Hornblower Prearranged RSA Chapter 11 Plan, DS Contemplate Equitization of First Lien Claims and Revolver Claims, $345M Equity Rights Offering

Relevant Documents:
Plan
Disclosure Statement
DS Approval Motion

The Hornblower debtors filed their prearranged plan of reorganization and disclosure statement late Monday evening, March 18, implementing the terms of their restructuring support agreement backed by prepetition lender Strategic Value Partners, or SVP, and sponsor/lender Crestview. Specifically, the DS notes that holders of more than 97% of first lien claims and 100% of revolver claims have agreed to vote in favor of the plan.

Under the plan, first lien claims and revolver claims would be equitized. The debtors’ first day papers note that the restructuring would hand majority ownership to SVP, and Crestview would retain a minority position, and the DS says that the new board would be controlled by SVP, with Crestview holding one board seat. The plan’s equity distributions on account of the first lien claims and revolver claims would be subject to dilution by a $345 million equity rights offering, a related backstop commitment premium and a separate 8% management incentive plan. Reorg’s analysis of the rights offering is available HERE.

Proceeds from the rights offering would satisfy a $285 million junior DIP facility and fund the operations of the reorganized debtors. The junior DIP - $121 million in new-money financing and $164 million to refinance the debtors’ incremental superpriority “bridge” facility - is provided by SVP and Crestview.

The debtors’ $300 million senior DIP facility provided by third-party lender Deutsche Bank AG New York Branch will refinance the debtors’ prepetition superpriority term loan facility. In connection with this financing, the senior DIP lender has agreed to provide two exit facilities - a $300 million first lien term loan facility, which would refinance the $300 million senior DIP facility, and a $50 million new-money revolving credit facility.

At the Feb. 21 first day hearing, the court granted interim DIP approval, enabling the debtors to access the entirety of the senior DIP facility and $224 million of the junior DIP ($60 million of the $121 million new-money financing and $164 million to refinance the bridge facility). The final DIP hearing is scheduled for Monday, March 25, at 9 a.m. ET.

Generally, the plan reflects treatment of claims as contemplated by the terms of the RSA. General unsecured claims, however, are now divided into two classes - Class 5 general unsecured claims and Class 6 unsecured go-forward trade claims - the treatment for each of which remains unspecified.

In another update to the RSA, the plan provides that Class 3 first lien claims and Class 4 revolver claims would also receive 96% and 4%, respectively, of the net proceeds of the debtors’ sale of their overnight cruising business, American Queen Voyages, or AQV. The AQV sale process is ongoing - the extended stalking horse bidder designation deadline is today, Tuesday, March 19, and the sale hearing is scheduled for April 4 at 10:30 a.m. ET.

Under the plan, the AQV debtors would be dissolved, with any remaining assets transferred to an AQV Wind Down Co. to be administered by an administrator.

A hearing for conditional DS approval is set for April 12 at 8:30 a.m. ET - the same hearing time for the debtors’ motion to approve the backstop agreement.

DS Approval Motion / Confirmation Timeline

The debtors’ disclosure statement approval motion proposes the following confirmation-related timeline:
 

• April 22: Voting and rights offering record dates;
   
• May 17: Plan supplement deadline;
   
• May 24 at 5 p.m. ET: Voting and plan objection deadlines, rights offering expiration time;
   
• May 29 at 5 p.m ET: Voting report deadline;
   
• May 31: Confirmation brief and objection reply deadlines; and
   
• June 3 at 10 a.m. ET: Combined final DS and plan confirmation hearing.
   

Plan / Disclosure Statement

A chart of the plan’s classes, along with their impairment status and voting rights, is shown below.
 
Treatment of Claims and Interests

The debtors’ plan sets forth the following classification of and proposed distributions to holders of allowed claims and interests (with revisions from the RSA term sheet, shown in bold):
 

• DIP claims: On the plan effective date, junior DIP claims would receive full cash payment from the proceeds of the rights offering, provided that such claims may be applied as the purchase price to subscribe for new common equity in connection with the rights offering, and senior DIP claims would receive full cash payment from the proceeds of the exit term loans or (to the extent provided under the terms of the senior DIP credit agreement) convert to exit term loans in accordance with the senior DIP credit agreement and the RSA.
   
• Administrative claims: Such claims would receive full cash payment of the unpaid portion of such allowed claims on the plan effective date or as soon as reasonably practicable thereafter if allowed on or prior to the effective date. For claims not allowed on or prior to the effective date, the plan provides for payment within approximately 30 days after allowance or as soon as reasonably practicable thereafter, subject to other terms.
  • Administrative claims would include claims under Bankruptcy Code section 503(b), allowed professional fee claims in the chapter 11 cases, restructuring expenses incurred after the petition date and through the plan effective date, which is defined as the reasonable and documented fees and expenses in connection with the restructuring transaction of the ad hoc group advisors, counsel to SVP, Crestview advisors, prepetition agent fees, and expenses and the expense reimbursement under the backstop commitment agreement (previously, the backstop expenses under the backstop purchase agreement and the backstop order) and the backstop commitment premium.
     
• Priority tax claims: Such claims would receive treatment in accordance with Bankruptcy Code section 1129(a)(9)C).
   
• Class 1 - Other secured claims: Such claims would receive at the option of the debtors, reorganized Hornblower debtors, or AQV Wind Down Co., as applicable, either (a) full cash payment of the unpaid portion of such allowed claims, including interest pursuant to Bankruptcy Code section 506(b) (or if payment is not then due, on the due date of such allowed claims), (b) reinstatement pursuant to Bankruptcy Code section 1124, (c) return or abandonment of collateral securing such claims, or (d) other treatment necessary to satisfy Bankruptcy Code section 1129.
  • Projected recovery: 100%.
     
• Class 2 - Other priority claims: Such claims would receive full cash payment of the unpaid portion of such allowed claims on the plan effective date or as soon thereafter as reasonably practicable (or, if payment is not then due, on the due date of such allowed claims).
  • Projected recovery: 100%.
     
• Class 3 - First lien claims: On the plan effective date or as soon thereafter as reasonably practicable, such claims would receive their pro rata share of (a) 96% of the subscription rights in relation to the rights offering; (b) 96% of new common equity, subject to dilution on account of new common HB equity issued in connection with the rights offerings, the backstop commitment premium and the MIP equity; (c) $50 million in cash funded to the Hornblower debtors by Crestview or an affiliate, or the Crestview cash contribution (previously, distribution), provided that holders may elect to use their pro rata share of the Crestview cash contribution (previously, distribution) as a credit towards the exercise of their subscription rights, in which case such portion of the Crestview cash contribution (previously, distribution) would be retained by the Hornblower debtors; and (d) 96% of the net cash proceeds of the sale(s) of AQV assets, or the AQV net cash proceeds.
  • Allowance: Aggregate principal of not less than approximately $726.5 million (previously, $696 million), plus accrued and unpaid interest, fees and other amounts payable under the first lien credit agreement accrued as of the petition date.
  • Projected recovery: “[•].”
     
• Class 4 - Revolver claims: On the plan effective date or as soon thereafter as reasonably practicable, such claims would receive their pro rata share of (a) 4% of the subscription rights in relation to the rights offering; (b) 4% of the new common equity, subject to dilution on account of new common equity issued in connection with the rights offering, the backstop commitment premium and the MIP equity; and (c) 4% of the AQV net cash proceeds.
  • Allowance: Aggregate principal of not less than approximately $26.7 million (previously, $26 million), plus accrued and unpaid interest, fees and other amounts payable under the revolver credit agreement, accrued as of the petition date.
  • Projected recovery: “[•].”
     
• Class 5 - General unsecured claims: “[●].” Previously, the RSA provided that on the plan effective date or as soon thereafter as reasonably practicable, such claims would receive treatment acceptable to the debtors and the required consenting HB first lien lenders.
  • Projected recovery: “[•].”
     
• Class 6 - Unsecured Go-Forward Trade Claims:“[●].”
  • Projected recovery: “[•].”
     
• Class 7 - Intercompany claims: On the plan effective date, all claims against a debtor held by another debtor or a nondebtor affiliate would be adjusted, reinstated or discharged in the debtors’ discretion (previously, as determined by the company parties), subject to the reasonable consent of (a) with respect to intercompany claims held by another debtor or against a Hornblower debtor, the required consenting HB first lien lenders, and (b) with respect to intercompany claims held by any Journey Beyond entity against Journey Beyond Holdings LLC, the consenting JBIH lenders. For the avoidance of doubt, on the plan effective date, the JB intercompany loans would be canceled and discharged.
  • Projected recovery: NA.
     
• Class 8 - Intercompany interests (previously, interests in company party subsidiaries): (Previously, excluding the AQV debtors) All existing interests in a debtor (previously, company parties) other than Hornblower held by another debtor or nondebtor affiliate would be reinstated or canceled in the debtors’ discretion (previously, the company parties’ discretion), subject to the reasonable consent of (a) with respect to the reorganized Hornblower debtors, the required consenting HB first lien lenders, and (b) with respect to the Journey Beyond entities, the consenting JBIH lenders. (Previously, interests in American Queen HoldCo LLC would be canceled as of the effective date.)
  • Projected recovery: NA.
     
• Class 9 - Section 510(b) claims: On the plan effective date, all section 510(b) claims would be discharged or released. Holders would not receive or retain any distribution, property or other value on account of such claims (previously, claims subject to subordination under Bankruptcy Code section 510(b) would receive no recovery).
  • Projected recovery: NA.
     
• Class 10 - Interests in Hornblower and Hornblower Holdings LLC: On the plan effective date, all interests in Hornblower and Hornblower Holdings LLC would be canceled. Holders would not receive or retain any distribution, property or other value on account of their interests.
  • Projected recovery: NA.
     

Plan Milestones

The DS incorporates milestones under the RSA, some of which have already been met. The debtors are subject to the following future milestones:
 

• April 6 (no later than 45 days after the petition date): Entry of final DIP order and AQV sale order;
   
• April 16 (no later than 10 days after entry of final DIP order): Entry of final DIP recognition order by Companies' Creditors Arrangement Act court;
   
• April 21 (no later than 60 days after the petition date): Entry of DS order and backstop order;
   
• June 20 (no later than 120 days after the petition date): Entry of plan confirmation order;
   
• June 30 (no later than 10 days after entry of plan confirmation order): Entry of confirmation recognition order by CCAA Act court; and
   
• July 10 (no later than 140 days after the petition date): Occurrence of plan effective date, subject to up to a 30-day extension by the debtors to obtain regulatory approvals.
   

Exit Facilities

In line with the RSA, the DS provides that in connection with the senior DIP facility, the senior DIP lenders would provide two exit facilities consisting of a $300 million senior secured term loan facility and a $50 million senior secured revolving credit facility. The facilities would be extended on terms substantially consistent with the RSA exit credit term sheet. The terms provide for incremental facilities, subject to certain terms.

The five-year exit facilities would bear interest, at the option of the borrower, of adjusted term SOFR+5.75% or the reference rate plus 4.75%, with a default premium of 2% per annum.

Rights Offering / Backstop Agreement

Under the debtors’ backstop commitment agreement, the debtors would conduct a $345 million rights offering, subject to reductions pursuant to the rights offering procedures and the RSA, at a purchase price per subscription equity interest calculated at 30% discount to the plan equity value.

Backstop parties would be entitled to a premium equal to 10% of the rights offering amount, which would be paid in the form of new common equity on the plan effective date, plus payment of fees and expenses.

New Board

The new board would consist of five members, four of which would be designated by SVP and one of which would be selected by Crestview or its related funds. According to the RSA term sheet, Crestview may remove its designee at any time and appoint a new member as long as Crestview and its related funds retain at least 50% of the new common equity owned by Crestview and its related funds as of the effective date.

The RSA terms also provide that directors would be appointed by a majority vote of shareholders, except with respect to Crestview’s designee subject to holding requirements. Appointment rights would not be transferable except in connection with a sale of at least 75% of the new common equity owned by Crestview and its related funds or SVP as of the effective date.

Management Incentive Plan

The new board would adopt a MIP under which 8% of new common equity issued as of the effective date on a fully diluted basis would be reserved. The new board would determine the allocation of the MIP equity within 60 days after the effective date, with additional terms that provide for the termination of employment within 30 days after the end of the negotiation period to the extent any key executive is not satisfied with their allocation under the MIP, including entitlement to severance benefits, if any.

Other Plan Provisions

Consistent with an RSA schedule, the plan would provide exculpation in favor of the debtors, the reorganized debtors and Chief Restructuring Officer Jonathan Hickman or any successor to such position. Released parties would include each of the debtors, the reorganized debtors and the AQV Wind Down Co., consenting stakeholders, agents, DIP agents, DIP lenders and backstop parties, plus their current and former affiliates, directors, officers, managers and professionals, unless a party elects to opt out of the releases or files an objection to the plan that is not resolved before confirmation.

Releasing parties would be the released parties, plus holders of claims that (a) are deemed to accept the plan, (b) vote to accept the plan or (c) abstain from voting on the plan, plus do not elect to opt out of the releases. Any holder that elects to opt out of the releases or objects to the plan would not be a releasing party.

The financial projections, liquidation analysis and a valuation analysis of the reorganized entity have not been provided and remain bracketed in the DS on file.