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Bouchard Transportation Co., Inc. – Files APA in Respect of $130mn Purchase of Wells Fargo Collateral Assets by Pennantia Consortium, Prepares for Interesting August 5th Sale Hearing as to Pair of Proposed Sales


August 3, 2021 – Further to the Court’s June 8th bidding procedures order [Docket No. 956] and the completion of an auction which commenced on July 19th, the Debtors have now filed an executed asset purchase agreement in respect of their Wells Fargo Assets (vessels encumbered by prepetition Wells Fargo loans, the “Pennantia APA”) amongst the Debtors, Bouchard Transportation Co., Inc. and successful bidder Pennantia LLC (the “Purchaser”) [Docket No. 1166]. 

The Purchaser is a consortium comprised of Wells Fargo, "real asset special situations investment platform" Rose Cay GP, LLC and distressed debt specialist Contrarian Capital Management LLC. A sale hearing is now scheduled for August 5th with a proposed sale order filed at Docket No. 1167.

On July 26th, in addition to designating the Purchaser, the Debtors also designated credit bidding prepetition lenders JMB Capital Lending Partners, LLC ("JMB") as the successful bidder in respect of their "DIP Collateral" assets (vessels encumbered by liens securing the Debtors’ debtor-in-possession financing) [Docket No. 1114].

Both of these sales will bring a bit of suspense to the August 5th sale hearing, with the Debtors still apparently considering an alternative proposal as to the Wells Fargo Assets from creditors 507 Summit LLC (“507”) and Peak Credit LLC (“Peak”) who have objected to the sale of those assets and presented the Debtors and the Court with the outline of an alternative restructuring that "permit[s] a reorganization that would result in realization of the Debtors’ going concern value for the benefit of their creditors" [Docket No. 1121, which we cover separately]. The 507/Peak objection attaches a term sheet in respect of the alternative restructuring and a letter from each of the proposed Plan sponsors, Lepercq de Neuflize & Co. Inc. ($600.0mn of discretionary capital under management) and Cohanzick Management LLC ($2.5bn under management) as to their financial bona fides.

As discussed in an earlier story, the back-up bidder in respect of the DIP Collateral Assets Hartree Partners, LP ("Hartree") will loom large in upcoming hearings despite its back-up bidder status in respect of those assets, with the Debtors' official committee of unsecured creditors (the "Committee") objecting to the idea that Hartree should receive a break-up fee and an expense reimbursement totalling $5.0mn ($3.3mn break-up fee and up to $1.5mn expense reimbursement, although expenses are now projected to be closer to $400k which leaves the interesting argument that the up to $1.1mn balance, otherwise included in the JMB bid, will now be left to provide a windfall at the Debtors' estates, see table below) for its only hours-long stalking horse role in respect of an auction won by a credit-bidding DIP lender, ie JMB. 

Hartree full-throatedly disagrees arguing that although its stalking horse bid may have appeared something of a knock-kneed foal, a stalking horse is a stalking horse; and its hours-old bid nonetheless "set an important floor for the price of the DIP Collateral above what the Debtors otherwise could have achieved" [Docket No. 1165]. Hartree adds as to the objection from the "sandbagging" Committee: "if allowed, [it] would severely erode the market’s faith in court-approved bidding protections, seriously hindering the ability of future debtors to market and sell their assets."

This will likely come down to a case of "who knew what when," with the Committee's arguments as to Hartree's failure to bring value to the Debtors' estates, and whether the bidder protections were actually necessary to induce the Hartree stalking horse role, largely obliviated by a demonstration that JMB had not otherwise shared its intention to bid for the DIP Collateral assets with the Debtors or otherwise; with that silence turning a presumption that they must have been in the asset sale race (and hence casting shade on the value add of the Hartree bidder protections) into a strong case that Hartree was a completely legitimate bidder and that its bid served as a meaningful bid floor.

Hartree significantly insists that JMB had not tipped its seemingly obvious hand as a DIP lender, noting that "the bid [made during the auction] by the DIP Lender came as a surprise to Hartree, as the DIP Lender had not shown any desire to own the assets prior to the Auction and had been previously unwilling to serve as Stalking Horse Bidder at the $110 million dollar amount."

Adding to Hartree's argument is the economic reality of the winning bid (adding $20.3mn of cash to its $95.0mn DIP credit bid) and JMB's apparent acceptance of Hartree's right to the bidder protections, with Hartree noting that: "it is entirely possible that absent Hartree’s bid, the maximum amount the DIP Lender would have been willing to bid would have been the amount of the DIP Obligations, i.e., $95 million….[and that] No party objected to the inclusion of the Bid Protections in the bid floor….Immediately following this description of the requirements for a topping bid, the DIP Lender put in a  bid for the $115.3 million minimum overbid amount." 

FN11: "The $400,000 amount represents a reasonable estimate of Hartree’s expenses as of the date the Committee filed its objection.  Given Hartree’s need to defend its entitlement to its bargained for Bid Protections, this estimate will likely be higher, and the amount payable the estates lower, as a direct result of the Committee’s actions."

For its part, the Debtors' have filed a revised proposed sale order (replete with the standard clauses about no collusion, fair process, etc.) which includes specific references to Hartree's right to the bidder protections and otherwise cleans up what was a complicated and often amended sales process and calendar [Docket No. 1151]

Wells Fargo Collateral Assets

  • Successful Bidder: A consortium comprised of Wells Fargo, "real asset special situations investment platform" Rose Cay GP, LLC and distressed debt specialist Contrarian Capital Management LLC with an aggregate purchase price of $130.0mn, comprised of a $100.0mn credit bod of Wells Fargo debt and $30.0mn in cash
  • Back-up Bidder(s): Keystone and Martin Operating Partnership
  • Assets: The Debtors' vessels securing the the Wells Fargo loans ($164.1mn outstanding as at Petition date)

Sale of DIP Collateral Assets

  • Successful Bidder:  JMB Capital Lending Partners, LLC ("JMB"), the Debtors' DIP lender with an aggregate purchase price of $115.3mn (the DIP financing is $90.0mn before interest)
  • Back-up Bidder: Hartree Partners, LP, ("Hartree") the Debtors' last-minute choice as stalking horse and one-time DIP lender ($110.0mn cash bid)
  • Assets: The Debtors' vessels securing the Debtors' DIP financing (list of vessels at Annex A of Hartree stalking horse APA, with assets aka, the "DIP Collateral" or "JMB First Lien Vessel Collateral")


On July 18th, further to the Court’s June 8th bidding procedures order [Docket No. 956], the Debtors filed a notice naming Hartree Partners, LP as their stalking horse bidder in a proposed sale of their DIP Collateral with the notice attaching an executed asset purchase agreement (the "Stalking Horse APA") that memorialized the terms of the $110.0mn cash sale. 

The deadline to designate a stalking horse was extended several times to accommodate negotiations, most recently in a July 18th notice which also extends the qualified bidder deadline until July 19th.

At the beginning of April, the Debtors switched debtor-in-possession ("DIP") lenders; replacing Hartree with JMB.

The Debtors had struggled from the outset of these Chapter 11 cases to line up adequate DIP financing, with an initial $60.0mn DIP financing facility provided by Hartree probably inadequate even before Hartree decided not to fund a second $31.2mn draw ($28.8mn of the Hartree financing made available by a December interim DIP order). 

The full $35.8mn balance of the Hartree DIP was repaid by the Debtors following receipt of the JMB financing.

The Marketing Process

The motion notes, “[T]he Debtors have taken significant strides towards revitalizing their business and unlocking significant value for their estates, including by: (a) successfully regaining certain certifications required to service customers; (b) repairing relationships with key counterparties; (c) completing necessary maintenance and repairs on key vessels identified for the Debtors’ near-term return-to-service plan; (d) significantly reducing the carrying costs of the Debtors’ fleet of vessels; and (e) obtaining postpetition financing that enabled the Debtors to access the liquidity necessary to administer these cases and pave a value-maximizing path to exit from chapter11. However, In order to propose a feasible, value-maximizing chapter 11 plan, the Debtors must capitalize on the value of their assets (including their fleet of vessels). To that end, the Debtors and their advisors determined, in their business judgment, that exploring a marketing process for potential sales of some or all of the Debtors’ assets was in the best interests of the Debtors’ estates. 

Prior to the Petition Date, the Debtors engaged Jefferies LLC (‘Jefferies’) to act as their exclusive investment banker in connection with the Debtors’ contingency planning efforts. In connection with its engagement, Jefferies is spearheading the marketing process designed to identify potential bidders for some or substantially all of the Debtors’ assets or the Debtors’ business. Specifically, prior to the date hereof, Jefferies contacted 165 potential bidders, representing both financial and strategic potential bidders. Of these potential bidders, all either reviewed a teaser document or participated in high-level discussions about a potential transaction. 73 bidders ultimately negotiated and executed confidentiality agreements and were provided access to a virtual data room containing detailed information about the Debtors’ industry, business and assets. Interested parties were invited to participate in further discussions with Jefferies regarding the Debtors’ industry, business and assets, the facts and circumstances of these chapter 11 cases and bidding process.

Subsequently, Jefferies received 9 written indications of interest from 7 parties. Of these, 6 proposals were for specific assets, 3 proposals were for substantially all of the Debtors’ assets, and no parties indicated an interest in acting as a chapter 11 plan sponsor. The Debtors and their advisors are currently advancing discussions with these parties in an effort to identify the highest or otherwise best bidders amongst them and to improve their bids to the benefit of the Debtors’ estates. As of the date of this motion, that process remains ongoing.

The substantial interest in the Debtors’ assets exhibited by a variety of market players thus far has led the Debtors to determine that establishing a court-approved schedule for their marketing process culminating in a potential Auction governed by court-approved Bidding Procedures will generate significant value for the Debtors’ estates and build on the marketing efforts that have already been launched. The marketing process and the Bidding Procedures proposed herein will enable the Debtors to move expeditiously to complete a fulsome marketing process, receive, evaluate and improve upon bids, execute one or more Stalking Horse Agreements if doing so will maximize the value received for their assets and hold an Auction (if necessary) to determine the highest or otherwise best bid (or bids).

The Debtors intend to use the proceeds of any asset sale to repay outstanding debt obligations and allowed claims and fund the Debtors’ working capital needs and distributions under the Debtors’ chapter 11 plan. The marketing process and the Bidding Procedures will result in the highest or otherwise best available offer for the assets. To the extent the Debtors move forward with a sale transaction for the assets, the Debtors submit that such transaction will be in the best interest of the Debtors’ estates and their stakeholders.”

The Debtors’ Prepetition Indebtedness

As of the Petition Date, the Debtors had approximately $229.5mn in aggregate principal amount of funded debt obligations.

About the Debtors

According to the Debtors: “Founded in 1918, the Company’s first cargo was a shipment of coal. By 1931, Bouchard acquired its first oil barge. Over the past 100 years and five generations later, Bouchard has expanded its fleet, which now consists of 25 barges and 26 tugs of various sizes, capacities and capabilities, with services operating in the United States, Canada, and the Caribbean. Bouchard remains dedicated to continuing the rich heritage of barging expertise and family pride well into the future.”

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The post Bouchard Transportation Co., Inc. – Files APA in Respect of $130mn Purchase of Wells Fargo Collateral Assets by Pennantia Consortium, Prepares for Interesting August 5th Sale Hearing as to Pair of Proposed Sales appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.

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