Mall owner Washington Prime Group is preparing a potential bankruptcy filing as time runs out to avert a default after it skipped an interest payment on its debt, according to people with knowledge of the plans, Bloomberg News reported. The real estate investment trust, which owns about 100 malls throughout the U.S., said last month that it would use a 30-day grace period to continue negotiations with its lenders. The plan to file for chapter 11 protection isn’t final and could change if negotiations evolve or the company’s grace period is extended, the people added. Short interest in the stock grew in late 2020, exceeding 30% of the outstanding shares as recently as October, according to Bloomberg data. The shares continued to trade as high as $7.49 even after the skipped debt payment. Day traders and Reddit investors began flocking to certain heavily shorted names in hopes of profiting when short sellers covered their bets. Columbus, Ohio-based Washington Prime has said that the impact from the COVID-19 pandemic could affect its ability to comply with debt covenants and continue operations, or remain a going concern “under certain circumstances.” It said in November that it was “actively negotiating” with debt holders to cut borrowings. At that time, Chief Executive Officer Lou Conforti emphasized that bankruptcy was not on the table. Washington Prime has been working with advisers from law firm Kirkland & Ellis and investment bank Guggenheim to help it handle its maturities, which include a first-lien term loan due in June. In December, it attempted to convert about $260 million worth of its unsecured bonds into $175 million of preferred equity issued by a new special purpose entity, but failed to reach an agreement with debt holders.
Remington Outdoor Company is facing objections from families of shooting victims, among others, to its proposed wind-down plan as it nears the conclusion of its chapter 11 case, Reuters reported. The gunmaker, represented by O’Melveny & Myers, will request approval of its plan at a remote hearing on March 8 before U.S. Bankruptcy Judge Clifton Jessup Jr. in Decatur, Alabama. The plan comes after last year’s sales of Remington’s various ammunition and firearm assets. The sales brought in about $157 million to Remington’s estate, which will be used to pay off creditors. In July, Remington filed its second bankruptcy in two years in the face of litigation with families of shooting victims and increased retailer restrictions on gun sales, with $253.7 million in funded debt. Before seeking bankruptcy protection, Remington had been defending itself against a lawsuit brought by families of victims of the 2012 Sandy Hook Elementary School shooting. The case was put on hold as a result of the bankruptcy. The Connecticut Supreme Court in March 2019 ruled the families could sue Remington for wrongfully marketing the Bushmaster AR-15 rifle used by the shooter, Adam Lanza, whom they say was motivated by the advertising to commit his crimes. The U.S. Supreme Court later declined to review the ruling. The company has denied liability for the shooting.
Trinity Health Corp. has agreed to sell Chicago’s Mercy Hospital and Medical Center to a Flint, Michigan-based biomedical company that will keep the facility running, Bloomberg News reported. Insight, the potential buyer that intends to operate the facility as a full-service acute care hospital, is filing paperwork for the change of ownership with the Illinois Health Facilities and Services Review Board, according to a statement from the company. The agreement is non-binding and final terms will be negotiated in the coming weeks, according to a statement from Mercy. “If the acquisition meets state regulatory approval, Insight plans to operate a community-based hospital that will serve patients from Bronzeville, Chicago’s South Side and the city of Chicago,” Jawad Shah, chief executive officer of Insight, said in the company’s statement. “We are committed to a thoughtful community engagement process to ensure access to care for Chicago’s diverse populations while achieving financial solvency.” The pandemic has exacerbated the financial struggles of many U.S. hospitals, including Mercy. Costs from treating COVID-19 patients have soared, and hospitals had to curtail profitable elective procedures. The proposed sale comes after Mercy Hospital filed for bankruptcy last month and Illinois health officials rejected plans by Mercy’s owner, Trinity, to close the 258-bed medical center and open an outpatient center on Chicago’s South Side. Read more.
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Valaris, the world’s largest offshore rig operator, has received approval from a U.S. bankruptcy court for its prearranged plan of reorganization filed as part of 2020 chapter 11 voluntary bankruptcy, The Maritime Executive reported. Last August, Valaris reached a deal with half of its bondholders to reduce its debt and finance its continuing operations through the bankruptcy process. The bankruptcy plan will eliminate $7.1 billion of existing debt and will provide Valaris with a $520 million capital injection through the issuance of a secured note maturing in 2028. The plan received support from approximately 80 percent of the company’s unsecured noteholders and bank lenders representing all of the company’s credit facility claims. Also, approximately 81 percent of the company’s voting shareholders voted to accept the plan. Valaris has also reached an agreement with Daewoo Shipbuilding & Marine Engineering Co. to amend its two newbuild drillship contracts. The delivery dates are being extended to December 31, 2023, while the company has the option to take delivery early or terminate the contracts on a non-recourse basis. Final payments for the VALARIS DS-13 and VALARIS DS-14 are estimated to be approximately $119 million and $218 million. Formed in 2019 through the combination of Ensco and Rowan Drilling, Valaris became the leader in the industry at a time when the ultra-deepwater market was continuing to show strong weakness from the collapse in the price of oil. The company began efforts to “right-size and streamline the organization,” but the substantial downturn in the sector, and later the impact of the pandemic, forced the company to use a bankruptcy filing to future restructure its operations to lower operating costs and its debt.
Offshore drilling rig contractor Seadrill said on Thursday it had taken an additional $2.9 billion non-cash impairment on its assets due to a bleak outlook for the sector, which has reduced demand for its drilling rigs, Reuters reported. Seadrill, which in February filed for chapter 11 bankruptcy protection in the United States for the second time in four years, said it expected offshore drilling demand to remain depressed well into 2021, with some degree of market recovery seen by mid-2022. The $2.9 billion impairment for the second half of 2020 comes on top of $1.2 billion taken on the assets in the first half of last year. The extra impairment reflects the company’s view that some of its cold-stacked rigs — an industry term for laid up rigs without crews — were unlikely to return to work. “We have now impaired all long-term cold stacked units in full and all other drillships and benign environment semi-submersible rigs have been written down to their estimated fair market value,” Seadrill said. At the end of 2020, 19 out of 34 of Seadrill’s drilling rigs were idle.
A group of unsecured lenders to Hertz Global Holdings Inc. are proposing an alternative reorganization of the rental car company that would take it public, a move that counters a plan to sell the company to two investment funds for as much as $4.2 billion, Bloomberg News reported. The lenders want to convert their holdings in the bankrupt company into shares of the reorganized company, which could be traded publicly. If Hertz’s board were to accept that plan, it would supersede a bid from Knighthead Capital Management and Certares Management to buy the company. The group believes the Knighthead bid, which values Hertz at $4.85 billion, is too low. Its members think Hertz has an enterprise value of $5 billion and would fetch more under their plan. The lenders have not submitted a formal proposal to Hertz and terms are still in flux. In one scenario being discussed, Hertz’s shares would become public upon emergence from bankruptcy. Members of the creditor group include Alliance Bernstein, Bank of America, Invesco, Fir Tree Partners, and JPMorgan Asset Management, according to court filings. Hertz’s board is in the early stages of evaluating proposals and will take the best bid. The company started negotiating with creditors and potential buyers in November, according to court documents. After talking with three bidders, Hertz settled on Knighthead and Certares, who jointly have a travel-focused investment fund.
Electricity retailers are asking Texas’s power regulator to suspend immediate collections on the massive bills arising from the state’s electricity outage, as energy market participants try to mitigate the threat to their financial health, WSJ Pro Bankruptcy reported. Electric retailer Just Energy Group Inc. on Wednesday filed a request to the Texas Public Utility Commission to suspend invoice collections by the state’s grid operator, one of several similar requests for relief by retail energy companies stemming from last month’s extreme winter freeze. The weather event knocked power plants offline, led to blackouts and caused a jump in energy prices in the Texas wholesale market, saddling many energy players with big bills to the Electric Reliability Council of Texas, the state’s grid operator. Already, the invoices have tipped the state’s largest electricity cooperative into bankruptcy and threatened the finances of cities, municipal power authorities, energy retailers, cooperatives and others including Just Energy. The company, based in Toronto, filed the request Wednesday to stop Ercot, which collects money from electric retailers to pay power plants, from issuing or settling invoices until questions raised by government authorities in Texas around the energy crisis “are investigated, addressed and resolved.” Just Energy has estimated its bills related to the weather event could reach $40 million. Read more.
In related news, Texas regulators voted to claw back some payments to power generators for services they never actually provided during the state’s massive blackouts last month, Bloomberg News reported. The move could save an estimated $80 million to $150 million, according to the independent market monitor for Texas’s grid, which recommended the change. The Public Utility Commission of Texas agreed yesterday to adopt the recommendation, saying retailers and others shouldn’t pay for so-called ancillary services to help smooth power flows on the grid if they weren’t delivered. It’s the first significant step by regulators to address the astronomical power bills accrued during the unprecedented cold blast that crippled the state’s grid. At peak, more than four million homes and businesses were without electricity, and power prices soared to record levels. The impact on individual companies is only starting to emerge. Texas’s power market is facing a $2.5 billion shortfall as retail electricity providers and others are squeezed by massive power bills in the wake of the crisis. Brazos Electric Power Cooperative, the largest power generation and transmission cooperative in the state, filed for bankruptcy after racking up an estimated $2.1 billion in charges. Griddy Energy LLC, the retailer whose customers were slammed with exorbitant electric bills, defaulted on its debt to the grid operator and has been banned from participating in the market. Read more.
The former owner of New York Sports Clubs and Lucille Roberts will forfeit a $250,000 bond to settle New York Attorney General Letitia James’ lawsuit over its billing practices during the coronavirus pandemic, Reuters reported. James had sued Town Sports International Holdings Inc in September, saying it kept charging membership dues, failed to issue promised credits, and refused to honor cancellation requests after the pandemic forced it to close its New York gyms last March. The settlement papers were filed in a New York state court in Manhattan on Wednesday. Town Sports did not admit liability. James had sued Town Sports in September, two weeks after the company filed for chapter 11 protection. A group of lenders led by private equity firm Tacit Capital later took control of many Town Sports assets in exchange for $80 million in debt. Town Sports is now winding down. James plans to provide restitution to gym members with the $250,000 bond, which Town Sports posted in 2015 under a state law to protect those members during a bankruptcy.
Alamo Drafthouse Cinemas Holdings LLC, a theater chain offering moviegoers seat-side food service, beer and themed cocktails, has filed for bankruptcy while planning to sell the business to Fortress Investment Group LLC and other investors, WSJ Pro Bankruptcy reported. Austin, Texas-based Alamo became the latest theater business forced into chapter 11 as a result of seismic changes to the movie industry during the COVID-19 pandemic. Cinemas across the U.S. either remain closed or are operating at reduced capacity while major film studios either delay or bypass theater releases in favor of streaming services. Alamo, which operates 41 company-owned and franchised cinemas, temporarily shut its locations last March and put in place a number of cost-saving measures to withstand the pandemic, including furloughing most staff. The company came up with ways to generate revenue as well, including renting out theaters for private screenings and launched a video-on-demand platform called “Alamo On Demand.” Despite these steps, a cash crunch continued throughout 2020 amid unprecedented industry conditions, Alamo Chief Financial Officer Matthew Vonderahe said in a declaration filed yesterday in the U.S. Bankruptcy Court in Wilmington, Del.
