Distressed Debt

Highlights of our extensive coverage of stressed and distressed debt as well as bankruptcy filing analysis across the Americas, EMEA and APAC.

Tue Apr 20, 2021 5:34 pm Bankruptcy Filings  Distressed Debt

Highlighting our TECT Aerospace bankruptcy case summary, the First Day by Reorg team took a deep dive into the chapter 11 filing that occurred on Monday, April 12 discussing the company’s background and events leading up the the bankruptcy filing as well as the DIP financing motion, the motion for joint administration, the motion to use cash management system and other motions involved. 

The manufacturer of high precision components and assemblies for the aerospace industry took a hit when Boeing suspended the production of its 737 MAX airplane, Spirit AeroSystems put an end to their supply agreement with TECT and when the Covid-19 pandemic restricted travel across the globe. Debtors are hopeful that the chapter 11 filing will result in the sale of most of their assets and with $50 million to $100 million in assets and $100 million to $500 million in liabilities, the debtor’s prepetition capital structure includes secured debt, unsecured debt and equity. Click through to read our full TECT Aerospace bankruptcy case summary here: https://reorg.com/tect-bankruptcy-case-summary/ 

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KME Group Base Borrowing Facility Extension
Tue Apr 20, 2021 9:02 am Distressed Debt  High Yield Bonds

Reorg’s EMEA Core Credit team has published 19 updates so far this year on KME Group, one of the world’s largest copper producers. In its second-quarter call in October 2020, KME’s management guided that the extension to its borrowing base facility would be concluded in November 2020. By mid-December 2020, the company said it had received extension commitments from 51% of its lenders. At the start of January this year, Reorg reported that the company had obtained the approval of over 70% of its lenders.

The delay in the extension of the facility was due to some lenders’ concern about the sharp rise in copper price, which translates into increased funding requirements for the company, sources said. The implications of rising copper prices on the group’s funding is something that Reorg previously highlighted, especially in the context of reduced working capital funding following the termination of the MKM borrowing base facility.

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Reorg Webinar Series: REIT Chapter 11 Filings and Out-of-Court Solutions

Discussing REIT chapter 11 filings and out-of-court restructurings and financings that certain REITs are using to avoid bankruptcies, our Americas Core Credit experts Mark Fischer, Kevin Eckhardt and Wing Li will be conducting a webinar on Friday, April 23 at 11:00am ET to help provide further transparency on the industry. Our team will be discussing certain REIT subsectors and how companies have restructured capital structures in light of reduced revenue caused by the Covid-19 pandemic. Mall REITs CBL and Pennsylvania REIT have each sought chapter 11 protection, and Washington Prime Group has warned of a possible chapter 11. However, hotel REITs Ashford Hospitality and Hersha Hospitality have so far avoided bankruptcy by securing out of court financing and selling assets, respectively. 

Our coverage team will discuss potential reasons why certain REITs have avoided bankruptcy and how REITs have used the bankruptcy process to fix their balance sheets. Register for the webinar here: https://reorg.zoom.us/webinar/register/3916178217068/WN_4xpg5cR6RpyNPFajhvpKUQ 

If you’re already a subscriber, you can view our ever-expanding coverage of REITs here: https://bit.ly/3edVMRF

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China Fortune Land Development has appointed Dentons and KPMG
Fri Apr 16, 2021 1:31 pm Distressed Debt  Financial Restructuring

The onshore creditors’ committee of industrial park developer China Fortune Land Development, or CFLD, has appointed Dentons and KPMG as its legal and financial advisors, respectively, which began due diligence on April 1, two creditor sources said citing the first creditor committee meeting held yesterday, April 7. The meeting was attended by CFLD CFO Wu Zhongbin, committee co-chairs Ping An Asset Management and ICBC, the two advisors and other committee members, according to the sources. Click through to request trial access: http://ow.ly/ro6550Emwb9

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2021 Leveraged Loan Market Trends; MFNs, PetSmart, Lien Amendments

More recently than ever, the success rates for lenders to push back against terms in their agreements or to push for the inclusion of others have increased. 2021 leveraged loan market trends have taken a turn to benefit lenders, plus some terms that used to be considered aggressive are becoming more and more familiar in these amendments. Our Americas Covenants team analyzes and reviews some of the most prominent 2021 leveraged loan market trends emphasizing the fact that these are exceptions to the rule. 

First, the team discusses the most favored nations (MFN) protection where lenders have been trying to break down the strength of this protection agreement in terms of pricing differences, length and scope. Next, our Americas Covenants team takes a look at the anti-PetSmart guarantor protections where guarantors and liens on assets could be released in an easy manner creating credit agreement provisions that include the block of the release of guarantors. Further in the article, our team discusses provisions to erroneous payments as a result of the Revlon and Citibank mistaken wire transfer, transfers to unrestricted subsidiaries, and a few other provisions that are becoming increasingly more common including earlier maturing debt, debt using restricted payment capacity and more. Read our Americas Covenants team’s full analysis of the 2021 leveraged loan market trends here: https://reorg.com/leveraged-loan-market-trends/

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Mon Apr 12, 2021 4:30 pm Distressed Debt  High Yield Bonds  Leveraged Finance

Rounding up and focusing our deep dive on the most prominent high yield and distressed litigation situations from the week of April 5, 2021, the Americas Core Credit team’s weekly podcast also takes a look at Hertz’s second amended plan of reorganization, Ferellgas’s lawsuit for their unpaid fees, and Intelsat’s Jackson crossover group and their debtors plans.

The Hertz debtors, on April 3rd, filed a second amended plan of reorganization in a company disclosure statement reflecting an “enhanced proposal from Centerbridge Partners, Warburg Pincus, and Dundet Capital Partners” to fund the company’s chapter 11 cases with their $1.6B rates offering, a $565M direct purchase of Hertz reorganized equity by Dundet, Centerbridge and Warburg, and a $385M preferred stock issuance to Centerbridge and Warburg. In a development of the Ferrellgas bankruptcy cases after the company emerged, Moelis Company, which serves as financial advisor, capital markets advisor and investment bankers to Ferrellgas LP and parent Ferrellgas Partners LP, sued the company for more than $20M in unpaid fees in connection with the parent company’s recent chapter 11 filing and Ferrellgas LP’s out of court restructuring. On Intelsat, their ad hoc parent entity convertible noteholder group and the Jackson crossover group objected to the debtor’s proposed 9 month extension of their exclusive periods to file and solicit votes on a chapter 11 plan. Click through to listen to the full podcast on Spotify, iTunes or SoundCloud for our discussion on Hertz, Ferrellgas, Intelsat as well as our deep dive on the prominent high yield and distressed litigation situations from the week of April 5, 2021.

If you are not a Reorg subscriber, request access here.

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Reorg Webinar Series: CFLD State of Play, Trading in Distressed Debt Through Creative Enforcement

Discussing China Fortune Land Development (CFLD) and their current state of play, Reorg’s managing editor for Asia, Shasha Dai, and Asia Core Credit senior credit analyst, James Shi, will be conducting a webinar on Wednesday, April 7, 2021 alongside Kobre Kim partner John Han. Our panel of experts will be taking a look at the state of trading in the distressed debt market through creative enforcement, plus the team will be diving deep into China Fortune Land Development’s event timeline from our initial coverage on the company in July 2019 when credit sensitive issues related to CFLD’s working capital were raised through to March 2021 when CFLD’s total overdue debt principal and interest reached RMB 37B. Our discussion will also include a review of the CFLD capital structure and their “two speed restructuring” process where the company plans to reach a debt restructuring agreement onshore first before CFLD addresses the offshore debt crisis. 

Register for the webinar here: https://reorg.zoom.us/webinar/register/8016160136487/WN_IR7TI9PNTxyngNCfbVVkug 

If you’re already a subscriber, you can view our ever-expanding coverage of the China Fortune Land Development situation here: https://app.reorg.com/v3#/dashboard/8185

If you’re not already a subscriber request a trial here: https://reorg.com/trial  

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After a conference call with investors on March 26, Yuzhou Management has assured its group of investors that their cash flow and balance sheets remain strong even though the company predicted a 94% year-over-year decline for their 2020 fiscal year. The company’s offshore notes fell deeply on the morning of the call creating obvious concern for investors, but management reassured investors by explaining that short sellers were dispersing false information. However, Youzhou can not comment further on the status of this information until their annual results are officially released on March 30. 

The Covid-19 pandemic resulted in low selling prices and the delay of development and delivery of property projects in 2020 for Yuhou impacting their cash flow and profit, but the company expects dividend payments to remain on par with 2019. Click through to read our Asia Core Credit team’s analysis of the call including a detailed examination of the company’s corporate bonds and senior notes as well as Yuzhou’s capital structure: ADD LINK

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Chapter 11 Filing Activity for March 2021
Wed Mar 31, 2021 8:25 pm Bankruptcy Filings  Distressed Debt

Written by Ian Howland, Research and Data Analyst, First Day ||

After a tepid start for chapter 11 filing activity during the first two months of 2021, spring has sprung some liveliness filing activity, as March’s count rose to 34, representing a 36% increase from February’s level and and a 79% increase from January, which was one of our slowest months on record. With one day left in the month, March’s numbers are down 5.6% from March 2020 and 12.8% from March 2019.

While January and February captured low filing counts by month-end across all sectors this year, they resembled some of 2020’s busiest months with respect to consumer discretionary and real estate filings, which represented a combined 64% of all chapter 11’s over the same period. Not only did the filing frequency increase significantly in March, the month’s filing set is also much more diverse, led by the communication services and real estate sectors with six cases each, followed by consumer discretionary with five, financials with four and each of the energy, healthcare and utilities sectors with three.

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Featuring a discussion on a force majeure dispute following the Texas winter storm, CBL Property’s amended RSA, Seadrill Partners’ disclosure statement approval and a deep dive into Argentine oil company YPF’s state of play after their liability management exercise, our Americas Core Credit weekly podcast breaks down the most important stories from the week of March 22nd, 2021. 

In terms of the force majeure dispute following Texas winter storm Uri, our team discussed the applicability of these clauses in power hedging agreements and how they could dictate legal strategies taken by Texas electricity generation projects facing high bills from financial institution hedge counterparties. Our team takes a look specifically at Canadian Breaks, a large wind farm in the Texas panhandle, after they filed a petition against J.P. Morgan when the bank presented the wind farm with a $79M bill for power purchased during the storm. 

On CBL Properties, our experts discuss the debtors filing of an amended restructuring support agreement which resolved their disputes with prepetition lenders and agent Wells Fargo paving the way for a potentially consensual restructuring of the mall REIT’s funded debt. Discussing Seadrill Partners, our team broke down the disclosure statement as well as Judge David Jones’ approval of this statement on a conditional basis after counsel announced significant progress on a global settlement with Seadrill Limited.  

Finally, Kyle Owusu, Director of Emerging Markets Credit, took a deep dive into Argentine oil company YPF and their current state of play after their liability management exercise. The company’s new 2029 and 2033 bonds, which were issued as part of the company’s February liability management exercise, are being offered at around 58, 50, and 48 respectively according to advisers. Click through to listen to the full episode on Spotify, Soundcloud or Apple Podcasts.

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