Financial Restructuring

Expert reporting and in-depth analysis on companies facing the need for financial restructuring with a focus on the complexities behind each restructuring situation

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: 

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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:

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Reorg on the Record; Spotlight on Asia
Fri Apr 16, 2021 1:26 pm Financial Restructuring

Written by Stephen Aldred, Managing Editor, Asia Core Credit || Indonesian textile company PT Sri Rejeki Isman Tbk’s (Sritex) restructuring will play out in an arena where the company has far narrower funding sources available. Sritex’s lenders are sounding the market to sell their holds. The company’s bonds are trading in the low to mid-30s and its unsecured loan debt is expected to price south of those marks.

Somewhat perversely, reduced funding sources may serve the company well, as increased scale has not improved Sritex’s operating efficiency. Sritex has generally seen a lengthening working capital cycle financed by debt, resulting in poor cash conversion despite higher reported earnings.

If Sritex de-prioritises growth and flatlines or reduce sales in the future, its working capital intensity could decrease, releasing cash towards debt-servicing (assuming limited impairments associated with its receivables – related party receivables have been growing, as has a growing stock of inventories). That could result in a more sustainable capital structure in the context of narrower sources of financing.  || Sign up for our weekly updates here.

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Reorg on the Record; The European primary market remains favorable

Written by Noor Sehur, Analyst Team Lead, EMEA Core Credit || The European primary market continues to remain favourable for new issuances. Reorg’s primary pipeline shows 36 companies with near-term maturities, 16 possible LBO deals and three deals from bolt-on acquisition financings which could take advantage of the attractive primary market. Recent deals with attractive pricing included Gatwick’s 4.375% 2026 bonds. The bonds were supported by the airport’s exposure to short haul flights, and equity cushion despite continued travel demand uncertainty. Advanz Pharma’s 2028 bonds also offered a premium to comparable bonds. Although most deals have priced tighter than original guidance in recent weeks, we have started to see pushback from investors on tighter margins. Douglas cut the €1.08 billion loan part of its debt package to €600 million while upsizing the SSNs to €1.305 billion from €1 billion and PIK notes to €475 million from €300 million, providing additional buffer to the secured debt investors. Pricing was also increased by 50 bps on the loan and the SSNs amid significant execution risks in the group’s transformation plan, near term cash burn and heavily adjusted EBITDA. In the loan market, margins widened on LGC Group‘s cov-lite term loan B, Idemia’s first lien term loan and Belron’s term loan B. || Sign up for our weekly updates 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. 

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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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Actico Sale Process Based on 2021 EBITDA
Tue Mar 30, 2021 3:46 pm Financial Restructuring  Leveraged Finance

Working with Raymond James as their financial advisor and a group of potential buyers, the Actico sale process is underway. With a projected EBITDA of €10M, Actico, who’s name was changed from Bosch Financial Software in 2015, could reach a potential valuation of €180M for the sale. The sale is expected to be supported by debt and with only minimal competition in the financial automation software sector it is attracting sponsors who are expected to carry out the due diligence. Also making this sale attractive to sponsors is the company’s consistent growth. Actico expects another 11% year-over-year growth for 2020, but with the impact of the coronavirus pandemic in the second and fourth quarters of 2020, there was a temporary weakening of business. Click through to read our full analysis of the situation as well as a full year, 2019 financial report for Actico: 

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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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Highlighting the Texas winter storm bankruptcies, Seadrill Partners’ amended plan and the Highpoint Resources chapter 11 plan, our Americas Core Credit experts released a podcast last Friday where legal analyst Sean Daly discussed a few of the most prominent distressed debt, high-yield and bankruptcy stories from the previous week. 

The Seadrill Partners debtors filed an amended plan of disclosure statement on Thursday, March 18th, out of their March 23rd disclosure statement hearing, which contains new information regarding the estimated amount of claims for each class and projected recoveries under the plan including information not expressly detailed in the previous plan and disclosure statement. For Highpoint Resources, Judge Christopher Sontchi confirmed a prepackaged chapter 11 plan for the company just 5 days after the cases were filed in the US Bankruptcy Court for the District of Delaware. Highpoint Resources’ debtors filed chapter 11 to effectuate a merger under a transaction support agreement with Bonanza Creek Energy. Finally, developments related to last month’s winter storm in Texas continue. Gritty Energy filed for chapter 11 bankruptcy on March 15 and Brazos Electric was appointed with a 5 member committee of unsecured creditors which selected Kramer Levin as counsel. Click through to listen to the full podcast on Spotify, Soundcloud or Apple Podcasts.

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Reorg on the Record; Greensill, Nordic Aviation Capital and Success for Open Justice in the English Courts
Thu Mar 18, 2021 5:00 pm Bankruptcy Filings  Financial Restructuring

The English courts have seen a busy start to the year with a number of new precedents that will impact debtors and creditors in a post-Brexit, post-Covid world, particularly those involved in new Part 26A restructuring plans. The Part 26A tool had its pan-European effectiveness curtailed by the judgment of Justice Zacaroli in Gategroup’s restructuring plan. The Gategroup decision means that Part 26A plans will not fall under the remit of the Lugano or Hague conventions, making automatic recognition in E.U. member states more difficult. In the scheme of MAB Leasing Ltd., Justice Zacaroli held that numerous different lease obligations could be placed in the same single creditor class. The MAB precedent on treatment of leases could see retail landlords placed in a single class for the purposes of a Part 26A plan and potentially “crammed down” – an alternative to the traditional company voluntary arrangement route. Elsewhere, following application to the English High Court, Reorg gained access to previously private witness statements filed in Global Ports Holdings’ scheme. The application was a success for the principle of open justice.
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