Eight chapter 11 cases filed between Monday and Thursday this week as July proves to be much more active than the previous month. The biggest case of the week was St. Croix-based oil refinery operator Limetree Bay Energy, whose capital structure includes approximately $2 billion of funded debt. Limetree is one of two energy companies to file this week, with the other being oilfield services provider Quantum Valve and Oilfield Solutions. This is the first week since April to include two energy filings in the same week, while chapter 11 activity for the sector remains well below 2019 and 2020 levels. For access to the relevant documents above as well as our First Day by Reorg team's coverage of all U.S. chapter 11 cases filed since 2012 with over $10 million in liabilities including the July 2021 chapter 11s click here to request a trial.
The rest of the week’s filers come from a broad array of industries and include multiple real estate cases, aftermarket auto parts distributor Automotive Parts Distribution International, Puerto Rican rental car company ABAB Corporation and an involuntary chapter 11 filed against lab testing services provider Stone Clinical Laboratories. The week also saw the latest Catholic diocese to file chapter 11 due to child abuse claims and the first to file so far in 2021, after six separate dioceses filed last year. Our coverage also included case summaries for foodservice supply chain services company Pipeline Foods, which filed at the end of last week and submitted its first day briefing this week, and Houston electric power producer Agilon Energy Holdings II, the latest utilities company hindered by Winter Storm Uri, which filed back in June and submitted its DIP financing motion on Tuesday.
At its midpoint, July is just three cases shy of June’s full-month count and includes a more balanced distribution of sectors, as shown below:
For the entire year-to-date period, here is how 2021 stacks up against prior years:
The graph below shows the breakdown of liability ranges for chapter 11 filings over the year-to-date period compared with prior years:
Limetree Bay Refining
filed in the Southern District of Texas to evaluate options to maximize value for the estate and stakeholders, including a potential asset sale. The company notes that it expects to continue operations at its oil storage terminal business, which is not included in the chapter 11 filing. Primarily, the debtors’ core objectives in chapter 11 are obtaining new liquidity through DIP financing to circumvent immediate liquidation, “pursuing other potential sources of financing” and “devising a plan to address the findings of the audits required under the EPA Order” and internal investigations. Success in these efforts “should provide the Debtors with an opportunity to attract, develop, and hopefully effectuate a chapter 11 exit strategy that will be in the best interests of the Debtors’ bankruptcy estates and their creditors,” the debtors say in their first day filings. The filing was brought about by a temporary suspension of LImetree Bay’s petroleum refining and processing operations in May, as well as “severe financial and regulatory constraints.” Judge David Jones approved the debtors’ proposed DIP financing, allowing an initial draw of $5.5 million from the $25 million in potential financing from Arena Investors. Counsel for the ad hoc group of terminal lenders to nondebtor affiliate Limetree Bay Terminals, which filed a limited DIP objection just before the hearing began, asserted that the group “begged” for increased involvement in the process and believes that it may have been able to offer a competitive DIP proposal.
Fridley, Minn.-based Pipeline Foods
, which filed on Thursday, July 9 in Delaware, seeks to “preserve value” as the debtors pursue a sale and stabilize their business. The company attributes the filing to the Covid-19 pandemic’s impact on the consumer packaged goods industry, which resulted in decreased customer orders, difficulties meeting operating expenses, regulatory scrutiny and credit agreement defaults. The case would be funded through the consensual use of cash collateral. Pipeline and its subsidiaries comprise a supply-chain solutions company with a focus on “accelerating the availability and reliability of organic, non-GMO, and regeneratively grown food.” The company is one of the few U.S.-based ingredient suppliers exclusively focused on organic and non-GMO ingredients and provides farmers with “education and financial support” in converting to organic practices. Debtors’ counsel said during Wednesday’s first day hearing that the company did not plan to continue operating in the ordinary course of business during the sale process. Asked by Judge Karen Owens as to whether the debtors were going into “wind-down mode,” debtors’ counsel said that they had no firm timetable on moving toward a “pure” wind-down scenario, but that for the time being, the debtors were not going to “mothball” their facilities and would be focusing their efforts on maintaining the business as a going concern to attract buyers for the assets.
Agilon Energy Holdings II
, a Houston-based provider of gas-fired peaking electric energy to the Electric Reliability Council of Texas, or ERCOT, market, filed chapter 11 on June 27 in the Southern District of Texas, intending to “begin to bring their two gas-fired power plants back online to restore operations,” aided by two stages of financing from their senior secured noteholders. The financing includes $1 million in emergency new-money DIP financing as a bridge to a replacement facility that would be designed to bring the company’s power plants (which are currently suspended) back into operation, pay off the emergency DIP facility and fund a sale process or “alternate path” to reorganization. The debtors currently have no cash on hand. The bankruptcy was precipitated by costly construction delays that triggered covenant defaults. The debtors say that they were exploring options with their senior lenders on a debt restructuring and making progress toward resolving their operational issues when Storm Uri hit Texas. As their combustion turbine engines were not constructed to operate in freezing temperatures, this “abnormal cold weather event” led to additional cost for an “unprecedented amount of purchased power expense during the week of cold weather.” During Agilon’s first day hearing on Thursday, Judge Marvin Isgur approved the $1 million emergency new money DIP financing. Debtors’ counsel, calling the case a “little different,” said that with “strong backing” from the prepetition senior secured lenders, the debtors’ “ultimate goal” is to sell substantially all of their assets or to recapitalize, indicating that a sale is more likely.
Automotive Parts Distribution International,
an Arlington, Texas-based aftermarket auto parts distributor whose inventory is purchased from China, Taiwan and other Asian markets for sale to retailers in North America, filed chapter 11 on Monday in Texas’ Northern District, to sell substantially all of its assets amid entry into an asset purchase agreement with trade creditor Agility Auto Parts Inc., one of the debtor’s 10 largest unsecured creditors (owed $630,012). The debtor says it intends to file a sale motion, which would include an APA with Agility Auto Parts providing for the following consideration: (i) $1.5 million in cash, (ii) the assumption of certain liabilities, including accrued program, marketing and warranty expenses, up to $6.3 million, (iii) the acceptance of the debtor’s assignment of its real estate leases and other executory contracts and payment of all associated cure costs and (iv) an agreement to make good faith offers to the hire the debtor’s non-officer employees. The sale would also be conditioned on Agility obtaining third-party financing for the cash component of the purchase price and the debtor’s compliance with certain sale milestones. Upon the proposed sale’s closing, the debtor would cease all business operations.
Out of cash and without additional financing, private label baking goods producer Something Sweet
filed chapter 11 after mothballing operations on June 25. Despite the shuttered operation, the debtors say that they are “an attractive business for a third-party sale,” having begun a prepetition sale process that resulted in 25 parties expressing interest and signing confidentiality agreements. Saybrook Corporate Opportunity Funds, which has provided $6.9 million in funding to Something Sweet since May 2019 to fund growth and expansion, would provide $500,000 in DIP financing through an affiliate and the debtors’ ultimate equityholder, Copenhagen Acquisition LLC. Saybrook is supportive of the sale process.
Below is a recap of the sale-related events for the week’s cases:
|Automotive Parts Distribution International
|Automotive Parts is an aftermarket auto parts distributor, which purchases inventory from China, Taiwan and other Asian markets for sale to North American retailers.
|Seeks to sell substantially all assets to Agility Auto Parts for $1.5 million in cash and assumption of up to $6.3 million of certain liabilities.
|Pipeline Foods is a supply-chain services company focused on non-GMO, organic and regenerative food and feed.
|Seeks to run sale process to be effectuated through a series of discrete assets sales to multiple buyers or through a going-concern sale to a single buyer.
|Debtors say five parties had shown “significant interest” in purchasing some or all of the debtors’ assets prepetition.
|Debtors expect to file bid procedures motion in the near term.
|Limetree Bay Energy
|Limetree Bay Energy owns and operates an oil refinery on St. Croix in the U.S. Virgin Islands.
|Free-fall restructuring with the goal of winding down or consummating the sale of substantially all of its assets.
|Something Sweet produces private label baked goods for regional and national grocery stores and “big box” chains.
|Seeks to continue prepetition sale process that yielded 25 parties expressing interest and signing NDAs.
- Bid procedures motion: Filed within 14 days of petition date (July 16)
- Bid procedures order: Entered within 21 days of petition date (July 23)
- Auction: Within 70 days of petition date (Sept. 10)
- Sale order: Entered within 75 days of petition date (Sept. 15)
- Sale consummation: Within 85 days of petition date (Sept. 25) Below is a recap of filing alerts and case summaries from this review period, all of which can also be found on the First Day website:
Below is a recap of filing alerts and case summaries from this review period, all of which can also be found on the First Day website
Case data, such as advisors and DIP financing terms, including for filings discussed above, can be found in the First Day Database
, which includes all U.S. chapter 11 cases filed since 2012 with over $10 million in liabilities.