/raid1/www/Hosts/bankrupt/TCR_Public/200625.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Thursday, June 25, 2020, Vol. 24, No. 176
Headlines
6TH & CENTER: Case Summary & Unsecured Creditor
A2Z WIRELESS: S&P Affirms 'B' ICR; Outlook Negative
AAC HOLDINGS: Moody's Lowers CFR to Ca on Chapter 11 Filing
ACASTI PHARMA: Gets FDA Response to TRILOGY 1 Briefing Package
ALUDYNE INC: Moody's Confirms 'B2' CFR, Outlook Negative
ARGYLE CAPITAL: Voluntary Chapter 11 Case Summary
ARIZONA INDUSTRIAL: S&P Cuts 2019A Revenue Bond Rating to 'BB+(sf)'
ASCENA RETAIL: Implements Changes to Compensation Programs
ASP MCS: S&P Downgrades ICR to 'D' on Missed Interest Payment
BEASLEY MEZZANINE: Moody's Cuts CFR to B3 & Alters Outlook to Neg.
BRINK'S CO: S&P Rates New $400MM Senior Unsecured Notes 'BB-'
BUCKEYE PARTNERS: Fitch Affirms 'BB' LT IDR, Outlook Stable
CABLE & WIRELESS: Fitch Affirms BB- LongTerm IDR, Outlook Stable
CADIZ INC: Stockholders Pass All Proposals at Annual Meeting
CALAIS REGIONAL: 2 Hospitals Fail to Get Court OK for Relief Funds
CALLON PETROLEUM: S&P Upgrades ICR to 'CCC+' on Cancelled Exchange
CARNIVAL CORP: Moody's Cuts Unsec. Rating to Ba2, Outlook Negative
CAROLINAS HOME: Case Summary & 7 Unsecured Creditors
CARROLL COUNTY ENERGY: S&P Affirms 'BB' Senior Secured Debt Rating
CENTURY ALUMINUM: S&P Upgrades ICR to 'B-' on New Note Issuance
CENTURY CASINOS: Moody's Confirms 'B3' CFR, Outlook Negative
CHESAPEAKE ENERGY: Egan-Jones Lowers Senior Unsecured Ratings to D
CHINESEINVESTORS.COM: Case Summary & 20 Top Unsecured Creditors
CIMAREX ENERGY: Egan-Jones Lowers Senior Unsecured Ratings to BB-
CLEVELAND-CLIFFS INC: S&P Lowers 7.5% Unsec. Notes Rating to 'CCC'
COMMSCOPE INC: Moody's Rates New Senior Unsecured Notes 'B3'
CONCENTRA INC: Moody's Withdraws B1 Corp Family Rating
COOPER TIRE: Moody's Confirms Ba3 CFR & B1 Sr. Unsecured Rating
CYTODYN INC: Signs Second Amended Employment Contract with CEO
DAWN ACQUISITIONS: Moody's Lowers CFR to B3, Outlook Stable
ELMIRA CITY: Moody's Hiles Issuer Rating to Ba1, Outlook Stable
ENDEAVOR CONSULTANTS: U.S. Trustee Unable to Appoint Committee
EXSCIEN CORP: Bankruptcy Administrator Unable to Appoint Committee
FREEMAN HOLDINGS: U.S. Trustee Unable to Appoint Committee
FRONTIER COMMUNICATIONS: Committee Hires Kramer Levin as Counsel
FRONTIER COMMUNICATIONS: Committee Hires UBS as Investment Banker
FRONTIER COMMUNICATIONS: Committee Taps A&M as Financial Advisor
FRONTIER COMMUNICATIONS: Hires Deloitte Tax to Provide Tax Services
GAMESTOP CORP: Egan-Jones Withdraws CC Sr. Unsecured Debt Ratings
GARDNER DENVER: Moody's Rates $400MM Secured Term Loan B 'Ba2'
GMP CAPITAL: DBRS Keeps Pfd-4(high) Shares Rating on Review
GNC HOLDINGS: Case Summary & 30 Largest Unsecured Creditors
HUNTS POINT: Voluntary Chapter 11 Case Summary
J.C. PENNEY: Lenders Challenged by New Group on Bankruptcy Funding
JAGUAR HEALTH: Board Adopts New Inducement Award Plan
JARCO HARVESTING: Case Summary & 9 Unsecured Creditors
KNOWLTON DEVELOPMENT: Fitch Assigns 'B' LT IDR, Outlook Stable
LANDS' END: Moody's Confirms 'B3' CFR, Outlook Negative
LATAM AIRLINES: 10% Owner Qatar Airways Pledges Support
LCF LABS: Voluntary Chapter 11 Case Summary
LVI INTERMEDIATE: Taps Chapter 11 Funds Through DIP Financing
MAN HANDS: Case Summary & 20 Largest Unsecured Creditors
MEREDITH CORP: Moody's Rates Incremental Secured Term Loan 'Ba3'
MINERALS TECHNOLOGIES: Moody's Rates $400MM Unsec. Notes 'Ba3'
MOBIQUITY TECHNOLOGIES: Posts $2.4-Mil. Net Loss in First Quarter
MOSAIC CO: Egan-Jones Cuts Foreign Curr. Unsecured Rating to B+
MT SIMPSON FARM: Case Summary & 3 Unsecured Creditors
MURRAY ENERGY: Subsidiaries File Notices of Mass Layoffs in W.Va
MYLAN NV: Egan-Jones Cuts Foreign Curr. Sr. Unsecured Rating to BB+
NAPHTHA ENERGY: Voluntary Chapter 11 Case Summary
NEIMAN MARCUS: Refutes Loan Term Breaches While In Bankruptcy
NELNET INC: Moody's Reviews 'Ba1' CFR for Downgrade
NOVETTA SOLUTIONS: S&P Affirms 'B-' Rating on First-Lien Debt
PHV CORP: Egan-Jones Lowers Senior Unsecured Ratings to B+
PIMLICO RANCH: Case Summary & 11 Unsecured Creditors
PQ CORP: Moody's Gives B1 Rating on New $450MM First Lien Loan
PULMATRIX INC: Stockholders Pass All Proposals at Annual Meeting
PURDUE PHARMA: Court Moves Bar Date to July 30, 2020
REDSTONE BUYER: S&P Assigns 'B' ICR; Outlook Stable
ROCKPORT DEVELOPMENT: Hires Grobstein Teeple as Financial Advisor
RWDT FOODS: Case Summary & 20 Largest Unsecured Creditors
RWDY INC: Case Summary & 19 Unsecured Creditors
SCIENTIFIC GAMES: S&P Affirms 'B' ICR; Outlook Negative
SEADRILL LTD.: Says Chapter 11 Is One Option to Address Downturn
SHIFT4 PAYMENTS: S&P Raises ICR to 'B' After Debt Reduction
SM ENERGY: Moody's Rates $447MM Second Lien Notes 'B3'
STONE QUARRIES: Case Summary & 12 Unsecured Creditors
STREBOR SPECIALTIES: U.S. Trustee Unable to Appoint Committee
TERRIER MEDIA: Moody's Lowers Sr. Credit Facilities to 'B1'
TOUCHPOINT GROUP: Raises $145K From Convertible Note Issuance
TUESDAY MORNING: Seek Approval to Hire Ernst & Young as Auditor
UNITI GROUP: Signs Deal to Sell $250M Shares of Common Stock
VCHP WICHITA: U.S. Trustee Unable to Appoint Committee
VIASAT INC: S&P Rates $400MM Senior Unsecured Notes 'B'
VISTA PROPPANTS: U.S. Trustee Appoints Creditors' Committee
WIN BIG DEVELOPMENT: Voluntary Chapter 11 Case Summary
WOOD PROTECTION: Case Summary & 9 Unsecured Creditors
YODEL TECHNOLOGIES: U.S. Trustee Unable to Appoint Committee
[*] 'Flex Act' Modifies Paycheck Protection Program
[*] Acceptable Uses of Provider Relief Funds of CARES Act
[*] Epstein Becker: PPP May Create False Claims Act
[*] Landlords Hard Hit by Bankruptcy Court Rulings
[*] New Interim PPP Loan Forgiveness Ruling for Employers
[*] Surge in Chapter 11 Bankruptcy Filings in May
[*] Top Questions for Human Resources for Chapter 11 Filings
[^] Recent Small-Dollar & Individual Chapter 11 Filings
*********
6TH & CENTER: Case Summary & Unsecured Creditor
-----------------------------------------------
Debtor: 6th & Center, LLC
220 West 6th Street
Little Rock, AR 72201
Business Description: 6th & Center is a Single Asset Real Estate
as defined in 11 U.S.C. Section 101(51B).
The Debtor owns a building located at
6th & Center Streets, Little Rock, AR
having an appraised value of $1.4 million.
Chapter 11 Petition Date: June 23, 2020
Court: United States Bankruptcy Court
Eastern District of Arkansas
Case No.: 20-12694
Judge: Hon. Phyllis M. Jones
Debtor's Counsel: James F. Dowden, Esq.
JAMES F. DOWDEN, P.A.
212 Center Street
Tenth Floor
Little Rock, AR 72201
Tel: 501-324-4700
E-mail: JFDowden@swbell.net
Total Assets: $1,475,100
Total Liabilities: $906,701
The petition was signed by Danny Brickey, member/authorized
representative.
The Debtor listed Small Business Administration as its sole
unsecured creditor holding a claim of $67,200.
A copy of the petition is available for free at PacerMonitor.com
at:
https://is.gd/3GM8eQ
A2Z WIRELESS: S&P Affirms 'B' ICR; Outlook Negative
---------------------------------------------------
S&P Global Ratings affirmed all of its ratings on U.S.-based
independent, exclusive Verizon retailer A2Z Wireless Holding Inc.
(doing business as Victra), including its 'B' issuer credit rating,
and removed them from CreditWatch, where the rating agency placed
them with negative implications on March 17, 2020.
The rating affirmation incorporates a modest leverage spike in 2020
and S&P's belief that Verizon's temporary favorable commission
structure arrangement during the pandemic could sufficiently
mitigate Victra's declines in store traffic and sales stemming from
the pandemic in the near term.
Despite the company's status as an essential retailer, Victra
closed about 25% of its stores at the peak of the pandemic; less
than 4% are currently still closed. Still, to date, Victra's
margins have benefited from Verizon's temporary Covid-19 financial
support in the form of minimum commission levels. Verizon also
supported the company's operations by providing Victra with
high-volume inventory during periods of supply chain disruptions.
"While we do not expect Verizon's support to carry on beyond May
2020, it should help, in our view, offset some of the declines in
sales related to the ongoing COVID-19 pandemic," S&P said.
In 2020, S&P expects revenue to decline in the mid-single
percentage area, with EBITDA margins in the low double-digit area
and leverage in the mid- to high-5x area (compared with 5.4x in
fiscal 2019).
Victra's covenant cushion under its first-lien credit agreement
might tighten in the next 12 months if the company fails to improve
its performance in its peak fourth quarter.
Liquidity should remain sufficient in the short term, but
tightening covenant headroom poses a risk. The tightest covenant
headroom under the company's term loan was about 15% at the end of
the first quarter of 2020. During the quarter, the company
benefited from Verizon's wellness program. Since S&P does not
incorporate additional support from Verizon into future quarters
and considering the rating agency's performance expectations, it
expects this cushion to tighten to less than 15% by year-end 2020.
Victra limited its cash burn during the pandemic through selective
furloughs of staff and extending its rent payment terms, which
helped to support liquidity
Performance improvement in the second half of 2020 depends on the
late 2020 5G rollout and device upgrades.
Victra remains Verizon's largest independent retailer based on
store count and benefits somewhat from the non-discretionary nature
of demand for mobile phones. However, the company, due to its
revenue concentration, depends on the competitiveness of Verizon's
plans relative to other carriers to drive sales and profitability,
which is largely a function of store traffic. Revenue decreased by
about 5% in 2019, mainly due to declining contract counts and the
continued elongation of the wireless device upgrade cycle. The risk
is also compounded by potentially unfavorable changes to the
commission structure arrangement with Verizon in the future and
potential changes in consumer behavior related to the pandemic or
the impact of a recession, including more volatile demand. S&P's
base case also incorporates modest growth in the fourth quarter of
2020 (which is the highest contributing quarter and generates about
35% of EBITDA historically), mainly driven by the expected 5G
industry roll-out.
Environmental, social, and governance (ESG):
-- Health and safety
The negative outlook reflects the uncertainty around the severity
and duration of the pandemic's effect on customers' cellphone
buying habits and Victra's performance, which could hurt the
company's ability to recover in line with S&P's expectations in the
second half of 2020.
"We could lower the rating if we anticipated Victra's liquidity
would tighten further, such that it would not be able to maintain
sufficient headroom under its financial covenant. We could also
lower the rating if the company's operating performance and credit
measures deteriorated below our base case expectations, possibly
because of unfavorable commission arrangements, shifts in consumer
behavior, or delays in the 5G roll-out such that we could view its
competitive standing as weaker. Under this scenario, we could see
EBITDA margin contracting by more than 150 basis points below our
base case, with leverage approaching 6.5x and free cash flow
generation eroding to below the high $20 million area on a
sustained basis," S&P said.
"We could revise the outlook to stable if revenue and EBITDA
recovered under our base case assumptions, affirming our believe
that leverage would be sustained at about the mid-5x area and that
the company would maintain sufficient headroom under its financial
covenant, with cash flow generation comfortably covering its fixed
charges, including sizable debt amortization," the rating agency
said.
AAC HOLDINGS: Moody's Lowers CFR to Ca on Chapter 11 Filing
-----------------------------------------------------------
Moody's Investors Service downgraded AAC Holdings, Inc.'s Corporate
Family Rating to Ca from Caa2. This follows AAC's June 20, 2020
announcement that it filed for voluntary protection under Chapter
11 of the U.S. Bankruptcy Code [1]. The rating agency also
downgraded AAC's senior secured ratings to Ca from Caa2. Moody's
also affirmed AAC's D-PD Probability of Default Rating. There was
no change to AAC's SGL-4 Speculative Grade Liquidity Rating. The
outlook, previously negative, was changed to stable.
The stable outlook reflects Moody's view that the current ratings
adequately reflect AAC's recovery prospects.
Ratings downgraded and to be subsequently withdrawn:
AAC Holdings, Inc.
Corporate Family Rating to Ca from Caa2
Senior secured 1st Lien revolving credit facility expiring 2022
to Ca (LGD4) from Caa2 (LGD3)
Senior secured 1st Lien term loans due 2023 to Ca (LGD4) from
Caa2 (LGD3)
Ratings affirmed and to be subsequently withdrawn:
Probability of Default Rating at D-PD
Ratings unchanged and to be subsequently withdrawn:
Speculative Grade Liquidity Rating at SGL-4
Outlook action:
The outlook, previously negative, was changed to stable.
RATINGS RATIONALE
AAC's Chapter 11 filing resulted in the downgrade of its Corporate
Family Rating to Ca. Moody's will subsequently withdraw all of
AAC's ratings due to its bankruptcy filing. For more information,
please refer to Moody's Withdrawal Policy on moodys.com.
AAC Holdings, Inc., headquartered in Brentwood, TN, provides
substance abuse treatment services for individuals with drug and
alcohol addiction. As of September 30, 2019, the company operated 9
inpatient substance abuse treatment facilities, 14 standalone
outpatient centers and three sober living facilities across the US.
AAC Holdings is publicly traded and generated $234 million of
revenue during the 12 months ending September 30, 2019.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
ACASTI PHARMA: Gets FDA Response to TRILOGY 1 Briefing Package
--------------------------------------------------------------
Acasti Pharma Inc. reports that the FDA has provided the Company
with a written response to its Type C Meeting request and briefing
package.
The FDA confirmed that it will require pivotal efficacy analyses
for TRILOGY 2 to be performed on the full Intent to Treat (ITT)
population as contemplated in the original Statistical Analysis
Plan (SAP), and they supported the conduct of post-hoc analyses in
TRILOGY 1 for exploratory purposes. Consistent with the Company's
prior disclosures, and depending on the outcome of TRILOGY 2, an
additional clinical study may still be needed prior to an NDA
submission.
Acasti and its expert advisors are carefully considering the FDA's
comments on the TRILOGY 1 data and will conduct further post-hoc
analysis based on their feedback. Concurrent with reporting the
Company's year-end financial results and investor conference call
on June 29, 2020, the Company will provide more information on
TRILOGY 1 post-hoc analyses conducted to date in a detailed update
to shareholders along with the plan for the unblinding and
reporting of the TRILOGY 2 results.
About Acasti Pharma
Acasti -- http://www.acastipharma.com/-- is a biopharmaceutical
innovator advancing a potentially best-in-class cardiovascular
drug, CaPre (omega-3 phospholipid), for the treatment of
hypertriglyceridemia, a chronic condition affecting an estimated
one third of the U.S. population. Since its founding in 2008,
Acasti has focused on addressing a critical market need for an
effective, safe and well-absorbing omega-3 therapeutic that can
make a positive impact on the major blood lipids associated with
cardiovascular disease risk. The Company is developing CaPre in a
Phase 3 clinical program in patients with severe
hypertriglyceridemia, a market that includes 3 to 4 million
patients in the U.S. The addressable market may expand
significantly if omega-3s demonstrate long-term cardiovascular
benefits in on-going outcomes studies (REDUCE-IT and STRENGTH).
Acasti may need to conduct at least one additional clinical trial
to expand CaPre's indications to this segment. Acasti's strategy
is to commercialize CaPre in the U.S. and the Company is pursuing
development and distribution partnerships to market CaPre in major
countries around the world.
KPMG LLP, in Montreal, Canada, the Company's auditor since 2009,
issued a "going concern" qualification in its report dated June 26,
2019, citing that the Company has incurred operating losses and
negative cash flows from operations since inception, and additional
funds will be needed in the future for activities necessary to
prepare for commercial launch. These events or conditions, along
with other matters, indicate that a material uncertainty exists
that casts substantial doubt on the Company's ability to continue
as a going concern.
ALUDYNE INC: Moody's Confirms 'B2' CFR, Outlook Negative
--------------------------------------------------------
Moody's Investors Service confirmed the ratings of Aludyne, Inc.,
including the corporate family rating at B2, the Probability of
Default Rating at B2-PD, and the senior secured rating at B3. The
outlook is negative. This action concludes the review for downgrade
initiated on March 26, 2020.
The following rating actions were taken:
Confirmations:
Issuer: Aludyne, Inc.
Corporate Family Rating, Confirmed at B2
Probability of Default Rating, Confirmed at B2-PD
Senior Secured Bank Credit Facility, Confirmed at B3 (LGD4)
Outlook Actions:
Issuer: Aludyne, Inc.
Outlook, Changed to Negative from Rating Under Review
RATINGS RATIONALE
Aludyne's ratings reflect the company's relatively modest scale,
limited product offering and high customer and geographic
concentrations within the cyclical automotive industry. The
negative impact from the coronavirus pandemic on global automotive
demand and manufacturing will significantly deteriorate Aludyne's
revenues, earnings and cash flow through 2020 before a gradual
recovery in 2021. Moody's expects the company's revenues to be down
approximately 25% in 2020 given its high exposure to domestic North
American auto manufacturers and for EBITA margins to be below 4%.
Restoration of EBITA margins in 2021 to recent historical levels at
or above 7%, which Aludyne has maintained since manufacturing
issues led to its 2015 bankruptcy, will be dependent on the
company's ability to effectively execute on new business wins it
has secured in recent years. Demonstrating a successful ramp up in
operations to profitably support an increase in scale is an
important consideration to Aludyne's overall credit profile.
Aludyne maintains a good competitive position within its product
space, specifically as a leading provider of aluminum steering
knuckles, which should support the company to secure new business
wins to offset program roll-offs. The company's credit profile
benefits from a conservative capital structure and low leverage
following the company's 2015 debt restructuring. Debt/EBITDA of
3.3x for the twelve months ending March 31, 2020 is expected to
increase to about 4x in 2020 before returning to near 3x in 2021.
The negative outlook reflects the risk that a recovery of new
vehicle demand expected in 2021 could be weakened should a more
extended recessionary environment persist or that Aludyne's
liquidity position could deteriorate should further production
issues arise.
Moody's expects Aludyne's liquidity position to be adequate into
2021. The company's liquidity is primarily supported by its cash
position, which stood at $134 million end of March 2020, following
a $65 million draw down on its $125 million asset-based facility
due 2022. Approximately $52 million of the company's cash, though,
is held outside the U.S., creating uncertainty around the timing
and access to these funds. Aludyne's availability under its ABL is
expected to remain limited through 2020 as its borrowing base
contracts significantly on lower production levels. Moody's expects
the company's cash burn for 2020 to be approximately $10 million,
inclusive of an expected reduction in capital spending following
elevated investment levels in prior years. Free cash flow is
expected to return to a modestly positive level of about $10
million in 2021.
Aludyne's role in the automotive industry exposes the company to
material environmental risks arising from increasing regulations on
carbon emissions. Automotive manufacturers continue to announce the
introduction of electrified vehicles to meet increasingly stringent
regulatory requirements. Aludyne's product portfolio stands to
benefit from this trend as it is a leading provider of
light-weighted aluminum solutions to reduce the overall weight of
the vehicle and improve fuel efficiency.
FACTORS THAT COULD LEAD TO A DOWNGRADE OR UPGRADE OF THE RATINGS
The ratings could be downgraded if Aludyne is unable to profitably
execute on new business wins such that EBITA margins are below 6%
in 2021 or debt/EBITDA is sustained above 3.5x. A weakening in the
company's liquidity position from ongoing cash burn expected into
2021 or sustained levels of low availability on its asset-based
facility could result in a downgrade.
The ratings are unlikely to be upgraded in the near term. Over
time, the ratings could be upgraded if the company is able to
profitability increase its scale such that EBITA margins are
maintained above 9%. A good liquidity profile supported by free
cash flow to debt sustained above 5% and maintaining a conservative
financial policy could also result in an upgrade.
The principal methodology used in these ratings was the Automotive
Supplier Methodology published in January 2020.
Headquartered in Southfield, Michigan, Aludyne is a vertically
integrated manufacturer and supplier of aluminum and iron chassis
subframe components, including steering knuckles, control arms,
sub-frames and assemblies for leading automotive OEMs. The company
went through a chapter 11 restructuring in 2015 which resulted in
the bondholders converting into equity owners. Revenue for the
twelve months ended March 31, 2020 was $852 million.
ARGYLE CAPITAL: Voluntary Chapter 11 Case Summary
-------------------------------------------------
Debtor: The Argyle Capital Group LLC
411 Jefferson St.
Seattle, WA 98104-2315
Business Description: The Argyle Capital Group LLC is primarily
engaged in renting and leasing real estate
properties.
Chapter 11 Petition Date: June 22, 2020
Court: United States Bankruptcy Court
Western District of Washington
Case No.: 20-11711
Debtor's Counsel: David A. Petteys, Esq.
STOLL PETTEYS PLLC
1455 NW Leary Way, Suite 400
Seattle, WA 98104
Tel: (206) 876-7828
E-mail: david@stollpetteys.com
Estimated Assets: $1 million to $10 million
Estimated Liabilities: $1 million to $10 million
The petition was signed by Kurt Fisher, manager.
The Debtor failed to include in the petition a list of its 20
largest unsecured creditors.
A copy of the petition is available for free at PacerMonitor.com
at:
https://is.gd/Ckf2Kl
ARIZONA INDUSTRIAL: S&P Cuts 2019A Revenue Bond Rating to 'BB+(sf)'
-------------------------------------------------------------------
S&P Global Ratings lowered its long-term ratings on Arizona
Industrial Development Authority's series 2019A, 2019B, and 2019C
senior living revenue bonds (Great Lakes Senior Living Communities
LLC Project) to 'BB+(sf)', 'BB(sf)', and 'BB-(sf)' from 'BBB+(sf)',
'BBB(sf)', and 'BB+(sf)', respectively. The outlook for all ratings
is negative.
The series 2019 bonds were issued in March 2019 by the Arizona
Industrial Development Authority on behalf of the borrower, Great
Lakes Senior Living Communities (GLSLC) LLC. The 2019 issuance
consists of five tranches of debt, with the fourth and fifth
tranches unrated. Proceeds of the bonds, with a total par amount of
$380.185 million, were used by the borrower to acquire eight senior
living facilities located across Michigan and Ohio consisting of
1,254 rental independent living, assisted living, and memory care
units. Proceeds of the bonds were also used to fund debt service
reserve funds for the series B and C bonds, and to pay certain
startup and issuance costs. As of fiscal year-end Dec. 31, 2019
there remains $380.185 million in debt outstanding.
The downgrade on the series 2019A, 2019B, and 2019C bonds reflects
the implementation of S&P's "Methodology for Rating U.S. Public
Finance Rental Housing Bonds," published on April 15, 2020. The
ratings are no longer under criteria observation.
"The negative outlook reflects our expectation that the public
health crisis and social risks posed by the COVID-19 pandemic are
likely to have a potentially severe and ongoing negative impact on
affordable age-restricted housing," said S&P Global Ratings credit
analyst Daniel Pulter.
The rating action incorporates S&P's view regarding the elevated
health and safety risks posed by the COVID-19 pandemic on all
affordable age-restricted housing developments. Specifically, the
risk of increasing expenses and decreases in rental revenue related
to the social risks of the pandemic have been evaluated in S&P's
rating. S&P views the project's governance risks to be in line with
the sector as it pertains to the sophistication, depth of bench,
and policies, procedures and governance practices of the ownership
entity. Environmental risks are also in line with that of the
sector as there are not any elevated environmental threats present
in the associated project areas.
ASCENA RETAIL: Implements Changes to Compensation Programs
----------------------------------------------------------
Given the volatile and uncertain environment created by COVID-19,
which is disrupting the retail industry and more specifically,
Ascena Retail Group, Inc.'s business across all brands, the
Compensation and Stock Incentive Committee of the Board of
Directors of Ascena Retail, in consultation with the Company's
legal and compensation advisors, extensively reviewed the Company's
short- and long-term incentive programs for its entire workforce to
determine whether those programs appropriately align compensation
opportunities with the Company's current goals and ensure the
stability of the Company's workforce. Following such thorough
consultation and review, the Committee approved the following
adjustments to the Company's existing compensation programs, and
restored base salaries to their pre-reduction rates for all those
who were subject to a temporary base salary reduction as a result
of the COVID-19 pandemic (with such restoration effective as of
June 21, 2020 for its current named executive officers), to enable
the Company to retain and continue to motivate its NEOs and other
officers and employees.
Retention and Performance-Based Arrangements
On June 17, 2020, the Company implemented new retention and
performance-based arrangements for each of the NEOs and for three
other executive officers, intended to cover a 6-month period, which
arrangements are in lieu of the short- and long-term incentive
award opportunities that the executive officers would have had
under the Company's historical plans. With respect to the
retention arrangement, in accordance with his or her retention and
clawback agreement, on or about June 22, 2020, each of the NEOs
will receive a cash retention award, in an amount equal to
$1,068,750 for each of the chief executive officer and the interim
executive chair of the Board and $603,125 for the executive vice
president and chief financial officer, which amount represents (i)
25% of the sum of (A) 75% of his or her fiscal 2021 target annual
incentive and (B) 50% of his or her fiscal 2021 target long-term
incentive, plus (ii) in the case of the Company's executive vice
president and chief financial officer who has an existing retention
agreement, an additional amount that accounts for the consolidation
of his existing retention agreement with that newly implemented by
the Company (i.e., $275,000). The award amounts for the Company's
other executive officers will be determined on the same basis as
the award amounts for its NEOs. Pursuant to his or her Retention
and Clawback Agreement, each such award will be paid immediately,
subject to repayment if the recipient is terminated for Cause or
resigns without Good Reason, in each case, before Dec. 31, 2020,
provided, that, the Retention Date with respect to $275,000 of the
Company's executive vice president and chief financial officer's
award will be Aug. 31, 2020. In the event that the recipient's
employment with the Company or one of its subsidiaries is
terminated for any reason (other than for Cause or without Good
Reason) prior to the Retention Date, such recipient's right to
retain the award is subject to the execution of a release of claims
in favor of the Company and its subsidiaries.
Under the performance-based arrangement, each of the NEOs will have
the opportunity to earn a cash incentive award, in an amount equal
to $1,068,750 for each of the chief executive officer and the
interim executive chair of the Board and $328,125 for the executive
vice president and chief financial officer, which amount represents
25% of the sum of (i) 75% of his or her fiscal 2021 target annual
incentive and (ii) 50% of his or her fiscal 2021 target long-term
incentive. Payment of the award will be subject to achievement of
objective performance criteria to be established by the Committee
as soon as possible.
Employee Incentive Program
In addition to making changes to the existing compensation
structure for its NEOs and other executive officers, the Committee
made adjustments to the existing compensation structure for
employees who are currently eligible to participate in the
Company's short- and long-term incentive programs (excluding the
Company's field managers, who will continue to participate in their
existing incentive programs). The Committee acknowledged that the
significant uncertainty in the current environment was posing a
meaningful distraction for employees and determined that replacing
the existing performance-based arrangements with a combination of
retention and performance-based arrangements was essential to keep
employees engaged and focused on the tasks necessary to move the
Company forward in achieving its goals. Accordingly, the Company
implemented a revised compensation program intended to cover a
6-month period, under which each participating employee will have a
target award opportunity equal to 50% of the sum of (i) 75% of his
or her fiscal 2021 target annual incentive and (ii) 50% of his or
her fiscal 2021 target long-term incentive, which is consistent
with the award opportunities established for the executive
officers, as described above. As with the executive officers, each
employee's target award opportunity will be 50% retention-based and
50% performance-based. Compensation opportunities beyond the
foregoing 6-month period will be determined by the Committee at a
later date.
Performance-Based Cash LTIP Awards
In fiscal 2018 and 2019, the Company granted performance-based cash
awards under its long-term incentive plan. As originally
structured, (i) the fiscal 2018 performance-based cash awards were
earned based on the Company's achievement of the specified Net
Income (50% weighted) and three-year TSR relative to a select index
of retailers (50% weighted) targets, and (ii) the fiscal 2019
performance-based cash awards were earned based on the Company's
achievement of EBITDA Growth (75% weighted) and Comparable Sales
(25% weighted) targets, with a modifier for TSR performance
relative to a select group of peers. Such earned performance-based
cash awards would then be paid in October 2020 or October 2021,
respectively, subject to the employee's continued employment with
the Company or one of its subsidiaries through Aug. 1, 2020 or Aug.
3, 2021, respectively. Under the revised arrangement, as
documented in his or her acceleration agreement, payment of the
portion of the performance-based cash awards that has been earned
based on fiscal 2018 and 2019 performance has been accelerated for
the Company's chief executive officer, its executive vice president
and chief financial officer and all other active employees holding
such performance-based cash awards. The Company's chief executive
officer will receive $913,750 for his fiscal 2018 performance-based
cash award and $100,000 for his fiscal 2019 performance-based cash
award, and its executive vice president and chief financial officer
will receive $72,250 for his fiscal 2018 performance-based cash
award and $11,400 for his fiscal 2019 performance-based cash
award.
As with the NEO and executive officer retention and
performance-based arrangements, the accelerated performance-based
cash award payment is subject to repayment if the employee's
employment with the Company or one of its subsidiaries is
terminated for Cause or without Good Reason (as each term is
defined in his or her award agreement) prior to Aug. 1, 2020 (for
the accelerated fiscal 2018 payment) or Aug. 3, 2021 (for the
accelerated fiscal 2019 payment). Additionally, in the event that
the employee's employment with the Company or one of its
subsidiaries is terminated for any reason (other than for Cause or
without Good Reason) prior to the relevant date, such recipient's
right to retain the accelerated payment is subject to the execution
of a release of claims in favor of the Company and its
subsidiaries.
The Company believes all of the foregoing changes will be
instrumental in preserving its workforce.
About Ascena Retail
Ascena Retail Group, Inc. (Nasdaq: ASNA) --
http://www.ascenaretail.com-- is a national specialty retailer
offering apparel, shoes, and accessories for women under the
Premium Fashion (Ann Taylor, LOFT, and Lou & Grey), Plus Fashion
(Lane Bryant, Catherines and Cacique), and Value Fashion
(Dressbarn) segments, and for tween girls under the Kids Fashion
segment (Justice). Ascena, through its retail brands, operates
ecommerce websites and approximately 2,800 stores throughout the
United States, Canada, and Puerto Rico.
Ascena Retail reported a net loss of $661.4 million for the fiscal
year ended Aug. 3, 2019, a net loss of $39.7 million for the year
ended Aug. 4, 2018, and a net loss of $1.06 billion for the year
ended July 29, 2017. As of Feb. 1, 2020, the Company had $3.07
billion in total assets, $2.99 billion in total liabilities, and
$76.6 million in total equity.
* * *
As reported by the TCR on March 20, 2020, S&P Global Ratings raised
its issuer rating on Ascena Retail Group Inc. to 'CCC-' from 'SD'
and maintained the 'D' rating on the term loan due August 2022.
"The rating action reflects our view of the likelihood of a
conventional default or a broad-based restructuring of Ascena's
capital structure in the next six months. Our opinion considers
the company's unsustainable capital structure, its still
significant debt burden following the repurchases, and our
expectation for weak performance amid a highly challenging
operating environment. The rating also reflects our view that the
recent coronavirus outbreak in the U.S. will further pressure store
traffic and limit conventional refinancing prospects," S&P said.
As reported by the TCR on April 16, 2020, Moody's Investors Service
downgraded Ascena Retail Group, Inc.'s corporate family rating to
Caa3 from Caa2. Ascena's Caa3 CFR is constrained by Moody's view
that default risk is elevated as a result of the company's high
leverage, 2022 debt maturities, and expectations for declining
earnings over the next 12-18 months.
ASP MCS: S&P Downgrades ICR to 'D' on Missed Interest Payment
-------------------------------------------------------------
S&P Global Ratings lowered its issuer credit rating on Lewisville,
Texas-based ASP MCS Acquisition Corp. (MCS) to 'D' (default) from
'CCC'. At the same time, S&P lowered its rating on MCS' secured
term loan to 'D' from 'CCC'. The '4' recovery rating, which
indicates its expectation of 30%-50% recovery, is unchanged.
The downgrade reflects S&P's belief that MCS will not make its June
15 interest payment within the five-day grace period.
"It reflects our view that MCS' capital structure is unsustainable
and that ongoing cash flow deficits will continue to pressure the
company's modest cash balances. We expect MCS will quickly obtain a
30-day forbearance agreement from its lenders and use the time to
effect a debt restructuring that will support the longer-term
viability of its capital structure," S&P said.
BEASLEY MEZZANINE: Moody's Cuts CFR to B3 & Alters Outlook to Neg.
------------------------------------------------------------------
Moody's Investors Service downgraded Beasley Mezzanine Holdings,
LLC's Corporate Family Rating to B3 from B2 and Probability of
Default Rating to Caa1-PD from B3-PD. The rating on the senior
secured term loan and senior secured revolver was also downgraded
to B2 from B1. The outlook was changed to negative from stable.
The downgrade of the CFR and negative outlook reflect the impact of
the coronavirus outbreak on the economy which Moody's expects will
substantially reduce radio advertising revenue in the near term and
lead to significantly higher leverage levels and lower cash from
operations. Beasley's Speculative Grade Liquidity rating was
downgraded to SGL-3 from SGL-2.
Downgrades:
Issuer: Beasley Mezzanine Holdings, LLC
Corporate Family Rating, Downgraded to B3 from B2
Probability of Default Rating, Downgraded to Caa1-PD from B3-PD
Speculative Grade Liquidity Rating, Downgraded to SGL-3 from SGL-2
Senior Secured Bank Credit Facility, Downgraded to B2 (LGD3) from
B1 (LGD3)
Outlook Actions:
Issuer: Beasley Mezzanine Holdings, LLC
Outlook, Changed to Negative from Stable
RATINGS RATIONALE
Beasley's B3 CFR reflects high leverage of 6.5x as of Q4 2019
(excluding Moody's standard lease adjustments) as well as Moody's
expectation that leverage will increase substantially in the near
term due to the impact of the coronavirus outbreak on radio
advertising revenue. The radio industry is also being negatively
affected by the shift of advertising dollars to digital mobile and
social media as well as heightened competition for listeners from a
number of digital music providers. Secular pressures and the
cyclical nature of radio advertising demand have the potential to
exert substantial pressure on EBITDA performance over time. Beasley
is also relatively small in size with revenue of $262 million in
2019 and concentrated exposure in 3 DMA's (Philadelphia, Boston,
and Tampa), with additional operations in 12 other markets.
While Beasley is small in size, the company has developed good
market clusters with a strong market position in most of the
markets that it operates. Beasley has been investing in its digital
platform and Moody's expects further growth in digital revenue over
time, albeit from a modest revenue level. Moody's projects Beasley
will continue to seek cost savings in the near term to help offset
a portion of the impact from the economic disruption caused by the
pandemic. Beasley has also made recent investments in esports
including a majority interest in the Overwatch League's Houston
Outlaws esports team to diversify the business model and
potentially accelerate growth in the future.
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The radio industry
sector has been one of the sectors most significantly affected by
the shock given its sensitivity to consumer demand and sentiment.
More specifically, the weaknesses in Beasley's credit profile have
left it vulnerable to shifts in market sentiment in these
unprecedented operating conditions and Beasley remains vulnerable
to the outbreak continuing to spread. Moody's regards the
coronavirus outbreak as a social risk under its ESG framework,
given the substantial implications for public health and safety.
Its action reflects the impact on Beasley of the breadth and
severity of the shock, and the broad deterioration in credit
quality it has triggered.
A governance consideration that Moody's considers in Beasley's
credit profile is its high leverage level and acquisition history
which is relatively aggressive, but the company has also directed a
portion of free cash flow to debt repayment. Despite being a public
company, Beasley is controlled by the Beasley family with related
party transactions between the company and different family
members.
Beasley's SGL-3 Speculative Grade Liquidity rating reflects Moody's
expectation that Beasley will maintain a limited, but adequate
liquidity position over the next year. Beasley had $18.6 million of
cash on the balance sheet and $11 million drawn on the $20 million
revolving credit facility due November 2022 as of Q4 2019. The
remaining amount of the revolver was drawn in Q1 2020 to increase
cash on the balance sheet. Free cash flow is projected to be
negative in the near term due to the impact of the coronavirus
outbreak on the economy. Beasley has suspended its quarterly
dividend ($5.5 million in 2019) and is projected to reduce capex in
the near term to help support liquidity. Asset sales are also
possible that could provide an additional source of liquidity.
The senior secured credit facilities have a first lien net leverage
ratio financial maintenance covenant of 5.75x at Q4 2019, but steps
down to 5.25x in Q1 2020. Beasley has entered into discussions with
lenders to obtain an amendment to its financial maintenance
covenant. Inability to obtain an amendment in a timely manner would
lead to additional negative rating activity.
The negative outlook reflects Moody's view that Beasley will
experience material declines in revenues and EBITDA in the next few
quarters due to the impact of the coronavirus outbreak on the
economy and radio advertising revenue. The outlook also
incorporates Moody's expectation for the company's debt-to-EBITDA
leverage to increase significantly and liquidity position to
deteriorate in the near term. Political advertising revenue is
projected to provide some support to results as the election
approaches at the end of 2020.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Ratings could be downgraded further if Beasley was unable to obtain
an amendment to its financial maintenance covenants in the near
term. Leverage projected to be sustained above 7x or continuing
negative free cash flow could also result in negative rating
activity. A weakened liquidity position or inability to refinance
debt maturities well in advance of maturity would also result in a
downgrade.
An upgrade is not expected in the near term due to the impact of
the coronavirus and higher projected leverage levels. However,
ratings could be upgraded if Beasley's leverage decreased below
5.5x, with positive organic revenue growth and stable EBITDA
margins. A free cash flow to debt ratio above 5% and maintenance of
a strong liquidity position would also be required. All near term
debt maturities would also need to be addressed.
Beasley Mezzanine Holdings, LLC owns and operates 64 radio stations
and related websites and mobile applications across 15 markets in
addition to investments in esports assets. The company's station
portfolio is located mainly across the eastern seaboard of the
United States, with major contributions to revenue from the
Philadelphia, Boston, and Tampa markets. The company is publicly
traded but controlled by the Beasley family via a dual-class share
structure. Beasley generated approximately $262 million in revenue
during 2019.
The principal methodology used in these ratings was Media Industry
published in June 2017.
BRINK'S CO: S&P Rates New $400MM Senior Unsecured Notes 'BB-'
-------------------------------------------------------------
S&P Global Ratings assigned its 'BB-' issue-level rating and '5'
recovery rating to The Brink's Co.'s proposed $400 million senior
unsecured notes due in 2025. The '5' recovery rating, same as that
on the existing unsecured debt, indicates its expectation for
modest recovery (10%-30%; rounded estimate: 10%) of principal in
the event of a payment default.
The company will use net proceeds to repay outstanding revolving
credit facility borrowings and fund remaining acquisition
consideration for the previously announced G4S PLC cash solutions
business. The transaction is leverage neutral.
"All of our ratings on Brink's are unchanged. Our 'BB' issuer
credit rating reflects the company's position as the leading
provider of cash management services domestically and in key
international markets, elevated leverage due to an acquisitive
growth strategy and COVID-19 pandemic disruptions, uncertainty
around the timing and pace of an economic recovery, and potential
unexpected execution challenges inherent to an acquisition-driven
growth strategy. For the complete rating rationale, see the
research update on Brink's published on May 13, 2020," S&P said.
"The stable outlook reflects our expectations that following
weakness in 2020 due to the COVID-19 pandemic, revenue and EBITDA
should continue to gradually recover in 2021, resulting in funds
from operations (FFO) to debt in the mid- to high-teens percentages
and leverage around 4x. We could lower the ratings on Brink's
should we expect FFO to debt below 10% or leverage above 5x on a
sustained basis. Conversely, we could raise the rating should
demand for Brink's services demonstrate a faster-than-anticipated
recovery in the second half of 2020 and early 2021, resulting in
healthy organic revenue growth rates and improved profitability,
with FFO to debt improving beyond 20%," S&P said.
ISSUE RATINGS - RECOVERY ANALYSIS
Key analytical factors
-- S&P's simulated default scenario envisions a global economic
slowdown in 2024 that leads to the loss of a number of key
contracts and pricing pressure in the domestic and overseas
markets. This would significantly reduce Brink's EBITDA and cause
its capital structure to become unsustainable, eventually leading
to default.
-- S&P believes the company's business model would reorganize
given its well-established brand and extensive logistic-based
network.
-- The Brink's Co. is the primary borrower under its senior
secured credit facilities (unrated) and the issuer of its senior
unsecured notes. The credit facilities and senior unsecured notes
are guaranteed by its material U.S. domestic subsidiaries.
-- Secured lenders benefit from a lien on substantially all of the
asset value of the borrower and guarantors and a 65% equity pledge
of Brink's material foreign subsidiaries. Additionally, certain
foreign subsidiaries are co-borrowers under the revolving credit
facility. Although foreign borrowers do not guarantee the U.S.
borrowing, lenders to the foreign revolving credit facility tranche
have a structurally senior claim on non-U.S. borrower enterprise
value up to the value of the foreign revolver borrowings (relative
to other U.S.-issued debt).
-- Pro forma for the complete G4S cash solutions business
acquisition, S&P estimates about 60% of Brink's enterprise value
will be attributed to nonguarantor entities. S&P expects the
unpledged value (35% of the foreign entity capital stock) to
support modest recovery prospects for its unsecured noteholders.
Simulated default assumptions
-- Simulated year of default: 2025
-- EBITDA at emergence: $345 million
-- EBITDA multiple: 6x
Simplified waterfall
-- Net enterprise value (after 5% administrative costs): $1.9
billion
-- Valuation split (obligors/nonobligors): 40%/60%
-- Priority claims: $454 million
-- Value available to first-lien debt (collateral/noncollateral):
$1.24 billion/$34 million
-- Estimated first-lien debt claims: $1.49 billion
-- Value available to unsecured claims: $243 million
-- Total unsecured clams/pari passu nondebt claims: $1
billion/$505 million
-- Recovery expectations: 10%-30% (rounded estimate: 10%)
All debt amounts include six months of prepetition interest.
Collateral value equals an asset pledge from obligors after
priority claims plus an equity pledge from nonobligors after
nonobligor debt. S&P generally assumes usage of 85% for cash flow
revolvers at default.
BUCKEYE PARTNERS: Fitch Affirms 'BB' LT IDR, Outlook Stable
-----------------------------------------------------------
Fitch Ratings has affirmed Buckeye Partner L.P.'s (BPL) Long-Term
Issuer Default Rating (IDR) at 'BB' and the senior unsecured notes
at 'BB'/'RR4'. The senior secured term loan and revolver have been
affirmed at 'BB+'/'RR1'. The junior subordinated notes have been
affirmed at 'B+'/'RR6'. The Rating Outlook remains Stable.
The Stable Outlook reflects Buckeye's diverse base of assets as
well as its size and scale. Furthermore, Fitch continues to expect
that Buckeye's sponsor, IFM Investors, will ensure that the company
reduces leverage over time.
KEY RATING DRIVERS
Adjusted EBITDA To Increase: Demand destruction is expected to
result in lower operating EBITDA in 2020 versus 2019. Better
results in the global marine terminals business for segregated
storage are not expected to offset the decline in the domestic
pipelines and terminals business. Fitch adds distributions from
FLIQ2 Holdings, LLC (FLIQ2; BBB/Stable) and South Texas Gateway to
adjusted EBITDA, and equity earnings are removed. As a result,
adjusted EBITDA is expected to increase in 2020 versus 2019.
Additional growth is expected in 2021 since Buckeye will receive
cash distributions on a full-year run rate.
Leverage Improving: Fitch forecasts that leverage (defined as total
debt with equity credit-to-adjusted EBITDA) to just above 6.0x at
the end of 2020 versus 6.6x at the end of 2019. With improved
adjusted EBITDA in 2021, Fitch expects leverage to fall by nearly a
full turn at the end of 2021 to just over 5.0x. Fitch expects
Buckeye to generate FCF and that Buckeye will direct toward
distributions to its sponsor, debt reduction, acquisitions, and/or
additional growth capex.
Increased Diversity: Buckeye's assets are located throughout the
U.S. and in the Caribbean. The primary locations in the U.S.
include Chicago, New York Harbor and the Gulf Coast. In the
Caribbean, its assets are primarily in the Bahamas, and it also has
assets in Puerto Rico and St. Lucia. Cash flow diversity increased
when it received a 57.6% stake in FLIQ2 from its sponsor. FLIQ2 is
a liquefied natural gas (LNG) facility near Freeport, TX. In 2019,
Buckeye attributed 65% of its EBITDA to its domestic pipelines and
terminals and 33% to global marine terminals. The remaining 2%
comes from its merchant services segment.
FLIQ2 Contribution: To bolster BPL's credit profile, IFM
contributed its 57.6% stake in FLIQ 2 Holdings LLC in December
2019. FLIQ2 owns one liquefaction train unit that is part of a
multi-train facility and it went into commercial operations in
January 2020. FLIQ2 has nearly all of the minimum guaranteed
capacity contracted with BP Energy Company, a subsidiary of BP plc
(BP; A/Stable), for 20 years under a use-or-pay tolling agreement.
Buckeye expects this stake to generate annual dividends in the
range of $100 million to $130 million.
Growth Projects: Buckeye is also investing in the South Texas
Gateway Terminal, which is a joint venture with Phillips 66
Partners LP and Marathon Petroleum Corp. (MPC; BBB/Negative). This
is an export terminal in the Corpus Christi ship channel that is
being constructed and operated by Buckeye. Buckeye disclosed that
it expected its capex contribution to the project to be around $325
million, higher than previously guided. Through Dec. 31, 2019,
Buckeye's net investment was $149.1 million. This project is also
backed by long-term commitments which will provide steady cash
flows. South Texas Gateway is expected to commence operations and
ramp up through the balance of 2020. This export terminal has
multiyear contracts and connects to crude oil pipelines including
the Gray Oak pipeline which has been ramping up over the last six
months.
Terminal Acquisition: In March 2020, Buckeye acquired three marine
terminals from Magellan Midstream Partners LP for approximately
$253 million (subject to final working capital adjustments). Total
storage capacity is 9.9 million barrels and the company estimate
that in 2019, the assets generated approximately $27.4 million of
EBITDA. Two terminals are part of the domestic pipeline and
terminals segment, and the other one is a marine terminal and is
part of global marine terminals segment.
Smaller Revolver: Despite the lower $600 million senior secured
revolver, compared to Buckeye's $1.5 billion senior unsecured
revolver prior to going private, liquidity remains adequate.
Further, Fitch does not expect Buckeye to have the need to return
to the capital markets in the near term after their $1 billion
issuance of senior unsecured notes in February.
ESG Considerations: Buckeye's ESG Relevance Score for Governance
has changed to a '4' from a '3' for Governance Issues for its Group
Structure and Financial Transparency. As a private company backed
by a private pension fund, disclosures are limited when compared to
public companies. This factor has a negative impact on its credit
profile and is relevant to the rating in conjunction with other
factors.
DERIVATION SUMMARY
The 'BB' rating reflects Buckeye's diverse asset base, size and
scale, and elevated leverage with the addition of the secured debt
for going private. Buckeye has a higher leverage profile than its
investment-grade peers which operate in the crude oil, refined
products pipelines and storage terminal segments, such as Plains
All American LP (PAA) which is rated two notches above Buckeye at
'BBB-'. Fitch forecasts Buckeye's leverage (defined as total debt
with equity credit to adjusted EBITDA) at 2020 YE leverage to be
just above 6.0x and declining to just above 5.0x by the end of
2021. PAA is forecasted to have leverage in the range of 4.5x to
5.0x at the end of 2020 and 2021.
NuStar is rated one notch lower than Buckeye at 'BB-' and is less
diverse than Buckeye which has the advantage of size and scale that
provides operational and geographic diversification. Fitch expects
NuStar's leverage to be around 5.6x-6.0x by YE 2020 and increase to
a range of 6.3x-6.5x in 2021.
Fitch expects Buckeye's leverage to be higher than other 'BB'
issuers such as AmeriGas Partners, LP (APU) and Sunoco, LP (SUN).
Fitch forecasts APU will have higher than 6.0x leverage at YE 2020
but is expected to decline as economies reopen and demand returns.
APU's leverage of 4.3x-4.6x from 2022-2023 is in line with or
better than wholesale fuel distributor SUN. Both have seasonal or
cyclically exposed cash flow, although retail propane demand tends
to be more seasonally affected and weather affected than motor fuel
demand.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within the Agency's Rating Case for the
Issuer
-- Fitch assumes funds from the $1 billion February debt issuance
will be used to repay the remaining 2021 maturities this year;
-- Demand destruction causes a decline in the domestic pipelines
and terminals business which outweighs better results at the marine
terminals segment due to increased segregated storage demand in
2020;
-- In 2021, adjusted EBITDA increases due to higher throughput
volumes in the domestic pipelines and terminals segment and full
year run rates/distributions from FLIQ2 and South Texas Gateway;
-- Annualized distributions from FLIQ2 range from $100 million to
$130 million.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to a
positive rating action/upgrade:
-- Fitch may take positive rating action if leverage (defined as
total debt with equity credit/adjusted EBITDA) is expected to be at
or below 5.0x for a sustained period of time.
Factors that could, individually or collectively, lead to a
negative rating action/downgrade:
-- Negative rating action may occur if Fitch expects leverage
(defined as total debt with equity credit/adjusted EBITDA) to be
near 6.0x by the end of 2021.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: With the proceeds from the $1 billion February
2020 bond offering, Buckeye has repaid all outstanding borrowings
on its $600 million secured revolver due in 2024. Proceeds from the
offering have been used to tender approximately $420 million of the
$650 debt maturities due in 2021. Fitch expects Buckeye to use
these funds to retire the remaining 2021 maturities and funds
capital expenditures without needing to draw on its revolver or
access the market. The next debt maturity is in July 2023.
SUMMARY OF FINANCIAL ADJUSTMENTS
Buckeye has $400 million of junior subordinated debt that meets
Fitch's criteria for 50% equity credit. Cash distributions from
FLIQ2 and South Texas Gateway are added to adjusted EBITDA (equity
earnings from both are excluded).
ESG CONSIDERATIONS
Buckeye Partners, L.P.: Group Structure: 4, Financial Transparency:
4
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of 3. ESG issues are credit neutral
or have only a minimal credit impact on the entity, either due to
their nature or the way in which they are being managed by the
entity.
Buckeye's ESG Relevance Score for Governance has changed to a '4'
from a '3' for Governance Issues for its Group Structure and
Financial Transparency. As a private company backed by a private
pension fund, disclosures are limited when compared to public
companies. This factor has a negative impact on its credit profile
and is relevant to the rating in conjunction with other factors.
CABLE & WIRELESS: Fitch Affirms BB- LongTerm IDR, Outlook Stable
----------------------------------------------------------------
Fitch Ratings has affirmed the following Cable & Wireless
Communications Limited ratings Long-Term Foreign Currency Issuer
Default Rating at 'BB-'; LT Local Currency IDR at 'BB-'; and
instrument ratings for the C&W Senior Finance unsecured notes at
'B+'/'RR5', the Coral-US Co-Borrower LLC secured credit facilities
at 'BB-'/'RR4', and the Sable International Finance Limited secured
notes rating at 'BB-'/'RR4'. The unsecured debt is now at C&W
Senior Finance Limited; the notes previously issued by C&W Senior
Financing Designated Activity Company, an SPV. The Rating Outlook
is Stable.
The ratings reflect Fitch's expectation that the increase in the
company's leverage is temporary. The ratings reflect C&W's leading
market positions across well-diversified operating geographies and
service offerings, underpinned by solid network competitiveness.
Further factored in C&W's ratings are Fitch's expectations that
parent Liberty Latin America will maintain moderately high levels
of leverage, competitive pressures in key markets, and cash flow
leakage to minority shareholders remain credit concerns.
Fitch has not taken any rating actions with regards to sister
company Liberty Communications of Puerto Rico LLC or parent company
Liberty Latin America Limited (LLA, NR).
KEY RATING DRIVERS
Leverage Expected to Rise: Fitch expects C&W's total net
debt/adjusted EBITDA to rise to 4.8x-5.0x in 2020 from 4.4x in
2019, before declining to 4.6x by YE 2021. The rise in leverage is
attributable to a decline in organic cash flow due to pressures in
the company's markets, and M&A. To pay for LCPR's USD1.95 billion
acquisition of AT&T Inc.'s (A-/Stable) assets in Puerto Rico and
the U.S. Virgin Islands, Fitch expects C&W to contribute around
USD150 million-USD200 million. At these levels, the company's
financial structure is in line with a 'B' category rating, although
the business profile remains strong, and supports a 'BB-' rating.
LLA Linkages: C&W is a wholly owned subsidiary of LLA. LLA's
financial management involves moderately high amounts of leverage
across its operating subsidiaries, each ring-fenced from one
another. While the credit pools are legally separate, LLA has a
history of moving cash around the group for investments and
acquisitions. This approach improves financial flexibility;
however, it also limits the prospects for deleveraging. Pro forma
for the acquisition, Fitch expects net leverage for the group of
around 4.7x-4.9x, with debt of approximately USD9.0 billion, cash
of USD800 million-USD900 million, and USD1.7 billion-USD1.8 billion
in EBITDA.
Historically, Fitch has rated VTR Finance N.V. (VTR, BB-/Stable)
and C&W higher than LCPR; more recently, LCPR's standalone credit
profile, pro forma for the acquisition has improved. The high level
of cash movements throughout the group and elevated leverage may
result in a consolidated credit profile closer to 'B+' than 'BB-',
which could result in C&W being downgraded, likely before VTR. The
strength of the linkages does not necessarily imply that the
ratings of all three entities being equalized immediately. A
deterioration of the financial profile of one of the credit pools
or the group more broadly could potentially place more financial
burdens on C&W, given LLA's acquisitive nature.
Strong Market Position: C&W has the No. 1 or No. 2 position in its
major markets, many of which are a duopoly between C&W and Digicel,
although Panama is currently a four-player mobile market. The risk
of new entrants is low, given the relatively small size of each
market. Investments of approximately USD1.3 billion over the last
three years should ensure that the company's network remains
competitive in the medium term. Under this environment, C&W's
market position should remain stable despite strong competition
from Digicel and Millicom. These dynamics support robust
Fitch-adjusted EBITDA margins, which have consistently topped 35%.
Diversified Operator: The company's revenue mix per service is well
balanced, with mobile accounting for approximately 27% of total
sales, fixed-line with 25%, and business to business with 48% of
revenues in 2019. In addition, the company's geographic
diversification in Central America and the Caribbean is solid, with
a large presence in countries with dollarized/dollar-linked
economies. The company's largest markets are Panama and Jamaica,
which together account for approximately 77% of mobile and 50% of
fixed subscribers. The company has grown its footprint through M&A
and consolidated its ownership of its subsidiaries.
Mixed Operating Prospects: C&W's largest market, Panama, has seen
mobile subscribers decline in each of the last three years, which
has offset growth elsewhere, pressuring mobile revenues. Fitch
anticipates mobile ARPUs to continue falling across the region. The
company's residential fixed-line segment has shown stronger growth
across countries over the same timeframe, as multi-play packages
have helped grow fixed-line ARPUs and revenues. C&W's revenues
should be more resilient than speculative grade issuers in the
region, despite the high proportion of pre-paid mobile. The
company's subsea cable business should continue to exhibit strong
growth as data demand increases, and the residential fixed line
segment should be more resilient than mobile. Fitch expects a
modest decline of 1%-3% of revenue in 2020.
Comfortable Liquidity: C&W has committed revolving credit
facilities for approximately USD680 million, from which it drew
USD313 million in 1Q20. These facilities, in addition to providing
liquidity to ensure ongoing operations, have also been used to fund
M&A. The company's amortization profile is long-dated, with the
majority of the debt (USD4.1 billion out of USD4.5 billion) due
after 2025. Fitch expects that the company's liquidity position
will not be compromised by the coronavirus, with a pre-dividend FCF
margin in the low single digits. Fitch expects that the company
will maintain cash balances of around USD300 million-USD350 million
over the rating horizon.
Instrument Ratings and Recovery Prospects: Fitch projects above
average recovery ratings for the secured debt; however, the
instrument ratings have been capped at 'RR4' due to Fitch's
Country-Specific Treatment of Recovery Rating Criteria, reflecting
concerns about creditor rights in C&W's countries of operation.
Over the last several years, C&W has simplified its debt structure,
resulting in a clear delineation of secured and unsecured debt in
the corporate chain. In January, Fitch downgraded the unsecured
notes, which are structurally subordinated to the secured Coral-US
Co-borrower and Sable International Finance Limited secured
facilities and notes; per Fitch's "Corporate Notching and Recovery
Rating Criteria," prior ranking debts above 2.0x EBITDA may
indicate a material subordination and lower recoveries for
unsecured debt in the transitional categories. C&W's competitive
position and relatively diversified operations support EBITDA
generation that compares favorably with speculative-grade telecoms
in the region. This strength is offset by its higher leverage than
most peers in the 'BB' rating category, as well as LLA's financial
management, which limits any material deleveraging.
DERIVATION SUMMARY
Compared to sister company VTR, which focuses on the Chilean
broadband and TV markets, C&W has larger scale, better service and
geographical diversification. VTR benefits from the Chilean
operating environment and its status as the largest broadband and
pay TV operator by subscriber share, although not by revenue share
(Telefonica Chile, BBB+/Stable). In general, fixed line services
are less competitive than mobile, although there are four
fixed-line providers in Chile, while C&W benefits from its
operations in a series of mostly duopoly markets (ex-Panama
mobile). VTR has the most conservative financial profile of the LLA
companies, with net leverage 0.5x-1.0x lower than C&W and LCPR,
making it the strongest of the three credit pools.
Compared to sister company LCPR, C&W has larger scale, better
service and geographical diversification. The leverage profiles of
these companies are roughly equivalent; with both having net
leverage around 4.5x on average. Following the AT&T acquisition,
LCPR's stand-alone credit profile will be strong for the rating
level and more comparable to C&W's. Fitch does not view integration
risk as a key rating driver for LCPR, given the complementary
product portfolios, and Liberty's experience handling M&A.
Compared with competitor Digicel Group Limited (C), C&W has a
stronger financial profile and better service diversification.
Digicel is also concentrated in markets with lower operating
environments, per capita incomes, and more FX risk. Both of the
ratings factor in the companies' approaches to corporate governance
to a degree, although LLA's is much less hostile to creditors than
Digicel's. Following the completion of Digicel's second debt
restructuring in as many years, Fitch will re-rate the surviving
entities.
Compared to WOM Mobile S.A. (WOM, BB-/Stable), C&W has greater
diversification and scale, as well as a history of positive FCF
generation. WOM benefits from its status in Chile, a market which
is close to 50/50 postpaid / prepaid mobile. WOM's ratings reflect
Fitch's expectations that the company will be managed to net
leverage around 3.0x-3.5x, around 1.0x-1.5x lower than C&W's.
Compared to Millicom international Cellular (MIC, BB+/Stable).
Millicom has embarked on an acquisitive spree over the last two
years, buying Cable Onda (BBB-/Stable) and Telefonica S.A.'s
(BBB/Stable) operations in Panama, as well as other Telefonica
assets in Central America, although the company cancelled one
acquisition. In 1Q20, Fitch downgraded Millicom's largest
subsidiary, Comcel Trust S.A. (BB/Stable), following a downgrade of
Guatemala (BB-/Stable). A Guatemalan downgrade is one of the
downgrade sensitivities for Millicom. Continued debt financed M&A
activity will likely result in a downgrade for Millicom.
ESG Considerations:
C&W has a score of 4 on Environmental Impacts, Group Structure and
Financial Transparency. Scores of 4 indicate factors that are not
key drivers to a rating, but can have an impact in combination with
other factors.
KEY ASSUMPTIONS
-- Revenues declining by 1%-3% in 2020, with mobile ARPUs
continuing to fall and fixed ARPUs relatively flat.
-- Fitch-adjusted EBITDA margins falling from 36%-37% to 34%-35%,
before rebounding in 2021 and beyond.
-- Some deterioration in working capital as customers lengthen
payment cycles.
-- Capex of around USD300 million-USD350 million in 2020 and
2021, before rising to USD350 million-USD400 million.
-- USD150 million-USD200 million contribution to LLA to fund LCPR
acquisition.
-- For the recovery analysis, Fitch uses a going concern EBITDA
of around USD650 million, and a 5.5x multiple for EV.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Fitch does not anticipate an upgrade as likely in the near
term, given the company's elevated leverage profile;
-- Longer-term positive rating actions are possible to the extent
that total debt/EBITDA and net debt/EBITDA sustained below 4.5x and
4.25x, respectively.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Total debt/EBITDA and net debt/EBITDA sustained above 5.25x
and 5.0x, respectively, due to a combination of organic cash flow
deterioration or M&A;
-- While the three credit pools are legally separate, LLA net
debt/EBITDA sustained above 5.0x could result in negative rating
actions at one or multiple rated entities in the group.
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
Comfortable Liquidity: C&W possesses sound liquidity, due to its
extended debt maturity profile, operating cash flow and access to
external financing when necessary. As of March 31, 2020, the
company held cash and cash of USD687 million, against current debt
and accrued interest of USD250 million.
In 1Q20, the company partially drew down its revolving credit
facilities to ensure access to cash at the onset of the coronavirus
lockdown. Fitch expects C&W to contribute between USD150
million-USD200 million to LLA to fund the capital contribution to
LCPR for its acquisition of AT&T Puerto Rico.
SUMMARY OF FINANCIAL ADJUSTMENTS
-- Adjusted leases consistent with new Fitch criteria;
-- Minor adjustments to operating expenses and working capital
items.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
Cable & Wireless Communications Limited: Group Structure: 4,
Exposure to Environmental Impacts: 4, Financial Transparency: 4.
CWC's operations in the Caribbean and Latin America expose it to
environmental impacts such as hurricanes. The Liberty Latin America
group structure and financial management strategies are somewhat
opaque, with significant related party transactions and relatively
limited transparency.
Except for the matters discussed, the highest level of ESG credit
relevance, if present, is a score of 3 - ESG issues are credit
neutral or have only a minimal credit impact on the entity(ies),
either due to their nature or the way in which they are being
managed by the entity(ies).
Cable & Wireless Communications Limited
- LT IDR BB-; Affirmed
- LC LT IDR BB-; Affirmed
Coral-US Co-Borrower LLC
- Senior secured; LT BB-; Affirmed
Sable International Finance Limited
- Senior secured; LT BB-; Affirmed
C&W Senior Finance Limited
- Senior unsecured; LT B+; Affirmed
CADIZ INC: Stockholders Pass All Proposals at Annual Meeting
------------------------------------------------------------
Cadiz Inc. held its 2020 Annual Meeting of Stockholders on June 17,
2020, the stockholders:
(a) elected Keith Brackpool, Stephen E. Courter, Maria
Echaveste, Geoffrey Grant, Winston Hickox, Murray H.
Hutchison, Richard Nevins, Scott S. Slater, and Carolyn
Webb de Macias as directors;
(b) approved the appointment of PricewaterhouseCoopers LLP as
the Company's independent auditors for the fiscal year
2020; and
(c) approved, on an advisory basis, the compensation of the
Company's named executive officers.
About Cadiz
Founded in 1983 and headquartered in Los Angeles, California, Cadiz
Inc. -- http://www.cadizinc.com/-- is a natural resources
development company dedicated to creating sustainable water and
agricultural opportunities in California. The Company owns 70
square miles of property with significant water resources in
Southern California and is the largest agricultural operation in
San Bernardino, California, where it has sustainably farmed since
the 1980s.
Cadiz reported a net loss and comprehensive loss of $29.53 million
for the year ended Dec. 31, 2019, compared to a net loss and
comprehensive loss of $26.27 million for the year ended Dec. 31,
2018. As of March 31, 2020, the Company had $74.07 million in
total assets, $93.76 million in total liabilities, and a total
stockholders' deficit of $19.68 million.
Cadiz said in its Annual Report for the period ended Dec. 31, 2019,
that limitations on the Company's liquidity and ability to raise
capital may adversely affect it. "Sufficient liquidity is critical
to meet the Company's resource development activities. Although the
Company currently expects its sources of capital to be sufficient
to meet its near-term liquidity needs, there can be no assurance
that its liquidity requirements will continue to be satisfied. If
the Company cannot raise needed funds, it might be forced to make
substantial reductions in its operating expenses, which could
adversely affect its ability to implement its current business plan
and ultimately impact its viability as a company."
CALAIS REGIONAL: 2 Hospitals Fail to Get Court OK for Relief Funds
------------------------------------------------------------------
Charles Eichacker, writing for Bangor Daily News, reports that a
court judge dismisses the request of two Maine hospitals to seek
federal relief funds.
A judge has dismissed the lawsuits filed by two bankrupt Maine
hospitals that haven't been allowed to receive funds from a federal
loan program aimed at propping up businesses during the coronavirus
pandemic.
Now, the hospitals hope that Maine's congressional delegation may
be able to find a solution to their financial challenges.
In late April 2020, Calais Regional Hospital and Penobscot Valley
Hospital in Lincoln both warned that they could have to close their
doors by the end of June without funds from the Paycheck Protection
Program, which offers forgivable loans to help businesses keep
their staff employed through the pandemic.
The Small Business Administration's interim rules for the program
bar any applicants in bankruptcy proceedings from applying for the
loans, which are extended by commercial banks with backing from the
federal government and can be forgiven if at least three-quarters
of the funds are spent on payroll and wages, among other
conditions.
The two hospitals have more recently found some breathing room and
do not expect to immediately close, after they each received funds
totaling at least $3.5 million from separate federal coronavirus
stimulus programs, according to court records. Both of them are in
the middle of Chapter 11 bankruptcy proceedings to restructure
their debts.
Like many hospitals, they have both suffered steep revenue
shortfalls after following state and federal guidance to cancel
lucrative elective services during the pandemic, according to their
lawsuits. The Calais hospital in late April started cutting 10
percent of its staff.
But on Wednesday, U.S. Bankruptcy Judge Michael Fagone ruled
against the hospitals in their lawsuits against the head of the
Small Business Administration.
The hospitals have argued they should qualify for the program in
part because the law that created the PPP -- the Coronavirus Aid,
Relief, and Economic Security Act, or CARES Act -- doesn't include
a restriction against applicants that are in bankruptcy.
Fagone had previously granted a temporary restraining order against
the head of the Small Business Administration allowing the
hospitals to apply for the funds, but Calais Regional Hospital has
had trouble finding a bank to loan the $1.8 million it's seeking.
In his 31-page ruling against the hospitals, Fagone called the
hospitals "particularly sympathetic," but wrote that the Small
Business Administration made reasonable choices about how to
allocate a large but finite amount of aid among struggling
businesses.
"Those choices may produce seemingly harsh results, but they are
not illegal," he wrote.
Now, the hospitals are looking to Maine's congressional delegation
for a solution.
U.S. Rep. Jared Golden, Sen. Susan Collins and Sen. Angus King have
pushed the Small Business Administration for a regulatory
workaround for critical access hospitals, according to Golden’s
office. Golden has also sponsored legislation that would exempt
bankrupt hospitals from that interim rule.
"We are very disappointed with the court's ruling and stand by our
argument that the CARES Act was clear about eligibility
requirements and that meant that SBA did not have discretion to
exclude companies in bankruptcy," DeeDee Travis, a spokesperson for
Calais Regional Hospital, said in a statement. "Congress should set
the eligibility for organizations in bankruptcy, especially for
critical access hospitals as such an important component in
battling the COVID-19 pandemic."
CALLON PETROLEUM: S&P Upgrades ICR to 'CCC+' on Cancelled Exchange
------------------------------------------------------------------
S&P Global Ratings raised its issuer credit rating on Callon
Petroleum Corp. to 'CCC+' from 'CC' after the company announced the
termination of its exchange offer and consent solicitations, which
the rating agency viewed as a distressed transaction.
At the same time, S&P raised the issue-level rating on the
unsecured notes to 'B-' from 'CC'. The recovery rating is '2'.
S&P lowered the rating on Callon to 'CC' in May after the company
announced an exchange in which investors would receive less than
the originally promised amount. S&P's expectation at the time was
that Callon would execute the exchange, which the rating agency
viewed as distressed because investors were to receive 40% of par
value. However, with the termination of the exchange, and S&P's
assumption that other such transactions are not forthcoming, the
rating agency is upgrading the company to 'CCC+'.
Lower oil prices will hurt Callon's cash flow and leverage metrics.
The company has over 75% of its oil production hedged in 2020 at
an average price of over $40 per barrel (/bbl). In addition, S&P
expects that the company has increased its hedge book for 2021
because oil prices have improved. However, S&P projects the
company's funds from operations (FFO) to debt will average 15%-20%
over the next two years. The company stated that it expects
forecast free cash flow generation of $25 million-$100 million from
the second quarter through the end of the year at an average West
Texas Intermediate (WTI) price of $25/bbl-$30/bbl. Given current
commodity prices, S&P believes that this free cash flow goal is
achievable but will not be enough to substantially reduce the large
draw on the company's credit facility.
Callon's borrowing base and commitment amount on its credit
facility were recently reduced, hurting liquidity. The borrowing
base on Callon's credit facility was reduced to $1.7 billion from
$2.5 billion and the elected commitment amount was reduced to $1.7
billion from $2.0 billion, further reducing the company's
liquidity. At the end of the first quarter, Callon had $1.35
billion drawn on its credit facility and $365 million of liquidity.
Despite being well hedged in 2020 and S&P's expectation that the
company has added additional hedges for 2021, Callon could be
exposed a potential reduction in the borrowing base during its fall
redetermination, depending on the commodity environment at the time
and resultant bank price decks.
The company noted that it would pursue divestitures of noncore
assets, mineral interests, or water assets, which, in S&P's view,
could be difficult in current market conditions but might be key to
improving liquidity.
The negative outlook reflects the current weak and volatile
commodity price environment and its potential impact on Callon's
financial performance and liquidity. Callon has a significant draw
on its revolving credit facility, about 80%, leaving it very
exposed to a further reduction in the borrowing base at the fall
redetermination, particularly given S&P's assumption that bank
price decks will remain at challenging levels, compounded by the
potential for fewer reserve additions due to lower drilling
activity in 2020. In addition, S&P believes the company's ability
to sell assets to repay debt will be hard to achieve under current
market conditions.
"We could lower the issuer credit rating if Callon's liquidity
weakened or if its leverage measures approached unstainable levels.
We could also lower the rating if Callon were to announce a debt
exchange that we would view as distressed. Both are possible if
crude oil prices fail to significantly and sustainably improve,"
S&P said.
"We could revise the outlook to stable if Callon's liquidity
improved, it reduced its debt on its credit facility, and it
improved its credit measures. All would likely occur in conjunction
with increasing commodity prices," the rating agency said.
CARNIVAL CORP: Moody's Cuts Unsec. Rating to Ba2, Outlook Negative
------------------------------------------------------------------
Moody's Investors Service assigned a Baa3 rating to Carnival
Corporation's planned senior secured term loan B. At the same time,
Moody's downgraded the company's senior unsecured rating to Ba2
from Ba1. Carnival's other ratings are unchanged, including its Ba1
Corporate Family Rating, Ba1-PD Probability of Default Rating, and
SGL-2 Speculative Grade Liquidity rating. The outlook remains
negative.
The proceeds of the planned $1.5 billion senior secured term loan
will be used to bolster the company's liquidity. "The downgrade of
Carnival's unsecured rating reflects the incremental $1.5 billion
of secured debt ahead of it in the capital structure, which along
with the company's March issuance of $4 billion of senior secured
notes, would account for approximately 25% of the company's total
debt," stated Pete Trombetta, Moody's lodging and cruise analyst.
Downgrades:
Issuer: Carnival Corporation
Senior Unsecured Shelf, Downgraded to (P)Ba2 from (P)Ba1
Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2
(LGD4) from Ba1 (LGD4)
Issuer: Carnival plc
Senior Unsecured Shelf, Downgraded to (P)Ba2 from (P)Ba1
Senior Unsecured Regular Bond/Debenture, Downgraded to
Ba2 (LGD4) from Ba1 (LGD4)
Assignments:
Issuer: Carnival Corporation
Senior Secured Term Loan B, Assigned Baa3 (LGD2)
RATINGS RATIONALE
Carnival's credit profile is supported by its position as the
largest worldwide cruise line in terms of revenues, fleet size and
number of passengers carried, with significant geographic and brand
diversification. Carnival also benefits from its view that over the
long run, the value proposition of a cruise vacation relative to
land-based destinations as well as a group of loyal cruise
customers supports a base level of demand once health safety
concerns have been effectively addressed. In the short run,
Carnival's credit profile will be dominated by the length of time
that cruise operations continue to be highly disrupted and the
resulting impact on the company's cash consumption, liquidity and
credit metrics. The normal ongoing credit risks include Carnival's
near term very high leverage, which Moody's forecasts will exceed
4.0x for at least the next two years, the highly seasonal and
capital intensive nature of cruise companies, competition with all
other vacation options, and the cruise industry's exposure to
economic and industry cycles as well as weather related incidents
and geopolitical events.
The rapid spread of the coronavirus outbreak and deteriorating
global economic outlook are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The cruise sector
has been one of the sectors most significantly affected by the
shock given its sensitivity to consumer demand and sentiment. More
specifically, Carnival's exposure to increased travel restrictions
has left it vulnerable to shifts in market sentiment in these
unprecedented operating conditions and the company remains
vulnerable to the continued uncertainty around the potential
recovery from the outbreak. Moody's regards the coronavirus
outbreak as a social risk under its ESG framework, given the
substantial implications for public health and safety. The action
reflects the impact on Carnival from the breadth and severity of
the shock, and the broad deterioration in credit quality it has
triggered.
The negative outlook reflects Carnival's high leverage and the
uncertainty around pace and level of the recovery in demand that
will enable the company to de-lever to below 4.5x.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Factors that could lead to a downgrade include indications over the
coming months that 2021 demand recovery may be weaker than expected
resulting in lower profitability or an expectation that debt/EBITDA
will remain above 4.5x or EBITA/interest expense was stabilized
below 3.0x. Ratings could also be downgraded if the level of free
cash flow deficits deepen in 2020 or should liquidity deteriorate
for any reason. The outlook could be revised to stable if
operations resume and demand shows good recovery trends in 2021
resulting in leverage approaching 4.5x. Given the negative outlook
an upgrade is unlikely over the near term. However, ratings could
eventually be upgraded if the company can maintain debt/EBITDA
below 3.5x, and EBITA/interest expense above 5.0x. A ratings
upgrade would also require a financial policy and capital structure
that supports the credit profile required of an investment grade
rating through inevitable industry downturns.
Carnival Corporation and Carnival plc own the world's largest
passenger cruise fleet operating under multiple brands including
Carnival Cruise Line, Holland America, Princess Cruises, AIDA
Cruises, Costa Cruises, and P&O Cruises, among others. Carnival
Corporation and Carnival plc operate as a dual listed company.
Headquartered in Miami, Florida, US and Southampton, United
Kingdom. Annual net revenues for fiscal 2019 were approximately $16
billion.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
CAROLINAS HOME: Case Summary & 7 Unsecured Creditors
----------------------------------------------------
Debtor: Carolinas Home and Land Investments, LLC
3335 Jason Avenue
Charlotte, NC 28208
Business Description: Carolinas Home and Land Investments, LLC
is the owner of fee simple title to 2.187-
acres and commercial building located in
Charlotte, NC, having a current value of
$658,200. The Company also owns 12.7-acres,
single family home, and commercial building
in Mount Holly, NC having tax records
valuation of $360,410.
Chapter 11 Petition Date: June 22, 2020
Court: United States Bankruptcy Court
Western District of North Carolina
Case No.: 20-30619
Judge: Hon. Laura T. Beyer
Debtor's Counsel: Richard S. Wright, Esq.
MOON WRIGHT & HOUSTON, PLLC
121 West Trade Street
Suite 1950
Charlotte, NC 28202
Tel: 704-944-6560
E-mail: rwright@mwhattorneys.com
Total Assets: $1,023,610
Total Liabilities: $1,193,519
The petition was signed by John M. Caves, sole member-manager.
A copy of the petition containing, among other items, a list of the
Debtor's seven unsecured creditors is available for free at
PacerMonitor.com at:
https://is.gd/m92ScE
CARROLL COUNTY ENERGY: S&P Affirms 'BB' Senior Secured Debt Rating
------------------------------------------------------------------
S&P Global Ratings affirmed its 'BB' rating on Carroll County
Energy LLC's (CCE) senior secured debt. The '1' recovery rating
remains unchanged, indicating its expectation for very high
(90%-100%; rounded estimate: 90%) recovery in a default scenario.
CCE is a 700-megawatt (MW) combined-cycle natural gas-fired power
plant. The project is located in Carroll County, Ohio and
dispatches into the American Electric Power (AEP) zone of the PJM
Interconnection. The project is owned by AP Carroll County Holdings
LLC (18%), San Jacinto Carroll Holdings LLC (11.5%), 730 Carroll
LLC (40%), Jera Power U.S.A. Inc. (20%), and Ullico Infrastructure
Carroll County HoldCo LLC (10.5%).
The single-asset nature of the project results in limited scale,
scope, and geographic diversity, which concentrates the risk from
unexpected operational outages; and
-- S&P expects that the prices in the 2022/2023 and 2023/2024 PJM
regional transmission organization (RTO) capacity auctions will be
lower than it previously anticipated, which will reduce CCE's
capacity revenue going forward.
CCE has been operating since December 2017 and has a track record
of stable operational performance with high availability and
capacity factors. However, despite CCE's stable historical
performance, S&P anticipates the company will report lower energy
margins due to lower demand and power prices in 2020.
Since late 2019 and into 2020, S&P has observed on-peak power
prices in the PJM in the high-teens to low-$20 range per
megawatt-hour (MWh). The combined effect of a mild winter and low
natural gas prices has placed significant downward pressure on
power prices in the PJM. Additionally, the business closures
stemming from the coronavirus pandemic have caused an unprecedented
widespread decline in power demand across all wholesale power
markets--including the PJM--which has further pressured already
weak power prices. In particular, S&P has observed material load
reductions from the commercial and industrial (C&I) sector. C&I
load represents at least 60% of the total load in the PJM and S&P
does not foresee that the increase in residential load due to the
coronavirus-related stay-at-home orders will supplant the C&I load
due to their fundamentally different load profiles. S&P anticipates
some recovery in power demand as states begin to reopen their
economies; however, it is uncertain at this stage whether the C&I
load will return to pre-pandemic levels. The rating agency expects
the sharp reduction in power demand to persist through the second
quarter of 2020 and potentially beyond. S&P's base-case scenario
assumes a recovery in power prices, though it expects this recovery
to occur gradually over the next several years.
Despite the current backdrop of declining power prices and weaker
power demand, S&P has observed increased generation in the PJM from
natural-gas fired facilities and reduced coal-based generation due
to lower natural gas prices. The PJM is currently undergoing a
fundamental shift in capacity away from coal-based generation due
to the combination of an aging fleet, poor economics, and
environmental pressures. When combined with its expectation for a
low future natural gas price environment, S&P anticipates these
factors will hasten the pace of baseload coal retirements in the
region. The increased generation in the PJM from gas-fired
facilities in such an acute environment, given the combined price
and demand shocks, demonstrates their resilience and
competitiveness.
"In our opinion, these factors should benefit the newer and
more-efficient gas-fired power plants -- with lower heat rates --
like CCE, more than the older and less-efficient plants in the
region," S&P said.
Furthermore, given that CCE is in close proximity to both the Utica
and Marcellus shale plays, S&P expects the project to continue to
benefit from relatively inexpensive gas feedstock, which should
lead to a $0.10-$0.15 favorable basis differential to Henry Hub on
average over the next several years. CCE also has a firm
transportation agreement with DTE Energy for 120,000 million BTUs
(mmBtus) per day of natural gas and interconnects with the
Tennessee Gas Pipeline through two lateral pipelines, which reduce
its fuel procurement risk.
"In our view, the locational advantages, low fuel costs, and the
ongoing retirement of coal and nuclear facilities in northeast Ohio
will favor efficient power plants like CCE to fulfill baseload
power demand resulting in higher generation and capacity factors of
between 85% and 90% over the next several years," S&P said.
S&P forecasts that merchant power generators such as CCE will
realize spark spreads in the in the mid- to high-single digit $/MWh
range in 2020. The root cause for these weaker spreads is the
demand destruction stemming from the coronavirus pandemic coupled
with lower natural gas prices and the uncertainty around the C&I
load heading into the summer of 2020. However, CCE does have a
revenue put for 600 MW of capacity in place with Morgan Stanley
Capital Group through March 2023 that provides it with a gross
energy margin floor of $34 million. Additionally, CCE's cash flow
profile is further bolstered by its gas and power swaps, which
hedge just over 80% of its gross energy margin in 2020 and
currently about 50% of its gross energy margin in 2021. CCE also
has cleared capacity payments through May 2022, which provides
additional cash flow stability.
S&P recently lowered its forecast for capacity prices in the
PJM-RTO region. Specifically, the rating agency now expects RTO
prices of $100/MW-day in the 2022/2023 and 2023/2024 capacity
auctions and $120/MW-day escalated at 2% in all future periods.
This is somewhat lower than S&P's prior expectation of $125/MW-day
for 2022/2023 and $120/MW-day for 2023/2024. Consequently, S&P
expects lower capacity revenue in the 2022-2023 and 2023-2024
delivery years for CCE.
"We currently project that CCE's DSCR will be about 2.0x through
the first quarter of 2021. Given our expectation that the shutdowns
will slowly ease going into mid-2020 and be followed by a steady
economic recovery, we assume the project will moderately improve
its energy margin beginning in 2021 with a projected DSCR of
greater than 2x throughout the second half of 2021," S&P said.
In 2019, CCE paid down $23.5 million on its term loan B through a
combination of mandatory amortization and excess cash flow sweep
payments ($3.4 million mandatory amortization and $20.1 million
excess cash flow sweep), bringing its ending balance to $433
million. Although the project's realized spark spreads in 2019 were
lower than S&P expected (due to weak natural gas prices and a mild
winter), it still managed to deleverage through significant cash
sweeps that were also supported by about $8 million in realized
gains from its power and gas hedges. Despite the near-term market
weakness, S&P forecasts that CCE will pay down the term loan B by
$20 million-$25 million with excess cash in 2020. S&P will continue
to monitor market developments and the project's performance during
the year.
"We expect that the demand shock stemming from the coronavirus
pandemic will be followed by a prolonged recovery. Due to the
reduced demand for power because of the coronavirus pandemic, we
expect power prices to remain somewhat depressed in 2020 and
potentially in 2021," S&P said.
S&P acknowledges a high degree of uncertainty about the rate of
spread and peak of the coronavirus outbreak.
"Some government authorities estimate the pandemic will peak about
midyear, and we are using this assumption in assessing the economic
and credit implications. We believe the measures adopted to contain
COVID-19 have pushed the global economy into recession. As the
situation evolves, we will update our assumptions and estimates
accordingly," S&P said.
The stable outlook reflects S&P's expectation that CCE will be able
to generate sufficient cash flow to maintain an average DSCR of
about 2.8x with a capacity factor in the 85%-90% range and a heat
rate of 6,700 Btus/kWh-6,900 Btus/kWh over the next five years. S&P
also expects the project's minimum DSCR to be about 2.0x in 2020
and believes it will sweep excess cash of between $20 million and
$25 million in 2020.
"We could lower our rating if the project is unable to maintain a
minimum DSCR of 1.5x on a consistent basis or its excess cash
sweeps are materially lower than we expect. This could occur due to
weak realized spark spreads caused by lower power demand in the PJM
region in the current low-cost gas environment. We could also
revise our outlook or lower the rating if CCE experiences
significant unplanned operational encumbrances that require it to
shut down the entire plant for an extended period," S&P said.
"While unlikely over the next 12 months, we could consider raising
our rating if we expect the project to maintain a DSCR of greater
than 2.5x in all years, including the refinancing period in our
base case. This could stem from a secular improvement in wholesale
power and capacity prices in PJM's AEP zone, a steady operational
performance with a high capacity factor, and continued access to
relatively inexpensive natural gas feedstock," the rating agency
said.
CENTURY ALUMINUM: S&P Upgrades ICR to 'B-' on New Note Issuance
---------------------------------------------------------------
S&P Global Ratings upgraded its issuer credit rating (ICR) on
Century Aluminum Co. to 'B-' from 'CCC+' and removed ratings from
CreditWatch with negative implications. At the same time, S&P
assigned its 'B' rating and '2' recovery rating to the proposed
notes.
Century plans to issue $250 million of senior secured notes due
2025, alleviating refinancing risk. The company will use the
proceeds to redeem the outstanding $250 million of senior notes due
in June 2021. The proposed transaction would eliminate the
refinancing risk it previously associated with these notes.
Recovery in credit metrics to more normal levels will depend
primarily on a recovery in aluminum prices. Under its aluminum
price assumptions of $1,700/ton for the remainder of 2020 and 15.5%
alumina to London Metal Exchange (LME) aluminum price relationship,
S&P expects Century to generate about $30 million-$50 million of
EBITDA resulting in EBITDA interest coverage of roughly 1x-1.5x and
debt leverage of about 10x-15x in 2020. In the second quarter of
2020, S&P expects Century to generate neutral or slightly negative
cash flow as a result of aluminum prices declining below $1,500/ton
earlier this year. However, prices have improved since April 2020
lows and S&P expects Century to generate positive EBITDA supported
by the rating agency's upward sloping aluminum price assumption,
the company's energy cost hedging program and increased volumes
from the fourth line operating at its Hawesville plant."
Although leverage is uncertain and highly dependent on market
conditions, it should gradually improve as the aluminum market
recovers. Under its base case, S&P assumes a $100/ton decline in
aluminum prices and a $10/ton increase in alumina prices would
result in a roughly $70 million reduction in EBITDA. Century has
displayed volatile leverage in the past, reaching 2.4x in 2017 when
aluminum prices averaged $1,968 per ton and then spiking to 14x in
2018 when alumina prices peaked at $700 per ton. S&P expects this
volatility to continue due to the company's substantial exposure to
aluminum prices, premiums, and raw material prices (primarily to
alumina). S&P expects Century's leverage to return to more
manageable levels as a result of the rating agency's expectation
that aluminum prices should increase from five-year lows in the
coming 12-24 months.
Century has taken steps to preserve cash amid the challenging
aluminum market. The company has demonstrated an ability to
preserve cash by squeezing its cost profile to lower cash breakeven
levels and has implemented effective hedges to limit further
downside from volatile energy prices. Currently, the company is
cash breakeven at about $1,550/ton compared to $1,675 earlier this
year. Century has cut nonessential capital spending in an effort to
preserve cash. S&P expects Century to burn cash heading into the
third quarter of 2020 as it works through low realized aluminum
prices on a three-month lag basis to spot prices; however the
rating agency expects cash generation to improve during the balance
of the year to generate neutral or slightly negative free cash
flow.
"The stable outlook indicates that while we expect Century's
leverage to remain elevated under current challenging aluminum
market conditions, we expect EBITDA interest coverage to remain
above 1.5x over the coming 12 months. This is based on our
assumption of improving aluminum prices and steady volumes, alumina
prices remaining within the 15%-16% range versus LME aluminum
prices," S&P said.
"We could lower the rating if aluminum prices fall below the
company's cash flow breakeven cost of $1,550 for an extended
period. This would translate into EBITDA interest coverage below
1x, which we would potentially view as indicative of an
unsustainable capital structure," the rating agency said.
An upgrade would be tied to a broader recovery in market conditions
with aluminum prices holding at more sustainable levels, resulting
in EBITDA interest coverage above 2x. The upgrade would also be
dependent on the company making further improvements in its cost
position to improve profitability.
CENTURY CASINOS: Moody's Confirms 'B3' CFR, Outlook Negative
------------------------------------------------------------
Moody's Investors Service confirmed Century Casinos, Inc.'s B3
Corporate Family Rating, B3-PD Probability of Default Rating, and
B3 senior secured credit facility rating. Century's Speculative
Grade Liquidity rating was downgraded to SGL-3 from SGL-2. These
rating actions conclude the review for downgrade initiated on March
26, 2020. The outlook is negative.
The confirmation of Century's Corporate Family Rating considers
that the company's casinos in North America re-opened after
approximately two months of being closed because of health and
safety concerns related to the coronavirus. The re-opening
alleviates a significant amount of Moody's near-term liquidity
concerns, particularly with respect to cash burn rates and covenant
compliance, two key factors behind Moody's decision to place
Century under review for downgrade on March 26.
Despite the partial nature of Century's casino openings because of
ongoing social distancing restrictions and requirements, Moody's
expects initial results will be strong in terms of revenue, and
given the company's substantially reduced expense base, the flow
through to EBITDA will also be strong as well as higher than it has
been historically under normal operating conditions. This will take
the pressure off Century's need to use its current liquidity to
support ongoing operations, as well as improve the likelihood that
the restricted borrowing group that is the obligor the rated credit
facility will meet the 4.25x net senior leverage covenant to the
extent its $10 million revolving credit portion of the facility is
drawn 35% or greater since borrowings above that level trigger the
covenant requirement. At March-2020, the revolver was fully drawn.
Because the restricted borrower that is the obligor to the rated
credit facility had about $58 million of cash as of March 31, 2020,
the company could pay down the revolver below the covenant trigger
threshold.
The negative outlook considers the inherent uncertainty that
Century and other gaming companies still face regarding gaming
demand, including future efforts to contain the coronavirus that
could disrupt visitation along with the pace at which consumer and
commercial spending at the company's properties will recover.
While initial results from casino re-openings suggest a significant
amount of pent-up demand, and possibly of longer-term benefits
related to substantial reduced operating expenses, Century remains
vulnerable to the social and economic challenges created by the
coronavirus, including efforts to contain the coronavirus along
with the potential for a slow economic recovery. As a result, the
company's ability to reduce leverage within the next 12-18 months
remains uncertain. Restricted group debt/EBITDA on a Moody's
adjusted basis for the latest 12-month period ended March 31, 2020
was around 6.2 times, or 0.7 times of a turn higher than the 5.5
times it was prior to the coronavirus.
The downgrade of Century's Speculative Grade Liquidity rating to
SGL-3 from SGL-2 reflects that the cash burn during the casino
closures will reduce cash to an estimated $30 million range at the
restricted borrower at the end of June 2020, and that the $10
million revolver is fully drawn.
Moody's took the following rating actions on Century Casinos,
Inc.:
Ratings confirmed:
Corporate Family Rating, at B3
Probability of Default Rating, at B3-PD
Senior secured credit facility rating, at B3 (LGD 3)
Rating Downgraded:
Speculative Grade Liquidity, to SGL-3 from SGL-2
Outlook Actions:
Outlook, Changed to negative From Rating Under Review
RATINGS RATIONALE
In addition to its high leverage and the continued uncertainty
created by the coronavirus, Century's B3 Corporate Family Rating
reflects company's relatively small scale in terms of revenue and
short track record operating as a combined company following the
December 6, 2019 acquisition of two casinos in Missouri one casino
in West Virginia. Annual revenue for the restricted borrowing group
is only about $260 million. Positive credit consideration is given
to Century's geographic diversification, albeit a modest amount,
and benefit to free cash flow from low capital expenditure
requirements going forward. There are no major expansion projects
on the immediate horizon as Century completed several growth
projects over the past two years.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be downgraded if Moody's anticipates that
Century's earnings decline or liquidity deterioration will be
deeper or more prolonged because of actions to contain the spread
of the virus or reductions in discretionary consumer spending. The
ratings could also be lowered if recovery values weaken or it
appears the company will need to obtain additional capital to
manage through the crisis.
A ratings upgrade is unlikely given the weak operating environment
and expectation for leverage to remain high in the foreseeable
future. Ratings could be upgraded if it appears that Century can
achieve and maintain debt/EBITDA below 5.0x, generate meaningfully
positive free cash flow, and maintain good liquidity including
comfortably meeting its financial covenant requirements.
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The gaming sector
is one of the sectors most significantly affected by the shock
given the non-essential nature of casino gaming and the sector's
historically high sensitivity to consumer demand and sentiment.
More specifically, Century's continued exposure to travel
disruptions and discretionary consumer spending have left it
vulnerable to shifts in market sentiment in these unprecedented
operating conditions and makes it vulnerable to the outbreak
continuing to spread.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. Century's ratings reflect the breadth and severity of
the shock, and the broad deterioration in credit quality it has
triggered.
The principal methodology used in these ratings was Gaming Industry
published in December 2017.
Century is headquartered in Colorado Springs, Colorado, is an
international casino entertainment company with operations in the
US, Canada, England, Argentina and Poland. The company is publicly
traded (NASDAQ: CNTY) and has consolidated annual net revenues of
around $420 million, although the revenue of the borrowing group
responsible for servicing the company's rated $180 million credit
facility is considerably smaller at about $260 million.
CHESAPEAKE ENERGY: Egan-Jones Lowers Senior Unsecured Ratings to D
------------------------------------------------------------------
Egan-Jones Ratings Company, on June 16, 2020, downgraded the
foreign currency and local currency senior unsecured ratings on
debt issued by Chesapeake Energy Corporation to D from C.
Headquartered in Oklahoma City, Oklahoma, Chesapeake Energy
Corporation produces oil and natural gas.
CHINESEINVESTORS.COM: Case Summary & 20 Top Unsecured Creditors
---------------------------------------------------------------
Debtor: Chineseinvestors.com, Inc.
227 W. Valley Blvd., Suite 208A
San Gabriel, CA 91776
Business Description: Chineseinvestors.com, Inc. was established
as an 'in language' (Chinese) financial
information web portal that provides
information about US Equity and Financial
Markets, as well as other financial markets.
Chapter 11 Petition Date: June 18, 2020
Court: United States Bankruptcy Court
District of California
Case No.: 20-15501
Judge: Hon. Ernest M. Robles
Debtor's Counsel: Rachel M. Sposato, Esq.
THE HINDS LAW GROUP
21257 Hawthorne Boulevard
Second Floor
Torrance, CA 90503
Tel: (310) 316-0500
E-mail: jhinds@hindslawgroup.com;
rsposato@hindslawgroup.com
Total Assets as of February 29, 2020: $2,655,736
Total Debts as of February 29, 2020: $11,574,081
The petition was signed by Wei Warren Wang, CEO.
A copy of the petition containing, among other items, a list of the
Debtor's 20 largest unsecured creditors is available for free at
PacerMonitor.com at:
https://is.gd/I7jwDG
CIMAREX ENERGY: Egan-Jones Lowers Senior Unsecured Ratings to BB-
-----------------------------------------------------------------
Egan-Jones Ratings Company, on June 18, 2020, downgraded the
foreign currency and local currency senior unsecured ratings on
debt issued by Cimarex Energy Corporation to BB- from BB.
Headquartered in Denver, Colorado, Cimarex Energy Corporation
explores and produces crude oil and natural gas in the United
States.
CLEVELAND-CLIFFS INC: S&P Lowers 7.5% Unsec. Notes Rating to 'CCC'
------------------------------------------------------------------
S&P Global Ratings lowered its issue-level rating on iron ore and
steel producer Cleveland-Cliffs Inc.'s 7.5% senior unsecured notes
due 2023 to 'CCC' from 'B-' and revised the recovery rating to '6'
from '4'.
Following the tender offer Cleveland-Cliffs Inc. completed in March
2020, approximately $13 million of its subsidiary AK Steel Corp.'s
7.5% notes due 2023 remain outstanding. The holders of these notes
released the liens securing the obligation. As such, these notes
are now an unsecured obligation and rank equally in right of
payment with the company's unsecured and unsubordinated debt.
ISSUE RATINGS--RECOVERY ANALYSIS
Key analytical factors
-- Cliffs' capital structure comprises a unrated $2 billion
revolving credit facility ($650 million currently drawn).
-- The company has approximately $2.2 billion of senior secured
notes, including the $150 million add-on to its $725 million senior
secured notes due 2026.
-- Cliffs has approximately $1.8 billion of guaranteed and senior
unsecured notes.
-- Finally, the company has $296 million of outstanding 1.5%
senior unsecured convertible notes (not rated) and $262 million of
outstanding 6.25% senior unsecured notes that are nonguaranteed,
which S&P considers subordinated to the guaranteed notes.
-- In S&P's hypothetical bankruptcy scenario, Cliffs would have
drawn about 60% of the commitment under its $2 billion asset-based
lending (ABL) facility less assumed undrawn letters of credit
(approximately $200 million).
-- S&P assumes that 50% of AK Steel's pension claims will be
accepted and will have a priority claim to the subsidiary's
collateral ahead of the ABL.
-- S&P incorporates additional claims associated with AK Steel's
industrial revenue bonds and Cliffs' asset retirement obligations
(in line with the guaranteed senior unsecured claims).
-- S&P's valuation uses an enterprise value approach because it
believes that creditors would realize greater recovery through
reorganization rather than liquidation.
-- The enterprise value is based on a 5.5x multiple, which is in
line with the multiples S&P uses for other integrated steelmakers.
-- All debt amounts include six months of accrued but unpaid
interest at default.
Simulated default assumptions
-- Year of default: 2022
-- EBITDA at emergence: $641.2 million
-- Implied enterprise value multiple: 5.5x
-- Gross enterprise value: $3.53 billion
Simplified waterfall
-- Net enterprise value (gross enterprise value, $3.5 billion;
less postretirement obligations, $360 million; less 5%
administrative expenses, $160 million): $3.0 billion
-- Total priority claims (ABL facility): $1.02 billion
-- Remaining value for Cliffs (50% obligor value, $650 million;
pro rata share of nonobligor value due to subsidiary guarantees,
$1.3 billion): $1.98 billion
-- Estimated Cliffs secured claims (guaranteed senior secured
notes): $2.28 billion
-- Recovery expectations: 70%-90% (rounded estimate: 85%)
-- Remaining value for Cliff's unsecured guaranteed obligations:
$0
-- Estimated Cliffs unsecured guaranteed obligations: $1.2
billion
-- Recovery expectations: 0%-10% (rounded estimate: 0%)
COMMSCOPE INC: Moody's Rates New Senior Unsecured Notes 'B3'
------------------------------------------------------------
Moody's Investors Service assigned a B3 instrument rating to the
proposed senior unsecured notes of Commscope, Inc., a wholly-owned
subsidiary of CommScope Holding Company, Inc. Proceeds are expected
to refinance near term maturities.
RATINGS RATIONALE
Moody's expects that the proposed notes offering by Commscope will
be leverage neutral, as all of the net proceeds are expected go
towards refinancing near term maturities. Although Commscope will
not benefit materially from interest expense savings, the extended
debt maturity profile provides the company more runway to
capitalize on its 5G strategy, which is expected to occur over the
next several years.
CommScope Holding Company, Inc.'s B1 Corporate Family Rating
reflects its high financial leverage stemming from the ARRIS
acquisition and volatile end market spending patterns balanced by
the combined companies' scale and leading market positions,
supplying numerous telecoms, broadband and enterprise connectivity
markets. Debt to EBITDA, pro forma for the acquisition and adding
back certain one-time expenses, is approximately 7.7x based on
trailing March 2020 results. The rating also considers management's
commitment to repay debt and the company's cash generating
potential. Moody's expects leverage to remain very high in 2020,
however, as a result of the global economic recession driven by the
COVID-19 pandemic.
Liquidity is good with about $650 million of cash on the balance
sheet (pro forma for the $250 million draw on the company's
revolver) plus an additional $750 million of revolver capacity.
Moody's expects the company to generate positive free cash flow
this year despite the macroeconomic headwinds.
The negative outlook reflects Moody's expectation of near-term
performance declines, uncertainty around and the timing and pace of
a global economic recovery, as well as CommScope's ability to
de-lever over the next 12-18 months.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Given the negative outlook, an upgrade of CommScope's ratings is
unlikely. However, an upgrade could occur if the company returns to
revenue growth, leverage declines towards 5.0x (including Moody's
adjustments) and liquidity remains solid. The ratings could be
downgraded if performance does not recover within the next 12-18
months, leverage is not on track to fall below 6.5x or liquidity
deteriorates materially.
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The weaknesses in
CommScope's credit profile, including its exposure to global
economies have left it vulnerable to shifts in market sentiment in
these unprecedented operating conditions and CommScope remains
vulnerable to the outbreak continuing to spread. Moody's regards
the coronavirus outbreak as a social risk under its ESG framework,
given the substantial implications for public health and safety.
Assignments:
Issuer: Commscope, Inc.
Senior Unsecured Regular Bond/Debenture, Assigned B3 (LGD5)
CommScope Holding Company Inc. is the holding company for CommScope
Inc., a supplier of connectivity and infrastructure solutions for
the wireless industry, telecom service and cable service providers
as well as the enterprise market. ARRIS, acquired April 2019, is
one of the largest providers of equipment to the cable television
and broadband industries. Pro forma combined revenues were
approximately $9.3 billion for the twelve months ended March 2020.
CommScope is headquartered in Hickory, NC.
The principal methodology used in these ratings was Manufacturing
Methodology published in March 2020.
CONCENTRA INC: Moody's Withdraws B1 Corp Family Rating
------------------------------------------------------
Moody's Investors Service withdrew its ratings for Concentra Inc.
including the company's B1 corporate family rating, B1-PD
probability of default rating, and B1 senior secured rating.
Withdrawals:
Concentra Inc.
Corporate Family Rating, Withdrawn, previously rated B1
Probability of Default Rating, Withdrawn, previously rated B1-PD
Senior secured bank credit facility rating, Withdrawn, previously
rated B1 (LGD3)
Outlook Actions:
Concentra Inc.
Outlook, Withdrawn, previously stable
RATINGS RATIONALE
Moody's has decided to withdraw the ratings for its own business
reasons. The company fully repaid its senior secured term loan.
Concentra is a provider of occupational and consumer healthcare
services, including workers' compensation injury care, physical
exams, wellness, preventative care and drug testing for employers.
Concentra has operations across the US though medical centers and
onsite clinics at employer worksites. The company also provides
outpatient services to veterans at 32 Department of Veterans
Affairs community-based outpatient clinics. Concentra generates pro
forma revenue of about $1.6 billion. Concentra is privately held
and jointly owned by Select Medical Corporation and affiliates of
Welsh, Carson, Anderson & Stowe. As a result of the US HealthWorks
acquisition, Dignity Health (a not-for-profit hospital group) also
has an ownership stake in Concentra.
COOPER TIRE: Moody's Confirms Ba3 CFR & B1 Sr. Unsecured Rating
---------------------------------------------------------------
Moody's Investors Service confirmed the ratings of Cooper Tire &
Rubber Company with the Corporate Family Rating and Probability of
Default Rating, at Ba3 and Ba3-PD, respectively; and senior
unsecured rating at B1. The Speculative Grade Liquidity Rating is
revised to SGL-2 from SGL-3. The outlook is stable. This action
concludes the review for downgrade initiated on March 26, 2020.
Confirmations:
Issuer: Cooper Tire & Rubber Company
Corporate Family Rating, Confirmed at Ba3
Probability of Default Rating, Confirmed at Ba3-PD
Senior Unsecured Regular Bond/Debenture, Confirmed at B1 (LGD5)
Upgrades:
Issuer: Cooper Tire & Rubber Company
Speculative Grade Liquidity Rating, Upgraded to SGL-2 from SGL-3
Outlook Actions:
Issuer: Cooper Tire & Rubber Company
Outlook, Changed to Stable from Rating Under Review
RATINGS RATIONALE
The confirmation of Cooper Tire's ratings, including the Ba3 CFR,
reflects the company's major market position as the 5th largest
tire manufacturer in the US and record of moderate debt leverage
going into the recession. Cooper-Tire's debt/EBITDA as of March 31,
2020 was 2.2x (inclusive of Moody's adjustments) including the $250
million of borrowings under the revolving credit agreement to
support liquidity. Excluding the revolver drawdown, pro forma
debt/EBITDA was 1.5x. The company's debt leverage will deteriorate
over the coming quarters with the gradual recovery of the
manufacturing operations before improving in the fourth quarter of
2020. Leverage should further improve into 2021 with demand for
aftermarket tires. Cooper Tire also has begun shifting production
of truck and bus radial tires to Vietnam through a joint venture
with Sailun Vietnam Co., Ltd. This action should continue to help
alleviate profit pressures from tariffs in 2020.
Similar to other auto parts suppliers, management has taken steps
to help mitigate lost volumes from the impact of the coronavirus
pandemic including capital expenditure reductions, temporary salary
reductions, reduced discretionary spending, and improved working
capital management. Moody's expects Cooper Tire's use of
last-in-first out inventory accounting will also help mitigate the
impact of lower volumes on the company's profit levels. The drop in
petroleum and related raw material costs is expected to be
reflected in the company's cost of goods sold. Further, Moody's
believes that consumers are likely to use their vehicles more as
social distancing policies are eased, rather than travel in planes,
trains, and busses. This trend should be supportive of aftermarket
tire demand.
The stable outlook reflects Moody's belief that Cooper Tire's
strong cash balances supports operating flexibility enabling the
company to manage operations as consumer demand for aftermarket
tires gradually recovers along with increasing production at Cooper
Tire's manufacturing operations.
Cooper Tire's SGL-2 Speculative Grade Liquidity Rating reflects the
expectation of a good liquidity profile through into next year
supported by cash and the expectation of positive free cash flow
(cash from operations less CAPEX less dividends). Free cash flow to
debt should be in the double-digit range for 2020. Cash and cash
equivalents were $433 million as of March 31, 2020. Availability
under the $500 million revolving credit facility was about $248.7
million after $250 million of borrowings and $1.3 million of
outstanding letters of credit. The facility matures in June 2024.
While Moody's expects positive full year free cash flow for 2020,
second quarter cash flow will be negative. Free cash flow for the
fourth quarter 2020 should be strongly positive, reflecting normal
industry seasonality. The revolving credit facility contains net
leverage ratio and interest coverage ratio financial covenants
which are expected to have sufficient cushion through over the next
4 quarters to support operating flexibility.
Cooper Tire also maintains a $150 million accounts receivable
securitization facility which matures in February 2021. Moody's
estimates availability under this facility was about $80 million at
March 31, 2020. In the event this facility is not renewed Cooper
Tire would have to rely on the revolving credit facility to fund
its growth in receivable balances.
Auto parts suppliers face material credit risk from carbon
transition as the automotive industry comes under increasing
pressure to accelerate vehicle electrification. Auto parts
suppliers risk exposure to manufacturers whose vehicle mix is not
aligned with regulatory requirements or consumer clean-air
preferences. Cooper Tire's products are primarily supplied to the
automotive aftermarket and are generally agnostic to vehicle
powertrain. However, as electrified vehicle specifications differ
from internal combustion engines, Cooper Tire must continue to
develop new tire specifications to meet new vehicle requirements.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Cooper Tire's ratings could be upgraded over the intermediate-term
if its financial policy remains balanced among shareholder returns,
capital investments to support organic growth (notably in high
valued tires) and acquisitions. Cooper Tire must also demonstrate
the ability of its operations to support and improve credit metrics
on a sustained basis without the impact of lower raw material
costs.
Cooper Tire's rating could be downgraded if Moody's believes Cooper
Tire's EBITA margin will be sustained below the high single digits
level, EBITA/interest sustained below 4.5x, debt/EBITDA approaching
high 2x, or the expectation of negative free cash flow though the
second half of 2021. Also, a major consideration for a rating
downgrade also would include, in Moody's view, a material changes
in the company's financial policies towards debt financed
acquisitions, increasing shareholder returns, or a change in the
company's competitive profile.
The principal methodology used in these ratings was Automotive
Supplier Methodology published in January 2020.
Cooper Tire & Rubber Company, headquartered in Findlay, Ohio, is
one of the largest tire manufacturers in North America and is
focused on the replacement markets for passenger cars and light and
medium duty trucks. Revenues for the LTM period ending March 31,
2020 were $2.7 billion.
CYTODYN INC: Signs Second Amended Employment Contract with CEO
--------------------------------------------------------------
CytoDyn Inc. and Nader Z. Pourhassan, Ph.D., president and chief
executive officer of the Company, entered into a second amended and
restated employment agreement effective June 15, 2020. The primary
changes to the agreement include a modification to the severance
payable to Dr. Pourhassan in the event his employment is terminated
by the Company without cause, by increasing severance payable to 18
months from 12 months upon termination without cause and deleting
the limitation from his prior agreement that the severance would
not be payable if the Company had less than $4 million in cash on
hand or net worth of less than $5 million. The amended agreement
also clarifies that vesting on option grants will only accelerate
upon termination of employment if permitted by the underlying stock
option award agreement.
Effective June 15, 2020, the Company and Michael D. Mulholland,
chief financial officer, entered into an amended and restated
employment agreement. With the exception of the severance-pay
period which remains 12 months, the changes to Mr. Mulholland's
agreement mirror those of Dr. Pourhassan described above.
The Compensation Committee of the Board of Directors of CytoDyn
Inc. approved a form of Restricted Stock Unit Agreement and
Performance Based Restricted Stock Unit Agreement and an amended
form of Stock Option Agreement for employees under the Company's
2012 Equity Incentive Plan.
On June 16, 2020, the Board of the Company approved an amendment to
the Company's 2012 Equity Incentive Plan. The amendment changes
the governing law of the Plan from Oregon to Delaware, the
Company's state of incorporation, and deletes the annual limitation
on the number of shares subject to options that may be granted
under the Plan and the aggregate limitation of grants of restricted
stock awards and restricted stock unit awards under the Plan. The
Board believed the limitations were no longer necessary after the
repeal of Section 162(m) of the Internal Revenue Code, relating to
the deductibility of performance-based compensation, for tax years
beginning after Dec. 31, 2017.
About CytoDyn Inc.
Headquartered in Vancouver, Washington, CytoDyn Inc. --
http://www.cytodyn.com/-- is a late-stage biotechnology company
focused on the clinical development and potential commercialization
of leronlimab (PRO 140), a CCR5 antagonist to treat HIV infection,
with the potential for multiple therapeutic indications.
As of Feb. 29, 2020, the Company had $38.82 million in total
assets, $43.20 million in total liabilities, and a total
stockholders' deficit of $4.38 million.
Warren Averett, LLC, in Birmingham, Alabama, the Company's auditor
since 2007, issued a "going concern" qualification in its report
dated Aug. 14, 2019, on the Company's consolidated financial
statements for the year ended May 31, 2019, citing that the Company
incurred a net loss of approximately $56,187,000 for the year ended
May 31, 2019 and has an accumulated deficit of approximately
$229,363,000 through May 31, 2019, which raises substantial doubt
about its ability to continue as a going concern.
DAWN ACQUISITIONS: Moody's Lowers CFR to B3, Outlook Stable
-----------------------------------------------------------
Moody's Investors Service downgraded Dawn Acquisitions LLC's
corporate family rating to B3 from B2 and its probability of
default rating to B3-PD from B2-PD. Dawn's $600 million senior
secured 1st lien credit facility, which consists of a $550 million
7-year term loan and a $50 million 5-year revolver, was downgraded
to B3 from B2. These downgrades are the result of Moody's
expectations for continued elevated leverage (Moody's adjusted) due
to revenue and EBITDA growth below previous expectations. Dawn is a
2018 carve-out of the colocation business of AT&T Inc. (AT&T, Baa2
stable), which consists of a portfolio of owned and leased data
centers and related critical infrastructure assets. The outlook is
stable.
Downgrades:
Issuer: Dawn Acquisitions LLC
Probability of Default Rating, Downgraded to B3-PD from B2-PD
Corporate Family Rating, Downgraded to B3 from B2
Senior Secured First Lien Bank Credit Facility, Downgraded to
B3 (LGD3) from B2 (LGD3)
Outlook Actions:
Issuer: Dawn Acquisitions LLC
Outlook, Remains Stable
RATINGS RATIONALE
Dawn's B3 CFR reflects its weak revenue and EBITDA growth trends
and the likelihood that leverage (Moody's adjusted) will remain at
an elevated level over the next two years, incompatible with the
prior rating. Delays in establishing standalone operations and
building a new sales force have resulted in the company's data
center facilities continuing to operate at low capacity utilization
levels and below Moody's initial expectations at the time of the
company's 2018 carve-out from AT&T. Although cost reduction efforts
have been gaining traction, they have not been sufficient to offset
the company's sales performance relative to budget. Dawn has also
made slow progress expanding network connectivity options inside
its geographically diversified data center footprint under an
evolving carrier neutral business model, still relying heavily on
its prior owner's global telecom network for connectivity for its
mostly enterprise customers. The rating also incorporates the
company's stable base of contracted recurring revenue, secular
growth drivers for colocation services and currently low capital
intensity relative to the industry due to still underutilized
capacity. Moody's believes Dawn's below industry average customer
churn profile can likely persist over the next few years given the
pervasive customer stickiness of its large enterprise customers.
These positive factors are offset by the company's small scale,
high leverage, growth strategy execution risks, intensifying
industry competition and the potential for higher capital intensity
in the future.
Moody's expects Dawn to have leverage around 7.5x (Moody's
adjusted) at year-end 2020. Moody's forecasts free cash flow to be
roughly breakeven during 2020 and 2021 due to currently modest
capital spending. Moody's estimates that leverage will fall to 7x
(Moody's adjusted) or lower through year-end 2021 based on
improving bookings trends from the company's direct sales force and
channel partners that drive capacity utilization higher.
Moody's expects Dawn to have adequate liquidity over the next 12
months. As of March 31, 2020, Dawn had about $20 million of cash on
hand and close to $25 million available under its $50 million
revolving credit facility. For 2020, Moody's forecasts Dawn to
generate close to breakeven free cash flow after accounting for
capital spending. The revolver contains a springing 8x maximum
first lien net leverage covenant to be tested when 35% or more of
the revolver is outstanding at the end of each quarter. As of March
31, 2020, Dawn's first lien net leverage was approximately 5.9x.
The instrument ratings reflect both the probability of default of
Dawn, as reflected in the B3-PD probability of default rating, an
average expected family recovery rate of 50% at default, and the
loss given default (LGD) assessment of the debt instruments in the
capital structure based on a priority of claims. The senior secured
first lien credit facility is rated B3 (LGD3), in line with the B3
CFR given the lack of junior securities to provide loss absorption
in the event of default. The senior secured first lien credit
facility is guaranteed on a senior secured basis by Dawn
Acquisitions LLC and all direct and indirect material domestic
subsidiaries subject to certain exceptions.
The rapid and widening spread of the coronavirus outbreak, the
deteriorating global economic outlook, falling oil prices and asset
price declines are creating a severe and extensive credit shock
across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The global
communications infrastructure industry globally is expected to be
more resilient than many sectors as the spread of the coronavirus
outbreak widens and the global economic outlook deteriorates.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
The stable outlook reflects Moody's view that Dawn will improve its
revenue and EBITDA growth trends and that leverage (Moody's
adjusted) will fall towards or below 7x over the next 12 to 18
months.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
Moody's could consider a ratings upgrade if the company generated
free cash flow equal to at least 5% of debt and leverage were to
trend through 5x (both on a sustained and Moody's adjusted basis).
Downward rating pressure could develop if bookings growth weakens,
churn rises, monthly recurring revenue trends weaken or if leverage
(Moody's adjusted) is sustained above 7x. In addition, if capital
intensity results in large cash flow deficits or if liquidity
becomes strained, a downgrade is likely.
The principal methodology used in these ratings was Communications
Infrastructure Industry published in September 2017.
Headquarters in Dallas, TX, Dawn Acquisitions LLC, doing business
as Evoque data center solutions, is a full-service retail
colocation provider with a portfolio of 31 owned and leased data
center facilities in 25 markets in 11 countries serving over
1,000-plus enterprise customers across diversified industries.
ELMIRA CITY: Moody's Hiles Issuer Rating to Ba1, Outlook Stable
---------------------------------------------------------------
Moody's Investors Service has upgraded the City of Elmira's issuer
and general obligation limited tax (GOLT) ratings to Ba1 from Ba3.
The outlook remains stable.
Moody's considers the outstanding debt to be GOLT because of
limitations under New York State (Aa1 negative) law on property tax
levy increases. The issuer rating is equivalent to the city's
hypothetical general obligation unlimited tax rating (GOULT); there
is no debt associated with the GOULT security.
RATINGS RATIONALE
The upgrade to Ba1 reflects the city's improved financial position.
While the most recent audit, 2018, still shows a negative reserve
position, unaudited 2019 figures show the city finally returning to
a positive operating fund balance. The Ba1 also takes into account
the city's elevated debt, reliance on cashflow borrowing, weak
resident wealth and income, and generally stagnant tax base.
The absence of distinction between the GOLT rating and the issuer
rating reflects both the city council's ability to override the
property tax cap and the city's faith and credit pledge supporting
debt service.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. The coronavirus crisis is not a key driver for this
rating action. Moody's does not see any material immediate credit
risks for Elmira. However, the situation surrounding coronavirus is
rapidly evolving and the longer-term impact will depend on both the
severity and duration of the crisis. If its view of the credit
quality of Elmira changes, Moody's will update the rating and/or
outlook at that time.
RATING OUTLOOK
The stable outlook reflects its expectations that, despite the
pandemic, the financial improvements shown in unaudited 2019
numbers will largely be maintained, resulting in significantly
healthier finances. The outlook also incorporates ongoing economic
development programs which may result in significant tax base
recovery.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS
- Significant improvement in the tax base and resident wealth
and incomes
- Operating surpluses resulting in the replenishment of reserves
- Improvement in liquidity levels and a decreased reliance on
cash flow borrowing
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
- Significant increase in debt, including cash flow borrowing
- Failure to continue financial improvement
- Material tax base contraction or decline in resident wealth
and incomes
LEGAL SECURITY
The GOLT bonds are secured by the city's general obligation pledge
as limited by New York State's Property Tax Cap-Legislation
(Chapter 97 (Part A) of the Laws of the State of New York, 2011).
PROFILE
The City of Elmira is located in Chemung County (A1), in New York
State's southern tier region. The city's population has been
decreasing steadily for decades and is currently approximately
27,500.
METHODOLOGY
The principal methodology used in these ratings was US Local
Government General Obligation Debt published in September 2019.
ENDEAVOR CONSULTANTS: U.S. Trustee Unable to Appoint Committee
--------------------------------------------------------------
The Office of the U.S. Trustee on June 22 disclosed in a court
filing that no official committee of unsecured creditors has been
appointed in the Chapter 11 case of Endeavor Consultants, LLC.
About Endeavor Consultants
Endeavor Consultants, LLC sought protection under Chapter 11 of the
Bankruptcy Code (Bankr. W.D. Wash. Case No. 20-41168) on April 30,
2020. At the time of the filing, Debtor disclosed assets of
between $100,001 and $500,000 and liabilities of the same range.
Judge Brian D. Lynch oversees the case. Sterbick & Associates,
P.S. is Debtor's legal counsel.
EXSCIEN CORP: Bankruptcy Administrator Unable to Appoint Committee
------------------------------------------------------------------
The U.S. Bankruptcy Administrator for the Southern District of
Alabama on June 18 disclosed in a filing that no official committee
of unsecured creditors has been appointed in the Chapter 11 case of
Exscien Corporation.
About Exscien Corporation
Exscien Corporation filed a Chapter 11 bankruptcy petition (Bankr.
S.D. Ala. Case No. 20-11364) on May 18, 2020, disclosing under $1
million in both assets and liabilities. Judge Henry A. Callaway
oversees the case. Debtor is represented by Jodi Daniel Dubose,
Esq., at Stichter Riedel Blain & Postler, P.A.
FREEMAN HOLDINGS: U.S. Trustee Unable to Appoint Committee
----------------------------------------------------------
The U.S. Trustee, until further notice, will not appoint an
official committee of unsecured creditors in the Chapter 11 cases
of Freeman Holdings, LLC and FWP Realty Holdings, LLC, according to
court dockets.
About Freeman Holdings
Freeman Holdings, LLC and FWP Realty Holdings, LLC sought
protection under Chapter 11 of the Bankruptcy Code (Bankr. S.D.
Fla. Case Nos. 20-15410 and 20-15412) on May 17, 2020. At the time
of the filing, Debtors each had estimated assets of between
$500,001 and $1 million and liabilities of between $1 million to
$10 million. Judge Scott M. Grossman oversees the cases. Wernick
Law, PLLC is the Debtor's legal counsel.
FRONTIER COMMUNICATIONS: Committee Hires Kramer Levin as Counsel
----------------------------------------------------------------
The official committee of unsecured creditors appointed in the
Chapter 11 cases of Frontier Communications Corp. and its
affiliates seeks approval from the U.S. Bankruptcy Court for the
Southern District of New York to employ Kramer Levin Naftalis &
Frankel LLP as its legal counsel.
The firm will render the following legal services to the committee
in connection with Debtors' Chapter 11 cases:
(a) administer the cases and oversee Debtors' affairs;
(b) prepare legal papers;
(c) appear in court, participate in litigation as a
"party-in-interest" and attend statutory meetings of creditors;
(d) negotiate, draft and seek confirmation of a Chapter 11
plan of reorganization;
(e) evaluate, object to and ultimately negotiate a resolution
on Debtors' motion to approve key employee retention plan;
(f) evaluate and object to the proposed fee structure proposed
by Debtors' financial advisor Evercore Group LLC;
(g) investigate the assets, liabilities and financial
condition of Debtors, prior transactions and operational issues
that may be relevant to the cases; and
(h) communicate with the committee's constituents in
furtherance of its responsibilities.
Kramer Levin's hourly rates are as follows:
Partners $1,050 – $1,500
Counsel $1,050 - $1,400
Special Counsel $995 - $1,160
Associates $585 - $1,040
Paraprofessionals $270 - $450
Kramer Levin made the following disclosures in response to the
request for additional information set forth in Paragraph D.1. of
the Revised U.S. Trustee Fee Guidelines:
1. Kramer Levin did not did not agree to a variation of its
standard or customary billing arrangements.
2. No professional at the firm varied his rate based on the
geographic location of Debtors' bankruptcy cases.
3. Kramer Levin did not represent the committee before its
formation on April 23. The firm's billing rates have not changed
since its selection. Kramer Levin has in the past represented,
currently represents and may represent in the future certain
committee members or their affiliates in their capacities as
official committee members in other Chapter 11 cases.
4. Kramer Levin is developing a budget and staffing plan that
will be presented for approval by the committee.
Douglas Mannal, Esq., a partner at Kramer Levin, disclosed in court
filings that the firm is a "disinterested person" within the
meaning of Section 101(14) of the Bankruptcy Code.
The firm can be reached through:
Douglas H. Mannal, Esq.
Amy Caton, Esq.
Jennifer Sharret, Esq.
Megan Wasson, Esq.
Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, NY 10036
Telephone: (212) 715-9100
Facsimile: (212) 715-8000
Email: dmannal@kramerlevin.com
acaton@kramerlevin.com
jsharret@kramerlevin.com
mwasson@kramerlevin.com
About Frontier Communications
Frontier Communications Corporation (NASDAQ: FTR) offers a variety
of services to residential and business customers over its
fiber-optic and copper networks in 29 states, including video,
high-speed internet, advanced voice, and Frontier Secure digital
protection solutions.
Frontier Communications Corporation and 103 related entities sought
Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 20-22476) on
April 14, 2020. Judge Robert D. Drain oversees the cases.
Debtors tapped Kirkland & Ellis LLP as legal counsel; Evercore as
financial advisor; and FTI Consulting, Inc., as restructuring
advisor. Prime Clerk is the claims agent, maintaining the page
http://www.frontierrestructuring.com/and
https://cases.primeclerk.com/ftr
The U.S. Trustee for Region 2 appointed a committee to represent
unsecured creditors in Debtors' Chapter 11 cases. The committee
tapped Kramer Levin Naftalis & Frankel LLP as its counsel; Alvarez
& Marsal North America, LLC as financial advisor; and UBS
Securities LLC as investment banker.
FRONTIER COMMUNICATIONS: Committee Hires UBS as Investment Banker
-----------------------------------------------------------------
The official committee of unsecured creditors appointed in the
Chapter 11 cases of Frontier Communications Corp. and its
affiliates seeks approval from the U.S. Bankruptcy Court for the
Southern District of New York to employ UBS Securities LLC as its
investment banker.
UBS Securities will render the following investment banking
services to the committee in connection with Debtors' Chapter 11
cases:
(a) review and analyze Debtors' business, operations,
properties, financial condition and prospects;
(b) analyze Debtors' business plans, financial projections and
forecasts;
(c) assist the committee in analyzing Debtors' enterprise
value, debt capacity, alternative capital structures (including any
refinancings) and various restructuring scenarios;
(d) review and analyze the restructuring support agreement
dated April 14 between Debtors and certain noteholders and any plan
of reorganization, disclosure statement or liquidation analysis
relating to Debtors;
(e) review and evaluate legal papers filed or to be filed by
Debtors and other parties;
(f) analyze and monitor any pending and future sale processes
and transactions;
(g) analyze Debtors' assets and liabilities, and potential
recoveries to creditor constituencies under various scenarios;
(h) analyze intercompany or related party transactions of
Debtors;
(i) advise and assist the committee with respect to any
debtor-in-possession financing arrangements;
(j) attend committee meetings and court hearings;
(k) provide expert testimony to the extent necessary;
(l) develop, evaluate and assess the financial issues and
options concerning any proposed transaction, including the value of
any debt or equity instruments being issued in connection with such
transaction;
(m) review and provide an analysis of any valuation of Debtors
or their assets; and
(n) analyze and explain any transaction to the committee.
The firm will be compensated as follows:
(a) A monthly fee of $150,000. One hundred percent (100%) of
the monthly fees actually paid after the first six months of the
employment agreement shall be credited (without duplication)
against any "completion fee" payable in the event the restructuring
is consummated. In the event an alternative restructuring is
consummated, 50 percent of the monthly fees actually paid after the
first six months of the agreement shall be credited (without
duplication) against any completion Fee payable.
(b) A completion fee payable upon the effective date of either
(i) a plan of reorganization substantially consistent with the RSA
in the amount of $1.5 million or (ii) an alternative restructuring
in the amount of $5 million.
Elizabeth LaPuma, a managing director at UBS Securities, disclosed
in court filings that the firm is a "disinterested person" within
the meaning of Section 101(14) of the Bankruptcy Code.
The firm can be reached through:
Elizabeth LaPuma
UBS Securities LLC
11 Wall Street
New York, NY 10005
Telephone: (212) 825-0132
About Frontier Communications
Frontier Communications Corporation (NASDAQ: FTR) offers a variety
of services to residential and business customers over its
fiber-optic and copper networks in 29 states, including video,
high-speed internet, advanced voice, and Frontier Secure digital
protection solutions.
Frontier Communications Corporation and 103 related entities sought
Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 20-22476) on
April 14, 2020. Judge Robert D. Drain oversees the cases.
Debtors tapped Kirkland & Ellis LLP as legal counsel; Evercore as
financial advisor; and FTI Consulting, Inc., as restructuring
advisor. Prime Clerk is the claims agent, maintaining the page
http://www.frontierrestructuring.com/and
https://cases.primeclerk.com/ftr
The U.S. Trustee for Region 2 appointed a committee to represent
unsecured creditors in Debtors' Chapter 11 cases. The committee
tapped Kramer Levin Naftalis & Frankel LLP as its counsel; Alvarez
& Marsal North America, LLC as financial advisor; and UBS
Securities LLC as investment banker.
FRONTIER COMMUNICATIONS: Committee Taps A&M as Financial Advisor
----------------------------------------------------------------
The official committee of unsecured creditors appointed in the
Chapter 11 cases of Frontier Communications Corp. and its
affiliates seeks approval from the U.S. Bankruptcy Court for the
Southern District of New York to employ Alvarez & Marsal North
America, LLC as its financial advisor.
A&M will render these financial advisory services to the committee
in connection with Debtors' Chapter 11 cases:
(a) assess and monitor cash flow budgets, liquidity and
operating results;
(b) review Debtors' disclosures, including the schedules of
assets and liabilities, statements of financial affairs, monthly
operating reports, and periodic reports;
(c) review Debtors' cost/benefit evaluations with respect to
the assumption or rejection of executory contracts and unexpired
leases;
(d) analyze Debtors' assets and liabilities and any proposed
transactions for which court approval is sought;
(e) review Debtors' proposed key employee retention plan and
key employee incentive plan;
(f) attend meetings;
(g) assist in the review of any tax issues;
(h) investigate and pursue avoidance actions;
(i) review claims reconciliation and estimation process;
(j) assist in the review of Debtors' business plan;
(k) assist in the review of the sales or dispositions of
Debtors' assets, including allocation of sale proceeds;
(l) review or prepare information and analysis necessary for
the confirmation of a bankruptcy plan; and
(m) assist in the prosecution of committee responses and
objections to Debtors' motions.
The firm will be paid at hourly rates as follows:
Managing Directors $900 - $1,150
Directors $700 - $875
Associates $550 - $675
Analysts $400 - $500
Richard Newman, managing director at Alvarez & Marsal, disclosed in
court filings that the firm does not represent any other entity
having an interest adverse to the committee in connection with
Debtors' bankruptcy cases.
The firm can be reached through:
Richard Newman
Alvarez & Marsal North America, LLC
540 West Madison Street, Suite 1800
Chicago, IL 60661
Telephone: (312) 288-4056
Email: rnewman@alvarezandmarsal.com
About Frontier Communications
Frontier Communications Corporation (NASDAQ: FTR) offers a variety
of services to residential and business customers over its
fiber-optic and copper networks in 29 states, including video,
high-speed internet, advanced voice, and Frontier Secure digital
protection solutions.
Frontier Communications Corporation and 103 related entities sought
Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 20-22476) on
April 14, 2020. Judge Robert D. Drain oversees the cases.
Debtors tapped Kirkland & Ellis LLP as legal counsel; Evercore as
financial advisor; and FTI Consulting, Inc., as restructuring
advisor. Prime Clerk is the claims agent, maintaining the page
http://www.frontierrestructuring.com/and
https://cases.primeclerk.com/ftr
The U.S. Trustee for Region 2 appointed a committee to represent
unsecured creditors in Debtors' Chapter 11 cases. The committee
tapped Kramer Levin Naftalis & Frankel LLP as its counsel; Alvarez
& Marsal North America, LLC as financial advisor; and UBS
Securities LLC as investment banker.
FRONTIER COMMUNICATIONS: Hires Deloitte Tax to Provide Tax Services
-------------------------------------------------------------------
Frontier Communications Corporation and its affiliates seek
approval from the U.S. Bankruptcy Court for the Southern District
of New York to employ Deloitte Tax LLP.
Deloitte Tax will provide tax advisory services as follows:
a. 2019 Tax Advisory Engagement Letter. Pursuant to the terms of
the 2019 Tax Advisory Engagement Letter, Deloitte Tax will provide
certain tax advisory services to the Debtors on federal, foreign,
state and local tax matters.
b. Audit Defense Work Order. Pursuant to the terms of the Audit
Defense Work Order and the 2019 Tax Advisory Engagement Letter,
Deloitte Tax will assist the Debtors with audit support in
jurisdictions including but not limited to New York and Washington
and advise the Debtors in resolving the issues raised by the
applicable tax authority. The services provided by Deloitte Tax may
include:
(i) Examination representation. Deloitte Tax will represent
the Debtors before the Department at meetings;
(ii) Examination process. Deloitte Tax will advise the Debtors
with respect to questions that arise from the Department, including
working with the Department to seek to develop audit procedures
that reduce demand on the Debtors' resources and set commitments
for audit process; seeking to reduce the number of Information
Document Requests (IDRs) and increase the specificity of the IDRs;
assisting the Debtors with tracking IDRs and Notices of Proposed
Adjustments during the examination process; and advising the
Debtors with respect to responses to IDRs and proposed adjustments
raised by the Department;
(iii) Examination closing. Deloitte Tax will advise the
Debtors with respect to preparation prior to closing the audit,
including assisting the Debtors with calculating the tax effects of
any proposed examination adjustments as well as modeling tax effect
of potential settlement scenarios and participating in closing
discussions with the Department aimed at successful resolution of
any remaining unagreed examination issues; and
(iv) Unagreed Examination. Deloitte Tax will advise the
Debtors regarding the development of a strategy for settlement in
appeals and represent the Debtors in their appeal before the
Department's Bureau of Conciliation and Mediation Services or the
New York State Division of Tax Appeals and Tax Appeals Tribunal,
including preparing a protest of the contested items, opening and
closing conferences, and any other scheduled meetings including
alternative dispute resolution techniques.
c. Refund Review Engagement Letter. Pursuant to the terms of the
Refund Review Engagement Letter, Deloitte Tax will assist the
Debtors in identifying potential sales and use tax overpayments
that have been incurred on the Debtors' purchases and assist the
Debtors in preparing vendor or taxing jurisdiction refund requests.
Deloitte Tax will perform an analysis of the Debtors' current sales
and use tax processes and procedures to identify areas of potential
improvement. In addition, pursuant to the amendments to the Refund
Review Engagement Letter, Deloitte Tax will perform services in
additional jurisdictions as described below:
(i) First Amendment. Pursuant to the First Amendment, Deloitte
Tax will provide the following services related to returns filed by
the Debtors prior to the commencement of the services in the
Detailed Analysis Phase and Refund Filing Phase:
a. California, Florida, Indiana and Texas – review and
file refunds for all open periods through May 31, 2018;
b. New York – review and file refunds for December 1,
2015 to May 31, 2018; and
c. Pennsylvania – review and file refunds for January
1, 2014 through March 31, 2017.
(ii) Second Amendment. Pursuant to the Second Amendment,
Deloitte Tax will conduct an analysis in Texas for sales and use
tax overpayments for the year ended December 31, 2018 with respect
to returns filed or vendor collected taxes remitted prior the
commencement of such services. Deloitte Tax expects to file refund
claims with respect to exemptions that apply to telecommunication
purchases.
(iii) Third Amendment. Pursuant to the Third Amendment,
Deloitte Tax will conduct an analysis in Texas for sales and use
tax overpayments for the year ended December 31, 2018 with respect
to returns filed or vendor collected taxes remitted prior the
commencement of such services. Deloitte Tax expects to file refund
claims with respect to exemptions that apply to telecommunication
purchases.
(iv) Fourth Amendment. Pursuant to the Fourth Amendment,
Deloitte Tax will conduct in analysis in Ohio for sales and use tax
overpayments for Frontier North Inc. for periods including July 1,
2011 to June 30, 2017, with respect to returns filed or vendor
collected taxes remitted.
(v) Fifth Amendment. Pursuant to the Fifth Amendment, Deloitte
Tax will conduct an analysis in Texas for sales and use tax
overpayments for the year ended December 31, 2019 with respect to
returns filed or vendor collected taxes remitted prior the
commencement of such services. Deloitte Tax expects to file refund
claims with respect to exemptions that apply to telecommunication
purchases.
d. 2018 Tax Advisory Engagement Letter. Pursuant to the terms of
the 2018 Tax Advisory Engagement Letter, Deloitte Tax will provide
certain tax advisory services to the Debtors on federal, foreign,
state and local tax matters.
e. M&E and Commuting Study Work Order. Pursuant to the terms of
the M&E and Commuting Study Work Order and the 2018 Tax Advisory
Engagement Letter, Deloitte Tax will: (i) perform a meals and
entertainment study, which includes analyzing the Debtors' travel,
meals, entertainment and similar expenditures for the fiscal year
ended December 31, 2019 to calculate the amount of the available
deductions resulting from these expenditures for the applicable
federal and state tax returns (the M&E Study); and (ii) advise the
Debtors in connection with the Debtors' analysis of their parking
and related commuting expenditures for the fiscal year ended
December 31, 2019 (the Commuting Study), and in each case, provide
tax advisory services with respect to changes required due to the
2017 Tax Reform Act.
The hourly rates for the firm's regular professionals are as
follows:
Partner/Principal/Managing Director $855
Senior Manager $765
Manager $645
Senior $535
Staff $435
The hourly rates for the firm's tax restructuring specialists are
as follows:
Partner/Principal/Managing Director $950
Senior Manager $805
Manager $690
Senior $535
Staff $435
Pursuant to the terms of the Refund Review Engagement Letter,
Deloitte Tax will charge Debtors fees computed on a contingent
basis equal to 25 percent of the benefits received.
Pursuant to the terms of the 2018 Tax Advisory Engagement Letter
and the M&E and Commuting Study Work Order, with respect to the M&E
Studies, Debtors agreed to be billed a fixed fee in the amount of
$35,000. With respect to the Commuting Study, Deloitte Tax will
charge Debtors for hours incurred based on the amount of
professional time required and the agreed-upon hourly rates, which
vary depending on the experience level of the professionals
involved.
In the 90 days prior to their bankruptcy filing, Debtors paid
Deloitte Tax the sum of $858,355.
Peter Hatzis, a partner at Deloitte Tax, disclosed in court filings
that the firm is a "disinterested person" within the meaning of
Section 101(14) of the Bankruptcy Code.
The firm can be reached through:
Peter Hatzis
Deloitte Tax LLP
695 East Main St.
Stamford, CT 06901
Telephone: (203) 708-4000
Facsimile: (203) 708-4797
About Frontier Communications
Frontier Communications Corporation (NASDAQ: FTR) offers a variety
of services to residential and business customers over its
fiber-optic and copper networks in 29 states, including video,
high-speed internet, advanced voice, and Frontier Secure digital
protection solutions.
Frontier Communications Corporation and 103 related entities sought
Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 20-22476) on
April 14, 2020. Judge Robert D. Drain oversees the cases.
Debtors tapped Kirkland & Ellis LLP as legal counsel; Evercore as
financial advisor; and FTI Consulting, Inc., as restructuring
advisor. Prime Clerk is the claims agent, maintaining the page
http://www.frontierrestructuring.com/and
https://cases.primeclerk.com/ftr
The U.S. Trustee for Region 2 appointed a committee to represent
unsecured creditors in Debtors' Chapter 11 cases. The committee
tapped Kramer Levin Naftalis & Frankel LLP as its counsel; Alvarez
& Marsal North America, LLC as financial advisor; and UBS
Securities LLC as investment banker.
GAMESTOP CORP: Egan-Jones Withdraws CC Sr. Unsecured Debt Ratings
-----------------------------------------------------------------
Egan-Jones Ratings Company, on June 16, 2020, withdrew its 'CC'
foreign currency and local currency senior unsecured ratings on
debt issued by GameStop Corporation. EJR also withdrew its 'C'
rating on commercial paper issued by the Company.
Headquartered in Grapevine, Texas, GameStop Corporation operates
specialty electronic game and PC entertainment software stores.
GARDNER DENVER: Moody's Rates $400MM Secured Term Loan B 'Ba2'
--------------------------------------------------------------
Moody's Investors Service assigned a Ba2 rating to a proposed $400
million senior secured term loan B issued by Gardner Denver, Inc.
There are no changes to the company's existing ratings, including
the Ba2 corporate family rating, Ba2-PD probability of default
rating, and SGL-2 speculative grade liquidity rating. The ratings
outlook is stable.
The company is expected to use proceeds from the term loan B for
general corporate purposes. In Moody's view, the additional
liquidity will enhance the company's already good liquidity
profile, increasing cash balances to bolster financial flexibility
amid the current headwinds stemming from the coronavirus pandemic.
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, low and volatile oil prices,
and asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The manufacturing
sector has been one of the sectors affected by the shock given its
sensitivity to consumer demand and sentiment. More specifically,
the end-markets the company is exposed to, although diversified,
are expected to experience lower demand at varying levels in these
unprecedented operating conditions, and the company remains
vulnerable to the lingering adverse effects of the coronavirus
pandemic. Moody's regards the coronavirus outbreak as a social risk
under its ESG framework, given the substantial implications for
public health and safety.
Moody's took the following rating actions for Gardner Denver,
Inc.:
Assignments:
Issuer: Gardner Denver, Inc.
Senior secured term loan B due 2027 at Ba2 (LGD3)
RATINGS RATIONALE
The company's Ba2 CFR broadly reflects its well-established
position and brand strength in mission critical engineered products
across key segments spanning industrial technologies and services
to precision and science technologies, as well as high pressure
solutions. The ratings also reflect the breadth and depth of the
company's sales base following a more than two-fold increase in
size upon its merger with the former Ingersoll-Rand plc industrial
business, healthy operating margins, and good free cash flow
generation.
At the same time, the Ba2 CFR also considers that the company will
be operating in a softening global macroeconomic environment
compounded by the negative effects of the coronavirus pandemic,
with continued albeit somewhat reduced post-merger top-line
pressure from the upstream energy business. The ratings also
recognize the integration risk related to the aforementioned
business combination given the sizable nature of the same.
The stable ratings outlook reflects Moody's expectation that the
company will maintain a good liquidity profile despite meaningful
downward pressure on revenue and earnings stemming from both the
oil price shock and the negative impact of the coronavirus on its
business, including industrial operations more broadly. Moody's
expects that capital spending by companies in the energy sector
will be meaningfully reduced.
From a corporate governance perspective, Moody's noted that the
company has prudently allocated its cash flow towards meaningful
debt reduction since its May 2017 IPO, and that acquisitions have
contributed to EBITDA growth in support of a more manageable level
of share repurchases. In addition, financial sponsor KKR's
ownership percentage has been diluted post the combination and
subsequent secondary share offering, implicitly further reducing
event risk and notwithstanding KKR's maintenance of considerable
board representation via its chairman.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Ratings could experience downward pressure if liquidity
meaningfully erodes such that annual free cash flow falls below
$200 million annually and cash balances decline below $300 million.
In addition, if debt-to-EBITDA exceeds 4.5x and EBITA-to-interest
falls below 4.0x on a sustained basis, the ratings could also be
considered for downgrade. More aggressive financial policies
including debt-financed share repurchases (whether for KKR's
remaining stake or in the open market) and/or the introduction of a
meaningful recurring dividend or sizable debt-funded acquisitions
could also lead to a ratings downgrade.
Although not anticipated in the near term, ratings could experience
upward pressure if the company's top-line and earnings revert to a
positive trajectory and debt-to-EBITDA improves to the mid-2x
level, EBITA-to-interest exceeds 5.0x and free cash flow-to-debt
exceeds 15% -- all on a sustained basis. A normalized governance
structure with a diverse group of shareholders that balances debt
and equity holder interests would also be considered appropriate
for prospectively higher ratings. In addition, a ratings upgrade is
predicated on Moody's expectation that the company will not engage
in debt-financed share repurchases and/or dividends over the next
twelve to eighteen months.
The principal methodology used in this rating was Manufacturing
Methodology published in March 2020.
Headquartered in Davidson, North Carolina, Gardner Denver, Inc., a
subsidiary of Ingersoll Rand Inc., is a publicly-traded (NYSE: IR)
global manufacturer of compressors, pumps and blowers used in
general industrial, energy, medical and other markets. KKR owns
approximately 11% of the company's common shares. Pro forma 2019
annual revenues exceed $6 billion.
GMP CAPITAL: DBRS Keeps Pfd-4(high) Shares Rating on Review
-----------------------------------------------------------
DBRS Limited maintained the Under Review with Developing
Implications status on GMP Capital Inc.'s (GMP or the Company)
Cumulative Preferred Shares rating of Pfd-4 (high).
DBRS Morningstar initially put GMP's rating Under Review with
Developing Implications on June 18, 2019, following the Company's
announcement that it had agreed to sell substantially all of its
capital markets business to Stifel Financial Corp. Subsequently,
DBRS Morningstar maintained the Under Review with Developing
Implications status on September 18, 2019, as the sale transaction
had yet to close. The sale transaction was completed on December 6,
2019; however, DBRS Morningstar maintained the Under Review with
Developing Implications status again on December 17, 2019, as the
Company was still in discussions with Richardson Financial Group
Limited (RFGL) to consolidate full ownership of Richardson GMP
Limited (Richardson GMP). On February 26, 2020, GMP announced that
it had entered into a nonbinding term sheet with RFGL to
consolidate the ownership of Richardson GMP. DBRS Morningstar once
again maintained the Under Review with Developing Implications
status on March 17, 2020, as GMP had called a special meeting of
common shareholders on April 21, 2020, to approve the
consolidation.
However, in light of concerns over the Coronavirus Disease
(COVID-19), GMP postponed the special meeting. All three of
Richardson GMP's shareholder groups (GMP, RFGL, and two elected
investment advisor representatives on the board of RGMP) agreed to
extend the contractual negotiation period between GMP and RFGL.
This agreement was set to occur on April 16, 2020, and has been
extended until 60 days following the date that the Declaration of
Emergency ordered by the Lieutenant Governor of Ontario has been
withdrawn or terminated by the Government of Ontario. In the
interim, the parties involved (GMP, RFGL, and the Richardson GMP
investment advisors) continue to work toward entering into a
definitive agreement, but without any assurances about the outcome
of these discussions.
Under the terms of the proposed transaction, GMP will acquire all
common shares of Richardson GMP that it does not already own (65.5%
stake). The DBRS Morningstar-rated Cumulative Preferred Shares
would remain with the consolidated entity.
KEY RATING CONSIDERATIONS
While DBRS Morningstar would ideally like to resolve this Under
Review with Developing Implications status as quickly as possible,
the ratings implications for GMP remain unclear. The continued
Under Review period considers that the consolidation of GMP with
Richardson GMP has yet to be finalized. DBRS Morningstar will
assess GMP's pro forma structure once it consolidates full
ownership of Richardson GMP. This assessment will review the
Company's assets and liabilities composition, ownership, future
strategic direction, and management's ability to execute on this
plan. If the consolidation were not to occur, DBRS Morningstar
would need to assess GMP's standalone intrinsic strength, including
its credit fundamentals, prospects for growth, and ability to
maintain debt service payments on its Cumulative Preferred Shares.
RATING DRIVERS
DBRS Morningstar would upgrade the rating on GMP if the Company's
franchise prospects and post-transaction pro forma financials are
deemed to be stronger with the consolidation of Richardson GMP.
Conversely, DBRS Morningstar would downgrade the rating if GMP's
credit fundamentals weaken. Additionally, negative rating pressure
could emerge if the current transaction does not conclude as
expected.
Notes: All figures are in Canadian dollars unless otherwise noted.
GNC HOLDINGS: Case Summary & 30 Largest Unsecured Creditors
-----------------------------------------------------------
Lead Debtor: GNC Holdings, Inc.
300 Sixth Ave.
Pittsburgh, PA 15222
Chapter 11 Petition Date: June 23, 2020
Court: United States Bankruptcy Court
District of Delaware
Seventeen affiliates that concurrently filed voluntary petitions
for relief under Chapter 11 of the Bankruptcy Code:
Debtor Case No.
------ --------
GNC Holdings, Inc. (Lead Case) 20-11662
GNC Parent LLC 20-11663
GNC Corporation 20-11664
General Nutrition Centers, Inc. 20-11665
General Nutrition Corporation 20-11666
General Nutrition Investment Company 20-11667
Lucky Oldco Corporation 20-11668
GNC Funding, Inc. 20-11669
GNC International Holdings, Inc. 20-11670
GNC China Holdco LLC 20-11671
GNC Headquarters LLC 20-11672
Gustine Sixth Avenue Associates, Ltd. 20-11673
GNC Canada Holdings, Inc. 20-11674
General Nutrition Centres Company 20-11675
GNC Government Services, LLC 20-11676
GNC Puerto Rico Holdings, Inc. 20-11677
GNC Puerto Rico, LLC 20-11678
Business Description: GNC is a global health and wellness
brand with a diversified omni-channel
business. In its stores and online, GNC
sells an assortment of performance and
nutritional supplements, vitamins, herbs
and greens, health and beauty, food and
drink, and other general merchandise,
featuring innovative private-label
products as well as nationally
recognized third-party brands, many of
which are exclusive to GNC. Visit
www.gnc.com for more information.
Judge: Hon. Karen B. Owens
Debtors' Counsel: Michael R. Nestor, Esq.
Kara Hammond Coyle, Esq.
Andrew L. Magaziner, Esq.
Joseph M. Mulvihill, Esq.
YOUNG CONAWAY STARGATT & TAYLOR, LLP
Rodney Square
1000 North King Street
Wilmington, Delaware 19801
Tel: (302) 571-6600
Fax: (302) 571-1253
Email: mnestor@ycst.com
kcoyle@ycst.com
amagaziner@ycst.com
jmulvihill@ycst.com
- and -
Richard A. Levy, Esq.
Caroline A. Reckler, Esq.
Asif Attarwala, Esq.
Brett V. Newman, Esq.
LATHAM & WATKINS LLP
330 North Wabash Avenue, Suite 2800
Chicago, Illinois 60611
Tel: (312) 876-7700
Fax: (312) 993-9767
Email: richard.levy@lw.com
caroline.reckler@lw.com
asif.attarwala@lw.com
brett.newman@lw.com
- and -
George A. Davis, Esq.
Jeffrey T. Mispagel, Esq.
LATHAM & WATKINS LLP
885 Third Avenue
New York, New York 10022
Tel: (212) 906-1200
Fax: (212) 751-4864
Email: george.davis@lw.com
jeffrey.mispagel@lw.com
Debtors'
Investment
Banker &
Financial
Advisor: EVERCORE GROUP, L.L.C.
Debtors'
Financial
Advisor: FTI CONSULTING, INC.
Debtors'
Claims &
Noticing
Agent: PRIME CLERK
https://cases.primeclerk.com/GNC
Attorneys in the
CCAA Case: TORYS LLP
Total Assets as of March 31, 2020: $1,415,957,000
Total Debts as of March 31, 2020: $895,022,000
The petitions were signed by Tricia Tolivar, chief financial
officer.
A copy of GNC Holdings' petition is available for free at
PacerMonitor.com at:
https://is.gd/c1s3DC
Consolidated List of Debtors' 30 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
1. The Bank of New York Mellon Notes Payable $157,899,413
Trust Company, N.A.
Attn: Mindy M. Wrzesinski
Senior Analyst, Client Service
BNY Mellon Corporate Trust
US Corporate Client Service Management
500 Ross Street, 12th Floor
Pittsburgh, PA 15262
Tel: 412-234-7424
Fax: 412-234-8377
Email: melinda.m.wrzesinski@bnymellon.com
2. Woodbolt Distribution Trade Payable $4,853,286
Attn: Doss Cunningham
President and CEO
3891 S Traditions Dr.
Bryan, TX 77807
Tel: 800-870-2070
Email: corporatear@woodbolt.com
3. Simon Property Group Landlord $4,562,909
Attn: David Simon
Chairman of the Board
Chief Executive Officer &
President
867675 Reliable Parkway
Chicago, IL 60686-0076
Simon Property Group
Attn: David Simon, Chairman
of the Board, Chief Executive
Officer and President
225 West Washington Street
Indianapolis, IN 26204
Tel: 317-685-7237
Fax: 317-263-7901
Email: 3172637091@simon.com
4. Nutrivo LLC Trade Payable $4,012,113
Attn: Mike and Tony Costello
Co-Founders
DBA Rivalus Nutrition
1083 Queen Street
Suite 221
Halifax, NS B3HOB2
Canada
Tel: 800-620-4177
Email: Cguman@nutrivo.com
5. Brookfield Property Partners, L.P. Landlord $3,764,737
Attn: Jared Chupaila, CEO
530 N. Orleans Street
Suite 300
Chicago, IL 60654
Tel: 312-960-5000
Fax: 312-442-6374
Email: joshua.deckelbaum@
brookfieldpropertiesretail.com
6. Optimum Nutrition Inc. Trade Payable $3,422,764
Attn: Yuki Phipps
Glanbia Business Services Inc.
975 Meridian Lake Dr.
Aurora, IL 60504
Tel: 630-256-7415
Email: ssnaremittance@glanbia.com
7. Lifelong Nutrition Inc. Trade Payable $3,143,221
Attn: Julie Chudak, Owner
c/o Seroyal International Inc.
490 Elgin Mills Rd East
Richmond Hill, ON L4C OL8
Canada
Fax: 800-722-9953
Email: accountsreceivable@seroyal.com
8. Resvitale LLC Trade Payable $2,585,001
Attn: Naomi Whittel, CEO
2255 Glades Road
Suite 342W
Boca Raton, FL 33431
Tel: 561-353-5401
Email: accountsreceivable@reserveage.com
9. JYM Supplement Science Trade Payable $2,308,093
Attn: Dr. Jim Stoppani, Founder
31356 Via Colinas #112
West Lake Village, CA 91362
Tel: 714-756-1185
Email: Mike_mcerlane@hotmail.com
10. Jasper Products LLC Trade Payable $1,942,771
Attn: Ken Haubein, President
PO Box 503776
St. Louis MO 68404
Jasper Products LLC
Attn: Ken Haubein, President
3877 E. 27th Street
Joplin, MO 68404
Tel: 417-206-3877
417-208-1116
Email: jeana.harris@jasperproducts.com
11. DAS Labs LLC Trade Payable $1,941,436
Attn: Ryan Gardner,
Managing Partner & CEO
313 South 740 East #3
American Fork, UT 84003
Tel: 801-358-3572
Email: ryan@buckedup.com
12. Adaptive Health LLC Trade Payable $1,797,132
Attn: Brandon Adcock
Co-Founder and CEO
615 S College St #1300
Charlotte, NC 28202
Tel: 704-557-0985
Email: brandon@directdigitalllc.com
13. FedEX Trade Payable $1,459,464
Attn: John A. Smith
President & CEO
PO Box 371461
Pittsburgh, PA 15250-7461
FedEx
Attn: John A. Smith
President & CEO
942 South Shady Grove Road
Memphis, TN 38120
Tel: 800-622-1147
901-818-7500
Email: dara.rupert@fedex.com
14. Basic Research Trade Payable $1,436,989
Attn: Brad Stewart
President & CEO
5742 West Harold Gatty Dr.
Salt Lake City, UT 84116
Tel: 801-517-7074
Fax: 801-517-7002
Email: ar@basicresearch.org
15. RedCon1 LLC Trade Payable $1,331,896
Attn: Aaron Singerman
CEO, Owner
701 Park of Commerce
Suite 100
Boca Raton, FL 33487
Tel: 954-551-9038
Email: stephanie@redcon1.com
16. VPX Sports Trade Payable $1,154,128
Attn: Jack Owoc, Owner, CEO &
CSO
PO Box 740930
Atlanta, GA 30374-0930
VPX Sports
Attn: Jack Owoc, Owner, CEO & CSO
1600 North Park Drive
Weston, FL 33326
Tel: 954-641-0570
Fax: 954-641-4960
Email: accounts.receivable@vpxsports.com
17. BPI Sports Trade Payable $1,076,852
Attn: Walt Freese, President & CEO
3149 SW 42nd Street
Hollywood, FL 33312
Tel: 954-926-0900
Email: ar@bpisports.net
18. Vital Proteins Trade Payable $1,042,248
Attn: Kurt Seidensticker, CEO
29215 Network Place
Chicago, IL 60673-1292
Vital Proteins
Attn: Kurt Seidensticker, CEO
3400 Wolf Rd
Franklin Park, IL 60131
Tel: 847-232-1713
Email: ar@vitalproteins.com
19. NDS Nutrition Trade Payable $1,038,573
Attn: Ryan Zink, President Co-Owner
4509 S 143 St. Ste 1
Omaha, NE 68137
Tel: 402-504-3043
Email: skinnaman@fitlifebrands.com
20. Ghost LLC Trade Payable $1,032,607
Attn: President or General Counsel
4575 Dean Martin Dr
Suite 2200
Las Vegas, NV 89103
Tel: 979-492-6711
Email: paul@ghostlifestyle.com
21. MyAderm Inc. Trade Payable $970,830
Attn: Eric Smart, CEO
88 Inverness Circle E Unit A 101
Englewood, CO 80112
Tel: 303-562-4876
Email: accounting@myaderm.com
22. Sonoma Nutraceuticals Inc. Trade Payable $945,477
Attn: Monty Sharma, CEO
PO Box 5
Station D
Toronto, ON M1R 4Y7
Canada
Sonoma Nutraceuticals Inc.
Attn: Monty Sharma, CEO
130 McLevin Ave Unit 4
Scarborough, ON M1B 3R6
Canada
Tel: 416-332-1881
416-292-8560
Email: scott@sonomanutraceuticals.com
23. Facebook Inc. Trade Payable $860,000
Attn: Accounts Receivable
15161 Collections Center Drive
Chicago, IL 60693
Facebook Inc.
Attn: Accounts Receivable
1 Hacker Way
Menlo, CA 94025
Tel: 650-543-4800
Fax: 650-543-4801
Email: ar@fb.com
24. Nutravail LLC Trade Payable $844,259
Attn: Richard O'Neill, CEO
14790 Flint Lee Road
Chantilly, VA 20151
Tel: 703-222-6340
Fax: 703-961-1835
Email: kconnors@nutravail.com
25. Google Inc. Trade Payable $830,000
Attn: Sundar Pichai, CEO
PO Box 39000
Dept 33654
San Francisco, CA 94139
Google Inc.
Attn: Sundar Pichai, CEO
1600 Amphiteatre Parway
Mountain View, CA 94043
Tel: 650-253-0000
Fax: 650-253-0001
Email: collections-us@google.com
26. 24-7 Intouch Inc. Trade Payable $750,000
Attn: Greg Fettes, Founder & CEO
240 Kennedy Street
2nd Floor
Winnipeg, MG R3C 1T1
Canada
Tel: 204-318-3040
Email: sharon.ines@24-7intouch.com
27. Hormel Financial Services Trade Payable $748,512
Attn: Jim Snee, President & CEO
PO Box 93624
Chicago, IL 60673-3624
Hormel Financial Services
Attn: Jim Snee, President & CEO
1 Hormel PL
Austin, TX 55912
Tel: 507-437-5634
Fax: 507-437-5489
Email: internationalback-up@hormel.com
28. Herbal Brands Inc. Trade Payable $740,763
Attn: President or General Counsel
1430 W Auto Dr.
Suite 109
Tempe, AZ 85281
Tel: 602-680-1658
Email: vicki.richards@herbalbrands.com
29. Hybrid Promotions LLC Trade Payable $728,279
Attn: President or General Counsel
10711 Walker Street
Cypress, CA 90630
Tel: 714-952-3866
Email: lvalencia@hybridapparel.com
30. Commission Junction LLC Trade Payable $720,000
Attn: Mayuresh Kshetramade, CEO
4140 Solutions Center
Chicago, IL 60677-4001
Commission Junction LLC
Attn: Mayuresh Kshetramade, CEO
530 E. Montecito St
Santa Barbara, CA 93103
Tel: 805-830-8174
800-761-1072
Email: cjar@cj.com
HUNTS POINT: Voluntary Chapter 11 Case Summary
----------------------------------------------
Debtor: Hunts Point Enterprises LLC
f/k/a BKD Holdings, LLC
359 Van Brunt Street
c/o Freshly Baked Holdings LLC
Brooklyn, NY 11231
Case No.: 20-42393
Chapter 11 Petition Date: June 24, 2020
Court: United States Bankruptcy Court
Eastern District of New York
Judge: Hon. Carla E. Craig
Debtor's Counsel: Lawrence F. Morrison, Esq.
MORRISON TENENBAUM PLLC
87 Walker Street, Second Floor
New York, NY 10013
Tel: 212-620-0938
Email: lmorrison@m-t-law.com
Estimated Assets: $100,000 to $500,000
Estimated Liabilities: $1 million to $10 million
The petition was signed by Mark Rimer, authorized officer.
The Debtor failed to include in the petition a list of its 20
largest unsecured creditors.
A copy of the petition is available for free at PacerMonitor.com
at:
https://is.gd/ru1BsM
J.C. PENNEY: Lenders Challenged by New Group on Bankruptcy Funding
------------------------------------------------------------------
Maria Halkias, writing for Dallas News, reports that lenders of
retailer J.C. Penney are being challenged by new group on
bankruptcy financing.
Unsecured creditors lined up with a competing offer and told the
judge he would lose his ability to guide Penney to an exit as an
operating retailer.
Proposed financing for J.C. Penney's bankruptcy gives the lenders
too much power in deciding whether Penney will come out as an
operating retailer, or have all its assets liquidated, according to
a new group that's made a competing financing offer.
J.C. Penney filed for bankruptcy in May with $900 million in
financing lined up from H/2 Capital Parnters and Silver Point
Capital. But another lender group that includes Aurelius Capital
Management, according to a report in the Wall Street Journal, has
called that agreement "predatory" and has received the backing of
Penney's unsecured creditors for its cheaper offer.
Penney's restructuring adviser Jim Mesterharm, managing director at
AlixPartners, testified Thursday in U.S. Bankruptcy Court that
without new financing, Penney would run out of cash by the end of
August 2020.
Mesterharm, who was hired by Penney at the end of March to help the
company determine its cash needs if it filed for bankruptcy, said
in his testimony that as Penney has reopened stores, it’s cash
balance has increased to $559 million as of Tuesday. Penney’s
sales performance has been better than expected so far.
However, Penney's suppliers are apprehensive about the lack of
financing in place, he said. One third of Penney's top 100
suppliers, which make up about 80% of its merchandise inventory,
have expressed concerns about being repaid. "We haven't received as
much shipments as we expected."
A lawyer for the unsecured creditors questioned the need for Penney
to even file bankruptcy. The court was asked to delay a decision on
the financing package until mid-July 2020.
Penney entered bankruptcy with $450 million in cash and up to $1
billion in unencumbered real estate assets, said Cathy Hershcopf,
an attorney for Penney's unsecured creditors from the Cooley law
firm.
The new group and the unsecured creditors told U.S. Bankruptcy
Court Judge David R. Jones Thursday that the debtor-in-financing
agreement negotiated by Penney’s attorneys ends up taking
Penney’s fate out of the judges hands.
"On July 15, DIP lenders will decide the fate of J.C. Penney and
whether the dream lives or dies, whether there's a reorganization
plan or a liquidation," Hershcopf said. The debtor-in-possession
financing doesn’t align the interests of the lenders with the
retailer, she said.
By approving the proposed financing, the court will undermine its
ability to help Penney exit Chapter 11 as a stronger, deleveraged
business, Herschcopf said. "This court will be powerless to help
J.C. Penney."
About J.C. Penney
J.C. Penney Corporation, Inc., is an American retail company,
founded in 1902 by James Cash Penney and today engaged in marketing
apparel, home furnishings, jewelry, cosmetics, and cookware. The
company was called J.C. Penney Stores Company from 1913 to 1924,
when it was reincorporated as J.C. Penney Co.
On May 15, 2020, J.C. Penney announced that it has entered into a
restructuring support agreement with lenders holding 70% of
JCPenney's first lien debt. The RSA contemplates agreed-upon terms
for a pre-arranged financial restructuring plan that is expected to
reduce several billion dollars of indebtedness. To implement the
Plan, the Company and its affiliates on May 15, 2020, filed
voluntary petitions for reorganization under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. S.D. Tex. Lead Case No. 20-20182).
Kirkland & Ellis LLP is serving as legal advisor, Lazard is
serving
as financial advisor, and AlixPartners LLP is serving as
restructuring advisor to the Company. Prime Clerk is the claims
agent, maintaining the page http://cases.primeclerk.com/JCPenney
JAGUAR HEALTH: Board Adopts New Inducement Award Plan
-----------------------------------------------------
The Board of Directors of Jaguar Health, Inc., adopted the New
Employee Inducement Award Plan and, subject to the adjustment
provisions of the Inducement Award Plan, reserved 500,000 shares of
the Company's common stock for issuance pursuant to equity awards
granted under the Inducement Award Plan.
The Inducement Award Plan was adopted without stockholder approval
pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. The
Inducement Award Plan provides for the grant of nonstatutory stock
options, restricted stock units, restricted stock, and performance
shares. The terms and conditions of the Inducement Award Plan are
substantially similar to the Company's 2014 Stock Incentive Plan,
but with such other terms and conditions intended to comply with
the Nasdaq inducement award rules. On June 16, 2020, the Board
also adopted forms of award agreements for use with the Inducement
Award Plan.
In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, the
only persons eligible to receive grants of equity awards under the
Inducement Award Plan are individuals who were not previously an
employee or director of the Company, or following a bona fide
period of non-employment, as an inducement material to such persons
entering into employment with the Company.
About Jaguar Health
Jaguar Health, Inc. -- http://www.jaguar.health/-- is a commercial
stage pharmaceuticals company focused on developing novel,
sustainably derived gastrointestinal products on a global basis.
The Company's wholly owned subsidiary, Napo Pharmaceuticals, Inc.,
focuses on developing and commercializing proprietary human
gastrointestinal pharmaceuticals for the global marketplace from
plants used traditionally in rainforest areas. Its Mytesi
(crofelemer) product is approved by the U.S. FDA for the
symptomatic relief of noninfectious diarrhea in adults with
HIV/AIDS on antiretroviral therapy.
Jaguar reported a net loss of $38.54 million for the year ended
Dec. 31, 2019, compared to a net loss of $32.15 million for the
year ended Dec. 31, 2018. As of March 31, 2020, the Company had
$33.28 million in total assets, $16.67 million in total
liabilities, $10.37 million in series A redeemable convertible
preferred stock, and $6.23 million in total stockholders' equity.
Mayer Hoffman McCann P.C., in San Francisco, California, the
Company's auditor since 2019, issued a "going concern"
qualification in its report dated April 2, 2020 citing that the
Company has experienced losses since inception, significant cash
used in operations, and is dependent on future financing to meet
its obligations and fund its planned operations. These conditions
raise substantial doubt about its ability to continue as a going
concern.
JARCO HARVESTING: Case Summary & 9 Unsecured Creditors
------------------------------------------------------
Debtor: Jarco Harvesting, Inc.
2310 Valholla Court
Abilene, TX 79606
Chapter 11 Petition Date: June 23, 2020
Court: United States Bankruptcy Court
Northern District of Texas
Case No.: 20-10107
Debtor's Counsel: Max R. Tarbox, Esq.
TARBOX LAW, P.C.
2301 Broadway
Lubbock, TX 79401
Tel: (806) 686-4448
Email: jessica@tarboxlaw.com
Estimated Assets: $1 million to $10 million
Estimated Liabilities: $1 million to $10 million
The petition was signed by Richard Wendland, president.
A copy of the petition containing, among other items, a list of the
Debtor's nine unsecured creditors is available for free at
PacerMonitor.com at:
https://is.gd/LYzadc
KNOWLTON DEVELOPMENT: Fitch Assigns 'B' LT IDR, Outlook Stable
--------------------------------------------------------------
Fitch Ratings has assigned a first-time Long-Term Issuer Default
Rating of 'B' to Knowlton Development Holdco, Inc. (parent),
Knowlton Development Corporation Inc. and KDC US Holdings, Inc.
(co-borrowers). Fitch has assigned a 'B+/RR3' rating to the
company's $125 million revolver and $1.425 billion term loan. The
Rating Outlook is Stable.
Knowlton Development Corp's 'B' rating reflects its position as a
global leader in custom formulation and manufacturing solutions for
beauty, personal care and home care brands, supported by a diverse
product portfolio and a customer base ranging from blue-chip names
to "indie" brands, with whom the company typically maintains
long-term relationships. Fitch expects KDC's broadening platform
and investment in R&D will enable the company to sustain modest
organic revenue growth over the long term.
The ratings are constrained by KDC's highly acquisitive strategy,
which Fitch expects will likely keep gross debt/EBITDA over 5.5x.
The company has completed seven acquisitions since its LBO in
December 2018, which have doubled revenue and EBITDA; the inability
to successfully integrate these businesses would be a rating
concern. Fitch expects near-term business challenges relating to
the impact of the coronavirus on KDC's manufacturing capabilities
and the impact of a consumer recession on KDC's end markets but
would expect the company to return to pre-COVID revenue and EBITDA
(pro forma for all completed acquisitions) in fiscal 2022.
KEY RATING DRIVERS
Defensible Competitive Advantage: Following its recent
acquisitions, KDC is one of the largest players in the market for
outsourced custom formulation and manufacturing solutions for
beauty personal care and home care brands, with over $2 billion of
revenue (pre-COVID 19). KDC's business model of partnering with its
customers to create new products and rapidly bring them to market
creates deeply entrenched relationships resulting in a high degree
of stickiness. Significant investment in R&D and technology and an
expansive breadth of product expertise that enable the company to
provide turnkey solutions solidify its competitive advantage.
Since 2002, KDC has expanded from operating a single factory in
Canada to become a global provider of custom manufacturing,
packaging and formulation solutions in a diverse set of segments
with over 800 customers and 31 manufacturing facilities worldwide.
Within the beauty and health segment, the company's relationships
span the spectrum from indie brands to CPG giants, providing a
natural hedge to rapidly changing industry dynamics and is further
diversified by product, producing items such as cosmetics,
deodorants, soaps, sanitizers, fragrances and shampoo. The
company's recent acquisition of Zobele provides critical mass to
the company's Home Care & Diversified Solutions segment while
further diversifying the company's portfolio. Customer
concentration is moderate with no single customer representing over
16% of sales pro forma the Zobele acquisition.
Stable End Markets: The company benefits from operating in end
markets where demand is relatively stable, even during recessionary
conditions. Fitch estimates that beauty sales remained flat to
positive during the Great Recession as the sector benefits from
relatively low-price points and the fact that health and beauty
products are often everyday use, consumable items. The company's
flexible manufacturing base helps enable it to redirect capacity
from segments of weak demand to areas of strength.
Revenues for "non-essential" categories have been fairly depressed
due to the coronavirus pandemic and the closure of retail stores,
which adversely affects KDC's Prestige Beauty & Health segment.
Numerous unknowns remain, including the length of the outbreak;
timeframe for a full reopening of retail locations and the cadence
at which it is achieved; economic conditions exiting the pandemic,
including unemployment and household income trends; the impact of
government support of business and consumers; and the impact the
crisis will have on consumer behavior.
Overall, Fitch expects KDC's organic revenue and EBITDA to be
materially affected beginning fiscal 4Q20 (quarter ending April
30th) before stabilizing beginning fiscal 3Q21. Fitch expects the
material decline in prestige beauty and health to be offset by
growth in essential product lines such as sanitizers and soaps and
contribution from recent acquisitions.
Strong Organic Growth Trajectory: KDC has established a strong
growth trajectory supported by both organic gains in revenue as
well as acquisitions. Organic growth has been supported by growth
in the global beauty market, which represents over 40% of the
company's pro forma sales. Fitch estimates global beauty product
sales have grown in the 3%-5% range while showing resistance to
recessionary pullbacks. Growth has also been supported by a trend
towards outsourcing as large consumer products companies move to a
more asset-lite model to focus on brand-building while indie
companies look to leverage the expertise and scale provided by
contract manufacturers. KDC's acquisition strategy serves to
further its organic growth as the added capabilities in adjacent
new markets enable the company to capitalize on cross-selling
opportunities in its customer base, helping KDC grow its wallet
share.
Aggressive Acquisition Strategy, Supported by Sponsor: KDC has
acquired over a dozen companies over the last five years with seven
acquisitions occurring in the last twelve months. The recent
acquisitions of HCT and Zobele were sizable, doubling the EBITDA of
the company on a pro forma basis. The large equity contributions
from the sponsor and the roll of equity from one of the target's
founders helped mitigate the impact on gross debt/EBITDA, which
Fitch expects the company to manage around 5.5x-6.0x (with leverage
expected to be higher, around 7x, in fiscal 2021 due to the impact
of the coronavirus pandemic).
The company's M&A activity has focused on companies with additive
technologies, new geographies, strong customer bases and attractive
growth, margin and FCF profiles. Fitch believes the company has
been successful thus far in identifying, acquiring and integrating
target companies in a largely credit enhancing manner although the
pace and magnitude of recent acquisitions pose meaningful
integration risk.
Elevated Leverage, Satisfactory Liquidity: Once KDC is through the
dislocation resulting from the impact the coronavirus, Fitch
expects leverage to return to the 5.5x - 6.0x area as EBITDA
normalizes. Fitch expects the company to manage leverage around
this area as it continues its acquisitive strategy, increasing
leverage above the range to consummate acquisitions and
deleveraging largely through EBITDA growth. Fitch views liquidity
as satisfactory with $107 million of cash and $69 million available
on its revolving credit facility as of June 8, 2020, and
expectations of positive FCF.
DERIVATION SUMMARY
KDC's 'B' rating reflects its position as a global leader in custom
formulation and manufacturing solutions for beauty, personal care
and home care brands, supported by a diverse product portfolio and
a customer base ranging from blue-chip names to "indie" brands,
with whom the company typically maintains long-term relationships.
Fitch expects KDC's broadening platform and investment in R&D will
enable the company to sustain modest organic revenue growth over
the long term.
The ratings are constrained by KDC's highly acquisitive strategy,
which Fitch expects is likely to keep gross debt/ EBITDA over 5.5x.
The company has completed seven acquisitions since its LBO in
December 2018, doubling revenue and EBITDA; the inability to
successfully integrate these businesses would be a rating concern.
Fitch expects near-term business challenges relating to the impact
of the coronavirus on KDC's manufacturing capabilities and the
impact of a consumer recession on KDC's end markets but would
expect the company to return to pre- coronavirus revenue and EBITDA
(pro forma for all completed acquisitions) in fiscal 2022.
KDC is rated higher than Anastasia Intermediate Holdings, LLC
('CCC'). Anastasia's 'CCC' rating reflects Fitch's view that its
capital structure is unsustainable following ongoing deterioration
in ABH's operating trends. After many years of strong growth,
revenue turned flat in 2018, and Fitch expects this could represent
ABH's peak volume. EBITDA, which peaked at around $175 million,
could moderate toward $40 million over the next few years, yielding
leverage (gross debt to EBITDA) in the mid-teens. These projections
raise significant questions regarding the long-term health of the
brand and the ability of management to successfully execute new
product launches and expense management. The rating also considers
the company's narrow product and brand profile, and risk that
continued beauty industry market share shifts could further weaken
ABH's projected growth through new entrants and brand extensions
from existing large players.
KDC is rated higher than Mattel, Inc. (B-/Positive). Mattel's IDR
of 'B-' reflects the company's operating trajectory in recent
years, which has led to material EBITDA declines from peak levels
and several years of negative FCF after dividends. The Positive
Outlook reflects increasing confidence that Mattel's cost reduction
program and sales initiatives could yield stabilizing topline
results and EBITDA improving above $500 million, at which point
Mattel could generate modestly positive FCF as cash restructuring
expenses subside in 2021.
KDC's rating is below Newell Brands Inc. (BB/Negative). Newell's
'BB' rating and Negative Outlook reflect elevated leverage (total
debt/EBITDA) of 4.4x following the completion of its asset
divestiture program and ongoing topline challenges in a number of
its categories. The ratings also reflect the significant business
interruption from the coronavirus pandemic and the potential of a
downturn in discretionary spending that Fitch expects could extend
well into 2021, which in turn could derail further deleveraging.
Fitch expects that EBITDA could trend below $1 billion in 2020 on
mid-teens sales declines, versus $1.34 billion reported in 2019.
Total debt/EBITDA could increase to over 6x in 2020 before
returning to under 4.5x in 2022, assuming EBITDA in the $1.2
billion range in 2021/2022 and paydown of upcoming debt
maturities.
KEY ASSUMPTIONS
- Organic revenue declines over 6% for FY20 (ended April 2020) as
weakness in cosmetics earlier in the year is exacerbated by the
impact of coronavirus in 4Q. The contribution from acquisitions,
including a full quarter of HCT results in total revenues up by
around 9% for fiscal 2021. Fiscal 2021 revenue growth exceeds 75%
largely due to the inclusion of a full year of Zobele and three
full quarters of HCT as continued weakness in cosmetics is offset
by strength in body and home care.
- EBITDA margins decline in 2021 due to coronavirus-related costs
but increase in subsequent years as the company captures synergies
related to recent acquisitions and as mix improves due to growth in
the higher margin Zobele business.
- FCF remains positive throughout the forecast. Leverage dips
below 7.0x by the end of FY21 and is maintained at or above the
5.5x area in FY22 and FY23, with the company potentially resuming
its acquisition activity.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A positive rating action would be considered if KDC's operating
trajectory exceeded Fitch's expectations, yielding debt/EBITDA
below 5.5x, along with a commitment by the company to maintain
leverage in this range.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A negative rating action would be considered if top-line
weakness, pressure on margins and/or an acceleration of the
company's acquisition strategy or any debt-financed transaction
such as special dividends resulted in sustained debt/EBITDA over
7.0x and minimal FCF.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Liquidity at June 8, 2020 consisted of $107 million of cash on hand
and $69 million of availability on the company's $125 million
revolver. The remaining debt in the cap structure includes the
company's $1.4 billion first lien term loan. The revolver is the
company's first maturity, coming due December 2023 and, apart from
modest quarterly amortization, the company has no maturities until
December 2025 when the first lien term loan matures. The company is
subject to a single springing financial covenant (based on revolver
utilization) requiring first lien leverage to be no greater than
7.75x.
RECOVERY CONSIDERATIONS
For issuers with IDRs of 'B+' and below, Fitch performs a recovery
analysis for each class of obligations of the issuer. The issue
ratings are derived from the IDR, the relevant Recovery Rating and
prescribed notching.
Fitch assumes a material loss in customers or significant
integration issues result in a pro forma loss of revenue around 15%
with pro forma EBITDA margins declining meaningfully due to the
loss of higher margin business and fixed cost deleveraging from the
large decline in sales.
Fitch applies a 6.0x EV/EBITDA multiple, modestly below the 6.3x
median multiple for Food, Beverage and Consumer bankruptcy
reorganizations analyzed by Fitch. The multiple reflects the
company's leading position in its formulation and manufacturing
businesses, its diverse and sticky customer relationships, and its
lack of consumer brand recognition.
After deducting 10% for administrative claims, KDC's first lien
secured credit facility including revolver and term loan are
expected to have good recovery prospects (51%-70%) and have been
assigned 'B+/RR3' ratings. The revolver and term loan are secured
by a first priority interest in substantially all assets of the
borrowers (Knowlton Development Corporation Inc. and KDC US
Holdings Inc.) and the guarantors (material direct and indirect
wholly-owned U.S. subsidiaries).
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).
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
KDC US Holdings, Inc.
- LT IDR B; New Rating
- Senior secured; LT B+; New Rating
Knowlton Development Corporation Inc.
- LT IDR B; New Rating
- Senior secured; LT B+; New Rating
Knowlton Development Holdco, Inc.
- LT IDR B; New Rating
LANDS' END: Moody's Confirms 'B3' CFR, Outlook Negative
-------------------------------------------------------
Moody's Investors Service downgraded Lands' End, Inc.'s (Lands'
End) probability of default rating to Caa1-PD from B3-PD.
Concurrently, Moody's confirmed the company's B3 corporate family
rating and B3 senior secured term loan rating. The speculative
grade liquidity rating remains SGL-4, and the outlook was changed
to negative from ratings under review. This concludes the review
for downgrade initiated on March 27, 2020.
The PDR downgrade to Caa1-PD from B3-PD reflects the risk that the
company may not be able to refinance its term loan due April 2021
in a timely and economical manner.
The CFR and term loan rating confirmations reflect Moody's view
that Lands' End's enterprise value and debt level support an above
average recovery rate in an event of potential default. The
confirmations also incorporate Moody's expectation for earnings and
cash flow recovery coming out of the coronavirus-driven disruption
that would allow the company to absorb what could be a material
increase in interest expense as part of its refinancing. Moody's
projects about flat EBITDA performance for the balance of 2020,
with upside in 2021. Lands' End predominantly digital retail
business benefits from the secular shift online, and its focus on
value-priced casual apparel basics should allow it to perform well
in a recessionary environment. Moody's expects these factors to
mitigate significant declines in the Outfitters segment.
The negative outlook reflects the uncertainty with regard to the
company's ability to refinance its near-dated debt maturities
because of ongoing stress in the capital markets. The negative
outlook also reflects the risks surrounding the recovery in the
Outfitters business and consumer spending.
The SGL-4 reflects the company's approaching debt maturities.
Moody's projects that aside from the debt maturity, Lands' End's
cash and revolver availability will be adequate to address its
liquidity needs for the next 12 months. The company had $59 million
of cash as of May 1, 2020, and $116 million available under its
$200 million asset-based revolver after $75 million borrowings.
Moody's took the following rating actions for Lands' End, Inc.:
Corporate family rating, confirmed at B3
Probability of default rating, downgraded to Caa1-PD from B3-PD
Senior secured term loan B, confirmed at B3 (LGD3 from LGD4)
Outlook, changed to negative from ratings under review
RATINGS RATIONALE
Lands' End, Inc.'s B3 CFR reflects the highly competitive apparel
retail segment in which the company competes and its high leverage.
The rating reflects Moody's expectations for stable earnings
performance for the balance of 2020 and modest improvement in 2021.
Moody's projects debt/EBITDA in the 4.7 times range in 2021, from 7
times as of May 1, 2020. The rating also incorporates governance
considerations, including allowing the term loan to become current,
which significantly increased refinancing risk, and the control by
ESL Investments. As an apparel retailer, Lands' End also needs to
make ongoing investments in its brand and infrastructure, as well
as in social and environmental drivers including responsible
sourcing, product and supply sustainability, privacy and data
protection.
Nevertheless, the credit profile benefits from Lands' End's
e-commerce operations, which position it well to capitalize on
continued growth in online apparel spending. Lands' End also has a
well-recognized brand name and has executed well on its
transformation over the past several years, achieving significant
positive operating momentum.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be downgraded if the company does not address its
debt maturities over the next few months in an economical manner.
The ratings could also be downgraded if the positive trends
reported at the beginning of Q2 are not sustained, or cash flow is
weaker than anticipated.
The ratings could be upgraded if the company addresses its
near-term maturities in a timely and economical manner and
maintains good overall liquidity. Quantitatively, the ratings could
be upgraded if debt/EBITDA is sustained below 5 times, and
EBIT/interest expense above 1.5 times.
Headquartered in Dodgeville, Wisconsin, Lands' End, Inc. (Nasdaq:
LE) is a leading multi-channel retailer of casual clothing,
accessories, footwear and home products. The company offers
products online at www.landsend.com, on third party online
marketplaces, as well as 26 company operated stores. ESL
Investments, Inc. and its investment affiliates, including Edward
S. Lampert, owns 64.8% of the company's outstanding stock. Revenue
for the twelve months ended May 1, 2020 was $1.4 billion.
The principal methodology used in these ratings was Retail Industry
published in May 2018.
LATAM AIRLINES: 10% Owner Qatar Airways Pledges Support
-------------------------------------------------------
Merco Press reports that Qatar Airways has pledged its support for
partner LATAM Airlines.
Qatar Airways, who owns 10% of the Chilean airline, reiterated its
support for the bankrupt LATAM Airlines, spurring a significant
rise of Latam stock June 2 and 3, 2020 on the Santiago Stock
Exchange, rising 37.63% and 16%.
"Of course we will come to his aid. It is a long-term strategic
investment. LATAM has filed for Chapter 11 (of the US Bankruptcy
Law) and if there is any financial requirement that we can
contribute to, like other shareholders in the game, yes, Qatar
Airways will do so," said the CEO of Qatar Airways, Akbar Al
Baker.
Latam Airlines recently filed for Chapter 11 bankruptcy in the
United States. As reported Latam Airlines obtained authorizations
from the US Court for its reorganization -- it will be able to
continue operating passenger and cargo flights according to the
demand and restrictions existing in each country, and it will also
be able to maintain agreements with travel agencies and business
partners, among others.
The airline will continue to maintain relationships and "honor
existing agreements with travel agencies, and other business
partners, without disruption; paying suppliers on time for all
goods and services delivered from May 26, 2020 onwards, and
throughout this process; maintaining commitments prior to May 26
with defined suppliers that deliver critical services," the airline
reported at the time.
About LATAM Airlines
LATAM Airlines Group S.A. -- http://www.latam.com/-- is a
pan-Latin American airline holding company involved in the
transportation of passengers and cargo and operates as one unified
business enterprise.
LATAM Airlines Group S.A. is the largest passenger airline in South
America. Before the onset of the COVID-19 pandemic, LATAM offered
passenger transport services to 145 different destinations in 26
countries, including domestic flights in Argentina, Brazil, Chile,
Colombia, Ecuador and Peru, and international services within Latin
America as well as to Europe, the United States, the Caribbean,
Oceania, Asia and Africa.
LATAM Airlines Group S.A. and its 28 affiliates sought Chapter 11
protection (Bankr. S.D.N.Y. Lead Case No. 20-11254) on May 25,
2020. Affiliates in Chile, Peru, Colombia, Ecuador and the United
States are part of the Chapter 11 filing.
The Debtors disclosed $21,087,806,000 in total assets and
$17,958,629,000 in total liabilities as of Dec. 31, 2019.
The Hon. James L. Garrity, Jr., is the case judge.
The Debtors tapped Cleary Gottlieb Steen & Hamilton LLP as general
bankruptcy counsel; FTI Consulting as restructuring advisor; and
Togut, Segal & Segal LLP and Claro & Cia in Chile as special
counsel. Prime Clerk LLC is the claims agent.
LCF LABS: Voluntary Chapter 11 Case Summary
-------------------------------------------
Debtor: LCF Labs Inc.
895 S. Rockefeller Avenue
Unit 103
Ontario, CA 91761
Chapter 11 Petition Date: June 22, 2020
Court: United States Bankruptcy Court
Central District of California
Case No.: 20-14295
Debtor's Counsel: Neil C. Evans, Esq.
LAW OFFICES OF NEIL C. EVANS
13351 D. Riverside Drive, Ste. 612
Sherman Oaks, CA 91423
Tel: (818) 802-8333
E-mail: evanstnt@aol.com
Estimated Assets: $1 million to $10 million
Estimated Liabilities: Unspecified
The petition was signed by Qusay Al Qaza, CEO.
A copy of the petition is available for free at PacerMonitor.com
at:
https://is.gd/g5btqc
LVI INTERMEDIATE: Taps Chapter 11 Funds Through DIP Financing
-------------------------------------------------------------
Jeff Montgomery of Law360 reports that Lasik Vision Institute owner
LVI Intermediate Holdings Inc. obtained approval for Chapter 11
debtor-in-possession financing. During the initial hearing on June
2, 2020, LVI Intermediate Holdings Inc. secured interim approval in
Delaware for $5.7 million of a proposed $27.5 million in Chapter 11
debtor-in-possession financing during an initial hearing on plans
for a company restructuring and sale effort.
G. David Dean of Cole Schotz PC, counsel to LVI, said during a
videoconference hearing that the loan, provided by a group of
prepetition lenders, would finance a case that now aims to reopen
85 laser eye surgery sites under the umbrella of Vision Group
Holdings by the end of the month.
That number, including Vision Group affiliated LASIK Vision
Institute and TLC Laser Eye Centers, would restore some 75% of the
fleet that LVI was operating when the COVID-19 pandemic and a $160
million debt burden forced shutdowns and LVI's retreat into
bankruptcy.
"The company was projected to run out of cash this week due to the
devastating impact of the pandemic," Mr. Dean said while seeking
initial approvals for the company, including the loans. "The only
condition under which these lenders would provide funding was
through a DIP loan and bankruptcy."
U.S. Bankruptcy Judge Karen B. Owens approved the bankruptcy loan
measure with few changes during a video conference, describing it
as "modest in relation to the amount of prepetition debt."
Mr. Dean said LVI's holdings were dealt a double blow over the past
year, first as collateral damage from negative news reports
involving a different type of laser eye surgery and then by the
social distancing and business closure orders prompted by the
COVID-19 pandemic.
"In the beginning of 2020, all trends were pointing back up and
toward a very good year, when, unfortunately, as we all know, the
world came to a screeching halt in early March. Revenues plummeted
to close to zero," Dean said. "As a result, the company was forced
to furlough or lay off many of its employees, and could not afford
to pay landlord rent in April or May 2020."
Although LVI had hoped that the company's lenders, represented by
prepetition agent LBC Credit Partners III LP, would submit a
stalking horse offer to buy the business, some in the lender group
declined. No other stalking horse candidates emerged and no lenders
would allow a bankruptcy financing loan that gave DIP lenders
first-in-line repayment priority, LVI said.
In the end, LVI opened its case with a lender-funded DIP, and Dean
said the same group reserved a right to put together their own
credit bid offer to cancel a portion of their debt claim in lieu of
cash.
Dean said LVI hopes that another party will emerge willing to offer
more than the $27.5 million needed to pay off the DIP loan, which
includes $11.5 million in new money, $4.6 in prepetition
"protective" advances from the lenders and $11.5 million in other
prepetition debt.
Although the pandemic dealt a near-fatal blow to the company, its
troubles are rooted in an aggressive business acquisition and
expansion effort in 2015 and 2016 that saw the business peak at 140
locations, then drop back as some sites proved unable to generate
sufficient revenue and others were unable to overcome regulatory
mandates, according to an initial declaration filed by interim LVI
CEO and President Lisa Melamed.
Losses of senior executives complicated management of the business,
while use of a discount program led to total revenue losses,
instead of a gain based on increased patient volumes, the
declaration said.
In March 2019, meanwhile, 9597930 Canada Inc. purchased an 84%
majority ownership position in LVI Super Intermediate Holdings, LVI
Intermediate's ultimate parent. Falcon Strategic Partners IV and LP
Macquarie Sierra Investment Holdings Inc. bought minority equity
positions in the parent at 8% each.
Dean said the DIP agreement includes a number of milestones,
including the filing of a sale motion within three days of the
petition date, entry of a sale procedures order three weeks after
that and an auction six weeks after filing of the sale motion.
According to the DIP motion, a sale order should be approved 60
days after the petition date, with a closing to follow no more than
15 days after the sale order deadline.
Judge Owens said she agreed with other judges in the Delaware
district, however, that DIP milestones were not to be considered
approvals or authorizations of the court. Instead, the judge said,
the court would consent to debtor agreement to designate failures
to meet the dates as defaults under the DIP agreement.
LVI is represented by G. David Dean, Norman L. Pernick, Krista K.
Kulp, Matteo Percontino and Mark Tsukerman of Cole Schotz PC.
LBC Credit Partners III L.P. is represented by Eric W. Moats of
Morris Nichols Arsht & Tunnell LLP and Randall L. Klein of Goldberg
Kohn Ltd.
The case is In re: LVI Intermediate Holdings Inc. et al., case
number 1:20-bk-11413, in the U.S. Bankruptcy Court for the District
of Delaware.
About LVI Intermediate Holdings
Headquartered in West Palm Beach, Florida, LVI Intermediate
Holdings dba Vision Group Holdings develops and manages, through
its various subsidiaries, among other businesses,two of the leading
LASIK surgery brands in the nation: The LASIK Vision Institute and
TLC Laser Eye Centers. The Company also owns and manages certain
select general ophthalmology practices and QuaslightLasik, a
licensed Preferred Provider Organization for LASIK surgery
providers.
MAN HANDS: Case Summary & 20 Largest Unsecured Creditors
--------------------------------------------------------
Debtor: Man Hands, LLC
109 S. Main Street
Mansfield, TX 76063
Business Description: Man Hands, LLC is a privately hedl company
that operates in the food service industry.
Chapter 11 Petition Date: June 22, 2020
Court: United States Bankruptcy Court
Northern District of Texas
Case No.: 20-42090
Debtor's Counsel: John P. Henry, Esq.
HENRY & REGEL, LLC
2100 Ross Ave., Suite 800
Dallas, TX 75201
Tel: 972-299-8445
E-mail: John@henryregel.com
Estimated Assets: $50,000 to $100,000
Estimated Liabilities: $1 million to $10 million
The petition was signed by Jason Boso, president and manager.
A copy of the petition containing, among other items, a list of the
Debtor's 20 largest unsecured creditors is available for free at
PacerMonitor.com at:
https://is.gd/fwDt1z
MEREDITH CORP: Moody's Rates Incremental Secured Term Loan 'Ba3'
----------------------------------------------------------------
Moody's Investors Service assigned a Ba3 rating to the incremental
senior secured term loan to be issued by Meredith Corp. The ratings
on existing first lien senior secured credit facilities are
downgraded to Ba3 from Ba2. The ratings downgrade on the first lien
credit facilities reflects the increase in total secured debt as a
proportion of total debt and its senior position ahead of unsecured
debt. The company will use proceeds from the incremental term loan
together with additional incremental secured debt and cash from the
balance sheet to redeem all of its outstanding Series A preferred
stock and pay fees and expenses incurred in connection with the
financing and redemption transactions. Financial strategy is a
consideration under Moody's ESG Framework. In conjunction in
incremental term loan launch, Meredith executed a financial
covenant amendment, which improves available liquidity under the
company's revolving credit facility.
Moody's affirmed Meredith's Corporate Family Rating at B2, the
Probability of Default Rating at B2-PD and senior unsecured notes
rating at Caa1. The outlook is stable. The Speculative Grade
Liquidity rating was upgraded to SGL-1 from SGL-2, reflecting
improved availability under the company's revolving credit facility
following execution of the amendment.
The following is a summary of its actions:
Issuer: Meredith Corp.
Corporate Family Rating, affirmed at B2
Probability of Default Rating, affirmed at B2-PD
New secured 1st lien Term Loan B-2, assigned Ba3 (LGD2)
Senior Secured 1st lien Term Loan B, downgraded to Ba3 (LGD2) from
Ba2 (LGD2)
Senior Secured Revolving Credit Facility, downgraded to Ba3 (LGD2)
from Ba2 (LGD2)
Gtd Senior Unsecured Notes, affirmed at Caa1 (LGD5)
Speculative Grade Liquidity Rating, upgraded to SGL-1 from SGL-2
Outlook Actions:
Issuer: Meredith Corp.
Outlook, Remains Stable
RATINGS RATIONALE
Meredith's B2 CFR reflects a material decline in advertising
spending across all media platforms, resulting in reduced operating
margins and operating cash flow, and increased financial leverage
of nearly 6x Debt-to-EBITDA (incorporating Moody's standard
adjustments and pro-forma for incremental debt raise). Many of the
company's advertising customers have had their revenue deteriorate
as countries have reduced travel and enforced social distancing,
driving meaningful reduction in business activity. In addition,
cancellation of various live sporting events may reduce broadcast
television viewership, further impacting advertising. Meredith
benefits from the broad reach of its branded lifestyle-oriented
content of its magazine titles and digital properties, sold through
its National Media group and solid ratings of its broadcast
stations. As a precautionary measure, Meredith suspended its common
stock dividend, implemented salary reductions and took actions to
further reduce its operational costs and working capital needs.
Moody's anticipates that the company will be able to manage its
operating cash flow needs over the next 12-18 months without
needing to access its revolving credit facility.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. The company's management team exercises a balanced
financial strategy, having repaid $825 million in debt following
the sales of select properties from the Time Inc. acquisition,
while successfully generating operating synergies and improving
performance of the retained portfolio of titles. The company's
suspension of common dividend further highlights prudent capital
and liquidity management.
Meredith's SGL-1 speculative-grade liquidity profile reflects very
good liquidity with full revolver availability and approximately
$115 million of balance sheet cash pro-forma for redemption of the
company's preferred stock and incremental debt raise. Moody's
expects Meredith EBITDA to decline materially over the next 12
months, with estimated free cash flow of approximately $200 million
in part augmented by the elimination of the company's common and
preferred stock dividend payments. The Maximum Total Net Leverage
financial covenant is tested at 30% utilization for revolving
credit facility, and Moody's anticipates that the company will have
full access to its revolving credit facility following its
execution of the financial covenant amendment. Meredith's assets
provide limited alternative liquidity given the credit facilities
are secured by 1st liens on substantially all tangible and
intangible assets in the U.S.
The stable rating outlook incorporates Moody's expectation that
advertising declines due to coronavirus will be sustained over the
next 6-9 months, with a likelihood of advertising spending
recovering as the coronavirus outbreak subsides. Moody's
anticipates the company's print-oriented advertising to remain weak
and declining due to underlying secular trends in the magazine
business, partially offset by growth in digital advertising. The
industry trends and effects of the coronavirus will lead to reduced
operating profits over the next 12-18 months, with resulting
elevated leverage. Moody's anticipates management will continue to
remain prudent in its financial strategy as it relates to
management of discretionary cash expenditures.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if Meredith demonstrates consistent
organic revenue and EBITDA growth, with debt-to-EBITDA leverage
being sustained comfortably below 4.5x (including Moody's standard
adjustments). Strong positive free cash flow and good liquidity
would also be needed, with good revolver availability. Management
would also need to maintain a commitment to financial policies
consistent with the higher rating.
The ratings could be downgraded if sustained macro-economic
weakness continues to pressure the company's advertising reliant
revenue stream without offsetting reductions in operating expenses
or discretionary dividend payments, or if debt-to-EBITDA is
sustained above 6x (including Moody's standard adjustments).
Deterioration in liquidity or increased likelihood of a financial
covenant breach could also result in a downgrade.
Meredith Corp. is a diversified media company with magazine
publishing, brand licensing, and television broadcasting
operations. In January 2018, Meredith acquired all outstanding
shares of Time Inc. for total enterprise value of $2.8bn. The
company operates two business segments, National Media, and Local
Media. The National Media segment includes national consumer media
brands delivered via multiple media platforms including print
magazines and digital and mobile media, brand licensing activities,
database-related activities, and business-to-business marketing
products and services. The Local Media segment consists of 17
television stations located across the United States (U.S.)
concentrated in fast growing markets with related digital and
mobile media assets.
The principal methodology used in these ratings was Media Industry
published in June 2017.
MINERALS TECHNOLOGIES: Moody's Rates $400MM Unsec. Notes 'Ba3'
--------------------------------------------------------------
Moody's Investors Service assigned a Ba3 rating to Minerals
Technologies Inc.'s new $400 million senior unsecured notes due
2028 and upgraded the ratings of the existing senior secured bank
credit facilities to Ba1 from Ba2. Moody's also affirmed MTI's Ba2
corporate family rating and Ba2-PD probability of default rating.
The SGL-2 rating is unchanged. The outlook is stable. The proceeds
of the new debt will be used to refinance the existing fixed rate
tranche of the Term Loan B and pay down the outstanding revolving
credit facility borrowings. The rating of the fixed rate Term Loan
B will be withdrawn upon repayment.
Assignments:
Issuer: Minerals Technologies Inc.
Gtd. Senior Unsecured Regular Bond/Debenture, Assigned Ba3 (LGD5)
Upgrades:
Issuer: Minerals Technologies Inc.
Senior Secured Revolving Credit Facility, Upgraded to Ba1 (LGD2)
from Ba2 (LGD3)
Senior Secured Term Loan B1, Upgraded to Ba1 (LGD2) from Ba2
(LGD3)
Senior Secured Term Loan B2, Upgraded to Ba1 (LGD2) from Ba2
(LGD3)
Affirmations:
Issuer: Minerals Technologies Inc.
Probability of Default Rating, Affirmed Ba2-PD
Corporate Family Rating, Affirmed Ba2
Outlook Actions:
Issuer: Minerals Technologies Inc.
Outlook, Remains Stable
The ratings are subject to the transaction closing as proposed and
receipt and review of the final documentation
RATINGS RATIONALE
Minerals Technologies Inc's (MTI) Ba2 CFR reflects its currently
moderate leverage, solid profitability, leading positions in
multiple end markets, reliance on a few product lines for the
majority of cash flow as well as significant exposure to cyclical
end markets, including paper, automotive, steel, farm and
construction equipment, oil and gas (O&G), construction and
environmental applications. The rating is constrained by the
company's moderate scale and its growth targets but supported by
the company's broad customer and geographic diversification,
consistent free cash flow generation and good liquidity. The change
in notching of the secured debt ratings reflects the increased
amount of unsecured debt and decreased amount of secured debt in
the capital structure and its position in the liability waterfall
ahead of the senior unsecured notes.
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, sharp fall in oil prices,
and asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. Some of the
end-markets MTI operates in, particularly, O&G, steel and
automotive sectors have been particularly affected by the shock
given their high sensitivity to the industrial demand, consumer
spending and overall market sentiment. Moody's regards the
coronavirus outbreak as a social risk under its ESG framework,
given the substantial implications for public health and safety.
The company's financial results have been adversely impacted by the
global economic slowdown, US-China trade tensions and more
recently, by the coronavirus outbreak that have led to the extended
shutdowns of automotive plants, steel mill and foundry closures,
paper mill outages, project delays and curtailed construction
activities. Despite the signs of increased business activity in
China and nascent rebound in the US, challenging market conditions
are expected to persist in the near term, weighing particularly on
the metal casting, refractories and energy segment products and
services, given their dependence on the O&G, automotive, steel and
other industrial end-markets as well the uncertainty over the path
and the duration of the global economic recovery.
Due to the coronavirus-driven weakness in multiple end-markets and
higher debt levels post issuance, Moody's expects MTI's credit
metrics to weaken meaningfully in 2020. However, the business
diversity, leading markets positions, solid balance sheet and the
ability to flex operating costs provide for a resilient credit
profile capable of accommodating the current deterioration in
market conditions. Pro-forma the issuance of the senior unsecured
notes, Moody-s adjusted debt/EBITDA is estimated at 3.8x for the
LTM ended March 29, 2020. Leverage will increase to 4-4.5x in 2020
based on Moody's expectations of 10-20% y-o-y decline in adjusted
EBITDA. However, still solid EBITDA margins, potential release of
working capital and relatively low capex intensity of the business
will allow the company to remain free cash flow positive in 2020 as
it had during the previous economic downturns, including the
2008-2009 financial crisis. Moody's expects financial leverage to
improve in 2021 to below 4x benefitting from the earnings recovery,
higher FCF and potential debt repayments.
The stable outlook reflects Moody's expectations that while the
credit profile will deteriorate in 2020 and the adjusted leverage
could briefly exceed 4x, solid operational performance, cost
cutting initiatives and free cash flow generation will mitigate the
effects of weaker global economic conditions and credit metrics
will remain appropriate for the rating. The stable outlook also
assumes the company will maintain a good liquidity position.
As an owner and operator of open-pit mines and producer of minerals
and commodity chemicals, the company's environmental risks and
social risks are viewed as high because its operations could have a
negative impact on local communities, including adverse effects
from direct environmental hazards. Operations are subject to
various stringent federal, state and foreign laws and regulations
related to the permitting, environment and health and safety,
including wastewater disposal and treatment. Governance risk is
average as MTI is a public company with transparent reporting. Over
the last few years, the company has shown to follow a balanced
capital allocation approach using free cash flow for debt
repayment, share repurchases, dividends and M&A.
The SGL-2 Speculative Grade Liquidity Rating reflects MTI's good
liquidity to support operations for at least the next four
quarters. As of March 29, 2020, the company reported the available
liquidity of over $400 million including cash and short-term
investments of $218 million and net of $9 million of outstanding
letters of credit, $191 million available under the $300 million
revolving credit facility (RCF), which is expected to have a
near-full availability after the transaction close. Pro-forma cash
balance is estimated at about $330m. The RCF matures in April 2023.
Moody's expects the company to generate at least $100 million of
free cash flow in 2020. The credit agreement contains the springing
net leverage ratio test of 3.5x if the revolver is drawn. The
senior unsecured notes will have the EBITDA-based consolidated
interest coverage ratio test of 2x. Given the significant cushion
under the covenant, Moody's expects the company to be in compliance
with the covenant over the next 12 months.
The Ba3 rating of the new senior unsecured notes reflects the
notes' effective subordination to the secured debt (RCF and the
term loan B facility). The notes will be guaranteed on a senior
unsecured basis by all domestic subsidiaries of the company.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's could upgrade the rating with near-term expectations for
debt reduction comfortably below $800 million, financial leverage
sustained below 3 times on a through-the-cycle basis, and retained
cash flow sustained above 25%.
Moody's could downgrade the rating if, on a sustained basis,
Moody's adjusted debt/EBITDA is expected to remain above 4 times or
retained cash flow below 15%.
The principal methodology used in these ratings was Chemical
Industry published in March 2019.
MOBIQUITY TECHNOLOGIES: Posts $2.4-Mil. Net Loss in First Quarter
-----------------------------------------------------------------
Mobiquity Technologies, Inc. reported a net comprehensive loss of
$2.43 million on $945,099 of revenue for the three months ended
March 31, 2020, compared to a net comprehensive loss of $2.97
million on $1.60 million of revenue for the same period in 2019.
As of March 31, 2020 the Company had $15.33 million in total
assets, $6.03 million in total liabilities, and $9.30 million in
total stockholders' equity.
The Company had cash and cash equivalents of $423,928 at March 31,
2020. Cash used in operating activities for the three months ended
March 31, 2020 was $836,696. This resulted primarily from a net
loss of $2,435,793, offset by warrant expense of $403,268, common
stock issued for services of $384,000, allowance for uncollectible
receivables of $306,000 and amortization and depreciation expenses
of $151,598, a decrease in accounts receivable of $1,110,542, an
increase in prepaid expenses and other assets of $14,000, a
decrease of accounts payable and accrued expenses of $742,311. Net
cash used in financing activities of $301,787 from the proceeds of
notes of $250,000, preferred stock converted to common of $314,960
and cash paid on bank notes of $263,173 for the quarter ended
March 31, 2020.
The Company had cash and cash equivalents of $890,846 at March 31,
2019. Cash used in operating activities for the three months ended
March 31, 2019 was $2,887,602. This resulted primarily from a net
loss of $4,498,649, offset by a decrease in accounts payable of
$259,663, a decrease in accounts receivable of $203,396, increase
in accrued expenses and other current liabilities of $52,330, the
non-cash change in corporate stack valuation of $1,539,723. Net
cash was provided by financing activities of $4,705,252 from the
proceeds of the issuance of common stock $1,879,000, subscription
receivable of $917,500 and the non-cash cost of issuance of
warrants of $3,745,749 for the quarter ended March 31, 2019.
The Company commenced operations in 1998 and was initially funded
by its three founders, each of whom has made demand loans to the
Company that have been repaid. Since 1999, the Company has relied
on equity financing and borrowings from outside investors to
supplement its cash flow from operations and expect this to
continue in 2019 and beyond until cash flow from its proximity
marketing operations become substantial.
Mobiquity said, "We have a history of losses and may continue to
incur losses in the future, which could negatively impact the
trading value of our common stock. We incurred losses from
operations of $13,462,229 for the year ended December 31, 2019, and
$2,432,755 for the quarter ended March 31, 2020. We may continue
to incur operating and net losses in future periods. These losses
may increase, and we may never achieve profitability for a variety
of reasons, including increased competition, decreased growth in
the unified advertising industry and other factors described
elsewhere in the "Risk Factors" section of our form 10-k for the
year ended December 31, 2019. If we cannot achieve sustained
profitability, our stockholders may lose all or a portion of their
investment in our company."
A full-text copy of the Quarterly Report is available for free at
the Securities and Exchange Commission's website at:
https://is.gd/RZj5Gs
About Mobiquity
Headquartered in Shoreham, NY, Mobiquity Technologies, Inc. owns
100% of Advangelists, LLC and 100% of Mobiquity Networks, Inc. as
wholly owned subsidiaries. Advangelists is a developer of
advertising and marketing technology focused on the creation,
automation, and maintenance of an advertising technology operating
system (or ATOS). Advangelists' ATOS platform blends artificial
intelligence (or AI) and machine learning (ML) based optimization
technology for automatic ad serving that manages and runs digital
advertising inventory and campaigns. Mobiquity Networks has
evolved and grown from a mobile advertising technology company
focused on driving Foot-traffic throughout its indoor network, into
a next generation location data intelligence company.
Mobiquity recorded a net loss of $43.75 million for the year ended
Dec. 31, 2019, compared to a net loss of $58.51 million for the
year ended Dec. 31, 2018.
BF Borgers CPA PC, in Lakewood, CO, the Company's auditor since
2018, issued a "going concern" qualification in its report dated
March 24, 2020 citing that the Company's significant operating
losses raise substantial doubt about its ability to continue as a
going concern.
MOSAIC CO: Egan-Jones Cuts Foreign Curr. Unsecured Rating to B+
---------------------------------------------------------------
Egan-Jones Ratings Company, on June 17, 2020, downgraded the
foreign currency senior unsecured rating on debt issued by The
Mosaic Company to B+ from BB.
Headquartered in Tampa, Florida, The Mosaic Company produces and
distributes crop nutrients to the agricultural communities located
in North America and other countries.
MT SIMPSON FARM: Case Summary & 3 Unsecured Creditors
-----------------------------------------------------
Debtor: MT Simpson Farm, LLC
7104 Honey Bee Road
Monroe, NC 28110
Business Description: MT Simpson Farm is engaged in the business
of commercial and industrial machinery and
equipment rental and leasing.
Chapter 11 Petition Date: June 23, 2020
Court: United States Bankruptcy Court
Western District of North Carolina
Case No.: 20-30625
Judge: Hon. Laura T. Beyer
Debtor's Counsel: Cole Hayes, Esq.
MOON WRIGHT & HOUSTON, PLLC
121 West Trade Street
Suite 1950
Charlotte, NC 28202
Tel: 704-944-6560
E-mail: chayes@mwhattorneys.com
Total Assets: $763,499
Total Liabilities: $2,300,768
The petition was signed by Cameron Simpson, owner.
A copy of the petition containing, among other items, a list of the
Debtor's three unsecured creditors is available f
or free at PacerMonitor.com at:
https://is.gd/0Bv6AD
MURRAY ENERGY: Subsidiaries File Notices of Mass Layoffs in W.Va
----------------------------------------------------------------
Fred Pace, writing for The Herald-Dispatch, reports that six
subsidiaries of Murray Energy Corp. filed mass layoffs notices that
cover 2,453 employees in West Virginia.
Worker Adjustment and Retraining Notification Act ("WARN") notices
were filed on May 28, 2020 with WorkForce West Virginia and
includes operations in Ohio, Marshall and Marion counties.
Murray's Anchor Longwall & Rebuild Inc. listed 139 workers who
could be affected, as well as 82 workers with its Kanawha
Transportation Center Inc., both listed in Ohio County.
Murray's Ohio County Coal Company listed 447 workers potentially
affected in Marshall County, as well as 854 workers with its
Marshall County Coal Company.
Murray's Harrison County Coal Company showed 448 workers could be
affected in Marion County, as well as 483 workers at its Marion
County Coal Company.
The filings reported June 17, 2020 as the projected date for the
potential layoffs.
Telephone and email messages seeking comment from Murray Energy
Corp. were not immediately returned.
Murray Energy, the largest privately held coal company in the U.S.,
filed for Chapter 11 bankruptcy protection in October 2019 while
facing more than $8 billion in potential and actual legacy
liabilities and $2.7 billion in outstanding funded debt
obligations.
Murray Energy Corp. acknowledged Wednesday that it has defaulted on
its $440 million bankruptcy financing package, setting up a pivotal
month for the nation’s largest private coal producer as it aims
to leave chapter 11 amid a market downturn exacerbated by the
coronavirus pandemic, according to a report by the Wall Street
Journal.
About Murray Energy Corp.
Headquartered in St. Clairsville, Ohio, Murray Energy --
http://murrayenergycorp.com/-- is the largest privately owned coal
company in the United States, producing approximately 76 million
tons of high quality bituminous coal each year, and employing
nearly 7,000 people in the United States, Colombia and South
America.
Murray Energy now operates 15 active mines in five regions in the
United States, plus two mines in Colombia, South America. It
operates 12 underground longwall mining systems, 42 continuous
mining units, 10 transloading facilities, and five mining equipment
factory and fabrication facilities.
Murray Energy and its affiliates sought protection under Chapter 11
of the Bankruptcy Code (Bankr. S.D. Ohio Lead Case No. 19-56885) on
Oct. 29, 2019. At the time of the filing, the Debtors disclosed
assets of between $1 billion and $10 billion and liabilities of the
same range.
The cases have been assigned to Judge John E. Hoffman Jr.
The Debtors tapped Kirkland & Ellis LLP and Kirkland & Ellis
International LLP as general bankruptcy counsel; Dinsmore & Shohl
LLP as local counsel; Evercore Group L.L.C. as investment banker;
Alvarez and Marsal L.L.C. as financial advisor; and Prime Clerk LLC
as notice and claims agent.
The U.S. Trustee for Region 9 appointed creditors to serve on the
official committee of unsecured creditors on Nov. 7, 2019. The
committee tapped Morrison & Foerster LLP as legal counsel;
AlixPartners, LLP as financial advisor; and Vorys, Sater, Seymour
and Pease LLP as local counsel.
MYLAN NV: Egan-Jones Cuts Foreign Curr. Sr. Unsecured Rating to BB+
-------------------------------------------------------------------
Egan-Jones Ratings Company, on June 17, 2020, downgraded the
foreign currency senior unsecured rating on debt issued by Mylan NV
to BB+ from BBB-.
Headquartered in Canonsburg, Pennsylvania, Mylan NV is a global
generic and specialty pharmaceuticals company.
NAPHTHA ENERGY: Voluntary Chapter 11 Case Summary
-------------------------------------------------
Debtor: Naphtha Energy Solutions, LLC
d/b/a Hippo Energy Partners
Suite 204
1645 Greens Prairie Rd.
College Station, TX 77845
Chapter 11 Petition Date: June 22, 2020
Court: United States Bankruptcy Court
Southern District of Texas
Case No.: 20-33115
Judge: Hon. Jeffrey P. Norman
Debtor's Counsel: Johnie Patterson, Esq.
WALKER & PATTERSON, P.C.
P.O. Box 61301
Houston, TX 77208
Tel: (713) 956-5577
Email: jjp@walkerandpatterson.com
Total Assets: $2,765,299
Total Liabilities: $2,874,223
The petition was signed by Robert W. Pierce, Jr., managing member.
The Debtor failed to include in the petition a list of its 20
largest unsecured creditors.
A copy of the petition is available for free at PacerMonitor.com
at:
https://is.gd/RtOSjK
NEIMAN MARCUS: Refutes Loan Term Breaches While In Bankruptcy
-------------------------------------------------------------
Samantha McDonald, writing for Yahoo News, reports that retailer
Neiman Marcus Group Inc. has denied a top lender's accusation of
violating the terms of a loan as it reorganizes during bankruptcy
proceedings.
In a filing on June 1, 2020 with the United States Bankruptcy Court
for the Southern District of Texas in Houston, the retailer said
that it did not breach the terms of Deutsche Bank AG’s $760
million debtor-in-possession financing fund.
The bank on Friday indicated in a filing that Neiman Marcus'
borrowing base — which determines how much it can obtain based on
the value of its inventory — is at a negative $11 million
although the retailer reported it to be $39 million at the time of
its bankruptcy filing.
However, in a response filing on Monday, Neiman Marcus wrote that
it now has $100 million more cash on hand than it initially
estimated when it filed Chapter 11 because it managed to sell more
inventory than planned.
"One direct effect of these higher-than-projected sales is a
decrease of the debtors' [Neiman Marcus'] current inventory,"
Neiman Marcus' filing read, explaining that it will use the cash to
"replace inventory levels to those required" under the loan.
(Vendors that were "previously unwilling to ship goods" to the
retailer, it wrote, have now "resumed sales and started
replenishing" Neiman Marcus' inventory.)
The company added, "To be clear, no breach has occurred."
Deutsche Bank on May 29, 2020 alleged that the bankrupt retailer
overvalued the inventory backing its asset-based credit line. It
further raised concerns about Neiman Marcus' ability to restore the
cash collateral reserve, which helps protect the bank and other
lenders, which would jeopardize financing moving forward.
Following weeks of speculation, Neiman Marcus filed for bankruptcy
in early May 2020. The debt-saddled luxury chain announced that it
had secured $675 million in financing from creditors to continue
operations during Chapter 11 proceedings. It listed estimated
assets of between $1 billion and $10 billion, versus estimated
liabilities in the same range.
"Prior to COVID-19, Neiman Marcus Group was making solid progress
on our journey to long-term profitable and sustainable growth,"
Geoffroy van Raemdonck, chairman and CEO of The Neiman Marcus Group
Inc., said in a statement at the time. "However, like most
businesses today, we are facing unprecedented disruption caused by
the COVID-19 pandemic, which has placed inexorable pressure on our
business."
About Neiman Marcus Group
Neiman Marcus Group LTD, LLC -- https://www.neimanmarcus.com/ -- is
a luxury omni-channel retailer conducting store and online
operations principally under the Neiman Marcus, Bergdorf Goodman,
and Last Call brand names. It also operates the Horchow e-commerce
website offering luxury home furnishings and accessories. Since
opening in 1907 with just one store in Dallas, Neiman Marcus and
its affiliates have strategically grown to 67 stores across the
United States.
Weeks after being forced to temporarily shutter stores due to the
coronavirus pandemic, Neiman Marcus Group and 23 affiliates sought
Chapter 11 protection (Bankr. S.D. Tex. Lead Case No. 20-32519) on
May 7, 2020, after reaching an agreement with a significant
majority of our creditors to undergo a financial restructuring that
will substantially reduce the Company's debt load, and provide
access to considerable financing to ensure business continuity.
Kirkland & Ellis LLP is serving as legal counsel to the Company,
Lazard Ltd. is serving as the Company's investment banker, and
Berkeley Research Group is serving as the Company's financial
advisor. Stretto is the claims agent, maintaining the page
https://cases.stretto.com/NMG
Judge David R. Jones oversees the cases.
The Extended Term Loan Lenders are represented by Wachtell, Lipton,
Rosen & Katz as legal counsel, and Ducera Partners LLC as
investment banker.
The Noteholders are represented by Paul, Weiss, Rifkind, Wharton &
Garrison LLP as legal counsel and Houlihan Lokey as investment
banker.
NELNET INC: Moody's Reviews 'Ba1' CFR for Downgrade
---------------------------------------------------
Moody's Investors Service placed on review for downgrade Nelnet,
Inc.'s Ba1 Corporate Family Rating and Ba2 (hyb) junior
subordinated debt ratings. The rating action was prompted by the
company's announcement that the US Department of Education (DOE)
will not renew its contract to service DOE's federal direct student
loans.
During the review, Moody's will reassess the company's standalone
assessment, particularly the impact on future profitability from
the loss of the DOE federal direct student loan servicing contract
and any adverse impact on its franchise strength.
On Review for Downgrade:
Issuer: Nelnet, Inc.
Corporate Family Rating, Placed on Review for Downgrade,
currently Ba1
Junior Subordinated Regular Bond/Debenture, Placed on Review
for Downgrade, currently Ba2 (hyb)
Outlook Actions:
Issuer: Nelnet, Inc.
Outlook, Changed To Rating Under Review From Stable
RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR
DOWNGRADE OF THE RATINGS
Nelnet's subsidiaries, Nelnet Servicing, LLC (Nelnet Servicing) and
Great Lakes Educational Loan Services, Inc. (Great Lakes), were
awarded student loan servicing contracts by the DOE in June 2009.
As of 31 March 2020, Nelnet Servicing was servicing $185.5 billion
of student loans for 5.5 million borrowers under its contract, and
Great Lakes was servicing $243.2 billion of student loans for 7.3
million borrowers under its contract. These servicing contracts
expire on 14 December 2020 with two potential six-month extensions
at the DOE's discretion through 14 December 2021. If the DOE's
contract decisions stand, Nelnet Servicing and Great Lakes will
eventually be required to migrate these portfolios onto another
provider's system.
During the review, Moody's will reassess the company's standalone
assessment, particularly the impact on future profitability, from
the loss of the DOE federal direct student loan servicing contract
and any adverse impact on the franchise strength that the company
may suffer as a result. While Moody's believes that servicing
federal direct student loans is only a modest contributor to
current profitability, the contract provides the company with
scale, insight and relationships in its core student loan business
services offerings as well as with respect to its plans to ramp up
its private student loan lending business. The company obtained
approval in March by the Federal Deposit Insurance Corporation
(FDIC) and the Utah Department of Financial Institutions (UDFI) to
establish a Utah-charted industrial bank.
The Ba1 corporate family rating currently assigned to Nelnet is
derived from its standalone assessment, which reflects the
company's credit profile, supported by its solid core earnings
generation, low corporate leverage, strong asset profile and
adequate liquidity position. As Nelnet's student loan portfolio
runs off, the company is facing operational and execution risks as
it goes through a strategic transformation. The loss of the DOE
servicing contract is a setback to those efforts.
After the 2008/09 financial crisis, the company significantly
strengthened its financial profile reducing its leverage and almost
entirely funding its business with securitizations, warehouse
facilities and cash generated from operations. At 31 March 2020,
the company had just $129 million of corporate debt outstanding,
consisting primarily of $100 million outstanding on its $455
million unsecured line of credit due in 2024 and $20.4 million of
junior subordinated hybrid securities.
Moody's assesses that as a student loan provider, Nelnet faces a
high regulatory risk. As student debt service increasingly weighs
on household finances, there have been many proposed measures to
alleviate the burden. A large-scale program to refinance loans
under the Federal Family Education Loan Program (FFELP) and private
student loans with direct loans funded by the US government would
be credit negative for FFELP and private student loan lenders and
servicers, particularly those concentrated in the market, such as
Nelnet. While repayment at par would result in lenders not
incurring credit losses on forgiven loans, a reduction in lenders'
loan portfolios would deprive lenders of future net interest income
and servicers of future servicing income.
Since Nelnet's ratings are on review for downgrade, rating upgrades
are unlikely. The ratings could be confirmed and the outlook
returned to stable if Moody's were to assess that the negative
impact on the company's future financial profile, particularly
profitability, was modest, or if the company was able to mitigate
these profitability pressures.
The ratings could be downgraded at the conclusion of the review if
Moody's were to assess a likely financial performance
deterioration, for example, if net income to managed assets falls
consistently below and is expected to remain below 0.50% from its
three-year average of around 0.60% to 0.70%. In addition, the
ratings could be downgraded if leverage materially increases, or if
the value of the investment portfolio declines due, for example, to
increasing prepayment speeds on the FFELP portfolio.
The principal methodology used in these ratings was Finance
Companies Methodology published in November 2019.
NOVETTA SOLUTIONS: S&P Affirms 'B-' Rating on First-Lien Debt
-------------------------------------------------------------
S&P Global Ratings affirmed its 'B-' issue-level rating on Novetta
Solutions LLC's first-lien term loan, which it recently increased
by $33 million to partially fund an acquisition. The '3' recovery
rating on the first-lien facility, which also includes a $30
million revolver, remains unchanged. At the same time, S&P affirmed
the 'CCC' issue-level rating on the company's second-lien term
loan. The '6' recovery rating remains unchanged.
Novetta used the proceeds from the add-on, along with an equity
contribution from its sponsor, to complete the acquisition of
WaveStrike LLC, a provider of software engineering services, data
analytics, and technology solutions to national security customers.
It brings new contract positions and adds some complementary
capabilities to Novetta's existing offerings. The transaction was
leverage neutral and therefore does not have a material impact on
the company's credit metrics.
Issue Ratings--Recovery Analysis
Key analytical factors
-- The company's pro forma capital structure consists of a $30
million first-lien revolver, $233 million first-lien term loan
($225 million currently outstanding), and $85 million second-lien
term loan.
-- S&P has valued the company on a going-concern basis using a
5.0x multiple of its projected emergence EBITDA.
-- Other key assumptions at default include LIBOR rising to 2.5%
and the revolver is 85% drawn.
Simulated default assumptions
-- Simulated year of default: 2022
-- EBITDA at emergence: $30.6 million
-- EBITDA multiple: 5x
Simplified waterfall
-- Net enterprise value (after 5% administrative costs): $145.4
million
-- Valuation split (obligors/nonobligors): 100%/0%
-- First-lien debt claims: $255.2 million
-- Recovery expectations: 50%-70% (rounded estimate: 55%)
-- Second-lien debt claims: $89.7 million
-- Recovery expectations: 0%-10% (rounded estimate 0%)
Ratings List
Novetta Solutions LLC
Issuer Credit Rating B-/Stable/--
Ratings Affirmed
Novetta Solutions LLC
Senior Secured B-
Recovery Rating 3(55%)
Senior Secured CCC
Recovery Rating 6(0%)
PHV CORP: Egan-Jones Lowers Senior Unsecured Ratings to B+
----------------------------------------------------------
Egan-Jones Ratings Company, on June 18, 2020, downgraded the
foreign currency and local currency senior unsecured ratings on
debt issued by PVH Corporation to B+ from BB-.
Headquartered in New York, PVH Corporation designs, sources,
manufactures, and markets men's, women's, and children's apparel
and footwear.
PIMLICO RANCH: Case Summary & 11 Unsecured Creditors
----------------------------------------------------
Debtor: Pimlico Ranch, LLC
12203 Magnolia Avenue
Riverside, CA 92503
Business Description: Pimlico Ranch, LLC is a Single Asset Real
Estate (as defined in 11 U.S.C. Section
101(51B)). It owns vacant land and 25-unit
residential subdivision in Murrieta,
California, having an appraised value of
$5.5 million.
Chapter 11 Petition Date: June 22, 2020
Court: United States Bankruptcy Court
Central District of California
Case No.: 20-14307
Judge: Hon. Scott C. Clarkson
Debtor's Counsel: Robert M. Yaspan, Esq.
LAW OFFICES OF ROBERT M. YASPAN
21700 Oxnard Street, Suite 1750
Woodland Hills, CA 91367
Tel: 818-905-7711
E-mail: ryaspan@yaspanlaw.com
Total Assets: $5,500,000
Total Liabilities: $6,719,670
The petition was signed by Ben R. Clymer, managing member.
A copy of the petition containing, among other items, a list of the
Debtor's 11 unsecured creditors is available for free at
PacerMonitor.com at:
https://is.gd/XX1AXh
PQ CORP: Moody's Gives B1 Rating on New $450MM First Lien Loan
--------------------------------------------------------------
Moody's Investors Service assigned a B1 rating to PQ Corporation's
proposed $450 million non-fungible first lien term loan due 2027.
In addition, PQ will seek to raise $200 million in other unsecured
debt, which together with proceeds from the new term loan, will be
used to redeem PQ's $625 million senior secured notes due 2022
through a conditional call notice and pay for related premiums,
accrued interest, fees and expenses. Moody's also affirmed the B1
Corporate Family Rating and the B1-PD Probability of Default
Rating, the B1 rating on the senior secured notes and the B3 rating
on the senior unsecured notes. The SGL-2 Speculative Grade
Liquidity (SGL) rating remains unchanged. The outlook is stable.
The assigned rating is subject to the transaction closing as
proposed.
"The proposed transaction as contemplated would allow PQ to extend
its maturity profile and significantly lower annual interest
expense while only modestly increasing debt," said Domenick R.
Fumai, Vice President and lead analyst for PQ Corporation.
Assignments:
Issuer: PQ Corporation
Senior Secured Bank Term Loan B, Assigned B1 (LGD3)
Outlook Actions:
Issuer: PQ Corporation
Outlook, Remains Stable
Affirmations:
Issuer: PQ Corporation
Corporate Family Rating, Affirmed B1
Probability of Default Rating, Affirmed B1-PD
Senior Secured Term Loan B1, Affirmed B1 (LGD3)
Senior Secured Regular Bond/Debenture, Affirmed B1 (LGD3) and to be
Withdrawn upon close of transaction
Senior Unsecured Regular Bond/Debenture, Affirmed B3 (LGD5)
RATINGS RATIONALE
PQ intends to use the net proceeds from the proposed $450 million
non-fungible sidecar first lien term loan and $200 million in other
unsecured debt to redeem its $625 million outstanding 6.75% senior
secured notes due 2022 through a conditional call notice. The
non-fungible first lien term loan add-on will contain the same
guarantors and share the same collateral package as the existing
first lien term loan. Moody's believes the issuance and subsequent
repayment of the senior secured notes due 2022 will provide PQ with
additional financial flexibility, while reducing annual interest
expense and removing refinancing risk associated with the notes. If
the balance of secured debt in the capital structure continues to
decline over the next 12-18 months, there would be upward momentum
for the senior secured rating.
PQ's B1 rating is supported by a debt profile more commensurate
with the rating, lower interest expense resulting in stronger free
cash flow generation and adoption of more conservative financial
policies following its IPO in September 2017. The company has
publicly stated a net leverage target of 3.0x to 3.5x. Since going
public in September 2017, the company has shown a commitment
towards debt reduction repaying more than $750 million through a
combination of IPO proceeds as well as internal cash flow
generation. Leading market positions in diverse end markets, a
broad customer base with many long-term relationships, and
geographic diversity lend stability to the financial performance of
the business compared to many other rated peers in the chemical
industry.
The rating is constrained by the company's continued elevated
leverage above its threshold for an upgrade. PQ's leverage
(Debt/EBITDA) measures 4.8x, including Moody's standard
adjustments, for the twelve months ended March 31, 2020. Moody's
forecasts revenue in FY 2020 to fall about 7% to $1.45 billion and
adjusted EBITDA to decline to $398 million from $432 million in
2019. However, leverage in FY 2020 is expected to be roughly flat
with 2019 as PQ further reduces debt through free cash flow
generation in the second half of the year. Significant ownership by
private equity also limits PQ's rating. Moreover, the diverse
business profile is offset by exposure to several economically
sensitive end markets such as refining, transportation and
construction, which are experiencing challenging fundamentals as a
result of the coronavirus pandemic's impact on the global
macroeconomy.
The SGL-2 Speculative Grade Liquidity rating (SGL) reflects good
liquidity to support operations. As of March 31, 2020, PQ had
approximately $236 million of total liquidity with roughly $108
million of cash on the balance sheet and $64 million outstanding
under its ABL facility. The ABL has a springing financial
maintenance covenant -- the only financial maintenance covenant.
There are no financial covenants under the term loan. PQ also has
alternate forms of liquidity in terms of a joint venture and
meaningful assets in non-guarantor foreign subsidiaries.
As of March 31, 2020, PQ's debt capital is comprised of an unrated
$250 million ABL, a rated $947.5 million first lien senior secured
term loan B maturing February 2027, rated $625 million senior
secured notes due 2022 and rated $295 million senior unsecured
notes maturing in 2025. In addition, the assigned instrument-level
ratings reflect collateral weakness related to a substantial
portion of assets located in non-guarantor subsidiaries and joint
ventures in which lenders do not have a lien on these assets.
The stable outlook assumes that longer-term, a combination of
modest EBITDA growth and continued free cash flow generation will
enable the company to maintain retained cash flow-to-debt in excess
of 10% (RCF/Debt) and at generate least $100 million of free cash
flow in 2020. The outlook also incorporates expectations for
limited bolt-on debt-financed acquisitions and adherence to
conservative financial policies.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's could upgrade the rating with expectations for sustained
adjusted financial leverage below 4.0x and retained cash
flow-to-debt sustained above 15%, and demonstration of organic
growth to mitigate potential shareholder friendly actions. Moody's
could downgrade the rating with expectations for sustained adjusted
financial leverage above 5.5x, negative free cash flow or retained
cash flow-to-debt below 10% change in financial policies, including
a large debt-financed acquisition, could also have negative rating
implications.
ESG CONSIDERATIONS
Moody's considers environmental, social and governance
considerations in PQ's rating. Environmental risks for PQ are
considered moderate as a specialty chemical company. In particular,
many of their products help companies adhere to emissions standards
or manufacture environmentally-friendly specialty silicas used as
ingredients in consumer products. Although the board has a majority
of independent directors, PQ's governance is viewed as weak for a
public company as CCMP and INEOS own the majority of the shares
and, therefore, control the appointment of directors. Until CCMP
and Ineos reduce their ownership of PQ below 30% and all directors
associated with these firms are removed from the board, this issue
will slow any improvement in the company's rating.
The principal methodology used in these ratings was Chemical
Industry published in March 2019.
Headquartered in Malvern, PA, PQ Corporation, the indirect
wholly-owned subsidiary of PQ Group Holdings Inc., is a leading
provider of inorganic specialty chemicals, including sodium
silicates, silicate derivatives, catalysts, reflective glass
spheres, and engineered glass materials. The company operates in
four segments: Refining Services, Catalysts (which includes the
Zeolyst Joint Venture), Performance Materials and Performance
Chemicals. CCMP Capital Advisors, LP (CCMP) purchased a stake in
the company in late 2014 and holds a 45% interest in the company.
INEOS Ltd. is the other significant owner with a 24% stake and the
remainder is publicly held. PQ began trading as a public company in
September 2017 and reported $1.6 billion in revenues for the twelve
months ended March 31, 2020.
PULMATRIX INC: Stockholders Pass All Proposals at Annual Meeting
----------------------------------------------------------------
Pulmatrix, Inc., held its 2020 annual meeting of stockholders on
June 17, 2020, at which the stockholders:
(a) elected Michael J. Higgins and Mark Iwicki as Class III
directors to serve on the Company's Board of Directors
until its 2023 Annual Meeting of Stockholders or until
successors have been duly elected and qualified;
(b) ratified the appointment of Marcum LLP as the Company's
independent registered public accounting firm for the 2020
fiscal year;
(c) approved, on an advisory basis, the compensation paid to
the Company's named executive officers; and
(d) approval, on an advisory basis, the triennial frequency of
future advisory votes on the compensation paid to the
Company's named executive officers.
About Pulmatrix
Pulmatrix, Inc. -- http://www.pulmatrix.com/-- is a clinical stage
biopharmaceutical company developing innovative inhaled therapies
to address serious pulmonary and non-pulmonary disease using its
patented iSPERSE technology. The Company's proprietary product
pipeline is initially focused on advancing treatments for serious
lung diseases, including Pulmazole, an inhaled anti-fungal for
patients with ABPA, and PUR1800, a narrow spectrum kinase inhibitor
in lung cancer. Pulmatrix's product candidates are based on
iSPERSE, its proprietary engineered dry powder delivery platform,
which seeks to improve therapeutic delivery to the lungs by
achieving optimal local drug concentrations and reducing systemic
side effects to improve patient outcomes.
Pulmatrix reported a net loss of $20.59 million for the year ended
Dec. 31, 2019, compared to a net loss of $20.56 million for the
year ended Dec. 31, 2018. As of March 31, 2020, the Company had
$30.82 million in total assets, $23.88 million in total
liabilities, and $6.94 million in total stockholders' equity.
PURDUE PHARMA: Court Moves Bar Date to July 30, 2020
----------------------------------------------------
Rick Archer of Law360 reports that a New York bankruptcy judge
granted Purdue Pharma's COVID-19-inspired request to give its
creditors an extra month to file their Chapter 11 claims against
the company, rejecting calls for more time and no extension by two
sets of states.
At a telephonic hearing, Judge Robert Drain granted Purdue's
request to move the bar date in its Chapter 11 case from June 30 to
July 30, a move the company said would take into account the
disruptions caused by the pandemic, while also striking a balance
between a call by one committee of states with claims against the
opioid maker for a 90-day extension and another state claimant's
urging to stick to the original schedule.
Purdue filed for Chapter 11 protection on Sept. 15, shortly after
reaching a tentative settlement with 24 states of suits holding the
company responsible for damages caused by opioid addiction.
Last month, a number of the states who did not consent to the
settlement asked the court to extend the deadline for submitting
claims against the Purdue estate from June 30 to Sept. 30, saying
more time was needed due to the disruption caused by the pandemic.
In response, Purdue, supported by the unsecured creditors committee
and a number of smaller ad hoc groups, filed a motion asking for a
30-day extension, saying it was needed "under the unique
circumstances presented by the pandemic" and struck a "reasonable
balance" between the nonconsenting states' request and the views of
creditors who wanted no extension or one limited to certain types
of claims.
At the hearing, Purdue counsel James McClammy argued more than 30
days was unnecessary. He said the public notice campaign — which
had been adjusted for the pandemic through such steps as scrapping
movie theater ads in favor of more online ads and daytime
television spots — has reached the point where they estimate 95%
of the U.S. adult population has seen at least six notices and that
the claim forms are designed to be simple to fill out without legal
assistance.
Under questioning from Judge Drain, McClammy said despite the
pandemic, the number of claims being filed had been in line with
expectations.
He said the 30-day delay is expected to directly cost about
$700,000 and that the indirect cost of extending the bankruptcy
case to allow a longer notice period would run into the "tens of
millions" of dollars.
Andrew Troop, counsel for the nonconsenting states, argued for the
full 90-day extension. He said it would not delay the case, saying
there is both extensive discovery and recovery distribution
mediation ongoing and that the longer deadline would benefit state
officials currently occupied with pandemic response.
On the other side, counsel for the states who have agreed to the
settlement said there was no reason for any extension, adding that,
with no evidence the pandemic had caused a drop in claims filings,
an extension would be an unnecessary hurdle on the way to the
submission of a Chapter 11 plan sometime in the fall.
Judge Drain ultimately ruled for the 30-day extension, saying while
there was no evidence of deficiencies in the noticing program, the
new deadline would provide "more fairness" for potential
claimants.
He did say he found the "strong feelings" provoked by the motions
were a "microcosm" for the case as a whole and urged the nondebtor
parties in the case to accept compromises on other issues and
cooperate on discovery.
"I want this case to move and I will make it move if the parties
don't start cooperating with each other," Judge Drain said.
Purdue is represented by Marshall S. Huebner, Benjamin S.
Kaminetzky, Timothy Graulich, Christopher Robertson, James I.
McClammy and Eli J. Vonnegut of Davis Polk & Wardwell LLP.
The unsecured creditors committee is represented by Ira S.
Dizengoff, Arik Preis, Mitchell P. Hurley and Sara L. Brauner of
Akin Gump Strauss Hauer & Feld LLP.
The nonconsenting states are represented by Andrew M. Troop, Andrew
V. Alfano and Jason S. Sharp of Pillsbury Winthrop Shaw Pittman
LLP.
The consenting states are represented by Kenneth H. Eckstein, David
E. Blabey Jr. and Rachael Ringer of Kramer Levin Naftalis & Frankel
LLP; Scott D. Gilbert, Craig J. Litherland and Kami E. Quinn of
Gilbert LLP; David J. Molton and Steven D. Pohl of Brown Rudnick
LLP; and Melanie L. Cyganowski and Jennifer Feeney of Otterbourg
PC.
The case is In re: Purdue Pharma LP, case number 7:19-bk-23649, in
the U.S. Bankruptcy Court for the Southern District of New York.
About Purdue Pharma LP
Purdue Pharma L.P. and its subsidiaries --
http://www.purduepharma.com/-- develop and provide prescription
medicines and consumer products that meet the evolving needs of
healthcare professionals, patients, consumers and caregivers.
Purdue's subsidiaries include Adlon Therapeutics L.P., focused on
treatment for Attention-Deficit/Hyperactivity Disorder (ADHD) and
related disorders; Avrio Health L.P., a consumer health products
company that champions an improved quality of life for people in
the United States through the reimagining of innovative product
solutions; Imbrium Therapeutics L.P., established to further
advance the emerging portfolio and develop the pipeline in the
areas of CNS, non-opioid pain medicines, and select oncology
through internal research, strategic collaborations and
partnerships; and Greenfield Bioventures L.P., an investment
vehicle focused on value-inflection in early stages of clinical
development.
Opioid makers in the U.S. are facing pressure from a crackdown on
the addictive drug in the wake of the opioid crisis and as state
attorneys general file lawsuits against manufacturers. More than
2,000 states, counties, municipalities and Native American
governments have sued Purdue Pharma and other pharmaceutical
companies for their role in the opioid crisis in the U.S., which
has contributed to the more than 700,000 drug overdose deaths in
the U.S. since 1999.
OxyContin, Purdue Pharma's most prominent pain medication, has been
the target of over 2,600 civil actions pending in various state and
federal courts and other fora across the United States and its
territories.
On Sept. 15 and 16, 2019, Purdue Pharma L.P. and 23 affiliated
debtors each filed a voluntary petition for relief under Chapter 11
of the U.S. Bankruptcy Code (Bankr. S.D.N.Y. Lead Case No.
19-23649), after reaching terms of a preliminary agreement for
settling the massive opioid litigation. The Debtors' consolidated
balance sheet as of Aug. 31, 2019, showed $1.972 billion in assets
and $562 million in liabilities.
U.S. Bankruptcy Judge Robert Drain oversees the cases.
Debtors tapped Davis Polk & Wardwell LLP and Dechert LLP as legal
counsel; PJT Partners as investment banker; AlixPartners as
financial advisor; and Prime Clerk LLC as claims agent.
Akin Gump Strauss Hauer & Feld LLP and Bayard, P.A. represent the
official committee of unsecured creditors appointed in Debtors'
bankruptcy cases.
David M. Klauder, Esq., was appointed as fee examiner. The fee
examiner is represented by Bielli & Klauder, LLC.
REDSTONE BUYER: S&P Assigns 'B' ICR; Outlook Stable
---------------------------------------------------
S&P Global Ratings assigned its 'B' issuer credit rating to
Redstone Buyer LLC (dba RSA Security), and its 'B' issue-level
rating and '3' recovery rating (65% recovery estimate) to the
company's $1.05 billion senior secured first-lien term loan due in
2027 and $75 million undrawn revolving credit facility (RCF) due in
2025. Concurrently, S&P assigned a 'B-' issue-level rating and '5'
recovery rating (10% recovery estimate) to the $300 million senior
secured second-lien term loan.
RSA, a cybersecurity and risk management solutions provider, is
being acquired by a consortium led by Symphony Technology Group
from Dell Technologies Inc. in an all-cash carve-out transaction
for approximately $2.1 billion. The transaction will be partially
funded with a $1.125 billion first-lien senior secured credit
facility, consisting of a $75 million undrawn revolver and a $1.05
billion term loan, and a $300 million second-lien senior secured
term loan.
The rating on RSA reflects the company's high pro forma leverage,
which S&P estimates will be over 6.5x at the end of fiscal 2021 and
over 5.5x by the end of fiscal 2022. Other risk factors include
limited scale compared to larger security players like Broadcom's
enterprise security business and Fortinet, modest customer
concentration and weak profitability. Credit strengths include a
strong recurring revenue base, high customer retention rates, and
consistent, if modest free cash flow generation. The rating also
reflects S&P's expectation that RSA will maintain adequate
liquidity and sufficient cash on its balance sheet."
The COVID-19 pandemic is driving increased demand for RSA's product
portfolio. The company ended the first quarter of fiscal 2021 after
reporting revenue growth of about 28% year over year (YoY), mainly
attributable to solid booking for SecurId products, which grew by
more than 100% YoY. This represents a reversal for SecureId
revenues, which had declined for the preceding eight consecutive
quarters. The recent increase in remote work post-COVID 19 has
driven this growth as enterprises increase investment in IT
security spending to support secure work from home platforms. The
security business has also experienced strong growth driven by an
increased focus on fraud-prevention especially for e-commerce and
online financial transactions. Although the market fundamentals for
cybersecurity and risk management solutions provider look promising
for the next several years, S&P sees competition against larger and
well-capitalized players like Broadcom's enterprise security
business and Fortinet as a meaningful risk that may limit the
sustainability of rapid top line growth.
The company has a strong recurring-revenue base and its high
renewal rates support highly visible cash generation. RSA has
strong revenue visibility due to a strong recurring revenue
base—recurring revenues account for more than 70% of the total
revenue, and retention rates are over 90%. Additionally, S&P
believes that the company's customer base will be relatively
sheltered from macroeconomic upheaval as it consists of about 90%
of Fortune 100 companies and 70% of Fortune 500 companies, which
mitigates risk associated with renewals somewhat. The company
generated free cash flow of over $80 million in past three years
and in its base case, S&P forecasts RSA will still generate modest
but lower free cash flow this year, offset by additional interest
burden.
RSA's credit metrics are likely to improve in fiscal 2022 due to
revenue growth and cost-reduction initiatives. While starting
leverage is elevated at over 6.5x, S&P expects leverage to compress
to below 6x by fiscal 2022, as scale grows, and EBITDA margin
expand. Margin expansion will largely stem from cost-cutting plans
related to sales-force optimization and headcount reduction, which
S&P expects will generate savings of about $140 million over the
next two years. RSA's EBITDA margins in 18%-20% range are
relatively weak when compared to broader software peers.
"We believe RSA's EBITDA margins will rise in the coming years
because we anticipate a high probability of achieving its
cost-reduction plans and anticipate continued growth in SecureId
revenue," S&P said.
"The stable outlook reflects our expectation that RSA will be able
to maintain leverage under 7.0x in spite of a challenging
macroeconomic environment due to strong demand for security
software and expense reductions. We anticipate the company will
continue to see growth in its recurring revenue base, which
currently represents approximately 70% of revenue and we expect
that free operating cash flow will remain positive. In addition,
RSA has relatively low cash flow needs in comparison to its cash
flow generation abilities," S&P said.
"We could lower the rating if competitive threats increase, failure
to launch compelling products, or weaker than expected margin
performance lead to leverage sustained above 7x or if there is a
deterioration of cash generation to break-even territory. We could
also downgrade RSA if its sources of cash are not sufficient to
cover its uses of cash and we view its liquidity as less than
adequate," the rating agency said.
Given RSA's existing leverage of over 6x and its financial
sponsor-ownership, an upgrade is unlikely over the next 12 months.
Over the longer term, S&P would consider an upgrade if RSA is able
to sustain leverage below 5.0x, generates free operating cash
flow/debt of above 5%. In addition to the aforementioned financial
metrics, S&P would be unlikely to upgrade RSA without a material
share of public ownership, as the rating agency believes that the
company's current ownership structure will preclude sustained
deleveraging.
ROCKPORT DEVELOPMENT: Hires Grobstein Teeple as Financial Advisor
-----------------------------------------------------------------
Rockport Development, Inc. seeks approval from the U.S. Bankruptcy
Court for the Central District of California to employ Grobstein
Teeple LLP as its financial advisor and accountant.
Grobstein Teeple will provide services as follows:
(a) obtain and evaluate financial records;
(b) evaluate assets and liabilities of Debtor and its
bankruptcy estate;
(c) evaluate tax issues related to Debtor and the estate;
(d) prepare tax returns;
(e) prepare monthly operating reports;
(f) perform reconstruction and forensic accounting; and
(g) provide accounting and consulting services requested by
the Debtor and its counsel.
The hourly billing rates for the firm's partners and principals are
as follows:
Grobstein, Howard $505
Boffill, Kermith $370
Howard, Benjamin $420
Leonard, Jeffrey $380
Lundeen, Brian $325
Rasmussen, Erik $495
Roopenian, Steven $315
Shamas, Eddie $310
Stake, Kurt $460
Teeple, Joshua $450
Wright, Kailey $315
The hourly billing rates for the firm's managers and directors are
as follows:
Bussell, Jeffrey $375
Chamichyan, Silva $275
Godoy, Steven $275
McCarthy, Michael $280
Rojany, Rachel $315
Thomsen, William $350
The hourly billing rates for the firm's staff and senior
accountants are as follows:
Chun, Jessie $225
Demirdzhyan, Lucy $140
Hymel, Dianne $85
Jarquin, Claudia $85
Johnson, Kelsea $150
Lopez, Lindsay $135
McCallum, Breanna $125
Meacham, Kevin $205
Mehra, Dimple $285
Mier, Lucia $200
Morberg, Thomas $150
Muga, Tracey $175
Odell, Alex $285
Patton, Jordan $115
Siegel, Brian $250
Solares, Kenneth $225
Vacek, Jackie $150
Grobstein Teeple charges an hourly fee of $125 for paraprofessional
services.
The firm received a pre-bankruptcy retainer in the amount of
$2,335.
Joshua Teeple, a partner at Grobstein Teeple, disclosed in court
filings that the firm neither holds nor represents any interest
materially adverse to the interest of Debtor's estate, creditors
and equity security holders.
The firm can be reached through:
Joshua R. Teeple
Grobstein Teeple LLP
23832 Rockfield Boulevard
Lake Forest, CA 92630
Telephone: (949) 381-5655
Facsimile: (949) 381-5665
Email: jteeple@gtllp.com
About Rockport Development
Rockport Development, Inc., a company based in Irvine, Calif.,
filed a Chapter 11 petition (Bankr. C.D. Cal. Case No. 20-11339) on
May 7, 2020. The petition was signed by CRO Michael VanderLey. At
the time of the filing, Debtor disclosed assets of between $10
million and $50 million and liabilities of the same range.
Judge Catherine E. Bauer oversees the case.
Debtor tapped Marshack Hays, LLP as its legal counsel. Michael
VanderLey of Force Ten Partners, LLC, is Debtor's chief
restructuring officer.
RWDT FOODS: Case Summary & 20 Largest Unsecured Creditors
---------------------------------------------------------
Debtor: RWDT Foods, Inc.
7021 NC Hwy 751
Suite 901
Durham, NC 27707-5731
Business Description: RWDT Foods, Inc. owns Denny's restaurant
franchises.
Chapter 11 Petition Date: June 24, 2020
Court: United States Bankruptcy Court
Middle District of North Carolina
Case No.: 20-80300
Judge: Hon. Lena M. James
Debtor's Counsel: John A. Northen, Esq.
NORTHEN BLUE, LLP
PO Box 2208
Chapel Hill, NC 27515
Tel: 919-968-4441
Email: jan@nbfirm.com
Debtor's
Special
Counsel: WYRICK ROBBINS YATES & PONTON LLP
Debtor's
Accountants: KELLEY GALLOWAY SMITH GOOLSBY, PSC
Total Assets: $3,047,359
Total Liabilities: $8,825,879
The petition was signed by Larry D. Thompson, president.
A copy of the petition containing, among other items, a list of the
Debtor's 20 largest unsecured creditors is available for free at
PacerMonitor.com at:
https://is.gd/Q07Zfo
RWDY INC: Case Summary & 19 Unsecured Creditors
-----------------------------------------------
Debtor: RWDY, Inc.
2640 Youree Drive, Suite 200
Shreveport, LA 71104
Business Description: RWDY, Inc. -- http://www.rwdyinc.com--
is an internationally recognized provider of
oil field consultants. The Company's
personnel have successfully supported
offshore drilling operations in Australia,
Brazil, Cameroon, New Zealand, Nigeria,
Qatar, New Zealand, United Arab Emirates and
Venezuela. The Company's consultants
include: project managers; drilling/
completion engineers; drilling/completion
foreman; mud engineers; HSE advisors/SEMS
advisors/HSE consultants; rig clerks/
logistics coordinators; shore base
dispatchers/materials coordinators;
rig commissioning managers; and cement
specialists.
Chapter 11 Petition Date: June 23, 2020
Court: United States Bankruptcy Court
Western District of Louisiana
Case No.: 20-10616
Judge: Hon. John S. Hodge
Debtor's Counsel: Robert W. Raley, Esq.
ROBERT W. RALEY, ESQ.
290 Benton Spur Road
Bossier City, LA 71111
Tel: (318) 747-2230
E-mail: rwr@robertraleylaw.com
Estimated Assets: $0 to $50,000
Estimated Liabilities: $10 million to $50 million
The petition was signed by Brian T. Owen, president.
A copy of the petition containing, among other items, a list of the
Debtor's 19 unsecured creditors is available for free at
PacerMonitor.com at:
https://is.gd/4YmZcv
SCIENTIFIC GAMES: S&P Affirms 'B' ICR; Outlook Negative
-------------------------------------------------------
S&P Global Ratings affirmed its 'B' issuer credit rating on
Scientific Games Corp. S&P also removed all of its ratings on the
company from CreditWatch, where it placed them with negative
implications on March 20, 2020.
At the same time, S&P is assigning its 'B-' issue-level and '5'
recovery rating to Scientific Games' subsidiary, Scientific Games
International Inc.'s, proposed $350 million senior unsecured notes.
The company plans to use the proceeds to repay its $341 million
subordinates notes due 2021.
S&P expects a decline in the company's gaming segment will cause
leverage to spike in 2020, but anticipate that a recovery in 2021
and its less volatile lottery business could help leverage improve
to about 7x in 2021. It forecasts Scientific Games' 2020 EBITDA to
fall around 45%-50% due largely to a decline in its gaming segment
as a result of casinos closures that began in mid-March and lasted
for much of the second quarter. S&P expects substantial portions of
Scientific Games' installed machine base, which represented
approximately 18% of revenue in 2019, will generate minimal revenue
in the second quarter due to these closures. Additionally, S&P
expects that portions of the company's installed base will continue
to be shut down at least through the remainder of 2020, as casino
operators reconfigure their floorplans to comply with capacity
limitations and state and local social distancing guidelines. As of
June 16, 2020, about two-thirds of commercial and tribal casinos
have reopened in some capacity. S&P also expects that Scientific
Games' new and replacement machine sales will be much lower this
year since the rating agency assumes operators will cancel or delay
orders given capacity limitations and reduced capital budgets to
preserve liquidity. S&P believes this divergence will persist into
2021 as gaming operators measure the effect of the coronavirus and
related containment measures on their businesses, as well as assess
the efficiency of their casino floors with potentially fewer slot
machines.
S&P believes however, that Scientific Games may be able to reduce
its leverage toward 7x by the end of 2021 since the rating agency
believes there will be some recovery in the gaming segment next
year. The lottery segment is also a recurring source of revenue and
should recover faster, and S&P forecasts growth in the company's
digital and social businesses as well.
S&P believes Scientific Games' lottery and digital segments will
fare better in 2020 and blunt the impact of the significantly lower
revenue anticipated in the gaming segment. It views the company's
lottery segment as less volatile compared to its gaming operations
even in an economic downturn since the lottery has a relatively low
price point and customers have easier access to lottery products,
which are sold at grocery stores, gas stations, and convenience
stores, compared to having to drive to a casino to gamble. Although
lottery point-of-sale locations in the U.S. remained open because
they are typically located in essential businesses, sales of
instant products will be negatively affected in the second quarter
as a result of lower consumer foot traffic because of stay-at-home
orders. Scientific Games reported that domestic lottery sales were
down 10%-15% in the beginning of the second quarter but that
declines were moderating and some regions had returned to growth by
mid-May. As a result, S&P expects that sales will recover as
consumers adapt and begin resuming more normal routines. It expects
the company's lottery segment revenue will decline in the
high-single-digit percent range in 2020 and recover to
approximately 2019 levels in 2021.
S&P expects the company's digital and social play segments will be
minimally affected in 2020 since the rating agency believes
stay-at-home orders drove growth in internet gaming and social play
since they were some of the only forms of entertainment for
customers. S&P expects revenue at SciPlay to continue to grow in
the 8%-10% range and for sports betting and digital gambling
revenue to decline in the mid-single-digit percent area, largely
resulting from the postponement of all major sports leagues
throughout the second quarter and uncertainty around how and when
many major sports leagues will resume games.
S&P believes Scientific Games will maintain adequate liquidity to
weather the current business disruption. Scientific Games'
liquidity consists of $814 million in cash following its $480
million revolver draw in April 2020 (including $133 million of cash
held at SciPlay), and S&P forecasts the company will use a modest
amount of cash flow from operations primarily as a result of
greater negative working capital as gaming operators elongate
payment terms. Additionally, S&P expects this transaction to
enhance liquidity since the proceeds will be used to repay existing
subordinated notes due May 2021, eliminating a near-term debt
maturity and extending the company's maturity profile. Pro forma
for this transaction, the company's closest maturity will be its
revolver and term loan, both due in 2024.
The company also secured an amendment to its credit facilities that
waives its net first-lien leverage covenant through March 31, 2021.
The company will instead be subject to a minimum liquidity covenant
of $275 million excluding cash and revolver availability at
SciPlay.
Environmental, social, and governance (ESG) credit factors for this
credit rating change:
-- Health and safety
The negative outlook reflects the significant anticipated spike in
Scientific Games' leverage in 2020 as a result of
coronavirus-related casino closures and S&P's expectation that
portions of its installed base will remain shut down even after
casinos reopen in order to comply with social distancing
guidelines. Additionally, S&P expects gaming operators will delay
or eliminate orders for new slot machines. The negative outlook
also reflects significant uncertainty in S&P's updated base-case
recovery assumptions around the extent of the pandemic and the
related recession's impact on Scientific Games' performance.
"We could lower the rating if we no longer believe that Scientific
Games will be able to recover and improve leverage below 7.5x in
2021 or if it cannot sustain EBITDA coverage of interest of more
than 2x. This would likely occur if the recovery is weaker than we
are currently forecasting because high unemployment impairs
consumer spending more than we have assumed, there is a second wave
of the coronavirus that leads to additional restrictions on
out-of-home activities, or the company's installed base is impaired
more than we have assumed," S&P said.
"It is unlikely that we would revise our outlook on Scientific
Games to stable over the next few quarters given the high degree of
uncertainty around when the coronavirus will be contained and how
long it will take the company's cash flow and credit measures to
recover. If we believe the pace of Scientific Games' recovery will
allow it to more quickly reduce its leverage below our 7.5x
downgrade threshold in 2021, we could revise the outlook to stable.
Given our forecast credit measures in 2020 and 2021, an upgrade is
unlikely. However, if Scientific Games' cash flow recovers faster
than we currently assume and we believe that it can sustain our
measure of adjusted debt to EBITDA below 6.5x, we could consider
raising the rating. This would likely result from
better-than-expected 2020 operating performance in the company's
gaming segment and a stronger recovery in 2021," S&P said.
SEADRILL LTD.: Says Chapter 11 Is One Option to Address Downturn
----------------------------------------------------------------
Carl Surran, writing for The Wall Street Journal, reports that
Chapter 11 bankruptcy is an option in addressing Saudi-Russian oil
price and pandemic-induced downturn.
Seadrill told The Journal that Chapter 11 bankruptcy is on the
table, a day after CFO Stuart Jackson said the downturn due to the
coronavirus and the Saudi-Russian oil price had forced the company
to abandon what an "interim solution" to its debt woes and focus on
a comprehensive restructuring.
"We are considering all options at this stage, of which Chapter 11
is one," a Seadrill spokesman says, adding the restructuring
situation is still fluid. "We anticipate this to take place over
the coming year, but it is too early to say for certain."
On June 2, 2020's conference call, Jackson said the company
believes it has sufficient liquidity to manage its business as well
as the restructuring process.
"From an investment perspective, we've also written down the value
of our Seadrill Partners holding to zero, as we expect this entity
will move into a comprehensive restructuring of its balance sheets
in the coming future," Jackson said.
About Seadrill Ltd.
Seadrill Limited is a deepwater drilling contractor providing
drilling services to the oil and gas industry. It is incorporated
in Bermuda and managed from London. Seadrill and its affiliates
own or lease 51 drilling rigs, which represents more than 6% of the
world fleet.
On Sept. 12, 2017, Seadrill Limited and 85 affiliated debtors each
filed a voluntary petition for relief under Chapter 11 of the
United States Bankruptcy Code (Bankr. S.D. Tex. Lead Case No.
17-60079) after reaching terms of a reorganization plan that would
restructure $8 billion of funded debt.
Together with the chapter 11 proceedings, Seadrill, North Atlantic
Drilling Limited ("NADL") and Sevan Drilling Limited ("Sevan")
commenced liquidation proceedings in Bermuda to appoint joint
provisional liquidators and facilitate recognition and
implementation of the transactions contemplated by the RSA and
Investment Agreement.
On July 2, 2018, Seadrill emerged from U.S. Chapter 11 bankruptcy
protection. Seadrill also commenced dissolution proceedings in
Bermuda in accordance with the confirmed Chapter 11 Plan.
SHIFT4 PAYMENTS: S&P Raises ICR to 'B' After Debt Reduction
-----------------------------------------------------------
S&P Global Ratings raised its issuer credit rating on Shift4
Payments LLC to 'B' from 'B-' after the company repaid $280 million
in debt.
Shift4 raised about $497 million in gross proceeds, including about
$397 million from its IPO and $100 million from a concurrent
private placement. The company used the proceeds to repay its debt,
contributing to a material improvement in leverage.
Meanwhile, S&P affirmed its issue-level rating on the company's
first-lien term loan and revolving credit facility at 'B' while
revising the recovery rating to '3' from '2'.
Shift4 has repaid its outstanding second-lien term loan, and S&P is
subsequently withdrawing its 'CCC' issue-level rating on this
debt.
S&P is assigning a 'B' issuer credit to Shift4 Payments Inc., the
newly created holding company and the sole managing member of
Shift4 Payments LLC.
Shift4 raised $497 million is gross proceeds through its IPO and
concurrent private offering that the company used to redeem debt,
contributing to a significant reduction in leverage and higher free
cash flow. The company deployed $280 million of proceeds to fully
repay $90 million outstanding under its revolving credit facility,
partially redeem $60 million under its first-lien term loan, and
fully pay down its second-lien term loan of $130 million. The
transaction resulted in a significant improvement in leverage to
6.4x from 9.9x as of March 31, 2020, and S&P expects the company to
sustain leverage below 7x over the coming year as transaction
volumes gradually recover despite a trough in April. Furthermore,
the lower debt balance will reduce interest costs by about $4.7
million on quarterly basis and contribute to higher free cash flow
generation.
S&P's rating also reflects its expectation that Shift4's
performance will improve in the second half of 2020 though
uncertainty from the COVID-19 pandemic remains a risk. The company
reported that at the onset of the pandemic in mid-March to early
April, its hospitality customers experienced about an 80% decline
in gateway transaction volumes while its food and beverage
merchants observed approximately 70% contraction in volumes due to
the shelter-in-place orders and closure of nonessential businesses
mandated across most states. Transaction volumes troughed at the
beginning of April and since then Shift4 has reported a recovery in
its key metrics at a quicker pace than S&P initially anticipated.
The improvement is mainly attributed to several factors such as the
steady reopening of most states, the high quality of the merchant
base, and the company's rapid efforts to expand its
software-enabled capabilities as more customers are embracing
omni-channel payments and new spending habits. As a result,
card-not-present transactions represented over 40% of the company's
volumes in April while they accounted for only 5% before the
pandemic.
Even though the company's pace of recovery has accelerated, S&P
views that macroeconomic weakness stemming from the pandemic
remains a risk. Shift4 derives the majority of its transaction
volumes from end markets such as food and beverage, lodging, and
retail, which have been affected the most by stay-at-home orders
and social distancing across many states. Despite early signs of
rebound in these industries, the trajectory of their recovery
remains uncertain following the pandemic, including the possibility
of resurgence of the coronavirus.
S&P expects revenues to drastically decline in the second quarter
of 2020, but anticipate a quick rebound in the second half of the
year supported by recovery in subscription-based sales and
transaction volumes. S&P now projects annual revenues to contract
in the mid-teens in 2020, better than its previous forecast of
about mid-20% decline. Similarly, S&P expects profitability to
weaken in the second quarter but improve in the second half of the
year. Despite the contraction in sales for 2020, however, S&P
believes that Shift4 will maintain its margin profile due to the
company's efforts in reducing operating expenses and accelerating
the realization of synergies related to prior acquisitions.
Following the IPO and the company's change in corporate and
ownership structure, Searchlight's stake is 36% in economic
interest while public shareholders own about 54% in the newly
created holding company Shift4 Payments Inc. The majority of voting
interest in the holding company, at 50%, is retained by the
company's founder, and about 47% held by Searchlight. In addition,
the sponsor controls two out of seven available seats on the board
of directors. Therefore, S&P no longer views Shift4 as a private
equity controlled entity but it does not anticipate any substantial
changes in the company's financial policy any time soon and expect
management to maintain debt at current levels.
"The stable outlook reflects our view that the company's operating
performance will gradually improve as lockdowns across the nation
ease in the second half of 2020 contributing to leverage sustained
below 7x over the coming year," S&P said.
"We could lower the rating if weak operating performance or high
merchant attrition decrease EBITDA materially causing sustained
leverage above 7x. We could also lower the rating if the company
adopts a more aggressive financial policy such that leverage
remains above 7x, or if it maintains free cash flow to debt below
3%," the rating agency said.
Considering the company's small market share, industry vertical
concentration, and relatively low cash flow generation, an upgrade
is unlikely over the next 12 months. Over the longer term, however,
S&P could raise the rating if the company achieves steady revenue
growth with continued client adoption of its payments and software
solutions while maintaining consistent EBITDA margins causing
leverage to remain below 5x.
SM ENERGY: Moody's Rates $447MM Second Lien Notes 'B3'
------------------------------------------------------
Moody's Investors Service assigned a B3 rating to SM Energy
Company's $447 million second lien notes due 2025. At the same
time, Moody's upgraded SM's senior unsecured rating to Caa2 from Ca
and the company's Probability of Default Rating to Caa1-PD from
Ca-PD. The company's Corporate Family Rating was affirmed at Caa1.
The outlook was revised to stable from negative.
Proceeds from the note's issuance, along with warrants and $53.5
million in cash, funded an exchange of $612 million of its senior
unsecured notes and $107 million of senior convertible notes.
Upgrades:
Issuer: SM Energy Company
Probability of Default Rating, Upgraded to Caa1-PD from Ca-PD
Senior Unsecured Notes, Upgraded to Caa2 (LGD5) from Ca (LGD5)
Senior Unsecured Shelf, Upgraded to (P)Caa2 from (P)Ca
Assignments:
Issuer: SM Energy Company
Senior Secured Second Lien Notes, Assigned B3 (LGD3)
Affirmations:
Issuer: SM Energy Company
Corporate Family Rating, Affirmed Caa1
Outlook Actions:
Issuer: SM Energy Company
Outlook, Revised to Stable from Negative
RATINGS RATIONALE
The upgrade of SM's senior unsecured notes to Caa2 and its PDR to
Caa1-PD reflects the companies significantly reduced near-term
restructuring risk following completion of the debt exchange. The
unsecured rating is one notch below the Caa1 CFR, reflecting a
subordinated claim to SM Energy's assets behind the senior secured
credit facility. The B3 rating on SM's second lien notes, one notch
above the CFR, reflects their advantaged position to the unsecured
notes in the company's capital structure and the small size of the
second lien notes issuance relative to SM's unsecured debt.
SM's Caa1 CFR reflects its still high debt leverage post-exchange -
particularly given the likelihood low oil prices will persist well
into 2021 - and the company's high capital intensity due to the
steep initial decline rates of its shale production. SM's steep
decline rate limits its flexibility to reduce spending in a low
commodity price environment without a sharp and negative production
response. Although the company is well-hedged in 2020 and will be
able to limit its year over year production decline to around 5%, a
much weaker hedge position in 2021 could leave the company
challenged to maintain production if oil price recovery lags
current expectations. SM benefits from a production base (136
mboe/d in the first quarter of 2020) that is similar in size to
many Ba-rated oil producers and some basin diversification. The
company's good inventory of Midland Basin drilling locations,
capable of generating positive returns in an oil price environment
below $40/bbl should allow the company to limit production declines
while generating modest free cash flow.
SM's SGL-3 rating is based on its expectation that the company will
maintain adequate liquidity through early 2021, primarily due to
its large borrowing capacity under its revolving credit facility.
The company had negligible cash and $72 million drawn as of March
31, 2020 under its $1.2 billion senior secured revolving credit
facility, which expires in September 2023. The revolver's borrowing
base was set at $1.1 billion in the April 2020 redetermination,
providing more than $1 billion of availability based on the amount
drawn as of March 31.
Cash flow is buttressed by the company's commodity hedging program,
with about 80% of expected oil production for the second, third and
fourth quarters of 2020 locked in at or above $55/bbl. SM's next
bond maturity is for its $65 million of senior convertible notes
due July 1, 2021, followed by $294 million of senior unsecured
notes coming due in November 2022. Although the debt exchange
didn't yield the magnitude of debt reduction the company was
seeking, its maturity profile is materially improved as a result.
The stable outlook reflects Moody's expectation that SM will be
able to limit annual production decline to around 5% in 2020 and
that the company is likely to achieve cash flow neutrality.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Ratings could be upgraded if the company appears likely to generate
a leveraged full-cycle ratio above 1x and retained cash flow/debt
above 20% in 2021. Ratings could be downgraded if EBITDA/interest
coverage falls below 1.5x or RCF/debt is below 10%.
The principal methodology used in these ratings was Independent
Exploration and Production Industry published in May 2017.
SM Energy Company is a Denver, Colorado-based publicly traded E&P
company with primary production operations in the Eagle Ford Shale
and the Midland Basin of Texas.
STONE QUARRIES: Case Summary & 12 Unsecured Creditors
-----------------------------------------------------
Debtor: Stone Quarries of Tennessee Inc.
158 Norcross Rd
Crossville, TN 38558
Business Description: Stone Quarries of Tennessee Inc. --
http://www.rocktennessee.com-- is a
supplier of quarried stone serving the
building and landscaping industries.
The Company offers natural bed and sawed
stone in irregular, dimensional, and
fieldstone categories.
Chapter 11 Petition Date: June 24, 2020
Court: United States Bankruptcy Court
Middle District of Tennessee
Case No.: 20-03081
Judge: Hon. Charles M. Walker
Debtor's Counsel: Dale Bohannon, Esq.
DALE BOHANNON ATTORNEY
115 S Dixie Ave
Cookeville, TN 38501
Tel: 931-526-7868
Email: dbohannon@dbohannon.net
Estimated Assets: $500,000 to $1 million
Estimated Liabilities: $1 million to $10 million
The petition was signed by James C. Botbyl, president.
A copy of the petition containing, among other items, a list of the
Debtor's 12 unsecured creditors is available for free at
PacerMonitor.com at:
https://is.gd/G5aWbI
STREBOR SPECIALTIES: U.S. Trustee Unable to Appoint Committee
-------------------------------------------------------------
The Office of the U.S. Trustee on June 23, 2020, disclosed in a
court filing that no official committee of unsecured creditors has
been appointed in the Chapter 11 case of Strebor Specialties, LLC.
About Strebor Specialties
Strebor Specialties, LLC, is a Dupo, Ill.-based small to medium
liquid filler with capabilities to do aerosol, liquid and oil
filling.
Strebor Specialties sought bankruptcy protection (Bankr. S.D. Ill.
Case No. 20-30262) on March 10, 2020. The petition was signed by
its manager, Otto D. Roberts, Jr. At the time of the filing,
Debtor disclosed total assets of $1,031,229 and total liabilities
of $6,285,898. Judge Laura K. Grandy oversees the case. The
Debtor tapped Silver Lake Group, Ltd. as its legal counsel.
TERRIER MEDIA: Moody's Lowers Sr. Credit Facilities to 'B1'
-----------------------------------------------------------
Moody's Investors Service downgraded Terrier Media Buyer, Inc.'s
(doing business as Cox Media Group (CMG)) senior credit facilities
rating to B1 from Ba3. Concurrently, Moody's assigned a B1 rating
to CMG's newly issued $150 million incremental 2026 term loan B and
affirmed CMG's B2 corporate family rating, B2-PD probability of
default rating, and Caa1 rating on the company's 2027 senior
unsecured notes. The outlook is stable.
The downgrade of the senior secured rating reflects the increased
proportion of secured debt in the capital structure upon the
closing of the incremental term loan. Moody's expects the proceeds
of the incremental term loan B to add cash onto the balance sheet
and be used for general corporate purposes.
Assignments:
Issuer: Terrier Media Buyer, Inc.
Senior Secured Bank Credit Facility, Assigned B1 (LGD3)
Affirmations:
Issuer: Terrier Media Buyer, Inc.
Probability of Default Rating, Affirmed B2-PD
Corporate Family Rating, Affirmed B2
Senior Unsecured Regular Bond/Debenture, Affirmed Caa1 (LGD5)
Downgrades:
Issuer: Terrier Media Buyer, Inc.
Senior Secured Bank Credit Facilities, Downgraded to B1 (LGD3) from
Ba3 (LGD2)
Outlook Actions:
Issuer: Terrier Media Buyer, Inc.
Outlook, Remains Stable
RATINGS RATIONALE
CMG's B2 CFR reflects (1) the company's aggressive financial policy
as evidenced by elevated leverage (Moody's adjusted debt to 2 year
average EBITDA and pro-forma for the transaction) which Moody's
expects will remain around 6.7x through 2020, absent any voluntary
debt repayment; (2) the company's high exposure to the TV
advertising market which is experiencing a downturn due to
COVID-19's effect on the US economy and is inherently cyclical and
under structural threat from digital advertising displacement; and
(3) execution risk around CMG's standalone business following the
carveout of the stations from Cox.
The B2 CFR also reflects (1) CMG's strong market position, with the
company operating the #1 or #2 station in around 65% of its
markets; (2) the expected growth in retransmission fee revenues,
which in 2019 accounted for around 30% of pro forma adjusted net
revenue; (3) strong free cash flow (FCF) generation (expected to be
around $125 million in 2020) supported by low capital spending.
CMG has a good liquidity profile supported by sizeable positive
free cash flow (FCF) generation. Moody's forecasts that the company
will generate around $125 million in FCF in 2020. On top of this,
the company will have a $325 million revolving credit facility
which is expected to remain undrawn over the coming year. The
revolver contains a springing (at 35% utilization) first lien net
leverage covenant which is set at 6.2x. The company's liquidity
profile is also supported by CMG's long-dated maturity profile with
very little scheduled annual amortization.
The ratings for the debt instruments reflect the overall
probability of default of CMG, reflected in the B2-PD PDR, an
average family loss given default (LGD) rate of 50% and the
composition of the debt instruments in the capital structure. The
senior secured facilities are rated B1 (LGD3) given their secured,
priority claim on material owned property and assets over the
unsecured notes, rated Caa1 (LGD5).
Moody's regards the current COVID-19 pandemic as a social risk
under its ESG framework, given the substantial implications for
health and safety. The response to the COVID-19 outbreak with stay
at home orders, rapid unemployment increases and a potential
looming recession in 2020 has led to advertising demand -- which is
correlated to the economic cycle and consumer confidence --
declining materially in 2020. Its current view on core local TV
advertising is that demand will decline severely in Q2 2020 and
remain materially lower in Q3 2020 compared to 2019. Moody's
currently expects Q4 to show some stabilization and core TV ad
demand in 2021 to return to pre-COVID-19 trends of a structural
mid-single digit percentage decline. As is typical for
broadcasters, the majority of CMG's costs are fixed and there are
few cost saving measures to mitigate the impact of a drop in ad
revenue on the company's EBITDA.
More positively, the COVID-19 pandemic has led to a very strong
increase in viewership of local TV as the concerned audiences have
sought clear, relevant and trustworthy news from their local
broadcasters. While the figures vary by market, Moody's estimates
that CMG's channels will have experienced at least a 30% increase
in viewership during their news programs in April and May.
Governance factors that were taken into consideration include the
company's private equity ownership and financial policy. At close
of the transaction, CMG's leverage (Moody's adjusted debt to 2-year
average EBITDA) was above 6x. Given the current consolidation
trends in the broadcast market, Moody's believes that as leverage
falls to lower levels, the company is likely to engage in further
debt financed M&A.
The stable outlook reflects Moody's expectations that CMG's strong
free cash flow generation will allow the company to reduce the
currently high leverage within the next 12-18 months. The stable
outlook also assumes the separation of CMG from Cox will be
straightforward and that the standalone business' costs will be
proportionate with those of its broadcasting sector peers. The
stable outlooks also reflect the strong fundamentals of the US
local broadcasting industry with increasing high-margin
retransmission fees expected to continue to more than offset
advertising decline.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
CMG's ratings could be upgraded should the company operate at a
leverage (Debt/2-year average EBITDA, Moody's Adjusted) well below
5.25x on a sustained basis.
Ratings could be downgraded should the company's leverage
(Debt/2-year average EBITDA, Moody's Adjusted) be sustained above
6.25x.
The principal methodology used in these ratings was Media Industry
published in June 2017.
Terrier Media Buyer, Inc., doing business as Cox Media Group, is an
affiliate of investment funds managed by Apollo Global Management,
LLC. Headquartered in Atlanta, Georgia, Cox Media Group is
primarily a television broadcasting business with radio assets that
complement the company's portfolio of high-quality television
stations in large, attractive media markets. Cox Media Group owns
or operates 31 television stations across 20 markets and 54 radio
stations across 10 markets. In 2019, the company reported $1.3
billion in adjusted net revenue on a pro forma basis.
TOUCHPOINT GROUP: Raises $145K From Convertible Note Issuance
-------------------------------------------------------------
Touchpoint Group Holdings, Inc., entered into a securities purchase
agreement, pursuant to which the Company issued a convertible
promissory note to FirstFire Global Opportunities Fund LLC. in the
principal amount of $145,000. The Convertible Note carries
interest at the rate of 10% per annum, matures on June 15, 2021,
and is convertible into shares of the Company's common stock, par
value $0.0001, at the Lender's election, after 180 days, at a 35%
discount, provided that the Lender may not own greater than 4.99%
of the Company's common stock at any time. The Convertible Note
contains customary default provisions and may be prepaid only prior
to the 180th day after issuance provided the Company pays the
agreed upon prepayment fee specified in the Convertible Note. The
Securities Purchase Agreement contains customary representations
and warranties.
About Touchpoint
Touchpoint Group Holdings, Inc., headquartered in Miami, Florida,
-- http://touchpointgh.com/-- is a media and digital technology
acquisition and software company, which owns Love Media House, a
full-service music production, artist representation and digital
media business. The Company also and holds a majority interest in
123Wish, a subscription-based, experience marketplace, as well as
majority interest in Browning Productions & Entertainment, Inc., a
full-service digital media and television production company.
Touchpoint Group reported a net loss of $6.63 million for the year
ended Dec. 31, 2019, compared to a net loss of $14.58 million for
the year ended Dec. 31, 2018. As of Dec. 31, 2019, the Company had
$4.83 million in total assets, $2.85 million in total liabilities,
$605,000 in temporary equity, and $1.37 million in total
stockholders' equity.
Cherry Bekaert LLP, in Tampa, Florida, the Company's auditor since
2016, issued a "going concern" qualification in its report dated
April 24, 2020 citing that the Company has recurring losses and
negative cash flows from operations that raise substantial doubt
about its ability to continue as a going concern.
TUESDAY MORNING: Seek Approval to Hire Ernst & Young as Auditor
---------------------------------------------------------------
Tuesday Morning Corporation and its affiliates seek approval from
the U.S. Bankruptcy Court for the Northern District of Texas to
employ Ernst & Young LLP as auditor.
Ernst & Young will render the following audit services:
(a) audit and report on Debtors' annual consolidated financial
statements as of and for the year ending June 30, 2020;
(b) audit and report on the effectiveness of Debtors' internal
control over financial reporting as of June 30, 2020; and
(c) review Debtors' unaudited interim financial information
before they file their quarterly reports on Form 10-Q.
Ernst & Young estimated its fees for the audit services at
$795,000.
The hourly rates for out-of-scope work, by level of professional,
are as follows:
Partner/Principal/Executive Director $900 – $950
Senior Manager $750 – $850
Manager $600 – $700
Senior $450 – $550
Staff $300 – $400
The firm received the sum of $279,332 from Debtors during the 90
days prior to their bankruptcy filing.
John Gregory, a partner at Ernst & Young, disclosed in court
filings that the firm is a "disinterested person" within the
meaning of Section 101(14) of the Bankruptcy Code.
The firm can be reached through:
John T. Gregory
Ernst & Young LLP
2323 Victory Ave.
Dallas, TX 75219
Telephone: (214) 969-8123
About Tuesday Morning Corp.
Tuesday Morning Corporation, together with its subsidiaries, is a
closeout retailer of upscale home furnishings, housewares, gifts,
and related items. It operates under the trade name "Tuesday
Morning" and is one of the original "off-price" retailers
specializing in providing unique home and lifestyle goods at
bargain values. Based in Dallas, Tuesday Morning operated 705
stores in 40 states as of Jan. 1, 2020. For more information,
visit http://www.tuesdaymorning.com/
On May 27, 2020, Tuesday Morning and six affiliates sought Chapter
11 protection (Bankr. N.D. Tex. Lead Case No. 20-31476). Tuesday
Morning disclosed total assets of $92 million and total liabilities
of $88.35 million as of April 30, 2020.
The Hon. Harlin Dewayne Hale is the case judge.
Debtors tapped Haynes and Boone, LLP as general bankruptcy counsel;
Alixpartners LLP as financial advisor; Stifel, Nicolaus & Co., Inc.
as investment banker; A&G Realty Partners, LLC as real estate
consultant; and Great American Group, LLC as liquidation
consultant. Epiq Corporate Restructuring, LLC is the claims and
noticing agent.
UNITI GROUP: Signs Deal to Sell $250M Shares of Common Stock
------------------------------------------------------------
Uniti Group Inc. entered into an ATM Equity Offering Sales
Agreement with BofA Securities, Inc., Goldman Sachs & Co. LLC,
Morgan Stanley & Co. LLC and Wells Fargo Securities, LLC.
Under the terms of the Agreement, the Company may issue and sell,
from time to time to or through the Sales Agents, shares of common
stock, par value $0.0001 per share, having an aggregate offering
price of up to $250,000,000. The Sales Agents will act as the
Company's agents in connection with any offerings of the Shares
under the Agreement. The sales, if any, of the Shares under the
Agreement may be made in sales deemed to be "at-the-market
offerings" as defined in Rule 415 under the Securities Act of 1933,
as amended, including by sales made directly on or through NASDAQ
or another market for the Shares, sales made to or through a market
maker other than on an exchange or otherwise, in negotiated
transactions at market prices prevailing at the time of sale or at
negotiated prices, or as otherwise agreed with the applicable Sales
Agent. The Company will pay the Sales Agents compensation for
sales of the Shares made through the Sales Agents, as sales agents,
under the Agreement, in an amount not to exceed 2% of the gross
sales price of such Shares.
The offering of the Shares pursuant to the Agreement will terminate
upon the earlier of (1) the sale of all shares subject to the
Agreement or (2) the termination of the Agreement by the Company or
the Sales Agents. The Company may terminate the Agreement for any
reason, at any time, upon prior written notice to the Sales Agents,
and each Sales Agent may terminate the Agreement as to itself for
any reason, at any time, upon prior written notice to the Company
and the other Sales Agents. Following termination by a Sales Agent,
the Agreement will remain in effect with respect to the Sales
Agents that have not terminated their obligations under the
Agreement.
The Shares will be issued pursuant to the Company's effective shelf
registration statement on Form S-3ASR (Registration No. 333-237139)
and a prospectus supplement of the Company, filed with the
Securities and Exchange Commission on March 12, 2020 and June 22,
2020, respectively. The prospectus supplement carries forward
approximately 1.83 million shares of Common Stock which remain
unsold pursuant to the Company's previous ATM Equity Offering Sales
Agreement entered into on Sept. 2, 2016 with the Sales Agents.
Prospectus Supplement Filed
On June 22, 2020, the Company filed a prospectus supplement under
the Company's effective shelf registration statement on Form S-3ASR
(Registration No. 333-237139) to satisfy one of its obligations
under the registration rights agreement, dated as of June 28, 2019,
entered into by and among the Company, its indirect subsidiary,
Uniti Fiber Holdings Inc., and Barclays Capital Inc., on behalf of
the initial purchasers, in connection with Uniti Fiber's issuance
of $345,000,000 aggregate principal amount of 4.00% Exchangeable
Senior Notes due 2024 that are exchangeable into shares of the
Company's Common Stock. The Prospectus Supplement covers the
resale from time to time by certain selling stockholders of
38,249,667 shares of Common Stock (plus an indeterminable number of
shares of the Company's Common Stock that may be issued in
connection with a stock split, stock dividend, recapitalization or
other similar event) issuable upon exchange of the Notes.
About Uniti
Headquartered in Little Rock, Arkansas, Uniti --
http://www.uniti.com-- is an internally managed real estate
investment trust. It is engaged in the acquisition and
construction of mission critical communications infrastructure, and
is a provider of wireless infrastructure solutions for the
communications industry. As of March 31, 2020, Uniti owns 6.3
million fiber strand miles, approximately 700 wireless towers, and
other communications real estate throughout the United States.
As of March 31, 2020, the Company had $5.01 billion in total
assets, $6.61 billion in total liabilities, and a total
shareholders' deficit of $1.59 million.
PricewaterhouseCoopers LLP, in Little Rock, Arkansas, the Company's
auditor since 2014, issued a "going concern" qualification in its
report dated March 12, 2020, citing that the Company's most
significant customer, Windstream Holdings, Inc., which accounts for
approximately 65.0% of consolidated total revenues for the year
ended Dec. 31, 2019, filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code, and uncertainties surrounding
potential impacts to the Company resulting from Windstream
Holdings, Inc.'s bankruptcy filing raise substantial doubt about
the Company's ability to continue as a going concern.
* * *
As reported by the TCR on March 20, 2020, Fitch Ratings affirmed
the Long-Term Issuer Default Ratings and security ratings of Uniti
Group, Inc. and Uniti Fiber Holdings at 'CCC'.
As reported by the TCR on March 6, 2020, S&P Global Ratings placed
all ratings on U.S. telecom REIT Uniti Group Inc., including the
'CCC-' issuer credit rating, on CreditWatch with positive
implications. The CreditWatch placement follows the company's
announcement it reached an agreement in principle with its largest
tenant Windstream Holdings Inc. to resolve all legal claims it
asserted against Uniti in the context of Windstream's bankruptcy
proceedings.
VCHP WICHITA: U.S. Trustee Unable to Appoint Committee
------------------------------------------------------
The U.S. Trustee, until further notice, will not appoint an
official committee of unsecured creditors in the Chapter 11 case of
VCHP Wichita LLC, according to court dockets.
About VCHP Wichita
Based in Wichita, Kansas, VCHP Wichita, LLC filed its voluntary
petition under Chapter 11 the Bankruptcy Code (Bankr. M.D. Fla.
Case No. 20-01239) on April 8, 2020. At the time of the filing,
Debtor disclosed assets of between $1 million and $10 million and
liabilities of the same range. Judge Cynthia C. Jackson oversees
the case. Agentis PLLC is Debtor's legal counsel.
VIASAT INC: S&P Rates $400MM Senior Unsecured Notes 'B'
-------------------------------------------------------
S&P Global Ratings assigned its 'B' issue-level rating and '6'
recovery rating to Viasat Inc.'s proposed $400 million senior
unsecured notes due 2028. S&P's '6' recovery rating indicates our
expectation for negligible (0%-10%; rounded estimate: 5%) recovery
for lenders in the event of a payment default.
At the same time, S&P left its 'BB+' issue-level rating on the
company's existing $600 million senior secured notes due 2027 and
its 'B' issue-level rating on the company's existing $700 million
senior unsecured notes due 2025 unchanged. S&P's '1' recovery
rating on the secured notes and its '6' recovery rating on the
unsecured notes also remain unchanged.
S&P anticipates Viasat will use the proceeds from the proposed
notes to fully repay its $390 million of existing revolver
borrowings and for general corporate purposes. S&P believes this
transaction will provide the company with roughly $1 billion of
liquidity that, when combined with its operating cash flow (the
rating agency estimates an average of over $500 million annually
over the next three years), will be sufficient to fund its ViaSat-3
constellation and residential equipment installs through fiscal
year 2022. However, S&P believes the company will need to raise at
least another $300 million to complete the project and maintain
sufficient minimum cash balances and revolver availability.
Fiscal year
2021 2022 2023
Beginning liquidity (mil. $) 992 587 122
Operating cash flow (mil. $) 475 515 575
Capital expenditure (mil. $) 850 950 750
Amortization (mil. $) 30 30 30
Ending liquidity (mil. $) 587 122 (83)
S&P-adjusted leverage (x) Low 4 area Mid 4 area About 4
Note: Liquidity includes revolver availability and cash balances.
Numbers in parentheses are negative.
S&P's 'BB-' issuer credit rating and stable outlook on Viasat
remain unchanged. While S&P expects the company's net leverage to
increase (3.8x as of March 31, 2020) as it uses its available
liquidity to fund its roughly $850 million-$950 million of annual
capital expenditure (capex) over the next two years, the rating
agency forecasts that the company's debt to EBITDA will peak in the
mid-4x area before subsiding, which will provide it with a decent
cushion relative to the rating agency's 5x downgrade threshold.
Additionally, S&P believes Viasat is poised to win a significant
share of Delta Air Lines Inc.'s in-flight WiFi business, which
would improve the company's growth prospect and provide additional
visibility into its revenue and EBITDA growth (this potential
contract is not included in the rating agency's current forecast).
However, while the ViaSat-3 constellation is a good opportunity for
the company to expand globally, it will need to win business from
competitors that have more of an established presence in Europe and
Asia, which could pose a challenge. Additionally, other companies
are launching satellites into low earth orbit (LEO) to compete with
Viasat. While S&P does not expect the company to face significant
new competition in the near term, these competitors could pose a
longer-term risk. If the LEO operators begin to pressure Viasat's
market share and operating margins, it could lead S&P to reevaluate
its view of the business and leverage thresholds, which would
likely pressure the ratings.
ISSUE RATINGS--RECOVERY ANALYSIS
-- S&P's '1' recovery rating on Viasat's $600 million 5.625%
secured notes due 2027 reflects the rating agency's expectation for
very high (90%-100%; rounded estimate: 95%) recovery in a simulated
default. S&P's issue-level rating is 'BB+'.
-- S&P's '6' recovery rating on Viasat's proposed $400 million
notes due 2028 and existing $700 million 5.625% senior unsecured
notes due 2025 indicates its expectation for negligible (0%-10%;
rounded estimate: 5%) recovery for lenders in the event of a
payment default. S&P's issue-level rating is 'B'.
-- The company's revolving credit facility and export-import
credit facility are currently unrated.
Key analytical factors
-- S&P's simulated default scenario contemplates heightened
competitive pressures from terrestrial network providers, satellite
operators, and satellite service providers, which leads to
increased churn and pricing pressure. This, in conjunction with the
high operating costs associated with its near-term satellite
launches, erodes Viasat's profitability. This would cause the
company's cash flow to decline to the point that it cannot cover
its fixed charges (interest expense, required amortization, and
minimum maintenance capex), eventually leading to a default in
2024.
-- Other default assumptions include an 85% draw on the revolving
credit facility; no future draws on the export-import facility and
required amortization payments of $20 million annually; the spread
on the revolving credit facility rises to 5% as covenant amendments
are obtained; and all debt includes six months of prepetition
interest.
-- The export-import facility is assumed to have $70 million
outstanding at default. This facility is directly collateralized by
ViaSat-2 so the secured notes are subordinated to the export-import
facility with respect to the value of ViaSat-2. If ViaSat-2's value
is insufficient to meet the export-import claims, then the
export-import facility would share ratably with the unsecured
noteholders with respect to the remaining value. S&P believes
ViaSat-2's value exceeds $70 million and therefore have shown the
export-import facility as a priority claim ahead of the secured
notes for simplicity.
-- S&P has valued the company on a going-concern basis using a 6x
multiple of the rating agency's projected emergence EBITDA to
reflect the company's satellite assets and customer relationships.
This multiple is in line with the multiples it uses for most of the
other satellite operators it rates.
Simulated default assumptions
-- Default year: 2024
-- EBITDA at emergence: $247 million
-- EBITDA multiple: 6x
Simplified waterfall
-- Gross recovery value: $1.48 billion
-- Net recovery value for waterfall after administrative expenses
(5%): $1.41 billion
-- Obligor/nonobligor valuation split: 100%/0%
-- Priority claim on ViaSat-2: $70 million
-- Value available for senior secured debt: $1.34 billion
-- Estimated senior secured debt: $1.24 billion
-- Recovery expectations: 90%-100% (rounded estimate: 95%)
-- Value available for senior unsecured: $94 million
-- Estimated senior unsecured debt: $1.13 billion
-- Recovery expectations: 0%-10% (rounded estimate: 5%)
VISTA PROPPANTS: U.S. Trustee Appoints Creditors' Committee
-----------------------------------------------------------
The Office of the U.S. Trustee on June 23 appointed a committee to
represent unsecured creditors in the Chapter 11 cases of Vista
Proppants and Logistics, LLC and its affiliates.
The committee members are:
1. The Andersons
c/o Sean Hankinson, VP Sales Rail Group
1947 Briarfield Blvd.
Maumee, OH 43537
419-891-6352p
Sean.hankinson@andersoninc.com
2. MP Systems Co., LLC
c/o David Corley, President
11407 Strang Line Road
Lexesa, KS 66215
913-599-6977
dcorley@midwestprocess.net
3. Schlumberger Technology Corporation
c/o Donald Burell, Credit Manager
3600 Briarpark Drive
Houston, TX 77042
281-285-1963
dburell@slb.com
4. Trinity Industries Leasing Co.
c/o Scott Ewing, Associate General Counsel
2525 N. Stemmons Fwy.
Dallas, TX 75207
214-589-6531
Scott.ewing@trin.net
5. Twin Eagle Sand Logistics, LLC
c/o Andy Branaugh, SVP-Sand & Terminal Logistics
8847 West Sam Houston Parkway North
Houston, TX 77040
832-776-0512 (mobile)
Andy.branaugh@twineagle.com
Official creditors' committees serve as fiduciaries to the general
population of creditors they represent. They may investigate the
debtor's business and financial affairs. Committees have the right
to employ legal counsel, accountants and financial advisors at a
debtor's expense.
About Vista Proppants and Logistics
Vista Proppants and Logistics, LLC is a pure-play, in-basin
provider of frac sand solutions in producing regions in Texas and
Oklahoma, including the Permian Basin, Eagle Ford Shale and
SCOOP/STACK. It is Headquartered in Fort Worth, Texas. For more
information, visit https://vprop.com
Vista Proppants and its affiliates sought protection under Chapter
11 of the Bankruptcy Code (Bankr. N.D. Texas Lead Case No.
20-42002) on June 9, 2020. At the time of the filing, Vista
Proppants had estimated assets of less than $50,000 and liabilities
of between $100 million and $500 million.
Judge Edward L. Morris oversees the cases.
Debtors tapped Haynes and Boone, LLP as its legal counsel.
Kurtzman Carson Consultants, LLC is the claims, noticing, balloting
and solicitation agent.
WIN BIG DEVELOPMENT: Voluntary Chapter 11 Case Summary
------------------------------------------------------
Debtor: Win Big Development, LLC
14362 N. Frank Lloyd Wright Blvd.
#1000
Scottsdale, AZ 85260
Case No.: 20-07495
Chapter 11 Petition Date: June 24, 2020
Court: United States Bankruptcy Court
District of Arizona
Debtor's Counsel: Richard W. Hundley, Esq.
THE KOZUB LAW GROUP, PLC
7537 E. McDonald Drive
Scottsdale, AZ 85250
Tel: 480-624-2700
E-mail: wkozub@kozublaw.com
Estimated Assets: $1 million to $10 million
Estimated Liabilities: $1 million to $10 million
The petition was signed by James Guajardo, manager.
The Debtor failed to include in the petition a list of its 20
largest unsecured creditors.
A copy of the petition is available for free at PacerMonitor.com
at:
https://is.gd/peDHIV
WOOD PROTECTION: Case Summary & 9 Unsecured Creditors
-----------------------------------------------------
Debtor: Wood Protection Technologies, Inc.
1175 Industrial Avenue, Unit R
Escondido, CA 92029
Business Description: Wood Protection Technologies, Inc.
is engaged in the business of paint,
coating, and adhesive manufacturing.
Chapter 11 Petition Date: June 23, 2020
Court: United States Bankruptcy Court
District of Colorado
Case No.: 20-14273
Debtor's Counsel: Warren Katz, Esq.
2949 North Broadway, Unit 2
Chicago, IL 60657
Tel: 949-697-4111
E-mail: wkatz@kentlaw.iit.edu
Total Assets: $360,000
Total Liabilities: $1,837,195
The petition was signed by Steven Plumb, representative.
A copy of the petition containing, among other items, a list of the
Debtor's nine unsecured creditors is available for free at
PacerMonitor.com at:
https://is.gd/eR5FVn
YODEL TECHNOLOGIES: U.S. Trustee Unable to Appoint Committee
------------------------------------------------------------
The U.S. Trustee, until further notice, will not appoint an
official committee of unsecured creditors in the Chapter 11 case of
Yodel Technologies, LLC, according to court dockets.
About Yodel Technologies
Yodel Technologies, LLC is a Florida-based telemarketing company
that develops and uses soundboard technology in combination with
live agents to enhance interactions with prospective clients or
customers. For more information, visit
https://www.yodelvoice.com/
Yodel Technologies filed a Chapter 11 petition (Bankr. M.D. Fla.
Case No. 20-00540) on Jan. 23, 2020. In the petition signed by
Robert Pulsipher, managing member and chief operating officer,
Debtor disclosed $3,126,219 in assets and $6,027,981 in
liabilities. Judge Michael G. Williamson oversees the case.
Debtor tapped Buddy D. Ford, P.A. as bankruptcy counsel; Weinberg
Partners, Ltd. as accountant; and Triumvir Management, LLC as
property manager.
[*] 'Flex Act' Modifies Paycheck Protection Program
---------------------------------------------------
Fox Rothschild LLP wrote in JDSupra an article titled "Easing Path
To Loan Forgiveness, 'Flex Act' Modifies Paycheck Protection
Program".
On June 3, 2020, the Senate unanimously approved H.R., 7010, the
Paycheck Protection Program Flexibility Act of 2020, or Flex Act,
modifying certain provisions of the CARES Act relating to loan
forgiveness under the Paycheck Protection Program (PPP).
The Flex Act, which the House of Representatives approved on May
28, 2020, expands the time during which borrowers can spend PPP
proceeds and ultimately makes it easier for borrowers to obtain
full forgiveness. The Flex Act will become effective if it is
signed by President Trump.
The Flex Act modifies the PPP by:
INCREASING
* the maximum percentage of loan proceeds a borrower can spend on
eligible non-payroll costs to 40% (currently 25%).
REDUCING
* the amount a borrower must spend on payroll costs to 60%
(currently 75%). If less than 60% is spent on payroll costs, there
might be no loan forgiveness.
EXTENDING
* for new loans only, the maturity date is extended from 2 years
to 5 years. However, existing PPP loans can be extended up to 5
years if the lender and borrower agree.
* the "covered period" during which a current borrower may use
PPP proceeds can be extended from 8 weeks to the earlier of (i) 24
weeks following disbursement or (ii) December 31, 2020. A current
borrower still can elect to use the original 8 week period. A new
borrower is not bound by the 8 week period.
* the payment deferral period for a PPP loan until the amount of
loan forgiveness is determined or, for borrowers who do not seek
forgiveness, is extended to 10 months.
PERMITTING
* PPP loan borrowers also may defer certain payroll tax payments
even if there is loan forgiveness
The Flex Act also extends the "Safe Harbor" date for rehiring
employees from June 30, 2020 to December 31, 2020. Specifically,
the law states that, during the period beginning on February 15,
2020 and ending on December 31, 2020, the amount of loan
forgiveness shall be determined without regard to a proportional
reduction in the number of full-time equivalent employees if an
eligible recipient, in good faith:
(a) is able to document (i) an inability to rehire individuals
who were employees of the borrower on February 15, 2020 and (ii) an
inability to hire similarly qualified employees for unfilled
positions on or before December 31, 2020; or
(b) is able to document an inability to return to the same level
of business activity as such business was operating at or before
February 15, 2020, due to compliance with requirements established
or guidance issued by the Secretary of Health and Human Services,
the Director of the Centers for Disease Control and Prevention, or
the Occupational Safety and Health Administration during the period
beginning on March 1, 2020 and ending December 31, 2020, related to
the maintenance of standards for sanitation, social distancing, or
any other worker or customary safety requirements related to
COVID-19.
Key Takeaways
What does this mean for borrowers? It should be easier to achieve
loan forgiveness because a smaller amount of the loan (only 60%)
needs to be used for payroll forgiveness, the time to use loan
proceeds is extended and the need to bring all workers back may be
waived in certain circumstances.
[*] Acceptable Uses of Provider Relief Funds of CARES Act
---------------------------------------------------------
Ellen Bonner and Helaine Fingold of Epstein Becker & Green, wrote
on JD Supra an article titled "Acceptable Use of CARES Act Provider
Relief Funds – Salary Limitation Update":
In a previous post, we discussed the appropriate use of the
Provider Relief Funds authorized and appropriated by Congress under
the Coronavirus Aid, Relief, and Economic Security ("CARES") Act,
Public Health and Social Services Emergency Fund ("Relief Fund")
for healthcare providers and facilities. Within that post, we
specifically discussed the limitation imposed on use of the Relief
Funds for payment of salaries, a topic of great interest to many
recipients. Under the Terms and Conditions, recipients are
prohibited from using the funds for salaries in excess of the
Senior Executive Service Executive Level II amount – an annual
salary of $197,300 – or $16,441 a month. We noted that, although
the Department of Health and Human Services ("HHS") had not spoken
to this requirement with respect to the Provider Relief Funds, HHS
permits other HHS grant Recipients to pay individuals' salaries in
excess of the $197,300 limit with non-federal funds.[1] Also, HHS'
federal contract regulations similarly limit use of federal
contract funds for salary costs to the Executive Level II amount,
but allow for amounts in excess of that limit to be paid with
non-federal funds.[2]
On Friday, May 29, 2020, HHS confirmed that this same approach
applies to Recipients' use of Provider Relief Funds. HHS
communicated this through release of a Frequently Asked Question on
HHS’ definition of Executive Level II pay level.
What is the definition of Executive Level II pay level, as
referenced in the Terms and Conditions? (Added 5/29/2020)
The Terms and Conditions state that none of the funds appropriated
in this title shall be used to pay the salary of an individual,
through a grant or other mechanism, at a rate in excess of
Executive Level II. The salary limitation is based upon the
Executive Level II of the Federal Executive Pay Scale. Effective
January 5, 2020, the Executive Level II salary is $197,300. For
the purposes of the salary limitation, the direct salary is
exclusive of fringe benefits and indirect costs. The limitation
only applies to the rate of pay charged to Provider Relief Fund
payments and other HHS awards. An organization receiving Provider
Relief Funds may pay an individual's salary amount in excess of the
salary cap with non-federal funds.
Accordingly, Recipients may use Relief Funds to pay salaries of
those earning in excess of $197,300, though amounts over $197,300
must be paid from non-federal funds.
As stated in our prior posts, we encourage Recipients to develop
specific mechanisms for tracking and documenting their use of
Provider Relief Funds, particularly in light of HHS’ and the HHS
Office of the Inspector General's ("OIG") statements regarding
their intent to audit providers on their compliance with the Terms
and Conditions applicable to the use of such funds.[3] Recipients
must be mindful that HHS guidance in this area continues to evolve,
with HHS issuing new and revised information. Epstein Becker &
Green continues to monitor HHS' actions for any changes that may
affect our clients.
[1] See Health Resources & Services Administration ("HRSA")
External Grants Policy Bulletin 2020-03E, February 7, 2020.
[2] See 48 C.F.R. §§331.101-70 and 352.231-70.
[3] See, e.g., HHS Announces Additional Allocations of CARES Act
Provider Relief Fund, HHS Press Release, April 22, 2020; HHS
General Relief Fund Distribution FAQs – Intent to Recoup Relief
Fund Payments not Tied to Specific Claims for Reimbursement, Added
May 6, 2020; Audit of CARES Act Provider Relief Funds-Distribution
of $50 Billion to Health Care Providers, OIG Workplan (accessed
June 2, 2020).
[*] Epstein Becker: PPP May Create False Claims Act
---------------------------------------------------
Janene Marasciullo of Epstein Becker & Green wrote on JDSupra an
article "For the Unwary, Paycheck Protection Program May Create
False Claims Act."
The Paycheck Protection Program ("PPP") provided forgivable loans
to assist small businesses with expenses during the COVID-19
shutdown, seemingly creating a lifeline for many of these
enterprises. As explained here, a borrower could obtain a loan
equal to the lesser of $10 million or the sum of its average
monthly payroll costs for 2.5 months, (reduced to the extent that
any individual was paid more than $100,000 per year) plus the
balance of any Economic Injury Disaster Loan received between
January 31, 2020 and April 3, 2020. Like many federal programs,
however, participation in the PPP program requires an extensive
series of certifications that could expose borrowers to liability
under the under the False Claims Act ("FCA"), a Civil War era
statute, that the government has continued to use to combat both
government contract and health care fraud. Borrowers must,
therefore, remain mindful of the key aspects of the FCA as they use
PPP funds and as they apply for loan forgiveness.
Briefly, the FCA creates liability for anyone who knowingly submits
a false claim, or causes another to submit a false claim, for money
to the federal government. The FCA broadly defines the term
"knowingly" to include actions taken with "deliberate ignorance" or
"reckless disregard" of the truth of a claim. The cost of an FCA
violation is substantial. The government can recover: (1) a civil
penalty between $5,000 and $10,000 for each false claim, (2) three
times the amount of damages actually suffered and (3) the costs of
any civil action the government brings to recover a penalty or
damages. In addition, the FCA's "qui tam" provision allows private
persons to bring whistleblower actions on behalf of the government,
and lows such private persons to recover between 15 and 30 percent
of any recovery, depending upon whether the government intervenes
in the case and the quality of the whistleblower's assistance. Qui
tam actions are frequently brought by disgruntled employees, and
hence, the qui tam provision is a particular risk for PPP borrowers
with displaced employees.
The PPP loan and loan forgiveness applications include several
certifications which could trigger FCA liability. The loan
application requires the borrower to certify that: (1) it was in
operation on February 15, 2020 and had employees to whom it paid
salaries and payroll taxes; (2) it needs the loan "to support
ongoing operations" due to uncertainty of current economic
conditions; (3) it will use the funds to retain workers and
maintain payroll, or make mortgage interest, lease, and utility
payments, and that not more than 25% of the forgiven amount would
be for non-payroll costs; (4) it will provide the lender with
documentation verifying the number of its full-time employees, and
the amount of its payroll, mortgage interest, rent and utility
payments during the eight week period following the loan; (5) it
has not and will not receive another loan under the PPP between
February 15, 2020 and December 31, 2020; and (6) the information in
the loan application and supporting documents is true and
accurate.
The PPP loan forgiveness application requires the borrower to (1)
report the dollar value of its payroll and non-payroll costs (e.g.,
mortgage interest, rent or lease, and business utility payments)
and (2) data concerning any reductions it made to the number of its
full time equivalent employees and the salary and wages paid to
employees. In addition, the loan forgiveness application requires
borrowers to certify that the "dollar amount of the forgiveness"
requested: (1) was used to pay authorized costs; (2) includes all
applicable reductions due to decreases in the number of and/or
compensation paid to full time employees; (3) does not include
non-payroll costs in excess of 25%; and (4) does not exceed eight
weeks of 2019 compensation, capped at $15,385 per individual. The
borrower must also certify that (1) it has "accurately verified"
the eligible payroll and non-payroll costs for which it seeks
forgiveness, (2) it has provided required documentation to its
lender, and (3) the forgiveness application is "true and correct in
all material respects."
An inaccurate certification on either application could lead to FCA
litigation exposure because the PPP has been subjected to intense
scrutiny by the government and the media. Attorney General William
Barr asked the public to report any COVID-19 related fraud and
directed the Department of Justice ("DOJ") to "prioritize the
investigation and prosecution" of any COVID-19 related fraud
schemes. Shortly after the first round of PPP funding was
exhausted, and reports indicated that many publicly traded
companies received PPP loans, Treasury Secretary Steven Mnuchin
reminded borrowers of their obligation to make truthful
certifications about their need for loans, and the government
demanded that certain borrowers return the loans.
To further complicate matters, the Treasury and Small Business
Administration (“SBA”) have made conflicting statements about
the PPP. Between April 29, 2020 and May 13, 2020, the Treasury
Department issued Frequently Asked Questions ("FAQs"), indicating
that the SBA will audit any loan over $2 million (FAQ 39),
following the submission of a forgiveness application, but will
deem any borrower who sought a loan of less than $2 million "to
have made the required certification in good faith." (FAQ 46).
However, in a May 22, 2020 Interim Rule, the SBA stated that it
may review loans “of any size” to evaluate whether the
borrower: (1) was eligible for a PPP loan; (2) calculated the loan
amount correctly; (3) used the proceeds for allowable expenses; and
(4) is entitled to loan forgiveness. The SBA also reminded
borrowers that they must keep documentation related to loan
forgiveness for six years after the loan is forgiven or repaid.
Further, these FAQs will not prevent qui tam actions by individual
plaintiffs nor prevent DOJ investigations into loans under $2
million. The media continues to scrutinize PPP and several news
organizations recently filed a lawsuit under the Freedom of
Information seeking the identity of all PPP borrowers and the
amounts of approved loans. Indeed, DOJ reportedly subpoenaed
records from several large banks concerning PPP loans.
In short, the PPP is likely to be the subject of continuing
scrutiny by the government, the media and plaintiffs’ lawyers.
Given the amount of money disbursed through the PPP, the haste with
which many borrowers sought PPP loans, and the confusion over some
PPP requirements, the PPP will likely provide fertile ground for
FCA litigation. Accordingly, PPP borrowers should review their
applications and document the basis for any loan request, the uses
for any loan proceeds, and the basis for any forgiveness request.
Borrowers who have had difficulty retaining employees as planned,
should consult counsel to ensure that they document their efforts
to rehire or retain employees. Further, any borrower who sought a
loan despite having substantial cash on hand, or which exceeded the
statutory calculation, should consult counsel. In addition,
borrowers who will not use loan proceeds for authorized purposes
should consult counsel, especially before submitting an application
for forgiveness. Finally, any borrower that receives audit
requests from the SBA, which is administering the PPP, or any
inquiries from the DOJ should consult counsel before responding.
EBG lawyers have extensive experience defending clients during both
government investigations and qui tam actions brought under the
FCA, and stand ready to assist PPP borrowers who may have questions
about the PPP, the certifications, or who face potential FCA
exposure.
[*] Landlords Hard Hit by Bankruptcy Court Rulings
--------------------------------------------------
Joe Dyton of Connected Real Estate Magazine reports that the
COVID-19 pandemic has forced retailers like Pier One, Neiman Marcus
and JC Penney into bankruptcy, and unfortunately they likely aren't
the last ones to suffer that fate. Confidant Asset Management
Senior Director, Noah Shaffer estimated that 25 or 35 percent of
businesses won't be able to come back from the pandemic-caused
economic fallout, GlobeSt. reports.
The bankruptcy not only hurts the retailers, however. The process
can also be dangerous for the landlords who own the properties
where these retailers operate.
"As more of those [retailers] go through Chapter 11, the creditors
are just going to come in and assume control of the company,"
Shaffer said. "It's not necessarily the best option. But this is
where we're at. There are not a lot of investors willing to jump
into that space right now."
The problem with creditors taking control of a company is they
could reject leases during the bankruptcy period, hurting landlords
in the process. Creditors could potentially "let it die" and
recover their investment if there aren't any bidders, according to
Shaffer.
"That would be the worst outcome," he told GlobeSt. "We're going to
start seeing that across the board if the investment environment
remains depressed."
If leases are rejected, properties would remain empty at the worst
possible time. Shaffer forecasted that there could be an increase
in retail space supply—15 to 20 percent of vacancy—during the
next 18 months. "Do you want to be part of that vacancy during that
time when rates are lower?" Shaffer said. "The answer is no."
How the bankruptcy process hurts landlords
Landlords are typically paid from the bankruptcy proceedings as an
unsecured creditor when a tenant turns down a lease during the
Chapter 11 process. There isn't usually money left over, and if
there is it's "pennies on the dollar" according to Shaffer. However
the landlord regains control of the property early in the process.
The numerous closures in the retail industry have changed this
scenario, GlobeSt. reports. Retailers don't have much, if any, cash
flow from revenue coming in and decreased sales have prevented many
stores from being able to get through the typical three-month
bankruptcy cycle. Retailers have had to ask courts for adjustments
and extensions instead.
"The retailers who filed pre-COVID-19 shut down, such as Pier One
and Modell's, are petitioning the court to extend the bankruptcy
proceeding and for the courts to release them from their obligation
to pay their expenses and bills during the pandemic," Shaffer told
GlobeSt.
Courts have complied with some extension requests, which isn't the
best news for landlords. However the courts believe landlords might
not see anything in terms of payment without this relief.
"(The relief) has essentially allowed retailers to avoid paying,"
Schaffer said. "Pier One filed a few months back, and they
haven’t paid April or May rent. The courts have allowed them not
to pay June, July and potentially August as part of that."
[*] New Interim PPP Loan Forgiveness Ruling for Employers
---------------------------------------------------------
Dena Calo and Erik Pramschufer of Saul Ewing Arnstein & Lehr LLP
wrote an article on JDSupra titled "New Interim-Rule Requires
Employers Seeking PPP Loan Forgiveness to Notify Their State
Unemployment Office If an Employee Declines an Offer for
Reinstatement"
Effective May 28, 2020 the Small Business Administration and the
U.S. Treasury Department --the government agencies overseeing the
Paycheck Protection Program (PPP) -- enacted an interim-rule adding
new requirements for businesses receiving PPP funds who anticipate
seeking forgiveness. In the interim-rule, the agencies seek to
clarify several outstanding questions business owners have raised
as areas throughout the country begin to return to the workplace.
In doing so, however, the agencies have raised new questions, left
some glaring ones unanswered, and altered the Treasury
Department’s previous guidance that businesses have been relying
on.
The Question and Backdrop
The question that the government agencies sought to answer was:
Will a borrower’s loan forgiveness amount be reduced if the
borrower laid-off or reduced the hours of an employee, then offered
to rehire the same employee for the same salary and same number of
hours, or restore the reduction in hours, but the employee declined
the offer?
The agencies' short answer is: No – with conditions.
The question above is commonplace for employers who are asking
employees to return to work. Employers are eager to get people back
into the workplace and resume business operations. Meanwhile many
employees have continuing concerns about exposure to COVID-19 in
the workplace (or on mass transit), and depending on their
financial circumstances may have less incentive to take this risk
while they are eligible for (or are receiving) unemployment
benefits. However, a condition for individuals to remain eligible
for benefits is demonstrating that they are ready, willing and able
to accept work.
To make matters more complicated it is important to also remember
that unemployment laws, processes and benefit conditions are
determined on the state level, meanwhile the PPP program is a
federal program.
It is against this backdrop that employers receiving PPP funds need
to figure out what to do when they attempt to recall an employee
off of furloughed status, but the employee declines the offer. As
part of their application for PPP employers intended that this
person would be paid and built it into their requested loan amount,
and of course expected that this amount would be forgiven. In an
FAQ published by Treasury on April 29, 2020 (link above) the
government responded that employers receiving PPP funds who make a
bona fide offer to an employee to return to work will not have
their loan forgiveness amount reduced, so long as the employer
communicated the offer in writing and the employee’s rejection
was documented by the employer.
The (New) Answer
Now, however, the agencies' most recent interim-rule clarified and
placed additional burdens on employers.
The new interim-rule states that PPP forgiveness will not be
reduced if the employer makes a good faith offer to return the
employee to the workplace, and the offer is declined, so long as
the following conditions are met:
* The good faith offer to rehire (or restore hours) is
communicated in writing during the covered period or the
alternative payroll covered period;
* The offer was for the same salary or wages, and the same number
of hours, as the employee earned in the pay period prior to the
separation;
* The offer was rejected by the employee;
* The borrower/employer documents the offer and the rejection;
and
* The borrower/employer informs the applicable state unemployment
insurance office of such employee’s rejected offer within 30 days
of the rejection.
The last condition is entirely new, and raises questions about how
employers should inform the applicable unemployment insurance
office, and what an employer should do if their employee rejected
their offer of rehiring more than 30 days ago. These questions,
unfortunately, are left unanswered by the interim-rule.
So, What Should Employers Do?
If an employer is receiving PPP funds, has made an offer for
reinstatement, and that offer has been rejected, the new
interim-rule clearly states that in addition to documenting the
rejection, there is now an obligation to inform the state
unemployment office within 30 days in order for those funds to be
later forgiven. For employers whose offer to rehire was rejected
more than 30 days ago, the notice should be sent as soon as
possible.
The next question is how the appropriate state unemployment office
should be informed of the employee declining the offer to rehire.
In this regard, every state is different. For example,
Pennsylvania has created a form that should be filled out and
returned to the unemployment office, and Ohio had originally
published an online portal, but has taken it down while it is
revising "pending policy references." Some states have no reporting
mechanism at all.
The SBA's interim-rule, footnote 4, states that additional
information telling employers how to report information to
applicable unemployment offices will be published on the SBA
website. However, there is no indication where this information
will be posted, and as of this writing, we are unable to find any
such guidance.
For employers looking for clarity amid all of the ongoing questions
in the marketplace right now, this lack of guidance is unfortunate.
Whatever method employers use to inform the unemployment agency, it
should, at a minimum, be in writing and well documented.
Regardless of the initial method of informing the office, if the
unemployment commission requires periodic verifications from
employers, the employee's decision to decline an employment offer
should be referenced, as well as the initial date that the
unemployment office was informed.
In addition to directly affecting PPP forgiveness, the new
requirement raises possible retaliation and discrimination issues
for individuals who object to returning to the workplace based upon
an underlying medical condition or their employers' failure to
follow applicable government orders. We will highlight some of
those issues in a separate blog.
[*] Surge in Chapter 11 Bankruptcy Filings in May
-------------------------------------------------
Reuters report that the filings of commercial bankruptcy in the
U.S. under Chapter 11 of the U.S. Bankruptcy Code rose by 48% in
May 2020 from 2019, marking an initial insolvencies wave arising
from the business disruptions triggered by the COVID-19 pandemic,
the American Bankruptcy Institute said on June 4, 2020.
Chapter 11 filings rose 28% in May from April, ABI said, citing
data from Epiq Systems, including filings by major retail chains
such as J.C. Penney and Neiman Marcus. Total U.S. bankruptcy
filings, meanwhile, fell 42% in May from year earlier, with
consumer filings down 43%, ABI said.
[*] Top Questions for Human Resources for Chapter 11 Filings
------------------------------------------------------------
William W. Kannel, H. Andrew Matzkin and Kaitlin Walsh of MINTZ
wrote on JDSupra an article titled "Top 10 Questions Human
Resources May Have When Their Company is Filing for Chapter 11
Protection":
Businesses in a wide range of industries may now be forced to
consider bankruptcy given the unprecedented economic challenges
caused by the COVID-19 pandemic. This advisory is designed to
provide a high-level view of issues to be considered by human
resources when considering filing for Chapter 11 bankruptcy. Please
note that this advisory focuses specifically on a Chapter 11
bankruptcy (pursuant to which a business will be reorganized)
rather than Chapter 7 bankruptcy (pursuant to which a business will
be liquidated).
In a Chapter 11 proceeding, the company continues to operate its
business as a "debtor-in-possession." The debtor-in-possession's
goal is to turn itself around financially and restructure its
financial obligations, rather than liquidate its assets, although
sometimes a Chapter 11 is filed to sell the company's assets as a
going concern. Immediately upon the filing of a bankruptcy petition
(frequently referred to as the "Petition Date"), the debtor company
is entitled to the benefit of an "automatic stay" that prevents
creditors from continuing or taking actions against it, including
actions to enforce claims that arose prior to the filing. This
gives the debtor a "breathing spell" during which it may continue
to operate in the ordinary course of its business and seek to
reorganize.
Any member of the Mintz team can put you in touch with the right
attorney to provide you with specific guidance on any of these
issues.
1. Can a company in Chapter 11 make wage payments to its
employees and offer health benefits to its employees?
Yes. A debtor-in-possession maintains the ability to pay
employees and offer health benefits in the ordinary course of its
business. If, however, the company was not able to pay all amounts
owing to its employees prior to the Petition Date, then it is
required to obtain permission from the Bankruptcy Court in order to
pay those "pre-petition" wages and benefits following the Petition
Date (the period after the filing of the bankruptcy petition is
generally referred to as "post-petition").
2. Can a company in Chapter 11 make basic decisions regarding
work terms and conditions and related HR matters?
Yes. A debtor-in-possession is generally entitled to conduct
operations, including in relation to its employees, in the ordinary
course of its business following the Petition Date (i.e.,
post-petition). Any action that is atypical, or out of the ordinary
course of business, requires approval of the Bankruptcy Court.
Bankruptcy counsel will assist you in making this distinction.
Further, the debtor-in-possession must remain in compliance with
certain federal and state statutes that require notice be provided
to employees in advance of mass layoffs (i.e., the federal WARN Act
and state WARN analogs). It is important to consult restructuring
professionals in order to ensure compliance with all applicable
law.
3. Can a company in Chapter 11 enter into executive employment
agreements?
It depends. While it may be permissible for a debtor to enter
into a standard executive employment agreement in the ordinary
course of business after filing for bankruptcy protection, it is
best practice to obtain Court approval, especially if there is
anything out of the ordinary course of business about the agreement
(which, for example, is likely the case if such agreement is being
negotiated post-petition for a senior executive). If the agreement
is out of the ordinary course of business, then the debtor company
must seek Court approval and justify the agreement based on the
particular facts and circumstances of the case. Most of the time,
the Court will apply the so-called “business judgment”
standard, which requires that the decision was made on an informed
basis, in good faith, and in the honest belief that the decision
was made in the best interests of the company, when determining
whether to provide such approval.
4. Can a company in Chapter 11 enter into agreements designed to
retain key employees during the pendency of the Chapter 11 case?
Companies in bankruptcy are often concerned about retaining
key employees during the reorganization process. The Bankruptcy
Code places strict limitations on key employee retention plans (or
KERPS) to employees who are considered "insiders." Insiders include
officers, directors, and others in control of the debtor company.
The Bankruptcy Code prohibits payments or obligations to insiders
for the purpose of inducing such person to remain with the debtor's
business, absent an evidentiary finding by the Court that: (a) it
is essential to retain the person because he or she has a bona fide
job offer from another business at the same or greater rate of
compensation; (b) the services provided by the person are essential
to the survival of the business; and (c) either (i) the amount at
issue is not greater than 10 times the amount of the mean transfer
or obligation of a similar kind given to non-management employees
during the calendar year in which the transfer is made or the
obligation is incurred, or (ii) if no such similar transfers or
obligations were made, the amount of the transfer or obligation may
not be greater than an amount equal to 25% of the amount of any
similar transfer or obligation made to or incurred for the benefit
of such insider for any purpose during the calendar year. Debtor
companies will sometimes structure proposed payments to personnel
as key employee incentive programs (or KEIPS) in order to avoid the
limitations in the Bankruptcy Code. However, as a KEIP is itself
outside of the ordinary course of business, it too must be approved
by the Bankruptcy Court. It is important to consult with bankruptcy
counsel in order to distinguish between a KEIP and a KERP and to
structure any such program in a manner most likely to receive
approval by the Bankruptcy Court.
5. Can a company that is contemplating filing for Chapter 11
enter into severance agreements before filing for bankruptcy
protection?
Again, consult your attorney on this one. You will want the
assistance of counsel to weigh your "clawback" risk. When a debtor
takes on new contractual obligations on the "eve of" bankruptcy
filing, such as those attendant to a severance agreement, those
contracts will be closely scrutinized in order to determine whether
they can be cancelled so that value can be brought back into the
debtor company's estate. If a company is insolvent at the time it
makes a transfer or incurs an obligation, or if the debtor receives
less than "reasonably equivalent value" in exchange for a transfer
or obligation, then that transfer or obligation may be subject to
clawback and voided. Please note that the length of the clawback
period (i.e., the length of the period before bankruptcy, during
which time such transactions can be challenged) can vary based on
applicable law and the specific circumstances of the transaction at
issue.
6. Is a company in Chapter 11 liable for severance payments
pursuant to a severance plan, policy, or agreement executed prior
to the bankruptcy filing?
It depends. If the severance agreement is "executory," the
debtor may seek court approval to reject the severance agreement.
Whether an agreement is executory generally is dependent on whether
each party to the agreement has material unperformed obligations on
the Petition Date. If the debtor company rejects the agreement,
then it does not need to continue to perform under the agreement,
although the former employee will have a claim for breach of
contract against the estate, which will be deemed to have arisen
pre-petition and may be subject to a statutory cap under the
Bankruptcy Code. If the severance agreement is with an "insider" of
the debtor company, then the debtor company may not make such
payments unless (a) the payments are part of a program generally
available to all full-time employees, and (b) the amount of the
payment is no greater than 10 times the amount of the mean
severance paid to non-management employees during the year in which
the payment is made to the insider.
7. Can a company in Chapter 11 restructure debts for wages and
health plan benefits?
Yes. A key part of formulating a restructuring plan under
Chapter 11 involves consideration of a company's employee-related
debts. Your bankruptcy counsel will assist you in formulating a
plan that not only makes sense for the future of the company but
also is consistent with the provisions of the Bankruptcy Code,
applicable law and the company's business goals. Generally,
pre-petition employee claims for wages and benefits, up to a
certain amount, are classified as "priority unsecured debt,"
provided certain conditions are met. "Priority unsecured debts" are
paid after secured debts (i.e., debts secured by collateral held by
the bankrupt company), but before other general unsecured debts
(i.e., debts that are not secured by any form of collateral). This
classification applies: (A) to forms of compensation such as unpaid
hourly wages, salaries, commissions, vacation, severance, and sick
leave pay, (B) if earned within 180 days of the company's
bankruptcy filing or when the company ceased operating its
business, whichever is earlier, and (C) up to $13,650 per employee
who files a claim, with such amount adjusted upward for inflation
every 3 years. Claims for wages and benefits which were not earned
within the time frame or exceed the dollar maximum are treated as
general unsecured claims (and, accordingly, do not have priority
status). Similarly, employee claims for unpaid contributions to an
employee benefit plan (e.g., a pension plan) also are classified as
"priority unsecured debt," provided certain conditions are met.
Often a motion seeking Court permission to pay these pre-petition
priority wage and benefit amounts is among the first pleadings a
debtor files in a Chapter 11 bankruptcy proceeding and, assuming
procedural rules are followed, such motions are routinely allowed.
8. Can a company in Chapter 11 terminate employment agreements
or collective bargaining agreements?
Generally, yes. As previously noted, a debtor company may
reject pre-petition agreements if they are "executory." An
unexpired employment agreement is an executory contract because
both the company and the covered employee have material ongoing
obligations under the agreement. Therefore, the debtor company can
reject the agreement, and the employee has a claim against the
debtor's estate. The Bankruptcy Code gives special treatment to
collective bargaining agreements ("CBAs"). In order to reject or
modify a CBA, the debtor company must engage in an expedited
negotiation process for modifying a CBA, and the Court must
evaluate whether the debtor can reject a CBA if negotiations are
unsuccessful. In order to reject a CBA, the Court must determine
(i) that the company made a proposal to the union that provides for
modifications in the employees' benefits and protections that are
necessary to permit reorganization and ensures all affected parties
are treated fairly and equitably; (ii) the authorized
representative of the union refused to accept the proposal "without
good cause," and (iii) the balance of the equities clearly favors
rejection of such agreement.
9. Can a company in Chapter 11 enforce post-employment
covenants?
Yes. Companies in bankruptcy can enforce non-competes,
non-solicits, non-disclosures and similar post-employment
covenants, just as it can outside of bankruptcy, provided that such
covenant is valid and enforceable under applicable law.
10. When a company files for bankruptcy, does the automatic stay
enjoin pending employee litigation?
Yes, generally. The automatic stay enjoins litigation by
employees against the debtor company only. The company's bankruptcy
filing does not stay any proceedings against individuals who are
not themselves in bankruptcy and who may be facing litigation based
on their personal liability related to the company. Also, the
automatic stay does not enjoin prepetition claims brought by
governmental units (e.g., EEOC, NLRB, Secretary of Labor) to
enforce such unit's police or regulatory powers. However, such
governmental unit generally will be stayed from seeking and
enforcing monetary claims.
[^] Recent Small-Dollar & Individual Chapter 11 Filings
-------------------------------------------------------
In re KOHO Software, Inc.
Bankr. M.D. Fla. Case No. 20-04649
Chapter 11 Petition filed June 17, 2020
See https://is.gd/0I4Tfc
represented by: Buddy D. Ford, Esq.
BUDDY D. FORD, P.A
E-mail: All@tampaesq.com
In re Brian Allen Self
Bankr. D. Ariz. Case No. 20-07255
Chapter 11 Petition filed June 17, 2020
represented by: Lamar Hawkins, Esq.
GUIDANT LAW, PLC
Email: lamar@guidant.law
In re Nicolas Thomas Scott and Mandy Lea Scott
Bankr. D. Colo. Case No. 20-14159
Chapter 11 Petition filed June 17, 2020
represented by: David Wadsworth, Esq.
WADSWORTH GARBER WARNER CONRARDY, P.C.
E-mail: dwadsworth@wgwc-law.com
In re Kevin Arthur Schemery and Michelle Simonson Schemery
Bankr. E.D.N.C. Case No. 20-02266
Chapter 11 Petition filed June 17, 2020
represented by: Danny Bradford, Esq.
In re Bounce For Fun, LLC
Bankr. E.D. Tex. Case No. 20-41392
Chapter 11 Petition filed June 17, 2020
See https://is.gd/CHJG8x
represented by: Eric A. Liepins, Esq.
ERIC A. LIEPINS
E-mail: eric@ealpc.com
In re CRGR, LLC
Bankr. M.D. Tenn. Case No. 20-02989
Chapter 11 Petition filed June 18, 2020
See https://is.gd/BYtO4F
represented by: Steven L. Lefkovitz, Esq.
LEFKOVITZ & LEFKOVITZ
E-mail: slefkovitz@lefkovitz.com
In re [N]Site Ventures, LLC
Bankr. D. Nev. Case No. 20-12931
Chapter 11 Petition filed June 18, 2020
See https://is.gd/NguWZW
represented by: Corey B. Beck, Esq.
COREY B. BECK, ESQ.
E-mail: becksbk@yahoo.com
In re Mount Clemens Investment Group, LLC
Bankr. E.D. Mich. Case No. 20-46959
Chapter 11 Petition filed June 19, 2020
See https://is.gd/pLmEW4
represented by: Robert N. Bassel, Esq.
E-mail: bbassel@gmail.com
In re MH, D.M.D. of Tennessee, PLLC
Bankr. M.D. Tenn. Case No. 20-03032
Chapter 11 Petition filed June 19, 2020
See https://is.gd/CLynyK
represented by: Gray Waldron, Esq.
DUNHAM HILDEBRAND, PLLC
E-mail: gray@dhnashville.com
In re Connie Clark Harrison
Bankr. M.D. Tenn. Case No. 20-03015
Chapter 11 Petition filed June 19, 2020
represented by: Henry Hildebrand, Esq.
DUNHAM HILDEBRAND, PLLC
Email: ned@dhnashville.com
In re David Michael Maresca
Bankr. E.D. Va. Case No. 20-11483
Chapter 11 Petition filed June 19, 2020
represented by: Steven Greenfeld, Esq.
In re Bruce Matthew Burke and Jasmine Jaruda Burke
Bankr. C.D. Cal. Case No. 20-10773
Chapter 11 Petition filed June 19, 2020
represented by: Arasto Farsad, Esq.
In re Everett C. Moulton, III
Bankr. W.D. Ark. Case No. 20-71451
Chapter 11 Petition filed June 19, 2020
represented by: Oswald Sparks, Esq.
In re James Michael Hays and Polly Alvirda Hays
Bankr. D. Neb. Case No. 20-40847
Chapter 11 Petition filed June 19, 2020
represented by: Galen Stehlik, Esq.
In re Heart Consultants, LLC
Bankr. D. Md. Case No. 20-16195
Chapter 11 Petition filed June 22, 2020
See https://is.gd/Gz1Lid
represented by: Robert K. Goren, Esq.
GOREN LAW, LLC
E-mail: rgoren@gorentuccilaw.com
In re SRG Eastside, LLC
Bankr. W.D. Pa. Case No. 20-21894
Chapter 11 Petition filed June 22, 2020
See https://is.gd/XCIznW
represented by: Robert O. Lampl, Esq.
ROBERT O LAMPL LAW OFFICE
E-mail: rlampl@lampllaw.com
In re John Francis Hogan
Bankr. N.D. Ga. Case No. 20-67418
Chapter 11 Petition filed June 22, 2020
represented by: William Rountree, Esq.
In re Herbert H. Stone
Bankr. W.D. Wisc. Case No. 20-11611
Chapter 11 Petition filed June 22, 2020
represented by: Michelle Angell, Esq.
KREKELER STROTHER, S.C.
E-mail: mangell@ks-lawfirm.com
In re Charles Collantes Macawile
Bankr. E.D. Cal. Case No. 20-90435
Chapter 11 Petition filed June 22, 2020
represented by: David Johnston, Esq.
In re Epifania Nicolas
Bankr. C.D. Cal. Case No. 20-14304
Chapter 11 Petition filed June 22, 2020
represented by: Eric Anderton, Esq.
In re Robert F. Tambone
Bankr. D. Mass. Case No. 20-11378
Chapter 11 Petition filed June 22, 2020
represented by: Kathleen Cruickshank, Esq.
In re G&S Marble, Inc.
Bankr. S.D. Fla. Case No. 20-16711
Chapter 11 Petition filed June 23, 2020
See https://is.gd/IxHK7l
represented by: Chad Van Horn, Esq.
VAN HORN LAW GROUP, P.A.
E-mail: chad@cvhlawgroup.com
In re Avalone Hospitality, LLC
Bankr. W.D. Tex. Case No. 20-51161
Chapter 11 Petition filed June 23, 2020
See https://is.gd/wvfnUy
represented by: H. Anthony Hervol, Esq.
LAW OFFICE OF H. ANTHONY HERVOL
E-mail: hervol@sbcglobal.net
In re Corfu 77, Corp.
Bankr. S.D.N.Y. Case No. 20-11460
Chapter 11 Petition filed June 23, 2020
See https://is.gd/PWmuKT
represented by: Lawrence F. Morrison, Esq.
MORRISON TENENBAUM, PLLC
E-mail: info@m-t-law.com
In re KR Medical Technologies, LLC
Bankr. S.D. Tex. Case No. 20-33139
Chapter 11 Petition filed June 23, 2020
See https://is.gd/YdfFqO
represented by: Russell Van Beustring, Esq.
THE LANE LAW FIRM, PLLC
In re Scott Franklin Burpee
Bankr. D. Idaho Case No. 20-40485
Chapter 11 Petition filed June 23, 2020
represented by: Brent T. Robinson, Esq. and
Reed W. Cotten, Esq.
In re Michael Cymerman and Meredith W. Cymerman
Bankr. D.D.C. Case No. 20-00271
Chapter 11 Petition filed June 23, 2020
represented by: Claude Alde, Esq.
In re Byron York Priestley
Bankr. C.D. Cal. Case No. 20-11795
Chapter 11 Petition filed June 23, 2020
represented by: Anerio Altman, Esq.
In re Sergio Tellez and Roseanna Tellez
Bankr. C.D. Cal. Case No. 20-15665
Chapter 11 Petition filed June 23, 2020
represented by: Todd Becker, Esq.
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Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than $3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
On Thursdays, the TCR delivers a list of recently filed
Chapter 11 cases involving less than $1,000,000 in assets and
liabilities delivered to nation's bankruptcy courts. The list
includes links to freely downloadable images of these small-dollar
petitions in Acrobat PDF format.
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
Monthly Operating Reports are summarized in every Saturday edition
of the TCR.
The Sunday TCR delivers securitization rating news from the week
then-ending.
TCR subscribers have free access to our on-line news archive.
Point your Web browser to http://TCRresources.bankrupt.com/and use
the e-mail address to which your TCR is delivered to login.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published
by Bankruptcy Creditors Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine
Tumanda, Valerie Udtuhan, Howard C. Tolentino, Carmel Paderog,
Meriam Fernandez, Joel Anthony G. Lopez, Cecil R. Villacampa,
Sheryl Joy P. Olano, Psyche A. Castillon, Ivy B. Magdadaro, Carlo
Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors.
Copyright 2020. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
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re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers. Information contained
herein is obtained from sources believed to be reliable, but is
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The TCR subscription rate is $975 for 6 months delivered via
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are $25 each. For subscription information, contact Peter A.
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*** End of Transmission ***