A credit agreement included with the RSA says the quiet part out loud — the agreement excludes Invesco, which supported a transaction that primed other Robertshaw lenders last year (more on that in a second).

As part of the pact, Robertshaw has lined up a $56m debtor-in-possession (DIP) financing from existing lenders to fund its operations through the bankruptcy, it said in a statement. The restructuring will wipe out $670m of debt, and lenders participating in the agreement have also offered a stalking horse bid for the business that will let them buy it if a better offer doesn’t emerge during the restructuring.

The filing is the culmination of months of financial and legal jockeying by Invesco and the parties to the RSA, and it looks like Invesco’s rivals have pulled ahead — at least for now.

Financial judo

Robertshaw, which makes electronic components for household appliances, has struggled not only with its debt burden but “financial challenges resulting from the impact of pandemic-era product shortages, logistics, and supply chain disruptions,” according to the first day declaration of Robertshaw chief executive officer John Hewitt.

In response, the company took steps to raise liquidity as well as revamp its organizational structure and leadership starting in 2022.

Those included a transaction in May 2023 that brought in $95m of new money while priming lenders who didn’t partake in the deal, which we reported on at the time. The move spurred an excluded creditor group headed by Guardian Life Insurance to sue Robertshaw and lenders that came out ahead in that transaction, including Invesco.

With Invesco holding a majority of the priming debt, it started positioning Robertshaw for a bankruptcy that would hand it control of the company, Hewitt wrote.

However, One Rock and the other lenders party to the RSA sought to avert bankruptcy with a creative alternative.

The group put capital into a new entity linked to Robertshaw known as RS Funding Holdings. RS Funding borrowed approximately $228m from those lenders and then distributed those funds to Robertshaw US Holding, the entity within the corporate structure that holds all of Robertshaw’s borrowings.

Robertshaw US Holding then used the funding to pay down debt including the super-priority first out term loan debt held by Invesco, thus reducing it to a minority holder of the priming debt. The company asserts that the moves were allowed under its credit agreements because RS Funding did not count as a “subsidiary.”

Echoing Guardian Life’s earlier move, Invesco sued to unwind the deal, alleging that “there will be no limit to the sophistry and deceit that will infect the distressed debt market for syndicated secured loans” if it’s not granted relief.

The filing could mean the litigation brought by Guardian Life and Invesco will ultimately take place in bankruptcy court.

”The Company believes that a speedy resolution through the Chapter 11 cases of the claims alleged in these two actions is the most efficient path to address these issues, while minimizing the value-destructive impacts of two costly and protracted state court litigations,” Robertshaw said in its statement.

The first day hearing is scheduled for 3.30pm CT on today.

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