Murray Energy to implement RSA via Chapter 11

BY Fraser Tennant

With coal continuing to lose market share to natural gas and renewable fuels, US private coal miner Murray Energy has entered into a restructuring support agreement (RSA) with an ad hoc lender group in order to restructure more than $2.7bn of debt.

To implement the RSA, Murray Energy, including certain of its subsidiaries, has filed for Chapter 11 bankruptcy protection. The company intends to finance its operations throughout Chapter 11 with cash on hand and access to a $350m new money debtor-in-possession (DIP) financing facility, subject to bankruptcy court approval.

Lenders party to the RSA have committed to provide the full amount of the DIP facility. The proceeds will be used to refinance borrowings under Murray Energy’s existing credit facility and to support ordinary course operations, as well as payments to employees and suppliers throughout the restructuring process.

Furthermore, under the RSA, the ad hoc lender group has agreed to form a new entity – Murray NewCo – to serve as a ‘stalking horse bidder’ to acquire substantially all of Murray Energy’s assets by credit bidding its debt under a Chapter 11 plan, subject to an overbid process. The RSA contemplates that substantially all of Murray Energy’s prepetition funded debt will be eliminated.

The RSA further states that Mr Robert E. Murray will be named chairman of the board of Murray NewCo, as well as president and chief executive. Murray Energy founder Robert Murray, having stepped down as chief executive, will remain the company’s chairman.

“We appreciate the support of our lenders for this process, many of whom have been invested with the company for a long time,” said Mr Moore. “I am confident the DIP facility provides the company with adequate liquidity to get payments to our valued trade partners and continue operating in the normal course of business without any anticipated impact to production levels.”

Murray Energy was the fourth-largest coal producer in the US in 2018, with 46.4 million short tons of output.

Mr Moore concluded: “Although a bankruptcy filing is not an easy decision, it became necessary to access liquidity and best position Murray Energy and its affiliates for the future of our employees and customers and our long-term success.”

News: Murray Energy files for bankruptcy as U.S. coal decline continues

Automotive supplier DURA moves forward with financing

BY Fraser Tennant

To facilitate an infusion of new capital and to pursue an expedited going-concern sale process, global automotive supplier DURA Automotive Systems is undergoing a restructuring process in order to fuel its future growth.

To implement the restructuring, DURA and its domestic subsidiaries have filed voluntary petitions for relief under Chapter 11 of the US Bankruptcy Code. DURA’s non-US subsidiaries are not part of the Chapter 11 filing.

Furthermore, DURA has obtained a commitment from Lynn Tilton, DURA’s chief executive and majority owner, for a $77m debtor-in-possession (DIP) financing facility, including $50m of new money, the proceeds of which will be used to fund DURA’s ongoing business operations, including capital expenditures for future platforms.

This facility will allow DURA to continue business as usual while pursuing a court-supervised, going-concern sale, commonly referred to as a ‘363 sale’. The contemplated sale is expected to have no effect on DURA’s customers, suppliers or employees.

“Ongoing constituent disputes have made it impossible for DURA to access ordinary course, yet essential financing,” said Ms Tilton. “The actions announced today will allow the company to move forward and access the necessary capital that will fuel its growth. I look forward to working closely with DURA’s leadership and its talented and dedicated work force throughout this process as we continue the transformation of this great company.”

Founded in 1914, DURA is a  leading global automotive supplier specialising in the design, engineering and manufacturing of innovative solutions that drive the evolution of mobility. Employing more than 9400 people in 14 countries, DURA invests in technological advancement, including vehicle lightweighting, design aesthetics, amalgamated mechatronics and advanced safety & advanced mobility and markets compete systems and modules to leading automakers in the Americas, Asia and Europe.

“The financing Ms Tilton has agreed to supply will provide DURA with much-needed capital to fund growth programmes that we have recently been awarded,” said Kevin Grady, executive vice president and chief financial officer (CFO) at DURA. “These important actions will allow us to continue our operations as normal. Most critically, this expedited sales process will not result in any supply disruptions or trade impairments.”

DURA expects this expedited sales process, including the closing on the 363 sale, to be completed within approximately 120 days.

News: Dura Automotive files for Chapter 11 bankruptcy

Forever 21 files for Chapter 11

BY Richard Summerfield

US fashion retailer Forever 21 has become the latest brick-and-mortar firm to file for Chapter 11 bankruptcy protection.

The California-based company filed for bankruptcy protection in the US Bankruptcy Court for the District of Delaware, listing both assets and liabilities in the range of $1bn to $10bn.

Forever 21 will now begin a process of restructuring. Last week, the company had announced its intention to exit Japan and close all 14 stores of its locations in the country by the end of October. The company now expects to focus on the profitable core part of its operations and shut some, if not most, of its international locations, though its operations in Mexico and Latin America will likely remain open. The company does not expect to close locations in major US markets, though there will be a large number of store closures.

“We have requested approval to close up to 178 stores across the U.S. The decisions as to which domestic stores will be closing are ongoing, pending the outcome of continued conversations with landlords,” the company said in a statement.  The company also said its Canadian subsidiary filed for bankruptcy and it plans to wind down the business, closing 44 stores in the country.

Forever 21 saw its revenue drop to $3.3bn last year, down from $4.4bn in 2016. It expects the restructured company to bring in $2.5bn in annual sales. The company employs about 32,800 people, down from 43,000 in 2016.

To facilitate its restructuring, the company has obtained $275m in financing from its existing lenders, with JPMorgan Chase Bank, N.A. acting as agent, as well as $75m in new capital from TPG Sixth Street Partners, and certain of its affiliated funds.

“This was an important and necessary step to secure the future of our Company, which will enable us to reorganise our business and reposition Forever 21,” said Linda Chang, executive vice president of Forever 21. “The financing provided by JPMorgan and TPG Sixth Street Partners will arm Forever 21 with the capital necessary to effect critical changes in the U.S. and abroad to revitalize our brand and fuel our growth, allowing us to meet our ongoing obligations to customers, vendors and employees. With support from our key landlord and vendor constituents, we are confident we will emerge as a stronger, more competitive enterprise that is better positioned to prosper for years to come, and we remain committed to delivering the fast fashion trends that our customers have come to expect from Forever 21,” she added.

News: Forever 21 closing stores in bankruptcy filing shows limits to fast fashion

Purdue Pharma files for Chapter 11 to settle opioid lawsuits

BY Fraser Tennant

Accused of fuelling the opioid crisis which claimed the lives of almost 70,000 people in the US last year, drug maker Purdue Pharma has filed for Chapter 11 bankruptcy protection in a bid to settle the opioid litigation the company faces.

To finalise and implement the settlement agreement, the court-supervised Chapter 11 process will facilitate a resolution of all claims against Purdue and its subsidiaries, while preserving the value of the company’s assets.

Furthermore, the settlement is estimated to provide more than $10bn to address the opioid crisis, including contributing millions of doses of life-saving opioid overdose reversal medications – treatment that has the potential to reverse overdoses from powerful synthetic opioids, such as fentanyl.

The key elements of the settlement, which is subject to court approval, include: (i) the owners of Purdue contributing all of its assets to a trust or other entity established for the benefit of claimants; (ii) the new entity being governed by a new board selected by claimants and approved by the bankruptcy court; (iii) the new entity potentially contributing tens of millions of doses of opioid overdose reversal and addiction treatment medications at no or low cost; and (iv) the new entity agreeing to be bound permanently by injunctive relief, including marketing restrictions on the sale and promotion of opioids.

“This unique framework for a comprehensive resolution will dedicate all of the assets and resources of Purdue for the benefit of the American public,” said Steve Miller, chairman of Purdue’s board of directors. “This settlement framework avoids wasting hundreds of millions of dollars and years on protracted litigation, and instead will provide billions of dollars and critical resources to communities across the country trying to cope with the opioid crisis.”

Across the US, more than 130 people die every day after overdosing on opioids. The misuse of and addiction to opioids – which includes prescription pain relievers, heroin and synthetic opioids, such as fentanyl – is a crisis that affects public health, as well as social and economic welfare.

Mr Miller concluded: “We will continue to work with state attorneys general and other plaintiff representatives to finalise and implement this agreement as quickly as possible.”

News: Purdue Pharma files for bankruptcy in the US

PG&E files Chapter 11 exit plan

BY Richard Summerfield

Californian energy provider PG&E Corp has filed a reorganisation plan which proposes to cap the wildfire liabilities that forced it into bankruptcy at about $18bn — less than half of what victims and insurers have said they are owed.

The plan, which was filed in US Bankruptcy Court in San Francisco, includes payments capped at $8.4bn for wildfire victims, payments capped at $8.5bn for reimbursing insurers that had paid victims and a $1bn settlement with local governments. The company was forced to file for Chapter 11 bankruptcy in January to deal with an estimated $30bn in liabilities related to devastating wildfires that its equipment ignited in 2017 and 2018. In its filing, the company listed $51.69bn in debts and $71.39bn in assets.

However, the exit plan may prove controversial as lawyers for fire victims said the company’s liabilities may top $40bn. Furthermore, insurance companies claim PG&E owes them approximately $18bn.

“This is outrageous,” said Gerald Singleton, a lawyer representing around 5500 wildfire victims. “PG&E is short changing the wildfire victims and is attempting to evade its responsibility.”

“Under the Plan we filed today, we will meet our commitment to fairly compensate wildfire victims and we will emerge from Chapter 11 financially sound and able to continue meeting California's clean energy goals,” said Bill Johnson, PG&E’s chief executive and president. “Throughout this process, we remain focused on the guiding principles of safely and reliably delivering energy to our customers, further reducing the risk of wildfires, and continuing to support the state’s clean energy goals. I am confident that we can, and will, provide better service to our customers and communities, and our Plan of Reorganization is another step in this process.”

Prior to the filing of its restructuring plan, the company has fended off a number of potential takeover and equipment offers. Last week, the city of San Francisco is believed to have offered $2.5bn for the company’s electrical equipment. The city’s offer is 35 times PG&E’s estimated 2019 earnings for the assets and described it as “a very attractive premium valuation” considering the company’s bankruptcy and other recent utility takeovers.  However, this offer was rebuffed.

Going forward, PG&E said it would employ a combination of debt and stock to raise the cash to help finance its exit from bankruptcy.

News: PG&E proposes reorganization plan with $17.9 billion for wildfire claims