On her The Bottom Line 11 blog, Fox partner Mette Kurth discussed the recent bankruptcy filing of mechanical systems startup Fallbrook Technologies:

Cross section of an automatic transmission.Texas-based Fallbrook Technologies has filed for chapter 11 protection. The committee formation meeting will take place on March 9, 2018 at 10:00 a.m. in Wilmington, Delaware. The formation notice is available here.

World Domination, One Gear At a Time

Fallbrook develops and manufactures the NuVinci continuously variable transmission systems. What is that, you ask? It makes stuff more efficient. So the company’s mission can be summed up as achieving world domination by creating a better mousetrap. Or as it says, setting the new global standard for managing mechanical and electro-mechanical power systems.

And it will do this by “transforming gears to (NuVinci) spheres.” That is, by using a set of rotating and tilting spheres between the input and output components of a transmission. If you have a degree in engineering, perhaps this brings something to mind. For the rest of us, the company has provided a helpful illustration.

Cool! Fallbrook’s system is now commercially available for bicycles and e-bikes. And, Fallbrook says, its technology has exciting applications in machinery, vehicles, and other equipment.

The company has two divisions.

– Its Enviolo-branded bicycle division, which was formed to demonstrate mass market viability and to continue to develop the NuVinci technology.
– Its licensing division, which provides NuVinci technology to “industry leaders” such as Allison Transmission, Dana Limited, TEAM Industries and Conti Temic microelectronics.

To read Mette’s full viewpoint on the filing, please visit her blog.

On her The Bottom Line 11 blog, Fox partner Mette Kurth discussed the recent bankruptcy filing of health care provider HCR ManorCare:

Court Pillars
Copyright: bbourdages / 123RF Stock Photo

HCR ManorCare, Inc. commenced a chapter 11 bankruptcy case on March 4, 2018. It accompanied the filing with a “prepackaged” chapter 11 plan. The company has requested a hearing to approve that plan on April 12, 2018.

The debtor, through its operating subsidiaries, is a Toledo-based provider of short-term, post-hospital services and long-term care. Its operating subsidiaries have not filed for bankruptcy protection.

To read Mette’s full viewpoint on the filing, please visit her blog.

On Friday, December 11, 2015, Cubic Energy Inc. and affiliated debtors (“Debtors” or “Cubic”) filed a voluntary Chapter 11 with the United States Bankruptcy Court for the District of Delaware.  This is a prepack bankruptcy, with Cubic filing a proposed Chapter 11 plan of reorganization and disclosure statement on the same day it filed for bankruptcy.

In addition, Cubic filed the standard “first-day” motions, including a motion to approve use of cash collateral, motion to pay employee wages, motion to appoint claims agent, and a motion to schedule a confirmation hearing, etc.

Per the Declaration of John S. Ross in support of First Day Motions, who serves as the Executive Vice President and Corporate Secretary for Cubic Energy, Inc., the Debtors are independent oil and gas exploration and production companies that have been adversely impacted by the significant decline in oil and gas prices that began in 2014.  The Debtors have entered into a proposed Chapter 11 plan to restructure their debt.

The bankruptcy proceedings have not yet been formally assigned to a judge.  The law firm of Bayard, P.A. represents the Cubic Debtors.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

On October 30, 2015, Fresh & Easy, LLC (“Debtor” or “Fresh & Easy”) filed a petition for bankruptcy under Chapter 11 of the United States Bankruptcy Code.  Fresh & Easy filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware.  At the time of its bankruptcy filing, Fresh & Easy had 97 stores in California, Arizona and Nevada.

Chief financial officer Peter McPhee signed court documents indicating the company has assets of $10 million to $50 million and debts of between $100 million and $500 million.

The Fresh & Easy bankruptcy is before Judge Christopher S. Sontchi. The case is proceeding under case number 15-12220. A date for the first creditors meeting has not yet been set as of the date of this post.

Fresh & Easy is represented by the law firm Cole Schotz P.C.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

On August 26, 2015, Santa Fe Gold Corporation and three of its subsidiaries, filed voluntary petitions under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware (the “Court”).  The case no. is 15-11761 and is pending before the Honorable Mary F. Walrath.

The Debtors are continuing in possession of their properties and are managing their businesses, as debtors in possession, in accordance with the applicable provisions of the Bankruptcy Code and orders of the Court.

Santa Fe Gold is a U.S.-based mining and exploration enterprise.  Santa Fe controls: (i) the Summit mine and Lordsburg mill in southwestern New Mexico; (ii) a substantial land position near the Lordsburg mill, comprising the core of the Lordsburg Mining District; and (iii) a deposit of micaceous iron oxide (MIO) in Western Arizona.

According to their petition, the Debtors have approximately $19 million in total assets, and $29.8 million in total debts.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

On April 19, 2015, Frederick’s of Hollywood, Inc., and its affiliated companies (the “Debtors” or “Frederick’s”) filed chapter 11 bankruptcy petitions in the United States Bankruptcy Court for the District of Delaware.  At the time of the bankruptcy filing, the Debtors held assets in the amount of $36.5 million, and debts in the amount of $106 million.

According to the Declaration of William Soncini, the Chief Operating Officer of the Debtors, Frederick’s sells high quality women’s apparel and related products under their proprietary Frederick’s of Hollywood brand. Decl. ¶ 8.  The Debtors’ major merchandise categories are foundations, lingerie, ready-to-wear, and accessories (including shoes, handbags, jewelry, personal care products, and novelties).  Id.  The Debtors’ target consumer base is women aged 18-45, and their exclusive product offerings and collections include Seduction by Frederick’s of Hollywood and the Hollywood Exxtreme Cleavage® bra.  Id.

According to the Soncini Declaration, the Debtors have commenced these chapter 11 cases to effectuate a sale of substantially all of their assets to a stalking horse purchaser, subject to higher or better offers received in connection with the proposed sale process.  Decl. ¶ 47.

The Debtors filed various “first-day” motions, including, among others, a motion to pay pre-petition wages to their employees, a utilities motion, a bid procedures motion in connection with the sale of substantially all of the Debtors’ assets, and a post-petition financing motion.  The first-day hearing will take place today, April 21st, at 10:00 a.m.

The law firms of Richards Layton & Finger LLP, and Milbank, Tweed, Hadley & McCloy LLP represent the Debtors in these actions.  The Honorable Kevin Gross will be presiding over this bankruptcy proceeding.

Carl D. Neff is a bankruptcy attorney with the law firm of Fox Rothschild LLP.  Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

Trump Entertainment Resorts, along with its affiliated debtors (“Trump Resorts” or “Debtors”), filed for bankruptcy under Chapter 11 of the Bankruptcy Code on September 9, 2014 (the “Petition Date”) in the United States Bankruptcy Court for the District of Delaware.

According to Declaration of Robert Griffin, Chief Executive Officer of the Debtors in Support of Chapter 11 Petitions and First Day Motions and Applications (the “Griffin Declaration”), the Debtors “own and operate two casino hotels located in Atlantic City, New Jersey: the Trump Taj Mahal Casino Resort and the Trump Plaza Hotel and Casino.”  Griffin Declaration, ¶ 5.  According to the Petition, the Debtors’ assets are valued at $100 million to $500 million, and their debts are estimated at $100 million to $500 million.   Debtors owe about $286 million to Carl Icahn-owned funds.

Events Leading to Bankruptcy

The Griffin Declaration provides a grim picture: since emerging from Trump Reports’ prior bankruptcy cases in 2010, the Debtors continued to face significant challenges due to the Rouletteprolonged economic downturn, increased competition from within the Atlantic City market and from neighboring states, and the lingering effects of Superstorm Sandy, all of which contributed to declining revenues.  These factors, coupled with the seasonal and capital-intensive nature of the Debtors’ businesses, high debt load, significant labor costs and double-digit real estate tax increases, hindered the Trump Resorts’ ability to operate successfully and negatively impacted the Debtors’ liquidity position.

Like much of Atlantic City, the two Trump properties have suffered from a decline in gambling revenue and falling occupancy at their hotel rooms.

Donald Trump sued Trump Entertainment last month to have his name taken off the two casinos, saying the company let the casinos fall into “an utter state of disrepair.”

Trump Resorts has filed for bankruptcy twice before.  It currently has about 2,800 full-time employees, and 1,800 seasonal employees.

Trump Resorts is represented by the law firm of Young Conaway.  The Trump Resorts bankruptcy proceeding is before the Honorable Kevin Gross of the Delaware Bankruptcy Court, proceeding under case no. 14-12103.  The Debtors’ first day hearing was held today, September 10th at which time various first day orders were entered. The next omnibus hearing is scheduled for October 6, 2014 at 10:00 a.m.

Carl D. Neff is a bankruptcy attorney with the law firm of Fox Rothschild LLP.  Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

Tuscany International Drilling Inc. (“TID”) and its subsidiary, Tuscany International Holdings (U.S.A.) Ltd. (“TIH”; collectively with TID, “Tuscany” or the “Debtors”) filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code late on Sunday, February 2, 2014 (the “Petition Date”) in the United States District Court for the District of Delaware.

According to the Declaration of Deryck Helkaa, Chief Restructuring Officer of the Debtors in Support of Chapter 11 Petitions and First Day Pleadings (the “Helkaa Declaration”), the Debtors “provide onshore drilling and workover services to oil and gas companies to support the exploration, development, and production of oil and gas.” Helkaa Declaration, ¶ 6. The Debtors have a strong competitive position in the key onshore drilling markets of Ecuador, Brazil and Colombia where they contract their fleet of technologically advanced onshore drilling rigs to customers.

As of the Petition Date, the Debtors owned 26 rigs, of which 12 are located in Colombia, nine in Brazil and five in Ecuador, with 15 of the rigs being contracted and operational, and five being directly owned by the Debtors.

In April of 2010, TID was listed on the Toronto Stock Exchange under the symbol TID, and in December 2011, was listed on the Colombian Stock Exchange under the symbol TIDC. As of January 27, 2014, TID had 375.2 million common shares outstanding, of which approximately 159.2 million are held by insiders. TID has 12.9 million stock options outstanding. See Helkaa Declaration, ¶ 15. According to the Petition filed on February 2, 2014, Tuscany maintains $100 to $500 million in assets, and $100 to $500 million in debts. To view a creditor matrix filed by the Debtors, click here.

Events Leading to Bankruptcy

Beginning in late 2012, Tuscany began to experience significant revenue, cash flow and liquidity challenges, mainly due to low rig utilization, non-payment by certain customers on large overdue accounts, and underperforming acquisitions in Brazil and Africa. See Helkaa Declaration, ¶ 19. As of the Petition Date, seven of their nine Brazilian oil rigs were not being utilized. As a result, the Tuscany Brazilian affiliates incurred a negative EBITDA of $6.7 million from January to October 2013. In addition, Tuscany suffered financial losses in connection with a series of unprofitable acquisitions.

Objectives in Bankruptcy

Tuscany’s main goal in bankruptcy is to restructure their balance sheet through a consensual plan of reorganization supported by their pre-petition lenders, who have connections to the United States.  The Debtors received debtor-in possession financing of $35 million that will help carry out operations during the restructuring process.

First Day Pleadings

The Debtors have filed various “first day” motions with the Court. These motions include, among others: (i) motion to pay pre-petition claims of certain critical vendors; (ii) motion for continued use of existing cash management system; (iii) motion to approve post-petition financing and authorizing use of cash collateral; and (iv) motion authorizing payment of certain pre-petition workforce obligations.

The Court has scheduled a “first day” hearing in connection with the above-referenced motions and others for today, February 4, 2014 at 1:00 p.m. (EST). Click here for the Notice filed by the Debtors regarding today’s hearing.

Tuscany is represented by the law firm of Young Conaway Stargatt & Taylor, LLP. Tuscany’s bankruptcy proceeding is before the Honorable Kevin Gross of the Delaware Bankruptcy Court, proceeding under case no. 14-10193.

Carl D. Neff is a bankruptcy attorney with the law firm of Fox Rothschild LLP.  Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

 

A Look at VeraSun’s Business

Based in Sioux Falls, South Dakota, VeraSun Energy Corporation (“VeraSun” or the “Debtor”), grew in its seven year history to become the leading producer of ethanol. As stated in a declaration of VeraSun’s chief financial officer in support of its “first day” bankruptcy motions (VeraSun declaration), VeraSun has fourteen production facilities in eight states producing over 1.4 billion gallons of ethanol annually. VeraSun employs approximately 932 employees, over one third of whom are salaried employees. The Debtor’s annual payroll expenses totals approximately $60 million, including payroll taxes.

Why VeraSun Filed for Bankruptcy

Given that ethanol is a blend component used in gasoline, VeraSun’s sales are influenced to a large degree by fuel prices. VeraSun produces corn-based ethanol, which means that the price of its largest commodity, corn, is tied to factors such as crop production, government regulation and annual rainfall. The high volatility in the price of corn and gasoline in 2008, combined with a unfavorable hedging strategy on the price of corn, led to VeraSun sustaining significant third quarter losses in 2008. VeraSun’s hedging strategy on corn was based on the assumption that corn prices would continue to rise in 2008. Instead, the price of a bushel of corn fell by 63% by August of 2008, resulting in third quarter losses estimated between $60 and $100 million.

In addition to fluctuations in corn and gas, VeraSun’s bankruptcy was also the result of its inability to service its debt. In 2007, VeraSun purchased ASA Opco Holdings, LLC for $405.6 million. To purchase ASA, VeraSun borrowed $233.4 million. In April of 208, VeraSun purchased US BioEnergy Corporation for $756.9 million, borrowing $525.1 million to fund its second acquisition. Both acquisitions represented VeraSun’s growth strategy in ethanol production. However, the unexpected shifts in fuel and corn prices meant VeraSun needed to raise cash in order to sustain its operations. A failed equity offering, coupled with the recent freeze on lending, gave VeraSun no other choice than to file for bankruptcy protection.

Administrative Claim Status for Vendors

One of the first motions the Debtor filed in this bankruptcy proceeding was a motion to confirm administrative expense status on obligations arising from the prepetition delivery of goods (read VeraSun’s bankruptcy motion here). Prior to filing for bankruptcy, VeraSun estimates that it ordered over $30 million in goods from vendors that were delivered to VeraSun within 20 days of the filing for bankruptcy. Such goods include grains, natural gas, and chemicals used in ethanol production. VeraSun has not paid for these goods and seeks an order from the court finding that VeraSun can pay such claims in the ordinary course of business, and that such claims are entitled to administrative claim status.

VeraSun filed the motion to pay administrative claims, in part, due to concerns that its vendors would need assurances that they will receive compensation for their goods and services in a timely manner. Without assurances that the Debtor can timely pay invoices as they come due, VeraSun worries that it could sustain significant harm if its vendors interrupt production or service.

VeraSun’s Financials

According to its petition for bankruptcy (read the VeraSun bankruptcy petition), VeraSun has total assets estimated at $3.4 billion, and total liabilities of $1.9 billion. Its ten largest unsecured creditors include:

Wells Fargo (Indenture Trustee) … $447 million
Fagen Inc. … $16.6 million
Cargill … $12.9 million
Haas TCM Processing … $5.4 million
Union Pacific Railroad … $5.3 million
Crown Iron Works … $2.8 million
Norfolk Southern … $2.5 million
CSX Transportation … $2.2 million
Citigroup … $2.1 million
ICM Inc. … $2.1 million

VeraSun’s prepetition debt is as follows:

UBS Credit Facility (Secured) … $81.7 million
Senior Secured Notes … $210 million (2012 maturity date)
Senior Unsecured Notes … $450 million (2017 maturity date)
ASA Senior Credit Facility (Secured) … $26.7 million
AgStar Credit Facilities (Secured) … $464.9 million
Marion Construction Term Note (Secured)… $90 million (2013 maturity date)

The Delaware Bankruptcy Proceeding

This bankruptcy proceeding is assigned to the Honorable Brendan L. Shannon. The following are some of Judge Shannon’s opinions in prior bankruptcy proceedings: In re Elrod HoldingsIn re Three A’s Holdings, and In re APCO Liquidating Trust.  VeraSun is represented by the law firm of Skadden, Arps, Slate, Meagher & Flom LLP. Given that the Debtor has over 1,700 creditors and potential parties in interest, it has filed a motion with the court seeking to have Kurtzman Carson Consultants, LLC appointed as the Debtor’s claims and balloting agent.
 

Affiliated Debtors

The following are a list of affiliated Debtors who also filed bankruptcy petitions:

VeraSun Energy Corporation
ASA Abion, LLC
ASA Bloomingburg, LLC
ASA Linden, LLC
ASA OpCo Holdings, LLC
US Bio Marion, LLC
US BioEnergy Corporation
VeraSun Albert City, LLC
VeraSun Aurora Corporation
VeraSun BioDiesel, LLC
VeraSun Central City, LLC
VeraSun Charles City, LLC
VeraSun Dyersville, LLC
VeraSun Fort Dodge, LLC
VeraSun Granite City, LLC
VeraSun Hankison, LLC
VeraSun Hartley, LLC
VeraSun Janesville, LLC
VeraSun Litchfield, LLC
VeraSun Marketing, LLC