Below is our initial take on recent bankruptcy-related developments:
Europe’s largest debt collector Intrum filed for Chapter 11 bankruptcy in the U.S. to restructure its debt after struggling with the pandemic, an energy crisis and two-decade-high interest rates.
S&K Take: This one popped up last week, but it merits some coverage as one of the more interesting recent prepacks. The plan, which was solicited prior to the petition date, broadly provides for the exchange of existing bonds at a discount for secured bonds, with the bondholders getting an equity kicker and some other goodies. The rub is that a minority lender group is not satisfied with the plan (purportedly because the exchange doesn’t account for varying maturity dates in allocating value among creditors) and is seeking to have the cases dismissed as a bad faith filing. Apparently, Intrum Texas became an obligor on all of Intrum’s indebtedness right before it filed in Texas, thereby opening the door for all of its Swedish relatives to follow suit. The dissenting holders allege that this was an attempt to manufacture jurisdiction and facilitate an end-run around Swedish law. The group has also filed a motion to lift stay so that a Swedish proceeding challenging the amendment to Intrum’s indebtedness can proceed. So here we are again, back in front of Judge Lopez with a venue dispute. Judge Lopez seemed inclined to keep the cases filed in his Court in his Court when we last looked at the Red River Talc case. We will see if he does the same here. Plan confirmation is set for Dec. 5, so we will have an answer pretty quickly.
On Friday, Hearthside Food Solutions filed for Chapter 11 bankruptcy protection in Houston, Texas, seeking to eliminate $1.9 billion in debt and reorganize its operations following investigations into child labor at its supplier factories.
S&K Take: Hearthside Food also filed this past week in Texas (where my NJ cases at?), with this case in front of Judge Perez. The case incorporates an RSA that provides for a comprehensive balance-sheet restructuring. First liens grab 100% of the equity (subject to dilution, of course, by an equity rights offering and a MIP) and $825 million in exit paper. Second liens, unsecured bonds and other GUCs get varying pots of cash provided that they vote in favor of the plan (the good ol’ death trap). Any cash left on the table goes back to the 1Ls. One interesting aspect of this case is that there are rumblings of unease with some of the goodies granted to the certain of the RSA parties (such as non-pro rata participation rights in the ERO). The parties had signed a cooperation agreement prepetition to avoid a non-pro rata transaction, but rumblings suggest that the RSA potentially provides a few too many sweeteners. We will keep an eye on this case as it progresses.
Real estate investment trust Office Properties Income Trust announced exchange terms with a group of noteholders to repay nearly $340 million of its outstanding senior unsecured notes due in 2025 before the end of the year.
S&K Take: OPIT has long been on the restructuring radar, and it appears as though they have been able to stave off maturity after maturity to successfully boot the can into at least 2026. Impressive. For those not familiar, OPIT picked off a few notes in a Q1 ’24 exchange, issuing secured notes due 2029 for some 2025s, 2026s, 2027s and 2031s. There was a big chunk of 2025s, however, which were subject to a cooperation agreement that would not budge. That maturity was pending in February, so the pressing question became what OPIT was going to do to address that near term maturity. Well, we now have our answer. The exchange looks similar to the prior exchange, although the secured take-back notes here are due 2027 (instead of 2029) and the equity kicker looks a little bit bigger. Office is likely to continue to be rough, so we will see if this gives OPIT enough runway to right the ship.