PG&E files updated Chapter 11 plan

BY Fraser Tennant

In a move that will allow it to exit bankruptcy as a “reimagined utility” and pay more than $25bn to wildfire victims, PG&E Corporation, the parent company of Pacific Gas and Electric Company, has filed an updated Chapter 11 plan of reorganisation.

According to the filing, PG&E is on track to have its plan confirmed by 30 June 2020, the deadline for participating in California’s new go-forward wildfire fund, a settlement for several wildfires in Northern California which killed dozens of people in 2017.

Upon emergence from Chapter 11, PG&E is expected to be a financially stable company positioned to continue prioritising safe operations and customer focus, while meeting California's energy needs and clean energy goals in a changed climate.

The key updated elements of the plan include: (i) regionalising the company's operations and its infrastructure to enhance the company’s focus on local communities and customers; (ii) further strengthening PG&E’s corporate governance by appointing an independent safety adviser: (iii) establishing a newly expanded role of chief risk officer (CRO) who will report directly to the PG&E chief executive and have oversight of risks associated with PG&E’s operations; (iv) paying value in excess of $25bn to wildfire victims through the settlements reached with individual victims, subrogation claimants and public entities; and (v) emerging with a financing structure that protects customer rates and positions the company for long-term success.

"Under our Plan, the company will emerge from Chapter 11 as a reimagined utility with an enhanced safety structure, improved operations, and a board and management team focused on providing the safe, reliable, and clean energy our customers expect and deserve,” said Bill Johnson, chief executive and president of PG&E Corporation. “Our 23,000 PG&E employees are striving every day to deliver that service and to build the utility of the future.”

Headquartered in San Francisco, Pacific Gas and Electric Company serves 16 million Californians across a 70,000-square-mile service area in Northern and Central California.

Mr Johnson concluded: “We are committed to emerge from Chapter 11 in a manner that allows us to help lead California toward the future, meeting the highest safety, governance and operational standards.”

News: Utility PG&E Files Restructured Chapter 11 Plan

McDermott launches Chapter 11 restructuring plan

BY Fraser Tennant

In a restructuring transaction that eliminates over $4.6bn of its debt, technology, engineering and construction solutions provider McDermott International has filed for Chapter 11 bankruptcy protection.

The Chapter 11 restructuring process will be financed by a debtor-in-possession (DIP) financing facility of $2.81bn. Subject to court approval, McDermott expects the DIP financing, combined with cash generated by McDermott, to enable it to stabilise its cash flows, continue operating in the normal course and fulfil its commitments to key stakeholders, including customers, suppliers, joint-venture partners, business partners and employees.

The Chapter 11 process has the support of more than two-thirds of all McDermott’s funded debt creditors, including the company’s unsecured bondholders.

“The restructuring transaction is further recognition of McDermott's fundamentally solid operating business and proven strategy," said David Dickson, president and chief executive of McDermott. “Our record backlog, the majority of which has been booked in the last two years, and high rate of new project awards demonstrates our customers’ continued confidence in our business, the demand for our skills and our long-term opportunities ahead.”

McDermott expects all of its businesses to continue to operate as normal for the duration of the restructuring. The company also expects to continue to pay employee wages and health and welfare benefits, and to pay all suppliers in full. All customer projects are expected to continue uninterrupted on a global basis.

"This financial restructuring will create a sustainable capital structure that matches the strength of our operating business, continued Mr Dickson. “As a result of the transaction, we are eliminating over $4.6bn in debt from our balance sheet and we will emerge with robust liquidity and significant financing to execute on customer projects in our backlog.”

Operating in over 54 countries, McDermott's locally focused and globally integrated resources include more than 42,000 employees, a diversified fleet of speciality marine construction vessels and fabrication facilities around the world.

Mr Dickson concluded: “McDermott will emerge a stronger, more competitive company with a solid financial foundation, and we will build upon our reputation as a premier, fully integrated provider of technology, engineering and construction solutions to the energy industry.”

News: McDermott to file for Chapter 11 bankruptcy protection

Thomas Health poised to restructure under Chapter 11

BY Fraser Tennant

Due to significant financial challenges largely beyond its control, healthcare provider Thomas Health has filed for Chapter 11 bankruptcy protection in order to advance its strategic alternatives, including restructuring options to address its long-term debt.

Despite the filing, the company is keen to stress that it is not closing its doors and that there are no planned changes to employment, services or how it delivers care to its patients. Furthermore, the Chapter 11 process is not expected to affect enrolment of patients or employers in healthcare plans throughout 2020.

“By addressing our debt structure now, we can secure the long-term future of Thomas Health,” said Dan Lauffer, chief executive of Thomas Health. “This is not a Thomas Health-only problem. Many hospital systems throughout the country are experiencing financial challenges and are now taking similar actions. We appreciate our community’s support as we continue serving the best interests of our patients, employees, physicians and all those whose livelihoods will be positively impacted by Thomas Health’s mission to each of communities that we proudly serve.”

A partnership built on the strengths between Thomas Memorial Hospital and Saint Francis Hospital, Thomas Health offers a range of patient focused service lines creating value for patients, physicians and payers through committed healthcare professionals delivering a compassionate exceptional patient experience, superior clinical outcomes and fiscal stewardship to enhance the health and wellness of the communities it serves.

However, like many hospital systems throughout the US, Thomas Health has been experiencing significant financial challenges, including: (i) an ongoing decrease in commercially-insured patients; (ii) Medicaid, Medicare and Public Employees Insurance Agency (PEIA) continuing to reimburse at levels below what it costs hospitals to provide such services; (iii) many patients being unable to afford their deductibles; and (iv) opioid/substance use disorder treatment costs being significant and often exceeding corresponding reimbursement.

Thomas Health senior management have been publicly discussing these challenges for several years and have made significant changes within the organisation that have saved the health system millions of dollars. For example, Thomas Health has merged duplicative services between Thomas Memorial and Saint Francis Hospital, consolidated both IT systems to an integrated platform, and built more affordable care clinics for non-emergent patients.

Going forward, Thomas Health expects the Chapter 11 process to strengthen its ability to meet the new healthcare payment realities and ensure its future.

News: Thomas Health board of directors vote to seek Chapter 11 protection

Borden Dairy files for Chapter 11 protection

BY Richard Summerfield

One of the largest and oldest dairy companies in the US, Borden Dairy, has filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of Delaware.

The company, founded in 1856, listed estimated debts and liabilities, both in a range from $100m to $500m. Amid rising milk prices and the increasing popularity of dairy-free equivalents including almond, rice and soy milk, Borden’s debt load became unsustainable. The company was also unable to meet its pension obligations. Borden has around 3300 employees, 22 percent of which are covered by a collective bargaining agreement.

The dairy market has experienced a number of significant challenges of late, with Borden becoming the second largest dairy producer to file for bankruptcy in recent months, after its larger rival, Dean Foods Co, filed in November 2019.

However, while Dean Foods reported a net loss in seven of its last eight quarters, Borden’s growth last year outpaced the wider industry, despite a 6 percent drop in overall US milk consumption since 2015. The company recorded revenue of $1.2bn in 2019. Part of the company’s increased sales result from other products it produces, including sour cream, cottage cheese, teas and orange juice.

“Borden is EBITDA-positive and growing, but we must achieve a more viable capital structure,” said Borden chief executive Tony Sarsam in a statement announcing the filing. “This reorganisation will strengthen our position for future prosperity. Over the past 163 years, we have earned the distinction of being one of the most well-recognised and reputable national brands. We remain committed to ‘The Borden Difference’, which is our promise to be the most service-oriented dairy Company that puts people first. We will continue serving our customers, employees and other stakeholders and operating business as usual throughout this process.

“Despite our numerous achievements during the past 18 months, the Company continues to be impacted by the rising cost of raw milk and market challenges facing the dairy industry,” he continued. “These challenges have contributed to making our current level of debt unsustainable. For the last few months, we have engaged in discussions with our lenders to evaluate a range of potential strategic plans for the Company. Ultimately, we determined that the best way to protect the Company, for the benefit of all stakeholders, is to reorganise through this court-supervised process.”

News: Borden Becomes Second Big U.S. Milk Producer to File for Bankruptcy

Melinta files for Chapter 11 protection

BY Richard Summerfield

Antibiotics maker Melinta Theraputics has filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of Delaware.

The company, which has four antibiotic treatments on the market, has been sounding the alarm about the state of its finances since November. In a quarterly filing Melinta said that limited liquidity and insufficient revenues would likely make a Chapter 11 necessary. Melinta listed $500m in assets and up to $500m in liabilities in its bankruptcy petition.

The drug maker has reached a restructuring agreement with secured lenders from Deerfield Private Design Fund III LP and Deerfield Private Design Fund IV LP, which would acquire 100 percent of the equity in the reorganised company in exchange for $140m of secured claims under a senior credit facility, according to a regulatory filing and company statement.

“While we have successfully conserved cash and enhanced revenue over the past several quarters, we nevertheless anticipate challenges in meeting the Company’s obligations, including near-term compliance with certain covenants,” said Jennifer Sanfilippo, interim chief executive officer. “We are confident that this process will secure new ownership of the business with the financial resources to support the Company’s antibiotics portfolio and ensure these potentially life-saving products continue to get to patients in need. We sincerely thank our employees and partners for their commitment to the antibiotics space, our business, and the patients we serve.”

Melinta is the latest firm in the antibiotics space to experience financial difficulty in recent years. In April 2019, biopharmaceutical company Achaogen filed for bankruptcy less than a year after the FDA approved a new antibiotic seen as an important weapon against carbapenem-resistant Enterobacteria infections, which are among the most difficult bacterial infections to treat.

Many new antibiotics have struggled to generate financial returns in recent years, which has caused several larger drug manufacturers to abandon antibiotic development altogether, in turn creating an opportunity for smaller companies. Unfortunately, many of these firms, Melinta included, have struggled.

News: Antibiotics maker Melinta files for Chapter 11 bankruptcy