/raid1/www/Hosts/bankrupt/TCR_Public/211110.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Wednesday, November 10, 2021, Vol. 25, No. 313
Headlines
24 HOUR FITNESS: S&P Affirms 'CCC-' ICR, Outlook Negative
3052 BRIGHTON FIRST: Dec. 13 Plan Confirmation Hearing Set
96 WYTHE: Unsecureds to be Paid in Full in Hotel's Plan
AARNA HOTELS: $23.5M Sale of Charlotte Assets to 25 Capital OK'd
ACCESS CIG: Moody's Rates New $60MM Extended Revolver Loans 'B2'
ADVANCED SAWMILL: Unsecured Creditors to Split $120K over 4 Years
AGSPRING MISSISSIPPI: Can File Late Reply Supporting Bid Procedures
AGUILA INC: Taps Davidoff Hutcher & Citron as Legal Counsel
ALM LLC: Amended Reorganizing Plan Confirmed by Judge
ALPHA METALLURGICAL: Amends ByLaws to Specify Exclusive Forum
ALPINE 4 HOLDINGS: Posts $2.5 Million Net Income in Third Quarter
ALTAR BIDCO: Moody's Assigns First Time B2 Corporate Family Rating
ALTAR MIDCO: S&P Assigns 'B' Issuer Credit Rating, Outlook Stable
APPLIED DNA: Increases CEO Hayward's Annual Salary to $450K
ARCIS GOLF: Moody's Assigns First Time B2 Corporate Family Rating
BAYLOR PORTFOLIO: Taps William Johnson as Bankruptcy Attorney
BBS HOLDINGS: Seeks to Hire Troutman Law Firm as Bankruptcy Counsel
BRAIN ENERGY: Wins Cash Collateral Access Thru Nov 30
BRAZIL MINERALS: Elects Cassiopeia Olson as Director
CAN B CORP: Incurs $3.2 Million Net Loss in Third Quarter
CANACOL ENERGY: Moody's Rates New $450MM Sr. Unsecured Notes 'Ba3'
CCS ASSET MANAGEMENT: Taps Hilco to Sell 'Cameron Road' Property
CEDAR FAIR: Moody's Affirms B2 CFR & Alters Outlook to Stable
CINCINNATI BELL: Moody's Assigns B1 Rating to New $850MM Term Loan
CINCINNATI BELL: S&P Rates New Sec. First-Lien Term Loan B-2 'B+'
CLAY GEOFFREY PHILLIPS: $197K Sale of Greene County Property Okayed
CLEARDAY INC: Hires Friedman LLP as New Auditor
CLUBHOUSE MEDIA: Inks $15-Mil. Equity Line Agreement With Peak One
CM CHEETAH: S&P Assigns 'B' Issuer Credit Rating, Outlook Stable
COLGATE ENERGY III: $200MM Notes Add-on No Impact on Moody's B2 CFR
CUENTAS INC: Amends Card Program Management Deal With Sutton Bank
DIAMOND SPORTS: Sinclair Buys Debts to Support Regional Sports Unit
DIFFUSION PHARMACEUTICALS: Granted 180-Day Extension by Nasdaq
DIOCESE OF NORWICH: Jones Walker, Hellman Represent Parish Group
DISH DBS: S&P Affirms 'B-' ICR on Secured Debt Issuance
DISH NETWORK: Moody's Lowers CFR & Senior Unsecured Notes to B2
DISH NETWORK: S&P Downgrades ICR to 'B-' on Increased Debt
DLC US: S&P Assigns 'BB-' ICR on Acquisition by DL Chemical
DONUT HOUSE: Second Amended Subchapter V Plan Confirmed by Judge
DURABILIS ROOFING: Taps Dellutri Law Group as Bankruptcy Counsel
EARTH ENERGY: Unsecured Creditors Will Get 50% in Subchapter V Plan
ENDO INTERNATIONAL: Incurs $77.2 Million Net Loss in Third Quarter
ENERGIZE HOLDCO: Moody's Assigns B3 CFR, Outlook Stable
ENERGIZE HOLDCO: S&P Assigns 'B' ICR on Acquisition by Warburg
ENERGY 11: Issues Letter to Interest Holders
ENPRO INDUSTRIES: Moody's Affirms Ba3 CFR Amid NxEdge Transaction
ETFF CORP: Trustee's Proposed Sale of Ohlbaum Judgments Approved
EYEPOINT PHARMACEUTICALS: Incurs $16.7M Net Loss in Third Quarter
FANATICS COMMERCE: Moody's Assigns First Time 'Ba3' CFR
FANATICS COMMERCE: S&P Assigns 'BB-' ICR, Outlook Stable
FIRSTENERGY CORP: Moody's Affirms Ba1 CFR & Alters Outlook to Pos.
FIRSTENERGY CORP: S&P Raises Senior Unsecured Debt Rating to 'BB+'
FLOYD SQUIRES: Eureka City Atty to Further Clarify Admin Expenses
FORD MOTOR: Fitch Rates New Unsecured Green Bonds Due 2032 'BB+'
FORD MOTOR: S&P Rates New Senior Unsecured Notes 'BB+'
FORUM ENERGY: Incurs $11.6 Million Net Loss in Third Quarter
FREEDOM SALES: Unsecured Creditors Will Get 1% of Claims in 5 Years
FREEPORT LNG: Fitch Assigns First Time 'B' IDR, Outlook Stable
FREEPORT LNG: Moody's Assigns First Time 'B1' Corp. Family Rating
FREEPORT LNG: S&P Assigns 'B' Issuer Credit Rating, Outlook Stable
FROZEN FOODS: Wins Cash Collateral Access Thru Nov 15
GAMESTOP CORP: Secures New $500M ABL Facility With Improved Terms
GRAND CANYON UNIVERSITY: Moody's Rates $1.2BB Taxable Bonds 'Ba1'
GRAPHIC PACKAGING: Moody's Rates New $400MM Unsecured Notes 'Ba2'
GRAPHIC PACKAGING: S&P Rates New Senior Unsecured Notes 'BB'
GREEN GROUP: Engages in Mediation to Resolve Claims Disputes
GTT COMMUNICATIONS: Latham & Watkins Represents Noteholder Group
GTT COMMUNICATIONS: To Seek Approval of Prepack Plan on Dec. 15
HALLUCINATION MEDIA: Court Narrows Claims in Suit v Ritz Ybor
HEARTWISE INC: Taps Eureka Consulting as Valuation Consultant
HYDROCARBON FLOW: Continued Operations to Fund Plan
IBIO INC: Acquires FastPharming Manufacturing Facility
INTELSAT SA: Restructuring Expenses Add Up to its Q3 2021 Net Loss
IRI HOLDINGS: Fitch Affirms 'B' LongTerm IDR, Outlook Stable
JOHNSON & JOHNSON: Unsealed Emails Shows Cancer Report Shaping Role
KANSAS CITY UNITED: Seeks Approval to Hire Stretto as Notice Agent
KEVIN B. DEAN: Removed as Debtor-in-Possession
LANNETT COMPANY: Moody's Cuts CFR to Caa1, Outlook Stable
LSF9 ATLANTIS: Fitch Affirms 'B' LT IDR, Outlook Stable
LTL MANAGEMENT: J&J Stay Ruling Deferred Until Case Venue Decided
LTL MANAGEMENT: Judge OKs Bid to Appoint Talc Committee
MALLINCKRODT PLC: Antitrust Claims Take Center Stage
MALLINCKRODT PLC: Insurers Say Acthar Price Inflated by $300 Mil.
MALLINCKRODT PLC: Paul Weiss, LRC 3rd Update on Noteholder
MASSOOD DANESH PAJOOH: CILP's Sale of 100 Northpoint Property OK'd
MAXCOM TELLECOMMUNICATIONS: Transtelco Completes Tender Offer
MCAFEE CORP: S&P Places 'BB' ICR on CreditWatch Negative
METHANEX CORP: S&P Alters Outlook to Positive, Affirms 'BB' ICR
MILLOLA HOLDINGS: Unsecured Creditors to Recover 100% in Plan
MOUTHPEACE DENTAL: Unsecureds' Recovery Hiked to 11% in Plan
NABORS INDUSTRIES: Posts $122.5 Million Net Loss in Third Quarter
NEKTAR THERAPEUTICS: Incurs $129.7 Million Net Loss in 3rd Quarter
NEOPHARMA INC: Hunter Smith Awarded $49,000 Fee
NORTHERN OIL: $200MM Add-on Notes No Impact on Moody's B2 CFR
NORWICH ROMAN: Abuse Victims Object to 90-Day Bar Date
NORWICH ROMAN: Committee Questions Fees, Wants to File Own Plan
ONDAS HOLDINGS: All 5 Proposals Passed at Annual Meeting
ORG GC MIDCO: Fully Consensual Restructuring to Cut Debt by $80M
ORG GC MIDCO: GC Services Parent Files for Chapter 11 With Plan
OSCEOLA MEDICAL: U.S. Trustee Unable to Appoint Committee
OWENS-ILLINOIS GROUP: Moody's Alters Outlook on B1 CFR to Positive
PANIOLO CABLE: Dec. 6 Plan Confirmation Hearing Set
PARKLAND CORP: Fitch Rates Proposed USD Unsecured Notes 'BB'
PARKLAND CORP: Moody's Rates New USD Unsecured Notes 'Ba3'
PARKLAND CORP: S&P Rates New US$500MM Senior Unsecured Notes 'BB'
PDG PRESTIGE: Unsecured Creditors to be Paid in Full in 60 Months
PENNFIELD CORP: Trustee's Sale of Ohlbaum Judgments to SM Approved
PG&E CORP: Investors Get Final OK on $2.5M Fees for $10M Deal
PING IDENTITY: Moody's Affirms B1 CFR & Rates $300MM Term Loan B1
PIPELINE FOODS: $7.2M Sale of Assets to Landus Cooperative Approved
PLASTIPAK HOLDINGS: Moody's Hikes CFR to Ba3 & Rates New Loans Ba3
PLASTIPAK HOLDINGS: S&P Affirms 'B+' ICR, Outlook Stable
PRIME HEALTHCARE: Fitch Affirms 'B' LT IDR, Outlook Stable
PROG HOLDINGS: Moody's Assigns First Time 'B1' Corp. Family Rating
PROG HOLDINGS: S&P Assigns 'BB-' ICR, Outlook Stable
RAMBUS INC: Posts $3.7 Million Net Income in Third Quarter
REAGOR-DYKES MOTORS: Ford Credit's Request for Docs Denied
ROCKDALE MARCELLUS: Asset Firms Face $90M Suit on Bankruptcy Scheme
RUSSO REAL ESTATE: Seeks Approval to Hire Peyco as Realtor
RUSSO REAL ESTATE: Seeks to Hire PSK CPA as Accountant
RUSSO REAL ESTATE: Taps Griffith, Jay & Michel as Legal Counsel
RYERSON HOLDING: Moody's Hikes CFR to B1, Outlook Remains Stable
RYMAN HOSPITALITY: Fitch Alters Outlook on 'B+' LT IDR to Stable
S K TRANSPORT: Seeks Approval to Hire Michelle Steele as Accountant
S.A.M. GROUP: Dec. 9 Plan Confirmation Hearing Set
SALEM MEDIA: Posts $22.1 Million Net Income in Third Quarter
SARA JENNIFER POMEROY: $165K Sale of 2017 Ferrari GTC 4 Lusso OK'd
SHOLAND LLC: Unsecureds to Get Share of Liquidating Trust Assets
SINTX TECHNOLOGIES: Ends Patent License Agreement With O2TODAY
SNAP ONE: S&P Rates Refinanced First-Lien Term Loan 'B'
SPI ENERGY: Posts $14.9 Million Net Loss in H1 2021
SPI ENERGY: To Relocate Corporate HQs to Santa Clara, Calif.
SRS DISTRIBUTION: $150MM Debt Increase No Impact on Moody's B3 CFR
SRS DISTRIBUTION: Moody's Affirms B3 CFR & Rates New Notes Caa2
SRS DISTRIBUTION: S&P Rates $700MM Senior Unsecured Notes 'CCC'
STONEWAY CAPITAL: Says Talks With Bondholders Ongoing
TLG CAPITAL: Taps Carle Mackie Power & Ross as Bankruptcy Counsel
TREEHOUSE FOODS: S&P Downgrades ICR to 'B' on Inflation Pressure
TRI-WIRE ENGINEERING: $8.8M Sale of All Assets to ITG Approved
US FINANCIAL: Trustee's Sale of Property in Annapolis Approved
VALUE VILLAGE: Business Income to Fund Plan Payments
VARIG LOGISTICA: Bankr. Court Dismisses MP Entities' Suit
VICTORY CAPITAL: Moody's Rates New $505MM 1st Lien Loan B 'Ba2'
WILLIE L. STEPHENS: Nov. 23 Hearing on Sale of Practice Assets
WP CITYMD: S&P Affirms 'B' Issuer Credit Rating, Outlook Stable
*********
24 HOUR FITNESS: S&P Affirms 'CCC-' ICR, Outlook Negative
---------------------------------------------------------
S&P Global Ratings affirmed its 'CCC-' issuer credit rating on All
Day Acquisition Co LLC (d/b/a 24 Hour Fitness).
S&P said, "At the same time, we lowered our issue-level credit
rating on the company's $235 million senior secured facilities to
'CCC-' from 'CCC' and revised our recovery rating to '4' from '2'
on lower recovery prospects for senior secured lenders.
"The negative outlook reflects our belief that the company could
face a near-term liquidity shortfall if its lenders do not agree to
lend the $40 million incremental facility, or if the company is
unable to raise additional liquidity in the first part of 2022.
We have revised our assessment of the company's liquidity to weak
despite the incremental $35 million of term loan issuance because
we believe the company could face material liquidity deficits over
the next 12 months.
"While the company's lenders have also included a provision for a
$40 million incremental senior secured facility, we do not include
the facility in our analysis of the company's liquidity because the
facility is uncommitted at this time. Even if the company's lenders
were to allow for the issuance of the $40 million facility, we
would likely continue to assess the company's liquidity as weak,
because we believe that it will generate negative EBITDA and burn
cash in the second half of 2021 and could need another liquidity
infusion in the early part of 2022 despite the incremental
liquidity.
"The company's clubs are fully open in all states, and it is our
understanding that memberships have continued to decline through
the first half of 2021 despite the lifting of COVID-19 restrictions
on fitness clubs in California and Oregon.
"We believe substantial uncertainty exists about where the
company's membership base could stabilize. 24 Hour Fitness ended
the second quarter of 2021 with approximately 2.4 million members,
which is down about 11% compared to the first quarter of 2021, and
down about 14% compared to its year-end 2020 memberships. We
believe that a significant portion of attrition in the second
quarter of 2021 was the result of a resumption of club openings and
membership billings in its California and Oregon clubs (accounting
for approximately 65% of the company's 286 clubs). We believe there
is significant uncertainty around the company's ability to attract
new members and stabilize attrition rates even with the receding
risk of the Delta variant of COVID-19.
"The negative outlook reflects continued anticipated cash burn at
least through early 2022, and our belief that the company could
face a near-term liquidity shortfall if its lenders do not agree to
lend the $40 million incremental facility, or if the company is
unable to raise additional liquidity in the first part of 2022.
"We could lower our ratings on 24 Hour Fitness over the next few
months if we believe a default or restructuring of its debt
obligations will become a virtual certainty.
"We could revise our outlook on 24 Hour fitness to positive or
raise ratings if we believe that the company can raise enough
liquidity to prevent a liquidity shortfall over the subsequent six
months."
3052 BRIGHTON FIRST: Dec. 13 Plan Confirmation Hearing Set
----------------------------------------------------------
3052 Brighton 1st Street II LLC and 3052 Brighton 1st Street LLC
(together, the "Proponents"), secured creditors of debtor 3052
Brighton First, LLC, filed the Modified Third Amended Disclosure
Statement and the Modified Third Amended Plan of Liquidation for
the Debtor.
On Nov. 4, 2021, Judge Nancy Hershey Lord approved the Disclosure
Statement and ordered that:
* Dec. 13, 2021, at 3:30 p.m. is the hearing on confirmation
of the Plan.
* Dec. 6, 2021, at 5:00 p.m. is fixed as the last day to
deliver all Ballots to be counted as votes.
* Dec. 6, 2021, is fixed as the last day to file objections to
confirmation of the Plan.
A full-text copy of the order dated Nov. 4, 2021, is available at
https://bit.ly/3oahBX6 from PacerMonitor.com at no charge.
Attorneys for 3052 Brighton 1st Street II LLC & 3052 Brighton 1st
Street LLC:
Jerold C. Feuerstein, Esq.
Daniel N. Zinman, Esq.
Stuart L. Kossar, Esq.
KRISS & FEUERSTEIN LLP
360 Lexington Avenue, Suite 1200
New York, NY 10017
Tel: (212) 661-2900
About 3052 Brighton First
3052 Brighton First, LLC, is a New York Limited Liability Company
having an address of 4403 15th Avenue, Brooklyn, New York 11219.
Its business consists of ownership and operating of the Property
located at 3052/3062 Brighton 1st Street, Brooklyn, New York 11235
(Block: 8669, Lot: 18).
3052 Brighton First, LLC, filed a Chapter 11 petition (Bankr.
E.D.N.Y. Case No. 20-40794) on Feb. 6, 2020. Bruce Weiner, Esq.,
is the Debtor's counsel.
96 WYTHE: Unsecureds to be Paid in Full in Hotel's Plan
-------------------------------------------------------
96 Wythe Acquisition LLC submitted a Second Amended Disclosure
Statement explaining its Chapter 11 Plan.
The Debtor's primary asset is the Williamsburg Hotel in Brooklyn,
NY. The day-to-day operations of the Hotel are managed by
affiliate Williamsburg Hotel BK LLC (the Management Company), which
has operated the hotel profitably.
Pursuant to the Plan, the post-Confirmation Debtor will be owned by
96 Wythe New Acquisition LLC. Toby Moskovits and Michael
Lichtenstein are the operating members and managers of 96 Wythe New
Acquisition LLC. Lockwood Development Partners will be a preferred
equity holder.
The Plan will be implemented by and through a cash infusion in the
amount of $9 million to be contributed from the Plan Sponsor (96
Wythe New Acquisition LLC), of which $1.438 million will be
allocated for the PPP Settlement, as well as cash on hand, which
the Debtor projects will aggregate $3 million upon the Effective
for a total available cash upon the Effective Date projected at
about $12 million. It should be noted that the amount of cash on
hand from operations upon the Effective Date may be higher or lower
than the $3 million projected, but this will not impact the Plan
going Effective.
The prior iteration of the Plan and Disclosure Statement provided
for a cash infusion of $8 million, and a total available cash of
$10 million on the Effective Date.
The Reorganized Debtor will continue to operate from and after the
Effective Date. The Plan Sponsor's cash infusion and the income
generated by the Reorganized Debtor's operations will be used to
fund operating expenses and to pay the amounts necessary to fund
the Plan payments. The Plan Sponsor will designate the managing
member of the Debtor upon the Effective Date.
As the Debtor intends to pay allowed claims in Classes 4 and 5 in
full, up to their amount of their Allowed Claim, one-half to be
paid on the Effective Date and the remainder to be paid with
interest 180 days after the Effective Date, the Debtor believes
that the Plan will provide all holders of claims against the Debtor
with a greater recovery than would be available if all of the
assets and interests of the Debtor were liquidated in a case under
chapter 7 of the Bankruptcy Code.
With respect to Class 5 Unsecured Claims, the Debtor has identified
approximately 41 Unsecured Claims, which it estimates aggregate
between $1,970,936 to $2,570,936, subject to final reconciliation.
Each holder of an Allowed, up to the amount of their Allowed Claim,
one-half to be paid on the Effective Date and the remainder to be
paid with interest 180 days after the Effective Unsecured Claim
will be paid in full Date. Class 5 is impaired.
Co-Counsel to the Debtor:
Douglas Spelfogel
Leah Eisenberg
Jason I. Kirschner
Dabin Chung
MAYER BROWN LLP
1221 Avenue of the Americas
New York, New York 10020
Telephone: (212) 506-2500
Facsimile: (212) 506-1910
- and -
Mark Frankel
BACKENROTH FRANKEL &
KRINSKY, LLP
800 Third Avenue
New York, New York 10022
Telephone: (212) 593-1100
Facsimile: (212) 644-0544
A copy of the Disclosure Statement dated Nov. 3, 2021, is available
at https://bit.ly/3CQEgxL from PacerMonitor.com.
About 96 Wythe Acquisition
96 Wythe Acquisition LLC owns and operates the Williamsburg Hotel,
a successful 10-story, 147-room independent hotel, constructed in
2017, and located at 96 Wythe Avenue, Brooklyn, New York. The
Hotel is upscale and full-service, featuring a full food and
beverage operation that includes a restaurant, bar/lounge, outdoor
cafe, library lounge bar, water tower bar, and event ballrooms.
96 Wythe Acquisition sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. S.D.N.Y. Case No. 1-22108) on Feb. 23,
2021. In the petition signed by David Goldwasser, chief
restructuring officer, the Debtor disclosed $79,990,206 in
liabilities.
Judge Robert D. Drain oversees the case.
Backenroth Frankel & Krinsky, LLP, led by Mark Frankel, is the
Debtor's counsel.
Kramer Levin Naftalis & Frankel LLP serves as counsel for Lender,
Benefit Street Partners Realty Operating Partnership, L.P.
AARNA HOTELS: $23.5M Sale of Charlotte Assets to 25 Capital OK'd
----------------------------------------------------------------
Judge J. Craig Whitley of the U.S. Bankruptcy Court for the Western
District of North Carolina authorized Aarna Hotels, LLC's sale to
25 Capital Investment Holdings, LLC, of assets consisting of the
real estate located at 3928 Memorial Parkway, in Charlotte, North
Carolina, containing approximately 3.27 acres and all improvements
thereon (Parcel ID 14327212); related furniture, fixtures,
equipment, and other personal property located at or used in
connection with the operation of the Real Property; and contracts,
permits, licenses, rights, warranties, and guarantees associated
with the operation of the Real Property and related personal
property as have been identified by the Purchaser for assumption
and assignment, for $23,525,000, pursuant to the terms of the 25
Capital APA.
Midas will be the sole Back-Up bidder as contemplated in the
Procedures Order.
In the event that the sale to 25 Capital authorized fails to timely
close, the Debtor is authorized to proceed to closing with Midas as
the Back-Up Bidder as set forth in the Procedures Order and the
Marriott Order.
The transfer(s) of the Assets to 25 Capital (or, to the extent
applicable, to Midas) will be free of all liens, claims, interests,
and encumbrances, provided that all such liens, claims, interests,
and encumbrances will attach to the sale proceeds.
The closing of the sale approved will close by Nov. 30, 2021, but
may be extended if necessary for the purchaser to pursue approval
from Marriott to own and operate the Assets as a branded Aloft by
Marriott franchise pursuant to the Marriott Order and the 25
Capital APA (or, if applicable, the Second APA). For the avoidance
of doubt, Marriott's post-petition franchise fees and expenses and
Marriott's bankruptcy counsel and local counsel fees will be paid
at closing from the sale proceeds in accordance with the Marriott
Order.
The Break-Up Fee of $200,000 and its earnest money deposit held in
escrow will be paid to Midas upon the closing to 25 Capital.
The allowed amount of the M2C Secured Claim, inclusive of fees and
charges to the extent approved by Court order, will be paid at
closing.
The net proceeds of the sale of the Assets will be deposited at
closing into the trust account of the Debtor's counsel, Moon Wright
& Houston, PLLC, together with any remaining funds of the Debtor,
to be distributed upon further order of the Court.
The Court waives the 14-day stay of the Order set forth in
Bankruptcy Rule 6004(h).
A copy of the APA is available at https://tinyurl.com/4tx5bvbc from
PacerMonitor.com free of charge.
About Aarna Hotels
Aarna Hotels, LLC is a limited liability company formed in 2017
under the laws of the State of North Carolina. It owns and
operates
an Aloft branded hotel located at 3928 Memorial Parkway in
Charlotte, North Carolina.
Aarna Hotels sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. W.D. N.C. Case No. 21-30249) on April 29,
2021. In the petition signed by Anuj N. Mittal, manager, the
Debtor
disclosed up to $50 million in both assets and liabilities.
Judge Laura T. Beyer presided over the case before Judge J. Craig
Whitley took over. Richard S. Wright, Esq., at Moon Wright &
Houston, PLLC, is the Debtor's legal counsel.
ACCESS CIG: Moody's Rates New $60MM Extended Revolver Loans 'B2'
----------------------------------------------------------------
Moody's Investors Service assigned a B2 rating to Access CIG, LLC's
proposed extended $60 million revolving credit facility due 2024.
All other ratings, including the B3 corporate family rating, the
B3-PD probability of default rating, the B2 rating on the upsized
$1.005 billion first lien term loan due 2025 (including the
proposed new $75 million incremental term loan), and the Caa2
rating on the $275 million second lien term loan due 2026 remain
unchanged. The outlook is stable.
Proceeds from an incremental $75 million fungible first lien term
loan will be used for general corporate purposes and to fund future
acquisitions. Concurrent with the incremental debt issuance, the
company will extend the maturity of its revolving credit facility
by one year to 2024.
Moody's considers the transaction moderately credit negative
because it further increases Access' very high debt and financial
leverage, while also signaling the company's readiness to ramp up
its acquisition activity over the next several quarters. Pro forma
for the incremental $75 million add-on, debt-to-EBITDA (Moody's
adjusted) will increase to 8.4x from 8.0x as of September 30, 2021.
Although leverage is expected to remain high and anticipated free
cash flow will be limited over the next 12-18 months, Moody's notes
that Access has a track record of successful execution of its
roll-up strategy by acquiring businesses at market multiples and
realizing cost synergies quickly. Moody's expects Access to
generate organic revenue growth in the low-single digit percentages
and steadily deleverage below 8.0x over the next 12-18 months,
while maintaining at least adequate liquidity.
Moody's announced the following new rating assignment:
Issuer: Access CIG, LLC
Senior Secured 1st Lien Revolving Credit Facility, Assigned B2
(LGD3)
RATINGS RATIONAL
The B3 CFR reflects Access' very high closing debt-to-EBITDA
leverage (pro forma for the $75 million incremental term loan)
estimated at around 8.4 times at September 31, 2021, aggressive
growth strategy that relies on frequent debt issuances to fund
acquisitions which limit free cash flow generation. The rating also
incorporates the company's modest annual revenue base of under $500
million, limited product line diversity and an ongoing secular
shift away from paper and towards electronic media. Moody's expects
the company's organic revenue and earnings growth will be in a
low-single digit percentages range over the next 12-18 months,
enabling steady deleveraging to below 8.0x over the same period.
Governance risks remain high given the company's debt-funded
acquisition strategy and private equity ownership.
The rating is supported by the company's highly recurring records
storage revenue (more than 60% of September 31, 2021 LTM revenue)
under multi-year contracts that provide stability though various
cycles, and its high EBITDA margin of at least 40%. Access has a
leading position in the niche document storage management market
for small and medium enterprises (SME) with a large and
geographically diverse storage infrastructure and customer base.
Moody's anticipation that Access will maintain strong client
retention rates that exceed 95% is a key credit support. Moody's
believes that as the business continues to grow, it can drive up
profitability and margin over the next two years. If Access can
self-fund its acquisition roll-up strategy from internally
generated cash, it can reduce its reliance on incremental debt to
fund acquisitions.
Moody's considers Access' liquidity profile as adequate. Liquidity
is provided by approximately $124 million of balance sheet cash at
closing of the incremental debt, expectation of breakeven to
slightly negative free cash flow over the next 12-15 months and
full availability under the extended $60 million revolving credit
facility expiring in 2024. The company's cash sources are
sufficient to cover annual cash obligations, including required
annual debt amortization on the first lien term loan of around $10
million, paid quarterly. The credit agreement also requires a
mandatory prepayment of debt from excess cash flow (50% of excess
cash flow, as defined in the debt agreements, subject to
leverage-based step-downs). Moody's does not anticipate a
meaningful reduction of debt from excess cash flow over the next
12-15 months. There are no financial maintenance covenants under
the term loans. The revolver is subject to a springing 7.0 times
first lien net leverage ratio when utilization exceeds 35% of the
facility. As of September 30, 2021, the first lien net leverage
ratio was around 4.9x. Moody's does not expect the covenant to be
triggered over the next 12-15 months and believes there will be
adequate cushion within the covenant level.
The stable outlook reflects Moody's view that the company's credit
metrics will improve slightly over the next 12-18 months driven by
organic revenue and earnings growth in a low-single digit
percentage range. Moody's also anticipates in the stable outlook
that Access will continue its roll-up strategy at a more measured
pace and maintain at least adequate liquidity.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be downgraded if operational challenges lead to
material top-line and earnings pressure such that EBITA to interest
expense (Moody's adjusted) falls below 1.0x, or liquidity
deteriorates, including increased revolver usage or an inability to
restore and sustain positive free cash flow generation.
Given Access' aggressive growth strategy and modest scale a ratings
upgrade is not expected over the medium term. Profitable revenue
growth that leads to a material reduction in leverage, free cash
flow in excess of 5% of total debt (Moody's adjusted) and more
balanced financial policy is necessary for an upgrade.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
Access, headquartered in Boston, MA and controlled by affiliates of
financial sponsors Berkshire Partners and GI Partners, provides
records and information management services primarily to the SME
segment in the U.S., Canada, and Latin America. The company
generated annual pro forma revenue of around $447 million for the
twelve months ended September 30, 2021.
ADVANCED SAWMILL: Unsecured Creditors to Split $120K over 4 Years
-----------------------------------------------------------------
Advanced Sawmill Machinery, Inc., filed with the U.S. Bankruptcy
Court for the Northern District of Florida a Chapter 11 Plan of
Reorganization and a Disclosure Statement on Nov. 4, 2021.
For over twenty five years, the Debtor has customized, refurbished,
and modified heavy machinery for sawmills to use in their day to
day operations.
During the year prior to the date on which the bankruptcy petition
was filed, the sole officer of the Debtor was Brenda Seffens, and
the sole owner was her husband David Seffens ("Equity Holder"). If
the Plan is confirmed by the Court, the equity interests of the
Debtor shall be extinguished, and the Reorganized Debtor shall
issue new shares to Peak NA US, Inc., which shall hold 100% of the
equity interests of the Debtor.
Early in this case, the Debtor has struggled to navigate
significant cash flow shortages. The cash flow issues are so dire
that the Debtor and its principal has decided that it is in the
best interests of the creditors and the estate to pursue a stock
sale to Peak NA US, Inc., which has committed to funding the Plan
and ensuring that the Debtor can continue post confirmation.
In order to ensure funding of the Plan for the Reorganized Debtor,
the Equity Holder has agreed to allow for the Debtor to extinguish
its current shares and issue new shares. All of the new shares in
the Reorganized Debtor will be issued to Peak NA upon the Effective
Date in return for Peak NA's cash infusion to fund Effective Date
payments, ongoing business operations, and to ensure the future
success of the Reorganized Debtor.
The Plan will treat claims as follows:
* Class 1 consists of the Allowed Secured Claim of American
First National Bank ("AFNB"), as assignee of First International
Bank. This class is impaired. The Debtor shall recommence regular
monthly payments due to AFNB under the terms of the prepetition
contract(s). The Debtor shall cure any prepetition and/or post
petition arrearages owed within 90 days after the Effective Date.
AFNB was also secured prepetition by way of the pledge of David
Seffens' stock in the Debtor. However, on the Effective Date,
pursuant to this Plan, AFNB will no longer have the Debtor's stock
as security.
* Class 2 consists of the Allowed Secured Claim of CIT Bank,
N.A. This class is impaired. The Debtor shall pay a total of
$20,000.00 to CIT on account of its Allowed Secured Claim as set
forth herein. The remaining portion of CIT's claim as reflected in
POC No. 9 shall be a general unsecured claim to be paid its pro
rata portion as such. The Debtor shall pay the Allowed Secured
Claim amount with 5.5% interest in 48 equal monthly installments
beginning on or before 30 days after the Effective Date.
* Class 3 consists of the Allowed Secured Claim of CIT Bank,
N.A. This class is impaired. The Debtor shall pay the Allowed
Secured Claim amount in full within 30 days after the Effective
Date. The remaining portion of CIT's Claim as reflected in POC No.
3 shall be a general unsecured claim to be paid its pro rata
portion as such.
* Class 4 consists of the Allowed Secured Claim of CIT Bank,
N.A. This class is impaired. The Debtor shall pay a total of
$25,000.00 to CIT on account of its Allowed Secured Claim as set
forth herein. The remaining portion of CIT's claim as reflected in
POC No. 4 shall be a general unsecured claim to be paid its pro
rata portion as such. The Debtor shall pay the Allowed Secured
Claim amount with 5.5% interest in 48 equal monthly installments
payable on or before 30 days after the Effective Date.
* Class 5 consists of the equipment lease claim of U.S. Bank,
N.A. ("USB"). This class is impaired. As of the Petition Date, the
Debtor owes USB $301,024.50. The Debtor will assume this executor
contract and pay all arrears in full. The Debtor shall recommence
the monthly payment amount of $5,630 pursuant to the contract (an
equipment lease agreement) between the parties in November 2021. To
cure the arrears, the Debtor shall pay additional monthly
installments at the end of the lease’s term to USB until the
amount of the Claim amount is paid in full.
* Class 6 consists of Allowed General Unsecured Claims. This
class is impaired. The holders of Allowed General Unsecured Claims
as set forth in the Disclosure Statement will receive their
pro-rata share of $120,000.00 payable over 4 years. The Debtor
shall pay the $120,000.00 dividend in the following manner: 8 equal
pro-rata distributions of $15,000.00 beginning on or before 180
days of the Effective Date and continuing on or before the last day
of every 6 months thereafter.
* Class 7 consists of all Equity Interests in the Debtor. This
class is impaired. The current Equity Holder of the Debtor is David
Seffens. Mr. Seffens shall not receive or retain any interest or
property on account of his Equity Interest in the Debtor. The
existing Equity Interests in the Debtor shall be cancelled and
extinguished on the Effective Date, and Peak NA will be issued 100%
of the shares of the Reorganized Debtor.
The payment of Claims is expected to be funded by the ongoing
profitable operations of the Debtor and a cash infusion on the
Effective Date from Peak NA. Within two business days of the filing
of this Plan, Peak NA will deposit $100,000 into Bruner Wright,
P.A.'s trust account representing earnest money to fund this Plan.
In the event that this Plan is not confirmed, or if this case is
dismissed or converted, then Peak NA shall be entitled to a full
refund.
On the Effective Date, the Equity Interests in the Debtor shall be
extinguished, and the Debtor shall issue new shares of the company
in which Peak NA shall own 100% of the Equity Interests of the
Reorganized Debtor. Peak NA shall provide sufficient cash to fund
the Effective Date Payments. The Debtor and Peak NA shall execute
documents, subscription agreements and other documents as required
that reflect the ownership structure and allocation of cash flow.
A full-text copy of the Disclosure Statement dated November 04,
2021, is available at https://bit.ly/3mXCcPb from PacerMonitor.com
at no charge.
Attorneys for the Debtor:
Byron Wright III, Esq.
Robert C. Bruner
Bruner Wright, P.A.
2810 Remington Green Circle
Tallahassee, FL 32308
Office: (850) 385-0342
Email: twright@brunerwright.com
rbruner@brunerwright.com
About Advanced Sawmill Machinery
Advanced Sawmill Machinery, Inc., is a Holt, Fla.-based company
that owns and operates a precision machine shop.
Advanced Sawmill filed a petition for Chapter 11 protection (Bankr.
N.D. Fla. Case No. 21-30612) on Sept. 20, 2021, listing up to $1
million in assets and up to $10 million in liabilities. Brenda W.
Steffens, executive vice president, signed the petition. Byron
Wright III, Esq., at Bruner Wright, P.A., is the Debtor's legal
counsel.
AGSPRING MISSISSIPPI: Can File Late Reply Supporting Bid Procedures
-------------------------------------------------------------------
Judge Craig T. Goldblatt of the U.S. Bankruptcy Court for the
District of Delaware granted the request of Agspring Mississippi
Region, LLC, and its affiliates for leave to file late reply in
support of their motion for entry of orders:
(i)(a) approving bidding procedures for the sale of their
"Big River Assets," (b) approving them to enter into an asset
purchase agreement with a stalking horse bidder and to provide
bidding protections thereunder, (c) scheduling an auction and
approving the form and manner of notice thereof, (d) approving
assumption and assignment procedures, and (e) scheduling a sale
hearing and approving the form and manner of notice thereof;
(ii)(a) approving the sale of their "Big River Assets" free
and clear of liens, claims, interests, and encumbrances, and (b)
approving the assumption and assignment of executory contracts and
unexpired leases; and
(iii) granting related relief.
The Debtors were granted leave to file the Reply on Nov. 1, 2021,
at 5:00 p.m. (ET), and such Reply will be deemed timely filed.
About Agspring Mississippi Region
Operating as a holding company, Agspring Mississippi Region, LLC
--
https://agspring.com/ -- focuses on grain, oilseed and specialty
crop handling, processing and logistics operations.
Agspring and its affiliates sought protection under Chapter 11 of
the Bankruptcy Code (Bankr. D. Del. Lead Case No. 21-11238) on
Sept. 10, 2021. In the petition signed by Kyle Sturgeon, chief
restructuring officer, Agspring listed $10 million to $50 million
in assets and $100 million to $500 million in liabilities.
Judge Craig T. Goldblatt oversees the cases.
The Debtors tapped Pachulski Stang Ziehl & Jones, LLP and Dentons
US, LLP as bankruptcy counsel; Faegre Drinker Biddle & Reath LLP
as
special counsel; Piper Sandler & Co. as investment banker; and
MERU, LLC as restructuring advisor. Kyle Sturgeon, managing
director at MERU, serves as the Debtors' chief restructuring
officer.
AGUILA INC: Taps Davidoff Hutcher & Citron as Legal Counsel
-----------------------------------------------------------
Aguila, Inc. seeks approval from the U.S. Bankruptcy Court for the
Southern District of New York to employ Davidoff Hutcher & Citron,
LLP to serve as legal counsel in its Chapter 11 case.
The firm's services include:
a. advising the Debtor of its powers and duties and the
continued management of its property and affairs;
b. negotiating with creditors to work out a plan of
reorganization and taking the necessary legal steps in order to
effectuate such a plan;
c. preparing legal papers;
d. representing the Debtor in all matters pending before the
court;
e. attending meetings and negotiating with representatives of
creditors and other parties in interest;
f. advising the Debtor in connection with any potential
refinancing of its secured debt and any potential sale of its
business;
g. representing the Debtor in connection with obtaining
post-petition financing;
h. taking any necessary action to obtain approval of a
disclosure statement and confirmation of a plan of reorganization;
and
i. performing all other legal services.
The firm's hourly rates are as follows:
Partners $700 - $850 per hour
Associates $300 - $495 per hour
Paraprofessionals $195 - $260 per hour
Davidoff has agreed to cap its blended hourly rate for its services
to no more than $500 an hour.
The firm will receive reimbursement for out-of-pocket expenses
incurred.
Robert Rattet, Esq., a partner at Davidoff, 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:
Robert L. Rattet, Esq.
Davidoff Hutcher & Citron LLP
120 Bloomingdale Road
White Plains, NY 10605
Tel: (914) 381-7400
Fax: 212-286-1884
Email: rlr@dhclegal.com
About Aguila Inc.
Aguila Inc., a nonprofit homeless services organization in New
York, filed a petition for Chapter 11 protection (Bankr. S.D.N.Y.
Case No. 21- 11776) on Oct. 15, 2021, listing as much as $10
million in both assets and liabilities. The case is handled by
Judge Martin Glenn. Robert Leslie Rattet, Esq., at Davidoff
Hutcher & Citron, LLP serves as the Debtor's legal counsel.
ALM LLC: Amended Reorganizing Plan Confirmed by Judge
-----------------------------------------------------
Judge Mildred Caban Flores has entered an order confirming the
Amended Plan of Reorganization filed by debtor ALM LLC.
The Bankruptcy Court has determined after notice and a hearing that
the requirements for final approval of the disclosure statement and
for confirmation set forth in 11 U.S.C. Sec. 1129(a) have been
satisfied.
A full-text copy of the Plan Confirmation Order dated Nov. 4, 2021,
is available at https://bit.ly/3wtgSE5 from PacerMonitor.com at no
charge.
About ALM LLC
ALM, LLC, also known as Agua La Montana, is the owner of a fee
simple title to a property in Trujillo Alto, P.R., having a current
value of $860,943.
ALM filed a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code (Bankr. D.P.R. Case No. 20-04571) on Nov. 25, 2020,
listing total assets of $1,083,384 and total liabilities of
$2,919,967. ALM President Kristian E. Riefkohl Bravo signed the
petition.
Judge Mildred Caban Flores oversees the case.
Gandia Fabian Law Office and Jimenez Vazquez & Associates, PSC,
serve as the Debtor's legal counsel and accountant, respectively.
ALPHA METALLURGICAL: Amends ByLaws to Specify Exclusive Forum
-------------------------------------------------------------
Alpha Metallurgical Resources, Inc.'s board of directors approved
an amendment to the Company's bylaws to specify that the federal
district courts of the United States of America shall, to the
fullest extent permitted by law, be the sole and exclusive forum
for resolution of any claim arising under the Securities Act of
1933, as amended, and the rules and regulations thereunder. No
other changes were made to the bylaws.
About Alpha Metallurgical
Alpha Metallurgical Resources (NYSE: AMR) (formerly known as
Contura Energy) -- http://www.AlphaMetResources.com/-- is a
Tennessee-based mining company with operations across Virginia and
West Virginia.
Alpha Metallurgical reported a net loss of $446.90 million for the
year ended Dec. 31, 2020, compared to a net loss of $316.32 million
for the year ended Dec. 31, 2019. As of March 31, 2021, the
Company had $1.67 billion in total assets, $1.50 billion in total
liabilities, and $170.16 million in total stockholders' equity. As
of Sept. 30, 2021, the Company had $1.68 billion in total assets,
$1.43 billion in total liabilities, and $248.10 million in total
stockholders' equity.
* * *
As reported by the TCR on Dec. 22, 2020, S&P Global Ratings
affirmed its 'CCC+' issuer credit rating on U.S.-based coal
producer Contura Energy Inc. and revised the liquidity assessment
to less than adequate. S&P said, "We view Contura's business as
vulnerable due to declining thermal demand and prices, which is
driving the company to exit these operations and begin reclamation
work at some of its mines."
In April 2020, Moody's Investors Service downgraded all long-term
ratings for Contura Energy, Inc., including the Corporate Family
Rating to 'Caa1' from 'B3'. "Contura has idled the majority of its
mines due to weak market conditions. Moody's expects that demand
for metallurgical coal will weaken further in the near-term as
blast furnace steel producers adjust to reduced demand due to the
Coronavirus," said Ben Nelson, Moody's vice president -- senior
credit officer and lead analyst for Contura Energy, Inc. "The
rating action is entirely driven by macro-level concerns resulting
from the global outbreak of coronavirus."
ALPINE 4 HOLDINGS: Posts $2.5 Million Net Income in Third Quarter
-----------------------------------------------------------------
Alpine 4 Holdings, Inc. filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing net income
of $2.48 million on $17.40 million of revenue for the three months
ended Sept. 30, 2021, compared to a net loss of $1.40 million on
$8.73 million of revenue for the three months ended Sept. 30,
2020.
For the nine months ended Sept. 30, 2021, the Company reported a
net loss of $6.78 million on $39.94 million of revenue compared to
a net loss of $3.71 million on $26.61 million of revenue for the
same period during the prior year.
As of Sept. 30, 2021, the Company had $97.11 million in total
assets, $47.36 million in total liabilities, and $49.75 million in
total stockholders' equity.
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1606698/000109690621002626/alpp-20210930.htm
About Alpine 4
Alpine 4 Holdings, Inc (formerly Alpine 4 Technologies, Ltd) is a
publicly traded conglomerate that is acquiring businesses that fit
into its disruptive DSF business model of drivers, stabilizers, and
facilitators. As of April 14, 2021, the Company was a holding
company that owned nine operating subsidiaries: ALTIA, LLC; Quality
Circuit Assembly, Inc.; Morris Sheet Metal, Corp; JTD Spiral, Inc.;
Deluxe Sheet Metal, Inc.; Excel Construction Services, LLC;
SPECTRUMebos, Inc.; Impossible Aerospace, Inc.; and Vayu (US),
Inc.
Alpine 4 Holdings reported a net loss of $8.05 million for the year
ended Dec. 31, 2020, compared to a net loss of $3.13 for the year
ended Dec. 31, 2019, and a net loss of $7.91 million for the year
ended Dec. 31, 2018. As of June 30, 2021, the Company had $94.03
million in total assets, $47.12 million in total liabilities, and
$46.91 million in total stockholders' equity.
ALTAR BIDCO: Moody's Assigns First Time B2 Corporate Family Rating
------------------------------------------------------------------
Moody's Investors Service assigned first time ratings to Altar
BidCo, Inc. including a B2 corporate family rating and a B2-PD
probability of default rating. Concurrently, Moody's assigned a B1
rating to the company's proposed $1.0 billion senior secured first
lien credit facility, which is comprised of a $175 million
revolving credit facility and an $825 million first lien term loan.
Moody's also assigned a Caa1 rating to the $205 million second lien
term loan. Proceeds from the term loans, along with $2.1 billion of
new equity from Thomas H. Lee Partners L.P. (THL), will be used to
fund the acquisition of Altar from its parent company, Brooks
Automation, Inc. (Ba3 Ratings under Review). The outlook is
stable.
Assignments:
Issuer: Altar BidCo, Inc.
Corporate Family Rating, Assigned B2
Probability of Default Rating, Assigned B2-PD
Senior Secured 1st Lien Revolving Credit Facility, Assigned B1
(LGD3)
Senior Secured 1st Lien Term Loan, Assigned B1 (LGD3)
Senior Secured 2nd Lien Term Loan, Assigned Caa1 (LGD6)
Outlook Actions:
Issuer: Altar BidCo, Inc.
Outlook, Assigned Stable
RATINGS RATIONALE
Altar's B2 CFR reflects the company's moderate size, high adjusted
debt-to-EBITDA (leverage) of 6.0x (estimated as of September 2021)
and risk associated with the separation from its former parent,
Brooks Automation, Inc. The company, on a standalone basis, will
predominately focus on automation and contamination control
solutions for semiconductor manufacturing systems. Demand for
Altar's equipment is highly correlated to the capital spending
trends of wafer fabrication and equipment manufacturing companies,
which increases the cyclicality of the business. Customer
concentration is high with the top five customers accounting for
more than 40% of sales. Governance risk is also a rating
constraint, as Moody's expects the private equity owner, THL, to
adhere to leveraging transactions in the form of debt-financed
acquisitions or shareholder distributions. Moody's notes that about
half of the companies' assets and EBITDA are in foreign
subsidiaries that are not part of the credit group, also
heightening risk to creditors. Moody's also notes that close to 65%
of intellectual property (IP) resides within the guarantor group.
The ratings are supported by Altar's defensible market strength and
its entrenched position within its customers' product designs. The
qualification process for many of the company's products takes
close to 24 months, increasing customer switching costs. In
addition, the company has over 800 patents with an average life of
over 8 years. Secular tailwinds within the semiconductors industry,
combined with the company's good profitability margins (EBITDA
margins above 20%) will generate strong earnings and cash flows
over the next 12-18 months. In addition, Moody's expects the
company to maintain good liquidity, with positive free cash flow
augmented by availability under the proposed $175 million revolving
credit facility.
The stable outlook reflects Moody's expectation that strong end
market demand will drive reduction in leverage to below 6.0x, and a
positive free cash flow.
The first lien credit agreement contains provisions for incremental
debt capacity up to the greater of $156 million and 100% of
consolidated adjusted EBITDA plus additional amounts subject to
5.25x pro forma first lien net leverage (if pari passu secured).
The credit facility also includes provisions allowing early
maturity indebtedness up to the greater of $312 million and 200% of
TTM EBITDA. Expected terms allow the release of guarantees when any
subsidiary ceases to be wholly owned; asset transfers to
unrestricted subsidiaries are permitted, subject to the carve-outs
and there are no anticipated "blocker" provisions providing
additional restrictions on such transfers. Leverage based step
downs to assets sales proceeds are set 50% if first lien leverage
ratio is equal to or less than 4.75x and 0% if first lien leverage
ratio is equal or less than 4.25x.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Rating could be upgraded if the company smoothly transitions to a
stand-alone entity. Over time if the company expands and
diversifies into new markets (outside of semiconductors), while
maintaining its profitability margins, the ratings could be
upgraded. An expectation that adjusted debt-to-EBITDA will be
sustained below 4.5x, and free cash flow-to-debt will be maintained
above 10% will also support an upgrade consideration.
Ratings could be downgraded should any operational issues with the
separation arise. Erosion in equipment demand or loss of market
share leading to weaker operating performance could also lead to a
downgrade. Increasing financial leverage with debt-to-EBITDA
exceeding 6.5x, deteriorating liquidity or an increasingly
aggressive financial policy including a debt-financed dividends or
sizeable acquisitions could also result in a downgrade.
Altar BidCo, Inc. manufacturers precision vacuum robotics,
integrated automation systems and contamination control solutions
for semiconductor chip makers and equipment manufacturers. Upon
transaction close, the company will operate as Brooks Automation
and will be owned by private equity firm, Thomas H. Lee Partners
L.P. Revenue for last twelve months ended June 2021 were $612
million.
The principal methodology used in these ratings was Semiconductors
published in September 2021.
ALTAR MIDCO: S&P Assigns 'B' Issuer Credit Rating, Outlook Stable
-----------------------------------------------------------------
S&P Global Ratings assigned its 'B' long-term issuer credit rating
to Altar MidCo, Inc. The outlook is stable. S&P assigned Altar
BidCo, Inc. its 'B' issue-level rating, with a '3' recovery rating,
to the proposed first-lien credit facilities, as well as its 'CCC+'
issue-level rating, with a '6' recovery rating, to the proposed
second-lien term loan.
Thomas H. Lee Partners has entered into a definitive agreement to
acquire the semiconductor solutions business of Brooks Automation,
a provider of precision vacuum robotics, integrated automation
systems, and contamination control solutions, for approximately $3
billion.
The acquired business will operate as Altar Midco, a newly created
holding company, and will continue to do business under the Brooks
Automation name.
This acquisition follows Brooks' announcement to separate into two
independent businesses.
The legacy company doing business as Brooks Automation announced in
May of 2021 that it plans to separate its life sciences and
semiconductor businesses into two independent companies. With the
acquisition by Thomas H Lee Partners, the Brooks Semiconductor
Solutions Group business will operate as a stand-alone, financial
sponsor-owned company, while retaining the Brooks Automation name.
This transaction is expected to close in the first half of 2022. As
the business transitions into a stand-alone company, S&P views
disruption to operations as a potential, albeit moderate, risk, due
to substantial operational, product, and customer separation
between the semiconductor and life sciences divisions.
S&P said, "The 'B' rating reflects our expectation that strong
growth prospects should allow steady deleveraging in the near term
in spite of high leverage of approximately 6x at close.
"We model pro forma leverage to be near 6x at transaction close
reflecting new debt incurred by the stand-alone Brooks Automation
semiconductor business. We expect leverage to decline to around
mid-5x by end of fiscal 2022 (ending September), driven by
high-single-digit percentage revenue growth from strong demand for
semiconductor capital equipment amid a global shortage of
semiconductor manufacturing capacity. Growing revenues will support
steady profitability with S&P Global Ratings-adjusted EBITDA
margins around 25% in forecast years, in spite of some supply
challenges. We also project FOCF generation of over $70 million per
year to support the business as it works through a period of
elevated leverage."
Brooks Automation will continue to benefit from medium term
strength in the semiconductor industry and wafer fab equipment
(WFE) spending.
The semiconductor industry has seen extremely strong recent demand
growth as macroeconomic recovery from the COVID-19 pandemic has
spurred spending on consumer and industrial goods. S&P said,
"Brooks operates in higher-growth segments in the semiconductor
equipment markets, contamination and vacuum control, and we believe
it is well positioned to outperform the semiconductor industry and
capitalize on secular growth vectors including 5G, autonomous
vehicles, and Internet of Things. Increasing chip content and
complexity in chip manufacturing have driven higher spending by
semiconductor companies as well as WFE manufacturers, who are
investing heavily in robotics equipment to automate production and
maximize capacity. Additionally, Brooks benefits from the
increasing need for contamination control, to clean and inspect the
chip at every aspect of its development as the importance of
high-quality, low-variance chip production grows at finer process
geometries. Nevertheless, we believe WFE spending, as well as the
broader semiconductor industry, will continue to be somewhat
cyclical over the longer term, and note moderate customer
concentration and limited demand visibility as potential risks for
the company and its peers in the industry."
S&P said, "The stable outlook reflects our expectation that Brooks
Automation will grow revenues in the high-single-digit area over
the near term driven by strength in the semiconductor industry. We
expect stable profitability and consistent revenue growth will
allow S&P Global Ratings-adjusted leverage to improve to the low-5x
area by fiscal 2023."
S&P could lower its rating if:
-- Key customer losses or general downturn in capital spending by
semiconductor manufacturers lead to sustained EBITDA and FOCF
declines; or
-- An aggressive financial policy leads to debt-funded funded
acquisitions resulting in leverage sustained above 6x and FOCF to
debt below 5%.
Although unlikely over the next 12 months, given Brooks' financial
sponsor ownership, S&P could raise its rating if:
-- The company maintains significant revenue growth and EBITDA
margins well above 25% such that leverage decreases below 5x on a
sustained basis; and
-- Brooks' financial policy leads S&P to believe that the company
is committed to maintaining leverage substantially below 5x.
APPLIED DNA: Increases CEO Hayward's Annual Salary to $450K
-----------------------------------------------------------
The board of directors of Applied DNA Sciences, Inc., acting
pursuant to a recommendation by its compensation committee, amended
the existing compensatory arrangement for Dr. James Hayward, the
company's president and chief executive officer and chairman of the
board, to increase his salary to an annual rate of $450,000,
effective Nov. 1, 2021.
About Applied DNA
Applied DNA -- http//www.adnas.com -- is a provider of molecular
technologies that enable supply chain security, anti-counterfeiting
and anti-theft technology, product genotyping, and pre-clinical
nucleic acid-based therapeutic drug candidates. Applied DNA makes
life real and safe by providing innovative, molecular-based
technology solutions and services that can help protect products,
brands, entire supply chains, and intellectual property of
companies, governments and consumers from theft, counterfeiting,
fraud and diversion.
Applied DNA reported a net loss of $13.03 million for the year
ended Sept. 30, 2020, compared to a net loss of $8.63 million for
the year ended Sept. 30, 2019. As of June 30, 2021, the Company
had $17.19 million in total assets, $1.61 million in total
liabilities, and $15.58 million in total equity.
Melville, NY-based Marcum LLP, the Company's auditor since 2014,
issued a "going concern" qualification in its report dated Dec. 17,
2020, citing that the Company incurred a net loss of $13,028,904
and generated negative operating cash flow of $11,143,059 for the
fiscal year ended Sept. 30, 2020 and has a working capital
deficiency of $4,811,847. These conditions along with the COVID-19
risks and uncertainties raise substantial doubt about the Company's
ability to continue as a going concern.
ARCIS GOLF: Moody's Assigns First Time B2 Corporate Family Rating
-----------------------------------------------------------------
Moody's Investors Service assigned first time ratings to Arcis
Golf, LLC including a B2 Corporate Family Rating, a B2-PD
Probability of Default Rating, and a B2 rating for its first lien
credit facilities consisting of a $75 million revolver due 2026 and
a $300 million term loan due 2028. The outlook is stable.
Proceeds from the first lien term loan will be used to refinance
existing borrowings ($255 million), pay related fees with the
remaining amount added to cash on balance sheet with which Moody's
expects the company to pursue acquisitions.
The following ratings/assessments are affected by the action:
New Assignments:
Issuer: Arcis Golf, LLC
Corporate Family Rating, Assigned B2
Probability of Default Rating, Assigned B2-PD
GTD Senior Secured First Lien Credit Facilities (revolver and term
loan), Assigned B2 (LGD3)
Outlook Actions:
Issuer: Arcis Golf, LLC
Outlook, Assigned Stable
RATINGS RATIONALE
Arcis's B2 CFR broadly reflects its small scale as measured by
revenue and moderately high leverage (high 4x for the LTM period
ended June 30, 2021, pro forma for this transaction and recent
acquisitions). The company's core business as a golf club owner and
operator makes it susceptible to discretionary consumer spending
and factors such as varying regional economic and weather
conditions. The ratings also reflect the company's geographic
concentration in Texas and Arizona where competition is high, and
high capital outlays required for ongoing reinvestment and
maintenance of the golf courses/clubs in order to maintain its
service offerings. Moody's considers the company as weakly
positioned in the B2 category given very modest free cash flow
expected over the next couple of years as the result of ongoing
spending on club amenities, the interest burden, taxes, and planned
growth capex. Rounds played exhibited strong growth during the
pandemic but are moderating as a broader arrange of leisure
activities are opening.
However, the ratings reflect Arcis's position as the second largest
golf club owner and operator in the US with both high end private
clubs and more accessible public courses that offer daily fee
access. Close to 40% of Arcis's revenue is recurring in nature,
which is underpinned by a dues-based membership business and
affluent clientele. The company's core business of operating golf
clubs helped mitigate the impact from the coronavirus pandemic as
demand for outdoor sports such as golf increased during the
pandemic. The company's significant real estate value provides good
collateral support with the company owning the real estate
associated with 57 out of 65 clubs. All fee-owned real estate
located in Arizona and Texas is pledged to the credit facility,
which real estate is associated with clubs that the company
estimates represents approximately 50% of total EBITDA, and the
credit facility benefits from a negative pledge on the other
fee-owned real estate, subject to customary exceptions.
Moody's views the company's governance risk as high given its
private equity ownership. As such, Moody's expects financial policy
to be aggressive and to tend to favor the shareholders.
Specifically, Moody's points to the company's aggressive
acquisition strategy, which is expected to be funded with
incremental debt. In addition, as a private company, financial
disclosure is expected to be more limited than for public
companies.
Moody's regards the coronavirus outbreak as a social risk under
Moody's ESG framework, given the substantial implications for
public health and safety. Although an economic recovery is
underway, it is tenuous, and its continuation will be closely tied
to containment of the virus. As a result, there is uncertainty
around Moody's forecasts.
Environmental risks are elevated with considerable land, water and
chemicals used to build and maintain golf courses. The company
seeks to utilize water from sustainable sources and minimize the
environmental hazards from items such as fertilizer, but the costs
to maintain facilities and protect the environment are high.
Social risks include the potential that golf demand will return to
the longer-term pre-pandemic declining trend. The jump in golf
participation during the pandemic benefits golf course operators
that are aiming to retain new participants. The company will
nevertheless need to continually reinvest in its facilities and
services to maintain competitive service offerings.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The stable outlook reflects Moody's expectation that leverage is
expected to remain moderately high at over 4.0x debt-to-EBITDA over
the next 12 to 18 months given its aggressive acquisition strategy.
The stable outlook also reflects Moody's expectation for at least
adequate liquidity over the next year.
The ratings could be downgraded if operating performance weakens
due to factors such as declines in membership levels, club
utilization or promotional pricing, Moody's adjusted debt-to-EBITDA
is sustained above 5.0x, retained cash flow to net debt below
12.5%, free cash flow is weak or liquidity otherwise deteriorates.
The rating could also come under pressure if credit metrics weaken
materially due to an aggressive financial policy.
The ratings could be upgraded if the company delivers continued
revenue and earnings growth with Moody's adjusted debt-to-EBITDA
sustained below 4.0x as well as strong liquidity with free cash
flow to debt in the high single digit.
As proposed, the new credit facilities are expected to provide
covenant flexibility that if utilized could negatively impact
creditors. Notable terms: 1) Incremental first lien debt capacity
in an aggregate amount up to the sum of the greater of $80 million
and 100% of trailing four quarters consolidated EBITDA, plus any
unused amounts under the general debt basket, plus additional
amounts subject to a first lien net debt-to-EBITDA leverage ratio
that is 0.25x above the First Lien Net Leverage Ratio on the
Closing Date. Amounts up to the greater of $80 million and 100% of
trailing four quarter EBITDA may be incurred with an earlier
maturity than the initial term loans. 2) Only wholly owned
subsidiaries must provide guarantees; partial dividends or
transfers of ownership interest resulting in partial ownership of
subsidiary guarantors could jeopardize guarantees, with no explicit
protective provisions limiting such guarantee releases. 3) There
are no expressed "blocker" provisions which prohibit the transfer
of specified assets to unrestricted subsidiaries; such transfers
are permitted subject to covenant carve-out capacity and other
conditions. 4) There are no expressed protective provisions
prohibiting an up-tiering transaction.
The proposed terms and the final terms of the credit agreement may
be materially different.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
Headquartered in Dallas, Texas, Arcis Golf is an owner and operator
of golf clubs (28 private and 37 public/daily fees) in the US. The
company is owned by Atairos and Fortress Investment Group. Pro
forma for recent acquisitions, revenue was about $291 million for
LTM period ended August 31, 2021.
BAYLOR PORTFOLIO: Taps William Johnson as Bankruptcy Attorney
-------------------------------------------------------------
Baylor Portfolio, LLC seeks approval from the U.S. Bankruptcy Court
for the District of Maryland to employ William Johnson, Jr., Esq.,
an attorney practicing in Greenbelt, Md., to handle its Chapter 11
case.
Mr. Johnson will render these services:
(1) general advice concerning compliance with the requirements
of Chapter 11;
(2) preparation of any necessary amendments to the Debtor's
bankruptcy schedules, statement of financial affairs and related
documents;
(3) representation of the Debtor in all contested matters;
(4) representation in any related matters in other courts;
(5) advice concerning the structure of a Chapter 11 plan and
any required amendments thereto;
(6) advice concerning plan feasibility;
(7) liaison, consultation and negotiation with creditors and
other parties in interest;
(8) review of relevant financial information;
(9) review of claims with a view to determining, which claims
are allowable and in what amounts;
(10) prosecution of claims objections;
(11) representation at the Section 341 meeting of creditors and
at any hearings or status conferences in court; and
(12) other necessary legal services.
Mr. Johnson will charge $405 per hour for his services. As of Nov.
2, 2021, the attorney has received $1,000 of the initial retainer
fee.
In court papers, Mr. Johnson disclosed that he does not have a
connection with the Debtor.
Mr. Johnson can be reached at:
William C. Johnson, Jr., Esq.
6305 Ivy Lane, Suite 630
Greenbelt, MD 20770
Phone: (301) 477-3450
(202) 525-2958
Fax: (301) 477-4813
Email: davejaxson@yahoo.com
About Baylor Portfolio
Baylor Portfolio, LLC filed a petition for Chapter 11 protection
(Bankr. D. Md. Case No. 21-16311) on Oct. 6, 2021, listing as much
as $50,000 in both assets and liabilities. Judge Maria Ellena
Chavez-Ruark oversees the case. William H. Jackson, Esq., at the
Law Office of William C. Johnson represents the Debtor as legal
counsel.
BBS HOLDINGS: Seeks to Hire Troutman Law Firm as Bankruptcy Counsel
-------------------------------------------------------------------
BBS Holdings II, LLC seeks approval from the U.S. Bankruptcy Court
for the District of Oregon to hire the law firm of Troutman Law
Firm, PC to serve as legal counsel in its Chapter 11 case.
The firm's hourly rates are as follows:
Ted A. Troutman, Esq. $495 per hour
Paralegal $220 per hour
Ted A. Troutman, Esq., the firm's attorney who will be providing
the services, disclosed in a court filing that he is a
"disinterested person" as the term is defined in Section 101(14) of
the Bankruptcy Code.
The firm can be reached at:
Ted A. Troutman, Esq.
Troutman Law Firm, PC
5075 SW Griffith Dr., Suite 220
Beaverton, OR 97005
Tel: 503-292-6788
Fax: 503-596-2371
Email: tedtroutman@sbcglobal.net
About BBS Holdings
Redmond, Ore.-based BBS Holdings II, LLC filed a petition for
Chapter 11 protection (Bankr. D. Ore. Case No. 21-32244) on Nov. 4,
2021, listing up to $1 million in assets and up to $10 million in
liabilities. Jason Bronson, manager, signed the petition.
Judge Peter C. Mckittrick oversees the case.
The Debtor tapped Troutman Law Firm, P.C. as legal counsel.
BRAIN ENERGY: Wins Cash Collateral Access Thru Nov 30
-----------------------------------------------------
The U.S. Bankruptcy Court for the Eastern District of New York has
authorized Brain Energy Holdings LLC to use cash collateral, in
which 153 Clinton Street Lender LLC asserts an interest.
The Debtor has immediate cash needs in order to run the day-to-day
operations of its business.
The Debtor's bankruptcy filing was precipitated by its default in
connection with amounts owed to the Lender. Specifically, on
December 20, 2018, the Lender made a loan to the Debtor, which was
evidenced by:
(i) Consolidated, Amended and Restated Land Loan Promissory
Note, executed by the Debtor and made payable to the order of the
Lender in the original principal amount of $3,040,000, which
matured on January 1, 2020, secured by, among other things: (a)
Consolidation, Extension and Modification Agreement made by the
Debtor; and (b) Assignment of Leases and Rents made by the Debtor,
and
(ii) Building Loan Promissory Note, executed by the Debtor and
made payable to the order of the Lender in the original principal
amount of $260,000, secured by, among other things, the Building
Loan Mortgage and Security Agreement made by the Debtor. Repayment
of the amounts owed to the Lender is further secured by a personal
Guaranty executed by Mr. Anthony Spartalis, the Debtor's principal
and sole member, and a lien against the membership interests in the
Debtor held by Mr. Spartalis which he pledged as collateral.
The Debtor defaulted under the Loan Documents by failing to make
the payment of all principal, interest and other amounts which
became due under the Note on the Maturity Date. On February 24,
2021, the Debtor, Mr. Spartalis and the Lender entered into a
Forbearance Agreement.
The Lender has consent to the Debtor's use of cash collateral in
accordance with the following monthly budget: (a) $5,000 to
compensate Spartalis for his services as the Building Manager
(through the date of Closing of the Sale on the Property); and (b)
$1,000 to pay any fees payable to the United States Trustee
pursuant to 28 U.S.C. section 1930(a)(6) (and any applicable
interest thereon), any amount that may be owed to the Clerk of the
Court, and any customary and necessary day-to-day expenses.
The Debtor's authorization to use cash collateral will expire on
the earlier to occur of: (a) the closing of a sale of the Property,
(b) November 30, 2021, (c) such later date upon which the Court
fixes, or (d) a breach of the Agreement or the Settlement Agreement
which is not timely cured as may be permitted therein. Absent an
Event of Default, the Termination Date may be extended from time to
time upon (a) the written agreement of the Debtor and the Lender,
which parties will be permitted to submit a Consent Order to the
Court, without further notice or hearing, extending the Termination
Date or (b) upon further Court Order.
The Debtor acknowledges and admits that the amounts it owes the
Lender totaled not less than $4,285,467 as of June 24, 2021.
Interest has and continues to accrue thereon at the rate of $2,070
per day, together with such other interest, costs and fees,
including legal fees, all as may be provided in the Loan Documents
which amount is due and payable in full, all without offset,
deduction and counterclaim of any kind. The Debtor further admits
that any and all liens and security interests securing the
Indebtedness, including the Mortgage and the Assignment of Rents,
are valid and duly perfected.
As partial adequate protection for the Debtor's use of cash
collateral, the Lender is granted valid, perfected, and enforceable
liens upon and security interests in any Rents and/or any and all
other types of property that would have been subject to the
Pre-Petition Liens that may come into existence after the Petition
Date. The Replacement Liens will have the same priority, extent and
validity as the Lender's Pre-Petition Liens.
The Replacement Liens in the Post-Petition Collateral granted (i)
are and will be in addition to all security interests, liens and
rights of set-off existing in favor of the Lender which exist on
the Petition Date and (ii) are and will be valid, choate,
perfected, enforceable, nonavoidable and effective as of the
Petition Date, in each case to the same extent the Pre-Petition
Liens are valid, choate, perfected, enforceable, non-avoidable and
effective without any further action by the Debtor or the Lender
and without the execution, filing or recordation of any financing
statements, security agreements, vehicle lien applications, or
other documents. All security interests and liens granted are
deemed perfected, and no further notice, filing or other act will
be required to effect such perfection.
These events constitute "Events of Default:"
a. The entry of an order by the Court converting the Case to a
case under chapter 7 of the Bankruptcy Code;
b. The entry of an order by the Court dismissing the Case
pursuant to sections 1112(b) or 305 of the Bankruptcy Code or
otherwise;
c. The Debtor's failure to comply with any other provision of
the Agreement and or the Settlement Agreement;
d. The Debtor's consummation of the sale or transfer of
Property outside of the ordinary course of its business without an
order of the Court authorizing the same; and/or
e. The Debtor's grant of a lien, claim or other encumbrance
upon the Property or the Rents senior in priority or pari passu
with any of the Lender's Pre-Petition Liens.
A copy of the order is available at https://bit.ly/3EWAgfQ from
PacerMonitor.com.
About Brain Energy Holdings
Brain Energy Holdings, LLC is a single asset real estate debtor (as
defined in 11 U.S.C. Section 101(51B)). It is the fee simple owner
of a six-floor mixed-use brownstone located at 153 Clinton St.,
Brooklyn, N.Y., having a current value of $4.5 million.
Brain Energy Holdings filed its voluntary petition for Chapter 11
protection (Bankr. E.D.N.Y. Case No. 21-42150) on Aug. 24, 2021,
disclosing $4,501,100 in total assets and $4,411,145 in total
liabilities. Anthony Spartalis, as managing member, signed the
petition.
Judge Nancy Hershey Lord oversees the case.
The Debtor tapped Pick & Zabicki, LLP as legal counsel and Frances
M. Caruso as bookkeeper.
BRAZIL MINERALS: Elects Cassiopeia Olson as Director
----------------------------------------------------
The board of directors of Brazil Minerals, Inc. unanimously elected
Cassiopeia Olson, Esq., as a new independent director to fill a
vacant seat on the board.
On Nov. 4, 2021, the company and Ms. Olson signed an agreement
setting forth the company's and Ms. Olson's responsibilities to
each other and Ms. Olson's compensation for acting as a director.
Both Ms. Olson and Ambassador Roger Noriega, also an independent
director, will serve as members of the newly formed audit committee
of the board.
Ms. Olson, 44, is an attorney with extensive experience in
international contracts and venture negotiations. She has
represented or engaged in transactions with leading companies,
including Credit Suisse, UBS, Apollo Group, Universal Music Group,
Sony, Chrysler/Jeep, Stella Artois, Miller Brewing Company, General
Motors, McDonald's, Verizon, among others.
Ms. Olson represented an investor in Brazil Minerals for several
years and in such capacity interacted with the company's management
and learned about its growth prospects. From 2013 to 2017, Ms.
Olson was at Brighton Capital Ltd, and from November, 2017 to
January, 2021, she was an attorney with Kaplowitz Firm, PC. Since
February, 2021, Ms. Olson has been an attorney with Ellenoff
Grossman & Schole LP. She received a B.A. in Economics and Finance
from Loyola University in Chicago, and a J.D. from The John
Marshall School of Law.
About Brazil Minerals
Brazil Minerals, Inc., together with its subsidiaries, is a mineral
exploration company currently primarily focused on the development
of its two 100%-owned hard-rock lithium projects. Its initial goal
is to be able to enter commercial production of spodumene
concentrate, a lithium bearing commodity. Visit
http://www.brazil-minerals.comfor more information.
Brazil Minerals reported a net loss of $1.55 million for the year
ended Dec. 31, 2020, a net loss of $2.08 million for the year ended
Dec. 31, 2019, and a net loss of $1.85 million for the year ended
Dec. 31, 2018. As of June 30, 2021, the Company had $1.77 million
in total assets, $1.89 million in total liabilities, and a total
stockholders' deficit of $119,656.
Lakewood, Colorado-based BF Borgers CPA PC, the Company's auditor
since 2015, issued a "going concern" qualification in its report
dated March 31, 2021, citing that the Company has suffered
recurring losses from operations and has a net capital deficiency
that raise substantial doubt about its ability to continue as a
going concern.
CAN B CORP: Incurs $3.2 Million Net Loss in Third Quarter
---------------------------------------------------------
Can B Corp. filed with the Securities and Exchange Commission its
Quarterly Report on Form 10-Q disclosing a net loss of $3.23
million on $1.91 million of total revenues for the three months
ended Sept. 30, 2021, compared to a net loss of $1.23 million on
$459,496 of total revenues for the three months ended Sept. 30,
2020.
For the nine months ended Sept. 30, 2021, the Company reported a
net loss of $8.15 million on $2.62 million of total revenues
compared to a net loss of $3.60 million on $1.23 million of total
revenues for the nine months ended Sept. 30, 2020.
As of Sept. 30, 2021, the Company had $14.61 million in total
assets, $9.01 million in total liabilities, and $5.61 million in
total stockholders' equity.
At Sept. 30, 2021, the Company had cash and cash equivalents of
$190,529 and negative working capital of $2,665,586. Cash and cash
equivalents decreased $267,269 from $457,798 at Dec. 31, 2020 to
$190,529 at Sept. 30, 2021. For the nine months ended Sept. 30,
2021, $6,447,003 was provided by financing activities, $6,063,915
was used in operating activities, and $650,357 was used in
investing activities.
The Company currently has no agreements, arrangements or
understandings with any person to obtain funds through bank loans,
lines of credit or any other sources.
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1509957/000149315221027274/form10-q.htm
About Can B Corp
Headquartered in Hicksville New York, Canbiola, Inc. (now known as
Can B Corp) -- http://www.canbiola.com-- develops, produces, and
sells products and delivery devices containing CBD. Cannabidiol
("CBD") is one of nearly 85 naturally occurring compounds
(cannabinoids) found in industrial hemp (it is also contained in
marijuana). The Company's products contain CBD derived from Hemp
and include products such as oils, creams, moisturizers, isolate,
and gel caps. In addition to offering white labeled products,
Canbiola has developed its own line of proprietary products, as
well as seeking synergistic value through acquisitions of products
and brands in the Hemp industry.
Can B Corp. reported a loss and comprehensive loss of $5.72 million
for the year ended Dec. 31, 2020, compared to a loss and
comprehensive loss of $5.90 million for the year ended Dec. 31,
2019. As of June 30, 2021, the Company had $6.16 million in total
assets, $3.21 million in total liabilities, and $2.96 million in
total stockholders' equity.
Hauppauge, NY-based BMKR, LLP, the Company's auditor since 2014,
issued a "going concern" qualification in its report dated April
12, 2021, citing that the Company incurred a net loss of $5,851,512
during the year ended December 31, 2020 and as of that date, had an
accumulated deficit of $30,521,025. Due to recurring losses from
operations and the accumulated deficit, the Company stated that
substantial doubt exists about its ability to continue as a going
concern.
CANACOL ENERGY: Moody's Rates New $450MM Sr. Unsecured Notes 'Ba3'
------------------------------------------------------------------
Moody's Investors Service assigned a Ba3 rating to Canacol Energy
Ltd.'s proposed up to $450 million senior unsecured notes due 2028.
Canacol's existing Ba3 ratings remain unchanged. The outlook is
stable.
Proceeds from the proposed notes will be used primarily to
refinance the company's existing notes due 2025 and a $30 million
senior secured loan, with no material effect on the company's
credit metrics.
The rating of the notes assumes that the final transaction
documents will not be materially different from draft legal
documentation reviewed by Moody's to date and that these agreements
are legally valid, binding, and enforceable.
RATINGS RATIONALE
Canacol's Ba3 rating reflects the company's small production and
reserves size, which is balanced by stable and predictable cash
flow, derived from contracted sales with solid fixed prices that
reduce volume and commodity price risk. Operating margins are solid
due to Canacol's low-cost operating structure, which supports
stable operating netback.
Canacol currently has access to 230 mmcf per day of pipeline
capacity. In the first six months of 2021, its production of
natural gas reached about 176,000 Mscfpd (30,000 Mboed), a volume
that will increase materially in the next few years as the company
steps up capital investments in exploration and production of
natural gas. Canacol has limited volume and price risk since about
80% of the company's sales are secured through long-term
take-or-pay contracts that have an average weighted life of seven
years. In addition, prices are 80% fixed in the contractual period
at profitable levels, resulting in stable EBITDA margins of about
78%.
Canacol's production comes mostly from a prolific area in Colombia,
Lower Magdalena Valley basin. In addition, its proved reserve life
is adequate at over six years and management is committed to
replacing reserves at an annual rate of 100-120%. The company's
business model is based on continued production and reserves growth
through a combination of exploration and property development.
Canacol has adequate liquidity. Cash and equivalents of $35 million
as of June 2021 plus $208 million in cash from operations that
Moody's expect from July 2021 to December 2022 are enough to fund
Canacol's capital spending program of about $130 million as well as
interest expenses and dividends of $30 million each, in the same
period. The company's debt maturity profile is comfortable because
currently no major debt matures before 2025. Proforma for the
proposed notes, refinancing risk is low since no major debt would
mature before 2028. Canacol has a $46 million committed revolver
that matures in 2023.
The stable rating outlook reflects Moody's expectation that Canacol
will be able to continue to increase production and reserves as
planned. The stable outlook also assumes that management will
maintain solid financial policies.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
Canacol's Ba3 ratings could be upgraded if it manages to increase
production closer to 100 MMboed and to raise its reserve size
efficiently, with minimal deterioration in financial metrics.
Quantitatively, an upgrade would require that its leveraged
full-cycle ratio, which measures an oil company's ability to
generate cash after operating, financial and reserve replacement
costs, is consistently above 2.5 times for a sustained period.
Canacol's Ba3 ratings could be downgraded if retained cash flow
(funds from operations less dividends) to total debt declines to
below 30%, or if its interest coverage, as per EBITDA to interest
expense, falls to below 4.5 times with limited prospects of a quick
turnaround. In addition, a deterioration of the company's liquidity
profile could lead to a negative rating action.
The principal methodology used in this rating was Independent
Exploration and Production published in August 2021.
Canacol, with headquarters in Alberta, Canada, is an independent
natural gas & oil exploration and production company in Colombia.
As of June 2021, its total assets amounted to $728 million.
CCS ASSET MANAGEMENT: Taps Hilco to Sell 'Cameron Road' Property
----------------------------------------------------------------
CCS Asset Management, Inc. received approval from the U.S.
Bankruptcy Court for the Western District of Texas to employ Hilco
Real Estate, LLC as its exclusive agent to market for sale its real
property in Travis County, Texas.
The firm's services include:
(a) meeting with the Debtor to ascertain its goals, objectives
and financial parameters in selling the "Cameron Road" property;
(b) providing market analysis for the sale of the property;
(c) advising the Debtor of the process to obtain the highest
and best offer for the property under the circumstances;
(d) soliciting interested parties for the sale of the property
and marketing the property for sale through an accelerated sales
process; and
(e) negotiating the terms of the sale of the assets.
Hilco will be paid a buyer's premium of 5 percent of the winning
bid amount, which buyer's premium will be charged to the winning
bid. The buyer's premium will be added to the winning bid price to
determine the total purchase price for the Cameron Road property
and will be paid to Hilco in cash as its commission.
In the event the Debtor accepts an offer to sell the property that
does not include the buyer's premium, it will pay Hilco a
commission equal to the same amount as would have been due if the
total purchase price of the offer had been calculated using a
buyer's premium of the percentage stated above.
In addition, Hilco will receive reimbursement of up to $10,000 for
marketing expenses actually expended.
As disclosed in court filings, Hilco is a "disinterested person" as
that term is defined in Bankruptcy Code Section 101(14).
The firm can be reached through:
Sarah Baker
Hilco Real Estate, LLC
5 Revere Drive, Suite 320
Northbrook, IL 60062
Tel: (847) 418-2703
Fax: (847) 897-0826
About CCS Asset Management Inc.
CCS Asset Management, Inc., an Austin, Texas-based company that
operates in the land subdivision industry, filed a voluntary
petition for Chapter 11 protection (Bankr. W.D. Texas Case No.
21-10355) on May 3, 2021, listing as much as $10 million in both
assets and liabilities. Anthony Sheridan, vice-president, signed
the petition.
Judge Tony M. Davis oversees the case.
Parkins Lee & Rubio, LLP and Gray & Associates, CPA, PC serve as
the Debtor's legal counsel and accountant, respectively.
CEDAR FAIR: Moody's Affirms B2 CFR & Alters Outlook to Stable
-------------------------------------------------------------
Moody's Investors Service affirmed Cedar Fair, L.P.'s B2 Corporate
Family Rating, Ba2 senior secured note and credit facility, and B3
senior notes ratings. The outlook was changed to stable from
negative.
The affirmation of the CFR and change in the outlook reflect the
strong recovery from the impact of the pandemic as well as the
improvement in free cash flow during the summer operating season.
Cedar Fair's Speculative Grade Liquidity (SGL) rating was upgraded
to SGL-2 from SGL-3 as the company had total liquidity of $922
million as of Q3 2021 (including $359 million of revolver
availability and $563 million of cash on the balance sheet). Free
Cash Flow (FCF) turned modestly positive ($41 million as of LTM Q3
2021) and Moody's projects FCF will remain positive in 2022,
despite higher expected capex as attendance levels continue to
recover from the impact of the pandemic.
Affirmations:
Issuer: Cedar Fair, L.P.
Corporate Family Rating, Affirmed B2
Probability of Default Rating, Affirmed B2-PD
Senior Secured Bank Credit Facility, Affirmed Ba2 (LGD2)
Senior Secured Regular Bond/Debenture, Affirmed Ba2 (LGD2)
Senior Unsecured Regular Bond/Debenture, Affirmed B3 (LGD5)
Issuer: Canada's Wonderland Company
Senior Secured Bank Credit Facility, Affirmed Ba2 (LGD2)
Upgrades:
Issuer: Cedar Fair, L.P.
Speculative Grade Liquidity Rating, Upgraded to SGL-2 from SGL-3
Outlook Actions:
Issuer: Cedar Fair, L.P.
Outlook, Changed To Stable From Negative
Issuer: Canada's Wonderland Company
Outlook, Changed To Stable From Negative
RATINGS RATIONALE
The B2 CFR reflects the extremely high leverage level (18.7x as of
Q3 2021 including Moody's standard adjustments) and Moody's view
that Cedar Fair's revenue and EBITDA will continue to improve over
the remainder of 2021 and 2022 due to strong pent up consumer
demand and fewer health restrictions which will support a recovery
in attendance levels. The pandemic severely impacted Cedar Fair's
portfolio of parks which led to negative EBITDA in 2020 and higher
debt levels. Cedar Fair operates 15 amusement and water parks
across North America, but its park in Toronto, which is one of its
larger parks, faced greater health and capacity restrictions during
the 2021 operating season than the parks located in the US. Cedar
Fair also competes for cyclical discretionary consumer spending
from an increasingly wide variety of other leisure and
entertainment activities.
Cedar Fair benefits from its typically sizable attendance (27.9
million in 2019) and revenue generated from a relatively
geographically diversified regional amusement park portfolio.
EBITDA margins and operating cash flows historically have been
good, and its parks have high barriers to entry. Cedar Fair's large
portfolio of regional amusement parks in the US and Canada are less
likely to be impacted by reduced travel activity as the vast
majority of guests are within driving distance of the parks. Cedar
Fair owns the land under all but one of its parks which is a
material positive. Ongoing cost efficiency and new revenue
initiatives will support performance going forward, although a
portion of the gains will be offset by higher wages for park
employees. Significant expenditures on new rides and attractions
prior to the pandemic and additional spending going forward will
also support the recovery in performance.
A governance impact that Moody's considers in Cedar Fair's credit
profile is the expectation of a less aggressive financial policy
going forward. Pre-pandemic Cedar Fair pursued a financial plan
that led to substantial dividend payments and minimal or negative
free cash flow, but Moody's expects the company will operate with a
more moderate financial policy with the goal to reduce leverage as
operations continue to recover from the pandemic. Cedar Fair is an
MLP and is a publicly traded company listed on the New York Stock
Exchange.
Cedar Fair' speculative grade liquidity rating of SGL-2 reflects a
good liquidity position with $563 million of cash and full access
to the $375 million revolving credit facility ($16 million of L/Cs
outstanding) as of Q3 2021. Cedar Fair extended $300 million of its
revolver maturity to December 2023 and the remaining $75 million
will mature in April 2022. While FCF was negative $599 million in
2020, it has turned positive as of LTM Q3 2021 and Moody's projects
FCF will remain positive, despite expectations of higher capex in
2022. Cedar Fair traditionally spent material amounts on capex each
year ($180 million spent in 2019, excluding the purchase of the
land at its park in Santa Clara for $150 million), but the company
reduced capex to $48 million LTM Q3 2021 in response to the impact
of the pandemic. Capex will increase to the $175 to $200 million
range in 2022. The partnership distributions were suspended to
preserve liquidity, but Moody's expects distributions will return
as performance improves. Moody's projects distributions will
account for a smaller portion of operating cash flow going forward,
compared to pre-pandemic levels as the company will remain focused
on reducing leverage levels.
Cedar Fair completed an amendment that extends the suspension of
the testing of the senior secured leverage financial maintenance
covenant through the end of 2021. Starting with the first quarter
of 2022, through the fourth quarter of 2022, Cedar Fair can
calculate the senior secured leverage covenant using Adjusted
EBITDA from the second, third and fourth quarters of 2019. Cedar
Fair will be subject to a minimum liquidity covenant of $125
million through the end of 2022.
The stable outlook reflects Moody's expectations that Cedar Fair's
results will continue to improve during the remainder of 2021 and
2022 due to strong consumer demand and the removal of capacity
restrictions at the company's parks. Cedar Fair will have to
contend with higher labor expenses and guest spending levels may
moderate in 2022, but Cedar Fair will likely benefit from higher
attendance levels as well as new revenue and cost savings
initiatives. Group sales have been slower to recover, but Moody's
expects group revenue will recover more significantly in 2022.
Moody's projects Cedar Fair's leverage will decline to
approximately 6x by the end of 2022 and to under the mid 5x range
by the end 2023 as EBITDA continues to recover as well as from debt
repayment.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
The ratings could be upgraded if leverage was projected to be
maintained well below 5x with a free cash flow to debt ratio of
over five percent after distributions to partners. Maintenance of a
good liquidity position with no near term debt maturities would
also be required.
The ratings could be downgraded if weak operating performance or
additional debt issuance lead to leverage sustained above 6.5x. A
significant deterioration in Cedar Fair's liquidity position may
also lead to a downgrade.
Cedar Fair, L.P. (Cedar Fair), headquartered in Sandusky, Ohio, is
a publicly traded Delaware master limited partnership (MLP) formed
in 1987 that owns and operates amusement parks, water parks, and
hotels in the U.S. and Canada. Properties include its four largest
parks, Cedar Point (OH), Knott's Berry Farm (CA), Canada's
Wonderland (Toronto), and Kings Island (OH). In June 2006, Cedar
Fair acquired Paramount Parks, Inc. from CBS Corporation for a
purchase price of $1.24 billion. In 2019, Cedar Fair bought two
water parks in Texas for approximately $261 million. Revenue for
the LTM ending Q3 2021 was approximately $1.02 billion.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
CINCINNATI BELL: Moody's Assigns B1 Rating to New $850MM Term Loan
------------------------------------------------------------------
Moody's Investors Service assigned a B1 rating to Cincinnati Bell
Inc.'s (CBB) new $850 million term loan and incremental $150
million add-on to the existing B1 rated term loan. The company's B1
Corporate Family Rating and B1-PD probability of default rating
remain unchanged. The B1 rating on the company's existing term loan
B and the B1 rating on the company's revolving credit facility
which is being upsized to $400 million from $275 million remain
unchanged. The B2 rating on the $88 million notes held at
Cincinnati Bell Telephone Company LLC (CBT) and the B2 rating on
the $22 million of 7.25% senior secured notes due 2023 also remain
unchanged. The outlook is stable.
The funds raised will be used to redeem the $975 million of
outstanding senior notes.
Assignments:
Issuer: Cincinnati Bell Inc.
Senior Secured 1st Lien Term Loan B2, Assigned B1 (LGD3)
Senior Secured Term Loan B, Assigned B1 (LGD3)
RATINGS RATIONALE
CBB's B1 CFR reflects the company's moderate leverage following the
acquisition by Macquarie Infrastructure Partners with Moody's
adjusted debt/EBITDA expected at around 3.6x in 2021. A key factor
supporting the rating is Moody's expectation that the company will
maintain a prudent financial policy and operate with leverage,
Moody's adjusted, of around 3.5x. The rating also reflects the
company's legacy market position as an incumbent local
telecommunications provider and its fiber-based business model. CBB
has been investing heavily in the expansion of a fiber network in
its Greater Cincinnati and Hawaii footprints and repositioning
itself as a competitive provider of broadband data, voice and video
services to residential, commercial and carrier customers.
The B1 rating also reflects the structural headwinds faced by the
company with legacy voice and video subscribers continuing to erode
and pressuring top line growth. The recent investments CBB made in
its enterprise-focused IT services business have helped return the
company to growth but they remain susceptible to intense
competition and much lower margins than the legacy business. Given
the need for fiber deployment -- to land-grab homes passed before
competitors do -- CBB's capital expenditure will continue to limit
free cash flow generation. Moody's does not expect material
deleveraging in the coming two years. In 2020, CBB generated $1.56
billion in revenue, a modest increase vs. $1.54 billion in 2019.
The company operates in two segments: Entertainment &
Communications (E&C) and IT Services & Hardware (ITS&H).
CBB is expected to have a good liquidity profile, supported by its
$400 million revolving credit facility and its $215 million
accounts receivable facility. The company is expected to hold only
a minimal cash balance and Moody's expects free cash flow to remain
low to neutral as the company continues to expand its FTTP
footprint. The revolver includes a springing first lien net
leverage covenant to be tested at 35% utilization and set at
5.75x.
The instrument ratings reflect the probability of default of the
company, as reflected in the B1-PD Probability of Default Rating,
an average expected family recovery rate of 50% at default, and the
particular instruments' ranking in the capital structure. The B1
rating on the senior secured facilities reflects the fact the
credit facilities will benefit from guarantees from all material
operating subsidiaries, and will be secured by substantially all
assets. The $88 million notes issued by Cincinnati Bell Telephone
Company LLC (CBT) will share security over the assets held at CBT
(estimated at 55%-60% of consolidated assets) with the secured
credit facilities and notes due 2024/2025 (which have now become
secured). These notes benefit from a guarantee from Cincinnati Bell
Inc. and their recovery over non-CBT assets would be subordinated
to that of secured credit facilities and secured notes due
2024/2025. The $22 million 7.25% senior secured notes due 2023,
only benefit from security over Cincinnati Bell Inc's assets, and
their security package excludes the assets held at CBT. As a result
Moody's rates both of these notes B2.
The stable outlook reflects Moody's expectations that CBB's ITS&H
operations will continue to grow and, with fiber demand, offset the
expected continued declines in the high margin legacy business.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's could upgrade the rating if leverage (Moody's adjusted)
were to sustainably decrease to below 3x while the company
generates material positive free cash flow.
Moody's could downgrade the rating if leverage (Moody's adjusted)
were to trend towards 4x or if the company were to fail to maintain
stable E&C revenue.
With headquarters in Cincinnati, Ohio, Cincinnati Bell Inc. is a
full-service regional provider of broadband data, voice and video
services, a provider of managed information technology services,
and a reseller of IT and telephony equipment. The company acquired
Hawaiian Telcom Communications, Inc., a leading provider of voice,
video, broadband, data center and cloud solutions, on July 2, 2018.
In 2020, CBB generated $1.56 billion in revenue and EBITDA of $436
million.
The principal methodology used in these ratings was
Telecommunications Service Providers published in January 2017.
CINCINNATI BELL: S&P Rates New Sec. First-Lien Term Loan B-2 'B+'
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S&P Global Ratings assigned its 'B+' issue-level rating to
U.S.-based telecommunications provider Cincinnati Bell Inc.'s
proposed $850 million senior secured first-lien term loan B-2 due
2028. The '2' recovery rating indicates its expectation of
substantial (70%-90%; rounded estimate: 70%) recovery in the event
of a payment default.
S&P said, "In addition, our issue-level rating on Cincinnati Bell's
existing $150 million first-lien term loan due 2028 remains 'B+',
with a '2' recovery rating, following the company's proposed $150
million add-on. Our issue-level rating on the company's $275
million revolving credit facility due 2026 remains 'B+', with a '2'
recovery rating, following its upsize by $125 million to $400
million."
The company will use net proceeds from the term loans and $15
million of borrowings under its revolving credit facility to repay
its $625 million of 7.0% senior secured notes due 2024, $350
million of 8.0% senior secured notes due 2025, and pay related fees
and expenses.
Although the incremental revolver size reduces recovery prospects
for secured lenders because we assume the revolver is 85% drawn in
our hypothetical default scenario, the lower recovery percentage is
not sufficient for S&P's to revise the '2' recovery rating.
S&P said, "Our issuer credit rating on Cincinnati Bell is 'B' with
a stable outlook. While legacy voice and data services will
continue to constrain growth in its entertainment and
communications segment, we believe that revenue from fiber-based
broadband will outpace declines from legacy products within a
couple years. This, combined with continued solid performance in
the IT services and hardware segment because of increasing demand
for managed services, should enable solid topline growth.
Therefore, we expect that adjusted debt to EBITDA will decline
modestly to the low- to mid-5x area in 2022 due to earnings
growth."
CLAY GEOFFREY PHILLIPS: $197K Sale of Greene County Property Okayed
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Judge Cynthia A. Norton of the U.S. Bankruptcy Court for the
Western District of Missouri authorized Clay Geoffrey Phillips'
sale of the real estate known as: All of Lots 8 & 9 Block 8, in the
Original Plat of Battlefield, in Greene County, Missouri, according
to the recorded plat thereof, pursuant to the terms of the Sale
Contract for a sum of $196,666.19.
The sale is free and clear and liens, with the proceeds to be
distributed at closing to the Small Business Administration in the
amount of $126,000, Greene County, Missouri real estate taxes of
$35,373.98, $8,292.21 to the Internal Revenue Service, and $20,000
to Central Bank of the Ozarks in and upon payment to those
Creditors that the property will be released from the lien, and
sold free and clear of liens with the Debtor to pay the U.S.
Trustee any trustee fees and all costs of closing.
The Debtor is authorized to sign the Deed of Conveyance.
The Order is effective immediately without the need for a 14-day
stay.
The bankruptcy case is In re: Clay Geoffrey Phillips, Case No.
14-61107 (Bankr. W.D. Mo.).
CLEARDAY INC: Hires Friedman LLP as New Auditor
-----------------------------------------------
The board of directors of Clearday Inc. has engaged Friedman LLP as
the company's independent registered public accounting firm for the
fiscal year ending Dec. 31, 2021, replacing Marcum LLP.
Friedman LLP served as the independent registered public accounting
firm of Allied Integral United, Inc. On Sept. 9, 2021, Clearday
completed its previously announced acquisition and merger with
AIU.
The report of Marcum LLP on Clearday's consolidated financial
statements for the years ended Dec. 31, 2019 and 2020 did not
contain an adverse opinion or disclaimer of opinion, nor was it
qualified or modified as to uncertainty, audit scope or accounting
principles.
During the years ended Dec. 31, 2019 and 2020, and the subsequent
interim period through July 3, 2021, there were no: (1)
disagreements (as defined in Item 304(a)(l)(iv) of Regulation S-K
and the related instructions) with Marcum LLP on any matter of
accounting principles or practices, financial statement disclosure,
or auditing scope or procedures, which disagreement if not resolved
to the satisfaction of Marcum LLP would have caused Marcum LLP to
make reference thereto in its reports on the consolidated financial
statements for such years, or (2) reportable events (as described
in Item 304(a)(l)(v) of Regulation S-K).
About Clearday
Clearday (fka Superconductor Technologies, Inc.) is an innovative
non-acute longevity health care services company with a modern,
hopeful vision for making high quality care options more
accessible, affordable, and empowering for older Americans and
those who love and care for them. Clearday has decade-long
experience in non-acute longevity care through its subsidiary
Memory Care America, which operates highly rated residential memory
care communities in four U.S. states. Clearday at Home -- its
digital service -- brings Clearday to the intersection of
telehealth, Software-as-a-Service (SaaS), and subscription-based
content.
Superconductor reported a net loss of $2.96 million in 2020
following a net loss of $9.23 million in 2019. As of July 3,
2021,
the Company had $2.36 million in total assets, $668,000 in total
liabilities, and $1.69 million in total stockholders' equity.
Los Angeles, CA-based Marcum LLP, the Company's auditor since 2009,
issued a "going concern" qualification in its report dated March
31, 2021, citing that the Company has a significant working capital
deficiency, has incurred significant losses and needs to raise
additional funds to meet its obligations and sustain is operations.
These conditions raise substantial doubt about the Company's
ability to continue as a going concern.
CLUBHOUSE MEDIA: Inks $15-Mil. Equity Line Agreement With Peak One
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Clubhouse Media Group, Inc. has entered into a $15 million Equity
Purchase Agreement and Registration Rights Agreement with Peak One
Opportunity Fund, L.P., a Delaware limited partnership.
Clubhouse Media will have the right to sell up to $15 million of
its Common Stock to Peak One over a 24-month period, upon
satisfaction of certain terms and conditions contained in the
Agreement and Registration Rights Agreement, which includes but is
not limited to filing a registration statement with the SEC,
registering the resale of any shares sold to Peak One. Pursuant to
certain terms and conditions contained in the Agreement and
Registration Rights Agreement, Peak One is obligated to purchase
shares upon receiving notice from Clubhouse Media as to the amount
of shares and timing of the purchase. Further, any Common Stock
that is sold to Peak One will occur at a purchase price of 95% of
the closing bid price on the trading day immediately preceding the
respective Put Date.
Amir Ben-Yohanan, CEO of Clubhouse Media, commented, "This $15
million financing with Peak One provides us with strong capital
backing to continue to execute on our strategic plans. Having
reliable capital backing will enable us to build on our momentum
with the flexibility to bring in capital in an opportunistic
manner. Clubhouse Media has many exciting opportunities available
for growth, and with this capital in place, we believe that we are
well positioned for the future."
About Clubhouse Media
Las Vegas, Nevada-based Clubhouse Media Group, Inc. operates a
global network of professionally run content houses, each of which
has its own brand, influencer cohort and production capabilities.
The Company offers management, production and deal-making services
to its handpicked influencers, a management division for individual
influencer clients, and an investment arm for joint ventures and
acquisitions for companies in the social media influencer space.
Its management team consists of successful entrepreneurs with
financial, legal, marketing, and digital content creation
expertise.
Clubhouse Media reported a net loss of $2.58 million for the year
ended Dec. 31, 2020, compared to a net loss of $74,764 for the year
ended Dec. 31, 2019.
Spokane, Washington-based Fruci & Associates II, PLLC, the
Company's auditor since 2020, issued a "going concern"
qualification in its report dated March 15, 2021, citing that the
Company has net losses and negative working capital. These factors
raise substantial doubt about the Company's ability to continue as
a going concern.
CM CHEETAH: S&P Assigns 'B' Issuer Credit Rating, Outlook Stable
----------------------------------------------------------------
S&P Global Ratings assigned its 'B' issuer credit rating to CM
Cheetah LP and its 'B' issue-level rating to the company's proposed
senior secured term loan issued by coborrowers Campaign Monitor
Finance Pty Ltd. and Finco US.
The stable outlook reflects S&P's expectation for the company to
execute on its organic growth strategy and implementation of cost
synergies such that S&P Global Ratings'-adjusted leverage improves
to the high-5x to low-6x range by 2022 while free cash flow to debt
remains in the 8%-10% range.
CM Group, a provider of email marketing solutions to small and
midsized businesses (SMBs), and Cheetah Digital, a provider of
customer engagement solutions to enterprise customers, will be
combined in a merger with an enterprise value of $2.2 billion.
The pro forma capitalization will include a $590 million,
seven-year first-lien term loan, a $45 million revolving credit
facility (unfunded at close), and approximately $1.7 billion of
common equity from the sponsors resulting in S&P Global
Ratings'-adjusted pro forma debt to EBITDA of about 6.5x-7x.
The rating primarily reflects the highly fragmented and competitive
nature of the email marketing industry, the company's low market
share, execution risk associated with aggressive cost-cutting, and
S&P Global Ratings'-adjusted leverage above 5x for the next few
years. Partially offsetting these factors are the company's sticky
customer base, highly recurring subscription-based revenues, and
modest ongoing capital spending requirements, resulting in
favorable cash flow conversion rates.
The email marketing industry is a cost-effective marketing tool but
with high exposure to SMBs vulnerable to failure. Despite the
proliferation of social media as a means of communication with
others, email is still highly relevant to consumers' lives.
According to Forbes, people check their email about 15 times per
day, making email a highly effective marketing tool. Email
marketing is especially attractive for SMBs as it is often the
cheapest way to contact their customers while generating the
highest return on investment out of all types of marketing.
Consequently, email marketing is a very sticky solution as it is
the backbone supporting the revenue-generating activities of SMBs
and enterprises. For example, CM Group has a 91% quarterly net
retention rate for the quarter ended June 30, 2021. S&P believes
most churn results from customer failure, as we estimate roughly a
third of SMB customers go out of business over the course of a
normal economic cycle. However, given the relatively low-cost and
critical nature of email marketing, it tends to be one of the last
costs customers target when facing financial difficulty.
The email marketing industry is extremely competitive with low
barriers to entry and little differentiation among competitors. The
space is highly fragmented with more than 200 players, and customer
acquisition costs are high, which makes scale a key determinant in
a company's competitive position in this industry. In addition,
companies are increasingly seeking more sophisticated marketing
solutions such as highly customized messages and personalized
customer loyalty programs. As a result, S&P expects the need for
greater scale and scope of marketing solutions to drive a wave of
consolidation in the industry, which should benefit the combined
CMG/Cheetah given their integrated, end-to-end solution, creating
opportunities for cross-selling and to improve customer retention
rates.
This combination enhances the company's competitive position, but
we recognize integration risk associated with an acquisitive growth
strategy. The combination of CMG's email marketing and Cheetah's
next-generation customer engagement platform creates an integrated,
end-to-end solution, which is a differentiator in terms of
CMG/Cheetah's ability to act as a one-stop shop for customers
across verticals and different corporate lifecycles. For instance,
as SMBs grow, their needs evolve such that they require more
sophisticated solutions beyond the scope of email marketing,
creating opportunities for CMG/Cheetah to retain clients otherwise
at risk of transitioning to competitive products.
However, the combined company consists of several brands that have
been acquired in recent years. S&P recognizes risks associated with
an acquisitive and aggressive cost cutting strategy. CMG standalone
has about $10 million in identified cost savings that will flow
through future periods from facility closures, vendor consolidation
and other cost-saving activities. Separately, Cheetah standalone
also has $12 million of identified costs savings from similar
initiatives before considering the synergies from bringing the two
companies together. S&P believes merging cultures, reducing
vendors, and other consolidation activities carries meaningful risk
that could result in operational disruptions and heightened churn.
The company has identified cost synergies in a number of areas,
which along with the scaling of the company's enterprise revenues
and rolling off of lower-margin legacy revenues could drive
sustained margin growth going forward. S&P said, "S&P Global
Ratings'-adjusted EBITDA does not add back software development
costs (we typically treat this as an operating expense), deferred
revenue, or restructuring costs, but we do give credit for cost
synergies in our forecast. Through combining CM Group and Cheetah
Digital, the company has identified $9 million of net cost savings
initiatives in year one, with the potential for almost $18 million
upside in year one and $5 million-$10 million in year two (in
addition to legacy cost reductions at each individual company). In
our forecast, we include about $14 million of cost reductions in
year one, but also consider costs to achieve these synergies.
Therefore, the most meaningful margin improvement comes in 2023,
with EBITDA margins forecast to grow to 26%-28% from about 21% on a
pro forma basis in 2021. Furthermore, given the favorable operating
leverage, there will likely be further upside to margins over the
next few years as the company curtails investment in its
lower-margin legacy business units and continues to scale its
next-generation enterprise platform."
S&P said, "We view Constant Contact as the closest rated peer, with
similar business risk profiles. Constant Contact offers a software
as a service (SaaS) online marketing platform that enables SMBs to
create, send, and track email marketing campaigns. The company is
the clear No. 2 player in the email marketing space with about 20%
share of the market, behind MailChimp with about 35% share of the
market, based on research from G2.com. In contrast, CM Group
accounts for less than 5% overall SMB share.
"However, we view favorably CMG/Cheetah's strategy of using CMG's
e-mail marketing as a lead engine to provide customers with more
sophisticated solutions from Cheetah as they grow. While the
combined company has more than 62,000 SMB accounts, its largest 100
enterprise customers account for a significant portion of EBITDA.
We believe these customers are more stable and less likely to
churn, as evidenced by a 100% net retention rate for Cheetah's
managed accounts in the quarter ended June 30, 2021." Given that
Constant Contact primarily targets very small businesses with less
than 20 employees, the company experiences much higher churn.
Constant Contact has higher EBITDA margins--in the low-40% range--
versus 25%-30% forecasted for CMG/Cheetah. However, S&P believes
this is partly because of higher service levels provided (as larger
customers also tend to require more complex marketing solutions),
more overhead associated with a wide range of offerings and brands
for different verticals, as well as having higher one-time costs
associated with the transaction. Therefore, we consider the
benefits of diversification when comparing profitability among the
two companies.
S&P said, "The stable outlook reflects our expectation for CM
Cheetah to execute on its organic growth strategy and
implementation of cost synergies such that S&P Global
Ratings'-adjusted leverage improves to the high-5x to low-6x range
by 2022 while free cash flow to debt remains in the 8%-10% range.
"We could lower the rating if CM Cheetah fails to execute on
cross-selling opportunities and underdelivers in terms of the
expected cost synergies or if intensifying competition leads to
elevated customer churn, such that S&P Global Ratings'-adjusted
leverage increases to 7x on a sustained basis. We could also lower
the rating if CMG/Cheetah engages in a large debt-funded
acquisition or leveraged recapitalization.
"Although unlikely over the next 12 months, there is upside to the
rating if the company materially outperforms our base case with
respect to organic revenue growth and EBITDA margin expansion, such
that S&P Global Ratings'-adjusted leverage improves to below 5x on
a sustained basis, notwithstanding any debt-financed acquisitions
or shareholder distributions."
COLGATE ENERGY III: $200MM Notes Add-on No Impact on Moody's B2 CFR
-------------------------------------------------------------------
Moody's Investors Service commented that Colgate Energy Partners
III, LLC's proposed $200 million add-on to its senior unsecured
notes due 2029 to fund an acquisition does not affect its ratings,
including Colgate's B2 Corporate Family Rating and B3 senior
unsecured notes ratings. Colgate's outlook remains positive and
reflects increasing production and reserves scale and Moody's
expectation for credit metrics to improve through 2022 while the
company keeps leverage low and maintains good liquidity.
Previously, Colgate completed two complementary acquisitions in
June and July that significantly boosted production and created
economies of scale. Colgate continues to develop a successful, but
relatively short, track record of operating at larger scale while
maintaining financial policies that target low leverage and
positive free cash flow.
Colgate is acquiring 22,000 net acres in the Delaware Basin. The
reserves are largely undeveloped and produce about 750 boe/d. The
additional assets are mostly contiguous acreage to Colgate's
existing position. Colgate expects the additional acreage to
provide drilling locations with a high rate of return that can be
prioritized in its development plans. Colgate expects to close the
acquisition in the first quarter of 2022.
Colgate's $300 million of senior unsecured notes due 2026 and $700
million of senior unsecured notes due 2029 (pro forma for the $200
million of add-on notes) are rated B3, one notch below the CFR,
reflecting effective subordination to the company's secured
borrowing base revolver due 2025 (unrated).
Colgate's B2 CFR reflects low leverage, solid interest coverage and
concentration in a single basin. Colgate is developing its track
record but has a relatively short history at scale. The company
meaningfully grew production from 3 Mboe/d in January 2018 to 34
Mboe/d in the second quarter of 2021 before nearly doubling it to
62 Mboe/d by the end of October as the assets acquired in mid-2021
became fully integrated. The company plans to reinvest cash flow in
its development program, further raising production scale in 2022.
Colgate's hedging program continues to support cash flow
visibility. The company's proved undeveloped reserves, including
those being purchased in the current acquisition, provide the
company with a large drilling inventory but require significant
capital to develop.
Moody's expects Colgate to maintain good liquidity through 2022.
The company's borrowing base is $625 million and elected
commitments are $500 million. As of October 31, 2021, the company
had $51 million of cash and $60 million was outstanding on the
revolver.
Factors that could lead to an upgrade include successful
integration and development of acquired assets with production
rising towards 75 Mboe/d; consistent positive free cash flow
generation and maintenance of low leverage; achievement of growth
at competitive returns on investment with a leveraged full cycle
ratio (LFCR) maintained above 1.5x; and debt-to-proved developed
(PD) reserves below $8 per boe.
Factors that could lead to a downgrade include negative free cash
flow that leads to higher debt; deterioration in liquidity; an LFCR
below 1x; debt-to-PD reserves above $10 per boe; and retained cash
flow (RCF) to debt below 30%.
Colgate, headquartered in Midland, Texas, is a privately owned
independent exploration and production company focused in the
Delaware Basin. The company is owned by Pearl Energy Investments,
NGP Energy Capital and company management.
CUENTAS INC: Amends Card Program Management Deal With Sutton Bank
-----------------------------------------------------------------
Cuentas Inc. entered into an amended and restated Prepaid Card
Program Management Agreement with Sutton Bank, an Ohio chartered
bank corporation.
Sutton Bank operates a prepaid card service and is an approved
issuer of prepaid cards on the Discover, Mastercard, and Visa
Networks. The bank agrees to the prepaid card services listed in
the amended agreement and other documents governing its prepaid
card program in connection with transactions processed on one or
more credit card networks
Pursuant to the amended agreement, Cuentas and Sutton Bank will
operate card programs in exchange for revenue share and expense
sharing between them. The agreement further provides that Cuentas
is responsible for and liable to Sutton Bank for fraud, unless such
expenses and losses were proximately caused by the negligence or
wilful misconduct of Sutton Bank.
The amended agreement replaces in its entirety the Prepaid Card
Program Management Agreement between Cuentas and Sutton Bank dated
June 27, 2019.
About Cuentas
Headquartered in Miami, Florida, Cuentas, Inc. --
http://www.cuentas.com-- is a Fintech company utilizing technical
innovation together with existing and emerging technologies to
deliver accessible, efficient and reliable mobile, new-era and
traditional financial services to consumers. Cuentas is
proactively applying technology and compliance requirements to
improve the availability, delivery, reliability and utilization of
financial services especially to the unbanked, underbanked and
underserved segments of today's society.
Cuentas reported a net loss attributable to the company of $8.10
million for the year ended Dec. 31, 2020, compared to a net loss
attributable to the company of $1.32 million for the year ended
Dec. 31, 2019. As of June 30, 2021, the Company had $12.94 million
in total assets, $3.45 million in total liabilities, and $9.48
million in total stockholders' equity.
DIAMOND SPORTS: Sinclair Buys Debts to Support Regional Sports Unit
-------------------------------------------------------------------
Sinclair Broadcast Group Inc. (NASDAQ: SBGI) is not giving up on
its debt-plagued, Covid-scarred regional sports network Diamond
Sports Group.
Sinclair Broadcast Group announced Nov. 8, 2021, that it has
purchased and assumed the lenders' and the administrative agent's
rights and obligations under the existing accounts receivable
securitization facility (the "A/R Facility") of its and Diamond
Sports Group, LLC's ("DSG") indirect subsidiary, Diamond Sports
Finance SPV, LLC ("Diamond SPV"). The Company purchased the
lenders' outstanding loans and commitments under the A/R Facility
by making a payment to the lenders as consideration for the
purchase of the lenders' respective rights and obligations under
the A/R Facility equal to approximately $184.4 million,
representing 101% of the aggregate outstanding principal amount of
the loans under the A/R Facility, plus any accrued interest and
outstanding fees and expenses.
In connection therewith, the Company and Diamond SPV entered into
an omnibus amendment to the A/R Facility to provide greater
flexibility to DSG, including, among other things, (i) increasing
the maximum facility limit availability from up to $250 million to
up to $400 million; (ii) eliminating the early amortization event
related to DSG's EBITDA less interest expense covenant; (iii)
extending the stated maturity date by one year from Sept. 23, 2023
to Sept. 23, 2024; and (iv) relaxing certain concentration limits
thereby increasing the amounts of certain accounts receivable
eligible to be sold. The other material terms of the A/R Facility
remain unchanged.
"We believe our decision to have the Company assume the lender
obligations under the A/R Facility demonstrates our sensible
long-term support of DSG," said Chris Ripley, the Company's Chief
Executive Officer. Ripley continued, "The amendment will provide
DSG with additional flexibility to manage its liquidity. At the
same time, we believe the structure of the facility results in a
low risk, high quality investment for the Company."
About Diamond Sports
Headquartered in Hunt Valley, Maryland, Diamond Sports Group, LLC,
was formed on March 11, 2019, and is the entity through which
Sinclair Broadcast Group, Inc., executed the acquisition of the
RSNs. Diamond owns and operates 22 RSNs that broadcast NBA, NHL and
MLB games on pay-TV platforms.
About Sinclair Broadcast
Sinclair Broadcast Group, Inc., operates as a television
broadcasting company in the United States. It owns or provides
various programming, operating, sales, and other non-programming
operating services to television stations. The company was founded
in 1986 and is headquartered in Hunt Valley, Maryland.
DIFFUSION PHARMACEUTICALS: Granted 180-Day Extension by Nasdaq
--------------------------------------------------------------
As previously disclosed, on May 6, 2021, Diffusion Pharmaceuticals
Inc. received a written notice from the staff of the Listing
Qualifications Department of The Nasdaq Stock Market, LLC relating
to the minimum bid price requirement contained in Nasdaq Listing
Rule 5550(a)(2). The May notice indicated that the company was not
in compliance with the bid price rule because the bid price for its
common stock had closed below $1.00 per share for the previous 30
consecutive business days. In accordance with Nasdaq Listing Rule
5810(c)(3)(A), the company was provided 180 calendar days, or until
Nov. 2, 2021, to regain compliance with the Bid Price Rule.
On Nov. 3, 2021, Diffusion Pharmaceuticals received an additional
notice from the staff providing that, although the company had not
regained compliance with the bid price rule by Nov. 2, 2021, in
accordance with Nasdaq Listing Rule 5810(c)(3)(A), the staff has
determined that the company is eligible for an additional 180
calendar days from the date of the November notice, or until May 2,
2022, to regain compliance with the bid price rule. To regain
compliance, the bid price for the company's common stock must close
at $1.00 per share or more for a minimum of 10 consecutive business
days.
The November notice has no effect on the listing or trading of
Diffusion Pharmaceuticals' common stock at this time, and the
company is currently evaluating its alternatives to resolve this
listing deficiency, including, if necessary and subject to the
approval of its board of directors and stockholders, implementing a
reverse stock split.
About Diffusion Pharmaceuticals
Diffusion Pharmaceuticals Inc. is an innovative biotechnology
company developing new treatments that improve the body's ability
to bring oxygen to the areas where it is needed most, offering new
hope for the treatment of life-threatening medical conditions.
Diffusion's lead drug TSC was originally developed in conjunction
with the Office of Naval Research, which was seeking a way to treat
hemorrhagic shock caused by massive blood loss on the battlefield.
Diffusion reported a net loss of $14.18 million for the year ended
Dec. 31, 2020, compared to a net loss of $11.80 million for the
year ended Dec. 31, 2019. As of June 30, 2021, the Company had
$52.71 million in total assets, $2.54 million in total liabilities,
and $50.17 million in total stockholders' equity.
DIOCESE OF NORWICH: Jones Walker, Hellman Represent Parish Group
----------------------------------------------------------------
In the Chapter 11 cases of The Norwich Roman Catholic Diocesan
Corporation, the law firm of Jones Walker LLP submitted a verified
statement under Rule 2019 of the Federal Rules of Bankruptcy
Procedure, to disclose that they are representing the Parish Group.
The Parishes consist of 51 entities listed on the attached Exhibit
A. It is expected that each entity listed on Exhibit A will join
the Association. An amended Verified Statement will be filed if the
membership in the Association changes. Further, the list on Exhibit
A includes Parishes who are successor corporations to former
parishes and therefore they may be listed more than once
artificially increasing the number of entities.
Saint Mary's Church Portland
Connecticut
P. O. Box 307
Portland
CT 06480-0307
The Church of Christ the King
Old Lyme, Incorporated
1 McCurdy Rd.
Old Lyme
CT 06371-1629
St. Pio Parish Corporation
161 Main Street
Old Saybrook
CT 06475- 2367
St, John's Roman Catholic Church
Montville, Connecticut
22 Maple Ave
Uncasville, CT 06382
The Our Lady of the Lakes Church Corporation
752 Norwich-Salem Turnpike
Oakdale, CT 06370
The Church of our Lady of Perpetual Help
63 Old Norwich Rd.
Quaker Hill, CT 06375
St. Therese of Lisieux Corporation
P.O. Box 655
Putnam, CT 06260
The Our Lady of Lourdes Corporation
1650 Route 12
Gales Ferry, CT 06335
The Sacred Heart Church Corporation
56 Sacred Heart Drive
Groton, CT 06340
The Saint Mary Church Corporation
69 Groton Long Point Rd.
Groton, CT 06340
St. John's Corporation of Cromwell, Connecticut
5 St. John Ct.
Cromwell, CT 06416-2118
The Saint Pius X Church Corporation
310 Westfield St.
Middletown, CT 06457-2080
Each Parish is an incorporated legal entity that has its own
employees, articles of incorporation, EIN, bank accounts, and real
property separate from the Debtor.
An Association was formed to address the concerns of the Parishes,
to advance the positions of the Parishes as a group, and as
necessary to defend the legal interests of the Parishes in the
Debtor's chapter 11 case. The Parishes agreed that it's in the best
interest of the Parishes to retain Jones Walker LLP to represent
all Parishes to save costs and resources and further their
interests. The Parishes intend to participate in this case as a
group.
Jones Walker is empowered and authorized to act on behalf of all
Parishes in this bankruptcy case.
As of July 15, 2021, the Parishes, in their capacity as a
collective group being represented by Jones Walker LLP, did not own
any equity securities of the Debtor.
Counsel for the Association of Parishes of The Roman Catholic
Diocese of Norwich, Connecticut can be reached at:
Mark A. Mintz, Esq.
Samantha Oppenheim, Esq.
Jones Walker LLP
201 St. Charles Avenue, 51st Floor
New Orleans, LA 70170
Telephone: (504) 582-8000
Facsimile: (504) 589-8260
E-mail: mmintz@joneswalker.com
soppenheim@joneswalker.com
- and -
Jeffrey Hellman, Esq.
Law Offices of Jeffrey Hellman, LLC
195 Church Street, 10th Floor
New Haven, CT 06510
Telephone: 203-691-8762
E-mail: jeff@jeffhellmanlaw.com
A copy of the Rule 2019 filing is available at
https://dm.epiq11.com/case/rcdn/dockets at no extra charge.
About The Norwich Roman Catholic
Diocesan Corporation
The Norwich Roman Catholic Diocesan Corporation is a nonprofit
corporation that gives endowments to parishes, schools, and other
organizations in the Diocese of Norwich, a Latin Church
ecclesiastical territory or diocese of the Catholic Church in
Connecticut and a small part of New York.
The Norwich Roman Catholic Diocesan Corporation sought Chapter 11
protection (Bankr. D. Conn. Case No. 21-20687) on July 15, 2021.
The Debtor estimated $10 million to $50 million in assets against
liabilities of more than $50 million. Judge James J. Tancredi
oversees the case.
The Debtor tapped Ice Miller, LLP as bankruptcy counsel and
Robinson & Cole, LLP as Connecticut counsel. Epiq Corporate
Restructuring, LLC is the claims and noticing agent.
On July 29, 2021, the U.S. Trustee for Region 2 appointed an
official committee of unsecured creditors in this Chapter 11 case.
The committee tapped Zeisler & Zeisler, PC as its legal counsel.
DISH DBS: S&P Affirms 'B-' ICR on Secured Debt Issuance
-------------------------------------------------------
S&P Global Ratings affirmed its 'B-' issuer credit rating on DISH
DBS Corp. (Subsidiary) and 'B- issue-level ratings on the existing
unsecured debt ('3' recovery rating is unchanged). At the same
time, S&P assigned a 'B+' issue-level rating and '1' recovery
rating the proposed secured notes.
S&P said, "We affirmed the 'B-' issue-level rating on Dish DBS'
existing unsecured debt. Although the issuance of $4 billion of
secured debt at Dish DBS reduces recovery prospects for unsecured
lenders with respect to the pay-TV assets, we believe this is
offset by a senior position on the spectrum assets. Therefore, our
'3' recovery rating, which indicates our expectation for meaningful
(50%-70%; rounded estimate: 65%) recovery in the event of payment
default, is unchanged.
"Our default valuation for the DBS business is about $7 billion
(after 5% administrative expenses). After the $4 billion of secured
debt, there is about $3 billion remaining for unsecured creditors.
However, Dish DBS' unsecured noteholders will rank senior with
respect to the cash or spectrum value (either purchased in Auction
110 or from existing Dish spectrum based on third-party valuation)
via an intercompany loan. There will be a negative pledge on this
spectrum, precluding it from being used to secure any other debt.
As such, we believe value lost from the pay-TV business will be
made up for with the value of the new spectrum acquired.
"Our 'B-' issuer credit rating already captured the likelihood that
Dish DBS' parent could use it as a funding vehicle for its wireless
business. There is capacity in the existing rating to absorb the
incremental $4 billion of debt because Dish DBS has grown earnings
and cash flow substantially since the start of the pandemic. In
fact, S&P Global Ratings'-adjusted LTM EBITDA of about $3.7 billion
is up around 35% compared with pre-COVID levels of $2.7 billion for
the year-ended 2019. This is mostly due to the following factors:
Higher prices: Dish average revenue per user (ARPU) has increased
to $95.41 for the nine months ended Sept. 30, 2021 from $85.55 for
the same period two years ago, an approximate 12% increase. Low
customer churn: Satellite-TV monthly churn was 1.32% for the
nine-months-ended Sept. 30, 2021, compared with 1.64% for the same
period two years ago. S&P said, "We believe Dish benefited from
social and travel restrictions during the pandemic, which resulted
in consumers spending significantly more time at home watching TV.
Furthermore, we believe temporary government stimulus has also
helped consumers absorb rising costs over the past 18 months. Lower
cost structure: Significantly lower customer additions resulted in
fewer truck rolls, lower advertising expense, and headcount
reductions. Furthermore, Dish dropped costly Sinclair regional
sports networks (RSN's) in July 2019 which has lowered programming
costs per subscriber."
S&P said, "However, we predict the rate of video-cord cutting will
accelerate again from a combination of rising prices, widening
availability of sports on streaming platforms, and lower-quality
general entertainment on traditional TV. We believe escalating
television programming costs will continue to result in rising
consumer prices, fueling more customer defections from pay-TV
services. As media companies raise affiliate fees for their linear
TV networks to make up for lost subscribers, we expect this
virtuous cycle to persist, leaving only die-hard sports fans and
higher-income consumers increasingly as the primary viewers of
traditional linear TV.
"However, key sports programming and news are becoming more widely
available on streaming platforms. We have historically viewed
sports and news as the glue holding the pay-TV bundle together
because content is often exclusive and watched live. While still
the most attractive content on TV, the draw of news and sports is
weakening as both genres are increasingly also available online.
Therefore, we expect the availability of key programming on both
linear TV and streaming platforms to accelerate cord-cutting as
consumers have more options to watch live news and sports."
The same situation is playing out with general entertainment. The
media companies are increasingly prioritizing some of their best
new original content to their owned direct-to-consumer (DTC)
platforms to differentiate their service and grow subscribers. This
redirection of content from the traditional linear TV network not
only improves the quality of DTC substitutes, but it also
simultaneously deprives the traditional ecosystem of the best new
content, making it less appealing.
These pressures are reflected in audience ratings for linear TV,
which are deteriorating at an alarming pace. According to Nielsen,
total day audience ratings year-to-date declined 15% year over year
for the four major English-language broadcast networks and 18% for
cable networks. This is despite the return of original programming
and sports, which were largely missing in 2020 due to COVID-19. S&P
believes these declines will likely worsen. In its opinion, the
only uncertainty is how quickly traditional TV's decline will
happen.
S&P said, "Although Dish may have a more profitable, rural customer
base, we believe significant uncertainty exists around EBITDA and
cash generation in 2022 and beyond. Dish began customer pruning
initiatives in 2017 by ending non-profitable promotions, with a
focus on ensuring new customers were of higher credit quality.
Given the historical low churn rates witnessed in recent months,
this could be a sign that Dish's remaining customers skew toward
rural areas, with fewer video alternatives. However, it's unclear
exactly how many customers face competition from only DirecTV
(which has renewed management focus following the spin-out from
AT&T)." Therefore, S&P believes recent benefits from the following
factors may not be sustainable:
-- ARPU: Dish may struggle to raise prices without causing
elevated churn, particularly if there is no government stimulus for
consumers.
-- Churn: Lower-priced streaming alternatives are becoming more
prevalent and could be more appealing for Dish customers that have
access to high-speed internet. As pandemic-related restriction
ease, competing forms of entertainment will re-open which will
likely contribute to a decline in TV viewership.
-- Lower installation costs: Fewer gross additions come at the
expense of future growth.
S&P's base-case includes the following EBITDA growth projections:
-- 2021: 5%-7%
-- 2022: (3)%-(6)%
-- 2023: (9)%-(13%)
The broadband infrastructure bill poses a significant long-term
risk to the size of the satellite TV addressable market. Satellite
providers can compete most effectively in markets that don't have a
cable provider offering high-speed internet (representing
approximately 12-15 million homes). However, the bipartisan
infrastructure bill includes an unprecedented $65 billion for
broadband deployment, with most of that money ($42 billion) to be
allocated to increasing high-speed internet availability through
government-subsidized buildouts into rural markets. If passed, it's
possible that funds could be distributed in late 2022 or early 2023
with a four-year deadline from date of the grant to the broadband
provider for service to be made available. This money would be on
top of the Rural Digital Opportunity Fund (RDOF) that will direct
$20 billion over 10 years to telecom providers to finance up to
gigabit-speed internet in unserved markets.
Therefore, S&P believes churn could begin to accelerate from
increased availability of high-speed internet, which will enable
more streaming options for consumers, in 2023 and beyond.
The company's capital structure is sustainable given strong cash
flow, but cash upstreaming poses risks. S&P said, "Under our
base-case scenario, Dish DBS has the ability to reduce leverage to
the low-3x area by the end of 2024 if it chooses to repay upcoming
maturities ($2 billion in 2022; $1.5 billion in 2023; $2 billion in
2024) with cash. However, we expect Dish DBS to at least partially
refinance these maturities to give it flexibility to continue to
upstream cash to the parent to fund its wireless network buildout.
We believe this strategy could amplify risks associated with
accelerating EBITDA losses as FOCF may be insufficient to keep pace
with EBITDA losses longer-term if Dish DBS does not reduce its debt
burden while generation is healthy in 2022."
The collateral that the intercompany loan from Dish Network
provides is consistent with our view that Dish DBS is moderately
strategic to Dish Network. S&P recognizes the importance of Dish
DBS to Dish Network, as the primary cash-generating asset,
particularly as the parent builds out its costly wireless network.
In the current ratings construct, this view prevents Dish DBS from
being rated more than one-notch below Dish Network.
However, the spectrum collateral provided is not cash generative
nor very liquid and will provide limited protection against default
on Dish DBS obligations. Therefore, we include the full value of
the secured obligation in S&P's adjusted Dish DBS credit metrics,
with no offset for the intercompany loan.
S&P said, "Long term, we believe it is more uncertain that Dish
Network would provide financial support to a declining pay-TV
business with a substantial debt burden. It appears there are
limited synergies between Dish's pay-TV business and its vision for
a nationwide 5G machine-to-machine IoT network. This raises
questions about the parent's willingness to provide money to Dish
DBS beyond what is pledged in the new intercompany loan (if, and
when, Dish Network or its other subsidiaries begin to generate
significant cash flow).
"The stable outlook reflects Dish's recent strong financial
performance, as robust earnings growth has created downside cushion
in the rating. Still, credit metrics are volatile, we project
earnings decline in 2022 and beyond, and ownership's target
leverage is unclear.
"We could lower the stand-alone credit profile (SACP) on Dish DBS
if debt to EBITDA approaches 5x without a clear path for
improvement. This could be the result of a $2 billion refinancing
in 2022, with no debt repayment, combined with EBITDA declines of
greater than 10% because of heightened churn. Although unlikely
over the next year, we could also lower the rating if we downgrade
the parent to 'CCC+' or below.
"We could raise the SACP if Dish DBS maintains debt to EBITDA below
4x on a sustained basis with a credible path of deleveraging. While
Dish could achieve this metric with EBITDA declines of 3%-6% in
2022 if it uses internal cash to repay $2 billion of debt coming
due, any upgrade to the SACP will require ongoing stability in
operating trends."
DISH NETWORK: Moody's Lowers CFR & Senior Unsecured Notes to B2
---------------------------------------------------------------
Moody's Investors Service downgraded DISH Network Corporation's
("DISH") corporate family rating to B2 from B1, its senior
unsecured notes to B2 from B1, and its probability of default (PDR)
rating to B1-PD from Ba3-PD. Moody's also affirmed the B2 CFR of
DISH DBS Corporation (a wholly-owned subsidiary of DISH Network
"DBS"), downgraded its senior unsecured debt ratings to B3 from B2,
and its PDR rating to B2-PD from B1-PD. Concurrently, Moody's
assigned a Ba3 rating to DBS's proposed $4 billion of senior
secured notes. DISH's speculative grade liquidity (SGL) rating is
unchanged from SGL-2. The outlook is stable.
The downgrade of DISH's CFR and unsecured notes is due to Moody's
expectation that debt and leverage will increase at DISH
(stand-alone) as a result of the transaction. The proceeds of the
secured notes offering at DBS will be transferred to DISH via an
intercompany loan. The intercompany loan will be secured by (i) the
cash proceeds of the loan and (ii) an interest in any wireless
spectrum licenses acquired using such proceeds. In certain cases,
DISH wireless spectrum licenses (valued based upon a third-party
valuation) may be substituted for the collateral. The intercompany
loan will not be included as collateral for the DBS senior secured
notes, and the notes will be subordinated to DBS's existing and
certain future unsecured notes with respect to certain realizations
under the intercompany loan and any collateral pledged as security
for the intercompany loan. Such collateral may not be subject to
additional encumbrances, other than certain permitted liens. If the
proceeds from the collateral were to be insufficient to satisfy
DISH's payment obligations under the intercompany loan, the amount
of such deficiency would be an unsecured claim against DISH and
pari passu with its existing unsecured notes. Current debt at DISH
is about $6 billion and the intercompany loan would bring that to
at least $10 billion. There is still significant capital needed for
the build-out of DISH's planned wireless network, so the present
cash balance of approximately $2.3 billion is unlikely to be used
to reduce indebtedness.
The affirmation of DBS's CFR is due to the neutralizing effect of
the intercompany loan on the impact from the new debt issuance.
While the FCC prohibits security interests in FCC licenses, and
some potential uncertainty exists as to the ability to perfect a
security interest in the proceeds of a sale of FCC licenses, in
Moody's view the negative pledge against any other encumbrances of
the collateral mitigates that potential deficiency. Moody's
anticipate that the intercompany loan terms will be structured to
effectively mirror or exceed the cost of the new secured notes and
link DBS more closely to DISH, but will fall far short of a full
bilateral guarantee and consolidation of the two credits. The
downgrade of the existing senior unsecured notes at DBS is caused
by the issuance of the new secured notes, which will result in
contractual subordination of the unsecured notes and potential
disproportionate loss absorption relative to the new secured notes
if a bankruptcy were to occur. However, Moody's note that the
unsecured notes will be contractually senior to the new secured
notes with respect to certain realizations under the intercompany
loan and any collateral pledged as security for the intercompany
loan. The PDR of DBS was downgraded due to the existence of secured
debt in the capital structure, which Moody's believe will result in
a higher probability of default and also higher recovery in default
due to reduced flexibility to add more debt. Moody's believe that
the issuance of the DBS secured notes represents a change in
financial policy regarding the use of secured debt, and therefore
governance is a key factor in these rating actions.
Downgrades:
Issuer: Dish Network Corporation
Corporate Family Rating, Downgraded to B2 from B1
Probability of Default Rating, Downgraded to B1-PD from Ba3-PD
Senior Unsecured Regular Bond/Debenture, Downgraded to B2 (LGD5)
from B1 (LGD5)
Issuer: Dish DBS Corporation
Probability of Default Rating, Downgraded to B2-PD from B1-PD
Senior Unsecured Regular Bond/Debenture, Downgraded to B3 (LGD5)
from B2 (LGD4)
Affirmations:
Issuer: Dish DBS Corporation
Corporate Family Rating, Affirmed B2
Assignments:
: Dish DBS Corporation
Senior Secured Regular Bond/Debenture, Assigned Ba3 (LGD3)
Outlook Actions:
Issuer: Dish DBS Corporation
Outlook, Remains Stable
Issuer: Dish Network Corporation
Outlook, Remains Stable
RATINGS RATIONALE
DISH's B2 CFR and DBS's B2 CFR reflect high pro forma gross
debt-to-EBITDA consolidated leverage (around 5.0x at consolidated
DISH) as of 9/30/2021 (incorporating Moody's standard adjustments)
for a company that is facing strong secular headwinds (DBS) and
significant startup and buildout costs (DISH). Moody's anticipate
that leverage will climb further without balance in capital
raising. DISH's B2 CFR is supported by the substantial asset value
derived from its vast wireless spectrum license holdings, although
they are in process of being converted into operating assets which
will need to generate revenues and eventually profits since it is
unlikely at this point that these assets will be sold/monetized as
financial assets. DISH's only subscribers are those acquired from
Sprint and T-Mobile in mid-2020 and the revenue stream it gets from
leasing certain satellite assets to DBS. DBS's B2 CFR reflects
Moody's concern that secular pressure from changing television
consumption habits to SVOD services like Netflix, Inc. (Ba1
positive) and other emerging direct-to-consumer platforms, will
continue to result in increasing cord-cutting of traditional linear
bundled pay TV services in the US, and Moody's do not expect SLING
TV, the company's over-the-top pay TV business to grow sufficiently
to mitigate the DBS subscriber losses. However, declining pay TV
penetration levels, particularly for smaller cable companies, will
likely result in elimination of pay TV service offerings by these
companies when they become unprofitable, and direct broadcast
satellite-distributed traditional linear pay TV providers could be
the beneficiaries in future years as they increasingly become the
providers of last resort, which may effectively elongate the
revenue tail for DBS. This would also likely give companies like
DBS more leverage against rising affiliate fees by networks. DBS
bondholders have no legal recourse to DISH or its wireless spectrum
licenses other than any wireless spectrum licenses pledged as
collateral for the intercompany loan, and have limited protection
against the upstreaming of cash to DISH, although the intercompany
loan restricts DBS from using any proceeds from prepayment of the
loan to directly make cash dividends or distributions to DISH prior
to repayment in full of the intercompany loan.
The rating also considers the company's controlling shareholder
structure. The controlling shareholder and Chairman, Charles Ergen,
has demonstrated willingness to be highly acquisitive, and to use
significant amount of debt and leverage to fund much of the
financing costs. In addition, limited transparency on fiscal
policies, extremely limited financial guidance from the company's
management, and flexible indenture covenants also moderately
constrain the CFR.
As of September 30, 2021, DISH and DBS had combined about $2.3
billion of cash and cash equivalents and about $3.0 billion of
marketable securities. The company has no revolving bank facility,
but Moody's believe that the company has significant alternate
liquidity potential with debt capacity at DISH, given only $6
billion of debt outstanding (excluding the intercompany loan),
which is far less than the perceived value of the spectrum license
assets it has accumulated over the years. DISH did not acquire a
substantial amount of wireless spectrum licenses in the C-Band
auction that concluded in February 2021 in the U.S., but Moody's
anticipate that the company may be active in the current auction,
may pursue other wireless spectrum license transactions and has a
standing option to acquire $3 billion of wireless spectrum licenses
from T-Mobile. DISH's need for additional capital to fund the
build-out of its wireless network was largely expected. However,
further increases in debt without additional equity capital raising
would increase financial risks at a time when DISH is still in its
developmental IOT network buildout stage and while DBS is unlikely
to see secular pressures recede in its pay TV business, and could
therefore further impact the company's credit ratings.
The stable outlook reflects Moody's expectation that the company
has adequate liquidity for DISH and DBS for the next 12 to 18
months to fund 5G build-out costs over that period and fund DBS's
$2 billion unsecured notes maturity in July 2022.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Given the capital needs and the start-up nature of the 5G build-out
at DISH and the debt maturities and secular pressures at DBS, a
rating upgrade for either company is unlikely. An upgrade could
occur if: 1) material equity capital is raised from a strategic
investor, such that little or no additional debt is likely to be
needed by DISH to complete the company's IOT vision; and 2) DBS can
manage its maturities in 2022 and beyond with senior unsecured debt
rather than secured debt, and demonstrates that it can pace the
secular pressure with continuing ability to reduce debt and
leverage.
Moody's recognize that DISH is transitioning from an asset holding
company (excluding DBS) to a wireless broadband company. That means
that it faces significant costs to build out its network, and then
to market it before it will achieve enough customers to generate
profits. Thus, the ratings will tolerate some temporary escalation
in leverage during this period. Ratings may be downgraded further
if DISH engages in more pure debt-financed acquisitions and
spectrum license purchases or debt-only financed build-out of the
network and start-up costs such that consolidated leverage is
sustained over 6.0x (including Moody's adjustments) after the
company reaches the requisite FCC-mandated build-out coverage
requirements. For DBS, ratings could face a downgrade if leverage
is sustained above 4.0x after 2022, if subscriber losses decline at
a faster pace than historical trends, or if liquidity becomes
constrained.
DBS is a wholly owned subsidiary of DISH and is a direct broadcast
satellite pay-TV provider, as well as an internet pay-TV provider
through its SLING TV business, with a total of approximately 11.0
million subscribers as of September 30, 2021. DBS's revenue for LTM
September 30, 2021 was $12.8 billion. DISH also operates a wireless
business segment, making the company the fourth U.S. national
carrier. DISH's wireless segment operates in two business units,
Retail Wireless and 5G Network Deployment. DISH's revenue for LTM
September 30, 2021 was roughly $18.0 billion on a consolidated
basis.
The principal methodology used in these ratings was Pay TV
published in October 2021.
DISH NETWORK: S&P Downgrades ICR to 'B-' on Increased Debt
----------------------------------------------------------
S&P Global Ratings lowered all ratings on Dish Network Corp.
(Parent) one notch, including its issuer credit rating to 'B-', as
Dish will likely sustain leverage above its 6.5x downgrade trigger
for at least the next year.
The stable outlook reflects S&P's view that the company will
maintain adequate liquidity--with a variety of funding options--as
it builds out its wireless network over the next several years.
However, rating upside is limited by uncertainty with 5G startup
costs and secular pressures facing the satellite TV business, which
will likely reduce EBITDA and keep leverage above our 6.5x upgrade
trigger.
Higher leverage from the issuance of new notes to fund spectrum
license purchases heightens risk around operational performance
over the next year. The pay-TV business has increased earnings and
cash flow significantly over the past 18 months, with EBITDA up
about 35% since the start of the COVID-19 pandemic. However, S&P's
believe the pace of video subscriber declines could accelerate from
a combination of rising prices, widening availability of sports on
streaming platforms, and lower quality general entertainment on
traditional TV. While Dish may have a more profitable, rural
customer base, we believe there is significant uncertainty around
pay-TV EBITDA in 2022 and beyond.
On the wireless side, Dish will accelerate its 5G network buildout
in the coming months. S&P said, "We project this will result in
upfront startup losses as sales and marketing ramps up, vendor
costs increase, and sales remain relatively nascent. We believe
Dish's retail business, which generates about $500 million-$600
million per year in EBITDA and largely consists of its prepaid
business, can offset the pickup in 5G network operating expenses as
we project roughly break-even wireless EBITDA in 2022. However, we
recognize significant uncertainty with this forecast, particularly
if churn picks up in Dish's prepaid business as social distancing
restrictions ease or 5G sales do not materialize in this new
market."
S&P said, "We include tower lease commitments in our adjusted
credit metrics. Dish has signed several long-term lease agreements
with tower providers, including American Tower, Crown Castle, and
SBA Communications. As of Sept. 30, 2021, there was roughly $13.6
billion in off-balance-sheet commitments principally for tower
obligations that extend until 2036. Consistent with our treatment
for other wireless carriers, we view these commitments as
debt-like. Therefore, our adjusted debt balance includes roughly
$9.5 billion in tower leases, using a net present value approach.
We have not adjusted EBITDA materially because there is minimal
rent showing up in operating expenses, but as Dish begins to make
payments, we will accordingly adjust EBITDA for the associated
interest and depreciation component of rent expense (as if
capitalized) accordingly.
"We believe the company's funding gap has narrowed due to a
combination of stronger pay-TV cash generation and more flexibility
provided by the recent wholesale mobile virtual network operator
(MVNO) deal with AT&T Inc. The pay-TV business raised average
revenue per user about 11% over the past 18 months, lowered its
cost structure, and experienced very low churn through the
pandemic. This resulted in healthy free operating cash flow (FOCF)
of about $1.5 billion over the past 12 months. Although we believe
there will likely be moderate pressure on pay-TV FOCF as EBITDA
declines over the next 2-3 years, we now project it will remain
over $1 billion through 2024 providing greater than expected
support to fund wireless capital requirements."
Separately, Dish agreed in July 2021 to make AT&T the primary
network services partner for Dish MVNO customers, paying AT&T at
least $5 billion over the next 10 years. Importantly, we believe
this agreement provides Dish with more financial flexibility
because its MVNO agreement with T-Mobile US Inc. expires in 2027.
We now believe Dish can rely on AT&T for coverage in more rural
markets through 2031, reducing our startup loss projections and
extending the timeline for rural capital expenditures (capex).
Although Dish will still need to meet U.S. Federal Communications
Commission (FCC) buildout requirements, it is only required to
cover 70% of the U.S. population for AWS-4, 700 megahertz (MHz),
and H-Block licenses by June 2023 and 75% of the population for
each partial economic area by 2025 with respect to the 600 MHz and
AWS-3 licenses. This will still involve significant amount of
capital and the MVNO deal does not ease these requirements.
However, building out the minimum requirements to satisfy the FCC
would have been insufficient to effectively compete with
established wireless players that have nationwide networks covering
99% of the population. Therefore, before the AT&T MVNO, Dish would
have had to build out into the less profitable rural markets much
quicker because the T-Mobile MVNO expires shortly after the FCC
buildout deadlines. With the AT&T MVNO, we believe Dish can rely on
AT&T's network to provide service in less densely populated markets
longer while reaping the benefits of owner economics in
higher-traffic areas.
S&P said, "Therefore, we now project a more manageable funding
shortfall of about $1 billion per year in 2022 and 2023 before
rising to about $2 billion in 2024. Given Dish Network's roughly
$5.2 billion in cash and marketable securities as of Sept. 30,
2021, we believe the need for external capital has been reduced
(assuming this cash balance is not depleted by spectrum purchases
in Auction 110).
"Still, we do not expect credit metrics to improve over the next
2-3 years. This is primarily because we project consolidated EBITDA
declines of 10%-15% over the next two years, combined with elevated
capital spending, to limit Dish's ability to reduce leverage. Our
base case does not include equity contributions, which we believe
are possible.
"The stable outlook on Dish reflects our view that leverage is
likely to remain above 6.5x for the next year but that its largely
unencumbered spectrum licenses provide a variety of funding
options, such that Dish maintains adequate liquidity."
S&P could lower its rating on Dish if:
-- S&P views the capital structure as unsustainable, which could
be caused by sharper than expected losses in its pay-TV or wireless
businesses--such that consolidated EBITDA declines about 20% or
more--combined with an absence of an equity infusion sufficient to
offset them; or
-- Less likely, the company's liquidity position deteriorates to
the point we believe a default is likely over the next year.
S&P could raise the ratings if:
-- S&P gains greater visibility into Dish's ability to maintain
leverage of less than 6.5x, which would likely require an equity
infusion or strategic partnership that provides increased earnings
and funding visibility.
DLC US: S&P Assigns 'BB-' ICR on Acquisition by DL Chemical
-----------------------------------------------------------
S&P Global Ratings assigned its 'BB-' issuer credit rating to DLC
U.S. Inc., which will be the initial U.S.-based borrower on the
proposed term loan facility.
On Sept. 27, 2021, Kraton Corp. announced that it had entered into
a definitive agreement to be acquired by DL Chemical Co. Ltd. (DL
Chem), a petrochemical company based in South Korea, and an
operating subsidiary of DL Holdings Co. Ltd. (DL Holdings), also
based in South Korea.
Upon acquisition close, DLC U.S. Inc. will merge with and into
Kraton Corp., with Kraton surviving the merger as a ring fenced,
non-guarantor, wholly owned subsidiary of DL Chemical.
S&P said, "We have also assigned our 'BB' issue-level rating to the
company's $950 million first-lien term loan. Our recovery rating of
'2' indicates our expectation for substantial (70%-90%; rounded
estimate: 70%) recovery in the event of a payment default.
"Our ratings reflect our assumption that newly created DLC U.S
Inc's business consists entirely of the unchanged business of
Kraton Corp. and that the transaction will result in debt leverage
that is materially similar to that of Kraton Corp."
Upon transaction close (and merger into Kraton Corp), the $735
million principal amount of Kraton's existing unsecured notes and
$98 million euro term loan will be replaced with a $950 million
first-lien term loan facility, resulting in an increase in gross
debt of approximately $100 million. S&P said, "As a result, we
continue to expect debt to EBITDA in the 3x-4x range and FFO to
debt exceeding 20% on a weighted average basis. The slight increase
in absolute debt is offset by our expectation for strong EBITDA
growth in 2021 and consistent free cash flow generation in the $75
million-$125 million range over the next few years. Globally,
positive demand trends across the company's key end-markets, such
as adhesives, paving, roofing, and consumer durables, have led to a
double-digit rebound in volumes through the first nine months of
the year. While higher raw material, production, and logistics
costs have negatively affected earnings in 2021, we expect the
company's ongoing pricing initiatives, which we generally expect to
trail raw material price increases with a moderate lag, will
support S&P Global Ratings-adjusted EBITDA in excess of $300
million over the next few years."
S&P said, "We expect new ownership to pursue financial policies
that will remain supportive of credit metrics we view as
appropriate for the 'BB-' rating, including maintaining FFO to debt
between 20% and 30%.
"We believe ownership will pursue prudent financial policies, as
evidenced by the initial capitalization of the company, which
includes a $1.5 billion equity contribution by DL Chemical.
Initially, we assume debt repayment and organic growth initiatives
will be given priority over shareholder distributions or
acquisitions; however, we expect Kraton (post-merger with DLC US)
will generate significant excess free cash flow, a portion of which
we assume will be distributed to the parent once Kraton reaches its
long-term gross leverage target. In our base case, we expect the
company to direct the majority of cash flow generation toward
organic growth opportunities and modest debt reduction and do not
expect large debt-funded acquisitions or shareholder distributions.
We assume Kraton functions as an independent entity and our 'BB-'
rating on Kraton does not consider any group support from the
parent or any support by Kraton to the parent.
"Our assessment of post-merger Kraton's business reflects the
company's average profitability and considerable geographic and
product diversity, which are offset, in our view, by the company's
high exposure to cyclical end-markets and volatile raw material
input pricing.
"We view the company's two segments: polymer and chemical, as
complimentary, and supportive of our business assessment, since
they require distinct raw material inputs and are generally exposed
to separate end-markets, with some overlap. The company's polymer
segment uses butadiene, styrene, and isoprene as its primary raw
material inputs and serves adhesive, consumer, automotive, paving,
and roofing end-markets while its chemical segment upgrades and
refines crude tall oil (CTO) and crude sulfate turpentine (CST)
into products used in adhesive, coating, mining, oilfield, and tire
applications. The diversification benefit provided by the two
segments is offset, in our view, by volatile raw material cost
fluctuations in both businesses and the company's overall exposure
to cyclical end markets. While we regard raw material cost and
earnings volatility as key risks, we expect that Kraton will
continue to pass through raw material price increases to customers
with a moderate lag, consistent with its historical pricing
strategy. This should support segment margins, which we view as
average for the chemicals sector, in the mid-to-high-teens range on
an S&P Global Ratings-adjusted basis. Our business assessment also
considers additional factors, including the company's geographic
diversity, its limited customer concentration, susceptibility to
competition from alternative products, and moderate supplier
concentration. Thus far in 2021, the company has derived about 45%
of total revenue from the Americas, 37% from EMEA, and about 18%
from Asia-Pacific. In addition, the company has a long-term supply
contract with International Paper to purchase all of its CTO and
CST, which extends through 2027.
"The stable outlook reflects our expectation that post-merger
Kraton's weighted average FFO to debt will remain between 20% and
30% over the next 12 months. We believe strong demand, volume
growth across the company's portfolio, and pricing actions related
to raw material cost inflation should lead to substantial revenue
growth in 2021. Our EBITDA expectation reflects our view that
Kraton will continue to pass on raw material price increases to
customers. We have not incorporated any large debt-funded
acquisitions or distributions to owners in our base case and
believe management will prioritize free cash flow for organic
growth initiatives and debt repayment over acquisitions or
dividends.
"We could lower our ratings over the next 12 months if the
broad-based demand strength across Kraton's key end markets, such
as paving, roofing, and adhesives, was to weaken significantly,
resulting in a decline in volumes and revenue. We could also
consider a lower rating if, contrary to historical trends, the
company struggled to pass on rising raw material costs to customers
in a timely manner, leading S&P Global Ratings-adjusted EBITDA
margins to decline by more than 200 basis points (bps). We could
also lower the ratings if, against our expectations, the company
undertook more aggressive financial policies, including large
debt-funded acquisitions or dividends, which caused credit measures
to deteriorate, such that FFO to debt fell below 20% on a weighted
average basis. In addition, we could take a negative rating action
if credit quality at the parent weakened materially and, in our
view, hurt or had the potential to hurt credit quality at Kraton.
"Although unlikely at this time, we could take a positive rating
action on Kraton over the next 12 months if demand in key
end-markets was stronger than currently expected and EBITDA margins
improved significantly during a period of stable raw material
pricing. In such an upside scenario, we would expect to see volume
and revenue growth 10% above our current assumptions, along with a
400 bps improvement in S&P Global Ratings-adjusted EBITDA margins.
To consider a positive action, we would also expect the company to
use free cash flow to repay debt on an ongoing basis and refrain
from debt-funded acquisitions or dividends, leading to materially
improved credit metrics, including weighted average FFO to debt
above 30% on a weighted average basis."
DONUT HOUSE: Second Amended Subchapter V Plan Confirmed by Judge
----------------------------------------------------------------
Judge Joseph G. Rosania, Jr., has entered an order confirming the
Second Amended Joint Plan of Reorganization under Subchapter V
filed by The Donut House, Inc. ("DH") and Omar Dieyleh ("Dieyleh"
and together "Debtors").
The Bankruptcy Court finds that the provisions of Chapter 11 of the
Bankruptcy Code have been complied with, in that the Plan has been
proposed in good faith and not by any means forbidden by law, and
all insiders involved in the Debtors' post-confirmation activities
are disclosed in the Plan and the exhibits thereto along with their
relationship to and compensation from the Debtors.
In addition, each holder of a claim or interest has accepted the
Plan or will receive or retain under the Plan property of a value,
as of the Effective Date of the Plan, that is not less than the
amount that such holder would receive or retain if the Debtors were
liquidated under Chapter 7 of the Bankruptcy Code. That all
payments made or promised by the Debtors under the Plan or by any
other person for services or costs and expenses in or in connection
with the Plan or incident to the case have been fully disclosed to
the Court and are reasonable or if to be fixed after confirmation
of the Plan will be subject to approval of the Court.
A full-text copy of the Plan Confirmation Order dated November 04,
2021, is available at https://bit.ly/3DdJDYh from PacerMonitor.com
at no charge.
Attorneys for the Donut House:
Keri L. Riley, #47605
Kutner Brinen Dickey Riley, P.C.
1660 Lincoln St., Suite 1720
Denver, CO 80264
Telephone: 303- 832-2400
Email: klr@kutnerlaw.com
Co-counsel to Omar Dieyleh:
Stuart J. Carr, #19708
2851 S. Parker Rd., Suite 710
Aurora, CO 80014
Tel: (303) 369-1915
Fax: (303) 369-0277
E-Mail: stuartjcarr@hotmail.com
- and -
Jan L. Hammerman
P.O. Box 3446
Englewood, CO 80155
Tel: (720) 261-8013
E-mail: Jlhammerman111@msn.com
About Donut House
The Donut House, Inc., a Colorado corporation that owns and
operates several Donut House restaurant locations in the Denver
Metro area, sought protection under Chapter 11 of the Bankruptcy
Code (Bankr. D. Colo. Case No. 21-11349) on March 22, 2021, listing
under $1 million in both assets and liabilities. Kutner Brinen
Dickey Riley, PC serves as the Debtor's counsel.
DURABILIS ROOFING: Taps Dellutri Law Group as Bankruptcy Counsel
----------------------------------------------------------------
Durabilis Roofing, LLC seeks approval from the U.S. Bankruptcy
Court for the Middle District of Florida to hire Dellutri Law Group
to serve as legal counsel in its Chapter 11 case.
The firm's services include:
(a) advising the Debtor as to its powers and duties under the
Bankruptcy Code;
(b) preparing legal papers;
(c) representing the Debtor at all meetings of creditors,
hearings, pretrial conferences and trials in the case;
(d) assisting with and participating in negotiations with
creditors and other parties in interest in formulating a plan of
reorganization, drafting the plan and disclosure statement, and
taking any other necessary steps to confirm the plan;
(e) representing the Debtor in negotiating with potential
funding sources and preparing documents necessary to obtain
funding; and
(f) performing other necessary legal services.
David Lampley, Esq., the firm's attorney who will be providing the
services, will be paid at an hourly rate of $350.
Mr. Lampley disclosed in a court filing that he is a "disinterested
person" as the term is defined in Section 101(14) of the Bankruptcy
Code.
The firm can be reached at:
David Lampley, Esq.
Dellutri Law Group, P.A.
Fort Myers, FL 33919
Tel.: 239-939-0900239-210-3680
Fax: 239-939-0588
Email: dlampley@dellutrilawgroup.com
About Durabilis Roofing
Durabilis Roofing, LLC, a Florida limited liability company, filed
a petition for Chapter 11 protection (Bankr. M.D. Fla. Case No.
21-01003) on July 30, 2021, listing up to $100,000 in assets and up
to $500,000 in liabilities. Judge Caryl E. Delano oversees the
case. The Debtor is represented by David Lampley, Esq., at
Dellutri Law Group, P.A.
EARTH ENERGY: Unsecured Creditors Will Get 50% in Subchapter V Plan
-------------------------------------------------------------------
Earth Energy Renewables, LLC, filed with the U.S. Bankruptcy Court
for the Western District of Texas an Amended Subchapter V Plan of
Liquidation dated Nov. 4, 2021.
On Aug. 18, 2021, the Trustee sold all of the assets of the Debtor
pursuant to an Order of the Bankruptcy Court ("Sale"). The Trustee
received $11,277,734 in gross sales proceeds. After paying secured
creditors and some administrative claims, the Estate received net
proceeds of $1,318,608.
On or about Oct. 15, 2021, the Debtor and several creditors
attended a mediation ("Mediation") to reach a settlement regarding
outstanding claim objections. The parties in attendance were the
Debtor, Keresa Plantation SDN BHD ("Keresa"), KDB Finance, LLC,
Steve Robson, and SC Ventures, LLC (collectively, the "Robson
Group"), Jeff Wooley and John Wooley (collectively, the "Wooleys"),
the EER DIP Group, and Matthew Cantu, Cesar Granda, Stephen
Montgomery, Sean Newton, Wolfgang Verdgaal, and Juan Zavala, Jubo
Zhang (collectively, the "Employees").
The Debtor, Trustee, Keresa, the Robson Group, the Wooleys, EER DIP
Group, and the Employees are collectively referred to a s the
"Mediation Parties." The Mediation Parties reached an agreement to
resolve, settle, and compromise their disputes ("Mediation
Agreement").
As a result of the Sale and Mediation, the purpose of this Plan is
to liquidate and distribute the limited monies to the creditors as
quickly as possible with the least amount of cost.
Following the sale, the Debtor has few assets remaining. Therefore,
the Debtor believes the Plan provides the greatest possible value
under the circumstances and has the greatest chance to be confirmed
and consummated.
Class 8 consists of Unsecured Claims. Class 8 claimants will be
paid a pro-rata distribution of any funds remaining after paying
all administrative expenses of the bankruptcy estate and the
Disbursing Agent, and distributions to be made to Classes 1 through
7. Once all claims are allowed, the Disbursing Agent will pay
these creditors their prorated share of remaining funds held by the
Disbursing Agent. This Class will receive a distribution of 50% of
their allowed claims.
Class 9 consists of the Robson Group and Keresa's additional
Mediation Claims. Class 9 claimants will receive a pro-rata
distribution of any additional funds after the satisfaction of all
claims and EER obligations under the Plan. There is not anticipated
to be distribution to Class 9.
Class 10 consists of all existing equity interests. Class 10
claimants shall not be paid under the Plan.
Funding will come from the proceeds of the Sale held by the
Trustee.
A full-text copy of the Amended Subchapter V Plan dated Nov. 4,
2021, is available at https://bit.ly/2YrwRGa from PacerMonitor.com
at no charge.
Attorney for the Debtor:
Dean W. Greer, Esq.
2929 Mossrock, Suite 117
San Antonio, TX 78230
Tel.: (210) 342-7100
Fax: (210) 342-3633
E-mail: dean@dwgreerlaw.com
About Earth Energy Renewables
Earth Energy Renewables, LLC is a Canyon Lake, Texas-based company
focused on commercializing bio-based chemicals and fuels. It has
demonstrated success in creating high-margin green alternatives to
petroleum-based products. Visit http://www.ee-renewables.comfor
more information.
Earth Energy Renewables sought protection under Chapter 11 of the
Bankruptcy Code (Bankr. W.D. Texas Case No. 20-51780) on Oct. 20,
2020. Jeff Wooley, manager, signed the petition. In the petition,
the Debtor disclosed total assets of up to $50 million and total
liabilities of up to $10 million.
Judge Ronald B. King oversees the case.
Dean W. Greer, Esq., is the Debtor's legal counsel.
Eric Terry, Chapter 11 trustee, tapped Chamberlain Hrdlicka White
Williams & Aughtry P.C. as legal counsel, William G. West P.C. CPA
as accountant, CohnReznick Capital Market Securities, LLC as
investment banker, and Macco Restructuring Group LLC as financial
advisor. Mr. McManigle, managing director at Macco, serves as
chief restructuring officer.
ENDO INTERNATIONAL: Incurs $77.2 Million Net Loss in Third Quarter
------------------------------------------------------------------
Endo International plc filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing a net loss
of $77.21 million on $772.03 million of total net revenues for the
three months ended Sept. 30, 2021, compared to a net loss of $75.89
million on $634.86 million of total net revenues for the three
months ended Sept. 30, 2020.
For the nine months ended Sept. 30, 2021, the Company reported a
net loss of $51.18 million on $2.20 billion of total net revenues
compared to net income of $64.60 million on $2.14 billion of total
net revenues for the same period during the prior year.
As of Sept. 30, 2021, the Company had $9.24 billion in total
assets, $1.55 billion in total current liabilities, $22.52 million
in deferred income taxes, $8.05 billion in long-term debt (less
current portion), $35.15 million in operating lease liabilities
(less current portion), $274.06 million in other liabilities, and a
total shareholders' deficit of $690.32 million.
As of Sept. 30, 2021, the Company had approximately $1.6 billion in
unrestricted cash; $8.3 billion of debt; and a net debt to adjusted
EBITDA ratio of 4.6.
Third-quarter 2021 net cash provided by operating activities was
$62 million compared to $77 million used in operating activities
during the third-quarter 2020. This change was primarily due to an
increase in adjusted income from continuing operations and changes
in working capital, offset by payments to settle certain opioid
matters.
Additionally, in October 2021, the Company completed the previously
announced sale of its manufacturing site in Chestnut Ridge, NY,
which included, among other assets, U.S. generic retail products
and related product inventory to subsidiaries of Strides Pharma
Science Limited for approximately $24 million in cash, as well as
certain other non-cash considerations. The exit of this site was
included in a series of business transformation initiatives that
the Company announced in late 2020, including further optimization
of its generic retail business cost structure.
"We delivered strong third-quarter results driven by outstanding
execution across all of our businesses. As a result of our
year-to-date performance and our expectations for the remainder of
2021, we are raising our full-year 2021 financial guidance," said
Blaise Coleman, president and chief executive officer at Endo.
"Additionally, we are pleased with our progress against our
strategic priorities including our efforts to expand and enhance
our portfolio with the recent launch of varenicline tablets, the
only available FDA approved generic version of Chantix, and the
continued positive market response to QWO."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1593034/000159303421000101/endp-20210930.htm
About Endo International plc
Endo International plc -- www.endo.com -- is a holding company that
conducts business through its operating subsidiaries. The
Company's focus is on pharmaceutical products and it targets areas
where it believes it can build leading positions.
* * *
As reported by the TCR on Sept. 6, 2021, S&P Global Ratings lowered
its long-term issuer credit rating on Endo International PLC to
'CCC+' from 'B-' and removed the rating from CreditWatch, where S&P
placed it with negative implications on Aug. 25, 2021. The outlook
is negative. The negative outlook reflects the potential for an
event of default within the next 12 months stemming from
opioid-related litigation or the possibility of a distressed
exchange.
ENERGIZE HOLDCO: Moody's Assigns B3 CFR, Outlook Stable
-------------------------------------------------------
Moody's Investors Service assigned to Energize Holdco LLC (dba TRC
Companies or "TRC") a corporate family rating at B3, probability of
default at B3-PD, a B2 rating to the proposed senior secured first
lien credit facility consisting of a $115 million revolver due
2026, a $635 million term loan and a $95 million delay draw term
loan both due 2028, and a Caa2 rating to the proposed senior
secured second lien credit facility consisting of a $210 million
second lien term loan and $30 million delayed draw term loan both
due 2029. The rating outlook is stable.
The proceeds of the proposed term loans and equity from Warburg
Pincus LLC ("Warburg Pincus") will be used to purchase the company,
fund $10 million of initial balance sheet cash at closing, prefund
two tuck-in acquisitions, and pay transaction-related fees and
expenses. Governance is a key consideration given the company's
private equity ownership. Ratings currently assigned to TRC
Companies, Inc. will be withdrawn upon repayment of the existing
debt.
Pro-forma for the proposed transaction and acquisitions, the
company's debt-to-EBITDA and EBITA-to-interest for the fiscal year
ended June 30, 2021 approximated 7.3x and 2.1x, respectively.
"TRC's highly levered capital structure following a
sponsor-to-sponsor sale is a key consideration in the B3 corporate
family rating," said Andrew MacDonald, Moody's lead analyst for the
company. "The company has diverse service offerings and we believe
that good demand for transmission and distribution infrastructure
spending in the US will be the key driver of revenue growth near
term, which in turn should lead to de-leveraging absent future
acquisitions or shareholder dividends."
Assignments:
Issuer: Energize Holdco LLC
Probability of Default Rating, Assigned B3-PD
Corporate Family Rating, Assigned B3
Senior Secured 1st Lien Term Loan, Assigned B2 (LGD3)
Senior Secured 1st Lien Multi Curr Rev Credit Facility, Assigned
B2 (LGD3)
Senior Secured 1st Lien Delayed Drawn Term Loan, Assigned B2
(LGD3)
Senior Secured 2nd Lien Term Loan, Assigned Caa2 (LGD5)
Senior Secured 2nd Lien Delayed Drawn Term Loan, Assigned Caa2
(LGD5)
Outlook Actions:
Issuer: Energize Holdco LLC
Outlook, Assigned Stable
RATINGS RATIONALE
TRC's B3 CFR reflects Moody's expectation for mid-single digit
revenue growth and elevated leverage at 7.3x pro forma at close of
the transaction for the fiscal year ended June 30, 2021 that will
gradually improve to around 6.5x during the next 12 to 18 months.
Steady growth is expected in the company's power and infrastructure
segments owing to demand for advanced energy services and
government support for infrastructure spending. The cyclically
depressed oil & gas segment will continue to be a drag on revenue,
although this segment is significantly smaller than it was one year
ago and is assumed will continue to gradually decline going
forward. There is also potential upside from increased US federal
government support on infrastructure spending initiatives. EBITDA
margins are expected to be sustained in the 16% to 17% range from
revenue mix shifting to higher margin services in the power segment
and cost savings implemented during the pandemic. Nonetheless,
there are uncertainties inherent to contract cost estimating,
meeting performance standards, and the involvement of
subcontractors that impose risks to ultimate profitability levels.
Support comes from the company's diverse customer base and end
markets including utilities, transportation, government,
commercial, and oil & gas with high customer retention rates and a
visible backlog of work. The company's liquidity is considered good
and is supported by Moody's expectation of $40 million of free cash
flow per annum and access to an undrawn $115 million revolver due
2026 at close. The company will also have access to $125 million in
delayed draw term loans that are expected to be used for
acquisitions. Governance risk is considered high given TRC's
acquisitive growth strategy and private equity ownership that could
prioritize shareholder returns over debt repayment.
The B2 (LGD3) rating on the first lien credit facility, one notch
above the CFR, reflects the priority lien with respect to
substantially all assets of the company relative to the second lien
term loan, which is rated Caa2 (LGD5), two notches below the CFR.
The B3-PD PDR is in line with the B3 CFR, reflecting Moody's
expectation for an average family recovery level.
As proposed, the new credit facility is expected to contain
covenant flexibility provisions that could adversely impact
creditors. Notable terms include: incremental debt capacity up to
the greater of $120 million and 100% of consolidated EBITDA, plus
unused capacity reallocated from the general debt basket, plus
unlimited amounts subject to 5.25x senior secured first lien net
leverage ratio, or the transaction is leverage neutral (if pari
passu secured, or amounts not greater than 7.25x senior secured net
leverage ratio, if junior or pari with second lien). Amounts up to
(i) the greater of $240 million and 200% of consolidated EBITDA may
be incurred with an earlier maturity date than the initial term
loan. 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. Lastly, the credit agreement gives the
borrower the flexibility to calculate available amount "builder
basket" using the greater of (1) 50% of consolidated net income,
(2) 100% retained excess cash flow, and (3) EBITDA minus 150% of
fixed charges.
The proposed terms and the final terms of the credit agreement may
be materially different
The stable outlook reflects Moody's expectation of at least low
single-digit organic revenue growth and EBITDA margins maintained
around 16% to 17%. Absent material debt-funded acquisitions,
debt-to-EBITDA leverage should improve to the mid-6x as earnings
grow and debt is repaid from free cash flow.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be downgraded if revenue declines or
Moody's-adjusted debt-to-EBITDA is sustained above 7.5x. A
deterioration in liquidity, debt-funded acquisitions or special
dividends, or sustained negative free cash flow could also lead to
a downgrade.
Ratings could be upgraded if earnings growth or debt reduction lead
to Moody's-adjusted debt-to EBITDA approaching 6x and sustained
free cash flow-to-debt above 2%. TRC's financial strategies would
also need to support metrics remaining at these levels.
Headquartered in Windsor, CT, TRC is a national engineering,
consulting, and construction management firm that services utility,
commercial & industrial, infrastructure and energy markets. The
company serves a broad range of industrial, commercial, and
government clients by managing projects from initial concept and
design to delivery and operations. Following the proposed
transaction, TRC will be owned by Warburg Pincus. Net service
revenue for the fiscal year ended June 30, 2021 was $758 million.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
ENERGIZE HOLDCO: S&P Assigns 'B' ICR on Acquisition by Warburg
--------------------------------------------------------------
S&P Global Ratings assigned its 'B' issuer credit rating to
Windsor, Conn.-based engineering, consulting, and construction
management service provider Energize Holdco LLC (d/b/a TRC Cos.,
Inc.). The outlook is stable.
S&P said, "At the same time, we assigned our 'B' ratings to the
company's proposed first-lien debt. The '3' recovery ratings
indicate our expectation for meaningful recovery (50%-70%; rounded
estimate: 50%) in the event of a payment default. In addition, we
assigned our 'CCC+' ratings to the company's proposed second-lien
debt. The '6' recovery ratings indicate our expectation for
negligible recovery in the event of a payment default."
Energize is being acquired by Warburg Pincus. The company plans to
issue a $115 million revolver, $635 million first-lien term loan,
$95 million first-lien delayed-draw term loan, $210 million
second-lien term loan, and $30 million second-lien delayed-draw
term loan.
S&P said, "We anticipate Energize's S&P Global Ratings-adjusted
debt to EBITDA will increase above 6.5x in fiscal 2022; however, we
expect it to approach 6x in 2023.We expect top-line growth from the
company's increased, higher-margin backlog, comprised of contracted
and executable work. The company's field work has improved as work
resumed from stoppages, which affected the company's fiscal 2020
operating performance. We also assume additional revenues from
future acquisitions primarily funded by its proposed delayed-draw
term loans. We view the company's cost structure as relatively
flexible, as demonstrated by its fiscal 2021 performance during
less-favorable market conditions. Its projects are mostly time and
materials, which we view as more favorable than fixed-price
contracts due to the risk of cost overruns. We anticipate EBITDA
margins in the low- to mid-teens-percent area through 2023.
"We believe the low capital intensity of Energize's business will
maintain positive and improving free operating cash flow (FOCF)
through fiscal 2023.Energize has relatively low maintenance capital
expenditure requirements at about 1% of revenue and continues to
manage its working capital. The company's operating performance
should benefit from its focus on engineering, consulting, and
construction management, which we believe have lower risk than
construction work. The company's profitability levels reflect
Energize's focus on higher-margin, lower-risk engineering and
construction (E&C) service offerings, in our view. However, we
believe the company still faces similar cyclical demand patterns to
traditional engineering and construction companies due to the
nature of its customers' industries. We expect free operating cash
flow in the low-single-digit-percent area in 2022, improving
thereafter.
"Our ratings on Energize reflect the company's position as a niche
engineering, consulting, and construction management firm,
participating in multiple end markets across the U.S. We believe
Energize's portfolio of services are not exposed to the same level
of contract risk as other traditional E&C providers, though we
believe Energize still faces similar cyclical demand. We assume
contract losses to be minimal with no customer accounting for more
than 5% of total net service revenue and tenured customer
relationships. Our view of the company's business incorporates its
scale and limited geographic diversity compared to larger,
multinational players. In addition, Energize competes with local
providers in a fragmented E&C industry marked by high competition
and pricing pressure. Our rating also incorporates the risks
associated with its controlling ownership by a private equity
sponsor, which may preclude meaningful debt reduction over time.
"The stable outlook reflects our assumption that the company will
maintain stable margins over the next 12 months as it executes on
its backlog. We expect its adjusted debt to EBITDA will increase
above 6.5x pro forma in fiscal 2022, declining below 6.5x in fiscal
2023. We expect its FOCF to debt will improve to the mid- to
high-single-digit-percent area in fiscal 2023."
S&P could lower its rating on Energize over the next 12 months if:
-- It appears FOCF to debt becomes negligible on a sustained
basis; or
-- S&P believes the company's adjusted debt to EBITDA will trend
higher than 6.5x on a sustained basis.
This could occur because of, for example, a meaningful
deterioration in EBITDA margins caused by the loss of key projects
or a material debt-financed transaction.
S&P considers an upgrade unlikely over the next 12 months given its
belief that Energize's financial policies will remain aggressive
over the medium term under its financial sponsor. However, S&P
could raise the ratings if:
-- S&P believes the company is committed to maintaining FOCF to
debt of greater than 5%;
-- It demonstrates sustained debt reduction (with leverage
approaching 4x); and
-- S&P comes to believe the risk of leverage increasing above 5x
adjusted debt to EBITDA is low.
ENERGY 11: Issues Letter to Interest Holders
--------------------------------------------
Energy 11, L.P. issued a letter to the holders of limited partner
interest in the Partnership as of Nov. 5, 2021.
Dear Partner:
We remain sensitive to concerns of our partners in Energy 11, L.P.
as the oil and natural gas industry continues its recovery from
2020.
We are pleased to announce that Energy 11 has continued to improve
its financial condition month to month as the industry recovers and
will be paying a distribution in November. The amount of the
distribution will be 50% of the regular monthly distribution based
on the 7% annualized distribution rate and will be paid on November
24th. We are optimistic that the recovering cash flow will allow
Energy 11 to be able to resume its regular monthly distribution in
December.
During the period the distributions have been suspended, we have
been accumulating the amount of the Limited Partners' unpaid
distributions. All accumulated unpaid distributions to Limited
Partners are required to be paid before Payout occurs, as defined
in our prospectus. Payout refers to the distribution of funds
after investors have received $20 per common unit and a 7%
cumulative return. Currently, all unpaid distributions for the
months from March 2020 to October 2021 and the partial unpaid
distribution for November 2021 have been accumulated.
Whiting, our largest operator, continues to invest its resources in
the Sanish field through the drilling and completion of new wells.
We are still required to pay down our debt and to continue to pay
Whiting for our share of the investment in the new wells. As a
reminder, there is always a delay from when we invest capital until
we receive the cash benefits associated with any new wells. In
total, we have incurred capital expenses in excess of $17 million
this year on new and existing wells which has been funded by cash
flow. We remain committed to the investment in new wells,
especially at current market prices, as new development is critical
for us to increase cash flow and to offset depletion. As a
non-operated fund, Whiting makes the decision on timing of new
wells. In addition, we have paid off over $13 million of the $40
million loan that we needed for drilling and operations in 2020.
We plan to continue to repay the loan as fast as possible with the
goal of becoming debt free.
As of September 30, the Partnership owns an approximate 25%
non-operated interest in 264 producing wells, 14 wells in progress
and future development sites in the Sanish Field located in North
Dakota. The Sanish Field is part of the Bakken Shale Formation,
one of the leading areas in the United States for oil production
and development.
If you have questions regarding the status of your investment,
please contact your Investment Counselor at David Lerner
Associates, Inc. We also encourage you to review all the
Partnership's filings with the Securities and Exchange Commission,
which are available online at www.energyeleven.com or www.sec.gov.
Sincerely,
Glade M. Knight
Chairman and Chief Executive Officer
Energy 11 GP, LLC
About Energy 11
Fort Worth, Texas-based Energy 11, L.P. -- www.energyeleven.com --
is a Delaware limited partnership formed to acquire producing and
non-producing oil and natural gas properties onshore in the United
States and to develop those properties.
Energy 11 reported a net loss of $2.80 million for the year ended
Dec. 31, 2020, compared to net income of $8.48 million for the year
ended Dec. 31, 2019. As of Dec. 31, 2020, the Company had $331.81
million in total assets, $51.46 million in total liabilities, and
$280.34 million in total partners' equity.
Oklahoma City, Oklahoma-based Grant Thornton LLP, the Company's
auditor since 2015, issued a "going concern" qualification in its
report dated March 12, 2021, citing that the Partnership has
substantial debt that is due within one year of the report date
which raises substantial doubt about the Partnership's ability to
continue as a going concern.
ENPRO INDUSTRIES: Moody's Affirms Ba3 CFR Amid NxEdge Transaction
-----------------------------------------------------------------
Moody's Investors Service affirmed the Ba3 Corporate Family Rating
and Ba3-PD Probability of Default Rating of EnPro Industries, Inc.
At the same time, Moody's downgraded EnPro's senior unsecured notes
rating to B2 from B1. The actions follow the company's decision to
enter into a definitive agreement to acquire NxEdge, Inc., an
advanced manufacturing, cleaning, coating, and refurbishment
business focused on the semiconductor industry. The company's
Speculative Grade Liquidity rating is unchanged at SGL-2,
signifying good liquidity. The ratings outlook is stable.
The proposed acquisition of NxEdge from Trive Capital for $850
million, represents the company's largest acquisition to date. The
acquisition is expected to be financed with a combination of cash,
revolver borrowings and additional bank term loan debt. The
transaction is expected to close by the end of 2021, subject to
regulatory approvals.
The downgrade of the unsecured notes rating reflects the addition
of a significant amount of secured debt that will be added to the
capital structure ahead of the unsecured notes.
The affirmation of the CFR and stable outlook reflects Moody's
expectation that the company will repay debt and quickly reduce
leverage. In the very near-term, debt will be repaid with the
proceeds of the pending sale of the company's CPI business. The
company's good corporate governance and strong track record of debt
repayment post acquisitions support this view. Moody's expects that
the company will follow similar policies following the NxEdge
acquisition.
Pro forma for the repayment of debt with the proceeds from the CPI
sale, adjusted debt/EBITDA will decline to around 4.0x. This is an
improvement from almost 5.0x pro forma for the transaction. The
affirmation also reflects the strategic benefits of the
acquisition, including expansion of EnPro's semiconductor product
and service offering. The acquisition will also increase EnPro's
scale and offerings within the semiconductor end market, while
adding a higher margin business.
Moody's took the following rating actions:
Downgrades:
Issuer: EnPro Industries, Inc.
Gtd Senior Unsecured Global Notes, Downgraded to B2 (LGD5) from B1
(LGD5)
Affirmations:
Issuer: EnPro Industries, Inc.
Probability of Default Rating, Affirmed Ba3-PD
Corporate Family Rating, Affirmed Ba3
Outlook Actions:
Issuer: EnPro Industries, Inc.
Outlook, Remains Stable
RATINGS RATIONALE
The Ba3 CFR is supported by EnPro's good revenue scale (pro forma
annual revenue approximates $1.2 billion), brand strength, and
end-market diversity ranging from general industrial,
semiconductors, and heavy duty trucking to food & pharma, aerospace
and energy and power generation. In addition, over half of the
company's business is aftermarket-related which adds revenue
stability and predictability. Moody's expects that the company's
efforts to reshape the portfolio in recent years through
divestitures and acquisitions will result in reduced earnings
volatility and improved EBITDA margins trending towards the 20%
range.
At the same time, the rating remains constrained by the cyclicality
in certain of its end markets including semiconductors, heavy duty
trucking, automotive and oil & gas. In addition, the company is not
immune to supply chain and inflationary cost headwinds affecting
the broader manufacturing industry. Credit risks also include the
company's ongoing portfolio reshaping that involves costs and
includes acquisition integration risk. The cyclical nature of the
semiconductor end market where the company is increasing its
exposure is also a ratings consideration.
The SGL-2 rating reflects Moody's expectation for good liquidity
over the next 12-18 months. The company will maintain ample cash
reserves and generate free cash flow in the $100 to $150 million
range. Liquidity will also be supported by good revolver
availability and adequate headroom under financial maintenance
covenants.
The stable outlook is based on Moody's expectation that the company
will successfully integrate the NxEdge acquisition and that it will
favorably contribute to the company's margin profile and cash flow.
Further, it is Moody's expectation that the company will
proactively repay debt such that debt/EBITDA improves to well below
4.0x over the next twelve to eighteen months.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade would be considered if the company meaningfully reduces
debt while improving operating margins, and the company
demonstrates successful acquisition integration. In addition,
debt/EBITDA sustained below 3.0 times, could support an upgrade.
Conversely, Moody's could lower the ratings if the company
experiences integration challenges, adjusted debt/EBITDA is
sustained above 4.5x or if free cash flow to adjusted debt is below
10%. Financial policy becoming more aggressive including additional
debt-financed acquisitions or debt-financed share repurchases or
dividends could also exert downward rating pressure.
Charlotte, North Carolina based EnPro Industries, Inc. (EnPro)
manufactures and markets a variety of proprietary engineered
products, including sealing products, specialized optical filters
and thin-film coatings for various end markets including the
semiconductor, industrial technology, and life sciences end
markets. The company also manufactures and markets heavy duty truck
wheel-end component systems; self-lubricating non-rolling bearing
products; and other engineered products for use in critical
applications by industries worldwide. The company's revenue totaled
approximately $1.1 billion for the twelve months ended September
30, 2021.
The principal methodology used in these ratings was Manufacturing
published in September 2021.
ETFF CORP: Trustee's Proposed Sale of Ohlbaum Judgments Approved
----------------------------------------------------------------
Judge Magdeline D. Coleman of the U.S. Bankruptcy Court for the
Eastern District of Pennsylvania authorized the sale procedures
proposed by Morris Anderson, Ltd., Plan Trustee Morris Anderson,
Ltd., Plan Trustee of the Plan Trust of ETFF Corp., et al., in
connection with the sale of the judgments held by the Debtors'
estates against Defendants Gary Ohlbaum, Smarda Ohlbaum and
Nourican Portfolio I, LLC, free of liens, claims, interests, and
encumbrances.
The Trustee is authorized to undertake all actions necessary to
sell the Ohlbaum Judgments to the Buyer as set forth in the terms
of the Purchase Agreement.
The Trustee is authorized to make, in the best business judgment, a
determination of the highest and best offer, and undertake all
actions to sell the Ohlbaum Judgments to that party.
The Trustee is authorized to sell the Ohlbaum Judgments to the
Buyer, SM Financial Services Corp., for the terms set forth in the
Motion.
The 14-day stay under Federal Rule 6004 will be waived for purposes
of closing on the Purchase Agreement.
The bankruptcy case is In re: ETFF Corp., Case 12-19430(MDC)
(Bankr. E.D. Pa.)
EYEPOINT PHARMACEUTICALS: Incurs $16.7M Net Loss in Third Quarter
-----------------------------------------------------------------
EyePoint Pharmaceuticals, Inc. filed with the Securities and
Exchange Commission its Quarterly Report on Form 10-Q disclosing a
net loss of $16.70 million on $9.06 million of total revenues for
the three months ended Sept. 30, 2021, compared to a net loss of
$3.80 million on $15.70 million of total revenues for the three
months ended Sept. 30, 2020.
For the nine months ended Sept. 30, 2021, the Company reported a
net loss of $38.99 million on $25.40 million of total revenues
compared to a net loss of $29.93 million on $27.31 million of total
revenues for the same period a year ago.
As of Sept. 30, 2021, the Company had $168.25 million in total
assets, $75.50 million in total liabilities, and $92.75 million in
total stockholders' equity.
Cash and cash equivalents at Sept. 30, 2021 totaled $119.7 million
compared to $44.9 million at Dec. 31, 2020.
The Company expects the cash on hand at Sept. 30, 2021 and expected
net cash inflows from its product sales will enable it to fund its
current and planned operations through the end of 2022.
"We continue to advance our pipeline, announcing positive 3-month
safety data for all dose levels in our Phase 1 DAVIO trial at the
American Society of Retina Specialists (ASRS) 2021 Annual Meeting
held in October. We look forward to presenting topline interim
safety and efficacy data for the DAVIO trial as a late breaker
presentation during the Retina Subspecialty Day at the American
Academy of Ophthalmology (AAO) 2021 Annual Meeting on November 13.
In October, we also announced preliminary data from our YUTIQ CALM
real-world registry study at ASRS, which allows us to better
understand the posterior segment uveitis patients we serve," said
Nancy Lurker, chief executive officer of EyePoint Pharmaceuticals.
Ms. Lurker continued, "Our commercial team continues to perform
with solid year over year revenue growth for both DEXYCU and YUTIQ,
despite a continued impact on demand caused by the COVID-19
pandemic."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1314102/000156459021054795/eypt-10q_20210930.htm
About EyePoint Pharmaceuticals
EyePoint Pharmaceuticals, formerly pSivida Corp. --
http://www.eyepointpharma.com-- headquartered in Watertown, MA, is
a specialty biopharmaceutical company committed to developing and
commercializing innovative ophthalmic products in indications with
high unmet medical need to help improve the lives of patients with
serious eye disorders. The Company currently has two commercial
products: DEXYCU, the first approved intraocular product for the
treatment of postoperative inflammation, and YUTIQ, a three-year
treatment of chronic non-infectious uveitis affecting the posterior
segment of the eye.
EyePoint reported a net loss of $45.39 million for the year ended
Dec. 31, 2020, compared to a net loss of $56.79 million for the
year ended Dec. 31, 2019. As of June 30, 2021, the Company had
$178.82 million in total assets, $71.96 million in total
liabilities, and $106.87 million in total stockholders' equity.
FANATICS COMMERCE: Moody's Assigns First Time 'Ba3' CFR
-------------------------------------------------------
Moody's Investors Service assigned first time ratings to Fanatics
Commerce Intermediate Holdco, LLC including a Ba3 corporate family
rating and a Ba3-PD probability of default rating. In addition,
Moody's assigned a Ba3 rating to the proposed $500 million senior
secured term loan. The outlook is stable. The proceeds will be used
to fund a dividend to the parent company, Fanatics Holdings, Inc.,
for continued investment in other related verticals. Moody's
ratings and outlook are subject to receipt and review of final
documentation.
The Ba3 CFR assignment reflects governance considerations,
particularly an expectation that Fanatics will maintain balanced
financial strategies and solid credit metrics under its current
ownership which includes its founder who has majority voting stock.
Pro forma for the transaction, leverage is high with Moody's
adjusted debt/EBITDA in the high-6x range for the LTM period June
30, 2021. However, leverage is expected to rapidly recover to the
high-4x range in the second half of 2021 and below 4x in 2022 as
continued rapid sales growth along with margin enhancement will
drive solid EBITDA growth.
Assignments:
Issuer: Fanatics Commerce Intermediate Holdco, LLC
Corporate Family Rating, Assigned Ba3
Probability of Default Rating, Assigned Ba3-PD
Senior Secured Term Loan B, Assigned Ba3 (LGD4)
Outlook Actions:
Issuer: Fanatics Commerce Intermediate Holdco, LLC
Outlook, Assigned Stable
RATINGS RATIONALE
Fanatics' Ba3 CFR reflects its leading position as an online
retailer of licensed sports merchandise. The rating is supported by
its long-term partnership agreements with major sports leagues and
relationships with key suppliers. The company purchases finished
product from vendors but also manufactures licensed product at a
higher margin through its private label, owned brands and licensed
brands. Sales growth from a meaningful pipeline of new potential
exclusive relationships is expected to lead to margin expansion.
However, margins are still considered low which is a constraint on
the rating. The rating is also constrained by the company's narrow
product focus on sports related apparel.
The stable outlook reflects the expectation of good liquidity and
reduced leverage from earnings growth.
Fanatics has good liquidity reflecting Moody's expectation for
minimum cash balances to approximate $100 million. Free cash flow
generation is expected to fluctuate significantly throughout the
year due to seasonality of working capital which is supported by
the proposed $700 million asset-based lending (ABL) revolving
credit facility due five years after the close of the transaction.
Cash flow is expected to be used for capital investment such as
technology and a new fulfillment center to support growth. Excess
cash is also expected to be allocated to Fanatics Holdings, Inc.,
for continued investment in other verticals.
The credit facility is expected to contain covenant flexibility for
transactions that could adversely affect creditors.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if the company sustainably expands
revenue and EBIT margins, and maintains conservative financial
policies and good liquidity. Quantitatively, an upgrade would
require average lease-adjusted debt/EBITDA sustained below 3.25
times and EBIT/interest expense above 3.5 times.
The ratings could be downgraded if revenue or earnings
deteriorated, or if liquidity materially weakened or financial
policies turned more aggressive, such as through shareholder
returns or debt-financed acquisitions, that led to sustainably
higher leverage. Failure to renew major licenses or sustainably
reduce leverage ahead of major license expirations could also lead
to a downgrade. Specific metrics include average lease-adjusted
debt/EBITDA sustained above 4.0 times or EBIT/interest expense
below 2.25 times.
Fanatics Commerce Intermediate Holdco, LLC is a retailer
specializing in the online sale of licensed sports merchandise
through a platform of sports related ecommerce sites. This includes
its flagship Fanatics brand and a variety of partner sites such as
NFLshop.com, NBAstore.com, MLBshop.com, NHLshop.com and
MLSstore.com. The company also operates through venue storefronts
primarily located in sports stadiums as well as wholesale to
third-party retailers. Fanatics is privately owned by a consortium
of investors including founder and CEO, Michael Rubin, who owns the
majority of voting stock. Revenue for the twelve-month period ended
June 2021 was approximately $3 billion.
The principal methodology used in these ratings was Retail Industry
published in May 2018.
FANATICS COMMERCE: S&P Assigns 'BB-' ICR, Outlook Stable
--------------------------------------------------------
S&P Global Ratings assigned its 'BB-' issuer credit rating to both
companies, Jacksonville, Fla.-based licensed sports merchandise
retailer Fanatics Commerce and Fanatics Holdings. At the same time,
S&P assigned its 'BB-' issue-level rating and '3' recovery rating
to the proposed term loan.
The stable outlook reflects S&P's expectation for a sustained
double-digit percent expansion in Fanatics Commerce's revenue and
profit.
S&P said, "The rating reflects our wholistic view of Fanatics
Holdings Inc., the parent entity, though we attribute most of the
company's revenue to Fanatics Commerce. We view Fanatics Commerce
as a core subsidiary of Fanatics Holdings because it is integral to
the group's identity and strategy and accounts for almost all of
Holdings' operating revenue and profit. Our assessment of the
broader group also incorporates its trading cards, non-fungible
tokens (NFTs), and online gaming subsidiaries, as well as its
nearly 50% stake in LIDS Sport Group, which we expect will provide
it with a consistent stream of dividends."
Fanatics' long-term partnerships and robust customer database are
at the core of its retail and wholesale expansion. The company has
secured long-term deals with colleges and major sports leagues,
including the NFL, MLB, and NBA, for the rights to manufacture and
distribute fan apparel and other merchandise. Many of these
contracts offer Fanatics Commerce exclusive rights to manufacturing
and distribution via online retail channels. The company has
secured these rights by developing relationships with the leagues
and their teams, including by offering lucrative revenue sharing
deals and granting access to customer data. The company also
partners with sports apparel brands, such as Nike, to manufacture
and sell branded league merchandise. S&P expects Fanatics to expand
its partnerships with retailers and sportswear brands over the
intermediate term given its broad portfolio of exclusive rights and
captive customer base.
The company has built a vast database of customer information that
enables it to forecast purchasing behavior and effectively target
its advertising. This database of over 80 million fans tracks
transactions conducted through the hundreds of websites Fanatics
operates. In addition to optimizing its sales potential, S&P
believes sharing this customer data with its major league partners
strengthens its relationships. This, along with its new
partnerships and the recent trend toward the casualization of
apparel, supported the double-digit percent increase in the
company's sales.
Fanatics' low profitability reflects the costs of entering into its
long-term partnerships, though its verticalization strategy will
likely lead to an improvement in its margins. S&P said, "In our
view, the company's low profitability reflects the onerous revenue
sharing agreements and royalty payments it has used to secure its
deals with leagues, teams, colleges, and other partners. Fanatics'
already thin margins are also being negatively affected by the
ongoing international supply chain bottlenecks, though we believe
its U.S. manufacturing facilities provide it with some flexibility
and partially mitigate the risk for supply interruptions. We
forecast the company's EBITDA margins will be in the mid-single
digit percent area in 2021 and 2022."
Fanatics' vertical merchandise accounts for nearly half of its
sales and provides significantly better gross margins than its
third-party manufactured merchandise. The company has developed its
proprietary merchandise offerings through various acquisitions,
including those of sportswear manufacturers Majestic (in 2017), Top
Of The World (2020), and WinCraft (2020). Its recent investments
have increased its vertical sales penetration by about 10% relative
to 2019, which led to an approximately 200 basis point (bps)
improvement in its gross margin. S&P said, "We believe Fanatics can
continue to steadily expand its profitability as it strengthens its
manufacturing and wholesaling segment. Nevertheless, we view its
business risk profile as weak given its low level of profitability
relative to other retailers and its lack of an established track
record."
S&P said, "We believe the company benefits from the favorable
competitive environment and its diversified revenue sources, though
its minimum royalty guarantees present some risk. We anticipate
relatively stable (albeit low) profitability at the Fanatics
Commerce business. In addition, we believe the company's long-term
exclusive licensing rights provide reasonable insight into its
future performance and limit its potential competitive threats.
Nevertheless, its licensing agreements include guaranteed minimum
royalty payments that it must pay to the intellectual property
owners regardless of its sales volume. We believe these royalty
guarantees could potentially weaken its profitability if it is
unable to increase its sales in line with its contractual
obligations. While we forecast a significant increase in its sales
relative to the requirements under its guarantees, an economic
downturn could lead to a rapid decline in its sales and pressure
its ability to meet its contractual obligations."
Fanatics powers over 900 e-commerce websites through its
cloud-based e-commerce platform as part of its online exclusivity
agreements and partnerships. For example, the company operates the
back end of the Dallas Cowboys' online store and is responsible for
product fulfilment and shipping. It also recently announced a
similar deal with Macy's for its fan apparel product offerings. In
our view, these partnerships enable significant point-of-sale
diversification that broadens Fanatics' customer reach.
Additionally, its broad portfolio of exclusive merchandising and
retailing rights provides it with a favorable competitive
environment. S&P applies a positive one-notch comparable ratings
analysis adjustment to its anchor on the company to reflect its
view that these factors positively differentiate Fanatics from
other retailers.
The company also generates revenue through its wholesale segment
(about 20% of its sales) by distributing its proprietary
merchandise to retail partners, including Walmart, Target, Dick's
Sporting Goods, and Kohls. Through its in-venue retail (IVR)
segment (about 5% of sales), Fanatics also operates multiple
partner flagship and in-stadium stores. S&P said, "In our view,
these channels provide the company with some revenue
diversification and contribute to its improving brand recognition.
We expect Fanatics to increase the sales in its wholesale and IVR
segments about in line with the expansion across the rest of its
business over the next several years. Specifically, we anticipate
it will raise its consolidated revenue by over 25% in 2021 and by
the double-digit percent area in 2022 and 2023 on improving
consumer spending and its healthy pipeline of new e-commerce and
league partnerships."
S&P said, "We assess Fanatics' financial risk profile as
aggressive, which reflects our forecast for S&P Global
Ratings-adjusted leverage in the low-4x area and negative free
operating cash flow (FOCF). We expect the company's S&P Global
Ratings-adjusted leverage, pro forma for the term loan issuance, to
be in the low-4x area through 2022. Our forecast incorporates
incremental expenses at its trading cards, NFTs, and online gaming
businesses in 2022, which offset some of the expansion in the
EBITDA from Fanatics Commerce. We include dividends received from
its equity affiliates (such as Lids) in our measure of its EBITDA
but exclude Fanatics' share of the profits from those affiliates.
Our assessment of the company's financial risk also incorporates
some anticipated profit volatility at Fanatics Holdings, which we
expect could lead to fluctuations in its credit metrics.
"We forecast negative FOCF of about $100 million over the next 12
months as the company invests in working capital, expands its
technology platform, and opens two new fulfilment centers. Our
forecast for negative FOCF also incorporates anticipated expenses
and investments at Fanatics Holdings' other subsidiaries, as well
as an offsetting benefit from its investment in LIDS Sport Group,
which we expect will provide it with a consistent stream of
dividends. Overall, we expect the company will improve its cash
flow in 2023.
"Management treats its various businesses separately under
independent funding structures. In our view, the individual
subsidiaries are currently sufficiently funded to absorb their
respective near-term operating expenses with cash on the
consolidated balance sheet. We also expect these subsidiaries will
remain sufficiently funded over the next several years through
potential equity capital fundraising, dividends from Fanatics
Holdings' equity affiliates, and dividends from Fanatics Commerce.
"The stable outlook reflects our expectation for good operating
performance over the next 12-24 months at Fanatics Commerce,
including an approximately 25% increase in its revenue in 2021 and
20% in 2022, as the company expands its partnerships with leagues,
teams, colleges, and retailers. We also expect about a 100 bps
expansion in Fanatics Commerce's EBITDA over the next two years as
it further improves its penetration of proprietary merchandise. We
expect operating losses at Fanatics Holdings' other subsidiaries to
be a drag on its consolidated EBITDA, though we anticipate it will
partially offset these with the dividends from its equity
affiliates. We forecast the company's S&P Global Ratings-adjusted
leverage will be in the low-4x area and anticipate it generates
negative FOCF in 2021 and 2022. We also anticipate Fanatics'
leverage will improve to the low- to mid-3x area by 2023."
S&P could lower its rating on Fanatics if:
-- S&P anticipates its S&P Global Ratings-adjusted leverage will
increase above 4x on a sustained basis, which could occur due to
underperformance at its main commerce business relative to its
forecast, if it no longer expects consistent dividend streams from
its equity affiliates, or if it comes to expect that the expenses
at Holdings' other subsidiaries will be consistently higher than
S&P currently anticipates; or
S&P believes the company's relationships with its major league,
team, or college partners has weakened and it is at risk of losing
its important licensing contracts.
S&P could raise its rating on Fanatics if:
-- The company establishes a track record of consistent or
improving profitability while expanding its reach with new
partnerships and continuing to expand its sales in line with S&P's
expectations;
-- S&P believes there is greater clarity into the future operating
activities of Fanatics Holdings' trading cards, online sports
betting, and NFT businesses; and
-- It sustains leverage of below 3x supported by management's
financial policy, perhaps due to expanding merchandise margins from
its higher vertical penetration or increased dividend receipts from
its equity affiliates.
FIRSTENERGY CORP: Moody's Affirms Ba1 CFR & Alters Outlook to Pos.
------------------------------------------------------------------
Moody's Investors Service affirmed the ratings of FirstEnergy Corp.
(FirstEnergy) including its Ba1 Corporate Family Rating, Ba1-PD
Probability of Default (PD) rating as well as its Ba1 senior
unsecured rating. Its Speculative Grade Liquidity (SGL) rating of
SGL-1 remains unchanged. Moody's also changed its outlook to
positive from stable. In addition, Moody's affirmed the ratings of
FirstEnergy's three Ohio utilities subsidiaries: Ohio Edison
Company (Ohio Edison, A3 senior unsecured), Toledo Edison Company
(Toledo Edison, Baa1 Issuer Rating), and Cleveland Electric
Illuminating Company (The) (Cleveland Electric, Baa2 senior
unsecured). The outlook of Ohio Edison was changed to stable from
negative, while the outlooks of Toledo Edison and Cleveland
Electric remain negative.
The change in the outlooks of FirstEnergy and Ohio Edison follow
FirstEnergy's announcement on November 1, 2021 that its Ohio
utility subsidiaries had reached a settlement agreement with
interveners related to several open regulatory proceedings in Ohio.
Separately, on November 7, 2021, FirstEnergy announced the sale of
a 19.9% minority interest in subsidiary FirstEnergy Transmission
(FET, Baa2 stable), its intermediate transmission holding company,
which will result in $2.4 billion of proceeds. In addition,
FirstEnergy stated that it has entered into an agreement to issue
an additional $1 billion of equity to shore up its balance sheet.
The proceeds of the asset sale and equity issuance are expected to
be used to lower parent debt levels as well as to fund incremental
investment and growth opportunities.
RATINGS RATIONALE
"The Ohio settlement agreement, which we expect to be approved by
the PUCO (Public Utilities Commission of Ohio), removes the
regulatory overhang that has existed for FirstEnergy and its three
Ohio distribution utility subsidiaries since corporate governance
issues surfaced last year," stated Jairo Chung, Moody's analyst.
"Also, the sale of a minority stake in FET and $1 billion of
additional equity issuance demonstrate the company's commitment to
improving its balance sheet," added Chung.
Over the last 16 months, since an external investigation by the
Department of Justice became public in July 2020, FirstEnergy has
made constructive progress in addressing the corporate governance
issues related to the investigation, including the various
regulatory proceedings that have followed in Ohio. With the clarity
provided by the settlement agreement, the concurrent removal of the
regulatory overhang that had existed in Ohio and the remediation of
the material weaknesses in its financial reporting, Moody's expect
FirstEnergy to refocus on the operation of its regulated
utilities.
Furthermore, the company's efforts to improve its credit profile
have been demonstrated by its actions to reduce parent debt and to
fund its underfunded pension obligation. Moody's estimate that
FirstEnergy's percentage of parent debt over consolidated debt will
be reduced to the low 30% range from above 40% as a result of these
actions. Based on its improved risk profile and the opportunity to
invest in rate base under credit supportive regulatory
environments, Moody's think it is possible that the company will
generate cash flow from operations before changes in working
capital (CFO pre-WC) to debt approaching 12% over the next few
years, a key rationale for the positive outlook.
In the stipulation reached with interveners in Ohio, Ohio Edison,
Toledo Edison and Cleveland Electric agreed to provide $306 million
of benefits for their customers through 2025, starting with $96
million in 2021 in customer bill credits associated with the
companies' 2017-2019 Significantly Excessive Earnings Test (SEET)
cases. With the settlement agreement, all parties agreed that the
three utilities will file their next base distribution rate cases
in May 2024. This agreement provides regulatory stability for Ohio
Edison, Toledo Edison and Cleveland Electric over the next three
years, a credit positive. Also, with the annual reconciliation
filing to be made, Moody's expect enhanced visibility into the
three utilities performance measured against the projected SEET
guideline.
However, the $306 million of aggregated customer refund for the
three utilities will also put negative pressure on the companies'
credit metrics. Moody's expect Ohio Edison will be able to absorb
the negative financial impact and still produce CFO pre-WC to debt
in the low 20% range which supports a stable outlook on the
utility. However, Toledo Edison and Cleveland Electric will be more
weakly positioned at their current ratings as a result of the
financial impact of the stipulation. Moody's expect these companies
will produce CFO pre-WC to debt slightly below their downgrade
thresholds of 16% and 13%, respectively. The negative outlook on
these utilities reflects their limited financial flexibility and
the potential that their weaker metrics could eventually pressure
their ratings.
ESG Considerations
FirstEnergy's ESG Credit Impact Score is CIS-4 (highly negative),
reflecting a combination of the high governance risk as described
below and moderately negative environmental and social risk.
FirstEnergy's moderately negative environmental risks (E-3 issuer
profile score) primarily reflects utility exposure to physical
climate risks. These risks are somewhat offset by FirstEnergy's
overall low carbon transition risk.
The company's moderately negative social risk (S-3 issuer profile
score) reflects the fundamental utility risk that demographics and
societal trends could include public concerns over affordability as
well as the utility's reputational risk. The social issuer profile
score was changed to S-3 from S-4, reflecting the stable regulatory
environments, including the lower social risk the company faces in
Ohio, under which FirstEnergy's utilities operate.
FirstEnergy's high governance risk (G-4 issuer profile score)
remains and considers the deferred prosecution agreement the
company is operating under and a developing track record in
improving the credibility of management. It also considers the
positive remediation of the company's material weakness in
financial reporting and improved internal controls.
Rating Outlook
The positive outlook on FirstEnergy reflects the clarity
surrounding the Ohio regulatory environment, Moody's expectation
that the company's other regulatory environments will remain
stable, and the steps it has taken to address corporate governance
related issues. Furthermore, it incorporates Moody's expectation
that FirstEnergy will maintain its low business risk profile and
will strengthen its balance sheet and improve financial metrics
over the next 12-18 months.
The stable outlook on Ohio Edison reflects Moody's view that the
regulatory environment in Ohio has stabilized and that it will
remain credit supportive. Also, it incorporates Ohio Edison's
relatively strong financial metrics that will be maintained despite
the financial impact of the Ohio stipulation.
The negative outlooks on Toledo Edison and Cleveland Electric
reflect the limited flexibility at their current ratings as a
result of the financial impact of the Ohio stipulation that may
last for over the next 2-3 years.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Factors that could lead to an upgrade
For FirstEnergy, a rating upgrade could be considered if the
regulatory environments in all of its jurisdictions remain stable
and the company continues to improve its risk profile, both from a
financial and corporate governance standpoint. Also, if its
financial metrics improve, including CFO pre-WC to debt above 12%,
a rating upgrade could be possible.
For Ohio Edison, a rating upgrade could be considered if the
regulatory environment improves such that the regulatory lag is
minimized, improving in its cash flows. Also, if Ohio Edison's CFO
pre-WC to debt ratio is above 20% on a sustained basis, a rating
upgrade could be possible.
For Toledo Edison and Cleveland Electric, rating outlooks could be
stabilized if their financial metrics strengthen above their
respective downgrade thresholds on a sustained basis. Specifically,
If their CFO pre-WC to debt ratio improves to above 20% and 16%,
respectively, a rating upgrade could be considered. Also, their
ratings could be upgraded if the regulatory environment in Ohio
improves, shortening regulatory lag and improving cash flows.
Factors that could lead to a downgrade
A rating downgrade could occur for FirstEnergy if there are new or
unexpected negative developments that again heighten corporate
governance risk or any of its regulatory environments deteriorate
such that it adversely impacts the company or its utility
subsidiaries materially. Also, if FirstEnergy's financial metrics
or balance sheet deteriorates, a rating downgrade could be
considered.
A downgrade of Ohio Edison could occur if there are adverse
regulatory developments in Ohio that materially affect its
financial metrics, including CFO pre-WC to debt below 16%, on a
sustained basis.
For Toledo Edison and Cleveland Electric, a rating downgrade could
be possible if their CFO pre-WC to debt remains below 16% and 13%,
respectively, on a sustained basis. Also, if there are adverse
regulatory developments in Ohio that increases regulatory lag or
creates contentiousness, a rating downgrade could be considered.
Affirmations:
Issuer: Cleveland Electric Illuminating Company (The)
Issuer Rating, Affirmed Baa2
Senior Secured First Mortgage Bonds, Affirmed A3
Senior Unsecured Regular Bond/Debenture, Affirmed Baa2
Issuer: FirstEnergy Corp.
Probability of Default Rating, Affirmed Ba1-PD
Corporate Family Rating, Affirmed Ba1
Senior Unsecured Bank Credit Facility, Affirmed Ba1
Senior Unsecured Regular Bond/Debenture, Affirmed Ba1
Senior Unsecured Shelf, Affirmed (P)Ba1
Issuer: Ohio Edison Company
Issuer Rating, Affirmed A3
Senior Secured First Mortgage Bonds, Affirmed A1
Senior Unsecured Regular Bond/Debenture, Affirmed A3
Issuer: Toledo Edison Company
Issuer Rating, Affirmed Baa1
Senior Secured Regular Bond/Debenture, Affirmed A2
Remains Unchanged:
Issuer: FirstEnergy Corp.
Speculative Grade Liquidity Rating, Remains Unchanged at SGL-1
Outlook Actions:
Issuer: Cleveland Electric Illuminating Company (The)
Outlook, Remains Negative
Issuer: FirstEnergy Corp.
Outlook, Changed To Positive From Stable
Issuer: Ohio Edison Company
Outlook, Changed To Stable From Negative
Issuer: Toledo Edison Company
Outlook, Remains Negative
The principal methodology used in these ratings was Regulated
Electric and Gas Utilities published in June 2017.
FirstEnergy Corp., headquartered in Akron, Ohio is a fully
regulated utility holding company, serving approximately six
million customers in five states through its utility operations.
FirstEnergy's total rate base is approximately $23 billion with
about $8 billion of FERC-regulated transmission.
Ohio Edison Company is the largest Ohio distribution utility within
the FirstEnergy family, serving over 1 million customers. Cleveland
Electric Illuminating Company is also an Ohio distribution utility
within the FirstEnergy family. It serves approximately 750,000 in
northeastern Ohio. Toledo Edison Company, the smallest Ohio
distribution utility within the FirstEnergy family, serves
approximately 310,000 customers in northwestern Ohio. All three
Ohio utilities are regulated by the Public Utility Commission of
Ohio.
FIRSTENERGY CORP: S&P Raises Senior Unsecured Debt Rating to 'BB+'
------------------------------------------------------------------
S&P Global Ratings raised its issuer credit ratings on FirstEnergy
Corp. (FE) and FirstEnergy Transmission LLC (FET) to 'BB+' from
'BB'.
S&P said, "We also raised our ICRs on American Transmission Systems
Inc. (ATSI), Cleveland Electric Illuminating Co. (CEI), Jersey
Central Power & Light Co. (JCP&L), Mid-Atlantic Interstate
Transmission LLC (MAIT), Metropolitan Edison Co. (MetEd),
Monongahela Power Co. (MonPower), Ohio Edison Co. (OE),
Pennsylvania Electric Co. (Penelec), Pennsylvania Power Co. (Penn
Power), Potomac Edison Co. (PE), Toledo Edison Co. (TE),
Trans-Allegheny Interstate Line Co. (TrAIL), and West Penn Power
Co. (WPP) to 'BBB' from 'BB+'. We raised our ICR on Allegheny
Generating Co. to 'BB+' from 'BB'.
"We removed our ratings on FE and its subsidiaries from
CreditWatch, where we had placed them with positive implications on
July 23, 2021. The outlook is stable.
"We raised our issue-level ratings on the senior unsecured debt at
FE and FET to 'BB+' from 'BB'.
"We raised our issue-level ratings on the senior secured debt at
CEI, OE, TE, Penn Power, WPP, PE, and MonPower to 'A-' from 'BBB+',
reflecting a '1+' recovery rating. We also raised our issue-level
ratings on the senior unsecured debt at CEI, OE, MetEd, Penelec,
JCP&L, MonPower, ATSI, MAIT, and TrAIL to 'BBB' from 'BBB-'."
On Nov. 7, 2021, FE announced it reached an agreement with
Brookfield Super-Core Infrastructure Partners to sell a 19.9%
minority interest in FET for $2.4 billion. At the same time, the
company announced that Blackstone is going to invest up to $1
billion of common equity that FE intends to use for its smart grid
and energy transition plan and to reduce debt. FE also recently
announced the remediation of its material weakness identified
within its internal controls along with a settlement in multiple
proceedings with the Public Utilities Commission of Ohio (PUCO).
S&P's upgrade reflects the recent significant improvements to the
company's business risk and financial measures after incorporating
the effects of the proposed minority interest sale of FET, the
issuance of common equity, the remediation of its material
weakness, and the settlement in multiple Ohio proceedings that
support a higher rating.
Since October 2020, when FE announced the termination of three
executives, including its CEO, following the determination that
they violated company policies and its code of conduct, the company
has enhanced its internal controls and reduced risk. Its deferred
prosecution agreement (DPA) with the Department of Justice (DOJ)
reduces risk by concluding the DOJ's investigation into FE,
assuming the company fully meets its obligations. The DOJ will
dismiss its charge against FE if FE meets its obligations under the
three-year agreement; this remediates the material weakness
identified within its internal controls. FE recently announced that
it reached a settlement with its Ohio utilities and multiple
parties to resolve proceedings before PUCO. S&P considers this
development positive for credit quality because it significantly
reduces regulatory uncertainty in the state and demonstrates the
company's ability to manage its regulatory risk within Ohio.
The settlement provides $306 million in refunds and bill reduction
benefits to FE Ohio utilities customers, including $176 million by
year-end 2022. Specifically, it resolves the Significantly
Excessive Earnings Tests (SEET) for 2017-2020 and provides $96
million for 2017-2019 SEET cases to customers, with $51 million
designated for residential customers. FE's Ohio utilities also
agreed to provide $210 million in future rate reductions for
customers over the 2022-2025 period; this is on top of the $96
million in SEET bill credits. The $210 million will be distributed
as follows: $80 million in 2022, $60 million in 2023, $45 million
in 2024, and $25 million in 2025. S&P expects the company will be
able to fund the customer refunds and bill credits in a
credit-supportive manner.
Furthermore, the settlement resolves required reviews of FE's
utilities' energy efficiency riders for 2014-2018 and the
companies' current rate plan (known as their electric security
plan; ESP), which is required every four years. As a result of the
settlement, FE's Ohio utilities' current ESP will continue through
May 2024, and then the utilities will file their next base
distribution rate case.
These steps support credit quality and increase our confidence that
the company will improve its internal controls and demonstrate
improved governance.
S&P revised its management and governance assessment of FE and its
subsidiaries to fair from weak.
In July 2021, FE entered into a three-year DPA with the U.S.
Attorney's office for the Southern District of Ohio (USSDO), under
which the government filed a charge of honest services wire
fraud--a charge similar to bribery--against FE. Under the
agreement, FE will pay $230 million, split between the U.S.
Treasury and the Ohio Development Service Agency for the benefit of
Ohio utility customers that can't be recovered from customers. FE
will fully cooperate with the government's investigation, and it
will adopt compliance and reporting remedial measures. The charges
against the company will be dismissed at the end of three years if
it meets its obligations under the agreement.
The revised assessment reflects the significant steps FE has taken
to remediate the material weakness identified within its internal
controls including:
-- Appointment of a new CEO and a new chief legal officer;
-- Termination of some senior management members, including FE's
former CEO, for violations of certain FE policies and its code of
conduct;
-- Separation from senior members of the legal department, due to
inaction and conduct that the FE board determined was influenced by
the improper tone at the top;
-- Establishment of a subcommittee of FE's audit committee, which,
with the board, assessess the compliance program, provides
recommendations, and oversees the implementation of changes in FE's
compliance program;
-- Appointment of a new vice chairperson of the FE board and
executive director to help lead efforts to enhance FE's reputation
with external stakeholders;
-- Addition of two new independent directors to the FE board;
-- Appointment of a new chief ethics and compliance officer who is
overseeing the ethics and compliance program and implementation of
enhancements to the existing compliance structure and role;
-- Increased communication and training of employees with respect
to ethical standards, integrity of business procedures, compliance
requirements, FE's code of business conduct and other policies, and
the process for reporting suspected violations of the law or code
of business conduct.
S&P said, "We assess the comparable rating analysis modifier as
negative to account for weakness in the financial risk profile,
including funds from operations (FFO) to debt of about 10% over the
next 12-18 months, along with the residual risk remaining under the
three-year probationary period under the DPA.
"We are revising our group rating status of FET, ATSI, MAIT, and
TrAIL to strategically important from core.
"This revision reflects the planned sale of an almost 20% equity
stake in FET (subsidiaries are ATSI, MAIT, and TrAIL) to strengthen
the company's financial measures and address equity and capital
spending needs. While we expect the buyer will receive certain
limited rights commensurate with the minority stake, FE will
continue to operate FET and will remain a majority owner, with an
80.1% ownership in FET. Therefore, while FET and its subsidiaries
are successful utility operators, have FE's long-term commitment,
and are important to FE's long-term strategy, we no longer view
these subsidiaries as highly unlikely to be sold. This revised
assessment has no effect on our ICRs, issue-level ratings, or the
stand-alone credit profiles (SACPs). We continue to view these
entities as insulated up to one notch from the group credit
profile.
"We assess the insulating measures at FE's regulated utilities as
sufficient to raise our ICR one notch above the group credit
profile.
"We continue to rate ATSI, CEI, JCP&L, MAIT, MetEd, MonPower, OE,
PE, Penelec, Penn Power, TE, TrAIL, and WPP one notch higher than
the 'bbb-' group credit profile because of the strength of their
SACPs and the cumulative value of structural protections that
insulate the companies from their ultimate parent." Key insulating
measures include:
-- Each utility is a separate stand-alone legal entity that
functions independently (both financially and operationally), files
its own rate cases, and is independently regulated;
-- Each utility has its own records and books, including
stand-alone audited financial statements;
-- Each utility has its own funding arrangements, issues its own
long-term debt, and has a distinct sublimit under its committed
credit facility for its short-term funding needs;
-- S&P believes there is a strong economic basis for FE to
preserve the entities' credit strength, which reflects the
utilities' low-risk, profitable, regulated nature, and that they
constitute most of FE's operations; and
-- There are no cross-default provisions between the utilities and
FE or FET that could directly lead to a default at the entities.
The stable outlook on FE and its subsidiaries reflects the steps
the company has taken to reduce its business risk and strengthen
its balance sheet, including the proposed minority interest sale of
FET and the proposed common equity issuance, the proceeds from
which FE will use to pay down debt. S&P said, "The stable outlook
also reflects the company's actions to remediate its material
weakness in its internal controls, the settlement in Ohio, and our
expectation that FE will continue to cooperate with the remaining
investigations and that potential future investigations will not
result in a significant weakening of the credit metrics, which we
expect to improve. We expect a consolidated FFO-to-debt ratio of
about 10%-12% over the forecast period."
S&P said, "We could lower our ratings on FE and its subsidiaries
over the next 12-24 months if FE's ability to consistently manage
regulatory risk weakens, or if consolidated financial measures
weaken such that FFO to debt is consistently below 9%. This could
occur if the company experiences regulatory setbacks in Ohio or if
the company faces additional significant penalties from future
investigations.
"We could raise our ratings on FE and its subsidiaries over the
next 12-24 months if FE maintains FFO to debt consistently above
12% or if the company improves management and governance. This
could occur if FE reduces its leverage and demonstrates it can
effectively manage its regulatory risk on a consistent basis."
FLOYD SQUIRES: Eureka City Atty to Further Clarify Admin Expenses
-----------------------------------------------------------------
At the status conference held on October 27, 2021, the United
States Bankruptcy Court for the Northern District of California,
Santa Rosa Division, identified certain expense entries requested
by the City of Eureka that required further explanation as to how
they supported the City's efforts in preparing for trial on its
Motion to Appoint Chapter 11 Trustee in the Chapter 11 cases of
Floyd E. Squires, III, and Betty J. Squires. The City's counsel,
Michael Sweet, agreed to provide further clarification of the
nature of the requested expenses in the form of a declaration. To
further assist Mr. Sweet, the Court, again, identified the expenses
it is inclined to allow and disallow in tables found in a
Supplemental Memorandum issued by the Court on October 29, 2021, a
full-text copy of which is available at
https://tinyurl.com/2wyvy7s7 from Leagle.com.
About the Squires
Floyd E. Squires, III, and Betty J. Squires filed for chapter 11
protection (Bankr. N.D. Cal. Case No. 16-10828) on Nov. 8, 2017,
and are represented by David N. Chandler, Esq. of the Law Offices
of David N. Chandler.
Janina M. Hoskins was appointed as examiner of the Debtors on April
23, 2018. Dentons US LLP, led by Michael A. Isaacs, is the
examiner's counsel.
FORD MOTOR: Fitch Rates New Unsecured Green Bonds Due 2032 'BB+'
----------------------------------------------------------------
Fitch Ratings has assigned a 'BB+'/'RR4' rating to Ford Motor
Company's proposed benchmark issuance of senior unsecured green
bonds due 2032. Ford's Long-Term Issuer Default Rating (IDR) is
'BB+'. The Rating Outlook is Stable.
KEY RATING DRIVERS
Proposed Green Bonds: Ford intends to allocate an amount equal to
the net proceeds from the bond offering to finance or refinance
clean transportation projects as outlined in the bonds' prospectus
supplement. Ford intends to fully allocate the proceeds by YE 2022.
Clean transportation projects include activities related to
designing, developing and manufacturing battery electric vehicles.
Ford will publish annual Sustainable Financing Reports detailing
progress on the projects funded by the bonds. It has also retained
an outside consultant that will confirm the bonds are aligned with
International Capital Market Association 2021 Green Bond Principles
and Loan Market Association 2021 Green Loan Principles.
Rating Rationale: Ford's IDR incorporates both the lingering
effects of the coronavirus pandemic on the company's credit
profile, as well as issues that predate the pandemic. Pre-pandemic
concerns included an elevated cost structure that resulted in lower
margins than most of the company's global peers and relatively weak
FCF generation, even after excluding cash costs associated with the
company's global redesign activities. The ratings also consider the
cost of substantial investments that Ford is making to electrify
its global vehicle fleet, ongoing investments in automated vehicle
technology and executional risks associated with the global
redesign activities.
The global semiconductor shortage will likely weigh on industry
vehicle production into at least 2022, but the effect so far has
been largely mitigated by higher net pricing and positive vehicle
mix, as end-market demand continues to be relatively robust. Fitch
expects most global regions will see improved economic conditions
over the next several years, which will lead to higher light
vehicle demand over the intermediate term that will help to support
Ford's sales and cash flows.
Reduced FCF Pressure: Fitch expects Ford's automotive FCF to remain
under pressure over the next couple of years as the company
continues to work through its global redesign, with a substantial
cash outflow expected in 2021 as the company potentially spends
over $2.5 billion on redesign work, including the end of
manufacturing in Brazil and the winddown of a substantial portion
of its operations in India.
Excluding the redesign initiatives, Fitch expects the company's FCF
to be positive over the next several years on a more benign market
backdrop, although the semiconductor shortage will remain a
near-term concern. Offsetting some of the improvement in operating
cash flows will be higher investments in electrification and
autonomous vehicles. Fitch expects Ford's automotive FCF margins,
according to Fitch's calculations and excluding the redesign
initiatives, to run in the low-single-digit range over the next
couple of years, and then to rise after that.
Elevated Leverage: Fitch expects Ford's leverage to remain elevated
for the next couple years compared with pre-pandemic levels, even
with the planned tender for up to $5.0 billion of the company's
senior unsecured notes. Since the pandemic began, Ford issued $8.0
billion in senior unsecured notes in 2020 and a further $2.3
billion in convertible notes in 2021. The proposed green bonds will
add to this tally.
Fitch expects EBITDA gross leverage (according to Fitch's
methodology) to run near the mid-2x range by YE 2021 and to decline
toward 2.0x by YE 2022. Beyond 2022, EBITDA leverage could decline
further, toward the mid-1x range. Fitch expects FFO leverage,
excluding redesign-related cash outflows, to run in the low-4x
range by YE 2021 and to decline toward the upper-2x range by YE
2022. FFO leverage could decline further, toward 2.0x, by YE 2023.
Actual leverage in 2020 spiked, on both a FFO and EBITDA basis, due
to the pandemic-driven decline in profitability and the higher
level of outstanding debt.
ESG Relevance Score: Ford has an ESG Relevance Score of '4' for
Management Strategy due to the complexity and costs of the
company's global redesign strategy, which has a negative impact on
the credit profile, and is relevant to the ratings in conjunction
with other factors.
DERIVATION SUMMARY
Ford's business profile is similar to other large global volume
auto manufacturers. From an automotive revenue perspective, it is
larger than General Motors Company (GM) (BBB-/Stable) but smaller
than Stellantis N.V. (Stellantis) (BBB-/Stable). Compared with GM,
Ford's operations are more globally diversified, with significant
operations in most major auto markets. However, from a brand
perspective, Ford is less diversified than Volkswagen AG (VW)
(BBB+/Positive), Stellantis or GM, focusing primarily on its global
Ford brand and, to a much lesser extent, its Lincoln luxury brand,
which is only available in North America and China. However, the
company sells a wide range of vehicles under the Ford brand
globally, ranging from small passenger cars to heavy trucks in
certain global markets. Ford has a particularly strong market share
in the highly profitable North American pickup and European light
commercial vehicle segments.
For the past several years, Ford's credit profile has been weaker
than that of global auto manufacturers in the 'BBB' category, such
as GM, Stellantis and VW. Ford's operating and FCF margins have
been lower and gross leverage has been higher than similarly rated
global auto manufacturers. However, Ford has one of the global
industry's strongest liquidity positions, providing it with
significant financial flexibility.
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for the issuer
include:
-- Global light vehicle sales rise by 6% in 2021, including an 8%
increase in U.S., with further recovery seen in subsequent
years;
-- Ford's revenue in 2021 is impacted by the loss of production
due to the semiconductor shortage, offset by positive net
pricing and vehicle mix;
-- Capex runs near 5% of revenue over the next several years,
relatively consistent with historical levels;
-- Excluding redesign costs, FCF margins run in the 0.5%-1.0%
range over the next couple of years, then rises toward 2% in
later years;
-- The company maintains automotive cash (excluding Fitch's
adjustments for not readily available cash) of at least $20
billion over the forecast horizon, with total liquidity,
including credit facility capacity, over $30 billion.
-- The company continues with its global redesign initiatives,
which is included in Fitch's FCF forecasts;
-- Ford Credit continues to make distributions to Ford over the
next several years, which is also included in Fitch's FCF
forecasts.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Fitch does not expect Ford's ratings to be considered for an
upgraded until the global macro environment has normalized;
-- Sustained North American automotive EBIT margin of 6.0%;
-- Sustained global automotive EBIT margin near 3.0%;
-- Sustained FCF margin near 1.5%, excluding restructuring costs;
-- Sustained FFO leverage near 2.0x, excluding restructuring
costs.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An extended decline in automotive cash below $15 billion;
-- Sustained breakeven global automotive EBIT margin;
-- Sustained negative FCF, excluding restructuring costs;
-- Sustained FFO leverage near 3.0x, excluding restructuring
costs.
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 Position: Ford had about $31 billion in automotive
cash and marketable securities as of Sept. 30, 2021 (excluding
Fitch's adjustments for not readily available cash). In addition to
its cash and marketable securities, as of Sept. 30, 2021, Ford also
had nearly full availability on its $13.5 billion primary revolver
(after accounting for $25 million in LOCs) and full availability on
its $2.0 billion supplemental revolver. It also had a total of
about $550 million available on various local credit facilities
around the world. About $3.4 billion of the primary revolver
commitments mature in 2024 and $10.1 billion matures in 2026. The
supplemental revolver matures in 2024.
As part of its captive finance adjustment, Fitch's Non-Bank
Financial Institutions team has calculated an allowable
debt-to-equity ratio of 4.0x for Ford Credit. This is lower than
the actual ratio of 9.8x as calculated by Fitch at YE 2020. As a
result of its analysis, Fitch has assumed that Ford makes a
theoretical $16.3 billion equity injection into Ford Credit, funded
with balance sheet cash, to bring Ford Credit's debt-to-equity
ratio down to 4.0x. Fitch has included the adjustment in its
calculation of Ford's not readily available cash. The resulting
adjustment reduces Fitch's calculation of Ford's readily available
automotive cash, but the company's metrics remain supportive of its
'BB+' Long-Term IDR.
In addition to the captive-finance adjustment, according to its
criteria, Fitch has treated an additional $800 million of Ford's
automotive cash as "not readily available" for purposes of
calculating net metrics. This is based on Fitch's estimate of the
amount of cash needed to cover typical seasonality in Ford's
automotive business. However, even after excluding the amounts
noted above from its liquidity calculations, Fitch views Ford's
automotive liquidity position as strong.
Debt Structure: As of Sept. 30, 2021, Ford's automotive debt
structure consisted primarily of about $21 billion in senior
unsecured notes (including $2.3 billion of convertible notes), $1.5
billion in delayed draw term loan borrowings and $1.1 billion in
remaining borrowings outstanding under the U.S. Department of
Energy's Advanced Technology Vehicles Manufacturing incentive
program, along with various other long- and short-term borrowings.
On Nov. 4, 2021, Ford launched a tender offer for up to $5.0
billion of its existing senior unsecured notes.
ISSUER PROFILE
Ford is a global automotive manufacturer that builds and sells
light vehicles primarily under the Ford and Lincoln brands, as well
as Ford-brand commercial vehicles. Ford also offers financial
services to dealers and customers through Ford Motor Credit Company
LLC.
ESG CONSIDERATIONS
Ford Motor Company has an ESG Relevance Score of '4' for Management
Strategy due to the complexity and costs of the company's global
redesign strategy, which has a negative impact on the credit
profile, and is relevant to the ratings in conjunction with other
factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
FORD MOTOR: S&P Rates New Senior Unsecured Notes 'BB+'
------------------------------------------------------
S&P Global Ratings assigned its 'BB+' issue-level rating and '3'
recovery rating to Ford Motor Co.'s proposed senior unsecured notes
(green bonds) due 2032. The '3' recovery rating indicates its
expectation for meaningful recovery (50%-70%; rounded estimate:
65%) in a hypothetical default scenario.
S&P said, "We expect the company to apply the proceeds from this
issuance toward new or existing green projects, assets, or
activities that meet the notes' eligibility criteria. These include
clean transportation projects and, specifically, the design,
development, and manufacture of its battery electric vehicle (BEV)
portfolio. We expect Ford to allocate the significant majority of
these proceeds to its North American projects by the end of 2022."
Separately, the company also commenced cash tender offers for up to
$5 billion of its existing unsecured debt across multiple tranches.
The tender offers include a financing condition that requires Ford
to have completed one or more senior note offerings of at least $1
billion to finance or refinance the green projects, per the terms
in their prospectus. These transactions would not affect S&P's
recovery ratings on the company's unsecured debt because it
typically caps its recovery ratings on the debt of issuers it rates
in the 'BB' category at '3'.
The proposed issuance and potential debt reduction have no material
effect on Ford's debt leverage because we already net most of its
accessible cash. However, S&P anticipates the company will realize
significant cumulative interest rate savings following the
repayment of its higher-cost debt, which will improve its cash flow
adequacy metrics somewhat over the new few years.
S&P said, "The negative outlook on Ford reflects the downside risks
to our current volume recovery assumptions across regions, as well
as the company's higher costs, weaker-than-expected performance in
China, and the potential for weak automotive free cash flow in
upcoming quarters stemming from its ongoing production shutdowns
related to the semiconductor chip shortage. Before revising our
outlook, we would need to be more confident that Ford's ongoing
cost-reduction programs, favorable product pricing, and working
capital improvements (leaner inventories) will support free
operating cash flow (FOCF) to debt of more than 10% (downside
trigger) in 2022 and 2023 after a large expected cash outflow in
2021."
FORUM ENERGY: Incurs $11.6 Million Net Loss in Third Quarter
------------------------------------------------------------
Forum Energy Technologies, Inc. filed with the Securities and
Exchange Commission its Quarterly Report on Form 10-Q disclosing
a net loss of $11.59 million on $140.98 million of revenue for the
three months ended Sept. 30, 2021, compared to a net loss of $21.55
million on $103.61 million of revenue for the three months ended
Sept. 30, 2020.
For the nine months ended Sept. 30, 2021, the Company reported a
net loss of $63.06 million on $392.92 million of revenue compared
to a net loss of $64.19 million on $399.51 million of revenue for
the same period during the prior year.
As of Sept. 30, 2021, the Company had $799.97 million in total
assets, $453.95 million in total liabilities, and $346.02 million
in total equity.
Management Commentary
Cris Gaut, chairman and chief executive officer, remarked, "Our
orders and backlog continued to build in the third quarter with an
11% sequential increase in orders and a 1.25 book-to-bill ratio.
This growth was led by orders for new product offerings in our
stimulation and intervention product line and continued growth in
subsea capital equipment orders. Our order flow has increased each
of the last five quarters and has nearly doubled on a
year-over-year basis. FET revenue of $141 million was impacted by
ongoing and widespread supply chain delays, and COVID related
disruptions for our customers' field operations.
1
"FET EBITDA of $7 million represents a 9% sequential increase, and
a $17 million improvement compared to the third quarter 2020. The
growth in our Subsea product line and market share gains in our
artificial lift product offering are particularly noteworthy.
"Despite the impact of ongoing supply chain disruptions and cost
inflation, we have a strong backlog and are beginning to see the
benefits of pricing improvements. As a result, we forecast fourth
quarter revenue to be between $145 and $155 million and EBITDA of
$9 to $11 million. Furthermore, we expect a constructive market
environment to support our outlook for continued growth in 2022.
"We ended the third quarter with $257 million principal amount of
debt outstanding and net debt of $206 million. In the third
quarter, we amended our ABL credit facility to, among other things,
extend the maturity to September 2026, subject to certain
exceptions, and reduce the facility size to $179 million. With this
extension and the Senior Notes maturity in August 2025, we now have
ample runway and liquidity to continue to execute our strategic
initiatives.
"The $10 million share repurchase program authorized by our board
of directors represents approximately 8% of our current equity
market capitalization. It demonstrates the confidence we have in
the company's business model, strong product offering and future
prospects, including our growing exposure to the energy
transition."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1401257/000140125721000096/fet-20210930.htm
About Forum Energy
Forum Energy Technologies is a global oilfield products company,
serving the drilling, downhole, subsea, completions and production
sectors of the oil and natural gas industry. The Company's
products include highly engineered capital equipment as well as
products that are consumed in the drilling, well construction,
production and transportation of oil and natural gas. Forum is
headquartered in Houston, TX with manufacturing and distribution
facilities strategically located around the globe. For more
information, please visit www.f-e-t.com
Forum Energy reported a net loss of $96.89 million for the year
ended Dec. 31, 2020, compared to a net loss of $567.06 million for
the year ended Dec. 31, 2019. As of June 30, 2021, the Company had
$804.16 million in total assets, $442.45 million in total
liabilities, and $361.17 million in total equity.
* * *
As reported by the TCR on July 15, 2021, Moody's Investors Service
upgraded Forum Energy Technologies, Inc.'s Corporate Family Rating
to Caa1 from Caa2. "The upgrade of Forum's ratings reflects
reduced risk of default and our expectation that Forum will grow
revenue and EBITDA through 2022 driving reduced leverage and better
interest coverage," commented Jonathan Teitel, a Moody's analyst.
As reported by the TCR on Aug. 25, 2021, S&P Global Ratings revised
its outlook on Forum Energy Technologies Inc. to stable from
negative and affirmed its 'CCC+' issuer credit rating. The stable
outlook reflects S&P's view that despite expecting leverage to
remain at unsustainable levels over the next 12 months, including
funds from operations (FFO) to debt of about 5%, S&P expects Forum
will maintain adequate liquidity and generate a small amount of
FOCF.
FREEDOM SALES: Unsecured Creditors Will Get 1% of Claims in 5 Years
-------------------------------------------------------------------
Freedom Sales & Service, LLC, filed with the U.S. Bankruptcy Court
for the Western District of Texas a Plan of Reorganization dated
November 4, 2021.
Freedom Sales & Services started operations in June 2016. The
Debtor operates a logistical company that provides remote natural
gas drilling facilities with parts and supplies required for
equipment and vehicles, around Pecos and other western areas of
Texas.
The Debtor filed this case on Aug. 6, 2021, to save the business
from aggressive collection efforts by merchant cash advance lenders
and to reorganize itself and its debts. Freedom has the goal of
paying allowed secured claims and proposing a repayment plan that
would allow the company to continue to operate its business.
Debtor anticipates futures sales will be able to fund the plan and
pay the creditors pursuant to the proposed plan. The projections
are currently modeled with the projection that the Debtor's largest
customer, will continue ordering from the Debtor at levels greater
than or equal to levels prior to the filing of this Bankruptcy. It
is anticipated that after confirmation, the Debtor will continue
operating the business. Based upon these projections and
assumptions the Debtor believes it can service the debt to the
creditors.
The Debtor will continue operating its business. The Debtor's Plan
separates the existing claims into 7 categories of Claimants.
These claimants will receive cash repayments over a 60 month period
of time beginning on the Effective Date.
Class 5 consists of Special Objected/Disputed Unsecured Claims.
These claims are impaired. While these claimants filed Secured
Proofs of Claim, due to the prior secured creditors exhausting the
security of the Debtor, they will be treated as unsecured claims.
* 5-1 EBF Partners LLC dba Everest Business Funding filed a
secured claim in the amount of $61,013.17 (Claim No. 8). This
claim was allegedly secured by future receivables, inventory,
equipment, and other business assets. However, due to the senior
secured creditors exhausting all secured assets of the Debtor,
these claims are unsecured. Debtor proposes to pay 1% of this claim
for a total of $610.13 at 0% interest per annum over 60 months.
The Debtor intends to file its objection to this claim, and subject
to the objection, if the objection is sustained, EBF Partners LLC
will receive nothing under this plan.
* 5-2 Forward Financing filed a secured claim in the amount of
$26,034.15 (Claim No. 6). This claim was allegedly secured by
future receivables, inventory, equipment, and other business
assets. However, due to the senior secured creditors exhausting
all secured assets of the Debtor, these claims are unsecured.
Debtor proposes to pay 1% of this claim for a total of $260.34 at
0% interest per annum over 60 months. Debtor intends to file its
objection to this claim, and subject to the objection, if the
objection is sustained, Forward Financing will receive nothing
under this plan.
* 5-3 Wide Merchant filed a secured claim in the amount of
$81,345 (Claim No. 10). This claim was allegedly secured by future
receivables, inventory, equipment, and other business assets.
However, due to the senior secured creditors exhausting all secured
assets of the Debtor, these claims are unsecured. Debtor proposes
to pay 1% of this claim for a total of $813.45 at 0% interest per
annum over 60 months. Debtor intends to file its objection to this
claim, and subject to the objection, if the objection is sustained,
Wide Merchant will receive nothing under this plan.
* 5-4 World Global Fund filed a secured claim in the amount of
$38,974.00 (Claim No. 1). This claim was allegedly secured by
future receivables, inventory, equipment, and other business
assets. However, due to the senior secured creditors exhausting
all secured assets of the Debtor, these claims are unsecured.
Debtor proposes to pay 1% of this claim for a total of $389.74 at
0% interest per annum over 60 months. Debtor intends to file its
objection to this claim, and subject to the objection, if the
objection is sustained, World Global will receive nothing under
this plan.
Class 6 consists of Allowed Unsecured Claims and are impaired. All
allowed unsecured creditors shall receive a pro rata distribution
at zero percent per annum over the next 5 years beginning not later
than the 30th day after the effective date of confirmation and
continuing every year thereafter for the additional 5 years
remaining on this date. Nothing prevents Debtor from making monthly
or quarterly distributions that may begin on the 30th day after the
effective date of confirmation, so long as 1/5 of the annual
distributions to the general allowed unsecured creditors are paid
by each yearly anniversary of the confirmation date of the plan.
Debtor will distribute $2,454.52 to the general allowed unsecured
creditor pool over the 5 year term of the plan. The Debtor's
General Allowed Unsecured Claimants will receive 1% of their
allowed claims under this plan.
Class 7 consists of Equity Interest Holders and are not impaired
under the Plan. The current owner will receive no payments under
the Plan; however, they will be allowed to retain their ownership
in the Debtor.
Debtor anticipates the continued operations of the business to fund
the Plan.
A full-text copy of the Plan of Reorganization dated Nov. 4, 2021,
is available at https://bit.ly/3mZFl0V from PacerMonitor.com at no
charge.
Debtor's Counsel:
Robert "Chip" Lane
The Lane Law Firm
6200 Savoy Drive
Suite 1150
Houston, Texas 77036-3300
About Freedom Sales & Services
Freedom Sales & Services, LLC, sought protection under Chapter 11
of the U.S. Bankruptcy Code (Bankr. W.D. Tex. Case No. 21-70120) on
Aug. 6, 2021. In the petition signed by Angel Borunda,
owner/president, the Debtor disclosed up to $100,000 in both assets
and liabilities.
Judge Tony M. Davis oversees the case.
Robert Chamless Lane, Esq., at The Lane Law Firm, is the Debtor's
counsel.
FREEPORT LNG: Fitch Assigns First Time 'B' IDR, Outlook Stable
--------------------------------------------------------------
Fitch Ratings is assigning Freeport LNG Investments, LLLP (FLNGI,
as borrower under the Term Loan B and FLNGI Option Holdco, LLC as
guarantor in the Term Loan B structure, and referred to
collectively as FLNGI) an Issuer Default Rating (IDR) of 'B'. The
senior secured loan is assigned a rating of 'B+'/'RR3'. The Rating
Outlook is Stable.
The rating reflects the stable distributions from three operating
liquified natural gas (LNG) companies, each financed independently
but operating as a single LNG complex. FLNGI's debt is structurally
subordinated to debt at the LNG operating and intermediate holding
company, and is also subject to significant refinance risk. The
dividends are supported by a stable revenue stream generated from
tolling-style agreements with investment-grade counterparties that
bear all-natural gas supply and most cost risks. The ratings
reflect the risk that the sole revenue source, the dividend from
the holding company, is subject to a lock-up test in addition to
FLNGI's high leverage.
KEY RATING DRIVERS
Revenue Assurance Features: Fitch believes FLNGI benefits from a
stable cashflow profile with operating revenues generated under
20-year long-term agreements (LTA). The capacity is almost entirely
sold to five energy companies with ratings of 'BBB-' or better
under LTAs with take-or-pay terms. The counterparties bear the risk
of natural gas supply under tolling agreements.
The three liquefaction plants, FLNG Liquefaction, LLC (FLIQ1; NR),
FLNG Liquefaction 2, LLC (FLIQ2; BBB/Stable), and FLNG Liquefaction
3, LLC (FLIQ3; BBB-/Stable), collectively known as the Operating
Companies (Opcos) have no commodity price exposure or volume risk
under the LTAs. The counterparties bear the power costs and the
fixed payments cover most operating costs. All five, 20-year
contracts have commenced and are operating under normal service to
its customers.
In 2020, the opcos' long-term customers exercised a provision under
the LTAs to cancel delivery of LNG cargoes. The severe drop in
economic activity during the coronavirus pandemic reduced demand
and depressed natural gas prices globally. Lifting rebounded
strongly towards the end of 2020 as cold weather returned to major
markets. Regardless of these cancellations, the opcos received
fixed-capacity payments under the LTAs reflecting the stable, fixed
payment stream.
Structural Subordination: The primary rating concern for FLNGI is
that the sole source of revenue is dividends from the three
liquefaction plants, the Opcos. Additionally, FLNGI's debt is
subordinate to the operating and cash flow needs at the Opcos,
which have $12.04 billion of project debt, and a $1.25 billion note
at FLEX -- IH (FLEX), an intermediate holding company and wholly
owned subsidiary of FLNG. FLNGI holds 63.4% limited partnership
interests in FLNG, which in turn, indirectly owns 50% of FLIQ1,
~42.44% of FLIQ2, and 100% of FLIQ3.
The Opco and FLEX indentures contain provisions preventing upstream
distributions ultimately to FLNGI if debt service coverage ratios
(DSCR) fall below 1.25x and 1.15x, respectively. Fitch believes
there is sufficient cashflow and a cushion against the cash traps
at the project and holding company levels. Under the Fitch rating
case for FLEX, Fitch projects the minimum DSCR over the 20-year
forecast of 1.27x, and this ratio occurs in 2038, when operations
should be well seasoned and beyond the initial maturity of the
FLNGI obligations.
High leverage: The leverage at FLNGI is high when considered on a
standalone and proportionally consolidated basis. The standalone
total debt to distributions under the Fitch forecast is about 8x in
2022 and declines to 7.0x by 2026. Fitch considers this the main
leverage metric, as it reflects the risk of structural
subordination. The proportionately consolidated approach reflects
FLNGI's 63.4% ownership share of the company and related
obligations. Under proportional consolidation in Fitch's base case,
the initial leverage is above 11.5x in 2022 and will decline to
10.0x by 2025-2026 as the first term loan maturity approaches.
Steady debt reduction is the main driver. These high debt levels
are mitigated by the stable dividend stream generated under the
LTAs.
Refinancing Risk: FLNGI's IDR reflects refinancing risk from the
financial policy at FLEX. FLNGI's $2.25 billion indebtedness
matures in 2026 (TLA) and 2028 (TLB), well before the maturity of
FLEX's $800 million notes due in 2031 and the $450 million notes
due in 2039. The excess cash flow sweep provision and target debt
balance mandates that FLNGI reduces debt to between $1.75 billion
by the 2026 maturity. Fitch believes the stable cashflows from the
LTAs, in place until 2039, is sufficient to refinance FLNGI's
debt.
Over the long term, FLNGI note holders may be subject to the
refinancing risk of the FLEX notes, if FLNGI's bullet maturities
expected in 2026 and 2028 are refinanced into long-term
obligations. The $450 million FLEX notes due in 2039 have a
six-month tail under the service contracts and reserving
requirements to repay debt and mitigate the refinancing risk, which
would add pressure to any refinanced FLNGI debt repayment. The
owners of FLNGI/FLEX are choosing to bear the risk of the Opcos
making profits as the last LTA expires in 2040.
Merchant Revenues Add Upside: Fitch believes the available excess
capacity not sold under long term contracts provides additional
revenue generating opportunities. Fitch includes these uncontracted
revenues in the base case, and believes that revenues generated
under short to medium term sales provide additional, but more
volatile revenues, as exhibited by the swings in market conditions
over the last 18 months.
Operations are Ramping Up: FLIQ1, FLIQ2 and FLIQ3 began operations
at December 2019, January 2020, and May 2020, respectively.
Collectively, the opcos have an operating track record but remain
in ramp-up. The facilities did not operate for one month last
summer when customers canceled cargo delivery. As of October 2020,
the facility was running at capacity. The plants were offline
temporarily over the last few months due to severe weather and
power outages, which Fitch assumes in its forecast as the complex
continues to optimize operations.
DERIVATION SUMMARY
FLNGI's consolidated operations are supported by long-term,
take-or-pay contracts to supply LNG for export. Its holding company
debt structure, contract tenor and stable cash flow profile
compares favorably with midstream energy peer, Cheniere Energy
Partners (BB+/Stable). Debt obligations at both companies are
secured by dividend streams derived from opcos, are subordinate to
opco debt and are at risk of dividend lock-ups.
Fitch notes that FLNGI's contract duration is slightly longer in
duration with 18 years remaining compared to the contracts at
Cheniere's wholly owned operating subsidiary, Sabine Pass
Liquefaction (SPL), ranging between 15 and 18 years remaining. The
contracts at both operators are with investment grade
counterparties. Operationally, SPL is a seasoned operator compared
to FLNGI. SPL's five liquefaction trains have been operating for
over five years, implemented debottlenecking to improve capacity
and are proven to be reliable. In contrast, FLNGI's three
liquefaction trains have been online for less than two years, are
in the process of optimizing capacity and have not yet reached a
stabilized level of operations, in Fitch's opinion.
The main driver of the rating difference is the leverage. At
Cheniere, Fitch expects consolidated debt with equity credit to
operating EBITDA of 6.0x in 2021, declining to around 5.0x under
the rating case compared to FLNGI's proportionately consolidated
leverage over 11.0x in 2022 and Fitch projects it declines to 10.0x
by 2025. The significantly higher leverage at FLNGI accounts for
the four-notch difference in the ratings.
Another midstream peer in a similar rating category is BCP Raptor,
LLC (B/Stable). It provides gathering, transportation, and
processing of natural gas, natural gas liquids (NGLs) and crude oil
in the Delaware basin of the Permian Basin. Unlike FLNGI, Raptor is
exposed to volume risk from investment and non-investment grade
producers under fixed-fee contracts. In 2020, Fitch downgraded the
IDR to 'B-' based on Fitch's forecast of leverage rising to 10.0x
as volumes underperformed from strong COVID related headwinds.
While FLNGI's projected consolidated leverage is slightly higher
than Raptor, FLNGI's predictable cashflow with minimum fixed
capacity payments covering operating and interest costs more than
offset this difference.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- Fitch's price deck, e.g. for 2021 Henry Hub (HH) of
$3.40/MMBtu, Title Transfer Facility (TTF) and National
Balancing Point (NBP) of $10 of natural gas, and for 2022, HH
at $2.75, TTF/NBP at $6 and long-term natural-gas price at HH
of $2.45 and TTF/NBP of $5, informing the basis for the
pricing of the excess capacity revenues;
-- Revenues from LTAs and excess capacity revenues are assumed in
the rating case;
-- Train capacity of 4.9 mtpa for the forecast period;
-- Proportionately consolidated debt declines during the forecast
due to mandatory annual amortization and additional reductions
from remaining cash available after interest and loan
amortizations obligations to reach the target debt balance
required under the loan agreement;
-- No additional debt at Opco or Flex;
-- No interruption of upstream distributions to FLNGI with the
opco and holdco performing in excess of the cash trap.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- An increase in dividends to FLNGI that results in leverage, as
measured by expected standalone total debt to distributions,
decreasing below 7.0x on a sustained basis;
-- Expected proportionally consolidated total debt with equity
credit to operating EBITDA below 9.5x on a sustained basis.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A multi-notch downgrade or financial distress of any LTA
counterparty;
-- A decrease in dividends to FLNGI that results in leverage, as
measured by expected standalone total debt to distributions,
increasing to above 8.0x on a sustained basis;
-- An increase in debt at the opcos or FLEX;
-- Expected proportionally consolidated total debt with equity
credit to operating EBITDA above 10.5x expected on a sustained
basis;
-- A severe and prolonged operational issue at any of the
liquefaction plants;
-- FFO fixed-charge coverage sustained below 1.5x, or other
conditions that raise a concern for liquidity.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: FLNGI has a letter of credit facility to fund
the debt service reserve fund equal to six months of debt service
under the term loan B. Fitch anticipates that dividends to FLNGI
will not be restricted by the dividend test and FLNGI's liquidity
is sufficient.
While FLNGI's debt is structurally subordinate to the opco and FLEX
debt, the next upcoming maturity is FLNGI's $1.2 billion loan due
2026, followed by the $1.2 billion term loan A due in 2028. The LTA
remain in place until 2038 and will generate stable cashflow to
support refinancing of the loans in 2026 and 2028.
ISSUER PROFILE
Freeport LNG Investments, LLLP is the limited liability partnership
that holds Michael Smith's 55.25% limited partnership (L.P.)
interest in Freeport LNG Development L.P (FLNG). Separately, FLNGI
Option HoldCo, LLC holds 8.11% in L.P. and is the guarantor of the
bonds. Collectively, both represents 63.3% ownership interest in
Freeport LNG Development, L.P. (Freeport Development). Freeport
Development operates a 15+ MTPA natural gas liquefaction and LNG
export facility consisting of three 5+ MPTA trains located near
Freeport, TX.
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch combines the financial statements of Freeport LNG
Investments, LLP and FLNGI Option HoldCo, LLC, collectively
referred to FLNGI, to reflect its full 63.3% ownership of Freeport
LNG Development, L.P. (Freeport Development). Additionally, Fitch
adjusts the financial statements to reflect the dividends from
Freeport Development as revenue. As an equity owner of Freeport
Development, dividends to FLNGI are reported on the cash flow
statement as "Distributions from Freeport LNG Development, L.P."
not operating revenue.
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.
FREEPORT LNG: Moody's Assigns First Time 'B1' Corp. Family Rating
-----------------------------------------------------------------
Moody's Investors Service assigned first time ratings to Freeport
LNG Investments, LLLP (FLNGI), including a B1 Corporate Family
Rating, B1-PD probability of default rating and B1 rating on its
proposed senior secured term loan B. The outlook is stable.
Assignments:
Issuer: Freeport LNG Investments, LLLP
Corporate Family Rating, Assigned B1
Probability of Default Rating, Assigned B1-PD
Senior Secured Term Loan B, Assigned B1 (LGD4)
Outlook Actions:
Issuer: Freeport LNG Investments, LLLP
Outlook, Assigned Stable
RATINGS RATIONALE
The B1 CFR principally reflects high absolute level of indebtedness
maintained by the group, as well as the expectation of a gradual
organic debt reduction and deleveraging over the longer term.
The rating is supported by the predictable and recurring nature of
the long-dated, contractually derived cash flow to be distributed
through intermediate holding companies to FLNGI, as well as the
effective controlling rights that the principal owner of FLNGI
maintains over the group's entire operations and strategic
development.
The stability and magnitude of FLNGI's cash flow stream is tempered
by the high extent to which FLNGI's debt is structurally
subordinated to $1.25 billion in debt raised at intermediate
holding company FLEX-IH and to $12.16 billion of project debt that
the group's LNG operating companies raised earlier to finance
construction of the three principal operating assets.
While FLNGI retains strong governance control, Moody's note risks
associated with concentrated ownership, as well as financial risks
associated with more complex capital structures and the presence of
minority shareholders in operating companies. Finally, Moody's note
a high degree of tolerance for debt and leverage, as well as
additional financial and project risks that would be associated
with the fourth LNG project that remains under consideration.
The stable outlook is supported by the strength and stability of
contractually derived cash flows.
Moody's expects that FLNGI will proactively manage distributions
from subsidiaries in a way to ensure sufficient coverage of its
debt service obligations and will maintain adequate funding of the
debt service account and adequate liquidity.
The term loan B is rated B1 at the level of the CFR and together
with equally ranked term loan A will constitute the entire capital
structure of FLNGI on a standalone basis. The term loan B is
secured by a pledge of ownership interests in the intermediate
holding company Freeport LNG Development L.P. (FLNG) and is
guaranteed on a senior secured basis by non-operating company
holding additional 8% ownership stake in FLNG. The term loan B is
structurally and effectively subordinated to the senior secured
debt raised by operating subsidiaries and holdings.
As proposed, the new senior secured term loan should provide
covenant flexibility that if utilized could negatively impact
creditors. Notable terms include the following: (a) no incremental
facilities can be incurred; and (b) the credit agreement does not
permit the designation of unrestricted subsidiaries, preventing
collateral "leakage" to unrestricted subsidiaries. Subsidiaries
must provide guarantees whether or not wholly-owned, eliminating
the risk that guarantees will be released because they cease to be
wholly-owned. 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.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
While not immediately likely, the upgrade of the ratings would
require a significant debt reduction on a consolidated basis,
leading to reduction in structural subordination and leverage. A
deterioration in the financial performance of FLNGI or its main
direct and indirect subsidiaries leading to reduced distributions,
with EBITDA/interest declining to below 2x, could prompt a
downgrade of the rating.
Freeport LNG Investments, LLLP ("FLNGI") a limited liability
limited partnership that holds 55.35% interest in Freeport LNG
Development L.P. ("FLNG"). Debt service and repayment of the its
term loans will be supported by distributions from FLNG, through
its 100% subsidiary FLEX Intermediate Holdco, LLC (FLEX IH) that
holds interests in the three operating LNG facilities, including
50% interest in FLNG Liquefaction, LLC (FLIQ1), 42% interest in
FLNG Liquefaction 2, LLC (FLIQ2) and 100% interest in FLNG
Liquefaction 3, LLC (FLIQ3).
The principal methodology used in these ratings was Midstream
Energy published in December 2018.
FREEPORT LNG: S&P Assigns 'B' Issuer Credit Rating, Outlook Stable
------------------------------------------------------------------
S&P Global Ratings assigned a 'B' issuer credit rating to Freeport
LNG Investments LLLP and guarantor FLNGI Option Holdco LLC.
S&P said, "At the same time, we assigned our 'B+' issue-level
rating and '2' recovery rating to the proposed senior secured term
loans. The '2' recovery rating indicates our expectation that
lenders will receive substantial (70%-90%; rounded estimate: 70%)
recovery in the event of a payment default.
"The stable outlook reflects our expectation that FLNGI will
maintain adequate liquidity and stand-alone S&P Global
Ratings-adjusted debt leverage in the 7x-8x range over the next 12
months.
"Our 'B' issuer credit rating on FLNGI reflects a three-notch
downward revision from our 'BB' issuer credit rating on FLEX-IH.
The downward revision reflects FLNGI's structural subordination,
sole reliance on upstream distributions from FLEX-IH to service its
financial obligations, the underlying cash flow stability of the
distributions it receives from FLEX-IH, and FLNGI's stand-alone
leverage. FLNGI is analyzed as a pure-play general partnership (GP)
because there are no other substantive assets other than its
ultimate interest in FLEX-IH.
"We typically rate the GP two to five notches below our issuer
credit rating on the operating company when they do not constitute
a group, as is the case with FLNGI. The number of notches between
our rating on the GP and our rating on the operating company
reflects how we assess (positive, neutral, or negative) certain
characteristics such as cash flow interruption risk, stand-alone
debt leverage, and cash flow diversity.
"We assess cash flow interruption risk as neutral. This reflects
our view of the cash flow stability of FLEX-IH's underlying cash
flows and our expectation that FLEX-IH will maintain distribution
coverage above 1x over the long term. FLEX Intermediate Holdco LLC
(FLEX-IH) is a limited liability company that holds Freeport LNG
Development L.P.'s (FLNG) ownership interests in each of its three
liquefaction trains: FLIQ1 (50% ownership), FLIQ2 (42.44%
ownership), and FLIQ3 (100% ownership). Cash flows at FLEX-IH are
predominantly fee-based in nature with long-term fixed tolling
agreements with highly rated offtakers, which provides stability to
the distributions FLNGI receives. We believe the corporate
structure has enhancements that meaningfully insulate FLNGI from
the risk of curtailed distributions (and the GP controls the board
of FLNG with 7 out of 10 seats and thus controls dividends from
FLNG).
"For our detailed credit analysis on FLEX-IH see the research
update published May 20, 2021.
"We assess stand-alone debt leverage as negative due to our
expectation of stand-alone debt to EBITDA in the 7x-8x range over
the next few years. Given the proposed capital structure, after
incorporating excess cash sweeps toward paydown of the term loans,
we expect leverage to remain elevated over the next few years
leaving negligible incremental debt capacity. Under our base case,
we expect FLNGI to sweep cash in line with the target debt balance
under the proposed debt structure.
"We assess the cash flow diversity as neutral, which reflects the
sole reliance on one entity, FLEX-IH, to service its financial
obligations. While cash flows are from three different trains, we
consider the default characteristics of the trains to be highly
correlated given the integrated mutualized operations. Despite
different ownership and financing of the individual trains, LNG
production and the project's operating expenses are shared equally
by the train owners. In the event that production from one of the
liquefaction trains is interrupted, the loss of capacity would be
shared equally among all liquefaction train owners rather than
solely by the owner of the affected liquefaction train. We assess
cash flow diversity as neutral given the Freeport facility operates
as a single integrated unit."
On Oct. 31, 2021, the pre-treatment facility at train 3 experienced
a fire that resulted in damage to some related equipment. As a
result, the project expects 3-4 weeks of downtime and 4-5 cancelled
cargoes. S&P expects the financial impact to be minimal at this
time. If trains remain offline for a much longer period of time or
are not able to return to full availability, it could negatively
impact the rating.
S&P said, "The stable outlook on FLNGI reflects our expectation
that it will maintain adequate liquidity and stand-alone S&P Global
Ratings-adjusted debt leverage in the 7x-8x range over the next 12
months. We expect stable distributions from FLEX Intermediate
Holdco to fully service the debt at FLNGI.
"We could lower the rating on FLNGI if distributions from FLEX
Intermediate Holdco are curtailed or if we lower the rating on FLEX
Intermediate Holdco.
"We could raise the rating on FLNGI if we expected stand- alone
debt leverage to be below 4.0x during our forecast period or if we
raise our rating on FLEX Intermediate Holdco."
FROZEN FOODS: Wins Cash Collateral Access Thru Nov 15
-----------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York has
authorized Frozen Foods Partners, LLC, d/b/a Gourmet Express, LLC,
d/b/a Gourmet Express to use cash collateral on an emergency basis
in an aggregate amount not to exceed, at any time, $440,694.
The Debtor requires the immediate use of Cash Collateral to avoid
immediate and irreparable harm to the Debtor, its estate and
creditors.
As of the Petition Date, the Debtors were indebted to Iron Horse
Credit LLC under the Credit Agreement and Loan Documents, in
respect of outstanding Advances in the aggregate principal amount
of not less than $1,999,429, plus interest accrued and accruing
thereon, together with all costs, fees, termination fees, fees and
expenses treasury, indemnification obligations, guarantee
obligations, and other charges, amounts, and costs of whatever
nature owing, whether or not contingent, whenever arising, accrued,
accruing, due, owing, or chargeable in respect of any of the
Borrowers Obligations pursuant to, or secured by, the Credit
Agreement.
The Debtor's right to use Cash Collateral in accordance with the
Order will terminate immediately upon the earlier of (i) November
15, 2021 at 10 a.m., (ii) the entry of a Court order terminating
access, (iii) upon written notice by the Lender to the Debtor, the
United States Trustee, and the Chapter V Trustee, of the
termination of the Lender's consent to the use of Cash Collateral,
or (iv) immediately upon the occurrence of an Event of Default.
An "Event of Default" will mean (a) the entry of an order
appointing a Chapter 11 trustee or an examiner with expanded powers
for the Debtor and/or the property of the Debtor; (b) the entry of
an order dismissing the Debtor's Chapter 11 case or converting the
Debtor's cases to a case under Chapter 7 of the Bankruptcy Code;
and (c) the entry of any order of the Court that impairs in any way
the security interests and liens granted to Lender in the
Collateral.
As adequate protection for any diminution in the value of the
Collateral, the Lender is granted valid, binding, enforceable,
non-avoidable and perfected first priority replacement liens on and
security interests in all currently owned and hereafter acquired
assets or properties of the Debtor and its estate. The Lender's
liens and security interests in the Collateral are subject only to
(i) the fees payable to the Clerk of the Bankruptcy Court and the
Office of the United States Trustee and (ii) prior valid and
perfected Permitted Liens.
The Lender is granted, pursuant to Bankruptcy Code Sections 507(b)
and 361, an allowed super-priority administrative expense claim to
the extent of any diminution of the value of the Collateral.
The Replacement Liens and all claims, rights, interests,
administrative claims and other protections granted to or for the
benefit of Lender pursuant to the Order will constitute valid,
enforceable, unavoidable and, to the extent of the Replacement
Liens, duly perfected security interests and liens.
A further hearing on the matter is scheduled for November 15 at 10
am.
A copy of the order and the Debtor's budget is available at
https://bit.ly/3kmqAUa from PacerMonitor.com.
The Debtor projects $829,268 in total income and $575,768 in total
expenses for the period from November 1 to 15, 2021.
About Frozen Foods Partners, LLC
Frozen Foods Partners, LLC is a Delaware limited liability company,
which was established in 2015. Frozen Foods is a consumer products
company engaged in the production, distribution and marketing of
frozen skillet meals under multiple consumer brands. It offers a
diversified portfolio of frozen products including meal kits,
skillet meals, combination of proteins, sauces, pastas and
vegetables, Asian and Mediterranean cuisines, as well as authentic
Latin specialties. Its products offer a quality dining solution for
working families and young adults. Its brands include Gourmet
Dining, Rosetto, La Sabrosa, and Tru Earth, which can presently be
found in many retailers, including Associated Grocers and
SuperValu, as well as private label brands.
Frozen Foods sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. S.D.N.Y. Case No. 21-11897) on November 1,
2021. In the petition signed by Jeffrey Lichtenstein as chief
executive officer, the debtor disclosed up to $10 million in both
assets and liabilities.
Judge Martin Glenn oversees the case.
Adam P. Wofse, Esq., at Lamonica Herbst and Maniscalco, LLP, is the
Debtor's counsel.
GAMESTOP CORP: Secures New $500M ABL Facility With Improved Terms
-----------------------------------------------------------------
GameStop Corp. has entered into a new $500 million global
asset-based revolving credit facility with a syndicate of banks.
The new five-year ABL facility, which was oversubscribed, replaces
the company's existing $420 million facility due in November 2022.
In addition to delivering enhanced liquidity, the new ABL facility
provides for reduced borrowing costs, lighter covenants and more
flexibility.
Wells Fargo Bank, N.A. acted as lead arranger and will serve as
administrative agent.
About GameStop
Grapevine, Texas-based GameStop Corp. is a specialty retailer
offering games and entertainment products through its E-Commerce
properties and thousands of stores.
GameStop reported a net loss of $215.3 million for fiscal year
2020, a net loss of $470.9 million for fiscal year 2019, and a net
loss of $673 million for fiscal year 2018. As of July 31, 2021,
the Company had $3.54 billion in total assets, $1.69 billion in
total liabilities, and $1.85 billion in total stockholders' equity.
GRAND CANYON UNIVERSITY: Moody's Rates $1.2BB Taxable Bonds 'Ba1'
-----------------------------------------------------------------
Moody's Investors Service has assigned an initial Ba1 issuer rating
to Grand Canyon University, AZ as well as a Ba1 rating to the
proposed $1.2 billion Taxable Bonds, Series 2021B with final
maturity in fiscal 2029. The outlook is stable.
RATINGS RATIONALE
The assignment of the Ba1 issuer rating acknowledges the
substantial scale and record of enrollment growth at Grand Canyon
University (GCU). Enrollment growth in online and on campus
segments will provide the university with the ability to invest in
new programs, facilities and service its debt. While the university
benefits from a clear market niche with a record of traction
amongst consumers, Moody's expect ongoing competition especially
for online students to intensify over the next decade. This
competitive landscape, when combined with limited liquidity and
heightened revenue concentration informs Moody's view of the fair
strategic positioning. Fair brand and strategic positioning also
incorporates graduation and retention rates softer than at some
peers. The degree of financial leverage also weighs on the rating
with total cash and investments to debt well below sector medians
at 0.3x. While the relationship between GCU and Grand Canyon
Education (GCE) including elements codified in the Master Services
Agreement (MSA) has demonstrated itself as high functioning, the
longer term nature of the MSA and various exit payment provisions
constrains the credit quality of the university. The MSA provisions
include a 60% revenue share for almost all of GCU's revenue.
Governance considerations, including the unique structure and
leadership relationship between GCU and GCE, are a key driver of
the rating action. While recognized as a private, nonprofit
corporation by the Internal Revenue Service, the Higher Learning
Commission (the university's regional accreditor), and the State of
Arizona, the US Department of Education treats the university as
for-profit based on its "Review of the Change in Ownership and
Conversion to Nonprofit Status of Grand Canyon University" dated
November 6, 2019. This Title IV status informs the operating
environment score of fair. While three years of audited financial
statements have substantiated good financial stewardship and budget
discipline, the Financial Policy and Strategy score is fair due to
the commitment to growth and capital investment at the expense of
building reserves as well as expense constraints introduced by the
MSA and debt burden. The approximately 8 year maturity of the
proposed bonds also exposes the university to interest rate and
market access risks over the medium term.
The Ba1 rating on the proposed taxable bonds incorporates the
Issuer Rating combined with the non-contingent, broad pledge of the
university. The Series 2021B bonds are enhanced by a pledge of
gross revenues and a first lien mortgage on the core campus. Given
the preponderance of secured debt in the capital structure and the
uncertainty around the value of the mortgage in a distressed
scenario, Series 2021 B bonds are rated at the same level as the
issuer rating at this time.
RATING OUTLOOK
The stable outlook reflects Moody's expectations of some revenue
growth and annual EBIDA in the $150 million range. Moody's forward
view of liquidity is informed by ongoing capital investment plans
with the majority of free cash flow going into facilities over the
next few years, with the pace of capital facility investments
moving in line with market and revenue changes. The stable outlook
is predicated on prospects to maintain healthy headroom over the 55
Days Cash on Hand covenant. The outlook is also contingent on
limited incremental debt as well as substantial headroom over the
Debt Service Coverage Ratio as well as evidence of ongoing
effective market access. The stable outlook also incorporates
Moody's expectations of credit favorable relationships with federal
and state agencies.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS
- Significant growth in total cash and investments
- Marked improvement in operating performance and debt
affordability
- Sustained operating history for Grand Canyon University
including evidence of expanding independence from GCE
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
- Deterioration in operating performance
- Unfavorable changes in operating environment including federal
regulatory or oversight changes
- Decline in unrestricted liquidity given already thin cushion
- Reduced ability to meet enrollment and student revenue growth
targets
LEGAL SECURITY
The obligation of the university, as currently the sole member of
the obligated group, is a general obligation enhanced by pledges
revenues which incorporate the majority of revenue including
tuition. The bonds are also enhanced by a mortgage of the majority
of the university's campus.
USE OF PROCEEDS
Proceeds from the Series 2021B bonds will be used to refinance the
Series 2021A Note, refinance the GCE Note, reimburse the university
for recent capital investments and to pay costs of issuance.
PROFILE
Grand Canyon University is a large, Christian university based in
Phoenix, Arizona is recognized by the IRS as not-for-profit
university. Founded in 1949, the university has had nonprofit
status for the majority of its years, but was reorganized as a
for-profit university between 2008 and 2018. For Fall 2021 the
university enrolled roughly 113,000 headcount students across on
campus, online and hybrid modes. Operating revenue was $1.3 billion
in fiscal 2021 with over 97% reliance on tuition and auxiliary
revenue.
METHODOLOGY
The principal methodology used in these ratings was Higher
Education Methodology published in August 2021.
GRAPHIC PACKAGING: Moody's Rates New $400MM Unsecured Notes 'Ba2'
-----------------------------------------------------------------
Moody's Investors Service assigned a Ba2 rating to Graphic
Packaging International, LLC's proposed $400 million senior
unsecured notes due in 2030 and EUR290 million senior unsecured
notes due in 2029. Proceeds from the notes will be used to
partially repay borrowings under the revolver and fully repay the
incremental term loan A-4 that were used to finance the acquisition
of AR Packaging Group AB that was closed on November 1, 2021. All
other ratings will remain unchanged.
The senior unsecured debt is rated Ba2 (one notch below the Ba1
CFR), reflecting its subordinated position in the capital structure
to the secured credit facilities and secured notes and the expected
loss absorption cushion it provides to the secured obligations.
Adjustments
Issuer: Graphic Packaging International, LLC
LGD Senior Secured Bank Credit Facility, Upgraded to a range of
(LGD2) from (LGD3)
LGD Senior Secured Regular Bond/Debenture, Upgraded to a range of
(LGD2) from (LGD3)
Assignments:
Issuer: Graphic Packaging International, LLC
Gtd Senior Unsecured Regular Bond/Debenture, Assigned Ba2 (LGD5)
RATINGS RATIONALE
The Ba1 corporate family rating is supported by the company's scale
and geographic diversification, its leading market position as an
integrated paperboard producer in a consolidated industry,
projected earnings growth in 2022 and reliance on stable food and
beverage and consumer end markets (which account for roughly over
70% of sales). Graphic Packaging is the largest North American
producer of coated unbleached kraft (CUK) paperboard and coated
recycled paperboard (CRB) and the second largest producer of solid
bleached sulfate (SBS) board with improving integration profile
(73% of the board produced is consumed internally as of September
2021). Given its scale, the company benefits from the ability to
move products between different substrates and to actively manage
supply to match demand and support pricing.
The Ba1 corporate family rating reflects expectations that the
company will return credit metrics within its 3-3.5x net target in
2022 following the closure of the debt-funded acquisition of AR
packaging for $1.49 billion. Moody's expects improvement in credit
metrics from higher earnings driven by the realization of the
announced price increases, ongoing organic volume growth from the
substitution from plastic into paper packaging and completed
acquisitions (AR Packaging and Americraft). The company should also
start to see benefits of lower costs from the start-up of the new
CRB machine in Kalamazoo, Michigan. With higher earnings and lower
capital expenditure following the completion of the Kalamazoo
investment in the fourth quarter of 2021, free cash flow and debt
reduction should improve in 2022.
Graphic Packaging's rating is constrained by exposure to volatile
recycled fiber costs (less than a third of production capacity) and
expectations of continued acquisitions to supplement organic growth
to reach management's revenue target of $10 billion by 2025 from
nearly $8 billion pro forma for AR Packaging acquisition.
Graphic Packaging's SGL-2 speculative grade liquidity rating
indicates good liquidity. The company maintains low cash balances
and relies on internally generated cash and a large revolver for
its liquidity. Pro forma for the AR Packaging acquisition and the
proposed note issuance, the company is expected to have $125
million of cash on hand and roughly $1.2 billion of availability
under its $2.3 billion multi-currency revolver facility due in
2026. The company expects to generate approximately $1.4 billion of
EBITDA in 2022 and improve free cash flow as the capital
expenditures will return to a more normalized level of $450 million
following the completion of the Kalamazoo investment.
The next maturity is $250 million of notes due in November 2022.
The company's credit agreement has a total leverage ratio covenant
of 4.25x as well as an interest coverage covenant of 3.0x. The
leverage covenant steps up to 5.0x for four quarters for an allowed
acquisition, so long as there at least one quarter between four
quarter periods when leverage does not exceed 4.25x. As of
September 30, 2021, the Company was in compliance with the leverage
ratio at 3.65x and the interest coverage ratio at 9.64x; Moody's
expects the company will continue to remain in compliance with its
debt covenants over the next 12 months.
As a manufacturing company, Graphic Packaging is moderately exposed
to environmental risks such as air and water emissions, and social
risks such as labor relations and health and safety issues. The
company has established expertise in complying with these risks and
has incorporated procedures to address them in their operational
planning and business models.
The stable ratings outlook reflects expectations that Graphic
Packaging will continue to grow its earnings and will return to its
own leverage targets within its target levels in 2022.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
For the ratings to be upgraded to the investment grade level, the
company's management would need to publicly commit to maintaining
investment-grade financial policies and achieve an unsecured
capital structure. The company would also need to maintain
debt/EBITDA below 3.0x, maintain EBITDA margin above 16% and
retained cash flow to debt above 20% (Debt/EBITDA of 4.4x, EBITDA %
of 17% and RCF/Debt of 15% as of September 2021 on a Moody's
adjusted basis pro forma for AR Packaging acquisition).
The ratings could be downgraded if operating performance and credit
metrics deteriorate such as debt/EBITDA rising to 4.0x and retained
cash flow to debt falls below 15% (on sustained basis) (Debt/EBITDA
of 4.4x, EBITDA % of 17% and RCF/Debt of 15% as of September 2021
on a Moody's adjusted basis pro forma for AR Packaging
acquisition). The ratings could also be downgraded if the company
undertakes additional debt-financed acquisition or
shareholder-friendly actions that stress its credit metrics and
cash flow generation.
Headquartered in Atlanta, GA, Graphic Packaging is one of North
America's leading manufacturers of CUK, CRB and SBS paperboard
packaging for food, food service, beverages and consumer goods.
Graphic Packaging generated sales of approximately $6.8 billion for
the twelve months ended September 30, 2021 ($7.9 billion pro forma
for AR Packaging acquisition).
The principal methodology used in these ratings was Paper and
Forest Products Industry published in October 2018.
GRAPHIC PACKAGING: S&P Rates New Senior Unsecured Notes 'BB'
------------------------------------------------------------
S&P Global Ratings assigned its 'BB' issue-level rating and '5'
recovery rating to Atlanta-based Graphic Packaging International
LLC's proposed $400 million senior unsecured notes due 2030 and
EUR290 million senior unsecured notes due 2029. The '5' recovery
rating indicates its expectation for modest (10%-30%; rounded
estimate: 10%) recovery in the event of a payment default. The
company intends to use the proceeds from these unsecured notes to
repay its $400 million incremental term loan A-4 in full and repay
a portion of the outstanding borrowings under its revolving credit
facility, as well as to pay fees and expenses related to the
offering. Graphic Packaging incurred these borrowings to finance a
portion of its AR Packaging acquisition and pay related fees and
expenses.
S&P's 'BBB-' issue-level rating and '1' recovery rating on the
company's secured notes are unchanged. The '1' recovery rating
indicates its expectation for very high (90%-100%; rounded
estimate: 95%) recovery in the event of a payment default.
ISSUE RATINGS--RECOVERY ANALYSIS
Key analytical factors
S&P's simulated default scenario contemplates a default occurring
in 2026 following an abnormally weak macroeconomic environment that
reduces the company's end-market demand, which leads to lower
business volumes and rising raw material and energy costs.
Graphic's cash flow would become insufficient to cover its interest
expense, the required amortization on its term loans, its working
capital, and its maintenance capital outlays. It assumes these
conditions would impair the company's ability to meet its fixed
charges, which eventually drains its liquidity and triggers a
bankruptcy filing.
S&P believes Graphic Packaging's underlying business would continue
to have considerable value. Therefore, it expects that it would
emerge from bankruptcy rather than pursue a liquidation.
Simulated default assumptions
-- Simulated year of default: 2026
-- EBITDA multiple: 6.0x
-- EBITDA at emergence: $864 million
-- Jurisdiction: U.S.
Simplified waterfall
-- Net enterprise value (after 5% administrative costs): $4.924
billion
-- Valuation split (obligors/nonobligors): 80%/20%
-- Priority claims: $560 million
-- Value available to secured debt (collateral/non-collateral):
$4.019 billion/$345 million
-- Secured debt claims: $4.006 billion
--Recovery expectations: 90%-100% (rounded estimate: 95%)
-- Value available to unsecured debt (collateral/non-collateral):
$13 million/$345 million
-- Senior unsecured debt claims: $2.537 billion
--Recovery expectations: 10%-30% (rounded estimate: 10%)
Note: S&P said, "Debt amounts include six months of accrued
interest that we assume will be owed at default. Collateral value
includes asset pledges from obligors (after priority claims) plus
equity pledges in nonobligors. We generally assume usage of 85% for
cash flow revolvers at default."
GREEN GROUP: Engages in Mediation to Resolve Claims Disputes
------------------------------------------------------------
Florida Corporate Funding, Inc., submitted a Second Amended
Disclosure Statement in connection with the Amended Plan of
Liquidation for debtor Green Group 11 LLC dated November 4, 2021.
The Debtor owns the real property at 220 Greene Avenue, Brooklyn,
New York 11238 (the "Property"). The Property value is subject to
dispute and untested following the pandemic. According to an
appraisal obtained by Fay Servicing, LLC, acting as the prior
servicing agent for U.S. Bank National Association as Legal Title
Trustee for Truman 2016 SC6 Title Trust ("Truman"), the Property
value was $1,784,000 as of the Petition Date.
The Debtor has no reorganization prospects if all scheduled and
filed Claims are Allowed. The Property is deeply underwater and the
Debtor has very little money. The Debtor was able pay ongoing
expenses only at least through August 2021. The August 2021 monthly
operating report shows a bank balance of $27,044. The Debtor has
stated that the Property experienced serious storm damage in
September 2021 and as a result, may no longer have the ability to
pay ongoing expenses.
The parties are engaged in mediation to resolve the claims
disputes. The Plan proposed represents the agreement of certain of
the parties during the mediation to sell the Property under a
Chapter 11 Plan and to continue the mediation to determine the
distribution of the sale proceeds.
FCF's Plan proposes, therefore, to sell the Debtor's Property with
professional marketing, and pay all creditors in their order of
priority, or as agreed to by separate settlement with a carve out
for priority and administrative claims, and up to $20,000 for
General Unsecured Claims.
It is unlikely that the sale proceeds will exceed the Secured
Claims of New York City, FCF and Truman. Absent a "carve-out," it
is therefore unlikely that sale will generate funds to pay the
costs of sale, junior Claims of the Debtor's bankruptcy
professionals, Priority Claims, General Unsecured Creditors or Plan
Administrator costs.
The Plan provides for a carve-out from the sale proceeds sufficient
to ensure payment of the costs of sale, Allowed Claims of the
Debtor's bankruptcy professionals, Priority Claims, Plan
Administrator costs, and a $20,000 payment to be made pro-rata to
General Unsecured Creditors. For the avoidance of doubt, with
respect to General Unsecured Creditors, if, as projected, the sale
proceeds are insufficient to make a $20,000 payment, the Plan
provides for a carve-out of up to $20,000 to ensure a minimum
$20,000 payment to be distributed pro-rata to holders of Allowed
General Unsecured Claims.
Class 2 consists of the claim of Florida Corporate Funding, Inc.
Judgment Lien Claim totals approximately $2,983,749 as of the
Petition Date. Payment of available Cash up to Allowed Amount of
Class 2 Claim, after payment of costs of sale, Administrative
Expenses, Priority Tax Claims, Class 1 Claims and Class 4 Claims,
Plan Administrator costs as provided for in the Plan, and up to
$20,000 to be paid pro-rata to Class 5 General Unsecured Creditors.
For the avoidance of doubt, with respect to General Unsecured
Creditors, if, as projected, the sale proceeds are insufficient to
make a $20,000 payment, the Plan provides for a carve-out of up to
$20,000 to ensure a minimum $20,000 payment to be distributed
pro-rata to holders of Allowed General Unsecured Claims.
Class 3 consists of the Truman Claim. Mortgage Lien Claim totals
approximately $1,719,766 as of the Petition Date. Payment of
available Cash up to Allowed Amount of the Class 3 Claim, after
payment of costs of sale, Administrative Expenses, Priority Tax
Claims, Class 1 Claims, and Class 4 Claims, Plan Administrator
costs as provided for in the Plan, and up to $20,000 to be paid
pro-rata to Class 5 General Unsecured Creditors. For the avoidance
of doubt, with respect to General Unsecured Creditors, if, as
projected, the sale proceeds are insufficient to make a $20,000
payment, the Plan provides for a carve-out of up to $20,000 to
ensure a minimum $20,000 payment to be distributed pro-rata to
holders of Allowed General Unsecured Claims. If the Property Sale
Proceeds are insufficient to pay the Class 3 Claim in full, the
deficiency amount shall be treated as a Class 5 Claim.
Class 5 consists of General Unsecured Claims. Claims total
approximately $3,000,000 based upon filed and scheduled Claims of
approximately $4,700,000, less the $1,784,000 value of the Property
under Truman's appraisal.
Payment of available Cash up to Allowed Amount of the Class 5
Claims, after payment of costs of sale, Administrative Expenses,
Priority Tax Claims, Class 1, 2, 3, and Class 4 Claims, and Plan
Administrator costs as provided for in the Plan If no Cash is
available from the sale proceeds, to pay Class 5 Claims, up to
$20,000 shall be paid pro-rata to Class 5 General Unsecured
Creditors from funds that would otherwise be paid to Class 2 and/or
Class 3. For the avoidance of doubt, with respect to General
Unsecured Creditors, if, as projected, the sale proceeds are
insufficient to make a $20,000 payment, the Plan provides for a
carve-out of up to $20,000 to ensure a minimum $20,000 payment to
be distributed pro-rata to holders of Allowed General Unsecured
Claims.
Class 6 consists of Interests Holders. Based on the Debtor's
schedule of equity security holders, Interest Holders are Michael
Khandorov and Charles Zizi. Payment of available Cash after payment
of Administrative Expenses, priority tax Claims, Class 1, 2, 3, 4
and 5 Claims.
Means for Implementation
Payments under the Plan will be paid from the Property Sale
Proceeds. If the Sale Proceeds are insufficient to pay costs of
sale, Administrative Expenses, Priority Tax Claims, Class 1, 2, 3
and Class 4 Claims, and Plan Administrator costs as provided for in
the Plan to pay Class 5 Claims, FCF and/or Truman shall carve out
sufficient funds to pay the costs of sale, Administrative Expenses,
Priority Tax Claims, Class 1 Claims, Class 4 Claims, Plan
Administrator costs as provided for in the Plan, and up; to $20,000
to be paid pro-rata to Class 5 General Unsecured Creditors.
For the avoidance of doubt, with respect to General Unsecured
Creditors, if, as projected, the sale proceeds are insufficient to
make a $20,000 payment, the Plan provides for a carve-out of up to
$20,000 to ensure a minimum $20,000 payment to be distributed
pro-rata to holders of Allowed General Unsecured Claims.
A full-text copy of the Second Amended Disclosure Statement dated
Nov. 4, 2021, is available at https://bit.ly/3BSChrr from
PacerMonitor.com at no charge.
Counsel for Florida Corporate Funding, Inc., Plan proponent:
Mark A. Frankel
Backenroth Frankel & Krinsky, LLP
800 Third Avenue
New York, NY 10022
Telephone: (212) 593-1100
Facsimile: (212) 644-0544
About Green Group 11
Green Group 11, LLC, is the owner and operator of a grocery store
located at 220 Greene Ave., Brooklyn, N.Y.
Green Group 11 filed a Chapter 11 petition (Bankr. E.D.N.Y. Case
No. 19-40115) on Jan. 8, 2019. In the petition signed by Michael
Kandhorov, manager, the Debtor disclosed $6,000 in assets and
$1,895,562 in liabilities. Judge Nancy Hershey Lord oversees the
case.
The Debtor tapped the Law Office of Ira R. Abel as bankruptcy
counsel, Jacobs PC as special counsel, and Spiegel, LLC as
accountant.
GTT COMMUNICATIONS: Latham & Watkins Represents Noteholder Group
----------------------------------------------------------------
In the Chapter 11 cases of GTT Communications, Inc., et al., the
law firm of Latham & Watkins LLP submitted a verified statement
under Rule 2019 of the Federal Rules of Bankruptcy Procedure, to
disclose that it is representing the Ad Hoc Noteholder Group.
Latham does not currently represent any other entity in the Chapter
11 Cases. Latham does not represent the Ad Hoc Noteholder Group as
a committee and does not undertake to represent the interests of,
and are not fiduciaries for, any creditor, party in interest, or
other entity that has not engaged Latham.
As of Nov. 5, 2021, members of the Ad Hoc Noteholder Group and
their disclosable economic interests are:
DDJ Capital Management, LLC
1075 Main Street, Suite 320
Waltham, MA 02451
* 2024 Notes: $149,068,000
Aristeia Capital, LLC
One Greenwich Plaza
Greenwich, CT 06830
* 2024 Notes: $37,300,000
HG Vora Special Opportunities Master Fund, Ltd.
c/o HG Vora Capital Management, LLC
330 Madison Avenue, 20th floor
New York, NY 10017
* 2024 Notes: $68,500,000
Allianz Global Investors U.S. LLC
600 West Broadway
San Diego, CA 92101
* 2024 Notes: $64,795,000
* U.S. Term Loans: $1,234,945
Latham does not hold any prepetition claims against or interests in
the Debtors, except to the extent Latham has claims against the
Debtors for services rendered in connection with its representation
of the Ad Hoc Noteholder Group. Latham does not make any
representation regarding the validity, amount, allowance, or
priority of any claims of the members of the Ad Hoc Noteholder
Group and reserves all rights with respect thereto.
The information contained in this Statement is not intended and
should not be construed to limit the assertion of any claims
against or interests in the Debtors held by the Ad Hoc Noteholder
Group, their affiliates or any other entity, as an admission with
respect to any fact or legal theory, or as a proof of claim of any
of the members of the Ad Hoc Noteholder Group against any of the
Debtors. Further, nothing in this Statement should be construed as
a limitation upon, or waiver of, any rights of the members of the
Ad Hoc Noteholder Group under applicable law.
Counsel for the Ad Hoc Noteholder Group can be reached at:
Richard A. Levy, Esq.
Ebba Gebisa, Esq.
LATHAM & WATKINS LLP
330 North Wabash Avenue, Suite 2800
Los Angeles, CA 90071
Telephone: (312)876-7700
Facsimile: (312) 993-9767
E-mail: richard.levy@lw.com
ebba.gebisa@lw.com
Ted A. Dillman, Esq.
LATHAM & WATKINS LLP
355 South Grand Avenue, Suite 100
Los Angeles, CA 90071
Telephone: (213)485-1234
Facsimile: (213) 891-8763
E-mail: ted.dillman@lw.com
- and -
Misha E. Ross, Esq.
Brian S. Rosen, Esq.
LATHAM & WATKINS LLP
1271 Avenue of the Americas
New York, NY 10020
Telephone: (212)906-1200
Facsimile: (212) 751-4864
E-mail: misha.ross@lw.com
brian.rosen@lw.com
A copy of the Rule 2019 filing, downloaded from PacerMonitor.com,
is available at https://bit.ly/3BYbGJy
About GTT Communications
Headquartered in McLean, Virginia, GTT Communications, Inc. --
http://www.gtt.net/-- owns and operates a global Tier 1 internet
network and provides a comprehensive suite of cloud networking
services. GTT connects people across organizations, around the
world, and to every application in the cloud.
GTT Communications, Inc., and its affiliates sought Chapter 11
protection (Bankr. S.D.N.Y. Lead Case No. 21-11880) on Oct. 31,
2021, to implement a prepackaged Chapter 11 plan.
GTT had total assets of $2.8 billion and total debt of $4.1 billion
as of June 30, 2201. As of the Petition Date, the Debtors had
prepetition funded indebtedness totaling $2.015 billion.
The Debtors tapped Akin Gump Strauss Hauer & Feld LLP as counsel;
TRS Advisors as investment banker; and Alvarez & Marsal, LLC as
restructuring advisor. Prime Clerk, LLC, is the claims agent.
GTT COMMUNICATIONS: To Seek Approval of Prepack Plan on Dec. 15
---------------------------------------------------------------
On Oct. 31, 2021, GTT Communications, Inc., and its affiliated
debtors commenced Chapter 11 cases and filed a Modified Joint
Prepackaged Chapter 11 Plan of Reorganization.
The Plan implements a pre-packaged restructuring agreed to by and
among the Debtors and their major stakeholders. As of the Petition
Date, Holders of more than 85% in amount of the 2018 Credit
Facility Claims and Holders of more than 76% in amount of the
Senior Notes Claims have entered into a restructuring support
agreement with the Debtors.
Prior to the Petition Date, on Sept. 16, 2021, the Company
consummated the I Squared Infrastructure Sale and prepaid
approximately $1.673 billion of its funded debt.
The primary purpose of the Plan is to implement an equitization of
a significant portion of the Debtors' secured debt and to provide
the Debtors' with working capital to continue their business as a
going-concern. Prior to the consummation of the I Squared
Infrastructure Sale, the Company had approximately $3.695 billion
in principal amount of funded debt.
Through a combination of the distribution of proceeds from the I
Squared Infrastructure Sale and the balance sheet deleveraging
contemplated by the Plan, the Company will reduce its funded debt
burden from approximately $2.015 billion to a projected $929
million as of the Effective Date of the Plan. The Debtors believe
that any alternative to confirmation of the Plan would result in
significant delays, litigation, and additional costs, ultimately
jeopardizing the recoveries of the Debtors' creditors.
Importantly, the Plan provides that all Holders of Class 5, Allowed
General Unsecured Claims will be satisfied in the ordinary course
of business in accordance with the terms and conditions of the
particular transaction and/or agreement or paid in full in Cash,
notwithstanding anything in the Plan to the contrary. The Debtors
will continue to operate in the ordinary course and its business
operations will not be disrupted by the restructuring process.
On Sept. 24, 2021, the Debtors commenced solicitation of votes to
accept or reject the Plan from Holders of Claims eligible to vote
on the Plan, which included Claims in Class 3 (2018 Credit Facility
Claims) and Class 4 (Senior Notes Claims). As of the Petition
Date, Holders of more than two-thirds in number and one-half in
amount of the voted Claims in each Voting Class voted in favor of
the Plan. As a result, the Debtors expect to meet the requirements
for confirmation of the Plan.
A hearing on the adequacy of the information in the Disclosure
Statement and the confirmation of the Plan (the "Combined Hearing")
will be held before the Honorable Michael E. Wiles, United States
Bankruptcy Judge, at the United States Bankruptcy Court for the
Southern District of New York, One Bowling Green, New York, NY
10004, on December 15, 2021, at 10:00 a.m. (ET). The Combined
Hearing may be continued from time to time by the Court or the
Debtors without further notice other than announcement in open
court or notice on the Court's docket.
The deadline for filing objections either to the adequacy of the
Disclosure Statement or to the confirmation of the Plan is Dec. 8,
2021 at 5:00 p.m. (ET).
Plan and Disclosure Statement
The Plan provides for a reorganization transaction in which:
* Each Holder of an Allowed Other Secured Claim will receive
(a) payment in full in Cash, payable on the later of the Effective
Date and the date that is 10 Business Days after the date on which
such Claim becomes an Allowed Claim, in each case, or as soon as
reasonably practicable thereafter, (b) reinstatement of such
Holder's Allowed Claim, or (c) such other treatment so as to render
such Holder's Allowed Claim Unimpaired pursuant to Bankruptcy Code
section 1124;
* Each Holder of an Allowed Other Priority Claim will receive
(a) payment in full in Cash, payable on the later of the Effective
Date and the date that is 10 Business Days after the date on which
such Claim becomes an Allowed Claim, in each case, or as soon as
reasonably practicable thereafter, or (b) such other treatment so
as to render such Holder's Allowed Claim Unimpaired pursuant to
Bankruptcy Code Section 1124;
* Each Holder of an Allowed 2018 Credit Facility Claim will
receive (a) its pro rata share of and interest in the following:
(i) the New GTT Term Loan Facility, (ii) the Secured Claims New
Equity Interests, (iii) the Noteholder New Common Equity Investment
Cash (if any), (iv) any Excess Cash, and (v) the I Squared Deferred
Consideration, in accordance with Section 4.3 of the Plan and (b)
Cash (in the currency of the relevant underlying loans) in an
amount equal to all accrued but unpaid prepetition interest and,
pursuant to the Cash Collateral Orders, postpetition interest with
respect to such 2018 Credit Facility Claim at the applicable
default interest rate under the Credit Agreement from the Petition
Date through and including the Effective Date;
* Each Holder of an Allowed Senior Notes Claim will receive its
Pro Rata share of (a) the Noteholder New Equity Interests, (b) the
Noteholder Warrants and (c) the right to participate in the
Noteholder New Common Equity Investment, in accordance with Section
4.7 of the Plan;
* Each Holder of an Allowed General Unsecured Claims will
receive (a) satisfaction of its General Unsecured Claim in full in
the ordinary course of business in accordance with the terms and
conditions of the particular transaction and/or agreement giving
rise to such Allowed General Unsecured Claim or (b) payment in full
in Cash on the date such General Unsecured Claim becomes payable as
if the Chapter 11 Cases had not been commenced; provided, that
notwithstanding anything in the Plan to the contrary claims for
rejection damages in connection with any rejected non-residential
real property lease, if any, shall be subject to the limitations of
the Bankruptcy Code section 502(b)(6);
* Intercompany Claims will, at the option of the Debtors (with
the consent of the Required Consenting Creditors, which consent
shall not be unreasonably withheld) or the Reorganized Debtors, as
applicable, be adjusted, Reinstated, or canceled and released
without any distribution;
* Intercompany Interests will, at the option of the Debtors
(with the consent of the Required Consenting Creditors, which
consent shall not be unreasonably
withheld) or the Reorganized Debtors, as applicable, be adjusted,
Reinstated, or
canceled and released without any distribution; and
* Each Holder of an Allowed Existing GTT Equity Interest/Section
510(b) Claim will receive its Pro Rata share of the Equityholder
Warrants.
Only Holders of Allowed 2018 Credit Facility Claims and Allowed
Senior Notes Claims (Classes 3 and 4) were entitled to vote to
accept or reject the Plan. All other Classes of Claims or Interest
were either presumed to accept or deemed to reject the Plan and not
entitled to vote.
About GTT Communications
Headquartered in McLean, Virginia, GTT Communications, Inc. --
http://www.gtt.net/-- owns and operates a global Tier 1 internet
network and provides a comprehensive suite of cloud networking
services. GTT connects people across organizations, around the
world, and to every application in the cloud.
GTT Communications, Inc., and its affiliates sought Chapter 11
protection (Bankr. S.D.N.Y. Lead Case No. 21-11880) on Oct. 31,
2021, to implement a prepackaged Chapter 11 plan.
GTT had total assets of $2.8 billion and total debt of $4.1 billion
as of June 30, 2201. As of the Petition Date, the Debtors had
prepetition funded indebtedness totaling $2.015 billion.
The Debtors tapped Akin Gump Strauss Hauer & Feld LLP as counsel;
TRS Advisors as investment banker; and Alvarez & Marsal, LLC as
restructuring advisor. Prime Clerk, LLC, is the claims agent.
HALLUCINATION MEDIA: Court Narrows Claims in Suit v Ritz Ybor
-------------------------------------------------------------
In the adversary proceeding captioned Hallucination Media, LLC,
Plaintiff, v. The Ritz Ybor, LLC, N.C.J. Investment Company, Joe
Capitano, Jr., Amphitheatre Events, LLC, and John A. Santoro,
Defendants, Adv. No. 8:19-ap-00134-RCT (Bankr. M.D. Fla.), the
Plaintiff sues the Ritz Defendants based upon the unraveling of
their business relationship. Defendants Ritz Ybor, LLC, Joseph
Capitano, Jr., and N.C.J. Investment Company seek summary judgment
on all counts of the Plaintiff's complaint, primarily based upon,
but not limited to, the operation of the statute of frauds.
As to Count I, the Ritz Defendants assert that there is no written
agreement to share control, profits, and losses necessary to
establish a partnership nor, additionally, to legally bind the
other party necessary to establish a joint venture.
Similarly, as to Count II, the Ritz Defendants assert that there is
no written agreement providing Plaintiff with a right of first
refusal.
As to Count III, the Ritz Defendants contend not only that there is
no written lease agreement but also that the agreement alleged does
not provide for the exclusive right to possess the real property
necessary to establish a "lease" that would be subject to the
provisions of Chapter 83 of the Florida Statutes.
Regarding Count IV, the Ritz Defendants assert that Mr. Capitano
cannot be liable for tortious interference as he was, at all
relevant times, not considered a separate entity to the alleged
contracts as he was acting as an agent for Ritz Ybor and not in his
individual capacity. Further, the Ritz Defendants claim that they
were within their rights to terminate the relationship with
Plaintiff and that even if that were not the case, their actions
would amount to a breach of contract which cannot be converted into
a tort.
Finally, as to Count V, the Ritz Defendants argue that the claim
fails because the statute of frauds may not be circumvented by an
action for fraud.
Citing the emails exchanged and documents attached to those emails,
the Plaintiff disagrees with the Ritz Defendants' argument that
writings sufficient to satisfy the statute of frauds do not exist.
But as an initial matter, the Plaintiff argues that the Motion must
be denied because the Ritz Defendants did not raise the statute of
frauds as an affirmative defense in their answer. The Response
answers the Motion's remaining arguments, if at all, largely with
conclusory denials.
In support of the Motion, the Ritz Defendants proffered Mr.
Capitano's affidavit. The Plaintiff offers no evidence counter to
Mr. Capitano's affidavit, other than a declaration of one of its
principals averring to the statements made in the Response. The
Response, however, is a hodge-podge of factual assertions,
unsupported denials, arguments that are largely conclusory, and the
Plaintiff's conclusions of law. The Court considered only the
properly supported factual assertions in the Response in rebuttal
to Mr. Capitano's affidavit.
The Court has considered the summary judgment record, together with
the relevant case law, and the arguments of counsel made at oral
argument on the Motion. In a memorandum decision and order dated
October 29, 2021, the Court concluded that the Motion should be
granted, in part.
The Court grants summary judgment in favor of all Defendants on
Counts III and V of Plaintiff's complaint.
The Court also grants summary judgment in favor of Joseph Capitano,
Jr. on Count IV of Plaintiff's complaint.
Insofar as the Motion is based upon the statute of frauds, summary
judgment is denied on Counts I and II of Plaintiff's complaint,
without prejudice. The Ritz Defendants' answer is deemed amended to
assert the statute of frauds affirmative defense. By subsequent
order, the Court will authorize limited discovery on the
affirmative defense as it relates to the remaining two counts of
the Complaint.
A full-text copy of the decision is available at
https://tinyurl.com/2nez7u7f from Leagle.com.
About Hallucination Media
Hallucination Media, LLC, filed a Chapter 11 petition (Bankr. M.D.
Fla. Case No. 16-04116) on May 12, 2016. The petition was signed
by Bryan L. Nichols, manager and member. The Debtor estimated
assets at $50,001 to $100,000 and liabilities at $0 to $50,000 at
the time of the filing. The Debtor is represented by Leon A.
Williamson Jr., Esq., at the Law Office of Leon A. Williamson, Jr.,
P.A.
HEARTWISE INC: Taps Eureka Consulting as Valuation Consultant
-------------------------------------------------------------
Heartwise Incorporated seeks approval from the U.S. Bankruptcy
Court for the Central District of California to hire Eureka
Consulting, LLC as valuation consultant.
The firm's services include:
(a) performing a peer appraisal review in accordance with the
Uniform Standards of Professional Appraisal Practice (USPAP)
standards of any third-party business valuation or appraisal
reports prepared by Sikich LLP;
(b) preparing any documents necessary to continue the
bankruptcy case;
(c) preparing an updated independent valuation of the Debtor;
and
(d) assisting the Debtor with deposition preparation, hearings
and other matters relating to its Chapter 11 case related to the
valuation of its assets.
The firm's hourly rates are as follows:
Managing Directors $750 per hour
Senior Associates $450 per hour
Analyst $350 per hour
Josh Edwards, the firm's primary consultant, who will be providing
the services, disclosed in a court filing that he is a
"disinterested person" as the term is defined in Section 101(14) of
the Bankruptcy Code.
The firm can be reached at:
Josh Edwards
Eureka Consulting LLC
555 Anton Blvd.
Costa Mesa, CA 92626
About Heartwise Inc.
Heartwise Incorporation -- https://www.naturewise.com/ -- is a a
retail store that sells wellness and health-related supplements.
Heartwise filed its voluntary petition for Chapter 11 protection
(Bankr. C.D. Calif. Case No. 20-13335) on Dec. 4, 2020, listing
$7,653,717 in assets and $12,030,563 in liabilities. Tuong V.
Nguyen, chief executive officer, signed the petition.
Judge Mark S. Wallace oversees the case.
The Law Offices of Michael Jay Berger and Trojan Law Offices serve
as the Debtor's bankruptcy counsel and special counsel,
respectively. Eureka Consulting, LLC is the Debtor's valuation
consultant.
HYDROCARBON FLOW: Continued Operations to Fund Plan
---------------------------------------------------
The Hydrocarbon Flow Specialist, Inc., HY "C", Inc., and
Hydrocarbon HY-VAC Systems, Inc., filed with the U.S. Bankruptcy
Court for the Western District of Louisiana a Joint Plan of
Reorganization dated Nov. 4, 2021.
The HydroCarbon Flow Specialist, Inc. ("HFS") provides a full range
of customized zero discharge systems for customers in the oil and
gas industry, including vacuum units, cuttings boxes, and offshore
tanks. HFS designs and manufactures innovative and efficient
products for its customers. In its business operations, HFS uses
the assets owned by HY "C", Inc. and Hydrocarbon HY-VAC Systems,
Inc. (together, the "HFS Affiliates"). Collectively, HFS and the
HFS Affiliates are referred to herein as "Debtors."
Debtors' Assets
HFS owns real property, with its estimated interest in such to be
$1,000,000, and estimates its personal property (or its interest in
such) to be valued at $1,536,893.77. The majority of the HFS
personal property is equipment (vehicles) subject to finance
arrangements.
HY "C", Inc. and Hydrocarbon HY-VAC Systems, Inc. estimate their
property to be valued at $110,309 and $79,852, respectively,
consisting of unused net operating losses (federal). The value of
their interest in numerous pieces of equipment is undetermined.
Debtors' Liabilities
HFS estimates it has incurred approximately $7.49 million in debt
owed to third parties, with more than $5.9 million owed to MC Bank
& Trust Company, its prepetition secured lender which also provided
DIP financing during this case. HFS also has multiple equipment
finance arrangements and a loan secured under a deed of trust in
Mississippi, and received an Economic Injury Disaster Loan from the
Small Business Administration in the amount of $150,000.00. Another
key claim involves the HFS Payroll Protection Program ("PPP") loan
balance in the amount of $386,727, which Debtor expects to be
forgiven at least in part.
Owen Risher and Mark Risher, insiders, have substantial claims for
funds provided to HFS prepetition, and have incurred personal
credit card debt and other debt in connection with Debtors'
business. The assets of HY "C", Inc. and Hydrocarbon HY-VAC
Systems, Inc. serve as collateral for HFS debt owed to MC Bank.
The Chapter 11 filing was necessitated by the effects of the
COVID-19 pandemic, which has significantly disrupted almost every
industry, and with cumulative impacts resulting in a substantial,
immediate downturn in the oil industry. Consequently, HFS has been
left with insufficient funds to service its debts (both secured and
unsecured). HFS was able to obtain Paycheck Protection Program
("PPP") loans and instituted cost-savings measures, but the
overwhelming effects of the pandemic nevertheless resulted in a
dearth of cash to continue the company's business without a Chapter
11 filing. Absent the Chapter 11 filings by the HFS Affiliates,
their assets which serve as collateral for HFS debt owed to MC Bank
would be subject to seizure, leaving HFS unable to operate its
business.
Class 5 consists of General Unsecured Claims, as follows:
* As addressed in Class 1, the balance of MC Bank's claims
referred to this class (valued at $2,676,435),
* PPP loan balance in the total estimated amount of $386,727,
some of which may be forgiven,
* general unsecured claims not otherwise referenced herein, in
the total amount of $336,593
Claim Treatment. Class 5 will have no recovery under the Plan. The
Debtor will apply for loan forgiveness in the approximate amount of
$386,727.
Class 6 consists of Unsecured Insider Reimbursable Business
Expenses incurred by Owen Risher and Mark Risher, who funded
business expenses for the Debtors, with a total valuation of
$98,878. Class 6 will have no recovery under the Plan. Class 6 is
impaired under the Plan and shall be deemed to reject the Plan.
Class 7 consists of claims arising from pre-petition payments by
insiders Owen Risher (totaling approximately $2.4 million) and Mark
Risher (totaling approximately $225,000) to help fund the Debtors.
Class 7 will have no recovery under the Plan. Class 7 is impaired
under the Plan and shall be deemed to reject the Plan.
Class 8 consists of Equity Interest Holders. The sole members of
this class are Nolan Fitch and Owen Risher, the sole shareholders
of the Debtors. All shares presently issued by Debtors will be
canceled. Class 8 is impaired under the Plan and shall be deemed to
reject the Plan.
The Plan will be funded from the Debtors' continued operations.
On Confirmation of the Plan, all property of the Debtors, tangible
and intangible, including, without limitation, licenses, furniture,
fixtures and equipment, will revert, free and clear of all Claims
and Equitable Interests except as provided in the Plan, to the
Debtors. The Debtors expect to have sufficient cash on hand to make
the payments required on the Effective Date.
A full-text copy of the Joint Plan of Reorganization dated November
04, 2021, is available at https://bit.ly/3BYMBy7 from
PacerMonitor.com at no charge.
Attorneys for Debtors:
GOLD, WEEMS, BRUSER, SUES & RUNDELL
Bradley L. Drell
Heather M. Mathews
P.O. Box 6118
Alexandria, LA 71307-6118
Telephone (318) 445-6471
Fax: (318) 445-6476
E-mail: bdrell@goldweems.com
About The HydroCarbon Flow Specialist
Patterson, La.-based The HydroCarbon Flow Specialist, Inc., and its
affiliates filed voluntary petitions for relief under Chapter 11 of
the Bankruptcy Code (Bankr. W.D. La. Lead Case No. 21-50420) on
July 7, 2021. Owen T. Risher, registered agent and director,
signed the petition. At the time of the filing, HydroCarbon Flow
Specialist disclosed $100,000 to $500,000 in assets and $10 million
to $50 million in liabilities.
Judge John W. Kolwe oversees the cases.
Gold, Weems, Bruser, Sues & Rundell and Wright, Moore, DeHart,
Dupuis & Hutchinson, LLC, serve as the Debtors' legal counsel and
accountant, respectively.
IBIO INC: Acquires FastPharming Manufacturing Facility
------------------------------------------------------
iBio, Inc. has purchased the manufacturing facility it previously
operated under a lease from two affiliates of Eastern Capital
Limited. The company also acquired the approximate 30% equity
interest in iBio CDMO, LLC held by the Eastern Affiliates. As a
result, the subsidiary and its intellectual property are now
wholly-owned by iBio.
"We are very pleased to now have full control of our facility, as
well as the CDMO entity which holds the exclusive rights to
manufacture using the FastPharming System in the United States,"
said Tom Isett, Chairman & CEO of iBio. "In addition to
immediately reducing our facility carrying costs by approximately
67%, this transaction should provide us with even greater strategic
and operational flexibility to continue rapidly growing our team in
Texas, as well as driving further adoption of FastPharming as the
green alternative to traditional mammalian cell culture
bioproduction around the globe."
The 130,000 square foot Bryan, TX, facility is subject to a ground
lease with Texas A&M University. As part of the transaction, the
CDMO becomes the ground lease tenant until 2060 upon exercise of
available extensions.
Before fees and settlement costs, the cost of the transaction was
$28,750,000, comprised of $28,000,000 in cash plus warrants to
purchase 1,000,000 shares of iBio common stock. iBio issued
additional warrants to purchase 289,581 shares of common stock to
pay for the final rent due. The total warrants to purchase
1,289,581 shares of common stock are immediately exercisable, will
expire on Oct. 10, 2026, and have an exercise price of $1.33 per
share.
iBio provided approximately $6,000,000 in capital to fund the
purchase. To fund the remaining cash portion of the transaction,
iBio entered into a $22,375,000 Senior Secured Term Loan with
Woodforest National Bank. The loan bears interest at 3.25% and
matures in two years, providing iBio with the flexibility to
explore potential longer-term financing options for its
FastPharming Facility, including, but not limited to, a potential
sale-leaseback transaction. Taking into account these potential
financing options, combined with the facility carrying cost savings
expected to be achieved through this transaction, the company
continues to believe that its current cash position is sufficient
to fund its operations through the first calendar quarter of 2023.
About iBio Inc.
iBio, Inc. -- http://www.ibioinc.com-- is a plant-based biologics
manufacturing company. Its FastPharming System combines vertical
farming, automated hydroponics, and novel glycosylation
technologies to rapidly deliver high-quality monoclonal antibodies,
vaccines, bioinks and other proteins. iBio is developing
proprietary products which include biopharmaceuticals for the
treatment of cancers, as well as fibrotic and infectious diseases.
The Company's subsidiary, iBio CDMO LLC, provides FastPharming
Contract Development and Manufacturing Services along with
Glycaneering Development Services for advanced recombinant protein
design.
iBio reported a net loss attributable to the company of $23.21
million for the year ended June 30, 2021, compared to a net loss
attributable to the company of $16.44 million for the year ended
June 30, 2020. As of June 30, 2021, the Company had $146.97
million in total assets, $38.40 million in total liabilities, and
$108.57 million in total equity.
INTELSAT SA: Restructuring Expenses Add Up to its Q3 2021 Net Loss
------------------------------------------------------------------
Jeffrey Hill of Via Satellite reports that global satellite
operator Intelsat generated a 7% year-over-year increase in total
revenue during its third fiscal quarter of 2021, but its hefty
legal and restructuring costs caused net losses to jump from $15.9
million to $145.7 million.
Intelsat earned $526.1 million in revenue and spent $98.3 million
in reorganization costs in Q3, including professional and financing
fees related to its debtor-in-possession senior secured credit
facilities. The operator's income tax expenses also increased
$21.3 million year-over-year due to higher income from its U.S.
subsidiaries — mainly its In-Flight Connectivity (IFC) business.
The operator also incurred $17.9 million of C-band clearing
expenses during the quarter.
These are the first results Intelsat has released since Stephen
Spengler, the operator's CEO for the past 18 years, surprised many
last month with an announcement that he was retiring from the
company once it emerged from Chapter 11 bankruptcy. He later told
Via Satellite magazine that he had planned the retirement for some
time, and that the decision "wasn't easy." Intelsat has yet to
name a CEO to replace Spengler.
Intelsat's third quarter results also highlight just how important
its August 2020 acquisition of Gogo's commercial In-Flight
Connectivity business was to its core financial health. The
operator's network services division grew its Q3 revenues by 43%
year-over-year to $241 million on the back of increasing demand for
IFC services and the expansion of services with mobility and
network customers.
However, Intelsat still has a way to go to get back to the level of
network services revenue it was generating nine years ago in 2013,
when the division was averaging $290 million per quarter.
Intelsat's media division revenues continued to decline in Q3,
dropping 11% year-over-year to $181.1 million. The operator
attributed this quarter’s decline to a planned service migration
by a specific customer from Intelsat’s network to the customer's
own network assets. Intelsat's Q3 media revenue peaked back in
2017, when it reached $237 million. It has gradually declined ever
since.
The operator's Q3 government services revenue decreased 12%
year-over-year to $95 million, due to a "one-time equipment sale"
in 2020, offset by new hosted payload services on Intelsat's Galaxy
30 satellite and increased demand for FlexMove land mobility
managed services. Intelsat's government revenue has hovered between
$95 million and $98 million for several years.
Intelsat's average fill rate remains at 74% and its contracted
backlog dipped from $6 billion in Q2 2021 to $5.7 billion in Q3
2021.
"We delivered strong quarterly sequential results despite the
secular headwinds impacting the satellite industry," said Spengler.
"Network Services benefited from the continued recovery in North
American airline travel resulting in higher in-flight connectivity
revenues. Media was impacted by a large planned service migration
from the Intelsat network onto customer-owned assets coupled with
the ongoing business trends. The start of hosted payload service
on our Galaxy 30 satellite and continued demand for our FlexMove
land mobility managed services created positive momentum for our
Government business."
About Intelsat S.A.
Intelsat S.A. -- http://www.intelsat.com/-- is a publicly held
operator of satellite services businesses, which provides a diverse
array of communications services to a wide variety of clients,
including media companies, telecommunication operators, internet
service providers, and data networking service providers. It is
also a provider of commercial satellite communication services to
the U.S. government and other select military organizations and
their contractors. The company's administrative headquarters are
in McLean, Virginia, and the Company has extensive operations
spanning across the United States, Europe, South America, Africa,
the Middle East, and Asia.
Intelsat S.A. and its debtor-affiliates concurrently filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy
Code (Bankr. E.D. Va. Lead Case No. 20-32299) on May 13, 2020. The
petitions were signed by David Tolley, executive vice president,
chief financial officer, and co-chief restructuring officer. At the
time of the filing, the Debtors disclosed total assets of
$11,651,558,000 and total liabilities of $16,805,844,000 as of
April 1, 2020.
Judge Keith L. Phillips oversees the cases.
The Debtors tapped Kirkland & Ellis LLP and Kutak Rock LLP as legal
counsel; Alvarez & Marsal North America, LLC as restructuring
advisor; PJT Partners LP as financial advisor & investment banker;
Deloitte LLP as tax advisor; and Deloitte Financial Advisory
Services LLP as fresh start accounting services provider. Stretto
is the claims and noticing agent.
The U.S. Trustee for Region 4 appointed an official committee of
unsecured creditors on May 27, 2020. The committee tapped Milbank
LLP and Hunton Andrews Kurth LLP as legal counsel; FTI Consulting,
Inc. as financial advisor; Moelis & Company LLC as investment
banker; Bonn Steichen & Partners as special counsel; and Prime
Clerk LLC as information agent.
IRI HOLDINGS: Fitch Affirms 'B' LongTerm IDR, Outlook Stable
------------------------------------------------------------
Fitch Ratings has affirmed the Long-Term Issuer Default Rating (LT
IDR) of IRI Holdings Inc. (IRI) at 'B'. Fitch has also affirmed
IRI's senior secured first lien ratings at 'BB-'/'RR2' and its
senior secured second lien at 'CCC+'/'RR6'. The Rating Outlook is
Stable.
The rating affirmation and Outlook reflect IRI's continued progress
in reducing total leverage as a result of cost cutting actions,
which has resulted in EBITDA expansion. Fitch-calculated total
leverage approximated 5.5x as of June 30, 2021, down roughly 0.5x
over the last six months. Operating performance has been supported
by increasing demand for market intelligence during the coronavirus
pandemic from consumer packaged goods (CPG) manufacturers and
retailers. However, uncertainty over the company's financial policy
with potential for sponsorship to seek to maintain flexibility to
pursue capital structure optimization, dividend recaps and/or
leveraged M&A constrains the rating over the near term.
KEY RATING DRIVERS
Improving Leverage: IRI's historically high leverage and aggressive
financial policies have constrained the rating. However, leverage
has steadily declined from roughly 9.0x at closing of the
recapitalization in late 2018. Gross leverage was 5.5x for the LTM
June 30, 2021 and has been below 6.5x for the last six quarters.
IRI Group Holdings, Inc. has $200 million of 10.5% paid-in-kind
accruing preferred stock that Fitch does not treat as debt of IRI
Holdings. IRI Group could refinance the preferred stock with debt
issued at IRI Holdings, which would elevate its leverage.
Improving FCF: IRI generated $82 million in FCF in 2020 following
$18 million in FCF 2019. Fitch had expected improvement in 2020
owing to a combination of EBITDA growth and better working capital
management. Additionally, high one-time costs associated with the
recapitalization and cost savings initiatives lessened. These
trends have continued through 1H'21, although to a lesser degree as
FCF was approximately $32 million in 1H'21 and $8 million in
2Q'21.
Strong Competitive Position: IRI receives raw sales data for 30
million universal product codes (UPCs) across 200,000 retail
stores. The company is the sole-source provider for purchase
activity data from some of the largest retail chains in the
country. IRI exclusively owns this data through long-term contracts
with retailers. IRI now holds the largest repository of frequent
shopper and loyalty data in the U.S. Its Liquid Data product
offering has also provided a technological competitive advantage
relative to competitors, enabling it to gain market share.
Diversified and Long-Standing Customer Base: IRI has approximately
2,500 clients across the CPG, health and retail sectors. Its 10
largest clients represented 19.8% of consolidated revenues for the
six-months ended June 30, 2021. No single client account accounted
for more than 4.2% of revenues for the same period. Roughly 30% of
IRI's revenues are generated internationally, primarily across
Europe, UK and Australia. Nine of the top 10 US-based customers
have been with the company for over 15 years.
Stable, Recurring Revenue Base: 85% of IRI's revenues are
contracted through long-term agreements, with an average tenor of
roughly 4.5 years, and a 99% retention rate. IRI's typical
contracts are non-cancellable and are three to five years in
length. IRI has long-standing relationships with its largest
customers, and the company's top 20 clients have been customers for
over 20 years. IRI's proprietary data and insight is crucial to CPG
companies as they design pricing, new product introductions and
promotional activity.
DERIVATION SUMMARY
IRI Holdings is comparable to its main competitor and peer,
Intermediate Dutch Holdings (d/b/a NielsenIQ; B+/Stable). The
company's scale is roughly half the size of NielsenIQ, but it has a
higher operating EBITDA margin and stronger growth. IRI's leverage
profile is materially higher than NielsenIQ.
While not a direct peer, IRI compares favorably to Boost Parent, LP
(d/b/a Autodata; B-/Stable), which has 3x IRI's revenue scale but
weaker margins by comparison. Autodata has much higher leverage
than IRI, resulting in its IDR being one notch lower. Another
indirect peer, The Dun & Bradstreet Corporation (BB-/Stable) has
larger revenue scale, materially higher margins and more
conservative leverage. Both IRI Holdings and NielsenIQ have margins
that are lower than their business services data & analytics peers
due to the fact that they acquire data continuously, reducing the
traditional operating leverage of these businesses.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- Total '21 revenue growth in higher-single digits, normalizing
to mid-single digit in '22 and beyond;
-- Adjusted EBITDA margin of approximately 20% in '21 reflecting
benefits from past and current cost actions and operating
leverage; assume modest margin compression in out years with
fewer add-backs;
-- Capex between 3-4%;
-- Normalization of cash tax rate;
-- IRI pays mandatory amortization (approximately $13 million
annually). Fitch does not assume any other debt repayment;
-- Fitch-assumed bolt-on acquisitions of approximately $100
million annually '22-'24;
-- No shareholder distributions and unchanged capital structure.
KEY RECOVERY RATING ASSUMPTIONS
The recovery analysis assumes that IRI would be considered a going
concern in bankruptcy and that the company would be reorganized
rather than liquidated. Fitch assumes a 10% administrative claim.
IRI's going-concern EBITDA is based on Fitch's estimated pro forma
operating EBITDA of $304 million for LTM June 30, 2021. Fitch has
adjusted going-concern EBITDA comparable its prior GC EBITDA
estimate (approximately 50% below pro forma LTM EBITDA) to reflect
deterioration resulting from major customer losses and increasing
competition for CPG clients and the high operating leverage of the
business.
An EV/EBITDA multiple of 8x is used to calculate a
post-reorganization valuation, above the 5.5x median TMT emergence
EV/forward EBITDA multiple. The 8.0x multiple is in-line with
recovery assumptions that Fitch employs for other data analytics
companies with highly recurring revenue streams. The multiple is
further supported by Fitch's positive view of the data analytics
sector including the high proportion of recurring revenues, the
contractual rights to proprietary data and the inherent leverage in
the business model. Recent acquisitions in the data and analytics
subsector have occurred at attractive multiples in the range of 10x
to over 20x.
Fitch assumes a fully drawn revolver in its recovery analysis since
credit revolvers are tapped as companies approach distress
situations. IRI had total debt of approximately $1.7 billion
including the $80 million incremental first lien term loan, the
outstanding $1.196 billion first lien term loan, the fully drawn
$80 million revolver, and the $390 million second lien term loan.
IRI also utilized $6.3 million under its $45 million in accounts
receivable monetization program as of June 30, 2021, which Fitch
treats as super senior in the waterfall.
The recovery analysis results in a 'BB'/'RR2' issue and recovery
ratings for the first lien credit facilities, implying expectations
for 71%-90% recovery. The recovery analysis results in 'CCC+'/'RR6'
issue and recovery ratings for the second lien credit facility
reflecting Fitch's view of limited recovery prospects in a distress
scenario.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Strong organic revenue growth and EBITDA expansion driving
Fitch-calculated total leverage (Total Debt with Equity
Credit/Operating EBITDA) below 6.0x and Interest Coverage (FFO
Interest Coverage) approaching 2.5x or higher for a sustained
period could lead to positive momentum.
-- FCF margins sustained above 5%.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Total leverage above 7.5x and interest coverage approaching
1.5x for a sustained period as a result of adverse operating
performance or material changes to industry dynamics.
-- Inability to generate consistent positive FCF.
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 believes that IRI has adequate liquidity
supported by approximately $120 million balance sheet cash as of
June 30, 2021 and full availability under its $80 million revolving
credit facility. IRI generated $82 million in Fitch-calculated FCF
in full-year 2020. Internally generated cash flow will remain
sufficient to meet the 1% amortization on the $1,290 million first
lien term loan and $80 million incremental first lien term loan.
IRI also maintains access to the $80 million revolving facility,
and management intends for the facility to remain undrawn in the
near term. In addition, IRI has access to $45 million accounts
receivable facilities, of which $6.3 million was outstanding at
June 30, 2021. IRI's first lien and second lien credit facilities
mature in 2025-2027.
ISSUER PROFILE
IRI Holdings Inc. is a leading provider of market data and
information services products and corresponding consulting and
insight services. Its product line offerings are used by consumer
product goods and consumer health manufacturers and retailers.
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.
IRI has an ESG Relevance Score of '4' for Governance Structure due
to its current ownership structure including private equity owners
controlling the majority of the board, which has a negative impact
on the credit profile, and is relevant to the rating in conjunction
with other factors.
JOHNSON & JOHNSON: Unsealed Emails Shows Cancer Report Shaping Role
-------------------------------------------------------------------
Jef Feeley and Anna Edney of Bloomberg News report that unsealed
emails reveal the role baby-powder maker Johnson & Johnson played
in a report that an industry group submitted to U.S. regulators
deciding whether to keep warnings off talc-based products linked to
cancer.
The emails -- unsealed in the state of Mississippi's lawsuit
against J&J over its refusal to add a safety warning -- show J&J
and its talc supplier chose the scientists hired by their trade
association, the Personal Care Products Council, to write the 2009
report assessing talc-based powders' health risks. They also show
the researchers changed the final version of their report at the
companies' behest.
About Johnson & Johnson
Johnson & Johnson (J&J) is an American multinational corporation
founded in 1886 that develops medical devices, pharmaceuticals, and
consumer packaged goods. J&J is the world's largest and most
broadly based healthcare company.
Johnson & Johnson is headquartered in New Brunswick, New Jersey,
the consumer division being located in Skillman, New Jersey. The
corporation includes some 250 subsidiary companies with operations
in 60 countries and products sold in over 175 countries.
Johnson & Johnson had worldwide sales of $82.6 billion during
calendar year 2020.
About LTL Management
LTL Management LLC is a newly formed subsidiary of Johnson &
Johnson. LTL was formed to manage and defend thousands of
talc-related claims and to oversee the operations of its
subsidiary, Royalty A&M. Royalty A&M owns a portfolio of royalty
revenue streams, including royalty revenue streams based on
third-party sales of LACTAID, MYLANTA /MYLICON and ROGAINE
products.
LTL Management LLC filed a Chapter 11 petition (Bankr. W.D.N.C.
Case No. 21-30589) on Oct. 14, 2021. The Hon. J. Craig Whitley is
the case judge.
The Debtor tapped JONES DAY as counsel, RAYBURN COOPER & DURHAM,
P.A., as co-counsel; BATES WHITE, LLC, as financial consultant; and
ALIXPARTNERS, LLP, as restructuring advisor. KING & SPALDING LLP
and SHOOK, HARDY & BACON L.L.P., serve as special counsel, and
McCARTER & ENGLISH, LLP is the litigation consultant. EPIQ
CORPORATE RESTRUCTURING, LLC, is the claims agent.
The Debtor was estimated to have $1 billion to $10 billion in
assets and liabilities as of the bankruptcy filing.
KANSAS CITY UNITED: Seeks Approval to Hire Stretto as Notice Agent
------------------------------------------------------------------
Kansas City United Methodist Retirement Home, Inc. seeks approval
from the U.S. Bankruptcy Court for the Western District of Missouri
to hire Stretto, Inc. as its notice and voting agent.
The firm's services include overseeing the distribution of notices
and managing the preparation, compilation and mailing of documents
to creditors in connection with the solicitation of the Debtor's
Chapter 11 plan.
Stretto will bill the Debtor no less frequently than monthly. The
Debtor agreed to pay out-of-pocket expenses incurred by the firm.
Sheryl Betance, senior managing director at Stretto, 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 at:
Sheryl Betance
Stretto
410 Exchange Suite 100
Irvine, CA 92602
Tel: (800) 634-7734 / 714.716.1872
Email: sheryl.betance@stretto.com
About Kansas City United Methodist
Retirement Home Inc.
Kansas City United Methodist Retirement Home, Inc., doing business
as Kingswood Senior Living Community, operates a continuing care
retirement community and assisted living facility for the elderly
in Kansas City, Missouri.
The Debtor sought protection under Chapter 11 of the Bankruptcy
Code (Bankr. W.D. Mo. Case No. 21-41049) on Aug. 18, 2021, listing
up to $50 million in assets and up to $100 million in liabilities.
Judge Cynthia A. Norton oversees the case.
Jonathan A. Margolies, Esq., at McDowell, Rice, Smith & Buchanan,
P.C. and Gilmore & Bell, P.C. serve as the Debtor's bankruptcy
counsel and special counsel, respectively. Stretto, Inc. is the
notice and voting agent.
UMB Bank, N.A., bond trustee, is represented by Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C.
KEVIN B. DEAN: Removed as Debtor-in-Possession
----------------------------------------------
Emile Clavet is a creditor in the subchapter V case of Kevin B.
Dean. He is, without question, a party in interest in the case. Mr.
Clavet has requested that the United States Bankruptcy Court for
the District of Maine remove the Debtor from his status as a
debtor-in-possession. Mr. Dean opposed that request, and the Court
conducted a hearing on Mr. Clavet's request on October 28, 2021.
During that hearing, the Debtor conceded that, under section
1185(a) of the Bankruptcy Code, if the Court determines that cause
exists, the Court is required to remove the debtor as a debtor in
possession.
Section 1185 of the Bankruptcy Code provides that:
On request of a party in interest, and after notice and a
hearing, the court shall order that the debtor shall not be a
debtor in possession for cause, including fraud, dishonesty,
incompetence, or gross mismanagement of the affairs of the debtor,
either before or after the date of commencement of the case, or for
failure to perform the obligations of the debtor under a plan
confirmed under this subchapter.
According to the Court, the statute does not articulate the entire
universe of facts and circumstances that might amount to cause for
removal. To that extent, the Debtor correctly asserts that the
Court has some discretion when evaluating whether cause exists.
That said, the statute does identify some facts and circumstances
that amount to cause, and fraud -- whether before or after the
filing of the petition -- is one of them, the Court pointed out.
The Debtor committed prepetition fraud, the Court said. The state
court determined as much, and this Court has also determined as
much. The pending appeal from this Court's determination in a
related adversary proceeding does not insulate the Debtor from the
operation of section 1185(a). If the Debtor is successful on
appeal, the Court may revisit the question of whether he should be
removed as a debtor in possession. But until then, there has been a
determination of fraud by the Debtor. Under the plain language of
the statute, the Court is required to order that Mr. Dean cease
serving as a debtor in possession. Effective as of November 2,
2021, the Debtor is removed a debtor in possession.
A full-text copy of the Order dated October 29, 2021, is available
at https://tinyurl.com/8mmpz3as from Leagle.com. The Court issued
an amended order dated November 1, 2021, a full-text copy of which
is available at https://tinyurl.com/4u6ee9n8 from Leagle.com to
correct a typographical error in the last sentence of the original
order.
The case is, In re Kevin B. Dean, Case No. 20-20427 (Bankr. D.
Maine).
LANNETT COMPANY: Moody's Cuts CFR to Caa1, Outlook Stable
---------------------------------------------------------
Moody's Investors Service downgraded the ratings of Lannett
Company, Inc., including the Corporate Family Rating to Caa1 from
B3 and affirmed the Probability of Default Rating at B3-PD. Moody's
also downgraded the 1st lien senior secured notes rating to B3 from
B1. The SGL-3 Speculative Grade Liquidity Rating remains unchanged.
The outlook is stable.
The downgrade follows continued deterioration in operating
performance as Lannett's base portfolio of oral generic drugs
erodes due to intense competitive pricing pressures. Given the
forecasted step-down in EBITDA, Lannett's leverage will be very
high for the next 18 months and it will be burning cash well into
fiscal year 2023. On November 3rd, Lannett announced a cost
restructuring initiative intended on generating $20 million of cost
savings that will take 18 months to fully achieve.
Lannett will be very dependent on the approval and commercial
success of several pipeline opportunities in order to delever and
return to earnings growth. These include generic Advair as well as
biosimilar versions of insulin glargine and aspart. Any major
setbacks to these programs raises the risk that the company's
capital structure is unsustainable. Without the success of these
programs, Moody's believes recovery for 1st lien secured creditor
in a default scenario would yield a lower than average recovery.
Moody's anticipates that Lannett's liquidity will remain adequate,
bolstered by a strong cash balance and no near-term debt
maturities.
The stable outlook reflects Moody's view that even though Lannett's
debt/EBITDA will remain very high over the next 12 to 18 months,
its liquidity will be sufficient bridge to the potential
commercialization of its higher value pipeline opportunities.
Downgrades:
Issuer: Lannett Company, Inc.
Corporate Family Rating, Downgraded to Caa1 from B3
Senior Secured 1st Lien Notes, Downgraded to B3 (LGD4) from B1
(LGD3)
Affirmations:
Issuer: Lannett Company, Inc.
Probability of Default Rating, Affirmed B3-PD
Outlook Actions:
Issuer: Lannett Company, Inc.
Outlook, Remains Stable
RATINGS RATIONALE
Lannett's Caa1 Corporate Family Rating is constrained by very high
financial leverage. The rating is also constrained by Lannett's
moderate size with revenues declining to under $400 million and
concentration in the US generic drug market. Critical to Lannett's
ability to reverse earnings declines will be the cumulative
contributions from higher value new product launches from Lannett's
internal and acquired pipeline and strategic in-licensing deals.
Lannett has several sizeable market opportunities that remain in
development but are several years away.
The SGL-3 reflects Moody's expectation that liquidity will be
adequate over the next 12-15 months. Lannett had $105 million of
unrestricted cash at September 30, 2021. Inclusive of Moody's
expectation that Lannett will receive a tax refund of approximately
$30 million next calendar year, Lannett will burn cash over the
next 12 months. Beyond April 2022, interest paid on Lannett's
second lien credit facility will be paid half in-kind ($9.5
million) and half in cash (presently all paid-in-kind). Lannett has
a $45 million asset-based revolver (ABL) that will expire in the
earlier of April 2026 or 90 days prior to any debt maturity. The
ABL has a springing fixed charge covenant only when availability
drops below 15% (less than $6.8 million). The 2nd lien also has a
minimum cash requirement of $15 million at the end of every month
and $5 million at any time.
Social risk considerations include Lannett's exposure to the
lawsuit into generic drug price fixing by State Attorneys General.
Lannett is a defendant alongside 33 other pharmaceutical companies
and individuals. There is no set trial date, and Lannett's exposure
to similar civil complaints also remain unresolved. Governance
considerations include Lannett's very high financial leverage.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Factors that could lead to a downgrade include an erosion in
liquidity or unfavorable regulatory outcomes on Lannett's key
late-stage pipeline assets. Negative legal developments related to
its exposure to investigations into alleged generic drug price
fixing could also result in a downgrade.
The ratings could be upgraded if Lannett can demonstrate a path to
achieving a sustainable base of earnings to support its debt and a
return to earnings growth. Moody's would also need to see
consistent positive cash generation.
Lannett Company, Inc. ("Lannett"), headquartered in Philadelphia,
Pennsylvania is a generic drug manufacturer and distributor with
capabilities in difficult-to-manufacture products. Lannett reported
revenues of $454 million for the twelve months ended September 30,
2021.
The principal methodology used in these ratings was Pharmaceutical
Industry published in June 2017.
LSF9 ATLANTIS: Fitch Affirms 'B' LT IDR, Outlook Stable
-------------------------------------------------------
Fitch Ratings has affirmed LSF9 Atlantis Holdings, LLC's (Victra)
ratings, including its Long-Term Issuer Default Rating (IDR) at 'B'
following the sale of the company by an affiliate of Lone Star
Funds to a consortium of investors, including the current CEO and
the proposed $80 million add-on to the company's existing secured
notes. The Rating Outlook is Stable.
The rating reflects Victra's reasonably stable position as the
largest authorized retailer for Verizon Communications Inc.
(A-/Stable) and the company's good long-term operating track
record, albeit mitigated by some declines in recent years. The
rating considers the company's relatively small scale and narrow
product and brand focus within the U.S. retail industry.
Finally, the rating reflects the expectations of good cash flow
(prior to sponsor dividends) of around $50 million annually and
adjusted leverage (adjusted debt/EBITDAR, capitalizing leases at
8x) trending in the high-5x to 6x range.
KEY RATING DRIVERS
Ownership Transfer; Leverage Target: Victra was recently sold for
approximately $1.1 billion, or around 7.4x Fitch-projected EBITDA
of $150 million beginning 2022. The transaction is being funded
with cash from the new owners and from the company and a proposed
$80 million add-on to the existing $735 million of secured notes
due 2026.
While a material change in Victra's strategic direction following
the sale is not expected, Fitch views positively the new owner's
financial policy to maintain net leverage below 3.5x. This would
equate to below 5.0x on a Fitch-adjusted basis, lower than Fitch's
projection of leverage in the high-5x range over time and in
contrast to a recent history of debt financed dividends by prior
owners.
Assuming EBITDA of around $150 million beginning 2022, adjusted
leverage could moderate toward the mid-5x range assuming Victra
uses FCF -- expected to be around $50 million annually -- to reduce
debt. The secured notes are callable in 2023.
Consumer Wireless Focus: Victra is a leading independent retailer
for Verizon, with approximately two-thirds of gross profits
generated from the sale of a device such as a phone or tablet.
Fitch views Victra's end market focus as essentially neutral to the
rating. Exposure to the consumer wireless category limits Victra's
economic cyclicality relative to other discretionary retail
categories, evidenced by the growing importance of wireless
telephony to consumer's lives. The complex nature of
device/contract purchases has limited ecommerce incursion relative
to other segments, although growing consumer knowledge and
activation process simplification could prove to be disruptive over
time.
The consumer wireless industry has shown recent signs of maturation
following a long period of good growth, likely due to tapering
penetration of smartphones and tablets and elongated replacement
cycles due to better-made hardware and successively less compelling
device upgrade features. The expansion of 5G networks could
modestly accelerate industry growth over the next two to three
years, largely as consumers upgrade devices to 5G-enabled
products.
Verizon Relationship: Victra exclusively partners with Verizon to
offer wireless contracts although offers devices produced by a wide
variety of manufacturers. Victra is Verizon's largest retail
partner, operating approximately 14% of Verizon-branded stores
managed by Verizon or third parties. This channel represents around
70% of Verizon's device activations, with the remaining share split
amongst stores operated by Verizon and OEMs (including Apple),
retailers like Walmart Inc. (AA/Stable) and Best Buy, and ecommerce
operators like Amazon.com, Inc. (AA-/Stable).
Victra benefits from its strong and longstanding relationship with
one of the leading players in the industry. The strength of the
relationship and Fitch's expectations for stable growth at Verizon
partially mitigate the lack of brand and category diversification
inherent in Victra's business model. The relationship also somewhat
protects the company competitively, as on a standalone basis it is
a relatively small player within retail and even the wireless
industry. Victra's position and scale could benefit if Verizon
further optimizes its retail footprint as it has in the past
through rationalizing its partner-operated store fleet and
allocating the stores to its largest partners.
Fitch's base case assumes a relatively stable store count over the
next three years from the 909 as of Sept. 30, 2021.
Modest Medium-Term EBITDA Growth Expected: Fitch expects low-single
digit annual EBITDA growth over time on modestly positive topline
growth. FY21 is expected to produce around 25% growth each in
revenue and EBITDA, yielding 2021 topline around $1.77 billion and
EBITDA close to $165 million, relative to comparable 2020 levels of
$1.43 billion and approximately $130 million, respectively. Strong
growth in 2021 is likely due to a combination of strong overall
consumer goods spending, 5G rollout activity and device launches.
Fitch expects some reversal in trend in 2022 against a strong 2021,
with revenue and EBITDA potentially declining toward $1.6 billion
and $150 million, respectively, with modest growth thereafter.
EBITDA margins, which were around 7% in the two years prior to
2020, expanded to 9% in 2020 and are expected to be in the low-9%
range beginning 2021 on expense actions taken in 2020, including
layoffs and the closure of less profitable stores. Fitch's topline
forecast for Victra compares with its positive low-single digit
revenue growth forecast for Verizon over the 2021-2024 period.
DERIVATION SUMMARY
Victra's 'B'/Stable rating reflects the company's relatively small
scale and narrow product and brand focus within the U.S. retail
industry. Finally, the rating reflects the expectations of good
cash flow of around $50 million annually and adjusted leverage
(adjusted debt/EBITDAR, capitalizing leases at 8x) trending in the
high-5x to 6x range following the company's two debt-financed
dividends and subsequent $80 million notes add-on in 2021.
Additionally, Victra's rating considers the company's reasonably
stable position as the largest authorized retailer for the leading
personal communications provider Verizon Communications Inc.
(A-/Stable) and the company's good long-term operating track
record, albeit mitigated by some declines in recent years.
Victra has several single-category retail peers within Fitch's
coverage. Victra is rated three notches lower than Signet Jewelers
Ltd (BB/Stable), whose rating reflects the company's improving
operating trajectory through topline and expense management
initiatives. Fitch expects stable revenue and EBITDA beginning 2022
of around mid-$6 billion and mid-$500 million, respectively,
relative to pre-pandemic levels of $6.1 billion and $504 million.
These expectations, alongside management's evolving financial
policy favoring debt reduction, has improved Fitch's confidence in
the company's ability to sustain adjusted leverage below 4.5x.
Rite Aid Corporation's 'B-'/Negative rating reflects ongoing
operational challenges, which have heightened questions regarding
the company's longer-term market position and the sustainability of
its capital structure. Persistent EBITDA declines have led to
negligible to modestly negative FCF and elevated adjusted
debt/EBITDAR in the low- to mid-7.0x range in recent years.
The Negative Outlook reflects accelerating operating weakness in
2020, including a 20% EBITDA decline to around $420 million, and
Fitch's reduced confidence in the company's ability to stabilize
EBITDA above $500 million. These concerns are somewhat mitigated by
Rite Aid's ample liquidity of well over $1 billion, supported by a
rich asset base of pharmaceutical inventory and prescription files,
and no notes maturities before 2025.
Party City Holdco Inc.'s 'CCC+' rating reflects reflect high
adjusted leverage (adjusted debt/EBITDAR, capitalizing leases at
8x), projected around 8x beginning 2021, assuming EBITDA rebounds
from breakeven in 2020 to $170 million in 2021 and $180 million in
2022, limited projected FCF of around $25 million and a weak
operating trajectory prior to the onset of the coronavirus
pandemic, which could limit Party City's post-pandemic recovery
prospects.
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for the issuer
include:
-- Fitch expects Victra's 2021 revenue to expand around 25% to
$1.77 billion. Revenue was up over 30% in 1H21 on supportive
consumer fundamentals, new device introductions and expanding
5G penetration; Fitch expects around 5% growth in 4Q. Revenue
could decline in 2022 against challenging comparisons, coming
in at $1.6 billion, significantly higher than the $1.4 billion
recorded in 2019. Revenue could expand low single digits
beginning 2023. Supply chain challenges, including chip
shortages which have impacted autos and other sectors, have
not materially affected Victra's sales and are not expected to
significantly limit growth in the medium term.
-- EBITDA, which expanded to $128 million in 2020 from $106
million in 2019 on cost reductions, could improve to
approximately $165 million in 2021 on topline expansion.
EBITDA could decline toward $150 million in 2022 assuming some
retraction in revenue, but expand alongside topline growth
beginning 2023. EBITDA margins, which expanded to 9.0% in 2020
from the prior 7% range on proactive cost reductions, are
expected to trend in the low-9% range beginning 2021 as cost
reductions taken in 2020 annualize.
-- Cash flow prior to sponsor dividends, which averaged in the
mid-$30 million range over the 2017-2019 period before
expanding to the $75 million range in 2020 on EBITDA growth,
is projected in the $50 million range beginning 2022 as higher
EBITDA levels are somewhat offset by higher interest expense
and capex; FCF prior to sponsor dividends in 2021 could be
close to $100 million given strong EBITDA. Cash on hand and
incremental debt issuance was used for approximately $215
million of sponsor dividends in 2021. Given the new owner's
net leverage target of below 3.5x (projected in the mid-4x
range in 2021), cash could be used for debt reduction
beginning 2023 (when the secured notes become callable) and
tuck-in acquisitions.
-- Adjusted debt/EBITDAR, capitalizing leases at 8x, averaged in
the mid-6x range over the 2017-2019 period, but fell to 5.5x
in 2020 on a combination of EBITDA growth, lower rent and some
debt reduction. Adjusted leverage in 2021 is expected to be
around 5.8x given higher debt levels to support sponsor
dividends, offset somewhat by strong EBITDA growth. Given
Fitch's EBITDA projections, adjusted leverage could climb to
around 6.0x in 2022 and moderate below 6.0x thereafter,
assuming some FCF deployment toward debt reduction.
-- Victra's current contract with Verizon expires in 2022, and
Fitch would view non-renewal or weakening of terms as a credit
negative. Fitch's rating case assumes Victra and Verizon will
renew their contract with no material changes.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- An upgrade could result from better than expected operating
performance such as EBITDA sustaining around $160 million,
which, in combination with debt reduction, would yield
adjusted debt/EBITDAR (capitalizing leases at 8x) sustaining
below 5.5x.
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- A downgrade could result from weaker than expected operating
performance, yielding EBITDA trending below $115 million,
moderating FCF generation and adjusted debt/EBITDAR above
6.5x. A downgrade could also result from further debt-financed
dividends bringing adjusted leverage above 6.5x.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
As of Sept. 30, 2021, Victra had $124 million of cash on hand and
approximately $19 million in borrowing capacity on its $75 million
ABL facility. As of this date, the company's outstanding debt
consisted of $735 million in secured notes due in February 2026.
In February 2021, the company issued $660 million in secured notes
due February 2026, which were used to pay down the outstanding
amount on the company's term loan facility as well as fund a $125
million dividend to the company's then sponsor, Lone Star. In May
2021, the company issued a $75 million add-on in secured notes to
its existing $660 million in notes. The proceeds of this add-on
funded a $90 million dividend to the sponsor.
To finance the company's sale in November 2021, Victra has proposed
an $80 million add-on to the secured notes. The company's owners
have announced a new net leverage target of under 3.5x, which
equates to below 5.0x on Fitch-defined leverage; as such the notes
could provide debt reduction opportunities once they become
callable in 2023.
ABL availability is governed by a borrowing base which includes
inventory and receivables, largely from Verizon. The secured notes
have a second lien on ABL assets and a first lien on Victra's
remaining assets, including net property, plant and equipment. The
notes are co-borrowed by LSF9 Atlantis Holdings, LLC and Victra
Finance Corp.
RECOVERY CONSIDERATIONS
Fitch's recovery assumes Victra is maximized as a going concern in
a post default scenario, given a going-concern valuation of
approximately $560 million compared with an estimated $115 million
in value from a liquidation of assets.
Fitch's going concern value is derived from a projected EBITDA of
around $110 million. The scenario, which assumes Victra's contract
with Verizon remains intact, assumes revenue of approximately $1.4
billion, around 15% below projected 2022 revenue, assuming closing
of around 100 lower-revenue stores and around 10% sales declines at
the remaining base. EBITDA margins could trend around 8% in a
recovery scenario, below the 9% range in 2020 albeit above the 7.2%
produced in 2019 as some of the company's recent expense reductions
are expected to be permanent.
The going concern EBITDA is slightly higher than the previous $100
million, reflecting Fitch's projection of a higher revenue base in
both its current projections and a post-recovery scenario. A going
concern multiple of 5x was selected, within the 4x-8x range
observed for North American corporates, reflecting Fitch's
assessment of Victra's industry dynamics and company-specific
factors.
The approximately $500 million in value available to service debt,
after deducting 10% for administrative claims, yields full recovery
for the $75 million ABL, which is limited by a borrowing base
including eligible receivables and inventory and is assumed to be
70% drawn at default. The ABL is therefore affirmed at 'BB'/'RR1';
the same rating is assigned to the ABL's co-borrower entity A2Z
Wireless Holdings, Inc. The $815 million in secured notes
(following the proposed upsize), which have a second lien on ABL
collateral and a first lien on Victra's remaining assets, are
expected to have good (51%-70%) recovery prospects. The secured
notes, which are co-borrowed by LSF9 Atlantis Holdings, LLC and
Victra Finance Corp, are therefore affirmed at 'B+'/'RR3'.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of '3'. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity, either due to their nature or
to the way in which they are being managed by the entity.
ISSUER PROFILE
Victra is a leading independent retailer for Verizon Wireless, and
offers a full range of wireless devices and services including,
phones, tablets, mobile broadband, wearable technology, accessories
and product insurance.
SUMMARY OF FINANCIAL ADJUSTMENTS
-- Summary of Financial Statement Adjustments - Fitch adjusts for
one-time charges and stock-based compensation.
-- Rent expense capitalized by 8.0x to calculate historical and
projected adjusted debt.
LTL MANAGEMENT: J&J Stay Ruling Deferred Until Case Venue Decided
-----------------------------------------------------------------
Vince Sullivan of Law360 reports that Johnson & Johnson will have
to wait until a North Carolina bankruptcy judge decides on whether
to keep a Chapter 11 case of its subsidiary, LTL Management, in
Charlotte court to know if talc-based liability claims will be
stayed against it after the judge said Friday he didn't want to
muddy the situation any further.
After a two-day hearing on a motion from subsidiary LTL Management
LLC to extend the bankruptcy stay of litigation to ultimate parent
Johnson & Johnson, U.S. Bankruptcy Judge J. Craig Whitley said the
complicated matters at issue should wait until he can render a
ruling.
As reported in the TCR, LTL Management LLC, the newly formed
subsidiary of Johnson & Johnson formed to deal with talc claims,
filed with the U.S. Bankruptcy Court for the Western District of
North Carolina an emergency motion, and then a lawsuit, seeking to
enforce the automatic stay against tort claimants who, despite the
imposition of the automatic stay, seek to recover on their claims
against the Debtor by asserting those same claims against the
Debtor's ultimate parent, Johnson & Johnson ("J&J"), and other
affiliates.
In a motion filed late Monday, Oct. 25, 2021, the bankruptcy
administrator for the Western District of North Carolina said the
interests of justice would best be served by sending the case of
LTL Management LLC to New Jersey where thousands of talc injury
claims are pending in a federal multidistrict litigation and where
the strongest connection for the debtor exists.
"The Court should transfer this bankruptcy case to the District of
New Jersey in the interest of justice or for the convenience of the
parties. While venue may be (barely) proper in this district
because the Debtor is a North Carolina entity, nothing requires the
Court to give deference to the Debtor's choice of venue when it is
entirely manufactured. The interest of justice prong of 28 U.S.C.
Sec. 1412 is triggered where, as here, a debtor has created facts
to fit the statute," the Bankruptcy Administrator said in a court
filing.
About LTL Management
LTL Management LLC is a newly formed subsidiary of Johnson &
Johnson (J&J) to manage and defend thousands of talc-related claims
and oversee the operations of its subsidiary, Royalty A&M, which
owns a portfolio of royalty revenue streams,including royalty
revenue streams based on third-party sales of LACTAID,
MYLANTA/MYLICON and ROGAINE products.
J&J is an American multinational corporation founded in 1886 that
develops medical devices, pharmaceuticals, and consumer packaged
goods. It is the world's largest and most broadly based healthcare
company.
LTL Management filed a Chapter 11 petition (Bankr. W.D.N.C. Case
No. 21-30589) on Oct. 14, 2021. The Debtor was estimated to have $1
billion to $10 billion in assets and liabilities as of the
bankruptcy filing.
The Hon. J. Craig Whitley is the case judge.
The Debtor tapped Jones Day and Rayburn Cooper & Durham, P.A. as
bankruptcy counsel; King & Spalding, LLP and Shook, Hardy & Bacon
LLP as special counsel; McCarter & English, LLP as litigation
consultant; Bates White, LLC as financial consultant; and
AlixPartners, LLP as restructuring advisor. Epiq Corporate
Restructuring, LLC is the claims agent.
About Johnson & Johnson
Johnson & Johnson (J&J) is an American multinational corporation
founded in 1886 that develops medical devices, pharmaceuticals, and
consumer packaged goods. J&J is the world's largest and most
broadly based healthcare company.
Johnson & Johnson is headquartered in New Brunswick, New Jersey,
the consumer division being located in Skillman, New Jersey. The
corporation includes some 250 subsidiary companies with operations
in 60 countries and products sold in over 175 countries.
Johnson & Johnson had worldwide sales of $82.6 billion during
calendar year 2020.
LTL MANAGEMENT: Judge OKs Bid to Appoint Talc Committee
-------------------------------------------------------
Judge J. Craig Whitley of the U.S. Bankruptcy Court for the Western
District of North Carolina granted the motion filed by U.S.
Bankruptcy Administrator Shelley Abel to appoint an official
committee of talc claimants in LTL Management, LLC's Chapter 11
case.
These talc claimants were appointed to serve on the committee
pursuant to the bankruptcy judge's Nov. 8 order:
1. Rebecca Love
c/o Ashcraft & Gerel, LLP
Attn: Michelle Parfitt
1825 K Street, NW, Suite 700
Washington, DC 20006
2. Kellie Brewer
c/o Fears Nachawati Law Firm
Attn: Majed Nachawati
5473 Blair Road
Dallas, TX 75231
3. Tonya Whetsel
c/o Karst von Oiste LLP
Attn: Eric Karst
23923 Gosling Rd., Ste. A
Spring, TX 77389
4. William A. Henry
c/o Levin Papantonio Rafferty
Attn: Christopher Tisi
316 S Baylen Street, Suite 600
Pensacola, FL 32502
5. Darlene Evans
c/o OnderLaw, LLC
Attn: James Onder
110 East Lockwood Avenue
St. Louis, MO 63119
6. Patricia Cook
c/o Weitz & Luxenberg, P.C.
Attn: Danny Kraft
700 Broadway
New York, NY 10083
7. Alishia Landrum
c/o Beasley Allen Law Firm
Attn: Leigh O'Dell
P.O. Box 4160
Montgomery, AL 36103
8. Blue Cross Blue Shield of Massachusetts
c/o Hill Hill Carter Franco Cole & Black, PC
Attn: Elizabeth Carter
425 Perry Street
Montgomery, AL 36104
9. Kristie Doyle
c/o Kazan, McClain, Satterley & Greenwood PLC
Attn: Steven Kazan
55 Harrison St., Ste. 400
Oakland, CA 94607
10. Randy Derouen
c/o Levy Konigsberg LLP
Attn: Audrey Raphael
605 Third Avenue, 33rd Fl
New York, NY 10158
11. April Fair
c/o Robinson Calcagnie, Inc.
Attn: Mark Robinson, Jr.
19 Corporate Plaza Drive
Newport Beach, CA 92660
Judge Whitley said he would entertain proposed additions or changes
to the group after dealing with a venue transfer motion this week.
About LTL Management
LTL Management LLC is a newly formed subsidiary of Johnson &
Johnson (J&J) to manage and defend thousands of talc-related claims
and oversee the operations of its subsidiary, Royalty A&M, which
owns a portfolio of royalty revenue streams, including royalty
revenue streams based on third-party sales of LACTAID,
MYLANTA/MYLICON and ROGAINE products.
LTL Management filed a Chapter 11 petition (Bankr. W.D.N.C. Case
No. 21-30589) on Oct. 14, 2021. The Debtor was estimated to have
$1 billion to $10 billion in assets and liabilities as of the
bankruptcy filing.
The Hon. J. Craig Whitley is the case judge.
The Debtor tapped Jones Day and Rayburn Cooper & Durham, P.A. as
bankruptcy counsel; King & Spalding, LLP and Shook, Hardy & Bacon
LLP as special counsel; McCarter & English, LLP as litigation
consultant; Bates White, LLC as financial consultant; and
AlixPartners, LLP as restructuring advisor. Epiq Corporate
Restructuring, LLC is the claims agent.
About Johnson & Johnson
Johnson & Johnson is an American multinational corporation founded
in 1886 that develops medical devices, pharmaceuticals, and
consumer packaged goods. It is the world's largest and most
broadly based healthcare company.
Johnson & Johnson is headquartered in New Brunswick, New Jersey,
the consumer division being located in Skillman, New Jersey. The
corporation includes some 250 subsidiary companies with operations
in 60 countries and products sold in over 175 countries.
The corporation had worldwide sales of $82.6 billion during
calendar year 2020.
MALLINCKRODT PLC: Antitrust Claims Take Center Stage
----------------------------------------------------
Maria Chutchian of Reuters reports that Mallinckrodt Plc filed for
bankruptcy last 2020 to resolve thousands of lawsuits accusing it
of fueling the opioid epidemic, but as it aims to bring the process
to a close, it must first address a completely different kind of
claim.
The pharmaceutical company recently kicked off a multi-day hearing
seeking approval of its proposed reorganization plan and underlying
opioid litigation settlement, which creditors and government
entities have largely signed off on.
But now, in what one Mallinckrodt attorney called an
"unconventional" approach to a Chapter 11 plan confirmation
process, the company will begin another hearing on Monday over two
insurers' claims that they have had to reimburse their customers at
highly-inflated prices for Mallinckrodt's Acthar gel.
The product, one of the company's main moneymakers, is used for
treatment of infantile spasms and multiple sclerosis.
The insurers, Humana Inc and Attestor, allege that not only did
Mallinckrodt engage in anti-competitive practices by inflating
Acthar's prices before the bankruptcy in violation of antitrust
laws, but that it has continued charging those high rates during
the case. The insurers argue that since they have had to continue
paying amounts they believe are illegal, they should be entitled to
senior priority status in Mallinckrodt's creditor payment
structure.
The company has said in court papers that the insurers' claims have
no merit.
Lawyers said they need to resolve this matter before U.S.
Bankruptcy Judge John Dorsey, who is overseeing the Chapter 11
case, can rule on the plan. It aims to cut $1.3 billion from
Mallinckrodt's overall debt and set up a trust for plaintiffs that
have brought opioid-related claims against the company worth around
$1.7 billion.
Acthar-related claims, which Mallinckrodt estimates to be around
$1.4 billion, are in line for a total recovery of $7.5 million.
The insurers say the actual amount of the claims is "billions"
higher than Mallinckrodt's estimate.
Mallinckrodt says the insurers' claims for damages do not qualify
as "actual administrative expenses" that are typically paid off
first in a corporate bankruptcy.
Other individuals and entities that have brought Acthar-related
antitrust claims have also objected to the proposed plan. They
argue it provides inappropriate rewards for management and
improperly favors opioid claimants over their claims.
Mallinckrodt has settled Acthar antitrust claims brought by federal
and state governments.
For Mallinckrodt: George Davis, Robert Malionek, Chris Harris,
George Klidonas, Andrew Sorkin, Anupama Yerramalli, Jeff Bjork,
Elizabeth Marks of Latham & Watkins; and Mark Collins, Robert
Stearn Jr, Michael Merchant, Amanda Steele, Robert Maddox of
Richards, Layton & Finger
For the insurers: Matthew Feldman and Paul Shalhoub of Willkie Farr
& Gallagher; Donna Culver and Robert Dehney of Morris, Nichols,
Arsht & Tunnell; and Scott Solberg and Benjamin Waldin of Eimer
Stahl
About Mallinckrodt PLC
Mal linckrodt -- http://www.mallinckrodt.com/-- is a global
business consisting of multiple wholly-owne d subsidiaries that
develop, manufacture, market and distribute specialty
pharmaceutical products and therapies. The company's Specialty
Brands reportable segment's areas of focus include autoimmune and
rare diseases in specialty areas like neurology, rheumatology,
nephrology, pulmonology and ophthalmology; immunotherapy and
neonatal respiratory critical care therapies; analgesics; and
gastrointestinal products. Its Specialty Generics reportable
segment includes specialty generic drugs and active pharmaceutical
ingredients.
On Oct. 12, 2020, Mallinckrodt plc and certain of its affiliates
sought Chapter 11 protection in Delaware (Bankr. D. Del. Lead Case
No. 20-12522) to seek approval of a restructuring that would reduce
total debt by $1.3 billion and resolve opioid-related claims
against them.
Mallinckrodt plc disclosed $9,584,626,122 in assets and
$8,647,811,427 in liabilities as of Sept. 25, 2020.
Judge John T. Dorsey oversees the cases.
The Debtors tapped Latham & Watkins LLP and Richards, Layton &
Finger P.A. as their bankruptcy counsel; Arthur Cox and Wachtell,
Lipton, Rosen & Katz as corporate and finance counsel; Ropes & Gray
LLP as litigation counsel; Torys LLP as CCAA counsel; Guggenheim
Securities LLC as investment banker; and AlixPartners LLP as
restructuring advisor. Prime Clerk, LLC, is the claims agent.
The official committee of unsecured creditors retained Cooley LLP
as its legal counsel, Robinson & Cole LLP as co-counsel, and Dundon
Advisers LLC as its financial advisor.
On Oct. 27, 2020, the U.S. Trustee for Region 3 appointed an
official committee of opioid related claimants. The OCC tapped Akin
Gump Strauss Hauer & Feld LLP as its lead counsel, Cole Schotz as
Delaware co-counsel, Province Inc. as financial advisor, and
Jefferies LLC as investment banker.
A confirmation trial for the Debtors' First Amended Joint Plan of
Reorganization is set to begin Nov. 1, 2021. The Confirmation
Hearing will be bifurcated into two phases. Phase 1 will commence
the week of Nov. 1. The Confirmation Hearing will continue with
Phase 2 on or around the week of Nov. 15, when the Acthar
Administrative Claims Hearing proceedings conclude.
MALLINCKRODT PLC: Insurers Say Acthar Price Inflated by $300 Mil.
-----------------------------------------------------------------
Rick Archer, writing for Law360, reports that a pair of health
insurers told a Delaware bankruptcy judge Monday, November 7, 2021,
that Mallinckrodt PLC owes them more than $300 million because of
the drugmaker's alleged efforts to keep a cheaper alternative to
its Acthar infantile spasm drug off the market.
The insurers and Mallinckrodt presented their opening arguments
over Zoom to U.S. Bankruptcy Judge John Dorsey in a trial on
whether the insurers' antitrust claims should be given a priority
over the other creditors in Mallinckrodt's Chapter 11 case. The
insurers claim the drugmaker is engaged in an ongoing scheme to
inflate the price of Acthar.
About Mallinckrodt PLC
Mallinckrodt -- http://www.mallinckrodt.com/-- is a global
business consisting of multiple wholly-owned subsidiaries that
develop, manufacture, market and distribute specialty
pharmaceutical products and therapies. The company's Specialty
Brands reportable segment's areas of focus include autoimmune and
rare diseases in specialty areas like neurology, rheumatology,
nephrology, pulmonology and ophthalmology; immunotherapy and
neonatal respiratory critical care therapies; analgesics; and
gastrointestinal products. Its Specialty Generics reportable
segment includes specialty generic drugs and active pharmaceutical
ingredients.
On Oct. 12, 2020, Mallinckrodt plc and certain of its affiliates
sought Chapter 11 protection in Delaware (Bankr. D. Del. Lead Case
No. 20-12522) to seek approval of a restructuring that would reduce
total debt by $1.3 billion and resolve opioid-related claims
against them.
Mallinckrodt plc disclosed $9,584,626,122 in assets and
$8,647,811,427 in liabilities as of Sept. 25, 2020.
Judge John T. Dorsey oversees the cases.
The Debtors tapped Latham & Watkins LLP and Richards, Layton &
Finger P.A. as their bankruptcy counsel; Arthur Cox and Wachtell,
Lipton, Rosen & Katz as corporate and finance counsel; Ropes & Gray
LLP as litigation counsel; Torys LLP as CCAA counsel; Guggenheim
Securities LLC as investment banker; and AlixPartners LLP as
restructuring advisor. Prime Clerk, LLC, is the claims agent.
The official committee of unsecured creditors retained Cooley LLP
as its legal counsel, Robinson & Cole LLP as co-counsel, and Dundon
Advisers LLC as its financial advisor.
On Oct. 27, 2020, the U.S. Trustee for Region 3 appointed an
official committee of opioid related claimants. The OCC tapped Akin
Gump Strauss Hauer & Feld LLP as its lead counsel, Cole Schotz as
Delaware co-counsel, Province Inc. as financial advisor, and
Jefferies LLC as investment banker.
A confirmation trial for the Debtors' First Amended Joint Plan of
Reorganization is set to begin Nov. 1, 2021. The Confirmation
Hearing will be bifurcated into two phases. Phase 1 will commence
the week of Nov. 1. The Confirmation Hearing will continue with
Phase 2 on or around the week of Nov. 15, when the Acthar
Administrative Claims Hearing proceedings conclude.
MALLINCKRODT PLC: Paul Weiss, LRC 3rd Update on Noteholder
----------------------------------------------------------
In the Chapter 11 cases of Mallinckrodt PLC, et al., the law firms
of Paul, Weiss, Rifkind, Wharton & Garrison LLP and Landis Rath &
Cobb LLP submitted a revised third amended verified statement under
Rule 2019 of the Federal Rules of Bankruptcy Procedure, to disclose
an updated list of Unsecured Notes Ad Hoc Group that they are
representing.
The Unsecured Notes Ad Hoc Group formed by certain unaffiliated
holders of the Debtors' (i) 5.75% senior notes due 2022 issued
under that certain Indenture, dated as of August 13, 2014, the
guarantors party thereto from time to time and Deutsche Bank Trust
Company Americas, as trustee, (ii) 5.500% senior notes due 2025
issued under that certain Indenture, dated as of April 15, 2015 by
and among the Issuers, the guarantors party thereto from time to
time and the Trustee and (iii) 5.625% senior notes due 2023 issued
under that certain Indenture, dated as of September 24, 2015.
In or around June 2020, certain Members of the Unsecured Notes Ad
Hoc Group engaged Paul, Weiss to represent the Unsecured Notes Ad
Hoc Group in connection with the Members' holdings of the
Guaranteed Unsecured Notes. In September 2020, the Unsecured Notes
Ad Hoc Group also engaged LRC to represent it in connection with
the Unsecured Notes Ad Hoc Group's holdings of the Guaranteed
Unsecured Notes.
On October 21, 2020, Counsel filed the Verified Statement of Paul,
Weiss, Rifkind, Wharton & Garrison LLP and Landis Rath & Cobb LLP
Pursuant to Federal Rule of Bankruptcy Procedure 2019. On March 2,
2021, Counsel filed the Amended Verified Statement of Paul, Weiss,
Rifkind, Wharton & Garrison LLP and Landis Rath & Cobb LLP Pursuant
to Federal Rule of Bankruptcy Procedure 2019. On July 13, 2021,
Counsel filed the Second Amended Verified Statement of Paul, Weiss,
Rifkind, Wharton & Garrison LLP and Landis Rath & Cobb LLP Pursuant
to Federal Rule of Bankruptcy Procedure 2019.
On November 3, 2021, Counsel filed the Third Amended Verified
Statement of Paul, Weiss, Rifkind, Wharton & Garrison LLP and
Landis Rath & Cobb LLP Pursuant to Federal Rule of Bankruptcy
Procedure 2019. The holdings of Carronade Capital Management, LP, a
Member of the Unsecured Notes Ad Hoc Group, were not included in
that filing. Accordingly, pursuant to Bankruptcy Rule 2019, Counsel
submits this Revised Third Amended Statement.
As of Oct. 18, 2021, members of the Unsecured Notes Ad Hoc Group
and their disclosable economic interests are:
Aurelius Capital Management, LP
535 Madison Avenue, 31st Floor
New York, NY 10022
* Revolving Credit Facility Obligations: $19,000,000
* 2024 Term Loan Obligations: $55,178,934.65
* 2025 Term Loan Obligations: $21,949,467.60
* First Lien Notes Obligations: $22,629,000
* Second Lien Notes Obligations: $2,913,000
* 5.500% Senior Notes Obligations: $43,284,000
* 5.625% Senior Notes Obligations: $35,200,000
* 4.75% Unsecured Notes Obligations: 49,574,000
* 9.50% Debenture Obligations9: $200,000
Capital Research and Management Company
333 South Hope Street, 50th Floor
Los Angeles, CA 90071
* First Lien Notes Obligations: $54,966,000
* 5.500% Senior Notes Obligations: $17,118,000
* 5.625% Senior Notes Obligations: $1,525,000
* 5.750% Senior Notes Obligations: $12,025,000
Carronade Capital Management, LP
17 Old Kings Highway South, Suite 140
Darien, CT 06820
* 5.500% Senior Notes Obligations: $2,315,000
* 5.625% Senior Notes Obligations: $12,220,000
* 5.750% Senior Notes Obligations: $2,000,000
Catalur Capital Management, LP
One Grand Central Place
60 East 42nd Street, Suite 2107
New York, NY 10165
* 5.500% Senior Notes Obligations: $1,000,000
* 5.625% Senior Notes Obligations: $3,000,000
* 5.750% Senior Notes Obligations: $1,000,000
Cerberus Capital Management LP
875 Third Avenue
10th Floor
New York, NY 10022
* 2024 Term Loan Obligations: $13,990,025
* Second Lien Notes Obligations: $10,000,000
* 5.500% Senior Notes Obligations: $8,401,000
* 5.625% Senior Notes Obligations: $10,500,000
* 5.750% Senior Notes Obligations: $37,500,000
Cetus Capital LLC
8 Sound Shore Dr., #303
Greenwich, CT 06830
* 2024 Term Loan Obligations: $8,350,635
* First Lien Notes Obligations: $1,500,000
* 5.625% Senior Notes Obligations: $8,620,000
* 5.750% Senior Notes Obligations: $1,140,000
OFM II, L.P.
* 2024 Term Loan Obligations: $2,783,545
* First Lien Notes Obligations: $500,000
* 5.625% Senior Notes Obligations: $6,380,000
* 5.750% Senior Notes Obligations: $860,000
Citadel LLC
601 Lexington Avenue
New York, NY 10022
* Second Lien Notes Obligations: $3,000,000
* 5.625% Senior Notes Obligations: $10,000,000
* 5.750% Senior Notes Obligations: $20,000,000
Credit Suisse Securities (USA) LLC
11 Madison Avenue, 4th Floor
New York, NY 10010
* 2024 Term Loan Obligations: $12,498.02
* First Lien Notes Obligations: $132,821.58
* 5.500% Senior Notes Obligations: $6,975,000
* 5.625% Senior Notes Obligations: $4,115,000
* 5.750% Senior Notes Obligations: $5,760,000
Deutsche Bank Securities Inc.
60 Wall Street
New York, NY 10005
* 2024 Term Loan Obligations: $4,385,412
* 2025 Term Loan Obligations: $6,070,310
* First Lien Notes Obligations: $1,000,000
* Second Lien Notes Obligations: $799,000
* 5.625% Senior Notes Obligations: $24,778,000
* 5.750% Senior Notes Obligations: $44,320,000
Farmstead Capital Management, LLC
7 North Broad Street, 3rd Floor
Ridgewood, NJ 07450
* 5.500% Senior Notes Obligations: $21,900,000
* 5.625% Senior Notes Obligations: $8,000,000
* 5.750% Senior Notes Obligations: $29,131,000
Federated Investment Management Company
1001 Liberty Avenue
Pittsburgh, PA 15222
* 2024 Term Loan Obligations: $4,619,361
* 2025 Term Loan Obligations: $3,981,076
* 5.500% Senior Notes Obligations: $66,375,000
* 5.625% Senior Notes Obligations: $45,650,000
* 5.750% Senior Notes Obligations: $2,000,000
FFI Fund, Ltd., FYI Ltd. and
Olifant Fund, Ltd.
888 Boylston Street, 15th Floor
Boston, MA 02199
* 5.500% Senior Notes Obligations: $44,800,000
* 5.625% Senior Notes Obligations: $100,000,000
* 5.750% Senior Notes Obligations: $52,500,000
Hain Capital Group, LLC
301 Route 17, 7th Floor
Rutherford, NJ 07070
* 5.625% Senior Notes Obligations: $16,500,000
* 5.750% Senior Notes Obligations: $5,000,000
Hudson Bay Capital
777 3rd Ave, 30th Floor
New York NY 10017
* 5.625% Senior Notes Obligations: $18,900,000
* 5.750% Senior Notes Obligations: $33,895,000
JPMorgan Investment Management Inc. and
JPMorgan Chase Bank, N.A.
JPMorgan Investment Management Inc.
1 E. Ohio Street, IN1-0143 - Floor 6
Indianapolis, IN 46204-1912
* 5.500% Senior Notes Obligations: $62,880,000
* 5.625% Senior Notes Obligations: $51,057,000
* 5.750% Senior Notes Obligations: $8,220,000
Livello Capital Management LP
One World Trade Center, 85th Floor
New York, NY 10007
* 2024 Term Loan Obligations: $1,740,802
* 2025 Term Loan Obligations: $994,858
* 5.500% Senior Notes Obligations: $4,000,000
* 5.750% Senior Notes Obligations: $2,000,000
Luxor Capital Group, LP
1114 Avenue of the Americas, 28th Floor
New York, NY 10036
* 5.750% Senior Notes Obligations: $14,000,000
Mariner Glen Oaks
500 Mamaroneck Avenue
1st Floor Harrison
NY USA 10528
* 5.625% Senior Notes Obligations: $6,000,000
* 4.75% Unsecured Notes Obligations: $1,000,000
Moore Global Investments, LLC
11 Times Square
New York, NY 10036
* First Lien Notes Obligations: $22,750,000
* 5.500% Senior Notes Obligations: $9,000,000
* 5.625% Senior Notes Obligations: $3,140,000
Nomura Corporate Research and Asset Management Inc.
309 W 49th Street
New York, NY 10019
* First Lien Notes Obligations: $14,550,000
* 5.625% Senior Notes Obligations: $14,152,000
* 5.750% Senior Notes Obligations: $23,300,000
North America Credit Trading Group of
J.P. Morgan Securities LLC
383 Madison Ave.
New York, NY 10179
* Second Lien Notes Obligations: $1,000
* 5.500% Senior Notes Obligations: $18,884,000
* 5.625% Senior Notes Obligations: $15,084,000
* 5.750% Senior Notes Obligations: $21,917,000
* 4.75% Unsecured Notes: $4,562,000
Nut Tree Capital Management
55 Hudson Yards 550 West 34th Street
2nd Floor
New York, NY 10001
* 5.625% Senior Notes Obligations: $6,000,000
* 5.750% Senior Notes Obligations: $3,000,000
Oaktree Capital Management, L.P.
333 South Grand Avenue, 28th Floor
Los Angeles, CA 90071
* 5.750% Senior Notes Obligations: $74,215,000
Paloma Partners Management Company
Two American Lane
Greenwich, CT 06831
* 5.500% Senior Notes Obligations: $7,360,000
* 5.625% Senior Notes Obligations: $6,000,000
Pretium Partners, LLC
810 Seventh Avenue
New York, NY 10019
* 5.625% Senior Notes Obligations: $1,000,000
* 5.750% Senior Notes Obligations: $6,375,000
Scoggin International Fund Ltd
660 Madison Avenue
New York, NY 10065
* 5.500% Senior Notes Obligations: $3,500,000
* 5.625% Senior Notes Obligations: $4,600,000
* 5.750% Senior Notes Obligations: $4,000,000
Scoggin Worldwide Fund Ltd
660 Madison Avenue
New York, NY 10065
* 5.500% Senior Notes Obligations: $818,000
Soros Fund Management LLC
250 West 55th Street
New York, NY 10019
* Revolving Credit Facility Obligations: $15,000,000
* 2024 Term Loan Obligations: $5,968,750
* First Lien Notes Obligations: $7,765,000
* 5.625% Senior Notes Obligations: $2,000,000
Serengeti Lycaon MM LP
632 Broadway, 12th Floor
New York, NY 10012
* First Lien Notes Obligations: $1,000,000
* 5.500% Senior Notes Obligations: $1,000,000
* 5.625% Senior Notes Obligations: $8,750,000
Third Point LLC
55 Hudson Yards, 51st Floor
New York, NY 10001
* First Lien Notes Obligations: $13,000,000
* 5.500% Senior Notes Obligations: $8,280,000
* 5.625% Senior Notes Obligations: $5,500,000
* 5.750% Senior Notes Obligations: $22,872,000
Two Seas
32 Elm Place 3rd Floor
Rye, NY 10580
* First Lien Notes Obligations: $15,000,000
* Second Lien Notes Obligations: $3,225,000
* 5.500% Senior Notes Obligations: $4,000,000
* 5.625% Senior Notes Obligations: $2,000,000
* 5.750% Senior Notes Obligations: $2,000,000
Wells Fargo Securities LLC
550 S. Tyron Street, 4th Floor
Charlotte, NC 28202
* Second Lien Notes Obligations: $328,000
* 5.500% Senior Notes Obligations: 9,000,000
* 5.625% Senior Notes Obligations: $3,071,000
* 5.750% Senior Notes Obligations: $20,831,000
* 4.75% Unsecured Notes Obligations: $500,000
* Shares: 178,834
Counsel to the Unsecured Notes Ad Hoc Group can be reached at:
LANDIS RATH & COBB LLP
Richard S. Cobb, Esq.
919 Market Street, Suite 1800
Wilmington, DE 19801
Telephone: (302) 467-4400
Facsimile: (302) 467-4450
E-mail: cobb@lrclaw.com
- and -
PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
Andrew N. Rosenberg, Esq.
Alice Belisle Eaton, Esq.
Claudia R. Tobler, Esq.
1285 Avenue of the Americas
New York, NY 10019
Telephone: (212) 373-3000
Facsimile: (212) 757-3990
E-mail: arosenberg@paulweiss.com
aeaton@paulweiss.com
ctobler@paulweiss.com
A copy of the Rule 2019 filing, downloaded from PacerMonitor.com,
is available at https://bit.ly/3BWyk5c and https://bit.ly/3c78Ast
About Mallinckrodt PLC
Mallinckrodt -- http://www.mallinckrodt.com/-- is a global
business consisting of multiple wholly-owned subsidiaries that
develop, manufacture, market and distribute specialty
pharmaceutical products and therapies. The company's Specialty
Brands reportable segment's areas of focus include autoimmune and
rare diseases in specialty areas like neurology, rheumatology,
nephrology, pulmonology and ophthalmology; immunotherapy and
neonatal respiratory critical care therapies; analgesics; and
gastrointestinal products. Its Specialty Generics reportable
segment includes specialty generic drugs and active pharmaceutical
ingredients.
On Oct. 12, 2020, Mallinckrodt plc and certain of its affiliates
sought Chapter 11 protection in Delaware (Bankr. D. Del. Lead Case
No. 20-12522) to seek approval of a restructuring that would reduce
total debt by $1.3 billion and resolve opioid-related claims
against them.
Mallinckrodt plc disclosed $9,584,626,122 in assets and
$8,647,811,427 in liabilities as of Sept. 25, 2020.
Judge John T. Dorsey oversees the cases.
The Debtors tapped Latham & Watkins LLP and Richards, Layton &
Finger P.A. as their bankruptcy counsel; Arthur Cox and Wachtell,
Lipton, Rosen & Katz as corporate and finance counsel; Ropes & Gray
LLP as litigation counsel; Torys LLP as CCAA counsel; Guggenheim
Securities LLC as investment banker; and AlixPartners LLP as
restructuring advisor. Prime Clerk, LLC, is the claims agent.
The official committee of unsecured creditors retained Cooley LLP
as its legal counsel, Robinson & Cole LLP as co-counsel, and Dundon
Advisers LLC as its financial advisor.
On Oct. 27, 2020, the U.S. Trustee for Region 3 appointed an
official committee of opioid related claimants. The OCC tapped
Akin Gump Strauss Hauer & Feld LLP as its lead counsel, Cole Schotz
as Delaware co-counsel, Province Inc. as financial advisor, and
Jefferies LLC as investment banker.
A confirmation trial for the Debtors' First Amended Joint Plan of
Reorganization is set to begin Nov. 1, 2021. The Confirmation
Hearing will be bifurcated into two phases. Phase 1 will commence
the week of Nov. 1. The Confirmation Hearing will continue with
Phase 2 on or around the week of Nov. 15, when the Acthar
Administrative Claims Hearing proceedings conclude.
MASSOOD DANESH PAJOOH: CILP's Sale of 100 Northpoint Property OK'd
------------------------------------------------------------------
Judge Christopher Lopez of the U.S. Bankruptcy Court for the
Southern District of Texas authorized County Investment L.P.
("CILP"), an affiliate of Massood Danesh Pajooh and U.S. Capital
Investments LLC, to sell the 100 Northpoint Property.
The sale is free and clear of any interests asserted by co-owner
Apadana, Inc., with the protections afforded to Apadana set forth
in the Order.
The sale is in accordance with the terms of the retention of
Tranzon pursuant to the Court's Order entered on Oct. 5, 2021.
From the proceeds of the sale of the 100 Northpoint Property, CILP
shall, at the closing of the sale: (i) satisfy and pay in full all
amounts owed in connection with the indebtedness related to CILP's
promissory note dated July 14, 2016, in the original principal
amount of $251,550 and granted in favor of Community Bank of Texas,
N.A. ("CBT"), which is secured by a deed of trust lien against the
100 Northpoint Property; and, (ii) pay the cost of a title
insurance policy and other reasonable closing costs. Upon payment
of the Northpoint Note in full, CBT will release its deed of trust
lien against the 100 Northpoint Property.
The balance of the proceeds of sale of the 100 Northpoint Property
after making such payments describe will be deposited into the
non-CBT DIP Account under the control of the Chief Restructuring
Officer, Michael P. Jayson.
The CRO will not disburse the Net Sales Proceeds except upon
further order of the Court. He will investigate and based on such
investigation, will attempt to negotiate a resolution of any
disputes as between CILP and Apadana as to the allocation and
distribution of the Net Sales Proceeds as between the bankruptcy
estate of CILP and Apadana. Thereupon, the CRO will cause to be
filed a Motion to Approve Distribution of Net Sales Proceeds. The
Distribution Motion will be served on all creditors and
parties-in-interest, including the Receiver and Apadana, by and
through its Registered Agent, as follows: Arash Tehrani, Registered
Agent Apadana, Inc., a Texas Corporation, 3131 Chimney Rock Road,
Houston, TX, USA 77056. After such notice, the Court will conduct a
hearing and make a ruling on the Distribution Motion.
The CRO is authorized and directed to pay the 10% Buyer's Premium
at the closing pursuant to the terms of the Tranzon marketing and
employment agreement.
Notwithstanding anything to the contrary in the Order:
(i) any sale of the 100 Northpoint Property is subject to
CBT's consent, which consent will not be unreasonably withheld;
(ii) any sale of the 100 Northpoint Property must be at a
price sufficient to satisfy all amounts owed in connection with and
pursuant to the Northpoint Loan (as defined in the Cash Collateral
Order) and the Northpoint Note;
(iii) CBT's right to credit bid up to the full amount of its
indebtedness owed under the Northpoint Note is preserved;
(iv) CBT will receive notice of all offers/bids related to
the sale of the 100 Northpoint Property;
(v) CBT will receive an accounting of all sale proceeds;
(vi) CBT, the Debtors, and the CRO will collectively
determine criteria for qualified bids and bidders;
(vii) CBT will be automatically deemed a qualified bidder;
(viii) the Debtors' indebtedness owed in connection with the
Northpoint Loan and Northpoint Note, including all approved costs
related thereto, including CBT's reasonable attorney fees and
costs, will be paid in full at closing, after which CBT will
release its deed of trust lien on the 100 Northpoint Property;
(ix) the Order in no way impairs or alters the rights,
remedies and obligations of CBT or the Debtors under applicable law
and the Northpoint Note and all applicable Loan Documents between
and among the Debtors and CBT; and
(x) the Order in no way alters or impairs the rights of the
Debtors or CBT under the Cash Collateral Order, the Bankruptcy
Code, or applicable non-bankruptcy law.
About Massood Danesh Pajooh
Massood Danesh Pajooh and affiliates each filed a voluntary
petition for relief under Subchapter V of Chapter 11 of the U.S.
Bankruptcy Code (Bankr. S.D. Tex. Case No. 21-32932) on September
3, 2021.
Judge Christopher Lopez oversees the jointly administered cases.
Pendergraft and Simon, LLP represents the Debtors as counsel.
CommunityBank of Texas, N.A., as lender, is represented by
Winstead
PC.
MAXCOM TELLECOMMUNICATIONS: Transtelco Completes Tender Offer
-------------------------------------------------------------
Lauren Coleman-Lochner of Bloomberg News reports that Transtelco
Holding Inc. said holders have tendered sufficient shares of Maxcom
Telecomunicaciones to effect some changes to the indentures
governing the notes. Transtelco is an El Paso, Texas-based
provider of digital infrastructure, including fiber networks.
Holders of Maxcom's 8% senior secured notes due 2024 tendered about
$54 million, or 95% of those outstanding, Transtelco said in a
statement Monday, Nov. 8, 2021.
Holders will receive $515 for each $1,000 principal amount
tendered. Tender offer was made in connection with Transtelco's
acquisition of Maxcom. Acquisition is expected to close around
Nov. 10, 2021. Transtelcom previously extended the tender offer.
About Maxcom Telecomunicaciones
Maxcom Telecomunicaciones SAB is a limited liability public stock
corporation (sociedad anonima burstatil de capital variable) with
indefinite life, organized under the laws of Mexico in 1996. Maxcom
USA Telecom, Inc., is a wholly owned subsidiary of Maxcom Parent
organized under the laws of New York in 2019.
Maxcom Parent and its subsidiaries are facilities-based
telecommunications providers that use a "smart-build" approach to
deliver "last mile" connectivity to enterprises, residential
customers and governmental entities in Mexico.
On Aug. 19, 2019, Maxcom USA Telecom, Inc. and its affiliated
debtor, Maxcom Telecomunicaciones, S.A.B. de C.V. each filed a
voluntary petition for relief under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the
Southern District of New York. The lead case is In re Maxcom USA
Telecom, Inc. (Bankr. S.D.N.Y. Case No. 19-23489).
Paul Hastings LLP is the Debtors' counsel. Alvarez & Marsal Mexico
is the Debtors' restructuring advisors. Prime Clerk LLC is the
claims agent.
MCAFEE CORP: S&P Places 'BB' ICR on CreditWatch Negative
--------------------------------------------------------
S&P Global Ratings placed its 'BB' issuer credit rating on McAfee
Corp. and all of its issue-level ratings on its debt on CreditWatch
with negative implications.
The CreditWatch placement reflects S&P's estimate that the
company's pro forma leverage will exceed 9x following the close of
the acquisition.
The CreditWatch placement follows McAfee's announcement that it has
agreed to be acquired by an investor group for approximately $14
billion of enterprise value, including the repayment of its
existing debt. The acquiring investor group will partially fund the
transaction with a $6.66 billion term loan and a $2.32 billion
bridge loan, which will raise leverage to over 9.0x from less than
4.0x currently.
CreditWatch
S&P said, "We will monitor any developments related to the proposed
transaction, including the receipt of required approvals. We will
also conduct a detailed review of McAfee's post-close business
strategies, capital structure, and ongoing financial policy. We
expect to resolve our CreditWatch by the close of the transaction.
At that time, we anticipate downgrading McAfee by at least three
notches to either 'B' or 'B-' given the currently available
information on its planned debt issuance. Based on our existing
forecasts for McAfee's EBITDA and cash generation over the next 12
months, we see a 'B-' outcome as more likely under the planned
capital structure."
McAfee is a provider of consumer cybersecurity software and
services. Intel Corp. acquired the company in 2011 and operated it
as Intel Security Group until TPG Capital and Thoma Bravo LLC
acquired a 51% equity stake in the business in April 2017. The
company went public through an IPO in 2020 but Intel and TPG retain
substantial minority stakes.
McAfee offers a suite of antivirus, identity, and privacy
protection products offered through direct sales and channel
relationships with original equipment manufacturers (OEMs),
retailers, and network operators. The company competes with
NortonLifeLock, Avast, and Trend Micro.
METHANEX CORP: S&P Alters Outlook to Positive, Affirms 'BB' ICR
---------------------------------------------------------------
On Nov. 8, 2021, S&P Global Ratings revised the outlook on Methanex
Corp. to positive from stable and affirmed its 'BB' issuer credit
rating on the company. The 'BB' issue-level rating and '4' recovery
ratings on Methanex's senior unsecured debt are unchanged.
The positive outlook reflects the potential for an upgrade if the
company's credit measures continue to trend in line with its
current expectations and management demonstrates prudent financial
policies to support credit quality.
The outlook revision reflects the continued strengthening in
methanol prices, led by strong demand and constrained supply.
Methanol prices have continued to strengthen since the fourth
quarter of 2020, with current average North American non-discounted
prices of about US$692 per metric ton (/mt); an increase of more
than 2x from October 2020 levels. Similarly, European and Asian
posted contract prices have also approximately doubled during the
same period, with prices currently at EUR490/mt and US$600/mt,
respectively. The spike in prices is driven by a mix of factors,
including strong demand and supply disruptions caused by Hurricane
Ida and the planned and unplanned outages methanol producers
experienced due to natural gas supply constraints and technical
issues. At the same time, feedstock prices have increased sharply,
with both natural gas and coal prices trending higher, underpinning
the increased methanol prices. S&P said, "We do not believe current
prices are sustainable, as new supply from the U.S. (Koch plant)
and Iran comes onstream partially offset by the start-up of two new
methanol-to-olefin (MTO) plants in the near term. In addition,
China's dual control policy and the Chinese government's
intervention in managing coal prices could lower methanol prices by
the second half of 2022. However, we believe prices will remain
above 2019 levels over our forecast period led by gradual recovery
in demand and continuing supply constraints due to feedstock
availability. In addition, no material new supply has been
announced beyond 2023, which could keep prices higher for a
prolonged period."
S&P said, "We expect credit measures will meaningfully strengthen
with adjusted FFO to debt averaging 35%-40%.
"We expect material improvement in cash flows over our forecast
period primarily led by our expectation of higher average realized
prices. Specifically, we estimate adjusted FFO to debt will average
in the 35%-40% range over our forecast period (fiscal years 2021
through 2023), which underpins this rating action.
"We estimate average realized prices of close to US$400/mt in 2021,
about a 60% increase from 2020 levels and a US$100/mt-increase
relative to 2019 levels. While cash costs are also expected to
increase due to rising natural gas prices, we believe these are
more than offset by the higher prices. In addition, Methanex
currently has 65% of its North American gas requirements hedged,
with the balance exposed to spot prices. Also supporting the higher
cash flows is an expectation of increasing production led by the
restart of the idled Chile IV plant (830,000 mt annual capacity)
and debottlenecking at Geismar 1 and 2, which is expected to add
200,000 mt of production.
"Although the company has announced it is proceeding with the G3
expansion (1.8 million mt capacity, with the US$800 million-US$900
million balance of capital to be spent through 2023), we project
that the company will be able to fund the expansion with internally
generated cash flows. We also note that Methanex has ample
liquidity to fund the G3 expansion, including existing cash (US$930
million as of Sept. 30, 2021), an undrawn US$300 million revolving
facility, and an undrawn US$600 million construction facility. The
company also expects to pay out share buybacks although the pace of
dividends and share buybacks will likely remain muted relative to
that of historical periods (namely fiscal 2017 and fiscal 2018),
while the company spends on the G3 expansion.
"Despite the improvement in credit measures, our financial risk
assessment remains unchanged and factors in the potential for
sensitivity in credit measures."
Methanol prices have been highly volatile historically as evidenced
in 2019 when average realized prices declined by about 30% from
2018 levels. All else being equal, if average realized prices fall
even modestly by US$20/mt in 2022, adjusted FFO to debt will
decrease to the mid-20% area from our current expectation of about
35%. S&P said, "That said, we believe management will pursue
financial policies to support credit quality. While the pace of G3
expansion is unlikely to be slowed down, in our view, we believe
management will undertake a measured approach with shareholder
distributions that does not substantially diminish the expected
improved credit measures."
S&P's business risk assessment on Methanex reflects the company's
leading market position constrained by lack of product diversity.
Methanex is the world's largest methanol producer, with about 13%
of the market share. S&P said, "We view geographic diversity as a
key business strength because the company has production facilities
in New Zealand, the U.S., Trinidad, Egypt, Canada, and Chile, which
are in the bottom half of the cost curve. Our long-term views
remain that demand growth from energy-related end markets should
outpace demand growth from traditional applications, particularly
in light of China's goal of being more self-sufficient in
energy-related markets."
That said, the company's limited product diversity (all earnings
from methanol) constrains our business risk assessment. S&P siad,
"We expect Methanex's EBITDA on both a quarterly and annual basis
will likely remain highly volatile because methanol prices depend
on the company's own supply and demand dynamics. Methanol is also
sensitive to changes in oil, natural gas, and coal prices in China
(coal prices tend to set the higher end of the methanol cost
curve). In addition, the company has had to limit production at
times, in certain areas such as Chile, Trinidad, and New Zealand,
because of natural gas supply constraints. We believe the company's
product concentration, inherent volatility in methanol prices, and
some natural gas supply constraints, position Methanex at the
weaker end of our business risk assessment compared with a more
diversified company such as Celanese US Holdings LLC."
S&P said, "The positive outlook reflects our expectation that, over
the next 12 months, Methanex will continue to generate strong
credit measures, supported by relatively favorable industry trends
underpinning methanol prices well above the US$300/mt level. At
these prices, we project adjusted FFO to debt will average 35%-40%
through 2023. Our outlook also reflects our expectation that
management will be able to fund the G3 expansion with internally
generated cash flows. However, we assume that management will be
prudent in its financial policy and cut back on discretionary
spending, specifically shareholder distributions, to preserve
liquidity in times of weakness.
"We could raise the rating to 'BB+' in the next 12-18 months if the
company's performance continues to trend in line with our
expectations. Specifically, we would expect adjusted FFO to debt to
be sustained in the 30%-45% range but given the high volatility in
earnings and credit metrics, we believe this ratio could drop at
least down to 20%-30% for some periods. We believe sustained
improvement in credit measures could occur if supply constraints
and continuing demand keep methanol prices above US$300/mt. In this
scenario, we would also expect the company to internally fund the
G3 expansion and not materially increase shareholder rewards, which
could affect credit measures.
"We could revise the outlook to stable over the next 12 months, if
the company's adjusted FFO to debt weakened and approached 20%,
with limited prospects for improvement. We believe this could occur
if methanol prices fell significantly due to prolonged industrial
weakness and depressed operating rates for MTO facilities, while
the company continued spending on its G3 project."
MILLOLA HOLDINGS: Unsecured Creditors to Recover 100% in Plan
-------------------------------------------------------------
Millola Holdings LLC filed with the U.S. Bankruptcy Court for the
District of Nevada a Plan of Reorganization for Small Business
dated November 4, 2021.
The Debtor is a limited liability company owned by 2 members. The
Debtor owns two pieces of residential real estate. One of the
properties was purchased at an HOA sale. The debt on that property,
which was encumbered at the time of the Debtor's purchase, is being
restructured.
Non-priority unsecured creditors holding allowed claims will
receive distributions, which the proponent of this Plan has valued
at approximately 100 cents on the dollar. This Plan also provides
for the payment of administrative and priority claims.
The Plan will treat claims as follows:
* Class 2A consists of the Secured Claim of Deutsche Bank
National Trust Co. This secured creditor's claim in the amount of
$160,268.50 is collateralized by 8600 West Charleston Blvd., Unit
1192, Las Vegas, Nevada, and, commencing on the effective date of
the plan, this secured creditor shall be tendered monthly payments
in the amount of $676 for 360 months, which is the claim amortized
over 30 years at the interest rate of 3.00%. Property taxes and
insurance shall be maintained separately by the Debtor.
* Class 3 consists of Non-priority unsecured creditors. Non
priority unsecured claims shall receive 100 percent payments in
full. Commencing on the first day of the month that is more than
one year after the effective date of the plan, $220 a month shall
be distributed pro rata to allowed unsecured claims for 48 months
and, if there is a balance at the end of the 47 payments, a final
payment shall satisfy the balance owed to these claims.
* Class 4 consists of Equity security holders of the Debtor.
All equity security holders of the Debtor shall retain their equity
positions.
The means for implementation shall come from rents from the two
properties and, as necessary, infusion of capital owners.
A full-text copy of the Plan of Reorganization dated November 04,
2021, is available at https://bit.ly/3bV8N1G from PacerMonitor.com
at no charge.
Attorney for the Plan Proponent:
David A. Riggi, Esq.
Riggi Law Firm
5550 Painted Mirage Rd. Suite 320
Las Vegas, NV 89149
Tel: (702) 463-7777
Fax: (888) 306-7157
E-mail: RiggiLaw@gmail.com
About Millola Holdings LLC
Millola Holdings LLC filed a petition for Chapter 11 protection
(Bankr. D. Nev. Case No. 21-13893) on Aug. 6, 2021, listing up to
$1 million in assets and up to $500,000 in liabilities. Judge
August B. Landis oversees the case. The Debtor is represented by
Riggi Law Firm.
MOUTHPEACE DENTAL: Unsecureds' Recovery Hiked to 11% in Plan
------------------------------------------------------------
Mouthpeace Dental, LLC, submitted an Amended Disclosure Statement
for Plan of Reorganization dated November 4, 2021.
Over the course of this case, the Debtor has steadily returned its
operations to near prepandemic levels. By returning its operations
to normal and reducing its monthly expenses and debt service
obligations, the Debtor has improved its revenue, and the Debtor
believes that the restructuring contemplated under the Plan will
enable it to emerge from bankruptcy as a leaner company, poised for
years of success.
Class 1 consists of the Secured Claim of the Bank of America
("BOA"). BOA holds a first-priority lien on most of the Debtors'
assets. Under the Plan, BOA would have an allowed secured claim of
$625,000, which would be paid in full with interest at the rate of
7.10% interest per annum over the course of seven years.
Class 3 consists of the Secured Claim of Stearns Bank. Stearns
holds a first-priority lien on certain equipment. The Debtor
estimates that the value of this equipment is approximately $15,000
and proposes that Stearns may have an allowed secured claim in that
amount, with the remainder of its claim being treated as a General
Unsecured Claim. The Debtor proposes to pay the secured amount of
the claim over seven years, plus 4% interest, with an estimated
monthly payment of approximately $205.03.
Class 4 consists of the Secured Claim of De Lage Landen Financial
Services d/b/a ProHealth Capital. ProHealth holds a firstpriority
lien on certain equipment. The Debtor estimates that the value of
this equipment is approximately $18,000.00 and proposes that
ProHealth may have an allowed secured claim in that amount, with
the remainder of its claim being treated as a General Unsecured
Claim. The Debtor proposes to pay the secured amount of the claim
over seven years, plus 4% interest, with an estimated monthly
payment of approximately $246.04.
Class 5 consists of the Secured Claim of Dell Dell Financial
Services, L.L.C. holds a first-priority lien on certain computer
equipment. The Debtor proposes that the Dell claim be allowed in
the amount of $1,450.00 and that it be treated as fully secured.
The Debtor would make payments under the plan of approximately
$19.82 per month, which would pay Dell's secured claim in full over
seven years plus 4% interest.
Class 6 consists of General Unsecured Claims. The Debtor
estimates, based on its schedules and proofs of claims that have
been filed, that there are approximately $163,000 in general
unsecured claims, which includes the estimated deficiency claims of
the SBA, Stearns, and ProHealth and accounts for likely claims
objection(s). The Debtor proposes to pay a dividend of
approximately 11% on General Unsecured Claims by making quarterly
payments of $650 over seven years, with such payments totaling
$18,200, which such payments being distributed pro rata to holders
of allowed General Unsecured Claims and being in full satisfaction
of such claims.
The cash distributions contemplated by the Plan shall be funded by
cash generated in the operation of the Reorganized Debtor's
business and by a cash infusion from the Debtor's principal for the
total sum of $50,000 on or before the Effective Date, plus
additional funding from the Debtor's principal in the amounts
necessary to pay the operating expenses of the Reorganized Debtor
and the Plan payments, if needed.
A full-text copy of the Amended Disclosure Statement dated November
04, 2021, is available at https://bit.ly/3qqXQ02 from
PacerMonitor.com at no charge.
Attorneys for the Debtor:
William A. Rountree
Benjamin R. Keck
Taner N. Thurman
ROUNTREE LEITMAN & KLEIN, LLC
Century Plaza I
2987 Clairmont Road, Suite 175
Atlanta, Georgia 30329
Tel: (404) 584-1238
E-mail: wrountree@rlklawfirm.com
bkeck@rlklawfirm.com
tthurman@rlklawfirm.com
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
NABORS INDUSTRIES: Posts $122.5 Million Net Loss in Third Quarter
-----------------------------------------------------------------
Nabors Industries Ltd. filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing a net loss
attributable to the company of $122.50 million on $524.37 million
of total revenues and other income for the three months ended Sept.
30, 2021, compared to a net loss attributable to the company of
$157.47 million on $437.61 million of total revenues and other
income for the three months ended Sept. 30, 2020.
For the nine months ended Sept. 30, 2021, the Company reported a
net loss attributable to the company of $455.60 million on $1.48
billion of total revenues and other income compared to a net loss
attributable to the company of $697.40 million on $1.69 billion of
total revenues and other income for the nine months ended Sept. 30,
2020.
As of Sept. 30, 2021, the Company had $5.17 billion in total
assets, $3.94 billion in total liabilities, $400.85 million in
redeemable noncontrolling interest in subsidiary, and 833.82
million in total equity.
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1163739/000155837021014856/nbr-20210930x10q.htm
About Nabors
Nabors (NYSE: NBR) owns and operates land-based drilling rig fleets
and provides offshore platform rigs in the United States and
several international markets. Nabors also provides directional
drilling services, tubular services, performance software, and
innovative technologies for its own rig fleet and those of third
parties. Leveraging advanced drilling automation capabilities,
Nabors highly skilled workforce continues to set new standards for
operational excellence and transform the industry.
Nabors reported a net loss attributable to common shareholders of
$820.25 million for the year ended Dec. 31, 2020, compared to a net
loss attributable to common shareholders of $720.13 million for the
year ended Dec. 31, 2019. As of June 30, 2021, the Company had
$5.04 billion in total assets, $3.71 billion in total liabilities,
$398.50 million in redeemable noncontrolling interest in
subsidiary, and $936.94 million in total equity.
* * *
As reported by the TCR on Dec. 14, 2020, S&P Global Ratings raised
its issuer credit rating on U.S.-based onshore drilling contractor
Nabors Industries Ltd. to 'CCC+' from 'SD', reflecting its
assessment of the company's credit risk following the debt
exchange.
Also in December 2020, Fitch Ratings downgraded the Issuer Default
Rating (IDR) for Nabors Industries, Ltd. and Nabors Industries,
Inc. (collectively, Nabors) to 'RD' from 'C' upon the completion of
the company's exchange of senior unsecured notes for new senior
unsecured priority guaranteed notes. Fitch deemed the exchange as a
distressed debt exchange (DDE) under its criteria.
NEKTAR THERAPEUTICS: Incurs $129.7 Million Net Loss in 3rd Quarter
------------------------------------------------------------------
Nektar Therapeutics filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing a net loss
of $129.71 million on $24.92 million of total revenue for the three
months ended Sept. 30, 2021, compared to a net loss of $108.59
million on $30.03 million of total revenue for the three months
ended Sept. 30, 2020.
For the nine months ended Sept. 30, 2021, the Company reported a
net loss of $378.19 million on $76.90 million of total revenue
compared to a net loss of $327.24 million on $129.45 million of
total revenue for the nine months ended Sept. 30, 2020.
As of Sept. 30, 2021, the Company had $1.28 billion in total
assets, $475.70 million in total liabilities, and $801.54 million
in total stockholders' equity.
Cash and investments in marketable securities at September 30, 2021
were approximately $955.3 million as compared to $1.2 billion at
December 31, 2020.
"We made significant progress across our portfolio this past
quarter ahead of multiple late-stage registrational trial data
readouts anticipated in the first half of 2022," said Howard W.
Robin, president and CEO of Nektar. "For bempegaldesleukin, we
remain on track to report data from the first three of our five
registrational studies with nivolumab in melanoma, renal cell
carcinoma and bladder cancer in the first half of 2022. We also
plan to present initial data from our PROPEL study evaluating the
combination of bempegaldesleukin plus pembrolizumab in patients
with previously untreated metastatic non-small cell lung cancer at
the upcoming ESMO Immuno-Oncology meeting."
Mr. Robin continued, "At the upcoming SITC and ASH meetings in the
fourth quarter, we look forward to showcasing our IL-15 program,
NKTR-255, which is being developed in solid tumors and
hematological malignancies. We recently expanded the development
plans for NKTR-255 with a new clinical collaboration with Merck
KGaA and Pfizer designed to evaluate the combination of NKTR-255
with avelumab, a PD-L1 inhibitor, in the JAVELIN Bladder Medley
study. Importantly, our partner Eli Lilly continues to advance a
broad development program for NKTR-358, demonstrating its potential
to be transformative in the treatment of autoimmune disease, with
ongoing Phase 2 studies in both lupus and ulcerative colitis and
plans to initiate additional Phase 2 studies in two different
immune-mediated diseases."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/906709/000090670921000018/nktr-20210930.htm
About Nektar
Nektar Therapeutics is a biopharmaceutical company with a robust,
wholly owned R&D pipeline of investigational medicines in oncology,
immunology, and virology as well as a portfolio of approved
partnered medicines. Nektar is headquartered in San Francisco,
California, with additional operations in Huntsville, Alabama and
Hyderabad, India. Further information about the company and its
drug development programs and capabilities may be found online at
http://www.nektar.com.
Nektar reported a net loss of $444.44 million for the year ended
Dec. 31, 2020, compared to a net loss of $440.67 million for the
year ended Dec. 31, 2019.
NEOPHARMA INC: Hunter Smith Awarded $49,000 Fee
-----------------------------------------------
When Neopharma, Inc. and Neopharma Tennessee, LLC sought Chapter 11
protection in late December 2020, they presented the United States
Bankruptcy Court for the Eastern District of Tennessee with a dire
scenario that needed urgent action.
An antibiotic factory leased by Neopharma Tennessee, LLC and
operated by Neopharma, Inc. in Bristol, Tennessee, had fallen on
hard times because of global competition from manufacturers of
generic drugs. Several changes of ownership and infusions of cash
-- including most recently loans or grants from the federal
Paycheck Protection Program ("PPP") and Coronavirus Aid, Relief,
and Economic Security Act ("CARES Act") -- failed to stanch the
financial bleeding. Manufacturing operations ended on August 10,
2020, but some payroll, utility, and other logistical expenses had
to continue to maintain certain post-marketing requirements from
the federal Food and Drug Administration ("FDA"). Failure to
maintain these requirements would have required a recall of all
Neopharma products then available in the pharmaceutical market.
This was the context in which Mark Dessauer and the firm of Hunter,
Smith and Davis, LLP ("HSD") were asked by Neopharma agent David
Argyle and potential investor Jefferson Gregory to file bankruptcy
petitions for the related debtors in late October 2020.
On November 2, 2020, HSD sent proposed retention agreements to
represent Neopharma, Inc. and Neopharma of Tennessee, LLC to Mr.
Argyle. Mr. Argyle signed the retention agreements on December 18,
2020, as Chief Restructuring Officer of the companies.
Between the bankruptcy filing date of December 22, 2020 and January
28, 2021, the date of appointment of a Chapter 11 Trustee, Mr.
Dessauer and HSD handled several matters for the Debtors, including
the filing of the two Chapter 11 petitions; moving for joint
administration of the cases of Neopharma, Inc. and Neopharma
Tennessee, LLC; fending off a motion to dismiss the case by prior
management; proposing a sale of the Debtors' assets for $2 million
and the assumption of a lease with the Industrial Development Board
of the City of Bristol; and obtaining interim authorization for
post-petition financing on an emergency basis. Those efforts did
not result in a successful sale or even a successful post-petition
loan, and a trustee was appointed when it was discovered that the
Chief Restructuring Officer of the Debtors was also the individual
who controlled the buyer and post-petition lender. At the same
time, the parties learned that this buyer/lender did not even have
the funds to consummate the transactions. Almost immediately
following this disclosure, the parties agreed to the appointment of
a trustee. Mr. Dessauer and HSD subsequently filed an application
requesting fees of $49,982.50 and expenses of $5,327.70 for the
work that they performed during the roughly six-week period in
which the debtor was in possession.
The Chapter 11 Trustee, Gary Murphey, has filed an objection to the
application. The Chapter 11 Trustee does not object to the hourly
rate or to the time spent, which is itemized in an exhibit to the
application. Rather, the Chapter 11 Trustee objects to the entire
application on principle because of HSD's entanglement with an
insider and what he alleges were conflicts of interest in the
representation of the Debtors. In short, the Chapter 11 Trustee
believes HSD filed the two petitions; proposed an asset sale to a
corporate entity formed by HSD and owned by an insider; and
proposed faulty post-petition financing, all for the benefit of Mr.
Argyle, who is that insider. He contends that these actions were
taken to the detriment of the estate.
"The actions HSD took on behalf of insiders nearly led the estates
to administrative insolvency and ultimately resulted in the
appointment of the Chapter 11 Trustee. Once appointed, the Chapter
11 Trustee and the Committee [of Unsecured Creditors] obtained
post-petition financing to pay utilities and keep the Debtors'
estates administratively solvent. The Chapter 11 Trustee and the
Committee also ran a successful sales and marketing process, which
led to a robust auction and a Successful Bid with a purchase price
of $8.5 million in cash plus assumption of significant
liabilities," the Chapter 11 Trustee said.
In support of their fee application, Mr. Dessauer and HSD argue
that the firm's services were reasonably performed for the benefit
the estate based on the best available information at the time and
should not be criticized from the perspective of 20/20 hindsight.
Mr. Dessauer and HSD also emphasize they never held an interest
adverse to the estate and that their connections with the Debtors
and any insiders were limited and were properly disclosed to the
Court and parties in interest or were a matter of public record.
Mr. Dessauer filed a declaration with exhibits in support of his
application and in response to the Trustee's objection. The
Declaration recounts the circumstances leading to Mr. Dessauer's
representation of the Debtors and the limits of his involvement
with Mr. Argyle and the would-be buyer, American Antibiotics
Initiative, Inc.
The Court held a hearing on the fee application and objection on
May 11, 2021. Counsel for the Chapter 11 Trustee, the Unsecured
Creditors Committee, and HSD appeared. HSD relied on the
Declaration and the exhibits attached to it as evidence that the
work was necessary and beneficial and that no conflicts existed.
The Chapter 11 Trustee relied on the pleadings in the case and
offered no additional testimony or documentary evidence in support
of his objection. The Committee argued in support of the objection
but provided no additional proof. The United States Trustee did not
object to the application.
The Court, in a Memorandum Opinion dated October 29, 2021, grants
the application but bars HSD from filing a further application for
any services rendered after January 28, 2021.
The Court held that the services provided preserved the opportunity
to recognize the value of this business. The Court found that, in
the context of HSD's experience attempting to consummate a sale to
Constitutional Antibiotics, Inc., and the potential for loss of any
value for creditors and employees, its actions to file the case and
file the motions for post-petition financing and sell the Debtors'
assets were reasonable and appeared to be beneficial to the estate
at the time those services were provided. The Court also found that
HSD has shown that it was disinterested during the period of its
representation, and that its objection to the sale does not
disqualify it from receiving compensation from the estate for
services it provided while the Debtors were in possession.
A full-text copy of the decision is available at
https://tinyurl.com/ezw9zckr from Leagle.com.
About Neopharma Inc.
Neopharma Inc. and Neopharma Tennessee, LLC, manufacturers of
pharmaceutical and medicinal products, sought protection under
Chapter 11 of the Bankruptcy Code (Bankr. E.D. Tenn. Lead Case No.
20-52015) on Dec. 22, 2020. At the time of the filing, the Debtors
disclosed assets of between $1 million and $10 million and
liabilities of the same range.
Judge Shelley D. Rucker oversees the cases. Hunter, Smith & Davis,
LLP serves as the Debtors' legal counsel.
On Jan. 14, 2021, the U.S. Trustee for Region 8 appointed an
official committee of unsecured creditors. The committee tapped
Buchalter P.C. as its lead bankruptcy counsel, Woolf McClane Bright
Allen & Carpenter PLLC as Tennessee counsel, and Province, LLC as
financial advisors.
Gary M. Murphey is the Debtors' Chapter 11 trustee. The trustee
tapped Polsinelli PC as legal counsel, Associated Accounting
Services, PC as tax accountant, and Resurgence Financial Services,
LLC as accountants.
NORTHERN OIL: $200MM Add-on Notes No Impact on Moody's B2 CFR
-------------------------------------------------------------
Moody's Investors Service commented that Northern Oil and Gas,
Inc.'s (NOG) proposed $200 million principal amount of additional
senior unsecured notes due 2028 (Additional Notes) will not affect
the company's existing ratings, including its B2 Corporate Family
Rating, B2-PD Probability of Default Rating, B3 senior unsecured
notes rating, SGL-2 Speculative Grade Liquidity (SGL) rating, or
its stable outlook.
The Additional Notes are being offered as an addition to the
company's existing 8.125% senior unsecured notes due 2028, of which
$550 million were issued in February 2021. The company will use the
net proceeds from the offering to repay a portion of its
outstanding revolver borrowings.
"The proposed add-on notes issuance is opportunistically
refinancing existing debt while improving financial flexibility,"
commented Amol Joshi, Moody's Vice President and Senior Credit
Officer.
RATINGS RATIONALE
NOG's senior unsecured notes are rated B3, one notch below the
company's B2 CFR, reflecting the priority claim of its secured
revolving credit facility.
NOG's B2 CFR reflects the company's moderate leverage, while its
acquisitions in 2021 improve scale and provide basin and commodity
diversification. The company's legacy Williston Basin asset base is
oil-weighted and benefits its unleveraged cash margins and cash
flow at higher oil prices. Its 2020 production fell materially
because of production shut-ins and lower drilling of new wells in
response to the pandemic induced collapse in oil prices. Pro forma
for the acquisitions, production should approach 60 thousand
barrels of oil equivalent (boe) per day. NOG has hedged a
meaningful portion of its oil and gas production through 2022,
reducing volatility in its revenue and cash flow. The company
should generate free cash flow through 2022, likely leading to
gradually improving leverage metrics, and its retained cash flow
(RCF) to debt ratio should remain supportive. While NOG manages a
well-diversified portfolio of non-operated working interests in
numerous producing assets, it relies on the operating performance
of its partners. The company continues to be challenged by its
limited scale, and NOG's growth strategy is focused on
participating in operator initiated wells and executing bolt-on
acquisitions, requiring a high degree of financial flexibility.
NOG's good liquidity is reflected by its SGL-2 rating, and is
supported by its ability to generate positive free cash flow
through 2022. At September 30, NOG had $2 million of cash and $319
million of revolver borrowings. While revolver borrowings should
increase after funding roughly $150 million for the cash portion of
the Williston Basin acquisition expected to close in mid-November,
the company will use the net proceeds from the Additional Notes
offering to repay a portion of its outstanding revolver borrowings.
The company's revolver borrowing base was increased to $850 million
from $725 million in early November, and the elected commitment
increased to $750 million from $660 million. The revolver's
financial covenants include a maximum net debt to EBITDAX ratio of
3.5x (with cash netting limited to $50 million), and a minimum
current ratio of 1x. The current ratio calculation allows certain
adjustments and the inclusion of unused amounts of the total bank
commitments. NOG's next debt maturity will be when its secured
revolver matures in November 2024. Substantially all of the
company's assets are pledged as security under the credit facility,
which limits the extent to which asset sales can provide a source
of additional liquidity.
NOG's stable outlook reflects the company's ability to generate
free cash flow through 2022, likely leading to gradually improving
leverage metrics.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if NOG successfully integrates and
develops the acquired assets with production rising towards 75
thousand boe per day, the company consistently generates positive
free cash flow supportive of debt reduction and it balances
leverage and any shareholder returns in line with actual results
and cash flow. The ratings could be downgraded if production
volumes materially decline, RCF to debt falls below 25%, liquidity
deteriorates significantly or the company borrows to fund
acquisitions or shareholder returns causing debt to grow materially
faster than cash flow.
Northern Oil and Gas, Inc., headquartered in Minnetonka, Minnesota,
owns non-operated working interests in oil and gas wells and
acreage in the Williston Basin, Marcellus Shale and Delaware Basin.
NORWICH ROMAN: Abuse Victims Object to 90-Day Bar Date
------------------------------------------------------
Joe Wojtas, writing for The Day, reports that the committee that
represents people who say they have been sexually assaulted by
priests and other members of the Diocese of Norwich have filed a
motion in federal bankruptcy court opposing the Catholic diocese's
attempt to prohibit victims from filing claims after Feb. 10,
2022.
The claimants' committee, which is being represented by the
Bridgeport law firm of Zeisler and Zeisler, wants a 120-day window
from the date that a plan advertising the deadline, otherwise known
as the bar date, is approved by Judge James Tancredi, as opposed to
the 90-day window being requested by the diocese.
In addition, the committee is opposing aspects of the claim form
that alleged victims have to submit including questions such as
whether victims ever got married, what jobs they have had and
whether they were ever sexually assaulted by anyone else. It says
these are irrelevant to the victims' claims of sexual assault by
diocesan employees and are designed to limit the diocese's exposure
to damages. In addition, the committee states they also a pose "the
very real risk of disocuraging survivors from submitting claims
altogether."
Tancredi is expected to rule on the issues when he holds a hearing
Tuesday, November 9, 2021, afternoon. The diocese's public
relations firm did not respond to an email requesting comment about
the motions.
In July 2021, the diocese filed for Chapter 11 bankruptcy in the
face of more than 60 young men filing lawsuits in which they charge
they were raped and sexually assaulted as boys by Christian
Brothers and other staff at the diocese-run Mount Saint John
Academy in Deep River from 1990 to 2002. Mount Saint John was a
residential school for troubled boys whose board of directors was
headed by retired Bishop of Norwich Daniel Reilly. Since then,
additional people whose sexual assault allegations involved not
only Mount Saint John but diocesan churches have filed claims. The
bankruptcy process, which freezes lawsuits against the diocese,
will determine the assets of the diocese and how much each victim
will receive in damages.
Deadline for filing claims in dispute
Claimants' committee attorney Stephen Kindseth wrote in the motion
that the claimants, who were minors when the abuse occurred, should
be provided with a reasonable opportunity to learn about the
process of submitting a claim and then complete and submit it.
He wrote that some additional time is appropriate because claims by
survivors of sexual abuse are "vastly different" from commercial
creditors in typical bankruptcy cases.
"The nature of the abuse and societal and personal stigma
associated with sexual acts — especially of the nature involved
in this case — make disclosure of abuse extremely difficult for
survivors. As such, a deadline to file sexual abuse claims must
provide a reasonable time for survivors to process their abuse in a
manner that allows them to disclose the details of their claims,"
he wrote.
He pointed out that among 19 similar case over the past six years,
sex abuse survivors were given an average of 142 days to submit a
claim from the date in which the judge set a deadline.
Kindseth wrote that the committee also recognizes that the
diocese's legal and financial professionals have incurred an
"extraordinary amount of fees and expenses to date" and that having
a slightly extended deadline could compound the risk of the diocese
incurring further substantial fees and expenses. But he wrote that
the diocese's choice of law firms and the manner in which it has
managed the case and its expenses "should not justify prejudicing
the survivors by imposing an unreasonable time limitation for them
to participate in the claims process."
A separate motion filed by Kindseth's associate Eric Henzy last
week harshly criticized the fees the diocese has paid to its team
of bankruptcy professionals, saying it is rapidly and massively
diminishing the assets available to the victims. The diocese has
racked up more than $2.2 million in legal and financial services
fees through Sept. 30 with Henzy estimating another $400,000 to
$500,000 being spent since Sept. 30.
With the diocese spending $110,000 a week in legal fees, Henzy has
filed a motion objecting to extending the period of time for the
diocese to file bankruptcy. He wrote that at the rate the diocese's
team is consuming its assets, the case and the assets must be taken
out of the hands of the diocese as soon as possible.
Questions criticized by victims committee
While Kindseth wrote that the claimants committee agrees some
specific additional questions should be included in the proof of
claim form to establish a claim for sexual abuse, "the multiple
questions requiring essentially the disclosure of the who, what,
when and where as well as the extent of harm caused will simply and
fairly take significant time for each survivor to recall,
comprehend and articulate in writing." He said the diocese wants to
ask the additional questions to learn more about the victims'
personal lives in an effort to develop arguments to limit the
damages the diocese has to pay them.
"Requiring such disclosures as a condition to the prima facia
establishment of their substantive claims in this bankruptcy case
is repugnant to the proof of claim process, completely unfair to
the survivors who may not understand the legal consequences
involved and almost certainly will serve to discourage survivors
from submitting claims altogether," he wrote in the motion.
The question ask about victims' marital status and whether they
have ever been married or have children, what school they attended
and any diplomas or degrees they received, whether they served in
the armed forces, where they are employed, their entire job
history, their current or former affiliation with any religious
organization and whether they were involved in any other incidents
of sexual abuse other than those they allege in their claim.
The questions are similar to the extensive questions asked by
lawyers defending the diocese in past lawsuits from those who say
they were sexually assaulted by diocesan priests. Those questions,
went much deeper into a victim's background, and were criticized by
victims' advocate as being asked to discourage victims from
proceeding with the suit.
Kindseth wrote that the claims form "repeatedly warns" that the
failure to complete the form may result in the victims' inability
to receive compensation. He further wrote that the diocese and its
insurer, Catholic Mutual, are seeking evidence to minimize the
effect of the abuse on the lives of the victims or identify an
alternative cause of the damages they claim.
"The compensation due a survivor of sexual abuse as a minor while
in the care of a clergy member should not be reduced based upon
whether he, later in life, attended school, served in the armed
forces, obtained employment, got married or had children, or
whether he separately had been subjected to sexual abuse," he
wrote.
More advertising needed about filing claims
The claimants committee maintains the diocese should expand the
advertising of the bankruptcy and the deadline beyond area
newspapers. It recommended it be published in the Providence
Journal and the Four County Catholic, a diocesan publication. The
motion also ask Tancredi to require and not just request that all
diocesan parishes display the notice and publish it in their
newsletters and bulletins.
Kindseth also categorized the diocese's plan to first publish the
notice no later than 45 days before the deadline and the second no
later than 30 days as "woefully inadequate." He wrote that the
purpose of the claim period would be undermined by not publishing
it until there were 45 days left. He also wrote the notice should
be published weekly during the entire period and also be done in
Spanish as many Spanish-speaking boys attended Mount Saint John. In
addition, he said news releases about the claims process should be
sent to all local radio and television stations.
About The Norwich Roman Catholic
Diocesan Corporation
The Norwich Roman Catholic Diocesan Corporation is a nonprofit
corporation that gives endowments to parishes, schools, and other
organizations in the Diocese of Norwich, a Latin Church
ecclesiastical territory or diocese of the Catholic Church in
Connecticut and a small part of New York.
The Norwich Roman Catholic Diocesan Corporation sought Chapter 11
protection (Bankr. D. Conn. Case No. 21-20687) on July 15, 2021.
The Debtor estimated $10 million to $50 million in assets against
liabilities of more than $50 million. Judge James J. Tancredi
oversees the case.
The Debtor tapped Ice Miller, LLP as bankruptcy counsel and
Robinson & Cole, LLP as Connecticut counsel. Epiq Corporate
Restructuring, LLC is the claims and noticing agent.
On July 29, 2021, the U.S. Trustee for Region 2 appointed an
official committee of unsecured creditors in the Chapter 11 case.
The committee tapped Zeisler & Zeisler, PC as its legal counsel.
NORWICH ROMAN: Committee Questions Fees, Wants to File Own Plan
---------------------------------------------------------------
The Official Committee of Unsecured Creditors in the Chapter 11
case of The Norwich Roman Catholic Diocesan Corporation objects to
the Debtor's motion for entry of an order extending its
exclusivity period for the filing and solicitation of acceptance of
a Chapter 11 Plan.
The Debtor requests an extension for a period of 120 days: (a) the
exclusive period during which only the Debtor may file a plan from
Nov. 12, 2021 to March 12, 2022; and (b) the exclusive period
during which only the Debtor may confirm a plan from Jan. 11, 2022
to May 11, 2022.
According to the Creditors' Committee, the Exclusivity Motion
should be denied because the Norwich Roman Catholic Diocesan
Corporation has grossly mismanaged, or simply failed to manage, its
bankruptcy estate and this bankruptcy case, and such failure will
be a major obstacle to a successful reorganization in this case.
The Debtor's professionals incurred almost $1.2 million in fees
and expenses in the first 11 weeks of this bankruptcy case, an
average of approximately $110,000 per week.
The Committee does not believe that the Debtor's professionals can
or will change the way that they are staffing and working this case
and assumes that the Debtor's professionals have incurred at least
an additional $400,000 to $500,000
in fees since Sept. 30.
"At the rate the Debtor's professionals are incurring fees, any
potential distribution to creditors in the case -- creditors who
are almost exclusively survivors of sexual abuse when minors by
agents of the Debtor -- will be rapidly and massively diminished.
This case needs to take a drastic turn to prevent that from
happening. The Debtor's exclusivity should terminate on Nov. 12,
2021, so that the Committee may quickly file and seek confirmation
of a plan that will get the case and what assets remain out of the
control of the Debtor," the UCC said in court filings.
The Committee is objecting to an extension of exclusivity so that
it may quickly and efficiently seek confirmation of a plan that
will place the Debtor’s available assets in a trust-type entity
and lodge with that entity the responsibility to efficiently
resolve claims and pursue and liquidate assets, including insurance
coverage.
About The Norwich Roman Catholic
Diocesan Corporation
The Norwich Roman Catholic Diocesan Corporation is a nonprofit
corporation that gives endowments to parishes, schools, and other
organizations in the Diocese of Norwich, a Latin Church
ecclesiastical territory or diocese of the Catholic Church in
Connecticut and a small part of New York.
The Norwich Roman Catholic Diocesan Corporation sought Chapter 11
protection (Bankr. D. Conn. Case No. 21-20687) on July 15, 2021.
The Debtor estimated $10 million to $50 million in assets against
liabilities of more than $50 million. Judge James J. Tancredi
oversees the case.
The Debtor tapped Ice Miller, LLP as bankruptcy counsel and
Robinson & Cole, LLP as Connecticut counsel. Epiq Corporate
Restructuring, LLC is the claims and noticing agent.
On July 29, 2021, the U.S. Trustee for Region 2 appointed an
official committee of unsecured creditors in the Chapter 11 case.
The committee tapped Zeisler & Zeisler, PC as its legal counsel.
ONDAS HOLDINGS: All 5 Proposals Passed at Annual Meeting
--------------------------------------------------------
At the 2021 Annual Meeting of Stockholders of Ondas Holdings Inc.,
stockholders of the company:
(1) elected Eric A. Brock, Stewart W. Kantor, Thomas V. Bushey,
Richard M. Cohen, Derek Reisfield, Randall P. Seidl, Richard H.
Silverman, and Jaspreet Sood as directors, each for a term expiring
at the next Annual Meeting or until their successors are duly
elected and qualified;
(2) ratified the selection of Rosenberg Rich Baker Berman, P.A.
as the company's independent certified public accountants for the
fiscal year ending Dec. 31, 2021;
(3) approved the Ondas Holdings Inc. 2021 Stock Incentive Plan;
(4) approved, on an advisory basis, the company's executive
compensation; and
(5) selected a yearly frequency of future Say on Pay votes.
Ondas Holdings has considered the outcome of this advisory vote and
has determined, as was recommended by the company's Board of
Directors in the Proxy Statement, that the company will hold a
advisory vote every year on the Company's executive compensation
until the next required frequency vote.
About Ondas Holdings Inc.
Ondas Holdings Inc., is a provider of private wireless data and
drone solutions through its wholly owned subsidiaries Ondas
Networks Inc. and American Robotics, Inc. Ondas Networks is a
developer of proprietary, software-based wireless broadband
technology for large established and emerging industrial markets.
Ondas Networks' standards-based (802.16s), multi-patented,
software-defined radio FullMAX platform enables Mission-Critical
IoT (MC-IoT) applications by overcoming the bandwidth limitations
of today's legacy private licensed wireless networks. Ondas
Networks' customer end markets include railroads, utilities, oil
and gas, transportation, aviation (including drone operators) and
government entities whose demands span a wide range of mission
critical applications. American Robotics designs, develops, and
markets industrial drone solutions for rugged, real-world
environments. AR's Scout System is a highly automated, AI-powered
drone system capable of continuous, remote operation and is
marketed as a "drone-in-a-box" turnkey data solution service under
a Robot-as-a-Service (RAAS) business model. The Scout System is
the first drone system approved by the FAA for automated operation
beyond-visual-line-of-sight (BVLOS) without a human operator
on-site. Ondas Networks and American Robotics together provide
users in rail, agriculture, utilities and critical infrastructure
markets with improved connectivity and data collection
capabilities.
Ondas Holdings reported a net loss of $13.48 million for the year
ended Dec. 31, 2020, compared to a net loss of $19.39 million for
the year ended Dec. 31, 2019. As of June 30, 2021, the Company had
$64.92 million in total assets, $5.14 million in total liabilities,
and $59.78 million in total stockholders' equity.
ORG GC MIDCO: Fully Consensual Restructuring to Cut Debt by $80M
----------------------------------------------------------------
GC Services Limited Partnership's intermediate holding company, ORG
GC Midco, LLC, has commenced a Chapter 11 case to implement a
pre-packaged, comprehensive consensual restructuring of the
Company's funded indebtedness through a prepackaged plan of
reorganization that will reduce funded indebtedness by $80
million.
None of Midco's subsidiaries -- including the Company's primary
operating entity, business process outsourcing provider GC Services
-- are expected to file for chapter 11 protection.
GC Services and other operating entities are not filing for chapter
11 because they determined doing so may deplete their value, and a
filing is unnecessary due to the fully consensual nature of the
restructuring.
As set forth in the Prepackaged Chapter 11 Plan, the restructuring
provides that:
i. the Existing Term Loans of approximately $185.3 million will
be cancelled and discharged in exchange for (a) takeback first lien
term loans in an aggregate amount of approximately $71 million, (b)
takeback second lien term loans in an aggregate amount of
approximately $29 million, and (c) preferred and common equity of
the Reorganized Company. More specifically:
a. each holder of an Allowed Existing Term Loan Claim
affiliated with BSP will receive its (i) pro rata share of (A)
Initial New 1L Loans, (B) New 2L Loans, and (C) New Holdco Junior
Preferred Equity, and (ii) 100% of the New Holdco Common Equity;
and
b. each holder of an Allowed Existing Term Loan Claim
affiliated with GS will receive its (i) pro rata share of Initial
New 1L Loans (less the amount of Term DIP Claims outstanding
immediately prior to the Effective Date rolled into Initial New 1L
Loans), (ii) pro rata share of New 2L Loans, (iii) 100% of the New
Midco Equity, and (iv) as a result of receiving 100% of the New
Midco Equity, GS will acquire an indirect interest in (A) 100% of
the New Holdco Senior Preferred Equity and (B) its pro rata share
of New Holdco Junior Preferred Equity, both of which shall be
issued to the Reorganized Debtor; provided that prior to the
Effective Date, GS may elect to have its pro rata share of the
Initial 1L Loans (less the amount of Term DIP Claims outstanding
immediately prior to the Effective Date rolled into Initial New 1L
Loans) and/or its pro rata share of the New 2L Loans issued to the
Reorganized Debtor.
ii. Holders of Existing ABL Facility Claims are unimpaired and,
on the Effective Date, will be either (a) paid in full and
refinanced out with a third party lender or (b) provided such other
treatment so as to render the Existing ABL Claims unimpaired;
iii. General Unsecured Claims are unimpaired and will receive
payment of their claims in full in cash in the ordinary course of
business; and
iv. Existing equity interests (i.e., Midco Equity Interests) in
the Debtor will be cancelled on the Effective Date.
One of the Company's Existing Term Lenders, GS, has agreed to
provide up to $6 million in senior secured debtor-in-possession
financing (the "Term DIP Facility") to fund the costs of
implementing the Restructuring. The Company's Existing ABL Lenders
have also agreed to allow GC Services to continue to access the
Existing ABL Facility during the pendency of the Debtor's Chapter
11 Case.
Capital Structure
The prepackaged plan of reorganization will substantially de-lever
the Company by reducing its funded indebtedness from approximately
$210.32 million to approximately $130.03 million upon emergence:
Existing Term Loan Facility: $185.3 million
Existing ABL Facility: $25.0 million
--------------
Total Prepetition Funded Debt: $210.3 million
New 1L Facility $71.0 million
New 2L Facility $29.0 million
Exit ABL Facility $30.0 million
--------------
Total Reorganized Funded Debt $130.0 million
Key Parties Support Plan
The Restructuring is supported by the Debtor's entire capital
structure. Pursuant to a Restructuring Support Agreement, dated as
of Oct. 16, 2021, 100% of the holders of Existing Term Loan Claims
-- Consenting Lenders -- have already voted in accordance with the
terms and conditions of the Restructuring Support Agreement, to
accept the Plan. All other claims of third parties against the
Debtor, including holders of General Unsecured Claims, are
unimpaired under the Plan, and third-party creditors, if any, are
accordingly presumed to accept the Plan.
Furthermore, the GCS Parties and the Consenting Lenders entered
into a Settlement and Release Agreement, dated as of Nov. 8, 2021,
with the Company's Sponsor (Owner Resource Group, LLC) and minority
equity holder (the Katz Parties) pursuant to which the Sponsor and
the Katz Parties have agreed to support and not object to the Plan.
In exchange, the GCS Parties have agreed to pay the Sponsors'
professional fees up to $100,000.
GCS LP and ORG have also agreed to terminate a Consulting
Agreement, dated July 31, 2017, by and between ORG and GCS LP,
whereby GCS LP retained ORG to provide certain management
consulting services, and ORG has agreed to waive any claims
thereunder.
Finally, pursuant to an Amended and Restated Forbearance Agreement
and Ninth Amendment to Credit Agreement, dated as of Nov. 7, 2021,
the Company's Existing ABL Facility Lenders have agreed to support
the Company's Restructuring process by continuing to provide the
Debtor's operating subsidiary, GC Services, with access to the
Existing ABL Facility during the Debtor's Chapter 11 Case. Pursuant
to the ABL Forbearance Agreement, the Debtor has agreed (i) not to
borrow under the Existing ABL Facility and (ii) that no funds made
available to GC Services under the facility will be made available
to, or otherwise used by, the Debtor during the Chapter 11 Case.
Milestones
The Company, the Consenting Lenders, and the Existing ABL Facility
Lenders have agreed to implement the restructuring with as little
disruption to the business as possible. In accordance with this
goal, and to reap the full benefits of the Restructuring, the
Debtor must exit chapter 11 quickly.
Accordingly, pursuant to the Restructuring Support Agreement and
the Term DIP Facility Agreement, the Debtor has agreed to use
commercially reasonable efforts to meet certain milestones (the
"RSA Milestones") for the Restructuring process, including (i)
confirmation of the Plan by no later than 24 days after the
Petition Date (i.e., December 2, 2021), and (ii) the Plan becoming
effective no later than 38 days after the Petition Date (i.e.,
December 16, 2021). Furthermore, the ABL Forbearance Agreement
also provides for certain milestones (the "ABL Milestones") for the
Debtor's Chapter 11 Case.
About GC Services
GC Services -- http://www.gcserv.com/-- is one of the industry's
largest privately owned business process outsourcing and accounts
receivable management solutions providers in the United States with
6,000 employees staffed throughout 30 geo-diverse contact center
locations.
GC Services is a privately held company that provides a full scope
of solution offerings, including 24x7x365 programs, multi-channel
and multi-lingual customer service programs, from numerous
locations in the continental United States and the Philippines, to
Fortune 500 companies, premier global financial institutions, and
large governmental entities.
In late 2015, investment funds managed by the Austin-based private
equity firm, Owner Resource Group, LLC, acquired a controlling
interest in GC Services from the Katz family.
ORG GC Midco, LLC, is the intermediate holding company of GC
Services and parent of 5 other subsidiaries.
ORG GC Midco, LLC, sought Chapter 11 protection (Bankr. S.D. Tex.
Case No. 21- 90015) on Nov. 8, 2021, to implement a prepackaged
plan of reorganization. In the petition signed by Michael Jones as
CFO and chief administrative officer, ORG GC Midco, LLC, estimated
assets of between $100 million and $500 million and estimated
liabilities of between $100 million and $500 million.
The Honorable Judge Marvin Isgur handles the case.
WEIL, GOTSHAL & MANGES LLP, led by Alfredo R. Perez, and Sunny
Singh, serves as the Debtors' counsel. RIVERON MANAGEMENT
SERVICES, LLC, is the Debtor's interim management services
provider. STRETTO, formally known as BANKRUPTCY MANAGEMENT
SOLUTIONS INC., is the noticing and solicitation agent and
administrative advisor.
ORG GC MIDCO: GC Services Parent Files for Chapter 11 With Plan
---------------------------------------------------------------
GC Services Limited Partnership, one of North America's oldest and
largest providers of business process outsourcing and accounts
receivable management solutions, on Nov. 8, 2021, announced that
its indirect owner and parent company, ORG GC Midco, LLC ("Midco")
has commenced a fully consensual "prepackaged" case under chapter
11 of the Bankruptcy Code in the United States Bankruptcy Court for
the Southern District of Texas. GC Services is not included in the
proceedings and its operations will not be impacted.
Midco has commenced its Chapter 11 Case in accordance with a
restructuring support agreement (the "RSA") entered into with 100%
of its secured term lenders. Pursuant to the RSA, the Company and
the secured term lenders agreed to pursue a consensual balance
sheet restructuring through a "prepackaged" plan of reorganization
("Plan"), upon consummation of which the secured term lenders will
become the new indirect owners of the Company. As of commencement
of the Chapter 11 case, and consistent with their obligations under
the RSA, 100% of the secured term lenders have already voted to
accept the Plan. The Chapter 11 Case and the Plan also enjoy the
support of Midco's shareholders. Importantly, the Plan provides
for the payment of all general unsecured claims in full in the
ordinary course of business. The Chapter 11 Case and Plan
represent an essential step to improve financial stability and
address outstanding debt obligations.
Midco has requested that the Plan be approved and the process
completed within the next 30 days.
GC Services' President and Chief Executive Officer, Mark Schordock,
commented, "While GC Services is financially sound, the
consolidated group has been hindered by an over-levered balance
sheet. The restructuring will result in a meaningful reduction in
debt and allow management to focus on further strengthening the
consolidated balance sheet and capitalize on new growth
opportunities in the future."
As GC Services is not a party to the filing, during Midco's
restructuring process, all day-to-day operations for GC Services
will be unimpacted and continue as normal. This includes service
offerings, uninterrupted continuation of its contracts with its
clients, payment of employee salaries and benefits, and payment of
vendor obligations.
"GC Services is not included in nor will its operations be impacted
by the Midco proceedings. Our valued clients can be assured that we
will continue to provide the services and solutions they have come
to rely on. As we look to the future, we see great opportunities
for growth," added Schordock.
For more information about the Midco restructuring process visit
https://cases.stretto.com/GCS.
About GC Services
GC Services is one of the industry's largest privately owned
business process outsourcing and accounts receivable management
solutions providers in the United States with 6,000 employees
staffed throughout 30 geo-diverse contact center locations. On the
Web: http://www.gcserv.com/
GC Services is a privately-held company that provides a full scope
of solution offerings, including 24x7x365 programs, multi-channel
and multi-lingual customer service programs, from numerous
locations in the continental United States and the Philippines, to
Fortune 500 companies, premier global financial institutions, and
large governmental entities.
ORG GC Midco, LLC, is the intermediate holding company of GC
Services and parent of 5 subsidiaries.
ORG GC Midco, LLC, sought Chapter 11 protection (Bankr. S.D. Tex.
Case No. 21- 90015) on Nov. 8, 2021, to implement a prepackaged
plan of reorganization. In the petition signed by Michael Jones as
CFO and chief administrative officer, ORG GC Midco estimated assets
of between $100 million and $500 million and estimated liabilities
of between $100 million and $500 million.
The Honorable Judge Marvin Isgur handles the case.
WEIL, GOTSHAL & MANGES LLP, led by Alfredo R. Perez, and Sunny
Singh, serves as the Debtors' counsel. RIVERON MANAGEMENT
SERVICES, LLC, is the Debtor's interim management services
provider. Stretto, formally known as BANKRUPTCY MANAGEMENT
SOLUTIONS INC., is the noticing and solicitation agent and
administrative advisor.
OSCEOLA MEDICAL: U.S. Trustee Unable to Appoint Committee
---------------------------------------------------------
The U.S. Trustee for Region 21, until further notice, will not
appoint an official committee of unsecured creditors in the Chapter
11 case of Osceola Medical Plaza, LLC, according to court dockets.
About Osceola Medical Plaza
Osceola Medical Plaza, LLC is a Kissimmee, Fla.-based company
engaged in renting and leasing real estate properties. It is the
fee simple owner of a medical office plaza located in Kissimmee
having a current value of $1.8 million.
Osceola filed a petition for Chapter 11 protection (Bankr. M.D.
Fla. Case No. 21-04459) on Oct. 1, 2021, listing $3,898,099 in
assets and $4,524,772 in liabilities. Faiz A. Faiz, managing
member, signed the petition. Judge Lori V. Vaughan oversees the
case. Aldo G. Bartolone, Esq., at Bartolome Law, PLLC is the
Debtor's legal counsel.
OWENS-ILLINOIS GROUP: Moody's Alters Outlook on B1 CFR to Positive
------------------------------------------------------------------
Moody's Investors Service affirmed Owens-Illinois Group, Inc.'s
(O-I) B1 Corporate Family Rating and B1-PD Probability of Default
Rating. Moody's also affirmed the B1 rating on the existing senior
unsecured notes at subsidiary OI European Group B.V. and the B3
rating on the senior unsecured notes at subsidiary Owens-Brockway
Glass Container, Inc. Concurrently, Moody's assigned a B1 rating to
OI European Group B.V.'s proposed $400 million senior unsecured
notes offering maturing 2030. Moody's also upgraded the Speculative
Grade Liquidity rating to SGL-1 from SGL-2. Finally, Moody's
revised the outlook to positive from stable.
The proceeds from the proposed $400 million senior unsecured notes
offering will be used to redeem all of the outstanding 4.0% senior
unsecured notes due 2023, repay a portion of borrowings outstanding
under the term loan A facility and for general corporate purposes.
The transaction is leverage neutral and improves the company's debt
maturity profile. Pro forma for the proposed refinancing, Moody's
projects O-I's debt-to-EBITDA (inclusive of Moody's adjustments)
will be 4.8x at year-end 2022. Similar to the existing 4.0% senior
notes, the new notes will be guaranteed by Owens-Illinois Group,
Inc. The rating on the existing 4.0% senior unsecured notes will be
withdrawn at the close of the transaction.
The change in outlook to positive from stable reflects Moody's
expectation for steady improvement in O-I's credit profile and
higher predictability in operating free cash flow. At the same,
Moody's rating takes into consideration the projected level of
elevated capital expenditures required for incremental growth and
the associated execution risks.
"Over the past two years, O-I's management team has taken the
initiative to exit non-core assets, streamline operations, invest
in growth, and remain committed to reduce debt." said Emile El
Nems, a Moody's VP-Senior Credit Officer. "While investing in
growth will require a significant increase in capital expenditures
and raises O-I's operating risks, we believe the company's
defensive end markets, stable margins and already agreed upon
divestitures will mostly offset these risks."
Affirmations:
Issuer: Owens-Illinois Group, Inc.
Corporate Family Rating, Affirmed B1
Probability of Default Rating, Affirmed B1-PD
Issuer: OI European Group B.V.
Gtd. Global Notes, Affirmed B1 (LGD4)
Issuer: Owens-Brockway Glass Container, Inc.
Global Notes, Affirmed B3 (LGD5)
Gtd. Senior Global Notes, Affirmed B3 (LGD5)
Upgrades:
Issuer: Owens-Illinois Group, Inc.
Speculative Grade Liquidity Rating upgraded to SGL-1 from SGL-2
Assignments:
Issuer: OI European Group B.V.
Gtd. Global Notes, Assigned B1 (LGD4)
Outlook Actions:
Issuer: Owens-Illinois Group, Inc.
Outlook, Changed To Positive From Stable
Issuer: OI European Group B.V.
Outlook, Changed To Positive From Stable
Issuer: Owens-Brockway Glass Container, Inc.
Outlook, Changed To Positive From Stable
RATINGS RATIONALE
O-I's B1 Corporate Family Rating reflects the company's (i) leading
market position as the largest glass packaging company in the world
(measured by revenue and volume), (ii) broad manufacturing presence
with 72 manufacturing facilities across 20 countries, (iii) high
exposure to defensive end markets (beer, soft drinks, spirits, and
food), and (iii) strategic relationships with blue chip customers.
In addition, the rating is supported by O-I's revenue, EBITDA and
operating free cash flow visibility with about 75% of sales being
under long-term contracts, and which include provisions for raw
material and energy costs pass-through. At the same time Moody's
rating takes into consideration the company's debt leverage,
product concentration risk, low growth and the expected levels of
elevated capital expenditures over the next two years.
O-I's SGL-1 Speculative Grade Liquidity Rating reflects Moody's
view that the company will maintain very good liquidity over the
next 12 to 18 months, generate free cash flow and maintain
significant revolver availability. The company's very good
liquidity is supported by (i) $628 million in cash, and (ii) a
$1,500 million undrawn revolving credit facility expiring in June
2024. The revolver and term loan (not rated by Moody's) have one
financial covenant, a maximum net leverage ratio of 5.0x which
decreased to 4.75x at the end of 2Q21 and 4.5x at the end 4Q21.
Annual amortization on the term loans is 3.75% in 2021 and 5%
thereafter.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Moody's changed the governance risk score for O-I to G-3
(moderately negative) from G-4 (highly negative). The change in
governance risk score reflects the company (i) reaching an
agreement in principle to resolve claims related to asbestos
containing products that were allegedly manufactured, distributed,
used and/or sold by Owens-Illinois, Inc. and (ii) agreeing to fund
$610 million in total consideration. In addition, the change in
score reflects the company's 12 independent board members and
commitment towards balancing the interest of creditors and
shareholders. At the same time, the score considers O-I's complex
organizational structure with multiple tiers of holding and
operating companies.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if adjusted debt-to-EBITDA is
sustained below 4.75x, EBITDA-to-interest coverage is above 5.0x,
the company improves free cash flow and maintains very good
liquidity, and free cash-to-debt is sustained above 5%.
The ratings could be downgraded if adjusted debt-to-EBITDA is
sustained above 5.5x, EBITDA-to-interest coverage is below 4.0x,
the company's free cash flow and liquidity deteriorate, and free
cash-to-debt is sustained below 3%.
The principal methodology used in these ratings was Packaging
Manufacturers: Metal, Glass and Plastic Containers Methodology
published in September 2020.
Headquartered in Perrysburg, Ohio, Owens-Illinois Group, Inc. is
the leading global glass packaging company (measured by revenue).
PANIOLO CABLE: Dec. 6 Plan Confirmation Hearing Set
---------------------------------------------------
Michael Katzenstein, the Chapter 11 Trustee of Debtor Paniolo Cable
Company, LLC, filed a motion for entry of an order approving the
Disclosure Statement for the Chapter 11 Trustee's Plan of
Liquidation of the Debtor.
On Nov. 4, 2021, Judge Robert J. Faris granted the motion and
ordered that:
* Any and all objections to approval of the Motion or the
Disclosure Statement, to the extent not previously resolved or
withdrawn, are overruled in their entirety.
* The Disclosure Statement, as amended, contains adequate
information as required by Bankruptcy Code section 1125 and is
approved.
* Nov. 23, 2021, at 5:00 p.m., is the deadline by which all
Ballots must be properly executed, completed, delivered to, and
actually received by the Balloting Agent.
* Dec. 6, 2021, at 2:00 p.m., is the date and time set for the
Confirmation Hearing.
* Nov. 23, 2021, at 5:00 p.m., is the deadline for filing and
serving Plan Objections.
A full-text copy of the order dated Nov. 4, 2021, is available at
https://bit.ly/2Ys9M6g from PacerMonitor.com at no charge.
Attorneys for Chapter 11 Trustee:
GOODSILL ANDERSON QUINN & STIFEL
JOHNATHAN C. BOLTON
CHRISTOPHER P. ST. SURE 10001-0
First Hawaiian Center, Suite 1600
999 Bishop Street
Honolulu, Hawaii 96813
Telephone: (808) 547-5600
Facsimile: (808) 547-5880
About Paniolo Cable Company
Paniolo Cable Company, LLC, owns a fiber optic network connecting
five major Hawaiian Islands.
Paniolo Cable Company filed a Chapter 11 petition (Bankr. D. Hawaii
Case No. 18-01319) on Nov. 13, 2018, and was represented by Andrew
V. Beaman, Esq., in Honolulu, Hawaii.
Michael Katzenstein was appointed as the Chapter 11 Trustee of
Paniolo Cable Company. Ducera Partners LLC is the Trustee's
investment banker.
PARKLAND CORP: Fitch Rates Proposed USD Unsecured Notes 'BB'
------------------------------------------------------------
Fitch Ratings has assigned a 'BB'/'RR4' rating to Parkland
Corporation's proposed issuance of U.S. dollar-denominated senior
unsecured notes. Proceeds will be used to refinance existing
unsecured notes due in 2027, reduce outstanding credit facility
borrowings, and for general corporate purposes including
acquisitions and capital spending.
Parkland's ratings and Stable Outlook reflect its unique position
as a fully integrated downstream petroleum company with a strong
retail fuel presence in Canada and the Caribbean and a growing
presence in the U.S. Parkland's advantaged position is bolstered by
its supporting distribution and logistics businesses and small
relative refining operations.
Long-term cash flow stability from Parkland's integrated operations
and diversified asset base support its credit quality. The company
has grown measurably in recent years, 2020 aside, through a
combination of acquisitions and steady capital spending on organic
initiatives. Risks remain as to post-acquisition synergy
realization and the potential for lingering coronavirus impacts to
impede further demand recovery.
KEY RATING DRIVERS
Acquisitions Add to Robust Business: Parkland has returned from a
pandemic-driven acquisition lull in strong fashion,
closing/announcing 14 acquisitions for roughly $1.2 billion since
3Q20. The company continues to add to its portfolio of assets and
further leverage established supply/distribution advantages. While
the U.S. has been and is likely to remain Parkland's focus for
acquisitions, the company recently added to its positions in Canada
and the Caribbean.
Parkland's ability to find, appropriately fund and successfully
integrate acquisitions remains integral to the external part of its
growth story. The extent to which Parkland can supplement organic
growth with accretive acquisitions without sacrificing balance
sheet strength would be supportive of credit quality. While the
company's track record on post-acquisition synergy capture has been
very good, risk remains that synergies may not materialize on
future transactions.
Resilience Shines Through: The drop in volumes across Parkland's
businesses and geographies in the first few months of the pandemic
was considerable. However, the degree and duration of the large
volume decreases were less severe than anticipated by Fitch, with
improved margins offering a meaningful buffer. The return in
Canada, the Caribbean, and the U.S. to pre-pandemic fuel volume
levels has been more rapid than prior targets. This resulted in
better 2020 leverage than prior Fitch estimates, and the positive
trend has continued through the first nine months of 2021.
The durability of Parkland's business model during a period of
extreme stress, including the relative stability of cash flows and
margins, is indicative of a strong credit profile. Given the
competitive nature of the retail gasoline market, risk remains
related to the company's ability to defend its margin, especially
in a period of increasing volumes.
Leverage in Focus: Parkland has successfully managed its pursuit of
growth while maintaining appropriate leverage. 2020 was a very
challenging year for the industry, and Parkland completed a major
turnaround at its refinery, and consequently leverage was above
Fitch's negative sensitivity. The 2021 Fitch forecast includes
leverage below 4.0x. Parkland has grown through acquisitions and
aspires to reach $2 billion in annual run-rate EBITDA by the end of
2025. Fitch will review attractive acquisitions that cause leverage
to slightly exceed the negative sensitivity temporarily on a case
by case basis.
Driving Supply Advantages: Parkland is able to leverage cost/supply
advantages with its established retail footprint in Canada and the
Caribbean and a small but growing presence in the U.S. to drive
value through the system. These advantages come via downstream
integration, allowing Parkland to produce and protect attractive
margins in support of consistent cash flow generation. Downstream
integration is a meaningful advantage versus nonintegrated fuel
retailer peers.
Parkland's diversified business and vertical integration also help
smooth some of the volatility common in the refining space. Its
retail outlet for finished product and capability to move, store
and deliver that product to customers provides an offset and a
simple buffer to the cyclical lows inherent in the refining
industry.
Diverse Footprint: Parkland has approximately 2,000 company and
dealer-owned retail sites across Canada, more than 650 sites in the
Caribbean and more than 500 sites the U.S. Its retail and
commercial franchises display size/scale advantages and
geographic/product diversification. Parkland has regionally
relevant brands in close proximity to the major population centers.
The company reports that roughly 85% of Canadians live within a
15-minute drive of a Parkland service station.
Parkland has a dominant position in many of the Caribbean countries
where it operates, meaningful shipping capabilities, and control of
essential distribution and supply assets. Its size/scale in the
U.S. is small, but the company has been expanding its retail,
commercial and wholesale capabilities via advantages developed just
north of the border.
The juxtapositions within Parkland's refining operations in
Burnaby, British Columbia, as they relate to size/scale and asset
quality are distinct. The company operates a single, small
capacity, low complexity refinery. Fitch typically views refineries
with less than 100,000 barrels per day of capacity and single-asset
refiners as more consistent with a 'B' credit profile, if it were a
standalone refining business.
Fitch believes Parkland's single refinery possesses some geographic
advantages. It is fully integrated with Parkland's
commercial/wholesale and retail businesses in Western Canada and,
as such, is not a merchant refiner. These unique characteristics
provide more cash flow and earnings stability than Parkland would
have without integration. However, the refining industry is subject
to periods of boom and bust, with sharp swings in crack spreads
over the cycle. The rest of Parkland's portfolio is highly ratable,
so refining remains a source of potential variability in future
results.
DERIVATION SUMMARY
Parkland is somewhat unique relative to Fitch's coverage given its
diversification across the midstream and downstream value chain,
especially due to the relatively small size/scale of its refining
operations. Fitch views similarly rated Sunoco LP (SUN;
BB/Positive) as a peer as both companies have significant fuel
distribution businesses. However, credit profile differences arise
from Parkland's position as a fully integrated downstream operator.
SUN has greater margin stability, supported by its multi-year
take-or-pay fuel supply agreement with a 7-Eleven subsidiary, under
which it will supply approximately 2.2 billion gallons of fuel
annually, and no refining operations.
From a business line perspective, though orders of magnitude
smaller in size/scale, Fitch sees Marathon Petroleum Corporation
(MPC; BBB/Stable) as a peer of Parkland. A one full rating category
difference between Parkland and MPC is appropriate given Parkland's
distinctive characteristics and weaker relative financial profile.
Additionally, credit rating differences, relative to MPC, arise
from Parkland's 'single refiner risk' factor and the substantially
smaller size/scale and complexity of Parkland's refining
operations.
Puma Energy Holdings Pte Ltd (BB-/Stable) is a global integrated
midstream and downstream peer with storage, distribution,
fuel-retailing and business to business activities across the
globe. Relative to Parkland, Puma has a slightly larger size/scale
and similar leverage but more exposure to developing economies and
foreign currency risks globally, leading to its lower rating.
Fitch expects Parkland's leverage, as measured by total adjusted
debt/operating EBITDAR, to be slightly better than SUN's over the
forecast period, based on Fitch's expectations for SUN's total debt
with equity credit/operating EBITDA to end 2021 between 4.0x-4.3x.
Parkland's leverage is roughly one half to one full turn worse than
MPC, and Fitch does not forecast improvement in this metric for
Parkland until later in the forecast period. Parkland's weaker
relative financial profile is a factor considered in the credit
rating difference between MPC and Parkland.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- Full-year volumes do not return to levels seen in 2019 in the
Canada and International segments until 2022, while the U.S.
segment continues to deliver double digit yoy volume
increases, largely driven by acquisitions;
-- Retail fuel margins remain above historical averages in 2021
in Canada before returning to more normalized levels in 2022
and beyond;
-- Utilization (for crude only) at the company's Burnaby refinery
of roughly 85% in 2021, after posting a turnaround impacted
69% utilization in 2020. Refining utilization of 90%-94% in
years without a major turnaround, beyond 2021;
-- Growth capital spending on organic initiatives increases in
2021, from a pandemic-reduced level in 2020, with total annual
capex ranging from $400 million to $500 million over the
forecast period;
-- Acquisitions are largely funded with a mix of cash on hand and
revolver availability. Incremental debt is issued in 2022 to
fund material investment, debt balances reduce from there over
the remainder of the forecast period;
-- USD1.00/CAD1.25 throughout the quarters of the forecast
period.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Leverage, defined as total adjusted debt capitalizing
operating lease expense at 8.0x /operating EBITDAR, sustained
below 3.0x;
-- Increased size and diversification, as evidenced by entry into
multiple new markets, along with the maintenance of robust
fuel and non-fuel margins.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Leverage, defined previously, above 4.0x on a sustained basis.
Attractive acquisitions that push this metric above the
negative sensitivity temporarily will be reviewed on a case by
case basis;
-- The reinstatement of stay-at-home orders across North America
related to the coronavirus, leading to demand destruction,
without an offsetting increase in fuel margins;
-- A disproportionate decrease in realized fuel margins versus
increased fuel volumes;
-- Impairments to liquidity;
-- Acquisitions that increase overall business risk and/or are
not financed in a balanced 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
Adequate Liquidity: Parkland had total available liquidity of
nearly $1.5 billion, including $228 million in unrestricted cash
and equivalents on the balance sheet as of Sept. 30, 2021.
The company' senior secured credit facilities have approximately
$1.9 billion in total availability, with a 2026 maturity. The
company had approximately $633 million drawn on its revolving
credit facilities as of Sept. 30, 2021.
On March 25, 2021, Parkland established an at-the-money (ATM)
equity program, allowing for the issuance of up to $250 million of
common shares. As of Sept. 30, 2021, the company had issued a just
over $22 million worth of common equity under the ATM program.
Fitch views positively Parkland's use of the ATM program, as it
represents another avenue for future small acquisition funding
beyond incremental debt.
With debt refinancing activities completed thus far in 2021,
Parkland has no senior unsecured notes or credit facilities due
until 2026.
ISSUER PROFILE
Parkland is a leading convenience store operator and an independent
supplier and marketer of fuel and petroleum products in Canada, the
U.S. and the Caribbean. Parkland serves customers through retail,
commercial and wholesale sales channels. It also operates the
Burnaby refinery in British Columbia.
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch applies an 8.0x multiple to operating leases.
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.
PARKLAND CORP: Moody's Rates New USD Unsecured Notes 'Ba3'
----------------------------------------------------------
Moody's Investors Service has assigned a Ba3 rating to Parkland
Corporation's proposed USD senior unsecured notes due 2030. The
rest of the ratings, including Parkland's Ba2 CFR and stable
outlook, are unchanged.
Proceeds from the company's proposed notes issuance will be used
redeem the C$300 million 2027 notes and pay down drawings on the
company's revolving credit facility and for general corporate
purposes including acquisitions and capital spending.
Assignments:
Issuer: Parkland Corporation
Gtd Senior Unsecured Regular Bond/Debenture, Assigned Ba3 (LGD4)
RATINGS RATIONALE
Parkland's Ba2 CFR benefits from: (1) a strong market presence as a
fuel marketer in both Canada and the Caribbean supported by good
brand recognition; (2) debt/EBITDA that is expected to be about
3.5x in 2022; (3) positive free cash flow in 2022, which will be
used to fund acquisitions; (4) established supply channels in key
geographies due to significant scale that provides competitive
advantages in sourcing products and creating barriers to entry; and
(5) geographic diversification within Canada and outside, with
about a quarter of its EBITDA generated outside of Canada.
Constraints to Parkland's credit profile include: (1) Moody's
expectation that fuel demand will decline steadily over time as
fuel efficiency improves and electric vehicle penetration
increases, which Parkland must mitigate with acquisitions, and with
investments in its retail operations and marketing strategies to
enhance fuel and non-fuel market share; (2) volatility tied to cash
flows from the refinery operations and supply logistics business
(involving the purchase, sale and storage of fuel products); and
(3) the Sol Put Option that could add about 0.3x to debt to EBITDA
if Parkland fully debt funded the estimated C$490 million
liability.
The senior unsecured notes are rated Ba3, one notch below the Ba2
CFR, due to the priority ranking revolving credit facility.
Parkland has good liquidity (SGL-2). Parkland's total liquidity
sources are around C$2.6 billion, which they will use to fund
acquisitions. Pro forma for the October 2021 notes offering and
revolver increase, and at September 30, 2021, Parkland had C$228
million of cash and almost full availability under its roughly
C$1.9 billion revolving credit facility due 2026, after netting
letters of credit. Moody's expect around C$200 million in positive
free cash flow through mid-2022. Moody's expect Parkland to remain
in compliance with its three financial covenants. Parkland has some
flexibility to generate liquidity from asset sales. Parkland has no
near term debt maturities.
The stable outlook reflects Moody's expectation that Parkland's
leverage will remain around 3.5x.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if Parkland successfully operates
existing and acquired businesses, debt/EBITDA is below 3x (not
above 3.5x temporarily for acquisitions (3.6x for LTM Q2/2021)), a
reduction of volatile supply and marketing EBITDA below 25% (over
40% expected in 2021), and generates positive free cash flow (C$40
million for LTM Q2/2021).
The ratings could be downgraded if Debt/EBITDA is above 4x (3.6x
for LTM Q2/2021), there are challenges operating existing and
acquired businesses, liquidity weakens, or if there is sustained
negative free cash flow (C$40 million for LTM Q2/2021).
Parkland Corporation, headquartered in Calgary, Alberta, is a large
marketer of fuel and petroleum products and is a large operator of
convience stores in Canada, the US and the Caribbean. Parkland also
owns the Burnaby refinery in the Greater Vancouver Area.
The principal methodology used in this rating was Retail Industry
published in May 2018.
PARKLAND CORP: S&P Rates New US$500MM Senior Unsecured Notes 'BB'
-----------------------------------------------------------------
S&P Global Ratings assigned its 'BB' issue-level rating and '4'
recovery rating to Parkland Corp.'s proposed US$500 million senior
unsecured notes due 2030. The '4' recovery rating reflects its
expectation of average (30%-50%; rounded estimate: 30%) recovery in
a default scenario. The 'BB' issue-level and '4' recovery ratings
on Parkland's existing unsecured notes are unchanged.
S&P said, "We expect the company will use note proceeds to redeem
all of its 6.5% C$300 million notes due 2027 and repay a portion of
the revolving credit facility (RCF). The new US$500 million notes
rank pari passu in right of payment with all of Parkland's other
existing and future senior debt and the guarantees are the same as
those on the company's existing senior notes. As a result, we view
this transaction as leverage neutral. We also expect that Parkland
will continue to pursue its acquisitive growth strategy, which it
will likely fund through cash on hand or drawings on its RCF. We
expect that organic growth, recovery in fuel volumes, and
successful integration of acquisitions should enable the company to
maintain a debt-to-EBITDA ratio of 3.7x-3.8x over the next 12
months."
ISSUE RATINGS-RECOVERY ANALYSIS
Key analytical factors:
-- S&P assumes a hypothetical default in 2026 stemming from a
significant decline in fuel volumes and margins, which could result
from a protracted recession that reduces fuel demand.
-- In addition, intensifying competition and lower-than-expected
refinery utilization could pressure cash flows further to the point
that the company is no longer able to operate absent filing for
creditor protection.
-- S&P said, "To value Parkland's Burnaby, B.C. refinery asset, we
apply about a US$3,000 multiple to the refinery's 55,000 barrels
per day crude slate throughput capacity. Our valuation reflects the
favorable market dynamics, access to cost-advantaged sources of
crude through the Trans Mountain Pipeline System, low-complexity
refinery, and a good product slate because more than 90% of the
refinery output is high-value products."
-- S&P also assumes that Parkland owns 100% of SOL Investments
Inc. at the time of default and has financed the acquisition
through its bank borrowings; therefore, it assumes a 100% draw on
the revolver, compared with an 85% default assumption in our
recovery criteria.
-- S&P values the rest of Parkland's assets, including 100% of
SOL, using an EBITDA multiple approach--the fuel retail assets are
valued at a 5x multiple on default-year EBITDA of about C$647
million.
-- Parkland's senior secured debtholders (for the RCF) would
expect very high (90%-100%; rounded estimate: 95%) recovery in the
event of default.
Simulated assumptions:
-- Valuation of refinery: About C$215 million
-- Emergence EBITDA of retail assets: C$647 million
-- Multiple: 5.0x
Simplified waterfall:
-- Gross enterprise value (including the valuation for the Burnaby
refinery): about C$3.4 billion
-- Net recovery value for waterfall after administrative expenses
(5%): about C$3.3 billion
-- Estimated priority claims: about C$4.3 million
-- Remaining recovery value: about C$3.27 billion
-- Estimated senior secured claim: about C$1.9 billion
-- Value available for senior secured claim: about C$3.27 billion
--Recovery range: 90%-100% (rounded estimate: 95%)
-- Estimated senior unsecured claims: about C$3.8 billion
-- Value available for unsecured claim: about C$1.3 billion
--Recovery range: 30%-50% (rounded estimate: 30%)
PDG PRESTIGE: Unsecured Creditors to be Paid in Full in 60 Months
-----------------------------------------------------------------
PDG Prestige Inc. filed with the U.S. Bankruptcy Court for the
Western District of Texas a Reissued Chapter 11 Plan of
Reorganization and a Disclosure Statement on Nov. 4, 2021.
PDGP owns and is the developer of a ±3.29 acre tract of real
property in Las Cruces, Dona Ana County, New Mexico and sometimes
referred to as Mesilla Valley Mall Subdivision, Replat No. 5 (the
"Subject Property").
The Debtor believes that the Subject Property as of the Petition
Date possessed a stabilized value of $4,700,000. Certain
investment fund(s) for which Legalist DIP GP, LLC serves as general
partner (collectively, "Legalist") holds a first consensual lien
against the subject property in the amount of original principal
amount of $4,700,000 under the DIP Credit Agreement approved by an
order entered on April 9, 2021 (the "DIP Order").
This Chapter 11 case was commenced by a voluntary petition filed on
February 15, 2021 (the "Petition Date") in order to stop the
foreclosure of the Subject Property by CityBank of Lubbock, Texas.
Previous efforts to develop and/or sell the Subject Property were
thwarted in 2019-2020 prior to the Petition Date as a result of
various litigation and /or notices of lis pendens asserted by
Thomas Springer and/or related entities and Dennis Crimmins and/or
related entities.
This Plan of Reorganization proposes to pay creditors of the Debtor
from cash flow from future operations and/or sales of property.
Secured claims will be paid in full according to the claim(s) filed
or pursuant to the agreement of the parties. General unsecured
creditors, other than the Westar Litigation Parties, will receive
payment in full.
The Plan will treat claims as follows:
* Class 1 consists of the allowed secured claim of Dona Ana
County, New Mexico or any other governmental entity assesses ad
valorem property taxes. Each such tax authority will retain its
statutory lien in, to, and/or against the Subject Property. As of
the filing of this Plan, PDGP believes that no such claims exists
and that all such taxes assessed are fully paid through the end of
2021.
* Class 2 consists of the allowed secured claim pursuant to
the order entered by the Court on April 12, 2021 (the "DIP Order")
approving the Code § 364(d) debtor-in-possession financing and
primary lien transaction between PDGP and Legalist (and which
financing was used to extinguish the then existing first lien
indebtedness owed to HD Lending, LLC). The DIP Credit Agreement and
the DIP Order shall remain in effect and govern the relations
between the parties following the Effective Date, including but not
limited to Legalist retaining all liens and/or other interests
provided in the DIP Credit Agreement and/or DIP Order.
* Class 3 consists of the claim of NMREA purporting to arise
from the contingent, disputed, and as-of-yet unearned portion of
the pre-petition listing agreement between PDGP and NMREA. If
and/or when any remaining commissions due to NMREA mature, such
commissions will be paid (1) within 60 days of the commission
accruing, or, (2) at the option of PDGP, with the closing of any
applicable sale. Upon any such payment, NMREA will releases its
liens asserted against the Subject Property or such portion thereof
in relation to which NMREA has received payment.
* The Class 6 general unsecured creditors consist of general
unsecured claims in aggregate minimum amount of at least /
approximately $32,250.00 and consisting of only the disputed claim
of City Bay Capital LLC. The Class 6 creditors will receive the
full payment of the allowed amount of each such claim in 60 equal
installments paid on or before the 15th day of each month
commencing with the first full month following the Effective Date.
* All prepetition equity interest owners shall retain their
equity interests in the reorganized Debtor following the Effective
Date.
Payments and distributions under the Plan will be funded by (1) a
sale of the Subject Property, (2) lease and/or rental income of the
Subject Property, and/or (3) existing financing and/or post
Effective Date re-financing.
A full-text copy of the Disclosure Statement dated Nov. 4, 2021, is
available at https://bit.ly/3qiJv5S from PacerMonitor.com at no
charge.
Attorneys for the Debtor:
Jeff Carruth, Esq.
Weycer Kaplan Pulaski & Zuber, P.C.
3030 Matlock Rd., Suite 201
Arlington, TX 76015
Telephone: (713) 341-1058
Facsimile: (866) 666-5322
Email: jcarruth@wkpz.com
About PDG Prestige
PDG Prestige, Inc., a real estate developer in El Paso, Texas,
sought protection under Chapter 11 of the Bankruptcy Code (Bankr.
W.D. Tex. Case No. 21-30107) on Feb. 15, 2021. Michael Dixson,
president, signed the petition.
At the time of the filing, the Debtor disclosed assets of between
$1 million and $10 million and liabilities of the same range.
Weycer Kaplan Pulaski & Zuber, P.C., is the Debtor's legal counsel.
PENNFIELD CORP: Trustee's Sale of Ohlbaum Judgments to SM Approved
------------------------------------------------------------------
Judge Magdeline D. Coleman of the U.S. Bankruptcy Court for the
Eastern District of Pennsylvania authorized the sale procedures
proposed by MorrisAnderson, Ltd., in its capacity as Trustee of the
Plan Trust of ETFF Corp., Pennfield Corp., and Pennfield Transport
Co., in connection with the sale of the judgments held by the
Debtors' estates against Defendants Gary Ohlbaum, Smarda Ohlbaum
and Nourican Portfolio I, LLC, to SM Financial Services Corp.
The sale is free of liens, claims, interests, and encumbrances.
The Trustee is authorized to undertake all actions necessary to
sell the Ohlbaum Judgments to the Buyer as set forth in the terms
of the Purchase Agreement.
The Trustee is authorized to make, in the best business judgment, a
determination of the highest and best offer, and undertake all
actions to sell the Ohlbaum Judgments to that party.
The Trustee is authorized to sell the Ohlbaum Judgments to the
Buyer for the terms set forth in the Motion.
The 14-day stay under Federal Rule 6004 will be waived for purposes
of closing on the Purchase Agreement.
About Pennfield Corporation
Pennfield Corporation and Pennfield Transport Company filed a
Chapter 11 petition (Bankr. E.D. Pa. Case No. 12-19430 and
12-19431) on Oct. 3, 2012, in Philadelphia. Founded in 1919,
Pennfield is a Lancaster, Pennsylvania-based manufacturer of bulf
and bagged feeds for dairy, equine and other commercial and
backyard livestock. The Company owns and operates three
production mills located in Mount Joy, Martinsburg, and South
Montrose, in Pennsylvania.
The Debtors filed for bankruptcy to sell their assets to Carlisle
Advisors, LLC, subject to higher and better offers. Carlisle had
also agreed to provide a $2.0 million DIP Loan but later defaulted
on this commitment.
Judge Bruce I. Fox presides over the case. Attorneys at
Maschmeyer Karalis P.C., in Philadelphia, serve as the Debtors'
bankruptcy counsel. Skadden, Arps, Slate, Meagher & Flom LLP is
the special counsel. Groom Law Group, Chartered, is the employee
benefits counsel. AEG Partners LLC is the financial advisor.
Lakeshore Food Advisors, LLC, is the investment banker.
Pennfield filed official lists showing assets of $7.2 million and
liabilities totaling $26.1 million, including $11.3 million in
secured claims. Debt includes $10 million owing to secured lender
Fulton Bank NA.
PG&E CORP: Investors Get Final OK on $2.5M Fees for $10M Deal
-------------------------------------------------------------
Katryna Perera of Law360 reports that a California federal judge on
Friday, Nov. 5, 2021, awarded $2.5 million in attorney fees and
granted final approval of a $10 million settlement between Pacific
Gas and Electric Co. and its investors over claims the utility
mismanaged planned power outages in the wake of widespread
wildfires, leading to a drop in its stock price.
The judge also approved class counsel to receive $82,000 in
litigation costs and a $5,000 award for each of the three lead
plaintiffs, according to an order filed in California federal
court. The order states that a final fairness hearing was held on
Sept. 16, 2021.
About PG&E Corporation
PG&E Corporation (NYSE: PCG) -- http://www.pgecorp.com/-- is a
Fortune 200 energy-based holding company, headquartered in San
Francisco. It is the parent company of Pacific Gas and Electric
Company, an energy company that serves 16 million Californians
across a 70,000-square-mile service area in Northern and Central
California.
As of Sept. 30, 2018, the Debtors, on a consolidated basis, had
reported $71.4 billion in assets on a book value basis and $51.7
billion in liabilities on a book value basis.
PG&E Corp. and Pacific Gas employ approximately 24,000 regular
employees, approximately 20 of whom are employed by PG&E Corp. Of
Pacific Gas' regular employees, approximately 15,000 are covered by
collective bargaining agreements with local chapters of three labor
unions: (i) the International Brotherhood of Electrical
Workers;(ii) the Engineers and Scientists of California; and (iii)
the Service Employees International Union.
On Jan. 29, 2019, PG&E Corp. and its primary operating subsidiary,
Pacific Gas and Electric Company, filed voluntary Chapter 11
petitions (Bankr. N.D. Cal. Lead Case No. 19-30088).
PG&E Corporation and its regulated utility subsidiary, Pacific Gas
and Electric Company, said they are facing extraordinary challenges
relating to a series of catastrophic wildfires that occurred in
Northern California in 2017 and 2018. The utility said it faces an
estimated $30 billion in potential liability damages from
California's deadliest wildfires of 2017 and 2018.
Weil, Gotshal & Manges LLP and Cravath, Swaine & Moore LLP are
serving as PG&E's legal counsel, Lazard is serving as its
investment banker and AlixPartners, LLP is serving as the
restructuring advisor to PG&E. Prime Clerk LLC is the claims and
noticing agent.
In order to help support the Company through the reorganization
process, PG&E has appointed James A. Mesterharm, a managing
director at AlixPartners, LLP, and an authorized representative of
AP Services, LLC, to serve as Chief Restructuring Officer. In
addition, PG&E appointed John Boken also a Managing Director at
AlixPartners and an authorized representative of APS, to serve as
Deputy Chief Restructuring Officer. Mr. Mesterharm, Mr. Boken and
their colleagues at AlixPartners will continue to assist PG&E with
the reorganization process and related activities. Morrison &
Foerster LLP serves as special regulatory counsel. Munger Tolles &
Olson LLP is also special counsel.
The Office of the U.S. Trustee appointed an official committee of
creditors on Feb. 12, 2019. The Committee retained Milbank LLP as
counsel; FTI Consulting, Inc., as financial advisor; Centerview
Partners LLC as investment banker; and Epiq Corporate
Restructuring, LLC as claims and noticing agent.
On Feb. 15, 2019, the U.S. trustee appointed an official committee
of tort claimants. The tort claimants' committee is represented by
Baker & Hostetler LLP.
PING IDENTITY: Moody's Affirms B1 CFR & Rates $300MM Term Loan B1
-----------------------------------------------------------------
Moody's Investors Service affirmed Ping Identity Corporation's B1
Corporate Family Rating, B1-PD Probability of Default Rating and
assigned B1 ratings to the company's proposed 1st lien credit
facilities comprising a $150 million revolving credit facility and
$300 million of term loans. The ratings outlook is stable. Ping
Identity Corporation is an indirect wholly-owned subsidiary of Ping
Identity Holding Corp. ("Ping Identity").
Affirmations:
Issuer: Ping Identity Corporation
Corporate Family Rating, Affirmed B1
Probability of Default Rating, Affirmed B1-PD
Assignments:
Issuer: Ping Identity Corporation
Gtd Senior Secured Term Loan, Assigned B1 (LGD4)
Gtd Senior Secured Revolving Credit Facility, Assigned B1 (LGD4)
Outlook Actions:
Issuer: Ping Identity Corporation
Outlook, Remains Stable
RATINGS RATIONALE
Ping Identity will use net proceeds from the new term loans to
refinance outstanding revolver borrowings and replenish its cash
position. Ping Identity's outstanding debt will increase from $119
million to $300 million and pro forma for the refinancing, it will
have about $230 million of cash on hand. Moody's expects the
company to utilize excess cash toward acquisitions to augment its
Identity and Access Management (IAM) offerings in a rapidly
evolving information security market.
Ping Identity's CFR is weakly positioned in the B1 rating category
as a result of its weak profitability and high financial leverage
over the next 12 to 18 months. Moody's analyst Raj Joshi said,
"Despite strong and accelerating growth in Annual Recurring
Revenues (ARR), large increase in investments to capitalize on the
growth opportunity will erode profitability." Joshi added,
"However, strong secular tailwinds driving demand for IAM solutions
and Ping Identity's high revenue retention rates mitigate the risks
and we expect free cash flow to increase to 10% to 15% of Moody's
adjusted debt in 2023." Moody's does not expect total debt to
EBITDA based on its conventional definition of leverage to be
meaningful before 2023.
The affirmation of the B1 CFR and stable ratings outlook reflects
Moody's expectation that Ping Identity will maintain strong growth
in ARR in the high teens percentages, growth in investments will
moderate and it will maintain good liquidity over the next 12 to 18
months.
The B1 CFR additionally reflects Ping Identity's modest operating
scale and the highly competitive and fragmented IAM products
market. The risks are mitigated by the strong secular demand for
IAM solutions in the workforce and customer use cases and Ping
Identity's broader portfolio of cloud platform offerings that
create opportunities to expand into the installed base. Ping
Identity's high proportion of recurring subscription revenues (94%
of total revenues in the 3Q '21) and 112% Dollar-based retention
rates support its credit profile.
As a provider of the critical IAM solutions that secure a large
number of identities globally, Ping Identity has high reputation
risk from potential cybersecurity breaches in its platform or
through its products in the networks operated by its customers.
The SGL-2 Speculative Grade Liquidity rating reflects Ping
Identity's good liquidity comprising its cash balances and an
undrawn $150 million revolving credit facility after the
refinancing transactions.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Given Ping Identity's weak profitability over the next 12 to 18
months a ratings upgrade is not expected over this period. Moody's
could upgrade the ratings over time if the company maintains strong
growth and improves profitability and Moody's expects sustained
free cash flow relative to total debt of over 20%. Conversely,
Moody's could downgrade the ratings if ARR growth decelerates
meaningfully below Moody's expectations or liquidity weakens. The
ratings could also come under pressure if Moody's believes that
free cash flow relative to total debt of 10% or higher is unlikely
to materialize as a result of continued high levels of investments,
operational challenges, or increases in debt.
Ping Identity Holding Corp.'s Identity and Access Management
solutions provide secure access to employees, partners and
consumers of its enterprise customers that allows users to connect
to software applications. The company generated $287 million in
revenues in the twelve months ended September 30, 2021.
The principal methodology used in these ratings was Software
Industry published in August 2018.
PIPELINE FOODS: $7.2M Sale of Assets to Landus Cooperative Approved
-------------------------------------------------------------------
Judge Karen B. Owens of the U.S. Bankruptcy Court for the District
of Delaware authorized Pipeline Foods, LLC, and its affiliates to
sell to Landus Cooperative for $7.2 million in accordance with the
terms of their Asset Purchase Agreement the following assets:
a. the real property (and all improvements, certain fixtures,
and infrastructure located thereon) located at 54464 Olive Street,
in Atlantic, Iowa;
b. certain equipment, machinery, tools, certain fixtures, and
other items and materials subject to a Master Lease Agreement with
Farm Credit Leasing Services Corp.; and
c. a Chevrolet Pickup.
The sale is free and clear of all Interests, with all such
Interests to attach to the Net Proceeds of Sale.
The Debtors are authorized to pay to Farm Credit Leasing from the
Net Proceeds of Sale the amount necessary to pay the indebtedness
due to Farm Credit Leasing in full.
In the event the Purchaser fails to consummate the Sale on the
terms and conditions of the Agreement, the Debtors, in consultation
with the Consultation Parties, may designate Elite Octane, LLC as
the Successful Bidder for all purposes herein pursuant to the terms
of its backup bid.
Upon such designation, the Debtors will be authorized, but not
required, to submit, in consultation with the Consultation Parties
and under certification of counsel, an alternative form of proposed
sale order, substantially in the form previously submitted with the
Court, modified to conform to the terms of the Back-Up Bid,
authorizing the Debtors to consummate all transactions contemplated
by the Back-Up Bid. In such case, the Purchaser's deposit will be
forfeited to the Debtors as set forth in the Bidding Procedures.
Notwithstanding anything to the contrary in the Sale Motion, the
Agreement, any list of contracts to be assumed and/or assigned
and/or any notices of proposed cure amounts, the Sale Order, or any
documents relating to any of the foregoing, nothing will permit or
otherwise effect a sale, an assignment or any other transfer to the
Purchaser of (i) any insurance policies that have been issued by
ACE American Insurance Company, Illinois Union Insurance Company,
Westchester Fire Insurance Company, Penn Millers Insurance Company,
Federal Insurance Company, and/or any of their U.S.-based
affiliates, and/or any predecessors and successors of any of the
foregoing and all agreements, documents or instruments relating
thereto and/or (ii) any rights, proceeds, benefits, claims, rights
to payments and/or recoveries under such Chubb Insurance Contracts.
For the avoidance of doubt, nothing will alter, modify or amend the
terms and conditions of the Order Approving Settlement Agreement
Among Pipeline Foods, LLC and Illinois Union Insurance Company
Pursuant to Federal Rule of Bankruptcy Procedure 9019 or the
Settlement Agreement.
Notwithstanding the provisions Bankruptcy Rule 6004(h), the Sale
Order will be effective and enforceable immediately upon its entry.
A copy of the Agreement is available at
https://tinyurl.com/2mtwrmpr from PacerMonitor.com free of charge.
About Pipeline Foods
Pipeline Foods, LLC -- https://www.pipelinefoods.com/ -- is the
first U.S.-based supply chain solutions company focused
exclusively
on non-GMO, organic, and regenerative food and feed. It is based
in
Fridley, Minn.
Pipeline Foods and its affiliates sought Chapter 11 protection
(Bankr. D. Del. Lead Case No. 21-11002) on July 8, 2021. The
affiliates are Pipeline Holdings, LLC, Pipeline Foods Real Estate
Holding Company, LLC, Pipeline Foods, ULC, Pipeline Foods Southern
Cone S.R.L., and Pipeline Foods II, LLC. In the petition signed by
CRO Winston Mar, Pipeline Foods disclosed between $100 million and
$500 million in both assets and liabilities.
Judge Karen B. Owens oversees the cases.
The Debtors tapped Saul Ewing Arnstein & Lehr, LLP as legal
counsel; Ocean Park Securities, LLC as investment banker; Baker
Tilly US, LLP and Baker Tilly Windsor, LLP as tax consultants; and
SierraConstellation Partners, LLC as financial advisor. Winston
Mar of SierraConstellation Partners serves as chief restructuring
officer. Stretto is the claims, noticing and administrative
agent.
Bryan Cave Leighton Paisner, LLP serves as legal counsel to the
Board of Directors.
On July 22, 2021, the U.S. Trustee for Region 3 appointed an
official committee of unsecured creditors. The committee tapped
Barnes & Thornburg, LLP as its legal counsel and Dundon Advisers,
LLC as its financial advisor.
Bryan Cave Leighton Paisner LLP serves as special counsel to the
board of managers of Pipeline Holdings, LLC, one of the affiliated
debtors.
PLASTIPAK HOLDINGS: Moody's Hikes CFR to Ba3 & Rates New Loans Ba3
------------------------------------------------------------------
Moody's Investors Service upgraded Plastipak Holdings, Inc.'s
("Plastipak") Corporate Family Rating to Ba3 from B1 and
Probability of Default Rating to Ba3-PD from B1-PD. At the same
time, Moody's assigned a Ba3 rating to the proposed senior secured
credit facilities, including revolver and term loans, issued by
Plastipak Packaging, Inc., a wholly-owned subsidiary of Plastipak.
The ratings outlook for Plastipak is stable.
The proceeds of the new loans will be used to refinance the
existing term loan maturing in 2024 and senior unsecured notes
maturing 2025, and pay fees and expenses associated with the
transaction.
"The upgrade considers Plastipak's steady deleveraging in the past
several years and our expectation that leverage will continue to
improve for the next 12-18 months," said Motoki Yanase, VP - Senior
Credit Officer at Moody's.
Moody's took the following actions:
Upgrades:
Issuer: Plastipak Holdings, Inc.
Corporate Family Rating, Upgraded to Ba3 from B1
Probability of Default Rating, Upgraded to Ba3-PD from B1-PD
Assignments:
Issuer: Plastipak Packaging, Inc.
Gtd Senior Secured Revolving Bank Credit Facility, Assigned Ba3
(LGD3)
Gtd Senior Secured Multi Currency Revolving Credit Facility,
Assigned Ba3 (LGD3)
Gtd Senior Secured Term Loan A, Assigned Ba3 (LGD3)
Gtd Senior Secured Term Loan B, Assigned Ba3 (LGD3)
Outlook Actions:
Issuer: Plastipak Holdings, Inc.
Outlook, Remains Stable
Issuer: Plastipak Packaging, Inc.
Outlook, Stable
RATINGS RATIONALE
The upgrade to Ba3 CFR reflects Moody's expectation that Plastipak
will continue to manage its total debt, which will help the company
improve leverage along with steady increases in EBITDA. The company
recorded 4.3x leverage for the twelve months ending July 2021,
reflecting Moody's standard adjustments including for lease and
pensions, which Moody's expects to decline to 4.0x-3.5x during the
next 12-18 months.
With EBITDA margin of under 13% for the twelve months to July 2021
including Moody's standard adjustments, Plastipak's profitability
remains lower than that of similarly-rated peers in the packaging
industry. Still, the margin has improved from 10% range recorded in
2017 to 2019, as the company exited from select low-margin preform
business while diversifying the product lineup to improve product
mix. The margin has also been largely stable through the past
several quarters, supported by long-term contracts that allowed the
company to pass through higher raw materials costs in a relatively
short period.
The Ba3 corporate family rating also acknowledges Plastipak's scale
and global geographic diversification, with its European business
contributing about a third of EBITDA, and its good market position
as one of the larger North American manufacturers of rigid plastic
containers and preforms.
At the same time, the rating considers the high customer
concentration of sales, albeit with many blue-chip customers with
long-term relationships, its primarily commoditized product line,
and margins that despite recent improvements remain relatively weak
for the rating category.
Moody's expect Plastipak to maintain good liquidity over the next
12 months, supported by positive free cash flow generation and
sufficient availability under the $300 million revolving credit
facility. Financial covenants for the credit facilities, including
the revolver and Term Loan A, include a maximum total net leverage
ratio of 5.0 times and a minimum interest coverage ratio of 2.5
times. Moody's expect the company to maintain significant cushion
under all its covenants over the next 12 months. The Term Loan B
does not have financial covenants. Foreign assets are excluded from
the collateral pledged, leaving some alternate source of liquidity.
The next significant debt maturity is the revolver and the Term
Loan A in November 2026.
The Ba3 rating on the senior secured credit facilities are on par
with the corporate family rating. This reflects all-secured debt
structure of the company. The ratings also consider the
instruments' security and guarantees from material subsidiaries.
The borrower is Plastipak Packaging, Inc., a wholly-owned
subsidiary. The guarantors include Plastipak Holdings, Inc., the
holding company parent of the group, and certain material
subsidiaries (including foreign subsidiaries) that collectively
represent a substantial majority of the company's EBITDA. Both the
revolver and the term loans are pari-passu, with a first lien
security from substantially all domestic assets of Plastipak and
the guarantees noted above. The company has meaningful non-debt
liabilities, including account payables, lease and pension
obligations, providing some cushion in the capital structure, yet
limited upside to the credit facilities' ratings given their
fluctuating amounts.
In terms of governance considerations in the ratings, Plastipak is
a family-owned company with 90% of total outstanding stock owned by
Young family with the balance owned by senior management. The
company demonstrated conservative financial policies relative to
many other plastic packaging manufacturers owned by private equity
investors. The company has not completed significant acquisitions
and its dividends have been paid from free cash flow over the
years.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The stable outlook reflects Moody's expectation that Plastipak will
realize a gradual but steady margin improvement and manage its
total debt for the next 12-18 months. The outlook also takes into
account the company's ability to generate positive free cash flow
and good liquidity.
Moody's could upgrade the ratings if the company sustainably
improves its credit metrics and product while maintaining a high
percentage of business under contract and conservative financial
policy. Specifically, ratings could be upgraded if debt/EBITDA
falls below 3.5 times, EBITDA to Interest coverage rises above 6.0
times, free cash flow to debt is above 9.0%, and EBITDA margin is
sustained above 15%.
could downgrade the ratings if there is a deterioration in
leverage, liquidity or the other credit metrics. Specifically, the
ratings could be downgraded if debt/EBITDA rises above 4.5 times,
EBITDA to interest coverage declines below 5.0 times, free cash
flow to debt falls below 7.0%, or EBITDA margin falls below 12.0%.
As proposed, the new credit facilities are expected to provide
covenant flexibility that if utilized could negatively impact
creditors. Notable terms include the following:
The preliminary first lien term loan facility documentation allows
for incremental first lien facilities not to exceed the sum of the
greater of $350 million and 100% of consolidated EBITDA for the
most recently ended four quarters. An unlimited amount can be
incurred so long as first lien net leverage is equal to or less
than 4.0x.
The proposed terms and the final terms of the credit agreement may
be materially different.
The principal methodology used in these ratings was Packaging
Manufacturers: Metal, Glass and Plastic Containers Methodology
published in September 2020.
Headquartered in Plymouth, Michigan, Plastipak Holdings, Inc. is a
family-owned global manufacturer and recycler of plastic packaging
containers and preforms used in the beverage, food, consumer
cleaning, personal care, industrial, and automotive end markets.
The Young family owns approximately 90% of total outstanding stock
with the balance owned by senior management. The company generated
around $3.0 billion of revenue for the twelve months ending July
31, 2021.
PLASTIPAK HOLDINGS: S&P Affirms 'B+' ICR, Outlook Stable
--------------------------------------------------------
S&P Global Ratings affirmed its 'B+' issuer credit rating on
Plastipak Holdings Inc.
S&P said, "We assigned our 'B+' issue-level and '3' recovery
ratings to the company's proposed $250 million term loan A and $850
million term loan B.
"We also revised our issue-level and recovery ratings to 'B+' and
'3', respectively, on the company's $300 million revolving credit
facility (RCF).
"The stable outlook reflects our expectations that elevated demand
will more than offset rising operating costs and enable the company
to maintain debt leverage in the mid-4x area.
"We expect sales volumes to remain elevated above pre-pandemic
levels. The pandemic provided a sustained tailwind for Plastipak,
as year-to-date unit volumes through July 31 were up 1.6% versus
prior year, driven by continued growth in beverages and a rebound
in industrial products. In addition, consumer cleaning and food and
juice volumes slightly declined over the same period, though they
remained well above pre-pandemic levels.
"We expect these dynamics to persist over the next 12 months. We
believe a sustained shift toward at-home consumption, remote
working, and pantry loading will continue to support elevated sales
volumes across the majority of Plastipak's key end markets. While
we believe there could be modest volume declines in certain
geographies or product categories, we believe overall unit volumes
will remain well above pre-pandemic levels.
"Operating costs are likely to remain elevated, but manageable.
Like many others, Plastipak saw costs rise over the past year due
to labor constraints, wage inflation, and general operating
challenges borne by the pandemic. We expect these dynamics to
persist over the next 12 months, given the ongoing labor and supply
chain constraints affecting the global economy. That said, we
believe these elevated costs will remain steady at current levels
and should be largely offset by expected sales volumes, such that
Plastipak will be able to maintain debt leverage in the mid-4x
area.
"S&P Global Ratings' stable outlook on Plastipak reflects our
expectations that sales volumes will remain elevated above
pre-pandemic levels over the next 12 months. We believe this
dynamic will help offset elevated operating costs and enable the
company to maintain debt leverage in the mid-4x range.
"We could lower our ratings on Plastipak if we expect debt to
EBITDA to exceed 6x on a sustained basis. We estimate this could
occur if Plastipak sales volume growth and operating margins both
contract 250 basis points (bps) from our base-case scenario.
"We could raise our ratings if Plastipak can improve leverage
closer to 4x and free operating cash flow (FOCF) to debt to 10% on
a sustained basis. This could occur over the next 12 months if the
company's revenue growth and operating margins both improve by
about 350 bps above our base-case scenario."
PRIME HEALTHCARE: Fitch Affirms 'B' LT IDR, Outlook Stable
----------------------------------------------------------
Fitch Ratings has affirmed the ratings of Prime Healthcare
Services, Inc. (PHSI) including its Long-Term Issuer Default Rating
(LT IDR) at 'B', asset-based lending facility (ABL) at 'BB'/'RR1'
and senior secured notes at 'B'/'RR4'. The Rating Outlook is
Stable.
KEY RATING DRIVERS
Durable Cashflows Relative to Typical Corporate: Hospital operators
such as PHSI tend to exhibit more durable revenues and EBITDA than
the typical corporate issuer due to the generally less economically
cyclical and non-discretionary demand for care. Cash conversion is
fairly predictable with high-quality receivable counterparties
(i.e. Medicare, state Medicaid programs and commercial insurers)
and good visibility into future capex requirements. Operating
performance has increasingly normalized as the coronavirus pandemic
has progressed from volume and margin perspectives. However, margin
pressure is possible given labor headwinds and other supply chain
pressures.
Growth via Acquisitions and Operational Improvements: PHSI has been
highly acquisitive since its formation. It operates 31 hospitals
(plus an additional 14 on behalf of a related party, Prime
Healthcare Foundation [PHF], in exchange for a management fee) up
from one in 2001.
PHSI's acquisition strategy targets underperforming emergency
department-centered hospitals and then improves their operating and
financial performance. Recent, albeit anecdotal, examples provided
by PHSI indicate it is largely successful in executing this
strategy as measured by quality-of-care statistics, cost reductions
and some revenue improvements. Fitch is unable to ascertain whether
previous improvements in case mix were attributable to fixing
suboptimal billing practices (e.g. avoidable claim denials) by the
previous owners of the acquired hospitals or whether it was due to
less justifiable billing and admissions practices such as those
alleged in disputes with payors. Continued successful execution of
the turnaround strategy for acquisitions will have a large
influence on trends in margins and cashflows given the company's
smaller scale compared to its for-profit hospital peers.
Potential for More Volatility than Peers: PHSI could exhibit more
volatile EBITDA and cashflows through-the-cycle than its for-profit
hospital peers due to its geographic concentration, smaller scale,
focus on the emergency department and the significant impact on
margins from programs such as California's Hospital Quality
Assurance Fees (QAF)s. Fitch is not assuming any meaningful changes
to PHSI's cashflows in the short-to-medium term as the QAF program
was made permanent in California and threats such as the Medicaid
Fiscal Accountability Rule (MFAR), which could have reduced
funding, have been rescinded. However, the MFAR proposal is
emblematic of the potential for impactful changes that could
decrease hospital cashflows.
The emergency department focus has offsetting implications for
PHSI. Patient volumes should be fairly durable in the short term,
because demand is less discretionary than other service lines.
However, the emergency department payor mix skews toward Medicare
and Medicaid, which pay at lower rates than commercial insurers.
Over the longer term, PHSI may face volume and margin pressure as
payors seek to reduce healthcare expenditures by incentivizing care
that can safely occur in lower cost settings (i.e. not in the
emergency department). For the proportion of volumes that, by
definition, are an emergency and best cared for in that setting,
payors may ration their financial resources, thus pressuring rate
growth. Prime's operating statistics indicate it has not been
immune to these volume pressures.
Conservative Financial Policies: Fitch expects PHSI will operate
with leverage around 4.5x through 2023 which is among the lowest
for for-profit providers, generally and for-profit hospitals,
specifically. Leverage could trend higher given PHSI's acquisitive
strategy. There could be negative momentum in the ratings and/or
Outlook if acquisitions and/or weaker than forecasted EBITDA result
in leverage sustaining above 5.0x.
Governance Increases Potential Risk: PHSI is a privately held
company with concentrated ownership that can influence decisions
through its senior management positions and its position on and
rights related to changes to members of the Board of Directors.
PHSI has a history of related-party transactions (including
donation of hospitals from PHSI to PHF), a more complex corporate
structure, and impairments and covenant waivers during benign
economic and operating environments. Financial and operational
disclosures are less robust than public peers, making it
incrementally more challenging to assess operating performance and
the merits of certain related-party transactions.
The company's legal disputes and settlements with the government
and payors have focused on alleged behaviors that, if true, would
undermine some but not all of the operational and financial
improvements. PHSI (along with PHF and Prime's founder and CEO)
entered into a settlement agreement with the DOJ in 2018 for $65
million and recently settled a dispute with Kaiser Permanente for
$49 million.
These factors, while not individually unique to PHSI, are more
prevalent with PHSI and constrain the ratings. Fitch is not
asserting that the company's actions heretofore have been untoward
but that, to the extent possible under the debt documents, the
company may take actions that may be to the benefit of ownership
and to the detriment of creditor recoveries in the event of a
default or restructuring.
DERIVATION SUMMARY
Compared with rated for-profit healthcare providers, Prime
Healthcare Services, Inc. (B/Stable) is smaller in terms of revenue
and more geographically concentrated, which increases the potential
for volatility in EBITDA and FCF. Its hospitals tend to be more
reliant on government payors and emergent care volumes than
elective procedures, which provides some durability to revenues in
exchange for lower margins due to the relative payment rates and
lower acuity mix. This can be seen in its lower level of revenues
and EBITDA compared with Universal Health Services despite a
similar number of hospitals.
PHSI offsets some of the aforementioned risks by operating with
leverage in the middle of the range compared with that of publicly
traded hospitals. Universal Health Services (BB+) typically
maintains leverage in the 2x-3x range, HCA, Inc. (BB+) in the 3x-4x
range, Tenet Healthcare Corp. (B), is trending towards 5x and
Community Health Systems, Inc. (B-), which is expected to be
between 7x-7.5x after years with higher leverage.
Compared with other hospital peers, Prime has relationships with a
number of related entities, including contributing hospitals to and
managing on behalf of PHF. The company is also private, and its
disclosures are adequate but below the standard of public filers.
These factors introduce governance, group transparency, and
financial transparency risks, which are less relevant in the
analysis of its public peers.
Fitch does not consider there to be a parent/subsidiary
relationship between Prime Healthcare Services, Inc. and Prime
Healthcare Foundation (BBB-/Positive) as they are independent
entities, PHF is not owned by PHSI nor Prime Healthcare Holdings,
Inc., the debt is not nor expected to be guaranteed or cross
defaulted, and Fitch does not expect that PHSI would provide
financial support to PHF. However, there is some operational
overlap as PHSI manages hospitals on behalf of PHF.
No country ceiling, operating environment or parent and rating
subsidiary analysis influenced the ratings.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- Mid-teen revenue growth in 2021 due to full year contribution
from Saint Francis Medical Center and, to a lesser extent,
longer average length of stay and a rebound in patient
volumes;
-- Volumes are expected to normalize in 2022 and grow at a low
single-digit rate beyond 2022 on an organic basis;
-- Consolidated EBITDAR margin is assumed to be around 12%,
slightly below pre-pandemic levels;
-- FCF is expected to be negative in 2021 and 2022 due to
repayments of Medicare advances and litigation settlements,
but positive in 2023 and beyond;
-- Approximately $100 million per year of acquisitions and $75
million per year of distributions.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Demonstrated improvement in operating fundamentals (i.e.
volumes) and Fitch's expectation that the improvement is
sustainable, or;
-- PHSI successfully pivoting its portfolio away from the
emergency room and thereby better aligning its volume growth
with secular trends;
-- Positive momentum would further be governed by one of the
items above occurring in conjunction with improvements in its
governance structure such that it is no longer a constraint on
the ratings.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Fitch's expectation of a deterioration in FCF from 'durably
positive' toward break-even and/or with greater volatility;
-- Fitch's expectation of leverage sustaining above 5.0x;
-- Further evidence of weak corporate governance such that it
warrants a lower rating in and of itself.
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
Debt Structure: PHSI's capitalization is comprised of a $450
million ABL, $925 million of senior secured notes, approximately
$870 million of lease liabilities (on balance sheet amount not
capitalized amount) and de minimis amounts of other debt. The
senior secured notes have an equity interest in the collateral
pledged to the lease liabilities and mortgages and hospital-level
debt.
Liquidity Sufficient: PHSI's liquidity is comprised of the undrawn
$450 million ABL facility and approximately $949 million of cash as
of June 30, 2021. Fitch also generally expects positive FCF
sufficient to cover operating needs beginning in 2023, though 2021
and 2022 will be negative as a result of repayment of Medicare
advances and litigation settlements.
Derivation of Recovery Ratings and Debt-Level Ratings: The
'BB'/'RR1' and 'B'/'RR4' ratings for PHSI's ABL facility and the
senior secured first-lien notes, respectively, reflect Fitch's
expectation of recovery for the ABL facility in the 91% to 100%
range and recovery for the first lien secured notes in the 31%-50%
range under a bankruptcy scenario. The instrument ratings for
PHSI's debt are notched from its 'B' IDR based on a bespoke
analysis. The recovery analysis assumes that Prime Healthcare
Services, Inc. would be reorganized as a going concern in
bankruptcy rather than liquidated.
Fitch estimates an enterprise value (EV) on a going-concern basis
of $1.2 billion for PHSI. The EV assumption is based on
post-reorganization EBITDA after dividends to associates and
minorities of approximately $220 million and a 6.25x multiple and a
deduction of 10% for administrative claims.
Fitch projects a post-restructuring sustainable cash flow, which
assumes both depletion of the current position to reflect the
distress that provoked a default, and a level of corrective action
that Fitch assumes either would have occurred during restructuring,
or would be priced into a purchase price by potential bidders. The
GC EBITDA estimate reflects Fitch's view of a sustainable,
post-reorganization EBITDA level upon which Fitch bases the
enterprise valuation.
Fitch assumes a scenario in which PHSI could default or restructure
if EBITDA were to decline toward $300 million, which would imply
elevated refinancing risk due to the leverage multiple nearing the
acquisition multiples for the hospitals and the company operating
at a meaningful FCF deficit, which would not be sustainable. EBITDA
at these levels could occur in a scenario where there was a
meaningful reduction in per treatment Medicaid and/or Medicare
reimbursement rates, changes to provider fee programs and/or if
there were negative impacts to the fees received from the
non-profit foundation.
Fitch assumes that upon entering bankruptcy/default, PHSI would be
unable to improve EBITDA as a unilateral reduction in government
rates would likely have limited cost offsets, particularly for a
hospital operator that has already improved the financial and
operating results of the acquired hospitals by reducing redundant
costs. Fitch expects the going concern EBITDA would be below the
EBITDA upon entering bankruptcy as Fitch assumes the potential loss
of the management fees it earns from the hospitals owned by Prime
Healthcare Foundation given contractual rights afforded to PHF and
financial incentives for ownership that could conflict with
creditors. Fitch also assumes that were the senior secured note
lenders to enforce their rights related to the hospitals for which
they have a first-lien, they would incur additional operating
expenses and general and administrative expenses reflecting the
loss of economies of scale.
The EV multiple of 6.25x EBITDA considers the historical bankruptcy
case study exit multiples for peer companies with a median of
6.0x-6.5x, the recent emergence of Quorum Health Corporation, a
rural hospital operator at 6.3x, recent acquisition multiples for
hospitals acquired by PHSI, trading multiples for publicly-traded
hospitals that have fluctuated between approximately 6.5x and 9.5x
since 2011 and the privatization multiple for LifePoint Health of
7.5x.
In applying the distributable proceeds, Fitch assumes $375 million
is drawn against the ABL, which would recover 100%. Fitch applied
the post-ABL distributable proceeds proportionally between the $700
million of senior secured notes and the mortgages, notes and other
debt based on Fitch's estimate of the amount of EBITDA generated by
each group's collateral. Incremental issuance of secured notes
absent a full release of additional collateral from the leased pool
would likely result in a downgrade of the secured notes.
Fitch has not assumed any material collateral leakage via
dispositions, contributions, restricted payments, etc. ahead of a
restructuring/bankruptcy though notes the possibility for such,
particularly via restricted payments, based on the terms of the
debt agreements.
ESG CONSIDERATIONS
PHSI has an ESG Relevance Score of '4' for Exposure to Social
Impacts due to pressure to contain healthcare spending growth,
highly sensitive political environment, and social pressure to
contain costs or restrict pricing, which has a negative impact on
the credit profile and is relevant to the rating in conjunction
with other factors.
PHSI has an ESG Relevance Score of '4' for Governance Structure due
to the significant control the Reddy family has via its ownership,
its senior management positions and the ability to influence the
composition of the Board of Directors. Disclosure regarding
relevant expertise and successful oversight by the Board of
Directors is limited. This has a negative impact on the credit
profile and is relevant to the rating in conjunction with other
factors.
PHSI has an ESG Relevance Score of '4' for Group Structure due to
the degree to which there have been related party transactions
where benefits to the ownership have been clearer than the benefits
to other stakeholders. For example, the contribution of PHSI
hospitals to PHF could have had positive tax consequences for
ownership but moved 15 assets out of the borrower group
(approximately one-third). PHSI retains some of the hospitals'
cashflows through management fees. This has a negative impact on
the credit profile and is relevant to the rating in conjunction
with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. 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
Prime Healthcare Services is a privately-owned, for-profit
healthcare provider that focuses on owning and managing short-term
acute care hospitals with above-average exposure to emergency
volumes.
Criteria Variation
Fitch considers PHSI's real estate lease liabilities to be
debt-like and assessed PHSI on an adjusted debt / EBITDAR basis
rather than debt / EBITDA, which is a variation from Fitch's
Corporate Rating Criteria. The variation is based on their
materiality (i.e. the largest obligation that are crossed and act
as one obligation), their ability to trigger a default as
guaranteed by PHSI, the fact that the leased real estate is core to
the operating strategy and that use of sale leasebacks has been the
strategy to fund acquisitions. The variation did not result in a
different rating category outcome.
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch has assessed PHSI using lease adjusted leverage metrics due
to the materiality of its lease obligations, their functioning as
one obligation and corporate guaranty and centrality to the
issuer's operating assets. Fitch has capitalized its estimate of
cash rent at an 8x multiple rather than the amounts reported as
lease liabilities.
PROG HOLDINGS: Moody's Assigns First Time 'B1' Corp. Family Rating
------------------------------------------------------------------
Moody's Investors Service has assigned a first-time B1 corporate
family rating and a B1 long-term senior unsecured rating PROG
HOLDINGS, INC.; (Prog Holdings), a US non-prime rent-to-own lessor
and consumer finance provider with $1.5 billion in total assets as
of Sept 30, 2021. The outlook is stable.
Assignments:
Issuer: PROG HOLDINGS, INC.
Corporate Family Rating, Assigned B1
Senior Unsecured Regular Bond/Debenture, Assigned B1
Outlook Actions:
Issuer: PROG HOLDINGS, INC.
Outlook, Assigned Stable
RATINGS RATIONALE
The assigned CFR is derived from Prog Holdings' b1 standalone
assessment, which is supported by its solid franchise as a provider
of alternative financial leasing, resulting in strong
profitability. The standalone assessment and ratings also
incorporate the risks to creditors from the firm's subprime
consumer focus resulting in weak asset quality, declining
capitalization from higher debt and planned shareholder
distribution reducing its ability to absorb unexpected losses, and
a business model largely reliant on a single product. Asset quality
challenges are somewhat mitigated by the company's solid lease
origination model through its technology-enabled platform as well
as the firm's strong cashflow generation. Moody's said the stable
outlook reflects its views that Prog Holdings will maintain
earnings, leverage and liquidity consistent with its rating level
over the next 12-18 months.
Moody's said Prog Holdings ratings reflect the high credit risk
associated with a business model focused on consumers with
non-prime and subprime credit profiles, particularly within the
consumer goods market where competition is elevated, including from
buy-now, pay-later financing platforms. Despite the low barriers to
entry in the US consumer finance market because of abundant
investment capital, Prog Holdings benefits from established
origination channels with large national retailers such as Best Buy
and Loews, among others. Additionally, Prog Holdings' business
model benefits from a multitude of lease origination channels
reducing its reliance on any one source, supporting its earnings
generation capacity and market position in the competitive
alternative US consumer financing market.
Prog Holdings' solid financial performance is underpinned by
consistently high levels of profitability, as evidenced by an
estimated net income to total assets of around 21.5% in the first
half of 2021. This high level of profitability enables the company
to support higher capital levels that protect creditors against
unexpected losses. Prog Holdings' tangible common equity to
tangible managed assets ratio was elevated at 62.6% as of June 30,
2021, although Moody's expects this ratio to deteriorate
significantly following their announced share buyback plan. Moody's
believes that the high-risk profile of Prog Holdings' assets
requires the company to maintain a strong cushion to absorb credit
losses, from capital and reserves. The company's pullback on lease
originations at the onset of the coronavirus pandemic demonstrated
some level of conservatism in its risk appetite. Its improved
credit performance in 2020, evidenced by a reduction in write-offs
in the Progressive Leasing segment, to 5.4% in 2020 down from 7.2%
in 2019, is largely a function of massive fiscal stimulus which has
supported consumers through the pandemic. Moody's expects the
company to maintain capital at or near current levels over the next
12-18 months.
The B1 long-term senior unsecured rating reflects the application
of Moody's Loss Given Default (LGD) model and methodology, which
consider the volume and priority of unsecured notes with respect to
other debt and non-debt obligations in Prog Holdings liability
structure, and the notes' asset coverage.
The assignment of Prog Holdings ratings also takes into account its
governance as part of Moody's environmental, social and governance
(ESG) considerations. Governance is very relevant for financial
companies. Moody's does not have any particular concerns with
respect to Prog Holdings governance practices.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Prog Holdings' ratings could be upgraded if the firm continues to
grow at a measured pace and diversifies its income sources while
maintaining strong profitability and improving capital levels
without increasing risk appetite.
Prog Holdings' ratings could be downgraded if there is a material
deterioration in capital, profitability and/or liquidity, or if
regulatory change threatens the profitability or viability of its
business model. Furthermore, issuance of secured debt or transition
of unsecured revolver to secured could reduce availability of
unencumbered assets for unsecured note holders and put downward
rating pressure on the senior unsecured rating.
The principal methodology used in these ratings was Finance
Companies Methodology published in November 2019.
PROG HOLDINGS: S&P Assigns 'BB-' ICR, Outlook Stable
----------------------------------------------------
S&P Global Ratings assigned its 'BB-' issuer credit rating and
stable outlook to Draper, Utah-based virtual lease-to-own (VLTO)
services provider Prog Holdings Inc. (Progressive). At the same
time, S&P assigned its 'BB-' issue-level and '4' recovery ratings
to the proposed notes.
Progressive operates in the competitive LTO industry, and its
business is inherently exposed to consumer credit risk. The company
has provided LTO services for over 20 years and is the largest VLTO
provider in the U.S. It competes with VLTO peers, traditional LTO
providers such as Rent-A-Center, and other subprime financing
providers. Progressive's business model relies on
credit-constrained consumers that lack liquidity to make large
purchases without financing. For discretionary categories, its
customers often have an option to delay purchases and acquire goods
for lower prices from traditional retailers using saved cash.
The company's business model exposes it to significant credit risk,
one of the more volatile subsectors in our retail portfolio.
Typically, lease write-offs represent about 6%-8% of revenues,
though changing macroeconomic conditions could drive rapid
deterioration of its lease portfolio. Its decision-making platform
somewhat limits this risk by utilizing its extensive database of
historical leases and customer information to predict payment
behavior and optimize the portfolio. Business from repeat customers
has increased the past few years, which S&P believes helps improve
portfolio performance and predictability. Furthermore, the short
lease terms (12 months) it offers help limit risk because they
result in rapid portfolio turnover, providing flexibility to react
to changing economic conditions. Still, S&P assesses Progressive's
business risk profile as weak, reflecting its competitive
landscape, its view of its reliance on favorable macroeconomic
conditions, and exposure to credit-constrained consumers.
Progressive differentiates its leasing service from traditional
credit products by offering short-term commitment-free leases.
Customers can return goods with no penalties any time throughout
the contract period or assume ownership by completing the full
agreement term. Alternatively, customers have early buyout options
to assume ownership early at a discount. Because these features
distinguish VLTO from traditional lending services, it tends to be
subject to less regulatory scrutiny relative to traditional lending
products. Nevertheless, regulatory risk is greater than with
traditional retailers, evidenced by the company's recent $175
million settlement with the U.S. Federal Trade Commission
pertaining to its lease disclosures.
Progressive also offers other financing options through its Vive
Financial business and Four Technologies, which it acquired in June
2021. These segments represent less than 5% of revenues and
earnings, and we view them as immaterial.
Progressive relies on retail partners to offer its services to
customers. These relationships are highly important to its
continued success. Most of its revenues are generated from large
retailers that can offer its service in their stores and websites
across the U.S. In our view, Progressive's retail partners benefit
from capturing sales that would otherwise be missed. However, some
retailers may be hesitant to partner with VLTO operators because
the service is viewed by some as predatory to subprime consumers.
Retailers that choose to offer third-party VLTO services typically
look to engage with providers that offer good customer service and
promise meaningful sales capture. S&P believes competitive threats
from other VLTO operators will constantly challenge Progressive's
business. For example, innovative services such as Acima's new LTO
payment card could improve overall customer service by enabling a
seamless transaction experience. Nevertheless, Progressive remains
a leader in the VLTO industry with its own suite of innovative
products. S&P believes it has established good long-term
relationships with its retail partners.
Progressive has some concentrated exposure to certain electronics,
furniture, appliance, and jewelry retailers. Deteriorating
relationships with key retail partners would pose a significant
risk to the business. However, its contractual partnership
agreements (which are sometimes exclusive) provide short- to
intermediate-term reliability in sales performance. S&P applies a
one-notch negative comparable ratings analysis modifier to reflect
its concentration to a handful of retail partners.
S&P said, "We believe government stimulus actions have led to
temporarily expanding profitability and subdued revenue growth,
both of which we expect to normalize next year. Recent government
stimulus has benefited consumers and improved lease payment
performance at Progressive. Lower write-off rates were the primary
driver of S&P Global Ratings-adjusted EBITDA margins improving
about 160 basis points (bps) in 2020 to 13.8%. We expect further
expansion of up to 100 bps in 2021. However, as excess unemployment
benefits and stimulus funding dwindle, we expect Progressive's
lease portfolio performance and profitability to normalize. We
forecast EBITDA margins contracting to about 12.5% in 2022, in line
with 2019. Through expanding its retail partnerships, revenue has
consistently increased in the double-digit percent area over the
past several years. In 2021, we expect high-single-digit percent
sales growth, somewhat constrained relative to its historic trend
despite general pent-up demand experienced by many retailers. We
attribute its lagging sales growth to improved financial condition
of consumers, driven by temporary government stimulus. We expect a
reversion to double-digit percent revenue growth in 2022, which
combined with contracting margins should result in a modest decline
in EBITDA and about consistent credit metrics.
"The anticipated transaction should result in S&P Global
Ratings-adjusted leverage in the mid- to high-1x area, though we
believe credit metrics could deteriorate rapidly. In our view, LTO
providers are subject to high potential volatility given inherent
risks of subprime consumer financing. They must therefore maintain
conservative financial policies to provide a cushion for
adversities. We believe Progressive will generally maintain
leverage below 2x. Under stress scenarios when consumers' financial
positions deteriorate, we anticipate declining EBITDA and rapid
leveraging. We therefore view its financial risk profile as
intermediate. Progressive has a capital-light business model
because its business is conducted virtually. This results in much
lower need for capital expenditures than with traditional retailers
and allows for consistently good FOCF generation. We forecast over
$250 million of annual FOCF.
"The stable outlook reflects our expectation for modest revenue
growth stemming from economic expansion as well as new retail
partnerships that expand Progressive's scope. We expect the rate of
write-offs to increase toward levels from before the COVID-19
pandemic, as evidenced in its third quarter earnings, while the
company continues to generate positive FOCF of over $250 million
annually. We forecast leverage sustained below 2x."
S&P could lower the rating on Progressive if:
-- S&P expects S&P Global Ratings-adjusted debt to EBITDA to be
sustained above 3x in good market conditions or funds from
operations to debt less than 30%, perhaps driven by a more
aggressive financial policy with higher debt balances;
-- Leverage rises above 4x due to a more severe-than-expected
operating trough (no change to financial policy), and it sees
significant pressure on cash flows; or
-- Operating performance deteriorates relative to S&P's forecast,
which could occur if the company cannot maintain relationships with
its retail partners or if it pursues more aggressive leasing
standards.
S&P could raise the rating on Progressive if:
-- It expands scale and enhances profitability as it fine tunes
its decision-making algorithms and enters into new retail
partnerships;
-- S&P believes competitive pressures from other LTO peers do not
pose a significant threat as the company secures more exclusive
contracts with major retailers;
-- It demonstrates a track record of profitability at its Vive
Financial and Four Technologies business segments; and
-- S&P expects it to maintain leverage at least in line with its
forecast and consistent with its publicly stated financial policy.
RAMBUS INC: Posts $3.7 Million Net Income in Third Quarter
----------------------------------------------------------
Rambus Inc. filed with the Securities and Exchange Commission its
Quarterly Report on Form 10-Q disclosing net income of $3.68
million on $81.28 million of total revenue for the three months
ended Sept. 30, 2021, compared to a net loss of $12.74 million on
$56.92 million of total revenue for the three months ended Sept.
30, 2020.
For the nine months ended Sept. 30, 2021, the Company reported net
income of $12.23 million on $236.52 million of total revenue
compared to a net loss of $28.42 million on $184.41 million of
total revenue for the same period during the prior year.
As of Sept. 30, 2021, the Company had $1.20 billion in total
assets, $354.82 million in total liabilities, and $847.84 million
in total stockholders' equity.
"Rambus delivered a strong third quarter, supported by great
execution from the team," said Luc Seraphin, chief executive
officer of Rambus. "We are well positioned for continued
profitable growth as demonstrated by this quarter's record product
revenue from memory interface chips. Strategically, we continue to
scale the business as the integrations of AnalogX and PLDA are well
underway with the new teams already contributing new products and
design wins."
Cash, cash equivalents, and marketable securities as of Sept. 30,
2021 were $419.7 million, a decrease of $57.4 million from June 30,
2021, mainly due to approximately $97.1 million paid in connection
with the acquisitions of AnalogX Inc. and PLDA Group, net of cash
acquired of approximately $8.6 million, partially offset by cash
provided by operating activities of approximately $46.0 million.
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/917273/000091727321000028/rmbs-20210930.htm
About Rambus Inc.
Rambus -- rambus.com -- is a provider of chips and silicon IP
making data faster and safer. With over 30 years of advanced
semiconductor experience, the Company is a pioneer in
high-performance memory subsystems that solve the bottleneck
between memory and processing for data-intensive systems.
Rambus reported a net loss of $43.61 million in 2020, a net loss of
$90.42 million in 2019, and a net loss of $157.96 million in 2018.
As of June 30, 2021, the Company had $1.15 billion in total assets,
$322.40 million in total liabilities, and $830.59 million in total
stockholders' equity.
REAGOR-DYKES MOTORS: Ford Credit's Request for Docs Denied
----------------------------------------------------------
In the Chapter 11 cases of Reagor-Dykes Motors, LP, Ford Motor
Credit Company, LLC, on July 15, 2021, served its first set of
interrogatories and second request for production of documents on
the trustee in the adversary proceeding styled DENNIS FAULKNER,
Creditors' Trustee of the Creditors Trust, Plaintiff, v. FORD MOTOR
CREDIT COMPANY, LLC, Defendant, Adversary No. 20-05005 (Bankr. N.D.
Tex.).
The Trustee objected to four interrogatories and nine requests for
production. Each interrogatory and request objected to by the
Trustee seeks information regarding the Debtors' financial
relationship with other creditors and how other creditors were
harmed by the Debtors' transfers to Ford Credit. The Trustee
contends that discovery about any specific creditor is irrelevant
to any of his causes of action and that supplying the requested
discovery would be overly burdensome. Ford Credit now files its
motion to compel the Trustee to respond to its requests; hearing
was held on October 14, 2021.
In a Memorandum Opinion and Order dated October 29, 2021, the
United States Bankruptcy Court for the Northern District of Texas,
Lubbock Division, sustained the Trustee's objections and denied
Ford Credit's motion to compel the Trustee's answer to the four
interrogatories and nine requests for production.
Through Ford Credit's interrogatories and requests for production,
Ford Credit seeks every document, contract, email, communication,
invoice, receipt, memorandum, and correspondence which could
possibly relate to the Debtors' fraudulent intent and their
commercial relationship with every other creditor. This amount of
information is prodigious, the Court pointed out.
Bryan Dumesnil, counsel for the Trustee, says the database housing
the Debtors' electronically stored information holds over one
million documents, and the Debtors also have thousands of boxes of
hard copy documents. An electronic search of the database of just
nine creditors returned over 240,398 documents, which Dumesnil says
would conservatively take 4,000 hours to review. The Debtors had
hundreds of other creditors. Dumesnil says it would also take
countless more hours to scrap through all the Debtors' tens of
thousands of monthly receipts and documents just to identify the
full volume of discovery that Ford Credit requests.
Such a Herculean task may be warranted were this a typical
fraudulent conveyance action where specific harm to other creditors
was alleged, the Court said. But where, as here, the plaintiff has
alleged fraudulent intent through the Ponzi-scheme presumption, the
minute details of the Debtors' every transaction with creditors are
largely irrelevant, the Court noted.
Even if some of the requested information could shed light on
relevant issues, the Trustee has demonstrated that the request is
unduly burdensome and disproportionate to the needs of this case,
the Court ruled. Ford Credit's motion to compel is therefore
denied. The Trustee is not required to respond to the four
interrogatories and nine requests for production beyond the extent
to which he has already replied.
A full-text copy of the decision is available at
https://tinyurl.com/4k9e9a2h from Leagle.com.
About Reagor-Dykes Motors
Dykes Auto Group -- https://www.reagordykesautogroup.com/ -- is a
dealer of automobiles headquartered in Lubbock, Texas. The Company
offers new and used vehicles, automobile parts, and other related
accessories, as well as car financing, leasing, repair, and
maintenance services. Some of its new vehicles include brands like
Ford, Toyota, GMC, Cadillac, Chevrolet and Buick.
Reagor-Dykes Motors, LP, based in Lubbock, Texas, and its
debtor-affiliates sought Chapter 11 protection (Bankr. N.D. Tex.
Lead Case No. 18-50214) on Aug. 1, 2018. In its petition, the
Debtors were estimated $10 million to $50 million in both assets
and liabilities. The petition was signed by Bart Reagor, managing
member of Reagor Auto Mall I, LLC, general manager and Rick Dykes,
managing member of Reagor Auto Mall I, LLC, general partner.
The Hon. Robert L. Jones presides over the case.
David R. Langston, Esq., at Mullin Hoard & Brown, L.L.P., serves as
bankruptcy counsel. BlackBriar Advisors LLC is serving as CRO for
the Debtor.
ROCKDALE MARCELLUS: Asset Firms Face $90M Suit on Bankruptcy Scheme
-------------------------------------------------------------------
Matthew Santoni of Law360 reports that a pipeline operator said the
asset management and investment companies trying to prop up and
purchase a Marcellus Shale gas driller were using the driller's
bankruptcy for a "brazen scheme" to cut off the pipeline company,
according to a lawsuit the pipeline company filed in Pennsylvania
federal court.
UGI Texas Creek said it had an exclusive agreement to transport gas
from Rockdale Marcellus LLC's wells since 2017, but when Rockdale
filed for Chapter 11 bankruptcy and got "debtor-in-possession"
loans to stay afloat, its lenders' terms required Rockdale to axe
the agreement with UGI.
About Rockdale Marcellus
Rockdale Marcellus is a northeast Pennsylvania natural gas driller.
It owns and operates 66 producing wells on 42,897 net acres in
three northeast PA counties.
On Sept. 21, 2021, Rockdale Marcellus, LLC and Rockdale Marcellus
Holdings, LLC filed petitions seeking relief under chapter 11 of
the United States Bankruptcy Code (Bankr. W.D. Pa. Lead Case No.
21-22080). The Debtors' cases have been assigned to Judge Gregory
L. Taddonio.
Rockdale LLC listed $100 million to $500 million in assets and
liabilities as of the bankruptcy filing.
Reed Smith LLP is serving as the Debtors' counsel. Huron
Consulting Services LLC is the restructuring advisor. Houlihan
Lokey Capital, Inc., is the investment banker. Epiq is the claims
agent.
RUSSO REAL ESTATE: Seeks Approval to Hire Peyco as Realtor
----------------------------------------------------------
Russo Real Estate, LLC and DeRiso Development, LLC seek approval
from the U.S. Bankruptcy Court for the Northern District of Texas
to hire Peyco Southwest Realty, Inc.
The Debtor requires the assistance of a realtor to list and sell a
number of tracts commonly referred to as the Trinity Cooper
properties located at 7201-7209 S. Cooper, Arlington, Texas.
Peyco will get a 4 percent commission from the sale.
Jordan Foster, a principal at Peyco, disclosed in a court filing
that his firm neither holds nor represents any interest adverse to
the Debtors or their estates.
The firm can be reached through:
Jordan Foster
Peyco Southwest Realty Inc.
1703 North Peyco Drive
Arlington, TX 76001
Phone: (817) 467-6803
Email: jfoster@peycosouthwest.com
About Russo Real Estate LLC and
DeRiso Development LLC
Russo Real Estate LLC, and DeRiso Development, LLC are Arlington,
Texas-based companies engaged in activities related to real
estate.
Russo Real Estate and DeRiso Development filed voluntary petitions
for relief under Chapter 11 of the Bankruptcy Code (Bankr. N.D.
Texas Lead Case No. 21-40220) on Feb. 1 2021. At the time of the
filing, Russo Real Estate disclosed assets of between $1 million
and $10 million and liabilities of the same range. DeRiso
Development had estimated assets of less than $50,000 and
liabilities of between $1 million and $10 million.
Judge Edward L. Morris oversees the cases.
The Debtors tapped Griffith, Jay & Michel, LLP and Hixson &
Stringham, PLLC as bankruptcy counsel; Curnutt & Hafer, LLP as
special counsel; and PSK CPA as accountant.
RUSSO REAL ESTATE: Seeks to Hire PSK CPA as Accountant
------------------------------------------------------
Russo Real Estate, LLC and DeRiso Development, LLC seek approval
from the U.S. Bankruptcy Court for the Northern District of Texas
to hire PSK CPA as their accountant.
The firm's services include assisting the Debtor in tax-related
matters; participating in negotiations with the Internal Revenue
Service; preparing for and attending IRS hearings; and conducting
conferences and consultations as may be necessary.
The firm will be paid on an hourly basis at its regular rates.
Casey Campbell, a principal at PSK CPA, has been designated by the
firm as the lead accountant.
Mr. Campbell disclosed in a court filing that his firm is a
"disinterested person" within the meaning of Section 101(14) of the
Bankruptcy Code.
The firm can be reached through:
Casey Campbell, CPA
PSK CPA
3001 Medlin Dr,
Arlington, TX 76015
Phone: +1 817-664-3000
Email: casey.campbell@pskcpa.com
About Russo Real Estate LLC and
DeRiso Development LLC
Russo Real Estate LLC, and DeRiso Development, LLC are Arlington,
Texas-based companies engaged in activities related to real
estate.
Russo Real Estate and DeRiso Development filed voluntary petitions
for relief under Chapter 11 of the Bankruptcy Code (Bankr. N.D.
Texas Lead Case No. 21-40220) on Feb. 1 2021. At the time of the
filing, Russo Real Estate disclosed assets of between $1 million
and $10 million and liabilities of the same range. DeRiso
Development had estimated assets of less than $50,000 and
liabilities of between $1 million and $10 million.
Judge Edward L. Morris oversees the cases.
The Debtors tapped Griffith, Jay & Michel, LLP and Hixson &
Stringham, PLLC as bankruptcy counsel; Curnutt & Hafer, LLP as
special counsel; and PSK CPA as accountant.
RUSSO REAL ESTATE: Taps Griffith, Jay & Michel as Legal Counsel
---------------------------------------------------------------
Russo Real Estate, LLC and DeRiso Development, LLC seek approval
from the U.S. Bankruptcy Court for the Northern District of Texas
to hire employ Griffith, Jay & Michel, LLP as legal counsel.
The firm's services include:
a. advising the Debtors generally with respect to general and
restructuring matters;
b. assisting the Debtors and their other professionals in the
protection and preservation of the estate;
d. assisting the Debtors in preparing legal papers; and
e. performing other general and restructuring legal services
for the Debtors in connection with their Chapter 11 cases.
The hourly rates for attorneys at Griffith range from $150 to $450.
The attorney primarily responsible for this bankruptcy matter will
be Mark J. Petrocchi, Esq. His hourly rate is $400.
Mr. Petrocchi 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 may be reached through:
Mark J. Petrocchi, Esq.
Griffith, Jay & Michel, LLP
2200 Forest Park Blvd.
Fort Worth, TX 76110
Phone: (817) 926-2500
Fax: (817) 926-2505
Email: mpetrocchi@lawgjm.com
About Russo Real Estate LLC and
DeRiso Development LLC
Russo Real Estate LLC, and DeRiso Development, LLC are Arlington,
Texas-based companies engaged in activities related to real
estate.
Russo Real Estate and DeRiso Development filed voluntary petitions
for relief under Chapter 11 of the Bankruptcy Code (Bankr. N.D.
Texas Lead Case No. 21-40220) on Feb. 1 2021. At the time of the
filing, Russo Real Estate disclosed assets of between $1 million
and $10 million and liabilities of the same range. DeRiso
Development had estimated assets of less than $50,000 and
liabilities of between $1 million and $10 million.
Judge Edward L. Morris oversees the cases.
The Debtors tapped Griffith, Jay & Michel, LLP and Hixson &
Stringham, PLLC as bankruptcy counsel; Curnutt & Hafer, LLP as
special counsel; and PSK CPA as accountant.
RYERSON HOLDING: Moody's Hikes CFR to B1, Outlook Remains Stable
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Moody's Investors Service upgraded Ryerson Holding Corporation's
corporate family rating to B1 from B2 and its probability of
default rating to B1-PD from B2-PD. At the same time, Moody's
upgraded Joseph T. Ryerson & Son's senior secured notes rating to
B2 from B3. Moody's maintained Ryerson's Speculative Grade
Liquidity Rating of SGL-2. The ratings outlook remains stable.
"The upgrade of Ryerson's ratings reflects its sustainably improved
credit profile resulting from its recent aggressive debt reduction
efforts supported by its strong free cash flow and proceeds from
sale-leaseback transactions. This will enable the company to
maintain credit metrics that support the upgrade even when end
market demand and metals prices decline to more sustainable
levels," said Michael Corelli, Moody's Senior Vice President and
lead analyst for Ryerson Holding Corporation.
Upgrades:
Issuer: Joseph T. Ryerson & Son
Gtd. Senior Secured Regular Bond/Debenture, Upgraded to B2 (LGD5)
from B3 (LGD5)
Issuer: Ryerson Holding Corporation
Corporate Family Rating, Upgraded to B1 from B2
Probability of Default Rating, Upgraded to B1-PD from B2-PD
Outlook Actions:
Issuer: Joseph T. Ryerson & Son
Outlook, Remains Stable
Issuer: Ryerson Holding Corporation
Outlook, Remains Stable
RATINGS RATIONALE
Ryerson's B1 corporate family rating is supported by the company's
recent debt pay downs, which along with a materially stronger
operating performance due to significantly improved end market
demand and product pricing, will result in substantially stronger
credit metrics. The rating also incorporates the company's product
and customer diversification and overall size and scale, its modest
capital spending requirements, countercyclical working capital
needs and good liquidity profile. The rating also reflects its
exposure to cyclical end markets, volatile steel and metals prices
and the competitiveness of the metals distribution sector which
results in somewhat weak and volatile profit margins through the
cycle.
Ryerson's operating performance significantly deteriorated in 2020
due to the COVID-19 pandemic's impact on steel and metals demand
and pricing as the company's product prices tend to track movements
in the price of these commodities. As a result, Ryerson generated
adjusted EBITDA of only $152 million versus $277 million in 2019.
Steel and metals prices and customer demand began to strengthen in
the back half of 2020 and those trends have accelerated this year.
Domestic steel prices have surged with hot rolled coil prices (HRC)
hitting a record high of about $1,950 per ton in October 2021
before modestly weakening in early November, but are expected to
remain at historically elevated levels through 2022. The price
surge has been attributable to industry consolidation, a temporary
dislocation of supply and demand, rising freight costs, import
protections and elevated prices for steel inputs. Aluminum and
copper prices have followed a similar trajectory and have also
materially strengthened over the past year. Most of Ryerson's end
markets have also strengthened and its limited exposure to the
aerospace and oil & gas sectors has been beneficial during this
economic recovery, as well as its exposure to certain end markets
that have held up better or recovered quicker such as consumer
durables, HVAC and construction. As a result, Ryerson's operating
performance has significantly improved in 2021 and will rise to a
record level despite substantial LIFO expense, with adjusted EBITDA
around $500 million. Moody's expect its operating results to remain
historically strong in 2022 despite signs of a peak in steel
prices.
In July 2020, Joseph T. Ryerson & Son issued $500 million of 8.50%
senior secured notes due in 2028 and used the proceeds to redeem
$530 million of 11% senior secured notes due in 2022. The company
secured favorable redemption terms, which allow it to periodically
reduce the outstanding principal amount by up to $100 million with
proceeds from a property sale and up to 10% of the original
principal amount during each twelve-month period through August 1,
2023. In October 2020 and July 2021, Ryerson exercised its once a
year option to redeem $50 million in outstanding notes. The company
also completed a sale-leaseback transaction in June 2021 and used
the proceeds to retire $100 million of the 8.5% senior secured
notes in July 2021. This transaction will result in annual lease
costs of about $6.4 million, but has reduced annual interest costs
by around $8.5 million. Overall, these debt paydowns have reduced
Ryerson's outstanding debt by about $300 million since December
2019 and significantly lowered its interest costs and further
paydowns are possible considering Moody's expectation for strong
free cash flow as investments in working capital reverse and become
a source of cash. However, a portion of this cash will be returned
to shareholders since the company initiated a $50 million share
repurchase program and a quarterly cash dividend of $0.08 per share
in August 2021, and subsequently raised the dividend to $0.085 per
share in November 2021 (about $3.25 million) and continues to
pursue periodic bolt-on acquisitions similar to the acquisition of
Specialty Metals Processing in September 2021.
Ryerson's debt reduction initiatives along with its robust
operating performance will result in its leverage ratio
(Debt/EBITDA) declining to about 1.5x in December 2021 from 6.8x in
December 2020, while its interest coverage (EBITA) rises to around
6.5x from 1.0x. These metrics will be strong for the B1 corporate
family rating, but are expected to materially weaken and become
more commensurate with its rating when metals prices and end market
demand trend toward historical levels.
Ryerson's SGL-2 speculative grade liquidity rating reflects its
good liquidity profile consisting of $40 million of unrestricted
cash and $638 million of availability on its $1 billion revolving
credit facility that covers the US and Canada and matures in
November 2025. The revolver had $350 million of outstanding
borrowings and $12 million of letters of credit issued as of
September 2021. The company is expected to continue to generate
free cash flow in the near term supported by its strong operating
performance and could use a portion of this cash to pay down
revolver borrowings.
Ryerson stable ratings outlook reflects Moody's expectation that
its operating results and credit metrics will remain strong in the
near term, but will return to levels more commensurate with its
rating when product pricing and end market demand trend toward
historical levels.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade of Ryerson's ratings could be considered if it sustains
an adjusted leverage ratio below 3.5x and EBIT margins of at least
6.0% while maintaining a good liquidity profile. An upgrade would
also be contingent on a reduction in Platinum Equity's ownership
position and the company having a majority of independent
directors.
Ryerson's ratings could come under pressure if its operating
performance and credit metrics materially weaken and it sustains a
leverage ratio above 4.5x and EBIT margins below 4.0% or
experiences a significant deterioration in its liquidity.
Ryerson Holding Corporation, through various operating
subsidiaries, is the second largest metals service center company
in North America, with about 95 locations in the US, Canada and
Mexico. The company also has four locations in China. Ryerson
provides a full line of carbon steel, stainless steel and aluminum
products to approximately 42,000 customers in a broad range of end
markets. The company generated revenues of approximately $5.0
billion for the 12-month period ended September 30, 2021. Ryerson
has been controlled by Platinum Equity since 2007 and Platinum
currently owns about 55% of its outstanding common stock.
The principal methodology used in these ratings was Distribution &
Supply Chain Services Industry published in June 2018.
RYMAN HOSPITALITY: Fitch Alters Outlook on 'B+' LT IDR to Stable
----------------------------------------------------------------
Fitch Ratings has affirmed the 'B+' Long-Term Issuer Default
Ratings (IDRs) for Ryman Hospitality Properties, Inc. (NYSE: RHP)
and its operating partnership, RHP Hotel Properties, LP. The Rating
Outlook has been revised to Stable from Negative.
Operating results have outpaced expectations, and Fitch believes
Ryman's RevPAR recovery will outpace the broader upper tier
segments, given its domestic focus and unique product offering.
Forward bookings trends point to favorable comparisons vs. prior
peak in the outyears, and Fitch believes continued progress on
vaccine rollout will limit the ongoing pandemic's impact to
economic activity. Fitch expects Ryman's leverage to decrease to
the high-4x/low-5x range towards the end of the forecast period.
KEY RATING DRIVERS
Specialized Product, Faster Recovery: RHP's recovery may occur
faster than Fitch previously expected. Hotel RevPAR improved to 81%
of 2019 in 3Q21, from 42% in 2Q21. Fitch believes that group demand
will prove resilient, despite greater post-pandemic familiarity
with technological alternatives. Conference and large group
meetings are an opportunity for relationship building and social
connection, and occur infrequently, in contrast to daily, routine
meetings, where teleconferencing is a better substitute. And less
time in the office will make offsite meetings and group gatherings
more valuable. Indeed, Ryman's forward bookings have been strong
when compared to 2018/2019 levels, and suggest group RevPAR could
be at or above 2019 levels in 2022.
As for recovery of 'in the year, for the year's bookings', recent
trends have been positive, and Fitch generally expects less
economic disruption from potential increases in coronavirus cases,
given vaccine rollout progress in the U.S. Ryman has proven
successful in adapting its business mix to more leisure transient
demand by appealing to "drive-to" vacation travel.
Better Than Expected Results: RHP's YTD performance has exceeded
expectations relative to the broader U.S. average luxury and upper
upscale hotel tiers. Monthly cash flow (which management defines as
adjusted EBITDAre less interest expense and debt service) turned
positive in June, and continued to improve in the second half. With
all five hotels fully reopened as well as the completion of capital
improvement projects, most notably the Gaylord Palms expansion, as
well as the acquisition of its JV partner's share in Gaylord
Rockies, and anticipated close of the Block 21 acquisition, Fitch
expects revenues and EBITDA to exceed 2019 levels by 2023. This
partly driven by the increase in ADR and room offerings as well as
a general recovery for Ryman's product type.
Operating margins have outperformed Fitch's previous expectations,
but Fitch expects the margin expansion to moderate as staffing
levels catch up to demand. Still, the pandemic gave many hotel
operators a chance to re-examine all costs and personnel from the
bottom up, and Fitch expects some sustainable benefit to margins.
Deleveraging through Forecasted Period: Fitch expects Ryman's
leverage (net debt to operating EBITDA) to fall to pre-COVID
levels, reaching around 5.0x by 2023. This deleveraging is as a
natural result of an improvement in EBITDA, cash on hand and debt
repayment. The company has stated an interest in returning to its
long-term leverage target of 3.5x-4.5x.
Block 21 a Good Fit: Recently, in October 2021, Ryman agreed to
acquire Block 21, a mixed-use, entertainment, lodging, office and
retail complex in Austin for $260 million. The purchase price
includes the assumption of $138 million of CMBS debt and $11
million of existing cash reserves attributable to the property. The
complex spans an entire city block and includes the 2,750-seat ACL
Live at the Moody Theater, 251-room W Austin hotel, 3TEN at ACL
Live club and about 53,000 square feet of other class A commercial
space. Although there is some execution risk, Fitch views the
acquisition positively, diversifying the income stream while
staying consistent with the experiential, entertainment focus of
the brand.
High Quality, Differentiated Portfolio: RHP owns a high quality,
concentrated portfolio of five specialized hotels with strong
competitive positions in the large group destination resort market.
The company's smallest hotel has 1,500 rooms and each of its five
properties ranks within the 10 largest U.S. hotels as measured by
exhibit and meeting space square footage. RHP's portfolio also has
the highest space-to-rooms ratio in the segment. Groups booking
rooms blocks of 10, or more comprise roughly 70% of with multi-year
advanced-booking windows. High capital costs and long lead times
provide some barriers to new supply in RHP's niche property type.
Volatile Cash Flows: Hotel industry cyclicality is a key credit
concern. Hotels re-price their inventory daily and, resulting in
the shortest lease terms and least stable cash flows within
commercial real estate. Economic cycles and exogenous events (e.g.
acts of terrorism) have historically caused, or exacerbated
industry downturns. The average large group bookings window is over
two years, which provides RHP with better revenue visibility than
most hotel REITs.
Longer lead times can cause group demand to lag that of the overall
industry, which can buffer cash flows during downturns and delay
them during recoveries. RHP's Entertainment segment (a small but
growing share of segment EBITDA) provides some additional cash flow
diversification and stability. The segment includes unique,
valuable entertainment content stemming from the Grand Ole Opry's
nearly 100 years of history, as well as other branded entertainment
and F&B assets.
DERIVATION SUMMARY
Ryman is smaller and notably more concentrated by assets, geography
and chainscale (i.e. hotel quality) than its peer Host Hotels &
Resorts (BBB-/Negative). Ryman's operations are concentrated to its
five large hotels. Additionally, Ryman's focus on the large group
segment of the leisure market differentiates it from its peers.
While RHP's entertainment assets generate a small portion of the
Ryman's overall EBITDA, Fitch views the diversification as a credit
positive. RHP's high portfolio concentration by assets, markets,
price/amenity level, brand and property manager are consistent with
speculative grade ratings.
RHP has demonstrated access to common equity, private placement
unsecured bonds and bank debt, secured debt, and joint ventures.
However, Fitch believes the company's access to many of these
capital avenues is weaker than more established REIT issuers that
own portfolios with more stable, longer lease duration property
types in core urban markets generally favored by institutional
equity investors and lenders.
Ryman's credit facility is secured by first-lien interests in each
of the company's owned Gaylord hotels (excluding Rockies, which is
secured by a separate term loan). As a result, the company would
likely be unable to access the secured mortgage market to bolster
its liquidity during a downturn. Fitch notes that this is mitigated
somewhat by the company's liquidity position and laddered maturity
profile.
Recovery Ratings: Fitch's recovery analysis assumes Ryman would be
considered a going concern (GC) in bankruptcy and the company would
be reorganized rather than liquidated. The EBITDA estimate reflects
Fitch's view of a sustainable, conservative post-reorganization
EBITDA level. Fitch assumes GC EBITDA of approximately $260
million, ex Rockies, which is over 40% below 2019 levels. GC EBITDA
exceeds LTM EBITDA as of 3Q21, due to the pandemic. Fitch also
applies a conservative EBITDA multiple of 8.0x to reflect the
uncertain nature of the asset type in a distressed environment.
For the Rockies, Fitch assumes GC NOI of approximately $79 million,
at an 11% cap rate, to reflect its newer quality, and estimated
higher run rate Total RevPAR. The recovery analysis featured
assumes that Ryman's $700 million revolver is fully drawn,
resulting in total debt of $3.5 billion (including the Rockies
loan). The analysis results in a recovery value of roughly $700
million for the Rockies asset (after 10% admin). Fitch has included
any shortfall from the Rockies loan (up to the $80 million
guarantee amount) as an unsecured claim.
The distribution of value yields a recovery ranked in the 'RR1'
category for the revolving credit facility, term loan A, and term
loan B; a recovery rating of 'RR2' for the Rockies loan; and the
'RR4' category for the unsecured obligations. Under Fitch's
Recovery Criteria, these recoveries results in notching three
levels above the IDR for the secured obligations excluding the
Rockies loan to 'BB+', two notches for the Rockies loan to 'BB',
and in line with the IDR for the unsecured debt.
KEY ASSUMPTIONS
-- FY RevPAR at 100% of 2019 levels in 2022, 102% in 2023, 105%
in 2024. EBITDA margin (excluding Block 21 acquisition)
recovery continues and reaches around 30% by 2024;
-- Completes acquisition of Block 21 in late 4Q21;
-- Fitch assumes RHP re-institutes some level of dividend in
2023.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Faster than expected rebound from the coronavirus pandemic, in
which global economies quickly return to pre-2020 levels with
minimal disruption;
-- Fitch's expectation for leverage sustaining below 5.0x;
-- Accelerating booking trends for 2022 and beyond, leading to
better than expected growth.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Fitch's expectation for leverage to sustain above 6.0x beyond
2023 due to protracted lodging industry weakness or a
perceived change in leverage policy;
-- Expectations of persistent underperformance of the upper tier,
particularly for Ryman's group focused asset type;
-- Slower margin recovery in 2022 and beyond.
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
As of Sept. 30, 2021, Ryman had $53 million of unrestricted cash
and $520 million of availability under its $700 million revolver.
Ryman expects to complete the acquisition of Block 21 with cash on
hand and other available liquidity. The company has a four million
share ATM program, which it has not tapped as of Sept. 30, 2021.
Fitch estimates Ryman's liquidity coverage at 1.2x through 2023,
which is strong for the rating. The company has no debt maturing in
2021-2022, and an $800 million term loan secured by the Gaylord
Rockies maturing in 2023. In April 2021, RHP acquired its JV
partner's 35% ownership in the property for $188 million (and 130
acres of undeveloped/adjacent land for $22 million). The loan has
three, one-year extension options. Ryman expects that owning 100%
of the asset puts it in better position to refinance the loan prior
to 2023.
At Sept. 30, 2021, there were no defaults under the covenants
related to the Company's outstanding debt based on the amended
terms reached with the lenders in December 2020. The company
expects to exit the waiver period on schedule in early 2022.
Fitch defines liquidity coverage as sources of liquidity
(unrestricted cash, availability under the revolving credit
facilities and forecasted retained cash flows from operating
activities after dividend payments) divided by uses of liquidity
(pro rata debt maturities, estimated maintenance capex and
committed (re)development expenditures).
ISSUER PROFILE
Ryman Hospitality Properties, Inc. (NYSE: RHP) is a lodging and
hospitality REIT that specializes in upscale convention center
resorts and country music entertainment experiences. The company's
core holdings include five of the top 10 largest non-gaming
convention center hotels in the U.S. under the Gaylord Hotels brand
and managed by Marriott International.
The company also owns two adjacent ancillary hotels and a small
number of attractions managed by Marriott for a combined total of
10,412 rooms and more than 2.7 million square feet of total indoor
and outdoor meeting space. The Company's Entertainment segment owns
and operates media and entertainment assets, including the Grand
Ole Opry, the Ryman Auditorium, WSM 650 AM and, Ole Red, as well as
a JV interest in the Circle, a country music lifestyle channel.
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.
S K TRANSPORT: Seeks Approval to Hire Michelle Steele as Accountant
-------------------------------------------------------------------
S K Transport Inc. seeks approval from the U.S. Bankruptcy Court
for the Southern District of West Virginia to hire Michelle Steele
of Michelle Steele Accounting Solutions, Inc. to prepare its
monthly operating reports.
Ms. Steele will be paid $60 per hour for her services.
In a court filing, Ms. Steele disclosed that she is a
"disinterested person" as the term is defined in Section 101(14) of
the Bankruptcy Code.
Ms. Steele can be reached at:
Michelle L. Steele, CPA
Michelle Steele Accounting Solutions, Inc.
5306 Dalewood Drive
Charleston, WV 25313
Phone: 304-553-2294
Email: michelle@mmtnb.com
About S K Transport Inc.
S K Transport Inc. filed a petition for Chapter 11 protection
(Bankr. S.D. W. Va. Case No. 21-30262) on Nov. 3, 2021, listing up
to $10 million in both assets and liabilities. Matthew McClure,
president, signed the petition.
Judge Mckay B. Mignault oversees the case.
The Debtor tapped Joseph W. Caldwell, Esq., at Caldwell & Riffee
and Michelle Steele of Michelle Steele Accounting Solutions, Inc.
as legal counsel and accountant, respectively.
S.A.M. GROUP: Dec. 9 Plan Confirmation Hearing Set
--------------------------------------------------
On Oct. 4, 2021, S.A.M. Group, LLC, filed with the U.S. Bankruptcy
Court for the Eastern District of Texas a Disclosure Statement
referring to the Plan of Reorganization.
On Nov. 4, 2021, Judge Phyllis M. Jones approved the Amended
Disclosure Statement and ordered that:
* Dec. 3, 2021, is fixed as the last day for filing written
acceptances or rejections of the Plan.
* Dec. 9, 2021, is fixed for the hearing on confirmation of
the Plan.
* Dec. 3, 2021, is fixed as the last day for filing and
serving written objections to confirmation of the Plan.
A full-text copy of the order dated Nov. 4, 2021, is available at
https://bit.ly/3D1h4Ng from PacerMonitor.com at no charge.
About S.A.M. Group
S.A.M. Group LLC is a privately-held company engaged in activities
related to real estate. S.A.M. Group sought protection under
Chapter 11 of the Bankruptcy Code (Bankr. E.D. Ark. Case No.
18-15169) on Sept. 24, 2018. In the petition signed by CEO Sam
McFadin, the Debtor estimated assets of less than $50,000 and
liabilities of $1 million to $10 million. Judge Phyllis M. Jones
presides over the case. The Debtor tapped the Bond Law Office as
its legal counsel.
SALEM MEDIA: Posts $22.1 Million Net Income in Third Quarter
------------------------------------------------------------
Salem Media Group, Inc. filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing net income
of $22.09 million on $65.98 million of total net revenue for the
three months ended Sept. 30, 2021, compared to net income of
$329,000 on $60.64 million of total net revenue for the three
months ended Sept. 30, 2020.
For the nine months ended Sept. 30, 2021, the Company reported net
income of $24.67 million on $189.12 million of total net revenue
compared to a net loss of $57.39 million on $171.76 million of
total net revenue for the nine months ended Sept. 30, 2020.
As of Sept. 30, 2021, the Company had $538.21 million in total
assets, $377.62 million in total liabilities, and $160.60 million
in total stockholders' equity.
On Sept. 10, 2021, the company exchanged $112.8 million of the 2024
Notes for $114.7 million (reflecting a call premium of 1.688%) of
newly issued 7.125% Senior Secured Notes due 2028.
Contemporaneously with the refinancing, the company obtained
commitments from the holders of the 2028 Notes to purchase up to
$50 million in additional 2028 Notes contingent upon satisfying
certain performance benchmarks, the proceeds of which are to be
used exclusively to repurchase or repay the remaining balance
outstanding of the 2024 Notes. The transaction was assessed on a
lender-specific level and was accounted for as a debt modification
in accordance with FASB ASC Topic 470. The company incurred debt
issuance costs of $4.2 million, of which $2.3 million of
third-party debt modification costs are reflected in operating
expenses for the current period, $0.8 million is deferred with the
Delayed Draw 2028 Notes, and $1.1 million, along with $3.0 million
from the exchanged 2024 Notes, is being amortized as part of the
effective yield on the 2028 Notes.
The Company received $11.2 million in aggregate principal amount of
PPP loans through the SBA during the first quarter of 2021 based on
the eligibility of its radio stations and networks as determined on
a per-location basis. The PPP loans were accounted for as debt in
accordance with ASC 470. The loan balances and accrued interest
were forgivable provided that the proceeds were used for eligible
purposes, including payroll, benefits, rent and utilities within
the covered period. The company used the PPP loan proceeds
according to the terms and filed timely applications for
forgiveness. During July 2021, the SBA forgave all but $20,000 of
the PPP loans resulting in a pre-tax gain on the forgiveness of
$11.2 million. The remaining PPP loan was repaid in July 2021.
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1050606/000119312521320441/d240858d10q.htm
About Salem Media
Irving, Texas-based Salem Media Group -- http://www.salemmedia.com
-- is a multimedia company specializing in Christian and
conservative content, with media properties comprising radio,
digital media and book and newsletter publishing.
Salem Media reported a net loss of $54.06 million for the year
ended Dec. 31, 2020, compared to a net loss of $27.84 for the year
ended Dec. 31, 2019.
* * *
In March 2021, S&P Global Ratings raised its issuer credit rating
on Salem Media Group Inc. to 'CCC+' from 'CCC'. S&P said, "The
stable outlook reflects our expectation that Salem's gross leverage
will remain about 8x through 2021. It also reflects our
expectation of sufficient cash to meet operating and fixed-charge
obligations over the next 12 months."
SARA JENNIFER POMEROY: $165K Sale of 2017 Ferrari GTC 4 Lusso OK'd
------------------------------------------------------------------
Judge Caryl E. Delano of the U.S. Bankruptcy Court for the Middle
District of Florida authorized Sara Jennifer Pomeroy and Eric
Douglas Pomeroy to (a) consummate the sale of the 2017 Ferrari GTC
4 Lusso to Kearns Motor Car Co. for $165,000; and (b) take any
actions as are reasonably necessary or appropriate to consummate
the sale transaction without further notice to or order of the
Court.
From the Purchase Price, the closing agent is directed to satisfy
the claim of TD Bank, the holder of a lien on the Vehicle; upon
satisfaction of the lien of TD Bank, the Purchaser will take title
to and possession of the Vehicle free and clear of all liens,
claims, encumbrances, and interests.
The closing agent may disburse to Debtors any proceeds of sale,
after the payment of TD Bank's lien. The Debtors will hold the
Sales Proceeds in a DIP bank account and, until further order of
the Court, will not spend or disburse the Sales Proceeds.
Any liens, claims, encumbrances, and interests, other than the lien
of TD Bank, will attach solely to the Sales Proceeds.
The Order is effective and enforceable immediately upon entry, and
the stays provided in Bankruptcy Rules 6004(h) and 6006(d) are
expressly waived and will not apply. Accordingly, the Debtors are
authorized and empowered to close the Sale immediately upon entry
of the Order.
Attorney Peter E. Shapiro is directed to serve a copy of the Order
on interested parties who do not receive service by CM/ECF and file
a proof of service within three days of entry of the Order.
Sara Jennifer Pomeroy and Eric Douglas Pomeroy sought Chapter 11
protection (Bankr. M.D. Fla. Case No. 20-08857) on Dec. 2, 2020.
The Debtors tapped Peter Shapiro, Esq., as counsel.
SHOLAND LLC: Unsecureds to Get Share of Liquidating Trust Assets
----------------------------------------------------------------
Sholand, LLC, filed with the U.S. Bankruptcy Court for the Northern
District of Texas an Original Plan of Liquidation dated Nov. 4,
2021.
The Debtor is a Tennessee limited liability company and the
successor in interest to Shoney's, Inc. and Shoney's, LLC, which
were the original operator and, in some cases, franchisor, of both
the Shoney's restaurant chain and the Shoney's Inn motel chain.
Since approximately 2007, the Debtor has had no retail restaurant
operations and has operated primarily as the lessee and sublessor
of real estate related to former Shoney's locations.
In addition, the Debtor has continued to wind-down liabilities
associated with its former operations through lease expirations,
sales or property and the reconciliation and payment of workers
compensation claims related to the Debtor's former operations.
The Debtor owns no remaining real estate and operates no business.
The Debtor's primary asset consists of the residual value of
security posted to secure letters of credit or bonds which
ultimately secure the Debtor's obligations to pay workers
compensation claims or obligations to insurers of workers
compensation claims against the Debtor.
The Debtor intends to treat Classes of Allowed Claims under the
Plan as follows:
* Class 1 consists of any Allowed Secured Claims of CapStar.
CapStar shall retain all legal, equitable and contractual rights on
account of its Allowed Class 1 Secured Claim and such Claim shall
remain unaltered by the Plan.
* Class 2 consists of any Allowed Priority Non-Tax Claims. In
full and final satisfaction of its Allowed Class 2 Claim, each
Holder of an Allowed Class 2 Priority Non-Tax Claim shall be paid
in full on the Effective Date.
* Class 3 consists of any Allowed General Unsecured Claims.
Holders of Allowed Class 3 Claims shall receive a Pro Rata Share of
the Beneficial Interests in the Liquidating Trust and subsequent
Distributions from the Liquidating Trust to the Holders of
Beneficial Interests in accordance with the Liquidating Trust
Agreement and the Plan.
* Class 4 consists of Interests in the Debtor. Interests in
the Debtor shall be extinguished.
The Liquidating Trust
On the Effective Date, the Debtor, on its own behalf and on behalf
of the Holders of Allowed Claims, shall execute the Liquidating
Trust Agreement and shall take all other steps necessary to
establish the Liquidating Trust. The Liquidating Trust Agreement
shall contain provisions customary to trust agreements utilized in
comparable circumstances, including, but not limited to, any and
all provisions necessary to govern the rights, powers, obligations
and appointment and removal of the Liquidating Trustee and to
ensure the treatment of the Liquidating Trust as a liquidating
trust for federal income tax purposes.
On the Effective Date, the Debtor, after making any initial
Distributions to Holders of Allowed Claims in Class 2 as well as
Administrative and other Priority Claims in accordance with the
provisions of the Plan, shall transfer and be deemed to have
transferred to the Liquidating Trust all of its right, title, and
interest in all of the Trust Assets and any other remaining
Property of the Debtor and its Estate, free and clear of any Lien,
Claim or Interest in such Property of any other Person except as
provided in the Plan.
Title to all Trust Assets shall vest in the Liquidating Trust on
the Effective Date. The Debtor or such other Persons that may have
possession or control of such Trust Assets shall transfer
possession or control of such Trust Assets to the Liquidating
Trustee and shall cooperate with the Liquidating Trustee by
executing documents or instruments necessary to effectuate such
transfers or that shall aid implementation of the deemed transfers
under the Plan. All Cash held in the Liquidating Trust shall be
invested in accordance with the Liquidating Trust Agreement.
The Liquidating Trust shall be established for the sole purpose of
liquidating and distributing the Trust Assets, with no objective to
continue or engage in the conduct of a trade or business. Subject
to definitive guidance from the IRS, all parties shall treat the
Liquidating Trust as a liquidating trust for all federal income tax
purposes.
A full-text copy of the Plan of Liquidation dated Nov. 4, 2021, is
available at https://bit.ly/3H4edpr from PacerMonitor.com at no
charge.
Counsel for the Debtor:
Howard Marc Spector, Esq.
Spector & Cox, PLLC
12770 Coit Road, Suite 850
Dallas, TX 75251
Tel: (214) 365-5377
Fax: (214) 237-3380
Email: hspector@spectorcox.com
About Sholand LLC
Sholand, LLC, sought protection under Chapter 11 of the Bankruptcy
Code (Bankr. N.D. Texas Case No. 21-40521) on March 12, 2021.
Robert Stetson, manager, signed the petition. At the time of the
filing, the Debtor disclosed assets of between $1 million and $10
million and liabilities of the same range. Spector & Cox, PLLC is
the Debtor's legal counsel.
SINTX TECHNOLOGIES: Ends Patent License Agreement With O2TODAY
--------------------------------------------------------------
SINTX Technologies, Inc. has ended its Patent License Agreement
with O2TODAY following O2TODAY's delay in bringing a product to
market.
SINTX previously announced this past August that it was
re-evaluating its joint development efforts with O2TODAY due to
delays in development. Nevertheless, SINTX will look to identify
new ways to collaborate with O2TODAY to develop antiviral,
antimicrobial fabrics containing SINTX FleX SN-AP silicon nitride
powder while exploring other possible partnerships.
The development of antipathogenic mask and fabric technology using
FleX SN-AP continues to be important to SINTX as it is part of its
broader business strategy to develop fabric applications. FleX
SN-AP has shown rapid antipathogenic activity against a broad
spectrum of bacteria and viruses including SARS-CoV-2. The company
will continue to work with OEM partners to develop products
utilizing its FleX products for masks as well as other products.
About SINTX Technologies
Headquartered in Salt Lake City, Utah, SINTX Technologies --
https://ir.sintx.com -- is an OEM ceramics company that develops
and commercializes silicon nitride for medical and non-medical
applications. The core strength of SINTX Technologies is the
manufacturing, research, and development of silicon nitride
ceramics for external partners. The Company presently
manufactures
advanced ceramics powders and components in its FDA registered, ISO
13485:2016 certified, and ASD9100D certified manufacturing
facility.
SINTX Technologies reported a net loss of $7.03 million for year
ended Dec. 31, 2020, compared to a net loss of $4.79 million for
the year ended Dec. 31, 2019. As of June 30, 2021, the Company had
$26.42 million in total assets, $4.94 million in total liabilities,
and $21.48 million in total stockholders' equity.
SNAP ONE: S&P Rates Refinanced First-Lien Term Loan 'B'
-------------------------------------------------------
S&P Global Ratings assigned its 'B' issue-level rating and '3'
recovery rating to Snap One Holdings Corp.'s refinanced $100
million revolving credit facility and $465 million first-lien term
loan. Snap One expects to repay the old debt through the
refinancing. The '3' recovery rating reflects its expectation of
meaningful (50%-70%, rounded estimate: 60%) recovery in the event
of default. S&P's 'B' issuer credit rating on Snap One is
unchanged.
Snap One is a vertically integrated distributor and manufacturer of
audiovisual and networking products for integrators and small
businesses that design and install audiovisual, security, and
networking systems in residential and light commercial settings
(e.g., homes and doctors' offices) and resell to end users (e.g.,
home owners).
ISSUE RATINGS - RECOVERY ANALYSIS
Key analytical factors
-- S&P assigned its 'B' issue-level rating and '3' recovery rating
to Snap One Holdings Corp.'s new $100 million revolving credit
facility and $465 million first-lien term loan.
-- S&P's simulated default scenario assumes a default occurring in
2024 because of heightened competition from online retailers and
disruptions to business operations that weaken its demand.
-- S&P values Snap One as a going concern because it believes,
following a payment default, it would likely be reorganized rather
than liquidated due to its proprietary products and market
position.
-- S&P applies a 6x multiple to an estimated distressed emergence
EBITDA of $60 million to estimate a gross enterprise value at
emergence of about $360 million.
Simulated default assumptions
-- Year of default: 2024
-- EBITDA at emergence after recovery adjustment: $60 million
-- EBITDA multiple: 6x
-- Revolving credit facility: 85% drawn at default
Simplified waterfall
-- Net enterprise value (after 5% administrative costs): $342
million
-- Secured first-lien debt: $559 million
--Recovery expectations: 50%-70% (rounded estimate: 60%)
Note: All debt amounts include six months of prepetition interest.
SPI ENERGY: Posts $14.9 Million Net Loss in H1 2021
---------------------------------------------------
SPI Energy Co., Ltd. filed with the U.S. Securities and Exchange
Commission its Unaudited Condensed Consolidated Balance Sheet as of
June 30, 2021 and Unaudited Condensed Consolidated Statements of
Operations for the six-month period ended June 30, 2021.
SPI Energy reported a net loss attributable to shareholders of the
Company of $14.91 million on $79.44 million of net sales for the
six months ended June 30, 2021, compared to net income attributable
to shareholders of the company of $2.66 million on $56.36 million
of net sales for the six months ended June 30, 2020.
As of June 30, 2021, the Company had $238.19 million in total
assets, $187.35 million in total liabilities, and $50.84 million in
total equity.
A full-text copy of the Form 6-K is available for free at:
https://www.sec.gov/Archives/edgar/data/1210618/000168316821005274/spi_ex9901.htm
About SPI Energy Co.
SPI Energy Co., Ltd. (SPI) is a global renewable energy company and
provider of solar storage and electric vehicle (EV) solutions for
business, residential, government, logistics and utility customers
and investors. The Company provides a full spectrum of EPC
services to third-party project developers, as well as develops,
owns and operates solar projects that sell electricity to the grid
in multiple countries, including the U.S., the U.K., Greece, Japan
and Italy. The Company has its US headquarters in Santa Clara,
California and maintains global operations in Asia, Europe, North
America and Australia. SPI is also targeting strategic investment
opportunities in green industries such as battery storage and
charging stations, leveraging the Company's expertise and growing
base of cash flow from solar projects and funding development of
projects in agriculture and other markets with significant growth
potential.
SPE Energy reported a net loss attributable shareholders of $6.51
million in 2020, a net loss attributable to shareholders of $15.26
million in 2019, and a net loss attributable to shareholders of
$12.28 million in 2018. As of Dec. 31, 2020, the Company had
$217.03 million in total assets, $168.65 million in total
liabilities, and $48.38 million in total equity.
SPI ENERGY: To Relocate Corporate HQs to Santa Clara, Calif.
------------------------------------------------------------
SPI Energy Co., Ltd. plans to relocate its corporate headquarters
from Hong Kong to Santa Clara, California.
"After discussions amongst our board members, it was agreed that
relocating our corporate headquarters to Santa Clara would provide
the most advantages for our business as we continue to focus on
expanding our US solar operations and accelerating the growth of
our rapidly evolving EV division," stated Mr. Xiaofeng Denton Peng,
chairman & chief executive officer of SPI Energy. "California is a
world leader in renewable energy solutions. SPI was originally
founded in Roseville, California in 2006, and we are proud to now
officially call California home for our expanding global
operations."
Approximately 33% of California's electricity came from renewable
energy in 2019 and the state is targeting 50% renewable generation
by 2025. California state has also mandated an end to the sale of
gasoline-fueled cars by 2035.
About SPI Energy Co.
SPI Energy Co., Ltd. (SPI) is a global renewable energy company and
provider of solar storage and electric vehicle (EV) solutions for
business, residential, government, logistics and utility customers
and investors. The Company provides a full spectrum of EPC
services to third-party project developers, as well as develops,
owns and operates solar projects that sell electricity to the grid
in multiple countries, including the U.S., the U.K., Greece, Japan
and Italy. The Company has its US headquarters in Santa Clara,
California and maintains global operations in Asia, Europe, North
America and Australia. SPI is also targeting strategic investment
opportunities in green industries such as battery storage and
charging stations, leveraging the Company's expertise and growing
base of cash flow from solar projects and funding development of
projects in agriculture and other markets with significant growth
potential.
SPE Energy reported a net loss attributable shareholders of $6.51
million in 2020, a net loss attributable to shareholders of $15.26
million in 2019, and a net loss attributable to shareholders of
$12.28 million in 2018. As of Dec. 31, 2020, the Company had
$217.03 million in total assets, $168.65 million in total
liabilities, and $48.38 million in total equity.
SRS DISTRIBUTION: $150MM Debt Increase No Impact on Moody's B3 CFR
------------------------------------------------------------------
Moody's Investors Service said that SRS Distribution Inc.'s B3
Corporate Family Rating, B3-PD Probability of Default Rating, B2
rating on the company's senior secured term loan and notes due 2028
and the Caa2 rating on the company's two unsecured notes due 2029
are not affected by the increase in the company's recently proposed
senior unsecured notes to upwards of $850 million from $700
million. Proceeds from the increased debt will be used for general
corporate purposes, including acquisitions. The outlook remains
stable.
Moody's views the higher amount of unsecured debt as credit
negative. The company's fixed charge payments, including cash
interest, term loan amortization and operating lease and equipment
finance payments will now approach $350 million per year versus the
previous estimate of $340 million, further reducing financial
flexibility. However, there is no change to Moody's forecast for
leverage of about 6.0x at year-end 2023 (October 31, 2023) as the
forward view already encompassed higher level of debt for potential
acquisitions.
Providing an offset to SRS' leveraged capital structure is good
profitability. Moody's forecasts an adjusted EBITDA margin in the
range of 10% - 12% over the next two years, which is a key
financial strength of the company. Profitability will benefit from
higher volumes from growth in demand for residential roofing repair
and replacement and the company's expansion into distribution of
landscaping and pool related products for professional uses and
operating leverage from that growth. Moody's projects revenue will
approach $7 billion by late 2023. A good liquidity profile
characterized by material revolver availability and no maturities
until 2026 and positive end market dynamics further support SRS'
credit profile.
The stable outlook reflects Moody's expectation that SRS will
benefit from inelastic demand for roofing products, SRS' primary
source of revenue, and successful integration of acquisitions
without impacting operations. These factors and steady leverage
further support the stable outlook.
SRS Distribution Inc., headquartered in McKinney, Texas, is a
national distributor of roofing supplies and related building
materials, and landscaping and pool-related products throughout the
United States. Leonard Green & Partners, L.P., through its
affiliates, is majority owner of SRS. Berkshire Partners LLC,
through its affiliates, is the next largest owner of SRS followed
by management and employees.
SRS DISTRIBUTION: Moody's Affirms B3 CFR & Rates New Notes Caa2
---------------------------------------------------------------
Moody's Investors Service affirmed SRS Distribution Inc.'s B3
Corporate Family Rating and B3-PD Probability of Default Rating.
Moody's also upgraded the company's proposed senior secured debt
consisting of a term loan and notes due 2028 to B2 from B3.
Finally, Moody's affirmed the Caa2 rating on SRS' senior unsecured
notes due 2029 and assigned a Caa2 rating to the company's proposed
senior unsecured notes, ranking pari passu. Moody's expects the
terms and conditions of the proposed senior unsecured notes to be
similar to SRS' existing senior unsecured notes due 2029. The
outlook is stable.
Proceeds from the new unsecured notes will be used to term out
revolver borrowings, which were used for acquisitions, put cash on
the balance sheet for general corporate purposes including bolt on
acquisitions, and pay related fees and expenses. Moody's expects
bolt on acquisitions to expand SRS' distribution centers for
roofing and related products into new markets and to grow its
landscaping and pool-related businesses.
"The increase in balance sheet debt and resulting interest payments
weigh heavily on the current ratings despite expectations that
acquired businesses will increase SRS' revenue and earnings,"
according to Peter Doyle, Vice President at Moody's. "The company
also faces execution risk to its operating plan as the cadence of
acquisitions has been high and will likely accelerate over the next
two years."
Moody's views the proposed transaction as credit negative due to
the use of debt for acquisitions, especially after the company paid
a debt financed dividend of about $1.1 billion earlier this year,
which represents several years of future free cash flow and
multiple years of adjusted EBITDA. The proposed notes issuance is
increasing balance sheet debt by another 17% to $4.2 billion from
$3.6 billion at July 31, 2021, resulting in SRS remaining highly
leveraged. Moody's projects adjusted debt-to-LTM EBITDA of about
6.0x over the next two years. Full year earnings from acquisitions,
higher volumes from organic growth and some price increases
compensate for SRS' increasing debt load. Moody's forward view also
assumes debt financed acquisitions in fiscal year 2023. Fixed
charges including cash interest, term loan amortization and
operating lease and equipment finance payments will approach $340
million per year, significantly reducing financial flexibility.
The upgrade of the ratings on SRS' existing senior secured term
loan and notes due 2028 to B2 from B3 is due to the higher amount
of unsecured debt in SRS' capital structure, resulting in improved
recovery for the secured debt holders.
The following ratings are affected by the action:
Affirmations:
Issuer: SRS Distribution Inc.
Corporate Family Rating, Affirmed B3
Probability of Default Rating, Affirmed B3-PD
Senior Unsecured Regular Bond/Debenture, Affirmed Caa2, to (LGD5)
from (LGD6)
Upgrades:
Issuer: SRS Distribution Inc.
Senior Secured Bank Credit Facility, Upgraded to B2 (LGD3) from B3
(LGD3)
Senior Secured Regular Bond/Debenture, Upgraded to B2 (LGD3) from
B3 (LGD3)
Assignments:
Issuer: SRS Distribution Inc.
Gtd Senior Unsecured Regular Bond/Debenture, Assigned Caa2 (LGD5)
Outlook Actions:
Issuer: SRS Distribution Inc.
Outlook, Remains Stable
RATINGS RATIONALE
SRS' B3 CFR reflects Moody's expectation that SRS will remain
highly leveraged over the next two years. Moody's forecasts
adjusted free cash flow-to-debt will be flat to about 3% over the
same time horizon, constrained by high cash interest payments. At
the same time SRS faces strong competition, execution risk to its
operating plan and the potential for additional significant
shareholder return activity. There could be major integration risks
as the cadence of acquisitions is likely to increase while SRS
merges acquired companies into its own operating and administrative
systems.
Providing an offset to SRS' leveraged capital structure is good
profitability. Moody's forecasts an adjusted EBITDA margin in the
range of 10% - 12% over the next two years, which is a key
financial strength of the company. Profitability will benefit from
higher volumes from growth in demand for residential roofing repair
and replacement and the company's expansion into distribution of
landscaping and pool related products for professional uses and
operating leverage from that growth. Moody's projects revenue will
approach $7 billion by late 2023. Moody's also calculates interest
coverage, measured as adjusted EBITA-to-interest expense, remaining
above 2.5x, which is reasonable considering the company's interest
commitment. A good liquidity profile characterized by material
revolver availability and no maturities until 2026 and positive end
market dynamics further support SRS' credit profile.
The stable outlook reflects Moody's expectation that SRS will
benefit from inelastic demand for roofing products, SRS' primary
source of revenue, and successful integration of acquisitions
without impacting operations. These factors and steady leverage
further support the stable outlook.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade of SRS' ratings could ensue if end markets remain
supportive of organic growth and the company delevers such that
adjusted debt-to-EBITDA is trending towards 5.5x, while preserving
good liquidity. The CFR could be downgraded if SRS' adjusted
debt-to-EBITDA is sustained above 6.5x or adjusted
EBITA-to-interest expense trending towards 1.5x. A deterioration in
liquidity, excessive usage if the revolving credit facility or
material shareholder return activity could result in downward
rating pressure as well.
The principal methodology used in these ratings was Distribution &
Supply Chain Services Industry published in June 2018.
SRS Distribution Inc., headquartered in McKinney, Texas, is a
national distributor of roofing supplies and related building
materials, and landscaping and pool-related products throughout the
United States. Leonard Green & Partners, L.P., through its
affiliates, is majority owner of SRS. Berkshire Partners LLC,
through its affiliates, is the next largest owner of SRS followed
by management and employees.
SRS DISTRIBUTION: S&P Rates $700MM Senior Unsecured Notes 'CCC'
---------------------------------------------------------------
S&P Global Ratings assigned its 'CCC' issue-level and '6' recovery
ratings to McKinney, Texas-based roofing products and landscape
supply distributor SRS Distribution Inc.'s (B-/Stable/--) proposed
$700 million senior unsecured notes due 2029. The '6' recovery
rating indicates its expectation for negligible recovery (0%-10%;
rounded estimate: 0%) in the event of a payment default.
S&P Global Ratings-adjusted leverage will remain in our expected
range of about 7x-8x pro forma for the proposed issuance. SRS will
use the proceeds to finance recent and pending acquisitions, repay
borrowings under its recently amended $1 billion dollar asset-based
lending facility (ABL) due 2026, and fund cash to the balance
sheet. S&P said, "We anticipate an earnings improvement will occur
through 2022 from improving price realizations, incremental
earnings from acquisitions it completed during the year, and
continued favorable market tailwinds. However, we expect the
company's credit metrics will have limited cushion for any
underperformance, and we believe any downturns in its demand could
hurt its financial performance."
The 'CCC' issue-level and '6' recovery ratings are the same as
S&P's ratings on the company's existing $450 million senior
unsecured notes due 2029.
STONEWAY CAPITAL: Says Talks With Bondholders Ongoing
-----------------------------------------------------
On Nov. 6, 2021, Stoneway Capital Corporation and six affiliated
debtors are currently subject to a jointly-administered
reorganization proceeding under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the
Southern District of New York. In connection with the Chapter 11
Cases and potential restructuring transactions thereunder (the
"Potential Transactions") of the Debtors, the Debtors entered into
confidentiality agreements (collectively, the "NDAs") with certain
holders of the 10.000% senior secured notes due 2027 issued by
Stoneway. Pursuant to the NDAs, the Debtors agreed to publicly
disclose certain information, including material non-public
information (the "Cleansing Material"), upon the occurrence of
certain dates or events set forth in the NDAs. In satisfaction of
the Debtors' obligations under such NDAs, the Company is making
public the Cleansing Materials by attaching them hereto.
The Cleansing Materials include
* the draft restructuring term sheet, which is available
https://www.stonewaycap.com/download/781/
* the business plan forecast through 2027, which is available at
https://www.stonewaycap.com/download/781/
Discussions regarding the Potential Transactions remain ongoing but
have been protracted due to additional transaction related expenses
and regulatory issues that have not been fully considered in the
Preliminary Forecast Summary, as well as the continued evaluation
of tax efficient structures for the Potential Transactions. The
Company also is addressing certain recent events related to a
damaged turbine at the Company's Luján power plant requiring
imminent repair. The assumptions regarding the Preliminary Forecast
Summary are expected to be revised, which may result in material
revisions to the Preliminary Forecast Summary and, as a result, the
Restructuring Term Sheet. Even if the Preliminary Forecast Summary
were to be adopted by the Company, the assumptions and estimates
underlying the Preliminary Forecast Summary are inherently
uncertain and are subject to a wide variety of significant
business, economic, regulatory and competitive risks and
uncertainties. As a result, no assurances can be given that the
events in the Preliminary Forecast Summary will occur or that the
projections therein will be achieved. Actual results could differ
materially from those projected as a result of certain factors,
including changes to the assumptions to the Preliminary Forecast
Summary. Additionally, the Company believes that the Preliminary
Forecast Summary involves increasingly higher levels of uncertainty
the further out the projections extend from their date of
preparation.
About Stoneway Capital Corp.
Stoneway Capital Corporation is a limited corporation incorporated
in New Brunswick, Canada, formed for the purpose of owning and
operating, through its Argentine subsidiaries, power generation
projects that will provide electricity to the wholesale electricity
markets in Argentina. The Argentine subsidiaries operate four
power-generating plants in Argentina that provide electricity to
the wholesale electricity market in Argentina.
Stoneway is 100% owned by GRM Energy Investment Limited.
On Oct. 8, 2020, the Company commenced proceedings under the Canada
Business Corporations Act (the "CBCA"). The Debtors were well on
the way toward closing the consensual restructuring when on Dec. 4,
2020, the Argentine Supreme Court issued a decision in an ongoing
noise discharge dispute involving one of the Generation Facilities
located in Pilar, Argentina. The Argentine Supreme Court Decision
created significant uncertainty as it overturned a decision of the
federal appeals court in San Martin, Buenos Aires.
As a result of the looming expiration of the informal standstill
arrangement, the Debtors commenced chapter 11 cases in the U.S. in
order to put the automatic stay in place, maintain the status quo
pending resolution of the various issues in Argentina, and ensure
that neither the Indenture Trustee nor the Argentine Trustee takes
any action that could be detrimental or value destructive to the
Company.
Stoneway Capital Ltd. and five related entities, including Stoneway
Capital Corp., sought Chapter 11 bankruptcy protection (Bankr.
S.D.N.Y. Case No. 21-10646) on April 7, 2021. Stoneway estimated
liabilities of $1 billion to $10 billion and assets of $500 million
to $1 billion.
Judge James L. Garrity, Jr. oversees the cases.
The Debtors tapped Shearman & Sterling LLP as bankruptcy counsel,
Bennett Jones LLP as Canadian counsel, Lazard Freres & Co. LLC as
investment banker, and RSM Canada LLP as tax services provider.
Prime Clerk, LLC is the claims agent and administrative advisor.
TLG CAPITAL: Taps Carle Mackie Power & Ross as Bankruptcy Counsel
-----------------------------------------------------------------
TLG Capital Development, LLC seeks approval from the U.S.
Bankruptcy Court for the Northern District of California to employ
Carle Mackie Power & Ross, LLP to serve as legal counsel in its
Chapter 11 case.
The firm's services include:
a. assisting in the preparation of the Debtor's bankruptcy
schedules, statement of financial affairs, and other filings
required by the Bankruptcy Code, the Bankruptcy Rules, the Local
Rules, and orders of the court;
b. assisting the Debtor in complying with the requirements of
the Office of the U.S. Trustee;
c. assisting in the analysis of the validity and amount of
claims or any objections to claims;
d. advising the Debtor regarding its obligations under the
Bankruptcy Code;
e. preparing legal papers;
f. assisting the Debtor in the negotiation, preparation,
solicitation and confirmation of a Chapter 11 plan;
g. representing the Debtor at court hearings and other legal
proceedings; and
h. performing other necessary legal services for the Debtor.
James Sansone, Esq., is the firm's attorney who is expected to
conduct most of the work for the Debtor in this case. The hourly
rate for Mr. Sansone is $375.
The firm received a retainer deposit of $11,738 from Kevin Lee, the
Debtor's managing member.
Mr. Sansone disclosed in a court filing that his firm is a
disinterested person within the meaning of Section 101(14) of the
Bankruptcy Code.
The firm can be reached through:
James V. Sansone, Esq.
Carle Mackie Power & Ross, LLP
100 B Street, Suite 400
Santa Rosa, CA 95401
Tel: 707-526-4200
Fax: 707-526-4707
Email: jsansone@cmprlaw.com
About TLG Capital Development LLC
TLG Capital Development, LLC is a San Francisco, Calif.-based
company engaged in activities related to real estate. It is the
owner (fee simple or tenants in common) of three real properties in
San Francisco worth $2.1 million.
TLG Capital Development filed its voluntary petition for Chapter 11
protection (Bankr. N.D. Calif. Case No. 21-30740) on Nov. 2, 2021,
listing $2,187,760 in assets and $6,428,450 in liabilities. Kevin
Lee, managing member, signed the petition.
Judge William J. Lafferty presides over the case.
James V. Sansone, Esq., at Carle Mackie Power & Ross, LLP,
represents the Debtor as legal counsel.
TREEHOUSE FOODS: S&P Downgrades ICR to 'B' on Inflation Pressure
----------------------------------------------------------------
S&P Global Ratings lowered its issuer credit rating on U.S.-based
TreeHouse Foods Inc. to 'B' from 'B+' as a result of the continued
underperformance and our updated forecast for leverage sustained
above 6x through 2022, absent significant debt repayment from a
potential asset sale.
S&P said, "Concurrently, we lowered issue-level ratings on the
company's senior secured credit facilities to 'BB-' from 'BB'. The
recovery rating is '1', indicating our expectations of very high
(90%-100%; rounded percentage: 90%) recovery in the event of a
payment default.
"We also lowered the issue-level ratings on the unsecured notes to
'CCC+' from 'B+' as a result of the lower issuer credit rating and
a downward revision in our expected recovery valuation. The
recovery rating is '6', indicating our expectations of negligible
(0%-10%; rounded percentage: 0%) recovery in the event of a payment
default.
"The developing outlook reflects the possibility that we could
affirm, raise, or lower the ratings depending on the outcome of the
company's review of strategic alternatives.
"The downgrade of the company reflects the deterioration in credit
metrics resulting from continued high cost inflation and a slow
demand recovery. For the 12-months-ended Sept. 30, 2021, we
estimate adjusted leverage (pro forma for the Riviana acquisition)
increased to about 6.2x, up from 6.0x for the 12-months-ended in
June. The higher leverage primarily reflects margin deterioration
resulting from continued high inflation in packaging, freight,
labor, and other input costs that are outpacing the company's
ability to increase prices. In addition, the company's 1.3% decline
in organic volumes is evidence that private-label demand is still
relatively soft. TreeHouse also revised its 2021 EBITDA and free
cash flow guidance significantly downward, indicating to us that
fourth quarter operating results will be weaker than we previously
expected. We now forecast that leverage will continue to climb to
the high-6x area in 2021, much higher than our prior forecast for
leverage in the mid-5x area, which assumed the company would be
better able to offset inflation headwinds in the near term through
pricing actions. We have also revised our forecast for 2022
downward because of the ongoing challenges, and we expect leverage
will remain above 6x through the end of next year. Our S&P Global
Ratings-adjusted leverage is typically at least 1.0x-1.5x higher
than the company's adjusted leverage, primarily because we do not
add back restructuring and other similar charges in calculating
EBITDA, and because we add lease liabilities and factored
receivables to debt.
"The credit impact of the strategic review will depend on which
path is executed, pro forma debt levels, and financial policies. In
its third-quarter earnings release, TreeHouse announced its
intention to conduct a review of strategic alternatives for the
business, which could include a sale of the company or divesting a
significant portion of its meal preparation segment. The segment
makes up roughly 63% of total revenue, and the remaining snacking
and beverages segment contributes the other 37%.
"The remaining company after a potential divestiture would be
significantly smaller than the current $4.3 billion of revenue. In
our view, the remaining company would also be less diversified.
EBITDA margin could be lower after the sale as well, if there are
significant stranded costs or additional restructuring expenses.
However, these risks could be more than offset by lower leverage
and we could consider higher ratings depending on the amount of
proceeds TreeHouse receives from the sale and applies to debt
repayment, as well as the new company's financial policy.
Furthermore, the snacking and beverages segment benefits from more
favorable consumer demand trends, a better growth outlook, and more
attractive acquisition targets when it eventually has the financial
flexibility to pursue them. Still, we believe there is significant
uncertainty around the timing and proceeds of actions resulting
from the strategic review. Any path the company pursues would
likely need the support of activist investor JANA Partners who owns
about 9% of the company's equity. If it pursues a divestiture,
TreeHouse will need to find a buyer for the slower-growth portion
of its portfolio at a time of relative stress caused by inflation
eroding its margins and the company being well outside its target
leverage range.
"If TreeHouse chooses a path that includes a sale of the entire
company or a leveraged buyout, we could consider lowering the
ratings if the buyer increases leverage at the company to fund the
purchase.
"The developing outlook reflects the possibility that we could
affirm, raise, or lower the ratings depending on the outcome of
TreeHouse's review of strategic alternatives.
"We could lower the ratings if the company pursues other strategic
alternatives, such as a leveraged buyout, that result in leverage
rising above 7x, or if the company's operating performance
continues to deteriorate because of continued heightened inflation,
supply chain challenges, and lower demand.
We could raise the ratings if the company successfully sells a
significant portion of its meal preparation business and uses the
proceeds to repay debt, such that it lowers leverage to--and
sustains it below--5x. We could affirm the rating if the company
completes an asset sale but we believe leverage will be sustained
above 5x."
TRI-WIRE ENGINEERING: $8.8M Sale of All Assets to ITG Approved
--------------------------------------------------------------
Judge Christopher J. Panos of the U.S. Bankruptcy Court for the
District of Massachusetts authorized Tri-Wire Engineering
Solutions, Inc., to sell substantially all of its assets utilized
in operating its business, including without limitation (i) the
Debtor's rights under leases of real property at which the Debtor
conducts its business operations, (ii) certain personal property,
including equipment, furniture and inventory, (iii) certain
contracts with third parties, (iv) and certain other miscellaneous,
specified assets as set forth in the certain Asset Purchase
Agreement dated as of Sept. 13, 2021, including, without
limitation, the right to use the Debtor's trade names and other
intellectual property, ITG Communications, LLC or its eligible
designee for $8.8 million, subject to the deposits and adjustments,
or to such other entity that submits the highest or otherwise best
offer to acquire the Assets as determined through the sale
procedures governing the Sale approved by the Court's order entered
on Sept. 23, 2021.
The Sale to the Winning Bidder pursuant to the APA is authorized
under Section 363(b) of the Bankruptcy Code. The APA and all
ancillary documents, and all of the terms and conditions thereof,
are approved, and the Debtor is authorized to consummate the
transactions contemplated thereby.
Notwithstanding anything to the contrary in the Order or the APA,
any personal property owned by Comcast or its parent, subsidiaries,
or affiliates that is now or thereafter in the possession of the
Debtor, will not be sold to the Winning Bidder but will remain
property of Comcast, and will not constitute part of the Assets
under the Order or the APA.
Notwithstanding anything to the contrary in the Order or the APA,
following the closing of the Sale, the Winning Bidder will permit
Comcast commercially reasonable access to (a) the Debtor's books
and records relating to the Wage & Hour Action that are transferred
to the Winning Bidder under the APA, and (b) the Debtor's former
personnel who are then-currently employed by the Winning Bidder and
who have knowledge of facts relating to the Wage & Hour Action; the
Winning Bidder's obligation to provide such access will be limited
to records in its possession or control and the Winning Bidder will
have no obligation to curate or create any records or summaries of
records.
Prior to destroying or otherwise relinquishing possession or
control of the Wage Records, the Winning Bidder will provide 30
days' written notice to Joel M. Walker, Esq., Nye, Stirling, Hale &
Miller, LLP, 1145 Bower Hill Road, Suite 104, Pittsburgh, PA 15243,
email: jmwalker@nshmlaw.com, to provide Attorney Walker the
opportunity, through discovery, court order, or arrangements with
the Winning Bidder, to copy or take possession of the Wage Records.
Subject to and conditioned on the Closing, the Debtor is authorized
pursuant to Section 365(a) of the Bankruptcy Code to assume and
assign the Assumed Contracts to the Winning Bidder.
At the Closing, disbursement of the proceeds of the Sale and other
funds payable incident to the Closing will be paid in accordance
with the Final Funds Flow, as follows: (i) first, to JPM in an
amount necessary to repay in full the Post-Petition Loan, as agreed
to by the Debtor, JPM, and the Committee; (ii) second, to pay the
Debtor or its counsel the amount of $400,000 to fund the SSG Fee
Escrow; (iii) third, to pay the HNB Payment, the Comcast Payment,
and Cure Amounts; (iv) fourth, as a carveout from proceeds
otherwise payable to JPM, to pay the amounts due under the
Incentive Bonus Plan, such payments to be made by JPM or pursuant
to JPM's express written directions; (v) fifth, to pay all other
items, including without limitation payments or reserves for
accrued employee compensation, accrued professionals' compensation,
payments for the Winning Bidder’s buyouts of equipment lease
obligations, and other items specified in the Final Funds Flow.
It is a final order and is enforceable upon entry and to the extent
necessary under Bankruptcy Rules 5003, 9014, 9021, and 9022. The
Court expressly finds that there is no just reason for delay in the
implementation of the Order and expressly finds cause exists to
waive all applicable stays imposed by Bankruptcy Rules 6004(h),
6006(d), and 7062 and such stays will not apply to the Order, which
will be effective immediately upon entry on the docket, or to the
transactions contemplated by the APA.
A copy of the Agreement is available at
https://tinyurl.com/exphzm9m from PacerMonitor.com free of charge.
About Tri-Wire Engineering Solutions, Inc.
Tri-Wire Engineering Solutions, Inc. -- https://www.triwire.net/
--
provides installation, construction, maintenance and other
technical support services to cable and telecommunications
companies throughout North America. Tri-Wire Engineering was
formed in 1999 and is headquartered in Tewksbury, Mass.
The Debtor sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. D. Mass. Case No. 21-11322 on September
13,
2021. In the petition filed by Ruben V. Klein, president, the
Debtor disclosed up to $10 million in assets and up to $50 million
in liabilities.
Casner & Edwards, LLP is the Debtor's counsel. Gentzler Henrich &
Associates LLC is the financial advisor and turnaround consultant.
SSG Advisors, LLC serves as investment banker.
US FINANCIAL: Trustee's Sale of Property in Annapolis Approved
---------------------------------------------------------------
Judge Thomas J. Catliota of the U.S. Bankruptcy Court for the
District of Maryland authorized Merrill Cohen, the Chapter 11
Trustee for the estate of US Financial Capital, Inc., to sell the
real property of the estate located in Anne Arundel County,
Maryland, known as 1085 Poplar Tree Drive, in Annapolis, Maryland
21409, to Yessica Reyes-Santos and Jose Ronal Romero Espana.
The Residential Contract of Sale between the Trustee and the Buyer
will be and is approved.
The Trustee's transfer of the Property pursuant to a Trustee's Deed
or Quit Claim Deed constitutes a legal, valid and effective
transfer of the Property and will vest the Buyer with all right,
title and interest of the Debtor and the bankruptcy estate in and
to the Property.
Prior to delivering title to the Property at closing, the Trustee
will have received the net proceeds of sale free and clear of any
interest of any party for distribution in the case.
Subject to final review and approval of the Trustee, the title
company or closing agent for the sale of the Property is authorized
to pay costs of closing as set forth in the Residential Contract of
Sale or as otherwise agreed to by the Trustee, including real
estate commissions in an amount not to exceed 5% of the gross sale
proceeds, and any escrow fees, title premiums, closing costs,
unpaid property taxes, HOA fees, front foot benefit charges and any
other fees and costs as approved by Trustee, the outstanding
balance due to Samjord Partners, LLC on its first deed of trust
with the balance of the net sale proceeds to be paid to the
Estate.
The Trustee is authorized to sell the Property to a substitute
purchaser without further notice in the event that the sale to the
Buyer does not close as long as the substitute contract has
substantially the same or better terms for the estate and is
approved by the Lender.
The Order is effective immediately and will not be subject to a
14-day stay as provided in Bankruptcy Rule 6004(h).
About US Financial Capital
US Financial Capital, Inc., is a privately-held company in
Columbia, Maryland, engaged in activities related to real estate.
It is the fee simple owner of 14 real estate properties having an
aggregate value of $1.38 million.
US Financial Capital sought protection under Chapter 11 of the
Bankruptcy Code (Bankr. D. Md. Case No. 18-14018) on March 27,
2018. In the petition signed by Ronald Talbert, chief operating
officer, the Debtor disclosed $1.38 million in assets and $13.92
million in liabilities. The Debtor hired the Law Office of David
W. Cohen as its legal counsel.
On Nov. 12, 2019, Merrill Cohen was appointed as Chapter 11
Trustee.
VALUE VILLAGE: Business Income to Fund Plan Payments
----------------------------------------------------
Value Village Thrift Stores, Inc., filed with the U.S. Bankruptcy
Court for the District of Arizona a Plan of Reorganization under
Subchapter V dated November 4, 2021.
Ross Kloeber is the 100% shareholder and president of the Debtor.
His parents formed this company in 1988 to operate a Thrift Store
(Value Village) located at 5346 W Glendale.
Mr. Kloebler receives an annual salary of $60,000. The total of
it's unsecured debt is $92,492. The Debtor owes $2,442,089 to the
Internal Revenue Service ("IRS") in secured, priority and unsecured
tax debt and $1,859,740.28 to the Arizona Department of Revenue
("ADOR") in secured, priority and unsecured tax debt.
Since the bankruptcy filing, the Debtor has continued to operate in
the ordinary course of business. The Debtor has substantially
abided by the operating guidelines administered by the United
States Trustee, including the filing of requested documents,
interim operating reports and payment of post petition expenses as
they become due. All Schedules have been filed and the initial
Debtor interview with the United States Trustee has been held.
The Debtor's assets value at $170,414. However, these assets are
fully liened up to IRS and ADOR in an amount will over $1,500,000.
IRS and ADOR also have, in addition to their secured claims,
priority tax claims in the amount of not less than $1,842,865.
This Plan of Reorganization proposes to pay creditors from Debtor's
income over the next 3 years. The Debtor has submitted Offers in
Compromise to both the IRS and ADOR. The Debtor's plan payments
for the first two years will be used to pay administrative expenses
and the Offer in Compromise amounts to IRS and ADOR. The payments
for the remaining 12 months of Debtor's Plan will be used to pay
Class 7 general unsecured creditors.
Payment of administrative expenses and priority claims. This Plan
also provides for full payment of certain administrative, claims
over the term of the Plan in the first two years.
Class 7 consists of Non-priority general unsecured claims. This
class consists of the unsecured debts of Debtor that have allowed
claims. This class will be paid a pro-rata portion of their claims
out from Debtor's semi-annual payment beginning 6 months after
Classes 1-5 are paid in full. The payments will be divided prorate
among all creditors in this class. It is anticipated that these
payments will begin in Month 25 of the Plan.
Class 8 consists of Interest Holders in Debtor. The only interest
holder in Debtor is Ross Kloeber, who is the 100% shareholder of
Debtor. Mr. Kloeber will retain his interest in Debtor and shall
provide his ongoing services to Debtor so that it is able to
operate and make the payments required under the Plan. He shall
not receive any distribution on account of his interest until after
all payments are made as is set forth in the Plan. All assets not
distributed to creditors pursuant to the Plan, shall be re-vested
in Debtor upon confirmation of the Plan, if the Plan confirmation
is consensual, or upon closing of the case, if the Plan
confirmation is non-consensual. His annual compensation will
continue at $60,000.00 during the term of the Plan.
The Debtor will be making semi annual payments to creditors.
Payments to Classes Two and Three (IRS and DOR) will commence once
the offers in compromise are accepted. Until such time, the Debtor
will set aside these payments the DIP account while awaiting
acceptance.
A full-text copy of the Plan of Reorganization dated Nov. 4, 2021,
is available at https://bit.ly/3o4LWWU from PacerMonitor.com at no
charge.
Attorney for Debtor:
Harold E. Campbell, Esq.
Law Offices of Harold E. Campbell PC
910 West McDowell
Phoenix, AZ 85007
Telephone: (480) 839-4828
Facsimile: (480) 897-1461
Email: heciii@haroldcampbell.com
About Value Village Thrift Stores
Value Village Thrift Stores, Inc. -- 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.
Value Village Thrift Stores sought protection under Chapter 11 of
the U.S. Bankruptcy Code (Bankr. D. Ariz. Case No. 21-06112) on
Aug. 6, 2021. In the petition signed by Ross O. Kloeber, III,
president, the Debtor disclosed up to $50,000 in assets and up to
$10 million in liabilities. Judge Paul Sala oversees the case.
Harold E. Campbell, Esq., represents the Debtor as legal counsel.
VARIG LOGISTICA: Bankr. Court Dismisses MP Entities' Suit
---------------------------------------------------------
Two contested matters are pending in the chapter 15 case of Varig
Logistica S.A., a discovery dispute in the main case and a motion
to dismiss the adversary proceeding styled VOLO LOGISTICS LLC, et
al., Plaintiffs, v. VARIG LOGISTICA S.A., Defendant, Adv. No.
20-1243-RAM-A (Bankr. S.D. Fla.).
The foreign debtor, Varig Logistica S.A., was a Brazilian cargo
airline that is in a liquidation proceeding in Brazil. The
fiduciary currently appointed to administer that liquidation, Vanio
Cesar Pickler Aguiar as Foreign Representative has filed, in
Brazil, corporate malfeasance claims against several defendants
consisting of private equity investment funds and their affiliates
who indirectly owned and controlled the Debtor for about three
years before the Debtor filed a reorganization case in Brazil in
2009. These entities continued to control the Debtor for about
three more years after the Debtor filed its Brazilian
reorganization case until that case was converted to a liquidation
proceeding in 2012.
The defendants in the Brazil proceeding, who are also the
Plaintiffs in this adversary proceeding are (i) Volo Logistics LLC;
(ii) MatlinPatterson Global Opportunities Partners II LP ("MP
Fund"); (iii) MatlinPatterson Global Opportunities Partners
(Cayman) II LP (together with the MP Fund, the "MP Funds"); (iv)
MatlinPatterson Global Advisors LLC ("MP Advisors"); (v)
MatlinPatterson Global Partners II LLC; and (vi) MatlinPatterson PE
Holdings LLC (f/k/a MatlinPatterson Asset Management LLC).
In the Brazil proceeding, the Foreign Representative alleges that
the MP Entities operated the Debtor in a manner that stripped the
Debtor of its equity to the detriment of the Debtor's creditors.
Although the Foreign Representative sued the MP Entities in a
Brazilian bankruptcy court, he served discovery on Volo in this
Court and Volo seeks to quash the Foreign Representative's domestic
discovery requests.
In this adversary proceeding, the MP Entities seek entry of a
judgment enjoining the Foreign Representative from further
prosecuting claims against them in Brazil. They argue that the
Debtor released all claims against its owners in exchange for the
MP Entities releasing the Debtor from liability for significant
operating loans. In short, The MP Entities argue that the Foreign
Representative cannot now pursue claims released by the Debtor.
Because the MP Entities are now debtors in Chapter 11 cases pending
before the United States Bankruptcy Court for the Southern District
of New York, the discovery dispute is stayed. However, the Court
finds cause to dismiss the adversary proceeding and to deny, as
moot, the MP Entities' alternative request for relief from the
automatic stay to prosecute in a New York Court its claims for
declaratory or injunctive relief.
There is one fundamental issue presented in the Adversary
Proceeding and in the Motion to Dismiss: Which court should
determine whether the claims asserted in the Brazilian Indemnity
Case are barred by the Claims Release? Should that defense be
presented and litigated in Brazil, in the Florida Bankruptcy Court
in the Adversary Proceeding, or in a New York court, as requested
alternatively by MP.
The Bankruptcy Court held that in the context presented in a
chapter 15 case, principles of comity compel the decision to defer
to the Brazilian bankruptcy court.
Referring back to, and summarizing the Brazilian bankruptcy court's
September 30th Decision, the Brazilian court made the following
findings:
(i) The Brazilian bankruptcy court has the absolute and
exclusive jurisdiction to hear and try the Brazilian Indemnity
Case;
(ii) The Adversary Proceeding filed by the MP Entities violates
the absolute jurisdiction of the Brazilian bankruptcy court; and
(iii) The Claims Release issue should be determined by the
Brazilian bankruptcy court as a matter of defense to the claims in
the Brazilian Indemnity Case.
Section 1501 of the Bankruptcy Code emphasizes the importance of
cooperation between the U.S. Court and the Brazilian bankruptcy
court, and "[c]onsistent with section 1501," section 1525(a) of the
Bankruptcy Code requires this Court to "cooperate to the maximum
extent possible with a foreign court." Therefore, in considering
the relief requested in the Adversary Proceeding and in considering
the Motion to Dismiss, the Court will respect the Brazilian
bankruptcy court's sovereign interpretation of the claims and
defenses that are pending before it.
Accordingly, the Court held that the Adversary Proceeding should be
dismissed.
The MP Entities' alternative request for relief from the automatic
stay is moot at this point. At the September 2nd status conference,
counsel for the MP Entities confirmed that it is their intention to
assert objections to any claims filed by the FR in the New York
Bankruptcy Cases but not to seek any affirmative relief against the
FR or the Brazilian bankruptcy estate. Therefore, the MP Entities
have no need for relief from the automatic stay in this chapter 15
case.
A full-text copy of the Order dated October 29, 2021, is available
at https://tinyurl.com/bd6wsah from Leagle.com.
About Varig Logistica
Varig Logistica SA was a Brazilian cargo airline and provided air
transport services to major cargo companies including, among
others, Federal Express, DHL and UPS. It was previously controlled
by affiliates of MatlinPatterson Global Advisers LLC.
On March 31, 2009, Alexandre Savio Abs da Cruz, manager of flight
operations of Varig Logstica S.A., filed a Chapter 15 petition for
the company (Bankr. S.D. Fla., Case No.: 09-15717). Stephen P.
Drobny, Esq., served as the petitioner's counsel. The Company
listed assets and debts of $100 million to $500 million.
VICTORY CAPITAL: Moody's Rates New $505MM 1st Lien Loan B 'Ba2'
---------------------------------------------------------------
Moody's Investors Service has affirmed the ratings of Victory
Capital Holdings, Inc. and assigned a Ba2 senior secured debt
rating to its proposed term loan issuance. The proceeds of the loan
will be used to fund the upfront cash payment for the acquisition
of WestEnd Advisors, LLC and associated transaction costs. The
outlook on the ratings is stable.
A summary of the rating action follows:
Issuer: Victory Capital Holdings, Inc.
Corporate Family Rating, affirmed at Ba2
Probability of Default Rating, affirmed at Ba2-PD
Senior Secured 1st Lien Bank Credit Facility, affirmed at Ba2
$505 million Senior Secured 1st Lien Term Loan B due 2028,
assigned at Ba2
Outlook Actions:
Issuer: Victory Capital Holdings, Inc.
Outlook, remains stable
RATINGS RATIONALE
The ratings affirmation reflects Victory's positive operating
performance and the organic AUM growth opportunities provided by
recent acquisitions. New investment franchises give the company
initial entree into the alternatives, sustainable investing and
model delivery markets each of which are attracting significant
investor demand. While the acquisition of WestEnd Advisors will be
funded with debt and add an additional turn to Victory's leverage
ratio, the company's leverage metric (debt/EBITDA as calculated by
Moody's) will still remain within Moody's expectation for a
Ba2-rated asset manager.
Victory plans to issue a $505 million 7-year term loan to fund the
upfront cash payment for WestEnd and associated transaction costs.
This would raise Moody's estimate of the company's financial
leverage by a turn to 2.9 times debt-to-EBITDA for the twelve
months ended September 30, 2021. However, the incremental revenue,
asset resilience, and business diversification benefits of
expanding into the growing third party model portfolio market
provide an offset to the elevated leverage.
Additionally, given WestEnd's limited need for back office
operations support, Moody's expect stable to modest growth in
profit margins as Victory works to integrate the new business. GAAP
pre-tax income margins averaged about 30% for the last 5 years, and
Moody's expect the company's adjusted EBITDA margins to run close
to 50% over the near term.
Victory's Ba2 CFR reflects its strong profitability, exclusive ties
to the USAA membership channel, and diverse product offerings
provided by franchises operating under its integrated
multi-boutique structure. Constraining the company's rating is its
concentrated exposure to US equities and modest size relative to
the broader financial services sector.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's could upgrade Victory's ratings if: 1) sustained asset
inflows drive organic growth and improve asset resiliency rates to
or above industry averages; 2) financial leverage (debt/EBITDA as
calculated by Moody's) is less than 2.5 times; or 3) profitability
as measured by GAAP pre-tax income margin is sustained above 20%.
Alternatively, the following factors could lead to a downgrade of
Victory's ratings if: 1) asset decay is sustained such that net
client redemptions exceed 3% of firm AUM per year; 2) leverage
(debt/EBITDA as defined by Moody's) is maintained above 3.5x; or 3)
five-year pre-tax income margin decline to below 15%.
Victory is an integrated multi-boutique asset manager headquartered
in San Antonio, Texas. At 30 September, the company had assets
under management of about $160 billion and earned total revenues of
approximately $862 million over the last twelve months.
WestEnd, founded in 2004, is a Charlotte based investment advisory
firm that provides model portfolio strategies to financial
advisors. At September 30 the company had approximately $18 billion
of assets under advisement.
The principal methodology used in these ratings was Asset Managers
Methodology published in November 2019.
WILLIE L. STEPHENS: Nov. 23 Hearing on Sale of Practice Assets
--------------------------------------------------------------
Judge Frank J. Bailey of the U.S. Bankruptcy Court for the District
of Massachusetts will convene a telephonic hearing on Nov. 23,
2021, at 9:30 a.m. to consider Willie L. Stephens, DDS, PC's sale
of the physical assets used in connection with the oral and
maxillofacial surgery practice, to Western Mass. Endodontics, P.C.
and Affinity Dental Management, Inc. for $62,550, subject to the
terms and conditions set forth in their Asset Purchase Agreement.
Objections and counteroffers, if any, will be due on Nov. 19, 2021,
at 4:30 p.m.
Because of concerns about COVID-19, all participants will appear by
telephone and may not appear in person. To appear telephonically,
attendees shall, at the appointed time of the hearing, dial (877)
336-1839 and enter access code 7925100.
The Debtor will immediately give notice of the Order to all
creditors and file a certificate of such service.
About Willie L. Stephens DDS PC
Willie L. Stephens, DDS, PC, a Wellesley, Mass.-based company that
offers oral surgery dental procedures, filed its voluntary
petition
for Chapter 11 protection (Bankr. D. Mass. Case No. 21-11591) on
Nov. 1, 2021, listing $602,177 in total assets and $1,202,578 in
total liabilities. Willie L. Stephen, president, signed the
petition. Judge Frank J. Bailey oversees the case. Parker Law
serves as the Debtor's legal counsel.
WP CITYMD: S&P Affirms 'B' Issuer Credit Rating, Outlook Stable
---------------------------------------------------------------
S&P Global Ratings affirmed its 'B' issuer credit rating on New
York-based WP CityMD Bidco LLC (d/b/a Summit Health).
S&P said, "We also assigned our 'B' issue-level rating and '3'
recovery ratings to the revolving credit facility and first-lien
term loan. The '3' recovery rating indicates our expectation for
meaningful (50%-70%; rounded estimate: 50%) recovery in the event
of default.
The acquisition will improve the company's scale and geographic
coverage as well as expand its specialty offering. Post the
completion of transaction, the company's revenue base will improve
to $2.8 million in 2022 considering full year impact of
acquisitions from about $2 billion estimated in 2021 which is
significantly higher than $1.6 billion in 2020. Strong growth in
the urgent care business drives 2021 revenue growth due to higher
patient volumes (both COVID-19-related and regular patient visits)
while its multispecialty business remain solid during the year.
While S&P expects a modest decline in base business revenue as
COVID-19 patient volume subsides in its urgent care centers, the
multispecialty business should see a steady organic revenue growth.
Following the acquisitions, the company expands its specialty
offering to include urology, and should also benefit from the
increased geographic footprint in the Northeast market, as it
further expands into New York's Westchester county, Connecticut,
Southern New Jersey and Pennsylvania, providing more opportunities
through referrals and relationship with local players.
S&P siad, "We estimate EBITDA margin moderate in 2022. Summit
Health generated strong margins in 2021 (estimated 18%-19%), due to
expense reduction initiatives, including staff optimization,
procurement efficiencies, and benefitting from its increased
operating leverage from enhanced scale since the merger in 2019.
However, EBITDA margin will slightly decline to 14%-15% in 2022 on
the acquisition of lower-margin business and integration costs.
"Cash flows to also moderate in 2022 but free operating cash flow
to debt will remain solid in 4%-5% range, and leverage remains
above 6x. We expect 2021 free cash flow to debt of 9%-10% due to
elevated pandemic-driven patient volumes, moderating to a still
solid 4%-5% range in 2022, mainly attributed to normalization of
patient volumes and higher interest expense from additional debt.
Free cash flows will also be affected by annual working capital
outflows of about $30 million-$35 million and higher capital
expenditure (capex) of $90 million-$100 million (including about
$40 million-$50 million growth capex to open de novo urgent care
sites and acquire new physicians in multispecialty). We expect
leverage to grow in the 6x-6.5x range in 2021, higher than our
earlier estimates of 5.5x due to debt-financed acquisitions, before
declining to around 6x in 2022 as the company benefits from the
full year of EBITDA from acquisitions. We believe Summit Health
will continue to pursue inorganic growth through a combination of
acquisitions, joint ventures, and new startups that may require
debt financing. We also believe the company's financial sponsors
would prioritize shareholder returns over debt repayment.
"The stable outlook reflects our expectations that company will
integrate the two acquisitions and the base business will generate
solid revenue growth of 25%-35% over the next 12-18 months as the
COVID-19 pandemic subsides. We expect improving volume trends at
its multispecialty facilities, aided by acquisitions and startups
to offset moderating growth at its urgent care facilities."
S&P could lower the rating if:
-- The company cannot integrate acquisitions; or
-- There are sizable patient volume declines for an extended
period, resulting in softer-than-expected revenue and cash flow
generation.
In such a scenario S&P believes revenue and EBITDA margin could
decline more than 200 basis points (bps), resulting in free
operating cash flow (FOCF) to debt below 3%.
Although unlikely, S&P could raise the ratings if:
-- The company continues to expand its market presence; and
-- Private equity sponsors show high commitment to sustain
adjusted debt to EBITDA below 5x while FOCF to debt remains above
7.5%.
*********
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Troubled Company Reporter is a daily newsletter co-published
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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.
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