Vertex Energy files for Chapter 11

BY Fraser Tennant

Largely as a result of low market demand for renewable diesel, environmental services company Vertex Energy has filed for Chapter 11 bankruptcy in order to facilitate transactions contemplated under a restructuring support agreement (RSA).  

With the overwhelming support of 100 percent of its term loan lenders, Vertex has filed customary first day motions and plans to operate its business in the ordinary course as it explores a holistic restructuring strategy pursuant to the terms of the RSA.

To fund this process and continue operating in the ordinary course, the term loan lenders have agreed to provide Vertex with an additional $80m debtor-in-possession financing facility subject to certain terms and the satisfaction of certain conditions. In addition, Vertex has also filed a Chapter 11 plan and bidding procedures, and anticipates confirming its Chapter 11 plan by the end of the year.

“As we enter this next phase of our restructuring process through a formal proceeding, we are appreciative of the continued support from our lenders,” said Benjamin P. Cowart, president and chief executive of Vertex. “Their confidence in our business, as demonstrated by this ongoing collaboration, reinforces the critical role Vertex plays in the specialty refinery space.”

A leading energy transition company that specialises in producing high-quality refined products, Vertex Energy’s innovative solutions are designed to enhance the performance of its customers and partners while also prioritising sustainability, safety and operational excellence.

In April 2022, Vertex completed the acquisition of Shell’s 90,000 barrels a day refinery for a cash consideration of $75m plus the value of the refinery’s hydrocarbon inventory and other accrued liabilities.

However, Vertex’s ambitions in the renewable space proved to be out of kilter with the current realities of market demand for renewable diesel and, in May 2024, the company announced it would be ‘pausing’ the production of this product.

Serving as restructuring counsel to Vertex is Kirkland & Ellis, with Bracewell LLP serving as restructuring co-counsel. Perella Weinberg Partners is serving as investment banker, and Alvarez & Marsal is serving as chief restructuring officer (CRO) and financial adviser.

Seth Bullock, a managing director at Alvarez & Marsal and Vertex’s CRO, concluded: “We have gained significant momentum with the partnership of Vertex’s lenders over the last several months and believe the restructuring support agreement and related milestones will allow the company to initiate a fresh start and improve long-term value as it singularly concentrates on strengthening its foundation for continued growth and stability.”

News: Vertex Energy files for bankruptcy, explores sale

J&J unit files for Chapter 11 to advance $8bn talc settlement

BY Fraser Tennant

In a bid to end tens of thousands of lawsuits alleging baby powder and other talc products caused cancer, a subsidiary of healthcare giant Jonson & Johnson (J&J) has filed for Chapter 11.

Red River Talc LLC, a unit of J&J, made the filing after it received the support of the overwhelming majority – approximately 83 percent – of current claimants for a proposed bankruptcy plan.

J&J faces lawsuits from more than 62,000 claimants who alleged that its baby powder and other talc products were contaminated with asbestos and caused ovarian and other cancers. J&J denies the allegations and has said that none of the talc-related claims against it have merit.

Such claims, states J&J, are premised on allegations that have been rejected by independent experts, as well as governmental and regulatory bodies, for decades.

However, following extensive negotiations with counsel for claimants who initially opposed the bankruptcy plan, Red River has agreed to increase its contribution to the settlement by $1.75bn to approximately $8bn. The unit has also agreed to commit an additional $1.1bn to the bankruptcy trust for distribution to claimants.

The support provided by the plan far exceeds the 75 percent approval threshold required by the US Bankruptcy Code to secure confirmation, which is also supported by the future claims representative, an attorney representing future claimants.

J&J has backed Red River’s commitments and also agreed to contribute an additional $650m to resolve the claims for legal fees and expenses sought by plaintiffs’ counsel for their leadership roles in the multidistrict litigation, where most of the filed ovarian claims are pending.

In aggregate, the contemplated settlement represents a present value of approximately $8bn to be paid over 25 years, totalling approximately $10bn – an agreement that constitutes one of the largest settlements ever reached in a mass tort bankruptcy case.

“The overwhelming support for the plan demonstrates the company’s extensive, good-faith efforts to resolve this litigation for the benefit of all stakeholders,” said Erik Haas, worldwide vice president of litigation at J&J. “This plan is fair and equitable to all parties and, therefore, should be expeditiously confirmed by the Bankruptcy Court.”

The bankruptcy plan enables a full and final resolution of the ovarian talc litigation, resolving 99.75 percent of all pending talc lawsuits against J&J and its affiliates in the US.

News: J&J unit files for bankruptcy to advance $10 billion talc settlement

KKR closes $4.6bn North American focused fund

BY Richard Summerfield

Private equity (PE) powerhouse KKR and Co has announced the final close of KKR Ascendant Fund SCSP, a $4.6bn fund dedicated to investing in middle market businesses in North America.

The fund, which was launched in 2022, is the first KKR vehicle solely focused on opportunities in the middle market and will target established companies with strong growth potential across seven industry verticals: consumer, financial services, healthcare, industrials, media, software and tech-enabled services.

“We are very proud of the strong response we have received from our fundraising efforts and believe that Ascendant is well-positioned to address the robust and attractive opportunities in the North American middle market,” said Pete Stavros and Nate Taylor, co-heads of KKR Global Private Equity. “We have long invested in this space in our Americas Private Equity funds and have found that we can harness KKR’s unique resources and expertise in value creation to deliver highly differentiated business outcomes. We wanted to launch a fund dedicated to this segment so that our investors could directly participate in the compelling outcomes we believe we can continue to deliver in the middle market.”

“Broad-based employee ownership and engagement programs are a key part of how KKR creates and maintains value across our portfolio companies,” said Nancy Ford and Brandon Brahm, co-heads of KKR’s Ascendant strategy. “Having seen the great success of these programs in other areas of KKR’s portfolio, we are thrilled that Ascendant will build on that strong foundation. These programs, which provide both equity ownership to employees and a strategy to enhance employee engagement, are implemented with the goal of creating aligned interests and enabling all employees to participate in the investment outcomes their work creates.”

The Ascendant fund, which was oversubscribed at the time of its closing, received backing from a range of investors, including public pensions, family offices and insurance companies. To date, the fund has struck six deals for companies including software provider Alchemer, dental care chain 123Dentist, and fire equipment provider Marmic Fire & Safety.

In a break from PE tradition, KKR has pledged to offer equity to employees of all its North America portfolio companies from the new fund. Typically, such an offer is usually reserved only for senior executives. However, over the last decade, emboldened by the firm’s investments in the industrial sector which began using the model, KKR has since expanded the employee ownership programme to more than 50 of its portfolio companies, awarding billions of dollars of equity to more than 110,000 employees. The firm believes it leads to higher revenue, improved productivity and lower turnover within its portfolio companies.

KKR, which had $601bn in assets under management (AUM) as of the end of June, has been attempting to raise capital at a difficult time for fundraising for large buyout firms. Limited partners have been unenthusiastic about making new commitments. PE firms have struggled to return capital amid persistently high interest rates, which have made selling companies to other buyout firms or refinancing companies challenging. However, after the Federal Reserve recently cut US borrowing rates, there is an expectation that PE-backed deal volume will begin to climb again.

News: KKR raises $4.6 billion for debut North America mid-market deals fund

L&G exits Cala Group for $1.8bn

BY Richard Summerfield

Legal and General (L&G) is to sell its UK housebuilder Cala Group to investment groups Sixth Street Partners and Patron Capital in a $1.8bn deal, as part of a plan to slim down and focus on its main operations.

The deal will see L&G receive around £500m when the deal closes, which is expected to happen before the end of the year, and the rest of the cash over five years. The company plans to reinvest the funds in its wider operations, as well as supporting future shareholder returns. L&G paid more than £315m to buy Patron’s majority stake in Cala in 2018. Patron formerly owned Cala alongside L&G but in 2018 sold its stake in the company at an equity valuation of £605m.

“Today’s announcement is excellent news for Cala,” said Kevin Whitaker, chief executive of Cala. “This investment by Sixth Street and Patron demonstrates their confidence in Cala’s business plan and further potential. We look forward to developing a strong partnership with Sixth Street and reigniting the excellent relationship we shared with Patron between 2013 and 2018. I would like to thank Legal & General for their support since they first invested in Cala. With their backing, Cala has successfully tripled the number of homes we build each year, whilst revenue and profits have grown five- and ten-fold respectively.”  

“Cala has a bright future and we are proud to be entering this new chapter as stewards of a company with such a deep history and long track record of sustainable growth,” said Julian Salisbury, co-chief investment officer of Sixth Street. “We, together with Patron, look forward to continuing to support Cala and its management team, not only with capital but also with the significant resources of our London-based real estate investment team led by Giulio Passanisi.” 

“We are pleased to be able to back the Cala business once again,” said Keith Breslauer, managing director and founder of Patron Capital. “Cala is one of the UK’s leading housebuilders with a best-in-class landbank and a focus on building high-quality homes, being consistently ranked five-star for customer service. Furthermore, Cala is also a people business with a strong corporate culture and a business we know well, and we look forward to working closely with Cala’s impressive management team and our partner, Sixth Street, to further build the business and help tackle the undersupply of homes in the UK.” 

“This transaction demonstrates continued momentum in executing our strategy, simplifying our portfolio to enable a sharper focus on our core, synergistic businesses,” said António Simões, group chief executive of L&G. “Cala has been an important part of L&G for over a decade, with profits increasing ten-fold since our initial investment in 2013. The sale announced today will provide capital to deliver our strategic goals of sustainable growth alongside enhanced returns for shareholders. I’d like to thank the whole Cala team for their contribution to the Group and wish them every success in the future.”

News: Legal & General sells UK housebuilder CALA Group in $1.8 bln deal

Mastercard acquires Recorded Future in $2.65bn deal

BY Fraser Tennant

In a deal that adds threat intelligence and cyber security technologies to its corporate portfolio, US multinational payment card services corporation Mastercard is to acquire threat intelligence company Recorded Future in a transaction valued at $2.65bn.

The combination of technology and expertise will help enable the development of even more robust practices and drive greater synergies in cyber security and intelligence, as well as helping to protect people and businesses.

“Trust is the foundation of any relationship,” said Craig Vosburg, chief services officer at Mastercard. “Recorded Future adds to how we deliver that greater peace of mind before, during and after the payment transaction. Together we will innovate faster, create smarter models and anticipate emerging threats before cyber attacks can take place – in payments and beyond.”

A current collaboration is an artificial intelligence (AI)-supported service that alerts financial institutions more quickly and with greater accuracy when a card is likely to have been compromised. Since its launch earlier this year, the service has doubled the rate at which compromised cards are identified, as compared to the same time period last year.

Headquartered in Boston with offices and employees around the world, Recorded Future works with over 1900 businesses and government organisations across more than 75 countries to provide real-time, unbiased and actionable intelligence.

The company offers real-time visibility into potential threats by analysing a broad set of data sources to provide insights that enable its customers to take action to mitigate risks. This ability, coupled with its use of AI and other best-in-class technologies, will add to Mastercard’s identity, fraud prevention, real-time decisioning and cyber security services.

“We created Recorded Future with a simple goal to secure the world with intelligence,” said Christopher Ahlberg, chief executive of Recorded Future. “By joining Mastercard, we see an opportunity to help more businesses and governments determine the steps to realise their full potential – and to enable everyone to feel safer in their daily lives.”

The transaction, which is anticipated to close by the first quarter of 2025, is subject to regulatory review and other customary closing conditions.

As new technologies are introduced and adopted, the acquisition bolsters the insights and intelligence used to secure today’s digital economy – in the payments ecosystem and beyond.

News: Mastercard bolsters threat intelligence capabilities with $2.65 billion deal for Recorded Future