Pacific Drilling opts for Chapter 11

BY Fraser Tennant

Due to significant disruption in the offshore drilling market caused by the coronavirus (COVID-19) pandemic, offshore ultra-deepwater drilling company Pacific Drilling has filed for Chapter 11 bankruptcy protection.

This is the second time the company has filed for Chapter 11 in less than three years, having previously emerged from bankruptcy in late 2018.

Alongside the filing, the Luxembourg-based Pacific Drilling and certain of its domestic and international subsidiaries have entered into a restructuring support agreement (RSA) with an ad hoc group of the largest holders of its outstanding bond debt.

The RSA is intended to eliminate the company’s approximately $1.1bn in principal amount of outstanding bond debt through the cancellation and exchange of debt for new equity. Pacific Drilling expects to emerge from Chapter 11 by the end of the year with access to new capital in the form of an $80m exit facility and with approximately $100m of cash and cash equivalents on the balance sheet.

“After spending months evaluating options for addressing our long term financial needs in light of challenging market and operational conditions, we are pleased to reach agreement that paves the way for an expeditious Chapter 11 restructuring process,” said Bernie Wolford, chief executive of Pacific Drilling.

He continued: “This restructuring is intended to enhance our financial flexibility by eliminating our entire prepetition debt and cash interest burden. We expect to emerge from this process in a stronger position to compete in today’s challenging, lower-commodity-price environment.”

Since the beginning of 2020, the global health crisis caused by COVID-19 and the resulting oil supply and demand imbalance have caused significant disruption in world economies and markets, including a substantial decline in the price of oil. The impact of these market conditions on Pacific Drilling’s business has been direct and significantly negative, rendering its current capital structure unsustainable over the long term.

However, with approximately $120m of cash and cash equivalents, and seven of the most advanced high-specification drillships in the world, Pacific Drilling intends to continue its worldwide operations as usual, deliver services for existing and prospective clients and, subject to court approval, pay all obligations incurred during the Chapter 11 case.

Mr Wolford concluded: “I appreciate the ongoing support of our employees, clients and vendors as we complete this accelerated restructuring process. We remain committed to delivering the safest, most efficient and reliable deepwater drilling services in the industry.”

News: Pacific Drilling files for Chapter 11 to eliminate $1.1 billion of debt

US denim retailer True Religion exits Chapter 11

BY Fraser Tennant

For the second time in three years, upmarket US denim brand True Religion has successfully emerged from Chapter 11 bankruptcy protection.

The emergence was achieved under a court-approved plan of reorganisation that significantly reduced the company’s debt as well as providing liquidity to execute its growth plans over the next several years.

Founded in 2002, True Religion first filed for Chapter 11 protection in July 2017 during a period when it struggled to adapt to a generational shift in shopping habits, and again in April 2020 when the full impact of the coronavirus (COVID-19) pandemic on retailers became clear.

However, even amid a global pandemic, True Religion’s strong brand identity has enabled the development and confirmation of a plan of reorganisation that paves the way for its continued success.

“We want to thank our loyal and diverse customer base, which remained faithful to the brand both prior to and during the pandemic,” said Michael Buckley, chief executive of True Religion. “We are incredibly thankful and completely indebted to our customers who have showed us consistent support during a period that was challenging in so many ways.”

Mr Buckley, who rejoined True Religion in November 2019 to execute the necessary changes to achieve the company’s full potential across its various channels, previously served as president from 2006 to 2010 during a phase of rapid growth.

“Although we had to make the very difficult decision to lower our overall store count and employee base, our successful emergence from bankruptcy as a stronger company is a testament to the contribution of all of our employees throughout the brand’s history,” added Mr Buckley.

Additionally, collaboration from lenders and other vendor partners in the bankruptcy case also proved pivotal in helping True Religion to emerge from Chapter 11.

Mr Buckley concluded: “The reorganisation has allowed True Religion to reduce its operating costs and lower its debt load, and emerge a profitable, lean operating company with a healthy balance sheet. The path is now clear to continue the reinvigoration of an iconic American brand.”

News: Retailer True Religion emerges from speedy Chapter 11 bankruptcy

Oil sector supplier Utex Industries files for Chapter 11

BY Fraser Tennant

In yet another bankruptcy related to the impact of coronavirus (COVID-19) on oil producers and the companies that rely on them for business, sealing product manufacturer Utex Industries has filed for Chapter 11.

The filing will be followed by a balance sheet restructuring intended to reduce Utex's funded debt by approximately $700m and provide it with up to $42.5m in new financing. The process is expected to be completed in a matter of weeks.

Utex’s plan is supported by over 81.6 percent and 90.4 percent of its first and second lien lenders, respectively. Utex’s lenders have also agreed to provide Utex with debtor-in-possession (DIP) financing and the consensual use of cash collateral to enable the company to operate its business in the ordinary course.

“After an extensive analysis of strategic and financial options for the Company, and after months of negotiations, we are very pleased to have reached an agreement for a consensual restructuring with our secured lenders and other stakeholders,” said Mike Balas, chief executive of Utex. “We believe that the restructuring contemplated by the Agreement will provide us with the capital structure and liquidity to compete and grow in today's business environment.”

A market-leading manufacturing business headquartered in Houston, Texas, Utex operates manufacturing, distribution and technical sales facilities in the US and abroad and has approximately 500 employees. The company supports a diverse customer base in the oil & gas, industrial, mining, and water end markets.

Throughout the Chapter 11 restructuring process, Utex expects to continue to operate its business without disruption to its vendors, customers, employees or other partners, and, subject to customary approvals, will have access to substantial liquidity to meet its obligations. This includes funding employee wages and benefits, and paying vendors and suppliers for all goods and services.

Mr Balas concluded: “I am grateful to our dedicated employees who have continued to work hard in this challenging business environment, and this restructuring will position us and our partners for success in the years to come.”

News: Utex Industries to Shed $700 Million Debt Through Chapter 11 Bankruptcy

Retail giant Neiman Marcus emerges from Chapter 11

BY Fraser Tennant

Emerging from one of the highest-profile retail collapses during the coronavirus (COVID-19) pandemic, omnichannel fashion retailer Neiman Marcus Holding Company has completed its Chapter 11 protection process, having successfully implemented a plan of reorganisation.

Now operating with a strengthened capital structure that eliminated more than $4bn of existing debt and more than $200m of cash interest expense annually, Neiman Marcus emerges with the full support of its creditors and new equity shareholders.

“With the successful implementation of our restructuring, Neiman Marcus will continue to be the preeminent luxury shopping destinations for years to come,” said Geoffroy van Raemdonck, chief executive of Neiman Marcus Group. “While the unprecedented business disruption caused by coronavirus (COVID-19) has presented many challenges, it has also given us the opportunity to reimagine our platform and improve our business.”

The company’s new owners are funding a $750m exit financing package that fully refinances the debtor-in-possession (DIP) loan and provides significant additional liquidity for the business. Neiman Marcus has also secured a $125m ‘first-in, last-out’ (FILO) facility, the proceeds of which will refinance existing debt and provide liquidity to support the company's ongoing operations and strategic initiatives.

Furthermore, the exit term loan financing and FILO facility are in addition to liquidity provided by a $900m asset-based lending (ABL) loan. With the support of its new shareholders and funds available from the exit financing and FILO and ABL facilities, Neiman Marcus expects to be able to execute on the strategic initiatives to ensure a long and successful future.

“Our new owners understand the value of our brands and the opportunity for growth,” continued Mr van Raemdonck. “They are also strongly committed to supporting our company on sustainability issues – where we intend to be a leader within the industry. At the conclusion of this process, I remain profoundly impressed by the strength of Neiman Marcus, the commitment of our associates, the unwavering support of our brand partners, and the loyalty of our customers.”

Confident that Neiman Marcus is positioned to continue to transform the future of retail, Mr van Raemdonck concluded: “We emerge from Chapter 11 as a stronger, more innovative retailer, brand partner and employer.”

News: Department store chain Neiman Marcus emerges from bankruptcy

Century 21 files for Chapter 11 blaming insurers

BY Fraser Tennant    

Pointing the blame at its insurers, US department store chain Century 21 has filed for Chapter 11 bankruptcy in order to commence a wind down of its retail operations and maximise its assets for the benefit of shareholders.

The company has 13 stores across New York, New Jersey, Pennsylvania and Florida, having served its customers for nearly 60 years.

Reportedly, the decision to file for bankruptcy follows nonpayment by the company's insurance providers of approximately $175m due under policies put in place to protect against losses stemming from business interruption, such as that experienced as a direct result of the coronavirus (COVID-19) pandemic.

Concurrently, Century 21 has filed a lawsuit against several of its insurance providers based on their decision not to compensate the company for losses under the policies.

"We have no viable alternative but to begin the closure of our beloved family business because our insurers, to whom we have paid significant premiums every year for protection against unforeseen circumstances, have turned their backs on us at this most critical time," said Raymond Gindi, co-chief executive of Century 21. "We are confident that had we received any meaningful portion of the insurance proceeds, we would have been able to save thousands of jobs and weather the storm, in hopes of another incredible recovery."

A pioneer and leader in high-end, off-price fashion retail since 1961, Century 21 offers men's, women's, and children's apparel, footwear, outerwear, lingerie and accessories, along with beauty and home goods,

"While we wish that Century 21 could continue to be a must-see shopping destination for so many, we are proud of the pioneering role it has played in off-price retail and the iconic brand it has become,” said IG Gindi, co-chief executive of Century 21. “It has been a true honour for us to be part of the vibrant New York City fashion scene and to serve millions of locals, tourists and celebrities, side by side."

Century 21 stores are currently open to serve customers, with going out of business sales commencing at all of its locations and at c21stores.com.

Mr Raymond Gindi concluded, "We will be forever grateful for the vital role our customers played in building the Century 21 legacy hand in hand with our family. Together, we hope we can help our loyal customers create some final memorable Century 21 stories."

News: Century 21 to close up shop, says insurers won't cover COVID losses