Acosta files for Chapter 11 bankruptcy

February 2020 | DEALRFONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

February 2020 Issue

In a bid to eliminate its long-term debt, full-service sales and marketing agency Acosta is reorganising and recapitalising via a Chapter 11 filing – actions it hopes will result in the strongest balance sheet in the industry.

Acosta’s Chapter 11 reorganisation – an agreement with more than 70 percent of its lenders and more than 80 percent of its noteholders – ensures that vendors will be paid in full for goods and services provided before and during the Chapter 11 process, with all employees receiving their usual wages and benefits. The Chapter 11 process will also eliminate all of Acosta’s approximately $3bn of long-term debt.

Furthermore, the agreement provides for a conversion of all of Acosta’s bank and bond debt into equity, an infusion of $250m in cash, and full satisfaction of other unsecured obligations in the ordinary course of business. Following the restructuring and recapitalisation, on a pro forma basis Acosta will have zero net interest burden and remain significantly cash flow positive with ample liquidity and working capital.

Acosta’s non-US subsidiaries and affiliates are not included in the Chapter 11 filing or affected by the Chapter 11 process. Having already received support for the reorganisation plan from a supermajority of both its lenders and noteholders, Acosta expects to complete the restructuring process quickly.

“This is a very positive development for Acosta and our employees, clients, customers and other business partners,” said Darian Pickett, chief executive of Acosta. “Through this strategic step, Acosta will be well-positioned, both operationally and financially, to make critical investments in our business and drive sales and market penetration for our clients and customers.

“This process will enable us to continue to operate our business without disruption,” continued Mr Pickett. “Our number one priority always has been to help drive long-term growth for our clients and customers and ensure they are well-equipped to succeed in the competitive consumer landscape. We look forward to doubling down on this commitment by reinvesting in our people and our capabilities across all retail channels.”

Additionally, investors have committed $250m in new equity capital backstopped by institutions committed to the long-term success of Acosta. “Our business remains fundamentally strong, and we are pleased that our new investors recognise the long-term value Acosta can create for our clients and customers,” added Mr Pickett. “We all are excited about what the future holds for Acosta.”

As the sales and marketing powerhouse behind most of the trusted brands seen in stores every day, Acosta provides a range of outsourced sales, marketing and retail merchandising services throughout the US, Canada and Europe. For 90 years, Acosta has led the industry in helping consumer packaged goods companies move products off shelves and into shoppers’ baskets.

Acting as legal counsel for Acosta is Kirkland & Ellis LLP, with PJT Partners, Inc. acting as financial adviser and Alvarez & Marsal as restructuring adviser. Davis Polk & Wardwell LLP is acting as legal counsel for an ad hoc group of lenders and Centerview Partners is acting as financial adviser. For certain supporting creditors, White & Case LLP and Sullivan & Cromwell LLP are acting as legal counsel.

Mr Pickett concluded: “I would like to thank all of our valued employees, clients, customers and business partners for their ongoing support.”

Fraser Tennant