The largest franchisee of Pizza Hut and Wendy’s or “of any restaurant concept in the U.S.” has filed for Chapter 11 bankruptcy in Houston federal court, NPC International announced Wednesday.
The Leawood, Kansas-based company turned to Houston partner Alfredo Perez of Weil, Gotshal & Manges to lead the reorganization. Lawyers from Weil’s New York office are also involved. NPC hired Greenhill & Co. as its financial advisor and AlixPartners as its restructuring advisor.
Bankruptcy attorneys Charles Gibbs, Eric Seitz, Jane Gerber and Nathan Coco from McDermott Will & Emery’s Dallas and Houston offices have appeared on the docket on behalf of Pizza Hut. The chief legal officer of Plano-based Pizza Hut is Lauren Leahy, who has been with the company since 2013.
In a company statement, Jon Weber, CEO of NPC’s Pizza Hut division, cited the combination of the COVID-19 pandemic and corporate debt, shifting consumer preferences, and increased labor and commodities costs as the reasons for NPC’s bankruptcy filing.
“These challenges have been magnified recently by the impact and uncertainty of COVID-19, and we believe it is necessary to take proactive steps to strengthen our capital structure, so we have the financial flexibility to continue to adapt to current industry trends,” Weber said. “We also intend to use this process to continue to evaluate and optimize our restaurant portfolio so that we are best positioned to meet the needs of consumers across the country.”
In court filings, some of the factors NPC cited as affecting commodities and labor costs were the trade wars, the shifting political climate and an increase in minimum wage rates driven by state and local market legislation.
NPC operates more than 1,200 franchised Pizza Hut and Wendy’s restaurants — about 1,200 of which are Pizza Huts. In its voluntary petition, NPC listed its assets as ranging between $1 billion and $10 billion and its liabilities in the same range. The company has between $25,000 and 50,000 creditors.
The company announced that it entered the bankruptcy with a restructuring support agreement with two key lender groups that it says will substantially reduce NPC’s long-term debt and strengthen its capital structure.
Houston Jackson Walker partner Bruce Ruzinsky, who represents the ad hoc priority and first line lender group, is another Texas attorney who has appeared on the docket already.
A hearing for NPC’s first day motions has been set for Thursday. The case has been assigned to U.S. Bankruptcy David Jones.
The case number is 20-33353.
Covia Holdings Corp
Ohio-based Covia Holdings Corp., a supplier of sand and other minerals in the energy industry, also chose Houston federal court as its venue to reorganize more than $1 billion in debt. The company, along with 27 of its affiliates, filed their Chapter 11 petition on Monday.
Covia turned to Kirkland & Ellis and Jackson Walker to handle its restructuring. Houston partner Matt Cavenaugh and Dallas associate Vienna Anaya are involved from Jackson Walker, while Kirkland’s team includes lawyers from the firm’s Chicago and New York offices.
Covia hired PJT Partners as its investment banker and AlixPartners as its financial advisor.
The company’s 30 largest unsecured creditors are associated with trade debts owed by Covia. Its largest creditor is Wells Fargo Vendor Financial Services, which says it’s owed $3 million. Winstead shareholder Sean Davis of the firm’s Houston office appeared on the docket Tuesday on behalf of Wells Fargo.
Dallas-based Trinity Industries is the second largest unsecured creditor with a claim of $2.9 million. Trinity General Counsel Sarah Teachout has turned to Dallas bankruptcy partner Omar Alainz of Baker Botts to vouch for the company as it tries to recover this claim.
Other Texas-based creditors listed in Covia’s voluntary petition include Houston-based Twin Eagle Sand Logistics (owed $433,102) and Weatherford-based Marquette Transportation Finance (owed $150,982).
Covia said in a company statement that it has about $250 million in cash reserves, which it expects to “provide substantial liquidity to fund operations, support its long-term investment program and manage the reorganization process.”
Covia was formed in 2018 through a business combination of Unimin Corp. and Fairmount Santrol Holdings. Covia serves more than 2,000 customers and reported $1.6 billion in revenues in 2019. In addition to its energy sector clients, an industrial segment makes up the other half of Covia’s business. It produces glass, golfing sand, paints, plastics roofing tiles and many other items.
In court filings, Covia cited the COVID-19 pandemic and changing market conditions — including a decline in debt and equity capital, a flat demand in proppants (used for producing sand) and low oil prices — as factors for its balance sheet issues.
Covia entered its bankruptcy with a restructuring support agreement with creditors holding a majority of its secured debt. Porter Hedges partner John Higgins IV is one of the lawyers representing the ad hoc group of term loan lenders.
Judge Jones is also handling this case, and the case number is 20-33295.
McDermott Exit
Just as one energy-related company appeared on Judge Jones’ docket, another — Houston-based McDermott International — began its exit.
On Monday afternoon, Judge Jones signed off on the oilfield service company’s exit from Chapter 11. McDermott has shed $4.6 billion in debt since it filed for bankruptcy protection six months ago.
The McDermott bankruptcy is one of the many to bring handsome legal fees to Kirkland and Jackson Walker, which have teamed up in numerous Chapter 11 reorganizations this year.
Jackson Walker’s Cavenaugh and fellow Houston partner Elizabeth Freeman served as local restructuring counsel. While lawyers outside of Kirkland’s Texas offices took the lead on the restructuring work, the Kirkland team also included Houston partners Andy Calder, Adam Larson, Brooks Antweil, Ahmed Sidik, Anna Rotman and Lucas Spivey.
For a more thorough list of Texas lawyers involved in McDermott’s bankruptcy, read The Texas Lawbook’s previous report here.
Read more details about McDermott’s bankruptcy exit from our partners at the Houston Chronicle.
One to watch for
Although it has not made an official appearance in bankruptcy court, Houston-based Rosehill Resources said Wednesday that it entered a restructuring support agreement with lenders and that it anticipates it will file for Chapter 11 in Houston by July 15 “solely for purposes of implementing the plan.”
Gibson, Dunn & Crutcher and Haynes and Boone are advising Rosehill.
The Texas attorneys on the Gibson Dunn team include Houston partners Shalla Prichard, Hillary Holmes and James Chenoweth, as well as Houston associate William Bald.
Haynes and Boone’s team includes bankruptcy lawyers Kelli Norfleet, Arsalan Muhammad and Martha Wyrick and energy transactions lawyers Buddy Clark, Kim Mai and Liz Felicidario. All attorneys are based in the firm’s Houston office.
Rosehill said that it expects to emerge from bankruptcy within 75 days of filing. Per the RSA, Rosehill will enter a $17.5 million debtor-in-possession facility. Once the RSA is implemented, Rosehill’s equity will be owned by the consenting creditors and holders of the company’s preferred stock.
“Holders of general unsecured claims, including the company’s trade creditors and vendors, will pass through the Chapter 11 cases with their claims unimpaired by the bankruptcy and being satisfied in full,” Rosehill said in a statement.