home Loan Banks FHLB 1.050 99.236 5/12/2026
Federal Home Loan
Mortgage Corp FHLMC 0.300 99.877 8/10/2023
GNC Holdings Inc GNC 1.500 1.250 8/15/2020
GTT Communications Inc GTTN 7.875 10.969 12/31/2024
GTT Communications Inc GTTN 7.875 10.430 12/31/2024
Goodman Networks Inc GOODNT 8.000 38.307 5/11/2022
International Paper Co IP 3.550 106.083 6/15/2029
Ludlow Corp MNK 9.500 10.000 5/1/2022
MAI Holdings Inc MAIHLD 9.500 19.389 6/1/2023
MAI Holdings Inc MAIHLD 9.500 19.389 6/1/2023
MAI Holdings Inc MAIHLD 9.500 19.750 6/1/2023
MF Global Holdings Ltd MF 9.000 15.625 6/20/2038
MF Global Holdings Ltd MF 6.750 15.625 8/8/2016
NCR Corp NCR 8.125 108.762 4/15/2025
NCR Corp NCR 8.125 108.471 4/15/2025
Navajo Transitional
Energy Co LLC NVJOTE 9.000 65.000 10/24/2024
Nine Energy Service Inc NINE 8.750 56.678 11/1/2023
Nine Energy Service Inc NINE 8.750 57.178 11/1/2023
Nine Energy Service Inc NINE 8.750 56.924 11/1/2023
OMX Timber Finance
Investments II LLC OMX 5.540 0.350 1/29/2020
Prospect Capital Corp PSEC 5.250 100.000 10/15/2030
Prospect Capital Corp PSEC 5.750 100.000 8/15/2030
Renco Metals Inc RENCO 11.500 24.875 7/1/2003
Revlon Consumer Products REV 6.250 43.366 8/1/2024
Riverbed Technology Inc RVBD 8.875 67.219 3/1/2023
Riverbed Technology Inc RVBD 8.875 67.219 3/1/2023
Rolta LLC RLTAIN 10.750 2.173 5/16/2018
SeaWorld Parks &
Entertainment Inc SEAS 9.500 107.442 8/1/2025
Sears Holdings Corp SHLD 8.000 2.524 12/15/2019
Sears Holdings Corp SHLD 6.625 1.260 10/15/2018
Sears Holdings Corp SHLD 6.625 2.274 10/15/2018
Sears Roebuck Acceptance SHLD 7.500 0.666 10/15/2027
Sears Roebuck Acceptance SHLD 6.750 0.403 1/15/2028
Sears Roebuck Acceptance SHLD 7.000 0.155 6/1/2032
Sears Roebuck Acceptance SHLD 6.500 0.323 12/1/2028
Sempra Texas Holdings Corp TXU 5.550 13.500 11/15/2014
TerraVia Holdings Inc TVIA 5.000 4.644 10/1/2019
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than $3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
On Thursdays, the TCR delivers a list of recently filed
Chapter 11 cases involving less than $1,000,000 in assets and
liabilities delivered to nation's bankruptcy courts. The list
includes links to freely downloadable images of these small-dollar
petitions in Acrobat PDF format.
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
Monthly Operating Reports are summarized in every Saturday edition
of the TCR.
The Sunday TCR delivers securitization rating news from the week
then-ending.
TCR subscribers have free access to our on-line news archive.
Point your Web browser to http://TCRresources.bankrupt.com/and use
the e-mail address to which your TCR is delivered to login.
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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
written permission of the publishers. Information contained
herein is obtained from sources believed to be reliable, but is
not guaranteed.
The TCR subscription rate is $975 for 6 months delivered via
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are $25 each. For subscription information, contact Peter A.
Chapman at 215-945-7000.
*** End of Transmission ***