25.08.2020

TNT files Chapter 11 bankruptcy

US crane rental group TNT has filed for voluntary Chapter 11 protection in the Delaware bankruptcy court.

The company has stated that the Covid-19 pandemic left it with no option but to covert at least $466 million of its debt - that was due to mature this year - into equity. We understand that the Chapter 11 paperwork was actually filed on Sunday night, just a few weeks after the company began negotiations with lenders to deal with the bulk of the debt without resorting to the court. Having failed to obtain a 100 percent buy in for its plans however it has switched to a pre-pack Chapter 11 plan, that it had prepared as a contingency, which includes the debt for equity swap.

Chief executive Michael Appling’s bankruptcy declaration said: "Facing a maturity wall during the Covid-19 crisis, the company is compelled to restructure its capital structure through these Chapter 11 cases."

“TNT is highly diversified, with no single industry comprising more than 24 percent of its business. We have been decreasing our involvement in the oil & gas sector in recent years due to the weakness of the energy market, and it currently represents only 11 percent of our revenues.”

"By contrast, several of the end markets that represent a larger proportion of the company's revenue are expected to experience growth as the U.S. economy recovers."

The company had been looking for new investors, lenders or buyers since last year, but according to Appling the marketing process was terminated in March as a result of "the lacklustre proposals received and the unfavourable market conditions due largely to the Covid crisis which materially affected the company's operations and attractiveness to potential bidders." Since then the company has been negotiating with its first and second lien lenders (TNT in debt/equity swap to avoid Chapter 11), which now has the approval of the holders of 98 percent of the $465.7 million in first lien revolving credit term loans and 93 percent of the $185 million of second lien debt.

Under the submitted plan, the company's first lien lenders will swap their debt for 97 percent of the equity of a reorganised TNT, with the second lien lenders receiving the remainder. The holder of the remaining $15.5 million in funded debt, who also approved the plan, will receive warrants for stock purchases. First lien lenders will also provide a $45 million debtor in possession loan facility and a $225 million loan facility.

The company hopes to have court approval for the plan during the first week of October, which would allow it to emerge from Chapter 11 by before the start of November. The normal day to day management and running of the company is not expected to change.