Acosta makes pre-packaged Chapter 11 filing to implement agreement

By Caroline Salls

Pittsburgh, Dec. 2 – Acosta, Inc. made a pre-packaged Chapter 11 bankruptcy filing Monday in the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, the company said it would file bankruptcy to implement an agreement reached with holders of more than 70% of its loans and more than 80% of its notes on the terms of a comprehensive reorganization and recapitalization.

Acosta said the deal will eliminate all of its roughly $3 billion of long-term debt.

The company said investors have committed $250 million in new equity capital backstopped by institutions “committed to the long-term success of Acosta.”

Plan terms

Under Acosta’s pre-packaged plan, vendors will be paid in full for goods and services provided before and during the Chapter 11 process, and all employees can expect to receive their usual wages and benefits.

Holders of first-lien claims will have the opportunity to provide the Acosta debtors with their share of $150 million of new money debtor-in-possession financing, backstopped by an informal group of creditors. The DIP financing will be used to satisfy all outstanding amounts due under Acosta’s A/R facility and to fund the Chapter 11 cases.

Administrative, priority tax, other priority and other secured claims will be paid in full in cash, or holders will receive another treatment that renders the claims unimpaired.

Holders of class 3 first-lien claims will receive a share of 85% of the total new common stock in the reorganized company, subject to dilution by an employee incentive plan, equity rights offering, direct investment preferred equity raise and equity backstop premium, and will receive first-lien subscription rights, subject to a cash-out option for creditors who accept the plan.

Holders of senior notes claims will receive a share of 15% of the total new common stock, subject to dilution, and senior notes subscription rights, with a senior notes cash-out option.

The reorganized Acosta debtors will issue $65 million of new preferred stock through the direct investment preferred equity raise, with the new preferred stock to be purchased by backstop parties.

The reorganized debtors will also issue $260 million of new preferred stock through the equity rights offering.

Holders of general unsecured claims, stock repurchase notes claims and acquisition notes claims will be unimpaired by the restructuring.

Interests in the holding company will be canceled, released and extinguished.

After the restructuring and recapitalization, on a pro forma basis, Acosta said it will have zero net interest burden and remain significantly cash flow positive with ample liquidity and working capital.

DIP financing

Ankura Trust Co., LLC is the administrative agent for the $150 million DIP facility.

The facility will mature on the earliest of six months from the bankruptcy filing date, 60 days after the filing date if a final order has not been entered, the effective date of a Chapter 11 plan, the closing of a sale of all or substantially all of the company’s assets or equity interests, termination of the restructuring support agreement, acceleration of the loans and termination of the commitments.

Interest will accrue at Libor plus 950 basis points, with a 1.5% Libor floor.

The company said its non-U.S. subsidiaries and affiliates are not included in the filing or affected by the Chapter 11 process.

Debt details

According to court documents, Acosta has $500 million to $1 billion in assets and $1 billion to $10 billion in debt.

The company’s largest unsecured creditors are Wilmington Trust, NA of Guilford, Conn., with an $800 million plus interest senior notes claim; Action Link LLC, with a $15.49 million seller notes claim; Elijah Bey, represented by counsel in Encino, Calif., with a $3 million litigation claim; Pet Firm, with a $1.75 million seller notes claim; Higgins Cohn Brand Management of Campbellville, Ont., with a $1.54 million seller notes claim; Chris V. Neilson, with a $1.16 million deferred compensation claim; Hargrove Inc. of Lanham, Md., with a $1.14 million trade payable claim; and Boyd W. Raines, with a $1.05 million deferred compensation claim.

Carlyle Partners VI Holdings, LP holds 78.47% of the company’s equity interests, and Viggo Investment Pte. Ltd. holds 16.93%.

Kirkland & Ellis LLP is acting as legal counsel for the company, PJT Partners, Inc. as financial adviser and Alvarez & Marsal as restructuring adviser.

Acosta is a Jacksonville, Fla.-based full-service sales and marketing agency. The Chapter 11 case number is 19-12551.

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