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— Bankruptcy —
The credit crunch has stricken several portfolio companies of private equity firms. For some companies, this means write-downs for PE owners; for other companies, it means Chapter 11 or liquidation. The filings keep coming. (Note: Most links require a Pipeline subscription.) June 12: Months after scrapping its IPO, chipmaker MagnaChip Semiconductor Finance Co. filed for Chapter 11. A consortium of private equity firms and other investors acquired the company in October 2004 from Hynix Semiconductor Inc. June 11: PE-backed Berean Christian Stores LLC has had its $2 million debtor-in-possession financing blessed by a bankruptcy judge. The debtor, which is owned by Boston PE firm JMH Capital, filed for Chapter 11 because of sliding sales and growing debt. - Jamie Mason
June 5: Swine flu has now claimed
a corporate victim. So says a partner in a Dallas private equity firm
(Richmont Capital Partners) who is also the CEO of one of its portfolio
companies, Nukote International Inc., a manufacturer and recycler of
commercial printer cartridges that on June 3 filed for bankruptcy a
second time. -- Mike Schoeck May 29: Consolidated Bedding Inc.: The Tampa, Fla. mattress maker filed for Chapter 7, listing assets of less than $50,000 and debt of $100 million to $500 million. May 28: Canadian commercial printing manufacturer Gandi Innovations Holdings LLC has filed Chapter 15. TA Associates Inc. acquired a minority stake in the company in September 2007. -- Kevin Fung May 27: Sun Capital Partners Inc.-backed clothing chain Anchor Blue Retail Group Inc. will sell 73 of its Most Purchasing Corp. stores back to Levi Strauss & Co. after filing for bankruptcy. -- Mike ShoeckMeanwhile, Plymouth, Mich., auto parts manufacturer Metaldyne Corp. has filed
for Chapter 11 and turned to its indirect shareholder, RHJ
International SA, and Carlyle Group to buy up most of its assets. -- Jonathan Braude May 19: JLL Partners Inc.-backed finance company J.G. Wentworth LLC, of Bryn Mawr, Pa., has fashioned a prepackaged restructuring and filed for bankruptcy. -- Ben Fidler May 13: Bankrupt Roma Foods of Oklahoma Inc., which has suffered more than $7 million in losses since December 2007 operating two restaurant chains, will seek final approval to access $2.5 million in debtor-in-possession financing on June 1. Roma Foods has been owned by Hestia Holdings LLC since December 2006, while Cingale LLC took over management of the company in April. -- Ben Fidler May 7: PE-backed Riviera Group Pty Ltd., a Gold Coast, Australia-based manufacturer of speed boats, has been placed into receivership by creditors. The company is owned by Ironbridge Pty Ltd., based in Sydney, and Gresham Private Equity, of London. Meanwhile, White Energy Inc., an ethanol power generator, filed
for bankruptcy. White Energy was taken private in August 2006 by Los
Angeles private equity firm Ares Management LLC and New York-based
Columbus Nova. May 1: Mortgage cos. Thornburg, Accredited fail: Mortgage lenders Thornburg Mortgage Inc. and Accredited Home Lenders Holding Co., long on the brink of collapse, both filed for Chapter 11 protection on May 1 with the intention of winding down. -- John Blakeley and Carolyn Okomo April 30: Chrysler LLC files. Dealscape wonders "Is Chrysler PE's worst deal ever?" Meanwhile, another fairly large company in the automotive sector was allowed to squeak into Chapter 11 protection without much fuss. Mark IV Industries Inc., a Sun Capital Partners Inc.-backed maker of engines, transmissions and other products, also filed for Chapter 11. - Ben Fidler April 29: Bankrupt Victor Oolitic Stone Co., which supplied the new Yankee Stadium with limestone for its Great Hall and Legends suites boxes, will seek access to its cash collateral. Its parent company is majority owned by Audax Management Co. LLC. affiliates. - Jamie Mason April 28: Source Interlink rides bankruptcy bandwagon
It's a terrible time to be in the magazine/newspaper industry. Just ask
magazine publisher Source Interlink Cos. (NASDAQ:SORC), which filed for
a lender approved prepackaged Chapter 11 bankruptcy to get out from
underneath $1.9 billion in debt. - Gerald Magpily April 22: Broder exchange offer faces severe test: It seems that private equity-backed Broder Bros. Co. has gotten its underwear in a bunch, warning of a possible Chapter 11 filing looming in its future. The company, majority-owned by buyout firm Bain Capital Inc. after a May 2000 equity purchase, was laid bare in May 2007 when S&P had a negative outlook on the company. - Carolyn Okomo April 21: PE-backed tomato producer Eurofresh Inc. made a prenegotiated bankruptcy filing that gives holders of outstanding senior debt the option of swapping it for equity in the reorganized company. New York private equity firm Bruckmann, Rosser, Sherrill & Co. LLC owns about 30.4% of Eurofresh's Series A preferred stock. - Michael Schoeck Meanwhile, Buffets Inc.'s reorg plan has been confirmed, Masonite Corp. has won its disclosure statement OK, Six Flags Inc. is riding a debt exchange offer to skirt a bankruptcy filing, Bruno's Supermarkets LLC has hung a big sale sign in its window, and Hines Horticulture Inc. cultivates a new future. Elsewhere, G.I. Joe's Holding Corp. surrenders to reality, Indalex Holdings Finance Inc. wins its interim DIP, and Milacron Inc. wins final cash OK on DIP. See more on these distressed situations and bankruptcies, below. April 19: Unable to crack the credit markets to refinance debt and confronted by lenders, concrete maker Dayton Superior Corp. filed
for bankruptcy. New York private equity firm Odyssey Investment
Partners Fund LP acquired Dayton in January 2000 and took the company
public in 2006. - Ben Fidler Meanwhile, distressed and turnaround private equity firm Sun Capital Partners Inc. has taken on a new role as a DIP lender to a few portfolio companies, though it maintains it's not getting into the DIP business. See this Deal magazine feature for more. Also in The Deal's April 20 issue, Alvarez & Marsal's Jeff Feinberg takes up the issue of how PE portfolio companies can weather the storm. And Moody's Investors Service is revisiting the issue of whether dividend recaps can help sink sponsor-backed companies into bankruptcy. April 16: Determining that a successful reorganization under Chapter 11 won't be possible, convenience store chain Appalachian Oil Co. will be selling its assets in a bankruptcy auction. Richardson, Texas, private equity firm Titan Global Holdings Inc. acquired the company in September 2007. - Kevin Fung Elsewhere, British bingo hall and gaming arcade operator Riva Gaming Group Ltd. proved to be the gamble that fizzled for Hermes Private Equity Ltd., when a debt restructuring agreed to by Riva's lenders cost the midmarket buyout shop almost all its equity. - Jonathan Braude April 14: Following the fate of former relatives in the U.K. and U.S., private equity-backed German discount chain DWW Deutsche Woolworth GmbH & Co. OHG has run for cover from creditors. - Andrew Bulkeley Meanwhile, PE-backed cosmetics company Jane & Co. LLC won interim approval to tap $1.1 million of its DIP loan. Elsewhere, Weisenbach, Germany-based Katz International Coasters GmbH, a manufacturer of beverage coasters primarily for beer producers, has been placed into insolvency protection. Katz is a portfolio company of German private equity firm CBR Management GmbH. April 3: Greenville, Pa., aluminum fabricator Signature Aluminum Inc., filed for bankruptcy citing declining aluminum prices and falling sales. The company is owned by private equity firm H.I.G. Capital LLC. Meanwile, overleveraged Zohar Waterworks LLC unveiled plans to auction its assets with the aid of a $3.4 million debtor-in-possession loan. Private equity firm Patriarch Partners LLC is the ultimate owner. - Carolyn Okomo Elsewhere, building insulation and shell contractor USI Senior Holdings Inc. can tap its cash collateral on an interim basis. The Edina, Minn.-based debtor, which is 75.8%-owned by private equity firm Wind Point Partners, filed for Chapter 11 on March 31. - Jamie Mason April 2: Big 10 Tire Stores Inc. filed for bankruptcy in hopes of treading water long enough to sell a debt-free version of itself to current private equity owner Sun Capital Partners Inc. - Ben Fidler Meanwhile, Quantum Equity Partners LLC-owned bulk trucking company F.T. Silfies Inc. has loaded up on some postpetition cash as the motor carrier works to haul itself out of bankruptcy. - Ben Fidler ROUNDING OUT THE FIRST QUARTER March 31: Sao Paulo-based freight airline company Varig Logistica SA filed for Chapter 15. Varig Logistica and New York private equity firm Matlin Patterson Global Advisors LLC purchased Brazil's ex-flagship carrier, Viacao Aerea Rio-Grandense SA, out of bankruptcy in 2006. March 25: German prefab home manufacturer Kampa AG is on the block. The company, backed by Frankfurt PE firm Triton Beteiligungsberatung GmbH, stopped all payments to creditors March 11 and announced it would apply to the courts for insolvency administration for itself and its subsidiaries. - Jonathan Braude Meanwhile, Rileys Ltd., which operators billiard and poker game clubs in the U.K., was placed
into a prepackaged administration by its private equity owners,
Greenhill Capital Partners Europe and J.O. Hambro Capital Management. March 24: Bankrupt Sportsman's Warehouse Inc. will seek interim
approval to tap a $85 million debtor-in-possession loan from General
Electric Capital Corp. as it moves to liquidate its inventory.
Sportsman's largest shareholder is Seidler Equity Partners. - Carolyn Okomo The company, which is backed by Dallas-based PE firm Brazos Private Equity Partners LLC filed for Chapter 11 March 22 with seven affiliates. - Jamie Mason March 20: Sun Capital Partners Inc.-backed Indalex Holdings Finance Inc. wants approval to use its cash collateral so that the bankrupt aluminum extruder can reorganize. The Lincolnshire, Ill. company filed for Chapter 11 March 20 with four affiliates. - Jamie Mason March 18: Drug Fair Group Inc. and parent CDI Group Inc. have filed for bankruptcy with plans to sell 32 locations to Walgreen Co. Sun Capital Partners Inc. acquired CDI, then the 22nd-largest drugstore chain in the U.S., in December 2005, according to the firm's Web site. - David Elman March 10: Bayside Capital Inc.-backed Milacron Inc., a plastics processing technologies and industrial fluids supplier, filed for bankruptcy and plans to sell itself to its senior noteholders. - Jamie Mason Meanwhile, Nordic Capital-owned Swedish automotive plastics group Plastal Holding AB sought cover from creditors. - Andrew Bulkeley March
4: Gryphon Investors portfolio company G.I. Joe's Holding Corp., which
operates 31 Joe's Sports outlets in three Pacific Northwest states, filed for Chapter 11. - Ben Fidler Feb. 25: Orlando, Fla.-based swimwear retailer Everything But Water LLC filed for Chapter 11 with plans to sell its assets, most-likely to D.B. Zwirn Special Opportunities Fund LP, one of its hedge fund backers. - Ben Fidler Feb. 19: Deflated by the steady decline of the automotive and
housing markets, Media, Pa. foam products maker Foamex International
Inc. has made its bed
in bankruptcy for the second time since 2005. MatlinPatterson Global
Opportunities Partners III LP is in negotiations on an asset purchase
agreement. - Ben Fidler Feb. 17: Detour energy bar maker Forward Foods LLC filed
for Chapter 11. Days later, a Delaware judge granted the company access
to a $4 million debtor-in-possession loan from private equity owner
Emigrant Capital Corp. - John Blakeley Feb. 6: Fortunoff returns to Chapter 11: Less than one year after buying Fortunoff Holdings LLC out of
bankruptcy for $80 million in cash, NRDC Equity Partners LLC has placed
the high-end retailer back under Chapter 11 protection. - John Blakeley Meanwhile, Sun Capital Partners Inc.'s Fluid Routing Solutions Inc. landed in Chapter 11 Feb.6. By PEhub's count, 11 companies went down in the first month of the year. Meanwhile, The Deal took up the issue of PE-backed bankruptcies Jan. 26, concluding worst may be yet to come. Jan. 23: Marine Drive Properties Ltd. hopes a ($2 million) DIP loan will help it sail out of restructuring proceedings. Financial difficulties forced the British Columbia real estate developer and Wyndansea Hotel Inc. to file for protection Jan. 15. Wyndansea is a joint venture between Marine Drive and private equity firm Starwood Capital Group LLC. - Jamie Mason Jan. 19: Wall Homes Inc. (Warburg Pincus LLC, Jen Partners LLC);
Jan. 16: Specialty Motors Group Holding Corp., or Von Weise Corp. (Sun
Capital Partners Inc.) Jan. 15: Meanwhile, the publisher of the Minneapolis Star Tribune filed for Chapter 11, done in the paper reported, by heavy debt and print advertising declines. Avista Capital Partners bought Star Tribune Co. two years ago for $530 million, less than half what McClatchy paid for it in 1998. - Carolyn Murphy Elsewhere, things seemed to have soured for Merisant Worldwide Inc., the company behind Equal sweetener. The Pegasus Capital Advisors LP portfolio company filed for bankruptcy Jan. 9. Rounding out 2008, American Greetings Corp. said it planned to acquire Chicago rival Recycled Paper Greetings Inc. as part of a prepackaged Chapter 11. Cambridge, Mass.-based Monitor Clipper Partners Inc. acquired Recycled Paper in 2005 in a recapitalization whose estimated value was more than $250 million. Last year, Monitor Clipper invested another $15 million following the initial $130 million outlay in the recap, Moody's said. - Vyvyan Tenorio "The Federal Deposit Insurance Corp. took control of WaMu's Washington Mutual FSB unit on Sept. 25 and sold it to J.P. Morgan Chase & Co. for $1.9 billion, leaving the Seattle-based bank holding company with little left in the way of operations. According to court papers, private equity firm TPG Capital has 5% or more of the voting securities in WaMu. TPG invested $2 billion in WaMu in April with co-investors. TPG's investment at that time was $1.3 billion. That investment has been wiped away." Rounding out August, Cadence Innovation LLC was the latest filing. Yucaipa Cos. has a 13.5% stake and another 52.7% owned by affiliates of hedge funds Black Diamond Capital Management LLC and Harbert Management Corp. For the auto parts maker, it's its second filing in five years. Meanwhile, nearly three months after saying it was considering a prepack filing, Mrs. Fields on Aug. 24 filed for bankruptcy protection. The Salt Lake City-based cookie company, which is majority owned by Capricorn Holdings, disclosed in a regulatory filing Aug. 15 it was facing a restructuring after unveiling June 5 it was weighing the option. Plastic pump maker ContinentalAFA Dispensing Co. was among the latest Chapter 11 filings Aug. 7. The company, which is owned by Harbinger Capital Partners, won interim approval to tap its $20 million DIP loan the next day. On July 21, auto parts maker DynAmerica Manufacturing LLC prepared to head to court for interim approval to tap its debtor-in-possession loan. The company has been backed by Chicago PE shop TMB Industries LLC since 2005, The Deal's Mike Schoeck wrote. DynAmerica won approval July 22. Meanwhile, the U.K.'s largest wood and laminates retailer, Floors-2-Go Ltd. was placed into administration, the U.K. form of bankruptcy protection, The Deal's Jonathan Braude noted July 24. Alchemy Partners LLP took the Birmingham, England-based company private in 2007 for £52.4 million. Weeks later, its founders bought it back. Back in the U.S., three more PE-backed companies filed the week of July 14. Pierre Foods Inc., which Madison Dearborn Partners LLC acquired in a 2004 deal worth between $150 million and $175 million, defaulted on its bank agreement and on July 15 filed for Chapter 11, securing a commitment for $35 million in debtor-in-possession financing. The news comes a day after Western Nonwoven Inc., which makes materials used in mattress manufacturing, filed for Chapter 11 with plans to sell most of its textile holdings to SBC Manufacturing Co. LLC for $4 million. Western is owned by a Cerberus Capital Management LP unit. The anticipated Chapter 11 of retailer Steve & Barry's LLC, which is 50% owned by Boston's TA Associates, came July 9. Despite overall rising sales and comparable same-store revenue increases, it's possible the filing stemmed from the discount retailer felt victim to a liquidity shortfall. To reorganize, the company has secured a $25 million debtor-in-possession loan from lender GE Capital Corp., as well as lenders and stockholders D.B. Zwirn and Spectrum, Whitehall is owned by hedge funds Prentice and Millennium Partners LP and Holtzman Opportunity Fund LP. Whitehall plans to finance its Chapter 11 stay with cash collateral and an $80 million DIP financing led by prepetition lenders Bank of America NA and Wells Fargo Retail Finance LLC, Mason wrote. TH Lee is Progressive's majority owner, having paid $528 million for a majority stake in the company in 2004. Oak Hill Capital Partners was its previous owner. TH Lee holds 92% of Progressive's common stock and 87.5% of preferred shares, Fidler noted, citing court papers. Meanwhile, as some expected, Knoxville, Tenn.-based Goody's Family Clothing Inc. filed for bankruptcy protection June 9. The company, which is owned by New York hedge fund Prentice Capital Management LP, won approval for a $210 million debtor-in-possession loan. Prentice and GMM Capital LLC roped the company with a $318 million deal for Goody's in October 2005. It's familiar territory for Prentice. Hammered by a nationwide decline in freight volumes, trucking company Jevic Holding Corp. on May 20 filed for Chapter 11 with a $60 million DIP loan from prepetition lender CIT Group/Business Credit Inc. and plans to liquidate. Jevic is a Sun Capital Partners portfolio company. Eos Airlines Inc. was for a short time in April the latest U.S.-based airline to go bankrupt, having filed for Chapter 11 April 11. Eos, which is backed by Golden Gate Capital, Sutter Hill Ventures and Maveron LLC, filed for Chapter 11 April 26 and ceased operations April 27. Golden Gate, Sutter Hill and Maveron took stake in the company, which offered business-class service between New York and London, in 2005 with $85 million to help get it off the ground. The EOS filing came the day after Washington, Mo.-based boat maker Challenger Powerboats Inc. filed for Chapter 7 liquidation April 25, in a move that will enable unsecured creditors to recoup some of their claims. The company was kept afloat by Dutchess Private Equities Fund Ltd., which pumped more than $20 million into the company between 2003 and 2007. Challenger and Eos' news also came nearly three weeks after another PE-backed bankruptcy made news April 8. Electric power plant operator North Carolina Power Holdings LLC, which was placed in involuntary Chapter 11 on March 17 by its private equity owner Vulcan Capital Management, saw two of the firm's affiliates call for the immediate appointment of a trustee. But the company's secured lender Del Mar Onshore Partners LP moved to block the request and dismiss the bankruptcy entirely, calling the request "premature." A hearing had been set for April 10. Judge A. Thomas Small was expected to enter an order April 9 to postpone the hearing until May 1, the New York firm's counsel told Blakeley. Kicking off April, Denver-based restaurant chain operator Vicorp Restaurants Inc., which Wind Point Partners and other co-investors closed a $225.5 million leveraged buyout of in 2003, filed for Chapter 11. Vicorp owns and operates the Village Inn and Bakers Square restaurants. Fairmont Capital took the company private in a $174 million deal in 2001. The company plans to close 56 restaurants and is reviewing underperforming assets. It has secured an agreement with lenders for a $60 million debtor-in-possession loan, according to a statement April 3. March 17 marked another PE-backed bankruptcy filing date, when Powermate Corp., an Aurora, Ill.-based portable electric generator maker, filed for Chapter 11 in hopes of selling its assets through a speedy Section 363 sale. The company was at the time the latest in Sun Capital Partners portfolio to go belly-up. Leiner Health Products Inc. filed for bankruptcy March 10, six years after its initial Chapter 11 filing, and said it would receive $74 million in DIP financing. The company's petition indicates Golden Gate Capital and North Castle Partners affiliates each own 46.82% of preferred shares. After emerging from bankruptcy protection, Leiner again fell on tough times last year. The Deal's David Carey explained that upon the 2002 filing: "North Castle led a $20 million bailout financing. The firm wound up with a profit on its $100 million investment when Leiner was recapitalized in April 2004. "In the recap, North Castle cashed out its existing stake and tapped capital from a second recently raised fund to reinvest. San Francisco-based Golden Gate came in as a co-sponsor. "Each firm invested $131.5 million of equity in 2004 and owns slightly less than 50% of Leiner." Meanwhile, kicking off March, Willis Stein & Partners LLC-backed Ziff Davis Media Inc. filed for bankruptcy March 5, nearly seven months after hiring restructuring firm Alvarez & Marsal LLC to help restructure its debt. The company emerged, silently, July 1. Rounding out February, Warburg Pincus-backed Wellman Inc., a Fort Mill, S.C., resins maker, filed for Chapter 11 on Feb. 22 amid a heavy debt load. The filing came two days after Sun Capital Partners-owned Lillian Vernon Corp.'s. The direct-mail and online retailer filed for bankruptcy Feb. 20. Sun Capital bough Lillian Vernon from Direct Holdings Worldwide LLC, an entity formed by Ripplewood Holdings LLC and ZelnickMedia, in June 2006 for undisclosed terms. Direct Holdings took the company private in 2003 in a $60 million deal after years of losses. (Sun Capital is also an investor in Sharper Image Corp., which filed Feb. 19.) That news came just days after Victor Plastics Inc., which is majority owned by Minneapolis private equity firm Spell Capital Partners LLC, found Feb. 15 a stalking-horse bidder in River Bend Industries, which also produces plastics for original equipment manufacturers. North Liberty, Iowa-based Victor filed for bankruptcy Jan. 15. Before Lillian Vernon, the last PE-backed company to hit the skids was BWAS Holdings Inc., a KPS Special Situations Funds portfolio company and maker of thermoplastic assemblies (tubes used for flow ducts and fender liners), which filed for bankruptcy protection Feb. 12. The company hopes a $30 million DIP loan will help it reorganize. The news came a day after carburetor and fuel injection systems maker Holley Performance Products Inc. of Bowling Green, Ky., filed for protection. Too much leverage forced the company, which is largely owned by private equity firm Kohlberg & Co., into Chapter 11. (For more on private equity-backed, transportation-related companies that have found themselves in bankruptcy, see below.) The Deal's John Morris took up the issue of PE-backed companies going under Feb. 4. PEHub's Dan Primack also did so Feb. 6. HOUSING DOWNTURN'S TO BLAME
TRANSPORTATION COS. SPUTTER
Others, which peHUB's Dan Primack pointed to, include:
But which companies tumble into bankruptcy may have something to do with their private equity backers as much as the companies' doings themselves. Morris noted in February: "In a report last month, Moody's Investors Service surveyed buyouts to see which sponsors milked their holdings for dividends early on in the investment's life. ... Moody's singled out TH Lee and Apollo for drawing dividends from one-third of their companies in the first year post-LBO. Both firms have a high proportion of distressed-level debt for their deals. By contrast, four firms that were much less prone to suck cash out of their portfolio companies-Cerberus Capital Management LP, Goldman Sachs Capital Partners, TPG and Warburg Pincus-all did better in the distressed rankings." Visit the complete Dealwatch Archive |
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