/raid1/www/Hosts/bankrupt/TCR_Public/211222.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Wednesday, December 22, 2021, Vol. 25, No. 355
Headlines
AVALANCHE COMPANY: Unsecureds to be Paid in Full in 48 Months
DLVAM1302 NORTH: U.S. Trustee Unable to Appoint Committee
INVESTFEED INC: Seeks to Hire Thomas A. Farinella as Legal Counsel
JPA NO. 49 CO.: Case Summary and One Unsecured Creditor
MALLETT INC: Unsecureds to get 25% of Their Claims
NORDIC AVIATION: Case Summary and 30 Largest Unsec. Creditors
RE-PRODECON LLC: Taps Wadsworth Garber Warner Conrardy as Counsel
TALOS ENERGY: Fitch Affirms 'B-' LT IDR, Outlook Stable
ZAPPELLI BODY SHOP: Case Summary & One Unsecured Creditor
*********
AVALANCHE COMPANY: Unsecureds to be Paid in Full in 48 Months
-------------------------------------------------------------
Avalanche Company, LLC, and secured creditors Nicholas Mechling and
Christopher Mechling filed their Disclosure Statement in support of
their First Amended Joint jointly proposed Plan of Reorganization.
The Plan provides that before each Plan Payment becomes due, the
Mechlings shall deposit to the account of the Reorganized Debtor
funds sufficient to make each Plan Payment. The Mechlings
anticipate that the source of these deposits shall be Intellectual
Property Proceeds.
Only to the extent that the Intellectual Property Proceeds received
by the Mechlings is insufficient to fund the Plan Payments, the
Mechlings may, but are not required to, deposit to the account of
the Reorganized Debtor funds sufficient to make the balance of each
Plan Payment. Each advance of funds so deposited by the Mechlings
shall constitute a loan to the Reorganized Debtor. Such loan(s) may
be on any terms agreed to by the Mechlings and the Reorganized
Debtor.
Class 3 - General Unsecured Claims. The Class 3 Allowed Claims
shall bear interest at 3% per annum from and after the Effective
Date, and shall be paid in 48 monthly installments. The first such
installment shall be due on the later of: (i) April 1, 2022 or (ii)
on the first day of the second full month after the Effective Date.
The total installments shall have a Present Value, amortized at 3%
per annum, equal to the amount of the Class 3 Allowed Claims as of
the Effective Date. The installments are graduated in amount, with
smaller installments due during the first year of Plan Payments,
and increasing during the second, third and fourth years.
Notwithstanding any other provision set forth in this section, no
payment shall be made on account of a Class 3 Allowed Claim unless
all Plan Payments owing to the Class 2 Creditor, which first became
due on or before the date on which the date on which the subject
Class 3 payment is to be made, have been made. The Reorganized
Debtor is permitted to prepay all or a portion of the Class 3
Allowed Claims at any time and from time to time, but only if all
Unclassified Claims, and the Class 2 Claim, have been Paid in Full.
Class 3 is impaired.
Attorney for Debtor
Avalanche Company, LLC:
Bruce R. Babcock 085878
4808 Santa Monica Ave.
San Diego, CA 92017
Telephone: (619) 222-2661
Attorneys for Creditors Nicholas Mechling
and Christopher Mechling:
Dean T. Kirby, Jr. 090114
Roberta S. Robinson 099035
KIRBY & McGUINN, A P.C.
707 Broadway, Suite 1750
San Diego, California 92101-5393
Telephone: (619) 685-4000
Facsimile: (619) 685-4004
A copy of the Disclosure Statement dated December 8, 2021, is
available at https://bit.ly/3Gnl4Js from PacerMonitor.com.
About Avalanche
Company
Avalanche Company, LLC, a San Diego, Calif.-based owner of sporting
goods, hobby and musical instrument stores, sought protection under
Chapter 11 of the Bankruptcy Code (Bankr. S.D. Cal. Case No.
20-01229) on March 3, 2020. At the time of the filing, the Debtor
disclosed assets of between $1 million and $10 million and
liabilities of the same range. Judge Christopher B. Latham
oversees the case. The Debtor is represented by the Law Office of
Bruce R. Babcock, Esq.
DLVAM1302 NORTH: U.S. Trustee Unable to Appoint Committee
---------------------------------------------------------
The U.S. Trustee for Region 21, until further notice, will not
appoint an official committee of unsecured creditors in the Chapter
11 case of DLVAM1302 North Shore, LLC, according to court dockets.
About DLVAM1302 North Shore
Anna Maria, Fla.-based DLVAM1302 North Shore, LLC filed a petition
for Chapter 11 protection (Bankr. M.D. Fla. Case No. 21-05371) on
Oct. 20, 2021, disclosing $1,988,681 in total assets and $1,585,279
in total liabilities. Floyd Calhoun, manager, signed the petition.
Judge Catherine Peek Mcewen oversees the case. The Debtor tapped
Buddy D. Ford, P.A. as legal counsel.
INVESTFEED INC: Seeks to Hire Thomas A. Farinella as Legal Counsel
------------------------------------------------------------------
InvestFeed, Inc. seeks approval from the U.S. Bankruptcy Court for
the Eastern District of New York to employ the Law Office of Thomas
A. Farinella, PC as its legal counsel.
The firm will render these legal services:
(a) assist the Debtor in administering this Chapter 11 case;
(b) make such motions or take such action as may be
appropriate or necessary under the Bankruptcy Code;
(c) represent the Debtor in prosecuting adversary proceedings
to collect assets of the estate and such other actions as the
Debtor deem appropriate;
(d) take such steps as may be necessary for the Debtor to
marshal and protect the estate's assets;
(e) negotiate with the Debtor's creditors in formulating a
plan of reorganization for the Debtor in this case;
(f) draft and prosecute the confirmation of the Debtor's plan
of reorganization in this case; and
(g) render such additional services as the Debtor may require
in this case.
The hourly rates of the firm's counsel and staff are as follows:
Attorneys $400
Clerks $200
Paraprofessionals $200
The Debtor paid the firm an initial retainer of $2,000.
Thomas Farinella, Esq., a member at the Law Office of Thomas A.
Farinella, disclosed in a court filing that the firm is a
"disinterested person" as that term is defined in Section 101(14)
of the Bankruptcy Code.
The firm can be reached through:
Thomas A. Farinella, Esq.
LAW OFFICE OF THOMAS A. FARINELLA, PC
260 Madison Avenue, 8th Floor
New York, NY 10016
Telephone: (917) 319-8579
Email: tf@lawtaf.com
About InvestFeed Inc.
InvestFeed, Inc. filed its voluntary petition for relief under
Chapter 11 of the U.S. Bankruptcy Code (Bankr. E.D.N.Y. Case No.
21-41025) on Apr. 19, 2021, listing under $1 million in both assets
and liabilities. Judge Elizabeth S. Stong oversees the case. The
Law Office of Thomas A. Farinella, PC serves as the Debtor's
counsel.
JPA NO. 49 CO.: Case Summary and One Unsecured Creditor
-------------------------------------------------------
Debtor: JPA No. 49 Co., Ltd.
Kasumigaseki Common Gate West Tower
3-2-1 Kasumigaseki
Chiyoda-Ku TOKYO 100-0013
Business Description: JPA No. 49 Co., Ltd. and affiliate JPA No.
111 Co., Ltd., are Japanese corporations.
JP Lease Products & Services Co. Ltd.,
directly owns 100% of the equity interest
in the Debtors.
Chapter 11 Petition Date: December 17, 2021
Court: United States Bankruptcy Court
Southern District of New York
Case No.: 21-12076
Debtor's Counsel: Kyle J. Ortiz
Togut, Segal & Segal LLP
Tel: 212-594-5000
E-mail: kortiz@teamtogut.com
Estimated Assets: $100 million to $500 million
Estimated Liabilities: $100 million to $500 million
Teiji Ishikawa, representative director, signed the petition.
List of Creditors Who Have the 20 Largest Unsecured Claims and
Are Not Insiders:
Entity Nature of Claim Claim Amount
------ --------------- ------------
JP Lease Product & Services Co.
Kasumigaeski Common Gate
West Tower
3-2-1 Kasumigaeski
Chiyoda-Ku, Tokyo Japan Loan/Debt $1,461,803
A copy of the Debtor's list of 1 unsecured creditor filed together
with the petition is available for free at PacerMonitor.com at:
https://www.pacermonitor.com/view/MUWRV6I/JPA_No_49_Co_Ltd__nysbke-21-12076__0001.0.pdf?mcid=tGE4TAMA
MALLETT INC: Unsecureds to get 25% of Their Claims
--------------------------------------------------
Mallett Inc. submitted a Disclosure Statement.
The Debtors assets are cash in the amount of $3,500,000, most of
which constitutes the Subtenant settlement proceeds, a $100,000
security deposit held by the Landlord, and the potential right to
recover New York City real property taxes paid in advance.
Class 2 - General Unsecured Claims. Scheduled Claims total
approximately $13,181,709, representing the Landlord's Claim of
$1,278,051.00, $11,879,790 of insider general unsecured claims, and
$23,868 of miscellaneous vendor debt. Payment on the Effective Date
of each Class 2 Creditor's pro-rata share of the Debtor's Cash
after payment of Administrative Claims, statutory fees, and
Priority Claims. The Debtor estimates a 25% distribution to each
claimant if all scheduled Class 4 Claims are Allowed in the amounts
scheduled. Class 2 is impaired.
Effective Date payments under the Plan will be paid from the
Debtor's Cash on hand of approximately $3,508,346.
ATTORNEYS FOR THE DEBTOR:
Mark A. Frankel
BACKENROTH FRANKEL & KRINSKY, LLP
800 Third Avenue
New York, New York 10022
Telephone: (212) 593-1100
Facsimile: (212) 644-0544
A copy of the Disclosure Statement dated December 8, 2021, is
available at https://bit.ly/3lSC16x from PacerMonitor.com.
About Mallett
Inc.
New York-based Mallett Inc. sought protection under Chapter 11 of
the Bankruptcy Code (Bankr. S.D.N.Y. Case No. 21-11619) on Sept.
15, 2021, listing $3,665,011 in assets and $13,181,708 in
liabilities. The petition was signed by Graham Shircore as
director. Judge James L. Garrity Jr. oversees the case. Backenroth
Frankel & Krinsky, LLP is the Debtor's legal counsel.
NORDIC AVIATION: Case Summary and 30 Largest Unsec. Creditors
-------------------------------------------------------------
Lead Debtor: Nordic Aviation Capital Designated Activity Company
Gardens International
550 Andrews Avenue, Suite 300
Limerick Ireland V94 4D83
Business Description: NAC is the industry's leading regional
aircraft lessor serving almost 70 airlines
in approximately 45 countries. NAC's fleet
of 475 aircraft includes ATR 42, ATR 72, De
Havilland Dash 8, Mitsubishi CRJ900/1000,
Airbus A220 and Embraer E-Jet family
aircraft.
On the Web: http://www.nac.dk
Chapter 11 Petition Date: December 17, 2021
Court: United States Bankruptcy Court
Eastern District of Virginia
Affiliates that simultaneously sought Chapter 11 protection on Dec.
17, 2021:
Entity Case No.
------ --------
Nordic Aviation Capital Pte. Ltd. 21-33688
NAC Aviation 17 Limited 21-33689
NAC Aviation 20 Limited 21-33690
Nordic Aviation Capital A/S 21-33691
Additional 113 affiliates that sought Chapter 11 protection on
December 19, 2021:
Entity Case No.
------ --------
Nordic Aviation Capital
Designated Activity Co. 21-33693
ALC ATR 426 1012, LLC 21-33696
ALC ATR 426 1018, LLC 21-33697
ALC ATR 726 1086, LLC 21-33698
ALC ATR 726 1103, LLC 21-33695
ALC ATR 726 1112, LLC 21-33701
Aldus Portfolio B Limited 21-33705
Aldus Portfolio Leasing Limited 21-33708
Argos Aviation Malta Limited 21-33712
Enclave Aviation Sweden AB 21-33719
Eagle I Limited 21-33716
Fortuna Aviation Desginated Activity Company 21-33720
Fortuna Aviation Holding Limited 21-33700
Freyja Aviation Four Ireland Limited 21-33714
Freyja Aviation One Ireland
Designated Activity Company 21-33718
Freyja Aviation One Malta Limited 21-33703
Freyja Aviation Three Ireland Limited 21-33717
Freyja Aviation Two Ireland Limited 21-33721
JAG VIII LLC 21-33710
Jetscape Aviation Group Ltd. 21-33704
Jetscape Aviation Group, LLC 21-33706
Jetscape Commercial Jets Limited 21-33707
Jetscape, Inc. 21-33709
Magni Aviation One Sweden AB 21-33711
Merlano Limited 21-33713
Minerva Aviation Malta Limited 21-33715
NAC Aviation 10 Limited 21-33699
NAC Aviation 11 Limited 21-33702
NAC Aviation 12 Limited 21-33743
NAC Aviation 14 Limited 21-33745
NAC Aviation 15 Limited 21-33748
NAC Aviation 16 Limited 21-33725
NAC Aviation 17 Limited 21-33689
NAC Aviation 18 Limited 21-33731
NAC Aviation 19 Limited 21-33735
NAC Aviation 2 A/S 21-33694
NAC Aviation 2 Limited 21-33722
NAC Aviation 20 Limited 21-33690
NAC Aviation 21 Limited 21-33737
NAC Aviation 22 Limited 21-33742
NAC Aviation 23 Limited 21-33744
NAC Aviation 24 Limited 21-33746
NAC Aviation 25 Limited 21-33747
NAC Aviation 26 Limited 21-33749
NAC Aviation 27 Limited 21-33724
NAC Aviation 28 Limited 21-33726
NAC Aviation 29 Designated Activity Company 21-33727
NAC Aviation 3 A/S 21-33723
NAC Aviation 3 Limited 21-33728
NAC Aviation 30 Limited 21-33729
NAC Aviation 31 Limited 21-33730
NAC Aviation 32 Limited 21-33732
NAC Aviation 33 Limited 21-33734
NAC Aviation 34 Limited 21-33739
NAC Aviation 35 Limited 21-33740
NAC Aviation 36 Limited 21-33741
NAC Aviation 4 Limited 21-33733
NAC Aviation 6 Limited 21-33736
NAC Aviation 7 Limited 21-33738
NAC Aviation 8 Limited 21-33778
NAC Aviation Canada Inc. 21-33752
NAC Aviation Colorado 1 LLC 21-33755
NAC Aviation Colorado 2 LLC 21-33761
NAC Aviation Cyprus 1 Limited 21-33764
NAC Aviation Cyprus 2 Limited 21-33768
NAC Aviation Cyprus 3 Limited 21-33771
NAC Aviation France 1 SAS 21-33773
NAC Aviation France 5 SAS 21-33751
NAC Aviation France 6 SAS 21-33762
NAC Aviation France 7 SAS 21-33766
NAC Aviation UK 1 Limited 21-33759
NAC Aviation UK 2 Limited 21-33775
NAC Aviation UK 3 Limited 21-33774
NAC Aviation US LLC 21-33772
NAC Services China Co., Ltd 21-33770
NAC Services France SAS 21-33756
NAC Services Malta Limited 21-33750
NAC Services UK Limited 21-33753
NK Aviation Limited 21-33754
NK Leasing Limited 21-33776
Nordic Aviation Capital A/S 21-33691
Nordic Aviation Capital Inc. 21-33757
Nordic Aviation Capital Pte. Ltd. 21-33688
Nordic Aviation Contractor (Ireland) Limited 21-33758
Nordic Aviation Financing ApS 21-33760
Nordic Aviation Financing One Pte. Ltd. 21-33763
Nordic Aviation Leasing Eight Pte. Ltd. 21-33765
Nordic Aviation Leasing Eighteen Pte. Ltd. 21-33767
Nordic Aviation Leasing Eleven Pte. Ltd. 21-33769
Nordic Aviation Leasing Fifteen Pte. Ltd. 21-33792
Nordic Aviation Leasing Fourteen Pte. Ltd. 21-33795
Nordic Aviation Leasing Nine Pte. Ltd. 21-33798
Nordic Aviation Leasing Nineteen Pte. Ltd. 21-33800
Nordic Aviation Leasing Pte. Ltd. 21-33801
Nordic Aviation Leasing Seven Pte. Ltd. 21-33802
Nordic Aviation Leasing Seventeen Pte. Ltd. 21-33803
Nordic Aviation Leasing Six Pte. Ltd. 21-33804
Nordic Aviation Leasing Sixteen Pte. Ltd. 21-33805
Nordic Aviation Leasing Twelve Pte. Ltd. 21-33799
Nordic Aviation Leasing Twenty Eight Pte. Ltd 21-33788
Nordic Aviation Leasing Twenty Five Pte. Ltd. 21-33793
Nordic Aviation Leasing Twenty Four Pte. Ltd. 21-33791
Nordic Aviation Leasing Twenty Nine Pte. Ltd. 21-33797
Nordic Aviation Leasing Twenty One Pte. Ltd. 21-33785
Nordic Aviation Leasing Twenty Pte. Ltd. 21-33790
Nordic Aviation Leasing Twenty Seven Pte. Ltd 21-33794
Nordic Aviation Leasing Twenty Three Pte. Ltd 21-33796
Nordic Aviation Leasing Twenty Two Pte. Ltd 21-33777
Nordic Aviation Leasing Two Pte. Ltd. 21-33779
Nordic Aviation Services Limited 21-33780
Nordic Aviation Services US, LLC 21-33781
Tiradentes Portfolio A Limited 21-33782
Tiradentes Portfolio B Limited 21-33783
Tiradentes Portfolio C Limited 21-33784
Tiradentes Portfolio D Limited 21-33786
Tyche Aviation Designated Activity Company 21-33787
Tyche Aviation Holding Limited 21-33789
Debtors'
General
Bankruptcy
Counsel: KIRKLAND & ELLIS LLP
Debtors'
Co-Bankruptcy
Counsel: Michael A. Condyles
KUTAK ROCK LLP
Tel: 804-644-1700
E-mail: michael.condyles@kutakrock.com
Debtors'
financial
advisor: N.M. ROTHSCHILD & SONS LIMITED
Debtors'
Co-corporate
Counsel: LAW FIRM OF CLIFFORD CHANCE LLP
Debtors'
Co-corporate
Counsel: LAW FIRM OF WILLIAM FRY LLP
Debtors'
Co-corporate
Counsel: LAW FIRM OF GORRISSEN FEDERSPIEL
Debtors'
restructuring
and tax advisor: ERNST & YOUNG LLP
Debtors' Tax and
Accounting
Advisors: PRICEWATERHOUSECOOPERS LLP
Debtors'
Claims Agent: EPIQ CORPORATE RESTRUCTURING, LLC
Estimated Assets: $1 billion to $10 billion
Estimated Debt: $1 billion to $10 billion
A copy of the list of 30 largest unsecured creditors filed together
with the petition is available for free at PacerMonitor.com at:
https://www.pacermonitor.com/view/SCBZDOA/Nordic_Aviation_Capital_Pte_Ltd__vaebke-21-33688__0001.0.pdf?mcid=tGE4TAMA
RE-PRODECON LLC: Taps Wadsworth Garber Warner Conrardy as Counsel
-----------------------------------------------------------------
RE-ProDeCon LLC seeks approval from the U.S. Bankruptcy Court for
the District of Colorado to employ Wadsworth Garber Warner
Conrardy, PC as its legal counsel.
The firm will render these legal services:
(a) prepare legal papers;
(b) perform all legal services for the Debtor; and
(c) represent the Debtor in any litigation which the Debtor
determines is in the best interest of the estate whether in state
or federal court(s).
The firm received a retainer in the amount of $11,738 from the
Debtor.
The hourly rates of the firm's counsel and staff are as follows:
David V. Wadsworth $450
Aaron A. Garber $425
David J. Warner $350
Aaron J. Conrardy $350
Lindsay S. Riley $250
Anthony Camera $200
Paralegals $125
In addition, the firm will seek reimbursement for expenses
incurred.
David Wadsworth, an attorney at Wadsworth Garber Warner Conrardy,
disclosed in a court filing that the firm is a "disinterested
person" as that term is defined in Section 101(14) of the
Bankruptcy Code.
The firm can be reached through:
David V. Wadsworth, Esq.
Wadsworth Garber Warner Conrardy, PC
2580 West Main Street, Suite 200
Littleton, CO 80120
Telephone: (303) 296-1999
Facsimile: (303) 296-7600
Email: dwadsworth@wgwc-law.com
About RE-ProDeCon LLC
RE-ProDeCon LLC filed its voluntary petition for relief under
Chapter 11 of the Bankruptcy Code (Bankr. D. Colo. Case No.
21-16027) on Dec. 13, 2021, listing $95,981 in assets and
$1,225,263 in liabilities. Tatjana Twerskoi, member, signed the
petition. Judge Elizabeth E. Brown oversees the case. Wadsworth
Garber Warner Conrardy, PC serves as the Debtor's counsel.
TALOS ENERGY: Fitch Affirms 'B-' LT IDR, Outlook Stable
-------------------------------------------------------
Fitch Ratings has affirmed the Long-Term Issuer Default Rating
(IDR) of Talos Energy Inc. (Talos) and Talos Production Inc. at
'B-'. Fitch has also affirmed the 'BB-'/'RR1' rating for the
first-lien revolver and a the 'B'/'RR3' rating for Talos' senior
second-lien notes. The Rating Outlook is Stable.
Talos' ratings reflect its relatively small, higher margin,
liquids-focused asset profile with current production in the low-
to mid-60 thousand barrels of oil equivalent per day (mboepd). Oil
accounts for approximately 70%+ of production, and its offshore
liquids production receives premium pricing to West Texas
Intermediate (WTI).
The ratings also consider a neutral to slightly positive FCF
profile over the forecasted period; relatively conservative balance
sheet; manageable capital program; attractive exploitation and
exploration inventory, and adequate liquidity. This is offset by
potentially significant environmental remediation costs, relatively
higher operating costs, and relatively weaker access to capital
markets.
KEY RATING DRIVERS
Offshore E&P: Talos' focus as a smaller competitor in the offshore
Gulf of Mexico results in an asset profile that is different from
the typical shale-driven onshore exploration and production (E&P)
issuer. Differences include relatively low asset acquisition costs,
which may be offset by higher plugging and abandonment (P&A)
obligations; lower decline rates; and typically, higher oil-price
realizations. Challenges associated with the business model include
execution risk associated with new exploration projects;
substantial capital requirements; longer spud to first oil times;
materially higher environmental remediation costs; the need to post
significant financial assurances to third parties to guarantee
remediation work; and the tail risks from hurricane activity and
potential oil spills.
Improving Liquidity Situation: Talos has taken actions to improve
its liquidity position, including the note refinancing in late-2020
and the note add-on stock offering in early-2021. These actions
allowed the company to extend maturities and reduce borrowings
under the credit facility. The next note maturity is not until 2026
and the revolver matures in 2024. Fitch estimates Talos will be FCF
positive over the forecasted horizon and expects excess cash to be
used to reduce revolver borrowings. Although Talos was able to
access both the debt and equity capital markets over the past year,
Fitch notes that the bonds trade at a material discount to other
energy issuers, which may limit future access.
Capex Supports FCF Generation: Talos is expected to generate
positive FCF based on Fitch's price deck ($67/bbl - 2022; $57/bbl -
2023; $50/bbl - long term). The low decline rate of its wells
provides for enhanced capital efficiency that somewhat offsets the
effects during a period of low oil prices and helps protect cash
flow. The company's normalized unit economics coupled with lower
capital-intensive projects, such as asset management, in-field
drilling and exploitation, result in a cash flow profile that
supports discretionary, exploratory capital, which may potentially
transform the longer-term asset base in better commodity price
environments. The capital program should support low, single-digit
near-term production growth on average through the forecast, while
maintaining longer term exploration upside.
Substantial Decommissioning Costs: Due to the company's focus on
mature offshore assets and an active M&A strategy, Talos'
environmental remediation costs for P&A are elevated compared with
onshore peers. Asset retirement obligations (AROs) as of Sept. 30,
2021 totaled $458 million. Fitch expects annual P&A costs of $60
million over the forecasted horizon. Fitch believes there is
potential for reduced outlays to the degree the company is able to
extend the lives of fields through recompletions and workovers.
Hedge Program: Talos is required to hedge 60% of proved developed
production on a rolling 12-month basis. Fitch believes this amount
is sufficient, although would be more comfortable with a higher
hedging plan until revolver borrowings were further reduced.
Consistent hedging over the longer term should be positive to the
credit profile, as it supports development funding and reduces cash
flow risk.
Carbon Capture and Storage: Talos is creating a subsidiary to
explore opportunities in Carbon Capture and Storage (CC&S) and use
its expertise in conventional oil and gas geology, engineering and
project delivery. The company has announced a letter of intent to
develop a CC&S project with Freeport LNG Development, L.P. and was
awarded a second project by the state of Texas. The subsidiary
would be deemed unrestricted and non-recourse to Talos debt.
Management plans to fund the venture with project financing debt,
although there may be some equity contributions from the parent.
The venture does not benefit the restricted group's credit profile
directly, but Fitch sees potential benefits in that it may assuage
investor ESG concerns, provides a new growth prospect, adds
diversification.
Zama Project Pending: Talos' owns offshore acreage in Mexico, which
includes the Zama discovery in Block 7. The company has a 35%
working interest in the reservoir, which Netherland Sewell &
Associates estimates has 670 million barrels of oil equivalent to
(mmboe)-1,010 mmboe of recoverable resource and approximately 94%
oil. On July 2, 2021, Mexico's Ministry of Energy (SENER) declared
Petroleos Mexicanos (PEMEX) as the operator of Zama. Talos
submitted Notices of Dispute to the Mexican Government on Sept. 3,
2021. The company is continuing to negotiate with SENER and the
outcome is unclear. Fitch estimates that Talos has invested
approximately $105 million into the project. Fitch does not believe
this is a material credit negative given the sunk costs of the
project.
DERIVATION SUMMARY
Talos' positioning against the Fitch-rated offshore, independent
E&P sector is mixed. Third quarter production was 57 mboepd
although Fitch believes current normalized production is in the
low- to mid-60 mboepd excluding the impact of hurricanes. Talos'
production size is smaller than similarly rated, onshore operators,
such as Baytex Energy (B/Stable) at 80mboepd or 81% liquids and
Callon Petroleum (B/Stable) at 100 mboepd or 83% liquids. It is
materially higher than EnVen Energy (B-/Stable) with production of
20 mboepd or 88% liquids.
Talos has historically managed at debt levels below 2.0 on a
debt/EBITDA basis and Fitch expects this to continue in the
post-pandemic forecast horizon. Despite the low leverage levels,
Fitch remains concerned regarding the relatively high borrowings
outstanding on the revolver, challenging access to debt capital
markets although there are no near term refinancings, and smaller
scale relative to other E&P issuers.
The company's offshore footprint exposes it to significantly higher
remediation, or P&A costs, than onshore shale-based single 'B'
peers. Operational risks are also higher, given potentially adverse
effects of any oil spills or hurricane activity on a company of
Talos' size.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- WTI oil prices of $67/bbl in 2022, $57/bbl in 2023, and
$50/bbl in the long term.
-- Henry Hub natural gas prices of $3.25 per thousand cubic feet
(mcf) in 2022, $2.75/mcf in 2023 and $2.50/mcf thereafter.
-- Premium differentials of $1.50 to WTI through the forecast.
-- Production slightly lower in 2022 due to drydocking and low,
single-digit increases thereafter.
-- Capex including P&A of $425 million 2022, $440 million in 2023
and $350 million in 2024.
-- FCF allocated toward paydown of revolver.
KEY RECOVERY RATING ASSUMPTIONS
The recovery analysis assumes that Talos Energy, Inc. would be
reorganized as a going-concern in bankruptcy rather than
liquidated. Fitch has assumed a 10% administrative claim.
Going-Concern (GC) Approach
Fitch assumed a bankruptcy scenario exit EBITDA of $300 million.
This estimate considers a prolonged commodity price downturn
($32/WTI and $1.65/mcf gas lows in 2023, increasing to $42/bbl WTI
and $2.25/mcf gas in 2024) causing liquidity constraints and
inability to access capital markets to refinance debt. The GC
EBITDA estimate reflects Fitch's view of a sustainable,
post-reorganization EBITDA level upon which Fitch bases the
enterprise valuation.
An EV multiple of 3.75x is applied to the GC EBITDA to calculate a
post-reorganization enterprise value versus the historical energy
upstream sub-sector multiple of 2.8x-5.6x for recent E&P
bankruptcies, and median EV/EBITDA multiples in observed offshore
transactions in the 2.0-4.0x range. The lower multiple also
reflects the impact of Asset Retirement Obligations and Surety
bonds.
These assumptions lead to an EV of $1,125 million, greater than the
liquidation valuation.
Liquidation Approach
The liquidation estimate reflects Fitch's view of the value of the
company's E&P assets that can be realized in sale or liquidation
processes conducted during a bankruptcy or insolvency proceeding
and distributed to creditors. Fitch used historical transaction
data for the GoM blocks on a $/bbl, $/1P, $/2P, $/acre and PDP
PV-10 basis to attempt to determine a reasonable sale, based on
Talos' recent M&A transactions, other recent offshore M&A
transactions, and valuations from emerging, offshore bankruptcies
of Fieldwood Energy, Stone Energy and Arena Energy.
Fitch assumed a 25% advance rate on A/R given that in a pro-longed
downturn, A/R would likely decrease. Fitch valued the oil & natural
gas assets at $1,094 million.
Waterfall Analysis
Fitch assumed the $730 million revolving credit facility was drawn
at 90% to account for downward borrowing base redeterminations as
the company approaches a bankruptcy scenario. The senior secured
revolver recovers at an 'RR1' level while the second lien notes
recovers at an 'RR3' level.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Material reduction of the revolving credit facility through
proceeds from FCF generation;
-- Increased size and scale evidenced by production trending
above 75mboepd-100mboepd;
-- Demonstrated ability to manage P&A obligations and reduced
AROs per flowing barrel or proved reserves;
-- Midcycle debt/EBITDA sustained below 2.5x and FFO leverage
below 3.0x.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Loss of operational momentum, evidenced by production trending
below 45mboepd;
-- Reduction in liquidity due to lower bank commitments or
increased revolver borrowings;
-- Midcycle debt/EBITDA above 3.5x on a sustained basis and FFO
leverage above 4.0x;
-- Unfavorable regulatory changes, such as increased bonding
requirements, or accelerated P&A spending;
-- Implementation of a more aggressive growth strategy operating
outside FCF;
-- Inability to manage P&A obligations.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity, Clear Maturities: The second-lien notes
issuance in late 2020 and early 2021 extends the next bond maturity
to 2026, while reducing borrowings under the credit facility. The
reserve-based loan (RBL) matures in November 2024 and Fitch
believes Talos' strong asset coverage should allow for an
extension. The RBL has a borrowing base of $950 million and current
commitments of $730 million, and $400 million was outstanding as of
Sept. 30, 2021.
Fitch expects Talos will generate positive FCF over the forecasted
horizon and use proceeds to further reduce the outstanding amounts
on the revolver. Management stated that capital budgets would be
determined on the ability to generate FCF even in commodity price
declines. The company's hedging program provides some protection,
but an enhanced program would provide more comfort.
ISSUER PROFILE
Talos Energy Inc. is a publicly traded, technically driven
independent exploration and production company with operations in
the U.S. Gulf of Mexico (GoM) and offshore Mexico. The company's
focus in the GoM is the exploration, acquisition, exploitation and
development of deep and shallow water assets near existing
infrastructure.
ESG CONSIDERATIONS
Talos Energy Inc. and Talos Production Inc. have an ESG Relevance
Score of '4' for waste and hazardous materials
management/ecological impacts, due to the enterprise-wide solvency
risks that an offshore oil spill poses for an E&P company.
Talos Energy Inc. and Talos Production Inc. have an ESG Relevance
Score of '4' for energy/management that reflects the company's cost
competitiveness and financial and operational flexibility due to
scale, business mix, and diversification.
These factors have a negative impact on the credit profile, and is
relevant to the ratings in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
ZAPPELLI BODY SHOP: Case Summary & One Unsecured Creditor
---------------------------------------------------------
Debtor: Zappelli Body Shop, Inc.
d/b/a Zappelli Auto Body and Collision
4914 A Sonoma Highway
Santa Rosa, CA 9540
Business Description: Zappelli Auto Body and Collision had
$530,000 of gross profit on $842,600 of
sales in the period Jan. 1 to Dec. 13, 2021.
Net loss during the period was $67,800.
Zappelli Body Shop is a "small business"
debtor that is filing under Subchapter V of
Chapter 11 of the Bankruptcy Code.
Chapter 11 Petition Date: December 16, 2021
Court: United States Bankruptcy Court
Northern District of California
Case No.: 21-10510
Debtor's Counsel: Brian A. Barboza
Law Offices of Brian A Barboza
131A Stony Circle, Suite 500
Santa Rosa, CA 95401
Tel: (707) 527-8553
E-mail: bbarboza@barbozaesq.com
Estimated Assets: $100,000 to $500,000
Estimated Liabilities: $1 million to $10 million
The petition was signed by CEO Samantha Zappelli.
List of Creditors Who Have the 20 Largest Unsecured Claims and
Are Not Insiders:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Keystone Automotive
1627 Army Court, Unit 7
Stockton, CA 95206 Supplier $3,000
A full-text copy of the petition, along with a list of one
unsecured creditor, is available for free at PacerMonitor.com at:
https://www.pacermonitor.com/filings/153878513
*********
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