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April 30, 2021 – Plan Proponents notify Court that their amended Plan of Liquidation had become effective as of April 30, 2021 [Docket No. 381]. The Court had previously approved the Plan, proposed collectively by the Debtors, their Prepetition Lender and the Official Committee of Unsecured Creditors (together, the “Plan Proponents”), on April 28, 2021 [Docket No. 371].
On September 24, 2020, Impresa Holdings Acquisition Corporation and three affiliated Debtors (“Impresa” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 20-12399 (Judge Shannon). At filing, the Debtors, a Gardena, California-based producer of machined parts and fabricated components for the aerospace industry, noted estimated assets between $0.0 and $50k; and estimated liabilities between $10.0mn and $50.0mn.
The Debtors were represented by (i) Morris, Nichols, Arsht & Tunnel LLP as bankruptcy counsel, (ii) Duff & Phelps Securities, LLC as investment banker and (iii) Stretto as claims agent.
A deadline for filing final administrative claims has been set for May 30, 2021.
The Plan calls for the liquidation of the Debtors’ remaining assets following a $10.5mn sale to Crestview Aerospace LLC ("Crestview," an affiliate of Vertex Aerospace) approved in December 2020 and the wind down of the Debtors’ business.
The Debtors’ principal prepetition shareholder (88.9%) was Twin Haven Special Opportunities Fund IV, L.P., a fund controlled by private equity house Twin Haven Capital Partners (“Twin Haven”) which purchased its stake in the Debtors in October 2014. Twin Haven was also the Debtors’ most significant lender.
The Combined Document [Docket No. 325] reads, “Impresa Holdings Acquisition Corporation, Impresa Acquisition Corporation, Impresa Aerospace, LLC and Goose Creek, LLC, the debtors and debtors in possession in these chapter 11 cases, Twin Haven Special Opportunities IV, L.P., the debtors’ prepetition secured lender, and the Official Committee of Unsecured Creditors jointly propose the following combined Disclosure Statement and Plan for the liquidation of the Debtors’ remaining assets and distribution of the proceeds of the Estates’ assets to the Holders of Allowed Claims against the Debtors.”
The Combined Document further provides, “Following the sale of substantially all of the Debtors’ assets to the Purchaser, the Debtors are focused principally on winding down their business and preserving Cash held in the Estates. The Debtors’ Retained Assets currently consist of proceeds of the Sale and certain Causes of Action, which have been resolved pursuant to the Settlement Term Sheet. This Plan provides for the Debtors’ Retained Assets to be distributed to holders of Allowed Claims in accordance with the terms of the Plan.” (See more on asset sale and settlements below).
The following is an updated summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Combined Document; see also the Liquidation Analysis below):
- Class 1 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%.
- Class 2 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $50,000 and the estimated recovery is 100%.
- Class 3 (“Prepetition Secured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $23,040,000 and the estimated recovery is 32.5%. The Prepetition Lender will be entitled to receive the Prepetition Secured Claims Distribution Amount on behalf of its claim with respect to the Second Amended and Restated Impresa Note. The Prepetition Lender’s projected recovery will not exceed its claim in connection with the Second Amended and Restated Impresa Note, and thus, the Prepetition Lender will not receive a distribution with respect to the IAC Note.
- Class 4 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $2,000,000 – $5,000,000 and the estimated recovery is 5% – 12.5%. Each Holder will receive its Pro Rata share of the GUC Recovery; provided, however, that the Prepetition Lender Deficiency Claim will not receive any distribution on the GUC Recovery, and, as part of the Settlement Term Sheet, the Prepetition Lender will not vote its Prepetition Lender Deficiency Claim.
- Class 5 (“Class Action Claim”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $5,617,059.72 and the estimated recovery is 6.2%. Each member of the Class Action Lawsuit who does not opt out of the CAP Recovery pursuant to Class Notice will receive a distribution pursuant to the terms of the Class Action Settlement; provided, however, that, for the avoidance of doubt, all such members of the Class Action Lawsuit that do not opt out of the CAP Recovery will not be entitled to any vote or distribution afforded to Holders of Class 4 General Unsecured Claims.
- Class 6 (“Subordinated Claim”) is impaired, deemed to reject and not entitled to vote on the Plan.
- Class 7 (“Equity Interests”) is impaired, deemed to reject and not entitled to vote on the Plan.
- “CAP Recovery” means $350,000 Cash to be funded to the Class Action Settlement Administrator on the Effective Date.
- “GUC Recovery” means $250,000 Cash to be funded on the Effective Date, as set forth in the Debtors’ Motion for Entry of an Order Approving the Settlement Term Sheet between the Debtors, Twin Haven Special Opportunities Fund IV, L.P. and the Official Committee of Unsecured Creditors (D.I. 246).
- “IAC Note” means that certain Secured Promissory Note, dated October 15, 2014, between IAC and the Prepetition Lender.
- “Plan Funding Amount” means Cash in an amount to be set forth in the Plan supplement which the Prepetition Lender may agree in its sole discretion to be funded from the Retained Assets on the Effective Date and allocated and used in accordance with the Plan for (a) the payment of Allowed Administrative Claims, Allowed Fee Claims, Allowed Tax Claims, Allowed Other Priority Claims and Allowed Other Secured Claims, (b) to fund the Plan Claim Reserve and (c) to satisfy any U.S. Trustee Fees; provided, however, that if the full Plan Funding Amount is not used as set forth in the Plan, the remainder of Cash will be returned to the Prepetition Lender.
- “Second Amended and Restated Impresa Note” means that certain Second Amended, Restated and Consolidated Secured Promissory Note, dated October 31, 2017, between Impresa and the Prepetition Lender.
On April 26, 2021, the Debtors' claims agent notified the Court of the Plan voting results [Docket No. 361] which were as follows.
- Class 3 (“Prepetition Secured Claims”): 4 claim holders, representing $4.00 (100%) in amount and 100% in number, voted in favor of the Plan.
- Class 4 (“General Unsecured Claims”) (Trade Creditors): 14 claim holders, representing $986,720.97 (89.3%) in amount and 87.5% in number, voted in favor of the Plan. 2 claims holders, representing $118,604.14 (10.7%) in amount and 12.5% in number, rejected the Plan.
- Class 4 (“General Unsecured Claims”) (Wage/Hour Creditors): 1 unacceptable representing $2,486.99.
- Class 5 (“Class Action Claim”): 1 claim holder, representing $5,617,059.72 (100%) in amount and 100% in number, voted in favor of the Plan.
The Debtors filed a Plan Supplement on April 12, 2021 [Docket No. 337], which attached the following:
- Exhibit A: Form of Liquidating Trust Agreement
- Exhibit B: Distribution Schedule
On December 16, 2020, the Court approved the Debtors’ $10.5mn asset purchase agreement (the “APA”) with Crestview (the “Purchaser”) in relation to the sale of their assets [Docket No. 208].
In providing notice on December 10, 2020 that the auction was cancelled, the Debtors told the Court that they had designated Crestview Aerospace LLC as the successful bidders for their assets, with Twin Haven Special Opportunities Fund IV, L.P. designated as the back-up bidder [Docket No. 194]. The APA was attached to the notice as Exhibit A.
Twin Haven Special Opportunities Fund IV, L.P. (the back-up bidder), a fund controlled by private equity house Twin Haven Capital Partners (“Twin Haven”), the Debtors’ principal shareholder (88.9%) and also the Debtors’ most significant prepetition lender, was the Stalking Horse bidder for the Debtors’ assets.
Creditors’ Committee Settlement
The memorandum states, “Following the sale and before filing the Plan, the Debtors, Prepetition Lender, and the Creditors’ Committee engaged in negotiations regarding claims and causes of action asserted or that could have been asserted by the Creditors’ Committee, by and against the Debtors and Prepetition Lender, as well as potential disputes related to the allocation of available value among the Debtors’ different stakeholders. As a result of the extensive, good-faith negotiations, the Debtors, Prepetition Lender and the Creditors’ Committee reached a compromise (the ‘Creditors’ Committee Settlement’).
Pursuant to the terms of the Creditors’ Committee Settlement, Prepetition Lender has agreed to, among other things, (a) to carve-out $250,000 from its sale proceeds to fund the Liquidating Trust for the benefit of holders of Allowed General Unsecured Claims (the ‘GUC Recovery’); (b) release its respective liens, claims and rights to any of the Debtors’ collateral; (c) waive its right to participate in any distribution on account of its Deficiency Claims; and (d) allow the sale proceeds to be used to satisfy claims and fund the wind down of the Debtors’ assets as set forth the Plan. In exchange for the foregoing, the Prepetition Lender and its related parties are receiving releases as set forth in Article X of the Plan. The Creditors’ Committee Settlement resolved potentially expensive, extensive and time-consuming litigation over the respective parties’ rights and interests in the Debtors’ assets, provided for an expedited and efficient wind down of the Debtors’ Estates for the benefit of all stakeholders, and provided significant recovery to the Debtors’ general unsecured creditors.”
Class Action Settlement
In respect of the Class Action Settlement, the Combined Document provides, “Prior to the Petition Date, Sandra Gutierrez, on behalf of herself and all other members of the general public similarly situated (‘Plaintiff’) filed a complaint (as amended, the ‘Complaint’) in the Superior Court of the State of California for the County of Los Angeles— Spring Street Courthouse, Case No. BC694784 (the ‘Class Action Lawsuit’), alleging that Impresa violated California wage-and-hour law (namely, the California Labor Code and Industrial Welfare Commission Wage Orders) and thereby engaged in unfair business practices in violation of the California Business & Professions Code, §§ 17200, et seq.
Pursuant to the Class Action Settlement, the Class Representative has agreed to, among other things, (a) support the Plan, (b) vote to accept the Plan, including any third-party releases, on behalf of herself and any other Class Members (defined in the Class Action Settlement) that have not opted out of the Class, (c) withdraw her objection to the Motion to Transfer and support transfer of the Class Action Lawsuit to this Court, and (d) release the Released Parties (defined in the Class Action Settlement) from any and all claims that the Class Representative and Class Members have or may have, arising at any time from February 20, 2014, through the date on which this Court approves the Class Action Settlement, that have been, or could have been, plead based on the factual allegations in the Complaint. The Prepetition Lender and the Debtors have agreed to fund $300,000 (the ‘CAP Recovery’) to be distributed to the Class Members in accordance with the Plan and Plan Supplement. The Class Action Settlement ends potentially expensive, extensive, complex, and time-consuming litigation over the allegations contained in the Complaint and facilitates an expedited and efficient wind down of the Debtors’ Estates for the benefit of all stakeholders."
Both the Memorandum and Disclosure Statement provide considerable additional procedural background on the class action lawsuit.
Events Leading to the Chapter 11 Filing
In a declaration in support of the Chapter 11 filing (the “Loye Declaration”), Steven F. Loye, the Debtors’ Chief Executive Officer, detailed the events leading to Impresa’s Chapter 11 filing. The Loye Declaration provides: “Though the Debtors believe they have a fundamentally sound business and a strong, established customer base, two significant recent events have created a ‘perfect storm’ for the Debtors’ business and necessitated filing these cases: (1) the grounding and suspension of production of the Boeing 737 MAX; and (2) the COVID-19 pandemic and its effect on the commercial aerospace industry.
Boeing is the Debtors’ largest customer, and the Boeing 737 MAX program is (or was) the Debtors’ largest source of revenue. Indeed, a substantial amount of the Debtors’ growth in revenue from 2016 to 2019 derived from the production ramp-up of the 737 MAX program.”
As of the Petition Date, the majority of the Debtors’ liabilities consisted of senior secured funded indebtedness. None of the Debtors’ funded indebtedness is or was publicly offered for sale or publicly traded. The Debtors’ debt obligations comprise the following principal components:
- i. IAC Note On October 15, 2014, IAC, as borrower, executed that certain Secured Promissory Note, in favor of Twin Haven, as lender, in the original principal amount of $8,000,000 (as amended, the “IAC Note”). IHAC and Impresa each entered into a certain Guaranty, dated October 15, 2014 (collectively, the “IAC Guaranties”), guaranteeing IAC’s obligations arising under the IAC Note. The IAC Note matures on October 15, 2020. As of the Petition Date, the total principal outstanding under the IAC Note was not less than $13.37 million plus accrued and unpaid interest with respect thereto and any additional fees, costs and expenses owing under or in connection therewith (the “IAC Note Obligations”).
- ii. On April 29, 2016, Impresa, as maker, executed that certain Secured Promissory Note, in favor of Twin Haven, as payee, in the original principal amount of $2,000,000 (the “$2.0mn Note”). IHAC and IAC each entered into a Guaranty, dated April 29, 2016, guaranteeing Impresa’s obligations under the Note. Along with the $2.0mn Note,
- On June 30, 2016, Impresa, as maker, executed that certain Secured Promissory Note, in favor of Twin Haven, as payee, in the original principal amount of $3,000,000 (the “$3.0mn Note”). IHAC and IAC each entered into a Guaranty, dated June 30, 2016, guaranteeing Impresa’s obligations under the $3.0mn Note.
- On December 14, 2016, Impresa executed that certain Amended, Restated and Consolidated Secured Promissory Note, in favor of Twin Haven (the “Amended and Restated Impresa Note”). The Amended and Restated Impresa Note superseded, replaced, and consolidated the $2.0mn Note and the $3.0mn Note, and included an additional loan of $623,242.00 extended from Twin Haven to Impresa.
- On September 29, 2017, Impresa executed that certain Secured Promissory Note, in favor of Twin Haven, as payee, in the original principal amount of $1,000,000 (the “$1.0mn Note”). IHAC and IAC each entered into a Guaranty, dated September 29, 2017, guaranteeing Impresa’s obligations under the $1.0mn Note.
- On October 31, 2017, Impresa executed that certain Second Amended, Restated and Consolidated Secured Promissory Note, in favor of Twin Haven (as amended, the “Second Amended and Restated Impresa Note”). The Second Amended and Restated Impresa Note superseded, replaced and consolidated the Amended and Restated Impresa Note and the $1.0mn Note, and included an additional loan of $124,649.00 extended from Twin Haven to Impresa. IHAC and IAC each entered into a Second Amended and Restated Guaranty, dated October 31, 2017 (collectively, the “Impresa Guaranties”).
- As of the Petition Date, the total principal outstanding under the Second Amended and Restated Impresa Note is not less than $9.21 million plus accrued and unpaid interest with respect thereto and any additional fees, costs and expenses owing under or in connection therewith (the “Impresa Note Obligations,” and together with the IAC Note Obligations, the “Prepetition Secured Obligations”). The Second Amended and Restated Impresa Note matures on October 15, 2020.
- iii. The Debtors estimate that as of the Petition Date claims of trade and miscellaneous unsecured creditors total approximately $3.6 million. Additionally, as described below, the Debtors have commitments to legacy vendors that may increase trade debt to approximately $10 million.
Liquidation Analysis (see Docket No. 325-1 for notes)
About the Debtors
According to the Debtors: "For more than 50 years, Impresa has provided end-to-end solutions for the Aerospace Industry. Capabilities range from traditional machine shop services like Sheet Metal Fabrication, Precision Machining, and Extrusions to advanced fabrication methods such as Hydroform and Titanium Hot Brake form. Innovative 'Lean Cellular' manufacturing gives Impresa the flexibility to support everything from one-off prototypes to large volume production."
The Loye Declaration adds: "The Debtors are a premier supplier in the commercial and military aerospace industries. The Debtors began their existence in Southern California in 1973, under the name Venture Aircraft. In April 2012, Venture Aircraft acquired the assets of Swift-Cor Aerospace, which served the same industry for over 50 years. In connection with that acquisition, Venture Aircraft changed its name to Impresa Aerospace.
Since 2012, the Debtors have continuously evolved their production capacity to provide end-to-end solutions for their customers. Operating out of their facility in Gardena, California, the Debtors manufacture a wide variety of metallic products, including machined parts, fabricated components, assembled parts and tooling for the commercial aerospace and defense markets. In conjunction with producing parts, the Debtors offer a variety of manufacturing services from sheet metal fabrication, precision machining, and aluminum extrusion to more-advanced services such as hydroforming and titanium hot brake forming. The scope of the Debtors’ services allows the Debtors the flexibility to support a broad range of customers and customer applications, and tailor the parts to each customers’ request, including production of parts for a Low Rate Initial Production (LRIP) or a full production volume.
The Debtors service virtually all the key companies within the aerospace industry, including Boeing, Spirit AeroSystems, Collins Aerospace (a unit of Raytheon), Northrup Grumman, Cessna, Lockheed Martin, and Gulfstream. Notable commercial programs include the Boeing 787, 777, 747 and 737, Airbus A380, and Gulfstream G550 and G650. The Debtors’ largest customer is Boeing. Impresa maintains strong contractual positions with Boeing and provides essential product for Boeing’s full range of commercial airliners. Impresa also contracts with several other blue-chip aerospace companies including those mentioned above. The Debtors’ strong contractual relationships with these key companies enabled the Debtors to profitably grow revenue from $32 million in 2016 to $43 million in 2019."
Prepetition Corporate Structure Chart
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