The Default Notice — Short circuiting the EV dream

Max Frumes
+Rachel Butt
+ 2 more

22 March 2024•13 min read

The euphoria around electric vehicles is screeching to a halt.

EV makers revved up production around 2020 and 2021, just when supply chain disruptions and higher costs set in, forcing many to play catch up.

The mass adoption that many hoped for has yet to happen, in part because of the vehicles’ higher price tags, as well as worries over having enough battery charge to complete a journey.

That kind of range anxiety may be worsened by a recent bankruptcy, which knocked down another company that can make sure your car is juiced.

EV charging provider Charge Enterprises filed a prepackaged Chapter 11 earlier this month, after struggling with sluggish growth and disputes with its lenders and former chairman. The company is set to hand over the keys to its lenders, led by Arena Investors.

Fisker shares tumbled after the California startup flashed warnings about its ability to stay afloat last month. The company said it is pausing production for six weeks as it focuses on strategic and financing options, including continued talks over a capital infusion with a large automaker.

Even cash-flush Apple is pulling the plug on a decades-long EV project, instead turning its focus to AI (we don’t blame them). This elicited a saluting emoji and an image of a cigarette from Elon Musk on X. The billionaire behind Teslalater wrote: "The natural state of a car company is dead.”

At the same time, Chinese EV startups like NIO and Zeekr are churning out cars faster than their Western peers, thanks to lower labor costs, generous government stimulus and less stringent quality control.

Competition is fierce, with Tesla leading the charge in slashing prices and other peers following suit. Shanghai-based NIO saw its net loss widen in the fourth quarter, bringing its full year deficit to RMB 20.7bn.

“It’s just a very difficult moment for a lot of these EV companies that received funding over the last 5 to 10 years but still are a fair amount away from commercial viability and cash flow breakeven,” said a restructuring banker.

People moves

If you have any recent moves to announce, please send to one of our team’s emails below to include in this section.

James Sprayregen, who built Kirkland & Ellis' restructuring group, is joining Hilco Global as a vice chairman. Sprayregen will be working alongside restructuring veteran David Kurtz, who was hired from Lazard last fall, and COO John Chen to oversee the firm's growing platform.

Bill Brady joined Akin Gump's special situations and private credit group in New York. Brady came from Paul Hastings, where he headed the alternative lender and private credit group.

Amelia Pollard is heading to The Financial Times, where she’ll be a reporter and producer with the “Due Diligence” newsletter. Pollard previously covered bankruptcy and distress at Bloomberg News.

This week’s news

The big EV crash — When the rapper Meek Mill took his new electric Hummer on its maiden voyage earlier this month, the brake pedal slipped off and the vehicle crashed. Mill was unscathed, but the car was badly damaged. It’s a convenient metaphor for the current state of the EV sector.

Incora — The Incora adversary trial took an unusual turn after lawyers for the ad hoc group of lenders said a witness uncovered hand-written notes relevant to the case that he did not remember taking.

Petmate — Platinum Equity-backed Petmate has reached an agreement that will hand lenders control of the company while reducing its debt levels.

Joann — The retailer commenced a prepackaged Chapter 11 case with a transaction support agreement entered into with its lenders and majority equity holders. It aims to exit bankruptcy by early May. Here is a summary of the key restructuring terms.

Robertshaw — The electronic components and systems maker received final DIP financing and bidding procedures approval from Judge Lopez, while entering into a settlement with a group of lenders aggrieved of its May 2023 uptiering. Meanwhile, Invesco continues to challenge the December 2023 transaction, and has asked the bankruptcy court to return the dispute to New York.

Loparex — 9fin 9fin reported exclusively this week on how a group of Loparex’s European creditors who were largely cut out of an initial liability management deal had organized with Dechert to find a way to participate.

Weight Watchers — The Ozempic effect is coming for more than just your wardrobe! Listen as we talk about how weight loss drugs are hurting brands like Weight Watchers and Herbalife, and how Oprah Winfrey is at the center of it all.

TGI Friday’s — The restaurant chain has engaged Guggenheim to raise roughly $200m of new funding to pay down debt.

Red Lobster — The seafood restaurant chain is seeking third party financing as it faces steep losses and debt coming due in 2026. It has also brought on a new independent board member at the behest of its lenders.

Rubio’s Restaurants — Known for its fish tacos, Rubio’s is considering a possible Chapter 11 bankruptcy filing in order to sell itself. A bankruptcy filing would be its second in the past four years.

Aventiv Technologies — The Platinum Equity-backed prison phone operator has struck a deal with a group of lenders to either sell the business or equitize outstanding loans to hand control to lenders.

Lumen — After months of back and forth, the telecom company closed the transactions contemplated by the improved transaction support agreement it had executed in January. The restructuring addresses the bulk of 2025 maturities, largely extend maturities of debt at Lumen and Level 3 through at least 2029, and helps shore up liquidity.

McAfee — A group of lenders to the struggling cyber security software provider — that 9fin had reported had organized with Akin Gump — are said to have signed a cooperation agreement and also hired Centerview. The company was recently reported to have hired Evercore.

Other active distressed and restructuring coverage

Apex Tool Group — The Bain-backed company clinched approval from more than 91% of first lien lenders to participate in a proposed exchange offer by a 27 February deadline.

Astound Broadband — Moody’s recently downgraded the company’s senior secured facilities to Caa1 and the senior unsecured notes to Ca. The company had previously hired advisors to engage with lenders on inbound liability management proposals.

Avison Young — The commercial real estate firm’s distressed exchange has brought some breathing room and reduced its total debt burden from around C$1.3bn to C$590m, but its capital structure remains "unsustainable" due to the high cost of the new debt and preferred equity, according to a recent report from S&P.

Belk — Lenders to the department store chain have been speaking with the company about a restructuring that could exchange much of its debt into equity.

Cano Health — The bankruptcy court passed a final order authorizing the $150m DIP. The de-SPACed healthcare services provider had filed for bankruptcy with a restructuring support agreement from holders of around 86% of its secured debt and 92% of the senior notes.

Charge Enterprises — The electric vehicle charging company filed for Chapter 11 before the US Bankruptcy Court for the District of Delaware, and virtually all first day motions were approved. It had previously inked a restructuring support agreement with Arena, its sole holder of funded debt, which intends to provide a $10m DIP facility and equitize prepetition debt.

CommScope — Unsecured lenders to the struggling telecommunications infrastructure company were reported to have pitched new money second lien financing to repay near-term maturities. 9fin had previously reported on a new money proposal from a secured lender group. The company recently disclosed dismal Q4 23 numbers.

Cumulus Media — Creditors holding a majority of the company’s term loans and secured bonds entered into a co-op agreement in response to what lenders are calling an “aggressive” exchange offer. The company announced the exchange on 27 February, and subsequently extended the tender deadline to April 2. 9fin reported exclusively on the legal advisor used by the company to launch the deal.

DISH/EchoStar — S&P downgraded the telecom company highlighting weak liquidity, a massive external funding need and a damaged relationship with traditional credit markets. Echostar recently reported poor Q4 23 numbers. 9fin had previously reported the telecom company is sounding out interest from third-party investors on financing proposals, after nixing two proposed exchange offers.

Emergent BioSolutions — The life sciences company disclosed a forbearance agreement with its secured lenders through 30 April 2024 as newly appointed CEO Joseph Papa takes the reigns amid an effort to stabilize the business and address the capital structure.

Enviva — The troubled wood pellet producer finally filed for bankruptcy before the US Bankruptcy Court for the Eastern District of Virginia. The filing is backed by two RSAs signed by a vast majority of creditors. The company has lined up a $500m DIP facility and aims to reduce debt by around $1bn through debt repayments, exchanges and equitization, and an equity rights offering. The bankruptcy court approved first day motions, but key customer RWE — which has a $349m claim — expressed concerns. Cyrus Capital Partners leads the ad hoc cross-holder group, which also includes Monarch, Arena Capital, Hudson Bay, American Industrial Partners, Ares, Oaktree and Diameter Capital Partners, among others.

Equinox — The luxury fitness chain has lined up roughly $1.8bn in new money led by Sixth Street and Silver Lake to refinance its debt wall and fund its growth. Other investors include Ares Management, HPS Investment Partners, L Catterton, and the principals of the “Related Companies”, according to a company statement.

Gol — Competitor Azul SA denied recent reports that it was considering purchasing the bankrupt Brazilian airline. Meanwhile, Gol declared that it will evaluate all recapitalization or other transactions, including to raise capital. The bankruptcy court earlier passed a final order authorizing DIP financing of up to $1bn after the company allowed objecting lenders to provide an incremental $50m over the $950m initially proposed.

GrafTech — The graphite electrodes producer tapped Evercore and Kirkland & Ellis to explore options, as it navigates a challenging outlook due to soft demand and pricing pressures.

Hearthside Food Solutions — A group of lenders signed a cooperation agreement to bind themselves in looming debt talks with the US food maker.

Medical Properties Trust — The REIT’s management signaled confidence in tackling upcoming debt maturities despite deepening losses after it wrote down its investments in distressed tenant Steward Health Care and disclosed bridge financing for the hospital operator. The 10-K filed for 2023 was missing a routine certificate of consent from PwC, its auditor, and disclosed an exchange with the SEC on the disclosure of financial statements for Steward.

Office Properties Income Trust — The office REIT continues to evaluate raising debt against its over $3bn of unencumbered assets, as it chips away at its maturity wall.

Platinum Equity — The private equity firm, led by billionaire Tom Gores, has amassed $12.5bn so far for its latest buyout fund. It is also looking to raise a new vehicle focused on higher-yielding credit investments in middle-market companies.

Rackspace Technology — The cloud computing company said it had secured $275m in new money from existing creditors, as part of a private debt exchange it completed earlier this week. Of the co-op group that participated in the private exchange, lenders that backstopped new money received better treatment than those that didn’t. A public debt exchange has since been launched, which provides non-co-op group lenders terms worse than those offered to the co-op group.

Russell Investments — The investment services firm owned by private equity firms TA Associates and Reverence Capital Partners launched an amend-and-extend deal to address its upcoming 2025 term loan maturity. 9fin had earlier reported that a deal was in the works.

SI Group — The chemical additives company recently shared preliminary 2023 results, which left some investors questioning the sustainability of its capital structure, even as its business shows signs of recovering.

SIRVA — The outsourced moving services provider has engaged advisors to explore options as it deals with a heavy debt burden and weak performance.

Sonrava Health (fka Western Dental) — The New Mountain-backed company is sounding out investor interest on new funding backed by its accounts receivables balance.

Spirit Airlines — The low cost carrier has hired Perella Weinberg and Davis Polk to advise on debt refinancing options, after the termination of its proposed merger with JetBlue Airways. Meanwhile, a group of convertible bondholders organized with King & Spalding and Ducera. It is reported that Spirit’s $1.1bn senior secured bonds due 2025 — the largest near-term maturity — may have a novel ‘triple-dip’ claim.

Staples — The Sycamore Partners-backed company’s bonds popped on encouraging Q423 guidance, boosting investor confidence on its refinancing prospects.

Steward Health Care — The troubled hospital operator’s “six-point action plan” came amid a backdrop of increasing tensions with the state of Massachusetts and a scramble among restructuring advisors to manage its financial chaos.

The RealReal — Warrants offered by luxury goods reseller as part of a debt exchange unveiled late-February are in-the-money after the company’s Q4 23 earnings print sent the stock surging.

Thrasio — The Amazon aggregator filed for bankruptcy following stalled demand growth and liquidity pressure post the pandemic-fueled e-commerce boom. The bankruptcy court provided interim approval for a $360m DIP facility.

TriMark — The foodservices company quietly completed an out-of-court restructuring deal in January. Lenders including Ares, Oaktree and Bayside Capital injected new money through equity, equitized much of their debt and received takeback paper, and now control the company.

United Site Services — Certain lenders to the portable toilet rental company have banded together with Akin Gump and Moelis, as the company battles weaker earnings amid an inflationary and higher rate environment.

Veritas Technology — Creditors are puzzled by the status of their debt holdings after the Carlyle-backed company announced a deal where data safety company Cohesity would buy and merge with Veritas’ data protection business. Veritas is reported to be working with Guggenheim Partners to address upcoming maturities.

Workhorse — The electric vehicle company is working with Stifel to help raise bridge financing as it combats cash flow pressures.

VeriFone — Lenders to the payment and commerce solutions company have organized with Gibson Dunn as they prepare for negotiations ahead of the maturity of the company’s $250m revolver and over $2bn of term loans in 2025.

WW International — 9fin reported last week that a group of lenders to the operator of the Weight Watchers franchise have organized with Gibson Dunn as the company faces subscriber losses stemming from the advent of GLP-1 drugs such as Ozempic and Wegovy, along with Oprah Winfrey’s decision to step down from the company’s board in May.

Xplore — The Stonepeak-backed company agreed to a standstill agreement with creditors to allow for negotiations to continue ahead of an interest payment this month. The company is considering putting its legacy business through bankruptcy in Canada and is seeking around $400m of capital. 9fin earlier reported on options being discussed to recapitalize the business and an asset drop-down Xplore completed late last year.