Fri 07/15/2022 10:43 AM
Share this article:
Reorg’s editorial leadership has selected the following list of the most compelling and topical situations across our global coverage universe. For any suggestions please email us at questions@reorg.com.
Eleven companies across a range of industries have filed for bankruptcy protection in the United States since July 1 as recent economic data signals both a looming recession and red-hot inflation. Copper, often a proxy for economic activity, fell below $7,000 a ton to its lowest level in nearly two years while the inversion between two- and 10-year U.S. Treasuries, considered a reliable indicator of recessionary fears, widened to 23 bps, the biggest move since January 2001. At the same time, U.S. consumer prices surged 9.1% year over year, led by energy, indicating that the Fed will have little choice but to continue tightening its key interest rates into the looming slowdown. James Bullard of the St. Louis Fed this morning said that Fed funds may need to reach 3.75% to 4% by year-end to stem the inflationary tide.Filers over the last two weeks included cryptocurrency platforms Celsius Networks and Voyager Digital, each citing the collapse in the value of digital currencies over the past several months. Output Services Group plans to file by August. Lenders continue to organize, with Cooper-Standard unsecured holders retaining Wilkie Farr and Phoenix Services lenders choosing Evercore. Creditor-on-creditor violence remains a theme, with Envision offering uptiers to select lenders in exchange for the surrender of litigation claims. Second-quarter earnings season ramps into high gear next week; company calls should provide helpful color on how companies are navigating the challenging macroeconomic environment.

In Europe, anxiety has also continued to grow over an expected recession and the euro traded close to parity with the dollar for the first time in 20 years because of the eurozone exposure to the impact of the war in Ukraine. Hilding Anders, Vue and Borr Drilling all announced restructuring agreements in Europe this week with the aim of getting terms outlined before the summer break.

In the high-yield bond primary market, banks are offloading underwritten positions off their books with OIDs as low as the mid-80s to get deals across the line before markets worsen and to keep yield attractive relative to secondary. Arrangers in leveraged loans primary markets are selling them in the low 90s.

Out in Asia, the sudden collapse of several rural banks in central China’s Henan province prompted protests by depositors, sending a property company’s bond prices on a rollercoaster ride as investors worried about the Henan government’s ability to close an equity and bond investment in the developer, Central China Real Estate, which plans to use the proceeds to repay $500 million notes due Aug. 8. Garuda Indonesia’s restructuring plans have hit a potential block in the form of lessors Greylag Goose 1410 and 1446 - owners of one A330-200 and one A330-300 aircraft. Greylag has filed a cassation case at the Indonesian Supreme Court, targeting liquidation of the carrier, and commenced arbitration proceedings in Singapore. Sources guide to watch for potential further litigation in U.K. courts.


Americas

Endo InternationalHolders of Endo International’s first lien debt are signing nondisclosure agreements as the company seeks a deal with holders at the top of the cap stack ahead of a chapter 11 filing. A filing could come before the end of the month as Endo reaches the end of a 30-day grace period associated with its announcement on June 30 that it would not make the $38 million interest payment on its 6% senior unsecured notes due 2028. Large holders of the company’s first lien debt include Silverpoint. Opioid claimants, whose claims are unsecured, have reached out to holders across the capital stack, but discussions between opioid claimants and debtholders are still in preliminary stages. The company this morning, Friday, July 15, announced that it skipped $1.9 million of coupons due on two series of senior notes. Reorg coverage of Endo is HERE.

Envision Healthcare Corp.

Envision Healthcare and its advisors have approached a select number of lenders to sign nondisclosure agreements, or NDAs, in exchange for the opportunity to participate in upcoming uptier debt exchanges. Lenders who agree to sign the NDAs must also agree to waive their rights to litigate the $1.3 billion recapitalization that took place in April. A series of transactions could be announced over the next several weeks, with the company possibly offering some lenders an opportunity to swap into superpriority paper, while lower-ranking paper could be offered to other participants. Reorg coverage of Envision is HERE.

Phoenix Services

The Phoenix Services lender steering committee has selected Evercore as its financial advisor. Gibson Dunn is the group’s legal advisor, and the company is working with PJT and Alix Partners. The company recently reported that first-quarter 2022 adjusted EBITDA fell 33.7% year over year to $11.4 million, as revenue increased 8.8% to $100.6 million in the same comparison. Reorg coverage of Phoenix is HERE.

Cornerstone Building Products

Cornerstone Building Brands is marketing a $410 million six-year cov-lite first lien term loan B and $600 million in six-year senior secured notes to support the purchase of 51% of its shares by Clayton Dublier & Rice. CD&R, the current owner of 49% of Cornerstone, will contribute $464 million via senior unsecured PIK holdco debt. CD&R’s acquisition of the remaining 51% of Cornerstone was announced on March 7. The company floated initial price talk for the loan of SOFR+562.5 bps, a floor of 0.50% and OID of 93 for the loan, and 92.4 OID with a coupon of 8.75% for a yield of 10.5%. Pricing for both tranches are expected Tuesday, July 19. Reorg coverage of Cornerstone is HERE.

Alvogen

Alvogen received $140 million of new capital last week in the form of preferred equity and extended its debt maturities by 18 months as part of the amend and extend process. About $80 million of the new money will be provided via junior preferred shares by CVC Capital’s related entities, and the remaining $60 million was contributed by two non-sponsor-related entities in the form of senior preferred shares. Reorg coverage of Alvogen is HERE.

Cooper Standard

A group of Cooper-Standard unsecured bondholders has organized and is working with Wilkie Farr as legal advisor. The move comes after the automotive parts manufacturer last month announced it had retained Goldman Sachs as financial advisor to assist in analyzing and evaluating potential alternatives for refinancing its capital structure. Reorg coverage of Cooper-Standard is HERE.

Output Services Group

Output Services Group is preparing to file a prepackaged chapter 11 bankruptcy as soon as August. The provider of printing and mailing of customer invoices and bills has a restructuring support agreement in place with sponsor Aquiline Capital Partners and first lien lenders. The company is expected to receive new capital while cutting debt as part of its in-court restructuring process. Reorg coverage of Output Services Group is HERE.

Eastern Generation

Eastern Generation, which in mid-June disclosed to lenders the sale of three natural-gas fired plants in the PJM, expects to receive proceeds from the sales of the Crete and Lincoln facilities and repay term loan lenders in August or September. The buyer of the two plants is Earthrise Legato LLC, according to a June 15 filing with the Federal Energy Regulatory Commission. According to the filing, the commission found that the sale of the facilities is in the public interest as it will not have an adverse effect on competition, will not have an adverse effect on rates, will not have an adverse effect on regulation, and will not result in any cross-subsidization. Reorg coverage of Eastern Generation is HERE.

Altera Infrastructure

A potential debt restructuring looms as Altera Infrastructure, which had roughly $170 million of liquidity as of March 31, faces $600 million of scheduled debt repayments over the next 12 months that may force it to brush up against a minimum liquidity covenant in the near term. While the company’s cash flow prospects relative to the LTM period have improved, largely as a result of an uptier exchange with owner Brookfield that converted cash-paying debt to pay in kind and the roll-off of certain newbuild capital expenditures, cash flow might be insufficient to address the company’s maturity obligations. Reorg coverage of Altera is HERE.

Celsius Networks

The New Jersey-based cryptocurrency finance platform and lender that claims over 1.7 million users worldwide for chapter 11 on Wednesday, July 13, seeking to “stabilize their business” and “consummate a comprehensive restructuring transaction.” The debtors filed without an RSA and, according to a press release, intend to fund postpetition operations using “$167 million” (other first day papers state the amount of cash is $130 million) of cash on hand, which “will provide ample liquidity to support certain operations during the restructuring process.” Reorg coverage of Celsius is HERE.

Voyager Digital

Voyager Digital Holdings Inc., a New York-based cryptocurrency firm, and several affiliates including cryptocurrency platform Voyager Digital LLC and Voyager Digital Ltd., filed chapter 11 petitions in the Bankruptcy Court for the Southern District of New York on July 5, reporting $1 billion to $10 billion in both assets and liabilities. CEO Stephen Ehrlich, the first day declarant, attributes the bankruptcy filing to a “short-term ‘run on the bank’ due to the downturn in the cryptocurrency industry generally and the default of a significant loan made to a third party.” Reorg coverage of Voyager is HERE.

Grupo Virgolino de Oliveira (GVO)

Brazilian sugar and ethanol producer Grupo Virgolino de Oliveira’s, or GVO’s, creditor Amerra Latin American Finance will receive 92 million Brazilian reais ($16.9 million) in exchange for releasing rights over compensation payments due to the company by a state entity. The decision was made as part of the company’s plano de recuperação judicial, or RJ plan. Creditors of the Brazilian sugar and ethanol producer approved the latest version of the plan, presented during its general creditor meeting, or AGC by its Portuguese initials, held Monday, July 11, through Tuesday, July 12. Reorg coverage of GVO is HERE.

Samarco

Samarco and its stakeholders have chosen Marcelo Perlman to serve as the intermediary for their ongoing mediation, which is expected to run for 30 days starting from the first meeting, yet to be scheduled, according to a court petition. The mediation is set to initially last 30 days, but parties may agree to an extension of another 30 days. After the mediation is finished, the mediator will inform the Second Commercial Court of Belo Horizonte whether the parties have entered into an agreement or not. Reorg coverage of Samarco is HERE.


Municipals

Debt service payments due July 1 have been a focal point for the $4 trillion municipal bond market. High-yield sectors such as student housing and senior living have been plagued by increased labor costs and declining census, pressuring debt service payments.Provident Group - ULM Properties

Provident Group - ULM Properties reported audited financials for the fiscal year ended Dec. 31, 2021, and noted a fixed-charge coverage ratio, or FCCR, of 1.07x, which is below the 1.2x covenant included in the master indenture for $26.3 million in Series 2019 student housing revenue bonds. The financials are tied to the performance of Warhawk Village, a student housing development on the Monroe campus of the University of Louisiana. Reorg coverage is HERE.

Albany Place

Albany Place, a senior living development in Guilderland, N.Y., will not make the debt service payment due July 1 on debt issued in 2017, according to a notice filed by bond trustee, UMB Bank. Occupancy for the senior living community is 43% for assisted living and 44% for memory care. Albany Place also did not make debt service payment due on Jan. 1. Reorg coverage is HERE.

American Dream Mall

Holders of American Dream Mall’s $800 million of municipal bonds backed by payments in lieu of taxes, or PILOT bonds, could intervene in multiple tax appeal cases unfolding in New Jersey Tax Court. The tax appeals are the attempt of Ameream LLC, the developer, to lower the property tax assessment conducted by the local municipality, East Rutherford, N.J. Since the PILOT bonds debt service relies on those assessments, bondholders clearly have an interest in the outcome. Reorg coverage is HERE.


Europe

Hilding AndersHilding Anders has floated a proposal for the restructuring of its over-levered balance sheet. The Sweden-based mattress producer is proposing to reinstate €300 million of its €570 million outstanding senior debt (comprising a €510 million term loan B, €46.5 million RCF draw and accrued interest) into a new senior facility maturing in February 2026 and paying 5% cash and 1.25% PIK. The group also plans to convert the remaining €270 million into a holdco note paying 12% PIK, sources told Reorg. An ad hoc group of term loan B and RCF lenders representing about 60% of the senior debt has locked up to the terms. Reorg coverage is HERE.

Takko

German discount retailer Takko is facing the prospect of a restructuring to address its €590 million maturity wall in 2023. While management is yet to disclose its plans of addressing maturities, Takko’s senior secured €285 million 5.375% and €225 million E+5.375% floating rates notes due November 2023, have declined about 15 points to 65-66 since the first-quarter earnings call on June 29. Reorg’s waterfall model and restructuring option on Takko is HERE.

Ideal Standard

Belgian sanitaryware and bathroom products manufacturer Ideal Standard’s cash flow generation has deteriorated over the past six months mainly as a result of operational restructuring charges, working capital outflow and unprecedented commodities inflation. As a result, the group’s €325 million senior secured notes due 2026 have fallen to about 60, yielding 22%. Under Reorg’s revised base case, the group’s total cash burn in 2022 will amount to €47.5 million, higher than previously expected. This will put pressure on the group's limited liquidity and will result in net leverage rising to 5.2x in the near term. In the medium term, however - assuming progressive normalization - the group could break even in 2023 and generate €5.2 million of levered free cash flow in 2024. We note prices of copper and zinc, two main raw materials, have decreased 30% since their peaks in March and April. We forecast net leverage to return to 4.2x by FY 2024, which could support a refinancing of the SSNs prior to their maturity in 2026. Reorg coverage is HERE.

888 Holdings

888 priced its $500 million term loan B on Monday, July 11, at SOFR+CAS+525 bps with an 85 OID, sources told Reorg. The term loan has a 0.5% floor and is part of a debt package to support its acquisition of William Hill’s non-U.S. businesses. A few days earlier, 888 priced its new €400 million 7.558% 2027 notes and €300 million floating rate notes due 2028. Reorg coverage is HERE.

Vue International

Cinema chain Vue has signed a lockup agreement with an ad hoc group representing about 60% of its first lien lenders to effect a debt-for-equity swap and recapitalize the business. The plan will equitize approximately £465 million of existing debt, giving the first lien creditors full control of the company. The agreement also features £75 million euro-equivalent of super-senior new money, an extension of €634 million first lien debt and the write-off of £165 million second lien debt facility. Reorg coverage is HERE.

Borr Drilling

Jackup drilling company Borr Drilling has reached an agreement in principle with most of its secured creditors to extend the majority of its secured debt to 2025. This will be supported by a planned equity raise of up to $250 million after Aug. 11. The company is seeking the required consents and waiver extensions from lenders to complete the transaction. Once these agreements are in place, the company will have long-term financing on about $1.4 billion and has also maintained the long-term financing on two new builds in the amount of $260 million. Reorg coverage is HERE.

PSC Group

Italian electrical contracting services PSC Group has hired PwC to help draft its restructuring plan, sources told Reorg. The company applied for a concordato preventivo con riserva, an Italian in-court restructuring procedure, on June 14 with the Court of Lagonegro in Italy, as reported. On the same day, CEO Roberto Loiola resigned from his post after joining the company in February. Claudio Calabi has been confirmed as chairman of the group. Reorg coverage is HERE.

Naftogaz

Naftogaz, Ukraine’s state-owned oil and gas group, is asking eurobond creditors to postpone principal and interest payments on its three notes, totaling $1.3 billion, for two years until 2024 to preserve cash and support Ukraine’s strategic priorities. The company, advised by Freshfields, is asking investors to vote by Thursday, July 21, but some creditors working with Dechert are pushing back, urging other noteholders to block the plan and make the company pay a $335 million maturity due on Tuesday, July 19. Reorg coverage is HERE.

BestSecret

European e-commerce company BestSecret priced a €315 million five-year senior secured floating rate note tap due 2027 to redeem its existing €260 million senior secured debt due in 2023. The notes priced in line with talk at Euribor+6% with an OID of 85. Reorg coverage is HERE.

Groupe Simago

BlackRock and Bridgepoint Credit have teamed up to each provide 50% of unitranche debt at 6x net leverage to back Ardian’s acquisition of a minority stake in French radiology management platform Groupe Simago, sources told Reorg. Simago reached a valuation multiple of 15x EBITDA, they added. Reorg coverage is HERE.

Sabio

U.K.-based unified communications group Sabio has appointed Moelis as financial advisor as the company prepares to start a sale process, sources told Reorg. The company is being marketed off EBITDA of about £30 million and has targeted a 15x to 20x multiple. Some sources noted that the target valuation is ambitious since valuations in the unified communications sector tend to be slightly lower than levels seen in the cloud and software sectors due to higher capital expenditure needs. Reorg coverage is HERE.


Asia

Central China Real EstateThis Chinese property developer was one of the most active names on the Asia high-yield market over the past two weeks, with speculation about whether a planned investment from a government-backed entity will close on time and with the clock ticking on maturing $500 million notes due Aug. 8. The notes’ prices went on a rollercoaster ride, first plunging 15 points due to repayment concerns before rising 17 points two days later amid relentless buying by private banks and possible short covering. Reorg coverage is HERE.

Shimao Group

In a timely combination of intel and analysis, we got hold of a writ of summons from the Hong Kong high court and reported a lawsuit against this Chinese real estate company from United Overseas Bank alleging breach of loan terms and security agreements and wrongful diminution of secured lenders’ interests. As Reorg pointed out in a tear sheet, the underlying asset, the Tai Wo Ping project in Hong Kong, is one of Shimao’s most valuable offshore assets with an estimated gross asset value of 19 billion Hong Kong dollars or more. Reorg coverage is HERE.

Analysis: SJM Holdings

Analysis of Macau casino operator SJM Holdings highlights that while available liquidity appears tight, the company enjoys bank support, and a liquidity injection from parent company Sociedade de Turismo e Diversões de Macau - which holds 14 billion Macanese pataca of cash as of December 2021 on a stand-alone basis - is likely forthcoming. The analysis also suggests the company’s long operating history in Macau and strong ties with the local government could minimize the risk of regulatory downside scenarios. Reorg coverage is HERE.

Garuda Indonesia

Garuda Indonesia’s restructuring plans have hit a potential stumbling block in the form of lessors Greylag Goose 1410 and 1446 - owners of one A330-200 and one A330-300 aircraft. Greylag has filed a cassation case at the Indonesian Supreme Court, targeting liquidation of the Indonesian flag carrier, and at the same time commenced arbitration proceedings in Singapore. A source close to the situation said that Avenue Capital Management is an investor in Greylag Goose. Watch for potential further litigation in the U.K. courts - prior lawsuits against the carrier have enjoyed success in the London Court of International Arbitration. Reorg coverage is HERE.

UPL Ltd.

Reorg blended journalism with credit analysis to estimate UPL Ltd.’s pro forma total debt for the fiscal year ending 2023 will stand at about 267.09 billion Indian rupees ($3.375 billion), down from INR 296.95 billion recorded for the fiscal year ended March 31, 2022. The analysis, based on management comments on an earnings call, led to our estimates that pro forma gross leverage for the agricultural products maker will improve to 2.6x from 2.9x reported in the 2022 fiscal year. The $400 million 5.25% perpetual bonds of subsidiary UPL Corp. Ltd. dropped to the low 80s after an S&P downgrade on “failure to deleverage,” which raised concerns about rising dependency on receivables securitization and extended trade payables to fund working capital needs. Reorg coverage is HERE.

Share this article:
This article is an example of the content you may receive if you subscribe to a product of Reorg Research, Inc. or one of its affiliates (collectively, “Reorg”). The information contained herein should not be construed as legal, investment, accounting or other professional services advice on any subject. Reorg, its affiliates, officers, directors, partners and employees expressly disclaim all liability in respect to actions taken or not taken based on any or all the contents of this publication. Copyright © 2022 Reorg Research, Inc. All rights reserved.
Thank you for signing up
for Reorg on the Record!