September 16, 2019 – The Debtors filed their Second Amended Plan and a related Disclosure Statement [Docket Nos. 1581 and 1583, respectively]; and further filed redlines of each document showing changes from versions filed on August 28, 2019 [Docket Nos. 1582 and 1524].
The amended Plan includes substantial changes but these are the key takeaways, even with the cushion provided by more than $300.0mn of general unsecured debt, the pain in the Debtors' Plan runs deep:
- Holders of the Debtors' Tranche A-1 Term Loan Secured Claims will receive their pro rata share of $68.8mn in cash, ie a recovery of 85.1%.
- Holders of the Debtors' Tranche A-2 Term Loan Secured Claims will receive their pro rata share of 100% of the emerged Debtors', unregistered "New Common Units" in exchange for the extinguishment of $202.6mn of funded debt. The Debtors assign an implied 65.2% recovery to this equity.
- General unsecured creditors (now split across two classes) will share up to $15.0mn in exchange for their release of "certain causes of action" against the Debtors, the Debtors' management and key pre-petition stakeholders. This quid pro quo has the blessing of the Debtors' Creditors Committee
- The Debtors will emerge with approximately 86% less funded debt
- The Debtors will emerge having shed approximately $300.0mn of general unsecured debt
Changes from Previous Version of Plan
Much has changed in recent weeks and, with the possible exception as to the releases embodied in the global settlement and subsequently amended Plan, introductory paragraphs in the Disclosure Statement do a good job of highlighting these changes:
“[Modified to include Creditors Committee support and 70% term loan support] The Plan is supported by substantially all of the Debtors key stakeholders, including the Creditors’ Committee (defined below) and certain term lenders under the Debtors’ Prepetition Term Loan Facility (the ‘Supporting Term Lenders’), Axar Capital Management (‘Axar’ and, together with its Affiliates, the ‘Axar Entities’) and Alden Global Capital (‘Alden’, and, together with its Affiliates, the ‘Alden Entities’) who collectively hold or control at least 70% of the Debtors’ Prepetition Term Loan Facility.
[Entirely new disclosure] Subsequent to the filing of the previous versions of the Plan and after arm’s length negotiations, the Debtors…, the Creditors’ Committee and the Lender Plan Support Parties agreed to the global settlement as set forth in the Plan. Pursuant to the global settlement, among other terms: (i) holders of Tranche A-1 Term Loan Secured Claims will receive their respective share of $68.8 million in cash consideration; (ii) holders of Tranche A-2 Term Loan Secured Claims will receive their respective share of 100% of the equity in the Reorganized Debtors; (iii) unsecured creditors will receive their respective share, as set forth in the Plan, of $15 million in cash consideration; (iv) holders of claims under the Debtors’ Prepetition Term Loan Facility will waive any deficiency claims; (v) the expenses of the Liquidating Trust of up to $2 million will be funded by the Reorganized Debtors; and (vi) the Plan will provide for the release of certain Causes of Action belonging to the Debtors’ Estates. This settlement is a global settlement of all issues related to, among other issues, the Debtors’ business, capital structure, and any Causes of Action belonging to the Estates. With the global settlement, the Creditors’ Committee supports the Plan and the releases contained therein, and recommends that all Holders of General Unsecured Claims vote to accept the Plan. The global settlement substantially increased recoveries to unsecured creditors compared to what was provided in the previous versions of the Plan. In contrast to liquidation, the Plan preserves value for creditors and minimizes additional potential claims that could dilute recoveries to all Creditors."
Revised Plan Overview
The Disclosure Statement provides the following revised Plan overview:
“As of the Petition Date, the Debtors’ capital structure included approximately $470 million in aggregate principal amount of outstanding debt, primarily consisting of: (a) approximately $156.7 million in aggregate principal amount revolving loans and FILO loans under the Prepetition ABL Credit Facility (as defined below) as well as approximately $36 million of undrawn letters of credit outstanding under the Prepetition ABL Credit Facility (the ‘Standby Letters of Credit’); and (b) approximately $277.2 million in secured debt under a term loan credit agreement (the ‘Term Loan Facility’).
If the Plan is confirmed, Payless (as defined herein) will emerge from these Chapter 11 Cases with approximately 86% less funded debt. Payless’ pro forma exit capital structure will consist of a New First Lien Facility and New Second Lien Facility, and New Common Units in Reorganized Holdings, as set forth below (in millions):
Specifically, the Plan contemplates the following restructuring transactions:
- New First Lien Facility and New Second Lien Facility.
- Each Holder of a Tranche A-1 Term Loan Secured Claim will receive its Pro Rata share of $68,800,000 in Cash.
- Each Holder of a Tranche A-2 Term Loan Secured Claim will receive its Pro Rata share of 100% of New Common Units, unless such Holder exercises the Cash Election.
- Each Holder of a General Unsecured Claim will receive its Pro Rata share of the Liquidating Trust Distributable Assets.
- All Equity Interests in Payless Holdings LLC will be extinguished with no consideration paid.”
The following is an updated summary of classes, claims, voting rights and projected recoveries (defined terms are as defined in the Plan):
- Class 1 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $7.9mn and expected recovery is 100%.
- Class 2 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $22.5mn and expected recovery is 100%.
- Class 3 (“Tranche A-1 Term Loan Claims”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $80.9mn and the expected recovery is 85.1%, ie $68.8mn in cash.
- Class 4 (“Tranche A-2 Term Loan Secured Claims”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $202.6mn and the expected recovery is 65.2%. Each holder of a Tranche A-2 Term Loan Secured Claim will receive its pro rata share of 100% of the “common units” (ie unregistered equity) of the emerged Debtors, unless such holder exercises the Cash Election at the time of voting on the Plan, provided, however, that Holders of Class 4 Claims shall waive any distributions under Class 5A or Class 5B of the Plan on account of their Tranche A-2 Term Loan Deficiency Claims.
- Class 5A (“General Unsecured Claims of Payless ShoeSource Worldwide, Inc. and Collective Brands Logistics Limited”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $176.0mn and the expected recovery is 4.8%. Each holder of a claim will receive its pro rata share of $8.4mn plus its pro rata share of any unused portion of the Liquidating Trust Fee and Expense Cap of the Liquidating Trust Distributable Assets. No Holder of any such Claim shall be able to receive a recovery on their Claim from both Class 5A and Class 5B.
- Class 5B (“General Unsecured Claims of Remaining Debtors”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $140.0mn and the expected recovery is 3.6%. Each holder of a claim will receive its pro rata share of: $5.1mn of the Liquidating Trust Distributable Assets, less the Canadian GUC Amount, plus its pro rata share of any unused portion of the Liquidating Trust Fee and Expense Cap of the Liquidating Trust Distributable Assets. No Holder of any such Claim shall be able to receive a recovery on the identical Claim from both Class 5A and Class 5B.
- Class 6 (“Intercompany Claims”) is impaired, deemed to accept and not entitled to vote on the Plan. The estimated aggregate amount of claims is [-] and the expected recovery is N/A.
- Class 7 (“Existing Equity Interests in Payless”) is impaired and deemed to reject. The estimated aggregate amount of claims is N/A and the expected recovery is N/A.
- Class 8 (“Intercompany Interests”) is impaired, deemed to accept and not entitled to vote on the Plan. The estimated aggregate amount of claims is N/A and the expected recovery is N/A.
The following exhibits were attached to the Disclosure Statement:
- Exhibit A: Plan of Reorganization
- Exhibit B: Corporate Structure Chart
- Exhibit C: Disclosure Statement Order
- Exhibit D: Financial Projections
- Exhibit E: Liquidation Analysis
- Exhibit F: Estimation of Payless’ Enterprise Value
Key Dates:
- Voting Deadline: October 17, 2019
- Plan Objection Deadline: October 17, 2019
- Confirmation Hearing: October 23, 2019
Read more Bankruptcy News
The post Payless Holdings – Files Second Amended Plan and Related Disclosure Statement to Reflect Global Settlement, Holders of $316mn in Unsecured Claims to Split (up to) $15mn Pool In Exchange for Releases appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.