Full time for Modell’s

BY Richard Summerfield

Modell’s Sporting Goods has filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of New Jersey.

The company, which was founded in 1889, operated over 140 stores across several north-eastern and mid-Atlantic US states and had 3623 employees at the time of the filing.

Modell’s had been in a state of financial distress for some time. In February, the company’s chief executive, Mitchell Modell, announced he was seeking an investor to take a minority stake in the business, calling it “crowdsourcing at the highest level”. However, these efforts were unsuccessful.

In a statement announcing the filing, Modell’s explained it was engaged in discussions with its financial creditors and had been exploring a recapitalisation of the business through a potential sale of some or all of its assets or an equity investment. The company will continue to pursue these discussions, it noted in a statement, though it has started to liquidate its remaining stores, having liquidated 19 stores prior to the filing.

“Over the past year, we evaluated several options to restructure our business to allow us to maintain our current operations. While we achieved some success, in partnership with our landlords and vendors, it was not enough to avoid a bankruptcy filing amid an extremely challenging environment for retailers,” said Mr Modell. “We are extremely appreciative of the support that our lenders (JP Morgan Chase and Wells Fargo), vendors and landlords provided during this difficult period, engaging in extensive renegotiation efforts and allowing us to pursue every possible avenue to preserve the jobs of our loyal associates. I want to thank each and every one of our associates for their support over the years and our customers for their historic support of Modell’s.

“This is certainly not the outcome I wanted, and it is one of the most difficult days of my life,” he continued. “But I believe liquidation provides the greatest recovery for our creditors. We have partnered with Tiger Capital Group to liquidate the remaining stores beginning Friday morning, March 13. The return from the liquidation of the first 19 stores managed by Tiger has been beyond spectacular, and we are confident this performance will continue across the remaining stores, maximizing return for our creditors.”

News: Modell’s Sporting Goods Voluntarily Files for Chapter 11 Bankruptcy Protection

Veritas to acquire DXC unit for $5bn

BY Richard Summerfield

DXC Technology announced it has agreed to sell its state and local health and human services business to private equity firm Veritas Capital for $5bn in cash. The deal is expected to close in December, subject to customary closing conditions and the receipt of third-party consent and regulatory approvals. The deal is not subject to any financing condition or shareholder approval.

The deal is the outcome of a process announced by DXC in November 2019 to explore strategic alternatives for three of its non-core assets. The company will use proceeds from the sale to pay down existing debt, which is consistent with DXC’s policy of maintaining a strong balance sheet and an investment grade credit profile.

“I’m pleased that we continue to execute the plan that we outlined in November, especially in this volatile environment,” said Mike Salvino, chief executive of DXC, in a statement announcing the deal. “The transaction is an important first step in our business and focusing on the enterprise technology stack. The transaction progressed much faster than we originally anticipated, but we are absolutely delighted to partner with Veritas Capital, the leading investor in health care and government sector.”

“DXC’s US State and Local Health and Human Services business is a leading player in a highly complex market that continues to benefit from technological innovation,” said Ramzi Musallam, chief executive and managing partner of Veritas. “The intersection of government, technology and healthcare is a key focus area for Veritas. By combining the business’ talented employees with our extensive industry experience, we plan to build on the business’ unwavering commitment to its customers and leadership in mission critical healthcare technology to drive continued improvement in the quality of healthcare for citizens nationwide. We look forward to welcoming the business and its employees into the Veritas portfolio.”

News: DXC Technology to sell healthcare unit for $5 billion to Veritas Capital

Tesco sells Malaysian and Thai assets to Charoen for $10.6bn

BY Fraser Tennant

In a deal which will see the return of $6.6bn to its shareholders, supermarket giant Tesco is to sell its businesses in Thailand and Malaysia to Bangkok-based conglomerate Charoen Pokphand Group for $10.6bn, including debt.

The sale of its Malaysian and Thai assets will simplify the Tesco Group, enabling a stronger focus on its retail businesses in the UK, Ireland and Central Europe. The transaction also generates substantial  value for Tesco’s shareholders and allows the Group to further de-risk by reducing indebtedness through a pension contribution of £2.5bn.

Over the last four years Tesco’s performance has significantly improved – particularly within the UK, its largest and most important market – but also across the wider Tesco Group. It is from this strengthened position that the Tesco board decided to respond to the expressions of interest it received for its businesses in Thailand and Malaysia and unanimously concluded that the offer by Charoen should be recommended to shareholders.

Operating across many industries ranging from industrial to service sectors, which are categorised into eight business lines covering 13 business groups, Charoen currently has investments in 21 countries and economies.

"Following inbound interest and a detailed strategic review of all options, we are announcing the proposed sale of Tesco Thailand and Tesco Malaysia,” said Dave Lewis, chief executive of Tesco. “This sale releases material value and allows us to further simplify and focus the business, as well as to return significant value to shareholders. I would like to thank all of our Tesco Thailand and Tesco Malaysia colleagues for their dedication, professionalism and service to our customers, which has resulted in the creation of such a strong business.”

Subject to customary regulatory approvals in Thailand and Malaysia, the transaction is expected to be completed during the second half of 2020.

Mr Lewis concluded: “I am confident that the agreement we have reached with Charoen presents an exciting opportunity for their continued success."

News: Tesco plans $6.6 bln shareholder return from Thai, Malaysia sale

Drilling company Pioneer Energy restructures through Chapter 11

BY Fraser Tennant

A victim of the turbulent economics of the oil & gas industry, drilling company Pioneer Energy Services has filed for Chapter 11 bankruptcy in order to implement a comprehensive financial restructuring.

The Chapter 11 process and restructuring, reached in agreement with Pioneer’s key stakeholders, includes a number of the company’s subsidiaries but does not include Pioneer’s international entities, the majority of which are located in Colombia.

“Over the course of the last several years, Pioneer has been challenged by the difficult economics of the oil and gas industry,” said Stacy Locke, president and chief executive of Pioneer. “We have continued to adapt to the challenging market environment in which we operate, but our strong underlying business has continued to labour under a heavy debt burden.”

Pioneer intends to use the Chapter 11 process to implement a balance sheet restructuring by significantly reducing the company’s long-term debt and related interest costs, providing access to additional financing and establishing a strong capital structure. Pioneer expects to emerge in a stronger financial position, capable of accelerating future growth and better able to serve our valued customers.

“Our objective is to use the restructuring process to implement a balance sheet restructuring and set Pioneer on a path to succeed in the future with a right-sized debt structure and ample liquidity going forward,” continued Mr Locke. “We are confident that these are the right steps to deliver value for the benefit of our stakeholders.”

Headquartered in Texas, Pioneer provides well servicing, wireline and coiled tubing services to producers primarily in Texas and the Mid-Continent and Rocky Mountain regions.  Pioneer also provides contract land drilling services to oil and gas operators.

The company expects to continue to operate in the normal course during the court-supervised process and the terms of the restructuring contemplate paying all customer, vendor and other trade obligations in full in the ordinary course of business.

Mr Locke concluded: “We appreciate the ongoing hard work and commitment of the entire Pioneer team. I am confident our employees will continue to focus on safety, the day-to-day operations and provide our customers the quality of service they have come to expect from Pioneer.”

News: Pioneer Energy files for bankruptcy protection

Thyssenkrupp sells elevator business for $18.7bn

BY Richard Summerfield

Thyssenkrupp AG has agreed to sell its elevator business to a consortium of Advent, Cinven and Germany’s RAG foundation for $18.7bn.

Once completed, the deal will be the biggest private equity acquisition in Europe since 2007, when KKR took Alliance Boots Plc private in a deal valued at more than $23bn including debt.

Thyssenkrupp will use cash from the elevator unit sale to pay down borrowings and fund some of its pension obligations. The company is heavily indebted and in its most recent earnings statement, net debt jumped to €7.1bn.

“With the sale, we are paving the way for Thyssenkrupp to become successful,” said Martina Merz, chief executive of Thyssenkrupp. “Not only have we obtained a very good selling price, we will also be able to complete the transaction quickly. It is now crucial for us to find the best possible balance for the use of the funds. We will reduce Thyssenkrupp’s debt as far as is necessary and at the same time invest as much as is reasonable in developing the company. With this, Thyssenkrupp can pick up speed again.”

“Cinven is delighted to invest in and accelerate the growth of Thyssenkrupp Elevator both organically and through further acquisitions,” said Bruno Schick, partner and head of DACH and Emerging Europe at Cinven. “Further investment in product development, R&D and international expansion will enable us to grow the business sustainably over the long-term. Alongside Advent and RAG-Stiftung, we look forward to partnering with management to shape the next phase of this outstanding business.”

“Thyssenkrupp Elevator has established itself as an international market leader, with a strong and innovative product portfolio,” said Ranjan Sen, managing partner and head of Germany at Advent. “We look forward to working alongside Cinven and RAG-Stiftung to leverage our collective expertise and capital resources and to build on this excellent platform for further growth, thereby creating a strong, independent industrial company.”

The deal is expected to close by the end of the third quarter of 2020, subject to customary closing conditions and regulatory approvals.

News: Thyssenkrupp sells elevator unit for $18.7 billion to Advent, Cinven consortium