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The Default Notice — So much for kinder and gentler
9fin team
•18 min read
The Default Notice is 9fin's weekly newsletter, incorporating summaries and commentary from our US distressed coverage for the past week. Find out more about what we do for distressed here.
Top News
We’ve written extensively about the evolution of liability management exercises both in this column and elsewhere. One recent development is the advent of transactions that offer a little something to everyone instead of leaving minority lenders high and dry. They’ve been labeled the “kinder and gentler” strain of LMEs.
One obvious reason for the transition away from hyper-aggressive drop-downs and uptiers is the threat of litigation. Serta Simmons was decided in favor of the lenders that participated in the transaction, but the litigation over that deal still came with a price tag (not to mention the decision was appealed). More recent decisions — like Judge Marvin Isgur’s ruling in the Incora adversary proceeding and Judge Christopher Lopez’s Robertshaw decision — show that participating lenders won’t always (ever?) get a clean win, either.
Yet transactions reported by 9fin this week are being perceived as neither kind nor gentle.
Del Monte’s $240m recapitalization is a deal that would, among other things, exchange existing term loan debt into second and third out debt under different terms. The variables are lenders’ participation in the new money financing and whether they are in an exclusive ad hoc group. If non ad hoc group members participate, it’s at least a 20-point gap in the package they’ll receive for their term loan versus what the ad hoc group will receive for the exact same term loan. The remaining term loan itself is in the 30s, down 40 points from quotes earlier this summer. And a legal fight could likewise be on the way, with excluded lenders in talks to hire litigation counsel.
Another deal brewing that participants fear will include haves and have-nots is Better Health (aka Physician Partners), which has hired a duo of advisors known for aggressive LMEs while some of its largest lenders appear willing to strike an opportunistic deal given the trading prices of the term loan just issued last year — the type of deal where discount is captured from those not at the table.
Either the arc of the LME universe is long and will bend towards friendly with some twists and turns, or it’s a pendulum — because more “violent” transactions are brewing with starkly different outcome for similarly situated lenders.
People Moves
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Fried Frank has hired Rachel Strickland, Daniel Forman and Andrew Mordkoff in New York, from Willkie Farr. Strickland, Willkie’s former restructuring chair, is joining Fried Frank as the new global chair of its restructuring practice as well. Eversheds announcedTodd Meyers joined in Atlanta as a partner and co-head of the US Restructuring and Insolvency team, leaving his position as chair of the restructuring practice at Kilpatrick Townsend.
Del Monte —The canned food company has struck a deal to raise up to $240m of new money and exchange existing term loan debt into second and third out debt under different terms depending on lenders’ participation in the new money financing and whether they are in an exclusive ad hoc group, according to sources and disclosures. Excluded lenders are in talks with Glenn Agre over potentially fighting the deal.
Better Health (fka Physician Partners) — The healthcare provider is getting advice from Evercore and Kirkland as uncertainty swirls around its earnings trajectory, while a group of lenders have banded together with Davis Polk and Houlihan Lokey ahead of potential negotiations with the company and sponsor Kinderhook Industries.
MultiPlan — MultiPlan has hired Guggenheim to explore ways to revamp its debt stack, according to 9fin sources. The company reported disappointing Q2 24 results last week, and certain secured creditors organized and signed a cooperation agreement to present a united front.
SunPower— The residential solar technology company (finally) filed for bankruptcy this week in the United States Bankruptcy Court for the District of Delaware with a stalking horse bidder in place, in order to complete its ongoing sale process. The debtors received approval for all first day motions without objection.
Steward Health Care— Steward received court approval for a $30m lifeline from the commonwealth of Massachusetts to help get the debtors through the transition and sale of the Massachusetts hospitals.
AMC Entertainment— Q2 24 earnings were disappointing, but company executives noted that AMC had its best June ever and things might be looking up. Meanwhile, the creative liability management deal, which 9fin reported exclusive details on, was a massive hit but first lien noteholders are unhappy.
iHeartMedia — iHeartMedia remains in “active dialogue” with its largest creditor group, management told analysts on the company’s earnings call for the second quarter ended 30 June, after the company announced earnings.
Pluralsight — JPMorgan is reported to be trying to broker trades in Pluralsight’s debt, including a direct loan which holders have marked down to around 50 cents. 9fin earlier delved into the possible incentives for the J.Crew-like maneuver the Vista Equity-backed company pulled off, and what it means for a corner of credit that touts more stringent lender protections and tight-knit relationships.
WOM— It’s reported that the bonds of the bankrupt Chilean telecom company have jumped as it markets its assets for sale amid potential interest from Carlos Slim’s America Movil.
Other active distressed and restructuring coverage
Alkegen — Formerly known as Unifrax, lenders to the specialty materials maker formed a coop as the company vetted financing proposals from third party investors.
Allen Media —A group of lenders has hired an FA in preparation of liability management talks with the company.
Altice France—The telecom company is set to hold its debt investor call 29 August. 9fin’sdeep-dive report explores the range of possibilities given the various moving parts.
Altice International— The telco announced its AdTech business, Teads, is to be acquired by industry peer, Outbrain, for $1bn. Since its French counterpart’s ultimatum, Altice International’s creditors have been wary that a similar stunt may be pulled on them but details are thin. We discuss Altice’s options and the potential deleveraging here.
American Physician Partners — For the vendors and firms owed money by a bankrupt company, the primary motivation to join an Unsecured Creditors’ Committee is often simple: maximize economic recoveries. Listen as Doctor Dennis Deruelle recounts his experience in navigating the rapid shuttering of APP and what lessons we can learn from it.
Anthology — Nearly 100% of the first lien loans of the Veritas-backed ed-tech company are said to have agreed to exchange under a liability management deal that 9finhad reported was launched after negotiations with an ad hoc group of first lien lenders.
Ardagh–The glass bottle maker (ARGID) and metal cans producer (AMP) separately reported results on 25 July.
Astound Broadband — A group of lenders 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.
Beyond Meat — The producer of plant-based meat substitutes is reported to have engaged with a group of convertible noteholders on a restructuring.
B. Riley Financial/Franchise Group — Franchise Group shareholders have sued the company’s executives and minority owner B. Riley over alleged breach of fiduciary duties in relation to the franchise holding company’s 2023 take-private deal. 9fin had earlier reported that Franchise Group and its lenders had hired advisors following weak earnings and news of Conn’s — in which it holds a large chunk of equity after it sold a business to Conn’s in 2023 — considering bankruptcy. Conn’s subsequently filed.
Brightspeed — Sponsor Apollo and lenders to the telecom company were reported to be in discussions for a restructuring involving the banks taking a haircut on their existing debt and providing $3.5bn of refinancing. 9fin had earlier reported on noteholders at Embarq, a Brightspeed subsidiary, having appealed a judgment that thwarted their attempt to seek redress for their subordination in an LBO in 2022.
CareMax —The value-based healthcare provider paid lenders a 3% PIK fee to execute an eighth amendment to its credit agreement, which provides for $20m in incremental term loan facilities and extend waivers through 15 August 2024.
Carestream Dental — The company reportedly began confidential talks with lenders to raise capital. 9fin had earlier reported that CD&R and CareCapital Advisors-backed company has been working with Jefferies to address its revolver and term loan maturities this year.
Chicken Soup for the Soul — Chicken Soup filed for Chapter 11 protection and reached an agreement with prepetition agent HPS Investment Partners for a DIP, but its case was converted to Chapter 7 after its lenders indicated that they would not be willing to fund any additional post-petition financing following shocking allegations of mismanagement at the debtor companies.
CommScope — 9fin published the first of many LME Breakdowns, to answer questions around how CommScope could use sale proceeds to address almost $6bn in 2025 and 2026 maturities, after the announcement of the $2.1bn sale of assets to Amphenol.
Conn’s Inc — Conn’s, a home goods retailer, filed for Chapter 11 protection in the US Bankruptcy Court for the Southern District of Texas, seeking to effectuate an orderly wind-down of its business. You can read more about the case here.
Diamond Sports Group — Diamond Sports Group has adjourned its confirmation hearing to a date to be determined as it seeks to finish negotiating a possible deal with Comcast, the NBA and the NHL.
EchoStar/DISH — Bondholders to the EchoStar subsidiary Hughes Satellite Systems are reported to have engagedGlenn Agre to explore remedies for value leakage in the form of a recently disclosed lease agreement for a satellite. The agreement requires Hughes to pay $15.9m monthly to EchoStar, and Hughes has also made a $100m prepayment under the lease.
Emergent BioSolutions — Holders of Emergent’s 3.875% SUNs due 2028 stand to receive a high potential recovery amid a stabilization of earnings, per 9fin analysis, as our illustrative waterfall outlines a scenario-based recovery of between 92% and 93% with the bonds quoted near 60 cents.
EmployBridge— Certain lenders have organized with Gibson Dunn as the company reported weaker performance with debt trading poorly and rumors of the company’s sponsor Apollo buying back debt in the secondary market.
Enviva — Enviva filed an application to retain Paul Weiss as debtors counsel and Vinson & Elkins as special counsel after its first two attempts to retain V&E failed.
Express— Express received permission to move forward with its sale process, and rapidly concluded the process, announcing that Phoenix Retail —a JV owned by WHP Global (majority owner of the entity holding Express’ IP), Simon Property Group,Brookfield Properties and Centennial Real Estate — emerged as the winning bidder for substantially all its assets.
EyeCare Partners — The vision care network completed its liability management deal involving $275m of new money and a discounted debt exchange that offered better terms to lenders who participated early and were involved in confidential talks with the company.
Fisker — Primary secured creditor Heights Capital agreed to extend Fisker’s access to cash collateral by three weeks to allow parties to reach a settlement in the Chapter 11 case. Heights had earlier requested the court to convert the case to Chapter 7.
Fossil Group—Following quarters of dismal results and with an operational restructuring ongoing, Fossil announced the resignation of its CFO and the appointment of Andy Skobe of Ankura to provide interim CFO services.
FreshDirect— The grocery delivery company is set to get some rescue financing from its parent company, Getir, to help support its operational needs.
Gol Airlines— Gol’s Abra bondholder group 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. In recent days the UCC has objected to the debtors attempts to allow aircraft lessors to sell a participation interest in their unsecured claims, while retaining their voting rights on any potential Chapter 11 plan.
GrafTech International— Certain creditors have signed a cooperation agreement to bind their acts together in potential negotiations with the company.
Hertz — The rental car company reported a meaningful decline in EBITDA as it continued to recognize losses and write-downs relating to its fleet in Q2 24, but management provided a clearer timeline for the completion of its fleet transformation plan.
Incora — The 2024/2026 noteholder group has asked for, at a minimum, the same adequate protection package given to Pimco and Silver Point at the start of the case given the court’s recent ruling in the uptier litigation.
Invitae — After hearing arguments on the UCC’s standing motion for litigation related to uptiers, and arguments over makewholes, Judge Michael Kaplan decided to issue a preliminary ruling denying the standing motion and reserved his ruling on the makewhole issue.
Leslie’s— The swimming pool maintenance and supply company shared a bleak preview of the quarter and full year, sending its stock and term loan tumbling.
Magenta Buyer/McAfee — The company is reported to have struck a deal with its lenders, including Elliott Investment Management, to raise $400m of new money and exchange existing debt at discounted prices. 9fin had earlier reported on talks between the company and its creditors.
Petrofac — The energy services company has defaulted on its senior secured notes after failing to convince lenders to extend the grace period on a missed interest payment.
Porter Airlines — The Canadian airline has gauged interest from private credit lenders in raising CA$250m in preferred equity to boost liquidity.
Purdue Pharma — Purdue Pharma and its creditors will move forward with 60-day mediation to try to come up with a settlement that would satisfy the Supreme Court’s ruling. If a settlement cannot be reached, the UCC in the case will pursue litigation against the Sackler family that the UCC estimates is worth approximately $11.5bn.
Red Lobster— Red Lobster has to modify its “opt-out” procedure for consenting to third-party releases in its proposed plan after the UST argued that the decision in the Purdue Pharma case prohibited such relief.
Restaurants Distress —A recent string of restaurant bankruptcies, including Rubio’s Coastal Grill and Red Lobster, suggests a bleaker outlook for the sector.
Rite Aid — Rite Aid notched a win when the judge overseeing the case ruled in favor of Rite Aid on a working capital dispute in the Elixir APA — an approximately $200m dispute, and then agreed to confirm the Chapter 11 plan. Rite Aid also received approval to sell $435m of a term loan issued by Elixir structured as a seller note held by Rite Aid. However, all is not resolved — MedImpact, Elixir’s purchaser, has appealed the Elixir ruling, and others have appealed confirmation.
Robertshaw — Judge Lopez found that the One Rock-sponsored company violated its credit agreement when implementing an LME in December — engineered with the support of Bain Capital, Canyon Partners and Eaton Vance, but confirmed that the participating lenders remained “required lenders” under the credit agreement. Invesco, the contesting lender, is only entitled to assert monetary damages and not equitable remedies, per the judgment. Invesco has since appealed the judgment and has claimed over $100m in damages supported by a comprehensive analysis (see the proof of claim), while Judge Lopez has approved Robertshaw’s sale to the participating lender group.
Rodan & Fields — The multi-level marketing company, in which TPG owns a minority stake, announced a comprehensive liability management exercise aimed at reducing debt from $614m to $105m. The transaction, which has the support of around 86% of the existing second-out and 56% of the third-out term loan, includes $75m in priming new money, uptier exchanges (with a subsequent equitization of uptiered loans handing control to lenders), and non-consenting lenders being stripped of key protections.
Salem Media— Certaindebtholders have banded together with Paul Hastings to negotiate a possible debt restructuring with the conservative Christian media company.
SI Group — The chemical additives company 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 moving services company was downgraded by S&P from B- to CCC. The S&P note states that on 25 April, SIRVA’s first and second-lien credit agreements were “modified to pledge more equity from subsidiaries as collateral to lenders, to 100% from 65%, which we view as lenders' concerns over the company's performance and ability to manage its obligations in a difficult operating environment.” This comes after it raised a new money priming loan (per S&P a $84m delayed-draw term loan) in order to bridge the company to a broader debt restructuring.
Spirit Airlines — The troubled ultra low-cost airline reported poor Q2 24 earnings and disclosed a poorer outlook for the next quarter amid industry oversupply and a “shift from being just low-cost and low-fare to delivering value with low cost”. Company executives were unwilling to share details of their conversations with bondholders on upcoming maturities.
Springs Window Fashions—The Clearlake-backed window treatment company retainedKirkland & Ellis and Centerview to engage with creditors who have organized into two groups, both with cooperation agreements in place. One creditor group holds a majority of the company’s term loan debt, while the other holds upwards of 40% of the term loan debt plus over two-thirds of the company’s bonds, according to sources.
STG Logistics — 9fin reported that STG lenders signed a cooperation agreement, which would bind them together in potential negotiations with the company.
Sunnova Energy— The 2026 and 2028 bonds of the residential and commercial solar companyrose after executives outlined a plan to raise cash through securitizations and asset sales to pay off existing debt. 9fin had reported in May on the company hiringadvisors and agreeing to several funding deals.
Telesat Canada — The Canadian satellite company posted expected declines in revenue, EBITDA and margins in Q1 24, and reaffirmed guidance for the full year. Backlog and cash generation for the legacy business declined as Telesat continues to lose GEO customers and focuses on Lightspeed. Certain creditors are reported to have hired Evercore and Lincoln International for advice. 9fin earlier provided a comprehensive analysis of the company’s disappointing FY 23 earnings and FY 24 guidance.
The Container Store— Certain lenders are getting legal advice from Paul Hastings, as the retailer faces a term loan maturity in 2026 and an uncertain earnings trajectory.
Tupperware— Tupperware disclosed a further extension of its forbearance agreement with its lenders, this time to 15 August, and a requirement from lenders that it deliver letters of intent for a repayment transaction by 31 July. The company had recently announced the departure of its CFO.
TGI Friday’s — The restaurant chain has engaged an FA to raise roughly $200m of new funding to pay down debt.
Thrive Pet Care— The company hiredEvercore to examine options for its debt stack, 9fin reported. Meanwhile, a group of first lien lenders is seeking advice from Akin Gump as they brace for potential negotiations with the TSG Consumer Partners-backed company, sources said.
United Site Services — The portable toilet rental company is set to tap a $115m commitment from sponsor Platinum Equity as it 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.
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”.
Wheel Pros— The Clearlake-backed company has entered into a short grace period after skipping interest payments tied to its term loans.
WW International — Weight Watchers creditors, which organized with Gibson Dunn, have signed a cooperation agreement to work together ahead of potential debt talks with the beleaguered diet company.
Wellpath — The HIG-backed prison healthcare company is working with Lazard to explore options ahead of a revolver maturing and a first lien term loan becoming current in October. A group of lenders is said to have tapped Akin Gump and have taken pitches from bankers, with Houlihan Lokey in the pole position.
Workhorse — The electric vehicle company continues to raise capital through the issuance of convertible notes and warrants and employ cost-cutting measures to address cash flow pressures. 9fin had earlier reported that the company is working with Stifel to help raise bridge financing.
WorldStrides— Lenders to the student trip company have retainedDucera Partners in order to develop potential alternatives to the recently expired discounted exchange offer.
Xplore — The Canadian rural internet provider announced an agreement to raise new debt and equity financing, with sponsor Stonepeak and certain existing lenders leading the investment and other lenders to get the opportunity to participate on substantially similar terms. Xplore has commenced a proceeding under the Canada Business Corporations Act to implement the deal.
Veritas Technologies — Lenders to the Carlyle-backed data management firm company are reported to have submitted a restructuring proposal involving a debt exchange and paydown. 9fin had earlier reported that a group of creditors has begun confidential talks with the company on ways to address its debt due 2025.
Vyaire Medical — Vyaire, a breathing technology company, commenced Chapter 11 after post-pandemic macroeconomic challenges led to a liquidity crisis. Backed by an RSA with a first lien ad hoc group, the company intends to continue to pursue a prepetition marketing process. The company also received interim approval of its $180m DIP facility at its first-day hearing.
Zayo— 9fin broke the news that Zayo is working with banks to help gauge investor interest in raising new debt at its recently carved out Europe subsidiary.
