Category Archives: Bankruptcy

An earlier version of this article had an incorrect grace period for Gymboree to be in default in the second paragraph. It has been corrected.

Childrens clothing retailer Gymboree is expected to file for bankruptcy in the coming weeks or even days, after it elected not to make an interest payment on $171 million of bonds that was due on Thursday.

The troubled company, which has been in talks with investment banks and advisers on ways to repair its balance sheet since January, has a 30-day grace period before it is officially in default. But its expected to announce some kind of prearranged or prepackaged filing in the near term that will allow it to proceed in an orderly fashion, said Reshmi Basu, associate editor of restructuring at Debtwire.

Its a story that has been playing out for some time, she told MarketWatch. Now, well see the lenders take control, they will reset the footprint and work with advisers on which unprofitable locations should be closed down.

Like rivals, Gymboree has been suffering from the many factors currently clobbering the retail sector, from weak mall traffic trends to changing consumer behavior to the onslaught from Amazon.com Inc AMZN, +0.46% The rise of e-commerce is forcing many to invest heavily in their own online and delivery technology, at a time when sales are under pressure.

Gymboree is expected to keep its Janie & Jack line, which is still successful, but to ditch its Crazy 8 brand, which is flailing, said Basu. The company is in talks to retain Great American Group and Tiger Group, two companies that specialize in asset appraisals, liquidations and inventory auctions, she said.

In case you missed it: Stressed retailers like J. Crew and Neiman Marcus are doing something unusual to manage debt

Related: J.C. Penney, Gymboree and J. Crew at risk -- and its not all Amazons fault

They will probably liquidate unprofitable brands and leverage the Janie & Jack line and beef up their e-commerce, she said.

Gymboree is another retailer that is saddled with debt taken on in a leveraged buyout. The company was acquired by Mitt Romneys former firm Bain Capital in 2010 for $1.8 billion. Today, the company has $1.043 billion of debt, split between a $769 million term loan, the $171 million of 9125% senior secured notes due December of 2018, an $80 million ABL revolving credit facility and a $49 million first-lien ABL term loan.

It had $22 million cash and cash equivalents as of Jan. 28, plus $73 million of restricted cash, according to a regulatory filing. Its leverage is more than 12 times, which is hard to sustain, said Basu.

Dont miss: Retail carnage continues as sectors job growth falls for fourth straight month

The companys bonds were last trading at 8.729 cents on the dollar, according to MarketAxess, deep into distressed territory. Its term loan was quoted at 44 cents to 46 cents on the dollar, according to Debtwire.

See also: Neiman Marcus is now borrowing money to make interest payments on its debt

Gymboree is one of the companies on Fitch Ratings list of loans and bonds of concern, which features those issuers with a significant risk of defaulting on their borrowings within the next 12 months.

In March, the company posted a $324.9 million loss for its fiscal second quarter, which included a $368.1 million noncash goodwill and intangible asset impairment charge and an $11.6 million charge related to excess inventories. Same-store sales fell 5% in the period.

But same-store sales for the Janie and Jack brand alone rose 11%, while same-store sales at Crazy 8 fell 6%.

The SPDR S&P Retail exchange-traded fund XRT, -0.02% has fallen 6% in 2017 so far while the S&P 500 SPX, -0.12% has gained 9%.

See also: From a risk-of-bankruptcy standpoint, the retail business is the new oil and gas

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Gymboree is one step closer to bankruptcy - MarketWatch - MarketWatch

Childrens apparel retailer Gymboree is expected to file for bankruptcy in the coming weeks after missing a $171 million interest payment due June 1. As of June 2, Gymboree has a 30-day grace period to make a belated payment, according to an SEC filing.

The retailer has been in talks with investment banks and advisors on ways to repair its balance sheet since January 2017. With the missed payment, valued at a 9.125% rate through 2018, S&P Global Ratings lowered the companys debt rating to "D" for default. Roughly $872 million of the company's roughly $1.1 billion total debt is due within 12 months, with S&P noting that operating trends continue to deteriorate.

The combination of massive debt and weak financial results has made Gymboree a prime candidate for bankruptcy. In February 2017, Moodys Investors Service named Gymboree asone of 19 retailers with a very high credit risk. Recently bankrupt Rue21 made the list, as well as troubled brands such as Sears Holdings, Bon-Ton Stores, J.Crew and Claires Stores.

If it is unable to make the payment, Gymboree would join a long list of other retailers that have filed for bankruptcy in 2017, includingPayless ShoeSource, Rue21,BCBG Max Azria, hhgregg,The Limited,RadioShack,Wet Seal,Eastern Outfitters,Gordmans,Gander MountainandMC Sports.

Gymboree operates approximately 1,300 stores under three brands: Gymboree, Janie & Jack and Crazy 8. The retailer has posted losses for the last several years amid increased competition from online retailers and discount/off-price brands. In Q2, the company posted a 5% decline in same-store sales. Net sales declined 6.4% to $356.8 million, while the brand took a$368.1 million goodwill and intangible asset impairment charge and an $11.6 million charge related to excess inventories.

In May, Gymboree appointed a new CEO, Daniel Griesemer, who had run teen apparel retailer Tillys for approximately five years until 2015. Griesemer will have the difficult position of restructuring the retailer out of its debt, which may or may not include a decision to file for bankruptcy protection.

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Gymboree Misses $171 Million Interest PaymentBankruptcy Next? - Retail TouchPoints

A consulting firm that analyzes asbestos litigation across the U.S. has found that as soon as Kaiser Gypsum (KG) sought bankruptcy protection in September 2016, the number of lawsuits filed against this "major" defendant dropped signficantly.

The problem, according to Washington-based KCIC founder Jonathan Terrell, is that as evidence of exposure to KG products - drywall, joint compounds and cements - disappears from the tort system pressure mounts on solvent defendants to pay larger sums in court case settlement.

In Madison County, the nation's busiest asbestos court, the rate of filings naming KG dropped to 7 percent in the fourth quarter of 2016, after sustaining a rate between 40 and 46 percent in 2015 through the second quarter of 2016, the report states.

In the third quarter of 2016 in Madison County, it shows the rate dropped to 29 percent.

KCIC estimates that it reviews 90 percent of all asbestos lawsuits filed in the U.S.

Its analysis shows that other top jurisdictions in which KG is named as a major defendant produced similarly significant reductions in the rate of filings after the company filed for bankruptcy.

In Baltimore City, Md., where the rate of filing against KG had been the highest, for instance, the number of suits filed in the fourth quarter of 2016 fell to zero. In 2015 through the third quarter of 2015 the rate of filing there ranged between 46 and 79 percent.

Terrell wrote earlier this year that an ad hoc committee of plaintiff firms was formed prior to KG's bankruptcy filing to "engage in discussions with the Debtors regarding the terms of a consensual plan of reorganization," also known as a "pre-packed" bankruptcy.

"The notion that plaintiff firms, largely responsible for KGs bankruptcy, should have a seat at the table is a little jarring, but such is the nature of the bankruptcy process," he wrote.

He went on to assert that keeping bankrupt companies in evidence in the tort system is not in the financial interest of plaintiffs.

"Firstly, as was well established in the Garlock case, plaintiffs have a potential for double recovery by obtaining full relief from solvent defendants in the tort system and then later making claims to the various post-bankruptcy trusts," he wrote.

"More significantly, if evidence is kept in the tort system, they face the considerable downside of a bankrupt company being awarded a share on the verdict sheet, thereby exposing the plaintiff and his counsel to the financial consequences of a missing share."

KCIC also reviewed the percentage of suits against KG filed by attorneys on the plaintiffs' ad hoc committee which shows a decline in filings at the end of 2015 and then "plummeting" as the bankruptcy was made public, its report states.

"And while KG is protected by Chapter 11 from actual litigation, there is nothing preventing plaintiffs counsel from continuing to name them on complaints," the report states. "If KG was named so frequently in the past, why the sudden change? Suspicious minds could be forgiven for thinking of the self-interest of the plaintiffs bar."

He wrote that it is unsurprising that exposure evidence of bankrupt companies "rapidly disappears" from the tort system given the financial incentives to keep it out.

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Report: Asbestos suits against Kaiser Gypsum dropped after bankruptcy, putting pressure on solvent companies - Madison County Record

Screenshot of Halker Consultings website.

Still recovering from an oil industry slump, a Centennial engineering firm says it has been forced to file Chapter 11 bankruptcy.

Halker Consulting says that tanking oil prices from 2014 to 2016 slashed revenue by 90 percent and forced it to back out of a 40,000-square-foot office lease in Englewood.

Revenue is now on the upswing, the companyreports, but it is seeking bankruptcy protection to prevent a former landlord, Apogee Colorado Holdings, from obtaining a court judgment that would sink the business.

If Halker Consulting were to allow Apogee to obtain a judgment, it would risk its ability to repay its debt to secured lenders, risk damage to customer relationships, risk damage to critical vendor relationships, and risk the jobs of its 65-person workforce, President Matthew Halker wrote in court documents.

Halker Consulting reports $1.5 million in assets against $3.6 million in debts. It filed Chapter 11 in Denver on June 1.

Matthew Halker founded Halker Consulting in 2006, according to court documents, building the company to 125 employees and monthly revenue of $1.6 million by the summer of 2014.

When the price of crude oil started to drop that fall, Halkers fortunes turned. By 2016, monthly revenue was $200,000, its founder reported to the bankruptcy court.

The engineering firm cut its staff and subleased half of its Englewood office to reduce costs. Still, those measures werent enough to make rent, and itdownsized to a smaller Centennial space in August 2016.

The recovery of oil prices has boosted business since then, the company says. Halker Consultings revenue exceeds $500,000 a month and it has increased its workforceto 65. But the company is still trying to fend off a lawsuit from its former landlord in Englewood, Apogee.

Apogee sued Halker Consulting in Douglas County last July, seeking to recover damages and saying the engineering firm broke its lease. Halker said in court filings that Apogee has since snubbed attempts to settle the dispute.

I offered to fly to Chicago, where Apogees principals maintain offices. But Apogee refused to meet with me, Halker wrote. During the course of the litigation, Halker Consulting and I presented Apogee with at least four realistic settlement proposals, attempting each time to address what we anticipated Apogee would want. Apogee never responded with a realistic counterproposal.

Halker says Apogee could thwart his companys chance of recovery if it obtains a judgment in the Douglas County case at a trial set for June 29.

Such a judgment also could jeopardize the businesss ability to pay secured lenders, Halker alleges. The company reports that Colorado Business Bank and Coulton Creek Capital have secured claims against ittotaling more than $2.1 million.

Adam L. Hirsch of Kurak Rock is representing Halker Consulting in the bankruptcy case.

Bankruptcy filings show that the Apogee dispute is not the only litigation the company faces. A former employee is suing for gender and pregnancy discrimination in U.S. District Court, and two Equal Employment Opportunity Commission complaints are pending against the company in Denver. Halker Consulting also is being sued by an equipment vendor in Arapahoe County.

Amy DiPierro is a BusinessDen reporter who covers residential real estate, nonprofits, startups and more. She is a graduate of Swarthmore College. Email her at amy@BusinessDen.com.

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Engineering firm adds bankruptcy to slew of legal troubles - BusinessDen

By Hong Soon-do, Beijing correspondent, AsiaToday

As China's economy is trembling, bankruptcy fears are growing among companies in China. What's worse is that even promising, high-quality companies are faltering as well. If things go on like this, bankruptcy could become common in the Chinese economy.

Such conclusive outlook would be comprehensible if you look at the realities of those top-ranking, promising companies at risk of bankruptcy. According to China's powerful economic magazine The Economic Observer (also known as Jingji Guancha Bao) and other Chinese media outlets, we should first mention LeEco, the parent company of China's Netflix Leshi. Based on the success of Leshi established in 2004, the company has been expanding its presence in various fields including smartphones, electric cars, TVs, virtual reality (VR) devices and clouding. However, the company's fast expansion has led to financial constraints.

Moreover, the debt ratio that the company should pay back to the financial sector is known to be around 500%, which is definitely not easy to handle. No wonder many news reports and the business circles forecast that the company's cash cow Leshi is heading toward bankruptcy. This is the main reason why LeEco co-founder Jia Yueting recently resigned as CEO of Leshi.

Tianjin FAW Xiali Automobile Co., which was once called a major automobile company boosted by high popularity of local brand Xiali, is in a similar situation. It has been struggling for four consecutive years. The cumulative deficit is estimated to reach 10 billion yuan (approx. $1.47 billion). If this is the case, it's not strange to see it go bankrupt soon. In fact, many are now talking about kicking Tianjian FAW Xiali out of the stock market.

Huishan Dairy, one of the leading companies in Liaoning Province, has reportedly received default notification from its creditor HSBC for failing to settle the debt of around 10 billion yuan (approx. $1.47 billion), which was recently due. We can say that it legally went bankrupt. Besides, there is little possibility of revival considering the fact that the troubled milk producer has not enough assets to cover the debts.

As we can see, there are many reasons why bankruptcy fears are hitting in China. Above all, one of the biggest reasons would be many companies taking on debt to expand their business excessively. Another reason would be excessive competition among companies which eventually leads to weakening competitiveness. However, the biggest reason seems to be the bubbles in almost every sector of the market. Perhaps, it's not an exaggeration to prospect that bankruptcy of companies will be a part of the Chinese economy in the future.

+ This article was originally published on AsiaToday. (See original version)

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Bankruptcy Fears Grow Among Top-Ranking, Promising Companies in China - HuffPost

Rooster Energy Ltd. and six affiliated Debtors filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Western District of Louisiana, lead case number 17-50705 (Rooster Energy, L.L.C.). The Company, which explores for, develops, and produces oil and gas properties, is represented by Jan M. Hayden of Baker, Donelson, Bearman, Caldwell & Berkowitz.

The Company anticipates that it will file for recognition of any orders entered under Chapter 11 of the Code under the Companies Creditors Arrangement Act (CCAA). British Columbia, Canada-based Rooster Energy Ltd. is the ultimate parent corporation of the other Debtors, and its common stock trades on the TSX Venture Exchange.

Rooster Energy has arranged for up to $525,000 in debtor-in-possession financing from lender from Corn Meal: a special purpose entity formed and owned by Chester F. Morrison, Jr., the largest shareholder in Rooster Energy and a holder of a significant portion of the subordinated secured debt as well as other unsecured debt. Rooster Energys C.E.O., Kenneth F. Tamplain, Jr., notes, To be clear, I do not believe that the DIP Loan proceeds are sufficient to allow the Debtors to fund operations absent approval of the use of Cash Collateral.

Documents filed with the Court explain, As a result of sustained, low oil and natural gas commodity prices, the oil and gas industry in general is in severe crisis. Independent oil and gas producers have been significantly affected, with over 100 companies filing for bankruptcy in 2015 and 2016.

Read more Rooster Energy bankruptcy news.

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Rooster Energy Chapter 11 Bankruptcy - Bankrupt Company News (press release) (blog)

Sacramento Business Journal

EXCLUSIVE: Township Nine owners file for bankruptcy Sacramento Business Journal The project, once expected to cost $2 billion and include 2,500 housing units, had been heralded as transformational for Sacramento's River District. Subscribe to get the full story. Already a subscriber? Sign in. Subscribe to get the full story ... Bankruptcy cases in Buffalo rise 15 percent in MayBuffalo Business First all 354 news articles »

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EXCLUSIVE: Township Nine owners file for bankruptcy - Sacramento Business Journal

SACRAMENTO, Calif. (KCRA)

A Sacramento development that was facing financial issues was in U.S. Bankruptcy Court Friday.

Township 9 in the River District had been touted as a mixed-use development that would serve as a gateway to downtown Sacramento.

Township 9 Owners, LLC filed the paperwork Friday saying, The Board has reviewed the Companys financial position and concluded that that Company is unable to pay its debts as they arise and that it would be in the best interest of the Company and its subsidiaries to reorganize.

Josie Miller and Claudine Walls said they love living in Township 9s only apartment building, the Cannery. They moved in thinking the surrounding empty lots would quickly turn into stores, restaurants and more homes.

"We don't have any yet, Miller said. They said we were going to have some condominiums, but I don't see any yet.

"I thought there was going to be some stores, Walls said. But it's not. But I love it. It's quiet.

In fact, it may stay quiet a little bit longer now that the companies developing the site have filed for bankruptcy.

The developers of the empty lots and investors will be forced to re-examine the financing of the deal.

The developers said it won't have any effect on people living at the Cannery but it could delay construction around the site.

WEBVTT READ THE PROJECTIS BY NO MEANS DEAD.THE BANKRUPTCY FILING COULD,HOWEVER, SLOW FUTURECONSTRUCTION HERE.JOSIE MILLER AND CLAUDINE WALLSSAY THEY LOVE LIVING IN TOWNSHIPNINE'S ONLY APARTMENT BUILDING.THEY MOVED IN THINKINGSURROUNDING EMPTY LOTS WOULDQUICKLY TURN INTO STORES,RESTAUARANTS AND MORE HOMES.>> WE DON'T HAVE ANY YET.THEY SAID WE WERE GOING TO HAVESOME CONDOMINIUMS, BUT I DON'TSEE ANY YET.>> YES, I THOUGHT THERE WASGOING TO BE SOME STORES.BUT IT'S NOT.BUT I LOVE IT.IT'S QUIET.KEVIN: IN FACT, IT MAY STAYQUIET A LITTLE BIT LONGER NOWTHE COMPANIES DEVELOPING THESITES HAVE FILED CHAPTER 11BANKRUPTCY.THAT MEANS THE DEVELOPERS OF THEEMPTY LOTS AND THE LENDERS WILLBE FORCED TO REEXAMINE THEFINANCING.THE DEVELOPERS SAY IT WON'T HAVETHE CANNERY, BUT IT COULD DELAYCONSTRUCTION AROUND HERE.EARLIER THIS WEEK, COUNCILMEMBER JEFF HARRIS HINTED THEPROJECT HIT A SNAG.>> IT'S A COMPLEX FINANCIALSTRUCTURE, SO THEY ARE WORKINGTHROUGH THOSE ISSUES RIGHT NOW.PROGRESS ON THE TOWNHOMES HASSTALLED.KEVIN: HARRIS SAID HE STILLTHINKS THE PROJECT WILL COME TOFRUITION AND HE HOPESDEVELOPMENT REMAINS UNDER LOCALCONTROL.THE DEVELOPERS SAY FILINGCHAPTER 11 WILL GIVE THEM A WAYTO CONTINUE ON WITH THE PROJECTAND NOT DROP IT ALTOGETHER.JOSIE MILLER SAYS SHE CAN WAIT.>> WELL, IT IS WHAT IT IS.

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Sacramento development files for bankruptcy - KCRA Sacramento

The future of the famed Mavericks surf competition is continuing to roll over rocky waters after Cartel Management canceled plans to auction off its assets this week.

Cartel and Titans of Mavericks are in the midst of federal bankruptcy proceedings, which have thrown the local big wave event into turmoil. The companies were slated to hold an auction June 1 in a proposal that sparked dispute from local Mavericks organizers and the San Mateo County Harbor District.

Just hours before the auction was slated to take place in a Los Angeles attorneys office, Cartel called it off. Only four parties showed an interest in placing a bid, and none met Cartels qualifications that included a minimum $1 million offer, according to court filings.

Instead, one of the parties has proposed an alternative transaction involving a potential recapitalization of Titans, according to the filing. That means in lieu of auctioning off its assets which many speculate included a coveted five-year permit from the Harbor District they will work with the unnamed party to negotiate an alternative arrangement, according to the filing. Without disclosing names, Cartels CEO Griffin Guess noted in an affidavit hes contacted hundreds of parties including high net-worth individuals, media companies, sports leagues, internet companies and product corporations. Although 14 entities gained access to Cartels data room which outlined what was for sale, only a small handful offered a bid. One unnamed entity even cited the cloud of uncertainty in having to deal with local organizers, as reason to not bid, according to the filing.

Cartel, which rebranded the contest at Titans of Mavericks, hosted just one event before filing bankruptcy citing a multi-million dollar debt to various creditors.

The contest attracts international attention as 24 of the worlds bravest big-wave surfers rush to the San Mateo County coastline to compete on Mother Natures stage. While the event hinges on volatile conditions like wind, monstrous 30-foot waves and weather aligning; the biggest hurdle could be for it to clear out of bankruptcy court in time for the winter season.

Ownership of the event first started by Jeff Clark has also been called into question, with local organizers contending the Harbor District permit should belong to them. Although hosting the contest requires a litany of regulatory approvals, for the first time two years ago the Harbor District issued multi-year permit through 2021.

The district and Cartel have been debating whether the coveted permit is transferable without the local boards approval.

In calling off the auction, Cartel used the opportunity to allege two parties had interfered and potentially reduced the value of their assets as the bankruptcy case unfolded in the media.

Cartel pointed to Mavericks Invitational Inc. which includes Clark and has run the event in years past before partnering with Cartel as well as the Harbor District and specifically Commissioner Sabrina Brennan.

I think theyre playing the blame game and this is probably embarrassing for them, that they didnt have a bunch of people lining up to fork over $1 million and theyre blaming people for it, Brennan said.

Ultimately, Brennan said she just wants to see a suitable group run Mavericks, particularly as for the first time women must be included in the contest.

Obviously Im very concerned about the future of the event, she said.

Time is ticking if surf enthusiasts, loyal fans and the big wave community at large are entertained with an event in this years 2017-18 season.

The event has been held just once since Cartel and local Mavericks organizers opted to work together in 2015. Despite favorable conditions, an event was never called last year and into the end of the season when fans found out why.

Cartel and Titans filed for Chapter 11 Bankruptcy earlier this year citing, in part, the costs and politics behind having to secure permits for the event.

There have been various battles to manage Mavericks over the years since Clark first kicked off an event in 1999. Recently, lawsuits and well as orders to keep quiet have flown back and forth between Cartel, locals and prior sponsors.

The requirements for hosting events have also changed over the years and it wasnt until recently that the California Coastal Commission also got involved. Permits from various agencies like the Coastal Commission, approval from the local Sheriffs Office and others is required for the event that typically requires closing public access to the beach and bluffs due to safety concerns. Hosting a contest requires advanced planning with the five-month window during which the contest can be held typically opening around November.

As the districts five-year permit lasts through 2021 and already one season has gone by without an event, this particular asset could be losing value over time.

In its filing, Cartel doesnt provide a timeline as to when it may present sale or acquisition options for the court to consider. Instead, it notes Titans and Cartel will continue to negotiate with the unnamed group to preserve the existing brands while also considering other offers potential buyers may present. It could also opt to try the auction route again.

The district opposed the assertion that its permit was transferable without the boards approval. However, if a new leader comes on board to recapitalize but maintain the Titans brand, Cartel suggests the districts objection would be moot.

The Harbor District Board of Commissioners is slated to meet in closed session Monday to discuss the issue, which is currently under the jurisdiction of a federal bankruptcy judge. Board Vice President Virginia Chang-Kiraly said whoever seeks to run the contest will still have to work with the district and adhere to its interests.

For the Harbor District, its always going to be about how the community is going to benefit, Chang-Kiraly said. We have to move forward as things progress and evolve, but our stance is this is a public event and were going to have the best interests of the public at heart every time.

samantha@smdailyjournal.com

(650) 344-5200 ext. 106

Twitter: @samantha_weigel

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Surf contest pulled from auction: Cartel postpones Mavericks sale, remains in bankruptcy - San Mateo Daily Journal

Canada's Stelco Seeks US Bankruptcy Court Protection Wall Street Journal (subscription) U.S. Steel Canada Inc., known as Stelco, has asked a New York judge to formally recognize its Canadian restructuring efforts, a condition of the company's plan to finalize a bankruptcy takeover by Bedrock Industries L.P. by the end of June. Stelco ...

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Canada's Stelco Seeks US Bankruptcy Court Protection - Wall Street Journal (subscription)