Ruthless creditor-on-creditor violence

Happy Wednesday. Here’s what we’ve got today…

• A look at Robertshaw’s contentious path to bankruptcy

• The deal sheet, plus the Founders Fund-backed manufacturing startup that wants to reignite the space race

Appliance manufacturer Robertshaw, a portfolio company of One Rock Capital Partners, filed for Chapter 11 bankruptcy last week. Here’s the background on one of the most remarkable cases of creditor-on-creditor violence in recent memory…

From the Beginning

One Rock acquired Robertshaw in 2018 for around $900 million, financed via a $440 million first-lien term loan and $140 million second-lien term loan, both broadly syndicated.

In a familiar story, pandemic-related supply chain struggles hobbled the business, operational turnarounds failed to improve the situation, and a liquidity crunch pushed Robertshaw over the edge.

In late 2022, the company was rapidly running out of cash and launched a debt financing process to secure some stop-gap funding. By May of last year, after reaching out to nearly 40 parties, the company settled on a proposal from a group of its existing lenders (the “Initial Ad Hoc Group”).

The group included Bain Capital, Canyon Partners, Eaton Vance, and Invesco, who collectively provided $95 million of new money and exchanged their original term loans into an equivalent amount of new Super Priority Credit Agreement (SPCA) loans, jumping to the top of the cap structure (and repayment queue) above the existing term loans from the original transaction.

Robertshaw’s original lenders that were excluded from the Initial Ad Hoc Group watched helplessly as their positions slid from 1st and 2nd in line for repayment to 6th and 7th.

In November, this group of “non-participating lenders” filed a complaint in New York State Court alleging that the maneuver violated the original credit agreement.

Despite the May cash infusion, within months, Robertshaw again found itself on shaky ground. The company’s ABL lenders, Deutsche Bank and PNC, began imposing restrictions on the company’s $50 million line, forcing Robertshaw to find a way to refinance the facility—something Robertshaw would have had to do anyway ahead of the ABL’s upcoming December maturity, but made more urgent by the immediate need for liquidity.

Robertshaw eventually agreed terms on a refinancing proposal from Brigade Capital Management. One day before close, however, existing term loan lender Invesco notified the company that it viewed Brigade’s refinancing arrangement as a violation of the terms of the SPCA.

Deciding an ABL deal wasn’t worth the fight, Brigade withdrew its proposal, sending Robertshaw straight back into the dire situation the company thought it had temporarily solved.

At the same time this was happening, Invesco made a series of secondary market purchases to bump its holdings of the new SPCA loans above a 50 percent “Required Lender” threshold, which allowed a majority holder (or holders) of the term loan to make amendments to the credit agreement.

As Robertshaw tells the story, the move was part of an Invesco scheme to turn on its previous allies, attempting to “enhance its own returns at the expense of Robertshaw and other lenders, including fellow members of the initial Ad Hoc Group.”

Robertshaw alleges that Invesco scrapped the proposed Brigade ABL refinancing as a way to force Robertshaw into default when the existing ABL matured in December.

Invesco could then push the company into a rushed Chapter 11 filing, a scenario in which, Robertshaw says, Invesco had planned “to use its Required Lender status to credit bid enough for it to take control and majority stakeholder ownership.”

“Invesco would have been able to purchase substantially all of the Company for pennies on the dollar, leaving all other stakeholders with virtually no recovery.”

Turning the Tables

Robertshaw kicked off a search for alternative financing to avoid a December default, ultimately securing new funding from the remaining members of the Ad Hoc Group, including One Rock, Bain Capital, Canyon Partners, and Eaton Vance.

The group provided $228 million in incremental debt, with proceeds used to pay off the maturing ABL, voluntarily prepay a portion of the first-out SPCA, and hand $44 million of new money to Robertshaw for its operations.

Crucially, the additional financing meant that the new Ad Hoc Group met the 50 percent threshold for “Required Lender” status, securing the majority needed to displace Invesco and prevent the firm’s unilateral decision-making.

None of that sat well with Invesco, which went ahead and sued Robertshaw, One Rock, and the Ad Hoc Group in New York State Supreme Court for breach of contract, among other complaints.

Unavoidable Bankruptcy

The additional funding lasted Robertshaw little more than a month, with a bankruptcy filing delayed from early January to February 15th.

At first glance, it’s a lot of effort for a headline outcome that’s no different than what it would have been in December. Diving deeper, however, One Rock has positioned itself to salvage whatever it can from the ordeal—the firm now holds $32 million of first-out SPCA claims and $10 million of second-out SPCA claims.

One Rock, along with the rest of the Ad Hoc Group (excluding Invesco), negotiated an in-court Restructuring Support Agreement with Robertshaw that targets a sale process and eventual liquidation.

The group has also put forward a debtor-possession-financing plan for $56 million of new money with up to 9.5 percent PIK interest, a 5 percent commitment fee, and a 5 percent exit fee.

Absent receipt of an improved offer, the group plans to credit bid their claims, including the $218 million of financing provided to date and the yet-to-be-approved DIP.

Robertshaw wrapped up the week with yet more legal proceedings, filing an adversary complaint against both Invesco and the uptiered May lenders to seek a declaration that the company’s actions were valid under the credit agreement in each case.

• Capital One has agreed to acquire Discover Financial Services in an all-stock deal valued at $35.3 billion.

• Occidental Petroleum is considering a sale of its 49 percent stake in Western Midstream Partners, currently trading at a $20 billion valuation, including debt.

• Stone Point Capital and Clayton, Dubilier & Rice are nearing a deal to acquire Truist Insurance Holdings, the insurance brokerage unit of Truist Financial Corporation, for $15.5 billion, per Bloomberg.

• Sanofi is considering a sale of its consumer health unit, drawing interest from private equity firms including Advent, Blackstone, Bain Capital, CVC, EQT, and KKR.

• TPG's €4.5 billion ($4.9 billion) offer for fund administration platform Alter Domus is the highest received in Permira's sale process, with other participants including H&F and Cinven.

• Walmart (NYSE: WMT) agreed to acquire Vizio, a smart TV maker, for $2.3 billion.

• Bernhard Capital Partners agreed to acquire CenterPoint Energy's Louisiana and Mississippi natural gas distribution operations for $1.2 billion.

• Apica acquired telemetry data mangement provider Circonus.

• Xalts, a Singapore-based fintech startup, acquired Contour Network, a digital trade platform originally formed by eight major banks.

• Carlyle and Cyrus Capital Partners agreed to acquire a majority stake in London Southend Airport from Esken.

• Hasa, a portfolio company of Wind Point Partners, acquired Chem Eleven Products, a provider of specialty chemicals.

• Cloyes Gear & Products, a portfolio company of MidOcean Partners, acquired Automotive Tensioners, a manufacturer of automotive engine components.

• Mubadala is considering an investment in Heathrow Airport, the UK's busiest airport.

• S.i. Systems, a Canadian IT staffing and consulting firm backed by Cornell Capital and TorQuest Partners, has acquired HVN Solutions, a Toronto-based IT staffing and consulting firm.

• Thoma Bravo is preparing to sell J.D. Power, a provider of data analytics and consumer intelligence, for a reported $8 billion, per Bloomberg.

• Universal Music Group acquired a minority stake in Chord Music Partners, a music IP investment firm, from KKR and Dundee Partners at a $1.85 billion valuation.

• ABB (SWX: ABB) has agreed to acquire SEAM Group, a provider of energized asset management and advisory services, from Align Capital Partners.

• Aquiline Capital Partners and Level Equity acquired a majority stake in DocuPhase, a Florida-based provider of accounting and business process automation solutions.

• BlackRock's Climate Finance Partnership acquired a 12.5 percent stake in Lake Turkana Wind Power, a Kenyan wind farm owned by Vestas Wind Systems.

• 1Password, a Toronto-based password management platform, acquired Kolide, a Somerville-based endpoint security and device management platform.

• FairMoney, a Paris-based digital bank, is in talks to acquire Umba, a Nigerian and Kenyan neobank, for $20 million, per TechCrunch.

• Flipkart is rumored to be considering an acquisition of Dunzo, an Indian hyperlocal delivery startup, per TechCrunch.

• NuView, a space-based LiDAR technology company, acquired Astræa, a provider of AI-driven Earth observation and geospatial intelligence solutions.

• Society Brands acquired Clarifion and Cleanomic, two Orange County-based direct-to-consumer health and wellness brands.

• Astera Labs, an AI-focused cloud infrastructure provider, filed for an IPO on the Nasdaq, with Morgan Stanley, JPMorgan, Barclays, Deutsche, Evercore, and Jefferies acting as joint bookrunners.

Tech, Vertical SaaS, & Misc. Enterprise

• Magic.dev, developer of an AI-enabled software engineering platform, raised $117 million in new funding from NFDG Ventures, CapitalG, and Elad Gil.

• Recogni, an AI-focused chip developer, raised $102 million in Series C funding led by Celesta Capital and GreatPoint Ventures.

• Clumio, a developer of cloud data backup and recovery solutions, raised $75 million in Series D funding led by Sutter Hill Ventures, with participation from Index Ventures, Altimeter Capital, and NewView Capital.

• Planity, a Paris-based online appointment booking platform for beauty and wellness businesses, raised €45 million in Series C funding. InfraVia Capital Partners led, with participation from Cardinal Health, M Capital, and Equite.

• EngineEars, a startup developing an audio engineering collaboration platform, raised a $7.5 million seed round led by Drive Capital, with participation from Slauson & Co., 645 Ventures, and Flus Investment Group.

• Device Authority, a cybersecurity company focused on enterprise IoT ecosystems, raised $2 million in additional funding from Mercato Partners.

Fintech

• Monzo, a UK-based digital-only bank, is raising up to £350 million in new funding led by existing investor CapitalG. Tencent and Ribbit Capital are also expected to join, per the Financial Times.

• Simetrik, a provider of B2B financial automation software, raised $55 million in Series B funding. Goldman Sachs Asset Management led, with participation from existing backers FinTech Collective, Cometa, Falabella Ventures, Endeavor Catalyst, Actyus, Moore Strategic Ventures, and Mercado Libre Fund.

• Exponential Markets, a developer of financial risk mitigation tools, raised $10.3 million in seed funding led by MaC Venture Capital, with participation from Citi, Autotech Ventures, and Avanta Ventures.

• Pulsate, provider of a mobile-first engagement platform for credit unions and community banks, raised $7.75 million in Series A funding led by TruStage Ventures and Curql Collective.

Media & Consumer

• Qloo, a developer of cultural AI technology specializing in personal recommendations, raised $25 million in Series C funding led by AI Ventures, with participation from AXA Venture Partners, Eldridge, and Moderne Ventures.

Healthcare & Life Sciences

• Reprieve Cardiovascular, a biotech developing automated heart failure treatments, raised $42 million in Series A funding. Lightstone Ventures and Sante Ventures co-led, with participation from Deerfield, Genesis Capital, and Arboretum.

• Bioptimus, a Paris-based startup commercializing AI biology models, raised $35 million in seed funding. Sofinnova Partners led, with participation from Bpifrance’s Large Venture Fund, Frst, Cathay Innovation, and Hummingbird, among others.

• Oula, a provider of holistic maternity care focused on obstetrics and midwifery, raised $28 million in Series B funding led by Revolution Ventures and Maverick Ventures, with participation from GV and returning backers Female Founders Fund, 8VC, Alumni Ventures, and Great Oaks.

• AZmed, a developer of AI radiology software, raised €15 million in Series A funding from Maison Worms, Techstars, and Teampact Ventures.

• WIVI Vision, a Spanish developer of binocular vision assessment and therapy, raised €4 million in funding from Adara Ventures, Hearstlab, Avançsa, Caixabank DayOne, BBVA Spark, and Banco Santander, among others.

Industrials, Greentech, & Other

• Trace Genomics, a sustainable agriculture company focused on soil DNA intelligence, raised $10.5 million in Series B funding led by S2G Ventures, Ajax Strategies, and Rabo Ventures.

• CVC Capital Partners raised $6.8 billion for a new Asia-focused buyout fund.

• Partech raised €280 million for its second Africa-focused fund.

• Overture Ventures raised a $60 million debut fund.

1. Hadrian raises $117 million Series B to build the next generation of American manufacturing.

• Founders Fund EIR John Coogan releases mini-documentary on Hadrian, an advanced manufacturing startup focused on efficient rocket & satellite production. Hadrian announced yesterday that it raised $117 million in new funding last December from Founders Fund, Andreessen Horowitz, Construct Capital, and Lux Capital, among others. — John Coogan

2. European corporate distress deepens.

• Weil releases its latest European Distress Index, analyzing data from more than 3,750 corporates. — Weil, Gotshal & Manges

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