August 23, 2018 — Portage Point Partners, LLC (Portage Point) announced that turnaround specialist Thomas J. Allison has joined the firm as a Senior Advisor. Chicago-based Portage Point, founded in 2016, serves as an interim management and advisory firm that partners with middle market companies. Matthew Ray, Managing Partner of Portage Point, commented, “Tom’s world-class experience and capabilities as well as his extensive business network will be significant assets to Portage Point and our clients.” Mr. Allison commented on his move, “Matt and I have worked so well together on many engagements over the years, and it is a natural progression for us to formalize that partnership. I am excited to be joining Portage Point as the firm continues to execute on substantial growth opportunities.” Mr. Allison joins Portage Point from Mesirow Financial Consulting where he was Executive Vice President and Senior Managing Director. Prior to Mesirow, he was one of the original founders and National Restructuring Group Practice Leader for Huron Consulting as well as the Partner-in-Charge for Arthur Andersen’s Central Region Restructuring Practice. Mr Allison is a founder and past chairman of the Turnaround Management Association (TMA) and was inducted into the TMA Hall of Fame in 2018. He was also the 2017 recipient of the TMA Legend Award and the first recipient of the TMA Peter Tourtellot Award. Mr. Allison, who has been a Certified Turnaround Professional (CTP) since 1994, is currently a Director and Restructuring Committee member for The NORDAM Group, Director and Audit Committee Chair for Monroe Capital, Director, Board Chair and the Audit Committee Chair for Katy Industries and Director for PTC Group Holdings Corp.
August 17, 2018 – In the latest chapter of a bitter battle between Oaktree Capital (“Oaktree”) and Apollo Global Management LLC (“Apollo”) over the future of Claire’s Stores, Inc. (“Claire’s” or “the Debtors”), Bloomberg is reporting that Oaktree is scrambling to meet an August 31 deadline to raise $1.5 billion for a cash bid that would top a debt-for-equity deal valued at $1.4 billion; the latter championed by Claire’s senior lenders, led by Elliott Capital Management, and Apollo, Claire’s’ private equity sponsor. Apollo is the holder of almost 98% of Claire’s outstanding equity and $52.8 million of debt which ranks senior to the $159 million of Claire’s second lien debt currently held by Oaktree. Reporting from the courtroom, Bloomberg quotes White & Case’s Tom Lauria on the looming deadline: “We are under extreme pressure raising $1.5 billion in cash.” Oaktree’s efforts may not be, however, exactly manic. As noted below, the Oaktree offer has been brewing for weeks and as Bloomberg reminds, “Oaktree is one of the largest distressed-debt investors in the world…[with]… $20 billion of uncommitted funds or ‘dry powder’ as of midyear.” If Oaktree wants to accessorize with Claire’s, it can. The real questions for Oaktree would appear to be ones of valuation and commitment: How much over $1.4 billion is Claire’s worth…and does Oaktree truly want to accessorize its portfolio with ownership or is it simply putting pressure on Apollo to push its valuation into territory more rewarding for second lien holders? The line of battle is clear: Apollo has embraced a plan of reorganization (“the Plan”) which values Claire’s at $1.4 billion, almost enough to make the largest class of Claire’s first lien lenders whole (86.8% estimated recovery), but which firmly shuts the door on a meaningful recovery by second lien lenders, who are left with a 3.5% estimated recovery (if they sign up to the Plan). Oaktree, Claire’s largest second lien lender, believes that Claire’s value extends $100’s of millions beyond the Plan valuation, possibly placing second tier lenders firmly in the money. Oaktree’s assault on the $1.4 billion valuation, has been holistic, and includes: (i) questioning why the Debtor picked a valuation at the bottom range of its own expert’s range (Lazard’s range as to enterprise value being $1,355,000,000 to $1,680,000,000), (ii) challenging the Debtor’s interpretation of a second lien intercreditor agreement, (iii) focusing on the apparent value added by post-petition operations at Claire’s (citing management projections as indicative of $400 million in additional enterprise value) and (iv) questioning whether Apollo’s efforts to protect its own Claire’s investment might have stepped over the line with a fraudulent transfer. According to Court documents reviewed by BankruptcyData.com, Oaktree has been paving the way for a competing bid for a number of weeks, taking concerted steps in court that are intended to open up a reorganization process that Oaktree asserts has been managed by Claire’s management to its detriment as a second lien lender and in order to advance the interests of its controlling shareholder…Apollo. On July 17, 2018, Oaktree filed a motion seeking authority to “commence, prosecute and, upon Court approval, settle certain claims and/or causes of action of the Debtors’ estates,” namely a series of transactions between Apollo and Claire’s’ affiliates that Oaktree argues amounted to a “fraudulent transfer.” The motion appears to have a twofold purpose: (i) to aggressively characterize Apollo as a bad actor and (ii) push yet another argument as to why the Debtor’s $1.4 billion enterprise valuation is unfairly low, notably to out-of-the-money second lien lenders. The motion [Docket No. 649] states, “Apollo…is well known for the notorious zeal with which it ‘will aggressively protect [its] investments and defend [its] companies’ using all the tools available [citing WSJ]’….This Motion concerns Apollo’s attempts to ‘aggressively protect’ its equity and debt investments in Claire’s Stores by requiring a Debtor, while it was insolvent, to undertake a complicated refinancing transaction (the ‘Affiliate Transaction’) pursuant to which Apollo and others exchanged distressed (and, in some cases, near worthless) debt in Claire’s Stores for new structurally senior debt….The successful avoidance of CBI’s transfer of the Claire’s IP [this transfer a component of the Affiliate Transaction]….will generate more than $170 million in additional distributable value for all creditors of the Debtors’ estates—first lien creditors, second lien creditors, and unsecured creditors, alike.” On July 18, 2018, Oaktree submitted to the Claire’s’ Finance Committee a partially committed preliminary all-cash offer, subject to securing certain additional financing commitments, that Oaktree contends awards cash payments to each class of creditors in an amount that exceeds their recoveries under Claire’s’ current Restructuring Support Agreement (‘the RSA’) with Apollo and a large majority of its first lien lenders. In a July 20, Court hearing, Oaktree advised that it “expects that its proposal will be fully committed by the August 31 Bid Deadline.” In that same July 20 hearing, Oaktree raised with the Court its concerns that, as drafted, the Disclosure Statement lacked clarity as to whether the Debtors’ could, or would, allow for the Debtors to “toggle” to a better offer (made in advance of the August 31 bid deadline) without requiring the maker of that offer to begin a new solicitation process; this restart adding months to the reorganization and presumably allowing for further bids that would threaten that made by Oaktree, including any made by parties to the RSA (“the RSA Parties”). The Judge hearing the case agreed [Docket No. 693], approving Claire’s Disclosure Statement subject to the inclusion of language making clear that the Debtors could in fact toggle without resolicitation; although Oaktree has expressed its concern that the Debtors are exploring ways to allow first lien lenders to “veto” a higher bid, ie to find an end-run around the toggle provision. On August 3, 2018, Oaktree objected [Docket No. 732] to Claire’s motion of July 17, 2018 requesting an extension of the exclusive periods during which Claire’s could file a Chapter 11 Plan and solicit acceptances thereof [Docket No. 614]. In its objection, Oaktree further underscored its seriousness as to a competing bid by notifying the Court that, “If exclusivity ends, Oaktree will file a chapter 11 plan that incorporates its proposal in the near term .” As at the date of the objection, Claire’s sat between the filing and solicitation deadlines of July 17, 2018 and September 15, 2018, respectively. Following on the heels of Oaktree’s competing bid, it is reasonable to see some degree of strategic gamesmanship from both sides. Extensions are not normally requested after the expiration of an exclusive filing period and, absent a competing bid, the nearing expiration of the solicitation period would presumably have been welcomed by the RSA Parties. If, however, Oaktree was able to have its bid inserted into the Plan at the last minute, with the RSA parties obligated to continue their support of the altered Plan, The RSA Parties would find their ability to counterbid largely cut-off. Perhaps noting competing efforts to control the reorganization timetable, and certainly aware of a suddenly active bidding process, on August 17, 2018, the Court approved Claire’s extension request [Docket No. 791]. It will be an exciting two weeks.
August 1, 2018 – Dorsey & Whitney LLP (“Dorsey”) have announced that Matthew “Matt” DeArman has joined the Firm’s Finance & Restructuring Group in Dallas as a Partner. Mr. DeArman’s practice focuses on the representation of agents, lenders and public and private corporate borrowers in a variety of finance transactions and restructuring matters, including in connection with secured and unsecured revolving and term facilities, asset-based lending, oil and gas reserve-based lending, first lien/second lien transactions, bridge and mezzanine financing, acquisitions financing, cross-border transactions and debtor-in-possession financing. His practice has an emphasis on asset-based lending and oil and gas related financings He joins Dorsey from Munsch Hardt Kopf & Harr, P.C., where he was a shareholder in the Dallas office. Prior to joining Munsch Hardt in 2017, he was in the corporate finance section of Norton Rose Fulbright where he was made a partner in the Dallas office in January 2017.
August 1, 2018 - B. Riley Financial, Inc. (NASDAQ: RILY) (“B. Riley”), has announced the signing of a definitive agreement pursuant to which specialty financial advisory services firm GlassRatner Advisory & Capital Group LLC (“GlassRatner”) became a wholly-owned subsidiary of B. Riley as of July 31, 2018. Under terms of the agreement, Atlanta-based GlassRatner will constitute a new, dedicated business consulting services unit vertical under B. Riley Financial and will continue to be operate under the same name and under the direction of co-Founder Ian Ratner. Bryant Riley, Chairman and Co-Chief Executive Officer of B. Riley, commented on the acquisition, “As we look to grow B. Riley Financial, we are strategically looking for businesses that allow us to enhance the services we provide to our clients. GlassRatner’s specialized expertise and skillset is a complementary fit for our diverse mix of services and strengthens our ability to provide clients with a more holistic, strategy through execution approach to their most critical needs. GlassRatner has approximately 100 professionals in 14 offices across the U.S. in Arizona, California, Florida, Georgia, Missouri, New York, Texas and Utah. Los Angeles-headquartered B. Riley, which provides financial services and solutions to fit the capital raising and financial advisory needs of public and private companies and high net worth individuals, has approximately 900 employees in offices serving major U.S. financial markets.
July 31, 2018 – Bankruptcy Management Solutions, Inc., which provides software and services to the consumer-bankruptcy and corporate-restructuring industries, has announced the appointment of Christopher Updike as its new General Counsel. Updike, who was a restructuring attorney at Cadwalader, Wickersham & Taft and, more recently, Debevoise & Plimpton, will oversee BMS’s legal department and also serve as an advisor on corporate and strategic initiatives. Before joining BMS, Updike advised debtors, creditors, lenders and acquirers on complex corporate restructurings, including chapter 11 cases, out-of-court workouts and cross-border insolvency proceedings. In 2016, he was selected as one of twelve “Outstanding Young Restructuring Lawyers” by Turnarounds & Workouts; he was further recognized as a “Next Generation Lawyer” for corporate restructuring in the Legal 500 United States guide in both 2017 and 2018.
July 23, 2018 - Oppenheimer & Co. Inc. ("Oppenheimer"), the investment bank subsidiary of Oppenheimer Holdings, has announced that Bruce Buchanan will be joining as its new Head of Restructuring & Special Situations. Buchanan is expected to be based in New York and will report to Robert Lowenthal, Head of U.S. Investment Banking. In his new role, Buchanan will be responsible for capital raising and providing strategic advisory services to Oppenheimer clients and will work with financial sponsors and other stakeholders on complex recapitalizations in both the public and private markets. Lowenthal commented, "Bruce has incredible experience with advising and assisting corporate clients on strategic alternatives, distressed capital structure solutions, and liability management services. His proven track record for creating value and providing exceptional service to his clients is a strong differentiator for our platform." Prior to joining Oppenheimer, Buchanan was the Head of Debt Capital Advisory for PwC Corporate Finance, where he developed and led the strategic corporate finance and debt capital advisory platform. He was previously Head of Strategic Finance and Restructuring at Morgan Stanley and Bank of America Merrill Lynch, and Head of Strategic Finance and Global Restructuring Group Team Leader at RBS Securities.
Bankruptcy Management Solutions, Inc. (BMS), a case- administration software and depository-services provider serving the corporate restructuring and bankruptcy industries, has announced that Anthony Facciano is joining the company as a director and will be responsible for managing BMS relationships with bankruptcy trustees and other fiduciaries. Facciano joins BMS from Epiq Systems Inc where he served as director of trustee and fiduciary services and was charged with market share growth.