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The Default Notice — A conspicuous lack of consumption
Max Frumes
+Rachel Butt
+ 2 more
•11 min read
Just when it seemed like all of the retailers and consumer-related credits that could restructure already did, and TMT and healthcare would dominate the restructuring headlines for 2024, the holiday season results started pouring in for retailers and fast casual food chains.
It turns out a lot of leftover tenants in strip malls and shopping centers across the country have a medley of unresolved issues including secular decline, too much leverage…and the cost of shrimp.
9fin reported on fabric and craft store company Jo-Ann Stores trying to raise funds from current lenders and there's a steering group.
Kids clothing chain The Children’s Placehired restructuring advisors who will address a covenant default after Saudi Investment firm Mithaq Capital bought a majority of the company in the open market, causing the stock to surge.
Apparel concern Express is reportedly preparing for bankruptcy. Canadian-based department store operator Hudson's Bay, owner of Saks, has been looking for financing. Department store chain Belk engaged lenders on a new round of restructuring.
Home furnishing concern At Home, famous for the double DIP, has bonds tracked by 9fin in the 30s and 40s, and term loan debt in the 40s. Restaurant chain Rubio’s Restaurants kicked off a sale process as its lenders are seeking an exit, while Red Lobster has found itself victim of an unfortunate shrimp promotion that proved too costly. 9fintracks stressed and distressed consumer discretionary bonds, and stressed and distressed consumer discretionary loans.
People Moves
There are a lot of people making moves in the distressed debt investing and restructuring industry. If you have any recent moves to announce, please send to one of our team’s emails below to include in our new People Moves section.
Rose Temple joinedFTI Consulting's restructuring communications team as a Managing Director from Joele Frank. Whitney Fogelberg joined C Street from Kirkland & Ellis and will co-head an LME-focused comms group.
Steward Health Care — 9finreported exclusively this week that the hospital operator is preparing for a bankruptcy filing, as the company struggled to pay outstanding rent and loans to its landlord Medical Properties Trust.
Medical Properties Trust — The REIT has rejected multiple financing proposals from third parties to deal with upcoming maturities and struggling tenants, in part because management didn’t want to pay up.
Audacy – Bankruptcy filings revealed that Soros Fund Management has become the largest holder of the company’s first lien debt — positioning itself to acquire a large chunk of Audacy equity through bankruptcy. The pre-packaged bankruptcy in Houston remains on track, in a plan that would reduce its debt load from $1.9bn to $350m by converting much of it to equity.
CommScope — A group of secured lenders has reportedly signed a co-op agreement, as the struggling telecommunications infrastructure company has more than $1.2bn of debt coming due in 2025.
DISH— The telecom company is sounding out interest from third party investors on financing proposals, after nixing two proposed exchange offers. This is heightening tension in the situation, as existing creditors have already been roiled by the company’s aggressive financing maneuvers.
Enviva — The struggling wood pellet producer announced that it has a forbearance agreement with creditors until 4 March to continue restructuring talks, confirming 9fin’s report yesterday. The company could be pursuing an out-of-court deal or a near-term bankruptcy filing. 9fin was also the first to uncover the firm on the other side of Enviva’s problematic wood pellet contracts.
GoTo Group — GoTo announced 99.99% participation by lenders excluded from a recently completed private exchange on the existing terms at 77 cents on the dollar, accepting the deal that is as much as 13 points lower than members of a backstop group.
Hawaiian Electric— The electric utility and banking company reported Q4 23 results. It disclosed a $75m commitment towards an initial recovery fund for the Maui wildfires, and a potential accounts receivable facility that could net it $200m-$250m of additional liquidity. Liability for the wildfires is far from crystallized — on the earnings call, management noted that it is the early stages of 101 lawsuits as a defendant and insurers have made around 150 subrogation claims against it.
Incora — Testimony from a former Silver Point managing director offered new details on the circumstances surrounding the uptiering transaction at the heart of the case.
Jo-Ann Stores — The arts and crafts retailer’s talks with existing lenders on additional funds may become challengingbecause of restrictions in its ABL agreement. Meanwhile, a lenders’ steering committee with key CLO holders is taking shape.
Office Properties Income Trust — The office REIT continues to address its maturity wall in piecemeal fashion. On its Q4 23 earnings call on 16 February, management noted that the company’s work on its balance sheet is “not finished and challenges remain”, that it is looking to resolve the $650m SUNs due early 2025 and subsequent maturities with Moelis’ help, and continues to evaluate raising debt against its over $3bn of unencumbered assets.
Red Lobster — The seafood chain is working with a host of restructuring advisors to help address its leases and improve operations. Its business has been weighed down by the unlimited shrimp offering, which proved to be a loss driver.
Robertshaw— The appliance parts maker filed for Chapter 11 bankruptcy in the Southern District of Texas Thursday after a series of convoluted transactions meant to keep the business afloat backfired. Robertshaw is attempting a 363 sale with Eaton Vance, Bain Capital, Canyon and sponsor One Rock making a stalking horse credit bid. The company also hopes to have complaints by Invesco and others against the prior transactions — currently before the New York state courts — resolved under bankruptcy court supervision.
Rubio’s Restaurants — The restaurant chain, known for its fish tacos, has kicked off a sale process as its lenders are seeking an exit. Rubio’s is working with Hilco to sell its assets and deal with unprofitable leases, and Carl Marks to help turnaround its operations.
Spirit Airlines — A group ofbondholders has selectedEvercore to prepare for possible negotiations with the company ahead of a 2025 maturity. They are bracing for the situation to be a slow burn as the low cost carrier is restricted from dealing with its debt due to its merger agreement with JetBlue. The group had previously also retained Akin Gump.
SunPower— One of the many struggling residential solar power companies reported Q4 23 earnings and is guiding to positive cash flow beginning H2 24. It also disclosed a reprieve in the form of a $175m second lien term loan from its majority shareholder, a $25m upsize of its revolver and long-term covenant waivers from lenders. On the earnings call, management lauded this shareholder support as exhibiting “strong belief in the future of the company” — however, the highly dilutive penny warrants attached to the term loan sparked a stock selloff.
The Children’s Place — Shareholders cheered when Mithaq Capital, a Saudia Arabia-based investment vehicle with ties to the one of the largest Islamic banks in the world, and Snowball Compounding Ltddisclosed that they have built a 54% stake in the struggling retailer. The company subsequently disclosed the execution of a non-binding term sheet for a $130m term loan from Gordon Brothers.
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.
Workhorse — The electric vehicle companyis working with Stifel to help raise bridge financing as it combats cash flow pressures.
Other active distressed and restructuring coverage
Lumen — The telecom company’s proposed restructuring with an improved transaction support agreement would address the bulk of 2025 maturities, largely extend maturities of debt at Lumen and Level 3 through at least 2029, and help shore up liquidity.
Magenta Buyer — A group of lenders to Magenta Buyer (dba McAfee) is working with advisors as the cyber security software provider struggles with liquidity and business performance problems.
Belk — Lenders to the department store chain have been speaking with the company about a restructuring that could result in an exchange of much of its debt into equity.
Cano Health — The de-SPACed healthcare services provider finally filed for bankruptcy with a restructuring support agreement from holders of around 86% of its secured debt and 92% of the senior notes.
AccentCare—Lenders had until 2 February to decide if they want to join the Advent International-backed home health company’s proposed debt extension plan, or potentially become last in the repayment line. We reported earlier that the company had hired Evercore to advise on negotiations with creditors in light of ongoing cash burn and a 2026 debt maturity. A group of lenders had previously organized with Gibson Dunn and Centerview Partners.
Hearthside Food Solutions — A group of lenders signed a cooperation agreement to bind themselves in looming debt talks with the US food packaging company.
Sonrava Health — The New Mountain-backed dental company and lenders tapped advisors.
Xplore—Advisors to Xplore and a group of lenders are discussing options to recapitalize the business.
Allen Media—The media company designated several subsidiaries – holding equipment that is claimed by the company to have zero market value — as unrestricted.
Astound Broadband— The company hired advisors to engage with lenders on inbound liability management proposals.
Carestream — Lenders organized ahead of the dental company’s debt wall.
Enviva — The troubled wood pellet producer is entertaining proposals for a loan to fund operations through a possible bankruptcy. An out-of-court process remains the priority.
SI Group — A majority group of term loan lenders to the SK Capital-backed chemical additives manufacturer formed an exclusionary co-op agreement.
Signature Bank— Distressed investors have been buying up debt issued by banking crisis casualty Signature Bank, with some managing to turn a profit on the trade.
United Site Services— Certain lenders to United Site Services have banded together, as the portable toilet rental company battles weaker earnings amid an inflationary and higher rate environment
