Phoenix Services exits bankruptcy with $400 million less debt

By Sarah Lizee

Olympia, Wash., June 30 – Phoenix Services LLC has emerged from Chapter 11 bankruptcy with $400 million less debt, according to a Friday evening press release.

As previously reported, the company’s Chapter 11 plan of reorganization was confirmed by the U.S. Bankruptcy Court for the District of Delaware on June 21.

The plan was unanimously approved by voting creditors. Specifically, all 271 holders of $332.06 million of prepetition lender claims voted to accept the plan. This was the only class entitled to vote.

In March, the company reached an agreement with an informal group of lenders for a restructuring and had expected to emerge from Chapter 11 mid-year.

The group of lenders represent about 78% of the company's debtor-in-possession facility and about 76% of its other prepetition secured debt.

The restructuring includes a $45 million new-money first-lien exit term loan credit agreement to invest in the business.

Wilmington Savings Fund Society, FSB is the agent on the exit facility, which is set to mature in 2028 and bear interest at SOFR plus 500 basis points.

The right to participate in the new-money exit debt syndication will be allocated as follows: 50% allocated to members of the informal lender group that are backstop parties on a pro rata basis; and 50% offered to all holders of new-money DIP loans on a pro rata basis.

Backstop parties will receive their pro rata share of a backstop premium equal to 20% on a fully diluted basis of the new interests.

Under the plan, all DIP claims will be exchanged for, on account of the rollup DIP loans, a pro rata share of 99% of new interests, subject to dilution by a management incentive plan, a participation premium and the backstop premium. On account of new money DIP loans, the claims will be exchanged for a pro rata share of the takeback debt and the Newco participation contract right.

All administrative expense claims, priority tax claims, other secured claims and priority non-tax claims are unimpaired.

Each holder of prepetition lender claims will receive its pro rata share of 1% of the new interests, subject to dilution.

Holders of general unsecured claims will not receive anything.

Intercompany claims will be reinstated, or distributed, contributed, set off, canceled, released or otherwise addressed.

Intercompany interests will be reinstated or canceled.

Existing equity will be canceled with no distribution.

Radnor, Pa.-based Phoenix Services is a provider of outsourced slag handling, metal reclamation and complementary services to steel mill customers. The company filed bankruptcy on Sept. 27, 2022 under Chapter 11 case number 22-10906.

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