This website uses cookies, pixel tags, and similar technologies (“Cookies”) for the purpose of enabling site operations and for performance, personalisation, and marketing purposes. We use our own Cookies and some from third parties. Only essential Cookies are used by default. By clicking “Accept All” you consent to the use of non-essential Cookies (i.e., functional, analytics, and marketing Cookies) and the related processing of personal data. You can manage your consent preferences by clicking Manage Preferences. You may withdraw a consent at any time by using the link “Cookie Preferences” in the footer of our website.
Our Privacy Notice is accessible here. To learn more about the use of Cookies on our website, please view our Cookie Notice.
This week’s focus was going to be on the struggles that senior unsecured noteholders are facing in upcoming liability management negotiations in situations like Altice, Ardagh, Astound and Bausch — being eclipsed by not just the debt that is more senior in the capital structure but the additional capacity above even the secured debt.
However, 9fin this week came across the most recent evolution of legal technology in liability management.
In the case of liquidity constrained call center software provider Alvaria, advisors really dialed up the creativity to address credit documents issued in a post-Serta Simmons world, coming up with a structure where a credit agreement included lien and payment subordination protections that were worded as a so-called sacred right.
Some are calling it the ‘At Home plus J. Crew’ or the ‘double-dip plus’, after the predecessor transactions that paved the way for it.
Given the Serta protections, any lien-priming would have required 100% lender approval. The Abry Partners-backed company could have done a drop-down with some assets and pledged those to raise third-party money, but that would have increased leverage and didn’t provide enough runway.
Alvaria and its advisors got around the company’s lien and payment subordination protections by creating a non-guarantor Cayman restricted subsidiary where they dropped the IP using a combination of restricted payments and permitted investments capacity. Then, that Cayman sub issued new debt with an exclusive claim on that IP and a pari claim on all the other assets and obligors. Finally, an intercompany loan was created to send proceeds to the OpCo, opening the door to a potential ‘double-dip’ argument; indeed, combined with the exclusive claim on the IP, it could even be considered a ‘triple-dip’ or ‘double-dip plus’.
This was another transaction where it was not a zero-sum negotiation. No first lien lender would have been fully stripped of its liens on the collateral, which still remained pledged to the original issuer (just the IP and they ultimately would get increasingly diluted the more participation in the multiple dip debt being issued at the Cayman sub), and where holders of 100% of the debt consented to various levels of discount and a mix of priority of the new debt between first and fourth out tranches. Given all the lenders signed the now-standard consents to not sue, the company will have room to operate without worrying about litigation.
A tribute to Judge Carey
Former Delaware Bankruptcy Judge Kevin Carey has died, according to an announcement from Hogen Lovells, where he had been serving as senior counsel in the restructuring group since 2019. Judge Carey oversaw major bankruptcies including Exide Technologies, Tribune Co, and New Century Financial. “Judge Carey was not only one of the best bankruptcy judges in the history of the profession, he was a deeply knowledgeable and valued colleague, and simply one of the very best people,” reads part of the Hogen Lovells tribute.
People Moves
If you have any recent moves to announce, please send to one of our emails below to include in our People Moves section.
Morgan StanleyhiredCharlie Towers from RBC as a managing director to head its US loan trading desk. Wells Fargo hired Alexandra Barth, leaving her position as co-head of leveraged finance at Deutsche Bank. Catherine Corey has joined 9fin as a distressed legal analyst.
Alvaria —The call center software company completed a priming capital raise with existing lenders that represents yet another innovation in the world of liability management. Some are calling it the ‘At Home plus J. Crew’ or the ‘double-dip plus’, after the predecessor transactions that paved the way for it.
SIRVA —The moving services companyhas raised between $70m to $80m via a new money priming loan in order to bridge the company to a broader debt restructuring.
Spirit Airlines — Read our three-part series on the stressed ultra low-cost airline and its 8% senior secured notesdue 2025 — the Loyalty Notes:
Part 1 covers Spirit’s historical financial performance and liquidity position and compares analysts’ forward estimates for Spirit with those of its peers
Part 2 reviews the capital structure and debt covenants, and discusses the bankruptcy remoteness of the Loyalty Notes structure and the uncertain value of the Loyalty Notes collateral
Part 3 examines options Spirit has to address the maturity of the Loyalty Notes, and how its creditors — including the noteholders with their famous “triple-dip” — can position themselves for a positive outcome
Incora — Messages between BlackRock employees from March 2022 implied they viewed Incora’s uptiering transaction as permissible under the company’s credit documents, according to testimony and evidencesubmitted in court.
Bausch Health — Bausch subsidiary Salix Pharmaceuticals was able to fend off an appellate court challenge from generic competitor Norwich Pharmaceuticals regarding exclusivity of a specific patent for Xifaxan, Bausch’s drug used mainly for the treatment of irritable bowel syndrome and hepatic encephalopathy.
Medical Properties Trust — Various law firms including Paul Weiss are aiming to organize Medical Properties Trust bondholders ahead of upcoming maturities later this year and in early 2025.
VistaJet — The private jet subscription company released Q4 23 results, with the company’s founder penning a letter announcing legal action against a “group of individuals” that has “disseminated half-truths, false rumors and lies.
Altice France— A group of secured creditors to the troubled telecom company — that 9finhad reported are in talks to form a cooperation agreement — have chosen Rothschildto help with potential debt talks with the company.
Jo-Ann Stores — We break down the recent DIP financing package obtained by the struggling retailer, as well as how it compares to recent DIP financings in our newly established DIP financing tracker.
Thrasio— The Amazon aggregator’s disclosure statement hearing has been set for 18 April despite the committee of unsecured creditors requesting an adjournment. The UCC, faced with a measly recovery for the general unsecured creditors, has accused Thrasio of having destroyed over $3bn of value and has claimed the debtors and disinterested directors are not being transparent with disclosures.
Endo International — The pharmaceutical company raised a $2.5bn SOFR+450bps exit term loan in preparation for emergence from bankruptcy. With significant customer and product concentration, and revenue outside of Endo’s branded pharmaceutical products exhibiting declines, sources have mixed feelings about the company’s prospects.
Cumulus Media — Cumulus Media again extended the deadline for its proposed exchange — which now expires today, 12 April, disclosing that they’re stuck on $15m of bonds agreeing to exchange, no change from the previous extension. 9fin previously reported 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.
Staples — The Sycamore Partners-backed office supplies company is working with bankers at JP Morgan and Morgan Stanley to gauge investor interest in a refinancing of upcoming debt.
Other active distressed and restructuring coverage
Astound Broadband — A group of lenders has started confidential talks with the Stonepeak-backed internet and cable provider. While the company has far-dated debt maturities, it is grappling with a cash flow squeeze.
Asurion— The electronics insurance and repair company’s term loans traded lower after the firm asked lenders for permission to delay its earnings report so that it can investigate a non-compliance allegation, according to 9fin sources.
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 de-SPACed healthcare services provider is in bankruptcy with a restructuring support agreement from holders of around 86% of its secured debt and 92% of the senior notes.
CommScope — A group of largely unsecured lenders to the struggling telecommunications infrastructure company pitched new money second lien financing to repay near-term maturities.
CURO Group— In a pre-pack led by Oaktree, Caspian Capital and Empyrean, the consumer finance company filed for Chapter 11 in SDTX with a plan that calls for the equitization of most of its secured debt and an effective date within 120 days post-petition. The filing came with a $70m DIP that Judge Marvin Isgur noted was “very expensive.”
ConvergeOne — The technology services provider filed a prepack in SDTX with an RSA signed by 81% of its first lien and second lien lenders that would see the equitization or cancellation of $1.6bn in funded debt, with first lien lenders set to receive most of the reorg equity.
DISH/EchoStar — 9fin 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 is in bankruptcy before the US Bankruptcy Court for the Eastern District of Virginia.
Fisker — The companysaid it hired Deutsche Bank and PJT Partners to serve as financial advisors as it continues to evaluate strategic alternatives. The company also disclosed that it had entered into a forbearance agreement with Heights Capital Management.
Gol — Gol’s Abra bondholder group recently disclosed updated members and holders including distressed investors. The bankrupt airline has said it will evaluate all recapitalization or other transactions, including to raise capital while in bankruptcy.
Graftech— 9fin has reported the company is evaluating new money proposals from third parties as it gears up for negotiations with debt investors.
Hawaiian Electric— A federal court remanded various cases related to the state utility’s potential wildfire liabilities back to a state court in a blow for the defendants, with Judge Jill Otake basing her decision on an analysis of the Multiparty, Multiform Trial Jurisdiction Act of 2002 (MMTJA).
Hearthside Food Solutions — The Charlesbank-backed food manufacturer is looking to raise funding ahead of its debt maturities, led by a revolver due in November this year.
McAfee — A group of lenders that 9fin had reported had organized are said to have signed a cooperation agreement and also hiredCenterview.
Michaels Stores— The bonds of Apollo-backed retailer traded up after the companyreported an encouraging jump in fourth quarter EBITDA.
MRP Solutions— Lenders to Clearlake Capital-backed packaging manufacturer MRP Solutions(fka Mold-Rite Packaging) are organizing and are in talks with Perella Weinberg Partners, according to 9fin sources.
MyEyeDr — The Goldman Sachs-backed vision care chain is regaining the confidence of investors with its latest refinancing thanks to a new slug of preferred equity and improved finances.
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.
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.
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.
Rubio’sRestaurants — 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.
Russell Investments— The investment services firm owned by private equity firms TA Associates and Reverence Capital Partners completed its amend-and-extend deal to address its upcoming 2025 term loan maturity.
SI Group — The chemical additives company recentlyshared preliminary 2023 results, which left some investors questioning the sustainability of its capital structure, even as its business shows signs of recovering.
Sonrava Health (fka Western Dental) — The New Mountain-backed company is sounding out investor interest on new funding backed by its accounts receivables balance.
Steward Health Care— A 9fin analysis outlines that Medical Property Trust’s total economic exposure to Steward could be as much as $4.8bn across its real estate investments, loans, unpaid rent, and minority equity investment as the struggling health operator approaches a 30 April forbearance agreement expiration with its ABL lenders.
Telesat Canada —9fin provided a comprehensive analysis of the company’s recently disappointing earnings causing the company’s bonds and equity to fall sharply in response.
TGI Friday’s —The restaurant chainhas engagedGuggenheim to raise roughly $200m of new funding to pay down debt.
United Site Services — Certain lenders to the portable toilet rental company have banded together as the company battles weaker earnings amid an inflationary and higher rate environment.
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.
Workhorse — The electric vehicle company is working with Stifel to help raise bridge financing as it combats cash flow pressures.
WW International— 9fin hasreported on how weight loss drugs are hurting brands like Weight Watchers and Herbalife.
Xplore — The Canadian rural internet providerkickstarted a grace period after skipping a coupon payment due at the end of March. It has been in talks with creditors and sponsor Stonepeak on ways to restructure its legacy business and fund the growth of its fiber projects.
