Drugmaker Orexigen plans assets sale through Chapter 11

BY Fraser Tennant

Following years of battling to bring its finances into the black, biopharmaceutical company Orexigen Therapeutics, well-known for its focus on the treatment of obesity, has filed a voluntary petition under Chapter 11 of the US Bankruptcy Code.

In addition to the Chapter 11 filing, Orexigen also intends to file a motion seeking authorisation to pursue an auction and sale process. The proposed bidding procedures, if approved by the court, would require interested parties to submit binding offers to acquire substantially all of Orexigen's assets, which would be purchased free and clear of the company's debt. 

According to Orexigen, bids from strategic and financial buyers are expected to be submitted by 21 May 2018, with a structured auction targeted to commence no later than 24 May 2018 and a sale to be concluded by 2 July 2018.

"The board and management team have thoroughly assessed all of our strategic options and believe that this process represents the best possible solution for Orexigen, taking into account our financial needs," said Michael Narachi, president and chief executive of Orexigen. "While we have been working closely with our noteholders and have the support of a controlling number of senior secured noteholders, our debt covenant requirements and near-term cash flow needs have necessitated the protection afforded by a court-driven process."

Focused on the treatment of weight loss and obesity, Orexigen’s first product, Contrave, was approved in the US in September 2014 and has since become the number one prescribed weight loss brand in the US. However, Orexigen has struggled to market the obesity drug (known as Mysimba in Europe), resulting in weak sales and massive debt. 

Orexigen is seeking to continue normal operations throughout the Chapter 11 process and has the support of a controlling number of its senior secured noteholders, who have made a $35m financing commitment in order to fund the process (including the sale of assets), and meet its operational and financial obligations.

Mr Narachi concluded: “Orexigen’s mission is to help improve the health and lives of patients struggling to lose weight. Since the launch of Contrave, nearly 800,000 patients in the US have benefited, and through a successful transaction process, we intend that this growing patient demand will continue to be served." 

News: U.S. drugmaker Orexigen files for Chapter 11 bankruptcy

Beleaguered Bon-Ton files for Chapter 11

BY Fraser Tennant

Debt ridden and struggling to grow sales, Bon-Ton Stores, Inc. (Bon-Ton), one of the largest regional department store chains in the US, has filed for Chapter 11 bankruptcy protection.

Having filed a number of customary motions with the US Bankruptcy Court for the District of Delaware, Bon-Ton, along with its subsidiaries, is currently engaged in constructive discussions with potential investors and its debt holders regarding the terms of a financial restructuring plan.

The beleaguered retailer intends to use this court-supervised process to explore potential strategic alternatives to maximise value for the benefit of its stakeholders, which may include a sale of the company or certain of its assets as part of the plan of reorganisation.

In addition, Bon-Ton has received a commitment from its existing ABL lenders for up to $725m in debtor-in-possession (DIP) financing which, subject to court approval, is expected to support its operations during the financial restructuring process. Bon-Ton has also requested court approval to pay wages and provide health and other employee benefits, as well as pay vendors in the ordinary course for all goods and services provided on or after the Chapter 11 filing date.

“The actions we are taking are intended to give us additional time and financial flexibility to evaluate options for our business,” said Bill Tracy, president and chief executive of Bon-Ton Stores. “Bon-Ton has seven well-loved brands and associates that have remained committed to delivering excellent service to our customers for decades. During this court-supervised process, we plan to continue operating in the normal course and executing on our key initiatives to drive improved performance.”

Headquartered in York, Pennsylvania and Milwaukee, Wisconsin, Bon-Ton operates 256 stores, which includes nine furniture galleries and four clearance centres. The stores offer a broad assortment of national and private brand fashion apparel and accessories for women, men and children, as well as cosmetics and home furnishings.

Acting as Bon-Ton’s legal counsel during the restructuring process is Paul, Weiss, Rifkind, Wharton & Garrison LLP. AlixPartners LLP is serving as restructuring adviser and PJT Partners, Inc. is acting as financial adviser.

Mr Tracy concluded: “We appreciate the ongoing dedication of our associates, whose hard work in serving our loyal customers is critical to our success and the future of our company. Importantly, we look forward to continuing to provide our customers with quality merchandise and an exceptional shopping experience in our stores and across e-commerce and mobile platforms as we move through this financial restructuring process.”

News: U.S. department store chain Bon-Ton files for bankruptcy

Carillion collapse could cause supply chain woes

BY Richard Summerfield

With debts of around £1.5bn – including a £600m pension deficit – construction powerhouse Carillion Plc has entered liquidation, threatening the jobs of around 43,000 people worldwide, including 20,000 in the UK, and thousands more in the firm’s global supply chain.

Critics have suggested that Carillion’s expansion plans in recent years were too ambitious and its overreliance on debt were the two the most telling elements of its collapse. According to Bloomberg data, net debt to equity doubled between 2012 and 2016, from 15 to 30. While Carillion did attempt to cut costs and dividends, the company’s efforts were too late, beginning in earnest in 2017.

The liquidation of the UK’s second biggest construction company on Monday has created a crisis in the UK’s construction industry, with the future of major projects, including as yet unfinished hospitals, currently in doubt.

Carillion’s collapse came after talks between the firm, its lenders and the government came to conclusion with no deal in place to save it. Companies working for the firm on purely private sector deals will only have two days of government support, according to Cabinet Office Minister David Lidington. In 2016 Carillon spent £952m working with local suppliers, and according to the trade body Build UK, anywhere between 25,000 and 30,000 small businesses are owed money by the company.

Carillion is responsible for hundreds of public sector projects in the UK and is a provider of a number of key public services, including the management of military bases for the Ministry of Defence, providing facilities management for hospitals, courts and schools, and is a key partner in a number of nationally important infrastructure projects, such as the new HS2 railway line.

The company had hoped to receive a bailout from the government in the region of £20m, a sum which it hoped would encourage banks to follow suit. However, the government was unwilling to intervene. As a result, Carillion was plunged into liquidation, rather than administration, as it had very few sellable assets.

PwC will be providing six ‘special managers’ to advise David Chapman, a civil servant working for the Insolvency Service, who has been appointed as the company’s liquidator. The company’s shareholders will receive nothing as a result of the collapse.

Carillion ran into financial difficulties last year after issuing three profit warnings in five months and writing down more than £1bn on the dwindling value of contracts in the UK, the Middle East and Canada. Yet, despite these warnings, the company continued to receive lucrative contracts from the government, prompting some serious questions of the government’s sourcing practices.

News: Britain's Carillion collapses

Toys R Us to close 26 UK stores putting 800 jobs at risk

BY Fraser Tennant

In another blow for the beleaguered toy retailer giant, Toys R Us has announced that it is to close 26 stores in the UK as part of a process to transform the business and make it fit to meet the evolving needs of customers in today’s UK retail market.

Under the UK Company Voluntary Arrangement (CVA) process, the toy chain has submitted a comprehensive operational and financial restructuring plan to its creditors and will solicit their approval of this plan over the coming weeks. 

If approved, the CVA would substantially reduce the UK company’s rental obligations and allow the company to move to a new, viable business model. The store closures, which may put more than 800 jobs at risk, are expected to commence in Spring 2018.

The toy retailer giant currently employs 3200 people in the UK.

The CVA process will not impact any Toys R Us entities or stakeholders outside the UK, including employees, vendors and customers. The company's approximately 1600 stores around the world, including all stores in the UK, are currently open for business and continuing to operate as usual.

“All of our stores across the UK remain open for business as normal through Christmas and well into the New Year,” said Steve Knights, managing director of Toys R Us UK. “Customers can also continue to shop online and there will be no changes to our returns policies or gift cards across this period.”

During 2018, the plan is for Toys R Us to make changes to the store estate as it moves to a new business model for future growth and profitability.

Mr Knights continued: “Our newer, smaller, more interactive stores are in the right shopping locations and are trading well, while our new website has generated significant growth in online and click-and-collect sales. But the warehouse style stores we opened in the 1980s and 1990s, while successful in the early days, are too big and expensive to run in the current retail environment.”

As a result of a heavy debt load and a consumer switch toward online shopping, in September 2017, Toys R Us voluntarily filed for Chapter 11 bankruptcy protection in the US and Canada.

Dave Brandon, chairman and chief executive of Toys R Us, concluded: “As we continued to work through the financial restructuring process, we hope to receive authorisation to restructure our UK lease obligations so that we will be better able to invest in our UK business.”

News: Toys R Us to shut 'at least' 26 UK stores

Armstrong Energy files for Chapter 11 reorganisation

BY Richard Summerfield

In yet another blow for a depressed industry, coal mining company Armstrong Energy, Inc. has announced that it, and substantially all of its wholly owned subsidiaries, has filed for reorganisation under Chapter 11 of the US Bankruptcy Code.

The collapse of Armstrong is the first such bankruptcy since president Donald Trump vowed to end the so-called ‘war on coal’, though it is one of many companies to have opted for bankruptcy in light of the emergence of cheap natural gas in the US in recent years.

Armstrong Energy has taken the Chapter 11 route (in the Bankruptcy Court for the Eastern District of Missouri) in order to consummate the transfer of substantially all of its assets to a new entity to be jointly owned by Knight Hawk Holdings, LLC and Armstrong’s secured noteholders. Once the proposed assets have been transferred, Knight Hawk will take control of Armstrong Energy’s ongoing operations.

A producer of low-chlorine, high-sulfur thermal coal from the Illinois Basin, Armstrong Energy operates both surface and underground mines. As of 30 June 2017, the company controlled over 445 million tons of proven and probable coal reserves in Western Kentucky and currently operates five mines. Armstrong also owns and operates three coal processing plants and river dock coal handling and rail loadout facilities, which support its mining operations.

"We remain firmly committed to serving our customers and to being a good employer by maintaining safe, productive operations as we undertake this process," said J. Hord Armstrong, III, executive chairman of Armstrong Energy. "We are confident that this court-supervised process is the best way forward.”

Citing “recurring losses from operations”, the beleaguered company had initially stated in an August filing with the US Securities and Exchange Commission (SEC) that it foresaw a need to reorganise under the protection of a federal bankruptcy court.

Armstrong Energy has filed various motions with the Missouri Bankruptcy Court, including requesting authorisation to continue paying employee wages and providing healthcare and other benefits. The company has also asked for authority to continue existing customer programmes and intends to pay suppliers in full under normal terms for goods and services provided after the filing date of 1 November 2017.

Kirkland & Ellis LLP is serving as legal adviser, MAEVA Group LLC is serving as financial adviser and FTI Consulting, Inc. (FTI) is providing interim management services to Armstrong Energy in connection with the Chapter 11 process.

Armstrong Energy expects its mining operations and customer shipments to continue in the ordinary course throughout the Chapter 11 process.

News: Coal-Mining Armstrong Energy Files for Bankruptcy Protection