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Strike, LLC – Court Approves Bidding Procedures and Stalking Horse Arrangements with American Industrial Partners, Ltd ($117.6mn Credit Bid plus $5.0mn of Wind-Down Cash)

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December 23, 2021 – The Court hearing the Strike cases issued an order (i) approving bidding procedures for the sale of substantially of the Debtors’ assets (the “Sale”), (ii) authorizing the Debtors to enter into a stalking horse asset purchase agreement with Strike Acquisition LLC (the “Stalking Horse Bidder”) including provisions as to a $1.5mn expense reimbursement and (iii) approving a proposed auction/sale timetable culminating in an auction on January 26, 2022 and a sale hearing on January 27th [Docket No. 279]. The revised APA is filed at Docket No. 278.

The Stalking Horse Bidder is an acquisition entity created by prepetition (and now proposed DIP) lender American Industrial Partners, Ltd. ("AIP") which will pace bidding with a credit bid (comprised of prepetition and DIP borrowings) of $117.6mn (AIP holding approximately two thirds of the $215.0mn owed by the Debtors under their junior term loan agreement) as augmented by an estimated $5.0mn of wind-down cash

As noted below, the Debtors marketing efforts appear to have borne considerable fruit, with 22 of 180 contacted parties having either signed an NDA, and begun diligence, or on the verge of doing so. In a further indication that the Debtors and AIP are genuinely looking to generate 3rd-party interest, the Stalking Horse Bidder has nor requested a break-up fee.

Background

The Debtors' motion notes, “Beginning in summer 2021, the Debtors foresaw that they would experience a liquidity shortfall in the third quarter of this year and sought rescue financing in order to avoid a free-fall into bankruptcy. Although the Debtors reached out to various funding sources, American Industrial Partners, Ltd. (‘AIP’) and certain of its affiliates (together with AIP, the ‘AIP Parties’), were the only parties that expressed a willingness to provide additional liquidity to the Debtors.

The Debtors engaged in good-faith negotiations with the AIP Parties to obtain the funding needed to preserve their businesses as a going-concern on the best possible terms and agree on the terms of a comprehensive restructuring. These negotiations were extended several times through the entry into forbearance agreements and amendments to the Debtors’ term loan facility and asset-backed loan facility.

On November 22, 2021, the Debtors and the AIP Parties entered into a restructuring support agreement (the ‘RSA’) with the common goal of maximizing the value of the Debtors’ assets and winding down their estates in a responsible and efficient manner. The RSA contemplates that the Debtors will engage in a pre- and post-petition marketing process for a sale of substantially all of their assets. The AIP Parties agreed to provide the stalking horse bid for that competitive process, which contemplates a purchase price comprised of (1) a credit bid of obligations under the Prepetition Senior Loan Facility and DIP Facility which the Debtors estimate to be approximately $115 million, (2) the assumption of certain liabilities, and (3) cash, which amount is anticipated to be sufficient to effectuate an orderly wind-down of the Debtors’ estates pursuant to a chapter 11 plan of liquidation (the ‘Liquidating Plan’). The AIP Parties further agreed to provide debtor-in-possession financing to fund the administration of the Chapter 11 Cases, including the Sale Transaction and wind-down process.

In order to continue to market their assets during these Chapter 11 Cases and conduct an auction (if necessary) to maximize the value of the estates, the Debtors seek authorization to enter into the Stalking Horse Agreement, implement the competitive sales process under the Bidding Procedures, and execute and consummate a Sale Transaction. The Bidding Procedures will allow the Debtors to market-test the Stalking Horse Bid and confirm whether any value exists for the Debtors’ unsecured creditors….Even if no higher and otherwise better offers are identified through this process, the Purchaser has agreed to purchase substantially all of the Debtors’ assets, which will preserve the Debtors’ businesses as a going concern, save thousands of jobs and vendor and customer relationships, and provide resources to allow the estates to wind-down in an orderly fashion pursuant to a Liquidating Plan. Granting the relief sought in this Motion is in the best interest of the Debtors’ estates.”

Prepetition Marketing Process

The motion continues: "On November 12, 2021, the Debtors launched a marketing process for the sale of the Assets. The Debtors’ investment banker Opportune Partners, LLC ('Opportune Partners') with input from the Debtors, compiled a list of potential financial and strategic purchasers, and then reached out to entities identified as potential purchasers.

Opportune Partners also distributed…a 'teaser'…to potential purchasers in connection with the marketing process. Thereafter, the Debtors provided interested parties that had executed non-disclosure agreements with a confidential information memorandum (the 'CIM') that included a summary of the Debtors’ operations, a description of its services and products, and historical and projected financial information. The CIM also included illustrative descriptions of the Assets. Those interested parties were also granted access to a virtual data room, which provided such interested parties with access to hundreds of documents, including the information a potential purchaser would need to make a proposal.

As of the date of this Motion, Opportune Partners has contacted 180 entities identified as potential purchasers of the Assets and distributed marketing materials to 155 of those potential purchasers. Currently, 22 potential buyers have non-disclosure agreements in process and 10 have signed a non-disclosure agreement and have been granted access to diligence materials."

Key terms of the Stalking Horse APA:

  • Seller: Strike HoldCo LLC, a Delaware limited liability company (“Strike HoldCo”), (ii) Strike, LLC, a Texas limited liability company (“Strike LLC”), (iii) Strike Global Holdings, LLC, a Texas limited liability company (“Strike Global”), (iv) Capstone Infrastructure Services, LLC, a Texas limited liability company (“Capstone”), (v) Delta Directional Drilling, LLC, a Texas limited liability company (“Delta”), and (vi) Crossfire, LLC, a Colorado limited liability company (“Crossfire” and together with Strike HoldCo, Strike LLC, Strike Global, Delta and Crossfire, each, a “Seller” and, collectively, the “Sellers”)
  • Purchaser: Strike Acquisition LLC, a Delaware limited liability company formed by AIP 
  • Purchase Price: (i) the assumption of the Assumed Liabilities by the
    Purchaser at Closing, plus (ii) a credit bid pursuant to section 363(k) of the Bankruptcy Code (the “DIP Credit Bid”) of all DIP Obligations outstanding as of immediately prior to the Closing (the “DIP Credit Bid Amount”), plus (iii) a credit bid pursuant to section 363(k) of the Bankruptcy Code (the “ABL Credit Bid” and, together with the DIP Credit Bid, the “Credit Bid”) of all ABL Obligations outstanding as of immediately prior to the Closing (the “ABL Credit Bid Amount” and, together with the DIP Credit Bid Amount, the “Credit Bid Amount”), plus (iv) the Excluded Cash.
  • Bid Protections: Up to $1.5mn expense reimbursement; a minimum overbid of $750k; and bid increments of $750k.
  • “Wind Down Amount” (part of the "Excluded Cash" definition) means an amount of cash equal to the sum of (i) the lesser of (A) the Sellers’ cash on hand as of immediately prior to the Closing plus any amount the Sellers are entitled to borrow under the DIP Credit Agreement at such time (other than the Wind Down Statutory Expense Amount and amounts the Sellers are entitled to borrow under the DIP Credit Agreement to fund the Professional Fee Amount) and (B) $5,000,000 plus (ii) the Wind Down Statutory Expense Amount (as defined in the DIP Credit Agreement), to the extent applicable.

The Credit Bid portion of the Purchase Price set forth in the Stalking Horse Agreement is estimated to be approximately $117,602,212.52 (the “Initial Credit Bid”) [see Docket No. 283]:

 

Estimated Amount Outstanding (as of 2/10/22)

DIP Credit Bid

$28,985,336.61

ABL Credit Bid

$88,616,875.91

Total:

$117,602,212.52

Key Dates

  • Deadline for Objections to the Sale Transaction other than Assignment Objections: January 19, 2022
  • Bid Deadline: January 24, 2022
  • Auction: January 26, 2022
  • Sale Hearing: January 27, 2022 (If no Qualified Bid, other than the Stalking Horse Bid, is received by the Auction Date, then the Sale Hearing shall occur on January 26, 2022)

Prepetition Indebtedness

The Debtors’ prepetition capital structure consists of (i) a revolving asset-backed loan facility (the “Prepetition ABL Facility”), which was subsequently amended to provide incremental delayed draw term loans provided by the AIP Parties (the “Prepetition Bridge Facility,” and together with the Prepetition ABL Facility, the “Prepetition Senior Loan Facility”) governed by the Prepetition Senior Loan Agreement (as defined below), (ii) a term loan facility (the “Prepetition Junior Loan Facility”) governed by the Prepetition Junior Loan Agreement (as defined below), and (iii) certain capital lease obligations. In addition, the Company has one cash-collateralized undrawn letter of credit in an aggregate face amount of $2,000,000 (the “Prepetition LC”).

As of the Petition Date, the aggregate amount of revolving loans outstanding under the Prepetition ABL Facility was approximately $51.0mn and the aggregate principal amount of Bridge Loans outstanding under the Prepetition Bridge Facility was approximately $30.0mn. As of the Petition Date, the aggregate principal amount of term loans outstanding under the Prepetition Term Loan Agreement was approximately $215.0mn.

About American Industrial Partners

According to AIP: "AIP is an operationally-oriented middle-market private equity firm that makes control investments in industrial businesses serving domestic and global markets. The Firm has deep roots in the industrial economy and has been active in private equity investing since 1989. AIP invests in all forms of corporate divestitures, management buyouts, recapitalizations, and going-private transactions of established businesses with revenues of $300 million to $1 billion+."

About the Debtors

According to the Debtors: “Strike is a full-service pipeline facilities, and energy infrastructure solutions provider. Headquartered in The Woodlands, Texas, Strike partners closely with clients all across North America, safely and successfully delivering a full range of integrated engineering, construction, maintenance, integrity and specialty services that span the entire oil and gas life cycle. For more information, visit www.strikeusa.com."

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The post Strike, LLC – Court Approves Bidding Procedures and Stalking Horse Arrangements with American Industrial Partners, Ltd ($117.6mn Credit Bid plus $5.0mn of Wind-Down Cash) appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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