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

Mirae Asset pulls plug on $5.8bn US hotels deal

BY Fraser Tennant

Citing a breach of contract obligations, global investments company Mirae Asset has pulled out of a $5.8bn deal to acquire 15 US-located luxury hotels from Chinese insurer AnBang Insurance Group.

The South Korea-based Mirae said that Anbang – one of the largest insurance groups in China with a global network of over 30 million customers – had failed to remedy breaches of certain obligations regarding the acquisition, resulting in the termination of the transaction. AnBang bought the hotels for $6.5bn in March 2016 from US private equity firm Blackstone.

In September 2019, a consortium led by Mirae agreed to buy the hotels in New York, San Francisco, Los Angeles and other locations, from Anbang, which had been selling some of its overseas assets. The Chinese government took control of the insurer in 2018 after it took on too much debt. Chinese authorities also sentenced AnBang chairman Wu Xiaohui to 18 years in prison for fraud.

The transaction, in which Mirae placed a 10 percent deposit, had originally been scheduled to close on 17 April 2020.

“Among other things, AnBang had failed to timely disclose and discharge various material encumbrances and liabilities impairing the hotels and failed to continue the operation of the hotels in accordance with contractual requirements,” explained Mirae in a statement. “Mirae Asset will protect its rights vigorously in accordance with the terms of the agreement.”

For its part, AnBang has filed litigation against Mirae and affiliated entities in the US, claiming that Mirae’s decision to terminate the transaction is itself a violation of the deal and that AnBang did not breach any contractual obligations, a claim the asset manager denies. In its lawsuit filing, AnBang stated that it “seeks an order forcing defendants to specifically perform their obligations under a sale and purchase agreement and certain equity commitment letters”.

The collapse of the Mirae/AnBang deal is the latest M&A transaction to be impacted by the coronavirus (COVID-19) pandemic. The travel and tourism industries have been hit particularly hard, with hotels in affected regions seeing sharp declines in bookings.

News: Mirae Asset scraps $5.8 billion deal to buy U.S. hotels from China's Anbang

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

Boeing terminates $4.2bn Embraer deal

BY Richard Summerfield

Boeing Co announced it has abandoned a deal to buy 80 percent of the commercial airline business of Embraer, saying the Brazilian company had failed to satisfy necessary conditions of the agreement.

On Saturday, Boeing terminated its Master Transaction Agreement (MTA) with Embraer. Under the terms of the agreement, Boeing had an option to terminate the agreement until 24 April, subject to extension by either party if certain conditions were met. Boeing did not disclose what the unmet conditions were and declined to comment on the specifics. The company will pay a termination fee of $75m to Embraer.

In response to the termination, Embraer said Boeing was making false claims to back out of the transaction due to its “own financial condition and 737 Max and other business and reputational problems”. Embraer also said that it would “pursue all remedies”.

“Boeing has worked diligently over more than two years to finalise its transaction with Embraer,” said Marc Allen, president of Embraer Partnership & Group Operations. “Over the past several months, we had productive but ultimately unsuccessful negotiations about unsatisfied MTA conditions. It is deeply disappointing. But we have reached a point where continued negotiation within the framework of the MTA is not going to resolve the outstanding issues.”

In 2018, Boeing and Embraer said they expected to close the deal by late 2019, pending regulatory approval. The deal faced an antitrust probe from the European Union. Boeing said that all regulatory authorities had approved the deal, except for the European Commission.

For Boeing, the deal a would have strengthened its position in the smaller jet market, adding the E-Jet-E2 to its portfolio.

Going forward, the two companies have confirmed that they will maintain their existing MTA, originally signed in 2012 and expanded in 2016, to jointly market and support the C-390 Millennium military aircraft.

News: Boeing Backs Out of $4.2 Billion Embraer Joint Venture Deal

Couche-Tard drops Caltex bid for now

BY Richard Summerfield

The proposed $5.6bn merger between Canadian convenience store Alimentation Couche-Tard and fuel retailer Caltex Australia has been shelved as the repercussions of the COVID-19 outbreak continue to be felt around the world.

In a statement, Couche-Tard confirmed that while it still believes that Caltex is a good fit for its expansion into Asia, and would be willing to re-engage once coronavirus-related uncertainty subsides, in the short-term it plans to prioritise safeguarding its own business.

“We remain convinced of the long-term financial and strategic merits of an acquisition of Caltex and all the benefits it would offer to the shareholders of both companies,” said Brian Hannasch, president and chief executive of Couche-Tard. “Despite the COVID-19 situation, we have worked to complete due diligence on schedule through a significant investment of time and money. Our current plan would be to reengage the process once there is sufficient clarity as to the global outlook, and the work done to date should mean that we will be able to quickly formalize our proposal at that time.”

He added: “Couche-Tard is focused on managing its own business through this period and prioritizing the health, safety and well-being of its employees, customers and the communities it serves.”

For Caltex, the collapse of the deal comes as oil prices go into freefall. US crude oil prices turned negative as drops in global fuel demand impacted storage capacity and sales. OPEC has agreed to cut production by an initial 9.7 billion barrels per day yet to flow on to the market. In response, Caltex has brought forward a planned maintenance shutdown of its Brisbane refinery in a bid to soften the economic hit.

Steven Gregg, chairman of Caltex, said in a separate statement: “We remain confident in the strength of Caltex as an independent business, and should we receive an approach in the future would be willing to consider it on its merits.”

News: Couche-Tard shelves $5.6 billion Caltex Australia buyout as deal becomes latest virus victim