Filing Alert: Southeastern Grocers Files Pre-Packaged Chapter 11 in Delaware

Update: An audio recording and presentation materials from Reorg Research’s webinar covering the Southeastern Grocers chapter 11 filing are now available here.  In the webinar, their coverage team provides an overview of the company and its financials, prepetition developments and creditor negotiations, and the chapter 11 filing, including highlights from the first day hearing.
Mette K.
4/2/18

 


Southeastern Grocers has commenced chapter 11 proceedings in Delaware. The company reports $1 to $10 billion in assets and liabilities.

“This course of action enables us to continue writing the story for our company and our iconic, heritage banners in the Southeast.”

—Anthony Hucker, President and Chief Executive Officer

The Restructuring Support Agreement

The filing was preceded by a Restructuring Support Agreement.  According to the company’s Press Release, the filing and accompanying pre-packaged plan are the next steps in implementing that agreement.  Creditors holding 80% of Southeastern’s 8.625%/9.375% senior PIK toggle notes due September 2018 are party to the RSA.  Private equity sponsor Lone Star Capital has also signed on. The restructuring will decrease overall debt levels by more than $500 million.

What About Suppliers, Trade Creditors, and Landlords?

Southeast Grocers has indicated that all general unsecured claims, including supplier partners and trade creditors, will be paid in full.  A letter to suppliers and a FAQ sheet are available on the company’s website.  More than 580 stores are expected to continue operating during the restructuring process.  However, the company intends to close 94 underperforming stores.  A list of Affected Stores is available here.

Mette K.
3/27/18

 

Filing Alert: #Remington Files Chapter 11 in Delaware

Without a foil to drive sales, and beset by litigation, Remington Outdoor Company has sought Chapter 11 protection Delaware.

Company Background.

Founded in 1816, Remington is one of the oldest gun makers in the world.  Its products include the Bushmaster AR-15 style rifle that was used in the 2012 Sandy Hook shooting. Twenty children between six and seven years old, as well as six adult staff members, were killed. The company has been sued by victims’ family members.  In addition, the company’s sales fell 30% last year in the midst of an industry-wide “Trump slump.”

The Fast-Track Plan and Support Agreement.

Remington reports $100 million to $500 million in assets and liabilities. Its filing includes:

  • A plan, disclosure statement, and restructuring support agreement between Remington and its major secured creditors;
  • A motion seeking approval of a $100 million in financing, a $45 million bridge loan, a $193 million asset-based loan facility.

Under the fast-track plan, Remington’s key creditors – reportedly, Franklin Templeton Investments and JPMorgan Asset Management – would exchange their debt holdings for most of the company’s equity. Concurrently, the company’s current owner, Cerberus Capital, would relinquish its ownership interests. Remington has already begun soliciting approval of its plan. It has asked to forgo the usual procedure of filing a full schedule of its debts and assets.  And it has requested a voting deadline of April 26th and hopes to confirm its plan around May 3rd.

Remington has said that its efforts to finance a turnaround were complicated by parties who were reluctant to lend to a gun manufacturer. The creditors in the current deal reportedly agreed to the “debt-for-equity swap” prior to the Parkland shooting, and it is unclear if any have since pulled out.

Additional Information.

The case number is 18-10684.  Additional information, including the docket of filed pleadings and instructions for filing claims, can be found on its claim agent’s website: PrimeClerk.com.

Mette K.

1-Year Later: A California Attorney Joins the Delaware Bar. And Opens a Bar!

On March 27, 2017, I told you that I was planning to move to Delaware and that Jeff was planning to open a bar here in Wilmington after we settled in.  Well, here we are one year later, and I am officially a member of the Delaware bar.  And Jeff now owns and runs Catherine Rooney’s in Newark, Delaware. We have just recovered from our first St. Patrick’s Day as Irish pub owners, so its time to catch everyone up. But suffice it to say, we are all in on Delaware!

First, I Passed the Delaware Bar.

Obtaining admission to the Delaware bar was a grueling process, the triathalon of the legal profession if you will.  It required passing the Delaware bar exam.  Which, for the record, was much more difficult than the California bar exam.  It required completing the “scavenger hunt,” a 20-week long clerkship.  And it required undergoing a rigorous background check that entailed gathering up 30 years of documents scattered across two continents.pexels-photo-92323  Judge Shannon described the four-phases of this process perfectly.

  1. Enthusiasm.  “It will be a long and difficult process, but I have this! Let’s do it!”
  2. Resignation. “This is really hard.  I’m think I’m going to fail.”
  3. Anger. “I’m sure I failed. This is a stupid process that absolutely does not capture my value as a person or lawyer.”
  4. Hypocrisy.  “Woo-ho! I passed! What a great system for ensuring that only top lawyers achieve admission to the bar.”

But more importantly, what this process taught me is that people are, without a doubt, much more interested in Jeff’s new bar than my efforts to pass my bar!

Then, Jeff Opened a Bar: Catherine Rooney’s!

Rooneys SnowJeff initially planned to open a new bar in downtown Wilmington.  We had the name, concept and business plan sketched out before we arrived.  But after doing some research once we got here, Jeff politely pointed out that nobody stays in Wilmington after hours.  And he cannot run a profitable bar giving away drinks to its only patrons, my friends who happen to be in town for hearings.  Fair point.

Guiness.jpgSo,  Plan B!  Jeff instead purchased Catherine Rooney’s, a popular Irish pub located on Main Street across from the University of Delaware in Newark.  While it’s not downtown, it’s only about 15-20 minutes away.  And everyone who we have gotten to know in the process – the staff, the townies, the university students and professors, other business owners in the area, the former owners – have been incredibly warm and welcoming.  And of course, we have Guinness.  Harp on tap.  Whiskey.  Great pub food.  Live music.  And a private room upstairs with a second bar, perfect for private events and entertaining.  Expect us to be making good use of that space!

For those of you wondering what it is like being an old couple and owning a bar in a college town, the following video from about 11:00 a.m. on St. Patrick’s Day pretty much says it all….!

Keep following for more updates and adventures!

Or check out Catherine Rooney’s on Instagram @rooneysnewark or on Facebook @CatherineRooneysNewark.

Mette K.

Ever Wish You Could Re-Live Your College Years? Here’s an Opportunity for a Great Cause!

Hello Linked In!

My son, Justin, along with most of his brothers, is participating in a charity event called St. Baldrics. (Yes, that’s right… in a surprise development, my wonky son has stopped studying long enough to join a frat! Now, it is a frat full of young RPI engineering students. So let’s not get carried away. But it is a frat. Hijinks and shenanigans are involved.)

I digress, though. The young men are fundraising to help promote research into childhood cancer. At the conclusion, they will then shave their heads to raise awareness.

Being a supportive mother, I have made my donation ($250) on the condition that my very camera-shy freshman provide before and after photos.

Now Justin has asked if I can also spread the word to all of you. And if I do that, it seems only fair that you should be able to join in the fun as well. So…. If my Linked In/Facebook community, collectively, matches my donation, I will post those before and after photos for everyone to share at the conclusion of the fundraiser. I mean, this is clearly the only possible response; right? (Diabolical laughter! My children will need so much therapy….)

As an added bonus, if you all double my donation, I will also share with you the very special cheer of the RPI Engineers football team. For perspective, I first bring you this video clip from my alma mater… the Trinity University Miracle Lateral Play.  Suffice it to say, nobody in my family will ever be playing football for USC. Or UCLA.

Seriously, please help Justin with this great cause!  You can donate here.

Mette K. (Proud Mother)

Filing Alert: #Fallbrook Technologies Files Chapter 11 Petition in Delaware

Texas-based Fallbrook Technologies has filed for chapter 11 protection. The committee formation meeting will take place on March 9, 2018 at 10:00 a.m. in Wilmington, Delaware. The formation notice is available here.

World Domination, One Gear At a Time

Fallbrook develops and manufactures the NuVinci continuously variable transmission systems. What is that, you ask? It makes stuff more efficient. So the company’s mission can be summed up as achieving world domination by creating a better mousetrap. Or as it says, setting the new global standard for managing mechanical and electro-mechanical power systems.

And it will do this by “transforming gears to (NuVinci) spheres.” That is, by using a set of rotating and tilting spheres between the input and output components of a transmission. If you have a degree in engineering, perhaps this brings something to mind. For the rest of us, the company has provided a helpful illustration.

Cool! Fallbrook’s system is now commercially available for bicycles and e-bikes. And, Fallbrook says, its technology has exciting applications in machinery, vehicles, and other equipment.

The company has two divisions.

  • Its Enviolo-branded bicycle division, which was formed to demonstrate mass market viability and to continue to develop the NuVinci technology.
  • Its licensing division, which provides NuVinci technology to “industry leaders” such as Allison Transmission, Dana Limited, TEAM Industries and Conti Temic microelectronics.

The Start-Up Business Encounters Liquidity Problems

The company landed in bankruptcy because of its “inability to meet operating expenses and satisfy debt obligations with current revenue streams.” Translation: Licensees are not yet selling products that utilize NuVinci, so hoped-for royalty income is not yet there. And revenue from its bicycle division is not enough to sustain the company.

Before filing for bankruptcy, Fallbrook says it “exhausted all other available courses of action, including a comprehensive marketing process for the Debtors’ assets, refinancing existing obligations, and negotiations with its noteholders.”

The Bankruptcy Plan

Those efforts, Fallbrook tells us, resulted in a restructuring support agreement that will de-leverage its balance sheet by allowing it to pay interest in kind, convert certain debts to equity, and obtain additional working capital.  The plan is supported by holders of the company’s senior secured notes, bridge notes, and subordinated convertible notes. The company hopes to obtain support from others in the coming weeks. Here is what the plan looks like:

  • Administrative Expense Claims: Paid in full in cash or other agreed treatment.
  • Priority Claims: Unimpaired.
  • Other Secured Claims: Secured claims other than existing notes and bridge notes to be paid in full in cash, unimpaired, reinstated or receive other agreed treatment.
  • Senior Secured Claims: Existing notes to be allowed in the amount of roughly $49.6 million, and bridge notes to be allowed amount of roughly $8.8 million. Existing notes and bridge notes to be cancelled, with holders participating in the new second lien facility and equity in the reorganized company.
  • Convertible Notes Claims and General Unsecured Claims: If the class of general unsecured claims votes to accept the plan, claimants will receive a pro rata share of 13% of the new common stock.
  • Existing Equity Interests: Extinguished.
  • Convenience Class: TBD

Notwithstanding its revenue struggles, Fallbrook says that it believes in its technology. Perhaps more importantly, it believes the total market for its technology is $150 billion.

Financing and Critical Vendor Status

To support its restructuring, Fallbrook has obtained a $8 million credit facility from with Kayne Credit Opportunities Fund (QP). Fallbrook has also asked for authority to pay critical vendors up to $1.25 million. And key vendor Tri Star has agreed to continue performing under a manufacturing and supply agreement in exchange for critical vendor status and other protections.

The Company’s Current Capital Structure

Secured Debt:

  • Existing notes: $49.6 million
  • Bridge notes: $8.8 million

Unsecured Debt:

  • Convertible notes: $15.3 million
  • Trade debt: $5.4 million

Case Information

The debtors are represented by Shearman & Sterling and Young Conaway Stargatt & Taylor. Roy Messing of Ankura Consulting is the CRO.

The case has been assigned to Judge Mary Walrath (case number 18-10384 (MFW)).

Mette K.