Avianca files for Chapter 11 bankruptcy

BY Richard Summerfield

Avianca Holdings, the second largest airline in Latin America, has filed for Chapter 11 bankruptcy protection after failing to meet a bond payment deadline, while its pleas for COVID-19 aid from Colombia’s government have so far been unsuccessful.

The company filed for bankruptcy in a court in New York on Sunday as the coronavirus outbreak continues to impact the aviation industry. Global air travel has fallen by 90 percent since the outbreak, according to the International Air Transport Association. The body predicts Latin American airlines will lose $15bn in revenues this year – the biggest drop in the industry’s history.

“Avianca is facing the most challenging crisis in our 100-year history as we navigate the effects of the COVID-19 pandemic,” said Anko van der Werff, chief executive of Avianca. “Despite the positive results yielded by our ‘Avianca 2021’ plan, we believe that, in the face of a complete grounding of our passenger fleet and a recovery that will be gradual, entering into this process is a necessary step to address our financial challenges.

“When government-mandated air travel restrictions are lifted and we are able to gradually resume our passenger flights, we look forward to welcoming back our furloughed employees and playing a leading role in restarting the economy in Colombia and our other key markets,” he continued. “We greatly appreciate the dedication of our employees to Avianca and to serving the more than 30 million passengers that fly our airline each year. We remain committed to our purpose to connect people, families and businesses.”

Undoubtedly, the COVID-19 crisis has not helped matters. Avianca has not flown a regularly scheduled passenger flight since late March and most of its 20,000 employees have gone without pay through the crisis. Furthermore, the pandemic has cut more than 80 percent of Avianca’s income, and the company has been struggling with high fixed costs. It had debts of $7.3bn in 2019.

Avianca previously filed for bankruptcy in the early 2000s and was rescued by a deal with Bolivian oil tycoon German Efromovich.

News: World's second-oldest airline, Avianca, driven to bankruptcy by coronavirus

Gold’s Gym files for Chapter 11 bankruptcy

BY Richard Summerfield

Prominent US gym chain Gold’s Gym has filed for Chapter 11 bankruptcy protection in Dallas as it has been unable to keep up with debt payments after the prolonged shutdown caused by the COIVD-19 outbreak. The company listed assets and liabilities of around $100m, according to court papers.

In April, Gold’s Gym permanently closed about 30 company-owned locations due to the COVID-19 outbreak and said that the decision to close the locations was made “to maintain the strength and growth of the potential of the brand as well as ensure the continued viability of the company for decades to come”.

According to Gold’s Gym, the Chapter 11 filing will not have a further impact on its current operations and it plans to emerge from bankruptcy by August.

“We want to be 100 percent clear that Gold’s Gym is not going out of business,” said Adam Zeitsiff Gold’s Gym’s president and chief executive. “The brand is strong, and we’ll continue to innovate and grow our digital business, our licensing program and our global footprint as we focus on serving our millions of members across the world.”

“The company will be seeking court approval to continue paying suppliers, vendors, and employees in the ordinary course on a go-forward basis,” the company said in a statement. “No single factor has caused more harm to our business than the current COVID-19 global pandemic. This has been a complete and total disruption of every one of our business norms, so we needed to take quick, decisive actions to enable us to get back on track.”

Gold’s Gym operates more than 700 gyms around the world, according to its website, which also noted that gyms owned by franchisees will not be affected by the restructuring.

The company will also try to sell itself under terms proposed by TRT Gym Asset Holdings LLC, according to the court documents. TRT Holdings Inc., the majority shareholder of Gold’s Gym, is in discussions with the company over the terms of a debtor-in-possession and exit loan to get it through the restructuring.

News: Gold’s Gym files for bankruptcy protection

Diamond Offshore files for Chapter 11

BY Fraser Tennant

Blaming the impact of an oil price war and coronavirus (COVID-19) pandemic, offshore drilling contractor Diamond Offshore Drilling, Inc., along with 15 of its subsidiaries, has filed for Chapter 11 bankruptcy. The company has debts of more than $2.6bn.

Diamond intends to use the bankruptcy proceedings to restructure and strengthen its balance sheet and achieve a more sustainable debt profile, while continuing to focus on safe, reliable, and efficient contract drilling services for its global clients.

In addition, Diamond and its advisers – Paul, Weiss, Rifkind, Wharton & Garrison LLP as legal counsel, Alvarez & Marsal as restructuring adviser and Lazard Frères & Co. LLC as financial adviser – are pursuing negotiations with its key stakeholders regarding a comprehensive restructuring plan to address the capital structure.

“After a careful and diligent review of our financial alternatives, the board of directors and management, along with our advisers, concluded that the best path forward for Diamond and its stakeholders is to seek Chapter 11 protection,” said Marc Edwards, president and chief executive of Diamond. “Through this process, we intend to restructure our balance sheet to achieve a more sustainable debt level to reposition the business for long-term success.”

Diamond has sufficient capital to fund its global operations in the ordinary course and to make continued investments in safety and reliability during the reorganisation proceedings and does not require additional post-petition financing. “Our clients and vendors should expect business as usual across our organisation as our world class team will stay steadfast on our collective goal of providing superior operations that clients have come to expect from Diamond,” added Mr Edwards.

A leader in offshore drilling, Diamond provides innovation, thought leadership and contract drilling services to the energy industry. With a total fleet of 15 offshore drilling rigs, consisting of 11 semisubmersibles and four dynamically positioned drillships, the company solves complex deepwater challenges around the globe.

Mr Edwards concluded: “Diamond remains focused on maintaining its high standards as it relates to safety and operational excellence during the Chapter 11 process.

News: Diamond Offshore files for bankruptcy, citing 'price war,' coronavirus

Frontier Communications files for Chapter 11

BY Fraser Tennant

In an attempt to reduce its debt by more than $10bn, telecommunications company Frontier Communications, along with its direct and indirect subsidiaries, has filed for Chapter 11 bankruptcy to expedite the implementation of a restructuring plan.

In conjunction with a restructuring agreement (RSA), Frontier has received commitments for $460m in debtor-in-possession (DIP) financing. Following court approval, the company’s liquidity will total over $1.1bn, comprising the DIP financing and more than $700m cash on hand.

This liquidity, combined with cash flow generated by Frontier’s ongoing operations, is expected to be sufficient to meet the company’s operational and restructuring needs.

“We are undertaking a proactive and strategic process with the support of our bondholders to reduce our debt by over $10 bn on an expedited basis,” said Robert Schriesheim, chairman of the finance committee at Frontier. “We are pleased that constructive engagement with our bondholders over many months has resulted in a comprehensive recapitalisation and restructuring. We do not expect to experience any interruption in providing services to our customers. 

“With a recapitalised balance sheet, we will have the financial flexibility to reposition the company and accelerate its transformation by allocating capital resources and adding talent to enhance our service offerings to our customers while optimising value for our stakeholders,” he continued. “Under the RSA, our trade vendors will be paid for goods and services provided both before and after the filing date.”

Under the RSA, bondholders have, subject to certain terms and conditions, agreed to support implementation of a plan that is expected to reduce the company’s debt and provide significant financial flexibility to support continued investment in its long-term growth.

In addition, Frontier intends to proceed with the sale of its Washington, Oregon, Idaho and Montana operations and assets to Northwest Fiber for $1.352bn in cash, subject to certain closing adjustments, on or around 30 April 2020, and will seek court approval to complete the transaction on an expedited basis.

“With the agreement with our bondholders, we can now focus on executing our strategy to drive operational efficiencies and position our business for long-term growth,” added Bernie Han, president and chief executive of Frontier. “At the same time, the COVID-19 pandemic continues to impact the entire business community, and our team is focused on ensuring the health and safety of our employees and customers.”

News: Frontier Communications files for bankruptcy protection

Print priorities: LSC Communications files for Chapter 11

BY Fraser Tennant

In a move to strengthen its liquidity and improve its capital structure, multinational commercial printing company LSC Communications, along with most of its US subsidiaries, has voluntarily filed for Chapter 11 bankruptcy.

As part of the restructuring process, Chicago-based LSC has received commitments for $100m in debtor-in-possession (DIP) financing from certain of its revolving lenders, subject to the satisfaction of certain closing conditions, which will allow it to continue to operate and pay vendors in full.

LSC’s subsidiaries in Mexico and Canada are not included in the Chapter 11 proceedings and will continue to operate as normal.

“As one of the country’s largest and most experienced printers with the leading mailing distribution network, we have a strong foundation and world-class team that will continue to work closely with our clients and vendors to achieve our mutual success,” said Thomas J. Quinlan III, chairman, president and chief executive of LSC Communications. “At the same time, the situation related to COVID-19 continues to evolve and impact our people, our communities, our clients and our vendors.”

LSC’s decision to file for Chapter 11 follows a comprehensive evaluation of opportunities to reduce its debt and better position the company to compete and deliver exceptional products and services to its clients.

“Our leadership continues to take the necessary steps to fortify our operations and effectively execute our critical role during this time, while making sure the health and safety of our employees remains our top priority,” continued Mr Quinlan. “Notably, the support we are receiving from our lenders through this process will help us to manage through these unprecedented near-term challenges as well as position LSC for the future.”

Since terminating its merger with Quad Graphics in July 2019, LSC’s proactive and aggressive approach to improving its cost structure and streamlining its manufacturing platform has seen it close eight of its facilities, as well as winning a host of new contracts.

News: LSC Files Chapter 11