NITROcrete LLC
CASE SUMMARY: NITROcrete Seeks to Reorganize or Sell Assets, Says Chapter 11 is the Best Path to Survive Off-Season, Shed Legacy Debts
Fri 11/19/2021 12:02 PM
Relevant Documents:
Voluntary Petition
First Day Declaration
Cash Collateral Motion
NITROcrete LLC, a Fort Collins, Colo.-based technology and services provider to the concrete and construction materials industry, filed for chapter 11 protection on Thursday, Nov. 17, in the Bankruptcy Court for the District of Colorado. In the first day declaration of NITROcrete CFO Kathleen Walton, the company says it “believes it has a strong opportunity to reorganize or sell as a going concern.” The “short-term, however, presents a challenge,” Walton continues, adding that “Chapter 11 represents the best path for Debtor to survive the off-season, keep its workforce employed, shed certain legacy debts through contract rejection under the Bankruptcy Code, and continue to provide high-quality services to its concrete industry customers.”
The first day hearing has yet to be scheduled.
The company reports $1 million to $10 million in assets and $10 million to $50 million in liabilities. The company’s prepetition capital structure includes:
In 2020, the debtors and several affiliated entities, collectively the debtors, partnered with Mantucket Capital, who acquired a controlling equity stake in the business for $15 million. “Following the disappointing 2020 season, needing additional capital, the Nitro Debtors obtained interim subordinated debt financing from Drew Nelson, the Founder and Executive Chairman of the Nitro Debtors, and several related parties in early 2021 to allow the Nitro Debtors to continue to pay down some bank debt, cover operating expenses and invest in planned growth expansion,” the debtors add.
The debtors are represented by Markus Williams Young & Hunsicker in Denver as counsel, Cordes & Company as financial advisor and SSG Advisors as investment banker. The case has been assigned to Judge Kimberley H. Tyson (case no. 21-15739).
Events Leading to the Bankruptcy Filing / Prepetition Restructuring Efforts
The company attributes the bankruptcy filing to business disruptions sparked by the Covid-19 pandemic, “onerous” legacy vendor obligations and “heavy” debt burdens, which have created an “untenable liquidity situation.” In addition, the debtors say that an “unseasonably cool season” in certain geographies this past summer has compromised their ability to survive the spring season.
Prepetition, the company negotiated a surrender of possession agreement at its previous headquarters and entered into a new and more affordable month-to-month lease for office space and a one-year lease for warehousing. This has reduced costs and “will provide additional cash available throughout the bankruptcy process,” the debtors say. The company has also “significantly reduced” its workforce and has been in “regular discussions” with Vectra Bank in an effort to address its distressed lending relationship with the lender.
Vectra has offered various proposals to the debtors’ majority investor, but “no resolution could be reached.” Consequently, it became evident that absent further capital infusions, the liquidity situation and legacy contract debt “would worsen.” Beginning in October 2021, without any definitive proposals for an acquisition, merger or financing, the debtors began to focus more on restructuring alternatives and a potential sale in bankruptcy, but these efforts did not result in any viable financing or acquisition alternatives.
Background
NITROcrete is a technology services provider for the concrete and construction materials industry. The company is headquartered in Fort Collins, Colo., and has 30 employees. NITROcrete designs and supplies equipment and technology products for the automation of a liquid nitrogen application process that is used to control concrete mix and temperature. This NITROcrete technology is used by domestic and global concrete companies to manage concrete mix temperature for large-scale commercial projects, including skyscrapers and civil construction products such as bridges and dams. The debtors have expanded their service to more than 30 customers in the U.S. and Canada and offer services through two non-debtor subsidiaries in Mexico and Brazil.
The debtors’ revenue model is based on subsidizing the initial cost of installation of its technology, which provides ongoing revenue for delivery or usage of liquid nitrogen by customers without additional meaningful investment.
“Though 2020 saw a decrease in customer demand for concrete cooling due to the unprecedented Covid-19-related work stoppages and project delays,” the debtors and their non-debtor subsidiaries maintained revenue of $12.1 million, a gross profit margin of 53.7% and net loss of $4.8 million. Through Sept. 30, 2021, the debtors and their non-debtor subsidiaries had revenue of $11.9 million and a net loss of $3.3 million.
NITROcrete’s corporate organizational structure is shown below:
The debtors' largest unsecured creditors are listed below:
Cash Collateral Motion
The debtors seek the use of cash collateral through Dec. 17 on an interim basis with the consent of prepetition senior secured lender Vectra. The company proposes the following adequate protection to Vectra: replacement liens (excluding avoidance actions and their proceeds), superpriority administrative expense claims (without recourse to avoidance action proceeds), financial reporting and maintenance of insurance.
The proposed budget for the use of cash collateral is HERE.
Motion to Implement KEIP / Motion to Implement KERP
The debtors seek to implement (a) a key employee incentive program and (b) a key employee retention program, each of which has been approved by the board and senior secured lender Vectra.
The KEIP bonuses would be carved out from either (1) the proceeds of an asset sale or (2) upon confirmation, as set forth in a plan of organization, amounts equal to the “Enterprise Value” of the reorganized company. The KEIP bonuses range from $91,250 among the three KEIP Insiders, representing 1.25% of an asset sale price or enterprise value of $7.3 million, to a total of $300,000, representing 2.5% of a final asset sale price or enterprise value of $12 million. If the final sales price or enterprise value is less than $7.3 million, then no KEIP bonuses would be paid out.
The KEIP bonuses would apply to three executive level staff members, as follows:
The KERP would apply to non-insiders, designed to retain employees needed for the continued operation of the company, and is as follows:
Other Motions
The debtors also filed various standard first day motions, including the following:
Voluntary Petition
First Day Declaration
Cash Collateral Motion
| Summary |
| NITROcrete provides services and technology for large-scale commercial and civil construction projects related the temperature control of concrete mix |
| Attributes bankruptcy to Covid-19-based business disruptions, “onerous” legacy vendor obligations and “heavy” debt burdens |
| Seeks to reorganize or sell assets as a going concern, with the case funded by the consensual use of cash collateral of prepetition first lien lender Vectra Bank |
NITROcrete LLC, a Fort Collins, Colo.-based technology and services provider to the concrete and construction materials industry, filed for chapter 11 protection on Thursday, Nov. 17, in the Bankruptcy Court for the District of Colorado. In the first day declaration of NITROcrete CFO Kathleen Walton, the company says it “believes it has a strong opportunity to reorganize or sell as a going concern.” The “short-term, however, presents a challenge,” Walton continues, adding that “Chapter 11 represents the best path for Debtor to survive the off-season, keep its workforce employed, shed certain legacy debts through contract rejection under the Bankruptcy Code, and continue to provide high-quality services to its concrete industry customers.”
The first day hearing has yet to be scheduled.
The company reports $1 million to $10 million in assets and $10 million to $50 million in liabilities. The company’s prepetition capital structure includes:
- Secured debt:
- Zions Bancorporation, N.A. dba Vectra Bank Colorado (first lien): $7.2 million plus interest
In 2020, the debtors and several affiliated entities, collectively the debtors, partnered with Mantucket Capital, who acquired a controlling equity stake in the business for $15 million. “Following the disappointing 2020 season, needing additional capital, the Nitro Debtors obtained interim subordinated debt financing from Drew Nelson, the Founder and Executive Chairman of the Nitro Debtors, and several related parties in early 2021 to allow the Nitro Debtors to continue to pay down some bank debt, cover operating expenses and invest in planned growth expansion,” the debtors add.
The debtors are represented by Markus Williams Young & Hunsicker in Denver as counsel, Cordes & Company as financial advisor and SSG Advisors as investment banker. The case has been assigned to Judge Kimberley H. Tyson (case no. 21-15739).
Events Leading to the Bankruptcy Filing / Prepetition Restructuring Efforts
The company attributes the bankruptcy filing to business disruptions sparked by the Covid-19 pandemic, “onerous” legacy vendor obligations and “heavy” debt burdens, which have created an “untenable liquidity situation.” In addition, the debtors say that an “unseasonably cool season” in certain geographies this past summer has compromised their ability to survive the spring season.
Prepetition, the company negotiated a surrender of possession agreement at its previous headquarters and entered into a new and more affordable month-to-month lease for office space and a one-year lease for warehousing. This has reduced costs and “will provide additional cash available throughout the bankruptcy process,” the debtors say. The company has also “significantly reduced” its workforce and has been in “regular discussions” with Vectra Bank in an effort to address its distressed lending relationship with the lender.
Vectra has offered various proposals to the debtors’ majority investor, but “no resolution could be reached.” Consequently, it became evident that absent further capital infusions, the liquidity situation and legacy contract debt “would worsen.” Beginning in October 2021, without any definitive proposals for an acquisition, merger or financing, the debtors began to focus more on restructuring alternatives and a potential sale in bankruptcy, but these efforts did not result in any viable financing or acquisition alternatives.
Background
NITROcrete is a technology services provider for the concrete and construction materials industry. The company is headquartered in Fort Collins, Colo., and has 30 employees. NITROcrete designs and supplies equipment and technology products for the automation of a liquid nitrogen application process that is used to control concrete mix and temperature. This NITROcrete technology is used by domestic and global concrete companies to manage concrete mix temperature for large-scale commercial projects, including skyscrapers and civil construction products such as bridges and dams. The debtors have expanded their service to more than 30 customers in the U.S. and Canada and offer services through two non-debtor subsidiaries in Mexico and Brazil.
The debtors’ revenue model is based on subsidizing the initial cost of installation of its technology, which provides ongoing revenue for delivery or usage of liquid nitrogen by customers without additional meaningful investment.
“Though 2020 saw a decrease in customer demand for concrete cooling due to the unprecedented Covid-19-related work stoppages and project delays,” the debtors and their non-debtor subsidiaries maintained revenue of $12.1 million, a gross profit margin of 53.7% and net loss of $4.8 million. Through Sept. 30, 2021, the debtors and their non-debtor subsidiaries had revenue of $11.9 million and a net loss of $3.3 million.
NITROcrete’s corporate organizational structure is shown below:
The debtors' largest unsecured creditors are listed below:
| 10 Largest Unsecured Creditors | ||
| Creditor | Location | Amount |
|---|---|---|
| Air Products and Chemicals Inc. | Charlotte, N.C. | 778,817 |
|
Linde |
Boston | 551,529 |
| Matheson Trigas | Dallas | 524,468 |
| Beitzel Corporation | Grantsville, Md. | 360,593 |
| Airgas USA LLC | Dallas | 313,397 |
| Ryan Wood | Loveland, Colo. | 152,783 |
| Linde Canada Inc. | Mississauga, Ontario | 121,467 |
| Vectra Bank | Denver | 114,324 |
| Ferus Inc. | Calgary, Alberta | 54,392 |
| Trident Transport LLC | Chattanooga, Tenn. | 37,577 |
The case representatives are as follows:
| Representatives | |||
| Role | Name | Firm | Location |
|---|---|---|---|
| Debtors' Counsel | James T. Markus | Markus
Williams Young & Hunsicker |
Denver |
| Matthew T. Faga | |||
| Zachary G. Sanderson | |||
| William G. Cross | |||
| Debtors' Financial
Advisor |
Michael Staheli | Cordes &
Company |
Greenwood Village, Colo. |
| Debtors' Investment
Banker |
Teresa C. Kohl | SSG Advisors | West Conshohocken, Pa. |
| U.S. Trustee | Robert S. Boughner | Office of the
U.S. Trustee |
Denver |
|
Debtors' Claims
Agent |
Tinamarie Feil | BMC Group | Hawthorne, Calif. |
Cash Collateral Motion
The debtors seek the use of cash collateral through Dec. 17 on an interim basis with the consent of prepetition senior secured lender Vectra. The company proposes the following adequate protection to Vectra: replacement liens (excluding avoidance actions and their proceeds), superpriority administrative expense claims (without recourse to avoidance action proceeds), financial reporting and maintenance of insurance.
The proposed budget for the use of cash collateral is HERE.
Motion to Implement KEIP / Motion to Implement KERP
The debtors seek to implement (a) a key employee incentive program and (b) a key employee retention program, each of which has been approved by the board and senior secured lender Vectra.
The KEIP bonuses would be carved out from either (1) the proceeds of an asset sale or (2) upon confirmation, as set forth in a plan of organization, amounts equal to the “Enterprise Value” of the reorganized company. The KEIP bonuses range from $91,250 among the three KEIP Insiders, representing 1.25% of an asset sale price or enterprise value of $7.3 million, to a total of $300,000, representing 2.5% of a final asset sale price or enterprise value of $12 million. If the final sales price or enterprise value is less than $7.3 million, then no KEIP bonuses would be paid out.
The KEIP bonuses would apply to three executive level staff members, as follows:
The KERP would apply to non-insiders, designed to retain employees needed for the continued operation of the company, and is as follows:
Other Motions
The debtors also filed various standard first day motions, including the following:
- Motion for joint administration; Order
- The cases will be jointly administered under case no. 21-15739.
- Motion to reject lease
- The debtors seek to reject a lease with Rocket Ship Properties, LLC as landlord for a building in Fort Collins, Colo. that previously served as the company’s principal place of business. The company defaulted under the lease and the parties entered into a surrender of possession agreement dated Nov. 1, through which NITROcrete provided $10,000 and was permitted to remain in possession through today. The debtor says it seeks to reject the lease to decrease expenses and has entered into a month-to-month lease at a “more affordable rate” and has moved into the new property to serve as its principal place of business.
- Motion to pay employee wages and benefits
- The debtors have $48,569 in prepetition wage obligations, including benefits and taxes.
- Application to employ Cordes & Company as financial advisor
- Application to employ SSG Advisors as investment banker
- Application to appoint BMC Group as claims agent
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