/raid1/www/Hosts/bankrupt/TCR_Public/221125.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Friday, November 25, 2022, Vol. 26, No. 328
Headlines
1ST HOSPITALITY: Case Summary & 20 Largest Unsecured Creditors
A1 PIPE CLEANING: Court OKs Interim Cash Collateral Access
AH DEVELOPMENT: Amends Toorak & U.S. Bank Secured Claims Pay
ALL FLORIDA SAFETY: Wins Interim Cash Collateral Access
AXALTA COATING: Moody's Affirms Ba3 CFR & Alters Outlook to Stable
BARNES ENTERPRISES: Seeks Cash Collateral Access
BERWICK HOSPITAL: Patient Care Ombudsman Files First Report
BITTER CREEK: Has Deal on Cash Collateral Access
BRAZOS ELECTRIC: Taps Moelis & Company as Investment Banker
BSPV-PLANO LLC: Exclusivity Period Extended to Nov. 30
CANO HEALTH: S&P Downgrades ICR to 'B-', Outlook Negative
CARRIAGE SERVICES: Moody's Cuts CFR to B2 & Sr. Unsec. Notes to B3
CARVANA CO: Moody's Affirms Caa1 CFR & Alters Outlook to Negative
CATHOLIC HEALTH SYSTEM: S&P Lowers Revenue Bonds Rating to 'B-'
CBAK ENERGY: Incurs $849K Net Loss in Third Quarter
CLUB 121 INC: Seeks Cash Collateral Access
COINBASE GLOBAL: Moody's Puts 'Ba3' CFR on Review for Downgrade
COSMOS HOLDINGS: Incurs $1.97 Million Net Loss in Third Quarter
CRYPTO CO: Incurs $416K Net Loss in Third Quarter
CUSTOM ALLOY: Court OKs Cash Collateral Access Thru Nov 26
DIMENSIONS IN SENIOR: Case Summary & 20 Top Unsecured Creditors
DIMENSIONS IN SENIOR: Files Emergency Bid to Use Cash Collateral
DIVERSIFIED HEALTHCARE: S&P Cuts ICR to 'B' on Liquidity Pressure
DOCUPLEX INC: Wins Cash Collateral Access Thru Jan 2023
ELLDAN CORP: Wins Cash Collateral Access Thru Dec 14
FIRST TO THE FINISH: Wins Cash Collateral Access Thru Dec 14
GLATFELTER CORP: Moody's Cuts CFR to Caa1 & First Lien Debt to B1
GOBP HOLDINGS: Moody's Affirms 'B1' CFR, Outlook Remains Stable
GORDIAN MEDICAL: Moody's Lowers CFR & Senior Secured Debt to Caa1
GTT COMMUNICATIONS: Gets OK to Hire PwC as Accounting Advisor
H-CYTE INC: Incurs $2.3 Million Net Loss in Third Quarter
HANESBRANDS INC: Moody's Alters Outlook on 'Ba2' CFR to Negative
HAVERLAND CARTER: Fitch Alters Outlook on 'BB+' LongTerm IDR to Neg
INDIANA WELLNESS: Amends Unsecureds & Anthem Secured Claims Pay
INTELLIGENT SURVEILLANCE: Executes Camera Sales & License Agreement
ITURRINO AND ASSOCIATES: Taps Advisors Commercial as Broker
JUST BELIEVE: Court OKs Interim Cash Collateral Access
LEADING LIFE: Dec. 1 Deadline Set for Panel Questionnaires
LEAFBUYER TECHNOLOGIES: Incurs $210K Net Loss in First Quarter
LIBBEY GLASS: Moody's Cuts CFR to B3 & Rates New 1st Lien Loan B3
LOYALTY VENTURES: Moody's Lowers CFR to Caa2, Outlook Remains Neg.
MANHATTAN SCIENTIFICS: Posts $71K Net Loss in Third Quarter
MARINE WHOLESALE: Seeks Interim Cash Collateral Access
MARY A II: U.S. Trustee Appoints Creditors' Committee
MOZART HOLDINGS: Fitch Affirms LongTerm IDR at 'B+', Outlook Neg.
NANO MAGIC: Incurs $543K Net Loss in Third Quarter
NEW JERSEY CITY UNIVERSITY: Fitch Affirms 'BB+' IDR, Outlook Neg.
NGL ENERGY: S&P Downgrades ICR to 'CCC+', Outlook Negative
NGV GLOBAL: Court OKs Cash Collateral Access Thru Dec 16
NGV GLOBAL: Dec. 2 Deadline Set for Panel Questionnaires
PIPELINE HEALTH: Taps Duane Morris as Special Counsel
PWM PROPERTY: Nov. 30 Hearing on Exclusivity Extension Bid
PWP INVESTMENTS: Wins Cash Collateral Access on Final Basis
RESHAPE LIFESCIENCES: Posts $11.8 Million Net Loss in Third Quarter
SABRE GLBL: Moody's Rates New 5-Year Senior Secured Notes 'Ba3'
SILVERGATE CAPITAL: Moody's Raises LongTerm Issuer Rating to Ba2
SKILLSOFT FINANCE II: Moody's Alters Outlook on 'B2' CFR to Stable
SPG HOSPICE: No Patient Care Concern, 4th PCO Report Says
STATERA BIOPHARMA: Incurs $3.4 Million Net Loss in Third Quarter
SUNNOVA ENERGY: S&P Affirms 'B-' ICR, Outlook Stable
THEOS FEDRO: Deal on Cash Collateral Access OK'd
TROIKA MEDIA: Posts $1.3 Million Net Income in First Quarter
WC BRAKER PORTFOLIO: Trustee Taps Graves Dougherty as Legal Counsel
YIELD10 BIOSCIENCE: Incurs $3.5 Million Net Loss in Third Quarter
[^] BOOK REVIEW: PANIC ON WALL STREET
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1ST HOSPITALITY: Case Summary & 20 Largest Unsecured Creditors
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Debtor: 1st Hospitality, LLC
117 Cody Ave Alliance
Alliance, NE 69301
Case No.: 22-41002
Chapter 11 Petition Date: November 22, 2022
Court: United States Bankruptcy Court
District of Nebraska
Judge: Hon. Thomas L. Saladino
Debtor's Counsel: Patrick R. Turner, Esq.
TURNER LEGAL GROUP, LLC
139 S. 144th Street
Omaha, NE 68010
Tel: 402-690-3675
Email: pturner@turnerlegalomaha.com
Estimated Assets: $1 million to $10 million
Estimated Liabilities: $1 million to $10 million
The petition was signed by Anupam Dave as authorized member.
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/FWAZOCQ/1st_Hospitality_LLC__nebke-22-41002__0001.0.pdf?mcid=tGE4TAMA
A1 PIPE CLEANING: Court OKs Interim Cash Collateral Access
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The U.S. Bankruptcy Court for the Southern District of Florida,
West Palm Beach Division, authorized A1 Pipe Cleaning Company, Inc.
to use cash collateral on an interim basis in accordance with the
budget, with a 10% variance.
As previously reported by the Troubled Company Reporter, the Debtor
relies on several key pieces of equipment to operate its business,
including a 2009 Sterling Vactor truck used to clean stormwater
drains. The truck encountered mechanical issues which required
extensive repair, which sidelined the Debtor's income while it
encountered significant expenses in repairing the truck. The Debtor
was at risk of losing the truck and elected to file the case in an
effort to reorganize its business.
On October 21, 2020, the Debtor obtained a loan from Commercial
Credit Group, Inc. in the amount of $178,128. The loan was
evidenced by a Note and Secured by a Security Agreement. The
parties subsequently amended the Note on February 14, 2020, and
February 24, 2022.
The Security Agreement attaches to all assets of the Debtor,
including the equipment, all inventory, accounts receivable, and
proceeds related thereto. CCG perfected its security interest in
the Collateral by filing UCC Financing Statements with the Florida
Secured Transaction Registry on October 23, 2020 and by having its
lien noted on the certificates of title to the titled Collateral.
In addition to the protections under 11 U.S.C. section 552(b), as
adequate protection for the Debtor's use of cash collateral, CCG
will have a perfected post-petition lien and security interest in
cash collateral and other property of the Debtor having the same
validity and priority as its pre-petition liens and security
interests in cash collateral and such property, without the need to
file or execute any documents as may otherwise be required under
applicable non-bankruptcy law, provided, however, that such liens
will not extend to any avoidance action of the Debtor's estate
under sections 544, 545, 547, 548, 550 and 553, and all proceeds
thereof, except that CCG's liens will extend to any transfers of
cash collateral avoided and recovered under sections 549 and 550.
CCG will have the right to assert a super priority administrative
expense claim pursuant to 11 U.S.C. section 507(b) to the extent of
any diminution in value of its collateral arising from the
imposition of the automatic stay or the Debtor's post-petition use
of its collateral including, without limitation, cash collateral.
As conditions to its use of cash collateral, and as further
adequate protection to CCG, the Debtor will provide CCG with any
proposed modifications to the Budget or new budgets at least five
business days prior to any hearing on the Debtor's Motion.
These events constitute an "Event of Default:"
(a) Further authorization to use cash collateral is not
extended at a hearing or is terminated by the Court;
(b) The Debtor fails to comply in any material respect with
any of the terms or conditions of the Order;
(c) The Debtor asserts in any pleading, motion, or objection
filed in any court that any material provision of the Order is not
valid or binding for any reason;
(d) Any material provision of the Order will, for any reason,
cease to be valid and binding without the prior written consent of
CCG;
(e) If the Debtor files a motion or other pleading seeking
dismissal or conversion of the case under section 1112 or any other
section of the Bankruptcy Code;
(f) A trustee under chapter 11 of the Bankruptcy Code, or a
responsible officer or an examiner with enlarged powers relating to
the operation of the Debtor's business, is appointed under section
1106 of the Bankruptcy Code; or
(g) If the bankruptcy case is otherwise dismissed or converted
to a case under chapter 7 of the Bankruptcy Code.
A copy of the order and the Debtor's budget is available at
https://bit.ly/3AGIAjY from PacerMonitor.com.
The budget provides for total expenses, on a monthly basis, as
follows:
$21,858 for November 2022;
$26,690 for December 2022;
$26,690 for January 2023;
$26,690 for February 2023; and
$26,690 for March 2023.
About A1 Pipe Cleaning Company, Inc.
A1 Pipe Cleaning Company, Inc. manages stormwater infrastructure by
inspecting and draining pipeline and storm drains.
The Debtor sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. S.D. Fla. Case No. 22-16706-EPK) on August
30, 2022. In the petition signed by James D Murray, president, the
Debtor disclosed up to $500,000 in both assets and liabilities.
Judge Erik P. Kimball oversees the case.
Rachamin "Rocky" Cohen, Esq., at Cohen Legal Services, PA,
represents the Debtor as legal counsel.
AH DEVELOPMENT: Amends Toorak & U.S. Bank Secured Claims Pay
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AH Development Group LLC submitted a First Amended Small Business
Subchapter V Plan dated November 15, 2022.
Debtor's goal in this reorganization is to restructure its existing
defaulted mortgage notes in order to create an affordable payment
scheme that will allow it to finalize renovations in order to
maximize rental income.
Debtor also plans on streamlining its operations by reducing its
liabilities associated with underperforming properties. Most
notably, 289 First Street, Albany, NY 12210, now a vacant lot,
previously held a condemned building razed by the City of Albany.
While the property was part and parcel of the Champion transaction,
due to the COVID-19 pandemic and reduction in monthly revenues,
Debtor was unable to rehab the building prior to condemnation.
Surrendering the vacant lot back to the City of Albany will reduce
Debtor's secured debt load by over $75,000.00.
The final Plan payment is expected to be paid 60-months from date
of confirmation.
Class 1 consists of the Secured Claim of Toorak Capital Partners.
The $65,182.28 amount of claim shall be paid at 5.00% interest over
36-months on a 120-month amortization. Monthly payment
$691.36/month. Balloon payment due month 36 at $48,915.01.
Class 2 consists of the Secured Claim of the U.S. Bank N.A., as
Trustee. The $298,287.61 amount of claim shall be paid at 5.00%
interest over 36-months paid pursuant to the amortization schedule.
Balloon payment due month 60 at $261,150.30.
The $425,415.68 amount of claim of the U.S. Bank shall be paid at
5.00% interest over 36-months paid pursuant to the amortization
schedule. Balloon payment due month 36 at $409,507.34.
Like in the prior iteration of the Plan, General Unsecured Claims
shall be paid in full under the Debtor's plan of reorganization. In
contemplation of paid treatment in full, General Unsecured
Creditors agree to enter into ongoing postpetition business
services with the Debtor. The Debtor shall pay Class 6 Claims
$501.85 per month for 60 months.
Class 9 consists of Equity Security Holders Ben Gaspard (80%
owner), Shelby Lemoine (10% owner), and Grace Campbell (10% owner).
Equity Interest holders shall receive 100% of the shareholder
interests in the reorganized Debtor.
The Plan will be implemented by the Debtor remitting payment to
creditors from the Debtor's cash flow derived from income from
solar related contracting services.
A full-text copy of the First Amended Plan dated November 15, 2022,
is available at https://bit.ly/3VdRaio from PacerMonitor.com at no
charge.
Attorneys for Debtor:
Michael Boyle, Esq.
Boyle Legal, LLC
64 2nd Street
Troy, NY 12180-3927
Tel: 518-687-1648
Fax: 518-516-5075
Email: mike@boylebankruptcy.com
About AH Development Group LLC
AH Development Group, LLC filed a petition for Chapter 11
protection (Bankr. N.D. N.Y. Case No. 21-11106) on Dec. 5, 2021,
listing $767,107 in assets and $1,178,466 in liabilities. Ben
Gaspard, managing member, signed the petition.
The Debtor tapped Michael Boyle, Esq., at Boyle Legal, LLC, as
legal counsel.
ALL FLORIDA SAFETY: Wins Interim Cash Collateral Access
-------------------------------------------------------
The U.S. Bankruptcy Court for the Middle District of Florida,
Jacksonville Division, authorized All Florida Safety Institute, LLC
to use cash collateral on an interim basis in accordance with the
budget.
The Debtor requires the use of cash collateral to continue
operating the business and pay salaries.
As of the Petition Date, the Debtor was indebted to the U.S. Small
Business Administration in the approximate amount of $2,066,071 and
Westlake Funding Company, LLC in the approximate amount of
$500,000. The Debtor's obligation is evidenced by a Promissory
Note, Security Agreement, Financing Statement, and Chattel Mortgage
executed on or about May 27, 2020 to USA/SBA and July 21, 2021 to
Westlake.
The Debtor is permitted to pay only expenses necessary for the
operation of the business and not any pre-petition expenses,
officer salaries, professional fees, or insiders without further
order of the Court.
As additional adequate protection to each Lender's interest and the
estate's interest in cash collateral, the Lender is granted a
replacement lien to the same nature, priority, and extent that the
Lender may have had immediately prior to the date that the case was
commenced nunc pro tunc to the Petition Date. Further, the Lender
is granted a replacement lien and security interest on property of
the bankruptcy estate to the same extent and priority as that which
existed pre-petition on all of the cash accounts, accounts
receivable and other assets and property acquired by the Debtor's
estate or by the Debtor on or after the Petition. The replacement
lien will be deemed effective, valid and perfected as of the
Petition Date, without the necessity of filing with any entity of
any documents or instruments otherwise required to be filed under
applicable non-bankruptcy law.
The Debtor is directed to make adequate protection payments:
a. $6,164 per month to the SBA commencing November 1, 2022 and
on the first of the month thereafter or further Court order;
b. $0.00 per month to Westlake. Stay to be lifted upon filing
of Consent Motion for Relief by the Creditor and further Order of
the Court; and
c. All other UCC-1 receivable Lenders including NewCo Capital
Group, Samson, Cloudfund/Delta and IOU will receive no adequate
protection at this time. The order is without prejudice to a later
finding that the Lenders may be secured by receivables, personal
property, inventory and/or equipment.
As additional adequate protection of the Lender's interest in the
cash collateral, the Debtor will (a) maintain all necessary
insurance coverage on the Lender's collateral and under no
circumstances will the Debtor allow its insurance coverage to
lapse, (b) continue to pay such monthly insurance payment in a
timely manner, and (c) within two days of the request of the
Lender, the Debtor will provide to the Lender's counsel a written
statement supported by evidence of Debtor's compliance with the
foregoing.
The Debtor's authority to use the cash collateral will terminate
immediately and upon the earlier of (a) order of the Court; (b) the
conversion of the case to a Chapter 7 case or the appointment of a
Chapter 11 trustee without the consent of the Lender; (c) the entry
of an Order that alters the validity or priority of the replacement
liens granted to the Bank; (d) the Debtor ceasing to operate all or
substantially all of its business; (e) the entry of an order
granting relief from the automatic stay that allows any entity to
proceed against any material assets of the Debtor that constitute
cash collateral; (f) the entry of an Order authorizing a security
interest under section 364(c) or 364(d) of the Bankruptcy Code in
the collateral to secure any credit obtained or debt incurred that
would be senior to or equal to the replacement lien; or (g) the
dismissal of the Chapter 11 case.
A continued hearing on the matter is set for December 13, 2022 at
2:30 p.m.
A copy of the order is available at https://bit.ly/3tSp0hb from
PacerMonitor.com.
About All Florida Safety Institute, LLC
All Florida Safety Institute, LLC offers driving lessons, driver's
license testing and traffic school. The Debtor sought protection
under Chapter 11 of the U.S. Bankruptcy Code (Bankr. M.D. Fla. Case
No. 22-01926) on September 22, 2022. In the petition signed by Mark
Allen, manager, the Debtor disclosed $2,200,185 in assets and
$5,618,570 in liabilities.
Judge Jacob A. Brown oversees the case.
Bryan K. Mickler, Esq., at the Law Offices of Mickler & Mickler,
LLP, is the Debtor's counsel.
AXALTA COATING: Moody's Affirms Ba3 CFR & Alters Outlook to Stable
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Moody's Investors Service has affirmed Axalta Coating Systems
Ltd.'s ("Axalta") Ba3 Corporate Family; the Ba1 ratings on the
senior secured first lien revolver and term loans of Axalta's
wholly owned subsidiaries -- Axalta Coating Systems Dutch Holding B
B.V., co-borrower Axalta Coating Systems U.S. Holdings Inc.; and
the B1 ratings on the USD and Euro senior unsecured notes issued at
Axalta Coating Systems, LLC and Axalta Coating Systems Dutch
Holding B B.V. The Speculative Grade Liquidity Rating (SGL)
remains SGL-1. The outlook has been changed to stable from
positive.
"Axalta's credit metrics have not improved as expected in 2022 as a
strong US Dollar and raw material headwinds in the first half have
been replaced by concerns over the potential for slowing demand
going into the fourth quarter and 2023," stated John Rogers,
Moody's Senior Vice President and lead analyst for Axalta.
Affirmations:
Issuer: Axalta Coating Systems Ltd.
Corporate Family Rating, Affirmed Ba3
Probability of Default Rating, Affirmed Ba3-PD
Issuer: Axalta Coating Systems Dutch Holding B B.V.
Senior Secured Bank Credit Facility, Affirmed Ba1 (LGD2)
Senior Unsecured Regular Bond/Debenture, Affirmed B1 (LGD5)
Issuer: Axalta Coating Systems, LLC
Senior Unsecured Regular Bond/Debenture, Affirmed B1 (LGD5)
Outlook Actions:
Issuer: Axalta Coating Systems Ltd.
Outlook, Changed To Stable From Positive
Issuer: Axalta Coating Systems Dutch Holding B B.V.
Outlook, Changed To Stable From Positive
Issuer: Axalta Coating Systems, LLC
Outlook, Changed To Stable From Positive
RATINGS RATIONALE
The outlook revision reflects the weakening of credit metrics in
2022, along with the expected headwinds from an economic downturn
in Europe, along with the strong US Dollar, limiting the
improvement in credit metrics in 2023, despite the expected debt
reduction. Roughly 60% of Axalta sales are outside of the US and
Canada and over half of those are in Europe. Moody's expects the
benefit from lower raw material prices will help offset some of
these headwinds and limit any further downside to metrics in 2023.
In general, Moody's views Axalta's business as much more resilient
to economic downturns that many other chemical companies. The
stable outlook also assumes that Axalta will take reasonable steps
to return metrics to levels that fully support the rating over the
next 12-18 months.
Credit metrics are currently weak for the rating with LTM September
30, 2022 Moody's adjusted Debt/EBITDA of 5.6x and Retained Cash
Flow ("RCF")/Debt of 14%. Free cash flow is also below normal due
to a roughly $200 million increase in working capital. In 2023,
Moody's expects free cash flow to be well above $400 million
providing the company with the opportunity to improve credit
metrics by paying down balance sheet debt as discussed on the third
quarter earnings call. In addition, Axalta recently names a new
CEO, Chris Villavarayan, who may adjust priorities for cash over
the next several years. Moody's believes that growth through
acquisition will continue to be a significant priority for
management to grow and diversify its earnings as Axalta's stock
price has been ranged bound over the past several years.
Axalta's Ba3 CFR is supported by stability in earnings and cash
flow over most of the cycle, strong adjusted EBITDA margins (above
20%) and meaningful free cash flow generation in most years.
Additionally, free cash flow can be preserved in a downturn by
adjusting spending (e.g., lower research and development expenses)
and lower capital investments. The company has also been successful
over time at handling fluctuating commodity prices (e.g., oil-based
resins, titanium dioxide). While raw materials cost increases over
the past two years have been unusually persistent, some have
already started to decline and most are expected to fall further in
the fourth quarter of 2022 and 2023. Moody's principal concern with
the company's business model relates to organic growth potential
and resultant use of cash for acquisitions and share repurchases.
The Ba3 CFR is principally constrained by meaningful financial
leverage for the rating category and uncertainty related to the
potential downside in demand in Europe in 2023 and the eventual
pace of recovery post the downturn in 2023. Moody's noted that
Axalta's earnings and cash flow should hold up better than most
other specialty chemical companies given the stability of the
autobody repair markets and the correlation with miles driven. The
rating is supported by a very good liquidity position and excellent
market position as a coatings producer that generates cash through
most economic cycles. The rating also takes into consideration past
financial policy statements related to lower leverage targets and
pursuit of investment-grade ratings over time -- an important
indicator of management's intent.
The SGL-1 Speculative Grade Liquidity rating is supported by a
substantial cash balance with $517 million of cash on hand at
September 30, 2022 and an undrawn $550 million revolving credit
facility due 2026 with only modest letters of credit ($512 million
available). The credit agreement governing the revolver includes a
maximum first lien leverage ratio test set at 5.5x that is only
tested if revolver borrowings exceed 30% of capacity at the end of
the fiscal quarter. The company has no near-term debt maturities.
ESG CONSIDERATIONS
Axalta' ESG Credit Impact Score is neutral-to-low (CIS-2) as
governance, environmental and social risks are all moderate.
Environmental risks are moderate as the company's waste and
pollutions metrics are low and it has no significant environmental
remediation liabilities. Social risks are also moderate for
specialty chemical companies as responsible production and health
and safety risks are lower than commodity chemical companies.
Governance risks are low as it is an independent public company.
Axalta has low-moderate exposure to environmental risks (E-3) due
to a below average level carbon transition and waste and pollution
risk exposure relative to other chemical companies. Like many other
specialty chemical companies, its exposure to physical climate,
natural capital and water management risks is also low-to-moderate.
Axalta has targeted to achieve a 50% absolute reduction of Scope 1
and 2 greenhouse gas emissions by 2030, sourcing at least 50% of
its electricity from renewable sources by 2030 and a 10% reduction
of process waste intensity, VOC emissions intensity, and water
usage intensity by 2030.
Axalta has moderate exposure to social risks (S-3) in most
categories. Customer relations risk is more limited as the vast
majority of sales are not to consumers, similar to other specialty
chemical companies. Responsible production and health and safety
risks are lower than many chemical companies due to the nature of
their products and processes. Risks related to societal trends are
viewed as low-to-moderate similar to other specialty chemical
companies and manufacturers.
Axalta has moderate exposure to governance risks (G-3) mainly
driven by its financial policies and track record. The company's
financial policies and risk management support its "Ba" rating.
Management credibility and track record is good as the company has
utilized free cash flow to de-lever its balance sheet subsequent to
acquisitions. The company's organizational structure and its board
structure and policies are consistent with an independent public
company and there have been no concerns over compliance and
reporting.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's could consider an upgrade with expectations for: (i)
adjusted financial leverage near 4.0x; (ii) retained cash flow to
debt sustained above 15%; and (iii) free cash flow to debt
sustained above 10% (FCF/Debt). An upgrade would also require the
new CEO to support the company's previously announced leverage
targets.
Moody's could consider a downgrade with expectations for (i)
adjusted financial leverage sustained above 5.0x; (ii) retained
cash flow-to debt sustained below 10%; (iii) a significant erosion
in the company's liquidity position; or (iv) the adoption of more
aggressive financial policy with regard to leverage and the pace,
or size, of acquisitions.
The principal methodology used in these ratings was Chemicals
published in June 2022.
Axalta Coating Systems Ltd. is one of the world's leading coatings
companies. The company operates two business segments: (i)
Performance Coatings, which accounts for over 69% of sales; and
(ii) Mobility Coatings, which accounts for under 31% of sales.
Headquartered in Glen Mills, Pa., Axalta generated $4.8 billion of
revenue in the twelve months ended September 30, 2022.
BARNES ENTERPRISES: Seeks Cash Collateral Access
------------------------------------------------
Barnes Enterprises, LLP asks the U.S. Bankruptcy Court for the
Middle District of Georgia, Macon Division, for authority to use
cash collateral and provide adequate protection.
The Debtor requires the use of cash collateral to cover its general
operating expenses, the administrative expenses of the case, and
pay the expenses required for the continued operation of the
Property.
Specifically, the Debtor seeks to use cash collateral to (a)
maintain its operations to enhance the prospects of viable plan of
reorganization and (b) to pay disbursements as more fully described
in the Budget.
Renasant Bank asserts that it is owed approximately $6,172,594 by
the Debtor. Renasant's claim is secured by, among other things,
"cash collateral" in the form of "rents" the Debtor receives from
the Tenants.
NFS Leasing, Inc. asserts it is owed approximately $205,000 by the
Debtor pursuant to the Debtor's guaranty of an Equipment Lease
executed by Clinic and dated September 23, 2021. NFS will likely
claim that its claim is secured by, among other things, "cash
collateral" pursuant to a Deed to Security Debt, Assignment of
Leases and Rents, Security Agreement, Financing Statement and
Fixture Filing dated February 7, 2022 and recorded in the records
of the Clerk of Superior Court of Bibb County, Georgia at Book
11162, Page 159.
On November 1, 2022, Renasant filed its Motion to Prohibit use of
cash collateral requesting the Court enter an order prohibiting the
Debtor's use of the cash collateral. On that same day, Renasant
also filed a Motion for Relief From Stay requesting the Court grant
it relief from the automatic stay so that Renasant may collect the
rents due to Debtor from the Tenants.
As adequate protection, the Debtor proposes to adequately protect
Respondents via the following, as may be applicable: (a) the
payment of all post-petition property taxes on any collateral held
by Respondents as and when they become due; (b) continuing to
maintain and, as necessary, replace Respondents' collateral; (c)
provide replacement liens and/or adequate protection payments to
the extent required by the Code, required to avoid economic
depreciation on Respondents' collateral while this Case is pending,
ordered by the Court, and/or agreed on between the Debtor and any
one or more of the Respondents, (d) maintaining appropriate
insurance sufficient to protect the value of Respondents'
collateral; and (e) operating the business in substantial
compliance with the Budget.
A copy of the motion is available at https://bit.ly/3EANO1T from
PacerMonitor.com.
A copy of the budget is available at https://bit.ly/3gA97J9 from
PacerMonitor.com.
The Debtor projects $93,176 in total operating expenses for
December 2022.
About Barnes Enterprises
Barnes Enterprises LLP, a financial services company in Macon, Ga.,
filed a petition for relief under Subchapter V of Chapter 11 of the
Bankruptcy Code (Bankr. M.D. Ga. Case No. 22-51155) on Oct. 3,
2022, with up to $50 million in assets and up to $10 million in
liabilities. Jenny Martin Walker has been appointed as Subchapter V
trustee.
The Debtor tapped Matthew S. Cathey, Esq., at Stone & Baxter, LLP
as legal counsel and Clayton & Company, PC as accountant.
BERWICK HOSPITAL: Patient Care Ombudsman Files First Report
-----------------------------------------------------------
Deborah Fish, the patient care ombudsman appointed in Berwick
Hospital Company, LLC's Chapter 11 case, filed with the U.S.
Bankruptcy Court for the Eastern District of Michigan her first
report regarding the quality of patient care provided at the
company's health care facility.
Berwick Hospital Company currently operates a state licensed 14-bed
inpatient behavioral health unit. This license was granted by the
State of Pennsylvania Department of Health on Sept. 19.
The quality of care provided to patients has been maintained since
the company's Chapter 11 filing, according to the report, which
covers the period from Oct. 3 to 31. In the report, the PCO
separated patient concerns into two categories: former patients of
the acute care hospital and current patients in the behavioral
health unit.
The PCO reported that concerns relating to former acute care
hospital patients are access to and proper storage of medical
records and collection on invoices for prior services rendered.
Meanwhile, concerns related to the behavioral health unit patients
are staffing, insurance, labs, and temperature of food service
room. The PCO is working with the company to address such issues,
according to the report.
A copy of the first ombudsman report is available for free at
https://bit.ly/3TQXvPm from PacerMonitor.com.
The ombudsman may be reached at:
Deborah L. Fish, Esq.
Allard & Fish, P.C.
1001 Woodward Avenue, Suite 850
Detroit, MI 48226
Telephone: 313-309-3171
Email: dfish@allardfishpc.com
About Berwick Hospital
Berwick Hospital Company, LLC is a Bloomfield Hills, Mich.-based
company, which operates in the health care industry.
Berwick filed a petition under Chapter 11, Subchapter V of the
Bankruptcy Code (Bankr. E.D. Mich. Case No. 22-47699) on Sept. 30,
2022, with $100,000 to $500,000 in assets and $1 million to $10
million in liabilities. Richardo I. Kilpatrick has been appointed
as Subchapter V trustee. Judge Lisa S. Gretchko oversees the case.
Robert Bassel, Esq., serves as the Debtor's legal counsel.
Deborah Fish, Esq., at Allard & Fish, P.C., is the patient care
ombudsman appointed in the Debtor's Chapter 11 case.
BITTER CREEK: Has Deal on Cash Collateral Access
------------------------------------------------
Bitter Creek Water Supply Corporation asks the U.S. Bankruptcy
Court for the Northern District of Texas, Abilene Division, for
authority to use cash collateral and provide adequate protection in
accordance with its agreement with the Texas Water Development
Board.
The Debtor requires the use of cash collateral to continue to
operate in the ordinary course of business and to pay normal
operating expenses.
Specifically, the Debtor seeks authority from the Court to use the
Water Supply Proceeds to pay in the ordinary course of business its
employees, purchase products and supplies, maintain services,
operate and preserve its business, and meet its administrative
responsibilities in the Subchapter v bankruptcy case.
On May 17, 2013, the Debtor entered into a Loan Agreement and
Promissory Note with the TWDB. Both the First Loan Agreement and
the Promissory Note have been amended from time to time and are
identified as TWDB Loan Numbers L1000150 and L1000176 between the
Debtor and the Secured Creditor.
On February 21, 2014, the Debtor entered into another Loan
Agreement and Promissory Note with TWDB. Both the Second Loan
Agreement and the Promissory Note have been amended from time to
time and are identified as TWDB Loan Number L1000175 between the
Debtor and the Secured Creditor.
Pursuant to the First Loan Documents, the Secured Creditor funded
an initial principal amount of $6 million, consisting of $5.3
million under TWDB Loan No. L1000150 and $700,000 under TWDB Loan
No. L1000176. An additional principal amount of $1.5 million, was
funded under TWDB Loan No. L1000175, in accordance with the Second
Loan Documents.
As of the Petition Date, the Debtor was liable to the Secured
Creditor pursuant to the Loan Documents (i) in an aggregate
principal amount of not less than $6.593 million, and (ii) accrued
and unpaid interest, fees, expenses, and other costs and
obligations due under the Loan Agreement.
As adequate protection of TWDB's interest in Cash Collateral as
well as its other collateral, the Debtor and the TWDB have agreed
that the Debtor will make monthly interest payments at the contract
rate on the principal amount under the Loan Documents owed to the
TWDB through the effective date of a confirmed plan.
A copy of the motion is available at https://bit.ly/3gBnnBd from
PacerMonitor.com.
About Bitter Creek Water Supply Corporation
Bitter Creek Water Supply Corporation is water supplier in
Sweetwater, Texas. The Debtor sought protection under Chapter 11 of
the U.S. Bankruptcy Code (Bankr. N.D. Tex. Case No. 22-10137) on
November 21, 2022. In the petition signed by Jeff Posey, president,
the Debtor disclosed up to $10 million in both assets and
liabilities.
Lynn Hamilton Butler, Esq., at Husch Blackwell LLP, is the Debtor's
counsel.
BRAZOS ELECTRIC: Taps Moelis & Company as Investment Banker
-----------------------------------------------------------
Brazos Electric Power Cooperative, Inc. seeks approval from the
U.S. Bankruptcy Court for the Southern District of Texas to employ
Moelis & Company LLC as investment banker.
The firm will provide these services:
a. assist the Debtor in conducting a business and financial
analysis of the generation business;
b. assist the Debtor in identifying and evaluating potential
counterparties for a transaction;
c. assist the Debtor in preparing a marketing plan and
information materials describing the generation business, which
Moelis may distribute to potential counterparties on a confidential
basis;
d. assist the Debtor in contacting potential counterparties,
arranging meetings with such counterparties and coordinating the
due diligence investigation of the generation business by such
counterparties, in each case as appropriate and acceptable to the
Debtor;
e. assist the Debtor in developing a strategy to effectuate the
Transaction;
f. assist the Debtor in structuring and negotiating the
transaction and participate in such negotiations as requested; and
g. meet with the Debtor's Board to discuss the proposed
transaction and its financial implications.
The firm will be paid as follows:
a. a transaction fee payable promptly at the closing of a
transaction, equal to the sum of (i) $3,500,000 and (ii) an amount
based on the transaction value as follows:
-- 1 per cent for the portion of transaction value in excess
of $800 million and less than $900 million; plus
-- 1.5 per cent for the portion of transaction value in excess
of $900 million.
b. a termination fee equal to 25% of any "termination fee,"
"break-up fee," "topping fee," "expense reimbursement" or other
form of compensation payable to the Debtor if, after the execution
of an agreement for a transaction, the transaction fails to close
and the Debtor receives any such compensation (the "Breakup Fee").
The Debtor will pay the termination fee when it receives any such
breakup fee. If the Debtor receives any such breakup fee in a form
other than cash, the value thereof shall be the fair market value
on the day the Debtor receives such breakup fee.
Bassam Latif, a managing director at Moelis & Company, disclosed in
a court filing that the firm is a "disinterested person" as the
term is defined in Section 101(14) of the Bankruptcy Code.
The firm can be reached at:
Bassam Latif
Moelis & Company, LLC
399 Park Avenue, 5th Floor
New York, NY 10022
Tel: +1 212 883 3813
Email: bassam.latif@moelis.com
About Brazos Electric Power Cooperative
Brazos Electric Power Cooperative Inc. is a 3,994-megawatt
transmission and generation cooperative which members' service
territory covers 68 counties from the Texas Panhandle to Houston.
It was organized in 1941 and the first cooperative formed in the
Lone Star state with the primary intent of generating and supplying
electrical power. At present, Brazos Electric is the largest
generation and transmission cooperative in the state and is the
wholesale power supplier for its 16 member-owner distribution
cooperatives and one municipal system.
Brazos Electric filed a voluntary petition for relief under Chapter
11 of the U.S. Bankruptcy Code (Bankr. S.D. Texas Case No.
21-30725) on March 1, 2021. At the time of the filing, the Debtor
disclosed assets of between $1 billion and $10 billion and
liabilities of the same range.
Judge David R. Jones oversees the case.
The Debtor tapped Norton Rose Fulbright US, LLP as bankruptcy
counsel, Foley & Lardner LLP and Eversheds Sutherland US LLP as
special counsel, Collet & Associates LLC as investment banker, and
Berkeley Research Group, LLC, as financial advisor. Ted B. Lyon &
Associates, The Gallagher Law Firm, West & Associates LLP, Butch
Boyd Law Firm and Boyd Smith Law Firm, PLLC serve as special
litigation counsel. Stretto is the claims and noticing agent.
The U.S. Trustee for Region 7 appointed an official committee of
unsecured creditors in the Debtor's case on March 15, 2021. The
committee is represented by the law firms of Porter Hedges, LLP and
Kramer, Levin, Naftalis & Frankel, LLP. FTI Consulting, Inc. and
Lazard Freres & Co. LLC serve as the committee's financial advisor
and investment banker, respectively.
BSPV-PLANO LLC: Exclusivity Period Extended to Nov. 30
------------------------------------------------------
BSVP-Plano, LLC has until next week to pursue its own Chapter 11
plan and remain in control of its bankruptcy.
Judge Brenda Rhoades of the U.S. Bankruptcy Court for the Eastern
District of Texas extended the company's exclusive right to file a
bankruptcy plan to Nov. 30 and to solicit votes on the plan to Jan.
31 next year.
During the first few weeks of its bankruptcy case, BSVP-Plano was
focused on litigating the use of cash collateral of its senior
secured creditor, The Huntington National Bank, in its capacity as
trustee for certain pre-bankruptcy bonds and as secured lender to
the company.
Currently, BSVP-Plano is in a mediation process with Huntington
National Bank. The company believes it is more appropriate to await
the conclusion of that process prior to filing a consensual plan to
save the burden and expenses of a contested confirmation process,
according to its attorney, Davor Rukavina, Esq., at Munsch Hardt
Kopf and Harr, PC.
About BSPV-Plano LLC
BSPV-Plano, LLC, a company in Plano, Texas, sought protection under
Chapter 11 of the Bankruptcy Code (Bankr. E.D. Texas Case No.
22-40276) on March 1, 2022, listing up to $100 million in both
assets and liabilities. Richard Shaw, manager, signed the
petition.
Judge Brenda T. Rhoades oversees the case.
Munsch Hardt Kopf and Harr, PC, Grant Thornton, LLP and American
Global of Texas, LLC serve as the Debtor's legal counsel, financial
advisor and insurance consultant, respectively.
CANO HEALTH: S&P Downgrades ICR to 'B-', Outlook Negative
---------------------------------------------------------
S&P Global Ratings lowered its issuer credit rating on Medicare
Advantage-focused primary care service provider Cano Health Inc.
to 'B-' from 'B'. The outlook is negative.
S&P said, "At the same time, we lowered our issue-level ratings on
the company's revolver and term loan to 'B-' from 'B'. The '3'
recovery rating is unchanged. We lowered our issue-level rating on
the company's senior unsecured notes to 'CCC' from 'CCC+'; the
recovery rating on this debt remains '6'.
"The negative outlook primarily reflects our forecast for very weak
credit measures through 2023, including near breakeven free
operating cash flow (FOCF) generation, with little room for the
company to underperform against our assumptions before we could
consider its capital structure unsustainable."
Cano's aggressive growth strategy contributed to weak near-term
profitability and cash flow deficits. Cano is on track to end this
year with about 300 thousand members and 170 owned medical centers,
up from about 227 thousand and 130, respectively, at the end of
2021. S&P said, "This significant expansion contributed to higher
de novo losses in 2022 (estimated to be about $85 million) that we
do not reverse from EBITDA. Some of these new members came with
higher-than-anticipated utilization and acuity levels that was not
adequately captured in the per member per month (PMPM) rates the
company was receiving. As a result, adjusted credit measures are
trending well below what we had expected this time last year.
Specifically, we expect adjusted debt to EBITDA of 20x-25x at the
end of 2022 and 9x-10x in 2023 with adjusted OCF to debt of
negative 7%-10% in 2022 and positive 2%-5% in 2023."
S&P said, "The company recently laid out five initiatives that we
believe should improve profitability and cash flow generation.These
initiatives include efforts to: optimize Cano Health's provider
network by selectively trimming underperforming affiliates from
Medicare Advantage and Medicaid service lines; pause de novo
investments and leverage the existing capacity at its medical
centers; improve overall performance in its Medicare Direct
Contracting service line, which Centers for Medicare & Medicaid
Services (CMS) has renamed to ACO Reach; adjust payor contracts to
improve profitability and cash flow by leveraging its
differentiated care platform in key markets; and consolidate
certain operations and optimize its total cost structure. Of these
initiatives, the one that we think is most meaningful in the near
term from a credit risk perspective is its plan to temporarily
pause de novo investments. We assume this will reduce its capital
expenditures next year to $10 million to $15 million from about $55
million in 2022, and likely result in lower de novo losses that we
believe was a constraint on operating cash flow generation.
"We also assume that the PMPM rates of recently added Medicare
Advantage members should increase over the next couple of years as
patients are integrated into Cano Health's network and their health
is reassessed. The medical cost ratio (MCR) of these patients
should also gradually improve and Cano Health's selling, general,
and administrative (SG&A) costs as a percentage of revenue decline
as it continues to scale up. Though we assume a pause in de novo
investments, we expect the company still has significant untapped
capacity at its existing medical centers to nearly double its
members and continue generate strong organic growth, albeit at a
slower pace than we had previously assumed. Under these
assumptions, we estimate that Cano Health should improve its EBITDA
and cash flow generation over the next couple of years. That said,
the magnitude of the profitability and operating cash flow miss
this year led us to believe there are more prevalent downside risks
to our forecast than we had previously incorporated in the rating.
As a result, we put less emphasis on forecast credit measures
beyond 2023 in determining our issuer credit rating on Cano
Health.
"The negative outlook primarily reflects our forecast for very weak
credit measures through 2023, including near breakeven FOCF
generation, with little room for the company to underperform
against our assumptions before we could consider its capital
structure unsustainable. The negative outlook also reflects more
prevalent downside risks to our forecast stemming from the
company's poor operating results of late and a weakened liquidity
position.
"We could lower our ratings on the company within the next 12
months if we consider the company's capital structure unsustainable
over the long term. This could occur if we expect adjusted OCF to
debt to remain below 2.5% or adjusted funds from operations (FFO)
cash interest coverage below 1.5x for a prolonged period,
potentially due to weaker-than-expected EBITDA margins. We could
also lower our ratings on Cano Health if we believe the company's
sources of liquidity are insufficient to cover its fixed charges.
"We could revise our outlook on the company to stable within the
next 12 months if operating performance improves and reinforces our
expectation for adjusted EBITDA margins to meaningfully increase
over the next couple of years, such that adjusted OCF to debt
returns to above 1.5%. In this scenario, we would also expect Cano
Health to maintain sufficient sources of liquidity to comfortably
cover its fixed charges over the next 12 months."
ESG credit indicators: To E-2, S-2, G-3; From E-2, S-2, G-2
S&P said, "We now consider governance factors as a moderately
negative consideration in our credit rating analysis of Cano
Health. In our opinion, the company followed an aggressive growth
strategy that we believe contributed to weaker-than-expected
operating performance in 2022 and increased liquidity risk."
CARRIAGE SERVICES: Moody's Cuts CFR to B2 & Sr. Unsec. Notes to B3
------------------------------------------------------------------
Moody's Investors Service downgraded Carriage Services, Inc.'s
corporate family rating to B2 from B1, its probability of default
rating to B2-PD from B1-PD and the senior unsecured rating to B3
from B2. Moody's also changed the company's Speculative Grade
Liquidity (SGL) rating to SGL-3 from SGL-2. The outlook remains
stable.
Governance is a key driver for the rating downgrade. During a
period in which Carriage's performance benefited from heightened
at-need demand driven by the coronavirus pandemic, the company
opportunistically repurchased $177 million of common shares through
the year 2021 and the first six months of 2022. These share
repurchases were primarily funded with revolver borrowings and free
cash flow. Furthermore, the company acquired a business for $25
million in October funded through a combination of cash and
revolver borrowings, and recently announced it is under a letter of
intent to acquire a large business, which Moody's expects will be
largely funded with debt. As of September 30, 2022, financial
leverage, as expressed by debt to EBITDA (Moody's calculation) was
5.3x. Moody's expects that the increase in debt coupled with a
normalization of at-need demand towards pre-pandemic levels and
inflationary pressures will increase financial leverage above 6x
for at least the next 12 months.
In conjunction with the October acquisition, Carriage obtained a
limited consent to complete the acquisition in spite of Carriage
exceeding the allowed total leverage ratio of 5.25x under its
credit agreement after the acquisition. Carriage's bank covenant
total leverage ratio was 5.14x as of September 30, 2022. Moody's
expects the recent acquisitions necessitate Carriage to amend its
financial leverage covenant to avoid a covenant breach.
Downgrades:
Issuer: Carriage Services, Inc.
Corporate Family Rating, Downgraded to B2 from B1
Probability of Default Rating, Downgraded to B2-PD
from B1-PD
Speculative Grade Liquidity Rating, Downgraded to SGL-3
from SGL-2
Senior Unsecured Regular Bond/Debenture, Downgraded to
B3 (LGD5) from B2 (LGD4)
Outlook Actions:
Issuer: Carriage Services, Inc.
Outlook, Remains Stable
RATINGS RATIONALE
The B2 CFR reflects Carriage's small scale with $372 million of
annual revenue and high financial leverage with debt to EBITDA of
5.3x as of September 30, 2022, which Moody's expects to increase
and remain above 6x for at least the next 12 months. Modest cash
flow generation with free cash flow to debt around 4% and solid
interest coverage with EBITA to interest expense of about 2.6x is
expected over the same period. The rating also reflects the credit
challenges from the fragmented and competitive deathcare industry,
with larger and smaller competitors that could create pricing
pressures or limit revenue growth. Moody's expects profitability
will be negatively impacted in the short term driven by a
normalization of at-need demand towards pre-pandemic levels and
inflationary pressures, but Carriage is likely to pass most price
increases onto customers. The ongoing secular trends toward the
increasing use of cremation services, which often generate lower
revenue than traditional burial and funeral services, could also
weigh on the financial performance or impede revenue and profit
growth over time.
The rating is supported by Carriage's established position as the
second largest player in the fairly stable deathcare industry, with
solid profitability EBITDA margins in excess of 25% expected over
the next year. The value of select Carriage assets, including its
diverse set of owned and controlled funeral and cemetery properties
and a backlog of already-sold pre-need funeral and cemetery
contracts, is likely greater than the amount of select liabilities,
including its costs to perform under its contracted pre-need
service contracts and its debt. Carriage is supported by
demographic trends that include an aging US population and the
expectation for higher at-need demand over the medium term compared
to pre-pandemic levels.
All financial metrics cited reflect Moody's standard adjustments
unless otherwise noted.
The SGL rating change to SGL-3 rating reflects Carriage's adequate
liquidity profile and Moody's concern of a financial leverage
covenant breach if it is not amended. Moody's expects free cash
flow of at least $20 million in 2023. However, Carriage is unlikely
to maintain large cash balances as evidenced by the less than $1
million cash held as of September 30, 2022. Liquidity is supported
by $79 million availability under its $250 million revolver
expiring May 2026 (unrated). The credit facility allows for future
increases in the facility size in the form of increased revolving
commitments or new incremental term loans by an additional amount
of up to $75 million. Financial covenants include a maximum total
leverage ratio (as defined in the credit agreement) that cannot
exceed 5.25x and a minimum fixed charge coverage ratio (as defined)
of 1.2x. As of September 30, 2022, the bank covenant total leverage
ratio was 5.14x, leaving very limited covenant cushion. Carriage
obtained a limited consent to complete an acquisition in October
despite the company exceeding the allowed total leverage ratio of
5.25x under its credit agreement after the acquisition. Moody's
expects recent debt-funded acquisitions and the normalization of
at-need demand to pre-pandemic levels necessitate Carriage to amend
its financial leverage covenant to avoid a covenant breach.
The B3 rating on the senior unsecured notes reflects the B2-PD
Probability of Default Rating and a Loss Given Default Assessment
of LGD5. The B3 instrument rating also reflects the senior notes'
position in the capital structure, behind the unrated secured
credit facility that expires in May 2026.
The stable outlook reflects Moody's expectations for limited
organic revenue and EBITDA growth in 2023, financial leverage to
remain above 5.5x and for Carriage to successfully address
financial covenant pressure and maintaining at least an adequate
liquidity profile. The outlook also anticipates Carriage to
opportunistically pursue debt-financed acquisitions.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if Moody's anticipates sustained
organic revenue and profit rate growth. Expectations that Carriage
would sustain financial leverage below 5.5x, an improvement in the
liquidity profile and balanced financial policies, and free cash
flow to debt would approach 8% are also important considerations
for a ratings upgrade.
The ratings could be downgraded if Moody's expects revenue or
margins to sustainably decline, indicating a weakening competitive
position, financial policies become more aggressive, such that
Moody's expects financial leverage will be sustained above 6.5x, or
liquidity deteriorates further, including an increased likelihood
of a covenant breach.
The principal methodology used in these ratings was Business and
Consumer Services published in November 2021.
Carriage Services, Inc., headquartered in Houston, Texas, is a
public company which provides funeral and cemetery services and
merchandise in the US. As of September 30, 2022, Carriage operates
169 funeral homes in 26 states and 31 cemeteries in 11 states
across the US. Carriage generated about $372 million revenue for
LTM period ended September 30, 2022.
CARVANA CO: Moody's Affirms Caa1 CFR & Alters Outlook to Negative
-----------------------------------------------------------------
Moody's Investors Service changed Carvana Co.'s outlook to negative
from stable. At the same time, Moody's affirmed Carvana's Caa1
corporate family rating, Caa1-PD probability of default rating and
Caa2 senior unsecured notes ratings. Carvana's SGL-4 speculative
grade liquidity rating remains unchanged.
The change in outlook to negative from stable reflects Carvana's
persistent lack of profitability and negative free cash flow
generation that has consistently fallen short of Moody's
expectations. It also reflects that Carvana's profitability and
free cash flow are is expected to remain very weak as gross profit
per vehicle and inventories remain under pressure. The Caa1 CFR
recognizes Carvana's challenges of stabilizing and improving free
cash flow deficits if costs savings initiatives fall short of
expectations and gross profit per vehicle continues to deteriorate.
However, Moody's also recognize Carvana's available liquidity with
about $316 million of balance sheet cash as of September 30, 2022,
a 12-month $2.2 billion floor plan facility ($1.625 billion
available) that matures in September 2023 and an 18-month $2.0
billion floor plan facility that matures March 2024 but is only
available after the 12-month facility matures and is repaid. The
company also has no near dated debt maturities and a material
amount of unencumbered real estate that could be monetized to
support liquidity.
Affirmations:
Issuer: Carvana Co.
Corporate Family Rating, Affirmed Caa1
Probability of Default Rating, Affirmed Caa1-PD
Senior Unsecured Regular Bond/Debenture, Affirmed Caa2 to (LGD4)
from (LGD5)
Outlook Actions:
Issuer: Carvana Co.
Outlook, Changed To Negative From Stable
RATINGS RATIONALE
Carvana's Caa1 CFR highlights its lack of profitability, negative
free cash flow and very weak credit metrics which Moody's expect
will remain weak as gross profit per vehicle and inventories remain
under pressure. However, it also recognizes Carvana's favorable
position in the used car retail segment and its unique ordering and
delivery models. Carvana's also has access to various sources of
liquidity with balance sheet cash, floor plan facilities and
unencumbered real estate. However, its 18-month $2.0 billion floor
plan facility expires in March 2024 and only becomes available
after its $2.2 billion floor plan facility matures and is fully
repaid on September 30, 2023. Moody's also views the challenges of
right sizing its costs structure while slowing growth by refocusing
its efforts on selling more profitable vehicles. In addition, its
ability to leverage existing ADESA locations and logistics will
remain a drag on improving profitability and cash flows
particularly as gross profit per vehicle and staffing remain
challenging.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Ratings could be upgraded once EBIT/interest is sustained around
1.0 time while maintaining adequate liquidity. Ratings could be
downgraded if the company was unable to generate positive operating
earnings, liquidity were to weaken or should the likelihood of
default increase for any reason.
Carvana Co. is a leading online retailer of used vehicles, with LTM
September 2022 revenue of around $14.5 billion.
The principal methodology used in these ratings was Retail
published in November 2021.
CATHOLIC HEALTH SYSTEM: S&P Lowers Revenue Bonds Rating to 'B-'
---------------------------------------------------------------
S&P Global Ratings lowered its long-term rating on all revenue
bonds issued for Catholic Health System, N.Y. (CHS) and its
subsidiaries to 'B-' from 'BB+'. The outlook is negative.
"The multi-notch downgrade reflects our expectation that CHS will
not meet its debt service coverage covenant in fiscal 2022, which
could trigger an event of technical default if a waiver is not
obtained," said S&P Global Ratings credit analyst Anne Cosgrove.
CHS continues to have persistent and significant operating losses
spurred by elevated labor costs as well as volume disruption. In
addition, CHS' high cash burn rate due to cash flow stresses has
led to a precarious level of liquidity at about 40 days' cash on
hand.
The rating reflects S&P's opinion of CHS':
-- Significant operating losses;
-- High leverage and large unfunded pension liability;
-- Limited service area characteristics; and
-- Very thin unrestricted reserves.
These weaknesses are somewhat offset by CHS':
-- Competitive, but stable, market position in western New York
State; and
-- Benefit from an increasing independent practice association.
The negative outlook reflects the significant near-term uncertainty
about the potential for triggering an event of technical default
and acceleration under the debt service coverage (DSC) covenant if
a waiver is not obtained. The negative outlook also reflects the
high cash burn rate and challenging industry conditions that could
preclude rapid improvement.
S&P said, "We could lower the rating if CHS violates its DSC
covenant in fiscal 2022 and is not able to obtain a waiver. We
could also lower the rating if CHS is not able to meet upcoming
debt service payments or other services given the very thin
unrestricted reserves. In addition, if there is any further decline
in unrestricted reserves. this could lead to a downgrade.
"We could revise the outlook to stable if CHS is able to obtain a
waiver prior to triggering an event of technical default under its
DSC covenant and demonstrates improvement in cash flow growth. We
could raise the rating or revise the outlook to stable if there is
sustained operational improvement and cash flow, contributing to
stronger coverage and improved liquidity."
Environmental, social, and governance (ESG) credit factors for this
change in credit rating/outlook and/or CreditWatch status:
-- Social human capital and management and governance (risk
management culture and oversight)
CBAK ENERGY: Incurs $849K Net Loss in Third Quarter
---------------------------------------------------
CBAK Energy Technology, Inc. has filed with the Securities and
Exchange Commission its Quarterly Report on Form 10-Q disclosing a
net loss of $848,728 on $57.72 million of net revenues for the
three months ended Sept. 30, 2022, compared to net income of $20.02
million on $9.56 million of net revenues for the three months ended
Sept. 30, 2021.
For the nine months ended Sept. 30, 2022, the Company reported net
income of $848,040 on $194.27 million of net revenues compared to
net income of $52.35 million on $24.87 million of net revenues for
the same period during the prior year.
As of Sept. 30, 2022, the Company had $251.21 million in total
assets, $123.61 million in total liabilities, and $127.60 million
in total equity.
Liquidity and Capital Resources
The Company had financed its liquidity requirements from a variety
of sources, including short-term bank loans, other short-term loans
and bills payable under bank credit agreements, advance from its
related and unrelated parties, investors and issuance of capital
stock and other equity-linked securities.
As of Sept. 30, 2022, the Company had cash and cash equivalents and
restricted cash of $41.6 million. Its total current assets were
$129.2 million and its total current liabilities were $115.9
million, resulting in a net working capital of $13.3 million.
As of Sept. 30, 2022, the Company had an accumulated deficit of
$121.2 million.
CBAK stated in the filing that, "The Company has accumulated
deficit from recurring net losses incurred for the prior years and
significant short-term debt obligations maturing in less than one
year as of September 30, 2022. These conditions raise substantial
doubt about the Company ability to continue as a going concern.
The Company's plan for continuing as a going concern included
improving its profitability, and obtaining additional debt
financing, loans from existing directors and shareholders for
additional funding to meet its operating needs. There can be no
assurance that the Company will be successful in the plans
described above or in attracting equity or alternative financing on
acceptable terms, or if at all."
Management's Comments
Yunfei Li, chairman and chief executive officer of the Company,
commented: "Our company managed to maintain a strong momentum in
the growth of revenues in the third quarter of 2022. Our efforts
to develop the electric vehicle ("EV") & light electric
vehicle("LEV") market have achieved noticeable progress. Our
revenues contributed from the EV & LEV market in the third quarter
grew by 413% compared to the same period in 2021. Our strategic
partnership with JinPeng Group, one of China's biggest LEV
manufacturers, and its EV manufacturing unit, Jemmell, brings our
battery products to an increasing number of electric vehicles.
With our cooperation with more EV/LEV manufacturers, we anticipate
to see our products be applied to more electric vehicles and
revenues from this market segment grow at a faster pace."
Mr. Li continued: "We are also glad to see that there is an
increasing global demand for green energy, which substantially
boost our energy storage business. We believe that our clients
with businesses all over the world will keep a strong demand for
our battery products in the near future."
Xiangyu Pei, interim chief financial officer of the Company, noted:
"In the first nine months of 2022, we managed to achieve a
year-over-year increase of 681% in revenues to $194 million.
During this period, revenues from our battery business grew by 168%
to $66.6 million as compared to the same period of 2021, of which
revenues from the LEV/EV sector have posted a strong increase of
341%. Given the strong demand for our battery products, we are
very positive about our growth and development in the near term."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1117171/000121390022072211/f10q0922_cbakenergy.htm
About CBAK Energy
Liaoning Province, People's Republic of China-based CBAK Energy --
www.cbak.com.cn -- is a manufacturer of new energy high power
lithium batteries that are mainly used in light electric vehicles,
electric vehicles, electric tools, energy storage including but not
limited to uninterruptible power supply (UPS) application, and
other high-power applications. Its primary product offering
consists of new energy high power lithium batteries, but it is also
seeking to expand into the production and sale of light electric
vehicles.
Hong Kong, China-based Centurion ZD CPA & Co., the Company's
auditor since 2016, issued a "going concern" qualification in its
report dated April 15, 2022, citing that the Company has negative
cash flows from operating activities, accumulated deficit from
recurring net losses incurred for the prior years and significant
short-term debt obligations maturing in less than one year as of
Dec. 31, 2021. All these factors raise substantial doubt about its
ability to continue as a going concern.
CLUB 121 INC: Seeks Cash Collateral Access
------------------------------------------
Club 121 Inc., successor by merger with Kimtifco Ltd., asks the
U.S. Bankruptcy Court for the Eastern District of New York, for
authority to use cash collateral.
The Debtor seeks to use cash collateral through and including March
31, 2023, subject to a further request by the Debtor for an
extension should a plan of reorganization not be confirmed by that
time.
The Debtor proposes to grant adequate protection to Avatar
Amityville Office LLC, which holds the only lien and security
interest in the rents under a pre-petition Consolidation,
Modification and Extension Agreement and note in the original
principal sum of $1.440 million, as follows:
a. granting Avatar a replacement lien on the post-petition
Rents, to which Avatar's secured claim might not otherwise attach
pursuant to 11 U.S.C. section 552(a);
b. the Debtor will remit monthly cash payments to Avatar of
$9,600 (calculated by multiplying the original principal sum due
under the Mortgage by the 8% nondefault contract rate of interest
set forth in the Note);
c. the Debtor will maintain insurance coverage on the Real
Property, and pay all electricity and gas bills and other expenses
of the Real Property;
d. the Debtor will manage the Real Property for no fee;
e. the Debtor will act to evict tenants in the Real Property
who are in arrears and replace these nonpaying tenants with new
tenants; and
f. the Debtor will act to procure paying tenants for the
presently empty office space in the Real Property.
A hearing on the matter is set for December 8, 2022 at 10 a.m.
A copy of the motion is available at https://bit.ly/3XFpC7w from
PacerMonitor.com.
About Club 121 Inc.
Club 121 Inc. is the fee simple owner of a commercial building and
real property located at 121 W. Oak Street, Amityville, NY 11701
valued at $4 million.
The Debtor sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. E.D.N.Y. Case No. 22-73005) on October 27,
2022. In the petition signed by Bruce A. Payne, president and CEO,
the Debtor disclosed $4,004,100 in assets and $2,571,612 in
liabilities.
Judge Louis A. Scarcella oversees the case.
Robert L. Pryor, Esq., at Pryor & Mandelup, LLP, represents the
Debtor as legal counsel.
COINBASE GLOBAL: Moody's Puts 'Ba3' CFR on Review for Downgrade
---------------------------------------------------------------
Moody's Investors Service has placed on review for downgrade
Coinbase Global, Inc.'s Ba3 corporate family rating and Ba2
guaranteed senior unsecured notes' rating. The rating action
follows heightened market turbulence in the crypto sector.
"Although Coinbase has a strong liquidity profile, the recent
sudden collapse of FTX has heightened the level of uncertainty in
the crypto operating environment, leading to increased challenges
for all firms operating in the sector; with an increasing
possibility of sustained reductions in trading volumes and client
engagement, that are important factors for Coinbase's revenue" said
Moody's Vice President and Senior Analyst Fadi Abdel Massih.
"During Moody's review for downgrade, Moody's will update Moody's
assessment of the crypto operating environment, and consider the
extent to which Coinbase's prospects are tied to such broader
factors that are essentially outside of its control."
Moody's has taken the following rating actions:
On Review for Downgrade:
Issuer: Coinbase Global, Inc.
Corporate Family Rating, Placed on Review for Downgrade, currently
Ba3
Backed Senior Unsecured Notes, Placed on Review for Downgrade,
currently Ba2
Outlook Actions:
Issuer: Coinbase Global, Inc.
Outlook, Changed To Rating Under Review From Negative
RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR
DOWNGRADE OF THE RATINGS
Moody's said the rating action reflects the increasingly
challenging operating environment within the crypto sector, with
the potential for subdued client engagement that would lead to
lower overall trading volumes, and with the sector already being
challenged by a significant reduction in crypto asset prices this
year. A key component of Moody's review will be to assess the
extent to which Coinbase's fortunes are inextricably linked to the
overall crypto operating environment, including the extent to which
any further market dislocations or market participant failures
could adversely affect sectoral customer sentiment.
Moody's said that the recent failure of FTX Trading Ltd. and its
affiliated entities (collectively referred to here as FTX), have
reverberated across the crypto ecosystem triggering losses for
institutional and retail customers and with the possibility of
additional failures of entities that were exposed to FTX. Moody's
said that Coinbase operates a different business model than FTX
did, with Coinbase's trading venues and custody platform at its
heart, and that a number of credit positive characteristics of
Coinbase have to date shielded it from failures across the crypto
asset platforms, including the failures of Celsius Network and
Voyager Digital earlier in 2022. Unlike FTX, Coinbase does not
engage in retail client lending activities that could expose it to
material asset-liability mismatch, misappropriation of customer
assets, related liquidity risk or other bank-like concepts or
risks. Moody's also said that FTX had a common ownership with a
crypto quantitative trading firm, Alameda Research, that clearly
exposed FTX to elevated risk of conflict of interest. Lastly,
Coinbase does not issue its own digital token, which FTX had
reportedly used in leveraging its trading positions. Moody's said
that Coinbase maintains a strong liquidity position (with $5
billion in cash and cash equivalents, $368 million in USDC (a
fiat-backed stablecoin), $623 million in crypto assets as at
September 30, 2022, in addition to custodial account overfunding
balances, which may be an incremental liquidity source) relative to
its $3.4 billion in long-term debt (including the $2 billion rated
senior guaranteed notes (due 2028 and 2031). Coinbase has also
invested heavily in its risk and controls framework, and as a
listed US public company with related standards of corporate
governance and a broad investor base, is subject to significantly
more ongoing scrutiny and oversight than appears to have been the
case with FTX.
During its review, Moody's will update its assessment of Coinbase's
flexibility in managing its cost base in a highly uncertain
operating environment, and will assess the company's ability to
weather further changes and challenges in this environment. Moody's
will also consider the susceptibility of Coinbase's financial
profile to worsen, should the deterioration in crypto asset prices
and trading volumes remain at current levels or worsen, and the
potential for crypto asset regulatory developments following the
recent adverse market events, and how these developments may affect
Coinbase's strategic position in the sector.
Coinbase's $2.0 billion senior guaranteed notes' Ba2 rating is a
notch higher than Coinbase's Ba3 CFR, based on the notes' priority
ranking in Coinbase's capital structure; with the notes ranking
ahead of the firm's $1.4 billion convertible debt notes, which
don't benefit from a guarantee from the firm's operating entities.
During its review, Moody's will update its assessment of Coinbase's
capital structure, including the implications of the holder
call-feature on Coinbase's convertible notes that matures prior to
the maturity of its rated debt.
Moody's said that since the ratings are under review for downgrade,
there is currently no upward pressure on Coinbase's ratings. In the
longer-term, Coinbase's ratings could be upgraded if it (1)
sustains a cost structure that could reliably generate
profitability in the current or lower crypto asset price and
trading volume environments and (2) achieves revenue
diversification through the development of profitable new revenue
streams not tied to trading volumes or crypto asset prices, without
adding significant credit risk.
Coinbase's ratings could be downgraded should Moody's conclude that
(1) there is increased likelihood that the crypto operating
environment could further lower trading volumes or transaction
revenue, or lead to regulatory restrictions that would adversely
affect Coinbase, (2) it will be increasingly challenging for
Coinbase to return to a strong level of profitability, (3) its
projected cash flow generation would significantly weaken its cash
debt coverage, or (4) there is evidence that Coinbase's expense
flexibility is limited.
The principal methodology used in these ratings was Securities
Industry Service Providers Methodology published in November 2019.
COSMOS HOLDINGS: Incurs $1.97 Million Net Loss in Third Quarter
---------------------------------------------------------------
Cosmos Holdings Inc. has filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing a net loss
of $1.97 million on $12.02 million of revenue for the three months
ended Sept. 30, 2022, compared to a net loss of $1.94 million on
$13.59 million of revenue for the three months ended Sept. 30,
2021.
For the nine months ended Sept. 30, 2022, the Company reported a
net loss of $3.01 million on $38.30 million of revenue compared to
a net loss of $6.49 million on $40.06 million of revenue for the
same period in 2021.
As of Sept. 30, 2022, the Company had $45.62 million in total
assets, $40.46 million in total liabilities, $1.71 million in
preferred stock, and $3.44 million in total stockholders' equity.
As of Sept. 30, 2022, the Company had working capital of $1,945,076
compared to $10,950,492 as of Dec. 31, 2021.
The Company had cash of $312,385 versus $286,487 as of Sept. 30,
2022 and December 2021, respectively. The Company had net cash
used in operating activities of $4,552,332 and $5,549,269 for the
nine months ended Sept. 30, 2022 and 2021, respectively. The
Company has devoted substantially all of its cash resources to
expand through organic business growth and has incurred significant
general and administrative expenses in order to enable the
financing and growth of its business and operations.
The Company had net cash used in investing activities of $68,932
and net cash used in investing activities of $835,425 during the
nine months ended Sept. 30, 2022 and 2021, respectively. For the
nine months ended Sept. 30, 2022 the net cash provided by investing
activities was mainly attributable to the proceeds from the loan
receivable from a third party.
The Company had net cash provided by financing activities of
$4,477,843 versus $6,475,402 during the nine months ended Sept. 30,
2022 and 2021, respectively.
For the period ended Sept. 30, 2022, the Company received proceeds
from lines of credit of $17,206,099 and payments of lines of credit
of $16,348,941, for a net increase on the line of credit of
$857,158.
Cosmos stated in the SEC filing that, "We anticipate using cash in
our bank account as of September 30, 2022, cash generated from debt
or equity financing, from investing activities or from management
loans, to the extent that funds are available to do so to conduct
our business in the upcoming year. Management is not obligated to
provide these or any other funds. If we fail to meet these
requirements, we may lose the qualification for quotation and our
securities would no longer trade on the over-the-counter markets.
Further, as a consequence we would fail to satisfy our reporting
obligations with the Securities and Exchange Commission ("SEC"),
and investors would then own stock in a company that does not
provide the disclosure available in quarterly and annual reports
filed with the SEC and investors may have increased difficulty in
selling their stock as we will be non-reporting."
Management Commentary
Greg Siokas, chief executive officer of Cosmos Health, stated in a
press release, "The slight decrease in our Consolidated Revenue
reported in USD was mainly due to the high variation in FX
differences of EUR and GBP to USD. In local currencies, we managed
to increase our revenue in the third quarter of 2022 to EUR11.9
million and GBP23.2 thousand compared to EUR11.5 million and
GBP17.8 thousand versus similar period last year, respectively,
which is an overall increase of almost 7.5%.
"In recent months we have made significant progress in our efforts
to grow our various businesses. Our nutraceuticals segment is our
strongest growth engine. The global nutraceuticals market was
valued at $455B in 2021 and is expected to reach $988B by 2030, a
CAGR of 9%, driven by the growing demand for dietary supplements
and functional foods. In addition, the COVID-19 pandemic has paved
the way for nutraceuticals to build a strong presence in the global
market. Our Sky Premium Life (SPL) brand continues to be received
well by the market. In recent months we also launched our SPL
products on Amazon Singapore and on Amazon United States and Amazon
Canada. In addition, we are in the midst of finalizing agreements
with various partners to distribute our nutraceutical products in
North America and Europe. These new markets provide untapped
growth opportunities and new audiences for our proprietary SPL
brand.
"In April, we launched our premium line of nutritional supplements,
Mediterranation. The Mediterranation line uses organic herbs and
plant extracts such as crataegus, hibiscus, dittany of Crete,
oregano, mastic and kritamos, found in specific regions in Greece
and the Mediterranean. The initial reaction from our distributors
and consumers has been very positive and we expect to see
increasing order flow.
"The Cosmos Health brand marks a new chapter in the Company's
evolution and better reflects our commitment towards a leading,
highly scalable and innovative global healthcare group based on our
R&D partnerships, fully licensed production facilities and fast
deployment to distribution channels. This is in alignment with the
Company's recent announcements about our R&D partnership with
CloudPharm as we execute on our goal of becoming a leading global
healthcare group.
"Our health care distribution and OTC pharmaceuticals businesses
continue to remain solid, providing Cosmos with stable cash flow
generation. We have entered an agreement with Virax Biolabs to
become the distributor of Monkeypox Virus Real-Time PCR Detection
Kits, having the exclusive distribution rights for Greece and
Cyprus, with the opportunity to distribute the test kits across
Europe on a non-exclusive basis."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1474167/000147793222008554/cosm_10q.htm
About Cosmos Holdings
Cosmos Holdings Inc., together with its subsidiaries, is an
international pharmaceutical company with a proprietary line of
nutraceuticals and distributor of branded and generic
pharmaceuticals, nutraceuticals, over-the-counter (OTC)
medications
and medical devices through an extensive, established EU and UK
distribution network.
Cosmos Holdings reported a net loss of $7.96 million for the year
ended Dec. 31, 2021, compared to net income of $820,786 for the
year ended Dec. 31, 2020. As of June 30, 2022, the Company had
$47.84 million in total assets, $39.69 million in total
liabilities, $3.02 million in mezzanine equity, and $5.13 million
in total stockholders' equity.
San Francisco, California-based Armanino LLP, the Company's auditor
since 2019, issued a "going concern" qualification in its report
dated April 15, 2022, citing that the Company has suffered
recurring losses and cash used in operations that raises
substantial doubt about its ability to continue as a going concern.
CRYPTO CO: Incurs $416K Net Loss in Third Quarter
-------------------------------------------------
The Crypto Company has filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing a net loss
of $415,737 on $252,733 of revenue for the three months ended Sept.
30, 2022, compared to a net loss of $278,476 on $109,252 of revenue
for the three months ended Sept. 30, 2021.
For the nine months ended Sept. 30, 2022, the Company reported as
net loss of $4.82 million on $515,767 of revenue compared to a net
loss of $232,226 on $220,397 of revenue for the nine months ended
Sept. 30, 2021.
As of Sept. 30, 2022, the Company had $2.49 million in total
assets, $4.85 million in total liabilities, and a total
stockholders' deficit of $2.36 million.
Crypto Co stated, "The ability to continue as a going concern is
dependent upon us generating profitable operations in the future
and/or obtaining the necessary financing to meet our obligations
and repay our liabilities arising from normal business operations
when they come due. Management is evaluating different strategies
to obtain financing to fund our expenses and achieve a level of
revenue adequate to support our current cost structure. Financing
strategies may include but are not limited to, private placements
of capital stock, debt borrowings, partnerships, and/or
collaborations. There can be no assurance that any of these
future-funding efforts will be successful."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1688126/000149315222032030/form10-q.htm
About Crypto Company
Malibu, CA-based The Crypto Company -- www.thecryptocompany.com --
is in engaged in the business of providing consulting services and
education for distributed ledger technologies, for the building of
technological infrastructure, and enterprise blockchain technology
solutions.
Crypto Company reported a net loss of $785,630 for the 12 months
ended Dec. 31, 2021, compared to a net loss of $2.82 million for
the 12 months ended Dec. 31, 2020. As of June 30, 2022, the
Company had $2.36 million in total assets, $4.48 million in total
liabilities, and a total stockholders' deficit of $2.11 million.
CUSTOM ALLOY: Court OKs Cash Collateral Access Thru Nov 26
----------------------------------------------------------
The U.S. Bankruptcy Court for the District of New Jersey authorized
Custom Alloy Corporation and CAC Michigan, LLC to use the cash
collateral of CIBC Bank USA on an interim basis in accordance with
the budget.
The Debtors require the use of cash collateral to continue their
business operations without interruption.
Custom and CIBC have entered into secured financing arrangements
pursuant to a Loan and Security Agreement dated as of March 4,
2010. CAC Michigan guaranteed the amounts owed by Custom under the
Prepetition Loan Agreement.
As of the Petition Date, the outstanding aggregate principal amount
of the obligations owing by the Debtors to CIBC under the
Prepetition Documents, exclusive of all accrued interest, fees,
costs, expenses, charges, and other Obligations (including legal
fees and expenses) is not less than $25,966,330.
The Debtors' authorization -- and the consent of CIBC -- to the use
of cash collateral will terminate, at CIBC's election and without
further notice or Court order, upon the earlier of: (i) 11:59 pm on
November 26, 2022; or (ii) the occurrence of an Event of Default;
or (iii) three business days after CIBC has provided written notice
to Debtors of the occurrence of an Event of Default under Paragraph
11(a) of the Order.
As adequate protection, CIBC is granted a replacement lien under 11
U.S.C. section 361(2) on all assets of the Debtors arising after
the Petition Date in an amount equal to the aggregate diminution in
value (if any) of the Prepetition Collateral resulting from the
sale, lease, or use by Debtors of its Prepetition Collateral, or
the imposition of the automatic stay pursuant to Section 362 of the
Bankruptcy Code. The Replacement Lien granted (i) will be deemed
automatically valid and perfected without any further notice or act
by any party and (ii) will remain in full force and effect
notwithstanding any subsequent conversion or dismissal of either
Case.
To the extent the adequate protection provided proves insufficient
to protect CIBC's interest in and to cash collateral, CIBC will
have a super priority administrative expense claim, pursuant to 11
U.S.C. section 507(b), senior to any and all claims against Debtors
under 11 U.S.C. section 507(a), whether in this proceeding or in
any superseding proceeding, subject to payments due under 28 U.S.C.
section 1930(a)(6).
Each of these events constitutes an "Event of Default":
a. Either Debtor fails to perform any of its obligations with
respect to use of cash collateral in accordance with the terms of
the Order;
b. Either Case is converted to a case under chapter 7 of the
Code; or
c. A trustee is appointed or elected in either of the Cases,
or an examiner with expanded power to operate either of the
Debtor's business is appointed in any of the Debtor's respective
Case.
A copy of the order and the Debtor's budget is available at
https://bit.ly/3tTUIKX from PacerMonitor.com.
The Debtor projects $863,866 in total cash receipts and $35,000 in
total operating disbursements for the one-week period ending
November 26.
About Custom Alloy Corporation
Custom Alloy Corporation is a manufacturer of specialty metals for
seamless and welded pipe fittings & forgings, predominantly for
customers requiring time-critical maintenance or repair.
The Debtor sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. D. N. J. Case No. 22-18143) on October 13,
2022. In the petition signed by Adam M. Ambielli, CEO and
president, the Debtor disclosed up to $50 million in assets and up
to $100 million in liabilities.
Judge Michael B. Kaplan oversees the case.
Jonathan I. Rabinowitz, Esq., at Rabinowitz, Lubetkin & Tully, LLC,
is the Debtor's counsel.
DIMENSIONS IN SENIOR: Case Summary & 20 Top Unsecured Creditors
---------------------------------------------------------------
Debtor: Dimensions in Senior Living, LLC
122 N McKenna Avenue
Gretna, NE 68028
Case No.: 22-80860
Business Description: The Debtor, together with its affiliates,
owns and manages a series of senior living/
assisted living facilitated in Nebraska,
Iowa, Missouri, and Kansas.
Chapter 11 Petition Date: November 21, 2022
Court: United States Bankruptcy Court
District of Nebraska
Judge: Hon. Thomas L. Saladino
Debtor's Counsel: Patrick R. Turner, Esq.
TURNER LEGAL GROUP, LLC
139 S. 144th Street
Omaha, NE 68010
Tel: 402-690-3675
Email: pturner@turnerlegalomaha.com
Estimated Assets: $100,000 to $500,000
Estimated Liabilities: $1 million to $10 million
The petition was signed by Amy Wilcox-Burns as 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/TLOPQEQ/Dimensions_in_Senior_Living_LLC__nebke-22-80860__0001.0.pdf?mcid=tGE4TAMA
DIMENSIONS IN SENIOR: Files Emergency Bid to Use Cash Collateral
----------------------------------------------------------------
Dimensions In Senior Living, LLC, Village Ridge, LLC, Village
Place, LLC, WB Real Estate Of Iola, LLC, Humboldt Assisted Living
LLC, Wilcox Properties Of Columbia, LLC, and Wilcox Properties of
Fort Calhoun, LLC, ask the U.S. Bankruptcy Court for the District
of Nebraska for authority to use cash collateral and provide
adequate protection.
The Debtor requires the use of cash collateral to maintain and
preserve the value of the Debtors' assets.
The Debtors propose to use cash collateral on an interim basis
pursuant to the Budgets allowing Debtors to exceed any individual
line item as long as the total does not exceed 120% of the Budget
through March 31, 2023.
As of the petition date, the names of the entities asserting
interests in the Debtor's cash collateral are:
-- Humboldt Assisted Living, LLC does not possess secured
debts or secured lenders.
-- As of the Petition Date, all or substantially all of the
assets of Wilcox Properties of Fort Calhoun, LLC are, subject to 11
U.S.C. sections 506, 552, subject to the liens and security
interests of ANB as senior lender and NEDCO, as junior lender;
-- As of the Petition Date, all or substantially all of the
assets of WB Real Estate of Iola, LLC are, subject to 11 U.S.C.
sections 506, 552, subject to the liens and security interests of
ANB;
-- As of the Petition Date, all or substantially all of the
assets of Wilcox Properties of Columbia, LLC are, subject to 11
U.S.C. sections 506, 552, subject to the liens and security
interests of ANB;
-- As of the Petition Date, all or substantially all of the
assets of Village Place, LLC are, subject to 11 U.S.C. sections
506, 552, subject to the liens and security interests of ANB; and
-- As of the Petition Date, all or substantially all of the
assets of Village Ridge LLC are, subject to 11 U.S.C. sections 506,
552, subject to the liens and security interests of Berkadia.
Certain Debtors entered into various loan documents with ANB to
evidence a series of petition loan. To secure the ANB Pre-Petition
Indebtedness, certain Debtors granted ANB a security interest in
all of their respective assets.
The following constitute adequate protection for ANB:
a. Notwithstanding 11 U.S.C. section 552, ANB's liens and
security interests in the ANB Pre-Petition Collateral will continue
to attach to applicable Debtors' respective post-petition assets of
the same kind and to the same extent the liens were effective or
valid with respect to the ANB Pre-Petition Collateral;
b. The loan documents evidencing the ANB Pre-Petition
Indebtedness will remain in full force and effect to the same
extent the liens were effective or valid prior to the Petition
Date;
c. The Debtors will comply with all reporting requirements
under the loan documents evidenc ing the ANB Pre-Petition
Indebtedness and will furnish to ANB such additional information
respecting the financial condition and results of the operation of
the Debtors as ANB may reasonably request.
d. ANB and its agents will have the right to inspect the books
and records of Debtors and to inspect and appraise ANB's Collateral
during regular business hours and at such other times as are
mutually convenient; and
e. The Debtors will make no dividends, distributions or
payments to its shareholders, investors, employees, officers or
directors in excess of that in the Budget, if any.
Debtor Village Ridge, LLC entered into various loan documents with
Berkadia to evidence a series of petition loan. To secure the
Berkadia Pre-Petition Indebtedness, certain Debtor Village Ridge,
LLC, granted Berkadia a security interest in all of its respective
assets.
The following constitute adequate protection for Berkadia:
a. Notwithstanding 11 U.S.C. section 552, Berkadia's liens and
security interests in the Berkadia PrePetition Collateral will
continue to attach to Debtor Village Ridge, LLC's post-petition
assets of the same kind and to the same extent the liens were
effective or valid with respect to the Berkadia Pre-Petition
Collateral;
b. The loan documents evidencing the Berkadia Pre-Petition
Indebtedness will remain in full force and effect to the same
extent the liens were effective or valid prior to the Petition
Date;
c. Debtor Village Ridge, LLC will comply with all reporting
requirements under the loan documents evidencing the Berkadia
Pre-Petition Indebtedness and will furnish to Berkadia such
additional information respecting the financial condition and
results of the operation of the Debtor Village Ridge, LLC as
Berkadia may reasonably request;
d. Berkadia and its agents will have the right to inspect the
books and records of Debtor Village Ridge, LLC and to inspect and
appraise Berkadia's Collateral during regular business hours and at
such other times as are mutually convenient; and
e. Debtor Village Ridge, LLC will make no dividends,
distributions or payments to its shareholders, investors,
employees, officers or directors in excess of that in the Budget,
if any.
Debtor Wilcox Properties of Fort Calhoun, LLC entered into various
loan documents with NEDCO to evidence a series of petition loan. To
secure the NEDCO Pre-Petition Indebtedness, Debtor Wilcox
Properties of Fort Calhoun, LLC granted NEDCO a security interest
in all of their respective assets.
The following constitute adequate protection for NEDCO:
a. Notwithstanding 11 U.S.C. section 552, ANB's liens and
security interests in the NEDCO Pre-Petition Collateral will
continue to attach to Debtor Wilcox Properties of Fort Calhoun,
LLC’s postpetition assets of the same kind and to the same extent
the liens were effective or valid with respect to the NEDCO
Pre-Petition Collateral;
b. The loan documents evidencing the NEDCO Pre-Petition
Indebtedness will remain in full force and effect to the same
extent the liens were effective or valid prior to the Petition
Date;
c. Debtor Wilcox Properties of Fort Calhoun, LLC will comply
with all reporting requirements under the loan documents evidencing
the NEDCO Pre-Petition Indebtedness and will furnish to NEDCO such
additional information respecting the financial condition and
results of the operation of the Debtor Wilcox Properties of Fort
Calhoun, LLC as NEDCO may reasonably request;
d. NEDCO and its agents will have the right to inspect the
books and records of Debtor Wilcox Properties of Fort Calhoun, LLC
and to inspect and appraise ANB's Collateral during regular
business hours and at such other times as are mutually convenient;
and
e. Debtor Wilcox Properties of Fort Calhoun, LLC will make no
dividends, distributions or payments to its shareholders,
investors, employees, officers or directors in excess of that in
the Budget, if any.
A copy of the motion and the Debtor's budget is available at
https://bit.ly/3VpyoEu from PacerMonitor.com.
The budget provides for total expenses, on a monthly basis, as
follows:
$33,116 for November 2022;
$33,116 for December 2022;
$33,116 for January 2023;
$33,116 for February 2023; and
$33,116 for March 2023.
About Dimensions In Senior Living, LLC
Dimensions In Senior Living, LLC and affiliatse own and manage a
series of senior living/assisted living facilitated in Nebraska,
Iowa, Missouri, and Kansas.
The Debtor sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. D. Neb. Case No. 22-80860) on November 21,
2022. In the petition signed by Amy Wilcox-Burns, chief restructing
officer, the Debtor disclosed up to $500,000 in assets and up to
$10 million in liabilities.
Patrick R. Turner, Esq., at Turner Legal Group, LLC, represents the
Debtor as legal counsel.
DIVERSIFIED HEALTHCARE: S&P Cuts ICR to 'B' on Liquidity Pressure
-----------------------------------------------------------------
S&P Global Ratings lowered its issuer credit rating on Diversified
Healthcare Trust (DHC) to 'B' from 'BB-'. At the same time, S&P
lowered its issue-level rating on the company's senior unsecured
notes that aren't guaranteed to 'B' from 'BB-' and revised the
recovery rating to '3' from '4'. S&P's issue-level rating on its
guaranteed senior unsecured notes are lowered to 'BB-' from 'BB'.
S&P revised the recovery rating on these notes to '1' from '2'.
S&P placed all ratings on DHC, including the 'B' issuer credit
rating, on CreditWatch with negative implications, meaning we could
either lower or affirm the ratings.
Key credit metrics have remained pressured as the company's SHOP
portfolio has been slow to recover. The company's SHOP portfolio
has been pressured since the onset of the pandemic, with occupancy
declining significantly, and quarterly net operating income (NOI)
turning negative (compared to $48.2 million of NOI generated from
the SHOP portfolio during the fourth quarter of 2019). During the
second quarter of 2022, NOI improved to $6.5 million compared to
$0.2 million during the first quarter. Our expectation was for
gradual improvement throughout the remainder of 2022. However, NOI
materially declined in the third quarter to negative $5.8 million.
While revenues increased slightly quarter over quarter as occupancy
recovered, property operating expenses far outpaced revenue growth
as operators struggled with inflationary pressures affecting labor,
utilities, and food. Also straining NOI was the company's
investments in marketing and training in an effort to accelerate
occupancy gains, as well as the unforeseen impact of Hurricane Ian
on one of DHC's SHOP assets in Florida.
S&P Global Ratings-adjusted debt to EBITDA increased to almost 15x
as of Sept. 30, 2022, from 12.7x a quarter prior. The company's
adjusted fixed-charge coverage ratio also worsened, to 0.7x as of
Sept. 30, 2022, from 0.8x a quarter prior. While S&P believes that
favorable senior housing tailwinds still support DHC's operating
performance recovering to at least pre-pandemic levels, it will
take longer than previously expected.
Liquidity pressure looms with multiple upcoming 2024 maturities.
The company's $700 million fully drawn revolver is due in January
2024, with $113.6 million required to be repaid in January 2023.
While DHC has unrestricted cash to nearly cover these borrowings
completely, a long-term refinancing of the revolver is likely to be
challenging given current market conditions and poor recent
operating performance. Additionally, the company has $250 million
senior unsecured notes maturing in May of 2024 and could face
challenges raising new debt to refinance this maturity. While
overall, the company's capital structure is well-laddered and quite
manageable, there are significant short-term liquidity risks.
Furthermore, the company has not yet gotten back into compliance
with its covenants, with a waiver on its fixed charge coverage
ratio covenant included in its credit agreement in place through
Dec. 31, 2022. S&P expects the company to reach an amendment with
its lenders to extend the waiver period and to get an extension on
the revolver. However, if the company is unable to extend the
covenant waiver period and its revolver before it becomes current
in early 2023, it could further pressure our view of the company's
liquidity position.
S&P will seek to resolve the CreditWatch placement upon the
company's ability to extend the covenant waiver period and the
maturity of its revolving credit facility. At that time, S&P will
reassess DHC's liquidity position and how it might affect the
rating. The inability to successfully extend the covenant waiver
period and its revolving credit facility over the next two months
could result in a downgrade given concerns related to liquidity,
covenant compliance, and the company's ability to service its
debt.
ESG Credit Indicators: E-2, S-3, G-3
DOCUPLEX INC: Wins Cash Collateral Access Thru Jan 2023
-------------------------------------------------------
The U.S. Bankruptcy Court for the District of Kansas authorized
Docuplex, Inc. to use cash collateral, which has been pledged to
Equity Bank, on a final basis through January 31, 2022.
The Court said the deadline for the Debtor to file a chapter 11
plan for purposes of the default provisions of the Cash Collateral
Order is extended from December 1 to December 30, 2022.
In the event a motion concerning the Debtor's default under the
Cash Collateral Order is filed, the Debtor's use of cash collateral
while the motion is pending will extend beyond the Specified
Period.
All other provisions of the Cash Collateral Order will remain
applicable, enforceable, and binding.
As previously reported by the Troubled Company Reporter, Equity
Bank holds an alleged properly perfected first-priority security
interest in the cash collateral, as well as all other equipment,
furniture, and personal property of the Debtor. The U.S. Small
Business Administration holds an alleged properly perfected second
priority security interest in the Debtor's accounts receivables,
non-titled machinery and equipment, general intangibles, goods, and
other forms of personal property.
Other creditors may assert first priority purchase money security
interests in specific items of equipment, as follows:
1) Heidelberg USA, Inc. (S_Coating GTT C CD102B Large Bail --
claim totals $8,848.73);
2) Canon Financial Services, Inc. (certain leased printers --
assets not owned by Debtor);
3) Fujifilm North America Corporation (FLH85Z Plate Processor
S/N 94199-0158 and Chiller S/N 109079002 -- claim totals
$17,099.96);
4) TCF Equipment Finance (ST100 6 Pocket Stitcher and
Fennimore Punch System -- claim totals $807.21); and
5) Key Equipment Finance (2009 Screen PTR8600S Thermal
Platesetter -- claim amount is unknown).
As partial adequate protection, Equity was granted a valid,
automatically perfected replacement lien against the Debtor's
assets for the full amount of the cash collateral that is utilized
pursuant to the Order. The replacement liens will have the same
validity, avoidability and priority as the security interests and
liens existing against the cash collateral as of the date of the
Order on the Motion. The replacement liens will be valid and
perfected without the need for the execution, recording or filing
of any further document or instrument or the taking of any further
act otherwise required under nonbankruptcy law.
Equity, for its benefit, is granted, an additional and replacement
continuing valid, binding, enforceable, non-avoidable, and
automatically perfected post-petition security interest in and lien
on any and all presently owned and hereafter acquired personal
property and all other assets of the Debtors and the estate,
together with any proceeds thereof.
Equity will also receive from the Debtor, commencing not later than
September 30, 2022, and continuing monthly thereafter until a)
confirmation of a chapter 11 plan, b) dismissal of the case, c)
conversion of the case to another chapter, or d) subsequent order
of the Court, payments in the amount of $10,000 as adequate
protection.
A copy of the Debtor's order and budget is available at
https://bit.ly/3AA4q91 from PacerMonitor.com.
About Docuplex, Inc.
Docuplex, Inc. owns and operates a print and mailing company,
providing all varieties of commercial printing, finishing, and
direct mailing services. It is one of the largest providers of
these services in Wichita, Kansas. Docuplex does not own any real
property, but owns a significant amount of furniture, fixtures,
machinery, equipment, rolling stock, and inventory used in the
operation.
Docuplex sought protection under Chapter 11 of the U.S. Bankruptcy
Code (Bankr. D. Kan. Case No. 22-10734) on September 2, 2022. In
the petition signed by Gina Cherry, controller, the Debtor
disclosed up to $10 million in both assets and liabilities.
Judge Mitchell L. Herren oversees the case.
David Prelle Eron, Esq., at Prelle Eron & Bailey, P.A. is the
Debtor's counsel.
ELLDAN CORP: Wins Cash Collateral Access Thru Dec 14
----------------------------------------------------
The U.S. Bankruptcy Court for the District of Minnesota authorized
Elldan Corp. to use cash collateral on an interim basis through
December 14, 2022, and transfer bank funds to a
debtor-in-possession bank account.
The Debtor will use cash to pay ordinary and necessary business
expenses and administrative expenses.
Bremer Bank, Headway Capital, LLC, U.S. Small Business
Administration, and Rapid Financial Services, LLC dba Rapid Finance
may have an interest in the Debtor's cash collateral
As adequate protection, the Debtor will grant the Secured Creditors
replacement liens, to the extent of the Debtor's use of cash
collateral, in post-petition inventory, accounts, equipment, and
general intangibles, with the lien being of the same priority,
dignity, and effect as their respective pre-petition liens.
However, the replacement liens will exclude all causes of action
under Chapter 5 of the Bankruptcy Code.
The Debtor will also carry insurance on its assets.
A copy of the order is available at https://bit.ly/3hWM8bo from
PacerMonitor.com.
About Elldan Corp.
Elldan Corp. is a provider of personal care services. The Debtor
sought protection under Chapter 11 of the U.S. Bankruptcy Code
(Bankr. D. Minn. Case No. 22-31870) on November 10, 2022. In the
petition signed by Kevin Steele, president, the Debtor disclosed
$102,895 in assets and $1,277,041 in total liabilities.
Judge Kesha L. Tanabe oversees the case.
John D. Lamey III, Esq., at Lamey Law Firm, P.A., is the Debtor's
legal counsel.
FIRST TO THE FINISH: Wins Cash Collateral Access Thru Dec 14
------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of Illinois
authorized Michael E. Collins, the Chapter 11 Trustee for First to
the Finish Kim and Mike Viano Sports Inc., to use cash collateral
on an interim basis in accordance with the budget, with a 10%
variance.
The Chapter 11 Trustee requires the use of cash collateral to
minimize the disruption of the Debtor's business, operate the
business in an orderly manner, maintain business relationships with
vendors, suppliers, and customers, pay employees, and satisfy other
operational as well as working capital needs.
CNB Bank & Trust, N.A., Nike USA, Inc., and the Bank of Springfield
have asserted a perfected security interest in the Debtor's
bankruptcy estate.
The Trustee may access cash collateral through the termination
date, which is the earlier of:
(i) December 14, 2022;
(ii) the entry of an Order, on a "final" basis approving the
Trustee's use of cash collateral;
(iii) five business days after notice by any Secured Lender to
the Trustee of any "Termination Event," unless within the
five-business day-period the Trustee has cured the Termination
Event or unless waived by that Secured Lender,
(iv) the date of the dismissal of the Debtor's bankruptcy case
or the conversion of the Debtor's bankruptcy case to a case under
Chapter 7 of the Bankruptcy Code,
(v) the date a sale of substantially all of the Estate's
assets is consummated after being approved by the Court,
(vi) the effective date of any confirmed chapter 11 plan.
As adequate protection, the Secured Lenders will be granted access
to examine the books and records of the Debtor and take an
inventory of assets of the Estate. The parties will use their best
efforts to coordinate on mutually available dates and times to
avoid duplication and disruptions on the operations.
As further adequate protection, and only to the extent of (a) the
diminution of value of a Secured Lender's interest in the
Prepetition Collateral occurring from the Petition Date to the
Termination Date, and (b) the prepetition validity and priority of
each the Secured Lender's respective security interests in the
Prepetition Collateral, the Secured Lenders are granted valid and
perfected, security interests in, and liens including, but not
limited to, replacement liens on all of the right, title, and
interest of the Estate.
As further adequate protection, the Chapter 11 Trustee will take
reasonable steps to preserve any and all rights of the Estate in
FTTF Health Supply, LLC from the sale of personal protective
equipment and related items and will seek documentation regarding
any receivables held by FTTF Health Supply, Inc.
The Adequate Protection Liens granted in the Postpetition
Collateral, including the cash collateral, in the First Cash
Collateral Order remain in full force and effect. All rights and
extensions granted to Nike in the First Cash Collateral Order and
Interim Orders remain in force and effect.
A final telephonic hearing on the matter is set for December 14 at
10 a.m.
A copy of the order is available for free at https://bit.ly/3Vm3tsW
from PacerMonitor.com.
About First to the Finish Kim
and Mike Viano Sports Inc.
First to the Finish Kim and Mike Viano Sports Inc. sells sporting
goods, hobbies, and musical instruments.
First to the Finish Kim and Mike Viano Sports filed its voluntary
petition for relief under Chapter 11 of the Bankruptcy Code (Bankr.
S.D. Ill. Case No. 20-30955) on October 7, 2020. The petition was
signed by Mike Viano, president. At the time of filing, the Debtor
estimated $1 million to $10 million in both assets and
liabilities.
Judge Laura K. Grandy oversees the case.
The Debtor is represented by Carmody MacDonald P.C.
The Chapter 11 Trustee, Michael E. Collins, is represented by
Manier & Herod, P.C.
CNB Bank & Trust, N.A., as secured lender, is represented by Silver
Lake Group, Ltd. Nike USA, Inc., also a secured lender, is
represented by A.M. Saccullo Legal, LLC.
GLATFELTER CORP: Moody's Cuts CFR to Caa1 & First Lien Debt to B1
-----------------------------------------------------------------
Moody's Investors Service downgraded Glatfelter Corporation's
corporate family rating to Caa1 from B1, probability of default
rating to Caa1-PD from B1-PD, senior unsecured notes rating to Caa2
from B2, senior secured first lien revolving credit facility and
term loan to B1 from Ba2, and speculative grade liquidity rating to
SGL-4 from SGL-3. Moody's ratings outlook remains negative.
The downgrade of the CFR reflects Moody's view that Glatfelter's
liquidity is weak and it will worsen in the next 12-15 months if
the company does not refinance its February 2024 term loan
maturity. In addition, Moody's believe the tightening of the
company's net leverage covenant to 4x (net leverage was 5.7x as of
September 2022) beyond December 2023 poses additional liquidity
risk. Moody's expect high raw materials costs such as pulp and
energy prices will continue to pressure the company's margins
amidst a challenging operating environment in Europe and potential
slowdown in demand and adverse consumers sentiment. This will
likely result in high leverage at around 8x in 2023 which combined
with tighter credit conditions and material decrease in the
company's equity value reduce, in Moody's view, Glatfelter's
prospect for external funding.
Downgrades:
Issuer: Glatfelter Corporation
Corporate Family Rating, Downgraded to Caa1 from B1
Probability of Default Rating, Downgraded to Caa1-PD from B1-PD
Speculative Grade Liquidity Rating, Downgraded to SGL-4 from
SGL-3
Senior Secured 1st Lien Bank Credit Facility, Downgraded to B1
(LGD2) from Ba2 (LGD2)
Senior Unsecured Regular Bond/Debenture, Downgraded to Caa2 (LGD5)
from B2 (LGD5)
Outlook Actions:
Issuer: Glatfelter Corporation
Outlook, Remains Negative
RATINGS RATIONALE
Glatfelter CFR (Caa1) is constrained by weak liquidity with
significant near term debt maturities (February 2024) and
tightening financial covenants (net leverage covenant steps down to
4x in March 2024); high leverage at around 9x (LTM Q3 2022 pro
forma for recent acquisitions) which Moody's expects will remain
elevated in 2023; lack of meaningful backward integration and
exposure to volatile input prices and cost inflation (market pulp,
synthetic fibers, and energy costs) mainly at its composite fibers
business; and competitive end markets (such as feminine hygiene and
single-serve coffee filters) with large competitors and buyers.
Glatfelter's rating benefits from leading market positions in
several niche segments of the composite fibers and airlaid
materials forest products subsectors; global diversity, with
operating platforms in Europe and North America; and decent demand
growth for most of its products.
Glatfelter's has weak liquidity (SGL-4) with about $80 million of
available liquidity (after minimum $50 million liquidity
requirement) to cover about $215 million of mandatory debt
repayments through March 2024. At September 2022, sources include
about $45 million of cash (after minimum $50 million liquidity
requirement), $32 million of availability under its committed $400
million revolving credit facility, which matures in September 2026,
and about $5 million of Moody's expected positive free cash flow
through March 2024. The company has limited headroom under its most
restrictive financial covenants with maximum net leverage ratio of
6.75x (5.7x as of September 2022), which steps down to 4x after
December 2023. Moody's expects the covenant step down and the
company's $180 million (outstanding) term loan maturity in February
2024 will constrain the company's liquidity.
The negative outlook reflects uncertainty around the company's
ability to address its financial covenant step down in early 2024
which coincides with its February 2024 term loan maturity. Moody's
expect the company's credit metrics and liquidity will remain weak
through 2023, which combined with tighter credit conditions, fuels
the uncertainty around Glatfelter's ability to secure external
funding or negotiate favorable financing terms.
The B1 ratings on Glatfelter's $400 million senior secured
revolving credit facility and $180 million term loan are three
notches above the Caa1 CFR, reflecting the first lien security on
substantially all domestic assets of the company and their priority
over the company's senior unsecured obligations. The Caa2 rating on
the company's $500 million senior unsecured notes are one notch
below the CFR, reflecting the noteholders' subordinate position in
the company's capital structure behind the secured obligations.
Glatfelter Corporation's ESG Credit Impact Score is very highly
negative (CIS-5), reflecting the company's highly negative
governance risks stemming from high financial leverage and weak
liquidity. Environmental and social risks as have a limited impact
on the current rating. As a manufacturing company, Glatfelter is
exposed to physical climate, natural capital, pollution risks and
health and safety issues, with a greater potential for future
negative impact over time. The company's recent acquisition of
spunlace business, a global manufacturer of nonwoven fabrics, has
slightly increase Glatfelter's exposure to petroleum based
feedstock.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Factors that could lead to a downgrade
- Inability to timely address financial covenant step down
or the February 2024 term loan maturity before it
becomes current
- Persistent negative free cash flow or further deterioration
in operating performance
Factors that could lead to an upgrade
- The company is able to successfully address its financial
covenant step down and February 2024 term loan maturity
- Glatfelter would need to improve and sustain its leverage
below 6.5x and EBITDA margins sustained above 10% based
on Moody's forward view
- Improved liquidity
Headquartered in Charlotte, North Carolina, Glatfelter is a
manufacturer of fiber-based engineered materials. The company's
sales LTM September 2022 were about $1.4 billion.
The principal methodology used in these ratings was Paper and
Forest Products published in December 2021.
GOBP HOLDINGS: Moody's Affirms 'B1' CFR, Outlook Remains Stable
---------------------------------------------------------------
Moody's Investors Service downgraded GOBP Holdings, Inc.'s ("GOBP",
the parent of Grocery Outlet Inc.) speculative grade liquidity
("SGL") to SGL-3 from SGL-1. At the same time, Moody's affirmed
all of GOBP's ratings, including its B1 corporate family rating,
B1-PD probability of default rating and B1 senior secured first
lien term loan and senior secured revolving credit facility. The
outlook remains stable.
The downgrade of GOBP's speculative-grade liquidity rating to SGL-3
(adequate) from SGL-1 (very good) reflects that its $100 million
revolving credit facility matures in less than 12 months on October
23rd, 2023 which potentially eliminates GOBP's external liquidity.
However, GOBP's liquidity remains adequate as the revolver is
currently undrawn, the company had unrestricted balance sheet cash
of $107 million at October 1, 2022 and generated $43 million of
free cash flow for the twelve months ended October 1, 2022.
The affirmation of the company's CFR reflects belief that GOBP's
operating performance will remain relatively stable, as many
consumers will be attracted to the company's extreme value
proposition in light of the uncertain macro-economic environment
and ongoing inflation. Moody's also believes that GOBP will keep a
conservative capital structure with no intention to pursue
leveraging transactions.
Downgrades:
Issuer: GOBP Holdings, Inc.
Speculative Grade Liquidity Rating, Downgraded to SGL-3 from
SGL-1
Affirmations:
Issuer: GOBP Holdings, Inc.
Corporate Family Rating, Affirmed B1
Probability of Default Rating, Affirmed B1-PD
Senior Secured Bank Credit Facilities, Affirmed B1 to (LGD4) from
(LGD3)
Outlook Actions:
Issuer: GOBP Holdings, Inc.
Outlook, Remains Stable
RATINGS RATIONALE
GOBP's B1 CFR reflects its small scale relative to larger, better
capitalized peers, low barriers to entry and relatively high
financial leverage with debt/EBITDA of about 4.8x. While product
cost inflation and increased labor, shipping and transportation
costs will be headwinds over the next 12 months Moody's expects
leverage to decline further to about 4.6x. This improvement
reflects management's continued focus on sharpening its customer
value proposition and competitive price positioning accompanied by
new store growth, which will result in consistent same store sales
and earnings growth as has been the case in the last several years.
In addition, sales of high margin natural, organic and specialty
products have increased and management continues to make
opportunistic inventory purchases at attractive prices. Positive
rating factors also include GOBP's attractive market niche and a
solid track record of organic and new store growth. The company
prepaid $75 million of its senior secured term loan in April
through cash on hand and has $385 million of principal remaining.
The stable outlook reflects Moody's expectation that the company's
operating performance and credit metrics will continue to improve
due to increased profitability driven by organic and new store
growth. The outlook also reflects Moody's belief that GOBP will
maintain adequate liquidity and will seek to refinance its
revolving credit facility over the next 3-6 months.
Moody's has revised GOBP's Credit Impact Score to a CIS-4 from a
CIS-3 and its governance issuer profile score to a G-4 from a G-3.
This reflects GOBP's aggressive financial strategy and risk
management. The company's $100 million revolving credit facility
will expire in less than 12 months in October 2023, and if not
renewed in a timely manner will have a negative impact on its
liquidity. GOBP continues to face a moderately negative exposure
to environmental risks mainly reflecting its exposure to carbon
transition, natural capital and physical climate risks. The
company's relatively small scale (as compared to peers), limits its
ability to offset physical climate risk associated with its
locations. GOBP also continues to face neutral to low exposure to
social risks mainly driven by its moderately negative exposure to
responsible production and customer relations.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade would require stability in margins, consistent same
store sales growth, and a material improvement in credit metrics
while maintaining good liquidity. Quantitatively, ratings could be
upgraded if EBIT/interest is sustained above 2.5x and debt/EBITDA
is sustained around 4.25x.
Ratings could be downgraded if same store sales and profitability
demonstrate a declining trend, financial policies become aggressive
or if liquidity deteriorates. Quantitatively ratings could be
downgraded if EBIT/interest is sustained below 1.75 times or if
debt/EBITDA is sustained above 5.0x.
Headquartered in Emeryville, CA, GOBP Holdings, Inc. is an
extreme-value retailer of food, beverages, and consumer goods. The
company operates 431 stores in CA, OR, WA, ID, NV, NJ and PN. The
company is publicly owned. Revenue for the last twelve months ended
October 1, 2022 was approximately $3.4 billion.
The principal methodology used in these ratings was Retail
published in November 2021.
GORDIAN MEDICAL: Moody's Lowers CFR & Senior Secured Debt to Caa1
-----------------------------------------------------------------
Moody's Investors Service downgraded the ratings of Gordian
Medical, Inc. including the Corporate Family Rating to Caa1 from
B3, and the Probability of Default Rating to Caa1-PD from B3-PD.
Moody's also downgraded the ratings on the senior secured credit
facilities to Caa1 from B2. The outlook remains stable.
The ratings downgrade reflects continued deterioration in Gordian's
operating performance and weakened liquidity. Moody's views that
Gordian's wound care business will continue to experience
headwinds, including reduced profitability due to patient
transition from Medicare to Medicare Advantage, continued labor
cost pressure, and uncertainty over the final outcome of the
on-going CMS investigations. As a result, Moody's expects that
Gordian will have high leverage (at around 7x) and is weakly
positioned to absorb future unexpected operating setbacks in light
of the company's weakened liquidity as Gordian may need to draw on
the revolver in the fourth quarter of 2022 to fund operational
expenses.
Social risk considerations are material to the rating action.
Gordian faces high social risk reflecting the high reliance on
Medicare and the need to maintain proper controls and compliance
procedures. The company has been the subject of several audits by
the CMS with some findings. In response, the company had to change
its selection of products which had a negative impact on the
company's operating performance. The company's profitability has
also been affected by rising labor cost.
Downgrades:
Issuer: Gordian Medical, Inc.
Corporate Family Rating, Downgraded to Caa1 from B3
Probability of Default Rating, Downgraded to Caa1-PD from B3-PD
Senior Secured Revolving Credit Facility, Downgraded to Caa1
(LGD4) from B2 (LGD3)
Senior Secured Term Loan B, Downgraded to Caa1 (LGD4) from B2
(LGD3)
Outlook Actions:
Issuer: Gordian Medical, Inc.
Outlook, Remains Stable
RATINGS RATIONALE
Gordian Medical's Caa1 CFR reflects the company's high leverage and
modest scale with revenue of approximately $240 million. It also
reflects the company's narrow business focus on wound care
treatment in two primary settings, Skilled Nursing Facilities
("SNFs") and wound clinics. Gordian has some payor concentration
with Medicare accounting for approximately one-third of revenue.
The rating is also constrained by a recent deterioration in
operating profitability due to higher costs, notably labor costs,
and changes in the company's product mix. Moody's expects adjusted
debt/EBITDA will increase to just above 7x in 2022 and Gordian will
not generate positive free cash flow in 2022 after expansion capex
and tax payments to cover sales tax that was unpaid by Gordian's
previous owner.
The rating is supported by favorable fundamentals for the wound
care industry including ageing population, growing incidence of
chronic illnesses, and a stable reimbursement environment. Given
Gordian's profit margins and modest capital requirements, Moody's
expects the company to generate small positive free cash flow in
2023.
Moody's expects Gordian to have adequate liquidity over the next
12-18 months. Moody's expects that Gordian will not generate any
positive free cash flow in 2022 and will rely on its $40 million
revolving credit facility. This facility, which was undrawn as of
September 30, 2022, matures in 2026 and has a springing First Lien
Net Leverage Covenant of 4.75x when 40% drawn. If tested, Moody's
expect Gordian to have limited headroom due to low EBITDA levels.
Gordian has interest rate exposure as its debt is fully variable.
Alternative sources of liquidity are limited as substantially all
assets are pledged. There is no financial covenant on the term
loan.
The rating of the senior secured credit facilities is in line with
the CFR at Caa1. The rest of the capital structure is comprised of
an unrated $32 million Unsecured Seller Note and a $73 million
unrated Subordinated Seller Deferred Consideration.
The stable outlook reflects Moody's expectation that Gordian's
leverage will remain high at close to 7x over the next 12-18 month,
and that operating performance will gradually stabilize.
ESG CONSIDERATIONS
Gordian's ESG credit impact score is very highly negative (CIS 5),
reflecting highly negative exposure to social risk considerations
(S-4) with a high reliance on Medicare and the need to maintain
proper controls and compliance procedures to avoid dispute with
CMS. The company is also exposed to labor shortages and cost
inflation as it uses skilled healthcare labor force. Nevertheless,
the aging of the US population and rising prevalence of diabetes, a
primary driver of complex wounds, are trends that are favorable for
Gordian. In addition, Gordian has very highly negative exposure to
governance considerations (G-5) driven by its aggressive financial
policies under private equity ownership, reflected in high debt
levels following the acquisition of RestorixHealth in 2021.
Furthermore, the recent CMS audit has brought to light compliance
issues which negatively weigh on its credit profile, and has
adversely impacted the company's profitability.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Ratings could be downgraded if the company fails to improve
operating performance, or if liquidity further deteriorates, making
its capital structure increasingly unsustainable. The rating could
also be downgraded if the company's financial policies become more
aggressive.
Ratings could be upgraded if Gordian successfully manages to grow
earnings, improves liquidity and generate positive free cash flow.
An upgrade would also be supported by demonstration of conservative
financial policies including a reduction in leverage. Specifically,
the ratings could be upgraded if adjusted debt to EBITDA was
sustained below 6 times.
Gordian Medical, Inc. is a leading provider of specialized wound
care supplies and related clinical education services in the United
States. The Company operates in the post-acute care space as a
clinically oriented provider of wound care management and ostomy,
urology and tracheostomy supplies and services. Gordian generates
revenue of approximately $240 million.
The principal methodology used in these ratings was Business and
Consumer Services published in November 2021.
GTT COMMUNICATIONS: Gets OK to Hire PwC as Accounting Advisor
-------------------------------------------------------------
GTT Communications, Inc. and its affiliates received approval from
the U.S. Bankruptcy Court for the Southern District of New York to
employ PricewaterhouseCoopers, LLP as accounting advisory services
provider.
The firm's services include:
(a) Training and Examples. Advise GTT on the scope of
accounting and financial reporting changes introduced by its
Bankruptcy pursuant to ASC 852 -- Reorganizations. If requested,
advise GTT in its preparation and facilitation of technical
training for certain GTT personnel (selected by GTT) to enhance
GTT's understanding of the scope of changes introduced by the
Bankruptcy, including:
-- The accounting and reporting framework requirements
of the standard that span the evolution of the bankruptcy
proceedings;
-- The difference between ASC 852 and existing
accounting standards, based on authoritative guidance;
-- Examples of redacted public registrant filings which
include the application of ASC 852 and other bankruptcy related
financial statement presentation and disclosure items within; and
-- Examples of publicly available bankruptcy accounting
guides which outline the application of the relevant US GAAP that
applies to entities in bankruptcy and upon emergence.
(b) Accounting Advice. Analyze and advise GTT on certain
accounting and reporting issues related to its bankruptcy, based on
information and facts provided by GTT, including, if requested,
technical accounting analyses and advice on possible alternative
accounting and reporting treatments that may be available for GTT's
consideration. These services will be mutually agreed upon and may
include:
-- Accounting and financial reporting pursuant to ASC
852 -- Reorganizations;
-- Debt financing arrangements pursuant to ASC 470 –
Debt;
-- Presentation of financial statements pursuant ASC 205
Presentation of Financial Statements;
-- Purchase accounting matters pursuant to ASC 805 --
Business Combination;
-- Revenue recognition matters pursuant to ASC 606 -
Revenue from contracts with customers; and other related
interpretations;
-- Leasing related matters pursuant to ASC 842 - Leases,
including identification of embedded leases in revenue and service
arrangements;
-- Matters pertaining to asset retirement obligations
pursuant to ASC 410 – Asset Retirement and Environmental
Obligations;
-- Matters pertaining to accounting for fixed assets
(including the depreciation of such assets) pursuant to ASC 360 -
Property, Plant, and Equipment;
-- Matters pertaining to accounting for Inventory
pursuant to ASC 330 - Inventory;
-- Matters pertaining to recognition of accounts
receivable allowances pursuant to ASC 326 - Current expected credit
loss standard (CECL);
-- Consolidation accounting pursuant to ASC 810 --
Consolidation;
-- Goodwill and other intangibles pursuant to ASC 350 --
Intangibles -- Goodwill and other;
-- Derivatives and hedging pursuant to ASC 815 --
Derivatives and Hedging, including embedded derivatives;
-- Preferred stock classification pursuant to ASC 480 --
Distinguishing Liabilities from Equity;
-- Treasury matter pursuant to ASC 320 -- Investments --
Debt and Equity Securities;
-- Stock-based compensation pursuant to ASC 718 --
Stock-based compensation;
-- Financial Instrumentals pursuant to ASC 825 --
Financial Instruments;
-- Determination of functional currency pursuant to ASC
839 -- Foreign Currency Matters; and
-- Taxes pursuant to ASC 740 -- Income Taxes.
(c) Valuation Advisory Services. Provide high level, generic
advice to GTT on certain valuation matters that GTT may consider
related to its fresh-start reporting upon emergence from bankruptcy
related to beginning balance of the post-emergence entity. These
services will be mutually agreed upon and may include:
-- Providing high level, generic advice and examples
from the applicable accounting literature (e.g., ASC 820, fair
value), or other publicly available information, as requested by
GTT;
-- Providing high level, generic advice to GTT regarding
the valuation methodologies used to calculate the fair value of
tangible assets, intangible assets, goodwill and liabilities
subject to GTT’s valuation in fresh-start accounting; and
-- Providing high level, generic advice to GTT regarding
the assumptions used by GTT to calculate the fair value of tangible
assets, intangible assets, goodwill and liabilities subject to
GTT’s valuation in fresh-start accounting.
(d) Financial Reporting and Disclosure. Advise GTT on certain
potential financial reporting and SEC filing matters that GTT may
consider related to its bankruptcy. These services will be mutually
agreed upon and may include:
-- Provide generic advice, and examples from the
applicable accounting literature (e.g., ASC 852, reorganizations),
public company disclosures, SEC comment letters, or other publicly
available information, as requested by GTT;
-- Provide advice to GTT on an analysis of its general
ledger accounts to address the following accounting and financial
reporting matters pursuant to ASC 852, Reorganization related to
the bankruptcy transaction:
-- Cut-off assessments: Identification of potential
accounts impacted by the timing and proceedings of the bankruptcy
transaction (e.g., petition date, emergence date);
-- Liabilities Subject to Compromise: Identification of
accounts to be considered for classification to liabilities subject
to compromise; and
-- Reorganization items, net: Identification of
transactions to be recognized within the Statement of Operations as
Reorganization items, net including GTT's revenues, expenses,
realized gains and losses, and provisions for losses as a result
of, or attributed to, the reorganization proceedings.
-- Advising GTT on the potential impact of the
Bankruptcy on GTT's existing financial reporting and data gathering
processes, including the potential impact on GTT's systems;
-- Reading and commenting on GTT prepared document
drafts e.g., draft financial statement disclosures and
presentation, drafts of potential SEC comment letter responses
(consistent with the Services performed);
-- Reading and commenting on GTT prepared SEC filing
documents, including management discussion and analysis ("MD&A");
and
-- Advising on pro-forma financial information non-GAAP
measures and key performance indicators (KPI) related to GTT
accounting and financial reporting matters. GTT is responsible for
the determination, identification, and definition of any pro forma
financial information, non-GAAP measures, or KPIs.
(e) Bankruptcy Business Processes: Advise GTT on the
potential impact of the Bankruptcy on certain of GTT's current
accounting and financial reporting policies, procedures, systems,
and processes, based on authoritative guidance. These Services will
be mutually agreed upon and may include:
-- Providing observations based upon GTT's design and
operation of bankruptcy related business processes; and
-- Reading and commenting on GTT prepared bankruptcy
related business process documentation, including narratives, white
papers and matrices developed by GTT to memorialize their business
process activities.
(f) Court Dockets. Read the listing of court dockets and
advise GTT on certain potential accounting matters that GTT may
consider related to the Bankruptcy including, if requested,
technical accounting advice and advice on specific matters,
including:
-- First day motions and orders;
-- Debt and debt-like items; and
-- Executory contracts and leases.
(g) Transaction Agreements. Read GTT's transaction agreements
and comment on certain accounting considerations, including, if
applicable:
-- Debt and debt-like items;
-- Equity and Rights offering;
-- Backstop commitments;
-- Warrants;
-- Stock Compensation;
-- Restructuring transactions;
-- Covenants;
-- Application of troubled debt restructuring, debt
modification, and/or debt extinguishment; and
-- Balance sheet classification of the instruments.
(h) Fresh-Start Reporting - Advise and assist GTT on its
application of fresh-start reporting pursuant to ASC 852 --
Reorganizations, including:
-- Advising and assisting GTT with its determination of
its qualification for fresh-start reporting using (i) Solvency Test
and (ii) Change in Control test;
-- Advising GTT with its assessment of the use of an
alternative date (convenience date) to apply fresh-start reporting;
and
-- Advising GTT with its selection of new accounting
policies as a result of the application of fresh-start reporting.
(i) Accounting for Emergence (4-Column Balance Sheet). Advise
and assist GTT with its analysis of certain transactions related to
its emergence from bankruptcy, including transactions included in
its 4-column balance sheet, including:
-- Analyzing GTT's general ledger accounts to identify
accounts that may be impacted by the bankruptcy transaction and/or
subject to adjustment by the application of fresh-start reporting;
-- Analyzing GTT's general ledger to identify accounts
that may be considered to be subject to valuation procedures;
-- Analyzing GTT's plan of reorganization to identify
potential accounting implications; and
-- Assisting GTT with its drafting of accounting entries
and supporting documentation.
The hourly rates charged by the firm for its services are as
follows:
Partner $1,105
Managing Director $1,045
Director $945
Senior Manager $835
Manager $735
Senior Associate $625
Associate $525
Rajeeb Das, a partner at PwC, disclosed in court filings that his
firm is "disinterested" as defined in Section 101(14) of the
Bankruptcy Code.
The firm can be reached through:
Rajeeb Das
PricewaterhouseCoopers, LLP
300 Madison Ave
New York, NY 10017
Phone: (646) 471-4000
Fax: (646) 471-3188
About GTT Communications Inc.
Headquartered in McLean, Va., GTT Communications, Inc. --
http://www.gtt.net/-- owns and operates a global Tier 1 Internet
network and provides a comprehensive suite of cloud networking
services.
GTT and its affiliates sought Chapter 11 protection (Bankr.
S.D.N.Y. Lead Case No. 21-11880) on Oct. 31, 2021, to implement a
prepackaged Chapter 11 plan. GTT had total assets of $2.8 billion
and total debt of $4.1 billion as of June 30, 2021. As of the
petition date, the Debtors had pre-bankruptcy funded indebtedness
totaling $2.015 billion.
Judge Michael E. Wiles oversees the cases.
The Debtors tapped Akin Gump Strauss Hauer & Feld, LLP as legal
counsel; TRS Advisors as financial advisor and investment banker;
The Siegfried Group, LLP as accounting and financial resource
services provider; Ernst & Young LLP as tax, valuation and
accounting and advisory services provider; and Alvarez & Marsal,
LLC as restructuring advisor. Brian Fox, Alvarez & Marsal's
managing director, serves as the Debtors' chief restructuring
officer. Prime Clerk, LLC is the claims agent and administrative
advisor.
On Dec. 16, 2021, the court approved the Debtors' disclosure
statement and confirmed their joint prepackaged Chapter 11 plan of
reorganization.
H-CYTE INC: Incurs $2.3 Million Net Loss in Third Quarter
---------------------------------------------------------
H-Cyte, Inc. has filed with the Securities and Exchange Commission
its Quarterly Report on Form 10-Q disclosing a net loss of $2.28
million on $0 of revenues for the three months ended Sept. 30,
2022, compared to a net loss of $586,611 on $460,216 of revenues
for the three months ended Sept. 30, 2021.
For the nine months ended Sept. 30, 2022, the Company reported a
net loss of $8.81 million on $453,460 of revenues compared to a net
loss of $4.05 million on $1.28 million of revenues for the nine
months ended Sept. 30, 2021.
As of Sept. 30, 2022, the Company had $240,559 in total assets,
$8.39 million in total liabilities, and a total stockholders'
deficit of $8.15 million.
H-Cyte said, "The Company has historically incurred losses from
operations and expects to continue to generate negative cash flows
as it implements its plan around the Biosciences Division.
"COVID-19 has adversely affected the Company's financial condition
and results of operations. The impact of the outbreak of COVID-19
on the economy in the U.S. and the rest of the world is expected to
continue to be significant. The extent to which the COVID-19
outbreak will continue to impact the economy is highly uncertain
and cannot be predicted. Accordingly, the Company cannot predict
the extent to which its financial condition and results of
operations will be affected.
"The Company had cash on hand of approximately $37,000 as of
September 30, 2022, and approximately $30,000 as of November 14,
2022. The Company's cash is insufficient to fund its operations
over the next year and the Company is currently working to obtain
additional debt or equity financing to help support working capital
needs.
"There can be no assurance that the Company will be able to raise
additional funds or that the terms and conditions of any future
financings will be workable or acceptable to the Company or its
shareholders. If the Company is unable to fund its operations from
existing cash on hand, operating cash flows, additional borrowings,
or raising equity capital, the Company may not continue
operations."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1591165/000149315222031927/form10-q.htm
About H-CYTE Inc.
Headquartered in Tampa, Florida, H-CYTE Inc. --
http://www.HCYTE.com-- is a hybrid-biopharmaceutical company
dedicated to developing and delivering new treatments for patients
with chronic respiratory and pulmonary disorders.
H-Cyte reported a net loss of $4.80 million for the year ended Dec.
31, 2021, compared to a net loss of $6.46 million on $2.15 million
of revenues for the year ended Dec. 31, 2020. As of June 30, 2022,
the Company had $305,691 in total assets, $6.88 million in total
liabilities, and a total stockholders' deficit of $6.58 million.
Tampa, Florida-based Frazier & Deeter, LLC, the Company's auditor
since 2018, issued a "going concern" qualification in its report
dated Feb. 25, 2022, citing that he Company has negative working
capital, has an accumulated deficit, has a history of significant
operating losses and has a history of negative operating cash flow.
These factors raise substantial doubt about the Company's ability
to continue as a going concern.
HANESBRANDS INC: Moody's Alters Outlook on 'Ba2' CFR to Negative
----------------------------------------------------------------
Moody's Investors Service, Inc. changed Hanesbrands, Inc.'s
("Hanesbrands") and Hanesbrands Finance Luxembourg S.C.A's ("HF
Lux") outlook to negative from stable. Moody's also downgraded
Hanesbrands' speculative grade liquidity rating (SGL) to SGL-3 from
SGL-2. At the same time, Moody's affirmed Hanesbrands' ratings,
including the Ba2 corporate family rating and Ba2-PD probability of
default, the Ba3 senior unsecured rating and the Ba2 senior
unsecured rating at the HF Lux entity.
The outlook change to negative reflects Moody's view that the
company's credit metrics will continue to weaken in 2022 due to
soft customer demand, high inventory levels and still elevated
input costs. These factors have led Moody's adjusted debt/EBITDA to
increase to 4.6x for the LTM ending Oct 1, 2022 from 3.3x at
year-end 2021. Moody's EBITA/interest has also eroded to 4.3x from
5.0x over the same time period. Moody's anticipates leverage to
further increase to >5.0x and EBITA/Interest coverage to decline
to
HAVERLAND CARTER: Fitch Alters Outlook on 'BB+' LongTerm IDR to Neg
-------------------------------------------------------------------
Fitch Ratings has affirmed the 'BB+' Issuer Default Rating (IDR)
and revenue bond rating on various series of debt issued by the New
Mexico Hospital Equipment Loan Council and Oklahoma Development
Finance Authority on behalf of members of the Haverland Carter
Obligated Group (OG). Fitch has also affirmed its 'BB+' rating on
$6 million in subordinate senior living revenue bonds series 2017B
guaranteed debt obligations issued by the Colorado Health
Facilities Authority on behalf of Haverland Carter Ralston Creek,
LLC (HCRC).
The Rating Outlook has been revised to Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
Haverland Carter
Obligated Group (NM) LT IDR BB+ Affirmed BB+
Haverland Carter
Obligated Group
(NM) /General
Revenues/1 LT LT BB+ Affirmed BB+
SECURITY
The bonds issued on behalf of the OG are secured by a first
mortgage on the OG's properties, a pledge of the OG's gross
revenues and debt service reserve funds. (DSRFs)
The series 2017B bonds are secured by a pledge of gross revenues of
HCRC and a guaranty agreement by the OG. Under the guaranty
agreement, the OG guarantees the payment of P&I on HCRC's 2017B
bonds. There is no DSRF supporting the 2017B bonds.
ANALYTICAL CONCLUSION
The affirmation of the 'BB+' IDR and outstanding debt ratings
reflects the solid market position of the OG's two life plan
communities (LPCs) as the only Type-A life care providers in their
respective primary service areas and the OG's adequate liquidity as
seen in the 31.9% cash to adjusted debt and 322 days cash on hand
(DCOH) as of Sept. 30, 2022. Fitch has revised the Outlook to
Negative as lower than budgeted occupancy and inflated labor
expenses has produced weak cash flow and only 0.6x coverage of
maximum annual debt service (MADS; according to Fitch's
calculations) through the interim period (six months ended Sept.
30, 2022). The OG is expected to generate gradual improvements in
both independent living and healthcare occupancy through marketing
and sales strategies introduced by Haverland Carter Lifestyle
Group's new Corporate Director of Sales and Marketing. Given the
weak profitability through the interim period, the OG will have to
sustain positive sales momentum through the rest of FY23 to improve
its debt service coverage to be at or above the 1.2x covenant by
FYE23 (March 30 YE).
KEY RATING DRIVERS
Revenue Defensibility: 'bbb'
Softer Occupancy Recovering in FY23; Good Market Position
The OG's midrange revenue defensibility reflects its good
historical demand indicators as well as La Vida Llena (LVL) and The
Neighborhood in Rio Rancho's (NIRR) solid positions as the only
Type-A LPCs in their respective primary service areas. Both
communities primarily compete against rental communities that do
not provide the combination of an entrance fee contract and the
full continuum of care, which Fitch views as a differentiating
factor.
Occupancy in LVL's existing independent living units (ILUs)
declined to 79% in FY22 from 83% in FY21, while occupancy at NIRR's
ILUs has been relatively stable at 93% in FY21 and 92% in FY22.
Despite the recent decline in ILU occupancy at LVL, Fitch expects
gradual census growth across campuses and service lines as the OG
has been implementing new customer relationship management
software, hiring additional residential/healthcare sales staff and
will be improving its online presence through a revamped website
and enhanced search engine optimization practices. These efforts
have already improved occupancy in LVL's existing ILUs from 79% to
86% and occupancy in the ILU expansion project building from 25% to
50% from FY22 to 2Q23 (68% of the new ILUs were sold as of Sept.
30, 2022). Given the improvement in sales velocity for LVL's new
ILUs, redemption of $11.1 million in 2019C entrance fee bonds by
the July 1, 2023 maturity date is expected to have a limited impact
on the OG's financial metrics.
Albuquerque's demographic indicators show limited population growth
and weak median household income (MHI) compared to national
averages while Rio Rancho has very good population growth and MHI
that exceeds national averages. Given the lack of life care
competition for both communities, Fitch believes demand for both
communities should remain stable. The OG's communities have a track
record of annual increases to entrance fees and monthly service
fees. LVL and NIRR's entrance fees and monthly service fees were
increased by 2.95% and 3.45%, respectively, in 2022 and are
budgeted to increase by 4.95% and 7.95%, respectively, in 2023. The
OG's weighted average entrance fee of approximately $308 thousand
is on par with the $316 thousand average home price of Albuquerque,
NM and $324 thousand average home price of Rio Rancho, NM,
(according to Zillow), supporting Fitch's view of affordable
pricing.
Operating Risk: 'bbb'
Operations Pressured Expansion and Inflation; Elevated Debt Burden
The OG's operating risk is adequate for a midrange assessment,
reflecting historically sound operations and an elevated debt
burden associated with the recently completed expansion project at
LVL. Due to additional expenses related to the relocating of half
of LVL's assisted living and all of LVL's memory care residents and
occupancy pressures across service lines, the OG reported a weak
110.1% operating ratio and -2.4% net operating margin (NOM) in
FY22. The rental expense related to the relocation of residents
offsite will not reoccur in FY23 (as the expansion project is
completed), but the OG has not been able to fully open its new
skilled nursing beds due to tight staffing conditions. Fitch views
this as a temporary, but prudent solution to industry labor
challenges given LVL and NIRR provide type-A lifecare contracts and
inflated clinical care costs without adequate revenue generation
would depress the OG's profitability metrics. Gradual improvement
of occupancy, especially new and existing ILUs at LVL, should allow
the OG's NOM and NOM-adjusted (-1.3% and 10.3, respectively,
through the interim period) to improve toward 3% and 15%,
respectively, through the Outlook Period, which is sufficient for
the midrange operating risk assessment. In the event the NOM and
NOM-adjusted do not trend toward these levels, the operating risk
assessment may be reduced to 'bb' and the current 'BB+' rating may
be downgraded.
The OG's capital spending has averaged a high 305% over the past
two years as a result of LVL's expansion/renovation project. Given
the completion of the expansion project at LVL and the fact that
NIRR's campus is relatively new (opened in April 2016), Fitch
expects capex over the next few years to be limited to routine
renovations funded by internal cash flow.
The OG issued series 2022 debt in April 2022 to refund its
outstanding series 2012 bonds. MADS following the issuance of its
series 2022 bonds is approximately $9.3 million. Capital-related
metrics are weak with the low revenue-only MADS coverage of 0.6x
and high debt-to-net available and MADS as a percent of revenue of
13.1x and 18.4%, respectively. These metrics are expected to trend
favorably as the OG's revenue generation/ILU occupancy improves
over the Outlook Period.
Financial Profile: 'bb'
Adequate Liquidity; Coverage Expected to be Around 1.2x
In the context of its midrange revenue defensibility and operating
risk assessments, the OG's financial profile is currently assessed
as 'bb', reflecting sufficient liquidity position and the
expectation for adequate debt service coverage around 1.2x. At
Sept. 30, 2022, the OG had approximately $37 million of
unrestricted cash and investments, translating to 322 DCOH, which
is neutral to the assessment of the OG's financial profile. Fitch
estimates cash to adjusted debt to be approximately 31.9% - this
metric includes the removal of $7.7 million of the OG's 2019C
temporary bonds (redeemed on Oct. 1, 2022) from total debt, the
addition of $6 million HCRC guaranteed bonds to total debt and the
inclusion of $12.9 million in debt service reserve funds as cash.
Fitch's baseline scenario, which is a reasonable forward look of
financial performance over the next five years given current
economic expectations, shows the OG financial profile improving
through the paydown of temporary debt and revenue growth. The
stress scenario incorporates both an investment portfolio and cash
flow stress that are in line with current economic conditions and
expectations. Under these assumptions, the OG's cash-to-adjusted
debt that rebounds to 34% by year four. Fitch's Negative Outlook
considers the fact that MADS coverage averages only 1.1x in the
stress case - in the event that the OG cannot generate coverage at
or above its 1.2x covenant, the rating could be downgraded.
Asymmetric Additional Risk Considerations
The OG's financial support for HCRC is no longer an asymmetric
additional risk consideration that is incorporated into the
long-term rating as management has decided to discontinue transfers
to support HCRC's operations. The guarantee of HCRC's series 2017B
subordinate bonds is incorporated into the OG's financial profile
analysis. HCRC's 2017B subordinate bonds are interest only for 10
years with a $6 million bullet payment in 2028.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Prolonged labor challenges or weak census levels at the OG
resulting in weaker operational performance and/or deterioration in
liquidity;
- Inability to generate 1.2x debt service coverage in FY23.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Improvement of census across campuses;
- Successful payoff of temporary debt associated with LVL's new
ILUs;
- Improvement of cash to adjusted debt to be consistently above 50%
in Fitch's stress case.
CREDIT PROFILE
The OG consists of Haverland Carter Lifestyle Group (HCLG), LVL,
the NIRR and Sommerset Neighborhood, Incorporated (Sommerset). HCLG
is the parent company and the sole member of LVL, NIRR and
Sommerset.
LVL is a Type-A life plan community located in Albuquerque, NM and
consists of 361 ILUs, 17 memory care units (MCUs), 53 assisted
living units (ALUs) and 58 skilled nursing facility (SNF) beds.
NIRR is a Type-A life plan community located in Rio Rancho, NM and
consists of 90 ILUs, 106 ALUs and 72 SNF beds.
LVL and NIRR offer fully amortizing and 50% refundable contract
options. Over 90% of the residents at LVL and NIRR have chosen the
fully amortizing plan.
Sommerset is located in Oklahoma City, OK and consists of 104 ALUs
and 20 MCUs. In FY22, the OG generated $46.8 million in total
revenues.
Non-obligated group affiliates include HCRC and Del Corazon
Hospice, LLC that was acquired in April 2019.
ESG CONSIDERATIONS
Haverland Carter Obligated Group's (NM) ESG Relevance Score for
Group Structure has been revised to '3' from '4' as the OG will no
longer be diluting its liquidity by transferring funds to HCRC.
This has had a negative impact on the credit profile, but is no
longer expected to be relevant to the ratings in conjunction with
other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
INDIANA WELLNESS: Amends Unsecureds & Anthem Secured Claims Pay
---------------------------------------------------------------
Indiana Wellness, LLC, submitted an Amended Small Business Chapter
11 Plan dated November 15, 2022.
This Plan of Reorganization is presented for restructuring the debt
of the Debtor and to seek vote to accept the Plan.
Class 3 consists of the Secured Claim of Anthem Insurance
Companies, Inc. Class 3 shall consist of Anthems allowed claim
entitled to secured treatment. Anthem filed a secured claim in the
amount of $2,310,774.51 collateralized by rights of recoupment of
setoff. Anthem shall be entitled to assert and recover pursuant to
any rights of recoupment or setoff. The deficiency claim of Anthem,
if any, shall be treated in Class 4. The claim of Anthem is
impaired and is entitled to vote on this Plan.
Class 4 shall consist of the general unsecured claimants of IW. The
Debtor's schedules disclose unsecured claims, some of which are
listed as contingent, unliquidated and disputed, totaling
approximately $3,710,500.00 amongst approximately 12 claimants. The
Unsecured Creditor Class consists primarily of two large unsecured
claims. Anthem inclusion in Class 3 includes deficiencies, if any,
from its asserted secured claim. The second large unsecured claim
if of Douglas R. Mennen and Kymberly Mennen. (collectively the
"Mennens") in the amount of $1,201437.00 which amount is not
disputed by IW.
The unsecured creditors shall receive a minimum of a pro-rata share
from the aggregate amount of $88,500.00 to be paid in 3 equal
annual installments of $29,500.00, commencing one year after the
Confirmation Date, and continuing for two years thereafter.
Provided that the amounts to be paid under the Plan shall not be
less than the projected disposable income of IW for the life of the
Plan.
Notwithstanding any other provision of the Plan, IW shall hold the
funds to be paid to General Unsecured Claims 4 in escrow and not
disburse to the General Unsecured Claims until the conclusion of
the Plan, or allowance/disallowance of the claims, and election
rights, of all claimants entitled to participate in the
distribution to the General Unsecured Claims. The claims of
unsecured claimants, if any, if allowed, are impaired and are
entitled to vote on this Plan.
The current principal of IW shall retain his member interest after
confirmation of the Plan.
The source of funds used in this Plan for payments to creditors
shall be the net disposable income of the Debtor for 3 years
resulting from continued, normal business operations of the
Debtor's business. The Debtor shall contribute all net disposable
income toward Plan payments; however, Debtor shall reserve a
portion of the net income to fund a reserve. The Debtor may also
choose the sell equipment or real estate. Further Debtor reserves
the right to pursuing borrowing and investor options for the
payment to the General Unsecured Claims.
A full-text copy of the Amended Chapter 11 Plan dated November 15,
2022, is available at https://bit.ly/3tVmaaY from PacerMonitor.com
at no charge.
Counsel for Debtor:
David R. Krebs, Esq.
Hester Baker Krebs, LLC
1 Indiana Square, Suite 1600
Indianapolis, IN 46204
Tel: (317) 833-3030
Email: dkrebs@hbkfirm.com
About Indiana Wellness
Indiana Wellness, LLC, is a company in Lafayette, Ind., which is
primarily engaged in general out-patient care services.
Indiana Wellness filed a petition for relief under Chapter 11,
Subchapter V of the Bankruptcy Code (Bankr. N.D. Ind. Case No.
22-40176) on July 11, 2022, listing $190,785 in assets and
$3,710,496 in liabilities. Douglas R. Adelsperger serves as
Subchapter V trustee.
David R. Krebs, Esq., at Hester Baker Krebs, LLC, is the Debtor's
counsel.
INTELLIGENT SURVEILLANCE: Executes Camera Sales & License Agreement
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Intelligent Surveillance Corporation submitted a Small Business
Third Amended Plan of Reorganization dated November 15, 2022.
The Debtor will reorganize and emerge from bankruptcy as a going
concern business and there will be a Distribution Agent appointed
at confirmation. The Distribution Agent will receive funds from the
Reorganized Debtor and from The Spotlight App, LLC, as described in
more detail herein, and will distribute the funds to the Debtor's
creditors pursuant to the terms of this Plan.
The Distribution Agent will receive the Debtor's net disposable
income for the earlier of (i) five years following the Effective
Date, and (ii) until such time that all such creditor claims are
satisfied in full.
The Debtor and Spotlight will enter into agreements to provide that
Spotlight will defer and subordinate the payments due from the
Debtor, the Spotlight Deferred Payments, so that such funds can
instead be provided to the Distribution Agent for the benefit and
payment of the Debtor's creditors under the Plan. The Spotlight
Deferred Payments are expected to result in excess of $1.3 million
in payments to the Distribution Agent over a five-year period.
Commercial Camera Sales and License Agreement
The Debtor has negotiated the principal terms of a commercial
contract to a private industry customer that will involve cash
payments for licensing and annual purchases of cameras in the
magnitude of the 2000 cameras sold to the United State Customs and
Border Protection. This contract upon execution is intended and
expected make the Plan financially feasible and to meet the
financial conditions precedent for the Plan to become effective
within 90 days of November 30, 2022 even if there is some further
delay in award of a contract from Customs and Border Protection.
Debtor expects and intends to obtain execution of this contract and
initial payment within the 90 day period following Confirmation,
allowing for the Plan to become effective and allowing
reorganization rather than liquidation to proceed.
Like in the prior iteration of the Plan, General Unsecured Claims
are unsecured claims that are neither Priority Unsecured Claims,
Critical Trade Vendor Claims nor Insider Claims. The General
Unsecured Claims will be paid in accordance with the Distribution
Waterfall and other terms of the Plan.
The equity interests in the Debtor shall be reinstated in the same
amounts and ratios as existed immediately prior to the entry for
the Order for Relief.
On the Effective Date of the Plan, all property of the Debtor,
tangible and intangible, including, without limitation, licenses,
furniture, fixtures and equipment, will revert, free and clear of
all Claims and Equitable Interests except as provided in the Plan,
to the Reorganized Debtor. The Debtor expects to have sufficient
cash on hand to make the payments required on the Effective Date.
The Board of Directors of the Debtor immediately prior to the
Effective Date shall serve as the initial Board of Directors of the
Reorganized Debtor on and after the Effective Date. Each member of
the Board of Directors shall serve in accordance with applicable
non-bankruptcy law and the Debtor's certificate or articles of
incorporation and bylaws, as each of the same may be amended from
time to time.
This will be a pot plan with the Distribution Agent receiving (i)
the Reorganized Debtor's net disposable income for up to five years
following the Effective Date, (ii) the Spotlight Deferred Payments
for up to the second through fifth year following the Effective
Date, and (iii) the Spotlight Excess Cash Payment for up to five
years following the Effective Date.
The Distribution Agent shall make all Plan payments to creditors
under the Plan in accordance with the Distribution Waterfall by
making payments to the creditors at each level in the Distribution
Waterfall in a pro-rata basis and will satisfy the claims in full
at each level of the Distribution Waterfall (subject to reserves
for disputed claims) before making payments to creditors at any
lower level of the Distribution Waterfall.
A full-text copy of the Third Amended Plan dated November 15, 2022,
is available at https://bit.ly/3iaF6QI from PacerMonitor.com at no
charge.
Counsel for Debtor:
Kenneth C. Johnston
Catherine (Kate) Gaither
Sean M. Affleck
Kenneth R. Flottman
JOHNSTON CLEM GIFFORD PLLC
1717 Main Street, Suite 3000
Dallas, Texas 75201
Tel. (214) 974-8000
Fax (972) 474-1750
Email: kjohnston@johnstonclem.com
Email: kgaither@johnstonclem.com
Email: saffleck@johnstonclem.com
Email: kflottman@johnstonclem.com
About Intelligent Surveillance
Intelligent Surveillance Corporation is a Texas Corporation. It
manufactures surveillance equipment primarily utilized by state and
federal law enforcement agencies and first responders, including
the Department of Homeland Security and U.S. Customs and Border
Protection.
On June 11, 2021, four of Debtor's creditors filed an involuntary
Chapter 7 petition against the Debtor in Dallas, Texas (Bankr. N.D.
Tex. Case No. 21-31096).
On July 6, 2021, Debtor moved to dismiss based on the petitioning
creditors' lack of standing and bad faith. On September 17, 2021,
the Bankruptcy Court held that three of the petitioning creditors
lacked standing, but provisionally denied the motion to dismiss
pending a determination of the number of Debtor's creditors.
On Oct. 8, 2021, three new petitioning creditors joined the
involuntary petition. On Dec. 10, 2021, the Bankruptcy Court held
that a sufficient number of petitioning creditors existed to
sustain the involuntary petition, as amended.
On March 30, 2022, the Bankruptcy Court held a hearing to determine
whether Debtor was generally paying its debts as they came due on
the involuntary petition date.
On April 4, 2022, the Bankruptcy Court entered an order for relief
under Chapter 7 of the Bankruptcy Code.
On April 21, 2021, the Bankruptcy Court granted a motion to convert
Debtor's case to a case under Chapter 11, Subchapter V of the
Bankruptcy Code.
Counsel to the Debtor-in-Possession:
Kenneth C. Johnston
Catherine (Kate) Gaither
Sean M. Affleck
Kenneth R. Flottman
JOHNSTON CLEM GIFFORD PLLC
1717 Main Street, Suite 3000
Dallas, Texas 75201
Tel: (214) 974-8000
Fax: (972) 474-1750
E-mail: kjohnston@johnstonclem.com
E-mail: kgaither@johnstonclem.com
E-mail: saffleck@johnstonclem.com
E-mail: kflottman@johnstonclem.com
ITURRINO AND ASSOCIATES: Taps Advisors Commercial as Broker
-----------------------------------------------------------
Iturrino and Associates, Inc. seeks approval from the U.S.
Bankruptcy Court for the Northern District of Texas to employ
Advisors Commercial Real Estate as real estate broker.
The Debtor requires a real estate broker to market for saleits real
property located at 4624 Golden Triangle Blvd., Keller, Texas.
The firm will be paid a commission of 6 percent of the sales price
of the property.
Steve Gray, a managing partner at Advisors Commercial Real Estate,
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:
Steve Gray
Advisors Commercial Real Estate
2000 E. Lamar Blvd., Suite 710
Arlington, TX 76006
Tel: (817) 226-0000
Fax: (817) 860-4180
About Iturrino and Associates
Iturrino and Associates, Inc., doing business as Dry Clean
Supercenter at Golden Triangle, operates a Dry Clean Super Center
located in Keller, Texas.
Iturrino and Associates sought protection under Chapter 11 of the
U.S. Bankruptcy Code (Bankr. N.D. Texas Case No. 22-40850) on April
18, 2022, with up to $1 million in assets and up to $10 million in
liabilities. Josh Iturrino, president and chief executive officer,
signed the petition.
Judge Edward L. Morris oversees the case.
Joyce Lindauer, Esq., at Joyce W. Lindauer Attorney, PLLC is the
Debtor's counsel.
JUST BELIEVE: Court OKs Interim Cash Collateral Access
------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of Florida,
West Palm Beach Division, authorized Just Believe Recovery Center
of Port Saint Lucie, LLC and Just Believe Recovery Center, LLC to
use cash collateral on an interim basis in accordance with the
budget, with a 10% variance, through and including 5 p.m. on
December 13, 2022.
The Debtor requires the use of cash collateral for an effective
reorganization and to avoid harm to the Debtor's bankruptcy
estate.
ASD Specialty Healthcare, LLC may purport to have a security
interest in accounts receivable and other assets of the Debtor.
Texas Capital Bank, N.A. purports to have a security interest in
the Debtor's future receivables, personal property and general
intangibles.
The Debtor is a party to a Business Loan and Security Agreement
dated April 2, 2019, with Alternative Funding Group, LLC in which
AFG may purport to have a security interest in Debtor’s future
receivables. AFG does not appear to have filed a UCC-1 Financing
Statement to perfect its purported lien.
The Debtor is a party to a Revenue Purchase Agreement dated June
16, 2022, with City Capital NY in which City may purport to have a
security interest in the Debtor's future receivables. City does not
appear to have filed a UCC-1 Financing Statement to perfect its
purported lien.
The Debtor is a party to a Future Receipts Sale and Purchase
agreement dated January 24, 2022, with Cloudfund, LLC in which
Cloudfund may purport to have a security interest in the Debtor's
future receivables. Cloudfund does not appear to have filed a UCC-1
Financing Statement to perfect its purported lien.
The Debtor is a party to two Revenue Purchase Agreements dated July
29, 2021, and March 9, 2021, respectively with NewCo Capital Group
VI LLC in which NewCo may purport to have a security interest in
the Debtor's future receivables. NewCo does not appear to have
filed a UCC-1 Financing Statement to perfect its purported lien.
The Court held that, during the pendency of this bankruptcy and
until further Court Order, all pre-petition and post-petition
income will be turned over and paid to the Debtor for deposit into
the Debtor in Possession bank accounts.
As adequate protection for and to the extent of Debtor's use of
cash collateral, ASD, Texas, AFG, City, Cloudfund and NewCo, are
granted, as of the Petition Date, (a) a replacement lien to the
same extent as any pre-petition lien, pursuant to 11 U.S.C. section
361(2), on and in all property acquired or generated post-petition
by the Debtor to the same extent and priority and of the same kind
and nature as their prepetition liens and security interests in the
cash collateral, without any prejudice to any rights of the Debtor
to seek to void the lien as to the extent, validity, or priority of
said liens; and (b) the secured claim of Texas will be increased by
any missed post-petition mortgage payments, accrued but unpaid
post-petition interest, and Texas' reasonable attorneys' fees and
costs.
A continued hearing on the matter is set for December 13 at 1:30
p.m.
A copy of the order is available at https://bit.ly/3GHBYWt from
PacerMonitor.com.
About Just Believe Recovery Center
Just Believe Recovery Center of Port Saint Lucie --
https://justbelieverecoverycenter.com/ -- is a drug and alcohol
addiction rehabilitation and detox facility with locations in
Florida and Pennsylvania.
Just Believe Recovery Center of Port Saint Lucie sought protection
under Chapter 11 of the U.S. Bankruptcy Code (Bankr. S.D. Fla. Case
No. 22-15739) on July 27, 2022, listing up to $50,000 in assets and
up to $10 million in liabilities. Its affiliate, Just Believe
Recovery Center, LLC filed for Chapter 11 protection (Bankr. S.D.
Fla. Case No. 22-16046) on Aug. 4, 2022, listing up to $50,000 in
assets and up to $10 million in liabilities. The cases are jointly
administered under Case No. 22-15739.
Judge Mindy A. Mora oversees the cases.
Kelley Fulton Kaplan & Eller, P.L. is the Debtors' legal counsel.
LEADING LIFE: Dec. 1 Deadline Set for Panel Questionnaires
----------------------------------------------------------
The United States Trustee is soliciting members for committee
ofunsecured creditors in the bankruptcy case of Leading Life Senior
Living, Inc, et al.
If a party wishes to be considered for membership on any official
committee that is appointed, it must complete a questionnaire
available at https://bit.ly/3XtG0HQ and return by email it to
Elizabeth A. Young -- elizabeth.a.young@usdoj.gov -- at the Office
of the United States Trustee so that it is received no later than
4:00 p.m., on Dec. 1, 2022.
If the U.S. Trustee receives sufficient creditor interest in the
solicitation, it may schedule a meeting or telephone conference for
the purpose of forming a committee.
About Leading Life
Leading Life Senior Living, Inc. is a not-for-profit Texas
corporation that owns two memory care facilities in
Oklahoma. The facilities were purchased in 2017 by the Debtor
from Edmond Memory Care LLC and Southwest Oklahoma City LLC. The
Edmond facility was opened in 2014 and has 42 beds. The Oklahoma
City facility was opened in 2015 and has 44 beds.
Leading Life Senior Living, Inc. sought protection under
Chapter 11 of the U.S. Bankruptcy Code (Bankr. N.D. Tex. Lead Case
No. 22-42784) on November 18, 2022. In the petition signed by
Joseph V. Pegnia as chief restructuring officer, the Debtor
disclosed up to $10 million to $50 million in assets and up to $10
million to $50 million in liabilities.
Ferguson, Braswell, Fraser, Kubasta PC is the Debtor's counsel.
Omni Agent Solutions is the Debtor's claims agent.
LEAFBUYER TECHNOLOGIES: Incurs $210K Net Loss in First Quarter
--------------------------------------------------------------
Leafbuyer Technologies Inc. has filed with the Securities and
Exchange Commission its Quarterly Report on Form 10-Q disclosing
a net loss of $209,972 on $1.13 million of revenue for the three
months ended Sept. 30, 2022, compared to a net income of $2.96
million on $851,693 of revenue for the three months ended Sept. 30,
2021.
As of Sept. 30, 2022, the Company had $2.03 million in total
assets, $3.51 million in total liabilities, and a total
stockholders' deficit of $1.47 million.
Leafbuyer stated, "The ability to continue as a going concern is
dependent upon the Company generating profitable operations in the
future and/or obtaining the necessary financing to meet its
obligations and repay its liabilities arising from normal business
operations when they come due. Management intends to finance
operating costs over the next twelve months from the date of the
issuance of these unaudited condensed consolidated financial
statements with existing cash on hand and/or the private placement
of common stock or obtaining debt financing. There is, however, no
assurance that the Company will be able to raise any additional
capital through any type of offering on terms acceptable to the
Company, as existing cash on hand will be insufficient to finance
operations over the next twelve months."
At Sept. 30, 2022 the Company had $225,321 in cash and cash
equivalents.
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1643721/000147793222008503/lbuy_10q.htm
About Leafbuyer
Leafbuyer Technologies, Inc. is a marketing technology company for
the cannabis industry and is an online cannabis resource.
Lakewood, Colorado-based B F Borgers CPA PC, the Company's auditor
since 2017, issued a "going concern" qualification in its report
dated Sept. 27, 2022, citing that the Company has suffered
recurring losses from operations and has a significant accumulated
deficit. In addition, the Company continues to experience negative
cash flows from operations. These factors raise substantial doubt
about the Company's ability to continue as a going concern.
LIBBEY GLASS: Moody's Cuts CFR to B3 & Rates New 1st Lien Loan B3
-----------------------------------------------------------------
Moody's Investors Service downgraded Libbey Glass LLC's ratings
including its Corporate Family Rating to B3 from B2, its
Probability of Default Rating to B3-PD from B2-PD, and assigned a
B3 ratings to the company's proposed new $285 million first lien
term loan due 2027. The outlook is stable. The B3 rating on the
company's existing first lien term loan due 2025 remains unchanged
and will be withdrawn concurrent with the anticipated repayment of
this debt obligation.
Proceeds from the proposed new $285 million first lien term loan
due 2027 will be used to refinance approximately $131.8 million
principal outstanding on the existing first lien term loan due
2025, fund the repayment of $126 million of preferred equity, and
to pay related fees and expenses.
The ratings downgrade reflects that the refinancing transaction
will more than double Libbey's outstanding debt and increase
financial leverage, and Moody's expectations for only modestly
positive free cash flow amid a weakening demand environment. The
refinancing is increasing interest expense close to pre-pandemic
and pre-bankruptcy filing levels during a period of rising interest
rates even though debt remains lower. Moody's projects that
Libbey's debt/EBITDA leverage will increase to over 4x by the end
of fiscal 2022 and pro forma for the refinancing transaction and
the divestiture of the European business, up from 3.0x in fiscal
2021. Persistently high inflation and weakening economic conditions
is pressuring consumer discretionary spending and restaurant
traffic, negatively impacting demand for the company's products.
Moody's anticipates these pressures to persist at least into 2023
and projects modestly positive free cash flow of around $5-$10
million over the next 12 months, pressured in part by higher cash
interest burden.
The company is replacing the paid-in-kind (PIK) preferred equity
with the proposed first lien term loan, which has a partial PIK
interest election at the company's option if net leverage (based on
the credit agreement definition) is at or above a certain
threshold. The partial PIK interest election is available through
December 31, 2024. Moody's estimates that cash interest expense
will increase by about $13 million assuming full cash pay, and $5
million if using the partial PIK interest election, pro forma for
the refinancing transaction. Moody's free cash flow projections
assume full cash pay.
Libbey has expanded its EBITDA margin to the low-to-mid teens
percentage range over the past few years in part driven by cost
savings and manufacturing consolidation initiatives, and by good
pricing power as demand for the company's products exceeded
capacity. In addition, the company recently divested its relatively
lower margin European business. Still, risks to Libbey's business
are high due to its exposure to cyclical economic downturns.
Moody's now expects the US economy will contract in a couple of
quarters in 2023 and to enter into a recession in Q2 2023. The
company's high leverage combined with high fixed operating costs
and expected modest positive free cash flow provides limited leeway
to absorb prolonged periods of lower demand or earnings pressures.
The incremental term loan's partial PIK interest election provides
some flexibility to somewhat offset lower earnings. Also, Libbey
has invested in refreshing its manufacturing asset footprint over
the past few years, which provides the company with the opportunity
to pause the level of reinvestment over the next 12 months, if
operating results deteriorate.
The following ratings/assessments are affected by the action:
Ratings Downgraded:
Issuer: Libbey Glass LLC
Corporate Family Rating, Downgraded to B3 from B2
Probability of Default Rating, Downgraded to B3-PD from B2-PD
New Assignments:
Issuer: Libbey Glass LLC
GTD Senior Secured 1st Lien Term Loan, Assigned B3 (LGD4)
Outlook Actions:
Issuer: Libbey Glass LLC
Outlook, Remains Stable
RATINGS RATIONALE
Libbey's B3 CFR reflects its relatively modest scale and narrow
product focus in the mature and highly competitive glassware
industry, and its elevated operational risk given the high fixed
operating costs associated with manufacturing the vast majority of
its glass products in-house. The high fixed cost makes it difficult
to mitigate prolonged demand pressures and creates profit margin
volatility. The company has nevertheless made progress reducing
fixed costs and improving the EBITDA margin through operational
restructuring following emergence from bankruptcy in November 2020
as well as the divestiture of the low margin European business.
Lower consumer discretionary spending power and weakening
macro-economic conditions is negatively impacting demand for the
company's products. Moody's projects Libbey's debt/EBITDA will
increase to over 4.0x by the end of fiscal 2022 and pro forma for
the refinancing transaction, up from 3.0x in fiscal 2021. Moody's
also expects modestly positive free cash flow over the next 12
months, which provides limited cushion to absorb potential future
earnings volatility. Governance risk factors include the company's
ownership by a group of previous lenders to the company with no
single firm having majority control and the inherent risk of a debt
financed shareholder distribution or ownership consolidation
transaction.
The rating also reflects Libbey's good market position in the
glassware industry with good channel diversification and an
established ecommerce business. The company benefits from the
relatively recurring demand for glassware as a result of breakage,
particularly in the foodservice channel. Libbey's good liquidity is
supported by its cash balance of $28.9 million and access to an
undrawn $90 million revolving facility due 2025 as of September 30,
2022, which provides financial flexibility to fund business
seasonality, investments in working capital and capital expenditure
projects.
Libbey's ESG credit impact score is highly negative (CIS-4) mainly
driven by its highly negative exposure to governance risks
reflecting its concentrated ownership by a group of pre-bankruptcy
lenders and its aggressive financial strategy including operating
with high leverage. The company is moderately negatively exposed to
environmental and social risks.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The stable outlook reflects Moody's expectation that demand for the
company's products will moderate over the next 12-18 months but to
a level that still supports modestly positive free cash flows and
good liquidity. The stable outlook also reflects that Libbey will
be able to pare back the level of reinvestment and capital
expenditures, which combined with the partial PIK interest election
on the new term loan will help to offset the potential future
earnings decline if the economic downturn is more severe than
Moody's expects.
The ratings could be upgraded if the company increases its revenue
scale while demonstrating consistent organic revenue growth and
EBITDA margin expansion, debt/EBITDA is sustained below 5.0x, and
EBITDA minus capital expenditures to interest is above 1.5x. A
ratings upgrade would also require the company to maintain at least
good liquidity highlighted by free cash flow-to-debt sustained
above 7.5% after assuming full cash pay interest expense, and
minimal reliance on revolver borrowings.
The ratings could be downgraded if the company's operating results
deteriorate with sustained revenue declines or a reduction in the
EBITDA margin, or if it fails to generate positive free cash flow
on an annual basis assuming full cash pay interest expense. The
ratings could also be downgraded if EBITDA minus capital
expenditures to interest is below 1.0x, or if liquidity
deteriorates for any reason including large revolver borrowings.
The principal methodology used in these ratings was Consumer
Durables published in September 2021.
Headquartered in Toledo, Ohio, Libbey Glass LLC designs,
manufactures, and markets glass tableware products and designs and
markets ceramic dinnerware and flatware products. The company
distributes its products to the foodservice, retail, and
business-to-business channel, primarily in the Americas. Libbey
Glass is owned a broad group of pre-bankruptcy lenders with no
single firm having majority control. Revenue for the last twelve
months (LTM) period ending September 30, 2022 is $616 million, pro
forma for the EMEA divestiture.
LOYALTY VENTURES: Moody's Lowers CFR to Caa2, Outlook Remains Neg.
------------------------------------------------------------------
Moody's Investors Service has downgraded Loyalty Ventures Inc.'s
corporate family rating to Caa2 from B2 and probability of default
rating to Caa2-PD from B2-PD. Moody's also downgraded the senior
secured term loan B, senior secured term loan A, and senior secured
revolving credit facility to Caa2 from B2. Moody's has also
downgraded the speculative grade liquidity rating to SGL-4 from
SGL-3. The rating outlook remains negative.
"The downgrade reflects an increased default risk due to weak
liquidity and high financial leverage as a result of Moody's
expectation of weak operating and financial performance in 2023 as
Loyalty Ventures battles a difficult operating environment." said
Mikhil Mahore, a Moody's analyst.
The company's high financial leverage and weaker than expected
execution following its spin off from its parent were key
governance drivers. As a result, Moody's has revised Loyalty
Ventures' Governance Issuer Profile Score (IPS) to G-5 from G-4,
and its Credit Impact Score (CIS) to CIS-5 from CIS-4.
Downgrades:
Issuer: Loyalty Ventures Inc.
Corporate Family Rating, Downgraded to Caa2 from B2
Probability of Default Rating, Downgraded to Caa2-PD
from B2-PD
Speculative Grade Liquidity Rating, Downgraded to SGL-4
from SGL-3
Senior Secured Bank Credit Facility, Downgraded to Caa2 (LGD3)
from B2 (LGD3)
Outlook Actions:
Issuer: Loyalty Ventures Inc.
Outlook, Remains Negative
RATINGS RATIONALE
Loyalty Ventures' Caa2 CFR is constrained by: (1) weak liquidity;
(2) Moody's expectation that leverage will increase to about 7.5x
in 2023; (3) weakness in its short-term loyalty campaign business
(BrandLoyalty) as a result of demand uncertainties and supply chain
challenges amid a weak European macroeconomic environment; (4)
customer concentration within its coalition loyalty rewards
business (AIR MILES) following the recent exit by Sobeys; and (5)
potential for increased competition within the loyalty program
market which could lead to further loss of sponsors.
The company's rating benefits from its: (1) good brand name AIR
MILES business that is a well-recognized and established brand in
Canada; and (2) business diversification provided by its
BrandLoyalty business that has customers in approximately 45
countries globally.
Loyalty Ventures has weak liquidity (SGL-4), with sources around
$160 million over the next four quarters compared to about $55
million of uses. Sources are comprised of cash of around $23
million at September 2022 (cash of around $73 million less about
$50 million that Moody's believes the company needs to operate) and
$138 million of availability under the company's $150 million
revolving credit facility due November 2026. Uses of liquidity
include $51 million of mandatory term loan amortization and Moody's
expectation of free cash flow consumption of about $5 million in
2023 (including about $25 million cash inflow from change in
redemption settlement assets). Moody's expects revolver commitment
will be reduced by $2.8 million a quarter starting from Q1 2023.
The company's financial covenants include a Total Leverage Ratio of
5.75x with step downs and Moody's expect the company to breach its
covenant in the latter half of 2023. Alternate sources of liquidity
are limited given that Loyalty Ventures assets are encumbered.
Loyalty Ventures' senior secured credit facilities are rated Caa2,
the same as the company's corporate family rating, as they
represent virtually all of the debt in the capital structure.
The negative outlook reflects Moody's view that liquidity could
further weaken over the next 12-18 months mainly due to
uncertainties in the BrandLoyalty business, and that the company
could restructure its debt.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Loyalty Venture's ratings could be downgraded if liquidity weakens,
challenging industry environment persists delaying free cash flow
recovery, or the company experiences further loss of key
customers.
The company's ratings could be upgraded if there is improvement in
liquidity, BrandLoyalty performance, or free cash flow.
Loyalty Ventures Inc. is a Dallas, Texas-based provider of loyalty
and rewards programs to retailers across several verticals such as
grocery, fuel and financial services.
The principal methodology used in these ratings was Business and
Consumer Services published in November 2021.
MANHATTAN SCIENTIFICS: Posts $71K Net Loss in Third Quarter
-----------------------------------------------------------
Manhattan Scientifics, Inc. has filed with the Securities and
Exchange Commission its Quarterly Report on Form 10-Q disclosing
a net loss of $71,000 on $9,000 of revenue for the three months
ended Sept. 30, 2022, compared to a net loss of $1.16 million on $0
of revenue for the three months ended Sept. 30, 2021.
For the nine months ended Sept. 30, 2022, the Company reported a
net loss of $2.33 million on $50,000 of revenue compared to a net
loss of $3.60 million on $50,000 of revenue for the same period
during the prior year.
As of Sept. 30, 2022, the Company had $1.36 million in total
assets, $1.60 million in total liabilities, $1.06 million in Class
D convertible preferred mandatory redeemable shares, and total
stockholders' deficit of $1.30 million.
The Company had an increase of $56,000 in cash and cash equivalents
for the nine months ended Sept. 30, 2022.
Manhattan Scientifics said, "Based upon current projections, our
principal cash requirements for the next 12 months consists of (1)
fixed expenses, including consulting and professional services and
(2) variable expenses, including technology research and
development, milestone payments and intellectual property
protection, and additional scientific consultants. As of September
30, 2022, we had $288,000 in cash. We believe our current cash
position may not be sufficient to maintain our operations for the
next twelve months. Accordingly, we may need to engage in equity
or debt financings to secure additional funds. If we raise
additional funds through future issuances of equity or convertible
debt securities, our existing stockholders could suffer significant
dilution, and any new equity securities we issue could have rights,
preferences and privileges superior to those of holders of our
common stock. Any debt financing that we secure in the future
could involve restrictive covenants relating to our capital raising
activities and other financial and operational matters, which may
make it more difficult for us to obtain additional capital and to
pursue business opportunities, including potential acquisitions.
We may not be able to obtain additional financing on terms
favorable to us, if at all. If we are unable to obtain adequate
financing or financing on terms satisfactory to us when we require
it, our ability to continue to support our business growth and to
respond to business challenges could be impaired, and our business
may be harmed."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1099132/000147793222008553/mhtx_10q.htm
About Manhattan Scientifics
Headquartered in New York, Manhattan Scientifics, Inc., was
established on July 31, 1992 and has one operating wholly-owned
subsidiary: Metallicum, Inc. The Company also holds a 5%,
noncontrolling interest in Imagion Biosystems, Inc. (f/k/a Senior
Scientific LLC). Manhattan Scientifics is focused on technology
transfer and commercialization of these transformative
technologies.
Manhattan Scientifics reported a net loss of $3.64 million for the
year ended Dec. 31, 2021, compared to net income of $4.31 million
for the year ended Dec. 31, 2020. As of Dec. 31, 2021, the Company
had $3.45 million in total assets, $1.36 million in total
liabilities, $1.06 million in series D convertible preferred
mandatory redeemable, authorized shares, and $1.04 million in total
stockholders' equity.
Draper, UT-based-Sadler, Gibb & Associates, LLC, the Company's
auditor since 2020, issued a "going concern" qualification in its
report dated April 5, 2022, citing that the Company has an
accumulated deficit, negative cash flows from operations, and
negative working capital, which raise substantial doubt about its
ability to continue as a going concern.
MARINE WHOLESALE: Seeks Interim Cash Collateral Access
------------------------------------------------------
Marine Wholesale and Warehouse, Co., asks the U.S. Bankruptcy Court
for the Central District of California, Los Angeles Division, for
authority to use cash collateral on an interim basis.
The Debtor requires the use of cash collateral to pay the Debtor's
necessary expenses related to the Debtor's continued operations.
The primary reason for filing the bankruptcy was due to the actions
of the Alcohol and Tobacco Tax and Trade Bureau, its assertion of
liability against the Debtor, and its collection efforts to collect
this asserted liability.
On June 28, 2020, the Debtor obtained an Economic Injury Disaster
Loan from the United States Small Business Administration. The SBA
filed a UCC Financing Statement with the Secretary of State for the
State of California on June 28, 2020. As of the Petition Date, the
amount due to the SBA for the SBA Loan was approximately $146,456.
Pursuant to the assessments and Tax Lien, the TTB asserts that it
has a secured claim against the Debtor in the amount of
$25,225,465. As to the Debtor's personal property, the TTB Claim is
second in priority to the SBA Claim because the TTB did not file
its Tax Lien until September 2, 2021.
TTB's entire claim against the Debtor arises from a single
contested allegation that the Debtor's former owner, the late
Robert L. Hartry, failed timely to report to TTB a transfer of
shares in the Debtor that occurred in December 15, 2012, allegedly
in violation of TTB's regulations.
Further, from December 2012 until March 31, 2017, TTB continued to
treat the Debtor as a bonded export warehouse proprietor, accepting
the firm's custodial warehouse bonds, its annual Occupational Tax
payment, and the company's monthly TTB returns. During that period,
TTB agents routinely visited and examined the Debtor's bonded
warehouse premises. United States Customs and Border Protection
(CBP) repeatedly approved Debtor's applications to withdraw tobacco
products from the bonded warehouse for delivery to qualified
vessels. Despite these actions, the TTB proceeded with the Cease
and Desist letter and the Inquiry Letter, and subsequently issued
the assessments and Tax Lien.
The Debtor asserts that as the holder of a Federally-issued
license, the Debtor was entitled to notice and an opportunity to
demonstrate or achieve compliance with TTB's regulation before its
warehouse permit was revoked, as required by the Administrative
Procedure Act, 5 U.S.C. section 558 and TTB's own regulations.
Accordingly, the Debtor asserts that the TTB Claim is meritless and
should be treated as an unsecured claim and reduced to $0. On
August 8, 2022, the TTB filed a proof of claim in the bankruptcy
case, asserting a claim of $25,225,465, of which it asserts the
entirety is secured.
While the TTB has a lien on both Debtor's personal property and
real properties, the only property that is cash collateral is the
Debtor's personal property. The Debtor's real properties are
utilized by the Debtor and therefore do not generate rent or other
profits. Rather, the only cash collateral now in the Debtor's
estate is its cash and accounts receivable, in which the SBA and
the TTB assert security interests. Additionally, the SBA and the
TTB will assert security interests in cash collateral that will
arise as proceeds from the sale of the inventory as Debtor
continues its business operations.
The Debtor's unsecured claims total approximately $2.280 million.
As adequate protection of the SBA's security interest, the Debtor
will pay SBA adequate protection payments, in cash, in the amount
of $731 each month, which have commenced on August 1, 2022, and on
the first business day of each month thereafter. This amount is
equal to the amount owing under the SBA Loan Documents, which
includes both principal and interest payments. This further
protects the SBA and is sufficient to show the SBA will be paid its
secured claim. Further, the Debtor will offer a postpetition
replacement lien on all of the Debtor's post-petition personal
property, other than recoveries from avoiding power actions, which
liens will have the same validity, priority, and extent as the
prepetition lien, in further adequate protection of the SBA's
interests, subject to the Debtor's ability to use such collateral
upon request and order of the Court.
As adequate protection for the TTB, the Debtor proposes a
post-petition replacement lien on all of the Debtor's post-petition
personal property, other than recoveries from avoiding power
actions, which liens will have the same validity, priority, and
extent as the prepetition lien, in further adequate protection of
the TTB's interests, subject to the Debtor's ability to use such
collateral upon request and order of the Court.
A copy of the motion is available at https://bit.ly/3ibWHr9 from
PacerMonitor.com.
About Marine Wholesale and Warehouse Co.
Marine Wholesale and Warehouse Co. sought protection under Chapter
11 of the U.S. Bankruptcy Code (Bankr. C.D. Cal. Case No. 22-13785)
on July 12, 2022. In the petition signed by Jennifer Hartry, vice
president and secretary, the Debtor disclosed up to $50 million in
both assets and liabilities.
Judge Sheri Bluebond oversees the case.
David R. Haberbush, Esq., at Haberbush, LLP is the Debtor's
counsel.
MARY A II: U.S. Trustee Appoints Creditors' Committee
-----------------------------------------------------
The U.S. Trustee for Region 21 on Nov. 22 appointed an official
committee to represent unsecured creditors in the Chapter 11 case
of The Mary A II, LLC.
The committee members are:
1. Jeffrey A. Tennis
15 Tennis Court
Lititz, PA 17543
Phone: 717-368-8630
Email: jtennis@ptd.net
2. Dana Bradley
Erndit, LLC
7428 Waterview DR
Cornelius, NC 28031
Phone: 704-236-2357
Email: Dana@performanceholdings.com
3. Keith Snyder
900 Northside Ct., Apt. 921
Lititz, PA 17543
Phone: 717-898-2835
Email: Kamesnyder@gmail.com
4. Paul C. Drago
1004 Harbor Oaks Drive
Charleston, SC 29412
Phone: 803-567-0150
Email: dragomdnc@aol.com
5. Amarpreet Singh Malik
Garment District Holdings, LLC
La Canada, CA 91011
Phone: 818-631-2627
Email: Amarsmalik@gmail.com
Official creditors' committees serve as fiduciaries to the general
population of creditors they represent. They may investigate the
debtor's business and financial affairs. Committees have the right
to employ legal counsel, accountants and financial advisors at a
debtor's expense.
About The Mary A II
The Mary A II, LLC, a company in Tampa, Fla., filed a petition
under Chapter 11, Subchapter V of the Bankruptcy Code (Bankr. M.D.
Fla. Case No. 22-01177) on March 25, 2022, with as much as $10
million in both assets and liabilities. Ruediger Mueller serves as
Subchapter V trustee.
Judge Caryl E. Delano oversees the case.
Alberto F. Gomez, Jr., Esq., of Johnson Pope Bokor Ruppel & Burns,
LLP and William Long, Jr. of Jonah Consulting Group, LLC serve as
the Debtor's legal counsel and chief restructuring officer,
respectively.
MOZART HOLDINGS: Fitch Affirms LongTerm IDR at 'B+', Outlook Neg.
-----------------------------------------------------------------
Fitch Ratings has affirmed Mozart Holdings, LP's and Medline
Borrower, LP's Long-Term Issuer Default Ratings (IDRs) at 'B+'. In
addition, Fitch has affirmed the following Medline Borrower, LP and
Medline Co-Issuer, Inc. instrument ratings: senior secured at
'BB-'/'RR3' and senior unsecured at
'B-'/'RR6'.
The Rating Outlook remains Negative.
The affirmation of Medline's 'B+' IDR primarily reflects the
company's steady performance in the face of challenging
macroeconomic conditions that have produced margin pressure and
slower cash conversion. Medline has been able to grow sales volumes
and increase prices for certain of its products during the past
year resulting in some expansion of gross margin.
As noted in Fitch's April 2022 Outlook revision, financial leverage
is expected to remain higher for longer because of the slower than
anticipated EBITDA growth and the use of FCF to meet payments under
Medline's Managing Partner Program. Fitch is encouraged by
Medline's solid execution of its strategy, which has produced
continued growth in prime vendor relationships and can be
reasonably expected to contribute to meaningful growth as inflation
headwinds abate.
KEY RATING DRIVERS
Leading Market Position for Medical/Surgical Products: Medline is a
market leader in the manufacturing and distribution of
medical/surgical products in the U.S. The company's vertical
integration of manufacturing and distribution capabilities and
global sourcing relationships helps to differentiate it from
leading competitors, such as Cardinal Health, Inc. and Owens &
Minor, Inc. Medline's profitability is enhanced by its ability to
maintain and grow relationships across a significant number of the
largest integrated delivery networks across the U.S. with Medline
branded products.
Consistently Solid Cash Flow: A combination of strong persistency
of existing customers and the ability to effectively penetrate both
the acute care and post-acute care health care market with private
label products continues to produce a high level of profitability
and cash flow, albeit somewhat constrained by inflationary
pressures. Investments in new and existing capacity are expected to
remain relatively stable over the forecast horizon.
Leverage Profile is High: A year after the acquisition of Medline
by Blackstone, Carlyle and Hellman & Friedman (the Sponsors), Fitch
estimates that gross leverage (gross debt/EBITDA) remains above
7.0x and FCF/Debt is below 5%, which is the key driver of Fitch's
Negative Outlook. However, Fitch believes gross debt will be
reduced over the medium to long term with both the application of
FCF to meet debt obligations and ultimately though future sales of
equity, either through an IPO or sale to other 3rd parties. In
addition, gross leverage will depend heavily on revenue and EBITDA
growth. Inflationary headwinds are expected to persist over the
medium term; however, Fitch believes Medline has broad pricing
power to offset those headwinds. Fitch expects that the
implementation of price increases will generally lag rising costs.
Fitch's calculation of gross leverage includes an amount of
mortgage debt secured principally by Medline's manufacturing and
distribution facilities. Such debt is treated as a having a higher
priority of claim than all other senior secured and senior
unsecured debt.
Governance and Financial Policy: In its inaugural coverage of
Medline, Fitch identified two critical assumptions underpinning its
forecast for Medline: 1) the ability of the Mills family and the
Sponsors to work together effectively and 2) to reduce debt over
the near to medium term. Fitch continues to believe these
assumptions are valid because it will lead to the highest value
proposition for all parties. However, the decision to prioritize
the use of FCF for management compensation instead of debt
reduction heightens the weight of this assumption to Fitch's
medium-term forecast. Any signs that Medline no longer has the
ability or intent to reduce debt towards its negative sensitivities
will heighten downgrade pressure.
DERIVATION SUMMARY
Medline's 'B+'/Negative Long-Term IDR reflects its strong position
in the large and stable market for medical/surgical products. The
company has established a wide array of branded products for sale
to acute care, post-acute care, physician office and surgery center
markets. The company's vertical integration of manufacturing
capabilities, distribution network and global sourcing
relationships differentiates Medline from its principal
competition: Cardinal Health, Inc. (CAH; BBB/Stable), Owens &
Minor, Inc. (OMI; BB-/Stable) and McKesson Corporation (MCK;
BBB+/Stable). Medline's strategy of leading with manufactured
products helps to subsidize and win prime-vendor relationships with
large integrated delivery networks.
Private label products comprise a majority of Medline's revenue and
gross profits compared to significantly lower amounts for CAH and
OMI. While OMI, CAH and MCK focus on parts of the acute care,
post-acute care, physician office and surgery center markets, only
CAH has a comparable segment focus and level of price
competitiveness. The company's EBITDA margins are significantly
higher than other distributors (including AmerisourceBergen)
because of the amount of branded products that it sells. Fitch
believes that private label products offer higher margins, albeit
at lower price points.
The IDRs of Mozart Holdings, LP and Medline Borrower, LP are rated
on a consolidated basis as discussed in Fitch's Parent-Subsidiary
Linkage Criteria using the weak parent/strong subsidiary approach,
open access and control factors based on the entities operating as
a single enterprise with strong legal and operational ties.
KEY ASSUMPTIONS
- Revenue increases at a CAGR of approximately 4-5% over the period
2022-2025 (the forecast period);
- Adjusted EBITDA margins are maintained between 11%-12% over the
forecast period;
- Working capital changes represent a use of cash of approximately
$200-300 million each year over the forecast period;
- Capex of approximately $350 million per year;
- FCF is used principally to fund MPU payments in 2022 and 2023 and
thereafter to reduce debt; discretionary debt reduction is used
while maintaining cash balances of at least $200 million;
- Secured mortgage debt of $2.230 billion is assumed to be senior
to all other senior secured and senior unsecured debt.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Expectation of sustaining gross debt/EBITDA (including secured
mortgage debt) at or below 5.0x by the end of fiscal 2023;
- FCF of approximately $750 million-$1.0 billion/year is applied to
the reduction of debt over the next three years;
- Operational strength demonstrated by customer retention and
market share growth leading to increasing CFO;
- Expectation of EBITDA margins remaining above 13% and FCF/debt
remains consistently above 10%.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Expectation of sustaining gross debt/EBITDA (including secured
mortgage debt) at or above 6.0x by the end of fiscal 2023;
- FCF is not used principally for debt reduction;
- Total revenue growth rate declines to low-to-mid-single digits as
a result of customer turnover and price concessions;
- Expectation of EBITDA margins falling below 10% and FCF/debt
remaining consistently below 5%.
LIQUIDITY AND DEBT STRUCTURE
Ample Liquidity: Fitch expects Medline's cash flow from operations
together with its revolving credit facilities will be sufficient to
fund its long-term and short-term capital expenditures, working
capital and debt service requirements. The company's revolving
credit facility has a financial covenant that provides ample room
to borrow in the event of liquidity stress (7.5x, excluding the
company's CMBS debt).
Cash and cash equivalents needs are expected to range between $200
million-$300 million and excess cash is expected to be used to pay
down debt after servicing MPU payments. Interest coverage
(operating EBITDA/interest paid) is expected to remain between
2.5x-3.0x.
Debt Maturities: The amortization of the term loan B is expected to
be approximately $70 million/year through maturity in 2028 and all
debt maturities are at least five years or longer, except the CMBS
debt due 2023. Fitch expects Medline to exercise its option to
extend the loan for one year and has two more one-year options to
extend thereafter; hence, refinancing risk remains low over the
forecast period. Fitch expects that Medline will apply
substantially all of its FCF to debt reduction over the forecast
period after it has paid the remaining estimated $500 million in
MPU payments in 2023.
Rating Recovery Assumptions
Fitch estimates an enterprise value (EV) on a going-concern basis
of approximately $10.125 billion for Medline, after deduction of
10% for administrative claims. The EV assumption is based on a
post-reorganization EBITDA of $1.5 billion and a 7.5x multiple;
neither assumption has changed since Fitch's initial rating
assignment.
The post-reorganization EBITDA estimate is approximately 35% lower
than Fitch's 2022 adjusted EBITDA estimate. Fitch's estimate of the
post-reorganization EBITDA is premised on an EBITDA approximating
pre-pandemic levels, which assumes a significantly lower base of
revenues and, therefore, EBITDA generation. A bankruptcy scenario
could arise as a result of disruption to 3rd party manufacturing
services and key supplier relationships along with decreasing
prices for Medline's goods and services and an inability to timely
reduce its expenses sufficiently to offset a material adverse
effect on its business. In this scenario, Fitch expects Medline
would need to reduce the size of its operations to offset the loss
of revenue.
The 7.5x multiple employed for Medline reflects acquisition
multiples of healthcare distributors and trading ranges of Mozart's
peer group (CAH, OMI, MCK), which have fluctuated between 6x-12x in
the recent past.
Instrument ratings and RRs for Medline's debt instruments are based
on Fitch's Corporates Recovery Ratings and Instruments Ratings
Criteria. Fitch includes Medline's CMBS debt in its waterfall
(approximately $2.2 billion) that occupies a super-senior position.
The secured mortgage debt is assumed to be fully recovered before
the other senior secured and senior unsecured debt in the capital
structure.
The waterfall analysis also includes secured credit facilities and
notes as follows: a cash flow revolving credit facility (assumed to
be fully drawn on $1.0 billion capacity); secured term loans
(approximately $7.7 billion USD equivalent after concession
allocation of 2%); and other secured debt (approximately $4.5
billion). The secured debt is expected to recover in a range of
51%-70% and, therefore, is rated 'RR3'.
Medline's senior unsecured debt of $2.5 billion ranks below other
secured debt and is estimated to have a recovery in a range of
0%-10%; therefore, it is rated 'RR6'. Fitch has assumed 2% of the
recovery value available to senior creditors is allocated to the
senior unsecured debt.
ISSUER PROFILE
Medline is the largest U.S.-based privately held manufacturer and
distributor of health care supplies to hospitals, post-acute
settings, physician offices and surgery centers.
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch adjusted reported EBITDA to remove non-recurring costs,
inventory normalization adjustments and non-operating
income/expense. In addition, for the forecast periods, Fitch's
leverage metrics include CMBS debt.
ESG CONSIDERATIONS
Medline has an ESG Relevance Score of '4' for Governance Structure,
because of the challenge of managing financial policy and capital
allocation objectives among the Mills family and the new major
shareholders. This has a negative impact on the credit profile and
is relevant to the rating in conjunction with other factors.
Medline has an ESG Relevance Score of '4' for Group Structure,
because of its complex capital structure and use of secured
mortgage debt to fund a material portion of the acquisition of the
company. This has a negative impact on the credit profile and is
relevant to the rating in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Medline Co-Issuer, Inc.
senior
unsecured LT B- Affirmed RR6 B-
senior secured LT BB- Affirmed RR3 BB-
Mozart Holdings, LP LT IDR B+ Affirmed B+
Medline Borrower, LP LT IDR B+ Affirmed B+
senior
unsecured LT B- Affirmed RR6 B-
senior secured LT BB- Affirmed RR3 BB-
NANO MAGIC: Incurs $543K Net Loss in Third Quarter
--------------------------------------------------
Nano Magic Holdings Inc. has filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing a net loss
of $542,594 on $807,026 of net revenues for the three months ended
Sept. 30, 2022, compared to a net loss of $757,569 on $545,515 of
net revenues for the three months ended Sept. 30, 2021.
For the nine months ended Sept. 30, 2022, the Company reported a
net loss of $1.30 million on $1.82 million of net revenues compared
to a net loss of $860,769 on $3.67 million of net revenues for the
nine months ended Sept. 30, 2021.
As of Sept. 30, 2022, the Company had $4.33 million in total
assets, $2.24 million in total liabilities, and $2.08 million in
total stockholders' equity.
The Company had losses from continuing operations and net cash used
by continuing operations of $2,448,637 and $1,488,818 for the nine
months ended Sept. 30, 2022 and a loss from continuing operations
of $993,452 and cash used by continuing operations of $520,310 for
the nine months ended Sept. 30, 2021. The Company said these
factors raise substantial doubt about the Company's ability to
continue as a going concern within one year after the date that
these unaudited consolidated financial statements are issued.
Management cannot provide assurance that the Company will
ultimately achieve profitable operations, become cash flow positive
or raise additional capital.
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/891417/000149315222031902/form10-q.htm
About Nano Magic
Headquartered in Madison Heights, Michigan, Nano Magic Holdings
Inc. -- www.nanomagic.com -- develops, commercializes and markets
consumer and industrial products powered by nanotechnology that
solve everyday problems for customers in the optical,
transportation, military, sports and safety industries.
Nano Magic reported a net loss of $1.57 million for the year ended
Dec. 31, 2021, compared to a net loss of $781,055 for the year
ended Dec. 31, 2020. As of March 31, 2022, the Company had $3.91
million in total assets, $2.32 million in total liabilities, and
$1.59 million in total stockholders' equity.
Sterling Heights, Michigan-based UHY LLP, the Company's auditor
since 2019, issued a "going concern" qualification in its report
dated March 30, 2022, citing that the Company has recurring losses
from operations, negative cash flow from operations, and an
accumulated deficit. These conditions raise substantial doubt
about the Company's ability to continue as a going concern.
NEW JERSEY CITY UNIVERSITY: Fitch Affirms 'BB+' IDR, Outlook Neg.
-----------------------------------------------------------------
Fitch Ratings has removed from Rating Watch Negative (RWN) and
affirmed at 'BB+' New Jersey City University's (NJCU) Issuer
Default Rating (IDR) and approximately $136 million of outstanding
(FYE 2021) New Jersey Educational Facilities Authority (NJEFA)
bonds, series' 2007F, 2010G, 2015A, 2016D, 2021A and 2021B, issued
on behalf of NJCU.
The Rating Outlook is Negative.
Entity/Debt Rating Prior
----------- ------ -----
New Jersey City
University (NJ) LT IDR BB+ Affirmed BB+
New Jersey City
University (NJ)
/General Revenues
/1 LT LT BB+ Affirmed BB+
SECURITY
The outstanding NJCU bonds issued by NJEFA are general obligations
of the university. The series 2021A/B financing is further secured
by a first lien pledge on the university's net tuition and certain
student fees (no room, board or student wellness fees). This pledge
was also extended to the prior NJEFA bonds on a parity basis
through a security and intercreditor agreement. (A subordinate lien
on net tuition and certain fees secures the university's long-term
lease for a separately-financed performing arts center.) Principal
and interest on NJEFA bonds are guaranteed by municipal bond
insurance policies.
The series 2021A/B bonds are additionally secured by cash-funded
debt service reserve funds. The 2021A/B bonds also feature a 35
days cash liquidity covenant beginning at fiscal year-end 2023 and
a sum-sufficient rate covenant.
ANALYTICAL CONCLUSION
The affirmation at 'BB+' and removal from RWN is grounded upon the
potential for stable, or increased, levels of state support while
NJCU's new management team overhauls its operations towards
long-term structural balance. Fitch's expectations of continued or
increased state support, which is a critical factor underpinning
the BB+ rating, reflects NJCU's important role in educating roughly
6,550 (fall 2022) mostly Pell Grant-eligible and minority students
within the State of New Jersey's public education system.
The Negative Outlook is predicated on the university's short runway
to achieve structural balance and secure supplemental support from
the State of New Jersey (A/Positive) before NJCU's already scant
liquidity falls to a precarious level that could trigger a
downgrade of one or more notches. However, the rating may also
stabilize, if by mid-calendar year 2023, further curtailment of
expenses and the commitment of external support in the form of
supplemental state appropriations, state funding for critical
capital needs, or other external support is achieved.
NCJU has made significant progress in reducing FY23's anticipated
(as of July 2022) $23 million deficit to $13 million (as of
September 2022), excluding the effect of $13 million in remaining
federal stimulus funds will be exhausted during FY23.
The Negative Outlook also reflects several headwinds NJCU faces in
achieving its goals, including unfavorable demographic and
socioeconomic trends that led to NCJU's year-over-year enrollment
decline of an estimated 6% in fall 2022, from already depressed
pandemic lows. Other headwinds include a high fixed cost burden
from debt, lease and pension liabilities, and sizeable, visible,
and critical capital needs. Additionally, NJCU has provided
voluntary operational revenue subsidies to West Campus Housing LLC
during the 2020, 2021, and 2022 fiscal years, funded by federal
stimulus receipts.
KEY RATING DRIVERS
Revenue Defensibility: 'bb'
Pressured Enrollment from a Price-Sensitive and Declining
Demographic, with Limited Revenue Sources Beyond Student and State
Revenues
NJCU's local market position is supported by affordability relative
to peers with annual tuition just under $14,000 (academic year
2022) and its urban location that is also a short commuter rail
ride to New York City. However, enrollment has proven vulnerable to
the ongoing effects of the pandemic on its price-sensitive student
population and to the impact of operating in particularly
unfavorable demographic conditions.
Management reports that between 2018 and 2028, the number of high
school graduates in New Jersey will drop by 9%, twice the drop
anticipated for the nation. COVID-19 has had lasting and
disproportionate effects on college participation by minority and
low-income populations. NJCU's undergraduate student body is
historically more than three-fourths Black and Hispanic, with more
than 60% receiving Pell grants for low-income students.
Reflecting this challenging demographic environment, NJCU's fall
2022 headcount enrollment fell almost 6% year-over-year rather than
recovering from pandemic lows, which followed the fall 2021 drop of
8%. The cumulative effect of annual enrollment declines is
significant. Over the five years from fall 2017, when NJCU's
enrollment numbered around 8,300 students, enrollment dropped over
20% to about 6,550 in fall 2022. Net student revenues dropped about
14% over the same five-year period.
For fall 2022, NJCU implemented a 3% tuition increase and reduced
discounting, which will help stabilize revenues and increase the
student revenue share to over 50% in FY23, but may further pressure
enrollment in the future.
The majority of NJCU's enrollment decline is among undergraduates,
which comprise about 75% of the student body. NJCU draws a
significant percentage of undergraduate students as transfers from
local community colleges, a source that has been particularly hard
hit since the start of the pandemic. In fall 2022, new freshman
enrollment actually increased modestly year-over-year, but was
overshadowed by losses in new transfer enrollment and retention
among continuing students.
Future stabilization or growth of the undergraduate student
population will require continued growth in new freshmen students,
recovery in the number of transfer students from community
colleges, and improved retention. To increase retention, programs
focusing on affordability, student experience and safety net
services for students facing hardships are being enhanced. Despite
these efforts, NJCU is anticipating at least another year of
challenged enrollment in fall 2023, driven by continued softness in
transfers and retention.
NJCU opened its Fort Monmouth, NJ campus in August 2021, offering
highly in-demand programs such as nursing and cybersecurity. Fall
2022 enrollment at Fort Monmouth fell to under 200 students, from
about 300 in its inaugural year, both well below projections. NJCU
has restructured operations at the campus while it reviews
strategic partnerships and other options.
State support, both directly in the form of operating and pension
appropriations and indirectly through expanding scholarship grants
to in-state students, will support NJCU's overall revenue picture.
State support will represent approximately 40% of NJCU's revenue
base in FY23. NJCU does not generate meaningful income from
endowment returns or fundraising.
Operating Risk: 'bbb'
Financial Emergency Paves Way for Restructuring of Operations
towards Long-Term Sustainability, but Restructuring is Hampered by
High Fixed Costs and Critical Capital Needs
Pandemic aid has supported NJCU's recent operating results,
resulting in atypical operating cash flow margins of almost 15% in
fiscal 2021 and 11% in (unaudited) fiscal 2022, following years of
anemic cash flow margins averaging 2%. Similarly, the current
year's budget would result in a Fitch-calculated cash flow margin
of roughly 12% including remaining stimulus fund income
(correlating more to a Fitch 'a' operating risk profile), and less
than 3% without stimulus fund income (correlating more to a Fitch
'bbb' operating risk profile). Thus, after stimulus funds are fully
expended in FY23, adequate cash flow margins will be highly
dependent on achieving fiscal balance.
Despite attempts to align its expense base with revenue
expectations in prior years, NJCU faces continued pressure from
high fixed costs such as debt and pension payments. As successive
revenue shortfalls from declining enrollment ensued, the resulting
structural imbalance and lack of flexibility prompted NCJU's
Trustees to declare a State of Emergency at its June 27, 2022
meeting. The former President and former CFO were replaced and the
new management team immediately implemented a three-month control
budget to address an anticipated structural deficit of $23 million
in FY23.
Significant progress has been achieved towards reaching balance
during FY23, but additional work remains. A full year FY23 budget
was adopted by NJCU's Board in September and reduced the recurring
deficit to just under $13 million off an expense base of $148
million. A balance of approximately $13 million in non-recurring
stimulus funds will be directed towards FY23 operations, half
towards student aid and half towards institutional support, but
represents a one-time fix. To date, the university has met all its
financial obligations and has budgeted for its full debt service
payments for FY23.
Fitch anticipates that NJCU has limited further flexibility to
fully balance its operations on a going-forward basis without
significant downsizing and/or additional support, due to high fixed
costs from debt, lease and pension liabilities, and a backlog of
critical capital needs. Under the prior administration, NJCU
embarked on significant expansion plans including the
aforementioned Fort Monmouth campus, a leased business school
campus in downtown Jersey City, NJ, a performance arts center, and
campus housing.
To the extent that these projects underperform expectations, net
costs accrue to the university. NJCU is reported to be in
discussions with potential partners for the Fort Monmouth campus
and considering the sale of the West Campus student housing
project. The university provided $2.2 million in operational
subsidies to the West Campus Student housing project in FY22 from
federal stimulus funds, and it is unclear to Fitch what the need or
capacity for additional subsidies will be in FY23.
Similar to the other New Jersey public universities, NJCU maintains
heavy reliance on the state to fund operating costs, pensions, and
capital needs. In fiscal 2023 the state has appropriated
approximately $34 million to NJCU and about another $19 million for
pension expenses that are typically funded by the state on a
pass-through basis. Together, these sources of state funding
comprise a critical 40% of NJCU's 2023 revenues. NJCU has requested
a one-time supplemental operating appropriation of $10 million, and
increased per-pupil appropriations to align more closely with
national averages.
While NCJU is not entertaining further capital expansion plans,
considerable deferred capital needs are both critical and visible.
The university has identified $26 million in critical
infrastructure needs for items such as electrical and plumbing
systems, boilers, and heating/air conditioning along with another
$9 million of basic and strategic capital needs. NJCU requested $15
million in NJ Higher Education Infrastructure Trust funds for
capital, and $35 million in federal American Rescue Plan Act (ARPA)
funds through the state to address capital needs and retention
initiatives for students, staff and faculty.
Positively, the university administration appears to have a good
working relationship with its faculty labor union and reached a
memorandum of understanding in September 2022 that implemented
mandatory furloughs and other expense reductions in exchange for a
deferral of any layoff notices until late calendar year 2022.
Management has also reduced its ranks by at least 30% since the
beginning of the pandemic, including a recent downsizing of
executive departments and heads from six divisions to four.
Financial Profile: 'bb'
Limited Liquidity Beyond FYE23; Leverage Remains Very High
NJCU is very highly leveraged, resulting in a 'bb' Financial
Profile assessment. The high leverage is due to diminishing
liquidity, high debt and lease obligations, and a sizable pension
liability. Available Funds of the university at FYE22 (unaudited)
stood at $24 million; assuming Available Funds of NJCU Foundation
remained roughly at the FYE21 level of $24 million, the total
Fitch-calculated Available Funds (including Foundation AF) at FYE22
is $48 million.
NJCU's total debt at FYE22 (unaudited) was $159 million. Assuming
pension liabilities and lease payments for Fort Monmouth, the
performing arts center, and business school facility remained at
FYE21 levels, total Fitch-Adjusted Debt is estimated at $314
million at FYE22, resulting in a very low 15% Available Funds to
Adjusted Debt ratio. Applying a Fitch-modeled downside scenario to
NJCU's operations including stressed market returns, NJCU
withstands the modeled scenario but with negligible Available
Funds.
At FYE23, the university anticipates having just $5 million of cash
and equivalents, assuming that it executes its current downsized
budget that anticipates a $13 million deficit, without supplemental
state aid or asset sales. In this scenario, and assuming $24
million of Available Funds at the Foundation, Available
Funds/Adjusted Debt would be just 9% at the end of FY23.
These leverage metrics fall to the bottom or below a 'bb' financial
profile assessment, but state support for pension contributions and
certain fringe benefits lowers the burden of NJCU's adjusted debt,
nearly half of which is related to pensions.
Conversely, continued NJCU subsidies, particularly any subsidies
not funded by pandemic or other external sources, to the
non-recourse student housing debt of the NJCU Foundation would
result in Fitch's inclusion of the student housing debt in NJCU's
leverage metrics, and will result in even lower than currently
projected Available Funds and leverage ratios. NJCU provided $2.2
million in subsidy for the project fiscal 2022 from pandemic aid.
While the latest publicly-reported occupancy at the project
improved to 72% from less than 50% during the pandemic, it is not
clear whether the project will be self-sufficient during the fiscal
year.
Asymmetric Additional Risk Considerations
Asymmetric additional risk considerations include multi-year
structural deficits, which, combined with limited liquid resources,
has potential to diminish the university's net assets. NJCU's
current projections at FYE23 will trigger a violation of a 35 days'
cash on hand covenant, requiring the University to hire and follow
recommendations of a consultant.
Should NJCU's West Campus Housing project require subsidies from
internal resources, Fitch will consider the project to be on
balance sheet, and the subsidies will further jeopardize NJCU's
very limited cash resources.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Any indication of reduction of support from the State of New
Jersey (A+/Positive), including support for pension and other
benefit costs, operating appropriations, or student aid;
- Inability of the university to implement its FY23 budget or carry
out a plan to generate structural balance in FY24 and beyond;
- Continued attrition of the student population or net student
revenues.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Given NCJUs long-term structural imbalances, declining
fundamentals and weakened liquidity, a positive rating
action/upgrade is unlikely at this time;
- Extraordinary support from the State of New Jersey or another
external party, together with the implementation of a viable
restructuring plan, may stabilize the rating.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
NGL ENERGY: S&P Downgrades ICR to 'CCC+', Outlook Negative
----------------------------------------------------------
S&P Global Ratings lowered its issuer credit rating (ICR) on NGL
Energy Partners L.P. (NGL) to 'CCC+' from 'B-'.
At the same time, S&P Global Ratings lowered its issue-level rating
on the partnership's senior secured debt to 'B' from 'B+'. The '1'
recovery rating on the debt is unchanged, indicating S&P's
expectation for very high (90%-100%; rounded estimate: 95%)
recovery. S&P Global Ratings also lowered its issue-level rating on
the partnership's senior unsecured debt to 'CCC-' from 'CCC'. The
'6' recovery rating on the debt is unchanged, indicating S&P's
expectation for negligible (0%-10%; rounded estimate: 0%)
recovery.
The negative outlook reflects S&P's view that, over the next 12
months, NGL faces a sizable maturity with tight liquidity cushion.
S&P said, "The downgrade reflects our expectation that although NGL
has sufficient cash flow to pay down the $400 million of 2023
senior unsecured notes before they mature, liquidity is tight.
Since our last review in August 2022, the notes now have a maturity
of less than 12 months, given the maturity in November 2023.
Although the company continues to perform well and our forecast is
relatively unchanged from our last review, we believe this sizable
maturity within the next 12 months represents an important
inflection point for NGL. Although our forecast considers a level
of liquidity that is sufficient to fully repay the notes, the
cushion is very tight and the company's dependence on positive
operating dynamics to meet the obligation has increased. Repayment
risk is somewhat heightened by a springing maturity on the
asset-based lending facility (ABL), but we forecast that the
company's cash flow timing will allow it to avoid this springing
before the 2023 notes.
"However, in our view, negative external influences on performance
could reduce cash flows, tightening liquidity such that it might be
difficult for NGL to meet the obligation without taking actions we
would deem commensurate with a default. These would include any
exchange, repurchases, or amendments that we determine provide
lenders with less than the original promise of the security when
issued. Up to this point, we have considered repurchases on the
notes by the company as opportunistic and not disadvantaging
lenders, supported by pricing that is very close to par or de
minimis in sizing. We will consider future actions taken on the
capital structure individually to determine if they are distressed
and lenders are being disadvantaged.
"The negative outlook reflects our view that, over the next 12
months, NGL faces a sizable maturity with tight liquidity cushion,
such that negative developments in operating performance could lead
to an increased likelihood of the company pursuing actions to
remedy its capital structure that we would consider to be
distressed and tantamount to a default."
S&P could consider a negative rating action on NGL if:
-- Liquidity tightens such that we believe the company will face
difficulty addressing its November 2023 notes; or
-- S&P believes there is an increased likelihood of conventional
default or a transaction we would view as distressed (which could
include below-par repurchases of debt) within the next 12 months.
S&P could consider a positive rating action if:
-- Liquidity improves such that the company has meaningful cushion
to absorb unexpected events; and
-- S&P has a high level of confidence that NGL will face no issues
addressing the maturities in its capital structure, whether through
repayment or accessing capital markets to refinance.
ESG credit indicators: E-3, S-2, G-3
S&P said, "Environmental factors are a moderately negative
consideration in our credit rating analysis of NGL. Although the
partnership's recent diversification into water solutions supports
the longevity of its business, it also faces multiple risks related
to climate change, including longer-term volume risks from reduced
drilling activity or demand due to the transition to renewable
energy sources ongoing in the midstream industry. Governance is
also a moderately negative consideration because of NGL's history
of leveraging acquisitions, which have stretched its balance sheet
and led us to assess its financial risk profile as highly
leveraged."
NGV GLOBAL: Court OKs Cash Collateral Access Thru Dec 16
--------------------------------------------------------
The U.S. Bankruptcy Court for the Northern District of Texas, Fort
Worth Division, authorized NGV Global Group, Inc. and affiliates to
use cash collateral on an interim basis in accordance with the
budget, with a 10% variance, through December 16, 2022.
The Debtors require the use of cash collateral to continue the
operation of their businesses.
As adequate protection to FirstCapital Bank of Texas, N.A. for the
Debtors' use of cash collateral, the Lender is granted a
replacement lien in the Debtors' assets that serve as collateral
under the Lender's applicable loan documents, in the same order of
priority that existed as of the Petition Date.
The Replacement Lien is subject and subordinate to a carve-out of
funds for all fees required to be paid to the Clerk of the
Bankruptcy Court and to the Office of the United States Trustee
pursuant to 28 U.S.C. Section 1930(a).
The Replacement Liens will be, valid, perfected, enforceable and
effective as of the Petition Date without the need for any further
action by the Debtors or the Lender, or the necessity of execution
or filing of any instruments or agreements.
A copy of the order is available at https://bit.ly/3ia5ha7 from
PacerMonitor.com.
About NGV Global Group
NGV Global Group is a global technology company that designs,
manufactures, distributes and supports natural gas operated medium
and heavy-duty commercial vehicles sold worldwide. The Company
manufactures natural gas engines, fuel storage units and fueling
systems for application in its own products and for sale to third
party companies interested in the conversion of trucks and buses to
operate on natural gas completely (dedicated) or in conjunction
(duel-fuel) with diesel fuel.
The Company also owns and operates a gas transportation company
which is registered with the US Department of Transportation (DOT)
allowing the Company to safely transport multiple substances across
the U.S. including: CNG, LNG, Hydrogen, Oxygen, Nitrogen and other
hazardous materials and gases.
NGV Global Group, Inc. and its affiliates sought protection under
Chapter 11 of the U.S. Bankruptcy Code (Bankr. N.D. Tex. Lead Case
No. 22-42780) on November 17, 2022. In the petition signed by
Farroukh Zaidi, chief executive officer, the Debtor disclosed up to
$50 million in assets and up to $100,000 in liabilities.
Judge Edward L. Morris oversees the case.
Jeff P. Prostok, Esq., at Forshey Prostok, LLP, is the Debtor's
counsel.
NGV GLOBAL: Dec. 2 Deadline Set for Panel Questionnaires
--------------------------------------------------------
The United States Trustee is soliciting members for committee of
unsecured creditors in the bankruptcy case of NGV Global Group, et
al.
If a party wishes to be considered for membership on any official
committee that is appointed, it must complete a questionnaire
available at https://bit.ly/3gvoLpc and return by email it to
Elizabeth A. Young -- elizabeth.a.young@usdoj.gov -- at the Office
of the United States Trustee so that it is received no later than
4:00 p.m., on Dec. 2, 2022.
If the U.S. Trustee receives sufficient creditor interest in the
solicitation, it may schedule a meeting or telephone conference for
the purpose of forming a committee.
About NGV Global Group
NGV Global Group is a global technology company that designs,
manufactures, distributes and supports natural gas operated medium
and heavy-duty commercial vehicles sold worldwide. The Company
manufactures natural gas engines, fuel storage units and fueling
systems for application in its own products and for sale to third
party companies interested in the conversion of trucks and buses to
operate on natural gas completely (dedicated) or in conjunction
(duel-fuel) with diesel fuel. The Company also owns and operates a
gas transportation company which is registered with the US
Department of Transportation (DOT) allowing the Company to safely
transport multiple substances across the U.S. including: CNG, LNG,
Hydrogen, Oxygen, Nitrogen and other hazardous materials and
gases.
NGV Global Group, Inc. and its affiliates sought protection under
Chapter 11 of the U.S. Bankruptcy Code (Bankr. N.D. Tex. Lead Case
No. 22-42780) on November 17, 2022. In the petition signed by
Farroukh Zaidi, chief executive officer, the Debtor disclosed up to
$50 million in assets and up to $100,000 in liabilities.
Judge Edward L. Morris oversees the case.
Jeff P. Prostok, Esq., at Forshey Prostok, LLP, is the Debtors'
counsel.
PIPELINE HEALTH: Taps Duane Morris as Special Counsel
-----------------------------------------------------
Pipeline Health System, LLC and its affiliates seek approval from
the U.S. Bankruptcy Court for the Southern District of Texas to
employ Duane Morris, LLP as special counsel.
The Debtors need the firm's legal assistance in connection with the
sale of their Illinois assets to AUM Global Healthcare Management,
LLC and Ramco Healthcare Holdings, LLC.
The firm will be paid between $795 per hour and $855 per hour. It
will also be reimbursed for out-of-pocket expenses incurred.
John Robert Weiss, Esq., a partner at Duane Morris, 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:
John Robert Weiss, Esq.
Duane Morris LLP
190 South LaSalle Street, Suite 3700
Chicago, IL 60603
Phone: +1 312 499 0148
Email: jrweiss@duanemorris.com
About Pipeline Health System
Pipeline Health Systems, LLC is an independent, community-focused
healthcare network that offers a wide range of medical services to
the communities it serves, including maternity care, cancer
treatment, behavioral health, rehabilitation, general surgery, and
hospice care. Headquartered in El Segundo, California, Pipeline's
operations include seven safety net hospitals across California,
Texas, and Illinois, with approximately 310 physicians and over
1,150 beds to serve patients, and a company-wide workforce of over
4,200.
Pipeline Health Systems and its affiliates sought Chapter 11
protection (S.D. Texas Lead Case No. 22-90291) on Oct. 2, 2022. In
the petition signed by Andrei Soran, authorized signatory, Pipeline
Health Systems disclosed $500 million to $1 billion in assets and
liabilities.
The Hon. David R. Jones is the case judge.
The Debtors tapped Kirkland & Ellis, LLP as general bankruptcy
counsel; Jackson Walker, LLP as local bankruptcy counsel; Duane
Morris, LLP as special counsel; Ankura Consulting Group, LLC as
restructuring advisor; and Jefferies, LLC, as financial advisor and
investment banker. Epiq Corporate Restructuring, LLC, is the claims
agent.
PWM PROPERTY: Nov. 30 Hearing on Exclusivity Extension Bid
----------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware is set to
hold a hearing on Nov. 30 to consider the motion filed by PWM
Property Management, LLC and 181 West Madison Property, LLC to
extend to Dec. 30 the period during which the companies have the
exclusive right to file a Chapter 11 plan.
The companies asked for more time to keep exclusive control of
their bankruptcy cases while they work to resolve the objection
from 245 Park Member, LLC to confirmation of their proposed plan of
reorganization.
The resolution of 245 Park Member's objection is the main
unresolved contingency in the companies' bankruptcy cases,
according to Allison Mielke, Esq., at Young Conaway Stargatt &
Taylor, LLP.
"While the [companies] are prepared to litigate this matter, they
have engaged with [245 Park Member] to discuss a resolution of the
objection," the companies' attorney said in court papers.
Meanwhile, Wells Fargo Bank, N.A. filed a statement to reserve its
right to object to further amendment of the companies' plan of
reorganization filed on June 9 or any future proposed plan.
About PWM Property Management
PWM Property Management LLC, et al., are primarily engaged in
renting and leasing real estate properties. They own two premium
office buildings, namely 245 Park Avenue in New York City, a
prominent commercial real estate assets in Manhattan's prestigious
Park Avenue office corridor, and 181 West Madison Street in
Chicago, Illinois.
On Oct. 31, 2021, PWM Property Management LLC and its affiliates
sought Chapter 11 protection (Bankr. D. Del. Lead Case No.
21-11445). PWM estimated assets and liabilities of $1 billion to
$10 billion as of the bankruptcy filing.
The cases are pending before the Honorable Judge Mary F. Walrath
and are being jointly administered for procedural purposes under
Case No. 21-11445.
The Debtors tapped White & Case LLP as restructuring counsel; Young
Conaway Stargatt & Taylor, LLP as local counsel; and M3 Advisory
Partners, LP as restructuring advisor. Omni Agent Solutions is the
claims agent.
PWP INVESTMENTS: Wins Cash Collateral Access on Final Basis
-----------------------------------------------------------
The U.S. Bankruptcy Court for the Central District of California
authorized PWP Investments, LLC to use cash collateral on a final
basis in accordance with the budget.
The Debtor requires the continued use of cash collateral for
ongoing maintenance of its property and payment of utility
services, property taxes, and insurance.
The Debtor owns rental property located at 1232 South Kenmore
Avenue, Los Angeles, CA 90006, which is encumbered by a First Deed
of Trust in favor of Lima One Capital, LLC. The loan secured by the
DOT matured prior to the Petition Date. According to the Debtor,
the principal balance on the Loan is $1,038,596. The Property
generates monthly rental income of $7,070.
Nothing in the record indicates that the Property is declining in
value. Based on the absence of evidence of declining value and the
proposed monthly adequate protection payment of $2,000 to the
Lender, the Court held that the Lender is adequately protected. In
addition, the use of cash collateral to pay insurance, property
taxes, utilities, and maintenance on the Property provides further
adequate protection to the Lender.
A copy of the order is available at https://bit.ly/3Xr71vK from
PacerMonitor.com.
About PWP Investments LLC
PWP Investments, LLC is in the Real Estate Investment Trusts
business.
PWP Investments, LLC sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. C.D. Cal. Case No. 22-13044) on June 1,
2022. In the petition filed by Christopher C. Uyan, as managing
member, the Debtor reports estimated assets and liabilities between
$1 million and $10 million each.
The case is assigned to the Honorable Bankruptcy Judge Ernest M.
Robles.
Thomas B. Ure, Esq., at Ure Law Firm is the Debtor's counsel.
RESHAPE LIFESCIENCES: Posts $11.8 Million Net Loss in Third Quarter
-------------------------------------------------------------------
Reshape Lifesciences Inc. has filed with the Securities and
Exchange Commission its Quarterly Report on Form 10-Q disclosing a
net loss of $11.81 million on $2.80 million of revenue for the
three months ended Sept. 30, 2022, compared to a net loss of $17.70
million on $3.71 million of revenue for the three months ended
Sept. 30, 2021.
For the nine months ended Sept. 30, 2022, the Company reported a
net loss of $29.60 million on $8.13 million of revenue compared to
a net loss of $26.47 million on $10.46 million of revenue for the
same period in 2021.
As of Sept. 30, 2022, the Company had $28.46 million in total
assets, $7.51 million in total liabilities, and $20.94 million in
total stockholders' equity.
ReShape stated in the SEC filing that, "The Company currently does
not generate revenue sufficient to offset operating costs and
anticipates such shortfalls to continue primarily due to the
unpredictability of new variants of COVID-19, which may result in a
slow-down of elective surgeries and restrictions in some locations.
As of September 30, 2022, the Company had net working capital of
approximately $6.1 million, primarily due to cash and cash
equivalents and restricted cash of $6.2 million. The Company's
principal source of liquidity as of September 30, 2022, consisted
of approximately $6.2 million of cash and cash equivalents and
restricted cash, and $2.2 million of accounts receivable. Based on
its available cash resources, the Company may not have sufficient
cash on hand to fund its current operations for more than twelve
months from the date of filing this Quarterly Report on Form 10-Q.
This condition raises substantial doubt about the Company's ability
to continue as a going concern. The Company believes in the
viability of its business strategy and in its ability to raise
additional funds, however, there can be no assurance to that
effect."
Management Commentary
"Since joining ReShape in August, we have made significant progress
adjusting our business model to support a more disciplined,
sustainable and scalable organization. We are on a path to
profitability and will achieve this by partnering with our
physician advocates and leveraging our integrated portfolio of
proven products and services that manage and treat obesity and
metabolic disease,"
stated Paul F. Hickey, president and chief executive officer of
ReShape Lifesciences, in a press release. "There are a multitude
of exciting initiatives ongoing to help drive top-line revenue, as
we seek to improve the quality of life for individuals fighting,
what can often be, a lifelong battle with obesity and its
comorbidities. The recently updated guidelines from the ASMBS and
IFSO are compelling, evidenced-based standards for metabolic and
bariatric surgery. If these guidelines are supported by payers,
they will dramatically increase the number of patients eligible for
bariatric surgery. It is our strong belief that, among the
approved procedures, the personalized Lap-Band will prevail as the
least invasive surgical treatment option for durable weight loss,
improvement in obesity related comorbidities and quality of life.
Additionally, many of the determinations reached in the recently
issued ASMBS Consensus Statement on Lap-Band use and aftercare
management, align perfectly with our own evidence-based, best
practices recommendations, including our view that proper aftercare
is critical to the success of the Lap-Band procedure.
"Since mid-August, we have made significant and necessary changes
to our overall strategy to streamline our organization and focus on
growth initiatives. Our new, targeted, digital marketing strategy
now aligns with our health care partners and has reduced our cost
per patient lead by over 50%. Additionally, we have right-sized
the organization to reduce operating expenditures so that we can
preserve cash and invest in our growth drivers, including sales and
marketing. To lead our global sales effort, we appointed seasoned
sales executive Nick Ansari, who I have had the pleasure of working
with for several years. This new leadership, in conjunction with
the implementation of the Sales Force platform, is enabling us to
track sales metrics and key performance indicators to predict and
drive sales growth. We also expect our margins to continue to
improve as a result of the recently instituted 7.5% price increase
for the Lap-Band. As important, we will continue to invest in the
research and development of innovative products to complement our
continuum of weight loss solutions. Having now completed the
limited release of our GIBI HD calibration tubes, which supports
bariatric procedures across the spectrum, we have made additional
improvements and are planning a full roll-out in the fourth
quarter. We also look forward to launching our next generation,
physician-led redesign of the Lap-Band (Lap-Band II) which is
designed to reduce patient discomfort and minimize postoperative
adjustments. Lastly, we are pleased with the reception we have
received from large, self-insured employers in response to our
discussions around ReShapeCare™ and how this important program
can help impact overall employee health and reduce employers'
health care costs. Based on this positive feedback, we will work
to expand this program to support both employees and our Lap-Band
patient leads to improve their health and achieve weight loss.
Looking ahead, we will continue to refine our business model to
solidify our position as the premier physician-led weight loss and
metabolic health-solutions company."
Mr. Hickey continued, "In addition to our metric driven and
disciplined approach to growing our Lap-Band and ReShapeCare
programs, we have also advanced development of our DBSN device,
which has the potential to address the significant, global type 2
diabetes market. Data on the device was recently published in the
peer reviewed journal, Frontiers in NeuroScience, and was presented
in an abstract during ObesityWeek. The novel DBSN system, which
uses a vagus nerve block technology platform, combined with vagus
nerve stimulation, may be able to reduce diabetes patients'
dependence on medications in a very individualized manner. The
compelling data generated, to date, was funded by a non-dilutive
NIH SBIR grant, and as reported in September, we received a second
SBIR grant to focus on the development of this technology to treat
hypoglycemia. We are very excited about this technology and its
future role in fighting obesity with personalized therapy, and we
will continue to collaborate with leading researchers and seek
continued NIH grant support."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1427570/000155837022017869/rsls-20220930x10q.htm
About ReShape Lifesciences
ReShape Lifesciences Inc. (Obalon Therapeurtics, Inc.) is a weight
loss and metabolic health-solutions company, offering an integrated
portfolio of proven products and services that manage and treat
obesity and metabolic disease.
ReShape reported a net loss of $61.93 million for the year ended
Dec. 31, 2021, a net loss of $21.63 million for the year ended Dec.
31, 2020, and a net loss of $23.67 million for the year ended Dec.
21, 2019. As of June 30, 2022, the Company had $41.93 million in
total assets, $9.56 million in total liabilities, and $32.36
million in total stockholders' equity.
SABRE GLBL: Moody's Rates New 5-Year Senior Secured Notes 'Ba3'
---------------------------------------------------------------
Moody's Investors Service assigned a Ba3 rating to Sabre GLBL
Inc.'s (wholly owned subsidiary of Sabre Holdings Corporation,
"Sabre" or "the Company") new 5-year Senior Secured Notes. The
Company's Ba3 Corporate Family rating, Ba3-PD Probability of
Default rating, and all other credit ratings are unaffected by the
proposed transaction. The stable outlook and SGL-2 speculative
grade liquidity rating are unchanged.
Assignments:
Issuer: Sabre GLBL Inc.
Gtd Senior Secured Global Notes, Assigned Ba3 (LGD3)
LGD Adjustments:
Issuer: Sabre GLBL Inc.
Senior Secured Bank Credit Facility, Adjusted to (LGD3) from
(LGD4)
Senior Secured Regular Bond/Debenture, Adjusted to (LGD3) from
(LGD4)
Moody's views the refinancing as credit neutral. The proceeds of
the offering, plus cash on hand, will be primarily used to fully
repay the outstanding obligations under the Term Loan B due 2024.
Leverage will be materially unchanged, and the refinancing improves
the company's maturity profile but increases interest costs.
Moody's expects all key terms and conditions to be the same or
materially similar to the existing Senior Secured Notes, and
therefore no material change to the capital structure or priority
of claims.
RATINGS RATIONALE
Sabre's Ba3 CFR reflects the company's asset-lite business model
and strong market position as the number two provider of Global
Distribution System (GDS) services globally. Moody's believes the
ongoing recovery in travel demand and air passenger volumes will
lift Sabre's revenues and profitability to pre-pandemic levels by
2024. The Company's financial policy also remains an important
credit support, with a commitment to return credit metrics to
pre-pandemic levels, including adjusted debt to EBITDA below 4.5x.
Reflecting the commitment, Sabre has suspended common dividends and
share repurchases until cash flows turn positive. Liquidity is also
good.
The credit profile is, however, constrained by the cyclical nature
of business which is sensitive to changes in the economy. This was
particularly evident during the pandemic. While the Company is
steadily recovering, the business remains challenged. Bookings in
2022 are expected to be 50%-60% relative to 2019 while free cash
flows are still negative, and leverage remains very high.
Competition in travel services is also high and rising with a wide
range of companies angling for more market share, requiring steady
investments in sales, marketing, and technology. These costs will
remain a drag on profitability which is improving but will remain
challenged. Moody's expects EBITDA margins to reach mid-teens
percent by 2024.
The SGL-2 rating reflects Moody's expectation that Sabre will
maintain good liquidity despite the lack of a revolving credit
facility. The Company had about $0.8 billion in unrestricted cash
balances (at the end of Q3 2022) which Moody's believes is more
than enough to cover its monthly cash burn before free cash flows
turn positive, by year end 2022. Moody's expects dividends and
share repurchases to remain suspended, preserving liquidity until
financial performance more fully recovers and leverage returns
within Moody's tolerances. With the planned refinancing, Sabre
will have a favorable maturity profile with no maturities due until
April 2025. The Company is subject to various covenants including a
5.0x senior secured incurrence test (not tested during a/this
refinancing) but is not subject to maintenance covenants.
The secured loans and senior secured guaranteed notes are rated Ba3
(LGD3), equal to Sabre's Corporate Family Rating (CFR) and reflects
the Ba3-PD Probability of Default rating and Moody's expectation
for an average family recovery in a default scenario given the
covenant-lite structure. Sabre GLBL Inc. (GLBL), Sabre Holdings
Corporation's wholly owned direct subsidiary, is the borrower on
the senior secured credit facilities as well as the issuer of the
senior secured notes. The senior notes are guaranteed on a secured
basis by Sabre Holdings Corporation, GLBL's parent company, and
each of GLBL's existing and future subsidiaries that are borrowers
or guarantors of the senior secured credit facilities. Senior
secured indebtedness is collateralized by substantially all of
Sabre's assets. The exchangeable notes are unrated, unsecured
obligations, guaranteed by Sabre Corporation (which does not
guarantee the secured obligations), ranked junior to secured debt.
Sabre's ESG Credit Impact Score is CIS-3, moderately negative. The
majority of revenues are generated from the airlines sector which
has high exposure to carbon transition risk. In addition, Sabre has
moderately negative social and governance risks reflecting the need
for technical and engineering talent and historically high
financial leverage.
The stable outlook reflects Moody's expectation that revenues will
be near $3 billion in 2023 (80% of 2019, pre-pandemic), and $3.5
billion by the end of 2024 (90% of 2019, pre-pandemic), producing
near $600 to $800 billion in EBITDA, over the respective periods.
EBITDA margins will approach 20% in 2023 and rise above in 2024.
Moody's expects free cash flows (FCF) to approach $200 million in
2023, and $500 million in 2024, after capital expenditures (of
approximately 3%-4% of revenue). FCF will cover mid-single percent
of debt in 2023 and rise to low-teens percent in 2024 on debt that
will fall to near $4 billion, driving leverage to near 4.75x.
Moody's outlook includes certain key assumptions including good
liquidity and a financial policy that will not tolerate shareholder
friendly distributions (e.g. dividends, share repurchases, etc.)
until free cash flows turns positive and will, thereafter, not
exceed positive free cash flows.
Note: all figures above are Moody's adjusted over the next 12-18
months unless otherwise noted.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
A ratings upgrade is unlikely at this time given the Company is
still in the mid to late stages of recovering from the pandemic.
However, ratings could be upgraded if Sabre returns to good
earnings growth with more diversified operating profits. Debt to
EBITDA would also need to be sustained below 4x (Moody's adjusted)
and free cash flow to debt (Moody's adjusted) sustained in the high
single digit percentage range. An upgrade would be contingent on
Moody's having a high degree of confidence that travel demand will
largely recover (relative to 2019) on a sustained basis.
Sabre's ratings could be downgraded if customer losses, pricing
erosion, competitive pressures or other issues cause leverage
(Moody's adjusted debt to EBITDA) to exceed 4.75x or free cash flow
to debt (Moody's adjusted) falls to the low single digit percentage
range on a sustained basis. Downward rating pressure could also
arise if Moody's expects liquidity to diminish or if Sabre uses
excess cash to fund shareholder-friendly transactions prior to
leverage (Moody's adjusted debt to EBITDA) falling to the
low-to-mid 4x range and or Moody's does not have a high degree of
confidence that travel demand will largely recover (relative to
2019) on a sustained basis.
Based in Southlake, TX, Sabre Holdings Corporation's business is
organized in two segments: the Travel Solutions segment includes
revenues from GDS services (a software-based passenger reservation
system) as well as from commercial and operations offerings to the
airline industry; and the Hospitality Solutions segment includes
distribution, operations, and marketing offerings for the hotel
industry. The company generated $2.4 billion in revenue for the
twelve months ending September 30, 2022.
The principal methodology used in this rating was Business and
Consumer Services published in November 2021.
SILVERGATE CAPITAL: Moody's Raises LongTerm Issuer Rating to Ba2
----------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of Silvergate
Capital Corporation (Silvergate Capital) and its bank subsidiary
Silvergate Bank ("the bank"), following the downgrade of the bank's
standalone Baseline Credit Assessment (BCA) to ba1 from baa3.
Silvergate Capital's long-term issuer rating was downgraded to Ba2
from Ba1. The bank's long-term deposit rating was downgraded to
Baa2 from Baa1 and its long-term issuer rating to Ba2 from Ba1.
Moody's affirmed the bank's short-term deposit rating at Prime-2.
The outlook was changed to negative from stable.
Downgrades:
Issuer: Silvergate Bank
Adjusted Baseline Credit Assessment, Downgraded to ba1 from baa3
Baseline Credit Assessment, Downgraded to ba1 from baa3
ST Counterparty Risk Assessment, Downgraded to P-3(cr) from
P-2(cr)
LT Counterparty Risk Assessment, Downgraded to Baa3(cr) from
Baa2(cr)
ST Counterparty Risk Rating (Foreign Currency), Downgraded to NP
from P-3
ST Counterparty Risk Rating (Local Currency), Downgraded to NP
from P-3
LT Counterparty Risk Rating (Foreign Currency), Downgraded to Ba1
from Baa3
LT Counterparty Risk Rating (Local Currency), Downgraded to Ba1
from Baa3
LT Issuer Rating (Local Currency), Downgraded to Ba2 from Ba1,
Negative from Stable
LT Bank Deposit (Local Currency), Downgraded to Baa2 from Baa1,
Negative from Stable
Issuer: Silvergate Capital Corporation
LT Issuer Rating (Local Currency), Downgraded to Ba2 from Ba1,
Negative from Stable
Pref. Shelf Non-cumulative (Local Currency), Downgraded to (P)B1
from (P)Ba3
Pref. Stock Non-cumulative (Local Currency), Downgraded to B1 from
Ba3
Affirmations:
Issuer: Silvergate Bank
ST Deposit Rating (Local Currency), Affirmed P-2
Outlook Actions:
Issuer: Silvergate Bank
Outlook, Changed To Negative From Stable
Issuer: Silvergate Capital Corporation
Outlook, Changed To Negative From Stable
RATINGS RATIONALE
The rating downgrade reflects the heightened operating challenges
Silvergate Bank faces managing funding and liquidity in the face of
amplified deposit volatility driven by the uncertainty in the
crypto currency market. This uncertainty is stemming from the
recent high-profile bankruptcy of FTX and the negative impact it
has had on many other crypto currency firms. A significant portion
of the bank's deposits are from crypto currency centric
institutions, and while the bank continues to have strong liquidity
and capital, continued large outflows of these deposits would
adversely impact the bank's financial condition.
Although currently very small, the bank also has a secured lending
portfolio collateralized by bitcoin, known as the SEN leverage
business. Moody's believes that risks in this portfolio are managed
through conservative haircuts and automated liquidations in the
event that collateral triggers are breached; nonetheless, risks in
this portfolio are elevated given the uncertainty in the crypto
currency market.
The negative outlook reflects Moody's view that a sustained deposit
withdrawal by crypto currency centric firms would pressure the
bank's funding and liquidity, as well as negatively impact the
bank's profitability and capital should the bank be forced to sell
securities to meet liquidity needs and realize losses that are
current unrealized. In addition, the rating agency believes that
concerns related to Silvergate Bank's crypto currency business
creates reputational risk that could potentially impact its
traditional banking business, further straining its financial
condition.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The negative outlook indicates that a ratings upgrade is unlikely
over the next 12-18 months. The outlook could return to stable if
the volatility in the crypto currency market subsides or if the
bank strengthens its funding profile, such as by reducing its
deposit concentration or reducing its reliance on crypto currency
related deposits. Additional credit positive developments would
include improved business diversification and the maintenance of
strong capitalization levels.
The BCA could be downgraded if the bank experiences a material
deterioration in its liquidity profile, a material reduction in
crypto currency related deposits, or a material reduction in core
deposits from its traditional banking business. Additionally, a
material deterioration in asset quality, such as from an increased
risk appetite, or a materially weaker capital position could lead
to a downgrade of the BCA. A lower BCA would likely lead to a
ratings downgrade.
The principal methodology used in these ratings was Banks
Methodology published in July 2021.
SKILLSOFT FINANCE II: Moody's Alters Outlook on 'B2' CFR to Stable
------------------------------------------------------------------
Moody's Investors Service affirms Skillsoft Finance II, Inc.'s B2
corporate family rating, B2-PD probability of default rating, and
the B2 rating on the company's senior secured term loan. The
speculative grade liquidity rating of SGL-2 is unchanged. The
rating outlook is changed to stable from positive.
The change of outlook to stable from positive reflects the
company's sale of SumTotal (for net proceeds of approximately $175
million), and uncertainty regarding the usage of proceeds. The
outlook change also reflects challenges to the company's operating
results, primarily to the Global Knowledge business, and the
potential impacts of continued macroeconomic uncertainty. Because
of this, Moody's expects leverage to remain within the 5.0x to 6.0x
range in the next 12-18 months.
The following ratings were affected:
Affirmations:
Issuer: Skillsoft Finance II, Inc.
Corporate Family Rating, Affirmed B2
Probability of Default Rating, Affirmed B2-PD
Gtd Senior Secured 1st Lien Term Loan, Affirmed B2 (LGD4)
Outlook Actions:
Issuer: Skillsoft Finance II, Inc.
Outlook, Changed To Stable From Positive
RATINGS RATIONALE
The B2 CFR reflects Skillsoft's relatively high pro forma debt to
EBITDA (expected to be 5.0x-6.0x in the next 12-18 months).
Skillsoft's credit profile benefits from the company's leading
position in the corporate learning industry, a growing base of
fairly predictable revenues from contracts, the increasing adoption
of Percipio, Skillsoft's proprietary content delivery platform and
a highly diversified customer base consisting of enterprise and
small to medium sized business.
Skillsoft's credit profile also reflects the highly competitive,
fragmented nature of the corporate learning market, which has low
barriers to entry and a large selection of free content. The rating
also considers the execution risk associated with the integration
of multiple recent acquisitions, as well as ongoing business
turnaround efforts after years of revenue declines. While Moody's
expects the company will focus on de-leveraging, the company is
acquisitive which could delay de-leveraging efforts.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Skillsoft's ratings could be upgraded if the company maintains
organic revenue growth and leverage is sustained below 4.5x.
Skillsoft's ratings could be downgraded if performance deteriorates
or if free cash flow generation declines such that liquidity is
materially weakened. Ratings could also face downward pressure if
leverage were expected to be sustained over 6.0x on other than a
temporary basis.
Skillsoft's SGL-2 rating is supported by large cash balances from
the proceeds of the SumTotal transaction in addition to the $43
million the company had on July 31, 2022. The company's unrated $75
million accounts receivable line has $35 million drawn as of July
31, 2022.
Skillsoft's ultimate parent is a public company. Moody's expects
the company to maintain moderate financial policies balancing the
interests of shareholders and creditors, as demonstrated by the
Codecademy acquisition which was funded with a combination of debt,
cash on hand and equity.
As a software company, Skillsoft's exposure to environmental risk
is considered low to neutral. Social risks are considered moderate,
in line with the software sector. Broadly, the main credit risks
stemming from social issues are linked to data security, diversity
in the workforce and access to highly skilled workers.
Skillsoft Finance II, Inc. is the debt issuing subsidiary of
Skillsoft Corp. which provides cloud-based e-learning, in person
training, learning management and human capital management software
solutions for enterprises, government, and education customers
through its Skillsoft, Global Knowledge, and Codecademy businesses.
The company is expected to generate around $550 million in revenue
in its fiscal year ending 2023 following the sale of SumTotal.
Skillsoft is headquartered in Nashua, New Hampshire.
The principal methodology used in these ratings was Software
published in June 2022.
SPG HOSPICE: No Patient Care Concern, 4th PCO Report Says
---------------------------------------------------------
Susan Goodman, the appointed patient care ombudsman for SPG
Hospice, LLC, filed with the U.S. Bankruptcy Court for the District
of Arizona a fourth interim report regarding the quality of patient
care provided at the company's health care facility.
The PCO continued to engage in regular phone updates with the
hospice administrator and remote document review as described in
previous reports. These continued efforts have not identified
bankruptcy-related concerns.
The PCO stated that the hospice census remained in the high teens,
occasionally getting in to the 20-range, yet not staying there for
any extended period. The administrator reported positively on
continued efforts to increase referral flow.
The administrator also reported having four patients request
transfers to other hospices since the Hospice Third Report filing.
While not directly related to the bankruptcy, per se, transferring
patient and family feedback included concerns associated with
continuity of nursing staff. However, the current interim Director
of Nursing has been in place since the end of July with bankruptcy
associated nursing departures dating back to May 2022.
In addition to the Director of Nursing, the nursing team includes a
part-time licensed practical nurse who also covers a substantial
amount of on-call time along with two per diem registered nurses.
The team continued to deny supply, medication, and vendor
challenges this reporting period.
The PCO asserted that the grievance that was mentioned in the third
report was reported as resolved prior to the filing of her fourth
report. Other than the operational transfers discussed previously,
no other patient concerns were received. The hospice services
team's reported focus continues to be growing census. As that goal
is accomplished, however, additional clinical and social work
recruitment will be needed when census rises to approximately 25.
A copy of the fourth ombudsman report is available for free at
https://bit.ly/3glq5uw from PacerMonitor.com.
The Ombudsman may be reached at:
Susan N. Goodman, Esq.
Pivot Health Law, LLC
P.O. Box 69734
Oro Valley, AZ 85737
Tel: (520) 744-7061
Email: sgoodman@pivothealthaz.com
About SPG Hospice
Established in 2018, SPG Hospice, LLC provides hospice services
throughout Arizona but primarily located in the Phoenix
metropolitan area.
SPG Hospice's affiliate, Scottsdale Physicians Group, PLC, provides
hospitalist staffing services for hospitals and physician staffing
services to skilled nursing facilities and other post-acute
settings. Its workforce is comprised of medical providers and
disease support personnel.
Meanwhile, United Telehealth Corp., another SPG Hospice affiliate,
provides advanced virtual care medical services to patients in
their homes throughout Arizona. It combines the remote provider
aspect of traditional telemedicine with an in-person medical
technician "Tech" who is physically present with the patient in
their home or facility.
SPG Hospice, Scottsdale and United Telehealth Corp. sought
protection for relief under Chapter 11 of the Bankruptcy Code
(Bankr. D. Ariz. Lead Case No. 22-02385) on April 19, 2022. At the
time of the filing, SPG Hospice listed up to $50,000 in assets and
up to $500,000 in liabilities.
Judge Eddward P. Ballinger, Jr. oversees the cases.
Jonathan P. Ibsen, Esq., at Canterbury Law Group, LLP serves as the
Debtors' legal counsel.
James Cross, the court-appointed Chapter 11 trustee for the
Debtors, tapped Cross Law Firm, PLC as bankruptcy counsel; Terry
A.
Dake, Ltd. as special counsel; Baldwin Moffitt Behm, LLP as tax
preparer; and Kathy Steadman of Coppersmith Brockelman, PLC as
healthcare personnel and regulatory compliance specialist.
Susan N. Goodman is the patient care ombudsman appointed in the
Debtors' bankruptcy cases.
STATERA BIOPHARMA: Incurs $3.4 Million Net Loss in Third Quarter
----------------------------------------------------------------
Statera Biopharma, Inc. has filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing a net loss
of $3.35 million on $670,473 of grants and contracts revenues for
the three months ended Sept. 30, 2022, compared to a net loss of
$12.73 million on $236,519 of grants and contracts revenues for the
three months ended Sept. 30, 2021.
For the nine months ended Sept. 30, 2022, the Company reported a
net loss of $14.61 million on $2.44 million of grants and contracts
revenues compared to a net loss of $24.63 million on $236,519 of
grants and contracts revenues for the same period in 2021.
As of Sept. 30, 2022, the Company had $12.75 million in total
assets, $22.92 million in total liabilities, and a total
stockholders' deficit of $10.17 million.
The Company stated, "At September 30, 2022, we had cash and cash
equivalents of $0.5 million, which represents a decrease of $6.3
million since the end of our last fiscal year. This decrease was
caused by our capital raise in the first quarter of 2022, offset by
our net cash used in operations of $4.0 million during the nine
months ended September 30, 2022 and $8.8 million repayment of
debt... [W]e are a clinical-stage company, have generated only
insignificant revenues to date, and have incurred cumulative net
losses and expect to incur significant expenses and operating
losses for the foreseeable future as we advance our lead candidates
through clinical trials, progress our pipeline candidates from
discovery through pre-clinical development, and seek regulatory
approval and pursue commercialization of our candidates. We do not
have commercial products other than CRO services, we have limited
capital resources, meaning that we are currently generating limited
revenues and cash from operations. We do not expect our cash and
cash equivalents will be sufficient to fund our projected operating
requirements or allow us to fund our operating plan, in each case,
beyond the fourth quarter of 2022. As a result, we will need
additional financing to support our continuing operations.
Historically, we have funded our operations through the sale of
equity and debt securities, as well as the receipt of funded
grants. Until such time as we can generate significant revenue from
product sales, if ever, we expect to finance our operations through
a combination of public or private equity and debt financings or
other sources, which may include collaborations with third parties,
the sale or license of drug candidates, the sale of certain of our
tangible and/or intangible assets, the sale of interests in our
subsidiaries or joint ventures, obtaining additional government
research funding, or entering into other strategic transactions.
However, we can provide no assurance that we will be able to raise
cash in sufficient amounts, when needed or at acceptable terms. We
do not expect that our existing cash and cash equivalents will
enable us to fund our operating expenses and capital expenditure
requirements beyond the fourth quarter of 2022. If we are unable
to raise adequate capital and/or achieve profitable operations,
future operations might need to be scaled back or discontinued.
The financial statements included elsewhere in this Quarterly
Report on Form 10-Q do not include any adjustments relating to the
recoverability of the carrying amount of recorded assets and
liabilities that might result from the outcome of these
uncertainties."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1318641/000143774922027371/cbli20220930_10q.htm
About Statera
Statera Biopharma, Inc. (formerly known as Cytocom, Inc. and
Cleveland Biolabs) is a pre-clinical and clinical biopharmaceutical
company developing multiple product candidates to address unmet
medical needs for use in diseases involving immune system
dysfunction.
An involuntary Chapter 11 bankruptcy case was filed against Statera
on Aug. 16, 2022, by three alleged creditors of the Company
alleging they are owed a total of $2.1 million on account of notes,
unpaid wages, and severance.
Statera Biopharma reported a net loss of $101.87 million for the
year ended Dec. 31, 2021, compared to a net loss of $12.09 million
for the year ended Dec. 31, 2020. As of Dec. 31, 2021, the Company
had $21.17 million in total assets, $22.67 million in total
liabilities, and a total stockholders' deficit of $1.51 million.
Lakewood, Colo.-based BF Borgers CPA PC, the Company's auditor
since 2022, issued a "going concern" qualification in its report
dated Oct. 4, 2022, citing that Company has suffered recurring
losses from operations and has a significant accumulated deficit.
In addition, the Company continues to experience negative cash
flows from operations. These factors raise substantial doubt about
the Company's ability to continue as a going concern.
SUNNOVA ENERGY: S&P Affirms 'B-' ICR, Outlook Stable
----------------------------------------------------
S&P Global Ratings affirmed its 'B-' issuer credit rating on
Sunnova Energy International Inc. (Sunnova) and its issue-level
rating on the company's senior unsecured notes. The '4' recovery
rating, which indicates average (30%-50%; rounded estimate: 40%)
recovery, is unchanged.
S&P said, "The stable outlook reflects our expectation that Sunnova
should be able to withstand shifting macroeconomic conditions,
including higher interest rates. We expect the cash flow deficits
will eventually decline as the company gains scale.
"Sunnova's ability to curtail capital expenditures should provide
some downside resilience in case of unfavorable macroeconomic
conditions. We view Sunnova's ability to control its growth capital
expenditures (capex) as providing key downside resilience in case
of a macroeconomic shift, including sustained high interest rates.
We anticipate the company would curtail new customer acquisitions,
and subsequent securitization, if increasing asset yields do not
sufficiently offset rising interest rates. In an inflationary
environment, the company should be able to pass some cost increases
on to consumers through higher-price contracts. To the extent the
company is not able to pass on cost increases, it could reduce
growth in a manner that would limit cash flow deficits. As a
result, Sunnova's ability to service its senior unsecured debt at
the company's holding company (holdco) level should benefit from
some protection against deteriorating macroeconomic conditions.
"Given the company's unique business model and financing strategy,
our analysis focuses on residual cash flows available at the holdco
level. We view these as more indicative of the underlying credit
trends, given the company's rapid growth. The company has been
financing the capital costs associated with new customers by
securitizing most of its receipts and assets. As a result, most of
its cash flows are encumbered, with unencumbered cash flows being
limited to unpledged solar renewable energy credits, state
incentives, inventory sales, service revenues, and other sources of
revenues. The residual cash flows from the securitized vehicles are
initially modest, as they are originally servicing the securitized
debt through interest and principal payments. However, Sunnova
should eventually benefit from the underlying assets' associated
cash flows because the securitizations are projected to amortize
over a much shorter period than the underlying assets. The
third-party owned contracts, either as power purchase agreements
(PPAs) or leases, are usually for 10-25-years. In addition, we also
factor in principal and interest payments from customer loan
contracts when we look at cash flows available to service the
corporate debt.
"Customers should continue to pay for their solar services even in
a recessionary environment. We anticipate that customers' default
rates should remain somewhat low even in a recessionary
environment. Sunnova has maintained sound underwriting standards,
with customers having an overall weighted-average FICO score in the
725-750 range. Furthermore, delinquency rates on solar contracts
have historically been very low, given the importance of the
service provided. We also note that these products typically
represent an adequate value proposition for customers compared with
the alternatives, including electric utilities and retail electric
providers.
"Hedging on warehouse credit facilities provides some protection
against rising interest rates. Sunnova has largely hedged its
floating interest rate exposure associated with its warehouse
facilities. We view this as meaningful because it should provide
some protection against rising interest rates. Furthermore, the
company hasn't needed to post collateral for those hedges, given
that they are secured by the assets under the warehouse facilities.
The rest of Sunnova's debt is largely fixed-rate, including
securitizations.
Provisions in the Inflation Reduction Act should support Sunnova's
growth. The regulatory environment remains supportive of
residential solar growth, which should result in more opportunities
for residential solar developers. The provisions embedded in the
Inflation Reduction Act (IRA) are particularly meaningful, as they
provide long-term certainty. For example, the incentive tax credit,
which was initially scheduled to decrease to 10% by 2024, is now
extended to 2032 at a base rate of 30%. As a result, we anticipate
that Sunnova will be able to fund its growth with more tax equity
financing than initially expected, which we view as credit
positive. Furthermore, the IRA has other meaningful provisions,
which include additional tax credits for domestically produced
content and low-moderate-income customers.
At the same time, the company's exposure to many forces besides the
regulatory environment that could affect its ultimate growth
trajectory, including supply chain disruption or the broader
competitive environment.
S&P said, "A highly leveraged capital structure could eventually
result in refinancing risk at the corporate level. Although we view
Sunnova as benefiting from a flexible business model, we also note
that its credit metrics are projected to be in the highly leveraged
category during our outlook horizon as the company scales up.
Having a very highly leveraged capital structure could be an
impediment to an eventual refinancing depending on prevailing
market conditions. At the same time, we note that Sunnova doesn't
have near-term debt maturities coming due and benefits from an
adequate liquidity cushion.
"In our analysis, we fully consolidate the securitized debt. This
is both consistent with the accounting treatment and our analytical
approach, as the company retains the equity positions of the
securitization special purpose vehicles (SPVs) and receives the
associated benefits.
"The stable outlook reflects our expectation that Sunnova should be
able to withstand unfavorable macroeconomic conditions, including
higher interest rates, given the flexibility embedded in its
business model in terms of customer acquisitions. We expect the
cash flow deficits will eventually lessen, with projected positive
cash flows available to service the debt at the holdco by 2024. We
also expect a sustained liquidity cushion of at least $250
million."
S&P could lower the ratings if:
-- S&P views Sunnova as becoming vulnerable to unfavorable
business, financial, and economic conditions, which would limit its
ability to meet its financial commitments;
-- S&P expects available liquidity, which consists of unrestricted
cash plus available credit facilities, will fall and remain below
$250 million; or
-- Credit losses spike or value per customer or underwriting
standards deteriorate.
In such a scenario, there could be a covenant breach, cash traps
within securitizations, and lower residual cash flows to the
company; or the company could struggle to curtail its capex and
cash flow deficits in the face of weakening capital market
conditions.
Although unlikely over the next 12 months given the significant
growth investments and expected cash flow deficits, S&P could raise
the ratings if:
-- The company established a track record of consistent cash flow
generation during its growth period;
-- Adjusted EBITDA interest coverage was sustained above 2x; and
-- Operational and geographic diversity increased significantly.
ESG credit indicators: E-1, S-2, G-2
Environmental factors are a positive consideration in S&P's credit
rating analysis for Sunnova. The company offers homeowners solar
energy systems to power their homes, and should benefit from high
consumer demand and government policy support for clean and
renewable energy.
THEOS FEDRO: Deal on Cash Collateral Access OK'd
------------------------------------------------
The U.S. Bankruptcy Court for the Northern District of California,
San Francisco Division, approved the Fifth Stipulation for Use of
Cash Collateral and Adequate Protection Between the Trustee and
Pender Capital Asset Based Lending Fund I, LP filed by Janina M.
Hoskins, the Chapter 11 Trustee of Theos Fedro Holdings, LLC.
The parties agree the Trustee may use cash collateral for these
purposes:
a. $530 per month for elevator services;
b. An amount not to exceed $3,000 for insurance;
c. $250 for the quarterly fee due to the United States
Trustee; and
d. Any other expenditure upon three days' notice without
objection.
On December 15, 2017, the Debtor executed and delivered to Pender a
Promissory Note in the principal amount of $3.6 million, secured by
a Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing dated December 15, 2017 and recorded in the San
Francisco County Recorder's Office on February 20, 2018, as
Instrument No. 2018-K580234-00, naming Pender as beneficiary and
encumbering the real property and related fixtures and improvements
commonly known as 819 Ellis Street, San Francisco, CA 94109, as
well as any rents and profits related thereto.
As of the Petition Date, Pender asserts a $4,093,662 secured claim
against the Ellis Property and the rents generated, plus all
interest, fees, costs, attorney's fees and other charges that
continue to accrue.
The Trustee will continue to make a monthly adequate protection
payment to Pender of $8,000 or more on the 10th day of every month.
In the event rent payments increase, the Adequate Protection
payments will be increased by the amount of the additional rents.
The Trustee will also have an eight-day grace period to make the
adequate protection payment.
In addition, as further adequate protection to Pender, to the
extent Pender's lien does not already extend to the rents or other
monies received by the Debtor for the Ellis Property pursuant to 11
U.S.C. section 552(b)(2), Pender will be granted a valid, perfected
and enforceable like-kind replacement liens on all Debtor funds of
the same nature, extent and relative priority in which Pender had a
perfected, prepetition security interest in the Ellis Property and
the rents and profits related thereto.
These events constitute an "Event of Default":
(i) The failure of the Trustee to make an adequate protection
payment in accordance with the terms of the Fifth Stipulation;
(ii) The failure of the Trustee to timely file any of the
Monthly Operating Reports in accordance with the Fifth Stipulation;
or
(iii) The Debtor's bankruptcy case is converted to a Chapter 7
or dismissed.
A copy of the order is available at https://bit.ly/3V0gvMY from
PacerMonitor.com.
About Theos Fedro Holdings
San Francisco, Calif.-based Theos Fedro Holdings, LLC, provides
support services to the transportation industry. It filed a
voluntary petition for relief under Chapter 11 of the Bankruptcy
Code (Bankr. N.D. Calif. Case No. 21-30202) on March 16, 2021.
Philip Achilles, managing member, signed the petition.
In its petition, the Debtor disclosed $1 million to $10 million in
both assets and liabilities. Judge Dennis Montali oversees the
case. The Law Offices of Stuppi & Stuppi serves as the Debtor's
legal counsel.
Felderstein Fitzgerald Willoughby Pascuzzi & Rios LLP serves as
counsel for Pender Capital Asset Based Lending Fund I, LP,
creditor. Janina M. Hoskins serves as the Debtor's Chapter 11
Trustee, while NRT West, Inc. serves as the real estate broker.
TROIKA MEDIA: Posts $1.3 Million Net Income in First Quarter
------------------------------------------------------------
Troika Media Group, Inc. has filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing net income
of $1.27 million on $119.81 million of revenues for the three
months ended Sept. 30, 2022, compared to a net loss of $2.14
million on $8.35 million of revenues for the three months ended
Sept. 30, 2021.
As of Sept. 30, 2022, the Company had $205.48 million in total
assets, $192.07 million in total liabilities, and $13.41 million in
total stockholders' equity.
Troika Media stated, "Our primary sources of liquidity are cash,
cash equivalents, and cash flows from the operations of our
businesses. Our principal uses of cash include working
capital-related items (including funding our operations), debt
service, investments, and related loans and advances that we may
fund from time to time, and liabilities from prior acquisitions.
The Company's use of its available liquidity will be based upon the
ongoing review of the funding needs of the business, its view of a
favorable allocation of cash resources, and the timing of cash flow
generation.
"We believe we have sufficient liquidity, including approximately
$32.7 million in cash and cash equivalents, as of September 30,
2022, and anticipated future operating cash flows, to fund our
business operations, and service the credit facility...during the
next twelve months and foreseeable future."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1021096/000162828022029909/trka-20220930.htm
About Troika
Troika Media Group, Inc. (fka M2 nGage Group, Inc.) --
www.thetmgrp.com -- is a professional services company that
architects and builds enterprise value in consumer facing brands to
generate scalable performance driven revenue growth. The Company
delivers three solutions pillars that: CREATE brands and
experiences and CONNECT consumers through emerging technology
products and ecosystems to deliver PERFORMANCE based measurable
business outcomes.
Troika Media reported a net loss of $38.69 million for the year
ended June 30, 2022, a net loss of $16 million for the year ended
June 30, 2021, and a net loss of $14.45 million for the year ended
June 30, 2020.
WC BRAKER PORTFOLIO: Trustee Taps Graves Dougherty as Legal Counsel
-------------------------------------------------------------------
John Patrick Lowe, the Chapter 11 trustee for WC Braker Portfolio
B, LLC, seeks approval from the U.S. Bankruptcy Court for the
Western District of Texas to employ Graves Dougherty Hearon &
Moody, PC as his legal counsel.
The firm's services include:
a. advising the trustee with respect to efforts to administer
and possibly liquidate assets of the Debtor's estate;
b. assisting the trustee in performing his due diligence with
respect to the investigation and prosecution of potential claims
asserted by or against the estate; and
b. investigating and pursuing avoidance actions, analyzing and
objecting to claims, and assisting the trustee in other matters
that may arise during the administration of the estate.
The hourly rates charged by the firm's attorneys and paralegals are
as follows:
Attorneys $285 to $650 per hour
Paralegals $20 to $195 per hour
In addition, the firm will seek reimbursement for out-of-pocket
expenses.
Brian Cumings, Esq., a partner at Graves, 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:
Brian T. Cumings, Esq.
Graves Dougherty Hearon & Moody, PC
401 Congress Avenue, Suite 2700
Austin, TX 78701
Tel: (512) 480-5626
Fax: (512) 536-9926
Email: bcumings@gdhm.com
About WC Braker Portfolio B
WC Braker Portfolio B, LLC, a company in Austin, Texas, sought
protection under Chapter 11 of the U.S. Bankruptcy Code (Bankr.
W.D. Texas Case No. 22-10628) on Sept. 29, 2022, with up to $500
million in assets and up to $50 million in liabilities. Natin Paul
as authorized signatory, signed the petition.
Judge Tony M. Davis oversees the case.
The Debtor is represented by Todd Headden, Esq., at Hayward, PLLC.
John Patrick Lowe, the Debtor's Chapter 11 trustee, is represented
by Graves Dougherty Hearon & Moody, PC.
YIELD10 BIOSCIENCE: Incurs $3.5 Million Net Loss in Third Quarter
-----------------------------------------------------------------
Yield10 Bioscience, Inc. has filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing a net loss
of $3.49 million on $111,000 of total revenue for the three months
ended Sept. 30, 2022, compared to a net loss of $2.40 million on
$92,000 of total revenue for the three months ended Sept. 30,
2021.
For the nine months ended Sept. 30, 2022, the Company reported a
net loss of $10.26 million on $363,000 of total revenue compared to
a net loss of $8.05 million on $462,000 of total revenue for the
nine months ended Sept. 30, 2021.
As of Sept. 30, 2022, the Company had $11.27 million in total
assets, $4.05 million in total liabilities, and $7.22 million in
total stockholders' equity.
Yield10 stated in the SEC filing that, "Since our inception, we
have incurred significant expenses related to our research,
development and product commercialization efforts. With the
exception of 2012, we have recorded losses since our initial
founding, including the three and nine months ended September 30,
2022. As of September 30, 2022, we had an accumulated deficit of
$396,394. Our unrestricted cash, cash equivalents and investments
are held primarily for working capital purposes and as of September
30, 2022, totaled $7,405 compared to cash, cash equivalents and
investments of $15,990 at December 31, 2021. As of September 30,
2022, we had restricted cash of $264, consisting of $229 held in
connection with the lease agreement for our Woburn, Massachusetts
facility and $35 held in connection with our corporate credit card
program. As of September 30, 2022, we continued to have no
outstanding debt.
"Our management is currently evaluating different strategies to
obtain the required funding for our operations. These strategies
may include, but are not limited to: public and private placements
of equity and/or debt, licensing and/or collaboration arrangements
and strategic alternatives with third parties, or other funding
from the government or third parties. Our ability to secure
funding is subject to numerous risks and uncertainties, including
the impact of the COVID-19 pandemic, geopolitical turmoil, and
economic uncertainty related to rising inflation and disruptions in
the global supply chain. As a result, there can be no assurance
that these funding efforts will be successful. The sale of equity
and convertible debt securities may result in dilution to our
stockholders and, in the case of preferred equity securities or
convertible debt, those securities could provide for rights,
preferences or privileges senior to those of our common stock. The
terms of debt securities issued or borrowings pursuant to a credit
agreement could impose significant restrictions on our operations.
If we raise funds through collaborations and licensing
arrangements, we might be required to relinquish significant rights
to our technologies or products or grant licenses on terms that are
not favorable to us. Additional capital may not be available on
reasonable terms, or at all."
Management Commentary
"The significant market opportunity represented by demand for
low-carbon index feedstock oil for biofuels is driving our efforts
to develop and commercialize Camelina as a new industrial crop,"
said Oliver Peoples, Ph.D., chief executive officer of Yield10
Bioscience, in a press release. "In the third quarter, our market
development efforts focused on securing growers to plant our winter
Camelina varieties at a scale of up to 160 acres. As the season
progresses into harvest next year, we plan to work closely with
growers to build confidence and experience with the crop. We have
also ramped up commercial seed production to enable our market
development activities to expand in 2023.
"We believe development of herbicide tolerant Camelina will be very
attractive to growers for its sustainability and economic benefits
while enabling planting of the crop on large acreage. Yield10
tested herbicide tolerant candidate Camelina lines in the field for
the first time in 2022 with excellent results, and have selected
lines for further testing and seed scale-up in contra-season.
Larger scale testing of these lines is expected in the spring of
2023. We remain focused on developing spring and winter Camelina
varieties having a robust herbicide package for seamless
integration into crop rotations and cover cropping use.
"The sustainable, land-based production of omega-3 oil with our
Camelina platform represents a significant market opportunity in
animal feed and human nutrition. We recently extended our
collaboration with Rothamsted Research with a priority on
developing elite Camelina to produce the EPA component of omega-3
co-deployed with our advanced technology for a robust trait
package. We plan to follow this with development of advanced EPA
plus DHA Camelina lines. Our program to deploy PHA bioplastic
continues to advance as the team gains deeper insights into
increasing PHA yield in Camelina seed.
"In the months ahead, we expect to continue discussions with
biofuel supply chain participants with the goal of forming
alliances, as well as engaging with growers and seed retailers to
expand experience with Camelina. We will also be evaluating
agronomic and yield data from our field tests conducted across a
range of geographies in 2022 to inform our efforts to develop
industry-leading, elite Camelina varieties," said Peoples.
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1121702/000112170222000049/yten-20220930.htm
About Yield10
Yield10 Bioscience, Inc. -- http://www.yield10bio.com-- is an
agricultural bioscience company that uses its "Trait Factory" and
the Camelina oilseed "Fast Field Testing" system to develop high
value seed traits for the agriculture and food industries. Yield10
is headquartered in Woburn, MA and has an Oilseeds Center of
Excellence in Saskatoon, Canada.
Yield10 Bioscience reported a net loss of $11.03 million for the
year ended Dec. 31, 2021, compared to a net loss of $10.21 million
for the year ended Dec. 31, 2020. As of June 30, 2022, the Company
had $14.27 million in total assets, $4 million in total
liabilities, and $10.27 million in total stockholders' equity.
Boston, Massachusetts-based RSM US LLP, the Company's auditor since
2017, issued a "going concern" qualification in its report dated
March 25, 2022, citing that the Company has suffered recurring
losses from operations. This raises substantial doubt about the
Company's ability to continue as a going concern.
[^] BOOK REVIEW: PANIC ON WALL STREET
-------------------------------------
A History of America's Financial Disasters
Author: Robert Sobel
Publisher: Beard Books
Softcover: 469 Pages
List Price: $34.95
Review by: Gail Owens Hoelscher
"Mere anarchy is loosed upon the world, the blood-dimmed tide is
loosed, and everywhere the ceremony of innocence is drowned; the
best lack all conviction, while the worst are full of passionate
intensity."
What a terrific quote to find at the beginning of a book on a
financial catastrophe! First published in 1968. Panic on Wall
Street covers 12 of the most painful episodes in American financial
history between 1768 and 1962. Author Robert Sobel chose these
particular cases, among a dozen or so others, to demonstrate the
complexity and array of settings that have led to financial panics,
and to show that we can only make; the vaguest generalizations"
about financial panic as a phenomenon. In his view, these 12 all
had a great impact on Americans of the time, "they were dramatic,
and drama is present in most important events in history." They had
been neglected by other fiancial historians. They are:
William Duer Panic, 1792
Crisis of Jacksonian Fiannces, 1837
Western Blizzard, 1857
Post-Civil War Panic, 1865-69
Crisis of the Gilded Age, 1873
Grant's Last Panic, 1884
Grover Cleveland and the Ordeal of 183-95
Northern Pacific Corner, 1901
The Knickerbocker Trust Panic, 1907
Europe Goes to War, 1914
Great Crash, 1929
Kennedy Slide, 1962
Sobel tells us there is no universally accepted definition if
financial panic. He quotes William Graham Sumner, who died long
before the Great Crash of 1929, describing a panic as "a wave of
emotion, apprehension, alarm. It is more or less irrational. It is
superinduced upon a crisis, which is real and inevitable, but it
exaggerates, conjures up possibilities, take away courage and
energy."
Sobel could find no "law of panics" which might allow us to predict
them, but notes their common characteristics. Most occur during
periods of optimism ("irrational exuberance?"). Most arise as
"moments of truth," after periods of self-deception, when players
not only suddenly recognize the magnitude of their problems, but
are also stunned at their inability to solve them. He also notes
that strong financial leaders may prove a mitigating factor, citing
Vanderbilt and J.P. Morgan.
Sobel concludes by saying that although financial panics have
proven as devastating in some ways as war, and while much research
has been carried out on war and its causes, little research has
been done on financial panics. Panics on Wall Street stands as a
solid foundation for later research on the topic.
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
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then-ending.
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*********
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