/raid1/www/Hosts/bankrupt/TCR_Public/211221.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Tuesday, December 21, 2021, Vol. 25, No. 354
Headlines
AHF PARENT: S&P Assigns 'B' Issuer Credit Rating, Outlook Stable
ANTHONY VULPIS: U.S. Trustee Unable to Appoint Committee
APP REALTY: Feb. 3 Hearing on Disclosure and Plan Confirmation
ASP NAVIGATE: S&P Affirms B- Issuer Credit Rating, Outlook Stable
CWT TRAVEL: Fitch Assigns 'CCC' LT IDR
DRIVE CHASSIS: S&P Alters Outlook to Positive, Affirms 'B' ICR
GTT COMMUNICATIONS: Plan Impermissibly Imposes Third Party Releases
HEALTHE, INC.: Trustee Retaining Former Employees & Selling Assets
J & R UNITED: Seeks to Hire Salazar Law as Bankruptcy Counsel
JANE STREET: S&P Affirms BB- Issuer Credit Rating, Outlook Stable
NITROCRETE LLC: 4862 Innovation Appointed as New Committee Member
PROVIDENT FUNDING: S&P Withdraws 'B-' Issuer Credit Rating
RIVER HILL: Seeks to Hire EmergeLaw as Bankruptcy Counsel
SPX FLOW: S&P Places 'BB' ICR on Watch Negative on Lone Star Deal
STARWOOD PROPERTY: Fitch Rates USD400MM Unsec. Notes 'BB+'
STATERA BIOPHARMA: To Pay $275K Attorneys Fees in "Litwin" Case
VANTAGE SPECIALTY: S&P Alters Outlook to Stable, Affirms CCC+' ICR
VIPER PRODUCTS: Seeks to Hire McWhorter, Cobb & Johnson as Counsel
*********
AHF PARENT: S&P Assigns 'B' Issuer Credit Rating, Outlook Stable
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S&P Global Ratings assigned its 'B' issuer credit rating to AHF
Parent Holding Inc. and its 'B' issue-level rating and '3' recovery
rating to its proposed $215 million term loan B.
Paceline Equity Partners announced it has entered into a definitive
agreement to acquire AHF Parent Holding Inc. Financing consists of
a cash equity contribution and funded debt of $223 million.
AHF has limited product diversity and lower profitability than
peers. Due to the inherent volatility of the housing market,
singular product focus, and smaller scale, we believe the company
could be more susceptible to a downturn in the sector. AHF offers
primarily hardwood flooring products (90% of sales) to residential
end markets, commanding the No. 1 position in solid wood flooring
and No. 2 in engineered wood flooring. Its well-known brands such
as Bruce can be found in major national home centers and flooring
retailers such as Home Depot, Lowe's, Floor & Decor, and Lumber
Liquidators. AHF has expanded its product mix in recent years by
entering resilient flooring with the introduction of luxury vinyl
tile (LVT; about 9% of sales) in 2021 with its acquisition of
Parterre. However, it still has limited offerings compared to
bigger and more diversified peers such as Mohawk Industries Inc.
(BBB+/Stable), Shaw Industries (unrated), Mannington Mills Inc.
(BB-/Stable), and Interface Inc. (BB-/Stable). AHF is smaller than
all four yet holds the leading market share in hardwood flooring.
AHF has lower EBITDA margins at 11%-12% than Mohawk (13%-14%) and
Interface (14%-15%) and higher than Mannington (7%-8%). However,
the company's profit margins are more stable due to its 65%
variable cost structure regarding selling, general, and
administrative costs and its heavy tie to more stable R&R markets
at 52%.
Though helped by the recent strong new construction activity and
R&R demand. AHF primarily provides residential wood flooring.
Strong consumer sentiment and demand growth over recent years has
primarily come from LVT markets. The category accounts for only
about 5% of its sales. The strong demand drivers for residential
R&R in the U.S. have continued, although are at risk of a cooling,
particularly if a general decline in economic conditions such as
consumer confidence, discretionary income, and spending decrease
and interest rates increase. S&P believes there is a risk of a
gradual and longer-term cooling from demand peaks for wood flooring
with our economic assumptions showeing signs of decreased growth
earlier than anticipated.
S&P said, "We anticipate about 5%-10% increase in adjusted EBITDA
through 2022 from estimated year-end 2021 and roughly 10% increase
in revenues in 2022 due to backlog end-market demand and
continuation of synergies through recent acquisitions. AHF
generates about 95% of its revenue from the residential housing
segment and 5% from commercial end markets, which were impaired by
reduced demand. We assume modest mid-single-digit percent sales
growth beyond 2022 based on our core U.S. Consumer Price Index,
residential construction growth, and leading indicators or
remodeling activity estimations.
"We expect AHF's S&P Global Ratings-adjusted leverage to be in the
4x-5x range under most market conditions though 2022 and forecast
adequate operating cash flow generation and minimal free cash flow.
The proposed debt issuance will increase leverage. We expect S&P
Global Ratings-adjusted leverage can increase above 5x if financial
sponsor Paceline Equity executes aggressive dividends or large
debt-funded acquisitions. AHF's prevailing end markets and strong
pricing trends enable it to rapidly increase earnings. Free
operating cash flow (FOCF) is de-minimis at $15 million-$25 million
relative to its size and peers. Historically, the company has
produced strong operating cash flows exceeding $30 million in 2020.
We expect AHF to generate $20 million-$30 million of S&P Global
Ratings-adjusted operating cash flow over the next 12 months.
"The stable outlook on AHF reflects our belief that R&R end markets
should remain stable through 2022. We expect mid-single-digit
percent revenue growth and relatively flat EBITDA margins,
maintaining adjusted debt to EBITDA of 4x-5x through 2022. Adjusted
leverage is also driven by our assumption of no large debt-funded
dividends or acquisitions in the outer months following the
acquisition by Paceline."
S&P could downgrade the company over the next 12 months if:
-- EBITDA margins deteriorate more than 300 basis points or
annualized revenues significantly decrease such that debt to EBITDA
increases toward 6x; or
-- Free cash flow is negative because the global economic recovery
stalls amid a resurgence in coronavirus cases, affecting consumer
confidence, and a lack of cash flow generation.
An upgrade is unlikely over the next year, as the financial sponsor
ownership is a limiting factor on the rating. However, this could
happen if demand for hardwood flooring is stronger than expected
and the company significantly expands end-market diversification.
Under this scenario, S&P expects AHF to sustain:
-- Adjusted leverage below 4x;
-- Positive discretionary cash flow for debt repayment; and
S&P's confidence that the financial sponsor is willing to maintain
leverage at or near this area.
ANTHONY VULPIS: 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 Anthony Vulpis Contract Carrier Corp., according to
court dockets.
About Anthony Vulpis Contract Carrier
Anthony Vulpis Contract Carrier Corp. filed its voluntary petition
for Chapter 11 protection (Bankr. S.D. Fla. Case No. 21-20090) on
Oct. 21, 2021, listing up to $50,000 in assets and up to $100,000
in liabilities. Judge Peter D. Russin oversees the case. Chad T.
Van Horn, Esq., at Van Horn Law Group, P.A. represents the Debtor
as legal counsel.
APP REALTY: Feb. 3 Hearing on Disclosure and Plan Confirmation
--------------------------------------------------------------
The court has entered an order that a combined hearing to consider
approval of the Disclosure Statement and confirmation of the Plans
of APP Realty LLC, et al. will be held before the Honorable
LaShonda A. Hunt on February 3, 2022, at 11:30AM (CST). The
Confirmation Hearing will proceed electronically using Zoom for
Government.
January 24, 2022 is fixed as the last day for filing and serving
written objections to the adequacy of the APP Realty Disclosure
Statement and confirmation of the Plans.
No later than December 16, 2021, APP Realty shall file an amended
Disclosure Statement, and the Debtors shall file their third
amended plans.
January 24, 2022 is fixed as the last day for filing written
acceptances or rejections of the Plan.
January 31, 2022 is fixed as the last day for the Debtors to file
the reports of balloting and serve notice of such filing together
with a copy of the report on the United States Trustee, all parties
on the service list, and all parties who have filed objections to
confirmation.
Prepared by:
Joyce W. Lindauer
State Bar No. 21555700
Kerry S. Alleyne
State Bar No. 24066090
Guy H. Holman
State Bar No. 24095171
Joyce W. Lindauer Attorney, PLLC
1412 Main St. Suite 500
Dallas, Texas 75202
Telephone: (972) 503-4033
Facsimile: (972) 503-4034
Paul M. Bauch (ARDC #6196619)
Carolina Y. Sales (ARDC #6287277)
Bauch & Michaels, LLC
53 W. Jackson Blvd., Suite 1115
Chicago, IL 60604
(312) 588-5000
pbauch@bmlawllc.com
csales@bmlawllc.com
About APP Realty and APP
Car Wash
APP Realty, LLC, owns land and a building housing a car wash
located in the City of Chicago, Cook County, Illinois.
APP Realty, LLC, a Chicago-based company, sought protection under
Chapter 11 of the Bankruptcy Code (Bankr. N.D. Ill. Case No.
21-03839) on March 24, 2021. The case is jointly administered with
the Chapter 11 case filed by an affiliate, APP Car Wash, LLC, on
May 20, 2021 (Bankr. N.D. Ill. Case No. 21-06550). Judge Lashonda
A. Hunt oversees the cases.
At the time of the filing, APP Realty had total assets of
$1,226,027 and total liabilities of $1,028,763. Meanwhile, APP Car
Wash disclosed total assets of up to $1 million and total
liabilities of up to $10 million.
Joyce W. Lindauer Attorney, PLLC and Bauch & Michaels, LLC serve as
the Debtors' bankruptcy counsel and local counsel, respectively.
ASP NAVIGATE: S&P Affirms B- Issuer Credit Rating, Outlook Stable
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S&P Global Ratings affirmed its 'B-' issuer credit rating on ASP
Navigate Acquisition Corp. (ASP) and 'B-' rating on the first-lien
senior secured debt. The recovery rating on the first-lien debt
remains '3' (rounded estimate: 50%), indicating expectations for
meaningful recovery in the default scenario.
S&P said, "Our stable outlook reflects our expectation for mid- to
high-single-digit percent revenue growth in 2022 driven by new
programs and new product launches, slight improvement in EBITDA
margin, adjusted leverage of about 7.5x, and slightly positive
FOCF.
"We expect continued recovery in product volumes and new product
launches to lead to a gradual improvement in credit measures to
nearly pre-pandemic levels in 2023.In the first half of 2021, ASP's
profitability and cash flow generation remained pressured by
ongoing pandemic-related challenges, including
weaker-than-historical order volumes, coupled with cost inflation
on materials and labor. However, in the third quarter of 2021 the
company reported 9% revenue growth reflecting a rebound in order
volumes among several customers and new product launches. EBITDA
margins in the third quarter also increased significantly to the
low-20% range due to a positive product mix shift and some
cost-savings initiatives, partially offset by increased cost in
recruitment and increased travel by commercial team.
"We expect the fourth quarter of 2021 and 2022 to continue to show
improvement supported by new programs and new product launches. We
now project that the company's 2021 revenue will be about $310
million and reach about $330 million to $340 million in 2022. We
also expect ASP's EBITDA margin to stabilize in the high-teens
range in 2022, leading to adjusted leverage at 7.5x and modest
positive cash flow. However, we believe the company will have to
continue navigating pandemic-related headwinds, supply chain
constraints, and labor disruptions over the next 12 months.
"We expect the company will maintain adequate liquidity and be able
to cover its fixed charges over the next 12 months. We estimate ASP
will have fixed charges of about $65 million to $70 million in 2022
(including cash interest payments of about $30 million, debt
repayment of about $5 million, working capital uses of about $10
million to $15 million, and capital expenditure of about $15
million to $20 million). In addition, we project the company will
report about $55 million of EBITDA in 2022. ASP had a cash balance
of $13 million as of Sept. 30, 2021 and $56 million of revolver
availability as of Sept. 30, 2021.
"Our stable outlook reflects our expectation for mid- to
high-single-digit percent revenue growth in 2022 driven by new
programs and new product launches, slight improvement in EBITDA
margin, adjusted leverage of about 7.5x, and slightly positive
FOCF."
S&P could lower the ratings if:
-- ASP faces increasing headwinds in operations such that EBITDA
margin declines, leading to very high leverage and unsustainable
capital structure; or
-- Its liquidity deteriorates due to material free operating cash
flow deficits.
Although unlikely in the next year, S&P could raise its ratings on
ASP if it expects adjusted leverage of below 7x for a sustained
period. S&P also expects improvement in the FOCF generation.
CWT TRAVEL: Fitch Assigns 'CCC' LT IDR
--------------------------------------
Fitch Ratings has assigned CWT Travel Group, Inc. a 'CCC' Long-Term
Issuer Default Rating (IDR). In addition, Fitch has assigned a
'CCC' IDR to co-borrowers CWT US, LLC, CWT UK Group Ltd, and CWT
Beheermaatschappij BV (collectively, CWT).
Fitch also assigned a 'B'/'RR1' rating to CWT's new $150 million
senior secured credit facility (consisting of $60 million revolver
and $90 million term loan), and a 'B-'/'RR2' rating to CWT's new
$625 million senior secured notes (issued by CWT Travel Group, Inc.
only and not the co-borrowers). There is no Rating Outlook.
The IDR reflects the persistent weakness in global corporate travel
and improved liquidity positioning. Near-term liquidity is not a
material concern given newly raised capital; however, the business
continues to operate at a free cash flow deficit and will need a
material and sustained recovery in fundamentals and cashflows to
support the new capital structure.
KEY RATING DRIVERS
Restructuring Cuts Debt Burden: The November 2021 restructuring cut
CWT's debt balance by roughly 60% through a recapitalization, and
provided additional liquidity in the form of $350 million in
equity, and a new $60 million undrawn revolver. Leverage metrics
will remain irrelevant until operations begin to normalize, but the
new capital structure represents gross leverage around 3.0x based
on pre-pandemic EBITDA levels. Long term, CWT could be upgraded
into the 'B' IDR category as operations improve and liquidity no
longer becomes the primary driver of its rating.
Increased Liquidity Runway: Fitch estimates CWT will have over $300
million in cash and $60 million in revolver availability at YE
2021. This should be sufficient in the context of forecast cash
burn through YE 2022, as corporate and international travel's
recovery lags that of the leisure segment. Fitch forecasts 2022 FCF
to be around negative $260 million. FCF is forecast to turn neutral
by 2023 and become marginally positive thereafter. CWT's 'CCC' IDR
reflects the improved liquidity position to fund ongoing
operational weakness over the short-to-intermediate term; however,
limited headroom remains for travel volumes to remain significantly
depressed.
Lagging Business Travel Recovery: Fitch anticipates business travel
to rebound at a slower pace relative to leisure travel. However,
despite increased telework options and reduced business travel in
the short term, Fitch expects an eventual return in the majority of
corporate travel demand. The agency assumes somewhat normalized
volumes in the medium term, but with some cannibalization and
reduced T&E budgets as a result of successful virtual/remote
meetings during the initial stages of the pandemic. However, new
viral variants (e.g. Omicron) remain a disruption risk,
particularly if they are more transmissible or cause more severe
illness.
Traditionally, the business travel industry has a moderate degree
of cyclicality, due to demand volatility stemming from economic
cycles or external shocks. The business travel industry is
fragmented, with many companies still retaining operations
in-house. However, CWT is one of the largest competitors along with
American Express Global Business Travel.
Company Diversification: CWT is diversified from a geographic,
customer and contract type perspective, helping to moderate an
impact from cyclical travel pressures (excluding idiosyncratic
shocks like the pandemic). A majority of revenue is generated in
the Americas and EMEA, with a growing presence in Asia. No single
customer comprises a meaningful portion of total revenue, and CWT's
business clients are also diversified across industries.
The company structures its contracts as either transaction
fee-based (roughly two-thirds of revenue) or management fee-based,
with the latter somewhat supporting cash flows in the event of
travel volume declines. Positively, CWT has exposure to government
and military travel, which is recovering at a faster pace than
corporate travel.
DERIVATION SUMMARY
CWT is a global operator in business travel management services
with historically moderate leverage. Its closest peer is Amex GBT,
which operates in the same travel vertical. The closest Fitch-rated
peer is Expedia Inc. (BBB-/Negative), which provides
business-to-consumer travel services primarily to individuals and
is more exposed to leisure travel.
Fitch expects leisure travel to see a stronger near-term recovery
relative to corporate travel. Expedia has significantly larger
scale, which had excess of $100 billion gross travel bookings and
$1 billion in annual FCF during 2019, while it also has a
long-established track record of adhering to a 'below 2.0x' gross
debt/EBITDA target.
Travelport and Sabre GLBL are also peers that operate in the global
distribution system (GDS) business. Long term, Fitch believes the
disintermediation risk of GDS companies from the travel funnel is
greater than business travel management companies, with the latter
offering high value-add services to corporate clients.
Fitch applied the strong subsidiary/weak parent approach under its
Parent and Subsidiary Linkage Rating Criteria. Fitch views the
linkage as strong across CWT's entities given the openness of
access and control by the parent and relative ease of cash movement
throughout the structure. The rated entities are viewed on a
consolidated basis, and the ratings are linked.
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for the issuer
include:
-- Traffic volumes remain significantly depressed during 2021 and
gradually recover beginning in 2022. Fitch forecasts CWT
revenues compared to 2019 levels to be down around 50% in
2022, 25% in 2023, and 5% in 2024;
-- Adjusted EBITDA remains negative through fiscal year 2022.
Given the structural savings in CWT's cost base, Fitch
forecasts EBITDA margins reaching mid-teens once travel demand
begins to normalize. Annual restructuring charges related to
labor cuts, which are added back to EBITDA, begin to decline
in 2022;
-- Meaningful reduction in capex as certain software development
programs are delayed. Fitch assumes no additional cash flow
benefits from governmental payroll assistance programs given
the uncertainty around the sustainability of such programs.
KEY RECOVERY RATING ASSUMPTIONS
The recovery analysis assumes that CWT would be reorganized as a
going-concern in bankruptcy rather than liquidated. Fitch has
assumed a 10% administrative claim, and has assumed the $60 million
revolver to be fully drawn at the time of recovery. The current
recovery ratings contemplate roughly $775 million of secured debt
claims.
Fitch estimates going-concern EBITDA in a scenario in which default
may be caused by deep cyclical pressures, resulting in prolonged
cash burn. Under this scenario, Fitch estimates a going-concern
EBITDA of roughly $130 million, which is around Fitch's forecast
2023 EBITDA to reflect a forward-looking view amid persistent
weakness in business travel.
This decline in EBITDA from the December 2019 peak is worse than
CWT's performance during the last recession, reflecting the
prolonged operating weakness in corporate travel and potential for
some degree of cannibalized travel volumes due to proliferation of
remote/virtual meetings.
Fitch assumes a going-concern recovery multiple of 6.0x for CWT.
This is slightly above Travelport's prior 5.0x recovery multiple
assumed by Fitch, as the agency believes that the long-term
disintermediation risk is lower for travel management companies
compared with GDS companies. There are limited public transaction
multiples in the travel services industry; however, CWT's recovery
multiple is lower than acquisition multiples for Travelport in 2018
(11.0x) and Orbitz Worldwide in 2015 (10.3x).
CWT's valuation multiple per the November restructuring was 9.0x
based on 2023 projected EBITDA and 4.0x based on 2024 projected
EBITDA (6.5x mid-point). The implied enterprise value is similar to
the valuation of the firm during the recent restructuring assuming
the newly raised equity has minimal value.
In terms of priority ranking for the collateral, the revolver and
term loan are considered priority over the new secured notes and
all three are secured by the same collateral. The collateral is
essentially all of the assets of CWT though some (less than 10%)
are not pledged given the associated costs with pledging assets in
foreign jurisdictions.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Fitch having greater confidence in the sustainability and
degree of operational recovery;
-- An improvement in financial flexibility, primarily due to
improving operational cash flow, such that utilization of one
time liquidity sources (e.g. revolver) is not required;
-- EBITDA margins approaching break-even.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Persistent weakness in global managed travel volumes;
-- A liquidity crisis is perceived as unavoidable in the next 12-
24 months;
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
CWT is estimated to have over $300 million in cash and $60 million
in revolver availability by YE 2021. The opening cash balances will
be funded in part by the $715 million in new secured debt and a
$350 million rights offering as defined in the restructuring's
sources and uses. There will be no near-term maturities. This level
of liquidity should be sufficient to provide runway for operations
to begin improving more materially in 2023. FCF will remain
negative in 2022, become roughly neutral in 2023, and turn
marginally positive in 2024.
ISSUER PROFILE
CWT Travel Group, Inc. is a travel management company, competing
with peer American Express Global Business Travel. Through its
online and offline offerings, CWT offers management, reservations
and booking services to a large number of corporate and government
clients.
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.
DRIVE CHASSIS: S&P Alters Outlook to Positive, Affirms 'B' ICR
--------------------------------------------------------------
S&P Global Ratings affirmed its 'B' issuer credit rating and
revised its outlook to positive. S&P also affirmed its 'B'
issue-level rating on the company's term loan. The '4' recovery
rating (rounded estimate: 45%) is unchanged.
The positive outlook reflects S&P's expectation that it could raise
its rating over the next 12 months if credit metrics improve in
line with its current expectations, even if current market
conditions weaken.
S&P said, "We expect DCLI's operating results will continue to
benefit from strong near-term demand for intermodal transportation
and a continued shortage of chassis equipment. Demand for
intermodal transportation has surged in recent months. Strong
consumer spending, extended retail restocking, and supply chain
bottlenecks have contributed to record volumes at U.S. ports. At
the same time, spot market pricing for truck transportation has
also reached record levels due to strong demand and tight capacity,
diverting some truck traffic to railroads. This has increased
demand for the chassis DCLI leases. Chassis are wheeled frames that
carry intermodal cargo containers to form the equivalent of a truck
trailer. DCLI's chassis are involved in the movement of
international and domestic intermodal containers to and from ports
and rail terminals. On the supply side, we believe insufficient
domestic production and tariffs on imported chassis from China have
contributed to a shortage of available equipment, benefitting
DCLI's pricing. We also believe that the company's chassis have
remained on rent for longer periods, as backlogs, labor shortages,
and insufficient warehouse capacity have slowed the movement of
containers at ports and within rail networks. Overall, we now
forecast revenues will increase in the high-20% area in 2021 before
declining somewhat in 2022 as conditions normalize.
"We do not expect current market conditions will persist over the
longer term. Although timing is uncertain, we believe that
intermodal demand should begin to decline to more normal levels in
2022. Lower import volumes would allow ports and transportation
providers to work through container backlogs. As volumes decline
and backlogs ease, we would expect truck capacity and railroad
efficiency will improve, leading to somewhat lower fleet
utilization in 2022 from current levels. However, even with reduced
demand and slightly lower revenues, we forecast credit metrics will
remain improved over historical levels. We also expect interest
expense will decline in 2022 due to the recent repricing of the
company's term loan, now down 125 basis points. Therefore, our
base-case scenario assumes EBIT interest coverage will increase to
the high-1x area in 2021 and mid-1x area in 2022 from around 0.5x
in 2020, while funds from operations (FFO) to debt increases to the
high-teens percent area in 2021 and mid-teens percent area in 2022
from the mid-single-digit percent area in 2020.
"We believe DCLI benefits from its market position as the only
chassis lessor with both domestic and marine fleets. The intermodal
chassis leasing sector is consolidated, with DCLI operating as one
of three major marine lessors and the only major domestic lessor.
DCLI also benefits from its presence at major ports and rail
terminals, as well as its long-term contracts with major ocean
shipping lines and railroads. The company also has the flexibility
to reduce its capital expenditures when demand is weak given the
discretionary nature of its chassis refurbishment program and
relatively short lead time with manufacturers
"The positive outlook reflects our expectation that DCLI will
continue to benefit from strong demand for intermodal
transportation. We expect credit metrics will continue to be
maintained at higher than historical levels, even as supply chain
disruptions ease and macroeconomic conditions normalize in 2022. We
forecast EBIT interest coverage will increase to the high-1x area
in 2021 and the mid-1x area in 2022 from around 0.5x in 2020. We
also forecast FFO to debt will increase to the high-teens percent
area in 2021 and the mid-teens percent area in 2022 from the
mid-single-digit percent area in 2020."
S&P could raise its rating over the next 12 months if:
-- The company's credit metrics improve in line with S&P's
expectations even amid weaker market conditions, with EBIT interest
coverage of at least 1.1x and FFO to debt around 12% on a sustained
basis.
-- S&P would also need to expect the company and its owners will
maintain a financial policy consistent with the higher rating.
S&P could revise its outlook to stable if it no longer believes the
company's credit metrics will improve in line with its
expectations, with EBIT interest coverage declining below 1.1x and
FFO to debt declining well below 12% on a sustained basis. This
could occur if:
-- Market conditions weaken significantly due to weaker consumer
spending or import levels;
-- DCLI pursues greater-than-expected debt-financed capital
expenditures or acquisitions; or
-- The company engages in debt-financed shareholder returns.
GTT COMMUNICATIONS: Plan Impermissibly Imposes Third Party Releases
-------------------------------------------------------------------
William K. Harrington, the United States Trustee for Region 2 (the
"United States Trustee"), submits his objection to confirmation of
the Debtors' Second Modified Joint Prepackaged Chapter 11 Plan of
Reorganization of GTT Communications Inc. and its Debtor Affiliates
filed on December 5, 2021. In support of the Objection, the United
States Trustee respectfully states:
The United States Trustee objects to confirmation of the Second
Modified Plan because the plan impermissibly imposes third party
releases on parties who have not affirmatively and unambiguously
demonstrated their consent to grant such releases. The Debtors are
moving quickly through a Court-sanctioned prepack process, relying
in part on the notion that the relief they are seeking is typical
and ordinary. The Debtors contend that all third party-releases in
the plan are consensual. However, the Debtors have not procured
appropriate consent from all parties subject to the consensual
releases in the Second Modified Plan.
The United States Trustee also objects to the scope of the Second
Modified Plan's injunction and exculpation provisions in connection
with such defenses as recoupment and contribution for creditors who
did not have a right to vote on the Second Modified Plan. The
Debtors appear to use Section 1146 of the Bankruptcy Code for
improper purposes, seeking the waiver of transfer taxes even for
preconfirmation sales.
United States Trustee:
William K. Harrington
Greg M. Zipes
Trial Attorney
201 Varick Street, Room 1006
New York, New York 10014
Tel. No. (212) 510-0500
Fax. No. (212) 668-2255
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 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, 2021. As of the petition date, the Debtors had
pre-bankruptcy funded indebtedness totaling $2.015 billion.
Judge Michael E. Wiles oversees the cases.
The Debtors tapped Akin Gump Strauss Hauer & Feld, LLP as legal
counsel; TRS Advisors as financial advisor and investment banker;
and Alvarez & Marsal, LLC as restructuring advisor. Brian Fox,
Alvarez & Marsal's managing director, serves as the Debtors' chief
restructuring officer. Prime Clerk, LLC is the claims agent and
administrative advisor.
HEALTHE, INC.: Trustee Retaining Former Employees & Selling Assets
------------------------------------------------------------------
On an expedited basis, David W. Carickhoff, the Chapter 7 Trustee
overseeing the liquidation of UVC technology company Healthe, Inc.,
wants permission from the Honorable Christopher S. Sontchi to
retain and compensate unidentified former employees as independent
contractors. The Trustee tells Judge Sontchi he believes the
historical and institutional knowledge these individuals possess
(and can’t easily obtain elsewhere) will reduce the expense and
time associated with, among other things, the collection of the
Debtor’s accounts receivable, sale of finished goods, and
otherwise assist with the preservation and monetization of the
Debtor’s assets.
Judge Sontchi will convene a hearing at 2:00 p.m. today, Tues.,
Dec. 21, to consider the Trustee’s request.
The Court will also consider the Trustee’s expedited request to
establish uniform procedures for selling or abandoning of estate
assets having minimal value, like:
* finished goods inventory located in one or more warehouses
operated by a third party logistics provider;
* work in process with certain manufacturers or other parties;
and
* furniture, fixtures, machinery, and equipment located in the
company’s corporate headquarters located at 800 Mary Louis Lane
in Kissimmee, Fla.
The Trustee believes there is a limited pool of companies in the
industry or otherwise that may have an interest in purchasing the
De Minimis Assets and it would be too costly and burdensome to ask
the Court for permission to sell each small estate asset
individually.
When the cash consideration in a small asset sale is less than
$500,000, the Trustee proposes he will file a notice of the
proposed De Minimis Sale with the Court and parties will have three
business days to raise objections. The notice will identify the
asset, the buyer, any lienholder, and the terms of the sale
agreement. The Trustee proposes to file notices and give parties
seven days to object when his business judgment tells him he should
abandon an estate asset.
Healthe, Inc., UVC technology company Healthe, Inc., filed a
chapter 7 petition (Bankr. D. Del. Case No. 21-11567) on Dec. 10,
2021. David W. Carickhoff serves as the Chapter 7 Trustee and is
represented by Bryan J. Hall and Alan M. Root at ARCHER & GREINER,
P.C., in Wilmington. The Debtor disclosed $12.2 million in assets
(including nearly 100 UV technology patents) and $15 million in
unsecured claims, of which more than half is owed to an insider.
J & R UNITED: Seeks to Hire Salazar Law as Bankruptcy Counsel
-------------------------------------------------------------
J & R United Industries, Inc. seeks approval from the U.S.
Bankruptcy Court for the Southern District of Florida to employ
Salazar Law, LLP as its legal counsel.
Salazar Law will render these legal services:
(a) advise the Debtor regarding its powers and duties in the
continued management and operation of its business;
(b) advise the Debtor in connection with post-petition and
pre-petition financing arrangements, emergency financing and
capital structure, and negotiate and draft documents relating
thereto;
(c) advise the Debtor regarding the evaluation of unexpired
leases and executory contracts to be assumed, rejected or
assigned;
(d) advise the Debtor with respect to legal issues arising in
or relating its ordinary course of business and provide advice and
counsel on matters involving tax, insurance, corporate, business
operation, contracts, real property, media, press releases, and
public affairs;
(e) take all necessary action to protect and preserve the
Debtor's estate;
(f) prepare legal papers;
(g) negotiate on the Debtor's behalf and prepare a plan of
reorganization, disclosure statement and all related agreements
and/or documents, and take any necessary action to obtain
confirmation of such plan;
(h) attend meetings and negotiate with representatives of
creditors and other parties-in-interest and advise and consult on
the conduct of this case;
(i) attend meetings with third parties and participate in
negotiations with respect to the matters described above;
(j) appear before this bankruptcy court, any appellate courts,
and the United States Trustee, and protect the interests of the
Debtor's estate before such courts and the United States Trustee;
(k) advise the Debtor with respect to its responsibilities in
complying with the United States Trustee's Operating Guidelines and
Reporting Requirements and with the rules of this court; and
(l) perform all other necessary legal services for the
Debtor.
The hourly rates of the firm's counsel and staff are as follows:
Luis Salazar $550
Jose Ceide $435
Daniel Halperin $350
Ali-Marcelle Lee-Sin $205
Partners $435 - $550
Of Counsel $350 - $550
Associates $285 - $450
Law Clerks $210 - $280
Paralegals $120 - $205
In addition, the firm will seek reimbursement for expenses
incurred.
Luis Salazar, Esq., the founder and managing partner of Salazar
Law, disclosed in a court filing that the firm is a "disinterested
person" as that term is defined in Section 101(14) of the
Bankruptcy Code.
The firm can be reached through:
Luis Salazar, Esq.
Salazar Law, LLP
2121 SW 3rd Avenue, Suite 100
Miami, FL 33129
Telephone: (305) 374-4848
Facsimile: (305) 397-1021
Email: Luis@Salazar.Law
About J & R United Industries
J & R United Industries, Inc. filed its voluntary petition for
relief under Chapter 11 of the Bankruptcy Code (Bankr. S.D. Fla.
Case No. 21-21670) on Dec. 13, 2021, listing under $1 million to
$10 million in both assets and liabilities. Salomon P. Grosfeld,
president, signed the petition. Judge Laurel M. Isicoff oversees
the case. Luis Salazar, Esq., at Salazar Law, LLP serves as the
Debtor's counsel.
JANE STREET: S&P Affirms BB- Issuer Credit Rating, Outlook Stable
-----------------------------------------------------------------
S&P Global Ratings affirmed its issuer credit ratings on 20 U.S.
institutional and retail securities firms, as well as their rated
subsidiaries. The affirmations follow a revision to its methodology
for rating banks and nonbank financial institutions and for
determining a Banking Industry Country Risk Assessment (BICRA). S&P
affirmed the issuer credit ratings on the following holding
companies:
Institutional securities firms:
Cantor Fitzgerald L.P.
Citadel Securities L.P.
Cowen Inc.
DRW Holdings LLC
Hudson River Trading LLC
Jane Street Group LLC
Jefferies Financial Group Inc.
Jump Financial LLC
StoneX Group Inc.
VFH Parent LLC
Retail securities firms:
Advisor Group Holdings Inc.
Ameriprise Financial Inc.
Aretec Group Inc.
Charles Schwab Corp.
IBG LLC
Kestra Advisor Services Holdings A Inc.
LPL Holdings Inc.
Oppenheimer Holdings Inc.
Raymond James Financial Inc.
Stifel Financial Corp.
The rating outlooks on these entities are unchanged. S&P's economic
risk and industry risk scores in the U.S. remain '3'.
S&P said, "These scores determine the BICRA and the anchor, or
starting point, for our ratings on financial institutions that
operate primarily in the U.S. The trends we see for economic risk
and industry risk remain stable and positive, respectively.
"Similarly, our assessment of the U.S securities firms anchor is
unchanged. The securities firm anchor remains at 'bbb-', two
notches below the bank anchor to reflect our view of the U.S.
securities firm sector's incrementally higher industry risk
relative to banks. These include U.S. securities firms' lower, but
still material, regulatory oversight and institutional framework;
higher competitive risk; and typically less stable, more
transactional revenue. Even accounting for the liquidity of
domestic capital markets, differences in assets, and the U.S.
investor insurance scheme (The Securities Investor Protection
Corp.), funding risk for securities firms is higher than for banks,
in our view, because securities firms typically lack central bank
access."
While no ratings in this group changed, there were some key changes
in the criteria that are worth noting. These include:
-- S&P said, "Clarifying the role that cash flow leverage (debt to
EBITDA) plays in our capital and earnings assessment within the
limited scope of select retail securities firms that have almost no
balance sheet risk because they employ third-parties to hold and
clear client's securities, notably Advisor Group Holdings Inc.,
Aretec Group Inc., and Kestra Advisor Services Holdings A Inc. This
is because we believe these entities' ability to generate cash flow
to meet their financial obligations is relevant to our view of
creditworthiness given their lack of tangible equity and limited
balance sheet risks."
-- For certain principal-trading-focused securities firms, S&P now
formally considers the ratio of required margins to net trading
capital in its liquidity assessment, and for those more reliant on
short-term funding, S&P now typically reflects this in the funding
assessment.
-- For certain securities firms, S&P has moved consideration of
additional risks beyond those captured in the capital and earnings
assessment associated with the trading book, illiquid or difficult
to value securities, and underwriting on a committed basis to its
assessment of risk position.
Institutional Securities Firms
Cantor Fitzgerald L.P.
S&P's ratings on Cantor Fitzgerald L.P. and its affiliate BGC
Partners continue to reflect Cantor's consolidated adequate
capitalization and liquidity; reliance on wholesale funding; and
diverse, well-positioned mix of securities, brokerage, and real
estate businesses.
Outlook
The stable outlook reflects S&P's expectation that Cantor's
profitability may be volatile, but that the company will maintain a
risk-adjusted capital (RAC) ratio over 9% and supportive funding
and liquidity, including a gross stable funding ratio (GSFR) and
liquidity coverage metric (LCM) above 100%.
Downside scenario.Over the next 12 months S&P could lower the
ratings if:
-- S&P expects the RAC ratio to fall below 9% or funding or
liquidity to materially erode;
-- The firm suffers from prolonged poor performance or an
unexpected material loss, or it materially increases its principal
risk exposure; or
-- Capitalization available to group entities with material risk
deteriorates, or capital fungibility across the group (and the
various subsidiaries) becomes a material issue.
Upside scenario. An upgrade is unlikely over the next 12 months.
Over the longer term, S&P could raise the ratings if it expects a
RAC ratio sustainably above 11% and improved business performance
and funding and liquidity measures.
Citadel Securities L.P.
S&P said, "Our ratings on Citadel Securities L.P. continue to
reflect the firm's dominant market positions in equities and
options market-making and growing presence in fixed-income
market-making, good business line and geographic diversification,
strong capitalization, and solid profitability. These strengths are
partially offset by the firm's limited amount of recurring revenue,
the potentially high confidence-sensitivity inherent to the
business model in a stress scenario, ambitious growth plans,
increased regulatory risk from the SEC's review of U.S. equity
market structure, high operational risk (although the firm has
shown a strong track record in managing this risk through a robust
operational risk framework), and reliance on short-term secured
funding."
Outlook
S&P said, "The stable outlook indicates our expectation that
Citadel Securities will retain its position as a leading and
strongly capitalized global market-maker while delivering strong
profitability. We expect that growth in the capital base will be
commensurate with the company's very ambitious growth plans, so
that the RAC ratio remains comfortably above 11% (from just under
14% as of Sept. 30, 2021)."
Downside scenario. S&P could lower the ratings if:
-- Capitalization (as measured by our RAC ratio) deteriorates
below 11% on a sustained basis because of an aggressive financial
policy--for example, because of increased distributions to
shareholders, material operational risk, or market risk losses; or
-- Liquidity deteriorates with, for example, margin to net trading
capital exceeding 65% (from approximately 59% as of Sept. 30,
2021); or
-- the SEC's review of the U.S. equity market structure proves
disruptive for Citadel Securities' business model.
Upside scenario. An upgrade is unlikely over the two-year horizon,
given the company's lack of contractually recurring revenue and
high confidence-sensitivity, as well as the high operational risk
it faces as a predominantly electronic market-making firm.
Cowen Inc.
S&P's ratings on Cowen Inc. continue to reflect its focused and
growing institutional and investment banking franchise, fairly
volatile revenue, adequate capitalization and liquidity, but weaker
than peer funding. They also incorporate the company's transition
to being less focused on principal investing, which could be a more
stable and better-capitalized business model.
Outlook
The stable outlook reflects S&P's expectation that Cowen will
successfully integrate its recently announced Portico acquisition,
maintain adequate capitalization with a RAC ratio of at least 8%,
liquidity with a LCM of about 1x, and profitability as it monetizes
some investments and moves to a less-capital-intensive business
model.
Downside scenario.Over the next 12 months, S&P could lower the
ratings if:
-- Cowen experiences weak profitability due to a downturn in
business performance or write-down in assets;
-- S&P expects the company to maintain its RAC ratio below 7%; or
-- S&P expects it to maintain its LCM below 0.9x or liquidity
otherwise deteriorates.
Upside scenario. Over the same horizon, S&P could raise its ratings
if Cowen demonstrates sustained growth and stable revenue and
profitability, and either:
-- Maintains a RAC ratio sustainably above 10%, or
-- S&P expects funding to improve, with a GSFR sustainably above
100%.
DRW Holdings LLC
S&P said, "Our ratings on DRW Holdings LLC continue to reflect the
firm's successful diversified, albeit higher-risk, principal
trading and investing business, which has strong market shares in
several major futures and options products. We view negatively the
firm's limited term funding, which makes it reliant on short-term
prime brokerage funding. Further, while we expect the RAC ratio to
remain above 7%, we believe DRW has additional trading and
operational risks as a technology-driven trading firm."
Outlook
S&P said, "The stable outlook on DRW reflects our expectation that
DRW's balance sheet, exposure, and margin requirements may be
volatile, but the firm will maintain good operating performance, a
RAC ratio above 7%, and a ratio of margin required to be posted to
prime brokers to total net trading capital typically below 55%. We
expect total commercial real estate (CRE) investments to decline
and total exposure to CRE and private equity investments to be less
than 50% of total adjusted capital. We also expect nonregulated
entities to continue to account for the majority of the firm's
earnings and resources and the holding company to maintain
liquidity sufficient to meet two years of debt service
obligations."
Downside scenario. S&P could lower its ratings over the next 12
months if it expects:
-- The RAC ratio to fall consistently below 7%;
-- Margin required to be posted to prime brokers to total net
trading capital to be consistently above 65%, or the firm's
liquidity to otherwise deteriorate;
-- Capital or liquidity outside of regulated entities to fall
dramatically, or holding company liquidity to deteriorate;
-- The performance or asset quality of its CRE portfolio to
deteriorate materially; or
-- Material operational risk issues or losses.
Upside scenario. Over the same time horizon, S&P could raise its
ratings if it expects the company to:
-- Maintain a RAC ratio comfortably above 10%,
-- Decrease its commercial real estate portfolio further, and
-- Improve its funding profile (as measured by our GSFR) while
maintaining margin, excluding additional central counterparty
clearing house margins/net trading capital consistently below 50%.
Hudson River Trading LLC
S&P said, "Our ratings on Hudson River Trading LLC (HRT) continue
to reflect its highly profitable high-frequency trading
market-making franchise and adequate capitalization. We believe the
firm's expansion strategy, reliance on short-term prime broker
funding, and transactional principal trading revenue--which can
vary quarterly--partially offset these strengths."
Outlook
The stable outlook on HRT indicates S&P's expectation that HRT will
maintain supportive operational performance, capitalization, and
liquidity as it continues to expand its trading operations and
risk. S&P expects the firm will maintain profitability, a RAC ratio
around 8%, and adequate funding and liquidity.
Downside scenario. Over the next 12 months, S&P could lower the
ratings if:
-- The firm grows market risk more rapidly than expected,
-- It suffers a material operating loss,
-- The RAC ratio declines below 7% on a sustained basis, or
-- Funding or liquidity deteriorate materially.
Upside scenario. While unlikely over the outlook horizon, S&P could
raise its ratings on HRT if it increases its business
diversification sufficiently to improve business stability and
improves its RAC ratio above 10% on a sustainable basis.
Jane Street Group LLC
S&P said, "Our ratings on Jane Street Group LLC continue to reflect
its highly profitable trading business, including a leading
exchange-traded fund market-making franchise, as well as its
adequate capitalization, with a RAC ratio that we expect to remain
above 8%. We believe the firm's reliance on short-term wholesale
funding, along with its relatively high risk appetite and volatile
principal trading business, partially offset these strengths."
Outlook
S&P said, "The stable rating outlook on Jane Street is based on our
expectation of solid, albeit potentially volatile, profitability,
with no outsize losses as Jane Street expands and continues to
diversify its trading business. We expect the firm to maintain a
RAC ratio above 8% and sufficient liquidity to offset margin call
exposure, including margin to net trading capital typically below
65%."
Downside scenario. S&P could lower the ratings in the next 12
months if:
-- Jane Street suffers significant losses or prolonged weak
operating results;
-- S&P expects the RAC ratio to fall below 7%; or
-- Margin to trading capital is consistently over 65% or liquidity
otherwise deteriorates.
Upside scenario. S&P could raise the ratings over the same time
horizon if it expects Jane Street to sustain a RAC ratio above 10%
and improve funding (as measured by its GSFR).
Jefferies Financial Group Inc.
S&P said, "Our ratings on Jefferies Financial Group Inc. (JFG)
continue to reflect the firm's solid and growing franchise in
investment banking and strong capitalization. While we view the
reliance on short-term wholesale funding at JFG subsidiary
Jefferies Group LLC and potential liquidity needs in a stress
scenario in the expanding prime brokerage business as relative
weaknesses, we believe the entity maintains considerable liquidity
buffers at Jefferies Group and at the holding company level."
Outlook
S&P said, "The stable outlook on JFG reflects our expectation that
Jefferies will maintain its solid and growing franchise in
investment banking, management's commitment to maintain strong
capitalization, and adequate funding and liquidity in the next two
years. We believe the company's RAC ratio will likely fall from the
elevated 14.5% at Aug. 31, 2021, but stay above 11.5%."
Downside scenario. S&P could lower the ratings if it expects:
-- The RAC ratio to fall below 11.5% on a sustained basis, for
example because of large buybacks, deteriorating earnings, or
losses in the portfolio;
-- The firm to unduly increase risks; or
-- The GSFR to fall below 110% (from 130% at the end of August
2021) or if liquidity was to deteriorate substantively.
Upside scenario. An upgrade is unlikely at this stage given peer
relativities.
Jump Financial LLC
S&P said, "Our ratings on Jump Financial LLC continue to reflect
the company's strong capitalization and profitable market-making
and principal trading business, which has strong market shares in
several major asset classes. We view negatively the reliance on
short-term prime brokerage funding, the lack of contingent
liquidity sources, and the significant operational risk linked to
the extensive use of algorithms for trading."
Outlook
S&P said, "The stable outlook is based on our expectation that Jump
will maintain good operating performance, capitalization, and
liquidity as it continues to expand its trading operations and
risk. Specifically, we expect the firm will maintain a RAC ratio
above 10%. We also expect nonregulated entities to continue to
account for the majority of the firm's earnings and resources and
the holding company to maintain liquidity sufficient to meet two
years of debt service obligations."
Downside scenario. Over the next 12 months, S&P could lower the
ratings if:
-- S&P expects the RAC ratio to fall below 10% on a sustained
basis, either because of large member distributions or increased
exposures to unconsolidated affiliates;
-- S&P expects the funding profile to deteriorate;
-- The ratio of margin required to be posted to prime brokers to
total net trading capital rises materially from already elevated
levels (81% as of June 30, 2021, pro forma the August term loan
issuance); or
-- Earnings or liquidity at unregulated entities fall
dramatically.
Upside scenario. Over the same time horizon, S&P could raise its
ratings if it expects:
-- Jump to maintain its RAC ratio comfortably above 15% on a
sustained basis; or
-- The margin required to be posted to prime brokers to net
trading capital to be consistently below 50%.
StoneX Group Inc.
S&P said, "Our ratings on StoneX Group Inc. continue to reflect its
diversified mix of businesses, including one of the largest
independent commodities and commodities-related financial products
trading firms in the U.S.; good earnings; and adequate liquidity,
as well as our view that overall risk-based capitalization is a
moderate weakness, given the company's loss history and growth
focus."
Outlook
S&P said, "The stable outlook on StoneX incorporates our
expectations that its diversified businesses will continue to
perform well, with solid profitability and prudent growth in risk
exposures and its acquisition strategy. We expect StoneX to retain
earnings to build capital to support its business and risk growth
and maintain a RAC ratio above 8%. We also expect the firm to
maintain a GSFR above 100% and a LCM above 1x."
Downside scenario. Over the next 12 months S&P could lower the
ratings if:
-- The company's operating performance deteriorates;
-- S&P expects the RAC ratio to fall below 8%; or
-- Liquidity deteriorates.
Upside scenario .Over the same time frame, S&P could raise its
ratings if the company:
-- Maintains its recent track record of solid operational
performance and lower risk;
-- Avoids material losses; and
-- Continues to build capital to support a RAC ratio sustainably
above 10%.
VFH Parent LLC
S&P said, "Our ratings on VFH Parent LLC (Virtu) continue to
reflect its aggressive financial management, including relatively
modest tangible equity (which has often been negative over the past
several years), reliance on short-term secured funding, and
increased regulatory risk from the SEC's review of U.S. equity
market structure. In our view, those factors more than offset
Virtu's strong track record of trading profitability, its diversity
across trading products and markets, and its good market position
in electronic market making."
Outlook
S&P said, "The stable outlook on Virtu reflects our expectation
that it will continue to exhibit solid profitability over the next
12 months with no material increase in risk or operational losses.
While tangible equity has been building, we don't expect the
company to sustain a RAC ratio above 3% over the long term."
Downside scenario. Over the next 12 months S&P could lower the
ratings if:
-- Core earnings erode;
-- The firm suffers material operational risk or market losses;
-- Margin-to-net trading capital increases substantially or
liquidity otherwise deteriorates; or
-- The SEC's review of U.S. equity market structure proves
disruptive for its business model.
Upside scenario. Over the same time horizon, S&P could raise the
ratings if it believes the firm is committed to sustaining a RAC
ratio above 3% and it improves its funding profile.
Retail Securities Firms
Advisor Group Holdings Inc.
S&P said, "Our ratings on Advisor Group Holdings Inc. are based on
its private-equity ownership and aggressive financial management,
with our expectation of gross debt to S&P Global Ratings-adjusted
EBITDA of above 6.0x, limited debt service coverage of below 2x,
and negative tangible equity. These weaknesses are partially offset
by the firm's improving earnings despite lower rates, minimal
exposure to credit and market risk, adequate liquidity, and good
market position in independent brokerage."
Outlook
S&P said, "The stable outlook on Advisor Group reflects our
expectation that Advisor Group will continue to operate with debt
to S&P Global Ratings-adjusted EBITDA above 6.0x and interest
coverage of about 2x over the next 12 months. We also expect the
company will maintain adequate liquidity and a comfortable cushion
relative to the leverage covenant on its revolving facility."
Downside scenario. S&P could lower the ratings if the company's net
first-lien leverage covenant is activated and minimal cushion is
maintained relative to the 7.5x threshold. S&P could also lower the
ratings if Advisor Group's debt service coverage approaches 1.2x or
if liquidity deteriorates.
Upside scenario. S&P could raise the ratings if it expects the
company's leverage to remain below 6.0x or if the debt service
coverage improves sustainably above 3x.
Ameriprise Financial Inc.
S&P's ratings on Ameriprise Financial Inc. (AMP) continue to
reflect the group's unique, diverse combination of insurance and
noninsurance wealth and asset management and banking businesses and
sound financial management with good capitalization and liquidity.
Outlook
The stable outlook on AMP indicates our expectation that the
company will continue to post solid profitability and maintain
supportive capitalization and good liquidity across the group, with
retained earnings supporting modest growth in the balance sheet.
Downside scenario. S&P could lower the ratings over the next 12-24
months if the company suffered material deterioration of
profitability, an unexpected increase in risk, or erosion of
capital or liquidity.
Upside scenario. Over the same time horizon, it is unlikely S&P
would raise the ratings.
Aretec Group Inc.
S&P's ratings on Aretec Group Inc. are based on its private-equity
ownership and aggressive financial management, with its expectation
of gross debt to S&P Global Ratings-adjusted EBITDA of above 6.0x,
modest debt service coverage of 2.25x-2.75x, and negative tangible
equity. These weaknesses are partially offset by the firm's
improving earnings despite lower rates, minimal exposure to credit
and market risk, and adequate liquidity.
Outlook
S&P said, "The stable outlook reflects our expectation that Aretec
will continue to operate with debt to S&P Global Ratings-adjusted
EBITDA above 6.0x and interest coverage of 2.25x-2.75x over the
next 12 months. We also expect the company will maintain adequate
liquidity and a comfortable cushion relative to the leverage
covenant on its revolving facility."
Downside scenario. S&P could lower the ratings if Aretec's interest
coverage approaches 1.2x, liquidity worsens, or it expects the
first-lien net leverage to weaken beyond its current expectations
(so that the cushion to the 6.5x first-lien net leverage covenant
threshold deteriorates substantially).
Upside scenario. S&P could raise the ratings if it expect the
company's leverage to remain below 6.0x or if the debt service
coverage improves sustainably above 3x.
Charles Schwab Corp.
S&P's ratings on Charles Schwab Corp. continue to reflect the
strength of its market position, its strong capital and earnings,
very limited risk appetite, and solid funding structure as a bank
holding company.
Outlook
S&P said, "The stable outlook on Charles Schwab incorporates our
expectation that TD Ameritrade (TDA) will be successfully
integrated with minimal client loss. We also expect the company to
retain sufficient earnings (and limit shareholder spending) to keep
the RAC ratio above 15%, regulatory Tier 1 leverage above 6%, and
the GSFR and LCM at very strong levels given the size of the
balance sheet may be volatile, depending on brokerage clients'
uninvested cash balances and participation in the market. We also
expect the company to maintain its good credit performance on loans
and conservative, high-quality asset mix, with a majority of very
low-risk, liquid securities."
Downside scenario. S&P could lower the ratings over the next 12-24
months if:
-- There are material problems integrating TDA or profitability
deteriorates;
-- S&P expects the regulatory Tier 1 leverage ratio to fall below
6% on a sustained basis or the RAC ratio to deteriorate;
-- The company suffers material erosion in asset quality, either
from deterioration in the performance of loans and investments or
an unexpected material increase in the portion of high-risk or
illiquid assets in its investment portfolio; or
-- It suffers excessive balance-sheet volatility.
Upside scenario. Given the transformative nature of the TDA
acquisition, S&P is unlikely to raise its ratings over the outlook
horizon. Over the longer term, S&P could raise its ratings if:
-- This integration is successful and Schwab demonstrates
supportive profitability and limited balance-sheet volatility;
-- Schwab maintains strong capital and liquidity, including
adjusted common equity to risk-weighted assets comfortably above
15% and regulatory Tier 1 leverage above 6.75% on a sustained
basis; and
-- Schwab prudently manages its cash-sweep and stock buyback
programs.
IBG LLC
S&P said, "Our ratings on IBG LLC and its subsidiary Interactive
Brokers continue to reflect the consolidated firm's solid market
position, very strong capitalization, resilient earnings in the
face of lower rates and competitive pressure, and adequate funding
and liquidity. While risk has decreased with the shrinking
market-making business, we believe IBG still faces model and
operational risks from this business. The company's reliance on
more volatile transactional revenue and its still-material portion
of more confidence-sensitive institutional clients, as well as the
highly competitive nature of the businesses, continue to at least
partially offset these strengths. We also believe compliance risk
is higher than some peers given the global customer base and recent
issues."
Outlook
S&P said, "Our positive outlook on IBG reflects its shrinking
market-making business and related market and operational risk, as
well as the continued growth of its less confidence-sensitive
retail clients, which we believe could improve its business and
financial stability. It also reflects the fact that IBG's business
and profitability have been less affected by COVID-19-related
market and economic stress, as well as by its competitors moving to
zero-commission pricing, than we expected. We forecast the firm
will maintain its RAC ratio well above 25%, GSFR above 110%, and
solid liquidity, including a LCM typically above 90%."
Upside scenario. Over the next 12-24 months, S&P could raise the
ratings if:
-- Profitability remains very strong;
-- IBG's portion of more stable and less confidence-sensitive
retail and financial advisor clients grows to provide improved
diversification and stability;
-- The Department of Justice inquiry is resolved and the company
establishes a strong regulatory compliance record;
-- The company remains committed to holding very strong levels of
capital and successfully manages its margin loan exposures with
minimal losses; and
-- Options market-making risk runs down materially.
Downside scenario. Over the same time horizon, S&P could revise the
outlook to stable if it expects the firm's RAC ratio to weaken to
below 20%, its business displays less stability or higher risk or
losses, or liquidity deteriorates.
Kestra Advisor Services Holdings A Inc.
S&P said, "Our ratings on Kestra Advisor Services Holdings A Inc.
are based on its private-equity ownership and aggressive financial
management, with our expectation of gross debt to S&P Global
Ratings-adjusted EBITDA of above 6.0x, limited debt service
coverage of just over 2x, and negative tangible equity. These
weaknesses are partially offset by the firm's improving earnings,
minimal exposure to credit and market risk, and adequate
liquidity."
Outlook
S&P said, "The stable outlook reflects our expectation that Kestra
will continue to operate with debt to S&P Global Ratings-adjusted
EBITDA above 6.0x and interest coverage of 2x-2.25x over the next
12 months. We also expect that the company will maintain adequate
liquidity and a comfortable cushion relative to the leverage
covenant on its revolving facility."
Downside scenario. S&P could lower the ratings if Kestra's interest
coverage approaches 1.2x, liquidity deteriorates, or the cushion
against the revolver's leverage covenants erodes substantially.
Upside scenario. S&P could raise the ratings if the company
demonstrates less aggressive financial management and it expects
the company's leverage to remain below 6.0x, or if the debt service
coverage improves sustainably above 3x.
LPL Holdings Inc.
S&P said, "Our ratings on LPL Holdings Inc. continue to reflect its
solid, relatively low-risk business, which has a high level of
recurring revenue and typically generates strong earnings, as well
as its adequate liquidity and modest credit and market risk.
Offsetting these strengths are the company's exposure to regulatory
and compliance risks, as well as its negative tangible equity and
reluctance to build equity capital. Like most retail brokers, LPL's
revenue and earnings are also exposed to declines in market values
and low short-term interest rates."
Outlook
S&P said, "The stable outlook on LPL reflects our expectation that
it will maintain solid liquidity, successfully integrate the
Waddell & Reed acquisition, and onboard recently won new business.
We expect this new business and continued organic growth to support
strong profitability and debt service coverage and limit debt to
EBITDA leverage, per its covenant calculation, to about 2x."
Downside scenario.Over the next 12 months, S&P could lower the
ratings if it expects:
-- Leverage (as defined by LPL's credit agreement) to be over 3x
either because of deteriorating market conditions or aggressive
financial management; or
-- Excess liquidity to deteriorate materially.
Upside scenario. An upgrade is unlikely over the next 12 months. In
the longer term, S&P could raise the ratings if LPL continues to
grow and perform well and builds capital.
Oppenheimer Holdings Inc.
S&P said, "Our ratings on Oppenheimer Holdings Inc. continue to
reflect the favorable business mix--the company derives a large
portion of its revenue from its relatively low-risk retail
brokerage and wealth management business--the firm's improved
profitability, and solid RAC ratio. However, in our view,
Oppenheimer continues to have a relatively modest market position
in a competitive industry, is partly reliant on short-term
wholesale funding, and has a LCM that can be volatile and weaker
than peers at times."
Outlook
The stable outlook indicates S&P's expectation that Oppenheimer
will maintain solid earnings and a RAC ratio above 10% over the
next 12 months.
Downside scenario. S&P said, "We could lower the ratings if the
company's earnings materially weaken or the RAC ratio decreases to
below 8% on a sustained basis. We could also lower the ratings if
there is significant attrition of financial advisors such that we
believe the company's market position has deteriorated."
Upside scenario. S&P could raise the ratings if the company
sustains its improved earnings and demonstrates otherwise stable
business trends while maintaining a RAC ratio above 13%, or if its
liquidity coverage ratio strengthens to comfortably above 100% on a
sustained basis.
Raymond James Financial Inc.
S&P said, "Our ratings on Raymond James Financial Inc. (RJF)
continue to reflect its solid retail brokerage franchise and
diverse business mix, flexible cost base, and strong capital (with
an expected RAC ratio above 10%) and liquidity. We believe the
firm's holdings of illiquid assets and relatively elevated credit
risk from the bank loan portfolio compared with higher-rated peers
(despite a very good track record of loan losses) partially work
against these strengths. We also believe RJF's recently announced
acquisition of TriState Capital Holdings will not erode RJF's
capital, funding, or liquidity."
Outlook
The stable outlook on RJF reflects S&P's expectation that RJF will
maintain its competitive position, performance, capitalization, and
liquidity commensurate with the ratings.
Downside scenario.Over the next 12-24 months, S&P could lower its
ratings if:
-- The RAC ratio falls below 10%, for example as a result of large
buybacks, a material weakening of earnings, a substantial increase
in the size of the bank balance sheet due to an influx of
customers' cash sweep deposits, or following the integration of
TriState;
-- The GSFR falls below 110%;
-- The company increases its risk appetite by shifting the asset
mix toward riskier assets; or
-- Liquidity deteriorates following a material increase in
brokerage client cash balances swept into its banks, unless the
additional sweep is invested in liquid available-for-sale
securities.
Upside scenario. An upgrade is contingent on successfully
integrating and operating TriState and on an updated assessment of
peer relativities.
Stifel Financial Corp.
S&P's ratings on Stifel Financial Corp. continue to reflect its
diverse wealth management and investment, commercial, and retail
banking business, strong funding and liquidity, and strong capital
position, partly offset by some risks from the firm's committed
underwriting.
Outlook
The positive outlook on Stifel reflects S&P's view that if
maintained, Stifel's prudent balance-sheet management; improved RAC
and liquidity; and the demonstrated benefit and performance of its
diversified retail and institutional brokerage, investment, and
commercial banking franchise could enhance the company's
creditworthiness.
Upside scenario. Over the next 12-24 months, S&P could raise the
ratings if it expects:
-- Continued slower growth in risk and retention of earnings to
support a RAC ratio sustainably above 11%;
-- The diversified business lines to support more stable revenue
and earnings;
-- Asset quality to remain solid and in line with peers', with no
material increase in nonperforming assets or deterioration in the
collateralized loan obligation portfolio; and
-- Prudent management of the deposit sweep program.
Downside scenario. Over the next 12-24 months, S&P could revise the
outlook to stable if it expects:
-- Asset quality deterioration or credit costs to increase beyond
current expectations, particularly if this would cause a loss;
-- The RAC ratio to fall below 10%; or
-- The GSFR to fall below 100% or the LCM to fall below 110% on a
sustained basis, or liquidity to otherwise deteriorate.
Ratings List
ADVISOR GROUP HOLDINGS INC.
RATINGS AFFIRMED
ADVISOR GROUP HOLDINGS INC.
Issuer Credit Rating B-/Stable/--
AMERIPRISE FINANCIAL INC.
RATINGS AFFIRMED
AMERIPRISE FINANCIAL INC.
Issuer Credit Rating A-/Stable/--
ARETEC GROUP INC.
RATINGS AFFIRMED
ARETEC GROUP INC.
Issuer Credit Rating B-/Stable/--
CANTOR FITZGERALD L.P.
RATINGS AFFIRMED
CANTOR FITZGERALD L.P.
BGC PARTNERS INC.
Issuer Credit Rating BBB-/Stable/--
CHARLES SCHWAB CORP.
RATINGS AFFIRMED
CHARLES SCHWAB CORP.
Issuer Credit Rating A/Stable/A-1
CHARLES SCHWAB & CO. INC.
Issuer Credit Rating A+/Stable/--
TD AMERITRADE HOLDING CORP.
Issuer Credit Rating A/Stable/NR
CITADEL SECURITIES L.P.
RATINGS AFFIRMED
CITADEL SECURITIES L.P.
Issuer Credit Rating BBB-/Stable/A-3
CITADEL SECURITIES (EUROPE) LTD.
CITADEL SECURITIES LLC
CITADEL SECURITIES GCS (IRELAND) LTD.
Issuer Credit Rating BBB/Stable/A-2
COWEN INC.
RATINGS AFFIRMED
COWEN INC.
Issuer Credit Rating BB-/Stable/--
DRW HOLDINGS LLC
RATINGS AFFIRMED
DRW HOLDINGS LLC
Issuer Credit Rating BB-/Stable/--
HUDSON RIVER TRADING LLC
RATINGS AFFIRMED
HUDSON RIVER TRADING LLC
Issuer Credit Rating BB-/Stable/--
IBG LLC
RATINGS AFFIRMED
IBG LLC
Issuer Credit Rating BBB/Positive/--
INTERACTIVE BROKERS LLC
Issuer Credit Rating BBB+/Positive/A-2
JANE STREET GROUP, LLC
RATINGS AFFIRMED
JANE STREET GROUP, LLC
Issuer Credit Rating BB-/Stable/--
JEFFERIES FINANCIAL GROUP INC
RATINGS AFFIRMED
JEFFERIES FINANCIAL GROUP INC
JEFFERIES GROUP LLC
Issuer Credit Rating BBB/Stable/--
JEFFERIES GMBH
JEFFERIES LLC
JEFFERIES INTERNATIONAL LTD.
Issuer Credit Rating BBB+/Stable/A-2
JUMP FINANCIAL LLC
RATINGS AFFIRMED
JUMP FINANCIAL LLC
Issuer Credit Rating BB-/Stable/--
KESTRA ADVISOR SERVICES HOLDINGS A INC.
RATINGS AFFIRMED
KESTRA ADVISOR SERVICES HOLDINGS A INC.
Issuer Credit Rating B-/Stable/--
LPL HOLDINGS INC.
RATINGS AFFIRMED
LPL HOLDINGS INC.
Issuer Credit Rating BB+/Stable/--
OPPENHEIMER HOLDINGS INC.
RATINGS AFFIRMED
OPPENHEIMER HOLDINGS INC.
Issuer Credit Rating BB-/Stable/--
RAYMOND JAMES FINANCIAL INC.
RATINGS AFFIRMED
RAYMOND JAMES FINANCIAL INC.
Issuer Credit Rating BBB+/Stable/NR
STIFEL FINANCIAL CORP.
RATINGS AFFIRMED
STIFEL FINANCIAL CORP.
Issuer Credit Rating BBB-/Positive/--
STONEX GROUP INC.
RATINGS AFFIRMED
STONEX GROUP INC.
Issuer Credit Rating BB-/Stable/--
VFH PARENT LLC
RATINGS AFFIRMED
VFH PARENT LLC
ORCHESTRA BORROWER LLC
Issuer Credit Rating B+/Stable/--
NITROCRETE LLC: 4862 Innovation Appointed as New Committee Member
-----------------------------------------------------------------
The U.S. Trustee for Region 19 appointed 4862 Innovation, LLC as
new member of the official committee of unsecured creditors in the
Chapter 11 case of NITROcrete, LLC.
As of Dec. 15, the members of the committee are:
1. Air Products & Chemicals, Inc.
Representative: Todd Reynolds
7201 Hamilton Boulevard
Allentown, PA 18195-1501
Tel: (610)481-5815
E-mail: parkssg@airproducts.com
2. Airgas
Representatives: Grant Lawson and Rob Cosner
1349 Empire Central Dr., Ste. 300
Dallas, TX 75247
Tel: (469)533-1080
Fax: (469)553-1081
E-mail: Grant.Lawson@Airgas.com
Rob.Cosner@airgas.com
3. 4862 Innovation, LLC
Representative: Ryan Wood
c/o David Wadsworth
Wadsworth, Garber, Warner & Conrardy
2580 W. Main St., Ste. 200
Littleton, CO 80120
Tel: (303)296-1999
E-mail: dwadsworth@wgwc-law.com
About NITROcrete
NITROcrete, LLC and its affiliates filed petitions for Chapter 11
protection (Bankr. D. Colo. Lead Case No. 21-15739) on Nov. 18,
2021. Stephen De Bever, chief executive officer, signed the
petitions. In its petition, NITROcrete listed up to $10 million in
assets and up to $50 million in liabilities.
Judge Kimberley H. Tyson oversees the cases.
The Debtors tapped Matthew T. Faga, Esq., at Markus Williams Young
& Hunsicker, LLC as bankruptcy counsel; Polsinelli, PC as special
counsel; Cordes & Company as financial advisor; and SSG Advisors,
LLC as investment banker. BMC Group, Inc. is the Debtors' noticing
agent.
The U.S. Trustee for Region 19 appointed an official committee of
unsecured creditors on Dec. 9, 2021. The committee is represented
by Kutner Brinen Dickey Riley, P.C. and Seward & Kissel, LLP.
PROVIDENT FUNDING: S&P Withdraws 'B-' Issuer Credit Rating
----------------------------------------------------------
S&P Global Ratings withdrew its 'B-' issuer credit rating on
Provident Funding Associates L.P. and its 'B-' rating on the
company's senior unsecured notes due 2025 at the company's request.
At the time of the withdrawal, the outlook was stable.
RIVER HILL: Seeks to Hire EmergeLaw as Bankruptcy Counsel
---------------------------------------------------------
River Hill Ltd. seeks approval from the U.S. Bankruptcy Court for
the Middle District of Tennessee to employ EmergeLaw, PLC as its
bankruptcy counsel.
EmergeLaw will render these legal services:
(a) advise the Debtor regarding its rights, powers and duties
in the management of its property;
(b) investigate and, if necessary, institute legal action on
behalf of the Debtor to collect and recover assets of its estate;
(c) prepare legal papers;
(d) assist and counsel the Debtor in the preparation,
presentation and confirmation of its disclosure statement and
plan;
(e) represent the Debtor as may be necessary to protect its
interests; and
(f) perform all other legal services for the Debtor.
The hourly rates of EmergeLaw's counsel and staff are as follows:
Partners $475 - $725
Associates and Law Clerks $225 - $375
Paralegals $150 - $190
In addition, the firm will seek reimbursement for expenses
incurred.
EmergeLaw received an initial payment of $21,738 from the Debtor.
Nancy King, Esq., an attorney at EmergeLaw, disclosed in a court
filing that the firm is a "disinterested person" as that term is
defined in Section 101(14) of the Bankruptcy Code.
The firm can be reached through:
Robert J. Gonzales, Esq.
Nancy B. King, Esq.
EmergeLaw, PLC
4000 Hillsboro Pike, Suite 1112
Nashville, TN 37215
Telephone: (615) 815-1535
Email: robert@emerge.law
nancy@emerge.law
About River Hill
River Hill Ltd. filed its voluntary petition for relief under
Chapter 11 of the Bankruptcy Code (Bankr. M.D. Tenn. Case No.
21-03771) on Dec. 10, 2021, listing $74,452 in assets and
$2,229,479 in liabilities. Robert R. Short, chief manager, signed
the petition. Judge Charles M. Walker oversees the case. EmergeLaw,
PLC serves as the Debtor's counsel.
SPX FLOW: S&P Places 'BB' ICR on Watch Negative on Lone Star Deal
-----------------------------------------------------------------
S&P Global Ratings placed its 'BB' issuer credit rating on SPX Flow
Inc. on CreditWatch with negative implications.
The CreditWatch placement reflects a high likelihood that S&P could
lower its ratings on SPX Flow given its expectation for higher
leverage under new financial sponsor ownership.
The CreditWatch placement follows SPX Flow's announcement that it
entered into an agreement to be acquired by Lone Star in an
all-cash transaction valued at $3.8 billion, including the
assumption of debt. SPX Flow's board of directors unanimously
approved the transaction, which S&P expects to close in the first
half of 2022, pending regulatory approvals.
Since the sale of its power and energy business in early 2020, SPX
Flow has operated with very low leverage. S&P said, "We expected
the company to gradually increase leverage to the 2x-3x range
through shareholder-friendly behavior and acquisitions. However,
given the planned sale to Lone Star, we believe the company could
undertake more aggressive financial policies. This could result in
higher debt and drive a weaker assessment of overall financial
risk, in our view."
CreditWatch
S&P plans to resolve the CreditWatch once the capital structure and
financial policies of the new owners become clear.
STARWOOD PROPERTY: Fitch Rates USD400MM Unsec. Notes 'BB+'
----------------------------------------------------------
Fitch Ratings has assigned a 'BB+' rating to the $400 million 3.75%
senior unsecured notes issued by Starwood Property Trust, Inc.'s
(Starwood), due Dec. 31, 2024.
The assignment of the final ratings follows the receipt of
documents conforming to information already received. The final
ratings are the same as the expected rating assigned to the
unsecured notes on Dec. 1, 2021.
KEY RATING DRIVERS
SENIOR DEBT
The debt rating is equalized with the ratings assigned to
Starwood's existing senior unsecured debt as the new notes will
rank equally in the capital structure. The unsecured debt rating is
equalized with the Long-Term Issuer Default Rating (IDR),
reflecting the availability of unencumbered assets and average
recovery prospects for creditors in a stressed scenario.
This transaction is expected to be neutral to Starwood's leverage,
given that proceeds are expected to be used to repay existing
borrowings.
Fitch views Starwood's ability to access the unsecured debt markets
and extend its debt maturity profile favorably; however, unsecured
debt as a proportion of total debt remains below-average following
the issuance. Fitch would view an increase in Starwood's unsecured
funding mix favorably as it would enhance its financial
flexibility. Still, Starwood's secured funding is diverse and
comprised of warehouse lines, repurchase facilities, mortgages and
securitizations, with a well-laddered maturity profile.
Starwood's ratings reflect the strength of its affiliation with
Starwood Capital Group (SCG) and its affiliate manager, SPT
Management, LLC. The affiliation provides access to deal flow and
deep industry and collateral expertise; a solid market position as
a commercial real estate (CRE), residential real estate and
infrastructure lender, special servicer and property investor;
diversity of its business model; strong asset quality; consistent
operating performance; relatively low leverage; appropriate
interest coverage; a diverse and well-laddered funding profile and
solid liquidity.
Rating constraints include Starwood's primary focus on the CRE
market, which exhibits volatility through the credit cycle, a
continued challenging environment for certain CRE property types
such as office and hotel, a largely secured funding profile and
potential for margin calls on secured credit facilities, although
the exposure is more modest than peers.
The Stable Outlook for the Long-Term IDR reflects Fitch's view that
Starwood will continue to maintain strong asset quality, generate
stable and consistent operating cash flows and maintain leverage at
a level appropriate for the risk profile of the portfolio.
Additionally, Fitch believes the company will continue to
opportunistically issue unsecured debt, to enhance its funding
flexibility, and appropriately manage its debt maturity profile.
RATING SENSITIVITIES
The unsecured debt rating is linked to the Long-Term IDR and would
likely move in tandem. However, an increase in secured debt and/or
a sustained decline in the level of unencumbered assets that
weakens recovery prospects on the unsecured debt could result in
the unsecured debt ratings being notched down from the IDR.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- A sustained increase in the proportion of unsecured debt
approaching 40% of total debt; a reduction in margin call
exposure; and the maintenance of leverage at-or-below 2.5x on
a Fitch-calculated basis, excluding all non-recourse debt.
-- Positive rating action would also be conditioned on the
maintenance of strong asset quality performance, consistent
core earnings generation; and a solid liquidity profile.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A sustained increase in Fitch-calculated leverage, excluding
all non-recourse debt, above 3.0x and/or a material increase
in total leverage;
-- An inability to maintain sufficient liquidity relative to
near-term debt maturities, unfunded commitments and margin
call potential;
-- A reduction in business line diversity, material deterioration
in credit performance, a reduction in core earnings and
coverage of the dividend, and/or a sustained reduction in the
proportion of unsecured debt funding below 10% could all yield
a negative rating action.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and
Covered Bond issuers have a best-case rating upgrade scenario
(defined as the 99th percentile of rating transitions, measured in
a positive direction) of three notches over a three-year rating
horizon; and a worst-case rating downgrade scenario (defined as the
99th percentile of rating transitions, measured in a negative
direction) of four notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of '3'. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
STATERA BIOPHARMA: To Pay $275K Attorneys Fees in "Litwin" Case
---------------------------------------------------------------
Statera Biopharma, Inc. has agreed to settle a class action lawsuit
filed by Harold Litwin, a stockholder of the Company.
On Oct. 16, 2020, Statera Biopharma, then known as Cleveland
BioLabs, Inc., entered into an Agreement and Plan of Merger with
Cytocom Inc. and High Street Acquisition Corp. ("Merger Sub"), a
wholly owned subsidiary of the Company, pursuant to which Merger
Sub merged with and into Cytocom, with Cytocom continuing as a
wholly owned subsidiary of the Company and the surviving
corporation of the merger. On Feb. 12, 2021, the Company filed a
Registration Statement on Form S-4 with the United States
Securities and Exchange Commission in connection with the Merger.
On March 19, 2021, Plaintiff Harold Litwin, a stockholder of the
Company, filed a putative class action lawsuit in the Delaware
Court of Chancery captioned Litwin v. Cleveland BioLabs, Inc., et
al., Case No. 2021-0242-SG and named as Defendants the Company,
each director then serving on the Company's board of directors, and
the Vice President of Finance of the Company. The complaint
alleged, among other things, that the Pre-Merger Board violated its
fiduciary duties under Delaware law by failing to disclose
purportedly material information regarding the proposed Merger,
including free cash flows of Cytocom. As relief, the complaint in
the Action sought, among other things, an injunction against the
Merger, damages and an award of attorneys' and experts' fees.
Also on March 19, 2021, Plaintiff filed a motion for expedited
proceedings and a motion for a preliminary injunction. The
Plaintiff's motion for expedited proceedings was granted in part
and denied in part by the Court on April 30, 2021. Thereafter, the
Plaintiff conducted expedited discovery, including review of
documents.
The Defendants have denied that they committed any violation of law
or engaged in any of the wrongful acts that were or could have been
alleged in the Action, and expressly maintain that they diligently
and scrupulously complied with their fiduciary and other legal
duties.
After the complaint was filed and without admitting that the
allegations in the complaint had any merit, the Company determined
to amend the Registration Statement on May 7, 2021 and June 4, 2021
by adding disclosures regarding, among other things, free cash flow
projections for Cytocom prepared in connection with the Merger. On
July 8, 2021, the Court approved a stipulation under which the
Plaintiff voluntarily dismissed the Action. The Court retained
jurisdiction solely for the purpose of adjudicating the anticipated
application of Plaintiff's counsel for an award of attorneys' fees
and reimbursement of expenses in connection with the Action.
Following negotiations, the Company, while denying any and all
liability, and maintaining that the Registration Statement already
contained all material information required for stockholders to
cast an informed vote regarding the Merger prior to the
Supplemental Disclosures, decided it was in its and the
stockholders' best interests to resolve the Plaintiff's counsel's
anticipated Fee and Expense Application and avoid further uncertain
and costly litigation of the issue by agreeing to pay $275,000 to
Plaintiff's counsel for attorneys' fees and expenses in full
satisfaction of the anticipated Fee and Expense Application. The
Court has not been asked to review, and will pass no judgment on,
the payment of attorneys' fees and expenses or their
reasonableness.
Counsel for the Plaintiff is Michael Rogovin, and he may be
contacted at 212-682-3025. Counsel for Defendants is Brian E.
Pumphrey, and he may be contacted at 804-775-7745.
About Statera
Statera Biopharma, Inc. (formerly known as Cytocom, Inc. and
Cleveland Biolabs) is a clinical-stage biopharmaceutical company
developing novel immunotherapies targeting autoimmune,
neutropenia/anemia, emerging viruses and cancers based on a
proprietary platform designed to rebalance the body's immune system
and restore homeostasis.
Cleveland Biolabs reported a net loss of $2.44 million for the year
ended Dec. 31, 2020, compared to a net loss of $2.69 million for
the year ended Dec. 31, 2019. As of Sept. 30, 2021, the Company
had $98.04 million in total assets, $23.84 million in total
liabilities, and $74.19 million in total stockholders' equity.
VANTAGE SPECIALTY: S&P Alters Outlook to Stable, Affirms CCC+' ICR
------------------------------------------------------------------
S&P Global Ratings affirmed its 'CCC+' issuer credit rating on
Vantage Specialty Chemicals Inc. and revised the outlook to stable
from negative.
S&P said, "We also affirmed the 'CCC+' issue-level ratings on the
first-lien credit facility and the 'CCC-' issue-level ratings on
the second-lien credit facility. The '3' and '6' recovery ratings
on both are unchanged, respectively.
"The stable outlook reflects our belief that Vantage will maintain
adequate liquidity and credit metrics appropriate for the rating
over the next 12 months."
The ongoing economic recovery has led to improved demand in some of
Vantage's key end markets.
Following a weak 2019, and a 2020 that was hit by declining demand
in high-end personal care and industrial end markets as the result
of the COVID-19 pandemic, Vantage has seen a pick-up in demand
through the back half of 2020 and thus far in 2021. Vantage has
benefitted from increased demand across the personal care, food
ingredients, and industrials end markets. In addition, the company
has benefitted from higher pricing in 2021 from a top-line
perspective. Slightly offsetting its improved volumes and pricing
is raw material headwinds, particularly in tallow (a key raw
material) leading to some margin compression. Vantage has
contractual pass-through dynamics in oleochemicals which result in
higher sales and lower gross margin percentage during periods of
high input costs. S&P said, "As the company's demand has rebounded,
its credit metrics have improved slightly. However, we still view
credit metrics as unsustainable, with weighted average debt to
EBITDA above 8.0x. Given the inflationary raw material environment
leading to working capital outflows, we expect free cash flow
generation will be negative in 2021. However, given our expectation
for a strengthening in 2022 EBITDA and a moderation in raw material
costs, we would expect Vantage to generate positive free cash flow
in 2022, while maintaining adequate liquidity."
Vantage continues to be a domestic producer of chemicals and
derivatives (focused on natural ingredients, including tallow and
other natural oils).
The company has seen modest growth from its previous Mallet
acquisition, which increased end-market diversity and expanded
Vantage's food end-market segment. Additionally, Vantage has picked
up end-market and geographic diversity through its previous Leuna
and Textron acquisitions, which also brought the benefit of
production facilities outside of the U.S. Despite this, Vantage's
revenues and EBITDA primarily come from the U.S., posing a strong
geographic concentration risk. Vantage has nine manufacturing
sites, with its key facilities concentrated in Gurnee, Ill., and
Chicago. Disruption of operations at any one location would hurt
operating results, which S&P views as a risk factor. Vantage has
long-standing relationships with its top customers.
Vantage holds strong positions in the niche markets in which it
operates, and the company's oleochemical and specialty derivatives
are important inputs in end-customer products.
Due to constrained pricing power, Vantage has lower margins than
commodity chemical peers such as LSB Industries. Given the
relatively large investments required in a small niche market,
barriers to entry are high, which should help protect Vantage's
market positions. Vantage's business also benefits from the high
proportion of contractual sales, with cost pass-throughs in its
commodity-like oleochemical business, as well as its ability to
pass on cost increases in its specialty derivatives business.
However, as a result of Vantage's lower margins, moderate customer
and geographic diversification, and small overall size, S&P
continues to assess its business as weak.
S&P said, "The stable rating outlook on Vantage reflects our
expectation that, while weighted-average debt to EBITDA will likely
remain at what we view as unsustainable levels, we expect the
company to generate positive free cash flow in 2022 while
maintaining adequate liquidity. The stable outlook reflects a
rebound in demand and pricing for Vantage products and
profitability being affected by raw material price hikes and supply
chain headwinds. We have not factored into our analysis any
distributions to shareholders or significant debt-funded capital
spending or acquisitions.
"We could lower the ratings over the next 12 months if Vantage's
organic revenue growth deteriorates or if its margins continue to
decline significantly, as the result of weaker-than-expected
end-market demand or the company not recognizing its procurement
and cost-savings initiatives. We could lower ratings if liquidity
weakened such that sources were below 1.2x uses, cash flow remained
negative well into 2022, or we believed covenant compliance could
become uncertain. We could also lower ratings should the company
decide to pursue a large debt-funded acquisition, with debt to
EBITDA reaching double-digit levels. If any of the company's
maturities become current (under 12 months) we could also take a
negative rating action.
"We could take a positive rating action over the next 12 months if
the company's end-market growth exceeds our expectations, resulting
in funds from operations (FFO) to debt approaching 10% and debt to
EBITDA approaching 7.5x on a sustained basis. We would also need to
believe the company's financial sponsors would remain supportive of
maintaining credit metrics at these levels and that the company's
liquidity is sufficient, and it is generating sustained positive
free cash flow."
VIPER PRODUCTS: Seeks to Hire McWhorter, Cobb & Johnson as Counsel
------------------------------------------------------------------
Viper Products & Services, LLC seeks approval from the U.S.
Bankruptcy Court for the Northern District of Texas to employ
McWhorter, Cobb & Johnson, LLP as its bankruptcy counsel.
The firm will render these legal services:
(a) prepare legal papers;
(b) advise the Debtor regarding the preparation of operating
reports, motions for use of cash collateral, and development of a
Chapter 11 plan;
(c) advise the Debtor concerning questions arising in the
conduct of the administration of the estate and the rights and
remedies of the estate's assets and the claims of secured,
preferred and unsecured creditors and other parties-in-interest;
and
(d) assist the Debtor with any and all sales of assets,
closings of such sales, and distributions to creditors.
Todd J. Johnston, Esq., an attorney at McWhorter, Cobb & Johnson,
disclosed in a court filing that the firm is a "disinterested
person" as that term is defined in Section 101(14) of the
Bankruptcy Code.
The firm can be reached through:
Todd J. Johnston, Esq.
McWhorter, Cobb & Johnson, LLP
1722 Broadway
Lubbock, TX 79401
Telephone: (806) 762-0214
Facsimile: (806) 762-8014
Email: tjohnston@mcjllp.com
About Viper Products & Services
Viper Products & Services, LLC provides environmentally sound
solutions for the oil & gas industry. It offers oil spill
management, testing, reporting, remediation, reclamation,
excavation, and bore/core drilling services.
Viper Products & Services filed its voluntary petition for relief
under Chapter 11 of the Bankruptcy Code (Bankr. N.D. Tex. Case No.
21-50187) on Dec. 13, 2021, listing $1 million to $10 million in
both assets and liabilities. Zack Tuttle, manager, signed the
petition. McWhorter, Cobb & Johnson, LLP serves as the Debtor's
counsel.
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Monday's edition of the TCR delivers a list of indicative prices
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then-ending.
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S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published
by Bankruptcy Creditors Service, Inc., Fairless Hills,
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Copyright 2021. All rights reserved. ISSN: 1520-9474.
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