Tag Archives: Bankruptcy reorganizations

CFO leaves as Houston retailer files for bankruptcy

Stage Stores has filed for Chapter 11 bankruptcy. It will simultaneously solicit bids for a going concern basis and initiate an orderly wind-down of operations.



CFO Jason Curtis is leaving the company to take a position with another retailer, effective May 22, 2020. CEO Michael Glazer will oversee the finance function. The company has also retained Rick Stasyszen to assist Mr Glazer. He previously served as the company’s Senior VP, Finance and Controller until May 2019.

The company operates 738 stores in 42 states. Historically, the company operated department stores under the names of Bealls, Goody’s, Palais Royal and Peebles. It was in the process of converting all its stores to the Gordman’s off-price brand.

All its stores closed on March 27, 2020 due to COVID-19. The company anticipates that approximately 557 stores will open on May 15. A second phase of approximately 67 stores will open on May 28 with the balance on June 4.

The company has been struggling for a few years. It last made an operating profit in 2015 and the coronavirus was the last straw.

As of February 2019, the company had 13,600 full-time and part-time employees.

https://www.businesswire.com/news/home/20200510005033/en/

Houston drilling contractor files for bankruptcy

Diamond Offshore has filed for Chapter 11 bankruptcy. The company operates 15 offshore drilling rigs and employs around 2,500. It has its head office in west Houston.



The company has made operating losses in four of the last five years. The company listed assets of $5.8 billion and debts of $2.6 billion in its Chapter 11 filing. The debt includes approximately $2 billion of senior notes owed to bondholders. The company will use its $435 million cash on hand to fund its operations while in bankruptcy.

Loews Corporation, a publicly-traded company whose primary business is insurance, owns 53% of Diamond. They will take a significant write-down on their $1.5 billion investment.

The Board of Directors of Diamond has decided to accelerate vesting of cash awards for 2018 and 2019 performance. Normally the awards would vest over three years. In order to retain key employees during bankruptcy, the Board has paid CEO Marc Edwards $1.75 million. Other members of the management team got between $140,000 and $261,000.

Between now and end of the first quarter of 2021, nine key employees will receive quarterly cash bonuses, subject to meeting certain performance targets. The target bonus for the CEO is $5 million. The target for the CFO Scott Kornblau is $555,000. The three performance targets are average rig efficiency, lost time incidents and reduction in overhead expenses.

On April 15, the company notified the Texas Workforce Commission that it intended to lay off 102 from its corporate office.

SEC filing

Houston E&P company files for bankruptcy

Yuma Energy has filed for bankruptcy. It becomes the first publicly-traded Houston-based E&P company to file since the recent oil price crash.

The company has its head office in the Galleria area. Historically operations were focused on SE Texas and Louisiana, though it does have some acreage in the Permian basin.  For the nine months ended September 30, it had revenues of only $7 million and a net loss of $6 million (ignoring impairments).

The company intends to liquidate its assets within 90 days.

The company has been struggling for some time. Eighteen months ago, it hired an investment banking firm to advise the company of strategic alternatives. In March 2019, it hired Anthony Schnur as its Chief Restructuring Officer and interim CEO.

In September 2019, the company thought they had found a solution when Red Mountain Capital Partners bought the outstanding debt of $35 million with the intent of converting most of the debt to common stock. Unfortunately, the stock conversion piece of the deal unraveled in March as the deterioration in market conditions caused Yuma to breach its covenants.

Anthony Schnur resigned from his positions with the company. He recently joined Ankura Consulting Group, who were promptly hired by the company as its financial advisor!

https://www.prnewswire.com/news-releases/yuma-energy-inc-files-for-chapter-11-protection-301041610.html

Houston luxury realtor files for bankruptcy protection

John Daugherty Realtors has filed for bankruptcy protection. This follows a dispute with its landlord over the rent for its corporate offices at 520 Post Oak Boulevard.



Historically the company has handled many of the priciest single-family home sales in Houston. However it suffered a blow in early December when two of its top agents, Laura Sweeney and Lisa Kornhauser, left for Compass, a rival real estate brokerage. Sweeney was ranked number 1 on the Houston Business Journal’s 2019 list of Top Residential Real Estate Agents by Sales volume. Kornhauser was ranked number 4. The pair generated almost 20% of the sales volume at John Daugherty Realtors.

A week after their departure, the company announced it would be acquired by New York firm, Douglas Elliman, which has its Houston offices on Kirby Drive in the River Oaks area. The potential merger appears to have triggered the dispute.

The landlord at 520 Post Oak Boulevard, Griffin Partners, alleges that John Daugherty Realtors has breached its contract as it wants to get out of its lease (which runs to 2027) so that it can move into the offices on Kirby Drive.

The deal for Douglas Elliman to acquire John Daugherty Realtors has now collapsed. However Mr Daugherty himself and the remaining team are still expected to join the New York firm.

John Daugherty Realtors has denied the allegations made by Griffin Partners.

The company filed for Chapter 11 bankruptcy on February 27. Since then it has filed motions to pay its real estate agents outstanding commissions and to terminate its leases at both Post Oak Boulevard and its office in The Woodlands.

Griffin – Complaint v Daugherty

Chapter 11 filing

McDermott files for bankruptcy – Management cashes in

Photo: Nandu Chitnis

McDermott International has filed for a pre-packaged Chapter 11 bankruptcy after months of deteriorating business prospects.



The key highlights of the restructuring are;

  • elimination of $4.6 billion of debt. The secured lenders will get 94% of the new equity, unsecured bondholders the remaining 6%.
  • Unsecured trade creditors will be paid in full
  • Existing shareholders are wiped out
  • Lummus to be sold for $2.725 billion

However, worry not, the senior management have looked after themselves. Back in October McDermott announced they had obtained $1.7 billion in additional new financing (at 12% interest rates).

At the same time, the senior management were awarded large retention bonuses. David Dickson, CEO, got $3.375 million. Samik Mukherjee, COO (the one who acknowledged taking TechnipFMC trade secrets) got $1.4 million. The funding and the bonuses were to be paid in tranches. So far, two-thirds of the bonus have already been paid out. The Board of Directors have decided to pay the remaining one third to Dickson and Mukherjee as a gesture of ‘good faith’ even though Tranche C of that financing agreement never got paid.

CFO Stuart Spence resigned in November. He got to keep all his retention bonus of $1.3 million.

Business prospects have deteriorated considerably in the second half of 2019 due to the uncertainties surrounding the company. Bookings were only $3 billion in the second half, versus $14 billion in the first half. Customers have canceled contracts or placed McDermott on the disqualified to bid list. Vendors have placed liens and withdrawn from job sites.

 

https://www.prnewswire.com/news-releases/mcdermott-international-inc-announces-comprehensive-prepackaged-restructuring-transaction-to-de-lever-balance-sheet-and-immediately-position-company-for-long-term-growth-300990241.html

Weatherford exits bankruptcy protection

Weatherford International has completed its financial restructuring and emerged from Chapter 11 bankruptcy protection.



The company entered into Chapter 11 at the beginning of July. The reorganization reduced overall debt by $6.2 billion (from $8.3 billion at filing). In return, the bondholders will own 94% of the restructured company. 5% has been set aside for a management incentive plan. Existing shareholders will own the other 1%.

Initially the company’s shares will trade over-the-counter. However it plans to list on the NYSE by the end of March, after it has reported its fourth quarter results and completes its fresh start accounting.

The company is the fourth largest oilfield service company but hasn’t made a profit since 2011

In November, Weatherford appointed Christian Garcia as its new CFO. He doesn’t start his new job until January 6, 2020.

In late November, William Macaulay, Chairman of the Board, died aged 74. He had been on the board since 1998 and had been Chair since March 2017 when Mark McCollum was appointed CEO. Thomas Bates has been appointed as the new Chairman.

https://www.weatherford.com/en/about-us/newsroom/media-releases/weatherford-successfully-completes-financial-restructuring/

 

Oilfield Services company misses interest payment as bankruptcy looms

Photo by Joshua Doubek

[Update 11-27-19:  Shares have now been delisted because the market cap has been below $15 million for 30 days]

Key Energy Services has announced that it has engaged Moelis & Company as its financial advisor and Sullivan & Cromwell as its legal advisor to analyze various strategic alternatives. The company also elected not to pay interest on its $250 million term loan. The interest was due October 18, 2019. This caused a default on the loan.



On October 29, the company entered into forbearance agreements with its lenders in which the lenders agreed not to exercise any rights related to the loan default until the earlier of December 6, 2019 or the occurrence of certain early termination events.

Key operates the largest well service rig fleet in the US. It also provides fishing and rental tools, coiled tubing and fluid management services. It is based in downtown Houston.

For the six months ended June 30, 2019, the company had revenues of $222 million and a net loss of $42 million. At that date, it only had $6 million in equity.

2016 Bankruptcy

Key entered into a pre-packaged bankruptcy agreement in October 2016. As part of that deal, its $1 billion of debt was reduced to $250 million (due in December 2021). The term loan had an average interest rate during 2018 of 12.42%. No wonder the company is seeking strategic alternatives!

Big loss for Platinum Equity

$338 million of the original debt was owned by Platinum Equity, a large PE firm based in Beverley Hills. After the restructuring, Platinum ended up with 50% of the equity of Key. After emerging from Chapter 11, the total equity of the company was valued at $252 million. The current market capitalization is $10 million (47 cents per share). So Platinum is sitting on a big loss. Even their $2.75 million annual advisory fees are now in jeopardy. Platinum subsequently acquired $30 million of the term loan so they will have some say in the restructuring.

Goldman Sachs stake

Back in May, Goldman Sachs disclosed it owned 1.5 million shares, or 7.5% of the company. The shares were acquired between February and April 2019. At the time Goldman said it planned to engage with Key’s management and board to discuss issues including corporate structure, board compensation, dividend policy and transactions such as asset sales or mergers “as a means of enhancing stockholder value”. In June, Goldman disclosed it had reduced its stake to 4.4%.

Robert Drummond, the CEO at the time of the bankruptcy, left in May 2018 to become the CEO of Keane Group. They have just merged with C&J Energy Services. Later that year, Key tried to merge, in an all-stock deal with Basic Energy of Dallas. Basic rejected the merger offer.

SEC Filing – Key Energy loan default

Charming Charlie files for bankruptcy – to close all stores

Social Woodlands

Houston-based retailer, Charming Charlie, has filed for bankruptcy protection for the second time in 19 months. This time it intends to close all remaining 261 stores by the end of August.

In its Chapter 11 filing, the company listed assets of less than $50,000 and liabilities of between $50 million and $100 million.



The company has more than 3,300 employees. It has suspended online sales and the issuance of new gift cards. According to the Wall Street Journal, the company has $19.8 million in gift cards outstanding. It is seeking court approval to honor gift cards for 30 days.

Bankruptcy in 2017

The company was founded in 2004 by Charlie Chanaratsopon (then aged 26) and was backed by PE firms, TSG Consumer Partners and Hancock Park Associates.

It originally filed for Chapter 11 in December 2017 and exited in April 2018. During that process, the company closed 100 stores. Before the original bankruptcy filing, the company had $154 million of debt. It exited with $50 million in term loans and a $35 million credit facility.

Mr Chanaratsopon stepped down as CEO in October 2017 to be replaced by Lana Krauter. The current CFO is Al Bellon, who was appointed to the role in April 2019. He originally joined the company as Assistant Controller in December 2014.

Current creditors

After the conversion of debt to equity, the company’s major shareholder is THL Credit. They still hold about $25 million of the remaining term loans. They also have a commitment of $8.3 million in vendor financing.

Major unsecured creditors include the professional firms of Guggenheim Securities ($2.1 million), FTI Consulting ($850,000), Paul, Weiss, Rifkind, Wharton & Garrison ($637,000) and BDO ($325,000).

Law firms Paul Hastings LLP and Klehr Harrison Harvey Branzburg LLP are handling the chapter 11 proceedings. Clear Thinking Group LLC is the restructuring adviser.

Charming Charlie Chapter 11 filing

 

Weatherford to file for bankruptcy (this time really)

Back on May 10, Weatherford International disclosed that it intended to file for bankruptcy. However the company didn’t actually file as it worked to get an agreement on a pre-packaged bankruptcy deal.

Now the time has come. The company today announced that it intends to file for Chapter 11 by July 1, 2019.

Soon after the announcement in May, the NYSE told the company that it intended to de-list the shares. Proceedings are underway, through trading is currently suspended by the NYSE (last share price 5 cents).

If you are feeling sorry for the senior management, don’t! They have looked after themselves. See my blog post Weatherford gives retention and quarterly cash bonuses to Senior Execs. These bonuses survive the bankruptcy filing.



In May, the company said it had entered into a Restructuring Support Agreement (RSA) with approximately 62% of the company’s unsecured loan note holders. Since then, the percentage has increased to 79%.

Interest default

The trigger for the filing now is that the company elected not to pay $68.8 million of interest on $1.7 billion of the notes. The interest payment was due June 15, 2019. The company has a 30-day grace period (i.e. July 16, 2019) before it is technically in default. At that point, those note holders would have the option to accelerate maturity of the principal, plus any accrued and unpaid interest.

Restructuring Terms

As a reminder, under the RSA, the company expects that

  • $7.4 billion of existing unsecured notes will be exchanged for 99% of the common stock of the reorganized company and $1.25 billion of new unsecured tranche B notes. Holders of the unsecured notes will have the option to convert up to $500 million of the tranche B notes to equity.
  • existing secured debt and unsecured credit facility ($1 billion) will be repaid in full
    all trade claims against the company will be paid in full.
  • existing equity will be cancelled and exchanged for 1% of the new common stock and three year warrants to purchase 10% of the new common stock.
  • two debtor-in-possession (DIP) facilities will be entered into. One for a $750 million revolving credit facility, the other a term loan for $1 billion, backed by the note holders.
  • once the company exits bankruptcy, the DIP facilities will be replaced by a $1 billion revolving credit facility and $1.25 billion new tranche A senior unsecured notes.

SEC filing

Bristow Group files for bankruptcy

Bristow Group, which provides helicopter services, has filed for Chapter 11 bankruptcy. This comes less than 24 hours after another Houston company, Weatherford International said it intends to file for bankruptcy.

Bristow said that its US subsidiaries and two of its Cayman Islands subsidiaries are included in the Chapter 11 filings. Its other non-US entities are not included.



Certain senior secured noteholders made a $75 million term loan to the company prior to the filing and provided a commitment for a further $75 million in debtor-in-possession (“DIP”) financing.

Earlier this week, I wrote that 9 senior executives, including the newly-installed CEO and CFO were paid large cash retention bonuses.

The company hasn’t filed a quarterly return since September 2018 as the company found material weaknesses in its internal controls. It had obtained waivers of default but the company elected not to make a $12.5 million interest payment in April on its senior loan notes. This means that waivers expired. In an April 12 filing, the company stated it had $202 million in liquidity.

Bristow has debt of around $1.5 billion. The senior note holders are owed $895 million while the banks and financial institutions are owed $580 million.  The company had assets of $2.86 billion at September 30, 2018.

No details yet on the terms of the restructuring.

Alvarez & Marsal is serving as the company’s restructuring advisor. Houlihan Lokey is serving as the financial advisor to the company.

On Friday, the shares closed at 29 cents (market cap $10 million).

Press release

https://cases.primeclerk.com/Bristow/Home-Index