CASE SUMMARY: Hornblower RSA Equitizes 1L Claims, Handing Majority Ownership to Strategic Value Partners; $345M Equity Rights Offering Would Be Issued at 30% Discount, Reflecting $725M Total Enterprise Value

 

Summary
Hornblower RSA would equitize first lien claims, reduce debt by $720 million and hand majority ownership to Strategic Value Partners
Company enters bankruptcy with a $300 million senior DIP facility from Deutsche Bank AG New York Branch and a $285 million junior DIP facility from prepetition lenders
Debtors to raise capital through $345 million equity rights offering backstopped by consenting secured lenders, with $350M in exit facilities upon emergence

Hornblower Holdings, a San Francisco-based company specializing in water-based and land-based experiences and transportation, and several affiliates filed petitions today in the Southern District of Texas, reporting $500 million to $1 billion in assets and $1 billion to $10 billion in liabilities. The company enters chapter 11 with a restructuring support agreement with funds managed by Strategic Value Partners, or SVP, and majority equityholder and sponsor Crestview Advisors LLC.

 

Representatives
Role	Name	Firm	Location
Debtors' Co-Counsel	Paul M. Basta Jacob A. Adlerstein Kyle Kimpler Sarah Harnett Neda Davanipour	Paul, Weiss, Rifkind, Wharton & Garrison	New York
Debtors' Co-Counsel	John F. Higgins M. Shane Johnson Megan Young-John	Porter Hedges	Houston
Debtors' Investment Banker	Matthew Scheidemann John Welsh Rupak Rajaram	Guggenheim Securities	New York
Debtors' Restructuring Advisor & CRO	Jonathan Hickman	Alvarez & Marsal North America	Charlotte, N.C.
Counsel to Ad Hoc Group	Evan Fleck Matthew Brod Justin Cunningham	Milbank	New York
Investment Banker to Ad Hoc Group	NA	Perella Weinberg Partners	NA
Financial Advisor to Ad Hoc Group	NA	FTI Consulting	NA
Counsel to Crestview	Adam L. Shpeen David Kratzer Robert (Bodie) Stewart Joseph W. Brown	Davis Polk & Wardwell	New York
Counsel to Senior DIP Lenders	Andrew Zatz David Ridley Andrea Amulic	White & Case	New York
Counsel to Alter Domus as Superpriority Credit Agreement Agent	NA	Norton Rose Fulbright US	New York
Counsel to GLAS Trust Company as Senior DIP Facility Agent	John R. Ashmead Gregg S. Bateman	Seward & Kissel	New York
Counsel to GLAS Trust Company as Junior DIP Facility Agent	NA	ArentFox Schiff	New York
Counsel to UBS AG Stamford Branch	NA	Cahill Gordon & Reindel	New York
U.S. Trustee	Jayson B. Ruff	Office of the U.S. Trustee	Houston
Debtors’ Claims Agent	Brian K. Osborne	Omni Agent Solutions	Woodland Hills, Calif.

RSA / Term Sheet

The debtors’ RSA, executed as of today with SVP and sponsor Crestview, provides for a total debt reduction of approximately $720 million. SVP would assume majority ownership while Crestview would retain a minority position.

Classification and Treatment of Claims and Interests

The RSA term sheet provides for the following classification and treatment of claims and interests:
 

• DIP claims: Would receive full cash payment from the proceeds of the rights offering, or with respect to the senior DIP loans, such loans would convert to exit term loans in accordance with the senior DIP credit agreement and the RSA.
  • Voting: Not classified; nonvoting.
     
• Administrative 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.
  • Administrative claims would include claims under Bankruptcy Code section 503(b), allowed claims for reasonable fee and expenses retained in the chapter 11 cases and the CCAA proceeding, and backstop expenses pursuant to the backstop purchase agreement and the backstop order.
  • Voting: Not classified; nonvoting.
     
• Priority tax claims: Would receive treatment in accordance with Bankruptcy Code section 1129(a)(9)C).
  • Voting: Not classified; nonvoting.
     
• Other secured claims: Would receive 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.
  • Voting: Unimpaired; deemed to accept the plan.
     
• Other priority 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).
  • Voting: Unimpaired; deemed to accept the plan.
     
• 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 “Rights” in relation to the rights offering, (b) 96% of new common equity, subject to dilution on account of new common equity issued in connection with the rights offerings, the backstop commitment premium and the MIP equity, and (c) $50 million in cash funded to the Hornblower debtors by Crestview or an affiliate, or the Crestview cash distribution, provided that holders may elect to use their pro rata share of the Crestview cash distribution as a credit toward the exercise of its rights, in which case such portion of the Crestview cash distribution would be retained by the Hornblower debtors.
  • Voting: Impaired; entitled to vote on the plan.
  • Allowance: Aggregate principal of $696 million, plus accrued and unpaid interest, fees and other amounts payable under the first lien credit agreement accrued as of the petition date.
     
• 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 “Rights” in relation to the rights offering and (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.
  • Voting: Impaired; entitled to vote on the plan.
  • Allowance: Aggregate principal of $26 million, plus accrued and unpaid interest, fees and other amounts payable under the revolver credit agreement, accrued as of the petition date.
     
• General unsecured claims: 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.
  • Voting: Impaired; entitled to vote on the plan.
     
• Intercompany claims: All claims against a debtor held by another debtor would be adjusted, reinstated or discharged as determined by the company parties, subject to the reasonable consent of the required consenting HB first lien lenders.
  • Voting: Unimpaired; deemed to accept the plan; or impaired; deemed to reject the plan.
     
• Interests in company party subsidiaries: Excluding the AQV debtors, all existing interests in company parties other than Hornblower would be reinstated or canceled in 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; (b) with respect to the Journey Beyond entities, the consenting JBIH lenders. Interests in American Queen HoldCo LLC would be canceled as of the effective date.
  • Voting: Unimpaired; deemed to accept the plan; or impaired; deemed to reject the plan.
     
• Section 510(b) claims: Claims subject to subordination under Bankruptcy Code section 510(b) would receive no recovery.
  • Voting: Impaired; deemed to reject the plan.
     
• Interests in Hornblower: 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.
  • Voting: Impaired; deemed to reject the plan.

Exit Facilities / Term Sheet

As noted above, the RSA contemplates two exit facilities consisting of a $300 million senior secured term loan and a $50 million senior secured revolving credit facility. The terms provide for incremental facilities, subject to certain terms.

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

Adjusted term SOFR means the greater of term SOFR and 1%. The reference rate is defined as the greatest of (i) the rate of interest publicly quoted by The Wall Street Journal as the “Prime Rate” in the United States, (ii) the federal funds effective rate plus 0.5% and (iii) adjusted term SOFR for an interest period of one-month plus 1%. The borrower may elect interest periods of one, three or six months (or a shorter period if agreed to by the administrative agent and all lenders) for adjusted term SOFR.

The exit facilities would mature five years after the closing date.

Rights Offering / Backstop Agreement

Under the debtors’ backstop commitment agreement dated today, the debtors would conduct a rights offering for a maximum aggregate purchase price of $345 million, subject to reductions pursuant to 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

According to the RSA term sheet, 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. The terms provide that 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 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 Provisions

According to an RSA schedule, the plan would provide exculpation in favor of the debtors, the reorganized debtors and CRO Hickman. Released parties would include each of the debtors, the reorganized debtors, 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 prior to confirmation.

Releasing parties would be the released parties, plus holders of claims that vote to accept the plan and holders that 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.

Milestones

RSA milestones are as follows:
 

• Feb. 26 (no later than three business days after the petition date): Entry of interim DIP order;
• March 7 (no later than 10 days after entry of interim DIP order): Entry of interim DIP recognition order by the CCAA court;
• March 7 (no later than 15 days after the petition date): Entry of AQV bidding procedures order;
• March 13 (no later than 21 days after the petition date): Plan, disclosure statement, DS approval motion and backstop motion filing deadline;
• 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 CCAA 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 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.
   

DIP Financing / Cash Collateral Motion

The debtors seek approval of two senior secured term loan DIP financing facilities: a senior facility in an aggregate principal amount of $300 million and a junior facility in an aggregate principal amount of $285 million. The senior DIP facility provides for the refinancing of the prepetition superpriority loans and a further commitment to provide a new $50 million senior secured first lien revolving credit facility to provide working capital for the debtors upon emergence. According to the Hickman declaration, the senior DIP facility would provide a net liquidity benefit of approximately $13 million after the refinancing.

The junior DIP facility consists of up to $121 million in DIP loans to provide incremental liquidity to fund the cases and $164 million in DIP loans to refinance previously funded emergency prepetition loans under the incremental superpriority facility. Deutsche Bank AG New York Branch is providing the senior DIP facility, and prepetition lenders are providing the junior DIP facility.

According to the declaration of Matthew Scheidemann of Guggenheim Securities, the debtors’ proposed investment banker, in support of the DIP motion, although the debtors reached out to third-party financing sources, none of them were willing to extend financing on an unsecured or junior basis or engage in a priming fight with any secured lenders.

In addition, Scheidemann says the ad hoc group would not consent to the debtors’ incurring other financing by any other party having priming or pari passu liens on collateral securing the obligations of the group, but the group was supportive of the senior DIP facility.

Upon entry of the interim DIP order, the entirety of the senior DIP facility would become available to “immediately refinance the Superpriority Facility,” and $224 million of the junior DIP facility would become available to provide the debtors with working capital and to fund the chapter 11 cases.

The debtors also seek the consensual use of cash collateral of certain secured lenders to Hornblower’s first lien credit agreement with Glas Trust as administrative agent and its RCF credit agreement with UBS as administrative agent.

ABR borrowing under the senior DIP facility bears interest at the greatest of (i) the prime rate, (ii) the federal funds effective rate “plus ½ of 1.00%,” and (iii) adjusted term SOFR+1%, plus 5.5% (which amount is increased to 6% if a PIK election has been made), provided that 3% is payable-in-kind on each interest payment date unless timely elected to be paid in cash, with a 2% default premium.

Term SOFR borrowing under the senior DIP facility bears interest at the adjusted term SOFR+6.5% (which amount is increased to 7% if a PIK election has been made), provided that 3.5% is payable-in-kind on each interest payment date unless timely elected to be paid in cash, with a 2% default premium.

ABR borrowing under the junior DIP facility bears interest at the greatest of (i) the prime rate, (ii) the federal funds effective rate plus half of 1%, and (iii) adjusted term SOFR+1%, plus 8%, with a 2% default premium.

Term SOFR borrowing under the junior DIP facility bears interest at adjusted term SOFR+9%, with a 2% default premium.

Both the senior and junior DIP facilities mature on the earlier of the plan effective date and nine months after the petition date.

To secure the senior DIP financing, the debtors propose to grant senior secured superpriority liens on substantially all assets and property of the debtors, subject to certain permitted exceptions, liens and the carve-out, and upon entry of the final DIP order, avoidance action proceeds. The junior DIP financing would be secured by junior secured superpriority liens on substantially all assets and property of the debtors, subject to the senior DIP liens, certain permitted exceptions and senior liens and the carve-out, and upon entry of the final DIP order, avoidance action proceeds.

Both facilities include various fees. The senior DIP facility has an exit premium, calculated as 1.5% of the aggregate principal amount of term loans, and an extension fee, calculated as 1% of the aggregate term loans outstanding eight months after the closing date. The junior DIP facility includes a closing fee of 4% of the commitments in effect on the closing date, a DDTL commitment fee of 1% of undrawn amounts of delayed draw term loans, and an exit premium, calculated as 4% of the aggregate principal amount of term loans.

The company proposes the following adequate protection to its DIP lenders: superpriority administrative claims and adequate protection liens subject to the DIP liens, the carve-out and the prepetition permitted senior liens, certain reporting rights, and reimbursement for the reasonable and documented prepetition and postpetition professional fees of the prepetition agents.

In addition, the debtors propose a waiver of the estates’ right to seek to surcharge its collateral pursuant to Bankruptcy Code section 506(c) and the “equities of the case” exception under section 552(b), subject to entry of the final DIP order.

The post-termination carve-out for professional fees is $4.5 million.

The proposed budget for the use of the DIP facility is HERE.

The DIP financing is subject to the same RSA milestones, as outlined above.

The lien challenge deadline is 60 days after the appointment of an official unsecured creditors committee, subject to extension if a chapter 7 or chapter 11 trustee is appointed prior to the end of the challenge period. The UCC lien investigation budget is $50,000.

Bid Procedures Motion

The debtors’ bid procedures motion seeks authority to sell all or substantially all of their AQV business assets and to potentially enter into one or more stalking horse agreements with bid protections consisting of a 3% breakup fee (based on the cash portion of the purchase price) and an expense reimbursement of no greater than 2% of the cash portion of the purchase price and $50,000.

The business operated a seven-vessel fleet offering “all inclusive luxury voyages” along the Ohio, Mississippi, Tennessee, Illinois, Cumberland, Columbia and Snake Rivers; “all-inclusive luxury cruising” along the Great Lakes, Canada, New England, the Southeast United States, Alaska, Mexico, the Yucatan Peninsula; and an “all-inclusive luxury expedition experience” in Alaska and Central America, including ports in between.

As noted above, the motion contains procedures to dispose of remaining AQV assets including AQV’s fleet not sold through the sale process. The seven-vessel fleet consists of four river vessels, two lake / ocean vessels and one expedition vessel. The debtors note they own six of the vessels, with one being leased or chartered, but provide no further details.

The debtors emphasize that the sale process should proceed “expeditiously” in light of the “significant costs” associated with operating the AQV business, as detailed in the motion, so as to ensure that net sale proceeds are “greater than” the interim costs necessary to maintain the assets.

The debtors disclose they have canceled certain scheduled cruises and terminated employment of substantially all employees of the AQV business, and they anticipate canceling all additional scheduled cruises during the chapter 11 cases.

According to the motion, the debtors’ prepetition marketing efforts in the first half of 2023 and in December 2023 did not yield any actionable bids or actionable indications of interest. The debtors say they are currently continuing discussions with certain parties who indicated an interest in purchasing the AQV assets.

The debtors propose the following sale timeline:
 

• March 15 at 5 p.m. ET: Stalking horse bidder designation deadline;
• March 20 at 5 p.m. ET: Sale objection deadline;
• Earlier of five days after filing stalking horse designation notice and March 20 at 5 p.m. ET: Stalking horse bidder(s) and bid protections objection deadline;
• March 21: Stalking horse bidder(s) and bid protections hearing;
• March 25 at 5 p.m. ET: Qualified bid deadline;
• March 27 at 10 a.m. ET: Auction, if necessary;
• March 27 (if no auction is held) or March 28 (if an auction is held): Identification of successful bidder and backup bidder, if any, and/or notification to dispose of any remaining AQV assets;
• April 1 at 5 p.m. ET: Proposed successful bid(s) objection deadline;
• April 2: Sale hearing, subject to adjournment to comply with assumption and assignment procedures to the extent a qualified bid for the AQV business as a going concern is received;
• Seven days after service of the AQV asset disposition notice(s): Deadline to object to such notice(s); and
• “As soon as reasonably practicable” after entry of a sale order: Sale closing date.

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. 24-90061.
• Motion to establish trading procedures
  • The debtors seek to establish trading procedures for its common stock, to be able to object to and prevent transfers if necessary to preserve net operating losses. The debtors estimate, as of the end of their 2022 tax year: (i) American Queen Holdco, LLC, and its consolidated debtor subsidiaries, collectively the AQ debtor group, had federal NOL carryovers in the amount of approximately $315 million and federal disallowed business interest expense carryforwards of approximately $20 million; and (ii) Hornblower Group Holdco LLC and its consolidated subsidiaries and together with the AQ debtor group had federal NOL carryovers in the amount of approximately $197 million and federal disallowed business interest expense carryforwards of approximately $120 million. The debtors anticipate that each debtor group may incur additional NOL carryovers and disallowed business interest expense carryforwards through the end of the 2024 tax year.
• Motion to maintain customer programs
• Motion to pay employee wages and benefits
  • The debtors seek to pay prepetition compensation and employee benefit programs amounting to $31.3 million.
• Motion to use cash management system
  • The cash management system comprises 148 bank accounts, 124 of which are maintained by the debtors at 14 different banks. The debtors’ primary bank is JPMorgan Chase Bank, where 81 accounts are located.
• Motion to pay critical vendors
  • The debtors estimate that they owe claims to their critical vendors, lien claimants, critical foreign claimants and 503(b)(9) claimants amounting to a total of $23 million on an interim basis and $31 million on a final basis.
• Motion to pay taxes and fees
  • The debtors estimate they owe approximately $15.6 million and £400,000 in prepetition taxes and fees.
• Motion to maintain customer programs
• Motion to maintain insurance programs
• Motion for foreign representative
• Motion to provide utilities with adequate assurance
• Motion to continue insurance programs
• Motion to file consolidated creditors list
• Motion to extend time to file schedules
• Application to appoint Omni as claims agent