by Madalina Iacob and Hema Oza
Resolute Investment Managers is, among other options, evaluating a potential prepackaged plan of reorganization that would ensure a swift trip through Chapter 11, said two sources familiar with the situation.
Among the potential paths being discussed are out-of-court solutions, including an amend-and-extend transaction and debt-for-equity swaps, the sources and a third source familiar noted. If customary lender participation thresholds are not reached, a prepackaged plan of reorganization could be used to implement the deal, they said.
The Kelso & Co-backed investment management company faces a loan maturity wall starting in 2024. The second lien group, advised by Houlihan Lokey, would prefer to amend and extend its holdings and give the company more time to right size its balance sheet. Early negotiations have centered on the need for Kelso – which has taken out several dividends over the years – to put money back into the business and partially delever it for an extension of the maturity.
To that end, after the first lien group organized with Gibson Dunn and Ducera, it approached Kelso with a proposal to inject funds into Resolute, but the request was met with staunch opposition, the sources said. For its part, Resolute is working with Debevoise & Plimpton and Evercore as advisors.
The issuer’s USD 544m first lien loan matures 30 April 2024, while its USD 89m second lien loan comes due April 2025. The Libor+ 425bps first lien loan was last quoted 73/76, in line with recent trades, according to Markit.
This week, Moody’s Investors Service downgraded the company’s rating to B2 from B1 and its second-lien term loan to Caa1 from B3 citing the issuer’s deteriorating operating performance in 2022, which increased leverage and weakened its interest coverage. Moreover, tightening financial conditions will continue to constrain RIM's revenue growth and have a negative impact on its profitability and liquidity, the report noted.
Amid the challenges, projections call for the company to generate less than USD 100m in annual EBITDA, as reported. Although the company has noted in prior earnings calls that they are going to cut costs, management has said that it would not come at the expense of employee morale or growth.
Representatives from Houlihan, Debevoise and Evercore did not return requests for comment. Kelso and Resolute declined comment.
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