/raid1/www/Hosts/bankrupt/TCR_Public/220411.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Monday, April 11, 2022, Vol. 26, No. 100
Headlines
100 ORCHARD: Wins Interim Cash Collateral Access
154 LENOX: Voluntary Chapter 11 Case Summary
AE SOLUTIONS: Wins Interim Cash Collateral Access
ALACRITY HOLDINGS 6: Files for Chapter 11 Bankruptcy
ALLIGATOR COMPUTER: Wins Cash Collateral Access
ALLSPRING BUYER: Fitch Affirms 'BB' LT IDR, Outlook Stable
ALTO MAIPO: AES Andes Agrees to Make New Money Contributions
ALTO MAIPO: Exclusivity Periods Extended to June 1
AMERICAN EAGLE: Gets Court Approval for $7.1 Million Sale
APOLLO ENDOSURGERY: Appoints Jeannette Bankes to Board of Directors
ART & ANTIQUES: Seeks Access to Cash Collateral
ARTIVION INC: Moody's Affirms B2 CFR & Alters Outlook to Negative
AUTOMATED RECOVERY: Taps Velarde & Yar as Bankruptcy Counsel
BAYTEX ENERGY: Fitch Raises LongTerm IDR to 'B+', Outlook Stable
BENNING MCLEAN: Taps Tyler Bartl & Ramsdell as Bankruptcy Counsel
BESTWALL LLC: 500 Asbestos Claimants Get Rare Fines
BLACK NEWS CHANNEL: Seeks Cash Collateral Access, $3.5MM DIP Loan
BOY SCOUTS: Defeats Girl Scouts TM Lawsuit on Genderless Terms
BOY SCOUTS: Insurers' Chapter 11 Stance Risks Organization's Future
CAMBER ENERGY: Gets Extension to File Delayed Reports Until May 20
CAN B CORP: Delays Filing of 2021 Annual Report
CERTA DOSE: Case Trustee Wins Final Cash Collateral Access
CHEFS' WAREHOUSE: Moody's Alters Outlook on 'B3' CFR to Positive
CHILAQUILES FACTORY: Taps Barron & Newburger as Bankruptcy Counsel
CIRTRAN CORP: Delays Filing of 2021 Annual Report
CLINIGENCE HOLDINGS: Completes Merger With Nutex Health
COLLECTIVE COWORKING: Wins Cash Collateral Access
COLON VENTURE: Claims Will be Paid from Property Refinance
CONGRUEX GROUP: Moody's Assigns B3 CFR & Rates New Secured Debt B3
CONGRUEX GROUP: S&P Assigns 'B' ICR, Outlook Stable
CONSOLIDATED WEALTH: Case Summary & Unsecured Creditors
DAVE & BUSTER: Main Event Deal No Impact on Moody's 'B2' Rating
DISPATCH ACQUISITION: S&P Affirms 'B-' ICR, Outlook Stable
DIVINIA WATER: Court Wants Trial in Suit vs. D&O Insurer
DLT RESOLUTION: Delays Filing of 2021 Annual Report
DONEGAN ENGINEERING: Disposable Income to Fund Plan Payments
E2OPEN LLC: $190MM 1st Lien Loan Add-on No Impact on Moody's B2 CFR
E2OPEN LLC: S&P Affirms 'B' Issuer Credit Rating, Outlook Stable
EARTHSTONE ENERGY: Fitch Gives FirstTime 'B+' IDR, Outlook Stable
EARTHSTONE ENERGY: Moody's Assigns First Time 'B1' CFR
ECO LIGHTING: Wins Cash Collateral Access Thru April 28
EVO TRANSPORTATION: Needs More Time to File 2021 Annual Report
FIRST CHOICE: Seeks Chapter 11 Bankruptcy Protection
FIX MY GADGET: Case Summary & 20 Largest Unsecured Creditors
FORGE REALTY LLC: Seeks Chapter 11 Bankruptcy Protection
FORUM DINER: Seeks Cash Collateral Access
FRONTDOOR INC: S&P Alters Outlook to Stable, Affirms 'BB-' ICR
GARDA WORLD: Fitch Affirms 'B+' IDR, Outlook Stable
GASHI & HAN: Seeks Interim Cash Collateral Access
GENCANNA GLOBAL: Court Bars LDC Claim
GFA PEANUT COMPANY: Creditors to Get Proceeds From Liquidation
GULF COAST HEALTH: U.S. Trustee Objects to Litigation Releases
HAWAIIAN HOLDINGS: S&P Upgrades ICR to 'B-', Outlook Stable
HIGHLANDS SENIOR CITIZENS: Files for Chapter 11 Bankruptccy
HILCORP ENERGY I: Moody's Rates New Senior Unsecured Notes 'Ba3'
HOLLY ENERGY: Fitch Assigns 'BB+' Rating to Proposed Unsec. Notes
HOLLY ENERGY: Moody's Rates Proposed Senior Unsecured Notes 'Ba3'
INNOVATIVE BUILDING: Files Emergency Bid to Use Cash Collateral
INTERMEDIA HOLDINGS: S&P Lowers ICR to 'B-' on Elevated Leverage
INTERNATIONAL SUPPLY: Transfers to CEFCU, R. Hofmann Void
JAGUAR DISTRIBUTION: May 26 Plan Confirmation Hearing Set
JETBLUE AIRWAYS: Fitch Affirms 'BB-' IDR & Alters Outlook to Neg.
KAISER ALUMINUM: Fitch Affirms 'BB' IDR & Alters Outlook to Stable
KDR SUPPLY: Files Emergency Bid to Use Cash Collateral
KNOWLTON DEVELOPMENT: Fitch Affirms 'B-' LT IDRs, Outlook Stable
KNOX CLINIC: Continued Operations to Fund Plan Payments
LA OAXAQUENA: Unsecureds to be Paid in Full in Subchapter V Plan
LATAM AIRLINES: Accuses Banco del Estado de Chile of Tipping Vote
LIVEWELL ASSISTED: Wins Cash Collateral Access Thru April 30
LUCERO LLC: Wins Cash Collateral Access Thru May 31
MALLINCKRODT PLC: Paul Weiss, LRC 4th Update on Noteholders
MATLINPATTERSON GLOBAL: Clashes w/ Creditors Over Fund Liquidation
MD HELICOPTER: Wins Cash Collateral Access, $12.5MM of DIP Loan
MEDALLION MIDLAND: Fitch Affirms 'B+' IDR, Outlook Stable
MEGA-PHILADELPHIA: Files Emergency Bid to Use Cash Collateral
MELO AIR: Seeks to Use Cash Collateral
MICROVISION INC: Appoints Jeffrey Herbst to Board of Directors
MIDCAP FINCO: Fitch Affirms 'BB+' LT IDR, Outlook Stable
MOBIQUITY TECHNOLOGIES: Chairman Converts Over $2M Debt Into Equity
MOLECULAR & DIAGNOSTIC: Wins Access to Cash Collateral
MYOMO INC: Reports Progress With China Joint Venture
NEELAM INC: Unsecureds to Get Share of Income for 5 Years
OLYMPIA SPORTS: Wins Interim Cash Collateral Access
ONEJET INC: Ex-Pilot Ravotti Drops Toxic-Exhaust Lawsuit
OZOP ENERGY: Needs More Time to File 2021 Annual Report
PARAGON OFFSHORE: 3rd Circuit Upholds $16.5M SinoEnergy Rig Deal
PARS BRONX REALTY: Hits Chapter 11 Bankruptcy in New York
PINNACLE CONSTRUCTORS: Wins Cash Collateral Access
PRECISION DRILLING: Fitch Affirms 'B+' LT IDR, Outlook Stable
PRESSURE BIOSCIENCES: Incurs $20.2 Million Net Loss in 2021
PROFESSIONAL DIVERSITY: Director Won't Stand for Re-Election
QUOTIENT LIMITED: Appoints Thomas Aebischer as Director
RENTZEL PUMP: Wins Cash Collateral Access Thru May 5
RESOLUTE FOREST: Moody's Hikes CFR to Ba3, Outlook Stable
REVLON INC: S&P Affirms 'CCC-' Issuer Credit Rating, Outlook Neg.
RODAN & FIELDS: Moody's Lowers CFR, Outlook Remains Negative
SCIENTIFIC GAMES: Completes Lottery Business Divestiture
SINCLAIR TELEVISION: Moody's Rates New $750MM Term Loan B 'Ba2'
SM ENERGY: Moody's Upgrades CFR to B1 & Alters Outlook to Positive
SMG INDUSTRIES: Delays Filing of 2021 Annual Report
SOLID BIOSCIENCES: Board Approves New Code of Business Conduct
SOUTHGATE TOWN: Seeks Cash Collateral Access
SPIRIT AIRLINES: Fitch Alters Outlook to Neg., Affirms 'BB-' IDR
STEM HOLDINGS: Steven Hubbard Quits as Officer
SWISSBAKERS INC: Wins Cash Collateral Access Thru May 11
TARVEDA THERAPEUTICS: Will Liquidate in Delaware Chancery Court
TELESAT CANADA: Moody's Cuts CFR to B3 & Alters Outlook to Negative
TIVITY HEALTH: Stone Point Transaction No Impact on Moody's B2 CFR
TRAEGER INC: S&P Alters Outlook to Negative, Affirms 'B' ICR
TUTOR PERINI: Fitch Withdraws Ratings
VOLUNTEER ENERGY: Cash Collateral Access, $5MM of DIP Loan OK'd
WAYNE BARTON: Executes Asset Purchase Agreement with Torah Academy
WESTPORT HOLDINGS: Dismissal of Valley National Appeal Affirmed
WISECARE LLC: Wins Cash Collateral Access Thru June 1
[^] BOND PRICING: For the Week from April 4 to 8, 2022
*********
100 ORCHARD: Wins Interim Cash Collateral Access
------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
authorized 100 Orchard Street LLC d/b/a Blue Moon Hotel to use the
cash collateral of Brick Moon Capital LLC and the U.S. Small
Business Administration, nunc pro tunc and effective as of the
Petition Date, on an interim basis in accordance with the budget.
The Debtor asserts that Brick has a duly perfected senior lien and
security interest in all of the Debtor's pre-petition assets,
including the Debtor's real property, the Hotel and all room
revenues collected by the Hotel.
To perfect its interests in the collateral, Brick filed a UCC-1
financing statement with the New York Secretary of State.
As of the Petition Date, Brick asserts the total amount the Debtor
owes is at least $10 million.
SBA has a duly perfected junior lien and security interest in the
Debtor's personal property. To perfect its interests in the
Collateral, SBA filed a UCC-1 financing statement with the New York
Secretary of State.
As of the Petition Date, SBA asserts the total amount the Debtor
owes is approximately $500,000.
As adequate protection to protect the Lenders from Collateral
Diminution, the Lenders are granted (a) replacement liens and
security interests in all of the Debtor's assets acquired
post-petition including cash to the extent that said liens were
valid, perfected and enforceable as of the Petition Date, subject
to (i) the claims of Chapter 11 professionals duly retained and to
the extent awarded pursuant to sections 330 and 331 of the
Bankruptcy Code, (ii) United States Trustee fees pursuant to 28
U.S.C. section 1930, and interest pursuant to 31 U.S.C. Section
3717, and (iii) the payment of any allowed claim of any
subsequently appointed chapter 7 trustee to the extent of $10,000;
and will not extend to estate causes of action and the proceeds of
any recoveries of estate causes of action under Chapter 5 of the
Bankruptcy Code.
The Replacement Liens and security interests granted in
post-petition room revenues and cash are automatically deemed
perfected upon entry of the Order without the necessity of the
Lenders taking possession, filing financing statements or other
documents, or taking any other action to validate or perfect the
liens and security interests granted by the Order.
A final hearing on the matter is scheduled for April 28, 2022 at 10
a.m. via Zoom for Government.
A copy of the order is available at https://bit.ly/3LO8N3y from
PacerMonitor.com.
About 100 Orchard St. LLC
100 Orchard St. LLC operates a 22-room boutique hotel known as the
"Blue Moon Hotel," located in the lower east side of Manhattan, at
100 Orchard Street. The Hotel is a historical building built in
1879. Beginning in 2002, 100 Orchard redesigned the five-story
tenement and restored the building to function as a stately
eight-story hotel. It was a five-year art preservation and design
project that received an award by National Geographic, acknowledged
by the Historic Districts Council, and written up in 50 major
articles. The Hotel was instrumental in revitalizing commerce south
of Delancey Street.
The Debtor sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. S.D.N.Y. Case No. 22-10358) on March 23,
2022.
In the petition signed by Randy Settenbrino, president/managing
member, the Debtor disclosed $25,341,713 in assets and $11,166,747
in liabilities.
Judge David S. Jones oversees the case.
Scott S. Markowitz, Esq., at Tarter Krinsky and Drogin, LLP is the
Debtor's counsel.
154 LENOX: Voluntary Chapter 11 Case Summary
--------------------------------------------
Debtor: 154 Lenox LLC
154 Lenox Road
Brooklyn, New York 11226
Business Description: The Debtor is primarily engaged in
activities related to real estate.
Chapter 11 Petition Date: April 8, 2022
Court: United States Bankruptcy Court
Eastern District of New York
Case No.: 22-40736
Judge: Hon. Jil Mazer-Marino
Debtor's Counsel: Isaac Nutovic, Esq.
LAW OFFICES OF ISAAC NUTOVIC
261 Mamdison Avenue, 26th Floor
New York, NY 11210
Tel: 917-922-7963
Email: inutovic@nutovic.com
Estimated Assets: $1 million to $10 million
Estimated Liabilities: $10 million to $50 million
The petition was signed by Ephraim Diamond, chief restructuring
officer.
The Debtor failed to include in the petition a list of its 20
largest unsecured creditors.
A full-text copy of the petition is available for free at
PacerMonitor.com at:
https://www.pacermonitor.com/view/EZ2A64A/154_Lenox_LLC__nyebke-22-40736__0001.0.pdf?mcid=tGE4TAMA
AE SOLUTIONS: Wins Interim Cash Collateral Access
-------------------------------------------------
The U.S. Bankruptcy Court for the District of Arizona authorized AE
Solutions, LLC to use cash collateral on an interim basis to pay
post-petition operating expenses in accordance with the budget.
The budget provides for $174,874 in total expenses.
The Court said any creditor holding a valid and enforceable
prepetition security interest in any pre-petition property of the
estate, will have a post-petition replacement lien on the same type
of post-petition assets acquired by the Debtor after the Petition
Date, if any, and in the same validity, priority, and extent as
such creditor possessed a lien on property on the Petition Date,
and will have all the rights and remedies of a secured creditor in
connection with the replacement liens granted by the Order, except
to the extent that the Bankruptcy Code may affect such rights and
remedies. The liens will be effective without perfection and as
against any successors of the Debtor, including any trustee.
As previously reported by the Troubled Company Reporter, the
entities that have current UCC Financing Statements filed against
the Debtor are:
-- Wesco Distribution, Inc.,
-- BlackRiver Business Capital,
-- SGSF Master Purchasing DE, LLC,
-- CT Corporation System, as Representative,
-- Outsource, LLC, and
-- OneSource Distributors, LLC
A further hearing on the matter is scheduled for April 21, 2022 at
11 a.m. via videconference.
A copy of the order is available at https://bit.ly/3jiuzzS from
PacerMonitor.com.
About AE Solutions, LLC
AE Solutions, LLC is a full-service, Service Disabled Veteran-Owned
Small Business (SDVOSB) certified construction firm that offers
construction and project management, and general contracting of
electrical, civil, structural, and renewable energy projects for
government and private commercial clients throughout the nation.
The Debtor sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. D. Ariz. Case No. 22-01806) on March 25,
2022. In the petition signed by William A. Clifton, manager, the
Debtor disclosed up to $10 million in both assets and liabilities.
Judge Paul Sala oversees the case.
D. Lamar Hawkins, Esq., at Guidant Law, PLC, is the Debtor's
counsel.
ALACRITY HOLDINGS 6: Files for Chapter 11 Bankruptcy
----------------------------------------------------
Alacrity Holdings 6 LLC filed for chapter 11 protection without
stating a reason.
According to court documents, Alacrity Holdings 6 LLC estimates
between 1 and 49 unsecured creditors, including Durga
Investments,LLC, Macon-Bibb Cty TaxCommission, and
Thompson-Kenny,LLC. The Petition states funds will be available to
Unsecured Creditors.
A meeting of creditors under 11 U.S.C. Sec. 341(a) is slated for
May 3, 2022, at 1:00 p.m. at Office of UST.
About Alacrity Holdings 6 LLC
Alacrity Holdings 6, LLC is registered as a domestic liability
company located at 7530 Saint Marlo Country Club Pkwy Duluth, GA
30097
Alacrity Holdings 6, LLC, filed for chapter 11 protection (Bankr.
N.D. Ga. Case No. 22-20284) on April 5, 2022. In the petition
filed by Stephen Klein, as manager, Alacrity Holdings 6 LLC listed
estimated assets between $1 million and $10 million and estimated
liabilities between $1 million and $10 million. The case is
assigned to Honorable Judge James R Sacca. William A. Rountree, is
the court appointed trustee. William A. Rountree, of Rountree
Leitman & Klein, LLC, is the Debtor's counsel.
ALLIGATOR COMPUTER: Wins Cash Collateral Access
-----------------------------------------------
The U.S. Bankruptcy Court for the Southern District of Ohio,
Western Division, authorized Alligator Computer Systems Corp. to,
among other things, use the cash collateral of U.S. Bank National
Association, and provide adequate protection on a final basis.
Prior to the commencement of the case, the Debtor's senior priority
lender was US Bank. The Debtor's senior obligations to the Lender
were evidenced, in part, by business loan agreements dated November
20, 2015, and other loan documents executed in connection therewith
or relating thereto. The Debtor's obligations owing to the Lender
under the Senior Secured Loan Documents, including the Senior
Secured Indebtedness, are secured by a security interests created
by UCC filings in essentially all assets of the Debtor, including
Inventory, Chattel Paper, Accounts, Equipment, Instruments, Leases
and other Goods, cash, General Intangibles, and Other Collateral,
all as defined in the UCC filing. The debt is almost equivalent to
the value of the collateral.
The Debtor is permitted to use cash collateral in accordance with
the budget, with a 5% variance.
The Debtor is directed to make monthly adequate protection payments
to the Lender in the amount of $4,000 per month. The Lender will
apply each of the Debtor's payments to its respective allowed
secured claims.
As further adequate protection for the Debtor's use of cash
collateral, the Lender is granted a post-petition claim against the
Debtor's estate. To secure the Adequate Protection Claim, the
Lender is granted a lien and security interest in and upon the
Pre-Petition Collateral and all post-petition proceeds of the
Pre-Petition Collateral, and the Post-Petition Collateral and all
proceeds thereof to the same extent, validity and priority as its
pre-petition security interest.
As reflected in the Budget, the Debtor is authorized to use cash
collateral to pay (i) all fees required to be paid under 28 U.S.C.
section 1930(a); and (ii) all reasonable fees and expenses incurred
by the Subchapter V Trustee. In accordance with the Budget, the
Debtor may pay to the subchapter V trustee, upon the Subchapter V
Trustee's reasonable request, up to $2,000 each month until there
is substantial consummation of a confirmed chapter 11 plan; the
case is dismissed or converted; or the Debtor is no longer
authorized to use cash collateral.
A copy of the order and the Debtor's monthly budget is available at
https://bit.ly/3udmx1B from PacerMonitor.com.
The Debtor projects $154,359 in total income and $95,947 in total
expenses.
About Alligator Computer Systems Corp.
Alligator Computer Systems Corp. sought protection under Chapter 11
of the U.S. Bankruptcy Code (Bankr. S.D. Ohio Case No. 22-10264) on
February 25, 2022. In the petition signed by James Ernst,
president, the Debtor disclosed $1,409,882 in assets and $5,113,874
in liabilities.
Judge Beth A. Buchanan oversees the case.
Eric W. Goering, Esq., at Goering and Goering is the Debtor's
counsel.
ALLSPRING BUYER: Fitch Affirms 'BB' LT IDR, Outlook Stable
----------------------------------------------------------
Fitch Ratings has affirmed the Long-Term Issuer Default Rating
(IDR) and senior secured debt rating of Allspring Buyer LLC
(Allspring), the main debt-issuing subsidiary of Allspring Global
Investments, at 'BB'. The Rating Outlook is Stable.
Allspring Buyer LLC, formerly known as Zebra Buyer LLC, is a
debt-issuing subsidiary that GTCR LLC and Reverence Capital
incorporated to acquire Wells Fargo's Asset Management (WFAM)
business from Wells Fargo & Company (WFC; A+/Negative).
KEY RATING DRIVERS
IDR and Senior Debt
The affirmation reflects Allspring's good franchise in the
traditional investment management (IM) space, assets under
management (AUM) diversification by asset class, product and
distribution channel, a scalable business model and strong reported
investment performance relative to benchmarks. Ratings also reflect
an experienced senior management team, a cash generative business
model and a long-term distribution agreement with WFC, which should
provide Allspring with operational and distribution infrastructure
during the transition period.
The ratings are constrained by the relatively high cash flow
leverage, as measured by gross debt/adjusted fee-related EBITDA
(FEBITDA), lower profitability margins relative to peers, the
fully-secured funding profile and limited balance sheet liquidity.
Other rating constraints include a lack of operating history as a
standalone entity and elevated execution risk associated with the
challenges of bringing a new IM brand to market and setting up
standalone operations.
Fitch believes Allspring is well-positioned among the large
traditional IMs, with $574 billion in AUM as of YE21, although it
remains materially smaller than industry leaders. Allspring's AUM
is well diversified by asset class, which is viewed favorably by
Fitch. However, $187 billion of AUM (32.6%) is in short-term money
market funds (MMFs) as of YE21, which Fitch believes could increase
AUM volatility and liquidity risk in a stressed scenario. Still,
MMFs should have some revenue upside in the rising rate
environment, despite the likely flows volatility, as fee waivers
will be removed following interest rate hikes by the U.S. Federal
Reserve.
An inability to successfully establish standalone operations and a
distribution platform could lead to higher operating costs, lower
AUM levels, as a result of lower fund sales and/or increased client
attrition and, consequently, weaker operating performance and
higher leverage. To date, Allspring has completed the setup of its
risk controls and fund governance structures and has made some key
hires in the technology space. However, the firm continues to rely
on some core IT infrastructure of WFC. Fitch also believes that the
firm's private equity ownership introduces the potential for more
equity-oriented actions in the medium term, which is partially
mitigated by the track record of Allspring's private equity owners
in the financial services sector.
The acquisition of WFAM was financed primarily by a $1.1 billion
secured term loan. Based on management representations, Allspring's
pro-forma run-rate cash flow leverage measured about 3.3x on a
gross debt/adjusted FEBITDA basis in FY21, which is within Fitch's
'bb' category quantitative benchmark range for traditional IMs of
3.0x-5.0x. Should some of the initial separation costs prove to be
recurring in nature, Fitch estimates leverage at around 4.0x.
Leverage may also increase as a result of Allspring's inability to
achieve projected revenue levels, driven by increased asset price
volatility or higher than expected AUM attrition. An inability to
sustain leverage, at-or-below 4.5x on a reported basis, over the
Outlook horizon could result in negative rating action.
Allspring's profitability is below that of large public peers.
Fitch estimates the run-rate adjusted FEBITDA margin to be about
24% in FY21, which is within Fitch's 'bbb' category benchmark range
of 20%-30% for traditional IMs. FEBITDA is adjusted for
nonrecurring and one-off carve-out costs, money market revenue
normalization, and other noncore legacy gains and losses. Fitch
believes margin expansion could be driven by cost optimization over
time, as revenue growth may prove challenging, in light of on-going
competitive pressures in the industry.
Allspring's total net flows averaged 1% of AUM from 2018-2021,
supported by strong inflows into MMFs during the pandemic. Average
flows are in line with Fitch's 'bbb' category benchmark range of
negative 5% to 5% for traditional IMs. Flows into long-term funds
were consistently negative over the past four years, but remained
within Fitch's 'bbb' range, on average.
Allspring's funding profile is fully-secured and consists of a
seven-year $1.1 billion first-lien secured term loan. The secured
funding profile is weaker than higher-rated peers, which largely
have unsecured financing. Fitch would view the addition of an
unsecured funding component favorably as it would enhance funding
flexibility.
Pro-forma interest coverage was about 7.0x in 2021, which is within
Fitch's 'bbb' category benchmark range of 6x-12x. Coverage could
still come under pressure in 2022 as a result of higher interest
rates on Allspring's floating-rate debt or reduced revenue from
market volatility or AUM outflows. Fixed charge coverage, which
includes also a 1% loan amortization, per annum is estimated at
5.6x for the same period.
Fitch views Allspring's liquidity as relatively limited. At Dec.
31, 2021, the company had about $350 million of balance sheet cash
and $170 million of revolver capacity, although availability could
be constrained by a market dislocation that reduces FEBITDA, as the
revolver has a leverage covenant (6.5x tested at 35% utilization).
There are no term debt maturities until 2027, but the secured term
loan has a 1% annual amortization requirement.
The Stable Outlook reflects Fitch's expectation that Allspring will
successfully establish standalone operations, while maintaining
good operating performance, as reflected in FEBITDA margins
sustained above 15%, a leverage sustained at 4.5x or below, on an
adjusted basis, while demonstrating convergence between reported
and adjusted metrics over time, and sound interest coverage of
above 5.0x.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Material differences between future consolidated audited
financial statements relative to management representations;
-- An inability to sustain cash flow leverage below 4.5x,
particularly if driven by debt-financed shareholder-friendly
distributions;
-- Sustained material investment underperformance and/or
meaningful long-term AUM outflows;
-- A liquidity shortfall or a decline in interest and fixed-
charge coverage below 3.0x;
-- An inability to execute on the operating strategy, leading to
excessive costs or operational failures, or a decline in
FEBITDA margins below 15%.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- A sustained improvement in reported cash flow leverage
approaching 3.5x;
-- Gross FEBITDA margins sustained above 20%;
-- A sustained fixed charge coverage above 5.0x;
-- Improved funding diversity, including the addition of an
unsecured funding component;
-- Favorable investment performance and sustained positive long-
term net client flows;
-- Successful transition to a standalone business and execution
of strategic objectives, including meaningful fund sales
through new third-party channels.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
The secured debt rating is equalized with the Long-Term IDR
reflecting the current funding mix and Fitch's expectations for
average recovery prospects under a stressed scenario.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- The secured debt rating is primarily sensitive to changes in
Allspring's IDR, and secondarily, to material changes in
Allspring's funding mix, and/or changes in Fitch's assessment
of the recovery prospects for the debt instrument.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- The secured debt rating is primarily sensitive to changes in
Allspring's IDR, and secondarily, to material changes in
Allspring's funding mix, and/or changes in Fitch's assessment
of the recovery prospects for the debt instrument.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and
Covered Bond issuers have a best-case rating upgrade scenario
(defined as the 99th percentile of rating transitions, measured in
a positive direction) of three notches over a three-year rating
horizon; and a worst-case rating downgrade scenario (defined as the
99th percentile of rating transitions, measured in a negative
direction) of four notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
ESG CONSIDERATIONS
Allspring Buyer LLC has an ESG Relevance Score of '4' for Financial
Transparency due to reflecting the sensitivity of the rating to
alignment of audited financial data with management
representations, which has a negative impact on the credit profile,
and is relevant to the rating[s] in conjunction with other
factors.
Allspring Buyer LLC has an ESG Relevance Score of '4' for
Management Strategy due to the execution risk associated with
establishing the firm as a standalone business, achievement of
envisioned cost savings and deleveraging, which has a negative
impact on the credit profile, and is relevant to the rating[s] 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.
ALTO MAIPO: AES Andes Agrees to Make New Money Contributions
------------------------------------------------------------
Alto Maipo SpA and Alto Maipo Delaware LLC submitted a further
revised versions of the Revised Plan (the "Further Revised Plan")
and of the Revised Disclosure Statement (the "Further Revised
Disclosure Statement") dated April 4, 2022.
The Plan reflects all material terms of a revised version of the
pre-negotiated restructuring that was agreed among the Debtors and
certain of their major stakeholders, evidenced by the Restructuring
Support Agreement dated April 1, 2022.
The anticipated benefits of the Plan include, without limitation:
* Approximately $2.1 billion in restructured obligations (the
"New and A&R Obligations"), which shall include the Working Capital
Facility, the Amended & Restated Secured Exit Financing Facility,
the 1L Secured Obligations, the Amended & Restated 2L Secured
Obligations and the New Common Equity;
* The exchange or payment of the up to $50 million DIP Credit
Facility with the proceeds of an Amended & Restated Secured Exit
Financing Facility;
* Unimpairment of general unsecured creditors, with allowed
General Unsecured Claims to be satisfied by contributions from AES
Andes; and
* The prospect of expeditious emergence from Chapter 11.
In order to right-size their capital structure to meet these market
challenges, the Debtors engaged in constructive negotiations with
their creditors in an attempt to reach pre arranged terms for a
chapter 11 restructuring plan.
The parties spent the majority of February 2022 in intense
negotiations over a revised plan structure, and reached agreement
on the terms of a further amended RSA (the "Third Amended RSA")
and plan structure. The Third Amended RSA provided for certain
necessary revisions to resolve the near-term liquidity shortfall
(including certain deferrals from the Sponsor, Strabag, and the
Senior Lenders; an increase in the size of the Amended & Restated
Secured Exit Financing Facility; and an additional $15 million in
working capital to be contributed by the Sponsor).
The parties subsequently agreed to certain further amendments to
the RSA and plan structure, resulting in the execution of a further
revised RSA dated as of April 1, 2022 (the "Fifth Amended RSA").
As provided in the Plan, AES Andes has agreed to make significant
new money contributions to the Debtors' go-forward capital
structure, which underscore its ongoing commitment to the Debtors'
restructuring efforts and go-forward potential. Pursuant to the
RSA, AES has agreed to provide both the Amended & Restated Secured
Exit Financing Facility and the Working Capital Facility on terms
that are substantially below market rates.
Further, the Fifth Amended RSA obligates AES Andes to (i) roll its
DIP Claims into an upsized Amended & Restated Secured Exit
Financing Facility and (ii) waive its rights to repayment in cash
at exit, agree to certain deferrals and fund up to $300,000.00 in
satisfaction of Allowed General Unsecured Claims, and (iii) agree
to make capital contributions of up to $10 million to fund any
necessary payments relating to certain litigation claims that will
ride through unimpaired. In total, the Debtors estimate that the
value of these contributions range between approximately $4.5 to
$28.8 million, with a midpoint estimate of $16.9 million.
The Plan provides for the treatment of Claims against and Interests
in the Debtors through, among other things, the following:
* Each Holder of an Allowed General Unsecured Claim, shall
have its Claim paid in full in cash, funded by a cash contribution
by AES Andes of up to $300,000.00 as set forth in the Plan. That
certain contingent and unliquidated General Unsecured set forth in
the Plan shall survive unimpaired. Remaining General Unsecured
Claims shall be disallowed and expunged and/or estimated at zero
for distribution purposes, or be resolved and released pursuant to
the terms of the Plan;
* All Allowed DIP Claims shall be exchanged for, or paid with
the proceeds of, the Amended & Restated Secured Exit Financing
Facility, and, in consideration for, inter alia, the impairment of
the DIP Claims, certain contributions to the Borrower for the
payment in full in cash of certain allowed unsecured claims, and
for their agreement to pay up to $10 million to satisfy certain
other claims to the extent set forth in the Plan Term Sheet, AES
Andes or its designee shall receive the New Common Equity, as
provided for in the Restructuring Term Sheet;
* In consideration of Strabag's Other Claims that are Allowed
Strabag shall be entitled to payment (less any payments on account
of any such items made prior to the Effective Date);
* Each Holder of an Existing Equity Interest shall have such
Interest cancelled, released, and discharged and without any
distribution, in each case, at the Company's election and to the
extent permitted under applicable law. In order to effectuate such
cancellation, release and discharge, as of the Effective Date,
Strabag shall, upon request and at the direction of the Debtors or
the Reorganized Debtors, re-deliver its shares to AES Andes or such
other entity as is designated by AES Andes.
The Debtors shall fund distributions under the Plan with (1) Cash
on hand, including Cash from operations; (2) the Amended & Restated
Secured Obligations; and (3) contributions made by AES Andes to the
extent set forth in this Plan. Cash payments to be made pursuant to
the Plan will be made by the Reorganized Debtors.
Counsel for Debtors:
Pauline K. Morgan, Esq.
Sean T. Greecher, Esq.
S. Alexander Faris, Esq.
Young Conaway Stargatt & Taylor, LLP
Rodney Square
1000 North King Street
Wilmington, DE 19801
Telephone: (302) 571-6600
Facsimile: (302) 571-1253
Email: pmorgan@ycst.com
sgreecher@ycst.com
afaris@ycst.com
Pauline K. Morgan, Esq.
Sean T. Greecher, Esq.
S. Alexander Faris, Esq.
Young Conaway Stargatt & Taylor, LLP
Rodney Square
1000 North King Street
Wilmington, DE 19801
Telephone: (302) 571-6600
Facsimile: (302) 571-1253
Email: pmorgan@ycst.com
sgreecher@ycst.com
afaris@ycst.com
About Alto Maipo
Alto Maipo owns the Alto Maipo Hydroelectric Project, outside
Santiago, Chile, which is currently under construction. The project
comprises two run-of-the-river plants with a combined installed
capacity of 531 megawatts. The run-of-the-river project is a joint
venture between U.S. utility subsidiary AES Gener and Chilean
mining company Antofagasta Minerals (AMSA).
Alto Maipo Delaware LLC and Alto Maipo SpA sought Chapter 11
protection (Bankr. D. Del. Lead Case No. 21-11507) on Nov. 17,
2021. Javier Dib, board president and chief restructuring officer,
signed the petitions. At the time of the filing, Alto Maipo
Delaware LLC estimated between $1 billion and $10 billion in both
assets and liabilities.
The cases are handled by Judge Karen B. Owens.
The Debtors tapped Young Conaway Stargatt & Taylor, LLP and Cleary
Gottlieb Steen & Hamilton LLP as legal counsel; Nelson Contador
Abogados & Consultores SpA as local Chilean counsel; AlixPartners,
LLP as financial advisor; and Lazard Freres & Co. LLC and Lazard
Chile SpA as investment banker. Prime Clerk, LLC is the claims,
noticing and administrative agent.
ALTO MAIPO: Exclusivity Periods Extended to June 1
--------------------------------------------------
Judge Karen Owens of the U.S. Bankruptcy Court for the District of
Delaware extended the exclusivity periods for Alto Maipo Delaware,
LLC and Alto Maipo, SpA to file a Chapter 11 plan and solicit
acceptances for the plan to June 1.
The extension will give the companies more time to solicit votes on
their joint Chapter 11 plan of reorganization without having to
deal with the distraction of a competing plan, according to their
attorney Sean Greecher, Esq., at Young Conaway Stargatt & Taylor,
LLP.
The reorganization plan filed on Feb. 28 provides for, among other
things, approximately $2.1 billion in restructured obligations,
including first and second lien financing facilities as well as the
issuance of new equity; and the exchange or payment of up to $50
million debtor-in-possession credit facility with the proceeds of a
secured financing facility.
The plan reflects a reorganization structure agreed upon by the
companies and their parent, AES Andes, and senior lenders.
About Alto Maipo
Alto Maipo owns the Alto Maipo Hydroelectric Project, outside
Santiago, Chile, which is currently under construction. The project
comprises two run-of-the-river plants with a combined installed
capacity of 531 megawatts. The run-of-the-river project is a joint
venture between U.S. utility subsidiary AES Gener and Chilean
mining company Antofagasta Minerals (AMSA).
Alto Maipo Delaware LLC and Alto Maipo SpA sought Chapter 11
protection (Bankr. D. Del. Lead Case No. 21-11507) on Nov. 17,
2021. Javier Dib, board president and chief restructuring officer,
signed the petitions. At the time of the filing, Alto Maipo
Delaware LLC estimated between $1 billion and $10 billion in both
assets and liabilities.
The cases are handled by Judge Karen B. Owens.
The Debtors tapped Young Conaway Stargatt & Taylor, LLP and Cleary
Gottlieb Steen & Hamilton LLP as legal counsel; Nelson Contador
Abogados & Consultores SpA as local Chilean counsel; AlixPartners,
LLP as financial advisor; and Lazard Freres & Co. LLC and Lazard
Chile SpA as investment banker. Prime Clerk, LLC is the claims,
noticing and administrative agent.
The Debtors filed their joint Chapter 11 plan of reorganization on
Feb. 28, 2022.
AMERICAN EAGLE: Gets Court Approval for $7.1 Million Sale
---------------------------------------------------------
Leslie A. Pappas of Law360 reports that bankrupt nursing home chain
American Eagle Delaware Holding Co. LLC won court approval
Thursday, April 7, 2022, to sell two underperforming facilities in
Florida for $7.1 million, putting it on track to pay down a series
of bonds and pave the way toward confirmation of its Chapter 11
later this month.
U.S. Bankruptcy Court Judge J. Kate Stickles of the District of
Delaware approved the sale of the so-called Vista Lake assets to
Evanston, Illinois-based skilled care facilities operator
Illuminate HC LLC at a virtual hearing Thursday after no one
objected. American Eagle sold the facilities in a "robust" virtual
bankruptcy auction on March 2022.
About American Eagle
Established in 2018, Eagle Senior Living --
https://www.eagleseniorliving.org/ -- is a non-profit provider of
senior living services across the United States, providing care on
a daily basis to approximately 1,000 residents. Eagle Senior Living
and related entities operate 15 residential senior care facilities
located across the country, from Colorado, Minnesota, Wisconsin,
and Ohio to Alabama, Tennessee, and Florida.
On Jan. 14, 2022, American Eagle Delaware Holding Company LLC and
16 affiliated companies each filed a petition seeking relief under
Chapter 11 of the Bankruptcy Code (Bankr. D. Del. Lead Case No.
22-10028) to seek confirmation of their prepackaged plan. The
Debtors' cases have been assigned to Judge J. Kate Stickles.
Parent company American Eagle Lifecare Corporation and management
company Greenbrier Senior Living are not included in the Chapter 11
filing. Greenbrier Senior Living continues to manage all of the
communities.
American Eagle Delaware Holding estimated assets and debt of $10
million to $50 million as of the bankruptcy filing.
The Debtors are represented in the Chapter 11 cases by Polsinelli
PC as legal counsel. FTI Consulting Inc. and Blueprint Healthcare
Real Estate Advisors, LLC serve as financial advisor and real
estate advisor, respectively. Epiq Corporate Restructuring, LLC, is
the claims agent and administrative advisor.
APOLLO ENDOSURGERY: Appoints Jeannette Bankes to Board of Directors
-------------------------------------------------------------------
Apollo Endosurgery, Inc. has appointed Jeannette Bankes to its
Board of Directors, bringing the number of board members to eight.
Bankes is the president and general manager of the Global Surgical
Franchise at Alcon, a worldwide developer, manufacturer and
marketer of eye care medical devices and ophthalmic products.
"Jeannette Bankes is a seasoned healthcare executive and board
member known for applying her tremendous insight, experience and
passion for technology to optimize product development and
worldwide commercialization," said Chas McKhann, president and CEO
of Apollo Endosurgery. "Known throughout the healthcare industry
as a thoughtful and practiced leader, Jeannette has led the
development and adoption of technologies designed to combat some of
healthcare's most urgent and complex challenges. Her voice and
vision will be a tremendous value in helping guide Apollo as we
continue to develop and bring to market less invasive devices to
advance therapeutic endoscopy."
Ms. Bankes brings 30 years of experience in the medical device and
pharmaceutical industries to her role on the Apollo Endosurgery
Board of Directors. She is a proven industry executive, board
advisor and product development expert who has held leadership
positions in multinational, billion-dollar healthcare companies,
Alcon, Boston Scientific, and Merck & Co. As president and general
manager of Alcon's Global Surgical Franchise, she oversees a
diverse, global product portfolio with approximately $5 billion in
annual sales. At Boston Scientific, Ms. Bankes' most recent role
was General Manager, Urology & Pelvic Health. During her 15-year
tenure at Boston Scientific, Ms. Bankes served as vice president of
Clinical & Regulatory Affairs. Ms. Bankes began her career with
Merck & Co., where she held diverse roles of increasing
responsibility in sales, marketing, clinical and biological
manufacturing. Ms. Bankes holds a B.S. in Biochemistry and Medical
Technology from Kutztown University.
"We are pleased to welcome Jeannette to the Apollo Board of
Directors," said John Barr, Chairman of the Board. "Her broad,
global experience in R&D, clinical testing, product registration
and new product commercialization will provide the Apollo
Endosurgery board with valuable perspectives. We are glad to have
her join us to help guide Apollo into the future of transforming
care delivery."
"I'm delighted to be joining the Apollo board at this exciting and
critical time for the company," said Bankes. "I look forward to
helping the Apollo team further its mission to deliver innovative,
cost effective minimally invasive therapeutic GI and bariatric
products and procedures to improve patient care."
In connection with her appointment to the Board, and in accordance
with the Company's Non-Employee Director Compensation Policy, (i)
Ms. Bankes will be granted, pursuant to the Company's 2017 Equity
Incentive Plan, an initial stock option and restricted stock unit
award to acquire the Company's common stock at a later date, valued
at $55,000 in the aggregate, and (ii) the Company will pay Ms.
Bankes an annual retainer of $35,000 for service as a member of the
Board. The stock option will have an exercise price equal to the
closing price of the Company's common stock as reported on Nasdaq
on the date the stock option is granted.
About Apollo Endosurgery
Apollo Endosurgery, Inc. -- http://www.apolloendo.com-- is a
medical technology company focused on less invasive therapies to
treat various gastrointestinal conditions, ranging from
gastrointestinal complications to the treatment of obesity.
Apollo's device-based therapies are an alternative to invasive
surgical procedures, thus lowering complication rates and reducing
total healthcare costs. Apollo's products are offered in over 75
countries and include the OverStitch Endoscopic Suturing System,
the OverStitch Sx Endoscopic Suturing System, and the ORBERA
Intragastric Balloon.
Apollo Endosurgery reported a net loss of $24.68 million for the
year ended Dec. 31, 2021, a net loss of $22.61 million for the
year ended Dec. 31, 2020, and a net loss of $27.43 million for the
year ended Dec. 31, 2019. As of Sept. 30, 2021, the Company had
$71.08 million in total assets, $71.17 million in total
liabilities, and a total stockholders' deficit of $92,000.
ART & ANTIQUES: Seeks Access to Cash Collateral
-----------------------------------------------
Art & Antiques Worldwide Media, LLC asks the U.S. Bankruptcy Court
for the Eastern District of North Carolina, Wilmington Division,
for authority to use cash collateral and provide adequate
protection.
The Debtor's income is solely derived from publishing a magazine.
To maintain its existing business operations, the Debtor expects it
will be required to incur certain operating expenses, generally as
set forth on the Fourteen Day Proposed Budget.
The Debtor acknowledges WebBank c/o CAN Capital Bank, Inc., as
Servicer, may have a lien on the funds in the Debtor's bank account
when the petition was filed, that were paid to the Debtor through
the operation of its business and on accounts receivable. The
Debtor seeks to use that cash to pay its ongoing expenses during
the case, in the ordinary course of business.
WebBank may assert a security interest in the Debtor's future
accounts receivable related to the Debtor's sale of advertising and
subscription pursuant to a certain loan dated March 15, 2022.
As adequate protection for the Debtor's use of WebBank's cash
collateral, the Debtor proposes to provide WebBank with
post-petition replacement liens on future accounts receivable
generated by the Debtor in the course of running its business, in a
lien amount equal to the amount of the cash collateral on hand as
of the Petition Date and interest-only payments at the non-default
rate established in the Loan Agreement. WebBank also asserts a lien
on other personal property owned by the Debtor, which has value
over and above the amount owed to WebBank.
The Debtor also requests a preliminary hearing on this motion to
avoid immediate and irreparable harm to the Debtor's bankruptcy
estate.
A copy of the order and the Debtor's 14-day budget from April 6,
2022 is available at https://bit.ly/374hVCj from PacerMonitor.com.
The Debtor projects $71,023 in total receipts and $26,448 in total
expenses.
About Art & Antiques Worldwide Media, LLC
Art & Antiques Worldwide Media, LLC sought protection under Chapter
11 of the U.S. Bankruptcy Code (Bankr. E.D. N.C. Case No.
22-00598-5) on March 18, 2022. In the petition signed by Phillip
Troy Linger, manager, the Debtor disclosed up to $100,000 in assets
and up to $1 million in liabilities.
George Mason Oliver, Esq., at The Law Offices of Oliver & Cheek,
PLLC is the Debtor's counsel.
ARTIVION INC: Moody's Affirms B2 CFR & Alters Outlook to Negative
-----------------------------------------------------------------
Moody's Investors Service changed the rating outlook for Artivion,
Inc. to negative from stable. At the same time, Moody's affirmed
the company's B2 Corporate Family Rating, B2-PD Probability of
Default Rating, and B1 rating of senior secured first lien credit
facilities.
The change of outlook to negative from stable reflects Moody's
expectation that Artivion may be unable to achieve credit metrics
consistent with its ratings over the next 12-24 months, including
adjusted net debt/EBITDA approaching 5x. While Moody's expects
Artivion to continue to post strong organic revenue growth in the
high single-digits, forward earnings growth may continue to be
constrained by challenging labor and supply chain conditions, which
negatively impacted profitability in FY2021. Earnings growth and
free cash flow generation will also be impacted by heightened R&D
spend in FY2022 particularly to support Artivion's On-X ProAct Xa
clinical project. As a result, Moody's expects Artivion's leverage
to remain elevated (7.5x net debt/EBITDA on Moody's adjusted basis
as of December 31, 2021).
The affirmation of Artivion B2 CFR continues to be supported by the
company's very good liquidity profile, with cash balances of
approximately $55 million as of December 31, 2021. The company also
has full access to its $30 million revolving credit facility and
adequate covenant headroom.
Affirmations:
Issuer: Artivion, Inc.
Corporate Family Rating, Affirmed B2
Probability of Default Rating, Affirmed B2-PD
Senior Secured First Lien Revolving Credit Facility, Affirmed B1
(LGD3)
Senior Secured First Lien Term Loan, Affirmed B1 (LGD3)
Outlook Actions:
Issuer: Artivion, Inc.
Outlook, Changed To Negative From Stable
RATINGS RATIONALE
Artivion's B2 CFR reflects its narrow focus on aortic medical
devices and tissue processing, as well as limited scale, with
revenue of approximately $300 million as of December 31, 2021. The
company is reliant on three product groups for 71% of its revenue.
Furthermore, Moody's expects that Artivion will continue to be
impacted by challenging labor and supply chain conditions that
impacted profitability in FY2021. In addition, the company will
continue to deploy heightened R&D spend to support potential new
product launches that may constrain the pace of earnings growth
over the next 12-24 months. As a result, Moody's expects the
company to generate a free cash flow deficit of -$10 million in
FY2022. That said, in FY2023, Moody's expects strong earnings
growth to support an inflection to positive free cash flow
generation. Moody's expects net debt to EBITDA to trend toward the
high-5x area over the next 12-24 months, driven entirely by organic
earnings growth.
The ratings also reflect Moody's expectations that the company's
volumes will continue to experience very strong growth over the
next few years, following 18% year-over-year revenue growth in
FY2021. Artivion has a credible market presence in its key
products, as well as a meaningful level of geographic
diversification with approximately 46% of sales generated outside
the United States. Moody's notes that demand for the company's
products face limited impact from the waning impact of the
pandemic, as patients with severe conditions cannot defer
procedures for an extended period. The rating also reflects
Artivion's moderate financial policies as a public company.
The Speculative Grade Liquidity Rating of SGL-1 reflects Moody's
expectation that Artivion's liquidity will remain very good over
the next 12 to 18 months. Artivion's liquidity is supported by $55
million of cash as of December 31, 2021. While Moody's expects a
-$10 million free cash flow deficit in 2022, the company can
comfortably absorb the free cash flow deficit with internal
sources. Furthermore, Moody's expects $10 million of positive free
cash flow generation in FY2023 driven by organic earnings growth.
The company continues to have full access under its $30 million
revolving credit facility. The company is subject to a springing
leverage test of net first lien leverage of 5.25x if more than 25%
of the revolving credit facility is utilized. Moody's does not
anticipate the covenant will be tested and there is adequate
headroom if it were tested. While Moody's does not anticipate any
material asset sales, the company does have discrete product lines
that could be sold to raise cash, providing potential alternate
sources of liquidity.
Social and governance considerations are material to the rating.
For Artivion, social risks arise from risks associated with
responsible production. As a manufacturer of medical devices that
are inserted into the body, such as heart valves and stent grafts,
the company can have exposure to risks such as product recalls,
regulatory actions or product liability litigation. The significant
majority of the company's products such as heart valves and stent
grafts are used to treat severe medical conditions. The company is
reliant on a few, though varied, products for most revenue.
Governance risks considerations include the company's moderate
financial policies as a public company. While the company has a
track record of acquisitions, a meaningful portion of the cost has
been funded by equity.
The negative outlook reflects Moody's expectation that Artivion may
be unable to achieve credit metrics consistent with its ratings
over the next 12-24 months, including adjusted net debt/EBITDA
approaching 5x, and positive free cash flow generation.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Ratings could be downgraded if the company is unable to delever
towards 5x Moody's adjusted net debt/EBITDA over the next 12-24
months. This scenario could include persistent headwinds from labor
cost inflation and supply chain disruption, negatively impacting
the cadence of earnings growth and deleveraging. In addition,
ratings could be downgraded if Artivion's financial policies became
more aggressive, or if the company does not sustain its very good
liquidity profile, including a return to meaningful positive free
cash flow generation in FY2023.
Ratings could be upgraded if the company is able to sustain high
single digit growth in both revenue and EBITDA. Further
diversification of the portfolio by product and geography would
also support a positive rating action. Quantitatively, ratings
could be upgraded if net debt/EBITDA is sustained below 4 times
while maintaining very good liquidity.
Headquartered outside Atlanta, Georgia, Artivion is a leader in the
manufacturing, processing, and distribution of medical devices and
implantable tissues used in cardiac and vascular surgical
procedures focused on aortic repair. Artivion markets and sells
products in more than 100 countries worldwide. Revenues are
approximately $300 million as of December 2021, and the company is
publicly traded.
The principal methodology used in these ratings was Medical
Products and Devices published in October 2021.
AUTOMATED RECOVERY: Taps Velarde & Yar as Bankruptcy Counsel
------------------------------------------------------------
Automated Recovery Systems of New Mexico, Inc. seeks approval from
the U.S. Bankruptcy Court for the District of New Mexico to employ
Velarde & Yar, P.C. to serve as legal counsel in its Chapter 11
case.
The firm's services include:
a. providing the Debtor with legal advice regarding all aspects
of its bankruptcy case including, without limitation, meetings of
creditors, claims objections, adversary proceedings, plan
confirmation and all hearings before the court;
b. preparing legal papers, including the Debtor's Chapter 11
plan;
c. assisting the Debtor in taking actions required to operate
under Chapter 11 of the Bankruptcy Code; and
d. performing all other legal services necessary for the
Debtor's continued operation.
The hourly rates charged by the firm's attorneys and paralegals are
as follows:
Attorneys $250 per hour
Paralegals $100 per hour
The firm will also seek reimbursement for out-of-pocket expenses.
Joseph Yar, Esq., a partner at Velarde & Yar, disclosed in a court
filing that his firm is a "disinterested person" as the term is
defined in Section 101(14) of the Bankruptcy Code.
The firm can be reached at:
Joseph Yar, Esq.
Velarde & Yar P.C.
4004 Carlisle Blvd NE, Suite S
Albuquerque, NM 87107
Tel: (505) 248-0050
Email: joseph@yarlawoffice.com
About Automated Recovery Systems of New Mexico
Automated Recovery Systems of New Mexico Inc. --
http://arscollect.com/about.html-- is a debt collection agency in
Farmington, N.M.
Automated Recovery Systems filed a petition under Chapter 11,
Subchapter V of the Bankruptcy Code (Bankr. D.N.M Case No.
22-10225) on March 23, 2022, listing up to $500,000 in assets and
up to $10 million in liabilities. Bryan Scott Perkinson serves as
Subchapter V trustee.
Judge David T. Thuma oversees the case.
Joseph Yar, Esq., at Velarde & Yar P.C. is the Debtor's legal
counsel.
BAYTEX ENERGY: Fitch Raises LongTerm IDR to 'B+', Outlook Stable
----------------------------------------------------------------
Fitch Ratings has upgraded Baytex Energy Corporation's (Baytex)
Long-Term Issuer Default Ratings (IDR) to 'B+' from 'B' and its
senior unsecured ratings to 'BB-'/'RR3' from 'B'/'RR4'. The Rating
Outlook is Stable.
Baytex's ratings reflect its absolute debt reductions consistent
with the company's 'Five-Year Outlook,' its improved leverage,
diversified asset base and FCF profile. The rating also considers
Baytex's relatively lower proved reserve base, non-operated status
of its Eagle Ford assets and exposure to heavy oil differentials.
KEY RATING DRIVERS
Continued Absolute Debt Reduction: Baytex reduced its total debt
during 2021 from approximately CAD1.8 billion to CAD1.4 billion at
year end. This includes reducing the outstanding balance of its
2024 notes, which become callable at par in June 2022, by USD200
million to USD200 million outstanding.
Absolute debt reduction, and EBITDA strength supported by a strong
commodity environment reduced total debt with equity
credit/operating EBITDA to approximately 1.7x at year-end 2021,
with Fitch forecasting under its Base Case, which uses US95/bbl WTI
in 2022, leverage to reduce further approximately 1x at year-end
2022. Baytex is targeting a net debt to bank EBITDA ratio of 1x at
USD55 WTI, which is a more ambitious target than the longer-term
net debt to EBITDA ratio target of 1.5x presented in 2021.
Balanced Debt and Distribution Strategy: Debt repayment is expected
to remain a priority in 2022 as Baytex expects to achieve its
initial $1.2 billion net debt target in 2Q22, approximately when it
will begin allocating 25% of FCF to share buybacks. Baytex has set
a level of $800 million in net debt before additional shareholder
enhancements are introduced. Under Fitch's Base Case, Baytex is
expected to achieve their CAD800 million net debt target by year
end 2023, supported by cumulative FCF generation in 2022 and 2023
of approximately CAD1.2 billion before moderating as Fitch's
commodity price assumptions migrate towards midcycle pricing.
Ring Fenced Term Loan Facility Removed: On April 1, 2022, Baytex
extended its credit facilities that previously were to mature in
2024, extending the maturity to April 2026. The new revolving
facilities consist of a USD650 million tranche for Canadian
borrowing and USD200 million tranche for U.S. borrowing and replace
the previous combined USD575 million revolving facilities and
CAD300 million term loan. The facilities modestly increased total
facility size from approximately USD810 million to USD850 million,
but also remove the term loan with ring-fenced asset security on
the previous term loan relating to the former Raging River assets.
With visibility to repay Baytex's 2024 notes, they have a
manageable and medium-term maturity schedule with minimal near-term
risk.
Diversified Assets: Baytex has a meaningfully diverse asset base by
geography and hydrocarbon. In 2021, 38% of production came from the
Eagle Ford (79% liquids), and the remaining 62% was Canadian
production (83% liquids). Baytex's Canadian production is roughly
evenly split between light oil and heavy oil, with heavy oil prices
being discounted due to quality and transportation differentials.
The impact on Baytex's overall margins from this is softened by its
Light Louisiana Sweet (LLS) priced Eagle Ford production and Mixed
Sweet Blend (MSW) priced Viking production.
Modest Growth Expectations: Baytex produced an average of
approximately 81mboped in 2021, about 2% above 2020 production.
Baytex's 'Five-Year Outlook' anticipates 2%-4% annual production
growth with production approaching 90mboepd in 2025, which is a
strategy that is currently generally consistent with the majority
of public E&P companies in terms of FCF being prioritized over
growth.
Affecting Baytex's discretion to increase its growth rate is its
non-operator status on its Eagle Ford acreage, with Marathon Oil
determining the development pace. Strong results from Baytex's
early stage Clearwater play in its Peace River acreage, where
Baytex drilled its first well in 1Q21 and is planning to have 26
wells drilled by the end of 2022, provides a currently small, but
growing production with outsized economics reflected in initial
wells drilled paying out in five months at USD65/bbl WTI.
Hedged Differentials and Commodity Prices: Helping provide cash
flow visibility, Baytex had hedged 41% of 2022 and 9% of 2023
estimated production volume at March 2022 and also partially hedges
Canadian differentials between Western Canadian Select and MSW to
WTI. Its corporate policy allows up to 60% of financial exposure.
Baytex has U.S. dollar to Canadian dollar FX exposure due to its
Eagle Ford assets, U.S. dollar-denominated debts and Canadian
dollar reporting.
DERIVATION SUMMARY
With 80.2mboed (81% liquids) of production during 2021, Baytex is
similar in size to Canadian peers MEG Energy Corp. (B+/Stable;
93.7mboed, 100% liquids) and Vermilion Energy Inc. (BB-/Stable;
84.4mboed, 53% liquids). Baytex's diverse asset base provides
exposure to Canadian heavy and light oil and the relatively
price-advantaged Eagle Ford, contributing to a cash netback of
CAD32.1 per barrel of oil equivalent (boe). This is above the 100%
heavy oil exposed MEG at CAD29.7/boe, but below Vermilion, which
benefits from exposure to higher priced international oil and
natural gas indices, at CAD41.6/boe for 2021. A differentiating
factor for Baytex is its non-operating status portion of its
production relating to its Eagle Ford trend assets, which is not
typical at the 'B+' rating level.
Baytex's Proved reserves base of 228mmboe, is materially below
MEG's 1.3 billion boe and relatively in line with Vermilion's
268mmboe. In terms of year-end 2021 debt/flowing barrel, Baytex'
approximately CAD17,000/boe is below Vermilion of approximately
CAD22,000/boe and well below more levered MEG at approximately
CAD30,000/boe.
Compared with 'B' category rated Eagle Ford exposed peers SM Energy
Company (B+/Positive) and Ranger Oil Corporation (B-/Stable),
Baytex's U.S. dollar-equivalent cash netback of USD25.1/boe trails
SM Energy's USD35.5/boe, and total production of approximately
140.7mboepd. Compared with primarily Eagle Ford exposed and Ranger
Oil, Baytex's netback trails its USD38.0/boe in 2021; however,
Baytex's production is materially above Ranger's 27.8mboed 2021
average.
KEY ASSUMPTIONS
-- WTI prices of USD95/bbl in 2022, USD76/bbl in 2023, USD57/bbl
in 2024 and USD50/bbl thereafter;
-- Henry Hub prices of USD4.25/mcf in 2022, USD3.25/mcf in 2023,
USD2.75/mcf in 2023 and USD2.50/mcf thereafter;
-- AECO differentials tighten as a percentage of Henry Hub during
forecast;
-- U.S. dollar to Canadian dollar FX rate of USD1.00/CAD1.29
through forecast;
-- Low single digit annual production growth through the
forecast;
-- 2024 senior unsecured notes are repaid prior to maturity;
-- Share buybacks with at least 25% of FCF annually;
-- Excess cash partially applied to reducing credit facility
utilization;
-- Dividend introduced after Baytex reaches $800 million total
debt.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Production growth resulting in average daily production above
125 Mboepd;
-- Commitment to a conservative financial policy resulting in
mid-cycle debt with equity credit/operating EBITDA or
sustained below 2.0x;
-- Maintaining adequate drilling inventory and improving mid
cycle pricing unit economics;
-- Midcycle FFO of approximately CAD1 billion.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Deteriorating liquidity and financial flexibility, including
increased revolver borrowings and inability to live within
cash flow over the next 12 to 18 months;
-- Loss of operational momentum leading to forecast production
below 70mboed;
-- Outstanding 2024 notes are not called once available to do so
at par;
-- Mid-cycle debt with equity credit/EBITDA sustained above 2.5x.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Increasing Liquidity: Baytex had CAD507 million drawn and CAD15
million of letter of credit on its credit facilities at year-end
2021. Proforma Baytex's April 1, 2022 extension of its credit
facilities maturities to April 2026 from April 2024, as well as
increase to USD850 million committed, Baytex had approximately
CAD566 million undrawn capacity to meet liquidity needs. Baytex's
credit facilities are covenant based as opposed to reserve based
and as such do not have negative redetermination risk. Liquidity is
expected to continue to improve through Fitch's forecast, supported
by FCF generation.
Baytex's next maturities are in 2024, when the remaining USD200
million outstanding on the original USD400 million notes issue.
Given Baytex's FCF generation forecast, Fitch anticipates the
remaining USD200 million outstanding on the 2024 notes will be
repaid prior to maturity after they become callable at par in June
2022 and leaving the only remaining notes in the company's maturity
schedule being the USD500 million 8.75% notes maturing April 2027.
KEY RECOVERY RATING ASSUMPTIONS
The recovery analysis assumes that Baytex would be reorganized as a
going-concern in bankruptcy rather than liquidated. Fitch has
assumed a 10% administrative claim and a 100% draw on its secured
revolving facility, reflecting that Baytex's facilities are not
affected by redetermination risk.
Going-Concern (GC) Approach
Baytex's GC EBITDA assumption reflects Fitch's view of a
sustainable, post-reorganization EBITDA level upon which Fitch
bases the enterprise valuation.
Baytex's bankruptcy scenario considers a structurally lower priced
crude oil and natural gas environment, resulting in reduced
operational and financial flexibility, in line with stress case
assumptions beyond existing production hedged period. Fitch
believes the lower price environment supports a lower capital
program, modest production declines and negative FCFs.
The GC assumption reflects Fitch's stressed case price deck, which
assumes WTI oil prices of USD42.00 in 2023, USD32.00 in 2024 and
USD42.00 in 2025. An EV multiple of 4.0x EBITDA is applied to the
GC EBITDA to calculate a post-reorganization enterprise value. The
choice of this multiple considered the following factors:
-- The historical bankruptcy case study exit multiples for peer
companies ranged from 2.8x-7.0x, with an average of 5.2x and a
median of 5.4x;
-- Selection of a lower multiple is consistent with the non-
operated nature of the Eagle Ford assets, relatively lower PDP
reserves, as well as exposure to lower-netback heavy oil in
Canada.
Liquidation Approach
The liquidation estimate reflects Fitch's view of transactional and
asset-based valuations, including recent transactions in the
Canadian oil sands, Viking, Duvernay and the Eagle Ford basin on a
CAD/boepd and CAD/acre, as well as Baytex's standardized measure of
net cash flows (PV-10) estimates. This data was used to determine a
reasonable sales price for the company's assets.
The allocation of value in the liability waterfall results in a
'RR3' rating for the Baytex's senior secured second lien notes,
notching up one level from Baytex's 'B+' IDR.
ISSUER PROFILE
Baytex Energy is a Canadian E&P company that averaged 80,156boped
production in 2021. 62% of production came from Canadian operations
and 38% within the U.S. Baytex's 2021 production mix consisted of
45% light oil and condensate, 28% heavy oil, 9% NGLs and 18%
natural gas.
ESG CONSIDERATIONS
Baytex has an ESG Relevance Score of '4' for Energy/Management,
reflecting the company's relatively smaller scale and heavy oil
exposure, which may expose the company to impending energy
transition risks. These factors have a negative impact on the
credit profile, and are 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.
BENNING MCLEAN: Taps Tyler Bartl & Ramsdell as Bankruptcy Counsel
-----------------------------------------------------------------
Benning McLean Holdings, LLC seeks approval from the U.S.
Bankruptcy Court for the Eastern District of Virginia to employ
Tyler Bartl & Ramsdell, P.L.C. to serve as legal counsel in its
Chapter 11 case.
The firm's services include:
a. assisting with required bankruptcy schedules and related
forms;
b. representing the Debtor at creditors' meetings;
c. advising the Debtor of its duties and responsibilities under
the Bankruptcy Code;
d. assisting in preparing monthly financial forms and in
analyzing cash flow and financial matters;
e. advising the Debtor in connection with executory contracts;
f. drafting documents to reflect agreements with creditors;
g. resolving motions for relief from stay and adequate
protection;
h. negotiating for obtaining financing and use of cash
collateral, as necessary, and determining whether reorganization,
dismissal or conversion is in the best interests of the Debtor and
its creditors;
i. working with creditors' committee and other counsel, if any;
j. working on any disclosure statement and plan of
reorganization; and
k. handling other matters that arise in the normal course of
administration of the Debtor's bankruptcy estate.
The firm will be paid at the rate of $450 per hour for its services
and will be reimbursed for out-of-pocket expenses. The retainer fee
is $21,738.
Steven Ramsdell, Esq., a partner at Tyler, disclosed in a court
filing that his firm is a "disinterested person" as the term is
defined in Section 101(14) of the Bankruptcy Code.
The firm can be reached at:
Steven B. Ramsdell, Esq.
Tyler, Bartl & Ramsdell, P.L.C.
300 N. Washington St., Suite 310
Alexandria, VA 22314
Email: (703) 549-5003
About Benning McLean Holdings
Benning McLean Holdings, LLC, a company in Falls Church, Va.,
sought voluntary Chapter 11 bankruptcy protection (Bankr. E.D. Va.
Case No. 22-10311) on March 21, 2022, listing as much as $10
million in both assets and liabilities. Yu-Dee Chang, managing
agent, signed the petition.
Judge Klinette H. Kindred oversees the case.
Steven B. Ramsdell, Esq., at Tyler, Bartl & Ramsdell, P.L.C. is the
Debtor's legal counsel.
BESTWALL LLC: 500 Asbestos Claimants Get Rare Fines
---------------------------------------------------
Vince Sullivan of Law360 reports that a North Carolina bankruptcy
judge took the unusual step of sanctioning nearly 500 asbestos
claimants in the Chapter 11 case of Georgia-Pacific unit Bestwall
LLC this second week of April 2022, saying fines were necessary to
compel the claimants to complete forms critical to the debtor's
claim estimation efforts.
During a hearing in Charlotte on Wednesday, April 6, 2022, Judge
Laura T. Beyer of the U. S. Bankruptcy Court for the Western
District of North Carolina said claimants who had not completed
sections of a personal injury questionnaire that asked about their
claims against other asbestos-related defendants would incur $100
daily fines beginning in two weeks.
About Bestwall LLC
Bestwall LLC -- http://www.Bestwall.com/-- was created in an
internal corporate restructuring and now holds asbestos
liabilities. Bestwall's asbestos liabilities relate primarily to
joint systems products manufactured by Bestwall Gypsum Company, a
company acquired by Georgia-Pacific in 1965. The former Bestwall
Gypsum entity manufactured joint compounds containing small amounts
of chrysotile asbestos. The manufacture of these
asbestos-containing products ceased in 1977.
Bestwall's non-debtor subsidiary, GP Industrial Plasters LLC
develops, manufactures, sells and distributes gypsum plaster
products.
Bestwall sought Chapter 11 protection (Bankr. W.D.N.C. Case No.
17-31795) on Nov. 2, 2017, in an effort to equitably and
permanently resolve all its current and future asbestos claims. The
Debtor estimated assets and debt of $500 million to $1 billion. It
has no funded indebtedness.
The Hon. Laura T. Beyer is the case judge.
The Debtor tapped Jones Day as general bankruptcy counsel, Robinson
Bradshaw & Hinson P.A. as local counsel, Schachter Harris LLP as
special litigation counsel for medicine science issues, King &
Spalding as special counsel for asbestos matters, and Bates White
LLC as asbestos consultant. Donlin Recano LLC is the claims and
noticing agent.
On Nov. 8, 2017, the U.S. bankruptcy administrator appointed an
official committee of asbestos claimants in the Debtor's case. The
committee retained Montgomery McCracken Walker & Rhoads LLP as its
legal counsel, Hamilton Stephens Steele + Martin, PLLC and JD
Thompson Law as local counsel, and FTI Consulting, Inc., as
financial advisor.
On Feb. 22, 2018, the court approved the appointment of Sander L.
Esserman as the future claimants' representative in the Debtor's
case. Mr. Esserman tapped Young Conaway Stargatt & Taylor, LLP as
his legal counsel and Alexander Ricks PLLC as his North Carolina
counsel.
BLACK NEWS CHANNEL: Seeks Cash Collateral Access, $3.5MM DIP Loan
-----------------------------------------------------------------
Black News Channel, LLC asks the U.S. Bankruptcy Court for the
Northern District of Florida, Tallahassee Division, for authority
to, among other things, use cash collateral and obtain postpetition
financing.
The Debtor seeks authority to obtain up to $3,528,000 in aggregate
principal amount of postpetition financing, and access up to
$1,590,000 in the aggregate in the interim and pending a final
hearing, all on the terms and conditions set forth in the Interim
Order and the Term Sheet, by and among the Debtor and Stache
Investments Corporation as DIP Lender.
Proceeds of the DIP Loan will be used solely to fund general
working capital, operational expenses and restructuring expenses in
accordance with the Term Sheet and any order entered by the
Bankruptcy Court related to the DIP Loan and the Approved Budget.
BNC, as borrower, is party to a Business Loan Agreement, dated
December 20, 2019, with Busey Bank, an Illinois Banking
Corporation, as lender, pursuant to which BNC gained access to a
line of credit from the Prepetition Lender in the original
principal amount of $5,000,000. On July 2, 2020, BNC and the
Prepetition Lender entered into the Change in Terms agreement,
pursuant to which the Prepetition Loan Agreement was amended to
increase the maximum loan commitment thereunder to $7,000,000. As
of the Petition Date, BNC had fully drawn upon the $7,000,000 line
of credit.
BNC, as borrower, also is party to a Revolving Credit and Security
Agreement, dated as of October 18, 2018, with Beatnik Investments,
LLC, an entity affiliated with Shahid Khan, as lender. In
accordance with the terms and conditions of the Prepetition Beatnik
Credit Agreement, Beatnik agreed to make certain loans and other
extension of credit to BNC. As of the Petition Date, the Debtor was
indebted to Beatnik under the terms of the Prepetition Beatnik
Credit Agreement for unpaid principal in the amount of $6,000,000,
plus interest, fees and other charges.
In addition, the Debtor is indebted to Beatnik for other loans and
advances totaling approximately $8.55 million.
Immediately prior to the Petition Date, Stache Investments
Corporation, an entity affiliated with Beatnik and Mr. Khan, at the
Debtor's request, made certain advances to the Debtor totaling
approximately $1,250,000. These funds made it possible for the
Debtor to pay, among other things, the wages, salaries and other
compensation earned through March 18, 2022, by the Debtor's
remaining employees and the recently departed employees and
contractors.
BNC's trade payables owed to vendors, suppliers and other
non-insider unsecured creditors amount to approximately $4 million
to $4.5 million as of the Petition Date.
The Debtor proposes to provide the Prepetition Lender with certain
forms of adequate protection to protect against the postpetition
diminution in value of the Prepetition Collateral resulting from
the Debtor's use, sale, or lease of the Prepetition Collateral, the
imposition of the DIP Liens, the payments of amounts under the
Carve-Out, and the imposition of the automatic stay.
A copy of the motion is available at https://bit.ly/3Krjada from
PacerMonitor.com.
About Black News Channel
Black News Channel is a news network and the only provider of 24/7
multiplatform programming dedicated to covering the unique
perspectives, challenges and successes of Black and Brown
communities.
Black News Channel sought Chapter 11 bankruptcy protection (Bankr.
N.D. Fla. Case No. 22-40087) on March 28, 2022. In the petition
signed by Maureen Brown, vice president of finance, it listed
estimated assets between $10 million and $50 million and estimated
liabilities between $10 million and $50 million.
Richard R. Thames, Esq., at Thames Markey, P.A., is the Debtor's
counsel.
BOY SCOUTS: Defeats Girl Scouts TM Lawsuit on Genderless Terms
--------------------------------------------------------------
Max Jaeger of Law360 reports that a New York federal judge tossed
the Girl Scouts' lawsuit challenging the Boy Scouts' use of
genderless scouting terms on Thursday, April 7, 2022, saying it
appeared the girls-only group was more concerned about losing
members after the Boy Scouts began admitting girls in recent years.
None of the so-called Polaroid factors traditionally applied in the
Second Circuit weighed in the Girl Scouts' favor, and many of them
helped the Boy Scouts, according to an opinion by U.S. District
Judge Alvin K. Hellerstein. The failure of their underlying
trademark claims doomed the additional causes of action for
trademark dilution, tortious interference and money damages.
About Boy Scouts of America
The Boy Scouts of America -- https://www.scouting.org/ -- is a
federally chartered non-profit corporation under title 36 of the
United States Code. Founded in 1910 and chartered by an act of
Congress in 1916, the BSA's mission is to train youth in
responsible citizenship, character development, and self-reliance
through participation in a wide range of outdoor activities,
educational programs, and, at older age levels, career-oriented
programs in partnership with community organizations. Its national
headquarters is located in Irving, Texas.
The Boy Scouts of America and affiliate Delaware BSA, LLC, sought
Chapter 11 protection (Bankr. D. Del. Lead Case No. 20-10343) on
Feb. 18, 2020, to deal with sexual abuse claims.
Boy Scouts of America was estimated to have $1 billion to $10
billion in assets and at least $500 million in liabilities as of
the bankruptcy filing.
The Debtors have tapped Sidley Austin LLP as their bankruptcy
counsel, Morris, Nichols, Arsht & Tunnell LLP as Delaware counsel,
and Alvarez & Marsal North America, LLC, as financial advisor.
Omni Agent Solutions is the claims agent.
The U.S. Trustee for Region 3 appointed a tort claimants' committee
and an unsecured creditors' committee on March 5, 2020. The tort
claimants' committee is represented by Pachulski Stang Ziehl &
Jones, LLP, while the unsecured creditors' committee is represented
by Kramer Levin Naftalis & Frankel, LLP.
BOY SCOUTS: Insurers' Chapter 11 Stance Risks Organization's Future
-------------------------------------------------------------------
Vince Sullivan of Law360 reports that the attorneys for the
bankrupt Boy Scouts of America told a Delaware judge Thursday,
April 7, 2022, that if insurers objecting to its proposed Chapter
11 plan had their way, the organization would likely fold and
thousands of survivors of sexual abuse would have no recourse for
recoveries, as the two parties battled over confirmation of the
plan.
During the second day of closing arguments in the plan confirmation
trial that began March 14, 2022 attorneys for the Boy Scouts said
that in the absence of a plan, the scouting organization will
likely cease to exist.
About Boy Scouts of America
The Boy Scouts of America -- https://www.scouting.org/ -- is a
federally chartered non-profit corporation under title 36 of the
United States Code. Founded in 1910 and chartered by an act of
Congress in 1916, the BSA's mission is to train youth in
responsible citizenship, character development, and self-reliance
through participation in a wide range of outdoor activities,
educational programs, and, at older age levels, career-oriented
programs in partnership with community organizations. Its national
headquarters is located in Irving, Texas.
The Boy Scouts of America and affiliate Delaware BSA, LLC, sought
Chapter 11 protection (Bankr. D. Del. Lead Case No. 20-10343) on
Feb. 18, 2020, to deal with sexual abuse claims.
Boy Scouts of America was estimated to have $1 billion to $10
billion in assets and at least $500 million in liabilities as of
the bankruptcy filing.
The Debtors have tapped Sidley Austin LLP as their bankruptcy
counsel, Morris, Nichols, Arsht & Tunnell LLP as Delaware counsel,
and Alvarez & Marsal North America, LLC, as financial advisor.
Omni Agent Solutions is the claims agent.
The U.S. Trustee for Region 3 appointed a tort claimants' committee
and an unsecured creditors' committee on March 5, 2020. The tort
claimants' committee is represented by Pachulski Stang Ziehl &
Jones, LLP, while the unsecured creditors' committee is represented
by Kramer Levin Naftalis & Frankel, LLP.
CAMBER ENERGY: Gets Extension to File Delayed Reports Until May 20
------------------------------------------------------------------
Camber Energy, Inc. received a letter from the NYSE American in
response to the company's request for an extension of the date by
which the company is to file outstanding financial reports.
The company is not in compliance with the Exchange's continued
listing standards. Specifically, Camber Energy is not in
compliance with Section 134 and 1101 of the NYSE American Company
Guide given the company failed to timely file with the Securities
and Exchange Commission the following reports: (i) Form 10-K for
the 9-month transition period ended Dec. 31, 2020; (ii) Form 10-Q
for the period ended March 31, 2021; (iii) Form 10-Q for the period
ended June 30, 2021; and (iv) Form 10-Q for the period ended Sept.
30, 2021.
Camber Energy intended to remedy the filing delinquency on or
before April 1, 2022, however due to certain circumstances
requested the Exchange grant the company an extension of time by
which to file the delayed reports. The Exchange accepted the
company's request and has allowed the company until May 20, 2022 to
file the delayed reports. The filing delinquency will be cured via
the filing of the delayed reports and the filing of the company's
annual report on Form 10-K for the period ended Dec. 31, 2021.
If Camber Energy is unable to cure the delinquency by May 20, 2022,
Exchange staff will initiate delisting proceedings as appropriate.
The company may appeal a staff delisting determination in
accordance with Section 1010 and Part 12 of the Company Guide.
Receipt of the letter does not have any immediate effect on the
listing of Camber Energy's shares on the Exchange, except that
until the company regains compliance with the Exchange's listing
standards, a "BC" indicator will be affixed to the company's
trading symbol. The company's business operations and SEC
reporting requirements are unaffected by the notification, provided
that if the filing delinquency is not cured, then the company will
be subject to the Exchange's delisting procedures.
Camber Energy is committed to filing the required reports to
achieve compliance with the Exchange's requirements, and, although
there are no guarantees it will do so, the company expects to file
the required reports on or before May 20, 2022.
About Camber Energy
Based in Houston, Texas, Camber Energy -- http://www.camber.energy
-- is primarily engaged in the acquisition, development and sale of
crude oil, natural gas and natural gas liquids from various known
productive geological formations, including from the Hunton
formation in Lincoln, Logan, Payne and Okfuskee Counties, in
central Oklahoma; the Cline shale and upper Wolfberry shale in
Glasscock County, Texas; and Hutchinson County, Texas, in
connection with its Panhandle acquisition which closed in March
2018.
Camber Energy reported a net loss of $8.61 million for the year
ended Dec. 31, 2020, compared to a net loss of $10.79 million for
the year ended Dec. 31, 2019. As of Sept. 30, 2020, the Company had
$11.79 million in total assets, $32.48 million in total
liabilities, $38 million in temporary equity, and a total
stockholders' deficit of $58.68 million.
Dallas, Texas-based Turner, Stone & Company, L.L.P., issued a
"going concern" qualification in its report dated Nov. 19, 2021,
citing that the Company has incurred significant losses from
operations and had an accumulated deficit as of March 31, 2020 and
2019. These factors raise substantial doubt about its ability to
continue as a going concern.
CAN B CORP: Delays Filing of 2021 Annual Report
-----------------------------------------------
Can B Corp. filed a Form 12b-25 with the Securities and Exchange
Commission with respect to its Annual Report on Form 10-K for the
year ended Dec. 31, 2021, disclosing that the company was unable to
file the Form 10-K within the prescribed time period due to a delay
in obtaining and compiling information, which delay could not be
eliminated by the company without unreasonable effort and expense.
In accordance with Rule 12b-25 of the Securities Exchange Act of
1934, as amended, the company will file its Form 10-K no later than
the 15th calendar day following the prescribed due date.
About Can B Corp
Headquartered in Hicksville New York, Canbiola, Inc. (now known as
Can B Corp) -- http://www.canbiola.com-- develops, produces, and
sells products and delivery devices containing CBD. Cannabidiol
("CBD") is one of nearly 85 naturally occurring compounds
(cannabinoids) found in industrial hemp (it is also contained in
marijuana). The Company's products contain CBD derived from Hemp
and include products such as oils, creams, moisturizers, isolate,
and gel caps. In addition to offering white labeled products,
Canbiola has developed its own line of proprietary products, as
well as seeking synergistic value through acquisitions of products
and brands in the Hemp industry.
Can B Corp. reported a loss and comprehensive loss of $5.72 million
for the year ended Dec. 31, 2020, compared to a loss and
comprehensive loss of $5.90 million for the year ended Dec. 31,
2019. As of Sept. 30, 2021, the Company had $14.61 million in
total assets, $9.01 million in total liabilities, and $5.61 million
in total stockholders' equity.
Hauppauge, NY-based BMKR, LLP, the Company's auditor since 2014,
issued a "going concern" qualification in its report dated April
12, 2021, citing that the Company incurred a net loss of $5,851,512
during the year ended Dec. 31, 2020 and as of that date, had an
accumulated deficit of $30,521,025. Due to recurring losses from
operations and the accumulated deficit, the Company stated that
substantial doubt exists about its ability to continue as a going
concern.
CERTA DOSE: Case Trustee Wins Final Cash Collateral Access
----------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York has
authorized Kenneth P. Silverman, Esq., the chapter 11 operating
trustee of the bankruptcy estate of Certa Dose, Inc., to use cash
collateral in which Dr. Caleb S. Hernandez asserts an interest.
Silverman requires the use of cash collateral to immediately make
certain payments to approximately 10 law firms and attorneys in the
ordinary course of the Debtor's businesses (OCPs) to preserve the
Debtor's intellectual property assets.
The Trustee is authorized to use cash collateral and all other
accounts of the Debtor to make the Immediate Payments. The Trustee
is also authorized and directed to use cash collateral and all
other accounts of the Debtor to make payments up to the amount of
$2,530, or such other amounts which may come due with respect to
the Debtor’s applicable insurance policies, to Chubb Insurance.
As adequate protection for the use of cash collateral, the Lender
is granted valid, binding, enforceable and automatically perfected
liens and/or security interests in and upon all of the assets the
Debtor presently owns or hereafter acquires.
As further adequate protection, the Lender is granted, pursuant to
and as limited by sections 361, 363 and 507(b) of the Bankruptcy
Code, super-priority administrative expense claims to the extent
that the Adequate Protections Liens prove inadequate and with
priority over all administrative expense claims and unsecured
claims against the Debtor or its estate.
Any replacement liens, adequate protection liens, and
super-priority claims granted are subject to the following fees,
expenses, and recoveries: any and all quarterly fees due to the
Office of the U.S. Trustee pursuant to 28 U.S.C. section 1930(a)(6)
and interest due pursuant to 31 U.S.C. section 3717, and any fees
due to the Clerk of the Bankruptcy Court pursuant to 28 U.S.C.
section 156(c).
A copy of the order is available at https://bit.ly/3NSSeoI from
PacerMonitor.com.
About Certa Dose, Inc.
Certa Dose Inc. develops, sells and licenses pharmaceutical
products and technology. Its principal business is developing,
selling and licensing its pharmaceutical products and technology.
The Company was designated as an innovation company by Johnson &
Johnson and has received a grant and mentorship from J & J.
Certa Dose sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. S.D.N.Y. Case No. 21-11045) on May 30,
2021. In the petition signed by Caleb S. Hernandez, president, the
Debtor disclosed up to $50 million in assets and up to $100 million
in liabilities.
Judge Lisa G. Beckerman presides over the case.
Norma Ortiz, Esq., at Ortis & Ortiz, LLP is the Debtor's counsel.
CHEFS' WAREHOUSE: Moody's Alters Outlook on 'B3' CFR to Positive
----------------------------------------------------------------
Moody's Investors Service changed the outlook for The Chefs'
Warehouse, Inc.'s (Chefs) to positive from stable. Concurrently,
Moody's affirmed the company's B3 corporate family rating, B3-PD
probability of default rating, and B2 senior secured first lien
term loan rating. The speculative grade liquidity rating was
upgraded to SGL-2 from SGL-3.
The change in outlook to positive from stable reflects Moody's
expectations for continued revenue and earnings recovery that will
result in leverage improving to 4.8x in 2022 from 7.1x in 2021 and
EBITA/interest expense improving to 2.8x from 1.6x. Chefs will
benefit from a continued normalization of dining out activity in
metropolitan areas, as well as in hospitality and travel-related
food away from home. While rising food, fuel and labor costs will
remain a headwind for the food distribution sector, the company
should be able to continue passing through the majority of cost
increases to its customers.
The upgrade of the speculative-grade liquidity rating to SGL-2 from
SGL-3 reflects Moody's expectations for breakeven to modestly
positive free cash flow, solid cash balances, and good revolver
availability over the next 12-18 months.
Moody's took the following rating actions for The Chefs' Warehouse,
Inc.:
Corporate Family Rating, Affirmed B3
Probability of Default Rating, Affirmed B3-PD
Senior Secured First Lien Term Loan, Affirmed B2 (LGD3)
Speculative Grade Liquidity rating, upgraded to SGL-2 from SGL-3
Outlook, Changed to Positive from Stable
RATINGS RATIONALE
The Chefs' Warehouse, Inc.'s B3 CFR reflects the company's high
leverage and the still challenging operating environment for food
distributors due to supply chain disruption and labor availability.
While distributors generally benefit in a steady inflationary
environment, the high volatility in food and fuel costs could
result in margin pressure and could also dent consumer spending on
discretionary categories including food away from home. The ratings
also reflect Chefs' modest scale relative to its public foodservice
industry peers. At the same time, the credit profile benefits from
the company's potential for continued deleveraging and good
liquidity over the next 12-18 months. In addition, the ratings
reflect Chefs' position as a premier distributor of specialty food
products in the United States and Canada. The company has a product
portfolio with a deep selection of specialty and
center-of-the-plate food products that differentiates its offering
from the larger, traditional broadline foodservice distributors.
Chefs' focus on the independent restaurant segment and scale within
the segment should allow it to return to solid operating margins
relative to its peers. The rating also benefits from governance
considerations, specifically the company's balanced financial
policies, including its issuance of common equity to support
liquidity during the pandemic, and its moderate leverage levels
maintained prior to 2020.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Factors that could result in an upgrade include solid revenue and
earnings recovery, such that debt/EBITDA is sustained around 5.5
times and EBITA/interest expense above 1.5 times. An upgrade would
also require continued good liquidity, including positive free cash
flow generation.
Factors that could result in a downgrade include a deterioration in
liquidity for any reason or expectations for EBITA/interest expense
to be maintained below 1.25x.
Headquartered in Ridgefield, CT, The Chefs' Warehouse, Inc.
distributes specialty food products to menu-driven independent
restaurants, fine dining establishments, country clubs, hotels,
caterers, culinary schools, bakeries, patisseries, chocolatiers,
cruise lines, casinos, and specialty food stores in the United
States and Canada. The company generated net sales of $1.7 billion
for the fiscal year ended December 24, 2021.
The principal methodology used in these ratings was Distribution &
Supply Chain Services Industry published in June 2018.
CHILAQUILES FACTORY: Taps Barron & Newburger as Bankruptcy Counsel
------------------------------------------------------------------
Chilaquiles Factory, LLC seeks approval from the U.S. Bankruptcy
Court for the Western District of Texas to employ Barron &
Newburger, PC to serve as legal counsel in its Chapter 11 case.
The firm's services include:
a. advising the Debtor of its rights, powers and duties;
b. reviewing the nature and validity of claims asserted against
the property of the Debtor and advising the Debtor concerning the
enforceability of such claims;
c. preparing legal documents and reviewing all financial reports
to be filed in the Debtor's case;
d. advising the Debtor concerning and preparing responses to
motions, complaints, pleadings and other legal papers, which may be
filed in its case;
e. advising the Debtor in connection with the formulation,
negotiation and promulgation of a plan of reorganization and
related documents;
f. working with professionals retained by other parties to
obtain approval of a consensual plan of reorganization for the
Debtor; and
g. performing all other necessary legal services for the
Debtor.
The hourly rates charged by the firm for its services are as
follows:
Attorneys $275 to $525 per hour
Staffs $40 to $125 per hour
The firm will also seek reimbursement for out-of-pocket expenses.
The retainer fee is $7,500.
As disclosed in court filings, Barron & Newburger is a
"disinterested person" within the meaning of Section 101(14) of the
Bankruptcy Code.
The firm can be reached at:
Stephen W. Sather, Esq.
Barron & Newburger, PC
7320 N Mopac Expy #400
Austin, TX 78731
Tel: (512) 476-9103
Email: ssather@bn-lawyers.com
About Chilaquiles Factory
Chilaquiles Factory, LLC filed a petition under Chapter 11,
Subchapter V of the Bankruptcy Code (Bankr. W.D. Texas Case No.
22-10170) on March 17, 2022, listing as much as $1 million in both
assets and liabilities. Eric Terry serves as Subchapter V trustee.
Judge H. Christopher Mott oversees the case.
The Debtor is represented by Stephen W. Sather, Esq., at Barron &
Newburger, PC.
CIRTRAN CORP: Delays Filing of 2021 Annual Report
-------------------------------------------------
CirTran Corporation filed with the Securities and Exchange
Commission a Form 12b-25 with respect to its Annual Report on Form
10-K for the year ended Dec. 31, 2021, disclosing that it was
unable to file its Annual Report within the prescribed period
without incurring undue costs and administrative burden.
The company had net sales of approximately $2,923,000 for the year
ended Dec. 31, 2021, compared to approximately $1,733,000 for
previous year, with corresponding cost of sales of approximately
$1,024,000 for the year ended Dec. 31, 2021, compared to
approximately $896,000 for the previous year, resulting in a gross
profit of approximately $1,899,000 for the year ended Dec. 31,
2021, as compared to approximately $836,000 for the previous year.
Its net income for the year ended Dec. 31, 2021, was approximately
$114,000, as compared to approximately $532,000 for the previous
year.
About Cirtran Corp
West Valley City, Utah-based CirTran Corporation is an established
global company with a diversified expertise in manufacturing,
marketing, distribution and technology in a wide variety of
consumer products, including tobacco products, medical devices and
beverages.
As of Sept. 30, 2021, the Company had $1.56 million in total
assets, $43.14 million in total liabilities, and a total
stockholders' deficit of $41.57 million.
Spokane, Washington-based Fruci & Associates II, PLLC, the
Company's auditor since 2020, issued a "going concern"
qualification in its report dated May 14, 2021, citing that the
Company has an accumulated deficit, net losses, and working capital
deficiencies. These factors raise substantial doubt about the
Company's ability to continue as a going concern.
CLINIGENCE HOLDINGS: Completes Merger With Nutex Health
-------------------------------------------------------
Clinigence Holdings, Inc. and Nutex Health Holdco LLC, together
with its affiliates, independent operators of micro hospitals and
hospital outpatient departments, have successfully completed their
business combination. The newly combined company, which will
continue under the new name "Nutex Health Inc.," brings together
two complementary healthcare organizations.
The shares of common stock of Nutex Health Inc., which had been
traded on the OTC Pink Marketplace under the ticker symbol "CLNH",
have been approved for listing on The Nasdaq Capital Market. The
Company's common stock will be traded on NASDAQ under the new
ticker symbol "NUTX".
In the merger, holders of membership interests in Nutex Holdco
(primarily comprised of physician-owners who had prior to the
merger contributed to Nutex Holdco all or a portion of their
ownership interests in Nutex-affiliated hospitals) received an
aggregate of 590,291,712 shares of Company common stock,
representing approximately 92% percent of the issued and
outstanding common stock of the newly combined company. As
disclosed in Clinigence's proxy statement relating to the Merger
filed with the Securities and Exchange Commission on Feb. 14, 2022,
the number of shares issued in the Merger in exchange for
membership interests in Nutex Holdco were calculated based on
trailing twelve months of earnings before interest, taxes,
depreciation and amortization attributable to the contributed
ownership interests in Nutex-affiliated hospitals at Sept. 30, 2021
of $163.9 million. This EBITDA figure is an unaudited non-GAAP
financial measure and is not intended to be used as a measure of
financial performance but rather is to be viewed solely as the
basis for calculation of the Merger consideration.
Nutex will be led by Tom Vo, M.D., MBA, as chairman and chief
executive officer, Warren Hosseinion, M.D. as president, Mike Bowen
as chief financial officer and Denise Pufal as chief operating
officer. Michael Chang, M.D. will be chief medical officer, Larry
Schimmel, M.D. will be chief medical information officer, Elisa
Luqman, J.D., MBA will be chief legal officer (SEC) and Pamela
Montgomery, J.D., LL.M, MSN, BSN, R.N. will be chief legal officer
(Healthcare).
The Board of Directors will consist of seven directors: four
independent appointees (Mitch Creem, John Waters, CPA, Michael Reed
and Cheryl Grenas, R.N., MSN) in addition to Dr. Vo, Dr. Hosseinion
and Matt S. Young, M.D.
"We are very pleased to announce the completion of our merger with
Clinigence Holdings to create one of the leading integrated care
delivery models in the nation," stated Tom Vo, M.D., MBA, chairman
and chief executive officer of Nutex Health. "We believe the
combination of the resources of our two organizations is unique,
and we are excited about our future. We anticipate highly
attractive growth opportunities ahead. We would also like to thank
all of our shareholders, employees and affiliated physicians for
their continued support."
"As a physician-led integrated hospital system with risk-bearing
provider networks, we are committed to providing all of our
patients with the most efficient and highest-quality care to ensure
outstanding clinical, patient satisfaction and utilization
outcomes," stated Warren Hosseinion, M.D., president of Nutex
Health. "This merger, along with our listing on NASDAQ, are
important milestones as we continue to build shareholder value."
Advisors
The Benchmark Company and Colliers International acted as financial
advisors to Clinigence in the transaction and McDermott, Will &
Emery served as legal counsel to Clinigence. Ernst & Young Capital
Advisors acted as exclusive financial advisor to Nutex Hea
About Clinigence Holdings
Clinigence Holdings -- http://www.clinigencehealth.com-- is a
healthcare information technology company providing an advanced,
cloud-based platform that enables healthcare organizations to
provide value-based care and population health management. The
Clinigence platform aggregates clinical and claims data across
multiple settings, information systems and sources to create a
holistic view of each patient and provider and virtually unlimited
insights into patient populations.
Clinigence reported a net loss of $13.67 million in 2021, a net
loss of $5.65 million in 2020, and a net loss of $7.12 million in
2019. As of Dec. 31, 2021, the Company had $85.73 million in total
assets, $10.59 million in total liabilities, and $75.14 million in
total stockholders' equity.
COLLECTIVE COWORKING: Wins Cash Collateral Access
-------------------------------------------------
The U.S. Bankruptcy Court for the Central District of California,
Los Angeles Division, has authorized Collective Coworking Holdings
Corp., dba CTRL Collective, to use cash collateral on an interim
basis to pay any and all of the Debtor's expenses incurred in the
ordinary course of its business and expenses owing to the Clerk of
the Bankruptcy Court or other amounts approved by order of the
court.
The Interested Parties will receive, as adequate protection,
replacement liens in post-petition collateral for any diminution in
the value of their collateral as of the petition date arising from
the Debtor's use of such collateral but only to the same extent,
validity, priority and enforceability as the prepetition liens held
by the Interested Parties.
The parties that assert an interest in the cash collateral are:
a. Greenwich Blackhawk Partners, a P.C.;
b. The Runnels Family Trust DTD 1-11-2000
c. Pacific Capital Management, LLC
d. Bryan Ezralow 1994 Trust U/T/D 12-22-1994
e. ESME LLC
f. Elevado Investment Company LLC
g. Marc Ezralow 1997 Trust U/T/D 11-26-1997
h. The Freedman Family Trust U/T/D 05/25/1982
i. The Freedman 2006 Irrevocable Trust U/T/D 02/27/2006
j. The David Leff Family Trust U/T/D 02/03/1988
k. C and R Irrevocable Trust U/T/D 11/05/2007
l. Emerson Partners
m. The Kingdom Trust Co., Cust. FBO J. Steven Emerson
Traditional IRA #15010260
n. The Kingdom Trust Co., Cust. FBO J. Steven Emerson
Roth IRA #15010261
o. T.R. Winston & Company LLC
p. South Bay Financial Group III, LLC; and
q. John and Nancy Glaser.
The Debtor's credit card processing company is authorized to
release any funds being held for the Debtor in its merchant
account.
A final hearing on the Motion will be held on May 12, 2022 at 11:30
a.m.
A copy of the order is available at https://bit.ly/3DHUfj2 from
PacerMonitor.com.
About Collective Coworking Holdings Corp.
Collective Coworking Holdings Corp. provides co-working space to
its members on flexible lease commitment basis at its location in
Pasadena, California. While CTRL services clients from a variety of
industries, the majority of its clientele is engaged in creative
work, such as advertising and marketing agencies, technology and
film companies, photographers, filmographers and website
developers. Collective Coworking offers office work space, meeting
space, conference rooms and hosting for small events, as well as
special amenities, such as photo studios, mailboxes, and lockers,
among other things.
Collective Coworking sought protection under Chapter 11 of the U.S
Bankruptcy Code (Bankr. C.D. Cal. Case No. 2:22-bk-11664-DS) on
March 25, 2022. In the petition signed by Charles "Duke" Runnels,
president, the Debtor disclosed up to $100,000 in assets and up to
$10 million in liabilities.
Matthew A. Lesnick, Esq., at Lesnick Prince & Pappas LLP is the
Debtor's counsel.
COLON VENTURE: Claims Will be Paid from Property Refinance
----------------------------------------------------------
Colon Venture Group, LLC, the within debtor-in-possession (the
"Debtor/Proponent") and Affiliate 152 S. Irving GC, LLC filed with
the U.S. Bankruptcy Court for the District of New Jersey a
Disclosure Statement describing Chapter 11 Reorganization Plan
dated April 4, 2022.
152 S. Irving and the Debtor are single asset real estate entities.
152 S. Irving was formed for the sole purpose of rehabilitating and
selling the real property located at 152 South Irving Street,
Ridgewood, New Jersey 07450 (the "Ridgewood Property") (the
Manville Property and Ridgewood Property collectively referred to
as the "Properties").
The Debtor's only asset, the Manville Property, was utilized as
additional collateral to borrow funds from Anchor Loans, LP in
order to complete the rehabilitation project at the Ridgewood
Property. 152 S. Irving and the Debtor have had no other business
operations stemming from ownership of the real properties.
Prior to the filing of both bankruptcy cases, 152 S. Irving applied
for a mortgage loan (the "Loan") with Anchor so as to rehabilitate
the Ridgewood Property. Accordingly, the Debtor and 152 S. Irving
began falling behind on payments to Anchor which triggered a
foreclosure proceeding against the Properties. The bankruptcy cases
were filed to stay scheduled Sheriff Sale on both Properties.
To remedy the problems that led to the bankruptcy filing, the
Ridgewood Property is under contract and will be sold before
confirmation of the Debtor's Plan. Most of Anchor's claim was paid
at closing, and the remaining balance shall be satisfied from the
refinancing of the Debtor's Manville Property. Based on the value
of the Manville Property, the Debtor believes that there is
sufficient equity in the Manville Property will to refinance and
pay all claims in full.
The Debtor is currently not generating income and is occupied by
one of its members who has been maintaining current with taxes and
insurance owed on the Manville Property. The Debtor's only asset,
the Manville Property, is currently valued at $315,875.00. In this
Reorganization Plan, the Debtor proposes to pay creditors in full
and fund the Plan by refinancing the Manville Property and using
the funds to pay the remainder of Anchor's claim in full.
This is a reorganization plan. The Debtor will fund the Plan from
the refinancing of its real estate located at 1015 Green Street,
Manville, New Jersey 08835 (the "Manville Property"). The Effective
Date of the proposed Plan is thirty days after entry of the order
confirming the Plan unless the Plan or confirmation order provides
otherwise.
Class One consists of a secured claim held by Anchor Loans, LP.
This creditor has a secured claim in the amount of $1,283,041. The
Debtor shall refinance the Manville Property within 6 months from
the entry of the Confirmation Order and proceeds shall be used to
pay the remaining balance owed on the secured claim to Anchor in
full. Anchor will be paid at the closing of the refinancing of the
Manville Property pursuant to a written payoff statement provided
by Anchor.
Class 2 consists of the ownership interest of the Debtor in its
respective assets, which are not otherwise abandoned pursuant to
the Plan. The ownership interests of the Debtor in its assets shall
not be altered as a consequence of the Plan.
The Plan will be funded from proceeds from the refinancing of the
Manville Property. The entry of the Order Confirming the Debtor's
Plan shall serve as authorization for the Debtor to refinance the
Manville Property, and use proceeds to fund the Plan.
A full-text copy of the Disclosure Statement dated April 4, 2022,
is available at https://bit.ly/3O0NVYO from PacerMonitor.com at no
charge.
Debtor's Counsel:
Carlos D. Martinez, Esq.
SCURA, WIGFIELD, HEYER, STEVENS & CAMMAROTA, LLP
1599 Hamburg Turnpike
Wayne, NJ 07470
Tel: 973-696-8391
Email: cmartinez@scura.com
About Colon Venture
Colon Venture Group, LLC is a Single Asset Real Estate debtor (as
defined in 11 U.S.C. Section 101(51B)).
Colon Venture filed a Chapter 11 bankruptcy petition (Bankr. D.N.J.
Case No. 22-10023) on Jan. 3, 2022. In the petition signed by
Walter Cubero, member, the Debtor disclosed $100,000 to $500,000 in
assets and $1 million to $10 million in liabilities. David L.
Stevens, Esq. of SCURA, WIGFIELD, HEYER, STEVENS & CAMMAROTA, LLP
is the Debtor's Counsel.
CONGRUEX GROUP: Moody's Assigns B3 CFR & Rates New Secured Debt B3
------------------------------------------------------------------
Moody's Investors Service assigned to Congruex Group LLC a B3
corporate family rating and a B3-PD probability of default rating.
Concurrently, Moody's assigned B3 ratings to Congruex's proposed
senior secured credit facilities, consisting of a $75 million
revolving credit facility expiring 2027, a $470 million term loan
due 2029 and a $75 million delayed draw term loan due 2029. The
outlook is stable.
Proceeds from the proposed term loan will be used to refinance $235
million of existing debt, fund the cash consideration for the
acquisitions of two identified businesses and pay
transaction-related fees and expenses. The proposed delayed draw
term loan will be available for general corporate purposes,
including to fund future acquisitions. The proposed revolver is
expected to be undrawn and fully available at closing. Congruex's
private equity ownership and history of debt-funded acquisitions
points to an aggressive financial policy; therefore, governance
considerations are a key driver of the rating action.
The following ratings/assessments are affected by the action:
Issuer: Congruex Group LLC
Corporate Family Rating, Assigned B3
Probability of Default Rating, Assigned B3-PD
Senior Secured Term Loan, Assigned B3 (LGD4)
Senior Secured Delayed Draw Term Loan, Assigned B3 (LGD4)
Senior Secured Revolving Credit Facility, Assigned B3 (LGD4)
Outlook, is Stable
The assigned ratings are subject to review of final documentation
and no material change to the size, terms and conditions of the
transaction as advised to Moody's.
RATINGS RATIONALE
Congruex's B3 CFR is supported by Moody's expectation of low-to-mid
single digit percentage organic revenue growth over the next few
years, reflecting its entrenched market position as a provider of
design, engineering, construction, and maintenance services to blue
chip US broadband network operators in tier 2 US markets. The
rating is also supported by Moody's expectations for ongoing
capital spending in wireline and wireless broadband infrastructure
by Congruex's customers, driven by increasing demand for network
bandwidth to ensure reliable video, voice, and data service. The
rating is constrained by Congruex's small revenue scale and limited
end-market and customer diversity, with its top 5 customers
representing 58% of 2021 revenue, pro-forma for identified
acquisitions. The rating is also constrained by Moody's
anticipation for aggressive financial strategies under private
equity ownership, especially debt-funded acquisitions. Since
Congruex's inception in 2017, the company has acquired and
successfully integrated 16 companies.
Pro-forma for identified acquisitions, Congruex's revenue is
expected to exceed $600 million in 2022, which is small compared to
many of its construction services peers, but EBITDA margins are
expected to be near 20%, higher than many of its larger competitors
which are primarily focused on serving tier 1 markets. Congruex's
focus on operating in tier 2 markets, where the cost of labor is
favorably lower, pricing competition is more rational and
competition is limited compared to tier 1 markets, support its
higher profitability rates compared to its peers that Moody's
rates. Since inception, the company has generated negative free
cash flow due, in part, to capital investment and
acquisition-related costs. However, according to the company, only
about 5% of historical capital spending is for maintenance
purposes, with the remainder oriented to growth. Pro-forma for
acquisitions and the proposed debt capital structure, financial
leverage was 4.5x as of FYE2021, which is modest compared to many
other issuers also rated at the B3. Moody's expects Congruex to
opportunistically pursue debt-funded acquisitions which would limit
financial leverage from declining meaningfully.
All financial metrics cited reflect Moody's standard adjustments.
The company's adequate liquidity profile reflects Moody's
expectation of only modestly positive free cash flow over the next
12 to 18 months and access to an undrawn $75 million revolver at
close. Moody's expectation of $5 to $10 million of free cash flow
during the next 12 months and $12.5 million cash on hand as of
December 31, 2021 should cover the $4.7 million of mandatory debt
amortization. Moody's expects the revolver may be used to fund
working capital growth and potential acquisitions. The revolver is
expected to contain a springing maximum first lien net leverage
ratio which will be tested only when the revolver loans are drawn
beyond an amount to be determined. Moody's expects Congruex to
maintain ample cushion under its financial covenant if it is
measured. Alternate liquidity is limited as the company's credit
facilities are secured by a first-priority lien on substantially
all tangible and intangible assets.
As proposed, the new credit facility is expected to provide
covenant flexibility that if utilized could negatively impact
creditors. Notable terms include incremental debt capacity, which
can be incurred on no more than five occasions, up to the sum of
$115 million and 100% of pro forma Adjusted EBITDA, plus unlimited
amounts subject to 4.25x first lien net leverage ratio (if pari
passu secured). No portion of the incremental may be incurred with
an earlier maturity than the initial term loans.
There are no express "blocker" provisions which prohibit the
transfer of specified assets to unrestricted subsidiaries; such
transfers are permitted subject to carve-out capacity and other
conditions.
Non-wholly-owned subsidiaries are not required to provide
guarantees; dividends or transfers resulting in partial ownership
of subsidiary guarantors could jeopardize guarantees, with no
explicit protective provisions limiting such guarantee releases.
There are no express protective provisions prohibiting an
up-tiering transaction.
The proposed terms and the final terms of the credit agreement may
be materially different.
The B3 ratings assigned to the senior secured credit facility, the
same as the B3 CFR, reflect the preponderance of debt represented
by the loans and revolver. The term loans and revolver are secured
by the assets of the borrower and benefit from secured guarantees
by the direct parent of Congruex Group LLC and each existing and
subsequently acquired direct or indirect U.S. restricted subsidiary
of Congruex Group LLC, as defined by the credit agreement.
The stable outlook reflects Moody's expectations of low-to-mid
single digit percentage organic revenue growth over the next two
years and the maintenance of at least adequate liquidity.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Congruex's ratings could be upgraded if the company enhances its
scale and business diversity while its operating performance,
credit metrics and liquidity strengthen such that the company
consistently generates positive free cash flow and financial
leverage is sustained around 4.0x.
The ratings could be downgraded if liquidity weakens, operating
performance deteriorates, there are disruptions integrating
acquisitions, top customers choose not to renew contracts, or if
financial leverage is sustained above current levels.
The principal methodology used in these ratings was Construction
published in September 2021.
Congruex Group LLC, formed in 2017 and domiciled in Boulder,
Colorado, provides end-to-end design, engineering, construction,
and maintenance services to broadband network operators. The
company is majority owned by affiliates of private equity sponsor
Crestview Partners.
CONGRUEX GROUP: S&P Assigns 'B' ICR, Outlook Stable
---------------------------------------------------
S&P Global Ratings assigned its 'B' issuer credit rating to
Congruex Group LLC, a U.S.-based broadband engineering and
construction (E&C) and maintenance services provider. The outlook
is stable.
S&P said, "We also assigned our 'B' issue-level and '3' recovery
ratings to the proposed $470 million first-lien term loan and $75
million delayed-draw term loan, indicating our expectation for
meaningful (50%-70%; rounded estimate: 50%) recovery in the event
of a payment default.
"The stable outlook reflects our view that the company's revenues
will increase from organic growth and acquisitions and our
expectation for S&P Global Ratings-adjusted debt to EBITDA in the
in 5x-6x range pro forma for the proposed transactions.
"Our view of Congruex's business risk incorporates the company's
small scale and its market position as a domestic E&C and
maintenance services provider, focusing on the broadband market,
despite positive secular trends in its end markets. We believe the
company is well-positioned to benefit from secular tailwinds
propelling broadband construction, including the rollout of
nationwide 5G networks, increases in wireline and wireless
investments, and deployments of fiber-to-the-home in the U.S. This
is supported by increasing capital spending among telecom
providers. In addition, we believe funding from the Bipartisan
Infrastructure Law to support broadband infrastructures could
provide the company with some potential upside over the longer
term.
"In our view, Congruex should have relatively stable revenue
streams and a good margin profile. The company generates about 80%
of its revenues from performing contracted jobs covered under
multiyear master service agreements (MSAs), with the remainder from
bid work. We view the company's EBITDA margins (mid-teens percent
on a pro forma basis) as moderately favorable compared with E&C
peers, due to its business mix and lower-cost onshore and offshore
workforce." In addition, Congruex has long-lasting relationships
with its top customers, including AT&T, Comcast, and Verizon.
These strengths are partially offset by the company's modest scale
and high customer concentration. More than 50% of revenues come
from its top five customers, although MSAs typically consist of
multiple contracts at local business units that could mitigate
attrition risk. In addition to customer concentration, Congruex's
niche service offering focuses on broadband. S&P said, "End-market
concentration could lead to weaker or volatile operating
performance in a sector-specific downturn, in our view. Like its
peers in the broader E&C industry, we believe the company could
face end-market cyclicality and execution risks, whereby earnings
and cash flows could deteriorate during periods of stress."
S&P said, "Our assessment of Congruex's financial risk incorporates
its financial sponsor ownership and our expectation for adjusted
debt to EBITDA above 5x pro forma for the transactions. We expect
Congruex's top line will increase over the next 12-24 months as it
continues to grow organically and integrate acquisitions, with
forecast S&P Global Ratings-adjusted EBITDA margins in the
mid-teens-percent area. While we anticipate some cashflow
seasonality, we do not expect significant working capital swings,
as the majority of Congruex's work is relatively small scale and
typically completed in 30 days. We expect the company's capital
expenditures to maintain equipment and fleets, and to support
growth projects. As such, we forecast Congruex to generate positive
free operating cash flow (FOCF) over the next 12 months, with FOCF
to debt in the mid-single-digit-percent area.
"While the company's debt leverage could decline through organic
growth, we believe the company could continue its merger and
acquisition (M&A) growth strategy. The company has completed 16
acquisitions over the last five years, and while M&A is necessary
to gain local expertise in new markets, this roll-up strategy
brings integration risk and could keep leverage elevated above our
base-case forecast. In addition, Congruex's ownership by a
financial sponsor could limit sustained leverage reduction over the
long term, in our view.
"The stable outlook reflects our view that revenues will continue
to benefit from organic growth and acquisitions and our expectation
for adjusted debt to EBITDA in the 5x-6x range pro forma for the
transactions.
"We could lower our ratings on Congruex during the next 12 months
if we believe adjusted debt to EBITDA will increase to above 6.5x
or FOCF to debt will fall below 3% on a sustained basis. This could
occur if, for example, the company experiences meaningful
deterioration in its EBITDA margins caused by execution or
acquisition integration issues, or material debt-financed
transactions.
"Although unlikely, we could raise the rating if we believe the
company has demonstrated sustained debt reduction along with
improved profitability, such that adjusted debt to EBITDA
approaches 4x and FOCF to debt approaches 10% on a sustained basis,
and that the risk of the company's financial sponsor owners
increasing leverage above 5x is low."
ESG credit indicators: E2 S2 G3
S&P said, "Governance is a moderately negative consideration in our
credit rating analysis of Congruex, as is the case for most rated
entities owned by private-equity sponsors. We believe the company's
highly leveraged financial risk profile points to corporate
decision-making that prioritizes the interests of the controlling
owners. This also reflects the generally finite holding periods and
a focus on maximizing shareholder returns."
CONSOLIDATED WEALTH: Case Summary & Unsecured Creditors
-------------------------------------------------------
Lead Debtor: Consolidated Wealth Holdings, Inc.
11200 Broadway Street, Suite 2705
Pearland, Texas 77584
Business Description: The Debtors manage a portfolio of roughly 28
life settlement contracts with 380
investors. The Debtors are no longer
engaged in the sale of new life insurance
today. The Debtors ceased doing so back in
early 2020.
Chapter 11 Petition Date: April 6, 2022
Court: United States Bankruptcy Court
Southern District of Texas
Four affiliates that concurrently filed voluntary petitions for
relief under Chapter 11 of the Bankruptcy Code:
Debtor Case No.
------ --------
Consolidated Wealth Holdings, Inc. (Lead Case) 22-90013
Granite Financial, Inc. 22-90014
Coordinated Wealth Management, LLC 22-90015
Consolidated Wealth Management, Ltd. 22-90016
Judge: Hon. David R. Jones
Debtors' Counsel: R. Hale Neilson, Esq.
Lenard M. Parkins, Esq.
Kyung S. Lee, Esq.
Charles M. Rubio, Esq.
PARKINS LEE & RUBIO, LLP
700 Milam St., Suite 1300
Houston, Texas 77002
Tel: (713) 715-1660
Email: hneilson@parkinslee.com
lparkins@parkinslee.com
Debtors'
Claims,
Noticing,
Solicitation &
Administrative
Agent: EPIQ CORPORATE RESTRUCTURING, LLC
Consolidated Wealth Holdings'
Estimated Assets: $100,000 to $500,000
Consolidated Wealth Holdings'
Estimated Liabilities: $0 to $50,000
Granite Financial's
Estimated Assets: $0 to $50,000
Granite Financial's
Estimated Liabilities: $0 to $50,000
Coordinated Wealth Management's
Estimated Assets: $500,000 to $1 million
Coordinated Wealth Management's
Estimated Liabilities: $100,000 to $500,000
Consolidated Wealth's
Estimated Assets: $1 million to $10 million
Consolidated Wealth's
Estimated Liabilities: $100,000 to $500,000
The petitions were signed by Deanna Osborne as owner.
Full-text copies of the petitions containing, among other items,
lists of the Debtors' unsecured creditors are available for free at
PacerMonitor.com at:
https://www.pacermonitor.com/view/DTBWHFA/Consolidated_Wealth_Holdings_Inc__txsbke-22-90013__0001.0.pdf?mcid=tGE4TAMA
https://www.pacermonitor.com/view/CQV6CBY/Granite_Financial_Inc_Jointly__txsbke-22-90014__0001.0.pdf?mcid=tGE4TAMA
https://www.pacermonitor.com/view/CDBFA2Q/Coordinated_Wealth_Management__txsbke-22-90015__0001.0.pdf?mcid=tGE4TAMA
https://www.pacermonitor.com/view/DAHIMVA/Consolidated_Wealth_Management__txsbke-22-90016__0001.0.pdf?mcid=tGE4TAMA
DAVE & BUSTER: Main Event Deal No Impact on Moody's 'B2' Rating
---------------------------------------------------------------
Moody's Investors Service says Dave & Buster's Inc.'s ("Dave &
Buster's", B2 stable) agreement with Ardent Leisure Group Limited
and RedBird Capital Partners to acquire Main Event Entertainment
Inc. ("Main Event", Caa1 stable), an owner and operator of 50
leisure family entertainment centers, has no immediate impact on
ratings. The acquisition, which is expected to close later this
year, for $835 million, an approximate 9 times multiple of 2021
adjusted EBITDA, will be funded through a committed $850 million
senior secured term loan B.
Pro-forma credit metrics are still supportive of the B2 corporate
family rating despite the negative impact from the $850 million
debt issuance. On a Moody's adjusted basis and pro-forma for the
transaction, Moody's estimates fiscal 2021 leverage increases to
around 4.5 times. Quantitatively, ratings could be downgraded if
leverage was sustained above 6.0x or coverage approached 1.25x.
Moody's views the integration risk posed by the transaction to be
offset by the benefits of increased scale and geographic
diversification in the United States, as there is limited overlap
with existing Dave & Buster's locations. Main Event will continue
to operate as its own brand, which also reduces integration risk,
and enables Dave & Buster's to extend its reach to families with
young children. Chris Morris, the current CEO of Main Event, will
be named CEO of Dave & Buster's upon closing.
Dave & Buster's continues to have very good liquidity with $26
million of cash on hand and $492 million of availability under its
revolving credit facility at the end of 2021. The company benefited
from pent-up consumer demand as restrictions eased in fiscal 2021
and continues to see strength in 2022 with comparable sales for the
first eight weeks of Q1 2022 up 5.4% over the same period in 2019.
Headquartered in Dallas, Texas, Dave & Buster's, Inc. is a leading
operator of large format, high volume specialty restaurant
entertainment complexes. As of December 31, 2021, the company owned
144 stores in 42 states, Puerto Rico and Canada. Fiscal 2021
revenues were about $1.3 billion. Dave & Buster's is listed on the
NASDAQ exchange under "PLAY". Main Event Entertainment Inc. owns
and operates 50 leisure family entertainment centers concentrated
in the Southern United States. Revenues for the twelve months ended
December 2021 were approximately $365 million.
DISPATCH ACQUISITION: S&P Affirms 'B-' ICR, Outlook Stable
----------------------------------------------------------
S&P Global Ratings affirmed its 'B-' issuer credit rating on
specialty waste and environmental services company Dispatch
Acquisition Holdings LLC (d/b/a Denali Water).
S&P said, "At the same time, we affirmed the issue-level rating on
the company's existing first-lien debt, including the $185 million
incremental add-on, at 'B-'. The recovery rating on this debt
remains '3', indicating our expectation for meaningful (50%-70%;
rounded estimate: 50%) recovery prospects in the event of a payment
default.
"The stable outlook reflects our view that the company's recurring
revenue stream and favorable industry tailwinds should allow it to
maintain debt leverage below 7x over the next 12 months.
"Our 'B-' issuer credit rating on Dispatch reflects the company's
limited scale, scope, and diversity of operations relative to other
environmental services companies, geographic concentration, average
EBITDA margins, modest customer concentration, and high debt
leverage. These risk factors are partially offset by its vertically
integrated services, recurring revenue streams, long-tenured
relationships, and the company's position as a sole-source provider
for those customers. Over the past 12 to 18 months, the company has
made two transformational acquisitions, both of which were funded
in part with debt and equity from TPG Growth. The company is owned
by financial sponsor TPG Growth LLC. This proposed transaction
helps expand Dispatch's market position in the waste solutions
channel.
"We expect modest deleveraging over the next 12 to 18 months;
however, we still expect metrics to remain highly leveraged.
"Following the Organix acquisition in 2021 and now the proposed IWP
acquisition, we expect Dispatch will have an S&P Global
Ratings-adjusted debt leverage ratio of around 7x and we expect
debt leverage to remain under 7x by year-end 2022. Over the next 12
to 18 months, we expect the company to experience continued growth
in revenue, EBITDA margins, and free cash flows. We believe this
will be driven by market and geographical expansion, favorable
industry tailwinds driving demand for sustainable specialty waste
services, contributions from previously completed acquisitions and
associated synergies, and the realization of various
process-improvement and cost-reduction initiatives currently under
way. We also expect the company to continue to actively integrate
bolt-on acquisitions to expand its service offerings and geographic
footprint, but nothing that would materially affect its credit
metrics on a sustained basis. Following what we would view as two
transformational acquisitions in 2021 and 2022, we expect Dispatch
to be highly focused on successfully integrating these and
capturing the targeted synergies. We continue to assess the
financial risk profile of Dispatch as highly leveraged. We forecast
Dispatch's weighted-average adjusted debt to EBITDA to be in the
6x-7x range and funds from operations (FFO) to debt to be below 12%
over the next 12 months."
Dispatch benefits from high barriers to entry and leading market
shares to help drive profitability.
Waste management services are sticky in nature and create barriers
to entry due to high switching costs for customers as the cost of
failure significantly outweighs the cost of service. Specifically,
nine out of Dispatch's top-10 customers have been contracted with
the company for at least five years, and six have been contracted
for at least 10 years. Over 90% of the combined business provides
recurring services that are considered critical and
nondiscretionary for its customers. The company also maintains a
national network of reuse sites secured by permits, geographic
proximity to transfer waste streams to reuse outlets, and customer
and application-specific treatment processes that are difficult to
replicate by smaller industry players. In addition, the company
owns an extensive fleet of specialized equipment, which improved
with the addition of IWP, including over 850 trucks, 1600 trailers,
and 500 storage containers and tanks. Dispatch is the industry
leader in sustainable solutions for industrial food processing
wastewater collection and food waste collection for supermarkets
and the second-leading service provider in the $2 billion municipal
wastewater residual collection end market. The company's strong
barriers to entry, customer stickiness, and leading market
positions lend to its average profitability.
Landfill avoidance and diminishing landfill capacity are major
trends increasing demand for sustainable specialty waste services.
Landfill capacity has decreased over the past 20 years and S&P
expects the trend to continue amid tightening regulations in some
states that ban organic waste at existing landfills. Dispatch does
not send its waste to landfills, but rather repurposes various
organic waste streams. After Dispatch collects wastewater
residuals, the company processes compostable organics to
manufacture agriculture and horticultural products including
compost, soils, and mulch.
The IWP acquisition not only increases size and expands Dispatch's
service expertise, it adds a strong California presence.
IWP has operated in California for decades with long-standing
customer relationships and strategic operations in several organic
waste processing businesses. California is one of the most
regulated states when it comes to the environment and waste, and
California state regulation SB 1383 will strive to divert
significant organic waste from landfills to sustainable solutions,
which will benefit Dispatch. In addition, IWP holds strategic
long-standing permits in areas where new permits are hard to come
by or are not being issued, which is a key factor to carrying out
specific waste services in certain areas.
S&P said, "The stable outlook reflects our view that the company's
recurring revenue stream and favorable industry tailwinds should
allow it to achieve a modest reduction in pro forma debt leverage
to under 7x in the next 12 months. This incorporates our forecast
for EBITDA growth, supported by ongoing cost-saving initiatives and
increased adoption of beneficial reuse waste services."
S&P may lower its ratings on Dispatch over the next 12 months if:
-- Business conditions in the organic water waste streams and food
waste collection deteriorate such that EBITDA declines materially,
causing S&P Global Ratings-adjusted debt leverage at levels we deem
unsustainable; or
-- The company consistently generates negative free cash flow
stemming from meaningful integration missteps or loss of major
contracts, causing liquidity to become constrained and/or covenants
cushions to tighten.
S&P may raise its rating on Dispatch over the next 12 months if:
-- Pro forma debt leverage approaches 6x and we believe the
company's financial policy, inclusive of debt-financed acquisitions
and shareholder returns, is supportive of this improved level of
leverage; and
-- The company continues to generate positive free operating cash
flow and maintains adequate liquidity.
ESG credit indicators: E-1, S-2, G-3
S&P said, "Environmental factors are a positive consideration in
our credit rating analysis of Dispatch Acquisition Holdings LLC
(d/b/a business as Denali Water Solutions). Landfill avoidance and
diminishing landfill capacity are driving demand for sustainable
specialty waste services, which is a key competitive advantage for
the company. Governance is a moderately negative consideration, as
it is for most rated entities owned by private-equity sponsors. We
believe the company's highly leveraged financial risk profile
points to corporate decision-making that prioritizes the interests
of the controlling owners. This also reflects private-equity
sponsors' generally finite holding periods and focus on maximizing
shareholder returns."
DIVINIA WATER: Court Wants Trial in Suit vs. D&O Insurer
--------------------------------------------------------
The United States Bankruptcy Court for the District of Idaho denied
a motion for summary judgment filed by Divinia Water, Inc.
On December 11, 2019, Divinia Water purchased a Director and
Officers Insurance Coverage Policy from Clear Blue Specialty
Insurance Company that contained a policy period of December 11,
2019 through December 11, 2020, and provided $1,000,000 of director
and officer coverage. Plaintiff's directors and officers, namely
Steven Sedlmayr, Remy Sedlmayr, Crosby Sedlmayr, and Kiersten
Sedlmayr Landers, are all covered "Team Members" as that term is
defined in the D&O Policy.
In June 2020, during the coverage period, Michael Breen and Ronald
Mezzetta brought two state court actions against Plaintiff and its
officers and directors, or Team Members, as individual defendants.
Breen and Mezzetta brought causes of action, among other things,
for breach of contract, fraud, breach of fiduciary duty against the
individual defendants, misappropriation of funds, unjust
enrichment, unlawful distributions, fraudulent transfers,
defamation, and minority shareholder oppression. On December 11,
2019, on or around the very same day Plaintiff purchased the D&O
Coverage from Defendant, the plaintiffs in the Underlying Actions
allegedly sent a demand letter to Plaintiff based on Plaintiff's
conduct. Some of the causes of action in the Underlying Actions are
based upon facts and circumstances that occurred before the D&O
Coverage period began.
On November 4, 2020, Plaintiff provided Defendant with written
notice of the Underlying Actions and Plaintiff's claim for a
defense and coverage under the D&O Policy. On January 27, 2021,
Plaintiff filed its subchapter 5 petition. In re Divinia Water,
Inc., Case No. 21-08012-JMM (Bankr. D. Idaho 2021). On March 5,
2021, counsel for Plaintiff's directors and officers submitted
invoices to Defendant seeking reimbursement for legal fees under
the D&O Policy in the amount of $237,208. Plaintiff made a demand
that Defendant pay the full amount.
After Defendant refused to honor the demand letter, Plaintiff
commenced this adversary proceeding on March 31, 2021. As of March
31, 2022, Defendant has not provided coverage, a defense, or
reimbursement for Plaintiff or the individual defendants' costs and
expenses incurred in the Underlying Actions.
In its motion, Plaintiff asks the Court to grant its motion for
summary judgment on its First Claim for Relief, which seeks a
Declaratory Judgment under 28 U.S.C. Section 2201(a) that Defendant
is obligated to pay Plaintiff the value of the reimbursable
invoices pursuant to Defendant's obligations set forth in the D&O
Policy. Plaintiff also seeks summary judgment on its Second Claim
for Relief for damages resulting from Defendant's breach of
contract and breach of the covenant of good faith and fair dealing
by failing to fulfill its obligations under the D&O Policy.
In response, Defendant argues Plaintiff was aware of circumstances
that could give rise to a claim, specifically the events that led
to the Underlying Actions, at the time it had completed its
Application. Defendant further asserts that Plaintiff is in
violation of several provisions of the Application and D&O Policy
and, thus, is not entitled to coverage. In other words, Defendant
argues that, because Plaintiff did not disclose in its Application
its knowledge of events that eventually gave rise to the Underlying
Actions, Defendant does not need to reimburse Plaintiff's directors
and officers for expenses incurred in defending the Underlying
Actions under the D&O Policy because the D&O policy is void.
Plaintiff argues that it had no duty to disclose the events leading
up to the Underlying Actions in its Application for coverage, is
not in violation of the Application or D&O Policy, and Defendant
should therefore reimburse Plaintiff's officers and directors for
their expenses.
In a Memorandum of Decision dated March 31, 2022, Bankruptcy Judge
Joseph M. Meier finds that Plaintiff has failed to establish its
burden that there is no material dispute of fact remaining for
trial. Accordingly, Judge Meier denies the Plaintiff's motion for
summary judgment in its entirety.
According to Judge Meier, a material dispute of fact remains. There
are two provisions identified by Defendant that are relevant to
this dispute. The first provision is found in the D&O Policy
itself, and provides:
"XIV. Application
You represent and acknowledge that the statements and
information contained in the Application are true, accurate, and
complete, and are the basis of this Policy and are to be considered
incorporated into and constituting a part of this policy.
This Policy is issued in reliance upon the truth and accuracy
of the Application.
The Court notes that the Plaintiff does not necessarily dispute
that this paragraph is germane to the contest at hand, but
expressly agrees with Defendant that another section of the D&O
Policy is relevant. That section provides:
IV. Exclusions
For the purpose of determining the applicability of any
Exclusion set forth in this Exclusions Section, the Wrongful Act or
knowledge of any Team Member shall not be imputed to any other Team
Member, and only the Wrongful Act or knowledge of the Chief
Executive Officer or functionally equivalent of the Tech Startup
shall be imputed to the Tech Startup. We shall not be liable under
this Coverage Part to pay any Loss on account of that portion of
any Claim made against You[.]"
Moreover, Plaintiff argues it had no duty to answer "yes" to any of
the questions in the Application for coverage, whereas Defendant
argues the opposing position: Plaintiff had a duty to answer "yes"
on the Application since it was aware of circumstances that could
give rise to a future claim and, because it did not, Defendant is
not required to provide coverage for the underlying claims, the
Court holds.
In addition to the D&O Policy, Plaintiff completed the Application
for insurance coverage. The Application, incorporated into the D&O
Policy, requested disclosure of any circumstances likely to result
in a claim for coverage.
The Court finds that a material dispute of fact remains for trial.
I[87-f the policy is reasonably subject to differing
interpretations, the language is ambiguous and its meaning is a
question of fact. The parties have differing interpretations of the
provision that states, "I am already aware of a specific
circumstance that is likely to result in a claim under the coverage
I am applying for." Defendant essentially argues that this
provision means that Plaintiff affirmatively stated that it was not
aware of any circumstances likely to give rise to a claim. In
contrast, Plaintiff argues for a more narrow interpretation of the
provision, arguing that Defendant must show that Plaintiff knew of
a specific circumstance that would likely result in a claim, not
just any circumstance that has some possibility of giving rise to a
claim in the future. At first blush, Plaintiff's argument seems to
hold water. However, the Application also contains the following
provision:
Any fact, circumstance or situation not disclosed above shall
be excluded from coverage. The undersigned agrees that if the
information supplied on this Application changes between the date
of this Application and the effective date of the insurance; that
he/she will immediately notify the Insurer of such changes, and the
Insurer may withdraw or modify any outstanding quotations or
authorizations or agreements to bind the insurance.
In addition, the D&O Policy also contains this provision:
If the Application contains misrepresentations or omissions
that materially affect the acceptance of the risk or the hazard
assumed by [Defendant], this Policy shall be void ab initio and
shall not afford coverage for any Insured who knew on the inception
date of this Policy the facts that were not truthfully disclosed in
the Application, whether or not the Insured knew the Application
contained such misrepresentation or omission.
These provisions are certainly broader than the "specific
circumstance" provision identified above, the Court holds. These
contrary provisions found in the Application and D&O Policy create
an ambiguity and, therefore, the meaning of these two provisions
taken together is a question of fact to be resolved at trial.
Furthermore, the word "likely" in the Application is open to
interpretation, the Court notes. This is problematic at this stage
in the litigation because the Court is asked to determine whether
Plaintiff was aware of a specific circumstance likely to result in
a claim. What is "likely" to result in a claim under the coverage
is subject to differing interpretations and both parties provide a
reasonable argument in support of their respective positions.
Because the provision is ambiguous, it is a question of fact to be
resolved at trial, and summary judgment is not appropriate.
Moreover, even if the Court were to determine at this stage which
of the conflicting provisions controls and what actions were
"likely" to result in a claim, and assuming arguendo that Plaintiff
omitted specific circumstances in its Application, the Court would
then need to determine whether that omission was material. The
parties dispute the extent to which the claims in the underlying
lawsuit are the same omitted "wrongful acts" which would render the
policy void. Presumably, if the underlying lawsuits were based on
different claims, the omission may not be material. If the
underlying lawsuits are based on the same claims, the omission may
be material. Determining whether a breach occurred as well as the
materiality of that breach is a question of fact reserved for
trial.
For these reasons, the Court denies Plaintiff's motion for summary
judgment on its breach of contract claim.
Plaintiff's complaint seeks a declaratory judgment under 28 U.S.C.
Section 2201(a), commonly referred to as the "Declaratory Judgment
Act," that Defendant is obligated to pay Plaintiff the value of
reimbursable invoices pursuant to the D&O Policy.
Plaintiff's first claim for relief seeking a declaratory judgment
is closely related to its breach of contract claim and must be
denied for the same reasons enumerated above. Declaring the rights
of the parties under the contract requires this Court to interpret
the contract. The Court first begins its analysis by examining the
contract itself. Only if the language is unambiguous can this Court
determine its meaning as a matter of law.
The contract language, however, itself is ambiguous and reasonably
subject to differing interpretations, the Court reiterates.
Therefore, interpreting the contract is a question of fact to be
resolved at trial. This question of fact is material because it
determines the rights of the parties under the policy, the very
basis of this dispute. Summary Judgment on Plaintiff's first claim
for relief will therefore be denied.
A full-text copy of the decision is available at
https://tinyurl.com/mvkzbc3c from Leagle.com.
The adversary proceeding is Divinia Water, Inc., Plaintiff, v.
Clear Blue Specialty Insurance, Co., Defendant, Adv. Pro. No.
21-08012-JMM (Bankr. D. Idaho).
Brian Michael Rothschild, Salt Lake City, Utah, and Robert Burns ,
Boise, Idaho, counsel for Plaintiff.
Alyson Foster, Boise, Idaho, counsel for Defendant.
About Divinia Water
Divinia Water, Inc., develops, bottles and sells drinking water.
It filed a Chapter 11 bankruptcy petition (Bankr. D. Idaho Case No.
21-40059) on Jan. 27, 2021. At the time of the filing, the Debtor
estimated assets of between $100,001 and $500,000 and liabilities
of between $500,001 and $1 million. Judge Joseph M. Meier oversees
the case. The Debtor tapped Parsons Behle & Latimer as its legal
counsel.
DLT RESOLUTION: Delays Filing of 2021 Annual Report
---------------------------------------------------
DLT Resolution, Inc. filed a Form 12b-25 with the Securities and
Exchange Commission with respect to its Annual Report on Form 10-K
for the year ended Dec. 31, 2021, disclosing that it was unable to
file Annual Report within the prescribed time period due to
unforeseen delays. The company is confident that it is close to
completion.
About DLT Resolution
Las Vegas, NV-based DLT Resolution Inc. currently operates in three
high-tech industry segments: blockchain applications;
telecommunications; and data services which includes image capture,
data collection, data phone center services, and payment
processing.
DLT Resolution reported a net loss of $503,929 for the year ended
Dec. 31, 2020, compared to a net loss of $1.04 million for the year
ended Dec. 31, 2019. As of Sept. 30, 2021, the Company had $3.08
million in total assets, $2.07 million in total liabilities, and
$1.01 million in total stockholders' equity.
Lakewood, CO-based BF Borgers CPA PC, the Company's auditor since
2019, issued a "going concern" qualification in its report dated
May 10, 2021, citing that the Company has suffered recurring losses
from operations and has a significant accumulated deficit. In
addition, the Company continues to experience negative cash flows
from operations. These factors raise substantial doubt about the
Company's ability to continue as a going concern.
DONEGAN ENGINEERING: Disposable Income to Fund Plan Payments
------------------------------------------------------------
Donegan Engineering, Inc., filed with the U.S. Bankruptcy Court for
the District of Maryland a Chapter 11 Plan under Subchapter V dated
April 4, 2022.
Donegan Engineering was established in March 1989. Donegan
Engineering provides mechanical and HVAC design services to
commercial clients. Donegan Engineering is owned solely by James
Donegan.
In the three years leading up to the filing of the case, COVID-19
caused a severe curtailing in Donegan Engineering's business.
Because the Debtor's business relates to commercial buildings, its
business was especially impacted because of the significant number
of people who were working from home.
Beginning in January 2022, business has increased significantly.
Many of the Debtor's clients that had put jobs on hold during COVID
are now ramping back off. As a result, Donegan Engineering has seen
a 50 percent increase in revenue from this time last year. Donegan
Engineering expects its business to gradually increase to its
pre-COVID levels of approximately $35000 per month.
During the term of this Plan, the Debtor shall submit the
disposable income (or value of such disposable income) necessary
for the performance of this plan to the Subchapter V Trustee and
shall pay the Trustee the sums.
The term of this Plan begins on the date of confirmation of this
Plan and ends on the 60th month subsequent to that date.
The value of the property to be distributed under the Plan during
the term of the Plan is not less than the Debtor's projected
disposable income for that same period. Unsecured creditors holding
allowed claims will receive distributions, which the Debtor has
valued at approximately 60 cents on the dollar. The Plan also
provides for the payment of secured, administrative, and priority
claims in accordance with the Bankruptcy Code.
The Plan will treat claims as follows:
* Class 3 consists of Internal Revenue - Unsecured General Tax
Claim. After payments of Classes 1, 2, 4, and 5, prorata shares of
all actual disposable income of the Debtor to be received in the
five-year period commencing on the date that the first payment is
due under the Plan. The allowed claims total $181,950.06. This
Class will receive a distribution of 1.65% of their allowed claims.
* Class 4 consists of EBF Partners LLC – Secured by UCC. By
agreement with EBF, it will be paid $4812.5 with equal monthly
payments made over the term of the Plan. The allowed claims total
$9,625.36. This Class will receive a distribution of 50% of their
allowed claims.
* Class 5 consists of Rapid Finance – Secured by UCC. By
agreement with Rapid Finance, it will be paid $18,00 with equal
monthly payments made over the first 12 months of the Plan. The
allowed claims total $22,698.77. This Class will receive a
distribution of 79% of their allowed claims.
* Class 6 consists of Sandy Spring Bank Unsecured General.
After payments of Classes 1, 2, 4, and 5, prorata shares of all
actual disposable income of the Debtor to be received in the five
year period commencing on the date that the first payment is due
under the Plan. The allowed claims total $26,750.51. This Class
will receive a distribution of 11% of their allowed claims.
* Class 7 consists of Small Business Funding Solutions, LLC.
This debt is a Payroll Protection Program loan that the Debtor
expects will be forgiven.
The sole source of funds for the Plan will be revenue from the
Debtor's engineering work.
A full-text copy of the Subchapter V Plan dated April 4, 2022, is
available at https://bit.ly/3rbgKYK from PacerMonitor.com at no
charge.
Attorney for the Debtor:
Michael P. Coyle, Esq.
The Coyle Law Group
7061 Deepage Drive, Suite 101B
Columbia, MD 21045
Phone: 443-545-1215
Email: mcoyle@thecoylelawgroup.com
About Donegan Engineering Inc.
Donegan Engineering, Inc. filed a petition for Chapter 11
protection (Bankr. D. Md. Case No. 21-16978) on Nov. 4, 2021,
listing up to $50,000 in assets and up to $100,000 in liabilities.
Michael Coyle, Esq., at The Coyle Law Group, LLC, is the Debtor's
legal counsel.
E2OPEN LLC: $190MM 1st Lien Loan Add-on No Impact on Moody's B2 CFR
-------------------------------------------------------------------
Moody's Investors Service says E2open, LLC's $190 million first
lien term loan add-on to its existing first lien term loan due
February 2028 is credit negative but does not immediately impact
the ratings. All existing ratings, including the B2 corporate
family rating, B2-PD probability of default rating, and B2 debt
instrument rating on the existing first lien credit facility
consisting of the first lien term loan due February 2028, $92.5
million USD Tranche revolver due February 2026, and $62.5 million
Multicurrency Tranche revolver due February 2026, remain unchanged.
The outlook remains stable.
On March 2, 2022, E2open acquired parcel shipping software provider
Logistyx Technologies, LLC (Logistyx) for $185 million. The
acquisition will be paid in three rounds, with $90 million paid in
cash on March 2, 2022, about $37 million due on May 31, 2022, and
about $58 million due on August 29, 2022. The first $90 million
cash payment was funded through a $80 million revolver draw and $10
million of cash on hand. In addition, E2open has the right to
settle up to $32.375 million and $31.523 million of the May 31 and
August 29 payments, respectively, with newly issued equity.
Net proceeds from the proposed $190 million term loan add-on will
be used to repay the $80 million revolver balance and place cash on
the balance sheet to prefund the remaining $95 million purchase
commitments and for general corporate purposes. Moody's expects the
company will use the excess cash proceeds to repurchase shares in
the future if it funds the allowable portion of the final two
payments with equity.
Moody's considers the transaction to be credit negative due to the
leveraging nature of the acquisition and the inherent event risk of
relying on cost synergy realization to support the incremental term
loan add-on. Pro forma Debt/EBITDA (as adjusted by Moody's) at
close will increase to 6.2x from 5.2x and adjustments for
identified-but-unrealized cost synergies account for the
preponderance of Logistyx's financing EBITDA. Moody's pro forma
debt/EBITDA of 6.2x does not include EBITDA adjustments for
unrealized cost synergies. Moody's considers E2open's successful
track record of cost synergy realization across the company's
previous 10 acquisitions and the fact that headcount related
actions account for the majority of Logistyx's identified cost
savings as partial mitigants against the elevated event risk.
However, Moody's believes the acquisition of Logistyx fits well
within E2open's suite of solutions and brings strategic benefits
related to cross-selling initiatives and end-market diversity.
Logistyx's solutions are aimed at enterprise clients in retail and
manufacturing and there is limited cross-over with E2open's legacy
customer base. In addition, Logistyx's niche solutions focused on
last mile parcel delivery and e-commerce will bolster the
transportation and logistics solution assets acquired from BluJay.
Moody's expects Logistyx's parcel carrier network of roughly 550
global carriers (UPS, FedEx, DHL, USPS, etc.) will improve the pro
forma last mile solution by increasing scale and visibility for
end-users focused on omni-channel and DTC shipping.
E2open's propensity to deploy aggressive financial policies
continues to constrain its credit profile. The company continues to
execute debt funded acquisitions as a main driver for growth. In
addition, the introduction of a $100 million share buyback program
in January 2022 will divert excess free-cash-flow (FCF) away from
funding acquisitions and further raises event risk. The company has
$100 million of remaining capacity under the buyback program.
Moody's projects the company will generate enough FCF to repurchase
the full $100 million commitment before the program expires on
January 20, 2023. However, Moody's projects the company will be
left with around $30 million of cash on hand to buffer against
integration risks from Logistyx and BluJay.
E2open (NYSE: ETWO) is a cloud software platform that offers
applications and network services to over 6,900 customers. The
company's software combines networks, data and applications to
provide an integrated platform that allows customers to optimize
supply chain across channel shaping, demand sensing, business
planning, logistics, global trade, manufacturing and supply
management. Pro forma annual revenue is approximately $600 million.
E2OPEN LLC: S&P Affirms 'B' Issuer Credit Rating, Outlook Stable
----------------------------------------------------------------
S&P Global Ratings affirmed its 'B' issuer credit rating on
U.S.-based supply chain management (SCM) software provider E2open
LLC and its 'B' issue-level rating on its first-lien debt. S&P's
'3' recovery rating on the first-lien debt is unchanged.
The stable outlook reflects that, despite S&P's estimate the
incremental debt will increase its pro forma leverage to the mid-8x
area, it anticipates E2open's robust growth prospects and EBITDA
margins in the 30% area, as well as its free operating cash flow
(FOCF) of about $140 million, will enable it to reduce its leverage
to 7x or below by the end of its fiscal year 2023.
E2open announced on March 3, 2022 that it had acquired the parcel
shipping and fulfillment technology firm Logistyx Technologies for
$185 million. The company paid $90 million of the purchase price
using existing liquidity at the close of the transaction and will
pay the remaining consideration in two additional installments of
either cash or a combination of cash and stock (at E2open's
discretion) 90 days and 180 days post-closing at management's
discretion.
S&P said, "This incremental debt will weaken E2open's credit
metrics, though we expect it to improve its leverage to about 7x or
below by 2023.Pro forma for the issuance, we project the company
will have S&P Global Ratings-adjusted debt of about $1.5 billion,
which includes about $1.1 billion outstanding on its first-lien
term loan and liabilities on its balance sheet related to its
special-purpose acquisition company (SPAC) structure that we
consider debt-like, including $184.2 million of warrant and
contingent consideration liabilities and $67.9 million of
liabilities related to its Tax Receivable Agreement. Based on these
levels and incorporating a full year of earnings contributions from
both Logistyx and BluJay (acquired on Sept. 1, 2021), we estimate
E2open's pro forma S&P Global Ratings-adjusted leverage will be in
the mid-8x area, which is high for the current rating.
Notwithstanding this, we forecast a more than 10% increase in its
organic revenue over the next 12 months and expect it to improve
its profitability over the coming quarters, mainly due to the
benefits stemming from its actioned cost synergies and the roll off
of one-time merger and restructuring expenses to achieve these
synergies. We believe this incremental EBITDA generation will
enable the company to reduce its leverage to at least the 7x area
by fiscal year 2023. Our base-case scenario further assumes that
the warrant, contingent consideration, and TRA liabilities we view
as having debt-like characteristics and include in our debt
calculation will likely remain largely non-cash, thus it is
unlikely they will negatively affect E2open's cash flow generation
or liquidity."
The supply chain transportation management capabilities E2open will
gain from Logistyx will likely enhance the overall value
proposition of its supply chain solutions. Logistyx Technologies
offers multi-carrier parcel and e-commerce shipping and fulfillment
solutions to retailers, manufacturers, and logistics providers.
While E2open currently provides various transportation management
solutions for shippers, logistics service providers, and freight
forwarders, these solutions historically catered to ocean carriers
prior to its acquisition of BluJay in 2021, which helped
strengthens its capabilities with ground carriers. Considering that
Logistyx maintains a carrier library spanning over 550 global
carrier integrations, including UPS, FedEx, DHL, and USPS, we
believe the acquisition will enhance E2open's direct-to-consumer
(DTC) e-commerce offerings. S&P also thinks that by creating a
complete global footprint for multi-carrier parcel management, the
company will likely be in a better position to provide its
customers with insights into the most-efficient and cost-effective
options and help them navigate compliance with carrier
certification processes and customs mandates. This will enhance the
overall value proposition of its supply chain solutions and help
E2open protect and expand its market positions.
The acquisition of Logistyx will provide E2open with additional
customers and cross-selling opportunities. Management has
communicated four initiatives to accelerate the company's
expansion. These include upselling existing customers, winning new
logos, leveraging new strategic partnerships, and improving its
pricing. S&P said, "With supply chains becoming increasingly
complex and the recent supply chain disruptions raising awareness
about the importance of SCM solutions, we think these initiatives
will contribute to E2open's future growth. That said, the sales
cycles for its solutions can be elongated and most customers
generally start with one product and gradually expand over time,
which makes increasing its business with its existing customers the
primary driver of its revenue growth. We expect this to continue in
the future. Because Logistyx's customer base spans many retailers,
manufacturers, and carriers and features little overlap with
E2open's customers, we see it as an attractive opportunity for
management to cross-sell its solutions to the combined customer
base."
S&P said, "E2open's ahead-of-schedule integration of BluJay, its
largest acquisition to date, increases our confidence that it will
successfully integrate and extract synergies from Logistyx. As of
the end of the third quarter of fiscal year 2022, the company
announced that it had fully integrated its go-to-market
organization with the BluJay team in one month following the close
of the acquisition. In addition, E2open raised its target for total
synergies related to the BluJay combination to at least $25 million
annually, which compares with an initial target of $20 million, and
expects to realize and achieve roughly 60-70% of these targets by
February 2022. In our view, given its progress with BluJay's
integration, we think the company will likely be able to seamlessly
integrate the Logistyx business and achieve cost synergies in short
order.
"Our view of E2open's financial policy is unchanged. Through 12
acquisitions over the last several years, the company has managed
to assemble a complete end-to-end supply chain solution. We see
this inorganic growth strategy as aggressive. We also believe that
it decision to purchase Logistyx so soon after acquiring BluJay
indicates the potential that it will increase the frequency of its
merger and acquisition (M&A) activity. At the same time, we
recognize that E2open has publicly communicated a leverage target
of about 4x since becoming a public company and funded both of its
recent acquisitions in a manner that is relatively consistent with
these targets.
"The stable outlook on E2open reflects that, despite our estimate
the incremental debt will increase its pro forma leverage to the
mid-8x area, we anticipate its robust growth prospects and EBITDA
margins in the 34% area, as well as its FOCF of about $200 million,
will enable it to reduce its leverage to 7x or below by the end of
its fiscal year 2023."
S&P would consider lowering its rating on E2open if:
-- Its operating performance significantly underperforms S&P's
forecast such that it FOCF to debt weakens below 5% and its S&P
Global Ratings-adjusted leverage remains above 7x over the next 12
months; or
-- It adopts more aggressive financial policies that result in the
same credit metrics.
An upgrade is highly unlikely over the next 12-24 months given
E2open's stretched credit metrics. However, S&P could consider
raising its ratings if it reduces its leverage below 5x over the
next 12 months and S&P believes its financial policies--including
acquisitions--would enable it to sustain its leverage at this level
or below.
EARTHSTONE ENERGY: Fitch Gives FirstTime 'B+' IDR, Outlook Stable
-----------------------------------------------------------------
Fitch Ratings has assigned a first-time Indicative Long-Term Issuer
Default Rating (IDR) of 'B+' to Earthstone Energy, Inc and
Earthstone Energy Holdings, LLC (Earthstone). It has also assigned
a 'BB+'/'RR1' rating to Earthstone's senior secured Reserve Based
Loan (RBL) credit facility and a 'B+'/'RR4' rating to its planned
senior unsecured bonds. The Rating Outlook is Stable.
The ratings reflect the close of the planned $550 million in senior
unsecured five-year notes, with proceeds being used to partially
fund the cash portion of its Bighorn acquisition, as well as to
partially repay its RBL. The ratings also consider Earthstone's
gross leverage of approximately 1x through Fitch's forecast period,
positive FCF generation and operating scale achieved through M&A.
KEY RATING DRIVERS
Increasing Permian-Focused Footprint: At the closing of the
Chisholm acquisition, Earthstone added 38,100 net acres and
13.3Mboepd of 4Q21 production within the upper Delaware Basin in
New Mexico. The Chisholm acquisition provided a good economic
position that Earthstone can continue to de-risk, as well as modest
basin diversification as it remains in the Permian and exposure to
federal acreage. This risk is managed by early permit planning and
an inventory of 65 federal and state drilling permits in New Mexico
with 56 more permits in process. This provides ample medium-term
drilling inventory on a two-rig Delaware drilling program.
Proforma its Bighorn acquisition, Earthstone's Midland Basin
position will consist of 208,500 net acres with production of
69Mboepd at 4Q21. Earthstone plans to run a two-rig drilling
program on its some of its smaller but more core Midland Basin
acreage positions in Midland and Upton county in 2022 on its
pre-Bighorn acreage. The acquisition of Bighorn provides a high
PDP, average older vintage well, cash flow generating asset that
requires little capex.
The upside to this acreage is lower compared with the acquired
Chisholm assets, and its gas weighting reduces Earthstone's
expected oil mix from approximately 53% at close of Chisholm to 40%
once Bighorn closes. Over time, Fitch anticipates Earthstone's oil
weighting to increase, as it focuses development capex on more oily
area in Lea county and to a lesser extend Eddy county in the upper
Delaware.
FCF Provides Support to Growth Plans: Earthstone is forecast to
generate FCF of approximately $400 million annually in 2022 and
2023 and approximately $200 million annually through 2025 under
Fitch's base price deck. Earthstone's FCF benefits from it not
paying a dividend and its low organic growth capital spending.
Earthstone's track record of five acquisitions in the past eighteen
months suggests FCF may be used to support further M&A
opportunities that preserve leverage. Additional FCF visibility is
provided by Earthstone's hedging policy, which currently hedges
over 50% of its proforma Bighorn 2022 production estimate.
1.0x Target Leverage: Earthstone is targeting long-term leverage of
1.0x or below. It has historically maintained a low leverage
structure, and Fitch's forecast expects leverage to remain at
approximately 1x through its forecast period. On a debt to flowing
barrel measure, Fitch forecasts approximately $12,500/bbl at
year-end 2022, decreasing to below $8,000/bbl through the forecast
as FCF is expected to be allocated to reducing revolver draw.
Growth Strategy: Since the beginning of 2021, including the $604
million Chisholm acquisition closed in February 2022 and the $860
million Bighorn acquisition closing in 2Q22, Earthstone's five
acquisitions have totaled over $1.8 billion. Fitch expects
Earthstone to continue to look for in-basin, bolt-on opportunities
to support its growth strategy. Fitch does not anticipate immediate
synergies from the Chisholm or Bighorn acquisitions as Earthstone
did not have any existing Delaware position in the case of Chisholm
and there are no 2022 plans for new drilling on acquired Bighorn
acreage.
Over a longer timeframe, with Earthstone having demonstrated
success in managing costs, having reduced lateral drilling and
completing costs per foot from approximately $1,000 in 2018 to
below $750 in 2021 and has managing its production expenses at a
relatively low level ($10.7/boe in 2021). Fitch anticipates
opportunities for Earthstone to operate the Chisholm and Bighorn
assets in a similar, gross of potential inflation, cost-benefiting
manner.
Small-Midsized Producer: Proforma closing the Bighorn acquisition,
Earthstone will have 0.4 billion boe of Proved Reserves, with
Bighorn adding approximately half of these, and proforma 4Q21
production of 84.8Mboepd, which is being guided to decline to
76Mboepd - 80Mboepd (41% oil, 57% liquids) by 3Q22. On both a
reserve and production basis, Earthstone's size is consistent with
the high 'B' rating category range. Earthstone's operational scale
is of higher importance to its overall Issuer Default Rating as
smaller producers typically have less resilience during weaker
points in the commodity cycle in terms of both ability to maintain
development plans and access to capital.
DERIVATION SUMMARY
At year-end 2021, proforma 13.3Mboepd of 4Q21 being acquired in the
Chisholm acquisition and approximately 41.2Mboepd in the Bighorn
acquisition, Earthstone's production would be approximately
84.8Mboepd with 2022 combined guidance in 3Q and 4Q of 78Mboepd
(41% oil, 67% liquids). This is below 4Q21 production from Callon
Petroleum (B/Stable) at 112.4Mboepd. Similar to Earthstone,
Callon's has operations are located in the Delaware and Midland
Basin, but predominantly more southern and in Howard county,
respectively.
Earthstone's Q421 proforma production trails 'B+'/Positive rated
peer SM Energy (158.3Mboepd, 53%) oil meaningfully, and is
relatively in line with Matador Resources Co. (B+/Stable; 98.3, 57%
oil), whose acreage in the Northern Delaware is positioned similar
to the assets Earthstone is acquired from its Chisholm acquisition
in Eddy and Lea counties. Earthstone's production is above that of
Ranger Oil (B-/Stable; 40.2Mboped, 68% oil) which operates in the
Eagle Ford trend.
Earthstone compares favorably with this peer group in terms of
leverage, with Fitch forecast gross leverage of 0.9x at year-end
2022. This is approximately similar to Matador and SM and about
half a turn below Range and Callon.
KEY ASSUMPTIONS
-- WTI (USD/bbl) of $95 in 2022, $76 in 2023, $57 in 2024, and
$50 in 2025 and longer term;
-- Henry Hub natural gas (USD/mcf) of $4.25 in 2021, $3.25 in
2023, $2.75 in 2024, and $2.50 in 2024 and longer term;
-- Successful closing of five-year, $550 million senior unsecured
notes offering;
-- Revolver refinanced in 2024 under comparable terms;
-- Net working capital remains steady post Chisholm and Bighorn
closing;
-- No dividends or share buys backs in forecast period;
-- Minimal cash amounts held on balance sheet with excess cash
being applied to pay off revolver;
-- Assumed M&A majority funded with accumulated cash of similar
liquids weighted asset toward end of forecast.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Continued de-risking and operational momentum in the Permian
basin that results in material increase of PDP reserves,
inventory and oil weighting;
-- Organic and/or M&A growth increasing production sustained over
125Mboped while maintaining unit costs;
-- Mid-cycle total debt with equity credit/EBITDA sustained below
1.5x.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A shift to negative FCF contributing to diminished liquidity
or utilization of revolver commitment above 65%;
-- Reducing revolver borrowings not a prioritized use of FCF;
-- Failure to maintain a clear, conservative financial and
operational policy;
-- Mid-cycle total debt with equity credit/EBITDA sustained above
2.0x.
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
Simple Structure with RBL Providing Liquidity: Earthstone typically
holds minimal cash on its balance sheet, drawing upon and making
payments to it revolver to meet cash needs. Upon close of the
Bighorn acquisition, which includes closing the planned five-year
$550 million senior unsecured bond to partially fund the cash
component of the transaction and to repay a portion of its RBL
draw, with a new elected commitment level of $800 million, the RBL
draw is expected to be between 50%-60% utilized. This results in
year-end 2021, proforma the Chisholm and Bighorn acquisition,
YE2021 liquidity of approximately $330 million provided by undrawn
capacity.
Forecast FCF in excess of $400 million annually in 2022 and 2023
under Fitch's base case provide sufficient funds to fully repay
Earthstone's revolving facility.
Earthstone has a simple maturity schedule with no near-term
maturities. Its RBL matures in November 2024, and the planned $550
million bond issuance would mature in 2027.
KEY RECOVERY RATING ASSUMPTIONS
The recovery analysis assumes that Earthstone would be reorganized
as a going concern (GC) in bankruptcy rather than liquidated. Fitch
has assumed a 10% administrative claim and a 100% draw on the RBL
facility.
Going-Concern (GC) Approach
Earthstone's GC EBITDA estimate reflects Fitch's view of a
sustainable, post-reorganization EBITDA level upon which the agency
bases the enterprise valuation.
Earthstone's bankruptcy scenario considers a weakened oil and gas
environment resulting in reduced operational and financial
flexibility, in line with Fitch's stress case assumptions. Fitch
believes the lower price environment pressures liquidity and
consequently results in a lower capital program to maintain
production and manage negative FCF.
The GC assumption reflects Fitch's stressed case price deck, which
assumes WTI oil prices of USD42.00 in 2023, USD32.00 in 2024 and
USD42.00 in 2025.
An EV multiple of 3.5x EBITDA is applied to the GC EBITDA to
calculate a post-reorganization enterprise value. The choice of
this multiple considered the following factors:
-- The historical bankruptcy case study exit multiples for peer
companies ranged from 2.8x-7.0x, with an average of 5.2x and a
median of 5.4x;
-- The multiple is in line with comparables Callon Petroleum,
Ranger Resources, SM resources and Matador Petroleum, who
similarly to Earthstone hold Delaware basin assets within Eddy
and Lea counties in New Mexico, which have heightened event
risk as they have exposure to federal acreage.
Liquidation Approach
The liquidation estimate reflects Fitch's view of the value of
balance sheet assets that can be realized in a sale or liquidation
processes conducted during a bankruptcy or insolvency proceeding
and distributed to creditors.
In assigning the value for Earthstone's assets, Fitch considered
Earthstone's, proforma Bighorn close, PV10 value adjusted for a
lower-price environment and comparable multiples for production per
flowing barrel, value per acre and value per drilling location
within the Delaware and Midland Basins.
The RBL assumption is to be 100% drawn given the proforma Chisholm
borrowing base of $1,325 million would provide cushion for a
redetermination in a stress case above Earthstone's $800 million
elected commitment level.
Under the waterfall allocation, the First Lien RBL of $800 million,
fully drawn, has a 'RR1' recovery and is notched up three levels to
'BB+'. The planned senior unsecured notes are assigned a 'RR4'
recovery rating and are notched in line with the IDR to 'B+'.
ISSUER PROFILE
Earthstone Energy, Inc is an independent energy exploration and
production company with operations primarily in the Midland Basin
of West Texas and Delaware Basin in New Mexico. The company also
has a lower priority small operation in the Eagle Ford trend of
South Texas.
ESG CONSIDERATIONS
Earthstone has an ESG Relevance Score of '4' for Energy/Management,
reflecting the company's operational flexibility due to its smaller
scale, and low basin diversification, which may expose the company
to impending energy transaction risks. These factors have a
negative impact on the credit profile, and are 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.
EARTHSTONE ENERGY: Moody's Assigns First Time 'B1' CFR
------------------------------------------------------
Moody's Investors Service assigned first time ratings to Earthstone
Energy Holdings, LLC, including a B1 Corporate Family Rating, B1-PD
Probability of Default Rating, and a B3 rating to the company's
proposed $550 million senior unsecured notes due 2027. The rating
outlook is stable.
Proceeds from the prospective note issuance will be used to fund a
portion of its acquisition of assets from Bighorn Permian
Resources, LLC (Bighorn) for $860 million. Earthstone is a publicly
traded, independent oil and natural gas company headquartered in
The Woodlands, Texas controlled by its private equity sponsors,
primarily EnCap (40%, pro forma for the Bighorn acquisition) and
Warburg Pincus (19%, pro forma). Operations are predominantly
focused on the Midland and Delaware sub-basins of the Permian Basin
in Texas and New Mexico.
"Earthstone ratings reflect its moderate financial leverage and
growing scale in the Permian basin, which it has largely
accumulated through a series of acquisitions over the past eighteen
months," noted John Thieroff, Moody's Senior Credit Officer. "We
expect the company to remain acquisitive with an eye toward
consolidating acreage and production proximate to its operations
while continuing to fund purchases with a substantial equity
component."
Assignments:
Issuer: Earthstone Energy Holdings, LLC
Corporate Family Rating, Assigned B1
Probability of Default Rating, Assigned B1-PD
Speculative Grade Liquidity Rating, Assigned SGL-2
Senior Unsecured Regular Bond/Debenture, Assigned B3 (LGD5)
Outlook Actions:
Issuer: Earthstone Energy Holdings, LLC
Outlook, Assigned Stable
RATINGS RATIONALE
Earthstone Energy Holdings, LLC's (Earthstone) B1 corporate family
rating (CFR) reflects its competitive cost structure, moderate
financial leverage and concentrated operations in the Permian
Basin. The company's scale has increased considerably following a
series of acquisitions since the beginning of 2021, most notably
Chisholm Energy Holdings LLC (Chisholm, closed in February 2022)
and its announced acquisition of Bighorn, which is expected to
close this month. As a result, Earthstone's pro forma production
will exceed 80 mboe/d, more than triple its 2021 level of 24.8
mboe/d. While the majority of the company's production comes from
the Midland sub-basin, its 2022 development plan is split between
the Midland and Delaware sub-basins, with a two-rig program in each
area. Moody's expects Earthstone's lease operating expenses to
continue to improve as production from horizontal wells accounts
for an increasingly larger share of its total mix (80% of the
company's producing wells at year-end 2021 were vertical.) The
complementary nature of Bighorn's operations in the Midland
sub-basin provides Earthstone opportunities to block up acreage and
drill longer horizontal laterals, which will improve unit drilling
economics.
Earthstone's credit profile is challenged by its aggressive
acquisition strategy, having undertaken six transactions (five
closed, one pending) since December 2020. The recently closed
Chisholm acquisition was a step-out and presents a greater
integration challenge for Earthstone, given the company's prior
lack of operations in the Delaware sub-basin. Geographic
concentration poses a risk, as the company lacks sufficient scale
to give it negotiating leverage for materials and services –
particularly meaningful in inflationary periods such as now. While
private equity ownership typically connotes a more aggressive
financial policy, Earthstone's sponsors have backed its acquisition
strategy with significant acquisition funding, including a $280
million equity placement in support of the Bighorn purchase.
Earthstone's proposed $550 million senior unsecured notes due in
2027 are rated B3, two notches below the CFR. The double notching
results from the priority ranking of the senior secured revolving
credit facility, the $800 million elected commitment of the
revolver, which is large relative to the notes, and the heavy
utilization of the revolver.
Moody's expects Earthstone to maintain good liquidity, reflected by
its SGL-2 Speculative Grade Liquidity Rating. Liquidity benefits
from the company's strong free cash flow generation, particularly
in the high commodity price environment likely to continue into
2023. Moody's expects Earthstone to prioritize repaying revolver
borrowings from its free cash flow, which could exceed $400 million
in 2022. Covenants under the revolver require Earthstone to
maintain consolidated total leverage of less than 3.5x and a
current ratio of greater than 1x, levels that the company will
likely have little problem maintaining compliance through mid-2023.
The revolver expires in November 2024 and Earthstone's next debt
maturity will be that of the proposed notes in 2027.
Moody's views Earthstone's governance risk as moderately negative,
due to the company's hyper-acquisitive growth strategy and the
control by its private equity sponsors, whose agenda could at times
place it in conflict with the interests of creditors. Sponsor
support of the Bighorn acquisition and willingness to issue equity
in support of other transactions, a conservative approach to
distributions, and Earthstone's public listing all serve to
mitigate private equity ownership concerns, to an extent.
The stable outlook reflects Moody's expectation that Earthstone
will generate substantial free cash flow over the next twelve
months and that reducing revolver borrowings will be its primary
use. The outlook also contemplates successful integration of the
company's recent acquisitions.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Factors that could lead to an upgrade include increased scale,
maintaining a leveraged full cycle ratio (LFCR) above 1.5x in a
mid-cycle commodity price environment, consistent free cash flow, a
track record of prudent capital allocation and shareholder returns,
RCF/debt sustained above 40%, and successfully integrating its
recent acquisitions done in rapid succession. Factors that could
precipitate a downgrade include RCF/debt below 25%, LFCR below
1.0x, and a greater reliance on debt to fund acquisitions.
The Woodlands, Texas-based Earthstone Energy Holdings, LLC is a
publicly traded independent exploration and production company
majority owned by EnCap and Warburg Pincus. The company operates in
the Midland and Delaware sub-basins of the Permian Basin in Texas
and New Mexico.
The principal methodology used in these ratings was Independent
Exploration and Production published in August 2021.
ECO LIGHTING: Wins Cash Collateral Access Thru April 28
-------------------------------------------------------
The U.S. Bankruptcy Court for the District of New Jersey authorized
Eco Lighting USA, LLC to use the cash collateral of the U.S. Small
Business Administration through April 28, 2022.
The Court said the limited objection of creditor MJL Enterprises,
LLC to the Debtor's use of cash collateral is preserved, and MJL
reserves the right to assert that the Small Business Administration
does not have a perfected lien and security interest on any funds
in any of the Debtor's bank accounts as of the date of the filing
of the case, including those funds that constituted loan or other
proceeds, and MJL's agreement to the extension herein does not
prejudice any of its rights with respect thereto.
Further and supplemental objections to the use of cash collateral
must be filed and served no later than April 14.
A further hearing on Debtor's Motion for Use of Cash Collateral is
scheduled for April 28 at 11 a.m. via Court Solutions due to
restrictions imposed by the COVID-19 pandemic.
A copy of the order is available at https://bit.ly/3NWSPWr from
PacerMonitor.com.
About Eco Lighting USA LLC
Eco Lighting USA LLC manufactures standard and custom lighting
solutions using the latest LED chip and electronic Induction
Lighting Technologies. The Company manufactures a wide selection
of LED and Induction light fixtures, retrofits, and bulbs that are
designed to save money through reduced energy consumption, vastly
reduced maintenance, and reduced installation costs.
The Debtor filed a petition for Chapter 11 protection (Bankr.
D.N.J. Case No. 22-11314) on February 18, 2022. In the petition
signed by Sean Blackman, member, the Debtor disclosed up to
$500,000 in assets and up to $10 million in liabilities.
Judge Vincent F. Papalia oversees the case.
Bruce H. Levitt, Esq., at Levitt and Slafkes, P.C. is the Debtor's
counsel.
EVO TRANSPORTATION: Needs More Time to File 2021 Annual Report
--------------------------------------------------------------
EVO Transportation & Energy Services, Inc. was unable to file its
Annual Report on Form 10-K for the period ended Dec. 31, 2021
within the prescribed time period without unreasonable effort and
expense because the Company needs additional time to complete the
presentation of certain information in its financial statements and
notes thereto.
Management anticipates significant changes in the company's results
of operations from the year ended Dec. 31, 2020 to the year ended
Dec. 31, 2021, which is the period covered by the subject report.
The reasons for the significant changes are: (a) the company
received settlement and contract adjustment payments of
approximately $28.4 million in the first quarter of 2021, (b) the
company entered into a settlement agreement and note purchase
agreements in the first and second quarter of 2021 pursuant to
which we purchased approximately $3.5 million of previously
outstanding convertible promissory notes, (c) the company was
awarded numerous additional contracts in the second and third
quarters of 2021, (d) its $10.0 million loan under the Paycheck
Protection Program was forgiven by the United States Small Business
Administration in the third quarter of 2021, and (e) the company
voluntarily terminated certain contracts in the fourth quarter of
2021. Accordingly, the company anticipates its financial
statements for the year ended Dec. 31, 2021 will reflect, among
other things, significant increases in revenue, net income, and
total assets. The company is unable to provide a quantitative
estimate of these or other amounts at this time because its
financial statements remain subject to ongoing review by management
and its auditors.
About EVO Transportation
Headquartered in Peoria, AZ, EVO Transportation & Energy Services,
Inc. is a transportation provider serving the United States Postal
Service ("USPS") and other customers. The Company believes it is
the second largest surface transportation company serving the USPS,
with a diversified fleet of tractors, straight trucks, and other
vehicles that currently operate on either diesel fuel or compressed
natural gas.
For the nine months ended Sept. 30, 2020, EVO Transportation
reported a net loss of $32.65 million. The Company reported a net
loss of $46.85 million for the year ended Dec. 31, 2020, compared
to a net loss of $32.71 million for the year ended Dec. 31, 2019.
As of Dec. 31, 2020, the Company had $142.32 million in total
assets, $201.42 million in total liabilities, $398,000 in series A
convertible preferred stock, $6.62 million in Series B redeemable
convertible preferred stock, $1.2 million in redeemable common
stock, and a total stockholders' deficit of $67.32 million.
FIRST CHOICE: Seeks Chapter 11 Bankruptcy Protection
----------------------------------------------------
Real estate company 2022 First Choice Real Estate, LLC filed for
chapter 11 protection in the Middle District of Alabama. According
to court filing, First Choice estimates between 1 and 49 unsecured
creditors. The petition states that funds will not be available to
unsecured creditors.
About First Choice Real Estate
First Choice Real Estate LLC is a real estate company in Alabama.
First Choice Real Estate, LLC filed a petition under Chapter 11,
SubChapter V o the Bankruptcy Code (Bankr. M.D. Ala. Case No.
22-30592)) on April 5, 2022. In the petition filed by Wade G.
Clingan, as member, First Choice Real Estate estimated assets
between $100,000 and $500,000 and estimated liabilities between
$100,000 and $500,000.
FIX MY GADGET: Case Summary & 20 Largest Unsecured Creditors
------------------------------------------------------------
Debtor: Fix My Gadget, Inc.
4732 N. University St #9051
Peoria, IL 61614
Business Description: Fix My Gadget is primarily engaged in the
repair of electronic gadgets and computer
peripheral equipment.
Chapter 11 Petition Date: April 8, 2022
Court: United States Bankruptcy Court
Central District of Illinois
Case No.: 22-80201
Judge: Hon. Thomas L. Perkins
Debtor's Counsel: Jeffrey T. Abbott, Esq.
OSTLING & ASSOCIATES, LTD
201 W. Olive Street
Bloomington, IL 61701
Tel: 309-827-3030
Fax: 309-827-3131
E-mail: ostlingassociates@comcast.net
Estimated Assets: $0 to $50,000
Estimated Liabilities: $10 million to $50 million
The petition was signed by Larry Mikell as president.
A full-text 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://www.pacermonitor.com/view/MGVFFJA/Fix_My_Gadget_Inc__ilcbke-22-80201__0001.0.pdf?mcid=tGE4TAMA
FORGE REALTY LLC: Seeks Chapter 11 Bankruptcy Protection
--------------------------------------------------------
Forge Realty LLC files bankruptcy protection in New York.
On April 04, 2022 Forge Realty LLC filed for chapter 11 protection
in the Eastern District of New York. According to court filing,
Forge Realty LLC estimates between 1 and 49 unsecured creditors.
The petition states that funds will be available to unsecured
creditors.
The Statement of Financial Affairs Non-Ind Form 207 is due on April
18,2022 and incomplete filings are due on April 18, 2022. (gaa)
A teleconference meeting of creditors under 11 U.S.C. Sec. 341(a)
is slated for May 9, 2022, at 10:00 a.m. (gaa)
About Forge Realty LLC
Forge Realty LLC is a real estate company that owns a commercial
condominium located at 123-32 82nd Avenue Kew Gardens, New York
with a current value of $1.2 million.
Forge Realty LLC filed for chapter 11 protection (Bankr. E.D.N.Y.
Case No. 22-40707) on April 04, 2022. In the petition filed by
John Pappas, as managing member, Forge Realty LLC listed total
assets amounting to $1,200,000 and total liabilities of $4,217,464.
The case is assigned to Honorable Judge Nancy Hershey Lord. Bruce
Weiner, of Rosenberg Musso & Weiner LLP, is the Debtor's counsel.
FORUM DINER: Seeks Cash Collateral Access
-----------------------------------------
Forum Diner Corp. asks the U.S. Bankruptcy Court for the Eastern
District of New York for authority to use cash collateral and
provide adequate protection.
The Debtor acquired a diner known as "Forum Diner" located at 315
W. Main Street, Bay Shore, NY 11706 from GSP Restaurant Corp. on
September 11, 2015, pursuant to a secured and financed sale
transaction. In connection with the transaction, GSP Restaurant
Corp. has a first position security interest in all of the Debtor's
assets. The note, security agreement and related documents were
assigned to Spiros Kaloudis.
The parties with an interest in the cash collateral are GSP, Square
Capital, LLC, Principis Capital LLC, and the U.S. Small Business
Administration.
The Debtor seeks to use cash collateral to maintain operations of
the Property in accordance with the budget setting forth the
Debtor's anticipated cash receipts and expenditures on a 14-day
basis pending the Final Hearing.
As adequate protection for any diminution in the Collateral, if
any, as a result of the use of cash collateral, if any, the Lenders
will receive valid, perfected and enforceable security interests to
the same extent that they existed as of the Petition Date. The
Debtor also proposes to make a monthly adequate protection payment
to GSP in the amount of $87,588.
The pre-petition liens and the Adequate Protection Liens will be
subject to (i) Quarterly fees of the United States Trustee and
other fees due the United States Bankruptcy Court pursuant to 28
U.S.C. 1930, including any fees and applicable interest thereon
pursuant to 28 U.S.C. chapter 123; and (ii) any cost and fees of a
chapter 7 Trustee, should one be appointed, however, not to exceed
the amount of $10,000.
These events constitute an "Event of Default:"
a. The failure by the Debtor to perform, in any respect, any
of the terms, provisions, conditions, covenants, or obligations
under the Interim Order;
b. The entry of any order by the Court granting relief from or
modifying the automatic stay of Bankruptcy Code section 362(a);
c. A default by the Debtor in reporting financial or
operational information as and when required under the Interim
Order that is not cured within 15 business days after written
notice to the Debtor and their counsel.
After the occurrence of an uncured Event of Default, GSP may
declare a termination of the Debtor's right to use cash collateral
by delivering to the Debtor a "Termination Declaration" setting
forth a date, not less than seven business days after delivery of
the Termination Declaration, upon which the Debtor's right to use
cash collateral will terminate. On the earlier of (i) the
Termination Date or the one year anniversary of the Petition Date,
i.e. February 15, 2023, the Debtor's right to use cash collateral
will automatically cease, unless the Debtor obtains an order by the
Court continuing the use of cash collateral, and except the Debtor
may use cash collateral solely to pay expenses critical to the
preservation of the Property during the Remedies Notice Period.
A copy of the motion is available at https://bit.ly/3DLIrwj from
PacerMonitor.com.
About Forum Diner Corp
Forum Diner Corp. is a Bay Shore, N.Y.-based company operating a
diner located at 315 W. Main Street, Bay Shore, NY 11706.
Forum Diner filed a petition under Chapter 11, Subchapter V of the
Bankruptcy Code (Bankr. E.D.N.Y. Case No. 22-40265) on Feb. 15,
2022, listing $85,214 in assets and $1,480,475 in liabilities.
Gerard R. Luckman, Esq., serves as the Subchapter V trustee.
Judge Nancy Hershey Lord oversees the case.
Morrison Tenenbaum, PLLC, led by Lawrence F. Morrison, Esq., serves
as the Debtor's legal counsel.
FRONTDOOR INC: S&P Alters Outlook to Stable, Affirms 'BB-' ICR
--------------------------------------------------------------
S&P Global Ratings revised its rating outlook on Frontdoor Inc. to
stable from positive. At the same time, S&P affirmed its 'BB-'
foreign and local currency long-term issuer credit ratings on the
company and its 'BB-' debt rating on its first-lien term loan B due
2028. The recovery rating remains '3'.
S&P said, "The revision of the outlook to stable from positive
reflects headwinds to operating performance and a more aggressive
approach to capital deployment through share buybacks in 2022,
which we expect will result in leverage deterioration. We forecast
the tight seller's market will continue to encumber top-line growth
for the first-year real estate channel offset by price
realizations, first-year direct-to-consumer growth, and steady
renewal retention. In addition, the inflationary cost pressures,
particularly felt in fourth-quarter 2021, will continue to squeeze
margins. In spite of pressures, we project Frontdoor will generate
solid cash flow over the next 12 months, but we expect the benefit
of cash against leverage to be lower than historical levels, given
our expectation that the company will allocate excess cash toward
share repurchases, absent any transformational acquisition.
For full-year 2021, Frontdoor generated 8.7% revenue growth, its
highest annual growth rate as a public company, but it experienced
a number of challenging market dynamics that pulled results below
budget. Frontdoor's revenue growth for 2021 was mainly attributed
to higher pricing, changes in its product mix, and investments in
emerging businesses (ProConnect and Streem) and the first-year
direct-to-consumer and renewal channels. Meanwhile, the first-year
real estate channel declined 4% year-over-year due to fewer
customers and home service plans. Frontdoor experienced pressure in
its first-year real estate channel as record-low housing inventory
drove the strong seller's market. Countering the declines in real
estate were improved price realization and the company's use of its
dynamic pricing model, which led to improvement across all home
service plan channels.
Frontdoor's direct-to-consumer business experienced an uptake of
its higher-priced products above initial expectations, which was a
2021 highlight. However, the higher-than-expected growth in the
adoption of new product offerings also resulted in
higher-than-anticipated claims costs, though Frontdoor's increased
claims costs in 2021 primarily stemmed from inflationary cost
pressures. Additional contributing factors to increased claims
costs included unanticipated spikes in service requests as COVID-19
variants kept customers at home, as well as actions to improve
customer service. With lower inventory levels as a result of global
supply-chain challenges, Frontdoor took certain steps to improve
service request cycle times, including relying on a higher number
of contractors supplying parts. These changes occurred amid a steep
rise in inflation of parts and equipment prices, particularly in
the fourth quarter, resulting in higher contractor costs.
The company also faced unfavorable expense movements in sales and
marketing. To combat weaker real estate channel results, Frontdoor
began accelerating marketing investments in 2020 to expand its
direct-to-consumer channel and improve retention, but advertising
costs in 2021 were higher than expected because of competition for
advertising space.
Although claims costs and marketing expenses increased in 2021,
Frontdoor managed to expand its S&P Global Ratings-adjusted EBITDA
margin to 18.7% from 17.7% due to its favorable price and product
mixes and a decline in the total number of service requests and
restructuring charges relative to 2020. In 2022, however, S&P
expects the benefits of improved pricing to only partially offset
inflationary cost pressures and supply-chain constraints leading to
margin contraction.
S&P said, "We expect 2022 revenue growth to stem primarily from
price realization, as a result of dynamic pricing initiatives and a
shift to higher-priced products, with overall customer volumes flat
relative to 2021. We expect challenges in the real estate market to
persist and margins to contract as a result of inflationary cost
pressures, supply-chain issues, and a modest business shift toward
the direct-to-consumer channel. Given that the company repurchased
over $100 million in shares in the months following the September
2021 announcement of its three-year repurchase authorization, we
expect that as Frontdoor generates cash the company will use free
cash flow to buy back shares as long as the share price remains
suppressed."
S&P's base case assumes the following in 2022:
-- Revenue growth of 5%-7%
-- EBITDA-to-revenue margins of 14%-17%
-- Excess cash outflow for share repurchases of $100 million to
$200 million
Based on these assumptions, S&P arrives at the following credit
metrics:
-- Leverage at 2.3x-2.8x at year-end 2022
-- Funds from operations (FFO) to debt of 25%-30%
-- EBITDA interest coverage above 7.0x
Frontdoor's fair business risk profile (BRP) reflects the company's
leading position in the home service plan market, its improving
pricing capabilities and geographic mix, and its lack of
substantial contractor or real estate partner concentrations. The
value proposition for the business remains strong as the cost and
complexities of appliances and repairs increase. But households'
adoption of products has remained slow despite year-over-year
growth and meaningful investments to improve awareness. To enhance
its presence as well as its value proposition, Frontdoor has been
pursuing its strategy of investing in technology. S&P expects the
company to maintain its leading market position in the home
services market and gradually expand its addressable market through
ProConnect on-demand services and the Streem technology platform.
S&P said, "Our preliminary financial risk profile (FRP) derives
from core and supplementary metrics: net debt to EBITDA and EBITDA
interest coverage. As of year-end 2021, Frontdoor's S&P Global
Ratings-adjusted net debt to EBITDA was 1.9x with coverage above
7.0x. While leverage dipped below 2.0x in 2021, we do not view this
level as sustainable, given the expected headwinds to operating
performance and cash deployment toward share repurchases."
Per the company's capital allocation strategy, Frontdoor targets
organic investments, acquisitions, and debt repayment, with its
final priority being share repurchases. In May 2021, Frontdoor
refinanced its debt, issuing a $260 million first-lien term loan A,
$380 million first-lien term loan B, and an undrawn $250 million
revolving credit facility. Although the transaction did not affect
net leverage, it did reduce gross debt outstanding, lower annual
interest expense, and extend all maturities. With the company
addressing debt repayment in 2021, for 2022 S&P's expect Frontdoor
to target share repurchase given the company's buyback activity in
2021 and the lack of transformational acquisition opportunities in
the pipeline.
S&P said, "While forecasted leverage and coverage would typically
lead to an intermediate FRP, we believe potential volatility in
earnings from business mix shifts in stressed origination markets,
as well as seasonal exposure to weather elements, creates some
volatility for cash flow, moderating our view of the FRP to
significant. The fair BRP and significant FRP lead us to a 'bb'
anchor. We then apply a negative 1 comparable rating analysis
modifier to reflect the company's limited penetration in its core
market and the narrow focus of its target base, which we think adds
uncertainty to near-term operating performance amid challenging
competitive dynamics. There is also a lower degree of
predictability in credit ratios due to the uncertainty of cash
deployment and the company's willingness to flex up leverage
opportunistically for transformational acquisitions.
"We view Frontdoor's liquidity as adequate based on our expectation
that sources will exceed uses of cash by at least 1.2x over the
next 12 months. We expect this ratio to be sustained even with a
15% decline in EBITDA. We also consider qualitative factors
including sound relationships with banks, prudent risk management,
and no near-term debt maturities.
"The company is subject to a financial covenant wherein its
consolidated first-lien leverage ratio shall not exceed 3.50x
absent a material acquisition. We expect the company to be in
compliance with its covenant with ample headroom over the outlook
horizon."
Principal liquidity sources include:
-- $248 million of revolver availability
-- $87 million of unrestricted cash as of Dec. 31, 2021
-- FFO of $170 million to $220 million
Principal liquidity uses include:
-- Required paydown of debt through scheduled amortization and
excess cash flow
-- Capital expenditure of $45 million to $55 million
-- Discretionary share repurchase of $100 million to $200 million
S&P said, "The stable outlook reflects our expectation that
Frontdoor's price realization and shift to higher-priced products,
offset by a continued decline in real estate channel revenue, will
lead to top-line growth of 5%-7% in 2022. We expect inflation and
supply-chain challenges, along with investments in sales and
marketing, to result in EBITDA margin contraction to 14%-17%.
Additionally, we anticipate capital and any excess cash flow to be
allocated toward share repurchases, absent any transformational
acquisition.
"All things considered, we expect net debt to EBITDA of 2.3x-2.8x
and EBITDA coverage above 7.0x in 2022. We believe Frontdoor will
maintain its dominant presence in the home service plan market,
supported by its significant contractor base and enhanced
technological capabilities relative to peers, while gradually
expanding its addressable market through its emerging businesses,
Streem and ProConnect.
"We could lower our ratings on Frontdoor in the next 12 months if
earnings or credit metrics deteriorate, resulting in debt to EBITDA
above 3.0x or coverage below 4.0x on a sustained basis. This could
occur if earnings fall due to prolonged and tighter-than-expected
seller's market dynamics or lost market share, if increased
operational and claims costs contract margins below expectations,
or if the company adopts a more aggressive financial policy.
"We could raise our ratings in the next 12 months if we expect
Frontdoor to maintain a less aggressive strategy with leverage
sustainably below 2.0x and coverage near 10.0x. We could also raise
our ratings if Frontdoor expands its geographic footprint through
greater revenue split by state, boosts market penetration via its
direct-to-consumer channel, and starts to experience meaningful
accretive benefits from its on-demand platform buildout.
"We affirmed our 'BB-' debt rating with a '3' recovery rating on
Frontdoor's first-lien term loan B due 2028. The company's
revolving credit facility due 2026 and first-lien term loan A due
2026 are unrated.
"We have valued Frontdoor on a going-concern basis using a 6.0x
multiple over our projected emergence EBITDA.
"Our simulated default scenario contemplates a default in 2026 due
to shrinking revenue and margins, a decline in market penetration,
and intense competition in the home service plan industry.
"We believe lenders would achieve the greatest recovery value
through reorganization rather than liquidation of the business."
-- Year of default: 2026
-- EBITDA at emergence after recovery adjustment: $83.9 million
-- Implied enterprise value (EV) multiple: 6.0x
-- Net EV (after 5% administrative costs): $478.3 million
-- Valuation split (% obligors/nonobligors): 100/0
-- Collateral value available to secured creditors: $478.3
million
-- Total first-lien debt: $801.5 million
-- Recovery expectations: 50%-70% (rounded estimate: 55%)
Note: All debt amounts include six months of prepaid interest.
GARDA WORLD: Fitch Affirms 'B+' IDR, Outlook Stable
---------------------------------------------------
Fitch Ratings has affirmed Garda World Security Corporation's (GW)
Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is Stable.
GW's ratings are driven by the company's relatively high leverage
and opportunistic M&A strategy, which is partly offset by the
company's good competitive and market positions, solid
diversification, ability to profitably integrate acquisitions and
exposure to growing end markets. The company continues to manage
through the pandemic quite well, maintaining adequate liquidity and
credit metrics for the rating category.
KEY RATING DRIVERS
Resilient Pandemic Performance: GW has performed quite well through
the pandemic, with increased demand in some areas (security
services at pharmacies, healthcare providers, governments,
financial institutions and grocery retailers) offsetting declines
in other areas (event management). Its staffing level higher now
than pre-pandemic, and labor cost increases are largely being
passed on to clients. The company continues to sign new business
and has been able to increase margins due to a combination of cost
control and pricing power in some segments.
Opportunistic M&A Approach: GW operates under an opportunistic
financial policy that includes pursuing debt funded acquisitions,
most recently Tidel Engineering. The company notes that these
acquisitions are typically executed at deleveraging multiples. The
company has completed more than 20 M&A transactions over the past
three years, significantly contributing to its revenue growth since
2018. In February 2021, GW dropped its bid to acquire much larger
European rival G4S PLC, which would have been a transformative
transaction for the company.
Leveraged Financial Structure: Following the 2018-2019 UAS and
Whelan acquisitions, as well as several tuck-ins, leverage peaked
over 7x in 2019 before receding to the 6x range currently. The
company delevered more quickly than Fitch expected due to higher
EBITDA margins. Fitch expects leverage to remain around the high-5x
to low-6x range as EBITDA margins normalize.
U.S. Security Services Entry: Starting with the UAS and Whelan
acquisitions in 2018-2019, GW has begun to ramp up its footprint in
the $25 billion U.S. security sector. This market has three large
players (AlliedUniversal & G4S with a 36% share, and Securitas with
18%) and is otherwise fragmented. Management has achieved scale
quickly through bolt-on acquisitions, high retention rates, and
organic growth. GW is the #3 player in the U.S. market and #1 in
Canada.
BC Partners Investment: In October 2019, BC Partners completed its
purchase of a 51% interest in GW, valuing the company at C$5.2
billion. The management team, including founder & CEO Stephan
Cretier, holds the remaining 49%. BC Partners is an established
firm, which has raised over EUR25 billion in capital. BC Partners's
investment in GW is predicated on buying into an entrepreneurial
management team, which operates in an industry with favorable
tailwinds. Management has increased its share of ownership to 49%
presently from 26% when it was taken private in 2012, and Fitch
continues to view this alignment of interests between the two
ownership groups positively.
Profitability Improvements: GW has grown its EBITDA margins
consistently through a time of expansion, from ~11% in 2011 to ~15%
in 2021, demonstrating its expertise in acquiring at reasonable
multiples and integrating those acquisitions effectively. The Tidel
acquisition is expected to be margin accretive. Margin improvements
to date are driven by recent pricing increases which offset rising
labor and fuel costs, as well as slight synergies from recent
acquisitions.
Strong Competitive and Market Position: GW is a leading provider of
cash management and security services, and its industry leading
retention rates position it well to defend and grow its share.
Although the company faces competition from several other large
multinational competitors, GW continues to increase its size and
scale to compete effectively against its peers. The security
services market has been growing at a healthy rate, and Fitch
expects further growth at least through the medium term.
Solid Diversification: GW has good diversification given its large
market positions in both Security and Cash Services segments.
Additionally, within each segment, the company's end market
exposure is diverse including exposure to natural resources,
property management, retail, restaurants, financial institutions,
healthcare, government agencies and special events.
DERIVATION SUMMARY
GW is comparable with The Brink's Company (BB+/Stable), a direct
competitor in the cash services segment, and Allied Universal (NR),
a competitor in the security segment. Compared with Brink's, GW has
significantly higher leverage and a more aggressive M&A strategy.
Compared with a combined Allied Universal/G4S, GW is smaller and
more focused, with stronger margins and historically lower
leverage.
KEY ASSUMPTIONS
Revenue growth to YE January 2022 reflects new contract wins,
volume recoveries, new services related to COVID-19, and mild
organic improvements. Going forward, growth in 2023 is expected to
be driven by the Tidel acquisition, reverting to a long-term growth
rate of 2% in Cash Services and 3% in Security Services.
The company is forecast to spend $120 million yearly on
acquisitions assuming a 6x multiple and a 12% margin.
Improvement in EBITDA margins in fiscal 2022 was partly driven by
pandemic forces, which Fitch expects to moderate during 2023. Going
forward, margins are forecast to be flat, as improvements in
increased fixed cost leverage are offset by integration costs under
the M&A program.
The company maintains positive FFO and FCF through the period, as
working capital needs are limited.
Capex is estimated to hold steady around $130 million annually.
Total debt/EBITDA is forecast around 6x over the next several years
as the company profitably integrates acquisitions.
Recovery Assumptions:
The recovery analysis assumes that GW would be reorganized as a
going concern in bankruptcy rather than liquidated. Fitch has
assumed a 10% administrative claim.
Fitch estimates GW's GC EBITDA at $600 million. This reflects pro
forma adjustments for cash flows added via acquisitions including
Tidel. The GC EBITDA estimate reflects Fitch's view of a
sustainable, post-reorganization EBITDA level upon which Fitch
bases the enterprise valuation. This estimate reflects a potential
weakening of the cash services market and/or the loss of several
significant customers. It also reflects corrective measures taken
in the reorganization to offset the adverse conditions that
triggered default such as cost cutting, contract repricing and
industry recovery.
Fitch assumes GW would receive a GC recovery multiple of 6.5x in
this scenario. This multiple is applied to the GC EBITDA to
calculate a post-reorganization enterprise value (EV). This
multiple reflects: According to industry information, most of the
large transactions announced over the past 15 years have indicated
average purchase price values in the 8x-10x EBITDA range, while
smaller acquisitions tend to have mid- to high single-digit
multiples.
-- GW's experience of acquiring small industry players in the 4x-
6x range post synergies, and the larger Whelan acquisition at
a multiple of 12x.
-- Ultimately GW's 6.5x multiple is driven by the company's size
and scale and by comparable EV valuations among security and
cash service providers.
Fitch's recovery scenario assumes GW's revolver is fully drawn.
These assumptions generate a 'BB+' rating and an 'RR1' Recovery
Rating for the senior secured debt and a 'B-' rating and 'RR6'
Recovery Rating for the senior unsecured debt.
RATING SENSITIVITIES
Factors that may, individually or collectively, lead to positive
rating action/upgrade:
-- An upgrade is unlikely in near term without a significant and
sustained decrease in debt/EBITDA and a more coherent
financial policy;
-- Total debt/EBITDA sustained below 5.0x;
-- Maintaining an FCF margin above 4%;
-- Maintaining an EBITDA margin above 13%.
Factors that may, individually or collectively, lead to negative
rating action/downgrade:
-- Pro forma total debt/EBITDA sustained above 6.5x;
-- Debt-funded shareholder-friendly activity, or a significant
acquisition that weighs on credit metrics;
-- Sustained decline in EBITDA margin to below 10%;
-- EBITDA/interest coverage ratio sustained below 1.5x.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: The company has adequate liquidity with a pro
forma post-Tridel transaction cash balance around $363 million and
full availability under its $335 million revolver. Fitch expects GW
to continue to generate positive FCF of around $200 million
annually. With no material debt maturities until 2026, Fitch views
liquidity to be adequate.
Debt Structure: Pro forma for the transaction, the company has $3.5
billion of debt at the senior secured level consisting of its $570
million senior secured notes maturing 2027, $1.4 billion senior
secured TLB maturing 2026, $700 million senior secured TLB maturing
2029, and an undrawn $335 million revolver maturing in 2024. The
company's senior unsecured debt balance of $1.4 billion consists of
the $604 million unsecured notes maturing 2027, $500 million
unsecured notes maturing 2029 and $29 million in other unsecured
debt.
ISSUER PROFILE
Garda World Security Corporation is a global supplier of cash
management and security services, with a focus on North America.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
GASHI & HAN: Seeks Interim Cash Collateral Access
-------------------------------------------------
Gashi & Han LLC d/b/a Cafe Locale asks the U.S. Bankruptcy Court
for the District of New Jersey for authority to use cash collateral
on an interim basis in accordance with the budget.
The Debtor requires the use of its cash collateral in order to
continue operating and maintain the "going concern" value of its
business.
The Debtor's accounts receivable and other assets appear to be
encumbered by a lien in favor of the United States of America,
Small Business Administration. As of petition date, the Debtor
owes SBA $500,000.
In addition, the Debtor's budget demonstrates the Debtor's ability
to remain current with all of its postpetition obligations, and
remit monthly adequate protection payments to the SBA.
The Debtor's business has been negatively impacted by the COVID-19
pandemic. The Debtor has also been drained by its ongoing dispute
with MGS World Inc., its landlord, which dispute has been ongoing
for approximately two years. The dispute involves the Debtor's
efforts to sell its business to a third party. To date the Debtor
has been unable to obtain MGS' cooperation in connection with the
proposed sale.
The Debtor's disputes with MGS were the subject of a Superior Court
Action pending in the Law Division, Bergen County. Although the
Debtor believed it was making significant progress in negotiations
with MGS, in February MGS filed an eviction action against the
Debtor which was scheduled for a hearing on March 29, 2022. The
Debtor's petition was filed in order to stay such eviction action.
In addition, MGS asserts that approximately $430,000 is due upon
the Debtor's lease agreement with MGS. The Debtor has unsecured
debt of approximately $150,000. The proposed order provides for
monthly adequate protection payments to be remitted to the SBA in
the amount of $700 commencing May 15, 2022.
The proposed order grants the SBA a replacement lien upon the
Debtor's existing and after acquired assets, having the same
priority as the SBA's pre-petition liens. The order also grants the
SBA a super priority administrative expense claim pursuant to
Section 507(b) of the Code to the extent that the adequate
protection proposed is insufficient to protect the SBA's interest
in and to the cash collateral. The foregoing replacement liens and
priority claim s are subject to the SBA establishing the prima
facia validity of its liens upon the Debtor's assets.
A copy of the motion is available at https://bit.ly/3NOcdoH from
PacerMonitor.com.
About Gashi & Han LLC
Gashi & Han LLC sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. D. N.J. Case No. 22-12451) on March 28,
2022. In the petition signed by Enver Gashi, managing member, the
Debtor disclosed up to $50,000 in assets.
Davide Edelberg, Esq., at Scarinci Hollenbeck, is the Debtor's
counsel.
GENCANNA GLOBAL: Court Bars LDC Claim
-------------------------------------
OGGUSA, Inc., fka GenCanna Global USA, Inc., filed a Complaint
against Louisville Dryer Company, contending LDC breached the
parties' agreement relating to LDC's manufacture of equipment for
GenCanna's use at its Mayfield production facility. LDC insists
GenCanna breached the agreement and filed a proof of claim in
GenCanna's bankruptcy case for damages. At the trial held on
February 22, 2022, GenCanna failed to prove LDC breached the
parties' agreement and LDC failed to justify allowance of its
claim.
Prior to trial, Count II of the Complaint for unjust enrichment was
dismissed. Count III is a request for turnover of the January
payments totaling $1,790,023 pursuant to 11 U.S.C. Section 542.
GenCanna did not discuss Count III in its trial brief or pursue it
at trial.
Judge Gregory R. Schaaf of the United States Bankruptcy Court for
the Eastern District of Kentucky, Lexington Division, holds
GenCanna's abandonment of, or failure to prosecute, this claim
entitles LDC to judgment on Count III.
Even if GenCanna had pursued Count III at trial, Judge Schaaf says
seeking relief under Section 542 is not appropriate when the debt
stems from a contractual dispute. GenCanna also did not provide any
law in its trial brief to address whether or when LDC earned the
January payments demanded in the Complaint or otherwise deal with
this issue at trial, the Court notes. LDC's standard payment terms
in the Proposals required a 30% "project initiation payment," which
is approximately the amount of the January 2019 payments. The
Agreement referred to these payments as GenCanna's "initial down
payment," and also referred to "work stoppages made by [LDC]
pending resolution of interim payment milestones by" GenCanna.
Mathis testified that LDC used the project initiation payment to
procure the materials needed to construct the dryers and coolers,
and LDC in fact manufactured three dryers and one cooler for
delivery.
Judge Schaaf also points out GenCanna offers no reason to believe
the $1,790,023 was not akin to a progress payment earned by a
contractor for performance under a construction contract.
GenCanna proceeded to trial on Count I, breach of contract, and
Count IV, dismissal of LDC's proof of claim pursuant to 11 U.S.C.
Section 502.
According to Metro Louisville/Jefferson County Gov't v. Abma, 326
S.W.3d 1, 8 (Ky. Ct. App. 2009), to prove a breach of contract, a
complainant must establish three things: 1) existence of a
contract; 2) breach of that contract; and 3) damages flowing from
the breach of contract. The parties agree they had a contract for
specially manufactured goods and related services that is evidenced
by the Agreement and the incorporated Proposals. They also agree
Kentucky's version of the Uniform Commercial Code applies.
GenCanna contends LDC anticipatorily repudiated (and thus breached)
the Agreement under K.R.S. Section 355.2-610 by sending the October
16 Email and December 3 Letter, entitling GenCanna to damages under
K.R.S. Section 355.2-711. However, the Court notes that neither
communication constituted an anticipatory repudiation of the
Agreement. Accordingly, Judge Schaaf rules GenCanna did not
establish an essential element of its claim.
GenCanna primarily focuses on LDC's October 16 Email that began by
declaring GenCanna in "default under its contract with" LDC. Judge
Schaaf, however, notes the correspondence does not describe the
alleged default. At trial, LDC explained the need to get the
completed dryers out of the facility because they were the size of
a bus and taking space needed to work on equipment for other
buyers. But LDC focused its arguments on its concern over the
payments due for the final dryer and cooler. Also, GenCanna
established at trial that LDC was not owed a progress payment for
the remaining dryer and cooler under the Proposals as of October
16, 2019.
GenCanna did not, however, prove the October 16 Email constituted
an anticipatory repudiation under Kentucky law because it did not
communicate an unequivocal and clear determination by LDC to cease
performance under the Agreement, Judge Schaaf further notes. LDC
expressly asked GenCanna to respond if it had "any objection" to
the proposed private sale or "wish[ed] to discuss the viability of
a cure period."
The record also confirms GenCanna did not treat the email as a
repudiation of future performance by LDC. GenCanna's Drennen
responded almost immediately to assure LDC that GenCanna was
pursuing additional financing and intended to satisfy its payment
obligation. Broadbent did not testify that he viewed the October 16
Email as a termination; he understood the October 16 Email as a
request to discuss issues involving the final dryer and cooler.
LDC characterized the October 16 Email as an inartfully worded
demand for adequate assurance in accordance with K.R.S. Section
355.2-609. LDC convincingly established at trial that it had
reasonable grounds for insecurity as of October 16, 2019, Judge
Schaaf rules.
By September, many unpaid contractors, subcontractors, and
materialmen filed liens against the Mayfield Facility. In early
September, GenCanna paused construction on the Mayfield Facility
through the end of the year without completing the foundations
necessary to accept delivery of the Assigned Equipment. Then,
GenCanna refused to discuss delivery of the three dryers after
notice they were ready by the dates required in the Agreement. Any
manufacturer would have a reason to feel insecure regarding future
payments and demand some form of adequate assurance in accordance
with K.R.S. Section 355.2-609.
But Mathis's trial testimony and the text did not show the October
16 Email was a request for adequate assurance, Judge Schaaf holds.
The October 16 Email does not state that LDC had "reasonable
grounds for insecurity" regarding GenCanna's future performance,
does not invoke the applicable statute, and does not include a
clear demand for assurances from GenCanna. Ultimately, the October
16 Email has no legal significance. Mathis's trial testimony
revealed that LDC simply wanted to open a line of communication to
understand how GenCanna intended to proceed under the Agreement
given its financial circumstances.
Drennan's response and the testimony from Drennan and Broadbent
confirmed GenCanna interpreted the October 16 Email similarly. They
did not believe the email repudiated the Agreement and neither
party changed its position based on the October 16 Email.
GenCanna also contends the December 3 Letter constituted an
anticipatory repudiation of the Agreement because LDC claimed
GenCanna was "in default" for failure to pay the $645,831 balance
due. The preceding discussion confirmed no progress payment was
due. The failure to accept delivery of the three dryers in early
October likely was a default, but that was not mentioned in the
settlement proposal.
The testimony confirmed the December 3 Letter was intended as a
walk-away resolution of the parties' situation given the dire
financial circumstances facing GenCanna. The cessation of
construction at the Mayfield Facility and lien problems were
exacerbated by the destruction of GenCanna's only operating
processing facility in early November. Any manufacturer would feel
insecure on these facts and look for a solution.
The settlement offer did not refer to termination of the Agreement
or the obligations thereunder. Broadbent, the recipient of the
December 3 Letter, did not testify that he viewed it as an
anticipatory repudiation of the Agreement by LDC. He took no action
on the letter because it simply was not one of GenCanna's more
pressing problems in November and December 2019.
Further, there is no evidence LDC took any steps to sell or
otherwise dispose of the unfinished dryer and cooler (or its
components) after sending the December 3 Letter. This information
could have evidenced repudiation, but the absence supports the
conclusion that LDC only intended to propose a resolution. The
December 3 Letter, like the October 16 Email, had no legal effect
on the parties' relationship; it was an offer of settlement by LDC
that GenCanna did not accept.
LDC filed a proof of claim for $645,031 in GenCanna's bankruptcy
case on June 20, 2020, offering "Breach of Contract" as the basis
for the claim [Case No. 20-50133, Claim No. 10082].
Judge Schaaf holds that his prior discussion confirmed the final
progress payment was not yet due. Further, LDC conceded in closing
arguments that a fair result based on common sense precluded a
judgment for GenCanna and allowance of the LDC claim. This
concession was reasonable because, even assuming GenCanna breached
the Agreement and Proposals by rejecting them in bankruptcy, LDC
made no effort at trial to establish its damages in accordance with
the Uniform Commercial Code. See KY. REV. STAT. Section 355.2-708.
Instead, LDC relied on arithmetic to establish the $645,831 claim
for the balance due on the Agreement.
Therefore, the LDC claim is disallowed.
A full-text copy of Judge Schaaf's Memorandum Opinion dated March
31, 2022, is available at https://tinyurl.com/4kvjms6z from
Leagle.com.
The adversary proceeding is OGGUSA, INC., fka GenCanna Global USA,
Inc. Plaintiff, v. LOUISVILLE DRYER COMPANY, Defendant, Adv. No.
20-5032 (Bankr. E.D. Ky.).
About GenCanna Global USA
GenCanna Global USA, Inc. -- https://www.gencanna.com/ -- is a
vertically-integrated producer of hemp and hemp-derived cannabidiol
products with a focus on delivering social, economic and
environmental impact through seed-to-scale agricultural
production.
GenCanna Global USA was the subject of an involuntary Chapter 11
proceeding (Bankr. E.D. Ky. Case No. 20-50133) filed on Jan. 24,
2020. The involuntary petition was signed by alleged creditors
Pinnacle, Inc., Crawford Sales, Inc., and ntegrity/Architecture,
PLLC.
On Feb. 6, 2020, GenCanna Global USA consented to the involuntary
petition and on Feb. 5, 2020, two affiliates, GenCanna Global Inc.
and Hemp Kentucky LLC, filed their own voluntary Chapter 11
petitions.
Laura Day DelCotto, Esq., at DelCotto Law Group PLLC, represents
the petitioners.
The Debtors tapped Benesch Friedlander Coplan & Aronoff, LLP and
Dentons Bingham Greenebaum, LLP as legal counsel, Huron Consulting
Services, LLC, as operational advisor, and Jefferies, LLC, as
financial advisor. Epiq is the claims agent.
The Office of the U.S. Trustee appointed a committee of unsecured
creditors on Feb. 18, 2020. The committee tapped Foley & Lardner
LLP as its bankruptcy counsel, DelCotto Law Group PLLC as local
counsel, and GlassRatner Advisory & Capital Group, LLC, as
financial advisor.
GFA PEANUT COMPANY: Creditors to Get Proceeds From Liquidation
--------------------------------------------------------------
GFA Peanut Company, LLC, filed with the U.S. Bankruptcy Court for
the Middle District of Georgia a Plan of Reorganization under
Subchapter V dated April 4, 2022.
Debtor is a Georgia limited liability company formed on October 24,
2015. The Debtor was originally formed by GFA Peanut Association, a
non-profit corporation, and GFA Peanut Association is the sole
member of the Debtor.
The Debtor's property was severely damaged in Hurricane Michael and
suffered cash flow shortages that resulted in foreclosure
proceedings instituted by Bank of Camilla, its primary secured
creditor.
This is a liquidating plan. The Debtor will no longer operate
following the conclusion of the sales contemplated in the plan.
However, the Debtor projects that it will be able to liquidate
assets sufficient to make the payments contemplated in the plan.
Non-priority unsecured creditors holding allowed claims will
receive distributions, which the proponent of this Plan has valued
at approximately 1 cent on the dollar. The Plan also provides for
the payment of administrative and priority claims.
Class 1 consists of Secured claim of Bank of Camilla. The claim
shall be settled and satisfied as follows:
* The Debtor will sell its interest in the 24th Ave. Property
to Doles Peanut Company, Inc., 4656 GA Hwy 313, Warwick, GA 31796
for the sum of $545,000.00 free and clear of all claims, liens,
encumbrances and interests with a closing date on or before June 4,
2022, unless the Bank of Camilla agrees to an extension of the
closing date. The lien of Bank of Camilla shall attach to the net
sales proceeds remaining after payment of the priority tax claims
of the City of Cordele and Crisp County Tax Commissioner and 2022
pro-rata ad-valorem taxes attributable to the 24th Ave Property.
* The Debtor will sell its interest in the Hwy. 300 Property
to Doles Peanut Company, Inc., 4656 GA Hwy 313, Warwick, GA 31796
for the sum of $105,000.00 free and clear of all claims, liens,
encumbrances and interests with a closing date on or before June 4,
2022, unless the Bank of Camilla agrees to an extension of the
closing date. The lien of Bank of Camilla shall attach to the net
sales proceeds remaining after payment of the priority tax claims
of the City of Cordele and Crisp County Tax Commissioner and 2022
pro-rata ad-valorem taxes attributable to the Hwy. 300 Property.
* The Debtor will sell its interest in the Machinery and
Equipment at 24th Ave. Property to Doles Peanut Company, Inc., 4656
GA Hwy 313, Warwick, GA 31796 for the sum of $110,000.00 free and
clear of all claims, liens, encumbrances and interests with a
closing date on or before June 4, 2022, unless the Bank of Camilla
agrees to an extension of the closing date. The lien of Bank of
Camilla shall attach to the net sales proceeds remaining after
payment of the priority tax claims of the City of Cordele and Crisp
County Tax Commissioner and 2022 pro-rata advalorem taxes
attributable to the Machinery and Equipment at 24th Ave Property.
* The Debtor will sell its interest in the 510 E. 11th Ave.
Property to Keith A. Christmas, 155 Fish Hatchery Road, Cordele, GA
31015 for the sum of $550,000.00 free and clear of all claims,
liens, encumbrances and interests with a closing date on or before
June 4, 2022, unless the Bank of Camilla agrees to an extension of
the closing date. The lien of Bank of Camilla shall attach to the
net sales proceeds remaining after payment of the priority tax
claims of the City of Cordele and Crisp County Tax Commissioner and
2022 pro-rata ad-valorem taxes attributable to the 24th Ave
Property.
Class 2 consists of Non-priority unsecured claims. Creditors
holding allowed Class 20 claims will be paid from the liquidation
of the Debtor's property and payment of allowed administrative
claims within 180 days after the Effective Date. The Debtor
estimates that Creditors holding allowed Class 20 claims will be
paid less than one cent on the dollar. The Debtor will liquidate
assets, if necessary, to make the payments proposed to Class 20
claims.
GFA Peanut Association shall retain its equity interest in the
Debtor.
All payments shall be made from the Debtor's future earnings, the
liquidation of its assets, or from loans, contributions or gifts to
the Debtor.
A full-text copy of the Subchapter V Plan dated April 4, 2022, is
available at https://bit.ly/38vNHs9 from PacerMonitor.com at no
charge.
Debtor's Counsel:
Robert M. Matson, Esq.
Akin, Webster And Matson, PC
544 Mulberry Street, Suite 400
P. O. Box 1773
Macon, GA 31202
Phone: (478) 742-1889
Email: rmatson@akin-webster.com
About GFA Peanut Company
GFA Peanut Company provides marketing and storage of peanuts and
peanut related products. The company is based in Camilla, Ga.
GFA Peanut Company filed its voluntary petition for relief under
Chapter 11 of the Bankruptcy Code (Bankr. M.D. Ga. Case No.
22-10003) on Jan. 3, 2022, listing as much as $10 million in both
assets and liabilities. Mike Roberts, chairman of GFA Peanut
Company, signed the petition.
Robert M. Matson, Esq., at Akin, Webster And Matson, PC serves as
the Debtor's legal counsel.
GULF COAST HEALTH: U.S. Trustee Objects to Litigation Releases
--------------------------------------------------------------
Vince Sullivan of Law360 reports that the Office of the United
States Trustee objected Friday, April 8, 2022, to the proposed
Chapter 11 plan of nursing home operator Gulf Coast Health Care
LLC, saying it includes nonconsensual releases of facility resident
litigation claims against nondebtor defendants.
In the objection, the U.S. Trustee said the releases would
extinguish personal injury and wrongful death claims lodged by
residents of the debtor's facilities against the debtor and other
nondebtor co-defendants, and Gulf Coast has not taken any steps to
receive consent from the claimants for the releases. The
litigation claimants are part of their own class of creditors under
the plan, with 167 members.
About Gulf Coast Health Care
Gulf Coast Health Care, LLC, is a licensed operator of 28 skilled
nursing facilities comprising nearly 3,350 licensed beds across
Florida, Georgia, and Mississippi. It provides short-term
rehabilitation, comprehensive post-acute skilled care, long-term
care, assisted living, and therapy services in each of its
facilities.
Gulf Coast Health Care and 61 affiliates sought Chapter 11
protection (Bankr. D. Del. Lead Case No. 21-11336) on Oct. 14,
2021. In the petition signed by Benjamin M. Jones as chief
restructuring officer, Gulf Coast Health Care listed up to $50
million in assets and up to $500 million in liabilities.
The cases are handled by Judge Karen B. Owens.
The Debtors tapped McDermott Will & Emery LLP and Ankura Consulting
Group LLC as legal counsel and restructuring advisor, respectively.
M. Benjamin Jones of Ankura serves as the Debtors' chief
restructuring officer. Epiq Corporate Restructuring, LLC, is the
claims, noticing, and administrative agent.
On Oct. 25, 2021, the U.S. Trustee for Region 3 appointed an
official committee of unsecured creditors in the Debtors' Chapter
11 cases. Greenberg Traurig, LLP, and FTI Consulting, Inc., serve
as the committee's legal counsel and financial advisor,
respectively.
The Debtor filed its proposed Chapter 11 plan and disclosure
statement on Oct. 28, 2021.
HAWAIIAN HOLDINGS: S&P Upgrades ICR to 'B-', Outlook Stable
-----------------------------------------------------------
S&P Global Ratings raised its ratings on Hawaiian Holdings Inc. to
'B-' from 'CCC+'.
S&P said, "At the same time, we raised our rating on the company's
2013-1 Class A enhanced equipment trust certificates (EETCs) to 'B'
from 'B-'. We also withdrew our rating on the company's Class B
EETCs since they were fully repaid in January 2022.
"The stable outlook reflects our expectation that Hawaiian's
operating performance will improve gradually through 2023,
supported by the continued strong demand for domestic travel."
Over the last few quarters, Hawaiian Airlines Inc. parent Hawaiian
Holdings Inc.'s operations have gradually recovered with the easing
of travel restrictions in the state of Hawaii.
S&P expects Hawaiian's operating performance in 2022 to benefit
from continued strong demand for domestic leisure travel. Over the
last two years, in addition to the overall impact of the steep
decline in global air travel stemming from the coronavirus,
Hawaiian also faced unique challenges given its focus on the Hawaii
market. Hawaii had among the most stringent COVID-19 travel
restrictions in the U.S. (including mandatory quarantines through
October 2020 and pre-travel testing requirement through May 2021),
which deterred visitors from traveling to the state. Beginning in
May 2021, the state started accepting proof of vaccination as an
alternative to pre-travel testing or quarantine, thus Hawaiian was
able to benefit from strong domestic demand (from the U.S.
mainland) during the summer of 2021. However, the resurgence of
COVID-19 cases due to the spread of the delta variant in the third
quarter of 2021 again had a severe impact on travel demand to
Hawaii, with the governor asking visitors to stay away from the
island amid high COVID-19 cases. Nevertheless, demand has since
recovered, despite a temporary setback in early 2022 due to the
spread of the omicron variant. Additionally, on March 25, 2022,
Hawaii lifted all restrictions for domestic passengers (no more
requirement to show proof of vaccination, test results, or
quarantine). Therefore, S&P now expects Hawaiian's operations in
2022 to benefit from continued favorable domestic leisure demand
trends, particularly in the summer.
That said, Hawaiian's international operations have remained
severely affected since 2020 by the impact of the COVID-19
pandemic. The company operated just 19% of its international
capacity in 2021. Hawaiian's international markets include Japan,
South Korea, Australia, and New Zealand, all of which had strict
travel and quarantine restrictions over the last two years. While
Hawaiian has recently restarted operations to some of these
countries, Japan, which is Hawaiian's largest international
destination, continues to have strict travel restrictions.
Therefore, S&P expects international demand to remain weak at least
through the first half of 2022, before recovering through the
second half of the year.
Interisland travel demand has also recovered, particularly in the
second half of 2021, since pretravel testing restrictions were
lifted. The company now operates about 70%-80% of its pre-pandemic
capacity in this segment. However, a return in interisland demand
close to 100% of pre-pandemic levels will be dependent on the pace
of the recovery of Hawaiian's international operations.
Hawaiian's credit measures will likely remain weak this year, then
improve somewhat in 2023. S&P said, "We expect Hawaiian's operating
performance in 2022 to be hindered by several cost factors,
including higher fuel and labor costs, as well as costs associated
with ramping up its international operations. However, like most
other U.S. airlines, we believe Hawaiian will likely recover most,
but not all, of the rise in jet fuel costs this year in the form of
higher fares given the strong demand environment, partly offset by
the impact of the slowing macroeconomic conditions. Nevertheless,
we expect higher nonfuel costs, including labor, will hurt the
company's EBITDA margins in 2022. We therefore forecast a sizable
pre-tax loss in 2022, close to 2021 levels (the company reported a
pre-tax loss of $185.3 million in 2021; however, this included
$320.6 million in federal Payroll Support Program (PSP) grants,
which is treated as an offset to operating expenses). As
international demand improves and some cost pressures ease, we
expect Hawaiian to report positive pre-tax income in 2023, but
still well below 2019 levels. We forecast funds from operations
(FFO) to debt in the mid-single-digit-percent area in 2022
(compared with 3.2% in 2021), improving to the 8%-12% range in
2023. We expect free operating cash flow (FOCF) to debt to remain
negative through 2023 (compared with positive 11.4% in 2021, when
FOCF to debt benefited from significant working capital inflows)."
Hawaiian's liquidity position remains adequate. In 2021, the
company raised $1.2 billion in senior secured notes backed by its
loyalty program and brand. Additionally, the second and third
rounds of federal payroll support also provided Hawaiian with about
$350 million of cash grants and unsecured loans. Therefore, the
company had $1.4 billion in cash and equivalents as of Dec. 31,
2021 (we exclude $300 million as the company has a covenant to
maintain at least $300 million under its revolver). Hawaiian's
current liquidity position is also supported by modest capital
spending requirements and debt repayment obligations in 2022. Due
to delivery delays from Boeing, Hawaiian is now likely to receive
its first two Boeing 787-9 aircraft in the first half of 2023
(compared with previous expectations of delivery in 2022). As a
result, capital spending requirements in 2022 are now estimated to
be about $105 million-$125 million.
Environmental, social, and governance (ESG) credit factors for this
change in credit rating/outlook and/or CreditWatch status:
-- Health and safety
S&P said, "The stable outlook reflects our expectation that
Hawaiian's operating performance will improve gradually through
2023, supported by continued strong demand for domestic travel. We
expect FFO to debt in the mid-single-digit-percent area in 2022,
improving to the low-teens-percent area in 2023. We expect FOCF to
debt to remain negative through 2023.
"We would expect to lower ratings over the next 12 months if we
came to believe the recovery would be more prolonged or weaker than
expected, or if Hawaii reintroduces stricter travel or quarantine
restrictions, resulting in a return to high cash flow burn. This
could eventually result in inadequate liquidity or a capital
structure that we would view as unsustainable in the long term.
"We could raise our ratings over the next 12 months if earnings and
cash flow improve such that we expect Hawaiian's FFO to debt will
improve to at least 12% on a sustained basis."
ESG credit indicators: To: E-3 S-4 G-2 From: E-3 S-5 G-2
Social factors are now a negative consideration (as compared to
S&P's previous assessment of very negative) in its credit rating
analysis. With its focus on traffic to and from Hawaii, Hawaiian's
performance was hit especially hard over the last two years due to
the decline in tourism. However, losses are now narrowing as parts
of the company's operations have stabilized. Domestic travel
volumes (from mainland U.S.) to Hawaii (which accounted for about
50% of revenues pre-pandemic) have improved over the past several
months and inter-island travel (25% of revenues pre-pandemic)
demand has also recovered somewhat. However, it will take some time
for demand for international travel to recover (25% of revenues
pre-pandemic).
Environmental factors remain a moderately negative consideration in
S&P's credit rating analysis of Hawaiian Holdings. Like other
airlines, Hawaiian faces long-term risk from tighter GHG emissions
regulation. Its average aircraft fleet age of 10-11 years
approximates the global average (11 years) but is younger than some
of the larger network carrier fleets.
HIGHLANDS SENIOR CITIZENS: Files for Chapter 11 Bankruptccy
-----------------------------------------------------------
The Highlands Senior Citizens Group, Jacumba, California, filed for
chapter 11 protection, without explaining a reason.
The Debtor's Chapter 11 Plan and Disclosure Statement are due Aug.
3, 2022.
According to court filing, The Highlands Senior Citizens Group
estimates between 1 and 49 unsecured creditors. The petition
states that funds will be available to Unsecured Creditors.
A telephonic meeting of creditors under 11 U.S.C. Sec. 341(a) is
slated for May 3, 2022, at 9:00 p.m. at Office of UST.
About The Highlands Senior Citizens
The Highlands Senior Citizens Group, doing business as Jacumba
Community Center, is a nonprofit organization that provides
services to senior citizens.
Highlands Senior Citizens Group, Jacumba, California, filed for
chapter 11 protection (Bankr. S.D. Cal. Case No. 22-00910) on April
5, 2022. In the petition filed by Greg A. Curran, as president,
The Highlands estimated assets between $1 million and $10 million
and liabilities between $0 and $50,000. Bruce R. Babcock, of Law
Office of Bruce R. Babcock, is the Debtor's counsel.
HILCORP ENERGY I: Moody's Rates New Senior Unsecured Notes 'Ba3'
----------------------------------------------------------------
Moody's Investors Service assigned a Ba3 rating to Hilcorp Energy
I, L.P.'s (HEI) proposed senior unsecured notes offering. In
conjunction with this issuance, HEI is merging Hilcorp North Slope,
LLC (HNS), which is currently a 100% owned unrestricted subsidiary
consisting of the majority of Alaskan assets acquired in June 2020
from BP p.l.c.'s (BP, A2 stable), into HEI and the restricted
group. Proceeds of the proposed offering, along with borrowings
under HEI's revolver and cash on hand, will be used to repay the
term loan ($1.17 billion outstanding amount) at HNS. Moody's views
this transaction as a credit positive. However, the Ba2 Corporate
Family Rating, the Ba2-PD Probability of Default Rating and stable
outlook remain unchanged at this time.
"Moody's views this transaction to be debt neutral as we evaluate
HEI, including its restricted and unrestricted groups, on a
consolidated basis," said Arvinder Saluja, Moody's Vice President.
"Nonetheless, merging HNS adds to the size, scale, and cash flow
generation of HEI's restricted group, and simplifies the capital
structure."
Assignments:
Issuer: Hilcorp Energy I, L.P.
Senior Unsecured Regular Bond/Debenture, Assigned Ba3 (LGD4)
LGD Adjustments:
Issuer: Hilcorp Energy I, L.P.
Senior Unsecured Regular Bond/Debenture, Adjusted to (LGD4) from
(LGD5)
RATINGS RATIONALE
The Ba3 rating on HEI's proposed and existing senior unsecured
notes reflects their subordinate position to the company's $1.2
billion secured borrowing base revolving credit's priority claim to
the company's assets. The size of the senior secured claims
relative to HEI's outstanding senior unsecured notes results in the
notes being rated one notch below the Ba2 CFR.
HEI's Ba2 CFR reflects its size and scale as well as its low-risk
production. The rating also takes into account the high cash calls
of future development costs for HEI, such as asset retirement
obligations. The acquisition of the BP's Alaskan upstream assets
added to HEI's debt levels but also materially expanded the scale
of HEI's production and reserves and should allow them to generate
ample free cash flow that will support debt reduction. The current
higher commodity price environment further supports improvement in
HEI's credit metrics.
The stable outlook reflects HEI's low risk exploitation strategy,
and Moody's expectation that the company will be able to generate
free cash flow for debt reduction.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
A rating upgrade could be considered if HEI reduces consolidated
debt to average daily production below $18,000 per Boe and
increases RCF to debt above 30%. Moody's would further expect that
HEI's future growth strategy not materially deviate from its
historic focus on the acquisition of mature, longer-lived assets
whose potential avail themselves to future exploitation upside. A
downgrade is possible should HEI's debt increase above $25,000 per
Boe of average daily production, should RCF to debt drop below 20%
or should debt levels further increase to fund acquisitions or
distributions.
Hilcorp Energy I, L.P. is a private limited partnership
headquartered in Houston, Texas. The company's primary producing
assets are located in Alaska, Texas, Louisiana and the Utica
Shale.
The principal methodology used in this rating was Independent
Exploration and Production published in August 2021.
HOLLY ENERGY: Fitch Assigns 'BB+' Rating to Proposed Unsec. Notes
-----------------------------------------------------------------
Fitch Ratings has assigned a 'BB+'/'RR4' rating to Holly Energy
Partners, L.P.'s (HEP) proposed senior unsecured notes offering.
These notes will rank pari passu with HEP's existing and future
senior unsecured notes. Proceeds from the notes are expected to be
used to partially repay borrowings under the revolving credit
facility. The notes will be co-issued by Holly Energy Finance
Corp.
Fitch currently rates HEP's Long-Term Issuer Default Rating (IDR)
'BB+' and the senior unsecured notes due 2028 'BB+'/'RR4'. The
Rating Outlook is Stable. HEP's rating is supported by the
partnership's modest leverage and fairly stable cash flows
underpinned by long-term minimum volume commitment (MVC) contracts,
predominantly with its sponsor and largest counterparty, HF
Sinclair Corporation (HF Sinclair; BBB-/Stable), the new parent
company.
Fitch recently equalized the IDR of HF Sinclair with HollyFrontier
Corporation (HFC; IDR BBB-/Stable), now a subsidiary of HF
Sinclair. Credit concerns include HEP's limited size/scale, lack of
customer diversity and geographic concentration.
KEY RATING DRIVERS
Sinclair Acquisition: Fitch views the transaction with Sinclair as
not leverage accretive in the near term and does not significantly
improve size/scale. In March 2022, HFC and HEP announced the close
of their respective acquisitions of assets from privately held
Sinclair companies, whereby HEP has acquired Sinclair
Transportation Company's crude and refined products pipeline and
terminal assets, together with interests in joint ventures. HEP
funded the acquisition with 21 million HEP units and $321.4 million
cash, inclusive of estimated working capital adjustments (funded
via revolver borrowings).
Sinclair's integrated network will help HEP gain additional scale
with increased connectivity to Guernsey as well as Casper
refineries, together with enhanced earnings, adding roughly $70
million-$80 million of annual EBITDA based on management estimates.
However, Fitch expects HEP EBITDA to remain below $500 million over
the forecast period.
Plans to Lower Leverage: HEP remains committed to its deleveraging
strategy, in Fitch's view. Leverage as of YE 2021 was 3.9x, in line
with Fitch's expectation. Fitch forecasts leverage to tick up by YE
2022 due to the anticipated closing of the Sinclair acquisition. YE
2022 leverage will include the full debt burden of this acquisition
with only a portion of the incremental EBITDA. Sustained expected
FCF generation is seen reducing leverage to below 4.0x in 2023,
barring any further acquisitions or increased capital spending.
Fitch continues to assume management's near-term focus is on
leverage reduction.
Cash Flow Assurances: HEP's revenues are nearly 100% fee-based,
insulating the partnership from commodity price risk and providing
stability to cash flows. The weighted average remaining contract
life is six years and there are contracts for about $32 million of
revenues up for renewal with HF Sinclair and $2 million with a
third party in 2022. Fitch expects these contracts to be renewed
for a majority of the expiring contract value.
Approximately 80% of the MVCs expire in 2024 or later. Importantly,
HEP received approximately 80% of its revenues from HF Sinclair and
Fitch notes that HEP's assets are integral to the refiner. Proforma
the Sinclair transaction, about 75% of go-forward revenues will be
underpinned by MVC's, consistent with the existing business
structure.
HF Sinclair Relationship Implications: Fitch recognizes that in the
past, HFC has been a reasonably supportive sponsor of HEP by
waiving incentive distribution rights. Following the consummation
of the Sinclair transaction, HFC has formed a new parent holding
company, HF Sinclair Corporation (HF Sinclair; 'BBB-'/ Stable),
which replaced HFC as a public company trading on NYSE commencing
March 15, 2022. Existing shares of HFC have converted on a
one-to-one basis into common shares of HF Sinclair. HEP will
continue to be consolidated into HF Sinclair's consolidated
financial statements.
From HEP's perspective, the new parent entity, HF Sinclair does not
change any of the current legal, operational and strategic
incentives between HEP and HFC, including lack of cross defaults or
guarantees between HFC and HEP's debt, HEP's separate financing
function, and a limited overlap between boards. Fitch continues to
view HEP's operational and strategic incentives as weak to
moderate. As its largest counterparty, the new parent will continue
to have credit implications for HEP.
HEP has an Environmental, Social and Governance (ESG) Relevance
Score of '4' for Group Structure due to somewhat complex group
structure. Group structure considerations have an elevated scope
for HEP given inter-family/related party transactions.
DERIVATION SUMMARY
HEP's rating reflects its modest leverage and strong cash flow
protections with approximately 74% of 2021 revenues from MVCs and
about 80% of its cash flows from its sponsor, HF Sinclair. The
rating also reflects the partnership's lack of customer
diversification, geographic concentration and limited size/scale.
The partnership is rated two notches above NuStar Energy LP
(BB-/Stable), which has significantly higher leverage. Fitch
expects NuStar to have YE 2022 leverage in the range of 5.4x-5.6x.
NuStar benefits from its larger size, with EBITDA being nearly
twice that of HEP, however, this consideration does not outweigh
NuStar's elevated leverage.
HEP is also rated two notches above Delek Logistics Partners, LP
(DKL; BB-/Negative). Like HEP, DKL's rating is supported by stable
cash flows from a sponsor that is also its largest counterparty,
Delek US Holdings Inc (DK; BB-/Negative). However, DK is rated
three notches below HEP's sponsor and largest counterparty HF
Sinclair. Fitch expects DKL's YE 2022 leverage to be approximately
3.3x. DKL's modest leverage is more than offset by its smaller
scale and exposure to a weaker counterparty, leading to the
two-notch separation between the IDRs.
MPLX LP (BBB/Stable) is rated two notches above HEP MPLX's
significant counterparty exposure is from its sponsor, Marathon
Petroleum Corporation (BBB/Stable). MPLX is also a very large MLP
with substantial asset diversity, geographic diversity and more
customer diversity than HEP. These factors provide MPLX with more
favorable access to capital markets even when capital markets have
proven to be difficult. These factors combined account for the
two-notch difference between the IDRs.
KEY ASSUMPTIONS
-- Fitch price deck;
-- The acquisition of Sinclair assets is complete in2022 and
funded by balance of debt and equity per management guidance;
-- No further acquisitions during the forecast period;
-- No share buybacks over the forecast period.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- An upgrade is not viewed as likely in the near-term. However,
Fitch may take positive rating action should HEP increase the
size/scale of its operations, including annual EBITDA
sustained at or above $500 million, and have leverage (defined
as total debt with equity credit to operating EBITDA) that is
expected to be sustained below 4.0x.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- As HEP's largest counterparty, a negative rating action at HF
Sinclair may negatively impact the rating at HEP. Should HF
Sinclair be downgraded by one notch, it is less likely to
impact HEP's rating but only if its credit profile looked
similar to current profile;
-- If leverage (as previously defined) was expected to be at or
above 4.5x on a sustained basis;
-- Material change to contractual arrangement or operating
practices with HF Sinclair that negatively impacts HEP's cash
flow or earnings profile;
-- Impairments to liquidity.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: As of Dec. 31, 2021, HEP had approximately $374
million in available liquidity. Cash on the balance sheet was $14
million, in addition to $360 million available under the $1.2
billion senior secured revolver. The revolver includes a $50
million sub-limit for letters of credit. As of Dec. 31, 2021, there
were no outstanding letters of credit. The revolver may be
increased by an additional $500 million, subject to lenders'
consent. The revolver is secured by substantially all HEP assets
and is guaranteed by material, wholly owned subsidiaries.
The revolver provides for three financial covenants: total leverage
ratio which cannot exceed 5.25x (or following certain acquisitions,
5.5x for two consecutive quarters), senior secured leverage cannot
exceed 3.75x (or following certain acquisitions, 4.0x) and the
minimum interest coverage ratio is 2.5x. As of Dec. 31, 2021, HEP
was in compliance with its covenants. Fitch expects HEP to remain
covenant compliant.
Debt Maturity Profile: HEP does not have maturities until 2025. The
revolver matures in July 2025. HEP also has $500 million senior
unsecured notes due 2028.
ISSUER PROFILE
HEP owns and operates crude and petroleum product pipelines,
storage tanks, distribution terminals and refinery processing units
that primarily support the refining and marketing operations of HF
Sinclair in Texas, New Mexico, Utah, Oklahoma, Nevada, Wyoming,
Kansas, Arizona, Idaho and Washington.
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch's calculation of adjusted EBITDA excludes equity in earnings
from unconsolidated affiliates and includes cash distributions from
those unconsolidated affiliates. A standard multiple of 8.0x is
applied to operating lease expense to derive lease equivalent debt.
Following HEP's adoption of ASC 842 for sales-type lease
accounting, adjustment has been/will be made to include
investment/interest income as normal recurring component of
operating income in the computation of adjusted EBITDA. Gain/loss
from such sales-type lease will be excluded for purposes of
adjusted EBITDA.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
HEP's rating and Outlook can be influenced by its sponsor and
largest counterparty, HF Sinclair.
ESG CONSIDERATIONS
Holly Energy Partners, L.P. has an ESG Relevance Score of '4' for
Group Structure due to somewhat complex group structure as a master
limited partnership where the general partner is owned by HF
Sinclair and has significant related party transactions, which has
a negative impact on the credit profile, and is relevant to the
rating[s] 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.
HOLLY ENERGY: Moody's Rates Proposed Senior Unsecured Notes 'Ba3'
-----------------------------------------------------------------
Moody's Investors Service assigned a Ba3 rating to Holly Energy
Partners, L.P.'s (HEP) proposed senior unsecured notes, and
upgraded its existing senior notes to Ba3 from B1. Moody's also
affirmed HEP's Ba2 Corporate Family Rating and Ba2-PD Probability
of Default Rating. The rating outlook and Speculative Grade
Liquidity Rating remain stable and SGL-3, respectively.
The proceeds from the new issuance are expected to be used to
partially repay borrowings under its revolver. The revolver
borrowings increased in March 2022 to fund the cash portion of
HEP's acquisition of Sinclair Transportation Company (Sinclair
Transportation, unrated). HEP funded the transaction with an equity
issuance of 21 million LP units and $321.4 million of cash. The
acquisition closed on March 14, 2022, and is expected to add
$70-$80 million to HEP's annual EBITDA.
Affirmations:
Issuer: Holly Energy Partners, L.P.
Corporate Family Rating, Affirmed Ba2
Probability of Default Rating, Affirmed Ba2-PD
Upgrades:
Issuer: Holly Energy Partners, L.P.
Senior Unsecured Regular Bond/Debenture, Upgraded to Ba3 (LGD5)
from B1 (LGD5)
Assignments:
Issuer: Holly Energy Partners, L.P.
Senior Unsecured Regular Bond/Debenture, Assigned Ba3 (LGD5)
Outlook Actions:
Issuer: Holly Energy Partners, L.P.
Outlook, Remains Stable
RATINGS RATIONALE
The upgrade of HEP's existing unsecured senior notes ratings and
the assignment of Ba3 rating to the new notes reflect Moody's
expectation of lower level of revolver usage and lower proportion
of secured debt in the capital structure going forward than in the
past. HEP's Ba3 rating on its senior unsecured notes reflects their
subordination to its $1.2 billion senior secured credit facility.
Because of the size of the priority claim and junior position of
the senior unsecured notes in the capital structure relative to the
senior secured credit facility, Moody's rates the notes one notch
below the Ba2 CFR.
HEP's Ba2 CFR reflects its stable cash flow from pipeline,
terminal, and tankage assets supported in large part by long-term
favorable take-or-pay contracts with HF Sinclair Corporation (HF
Sinclair, Baa3 stable) that have limited commodity risk. HF
Sinclair owns HEP's general partner interest and is its refining
parent. HEP has low growth capital spending requirements and modest
financial leverage that Moody's expect to remain about 4x through
2022. HEP's beneficial relationship with HF Sinclair has provided
favorable growth opportunities. The rating is restrained by HEP's
relatively modest scale of operations and its moderate geographic
diversification. HEP's rating also considers the growth and
distribution requirements inherent in the MLP business model, and
some execution risk in its growth capital projects that will bring
additional cash flow and improve diversification.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if HEP's size and scale continue to
increase such that EBITDA approaches $500 million, while
maintaining Debt/EBITDA around 4x and distribution coverage above
1.2x. The ratings could be downgraded if Debt/EBITDA is above 5x;
HEP's business profile becomes materially riskier through
acquisitions or growth capital projects; if contract coverage of
revenue declines; or if the distribution coverage falls below 1x. A
rating downgrade of HF Sinclair could also result in a downgrade of
HEP.
Headquartered in Dallas, Texas, Holly Energy Partners, L.P. is a
master limited partnership that was formed to acquire, own, and
operate substantially all of the crude oil and refined product
pipelines, terminals, and tankage assets of HF Sinclair
Corporation. HF Sinclair owns 47% of HEP though its limited partner
(LP) interest and non-economic general partner (GP) interest.
The principal methodology used in these ratings was Midstream
Energy published in February 2022.
INNOVATIVE BUILDING: Files Emergency Bid to Use Cash Collateral
---------------------------------------------------------------
Innovative Building and Remodeling asks the U.S. Bankruptcy Court
for the District of Idaho for authority to use cash collateral
consisting of proceeds of sales of inventory and related items on
an emergency and continuing basis.
The Debtor needs to access cash collateral to pay for the operation
and maintenance of the business during the Chapter 11 proceedings.
There are several creditors with security interests filed with the
Secretary of State but the Debtor disputes the claims. These
creditors are Corporation Service Company, BizFund, LLC, the U.S.
Small Business Administration, Retail Capital LLC dba Credibly,
Iruka Capital Group LLC, Western Equipment Finance, CT Corporation
System, and John Deere Construction.
The estimated fair market value, and the basis of the estimate, of
the collateral which allegedly secures the creditors' claims is
$138,730.
To the extent they assert a pre-petition lien in the Debtor's cash
collateral, the Debtor is willing to give the Listed Creditors
adequate protection. Specifically, the Listed Creditors will be
granted a post-petition lien, to the same extent and priority as
existed pre-petition, against the Debtor's post-petition cash
collateral.
A copy of the motion and the Debtor's budget is available at
https://bit.ly/3NP2qP4 from PacerMonitor.com.
The Debtor projects $51,146 in total monthly expenses.
About Innovative Building & Remodeling
Innovative Building & Remodeling is a family owned and operated
construction company in Meridian, Idaho, that specializes in custom
design and build projects.
The Debtor sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. D. Idaho Case No. 22-00071) on March 4,
2022. In the petition signed by Dustin Collins, managing member,
the Debtor disclosed $496,400 in assets and $1,218,331 in
liabilities.
Judge Noah G. Hillen oversees the case.
Luke Gordon, Esq., at Gordon, Delic and Associates is the Debtor's
counsel.
INTERMEDIA HOLDINGS: S&P Lowers ICR to 'B-' on Elevated Leverage
----------------------------------------------------------------
S&P Global Ratings lowered its issuer credit rating on U.S.-based
cloud communications and collaboration provider Intermedia Holdings
Inc. and its ratings on the company's first-lien term loan and
revolving credit facility (RCF) to 'B-' from 'B'.
S&P said, "At the same time, we removed all these ratings from
CreditWatch, where we placed them with positive implications on
March 25, 2021.
"The stable outlook reflects our expectation that Intermedia will
benefit from low-teens-percent revenue growth in 2022, helped by
investments in sales and other functions--including its NEC
partnership--to support organic growth, but with leverage still
elevated and FOCF remaining negative.
"The downgrade reflects our view that barring a successful IPO that
materially reduces outstanding debt, Intermedia will continue to
maintain significantly elevated leverage (well above 7x) and
negative FOCF in 2022. This is due to organic growth investments
since 2020, especially following its strategic partnership with NEC
Corp., which was announced in April 2020 and was recently extended
through at least April 2030. While we expect improved revenue
growth to drive a decrease in leverage to the mid-8x area in 2022
from a peak in the mid-10x area in 2021, this remains well above
the 7x area that we consider appropriate for a 'B' rating.
Furthermore, we expect FOCF of negative $10 million-$15 million due
to continued modest S&P Global Ratings-adjusted EBITDA margins of
just above 10% in 2022. (We adjust debt and EBITDA for operating
leases, contingent considerations, and stock-based compensation. In
addition, we expense capitalized software development costs, and we
do not net any surplus cash from our debt figures.)
"Revenue growth should benefit from more sales staff, product
investment, and the expansion of the NEC partnership globally. We
expect Intermedia's revenue to grow by well above 10% in 2022 and
2023, supported by new hires in its sales and customer success
teams over the last few years. This should help drive unified
communications as a service (UCaaS) product growth through new
partner recruitment and enablement. The company has also invested
in strengthening the scalability and integrations within its
product platforms, which has facilitated the launch and expansion
of its NEC partnership to well over 700 partners in eight countries
as of Sept. 30, 2021. These partners will sell Intermedia's UCaaS
solutions under the NEC brand. We expect that the increasing mix of
UCaaS revenues will also help steadily improve EBITDA margins over
time, assuming these gains are not fully reinvested. We expect that
the company's recent investments will also bolster growth and
EBITDA margins In 2023, which should improve credit metrics."
Liquidity should remain sufficient despite negative FOCF due to RCF
availability. Given Intermedia's negative FOCF generation and
modest cash balance of about $10 million, its total $52 million
RCF, which was recently extended to mature in October 2024, should
serve as an important near-term liquidity source.
S&P said, "The stable outlook reflects our expectation that
Intermedia will benefit from low-teens-percent revenue growth in
2022, helped by investments in sales and other functions to support
organic growth, including its NEC partnership. In addition to a
slight improvement in EBITDA margins from a more favorable product
mix and operating leverage gains, we expect leverage to improve to
a still-elevated mid-8x area and FOCF to remain negative."
S&P could lower the ratings if it viewed Intermedia's capital
structure as unsustainable, which could reflect:
-- Competitive or macroeconomic pressures or operational mishaps
leading to a significant slowdown in revenue growth;
-- Continued elevated spending on organic or inorganic growth
investments that have less-than-expected contributions to revenues
and long-term EBITDA margins; or
-- A sustained cash burn resulting in a materially weakened
liquidity position, such that S&P expects Intermedia to
continuously rely on external capital infusions.
S&P could raise the ratings if:
-- Intermedia maintained double-digit percent organic revenue
growth or improved EBITDA margins well above the mid-teens
percentage area such that S&P expects leverage to fall below 7x on
a sustainable basis and positive FOCF to debt above the
low-single-digit percent area; or
-- Intermedia successfully completes an IPO, resulting in a
reduced debt balance such that S&P expects the credit metrics above
to be maintained.
ESG credit indicators: E-2, S-2, G-3
INTERNATIONAL SUPPLY: Transfers to CEFCU, R. Hofmann Void
---------------------------------------------------------
Sheldon Stone, as trustee of the International Supply Co. Creditor
Trust, brought a complaint to avoid and recover prepetition
fraudulent transfers made to Citizens Equity First Credit Union
("CEFCU"). Because International Supply Co. was insolvent when it
made the transfers, not to satisfy its own debts, but rather for
the benefit of its controlling shareholder, the transfers will be
avoided and judgment will be entered in favor of the Trustee,
according to an opinion dated March 30, 2022, penned by Judge Mary
P. Gorman of the United States Bankruptcy Court for the Central
District of Illinois.
The Trustee commenced the proceeding by filing his 10-count
complaint against CEFCU, E. Lee Hofmann, and Rebecca Hofmann,
seeking to avoid transfers of money from ISCO to CEFCU and Rebecca
Hofmann made on behalf of Lee Hofmann. The complaint seeks relief
under the Bankruptcy Code and the Illinois Uniform Fraudulent
Transfer Act. In the alternative, the complaint seeks judgment
against the defendants for unjust enrichment and includes a count
seeking damages against the Hofmanns for breach of their fiduciary
duties to ISCO. Each of the defendants answered the complaint;
CEFCU also asserted a cross claim against Lee Hofmann for breach of
contract.
Lee Hofmann founded ISCO in 1983. At all relevant times, Mr.
Hofmann and his wife Rebecca Hofmann were Illinois residents and
officers, controlling shareholders, and paid employees of ISCO.2 In
addition to her roles with ISCO, Mrs. Hofmann was a manager of a
separate company, Games Management, LLC.
In September 2004, Games Management, LLC executed a note in favor
of CEFCU for a $2.7 million loan. At that time, Lee Hofmann
executed a commercial guaranty of the CEFCU Note, personally
guaranteeing payment. Thereafter, Games Management, LLC defaulted
on the CEFCU Note, triggering Lee Hofmann's liability. On January
19, 2011, CEFCU obtained a judgment in state court against Lee
Hofmann in the amount of $2,803,491.25 based on his default under
the guaranty. On March 18, 2011, a second state court judgment was
entered in favor of CEFCU and against Lee Hofmann in the amount of
$253,627.19.
As part of its effort to enforce or collect on the judgments
against Lee Hofmann, CEFCU served process and obtained citation
liens against Lee Hofmann's non-exempt personal property, including
his wages from ISCO. In an apparent attempt to avoid payment on the
Hofmann judgments, Lee Hofmann's salary from ISCO was diverted to
Rebecca Hofmann. Once the diversion was discovered, CEFCU obtained
a state court judgment against ISCO and Rebecca Hofmann, jointly
and severally, in the amount of $261,800 ("ISCO/Rebecca judgment").
The ISCO/Rebecca judgment expressly stated that any amounts
collected were to be applied toward the satisfaction of the
judgments against Lee Hofmann. The issue of attorney fees and costs
was reserved for determination at a later date; CEFCU now asserts
such fees and costs to have been at least $81,947.50.
While an appeal of the ISCO/Rebecca judgment was pending, CEFCU,
Lee Hofmann, Rebecca Hofmann, and ISCO entered into a global
settlement agreement. By the terms of the agreement, Lee Hofmann
agreed to pay CEFCU $2,010,000 on or before August 1, 2013, upon
receipt of which CEFCU would release all judgments and dismiss any
related proceedings against Lee Hofmann, Rebecca Hofmann, and ISCO.
The parties also agreed that the pending appeal of the ISCO/Rebecca
judgment would be dismissed. In addition, CEFCU agreed to abstain,
pending receipt of the settlement payment, from recording a deed to
property previously transferred to CEFCU from the Hofmann
Irrevocable Trust by court order. Payment was not timely made,
however, and CEFCU recorded the deed to the trust property. The
settlement was renegotiated and an amended settlement agreement,
dated August 2, 2013, was entered into increasing the amount to be
paid to CEFCU to $2,020,000, with $1,400,000 due immediately and
the balance of $620,000 due by August 15, 2013. If the balance owed
was not paid by August 15, 2013, CEFCU would retain the trust
property and apply any proceeds from the sale of the property to
satisfy the outstanding balance on the judgments.
On August 2, 2013, ISCO tendered a cashier's check to CEFCU for the
$1.4 million installment due from Lee Hofmann under the amended
settlement agreement. On August 16, 2013, ISCO transferred another
$320,000 from its savings account at Heartland Bank & Trust Company
("Heartland Bank") to the Games Management, LLC account at CEFCU,
which CEFCU, in turn, applied to the balance due under the amended
settlement agreement. The same day, Lee Hofmann and ISCO together
borrowed $300,000 from Morton Community Bank, which was distributed
directly to CEFCU as final payment due under the amended settlement
agreement. Upon receipt of the final $300,000 payment, CEFCU
released its judgments, dismissed the related proceedings, and
transferred the real estate property it was holding as security
back to the Hofmann Trust from which it came. The Hofmann Trust
recorded the deed on the real estate a week later and, eventually,
transferred the property by quitclaim deed to the Hofmanns.
On October 1, 2014, ISCO signed a promissory note in favor of
Heartland Bank in the amount of $3.75 million. The same day, the
Hofmanns signed a deed of trust in favor of Heartland Bank for the
real estate previously held by the Hofmann Trust and that deed of
trust was subsequently recorded. ISCO filed its bankruptcy petition
on September 24, 2015. And on August 1, 2016, Heartland Bank
released the deed of trust; the Hofmanns thereafter transferred the
trust property to a third party.
"Viewed in isolation, ISCO bore all the hallmarks of a successful
company. It was operationally profitable and showed potential for
significant growth. At one point it had sizeable assets compared to
its debts and was able to generate sufficient cash flows to meet
its demands. But that was only half of the story. Over time, ISCO
came to be used as the personal piggy bank of its controlling
shareholder Lee Hofmann," Judge Gormann writes in her Opinion.
The judge points out that in the years leading up to the events at
issue in this proceeding, Mr. Hofmann caused ISCO to liquidate the
company's assets to fund millions of dollars in distributions to
himself or others on his behalf. When there were no longer
sufficient assets to continue funding the shareholder
distributions, Mr. Hofmann caused ISCO to incur substantial amounts
of debt to provide him with needed cash. What resulted was an
otherwise profitable company that was no longer adequately
capitalized, unable to pay its debts, and unable to meet its own
operational demands without incurring additional debt that it could
not pay.
Despite its inability to meet its own obligations, ISCO continued
to funnel whatever cash it had to Mr. Hofmann to satisfy his
personal obligations and endeavors. The culmination of this
practice came when, despite being unable to cover $1 million of its
own input costs on a multi-million-dollar contract, ISCO paid CEFCU
$1.72 million and incurred liability on another $300,000 loan to
satisfy what were primarily Lee Hofmann's debts. And although ISCO
was able to stay afloat for some time due to its lender's
willingness to renew and extend the maturity of its existing loans
on an annual basis, the company was stretched so thin by the
siphoning of cash for Mr. Hofmann's benefit that it was only a
matter of time before it sought relief under the Bankruptcy Code.
"It is an unfortunate result for CEFCU to have the $1.72 million
transferred to it by ISCO on Mr. Hofmann's behalf avoided and to be
required to refund the sums to ISCO's bankruptcy estate. But the
result here is required by the law and evidence. Judgment for the
full $1.72 million plus prejudgment interest and costs will be
entered in favor of the Trustee and against CEFCU," Judge Gorman
finds.
A full-text copy of the Opinion is available at
https://tinyurl.com/2esrvp8r from Leagle.com.
The adversary proceeding is SHELDON STONE, not individually but
solely as trustee of the International Supply Co. Creditor Trust,
Plaintiff, v. CITIZENS EQUITY FIRST CREDIT UNION, Defendant, Adv.
No. 17-08049 (Bankr. C.D. Ill.).
About International Supply Co.
International Supply Co. commenced bankruptcy proceedings under
Chapter 11 of the U.S. Bankruptcy Code in Central District of
Illinois (Case No. 15-81467) on September 24, 2015.
The Debtor's primary line of business is integration services and
machinery for power generation systems throughout the country.
The Debtor has tapped Sumner Bourne, Esq., as its counsel. Judge
Thomas L. Perkins has been assigned the case.
The Office of the U.S. Trustee appointed six creditors to the
official committee of unsecured creditors. The committee is
represented by Goldstein & McClintock LLLP.
JAGUAR DISTRIBUTION: May 26 Plan Confirmation Hearing Set
---------------------------------------------------------
Jaguar Distribution Corp. filed with the U.S. Bankruptcy Court for
the Central District of California a motion for order approving
Disclosure Statement describing Chapter 11 Plan of Liquidation.
On April 4, 2022, Judge Martin R. Barash granted the motion and
ordered that:
* The Disclosure Statement as modified is approved.
* April 27, 2022 is the last date by which ballots accepting
or rejecting the Plan must be received by counsel for the Debtor.
* May 4, 2022, is the last date by which the Debtor must file
a Ballot summary, which shall include a tabulation of Ballots
received.
* May 4, 2022, is the last date by which the Debtor must file
and serve its confirmation brief/motion to confirm the Plan.
* May 11, 2022 is the last date by which any party objecting
to confirmation of the Plan must file and serve its objection.
* May 18, 2022 is the last date by which the Debtor must file
any reply memorandum and supporting declarations and evidence in
support of confirmation of the Plan.
* May 26, 2022, at 10:00 a.m. is the hearing on the
confirmation of the Plan.
A full-text copy of the order dated April 4, 2022, is available at
https://bit.ly/3LQNE8H from PacerMonitor.com at no charge.
Attorneys for the Debtor:
John N. Tedford, IV, Esq.
Zev Shechtman, Esq.
Aaron E. De Leest, Esq.
DANNING, GILL, ISRAEL & KRASNOFF, LLP
1901 Avenue of the Stars, Suite 450
Los Angeles, California 90067-6006
Telephone: (310) 277-0077
Facsimile: (310) 277-5735
E-mail: jtedford@DanningGill.com
zs@DanningGill.com
adeleest@DanningGill.com
About Jaguar Distribution Corp.
Established in 1982, Jaguar Distribution Corp. --
http://www.jaguardc.com/-- is a distributor of independent films
to the worldwide in-flight marketplace.
Jaguar Distribution sought protection under Chapter 11 of the
Bankruptcy Code (Bankr. C.D. Cal. Case No. 20-11358) on July 31,
2020. In its petition, the Debtor disclosed total assets of
$1,768,195 and total liabilities of $9,018,419. James Wong, chief
restructuring officer, signed the petition.
Judge Martin R. Barash oversees the case.
Danning, Gill, Israel & Krasnoff, LLP and Greg Seigel, CPA serve as
the Debtor's legal counsel and accountant, respectively.
The U.S. Trustee for Region 16 appointed an official committee of
unsecured creditors on Aug. 21, 2020. The committee is represented
by SulmeyerKupetz, A Professional Corporation.
JETBLUE AIRWAYS: Fitch Affirms 'BB-' IDR & Alters Outlook to Neg.
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Fitch Ratings has revised JetBlue Airways Corporation's Outlook to
Negative from Stable. In addition, Fitch has affirmed JetBlue's
Long-Term Issuer Default Rating at 'BB-'.
The Outlook revision follow JetBlue's announcement that it has made
an unsolicited bid to purchase Spirit for $3.6 billion in an
all-cash transaction. The Negative Outlook is driven by a
confluence of factors, including additional debt to be raised to
fund the transaction, integration related risks, and the
uncertainty in the current operating environment as it relates to
the recovery in air traffic and volatility in fuel prices.
Should the transaction close, negative rating actions would likely
be limited to a one-notch downgrade given the relative balance
sheet strength of both companies and Fitch's positive view of the
strength of the merger. Fitch may also maintain the ratings at
'BB-' as more details of the transaction, including funding and
potential synergies, become clearer and if the operating
environment were to improve. Should the offer be rejected or
otherwise fall through, Fitch will review the Outlook, but may
maintain it at Negative on concerns around fuel and the broader
macroeconomic environment.
KEY RATING DRIVERS
Combined JetBlue/Spirit Creates Sizeable Competitor: The potential
combination of JetBlue and Spirit would create a sizeable
competitor that is better positioned to compete with the legacy
carriers. Based on 2019 available seat miles, the combined
companies would be around two thirds the size of Southwest
Airlines. This would push JetBlue solidly into fifth place in terms
of total airline size in the U.S., well ahead of Alaska Airlines.
The combined scale and ability to increase density in key markets,
including various Florida destinations and legacy hubs, along with
JetBlue's relative cost structure to the legacy airlines will make
the airline a formidable competitor.
Following the acquisition, the combined companies would operate a
fleet of 387 Airbus A320 family aircraft. The company estimates
that the acquisition will allow revenues to grow in the low double
digit range annually, compared to its estimates of mid-to-high
single digit growth on a standalone basis .
Synergies and Fleet Commonality: JetBlue and Spirit both are both
Airbus operators, creating clear synergies if the two carriers were
to merge. Fleet simplicity allows for savings on items like
sparing, procurement, crew flexibility etc., all of which helps to
maintain a unit cost advantage to competition. Fitch expects some
revenue synergies to be readily achievable, particularly once
JetBlue begins to migrate Spirit's fleet to its current passenger
layout, creating more opportunities for premium fares.
However, dis-synergies are a concern. JetBlue plans to reconfigure
Spirit's aircraft to current JetBlue layouts, which will reduce the
density of those aircraft creating a unit cost headwind. The change
to Spirit's underlying unit cost structure takes away part of
Spirit's competitive advantage, which is its ability to compete
aggressively on price and target price sensitive travelers. JetBlue
has stated that the combined companies will operate with a unit
cost structure in line with pre-acquisition JetBlue, which, while
higher than Spirit's ultra-low cost structure, maintains an
advantage to legacy carriers.
Regulatory Hurdles: Regulatory approval for the transaction is
uncertain as the current administration has taken a tougher stance
on consolidating transactions. The Department of Justice (DOJ) is
already suing to block JetBlue's Northeast Alliance with American
Airlines, claiming that the partnership is anticompetitive. JetBlue
argues that the Spirit acquisition creates a meaningful competitor
to the legacy carriers which will be more effective in reducing
total fares compared to a merger of smaller low-cost carriers.
While Fitch believes that JetBlue's arguments have merit, there is
a concern that the transaction will be viewed as a higher-fare
airline eliminating a lower-fare competitor. In the event that the
DOJ blocks the transaction, JetBlue may be required to pay Spirit a
break-up fee. The size of the potential fee has not yet been
determined.
Integration a Concern in the Current Environment: The Negative
Outlook is partly driven by the additional risks presented with
integrating two airlines in the midst of an uncertain operating
environment. The traffic recovery coming out of COVID looks to be
robust, but uncertainties remain around the potential for future
variants and the pace of business and international recovery.
Additionally, the Ukraine/Russia conflict has spurred materially
higher fuel prices and increased the possibility of broader impacts
on the economy.
Should higher fuel prices persist and/or demand recovery slow, the
combined companies could be in a position where acquisition related
debt pressures credit metrics for a longer than expected period.
JetBlue estimates that it's post-merger net debt/EBITDAR will be
around 3x and will decline thereafter. Fitch's estimates are
conservative to management's figures, but precise estimates are
difficult given the current lack of detail around financing plans.
JetBlue's Financial Strength Limits Downside: While JetBlue's gross
debt balance at YE 2021 is roughly double where it was at YE 2019,
it's net debt balance is flat. JetBlue also maintains a sizeable
liquidity balance of more than $3.4 billion, and estimates that it
holds in excess of $9 billion of unencumbered assets. JetBlue went
in to the COVID downturn with a strong balance sheet, and has a
track record of managing towards solid financial flexibility as
reflected in its pre-pandemic rating of 'BB+'. While the size of
the merger-related debt raise remains unknown, Fitch does not
consider the purchase price to be unmanageable in the context of
JetBlue's overall financial flexibility.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to an
Outlook Stabilization:
-- Consummation of the Spirit acquisition in a credit conscious
manner;
-- Increasing evidence of a stabilizing operating environment
including a continued rebound in traffic, and increasing
visibility on the impact of crude oil prices on margins and
cash flow;
-- Demonstrated ability to manage RASM ahead of CASM leading
EBITDAR margins to the upper teens or higher.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- EBIT margins remaining in high single digits;
-- Adjusted debt/EBITDAR sustained below 3.75x;
-- FFO Fixed charge coverage remaining above 3.0x.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Completion of the acquisition in manner leading credit metrics
to remain outside levels commensurate with the current rating;
-- Sustained adjusted debt/EBITDAR above 4.75x;
-- FFO fixed charge coverage falling below 2.5x on a sustained
basis;
-- EBIT margins in the low single digits.
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.
ISSUER PROFILE
JetBlue is a low-cost carrier that serves nearly 100 destinations
throughout the U.S., Caribbean, and Latin America. The company has
focus cities in Boston, NYC-JFK, Fort Lauderdale, Orlando, and San
Juan and is the sixth largest carrier in the U.S. by revenues and
available seat miles.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
KAISER ALUMINUM: Fitch Affirms 'BB' IDR & Alters Outlook to Stable
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Fitch Ratings has affirmed Kaiser Aluminum Corporation's Long-Term
Issuer Default Rating (IDR) at 'BB'. Fitch has also affirmed
Kaiser's ABL at 'BBB-'/'RR1' and unsecured notes at 'BB'/'RR4'. The
Rating Outlook has been revised to Stable from Positive.
The Outlook revision to Stable reflects slower aerospace and margin
recovery resulting from inflationary costs, supply chain
disruptions and labor inefficiencies. The Stable Outlook also
reflects Fitch's expectation that total debt/EBITDA (6.3x as of
Dec. 31, 2021), will steadily decline but remain above 3.0x over
the ratings horizon.
Kaiser's ratings reflect its solid business model, including its
focus on products with demanding applications and higher barriers
to entry. The ratings also reflect the company's ability to pass
through metal prices to customers for the majority of its products,
partially offset by its exposure to cyclical end markets and
customer concentration.
KEY RATING DRIVERS
Near-Term Elevated Leverage: Fitch expects total debt/EBITDA to
steadily decline from 6.3x as of Dec. 30, 2021 over the next few
years as the aerospace end market recovers. Fitch also expects
EBITDA margins to improve as cost pressures ease, but remain above
3.0x over the ratings horizon. Kaiser's strategy is to maintain
conservative financial leverage and targets net leverage below 2.0x
through the cycle. The company currently targets achieving its net
leverage target by the end of 2023. Total debt/EBITDA has on
average been around 2.0x in the three years prior to the pandemic
in 2020 despite highly volatile aluminum prices and Kaiser's
exposure to cyclical end markets.
Pressured Margins: Fitch-calculated EBITDA margins averaged around
6.3% in 2021 compared with EBITDA margins of around 13.7% on
average over the past four years. Recent EBITDA margin pressures
were driven by constraints on labor availability, rapidly rising
material and inflationary costs and supply chain challenges.
Depressed margins in 2021 drove EBITDA generation significantly
lower than expected leading to elevated leverage. Fitch expects
cost pressures will ease beginning in 2022, and margins will
recover over the next few years.
Warrick Acquisition Credit Positive: Fitch views Kaiser's
acquisition of Alcoa Warrick LLC for $670 million positively, as
Kaiser financed the transaction with cash on hand, preserving its
financial profile while increasing sales and earnings.
Additionally, Fitch views the gained exposure to the stable,
non-cyclical packaging end market positively, as it partially
offsets Kaiser's exposure to cyclical end markets.
Packaging accounted for approximately 41% of 2021 sales. In
connection with the acquisition, Kaiser took on some pension and
OPEB obligations for existing employees but not retirees. The
pension service cost is manageable at around $6 million per year,
and liabilities are around $93 million as of Dec. 31, 2021.
Aerospace/Auto Improving: Commercial airlines and automotive
production were significantly negatively impacted by the pandemic
in 2020. Automotive demand has shown a faster than initially
anticipated recovery in 2021, with Kaiser's auto shipments reaching
around 2019 levels, although supply chain disruptions are delaying
a full recovery. Aerospace shipments continue to remain weak in
2021, down 41% compared with 2019 pre-pandemic levels.
Fitch expects the recovery for the commercial airlines industry
will take longer than for auto, with Kaiser not expecting a full
aerospace recovery to 2019-levels until 2023/2024. Fitch believes
automotive shipments could see modest growth in 2022 compared to
2019 levels. Longer term, Fitch believes the aerospace and
automotive industries show significant growth opportunities driven
by increasing aluminum content from the light-weighting of
vehicles, and generally increasing global travel demand over the
past 15 years prior to the 737MAX issues and the pandemic in 2019
and 2020, respectively.
Capital Spending Expectations Manageable: Kaiser has planned for a
$225 million investment to expand its Trentwood facility in order
to support the recovery in aerospace and for general engineering
plate demand. Fitch believes Kaiser's capital spending timing for
the Trentwood project is flexible, with a restart of spending
expected in line with a recovery in aerospace demand.
In addition, the company is planning a $150 million new roll coat
line at its Warrick facility, expected to be complete by 2024, to
meet growing demand for higher margin coated products in the food
and beverage can markets. This is in addition to $25 million in
other investments to support the automotive market and general
engineering long products demand. Capex associated with these
projects should occur over the next few years, and be supported by
a combination of cash on hand and FCF.
Solid Business Model: Kaiser focuses on products with demanding
applications and higher barriers to entry, which tend to command a
premium and differentiates its product mix from competitors.
Kaiser's EBITDA margins tend to fluctuate much less than aluminum
prices as a result of the company's ability to pass though the
majority of metal prices on to customers, and its use of hedges to
mitigate most of the remaining price risk.
Customer Concentration Credit Neutral: Kaiser's end market exposure
includes aerospace, general engineering and auto, which accounted
for 20%, 27% and 9% of 2021 net sales, respectively. Fitch views
Kaiser's significant exposure to the stable packaging market, long
customer relationships and exposure to industries with solid
longer-term growth prospects as partially offsetting customer
concentration risk. Kaiser has significant customer concentration
as Reliance Steel & Aluminum Co. (BBB+/Stable) and Silgan
(BB+/Stable), its two largest customers, represented a combined 31%
of sales in 2021.
DERIVATION SUMMARY
Kaiser is smaller and has weaker projected leverage metrics
compared with leading global rolled aluminum sheet producer Arconic
Corporation (BB+/Stable), although Arconic has weaker margins and
meaningful pension obligations. Kaiser has similar end market
diversification compared with Arconic and is more diversified by
end market than global engineering products provider Howmet
Aerospace Inc. (BBB-/Stable). However, Howmet is significantly
larger, has higher EBITDA margins and has more favorable projected
leverage metrics.
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for the issuer
include:
-- Packaging shipments grow roughly 5% per year;
-- Slow recovery in aerospace shipments in 2022 and 2023, not
recovering to near-2019 levels until in 2024;
-- Automotive shipments improve moderately in 2022, and roughly
1% growth per year thereafter;
-- Aluminum prices of $2,950/tonne in 2022, $2,600/tonne in 2023,
$2,500/tonne in 2024 and $2,250/tonne in 2025;
-- Dividends remain at current level;
-- No acquisitions and no share repurchases through the forecast
period.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Total debt/EBITDA sustained below 3.0x;
-- EBIT margins sustained above 8% reflective of improved market
conditions.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Total debt/EBITDA sustained above 4.0x;
-- EBIT margins expected to be sustained below 7%;
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Strong Liquidity: As of Dec. 31, 2021, cash and cash equivalents
were $303 million and availability was $367 million under the $375
million ABL due 2024 ($8 million utilized for LOCs, no borrowing).
The ABL is subject to a borrowing base ($375 million at Dec. 31,
2021) and a 1.0x fixed charge coverage covenant if excess
availability is less than the greater of (i) 10% of the Line Cap
(minimum of $375 million and borrowing base) and (ii) $30 million.
ISSUER PROFILE
Kaiser Aluminum Corporation manufactures and sells semi-fabricated
specialty aluminum mill products for the following end market
applications: aerospace and high strength; packaging; automotive;
general engineering; and other industrial applications.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
KDR SUPPLY: Files Emergency Bid to Use Cash Collateral
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KDR Supply, Inc. asks the U.S. Bankruptcy Court for the Eastern
District of Texas, Beaumont Division, for authority to use cash
collateral and provide adequate protection for the period from
April 6 through April 27, 2022.
KDR requires the emergency use of cash collateral in the amount of
$209,960 for the next 21 days to meet payroll and expenses to
continue its business operations. The majority of these funds are
for payroll, payroll taxes and benefits, insurance, sales tax and
continuing expenses. The anticipated income for this period is
$260,000.
In addition, the Debtor requires the use of cash collateral on a
monthly basis.
The Debtor was in the business of selling oilfield equipment and
supplies from its inception in 1993. From its incorporation to the
present, the Debtor has been the subject of several routine sales
tax audits that resulted in no additional taxes assessed except for
the audit for the period from 2007 to 2011.
In 2011, the Texas State Comptroller performed a new sales tax
audit for the period August 1, 2007 through June 30, 2011 that,
with continuations, lasted over 10 years. On May 6, 2021, the State
Office of Administrative Hearings convened a hearing via Zoom which
closed on June 2, 2021. Two days later, the State Office of
Administrative Hearings entered its Proposal for Decision against
the Debtor, Dana L. Fisher and Rocky Fisher. In the Decision, the
Administrative Law Judge assessed taxes, late penalty, additional
penalty, and interest against the Debtor and personal liability
against Dana L. Fisher and Rocky Fisher for the total amount of the
Assessment.
On December 10, 2021, the Texas State Comptroller issued a Texas
Statement of Account for Limited Sales, Excise, and Use Tax thereby
assessing taxes, penalties and interest against the Debtor, Dana L.
Fisher and Rocky Fisher.
As of December 10, 2021, the Debtor's total obligation to the Texas
State Comptroller is $4,659,361. As of March 31, 2022, the total
indebtedness to the Texas State Comptroller was reported as:
Tax Due $1,924,884
Penalty $1,675,938, and
Interest $1,073,797
On May 29, 2020, the Debtor received a Small Business
Administration Loan for $150,000. The SBA Loan is payable in equal
monthly installments of $731 per month beginning on May 29, 2021,
for a period of 30 years with interest at the rate of 3.75%. The
SBA Loan is secured by a "Blanket Lien" on all of the Debtor's
Assets.
As adequate protection for the use of cash collateral, the Debtor
will agree, with Court approval, to grant replacement liens to the
Texas Comptroller and the SBA equal to those held pre-petition.
This agreement does not foreclose the Debtor from objecting to the
validity of the Texas Comptroller's lien. The security interests
granted to the Texas Comptroller and the SBA post-petition will not
have priority over (a) prior perfected and unavoidable liens and
security interest in the property of the Debtor's estate as of the
Petition Date other than their liens in the PrePetition Collateral,
provided that such liens and security interest are prior to other
prepetition liens and security interests, valid, perfected, not
adequately protected, and non-avoidable in accordance with
applicable law; (b) the quarterly fees payable to the United States
Trustee pursuant to 28 U.S.C. section 1930; and, (c) the carve-out
for attorney's fees.
A copy of the motion is available at https://bit.ly/3JsKKFO from
PacerMonitor.com.
About KDR Supply, Inc.
KDR Supply, Inc. was founded in 1981 to support the local oilfield
service industry. KDR Supply offers, subsurface pumps, industrial
supplies, oilfield supplies, pumps, and tools.
KDR Supply sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. E.D. Tex. Case No. 22-10115) on April 6,
2022. In the petition signed by Rocky Fisher, president, the Debtor
disclosed $2,668,765 in total assets and $6,793,314 in total
liabilities.
Julie M. Koenig, Esq., at Cooper and Scully, PC is the Debtor's
counsel.
KNOWLTON DEVELOPMENT: Fitch Affirms 'B-' LT IDRs, Outlook Stable
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Fitch Ratings affirmed Knowlton Development Corporation, Inc.'s
(KDC), KDC US Holdings, Inc. and kdc/one Development Corporation,
Inc.'s Long-Term Issuer Default Ratings (IDRs) at 'B-' following
KDC's announced acquisition of Aerofil, a leader in aerosol and
liquids manufacturing solutions as well as the strategic investment
in the company by KKR. Fitch has upgraded the rating on KDC's
secured credit facility from 'B-'/'RR4' to 'B'/'RR3'.
KDC's rating considers its status as a global leader in custom
formulation, packaging and manufacturing solutions for beauty,
personal care and home care brands, supported by a diverse product
portfolio and customer base, ranging from blue-chip names to
"indie" brands. While the recent strategic investment by KKR
affords the company significant financial flexibility in the near
term, the ratings are constrained by KDC's highly acquisitive
strategy and potential for debt-financed shareholder returns, which
Fitch expects could result in debt/EBITDA trending in the 7.0x
range over time, up from around 6.0x pro forma for the KKR
investment.
KEY RATING DRIVERS
Acquisitions and Business Investment Drive Elevated Leverage: KDC
has acquired over a dozen companies over the last five years with
six acquisitions completed since 2019. Fitch expects KDC to
continue its acquisitive strategy, which could result in leverage
maintaining around the 7.0x area, up from around 6.0x today. The
recently announced Aerofil acquisition is in line with KDC's
disciplined acquisition strategy; it adds to KDC's aerosol and
liquid filling capabilities, complements KDC's portfolio of
customers and adds significant technical expertise. Going forward,
Fitch anticipates the company will continue to pursue bolt-on
acquisitions to grow its capabilities that support cross-selling
and synergy opportunities for the business.
KDC sharply increased capex in fiscal 2021 (ending April 2021),
continuing into fiscal 2022, in order to support the company's
organic growth initiatives and new contract wins. The elevated
capex resulted in negative FCF of around $50 million in fiscal 2021
and Fitch expects slightly greater cash burn in fiscal 2022. Fitch
expects a return to positive FCF in fiscal 2023 as growth capex
tapers off though this could be delayed if there are new mandates
requiring additional investment.
KDC launched an IPO in September 2021 with a goal to deleverage its
balance sheet, though the company subsequently withdrew from the
process citing market volatility. Should the company revisit the
process and use the funds towards permanent debt reduction, KDC's
leverage profile and financial flexibility could improve
meaningfully.
Defensible Competitive Advantage: KDC is one of the largest players
in the market for outsourced custom formulation, packaging and
manufacturing solutions for beauty, personal care and home care
brands following its acquisitions in early 2020 with fiscal 2021
revenue of over $2 billion. KDC's business model of partnering with
its customers to create innovative products and rapidly bringing
them to market creates deeply entrenched relationships. Significant
investment in R&D and technology and a breadth of product expertise
that enables KDC to provide global turnkey solutions solidify its
competitive advantage.
KDC has expanded from operating a single factory in Canada in 2002
to operating 27 manufacturing facilities worldwide. Within the
beauty and personal care segment, the company's customers range
from indie brands to giants in consumer-packaged goods, providing a
natural hedge to rapidly changing industry dynamics. KDC also
covers a wide range of products, such as personal care, skincare,
cosmetics, deodorants, soaps, sanitizers, fragrances and hair
care.
The company's acquisitions in early 2020 provide critical mass to
its home care segment while also diversifying its portfolio.
Customer concentration is moderate; in fiscal 2021 the company's
top two customers represented 20.3% and 14.4% of sales with the
company serving over 700 customers worldwide across over 1,000
brands.
Stable End Markets: KDC benefits from operating in end markets
where demand is relatively stable, even during recessionary
conditions. Fitch estimates that personal care sales remained flat
to positive during the global financial crisis as the sector
benefits from low price points and due to the fact that health and
beauty products are often everyday use, consumable items. The
company's flexible manufacturing base allows it to redirect
capacity from segments of weak demand to areas of strength.
The impact of the coronavirus on the company's sales has been
mixed, with demand for personal care and home care products
increasing and demand for "non-essential" products, particularly
color cosmetics, down sharply. The net result for fiscal 2021 was
5.5% organic revenue growth for KDC yoy. These trends may continue
in the near term despite the rollout of vaccines as lingering
caution among consumers results in higher demand for personal care
and home care products. Over the medium term, Fitch expects demand
patterns for the company's products to return to normal,
contributing to a mid-single-digit long-term organic growth rate.
Acquisitive Strategy Supports Growth: KDC's acquisition strategy
supplements organic growth by adding capabilities in adjacent new
markets to enable the company to capitalize on cross-selling
opportunities in its customer base, which helps KDC to grow its
wallet share. The company's M&A activity focuses on companies with
additive technologies, new geographies, strong customer bases and
attractive growth, margin and FCF profiles.
The acquisitions in 2020 were sizable, more than doubling the
EBITDA of the company. Equity contributions from the sponsor,
including the most recent strategic investment by KKR have helped
mitigate the impact on leverage.
Parent Subsidiary Linkage: Fitch's analysis includes a weak
parent/strong subsidiary approach between the parent and its
subsidiaries kdc/one Development Corp. Inc. and KDC US Holdings,
Inc. Fitch assesses the quality of the overall linkages as high
which results in an equalization of IDRs across the corporate
structure.
DERIVATION SUMMARY
KDC's Issuer Default Rating (IDR) of 'B-' considers KDC's status as
a global leader in custom formulation, packaging and manufacturing
solutions for beauty, personal care and home care brands, supported
by a diverse product portfolio and 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, including the recent
Aerofil acquisition, and investment in R&D will enable the company
to sustain modest organic revenue growth over the long term. While
the recent strategic investment by KKR affords the company
significant financial flexibility in the near term, the ratings are
constrained by KDC's highly acquisitive strategy, which Fitch
expects could result in debt/EBITDA trending in the 7.0x range over
time, up from around 6.0x today proforma for the KKR investment.
KDC IDR is below those of ACCO Brands Corporation (BB/Stable) and
Central Garden & Pet Company (BB/Stable). ACCO's 'BB'/Stable rating
reflects the company's good position in the global office and
business products industry. The ratings are constrained by secular
challenges in the office products industry in North America, Europe
and Australia.
The company has taken steps over the last few years to manage costs
given pressures on U.S. organic growth and has executed well on
diversifying its customer base toward higher-growth, higher-margin
channels in North America as well as acquisitions in
better-performing categories and international markets. The rating
also reflects ACCO's good balance sheet management, which has led
to gross leverage trending around 3.0x over time.
Central Garden & Pet Company's 'BB'/Stable rating reflects the
company's diversified portfolio of products across the pet and lawn
and garden segments with market leading brands and a commitment to
maintain leverage (debt/EBITDA) between 3.0 and 3.5x offset by
limited scale with EBITDA in the $300 million range. The rating
incorporates expectations of modest organic revenue growth over the
long term supplemented by acquisitions, with EBITDA margins in the
10% range and positive FCF in the $100 million to $200 million
range annually.
KEY ASSUMPTIONS
-- Following a near doubling of revenue in fiscal 2021 to $2.1
billion, organic revenue growth moderates to around 15% in
fiscal 2022 benefiting from new business wins, price increases
and a normalization in sales of certain categories negatively
impacted by the pandemic. Organic revenue moderates to the
low-to-mid single digits thereafter;
-- Fitch-calculated EBITDA margins improve in fiscal 2022, due to
synergy capture from acquisitions, the dissipation of
pandemic-related costs, and fixed cost leveraging from new
business wins. EBITDA in 2023 and beyond grows in line with
revenues;
-- Elevated capex in fiscal 2022 results in negative FCF. FCF
turns positive in fiscal 2023 as growth capex needs moderate;
-- Fitch anticipates further debt-funded acquisitions and/or
dividends may result in leverage remaining around the 7.0x
range over the forecast period, up from around 6.0x today
proforma for the KKR investment, but improved from the high-8x
area at the end of fiscal 2021.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- A positive rating action would be considered if KDC's
operating trajectory meets Fitch's expectations, with business
investments leading to strong EBITDA growth resulting in a
return to sustained positive FCF along with a commitment to or
demonstrated record of maintaining debt/EBITDA under 7.0x.
Factor 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 increased capex lead to
continued negative FCF beyond fiscal 2022, or an acceleration
of the company's acquisition strategy or any debt-financed
transaction such as special shareholder distributions results
in sustained debt/EBITDA over 8.0x, leading to concerns around
the viability of the company's capital structure.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
KKR Equity Investment Boosts Liquidity: Between cash on hand and
revolver availability, Fitch views KDC's liquidity as ample,
proforma for the recently announced equity investment by KKR.
As of Jan. 31, 2021, the company had $1,520 billion of term loan
outstanding split between USD ($904.8 million) and EUR tranches
($615.7 million).
The revolver, which comes due in December 2023, is KDC's first
maturity 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.
The recovery analysis assumes that KDC would be reorganized as a
going-concern in bankruptcy rather than liquidated. Fitch assumes a
material loss in customers or significant integration issues result
in a loss of EBITDA around 25%.
Fitch applies a 6.0x enterprise value/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, packaging 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 (kdc/one Development Corporation, Inc and KDC US
Holdings, Inc.) and the guarantors (material direct and indirect
wholly-owned U.S. subsidiaries).
ISSUER PROFILE
KDC is a global leader in custom formulation and manufacturing
solutions for beauty, personal care and home care brands. It
provides services from product ideation and formulation to design,
packaging and manufacturing. KDC serves over 700 customers globally
across over 1,000 brands.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
KNOX CLINIC: Continued Operations to Fund Plan Payments
-------------------------------------------------------
Knox Clinic Corporation filed with the U.S. Bankruptcy Court for
the Eastern District of Michigan a Small Business Subchapter V Plan
of Reorganization dated April 4, 2022.
Debtor owns and operates a medical clinic that prepetition provided
telehealth services and medical related services, and operated a
brick and mortar clinic in Illinois.
Debtor filed its chapter 11 bankruptcy for several reasons,
including, inter alia, to downsize so that it can maximize its
resources for the benefit of all constituencies. Prior to the
petition and post petition, Debtor has been concentrating on its
primary practice and its mental health practice, and has closed l
of its other practice groups. Through this chapter 11 filing,
Debtor seeks to, among other things, pay creditors and interest
holders over time as required by the Bankruptcy Code.
Debtor anticipates that the allowed amount of priority unsecured
claims will be no more than $100,000. This is an unimpaired class
and will be paid in full on the Effective Date.
General unsecured Claims are not secured by property of the estate
and are not entitled to priority under § 507(a) of the Code. The
Class GUC shall be paid monthly on a pro-rata basis to Class
General Unsecured Creditors over 60 months. Because it is unclear
as to the base amount of claims, it cannot be determined what
percentage unsecured creditors will receive.
In any event, general unsecured creditors will receive a greater
distribution than they would in a chapter 7 liquidation. Plan
payments will be made by the Debtor directly, and may be prepaid.
Plan payments shall be made monthly, and pursuant to the
projections, will vary between $4,400 per month and $5,573 per
month approximately [net income]. Debtor anticipates that the
allowed amount of general non priority unsecured claims will be no
more than $5,000,000.00.
SBJ Group is the sole equity holder of the Debtor. Notwithstanding
anything else in this Plan or 11 U.S.C. § 1141(d)(1)(B), SBJ Group
shall retain its equity interest in the reorganized Debtor in the
same manner, nature, and extent as prior to the Petition Date.
Debtor believes that it will have sufficient cash flow from
operations to fund its plan payments and operating expenses. Out of
an abundance of caution, Debtor's principal or a related entity
will loan the Debtor $100,000 on or prior to the Effective Date to
satisfy plan obligations, which shall be repaid over 60 months at
0% interest.
On Confirmation of the Plan, all property of the Debtor, tangible
and intangible, including, without limitation, licenses, furniture,
fixtures and equipment, will revert, free and clear of all Claims
and Equitable Interests except as provided in the Plan, to the
Debtor. The Debtor expects to have sufficient cash on hand to make
the payments required on the Effective Date.
The Debtor must commit all or such portion of the future earnings
or other future income of the Debtor as is necessary for the
execution of the Plan.
A full-text copy of the Subchapter V Plan dated April 4, 2022, is
available at https://bit.ly/3DXxffP from PacerMonitor.com at no
charge.
Attorneys for Debtor:
Robert Bassel, Esq.
P.O. Box T
Clinton, MI 49236
Tel: (248) 835-7683
Email: bbassel@gmail.com
About Knox Clinic Corporation
Knox Clinic Corporation filed its voluntary petition for relief
under Chapter 11 of the Bankruptcy Code (Bankr. E.D. Mich. Case No.
22-40018) on Jan. 3, 2022, listing as much as $1 million in both
assets and liabilities. Judge Maria L. Oxholm oversees the case.
Robert Bassel, Esq., a practicing attorney in Clinton, Mich.,
represents the Debtor in its Chapter 11 case.
LA OAXAQUENA: Unsecureds to be Paid in Full in Subchapter V Plan
----------------------------------------------------------------
La Oaxaquena LLC filed with the U.S. Bankruptcy Court for the
Northern District of Georgia a Plan of Reorganization under
Subchapter V dated April 4, 2022.
Debtor is a Georgia limited liability company formed on January 1,
2017. Debtor's main business is a restaurant.
Ana Garcia will continue in her role as managing member of the
Debtor.
Holders of claims would not receive any greater return in a
liquidation of Debtor's assets. Moreover, in liquidation, the
Subchapter V Trustee or chapter 7 trustee would incur costs
associated with liquidation, such as auctioneer fees that far
exceed the value of Debtor's assets. In this case, Debtor is
proposing to pay all allowed claims in full.
Class 1 shall consist of General Unsecured Claims of the Debtor.
The allowed unsecured claims total $15,100.00. This Class will
receive total payments of $15,100.00. The Claims of the Class 1
Creditors are Impaired by the Plan and the holders of Class 1
Claims are entitled to vote to accept or reject the Plan.
* If the Plan is confirmed under section 1191(a) of the
Bankruptcy Code, Debtor shall pay the General Unsecured Creditors
the full value of their allowed claims, in either monthly payments
of $251.67 (in which each creditor shall receive their pro rata
share of each payment), commencing on the 1st of the month
immediately following the Effective Date and continuing on the 1st
day of each month through and including the 60th month following
the Effective Date. Debtor may also pay claims in advance with no
penalty.
* If the Plan is confirmed under section 1191(b) of the
Bankruptcy Code, Debtor shall pay the General Unsecured Creditors
the full value of their allowed claims, in either monthly payments
of $251.67 (in which each creditor shall receive their pro rata
share of each payment), commencing on the 1st of the month
immediately following the Effective Date and continuing on the 1st
day of each month through and including the 60th month following
the Effective Date. Debtor may also pay claims in advance with no
penalty.
Class 2 consists of the Equity Holder of the Debtor. Each equity
security holder will retain her Interest in the reorganized Debtor
as such Interest existed as of the Petition Date. This class is not
impaired and is not eligible to vote on the Plan.
The source of funds for the payments pursuant to the Plan is the
future income of the Debtor from its normal operations.
Upon confirmation, Debtor will be charged with administration of
the Case. Debtor will be authorized and empowered to take such
actions as are required to effectuate the Plan. Debtor will file
all post-confirmation reports required by the United States
Trustee's office or by the Subchapter V Trustee. Debtor will also
file the necessary final reports and may apply for a final decree
as soon as practicable after substantial consummation and the
completion of the claims analysis and objection process. Debtor
shall be authorized to reopen this case after the entry of a Final
Decree to enforce the terms of the Plan including for the purpose
of seeking to hold a party in contempt or to enforce the
confirmation or discharge injunction or otherwise afford relief to
Debtor.
A full-text copy of the Plan of Reorganization dated April 4, 2022,
is available at https://bit.ly/3jieNVS from PacerMonitor.com at no
charge.
Attorney for Debtor:
Will B. Geer, Esq.
Wiggam & Geer, LLC
50 Hurt Plaza, SE, Suite 1150
Atlanta, GA 30303
Tel: (678) 587-8740
Fax: (404) 287-2767
Email: wgeer@wiggamgeer.com
About La Oaxaquena LLC
La Oaxaquena LLC is part of the restaurants industry.
La Oaxaquena LLC filed its voluntary petition for relief under
Chapter 11 of the Bankruptcy Code (Bankr. N.D. Ga. Case No.
22-50127) om Jan. 5, 2022. The petition was signed by Ana Lopez
Garcia, managing member. At the time of filing, the Debtor
estimated $50,000 in assets and $1 million to $10 million in
liabilities. Will Geer, Esq. and WIGGAM & GEER, LLC represents the
Debtor as counsel.
LATAM AIRLINES: Accuses Banco del Estado de Chile of Tipping Vote
-----------------------------------------------------------------
Rick Archer, writing for Law360, reports that South American air
carrier LATAM Airlines on Thursday, April 7, 2022, told a New York
bankruptcy judge it wants to probe what it says are inaccurate
statements concerning its Chapter 11 plan filed in a Chilean court
by an objector to the plan.
At a virtual status conference, counsel for LATAM said the airline
has filed a Rule 2004 discovery motion to look into bond indenture
trustee Banco del Estado de Chile's actions, saying they may be an
attempt to set up future litigation or influence the ongoing
Chapter 11 plan vote.
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.
LIVEWELL ASSISTED: Wins Cash Collateral Access Thru April 30
------------------------------------------------------------
The U.S. Bankruptcy Court for the Eastern District of North
Carolina, Raleigh Division, authorized Livewell Assisted Living,
Inc. to use cash collateral on an interim basis in accordance with
the budget, with a 10% variance, through April 30, 2022.
The budget provides for $265,000 in total income and $247,224 in
total expenses for April 2022.
The Debtor has no other source of readily available cash with which
to obtain the funds and supplies necessary to continue its ongoing
operations.
The possible lienholders of the Debtor's cash collateral are:
Creditor Balance owed
-------- ------------
U.S. Small Business Administration $510,017
Itria Ventures $54,483
Forward Financing $114,062
Vox Funding $80,300
Delta Bridge Funding $33,973
Wynwood Capital Group $44,970
United Fund USA $24,481
Seabrook Funding $52,465
EBF Holdings $66,960
CFG Merchant Funding $117,520
Green Grass Capital $47,680
The secured creditors are granted liens in after-acquired revenue
to the same extent and priority as they had prior to the filing of
the case.
A further hearing on the matter is scheduled for April 26, 2022 at
11:30 a.m.
A copy of the order is available at https://bit.ly/3JfH8qv from
PacerMonitor.com.
About Livewell Assisted Living
Livewell Assisted Living, Inc., a part of the continuing care
retirement communities industry, filed its voluntary petition for
Chapter 11 protection (Bankr. E.D.N.C. Case No. 22-00264) on Feb.
7, 2022, listing up to $500,000 in assets and up to $10 million in
liabilities. Justin Beckett, president, signed the petition.
Judge David M. Warren oversees the case.
Travis Sasser, Esq., at Sasser Law Firm represents the Debtor as
legal counsel.
LUCERO LLC: Wins Cash Collateral Access Thru May 31
---------------------------------------------------
The U.S. Bankruptcy Court for the Northern District of California,
San Francisco Division, authorized Lucero LLC to use cash
collateral on an interim basis through May 31, 2022.
For the real property of the estate commonly known as Shelter Creek
Lane #1254, San Bruno CA 94066, APN: 101-700-500, the Court's
approved budget is as follows:
Item Amount
---- ------
Monthly Rent (as of March 2022) $1,700
Senior Lien (Pensco Trust) - $859.33
Property Tax Set Aside - $106.28
(Payable to Subject Property Sequestered
Account – DIP Account X9122)
Insurance Payment Set Aside -$21.42
(Subject Property Sequestered Account
DIP Account X9122)
Net Operating Profit / Loss $712.97
(Subject Property
Sequestered Account
-DIP Account X9122)
The Debtor will remit adequate protection payments to Pensco Trust
in the amount of $859.33.
A copy of the order is available at https://bit.ly/3DM4EtX from
PacerMonitor.com.
About Lucero LLC
Lucero, LLC, a company in San Mateo, Calif., sought protection
under Chapter 11 of the Bankruptcy Code (Bankr. N.D. Calif. Case
No. 22-30058) on Jan. 31, 2022, listing up to $10 million in assets
and up to $1 million in liabilities. Henry Richard Lucero,
managing member, signed the petition.
Judge Dennis Montali oversees the case.
Belvedere Legal, PC, led by Matthew D. Metzger, Esq., is the
Debtor's legal counsel.
MALLINCKRODT PLC: Paul Weiss, LRC 4th Update on Noteholders
-----------------------------------------------------------
In the Chapter 11 cases of Mallinckrodt PLC, et al., the law firms
of Paul, Weiss, Rifkind, Wharton & Garrison LLP and Landis Rath &
Cobb LLP submitted a fourth amended verified statement under Rule
2019 of the Federal Rules of Bankruptcy Procedure, to disclose an
updated list of Unsecured Notes Ad Hoc Group that they are
representing.
The Unsecured Notes Ad Hoc Group formed by certain unaffiliated
holders of the Debtors' (i) 5.75% senior notes due 2022 issued
under that certain Indenture, dated as of August 13, 2014, the
guarantors party thereto from time to time and Deutsche Bank Trust
Company Americas, as trustee, (ii) 5.500% senior notes due 2025
issued under that certain Indenture, dated as of April 15, 2015 by
and among the Issuers, the guarantors party thereto from time to
time and the Trustee and (iii) 5.625% senior notes due 2023 issued
under that certain Indenture, dated as of September 24, 2015.
In or around June 2020, certain Members of the Unsecured Notes Ad
Hoc Group engaged Paul, Weiss to represent the Unsecured Notes Ad
Hoc Group in connection with the Members' holdings of the
Guaranteed Unsecured Notes. In September 2020, the Unsecured Notes
Ad Hoc Group also engaged LRC to represent it in connection with
the Unsecured Notes Ad Hoc Group's holdings of the Guaranteed
Unsecured Notes.
On October 21, 2020, Counsel filed the Verified Statement of Paul,
Weiss, Rifkind, Wharton & Garrison LLP and Landis Rath & Cobb LLP
Pursuant to Federal Rule of Bankruptcy Procedure 2019 [ECF No.
272]. On March 2, 2021, Counsel filed the Amended Verified
Statement of Paul, Weiss, Rifkind, Wharton & Garrison LLP and
Landis Rath & Cobb LLP Pursuant to Federal Rule of Bankruptcy
Procedure 2019 [ECF No. 1567]. On July 13, 2021, Counsel filed the
Second Amended Verified Statement of Paul, Weiss, Rifkind, Wharton
& Garrison LLP and Landis Rath & Cobb LLP Pursuant to Federal Rule
of Bankruptcy Procedure 2019 [ECF No. 3211]. On November 3, 2021,
Counsel filed the Third Amended Verified Statement of Paul, Weiss,
Rifkind, Wharton & Garrison LLP and Landis Rath & Cobb LLP Pursuant
to Federal Rule of Bankruptcy Procedure 2019 [ECF No. 5119]. On
November 5, 2021, Counsel filed the Revised Third Amended Verified
Statement of Paul, Weiss, Rifkind, Wharton & Garrison LLP and
Landis Rath & Cobb LLP Pursuant to Federal Rule of Bankruptcy
Procedure 2019 [ECF No. 5192]. Since then, the Members of the
Unsecured Notes Ad Hoc Group and the disclosable economic interests
in relation to the Debtors that such Members hold or manage have
changed. Accordingly, pursuant to Bankruptcy Rule 2019, Counsel
submits this Fourth Amended Statement.
As of March 25, 2022, members of the Unsecured Notes Ad Hoc Group
and their disclosable economic interests are:
Aurelius Capital Management, LP
535 Madison Avenue, 31st Floor
New York, NY 10022
* Revolving Credit Facility Obligations: $19,000,000
* 2024 Term Loan Obligations: $41,747,596
* 2025 Term Loan Obligations: $21,892,604
* First Lien Notes Obligations: $29,629,000
* Second Lien Notes Obligations: $9,974,000
* 5.500% Senior Notes Obligations: $34,284,000
* 5.625% Senior Notes Obligations: $12,200,000
* 5.750% Senior Notes Obligations: $25,372,000
* 4.75% Unsecured Notes Obligations: $51,574,000
* 9.50% Debenture Obligations: $200,000
Arena Investors, LP
405 Lexington Ave, 59th Fl
New York, NY 10174
* 5.750% Senior Notes Obligations: $10,000,000
Cerberus Capital Management LP
875 Third Avenue
10th Floor
New York, NY 10022
* 2024 Term Loan Obligations: $17,932,514.12
* 2025 Term Loan Obligations: $3,994,832.11
* Second Lien Notes Obligations: $8,500,000
* 5.500% Senior Notes Obligations: $8,401,000
* 5.625% Senior Notes Obligations: $16,439,000
* 5.750% Senior Notes Obligations: $31,561,000
Cetus Capital LLC
8 Sound Shore Dr., #303
Greenwich, CT 06830
* 2024 Term Loan Obligations: $997,382
* 5.500% Senior Notes Obligations: $580,000
* 5.625% Senior Notes Obligations: $7,478,000
* 5.750% Senior Notes Obligations: $1,140,000
Citadel Advisors LLC
131 S. Dearborn St.
Chicago, IL 60603
* Second Lien Notes Obligations: $3,000,000
* 5.625% Senior Notes Obligations: $21,000,000
* 5.750% Senior Notes Obligations: $20,000,000
Citigroup
388 Greenwich St,
New York, NY 10013
* Revolving Credit Facility Obligations: $3,620,435.93
* 2024 Term Loan Obligations: $5,000,000
* 2025 Term Loan Obligations: $7,705,170.37
* 5.625% Senior Notes Obligations: $1,000,000
Credit Suisse Securities (USA) LLC
11 Madison Avenue, 4th Floor
New York, NY 10010
* Revolving Credit Facility Obligations: $9,500,000
* 2024 Term Loan Obligations: $1,517,607
* 2025 Term Loan Obligations: $3,123,567
* First Lien Notes Obligations: $1,120,000
* 5.500% Senior Notes Obligations: $15,765,000
* 5.625% Senior Notes Obligations: $9,280,000
Deutsche Bank Securities Inc.
60 Wall Street
New York, NY 10005
* 2024 Term Loan Obligations: $28,246,239
* 2025 Term Loan Obligations: $6,767,039
* First Lien Notes Obligations: $1,000,000
* 5.500% Senior Notes Obligations: $6,435,000
* 5.625% Senior Notes Obligations: $33,988,000
* 5.750% Senior Notes Obligations: $29,695,000
Farmstead Capital Management, LLC
7 North Broad Street, 3rd Floor
Ridgewood, NJ 07450
* 5.500% Senior Notes Obligations: $21,900,000
* 5.750% Senior Notes Obligations: $29,131,000
Federated Investment Management Company
1001 Liberty Avenue
Pittsburgh, PA 15222
* 2024 Term Loan Obligations: $4,607,268
* 2025 Term Loan Obligations: $3,970,763
* 5.500% Senior Notes Obligations: $66,375,000
* 5.625% Senior Notes Obligations: $45,650,000
* 5.750% Senior Notes Obligations: $2,000,000
FFI Fund, Ltd., FYI Ltd. and
Olifant Fund, Ltd.
888 Boylston Street, 15th Floor
Boston, MA 02199
* 5.500% Senior Notes Obligations: $38,800,000
* 5.625% Senior Notes Obligations: $133,500,000
* 5.750% Senior Notes Obligations: $54,500,000
Hain Capital Group, LLC
301 Route 17, 7th Floor
Rutherford, NJ 07070
* 5.625% Senior Notes Obligations: $16,500,000
* 5.750% Senior Notes Obligations: $10,000,000
Hudson Bay Capital
777 3rd Ave, 30th Floor
New York NY 10017
* 2024 Term Loan Obligations: $14,961,039
* 5.500% Senior Notes Obligations: $3,000,000
* 5.625% Senior Notes Obligations: $14,900,000
* 5.750% Senior Notes Obligations: $43,895,000
JPMorgan Investment Management Inc. and
JPMorgan Chase Bank, N.A.
JPMorgan Investment Management Inc.
1 E. Ohio Street, IN1-0143 - Floor 6
Indianapolis, IN 46204-1912
* 5.500% Senior Notes Obligations: $62,750,000
* 5.625% Senior Notes Obligations: $50,752,000
* 5.750% Senior Notes Obligations: $8,220,000
Livello Capital Management LP
One World Trade Center, 85th Floor
New York, NY 10007
* 2024 Term Loan Obligations: $1,731,712
* 2025 Term Loan Obligations: $1,984,536
* 5.500% Senior Notes Obligations: $2,000,000
* 5.750% Senior Notes Obligations: $3,000,000
LMR Partners LLC
412 West 15th Street, 9th Floor
New York, NY 10011
* 5.625% Senior Notes Obligations: $2,000,000
* 5.750% Senior Notes Obligations: $3,000,000
Luxor Capital Group, LP
1114 Avenue of the Americas, 28th Floor
New York, NY 10036
* 5.750% Senior Notes Obligations: $13,000,000
Mariner Glen Oaks
500 Mamaroneck Avenue
1st Floor Harrison
NY USA 10528
* 5.625% Senior Notes Obligations: $8,000,000
* 4.75% Unsecured Notes Obligations: $1,000,000
Moore Global Investments, LLC
11 Times Square
New York, NY 10036
* 2024 Term Loan Obligations: $16,940,112.75
* First Lien Notes Obligations: $23,915,000
* 5.625% Senior Notes Obligations: $3,378,000
* 5.750% Senior Notes Obligations: $1,631,000
Nomura Corporate Research and Asset Management Inc.
309 W 49th Street
New York, NY 10019
* 5.625% Senior Notes Obligations: $14,152,000
* 5.750% Senior Notes Obligations: $30,692,000
North America Credit Trading Group of
J.P. Morgan Securities LLC
383 Madison Ave.
New York, NY 10179
* Second Lien Notes Obligations: $1,000
* 5.500% Senior Notes Obligations: $18,884,000
* 5.625% Senior Notes Obligations: $16,319,000
* 5.750% Senior Notes Obligations: $29,217,000
* 4.75% Unsecured Notes: $5,892,000
OFM II, L.P.
8 Sound Shore Dr., #303
Greenwich, CT 06830
* 2024 Term Loan Obligations: $997,382
* 5.500% Senior Notes Obligations: $420,000
* 5.625% Senior Notes Obligations: $5,522,000
* 5.750% Senior Notes Obligations: $860,000
Scoggin International Fund Ltd
660 Madison Avenue
New York, NY 10065
* 5.500% Senior Notes Obligations: $2,500,000
* 5.625% Senior Notes Obligations: $6,600,000
* 5.750% Senior Notes Obligations: $5,000,000
Sculptor Capital LP
9 W 57th Street, 40th Floor
New York, NY 10019
* 5.500% Senior Notes Obligations: $10,000,000
* 5.625% Senior Notes Obligations: $3,200,000
* 5.750% Senior Notes Obligations: $76,979,000
Serengeti Lycaon MM LP
632 Broadway, 12th Floor
New York, NY 10012
* 5.500% Senior Notes Obligations: $1,000,000
* 5.625% Senior Notes Obligations: $6,000,000
Two Seas
32 Elm Place 3rd Floor
Rye, NY 10580
* First Lien Notes Obligations: $15,000,000
* Second Lien Notes Obligations: $3,225,000
* 5.750% Senior Notes Obligations: $4,000,000
Wells Fargo Securities LLC
550 S. Tyron Street, 4th Floor
Charlotte, NC 28202
* Second Lien Notes Obligations: $249,000
* 5.625% Senior Notes Obligations: $71,000
* 5.750% Senior Notes Obligations: $18,929,000
Counsel to the Unsecured Notes Ad Hoc Group can be reached at:
LANDIS RATH & COBB LLP
Richard S. Cobb, Esq.
Matthew R. Pierce, Esq.
919 Market Street, Suite 1800
Wilmington, DE 19801
Telephone: (302) 467-4400
Facsimile: (302) 467-4450
E-mail: cobb@lrclaw.com
pierce@lrclaw.com
- and -
PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
Andrew N. Rosenberg, Esq.
Alice Belisle Eaton, Esq.
Claudia R. Tobler, Esq.
1285 Avenue of the Americas
New York, NY 10019
Telephone: (212) 373-3000
Facsimile: (212) 757-3990
E-mail: arosenberg@paulweiss.com
aeaton@paulweiss.com
ctobler@paulweiss.com
A copy of the Rule 2019 filing, downloaded from PacerMonitor.com,
is available at https://bit.ly/38yYdyR and https://bit.ly/3KrHtHZ
About Mallinckrodt PLC
Mallinckrodt -- http://www.mallinckrodt.com/-- is a global
business consisting of multiple wholly-owned subsidiaries that
develop, manufacture, market and distribute specialty
pharmaceutical products and therapies. The company's Specialty
Brands reportable segment's areas of focus include autoimmune and
rare diseases in specialty areas like neurology, rheumatology,
nephrology, pulmonology and ophthalmology; immunotherapy and
neonatal respiratory critical care therapies; analgesics; and
gastrointestinal products. Its Specialty Generics reportable
segment includes specialty generic drugs and active pharmaceutical
ingredients.
On Oct. 12, 2020, Mallinckrodt plc and certain of its affiliates
sought Chapter 11 protection in Delaware (Bankr. D. Del. Lead Case
No. 20-12522) to seek approval of a restructuring that would reduce
total debt by $1.3 billion and resolve opioid-related claims
against them.
Mallinckrodt plc disclosed $9,584,626,122 in assets and
$8,647,811,427 in liabilities as of Sept. 25, 2020.
Judge John T. Dorsey oversees the cases.
The Debtors tapped Latham & Watkins LLP and Richards, Layton &
Finger P.A. as their bankruptcy counsel; Arthur Cox and Wachtell,
Lipton, Rosen & Katz as corporate and finance counsel; Ropes & Gray
LLP as litigation counsel; Torys LLP as CCAA counsel; Guggenheim
Securities LLC as investment banker; and AlixPartners LLP as
restructuring advisor. Prime Clerk, LLC, is the claims agent.
The official committee of unsecured creditors retained Cooley LLP
as its legal counsel, Robinson & Cole LLP as co-counsel, and Dundon
Advisers LLC as its financial advisor.
On Oct. 27, 2020, the U.S. Trustee for Region 3 appointed an
official committee of opioid related claimants. The OCC tapped
Akin Gump Strauss Hauer & Feld LLP as its lead counsel, Cole Schotz
as Delaware co-counsel, Province Inc. as financial advisor, and
Jefferies LLC as investment banker.
A confirmation trial for the Debtors' First Amended Joint Plan of
Reorganization is set to begin Nov. 1, 2021. The Confirmation
Hearing will be bifurcated into two phases. Phase 1 will commence
the week of Nov. 1. The Confirmation Hearing will continue with
Phase 2 on or around the week of Nov. 15, when the Acthar
Administrative Claims Hearing proceedings concludes.
MATLINPATTERSON GLOBAL: Clashes w/ Creditors Over Fund Liquidation
------------------------------------------------------------------
Rick Archer of Law360 reports that MatlinPatterson Global has hit
back against a bid by foreign creditors to convert its Chapter 11
case into a Chapter 7, telling a New York bankruptcy judge Friday,
April 8, 2022, the fact a distressed company investment fund was
intended to be liquidated is not a good enough reason to grant the
request.
At a virtual hearing, the litigation creditors told U.S. Bankruptcy
Judge David Jones that a conversion from Chapter 11 bankruptcy to a
Chapter 7 liquidation is appropriate because the fund isn't
undergoing rehabilitation but rather seeking to wind down and pay
its investors, while MatlinPatterson said clearing the litigation
claims.
About MatlinPatterson Global
MatlinPatterson Global Opportunities Partners II L.P. is a private
investment fund structured as limited partnership entity organized
in the State of Delaware.
MatlinPatterson and its affiliates sought Chapter 11 protection
(Bankr. S.D.N.Y. Lead Case No 21-11255) on July 6, 2021, disclosing
total assets of $100 million to $500 million and total liabilities
of $10 million to $50 million. The cases are handled by Judge David
S. Jones.
The Debtors tapped Simpson Thacher & Bartlett, LLP as bankruptcy
counsel; Schulte Roth & Zabel, LLP as conflicts counsel; FTS US
Inc. as tax consultant; Ernst & Young, LLP as tax services
provider; and North Country Capital LLC as restructuring advisor.
Matthew Doheny of North Country Capital serves as the Debtors'
chief restructuring officer. Kurtzman Carson Consultants, LLC is
the claims, noticing and administrative agent.
MD HELICOPTER: Wins Cash Collateral Access, $12.5MM of DIP Loan
---------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware authorized
MD Helicopter, Inc. et al. to, among other things, use cash
collateral and obtain postpetition financing.
MD Helicopter is permitted to obtain postpetition financing and
debtor Monterrey Aerospace, LLC to guarantee unconditionally, the
DIP Borrower's obligations in connection with a superpriority
senior secured credit facility consisting of a $60,000,000 term
loan credit facility. About $12,500,000 of the DIP Loans will be
available immediately upon entry of the Interim Order. Acquiom
Agency Services LLC is the administrative agent and collateral
agent under the DIP Facility.
The Debtors have an immediate need to obtain the DIP Facility and
use cash collateral to, among other things, (A) permit the orderly
continuation of their business; (B) fund the Adequate Protection
Account; and (C) pay the costs of administration of their estates
and satisfy other working capital and general corporate purposes of
the Debtors.
Under a Credit Agreement, dated as of July 8, 2005, by and among MD
Helicopter, Inc., as borrower, Monterrey Aerospace, LLC, as
guarantor, the Lenders from time to time party thereto, Ankura
Trust Company, LLC, as administrative agent for the Zohar Lenders,
pursuant to an order appointing Ankura Trust Company, LLC as New
Agent and the New Agent Agreement, Patriarch Partners Agency
Services, LLC, as administrative agent for the Patriarch Lenders,
and Ankura and PPAS, as collateral agent, the Prepetition First
Lien Lenders provided certain loans, advances and other extensions
of credit.
As of the Petition Date, the applicable Debtors were indebted and
liable under the Prepetition First Lien Loan Documents for an
aggregate amount of not less than $357 million in respect of the
loans made under the Prepetition First Lien Credit Agreement.
As adequate protection, the Prepetition First Lien Secured Parties
are granted a valid, binding, continuing, enforceable, fully
perfected, non-avoidable, automatically, and properly perfected
first priority senior security interest in and lien upon all
property of the Debtors.
As further adequate protection, the Prepetition First Lien Secured
Parties are granted a valid, binding, continuing, enforceable,
fully-perfected first priority senior priming security interest in
and lien upon all property of the Debtors that was subject to the
Prepetition Liens.
A final hearing on the matter is scheduled for April 25, 2022 at 9
a.m.
A copy of the order is available at https://bit.ly/3DO61Iz from
PacerMonitor.com.
About MD Helicopters
MD Helicopters Inc. is a global manufacturer and supplier of
commercial and military helicopters, spare parts, and related
services. The Company's sole manufacturing facility is located in
Mesa, Arizona.
MD Helicopters sought Chapter 11 bankruptcy protection (Bankr. D.
Del. Case No. 22-10263) on March 30, 2022.
MD Helicopters estimated assets between $100 million to $500
million and liabilities between $100 million to $500 million.
Suzzanne Uhland, Esq., Adam S. Ravin, Esq., Brett M. Neve, Esq.,
Tianjiao (TJ) Li, Esq., Alexandra M. Zablocki, Esq., at Latham &
Watkins LLP are the Debtors' counsel. Moelis & Company LLC are the
Debtors' investment bankers. AlixPartners, LLP is the restructuring
advisor. Prime Clerk LLC is the Notice, Claims and Balloting
Agent.
MEDALLION MIDLAND: Fitch Affirms 'B+' IDR, Outlook Stable
---------------------------------------------------------
Fitch Ratings has affirmed the Issuer Default Ratings (IDR) for
Medallion Midland Acquisition, LLC and Medallion Gathering &
Processing, LLC at 'B+'. The senior secured term loan issued by
Medallion Midland Acquisition, LLC due 2028 has also been affirmed
at 'BB-'/'RR3'. The Rating Outlook is Stable.
The rating reflects Medallion's limited size and scale, its
position as a gathering and transportation service provider located
in a single basin, counterparty and volumetric risk. Medallion's
leverage has declined as volumes continue to steadily increase in a
robust commodity price environment. Liquidity is adequate and
near-term capital spending will be funded with excess cash flow.
KEY RATING DRIVERS
Limited Size and Scale: Medallion's size and scale is limited with
EBITDA below $300 million and generally consistent with a 'B' range
IDR. The lack of operational and geographic diversity, in Fitch's
view, subjects Medallion to outsized event risk and capital market
access risks should there be a slowdown in or longer-term
disruption of Midland Basin area production.
Fitch believes this limited size and scale to be offset in part by
Medallion's operational focus within the Midland region of the
Permian basin, where Medallion derives about 90% of its volumes,
which is expected to continue to see significant production growth
in the near to intermediate term. Given its low-cost production
dynamics, Fitch expects Midland region production from Medallion's
customers to continue to grow and that Medallion will be a
beneficiary of this growth.
Customer Diversity and Fixed-fee Contracts: Medallion has 26
customers that exhibit considerable variety in pace and phasing of
growth, which is typical given the large number of customers.
Around half of the volumes are derived from private companies which
have increased production at a greater pace than their public
peers. Customer consolidation continued to increase the
counterparty quality. However, these investments are also more
susceptible to slowdowns should the commodity prices decline
significantly. In addition, Medallion mostly has acreage-dedication
contracts with no volume protections.
Total system volumes have increased to 595Mbbls/day in 2021, an
increase of 11.9% over 2020. Fitch expects volumes to grow in the
5%-10% range in 2022. Fitch notes that rig count on Medallion
acreage more than tripled in 1Q22 from the trough experienced in
mid-2020, and is now at levels seen in March 2020.
Refinancing Risk Resolved: In October 2021, Medallion refinanced
its senior secured term loan B extending its maturity to 2028. At
the same time, it also increased the size of its revolver to $100
million (from $50 million) extending its maturity to 2026 from 2022
removing near-term refinancing risk. Medallion's system is fully
built out and future capex spending is targeted to smaller projects
and maintenance.
The price path that emerged from the coronavirus/OPEC+ leadership
dynamics of 2020 is unlikely to be replicated at the next price
cycle. Fitch believes a long-duration trough would be more harmful
to Medallion. The Fitch price deck manifests Fitch's criterion to
rate through the cycle, yet Fitch's through- the-cycle approach
does not preclude the primacy of liquidity. If another price bust
more severely tested Medallion and peers, having adequate liquidity
will become even more important.
Competitive Risks: Medallion is located in and around a significant
amount of existing gathering infrastructure, including the flexible
service of trucks, which could provide a significant amount of
competition. The gathering sub-sector has low barriers to entry,
relative to most other midstream sub-sectors. Offsetting the
competitive risks is an increase in acres dedicated by producer
counterparties to Medallion's operations.
Medallion's dedicated acreage has increased by about 67% since
October 2017. One of the barriers to entry in the gathering sector
are acreage dedications. Medallion has worked pro-actively to
extend the term of its foundational gathering service contracts. At
inception of the term loan B, the company had a material amount of
dedicated acreage under contracts that reached expiration over the
past three and a half years. Through diligent partnering with
customers, across its entire contract portfolio, no material
acreage dedication contracts are set to expire before the YE 2025.
Leverage Continues to Decline: Medallion is a Permian gathering
borrower that has steadily delevered since formation. Deleveraging
continued during 2021, ahead of Fitch's forecast. EBITDA grew by
about 17% in 2021 as volumes continued to increase. Revenues were
higher than expected due to incremental marketing revenues and
greater pipeline loss allowance income, lowered by reduced fees on
EPIC. Operating costs were also lower than expected resulting in
leverage at YE 2021 of 4.6x, appreciably below 5.6x at YE 2020.
Fitch forecasts leverage at YE 2022 at around 4.5x, slightly higher
than management's projections. Medallion's financial policy is to
bring leverage down to approximately 4.0x, according to Fitch's
calculations.
Medallion's loan agreement requires excess cash flow sweeps, at
certain leverage levels, to be split between owner distributions
and loan prepayments, above the scheduled 1% repayments
requirement. Fitch does not expect any additional amortization from
excess cash sweeps. Fitch forecasts Medallion to post positive FCF
going forward, absent initiation of a dividend.
Supportive Sponsor: The ratings recognize Medallion benefits from a
supportive sponsor in Global Infrastructure Partners (GIP), which
has, after the company's creation by GIP, invested a significant
amount of equity into Medallion. Fitch anticipates GIP will
continue to support accretive growth projects.
DERIVATION SUMMARY
Medallion's closest peer is Oryx Midstream Services Permian Basin
LLC (Oryx; BB-/Stable). Oryx is a crude gathering and intra-basin
transportation service provider. Oryx recently merged with Plains
All American Pipeline L.P.'s (BBB-/Stable), transferring its assets
into a joint venture (JV) for the two company's Permian assets.
Oryx is significantly larger in size; however, it is a holding
company with a minority ownership (35%) in the JV. Medallion is a
Midland sub-basin company, and Oryx now has operations in both the
Delaware and Midland sub-basins.
Oryx's producers also have higher credit quality, with
approximately 61% of 2021 volumes from investment-grade
counterparties. Before the merger, Fitch expects Oryx's leverage to
be over 6.0x in 2022, the first full year of operations compared
with Medallion's leverage of around 4.5x at YE 2022.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- Fitch's price deck of WTI price deck of $95/bbl in 2022,
$76/bbl in 2023, $57/bbl in 2024, and $50bbl thereafter.
-- A rise in volumes by Medallion's customers under dedication
contracts (2022 versus 2021).
-- 2022 capex and other growth investments in line with 2021.
-- All-in interest rates consistent with past history, as driven
by a past long-term hedge.
Recovery Rating Assumption
For the Recovery Rating, Fitch's estimates the company's
going-concern value was greater than the liquidation value. The
going-concern multiple used was a 6.0x EBITDA multiple, which is in
the range of most multiples seen in recent reorganizations in the
energy sector. There have been a limited number of bankruptcies
within the midstream sector.
Two recent gathering and processing bankruptcies of companies
indicate an EBITDA multiple between 5.0x and 7.0x, by Fitch's best
estimates. In its recent Bankruptcy Case Study Report, "Energy,
Power and Commodities Bankruptcies Enterprise Value and Creditor
Recoveries", published in September 2021, the median enterprise
valuation exit multiple for the 51 energy cases with sufficient
data to estimate was 5.3x, with a wide range of multiples
observed.
Fitch assumed a mid-cycle going-concern EBITDA of approximately
$101 million (same as the previous assumptions). Fitch calculated
administrative claims to be 10%, and fully drew down the revolving
credit facility, which are the standard assumptions.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- A long-term plan to achieve a run-rate of $300 million per
annum EBITDA with leverage, measured as total debt with equity
credit/operating EBITDA, expected to be below 5.0x on a
sustained basis;
-- Forecast of meaningfully rising EBITDA after consideration, as
part of the long-term forecast, of a small number of
expirations of contracts of various sorts.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Actual or forecast leverage, total debt with equity
credit/operating EBITDA, is at or above 6.0x;
-- FFO fixed-charge coverage sustained below 2.5x, or other
conditions that raise a concern for liquidity;
-- The initiation of a distribution policy that Fitch forecasts
will have the effect of increasing leverage from current
expectations;
-- A significant increase in capex, targeted towards higher
business risk projects.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Fitch expects Medallion's liquidity to remain
adequate. Liquidity, as of Dec. 31, 2021, consisted of full
availability under its $100 million super senior secured revolving
credit facility, which is effectively senior to its term loan, and
$11.6 million of cash. The credit facility matures in October
2026.
The term loan requires 1% per annum mandatory amortization and
requires the company to maintain a debt service coverage ratio
(DSCR), as defined in the agreement, of above 1.1x. The DSCR was
2.6x at YE 2021, well above the covenant. The revolving credit
facility contains restrictions on debt to capital, leverage, and
debt service coverage ratios. Medallion was in compliance with its
financial covenants as of Dec. 31, 2021 and Fitch expects it to
remain so throughout the forecast period.
ISSUER PROFILE
Medallion Midstream is a Permian Basin focused midstream services
company, with assets located largely in the Midland basin. The
company provides crude oil gathering and intra-state transportation
services in Texas.
ESG Consideration
Medallion's ESG Relevance Score for Group Structure and Financial
Transparency has changed from a '4' to a '3'. Medallion operates
under a somewhat more complex group structure, with private equity
ownership. Timeliness and transparency in financial and other
disclosures have resulted in the revision of the relevance score.
This factor no longer has an impact on ratings.
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.
MEGA-PHILADELPHIA: Files Emergency Bid to Use Cash Collateral
-------------------------------------------------------------
Mega-Philadelphia LLC asks the U.S. Bankruptcy Court for the Middle
District of Florida, Fort Myers Division, for authority to use cash
collateral in the ordinary course of business, and pursuant to an
initial budget.
Mega says these creditors may claim to have a secured interest in
the cash collateral, by virtue of certain UCC-1 financing
statements filed with the Pennsylvania Secretary of State and
Florida Secretary of State:
a. Centric Bank;
b. U.S. Small Business Administration;
c. Funding Metrics, LLC; and
d. GTR Source, LLC.
To the extent the Court may determine that these entities are
indeed valid creditors with a security interest in the cash
collateral, Mega proposes to provide sufficient and adequate
protection to the Alleged Secured Creditors to ensure their
interests are protected by preserving their rights, claims, and
liens to the same extent they existed on the Petition Date, if
any.
Mega is a radio station business that provides radio broadcasting
services. Mega says the continued operation of its business will
preserve its going concern value. Mega's use of the cash collateral
includes, but is not limited to, the use of Mega's cash and
collected receivables to pay for the ordinary operating expenses of
Mega and the costs associated with the Chapter 11 case.
A copy of the motion and the Debtor's budget for the period from
March to June 2022 is available at https://bit.ly/3xax5Az from
PacerMonitor.com.
The Debtor projects $520,000 in total income and $498,652 in total
expenses.
About Mega Philadelphia, LLC
Mega Philadelphia, LLC is a music and radio station business that
provides radio broadcasting services in Philadelphia, Pennsylvania;
South New Jersey; and Atlantic City, New Jersey, with its corporate
headquarters also located at 14366 Charthouse Circle, Naples,
Florida 34114. Mega's business generates advertisement revenue
through broadcast radio and live promotional events. M.S.
Acquisitions & Holdings, LLC is the 100% owner and sole member of
Mega.
Mega sought protection under Chapter 11 of the U.S. Bankruptcy Code
(Bankr. M.D. Fla. Case No. 22-00340) on March 25, 2022. In the
petition signed by Michael Sciore, chief executive officer, the
Debtor disclosed $346,574 in assets and $2,285,961 in liabilities.
Brett Lieberman, Esq., at Edelboim Lieberman Revah PLLC is the
Debtor's counsel.
MELO AIR: Seeks to Use Cash Collateral
--------------------------------------
Melo Air, Inc. asks the U.S. Bankruptcy Court for the Middle
District of Florida, Tampa Division, for authority to use cash
collateral retroactive to the petition date in accordance with the
budget, with a 10% variance and provide adequate protection.
The Debtor requires the use of cash collateral to maintain business
operations and preserve value of the estate.
Monroe Capital Management Advisors, LLC may assert liens against
the Debtor's assets in the amount of $64,718.
The Debtor estimates that the collective claims of the Secured
Creditor are secured by $68,700. The Secured Creditor Assets
include $68,700 in cash and accounts receivables which the Debtor
expects to collect.
As adequate protection for the use of cash collateral, the Debtor
offers the Secured Creditor:
a. Post-petition replacement liens on the Secured Creditor
Assets to the same extent, validity, and priority as existed
pre-petition;
b. The right to inspect the Secured Creditor Assets on 48
hours' notice, provided the inspection does not interfere with the
Debtor's operations; and
c. Copies of monthly financial documents generated in the
ordinary course of business and other information as the Secured
Creditor reasonably request with respect to the Debtor's
operations.
A copy of the motion is available at https://bit.ly/3JmExLx from
PacerMonitor.com.
About Melo Air, Inc.
Melo Air, Inc. sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. M.D. Fla. Case No. 22-01394) on April 7,
2022. In the petition signed by Gustavo M. Melo, president, the
Debtor disclosed $100,000 in assets and $500,000 in liabilities.
Buddy D. Ford, Esq., at Buddy D. Ford, P.A. is the Debtor's
counsel.
MICROVISION INC: Appoints Jeffrey Herbst to Board of Directors
--------------------------------------------------------------
Jeffrey Herbst has been appointed to MicroVision, Inc.'s Board of
Directors.
"We are delighted to add Jeff to the MicroVision Board," said Brian
Turner, Chair of the Board. "Jeff brings over thirty years of
operational, business development, venture capital and M&A
experience to MicroVision. His innovative work supporting the
automotive industry, through strategic partnerships and
investments, while at NVIDIA will be highly relevant and valuable
as we optimize MicroVision's position in the ADAS market and
continue to execute our strategy."
Herbst spent nearly 20 years at NVIDIA where he built and managed
an ecosystem of accelerated computing applications spanning the
domains of AI, data science, autonomous machines, and graphics and
visualization. While there, he created the NVIDIA GPU Ventures
program, overseeing more than 40 global investments and 20
acquisitions valued at over $8 billion, and led the NVIDIA
Inception global startup accelerator comprised of more than 8,000
AI, data science and high-performance computing companies. He
later co-founded GFT Ventures, a venture capital firm focused on
investing in early-stage frontier technology companies primarily
located in the U.S. and Israel. He holds a law degree from
Stanford University and a bachelor's degree in computer science
from Brown University.
"I'm both delighted and honored to join the MicroVision Board,"
said Herbst. "My passion for the automotive ecosystem runs deep,
especially relating to the technology powering the next generations
of safer, smarter, more efficient, and ultimately autonomous
vehicles. I look forward to working with the MicroVision directors
and management to help position the company for long term success
in the automotive lidar and ADAS markets."
With Mr. Herbst's appointment, the number of directors on
MicroVision's Board will increase to eight.
About MicroVision
MicroVision -- http://www.microvision.com-- is a pioneering
company in MEMS based laser beam scanning technology that
integrates MEMS, lasers, optics, hardware, algorithms and machine
learning software into its proprietary technology to address
existing and emerging markets. The Company's integrated approach
uses its proprietary technology to provide solutions for automotive
lidar sensors, augmented reality micro-display engines, interactive
display modules and consumer lidar modules.
MicroVision reported a net loss of $43.20 million for the year
ended Dec. 31, 2021, a net loss of $13.63 million for the year
ended Dec. 31, 2020, a net loss of $26.48 million for the year
ended Dec. 31, 2019, and a net loss of $27.25 million for the year
ended Dec. 31, 2018. As of Dec. 31, 2021, the Company had $130.23
million in total assets, $17.47 million in total liabilities, and
$112.75 million in total shareholders' equity.
MIDCAP FINCO: Fitch Affirms 'BB+' LT IDR, Outlook Stable
--------------------------------------------------------
Fitch Ratings has affirmed MidCap FinCo Intermediate Holdings
Limited's (MidCap) and its debt-issuing subsidiary MidCap Financial
Issuer Trust's Long-Term Issuer Default Ratings (IDRs) at 'BB+'.
The Rating Outlook is Stable. Concurrently, Fitch has affirmed
MidCap Financial Issuer Trust's unsecured debt rating at 'BB'.
KEY RATING DRIVERS
The rating affirmation reflects MidCap's strong middle market
franchise and relationship with Apollo Global Management, Inc.
(Apollo; rated A/Stable), which provides access to industry
relationships and deal flow, lower-risk portfolio profile, low
portfolio concentrations, minimal exposure to equity investments,
relatively strong asset quality historically, and an experienced
management team.
Rating constraints specific to MidCap include higher leverage than
commercial lending peers, below-average core earnings metrics, a
largely secured funding profile and the potential impact of
meaningful portfolio company revolver draws on leverage and
liquidity. Rating constraints on commercial lenders more broadly
include the competitive underwriting conditions in the middle
market.
Fitch views MidCap's affiliation with Apollo as a rating strength,
as it provides the company with access to industry knowledge,
relationships with sponsors and banks, investment management
resources and deal flow. Apollo is an alternative investment
manager with approximately $497.6 billion of assets under
management as of Dec. 31, 2021, including $350.1 billion in credit
strategies.
MidCap's credit performance has been solid historically, although
this may be partially attributable to the relatively benign credit
environment prior to the pandemic, and the focus on asset-based
lending until more recently. Net charge-offs averaged 0.35% of
average loans from 2018 through 2021, and peaked at 0.6% in 2020
before declining to average levels in 2021. At Dec. 31, 2021,
approximately 1.3% of MidCap's loan portfolio was on non-accrual
status; down from an average of 1.7% from 2018 to 2021 and down
from 2.5% a year ago.
Fitch believes credit metrics could come under pressure near term
if the macro backdrop becomes more challenged, but the firm's focus
on first lien loans (99%) of the portfolio at YE 2021 should
position it well from a credit perspective.
MidCap's core earnings have been below peers, given the focus on
lower-yielding senior debt investments. In 2021, pre-tax return on
average assets (ROAA), excluding interest expense on profit
participating notes and a loss on the extinguishment of debt, was
2.4%; up from 1.9% a year ago, but down from a 2.7% average from
2017 to 2019. However, earnings are poised to grow in 2022, given
strong portfolio growth in 2H21 and expectations for rising
interest rates.
Relative to peers, Fitch believes MidCap has a more stable earnings
profile, as business development companies (BDC) need to mark their
portfolios to fair market value quarterly, and generally have
larger equity exposures that contribute to more earnings volatility
over time.
MidCap's leverage target, as measured by consolidated gross debt to
tangible equity (including profit participating notes payable), is
3.75x-4.50x. Leverage was 4.4x at YE 2021, up from 3.5x at YE 2020,
as borrowings increased to support strong origination activity. An
increase in leverage beyond the targeted range could result in
negative rating actions.
MidCap's funding is largely secured, although well-diversified. At
YE 2021, the company had numerous credit facilities with aggregate
capacity of $5.7 billion, nine securitizations with $4.2 billion of
notes outstanding and $1.4 billion of unsecured notes across two
issuances. Unsecured debt represented 15.4% of total debt at YE
2021, which is below Fitch's 'bb' category funding, liquidity and
coverage benchmark range of 20%-75% for finance and leasing
companies with an operating environment score of 'bbb'. Fitch does
not expect a material change in the company's funding mix over the
Outlook horizon.
Fitch believes MidCap's liquidity profile is sound. At YE 2021,
MidCap had $33.1 million of unrestricted cash, $2.1 billion of
undrawn capacity on its credit facilities and $285 million of
undrawn equity, which would be more than sufficient to fund
historical peak revolver draws of approximately 70%. The credit
facilities have maturities ranging from 2022 to 2032, and Fitch
expects them to be renewed and extended, as necessary. The next
term debt maturity is in 2028, when $1 billion of unsecured debt is
due.
MidCap has historically distributed the majority of its earnings to
shareholders, but the firm will offer shareholders the opportunity
to reinvest dividends in the company in 2022, which Fitch views
favorably, as it will help to fund portfolio growth if adopted.
The Stable Outlook reflects Fitch's expectation that MidCap will
retain underwriting discipline, demonstrate relatively sound credit
performance, manage leverage within the targeted range and maintain
sufficient funding diversity and liquidity to navigate the current
economic environment.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- A sustained increase in leverage above 4.5x, a sustained
reduction in unsecured debt below 10%, material deterioration
in asset quality, an inability to maintain sufficient
liquidity to fund interest expenses and revolver draws, a
change in the perceived risk profile of the portfolio,
material operational or risk management failures, and/or
damage to the firm's franchise which negatively impacts its
access to deal flow and industry relationships could drive
negative rating action.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- A sustained reduction in leverage to below 3.0x, improved
funding flexibility, including unsecured debt approaching 35%
of total debt, and strong and differentiated credit
performance of recent vintages could yield positive rating
momentum. Any ratings upgrade would be contingent on the
maintenance of consistent operating performance, a continued
focus on first lien investments and a sufficient liquidity
profile.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
The unsecured debt rating is one notch below the IDR given the high
balance sheet encumbrance and the largely secured funding profile,
which indicates weaker recovery prospects under a stress scenario.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- The unsecured debt rating is expected to move in tandem with
the Long-Term IDR. However, an increase in the proportion of
unsecured funding, approaching 25%, assuming no change to the
firm's leverage target, and/or the creation of a sufficient
unencumbered asset pool, which alters Fitch's view of the
recovery prospects for the debt class, could result in the
unsecured debt rating being equalized with the IDR.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- The unsecured debt rating is expected to move in tandem with
the Long-Term IDR. However, an increase in the proportion of
unsecured funding, approaching 25%, assuming no change to the
firm's leverage target, and/or the creation of a sufficient
unencumbered asset pool, which alters Fitch's view of the
recovery prospects for the debt class, could result in the
unsecured debt rating being equalized with the IDR.
SUBSIDIARIES & AFFILIATES: KEY RATING DRIVERS
The Long-Term IDR of MidCap Financial Issuer Trust, the issuer of
the announced unsecured debt, is equalized with the Long-Term IDR
of its direct parent, MidCap, which is a guarantor on the debt.
SUBSIDIARIES AND AFFILIATES: RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- MidCap Financial Issuer Trust's Long-Term IDR is expected to
move in tandem with the Long-Term IDR of the parent.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- MidCap Financial Issuer Trust's Long-Term IDR is expected to
move in tandem with the Long-Term IDR of the parent.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and
Covered Bond issuers have a best-case rating upgrade scenario
(defined as the 99th percentile of rating transitions, measured in
a positive direction) of three notches over a three-year rating
horizon; and a worst-case rating downgrade scenario (defined as the
99th percentile of rating transitions, measured in a negative
direction) of four notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
MOBIQUITY TECHNOLOGIES: Chairman Converts Over $2M Debt Into Equity
-------------------------------------------------------------------
Mobiquity Technologies, Inc.'s chairman, who is the company's
secured lender, has converted over $2 million of his secured
indebtedness into equity on terms specifically described in the
company's Form 8-K, which was filed with the Securities and
Exchange Commission.
Dean L. Julia, chief executive officer of the company, said, "We
are very thankful to our chairman and we are thrilled to see him
take the opportunity to convert his debt into shares. I believe
his conversion displays confidence in our ability to execute the
business plan and drive shareholder value going forward. The
conversion from debt to equity also strengthened our balance sheet
and created more shareholder value."
About Mobiquity
Headquartered in Shoreham, NY, Mobiquity Technologies, Inc. is a
next generation, Platform-as-a-Service (PaaS) company for data and
advertising. The Company maintains one of the largest audience
databases available to advertisers and marketers through its data
services division. Mobiquity Technologies' Advangelists subsidiary
(www.advangelists.com) provides programmatic advertising
technologies and insights on consumer behavior. For more
information, please visit: https://mobiquitytechnologies.com/
Mobiquity reported a net comprehensive loss of $34.95 million for
the year ended Dec. 31, 2021, a net comprehensive loss of $15.03
million for the year ended Dec. 31, 2020, and a net comprehensive
loss of $44.03 million for the year ended Dec. 31, 2019. As of
Dec. 31, 2021, the Company had $8.40 million in total assets, $5.48
million in total liabilities, and $2.92 million in total
stockholders' equity.
Lakewood, Co-based BF Borgers CPA PC, the Company's auditor since
2018, issued a "going concern" qualitication in its report dated
March 29, 2022, citing that the Company has suffered recurring
losses from operations and has a significant accumulated deficit.
In addition, the Company continues to experience negative cash
flows from operations. These factors raise substantial doubt about
the Company's ability to continue as a going concern.
MOLECULAR & DIAGNOSTIC: Wins Access to Cash Collateral
------------------------------------------------------
The U.S. Bankruptcy Court for the Northern District of Mississippi
authorized Molecular & Diagnostic Testing Labs of America, LLC to
use the cash collateral of McKesson Corporation and BNA Bank to pay
all expenses incurred in the ordinary course of business, provided
the Debtor complies with the remaining provisions of the Agreed
Order.
The Debtor is authorized to set aside $2,000 per month for payment
of administrative fees, including UST fees, attorney's fees and
other professional fees, provided the Court has authorized payment
of attorney's fees and other professional fees.
The Debtor is directed to pay $2,552 to BNA within three business
days following the entry of the Agreed Order to cover the amount
to which BNA is entitled to recover as a setoff.
The Debtor is also ordered to pay BNA $933 per month and McKesson
$6,140 as adequate protection payments. The initial payment will be
paid within three business days following the entry of the Agreed
Order and payment of additional monthly payments of $933 will be
paid on or before the 10th day of each month, commencing on May 10,
2022.
Moreover, the Debtor is permitted to pay $1,860 monthly into a
separate DIP account commencing with a payment made within three
business days following the entry of the Agreed Order, with
additional monthly payments in the same amount on or before the
10th day of each month commencing on May 10, 2022, with the funds
to be held for subsequent disbursement to BNA and/or McKesson upon
further Court order as to the extent, validity and priority of
their liens on the accounts receivable of the Debtor.
BNA and McKesson are granted replacement liens on the Debtor's
postpetition accounts receivable at the total values of their
respective liens against the accounts receivable they held as of
the Petition Date, subject to the said further order of the Court,
less any amounts paid to them with respect to accounts receivable
under the other provisions of the Agreed Order.
BNA is granted a replacement lien on the Debtor's postpetition
inventory at the total value of BNA's lien against the inventory it
held as of the Petition Date, less any amounts paid to BNA with
respect to inventory under the other provisions of the Agreed
Order.
A copy of the order is available at https://bit.ly/35QCqSf from
PacerMonitor.com.
About Molecular & Diagnostic
Molecular & Diagnostic Testing Labs of America, LLC is a reference
lab located in Tupelo, Mississippi, providing laboratory testing
services.
The Debtor sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. N.D. Miss. Case No. 21-12201) on November
17, 2021. In the petition signed by Joseph R. Campbell a/k/a Joey
Campbell, its managing member, the Debtor disclosed up to $500,000
in assets and up to $10 million in liabilities.
Judge Selene D. Maddox oversees the case.
Robert Gambrell, Esq., at Gambrell & Associates, PLLC is the
Debtor's counsel.
MYOMO INC: Reports Progress With China Joint Venture
----------------------------------------------------
Myomo, Inc. provides an update on the status of its joint venture
in China and the associated impact on first quarter 2022 revenue.
As of March 31, 2022, a portion of the technology license fee from
the JV Company, Jiangxi Myomo Medical Assistive Appliance Co. Ltd.,
has been paid. Myomo received $1.0 million of the total $2.7
million license fee during March, which will be accounted for as
revenue during the three months ended March 31, 2022.
David Henry, Myomo's chief financial officer, said, "This license
revenue is additive to first quarter product revenue, which on
March 9, 2022 we stated would be in the range of $2.6 million to
$3.0 million. Our joint venture is making tangible progress toward
beginning operations, and we expect the remainder of the license
fee will be paid during the second quarter. At that point we will
begin transfer of the technology and record the remaining $1.7
million as revenue. In anticipation of this final payment, plans
are underway to assist joint venture staff in establishing
operations for the production and sale of the MyoPro's for
individuals in China with upper-limb paralysis."
About Myomo
Headquartered in Cambridge, Massachusetts, Myomo, Inc. --
http://www.myomo.com-- is a wearable medical robotics company that
offers expanded mobility for those suffering from
neurologicaldisorders and upper limb paralysis. Myomo develops and
markets the MyoPro product line. MyoPro is a powered upper limb
orthosis designed to support the arm and restore function to the
weakened or paralyzed arms of patients suffering from CVA stroke,
brachial plexus injury, traumatic brain or spinal cord injury, ALS
or other neuromuscular disease or injury.
Myomo reported a net loss of $10.37 million for the year ended Dec.
31, 2021, a net loss of $11.56 million for the year ended
Dec. 31, 2020, a net loss of $10.71 million for the year ended Dec.
31, 2019, and a net loss of $10.32 million for the year ended Dec.
31, 2018. As of Dec. 31, 2021, the Company had $20.10 million in
total assets, $4.69 million in total liabilities, and $15.41
million in total stockholders' equity.
NEELAM INC: Unsecureds to Get Share of Income for 5 Years
---------------------------------------------------------
Neelam Inc. filed with the U.S. Bankruptcy Court for the District
of New Jersey a Small Business Plan of Reorganization dated April
4, 2022.
The Debtor has been incorporated since 1997 and was formed for the
purpose owning and managing residential commercial and mixed use
real estate. Nayana Desai has been the President and shareholder of
the Debtor since its formation and has nearly 30 years' experience
in real estate investment business.
Nayana Desai transferred the Neelam Properties to the Debtor
shortly after the Debtor's formation in 1997. Since its formation,
the Debtor's operations had always been stable until the onset of
the COVID Pandemic.
The Debtor's primary assets consist of the Neelam Properties. No
independent appraisal of the assets has been performed, but the
Debtor estimates that the total value of the real property is
approximately $2,150,000.
Class One consists of a Secured Claim held by Flatiron Realty
Capital The creditor filed Proof of Claim No. 3 in the Claims
Register of this case asserting a secured claim of $255,008.20.
Commencing on the 15th of the month following the Effective Date,
the Allowed Secured Claim shall be paid in monthly installments
over 60 months in the amount of $1,369 per month principal and
interest calculated at 5% interest amortized over 30 years with a
balloon payment to be made at the end of the 60th month of the Plan
in an amount equal to the outstanding balance owing.
Class Two A consists of a Secured Claim held by U.S. Bank National
Association. The creditor filed Proof of Claim No. 4 in the Claims
Register of this case asserting a secured claim of $223,528.44.
Commencing on the 15th of the month following the Effective Date,
the Allowed Secured Claim shall be paid in monthly installments
over 60 months in the amount of $1,200 per month principal and
interest calculated at 5% interest amortized over 30 years with a
balloon payment to be made at the end of the 60th month of the Plan
in an amount equal to the outstanding balance owing.
Class Two B consists of a Secured Claim held by U.S. Bank National
Association. The creditor filed Proof of Claim No. 5 in the Claims
Register of this case asserting a secured claim of $314,513.89.
Commencing on the 15th of the month following the Effective Date,
the Allowed Secured Claim shall be paid in monthly installments
over 60 months in the amount of $1,688 at 5% interest. Amortized
over 30 years with a balloon payment to be made at the end of the
60th month of the Plan in an amount equal to the outstanding
balance owing.
Class Three are holders of General Unsecured Claims, including and
claims of creditors not otherwise classified under the Plan. The
estimated amount of unsecured claims as scheduled or filed is
$7,615.45. Commencing on the first anniversary of the Effective
Date of the Plan and each year thereafter for a total of 5 years,
the Debtor shall make annual payments in an amount equal to the
annual projected disposable income of the Debtor.
The Debtor shall distribute the funds to the holders of liquidated,
non-contingent claims as scheduled or filed, subject to timely
objection to the validity or extent of each claim and the claims of
creditors not otherwise treated under the Plan (the "General
Unsecured Claims") on a pro-rata basis commencing one year after
the Effective Date and annually thereafter during the life of the
Plan.
The Plan will be funded from a combination of (i) funds on hand in
the estate at the time of Confirmation; and (ii) future income
generated through leasing, sale or refinance of the Neelam
Properties.
The Debtor's financial projections show that the Debtor will have
an aggregate annual average pre-tax cash flow, after paying
operating expenses and, of between $133,000 and $135,000. The final
Plan payment is expected to be paid 60 months following the
Effective Date.
A full-text copy of the Plan of Reorganization dated April 4, 2022,
is available at https://bit.ly/3JqBj9H from PacerMonitor.com at no
charge.
Counsel to the Debtor:
Narissa A. Joseph
LAW OFFICE OF NARISSA A. JOSEPH
305 Broadway, Suite 1001
New York, NY 10007
(973) 768-6072
njosephlaw@aol.com
About Neelam Inc.
Neelam Inc. has been incorporated since 1997 and was formed for the
purpose owning and managing residential commercial and mixed use
real estate.
Neelam Inc. filed a Chapter 11 Petition (Bankr. D.N.J. Case No.
21-14967) on June 17, 2021. The Debtor is represented by Julio E.
Portilla, Esq. of LAW OFFICE OF JULIO E. PORTILLA, P.C.
OLYMPIA SPORTS: Wins Interim Cash Collateral Access
---------------------------------------------------
The U.S. Bankruptcy Court for the Eastern District of Pennsylvania
authorized Olympia Sports, Inc. to use cash collateral on an
interim basis in accordance with the budget through April 30,
2022.
The Debtor requires immediate authority to use cash collateral to
continue its business operations without interruption toward the
objective of formulating an effective plan of reorganization.
The Small Business Administration asserts a security interest in,
among other things, accounts receivable, equipment, inventory, and
proceeds thereof, to secure its liens. The SBA has filed a UCC-1
Financing Statement.
The Debtor is permitted to use cash collateral for these purposes:
a. maintenance and preservation of its assets;
b. the continued operation of its business, including but not
limited to payroll, payroll taxes, employee expenses, and insurance
costs;
c. the completion of work-in-process; and
d. the purchase of replacement inventory.
The motion as relates to determining whether Adidas is designated
as a Critical Vendor is dismissed without prejudice.
As adequate protection for use of cash collateral, the Secured
Creditor is granted a replacement perfected security interest under
Section 361(2) of the Bankruptcy Code to the extent the Secured
Creditor's cash collateral is used by the Debtor.
To the extent the adequate protection provided proves insufficient
to protect the Secured Creditor's interest in and to the cash
collateral, the Secured Creditor will have a superpriority
administrative expense claim, pursuant to Section 507(b) of the
Bankruptcy Code, senior to any and all claims against the Debtor
under Section 507(a) of the Bankruptcy Code.
The Debtor is also directed to make $731 in monthly payments to the
SBA. The payments are to be made the first of every month beginning
April 1.
The final hearing on the matter is scheduled for April 27 at 12:30
p.m.
A copy of the order and the Debtor's budget for the period from
March to May 2022 is available for free at https://bit.ly/3qVneL8
from PacerMonitor.com.
The Debtor projects $52,856 in total revenue and $35,739 in total
expenses for April 2022.
About Olympia Sports, Inc.
Olympia Sports, Inc. owns and operates a shoes and clothing retail
store. Olympia Sports sought protection under Chapter 11 of the
U.S. Bankruptcy Code (Bankr. E.D. Pa. Case No. 22-10535) on March
2, 2022. In the petition signed by Jae Ko, president, the Debtor
disclosed $426,214 in assets and $1,001,666 in liabilities.
Judge Ashely M. Chan oversees the case.
Robert N. Braverman, Esq., at McDowell Law, PC is the Debtor's
counsel.
ONEJET INC: Ex-Pilot Ravotti Drops Toxic-Exhaust Lawsuit
--------------------------------------------------------
Matthew Santoni, writing for Law360, reports that a former pilot
for bankrupt airline OneJet has dropped his lawsuit claiming the
carrier's lax maintenance allowed exhaust to leak into his plane
and sicken him, according to court records.
Jeremy Ravotti, a pilot contracted to fly OneJet's small planes
between midsize airports, stipulated to the dismissal of his suit
with prejudice Wednesday, April 6, 2022, which U.S. District Judge
W. Scott Hardy granted the same day. The stipulation didn't say the
parties had reached a settlement, but settlement talks had
continued earlier in 2022 even after a mediation session didn't
resolve the case in January, court documents said.
About OneJet Inc.
OneJet Inc. was a virtual airline that specialized in scheduled
point-to-point flights operated by small business jets and regional
aircraft. Flights were operated utilizing a public charter
arrangement.
OneJet was forced into involuntary Chapter 7 bankruptcy (Bankr.
W.D. Pa. Case No. 18-24070) by several investors in October 2018,
two months after it stopped flying. It later reported it had no
assets and $43 million in liabilities.
The Chapter 7 Trustee:
Rosemary C. Crawford
Crawford McDonald, LLC. P.O. Box 355
Allison Park, PA 15101
The Chapter 7 Trustee's counsel:
Kirk B. Burkley, Esq.
Bernstein-Burkley, P.C.
Tel: 412-456-8108
E-mail: kburkley@bernsteinlaw.com
- and -
Rosemary C. Crawford, Esq.
Crawford McDonald, LLC
Tel: 724-443-4757
E-mail: crawfordmcdonald@aol.com
OZOP ENERGY: Needs More Time to File 2021 Annual Report
-------------------------------------------------------
Ozop Energy Solutions, Inc. filed a Form 12b-25 with the Securities
and Exchange Commission with respect to its Annual Report on Form
10-K for the year ended Dec. 31, 2021, disclosing that it needs
additional time to compile and analyze supporting documentation in
order to complete the Form 10-K and to permit the company's
independent registered public accounting firm to complete its
audit.
In accordance with Rule 12b-25 of the Securities Exchange Act of
1934, the company will file its Form 10-K no later than the 15th
calendar day following the prescribed due date.
Ozop anticipates a significant change in its results of operations
for the year ended Dec. 31, 2021, as compared to the year ended
Dec. 31, 2020, as the company had significant derivative liability
calculations during the year ended Dec. 31, 2021 and a reasonable
estimate of the results of operations could not be made as of the
current date because the company's accountants are still auditing
the derivative liabilities and the company's results of
operations.
About Ozop Energy Solutions
Ozop Energy Solutions (http://ozopenergy.com)invents, designs,
develops, manufactures, and distributes ultra-high-power chargers,
inverters, and power supplies for a wide variety of applications in
the defense, heavy industrial, aircraft ground support, maritime
and other sectors. The Company's strategy focuses on capturing a
significant share of the rapidly growing renewable energy market as
a provider of assets and infrastructure needed to store energy.
OZOP Energy reported a net loss of $20.48 million for the year
ended Dec. 31, 2020, compared to a net loss of $571,595 for the
year ended Dec. 31, 2019. As of June 30, 2021, the Company had
$9.42 million in total assets, $54.07 million in total liabilities,
and a total stockholders' deficit of $44.65 million.
Hackensack, New Jersey-based Prager Metis CPA's LLC, the Company's
auditor since 2018, issued a "going concern" qualification in its
report dated April 15, 2021, citing that as of Dec. 31, 2020, the
Company had an accumulated deficit of $21,793,375 and a working
capital deficit of $4,604,189. In addition, the Company has
generated losses since inception. These factors, among others,
raise substantial doubt regarding the Company's ability to continue
as a going concern.
PARAGON OFFSHORE: 3rd Circuit Upholds $16.5M SinoEnergy Rig Deal
----------------------------------------------------------------
Rick Archer of Law360 reports that the Third Circuit upheld Friday,
April 8, 2022, the $16.5 million settlement of an oil rig dispute
between Paragon Offshore PLC and SinoEnergy Capital Management Ltd.
against an appeal by a former Paragon equity holder, saying Paragon
shareholders had had no standing to challenge the deal.
In an unpublished opinion, the panel said the bankruptcy and
district courts were right to dismiss Michael Hammersley's
challenges to the settlement and the associated dismissal of the
bankruptcy case of a Paragon affiliate, saying he stood to gain
nothing from Paragon's 2016 bankruptcy and thus sustained no losses
when the deal was made.
About Prospector Offshore
and Paragon Offshore
Paragon Offshore Plc, and several affiliates filed Chapter 11
bankruptcy petitions (Bankr. D. Del. Case Nos. 16-10385 to
16-10410) on Feb. 14, 2016. The Delaware Bankruptcy Court entered
an order on June 7, 2017, confirming the 2016 Debtors' Fifth Joint
Chapter 11 Plan of Reorganization.
Prospector Offshore Drilling S.a r.l. and three affiliates filed
separate Chapter 11 bankruptcy petitions (Bankr. D. Del. Case Nos.
17-11572 to 17-11575) on July 20, 2017. The affiliates are
Prospector Rig 1 Contracting Company S.a r.l.; Prospector Rig 5
Contracting Company S.a r.l.; and Paragon Offshore plc (in
administration).
The Hon. Christopher S. Sontchi presides over the cases.
The Debtors are represented by Gary T. Holtzer, Esq., and Stephen
A. Youngman, Esq., at Weil, Gotshal & Manges LLP, and Mark D.
Collins, Esq., Amanda R. Steele, Esq., and Joseph C. Barsalona II,
Esq., at Richards, Layton & Finger, P.A., as counsel. The Debtors
hired as their financial advisors, Lazard Freres & Co. LLC; as
their restructuring advisor, AlixPartners, LLP; and as their
claims, noticing and solicitation agent, Kurtzman Carson
Consultants LLC.
In the petitions signed by Senior VIce President and CFO Lee M.
Ahlstrom, the Debtors estimated $1 billion to $10 billion in both
assets and liabilities.
The Debtors' bankruptcy filing came two days after the Paragon
Offshore group completed its corporate and financial reorganization
on July 18, 2017. The plan of reorganization under chapter 11 of
the U.S. Bankruptcy Code substantially de-levered Paragon
Offshore's ongoing business, eliminating approximately $2.3 billion
of secured and unsecured debt.
PARS BRONX REALTY: Hits Chapter 11 Bankruptcy in New York
---------------------------------------------------------
Pars Bronx Realty LLC filed for chapter 11 protection.
According to court filings, Pars Bronx Realty estimates 1 and 49
unsecured creditors, including New York State Department of
Taxation, Internal Revenue, Service, and NYC Department of
Buildings. Pars Bronx Realty also has 6 secured creditors, like
Mooring Tax Asset Group LLC, Enviromental Control Board, and Aflux
LLC. The petition states that funds will be available to unsecured
creditors.
A teleconference meeting of creditors under 11 U.S.C. Sec. 341(a)
is slated for May 6, 2022, at 3:00 p.m. at Office of UST.
About Pars Bronx Realty LLC
Pars Bronx Realty LLC is primarily engaged in renting and leasing
real estate properties.
Pars Bronx Realty LLC filed for bankruptcy protection under Chapter
11 Subchapter V of the Bankruptcy Code (Bankr. E.D.N.Y.Case No.
22-40714) on April 5, 2022. In the petition filed by Pari Keyhani
Shojae, as owner and president, Pars Bronx Realty LLC listed
estimated assets between $1 million and $10 million and estimated
liabilities between $1 million and $10 million. This case is
assigned to Honorable Judge Elizabeth S. Stong. Ryan L Gentile and
Gus Michael Farinella, of Law Offices Of Gus Michael Farinella PC,
are the Debtor's counsels.
PINNACLE CONSTRUCTORS: Wins Cash Collateral Access
--------------------------------------------------
The U.S. Bankruptcy Court for the Middle District of Tennessee,
Nashville Division, has authorized Pinnacle Constructors, Inc. to
use cash collateral on an interim basis in accordance with the
budget until the final hearing.
In addition to the expenses set forth in the Budget, the Debtor is
authorized to use cash collateral for payment of: (i) allowed
professional fees and disbursements to the Debtor's professionals,
that are specifically approved by the Court in the case, including
the Subchapter V Trustee, and (ii) any fees payable to the Clerk of
the Bankruptcy Court.
As interim adequate protection for the use of, and any diminution
in the value of, the collateral, Southeast Community Capital
Corporation d/b/a/ Pathway Lending and Renasant Bank are granted
replacement security interests in the Debtor's post-petition
property and proceeds thereof.
The replacement liens and security interests granted will be deemed
perfected upon entry of the Order without the necessity of the
Lenders taking possession of any collateral or filing financing
statements or other documents.
The Debtor will keep its assets insured by reasonable and
sufficient insurance coverage as required by the terms of the loan
documents executed by Debtor in favor of the Lenders, and will,
upon request and reasonable notice, provide the Lenders reasonable
information to allow the Lenders to determine the extent to which
the Debtor is complying with the Cash Collateral Budget. In
addition, the Debtor will provide to Renasant proof of insurance on
its collateral, in form and substance satisfactory to Renasant, by
no later than March 11, 2022.
The final hearing on the matter is scheduled for May 10, 2022 at
1:30 p.m.
A copy of the order and the Debtor's eight-week budget through May
20, 2022 is available at https://bit.ly/3v4oMUp from
PacerMonitor.com.
The budget provides for total expenses, on a weekly basis, as
follows:
$17,500 for the week ending April 1, 2022;
$16,300 for the week ending April 8, 2022;
$35,700 for the week ending April 15, 2022;
$4,300 for the week ending April 22, 2022;
$64,400 for the week ending April 29, 2022;
$5,000 for the week ending May 6, 2022;
$13,000 for the week ending May 13, 2022; and
$11,300 for the week ending May 20, 2022.
About Pinnacle Constructors, Inc.
Pinnacle Constructors, Inc. is a Tennessee corporation that
provides underground utility work specializing in large diameter
water, sewer, and storm drainage projects. The company also
performs site grading with a focus on land development in new
subdivisions, and heavy equipment hauling and relocation.
The Debtor sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. M.D. Tenn. Case No. 22-00670) on March 4,
2022. In the petition signed by Kevin Webb, president, the Debtor
disclosed up to $10 million in both assets and liabilities.
Nancy King, Esq., at EmergeLaw, PLC is the Debtor's counsel.
Southeast Community Capital Corporation d/b/a/ Pathway Lending, as
lender, is represented by J. Timothy Street, Esq. at Johnston &
Street.
Renasant Bank, as lender, is represented by David W. Houston, IV,
Esq. and J. Patrick Warfield, Esq. at Burr & Forman.
PRECISION DRILLING: Fitch Affirms 'B+' LT IDR, Outlook Stable
-------------------------------------------------------------
Fitch Ratings has affirmed Precision Drilling Corporation's
(Precision) Long-Term Issuer Default Rating (IDR) at 'B+'. Fitch
has also affirmed Precision's senior secured revolver at
'BB+'/'RR1' and the senior unsecured ratings at 'B+'/'RR4'. The
Rating Outlook is Stable.
Precision's rating reflects the company's execution on debt
reduction initiatives, strong liquidity profile, and lack of
near-term maturities. Fitch expects continued FCF generation with
proceeds allocated towards debt repayment, which should help
maintain credit metrics within rating tolerances.
Offsetting factors include uncertainty around increases in E&P
development spending as public producers remain disciplined despite
historically high prices. Other concerns include supply chain
disruptions leading to increased service and labor costs that will
have to be offset by continued increases in day rates.
KEY RATING DRIVERS
Improving Rig Count, Higher Costs: Both U.S. and Canadian rig
counts have seen slower, more gradual increases since bottoming out
in 2Q20. Public producers continue to remain disciplined with
development spending as they maintain production profiles and
return FCF to shareholders. Day rates in the U.S. have moved into
the USD25,000 range for active rigs, which has supported modest
margin increases for Precision in 4Q21 and are also expected in
1Q22. Margin increases should be feasible in the near term as
utilization rates improve, but sustainable increases in the medium
term could be challenged by weakening rig demand and/or labor
constraints. Fitch believes Precision will have to continue
increasing day rates in the near and medium term to offset higher
service and labor costs as supply chain disruptions pressure the
industry.
Modest Capital Program; Positive FCF: Management has guided towards
a capital budget of approximately CAD98 million in 2022, (CAD56
million of maintenance and CAD42 for upgrade and expansion
spending) up from CAD76 in 2021, with a focus on FCF generation.
Fitch's base case forecasts approximately CAD100-CAD140 million FCF
in 2022 and 2023, assuming modest improvements in rig counts and
margins from 4Q21.
Continued Debt Reduction; Strong Liquidity: Fitch expects
Precision's liquidity profile will remain strong throughout the
rating horizon and views management's CAD75 million debt reduction
target in 2022 and CAD400 million debt reduction target over four
years as achievable given the positive FCF forecast. Gross debt
reduction totaled CAD115 million in 2021, and the company has
repaid approximately CAD665 million of total debt since 2018. FCF
is expected to be allocated to reduce revolver borrowings in 2022
as the company exited 2021 with US118 million outstanding (US33
million in outstanding letters of credit) under the USD500 million
credit facility.
Improving Leverage; Clear Maturity Profile: Fitch's base case
forecasts leverage at 3.3x in 2022 and improving thereafter through
a combination of expected gross debt reduction and modest increases
in pricing and activity levels. The maturity profile also remains
muted with no significant maturities until the revolver matures in
2025. Fitch expects debt repayment will largely be aimed at the
credit facility in the near term and believes management will look
to return capital to shareholders via share buybacks.
Leading Canadian Share: Precision has a leading market share in
Canada, with approximately 33% of active rigs in key Canadian
basins. The company's current Canadian fleet consists of 109
drilling rigs and 188 well service rigs. Fitch anticipates drilling
activity will modestly improve through 2022. Precision should
continue to maintain market share given its success and growth in
digital leadership through its Alpha Technology services, which are
not exposed to pricing competition and help improve overall
utilization rates.
Volatile U.S. Operations; Competitive Pricing: U.S. operations are
historically more volatile than Canadian operations, although both
regions are seeing a slower, extended recovery since pandemic lows
in 2Q20. Fitch estimates Precision has the fourth-largest market
share at approximately 9% market share, an improvement from
approximately 6% in 2015. Fitch expects improving activity levels
in the U.S. for 2022, similar to Canada, but believes supply chain
disruptions and higher service and labor costs could limit margin
expansion in the medium term.
DERIVATION SUMMARY
Precision's primary peer is Nabors Industries (CCC+), which is also
an onshore driller with exposure to U.S. and international markets.
Fitch estimates that Nabors has the third largest market share in
the U.S. at approximately 12% versus Precision at 9%. Nabors' gross
margins in the U.S. are higher than Precision's and are helped by
their offshore and Alaskan rig fleet, which operate at
significantly higher margins. Precision has the highest market
share in Canada at approximately 33%. However, Nabors has a
significant international presence, which typically means
longer-term contracts that partially negate the volatility of the
U.S. market.
Precision has stronger leverage metrics and a much less significant
maturity wall than Nabors. Nabors has more liquidity than Precision
due to its larger revolver and higher availability, but Fitch
expects both companies to generate free cash flow over their
respective forecast periods and utilize the cash to reduce debt.
Compared to Enerflex, Ltd. (BB-/Stable), a global supplier of
natural gas infrastructure and energy transition solutions, both
companies have similar leverage profiles at around 3.0x and simple
capital structures. Enerflex is larger, more diversified and cash
flows are less susceptible to commodity price cycles through more
stable, recurring revenue streams and long-term take-or-pay
contracts with five to 10-year terms.
KEY ASSUMPTIONS
-- WTI oil price of USD95/bbl in 2022, USD76/bbl in 2023,
USD57/bbl in 2024 and USD50/bbl thereafter;
-- Henry Hub natural gas price of USD4.25/mcf in 2022,
USD3.25/mcf in 2023, USD2.75/mcf in 2024 and USD2.50/mcf
thereafter;
-- Revenues increase by about 30% in 2022 due to improving rig
count and day rates;
-- Capex of CAD98 million in 2022 given moderate increase in
upgrade and expansion capital;
-- Free cash flow to remain positive with proceeds used to reduce
debt.
KEY RECOVERY RATING ASSUMPTIONS
The recovery analysis assumes Precision would be reorganized as a
going-concern (GC) in bankruptcy rather than liquidated. Fitch
assumed a 10% administrative claim.
Going-Concern Approach
Precision's GC EBITDA estimate reflects Fitch's view of a
sustainable, post-reorganization EBITDA on which the enterprise
valuation (EV) is based. The GC EBITDA assumption for commodity
sensitive issuers at a cyclical peak reflects the industry's move
from top-of-the-cycle commodity prices to midcycle conditions and
intensifying competitive dynamics.
The GC EBITDA assumption is relatively in-line with 2025 forecast
EBITDA, which represents emergence from a prolonged commodity price
decline. Fitch assumes a WTI oil price of USD67/bbl in 2022,
USD42/bbl in 2023, USD32/bbl in 2024, USD42/bbl in 2025 and
USD45/bbl over the long term.
The assumption also reflects loss of customers and lower margins,
as E&P companies pressure oilfield service firms to reduce
operating costs. It also reflects corrective measures taken in the
reorganization to offset the adverse conditions that triggered
default, such as cost cutting and optimal deployment of assets.
An EV multiple of 5.0x EBITDA is applied to GC EBITDA to calculate
a post-reorganization EV. The choice of this multiple considered
the following factors:
The historical bankruptcy case study exit multiples for peer energy
companies have a wide range, with a median of 6.1x. The oilfield
service subsector ranges from 2.2x-42.5x due to the more volatile
nature of EBITDA swings in a downturn. The median is 7.4x.
Fitch uses a 5.0x multiple for Precision because of its high mix of
Canadian rigs, weaker competitive position in the U.S. and relative
mix of non-super spec rigs.
Liquidation Approach
The liquidation estimate reflects Fitch's view of the value of
balance sheet assets that can be realized in sale or liquidation
processes conducted during a bankruptcy or insolvency proceeding
and distributed to creditors.
Fitch assigns a liquidation value to each rig based on management
discussions, comparable market transaction values, and upgrade and
new building cost estimates.
Different values were applied to top-of-the-line super spec rigs,
lower value super spec rigs, non-super spec rigs and higher value
international rigs.
The GC value was estimated at approximately CAD1.1 billion, or
approximately CAD4 million per rig.
Fitch assumes the secured credit facility will be fully drawn upon
default and is super senior in the waterfall. The value allocation
in the liability waterfall results in a recovery corresponding to
'RR1' for the secured credit facility and a recovery corresponding
to 'RR4' for the senior unsecured notes.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Increased size, scale and/or diversification;
-- Ability to maintain a competitive asset base in a credit-
conscious manner;
-- Maintenance of liquidity and financial flexibility including
low revolver utilization;
-- Midcycle gross debt/EBITDA below 3.5x on a sustained basis.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Failure to manage FCF that negatively affects liquidity and
debt reduction capacity;
-- Deteriorating bank relationships that result in increasing
covenant pressure or reduced liquidity;
-- Structural deterioration in rig fundamentals that results in
weaker than expected financial flexibility;
-- Midcycle gross debt/EBITDA above 4.5x on a sustained basis.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Strong Liquidity: Precision had CAD41 million of cash on hand as of
Dec. 31, 2021, and USD118 million drawn (USD33 million of
outstanding letters of credit) on its USD500 million revolver.
There are no significant maturities due until the revolver matures
in June 2025 and 7.125% notes mature in January 2026. Fitch
anticipates the company will continue to be FCF positive over the
forecast given the improving rig count and utilization rates which
supports the liquidity profile.
ISSUER PROFILE
Precision is an oilfield service company that owns and operates a
fleet of 226 onshore drilling rigs that operate in Canada (109
rigs), the U.S. (104 rigs), and internationally (13 rigs), mainly
in the Middle East.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
PRESSURE BIOSCIENCES: Incurs $20.2 Million Net Loss in 2021
-----------------------------------------------------------
Pressure Biosciences, Inc. filed with the Securities and Exchange
Commission its Annual Report on Form 10-K disclosing a net loss of
$20.15 million on $2 million of revenue for the year ended Dec. 31,
2021, compared to a net loss of $16.01 million on $1.22 million of
revenue for the year ended Dec. 31, 2020.
As of Dec. 31, 2021, the Company had $2.83 million in total assets,
$25.04 million in total liabilities, and a total stockholders'
deficit of $22.21 million.
As of Dec. 31, 2021, the Company did not have adequate working
capital resources to satisfy its current liabilities. The Company
has been successful in raising cash through debt and equity
offerings in the past. The Company has efforts in place to
continue to raise cash through debt and equity offerings.
Pressure Biosciences stated, "We believe our current and projected
capital raising plans, and our projected continued increases in
revenue, will enable us to extend our cash resources for the
foreseeable future. Although we have successfully completed equity
and debt financings and reduced expenses in the past, we cannot
assure you that our plans to address these matters in the future
will be successful."
The Company believes it will need approximately $12 million in
additional capital to fund its three-pronged operational plan,
which was designed to help increase revenues and reach
profitability, by:
A. reducing/eliminating debt and cleaning up the balance sheet;
B. funding UST development, instrument build and
commercialization;
C. facilitating up-listing PBIO to a major exchange; and
D. providing a minimum of two years of operational and growth
capital.
"However, if we are unable to obtain such funds through sales, the
capital markets or other source of financing on acceptable terms,
or at all, we will likely be required to cease our operations,
pursue a plan to sell our operating assets, or otherwise modify our
business strategy, which could materially harm our future business
prospects. These conditions raise substantive doubt about our
ability to continue as a going concern," Pressure Biosciences
said.
Net cash used in operating activities was $4,868,573 for the year
ended Dec. 31, 2021 as compared with $4,883,194 for the year ended
Dec. 31, 2020.
Net cash used in investing activities for the year ended Dec. 31,
2021 totaled $122,945 compared to $796,663 for the year ended
Dec. 31, 2020. Cash capital expenditures in the prior year
included loan advances to the Company's then pending merger partner
and purchases of laboratory and technology equipment.
Net cash provided by financing activities for the year ended Dec.
31, 2021 was $5,105,289 as compared with $5,668,772 for the year
ended Dec. 31, 2020. In 2021, the Company received net proceeds of
$1,015,000 from the sale of Series AA convertible preferred stock
and loans in the aggregate amount of $7,779,538 during the year and
the Company made payments on new and existing debt of $3,704,022.
Houston, Texas-based MaloneBailey, LLP, the Company's auditor since
2015, issued a "going concern" qualification in its report dated
April 4, 2022, citing that the Company has a working capital
deficit, has incurred recurring net losses and negative cash flows
from operations. These conditions raise substantial doubt about
its ability to continue as a going concern.
A full-text copy of the Form 10-K is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/0000830656/000149315222009156/form10-k.htm
About Pressure Biosciences
South Easton, Mass.-based, Pressure Biosciences Inc. --
http://www.pressurebiosciences.com-- develops and sells
innovative, broadly enabling, high pressure-based platform
technologies and related consumables for the worldwide life
sciences, agriculture, food and beverage, and other key industries.
PROFESSIONAL DIVERSITY: Director Won't Stand for Re-Election
------------------------------------------------------------
Haibin Gong, a member of the board of directors of Professional
Diversity Network, notified the company that he has decided not to
stand for re-election as a director of the company at its 2022
annual shareholder meeting.
Professional Diversity Network stated the decision was not the
result of any disagreement with the company on any matter relating
to its operations, policies or practices. The Nominating and
Governance Committee of the Board has nominated Scott Liu, who
served as a director of the company for the years 2016 through
‎‎2018, to stand for election as a director of the company at
the annual shareholder meeting.‎
On April 1, 2022, the Board resolved to hold the company's annual
shareholder meeting on June 2, 2022, and ‎to fix April 5, 2022 as
the record date for determining stockholders entitled to vote at
the annual shareholder meeting. ‎
About Professional Diversity
Headquartered in Chicago, Illinois, Professional Diversity Network,
Inc. -- https://www.prodivnet.com -- is a global developer and
operator of online and in-person networks that provides access to
networking, training, educational and employment opportunities for
diverse professionals. Through an online platform and its
relationship recruitment affinity groups, the Company provides its
employer clients a means to identify and acquire diverse talent and
assist them with their efforts to recruit diverse employees. Its
mission is to utilize the collective strength of its affiliate
companies, members, partners and unique proprietary platform to be
the standard in business diversity recruiting, networking and
professional development for women, minorities, veterans, LGBT and
disabled persons globally.
Professional Diversity reported a net loss of $2.76 million for the
year ended Dec. 31, 2021, a net loss of $4.35 million for the
year ended Dec. 31, 2020, compared to a net loss of $3.84 million
for the year ended Dec. 31, 2019. As of Dec. 31, 2021, the Company
had $8.98 million in total assets, $5.87 million in total
liabilities, and $3.11 million in total stockholders' equity.
Wilmington, DE-based Ciro E. Adams, CPA, LLC, the Company's auditor
since 2018, in its report dated March 31, 2022, citing that the
Company has incurred significant losses, and needs to raise
additional funds to meet its obligations and sustain its
operations. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.
QUOTIENT LIMITED: Appoints Thomas Aebischer as Director
-------------------------------------------------------
Quotient Limited appointed Thomas Aebischer to its Board of
Directors effective as of May 1, 2022. Mr. Aebischer will also
serve on the Board's Audit Committee.
Mr. Thomas Aebischer, 60, has been the chief financial officer of
RWDC Ltd., a biotechnology company concentrated on innovative and
cost-effective environmentally friendly biopolymer material
solutions, since March, 2021. From January 2016 to December, 2019,
Mr. Aebischer served as executive VP and CFO of LyondellBasell
Industries, a company active in plastics, chemicals and refinement.
He also served as chief financial officer for the Holcim Group from
2011 to 2015. Before becoming chief financial officer, he worked
in various positions for Holcim including as the chief financial
officer for group companies from 1996 to 2010. Earlier in his
career, Mr. Aebischer held positions as tax assessor and financial
auditor. He has served as a director and member of the audit
committee of Dormakaba (Switzerland) since October, 2021. Mr.
Aebischer is a Swiss Certified Accountant and graduated from the
Advanced Management Program at Harvard Business School.
In connection with Mr. Aebischer's appointment, the Company has
agreed to grant him share options and restricted share units. Mr.
Aebischer will receive a cash retainer and have business expenses
reimbursed, if any, consistent with other non-employee directors in
connection with his service on the Board and the Audit Committee.
The Company also expects to enter into an indemnification agreement
with Mr. Aebischer.
About Quotient Limited
Penicuik, United Kingdom-based Quotient Limited is a
commercial-stage diagnostics company committed to reducing
healthcare costs and improving patient care through the provision
of innovative tests within established markets. With an initial
focus on blood grouping and serological disease screening, Quotient
is developing its proprietary MosaiQTM technology platform to offer
a breadth of tests that is unmatched by existing commercially
available transfusion diagnostic instrument platforms. The
Company's operations are based in Edinburgh, Scotland; Eysins,
Switzerland and Newtown, Pennsylvania.
Quotient Limited reported a net loss of $108.47 million for the
year ended March 31, 2021, a net loss of $102.77 million for the
year ended March 31, 2020, and a net loss of $105.38 million for
the year ended March 31, 2019. As of Dec. 31, 2021, the Company
had $208.77 million in total assets, $334.38 million in total
liabilities, and a total shareholders' deficit of $125.61 million.
RENTZEL PUMP: Wins Cash Collateral Access Thru May 5
----------------------------------------------------
The U.S. Bankruptcy Court for the Western District of Oklahoma
authorized Rentzel Pump Manufacturing, LP to use cash collateral on
an interim basis through May 5, 2022. At 9:30 a.m., on that date,
the Court will hold a hearing to consider the Debtor's request to
use cash collateral on a final basis.
The Court said the cash collateral may only be used to fund the
types and corresponding amounts of itemized expenditures contained
in the budget that will be filed separately within seven days of
the entry of the Order; provided, however, the Debtor may use cash
collateral in excess of the amount designated for a particular
line-item so long as the percentage of deviation of each line item
during any rolling 4-week period does not exceed 10% in aggregate.
Any unused portion of the Variance will carry over to the following
rolling 4-week period.
The Debtor is directed to provide to Oklahoma State Bank an initial
aging of all accounts receivable and accounts payable and a list of
all inventory, plus total current operating expenses and total
current collections. This report shall be updated and provided to
Oklahoma State Bank by the 30th day of each month thereafter.
As adequate protection, Oklahoma State Bank is granted a validly
perfected first priority lien on and security interests in the
Debtor's post-petition Collateral subject to existing valid,
perfected and superior liens in the Collateral held by other
creditors, if any, and the Carve-Out. The rights, liens and
interests granted to Oklahoma State Bank will be based on Oklahoma
State Bank's relative rights, liens and interests in the Debtor's
cash collateral pre-petition. The postpetition security interests
and liens granted will be valid, perfected and enforceable and will
be deemed effective and automatically perfected as of the Petition
Date without the necessity of Oklahoma State Bank taking any
further action.
In the event of, and only in the case of diminution of value of
Oklahoma State Bank's interest in the Collateral, the Bank will be
entitled to a super-priority claim that will have priority in the
Debtor's bankruptcy case over all priority claims and unsecured
claims against the Debtor and its estate.
The Carve-Out includes any fees due to the U.S. Trustee pursuant to
28 U.S.C. section 1930 and fees and expenses incurred by the
Debtor's professionals and approved by the Court in an amount not
to exceed $20,000 and all Court approved Subchapter V Trustee
fees.
Beginning no later than May 3, 2022, the Debtor will make the first
post-petition monthly payment to Oklahoma State Bank of $3,000,
pursuant to the Debtor's pre-petition loan documents with Oklahoma
State Bank, unless Debtor and Oklahoma State Bank agree to a
different or lesser amount and continuing every month thereafter
while Debtor is using cash collateral.
A copy of the order is available at https://bit.ly/3r8edOZ from
PacerMonitor.com.
About Rentzel Pump Manufacturing, LP
Rentzel Pump Manufacturing, LP sought protection under Chapter 11
of the U.S. Bankruptcy Code (Bankr. W.D. Okla. Case No. 22-10541)
on May 25, 2022. In the petition signed by Randall Rentzel,
president, the Debtor disclosed up to $500,000 in assets and up to
$10 million in liabilities.
Judge Sarah A. Hall oversees the case.
Gary D. Hammond, Esq. at Mitchell & Hammond is the Debtor's
counsel.
Oklahoma State Bank, as lender is represented by:
Melvin R. McVay, Jr., Esq.
Clayton D. Ketter, Esq.
PHILLIPS MURRAH, P.C.
Corporate Tower, Thirteenth Floor
101 North Robinson Avenue
Oklahoma City, OK 73102
Tel: 405-235-4100
Tel: 405-235-4133
Email: mrmcvay@phillipsmurrahc.com
Email: cdketter@phillipsmurrah.com
RESOLUTE FOREST: Moody's Hikes CFR to Ba3, Outlook Stable
---------------------------------------------------------
Moody's Investors Service upgraded Resolute Forest Products Inc.'s
corporate family rating to Ba3 from B1, probability of default
rating to Ba3-PD from B1-PD, and guaranteed senior unsecured notes
rating to B1 from B2. The company's speculative grade liquidity
rating remains unchanged at SGL-1. The ratings outlook is stable.
"The upgrade reflects improvement in Resolute's financial
performance and Moody's view that leverage (adjusted Debt to
EBITDA) will remain around 4x over the next 12 to 18 months" said
Aziz Al Sammarai, Moody's analyst.
Upgrades:
Issuer: Resolute Forest Products Inc.
Corporate Family Rating, Upgraded to Ba3 from B1
Probability of Default Rating, Upgraded to Ba3-PD from B1-PD
Senior Unsecured Regular Bond/Debenture, Upgraded to B1 (LGD4)
from B2 (LGD4)
Outlook Actions:
Issuer: Resolute Forest Products Inc.
Outlook, Remains Stable
RATINGS RATIONALE
Resolute (Ba3 CFR) benefits from: (1) end-market and product
diversity with leading market positions across several paper and
forest product sectors; (2) leverage expectation of about 4.3x in
2023 (1.7x in 2021 after lumber export duty deposits and including
Moody's adjustments for the company's operating leases and large
unfunded pension liabilities); (3) operating flexibility across
North America with 17 sawmills, four commodity pulp mills and 7
newsprint and specialty paper mills; and (4) strong liquidity. The
company has announced a strategic review of its tissue business
segment. In the event of a sale, Moody's expects sale proceeds to
be reinvested into Resolute's remaining businesses and bolster
liquidity.
Resolute is constrained by: (1) the inherent price volatility of
its products; (2) the company's exposure to the secular decline of
newsprint and specialty papers (which represents about 27% of 2021
revenue); and (3) uncertainties regarding tariffs and the potential
negotiation of a new softwood lumber agreement between Canada and
the US.
The stable outlook reflects Moody's expectation that Resolute will
be able to maintain strong liquidity and leverage around 4x through
volatile industry conditions. Moody's expect that lumber, pulp and
commodity paper prices, which are currently at above trend levels,
will decline over the next 4 quarters, partially offset by benefits
reaped by the Calhoun pulp and paper operations closure. Moody's
expect that lumber and NBSK pulp prices will decrease 12% and 1%,
respectively, in 2022 and 32% and 11%, respectively in 2023 as both
demand and supply return to more normal levels.
Resolute has strong liquidity (SGL-1), with about $1.3 billion of
sources and no significant debt maturities over the next twelve
months. The company's sources of liquidity include about $112
million of available cash (at YE 2021), $370 million of Moody's
expected free cash flow (after duty deposits) and combined
availability of about $841 million under a) Resolute's $450 million
asset based revolving credit facility (ABL) that matures in
December 2026 (net of borrowing base and springing covenant
restrictions, drawings and letter of credit use), b) its $174
million delayed term loan facility with Investissement Québec
backed by lumber duty deposits (matures in 10 years), c) its $180
million secured delayed draw term loan available until April 2024
(matures up to 10 years from drawings), and d) its $180 million
secured revolving credit facility that matures April 2027. Resolute
does not have any significant debt maturities until 2026. In
addition, the company has approximately $400 million of softwood
lumber duty deposits (paid through December 2021) that will likely
be largely refunded (as they have been in the past) if and when a
new softwood lumber agreement is reached between Canada and the
US.
Resolute Forest Products ESG Credit Impact Score is Highly Negative
(CIS-4), reflecting the long-term secular decline in the company's
commodity paper business (about 27% of 2021 sales) which continues
to be replaced by digital alternatives. The challenge of shutting
down mills or repurposing assets as consumer preferences switch
away from commodity paper is a constraint to the credit rating. As
a manufacturing company, Resolute is exposed to moderate
environmental risks. Moderate governance risks reflect the
company's modest adjusted leverage relative to peers.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Factors that could lead to an upgrade
Adjusted debt/EBITDA is likely to be sustained around 3x (1.7x for
2021) based on Moody's forward opinion of sustainable metrics
(RCF-capex)/adjusted debt likely to be above 10% (39% for 2021)
based on Moody's forward opinion of sustainable metrics
The company is able to limit its exposure and diversify away from
business segments facing secular decline such as newsprint and
specialty paper
Factors that could lead to a downgrade
-- Sustained deterioration in the company's operating environment
or liquidity
-- Adjusted debt/EBITDA is likely to be sustained above 4.5x
(1.7x for 2021) based on Moody's forward opinion of sustainable
metrics
-- (RCF-capex)/adjusted debt likely to be below 5% (39% for 2021)
based on Moody's forward opinion of sustainable metrics
-- Sustained negative free cash flow generation
Headquartered in Montreal (Quebec, Canada), Resolute Forest
Products Inc. produces lumber, newsprint and specialty paper,
market pulp and tissue. Net sales for the year-ended December 31,
2021 were $3.7 billion.
The principal methodology used in these ratings was Paper and
Forest Products published in December 2021.
REVLON INC: S&P Affirms 'CCC-' Issuer Credit Rating, Outlook Neg.
-----------------------------------------------------------------
S&P Global Ratings affirmed its 'CCC-' issuer credit rating on
Revlon Inc. and all of its issue-level ratings on the company's
debt.
The negative outlook indicates that a default appears unavoidable
given its capital structure is unsustainable and liquidity is
pressured.
Near-term liquidity risk could make a default unavoidable in the
next six months. Ongoing supply chain challenges and persisting
inflation could unravel Revlon's liquidity in the near term,
putting further pressure on its ability to cover its interest
burden of about $260 million a year. Revlon has approximately $206
million of liquidity which includes $102 million of cash as of Dec.
31, 2021, $97 million of ABL availability that includes $25 million
of incremental borrowing base, and $7 million of borrowing base
capacity under its foreign ABTL facility. Once the company's ABL is
current S&P would no longer consider it a source of liquidity,
which can occur as early as June 2022 for the current $72 million
available. Additionally, the company has filed a S-3 shelf
registration to issue debt or equity securities. Debt securities
would only be issued on an unsecured basis and rank subordinate to
its existing senior debt in the capital structure. Given the
company's secured term debt is trading at distressed levels of 51
cents to the dollar and its stock is trading around $8 (down from
$15 last year), S&P is uncertain if this can successfully be
executed, unless it's possibly part of a broader restructuring. The
company did not generate positive free operating cash flow in
fiscal 2021 but S&P forecasts it will in 2022, mainly as a result
of improving margins from lower costs, less cash tied up in working
capital, and lower capital expenditures. However, the company's
ability to hit its EBITDA forecast is uncertain given its
performance over the past several years (which contributed to two
separate selective defaults) and we believe the company's need to
build inventory levels could have a negative impact on working
capital. Furthermore, its current need to raise external liquidity
to manage operations through an uncertain macroeconomic landscape
adds further uncertainty to the forecast and the company's ability
to manage liquidity over the next six months.
The company's capital structure remains unsustainable. In addition,
it may need to further restructure its balance sheet to address its
2023 refinancing requirements. Revlon has largely addressed its
near-term maturities (with distressed lenders), thus its next large
maturity wall is 2023 when approximately $1 billion of its debt
will come due and another $365 million of asset-based maturities
will likely spring into 2023 from 2024. S&P said, "However, the
company's continued negative free operating cash flow (FOCF), high
leverage (in the double-digit area), and pro forma reported
interest expense of $250 million lead us to view its capital
structure as unsustainable. Revlon restructured its balance sheet
in 2020 to avoid triggering the springing maturities on some of its
debt. This cost the company about $190 million of cash to complete,
reducing liquidity but improving its interest burden by about $50
million annually. We believe Revlon intends to manage the timing of
its other cash outflows to preserve sufficient liquidity to cover
its quarterly debt service payments. Still, we believe it will be
challenging for the company to meet its debt service needs. Revlon
received a clean fiscal year audit and going concern opinion in its
2021 10K filing."
S&P said, "Revlon had $72.4 million of availability under its $270
million revolving credit facility at the end of 2021. We believe
its owners, MacAndrews & Forbes, could provide it with additional
liquidity, though we anticipate its 2020 debt restructuring will
weigh on lender confidence and pressure its ability to refinance
its capital structure as needed."
Revlon addressed its 2021 maturities in March 2021 by extending the
expiration of its 2016 asset-based lending (ABL) revolving credit
agreement to 2023, downsizing its revolving tranche A facility to
$300 million from $400 million, and creating a second-in-second-out
(SISO) term loan tranche. The company further amended the 2016 ABL
revolving credit agreement in May 2021 to replace Citibank with
MidCap Financial as the collateral and administrative agent,
downsize the tranche A commitment to $270 million from $300
million, upsize the SISO tranche to $130 million from $100 million,
and extend the tranche A and SISO tranche maturities to May 2024.
S&P expects Revlon's top-line will continue expanding as consumer
demand remains elevated following the pandemic but, it anticipates
its performance will remain challenged due to its increased
competition and concentration in the mass channel. Pandemic-related
behaviors, such as mask wearing, social distancing, and working
from home, negatively affected the color cosmetics segment of the
industry because the demand for these products declined
significantly. Revlon's sales started to recover and grow again in
2021 as economies started to open, mainly driven by fragrances as
demand for color cosmetics and branded hair care lagged. For the
fiscal-year-ended 2021, total sales grew 9.2% driven by growth of
5.7% in the Revlon segment, 14.8% in Elizabeth Arden, 4.4% in
portfolio, and 13.8% in fragrances. The color cosmetics segment was
already expanding at a slower rate than skincare and the pandemic
exacerbated this divergence. The company primarily sells its color
cosmetics through the mass channel, where it has faced intensifying
competition in recent years because companies are increasingly
selling high-quality products at affordable prices through the
direct-to-consumer channel. Revlon continues to invest in its
e-commerce channel to broaden its consumer reach beyond the more
traditional mass channel. Throughout 2020-2021, Revlon generated
double-digit percent net increases in its sales in this channel and
e-commerce sales now account for approximately 16% of its total net
sales. Revlon will continue to focus on growing its e-commerce
penetration across all categories of its business.
Management's cost-saving initiatives and efforts to revitalize the
brand will help strengthen the company's profitability, though its
credit measures will remain weak. Revlon is still focused on its
current restructuring program called the Revlon Global Growth
Accelerator (RGGA) to enhance the organic growth of its key brands,
markets, and channels, achieve $60 million-$80 million (from $75
million-$95 million) of annual cost savings from operating
efficiencies, improve the capabilities of its employees through
training, and deliver transformational change. The program will
focus on expanding the Revlon and Elizabeth Arden brands in the
U.S. mass and prestige channels, as well as in Europe, the Middle
East, and Africa (EMEA), and China, and increasing its penetration
in the e-commerce channel with a goal of lifting its sales by the
mid-single-digit percent area annually through 2023. The company
has restructured its business over the last several years by
focusing on cost reduction, product innovation, and gaining
relevancy with younger consumers. The company has improved its cost
structure through these efforts, which supports S&P's base-case
forecast for EBITDA margin improvements. However, due to its large
debt balance, we still believe its capital structure is
unsustainable.
Revlon operates in the beauty industry, which is very fragmented
but also features large players (such as Estee Lauder, Coty,
L'Oreal) with greater financial wherewithal to develop and market
their products. The industry is also attracting many new innovative
brands that benefit from the relatively low costs involved in
influencer marketing, co-manufacturing, and the e-commerce channel.
These nascent companies are disrupting an industry with low
barriers to entry as consumers increasingly seek, and are willing
to try, new and innovative products.
S&P said, "The negative outlook on Revlon reflects our view that a
default appears unavoidable given that its capital structure is
unsustainable due to its heavy debt service burden and the risk of
liquidity shortfalls as the company navigates challenges with its
supply chain, rising costs and higher interest rates.
"We could lower our rating if Revlon misses a debt service payment,
files for bankruptcy protection, or initiates another debt
restructuring.
"We could raise our rating if improving operating performance and
cash flow management lead us to believe that a payment default or
bankruptcy filing are unlikely over the near term even if its
capital structure remains unsustainable."
ESG credit indicators: E-2, S-2, G-3
Social factors are an overall neutral consideration in S&P's credit
rating analysis of Revlon Inc. Although the pandemic exacerbated
declines in the color cosmetic space, the category is now growing
globally. Governance factors are a moderately negative
consideration for Revlon, as it has underperformed its peer set for
the past several years leading to multiple restructuring programs
to align the size and structure of the company. MacAndrews & Forbes
is the majority owner and controls the board and elections to the
board (currently six independent and three non-independent).
RODAN & FIELDS: Moody's Lowers CFR, Outlook Remains Negative
------------------------------------------------------------
Moody's Investors Service downgraded Rodan & Fields, LLC's ("R +
F") Corporate Family Rating to Caa3 from Caa2 and its Probability
of Default Rating to Caa3-PD from Caa2-PD. Moody's also downgraded
R + F's first lien senior secured revolving credit facility and
term loan ratings to Caa3 from Caa2. The rating outlook remains
negative.
The downgrade reflects Moody's view that R + F's capital structure
is becoming increasingly unsustainable as a result of continued
declines in consultants, revenue and earnings, as well as weakening
liquidity. Both revenue and earnings have declined in the
double-digit percentage range in the last three years, hurt by
significant declines in the company's independent sales consultants
and notwithstanding strategic initiatives to turn around the
business during that time. Moody's views changes in consumer
shopping patterns and the reduced attractiveness of the business
opportunity as an independent consultant are negatively affecting
the company's direct selling model. R + F is also facing ongoing
competition from large well capitalized competitors as well as a
large number of independent brands. Rising leverage and negative
free cash flow are weakening the company's flexibility to invest.
Moreover, the company's liquidity has meaningfully deteriorated. R
+ F had $82 million cash on hand at fiscal year-end 2021, a decline
from $149 million about a year ago. The preliminary approval of the
lash boost litigation settlement in March 2022 including a $30
million cash settlement, expected to be paid out in late 2022, will
further reduce the company's liquidity. R + F is executing on plans
to stabilize the consultant base including a category expansion
scheduled for later in 2022. However, Moody's is concerned that the
nearing June 2023 revolver expiration with a $36 million
outstanding balance as of December 2021, may not afford the company
enough time to stabilize revenue and strengthen credit metrics
enough to permit a successful refinancing of the debt. Moody's thus
views default risk as growing including the potential for a
distressed exchange transaction such as a discounted debt
repurchase.
Moody's took the following rating actions:
Downgrades:
Issuer: Rodan & Fields, LLC
Corporate Family Rating, Downgraded to Caa3 from Caa2
Probability of Default Rating, Downgraded to Caa3-PD from Caa2-PD
Gtd Senior Secured First Lien Revolving Credit Facility,
Downgraded to Caa3 (LGD3) from Caa2 (LDG4)
Gtd Senior Secured First Lien Term Loan, Downgraded to Caa3 (LGD3)
from Caa2 (LGD4)
Outlook Actions:
Issuer: Rodan & Fields, LLC
Outlook, Remains Negative
RATINGS RATIONALE
The Caa3 CFR reflects R + F's reduced revenue scale of below $1
billion and narrow focus on skincare. The company's debt-to-EBITDA
leverage was high at about 9.0x for the last twelve months ending
September 30, 2021, primarily a result of revenue and earnings
erosion in the last three years. The company has limited geographic
diversity and faces high and increasing competition from larger and
better capitalized competitors. Products are somewhat discretionary
and vulnerable to consumer spending pullbacks and focused largely
within the skincare segment. The company is also vulnerable to the
fundamental risks related to the direct selling business model,
such as declines in net enrollment of independent sales consultants
(new enrollment net of churn rate). In addition, Moody's believes
the company's default risk has significantly increased as a result
of weakened liquidity. While R + F is implementing strategies to
turn around the business, the company has limited time to stabilize
and grow its consultant base and earnings because the revolving
credit facility expires in June 2023. Addressing this maturity
could be challenging without demonstrated operating improvement due
to the high leverage, heightening default risk including the
potential for a distressed exchange. The rating is supported by the
company's good brand name recognition in niche markets and
well-regarded skincare products. The company's plans to expand its
product offering to an adjacent category in the second half of 2022
is expected to generate additional revenue and earnings.
In terms of Environmental, Social and Governance (ESG)
considerations, the most important factor for R + F's ratings are
governance considerations related to its financial policies.
Moody's views R + F's financial policies as aggressive given the
largely debt financed dividend paid to the company's founders in
2018. Moody's favorably believes the founders have a long-term
commitment to the company that bears their names. However, it is
unclear the extent to which the founders or minority equity holder
TPG are willing to inject capital into the business to help
alleviate the high leverage. Moody's may consider any such
transaction, if one occurs, as a distressed exchange depending on
the structure and use of proceeds.
Social considerations also impact R + F. The company is a "premium
skincare" company. R + F sells dermatologist inspired products that
appeal to customers to help their self-esteem by addressing skin
concerns. Hence social factors are a significant driver of R + F's
sales, and a strong factor support such sales. To the extent such
social factors change, it could have an impact -- positive or
negative -- on the company's sales and earnings.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The negative outlook reflects the increased risks of default or
distressed exchange that R + F faces due to weak operating trends,
high leverage, negative free cash flow and weakening liquidity as a
result of the preliminarily approved $30 million lash settlement
expected to be paid in late 2022 and the approaching June 2023
revolving credit facility expiration.
The ratings could be downgraded further if R + F does not stabilize
sales representative counts, revenue and earnings. A further
weakening of liquidity including a failure to extend revolver, an
increase in default risk or weakening of expected recovery values
could also lead to a downgrade.
Before Moody's would consider an upgrade, R + F would need to
materially improve its operating performance, restore positive free
cash flow, and improve liquidity including proactively address the
June 2023 expiration of its revolving credit facility.
The principal methodology used in these ratings was Consumer
Packaged Goods Methodology published in February 2020.
Based in San Francisco, CA, Rodan + Fields, LLC is a direct-seller
of skin care products. The company operates through a multi-level
marketing system that consists of about 163,000 consultants,
largely in the US. R+F is majority owned by the families of the
founders, Dr. Katie Rodan and Dr. Kathy Fields with TPG owning a
minority interest. The company generated about $870 million in
annual revenue for the twelve-month ending December 31, 2021.
SCIENTIFIC GAMES: Completes Lottery Business Divestiture
--------------------------------------------------------
Scientific Games Corporation, doing business as Light & Wonder,
completed the sale of its Lottery Business to Brookfield Business
Partners L.P. for $5.8 billion in gross cash proceeds and
approximately $5.0 billion of net after-tax cash proceeds. The
sale marks a major milestone in transforming the Company and its
balance sheet, delivering on one of the key promises the Company
made as part of its strategic review. After another record year
this is a significant step forward for the Lottery Business,
positioning it to accelerate growth as a stand-alone company with a
singular focus on its lottery customers.
With the net proceeds from the sale of the Lottery Business, Light
& Wonder is executing a balanced and opportunistic approach to
capital allocation, as communicated in its fourth quarter 2021
earnings call, focused on the priorities below:
* Priority #1: Debt reduction to a target net debt leverage
ratio range of 2.5x to 3.5x. The Company plans to use the net
proceeds from the sale of the Lottery Business to pay down
approximately $5.0 billion of its existing debt, by reducing and
refinancing its SGI Term Loan B-5 and paying off certain
outstanding notes. Taking this pay down into account, the
Company's adjusted net debt reflecting after-tax proceeds at year
end 2021 would have been approximately $3.2 billion compared to
$8.2 billion reported at year end 2021. Accordingly, the adjusted
net debt leverage ratio reflecting after-tax proceeds at year end
2021 would have been 3.9x, compared to 6.2x reported at year end
2021. The Company anticipates that it will achieve a net debt
leverage ratio within its target range of 2.5x to 3.5x following
the completion of the previously announced sale of its Sports
Betting Business, which is expected to occur in the third quarter
of 2022.
* Priority #2: Share buy-backs to return substantial capital to
shareholders now and in the future. The Company recently announced
the authorization of a 3-year, $750 million share repurchase
program. Since the announcement the Company has been actively
repurchasing shares, reflecting its strengthened balance sheet, the
recurring nature of its revenue, strong cash flow generation and
the value in its shares.
* Priority #3: Disciplined investment in key growth
opportunities. The Company will prioritize using its capital for
buy-backs, debt reduction and organic investments unless convinced
that M&A activity will deliver greater long-term shareholder value
than other uses of the Company's capital.
"The Lottery Business sale closing is a significant step towards
streamlining our portfolio and strengthening our balance sheet as
we execute on our strategy to transform our business with a
singular focus on building great games and franchises to entertain
our players wherever and whenever they want to play. The
convergence of land-based and digital continues to gain momentum
and we are strongly positioned to be a leader in the industry,"
said Light & Wonder Chief Executive Officer Barry Cottle. "With
the completion of the Lottery Business sale and the upcoming sale
of our Sports Betting Business, we are moving rapidly as we execute
on our vision to be a leading cross-platform global game provider
and unlock the full potential of Light & Wonder. This also
positions the Lottery Business for success as a stand-alone company
completely focused on innovating for its global lottery
customers."
"The proceeds from this transaction and our strong cash profile
allow us to accelerate progress on our capital allocation
strategy," said Light & Wonder Chief Financial Officer Connie
James. "We now have the financial flexibility and balance sheet
integrity that, combined with our double-digit growth profile and
high mix of digital and recurring revenues, give us a tremendous
opportunity to continue to drive shareholder value."
As previously announced, the Company recently rebranded to Light &
Wonder as part of the sale of its Lottery Business. The Lottery
Business will maintain the Scientific Games name.
About Light & Wonder
Scientific Games Corporation, doing business as Light & Wonder,
operates a cross-platform games and entertainment business. The
Company brings together over 5,600 employees from six continents to
connect content between land-based and digital channels.
Scientific Games reported net income of $390 million for the year
ended Dec. 31, 2021, a net loss of $548 million for the year
ended Dec. 31, 2020, a net loss of $118 million for the year ended
Dec. 31, 2019, and a net loss of $352 million for the year ended
Dec. 31, 2018. As of Dec. 31, 2021, the Company had $7.88 billion
in total assets, $9.99 billion in total liabilities, and a total
shareholders' deficit of $2.11 billion.
SINCLAIR TELEVISION: Moody's Rates New $750MM Term Loan B 'Ba2'
---------------------------------------------------------------
Moody's Investors Service assigned a Ba2 instrument rating to
Sinclair Television Group, Inc's proposed new $750 million term
loan B due 2029 and the proposed revolving credit facility due
2027. The remaining ratings, namely the Ba3 corporate family
rating, the Ba3-PD probability of default rating, the Ba2 rating on
the existing senior secured facilities, the B2 on the existing
senior unsecured notes and the SGL-1 speculative grade liquidity
rating remain unchanged.
Proceeds from the new loan will be used to pay down $379 million
outstanding on Sinclair's existing term loan B due 2024 and redeem
the $348 million of senior notes due 2026.
Assignments:
Issuer: Sinclair Television Group, Inc
Gtd Senior Secured Term Loan B4, Assigned Ba2 (LGD3)
Gtd Senior Secured Revolving Credit Facility, Assigned Ba2 (LGD3)
RATINGS RATIONALE
Sinclair's Ba3 CFR is supported by the company's established brand,
its scale and the significant reach of its portfolio of broadcast
channels. The company is one of the largest US broadcasters with
185 TV stations in 86 markets as of December 31, 2021. The
company's revenue model benefits from a mix of recurring
retransmission fees that help offset the inherent volatility of
traditional advertising related revenue. The company benefit from
political advertising in even years, and in 2020 the US
presidential election drove the company's free cash flow to around
$650 million, which more than offset declines caused by COVID-19.
Sinclair expects 2022's political advertising spend to also bring a
material increase over 2021 EBITDA and free cash flow.
Sinclair's Ba3 CFR also reflects the inherent volatility of core TV
advertising as well as increased uncertainty over long-term growth
rates of retransmission revenues as cable subscribers have been
cutting the cord in higher numbers, accelerated by the COVID-19
pandemic. The company has historically tolerated high leverage, in
particular in times of M&A.
Pro forma for the proposed transaction, Sinclair's leverage
(Moody's adjusted and computed on a 2-year EBITDA average, to
account for political advertising swings) is around 4.8x at year
end 2021. This figure is expected to improve by year end 2022 as
core advertising is expected to surpass the heavily disrupted
advertising revenues from 2020, and expectations for political
spending on local TV are high. Moody's run-rate expectations are
that core TV revenues will continue to decline by low single digit
(ex-COVID impact) annually as advertising budgets continue to shift
towards digital platforms. In addition, the continuing trends of
cord cutting raises questions over whether broadcasters can
continue increasing retransmission revenues by the historical
mid-teen rates. Increases in retransmission rates happen at the
time of renewal of the agreement with MVPDs. In 2022, around 21% of
Sinclair's subscribers are up for renewal and 59% in 2023 which
should bring material step-ups in retransmission fee revenue.
Sinclair's liquidity profile is very good as reflected in its SGL-1
speculative grade liquidity rating. As of December 31, 2021, the
company had about $317 million in cash and cash equivalents and
full availability under its $650 million revolving credit facility
which the company is seeking to extend the maturity of to April
2027. The revolver has a springing 4.5x first lien net leverage
covenant, tested at or above 35% utilization. The company generated
about $301 million of free cash flow in 2021, a figure Moody's
expect the company will materially exceed in 2022 as a result of
political ad spend.
The Ba2 (LGD3) rating on the company's senior secured facilities
and notes reflects their priority ranking ahead of the B2 (LGD5)
rated senior unsecured notes. The instrument ratings reflect the
probability of default of the company, as reflected in the Ba3-PD
probability of default rating (PDR), an average expected family
recovery rate of 50% at default given the mix of secured and
unsecured debt in the capital structure, and the particular
instruments' rankings in the capital structure.
The stable outlook reflects Moody's expectations that Sinclair will
continue to operate with metrics commensurate with its Ba3 rating,
in particular leverage (Moody's adjusted on a two-year basis)
between 4.25x and 5.5x. The stable outlook also reflects Moody's
expectations that the company will maintain a very good liquidity
profile in 2022 and beyond.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Ratings could be upgraded if:
-- Debt to 2-year average EBITDA (Moody's adjusted) is sustained
comfortably below 4.25x and,
-- 2-year average Free cash flow to debt (Moody's adjusted) is
sustained above 10%
-- A positive rating action would also be contingent on
maintaining good liquidity.
Ratings could be downgraded if:
-- Debt to 2-year average EBITDA (Moody's adjusted) rises above
5.5x, or
-- 2-year average free cash flow to debt (Moody's adjusted) falls
below 5%.
-- Deterioration in the company's liquidity could also put
pressure on the ratings.
Sinclair Television Group, Inc., headquartered in Hunt Valley, MD
and founded in 1986, is a leading U.S. television broadcaster. As
of December 31, 2021, the company owns and/or operates 185
television stations across 86 markets. The station group reaches
approximately 24% of the US population (taking into account the UHF
discount). The affiliate mix is diversified across primary and
digital sub-channels including ABC, CBS, NBC, and FOX. The company
also owns a local cable news network in Washington D.C., four radio
stations and the Tennis Channel. Members of the Smith family
exercise control over most corporate matters of Sinclair Broadcast
Group, Inc. ("SBGI"), Sinclair Television Group, Inc.'s ultimate
parent, with 81% of voting rights (through the dual class share
structure). The company reported $3.09 billion of revenue in 2021.
The principal methodology used in these ratings was Media published
in June 2021.
SM ENERGY: Moody's Upgrades CFR to B1 & Alters Outlook to Positive
------------------------------------------------------------------
Moody's Investors Service upgraded SM Energy Company's Corporate
Family Rating to B1 from B2 and Probability of Default Rating to
B1-PD from B2-PD. At the same time, Moody's also upgraded SM's
senior secured rating to Ba3 from B1, its senior unsecured rating
to B2 from B3. The Speculative Grade Liquidity rating (SGL) was
upgraded to SGL-1 from SGL-2. The outlook was changed to positive
from stable.
"The upgrade of SM's ratings reflects the company's continued
improvement in its debt leverage, focus on simplifying the capital
structure by paying off the second lien notes amid current strong
commodity price environment," commented Sreedhar Kona, Moody's
Senior Analyst. "SM's ability and willingness to further reduce
debt through 2022 and the prospect of durable improvement in the
company's credit metrics while maintaining its significant scale,
contribute to the positive outlook. SM's competitive cost structure
and considerable inventory of highly economic drilling locations
will allow the company to maintain its size and scale."
Upgrades:
Issuer: SM Energy Company
Corporate Family Rating, Upgraded to B1 from B2
Probability of Default Rating, Upgraded to B1-PD from B2-PD
Senior Secured Regular Bond/Debenture, Upgraded to Ba3 (LGD3) from
B1 (LGD3)
Senior Unsecured Regular Bond/Debenture, Upgraded to B2 (LGD5)
from B3 (LGD5)
Speculative Grade Liquidity Rating, Upgraded to SGL-1 from SGL-2
Outlook Actions:
Issuer: SM Energy Company
Outlook, Changed To Positive From Stable
RATINGS RATIONALE
SM's B1 CFR reflects its substantial acreage position in the
Midland Basin, its competitive cost structure, and a substantially
improved debt maturity profile and the prospect of significant debt
reduction through 2022 resulting in further improving credit
profile. SM benefits from a production base (average daily
production was 141 mboe/d in 2021) that is similar in size to many
Ba-rated oil producers and some basin diversification. The
company's good inventory of Permian drilling locations, capable of
generating positive returns in an oil price environment below
$40/bbl, provides SM the ability to generate mid-single digit
percentage production growth and free cash flow for debt reduction.
As the mix of production continues to shift toward the Midland
Basin from South Texas, SM's cost structure and cash margins will
continue to improve and allow the company to realize higher cash
margins. The company's focus on debt reduction in lieu of growth in
size and scale somewhat constrains the company's credit profile.
SM's senior unsecured notes are rated B2, one notch below the B1
CFR, reflecting their subordinated claim to SM Energy's assets
behind the senior secured credit facility and the size of the
facility. The Ba3 rating on SM's senior secured 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 SGL-1 rating reflects Moody's expectation that SM will
maintain very good liquidity through mid-2023, primarily due to
robust cash flow generation, as well as ample borrowing capacity
under its revolving credit facility. As of December 31, 2021, the
company $332 million of cash and no outstanding borrowings ($2.5
million of Letters of Credit) under its $1.1 billion committed
revolving credit facility expiring in September 2023. The company
will be able to meet all its cash needs including capital spending
for 2022 from its operating cash flow. The company will generate
significant free cash flow which it plans to use to reduce debt.
The revolver is governed by two financial covenants -- total debt
to EBITDAX of not greater than 4x and a minimum current ratio
requirement of 1x. Moody's expects the company to maintain
compliance under its covenants.
The positive outlook reflects Moody's expectation SM will generate
substantial free cash flow in 2022 and reduce debt significantly to
deliver a durable improvement in its credit metrics. The company's
significant scale and its competitive cost structure and
considerable inventory of highly economic drilling locations also
contribute to the positive outlook.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Ratings could be upgraded if SM reduces its debt to average daily
production to approach $10,000 and maintaining retained cash flow
(RCF) to debt ratio consistently above 35% and a Leveraged
Full-Cycle Ratio (LFCR) above 1.5x. Ratings could be downgraded if
LFCR approaches 1x, RCF to debt falls below 20% or if EBITDAX to
interest coverage is less than 2x.
SM Energy Company is a Denver, Colorado based publicly traded E&P
company with primary production operations in the Eagle Ford Shale
(Webb County) and the Midland Basin (Howard, Upton, Midland and
Martin Counties) of Texas.
The principal methodology used in these ratings was Independent
Exploration and Production published in August 2021.
SMG INDUSTRIES: Delays Filing of 2021 Annual Report
---------------------------------------------------
SMG Industries, Inc. filed a Form 12b-25 with the Securities and
Exchange Commission with respect to its Annual Report on Form 10-K
for the year ended Dec. 31, 2021, disclosing that the compilation,
dissemination and review of the information required to be
presented in the Annual Report could not be completed and filed by
March 31, 2022, without undue hardship and expense to the company.
SMG anticipates that it will file its Annual Report on Form 10-K
within the applicable "grace" period provided by Securities
Exchange Act Rule 12b-25.
The company expects its consolidated revenues from operations for
the year ended Dec. 31, 2021 to be approximately $51.7 million,
representing an increase of approximately 93% from the prior year
ended Dec. 31, 2020 of $26.6 million.
About SMG Industries
Headquartered in Houston, Texas, SMG Industries Inc. --
www.SMGIndustries.com -- is a growth-oriented transportation
services company focused on the domestic logistics market.
SMG Industries reported a net loss of $15.87 million for the year
ended Dec. 31, 2020, compared to a net loss of $3.98 million for
the year ended Dec. 31, 2019. As of Sept. 30, 2021, the Company
had $31.33 million in total assets, $45.93 million in total
liabilities, and a total stockholders' deficit of $14.60 million.
Houston, Texas-based MaloneBailey, LLP, the Company's auditor since
2017, issued a "going concern" qualification in its report dated
April 19, 2021, citing that the Company has suffered recurring
losses from operations and has a net capital deficiency that raises
substantial doubt about its ability to continue as a going concern.
SOLID BIOSCIENCES: Board Approves New Code of Business Conduct
--------------------------------------------------------------
The Board of Directors of Solid Biosciences Inc. approved a new
Code of Business Conduct and Ethics, which is applicable to all
employees, officers and directors of the company and its
subsidiaries.
The new Code of Conduct replaces the company's previous Code of
Business Conduct and Ethics in its entirety, to, among other
things, reflect current industry and public company best practices.
It also incorporates the procedures previously set forth in the
company's Whistleblower Policy. The adoption by the Board of the
New Code of Conduct did not result in any explicit or implicit
waiver with respect to any employee, officer or director of the
company from any provision of the prior Code. The new Code of
Conduct became effective upon approval by the Board.
A copy of the document detailing the new Code of Conduct is
available on the company's website at
https://investors.solidbio.com/governance/governance-documents
About Solid Biosciences
Headquartered in Cambridge, MA, Solid Biosciences --
www.solidbio.com -- is a life sciences company focused on
advancing
transformative treatments to improve the lives of patients living
with Duchenne. Disease-focused and founded by a family directly
impacted by Duchenne, the Company's mandate is simple yet
comprehensive work to address the disease at its core by
correcting
the underlying mutation that causes Duchenne with its lead gene
therapy candidate, SGT-001, as well as our recently announced
next-generation gene therapy candidate, SGT-003.
Solid Biosciences reported a net loss of $72.19 million for the
year ended Dec. 31, 2021, a net loss of $88.29 million for the year
ended Dec. 31, 2020, a net loss of $117.22 million for the year
ended Dec. 31, 2019, and a net loss of $74.80 million for the year
ended Dec. 31, 2018. As of Dec. 31, 2021, the Company had $232.38
million in total assets, $24.17 million in total liabilities, and
$208.21 million in total stockholders' equity.
SOUTHGATE TOWN: Seeks Cash Collateral Access
--------------------------------------------
Southgate Town and Terrace, Inc. asks the U.S. Bankruptcy Court for
the Eastern District of California for authority to use cash
collateral and provide adequate protection.
The Debtor says its need to use cash collateral is immediate and
critical. The funds are necessary to enable the Debtor to continue
operations and to administer and preserve the value of its estate
as a going concern.
The Debtor further requests the Court to schedule a hearing to
consider entry of the Final Order authorizing use of cash
collateral, granting replacement liens, and approving the proposed
DIP Budget.
In 1992 the California Department of Housing and Community
Development (HCD) through the California Housing Rehabilitation
Program (CHRP) loaned Southgate $2,197,725. The Note is secured by
the Cooperative's real property as well as rents. The Note has a
term of 40 years at 3% interest. Payments are annual with interest
only payments. The Note was supported by a Deed of Trust,
Regulatory Agreement and CHRP regulations. HCD has alleged a number
of violations of the Regulatory Agreement and accelerated the loan
and declared the full amount due. The Debtor is current on the
monetary obligations called for under the Note but for the
acceleration declared by HCD. A non-judicial foreclosure sale was
set for March 17, 2022.
HCD holds a First Priority Note Secured by Deed of Trust including
an assignment of rents. The Debtor operates a 104-unit housing
complex and does not collect rents per se. Monthly charges paid by
each resident/member are deemed carrying charges. These are the
funds necessary to maintain the housing complex including
operations as well as service the HCD Note. However, the Debtor has
elected to request authority to use the carrying charges in an
abundance of caution.
The Debtor operates through an independent property management
company, Jordan Management Company, which holds the Debtor's funds
in Certified Trust Accounts. The accounts are titled Jordan
Management Company, Southgate Town and Terrace Homes, Inc.
CGA-Account. JMC is seeking a bank that will provide
Debtor-in-Possession accounts in compliance with the requirements
of Local Rule 2015-2 and the United States Guidelines.
Unfortunately, Umpqua Bank where the Debtor's prepetition accounts
were held, stopped providing DIP accounts in March 2022.
As relevant to cash collateral issues, the Debtor believes the cash
in the JMC accounts are unsecured because no person other than JMC
and the Debtor has a control agreement or possession of the
accounts. The only collateral constituting cash collateral will be
the monthly income generated from the ongoing operations after the
Petition Date.
The Secured Creditors will be adequately protected for the use of
cash collateral -- monthly payments by members -- by their liens,
the replacement liens the Debtor seeks to grant them, and by the
adequate protection payments the Debtor proposes to pay equal to
the accruing interest on the Secured Claims.
A copy of the motion and the Debtor's budget is available at
https://bit.ly/3Kerj4L from PacerMonitor.com.
The Debtor projects $58,663 in total monthly revenue and $11,763 in
total monthly operating and maintenance expenses.
About Southgate Town and Terrace Homes
Southgate Town and Terrace Homes Inc. is a limited equity housing
cooperative per CA Civil Code Section 817. It is a resident-owned
affordable housing community in South Sac, California.
Southgate Town and Terrace Homes sought Chapter 11 bankruptcy
protection (Bankr. E.D. Cal. Case No. 22-20632) on March 16, 2022.
In the petition filed by Mirza Baig, as president, Southgate Town
and Terrace Homes estimated assets between $1 million and $10
million and liabilities of the same range. The case is handled by
Honorable Judge Fredrick E. Clement.
Stephen Reynolds, Esq., of Reynolds Law Corporation, is the
Debtor's counsel.
SPIRIT AIRLINES: Fitch Alters Outlook to Neg., Affirms 'BB-' IDR
----------------------------------------------------------------
Fitch Ratings has revised the Rating Outlook for Spirit Airlines to
Negative from Stable and affirmed its Long-Term Issuer Default
Rating at 'BB-'.
The Outlook revision follow JetBlue's announcement that it has made
an unsolicited bid to purchase Spirit for $3.6 billion in an
all-cash transaction. The Negative Outlook is driven in part by the
acquisition announcement but also considers uncertainties in the
current operating environment including volatile fuel prices and
potential broader economic impacts.
Should the transaction close, negative rating actions would likely
be limited to a one-notch downgrade given the relative balance
sheet strength of both companies and Fitch's positive view of the
strength of the merger. Fitch may also maintain the ratings at
'BB-' as more details of the transaction including funding and
potential synergies become clearer, and if the operating
environment were to improve. Should the proposed transaction fall
through, Fitch will review its Outlook and may maintain it at
Negative or revise it back to stable depending on the status of the
operating environment at the time.
KEY RATING DRIVERS
Combined JetBlue/Spirit Creates Sizeable Competitor: The potential
combination of JetBlue and Spirit would create a sizeable
competitor that is better positioned to compete with the legacy
carriers. Based on 2019 available seat miles, the combined
companies would be around two thirds the size of Southwest
Airlines. This would push the combined companies solidly into fifth
place in terms of total airline size in the U.S., well ahead of
Alaska Airlines.
The combined scale and ability to increase density in key markets,
including various Florida destinations and legacy hubs, along with
the combined entity's relative cost structure to the legacy
airlines will make the airline a formidable competitor. Following
the acquisition, the combined companies would operate a fleet of
387 Airbus A320 family aircraft. The company estimates that the
acquisition will allow revenues to grow in the low double-digit
range annually, compared to its estimates of mid-to-high single
digit growth on a standalone basis.
Synergies and Fleet Commonality: JetBlue and Spirit both are both
Airbus operators, creating clear synergies if the two carriers were
to merge. Fleet simplicity allows for savings on items like
sparing, procurement, crew flexibility etc., all of which helps to
maintain a unit cost advantage to competition. Fitch expects some
revenue synergies to be readily achievable, particularly once
JetBlue begins to migrate Spirit's fleet to its current passenger
layout, creating more opportunities for premium fares.
However, potential dis-synergies are a concern. JetBlue plans to
reconfigure Spirit's aircraft to current JetBlue layouts, which
will reduce the density of those aircraft creating a unit cost
headwind. The change to Spirit's underlying unit cost structure
takes away part of Spirit's competitive advantage, which is its
ability to compete aggressively on price and target price sensitive
travelers.
JetBlue has stated that the combined companies will operate with a
unit cost structure in line with pre-acquisition JetBlue, which,
while higher than Spirit's ultra-low cost structure, maintains an
advantage to legacy carriers. JetBlue estimates that the
transaction will generate net synergies of $600 million-700
million, with 50% of that target accruing by year three after
closing.
Regulatory Hurdles are a Concern: Regulatory approval for the
transaction is uncertain as the current administration has taken a
tougher stance on consolidating transactions. The Department of
Justice is already suing to block JetBlue's Northeast Alliance with
American Airlines, claiming that the partnership is
anticompetitive. JetBlue argues that the Spirit acquisition creates
a meaningful competitor to the legacy carriers which will be more
effective in reducing total fares compared to a merger of smaller
low-cost carriers.
While Fitch believes that JetBlue's arguments have merit, there is
a concern that the transaction will be viewed as a higher-fare
airline eliminating a lower-fare competitor. In the event that the
Department of Justice blocks the transaction, JetBlue may be
required to pay Spirit a break-up fee. The size of the potential
fee has not yet been determined.
Integration a Concern in the Current environment: The negative
outlook is partly driven by the additional risks presented with
integrating two airlines in the midst of an uncertain operating
environment. The traffic recovery coming out of COVID looks to be
robust, but uncertainties remain around the potential for future
variants and the pace of business and international recovery.
Additionally, the Ukraine-Russia conflict has spurred materially
higher fuel prices and increased the possibility of broader impacts
on the economy. Should higher fuel prices persist and/or demand
recovery slow, the combined companies could be in a position where
acquisition related debt pressures credit metrics for a longer than
expected period.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to an
Outlook Stabilization:
-- Consummation of the acquisition by JetBlue in a credit
conscious manner;
-- Increasing evidence of a stabilizing operating environment
including a continued rebound in traffic, and increasing
visibility on the impact of crude oil prices on margins and
cash flow.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Adjusted debt/EBITDAR sustained below 4.25x;
-- FFO fixed-charge coverage sustained around 3.0x;
-- Realization of merger synergies leading FCF to trend towards
neutral or higher.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Completion of the acquisition in a manner leading credit
metrics to remain above levels commensurate with the current
rating;
-- Adjusted debt/EBITDAR sustained above 4.75x;
-- EBITDAR margins deteriorating into the low double-digit range;
-- FFO fixed-charged coverage sustained at 2.0x or below;
-- Liquidity declining toward 15% of LTM revenue.
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.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
STEM HOLDINGS: Steven Hubbard Quits as Officer
----------------------------------------------
Steven Hubbard submitted his resignation as an officer of Stem
Holdings, Inc., effective immediately, to pursue other interests.
On March 30, 2022, the Company's board of directors accepted Mr.
Hubbard's resignation and expressed its appreciation for the
services he provided to the Company. Concurrent with Mr. Hubbard's
resignation, the board appointed Matthew J. Cohen as chief
executive officer, chief financial officer and a director of the
Company, all with immediate effect.
Matthew Cohen co-founded Stem Holdings, Inc. in 2016 and has been
an independent consultant to the Company for the last five years.
On March 30, 2022, Mr. Cohen was appointed chief executive officer,
chief financial officer and a director of the Company; all titles
of which he currently serves. Mr. Cohen has over 38 years of
experience serving in corporate leadership roles, investing
capital, structuring, and funding public/private partnerships, and
providing strategic advisory services to companies throughout the
U.S., Europe, Asia and Latin America. Specifically, Mr. Cohen has
held the titles of chief executive officer, chief operating
officer, chief financial officer and chief recovery officer,
president, vice president, and secretary and has extensive
experience in business combinations and valuations, mergers and
acquisitions, reverse mergers, revenue recognition, equity-based
compensation, initial public offerings, secondary offerings, debt
offerings and REIT compliance. He is also knowledgeable regarding
the requirements of the Sarbanes-Oxley Act of 2002, including
internal controls and Section 404 thereof, as well as the
significant issues facing SEC registrants. In addition to being a
senior executive of other publicly traded companies, he served on
many publicly traded company boards and as Chairman of the Audit
Committee for several companies. His experience spans a variety of
industries including diagnostic services, aerospace, benefits and
services company, consumer retail, biotech and he previously worked
in the Investment Banking Division at Oppenheimer & Co. as an
Analyst. Mr. Cohen has a B.B.A. degree in Accounting from New
Paltz State University, New York (1980) and in that same year, was
the recipient of the school's annual scholar athlete award. He is
a member of the American Institute of Certified Public Accountants
(AICPA).
About Stem Holdings
Headquartered in Boca Raton, Florida, Stem Holdings, Inc. --
http://www.stemholdings.com-- is a multi-state, vertically
integrated, cannabis company that, through its subsidiaries and its
investments, is engaged in the manufacture, possession, use, sale,
distribution or branding of cannabis, and holds licenses in the
adult use and medical cannabis marketplace in the states of Oregon,
Nevada, California, Oklahoma and Massachusetts.
Stem Holdings reported a net loss of $64 million for the year ended
Sept. 30, 2021, compared to a net loss of $11.5 million for the
year ended Sept. 30, 2020. As of Dec. 31, 2021, the Company had
$43.80 million in total assets, $13.91 million in total
liabilities, and $29.90 million in total shareholders' equity.
Deer Park, IL-based LJ Soldinger Associates, LLC, the Company's
auditor since 2017, issued a "going concern" qualification in its
report dated Jan. 13, 2022, citing that the Company, and its
affiliates, had net losses of $64.4 million and $11.5 million,
negative working capital of $2.954 million and $9.235 million and
accumulated deficits of $115.750 million and $51.386 million as of
and for the year ended Sept. 30, 2021 and 2020, respectively. In
addition, the Company has commenced operations in the production
and sale of cannabis and related products, an activity that is
illegal under United States Federal law for any purpose, by way of
Title II of the Comprehensive Drug Abuse Prevention and Control Act
of 1970, otherwise known as the Controlled Substances Act of 1970.
These facts raise substantial doubt as to the Company's ability to
continue as a going concern.
SWISSBAKERS INC: Wins Cash Collateral Access Thru May 11
--------------------------------------------------------
The U.S. Bankruptcy Court for the District of Massachusetts
authorized Swissbaker Inc. to use cash collateral on an interim
basis through May 11, 2022, on the same terms and conditions as set
forth in the Order Granting Interim Use of Cash Collateral dated
March 23, 2022, except as modified by this order.
The Court said the Debtor may use funds in accordance with the
Extended Cash Collateral budget filed on April 1, 2022, subject to
an upward variance in cost of goods sold proportionate to an
increase in sales over budget and a variance of up to 10% on all
other budgeted amounts.
A final hearing on the matter is scheduled for May 10, at 10:30
a.m. The deadline for any objections to the Motion is extended to
May 6, at 4:30 p.m.
A copy of the order is available at https://bit.ly/3uXaQvm from
PacerMonitor.com.
About Swissbakers, Inc.
Swissbakers, Inc. is a family-owned European bakery. Swissbakers
sought protection under Chapter 11 of the U.S. Bankruptcy Code
(Bankr. D. Mass. Case No. 22-10357) on March 18, 2022. In the
petition signed by Nicolas Stohr, chief executive officer, the
Debtor disclosed up to $500,000 in assets and up to $10 million in
liabilities.
Judge Janet E. Bostwick oversees the case.
Joseph S.U. Bodoff, Esq., at Rubin and Rudman LLP is the Debtor's
counsel.
TARVEDA THERAPEUTICS: Will Liquidate in Delaware Chancery Court
---------------------------------------------------------------
Jeff Montgomery of Law360 reports that a debt-burdened
biopharmaceutical company, Tarveda Therapeutics, is unable to
finance operations despite holding cancer treatment drug prospects
potentially worth billions has moved to liquidate under an
assignment of assets for the benefit of creditors proceeding in
Delaware's Court of Chancery.
Tarveda Therapeutics Inc.'s filing for court recognition of its ABC
— a process used at times as an alternative to bankruptcy
liquidation — aims to settle some $21.5 million in debt,
including $15. 4 million owed to Oxford Finance LLC and secured by
a lien on all the company's assets.
About Tarveda Therapeutics Inc.
Tarveda Therapeutics Inc. -- https://www.tarvedatx.com/about-us--
is a biopharmaceutical company that develops new class of selective
precision and potent oncology medicines.
TELESAT CANADA: Moody's Cuts CFR to B3 & Alters Outlook to Negative
-------------------------------------------------------------------
Moody's Investors Service downgraded Telesat Canada's corporate
family rating to B3 from B2, probability of default rating to B3-PD
from B2-PD, senior secured credit facilities and senior secured
notes ratings to B2 from B1, and senior unsecured notes rating to
Caa2 from Caa1. The company's speculative grade liquidity rating
was maintained at SGL-2. The outlook is negative. This concludes
the review for downgrade that was initiated on February 9, 2021
following Telesat's announcement that it had selected Thales Alenia
Space as the contractor for its low earth orbit (LEO) satellite
constellation that will cost about $5 billion [1].
"The downgrade reflects the company's declining revenue and EBITDA
profile, which is expected to cause leverage to be sustained above
7x through the next 12 to 18 months", said Peter Adu, Moody's Vice
President and Senior Analyst. "The negative outlook captures the
funding uncertainty and the potential for elevated leverage with
the LEO project", Adu added.
Downgrades:
Issuer: Telesat Canada
Corporate Family Rating, Downgraded to B3 from B2
Probability of Default Rating, Downgraded to B3-PD from B2-PD
Senior Secured Bank Credit Facility, Downgraded to B2 (LGD3) from
B1 (LGD3)
Senior Secured Regular Bond/Debenture, Downgraded to B2 (LGD3)
from B1 (LGD3)
Senior Unsecured Regular Bond/Debenture, Downgraded to Caa2 (LGD6)
from Caa1 (LGD6)
Outlook Actions:
Issuer: Telesat Canada
Outlook, Changed To Negative From Rating Under Review
RATINGS RATIONALE
Telesat's B3 CFR is constrained by: (1) declining revenue and
EBITDA in its existing business, which it operates with
geosynchronous (GEO) satellites; (2) high customer concentration
and challenges with contract renewals; (3) funding delays with its
planned low earth orbit (LEO) satellite constellation; (4) Moody's
expectation that leverage (adjusted Debt/EBITDA) will be sustained
above 7x through the next 12 to 18 months, absent the LEO project
(was 7.3x for 2021), while the metric will increase materially over
the construction phase of the constellation (over 12x expected)
should it proceed; (5) small scale relative to fixed satellite
services (FSS) peers; and (6) elevated business risk from evolving
technology and an increasing supply of satellites. The rating
benefits from: (1) good market position in the global FSS market;
(2) good backlog, which provides near term revenue visibility; (3)
strong margins relative to FSS peers; (4) long track record of
expertise with satellite and related technologies; (5) support from
the Canadian government on its LEO project; and (6) potential to
receive Phase-2 C-band spectrum proceeds in the US, which will
provide deleveraging capacity.
On a pre-LEO constellation basis, Telesat has two classes of debt:
(1) senior secured facilities consisting of a $200 million revolver
due in December 2024 and $1.9 billion (face value) term loan B due
in December 2026 ($1.55 billion outstanding), $500 million secured
notes due in December 2026, and $400 million secured notes due in
June 2027 - all rated B2; and (2) Caa2-rated $550 million senior
unsecured notes due in October 2027. The B2 rating on Telesat's
secured credit facilities and notes, which is one notch above its
B3 CFR, benefits from preferential access to realization proceeds
as well as loss absorption capacity provided by the junior ranking
unsecured notes. In turn, the unsecured notes are rated two notches
below the CFR at Caa2 due to the substantial amount of secured debt
ranking above them in the capital structure.
Telesat has high governance risk. The company's leverage has been
increasing due to ongoing pressures in its GEO business while the
LEO project will lead to elevated leverage for several years. Also,
the Telesat Reorganization and Divestiture Act, which governs the
company's corporate matters, does not provide specific procedures
to follow in the event of financial distress. While most Canadian
corporations can use the Companies Creditors Arrangement Act to
protect themselves from creditors while they reorganize their
business and capital structure, Telesat does not have this benefit.
As a result, Telesat is likely to face a more prolonged period of
financial distress than would otherwise be the case should it run
into difficulties.
On a pre-LEO constellation basis, Telesat has good liquidity
(SGL-2). Sources approximate C$1.8 billion while it has no debt
maturities in the next four quarters as it has already made
mandatory quarterly term loan repayments to maturity. The company's
liquidity is supported by cash of about C$1.4 billion at December
31, 2021, full availability under its $200 million (C$250 million)
revolving credit facility due in December 2024 and Moody's expected
free cash flow of about C$150 million in the next four quarters,
excluding LEO capital expenditures. Moody's considers the company's
large cash balance as a funding source for the LEO project. When
construction of the constellation gets underway, Moody's expects
the cash balance to decline and free cash flow to turn negative due
to high capital expenditures. Telesat is subject to a net leverage
covenant if the revolver is drawn by more than 35%. Moody's does
not expect the covenant to be applicable in the next four quarters.
Telesat can sell non-core assets including excess transponder
capacity to augment liquidity.
The negative outlook reflects expectations for continued decline in
the GEO business, the funding uncertainty for the planned LEO
constellation, execution risks of completing the constellation on
time and on budget, and lack of visibility on revenue and earnings
potential once the constellation is operational.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's will consider upgrading Telesat's ratings if it generates
sustainable positive organic growth in revenue and EBITDA (down 8%
and 18% for 2021 respectively) while sustaining Debt/EBITDA below
6x (above 12x expected through the construction phase of the LEO
project) and FCF/Debt above 0% (below 0% expected through the
construction phase of the LEO project).
The ratings will be downgraded if liquidity becomes weak or if
revenue and EBITDA declines accelerate (down 8% and 18% for 2021
respectively) or if it sustains Debt/EBITDA above 8x (above 12x
expected through the construction phase of the LEO project) and
FCF/Debt below 0% (below 0% expected through the construction phase
of the LEO project).
The principal methodology used in these ratings was Communications
Infrastructure published in February 2022.
Telesat, headquartered in Ottawa, Canada, is a fixed satellite
services company. The company's fleet consists of 15 GEO
satellites, one phase 1 LEO satellite and the Canadian payload on
ViaSat-1. Revenue for the year ended December 31, 2021 was C$758
million. Telesat is an indirect wholly owned and primary operating
subsidiary of Telesat Corporation, a publicly traded entity.
TIVITY HEALTH: Stone Point Transaction No Impact on Moody's B2 CFR
------------------------------------------------------------------
Moody's Investors Service said Tivity Health, Inc.'s B2 Corporate
Family Rating, B2-PD Probability of Default Rating and B2 ratings
of the senior secured bank credit facility, consisting a revolver
and a term loan B, are unchanged following the company's
announcement on April 5 that it has entered into a definitive
agreement to be acquired by funds managed by Stone Point Capital
LLC. Under the terms of the agreement, Tivity Health's shareholders
will receive $32.50 in cash per share, representing a total
transaction value of $2.0 billion. The SGL-1 speculative grade
liquidity rating and stable outlook are also unchanged.
Moody's will withdraw all the ratings and outlook of Tivity Health
if the company's debt is repaid as expected. The transaction was
approved by Tivity Health's Board and is expected to close in or
prior to the third quarter of 2022, but is still subject to the
shareholder approval, regulatory approvals and other customary
closing conditions. Following completion of the transaction, Tivity
Health will become a privately held company.
Based in Franklin, TN, Tivity Health, Inc. is a provider of fitness
and health improvement programs for mostly older adults in the US.
The key brand is SilverSneakers, which is a service that provides
fitness programs to older adults. The publicly-traded company
generated $481 million of revenue for the twelve-month ending
December 31, 2021.
TRAEGER INC: S&P Alters Outlook to Negative, Affirms 'B' ICR
------------------------------------------------------------
S&P Global Ratings revised its outlook to negative from positive
and affirmed all its ratings on Salt Lake City-based outdoor grill
manufacturer Traeger Inc., including its 'B' issuer credit rating.
S&P also withdrew the ratings on TGP Holdings as Traeger Inc. is
now public filing financial statements following last year's IPO
The negative outlook reflects the increase in leverage,
particularly in the first two quarters of the year, and the
potential for grill demand faltering amid inflation pressure that
will likely hurt discretionary consumer spending. S&P could lower
the rating if the company underperforms such that we expect S&P
adjusted leverage will remain above 6.5x over the next 12-18
months.
Traeger's elevated leverage is due to high input cost inflation,
which will delay the company from reaching its fairly conservative
leverage targets. In fiscal year 2021 Traeger's S&P Global
Ratings-adjusted EBITDA declined to about $93 million, which was
materially below our expectations. This was mainly due to high
in-bound freight costs, which took hold in the second half of the
year and caused gross margin for the year to contract by 420 basis
points versus the prior year. Top-line growth remained healthy at
about 45%, supported by good sell through at retail and price
increases being passed through in the second half. Still, most of
Traeger's fiscal 2021 EBITDA generation was supported by an
elevated first quarter in which retailers replenished low
inventories following COVID-19 stimulus spending, leading to strong
selling volumes for Traeger. In addition, working capital usage
increased substantially as the company more than doubled its
inventory position year over year to navigate supply chain
disruptions and continue to service its retail customers. The
company drew under its revolving credit facilities to fund some of
the working capital investments. S&P said, "As a result of the
higher working capital, free operating cash flow (FOCF) was
negative $57 million for the year leading to more debt than we
anticipated at fiscal year end. The higher-than-expected debt
balances, coupled with margin pressure resulting from inflationary
headwinds and supply chain disruptions, raised adjusted leverage to
5.2x as of the fiscal year end 2021. In fiscal 2022 we expect
EBITDA to decline further due to the difficult first-quarter
comparison and an annualization of higher freight costs. Based on
this outlook, leverage should exceed 6x by fiscal year-end 2022. We
expect leverage to decrease to below 5x in fiscal 2023 as gross
margin moderates and expect leverage to steadily decline thereafter
as the company continues to target leverage closer to 3.5x."
S&P said, "We expect inflationary pressures to outpace the
company's cost-mitigating initiatives, leading to lower
profitability through fiscal 2023. Management has taken initiatives
to mitigate the pressure on profitability, most notably price
increases. Other efforts include optimizing product design,
tightening selling, general, and administrative (SG&A) spending,
and bringing some manufacturing capacity online in North America.
Nonetheless, if high freight costs continue well beyond 2022, we
view Traeger as particularly vulnerable due to its Asia-based
outsourced manufacturing model for grills, and larger product
sizes. Traeger leaves most of its freight carrier contracts
unhedged, allowing it to either benefit or suffer depending on how
the port congestion and carrier rate situation unfolds. To add to
the uncertain outlook, inflation pressure on consumer discretionary
spending, particularly premium grills, could cause demand and
volumes to decline. Given the high price points for the company's
grills, consumer price sensitivity to more discretionary products
could threaten the effectiveness of price actions, which Traeger
plans to continue to take in 2022. Given the uncertain direction
and magnitude of freight costs and volume trends, we forecast S&P
Global Ratings-adjusted EBITDA margin will further decline in 2022
and remain below its historical mid-teen percent levels through
fiscal 2023.
"Notwithstanding near-term risks, we believe Traeger's long-term
operating outlook still has solid growth opportunity. At fiscal
year-end 2021, Traeger's U.S household penetration was 3.5%. Given
Traeger's penetration is closer to 15% in more established markets
such as the Pacific Northwest and Rocky Mountain regions, we
believe significant market growth opportunity exists for wood
pellet grills. Traeger's high-double-digit top-line growth has
historically outperformed the industry average. The higher
installed grill base has also benefitted revenue streams for its
consumable products like wood pellets. Driving higher selling
prices and gross margins through innovation is a core competency
for Traeger, which is launching more internet of things
(IoT)-enabled smart grill and accessories. We believe strong
top-line growth, coupled with the asset-lite manufacturing model
and structurally higher margins, will support Traeger rapidly
deleveraging once supply chain conditions normalize.
"The negative outlook reflects uncertainty around the magnitude of
margin deterioration amid higher freight costs and inflationary
pressure on consumers, causing less demand for Traeger's
discretionary products. This could result in Traeger's EBITDA
margins staying below the mid-teens percent area and leverage above
6.5x over the next 12-18 months."
S&P could lower the rating if the company's operating performance
deteriorates such that leverage stays above 6.5x. This could happen
if:
-- Margin pressure intensifies because of freight and input cost
inflation; or
-- Demand for the company's products weakens such that revenue
declines significantly.
S&P could revise its outlook to stable if the company sustains
leverage below 6x. This could occur if:
-- Its mitigating actions successfully alleviate margin pressure;
and
-- Consumer demand for its product remains robust, enabling it to
continue to grow market share.
ESG credit indicators: E-2, S-2, G-3
TUTOR PERINI: Fitch Withdraws Ratings
-------------------------------------
Fitch Ratings has affirmed Tutor Perini Corp.'s (TUT) 'B+'
Long-Term Issuer Default Rating. Fitch also affirmed the company's
senior first lien revolver and term loan B at 'BB+'/'RR1' and
senior unsecured notes at 'B+'/'RR4'. The Rating Outlook is
Stable.
TUT's ratings reflect the company's improving backlog, a high
degree of revenue and cash flow visibility on many of the company's
projects, and long-term secular tailwinds including an expected
increase in infrastructure spending in the U.S. Fitch also believes
most of TUT's key contracts are considered essential, and the
company will be able to continue executing on backlog near-term as
new awards recover. Customer and contract diversification also
support the rating. Positive rating momentum could occur if the
overall market environment improves and the company replenishes and
increases its backlog with new award wins.
Key risks to the rating and Outlook include potential project
delays, labor shortages, cyclicality, and key person risk. Working
capital fluctuations throughout the year could also exacerbate cash
flow seasonality and strain liquidity during a hypothetical
downside scenario.
Fitch has withdrawn TUT's ratings for commercial reasons.
KEY RATING DRIVERS
Backlog Set to Improve: Fitch considers the company's backlog to be
a positive driver for the company despite being lower than 2019
levels. Backlog stabilized at around $8.2 billion as of December
2021, below the near-record $11.2 billion at YE 2019 as a result of
fewer contracts being awarded across the engineering and
construction (E&C) sector during the coronavirus pandemic. New
awards have bounced back to $4.5 billion in 2021, from $2.4 billion
in 2020, but remain below the $6 billion level the company saw
before the pandemic.
Fitch anticipates project bidding and new contracts to pick up in
2022 as state and federal governments increase infrastructure
spending and the passing of the $1.2 trillion Infrastructure
Investment and Jobs Act in late 2021. Margins are expected to be
under pressure in 2022 as new contracts awarded in 2021 included
large components of lower margin building projects. Fitch expects
margin improvement over the longer term as the company wins new
civil awards.
Strong Position, Limited Competitors: Following a market shift over
the past few years, a limited number of competitors are willing to
take on large infrastructure contracts. Fitch believes TUT has
separated itself through a reputation for consistent execution over
the years. The company has effectively managed project risk and
largely avoided large cost overruns that have affected peers.
Competition could increase again over time if former competitors
reenter the space following the Infrastructure Investment and Jobs
Act becoming law in late 2021.
Deleveraging capacity: TUT's nominal debt balance remained elevated
at $1.0 billion at YE 2021 with the company's leverage (gross
debt/EBITDA) stable at 3.0x. Fitch views the company's willingness
to maintain a significant long-term debt balance as a credit
negative in the highly cyclical E&C sector. However, the company's
leverage could decline in the medium term if TUT prioritizes debt
repayment as the company's cash flow generation improves. The
company repaid the remaining portion of its unsecured convertible
notes in June 2021, and Fitch believes it will have the capacity to
repay at least a portion of its term loan balance and outstanding
notes ahead of maturity in 2025 and 2027, respectively.
Adequate Liquidity, Flexibility: Fitch considers the company's
liquidity to be adequate to cover working capital fluctuations,
capex spending, and debt servicing during a moderate temporary
downturn. The company had $100 million of readily available cash as
of December 2021 plus $148 million in revolver availability. In
comparison, the company has $24 million in short-term maturities
and the company does not have any significant maturities until
2025. Fitch forecasts the company will generate positive annual FCF
on average over the rating horizon as it executes on its current
backlog, resolves outstanding legal and project disputes, and is
positioned well to win new awards.
Scale and Market Position: TUT's rating is supported by the firm's
scale and domestic market position. The company maintains
operations that are predominantly located in the U.S. and serve a
diverse set of customers and a wide range of end markets. This
geographic and end-market diversity, coupled with its extensive
longstanding customer relationships, allow its segments to be
highly competitive on projects of all sizes, while maintaining
limited exposure to a single region, industry or customer. The
company's markets and capabilities include mass-transit systems,
bridges, tunnels, highways, commercial and industrial buildings,
condominiums, hospitality and gaming, aviation, education, sports
facilities and health care.
Diversified Projects and Customers: Fitch considers TUT to be
relatively diversified by contract and moderately diversified by
end-market. The company features a balanced split between private
and public customers, with approximately 64% of revenue generated
from federal, state and local government agencies over the past
three years, and the remaining 36% originating from private project
owners. The company's December 2021 backlog of approximately $8.2
billion is comprised of 55% higher margin civil projects, 28%
building projects and 17% specialty contractor projects. Individual
customer concentration is limited, but could increase depending on
the size of potential contract wins.
Key Person Risk: The CEO and Chairman of the Board has a long
tenure with the company, and his experience and knowledge would not
easily be replaced by one single person. However, several
experienced executives are in place who would be able to manage the
company when an eventual transition occurs. Fitch views this
transition as a risk due to the potential reputational impact,
although Fitch expects the company will continue to address a
potential succession plan over the intermediate term.
DERIVATION SUMMARY
TUT's rating reflects the company's strong reputation, product and
end-market diversification compared with peers and meaningful
growth prospects. The rating is constrained by the company's
financial structure and profitability. Fitch considers the
company's profitability to be comparable with other companies
within the E&C industry but is vulnerable to the risk of
intensifying competition and potential execution challenges.
KEY ASSUMPTIONS
-- Revenue to be flattish in 2022, followed by mid-single-digit
growth in 2023 and 2024, driven by execution on outstanding
backlog and new award bookings beginning in early 2022;
-- EBITDA margins remain around 7% over the rating horizon due to
the improved contract mix and forecasted improvement in the
specialty contractors portion of the business; the building
segment operating margins remain in low single digits, civil
segment generates in the mid-teens and specialty contractors
fluctuates in the low- to mid-single-digits;
-- Annual capex between $50 million and $80 million through 2025;
-- The company effectively manages liquidity and working capital;
and
-- No material acquisitions, dividends or share repurchases.
Key Recovery Rating Assumptions
-- The recovery analysis assumes TUT would be reorganized as a
going concern in bankruptcy rather than liquidated;
-- A 10% administrative claim.
Going Concern Approach
Fitch assumes a distressed scenario in which the company loses
several major customers/projects in conjunction with a large
negative legal claim. Fitch also incorporated the current weak
bidding environment, which carries risk that contracts in its
current backlog could theoretically not be replaced by new work;
The going concern EBITDA estimate of $175 million reflects Fitch's
view of a sustainable, post-reorganization EBITDA level upon which
Fitch bases the enterprise valuation. The going concern EBITDA
reflects the company's limited profitability and uneven cash flows,
but also its strong backlog and long-term secular tailwinds;
An enterprise value multiple of 5.0x is applied to the going
concern EBITDA to calculate a post-reorganization enterprise value.
In determining the multiple, Fitch considered the company's high
exposure to cyclicality, and its diversification and strong
reputation. Fitch also considered the low trading multiple in the
sector compared with other E&C and industrial companies;
Fitch notes that in this scenario, when comparing with a
liquidation approach, Fitch utilized a 25% accounts receivable
recovery rate for the liquidation value analysis due to the
assumption that much of the company's current project receivables
would not be available to pre-petition creditors as a result of
project disputes/litigation. It is customary within the industry
for major disputes with project owners to drag on for years, even
post-bankruptcy, and in any case would likely be settled for a
significant discount.
The allocation of value in the liability waterfall results in
recovery corresponding to 'RR1' recovery for the senior secured
revolver and term loan and a recovery corresponding to 'RR4' for
the senior unsecured notes.
RATING SENSITIVITIES
Ratings sensitivities are no longer applicable given the ratings
withdrawal.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Fitch considers the company's liquidity to be
adequate to cover working capital fluctuations, capex and debt
servicing during a temporary moderate downturn. Fitch calculated
the company's total available liquidity at greater than $300
million as of YE 2021, comprising approximately $100 million of
readily available cash as of December 2021 plus $148 million in
revolver availability.
The company also had an additional $102.7 million of cash related
to Variable Interest Entities, which Fitch considers restricted,
and $9.2 million of restricted cash on the balance sheet. The
company's capital structure is comprised of a senior first lien
revolver maturing in 2025 and term loan maturing in 2027, and
senior unsecured notes due in 2025.
ISSUER PROFILE
Tutor Perini is a large engineering and construction firm that
operates primarily across the United States. The company competes
via three main segments: Civil, Building and Specialty Contractors.
VOLUNTEER ENERGY: Cash Collateral Access, $5MM of DIP Loan OK'd
---------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of Ohio,
Eastern Division, authorized Volunteer Energy Services, Inc. to use
cash collateral on an interim basis an obtain postpetition
financing.
The Debtor is permitted to obtain up to $5 million from PNC Bank,
National Association, in its capacity as administrative agent,
collateral agent, and issuer and the financial institutions party
thereto from time to time. The Debtor needs the loan to fund its
wind-down in accordance with, and subject to, a budget.
The Debtor entered the Chapter 11 case with the support of PNC,
which is also its pre-petition secured lender. The Debtor, as
borrower, PNC Bank, National Association, in its capacity as
administrative agent, collateral agent, and issuer, PNC Capital
Markets LLC, as lead arranger, and the financial institutions party
thereto from time to time, are parties to an Amended and Restated
Revolving Credit and Security Agreement, dated June 30, 2016,
pursuant to which the Pre-Petition ABL Lender agreed to make
available to the Debtor a revolving credit line in the maximum
principal amount of $42 million. The Debtor's obligations under the
Pre-Petition ABL Credit Agreement are secured by a security
interest in and lien on substantially all the Debtor's assets.
As of the Petition Date, approximately $30 million is outstanding
under the Pre-Petition ABL Credit Agreement.
As adequate protection for the use of cash collateral, the DIP
Agent, for itself and on behalf of the DIP Lender, is granted a
first priority, priming, valid, perfected and enforceable Liens in
and upon all of the DIP Collateral, subject only to the Carve-Out
and any Senior Liens, to secure all existing and future obligations
and liabilities under or in connection with the DIP Financing
Documents, whether due or to become due, absolute or contingent, as
provided by and more fully defined in, the DIP Financing
Documents.
As further adequate protection, the DIP Agent, for the benefit of
itself and the DIP Lender, superpriority administrative claim
status for the Post-Petition Obligations, pursuant to Bankruptcy
Code sections 364(c)(1) and 507(b) in accordance with the terms of
the Interim Order.
The final hearing on the matter is scheduled for April 21, 2022 at
1:30 p.m.
A copy of the order is available at https://bit.ly/3r2VhBa from
PacerMonitor.com.
About Volunteer Energy Services Inc.
Volunteer Energy Services Inc. is in the business of electric power
generation, transmission and distribution. Volunteer Energy sought
protection under Chapter 11 of the U.S. Bankruptcy Code (Bankr.
S.D. Ohio Case No. 22-50804) on March 25, 2022. In the petition
signed by David Warner, chief financial officer, the Debtor
disclosed up to $100 million in both assets and liabilities.
Judge C. Kathryn Preston oversees the case.
David M. Whittaker, Esq., at Isaac Wiles and Burkholder LLC
represents the Debtor as counsel.
WAYNE BARTON: Executes Asset Purchase Agreement with Torah Academy
------------------------------------------------------------------
Wayne Barton Study Center, Inc., submitted an Amended Plan of
Reorganization for Small Business under Subchapter V dated April 4,
2022.
The Debtor has determined that downsizing will provide for a more
efficient and costeffective process of feeding those in need;
consequently, the Debtor will sell its Real Property as is, where
is, with no contingencies (the "Sale") to Torah Academy of Boca
Raton Inc., and its permitted assigns for a Purchase Price of
$6,500,000.00; or in the event that the Torah Academy fails to
close the transaction, through an auction process. The Debtor
anticipates that with the sale of the Real Property, creditors will
be paid in full, including Benworth and Gelt Financial, LLC, the
two primary secured creditors.
The Debtor plans to utilize the remaining proceeds from the Sale to
purchase a warehouse with approximately 10,000 square-feet of space
to operate as a food ministry going forward. The warehouse will
have both cold and dry storage, and the Debtor intends to build it
out to install kitchen and food prepping facilities. The Debtor
will almost exclusively focus on feeding the needy.
Sale of Debtor's Real Property
On February 20, 2022, the Debtor filed a Motion for Entry of an
Order Authorizing and Scheduling the Sale of the Debtor's Real
Property, Free and Clear of All Liens, Claims and Encumbrances,
Subject to Higher and Better Offers.
Subsequent to the filing of said motion, Debtor, as Seller, and
Torah Academy of Boca Raton Inc., a Florida not-for profit
corporation entity, and/or its permitted assigns, as Buyer,
executed an Asset Purchase Agreement for the sale of Debtor's real
property in the amount of $6,500,000.00. A copy of the executed
Asset Purchase Agreement was filed with the Court on March 22,
2022. This motion is pending, and the Buyer is still conducting its
due diligence, as of the filing of this Plan.
As the Sale is being done under this Plan, which is being confirmed
under section 1191 of the Code, the Sale may not be taxed under any
law imposing a stamp tax or similar tax, per section 1146 of the
Code; therefore, the Sale is exempt from any documentary stamp tax
which would otherwise be imposed by the Florida Department of
Revenue.
Non-priority unsecured creditors holding Allowed claims will
receive distributions in lump sums, which the proponent of this
Plan has valued at approximately 100 cents on the dollar, so long
as there are sufficient Sale Proceeds to pay claims. This Plan also
provides for the payment of Administrative and Priority Claims.
Class 2 consists of the Allowed Secured Claim of Gelt Financial,
LLC, in the amount of approximately $252,000. Gelt holds a second
position secured interest in the Property as well as the Debtor's
personal property. The Class 2 Claimholder shall be paid its
Allowed Class 2 Claim from the Sale Proceeds after payment to
holders of Allowed Administrative Claims (including professional
fees), court fees, US Trustee fees, and the Class 1 Claim. The
Debtor anticipates the Class 2 Claimholder shall be paid in full.
Like in the prior iteration of the Plan, each holder of an Allowed
general unsecured claim against the Debtor shall be paid its
Allowed Claim from the Sale Proceeds after payment to holders of
Allowed Administrative Claims, Allowed Priority Tax Claimholders,
and holders of Allowed Class 1, 2, and 3 Claims. The Debtor
anticipates the holders of Allowed Class 4 Claims will be paid in
full.
All payments as provided for in the Plan shall be funded from the
Sale Proceeds and Debtor's Cash on hand, unless otherwise stated.
A full-text copy of the Amended Plan of Reorganization dated April
4, 2022, is available at https://bit.ly/3jlPfHr from
PacerMonitor.com at no charge.
Attorneys for the Debtor:
Aaron A. Wernick, Esq.
Wernick Law, PLLC
2255 Glades Road, Suite 324A
Boca Raton, FL 33431.
Tel: 901-525-1322
Fax: 901-525-2389
Email: awernick@wernicklaw.com
About Wayne Barton
Wayne Barton Study Center, Inc., is a tax-exempt entity in Boca,
Fla., which was established to enhance the health, welfare, and
education of children in need in its community.
Wayne Barton Study Center filed a petition for Chapter 11
protection (Bankr. S.D. Fla. Case No. 22-10384) on Jan. 18, 2022,
listing up to $10 million in assets and liabilities. Wayne Barton,
president, signed the petition.
Judge Mindy A. Mora oversees the case.
The Debtor tapped Wernick Law, PLLC, as legal counsel.
WESTPORT HOLDINGS: Dismissal of Valley National Appeal Affirmed
---------------------------------------------------------------
Valley National Bank appeals the district court's order dismissing
its appeal from the bankruptcy court's final order granting the
litigation funding agreement between Jeffrey Warren, as Liquidating
Trustee for Westport Holdings Tampa, Limited Partnership (WHT I)
and Westport Holdings Tampa II, Limited Partnership (WHT II), and
A/Z Property Partners LLC (A/Z). The district court dismissed
Valley National Bank's appeal, finding that it lacked Article III
standing and "person aggrieved" standing to appeal.
In May 2018, the bankruptcy court confirmed the Liquidating
Trustee's first amended mediated joint plan of liquidation.
Pursuant to the joint plan, all of the Debtors' causes of action
became assets of the Liquidating Estate, and the Liquidating
Trustee was vested with the authority to settle, sell, or dispose
of any existing causes of action.
In February 2020, the Liquidating Trustee entered into an Asset
Purchase Agreement with Tampa Life, wherein the Debtors 2 WNT is
not a debtor. Valley National Bank is a creditor for WNT. In May
2020, the Florida Office of Insurance Regulation and Tampa Life
entered into a consent agreement, authorizing Tampa Life to acquire
the Debtors' assets.
Meanwhile, in January 2020, the Liquidating Trustee filed a
complaint against Valley National Bank, creating a separate
adversary proceeding. The Liquidating Trustee asserted claims
against Valley National Bank, namely, aiding and abetting a breach
of a fiduciary duty and the avoidance and recovery of a fraudulent
transfer of $3 million of WHT I's statutorily required minimum
liquid reserves in connection with loans made by Valley National
Bank to WNT.
Later, in June 2020, the Liquidating Trustee moved the bankruptcy
court for authority to sell all causes of action against Valley
National Bank to BRP Senior Housing Management, LLC (BRP). Valley
National Bank objected to this sale, contending that the principal
of BRP, Richard Ackerman, took issue with the administrative
challenges it had recently presented to the Florida Office of
Insurance Regulation. According to Valley National Bank, Ackerman
allegedly threatened that BRP would acquire causes of action
against it and engage in extensive litigation should it not
withdraw the administrative challenges.
Ultimately, the Liquidating Trustee's proposition to sell the
causes of action to BRP fell through, and the Liquidating Trustee
moved the bankruptcy court to instead grant it permission to enter
into a litigation funding agreement with A/Z, also managed by
Ackerman. The Liquidating Trustee explained that, when the Florida
Office of Insurance Regulation approved the asset purchase
agreement between it and Tampa Life, it discovered that it did not
have sufficient funds to consummate the closing of the sale. The
Liquidating Trustee also asserted that it had valid and substantial
claims against Valley National Bank, and that A/Z wished to invest
with him to facilitate the closing of the asset sale to Tampa Life,
prosecute the claims against Valley National Bank, and profit if
the claims were successful.
Under the agreement, A/Z would pay the Liquidating Trustee $250,000
at the closing of University Village, and then fund the costs
associated with prosecuting the causes of action against Valley
National Bank. The Liquidating Trustee had to give A/Z notice of a
settlement offer, and agreed to not respond to the offer until
giving A/Z good faith consideration to its analysis of the offer.
The Liquidating Trustee also agreed to not make settlement offers
without first giving good faith consideration to A/Z. Finally, the
Liquidating Trustee did not waive attorney-client privilege of its
attorney communications, unless consent to waive such privilege was
given in writing and the information was necessary to assist the
litigation of claims against Valley National Bank. Notably, the
Liquidating Trustee remained the ultimate decision-maker, which
Valley National Bank acknowledged. Ultimately, the bankruptcy court
granted the Liquidating Trustee permission to enter a litigation
funding agreement with A/Z.
Valley National Bank appealed the order granting the litigation
funding agreement to the district court, arguing the agreement was
champertous under Florida law. It also argued that it had Article
III standing, because the litigation funding agreement caused an
injury in fact by allowing a nonparty to exert control over the
adversary proceeding, influence a settlement, and prolong the
litigation. It also asserted that it had "person aggrieved"
standing, because such undue influence affected the integrity and
fairness of the bankruptcy proceedings.
At oral argument regarding the standing issues, Valley National
Bank confirmed that no settlement agreements had been extended by
either party, there had been no discovery, and there had been "no
movement" in the adversary proceeding between it and the
Liquidating Trustee. It argued the harm specific to it was
Ackerman's announcement of his "intention to acquire a cause of
action" which would keep him from being able to quickly settle with
the Liquidating Trustee. It contended that the Liquidating Trustee,
even if he wanted to settle, would be unable to, so he could keep
Ackerman, the man funding the litigation, happy.
The district court concluded that Valley National Bank lacked
Article III standing and "person aggrieved" standing in order to
appeal the bankruptcy court's order granting the litigation funding
agreement. As to Article III standing, the court found that Valley
National Bank failed to sufficiently allege a concrete injury in
fact that resulted from the bankruptcy court's order, and the risk
of future harm was speculative. Next, the court concluded that,
even if Valley National Bank had Article III standing, its claims
still failed under "person aggrieved" standing because it suffered
no direct harm from the litigation funding agreement and the
interest it sought to vindicate was not protected by the Bankruptcy
Code.
After review, the United States Court of Appeals for the Eleventh
Circuit affirms. The Eleventh Circuit says a federal court's power
to hear a case is limited by Article III, Section 2, of the U.S.
Constitution, which dictates that a federal court's judicial power
is limited to cases and controversies. Thus, the doctrine of
standing limits the category of litigants who may bring a lawsuit
in federal court. There are three elements to Article III standing.
Id. A plaintiff must have: "(1) suffered an injury in fact, (2)
that is fairly traceable to the challenged conduct of the
defendant, and (3) that is likely to be redressed by a favorable
judicial decision."
An injury in fact refers to an invasion of a legally protected
interest that is both (1) "concrete and particularized" and (2)
"actual or imminent, not conjectural or hypothetical."
For an injury to be imminent, the threatened injury must be
"certainly impending" and allegations of "possible future injury"
are not sufficient. Standing cannot rely "on a highly attenuated
chain of possibilities" or speculation.
Although plaintiffs need not wait for an injury to occur before
filing suit, the plaintiff must still at least demonstrate that he
is in immediate danger of sustaining a direct injury, meaning that
the anticipated injury must occur within a fixed time period in the
future. If a plaintiff cannot show that injury is likely to occur
immediately, the plaintiff lacks standing. Moreover, even if a
plaintiff can demonstrate immediacy, he must still show that injury
is "substantially likely to actually occur," and that the injury is
not hypothetical or conjectural.
According to the Eleventh Circuit, the district court did not err
in concluding that Valley National Bank lacked Article III
standing, because Valley National Bank has not articulated a
concrete, imminent injury in fact. Valley National Bank's alleged
injury is not imminent, and is instead based on a speculative,
highly attenuated, chain of possibilities, the circuit court holds.
Valley National Bank's alleged injury is that Ackerman, through
A/Z, will unduly influence the adversary proceeding between it and
the Liquidating Trustee. While Valley National Bank asserts that
Ackerman threatened to subject it to lengthy litigation,
importantly, neither side has offered a settlement, no discovery
has occurred in their proceeding, and there has been "no movement"
in the case. Because there has been no movement in the adversary
proceeding, Valley National Bank's alleged injury -- extensive
litigation at the hands of Ackerman -- is merely speculative, the
11th Circuit further holds.
Valley National Bank's alleged injury is also based on a highly
attenuated chain of possibilities, the circuit court finds. For
Valley National Bank's alleged injury to come to fruition, first, a
settlement offer must be made, which may or may not occur, the
circuit court points out. Assuming a settlement offer is made by
Valley National Bank, the Liquidating Trustee would then present
that settlement to A/Z. Then, the Liquidating Trustee, although he
retained the ultimate decision-making power, would have to
acquiesce to A/Z's judgments regarding the offer. In this scenario,
one must also assume that A/Z's judgment would be one that
negatively impacts Valley National Bank and needlessly extends the
litigation process. Valley National Bank's alleged injury, although
possible, is clearly based on a highly attenuated chain of
possibilities, which is insufficient to establish Article III
standing. Even more, this attenuated chain of events demonstrates
that the alleged injury is not substantially likely to actually
occur, and is instead hypothetical.
Thus, Valley National Bank cannot demonstrate that it has, or will,
suffer an injury in fact, and fails to establish that it has
Article III standing, the 11th Circuit further holds.
Beyond Article III standing, the Eleventh Circuit says it has
adopted the "person aggrieved" standing doctrine "as our standard
for determining whether a party can appeal a bankruptcy court's
order." This standard restricts a plaintiff's standing more than
Article III. Under this standard, a party may only appeal a
bankruptcy court order if the party had a direct and substantial
interest in the question being appealed. An "aggrieved person" is
an individual who is "directly, adversely, and pecuniarily
affected" by the bankruptcy court's order.
A party is not aggrieved under this standard when the only interest
allegedly harmed by the bankruptcy court's order is the party's
interest in "avoiding liability from an adversary proceeding." An
order subjecting a party to litigation only indirectly harms that
party, and orders allowing litigation to continue do not burden a
party's ability to defend against liability. Accordingly, when a
party's "sole interest is that of an adversary defendant in
avoiding liability," he is not a person aggrieved by the bankruptcy
court's order.
Additionally, a person cannot be aggrieved if the interest he seeks
to validate is not protected or regulated by the Bankruptcy Code.
Notably, an adversary defendant's interest in avoiding liability is
"antithetical to the goals" of the Bankruptcy Code.
Finally, an individual may not meet the "person aggrieved" doctrine
simply by virtue of attacking the inherent fairness of the
bankruptcy proceedings. Instead, a party must show both "a direct
harm and hold an interest within the scope of the Bankruptcy
Code."
Even if Valley National Bank had Article III standing, its appeal
is still subject to dismissal, for it does not have "persons
aggrieved" standing, the Eleventh Circuit finds. Valley National
Bank has suffered no direct harm based on the litigation funding
agreement. Instead, its main concern is how A/Z may influence
possible settlement agreements between it and the Liquidating
Trustee. However, Valley National Bank is simply an adversary
defendant whose sole interest is in avoiding liability by
attempting to ensure that the Litigating Trustee cannot continue to
pursue litigation against it. Thus, Valley National Bank is not a
person aggrieved by the bankruptcy court's order, the Eleventh
Circuit holds. This sole interest is also not an interest protected
by the Bankruptcy Code.
Valley National Bank attempts to establish standing by arguing that
its claim is an attempt to preserve fairness in the bankruptcy
proceedings. However, such a claim cannot establish "person
aggrieved" standing, the circuit court further holds. Accordingly,
Valley National Bank lacks standing under the "person aggrieved"
doctrine, as well.
Valley National Bank also asks the Court to determine if the
litigation funding agreement was champertous under Florida law.
However, the Eleventh Circuit holds it cannot rule on the merits of
a case after finding that the plaintiff lacks standing.
Accordingly, the circuit court declines to consider this argument.
Based on these reasons, the Eleventh Circuit finds the district
court did not err in concluding that Valley National Bank lacked
both Article III standing and "person aggrieved" standing.
A full-text copy of the March 31, 2022 Opinion is available at
https://tinyurl.com/49c6z6xe from Leagle.com.
The appeals case is VALLEY NATIONAL BANK, f.k.a. USAmeribank,
Plaintiff-Appellant, v. JEFFREY WAYNE WARREN, as Liquidating
Trustee for Westport Holdings Tampa, Limited Partnership and
Westport Holdings Tampa II, Limited Partnership,
Defendant-Appellee, No. 21-11767 (11th Cir.).
About Westport Holdings Tampa
Westport Holdings Tampa, doing business as University Village, is a
care retirement community in Tampa, Fla. It offers residents
villas, apartments, an assisted living facility and a skilled
nursing care center for their end-of-life needs.
Westport Holdings Tampa, Limited Partnership and Westport Holdings
Tampa II, Limited Partnership filed Chapter 11 petitions (Bankr.
M.D. Fla. Lead Case No. 16-08167) on Sept. 22, 2016. Judge Michael
G. Williamson oversees the cases. Stichter Riedel Blain & Postler,
P.A., serve as the Debtors' bankruptcy counsel while Broad and
Cassel is the special counsel for healthcare and related litigation
matters.
The U.S. Trustee for Region 21 appointed an official committee of
resident creditors on Dec. 29, 2016. The resident committee is
represented by Jennis Law Firm.
On May 10, 2018, the court confirmed the Debtors' joint Chapter 11
plan of liquidation. Jeffrey W. Warren is the liquidating trustee
appointed in the Debtors' cases. Bush Ross, PA and Mercer Law, LLC
serve as the liquidating trustee's bankruptcy counsel and special
counsel, respectively.
WISECARE LLC: Wins Cash Collateral Access Thru June 1
-----------------------------------------------------
The U.S. Bankruptcy Court for the District of Maryland, Baltimore
Division, approved the stipulation that Wisecare, LLC entered into
with Steans Bank, NA regarding the Debtor's use of cash
collateral.
The Debtor is authorized to use cash collateral only to fund the
expenses provided on the April and May 2022 budget, the Adequate
Protection Payments, and the administrative claim escrow payments.
The authorization granted to the Debtor under the Second Interim
Order shall terminate upon the earlier of: (a) June 1, 2022; (b)
the entry by the Court of an order denying the Debtor's
authorization to use cash collateral; or (c) at the option of the
Lender, upon the occurrence of an Event of Default after notice and
the expiration of the cure period as set forth in the First Interim
Order.
Notwithstanding any termination, the rights and obligations of the
Debtor and the rights, claims, security interests, liens and
priorities of the Lender with respect to all transactions that
occurred prior to the occurrence of any termination, including,
without limitation, all replacement liens granted to the Lender as
adequate protection and priority claims under Section 507(b) of the
Bankruptcy Code, which are provided, will remain unimpaired and
unaffected by any termination of the Order, will survive any
termination of the Order, and will be binding upon the Debtor, its
estate, all successors in-interest to the Debtor, including any
Chapter 11 trustee or any Chapter 7 trustee, and all creditors and
other parties in interest.
As adequate protection, the Lender is granted replacement liens and
superpriority treatment on the same terms as provided by the First
Interim Order.
A copy of the order is available at https://bit.ly/3KjhSky from
PacerMonitor.com.
About WiseCare LLC
WiseCare, LLC offers a variety of diagnostic and treatment services
for the urgent care needs of patients of all ages. Severn,
Md.-based WiseCare filed its voluntary petition for relief under
Chapter 11 of the Bankruptcy Code (Bankr. D. Md. Case No. 21-17794)
on Dec. 14, 2021, listing $100,000 to $500,000 in assets and $1
million to $10 million in liabilities. Perry Weisman, its owner,
signed the petition. Joseph Selba, Esq., at Tydings & Rosenberg,
LLP serves as the Debtor's legal counsel.
Judge David E. Rice oversees the case.
Stearns Bank NA, as lender, is represented by:
Robert B. Scarlett, Esq
Scarlett & Croll, P.A.
201 N. Charles St., Suite 600
Baltimore, MD 21201
Tel: 410-468-3100
Email: rscarlett@scarlettcroll.com
[^] BOND PRICING: For the Week from April 4 to 8, 2022
------------------------------------------------------
Company Ticker Coupon Bid Price Maturity
------- ------ ------ --------- --------
Accelerate Diagnostics AXDX 2.500 73.050 3/15/2023
Assabet Valley Bancorp AVBANC 5.500 88.251 8/1/2027
Assabet Valley Bancorp AVBANC 5.500 88.251 8/1/2027
BPZ Resources Inc BPZR 6.500 3.017 3/1/2049
Basic Energy Services Inc BASX 10.750 3.048 10/15/2023
Basic Energy Services Inc BASX 10.750 3.048 10/15/2023
Broadcom Inc AVGO 4.250 100.021 4/15/2026
Buffalo Thunder
Development Authority BUFLO 11.000 50.000 12/9/2022
Continental Airlines
2007-1 Class A Pass
Through Trust UAL 5.983 101.125 4/19/2022
Continental Airlines
2007-1 Class B Pass
Through Trust UAL 6.903 98.686 4/19/2022
Diamond Sports Group
LLC / Diamond Sports
Finance Co DSPORT 6.625 19.974 8/15/2027
Diamond Sports Group
LLC / Diamond Sports
Finance Co DSPORT 6.625 20.266 8/15/2027
EnLink Midstream
Partners LP ENLK 6.000 76.000 N/A
Endo Finance LLC /
Endo Finco Inc ENDP 5.375 65.027 1/15/2023
Endo Finance LLC /
Endo Finco Inc ENDP 5.375 65.027 1/15/2023
Energy Conversion Devices ENER 3.000 7.875 6/15/2013
Exela Intermediate LLC /
Exela Finance Inc EXLINT 11.500 45.536 7/15/2026
Exela Intermediate LLC /
Exela Finance Inc EXLINT 10.000 66.669 7/15/2023
Exela Intermediate LLC /
Exela Finance Inc EXLINT 10.000 66.494 7/15/2023
GATX Corp GMT 4.750 100.367 6/15/2022
GNC Holdings Inc GNC 1.500 0.185 8/15/2020
GTT Communications Inc GTTN 7.875 10.000 12/31/2024
GTT Communications Inc GTTN 7.875 10.250 12/31/2024
General Electric Co GE 4.000 76.654 N/A
Goodman Networks Inc GOODNT 8.000 89.652 5/11/2022
Lannett Co Inc LCI 4.500 28.889 10/1/2026
MAI Holdings Inc MAIHLD 9.500 30.000 6/1/2023
MAI Holdings Inc MAIHLD 9.500 30.000 6/1/2023
MAI Holdings Inc MAIHLD 9.500 30.000 6/1/2023
MBIA Insurance Corp MBI 11.501 11.796 1/15/2033
MBIA Insurance Corp MBI 11.501 11.796 1/15/2033
Macquarie Infrastructure
Holdings LLC MIC 2.000 94.792 10/1/2023
Malvern Bancorp Inc MLVF 6.125 95.000 2/15/2027
MassMutual Global Funding II MASSMU 2.500 99.900 4/13/2022
MassMutual Global Funding II MASSMU 2.500 99.826 4/13/2022
Morgan Stanley MS 1.800 81.692 8/27/2036
Nine Energy Service Inc NINE 8.750 61.908 11/1/2023
Nine Energy Service Inc NINE 8.750 60.223 11/1/2023
Nine Energy Service Inc NINE 8.750 58.528 11/1/2023
OMX Timber Finance
Investments II LLC OMX 5.540 0.760 1/29/2020
Renco Metals Inc RENCO 11.500 24.875 7/1/2003
Revlon Consumer Products REV 6.250 41.769 8/1/2024
Sears Holdings Corp SHLD 6.625 1.019 10/15/2018
Sears Holdings Corp SHLD 6.625 1.739 10/15/2018
Sears Roebuck Acceptance SHLD 6.500 1.011 12/1/2028
Sears Roebuck Acceptance SHLD 7.000 1.066 6/1/2032
Sears Roebuck Acceptance SHLD 6.750 1.042 1/15/2028
Sears Roebuck Acceptance SHLD 7.500 0.815 10/15/2027
TPC Group Inc TPCG 10.500 38.347 8/1/2024
TPC Group Inc TPCG 10.500 39.251 8/1/2024
Talen Energy Supply LLC TLN 6.500 35.341 6/1/2025
Talen Energy Supply LLC TLN 10.500 35.504 1/15/2026
Talen Energy Supply LLC TLN 9.500 83.716 7/15/2022
Talen Energy Supply LLC TLN 7.000 27.190 10/15/2027
Talen Energy Supply LLC TLN 6.500 28.249 9/15/2024
Talen Energy Supply LLC TLN 10.500 32.608 1/15/2026
Talen Energy Supply LLC TLN 9.500 80.783 7/15/2022
Talen Energy Supply LLC TLN 6.500 28.249 9/15/2024
Talen Energy Supply LLC TLN 10.500 33.124 1/15/2026
Talos Petroleum LLC SGY 7.500 94.910 5/31/2022
TerraVia Holdings Inc TVIA 5.000 4.644 10/1/2019
Trousdale Issuer LLC TRSDLE 6.500 33.000 4/1/2025
Wolverine Escrow LLC WAIR 13.125 42.929 11/15/2027
*********
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
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*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published
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Pennsylvania, USA, and Beard Group, Inc., Philadelphia, Pa., USA.
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Rousel Elaine Tumanda, Joel Anthony G. Lopez, Psyche A. Castillon,
Ivy B. Magdadaro, Carlo Fernandez, Christopher G. Patalinghug, and
Peter A. Chapman, Editors.
Copyright 2022. All rights reserved. ISSN: 1520-9474.
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*** End of Transmission ***