Shattered finances: glassmaker Libbey files for Chapter 11

BY Fraser Tennant    

In a bid to restructure its balance sheet following plunging demand for its products, glassware manufacturer Libbey and its US-based subsidiaries have filed for Chapter 11 bankruptcy.

Like many retailers, Libbey – which operates manufacturing plants in the US, Mexico, China, Portugal and the Netherlands – has been hit especially hard by the outbreak of the coronavirus (COVID-19) pandemic and its crippling impact on global economies. The Chapter 11 process is expected to strengthen Libbey’s balance sheet and help it to navigate the effects of COVID-19.

Moreover, a number of Libbey's existing lenders have agreed to provide up to $160m in debtor-in-possession (DIP) financing, including a $100m revolving credit facility and a $60m term loan. Following court approval, Libbey expects this financing, together with cash flow from operations, to support the business during the court-supervised process.

"While we entered 2020 with positive momentum from our strong finish in 2019, the dramatic and prolonged impact of COVID-19 on the demand for our products and on our business is truly unprecedented in Libbey's more than 200-year history,” said Mike Bauer, chief executive of Libbey. “As a result, entering this process is a necessary step to address our liquidity, strengthen our balance sheet and better position Libbey for the future.”

Libbey is continuing to serve customers and end users globally throughout the Chapter 11 process, and will continue to evaluate the operating environment and make adjustments, as necessary, to adapt to the impact of COVID-19.

“We believe this process will help Libbey become an even stronger, more influential partner to our customers, vendors and end users, and ensure we continue to create the most rewarding experiences with our extensive line of high-quality glassware and other tabletop products."

One of the largest glass tableware manufacturers in the world, Libbey supplies tabletop products to retail, foodservice and business-to-business customers in over 100 countries. Libbey's international subsidiaries in Canada, China, Mexico, the Netherlands and Portugal are not included in the Chapter 11 proceedings and are operating in the normal course of business.

Mr Bauer concluded: “As we navigate the current environment, we remain focused on providing end users with products that are environmentally sustainable, beautiful and durable.”

News: Libbey Commences Chapter 11 Reorganization with $160 Million in Agreed Financing

Texas Capital and Independent Bank abort $5.5bn merger

BY Fraser Tennant

Citing the volatile economic conditions caused by coronavirus (COVID-19), Texas Capital Bancshares and Independent Bank Group have mutually agreed to terminate their $5.5bn merger agreement.

The termination was approved by both companies’ boards of directors after careful consideration of the significant impact of COVID-19 on global markets and on the companies’ ability to fully realise the benefits they expected to achieve through the merger.

“Due to the unprecedented impact of the COVID-19 pandemic, both companies’ boards of directors believe it is in the best interests of our employees, clients and all of our shareholders to focus on managing our business during this time,” said Larry Helm, chairman of Texas Capital Bancshares. “With the talent and depth of our team and strong organic growth model, Texas Capital Bank has built a resilient business with lasting client relationships and a record of value creation through changing market dynamics and economic pressures.”

Neither party will pay any termination fee as a result of the mutual decision to terminate the merger agreement.

“While both companies believed in the benefits of the proposed transaction, it would not be prudent to continue to pursue the combination and integration of our companies at this time,” said David R. Brooks, group chairman and chief executive of Independent Bank Group. “I am confident this is the right decision for our company and our customers, employees, shareholders and other stakeholders. This decision allows us to dedicate our focus and resources toward ensuring the strength of our business, serving the interests of our customers and protecting the health and safety of our employees during these unprecedented times.”

Coinciding with the termination of the merger, Texas Capital Bank president and chief executive Keith Cargill announced that he had stepped down from both roles with immediate effect.

Mr Helm concluded: “Our dedicated team, whose tireless efforts to enhance our clients’ experience and the communities where we operate, will continue to guide Texas Capital Bank’s purpose and success.”

News: Texas banks call off merger, citing coronavirus impact

Latam the latest airline to file for bankruptcy protection

BY Richard Summerfield

Latam Airlines Group SA, Latin America’s largest air carrier, has filed for Chapter 11 bankruptcy protection in New York after the COVID-19 pandemic grounded flights across the region.

“Latam entered the COVID-19 pandemic as a healthy and profitable airline group, yet exceptional circumstances have led to a collapse in global demand and has not only brought aviation to a virtual standstill, but it has also changed the industry for the foreseeable future,” said Roberto Alvo, chief executive of Latam.

He continued: “We have implemented a series of difficult measures to mitigate the impact of this unprecedented industry disruption, but ultimately this path represents the best option to lay the right foundation for the future of our airline group. We are looking ahead to a post-COVID-19 future and are focused on transforming our group to adapt to a new and evolving way of flying, with the health and safety of our passengers and employees being paramount.”

The airline will continue to fly while it is in bankruptcy protection. Its affiliates in Argentina, Brazil and Paraguay were not included in the Chapter 11 filing, though affiliates in Chile, Peru, Colombia, Ecuador and the US were.

To help fund its continued operations throughout the bankruptcy period, the company has secured funding from a number of its major shareholders, including the Cueto and Amaro families and Qatar Airways. In total, the company has secured around $900m in debtor-in-possession (DIP) financing.

However, the company has given no indication whether its largest shareholder, Delta Air Lines, which holds 20 percent of the company, will help. The airline noted in its statement: “To the extent permitted by law, the group would welcome other shareholders interested in participating in this process to provide additional financing.” The airline also noted that it had about $1.3bn in cash on hand.

Latam has struggled since the outbreak of the COVID-19 pandemic. In mid-March, it cut 90 percent of its flights and by April was down to just five routes. Earlier this month, Latam confirmed that it would lay off 3 percent of its workforce, some 1400 employees.

Of course, the company is not the only airline to suffer. Fellow South American airline Avianca has already filed for Chapter 11 bankruptcy, while Virgin Australia entered voluntary administration last month.

News: Latam Air Files Chapter 11 Bankruptcy, Stymied by Lockdowns

JCPenney files for bankruptcy protection

BY Richard Summerfield

JCPenney, one of the largest and most historic clothing and homeware retailers in the US, has filed for Chapter 11 bankruptcy in the US Bankruptcy Court for the Southern District of Texas.

JCPenney had about 846 stores, an e-commerce site and about 95,000 employees around the world, prior to the filing. In response to the COVID-19 outbreak, in March, the company announced the temporary closure of its stores and business offices. Though some of its locations recently reopened, the majority are still closed. Under the terms of the company’s business plan, which was filed with the US Securities and Exchange Commission (SEC), JCPenney plans to permanently close 242 stores, about 30 percent. It has yet to disclose which locations will be shuttered.

The company has reached an agreement with most of its lenders on the turnaround plan that will allow it to stay in business as a more financially healthy company. In a statement announcing the filing, JCPenney confirmed it had approximately $500m in cash on hand as of the Chapter 11 filing date. The company has also received commitments for $900m in debtor-in-possession (DIP) financing from its existing first lien lenders, which includes $450m of new money.

Though the company cited the COVID-19 outbreak for its filing, in reality JCPenney has suffered many years of mismanagement and decline. The company’s most recent profitable year was 2010, and its net losses since have totalled $4.5bn. In 2019, JCPenney suffered a 5.5 percent decline in first quarter sales and was forced to close 27 stores across the country.

“The Coronavirus (COVID-19) pandemic has created unprecedented challenges for our families, our loved ones, our communities, and our country,” said Jill Soltau, chief executive of JCPenney. “As a result, the American retail industry has experienced a profoundly different new reality, requiring JCPenney to make difficult decisions in running our business to protect the safety of our associates and customers and the future of our company.

She continued: “Until this pandemic struck, we had made significant progress rebuilding our company under our Plan for Renewal strategy – and our efforts had already begun to pay off. While we had been working in parallel on options to strengthen our balance sheet and extend our financial runway, the closure of our stores due to the pandemic necessitated a more fulsome review to include the elimination of outstanding debt.”

JCPenney became the fourth national retailer to file for bankruptcy in the US in May, following J.Crew Neiman Marcus and Stage Stores (SSI).

News: JCPenney files for bankruptcy

Satellite operator Intelsat files for Chapter 11

BY Fraser Tennant

In a move to enable its financial restructuring ahead of C-band spectrum changes for 5G services, as well cut some of its $15bn of debt, communications satellite services provider Intelsat and certain of its subsidiaries have filed for Chapter 11 bankruptcy.

The restructuring process is intended to enhance Intelsat’s liquidity and substantially reduce its legacy debt burden, allowing the company to emerge from Chapter 11 with a strengthened balance sheet to complement its strong operating model and future growth plans.

To help provide sufficient liquidity during the restructuring process to support ongoing operations, Intelsat has secured a commitment for $1bn of debtor-in-possession (DIP) financing, subject to court approval.

“This is a transformational moment in the history of our company,” said Stephen Spengler, chief executive of Intelsat. “Intelsat is the pioneer and foundational architect of the satellite industry. For more than 50 years, we have been respected for quality, innovation, sector leadership and premium services. Our success has come despite being burdened in recent years by substantial legacy debt. Now is the time to change that.”

One of the primary catalysts for restructuring the balance sheet now is Intelsat’s desire to participate in the accelerated clearing of C-band spectrum under the Federal Communications Commission (FCC) order in support of a build-out of 5G wireless infrastructure in the US.

“We intend to move forward with the accelerated clearing of C-band spectrum in the US and to achieve a comprehensive solution that would result in a stronger balance sheet,” continued Mr Spengler. “This will position us to invest and pursue our strategic growth objectives, build on our strengths, and serve the mission-critical needs of our customers with additional resources and wind in our sails.”

While it moves through the Chapter 11 restructuring process, Intelsat’s day-to-day operations, engagement with customers and partners, and capital investments will continue as usual. At the same time, the company is also managing the economic slowdown impacting several of its end markets caused by the coronavirus (COVID-19) global health crisis.

Mr Spengler concluded: “At the end of the Chapter 11 process, we will be on stronger financial footing for the future, further enhancing our industry-leading portfolio of space-based communications services and paving the way for our continued innovation and investments to benefit our customers.”

News: Intelsat files for Chapter 11 bankruptcy