Table manufacturer Libbey Inc. and its U.S.-based subsidiaries filed voluntary petitions for a court-supervised reorganization under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware.
Libbey’s international subsidiaries in Canada, China, Mexico, the Netherlands and Portugal are not included in the Chapter 11 proceedings and are operating in the normal course of business.
Libbey expects to use the court-supervised restructuring process to strengthen its balance sheet to navigate the effects of the COVID-19 pandemic and better position the Company for the future. Libbey is continuing constructive discussions with its lenders and other stakeholders regarding the terms of a consensual financial restructuring plan and is focused on moving through the process as efficiently as possible.
Certain of Libbey’s existing lenders have agreed to provide up to $160 million in debtor-in-possession (“DIP”) financing, including a $100 million revolving credit facility and a $60 million term loan. Following court approval, the Company expects this financing, together with cash flow from operations, to support the business during the court-supervised process. The Company is continuing to serve customers and end users globally, and will continue to evaluate the operating environment and make adjustments, as necessary, to adapt to the impact of COVID-19.
Mike Bauer, chief executive officer of Libbey, said, “While we entered 2020 with positive momentum from our strong finish in 2019, the dramatic and prolonged impact of COVID-19 on the demand for our products and on our business is truly unprecedented in Libbey’s more than 200-year history. As a result, entering this process is a necessary step to address our liquidity, strengthen our balance sheet and better position Libbey for the future. We believe this process will help Libbey become an even stronger, more influential partner to our customers, vendors and end users, and ensure we continue to create the most rewarding experiences with our extensive line of high-quality glassware and other tabletop products.”
He continued, “Throughout our history, Libbey has been dedicated to delivering the finest glassware and tabletop products to the world and empowering consumers to celebrate life’s moments. As we navigate the current environment, we remain focused on providing end users with products that are environmentally sustainable, beautiful and durable. We are already seeing some improvement in our end markets with the gradual lifting of stay-at-home restrictions, and during the past few weeks have reopened our U.S. distribution centers and restarted several production lines in Toledo, Ohio and Shreveport, Louisiana. I want to thank all of our employees for their continued dedication and tireless efforts, especially during the unprecedented uncertainty we are collectively facing due to COVID-19. I also would like to thank our lenders for their continued support and look forward to working with them and all our stakeholders as we move forward.”
Libbey is filing customary first day motions that, once approved by the Court, will allow the Company to smoothly transition its business into Chapter 11, including, among other things, granting authority to pay employee wages and benefits and honor customer commitments in the ordinary course of business. The Company will also pay vendors in the ordinary course for all goods and services provided on or after the Chapter 11 filing date.
As of the Petition Date, inclusive of the furloughed employees and laid-off employees, the Debtors’ work force consists of 1,752 employees worldwide (excluding non-employee directors), of whom 1,743 are located in the United States, and approximately 6 are located in Canada and one each in Singapore, Australia, and China.
Prepetition Capital Structure
As of the Petition Date, the Debtors had $66.9 million of outstanding borrowings under the Prepetition ABL Facility and $9.4 million in letters of credit and $5.6 million of other reserves, and a borrowing base of $83.1 million, resulting in $1.4 million of unused availability. JPMorgan Chase Bank, N.A., as administrative agent with respect to the US Loans and J.P. Morgan Europe Limited as administrative agent with respect to the Netherlands Loans.
As of the Petition Date, $377.9 million in principal amount was outstanding under a prepetition term loan agreement with Cortland Capital Market Services LLC, as administrative agent and collateral agent, (as successor agent to Citibank, N.A.).
In addition, the Debtors believe that, as of the Petition Date, their obligations related to unsecured trade debt are in excess of $35 million.
Road to Bankruptcy
Brian Whittman, a managing director at Alvarez & Marsal North America, LLC, explains that throughout 2019 and the start of 2020, the Debtors’ business was impacted by global competition in all of the Debtors’ distribution channels, fluctuating business and consumer confidence in the United States and Europe as a result of increased economic and political uncertainty from various factors including ongoing trade tensions between the United States and China and the potential for a Brexit no-deal in Europe, as well as slowing economies in Europe, China and parts of Latin America.
For the year ended Dec. 31, 2019, the Company incurred a net loss of $69.0 million, compared to a net loss of $8.0 million in the prior year, of which $65.2 million was attributed to non-cash impairment charges in the Company’s Latin America and EMEA segments, while total revenues were down just $16.0 million over the same period.
As COVID-19 swept from China to Europe and eventually the United States, the Company saw an abrupt and sharp decline in revenue in mid-March. Due to the decreased demand and to preserve liquidity, the Debtors implemented a lay-off of virtually all if their US hourly workforce in March and furloughed approximately 280 salaried employees in two waves in April and May.
While the efforts to restructure the balance sheet began in earnest at the start of 2020, the COVID-19 pandemic has exacerbated demand and revenue decline and in turn has had an acute impact on the Debtors’ liquidity. Certain of the Prepetition Term Loan Lenders formed an ad hoc group (the “Lender Group”) in late 2019. The Company engaged in discussions with the Lender Group around an amend-and-extend transaction. However, the Lender Group’s concern over the impact COVID-19 would have on the Company’s business ultimately prevented those discussions from resulting in a transaction. The Company also informed the Lender Group of certain inbound merger and acquisition proposals from strategic buyers. These proposals were not pursued because, among other reasons, they were insufficient to pay the Company’s Prepetition Term Loans in full, thus requiring lender consent, and the Lender Group did not believe it was in the Company’s best interest to pursue such a transaction
The immediate focus of the Chapter 11 cases is reaching a consensual, value maximizing transaction with the creditor constituencies, a process that began prepetition. The Debtors anticipate swift negotiations on an overall restructuring with the lenders and other constituencies on a chapter 11 plan that deleverages the balance sheet with emergence from bankruptcy in accordance with the milestones in the DIP financing agreements. Preserving the Debtors’ going-concern value through the chapter 11 process will ultimately benefit all of their stakeholders.
$160 Million DIP Financing
The Debtors are seeking DIP financing consisting of:
(a) DIP ABL Facility
A $100 million senior secured superpriority DIP revolving, asset-based facility with the Prepetition ABL Lenders (the “DIP ABL Facility”), which includes refinancing of a portion of the Prepetition ABL Facility with a “creeping roll-up” during the interim period and a complete “roll-up” of the borrowings of Libbey Glass Inc. pursuant to the final order; and
(b) DIP Term Loan Facility
A new money $60 million senior secured superpriority DIP term loan facility with certain Prepetition Term Loan Lenders, with a dollar-for-dollar “roll-up” of such amounts due under the Prepetition Term Loan Credit Agreement for such lenders.
The DIP Facilities contain these milestones for the Chapter 11 cases:
* Entry of the Interim DIP Order by no later than 5 days following the Petition Date;
* Plan and Disclosure Statement filed by no later than 15 days following the Petition Date;
* Motion to approve the Disclosure Statement and the related solicitation materials filed by no later than 15 days following the Petition Date;
* Entry of the Final DIP Order approving the DIP Term Facility on a final basis by no later than 35 days following the Petition Date;
* Entry of an order approving the solicitation of the Plan by no later than 55 days following the Petition Date;
* Commencement of solicitation of the Plan by no later than 57 days following the Petition Date;
* Entry of Confirmation Order by no later than 100 days following the Petition Date; and
* Consummation of Plan by no later than 105 days following the Petition Date.
About Libbey Inc.
Based in Toledo, Ohio, Libbey Inc. (NYSE American: LBY) is one of the largest glass tableware manufacturers in the world. Libbey Inc. operates manufacturing plants in the U.S., Mexico, China, Portugal and the Netherlands. In existence since 1818, the Company supplies tabletop products to retail, foodservice and business-to-business customers in over 100 countries. Libbey’s global brand portfolio, in addition to its namesake brand, includes Libbey Signature, Master’s Reserve, Crisa, Royal Leerdam, World Tableware, Syracuse China, and Crisal Glass. In 2019, Libbey Inc.’s net sales totaled $782.4 million.
Libbey Glass Inc. and 11 of its affiliates sought Chapter 11 protection (Bankr. D. Del. Lead Case No. 20-11439) on June 1, 2020
In the petition signed by CEO Michael P. Bauer, Libbey Glass was estimated to have $100 million to $500 million in assets and $500 million to $1 billion in liabilities as of the bankruptcy filing.
The Hon. Laurie Selber Silverstein is the case judge.
The Debtors tapped Latham & Watkins LLP and Richards, Layton & Finger, P.A., as counsel; Alvarez & Marsal North America, LLC as financial advisor; and Lazard Ltd as investment banker. Prime Clerk LLC is the claims agent, maintaining the page https://cases.primeclerk.com/libbey