Virgin Atlantic files for Chapter 15 bankruptcy protection

BY Fraser Tennant

At a time when coronavirus (COVID-19) is having a severe impact on the aviation industry, Virgin Atlantic Airways is seeking protection from creditors in the US under Chapter 15 of the US Bankruptcy Code – a mechanism that allows US courts to recognise foreign restructuring processes.

In the court filing, the beleaguered British airline stated that it had negotiated an agreement with stakeholders that would allow for “a consensual recapitalisation” that would remove debt from its balance sheet and “immediately position it for sustainable long-term growth”.

The Chapter 15 filing is alongside proceedings in a UK court, which saw the airline obtain approval earlier this week for affected creditors to vote on the restructuring plan. The vote is scheduled to take place on 25 August.

“In order to progress the private-only solvent recapitalisation of the airline, the restructuring plan is going through a court-sanctioned process under Part 26A of the Companies Act 2006, to secure approval from all relevant creditors before implementation,” said a Virgin Atlantic spokesperson. “With support already secured from the majority of stakeholders, it is expected that the plan, and recapitalisation, will come into effect in September. We remain confident in the plan.”

The restructuring plan – agreed with stakeholders on 14 July – will deliver a refinancing package worth around £1.2bn over the next 18 months, including cost savings of approximately £280m per year and an estimated £880m rephasing and financing of aircraft deliveries over the next five years.

Once approved and implemented, Virgin Atlantic expects the restructuring plan to help it to return to profitability from 2022.

One of many players operating in an industry to be majorly impacted by COVID-19, Virgin Atlantic – 51 percent owned by Richard Branson’s Virgin Group and 49 percent by US airline Delta – closed its Gatwick base in May and cut more than 3500 jobs in an attempt to absorb the devastating fallout from the pandemic, which has grounded planes and decimated demand for air travel.

“Once our plan is approved, we will continue to focus on providing our customers with the service they have come to expect,” said Shai Weiss, chief executive at Virgin Atlantic, when the restructuring plan was announced last month. “While we must not underestimate the challenges ahead and the need to continuously respond to this crisis, the pursuit of our vision continues.”

News: Virgin Atlantic Airways seeks U.S. Chapter 15 bankruptcy protection

Remington Arms files for Chapter 11 bankruptcy

BY Richard Summerfield

Gunmaker Remington Arms has filed for Chapter 11 bankruptcy protection in the Bankruptcy Court of the Northern District of Alabama.

The company listed assets and liabilities both in the range of $100m to $500m. Remington said it had $437.5m in sales in 2019, about half what it earned in 2016. The filing is the second time in two years that the company has filed for Chapter 11 bankruptcy. In March 2018, Remington filed for bankruptcy and announced it was seeking to reduce its debt by $620m. It exited the Chapter 11 process the same year when ownership of the company transferred to some of its former creditors, including Franklin Templeton Investments and JPMorgan Asset Management.

The company’s latest filing comes after the collapse of a mooted sale. Recently, Remington had been in discussions over a possible sale to the Navajo Nation, however The Wall Street Journal, citing a person with knowledge of the situation, reported that those discussions had broken down.

Remington’s financial problems have been ongoing for some time. The firearms industry faced a public backlash after the 2012 incident at Sandy Hook Elementary school which left 20 children and six adults dead. Remington bore the brunt of the criticism after it emerged that the company had manufactured the AR-15-style rifle, the Bushmaster, used by the gunman.

The families of the Sandy Hook victims sued the company, and Remington took on debt, both from paying hefty legal fees and from buying out investors that wanted to divest after a wave of negative public sentiment toward the company. That legal battle is still ongoing and has undoubtedly had an impact on the company’s finances.

In response to the filing, the Sandy Hook families released a statement expressing concern that the company would use the bankruptcy process to escape any potential financial liability stemming from their lawsuit.

Remington’s filing comes amid a reported a spike in firearms sales in the US. Unrest has grown across the country since the death of George Floyd and the escalation of calls to defund the police.

News: U.S. gunmaker Remington files for bankruptcy again

BJ Services files for Chapter 11 bankruptcy

BY Richard Summerfield

Fracking pioneer BJ Services has filed for Chapter 11 bankruptcy protection in the US, amid a severe downturn in oilfield services demand. The company had been in discussions to sell its cementing business, and a portion of its fracking operations.

As part of the bankruptcy process, the company will now look to wind down its operation. BJ Services’ executive team has spent the past few weeks working to avert the bankruptcy and wind down, and the company is still in talks with lenders trying to secure funding for the Chapter 11 process, according to a press release announcing the filing.

Regardless of the company’s efforts, it filed for Chapter 11 in the bankruptcy court for the Southern District of Texas, listing assets and liabilities in the range of $500m to $1bn. The company also said it is seeking additional funding to see it through the asset sale and wind-down process. Meanwhile, it is working to minimise the disruption to current projects and reaching out its clients to cover various options.

“The industry continues to face unprecedented uncertainty caused by volatile commodity markets and significantly reduced demand due to the COVID-19 pandemic. Despite maintaining a leading market position and strong client support, the severe downturn in activity and subsequent lack of liquidity resulted in an unmanageable capital structure,” said Warren Zemlak, president and chief executive of BJ Services.

He continued: “After exhausting every possible alternative to address these issues and improve our liquidity, we have made the very difficult decision to proceed with a Chapter 11 process. Our Board of Directors and the entire management team worked diligently over the course of the past several weeks to avoid this outcome. Having said that, we are pleased to be in discussions with interested bidders for our cementing business and for certain portions of our fracturing business and technology.”

BJ Services was a leading provider of hydraulic fracturing services in the formative days of the US shale revolution. It was acquired in 2010 by Baker Hughes for $6.8bn. In 2017, Baker Hughes formed a joint venture to operate BJ Services’ pressure-pumping and cementing businesses. The deal involved selling 53 percent of the company to oil-services-focused CSL Capital Management and an energy division of Goldman Sachs for $325m.

News: Oil firm BJ Services files for Chapter 11 bankruptcy

GNC to close 1200 stores as part of Chapter 11 bankruptcy

BY Fraser Tennant

Due to coronavirus (COVID-19)-related impacts on its business, global health and wellness brand GNC Holdings, Inc. is to pursue a dual-path process that will allow it to restructure its balance sheet and accelerate its business strategy through Chapter 11 bankruptcy.

The Chapter 11 filing allows the retailer to keep operating, although hundreds of underperforming stores – approximately 800 to 1200 – will be closed. GNC’s US and international franchise partners and all corporate operations in Ireland are separate legal entities and are not a part of the Chapter 11 process.

“The COVID-19 pandemic created a situation where we were unable to accomplish our refinancing and the abrupt change in the operating environment had a dramatic negative impact on our business,” said GNC in a statement.

With the support of its lenders and key stakeholders, GNC expects to confirm a standalone plan of reorganisation or consummate a sale that will enable the business to exit from this process later this year. To this end, the company has secured approximately $130m in additional liquidity – $100m debtor-in-possession (DIP) financing and $30m from modifications to an existing credit agreement.

GNC is confident that between financing and cash flow from normal operations, and with the continued support of the International Vitamin Corporation (IVC), its largest vendor, GNC will meet its go-forward financial commitments as it works to achieve its financial objectives.

Headquartered in Pittsburgh, PA, GNC is a leading global specialty retailer of health and wellness products, including vitamins, minerals and herbal supplement products, as well as sports nutrition products and diet products. The company has been led by chief executive Ken Martindale since September 2017.

Furthermore, GNC has a diversified, multichannel business model and derives revenue from product sales through company-owned retail stores, domestic and international franchise activities, third-party contract manufacturing, e-commerce and corporate partnerships.

However, like many retailers, the Pittsburgh-based company has struggled in recent years, clawing its way out of difficulty in February 2018 when it refinanced its loans and negotiated a $300m investment with Chinese health food group Harbin. Despite this, over the past 12 months, the company has reduced its store-count.

GNC concluded: “This reduction will allow GNC to invest in appropriate areas to evolve for the future, and better position the company to meet current and future consumer demand around the world.”

News: GNC parent company files for bankruptcy protection, plans to permanently close up to 1,200 stores

Online learning company Skillsoft files for Chapter 11

BY Fraser Tennant

In an attempt to reduce its approximately $1.5bn debt and position itself for long-term growth, US educational technology company Skillsoft and a number of its affiliates has filed for Chapter 11 bankruptcy.

The voluntary, pre-packaged Chapter 11 cases have been filed in order for Skillsoft to implement a restructuring support agreement (RSA) with many of its lenders – an agreement which is expected to result in a reduction of the company’s balance sheet to $410m from approximately $2bn.

Furthermore, the RSA is expected to provide Skillsoft with significant additional liquidity – while minimising operational disruptions – by ensuring all holders of general unsecured claims, including vendors, suppliers and other trade creditors, are paid in full. Additionally, there are no planned changes to Skillsoft’s leadership team or organisational structure as a result of the restructuring.

“This agreement marks an important step forward in significantly strengthening Skillsoft’s capital structure and positioning the company for long-term success,” said John Frederick, chief administrative officer at Skillsoft. “This is an exciting time for digital learning, and Skillsoft provides best-in-class learning solutions to thousands of customers around the world, including 65 percent of companies in the Fortune 500.”

Indeed, Skillsoft has stated that it remains focused on providing its customers with state-of-the-art corporate learning solutions, best-in-class performance support resources, as well as live events.

“While our core business remains strong, with attractive profitability and cash flow characteristics, our debt levels are too high,” added Mr Frederick. “We need to invest further and that requires our debt levels to come down to free up cash to further enhance our offerings. We look forward to benefitting from a stronger balance sheet and enhanced financial flexibility.“

In conjunction with the court-supervised process, Skillsoft has received a commitment for $60m in debtor-in-possession (DIP) financing from some of its first lien lenders. This financing, together with cash generated from ongoing operations, is expected to provide ample liquidity to support Skillsoft’s operations during the restructuring process.

“We appreciate the broad support of our lenders, who will become the new owners of the Company and recognise the inherent value in the Skillsoft brand,” concluded Mr Frederick. “We also thank the entire Skillsoft team for their ongoing hard work and commitment to our company and our customers and are grateful to our vendors and business partners for their continued support.”

News: E-learning company Skillsoft files for Chapter 11 bankruptcy