Welcome to the Re/Re/Recap. This week’s most interesting news in the world of turnaround and restructuring is just a scroll away. Thanks for tuning in. As always, please share with your friends, family, and pets. Send us a shout at contact+re@weakform.com.
Who needs DIP financing when you can just sell new shares?
Yes, Herz Global Holdings ($HTZ) received approval from Wilmington Judge Mary Walrath to sell more stock to an equities market that seems like it can’t get enough of the bankrupt company. A lot of stories on the seemingly illogical, out-of-nowhere rally on HTZ shares call out “day traders” on apps like Robinhood.
We previously noted that Carl Icahn owned about 39% of the company, which he liquidated for a loss of $1.6b. Maybe Carl’s block has something to do with this? I won’t speculate but, anecdotally, a friend of mine will. Yes, it was the first ever stock he’s invested in. No, he doesn’t know what bankruptcy means. Yes, he’s probably going to lose his money. Yes, I tried to warn him.
But then again, what is fair market value, really? How do we price in consumer sentiment in the market? Are these amateur traders gutsy? stupid? smart? Do they trade in volumes material enough to move prices in new, unprecedented ways? Ways that break algos and confound “professionals”? Our contemporaries over at PETITION are trying to wrap their heads around it too.
Hertz lawyer Thomas Lauria on the shares: “might ultimately be worthless, although it’s impossible to know this as a point of certainty.”
Potbelly Sandwich Shop looking to shed some weight
There’s been some reportage drama this week as an AdWeek article alleged that A&M had been engaged by the shop. The company has since denied retaining A&M, but regardless, is working to minimize its lease obligations—and plans to permanently close up to 100 locations—which it might have to do via bankruptcy.
Potbelly doesn’t carry any long-term debt outstanding other than a revolving credit facility, so it’ll be an impairment debate if it gets to court.
Vista Proppants flows into a Ch11 filing
Vista Proppants & Logistics LLC filed for Chapter 11 on Tuesday, June 9, the latest filer challenged by a distressed oil and gas industry. As the demand for its primary product—frac-sand, which is mixed with the fracking fluid pumped into drill sites—cracks, the company is working to reduce its debt load (namely, a $370m term loan) and exit railcar leases.
The O&G industry has been hit hard by the market downturn. This Reuters article takes a look at the O&G auction market—which is more active now than it has been since the 1980s.
Misc. Etc. Ok.
Experiencing Chop: Delta plays air traffic control with incoming debt, looks to lenders for concessions.
Hot debt market: PG&E hungry for more debt as it works through in-court restructuring.
Suited: J. Crew buttoned up an updated plan of reorg on June 11, 2020 (paywall). Brooks Brothers considers joining the in-court party.