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T R O U B L E D C O M P A N Y R E P O R T E R
Friday, July 15, 2022, Vol. 26, No. 195
Headlines
37 VENTURES: Solicitation Period Extended to Aug. 1
500 MADISON: Voluntary Chapter 11 Case Summary
819D LLC: Seeks Approval to Hire Hirschler Fleischer as Counsel
85 FLATBUSH: Court Enters Order Confirming TH Holdco Plan
ACCO BRANDS: Egan-Jones Retains B+ Senior Unsecured Ratings
ADVANZEON SOLUTIONS: Unsecureds Paid From Cash Flow and Liquidation
AHERN RENTALS: Moody's Cuts CFR to Caa2, Outlook Still Negative
AM96 MANAGEMENT: Voluntary Chapter 11 Case Summary
AMPHIL GROUP: Seeks Approval to Hire Rodeo Realty as Broker
ANTI APPAREL: Taps Rothbloom Law Firm as Bankruptcy Counsel
ATLAS ONTARIO: Moody's Assigns B2 CFR & Alters Outlook to Negative
AVIS BUDGET: Egan-Jones Retains B Senior Unsecured Ratings
B&G FOODS: Egan-Jones Retains B Senior Unsecured Ratings
BAY AREA COMMERCIAL: Files Subchapter V Case
BLUCORA INC: Egan-Jones Retains B+ Senior Unsecured Ratings
C & M ELECTRICAL: Case Summary & 20 Largest Unsecured Creditors
CALAMP CORP: Egan-Jones Retains CCC Senior Unsecured Ratings
CELSIUS NETWORK: Case Summary & 50 Largest Unsecured Creditors
CELSIUS NETWORK: Seeks Chapter 11 Bankruptcy Protection
CHART INDUSTRIES: Egan-Jones Retains BB+ Senior Unsecured Ratings
CHARTER COMMUNICATIONS: Egan-Jones Retains BB Sr. Unsec. Ratings
CHICAGOAN LOGISTIC: Amends Plan to Include ATX MCA Secured Claim
CHOICE HOTELS: Egan-Jones Retains BB+ Senior Unsecured Ratings
CHRIS PETTIT: Trustee Seeks to Hire Dykema Gossett as Counsel
CITRIX SYSTEM: Egan-Jones Retains BB+ Senior Unsecured Ratings
COEUR MINING: Egan-Jones Retains BB- Senior Unsecured Ratings
COMMUNITY HEALTH: Egan-Jones Retains CCC+ Sr. Unsecured Ratings
CONSOLIDATED COMMUNICATIONS: Egan-Jones Retains B- Unsec. Ratings
CORNERSTONE BUILDING: Moody's Cuts CFR to B2, Outlook Stable
CORNERSTONE BUILDING: S&P Lowers ICR to 'B' on Leveraged Buyout
DBMP LLC: CertainTeed Nixes Move to Dodge 'Texas Two-Step' Fight
DIOCESE OF NORWICH: Exclusivity Period Extended to Sept. 30
DOUBLE J PLAYSCAPES: Files Chapter 11 Subchapter V Case
ECHOSTAR CORP: Egan-Jones Retains BB- Senior Unsecured Ratings
FERRELLGAS LP: Moody's Hikes CFR to B1 & Sr. Unsecured Notes to B2
FIRSTENERGY CORP: Shareholders Attorneys Seek $48-Mil. in Fees
FRESH MARKET: S&P Discontinues 'B-' ICR on Debt Repayment
GLOBALSTAR INC: Egan-Jones Retains CC Senior Unsecured Ratings
HARVEST MIDSTREAM: S&P Ups ICR to 'BB-' on Improved Leverage
HDT HOLDCO: Moody's Lowers CFR to B2 & Alters Outlook to Negative
HISPANIC FOOD: Moody's Assigns First Time 'B2' Corp. Family Rating
HUDBAY MINERALS: Moody's Ups CFR to B1 & Sr. Unsecured Notes to B2
INDEPENDENCE FUEL: Case Summary & 20 Largest Unsecured Creditors
INSPIRED ENTERTAINMENT: Moody's Upgrades CFR & Secured Notes to B2
ION GEOPHYSICAL: CityWest Landlord Says Plan Provisions Inequitable
ION GEOPHYSICAL: DGH Says Joint Reorganizing Plan Unconfirmable
ION GEOPHYSICAL: Taxing Authorities Oppose Joint Reorganizing Plan
IXS HOLDINGS: Moody's Lowers CFR & Senior Secured Debt to Caa1
JO-ANN STORES: Moody's Cuts CFR to B3 & Alters Outlook to Negative
JOURNEY PERSONAL: Moody's Lowers CFR to B3, Outlook Negative
JPA NO. 111: Unsecured Claims Unimpaired in Plan
KB HOME: Egan-Jones Retains BB- Senior Unsecured Ratings
LEAR CAPITAL: U.S. Trustee Appoints Customers' Committee
LIVEWELL ASSISTED: Wins Cash Collateral Access Thru July 31
LTL MGT: Law Groups Ask 3rd Circuit to Toss Bankruptcy Filing
M1 DEVELOPMENT: Hearing on Exclusivity Bid Set for July 26
MADISON SQUARE: U.S. Trustee Appoints Creditors' Committee
MAPLE LEAF: Amends Capital Dude & WBT Claims Pay Details
MICHAELS COMPANIES: Moody's Cuts CFR to B2 & Alters Outlook to Neg.
MICHAELS COS: S&P Alters Outlook to Negative, Affirms 'B' ICR
MLK BRYANT: Court Confirms Chapter 11 Plan
MOUNTAINEER MERGER: S&P Alters Outlook to Neg., Affirms 'B' ICR
NAUTILUS POWER: Moody's Lowers Rating on Senior Secured Debt to B3
OAKVIEW FARMS: U.S. Trustee Unable to Appoint Committee
ODYSSEY CONTRACTING: Unsecureds Owed $2M to Get 5% in 5 Years
PBF HOLDING: Moody's Hikes CFR to Ba3 & Alters Outlook to Stable
POPPA CONSTRUCTION: Unsecureds to Split $25K in Subchapter V Plan
REAMIR 44: Exclusivity Period Extended to Aug. 30
REVLON INC: Section 341 Meeting of Creditors Set for July 19
REVLON INC: Wants to Terminate Leases as Part of Bankruptcy
RYDER SYSTEM: Egan-Jones Retains BB+ Senior Unsecured Ratings
SAN DIEGO TACO: Gets Cash Collateral Access Thru Sept 1
SANITYDESK INC: Has Final OK on $164,000 DIP Loan
SAS AB: Wins Court Approval of 'First-Day' Motions
SEQUA CORP: Moody's Hikes CFR to Caa1 & Alters Outlook to Stable
SHAPE TECHNOLOGIES: Moody's Raises CFR to B3, Outlook Stable
SIGNIFY HEALTH: BPCI-A Program Exit No Impact on Moody's 'B1' CFR
SOMM INC: Case Summary & 20 Largest Unsecured Creditors
SOUTH EDGE: Case Summary & Four Unsecured Creditors
STAGWELL GLOBAL: Moody's Ups CFR to B1 & Alters Outlook to Stable
STEVEN K. THOMAS: Combined Disclosure & Plan Confirmed by Judge
TELIGENT INC: Court Okays Liquidation Plan After $87 Million Deal
TEXAS ARMORING: Gets OK to Hire ABIP CPA as Accountant
TRANSPORTATION DEMAND: Unsecureds to Split $1M over 5 Years
TRIDENT TPI: Moody's Rates New First Lien Loan 'B2', Outlook Stable
TRIDENT TPI: S&P Rates New $125MM First-Lien Term Loan 'B-'
TRX HOLDCO: Seeks Approval to Hire Baker Tilly U.S. as Accountant
U.S. SILICA: S&P Affirms 'B-' ICR, Off Watch Dev.
US HOP SOURCE: Floreses Face Bankruptcy After Scam, Litigation
VOYAGER DIGITAL: Adresses Customer Anger in First Hearing
WELLPATH HOLDINGS: Moody's Cuts CFR to B3 & First Lien Loans to B2
[*] June 2022 Commercial Chapter 11 Filings Rise 29% Y/Y
[^] BOOK REVIEW: The Heroic Enterprise
*********
37 VENTURES: Solicitation Period Extended to Aug. 1
---------------------------------------------------
The U.S. Bankruptcy Court for the Central District of California
extended to Aug. 1 the exclusivity period for 37 Ventures, LLC and
Larada Sciences, Inc. to solicit acceptances for their proposed
Chapter 11 plan of reorganization.
The Debtors are waiting for the closing of the transaction
negotiated by one of 37 Ventures' portfolio companies, which is
expected to generate substantial cash proceeds.
The companies' attorney, Jeffrey Kwong, Esq., at Levene Neale
Bender Yoo & Brill, LLP, said the transaction is a potential "game
changing" event with respect to 37 Ventures' ability to pay its
creditors and that extending the solicitation period will allow for
the transaction to close.
Alignment Debt Holdings 1, LLC, a creditor, previously opposed
another extension, saying the companies failed to demonstrate
"cause" following their refusal to negotiate a consensual plan that
can be presented to the court promptly once the transaction
closes.
37 Ventures, LLC and Larada Sciences defended the Aug. 1 extension
date, saying it was sought in "good faith" and that they are
already prepared to modify their plan and move forward with the
confirmation hearing following the closing of the transaction.
The companies filed the latest version of their plan on Jan. 4,
which proposes to pay their creditors in full over time.
About 37 Ventures
37 Ventures, LLC, a company based in Thousand Oaks, Calif., sought
protection under Chapter 11 of the Bankruptcy Code (Bankr. C.D.
Calif. Case No. 21-10261) on March 18, 2021. Its affiliate, Larada
Sciences, Inc., a Utah-based company that owns and operates clinics
dedicated to head lice prevention and treatment, filed a Chapter 11
petition (Bankr. C.D. Calif. Case No. 21-10269) on March 19, 2021.
The cases are jointly administered under Case No. 21-10261. Judge
Deborah J. Saltzman oversees the cases.
In their petitions, 37 Ventures and Larada Sciences disclosed
assets of between $1 million and $10 million and liabilities of
between $10 million and $50 million.
Levene Neale Bender Yoo & Brill, LLP serves as 37 Ventures' legal
counsel. Larada Sciences tapped Cohne Kinghorn, PC as bankruptcy
counsel, Zolkin Talerico LLP as local counsel, and Rocky Mountain
Advisory, LLC as financial advisor.
500 MADISON: Voluntary Chapter 11 Case Summary
----------------------------------------------
Debtor: 500 Madison Manalapan LLC
1336 45th Street
Brooklyn, NY 11219
Business Description: 500 Madison Manalapan LLC is engaged in
activities related to real estate.
Chapter 11 Petition Date: July 14, 2022
Court: United States Bankruptcy Court
Eastern District of New York
Case No.: 22-41690
Judge: Hon. Elizabeth S. Stong
Debtor's Counsel: Kevin J. Nash, Esq.
GOLDBERG WEPRIN FINKEL GOLDSTEIN LLP
1501 Broadway
New York, NY 10036
Tel: 212-221-5700
Email: kjnash@gwulaw.com
Estimated Assets: $1 million to $10 million
Estimated Liabilities: $1 million to $10 million
The petition was signed by Shlomo Kolodney as manager.
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/OOVOEKY/500_Madison_Manalapan_LLC__nyebke-22-41690__0001.0.pdf?mcid=tGE4TAMA
819D LLC: Seeks Approval to Hire Hirschler Fleischer as Counsel
---------------------------------------------------------------
819D, LLC seeks approval from the U.S. Bankruptcy Court for the
District of Columbia to hire Hirschler Fleischer as its bankruptcy
counsel.
The firm's services include:
(a) advising the Debtor with respect to local practice and
procedure;
(b) advising the Debtor with respect to its powers and duties
in the continued operation of its businesses;
(c) attending meetings and negotiating with representatives of
creditors and other parties-in-interest;
(d) taking necessary actions to protect and preserve the
Debtor's estate, including the prosecution of actions on the
Debtor's behalf, the defense of any actions commenced against the
Debtor, and, where appropriate, objecting to claims filed against
the estate;
(e) preparing legal papers and appearing in court;
(f) assisting the Debtor in the preparation of a Chapter 11
plan and disclosure statement;
(g) representing the Debtor in matters, which may arise in
connection with its business operations, financial and legal
affairs, dealings with creditors and other parties-in-interest,
sales, litigation, and in any other matters; and
(h) performing all other necessary legal services in
connection with the prosecution of the Debtor's Chapter 11 case.
The hourly rates charged by the firm's attorneys range from $275
for associates to $675 for senior partners. Kristen Burgers, Esq.,
and Stephen Leach, Esq., the firm's attorneys who will be handling
the case, charge $490 per hour and $570 per hour, respectively.
As disclosed in court filings, Hirschler Fleischer is a
"disinterested person" within the meaning of Section 101(14) of the
Bankruptcy Code.
The firm can be reached through:
Stephen E. Leach, Esq.
Kristen E. Burgers, Esq.
Hirschler Fleischer, PC
8270 Greensboro Drive, Suite 700
Tysons, VA 22102
Phone: (703) 584-8900
Facsimile: (703) 584-8901
Email: sleach@hirschlerlaw.com
kburgers@hirschlerlaw.com
About 819D LLC
819D, LLC, a company in Annapolis, Md., sought protection under
Chapter 11 of the U.S. Bankruptcy Code (Bankr. D.D.C. Case No.
22-00101) on June 19, 2022, listing as much as $10 million in both
assets and liabilities. Andrew Rubin, president, signed the
petition.
Judge Elizabeth L. Gunn oversees the case.
Kristen E. Burgers, Esq., at Hirschler Fleischer PC is the Debtor's
counsel.
85 FLATBUSH: Court Enters Order Confirming TH Holdco Plan
---------------------------------------------------------
Judge Sean H. Lane has entered an order confirming TH Holdco LLC'S
Second Amended Chapter 11 Plan, as modified.
TH Holdco LLC as creditor filed a Second Amended Chapter 11 plan
related to the Debtors 85 Flatbush RHO Mezz, LLC, 85 Flatbush RHO
Hotel LLC, and 85 Flatbush RHO Residential LLC pursuant to section
1121(a) of the Bankruptcy Code.
The Plan identifies the Purchaser as TH Holdco. The purchase price
for the Hotel Property and/or Residential Property will be set
forth in the executed Purchase Agreement filed promptly after the
Confirmation Hearing. The opening bid for the Auction shall be the
TH Holdco Credit Bid with the TH Holdco Additional Consideration
and TH Holdco Unsecured Claim Dedicated Fund. In the event that
another bidder submits a higher and better bid at the Auction which
is approved by the Bankruptcy Court, then the term Purchaser shall
refer to such higher and better bidder.
Based on the representations of TH Holdco's counsel at the
Confirmation Hearing, the treatment of Class 6 and Class 8 under
the Second Amended Plan is hereby modified to provide for the
payment of all allowed Class 6 and Class 8 claims in full, in Cash,
on the Effective Date of the Plan, and such Classes shall be deemed
unimpaired under Section 1124 of the Bankruptcy Code. The term "TH
Holdco Unsecured Claim Additional Funding," as defined in the Plan,
shall be revised to mean payment of all allowed General Unsecured
Claims in Classes 6 and 8 in full in Cash on the Effective Date of
the Plan.
On June 24, 2022, TH Holdco caused to be filed the Certification of
Acceptances and Rejections of Plan, which provides that the Plan
has been accepted and/or deemed accepted by the holders of the
impaired claims of creditors classified in Classes 1-14.
The amendments to the Plan improve the treatment of Classes 6 and 8
under the Plan and do not requiring the re-noticing or
re-solicitation of the Plan under any applicable Bankruptcy Rule.
The sale of the Properties to the Purchaser under the Purchase
Agreement is approved in all respects pursuant to the terms and
condition of this Order. The Debtors are authorized and directed
to sell the Properties and other purchased assets to the Purchaser
as provided in the Sale and Bid Procedures and otherwise consummate
the Sale Transaction contemplated by the Purchase Agreement upon
the Effective Date of the Plan.
TH Holdco LLC as creditor submitted a Second Amended Chapter 11
Plan related to the Debtors 85 Flatbush RHO Mezz, LLC, et al.
pursuant to section 1121(a) of the Bankruptcy Code.
TH Holdco Unsecured Claim Dedicated Fund means a segregated and
dedicated fund of $1,250,000 cash provided by TH Holdco separate
from its TH Holdco Credit Bid to be allocated Pro Rata, based on
the total amount of Allowed General Unsecured Claims in Classes 6
and 8, among holders of Allowed General Unsecured Claims against 85
RHO Flatbush Hotel or 85 RHO Flatbush Residential but not with
respect to any Allowed General Unsecured Claims against 85 RHO
Flatbush Mezz. This Fund shall be available only if TH Holdco
closes the Sale Transaction as the successful acquirer of either
the Hotel Property and the Residential Property or both
Properties.
Counsel to the TH Holdco LLC:
Lauren Macksoud, Esq.
Sarah M. Schrag, Esq.
DENTONS US LLP
1221 Avenue of the Americas, 25th Floor
New York, New York 10020
Telephone: (212) 768-6700
Facsimile: (212) 768-6800
E-mail: lauren.macksoud@dentons.com
sarah.schrag@dentons.com
- and -
Robert E. Richards, Esq.
DENTONS US LLP
233 South Wacker Drive, Suite 5900
Chicago, Illinois 60606
Telephone: (312) 876-8000
Facsimile: (312) 876-7934
E-mail: robert.richards@dentons.com
A copy of the Disclosure Statement dated July 6, 2022, is available
at https://bit.ly/3alaNTR from PacerMonitor.com.
About 85 Flatbush RHO Mezz
85 Flatbush RHO Mezz LLC is the 100% owner of 85 Flatbush RHO Hotel
LLC and 85 Flatbush RHO Residential LLC. RHO Hotel and RHO
Residential collectively own the property located at 85 Flatbush
Extension, Brooklyn, N.Y.
The property is a 132,641-square-foot, 12-story, mixed use property
consisting of a 174-room boutique hotel on the first six floors
known as the Tillary Hotel Brooklyn, a 58,652-square-foot 64-unit
luxury multi-family building and a 5,642-square-foot parking
garage. The residential component of the property has nine studios,
26 one-bedroom units and 29 two-bedroom units.
85 Flatbush RHO Mezz and its affiliates sought protection under
Chapter 11 of the Bankruptcy Code (Bankr. S.D.N.Y. Lead Case No.
20-23280) on Dec. 18, 2020. In its petition, 85 Flatbush RHO Mezz
disclosed between $50 million and $100 million in both assets and
liabilities.
Judge Robert D. Drain oversees the cases.
Fred B. Ringel, Esq., at Robinson Brog Leinwand Greene Genovese &
Gluck P.C., is the Debtor's legal counsel.
ACCO BRANDS: Egan-Jones Retains B+ Senior Unsecured Ratings
-----------------------------------------------------------
Egan-Jones Ratings Company on June 28, 2022, retained its 'B+'
foreign currency and local currency senior unsecured ratings on
debt issued by Acco Brands Corporation.
Headquartered in Lake Zurich, Illinois, Acco Brands Corporation
manufactures office products.
ADVANZEON SOLUTIONS: Unsecureds Paid From Cash Flow and Liquidation
-------------------------------------------------------------------
Advanzeon Solutions, Inc., Second Amended Plan of Reorganization
and a corresponding Disclosure Statement.
The distributions under the Plan will be funded principally by (i)
existing Cash on hand on the Effective Date, and (ii) revenues
generated by continued operations by the Debtor through PVMS
following the Effective Date; and (iii) recoveries from claims and
causes of action pursued by the Litigation Trustee.
Under the Plan, holders of Class 7 Unsecured Claims will be paid on
account of their Allowed Unsecured Claims their Pro Rata Share of
the Unsecured Creditor Distribution Fund. The Unsecured Creditor
Distribution Fund will be funded from two sources. The first source
of funding for the Unsecured Creditor Distribution Fund will be the
"Net Cash Flow" available from the operations of PVMS. For purposes
of the Plan, "Net Cash Flow" shall be total cash receipts less
labor, materials, operating, general, and administrative expenses,
and less cash necessary for debt service, reserving for operating
capital, and payment of applicable income taxes, as to each items
for both PVMS and the Reorganized Debtor. Net Cash Flow, to the
extent available, shall be funded by the Reorganized Debtor, and
shall be payable in quarterly payments, beginning on the date that
is the first day of the calendar quarter following the quarter in
which the Effective Date occurs, with the last payment to be made
on the quarter in which the Unsecured Creditor Distribution Fund
has been funded sufficient to pay all Allowed Class 7 Unsecured
Claims in full, after taking into account any distributions from
the Litigation Trust to the Holders of Allowed Class 7 Unsecured
Claims as the Trust Beneficiaries. As to any quarter in which the
Net Cash Flow is negative, no payment shall be due to fund the
Unsecured Creditor Distribution Fund on account of Net Cash Flow
for that quarter. The second source of funding for the Unsecured
Creditor Distribution Fund shall be the net proceeds from the
liquidation of the Litigation Trust Assets. Proceeds from the
liquidation of the Litigation Trust Assets shall be distributed by
the Litigation Trust in accordance with the Litigation Trust
Agreement. Class 7 is impaired.
Holders of Unsecured Claims should understand that, although the
Debtor projects to have significant Net Cash Flow available under
the Plan to fund distributions on account of Allowed Class 7
Unsecured Claims, distributions under the Plan from Net Cash Flow
are only due if Net Cash Flow is positive. Thus, it is possible
that for one or more quarters no Net Cash Flow will be available to
fund a distribution to Allowed Class 7 Unsecured Claims, and that
Allowed Class 7 Unsecured Claims will not receive a distribution
for one or more quarters.
Attorneys for the Debtor:
Daniel R. Fogarty, Esq.
STICHTER, RIEDEL, BLAIN & POSTLER, P.A.
110 East Madison Street, Suite 200
Tampa, Florida 33602
Tel: (813) 229-0144
Fax: (813) 229-1811
E-mail: dfogarty@srbp.com
A copy of the Disclosure Statement dated July 8, 2022, is available
at https://bit.ly/3yAiOMu from PacerMonitor.com.
About Advanzeon Solutions
Based in Tampa, Fla., Advanzeon Solutions, Inc., provides
behavioral health, substance abuse and pharmacy management
services, as well as sleep apnea programs, for employers,
Taft-Hartley health and welfare Funds, and managed care companies
throughout the United States.
Advanzeon Solutions sought protection under Chapter 11 of the
Bankruptcy Code (Bankr. M.D. Fla. Case No. 20-06764) on Sept. 7,
2020.
At the time of the filing, the Debtor estimated assets of between
$500,000 and $1 million and liabilities of between $1 million and
$10 million. The petition was signed by Clark A. Marcus, chief
executive officer.
Stichter, Riedel, Blain & Postler, P.A., is the Debtor's legal
counsel.
AHERN RENTALS: Moody's Cuts CFR to Caa2, Outlook Still Negative
---------------------------------------------------------------
Moody's Investors Service downgraded Ahern Rentals Inc.'s corporate
family rating to Caa2 from Caa1 and probability of default rating
to Caa3-PD from Caa1-PD. Concurrently, Moody's downgraded the
rating on Ahern's senior secured second lien notes to Caa3 from
Caa2. The outlook remains negative.
The downgrade is a result of Ahern's proposed debt exchange offer
to existing noteholders which Moody's will consider a distressed
exchange and limited default if completed. Participating
bondholders will receive less than initially promised if they do
not tender early. Further, Moody's views the transaction as a means
of default avoidance because the existing notes mature in May 2023
and the rating agency does not believe the company is able to
refinance through the traditional bond market. In addition, there
is an element of coercion to existing noteholders to participate in
the new offering, because those who do not participate in the
exchange offer will become effectively subordinated to holders of
the new notes.
Governance is a key driver of the rating action as management has
proposed a debt restructuring where current creditors may be
disadvantaged and refinancing options were not managed well in
advance of a potential liquidity event.
The negative outlook reflects the likelihood that the proposed
transaction will meet Moody's determination of a distressed
exchange. The outlook also reflects uncertainty around the
resulting capital structure, the extent of any resulting losses to
existing creditors, and the potential for a large remaining debt
maturity in 2023 if a significant number of creditors do not
participate in the exchange.
Downgrades:
Issuer: Ahern Rentals Inc.
Corporate Family Rating, Downgraded to Caa2 from Caa1
Probability of Default Rating, Downgraded to Caa3-PD from Caa1-PD
Senior Secured 2nd Lien Regular Bond/Debenture, Downgraded to Caa3
(LGD4) from Caa2 (LGD5)
Outlook Actions:
Issuer: Ahern Rentals Inc.
Outlook, Remains Negative
RATINGS RATIONALE
Ahern's Caa3-PD probability of default rating reflects Moody's view
that the chances of a debt restructuring that would be deemed a
distressed exchange have increased following the announcement of
the proposed exchange offer. Moody's will append the /LD to the
Caa3-PD probability of default rating if the proposed exchange
offer is completed as contemplated acknowledging the limited
default.
The Caa2 corporate family rating reflects the company's very weak
liquidity. The existing notes mature in May 2023 if they are not
exchanged. Further, the company's ABL will expire 91 days prior
to the May 15, 2023 maturity date of the second lien notes if those
notes are not refinanced. Moody's understands that the company will
attempt to amend the terms of the existing ABL in conjunction with
the note exchange offer.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The company's ratings could be downgraded if the expected recovery
rate declines or the company pursues a more aggressive debt
restructuring. The ratings could also be downgraded further if the
company does not successfully extend maturities of the notes or the
expiration of the ABL revolver such that the company could not meet
its maturing debt obligations.
The ratings could be upgraded if the company successfully
refinances the second lien notes. Moody's would also expect Ahern
to strengthen its liquidity by significantly reducing the potential
for any remaining debt maturities in 2023 resulting from existing
creditors that do not exchange their notes and by restoring
availability on the ABL revolver.
The principal methodology used in these ratings was Equipment and
Transportation Rental published in February 2022.
Ahern Rentals Inc., (Ahern) headquartered in Las Vegas, NV, is an
equipment rental company with a network of 112 branches across 31
states, as well as a small international presence. The company
generates approximately 70-75% of its rental revenue from the
largest portion of its rental fleet, high reach equipment, which
consists of boom lifts, fork lifts, and scissor lifts. Ahern's
majority shareholder is the company's Chairman and Chief Executive
Officer, Don Ahern. Ahern reported revenue of approximately $937
million for the twelve months ended March 31, 2022.
AM96 MANAGEMENT: Voluntary Chapter 11 Case Summary
--------------------------------------------------
Debtor: AM96 Management Inc.
244 5th Avenue
Suite 210B
New York, NY 10001
Business Description: The Debtor is a Single Asset Real Estate (as
defined in 11 U.S.C. Section 101(51B)).
Chapter 11 Petition Date: July 13, 2022
Court: United States Bankruptcy Court
Eastern District of New York
Case No.: 22-41677
Judge: Hon. Nancy Hershey Lord
Debtor's Counsel: Leo Jacobs, Esq.
JACOBS P.C.
450 Lexington Avenue
New York, NY 10017
Tel: 718-772-8704
Email: Leo@JacobsPC.com
Estimated Assets: $500,000 to $1 million
Estimated Liabilities: $1 million to $10 million
The petition was signed by Avraam Boruchov as chief executive
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/2Z7ZKZY/AM96_Management_Inc__nyebke-22-41677__0001.0.pdf?mcid=tGE4TAMA
AMPHIL GROUP: Seeks Approval to Hire Rodeo Realty as Broker
-----------------------------------------------------------
Amphil Group, LLC seeks approval from the U.S. Bankruptcy Court for
the Central District of California to hire Rodeo Realty Beverly
Hills to market for sale its property located at 19650 Chalina
Drive, Walnut, Calif.
Rodeo is entitled to a commission equal to 5 percent of the listing
price of the property, which is currently listed at $2.195
million.
As disclosed in court filings, Rodeo is not employed by, or
connected with, any of the Debtor's creditors or with any other
party in interest in the Debtor's Chapter 11 case.
The firm can be reached through:
Elie Samaha
Rodeo Realty Beverly Hills
202 N. Canon Drive
Los Angeles, CA 90024
Phone: +1 213 448 5600
Email: eliesarnaha@rodeore.com
About Amphil Group
c, LLC is the fee simple owner of a single family residence located
at 19650 Chalina Drive, Walnut, Calif., having a current value of
$2 million.
Amphil Group, filed its voluntary petition for relief under Chapter
11 of the Bankruptcy Code (Bankr. C.D. Calif. Case. No. 21-18014)
on Oct. 18, 2021. The petition was signed by Frank Hernandez Jr. as
managing member. At the time of filing, the Debtor listed
$2,000,160 in assets and $1,161,738 in liabilities.
Judge Vincent P. Zurzolo oversees the case.
Michael Jay Berger, Esq. at the Law Offices of Michael Jay Berger
represents the Debtor as counsel.
ANTI APPAREL: Taps Rothbloom Law Firm as Bankruptcy Counsel
-----------------------------------------------------------
Anti Apparel Group, LLC seeks approval from the U.S. Bankruptcy
Court for the Northern District of Georgia to hire The Rothbloom
Law Firm as its bankruptcy counsel.
The firm's services include:
(a) preparing pleadings and applications;
(b) conducting examinations;
(c) advising the Debtor of its rights, duties and
obligations;
(d) consulting with and representing the Debtor with respect
to the preparation of a plan of reorganization and disclosure
statement;
(e) representing the Debtor in contested matters and adversary
proceedings; and
(f) representing the Debtor in other matters incidental to the
proper preservation and administration of the Debtor's estate and
business.
The firm will be paid as follows:
Howard D. Rothbloom, Esq. $375 per hour
Paralegal $175 per hour
The firm received a pre-bankruptcy retainer in the amount of $6,500
and the filing fee of $1,738.
As disclosed in court filings, Rothbloom is a "disinterested
person" within the meaning of Section 101(14) of the Bankruptcy
Code.
The firm can be reached through:
Howard D. Rothbloom, Esq.
The Rothbloom Law Firm
309 E. Paces Ferry Road, NE, Suite 400
Atlanta, GA 30305
Phone :(770) 792-3636
Email: howard@rothbloom.com
About Anti Apparel Group
Anti Apparel Group, LLC sought protection for relief under Chapter
11 of the Bankruptcy Code (Bankr. N.D. Ga. Case No. 22-55011) on
July 1, 2022, listing under $1 million in both assets and
liabilities. Howard Rothbloom, Esq., at The Rothbloom Law Firm
serves as the Debtor's counsel.
ATLAS ONTARIO: Moody's Assigns B2 CFR & Alters Outlook to Negative
------------------------------------------------------------------
Moody's Investors Service assigned a B2 corporate family rating and
a probability of default rating of B2-PD to ATLAS ONTARIO LP
("Allied Universal"). Concurrently Moody's affirmed the ratings of
Allied Universal Holdco LLC's senior secured instruments of B2 and
the senior unsecured instruments of Caa1. Moody's also withdrew
Allied Universal Holdco LLC's existing B2 CFR and B2-PD PDR
ratings. The outlook has been changed to negative.
The rating actions follow a review of the credit taking into
account recent performance of the company. Leverage is very high
for the rating at 8.5x as of the end of 1Q 2022 and cash flow is
expected to be negative this year due to certain non-recurring
expenses. Leverage has been increasing sequentially in an
environment of rising interest rates and pressured margins.
Combined with a highly acquisitive business strategy Moody's sees
elevated risks to the financial profile of the company. However,
Moody's believes that the demand for security services is stable
and Allied Universal benefits from historically strong customer
retention rates, a history of organic revenue growth and a
geographically diversified business. Deleveraging is possible in
the absence of debt funded acquisitions. Governance is a driver of
the rating action. Allied Universal has very high governance risks
that arises from its tolerance for high leverage, frequent debt
funded acquisitions and private equity ownership.
The following ratings/assessments are affected by the action:
New Assignments:
Issuer: ATLAS ONTARIO LP
Corporate Family Rating, Assigned B2
Probability of Default Rating, Assigned B2-PD
Ratings Withdrawn:
Issuer: Allied Universal Holdco LLC
Corporate Family Rating, Withdrawn, previously rated B2
Probability of Default Rating, Withdrawn, previously rated B2-PD
Ratings Affirmed:
Issuer: Allied Universal Holdco LLC
Senior Secured Bank Credit Facility, Affirmed B2 (LGD3)
Senior Secured Regular Bond/Debenture, Affirmed B2 (LGD3)
Senior Unsecured Regular Bond/Debenture, Affirmed Caa1 (LGD6)
Outlook Actions:
Issuer: Allied Universal Holdco LLC
Outlook, Changed To Negative From Stable
Issuer: ATLAS ONTARIO LP
Outlook, Assigned Negative
RATINGS RATIONALE
The B2 CFR reflects the large scale and geographic scope of Allied
Universal, very high leverage for the rating and thin margins. Pro
forma debt / EBITDA was 8.5x (Moody's adjusted, as of March 2022,
pro forma for acquired EBITDA) and leverage has been increasing
sequentially for the past few quarters as overall debt levels have
been increasing. A very high interest expense burden also
constrains cash flow and weighs on the credit. The expectation for
aggressive financial policies and debt-funded M&A is credit
negative. Margins have been pressured for the past year or so due
to unfavorable labor market conditions. As a result of higher
levels of attrition Allied Universal has been incurring higher
costs to hire and train new employees. Although it is hard to
predict when labor market conditions will improve Moody's expects
conditions to remain unfavorable through the remainder of this year
and thus margins to remain below the historical 9% area. Allied
Universal's EBITDA margins are low relative to other essential
business services companies. However, security services, which
accounts for over 85% of revenues, features very low capital
investment requirements, leading to good free cash flow conversion
despite the narrow profit margins. Allied Universal benefits from
its market position as the US's largest security services company,
the recession resistant nature of the security services business,
an ability to pass on higher wages to customers and a track record
of successfully integrating acquisitions and achieving targeted
cost reductions.
All financial metrics cited reflect Moody's standard adjustments.
Moody's considers demand for security services to be relatively
stable through economic cycles since customers generally view
security as a non-discretionary spending item. The overall security
services industry is relatively mature, with limited growth
prospects. Allied Universal is the largest security services
provider in North America with an estimated 35% market share
(according to the company) of the over $25 billion outsourced
manned guarding market. Moody's believes this scale brings benefits
from both a revenue and a cost perspective and provides a
competitive advantage relative to smaller regional companies,
particularly with regard to national accounts. The company's
largest competitors include Securitas AB (unrated) and Garda World
Security Corporation (B3 stable). The North American security
services market is highly fragmented, with the top three companies
representing about half of the market and the remaining 50% spread
among thousands of local competitors. Historically, about 20% of
Allied Universal's pro-forma revenue has been comprised of national
accounts, which typically benefit from longer contracts and
established relationships, as well as reportedly high customer
retention rates of over 95%.
As a private company owned by financial sponsors, Allied
Universal's financial strategies are aggressive and opportunistic.
Its track record of debt-financed acquisitions and history of
operating with high financial leverage and limited free cash flow
reflect its opportunistic policies typical of financial sponsor
ownership. The board of directors is controlled by Warburg Pincus
and CDPQ. Among Allied Universal's expected near term capital
allocation priorities are investing in the business, completing
acquisitions, financial leverage reduction and cash returns to
shareholders. Financial reporting is delivered much later than is
typical for publicly-traded services companies, limiting timeliness
and transparency into its operations and financial results.
Moody's considers Allied Universal's liquidity profile as good.
Liquidity is supported by unrestricted cash on hand of
approximately $800 million as of the end of 1Q 2022 and
availability under the company's three revolvers. Free cash flow is
projected be negative in 2022 and improve to $200 million in 2023.
The $300 million senior secured first lien revolving credit
facility expiring 2024 was fully available as of the end of the
quarter while the Eu300 million senior secured revolver due 2026
and unrated $1,500 million senior secured asset based revolving
credit facility ("ABL") expiring 2024 were more than 50% available.
The $300 million and Eu300 million revolvers are subject to a
maximum first lien net leverage ratio when utilization exceeds 40%
of total capacity. Moody's does not anticipate that the covenant
will be tested over the next year. If it were tested, Moody's
believes that the company would remain compliant.
The ratings assigned to the individual instruments are based on the
probability of default of the company, reflected in the B2-PD PDR,
as well as a family recovery of 50% of debt obligations assumed at
default. The B2 ratings for the first lien credit facilities and
senior secured notes are at the same level as the company's B2 CFR,
reflecting their position in the capital structure ahead of the
unsecured debt but junior to the unrated $1.5 billion ABL. The ABL
has a first lien on the US working capital assets of Allied
Universal, while the bank credit facilities and senior secured
notes have a first lien on all other assets.
The negative outlook incorporates Moody's expectations for low
single digit revenue increases. However, margins will continue to
be pressured, and EBITDA margins will be between 7% and 9%, which
is lower than historical levels. Free cash flow to debt will be
negative for 2022 - the company has payments related to pensions
and the CAREs act that are large and temporary in nature. The CAREs
Act repayment will end this year although the company will have to
continue cash payments related to pensions for the next several
years. The negative outlook also incorporates the expectation for
periodic debt-funded acquisitions that could result in debt to
EBITDA to rise.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if Moody's expects 1) debt to remain
around 5.0 times; 2) free cash flow above 6.0% of total debt; 3)
balanced financial policies; and 4) good liquidity.
The ratings could be downgraded if 1) revenue growth rates decline
toward break-even; 2) deleveraging from current levels is not
achieved and there is no clear path to leverage approaching 7.0x;
3) Profitability improvements are not achieved; or 4) free cash
flow to debt is anticipated to remain below 3.0%.
The principal methodology used in these ratings was Business and
Consumer Services published in November 2021.
Allied Universal, headquartered in Conshohocken, Pennsylvania and
Santa Ana, California and controlled by affiliates of private
equity sponsors Warburg Pincus and CDPQ, is one of the world's
largest security and related services company. Revenue for FY 2021
(including a full year of G4S results) is around $19 billion.
AVIS BUDGET: Egan-Jones Retains B Senior Unsecured Ratings
----------------------------------------------------------
Egan-Jones Ratings Company on June 29, 2022, retained its 'B'
foreign currency and local currency senior unsecured ratings on
debt issued by Avis Budget Group, Inc.
Headquartered in Parsippany-Troy Hills, New Jersey, Avis Budget
Group, Inc. operates as a vehicle rental and mobility solution
service.
B&G FOODS: Egan-Jones Retains B Senior Unsecured Ratings
--------------------------------------------------------
Egan-Jones Ratings Company on June 28, 2022, retained its 'B'
foreign currency and local currency senior unsecured ratings on
debt issued by B&G Foods Inc.
Headquartered in Parsippany-Troy Hills, New Jersey, B&G Foods Inc.
manufactures, sells, and distributes shelf-stable foods across
North America.
BAY AREA COMMERCIAL: Files Subchapter V Case
--------------------------------------------
Bay Area Commercial Sweeping Inc. filed for chapter 11 protection
in the Northern District of California, without stating a reason.
The Debtor filed as a small business debtor seeking relief under
Subchapter V of Chapter 11 of the Bankruptcy Code.
According to court filing, Bay Area Commercial Sweeping Inc.
estimates between 1 and 49 creditors. The petition states funds
will be available to unsecured creditors.
About Bay Area Commercial Sweeping
Bay Area Commercial Sweeping Inc. -- https://www.bacsweeping.com --
filed a petition for relief under Subchapter V of Chapter 11 of the
U.S. Bankruptcy Code (Bankr. N.D. Cal. Case No. 22-50590).
In the petition filed by Stephanie Serrano, as president, the
Debtor estimated assets of $500,000 to $1 million and liabilities
of $1 million to $10 million.
This case has been assigned to Judge Stephen L. Johnson.
Timothy Nelson has been appointed as Subchapter V trustee.
Brent D. Meyer, of Meyer Law Group, LLP, is the Debtor's counsel.
BLUCORA INC: Egan-Jones Retains B+ Senior Unsecured Ratings
-----------------------------------------------------------
Egan-Jones Ratings Company on June 29, 2022, retained its 'B+'
foreign currency and local currency senior unsecured ratings on
debt issued by Blucora, Inc.
Headquartered in Irving, Texas, Blucora, Inc. is a provider of a
wide range of technology-enabled financial services to consumers,
small businesses and tax professionals through its subsidiaries.
C & M ELECTRICAL: Case Summary & 20 Largest Unsecured Creditors
---------------------------------------------------------------
Debtor: C & M Electrical Contractors, Inc.
P.O. Box 113
Jefferson, GA 30549
Business Description: The Debtor provides a complete range of
electrical and mechanical solutions for the
governmental, industrial, commercial, &
agricultural sectors.
Chapter 11 Petition Date: July 14, 2022
Court: United States Bankruptcy Court
Northern District of Georgia
Case No.: 22-20649
Judge: Hon. James R. Sacca
Debtor's Counsel: Benjamn Keck, Esq.
KECK LEGAL, LLC
2566 Shallowford Rd. Suite 104-252
Atlanta, GA 30345
Tel: 678-641-1720
Email: bkeck@kecklegal.com
Estimated Assets: $500,000 to $1 million
Estimated Liabilities: $1 million to $10 million
The petition was signed by Richard Cody Esco as sole shareholder.
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/GFJ72AY/C__M_ELECTRICAL_CONTRACTORS_INC__ganbke-22-20649__0001.0.pdf?mcid=tGE4TAMA
CALAMP CORP: Egan-Jones Retains CCC Senior Unsecured Ratings
------------------------------------------------------------
Egan-Jones Ratings Company on June 29, 2022, retained its 'CCC'
foreign currency and local currency senior unsecured ratings on
debt issued by CalAmp Corp. EJR also retained its 'C' rating on
commercial paper issued by the Company.
Headquartered in Irvine, California, CalAmp Corp. delivers wireless
access and computer technologies.
CELSIUS NETWORK: Case Summary & 50 Largest Unsecured Creditors
--------------------------------------------------------------
Lead Debtor: Celsius Network LLC
121 River Street
PH05
Hoboken, NJ 07030
Business Description: Celsius Network LLC is a cryptocurrency loan
company headquartered in Hoboken, New
Jersey.
Chapter 11 Petition Date: July 13, 2022
Court: United States Bankruptcy Court
Southern District of New York
Eight affiliates that concurrently filed voluntary petitions for
relief under Chapter 11 of the Bankruptcy Code:
Debtor Case No.
------ --------
Celsius Network LLC 22-10964
Celsius Network Inc. 22-10965
Celsius Network Limited 22-10966
Celsius KeyFi LLC 22-10967
Celsius Mining LLC 22-10968
Celsius Networks Lending LLC 22-10969
Celsius Lending LLC 22-10970
Celsius US Holding LLC 22-10971
Debtors'
General
Bankruptcy
Counsel: Joshua A. Sussberg, Esq.
KIRKLAND & ELLIS LLP AND
KIRKLAND & ELLIS INTERNATIONAL LLP
601 Lexington Avenue
New York, NY 10022
Tel: (212) 446-4800
Email: joshua.sussberg@kirkland.com
Debtors'
Financial
Advisor: ALVAREZ & MARSAL NORTH AMERICA, LLC
Debtors'
Investment
Banker: CENTERVIEW PARTNERS LLC
Debtors'
Regulatory
Counsel: LATHAM & WATKINS, LLP
Debtors'
Notice &
Claims
Agent: STRETTO, INC.
Estimated Assets
(on a consolidated basis): $1 billion to $10 billion
Estimated Liabilities
(on a consolidated basis): $1 billion to $10 billion
The petitions were signed by Alex Mashinsky as chief executive
officer.
A full-text copy of the Lead Debtor's petition is available for
free at PacerMonitor.com at:
https://www.pacermonitor.com/view/QAR3MWY/Celsius_Network_LLC__nysbke-22-10964__0001.0.pdf?mcid=tGE4TAMA
Consolidated List of Debtors' 50 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
1. Pharos USD Fund SP Loan Party $81,081,803
Pharos Fund SP Landmark
Square, 1st Floor
64 Earth Close
PO Box 715
Grand Cayman
KY-1107
Cayman Islands
Email: admin@lanternventures.com
2. On File Customer $40,586,695
3. On File Customer/ $38,359,717
Loan Party
4. On File Customer $24,628,833
5. On File Customer/ $20,998,387
Loan Party
6. On File Customer $19,369,656
7. On File Customer/ $15,812,046
Loan Party
8. On File Customer/ $15,571,124
Loan Party
9. On File Customer/ $15,133,797
Loan Party
10. On File Customer $14,569,039
11. ICB Solutions Customer $13,343,960
W Royal Forest Blvd
Columbus, OH
43214ICB Solutions
W Royal Forest Blvd
Columbus, OH 43214
Tel: 614-403-0997
12. The Caen Group LLC Customer $13,077,800
Detwiler Road
Escondido, CA 92029
Tel: 760-803-0712
13. Alameda Research LTD Loan Party $12,770,047
Tortola Pier
Park, Building 1
Second Floor
Wickhams Cay I
Road Town,
Tortola VG1110
British Virgin Islands
Tel: 774-270-0676
Email: sam@alamded-research.com
14. B2C2 LTD Loan Party $11,814,949
86-90 Paul Street
London EC2A
4NE
United Kingdom
Tel: 44-203-973-4780
Email: middleoffice@B2C2.com
15. Covario AG Customer $11,310,531
Landys+Gyr
Strasse 1
Zug 6300
Switzerland
Tel: 414-154-11382
Email: brokerage@covar.io
16. On File Customer $11,168,614
17. On File Customer $11,131,962
18. On File Customer $11,089,080
19. On File Customer $10,378,951
20. On File Customer $10,328,557
21. Invictus Capital Customer $9,885,589
Financial
Technologies SPC
67 Fort Street
Grand Cayman,
KY1-1102
Cayman Islands
Email: spc@invictuscapital.com
22. On File Customer $9,790,947
23. On File Customer $9,678,180
24. On File Customer/ $9,331,765
Loan Party
25. On File Customer/ $9,087,167
Loan Party
26. On File Customer $8,499,705
27. Strobilus LLC Customer/ $7,850,694
159 Main St. Loan Party
Nashua, NH
03060
Tel: 617-640-3914
28. Crypto10 SP - Customer $7,829,667
Segregated
Portfolio of
Invictus Capital Financial
Technologies SPC
67 Fort Street,
1st Floor,
Artemis House
George Town,
KY1-1102
Cayman Islands
Email: c10_spc@Invictuscapital.com
29. Altcointrader (Pty) Ltd Customer $7,593,905
229 Ontdekkers
Road, Horizon,
Roodepoort 1724
South Africa
Tel: 278-2411-0866
Email: richard@altcointrader.co.za
30. On File Customer/ $7,460,897
Loan Party
31. On File Customer $7,280,505
32. On File Customer $7,207,770
33. On File Customer $6,754,458
34. Deferred 1031 Customer $6,684,659
Exchange, LLC
Lakeland Ave.
Dover, DE 19901
Tel: 425-766-7107
35. On File Customer $6,499,769
36. On File Customer $6,370,197
37. On File Customer/ $6,349,731
Loan Party
38. On File Customer/ $6,268,520
Loan Party
39. On File Customer/ $6,099,136
Loan Party
40. On File Customer $5,909,689
41. On File Customer $5,851,623
42. On File Customer $5,807,454
43. On File Customer/ $5,788,622
Loan Party
44. On File Customer/ $5,783,350
Loan Party
45. On File Customer $5,747,666
46. On File Customer/ $5,746,814
Loan Party
47. On File Customer $5,710,805
48. On File Customer $5,710,207
49. On File Customer $5,664,096
50. On File Customer $5,588,694
CELSIUS NETWORK: Seeks Chapter 11 Bankruptcy Protection
-------------------------------------------------------
Celsius Network on July 13, 2022, announced that it initiated
voluntary Chapter 11 proceedings to provide the Company with the
opportunity to stabilize its business and consummate a
comprehensive restructuring transaction that maximizes value for
all stakeholders.
To implement the restructuring, the Company and certain of its
subsidiaries filed voluntary petitions for reorganization under
Chapter 11 of the U.S. Bankruptcy Code in the United States
Bankruptcy Court for the Southern District of New York.
Members of the Special Committee of the Board of Directors said,
"Today's filing follows the difficult but necessary decision by
Celsius last month to pause withdrawals, swaps, and transfers on
its platform to stabilize its business and protect its customers.
Without a pause, the acceleration of withdrawals would have allowed
certain customers—those who were first to act—to be paid in
full while leaving others behind to wait for Celsius to harvest
value from illiquid or longer-term asset deployment activities
before they receive a recovery."
"This is the right decision for our community and company," said
Alex Mashinsky, Co-Founder & CEO, Celsius. "We have a strong and
experienced team in place to lead Celsius through this process. I
am confident that when we look back at the history of Celsius, we
will see this as a defining moment, where acting with resolve and
confidence served the community and strengthened the future of the
company."
Celsius to Continue to Operate
Celsius has $167 million in cash on hand, which will provide ample
liquidity to support certain operations during the restructuring
process.
To ensure a smooth transition into Chapter 11, Celsius has filed
with the Court a series of customary motions to allow the Company
to continue to operate in the normal course. These "first day"
motions include requests to pay employees and continue their
benefits without disruption, for which the Company expects to
receive Court approval. Celsius is not requesting authority to
allow customer withdrawals at this time. Customer claims will be
addressed through the Chapter 11 process.
New Directors to Provide Additional Leadership
David Barse is the Founder and Chief Executive Officer of XOUT
Capital, an index company, and DMB Holdings, a private family
office. Mr. Barse was formerly the CEO of Third Avenue Management
for 25 years, a pioneer in fundamental, bottom-up deep value and
distressed investing.
Alan Carr is an investment professional with over 25 years of
experience building businesses, leading complex restructurings, and
protecting and creating value for stakeholders. Mr. Carr is a
Founder and the Managing Member of Drivetrain, LLC, a professional
fiduciary services firm.
About Celsius Network
Celsius Network LLC -- http://www.celsius.network/-- is a
financial services company that generates revenue through
cryptocurrency trading, lending, and borrowing, as well as by
engaging in proprietary trading.
Celsius helps over a million customers worldwide to find the path
towards financial independence through a compounding yield service
and instant low-cost loans accessible via a web and mobile app.
Celsius has a blockchain-based fee-free platform where membership
provides access to curated financial services that are not
available through traditional financial institutions.
The Celsius Wallet claims to be one of the only online crypto
wallets designed to allow members to use coins as collateral to get
a loan in dollars, and in the future, to lend their crypto to earn
interest on deposited coins (when they're lent out).
Crypto lenders such as Celsius boomed during the COVID-19 pandemic,
drawing depositors with high interest rates and easy access to
loans rarely offered by traditional banks. But the lenders'
business model came under scrutiny after a sharp sell-off in the
crypto market spurred by the collapse of major tokens terraUSD and
luna in May 2022.
New Jersey-based Celsius froze withdrawals in June 2022, citing
"extreme" market conditions, cutting off access to savings for
individual investors and sending tremors through the crypto
market.
The list of major crypto firms that have filed for bankruptcy
protection in 2022 now includes Celsius Network, Three Arrows
Capital and Voyager Digital.
Celsius Network LLC and its subsidiaries sought protection under
Chapter 11 of the U.S. Bankruptcy Code (Bankr. S.D.N.Y. Case No.
22-10964) on July 14, 2022. In the petition filed by CEO Alex
Mashinsky, the Debtor estimated assets and liabilities between $1
billion and $10 billion.
Joshua A. Sussberg, of Kirkland & Ellis LLP, is serving as legal
counsel, Centerview Partners is serving as financial advisor, and
Alvarez & Marsal is serving as restructuring advisor.
Kirkland & Ellis LLP is serving as legal counsel, Centerview
Partners is serving as financial advisor, and Alvarez & Marsal is
serving as restructuring advisor to Celsius.
Stretto, the claims agent, maintain the page
https://cases.stretto.com/celsius
CHART INDUSTRIES: Egan-Jones Retains BB+ Senior Unsecured Ratings
-----------------------------------------------------------------
Egan-Jones Ratings Company on June 30, 2022, retained its 'BB+'
foreign currency and local currency senior unsecured ratings on
debt issued by Chart Industries, Inc.
Headquartered in Ball Ground, Georgia, Chart Industries, Inc.
operates as a global manufacturer of equipment used in the
production, storage, and end-use of hydrocarbon and industrial
gases.
CHARTER COMMUNICATIONS: Egan-Jones Retains BB Sr. Unsec. Ratings
----------------------------------------------------------------
Egan-Jones Ratings Company on June 29, 2022, retained its 'BB'
foreign currency and local currency senior unsecured ratings on
debt issued by Charter Communications, Inc.
Headquartered in Stamford, Connecticut, Charter Communications,
Inc. operates cable television systems in the United States.
CHICAGOAN LOGISTIC: Amends Plan to Include ATX MCA Secured Claim
----------------------------------------------------------------
Chicagoan Logistic Company ("CLC") submitted a Sixth Amended Plan
of Reorganization for Small Business dated July 11, 2022.
This Plan of Reorganization proposes to pay creditors of the Debtor
from its monthly business income and cash flow.
The Plan provides for payment of one class of secured creditors,
one class of priority claims, and one class of general unsecured
non-priority claims. Non-priority unsecured creditors holding
allowed claims will receive payment, through periodic cash
distributions from the Debtor if the Plan is consensual. If this is
not a consensual plan, the distributions will be made by the
Subchapter V Trustee, Matthew Brash, on a quarterly basis. This
Plan also provides for the payment of administrative and priority
claims including priority tax claims. The Plan does not provide for
any payments or distributions to the holder of the equity
interest.
Class IH consists of the Secured claim of ATX MCA FUND III in the
amount of $25,168.00 secured by future receipts. The balance of the
Claim in the amount of $142,622.06 will be treated as a class 3
claim. Claim 1H is impaired.
Class 3 consists of General Unsecured Non-Priority Claims. General
Unsecured Non-Priority Claims aggregate approximately $958,115.96
as set forth on the Allowed Unsecured Non-Priority Claims Register.
Allowed Class 3 claims shall be paid approximately $335,340.59
through pro rata distributions of deferred cash payments to holders
of allowed Class 3 Claims in sixty monthly installments. Monthly
payments will commence on September 1, 2022, and each month
thereafter through and including September 30, 2027.
In the first year of the Amended Plan, the Debtor shall make
payments equal to 10% of the entire dividend to be paid to
unsecured creditors over the life of the Amended Plan. In the 2nd
year of the Amended Plan, the Debtor shall make payments equal to
15% of the entire dividend to be paid to unsecured creditors. In
the 3rd year of the Amended Plan, the Debtor shall make payments
equal to 20% of the entire dividend to be paid to unsecured
creditors. In the 4th year of the Amended Plan, the Debtor shall
make payments equal to 25% of the entire dividend to be paid to
unsecured creditors. In the final year of the Amended Plan, the
Debtor shall pay 30% of the entire dividend to be paid to unsecured
creditors.
The monthly installments shall be distributed to allowed Class 3
Claims, pro rata, by the Debtor in the event the Plan is
consensual. If the Plan is not consensual, distributions shall be
made by the Subchapter V Trustee, Matthew Brash, on a quarterly
basis. Class 3 claimants may be prepaid without penalty or
discount. Class 3 claims are impaired under the Plan. Any excess
reserves generated after Debtor's operations and after its
obligations are paid, and its Plan payments, over a quarterly
period exceeding $10,000.00 shall be distributed as an excess
dividend to the Class 3 claimants. Class 3 claims are impaired
under the Plan.
The Plan shall be funded by proceeds from the Estate's available
cash, cash equivalents, and proceeds generated from Debtor's
business income and cash flow. The Debtor projects that his cash
flow will be sufficient to make the Plan payments.
A full-text copy of the Sixth Amended Plan dated July 11, 2022, is
available at https://bit.ly/3Rv7OZv from PacerMonitor.com at no
charge.
Attorneys for the Debtor:
Laxmi P Sarathy
3553 W. Peterson Ave., Suite 102
Chicago, Illinois 60659
Tel: (312) 674-7965
E-mail: L.sarathylaw@gmail.com
David R Herzog
53 West Jackson Blvd., Suite 1442
Chicago, Illinois 60604
Tel: (312) 427-1558
E-mail: drh@dherzoglaw.com
About Chicagoan Logistic Company
Chicagoan Logistic Company, an affiliate of NAHAUL, Inc., is a
Chicago-based company in the general freight trucking
industry.
Chicagoan Logistic Company and NAHAUL filed Chapter 11 petitions
(Bankr. N.D. Ill. Case Nos. 21-07154 and 21-07152) on June 5, 2021.
The two cases are not jointly administered.
In the petition signed by Serkan B. Kaputluoglu, president,
Chicagoan Logistic Company disclosed total assets of up to $1
million and total liabilities of up to $10 million.
Judge Carol A. Doyle oversees Chicagoan Logistic Company's Chapter
11 case.
Chicagoan Logistic Company tapped David Herzog, Esq., at Herzog &
Schwartz, P.C. and Laxmi P. Sarathy, Esq., as bankruptcy counsel;
Romano Law, PLLC as special counsel; and Daniel Greenman & Co. As
accountant.
Buchalter, A Professional Corporation represents creditor, Partners
Funding. Vadim Serebro, Esq., serves as counsel to creditor, World
Global Capital LLC, doing business as Funderslink. ATX MCA Fund
I, LLC, also a creditor, is represented by The Magnozzi Law Firm,
P.C. Creditor BMO Harris is represented by Howard & Howard.
CHOICE HOTELS: Egan-Jones Retains BB+ Senior Unsecured Ratings
--------------------------------------------------------------
Egan-Jones Ratings Company on June 29, 2022, retained its 'BB+'
foreign currency and local currency senior unsecured ratings on
debt issued by Choice Hotels International, Inc.
Headquartered in Rockville, Maryland, Choice Hotels International,
Inc. franchises hotel properties.
CHRIS PETTIT: Trustee Seeks to Hire Dykema Gossett as Counsel
-------------------------------------------------------------
Eric Terry, the Chapter 11 trustee for Chris Pettit & Associates,
P.C., seeks approval from the U.S. Bankruptcy Court for the Western
District of Texas to hire Dykema Gossett, PLLC as his bankruptcy
counsel.
The firm's services include:
a. assisting the trustee to protect and preserve the estates
of the Debtor, including assisting the trustee to locate, take
possession of, or liquidate assets of the estate;
b. preparing legal papers;
c. advising the trustee with respect to bankruptcy law,
wind-down matters, regulatory, real estate, labor law, intellectual
property, and lease or contract;
d. assisting the trustee with the sale of estate assets or
abandonment of assets with little or no value;
e. assisting and coordinating with the trustee and other
professionals he retained;
f. investigating potential claims and causes of action and, if
appropriate, pursuing litigation or settlement of such claims and
causes of action against relevant parties;
g. assisting the trustee with any necessary exemption or
discharge objections;
h. assisting the trustee and other professionals with any
necessary U.S. trustee matters and related filings;
i. assisting the trustee with respect to any potential
conflicts between the Debtors' estates and matters related to
potential conversion of the cases to Chapter 7; and
j. performing other necessary legal services for the trustee.
The firm will be paid at these rates:
Patrick L. Huffstickler, Member $480 per hour
Thomas Alleman, Member $430 per hour
Basil Umari, Senior Counsel $430 per hour
Danielle Rushing, Associate $350 per hour
Alexandria Rahn, Associate $350 per hour
As disclosed in court filings, Dykema and its attorneys do not have
any connection representing an adverse interest to the trustee and
the Debtors or their estates.
The firm can be reached through:
Patrick L. Huffstickler, Esq.
Dykema Gossett PLLC
112 E. Pecan Street, Suite 1800
San Antonio, TX 78205
Phone: 210-554-5273
Email: phuffstickler@dykema.com
About Chris Pettit & Associates
Chris Pettit & Associates, P.C., a personal injury law firm in
Texas, and principal Christopher John Pettit sought protection
under Chapter 11 of the U.S. Bankruptcy Code (Bankr. W.D. Texas
Lead Case No. 22-50591) on June 1, 2022. In the petition filed by
Christopher John Pettit, president of Chris Pettit & Associates,
the firm listed up to $50,000 in assets and up to $500,000 in
liabilities.
Judge Craig A. Gargotta oversees the case.
Michael G. Colvard, Esq., at Martin & Drought, P.C. is the Debtors'
counsel.
Eric Terry, the Chapter 11 trustee appointed in Chris Pettit &
Associates' case, is represented by Dykema Gossett, PLLC.
CITRIX SYSTEM: Egan-Jones Retains BB+ Senior Unsecured Ratings
--------------------------------------------------------------
Egan-Jones Ratings Company on June 30, 2022, retained its 'BB+'
foreign currency and local currency senior unsecured ratings on
debt issued by Citrix Systems, Inc.
Headquartered in Fort Lauderdale, Florida, Citrix Systems, Inc.
designs, develops, and markets technology solutions that allow
applications to be delivered, supported, and shared on-demand.
COEUR MINING: Egan-Jones Retains BB- Senior Unsecured Ratings
-------------------------------------------------------------
Egan-Jones Ratings Company on June 28, 2022, retained its 'BB-'
foreign currency and local currency senior unsecured ratings on
debt issued by Coeur Mining, Inc.
Headquartered in Chicago, Illinois, Coeur Mining, Inc. operates as
a mining company.
COMMUNITY HEALTH: Egan-Jones Retains CCC+ Sr. Unsecured Ratings
---------------------------------------------------------------
Egan-Jones Ratings Company on June 29, 2022, retained its 'CCC+'
foreign currency and local currency senior unsecured ratings on
debt issued by Community Health Systems, Inc. EJR also retained its
'B' rating on commercial paper issued by the Company.
Headquartered in Franklin, Tennessee, Community Health Systems,
Inc. owns, leases, and operates hospitals.
CONSOLIDATED COMMUNICATIONS: Egan-Jones Retains B- Unsec. Ratings
-----------------------------------------------------------------
Egan-Jones Ratings Company on June 29, 2022, retained its 'B-'
foreign currency and local currency senior unsecured ratings on
debt issued by Consolidated Communications Holdings, Inc. EJR also
retained its 'B' rating on commercial paper issued by the Company.
Headquartered in Mattoon, Illinois, Consolidated Communications
Holdings, Inc. offers telecommunications services.
CORNERSTONE BUILDING: Moody's Cuts CFR to B2, Outlook Stable
------------------------------------------------------------
Moody's Investors Service downgraded Cornerstone Building Brands,
Inc.'s Corporate Family Rating to B2 from B1 and Probability of
Default Rating to B2-PD from B1-PD. Moody's also downgraded the
rating on Cornerstone's existing senior secured credit facility to
B2 from B1 and the rating on the company's senior unsecured notes
to Caa1 from B3. Concurrently, Moody's assigned a B2 rating to
Cornerstone's new senior secured debt maturing 2028. The outlook is
stable. Finally, Moody's withdrew the company's SGL-1 Speculative
Grade Liquidity Rating.
The ratings downgrades reflect Cornerstone's increase in debt
leverage as a result of the company's going private transaction
announced on March 7, 2022. Pro forma for the leveraged buy-out
transaction and the proposed financing, Moody's expects total
debt-to-EBITDA at year-end 2022 to be 5.7x (inclusive of Moody's
adjustments) compared to 4.4x total debt-to-EBITDA at year end
2021. The proceeds from the proposed $1,010 million new senior
secured debt, the issuance of $464 million in PIK notes at the
holding company, the $195 million raised in preferred equity, and
available cash will be used to fund the transaction. Governance
risk we consider in Cornerstone's rating is its status as a
privately owned company by Clayton Dubilier and Rice (CD&R), a
private equity firm with a history of debt financed acquisitions
and dividend distributions.
The B2 rating assigned to the new senior secured debt, the cash
flow facility and the term loans, which are in line with the B2
CFR, results from their priority position to both the senior
unsecured notes and the $464 million PIK notes, as well as the
collateral securing the secured debt.
"While we expect Cornerstone's management team to remain focused on
execution and reducing debt leverage from free cash flow, we
believe the increase in leverage will limit the company's financial
flexibility at a time of increased operating and financial risks,"
said Emile El Nems, VP – Senior Credit Officer at Moody's.
Downgrades:
Issuer: Cornerstone Building Brands, Inc.
Corporate Family Rating, Downgraded to B2 from B1
Probability of Default Rating, Downgraded to B2-PD from B1-PD
Senior Secured Bank Credit Facility, Downgraded to B2 (LGD3) from
B1 (LGD3)
Senior Unsecured Regular Bond/Debenture, Downgraded to Caa1 (LGD6)
from B3 (LGD5)
Assignments:
Issuer: Cornerstone Building Brands, Inc.
Senior Secured Bank Credit Facility, Assigned B2 (LGD3)
Senior Secured Regular Bond/Debenture, Assigned B2 (LGD3)
Withdrawals:
Issuer: Cornerstone Building Brands, Inc.
Speculative Grade Liquidity Rating, Withdrawn, previously rated
SGL-1
Outlook Actions:
Issuer: Cornerstone Building Brands, Inc.
Outlook, Changed To Stable From Rating Under Review
RATINGS RATIONALE
Cornerstone's B2 CFR reflects the company's elevated leverage and
exposure to cyclical end markets. At the same time, the rating
takes into consideration the company's (i) leading position as the
largest integrated manufacturer of exterior building products in
North America for the commercial, residential, and repair and
remodel construction industries, (ii) improved profitability and
(iii) predictability in generating free cash flow. The rating is
also supported by the company's good liquidity.
Moody's expects Cornerstone to have good liquidity over the next
12-18 months. This is supported by (i) $303 million of cash, (ii)
$850 million of availability under the company's $850 million
asset-based lending revolver (ABL) expiring July 2027, (iii) $95
million of availability under the company's $95 million ABL FILO
facility expiring July 2027, (iv) full availability under the
company's $115 million cash flow revolving credit facility expiring
April 2026, (v) and Moody's expectation for solid free cash flow
generation. The ABL facilities ($850 million ABL facility and $95
million FILO facility) have a springing fixed charge covenant ratio
of 1:1 that gets triggered when availability under the ABLs, in
aggregate, is below 10% of total commitments or the borrowing base,
whichever is lower. Similarly, the company's cash flow facility
has a springing net leverage ratio of 7.75x that gets triggered
when utilization is more than 35% of the facility. There are no
financial covenants under the term loan facility.
The stable outlook reflects Moody's expectations that Cornerstone
will steadily grow revenue organically, improve profitability and
generate significant free cash flow that can be used to de-lever
its balance sheet.
The proposed $1,010 million in senior secured debt is expected to
contain similar covenant flexibility to the existing $2,574 million
senior secured term loan facility including an ability to incur
incremental indebtedness. In addition, the designations of
unrestricted subsidiaries and transfer of assets to unrestricted
subsidiaries are permitted.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if: total debt-to-EBITDA approaches
4.75x, adjusted EBITA-to-interest expense is above 3.5x, the
company improves its free cash flow and good liquidity, and the
company demonstrates a commitment to modest leverage.
The ratings could be downgraded if: total debt-to-EBITDA is above
5.75x, adjusted EBITA-to-interest expense is below 2.5x, and the
company's operating performance and liquidity deteriorate.
The principal methodology used in ratings was Manufacturing
published in September 2021.
Headquartered in Cary, North Carolina, Cornerstone Building Brands,
Inc., is the largest manufacturer of exterior building products for
residential and low-rise non-residential buildings in North
America. Following the going private transaction, Cornerstone will
become a privately owned business by Clayton, Dubilier and
Rice. At May 28, 2022, Cornerstone's last twelve months revenue
were $6.0 billion.
CORNERSTONE BUILDING: S&P Lowers ICR to 'B' on Leveraged Buyout
---------------------------------------------------------------
S&P Global Ratings lowered its issuer credit rating on Cornerstone
Building Brands Inc. to 'B' from 'B+'. At the same time, S&P
assigned its 'B' rating to the company's proposed $410 million term
loan B, $600 million of new senior secured notes, and the existing
$2.6 billion senior secured term loan. S&P also assigned its 'CCC+'
rating to the company's existing $500 million unsecured notes.
The stable outlook is based on S&P's expectation of adjusted
leverage of approximately 6x–7x over the next 12 months.
Clayton, Dubilier & Rice (CD&R) intends to acquire its remaining
equity stake in Cornerstone for approximately $2.2 billion. This is
funded by $410 million term loan B and $600 million of new senior
secured notes, $464 million HoldCo PIK notes (unrated), $195
million cash equity, and cash on the balance sheet. The sponsor
currently owns about 49% of Cornerstone.
The proposed capital structure will result in Cornerstone's debt
leverage rising toward 6-7x. S&P Global Ratings-adjusted debt will
increase by roughly 50% at a time when potential macro-economic
headwinds are building. The leveraged buyout (LBO) by CD&R will
raise Cornerstone's leverage from 4.4x at year-end 2021. As part of
this transaction, Cornerstone will upsize its asset-based lending
(ABL) credit facility due 2026 to $850 million (not rated),
establish a new ABL FILO tranche (unrated) and issue new $1.01
billion in senior secured debt. The sponsor will also make a cash
equity contribution of $195 million along with $643 million cash
from the balance sheet to complete the transaction. Full control by
financial sponsors, combined with high leverage, is a rating
constraint because we incorporate the intrinsic risks of financial
sponsor strategies including short- to intermediate-term holding
periods, the use of debt or debtlike instruments to maximize
shareholder returns, and priority on invested returns in S&P's
rating.
Cornerstone has achieved large scale and leading market position in
two cyclical and competitive construction markets with the
combination of NCI Building Systems and Ply Gem Industries. Our
view of the company's business reflects its leading market position
in most of its markets with roughly 35% market share in vinyl
siding, and 25% in vinyl windows. Furthermore, it has an estimated
No. 1 market position in vinyl windows and siding, No. 1 in metal
roofing and components, No. 2 position in stone veneer, and top
three in engineered building systems. S&P said, "We expect the
company to sustain its position as it leverages its size to enhance
operational effectiveness and compete in often fragmented product
categories. On a consolidated basis, Cornerstone benefits from a
diverse customer base, broad range of products (including
commercial metal building products and residential vinyl siding and
windows); a predominantly variable cost structure; and large size
compared with other rated building material companies. Two-thirds
of Cornerstone's revenue are derived nearly evenly from cyclical
new residential and new commercial construction markets, increasing
the risk of potential earnings volatility. However, we note that
commercial construction cycles generally lag residential patterns,
somewhat limiting the prospects of a simultaneous downturn in both
markets. The remaining one-third of Cornerstone's revenue emanates
from more stable repair and replacement activity."
S&P said, "Cornerstone's end markets feature more stable
fundamentals amid some macroeconomic pressures, which we believe
will enable it to produce strong earnings over the next 12 months.
Although inflationary and geopolitical circumstances are pressuring
the global economy, we expect generally stable demand for
Cornerstone's products and pricing discipline. We expect this will
likely keep adjusted leverage elevated, barring an unanticipated
jump in acquisitions or dividends other than what we incorporate
into the base-case forecast. Cornerstone serves the residential new
construction (34% of last-12-month first-quarter 2022 sales),
commercial construction (32%), and residential repair and remodel
(34%) end markets, which have experienced favorable tailwinds. New
residential construction projects typically take at least four
months to complete (longer for custom homes than for production
homes; and longer for multifamily homes than for single-family
homes) while new commercial construction projects typically take at
least nine months to complete. As such, we expect Cornerstone to
continue to see demand from in-progress projects but anticipate its
demand from new commercial construction projects could decline.
That said, the company mostly provides products for commercial
buildings of five stories or lower, which is a segment that we view
as less at risk than higher-density highrises. We also believe
rising interest and mortgage rates could increase downward pressure
on new residential construction. However, we believe slowed
residential new construction as a result of rising costs for new
homes will be somewhat offset by increased repair and remodel
spending in the residential end markets. Our base case assumes
repair and remodeling spending to drive its demand, though there is
heightened potential for a U.S. recession presents downside risk to
our forecast. We forecast organic revenue growth in the
low-single-digit-percent range over the next 12 months, in line
with our overall expectations for U.S. residential repair and
remodeling spending. That said, we view demand for discretionary
and high-cost projects to be closely tied to economic cycles and
consumer spending. Given our view of a 40% risk of recession over
the next 12 months, there is reasonable (but not yet probable)
downside risk to our base-case scenario.
"Additionally, Cornerstone is exposed to volatile raw material
costs, particularly for polyvinyl chloride resin, glass, aluminum,
and steel. Although the company has generally been able to pass on
the increases in its raw material costs to its customers, some of
its segments operate in highly competitive price environments,
which can lead to margin volatility. We expect Cornerstone's S&P
Global Ratings-adjusted EBITDA margin to decline modestly towards
13% in 2022, from 13.6% in 2021, as inflationary pressures on its
key raw materials persist. However, we do not believe this will
lead to a significant deterioration in its credit metrics because
it will likely pass through most of the increase to its customers.
Leverage should remain high despite modestly improved EBITDA, while
liquidity is adequate. Financial sponsor CD&R's LBO of Cornerstone
will push adjusted debt to EBITDA to 6x-7x. While high, we expect
some improvement over the next 12 months. We also expect EBITDA
interest coverage to be satisfactory at 2x and for liquidity to
remain adequate despite the potential for modestly higher working
capital needs this year.
"The stable outlook reflects our expectation for debt leverage in
the range of 6x–7x, and EBITDA margins of roughly 13% over the
next 12 months due to higher transaction-related debt despite
elevated EBITDA from Cornerstone's existing businesses."
S&P could lower its rating on Cornerstone Building Brands Inc. if
debt to EBITDA approaches 8x over the next 12 months or its
liquidity position deteoriorates, which could occur if:
-- EBITDA margin is 200 basis points lower than S&P's current
expectation. This could occur if new residential construction and
repair and remodeling markets weaken materially, or input costs
increase exponentially, and price increases are limited; or
-- The financial sponsor undertakes a more aggressive financial
policy than we anticipate, including debt-funded acquisitions
and/or dividends, causing leverage to increase and we believe there
is little prospect of recovery.
S&P believes an upgrade is unlikely within the next 12 months given
the company's current leverage profile; however it could take a
positive action if: The company significantly boosts earnings that
would result in adjusted leverage trending toward 5x; and
-- S&P could also raise the rating if Cornerstone sustains
adjusted leverage toward 5x and it believes financial sponsor CD&R
is committed to maintaining such ratios; or
-- Cornerstone increases its diversity of earnings in the assets
they currently operate.
ESG credit indicators: E-2, S-2, G-3
S&P said, "Governance is a moderately negative consideration in our
credit rating analysis of Cornerstone Building Brands Inc. Our
assessment of the company's financial risk profile as highly
leveraged reflects corporate decision-making that prioritizes the
interests of the controlling owners, in line with our view of most
rated entities owned by private-equity sponsors. Our assessment
also reflects their generally finite holding periods and a focus on
maximizing shareholder returns. Environmental factors are an
overall neutral influence on our credit rating analysis, since the
company engages in light manufacturing and distribution building
products."
DBMP LLC: CertainTeed Nixes Move to Dodge 'Texas Two-Step' Fight
-----------------------------------------------------------------
Daniel Gill of Bloomberg Law reports that Saint-Gobain Corp. and
its subsidiary CertainTeed LLC lost their bid to dismiss a lawsuit
by asbestos victims seeking to undo their pre-bankruptcy "Texas
Two-Step" maneuver designed to limit liability.
CertainTeed faces lawsuits from thousands of people who claim they
developed cancer from asbestos used in the company's building
materials products. CertainTeed took advantage of a Texas corporate
law and divided itself into two companies -- CertainTeed and DBMP
LLC. DBMP then filed bankruptcy in January 2020 to house and
manage thousands of claims for asbestos-related injuries.
About CertainTeed
CertainTeed manufactures exterior and interior building materials
and supplies, including roofing, siding, insulation, windows and
foundations. CertainTeed is a subsidiary of Saint-Gobain, a French
corporation listed on numerous stock exchanges across Europe.
About DBMP LLC
DBMP, LLC is a North Carolina limited liability company and the
direct parent company of Millwork & Panel LLC, which manufactures
vinyl siding and polyvinyl chloride (PVC) trim products for the
construction market at facilities it owns in Claremont, N.C. and
Social Circle, Ga. It is a defendant in tens of thousands of
asbestos-related lawsuits pending in courts throughout the United
States.
DBMP sought protection under Chapter 11 of the Bankruptcy Code
(Bankr. W.D.N.C. Case No. 20-30080) on Jan. 23, 2020. At the time
of the filing, the Debtor disclosed assets of between $500 million
and $1 billion and liabilities of the same range.
Judge J. Craig Whitley presides over the case.
The Debtor tapped Jones Day as bankruptcy counsel; Bates White LLC
as consultant; Robinson, Bradshaw & Hinson, P.A. and Schiff Hardin
LLP as special counsel; and Epiq Corporate Restructuring, LLC as
claims, noticing and balloting agent. The Debtor also tapped
Donlin, Recano and Company, Inc., to oversee the submission of
personal injury questionnaires by claimants.
The official committee of asbestos personal injury claimants
appointed in the Debtor's case tapped Robinson & Cole, LLP and
Caplin & Drysdale, Chartered as its bankruptcy counsel. Hamilton
Stephens Steele Martin, PLLC is the committee's local counsel.
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 and Stutzman,
Bromberg, Esserman & Plifka, a Professional Corporation, as his
bankruptcy counsel. Alexander Ricks PLLC is the FCR's North
Carolina counsel.
DIOCESE OF NORWICH: Exclusivity Period Extended to Sept. 30
-----------------------------------------------------------
The Norwich Roman Catholic Diocesan Corporation obtained an order
from the U.S. Bankruptcy Court for the District of Connecticut
extending the exclusivity periods to file a Chapter 11 plan and
solicit acceptances for the plan to Sept. 30 and Nov. 30,
respectively.
The extension will give the Norwich diocese more time to mediate
and negotiate the terms of a consensual plan of reorganization,
according to its attorney, Patrick Birney, Esq., at Robinson &
Cole, LLP.
To facilitate negotiations, the Norwich diocese, the unsecured
creditors' committee and other concerned parties have agreed on
referring plan discussions to mediation. On May 31, the diocese and
the committee filed a joint motion to approve mediation and appoint
Paul Finn as the mediator. The hearing on the joint motion is set
for July 25, 2022.
About The Norwich Roman Catholic
Diocesan Corporation
The Norwich Roman Catholic Diocesan Corporation is a nonprofit
corporation that gives endowments to parishes, schools, and other
organizations in the Diocese of Norwich, a Latin Church
ecclesiastical territory or diocese of the Catholic Church in
Connecticut and a small part of New York.
The Norwich Roman Catholic Diocesan Corporation sought Chapter 11
protection (Bankr. D. Conn. 2:21-bk-20687) on July 15, 2021. The
Debtor estimated $10 million to $50 million in assets against
liabilities of more than $50 million. Judge James J. Tancredi
oversees the case.
The Debtor tapped Ice Miller, LLP as bankruptcy counsel and
Robinson & Cole, LLP as Connecticut counsel. Epiq Corporate
Restructuring, LLC is the claims and noticing agent.
DOUBLE J PLAYSCAPES: Files Chapter 11 Subchapter V Case
-------------------------------------------------------
Double J Playscapes & Construction Inc. filed for chapter 11
protection in the Eastern District of Michigan. The Debtor filed
as a small business debtor seeking relief under Subchapter V of
Chapter 11 of the Bankruptcy Code.
According to court filing, Double J Playscapes estimates between 1
and 49 unsecured creditors. The Petition states funds will be
available to unsecured creditors.
A meeting of creditors under 11 U.S.C. Section 341(a) is slated for
Aug. 10, 2022, at 2:00 PM. Proofs of claim are due by Nov. 8,2
2022.
About Double J Playscapes
Double J Playscapes & Construction Inc. is a landscaping services
provider.
Double J Playscapes & Construction filed a petition for relief
under Subchapter V of Chapter 11 of the U.S. Bankruptcy Code
(Bankr. E.D. Mich. Case No. 22-31013) on July 8, 2022. In the
petition filed by the Debtor estimated assets up to $50,000 and
liabilities between $50,000 and $100,000.
The case is assigned to Honorable Bankruptcy Judge Joel D.
Applebaum.
Kimberly Ross Clayson has been appointed as Subchapter V trustee.
George E. Jacobs, of the Bankruptcy Law Offices, is the Debtor's
counsel.
ECHOSTAR CORP: Egan-Jones Retains BB- Senior Unsecured Ratings
--------------------------------------------------------------
Egan-Jones Ratings Company on June 27, 2022, retained its 'BB-'
foreign currency and local currency senior unsecured ratings on
debt issued by EchoStar Corporation.
Headquartered in Englewood, Colorado, EchoStar Corporation operates
satellite communication infrastructures.
FERRELLGAS LP: Moody's Hikes CFR to B1 & Sr. Unsecured Notes to B2
------------------------------------------------------------------
Moody's Investors Service upgraded Ferrellgas, L.P.'s Corporate
Family Rating to B1 from B2 and Probability of Default Rating to
B1-PD from B2-PD. Concurrently, Moody's upgraded to B2 from B3 the
company's senior unsecured notes due 2026 and 2029 that were issued
in March 2021. The Speculative Grade Liquidity (SGL) rating was
also upgraded to SGL-2 from SGL-3. The ratings outlook remains
stable.
"Since completing its refinancing transactions in 2021, Ferrellgas
has improved its operations and lowered its financial leverage
while enhancing its liquidity," said Arvinder Saluja, Moody's Vice
President.
Upgrades:
Issuer: Ferrellgas, L.P.
Corporate Family Rating, Upgraded to B1 from B2
Probability of Default Rating, Upgraded to B1-PD from B2-PD
Speculative Grade Liquidity Rating, Upgraded to SGL-2 from SGL-3
Senior Unsecured Regular Bond/Debenture, Upgraded to B2 (LGD4)
from B3 (LGD4)
Outlook Actions:
Issuer: Ferrellgas, L.P.
Outlook, Remains Stable
RATINGS RATIONALE
Ferrellgas' B1 CFR reflects the continued improvement in operations
leading to better margins, improved liquidity, and leverage
(excluding preferred equity) below 4.5x in fiscal 2022. Ferrellgas
has a July fiscal year end. Ferrellgas' better operating profile
stems from its ongoing cost reductions and efficiency improvements
emanating from management's concentrated focus on these objectives.
Its credit profile also benefits from the company's substantial
scale and geographic diversification that facilitate cost
efficiencies in the fragmented propane distribution industry, its
utility-like services that provide a base level of revenue, and a
propane tank exchange business which generates complementary cash
flows during summer months. Ferrellgas' ratings are constrained by
its exposure to the seasonal nature of propane sales with
significant dependency on cold weather months and the associated
volatility in cash flows. Additionally, the meaningful
distributions burden (about $65 million annually) to service its
$650 million of preferred equity increases the company's cash burn
and is a material difference from its higher rated peers.
Ferrellgas' senior unsecured notes due 2026 and 2029 are rated B2,
one notch below the company's B1 CFR. The company's capital
structure is comprised of $1,475 million senior unsecured notes,
which make up the majority of debt in the liability structure, and
a $350 million secured revolving credit facility (unrated) that has
a borrowing base comprised of a fixed $200 million plus up to $150
million based on a proportion of receivables and inventories, as
defined in the credit agreement. The company's revolver benefits
from first priority claim over the company's assets, subordinating
the senior notes to the claims under the facility.
The SGL-2 speculative grade liquidity rating reflects Moody's view
that Ferrellgas' liquidity will be good through 2023. The company
has approximately $259 million available on its $350 million
secured revolving credit facility due April 2025 after accounting
for letters of credit that totaled $91 million at April 30, 2022.
The revolver's financial covenants include a minimum interest
coverage ratio of 2.50x, a maximum secured leverage ratio of 2.50x,
and a maximum total net leverage ratio (with cash netting limited
to $100 million if the revolver usage is at or above 50%) of 5.25x,
stepping down by 0.25x on October 31, 2022 and reaching 4.75x on
April 30, 2023. The company has good headroom for future compliance
with these covenants which Moody's expects to be maintained through
2023. Moody's further expects the company's cash on hand to stand
over $200 million in 2022-23. The company's working capital needs
are highly seasonal, with peak borrowings during the winter season
that can fluctuate significantly with volatile propane price.
Moody's expects Ferrellgas to generate modest free cash flow given
the improvement in earnings and lower interest expense after its
2021 refinancing.
The stable outlook reflects Moody's expectation that Ferrellgas
will generate free cash flow, sustain financial leverage below 4.5x
and maintain adequate liquidity.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Ferrellgas ratings could be upgraded if the company's leverage
(Debt/EBITDA) falls below 3.5x while retained cash flow to net debt
remains approaching 20%. A substantial reduction in the amount of
outstanding preferred equity would also be supportive of an
upgrade. The ratings could be downgraded if leverage rises above
4.5x or Ferrellgas' operational profile deteriorates.
Ferrellgas, L.P. (Ferrellgas), is an operating subsidiary of
Ferrellgas Partners L.P., a publicly traded company, that owns and
operates propane distribution businesses based in Overland Park,
Kansas.
The principal methodology used in these ratings was Business and
Consumer Services published in November 2021.
FIRSTENERGY CORP: Shareholders Attorneys Seek $48-Mil. in Fees
--------------------------------------------------------------
Sarah Jarvis of Law360 reports that the attorneys for FirstEnergy
Corp. shareholders have asked an Ohio federal judge to approve
their requested $48.6 million in attorney fees and give final
approval to a $180 million settlement to end litigation over the
company's billion-dollar nuclear energy bailout bribery scandal.
Counsel for the lead plaintiffs in a consolidated case in the
Southern District of Ohio said in a Thursday motion that the
settlement they reached with a special litigation committee of
FirstEnergy's board of directors "is by any measure historic" and
achieves the shareholders' goals of remediating financial harm and
reforming the utility's internal governance.
About FirstEnergy Corp.
FirstEnergy Corp is an electric utility headquartered in Akron,
Ohio. It was established when Ohio Edison acquired Centerior
Energy in 1997. Its subsidiaries and affiliates are involved in
the distribution, transmission, and generation of electricity, as
well as energy management and other energy-related services.
In July 2021, FirstEnergy Corp. said it has agreed to pay a $230
million fine for its central role in a bribery scheme -- the goal
of which was to get legislation passed that included a $1 billion
bailout for two of its power plants in Ohio. Federal prosecutors
charged FirstEnergy, based in Akron, Ohio, with conspiring to
commit honest services wire fraud. In a deal with the Justice
department, the utility company agreed to pay the
multimillion-dollar penalty as part of a deferred prosecution
agreement.
FRESH MARKET: S&P Discontinues 'B-' ICR on Debt Repayment
---------------------------------------------------------
S&P Global Ratings discontinued all of its ratings on The Fresh
Market Inc., including its 'B-' issuer credit rating.
The company had no rated debt outstanding following Cencosud's, a
South American retailer, July 11, 2022, redemption in conjunction
with its acquisition of a majority of the business.
S&P discontinued all of its ratings on The Fresh Market after its
debt was redeemed in conjunction with its majority acquisition by
Cencosud.
GLOBALSTAR INC: Egan-Jones Retains CC Senior Unsecured Ratings
--------------------------------------------------------------
Egan-Jones Ratings Company on June 27, 2022, retained its 'CC'
foreign currency and local currency senior unsecured ratings on
debt issued by Globalstar, Inc. EJR also retained its 'C' rating on
commercial paper issued by the Company.
Headquartered in Covington, Louisiana, Globalstar, Inc. provides
mobile voice and data communications services via satellite.
HARVEST MIDSTREAM: S&P Ups ICR to 'BB-' on Improved Leverage
------------------------------------------------------------
S&P Global Ratings raised its issuer credit rating (ICR) on
Houston-based midstream energy partnership Harvest Midstream I L.P.
to 'BB-' from 'B+'. The outlook is stable.
S&P said, "At the same time, we affirmed our 'BB-' issue-level
rating and revised the recovery rating to '3' from '2' on the
partnership's senior unsecured notes. The '3' recovery rating
indicates our expectation for meaningful (50%-70%; rounded
estimate: 65%) recovery in the event of a payment default.
"The stable outlook reflects our expectation that Harvest will
maintain stable volumes across its systems in the near term and
benefit from recent asset acquisitions, while generating
substantial excess free operating cash flow (FOCF). Adjusted debt
to EBITDA is expected to be approximately 3.0x for 2022 and 2023.
Our 'BB-' ICR reflects improved leverage and commodity prices, and
acquisitions.
"The upgrade reflects Harvest's stronger-than-anticipated financial
measures. The partnership ended 2021 with leverage below 3.0x
compared with our expectation of approximately 3.5x-4.0x, and we
expect leverage will remain below 4.0x in the long term. The
improved leverage profile reflects stronger commodity prices and
recent asset acquisitions. The partnership has realized a full year
of earnings from the Trans Alaska Pipeline System (TAPS), a deal
that closed in December 2020, and its EBITDA and leverage have
benefited from this transaction. We expect some upside from
stronger commodity prices, particularly from the Harvest Four
Corner assets in the San Juan basin, and stable volumes across the
Alaska systems. Harvest acquired the remaining 75% interest in
Arrowhead South Texas Holdings (ASTH), which gathers and transports
oil in Texas. Harvest will consolidate ASTH's earnings in September
2022 and we expect an incremental $60 million in net revenues from
this acquisition."
S&P assesses the partnership's business risk profile as weak.
S&P said, "The partnership's core exposures are in the San Juan
Basin and Alaska, with complementary exposures in South Texas, the
Gulf Coast, and the Utica Basin. The San Juan Basin and Alaska
account for approximately 97% of net revenues. The geographic
concentration in these higher-break-even regions limits our view of
the partnership's business risk. The partnership's assets are
evenly diversified across natural gas and oil. Pipelines make up
65% of Harvest's asset portfolio, processing facilities account for
33%, and terminals account for 2% (based on net revenue). The
partnership's contract profile consists of a collection of large
upstream producers, as well as marketing and refining customers
such as Shell Trading Co., Valero Energy Corp., and Marathon Oil
Corp. We view Harvest's overall contract profile as weaker than
those of similarly rated midstream issuers, reflecting more
volumetric and commodity price risk. An estimated 12% of 2021
EBITDA is backed by minimum volume commitment contracts and 94% of
revenues come from fixed-fee and cost-of-service contracts. We view
Hilcorp Energy I L.P (HEI) as a material counterparty, and our
rating on HEI could constrain our rating on Harvest, although the
two ratings are not directly linked."
S&P assesses the partnership's financial risk profile as
significant.
The earnings from TAPS and rising commodity prices have materially
improved Harvest's leverage profile. The successful acquisition and
integration of TAPS improved Harvest's leverage in 2021. Increased
commodity prices are supportive of stable volumes on TAPS, a
cost-of-service pipeline, and will have a larger impact on the
Harvest Four Corners assets, where approximately 20% of cash flows
are exposed to commodity price fluctuations. S&P said, "We view
Harvest's asset portfolio as essential in Alaska and the San Juan
basin to move product from oil fields and into downstream markets.
The consolidation of ASTH will provide an earnings lift, which will
be fully realized beginning in 2023. We expect Harvest will achieve
adjusted debt to EBITDA of approximately 3.0x in 2022 and 2023,
increasing to 3.4x in 2024 as commodity prices normalize."
S&P said, "The stable outlook reflects our expectation that Harvest
will maintain stable volumes across its system in the near term and
benefit from the ASTH acquisition, while generating substantial
excess FOCF. Adjusted debt to EBITDA is expected to be
approximately 3.0x through 2023.
"We could consider a negative rating action if we expect adjusted
debt to EBITDA to stay above 4.0x on a sustained basis. This would
likely be due to lower-than-expected volumes and EBITDA; relevering
to finance acquisitions; loss of meaningful volumes on TAPS due to
contracts expiring, or if HEI is materially downgraded, given
Harvest's high exposure to its volumes.
"Although unlikely in the near term, we could consider a positive
rating action if the partnership significantly scales operations
and diversifies its exposure across lower-break-even basins, while
also sustaining adjusted debt to EBITDA below 3.0x for an extended
period."
ESG credit indicators: E-3, S-2, G-2
Environmental factors are a moderately negative consideration in
S&P's credit rating analysis of Harvest Midstream I L.P. Harvest's
gathering and processing business faces multiple risks relating to
climate change including volume declines and the general energy
transition pressures facing the midstream industry.
HDT HOLDCO: Moody's Lowers CFR to B2 & Alters Outlook to Negative
-----------------------------------------------------------------
Moody's Investors Service downgraded the ratings of HDT Holdco,
Inc., including the Corporate Family Rating to B2 from B1 and
Probability of Default Rating to B2-PD from B1-PD. Concurrently,
Moody's downgraded the ratings on the company's senior secured bank
credit facility to B2 from B1. The outlook was revised to negative
from stable.
The ratings downgrades reflect the company's significant
contraction in revenue and earnings in recent quarters, as well as
negative free cash flow. Annual revenue in 2022 will decline by
more than 15% over to prior year due to lower defense department
spending and weak operating results caused by staffing shortages
and supply chain constraints at a major production facility.
The change in outlook to negative reflects the risk of further
negative rating pressure if the company's financial performance
does not significantly improve in the coming months. While bookings
have improved since the defense budget passed in March 2022,
uncertainty remains given the very recent improvement and an
expected volatile recovery as labor shortages and supply chain
constraints persist.
Downgrades:
Issuer: HDT Holdco, Inc.
Corporate Family Rating, Downgraded to B2 from B1
Probability of Default Rating, Downgraded to B2-PD from B1-PD
Senior Secured Bank Credit Facility, Downgraded to B2 (LGD3) from
B1 (LGD3)
Outlook Actions:
Issuer: HDT Holdco, Inc.
Outlook, Negative from Stable
RATINGS RATIONALE
The B2 CFR reflects HDT's small revenue base with expected 2022
revenue under $400 million. HDT's revenue will continue to be
subject to volatility as it is vulnerable to cuts or delays in US
defense spending and heavy reliance on a limited number of
customers. Adjusted Debt/EBITDA was over 8.0x at March 31, 2022 but
Moody's expects significant improvement in the coming quarters with
the return of more normal US military spending following passage of
the defense budget this past March. While liquidity is adequate,
supported by an undrawn revolver and $25 million of cash, HDT has
absorbed significant cash burn to fund working capital investments
and poor execution over the last 12 months.
The B2 is supported by HDT's good competitive standing within
expeditionary markets, underpinned by sole-sourced and incumbency
positions on many of its contracts. A return to normal defense
spending already underway will continue to support improved revenue
and profitability after an inflection point in the last quarter of
2022.
The negative outlook reflects high financial leverage and breakeven
free cash flow over the next year despite higher customer bookings.
Uncertainty remains given the very recent improvement in revenue
and an expected volatile recovery as labor shortages and supply
chain constraints persist.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Ratings could be upgraded with a meaningful increase in scale and
if EBITDA margins were sustained around 20%. Debt/EBITDA sustained
below 4.5x with FCF-to-debt in excess of 10% would also support an
upgrade. The ratings could be downgraded if liquidity were to
further weaken, if Debt/EBITDA is sustained above 5.5x or if HDT is
unable to improve adjusted EBITDA margins to at least the
mid-teens.
HDT Holdco, Inc. ("HDT") is a leading provider of expeditionary
solutions serving defense and government customers. Products
include expeditionary shelters and accessories, environmental
control units, power generators and management systems, specialty
vehicles, robotics, and other technical products. The company is
owned by entities of Nexus Capital Management.
The principal methodology used in these ratings was Aerospace and
Defense published in October 2021.
HISPANIC FOOD: Moody's Assigns First Time 'B2' Corp. Family Rating
------------------------------------------------------------------
Moody's Investors Service assigned Hispanic Food Holdings LLC
("Hispanic Foods") a B2 Corporate Family Rating and a B2-PD
Probability of Default Rating. Moody's also assigned a B2 rating to
the company's proposed $75 million Revolving Credit Facility and to
its proposed $435 million Senior Secured Term Loan. The rating
outlook is stable. This is a first time rating for Hispanic Food.
Tony's Fresh Market, which is currently owned by Apollo Global
Management, LLC ("Apollo"), will be acquiring Cardenas Markets
("Cardenas") to form Hispanic Food Holdings LLC for about $600
million. Proceeds from the $435 million term loan along with a $376
million new equity contribution from Apollo, will be used to fund
the acquisition of Cardenas, the repayment of a $190 million first
lien term loan at Tony's, $2 million of balance sheet cash and for
fees and expenses. Apollo previously contributed $162 million of
cash equity along with $54 million of cash equity from the founding
families of Tony's to fund the original purchase of Tony's Fresh
Market.
Moody's assigned the following ratings:
Issuer: Hispanic Food Holdings LLC
Corporate Family Rating, Assigned B2
Probability of Default Rating, Assigned B2-PD
Proposed $75 million Gtd. Senior Secured Revolving Credit
Facility maturing 2027, Assigned B2 (LGD3)
Proposed $435 million Gtd. Senior Secured Term Loan maturing
2029, Assigned B2 (LGD3)
Outlook Actions:
Issuer: Hispanic Food Holdings LLC
Outlook, Assigned Stable
RATINGS RATIONALE
Hispanic Food's B2 corporate family rating reflects the company's
relatively small scale within the highly competitive grocery retail
sector and geographic concentration in the Southwest and Chicago
area. Following Tony's acquisition of Cardenas to create Hispanic
Food, Moody's estimates leverage will be moderate with adjusted
debt/EBITDA at 4.3x. While the company generates solid sales and
earnings, the pace of sales growth in 2021 was slower than what the
company experienced in 2020 at the beginning of the pandemic.
Moody's expect organic sales growth in 2022 in the low to
mid-single digit range largely as a result of price increases
related to inflation. Earnings will benefit from a number of
strategic initiatives that management will undertake to improve
operating performance of the new company. Some of these will
include better workforce productivity, reducing shrink and better
merchandising. The rating is also reflects the risk of aggressive
financial policies inherent with ownership by a financial sponsor.
The ratings are supported by Hispanic Food's attractive market
niche with a focus on the Hispanic community, which is one of the
fastest growing demographics in the US. The company's high
perishable sales mix, which is at about 65% including dairy, makes
it less exposed to the sales volatility associated with pantry
loading when compared to other traditional grocery stores. With
the use of partners, such as Instacart, Grub hub and Uber Eats,
Hispanic Food will continue delivery and curbside pickup at most of
its stores. The company also benefits from stronger operating
margins relative to many larger peers. Hispanic Food's good free
cash flow and good liquidity are also positive rating factors. The
company's non-unionized labor force is also a distinct advantage
over its unionized peers.
In terms of Environmental, Social and Governance (ESG)
considerations, the most important factor for Hispanic Food's
ratings are governance considerations related to its financial
policies. Moody's views Hispanic Food's financial policies as
potentially aggressive given its ownership by a financial sponsor
and expected appetite for tuck in debt financed acquisitions.
Social considerations also impact Hispanic Food in that U.S. food
retailers continue to undergo a shift toward e-commerce which has
increased margin pressure and forced retailers to invest heavily on
e-commerce capabilities. That said, Hispanic Food will continue to
use 3rd party partners to facilitate its e-commerce activities,
which is less capital intensive. Consumers are also increasingly
mindful of sustainability issues, the treatment of workforce, data
protection and the source of products. While these various
initiatives may not essentially translate into direct credit
implications, over time these factors can impact brand image and
companies will have to work toward sourcing transparency and
investments in sustainable supply chains.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The stable outlook reflects Moody's expectation that Hispanic
Food's financial policies will remain balanced and management
initiatives will drive improved same store sales growth and
profitability.
The ratings could be downgraded if Hispanic Food's operating
performance deteriorates or if the company's liquidity and free
cash flow weakens. Aggressive financial policies, including debt
funded acquisitions or shareholder distributions could also prompt
a downgrade. Quantitatively, ratings could also be downgraded
should debt/EBITDA (including Moody's adjustments) rise above 5.0x
or EBITA/interest falls below 1.25x could also prompt a downgrade.
Ratings could be upgraded if operating performance improves such
that same store sales growth remains consistently positive
accompanied with margin expansion and good free cash flow. In
addition, an upgrade would require maintaining good liquidity.
Quantitatively, ratings could be upgraded should debt/EBITDA
(including Moody's adjustments) be sustained below 3.75x and
EBITA/interest be sustained above 2.0x.
Headquartered in Ontario, California, Hispanic Food Holdings LLC
will operate 84 grocery stores in the Southwest and Chicago area.
The company will be owned by Apollo and will generate nearly $2.0
billion in pro-forma revenue.
The principal methodology used in these ratings was Retail
published in November 2021.
HUDBAY MINERALS: Moody's Ups CFR to B1 & Sr. Unsecured Notes to B2
------------------------------------------------------------------
Moody's Investors Service upgraded Hudbay Minerals Inc.'s
corporate family rating to B1 from B2, probability of default
rating to B1-PD from B2-PD and senior unsecured note rating to B2
from B3. Hudbay's speculative grade liquidity rating (SGL) is
unchanged at SGL-2 and the rating outlook remains stable.
"The upgrade reflects the expectation that Hudbay's production will
increase through 2024 and the reduction in leverage that has been
aided by improved operating performance, higher production, and
increased product diversification" said Jamie Koutsoukis, Moody's
analyst.
Upgrades:
Issuer: Hudbay Minerals Inc.
Corporate Family Rating, Upgraded to B1 from B2
Probability of Default Rating, Upgraded to B1-PD from B2-PD
Senior Unsecured Regular Bond/Debenture, Upgraded to B2 (LGD4)
from B3 (LGD4)
Outlook Actions:
Issuer: Hudbay Minerals Inc.
Outlook, Remains Stable
RATINGS RATIONALE
Hudbay's B1 CFR is constrained by its: 1) modest scale (2021
production of 99,470 tonnes of copper in concentrate and 193,783
ounces of gold); 2) concentration at two producing mines; and 3)
exposure to commodity price risk. Hudbay benefits from its: 1) mine
locations in favorable jurisdictions (Canada and Peru); 2) product
diversity beyond copper (gold, silver, zinc and molybdenum) which
allows for competitive costs, net of by-product credits; 3)
adjusted debt to EBITDA of below 2x in 2022; and 4) long reserve
lives at its Constancia mine (16 years) and Lalor/Snow Lake
operations (16 years).
The upgrade acknowledges the strengthening in the company's credit
profile, supported by growing production and steady performance at
the company's Constancia and Lalor mines. Hudbay's guidance for
copper production in 2022 is about 30% higher compared to 2021
production, and gold production is about 40% higher than the
previous year, driven by the company's completion of its $250
million brownfield investment program in 2021. Furthermore the
company has a number of organic growth opportunities including the
implementation of a recovery improvement program at the Stall mill
in Manitoba and exploration at the Maria Reyna and Caballito
satellite sites in Peru. Copper and gold production will increase
steadily through 2024.
The B2 rating on the company's senior unsecured notes, is one notch
below the B1 CFR, reflecting the structural subordination of the
notes to the secured revolving credit facility.
Hudbay's has good liquidity (SGL-2) with about $770 million in
sources compared to minimal uses through June 2023. The company's
liquidity sources include $213 million of cash at March 31, 2022
about $358 million of availability under its $450 million secured
credit facility expiring October 26, 2025 and Moody's expectation
of over $200 million of free cash flow to June 2023. The company's
next debt maturity is in 2026. Hudbay's credit facility includes
three financial maintenance covenants that Moody's expect the
company to remain in compliance with.
The stable rating outlook on Hudbay reflects Moody's expectation
that the company will generate free cash flow and maintain strong
credit metrics, on the back of continued solid production at its
Constancia and Lalor mines.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if Hudbay is able to reduce its mine
and geographic concentration. Quantitatively, Moody's would
consider an upgrade if the company maintains an EBIT margin of at
least 12%, interest coverage of at least 3.5x and if adjusted
debt to EBITDA remains below 3x at various copper and gold prices.
The ratings could be downgraded if free cash flow is negative on
a sustained basis (excluding material development spending), if the
company experiences material operational issues at its mines
resulting in lower production, or if liquidity deteriorates.
Quantitatively, Moody's would consider a downgrade if debt/EBITDA
is sustained above 4x and (CFO - Dividends)/Debt) is sustained
below 20%.
The principal methodology used in these ratings was Mining
published in October 2021.
Headquartered in Toronto, Ontario, Canada, Hudbay Minerals Inc. is
a mining company mainly focused on copper through its Constancia
mine in Peru and copper and gold at its Lalor mine in Manitoba,
Canada. Revenue in 2021 totaled $1.5 billion.
INDEPENDENCE FUEL: Case Summary & 20 Largest Unsecured Creditors
----------------------------------------------------------------
Debtor: Independence Fuel Systems, LLC
381 Casa Linda Plaza
Dallas, TX 75218
Business Description: The Debtor owns two gasoline stations in
Lonview, one in Carthage, one in
Centerville, one in Dallas, and one in
Larado, Texas.
Chapter 11 Petition Date: July 14, 2022
Court: United States Bankruptcy Court
Eastern District of Texas
Case No.: 22-60301
Debtor's Counsel: Eric A. Liepins, Esq.
ERIC A. LIEPINS
12770 Coit Road
Suite 850
Dallas, TX 75251
Tel: 972-991-5591
Fax: 972-991-5788
Email: eric@ealpc.com
Estimated Assets: $0 to $50,000
Estimated Liabilities: $1 million to $10 million
The petition was signed by Charles Neuberger, chairman of the Board
of Managers.
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/DW22OZY/Independence_Fuel_Systems_LLC__txebke-22-60301__0001.0.pdf?mcid=tGE4TAMA
INSPIRED ENTERTAINMENT: Moody's Upgrades CFR & Secured Notes to B2
------------------------------------------------------------------
Moody's Investors Service has upgraded to B2 from B3 Inspired
Entertainment, Inc. ("Inspired" or "the company") corporate family
rating. Moody's has also upgraded to B2-PD from B3-PD the company's
probability of default rating. Concurrently, Moody's has upgraded
to B2 from B3 the rating on the GBP235 million guaranteed senior
secured global notes ("Secured Notes") due 2026 issued by Inspired
Entertainment (Financing) PLC. The rating outlook for both entities
has also changed from stable to positive.
"Inspired has experienced a strong rebound in revenues since the
lifting of Covid restrictions related to betting shops especially
in the UK. Despite the trends towards online gaming and betting,
the company's gaming machines remain an appealing form of
entertainment. Additionally, the company's good growth in its
online offering demonstrate Inspired ability to generate high
quality content, which is a key differentiator for the company. As
a result, we project the ratio of Debt to EBITDA to be well below
the 4.0x by the end of the 2022", says Stefano Cavalleri Vice
President – Senior Analyst and lead analyst for Inspired.
RATINGS RATIONALE
The upgrade reflects Moody's expectation that Inspired's
Moody's-adjusted Ebitda for 2022 will exceed $90 million (+70% on
prior year) resulting in a debt to EBITDA ratio below 4x.
Inspired will continue to benefit from retail gaming revenues
returning to pre-pandemic levels over the next 12 months as well as
continued growth in its on-line business; total revenue in the last
twelve-month ending March 2022 were up 20% on full year 2021, and
online was up 68.5% compared to full year 2019. Moody's expects the
company to generate positive free cash flows this year after capex
of around $30 million.
The B2 rating is supported by Inspired (1) leading positions in
gaming machines in the UK and virtual sports; (2) successful
transition of its business into online gaming with its virtual
sports and Interactive segments, which now account for almost 50%
of its EBITDA; (3) profit-sharing-based revenue model enabling
Inspire to fully benefit from rapidly growing online content; and
(4) positive cash flow generation expected from retail gaming
because of a well-invested asset base of terminals converted into
digital and track record of contract renewals with existing
customers.
At the same time, Inspired's B2 rating is constrained by (1)
customer and geographical concentration (top 10 customers accounted
for around 60% of total 2021 revenue and the UK accounted for 71%
of total 2021 revenue), although its international presence is
growing; (2) exposure to social risks in the context of evolving
regulation to protect problem gamblers, particularly in the UK; and
(3) exposure to consumer changing preferences for gaming content
and the uncertainties surrounding Inspired's ability to recover
investments in new product launches; (4) limited history of
generating free cash flows.
ESG CONSIDERATIONS
Inspired is has a highly negative exposure to social risks. As a
provider of content to the Gaming industry, Inspired, faces the
risk of a potential shift in consumer preferences away from slot
machines, which account for a significant share of the company's
revenue. The company's iGaming and Virtual Sports operations
mitigate this risk because they contribute about half of the
company's EBITDA. The company also faces the risk of a continuously
evolving regulatory framework with the aim to provide an
environment where players are reminded to behave responsibly,
reduce problem gambling and money laundering.
Governance risks are moderately negative. They relate mostly to
possible future acquisitions which may be partly debt funded as
well as the announcement that the company has established a $25
million share buy back program. The negative assessment takes into
account a focus on shareholders as reflected as well in the 2020
decision to stop interest payments. This is balanced by good
disclosures given the status as a publicly listed company, a
proficient management team, a policy of not paying dividends and a
stated target net debt to EBITDA of 3x.
LIQUIDITY
Inspired's liquidity position is good, evidenced by (1) on
balance-sheet cash of $40.8 million as of March 31, 2022 and (2) a
fully available GBP20 million RCF expiring in November 2025. The
company has no debt maturities until 2026, when the GBP235 million
guaranteed senior secured notes come due.
The RCF has financial covenants based on the secured net debt
leverage ratio of 6.0x, with stepdowns to 5.75x in Q1 2023 and
5.50x in Q1 2024. Net leverage was 3.4x as of Q1 2022. Therefore,
Moody's expect Inspired to comfortably remain compliant.
RATIONALE FOR THE POSITIVE OUTLOOK
The positive rating outlook reflects Moody's view that, in the next
12-18 months, the company's quality content and the increasing
penetration of its online products will continue to attract players
and gamblers, driving top-line growth and its leverage will rapidly
trend downwards towards 3.5x.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Upward pressure on the ratings could arise over time if the
company's (1) Moody's-adjusted gross leverage falls sustainably
below 3.5x; (2) margins are stable with some improvements and (3)
good liquidity is maintained. A rating upgrade is conditioned upon
greater clarity around the upcoming regulatory changes in the UK
and confirmation that the impact on the company's revenues will be
limited.
Downward pressure on the ratings could occur if the company's (1)
Moody's-adjusted gross leverage is maintained for a prolonged
period of time above 4.0x; (2) retained cash flow (RCF)/Net debt
(as adjusted by Moody's) deteriorates towards 20% and (3) changes
to its financial policy resulting in greater appetite for leverage.
A downgrade could also occur as a result of materially adverse
regulatory actions in one or more of the larger geographies.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Business and
Consumer Services published in November 2021.
COMPANY PROFILE
Inspired offers an expanding portfolio of content, technology,
hardware and services for regulated gaming, betting, lottery,
social and leisure operators across retail and mobile channels
around the world. The company operates in approximately 35
jurisdictions worldwide, supplying gaming systems with associated
terminals and content for more than 50,000 gaming machines located
in betting shops, pubs, gaming halls and other route operations;
virtual sports products through more than 44,000 retail channels;
digital games for 100+ websites; and a variety of amusement
entertainment solutions with a total installed base of more than
19,000 devices.
ION GEOPHYSICAL: CityWest Landlord Says Plan Provisions Inequitable
-------------------------------------------------------------------
PKY-2101 CITYWEST 3&4, LP, objects to the Joint Chapter 11 Plan of
Reorganization of Ion Geophysical Corporation and its Debtor
Affiliates.
CityWest Landlord points out that pursuant to the overly broad
discharge and injunction provisions of the Plan, (at Article
VIII(F)), the Debtors seek to enjoin creditors, including the
CityWest Landlord, from exercising their rights of setoff or
recoupment. With regard to the CityWest Landlord, this injunction
would improperly enjoin bargained-for protections in the Lease,
including pre- and post-petition expense adjustments and
reconciliations under the Lease.
CityWest Landlord cites that while Article VIII(F) of the Plan
provides that creditors are enjoined from exercising rights of
setoff or recoupment after the Effective Date, the Plan inequitably
preserves setoff and recoupment rights for the benefit of each of
the Debtors and Reorganized Debtors.
CityWest Landlord claims that the Debtors seek to restrict the
application of setoff unless a party asserting setoff has filed a
motion on or before the Effective Date. As a result, the Debtors'
attempts to impose additional procedural requirements through the
Plan should not be countenanced.
Moreover, it is just as clear that creditors' equitable remedy of
recoupment must survive plan confirmation. Therefore, the Plan's
proposed injunction relative to nondebtor parties' setoff and
recoupment rights is overbroad and improper.
Accordingly, the CityWest Landlord objects to the Plan provisions
that seek to prohibit the Landlords' rights of setoff and
recoupment, and respectfully request that, for the reasons set
forth, Article VIII(F) of the Plan should be modified, by including
the following language:
* Notwithstanding anything to the contrary, nothing shall
modify the rights, if any, of any current or former party to an
Unexpired Lease, to assert any right of setoff or recoupment that
such party may have under applicable bankruptcy or non-bankruptcy
law, including, but not limited to, (i) the ability, if any, of
such parties to setoff or recoup a security deposit held pursuant
to the terms of their unexpired lease(s) with the Debtors, or any
successors to the Debtors, under the Plan; (ii) assertion of rights
of setoff or recoupment, if any, in connection with Claims
reconciliation; or (iii) assertion of setoff or recoupment as a
defense, if any, to any claim or action by the Debtors or any
successors of the Debtors.
CityWest Landlord asserts that the Debtors have not and cannot
justify their desire to abrogate their creditors' rights of setoff
and recoupment, and particularly, the CityWest Landlord's right of
setoff or recoupment pursuant to the bargained-for protections in
the Lease, by the inclusion of the language in Article VIII(F) of
the Plan. The Landlords respectfully request that Article VIII(F)
be modified to preserve those rights.
Attorneys for CityWest Landlord:
JACKSON WALKER L.L.P.
Michael S. Held
State Bar No. 09388150
2323 Ross Avenue, Suite 600
Dallas, Texas 75201
(214)953-6000
(214) 953-5822 (Fax)
mheld@jw.com
About ION Geophysical Corporation
ION Geophysical Corporation is an innovative, asset-light global
technology company that delivers data-driven decision-making
offerings to offshore energy and maritime operations markets. It is
based in Houston, Texas.
ION Geophysical Corporation and its affiliates sought protection
under Chapter 11 of the Bankruptcy Code (Bankr. S.D. Texas Lead
Case No. 22-30987) on April 12, 2022. At the time of the filing,
ION Geophysical listed $10 million to $50 million in assets and
$100 million to $500 million in liabilities.
Judge Marvin Isgur oversees the cases.
The Debtors tapped Winston & Strawn, LLP as legal counsel; FTI
Consulting, Inc. as financial consultant; and Perella Weinberg
Partners, LP as investment banker. Epiq Corporate Restructuring,
LLC is the Debtors' notice and claims agent.
The U.S. Trustee for Region 7 appointed an official committee of
unsecured creditors on April 18, 2022. The committee is
represented by White & Case, LLP.
ION GEOPHYSICAL: DGH Says Joint Reorganizing Plan Unconfirmable
---------------------------------------------------------------
The Directorate General of Hydrocarbons, a/k/a the Ministry of
Petroleum & Natural Gas, Government of India ("DGH"), a creditor of
Ion Geophysical Corporation and Its Debtor Affiliates, objects to
confirmation of the Debtors' Joint Chapter 11 Plan of
Reorganization.
DGH claims that the Disclosure Statement describes a reorganization
Plan that the Debtors have admitted is no longer necessary and it
leaves creditors completely in the dark as to whether the Plan is,
in fact, going to be withdrawn or, if the Debtors intend to move
forward, how the reorganization Plan can be reconciled to the
liquidation process that is unfolding or how creditor rights and
recoveries will be impacted. In short, the Disclosure Statement now
describes a reality that no longer exists, and it cannot be finally
approved as containing adequate information.
DGH points out that the Plan violates the absolute priority rule.
It does so by granting equity holders a continuing interest in the
Reorganized Debtors while leaving unsecured creditors with
distributions somewhere between 0 and 1%, rendering it
unconfirmable. Clearly, this treatment does not pay holders of
Allowed Class 5 General Unsecured Claims in full. Nevertheless, the
reorganization Plan provides for holders of ION Geophysical Common
Interests classified in Class 9 to receive a pro rata share of and
interest in 0.25% of the New Common Stock in the Reorganized
Debtors on account of their Allowed Class 9 Claims.
DGH states that Executory Contract Cure amounts are treated by
"payment of the default amount in Cash on the Effective Date or as
soon as reasonably practicable thereafter or as provided in the
Cure Notices or any Asset Purchase Agreement(s), with the amount
and timing of payment of any such Cure dictated by the Debtors'
ordinary course of business." Royalty Cure Claims, conversely,
"shall be paid in installments over time in the ordinary course of
business as set forth in the applicable Cure Notice or any Asset
Purchase Agreement(s)." These treatments are inconsistent.
DGH asserts that the Plan provides that Royalty Cure Claims, "shall
not exceed $12,800,000 in the aggregate and no more than $500,000
shall be required to be paid within the first 30 days after the
Effective Date without the prior consent of the Required Supporting
Creditors." Plan at Article IX.A.10. With respect to Cure amounts
for Executory Contracts, the Plan appears to have no such similar
cap.
DGH further asserts that it is impossible to discern whether the
Debtors are seeking to somehow bifurcate the rights and obligations
under the Agreements by leaving the liabilities arising thereunder
with GX Technologies' estate while simultaneously assuming and
assigning the rights under the Agreements to ION or a third-party
buyer.
DGH objects to the provisions of Section VI.I. of the Plan, which
seek to require DGH to file a motion with the Bankruptcy Court
requesting the authority to perform a setoff or recoupment on or
before the Confirmation Date in order to preserve any setoff or
recoupment rights that it has. DGHS by this objection fully asserts
and reserves any such rights.
Co-Counsel to the Directorate General of Hydrocarbons:
CULHANE MEADOWS PLLC
Richard G. Grant
Texas Bar No. 08302650
13101 Preston Rd., Suite 110-1593
Dallas, Texas 75240
Telephone: (214) 210-2929
Email: RGrant@CM.law
Mette H. Kurth (DE Bar No. 6491)
CULHANE MEADOWS, PLLC
3411 Silverside Road
Baynard Bldg. Suite 104-13
Wilmington, Delaware 19807
Telephone: (302) 289-8839 ext.100
Email: mkurth@cm.law
About ION Geophysical Corporation
ION Geophysical Corporation is an innovative, asset-light global
technology company that delivers data-driven decision-making
offerings to offshore energy and maritime operations markets. It is
based in Houston, Texas.
ION Geophysical Corporation and its affiliates sought protection
under Chapter 11 of the Bankruptcy Code (Bankr. S.D. Texas Lead
Case No. 22-30987) on April 12, 2022. At the time of the filing,
ION Geophysical listed $10 million to $50 million in assets and
$100 million to $500 million in liabilities.
Judge Marvin Isgur oversees the cases.
The Debtors tapped Winston & Strawn, LLP as legal counsel; FTI
Consulting, Inc. as financial consultant; and Perella Weinberg
Partners, LP as investment banker. Epiq Corporate Restructuring,
LLC is the Debtors' notice and claims agent.
The U.S. Trustee for Region 7 appointed an official committee of
unsecured creditors on April 18, 2022. The committee is represented
by White & Case, LLP.
ION GEOPHYSICAL: Taxing Authorities Oppose Joint Reorganizing Plan
------------------------------------------------------------------
Cypress-Fairbanks Independent School District and Harris County
(collectively, "the Taxing Authorities"), secured creditors of Ion
Geophysical Corporation and Its Debtor Affiliates, object to
Debtors' Joint Chapter 11 Plan of Reorganization.
The Taxing Authorities point out that it appears from the Plan that
the Taxing Authorities' claims will be treated as Class 1 – Other
Secured Claims. The Plan provides for various treatments in
satisfaction of Class 1 claims without providing much specificity
as to when the Taxing Authorities' claims will be paid. As senior
secured creditors, the Taxing Authorities should be paid prior to
payment of any other creditor.
The Taxing Authorities object to the Plan on the basis that the
Plan fails to properly provide for the payment of interest on the
Taxing Authorities' claims as required by 11 U.S.C. §§ 506(b) and
1129. The Taxing Authorities are entitled to interest on their
claims at the statutory rate of 12% per annum continuing until the
claims are paid in full.
The Taxing Authorities assert that the Plan fails to provide for
the retention of the Taxing Authorities' liens on the collateral,
or proceeds thereof. The Plan should not be confirmed unless and
until it specifically provides for the Taxing Authorities pre and
post-petition liens to remain on the collateral until the taxes are
paid in full.
The Taxing Authorities object to Article VII (G) of the Plan, which
provides that amendments to claims may not be made after the Claims
Bar Date. The Taxing Authorities' claims consist of estimated 2022
tax amounts. The 2022 taxes may not be final by the Claims Bar Date
and therefore the Taxing Authorities should be allowed to amend
their claims to reflect the certified final tax amounts without
having to receive prior authorization to do so.
Lastly, the Taxing Authorities object to any Exit Financing
Facility that seeks to prime or subordinate their senior secured
tax liens.
Counsel for the Taxing Authorities:
LINEBARGER GOGGAN BLAIR & SAMPSON, LLP
TARA L. GRUNDEMEIER
Texas State Bar No. 24036691
Post Office Box 3064
Houston, Texas 77253-3064
(713)844-3478 Telephone
(713) 844-3503 Facsimile
tara.grundemeier@lgbs.com
About ION Geophysical Corporation
ION Geophysical Corporation is an innovative, asset-light global
technology company that delivers data-driven decision-making
offerings to offshore energy and maritime operations markets. It is
based in Houston, Texas.
ION Geophysical Corporation and its affiliates sought protection
under Chapter 11 of the Bankruptcy Code (Bankr. S.D. Texas Lead
Case No. 22-30987) on April 12, 2022. At the time of the filing,
ION Geophysical listed $10 million to $50 million in assets and
$100 million to $500 million in liabilities.
Judge Marvin Isgur oversees the cases.
The Debtors tapped Winston & Strawn, LLP as legal counsel; FTI
Consulting, Inc. as financial consultant; and Perella Weinberg
Partners, LP as investment banker. Epiq Corporate Restructuring,
LLC is the Debtors' notice and claims agent.
The U.S. Trustee for Region 7 appointed an official committee of
unsecured creditors on April 18, 2022. The committee is represented
by White & Case, LLP.
IXS HOLDINGS: Moody's Lowers CFR & Senior Secured Debt to Caa1
--------------------------------------------------------------
Moody's Investors Service downgraded the ratings of IXS Holdings,
Inc., including the corporate family rating to Caa1 from B2, the
Probability of Default Rating to Caa1-PD from B2-PD and the senior
secured rating to Caa1 from B2. The outlook remains negative.
The downgrades reflect Moody's expectation that IXS' operating
results will remain very weak, constrained primarily due to uneven
global light vehicle production through the remainder of this year.
Lingering supply chain disruptions (semiconductor and parts
shortages), further exacerbated by Covid lockdowns in China and the
Russia-Ukraine conflict, are the primary causes. However, labor
shortages and freight logistics will also weigh on operating
efficiencies. The downgrades also reflect Moody's expectation for
continued margin pressure from historically high raw materials,
labor, energy and freight expenses.
The negative outlook incorporates Moody's expectation that
liquidity will remain weak with a modest cash position and negative
free cash flow anticipated through fiscal 2023. Extended reliance
on the asset-based revolving credit facility (ABL) further reduces
overall liquidity. Margins will remain depressed even with
automotive original equipment manufacturers (OEM) production rates
steadily improving through next year.
Governance considerations were a factor in this rating action as
debt-to-EBITDA will remain very high through 2023. Financial
flexibility is weak, further strained by a $30 million sponsor
distribution in December 2020.
Moody's took the following actions:
Downgrades:
Issuer: IXS Holdings, Inc.
Corporate Family Rating, downgraded to Caa1 from B2
Probability of Default Rating, downgraded to Caa1-PD from B2-PD
Senior Secured Bank Credit Facility, downgraded to Caa1 (LGD4)
from B2 (LGD4)
Outlook Actions:
Issuer: IXS Holdings, Inc.
Outlook, Remains Negative
RATINGS RATIONALE
Debt-to-EBITDA, inclusive of Moody's adjustments, is very high at
over 14x as earnings have fallen sharply since the company's fiscal
Q3 2021. Modestly stronger earnings should result in lower
leverage by the end of the fiscal year ending September 30, 2023
but debt-to-EBITDA will remain elevated near 10x. Further, free
cash flow will remain negative largely due to lost volume and
operating inefficiencies driven by unstable OEM production runs.
The current inventory buildup and higher capital expenditures are
contributing to negative free cash flow but are expected to trend
back towards more normalized levels in 2023.
IXS' ratings also reflect a competitive position in pickup truck
upfitting products and services, especially spray-on bedliners,
with demand expected to accelerate with increasing build rates of
light trucks as a percentage of total vehicle production in North
America. IXS also benefits from somewhat counter cyclical growth
away from automotive OEM production volumes through its aftermarket
spray-on pick-up truck bedliner business and industrial coatings
business.
IXS' liquidity reflects Moody's expectation for the company to
maintain a cash balance less than $10 million with around $35
million of availability under a $75 million ABL expiring March
2025. Availability was nearly $42 million at March 31, 2022. A
fixed charge coverage ratio on the ABL is triggered when
availability falls below a certain threshold which is not
anticipated over the next twelve months. The term loan does not
have financial covenants. Free cash flow will be meaningfully
negative in 2022 (negative $52 million for the twelve months ended
March 31, 2022) due to weak earnings and a buildup in working
capital stemming from supply chain disruptions.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be downgraded further with concerns that the
liquidity position will continue to deteriorate, including greater
than anticipated reliance on the ABL. Negative rating action
could also result from the inability to improve margins or lack of
significant progress in generating breakeven free cash flow.
A rating upgrade over the intermediate term is unlikely given
Moody's expectation for results to improve but remain quite weak
through the company's fiscal 2023. Over the longer-term,
EBITA-to-interest above 1.5x, debt-to-EBITDA below 6x and an EBITA
margin greater than 5% could result in positive rating action. A
ratings upgrade would also hinge on improving and maintaining
liquidity, including restoring revolver borrowing availability.
The principal methodology used in these ratings was Automotive
Suppliers published in May 2021.
IXS Holdings, Inc. provides vehicle uplift services and coating
solutions that enable automotive OEMs and automotive aftermarket
dealers to customize/accessorize vehicles and industrial OEMs to
protect and preserve parts and equipment. The company operates
through two divisions, Ground Effects which provides vehicle uplift
services for automotive OEMs including the application of spray-on
pickup truck bedliners, installation of factory options and
functional external accessories and IXS Coatings which is an
aftermarket retailer of spray-on bedliners (LINE-X) and industrial
coatings. Revenue for the twelve months ended March 31, 2022 was
just over $620 million.
IXS has been owned by private equity sponsor Clearlake Capital
Group, L.P. since a leveraged buyout in March 2020.
JO-ANN STORES: Moody's Cuts CFR to B3 & Alters Outlook to Negative
------------------------------------------------------------------
Moody's Investors Service downgraded Jo-Ann Stores LLC.'s corporate
family rating to B3 from B2, its probability of default rating to
B3-PD from B2-PD, and its first lien term loan to B3 from B2. Its
speculative grade liquidity rating was downgraded to SGL-3 from
SGL-2. The outlook was changed to negative from stable.
"The downgrades reflect weakness in Jo-Ann's credit metrics as its
operating performance continues to be pressured by elevated ocean
freight costs coupled with the risk of slowing of consumer demand,"
stated Christina Boni, a senior Vice President with Moody's.
"Jo-Ann will continue to contend with historically high freight
rates over the next twelve months as free cash generation remains
muted and demand is curbed by higher inflation" Boni added.
Jo-Ann's speculative grade liquidity rating was downgraded to SGL-3
from SGL-2 as the company has increased its revolver usage to
support working capital as product is purchased earlier to relieve
supply chain delays. Although this additional inventory purchased
will be monetized in the second half of the year, usage will peak
higher than historical levels as the cash flow from the business
remains depressed.
Downgrades:
Issuer: Jo-Ann Stores LLC.
Corporate Family Rating, Downgraded to B3 from B2
Probability of Default Rating, Downgraded to B3-PD from B2-PD
Speculative Grade Liquidity Rating, Downgraded to SGL-3 from
SGL-2
Senior Secured Bank Credit Facility, Downgraded to B3 (LGD4) from
B2 (LGD4)
Outlook Actions:
Issuer: Jo-Ann Stores LLC.
Outlook, Changed To Negative From Stable
RATINGS RATIONALE
Jo-Ann's B3 corporate family rating reflects the company's small
size as well the impact from continued cost pressures on its
current operating performance. Demand for its products also
remains vulnerable as consumers contend with inflationary pressures
and price increases are taken to offset higher product and supply
chain costs. Governance risk is also a key rating constraint.
Despite being a public company, the company is majority owned by a
financial sponsor which can lead to aggressive financial
strategies, included its continued payment of an annual dividend of
approximately $18 million. Historically, Jo-Ann has benefited from
relatively stable demand for sewing and do-it-yourself arts and
crafts as well as higher margins relative to other retail segments.
However, Jo-Ann's operating results have been hurt since the latter
half of 2021 by supply chain challenges as freight costs increased
and higher costs were incurred to secure product on a timely basis.
These costs are expected to remain elevated in 2022 with funded
debt/reported EBITDA around 9x at the end of the fiscal year as the
company pivots and holds higher inventory levels as it sources
product earlier to ensure availability.
The negative outlook reflects the risk that any further cost
increases would requires higher price increases that may weigh on
consumer demand. Although elevated freights costs should subside
as supply conditions normalize these expenses may not fully revert
to historical levels and may continue to weigh on Jo-Ann's long
term profitability.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Rating could be upgraded to the extent top line growth consistently
returns, cost pressures prove transitory, and operating margins
revert toward pre-pandemic levels. Additionally, ratings could be
upgraded if the company has good liquidity and financial strategies
are balanced.
Quantitatively, an upgrade would require EBIT/interest to be
sustained above 1.5x and debt/EBITDA approaches 5.0x.
Ratings could be downgraded if liquidity deteriorates for any
reason or financial strategies become more aggressive.
Quantitatively, ratings would be downgraded should EBIT/interest be
sustained below 1.0x or funded debt/EBITDA remained unsustainably
high.
JOANN Inc. (formerly Jo-Ann Stores Holdings Inc.) is the parent
company of Jo-Ann Stores LLC. and a leading retailer of fabrics and
craft supplies offering a wide range of products for quilting,
apparel, craft and home décor sewing. Jo-Ann operates 846 retail
stores in 49 states as of April 30, 2022. Revenue for the latest
twelve months ended April 30, 2022 was approximately $2.3 billion.
Joann Inc. is a publicly traded company on the NASDAQ under the
symbol "JOAN" and is majority owned by affiliates of Leonard Green
& Partners L.P. which owns in excess of 66% of its equity.
The principal methodology used in these ratings was Retail
published in November 2021.
JOURNEY PERSONAL: Moody's Lowers CFR to B3, Outlook Negative
------------------------------------------------------------
Moody's Investors Service downgraded the ratings of Journey
Personal Care Corp. including the company's Corporate Family Rating
to B3 from B2, Probability of Default Rating to B3-PD from B2-PD,
and the existing first lien term loan rating to B3 from B2. The
rating outlook is negative.
The rating downgrades reflect Moody's expectation for
debt-to-EBITDA (Moody's adjusted) to peak above 15x in 2022 and
eventually moderate to a still elevated mid-7x by 2023 given
inflationary cost pressures and supply chain disruptions, which are
adversely impacting operating performance. Journey's ability to
take pricing actions across the healthcare portion of its product
portfolio is more limited, and pricing actions the company has
implemented across its retail segment are only partially mitigating
the cost pressures. Increasing raw material and freight costs
during the second half of 2021 and continuing into 2022 are
resulting in meaningful margin contraction. Moody's forecasts
EBITDA margin will improve to high-single digit in 2023, although
that is still meaningfully below pre-pandemic margins, mostly
driven by earnings improvement as input costs moderate over the
next 12-18 months. Moody's projects free cash flow will be negative
over the next year including headwinds from rising interest rates,
and increasing revolver usage is weakening liquidity.
Ratings Downgraded:
Issuer: Journey Personal Care Corp.
Corporate Family Rating, Downgraded to B3 from B2
Probability of Default Rating, Downgraded to B3-PD from B2-PD
Senior Secured 1st Lien Term Loan, Downgraded to B3 (LGD4) from B2
(LGD4)
Outlook Actions:
Issuer: Journey Personal Care Corp.
Outlook, Changed To Negative From Stable
RATINGS RATIONALE
Journey's B3 CFR reflects its high leverage, relatively modest
scale compared to its larger and more diversified peers, its
acquisitive growth strategy, limited operating history as a
standalone entity post spinoff, high customer concentration and
earnings vulnerability to higher input, labor and freight costs.
Financial leverage is very high with debt-to-EBITDA (Moody's
adjusted) at 9x for the latest twelve months ending March 31, 2022.
Moody's projects that Journey's debt-to-EBITDA will peak above 15x
in 2022 before declining to a still elevated mid-7x in 2023 as
inflationary pressures begin to ease slightly and the company is
able to benefit from several quarters of pricing actions.
Deleveraging will likely be through earnings growth with debt
repayment unlikely as Moody's expects negative internal cash flow
generation in 2022. Journey's credit profile benefits from branded
products, increasing demand for adult incontinence products given
the growth of the target population and diversified channel
distribution. The company's branded products, a majority of which
are sold in its healthcare/institutional and direct to consumer
segments, provide a stable source of demand. Journey's strategy
will primarily focus on increasing penetration in the adult
incontinence category. Other risks include successfully managing
the company through an intensely competitive operating environment
that will require strong execution, and aggressive financial
policies expected under financial sponsor ownership. Customer
concentration with large retailers is high, though these
relationships are well-established and Journey's products are
important customer traffic drivers.
Liquidity is adequate despite negative projected free cash flow and
increasing revolver usage. Journey had $30 million of cash as of
March 2022 and $26.5 million drawn on its $120 million asset-based
revolver at the end of March. Moody's believes these cash sources
provide adequate coverage for required term loan amortization and
operational needs. There are no term loan financial maintenance
covenants and Moody's does not expect revolver availability to fall
below the 10% level that would trigger the minimum 1.0x fixed
charge coverage ratio. The maturity profile is good with the ABL
expiring in 2026 and the term loan maturing in 2028.
Environmental considerations factors Journey's exposure to natural
capital, raw materials, land, water, energy usage and packaging
waste. The company is heavily reliant on pulp and petroleum-derived
chemicals such as polypropylene. Restrictions on the availability
and price of these products will have a negative effect on the
company's costs and cash flow. Disposable diapers generate vastly
more landfill waste than reusable diapers and have a greater impact
on ozone depletion, as chlorofluorocarbons (CFC) are released as
the products decompose in the landfill.
Social risk factors reflect the need to maintain good customer
relationships and brand image, responsible production and health &
safety risks. The company must cost-effectively manage a broad
supply chain and responsibly source inputs such as polypropylene
and other synthetic materials, chemicals, pulp and fiber and
packaging. In addition, the company has exposure to health and
safety risks due to its manufacturing facilities that include the
handling of potentially harmful ingredients such as chemicals.
Customer relations risks are present but viewed as manageable due
to the essential nature of many products.
Governance factors take into account private equity ownership with
aggressive financial policies including the willingness to operate
with a high amount of financial leverage, debt funded acquisitions
and potential dividend distributions. However, Journey is likely to
focus on busines reinvestment and stabilizing operations over the
next 12 to 18 months.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The negative outlook reflects Moody's expectation that Journey's
market share is vulnerable when compared to better capitalized
competitors, expectations of free cash flow will be constrained by
the inflationary pressures and rising interest rate environment,
and liquidity that is weakened by increasing revolver usage.
The ratings could be downgraded if Journey is unable to stabilize
revenue and restore EBITDA growth because of declining market
share, retail distribution losses, pricing that does not keep pace
with costs. Debt funded acquisitions or shareholder distributions
or a deterioration in liquidity could also contribute to a
downgrade. EBITDA-Capex/interest that remains below 1.0x or
continued negative free cash flow could also prompt a downgrade.
An upgrade would require that the company stabilize and improve
earnings including successfully implementing actions to mitigate
cost pressures. An upgrade would also require Journey to generate
consistent positive free cash flow and maintain debt-to-EBITDA
leverage below 5.5x.
The principal methodology used in these ratings was Consumer
Packaged Goods published in June 2022.
Journey Personal Care Corp (dba Attindas Hygiene Partners,
headquartered in Raleigh, North Carolina) designs, manufactures and
sells a range of branded and partner-branded adult incontinence
products including protective underwear, briefs, underpads, and
pads as well as diapers and training pants for babies throughout
the United States and Europe. Journey generated approximately $935
million in annual revenue for the latest twelve months ending March
31, 2022 and was acquired by private equity firm American
Industrial Partners in a March 2021 leveraged buyout.
JPA NO. 111: Unsecured Claims Unimpaired in Plan
------------------------------------------------
Judge David S. Jones has entered an order conditionally approving
the Disclosure Statement of JPA No. 111 Co., Ltd. and JPA No. 49
Co., Ltd.
A Combined Disclosure Statement/ Confirmation Hearing will be held
on August 5, 2022 at 10:00 a.m. (prevailing Eastern Time).
Any objections to approval of the Disclosure Statement or
confirmation of the Plan must be filed and served no later than
July 28, 2022 at 4:00 p.m. (prevailing Eastern Time).
Any replies or an omnibus reply filed by the Debtors to any filed
objections to approval of the Disclosure Statement or confirmation
of the Plan must be filed no later than August 2, 2022 at 12:00
p.m. (prevailing Eastern Time).
The Plan Supplement filing date will be on July 21, 2022.
Sale and Global Settlement
JPA No. 111 Co., Ltd. and JPA No. 49 Co., Ltd. submitted a
Disclosure Statement for the Joint Chapter 11 Plan of
Reorganization.
Pursuant to the Sale and Global Settlement, the Debtors received $5
million in cash to their estates and obtained the rights to receive
the proceeds of the VNA Claims (Seller) Portions valued at roughly
$7 million. The Plan provides that (a) the Debtors will use cash on
hand, including the proceeds of the Sale, to pay all remaining
administrative, priority, and unsecured claims in full on the
effective date of the Plan (the "Effective Date") to the extent not
paid prior to the Effective Date in accordance with the Bankruptcy
Code and the Plan or thereafter as such claims may be reconciled
and allowed, and (b) any remaining cash, including on account of
the VNA Claims (Seller) Portions, will remain with the Debtor for
the ultimate benefit of JP Lease Products & Services Co. Ltd.
("JPL"), the sole remaining creditor and the sole equity holder of
each of the Debtors.
Subsequent to the Sale Ruling, the JPA Parties, the FitzWalter
Parties, the Intermediate Lessors, and the Purchasers, and the
foregoing parties' respective agents, officers, directors, and
affiliates (the "Settlement Parties") negotiated a global
resolution of all material issues impacting the Chapter 11 Cases
and the Sale (including the Sale Objections) and entered into that
certain Settlement Addendum, dated March 25, 2022 (the "Global
Settlement"). The Global Settlement paved the way for the entry of
a consensual order approving the Sale and provided for the mutual
release of actual and potential claims and causes of action by and
among the Settlement Parties and their respective Related Parties.
Among other things, the Global Settlement provided that, upon
closing of the Sale, (a) the Stalking Horse Bidders agreed to pay
an amount to FitzWalter as part of the Sale to settle certain
disputed amounts asserted as secured obligations and identified by
the Bankruptcy Court in the Sale Ruling, (b) FitzWalter agreed to
withdraw the FitzWalter Appeal with prejudice, (c) FitzWalter
agreed to withdraw certain claims it had asserted against certain
of the Debtors' non-debtor affiliates, including JPL, JPLS Ireland,
and Heinrich Loechteken, a director of the Debtors, in England, (d)
the Debtors agreed to withdraw an adversary complaint filed against
FitzWalter in the Bankruptcy Court relating to FitzWalter's
prepetition foreclosure and enforcement process as well as certain
alleged actions taken during the Chapter 11 Cases, and (e) all
parties to the settlement agreed to execute mutual releases as
provided in the Global Settlement.
On March 25, 2022, the Bankruptcy Court entered an order (the "Sale
Order") approving, among other things, (a) the Sale to affiliates
of the Stalking Horse Bidders (the "Purchasers") pursuant to the
purchase agreements attached to the Sale Order as Exhibit A and
Exhibit B (together, the "Stalking Horse Purchase Agreements") and
(b) the Global Settlement, a copy of which was attached as Exhibit
D to the Sale Order. The closing of the MSN 173 Stalking Horse
Purchase Agreement (as defined in the Sale Order) occurred on June
14 (the "MSN 173 Closing"). The closing of the MSN 067 Stalking
Horse Purchase Agreement (as defined in the Sale Order) occurred on
June 15, 2022 (the "MSN 067 Closing" and together with the MSN 173
Closing, the "Sale Closing").
Under the Plan, holders of Class 3 General Unsecured Claims will
receive payment in full in Cash on or as soon as is reasonably
practicable after the later of (A) the Effective Date and (B) the
date on which such General Unsecured Claim is Allowed by a Final
Order of the Bankruptcy Court; provided, however, that no General
Unsecured Claims will be deemed Allowed to the extent such Claims
have been resolved by the Global Settlement, the Asset Purchase
Agreements, the Sale Order, or any other Sale and Settlement
Transaction Documents. Creditors will recover 100% of their claims.
Class 3 is unimpaired.
Attorneys for the Debtors and Debtors in Possession:
Kyle J. Ortiz, Esq.
Bryan M. Kotliar, Esq.
John C. Gallego, Esq.
TOGUT, SEGAL & SEGAL LLP
One Penn Plaza, Suite 3335
New York, NY 10119
Tel: (212) 594-5000
A copy of the Order dated July 8, 2022, is available at
https://bit.ly/3RkNry9 from PacerMonitor.com.
A copy of the Disclosure Statement dated July 8, 2022, is available
at https://bit.ly/3yUtcQD from PacerMonitor.com.
About JPA No. 111 and JPA No. 49
Tokyo-based JPA No. 111 Co., Ltd., and its subsidiary JPA No. 49
Co., Ltd., filed a Chapter 11 Petition (Bankr. S.D.N.Y., Case No.
21-12075) on December 17, 2021. The Debtors are special purpose
vehicles wholly owned by JP Lease Products & Services Co. Ltd.,
which offers financial services based on a financial scheme
combining the borrowings from financial institutions and funds to
manage valuable assets including aircraft, ships, containers for
maritime transportation, and solar power generation equipment,
which is a direct wholly-owned subsidiary of JIA. JIA, in turn,
creates and sells unique financial instruments to investors that
consist of small and medium enterprises in Japan through a network
of financial institutions, including banks and securities
companies, and tax and accounting firms.
The Debtors had estimated liabilities of $100 million to $500
million.
The case is assigned to Honorable David S. Jones.
The Debtor's counsel is Kyle J. Ortiz, Esq., Bryan M. Kotliar,
Esq., Amy M. Oden, Esq., and Amanda C. Glaubach, Esq., at Togut,
Segal & Segal LLP, in New York. The petition was signed by Teiji
Ishikawa, representative director.
KB HOME: Egan-Jones Retains BB- Senior Unsecured Ratings
--------------------------------------------------------
Egan-Jones Ratings Company on June 30, 2022, retained its 'BB-'
foreign currency and local currency senior unsecured ratings on
debt issued by KB Home.
Headquartered in Los Angeles, California, KB Home builds
single-family homes in the United States, primarily targeting
first-time and first-move-up homebuyers.
LEAR CAPITAL: U.S. Trustee Appoints Customers' Committee
--------------------------------------------------------
The U.S. Trustee for Region 3 on July 13 appointed an official
committee to represent customer creditors in Lear Capital, Inc.'s
Chapter 11 case.
The committee members are:
1. Gregory Woods
2. James Watson
3. David Clark
4. Randy Svilar
5. Patricia Schappaugh on behalf of June Wheeler
The customers' committee will investigate Lear Capital's business
operations and additional assets that can be liquidated in order to
increase the pool available for creditors.
About Lear Capital
Lear Capital Inc. is a silver and gold coin dealer based in Los
Angeles, Calif.
Lear Capital filed a petition under Chapter 11, Subchapter V of the
Bankruptcy Code (Bankr. D. Del. Case No. 22-10165) on March 2,
2022, to weather possible future legal claims associated with its
sales practices as well as customer disclosures. Jami B. Nimeroff
serves as Subchapter V trustee.
As of Feb. 28, 2022, Lear Capital had assets of $34,449,619 against
liabilities of $22,355,066.
Judge Brendan Linehan Shannon oversees the case.
The Debtor tapped Shulman Bastian Friedman & Bui, LLP as general
bankruptcy counsel; Morris James, LLP as local counsel; Mitchell
Silberberg & Knupp, LLP and The Cook Law Firm, P.C. as special
counsels; Paladin Management Group as financial advisor; and Baker
Tilly US, LLP as accountant. BMC Group, Inc., is the claims,
noticing and administrative agent.
LIVEWELL ASSISTED: Wins Cash Collateral Access Thru July 31
-----------------------------------------------------------
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 July 31, 2022.
The budget provides for $350,000 in total revenue and $340,622 in
total expenses for July 2022.
The Debtor requires the use of cash collateral 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 $95,153
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 July 26 at 10
a.m.
A copy of the order is available at https://bit.ly/3cc4Hpc 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.
LTL MGT: Law Groups Ask 3rd Circuit to Toss Bankruptcy Filing
-------------------------------------------------------------
Nicole Rosenthal of Law360 reports that a group of law professors
and nonprofits urged the Third Circuit to toss pharmaceutical
company Johnson & Johnson's Chapter 11 case, arguing that the
bankruptcy is a bad-faith move to steer talc-related asbestos
injury claims away from trial.
The American Association for Justice, as well as the self-described
Complex Litigation Law Professors, said in briefs filed Thursday
that Johnson & Johnson subsidiary Johnson & Johnson Consumer Inc.
unfairly split its assets into two components, New JJCI and LTL
Management, in order for LTL Management to file for bankruptcy and
evade tens of thousands of claims alleging its talcum powder
products are.
About LTL Management
LTL Management, LLC, is a subsidiary of Johnson & Johnson (J&J),
which was formed to manage and defend thousands of talc-related
claims and oversee the operations of Royalty A&M. Royalty A&M owns
a portfolio of royalty revenue streams, including royalty revenue
streams based on third-party sales of LACTAID, MYLANTA/MYLICON and
ROGAINE products.
LTL Management filed a petition for Chapter 11 protection (Bankr.
W.D.N.C. Case No. 21-30589) on Oct. 14, 2021. The case was
transferred to New Jersey (Bankr. D.N.J. Case No. 21-30589) on Nov.
16, 2021. The Hon. Michael B. Kaplan is the case judge. At the
time of the filing, the Debtor was estimated to have $1 billion to
$10 billion in both assets and liabilities.
The Debtor tapped Jones Day and Rayburn Cooper & Durham, P.A., as
bankruptcy counsel; King & Spalding, LLP and Shook, Hardy & Bacon
LLP as special counsel; McCarter & English, LLP as litigation
consultant; Bates White, LLC as financial consultant; and
AlixPartners, LLP as restructuring advisor. Epiq Corporate
Restructuring, LLC, is the claims agent.
An official committee of talc claimants was formed in the Debtor's
Chapter 11 case on Nov. 9, 2021. On Dec. 24, 2021, the U.S. Trustee
for Regions 3 and 9 reconstituted the talc claimants' committee and
appointed two separate committees: (i) the official committee of
talc claimants I, which represents ovarian cancer claimants, and
(ii) the official committee of talc claimants II, which represents
mesothelioma claimants.
The official committee of talc claimants I tapped Genova Burns LLC,
Brown Rudnick LLP, Otterbourg PC and Parkins Lee & Rubio LLP as its
legal counsel. Meanwhile, the official committee of talc claimants
II is represented by the law firms of Cooley LLP, Bailey Glasser
LLP, Waldrep Wall Babcock & Bailey PLLC, Massey & Gail LLP, and
Sherman Silverstein Kohl Rose & Podolsky P.A.
About Johnson & Johnson
Johnson & Johnson is an American multinational corporation founded
in 1886 that develops medical devices, pharmaceuticals, and
consumer packaged goods. It is the world's largest and most
broadly based healthcare company.
Johnson & Johnson is headquartered in New Brunswick, New Jersey,
the consumer division being located in Skillman, New Jersey. The
corporation includes some 250 subsidiary companies with operations
in 60 countries and products sold in over 175 countries.
The corporation had worldwide sales of $82.6 billion in 2020.
M1 DEVELOPMENT: Hearing on Exclusivity Bid Set for July 26
----------------------------------------------------------
The U.S. Bankruptcy Court for the Eastern District of New York is
set to hold a hearing on July 26 to consider M1 Development LLC's
motion to extend the period during which only the company can file
a Chapter 11 plan.
The motion seeks to extend the exclusivity period for the company
to file a Chapter 11 plan to Aug. 8 and to solicit acceptances to
Oct. 7.
The extension will allow M1 Development to resolve contingencies,
which will have a substantial effect on its plan. These include an
adversary case filed by the company and its owner, Rafi Manor, to
recover assets of the estate against 44 Box Street Investors LLC
and seven others. The case (Adversary Proceeding No. 22-01002-nhl)
is pending before the bankruptcy court.
In addition, the company's owner is a defendant in a lawsuit
commenced by 54 Dupont Holdings LLC and Realya Development, LLC
(Adversary Proceeding No. 21-01167). It is a contingency, which the
company believes must be resolved prior to the formulation of its
Chapter 11 plan.
About M1 Development
M1 Development, LLC filed its voluntary petition for relief under
Chapter 11 of the Bankruptcy Code (Bankr. E.D.N.Y. Case No.
21-40977) on April 14, 2021. Rafi Manor, owner of M1 Development,
signed the petition. At the time of the filing, the Debtor
disclosed $357,186 in assets and $2,272,000 in liabilities.
Judge Jil Mazer-Marino presides over the case.
The Law Offices of Avrum J. Rosen, PLLC serves as the Debtor's
legal counsel.
MADISON SQUARE: U.S. Trustee Appoints Creditors' Committee
----------------------------------------------------------
The U.S. Trustee for Region 2 on July 13 appointed an official
committee to represent unsecured creditors in the Chapter 11 case
of Madison Square Boys & Girls Club.
The committee members are:
1. Yuan P. Zee
2. Robert Liguori
3. George Daniello
4. Hector Bush
5. Jay Sapiro
Official creditors' committees serve as fiduciaries to the general
population of creditors they represent. They may investigate the
debtor's business and financial affairs. Committees have the right
to employ legal counsel, accountants and financial advisors at a
debtor's expense.
About Madison Square Boys & Girls Club
Madison Square Boys & Girls Club, Inc. --
https://www.madisonsquare.org – was established to save and
enhance the lives of New York City boys and girls who by means of
economic or social factors are most in need of its services.
Madison Square Boys & Girls Club sought protection under Chapter 11
of the U.S. Bankruptcy Code (Bankr. S.D.N.Y. Case No. 22-10910) on
June 29, 2022. In the petition filed by Jeffrey Dold, as chief
financial officer, the Debtor reported $50 million to $100 million
in assets and $100 million to $500 million in liabilities.
Alan W. Kornberg, Esq., at Paul, Weiss, Rifkind, Wharton, is the
Debtor's counsel.
MAPLE LEAF: Amends Capital Dude & WBT Claims Pay Details
--------------------------------------------------------
Maple Leaf, Inc., submitted a First Modification of Chapter 11 Plan
of Reorganization dated July 11, 2022.
The treatment of Class 2 claimant Capital Dude, LLC is modified to
provide a balloon payment following the initial 36 monthly
payments, instead of monthly payments over 55 months. The Plan
language is modified as follows:
* Capital Dude, LLC: The Allowed Secured Claim of Capital
Dude, LLC, as set forth in its proof of claim No. 35 on file in
this case in the amount of $220,217.00, shall be paid in full
without interest in 36 equal monthly installments of $4,000, and a
balloon payment of the entire remaining balance due in month 37
following the Effective Date.
The treatment of Class 2 claimant WBT is modified to reduce the
maturity and amortization of its claim from 18 years to 16 years,
and in the event of a refinance of a portion of its claim, to
reduce the amortization of the remaining balance from 84 months to
65 months.
This Plan alters the terms of the existing WBT loan documents as
follows:
* Any default existing as of the Effective Date is deemed
waived or cured.
* Any provisions in the loan documents that provide for a
default due to the Reorganized Debtor's insolvency, or financial
condition of the Reorganized Debtor from the Effective Date
forward, remain effective and enforceable.
* The maturity date is extended to June 26, 2038, which is 8
years after the original maturity date (June 26, 2030).
* The remaining balance of the note shall be re-amortized, as
of the Effective Date, over the remaining term based on the
extended maturity date, which is approximately 16 years.
* The monthly payment shall be adjusted to coincide with the
re-amortization, with an estimated monthly payment of approximately
$15,100.
If WBT receives at least $1,455,000 from a refinance of the Shop
Property, the WBT Claim and Loan Documents shall be further
modified as follows:
* Any default existing as of the date WBT receives the
proceeds of the refinance of the Shop Property will be deemed
waived or cured.
* The remaining balance due on the WBT Claim will be
re-amortized over 84 65 months, and monthly payments adjusted to
reflect the reduced balance and reamortization. For example, if
following the refinance of the Shop Property, the remaining balance
due on the WBT note is $440,500, that balance shall be re amortized
over 65 months, and if the interest rate remains 5.75%, monthly
payments will be approximately $8,000.
* The other terms of this Plan and the loan documents shall
remain in effect until the remaining balance of WBT Claim is paid
in full.
The Debtor avers that these modifications do not impact the
treatment of any other claims under the Plan.
A full-text copy of the First Modified Plan of Reorganization dated
July 11, 2022, is available at https://bit.ly/3c9Jts4 from
PacerMonitor.com at no charge.
Counsel to the Debtor:
Craig E. Stevenson, Esq.
DeWitt, LLP
Two E. Mifflin Street, Suite 600
Madison, WI 53703
Tel: 608-252-9263
Fax: 608-252-9243
Email: ces@dewittllp.com
About Maple Leaf
Maple Leaf, Inc., a company in Verona, Wis., filed a petition under
Chapter 11, Subchapter V of the Bankruptcy Code (Bankr. W.D. Wis.
Case No. 22-10420) on March 25, 2022, listing as much as $10
million in both assets and liabilities. William E. Wallo serves as
Subchapter V trustee.
Judge Catherine J. Furay oversees the case.
Craig E. Stevenson, Esq., at DeWitt, LLP is the Debtor's legal
counsel.
MICHAELS COMPANIES: Moody's Cuts CFR to B2 & Alters Outlook to Neg.
-------------------------------------------------------------------
Moody's Investors Service downgraded the ratings of The Michaels
Companies, Inc. including its corporate family rating from B1 to
B2, its probability of default rating to B2-PD from B1-PD, its
senior secured credit facility and senior secured notes to B1 from
Ba3 and its senior unsecured notes to Caa1 from B3. The ratings
outlook is changed to negative from stable.
"The downgrades reflect the significant weakness in credit metrics
as operating performance continues to be pressured by elevated
ocean freight costs coupled with a slowing of consumer demand,"
stated Christina Boni, a Senior Vice President at Moody's.
"Michaels will have to contend with historically high freight rates
over the next twelve months as free cash generation remains muted"
Boni added.
Ratings Downgraded:
Issuer: The Michaels Companies, Inc.
Corporate Family Rating, Downgraded to B2 from B1
Probability of Default Rating, Downgraded to B2-PD from B1-PD
Senior Secured Term Loan, Downgraded to B1 (LGD3) from Ba3 (LGD3)
Senior Secured Regular Bond/Debenture, Downgraded to B1 (LGD3)
from Ba3 (LGD3)
Senior Unsecured Regular Bond/Debenture, Downgraded to Caa1 (LGD5)
from B3 (LGD5)
Outlook Actions:
Issuer: The Michaels Companies, Inc.
Outlook, Changed To Negative From Stable
RATINGS RATIONALE
Michaels' B2 CFR reflects the risks of slowing consumer demand as
product inflation and higher ocean freight costs pressure to its
profitability and credit metrics. Nonetheless, the rating is
supported by the company's scale and strong market position (in
terms of number of stores) as the established leader in the highly
fragmented arts and craft segment of retail. Michaels, which had a
track record of relatively stable revenue and margins before the
pandemic, experienced strong demand after reopening post lockdowns
that has been normalizing since the second half of 2021. The vast
majority of its products are imported from Asia which has forced
the company to adapt to continued disruption by increasing lead
times to ensure product availability. Product delays hurt sales
activity significantly in Q4 2021 and freight costs are expected to
remain significantly elevated in 2022 as inflation pressures also
curtail consumer demand. Moody's expect these pressures to impact
Michaels' profitability and are forecasting an increase in funded
debt to reported EBITDA of over 8x in fiscal 2022 before an
anticipated normalization in container costs support earnings
improvement in 2023. Michaels' rating also reflects governance
considerations particularly Michaels' private equity ownership by
Apollo and the business risk associated with the highly seasonal
nature of its product sales. The company is also exposed to
categories that are more sensitive to economic conditions (such as
seasonal décor and custom framing), and competition from two other
arts and craft chains as well as larger well capitalized big box
retailers. Liquidity is good despite significantly weaker free cash
flow generation than historical levels as profitability weakens.
Higher cash usage is also expected for working capital in the
first half of fiscal 2022 as product is sourced earlier given
longer product lead times.
The negative outlook reflects the risk of weaker consumer demand
and the continued need to offset higher product costs with prices
increases. Although elevated freight costs should subside as
supply conditions normalize, certain cost increases may not prove
transitory and inflation may continue to weigh on demand which
could lead credit metrics remaining weak beyond 2022.
The B1 ratings on Michaels' secured term loan and notes are one
notch higher than the B2 corporate family rating reflecting their
security interest in certain assets of the company and the
significant level of junior capital in Michaels' capital structure.
The secured term loan rating also takes into consideration the
relatively stronger position of the unrated $1 billion asset-based
revolver, which has a first lien over the company's most liquid
assets including inventory. The Caa1 rating for Michaels Stores'
senior unsecured notes reflects their junior ranking in the
company's overall capital structure.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Rating could be upgraded to the extent revenue returns to
consistent growth, cost pressures prove transitory, and operating
margins revert toward pre-pandemic levels. Additionally, ratings
could be upgraded if Michaels' maintains good liquidity along with
balanced financial policies. Quantitatively, ratings would be
upgraded should EBIT/interest be sustained above 2.25x and
debt/EBITDA remains below 4.75x.
Ratings could be downgraded if liquidity deteriorates for any
reason or financial strategies become more aggressive.
Quantitatively, ratings would be downgraded should EBIT/interest be
sustained below 1.25x or debt/EBITDA remained above 6.0x.
The Michaels Companies, Inc., the largest dedicated arts and crafts
specialty retailer in North America based on number of stores
operated. The company operates 1,275 stores in 49 states and Canada
and generated revenues of approximately $5.2 billion for the latest
twelve months ended April 30, 2022. The company primarily sells
general and children's crafts, home decor and seasonal items,
framing and scrapbooking products. The company was taken private by
Apollo Global Management Inc. in a transaction valued at
approximately $5.5 billion in April 2021.
The principal methodology used in these ratings was Retail
published in November 2021.
MICHAELS COS: S&P Alters Outlook to Negative, Affirms 'B' ICR
-------------------------------------------------------------
S&P Global Ratings revised its rating outlook on U.S.-based arts
and crafts specialty retailer Michaels Cos. Inc. to negative from
stable and affirmed all of its ratings, including its 'B' issuer
credit rating on the company.
The negative outlook reflects the potential for a lower rating over
the next 12 months if Michaels is unable to reverse declining sales
and margin trends, straining FOCF generation and causing adjusted
leverage to be sustained at about 6x.
S&P said, "The outlook revision reflects Michaels'
weaker-than-expected operating results due to slowing demand and
higher costs attributable to a challenging operating environment,
which we expect to persist this year. The company's comparable
store sales declined 10% during its first quarter ending April 30,
2022, compared with last year, as lower guest traffic more than
offset higher prices. Despite increased promotional activity during
the quarter, in part to clear excess seasonal inventory from last
year, customers did not respond as strongly as expected. We expect
further sales pressure at Michaels this year as customers trim
discretionary spending due to inflationary pressures that are
diminishing purchasing power. Further, consumers have more
entertainment options available now. In addition to sales pressure,
supply chain challenges have meaningfully dented Michaels'
operating margins. The company relies heavily on imported
merchandise and higher international freight costs, as well as
clearance activity on late arriving seasonal products last year,
have compressed margins. In response, the company is extending
order lead times and increasing contracted shipping capacity to
avoid missing sales targets in the second half of this year. Based
on our expectations for a weakening consumer environment, we
believe there is risk that higher inventory balances will be met
with weaker customer demand, leading to heightened promotional and
clearance activity that carries into 2023.
"We anticipate weaker margins and cash flow this year. Michaels'
S&P Global Ratings-adjusted EBITDA margin decreased by about 400
basis points during the first quarter, driven by transportation
costs and operating deleverage. We expect margin pressure to
persist this year because Michaels has recently completed its
freight contract negotiation cycle for ocean transportation, with
rates significantly higher than historical average. In response,
the company has been raising prices and increasing discipline in
promotions to partially offset higher product and distribution
costs. However, we believe there is a risk promotional activity
could accelerate if traffic trends remain weak, leading to greater
margin pressure than we currently anticipate in our base case
forecast. Michaels experienced a cash flow deficit of approximately
$350 million during the first quarter, driven by higher working
capital needs related to rebuilding the company's core arts and
crafts inventory position. We expect FOCF generation will remain
challenged this year due to softer operating trends. In 2023, we
expect a modest improvement in S&P Global Ratings-adjusted EBITDA
margins due to easing supply chain pressures, contributing to a
meaningful improvement in FOCF generation.
"We project adjusted leverage rising to about 6x in 2022 before
improving to the mid-5x area in 2023. In the first quarter,
Michaels' cash position declined significantly compared with the
end of fiscal 2021, and the company drew on its asset-based lending
(ABL) facility as it built its inventory position for the year. We
expect S&P Global Ratings-adjusted leverage to weaken to
approximately 6x this year due to EBITDA pressure. In 2023, we
forecast leverage improving to the mid-5x area as performance
modestly improves. We believe improvements in credit metrics will
likely result from EBITDA growth rather than debt repayment given
Michaels' financial sponsor ownership."
The negative outlook on Michaels reflects the risk the rating could
be lowered if the company faces extended performance pressures that
cause sustained weak FOCF generation and S&P Global
Ratings-adjusted leverage of about 6x.
S&P could lower its rating on Michaels over the next 12 months if:
-- Operating performance deteriorated more than we currently
expect, including persistent comparable store sales weakness,
indicating the company is losing market share; or
-- S&P expected sustained margin pressure and the company were
unable to meaningfully increase its FOCF, likely resulting in S&P
Global Ratings-adjusted leverage remaining at about 6x.
S&P could revise its outlook on Michaels to stable if operating
pressures subsided and FOCF generation improved and it expected
adjusted leverage to be on track to be maintained well below 6x.
ESG credit indicators: E-2, S-2, G-3
MLK BRYANT: Court Confirms Chapter 11 Plan
------------------------------------------
Judge Peter C. McKittrick has entered an order confirming MLK
Bryant, LLC's Chapter 11 Plan dated March 1, 2022.
The Debtor may sell any of its real property assets without any
further order of the Court.
The Court finds that the Plan was properly transmitted to creditors
and parties in interest and that two classes voted to accept the
Plan, the Class 1 Claimant, subject to the below noted
modifications to the Plan, and the Class 3 Claimant. No formal
objections to the Plan were filed. The Court further approves the
following modifications to the Plan, as set forth below:
(1) Debtor's loan with the Class 1 Claimant is only nonrecourse
as against the Debtor, solely as to payment obligations to the
Class 1 Claimant, but not as to any actions which may be taken by
the Debtor which may adversely affect the MLK Property, such as,
engaging in waste on the MLK Property. The Class 1 Claimant
continues to hold all of its claims without impairment against the
borrower or guarantors on the loan made by the Class 1 Claimant, as
provided in the Class 1 Claimants loan documents.
(2) Debtor shall not be permitted to surrender the MLK Property
to the Class 1 Claimant in full satisfaction of the Debt without
the written consent of the Class 1 Claimant. Absent such consent,
no surrender is permitted. In the event of an uncured default the
automatic stay shall be immediately lifted as to the Class 1
Claimant and it may proceed with its state law remedies as against
the borrower under the loan from the Class 1 Claimant or any
guarantors of the loan from the Class 1 Claimant.
(3) The cure provisions in the Plan as to other claimants do not
apply to the Class 1 Creditor.
(4) Notwithstanding the provisions in Article VI, Section 1, the
obligations of the Debtor to make the payments to the Class 1
Claimant are not limited to the revenue generated by the business
operating on the MLK Property or from the sale or refinance of the
MLK Property.
(5) As to the Class 1 Claimant's Claim, Article VI, Section 8,
shall not apply and the following shall apply to the payments to be
made to the Class 1 Claimant: Any payment, if mailed, is to be
mailed to the designated address of the attorney for the Class 1
Claimant, and must be received no later than 5:00 pm of the due
date, which is the 1st of each month, or alternatively, hand
delivered to the attorney's address for delivery no later than 5:00
pm of the due date, or this will be a default as to the obligations
to the Class 1 Claimant.
(6) The provisions in Article VII do not apply to the payment
obligations due the Class 1 Claimant. The following applies
exclusively to the Class 1 Claimant: if the Debtor fails to timely
make a monthly payment obligation, or fails to maintain property
damage and liability insurance against the MLK Property, the Class
1 Claimant shall give written notice to the Debtor of the
particular failure, and the Debtor shall thereafter have 30 days
from the respective due date (not from the date the notice of the
particular failure is given to the Debtor), in which to cure the
identified failure. If Debtor fails to do so, then the Class 1
Claimant shall be entitled to the immediate lifting of the
automatic stay and the Class 1 Claimant may proceed with all of its
state law remedies. The Class 1 Claimant is only required to
provide the 30 day notice a maximum of four times. Following the
giving of the fourth 30-day notice, Debtor shall not have any
further cure opportunities, and any failure of the Debtor to timely
make the monthly obligations or maintain property damage and
liability insurance shall entitle the Class 1 Claimant to the
immediate lifting of the automatic stay and the Class 1 Claimant
may proceed with all of its state law remedies.
(7) As to the Class 1 Claimant's Claim, interest shall run at the
rate of 8% on the amount of $875,000.00 until paid, and the balance
stated in the Proof of Claim of the Class 1 Claimant, in the amount
of $310,443.21, shall not bear interest, until paid, subject to the
following: in the event that the Debtor defaults on its obligations
to the Class 1 Claimant under the Plan, default interest shall be
reinstated at the rate of 5% per annum and shall run on the
$875,000.00 retroactive to the Effective Date until paid (which
interest is in addition to the 8% interest). The full payment of
the Class 1 Claimant's Claim shall be required on the earlier to
occur of either a default under the Plan by the Debtor prior to
September 1, 2023, or September 1, 2023.
(8) The Class 1 Claimant's Claim, as reflected in the filed Proof
of Claim, is accepted as of the filing of the bankruptcy petition.
The Class 1 Claimant is also entitled to be paid, in addition to
any amounts noted above, upon the earlier to occur of a default by
the Debtor under the Plan as to the Class 1 Claimant, or September
1, 2023, all reasonable attorney fees and costs incurred by the
Class 1 Claimant.
About MLK Bryant
MLK Bryant, LLC, a company based in Portland, Ore., filed a
petition for Chapter 11 protection (Bankr. D. Ore. Case No.
21-32459) on Dec. 11, 2021, listing up to $2,101,114 in assets and
up to $1,165,948 in liabilities. Meron Alemseghed, member, signed
the petition. Judge Peter C. Mckittrick oversees the case. The
Debtor tapped Michael D. O'Brien & Associates, P.C., as legal
counsel.
MOUNTAINEER MERGER: S&P Alters Outlook to Neg., Affirms 'B' ICR
---------------------------------------------------------------
S&P Global Ratings revised its outlook on Morgantown, W.Va.-based
off-price retailer Mountaineer Merger Corp. (doing business as
Gabe's) to negative from stable and affirmed all of its ratings,
including its 'B' issuer credit rating.
S&P said, "The negative outlook reflects the potential we will
lower our rating on the company over the next 12 months if it faces
greater pressure than we currently forecast such that the rebound
in its earnings and cash flow generation is delayed."
The company's recent operating performance has been weaker than
anticipated and the timing of a recovery is uncertain due to
ongoing inflationary pressures and macroeconomic weakness. Gabe's
reported a weak year-over-year performance in the first quarter of
2022 (ended April 30, 2022), including a 17% decline in its revenue
due to a 21% drop in its comparable store sales given the tough
comparison with its government stimulus-bolstered sales during the
first quarter of 2021. The sales decline also reflects certain
merchandising missteps because the company failed to pivot toward
away-from-home trends, particularly in its apparel segment, while
inflationary pressures weighed on consumer spending. S&P said,
"While Gabe's gross margins improved relative to the prior year
period due to its lower shrinkage expense and increased selling
margin, higher operating costs weighed on its overall
profitability. Given its small operating scale, we think the
company remains vulnerable to ongoing cost pressures amid the
weakening macroeconomic conditions. We now forecast roughly flat
revenue and an S&P Global Ratings-adjusted EBITDA margin sustained
in the mid- to high-11% area in fiscal year 2022 (ending January
2023)."
&P said, "We expect weak cash flow this year because higher
operating costs will weigh on its profitability. We forecast Gabe's
will generate negative free operating cash flow (FOCF) of about $40
million in fiscal year 2022 as it contends with higher operating
costs, including for freight and labor, and lower consumer demand
as it continues to open new stores, albeit at a slower pace than
previously planned. Moreover, record levels of inflation and
increased costs associated with the build-out of its new
distribution center will weigh on its performance. We anticipate
the company will generate moderately positive FOCF in fiscal year
2023 as its sales growth prospects improve and its capital spending
normalizes."
Gabe's has sufficient liquidity to withstand its near-term cash
burn, though its covenant headroom is shrinking. As of April 30,
2022, the company had $20 million of cash on hand and about $24
million of availability under its ABL facility. Subsequently,
Gabe's executed a $15 million accordion under its ABL due 2026,
increasing the total commitment to $95 million. S&P said, "Given
the company's lack of near-term maturities, we do not foresee any
immediate liquidity issues. However, we note that the cushion under
Gabe's senior secured first-lien net leverage covenant is thinning.
While we forecast that the company will have headroom of more than
10% under its financial covenant, we note that its liquidity could
become constrained if additional headwinds, such as continued
merchandising missteps, weaken its operating performance and cash
flow generation."
Gabe's position as a value retailer will likely support reasonable
ongoing demand even amid less favorable macroeconomic conditions.
The company is an extreme discounter and prices its products
20%-70% below department stores and mass retailers, which supports
its competitive position, particularly during periods of weaker
economic conditions as consumers look to trade down their
purchases. Gabe's offers lower average retail prices per unit than
its peers, such as TJX Cos. Inc. and Ross Stores Inc. Moreover, the
company's sourcing strategy, which capitalizes on retailer
missteps, store closures, bankruptcies, and accelerating returns
from e-commerce growth, largely insulates it from industry-wide
supply chain constraints. Nonetheless, Gabe's competes with much
larger off-price retailers that possess sophisticated supply chains
with vast and established vendor networks, as well as better
negotiating leverage with their suppliers. This greater scale
allows its peers to build customer loyalty and drive recurring
traffic through more-consistent merchandise refreshes.
S&P said, "The negative outlook reflects the possibility that we
could downgrade Gabe's if the difficult operating conditions we
expect this year intensify or persist longer than we anticipate,
constraining its liquidity and challenging the company's ability to
generate positive FOCF (excluding capital outlays related to its
new distribution center)."
S&P could lower our rating on Gabe's if its operating prospects do
not rebound in the second half of this year with prospects for
continued improvement in 2023. Specifically, S&P could lower its
rating if ongoing economic or operating weaknesses further pressure
its liquidity, including:
-- Sustained higher revolver borrowings;
-- Diminished covenant headroom; or
-- Limited positive FOCF prospects under normalized capital
spending levels.
S&P could revise its outlook on Gabe's to stable if its operating
performance prospects improve, likely due to stronger supply
conditions, merchandising improvements, and the absence of a major
deterioration in the macroeconomic environment. Under this
scenario, S&P would expect improving liquidity conditions such as:
-- Reduced borrowings outstanding under its revolver;
-- Greater covenant headroom; and
-- Improved positive FOCF prospects under normalized capital
spending levels.
S&P would also expect leverage to be sustained under 5x.
ESG credit indicators: E-2, S-2, G-3
NAUTILUS POWER: Moody's Lowers Rating on Senior Secured Debt to B3
------------------------------------------------------------------
Moody's Investors Service has downgraded the rating of Nautilus
Power, LLC's ("Nautilus" or "Project") senior secured credit
facilities to B3 from B1 and maintained the negative outlook. The
credit facilities are comprised of a term loan B due in 2024 with
about $556 million outstanding and a $67.5 million bank revolving
credit facility due in 2023.
RATINGS RATIONALE
"The downgrade of Nautilus to B3 reflects Moody's view that
declining capacity revenues in both PJM Interconnection and ISO-New
England will pressure debt service coverage ratios and heighten
refinancing risk for the project's term loan, which matures on May
16, 2024" said Gayle Podurgiel, Vice President – Senior Analyst.
Although Nautilus is tracking ahead of its target debt balance with
$556 million of debt outstanding at June 30, 2022 relative to a
target of $595 million, the project's cash flow is likely to
decline materially unless there is a significant improvement in
capacity prices at the next PJM auction in December 2022, which
Moody's do not expect. The negative outlook reflects the
project's challenges as it approaches its major debt maturity in
less than two years, considering its high reliance on capacity
revenues to service this debt. Moody's project Nautilus' debt
outstanding will be roughly $475 million at the end of 2023.
The downgrade considers the weak outcome of the most recent PJM
capacity auction last month following a previous unfavorable PJM
capacity auction outcome last year. Over the past few years,
Nautilus has derived a majority of its operating margin and cash
flow from capacity auctions in the PJM and ISO-NE regions where it
operates and faces material capacity revenue declines that started
in June 2022. Nautilus' portfolio includes the Lakewood, Ocean
Peaking and Rock Springs plants totaling 1,342 Megawatts (MW)
located in the Eastern Mid-Atlantic Area Council (EMAAC) eastern
region of PJM, which saw a capacity price of $49.49/MW-day in the
most recent capacity auction for the 2023/24 capacity year. This
was higher than the rest of PJM (RTO), which cleared at a price of
$34/MW-day, but is about half of the previous auction price of
$97.86/MW-day for EMAAC in the 2022/23 capacity year and less than
a third of the $165/MW-day for EMACC in the 2021/22 capacity year.
Nautilus owns an additional 687 MW of power generation plants in
ISO- New England (ISO-NE) where capacity prices are also
contracting to $3.80 per kilowatt-month in the 2022/23 capacity
year and to $2.00 per kilowatt-month in 2023/24. Since capacity
revenues represent over 80% of Nautilus' total operating margin,
Moody's expect credit metrics to weaken substantially in both 2023
and 2024.
The B3 rating acknowledges the current year prospects for higher
cash flow from energy contributions from the portfolio, which ran
at an aggregate capacity factor of 10% in 2021. The Newington
plant, a 2002-vintage 630 Megawatt combined cycle gas turbine
located in New Hampshire, runs at a 20-25% capacity factor and is
the largest energy margin contributor in the Nautilus portfolio.
Moody's expect the outsize energy margin contribution to cash flows
in 2022 will partially carry over to 2023 but that energy margins
will compress historical levels in 2024 due to the extreme
backwardation of current power and gas forwards.
LIQUIDITY
Nautilus maintains adequate but declining liquidity, with about
$75.2 million in unrestricted cash and restricted cash, including
about $18 million in its major maintenance reserve account as of
June 30, 2022. It has a limited $10 million of availability after
letters of credit posted under its $67.5 million working capital
facility maturing on May 16, 2023. The revolving credit facility
was recently reduced from $75 million and amended terms to increase
the excess cash flow sweep to 100% and remove restrictions on
incremental debt issuance.
Rating Outlook
The negative outlook reflects Moody's expectation the project's
cash flows will compress materially in 2023 and that another weak
capacity price outcome in the upcoming PJM and ISO-New England
auctions will increasingly challenge refinancing prospects as the
loan approaches maturity in 2024.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Factors that could lead to an upgrade
In light of the negative outlook, an upgrade is unlikely. The
rating outlook could return to stable if cash flow generation from
energy markets remains high in 2023 and if capacity prices improve
such that the credit metrics remain solidly in the high-B range in
Moody's power generation project rating methodology, including DSCR
above 1.3x, the ratio of Debt/EBITDA of 9.0x or below, and a ratio
of Project CFO/Debt of 5% or higher on a prospective basis.
Factors that could lead to a downgrade
The rating could be downgraded further if pricing results of the
2024/25 PJM capacity market auction in January 2023 remains weak in
the markets where Nautilus competes or if Moody's assessment of the
portfolio's refinancing risk increases s further.
PROFILE
Nautilus is a wholesale power generation and marketing company
owned by The Carlyle Group. Nautilus owns a portfolio of six power
generation assets totaling 2,085 MWs located in the PJM and ISO-NE
power markets. In the EMAAC area of PJM, Nautilus' portfolio
includes the 280 MW dual-fueled Lakewood Energy facility, as well
as the 374 MW Ocean Peaking Power and 744 MW Rock Springs
facilities, both of which are natural gas-fired peaking plants. In
ISO-NE, Nautilus owns the 630 MW dual-fueled, combined-cycle
Newington Energy facility. Nautilus also owns and manages a
collection of oil-fired aero-derivative units, which represent 57
MWs of total portfolio capacity.
METHODOLOGY
The principal methodology used in these ratings was Power
Generation Projects Methodology published in January 2022.
OAKVIEW FARMS: U.S. Trustee Unable to Appoint Committee
-------------------------------------------------------
The U.S. Trustee for Region 6 disclosed in a court filing that no
official committee of unsecured creditors has been appointed in the
Chapter 11 case of Oakview Farms, LLC.
About Oakview Farms
Oakview Farms, LLC, sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. S.D. Texas Case No. 22-31588) on June 7,
2022. At the time of the filing, the Debtor estimated assets and
liabilities between $1 million and $10 million.
The case is assigned to Judge Eduardo V. Rodriguez.
Susan Tran Adams, Esq., at Tran Singh, LLP is the Debtor's counsel.
ODYSSEY CONTRACTING: Unsecureds Owed $2M to Get 5% in 5 Years
-------------------------------------------------------------
Odyssey Contracting Corp. submitted a Plan and a Disclosure
Statement.
The Debtor seeks over $2,000,000 in contract disputes and will use
the proceeds from the anticipated judgment to partially fund the
plan of reorganization.
All classes under the plan, priority, secured, and unsecured will
be paid from the cash flow generated from the Debtor's business. In
addition, the Debtor contemplates that the successful outcome of
pending litigation over contract disputes with former associates
and creditors will be available for use in future operations.
Under the Plan, Class 3 Unsecured Claims total $2,376,600. Class 3
creditors will receive 5% of their allowed claims over a 60-month
period, paid on a quarterly basis. Class 3 creditors will not
receive any interest on their allowed claims. Class 3 is impaired.
The source of funds for planned payments, including funds necessary
for capital replacement, repairs, or improvements are the proceeds
from business income and litigation proceeds from Odyssey vs.
Hercules (17-01255-DSC).
Counsel for the Debtor:
Dennis J. Spyra, Esq.
3265 Long Hollow Road
Elizabeth, PA 15037
Tel: (412) 673-5228
Fax: (412) 774-1713
Email: attorneyspyra@dennisspyra.com
A copy of the Disclosure Statement dated July 6, 2022, is available
at https://bit.ly/3P9PZNI from PacerMonitor.com.
About Odyssey Contracting
Odyssey Contracting Corp. is a Pennsylvania corporation which was
formed in 1987 and which is based in Houston, Pennsylvania. The
Debtor is engaged in the business of bridge painting and repair
which services it provides throughout the United States.
Odyssey Contracting Corp. filed a Chapter 11 petition (Bankr. W.D.
Pa. Case No. 15-22330) on June 29, 2015. In the petition signed by
Stavros Semanderes, president, the Debtor estimated $1 million to
$10 million in assets and liabilities.
The Hon. Carlota M. Bohm presides over the case.
Robert O. Lampl, Esq., at Robert O. Lampl, Attorney at Law, serves
as the Debtor's counsel.
On Dec. 29, 2016, the Debtor filed a Chapter 11 plan of
reorganization and disclosure statement. Ongoing business
operations will not be the primary source of funding for the
Debtor's Plan. Rather, the primary source of funding for the
Debtor's Plan is the litigation in which the Debtor is seeking
damages in the approximate aggregate amount $28,000,000.
PBF HOLDING: Moody's Hikes CFR to Ba3 & Alters Outlook to Stable
----------------------------------------------------------------
Moody's Investors Service upgraded PBF Holding Company LLC's (PBF)
Corporate Family Rating to Ba3 from B2, Probability of Default
Rating to Ba3-PD from B2-PD and senior unsecured debt ratings to B1
from Caa1. The Speculative Grade Liquidity (SGL) rating was
upgraded to SGL-1 from SGL-3. The outlook was changed to stable
from ratings on review.
Concurrently, Moody's upgraded PBF Logistics LP's (PBFX) Corporate
Family Rating to B1 from B2, Probability of Default Rating to B1-PD
from B2-PD, and senior unsecured debt rating to B2 from B3. The
SGL-2 rating was downgraded to SGL-3. The outlook was changed to
stable from ratings on review.
These rating actions conclude the rating reviews initiated on June
9, 2022.
"The upgrade of PBF's ratings reflects the significant debt
reduction and our expectation for improving profitability and
leverage driven by high crack spreads, increased demand and
constrained supply," commented Jonathan Teitel, a Moody's analyst.
"The upgrade of PBFX's ratings reflect the benefits from the
improvement in PBF's credit profile since it generates the
substantial majority of its revenue from PBF."
The following ratings/assessments are affected by the action:
Ratings Upgraded:
Issuer: PBF Holding Company LLC
Corporate Family Rating, Upgraded to Ba3 from B2
Probability of Default Rating, Upgraded to Ba3-PD from B2-PD
Speculative Grade Liquidity Rating, Upgraded to SGL-1 from SGL-3
GTD Senior Unsecured Global Notes, Upgraded to B1 (LGD5) from Caa1
(LGD5)
Issuer: PBF Logistics LP
Corporate Family Rating, Upgraded to B1 from B2
Probability of Default Rating, Upgraded to B1-PD from B2-PD
Senior Unsecured Global Notes, Upgraded to B2 (LGD5) from B3
(LGD5)
Ratings Downgraded:
Issuer: PBF Logistics LP
Speculative Grade Liquidity Rating, Downgraded to SGL-3 from
SGL-2
Outlook Actions:
Issuer: PBF Holding Company LLC
Outlook, Changed To Stable From Rating Under Review
Issuer: PBF Logistics LP
Outlook, Changed To Stable From Rating Under Review
RATINGS RATIONALE
PBF's upgrade to Ba3 CFR reflects the full redemption of its $1.25
billion senior secured notes due 2025 on July 11, 2022, using cash
on the balance sheet and Moody's expectations of further debt
reduction funded through free cash flow, resulting in the company
ultimately reducing its reported debt by over 50% from the
beginning of this year. Moody's expects improving profitability in
2022 driven by high crack spreads and crude oil differentials,
increased demand for refined products and constrained supply.
Moody's expects profitability will remain strong in 2023 but soften
compared to 2022 on lower crack spreads. A risk to PBF's earnings
is its cost to comply with regulations including the federal
Renewable Fuel Standard (RFS) and California's Low Carbon Fuel
Standard (LCFS). Moody's expects costs to settle obligations will
be a substantial use of cash through 2023, with future costs
uncertain. PBF has a project for a renewable diesel production
facility that would generate RINs and somewhat mitigate this risk.
PBFX's B1 CFR reflects low leverage, good interest coverage and
benefits from a large portion of its revenue generated under
long-term, fee-based contracts, many of which have minimum volume
commitments and fee adjustments for inflation. PBFX's credit
profile benefits from the improvement in PBF's credit profile since
it generates the substantial majority of revenue from PBF. PBFX is
strategically important to PBF Energy, Inc., which owns PBF and 48%
of PBFX. PBFX operates midstream infrastructure critical to
supporting PBF's refining operations. PBFX's rating is constrained
by relatively small scale of operations and limited third-party
revenue.
PBF's SGL-1 rating reflects Moody's expectation for PBF to maintain
very good liquidity through 2023. As of March 31, 2022, the company
had $1.38 billion of cash on the balance sheet, roughly equivalent
to the amount needed for the bond redemption, but Moody's expects
the company to generate substantial free cash flow during the
second quarter of 2022 with strength continuing into the third
quarter. In May 2022, PBF amended its ABL revolver, establishing
Tranche A with $1.55 billion of lender commitments due May 2023
(the pre-existing maturity) and Tranche B with $2.75 billion of
commitments due January 2025. The revolver has a springing (based
on availability) minimum fixed charge coverage ratio covenant.
Important to the company's liquidity is an inventory intermediation
agreement expiring December 2024 to support the Delaware City,
Paulsboro and Chalmette refineries.
PBFX's SGL-3 rating reflects Moody's expectation for PBFX to
maintain adequate liquidity factoring in the potential for support
from PBF Energy Inc. through its access to PBF's liquidity because
of its strategic importance to the refining business. As of March
31, 2022, PBFX had $53 million of cash on the balance sheet. The
$500 million revolver matures in July 2023 unless the senior notes
due May 2023 are outstanding in February 2023, in which case the
revolver matures in February 2023. Moody's expects that PBFX will
address the renewal of its revolver in the near term, ensuring that
it has adequate committed borrowing capacity and free cash flow to
manage the upcoming notes maturity. The revolver's financial
covenants are comprised of a minimum interest coverage ratio, a
maximum total leverage ratio and a maximum senior secured leverage
ratio.
PBF's senior unsecured notes due 2025 and 2028 are rated B1. This
is one notch below the CFR and reflects effective subordination to
its revolver.
PBFX's senior unsecured notes due 2023 are rated B2. This is one
notch below the CFR and reflects effective subordination to PBFX's
revolver.
The stable outlook for PBF reflects Moody's expectation for
improving profitability, cash flow and leverage metrics over the
next 12-18 months.
The stable outlook for PBFX reflects Moody's expectation that PBFX
will address its current debt maturities soon and for improving
credit metrics at PBF, which is its largest customer.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Factors that could lead to an upgrade of PBF's ratings include
further reduction of debt, sustained operating improvement and low
leverage, maintenance of retained cash flow (RCF) to debt above
25%, and positive free cash flow. Factors that could lead to a
downgrade of PBF's ratings include RCF/debt below 15%, weakening
operating performance, negative free cash flow, or weakening
liquidity.
Factors that could lead to an upgrade of PBFX's ratings include
increased size and scale, increased EBITDA from third parties,
maintenance of strong credit metrics and good liquidity. Factors
that could lead to a downgrade of PBFX's ratings include a
substantial increase in financial leverage, weakening liquidity, or
a downgrade of PBF below a B1 CFR.
The principal methodology used in rating PBF Holding Company LLC
was Refining and Marketing published in August 2021.
PBF, headquartered in Parsippany, NJ, is a subsidiary of PBF Energy
Inc., a publicly traded refiner in the US with facilities in
multiple states. PBF Energy Inc. is the sole managing member of PBF
Energy Company LLC and owns about 99.2% of the economic interests
in PBF Energy Company LLC (the parent company of PBF Holding).
PBFX, headquartered in Parsippany, NJ, is a master limited
partnership formed by PBF Energy Inc. for midstream infrastructure
relating to the refineries. PBF Energy Inc. owns the general
partner of PBFX and about 48% of the limited partnership interest.
POPPA CONSTRUCTION: Unsecureds to Split $25K in Subchapter V Plan
-----------------------------------------------------------------
Poppa Construction, Inc., filed with the U.S. Bankruptcy Court for
the Middle District of Florida a Small Business Plan of
Reorganization under Subchapter V dated July 11, 2022.
The Debtor is a Florida corporation that was incorporated in
September 2010. The Debtor is an independent general contracting
firm in Naples, Florida.
The Debtor intends to sell its assets to JJTI, LLC (the "Buyer")
free and clear of liens, claims, and encumbrances in accordance
with the term sheet and to distribute the net proceeds from the
sale to creditors in the order of their priority.
This Plan of Reorganization proposes to pay creditors of the Debtor
from the net proceeds from the sale of its assets. The Debtor, as
reorganized pursuant to this Plan, is hereafter referred to as the
"Reorganized Debtor" in this Bankruptcy Case (the "Reorganized
Case").
Class 2 consists of the secured claim of Ally Financial which is
secured by a lien on the Debtor's 2019 Dodge Ram Big Horn Truck.
The Debtor scheduled Ally Financial as a secured claim in the
amount of $15,808.24. The Buyer will assume the obligations to Ally
Financial. The Class 2 Claim is unimpaired by the Plan.
Class 3 consists of the secured claim of Ally Financial which is
secured by a lien on the Debtor's 2019 Dodge Ram Limited Truck. The
Debtor scheduled Ally Financial as a secured claim in the amount of
$24,789.43. The Buyer will assume the obligations to Ally
Financial. The Class 3 Claim is unimpaired by the Plan.
Class 4 consists of the Secured claim of PPF. The Debtor's
Complaint in the adversary proceeding asserts that PPF is an
unsecured creditor. To the extent that the Court finds that PPF
holds an Allowed Secured Claim, such Allowed Secured Claim shall be
paid from the net proceeds from the sale of the Debtor's assets
after payment of Allowed Administrative Expense Claims, Allowed
Priority Claims, and after a $25,000.00 carve-out for distribution
to Class 5 claimants. The Class 4 Claim is impaired by the Plan.
Notwithstanding anything herein to the contrary, no distribution
shall be made to PPF on account of its Allowed Secured Claim unless
and until the ruling on Appeal is affirmed. Pending a ruling on the
Appeal, the Debtor shall reserve, in its counsel's trust account,
the funds that would otherwise be distributed to PPF on account of
its Allowed Secured Claim. If the ruling on Appeal is affirmed, the
Debtor shall make any Class 4 distributions to which PPF is
entitled. If the ruling on Appeal is ultimately resolved in favor
of the Debtor, PPF shall not receive any distribution on account of
its Class 4 claim and any amounts reserved for PPF shall be
distributed to the remaining creditors in Class 5 pro rata.
Class 5 consists of All nonpriority unsecured claims. Each holder
of a non priority unsecured claim, including any unsecured claim of
PPF, shall receive its pro-rata share of the sum of $25,000.00 on
the Effective Date. The Class 5 Claims are impaired by the Plan.
Class 6 is comprised of all equity interests in the Debtor, which
are owned by Jordan Poppa-Turner. Mr. Poppa-Turner will retain his
equity interests in the Debtor. No distributions will be made to
Mr. Poppa-Turner until the distributions to Class 5 have been made.
The Class 6 Claim is unimpaired by the Plan.
Payments required under the Plan will be funded from the net
proceeds from the sale of the Debtor's assets.
A full-text copy of the Plan of Reorganization dated July 11, 2022,
is available at https://bit.ly/3Ps2YdE from PacerMonitor.com at no
charge.
Attorneys for Debtor:
Edward J. Peterson
Florida Bar No. 014612
Stichter Riedel Blain & Postler, P.A.
110 East Madison Street, Suite 200
Tampa, Florida 33602
Telephone: (813) 229-0144
Email: epeterson@srbp.com
About Poppa Construction
Poppa Construction, Inc., a company in Naples, Fla., filed a
petition under Chapter 11, Subchapter V of the Bankruptcy Code
(Bankr. M.D. Fla. Case No. 22-00498) on May 5, 2022, listing up to
$500,000 in assets and up to $10 million in liabilities. Kathleen
L. DiSanto serves as Subchapter V trustee.
Judge Caryl E. Delano oversees the case.
Edward J. Peterson, Esq., at Stichter, Riedel, Blain & Postler,
P.A. and Roetzel & Andress serve as the Debtor's bankruptcy counsel
and special litigation counsel, respectively.
REAMIR 44: Exclusivity Period Extended to Aug. 30
-------------------------------------------------
The U.S. Bankruptcy Court for the Eastern District of New York
extended to Aug. 30 the exclusivity period for Reamir44, Inc. to
file a plan for emerging from Chapter 11 protection.
Under U.S. bankruptcy rules, companies in Chapter 11 protection
have the sole right to craft and formally propose turnaround plans
unless a judge strips them of that right.
Reamir44's attorney, Alla Kachan, Esq., at the Law Offices of Alla
Kachan P.C., said the extension will give the company more time to
reach mutually agreeable terms of settlement with creditors to
resolve their claims, and to formulate a plan containing those
terms.
About Reamir 44
Hotel Grand Central LLC, a creditor, commenced a Chapter 7
involuntary petition against Reamir44, Inc. (Bankr. E.D.N.Y. Case
No. 21-42963) on Nov. 29, 2021. The involuntary case was converted
to one under Chapter 11 on Jan. 24, 2022.
Judge Nancy Hershey Lord presides over the case.
Alla Kachan, Esq., at the Law Offices of Alla Kachan P.C.
represents the Debtor as counsel.
REVLON INC: Section 341 Meeting of Creditors Set for July 19
------------------------------------------------------------
The U.S. Trustee for Region 2 will convene a meeting of creditors
of Revlon Inc. and its debtor-affiliates on July 19, 2022, at 1:00
p.m. (prevailing Eastern Time). For location, dial-in no.: (877)
727-9367.
This is the first meeting of creditors required under Section
341(a) of the Bankruptcy Code in all bankruptcy cases.
A representative of the Debtors is required to appear at the
meeting and answer questions under oath.
All creditors are invited, but not required, to attend. This
meeting of creditors offers the one opportunity in a bankruptcy
proceeding for creditors to question a responsible office of the
Debtor under oath about the company's financial affairs and
operations that would be of interest to the general body of
creditors.
About Revlon Inc.
Revlon Inc. manufactures, markets and sells an extensive array of
beauty and personal care products worldwide, including color
cosmetics; fragrances; skin care; hair color, hair care and hair
treatments; beauty tools; men's grooming products; anti-perspirant
deodorants; and other beauty care products. Today, Revlon's
diversified portfolio of brands is sold in approximately 150
countries around the world in most retail distribution channels,
including prestige, salon, mass, and online.
Since its breakthrough launch of the first opaque nail enamel in
1932, Revlon has provided consumers with high quality product
innovation, performance and sophisticated glamour. In 2016, Revlon
acquired the iconic Elizabeth Arden company and its portfolio of
brands, including its leading designer, heritage and celebrity
fragrances.
Revlon is among the leading global beauty companies, with some of
the world's most iconic and desired brands and product offerings in
color cosmetics, skin care, hair color, hair care and fragrances
under brands such as Revlon, Revlon Professional, Elizabeth Arden,
Almay, Mitchum, CND, American Crew, Creme of Nature, Cutex, Juicy
Couture, Elizabeth Taylor, Britney Spears, Curve, John Varvatos,
Christina Aguilera and AllSaints.
Revlon, Inc., sought Chapter 11 protection (Bankr. S.D.N.Y. Case
No. 22-10760) on June 15, 2022. Fifty affiliates, including Almay,
Inc, Beauty Brands USA, Inc., and Elizabeth Arden, Inc., also
sought bankruptcy protection on June 15 and June 16, 2022.
Revlon disclosed total assets of $2,328,093,000 against total
liabilities of $3,689,240,395 as of April 30, 2022.
The Hon. David S. Jones is the case judge.
PJT Partners is acting as financial advisor to Revlon and Alvarez &
Marsal is acting as restructuring advisor. Paul, Weiss, Rifkind,
Wharton & Garrison LLP is acting as legal advisor to the Company.
Mololamken, LLC, is the conflicts counsel. Kroll, LLC, is the
claims agent.
REVLON INC: Wants to Terminate Leases as Part of Bankruptcy
-----------------------------------------------------------
Miriam Hall of Bisnow reports that cosmetics conglomerate Revlon is
working to terminate its office and retail leases at 200 Park Ave.
South in an attempt to save the firm millions in the wake of its
bankruptcy filing in June 2022.
The company leases nearly 46K SF at the ABS Partners-owned building
for its Elizabeth Arden-branded spa and office space, according to
Crain's New York Business.
About Revlon Inc.
Revlon Inc. manufactures, markets and sells an extensive array of
beauty and personal care products worldwide, including color
cosmetics; fragrances; skin care; hair color, hair care and hair
treatments; beauty tools; men's grooming products; anti-perspirant
deodorants; and other beauty care products. Today, Revlon's
diversified portfolio of brands is sold in approximately 150
countries around the world in most retail distribution channels,
including prestige, salon, mass, and online.
Since its breakthrough launch of the first opaque nail enamel in
1932, Revlon has provided consumers with high quality product
innovation, performance and sophisticated glamour. In 2016, Revlon
acquired the iconic Elizabeth Arden company and its portfolio of
brands, including its leading designer, heritage and celebrity
fragrances.
Revlon is among the leading global beauty companies, with some of
the world's most iconic and desired brands and product offerings in
color cosmetics, skin care, hair color, hair care and fragrances
under brands such as Revlon, Revlon Professional, Elizabeth Arden,
Almay, Mitchum, CND, American Crew, Creme of Nature, Cutex, Juicy
Couture, Elizabeth Taylor, Britney Spears, Curve, John Varvatos,
Christina Aguilera and AllSaints.
Revlon, Inc., sought Chapter 11 protection (Bankr. S.D.N.Y. Case
No. 22-10760) on June 15, 2022. Fifty affiliates, including Almay,
Inc, Beautyge Brands USA, Inc., and Elizabeth Arden, Inc., also
sought bankruptcy protection on June 15 and June 16, 2022.
Revlon disclosed total assets of $2,328,093,000 against total
liabilities of $3,689,240,395 as of April 30, 2022.
The Hon. David S. Jones is the case judge.
PJT Partners is acting as financial advisor to Revlon and Alvarez &
Marsal is acting as restructuring advisor. Paul, Weiss, Rifkind,
Wharton & Garrison LLP is acting as legal advisor to the Company.
Mololamken, LLC, is the conflicts counsel. Kroll, LLC, is the
claims agent.
RYDER SYSTEM: Egan-Jones Retains BB+ Senior Unsecured Ratings
-------------------------------------------------------------
Egan-Jones Ratings Company on June 30, 2022, retained its 'BB+'
foreign currency and local currency senior unsecured ratings on
debt issued by Ryder System, Inc.
Headquartered in Miami, Florida, Ryder System, Inc. provides a
continuum of logistics, supply chain, and transportation management
solutions worldwide.
SAN DIEGO TACO: Gets Cash Collateral Access Thru Sept 1
-------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of California
approved the Amendment to Stipulation for further interim use of
cash collateral and for adequate protection filed by San Diego Taco
Company, Inc.
The purpose of the Second Amendment to Stipulation is solely to
extend the Debtor's interim use of cash collateral from May 1, 2022
to September 1, 2022.
The Debtor is authorized to use the cash collateral up to the
amount and for the specific purposes set forth in the Budget
contained in the Stipulation, through May 1, or at a later date as
may be agreed to pursuant to a further written stipulation between
the Debtor and its secured creditor, Pacific Premier Bank, and
approved by the Court without the need for further hearing.
The Court said all other terms and conditions of the stipulation
and the Court's order will remain in effect and binding upon the
Debtor and the Secured Creditor.
A copy of the order is available at https://bit.ly/3Pst68w
PacerMonitor.com.
About San Diego Taco Company, Inc.
San Diego Taco Company, Inc. operates restaurants that specialize
in Mexican cuisine. The Debtor sought protection under Chapter 11
of the U.S. Bankruptcy Code (Bankr. S.D. Cal. Case No. 21-03594) on
September 2, 2021. In the petition signed by Ernie Becerra III,
president, the Debtor disclosed $615,570 in total assets and
$1,597,598 in total liabilities.
Judge Christopher B. Latham oversees the case.
Jason E. Turner, Esq., at J. Turner Law Group, APC is the Debtor's
counsel.
SANITYDESK INC: Has Final OK on $164,000 DIP Loan
-------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware authorized
Sanity Desk Inc. to use cash collateral in accordance with the
budget and obtain postpetition financing, on a final basis.
The Debtor is permitted to obtain senior secured postpetition
financing in an aggregate maximum principal amount of $164,000, on
a superpriority basis pursuant to the terms and conditions of the
Debtor In Possession Credit and Security Agreement the Debtor
entered into with lenders Mark Zollner, Equity Trust Company,
Custodian FBO Bradley B. Furber IRA 200208130, Baltic Capital
Management BV, IRA Financial Trust Company CFBO Lester Golden
47-5494278, Golden Family Irrevocable Trust, Sandor Bela Hatvany,
Sweeney Family Trust dated 7-10-79 and Antonio Sclafani.
The Debtor requires access to postpetition financing in an amount
necessary to fund (i) the Debtor's operations, (ii) the
administrative costs of the Chapter 11 Case, and (iii) the pursuit
of confirmation of a plan of reorganization.
The DIP Obligations will bear interest at 10% per annum as provided
in the DIP Agreement. After an Event of Default, the interest will
accrue at 15% per annum payable monthly as provided in the DIP
Agreement.
These events constitute an "Event of Default":
a. The Borrower (i) fails to make any payment of principal of,
or interest on, the DIP Loan or any of the other DIP Obligations
when due and payable, or (ii) fails to pay or reimburse DIP Lender
for any expense reimbursable hereunder or under any other DIP
Facility Document.
b. The Borrower fails or neglects to perform, keep or observe
any provision of the Final DIP Order, the DIP Agreement, the DIP
Notes, or any other DIP Documents, in any material respect;
c. Any representation or warranty made by Borrower herein or
in any of the DIP Facility Documents, any financial statement, or
any statement or representation made in any other certificate,
report or opinion delivered in connection herewith or therewith
proves to have been incorrect or misleading in any material respect
when made;
d. There occurs any uninsured damage to or loss, theft or
destruction of any portion of the Collateral that could reasonably
be expected to have a Material Adverse Effect;
e. The Borrower breaches or violates any term of this Final
DIP Order;
f. The Borrower uses the proceeds of the DIP Facility for
purposes not authorized under the Budget (subject to the Permitted
Variance);
g. The funding of the requested Advance would cause the
aggregate outstanding amount of the DIP Loan to exceed the amount
then authorized by the Final DIP Order, as the case may be, or any
order modifying or vacating the Final DIP Order will have been
entered, or any appeal of the Final DIP Order will have been timely
filed;
h. The funding of a requested Advance would cause the
aggregate outstanding amount of the DIP Loan to exceed either (i)
the Maximum Amount, subject to any adjustments in this Agreement,
or (ii) any of the limitations set forth in the Budget (subject to
the Permitted Variance);
i. The creation, existence or allowance of any Indebtedness,
whether recourse or nonrecourse, and whether superior or junior,
resulting from borrowings, DIP Loan, advances, or the granting of
credit, whether secured or unsecured, except (i) Indebtedness to
DIP Lender arising under or as a consequence of this Agreement or
the other DIP Facility Documents and (ii) Indebtedness existing on
the Petition Date or otherwise expressly permitted under the
Agreement, the Final DIP Order or the other DIP Facility
Documents;
j. Other than potential Liens arising from any unpaid Taxes,
the creation, existence or allowance of any Liens on any of
Borrower's properties or assets except the Liens existing as of the
Petition Date and the Liens created or permitted under the
Agreement, the Final DIP Order or the other DIP Facility
Documents;
k. Except as occasioned by the commencement of the Bankruptcy
Case and the actions, proceedings, and investigations related
thereto, any event or circumstance having a Material Adverse Effect
will have occurred since the Closing Date;
l. Any representation or warranty by the Borrower contained
herein or in any other DIP Facility Document is untrue or incorrect
as of such date as determined by DIP Lender, except to the extent
that such representation or warranty expressly relates to an
earlier date and except for changes therein expressly permitted or
expressly contemplated by the DIP Agreement;
m. The occurrence of any of the following in the Bankruptcy
Case:
1. The bringing of a motion or the filing of any plan
of reorganization or disclosure statement attendant thereto by
Borrower: (w) to sell assets of Borrower (other than as provided in
Section 7.6 of the DIP Agreement or otherwise agreed to by the DIP
Lender); (x) to obtain additional financing under Section 364(c) or
(d) of the Bankruptcy Code not otherwise permitted pursuant to the
DIP Agreement; (y) to grant any Lien upon or affecting any
Collateral; or (z) or any other action or actions adverse to DIP
Lender or its rights and remedies hereunder or its interest in the
Collateral, unless the DIP Obligations are indefeasibly paid
pursuant to such motion, plan of reorganization.
2. The payment of, or application for authority to
pay, any prepetition claim without DIP Lender's prior written
consent or pursuant to an order of the Bankruptcy Court after
notice and hearing unless otherwise permitted under the DIP
Agreement;
3. The appointment of an interim or permanent trustee
in the Bankruptcy Case or the appointment of a receiver or an
examiner in the Bankruptcy Case with expanded powers to operate or
manage the financial affairs, the business, or reorganization of
Borrower without DIP Lender's consent; or the sale without DIP
Lender’s consent, of all of Borrower's assets either through a
sale under Section 363 of the Bankruptcy Code, through a confirmed
plan of reorganization in the Bankruptcy Case, or otherwise that
does not provide for payment in full of the DIP Obligations and
termination of DIP Lender's commitment to make the Advances;
4. The dismissal of the Bankruptcy Case, or the
conversion of the Bankruptcy Case from one under Chapter 11 to one
under Chapter 7 of the Bankruptcy Code or the filing of a motion or
other pleading by Borrower seeking the dismissal of the Bankruptcy
Case under Section 1112 of the Bankruptcy Code or otherwise;
5. The entry of an order by the Bankruptcy Court
granting relief from or modifying the automatic stay of Section 362
of the Bankruptcy Code to allow any creditor to execute upon or
enforce a Lien on any Collateral;
6. The commencement of a suit or action against the DIP
Lender for any acts or omissions solely in the role as the DIP
Lender, and, as to any suit or action brought by any Person other
than Borrower or a subsidiary, officer or employee of Borrower, the
continuation thereof without dismissal for 30 days after service
thereof on DIP Lender, that asserts by or on behalf of Borrower,
any state agency in the Bankruptcy Case or any creditor, any claim
or legal or equitable remedy for subordination of the claim or Lien
of DIP Lender;
7. The failure to file a plan of reorganization or
motion for asset sale pursuant to Section 363 of the Bankruptcy
Code on or before the statutory limitations and the Maturity Date;
8. The entry of an order in the Bankruptcy Case
granting any other superpriority administrative claim or Lien equal
or superior to the claims and Liens granted to DIP Lender.
All of the DIP Obligations will constitute allowed senior
administrative expense claims against the Debtor with priority over
any and all administrative expenses, adequate protection claims,
diminution claims and all other claims against the Debtor's
estate.
As security for the DIP Obligations, the DIP Lender is granted a
valid, binding, continuing, enforceable, fully perfected first
priority senior security interest in and lien upon all pre- and
postpetition property of the Debtor or its estate.
The DIP Liens are deemed duly perfected and recorded under all
applicable federal or state or other laws.
The Debtor will maintain insurance on all insurable property now or
hereafter owned against such risks and to the extent customary in
its industry.
The liens and claims of or granted to the DIP Lender will be
subject and subordinate to the payment, without duplication, of the
following fees and claims Carve-Out:
a. All allowed fees and expenses of attorneys, investment
bankers and financial advisors employed by the Debtor or its estate
pursuant to sections 327 and 328 of the Bankruptcy Code, and
b. All allowed fees and expenses of the Subchapter V Trustee
appointed in the Chapter 11 case, subject to the Budget, that
accrued prior to the Termination Date (i) solely to the extent set
forth in (and limited by) the Budget.
A copy of the order is available at https://bit.ly/3z46buy from
PacerMonitor.com.
About SanityDesk, Inc.
SanityDesk, Inc. -- https://sanitydesk.com/ -- is a digital
marketing strategist and funnel builder.
SanityDesk, Inc., filed a petition for relief under Chapter 11 of
the U.S. Bankruptcy Code (Bankr. D. Del. Case No. 22-10527) on June
10, 2022. The Debtor estimated less than $500,000 in assets and $1
million to $10 million in liabilities as of the bankruptcy filing.
Michael G. Busenkell, Esq., at Gellert Scali Busenkell & Brown,
LLC, is the Debtor's counsel.
Jami B Nimeroff has been appointed as Subchapter V trustee.
SAS AB: Wins Court Approval of 'First-Day' Motions
--------------------------------------------------
SAS AB announced July 7, 2022, that it has received approval from
the U.S. Bankruptcy Court for the Southern District of New York for
all of its "First Day" motions as part of the Company's voluntary
chapter 11 process in the U.S.
The approvals granted by the Court confirm that SAS is authorized
to continue to operate its business in the ordinary course
throughout the chapter 11 process in accordance with the Court’s
orders. The Court specifically authorizes SAS to, among other
things, continue to:
* Pay all employee wages and benefits;
* Operate the airline in the ordinary course;
* Honor existing customer programs, including the EuroBonus
loyalty program;
* Honor various pre-petition obligations owed to certain of its
critical travel agency partners, vendors and suppliers;
* Pay vendors and suppliers in full under normal terms for goods
received and services provided on or after July 5, 2022; and
* Pay all taxes, insurance, and other regulatory fees in the
ordinary course.
Anko van der Werff, President and Chief Executive Officer of SAS,
said, "These court approvals confirm that our operations will
continue as usual as we begin our restructuring process in the U.S.
We remain focused on providing the service our customers are used
to, while accelerating our efforts to implement key elements of our
comprehensive business transformation plan, SAS FORWARD.
Ultimately, our plan is about improving our financial position and
continuing our more than 75-year legacy as Scandinavia’s leading
airline."
SAS' flight schedule is unaffected by the filing and its
reservations, customer service, SAS EuroBonus and all other
customer services and systems will continue as normal. Separate
from the chapter 11 process, the strike undertaken by the SAS
Scandinavia pilots' unions will continue to impact flight
schedules.
Additional information about this process is available at the
Company's dedicated restructuring website,
https://sasgroup.net/transformation. Court filings and other
documents related to the chapter 11 process in the U.S. are
available on a separate website administered by SAS’ claims
agent, Kroll Restructuring Administration LLC, at
https://cases.ra.kroll.com/SAS. Information is also available by
calling (844) 242-7491 (U.S./Canada) or +1 (347) 338-6450
(International), as well as by email at SASInfo@ra.kroll.com.
About Scandinavian Airlines
SAS SAB, Scandinavia's leading airline, with main hubs in
Copenhagen, Oslo and Stockholm, is flying to destinations in
Europe, USA and Asia. Spurred by a Scandinavian heritage and
sustainable values, SAS aims to be the global leader in sustainable
aviation. The airline will reduce total carbon emissions by 25
percent by 2025, by using more sustainable aviation fuel and our
modern fleet with fuel-efficient aircraft. In addition to flight
operations, SAS offers ground handling services, technical
maintenance and air cargo services. SAS is a founder member of the
Star Alliance, and together with its partner airlines offers a wide
network worldwide. On the Web: https://www.sasgroup.net
SAS AB and its affiliates, including Scandinavian Airlines Systems
Denmark-Norway-Sweden and Scandinavian Airlines of North America
Inc., sought protection under Chapter 11 of the U.S. Bankruptcy
Code (Bankr. S.D.N.Y. Case No. 22-10925) on July 5, 2022. In the
petition filed by Erno Hildén, as authorized representative, the
Debtor SAS AB estimated assets between $10 billion and $50 billion
and liabilities between $1 billion and $10 billion.
Weil, Gotshal & Manges LLP is serving as global legal counsel and
Mannheimer Swartling Advokatbyra AB is serving as Swedish legal
counsel to SAS. Seabury Securities LLC and Skandinaviska Enskilda
Banken AB are serving as investment bankers, Seabury is also
serving as restructuring advisor. FTI Consulting is serving as
financial advisor. Kroll Restructuring Advisors is the claims
agent.
SEQUA CORP: Moody's Hikes CFR to Caa1 & Alters Outlook to Stable
----------------------------------------------------------------
Moody's Investors Service has concluded its review for upgrade of
Sequa Corporation. Moody's upgraded its ratings for Sequa
Corporation, including the corporate family rating to Caa1 from
Caa2 and the probability of default rating to Caa1-PD from Caa2-PD.
The rating actions follow Sequa's recent divestiture of its Precoat
metals division for approximately $1.28 billion. $967 million of
the after-tax proceeds were used to reduce or retire existing first
lien and second lien debt. Ratings on the first lien term loan due
2025 and on the second lien term loan due 2024 have been withdrawn.
The rating outlook for Sequa Corporation was changed to stable from
rating under review. This concludes the review for upgrade
initiated on March 16, 2022.
Upon the consummation of the divestiture, Sequa's existing
borrower, Sequa Mezzanine Holdings L.L.C was sold and is no longer
a party to the first lien credit agreement. The newly formed
Chromalloy Holdings, LLC. ("Chromalloy") is now the sole remaining
borrower under the first lien credit agreement. Concurrent with the
above rating actions, Moody's confirmed the Caa1 ratings on
Chromalloy's first lien revolving credit facilities and the first
lien term loan due 2023. Moody's also assigned a stable outlook to
Sequa's new borrower, Chromalloy Holdings, LLC.
The rating upgrades reflect the strengthening of credit metrics
following the divestiture, which has resulted in an almost 1.5x
reduction in debt-to-EBITDA to about 4.7x, pro forma at the end of
March 2022. The upgrades also reflect Moody's expectations of a
continued recovery in commercial aerospace aftermarket and original
equipment manufacturer (OEM) volumes, which Moody's expects will
support earnings growth and improving credit metrics through 2023.
The following summarizes the rating actions:
Issuer: Sequa Corporation
Corporate Family Rating, Upgraded to Caa1 from Caa2
Probability of Default Rating, Upgraded to Caa1-PD from Caa2-PD
Outlook, Changed To Stable From Rating Under Review
Issuer: Chromalloy Holdings, LLC
First lien senior secured revolving facility due 2022, confirmed
Caa1 (LGD3)
First lien senior secured revolving facility due 2023, confirmed
Caa1 (LGD3)
First lien senior secured term loan due 2023, confirmed Caa1
(LGD3)
Outlook: Assigned Stable
RATINGS RATIONALE
The Caa1 corporate family rating primarily reflects Sequa's
short-dated capital structure and accompanying refinancing risk
with the entirety of the company's capital structure becoming due
in late 2023. Notwithstanding the deleveraging nature of the
divestiture, the sale of the metal coating business reduces the
diversity of Sequa's revenue stream. This makes the company more
reliant on its Chromalloy engine repair business, which will remain
susceptible to cyclical declines in air travel demand. The company
has a weak record of cash generation and Moody's expects limited
free cash generation over the next 18 months.
Sequa benefits from a well-established market position within its
niche OEM engine segment and a growing presence in the high margin
commercial aerospace aftermarket business. Moody's recognizes the
considerable barriers to entry in the Chromalloy business resulting
from stringent FAA and aircraft manufacturer approval requirements.
The company's growing IP portfolio of parts and repairs further
supports the company's business profile.
The stable outlook reflects Moody's expectations for growing
commercial aerospace traffic volumes and on-going demand in
military markets. This will support earnings growth and an
improvement in credit metrics over the next 18 months.
Moody's expects Sequa to have weak liquidity over the next twelve
months. Pro forma March 2022 cash balances following the
divestiture are expected to be around $150 million. The company has
a short-dated capital structure with substantially all debt
becoming due in 2023. Moody's expects weak cash generation over the
next 18 months with free cash flow-to-debt about breakeven. Sequa
has an undrawn $126 million revolver that expires in the next 12
months. The revolver contains a springing first lien net leverage
ratio of 8.25x (steps down to 5.75x effective September 2022) that
comes into effect if usage exceeds 35% or around $40 million.
Moody's expects Sequa to maintain sufficient cushion with respect
to the covenant.
The Caa1 rated first lien senior credit facility represents the
entirety of the company's funded debt structure, and as such, is
rated consistent with the Caa1 corporate family rating. The bank
credit facility is comprised of a $126 million senior secured
revolver and a $447 million senior secured term loan. The credit
facility benefits from upstream subsidiary guarantees and is
secured by substantially all tangible and intangible assets of the
borrower and each guarantor.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Factors that could lead to an upgrade include a refinancing or
extension of the company's credit facility. The ratings could also
be upgraded with sustained earnings growth and generation of
positive free cash flow.
Factors that could lead to a downgrade include an inability to
refinance or extend the existing credit facility or a weaking of
earnings or cash generation.
Sequa Corporation, headquartered in Palm Beach Gardens, Florida, is
a leading independent provider of advanced engine components and
repairs for the commercial and military aerospace and industrial
gas turbine ("IGT") markets, serving OEM and aftermarket customers.
Sequa was purchased by the Carlyle Group in December 2007. Revenues
for the twelve months ended December 2021 were $780 million
(excludes revenues from the divested Precoat business).
The principal methodology used in these ratings was Aerospace and
Defense published in October 2021.
SHAPE TECHNOLOGIES: Moody's Raises CFR to B3, Outlook Stable
------------------------------------------------------------
Moody's Investors Service upgraded the ratings for Shape
Technologies Group, Inc., including the company's corporate family
rating to B3 from Caa1 and probability of default rating to B3-PD
from Caa1-PD. Concurrently, Moody's upgraded the company's first
lien senior secured ratings to B3 from Caa1. The outlook is
stable.
The upgrade reflects continued improvement in revenue and earnings
over the last year which has resulted in deleveraging and positive
free cash flow. The company suffered several years of
underperformance driven by softness in end markets such as
automotive and expense management challenges that were then
exacerbated by the pandemic. Moody's expects growth to continue
through 2022 and then slow in 2023 as pent-up demand stemming from
the pandemic subsides. Moody's expects free cash flow to be
modestly positive despite higher interest rates and global supply
chain constraints.
Upgrades:
Issuer: Shape Technologies Group, Inc.
Corporate Family Rating, Upgraded to B3 from Caa1
Probability of Default Rating, Upgraded to B3-PD from Caa1-PD
Senior Secured Bank Credit Facility, Upgraded to B3 (LGD4) from
Caa1 (LGD4)
Outlook Actions:
Issuer: Shape Technologies Group, Inc.
Outlook, Remains Stable
RATINGS RATIONALE
Shape's B3 CFR reflects its modest scale with revenue under $500
million. The company remains subject to revenue and profit
volatility given its niche market focus and exposure to cyclical
end markets. Moody's adjusted debt/EBITDA will continue to be high
at around 6.0x in 2022.
The rating is supported by the company's sizable aftermarket
business, about two thirds of total revenue, supported by a large
installed equipment base. Shape will continue to be a market leader
in the waterjet cutting market because of its global footprint and
patent-protected technology.
Assuming the two revolving credit facilities are extended in the
near-term, liquidity is good with no expected draws on the
revolvers and expected sufficient positive free cash flow to
service mandatory debt amortization.
The stable outlook reflects continued revenue growth, albeit at a
slower pace, deleveraging to around 5.5x and positive free cash
flow over the next 12-18 months.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if Shape's revenue and earnings
continue to grow with EBITA margin maintained in the mid-teens.
Adjusted debt-to-EBITDA sustained below 5.5x as the company
maintains good liquidity could support consideration for an
upgrade.
The ratings could be downgraded if the company's operating cash
flow becomes insufficient to service debt and fund capital
expenditures. Weakening interest coverage, defined as EBITDA less
capital expenditures to interest coverage, that declines towards
1.0x or adjusted Debt/EBITDA sustained above 7.0x could prompt a
rating downgrade.
Headquartered in Kent, Washington, Shape Technologies Group, Inc.
is a manufacturer of ultra-high-pressure technology and advanced
materials processing systems. Revenue for the twelve months ended
March 31, 2022 was $409 million.
The principal methodology used in these ratings was Manufacturing
published in September 2021.
SIGNIFY HEALTH: BPCI-A Program Exit No Impact on Moody's 'B1' CFR
-----------------------------------------------------------------
Moody's Investors Service said that Signify Health, LLC's planned
discontinuation of Episodes of Care Services segment is a modest
positive credit development, but it does not affect the company's
B1 corporate family rating or stable outlook. Signify announced
that it will discontinue its Bundled Payments for Care
Improvement-Advanced (BPCI-A) program, ultimately terminating its
Episodes of Care Services segment (ECS). The company claims that
the high level of uncertainty and lack of transparency around the
benchmark pricing provided by Center for Medicare and Medicaid
Innovation (CMMI) has made the BPCI-A program unsustainable. The
Company will continue to participate in the Medicare Shared Savings
Program ("MSSP") through its recent acquisition of Caravan, which
is a permanent Medicare program. The decision was made in line
with Signify's customers who also shared the same sentiment. The
company will now focus on its larger and more profitable segment,
the Home and Community Services (HCS), which is expected to expand
given the increasing number of in-home health evaluations (IHE).
Signify's BPCI-A program represents around 15% of the company's
total revenue and hasn't been profitable throughout 2021. This
said, Moody's believes that Signify's exit from the program will
enable the company to expand margins and generate stronger cash
flows.
Nevertheless, the discontinuation of the ECS segment demonstrates
the deep impact that unilateral decisions made by CMS (Center for
Medicaid and Medicare Services) can cause to Signify. This
legislative risk is a key rating constraint.
Signify Health, domiciled in both Dallas, TX and Norwalk, CT, is a
leading provider of home-based health risk assessment ("HRA")
services on behalf of Medicare Advantage health plans in the US,
and chronic and post-acute bundled payment management. The company
was formed by the late-2017 acquisition by New Mountain Capital of
both Censeo Health and Advance Health. In 2019, New Mountain
contributed to the Signify Health entity another of its portfolio
companies, Connecticut-based Remedy Partners, a provider of
software and analytics that facilitate large-scale bundled payment
programs. The company undertook an IPO in February 2021. In 2021
Signify generated $773 million of revenue.
SOMM INC: Case Summary & 20 Largest Unsecured Creditors
-------------------------------------------------------
Debtor: Somm, Inc.
dba Somm Select
1620 Carneros Meadows Lane, Suite 115
Sonoma, CA 95476
Business Description: The Debtor is a wine wholesaler and
importer.
Chapter 11 Petition Date: July 14, 2022
Court: United States Bankruptcy Court
Northern District of California
Case No.: 22-10267
Judge: Hon. Roger L. Efremsky
Debtor's Counsel: Michael C. Fallon, Esq.
LAW OFFICE OF MICHAEL C. FALLON
100 E Street, Suite 219
Santa Rosa, CA 95404
Tel: (707) 546-6770
Fax: (707) 546-5775
Email: mcfallon@fallonlaw.net
Estimated Assets: $1 million to $10 million
Estimated Liabilities: $1 million to $10 million
The petition was signed by Morris C. Aaron, MCA Financial Group,
Ltd; chief restructuring officer.
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/SIJ6XXA/Somm_Inc_dba_Somm_Select__canbke-22-10267__0001.0.pdf?mcid=tGE4TAMA
SOUTH EDGE: Case Summary & Four Unsecured Creditors
---------------------------------------------------
Debtor: The South Edge
2115 Old Adobe Road
Petaluma, CA 94954
Business Description: The Debtor is primarily engaged in renting
and leasing real estate properties.
Chapter 11 Petition Date: July 14, 2022
Court: United States Bankruptcy Court
Northern District of California
Case No.: 22-10269
Judge: Hon. Roger L. Efremsky
Debtor's Counsel: Gina R. Klump, Esq.
LAW OFFICE OF GINA R. KLUMP
30 5th Street, Suite 200
Petaluma, CA 94952
Tel: 707-778-0111
Fax: 707-778-1086
Email: klumplaw@gmail.com
Estimated Assets: $1 million to $10 million
Estimated Liabilities: $1 million to $10 million
The petition was signed by JoAnn Claeyssens as president.
A full-text copy of the petition containing, among other items, a
list of the Debtor's four unsecured creditors is available for free
at PacerMonitor.com at:
https://www.pacermonitor.com/view/BK3OF2A/The_South_Edge__canbke-22-10269__0001.0.pdf?mcid=tGE4TAMA
STAGWELL GLOBAL: Moody's Ups CFR to B1 & Alters Outlook to Stable
-----------------------------------------------------------------
Moody's Investors Service upgraded Stagwell Global LLC's corporate
family rating to B1 from B2, probability of default rating to B1-PD
from B2-PD, senior unsecured notes rating to B2 from B3, and
speculative grade liquidity rating to SGL-2 from SGL-3. The outlook
was also changed to stable from positive. The company was formed
from the merger of MDC Partners Inc. and Stagwell Marketing Group
Holdings LLC in August 2021.
"The upgrade reflects the company's good operating momentum
post-merger and its focus on deleveraging", said Peter Adu, Moody's
Vice President and Senior Credit Officer.
Upgrades:
Issuer: Stagwell Global LLC
Corporate Family Rating, Upgraded to B1 from B2
Probability of Default Rating, Upgraded to B1-PD from B2-PD
Speculative Grade Liquidity Rating, Upgraded to SGL-2 from SGL-3
Senior Unsecured Regular Bond/Debenture, Upgraded to B2 (LGD4)
from B3 (LGD4)
Outlook Actions:
Issuer: Stagwell Global LLC
Outlook, Changed To Stable From Positive
RATINGS RATIONALE
Stagwell's B1 CFR is constrained by: (1) advertising spending
shifts to large technology companies and digital media platforms,
which requires the company to adjust its business accordingly; (2)
increasing competition from consulting firms, which have digital
strengths and are growing their creative offerings with
acquisitions; (3) small scale relative to key industry peers; and
(4) controlled ownership risks that could lead to leveraging
transactions. The rating benefits from: (1) increasing digital
services exposure, which should drive double digit annual revenue
growth through 2024; (2) Moody's expectation that Debt/EBITDA will
be maintained below 4.5x by the end of 2023, supported by EBITDA
growth and debt repayment; (3) good client and industry diversity;
and (4) good liquidity, including consistent positive free cash
flow generation, which could be used to repay debt and reduce
leverage.
Stagwell has two classes of debt: (1) unrated $500 million senior
secured revolving credit facility expiring in 2026; and (2)
B2-rated $1.1 billion senior unsecured notes due in 2029. Both
instruments are guaranteed by the same domestic subsidiaries. The
unsecured notes are rated B2, one notch below the CFR, reflecting
their junior ranking below the secured revolver in the capital
structure.
Stagwell is likely to have good liquidity (SGL-2) over the next 12
months to June 30, 2023. Sources approximate $670 million compared
to uses of about $80 million in the form of deferred acquisition
consideration payments over this timeframe. Sources consist of cash
of $135 million at March 31, 2022, expected annual free cash flow
of around $200 million, and $335 million of availability (after
drawings and letters of credit) under its $500 million revolving
credit facility expiring in August 2026. The revolving credit
facility is subject to a total leverage covenant with step downs
and cushion is likely to exceed 30% over the next 12 months.
Stagwell has limited ability to generate liquidity from asset
sales.
The outlook is stable because the company is likely to record good
revenue and EBITDA growth, which should enable Debt/EBITDA to be
maintained below 4.5x by the end of 2023 despite rising competition
in the advertising industry. The stable outlook also assumes that
risks with the company's acquisition growth strategy will be
prudently managed.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if the company generates consistent
positive revenue and EBITDA growth while sustaining Debt/EBITDA
below 4x (pro forma 5.4x for 2021) and FCF/Debt above 5% (pro forma
-1% for 2021).
The ratings could be downgraded if business fundamentals
deteriorate, evidenced by material decline in revenue and EBITDA,
if Debt/EBITDA is sustained above 5.5x (pro forma 5.4x for 2021) or
if liquidity becomes weak.
The principal methodology used in these ratings was Business and
Consumer Services published in November 2021.
Headquartered in New York City, Stagwell is a global provider of
marketing, advertising, communications and consulting services. Pro
forma revenue for 2021 was $2.2 billion.
STEVEN K. THOMAS: Combined Disclosure & Plan Confirmed by Judge
---------------------------------------------------------------
Judge Mindy A. Mora has entered findings of fact, conclusions of
law and order confirming the First Amended Combined Disclosure
Statement and Plan of Reorganization (the "CDP") of Steven K.
Thomas, Inc., d/b/a Hearing Care and Audiology.
The CDP provides the same treatment for each claim or interest in
each class, and accordingly, satisfies 11 U.S.C. Sec. 1123(a)(4).
Section 8 of the CDP sets forth the means by which the CDP will be
implemented, and accordingly, makes adequate means for its
implementation and satisfies 11 U.S.C. Sec. 1123(a)(5). The CDP
will be funded through income generated by Debtor and payments by
the Debtor.
The CDP was voted on by the holders of Class 2 and complies with
all applicable provisions of the Bankruptcy Code, including 11
U.S.C. Sec. 1129(a) with respect to all Classes of Claims and
Interests under the CDP, and, as required by Fed. R. Bank. P.
3016(a), the CDP is dated and identifies the Debtor as the Plan
Proponent.
Debtor's cash on hand will be available for the payment in whole or
in part of the Allowed Administrative Expense Claims, Priority Tax
Claims, the United States Trustee Fees, and the amounts due to
creditors as set for in the Proponent's Certificate.
Debtor estimates that Class 2 creditors will receive a distribution
of approximately 63.10% of the Allowed General Unsecured Claims.
The following corrections are made to the CDP:
* Page 9, Paragraph (D) – Management of the Debtor After
Bankruptcy is corrected on line 2 to reflect the date of March 10,
2022 not 2021;
* Page 10, Paragraph (E) – Current and Historical Financial
Condition is corrected in the third paragraph, second line, to
reflect the correct amount $2,039.82 per month to general unsecured
creditors, not $2,089.82.
A full-text copy of the Plan Confirmation Order dated July 11,
2022, is available at https://bit.ly/3cgPF1C from PacerMonitor.com
at no charge.
Attorney for Debtor:
Chad T. Van Horn, Esq.
Van Horn Law Group, PA
330 N. Andrews Ave., Suite 450
Fort Lauderdale, FL 33301
Telephone: (954) 765-3166
Email: Chad@cvhlwgroup.com
About Steven K. Thomas
Inc.
Steven K. Thomas Inc. is a hearing care and audiology business with
offices located in Boynton Beach, Florida and Atlantis, Florida.
Steven K. Thomas Inc., a Florida corporation, was originally
founded in 2003. Steven K. Thomas is the president and sole owner
of the company.
Steven K. Thomas Inc. filed for Chapter 11 protection (Bankr. S.D.
Fla. Case No. 21-20074) on Oct. 20, 2021, listing up to $50,000 in
assets and up to $500,000 in liabilities. Judge Mindy A Mora
presides over the case. Chad Van Horn, Esq., at Van Horn Law
Group, Inc. serves as its attorney.
* * *
The Debtor has received an offer to sell its business assets to a
third-party for the sum of $100,000. The sale proceeds will be
used to fund the Debtor's Plan.
TELIGENT INC: Court Okays Liquidation Plan After $87 Million Deal
-----------------------------------------------------------------
Alex Wolf of Bloomberg Law reports that generic drug maker Teligent
Inc.'s bankrupt estate won court approval of a plan to liquidate
and partially pay out lender Ares Capital Corp. and unsecured
creditors’ claims.
The Buena, New Jersey-based company's Chapter 11 wind-down
proposal, hammered out in negotiations following sales of its U.S.
and Canadian assets for $87 million, received approval during a
virtual hearing Thursday, July 6, 2022 in the U.S. Bankruptcy Court
for the District of Delaware
Teligent's bankruptcy estate, liquidating under the name VJGJ Inc.,
defeated objections from McKesson Corp. and KeySource Acquisition
LLC regarding payment of their creditor claims.
About Teligent Inc.
Teligent, Inc., a specialty generic pharmaceutical company,
develops, manufactures, markets, and sells generic topical, branded
generic, and generic injectable pharmaceutical products in the
United States and Canada. The company was formerly known as IGI
Laboratories, Inc. and changed its name to Teligent, Inc. in
October 2015. Teligent, Inc. was founded in 1977 and is based in
Buena, N.J.
Teligent Inc. and three affiliates sought Chapter 11 protection
(Bankr. D. Del. Lead Case No. 21-11332) on Oct. 14, 2021. The
cases are handled by Honorable Judge Brendan Linehan Shanno.
As of Aug. 31, 2021, Teligent had total assets of $85 million and
total debt of $135.8 million.
The Debtors tapped Young Conaway Stargatt & Taylor, LLP as
bankruptcy counsel; K&L Gates, LLP as special corporate counsel;
Raymond James & Associates, Inc. as investment banker;
PharmaBioSource Realty, LLC as real estate consultant; and Portage
Point Partners, LLC as restructuring advisor. Vladimir Kasparov of
Portage Point Partners serves as the Debtors' chief restructuring
officer. Epiq Corporate Restructuring, LLC is the claims and
noticing agent and administrative advisor.
The U.S. Trustee for Region 3 appointed an official committee of
unsecured creditors in the Debtors' cases on Oct. 27, 2021. Jenner
& Block, LLP and Saul Ewing Arnstein & Lehr, LLP serve as the
committee's bankruptcy counsel. Province, LLC is the committee's
financial advisor.
Latham & Watkins LLP, serves as co-counsel to the Prepetition First
Lien Parties and the Senior DIP Parties. Morgan Lewis & Bockius LLP
serves as co-counsel to the DIP Junior Term Loan Parties and
Prepetition Second Lien Parties. Morris, Nichols, Arsht & Tunnell
LLP serves as co-counsel to the DIP Parties and Prepetition Secured
Parties. Jenner & Block LLP serves as co-counsel to the Creditors'
Committee. Osler, Hoskin & Harcourt LLP, serves as Canadian
counsel to both the DIP Junior Term Loan Parties and the Senior DIP
Parties. NautaDutilh Avocats Luxembourg S.a r.l., as Luxembourg
serves as counsel to both the DIP Junior Term Loan Parties and the
Senior DIP Parties. TGS Baltric is the Estonian counsel to both
the DIP Junior Term Loan Parties and the Senior DIP Parties.
TEXAS ARMORING: Gets OK to Hire ABIP CPA as Accountant
------------------------------------------------------
Texas Armoring Corporation received approval from the U.S.
Bankruptcy Court for the Western District of Texas to employ ABIP
CPA, an accounting firm in San Antonio, Texas, to prepare its tax
returns and financial reports.
The firm will be paid at these rates:
Partners $385 to $395 per hour
Associates $150 per hour
In addition, the firm will receive reimbursement for its
out-of-pocket expenses.
Fernando Rocha, a partner at ABIP CPA, 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:
Fernando Rocha
ABIP CPA
7339 San Pedro, Suite 901
San Antonio, TX 78216
Tel: (210) 341-2581/(210) 962-6862
Email: frocha@abipcpa.com
info@abipcpa.com
About Texas Armoring Corporation
Texas Armoring Corporation -- http://www.texasarmoring.com/-- is a
worldwide supplier of lightweight armored bulletproof cars, trucks
and sport utility vehicles (SUVs).
Texas Armoring sought Chapter 11 bankruptcy protection (Bankr. W.D.
Texas Case No. 22-50436) on April 29, 2022, listing as much as $1
million in both assets and liabilities. Ronald Kimball, president
of Texas Armoring, signed the petition.
The case is assigned to Judge Michael M. Parker.
James Samuel Wilkins, Esq., at James S. Wilkins, PC and ABIP CPA
serve as the Debtor's legal counsel and accountant, respectively.
TRANSPORTATION DEMAND: Unsecureds to Split $1M over 5 Years
-----------------------------------------------------------
Transportation Demand Management, LLC ("TDM") and Transportation
Demand Management Holdings, LLC, ("Holdings") filed with the U.S.
Bankruptcy Court for the Western District of Washington a Plan of
Reorganization under Subchapter V dated July 11, 2022.
TDM was initially founded by Gillis and Rebecca Pritchett
("Pritchett") in 1998 each owning 50% of the company. TDM began
with only two paratransit vehicles providing non-emergency medical
transportation.
In March 2016, Gillis purchased Pritchett's interest in the company
with cash and a seller carry back note for a total of approximately
$4.4M. In 2016, Gillis also found a private equity buyer for TDM.
The transaction would be structured such that Gillis would sell or
contribute the entirety of her interest in TDM ("Sale") to a newly
created company entitled Transportation Demand Management Holdings,
LLC.
In 2021, while TDM experienced a $6M reduction in top line revenue,
it only reported a $500,000 loss. Notwithstanding, the pandemic's
effect on TDM's revenue was unprecedented and severe. It could no
longer service its obligations to Parkview and FSB. After many
unsuccessful attempts to reach new arrangements with Parkview and
FSB, the combination of obligations and the global pandemic finally
left TDM with no other option other than seeking bankruptcy
relief.
Since the filing of the case TDM has exceeded or met its revenue
projections. TDM has continued to make payments to secured
creditors and lessors since the filing date. TDM is current on all
lease obligations. To survive during Covid, TDM explored and
successfully entered new markets.
Class 4 consists of Secured Equity Claim Parkview. Parkview shall
receive (i) an allowed unsecured claim in the amount of
$7,873,799.66 (ii) a liquidation preference in the amount of
$1,500,000 to be paid upon the sale of substantially all of the
assets of the Debtors, (iii) 50% of all distributions of cash to
the extent any such distributions are made to the equity holders of
the Debtors, (iv) 20% of non-voting common stock of Holdings, and
(iv) an allowed secured claim in the amount of $29,527 to paid upon
the receipt of the ERTC. Class 4 is impaired under the Plan (Claim:
$7,903,326.66/Collateral: $29,527).
Class 5 consists of Gillis Preferred Equity. Gillis shall receive
(i) an allowed unsecured claim on account of her preferred interest
in the amount $1,372,018.65 and (ii) Gillis shall receive a
liquidation preference in the amount of $225,000 to be paid upon a
sale of substantially all of the assets of the Debtors on account
of her preferred equity interest, and (iii) an allowed secured
claim in the amount of $5,210.70 to paid upon the receipt of the
ERTC. Class 5 is impaired under the Plan (Claim:
$1,377,229.35/Collateral:$5,210.70).
Class 6 consists of Common Equity. Upon the Effective Date of the
Plan, (i) the Gillis Equity Interest shall be reduced by 5%, The
TDMM Equity Interest shall be reduced by 5% and (ii) the CVG Equity
Interest shall be reduced by 10%. Class 6 is impaired under the
Plan.
Class 7 consists of General Unsecured Claims. This class of claims
is impaired under the plan. Accordingly, the Debtors are required
to commit their Disposable Monthly Income to this class during
Commitment Period. Allowed General Unsecured Claims will receive
monthly payments over the course of the Commitment Period amounting
to a pro rata portion of the Debtor's Disposable Monthly Income.
Specifically, the holder of a Class 7 Claim shall receive
approximately $1,113,763 on a pro rata basis during the Commitment
Period. The estimated total amount of General Unsecured Claims is
$11,737,060.51.
"Commitment Period" shall mean the five-year period commencing on
the Effective Date.
All distributions to creditors under the Plan will be funded as
follows by the current operations of the Debtors and available cash
on hand. The Debtors budget makes clear that they have or will have
sufficient funds to make all required payments under the Plan.
A full-text copy of the Plan of Reorganization dated July 11, 2022,
is available at https://bit.ly/3RuQBPX from PacerMonitor.com at no
charge.
Debtor's Counsel:
Nathan T. Riordan, Esq.
Wenokur Riordan PLLC
600 Stewart St #1300
Seattle, WA 98101
Phone: +1 206-724-0846
About Transportation Demand Management
Transportation Demand Management, LLC is a motorcoach and minibus
operator in the Pacific Northwest with a fleet of over 90
motorcoaches and mini buses of varying size generating more than
$15M in annual sales.
The Debtor sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. W.D. Wash. Case No. 22-10482-MLB) on March
26, 2022. In the petition signed by Gladys Gillis, chief executive
officer, the Debtor disclosed up to $10 million in both assets and
liabilities.
Judge Marc Barreca oversees the case.
Nathan T. Riordan, Esq., at Wenokur Riordan PLLC is the Debtor's
counsel.
TRIDENT TPI: Moody's Rates New First Lien Loan 'B2', Outlook Stable
-------------------------------------------------------------------
Moody's Investors Service assigned a B2 rating to Trident TPI
Holdings, Inc's (dba Tekni-Plex) proposed first lien term loan. At
the same time, Moody's affirmed the company's existing ratings,
including its B3 Corporate Family Rating, B3-PD Probability of
Default Rating, B2 senior secured bank credit facility and Caa2
senior unsecured notes. The outlook is stable.
The proposed $125 million, six-year, first lien term loan will be
used in conjunction with the remaining $37 million of an existing
delayed-draw term loan to finance the purchase of a private
packaging provider. This company manufactures specialty packaging
in North America and will enhance Trident's ability to offer
customers sustainability solutions through its focus on molded
fiber and recycled PET plastic. This acquisition will further scale
Trident's position in the egg packaging market and diversify the
company into other end markets including agriculture, industrial
and food service. Pro forma this transaction, debt-to-EBITDA for
the last twelve months ended March 31 (inclusive of Moody's
adjustments) is 7.5x. At fiscal year end June 2022, Moody's
expect debt leverage to be 7.2x before falling to 6.6x and 6.1x in
fiscal years ended June 2023 and 2024, respectively, due to EBITDA
improvement and allocation of free cash flow to debt reduction.
"This transaction further enhances Trident's material science and
sustainability capabilities, which are supportive of the company's
strong EBITDA margins," said Scott Manduca, Vice President at
Moody's.
The B2 rating assigned to the proposed first lien term loan is one
notch above the CFR given the amount of unsecured debt in the
capital structure that provides loss absorption in a distressed
scenario.
Assignments:
Issuer: Trident TPI Holdings, Inc.
Senior Secured 1st Lien Term Loan, Assigned B2 (LGD3)
Affirmations:
Issuer: Trident TPI Holdings, Inc.
Corporate Family Rating, Affirmed B3
Probability of Default Rating, Affirmed B3-PD
Senior Secured Bank Credit Facility, Affirmed B2 (LGD3)
Senior Unsecured Regular Bond/Debenture, Affirmed Caa2 (LGD5)
Outlook Actions:
Issuer: Trident TPI Holdings, Inc.
Outlook, Remains Stable
RATINGS RATIONALE
Trident's B3 CFR reflects the company's high leverage and
integration risk from implementation of its growth through
acquisition strategy. Expected EBITDA improvement through organic
and inorganic growth will translate into higher free cash
flow-to-total adjusted debt of around 3-5% over fiscal years 2023
and 2024 assuming no further acquisitions. Historically, free
cash flow has been weak and averaged around 1% of total adjusted
debt.
Trident benefits from a specialized product offering and deep
material science capabilities serving stable end markets across its
global footprint. The company serves a large blue chip customer
base in the consumer goods, including eggs and fresh produce, and
healthcare segments. These segments require a high threshold of
product certifications, which enhance Trident's barrier to entry
position and supports healthy EBITDA margins. With capital
expenditure requirements to remain competitive at around 4-5% of
revenue, the company should be positioned to generate free cash
flow, which can be allocated to debt reduction or the funding of
bolt on acquisitions that improve EBITDA.
Moody's expects Trident's liquidity to be good over the next twelve
to eighteen months supported by modest free cash flow and
availability under a $126 million asset-based revolving credit
facility. Trident's ABL expires in October 2024 after a three
year extension of the facility was executed in August 2021. Moody's
expect the company to address upcoming maturities accordingly,
including $882 million of term loans maturing in October 2024 and
$345 million and $260 million of notes maturing in August 2024 and
November 2025, respectively. Maturity dates for other debt in the
capital structure occur further out in 2028.
Although preliminary and subject to change, the new term loan
marketing term sheet contains the same covenants of the existing
credit agreement and amendments therein. This includes
incremental term loan facilities with equal to or less than a first
lien net leverage ratio of 4.95x and a total net leverage ratio of
equal to or less than 6.75x.
The stable outlook reflects expected EBITDA improvement and free
cash flow generation, both of which should support the company
reducing leverage near 6.5x by fiscal year end June 2023.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
While an upgrade is unlikely over the near term given Trident's
high leverage, Moody's could consider an upgrade if debt-to-EBITDA
(inclusive of Moody's adjustments) is below 5.5x, free cash
flow-to-debt is above 5%, and the company maintains good liquidity.
A downgrade could be considered if debt-to-EBITDA (inclusive of
Moody's adjustments) is above 7.0x, free cash flow-to-debt is below
2%, and the company's liquidity deteriorates.
Headquartered in Wayne, Pennsylvania, Trident (dba Tekni-Plex) is a
manufacturer of plastic packaging and provider of material science
and sustainable solutions to the food, healthcare, and consumer
good end markets. Trident TPI Holdings is a portfolio company of
Genstar Capital.
The principal methodology used in these ratings was Packaging
Manufacturers: Metal, Glass and Plastic Containers published in
December 2021.
TRIDENT TPI: S&P Rates New $125MM First-Lien Term Loan 'B-'
-----------------------------------------------------------
S&P Global Ratings assigned its 'B-' issue-level rating and '3'
recovery rating to Trident TPI Holdings Inc.'s (doing business as
Tekni-Plex) proposed $125 million non-fungible incremental
first-lien term loan. The '3' recovery rating indicates its
expectation for meaningful (50%-70%; rounded estimate: 60%)
recovery in the event of a payment default.
The company has agreed to acquire a specialty packaging provider,
and will fund the acquisition primarily with the proceeds from the
incremental first-lien term loan, as well as from $37 million in a
delayed draw term loan.
S&P's 'B-' issuer credit rating on Tekni-Plex is unchanged and
reflects its expectation that the steady demand trends for rigid
packing solutions in its key end markets will continue to support
its free cash flow generation and leverage in the 8x area over the
next 12 months despite the incremental debt to fund the most recent
acquisition.
Key analytical factors
Tekni-Plex's proposed capital structure comprises a $126 million
revolving credit facility, a $867 million first-lien term loan, a
$801 million first-lien delayed-draw term loan (assumed 100% drawn
at default), a $122 million first-lien incremental term loan (2022
term loan), and $605 million of senior unsecured notes.
S&P has valued the company on a going-concern basis using a 5.5x
multiple of its projected emergence EBITDA of $248.5 million.
S&P said, "Our simulated default scenario assumes a default
occurring in 2024 due to a deep global recession that sharply
reduces the demand from Tekni-Plex's customers and leads to a
significant drop in the company's sales. Pricing competition and
substitution risk would also reduce Tekni-Plex's customer base. We
assume that in this scenario the company uses its liquidity to fund
its cash shortfalls to the point that it is unable to meet its
fixed obligations."
Simulated default assumptions
-- Simulated year of default: 2024
-- Implied enterprise value multiple: 5.5x
-- EBITDA at default: $248.5 million
Simplified waterfall
-- Net enterprise value (after 5% administrative costs): $1.298
billion
-- Collateral value available to secured debt: $1.075 billion
-- First-lien secured debt: $1.841 billion
--Recovery expectations: 50%-70% (rounded estimate: 60%)
-- Collateral value available to senior unsecured debt: $0
-- Senior unsecured debt: $630 million
--Recovery expectations: 10%-30% (rounded estimate: 10%)
Note: All debt amounts include six months of prepetition interest.
TRX HOLDCO: Seeks Approval to Hire Baker Tilly U.S. as Accountant
-----------------------------------------------------------------
TRX Holdco, LLC and Fitness Anywhere, LLC seek approval from the
U.S. Bankruptcy Court for the Central District of California to
hire Baker Tilly U.S., LLP as their accountant.
The firm's services include:
(1) preparing and filing the Debtors' state and federal income
tax returns;
(2) providing the Debtors with consulting services regarding
income tax compliance; and
(3) providing other tax-related advice as requested by the
Debtors.
The firm will charge these hourly fees:
Partners and Principals $500 - $695
Directors $395 - $495
Managers and Senior Managers $225 - $375
Consultants $150 - $275
Paraprofessionals $75 - $175
As disclosed in court filings, Baker Tilly U.S. is a "disinterested
person" within the meaning of Section 101(14) of the Bankruptcy
Code.
The firm can be reached through:
Jere G. Shawyer, CPA
Baker Tilly U.S., LLP
8219 Leesburg Pike, Suite 800
Tysons, VA 22182
Phone: +1 (703) 923 8672
About TRX Holdco
TRX Holdco LLC -- https://www.trxtraining.com/ -- is the maker of
black-and-yellow fitness straps used for bodyweight exercises and
sold in infomercials.
TRX Holdco and affiliate, Fitness Anywhere LLC provide sporting and
athletic goods. The Debtors sought protection under Chapter 11 of
the U.S. Bankruptcy Code (Bankr. C.D. Calif. Lead Case No.
22-10948) on June 8, 2022. In the petition signed by Brent Leffel,
chairman of the Board of Managers of TRX Holdco, TRX Holdco
disclosed up to $50 million in both assets and liabilities.
The cases are assigned to Judge Scott C. Clarkson.
The Debtors tapped Levene, Neale, Bender, Yoo & Golubchik LLP as
bankruptcy counsel; Duane Morris, LLP and The Law Office of
Michael A. Zuercher, Inc. as special counsels; Kroll LLC as
financial advisor; Kroll Securities, LLC as investment banker; and
Baker Tilly U.S., LLP as accountant.
U.S. SILICA: S&P Affirms 'B-' ICR, Off Watch Dev.
-------------------------------------------------
S&P Global Ratings removed its ratings on U.S. Silica Co. from
CreditWatch, where they were placed with developing implications on
Oct. 14, 2021, and affirmed all ratings, including its 'B-' issuer
credit rating on the company.
The positive outlook indicates the possibility of an upgrade within
the next 12 months if U.S. Silica sustains its adjusted leverage
below 5x.
The retention of the ISP segment preserves the breadth of U.S
Silica's end markets and should support better margin stability.
U.S. Silica has retained its industry and specialty products (ISP)
segment following the conclusion of its strategic evaluation of the
business. As a result, S&P Global Ratings removed U.S. Silica from
CreditWatch, where it was placed with developing implications Oct.
14, 2021, and affirmed its 'B-' issuer credit rating on the
company.
S&P said, "We expect the ISP segment will continue to provide good
support for the current rating through revenue, product and
end-market diversity, and stable margins. The segment accounted for
44% of revenues and 51% of gross profit for fiscal 2021 and it will
remain a source of significant diversification from the volatile
oil and gas industry. The segment's gross margin has been more
stable in the 34%-38% range over the past three years, compared
with 24%-34% for the oil and gas segment. The ISP segment also
offers product and end-market diversity through more than 600
products and materials, servicing customers primarily in building
and construction products, fillers and extenders, filtration,
glassmaking, foundry, and the sports and recreation markets.
"We expect U.S. Silica's leverage will improve, fueled by stronger
earnings and debt reduction. We forecast the company's adjusted
EBITDA at $250 million-$300 million in fiscal 2022, which compares
favorably with $226 million generated in fiscal 2021. We anticipate
U.S. Silica will sell 17 million-19 million metric tons in 2022
following strong demand for frac sand in the oil and gas industry.
Tight supply stemming from labor and other operational bottlenecks
in the industry has led to customers executing purchase agreements
with U.S. Silica to ensure operational security. As a result, we
view the risk of oversupply as remote over the next 12-24 months,
though this could change quickly due to low entry barriers. We
assume price increases in the ISP segment will weather the negative
effects of rising production costs, further supporting our
expectation for improved earnings in 2022. Overall, we anticipate
higher transportation, labor, and energy costs will partially
offset the benefits of increased tonnage and prices in all
segments.
"In addition, U.S. Silica reduced adjusted debt by $100 million in
July 2022 through voluntary and opportunistic debt repayment, a
trend that could continue assuming our projection of significant
discretionary cash flows of about $250 million-$300 million in the
next 24 months. Consequently, we believe adjusted leverage will
improve to below 5x in the next 12-24 months. Although current oil
prices support this forecast, we bear in mind that deleveraging
plans can be quickly disrupted by oil prices sharply moving toward
their long-term averages.
"The positive outlook reflects the potential for an upgrade in the
next 12 months if U.S. Silica sustains adjusted leverage below 5x
through solid earnings and debt reduction initiatives in line with
its current capital allocation plans.
"We could raise our ratings on the company if it maintained
adjusted leverage below 5x, such that there is sufficient headroom
to absorb volatility in earnings. This could occur if the rebound
in its oil and gas proppants segment persists and it can continue
to pass on rising costs to customers in the ISP segment. This could
also occur if it uses its excess cash to repay long-term debt.
"We could revise our outlook to stable on U.S. Silica if market
conditions reverse sharply, leading to weaker demand and prices
lower than our base-case scenario or reduced prospects of
refinancing upcoming maturities. In such an instance, we would
expect adjusted leverage above 5x and negative discretionary cash
flows."
ESG credit indicators: E-3, S-2, G-2
S&P said, ""Environmental factors are a moderately negative
consideration in our credit rating analysis of U.S. Silica, given
the company's significant exposure to the oil and gas end market
(55% of revenue), an industry that is subject to stringent
environmental regulations and climate transition risks. We consider
the company to be exposed to similar environmental risk factors
that the oil and gas industry faces. The ccompany's sand mining
operations are also subject to tight environmental laws due to the
operations impact on natural habitats."
US HOP SOURCE: Floreses Face Bankruptcy After Scam, Litigation
--------------------------------------------------------------
Megan Ulu-Lani Boyanton of The Denver Post reports that the
father-son team behind a hops wholesale company has faced tough
years recently: first falling prey to a foreign scam, then
grappling with legal action against two corporate giants. Now,
Randall and Tase Flores, the pair behind US Hop Source in
Englewood, fear bankruptcy is their only way forward.
The trouble started in the fall of 2020 when US Hop Source received
a request for a price quote on 1,100 pounds of hops from a
so-called Marcos Estrada of Estrada and Sons for a new brewery
being built in Panama City, Panama. The Floreses' company buys and
sells hops around the world.
"It wasn't out of the ordinary," said father Randall Flores, 63,
pointing to deals they've done with a Swedish merchant and a craft
brewery in Palau.
First, it was business as usual: providing prices, chatting over
the phone, starting the invoice process and taking a credit card
payment for about $19,000, which initially posted, he said.
A follow-up email from Estrada prompted US Hop Source to hold those
hops, as he placed an additional order valued at $31,000. Another
credit card payment was issued, but this time, online payments
company Paysafe flagged it for further investigation.
Later, it was determined that both major payments were fraudulent.
"We fell prey to a very sophisticated, international business
scam," the elder Flores said.
The Floreses are hardly the first to be tricked in an elaborate
scheme. The Federal Bureau of Investigation listed business and
investment fraud as one of the most common types of scams and
crimes it runs into.
The Denver District Attorney's Office recently issued fraud alerts
about home improvement scams, Internal Revenue Service phone scams
and tax season phishing, among others.
In 2020, the number of Americans who fell for online fraud totaled
close to half a million, with victims aged 50 to 59 years old
typically losing the most, according to SEON, which helps online
businesses with fraud management. A case of online fraud in the
U.S. costs the injured party about $7,000 on average.
However, for the Floreses, the financial situation is worse. After
receiving the first payment of around $19,000, the team at US Hop
Source had already begun buying related supplies and shipping, not
realizing "the card number that was used was a JPMorgan Chase bank
card number that does not nor has never existed," Randall Flores
said.
Tase Flores, 32, said, after it dawned on them, they tried to
contact Estrada and Sons to no avail. They filed police reports and
met with the Department of Homeland Security.
Paysafe soon came calling for its money back, although "it was more
than two weeks before they realized that they had paid out $19,000
on a credit card number that never existed," Randall Flores said.
The Floreses allege that Paysafe terminated US Hop Source's account
in December 2020, and tried to withdraw money from the company's
bank account several times.
Paysafe declined to provide comment for the story.
In January, US Hop Source filed a complaint against both Paysafe
and Chase with the 18th Judicial District Court in Arapahoe County,
arguing a breach of contract by the former and negligence by the
latter. The Floreses sought a judgment that they don't owe debt,
and hoped to get money for attorney fees.
"By approving credit card transactions to a non-existing credit
card number, Paysafe acted recklessly," according to the Floreses'
complaint. "JP Morgan owes a duty to merchants to use reasonable
care when approving credit card transactions purportedly made on
cards issued by it."
After some legal back-and-forth, representatives of Paysafe argued,
"US Hop Source currently owes Paysafe $24,050.00 in funds charged
back which were unpaid," according to the counterclaim filed in
March.
Chase filed a motion to dismiss in April, describing the events as
"unfortunate, however as a matter of law, they do not and cannot
give rise to liability for Chase."
The court dismissed the case in May. Eric Coakley, who represents
the Floreses, explained this dismissal as likely because of the
case law that "a bank is not responsible for fraud committed by a
third party," although "those cases tend to come up when someone
steals someone's credit card."
He called this specific instance with the Floreses "a new one on
me."
When asked for comment, Michael Lindsay of Snell & Wilmer LLP, who
represented Paysafe alongside Ciera Gonzalez, responded, "Paysafe
does not comment on pending litigation."
Ronald Tomassi, Jr., and Gregory Carter of Leόn Cosgrove LLP, who
represented Chase, didn't respond to multiple requests for
comment.
"The Arapahoe County District Court didn't find any fault by Chase
and dismissed US Hop Source's complaint against the bank," Chase
spokesperson Maura Cordova said in an emailed statement.
In June 2022, Chase filed a motion for attorneys' fees, with
Tomassi writing that the bank incurred over $14,000 in fighting the
complaint by US Hop Source.
"They're just trying to put us — a small, two-man operation
that's struggling to begin with — out of business, just because
they made a mistake," said Randall Flores, who described the
company's current financial situation as "dire."
Coakley said, among a few possible legal actions, "the next step
might be bankruptcy for these guys, unfortunately."
He hopes for a potential legislative fix. "When a bank makes an
error like this, the risk shouldn't be on the merchant."
About US Hop Source
US Hop Source is an agricultural product wholesaler in Colorado
owned by father and son Randall and Tase Flores.
VOYAGER DIGITAL: Adresses Customer Anger in First Hearing
---------------------------------------------------------
Dietrich Knauth of Reuters reports that bankrupt crypto lender
Voyager Digital described a rocky relationship with its customers
at an initial bankruptcy hearing on Friday, saying it had received
threats after freezing customers' crypto accounts.
In the company's first bankruptcy hearing before U.S. Bankruptcy
Judge Michael Wiles in Manhattan, Voyager attorney Christopher
Marcus of Kirkland & Ellis said the company had proposed a
bankruptcy restructuring plan as early as it could in order to
assure customers that they had not "lost everything" after the
company froze their accounts.
Voyager filed for bankruptcy protection in Manhattan on Tuesday,
blaming a recent slump in crypto markets that caused it to freeze
customer withdrawals. The company said it had 3.5 million active
users and over $5.9 billion in cryptocurrency assets at the time of
its filing.
The recent crash led one fellow crypto lender, Three Arrows Capital
(3AC), to file for bankruptcy in the British Virgin Islands. Two
others, Celsius Network and Vauld, have blocked customers from
withdrawing crypto assets.
Voyager's relative silence before its bankruptcy filing caused some
customers' anger to escalate into personal threats against company
management and their families, Marcus said.
"We are focused on a path forward," Marcus said. "It is not correct
to think that there is no hope."
The bankruptcy plan, filed on Wednesday, describes Voyager's
efforts to find an outside buyer or to partially repay its
customers. Under the plan, if no buyer emerges, Voyager would give
its customers all existing Voyager tokens, 100% of the company's
equity shares, any proceeds from a $650 million dispute with 3AC,
and a to-be-determined partial repayment of the specific
cryptocurrency held in their accounts.
While Voyager attempted to reassure customers, it also told Wiles
that customers did not own the specific crypto assets in their
accounts. Voyager considers those assets to be the company's
property, saying that its customers hold unsecured claims for the
value of those assets.
Voyager drew a distinction between the crypto assets and the
portion of customer accounts held in cash, which it did not claim.
Customers' cash accounts were held in a $350 million commingled
account with Metropolitan Commercial Bank, and Voyager will not
interfere with the cash account unless it has concerns about
fraudulent customer withdrawals, Josh Sussberg of Kirkland said.
Wiles said the case presented several novel legal questions,
including Voyager's position that it owned the crypto assets. The
judge questioned whether Voyager had even filed the right type of
bankruptcy case, suggesting that it met the criteria for
liquidating as a broker-dealer with protected customer accounts.
Sussberg said a traditional Chapter 11 restructuring would be
better for customers. A broker-dealer liquidation would completely
halt Voyager's operations and result in a lot of expensive
litigation that would benefit no one, Sussberg said.
About Voyager Digital
Based in Toronto, Canada, Voyager Digital Holdings Inc. --
https://www.investvoyager.com/ -- runs a cryptocurrency platform.
Voyager claims to offer a secure way to trade over 100 different
crypto assets using its easy-to-use mobile application. Through
its subsidiary Coinify ApS, Voyager provides crypto payment
solutions for both consumers and merchants around the globe.
Voyager Digital Holdings Inc. and two affiliates sought protection
under Chapter 11 of the U.S. Bankruptcy Code (Bankr. S.D.N.Y. Lead
Case No. 22-10943) on July 5, 2022. In the petition filed by
Stephen Ehrlich, as chief executive officer, the Debtor estimated
assets and liabilities between $1 billion and $10 billion.
The Debtors tapped KIRKLAND & ELLIS LLP as general bankruptcy
counsel; BERKELEY RESEARCH GROUP, LLC, as financial advisor; MOELIS
& COMPANY as investment banker; and CONSELLO GROUP as strategic
financial advisor. STRETTO, INC., is the claims agent.
WELLPATH HOLDINGS: Moody's Cuts CFR to B3 & First Lien Loans to B2
------------------------------------------------------------------
Moody's Investors Service downgraded Wellpath Holdings, Inc.'s
Corporate Family Rating to B3 from B2 and Probability of Default
Rating to B3-PD from B2-PD. At the same time, Moody's downgraded
the senior secured revolving credit facility and first lien term
loan ratings to B2 from B1, and senior secured second lien term
loan rating to Caa2 from Caa1. The rating outlook remains stable.
The ratings downgrade reflects substantial pressure on Wellpath's
margins stemming from persistent labor issues including a highly
competitive market for nurses, as well as an increase in pharmacy
supply costs. Moody's expects that, despite double-digit top-line
growth from recent business wins, earnings and cash flows will
continue to be pressured due to elevated expenses, most notably
from labor shortages and wage inflation, as well as slower
receivables collections. As a result, Moody's expects the company's
financial leverage to remain high and the ability to generate
positive free cash flow will be constrained in the next 12 to 18
months.
Social risk considerations are relevant to the rating action.
Wellpath faces operational headwinds stemming from labor shortages,
specifically with the recruitment and retainment of nurses in a
highly competitive market, resulting in increased costs via wage
inflation and other means of acquiring talent.
The following is a summary of Moody's rating actions:
Downgrades:
Issuer: Wellpath Holdings, Inc.
Corporate Family Rating, Downgraded to B3 from B2
Probability of Default Rating, Downgraded to B3-PD from B2-PD
Senior Secured 1st Lien Term Loan, Downgraded to B2 (LGD3) from B1
(LGD3)
Senior Secured 1st Lient Revolving Credit Facility, Downgraded to
B2 (LGD3) from B1 (LGD3)
Senior Secured 2nd Lien Term Loan, Downgraded to Caa2 (LGD5) from
Caa1 (LGD5)
Outlook Actions:
Issuer: Wellpath Holdings, Inc.
Outlook, Remains Stable
RATINGS RATIONALE
Wellpath Holdings, Inc.'s ("Wellpath") B3 Corporate Family Rating
reflects Moody's expectation that the company will operate with
high financial leverage as a result of EBITDA margin compression
from increased labor and supply costs. Although Moody's estimates
adjusted debt to EBITDA that is in the mid-7 times for the last
twelve months ended March 31, 2022, Moody's expects leverage to
decline, but still remain high, in the low 6 times range over the
next 12 to 18 months. The rating also incorporates social,
operational and competitive business risks associated with the
correctional healthcare segment.
The rating benefits from Wellpath's scale and good diversity across
customers, geographies, and business segments, as well as its
strong market position in the lower risk public jails segment.
Moody's expects the company to experience good top-line growth
stemming from two recently-implemented large prison contracts with
state governments. The rating also reflects Moody's expectation
that governments looking to further reduce healthcare-related
expenditures will continue to outsource onsite healthcare services
offered in prison and jail settings to providers such as Wellpath.
Moody's expects Wellpath to maintain adequate liquidity over the
next 12 months. As of March 31, 2022, the company has approximately
$40 million of cash on hand. However, approximately $17 million of
deferred employer payroll taxes will need to be returned to the
government in January 2023. Moody's expects the company to generate
slightly negative free cash flow in the next 12 to 15 months, which
includes mandatory term loan amortization of approximately $5
million. Wellpath has access to about $50 million of its $65
million revolving credit facility, which expires in October 2023.
Moody's anticipates the company to have sufficient cushion under
its springing first lien net leverage covenant on the revolver if
it were to be tested.
ESG considerations are material to Wellpath's credit profile.
Wellpath will remain exposed to the social risks of providing
health care and related services in correctional facilities to a
highly vulnerable patient base. There is ongoing legislative,
political, media and regulatory focus on ensuring the delivery of
medically appropriate care to this patient base. Effectively
managing the cost, quality and continuity of providing healthcare
in correctional facilities is an ongoing challenge and presents
unique complexities. Any weakness in providing healthcare services
– real or perceived – can negatively affect Wellpath's
reputation and ability to attract and sustain clients at profitable
rates. With respect to governance, Moody's expects financial
strategy to be aggressive under private equity ownership, and that
the company could incur debt to fund acquisitions if a suitable
opportunity arose.
The stable outlook reflects Moody's expectation that Wellpath will
continue to grow on the top-line with new business wins, despite
experiencing persistent nursing labor issues that will continue to
pressure the company's already thin margins and constrain the
ability to generate positive free cash flow. Though Moody's
calculates Wellpath's current financial leverage at above 7 times
with significant add-backs to EBITDA, Moody's expects leverage to
decline vis-à-vis some earnings growth from recent large
contracts.
Wellpath's senior secured first lien credit facility, comprised of
a $65 million revolving credit facility expiring in October 2023
and $500 million term loan maturing in October 2025, is rated B2,
one notch above the B3 CFR. This reflects the benefit of a layer of
loss absorption provided by the $110 million senior secured second
lien term loan maturing in October 2026, which is rated Caa2.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Ratings could be upgraded if Wellpath demonstrates a track record
of improved profitability while also maintaining good medical
service. Quantitatively, debt/EBITDA sustained below 5.5x and free
cash flow to debt of at least 5%, on a sustained basis, could
support an upgrade. Improvement in liquidity supported by sustained
positive free cash flow could also support an upgrade.
Moody's could downgrade the ratings if the company faces
reputational problems or operational challenges serving the
prison/jail population including issues that negatively affect
client relationships or the cost of service. If the company's
liquidity were to further weaken or free cash flow was to turn
negative for an extended period, the ratings could be downgraded.
Wellpath Holdings, Inc. ("Wellpath"), headquartered in Nashville,
Tennessee, provides medical, dental, and behavioral health services
to patients in local detention facilities, federal and state
prisons and behavioral healthcare facilities. Wellpath is privately
owned by H.I.G. Capital. The company generated revenues of
approximately $1.9 billion for the twelve months ended March 31,
2022.
The principal methodology used in these ratings was Business and
Consumer Services published in November 2021.
[*] June 2022 Commercial Chapter 11 Filings Rise 29% Y/Y
--------------------------------------------------------
ABL Advisor reports that the 447 commercial chapter 11 filings in
June 2022 represented a 29 percent increase from the 347 filings in
June 2021, according to data provided by Epiq Bankruptcy, the
leading provider of U.S. bankruptcy filing data. Overall
commercial filings decreased 7 percent in June 2022, as the 1,864
filings were down from the 1,999 commercial filings registered in
June 2021. Small business filings, captured as subchapter V
elections within chapter 11, experienced an 8 percent decrease from
106 in June 2021 to 98 in June 2022. Total bankruptcy filings were
32,175 in June 2022, a 6 percent decline from the June 2021 total
of 34,291. Noncommercial bankruptcy filings totaled 30,311 in June
2022, also registering a 6 percent decrease from the June 2021
noncommercial total of 32,292.
Total bankruptcy filings were 185,303 during the first six months
of 2022, a 15 percent decrease from the 217,047 total filings
during the same period a year ago. Total consumer filings also
registered a 15 percent decrease, as the 175,112 filings during the
first half of 2022 were down from the 204,679 filings during the
first six months of 2021. The 10,191 total commercial filings for
the first half of 2022 represented a 17 percent decline from the
commercial filing total of 12,278 for the first half of 2021. The
1,765 total commercial chapter 11 filings during the first six
months of the year (Jan. 1-June 30) were an 18 percent decrease
from the 2,155 total filings during the same period in 2021,
according to data provided by Epiq Bankruptcy Analytics.
"The year-over-year filing counts continue to show declines, but
month-over-month we see growth in chapter 13 filings that when
coupled with the growth in corporate chapter 11s, tell a different
story," says Chris Kruse, senior vice president at Epiq.
"Turbulence in the market including inflation concerns, labor
shortages in key industries, and a downward shift in housing prices
all point toward increases in the months ahead."
"Tightening credit markets amid increasing interest rates, elevated
prices due to inflation and global supply concerns are presenting
financially distressed families and businesses with more economic
dilemmas," said ABI Executive Director Amy Quackenboss. "Bankruptcy
provides a shield to the mounting economic challenges being
experienced by financially struggling consumers and companies."
Total filings in the first half of 2022 point to a pace for the
full year that could be the lowest since the 348,521 bankruptcies
recorded by the Administrative Office of the U.S. Courts in
calendar year 1984. Will total, business and consumer filings
remain on this pace for the second half?
In partnership with Epiq, an abiLIVE webinar on July 12 will
feature experts looking at filing trends through June 30 and
providing their thoughts on what could happen with bankruptcies
moving forward. Speakers on the program include ABI President Hon.
Kevin Carey (ret.) of Hogan Lovells (Philadelphia), Deirdre
O’Connor of Epiq (New York) and ABI's Ed Flynn (Alexandria, Va.).
Christopher Kruse of Epiq (San Francisco) will serve as moderator
for the program. Click here for your complimentary registration.
President Joe Biden on June 21 signed into law the "Bankruptcy
Threshold Adjustment and Technical Corrections Act" to provide
greater access to struggling small businesses and families looking
to achieve a financial fresh start. The bill was introduced by Sen.
Charles Grassley (R-Iowa) to raise the debt limit back to $7.5
million for small businesses electing to file for bankruptcy under
subchapter V of chapter 11. Consistent with the recommendations of
ABI’s Commission on Consumer Bankruptcy, the measure also raises
the debt limit for individual chapter 13 filings to $2.75 million
and removes the distinction between secured and unsecured debt for
that calculation. The bill passed the Senate on April 7 and the
House of Representatives on June 7. All provisions of the law will
sunset two years from enactment, on June 21, 2024.
[^] BOOK REVIEW: The Heroic Enterprise
--------------------------------------
The Heroic Enterprise: Business and the Common Good
Author: John Hood
Publisher: Beard Books (reprint of book published by The Free
Press/Division of Simon and Schuster in 1996).
Paperback: 266 pages
List Price: $34.95
Order your copy at https://bit.ly/3awLUV3
Hood writes as a counterbalance to ideas that business should be
expected to contribute to the common good along the lines of
charities, say, or public health. He writes too against the highly
partisan, pernicious perspective that business activity is
antisocial and disruptive which at times gains some degree of
credibility.
Critiques of business have been around as long as commerce and
business have been around. These come usually from religious or
political zealots seeking dictatorial hold over all significant
kinds of human activity and enterprise. In this work, Hood aims to
counterbalance latter-day versions of such critiques arising in
American society. The counterculture, antiestablishment 1960s was
a time when such critiques were particularly strong. They have
moderated since, yet remain a persistent chorus which influences
politics and imagery and public affairs of business.
Hood does not aim to stifle or eliminate debate about the effects
of business on society or how business should engage in business.
What he aims for is dismissing once and for all myopic and almost
utopian conceptions about business and related erroneous purposes
and values of it. Such conceptions are worrisome to
businesspersons not because they believe they have any foundation,
but because they waste resources and energy in having to
continually correct them so business can function properly. And to
the extent such myopic conceptions are believed or entertained by
the public, they hamper the public and politicians in working out
policies by which the greatest benefits of business can be reaped
by society.
The author clarifies the place and role of business by contrasting
business with other parts of society. A standard, self-evident
tenet of sociologists going back to the time of Plato is that
society is made up of different parts fulfilling different roles
for the varied needs of society and so that a society will function
smoothly and survive. Business is distinguished from government
and philanthropy. "Businesses exist to make and sell things,
whereas by contrast "governments exist to take and protect things
[and] charities exist to give things away." The social
responsibility for each category of institution is inherent in its
purposes and activities. For example, businesses alone cannot
solve environmental problems. Whatever problems which can be
attached to business are related to government policies and
business's operations to satisfy consumer interests. Hence,
business alone cannot solve environmental problems, and should not
be expected to. Critics requiring that business solve
environmental problems without similarly requiring changes in
government policies and consumer interests are shortsightedly and
unreasonably tarnishing business while not making any relevant or
productive arguments for dealing with environmental problems.
In elucidating business's proper place in and contributions to
society, Hood is not unmindful that some businesses fail to fulfill
their role in good faith and beneficially. But instead of
criticizing business fundamentally, he proffers questions critics
can ask before targeting particular businesses. Two of these are
"Are corporations obtaining their profits through force or fraud?"
and "Are corporations putting investments at their disposal to the
most economically productive use?" Hood's perspective in support
of business against unfair and irrelevant criticisms is based on
the acknowledgment that business is operating productively, for the
common good, and is open to cooperative activities with other parts
of society in trying to resolve common problems.
"The Heroic Enterprise" is not an argument for business -- for as a
fundamental aspect of any society, business does not need an
argument to justify it. The book mostly takes the approach of
reviewing why business is necessary and therefore must be
naturally, easily accepted -- namely, because of the manifold
benefits business provides for society and because it along with
good government and respectable morals has been a primary engine
for the betterment of human life.
John Hood has much experience in the media and communication as a
syndicated columnist, TV commentator, and radio host. Author of
seven nonfiction books on subjects as business, advertising, public
policy, and political history, and many articles for national
publications such as the Wall Street Journal, Hood is President of
the John William Pope Foundation, a Raleigh, N.C.-based grantmaker
that supports public policy organizations, educational
institutions, arts and cultural programs, and humanitarian relief
in North Carolina and beyond. Hood also serves on the board of the
John Locke Foundation, the state policy think tank he helped found
in 1989 and led as its president for more than two decades. He
teaches at Duke University's Sanford School of Public Policy.
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than $3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
On Thursdays, the TCR delivers a list of recently filed
Chapter 11 cases involving less than $1,000,000 in assets and
liabilities delivered to nation's bankruptcy courts. The list
includes links to freely downloadable images of these small-dollar
petitions in Acrobat PDF format.
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
Monthly Operating Reports are summarized in every Saturday edition
of the TCR.
The Sunday TCR delivers securitization rating news from the week
then-ending.
TCR subscribers have free access to our on-line news archive.
Point your Web browser to http://TCRresources.bankrupt.com/and use
the e-mail address to which your TCR is delivered to login.
*********
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Copyright 2022. All rights reserved. ISSN: 1520-9474.
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