Energy Future manages to delay Ch. 11 for now; in talks on $9.7M DIP

Energy Future Holdings will not be filing Chapter 11 tonight, the company said, even as it also disclosed it was arranging a $9.675 billion DIP facility for the filing when it did, finally, arrive.

Rather, in a Form 8-K filed this evening with the Securities and Exchange Commission, the company said it would skip some $119.3 million of April 1 coupon payments with respect to certain of its first lien notes, second lien notes, and pollution control revenue bonds, at its Texas Competitive Electric Holdings (TCEH) subsidiary, and instead “use the permitted grace periods” the debt indentures provide.

The first and second lien debt provides for a 30-day grace period, according to the filing, and the pollution control bonds provide for a 60-day grace period.

The coupons being skipped are $50.3 million due on $1.75 billion of 11.5% first lien notes due 2020; $58.9 million due on two series of $1.57 billion of 15% second lien notes due 2021; and $10.1 million due on the pollution control revenue bonds.

Separately, the company also said in a different SEC filing this evening that it would not be filing its Form 10-K, or annual report, as required today. As was widely expected, however, the company said the Form 10-K would include a statement from the company’s auditors substantially doubting Energy Future’s ability to continue as a going concern due to the company’s inability to repay debt obligations this year, most notably $3.85 billion of TCEH first lien term loans due in October. According to the filing, the auditor’s warning would trip a covenant in the TCEH credit agreement, and ultimately result in a default following a 30-day cure period.

“In consideration of the additional time required to evaluate the effects of these events on the financial statements and disclosures included in the companies’ annual reports on Form 10-K, such Form 10-Ks cannot be timely filed without unreasonable effort and expense, “ the company said in the filing.

Meanwhile, the company confirmed in the 8-K that, as had been stated in numerous press reports over the past two weeks, it has been engaged with its creditors and equity holders “in discussions regarding the terms of and conditions to changes in the companies’ capital structure and restructuring alternatives.” The company said that while “these discussions have been, and continue to be, constructive,” the parties have not yet reached an agreement.

The company also confirmed that it had executed confidentiality agreements with “certain unaffiliated holders of claims against the companies.”

The company did not provide any details of the substance of the negotiations, or the specific parties involved.

While, as noted, the company said it would “use” the grace periods provided by the various debt indentures affected by the non-payment of the coupons, the company said this did not mean that a Chapter 11 filing would necessarily be delayed by the entire 30-day grace period.

“TCEH’s decision of how much of the applicable grace periods to use before pursuing any restructuring alternative (including the filing for protection under Chapter 11 of the US Bankruptcy Code) will be evaluated based on various factors, including the status of the discussions [with creditors],” the company said.

But in the absence of the company curing the default, it is difficult to see how it could avoid a Chapter 11 filing beyond that grace period without the consent of its creditors. Defaults under the respective indentures would trigger various cross defaults and acceleration of an additional $23.8 billion of secured and $4.3 billion of unsecured debt.

Indeed, in connection with a potential Chapter 11 filing, the company said it has been “negotiating binding commitments with certain financial institutions for debtor-in-possession financings.” The filing said the proposed DIP “would provide for senior secured, super-priority revolving credit facilities and term loans totaling up to $4.475 billion at TCEH and $5.2 billion at Energy Future Intermediate Holdings, the intermediate holding company that serves as the parent for the company’s regulated utility, Oncor.

While negotiations continue, the company said it expects to operate in the normal course of business, noting that as of March 25, cash and cash equivalents totaled $763 million, consisting of $197 million at holding company EFH Corp., $137 million at EFIH, and $429 million at TCEH. – Alan Zimmerman


Bombardier places $1.8B, 2-part high yield offering (BB-/Ba3/BB-) at tight end of talk

Bombardier this afternoon completed its $1.8 billion, two-part offering of senior notes, via Bank of America as lead on the bookrunner squad, according to sources. Terms were finalized at the tight end of talk on both tranches. Note the 8.5-year tranche has a first call at par plus 75% of the coupon. Joint bookrunners are Barclays, BNP Paribas Citi, Commerzbank, Credit Agricole, Credit Suisse, Deutsche Bank, J.P. Morgan, Morgan Stanley, National Bank of Canada, and UBS. Proceeds will be used to refinance existing bonds, including 6.3% notes due in May and 7.25% notes due 2016. The pair total nearly $1 billion, and excess capital from the fundraising will support general corporate purposes, according to sources. Terms:

Issuer Bombardier
Ratings BB-/Ba3/BB-
Amount $600 million
Issue senior (144A-life)
Coupon 4.75%
Price 100
Yield 4.75%
Spread T+302
Maturity April 15, 2019
Call nc-life
Trade March 31, 2014
Settle April 3, 2014 (T+3)
Px talk 4.75-4.875%
Issuer Bombardier
Ratings BB-/Ba3/BB-
Amount $1.2 billion
Issue senior (144A-life)
Coupon 6%
Price 100
Yield 6%
Spread T+344
Maturity Oct. 15, 2022
Call nc3 @ par+75% coupon
Trade March 31, 2014
Settle April 3, 2014 (T+3)
Px talk 6.125% area
Notes First call is at par+75% coupon

Bankruptcy: Overseas Shipholding, equity panel end fracas over plan-support pact

Overseas Shipholding Group has reached an agreement under which the newly appointed equity committee in the case agreed not to file further objections to the company’s proposed plan-support agreement with a group of its senior lenders, and the company agreed to delay the hearing on the adequacy of the company’s disclosure statement to May 7, according to a stipulation filed with the bankruptcy court in Wilmington, Del.

The company’s disclosure-statement hearing is currently set for April 11.

The agreement also obligates the company to “reasonably consult and confer” with the equity panel and certain other specific equityholders, as well as potential third-party financing sources, “regarding possible alternative plans of reorganization.”

The agreement is subject to bankruptcy-court approval.

The other equityholders with which the company agreed to consult, in addition to the equity panel, are BHR Capital, Blue Mountain Capital, Cyrus Capital Partners (which is also a member of the official committee), and Donald Smith & Co. – the same group of holders that said in a February court filing that it had submitted a proposed alternative reorganization plan to the company that would provide creditors with “full value or otherwise unimpaired treatment” and would provide equityholders with a recovery “significantly greater” than that provided for in the company’s current plan (see “Shareholder group says it has alternate Overseas Shipholding plan, LCD, Feb. 26, 2014). – Alan Zimmerman



MDC Partners add-on high yield bonds (B-/B3) price at 105.25 to yield 5.276%

Marketing-services company MDC Partners this afternoon completed an add-on to its 6.75% senior notes due 2020 via bookrunners J.P. Morgan and Goldman Sachs, according to sources. Terms were finalized at the tight end of price talk. The notes come under Rule 144A for life and will be immediately fungible with the $660 million already outstanding. The original issue was completed in March 2013 at par. Proceeds will be used for general corporate purposes. Terms:

Issuer MDC Partners
Ratings B-/B3
Amount $75 million
Issue senior (144A for life)
Coupon 6.75%
Price 105.25
Yield 5.276%
Spread T+387
Maturity April 1, 2020
Call nc2
Trade March 28, 2014
Settle April 2, 2014 (T+3)
Lead Books JPM/GS
Px talk 104.75-105.25

Bankruptcy: Quiznos unsecured creditors’ committee appointed; full list


The U.S. Trustee overseeing the Chapter 11 proceedings of QCE Finance LLC, the owner of Quiznos, appointed an official committee of unsecured creditors on Wednesday. Current membership and contact information is as follows:


  • Aprendo Strada Inc. (787-460-4401)
  • DDR Corp. (Eric Cotton, 216-755-5662)
  • FX Networks (Susy Li, no phone listed, 10201 West Pico Boulevard, Building 103, Los Angeles, CA 90035)
  • Ghazi Hajj (no phone listed, 20969 Delgado Terrace, Boca Raton, FL 33433)
  • Maple Leaf Bakery Inc. (Brent Hill, 847-655-8163)
  • Pepsi-Cola Company (Taylor Ricketts, 336-896-5863)
  • John Brandon Turner (no phone listed, 395 S. Vine Street, Denver, CO 80209)

The Denver-based sandwich chain filed a pre-packaged Chapter 11 in Wilmington, Del., on March 14. Lawyers for Quiznos will return to court on April 9 for a final hearing on the company’s $15 million debtor-in-possession credit facility. – John Bringardner


Guitar Center bonds dip on entry into trading mart; Jefferies Finance, Calument

guitar center logoWednesday’s rush of issuance totaling $5 billion from nine credits was met with mixed interest in the secondary market on the break. Most were met with follow-on demand, like Jefferies Finance 6.875% notes due 2022, which were wrapped around 101, from par issuance, but for the first time in weeks there were laggards, such as Calumet Specialty Products 6.5% notes due 2021, which slipped to 99.5/100, also from par pricing, sources said.

Guitar Center’s two tranches followed suit. The 6.5% secured notes due 2019 and 9.625% unsecured notes due 2020 were both pegged at 98.5/99 this morning, from 98.9 at offer apiece, according to sources. Bank of America led the bookrunner quartet, with issuance under Rule 144A for life. As reported, the deal is part of a broad recapitalization effort whereby vintage-2007 buyout loans and some bonds held by Ares Management are repaid in full, a portion of cash-pay opco bonds are swapped into equity, and all holdco PIK notes are swapped into holdco equity.

Warner Music 5.625% secured notes due 2022 edged up to 100.25/100.75, from par pricing, while a coordinated issue of 6.75% unsecured notes due 2022 were steady, at 100/100.5, according to sources. Videotron 6.5% notes due 2021 were also at 100.25/100.75, versus par issuance. – Matt Fuller

Follow Matthew on Twitter @mfuller2009 for leveraged debt deal-flow, fund-flow, and trading news


Calumet Specialty Products $900M high yield bonds (B+/B2) price at par to yield 6.5%

Calumet Specialty Products this afternoon completed its offering of senior notes via Bank of America, Barclays, RBC, and J.P. Morgan. Terms were finalized at the tight end of guidance, along with a $50 million upsizing. Proceeds from the issuer’s return to market after four months will be used to fund the acquisition of Anchor Drilling Fluids, which was announced this morning for a consideration of $235 million. Additional capital will be used to fund the redemption of its 9.375% notes due 2019 and for general corporate purposes. As reported, the notes feature a special redemption feature, whereby $235 million of the new issue will be redeemed at par plus accrued interest if the Anchor acquisition is not closed or terminated by June 30, 2014. Calumet is an independent producer of specialty hydrocarbon products and fuel products in North America. Terms:

Issuer Calumet Specialty Products
Ratings B+/B2
Amount $900 million
Issue senior (144A)
Coupon 6.50%
Price 100
Yield 6.50%
Spread T+425
Maturity April 15, 2021
Call nc3
Trade March 26, 2014
Settle March 31, 2014 (T+3)
Px talk 6.5-6.75%
Notes Upsized by $50 million

Kindred Healthcare high yield bonds (B-/B3) price at par to yield 6.375%

Kindred Healthcare this afternoon completed its offering of senior notes via J.P. Morgan, Citi, Barclays, Morgan Stanley, and Wells Fargo, according to sources. Terms were finalized at the tight end of talk. Proceeds, alongside a new asset-based revolver and a new term loan, will be used to redeem the borrower’s 8.25% notes due 2019. Note, the first call is par plus 75% of the coupon. Kindred Healthcare is a healthcare-services company that operates hospitals, nursing and rehabilitation centers, assisted-living facilities, and a contract rehabilitation-services business. Terms:


Issuer Kindred Healthcare
Ratings B-/B3
Amount $500 million
Issue senior (144A)
Coupon 6.375%
Price 100
Yield 6.375%
Spread T+389
Maturity April 15, 2022
Call nc3; first call at par+75% coupon
Trade March 26, 2014
Settle April 9, 2014 (T+10)
Px talk 6.5% area

Bankruptcy: Sbarro unsecured creditors’ committee appointed, full list


The U.S. Trustee for the Manhattan Bankruptcy Court on March 26 appointed an official committee of unsecured creditors in the Chapter 11 proceedings of Sbarro.

The members of the panel and their contact information are as follows:

  • Performance Food Group, f/k/a Vistar Corporation (Attn: Bradley W. Boe, (303) 662-7121);
  • PepsiCo Sales (Attn: Michael T. Bevilacqua, (336) 896-5577);
  • GGP Limited Partnership (Attn: Julie Minnick Bowden, (312) 960-2707);
  • Simon Property Group (Attn: Ronald M. Tucker, (317) 263-2346);
  • The Macerich Company (Attn: Stephen L. Spector, (310) 394-6000).

Global Geophysical files Chapter 11; bondholders provide $60M DIP

Global Geophysical Services yesterday filed for Chapter 11 in bankruptcy court in Corpus Christi, Texas, the company announced last night.

The seismic data provider said its non-U.S. subsidiaries were not included in the filing.

The company said it obtained a $60 million multiple draw term loan DIP facility from holders of the company’s 10.5% senior notes due 2017. The holders are providing the DIP on a priming basis, court filings show, and the company’s motion seeking approval of the DIP provides that if the company’s current senior secured lenders “are not willing to consent to such priming, the DIP lenders are willing to provide the debtors all assistance reasonable and necessary to prosecute approval of the DIP Facility contained herein.”

The DIP’s term is 15 months. Interest is at L+850 with a 1.5% LIBOR floor.

The company is seeking interim access to $25 million.

In connection with the priming of the lenders’ liens, the company said that the lenders, with a claim of about $81.765 million, are oversecured and that even after borrowing the $25 million sought from the DIP on an interim basis, lenders would have a “substantial equity cushion,” based on the market value of the company’s publicly traded securities, publicly available financial data, and testimony the company expects to present at the DIP hearing.

Wilmington Trust is the administrative agent under the facility.

In an affidavit filed in the case, the company’s CFO, Sean Gore, explained that the company’s 2013 results were its best since 2009. But, Gore said further, “the combination of debtors’ strategic focus on the growing international market and buildup of backlog, combined with almost exclusive reliance on operating cash flow for liquidity, had an unintended consequence in early 2014.”

More specifically, Gore said that in September 2013, the company entered into a new $82.8 million term loan A, the proceeds of which were used primarily to refinance an existing revolver. The company also obtained a commitment for a $22.2 million term loan B at the time, but it was subject to certain potential transactions, was never drawn upon, and was terminated in February.

The term loan restricted the company’s ability to incur or guarantee additional debt, or to grant liens on assets.

At the same time, Gore said that the company received several large new overseas contracts early this year, increasing its backlog of business by $80 million in January and February alone, but the projects would require substantial upfront working capital for the company to position necessary crews and equipment. Revenue from the projects, however, would be significantly delayed.

Meanwhile, this issue combined with several other “relatively small and ordinary problems” that arose during the first quarter eventually resulted in “a full-on liquidity crisis for the short term.”

Compounding the company’s problems, Gore said it “also faced potential covenant defaults under the financing agreement related to liquidity and restatement of historical financial statements and related consolidated financial information for various annual and quarterly periods going back to 2009.” Rather than file a Form 10-K for 2013, Gore said, the company on March 17 filed a Form 8-K with the SEC disclosing the contemplated restatement. As reported, the company’s filing also noted it was in discussions with secured lenders concerning liquidity and that it had hired financial advisors Evercore Group and Alvarez & Marsal to evaluate financial and strategic alternatives (see “Global Geophysical bonds in price discovery on financial restatement,” LCD, March 18, 2014).

According to Gore’s affidavit, despite the company’s improving operations, its debt service obligations, including $40 million per year in interest alone, “made it impossible for the debtors to meet their short-term liquidity needs when faced with unexpected challenges.” Gore concluded, “[f]acing these challenges, the debtors chose to pursue debtor-in-possession financing to bridge their immediate needs while exploring a longer-term solution for their capital structure.”

Gore said that with the DIP in place, the company’s believes a stand-alone reorganization plan is possible, noting that deleveraging could immediately add $20-30 million of additional liquidity via debt service relief. “At the same time,” Gore added, the company would also “explore and develop alternative strategies, which could include a process for a sale of assets, a merger or business-combination transaction, or another form of recapitalization.”

The company’s 10.5% bonds slipped to 49/52 flat, or without accrued interest, this morning, sources said. The issue changed hands in blocks as low as 47 earlier today, versus 50 yesterday and 57.5 on Monday, trade data show.

Roughly $250 million aggregate principal of the notes are outstanding, $200 million of which were issued April 27, 2010, and $50 million of which were issued March 28, 2012. – Alan Zimmerman/Matt Fuller