Article
LME Boom Puts New Pressure on Distressed Companies’ Communications, Says FTI’s Chesley
Editor’s Note: An earlier version of this story was published in error. It has been updated to reflect a correct version of the “View from the Market” section.
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By Priya Batchu
Companies have turned to out-of-court transactions such as amend-and-extends and other LME exercises, but the business still faces many of the same pressures that accompany an in-court-restructuring.
“A lot of companies experience a very sharp ecosystem effect,” Chesley said. “Customers stop buying, or the supply chain tightens up or credit card processors change collateral requirements. All of those have deleterious effects on the business’ ability to operate.”
Companies are responding by addressing those concerns directly instead of trying to avoid discussion of their capital structures, Chesley said.
“The companies that do this well don’t hide from it and take the challenge of a maturity head-on,” she said. “Yes, we have debt coming due, and we’re proactively talking to our financial stakeholders to address it.”
There is also a prominent challenge when a company goes through many rounds of liability management or operational restructuring.
“Even though liability management transactions provide important time and runway, you get a lot of fatigue with companies and with their stakeholders,” Chesley said. “It just makes people tired and distracted; there can be significant attrition.”
Restructuring communications in those situations go beyond what a company says publicly, she added.
“It’s important to rally employees and engage them through changes. We work with our clients to maintain focus and demonstrate that there’s a light at the end of the tunnel.”
A mistake companies can make when an in-court process does become necessary is to try and avoid the word “bankruptcy,” rather than explaining what the process means for stakeholders, Chesley said.
“Our view is you’re better off educating stakeholders on what it means and what it doesn’t mean. The second you file the bankruptcy, there are dedicated news outlets that scrub these documents,” Chesley said.
Companies need to “communicate from minute one” so important stakeholders hear straight from the company about what is happening.
Looking ahead, Chesley is interested in those sources of restructuring activity that might come from outside forces that are difficult to predict.
GLP-1 drugs are one type of example. Their adoption has affected businesses well beyond healthcare, including grocery, alcohol, vitamins and supplements, foodservice and fitness.
“For a lot of categories, it felt like GLP-1s popped out of nowhere,” Chesley said. “It has massive impacts on tons of businesses, on snack foods, alcohol and even produce companies.”
“People are eating less, period,” Chesley said.
She also pointed to rising interest rates, tightening consumer spending and industry-specific disruptions, including diesel fuel costs, as those factors can reverberate through companies and capital structures.
“What are those other exogenous trends that might be coming?” Chesley said. “We didn’t see Covid coming. GLP-1s crept up on a lot of us. We’re focused on what is coming next.”
Paramount Skydance
Prices for the media company’s newly issued bonds fell in their first trading sessions this week after pricing at par on Sept. 30. The financing consists of $30 billion of first lien notes, $12.4 billion of second lien notes, $12.7 billion of second lien exchange notes for existing WBD unsecured notes and $14.5 billion of secured term loans. The debt financing was issued alongside a $47 billion equity investment from a syndicate led by the Ellison family at a formula-based price with a $12 per share floor. Paramount Skydance stock closed at $9.34 on Oct. 1 and traded at $9.28 as of 12:30 p.m. ET today.
Octus analysis puts the equity syndicate’s mark-to-market loss at as much as 38%, as a portion of the share price likely reflects warrants for nonsyndicate equityholders as merger compensation. On a pro forma basis as of Sept. 29, the combined company starts with about $87.5 billion of debt and net leverage of about 6.7x before $6 billion of synergies anticipated by the company, based on June 30 EBITDA. Leverage would fall to 4.5x after accounting for the synergies. Octus’ coverage of Paramount Skydance is HERE.
Americas Court Opinion Review
In the latest installment of the Court Opinion Review, we discuss the value of exclusivity in an overleveraged RSA world, the limits of chapter 15 recognition in Delaware (or lack thereof) and conflicting U.S. and Brazilian bankruptcy court decisions in Braskem Idesa. Read the Court Opinion Review HERE.
Oracle
Oracle’s force majeure notice to the developer of Project Jupiter, a New Mexico data center financed with an $18 billion privately syndicated loan backed by Oracle’s triple-net lease payments, has investors rethinking how force majeure language and local political pushback affect data center deals. The notice lets Oracle pay less rent while the project is delayed. Although the force majeure clause may not be news for the market, any setback concerning a massive financing such as this will have ripple effects in a growing asset class and is enough to create unease in the market. Octus’ coverage of Oracle is HERE.
Acrisure
An internal document linked to the insurance broker’s second-quarter presentation and management commentary on a lender call portrayed an operational metric in noticeably different ways. CFO Aaron Miller said on the lender call that second-quarter retention was “a bit lower than the first quarter,” which was 86.5%, and “still in the mid 80s,” while an internal document removed from the lender presentation put second-quarter North America retail retention at 82%, a 450 bps gap. That document, which Acrisure inadvertently included in a since-revised presentation, projected full-year 2026 adjusted EBITDA down 3% year over year to $1.27 billion, and full-year revenue of $4.9 billion with third and fourth-quarter revenue of $1.25 billion and $1.2 billion, both down from $1.29 billion in the second quarter. Octus’ coverage of Acrisure is HERE.
Asurion
The insurance provider for mobile devices has seen its debt sell off amid AI competition concerns and customer losses. Recent news of Meta’s Muse launch has intensified operational worries that agentic AI tools might increase competition for service providers. This, coupled with technical pressure, has led to a selloff of Asurion’s first and second lien debt. Second-quarter adjusted EBITDA fell 19% year over year while revenue fell 8%, driven largely by the loss of U.S. customers to T-Mobile and restructured contracts in Japan. Octus’ coverage of Asurion is HERE.
America’s Car-Mart
The used vehicle retailer was able to extend its limited waiver of existing and anticipated defaults with Silver Point Finance LLC, as administrative and collateral agent, and its lenders through Oct. 8, from Oct. 1 previously. The extension continues the company’s temporary relief on minimum liquidity and minimum collateral coverage ratio obligations. A special committee of the board is evaluating strategic alternatives that include financing, recapitalization, restructuring or M&A, and the company has noted that it has made significant progress toward a transaction. Octus’ coverage of America’s Car-Mart is HERE.
Getty Images
Getty Images made coupon payments for its 9.75% senior notes due 2027 and 14% senior notes due 2028 within the 30-day grace period, so no event of default occurred. The media company and its advisors have been evaluating strategic financing alternatives and balance sheet management initiatives which includes active dialogue with key debtholders and equityholders. Getty Images is facing significant financial challenges, including a liquidity crunch and elevated leverage, after a failed merger with Shutterstock. The payment on Getty Images’ coupons was coincident with publication of the Octus Coupon Tracker, which tracks coupon payments due within the next three months on bonds that are priced below 50. Octus’ coverage of upcoming coupons is HERE. Octus’ coverage of Getty Images is HERE.
Cable One
Certain B-2 and B-3 term lenders advised by Moore & Van Allen and Houlihan Lokey are working on an out-of-court proposal to address the roughly $480 million put obligation owed to GTCR for a 55% stake in Mega Broadband, which was previously expected to be resolved Oct. 1. The lenders might consider contributing new financing if needed. An ad hoc group of B-4 lenders is working with Gibson Dunn and Perella Weinberg Partners as the company announced it is in advanced discussions with GTCR, certain of its existing lenders and a consortium of leading private lending institutions regarding financing transactions. Cable One is advised by Cravath, Centerview Partners and Alvarez & Marsal. Octus’ coverage of Cable One is HERE.
Cogent Communications
An ad hoc group of noteholders is working with Houlihan Lokey as the company struggles to refinance its $750 million notes due in June 2027. The company is contending with revenue loss from its Sprint wireline business, as well as high cash interest expense and elevated capital expenditures. Octus’ coverage of Cogent Communications is HERE.
Leslie’s
Leslie’s, the largest U.S. direct-to-consumer pool and spa care company, filed chapter 11 on Sept. 30 in the Southern District of Texas with a restructuring support agreement backed by 81% of prepetition term loan lenders. The RSA contemplates a plan of reorganization that would reduce funded debt by $685 million (or 90%), equitize prepetition term loans and provide a $60 million equity investment backstopped by certain RSA parties.
The case would be funded with a $90 million new-money DIP term loan financing from existing lenders and a $225 million asset-based financing facility with a creeping rollup of prepetition ABL claims. On the effective date, $75 million of the DIP term loan (excluding premiums) would convert dollar-for-dollar into exit term loans. Remaining DIP term loan claims, plus accrued or capitalized interest, would be converted into 30% of predilution new common equity, while outstanding DIP ABL claims would also be converted into exit ABL financing on a dollar-for-dollar basis.
Judge Alfredo R. Perez granted interim DIP approval at a first day hearing on Thursday, unlocking an initial $45 million draw of the DIP term loan facility and the creeping rollup of the ABL. Octus’ Leslie’s coverage is HERE.
Andrade Gutierrez
Brazilian construction and engineering company Andrade Gutierrez Engenharia SA filed chapter 15 on Sept. 30 in the Bankruptcy Court for the Southern District of New York along with five affiliates, seeking recognition of their Brazilian recuperação extrajudicial, or REJ proceedings, as a foreign main proceeding. The debtors ask the U.S. court to give their two REJ plans full force and effect after the Belo Horizonte First Business Court confirmed them on Sept. 17.
The debtors are part of the engineering and civil construction division of the Andrade Gutierrez Group, a Brazilian private engineering and infrastructure conglomerate. The company says the chapter 15 filing is a “culmination of good-faith restructuring negotiations” that resulted in approved REJ plans to restructure about $554.6 million of New York law-governed notes. Octus’ Andrade Gutierrez coverage is HERE.
Brightline Florida
At Brightline Florida’s first day hearing on Tuesday, Judge Mark E. Hall granted interim approval of $190 million of $257.7 million in senior secured DIP notes to be issued by nondebtor and sole Brightline operating company Brightline Trains Florida LLC, or OpCo. The judge overruled an objection from CK Opportunities Fund I, the majority holder of Brightline Holdings term loans that sued several Brightline entities and Morgan Stanley as Brightline Holdings’ loan agent in New York state court. That litigation is now stayed in the wake of the chapter 11 filing.
The debtors also announced that a Davis Polk-represented ad hoc group of Brightline East LLC noteholders holding $746 million of Brightline East’s $1.119 billion of corporate notes and a Cleary Gottlieb-represented ad hoc group of OpCo bondholders signed on to the RSA. RSA parties now hold over $4.6 billion in claims against Brightline, an increase from $3.6 billion, counsel said. Octus’ Brightline Florida coverage is HERE.
DISH DBS and DISH Wireless
Judge Christopher M. Lopez confirmed the DISH DBS debtors’ standalone prepackaged plan at a brief uncontested hearing on Tuesday, 91 days after the debtors filed chapter 11 with fellow EchoStar affiliate DISH Wireless. The plan went effective on Thursday.
The plan implements a March 19 restructuring support agreement whereby EchoStar agreed to pay approximately $4.75 billion in DISH DBS funded debt, in part with proceeds from EchoStar’s $23 billion sale of 5G wireless spectrum to AT&T. Holders of the approximately $750 million in remaining 2026 senior secured notes, 2028 senior secured notes and 2028 and 2029 senior notes will receive amended notes under the plan. Additionally, the DISH DBS noteholders will also share in any recoveries on a disputed $8.85 billion intercompany claim against DISH Wireless according to a waterfall in the proposed Wireless liquidating plan.
All other DISH DBS creditors are unimpaired under the confirmed plan, and their claims will ride through the bankruptcy. Octus’ EchoStar coverage is HERE.
Optimum Creditor Suit
CSC Holdings lenders sued CSC, parent Optimum Communications and executives in New York state court, challenging a series of 2025 and 2026 restructuring transactions the plaintiffs say diverted “substantial value” from creditors to insiders, including controlling shareholder Patrick Drahi and director/former CEO Dexter Goei. The lender suit comes as negotiations between the telecommunications company and restricted lenders have dragged on. Octus’ coverage of Optimum is HERE.
SEC Flags Private Credit Valuation Practices
U.S. Securities and Exchange Commission staff issued a “critical reminder to private credit market participants of valuation and investor disclosure best practices. The nonbinding staff-level notice comes amid the SEC’s efforts to increase investor access to private markets while also being cognizant of issues stemming from valuation practices and opacity. Octus’ coverage of Regulatory Policy & Litigation is HERE.
Section 301 Forced Labor Tariff Challenge
A panel of the U.S. Court of International Trade heard oral argument on importers’ challenge to President Donald Trump’s forced labor tariffs ranging from 10% to 12.5% on 60 economies. The panel quizzed the government on the specific provision of section 301 of the Trade Act of 1974 upon which they relied. The parties also debated whether the U.S. Trade Representative sufficiently demonstrated a burden to U.S. commerce caused by trading partners’ alleged failure to enforce forced-labor import restrictions. Octus’ coverage of Tariff Policy & Impact is HERE.
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