The Default Notice — Over the top

9fin team

27 September 2024•23 min read

Welcome to 9fin’s weekly newsletter dedicated to US distressed debt, restructuring and special situations news and developments. Check out what else we do for distressed and restructuring here.

Top news

For the sophisticated distressed investing hedge fund giants, they’ll be the first to tell you that since 2020, they’ve been hunting situations where they weren’t an existing lender but could come in and provide third-party capital with extremely tight covenants and juicy pricing and fees that primed other lenders through some clever LME. These opportunities created enormous risk-adjusted returns and also served to inspire (read: coerce) existing lenders to then accept a discount in the same or subsequent transactions.

Even when things went wrong, these loans would wind up money good: GoldenTree and Silver Point’s loan to Talen Energy in 2021 survived the bankruptcy with double digit returns in interest and fees in the settlement; Centerbridge and Angelo Gordon lending off of the Amsurg business in Envision Health cleaned up in the messy bankruptcy with a healthy return; Oaktree providing a double dip loan in Rayonier Advanced Materials; followed by innovative “pari plus” transactions with Oaktree and Centerbridge lending to Sabre; and Angelo Gordon, Oaktree and Apollo lending to Trinseo in 2023 — where in nearly all of these cases, the largest new money portion came from lenders without meaningful positions in the existing capital structure.

In 2024, not so much. Aside from Apollo’s priming loan secured off of Ardagh assets in an unsub (which included a potential exchange loan that has yet to be executed with unsecured creditors refusing to be hunted and gathered) and possibly Carestream Dental — there have been few if any instances of true third-party lenders successfully chosen to provide priming capital. Anecdotally, 9fin has heard that many of these usual suspects have obviously been the first calls of company advisors who are constructing an LME seeking proposals from third-parties (Apollo is on everyone’s speed dial and is reportedly in talks with Altice France to provide new debt). Yet the end result is almost assuredly using the third-party term sheets to hammer down existing lenders and then strike a deal with those existing lenders to capture more discount and more holistically address the capital structure.

United Site Services wrapped up its LME this week with existing lenders; American Rock Salt got a $115m new loan provided mainly by its existing first lien lenders; while SI Group performed an uptiering, capital raising transaction with its existing lenders.

Of course, existing is not to say original lenders. Obviously these same funds have been buying into these capital structures — say in Springs Window for example — and often times leading negotiations. But less and less it seems funds are able to simply come in over the top without those secondary purchases.

People Moves

If you have any recent moves to announce, please send to one of our team’s emails below to include in our People Moves section.

Paul Hastings added restructuring lawyer Charles Persons as a partner in Dallas from Sidley Austin.

This week’s news

Out-of-court

Bausch Health/Bausch + Lomb — Advisors to Bausch Health and its creditor groups are discussing ways to delever and take advantage of the potential sale of its 88% stake in Bausch + Lomb. Jefferies is understood to be working with the company on financing which, together with proceeds from the stake sale, could help address near-term maturities.

Medical Properties Trust — 9fin published a deep-dive report on the troubled US-based healthcare REIT embroiled in the Steward bankruptcy. The report explores MPT’s aggressive nine-year expansion strategy that has seen it amass substantial balance sheet assets, which are now under scrutiny as a result of questionable financings or transactions and the financial distress of some key tenants.

New Fortress Energy — The LNG company is gauging investors’ interest in providing new money to tackle its upcoming debt wall. As reported, NFE engaged Morgan Stanley while certain bondholders have organized with Perella Weinberg Partners. We look at the company’s options for tackling its near-term maturities here.

WW International — The weight management company has added PJT Partners to its advisory roster to help address its debt amid an operational turnaround, while a group of creditors previously organized with Gibson Dunn and under a cooperation agreement has added Houlihan Lokey as an advisor. 9fin had also reported earlier that the company is seeking advice from Simpson Thacher.

24 Hour Fitness — The fitness chain is working with Piper Sandler to explore strategic and refinancing options ahead of $300m in debt coming due 2025.

American Rock Salt — The salt company has lined up a $115m new loan provided by its existing first lien lenders and support from its family owners, just as its extended grace period on a missed interest payment came to an end.

EW Scripps — The CEO of the broadcasting company penned a note to staff stating that the company will cut jobs as its news operation moves to digital-only coverage in mid-November. This comes as the company faces $1.26bn in upcoming debt maturities. Scripps’ shares and longer-dated bonds bid up on the news, and stock rallied.

Altice France — Elliott Investment Management is not aligned with the rest of the French Telco’s secured creditor group’s plans to extend the co-op agreement until February 2026, sources told 9fin. This means the New York-based hedge fund would have the ability to provide its own proposal to Altice France after the final extension built into the co-op, which doesn’t require unanimous consent, expires in February 2025.

EchoStar/DISH Network — The company disclosed on 23 September that it had ended talks with the crossholder group advised by Milbank and Lazard on a new money deal and discounted exchange for notes issued by subsidiary DISH DBS, but it remains engaged with “various other parties” on possible financing transactions. This potentially paves the way for the two creditors groups holding DISH Networks’ convertible notes, or third parties, to negotiate a deal with the company. In parallel, an agreement on a DirecTV-DISH merger is reported to be close — this news saw DISH Network, DISH DBS and Hughes Network Systems bonds extend their rally this week.

Carestream Dental – The Atlanta-based healthcare company raised more than $525m of new money in a transaction that would help push out its debt wall and support its growth plans. The new financing includes a first lien term loan due 2030 led by the credit arm of General Atlantic. GA and Canyon Partners were among investors that took the bulk of the reorg equity.

MultiPlan — We have published a Legal QuickTake of the agreements governing MultiPlan’s revolver and term loan.

B. Riley Financial — The financial services company disclosed that it had repaid $86m of its term loan, terminated its revolver and amended its credit agreement with Nomura and others to hike (and part PIK) interest, commit to reducing the term loan to $100m or lower by September 2025 and introduce/amend leverage, interest coverage and liquidity maintenance covenants. Also, Kenny Young, company president and B. Riley Principal Investments CEO, resigned and was re-hired as a consultant. Last week, the company was reported to be in talks to sell its wealth management business to Stifel for over $100m.

Allen Media — Multiple groups of creditors to the media company, with secured lenders represented by Ducera Partners and Gibson Dunn and unsecured noteholders by Paul Weiss, were reported to have united under a single cooperation agreement. The company is reported to be planning deeper cost cuts as debt maturities near and has retained Moelis and Kirkland & Ellis as its legal advisors.

United Site Services — The Platinum Equity-backed portable toilet rental company announced that it had closed the LME it unveiled in August. The LME included $300m in new money with an apparent double dip structure, USS capturing over $200m of discount, and an issuance of $447m of first lien first-out debt, $1.779bn of second-out term loans and $194m of third-out notes, and an extension of the vast majority of the debt to 2030.

Viasat — The satellite operator closed an upsized offering of $1.975bn in 9% senior secured notes due 2029 by its Inmarsat subsidiaries, as competitor Starlink continues to sign up major airlines for its in-flight connectivity offering.

Sotheby’s — The Patrick Drahi-owned auction house, with its own non-Altice troubles, is reported to be set to use around $700m of $1bn contributed by Drahi and the Abu Dhabi Developmental Holding Company to pay down its debt.

Hawaiian Electric — The utility company raised nearly $500m (and potentially another $75m) through an equity offering aimed at raising cash to fund its contribution to the Maui wildfire litigation settlement. Earlier, Central Pacific was reported to be discussing raising $1bn from Warburg Pincus, Centerbridge Partners and Atlas Merchant Capital to buy American Savings Bank from the company.

Bankruptcy

Steward Health Care — The sale of Wadley Regional Medical Center was approved without any allocation of funds going to MPT. Additionally, the allocation of $17m of proceeds from the group of Massachusetts hospitals sold is still being disputed between Apollo and the FILO lenders with a hearing on the issue scheduled for Sunday. Separately, Steward’s CEO Ralph de la Torre was referred to the DOJ for a criminal contempt charge by a full senate vote this week for ignoring a senate subpoena.

Vertex Energy - Vertex commenced its Chapter 11 case with a restructuring support agreement signed by 100% of its term loan lenders and a $80m DIP facility and its first-day relief granted at an uncontested hearing. The company intends to move forward with a dual track plan — either via a recapitalization or a sale of all of the company’s assets.

Tupperware Brands — Tupperware secured short-term consensual use of cash collateral after agreeing to the terms of a bridge order with an ad hoc group of lenders. A hearing has been scheduled for 11 October that will address the ad hoc group’s motion to dismiss the case.

Avon International — Avon received approval of its DIP facility and bidding procedures, pending modifications to the orders requested by the judge. The company’s hearing on its 9019 motion for its settlement with Natura was pushed after the UCC filed a motion seeking the adjournment of same. Separately, at CDS auction on 24 September, protection holders of Avon Products CDSs secured a payout of 66 cents on the dollar after a second-half surge.

Incora — Incora and the other parties to the adversary proceeding reconvened for oral arguments on the 2024/2026 holders’ claim for tortious interference and to discuss the first lien lenders’ motion for mediation. Judge Marvin Isgur took the tortious interference claims under advisement, and the parties are still working to iron out the mediation process.

Red River Talc (J&J) — Red River Talc commenced its Chapter 11 case with a pre-packaged plan that includes a proposal for a $9bn trust to eliminate its third-party tort liability. At a contentious first-day hearing, the company secured a stay of all litigation until 11 October.

Purdue Pharma — Purdue secured an additional 35-day extension to its mediation process and preliminary injunction despite objections from certain creditors to the request.

SunPower — SunPower received interim approval of its disclosure statement, as well as approval of its bid procedures and a stalking horse APA at a relatively easy hearing, however, future issues relating to the scope of releases that will be addressed at a confirmation hearing, were previewed.

Other active distressed and restructuring coverage

Distressed Pitch List — In an update to our Distressed Pitch List, we added Goodyear, Melco Resorts & Entertainment, Optiv, PENN Entertainment and Chemours and removed New Fortress Energy, which will be a part of our regular coverage going forward.

Out-of-court

Alkegen — The insulation products manufacturer is nearing a debt deal to address its 2025 maturities with the help of new money lenders.

Altice International — After the company sold its first asset since announcing its strategic review and since Altice France’s ultimatum, listeners on the Q2 24 earnings call were keen to hear how the telco would apply the Teads sale proceeds. It’s fair to say management was slightly ambiguous. 9fin’s earnings review is available here.

Altice USA — 9fin explores the different options available to Altice USA and its creditors in our LME Breakdown.

AMC Entertainment — The 1L noteholders who were left out of the AMC’s recent LME have filed a complaint in New York State Court alleging AMC and its junior creditors violated the intercreditor agreement in effecting this transaction. We summarize the complaint here.

Anastasia Beverly Hills — Crossholders are in talks to renew a cooperation agreement set to expire in the near-term, following weaker than expected second quarter earnings. The creditor group has been seeking advice from Milbank and there has not been any engagement between the parties so far.

Beasley Broadcast Group — The company launched a combined exchange and tender offer targeting $267m in debt maturing in 2026. Holders can participate through a combination of a cash tender, exchange debt with equity, and a super-priority piece of paper.

Better Health (fka Physician Partners) — The healthcare provider and lenders hired advisors ahead of potential negotiations with the company and sponsor Kinderhook Industries.

Beyond Meat — The producer of plant-based meat substitutes is reported to have engaged with a group of convertible noteholders on a restructuring.

CareMax — The value-based healthcare provider is laying the groundwork for a potential bankruptcy filing.

CommScope — 9fin published an LME Breakdown 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.

Cox Media Group — A steering committee has kickstarted negotiations with Cox Media on ways to address its upcoming debt maturity.

Del Monte — The canned food company closed its deal to raise new money and exchange existing term loan debt into second and third out debt.

Drive DeVilbiss Healthcare — The CD&R-backed company has embarked on a sale process that could involve selling its assets piecemeal or as a single entity. Drive, which makes medical equipment, previously went through an out-of-court restructuring, in which the sponsor kicked in fresh cash and existing first and second lien lenders agreed to extend debt wall.

Emergent BioSolutions — The pharma company disclosed that it had raised a $250m first lien loan from Oak Hill to refinance debt due May 2025. The financing package gives Oak Hill $10m of common stock and warrants to purchase an additional 2.5m shares. The company’s stock declined 11% on the day.

EmployBridge — Certain lenders have organized 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.

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.

GPS Hospitality — The privately owned quick service restaurant franchisee disclosed poor quarterly numbers, and senior secured notes dropped 11 cents.

GrafTech International — Certain creditors have signed a cooperation agreement to bind their acts together in potential negotiations with the company.

Hearthside Food Solutions — The company reported Q2 24 earnings showing widening losses and warned that its ability to continue as a going concern depended on its efforts to address a raft of near-term debt maturities.

Hertz — The third circuit court of appeals issued a decision overturning the bankruptcy court to provide the unsecured noteholders postpetition interest at the contract rate, including a make whole.

iHeartMedia — iHeartMedia has yet to strike a deal with its largest creditor group.

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.

LifeScan — The Platinum Equity-backed medical device company reported year-over-year declines in revenue and EBITDA for the second quarter ending 30 June, but not by as much as the company had projected.

Lumen Technologies — The company’s early tender deadline for its most recent debt exchange closed with participation rates already approaching amounts required to reach its cap on new issues.

Mavenir Systems — Lenders are in confidential negotiations with the Texas-based software company as they try to find ways to increase its financial breathing room. The negotiations come after Mavenir entered into a brief grace period, which expired since, after skipping a coupon payment due in late August. Subsequently, some lenders were reported to have provided the company $35m in what appears to be stopgap financing to fund interest payments and fund working capital needs.

Michaels Stores — The Apollo-owned arts and craft retailer reported a more than 20% decline in Q2 EBITDA due to weaker sales and margin pressure, sparking its bonds to edge down.

ModivCare — The medical transportation provider revised its 2024 adjusted EBITDA guidance downwards primarily due to NEMT segment pricing accommodations made to strategically retain and expand key customer relationships, but also increased its forecast adjusted EBITDA growth to over 10% in 2025. ModivCare had earlier filed an S-3 as it looks to raise $200m of capital and amended financials to include a going concern warning in the midst of difficulties collecting on receivables.

OnTrac — Certain lenders of the package delivery company, formerly known as Lasership, are organizing with Gibson Dunn after it reported volume and earnings losses for Q2 2024, 9fin sources say.

Office Properties Income Trust — The company announced that it concluded a series of private exchange agreements, issuing common shares to retire $6.8m of its senior notes due 2025, chipping away at near term maturities remaining after a debt exchange concluded in June.

P&L Development — This private label drug maker is discussing potential refinancing options with lenders as its $465m in secured notes and ABL facility come due in 2025, 9fin sources say.

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.

Radiate Holdco (aka Astound Broadband) — The company has received a new $50m loan from its private equity backer Stonepeak. It has been exploring restructuring options with a group of lenders, but the talks fell apart over certain terms of the proposed debt swap and new money offer.

Salem Media — Certain debtholders have banded together to negotiate a possible debt restructuring with the conservative Christian media company.

Sandvine — The company announced that it has been acquired by a group of lenders to the company, who have agreed to a significant writeoff of their debt and to provide new capital.

Screenvision — Certain lenders of the Abry Partners-backed company have organized with Gibson Dunn to negotiate ahead of its $201.5m in loans that are set to mature in 2025.

Sinclair Broadcast Group — The company announced that it is increasing its advertising guidance for the third quarter 2024 to account for stronger-than-expected political revenues. Recent retransmission agreement renewal activity has been in-line with expectations and the company reiterated its earlier forecast for net trans growth rate from 2023 through 2025.

SI Group — The chemical additives company closed an LME with a majority of its existing creditors, including first lien term loan and revolver lenders, as well as unsecured noteholders, on board and its sponsor providing $100m of capital. A subsequent offer to exchange, on the same terms as the initial exchange transaction, has also commenced for the remaining creditors.

Spirit Airlines — The ultra low-cost carrier and its credit card processing agreement counterparty agreed to a month’s extension, with the new deadline 21 October, for the airline to refinance or extend a chunk of its secured notes due 2025. The company’s executives have had conversations with bondholders on upcoming maturities.

Springs Window Fashions — The Clearlake-backed window treatment company retained advisors 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 company rose 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 hiring advisors and agreeing to several funding deals.

TeamHealth — The healthcare staffing firm has completed its latest refinancing with the help of new money provided by firms including Ares, King Street, and its sponsor Blackstone.

Telegram — Convertible bonds issued by the messaging app company traded down around 11 points to the 85-87 cent range after founder and CEO, Pavel Durov, was arrested in France.

Telesat Canada — The Canadian satellite company posted expected declines in revenue, EBITDA and margins in Q2 24. Certain creditors were earlier reported to have hired advisors.

TGI Friday’s — The management of the restaurant chain is reported to have been replaced by FTI in relation to many day-to-day functions after the company failed to share certain documents with bondholders on time.

The Container Store — Certain lenders are getting legal advice as the retailer faces a term loan maturity in 2026 and an uncertain earnings trajectory.

Thrive Pet Care — The company hired a financial advisor to examine options for its debt stack, 9fin reported. Meanwhile, a group of first lien lenders has retained counsel as they brace for potential negotiations with the TSG Consumer Partners-backed company, sources said.

Tosca Services — The plastic crate maker got 100% of lenders to participate in a private exchange deal by the 22 August deadline. Previously, 9fin reported that Tosca launched a deal to raise $100m and to extend debt maturities via an uptier liability management exercise-style transaction.

Trinseo — Lenders to the chemical company have again banded together with Gibson Dunn and Evercore, in the midst of continuing underperformance, cash burn and high leverage. Trinseo had completed a double-dip financing deal in September 2023.

Tropicana — The beverage company’s loan slipped several points after its management projected flat full-year 2024 EBITDA on a 16 September call.

VeriFone — Lenders to the payment and commerce solutions company have organized as they prepare for negotiations ahead of the maturity of the company’s $250m revolver and over $2bn of term loans in 2025.

Veritas Technologies — 9fin reports on the Carlyle-backed data management firm and its creditor group attempting to revive restructuring talks, and on where the discussions stood when they stalled.

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”.

Volcan Compañía Minera — The Peruvian mining company completed its August announced exchange offer with 81% participation from lenders. The deal’s closure rounds out its greater restructuring efforts — including a refinancing of its bank debt — that will kick out debt maturities until 2029.

Wellness Pet Company — Certain lenders to the Clearlake Capital-backed company organized as the quotes on the company’s loans are veering deeper into distressed territory.

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 counsel and have taken pitches from bankers.

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.

Workhorse — The electric vehicle company rescheduled its Q2 earnings call and delayed filing its 10-Q. It 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 an investment bank to help raise bridge financing.

WorldStrides — Lenders to the student trip company have retained a financial advisor 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.

Zayo — Zayo was reported to have completed the carve-out of its European assets, with the parent receiving around $1bn in consideration through an intercompany loan and cash.

Bankruptcy

Big Lots — Big Lots commenced its Chapter 11 case on 9 September, backed by an agreement to sell all of its assets to Nexus Capital Management for $620m. The company received interim approval of its first-day motions at lengthy hearing.

Conn’s Inc — Final DIP approval was granted after the company was able to resolve numerous objections and reservation of rights, along with informal comments.

Diamond Sports — Diamond Sports received approval of the assumption of modified agreements with the NHL and NBA, as well as an amendment to the final DIP order. A status conference has been set for early October to keep all the parties informed as to the progress for the company to exit Chapter 11.

Digital Media Solutions — The company is Kirkland & Ellis’ first Chapter 11 case commenced in SDTX since 2023. The Chapter 11 is backed by a DIP facility and credit bid from certain of its prepetition lenders.

Enviva — The bankrupt wood pellet manufacturer filed its plan of reorganization and disclosure statement.

Express — The company’s disclosure statement hearing has been pushed to 29 October after the UCC objected to approval of the document and filed a cross-motion to terminate the debtors’ exclusivity.

Fisker — The defunct electric car maker received interim bankruptcy court approval of its disclosure statement and a global settlement for its Chapter 11 plan of liquidation.

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. 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.

Hoonigan (Wheel Pros) — The aftermarket wheel and vehicle product manufacturer and distributor filed for bankruptcy with an RSA in place, after having completed a double-dip financing last September. The debtors received all first day relief, have begun solicitation for their prepackaged plan, and are targeting confirmation mid-October.

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.

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 approved Robertshaw’s plan of liquidation and found that Invesco’s Proof of Claim related to the debtors’ breach of the credit agreement was an unsecured claim.

Rubio’s Restaurants — Rubio’s filed Chapter 11 bankruptcy in order to sell itself.

Vyaire Medical — Sales of the company’s ventilator business and respiratory diagnostic business were approved, with the final sale price being only $90.5m. The sale orders also amended the final DIP order, a necessary change required by the company’s DIP lenders to allow the sales to move forward despite falling short of the required $140m minimum bid for the combined business.

Yellow Corp — The court overseeing Yellow’s Chapter 11 case addressed dueling summary judgment motions from the company and the PBGC with respect to withdrawal liability, siding primarily with the PBGC and dealing a blow to Yellow.