CST Industries files Chapter 11 bankruptcy with plans to sell assets

By Caroline Salls

Pittsburgh, June 14 – CST Industries Holdings, Inc. filed for Chapter 11 bankruptcy on June 9 in the U.S. Bankruptcy Court for the District of Delaware to complete a sale of its business.

Chief executive officer Timothy J. Carpenter said in a statement filed with the court that CST entered into a letter of intent on March 21 to pursue a potential transaction to sell the company to a new entity that would be backed by a combination of a third-party purchaser and CST’s pre-bankruptcy mezzanine lenders.

However, Carpenter said, “when CST received the draft asset purchase agreement, it was clear that the transaction structure was unworkable outside of a sale in a Chapter 11 case.”

As a result, CST sought several alternatives and also asked the potential purchasers to restructure the deal.

Carpenter said the potential purchasers were not willing to “correct the fatal flaw in the transaction structure,” and the exclusivity period under the letter of intent expired.

“CST has remained engaged in ongoing dialogues with the potential purchasers to consider alternative structures, but did not receive any proposals prior to the petition date that were sufficient to obviate these Chapter 11 cases,” Carpenter said in the statement.

In addition, Carpenter said the company sought to refinance its debt under the BNP loan agreement before the May 23 maturity date, but was ultimately unable to do so.

“The debtors believe that a structured sale process will enable them to emerge from bankruptcy quickly and maximize value to their stakeholders,” Carpenter said.

In conjunction with the bankruptcy filing, CST obtained a commitment for $15 million in debtor-in-possession financing.

BNP Paribas is the administrative and collateral agent for the DIP financing.

A total of $14 million of the financing will be available to the company on an initial basis.

Interest will accrue at either the Base rate plus 525 basis points or Libor plus 625 bps.

The facility is scheduled to expire 120 days after closing, subject to an option for two 30-day extensions.

According to court documents, CST has $50 million to $100 million in total assets and $100 million to $500 million in total debt. Carpenter said the company owed $171.8 million on account of debt financing as of June 9, $57.5 million of which is senior secured debt owed under a BNP loan agreement and $114.3 million of which is unsecured mezzanine debt.

The company’s largest unsecured creditors are OCM Mezzanine Fund II, LP of Los Angeles, with a $62.33 million bank loan claim; Northwestern Mutual Life Insurance Co. of Milwaukee, with a $51.94 million bank loan claim; Center Ethanol Co., LLC of Sauget, Ill., with a $23.27 million litigation claim; and Cargill Steel of Catoosa, Okla., with a $1.63 million trade claim.

The company is represented by Hughes Hubbard & Reed LLP and Potter Anderson & Corroon LLP.

CST is a Kansas City, Mo.-based industrial storage solutions company. The Chapter 11 case number is 17-11292.

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