Bouchard Transportation Co., Inc. – Court Order Approves a Further $31.2mn of DIP Financing

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December 22, 2020 – The Court hearing the Bouchard Transportation Co. cases issued a final order authorizing the Debtors to (i) access the $31.2mn balance of a $60.0mn of debtor-in-possession (“DIP”) financing facility and (ii) continue using cash collateral [Docket No. 334].

In an October 22nd interim DIP order, the Court had earlier approved access to a first $28.8mn tranche of the DIP financing which is being provided by Oaktree capital-backed Hartree Partners, LP (“Hartree”) [Docket No. 141].

Background

It took the Debtors a month to line up DIP financing (and to schedule a "first day" hearing), the obtaining of which was the primary driver for filing Chapter 11 in the first place, financing having become unavailable outside of the Chapter 11 context after the United States Coast Guard lifted Bouchard’s document of compliance certification (the “DOC Certificate” or “DOC”). Without the DOC, Bouchard effectively cannot operate. The Debtors' have unencumbered assets, in the form of vessels now pledged to the DIP Lenders, but were struggling to find lenders who were willing to count on that collateral while some of the Debtors' vessels were subject to foreclosure sales (at foreclosure sale prices) and "various vendor parties…asserted maritime lien claims against the Debtors’ assets."  The Debtors sum up: "No party was willing to provide new money on an out-of-court  basis.  Accordingly, the Company commenced these chapter 11 cases, in part, to access necessary near-term liquidity through potential DIP financing—liquidity that the Company otherwise would have been unable to attain."

The Debtors’ DIP motion [Docket No. 102] stated, “Over the past month, Jefferies engaged at least eighteen financial and strategic parties in interest, both inside and outside the capital structure, regarding potential DIP financing. Eight parties signed non-disclosure agreements. Two parties submitted term sheet proposals. The Debtors worked closely with both parties that submitted proposals to improve upon the economic and legal terms for the benefit of the Debtors and their estates. Those negotiations culminated with the proposed twelve-month, $60 million financing (the ‘DIP Facility’ and the loans thereunder, the “DIP Loans”), approximately $29 million of which will be made available on an interim basis on the terms set forth in Exhibit A attached hereto (the ‘DIP Term Sheet’). The proposed DIP Facility represents the best available financing at this time for the Debtors to source essential liquidity that will fund these chapter 11 cases, provide adequate runway to undertake their operational restructuring initiatives, and otherwise help unlock the value of the business— including the Debtors’ fleet of 50 vessels, the majority of which are outside the prepetition secured lenders’ collateral package—for the benefit of all stakeholders. The DIP Facility is primarily secured by a first lien on 9 vessels that are unencumbered by funded debt.

Meanwhile, the Debtors and their advisors engaged with their prepetition secured lenders—each of which is materially oversecured — regarding an appropriate adequate protection package. By this Motion, the Debtors also seek authority to grant the proposed adequate protection package, which is reasonable and appropriate under the circumstances of these chapter 11 cases. It is critical that the Debtors obtain immediate approval of the DIP Facility and continued access to cash collateral. First, approval of the DIP Facility will inject much-needed liquidity into the business and send a crucial signal to the Debtors’ employees, vendors, suppliers, customers, and regulators. The Debtors intend, and will have the ability, to satisfy past due obligations to employees, pay certain undisputed maritime lienholder claims, and begin the process of returning to ordinary course operations, among other priority items in these chapter 11 cases. Second, without authority to use Cash Collateral, the Debtors could face additional operational and liquidity challenges at a time when the focus should be on their operational turnaround early in these cases. Third, immediate access to the Initial Draw of the DIP Facility will facilitate the Debtors’ expeditious return to ordinary course operations. As detailed in the Morgner Declaration, the proposed DIP Facility represents the best and most feasible currently available source of financing for the Debtors under the circumstances. 

Key Terms of the DIP Financing

  • Borrowers: B. No. 272 Corp., B. No. 205 Corp., B. No. 284 Corp., B. No. 282 Corp., Tug Donna J. Bouchard Corp., Tug Morton S. Bouchard Corp., Tug Frederick E. Bouchard Corp., Tug Linda Lee Bouchard Corp., and Tug Denise A. Bouchard Corp., as co-borrowers (collectively, the “Borrowers”).
  • Guarantors: Each of Borrowers’ affiliated debtors other than BTC (collectively with the Borrowers, the “DIP Obligors”).
  • DIP Agent: The initial DIP Agent is Hartree
  • DIP Lenders: The sole initial DIP Lender is Hartree.
  • Commitment:  $60.0mn superpriority senior secured term loan, consisting of:
    • Initial DIP Draw: $28.8mn to be available upon receipt of interim approval from the Bankruptcy Court; and
    • Final DIP Draw: one or more draws of up to $31.2 million which shall be available upon entry of the Final DIP Order 
  • Interest Rates: The DIP Facility shall bear interest at a rate per annum calculated as follows: (a) LIBOR + 7% (with LIBOR to be determined by the DIP Lenders) subject to a 1% LIBOR floor, compounded monthly and payable monthly in kind.
  • Fees: 
    • Structuring Fee: 1% of the aggregate principal amount of the DIP Commitments, payable in kind at the closing.
    • Original Issue Discount: 5% of the aggregate principal amount of the DIP Commitments, structured as an original issue discount of the DIP Loans and payable in kind on each draw date.
    • Exit Fee: $3.0mn, payable upon repayment in full of the DIP Loans, subject to a rebate to be agreed upon if the DIP Lenders provide exit financing.

The Debtors’ Prepetition Capital Structure

As of the Petition Date, the Debtors have approximately $229.5mn in aggregate principal amount of funded debt obligations.

Funded Debt

Agent / Lenders

Maturity

Principal Amount Outstanding 

Secured Debt

Prepetition Revolving Credit Facility ($165.0mn)

Wells Fargo, N.A.

February 7, 2020

$164.1mn

Prepetition Aircraft Loan ($25.0mn)

Fortress Credit Co LLC

March 10, 2021

$25 mn

Total Secured Debt

 

$189.1mn

Unsecured Bouchard Promissory Notes

Unsecured Promissory Notes Morton S. Bouchard III, and Morton S. Bouchard III 2017 Family Trust (Exempt Share) December 31, 2025 $40.4mn
Total Unsecured Debt

$40.4mn
Total Outstanding Funded Debt $229.5mn

About the Debtors

According to the Debtors: “Founded in 1918, the Company's first cargo was a shipment of coal.  By 1931, Bouchard acquired its first oil barge. Over the past 100 years and five generations later, Bouchard has expanded its fleet, which now consists of 25 barges and 26 tugs of various sizes, capacities and capabilities, with services operating in the United States, Canada, and the Caribbean. Bouchard remains dedicated to continuing the rich heritage of barging expertise and family pride well into the future. 

On September 28, 2020, privately held Bouchard Transportation Co., Inc. and four affiliated Debtors (“Bouchard” or the “Debtors”), "the nation's largest independently-owned ocean-going petroleum barge company" with 26 tugs and 25 barges, filed for Chapter 11 protection after numerous health and safety challenges left them operationally adrift and unable to raise the capital necessary to face the severe liquidity crunch that followed a near total shutdown of operations.

In February 2020, the US Coast Guard Captain of the Port (aka COTP) of New York and New Jersey issued the New York City-based Debtors with an order demanding the removal of vessels from local waters, citing numerous environmental, safety and operational issues. 

Also in February 2020, the Debtors faced similar enforcement actions in respect of vessels located in Louisiana and Texas waters, with numerous press reports citing under-staffed vessels, poor working conditions and safety/environmental issues. The Debtors' rough waters extend back to October 2017 when a 488’ oceangoing tank barge loaded with crude oil blew up and burned as it was leaving Port Aransas, Texas. Two of the barge's crewmembers were killed in that incident.

Subsequent investigations by the Coast Guard and NTSB revealed that corrosion had allowed fumes to leak and explode, and also flagged that similar deficiencies existed in other of the Debtors' vessels. 

In a press release announcing the Chapter 11 filings, Bouchard advised that it: “intends to fund the chapter 11 process with debtor-in-possession financing, which will provide the Company with the necessary liquidity to maintain normal operations while it undertakes certain key operational restructuring initiatives, including to ensure the fleet is in full compliance with all operating regulations, and otherwise emerge as a stronger enterprise positioned for long-term success.”

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