Below is our initial take on recent bankruptcy-related developments:
Del Monte Foods files for bankruptcy and will search for buyer | CBSNews
Del Monte Foods, a nearly 140-year-old staple in canned produce, has filed for Chapter 11 bankruptcy and is seeking a buyer as part of a restructuring agreement with its lenders.
S&K Take: Canned food producer Del Monte filed in the DNJ on Tuesday to run a sale process supported by certain of its senior lenders. This comes on the heels of an LME transaction that Del Monte undertook in August of 2024. That transaction raised $240 million of debt, although that obviously wasn’t enough to stave off a more fulsome restructuring. The bankruptcy has a group of term loan lenders providing a $165 million new money DIP with a $247.5 million roll up all of which would be credit bid for the company’s assets in a sale process (per the RSA). $100 million would be provided on an interim basis with a $150 million interim roll. A group of lenders that were not invited to the roll up party (or the RSA party for that matter) objected to the DIP at the first day hearing, arguing that the roll up was unnecessary and overly burdensome, giving participating lenders a leg up in the process. Judge Kaplan considered those arguments, and interestingly noted that while he is aware of the notion that bankruptcy judges should more carefully assess the “parade of horribles” arguments often made by debtors and participating lenders (i.e., if you don’t authorize the DIP, the debtors will liquidate), there were no other options in these cases, and he was not willing to gamble. Perhaps if the non-participating lenders were aware of the imminent filing (they represented at the hearing that they were not) there may have been another option, but alas. Litigation relating to the 2024 LME settled, so perhaps there is some hope for a consensual resolution in the future.
Wolfspeed files for bankruptcy protection to cut worsening debt, shares jump | Reuters
On Monday, after chipmaker Wolfspeed announced that it had filed for Chapter 11 bankruptcy, shares of the company rose 64.5% in extended trading.
S&K Take: Wolfspeed filed its anticipated prepackaged bankruptcy (well documented in these pages) in the SD Texas on Monday, which lines up with the terms of the June 22 RSA. The plan would cut about $4 billion in debt. Senior secureds would get a $250 million paydown and reinstatement, Renesas and the 2026 converts get second lien take back paper and equity, unsecureds are passed through, and existing equity gets 3-5% of pre-diluted equity in the NewCo. As noted in the article, shares traded up ($1.06 a share at the time of this writing) in the wake of the bankruptcy. I am not a big math guy, but that seems a bit optimistic. We have seen some odd turns for equity recently (23andMe, for example) but the numbers are the numbers here. Smarter folks than I can take the DS and calculate the likely dilution, but it seems unlikely that the current value is supported.
Private equity firm moves to revive Silver Airways | AirlineGeeks
Argentum, a special purpose acquisition company formed by Wexford Capital LP, filed a joint application with Silver on Monday seeking expedited DOT approval to transfer the bankrupt airline’s authorities.
S&K Take: Well that got weird. Last we looked at Silver, the debtors had sold the majority of their assets to Argentum, and had a bidder lined up for its Seaborne assets as well. The debtors went to a sale hearing for Seaborne—a process that is usually not very eventful. The UST had even agreed to stand down on its motion to dismiss the cases based on the sale process. At that hearing, it came out that (i) the Seaborne bidder had not spoken to the Seaborne aircraft lessor, which lessor was not on board with continuing the lease, and (ii) Nella Airlines, the entity behind the bidder, did “not exist.” The debtors’ CEO said that he lacked any knowledge of the bidder’s finances (you typically want to at least kick the tires on financial wherewithal to close) and that the person that might have that info was not available to the Court. Judge Russin did not react well to any of this, saying that the process was “bordering on inept.” The debtors then stated that a mystery alternative bidder was prepared to step in. Argentum then argued that it was entitled to the Seaborne assets under its existing APA so that bid was kaput. Dogs and cats, living together, mass hysteria! Judge Russin then appointed a chapter 11 trustee on the spot (based on the oral motion of another lessor) to sell the Seaborne assets. Despite what sounds like one of the most entertaining hearings in recent memory, it looks like there is a happy ending to this—the chapter 11 trustee sold the Seaborne assets for $700k in cash and the assumption of $675k in liabilities, which is a significant improvement on the (fictional) Nella bid.
