But these kind of early organizations have become so frequent, that one portfolio manager said it is pulling them away from spending time on actually managing their investments.

“Our friendly professionals out there have incredibly sharp elbows not just against each other, but also in terms of getting involved to drive the process or outcome that aren’t necessarily called for from borrowers,” the portfolio manager said.

Regardless of how you feel about it, getting involved early has become increasingly important in the 3D chess game of distressed debt investing, where one has to watch out for the incentives and alliances of fellow creditors, sponsors, as well as certain advisors and lawyers in the turnaround business.

More often than not, investors that have the means to build a sizable position and the desire to drive negotiations wind up with better restructuring terms than those "on the outside," as seen with Rackspace Technology and Apex Tool Group.

In the case of Weight Watchers (WW), being early in the game may pay off. Certain lenders are getting legal advice from Gibson Dunn to prepare for negotiations with the diet company, after WW management said on its Q4 earnings call that it’s opportunistically considering capital structure options.

The company has battled years of declining sales and is trying to stay relevant with the growing popularity of weight-loss drugs like Ozempic and Wegovy. It suffered a social-media backlash after reaching out to influencers to promote a new prescription obesity drug service, in possibly the biggest brand shift in its history. That added to existing investor concerns around WW’s subscriber count and competition from Eli Lilly, which has partnered with Amazon to sell weight loss drugs directly to the public.

It doesn’t help that WW is losing media mogul Oprah Winfrey from its board. Oprah is also planning to donate all her holdings in the company’s stock — not so welcoming news, especially after WW’s shares dropped around 13% on Wednesday when 9fin reported on the lender organization.

“Oprah’s exit was the kiss of death,” a credit investor tracking the situation said.

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.

Doug Mannal has joined Morrison Foerster as a partner in the firm’s business restructuring and insolvency group, according to an announcement.

Brent Shepherd has joined Houlihan Lokey as a managing director in its capital markets group. Based in Chicago, Shepherd will co-lead the firm’s healthcare capital markets efforts alongside Managing Director Neha Shah.

Alexander Saeedy shifted to the banking beat at The Wall Street Journal, covering JPMorgan and Bank of America, from the bankruptcy and distressed team.

The Default Notice is produced by 9fin’s distressed and restructuring team: Max Frumes | max.frumes@9fin.com, Rachel Butt | rachel@9fin.com, Max Reyes | max.reyes@9fin.com, Kartikeya Dar | kartik@9fin.com and Larry Feldman | larry@9fin.com

This week’s news

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.

WW International — 9fin reported this 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.

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.

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.

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.

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. 9fin reported exclusively on the legal advisor used by the company to launch the deal.

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.

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.

CommScope — Unsecured lenders to the struggling telecommunications infrastructure company were reportedto 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.

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.

Jo-Ann Stores — The arts and crafts retailer added Pamela Corrie — a seasoned restructuring professional and independent director — to its board, after it was reported to be planning for an imminent bankruptcy filing. 9fin had previously reported that its talks with existing lenders on additional funds may become challenging because of restrictions in its ABL agreement.

Lumen — The telecom company finally commenced a consent solicitation to implement the terms of an improved transaction support agreement. The proposed restructuring 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.

Robertshaw — Invesco responded to the adversary complaint by the company against it, while the company and the ad hoc group of lenders are seeking discovery from Invesco. Invesco has previously accused Robertshaw’s lenders and its financial sponsor of attempting to “weaponize the bankruptcy process” by using a DIP financing proposal to legitimize a disputed pre-petition transaction.

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.

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.

Incora — Testimony in the Incora adversary trial this week offered a look at a financing plan proposed by a lenders seeking to head off the March 2022 uptiering transaction the company ultimately engaged in. Meanwhile, the plan confirmation hearing was again pushed, this time to 17 April.

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.

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.

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.

Equinox — The luxury fitness chain has lined up roughly $1.8bn in new money led by Sixth Street and Silver Laketo 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.

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.

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 bondsdue 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.

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.

Weekly declines

Top bond movers (link to full screener on 9fin)

Top loan movers (link to full screener on 9fin)

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