OneWeb files for Chapter 11 bankruptcy protection

BY Richard Summerfield

Satellite operator OneWeb has filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the Southern District of New York. The firm, backed by SoftBank Group Corp, aims to build a global network to deliver broadband internet.

OneWeb had already raised £2.6bn to fund its expansion but had been attempting to raise additional funding. In a statement released on Saturday the company noted that it had been close to obtaining financing but that “the process did not progress because of the financial impact and market turbulence related to the spread of COVID-19”.

“OneWeb has been building a truly global communications network to provide high-speed low latency broadband everywhere,” said Adrian Steckel, chief executive of OneWeb. “Our current situation is a consequence of the economic impact of the COVID-19 crisis. We remain convinced of the social and economic value of our mission to connect everyone everywhere.”

He continued: “Today is a difficult day for us at OneWeb. So many people have dedicated so much energy, effort, and passion to this company and our mission. Our hope is that this process will allow us to carve a path forward that leads to the completion of our mission, building on the years of effort and the billions of invested capital. It is with a very heavy heart that we have been forced to reduce our workforce and enter the Chapter 11 process while the Company’s remaining employees are focused on responsibly managing our nascent constellation and working with the Court and investors.”

OneWeb’s network was intended to compete with SpaceX’s ‘Starlink’ project and had launched 74 satellites to date. The company planned a constellation of 648 spacecraft. If no buyer for OneWeb or its assets can be found, the UK government is ultimately responsible for the 74 spacecraft currently in orbit.

News: OneWeb files for bankruptcy protection

Carlyle’s Japan-focused fund

BY Richard Summerfield

Private equity giant Carlyle Group has raised $2.3bn (¥258bn) for its fourth Japanese buyout fund, Carlyle Japan Partners IV ( CJP IV).

The fund will focus on targets shed by conglomerates as well as succession deals. Specifically, it will focus on upper mid-market investment opportunities in Japan across consumer, retail and healthcare, general industries and technology, media and telecoms. It will also pursue large-cap investments on an opportunistic basis.

The fund received strong backing from domestic and global investors and is more than double the size of its predecessor fund, CJP III, which raised ¥120bn.

“Our investments over the past 20 years have earned us the trust and support of our investors, who we would like to thank for their continued confidence in our ability to create value and drive performance,” said Kazuhiro Yamada, head of Carlyle Japan in a statement. “We are seeing growing opportunities in Japan across succession and carve-out deals, and with this larger fund and strengthened leadership, we believe we are well-positioned to capture these.”

“We have been a driving force in the development of the Japanese private equity market for two decades, combining our deep local knowledge with our global platform to create significant long-term value for our investors and for Japanese companies,” said Kewsong Lee, co-CEO of The Carlyle Group. “We are excited about how the market is evolving and will strive to further build out our Japan business by partnering with strong management teams and high potential companies to drive growth and value over the long-term.”

Corporate asset acquisitions are likely to range between ¥20bn and ¥40bn, though for larger deals the firm will also use money from other funds in Asia, Europe and the US.

News: Carlyle raises $2.3 billion for its biggest Japan fund to date

Pennon to sell Viridor to KKR in $4.2bn deal

BY Fraser Tennant

In a deal valued at $4.2bn, water utility and waste management company Pennon Group Plc has agreed to sell its recycling and residual waste business Viridor to investment firm Planets UK Bidco.

Pennon has stated that the sale of Viridor will be done on a cash-free, debt-free basis. There is also the potential for additional consideration of up to £200m contingent on future events and outcomes.

The Pennon board – which unanimously agreed the transaction – intends to use the deal’s £3.7bn net cash proceeds to reduce its borrowings and make a return to shareholders, while retaining some funds to pursue operational excellence and growth within the UK water industry.

Planets UK Bidco is a new company established by funds advised by global investment firm Kohlberg Kravis Roberts (KKR), a leading global investment firm that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate and credit, with strategic partners that manage hedge funds.

“Following a detailed review of the Group's strategic options, we are pleased to announce the proposed sale of Viridor for an enterprise value of £4.2bn,” said Chris Loughlin, chief executive of Pennon. “The transaction is great news for shareholders as it recognises the strategic value that Pennon has developed and nurtured in Viridor over many years and accelerates the realisation of that value for shareholders.”

A company at the forefront of the resource sector in the UK, Viridor transforms waste into energy, high-quality recyclates and raw materials. It provides services to around 150 local authorities and major corporate clients as well as around 32,000 customers across the UK.

Expected to complete in summer 2020, the transaction is conditional on approval from Pennon shareholders, merger control clearance from the European Commission and certain other conditions.

Mr Loughlin concluded: “On completion of the transaction, Pennon will continue to focus on its sector-leading water and wastewater businesses and will consider further growth opportunities that create value for customers, employees and shareholders."

News: British utility Pennon to sell waste management unit for $5 billion, including debt

Costco acquires Innovel from Transformco for $1bn

BY Fraser Tennant

In a $1bn deal which significantly bolsters its distribution, logistics and delivery capabilities, US multinational Costco has acquired third-party delivery and logistics provider Innovel Solutions from  integrated retailer Transform Holdco (TFCO) LLC, the operator of Sears and Kmart stores.

Under the terms of the acquisition agreement, Costco will provide TFCO warehousing, delivery and installation services to Sears and Kmart members on a long-term commercial arrangement. Costco will also retain over 1500 Innovel employees on a go-forward basis.

A provider of warehousing, transportation, installation and home delivery services to retail, manufacturing and commercial clients, Innovel’s network covers nearly 90 percent of the US and Puerto Rico. The company also regularly ranks in the top quartile of customer satisfaction scores. Costco has been a customer of Innovel since 2015.

As part of its acquisition of Innovel, Costco will enter into a long-term commercial agreement in which it will leverage TFCO’s Service Live platform to source technicians for complex installations across the country.

“We have had a great relationship with Innovel and share a philosophy of taking care of our members,” said Craig Jelinek, chief executive of Costco. “We believe the acquisition will allow us to grow our e-commerce sales of big and bulky items at a faster rate.”

Costco’s acquisition of Innovel comes as other large retailers, such as Walmart, Amazon, Target, The Kroger Cos., Albertsons Cos., Ahold Delhaize USA and Dollar General, boost their distribution, logistics and delivery capabilities to meet demand for fast-growing product categories and adapt to an emerging omnichannel business model. These efforts include the construction of new distribution centres, automated facilities to fulfill online orders and dedicated space in stores for e-commerce orders.

For TFCO, Costco’s acquisition of Innovel allows it to focus on its core assets and capabilities to deliver service excellence for its members and customers. TFCO believes this programme will give it the best chance to grow value and to maintain a meaningful retail presence in the US to support the expansion of its core businesses.

News: Costco buys logistics firm Innovel for $1 billion

Full time for Modell’s

BY Richard Summerfield

Modell’s Sporting Goods has filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of New Jersey.

The company, which was founded in 1889, operated over 140 stores across several north-eastern and mid-Atlantic US states and had 3623 employees at the time of the filing.

Modell’s had been in a state of financial distress for some time. In February, the company’s chief executive, Mitchell Modell, announced he was seeking an investor to take a minority stake in the business, calling it “crowdsourcing at the highest level”. However, these efforts were unsuccessful.

In a statement announcing the filing, Modell’s explained it was engaged in discussions with its financial creditors and had been exploring a recapitalisation of the business through a potential sale of some or all of its assets or an equity investment. The company will continue to pursue these discussions, it noted in a statement, though it has started to liquidate its remaining stores, having liquidated 19 stores prior to the filing.

“Over the past year, we evaluated several options to restructure our business to allow us to maintain our current operations. While we achieved some success, in partnership with our landlords and vendors, it was not enough to avoid a bankruptcy filing amid an extremely challenging environment for retailers,” said Mr Modell. “We are extremely appreciative of the support that our lenders (JP Morgan Chase and Wells Fargo), vendors and landlords provided during this difficult period, engaging in extensive renegotiation efforts and allowing us to pursue every possible avenue to preserve the jobs of our loyal associates. I want to thank each and every one of our associates for their support over the years and our customers for their historic support of Modell’s.

“This is certainly not the outcome I wanted, and it is one of the most difficult days of my life,” he continued. “But I believe liquidation provides the greatest recovery for our creditors. We have partnered with Tiger Capital Group to liquidate the remaining stores beginning Friday morning, March 13. The return from the liquidation of the first 19 stores managed by Tiger has been beyond spectacular, and we are confident this performance will continue across the remaining stores, maximizing return for our creditors.”

News: Modell’s Sporting Goods Voluntarily Files for Chapter 11 Bankruptcy Protection