Escape from New York? – NRA files for Chapter 11

BY Fraser Tennant

In what it calls the "most transformational moment in its history”, the National Rifle Association (NRA) has filed for Chapter 11 protection in order for it to reincorporate in Texas and escape “a corrupt political and regulatory environment” in New York, where it is currently incorporated.

The NRA has stated that the Chapter 11 filing is part of a restructuring plan rather than financial problems and that it is not bankrupt or going out of business. Rather, the association has indicated that it is in its strongest financial condition in years.

The gun-rights group’s plan to restructure and move to Texas comes amid a legal battle with New York’s attorney general Letitia James, who has vowed to investigate the “legitimacy” of the NRA and seek its dissolution.

To this end, in August 2020, the NRA was sued by Ms James, accusing NRA chief executive and executive vice president Wayne LaPierre and other senior leaders of illegally diverting tens of millions of dollars from the association through excessive expenses and contracts that benefitted relatives or close associates.

In response, the NRA rapidly filed its own lawsuit, stating that there was no evidence to support the attorney general’s claims that the NRA was a “terrorist organisation” and a “criminal enterprise”. Moreover, the association believes that the attorney general’s investigation is for purely political purposes.

Aiming to swiftly move through the Chapter 11 restructuring process, the NRA seeks court approval to reincorporate the association in the state of Texas – home to more than 400,000 NRA members – while continuing its day-to-day operations, training programmes and second amendment advocacy.

“Texas values the contributions of the NRA, celebrates our law-abiding members, and joins us as a partner in upholding constitutional freedom,” said Mr LaPierre. “We seek protection from New York officials who illegally abused and weaponised the powers they wield against the NRA and its members.”

Established in 1871, the NRA is America’s largest and oldest civil rights organisation, with approximately five million members. Furthermore, through its restructuring plan, the NRA aims to streamline costs and expenses, proceed with pending litigation in a coordinated and structured manner, and realise many financial and strategic advantages.

“The plan represents a pathway to opportunity, growth and progress,” concludes Mr LaPierre. “The NRA is pursuing reincorporating in a state that values the contributions of the NRA, celebrates our law-abiding members and will join us as a partner in upholding constitutional freedom. This is a transformational moment in our history.”

News: N.R.A. Declares Bankruptcy and Seeks to Exit New York

Superior Energy Services files for Chapter 11

BY Fraser Tennant

In a move to unburden itself of more than $1bn in debt, oilfield services company Superior Energy Services has filed for Chapter 11 bankruptcy protection in order to implement a proposed pre-packaged restructuring plan.

The filing is the latest in a series of bankruptcies to have hit the energy industry in recent months, including those of Seadrill Partners and Noble Corporation. In 2020 to date, 54 oilfield services companies have filed for bankruptcy.

Superior Energy’s restructuring plan eliminates all of its funded debt and related interest costs, as well as establishing a capital structure that the company believes will improve its operational flexibility and long-term financial health, even in a low-commodity-price environment.

“Since the initial announcement of our planned recapitalisation initiative, we have been encouraged by the growing consensus of the noteholders that have agreed to support the plan, as well as the ongoing strong backing and support provided by our customers and lenders,” said David Dunlap, president and chief executive of Superior Energy. “We look forward to quickly emerging from the Chapter 11 in early 2021.”

The company also intends to operate its businesses and facilities without disruption to its customers, vendors and employees, and is filing motions with the Bankruptcy Court to ensure that all undisputed trade claims against it – whether arising prior to or after the commencement of Chapter 11 proceedings – will be paid in full in the ordinary course of business.

Founded in 1991, Houston-based Superior Energy serves the drilling, completion and production-related needs of oil and gas companies worldwide through a diversified portfolio of specialised oilfield services and equipment that are used throughout the economic lifecycle of oil and gas wells.

Mr Dunlap concluded: “We thank all of our employees for their ongoing hard work and commitment to our company and our customers and are grateful to our vendors and other valuable business partners for their continued support.”

News: Superior Energy Services files Chapter 11 bankruptcy to restructure

Guitar Center files for Chapter 11 bankruptcy

BY Richard Summerfield

Guitar Center, the biggest musical instrument retailer in the US, has filed for Chapter 11 bankruptcy as the impact of COVID-19 continues to be felt across the retail sector.

The filing in the Bankruptcy Court of the Eastern District of Virginia will allow Guitar Center and its related brands to continue to operate in the normal course while it restructures. The company said it has liabilities of $1bn to $10bn, with a similar range for its assets, according to the filing.

Under the terms of the company’s restructuring plan, Guitar Center, which has around 300 stores across the US, and its sister brand Music & Arts, which has more than 200 stores specialising in band and orchestral instruments for sale and rent, will reduce their debt by nearly $800m.

Guitar Center has secured up to $165m in new equity investments from its equity sponsor, a fund managed by private equity firm Ares Management Corporation, and new equity investors, which include a fund managed by The Carlyle Group and funds managed by Brigade Capital Management.

Guitar Center has arranged $375m in debtor-in-possession (DIP) financing, which is being provided by a number of its existing noteholders and ABL lenders. In connection with the plan, the company currently intends to raise $335m in new senior secured notes. UBS Investment Bank will serve as the lead placement agent in connection with this effort. Guitar Center expects to emerge from bankruptcy protection before the end of the year.

“This is an important and positive step in our process to significantly reduce our debt and enhance our ability to reinvest in our business to support long-term growth,” said Ron Japinga, chief executive of Guitar Center. “Throughout this process, we will continue to serve our customers and deliver on our mission of putting more music in the world. Given the strong level of support from our lenders and creditors, we expect to complete the process before the end of this year.”

Prior to the outbreak of COVID-19, the company was already under significant financial pressure as competition from online rivals intensified and it struggled to cope with its heavy debt load, a legacy of its leveraged buyouts. The retailer was first acquired by private equity firm Bain Capital. Ares Management then took control in 2014, in a deal aimed at reducing Guitar Center’s debt; despite these efforts, the company continued to carry around $1.3bn worth of debt from the Bain takeover.

News: Guitar Center is filing for bankruptcy

Natural gas producer Gulfport Energy files for Chapter 11

BY Fraser Tennant

In a bid to reduce its debt by approximately $1.25bn, natural gas and oil company Gulfport Energy Corporation, along with its wholly owned subsidiaries, has filed for Chapter 11 bankruptcy protection in order to implement a restructuring support agreement (RSA).

Attached to the RSA is a pre-negotiated’ restructuring plan that will strengthen Gulfport’s balance sheet, significantly reduce its funded debt, and lower ongoing operational costs. The company also plans to  issue $550m of new senior unsecured notes under the plan to existing unsecured creditors of certain Gulfport subsidiaries.

In addition, Gulfport has secured $262.5m in debtor-in-possession (DIP) financing from its existing lenders under its revolving credit facility, including $105m in new money that will be available upon court approval. The financing is structured to fund Gulfport’s ordinary course operations during the Chapter 11 proceedings, including employee wages and benefits and payments to suppliers and vendors.

Gulfport Energy is one of a growing number of US oil and gas companies that have filed for Chapter 11 bankruptcy protection after the coronavirus (COVID-19) pandemic deepened their struggle with low prices and excessive debt.

“Despite efforts to streamline our business, our large legacy debt burden in addition to significant legacy firm transportation commitments created a balance sheet and cost structure that was unsustainable in the current market environment,” said David M. Wood, president and chief executive of Gulfport Energy. “After working diligently to explore all strategic and financial options available, Gulfport’s board of directors determined that commencing a Chapter 11 process is in the best interest of the company and its stakeholders.”

Headquartered in Oklahoma City and employing 259 people, Gulfport Energy is an independent returns-oriented, gas-weighted, exploration and development company, as well as being one of the largest producers of natural gas in the US.

“We expect to exit the Chapter 11 process with leverage below two times and rapidly deliver thereafter due to a much-improved cost structure driven by reduced legacy firm transport commitments and costs,” continued Mr Wood. “These improvements will significantly improve our ability to generate cash flow and value for our stakeholders going forward.”

Furthermore, Gulfport hopes to safeguard its future with the help of commitment from its existing lenders to provide $580m in exit financing upon emergence from Chapter 11.

Mr Wood concluded: “We hope to move through the restructuring process quickly and efficiently and emerge as a stronger company positioned for future success.”

News: Natural gas producer Gulfport Energy files for bankruptcy

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