Bankruptcy/Restructuring

Fading denim brand Diesel USA files for Chapter 11

BY Fraser Tennant

Blaming falling sales, a fumbled turnaround, expensive leases and inflexible landlords, denim and accessory brand Diesel USA has moved to protect itself from creditors and filed a voluntary petition for relief under Chapter 11 bankruptcy.

Hit hard by the ongoing downturn in the retail sector, the New York-based arm of Italian retail clothing company Diesel S.p.A. has seen annual sales plummet 53 percent, to $104m. In addition, cyber attacks and theft have proved costly to the retailer.

The Chapter 11 petition estimates up to $100m in assets and as much as $50m in debt. Diesel’s parent company the OTB Group is not part of the Chapter 11 filing.

Diesel’s bankruptcy comes at a time when several retailers, such as shoe store Payless, Victoria’s Secret and Gap, have reduced their footprints and closed stores following bankruptcy. However, unlike these retailers, Diesel intends to breathe new life into its US brand.

“The filing is a critical step in enabling Diesel USA to address certain long-term liabilities for a healthier and stronger business in the country, building a dynamic brand presence in line with the evolving US retail environment,” said Diesel in a statement. “This procedure opens the way to a redefinition of the brand’s geographic footprint in the US.”

This redefinition of the brand will include some important milestones for Diesel USA in 2019, including refitting and reviewing most of its retail store network and making sure its retail footprint meets the needs of both existing and new consumers.

Diesel is also looking to strengthen its e-commerce presence and has pledged to redouble its commitment to innovation via a series of key wholesale partnerships designed to give resonance to the retailer’s collections and special products, with tailored buying and distribution activities planned for each.

A premium denim and accessory brand which dominated pop culture in the 1990s and early 2000s, Diesel USA currently has 380 employees and 28 retail stores in the US, as well as relationships with department stores and specialty retailers.

The Diesel statement concluded: “We remain fully committed to the US market, a unique and fundamental window to an important player globally.”

News: Jeans maker Diesel USA files for bankruptcy

Bankruptcy forces Payless ShoeSource to close its US doors

BY Fraser Tennant

As the latest retail chain to shut up shop in the US, shoe retailer Payless ShoeSource is to close its 2500 stores in the US after filing for Chapter 11 bankruptcy – for the second, and likely final, time.

The company first filed for Chapter 11 bankruptcy in April 2017, closing approximately 400 stores.

In addition to its Chapter 11 filing, Payless ShoeSource will also be seeking protection from creditors under the Companies' Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice.

Founded in 1956, Payless ShoeSource serves millions of customers through its extensive global network spanning 36 countries worldwide. The firm has 420 stores in Latin America, the US Virgin Islands, Guam and Saipan, as well as 370 international franchisee stores across the Middle East, India, Indonesia, Indochina, Philippines and Africa.

“The challenges facing retailers today are well documented and, unfortunately, we emerged from a prior reorganisation ill-equipped to survive in today’s retail environment,” said Stephen Marotta, chief restructuring officer at Payless ShoeSource. “The company has been left with too much remaining debt, too large a store footprint and a yet-to-be realised systems and corporate overhead structure consolidation. As a consequence, we must wind down our North American retail operations under Chapter 11 and the CCAA.”

The company has said that it expects store closings will begin at the end of March – with many stores remaining open until the end of May – as it conducts liquidation sales in the US and Canada. E-commerce operations have also been wound down. However, profitable stores throughout Latin America, which are not part of the Chapter 11 filing, and international franchisees’ stores will continue to operate as usual. “As we move through the process, we will work to minimise the impact on our employees, customers, vendors and other stakeholders,” added Mr Marotta.

Additionally, authorisation is being sought from the US Bankruptcy Court for customer gift cards and store credit to be honoured until 11 March 2019, and to allow returns and exchanges of applicable non-final sale purchases made prior to 17 February 2019, until 1 March 2019. A similar request will be made in the Canadian Court. However, rewards programmes and outstanding merchandise coupons in North America have been discontinued with immediate effect.

"I would like to express our deep appreciation for the hard work of our dedicated employees and their commitment to customers, who have shown us tremendous loyalty for more than 60 years,” concluded Mr Marotta.

News: Payless ShoeSource seeks bankruptcy protection again

Californian wildfires liabilities push PG&E toward Chapter 11

BY Fraser Tennant

The devastation wrought by wildfires in California is pushing energy company Pacific Gas and Electric (PG&E) Corporation to file for Chapter 11 bankruptcy as it faces liabilities estimated at $30bn.

In 2017 and 2018, fires destroyed vast areas of Northern California and claimed the lives of 44 and 86 people respectively.

During the Chapter 11 process, PG&E expects to resolve its liabilities resulting from the 2017 and 2018 wildfires and will assure access to the capital and resources needed to continue to provide a safe service to its customers.

Furthermore, the company has stated that it does not expect any impact to its customers’ electric or natural gas service and remains committed to assisting the communities affected by the wildfires.

Earlier this week, Geisha Williams, PG&E's chief executive since March 2017, resigned.  

"The people affected by the devastating wildfires are our customers, our neighbours and our friends, and we understand the profound impact the fires have had on our communities and the need for PG&E to continue enhancing our wildfire mitigation efforts,” said John R. Simon, interim chief executive at PG&E Corporation. “We remain committed to helping them through the recovery and rebuilding process. We believe a court-supervised process under Chapter 11 will best enable PG&E to resolve its potential liabilities in an orderly, fair and expeditious fashion.”  

PG&E has engaged in discussions with potential lenders with respect to debtor-in-possession (DIP) financing and expects to have approximately $5.5bn of committed DIP financing by the time it files for relief under Chapter 11 on or about 29 January 2019. The DIP financing will provide PG&E with sufficient liquidity to fund its ongoing operations, including its ability to provide a safe service to its customers.

Richard C. Kelly, chair of the board of directors of PG&E Corporation, concluded: “Our goal will be to work collaboratively to fairly balance the interests of our many constituents – including wildfire victims, customers, employees, creditors, shareholders, the financial community and business partners – while creating a sustainable foundation for the delivery of safe service to our customers in the years ahead.”

News: PG&E talking to banks on multibillion dollar bankruptcy financing

Parker Drilling announces RSA and Chapter 11 to reduce debt and obtain capital

BY Fraser Tennant

Another victim of the ongoing volatility across the sector, oilfield services provider Parker Drilling Company has entered into a restructuring support agreement (RSA) in a bid to reduce its spiralling debt and obtain access to capital commitments.

To implement the terms of the RSA, Parker has voluntarily filed for Chapter 11 protection. The company’s non-US subsidiaries and certain US subsidiaries are excluded from the filing and will not be affected by the process. Furthermore, Parker intends to seek confirmation of a prearranged plan of reorganisation, for which consenting stakeholders have indicated their support.

Parker’s proposed plan, which is subject to court approval, reduces approximately two-thirds of funded debt and injects $95m of new, fully committed equity capital through a backstopped rights offering. It also contemplates the issuance of a new $210m loan.

In addition, Parker anticipates that its cash flow and existing liquidity will be sufficient to support global operations during the bankruptcy and restructuring process, and has further augmented liquidity with access to $50m in debtor-in-possession (DIP) financing. The lenders under the DIP financing have also committed to fund an exit facility of $50m.

“The steps we are announcing will ensure that we have the appropriate capital structure to take advantage of these opportunities to strategically grow our assets, our global footprint, and our suite of products and services," said Gary Rich, chairman, president and chief executive of Parker Drilling. "We are confident that by resolving our legacy balance sheet issues, we will be able to continue executing a strategy to build greater scale in core markets and expand strategic offerings, while strengthening our drilling and rental tools businesses.”

Parker’s existing customer and vendor contracts are expected to remain in place and be serviced in the ordinary course of business during the bankruptcy and restructuring process. Employee wages and benefits, as well as trade creditors, will be paid in full in the ordinary course of business.

A provider of drilling services and rental tools to the energy industry, Parker serves operators in the inland waters of the US Gulf of Mexico and in select US and international markets.

Mr Rich concluded: “I am confident that the strength of our complementary business lines, combined with a solid financial platform, will position Parker to lead the industry as market conditions improve."

The company has stated that it expects to emerge from bankruptcy protection early in 2019.

News: Parker Drilling files for pre-arranged Chapter 11 reorganization

Helicopter-leasing company Waypoint files for Chapter 11

BY Fraser Tennant

The latest casualty of depressed global oil and gas prices, Ireland-based helicopter leasing company Waypoint Leasing Holdings Ltd has filed for Chapter 11 bankruptcy in New York and plans to restructure.

Waypoint, along with certain of its subsidiaries, expects to proceed to move through the restructuring process as quickly as possible, and is committed to working with its lenders and stakeholders toward a speedy and successful transformation of the company.

The world’s largest independent helicopter leasing company, Waypoint’s portfolio includes approximately 160 aircraft with a market value of $1.6bn. The company is backed by entities controlled by billionaire investors George Soros and Michael Dell.

“Waypoint’s Chapter 11 filing is the next step in our holistic transformation strategy and will provide us with the opportunity to emerge with a stronger, sustainable and more competitive balance sheet,” said Hooman Yazhari, chief executive of Waypoint. “It will further catalyse our ability to implement many of the innovative and evolutionary changes to our business model, allowing us to meet head-on the challenges and opportunities which our displaced industry presents.”

Over the past six months, Waypoint has been actively working with its lenders to de-lever its balance sheet and reposition for strength and stability. The company also plans to continue that work during the Chapter 11 process and, in addition to de-levering, will continue to implement strategic initiatives.

“During our continued transformation, our team will work as hard as possible to demonstrate Waypoint’s true value as the most dedicated and capable steward of our assets,” Mr Yazhari continued. “We will also continue our intense focus to deliver on the needs and requirements of our customers.”

Waypoint also stated that it would use the Chapter 11 process to facilitate the acquisition of Waypoint by a new owner, with a continued focus on its customers.

Mr Yazhari concluded: “I am incredibly grateful for our supportive stakeholders, including our global customer base, original equipment manufacturers and maintenance, repair and operating suppliers, other partners and our talented team of employees.”

Established in 2013, Waypoint’s fleet is supported by over 40 employees based in eight offices worldwide. In addition to Ireland, Waypoint has offices in London, the US, Canada, Hong Kong, Brazil and South Africa.

News: Helicopter Company Backed by Soros, Dell Flies into Chapter 11

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