Wed 09/12/2018 06:10 AM
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Checkout Holding Corp., aka Catalina Marketing, has indicated to its creditors that it has brought on a consultant who is expected to transition into the CEO role, according to sources. The identity of the individual has not been confirmed by Reorg but sources add that the consultant is a professional with executive experience, an extensive career in retail and a restructuring background.

Catalina disclosed to its employees on May 31 that Andy Heyman would be departing as CEO, as reported by Reorg that day; Heyman was appointed CEO in November 2016.

The company is currently in negotiations with advisors to its creditor constituencies regarding attempts to refinance the company’s debt outside of bankruptcy court, as reported. The company has informed creditors it will be sharing an updated business plan as part of the discussions, sources note.

Catalina said with its release of earnings in mid-August that it is likely to miss its budgeted EBITDA projection for the second half of the year due to continuing headwinds in the U.S. segment. The company cut its capital expenditures budget for the year, guiding to full-year capex in the mid-$30 million range, compared with a $50 million range previously. In light of the operational declines, Catalina hired FTI Consulting as an operational advisor after holding pitches for the role in August; FTI joined the company’s restructuring advisors Weil Gotshal and Centerview Partners.

In the restructuring negotiations, a group of majority term lenders is advised by Jones Day and Evercore, a group of second lien lenders is advised by Paul Weiss and PJT Partners, and a Crescent-led unsecured noteholder group is advised by Debevoise & Plimpton and Houlihan Lokey.

The company’s capital structure includes a $100 million revolver that matures in April 2019, a $1.1 billion first lien term loan due April 2021, which accrues interest at LIBOR+350 bps with a 1% LIBOR floor, a $460 million second lien term loan due April 2022, which accrues interest at LIBOR+675 bps with a 1% floor, and $328 million in 11.5% unsecured PIK/toggle notes due 2023. In addition to the April 2019 revolver maturity, the company’s PIK/toggle holdco notes become mandatory cash pay in April 2019 and the company’s refinancing efforts seek to address that maturity wall and liquidity constraint as well an additional liquidity constraint that could result in potential applicable high-yield discount obligations, or AHYDO, catch-up payments (estimated to be as much as $150 million) due under the notes, as reported.

The company’s first lien term loan was quoted by a trading desk Tuesday afternoon at 47.75/48.75 and the second lien term loan was quoted at 11.75/12.75. Prior to the release of earnings, the first lien term loan was quoted in the 62 context, while the second lien term loan was quoted in the 20 context, according to a trading desk.

Catalina declined to comment for this story. Company sponsor Berkshire Partners did not respond to request for comment. 
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